Zimbabwe’s banks make a killing despite tough economy

However, NBS and Metbank recorded the highest CIR at 310.12 percent and 144.9 percent respectively, reflecting operational inefficiency as their operating revenues fails to absorb operating expenses.

The sector has increased its Treasury Bill holdings as most banks view them as a better alternative to individual and corporate loans given the high credit risk in the economy.

On average, banks have doubled their TB holdings, reflecting their great confidence in the security, which in a well-functioning economy represents a risk-free investment. Banks such as Ecobank, Standard Chartered Bank and Agribank have increased their TBs holdings by 220 percent, 180 percent and 168 percent to $61.1 million, $135.7 million and $60.8 million, in that order.

For Barclays, TBs accounted for almost 50 percent of the bank’s investment securities at $34 million.

Banks maintain the stance that the government has and will always pay the TBs on maturity despite a tight fiscal space.

Most banks recorded a significant decline in non-performing loans in the period, benefiting from NPL disposals to the Zimbabwe Asset Management Corporation (ZAMCO).

As at December 31 last year ZAMCO had bought bad loans worth $813 million resulting in a decline in the market NPL ratio to 7.9 percent by end of 2016, down from a peak of 20.45 percent in June 2014.

However, MBCA’s NPLs increased to 5.3 percent from 2.9 percent previously.

Additionally, Agribank’s NPLs are still high at 20 percent on the back of its aggressive lending.

Cautious lending and aggressive collections also contributed to the decline in NPLs in general.

The economic outlook remains uncertain as national savings continue to wane.

The cash crisis will likely remain a challenge as low incomes growth and weak depositor confidence will continue to militate against deposit mobilisation from the unbanked population.

The introduction of bond notes will discourage hard currency deposits as the banking public continues to struggle to access funds on demand.

In the face of challenging economic conditions and increasing cost of doing business, the debt repayment capacity of borrowers remains constrained, and this will dampen the risk appetite of banks to extend loans.

The high rate of loans to individuals by some banks remains a concern. 

The consumptive nature of individual loans does not bode well for economic recovery.

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