Pressure mounts on banks
A dark cloud is hanging over several Zimbabwean commercial banks, which are struggling due to chronic capitalisation problems and a prolonged liquidity crisis in the market.
Latest information gleaned from Ministry of Finance, Reserve Bank and banking sector reports show only six out of 26 banks in the market are strong, while the rest are just keeping their heads above water.
"Six banking institutions continued to dominate the market in terms of deposits, commanding close to $2-billion of the total banking sector deposits, representing about 70% of the total market deposits," one of the documents says. "CBZ Bank retains the highest systemic importance, with market share for deposits of close to 25%."
Main banks in Zimbabwe in terms of core capital include CBZ, Standard Chartered, Barclays, Stanbic, BancABC and ZB Bank.
This means the other 20 banks are just breaking even.
ZABG is critically undercapitalised, with a negative core capital position of about $8-million. The deterioration in capital is attributed to cumulative losses for the current and prior years.
The bank has been given until September 30 2012 to meet minimum capital requirements following a protracted demerger process in the last quarter of 2010.
ZABG has been trying in vain to get its major shareholders and investors to inject capital.
A consortium of Russian investors is said to be trying to take over the bank, which has requested $5-million from the Ministry of Finance to cover its operational expenses.
Other banks which have been struggling include ReNaissance, which is now under the management of a curator, TN Bank, Kingdom Bank, Genesis Investment Bank and Royal Bank.
Following its closure and management by a curator, ReNaissance's future has become gloomy, with the old shareholders fighting vicious battles for ownership and control with the curator and central banks officials.
Genesis Bank has been trying to get foreign investors to strengthen its weak position. The central bank has approved in principle the proposed acquisition of a 93% stake in the bank by a consortium of investors led by FMB of Malawi.
Several banks failed to meet their minimum statutory capital requirements - a buffer against contingency risk and a cushion for depositors - last year due to low capitalisation and poor balance sheets. They were given new deadlines which stretched into this year.
The International Monetary Fund has expressed concern over "rising vulnerabilities in the banking system" in Zimbabwe.
The IMF has advised that small and weak banks must be recapitalised, merged or closed, something which several struggling banks are considering.
Owners of small banks have been hanging onto their assets, hoping to secure funds for capitalisation or new shareholders, something which has been difficult mainly due to the macro-economic environment and policy problems.
Foreign-owned banks - which underpin the banking sector - have been under growing threat of seizure or being pushed out of the market as they continue to resist government's controversial indigenisation laws, which amount to expropriation disguised as empowerment.
Empowerment and Indigenisation Minister Saviour Kasukuwere has accused banks of defiance and has threatened punitive measures.
"We have Standard [Chartered] Bank who show a lot of disrespect for our laws," Kasukuwere said recently.
"Barclays Bank is still trying to find all the excuses that it can and Stanbic Bank ignores its own commitments to the people of this country. It must be made clear to them that they will not escape the law."
Zimbabwe experienced a chain of bank collapses in 2004 at the height of the economic meltdown and hyperinflation.
A number of banks are battling for survival due to poor economic performance, low-capacity utilisation by industry and depressed demand against a backdrop of low disposable incomes.