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Mozambique: Banks Making Huge Profits
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Agencia de Informacao de Mocambique (Maputo)
23 November 2007
Posted to the web 23 November 2007
Maputo
The performance of Mozambican banks during the 2006 financial year was not only better than the previous year's results, but also exceeded the expectations of the banks themselves.
According to the 2007 survey of the banking sector, published jointly by the Mozambican Association of Banks (AMB) and the consultancy company KPMG, the real growth in the sector in 2006 was a remarkable 136 per cent.
This success, according to Hermenegildo Gamito, chairperson of the AMB, was measured "above all by the satisfaction of clients and the return on equity".
Speaking at the launch of the AMB/KPMG report, he said that factors contributing to the success included "more prudent" intervention by the central bank in terms of interest rates and the exchange rates, and improvements in the management of the commercial banks.
In the broader context, the rise in banking profits was hardly a surprise given the strong growth in the Mozambican economy. The Mozambican Gross Domestic Product grew by 9.6 per cent in 2006, an improvement on the average annual growth of GDP of eight per cent over the past decade.
The total profits of the nine commercial banks in 2006 were 2.303 billion meticais, compared to only 940.6 million meticais in 2005 (at current exchange rates there are about 24.2 meticais to the US dollar).
Part of this improvement is administrative: the Bank of Mozambique demanded that loans in foreign currency be converted to meticais - and loans in meticais carry a high interest rate than foreign currency loans.
Loans to clients increased by 24 per cent which, the survey says, "resulted in an increase in the financial margin of about 63 per cent as against 22 per cent in 2005".
The banks could also rub their hands in glee at the "increase in reference interest rates with impact on the increase in the local banking spread from 6.47 per cent in 2005 to 8.01 per cent in 2006". In other words, what is good for the banks is not necessarily good for those who borrow from them.
In the dry language of the report, "the scenario of continuous increase in interest rates, both in the local as well as the international market, has favoured an increase in interest revenue from applications maintained with corresponding banks and loans".
The Return on Average Equity (ROAE) was 47.73 per cent in 23006, which compares with 21.54 per cent in 2005. The second key ratio.
the return on average assets (ROAA), rose from 2.06 per cent in 2005 to 3.99 per cent in 2006.
A breakdown of the sector shows, not surprisingly, that the International Bank of Mozambique (BIM) remained far and away the largest commercial bank in 2006, with total assets of 24.7 billion meticais, compared with 20.1 billion in 2007. Its loan portfolio was 10.8 billion meticais (8.8 billion in 2005), and total client deposits were 20.8 billion meticais (compared with 17.7 billion in 2005).
BIM is the descendant of the once state-owned Commercial Bank of Mozambique (BCM), and its main shareholder is the largest Portuguese financial institution, the BCP.
Other banks lag way behind BIM. In second place is the BCI- Fomento with just over 14 billion meticais in assets, and a loan portfolio of 7.67 billion meticais..
All the commercial banks bar one made a profit in 2006. BIM's profits were 1.6 billion meticais, and those of the BCI-Fomento were 512 million. Only the country's smallest bank, the Merchant and Investment Bank (BMI) made a loss (of 12.4 million meticais).
BIM's profits grew by 259 per cent in 2006 - almost twice as much as the 143 per cent growth in the BCI-Fomento's profits. The highest growth in profits, however, was shown by the Malaysian- owned International Commercial Bank (ICB), whose profits jumped by 365 per cent - but the ICB has just three branches and its total profit was just seven million meticais.
BIM had 76 branches and 191 automatic teller machines (ATMs) in 2006 - BCI-Fomento had 38 branches and 67 ATMs, and the Austral Bank had 48 branches and 71 ATMs. But the five smallest of the nine commercial banks are clearly going for a niche market concentrated almost entirely in Maputo.
Their number of branches is in single figures, and some of them have no ATMs at all. Thus the Mozambican branch of the Botswana- based African Banking Corporation has two branches and no ATMs.
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The overall picture is of a market where one bank, BIM, enjoys overwhelming dominance - although some of its competitors, notably the BCI-Fomento, are making valiant efforts to catch up.
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| Copyright © 2007 Agencia de Informacao de Mocambique. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections -- or for permission to republish or make other authorized use of this material, click here. | |||||||||||||||||||||||||||||
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