NEDBANK Zimbabwe managing director Sibongile Moyo feels safe to continue lending in United States dollars despite uncertainty over its continued use.
The uncertainty around its continued usage comes as President Emmerson Mnangagwa, who had initially extended the use of the multicurrency regime to 2030, hinted that the country could move to a monocurrency regime earlier.
This uncertainty has led to banks taking a cautious stance in distributing long-term foreign currency loans.
Commenting on the bank’s financial results for the half year ended June 30, 2024, in an online media briefing on Tuesday, Moyo said the current legal provisions in place enabled the bank to continue lending.
“Our loan book doubled from June 2023, that is over a 100% increase, where there was a bit of a low base and then from December. We’ve since increased it again by 26% up to June 2024. And, of course, it’s predominantly a US dollar-denominated loan book,” she said.
“The legal provisions currently in place are enabling us to continue lending and collecting loan repayments as well as transactions in US dollars until December 31, 2030.
“We would like to see increased use of local currency sooner rather than later, but that is notwithstanding the legal provisions in place that enable the multi-currency environment and allow us to carry on lending and collecting repayments in dollars.”
Moyo who said the bank was still waiting for the central bank’s approval to publish the financial results under review, hinting that the bank’s performance had seen the loan book doubling since June 2023, with growth of about 26% since December.
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Moyo said it was important to note that a significant portion of the bank’s lending book was naturally going to the generators of US dollars, exporters, adding that they remained a significant part of its market. She said during the period, these were the major drivers on core banking income and net interest income.
She, however, added that the local currency interest-earning assets, such as the ZiG-denominated loans and ZiG-denominated Treasury Bills dampened the net interest performance.
This was due to a reduction in interest rates that came through with the reduction of rates by the central bank.
Commenting on the impact of the introduction of ZiG, Moyo said it was likely that the future could see increased lending in local currency.
“The lending environment is such that there’s a shift to US dollar borrowing, mainly because there was more stability in the US dollar currency when we were experiencing the local currency depreciating rapidly,” she said.
“But, with the recent changes, we’ve seen a stabilisation of the local currency, though it has literally only been maybe three or four months since the introduction of a more stable reserve backed currency.
“Then, we may, in future, increase borrowing in local currency, but now our ZiG is quite negligible because most of the borrowing was in US dollars.”
The market has largely rejected the local currency as it still finds its footing, with foreign currency offering more stability in terms of raising capital.
Moyo said the banks’ net non-performing loans ratio was low at 0,38%, reflecting the prudent management of the bank’s credit book.
