via Better fortunes for banks — MMC NewsDay January 19, 2015
THE banking sector industry performance is expected enjoy better fortunes in 2015 relative to last year buoyed by the central bank’s initiatives to rescue the sector from mounting credit risks, a leading research firm has said.
The credit risks are in the form of non-performing loans, MMC Capital said in 2014 Economic Review & 2015 Outlook report.
The banking sector has seen a rise in the level of non-performing loans to 20,45% in September from 1,6% in 2009 raising fears that banks would cut on lending needed to revive the economy.
The Reserve Bank of Zimbabwe (RBZ) has said that it will work on a credit reference bureau to address the information asymmetry gap in the financial sector that has given rise to client defaulting in several banks.
MMC Capital sees the move to set up a credit reference system as a key step in enhancing financial sector stability.
“The credit reference system will complement ZAMCO [Zimbabwe Asset Management Company], and help enhance financial stability by promoting more robust risk management practices, reducing credit risk, increasing the supply of credit to fuel growth-related activities, and helping to promote lower interest rates,” MMC said.
ZAMCO was created last year to buy the bad debt in the banking industry and free banks to accelerate lending to sectors of the economy.
MMC said the capitalisation of RBZ was another welcome development set to bring stability in the banking sector.
“We are of the view that capitalisation of the central bank is key in facilitating the efficient execution of its lender of last resort mandate,” MMC said.
Latest statistics from RBZ showed that 13 out of 20 banks recorded profits in the nine months to September 30 2014.
However, the sector’s profitability lowered 18% to $24,5 million amid rising loan defaults.
In the same period last year, the sector’s net profitability was $29, 93 million.
“The losses recorded by the other seven banking institutions are attributed to high levels of non-performing loans and lack of critical mass to generate sufficient revenue to cover high operating expenses,” RBZ said.
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