aurora
Business Writer
The banking sector’s total profits jumped by $24,43 billion in 2021 amid overall strong performance by the sector on the back of prudential supervision, the regulator, Reserve Bank of Zimbabwe (RBZ) said.
RBZ Governor Dr John Mangudya confirmed the sound performance when he delivered his 2022 Monetary Policy statement on Monday.
“Profitability for the banking sector has recorded an overall improvement. For the year ended 31 December 2021, the banking sector reported unaudited aggregate profit of $59,29 billion, an increase of 69,63 percent from a profit of $34,95 billion reported for the corresponding period in 2020,” the report said.
Most local banks have been hailed for embracing technology and moving away from physical banking in favour of digital and internet-based business, a development which has seen most financial institutions reducing the number of physical branch networks.
During the year under review, interest income from loans and advances contributed 34,99 percent to total earnings, compared to 17,82 percent for the year to December 2020, the governor said, an indication of a shift towards the traditional sources of revenue such as income from financial intermediation activities, which is considered stable and sustainable.
Non-interest income was driven by fees and commissions due to increased transactional volumes on digital platforms in the wake of Covid-19, as well as initiatives by banking institutions to promote the use of plastic money.
Translation gains on foreign currency denominated assets as well as revaluation gains from investment properties also contributed to the growth in other non-interest income.
The monetary policy statement said through sound regulatory supervision, the banking sector operated way above expected capitalisation thresholds with aggregate core capital amounting to $100,83 billion as of December 31, 2021, up from $63,39 billion as of September 31, 2021 mainly attributed to growth in retained earnings.
The banking sector’s average capital adequacy and tier one ratios of 32,86 percent and 26,54 percent, respectively, were way above the regulatory minima of 12 percent and 8 percent, respectively.
Total banking sector assets increased to $796.72 billion in December 2021, from $569,9 billion as of September 30, 2021 mainly attributable to translation of foreign currency-denominated assets.
The banking sector asset quality remains satisfactory with the average non-performing loans (NPLs) to total loans ratio of 0.94 percent as at 31 December 2021, against the generally acceptable international threshold of 5 percent.
The average prudential liquidity ratio was 64,37 percent as at 31 December 2021, against the minimum regulatory requirement of 30 percent, largely reflecting high stock of liquid assets in the sector.
“The increasing economic activity on the back of vaccine rollout, slow-down inflation, expected good rains in the 2021/2022 farming season, and stability of the local currency is expected to provide a stable environment for the banking sector.
“The banking sector will continue to play an important role in supporting the funding requirements of the economy as the recovery gains traction,” the Governor added.
Bongani Ndlovu