Zimbabwe's banking sector boosted profitability in the nine months to September 30, 2018 posting an aggregate net profit of $283,98 million, latest Reserve Bank of Zimbabwe (RBZ) figures show. This was a 76, 68 percent increase from a net profit of $160, 73 million for the corresponding period in 2017.
"The improved earnings performance was buoyed by non-interest income arising from a surge in digital transactional volumes as well as interest income from investments in securities, mainly treasury bills," noted the central bank in its banking sector report for the quarter to September 30, 2018.
For the third quarter, the major profitability indicators, return on assets and return on equity improved from 1,89 percent and 11,15 percent, to 2,56 percent and 16, 64 percent, respectively.
The figures show that non-interest income contributed significantly to the jump in profits.
"Fees and commission continues to drive growth in total income as it increased by 15, 75 percent from $318, 97 million during the nine months ended 30 September 2017 to $369,20 million during the corresponding period in 2018, and accounted for 35, 50 percent of total income, as at 30 September 2018," reads the report.
"Interest income from loans and advances constituted 29,73 percent of total income for the nine months ended 30 September 2018, compared to 36,54 percent in 2017, while interest on investments and securities accounted for 21,01 percent (in 2018) against 15,46 percent (in 2017)."
Meanwhile, the central bank has said all financial soundness indicators show "satisfactory condition and performance of the banking sector" reflected in an expanding asset base, adequate capitalization, improved profitability and satisfactory asset quality.
For the period under review, the sector's total assets maintained an upward growth trajectory from $12,35 billion as at 30 June 2018 to $13,55 billion. The banking sector aggregate core capital increased by 7,24 percent, from $1,38 billion as at 30 June 2018 to $1,48 billion as at 30 September 2018 on the back of increased earnings recorded by the sector.
The country's 19 banks were all in compliance with the prescribed minimum capital requirements, with the exception of one institution.
The RBZ said Tier 1 and capital adequacy ratios of 22,70 percent and 26,32 percent, were above the regulatory minima of 8 percent and 12 percent, respectively. As at the end of the third quarter, banking sector deposits increased by 0, 76 percent from $9,53 billion as at 30 June 2018 to $9,57 billion as at 30 September 2018. Total loans and advances totalled $4,01 billion, translating to a loans to deposit ratio of 41,88 percent.
Financial experts have said that local banks are charging heavily on transactions, a factor that has contributed to the maintenance of low deposit rates in the sector.
Zimbabwe is currently experiencing a liquidity crunch due to failure by banks to attract meaningful, longer term deposits because of a lack of confidence in the banking system, subdued commodity prices, low export volumes, as well as the operation of a multi-currency system with the country having low United States dollar reserves.
Meanwhile, there was an improvement in the banking sector loan portfolio as reflected by a decline in the non-performing loan (NPL) ratio from 8,63 percent as at 30 September 2017 to 6,69 percent in the period under review.