An analysis by the Reserve Bank of Malawi (RBM) on the country’s banks has shown a jump in profitability and assets despite slightly elevated levels in credit risk.
The central banks’ 2019 Financial Institutions Supervision Report shows banks’ total assets increased during the year due to an increase in loans and growth in investments though asset quality as measured by non-performing loans (NPLs) ratio remained subdued.
This was depicted by a slight increase in the ratio to 6.3 percent in December 2019 from 6.1 percent in December 2018.
The results, based on an analysis on the macroeconomic and financial sector developments and risks for the period between January and December 2019, indicate growth in loans and leases of 24.2 percent to K609.9 billion and investments by 16.4 percent to K791.7 billion in December 2019.
RBM Governor Dalitso Kabambe, who is also registrar of financial institutions, said the banking sector was well-capitalised,
liquid and profitable in the year.
He said: “Riding on the stability of the macroeconomic environment, the sector’s performance was satisfactory as all institutions were generally sound and stable during the year.
“This notwithstanding, credit risk was slightly elevated as NPLs ratio remained above the regulatory requirement of five percent coupled with inherent economic sector concentration.”
In terms of sectoral distribution of loans and leases, three sectors, mining and quarrying, community, social and
personal services and financial services had the largest growth of 92.9 percent, 53.6 percent and 50.4 percent to K2.7 billion, K72.8 billion and K19.4 billion as at December 2019, respectively.
However, in terms of share of total loans and leases, wholesale and retail trade, agriculture and manufacturing sectors constituted the largest share amounting to K358 billion and represented 56.2 percent of total loans.
In the review period, growth in total loans and leases was mainly on account of an increase in lending to private corporations by K69.0 billion, individuals and households by K33.3 billion, and parastatals by K25.6 billion as at December 2019.
On the other, hand investments constituted the highest proportion of net total assets at 41.9 percent from 40.7 percent in 2018 while total loans and leases constituted 32.3 percent from 29.4 percent in 2018.
Bankers Association of Malawi (BAM) president Kwanele Ngwenya, who is also NBS Bank plc chief executive officer, told Business News earlier that with the stable economy, banks’ performance and operations have improved for the better despite a few bottlenecks the sector has faced in the year