Banking sector’s credit risk remains low: RBZ

ThE reserve Bank of Zimbabwe (RBZ) says credit risk in the banking sector remains low due to sound credit risk management systems and strong internal controls by banking institutions.

In its banking sector report for the quarter to September 2023, the central bank said the aggregate non-performing loans to total loans (NPL) ratio of 2,34 percent remains within the acceptable international threshold of 5 percent.

“The low NPL ratio is reflective of sound credit risk management systems and strong internal controls by banking institutions,” reads the report.

The bank said it will continue to closely monitor developments in the banking sector’s credit risk exposures.

In 2014, the NPL ratio surged to 20,45 percent, surpassing the internationally acceptable threshold of 5 percent, which prompted the RBZ to establish the Zimbabwe Asset Management Company to clean up the non-performing loans.

In that regard, the banking sector has been prudent in disbursing loans while at the same time investing heavily in sound credit management systems.

The sector’s total loans and advances, which accounted for 30–40 percent of the total banking assets, remained dominant.

The RBZ said the banking industry is expected to remain resilient, with banks playing their critical intermediary role.

“Banking institutions are expected to continuously evolve and build financial and operational resilience,” said the RBZ.

For the period under review, the central bank said the banking sector remained profitable, with an aggregate profit of $4,67 trillion for the nine months to September 30, 2023, compared to $341,28 billion reported in the corresponding period in 2022.

“profitability was mainly driven by non-interest income, which accounted for 86,73 percent of total income. The non-interest income was primarily comprised of translation gains on foreign currency assets and investment properties, as well as fees and commissions,” reads the report.

According to the report, aggregate banking sector deposits continued on an upward trajectory, reaching $16,08 trillion, and this was mainly driven by foreign currency-denominated deposits, which accounted for 80.49 percent of total deposits.

During the quarter under review, the total banking sector assets amounted to $28,36 trillion, an increase of 3,95 percent from $27,28 trillion as of June 30, 2023. — BH24.