Customers’ deposits at NBS Bank dropped 13 percent to K39.5 billion (about $98.7m) in the year ended December 31 2012 from the previous year’s K45 billion (about $112m) largely blamed on the liquidity challenges in the economy.
The Malawi Stock Exchange (MSE)—listed bank, which has posted a 56.9 percent after-tax profit drop to K726 million (about $1.8m) from K1.6 billion (about $4m) the year before, saw it’s total asset marginally growing by six percent to K59.6 billion (about $149m) from K56.1 billion (about $140m) buoyed by increase in money market balances.
“Loan impairment provision grew significantly because some of our clients were caught up in the devaluation and in view of the high interest rates, they were unable to service their loans hence increased loan impairments following the bank’s prudent management of credit risk,” reads a joint statement by the bank’s chairperson Felix Mlusu and one of the directors.
The bank says the economy in 2012 did not perform well with the gross domestic product (GDP) growing by less than two percent from five percent the year before, inflation rising from 9.8 percent in December 2011 to 34.6 percent in December 2012, the bank rate jumping to 25 percent from 13 percent pushing base lending rates to around 36 percent from 17.5 percent.
“Deposit rates increased to an average of 28 percent, mainly on account of the liquidity squeeze experienced during the year,” says the bank.
The financial institution projects the economy will remain depressed until the second half of 2013 [June to December] with continued shortage of foreign exchange and rising inflation.
The bank has since forecast that monetary authorities will soon raise the bank rate, currently at 25 percent, in an attempt to reduce the growth of money supply.
The Reserve Bank of Malawi (RBM) Monetary Policy Committee (MPC) is expected to meet on April 11 to decide on, among others, the bank rate.
The RBM last raised the bank rate on December 3 2012 from 21 percent to 25 percent.
A raise in the bank rate will trigger a reciprocal rise in commercial bank’s lending rates. Already, Standard Bank last week raised its base lending rate by five percentage points to 40 percent.
But NBS Bank says it will continue with its strategy of taking banking to the people.