THE average loan-to-deposit ratio for Zimbabwean banks during the first six months of the year was 35,83% from about 62% during the same period last year as banks slow down on lending following the formalised dollarisation of the economy in January.
The levels are remarkably low compared to a regional average of about 79,1% recorded during the same period.
Commercial banks, loan-to-deposit ratio was 44,5%, merchant banks 48%, building societies 28,25% and savings banks 25,31%.
Banks are unique businesses, not only as guarantors of deposits, but also as suppliers of capital without which an economy cannot function.
This balancing act is reflected in the value of a bank’s lending as a proportion of the money it has in deposits.
“An analysis of the extent of credit extension for the three months from April to June indicates that lending has been restricted as reflected by the average loan-to-deposit ratio of 35,83%,” Reserve Bank governor Gideon Gono said.
However, the quests for growth in profits by banks had often been undertaken at the expense of sound lending practices. Since the economy was dollarsised, the pendulum swung too far forcing the Reserve Bank to read on banks the riot in its latest monetary policy presented a fortnight ago.
MBCA has been the emblem for an industry being blamed for closing lending taps.
The Mberikwazvo Chitambo-led bank had the most attractive loan-to-deposit ratio of 148,86% during the first six months of the year. MBCA’s performance is far much better than most major banks in Africa, Europe and America. The bank’s deposits in the period under review was US$38,6 million.
South Africa’s loan-to-deposit ratio is said to average 103%, with the big four banks on Standard on 99%, Nedbank 102%. FirstRand and Absa’s ratio 110%.
TN was second with 90,44%, Kingdom bank 67,38%, NMB 66,35%, CFX 53,65%, Metropolitan bank 52,80%, CBZ 46,92%, Standard Chartered bank 20,24%, Zabg 18,02%, ZB Bank 19,01% Stanbic 14,68%, FBC 11,87%, Agribank 10,32% and Barclays bank 4,16%.
“As monetary authorities we note with concern that, although there is a gradual increase in the level of deposits there is no corresponding level in loans and advances,” Gono said.
Gono said in the commercial banks market segment, the loans/deposits ratios were ranging from a mere 2,33% to 99,8% as at June 30.
“While some banking institutions have mobilised relatively large amounts of deposits, in some instances, this has not resulted in corresponding levels of loans and advances,” Gono said.
Banks do not have other sources of funds beyond deposits, shareholders’ equity, and borrowing, the ratios helps interpreting why banks are so nervous about lending in an unstable environment.
However in the case of listed banks such as Kingdom, NMB, CFX, CBZ and FBC, they have another constituency to answer to — shareholders.
For Merchant banks Interfin had a loan-to-deposit ratio of 99,80%, BancABC (72,25%), Rennaisance (62,59%), Premier (51,09%), Genesis 50,42% and NDH 0%.
For Building society’s FBC’s ratio was 79,26%, while CABS was second with 31,52%. Beverley and ZB Building were third and fourth respectively with 2,33% and 0% respectively.
The country’s sole saving bank POSB’s loan-to-deposit ratio was 25,31%.
“As monetary authorities we are greatly concerned with extreme instances of disintermediation at some banking institutions. While we appreciate the need to conduct due diligence and sound risk management, banking institutions should play a meaningful role and contribute to the economic turnaround of the country,” the Reserve Bank said.
The Reserve Bank said banking institutions should balance the need for sound risk management and financial intermediation in order to boosts confidence in the financial sector and spur the economic recovery process.
In order to promote banks compliance with the recapitalisation deadlines of September 30, the Reserve Bank said it has held “prudential meetings with all banking institutions whose levels were below the required capital adequacy ratios and requested them to submit recapitalisation plans”.
“The recapitalisation plans have revealed that most banking institutions will be recapilatised through fresh capital injections by holding companies, private placements, rights issues and strategic partnerships with new investor,” the Reserve Bank said.
By September 30 commercial Bank are required to have minimum capital levels of UD$6,25 million. merchant bank and building societies – US$5 million while finance and discount houses should have US$3,75 million.
The next deadline is March 31 next year. The amount required are double what Reserve Bank ordered the institution to stick to next month.
Banking institutions are reportedly grappling for lifelines as the first deadline for new capital requirements looms.
As of June 30, a total of US$627,6 million was deposited in the country’s 14 commercial banks.
CBZ handled the most deposits amounting US$183,6 million. Stanbic bank was second with deposits totaling US$132,1 million, while Standard Charted was third after handling US$89,3 million. The rest of the tally reads: Barclays US$74 million, MBCA 38,5 million, FBC US$38,3 million, Kingdom US$23,5 million, ZB Bank US$21,9 million, NMB US$10,6 million, Zabg US$6,3 million, Agribank US$3,5 million, Metropolitan US$2,7 million, TN US$1,8 million and CFX US$783 444.
Of the country’s six merchant banks, BancABC handled the highest deposits during the period under review of US$18,9 million, followed by Premier Bank with US$11,8 million. Interfin’s deposits where US$9 million, while those of Rennaisance and Genesis where US$5,4 million and US$1,9 million respectively.
Of the country’s four building societies, CABS handled the most deposits of US$14,9 million. Beverley was second with deposits amounting to US$2,2 million. ZB Building society and FBC handled US$1,2 million and US$678 887 respectively.