Enacy Mapakame Business Reporter
Zimbabwe’s listed financial services sector has remained profitable largely on the back of cost containment measures and cautious lending.
Latest financial results for the half year to June 30, 2017 show that while banks registered a slowdown in bottom-line growth, the sector remains in the black. The banking stocks, CBZ Holdings, Barclays, FBC Holdings, NMB and ZB Financial Holdings recorded profits for the period to June 30, 2017.
Zimbabwe’s largest banking group, CBZ Holdings saw profit after tax for the period marginally increased to $12 million on the back of an eight percent increase in total income at $80,4 million. All of the group’s business units had a positive contribution to both revenue and profitability.
The financial services group indicated its continued cost containment initiatives with cost to income ratio falling to 66 percent from 72,2 percent in June 2016. FBCH’s profit after tax for the period to June 2017 rose 9 percent to $9,6 million. Its cost to income ratio declined to 74 percent from 76 percent in the prior year while loans were 7 percent weaker to $258 million.
NMB Holdings said after-tax profit for the six-months to June 30, 2017 jumped 35 percent to $3,6 million from $2,6 million in the prior comparable period . At ZBFH, net profit for the period rose 38 percent to $8,17 million from $5,94 million recorded during the same period in the prior year with all the strategic business units operating profitably.
Other non-listed banks such as Ecobank, Standard Chartered, Stanbic, Agribank, MBCA also reported increase in profitability for the half year to June. However, the People’s Own Savings Bank (POSB) reported a contraction in profits.
Also important to note is the role that Treasury Bills has played in the banking sector. CBZH chief executive Mr Never Nyemudzo, told analysts that TBs had become an important aspect of the banking sector and brought stability to the group’s balance sheet.
Government has issued TBs worth $2,5 billion as at June 30 2017. Following the Reserve Bank of Zimbabwe’s target set on non-performing loans (NPLs) to as low as 5 percent in December 2016, banks have embraced cautious lending as well as make significant write downs. Average NPLs for the listed banks have ranged from 10 percent to 0,8 percent. Industry average NPL rate as at June 30, 2017 is at 7,95 percent.
Analysts say the banks will, however, continue to struggle to reach the 5 percent level on average NPL ratio, as the liquidity crisis has had a big impact on companies’ ability to pay back their obligations as well as the slowdown in economic growth affecting all sectors.
The banking sector has also seen an increase in deposits. According to the Reserve Bank of Zimbabwe quarterly review for the sector, aggregate banking sector deposits as at 31 March 2017 marginally increased by 0, 61 percent to $6,55 billion from $6,51 billion as at December 31, 2016.
The commercial banks accounted for 83 percent of the sector’s deposits and 74 percent of the total loans. Deposits were dominated by demand and time deposits, which accounted for 56,9 percent and 27,87 percent of total deposits respectively.
But as at June 30, 2017, 71 percent of the total deposits were made of savings and demand deposits while 2,83 percent were bond notes and coins. At least 25 percent consisted of time deposits.
There has however been a slowdown in loan activity resulting also in fall in loans to deposit ratio as banks reduce their appetite to lend amid the high default risk on the back of the challenging economic environment.