adminOliver Kazunga Senior Business Reporter
AGGREGATE core capital base in the banking sector grew by 19 percent to $899.1 million in the first half of 2015, demonstrating the resilience of the sector against a harsh economic environment, Reserve Bank of Zimbabwe governor, John Mangudya, said yesterday.
In his mid-term monetary policy statement, Mangudya said as at December 31, 2014, the banking sector’s aggregate core capital stood at $753.3 million.
Mangudya said all the country’s 13 commercial banks had surpassed the prescribed minimum $25 million core capital requirement.
The banks are expected to reach $100 million core capital by 2020 with CBZ already sitting on $188.72 million as at June 30, 2015.
Of the country’s three building societies, CABS and FBC Building Society had as at June 30, 2015, achieved $99.72 million and $32.74 million respectively while ZB Building Society had $15.20 million as at June 30, 2015.
“The banking sector has demonstrated resilience against shocks and has significantly contributed to the economic transformation of the real economy.
“Growth in the aggregate core capital position was largely underpinned by increased retained earnings. As at June 30, 2015, all operating banking institutions were in compliance with the prescribed minimum capital requirements,” said Mangudya.
He said the government injected $30 million into Agribank while ZB Bank secured $20 million in May 2015, making the ailing institutions compliant with respective minimum capital requirements.
Troubled Metbank’s financial condition has also improved, with a core capital position of $33,74 million as at June 30, 2015.
“Improvement in the bank’s liquidity position is attributed to balance sheet restructuring, strategic realignment towards a property development banking model and cost containment measures among other initiatives,” said Mangudya.
He said the banking sector remained profitable with an aggregate net profit of $43.01 million (excluding Tetrad Investment Bank which is under provisional judicial management) for the half year ended June 30, 2015 up from $26.53 million during the corresponding period in 2014. The RBZ boss said 14 out of 18 operating banking institutions recorded profits for the half year ended June 30, 2015.
Losses recorded by the remaining institutions were mainly attributed to increased levels of provisions, he said.
Mangudya said a number of banking institutions continue to rationalise operating costs while simultaneously implementing revenue enhancement measures, which include growth of non-funded income through introduction of technology-driven products and corporate finance structures.
He said total banking sector deposits continued on an upward trajectory, increasing by 14.2 percent from $4.9 billion as at June 30, 2014 to $5.6 billion as at June 30, 2015.
By the first half of this year, he said, loans and advances amounted to $4 billion translating into a loans to deposit ratio of 71.4 percent.
“Bank deposits were largely dominated by demand deposits, which accounted for 55.49 percent of total deposits. These demand deposits are relatively short-term in nature with constraining effects on banking institutions’ ability to meet the long-term funding requirements of key productive sectors,” said Mangudya.
He said the banking industry was poised for growth with improved capacity to the economy arising from policy initiatives being implemented by the government and the central bank. Mangudya, however, noted that three troubled banks — Interfin Bank Limited, Allied Bank and AfrAsia Bank Limited — closed down due to chronic liquidity and insolvency challenges.
Zimbabwe has 18 operating banking institutions comprising 13 commercial banks, three building societies, one merchant bank, one savings bank and 147 microfinance institutions.
The RBZ also supervises the Small and Medium Enterprises Development Corporation (Sedco) and the Infrastructural Development Bank of Zimbabwe.
The central bank has also issued two deposit taking microfinance licences to African Century Limited, which is finalising the infrastructural and operational requirements before commencement of business and to Getbucks Financial Services (Pvt) Ltd, which has been operating as a credit only micro-finance institution.
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