Nedbank Group says its loan book Zimbabwe has been on a constant growth trajectory largely driven by the US dollar book from which the bank is supporting key productive sectors, mainly exporters.
The South African banking group operates in Zimbabwe through Nedbank Zimbabwe, which falls under the Nedbank Africa Regions (NAR) cluster, whose other operations include Eswatini, Lesotho, Mozambique, and Namibia, as well as representative offices in Ghana and Kenya.
Dr Terence Sibiya, the group managing executive of Nedbank Africa Regions, said during a press briefing on Tuesday that the country's legal provisions currently in place are enabling continuous lending and collecting loan repayments in US dollars until December 31, 2030.
"Our loan book doubled from June 2023, that is over 100 percent increase, when there was a bit of a low base, and from December, we have since increased it again by 26 percent up to June 2024.
"It is predominantly a US dollar-denominated loan book, the legal provisions currently in place are enabling us to continue lending and collecting loan repayments as well as (executing) transactions in US dollars until December 31, 2030," he revealed in a briefing for the group's interim financials for the period to June 30, 2024.
He said the group would like to see increased use of local currency sooner rather than later, but that was notwithstanding the legal provisions in place that enable the multi-currency environment and allow us to carry on lending and collecting repayments in dollars.
"A significant portion of our lending book is in any case to natural generators of US dollars who are exporters, and that has always been a significant part of our market, so that does not really go away," said Dr Sibiya.
He noted that the lending environment was largely mainly because there was more stability in the US dollar currency when the economy was experiencing rapid depreciation of the previous local currency (Zimbabwe dollar).
"But with the recent changes, we have seen a stabilisation of the local currency, though it has only been maybe three or four months since the introduction of a more stable reserve-backed currency. We may see increased borrowing in local currency in the future," said Dr Sibiya.
"Lending here in Zimbabwe is predominantly US dollar interest rates that have an impact, and those have remained relatively stable.
"But coming to Zimbabwe specifically, we see that US dollar liquidity is limited because it is limited to the deposits that are in the market.
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"We will find that as we try and lend more and more, the marginal cost or incremental cost of lending in US dollars will become higher, reflecting the shortage of dollars, because we have given out most of the deposits in the market as loans," he said.
Dr Sibiya said since the introduction of the new currency over the last three months, the local operation has had a pipeline of requests for willing buyer and willing seller forex requirements from clients that was building up.
However, last week the central bank made quite a significant injection into that market of over US$50 million, which went a long way in clearing the pipeline that the Bank had accumulated.
"We are starting again to collect the requirements for clients since most of that was cleared, and then we will see when the huge availability of similar big injections will come on stream to again address the accumulated pipeline at that point," said Dr Sibiya.
Commenting on the group's financials, Mr Jason Quinn, the chief executive, said Nedbank Group produced a relatively strong financial performance, with headline earnings (HE) increasing by 8 percent year-on-year to R7,9 billion, underpinned by good non-interest revenue growth, a lower impairment charge, and tight cost control.
He said the group's return on equity (ROE) improved to 15,0 percent from 14,2 percent in the prior period.
The group's diluted headline earnings per share (HEPS) increased by 12 percent, benefiting from the R5bn capital optimisation programme.
