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PROFITS in the banking sector over the first half of the year fell by 17 percent to $52 million following the implementation of a central bank directive to cap interest rates, while bad debts accelerated to $500 million as economic performance continues to weaken.

A banking sector survey by MMC Capital showed non-performing loans (NPL) constituted 13.8 percent of the $3.67 billion loan book as at 30 June, making the country’s NPL ratio one of the highest in sub-Saharan Africa.

“The deteriorating economic fundamentals have been the chief contributor to the sector’s worsening NPL ratio as most borrowers are now failing to service their debts due to deteriorating macroeconomic environment,” the report said.

“This situation will have a huge bearing on the economy as the reduced credit supply will lead to working capital challenges and in many instances businesses will fail to fund capital expenditure.”

Total profit after tax for the reporting banks amounted to $52.1 million for the half-year ending 30 June 2013 relative to $63.3 million in 2012 after the banks signed a Memorandum of Understanding (MoU) with the Reserve Bank of Zimbabwe in January to cut customer service fees.

“Historically, non-funded income has been the major contributor to most banks’ revenue and the MoU (between the bank and the RBZ) was a major blow to the top line,” the report read.

Non-funded income dropped by four percent to $170.6 million in the period under consideration.

The majority of banks have instead, widened e-banking transactional activities which are cheaper than the traditional channels to increase revenue streams.

“Banks seem to have exhausted their capacity to continue implementing cost containment measures as the cost to income ratio remained flat at 72 percent relative to HY 2012,” said the report.

Total banking deposits, at $3.84 billion for the half-year were 1.29 percent lower than prior year.

Demand deposits constituted 52 percent of the total deposits followed by savings and short-term deposits which also constituted 33 percent. Long-term deposits accounted for 14 percent of the total deposits.

CBZ, Zimbabwe’s the largest bank saw its share of deposits rise to 24.9 percent up from 23.85 percent in the prior year although the bank’s deposit base shrunk by 8.3 percent to $878.89 million from $958.83 million last year as consumers appetite to save wanes.


The top quartile banks of CBZ, CABS, Standard Chartered and Stanbic contributed about 65 percent to the earnings base compared to 72 percent in 2012.

Total banking sector assets grew by 19 percent from $4.3 billion to $5.16 billion for the half-year while the loans to deposit ratio also increased to 96 percent from 88 percent, reflecting increased lending despite the risky credit environment.

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