THE banking institutions in Zimbabwe were profitable in the first half of this year with reported aggregate profits of $4,55 trillion, largely driven by non-interest income which constituted 92,51% of total income. In the same period last year, banks recorded a profit of $181,25 billion.
There are 18 banking institutions in the country.
According to Reserve Bank of Zimbabwe (RBZ)’s mid-term monetary policy statement released on Wednesday, banking sector performance remained satisfactory, as reflected by adequate capitalisation, strong asset quality, adequate liquidity and sustained profitability, among other key financial soundness metrics.
“The banking sector continued to demonstrate resilience on the back of a broad range of complementary fiscal and monetary stabilisation measures, to foster and enhance price and financial stability,” RBZ governor John Mangudya said in the statement.
“Banking institutions continue to adapt to the dynamic operating environment by reconfiguring their business models, including the digitisation of banking services. This has gone a long way in providing convenient and modern banking services to the banking public, as well as fostering inclusivity.”
In the period under review, the banking sector was adequately capitalised and all banking institutions were in compliance with the prescribed tier 1 and minimum capital adequacy ratios of 8% and 12%, respectively. The average capital adequacy and tier 1 ratios were 40,48% and 35,35%, respectively.
Aggregate core capital increased to $5,05 trillion.
“The growth in core capital was mainly attributed to capitalisation of retained earnings. The retained earnings for some banking institutions are largely composed of revaluation gains from investment properties and translation gains from foreign exchange-denominated assets,” Mangudya said.
As at June 30, 2023, 15 out of 18 banking institutions (excluding POSB) reported core capital levels that were above the minimum capital requirements. Banking institutions are employing a number of capital preservation strategies, which include investing in gold coins and properties, lending in US dollar, as well as maintaining a portion of their capital in the greenback.
Mangudya said RBZ continued to monitor capitalisation of banking institutions, given that a well-capitalised banking sector is an engine for sustainable economic growth and development. Total banking sector assets increased to $27,28 trillion. Aggregate banking sector loans and advances increased 7,9 times from $1,29 trillion as at December 31, 2022 to $10,19 trillion as at June 30, 2023.
“The increase was largely attributed to an increase in foreign currency-denominated loans, which constituted 94% of the sector’s loan book,” he said.
Total loans to total deposits ratio for the banking sector remained relatively stable at 55% from 55,67% at the end of 2022. The foreign currency loans to foreign currency deposits ratio was 60% during the same period, Mangudya said.
“The banking institutions continued to contribute to economic recovery and growth by channelling resources to the productive sectors of the economy. The loans to the productive sectors constituted 77,67% of total loans as at 30, June 2023.”
Asset quality remains satisfactory.
The aggregate non-performing ratio of 3,62% as at June 30, 2023 was within the bank’s risk appetite, as well as the internationally acceptable threshold of 5%. The ratio increased from 1,58% as at December 31, 2022 owing largely to revaluation effects on foreign currency-denominated non-performing loans.
Source Newsday
