THE Zimbabwean banking sector’s US dollar-denominated earnings increased by 27.74% to US$535.3 million in 2021 largely due to interest income from loans and advances, the Reserve Bank of Zimbabwe (RBZ) has revealed.
In its banking sector report for the year ended 31 December 2021, the central bank revealed that the “banking sector United States dollar-denominated earnings increased by 27.74% from US$419.06 million for the year ended 31 December 2020, to US$535.3 million during the corresponding period in 2021.”
The report notes that the net aggregate banking sector profit, on local currency basis, increased from ZW$34.24 billion to ZW$59.29 billion.
“The growth in earnings was largely attributable to interest income from loans and advances and fees and commission, which constituted 34.99% and 31.80% of total income, respectively,” the report reads in part.
The report shows that the increase in the proportion of interest income from loans and advances from 17.82% of total income in 2020, to 34.99% as at 31 December 2021 indicates a shift by the sector towards the traditional banking sources of revenue which are considered more stable.
“Non-interest income was driven by fees and commissions due to increased transactional volumes on digital platforms in the wake of Covid-19, as well as initiatives by banking institutions to promote the use of plastic money,” it said.
Translation gains on foreign currency-denominated assets, as well as revaluation gains from investment properties also contributed to the growth in non-interest income, the report reveals.
In the period under review, the banking sector deposits increased from ZW$367.02 billion as at 30 September 2021 to ZW$476.35 billion as at 31 December 2021, representing a 29.79% increase.
Commercial banking sub-sector deposits dominated the deposits and constituted 90.55% of total banking sector deposits.
The deposits, according to the report, were fairly balanced between local currency-denominated deposits (51.41%) and foreign currency deposits (48.59%).
The country’s central bank has ruled out a return to using the US dollar as official currency because there are not enough greenbacks in the country.
In his monetary policy statement released in February, RBZ governor John Mangudya said the financial system was still dominated by the local unit.
The US dollar is being used to pay for everything from fuel, food, medicines and school fees. State workers and bank employees have requested to be paid in greenbacks.
The country shifted to the US dollar from 2009 to 2019, after the local currency collapsed and a bout of hyperinflation decimated savings and resulted in fuel and food shortages.