THIRTEEN out of 20 banks recorded profits in the nine months to September 30 with the sector’ s profitability lowering 18% to $24,5 million amid rising loan defaults, latest statistics from the Reserve Bank of Zimbabwe (RBZ) have shown.
In the same period last year, the sector’s net profitability was $29, 93 million.
“The losses recorded by the other seven banking institutions are attributed to high levels of non-performing loans and lack of critical mass to generate sufficient revenue to cover high operating expenses,” RBZ said.
RBZ said the macroeconomic constraints as well as institution-specific deficiencies continue to affect the performance and condition of the banking institutions.
“Economic performance remains fragile, on account of the various challenges the economy is facing, notably supply side bottlenecks, liquidity shortages, lack of long term financing, competition from cheap imports, company closures, and the slow pace of recovery in the advanced economies,” it said.
Non-performing loans (NPLs) have been rising in the sector to 20,45% as at September 30 2014 raising fears that banks would cut on lending critically needed to reboot sectors of the economy.
An NPL is when payments of interest and principal are past due by 90 days or more, or at least 90 days of interest payments have been capitalised, refinanced or delayed by agreement.
In the period under review, the banking sector reported a net capital base and core capital position of $913 million and $803 million respectively.
This represented an improvement from $893 million and $753,3 million, respectively as at June 30 this year.
“The increase in the capital position was largely attributed to profits recorded by some banking institutions during the quarter,” RBZ said.
Banking sector deposits remained largely stable at $4,96 billion over the two quarters ended June 30 and September 30 2014.
Total banking sector loans and advances amounted to $3,84 billion, as at September 30.
The household sector borrowed 21%, corporations (77%) and 2% was borrowed by central government and state enterprises.
RBZ said the transitory nature of deposits and limited sources of long-term funding has continued to hamper effective intermediation to productive sectors of the economy.
“The situation is further exacerbated by limited inter-bank trading, general market liquidity constraints and limited lender of last resort function,” it said.
RBZ said commercial banks continue to dominate the banking sector accounting for 80,72% of total banking sector loans and advances.
“Top five banks had loans and advances amounting to $2,44 billion, which accounted for 63,54%of total banking sector loans and advances as at 30 September 2014,” RBZ said.