Zimbabwe’s banks weather the storm
ZIMBABWE’S banks gained US$50 million in after tax profits during the year ended December 31, 2015, as five previous loss-makers returned to the black despite a deteriorating climate, an analysis of the sector by MMC Capital has indicated.
MMC said combined after tax profits rose by 63 percent to US$128 349 060 during the review period, from US$78 892 207 the previous year, after “notable improvements in impairments management, new products and branch network expansion”.
This was in line with what the central bank said in January that non-performing loans dropped to 10,9 percent last year, from 20,1 percent in 2014.
The establishment of the Zimbabwe Asset Management Corporation to absorb the bulk of toxic assets worked in the sector’s favour.
Of the five banks that returned to profit, FBC Bank reported a 2 895 growth in profit to US$7,6 million in 2015, recovering from a loss of US$272 000 in 2014.
A cluster of mid-tier banks, led by the transforming POSB, were at the heart of the growth, with the lower end of the market outfit putting up a 532 percent rise in profits to US$7,9 million, from a profit of US$1,2 million the previous year.
“Profits were predominantly po-sted across the board with aggregate banking sector profit after tax (PAT) at US$128 million, rising from US$79 million recorded in 2014,” MMC said.
“The rise in PAT was mainly attributed to an improvement in fortunes for banks such as Metbank, FBC, BancABC and ZB Bank, which all moved into profitability in the year under review. Other previously profitable banks such as POSB, Ecobank and NMB registered impressive growth in profits, advancing by 532 percent, 141 percent and 235 percent respectively,” MMC added.
All 16 banks reported profits in 2015, compared to 11 in 2014, as sector players rolled out new products and entered the ICT based banking market, while others opened new branches.
MMC attributed the rise in revenue to technology based banking at POSB, which expanded its international money transfer and agency business.
In November 2014, Steward Bank rolled out agent banking outlets, which opened a fresh page on the Zimbabwean landscape.
Under the model, selected EcoCash agents were allowed to use Steward Bank’s 10 000 strong footprint to offer basic services under the retail bank.
A fortnight ago, Steward Bank chief executive officer, Lance Mambondiani, said the agent banking model represented the future.
“We don’t believe we should open 1 000 branches countrywide,” Mambondiani said.
“We have established 3 000 agencies, which make us the biggest bank (by network) in Zimbabwe,” said Mambondiani.
Despite the poorly performing economy, characterised by declining manufacturing capacity and subdued foreign direct investment, the banking industry has begun to respond to measures laid out by the central bank to stabilise the financial markets.
Bank closures hit the sector between 2003 and 2008, before stability briefly returned to the market after dollarisation in 2009.
But since 2012, weaker banks have collapsed.
These include Royal Bank, AfrAsia Kingdom Bank, Allied Bank, Tetrad Investment Bank and Interfin Banking Corporation.
While cash shortages returned to haunt the sector in the past year, MMC said based on the 2015 financial results, banks were recovering.
“The FY (full year) 2015 financial results for banks give a clear testament that the banking sector, indeed, is weathering the storm,” the report said.
“The banking sector in Zimbabwe is showing positive signs of sustained growth despite the obtaining operational challenges. CABS, accounting for 22 percent of total sector profitability, had the largest market share. Other notables were CBZ and Stanbic with 20 percent and 19 percent contributions respectively.”
“Two of the traditional big banks, namely Barclays and Standard Chartered, gathered less than four percent combined contribution to total sector profitability. Reputed for their cautious approach, the two banks seem to have lagged behind the other tier 1 and tier 2 banks on this front, with StanChart in particular suffering a 94 percent decline in PAT due to a substantial tax expense,” the report said.
It said commercial banks contributed a bigger share of bank profits, accounting for 66 percent during the reporting period, from 61 percent the previous comparable period.
However, the traditional big banks failed to match the growth reported by others.
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