The rate of non-performing loans (NPLs) had dropped to 7,08 percent by end of last year from 20,5 percent in 2015, raising great expectations that the financial services sector is becoming more stable.
Although the NPLs have declined to single-digit figures, they remain above the 2016 year-end target of 5 percent set by the Reserve Bank of Zimbabwe (RBZ). Fears abound that while cutting back on lending might help maintain stability in the financial services sector, it could negatively impact on economic activities as this affect loans uptake due to as banks become risk averse.
Most companies are struggling to access funding for their working capital requirements, while the credit has been expensive where available. Presenting the 2018 Monetary Policy Statement RBZ Governor Dr John Mangudya said: "The quality of the banking sector loan portfolios has improved over the years.
"The ratio of non-performing loans (NPLs) was 7,08 percent as at December 31, 2017, down from 7,87 percent as at December 31, 2016, as banks continue to strengthen their credit risk management systems, in the aftermath of balance sheet clean up through disposals of NPLs to ZAMCO."
He said as at December 31, 2017 Zimbabwe Asset Management Company (Zamco) had acquired NPLs amounting to $987 million. These acquisitions have enabled banks to clean up their balance sheets so that they are better able to support the economy through provision of credit.
Zamco has now embarked on the resolution and recovery phase of its operating cycle. In this phase, all efforts are devoted towards implementing recovery strategies and collecting from the borrowers whose NPLs have been acquired by Zamco.
Dr Mangudya said the performance of the banking sector was satisfactory over the year to December 31, 2017, as reflected by the improvement in the key risk and performance indicators. Total assets increased to $11,25 billion from $8,73 billion in 2016 while capitalisation and profitability indicators also reflect improved performance.
The net profit for the period ended December 31, 2017, amounted to $241,94 million, representing an increase of 33,91 percent, from $181,06 million reported in the corresponding period in 2016. A total of 18 out of 19 operating banking institutions recorded profits during the period ended December31, 2017.
The average prudential liquidity ratio of 62,62 percent for the banking sector as at December 31, 2017, was above the regulatory requirement of 30 percent. All banks were compliant with the minimum prudential liquidity ratio as at year end 2017.