Ndakaziva Majaka 19 February 2017
HARARE – Zimbabwe’s banks posted a startling 42 percent surge in profits
that buttressed economists and investors’ belief that “unacceptable
charges” and “extortionist fees” were reinvigorating the long-struggling
The super profits announcement was immediately followed by an announcement
by Reserve Bank of Zimbabwe (RBZ) governor John Mangudya in his 2017
monetary policy statement that he had capped interest rates at 12 percent
per annum from 18 percent and further reduced bank charges.
Banks have reneged on past pledges to the RBZ to lower their rates, which
had given Zimbabwean lenders one of the highest returns-on-equity in
Businesses in the country have long complained that high commercial
lending rates, which average 18 percent or more, hobble corporate
investment, while individuals say the high cost puts borrowing out of
reach of many.
Financial institutions quote high lending rates even on struggling civil
servants despite getting cheap funds from State-run pension fund, Nssa.
The super performance of banks was largely in line with what economists
had been expecting: trading revenue was upbeat thanks to increased market
activity following the introduction of bond notes; and a recent upward
move in interest rates produced remarkable gains in banks’ income.
At a time most Zimbabwean businesses are closing shop on the back of
perennial losses driven by economic collapse; just in the first half of
2016 alone, banking sector profitability jumped to $181 million from
In fact, all of the country’s 19 banking institutions – 13 of which are
commercial banks, five building societies and one savings bank – recorded
profits, with an improved average return on assets from two percent to 2,2
percent, while return on equity also went up from 11 percent to 12,6
This performance by the banks comes at a time when the country is
experiencing acute cash shortages caused by withdrawal limits,
consequently leading to numerous withdrawals by depositors and translating
to more income for banks from ATM fees and other withdrawal charges.
Mangudya said interest income continued to be the major income driver
constituting 58,4 percent of total income of $1 billion for the period
Former Finance minister, Tendai Biti, said: “They are making super profits
because they have unacceptable charges and extortionist fees… But it is
not their fault.
“The real issue is that banks are not operating normally. They do not have
good bank assets.
“They cannot lend to businesses because they have collapsed, they cannot
lend to farmers because farmers do not have title deeds…
“So, in the absence of a regime that can help them make money normally
through interest income and lending to good clients, they make money from
non-interest income and they are in a rut because they still have to
remain in business,” Biti said.
He pointed out that the central bank and Treasury still needed to put in
place a statutory instrument to closely monitor banks and charges being
levied on depositors.
“They will simply not comply despite the slash in withdrawal rates, unless
a statutory instrument is enforced to monitor them and deal with the
“The problem is that banking is an accounting-based sector and they will
always make use of creative accounting to pass costs to depositors,” he
The profits naturally surprised most depositors, given the country’s
Harare-based depositor, Karen Mutandwa told the Daily News on Sunday:
“Doesn’t it just come as a shock that banks are the only sector of the
economy that is flourishing? Clearly, they are benefitting from our
“If they are not lending as much as they used to, then where is the
interest income coming from?
“Someone is making a killing in these tough times and someone is not
telling the truth,” she said, standing in a bank ATM queue.
Harare-based economist Issis Mwale said it was a no-brainer that banks
were going to record higher profits in 2016 in spite of worsening economic
conditions, adding the banks were “cashing in on cash scarcity”.
“Can’t you see? Because there is no cash, people are withdrawing more
money and because of this, they incur more in withdrawal fees.
“Cash shortages did affect banks, but they also benefited the most as
their depositors kept withdrawing and performing other functions.
“It is a simple matrix really. But I doubt this year will be great for
them, given withdrawal fees were slashed,” Mwale said.
Bankers have said the RBZ’s newly-introduced withdrawal charges are
anticipated to eat into income, with some pointing out financials were set
to reflect the effect in the first half of 2017.
In his monetary policy statement, Mangudya said: “With effect from 1 April
2017, all banking institutions are required to ensure that lending
interest rates should not exceed 12 percent per annum and that bank
charges that include application fees, facility fees and administration
fee, should not exceed three percent.”
Well placed bankers said the new charges – introduced in line with cash
shortages afflicting the economy – were going to eat into profits as most
local financial institutions had recorded increased withdrawal traffic due
to the present cash challenges.
“..this will definitely eat into income in the medium term. I am sure the
first half of 2017 will have the extent to which the new charges will
affect local banks…” a banker, who spoke on condition of anonymity,
Prior to the country’s cash shortages, banks were charging $2,50 for ATM
withdrawals and about three percent of the withdrawn amount for cash
withdrawals inside banking halls.
However, the RBZ, much to the relief of most depositors, ruled that cash
withdrawal charges be lowered.
The new ATM cash withdrawal charges include $0,50 for $50 and $5 for $500,
while over-the-counter withdrawals from banking halls are charged at
$0,25c for $20, $0,63 for $50 and $2,50 for $200.
While cash withdrawal limits had been reduced significantly, there has not
been a proportionate reduction in the levels of bank charges for the major
part of 2016.
The country has been using a multi-currency regime backed by the US
dollar. Calls for the adoption of the rand have been rejected by the
The current dollar crunch has affected businesses, with companies unable
to pay for crucial imports such as raw materials and equipment for
Equities group, IH Securities cautioned of a turbulent year for banks on
the back of government’s failure to contain expenditure, despite the
fantastic financials recorded in 2016.
“Confidence in the sector is faltering, the sector is becoming a
“On the surface the financial sector remained somewhat resilient in 2016
despite clear headwinds in the form of growing exposure to Treasury Bills,
uncertainty around bond notes and a decline in quality borrowers under the
“We are wary of the financial sector as balance sheets become heavily
exposed to Treasury Bills and as cash balances begin to lean towards bond
notes relative to hard forex,” IH said in its 2017 equity strategy paper.
In 2016, total banking sector deposits increased by 6,1 percent, from $6,1
billion as at September 30, 2016 to close the year at $6,5 billion.
The commercial banking sub-sector accounted for 82 percent of the banking
sector deposits and 74,1 percent of the total banking sector loans as at
December 31, 2016.
Banking sector deposits were dominated by demand and time deposits, which
accounted for 54,6 percent and 26,8 percent of total deposits,
respectively, as at December 31, 2016.
In the year under review, the average prudential liquidity ratio for the
banking sector was 61,9 percent, above the stipulated minimum regulatory
requirement of 30 percent.