BANKING SECTOR RECORDS DECLINE IN GROSS LOANS

Tue, 26 Dec 2017 13:07:55 +0000

By BUUMBA CHIMBULU

THE banking industry as at end of October 2017 recorded a decline of 3.8 percent gross loans and advances owing to increased Non-Performing Loans (NPLs).

The sector during the period under review recorded K23.4 billion worth of gross loans and advances from K24.3 billion recorded during the same period in 2016, representing a decline of 3.8 percent.

According to the Bankers Association of Zambia (BAZ) chief executive officer, Leonard Mwanza, the ratio of NPLs remained above the 10.0 percent prudential threshold, as a result, banks had to raise provisions to cover the incurred losses.

“The poor quality of the sector loan book is evident in the higher level of total provisioning as evidenced by the high NPL ratio which increased to 11.7 percent at end October 2017 from 9.9 percent at end December 2016,” he said.

Mr. Mwanza also said the easing of the monetary policy rate and the statutory reserve ratio to 10.25 percent and 8 percent, respectively had resulted in a marginal decline in commercial bank lending rates.

Responding to a press query, Mr. Mwanza explained that the average commercial banks’ nominal lending rate was recorded at 25.4 percent in October 2017 compared to an average rate of 28.7 at end October 2016.

Meanwhile, Mr. Mwanza said the review of the banking sector’s performance however as at end October 2017 indicated that the industry was satisfactory largely due to a strong capital adequacy position and satisfactory earnings.

“The capital adequacy ratios stood at 24.4 percent for primary regulatory capital and 26.5 percent for the total regulatory capital,” Mr. Mwanza said.