Don’t you too find it rather surprising that the banks with the largest, dreadful and most ridiculous queues all the time, whether it’s month-end, mid –month or beginning of the month, are sitting pretty, ranking high with the largest profits? This is an absolute circus. Let me give you an example. CABS. Zimbabwe’s banks recently posted a startling 42 percent surge in profits. What else is even more surprising is that banks are making more profits during this liquidity crunch in the country than any other time.
Banks are announcing their annual financial results for 2016 with such banks like CABS, POSB, EcoBank, Metbank, Stanbic, NMB, Agribank, BancABC and FBC having all reported profits except for National Building Society (NBS) that made a $3 million loss. NBS could be excused since it’s recently starting. Interestingly, Agribank pulled a shocker, apparently made its first profit in 7 years, yes, you heard me right, in 7 years, 2009 was the last time it recorded a profit. Indeed, was a fruitful year for banks, but at whose cost and how? Could it have been largely contributed to unacceptable charges and exorbitant fees, fair enough, let’s find out.
The super performance of banks was largely in line with what economists had been expecting – trading revenue was upbeat, thanks to increased market activity following the introduction of bond notes: and a recent upward move in interest rates produced remarkable gains in banks’ income.
At a time most Zimbabwean businesses are closing shop on the back of perennial losses driven by economic collapse; just in the first half of 2016 alone, banking sector profitability escalated to $181 million from $127, 4 million.
As a matter of fact, all of the country’s 19 banking institutions – 13 of which are commercial banks, five building societies and one savings banks – recorded profits, with an improved average return on assets from two percent to 2,2 percent, while return on equity also went from 11 perfect to 12, 6 percent.
This performance by the banks comes at a time when the country is experiencing acute cash shortages caused by withdrawal limits, consequently leading to numerous withdrawals by depositors and translating to more income for banks from ATM fees and other withdrawal charges.
Former Finance Minister, Tendai Biti, said, “They are making super profits because they have unacceptable charges and extortionist fees…But it is not their fault”
He pointed out that the Central Bank and Treasury still need to put in place a statutory instrument. Instruments closely monitoring banks and charges being levied on depositors.
The problem is that banking is an accounting-based sector, and they will always make use of creative accounting to pass costs to depositors.
It’s a no brainer that banks were going to record higher profits in 2016. In spite of worsening economic conditions, because banks are simply “cashing in on cash scarcity.”
Good news for us the depositors, though not some good news for the banks. RBZ’s newly-introduced withdrawal charges to dwindle bank’s income, with some bankers pointing out financials are set to reflect in the first half of 2017.
Ok, wait a second…seriously, bankers, are admitting to being the only sector of the economy that is flourishing, clearly benefiting from our misery. Prior to the country’s cash shortages. Banks were charging $2.50 for ATM withdrawals and about three percent of the withdrawals inside banking halls.
Here’s list of the banks and the profits they made in 2016. More banks will be announcing results in the coming weeks. Hence will keep updating this article as the results come in.
- CABS – 39.2 million profit
- FBC Holdings – $21.9 million profit
- Stanbic Holdings – $21.2 million profit
- Ecobank – $9.9 million profit
- POSB – $9.68 million profit
- NMB Bank – $5.1 million profit
- AgriBank – $4.8 million profit
- BancABC – $1.8 million profit
- Metbank – $660K profit
- National Building Society (NBS) – $3 million loss
In the year under review guess we now all know how these banks largely accrued such high profits. From you, the depositor. Last year there were massive cash shortages. This situation that was exploited by some banks, who levied very high rates for withdrawals as well as electronic transfers. Thanks to RBZ which had to step in and direct the banks to charge lower rates after a public outcry. Personally, I think 2017 banks’ income are likely going to dwindle due to that effect.
