An indigenous bank has called for innovation in the banking sector saying the current business environment and its problems are temporary, things are bound to improve.
In its report for the half year to June, Time Bank says to understand the business environment, it is important to note that all the nations of the world are at different levels of economic development.
Each level represents a different type of economy and therefore different production, marketing and financial systems.
When British bankers were faced with inflation, they did a lot of study on the circulation of money in an economy. This contributed to the regulation of money supply.
American bankers brought about derivatives and futures into the banking system and this improved financial leverage techniques in the banking sector.
Germans allowed banks to have equities in companies helping the supply of venture capital into the economy.
Japanese bankers insisted that banks should be allowed to have Tier 2 capital, which included hidden reserves. Though there was resistance from other countries, it was eventually accepted.
The Malaysians lowered interest rates and changed the legal definition of a bad loan from that with 90 days interest arrears to one with 180 days and that brought relief to borrowers as they had more time to organise their businesses before repaying the loans. Malaysian banks at the same time became stronger.
“At the centre of the development of the banking systems was innovation, utilisation of legal provisions, financial engineering and business leadership,” the bank says. “Zimbabwean bankers can do the same.”
The bank says it is on this understanding that it has developed its business strategy. Its net interest income improved from $902.5 million to $4.7 billion while fees and commissions dropped from $27.4 million to a negative $476.7 million but other operating income shot up from $254.7 million to $3.1 billion.
Operating income improved from $1.4 billion to $7.3 billion with net profit increasing from $1 billion to $3.9 billion.
The bank’s asset base decreased marginally from $36.6 billion to $36.4 billion while shareholders’ funds more than doubled from $3 billion to $7 billion.
Its capital adequacy dropped from 48.1 percent to 46.9 percent while return on equity shot up from 35 percent to 84 percent.