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Harare - In its report for the quarter ended September 30 2014, the Reserve Bank of Zimbabwe said the banking sector had been profitable despite the decline in overall profit levels.
The Zimbabwean central bank said as at September 30 2014, 13 out of 20 operating institutions reported profits.
The statistics above show that while some banks have struck gold in Zimbabwe, others have been burnt and now question their decision to venture into that country in the first place.
South Africa has its fair share of banks operating in Zimbabwe namely Stanbic (owned by Standard Bank), MBCA, owned by Nedbank, and CABS owned by Old Mutual among others. Fortunately these banks have been successful and profitable for years.
It has however not been the same for other local and foreign investors, whose fortunes have been nothing but bleak since they ventured into Zimbabwe.
One such bank is Mauritius-based AfrAsia Bank Limited. The bank’s fortunes have been so bad that it has decided to isolate its operations in Zimbabwe from those of the holding company.
Chairperson Arnaud Lagesse said “the Zimbabwe entities will cease to be subsidiaries of the Bank and will be held separately”.
Lagesse said the move “will also ensure that the Zimbabwe investment is further ring-fenced and help isolate any potential additional risks associated" with it.
While AfrAsia still believes that its Zimbabwean operations can be restructured to success, Lagesse admitted that investing in Africa is highly risky.
“But dealing in Africa is not risk free, as our investment in Zimbabwe has demonstrated,” he said.
Highlighting the magnitude of the country's problems, Lagesse said the Zimbabwean operations had given rise to an impairment loss of 217 million Mauritian rupees (R78.4m) and a net credit impairment of 108 million Mauritian rupees (R39.05m) on a loan to its subsidiary.
“An unfavourable liquidity situation prevailing in Zimbabwe and significant losses incurred by AfrAsia Bank Zimbabwe Limited affected the Bank’s results considerably,” said Lagesse.
He said the problems in Zimbabwe were mainly due to non-performing loans.
Other banks face the same bleak fate
It is, however, important to note that AfrAsia is not alone in this as other banks are facing the same fate.
Liquidity and credit risk remain the major challenges facing the banking sector in Zimbabwe, with the average non-performing loans to total loans ratio at 20.45% as at September 30 2014.
While AfrAsia has isolated its Zimbabwean operations and is working on restructuring, Strive Masiyiwa-owned Steward Bank has decided to part ways with its CEO Kwanele Ngwenya.
READ: Zimbabwe bank folds
Unnamed sources quoted by Zimbabwean media say Ngwenya, who was hired from South Africa, was forced out of the banking institution following its poor performance and issues relating to non-performing loans.
The sources said the board was not amused by the bank’s bad book and level of non-performing loans. While the official statement said Ngwenya had indicated his desire not to renew his contract - which was due to expire at the end of January 2015 - it is not far-fetched to link his departure with non-performing loans, as the bank has not done well since he came on board.
Banking in Zimbabwe is no easy matter, as earnings capacity is severely weighed down by the rising level of non-performing loans and limited resources.
Most Zimbabwean banks are not adequately capitalised and are also limited in credit creation, with nothing much to lend out.
NOW READ: Zimbabwe banking industry fragile
The Zimbabwean central bank said as at September 30 2014, 13 out of 20 operating institutions reported profits.
The statistics above show that while some banks have struck gold in Zimbabwe, others have been burnt and now question their decision to venture into that country in the first place.
South Africa has its fair share of banks operating in Zimbabwe namely Stanbic (owned by Standard Bank), MBCA, owned by Nedbank, and CABS owned by Old Mutual among others. Fortunately these banks have been successful and profitable for years.
It has however not been the same for other local and foreign investors, whose fortunes have been nothing but bleak since they ventured into Zimbabwe.
One such bank is Mauritius-based AfrAsia Bank Limited. The bank’s fortunes have been so bad that it has decided to isolate its operations in Zimbabwe from those of the holding company.
Chairperson Arnaud Lagesse said “the Zimbabwe entities will cease to be subsidiaries of the Bank and will be held separately”.
Lagesse said the move “will also ensure that the Zimbabwe investment is further ring-fenced and help isolate any potential additional risks associated" with it.
While AfrAsia still believes that its Zimbabwean operations can be restructured to success, Lagesse admitted that investing in Africa is highly risky.
“But dealing in Africa is not risk free, as our investment in Zimbabwe has demonstrated,” he said.
Highlighting the magnitude of the country's problems, Lagesse said the Zimbabwean operations had given rise to an impairment loss of 217 million Mauritian rupees (R78.4m) and a net credit impairment of 108 million Mauritian rupees (R39.05m) on a loan to its subsidiary.
“An unfavourable liquidity situation prevailing in Zimbabwe and significant losses incurred by AfrAsia Bank Zimbabwe Limited affected the Bank’s results considerably,” said Lagesse.
He said the problems in Zimbabwe were mainly due to non-performing loans.
Other banks face the same bleak fate
It is, however, important to note that AfrAsia is not alone in this as other banks are facing the same fate.
Liquidity and credit risk remain the major challenges facing the banking sector in Zimbabwe, with the average non-performing loans to total loans ratio at 20.45% as at September 30 2014.
While AfrAsia has isolated its Zimbabwean operations and is working on restructuring, Strive Masiyiwa-owned Steward Bank has decided to part ways with its CEO Kwanele Ngwenya.
READ: Zimbabwe bank folds
Unnamed sources quoted by Zimbabwean media say Ngwenya, who was hired from South Africa, was forced out of the banking institution following its poor performance and issues relating to non-performing loans.
The sources said the board was not amused by the bank’s bad book and level of non-performing loans. While the official statement said Ngwenya had indicated his desire not to renew his contract - which was due to expire at the end of January 2015 - it is not far-fetched to link his departure with non-performing loans, as the bank has not done well since he came on board.
Banking in Zimbabwe is no easy matter, as earnings capacity is severely weighed down by the rising level of non-performing loans and limited resources.
Most Zimbabwean banks are not adequately capitalised and are also limited in credit creation, with nothing much to lend out.
NOW READ: Zimbabwe banking industry fragile
