By Alois Vinga
Defying all odds, banking sector profitability rose 12x in the first half of 2022, driven by rising US dollar loan advances, which have since overtaken the Zim dollar component, as per the recent mid-term statement on monetary policy revealed.
The plan shows that profitability has increased significantly, demonstrating the resilience of the sector in the face of mounting challenges.
“The banking sector reported total unaudited profits of ZW$181.25 billion for the six months ended June 30, 2022, a 12-fold increase from the total profits of ZW$15.09 billion reported for the corresponding period in 2021,” the MPS said .
However, the growth in banking sector revenues was largely driven by noninterest revenues which accounted for 79.03% of total revenues and consisted mainly of revaluation gains on investment property 25.7%, fees and commissions 21.47% and translation gains on foreign currency denominated ones Assets 20.38%.
During the period, loans and advances to the banking sector increased 2.64-fold, from R$229.94 billion as of December 31, 2021, to R$603.14 billion at the end of June 2022, largely due to translation into foreign currencies denominated loan.
“Loans denominated in foreign currencies accounted for 65.87% of total banking sector loans, up from 36.87% reported as of December 31, 2021.
“During the period, financial intermediation, as measured by the loan-to-deposit ratio, improved from 48.27% as of December 31, 2021 to 53.69% as of June 30, 2022. The banking sector continued to support the productive sectors of the economy, such as evidence of credit to the productive sectors, which accounted for 76.29% of total credit as of June 30, 2022,” the MPS said.
As a result of the gains, the quality of the banking sector’s assets remained satisfactory, with the average ratio of non-performing loans (NPLs) to total loans for the banking sector being 1.50%, against the generally acceptable international threshold of 5%.
As of June 30, 2022, interest income on receivables contributed 18.22% compared to 40.96% of total income in June 2021.