Banks Maintain Solid Footing: RBZ

THE banking sector continues to operate on a sound footing premised on adequate capitalisation and improved performance despite persistent negative macro-economic indicators, Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mangudya, has said.

The banking sector aggregate core capital increased by 1,13 percent, from $1,37 billion as at December 31, 2017 to $1,38 billion as at June 30, 2018, on the back of improved earnings performance, said Dr Mangudya in his mid-term monetary policy statement presented on Monday.

Banks Maintain Solid Footing: RBZ

“As at June 30, 2018, the banking sector remained adequately capitalised and capital held by banking institutions was considered sufficient against risks, as reflected by average tier 1 and capital adequacy ratios of 22,70 percent and 26,32 percent, respectively,” he said.

As at June 30, 2018, all banks were in compliance with the prescribed minimum capital requirements of $25 million for commercial banks and $20 million for building societies.

Dr Mangudya said the financial institutions were making significant progress towards meeting the 2020 minimum capital requirements.

“In terms of the capitalisation plans submitted by banking institutions, all locally-owned commercial banking institutions have indicated plans to operate as tier 1 banking institutions together with foreign-owned banking institutions, which are required to maintain minimum capital of $100 million,” he said.

As at the end of the first half, three banking institutions namely, CBZ ($173,33 million), Stanbic ($135,89 million) and CABS ($128,53 million) were already compliant with the 2020 minimum capital requirements.

In terms of deposits, Dr Mangudya said, congregated deposits amounted to $9,53 billion as at June 30, 2018 representing a 12,38 percent increase from $8,48 billion reported as at December 31, 2017.

He indicated that the banking industry was predominantly funded by demand deposits, which accounted for 64,47 percent of total deposits, time deposits 24,34 percent, call deposits 1,33 percent, savings deposits 4,76 percent, foreign deposits (foreign entity deposits) 1,60 percent and foreign deposits (foreign lines) 2,19 percent, and other deposits 1,32 percent.

Total banking sector loans and advances increased by 7,37 percent from $3,80 billion as at December 31 last year to $4,08 billion as at June 30, 2018.

“As the economy rebounds, banking institutions are urged to ensure that lending rates are supportive of economic recovery to enhance productive sector lending,” said Dr Mangudya.

“The quality of the banking sector loan portfolio continues to improve as reflected by the ratio of non-performing loans (NPLs) to total loans of 6,22 percent as at June 30, 2018 from 7,08 percent as at December 31, 2017”.