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Banking sector profitability dips 17%

Business
The banking sector after-tax profit dipped 17% last year to $78,69 million amid rising impairments, a reflection of the deteriorating economic activity, an analysis by a leading brokerage firm has shown.

The banking sector after-tax profit dipped 17% last year to $78,69 million amid rising impairments, a reflection of the deteriorating economic activity, an analysis by a leading brokerage firm has shown.

BY NDAMU SANDU

In 2013, profit after tax for the industry was $94 959 970.

Whereas three banks (NMB, MetBank and POSB) had posted losses in 2013, the number swelled to five (ZB Bank, ZB Building Society, BancABC, FBC and MetBank) last year, a report by MMC Capital showed.

MMC said a sample of the 2014 full-year results for banks attested to the fact that the deterioration in economic activity in Zimbabwe was leading to worsening non-performing loans (NPLs).

According to the monetary policy, the average non-performing loans to total loans stood at 16% as at December 31 2014 after factoring out closed banks.

“On the back of the NPLs, total banking sector profitability (PAT) for the sample lost 17% to $78,69 million in the year 2014. The majority of banks recorded significant growth rates in impairment charges for the full-year period ended December 31 2014,” MMC said.

The banking industry had stood the economic headwinds since the introduction of the multi-currency regime in 2009 with sectors such as manufacturing taking a knock.

Analysts fear rising impairments on the back of the harsh economic environment that has spawned a high NPL ratio would result in banks cutting on lending needed to oil the economy.

But they are optimistic the establishment of a credit reference bureau would weed out multiple debtors that have over borrowed at a number of financial institutions.