Zim banks profit out of transaction charges

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By Alois Vinga

BANKING institutions which have so far reported their financial performances for the first half of 2019 raked in millions derived from transaction fees, monthly account service charges and commission fees among others, registering a revenue growth of between 40% and well above 100% .

An analysis of various financial statements that have been published so far shows that non-interest income is growing much faster than interest based income.

Agribank chairperson, Thomas Nherera said that non-interest income grew much faster during the year’s first half.

“Non-interest income grew by 121 % from $7.1 million for half year of 2018 to close the first half of 2019 at $15.7 million. Growth on non-interest income was mainly due to increased customer transactions from the ICT delivery channels and electronic banking,” he said.

In comparison, interest based income grew by 15% from $14.5 million recorded during the comparative period last year to the current $17 million.

First Capital Bank’s director, Sam Matsekete said that while interest income grew by 9% compared to the same period in the prior year driven by growth in customer assets to $19.3 million, net fee and commission income grew by 74% inclusive of the effect of exchange rate movements to $ 23.4 million.

The FBC Holdings Limited, Group chairperson, Herbert Nkala echoed similar sentiments reporting that Net Interest Fees and Commission income for his bank totalled $32.3 million as the group continues to make strides on its digitalisation strategy.

In comparison, during the period under review, net interest and related income stood at $27.3 million.

Diversified financial services company, ZB Bank group chief executive, Roy Mutandagayi said that net interest income from lending and trading activities of $14.3 million up to 30 June 2019 was 40% better than $10.2m reported for the corresponding period in 2018.

Banking commissions and fees stood at $28 million for the six months to June 2019 registering an increase of 39 % when compared to $19.8 million registered in June 2018.
“Commission and fee rates were adjusted during the second quarter of 2019 to keep track with general price movements,” Mutandagayi said.

Notably, Standard Chartered Bank raked in $20 million through fees and commission income at a time when net interest income injected $24.4 million.

Assessing the obtaining trends, economist Doctor Godfrey Kanyenze said that the income levels reflect a highly imbalanced environment where businesses are doing everything to make profits while employees are not being remunerated accordingly.

“The fact that banks have for years been making profits out of transaction fees is not new considering that the current borrowing interest rates and currency problems being charged on loans are too high and discouraging thereby leaving non-interest avenue as one of few available options to the banks. Such trends reflect the existence of policy problems which need urgent redress,” he said.