6 July 2018

Zimbabwe: Banking Sector Profitable, but...

Zimbabwean banks recorded income of US$1,1 billion in the full year to December 2017, an increase of 13% from the previous year. This indicates the financial sector is in a stable condition despite the suffocating liquidity crunch and cash crisis, a survey done by a financial expert for the Zimbabwe Independent reveals.

However, most banks were helped by the mopping of non-performing loans through the Zimbabwe Asset Management Company (Zamco). Non-funded income at US$550 million accounted for close to half of the total earnings, a trend which points to a growing over-reliance on non-interest income. Banks are also struggling with high levels of staff costs to income ratios and staff costs to expenditure ratios.

The survey, whose analysis focused on key ratios, as well as the balance sheet size and profitability, showed that most institutions registered growth in loans, deposits and assets, as confidence in the sector is beginning to grow. In the past almost two decades, Zimbabwe's economy all but collapsed spectacularly, with a series of banks either closing down or being put under curatorship by the central bank.

Government, through a special purpose vehicle, Zamco, has had to step in to clean up the mess, buying close to a billion dollars' worth of non-performing or bad loans.

Currently the industry comprises 14 commercial banks and four building societies, namel: Agribank, BancABC, Barclays, Cabs, CBZ, Ecobank, FBC Bank, FBC Building Society, Nedbank (formerly MBCA), Metbank, National Building Society, NMB, POSB, Stanbic, StanChart, Steward, ZB Bank, and ZB Building Society.

As at 31 December 2017, the 18 institutions cumulatively held US$10,5 billion worth of assets, with the biggest banks by asset base being CBZ (US$1,992 billion), Stanbic (US$1,403 billion), Cabs (US$1,267 billion) and StanChart (US$816 million), accounting for 52% of all bank assets. CBZ, Stanbic and Cabs account for 52% of all bank assets. Mid-tier banks by asset base are FBC (US$558 million), Barclays (US$556 million), Ecobank (US$547 million), BancABC (US$530 million), Steward (US$461 million), ZB Bank (US$442 million), and NMB (US$423 million). The smallest bank by asset base is ZB Building Society with a modest US$42 million.

According to the survey, the banks had a cumulative deposit base of US$8,6 billion, and the top four banks by deposits mirror their asset ranking as well, and they are CBZ (US$1,791 million), Stanbic (US$1,208 million), Cabs (US$1,043 million), and StanChart (US$705 million) respectively. These accounted for 55,37% of the deposits held by all the banks.

The mid-tier banks by deposit base who constitute approximately 32,34% are FBC (US$461 million), Ecobank (US$452 million), Barclays (US$450 million), BancABC (US$400 million), NMB (US$357 million), ZB Bank (US$355 million), Steward (US$350 million), and Nedbank (US$297 million) respectively.

Agribank, Metbank and POSB make a tier just below the smaller entities comprising solely of building societies other than Cabs. ZB building society is the smallest in terms of deposit base.

The survey also showed that local banks continue to demonstrate a huge appetite for holding government-backed securities, with a balance of US$2,98 billion out of the US$3,45 billion in issued loans as at 31 December 2017. CBZ holds a third of all Treasury Bills.

Advances and loans have not only grown in value but also in quality. Banks continue to strengthen their credit risk management systems with the ratio of non-performing loans (NPLs) at 6,39% which ranks competitively with the region and other markets.

CBZ has the largest value of non-performing loans (NPLs) of US$95 million, with Cabs coming a distant second with US$42 million. Stanbic is ranked eighth in terms of the highest value of NPLs even though the bank has the third highest amount of loans in issue. ZB Building Society does not have any NPLs at all.

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