Banks stay away from lending

The dollarisation of  the country’s economy was so sudden and without the backing of international reserves, resulting in the central bank failing to immediately convert Zimbabwe dollar balances of the banking system into foreign currency.
This made both domestic savings of the public and money capital balances of banks worthless.
Additionally, the Reserve Bank of Zimbabwe had recalled all Treasury Bills held by banks and redeemed them in local currency even before maturity just before the dollarisation.
As a result, the recovery of the financial sector has in effect depended on foreign currency capitalisation of banks and the attraction of foreign currency deposits from the public.
Nevertheless, Zimbabwe’s financial sector is expected to play a key role in the mobilisation of resources to drive the country’s economic turnaround following the dollarisation of the country’s economy early this year to evade a moribund domestic currency hit by hyperinflation.
The role of the financial sector in turning around the country’s economy will depend largely on the mobilisation of deposits, as well as channelling of these resources to the productive sectors of the economy to stimulate growth.
The sector had witnessed massive capital flight, the collapse of financial institutions, negative real interest rates as well as a number of currency revaluations that had all militated against public confidence in the banking sector.
Deposits were significantly eroded by hyperinflation, and depositors lost value because they could not withdraw their money from banks due to chronic shortages of notes.
But confidence is slowly creeping back into the financial services sector, with indications showing that deposits are following bank size.
Lending, however, remains slow due to the increasing aversion of risk in the dollarised market where banks fear that large advances books could precipitate significant write-offs that could wipe off capital.
Total assets for CBZ Holdings, which accounts for CBZ Bank, CBZ Asset Management, CBZ Prop-erties, Optimal Insurance, CBZ Building Society and Transcont-inental stood at US$256,4 million as at June 30, 2009.
CBZ Bank, the group’s flagship  had total assets amounting to US$219,8 million.
Stanbic Bank trailed with a balance sheet size of US$162,9 million during the same period, with Standard Chartered Bank (Stanchart) coming third at a total asset base of US$135,4 million and Barclays taking fourth spot at US$116,7 million
CBZ Bank again took the top spot in terms of deposit mobilisation, with customer deposits amounting to US$184,2 million for the half year to June 30, 2009.
Total deposits, including those held by building societies and other banking institutions, totalled US$705 million by the end of June 2009.
Stanbic Bank had a deposit base of US$138,9 million, making it a formidable player in the sector, while Barclays and Stanchart had total deposits of US$74 million and US$89,4 million respectively.
FBC Bank is also progressing towards the big-player status, shrugging off historical shareholder ties that had dragged its reputation. With the able leadership of veteran banker Livingston Gwata at the holding company level, the bank has displayed some acumen that has so far been lacking among indigenously-owned banking peers, most of which are battling to meet new capitalisation requirements from the central bank.
The balance sheet size for FBC Bank stood at US$64,7 million, while total deposits from customers amounted to US$31,9 million.
Another local bank that appeared to have shrugged off the turbulence in the local market, as well as its own woes with regulators was NMBZ Bank, with total assets amounting to US$24,9 million and an advances book of US$8,7 million for the six months to June 2009.
Deposits at the bank were at US$13,8 million.
ZB Bank, part of the troubled ZB Financial Holdings group, is beleaguered and battling to raise fresh capital, as is CFX Bank, the product of a controversial merger between Century Bank and CFX Financial Services, which is reportedly a takeover target by a Zambian bank to help shore up its capital.
ZB Financial Holdings chief executive officer, Elisha Musha-yakarara, admitted that banking subsidiaries, which include a building society, had largely been subdued as a result of the unavailability of liquidity and the rapid turnover of customer balances.
ZB Bank had an asset base valued at US$37,7 million, with advances standing at US$3,7 million. Deposits were at US$22,1 million. Customer confidence on the group’s operations was hurt by the placing of the group under targeted sanctions by the United States and the European Union.
But Mushayakarara reckons the worst is over and the group’s operations are now on a sustainable road to recovery and profitability.
Bryan Hofmann, CFX Financial Services board chairman, suggested in a recent statement accompanying results for the half year to June 30, 2009 that they were planning to have a rights issue before the end of this month.
There is, however, nothing to show this would take place soon.
ZABG Bank, previously known as Zimbabwe Allied Banking Group, had total assets amounting to US$14 million, with a deposit base of US$6,9 million. The board is currently “working hard” to ensure the bank’s compliance with new recapitalisation levels.
But lending across the banking sector remains low.
Advances, including overdrafts, at CBZ Bank amounted to US$86 million. The bank had US$40 million sitting in nostro accounts.
A nostro account is a bank account established in a foreign country for the purpose of holding that country’s currency.
Barclays Bank had loans and customer advances to the tune of US$1,6 million during the half year to June 30 2009, against cash and bank balances amounting to US$76,7 million.
Gross loans and advances to customers amounted to US$20,3 million at Stanbic. Some banks have made public commitments to increase lending. Loans and advances at Stanchart amounted to US$17,9 million.
Barclays chairman, Anthony Mandiwanza, said the bank was introducing a number of new products during the second half of the year to augment the current product bouquet.
“Barclays will continue efforts to rebuild the advances book to ensure that your bank is well positioned to grow shareholder value,” said Mandiwanza. “Such growth in advances will, however, still be subjected to rigorous risk processes to ensure s high quality advances book that will minimise write-offs in the future.”
While not spelling out its own advances policy during the second half, Stanchart board chairman Honour Mkushi said: “Economic policy stability should enhance confidence with the banking public and encourage savings. This will encourage banks to lend more to industry and commerce.”
Gibson Mandishona, NMBZ  chairman, said: “The multi-currency exchange regime has largely been characterised by constrained liquidity, lack of a sustainable savings culture by depositors and high operational costs…”
He said the banking group would “take advantage of new opportunities to increase revenue streams and grow its deposit base.”