Mounting bad loans hamper Zim banks

Credit risk continues to be the biggest drawback for Zimbabwean banks as non performing loans reached 20.45% for the nine months to September 30 2014. According to the Reserve Bank of Zimbabwe’s latest quarterly report, credit risk remained a key challenge across a number of banking institutions. “The earnings capacity has been weighed down by rising level of non-performing loans,” said the RBZ adding that the average ratio of non-performing loans to total loans increased to 20.45% as at September 30 2014, up from 18.49% as at June 30 2014. The RBZ, however, said the banking sector has been profitable despite the decline in the overall profit levels. “In the period under review, 13 out of 20 operating institutions reported profits,” said the RBZ adding that the banking sector reported an aggregate net profit of US$24.35m for the nine months to end-September 2014. “This represents a marginally lower position compared to US$29.93m reported for the same period in 2013.” The RBZ said the macroeconomic constraints as well as institution-specific deficiencies continue to affect the overall performance and condition of the banking institutions. “Economic performance remains fragile, on account of the various challenges the economy is facing, notably supply side bottlenecks, liquidity shortages, lack of long term financing, competition from cheap imports, company closures, and the slow pace of recovery in the advanced economies,” said the Bank. HARARE NAMPA/AFP