THE financial services sector delivered a mixed, but progressively improving performance in 2025, shaped by macro-economic stabilisation measures, tight monetary policy and a continued shift towards US dollar-based intermediation.
While operating conditions continued to be challenging, particularly during the first half of the year, relative currency stability has created a more predictable operating environment compared to prior periods. This stability improved visibility for balance sheet management and reduced earnings volatility across the sector.
As of the third quarter, monthly ZiG inflation averaged 0,5% from February to September 2025, declining from 0,4% in August 2025 to -0,25% in September, according to central bank statistics. Exchange rate stability was reflected by the interbank exchange rate oscillating around ZiG 26,76 per US dollar during the third quarter of 2025, with the parallel market premium also declining towards convergence with the interbank rate.
The remaining gap is explained by an illegality premium and the search costs associated with the risks of obtaining foreign currency from informal channels.
The banking sector benefited from improved liquidity management, higher levels of US dollar-denominated transactions and stronger non-interest income streams, especially from transactional fees and treasury-related activities.
Asset quality showed signs of stabilisation, with non-performing loans largely contained as institutions maintained conservative lending standards and a preference for short-tenor, low-risk exposures.
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Capital adequacy across the sector generally remained sound, although real capital growth was constrained by persistent inflationary pressures and limited opportunities for long-term lending. This caution comes as the sector looks ahead to Zimbabwe’s announced 2030 mono-currency regime, leaving it unsure of contracts that go beyond 2025.
On the other hand, insurance and asset management firms demonstrated notable resilience during the year.
Growth was supported by higher US dollar-based premium inflows, better claims management, and increased demand for capital preservation and wealth protection products.
However, performance remained uneven, particularly for portfolios with significant exposure to local-currency instruments, where real returns continued to face pressure.
As of the second quarter of 2025, the Insurance and Pensions Commission anticipated growth that would broaden the revenue base, improve coverage potential, and reduce systemic risk. With a stronger fiscal position and improved private sector credit access, the regulator highlighted confidence in long-term financial instruments such as insurance continuing to firm up.
Capital markets activity improved meaningfully in the second half of 2025, supported by improved investor sentiment.
The Victoria Falls Stock Exchange (VFEX) emerged as a relative outperformer, driven by strong performances from select counters and growing investor confidence in US dollar-denominated assets. This recovery created opportunities for financial services firms to expand participation through advisory, custody, brokerage and asset management services.
Structurally, the sector underwent a significant shift in earnings composition during the year.
Historically, financial services performance had been heavily supported by translation gains, pre-evaluation gains, and monetary gains — factors that inflated both top-line and bottom-line performance, but did not reflect underlying cash generation.
In 2025, improved macro-economic stability effectively stripped out these excess earnings layers. As a result, sector performance transitioned towards cleaner, higher-quality earnings, where revenue growth was increasingly driven by core interest income and sustainable non-interest income, rather than currency-related distortions.
This marked a migration from inflated, non-recurring earnings towards real, cash-backed profitability.
Overall, while headline growth moderated, the quality, sustainability and transparency of earnings improved significantly, positioning the financial services sector on a more stable and credible footing going forward.
A financial analyst at Fincent Capital, Kudakwashe Taimo, said improved monetary discipline and relative exchange-rate stability enhanced predictability for financial institutions, as higher US dollar transaction volumes supported revenue growth, particularly for banks with strong transactional platforms.
“Resilient capital markets performance, especially on the VFEX, improved confidence and created new fee-generating opportunities. Prudent risk management helped contain credit risk despite a subdued lending environment, while product innovation in asset management and insurance supported client retention in a challenging macroeconomic context,” he said.
However, Taimo said despite these positives, several structural constraints persisted, such as limited credit expansion as banks remained highly risk-averse, with lending skewed towards short-term facilities, constraining real sector growth.
Taimo noted that weak real returns on local-currency assets continued to undermine savings mobilisation and long-term investment products, as well as shallow market depth — particularly on the VFEX for financial sector counters — which limited price discovery and liquidity.
“Overreliance on non-interest income exposes institutions to policy and regulatory shifts. Capital erosion risk remains a concern for institutions unable to effectively hedge against inflation or currency volatility,” he said.
Investment analyst Enock Rukarwa said the sector had lost a lot of “fat”, which was in the form of translation gains, pre-evaluation gains and monetary gains.
These, he said, were the three pillars that used to dominate the performance of the financial services sector.
“But given the stability that we have seen in 2025 and from even April 2024 to date, this stability has ensured that the top-line and bottom-line for the financial services sector is now clean,” Rukarwa said.
“It’s now real money. It’s now interest income and non-interest income. This is pure money without any translation gains, monetary gains, or pre-evaluation gains.
“So, to sum it up, the performance of the financial services sector has migrated from a position where it was carrying a lot of excess numbers, which were not necessarily real money, to a situation whereby the quality of earnings is now improving,” he added.
Looking ahead, Rukarwa said if relative stability is sustained in 2026, the quality of the financial services sector’s earnings will continue to improve.
“However, margins may be thin, but the quality of those earnings will be better compared to what we have seen in the past five or even ten years,” he said.
Taimo, on the other hand, said the outlook for the financial sector was cautiously optimistic, anchored on the assumption of continued macroeconomic stability and consistent policy execution. He said banks were expected to gradually increase US dollar-denominated lending, particularly to export-oriented sectors, infrastructure-linked projects, and corporates with predictable foreign currency cash flows.
“This should support modest balance sheet growth while preserving asset quality. Margin expansion is likely to remain constrained, placing greater emphasis on operational efficiency and digital scale,” Taimo said.
“The insurance and asset management sectors are likely to benefit from growing demand for US dollar-based savings, income, and pension products, especially as institutional investors seek yield stability and regulatory compliance. Meanwhile, capital markets are expected to deepen further, with REIT listings and additional corporate activity potentially broadening the investment universe.”
However, he warned that risks were skewed towards policy consistency, liquidity conditions, and the pace of real sector recovery.
Sustained confidence is expected to depend on maintaining monetary discipline, strengthening market infrastructure, and improving investor protection frameworks.