The banking sector coasted to profitability in 2015 with aggregate net profit rising in a year in which the interbank market resumed operations, for the first time since the country embraced the multicurrency regime in 2009.
BY NDAMU SANDU
In the period ended September 30, 2015, aggregate net profit was $86,09 million compared to $24,35 million recorded in the same period last year as the sector weathered the storm that engulfed other sectors of the economy.
NewsDay gives the highlights of 2015.
Resumption of the interbank market
The interbank market became operational in March after several false starts, a development that would help in the distribution of liquidity.
The $200 million interbank facility is underwritten by the African Export-Import Bank (Afreximbank) under the Afreximbank Trade Debt Backed Securities. The resumption of the interbank market is a milestone in Zimbabwe’s financial sector as the facility would assist in meeting the short-term liquidity gaps of qualifying institutions whilst at the same time establishing a reference rate for pricing of financial products through the discount window.
Recapitalisation of the central bank
The Reserve Bank of Zimbabwe (RBZ) was recapitalised to the tune of $100 million through the issuance of long-dated debt instruments. Finance minister Patrick Chinamasa said RBZ would be recapitalised further to the tune of $150 million to be able to resume its lender of last resort function.
The aggressive push to bring down non-performing loans (NPLs) resulted in the default rate declining to 14,27% as at September 30 from a peak of 20,45% in June last year. RBZ forecasts the NPL ratio at 10% by June 30 before halving to 5% by December 31, 2016.
Zimdollar dead and buried
The banished Zimbabwean dollar was officially decommissioned from the formal system in a major boost for the multicurrency regime introduced in 2009 to tame hyperinflation. The continued existence of the local unit in the formal system had swirled speculation that it would be retrieved from the recycled bin.
Closure of weak banks
Distressed banks were weeded out in 2015. Allied Bank and AfrAsia Bank surrendered banking licences after failing to meet the $25 million minimum capital requirements.
AfrAsia, alongside MetBank and Tetrad Bank, had a June 30, 2015 deadline to shape up or ship out. MetBank improved its core banking capital above the $25 million. The Deposit Protection Corporation was appointed as the provisional judicial manager of Tetrad to oversee the day-to-day running of the bank.
Interest rates pact
In July RBZ and Bankers’ Association of Zimbabwe agreed on an interest rate guideline where borrowers with low credit risk from the productive sector can access loans at a cost of between 6% and 10% per annum, in a move meant to stimulate economic growth.
The new measures punish consumptive lending, which will come at a cost of 12% to 18% per annum.
RBZ governor John Mangudya said the interest rate guidelines were agreed upon by RBZ and the Bankers’ Association of Zimbabwe “within the broader policy to streamline costs of doing business and stimulate economic activity through affordable credit facilities in the domestic banking system”.
Fighting for the homeless
Banks stepped up efforts to provide home loans to have a steady flow of interest income. Banks that are offering long-tenure mortgages include CABS, CBZ, FBC, Stanbic and ZB among others. The provision of mortgages had been neglected by banks that were then couched in their comfort zones.
When SMEs became kings
According to the Finscope survey of 2012, there are 2,8 million Micro, Small and Medium Enterprises owners, owning 3,5 million MSMEs and employing 2,9 million people. Yet this was a sector shunned by banks. In comes mobile money and banks are jolted into action.
The year saw banks coming up with products to tap into the small to medium enterprises to get a share of the over $5 billion circulating in that sector.
Soft landing for Sakala
Former African Development Bank vice-president Thomas Zondo Sakala failed in his bid to win the presidency of the Abidjan-headquartered bank. Nigerian Akinwumi Adesina romped to victory and began his first term on September 1. Sakala was later appointed CEO of the Infrastructure Development Bank of Zimbabwe replacing Charles Chikaura, who completed his second and final term on August 31.
Year of the bond coin
When bond coins were introduced in December, there was scepticism in the market. It brought back memories of the bearer cheques that were rejected. As the year comes to a close the bond coins are not only ruling the roost, but managed to oust from the market South African rand and Botswana pula coins.
New licences, financial inclusion thrust
RBZ issued two microfinance firms, African Century and GetBucks, with deposit-taking licences to help drive the financial inclusion thrust. RBZ also gave banks a December 31, 2015 deadline to come up with board-approved financial inclusion plans in a bid to bring the unbanked into the formal channel.
Halting bank failures
A Bill to enforce corporate governance in the banking sector sailed through the National Assembly two weeks ago. It has to go through the Senate and signed by President Robert Mugabe for it to become law.
The proposed law will make directors and senior managers of banking institutions liable to lawsuits if they act recklessly or negligently.
Six banks — Allied, Trust, AfrAsia, Capital, Interfin and Royal — have been closed since 2012 all with the same ailments — undercapitalisation, poor corporate governance, insider non-performing loans and abuse of depositors’ funds akin to declaration of dividend to shareholders.
Movers and shakers
Hashmon Matemera was in January appointed to lead AfrAsia Bank Zimbabwe Limited. But the bank would surrender its licence weeks later.
Kwanele Ngwenya left Steward Bank at the beginning of the year and was replaced by Lance Mambondiani. Kevin Terry left CABS in January to take up a new position as deputy group CEO of Old Mutual Kenya. He was replaced by Simon Hammond.