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Oliver Kazunga Senior Business Reporter—
COMMERCIAL bank CBZ has emerged as one of the strongest institutions after surpassing the $100 million prescribed minimum capital requirement which is effective by 2020. In 2012, the Reserve Bank of Zimbabwe raised capital requirements for banks tenfold in a bid to protect depositors’ funds. Under the arrangement, the monetary authority said between 2012 and 2020 commercial banks were required to raise their minimum capital levels from $12,5 million to $100 million.
RBZ governor Dr John Mangudya indicated in his maiden monetary policy presented a fortnight ago that CBZ’s capitalisation level was now at $153,74 million.
He also indicated that as at June 30, 2014, a total of 14 out of 19 operating banking institutions excluding POSB were in compliance with the prescribed minimum capital requirements.
Some of the institutions included CABS, Stanbic Bank, Steward Bank, Standard Chartered Bank and FBC whose capitalisation levels were $88.08 million, $73,67 million, $62,90 million, $61,15 million and $38,78 million respectively.
“On aggregate, core capital for the banking sector amounted to $753.09 million as at 30 June 2014 (excluding Interfin Bank which is under curatorship), compared to $790.35 million as at December 31, 2013,” said Dr Mangudya.
He said the reduction in the total core capital was largely attributed to loan loss provisions and subdued earnings performance by some banking institutions.
The banks, he said, have submitted recapitalisation plans which were hinged on organic growth, injection by shareholders, rights issues and mergers and acquisitions for compliance with the minimum capitalisation requirements.
“Efforts by banks to increase their capital positions have been constrained by a number of challenges including the macroeconomic environment and subdued foreign direct investment.”
On the sector’s profitability, he said the financial services industry has remained “generally” profitable with statistics indicating an aggregate net profit of $13.84 million for the half year ended June 30, 2014 up from $4.90 million during the corresponding period in 2013.
“A total of 12 banks recorded profits for the period ended June 30, 2014. The losses recorded by the few banking institutions are attributed to high levels of non-performing loans, lack of critical mass in terms of revenue to cover high operating expenses and deliberate strategy by some banks to clean up bad loan books through provisioning,” said Dr Mangudya.
He said total banking sector deposits increased by 4.86 percent from $4.73 billion as at December 31, 2013 to $4.96 billion as at June 30, 2014, while loans and advances marginally increased from $3.70 billion to $3.81 billion, during the same period.
In light of the challenging economic conditions and increasing cost of doing business, the debt repayment capacity of the borrowers remained under stress.
“Credit risk remains a key component in the risk profile of the banking sector. As a result, the level of non-performing loans has risen from 15.9 percent as at December 31, 2013 to 18.5 percent as at June 30, 2014,” he said.
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