Zimbabwe’s banking sector profits surged over ten-fold to $86.09 million in the nine months to September 2015 from $7.47 million profit recorded in the same period in 2014 driven by growth in net interest income, latest statistics show.
The central bank said in its third quarter banking sector review that a total of 14 out of 18 operating banking institutions — excluding Tetrad Investment Bank which is under provisional judicial management — recorded profits during the period under review.
“The profitability indicators for the banking sector as measured by the average return on assets and return on equity improved from 0.37 percent and 2.54 percent as at 30 September 2014 to 1.37 percent and 7.91 percent as at 30 September 2015, respectively,” said the RBZ.
The central bank noted that the major source of income for the banking sector was interest income, largely from loans and advances, which constituted 63.46 percent of total income amounting to $799 million.
Non-interest income accounted for 36.54 percent of total income largely comprised of fees and commissions.
Total banking sector deposits and loans amounted to $5.5 billion and $4 billion, respectively.
“Demand deposits continue to dominate the sector’s funding sources while banking sector lending to individuals, agriculture and manufacturing were 25 percent, 17 percent and 13 percent respectively,” the RBZ said.
“Non-performing loans ratio improved from 14.52 percent as at 30 June 2015 to 14.27 percent as at 30 September 2015. Nonetheless, credit risk continued to be a significant risk for the sector,” the central bank added.
The sector average capital adequacy ratio remained largely static at 19.7 percent by end of September last year from 19.72 percent in the previous quarter.
This position is above the minimum regulatory capital adequacy ratio of 12 percent.
Analysts say confidence is slowly creeping into the sector long dogged by poor corporate governance, high interest rates and increasing insider non-performing loans.
The RBZ said all operating banking institutions – excluding TIB – were in compliance with the prescribed $25 million minimum capital requirements.
“Banking institutions are expected to continuously review their capital positions to assess adequacy in respect of the risks assumed in the intermediation role. In this regard, preservation of capital remains key to all players in the sector,” said the central bank.
The financial services sector’s aggregate core capital base increased to $916.81 million in the quarter to September from $899.10 million in the previous quarter due to capitalisation of earnings.
The banking sector’s net capital base in the quarter under review also increased to $1.07 billion from $1.04 billion.-The Source