Banks’ Q1 NPLs climb to 8,4 pc

02 Jul, 2017 - 00:07 0 Views
Banks’ Q1 NPLs climb to 8,4 pc RBZ building in HARARE

The Sunday Mail

Enacy Mapakame
NON-PERFORMING loans (NPLs) at local banks worsened to 8,39 percent in the first quarter ended March 31, 2017 from 7,87 percent in the same period a year earlier, the Reserve Bank of Zimbabwe (RBZ) has said.

The central bank’s quarterly review published last week noted that though banks dialled back on loans and advances from $3,7 billion to $3,6 billion in the period, souring loans remained relatively high.

Monetary authorities are targeting to slash the ratio to 5 percent, which is considered to be the internationally accepted level.

Overall, NPLs peaked at 20,5 percent as at September 31, 2014, before declining to 7,87 percent by close of 2016.

The Credit Reference Bureau, which recently went live, is however expected to reverse the recent uptick.

“The level of NPLs is, however, expected to return to the downward trend in response to a number of holistic NPL resolution policy measures by the Reserve Bank, including operationalisation of the credit reference system,” said RBZ in the report.

“The sustainable reduction in NPLs is expected to strengthen banks’ balance sheets and position them to meaningfully contribute to the revival of the economy. The Reserve Bank continues to monitor the NPL trends and the effectiveness of banks’ credit risk management practices,” said RBZ.

Banks have been cutting back on lending since September 2015 as they become increasingly risk averse, particularly in an environment where high interest rates are feeding into high default rates.

Government plans to reduce lending rates, unveil facilities for cross-border traders and improve support for the gold support facility in order to promote financial inclusion.

The RBZ recently reduced lending rates for the productive sector as well as mortgages to 12 percent per annum effective April 1, 2017, and this is expected to drive economic growth in the medium to long term.

In the quarter under review, total loans and advances amounted to $3,6 million, translating to a loans-to-deposit ratio of 54,8 percent.

The productive sectors accounted for 67 percent of total loans, while individual loans took up 19 percent. Government and economists have been pushing banks to skew lending towards production rather than consumptive activities.

Of the total loans to the productive sector, tourism, agriculture and manufacturing accounted for 17 percent, 16 percent and 12 percent, respectively.

The sector’s prudential liquidity ratio — a measure of the stability of banks’ finances — stood at 60,2 percent against a regulatory minimum requirement of 30 percent, as banking institutions adopted a cautious approach to lending.

The sector has, however, been hit by cash shortages that started early last year.

“Notwithstanding the high prudential liquidity ratios recorded across the sector, the banking industry continued to experience underlying cash challenges on the back of continued high demand for cash by the banking public,” said RBZ.

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