Banking sector profitability was up by nearly half to $181,06 million in the year ended December 31 on lower loan provisions and realignment of cost structures, the Reserve Bank of Zimbabwe (RBZ) has said.
BY NDAMU SANDU
In 2015, aggregate net profit was $127,47m.
In his monetary policy statement, Reserve Bank of Zimbabwe governor, John Mangudya said the increase in net profit translated to improved average return on assets and return on equity, which rose to 2,26% and 12,64% from 2,07% and 11,03% respectively.
“All operating banking institutions recorded profits during the period ended December 31, 2016,” he said.
“The increase in profitability was largely driven by lower loan loss provisions in line with improving asset quality, lower interest expenses, as well as continued realignment of cost structures at most institutions.”
Interest income was the major driver constituting 58,40% of total income of $1,05 billion for the period ended December 31, 2016.
Mangudya said salaries and employment benefits dominated total costs for banking institutions, as they accounted for 42,53% of total banking sector costs.
“Banking institutions continue to implement various measures to enhance their earnings capacity through embracing technology in banking, which is more cost efficient than traditional approaches to banking, as well as adoption of agency banking models, while instituting cost containment measures,” he said
Total banking sector deposits increased by 6,10% to $6,51bn as at December 31 from $6,14bn as at September 30.
Banking sector deposits were, however, dominated by demand and time deposits, which accounted for 54,63% and 26,85% of total deposits, respectively, as at December 31.
The average prudential liquidity ratio for the banking sector was 61,91% as at December 31, above the stipulated minimum regulatory requirement of 30%.
All operating banks were compliant with the prudential liquidity ratio as at December 31.
Notwithstanding the high average prudential liquidity ratios recorded across the sector, the banking industry continued to experience underlying United States dollar cash shortages on the back of high demand for cash.
However, the central bank has been promoting the use of plastic money, resulting in its significant use and decline in the demand for physical cash.
RBZ will continue with efforts to implement measures aimed at addressing the liquidity challenges that have been experienced by the banking sector during 2016.