Reserve Bank of Zimbabwe (RBZ) quarterly banking sector report for the third quarter of 2022 has revealed that the country’s banks have high capitalisation thresholds, sound asset quality, and non-performing loans.
The Zimbabwe banking sector is characterised by well-capitalised banking institutions with average capital adequacy ratio of 35,45 percent the highest in two years and well above the regulatory limit of 12 percent.
Capital requirements are standardised regulations put in place for banks and other depository institutions to determine how much liquid capital must be held against a prescribed value of their assets.
Under the current regulations, all banks must have a minimum capital equivalent to US$30 million.
Commercial banks, merchant banks, development banks, finance, and discount houses are required to have minimum capital equivalent to US$20 million while deposit-taking institutions must have an equivalent of US$5 million.
Good liquidity indicators as shown by an average liquidity ratio of 59,51 percent well above the stipulated benchmark of 30 percent.
The RBZ said the ratio has, however, been on a declining trend from a high of 74,85 percent in June 2020 as banking institutions are increasing their lending, as reflected by the gradual increase in the loans to deposits ratio from 44,16 percent in March 2021 to 52,83 percent in September 2022.
Banks have been increasing their support to productive sectors as total banking sector loans and advances increased significantly to $1,1 trillion from $603,14 billion as at June 30 2022.
According to RBZ, the growth was largely attributed to translation of foreign currency denominated loans amounting to $704,71 billion, which constituted 68,97 percent of total banking sector loans.
The banking sector continued to support the productive sectors of the economy as evidenced by loans to the productive sectors constituting 76,29 percent of total loans as at September 30, 2022.
The local banks have also seen the percentage of non – performing loans (NPLs) cool off from a three year high in the quarter ending September 30, 2022.
Despite being within the RBZ threshold of 5 percent, the NPLs rose to 1,57 percent in March 2022, the highest level since December 2019, however, in the period under review they cooled off to 1,41 percent – Harare