THE Reserve Bank of Zimbabwe (RBZ) says the banking sector remains generally stable despite a challenging economic environment characterised by tight liquidity conditions.
In its first quarter review, the central bank said some of the challenges facing the sector were transitory deposits, limited inter-bank trading, general market illiquidity and its own limitations as a lender of last resort.
“The liquidity of the banking sector measured by the prudential liquidity ratio, which is a reflection of an institution’s ability to meet its maturing obligations as they fall due, remained satisfactory,” the bank said, adding that the ratio was at 38 percent, which is above the regulatory minimum of 30 percent.
The central bank said credit risk remained a major challenge with the average ratio of non-performing loans to total loans increasing to 16.9 percent up from 15.9 percent in December last year.
“This trend is partly a reflection of macroeconomic challenges that have militated against borrowers’ ability to service loans,” the bank said.
Commercial banks accounted for 92.7 percent of total banking sector loans and advances.
During the period under review, a number of banks were compliant with the minimum capital requirements of $25 million while one had surpassed the $100 million requirement by 2020.
“The remaining non-compliant banks are instituting various measures towards compliance,” RBZ said.
However, it said the average capital adequacy ratios for the sector had been declining from as high as 18,6 percent in June last year to the current 13,6 percent although it was still above the required minimum of 12 percent.
This was attributed to the decline in the level of capital coupled with the growth in risk weighted assets (sector loans and advances).
Persistent losses being recorded by some banking institutions further threatened the sector’s capital levels, according to the report.
The report said a few banks with a combined market share of 8.1 percent in terms of assets were facing liquidity and solvency challenges although it said these were considered to be of low systemic importance.
“The Reserve Bank continues to closely monitor these institutions,” it said.
During the period under review, 16 out of 21 institutions, recorded profits. Aggregate net profit stood at $20 million up from $0.47 million last year.Advertisement
Interest income accounted for 63,8 percent, while non-interest income was 36 percent.
Deposits amounted to $4,8 billion, while loans and advances were $3,6 billion, translating into loans to deposits ratio of 78 percent.
Bank deposits were dominated by demand deposits which accounted for 57.9 percent of total deposits.