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Africa Moyo

Deputy News Editor

THE local banking sector has generally been stable, safe and profitable, while non-performing loans are within the internationally accepted threshold of 5 percent, Reserve Bank of Zimbabwe Governor Dr John Mushayavanhu said yesterday.

Presenting the 2024 Monetary Policy Statement in Harare, the governor said the banking sector has “demonstrated resilience to shocks” emanating from the dynamic operating environment.

The sector remains a key catalyst for inclusive and sustainable economic growth, he added. 

“Stability in the sector is attributed to a raft of stabilisation measures by fiscal and monetary authorities,” said Dr Mushayavanhu.

“Banking sector performance remained robust with adequate capital and liquidity buffers, satisfactory asset quality and sustained profitability, among other key financial soundness metrics.”

As at December 31 last year, the banking sector was adequately capitalised and all banking institutions complied with the prescribed tier 1 and capital adequacy ratios of 8 percent and 12 percent.

Aggregate core capital increased from $5,05 trillion as at June 30 last year to $6,31 trillion as at December 31 due to organic growth. 

Retained earnings from some banking institutions were largely driven by revaluation gains from investment properties and translation gains from foreign currency denominated assets.

Presently, banking institutions are pursuing various measures to bolster their capital levels as part of ongoing efforts to ensure they have adequate economic capital commensurate with their risk profiles and to ensure ongoing compliance with minimum capital requirements.

External audits of banking institutions for the year ended December 31 last year are underway. 

From left, Finance, Economic Development and Investment Promotion Deputy Minister, Kuda Mnangagwa, Reserve Bank of Zimbabwe Governor Dr John Mushayavanhu and former RBZ Governor, Dr John Mangudya follow proceedings during the 2024 Monetary Policy Statement presentation at the apex bank in Harare yesterday. – Pictures: Believe Nyakudjara

Dr Mushayavanhu said the RBZ will leverage on the audit reports to conduct capital verification examinations to confirm the banks’ declared capital positions as at December last year.

Total banking sector assets increased from $27,28 trillion as at June 30 last year to $34,41 trillion by December 31.

“Banking sector asset quality remains satisfactory. As at 31 December 2023, the aggregate non-performing loans to total loans ratio (NPL) of 2,09 percent was within the internationally acceptable threshold of 5 percent. 

“The ratio improved from 3,62 percent as at 30 June 2023 reflecting continued sound credit risk management practices and strong internal controls within the banking sector.” 

As at December 31 last year, aggregate banking sector loans and advances amounted to $11,26 trillion, representing a 10,50 percent increase from $10,19 trillion reported as at June 30 last year. 

The increase was largely attributed to an increase in foreign currency-denominated loans, which accounted for 84,67 percent of the sector’s loan book. 

Dr Mushayavanhu said the banking sector continued to support the funding requirements of the productive sectors of the economy as evidenced by loans to the productive sectors, which constituted 72,68 percent of total loans as at December 31.

“The banking sector remains profitable. All banking institutions registered profits with reported aggregate profits of $5,77 trillion for the year ended 31 December 2023, compared to $503,13 billion reported in 2022. 

“The growth in the banking sector income largely emanated from non-interest income, which accounted for 84,27 percent of total income ($10,45 trillion) as at 31 December 2023.”

The establishment of the Collateral Registry in November 2022 in terms of the Moveable Property Interest Act, marked a significant step in the RBZ’s efforts to enhance the credit infrastructure. 

The Collateral Registry is designed to facilitate commerce and industry by enabling individuals and businesses to use their movable property as collateral to access credit. 

As at December 31 last year, 57 institutional users including banks, microfinance institutions, contract financiers and law firms, were using the system.

Dr Mushayavanhu said the Collateral Registry system recorded 1 204 active registered security interests with a total loan amount of $4,59 trillion as at December 31.

Movable assets accepted as collateral by lending institutions range from household goods, private vehicles, trucks, agricultural equipment to shares.