eBusiness Weekly
Africa Moyo
Most financial institutions are tightening on lending as they try to significantly reduce Non-Performing Loans (NPLs) ratios. This comes as most banks increased total loans and advances last year to US$4,22 billion compared to US$3,80 billion in 2017.
But the jump in loans and advances saw a concomitant rise in NPLs to 8,30 percent for the entire banking sector, up from 7,08 percent as at December 2017. The globally accepted NPLs benchmark is 5 percent and anything above that becomes worrisome and toxic.
However, since local banks hit an NPLs level of 20,5 percent in 2015, market watchers still believe the current level is not too bad, if it is managed well. A low NPLs level trend is viewed as a sign of stability in the financial services sector.
Despite a jump in NPLs, the banking sector remains adequately capitalised, with an average tier 1 and capital adequacy ratios of 23,84 percent and 30,27 percent, respectively.
The surge in NPLs has now seen banks adopting “stricter” lending criteria including lending to individuals working for “strong companies” and businesses that are doing “exceptionally well”.
Agribank chief executive officer Sam Malaba said the financial institution would “enhance credit granting systems”, going forward.
“Reflecting the sustained debt recovery initiatives and more prudent lending, the NPL ratio improved from 13,48 percent in December 2017 to 8,75 percent as at end of December 2018, a better result compared to industry average of 9,35 percent.
ZB Financial Holdings CEO Ron Mutandagayi says there was a “notable improvement” in the quality of the group’s assets exposed to credit risk, with the NPL ratio improving to 4,6 percent at December 31, 2018 compared to 10,7 percent in the comparative period.
First Capital Bank managing director Samuel Matseketse said the bank’s gross loans and advances to customers grew by 72 percent from US$117 million in December 2017 to US$201 million as at December 31, 2018.
This saw net interest income constituting 49 percent of total income compared to 30 percent in the prior year.
The loan to deposit ratio was raised to 36 percent from 26 percent a year earlier.
Matseketse said the increase in impairment to US$2,5 million for the year ended December 2018 from US$0,1 million “reflects general provisions driven by growth in the loan book and other interest earning assets as well as the effect of aligning the provisioning approach to the new International Financial Reporting Standard 9 (IFRS9)”.
However, Matseketse said; “The bank continues to sustain disciplined lending practices especially considering the high credit risk environment currently prevailing in the market.”
NMBZ Limited chairman Benedict Chikwanha, said the bank continues with its drive to reduce NPLs, with the ratio standing at 7,43 percent as at December 31, 2018. The NPL ratio was lower than 7,98 percent level recorded as at December 31, 2017.
Chikwanha attributed the decline in the NPL ratio largely to “aggressive collections and stricter credit underwriting standards”.
Metbank chairman Darlick Marandure said; “effective risk management policies and procedures” will continue to be pursued through board approved committees namely loans review committee, asset and liability committee (ALCO), credit committee, remuneration committee and other operational risk management committees.
The bank reported a profit after tax of US$17 million in the 2018 financial year, which was a significantly better performance of the results from the previous financial years. Metbank also realised reasonable growth in loans and deposits compared to the previous periods.
Zimbabwe had 19 operating banking institutions as at December 31, 2018 comprised of 13 commercial banks, five building societies, one savings bank.
Other institutions under the RBZ supervision include credit-only-microfinance institutions (199), deposit taking MFIs (six) and two development finance institutions.
