A FRICAN Banking Corporation of Zimbabwe Limited (BancABC) loans and advances increased by 81% to ZWL$117,1 billion for the period ended June 30, 2023 with the bulk of the loans in foreign currency.
The figure stood at ZWL$64,8 billion as of December 31, 2022.
BancABC said despite the increased appetite for loans, it would adopt a cautionary lending approach due to the tightening liquidity situation and the need to mantain adequate cashflows to meet customer demand.
The lending was skewed to individuals or retail customers, board chairperson Albert Katsande said in a statement accompanying the financial results.
As loans and advances were now largely biased towards the greenback, Katsande said banks needed to continue exercising due diligence and sound credit management practices to keep non-performing loans low.
“In the banking sector, liquidity conditions evolved from a surplus position during the first few months of the year to become extremely tight, necessitated by withdrawal of liquidity following quarterly payment date [QPD] for corporate taxes as well as marked depreciation of ZWL (Zimdollar) against the US$,” he added.
“Interest rates were initially relaxed before marginally reviewed upwards in line with inflation developments and the thrust being to deter speculative borrowing. Specifically, high interest rates on local currency resulted in a significant shift in borrowing appetite in favour of US dollar-denominated loans.”
Consequently, the composition of US dollar loans to total loans increased from circa 56% in December 2022 to 94% in June 2023.
- BancABC reports 81% increase in loans
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“Reflecting high of dollarisation in the economy, the share of foreign currency deposits also increased from 57% in December 2022, to 86% in June 2023,” Katsande said.
“The shrinkage in contribution of local currency deposits and loans was also as a result of the huge depreciation of the ZWL against the US$.”
He said banks were now under extreme pressure, due to this change to US dollar transactions, to maintain capital above the stipulated amount.
“Against this difficult external context, the group recorded inflation adjusted profit after tax of ZWL$118,6 billion for the period ended June 30, 2023, up 641% from ZWL$16 billion for the period ended June 30, 2022,” Katsande said.
“The performance was driven by growth in total income, which rose to ZWL$234,5 billion during the reporting period from ZWL$56,9 billion reported in June 2022.
“Key income drivers were currency revaluation gains, foreign currency-based income, digital income and fair value gains on investment properties.”
BancABC’s capital adequacy and liquidity ratios were well above the regulatory minimum of 44% and 73%, respectively.
The group closed the period under review with a core capital of US$32,2 million against the required amount of US$30 million.
“Furthermore, the group expanded existing capabilities to support foreign currency-related transactions in a highly dollarised environment and continued with its capital preservation strategies of hedging asset portfolios against inflation and currency erosion while ensuring that costs remain well contained,” Katsande said.
“The executed strategy worked well as it delivered improved performance as demonstrated by increase in profitability and attainment of regulatory capital from organic growth.”
Katsande said the investment made in technology, delivery channels and human capital had been designed to further grow and broaden the group’s revenue streams.
