Zimbabwe’s banks make a killing despite tough economy

The improvement in profitability ratios was on the back of improved after tax profit posted by the financial institutions.

All reporting banks posted a profit after tax for the full-year ended 31 December 2016, apart from the newcomer, NBS . NBS made a loss owing to set-up costs which outstripped income but the bank expects to record a profit in the current financial year since it is now geared for operations.

Total deposits from reporting banks increased by 16.8 percent to $6.2 billion as at December 31, 2016 from $5.3 billion recorded in the previous year.

Deposits remained concentrated among the bigger banks — seen as safer after a string of failed institutions, the last of which was AfrAsia Bank Zimbabwe in February 2015.

Nearly 66 percent of total bank deposits in 2016 were concentrated in the top five banks (CBZ; CABS; Stanbic; Stanchart and Barclays), same as in 2015.

From the reporting banks, CBZ bank commanded the largest deposit market share of 28.03 percent as at  December, 31 2016, down from 31.17 percent in the same period prior year, while CABS and Stanbic followed with 13.65 percent and 11.34 percent, respectively. CBZ continues to maintain the lead on the back of aggressive deposit mobilisation.

Deposits were largely short-term, demonstrating the constrained capacity of the banks to extend the much needed long term credit facilities to various sectors of the economy whose demand for such credit persistently outstrips supply

Commercial banks’ share of deposits was 82.34 percent for the period, marginally higher than 80.67 percent in 2015.

Aggregate bank’s loan and advances from reporting banks decreased by 4 percent to $3.29 billion in 2016 from $3.42 billion in the previous year.

Lending by some major banks remains tightly focused with some declaring that they are prepared to lose market share in certain asset classes to ensure that loans are of an appropriate quality and margin.

On average, from the reporting banks Loan to Deposit Ratio (LDR) retreated from 76.46 percent as at 31 December 2015 to end at 57.75 percent  on 31 December 2016.

The decline in the LDR in 2016 however indicates that banks are now reducing their appetite for lending amid heightened default risk given the increasingly tough operating environment.

Top five banks by loans and advances, commanded a combined market share of 65.97 percent compared to 62.65 percent as at 31 December 2015.

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