Banks in K265bn profit in 2023
The country’s commercial banks posted a cumulative profit of K265 billion in 2023 and showed resilience to economic shocks by growing their asset base by 33 percent to K5.8 trillion, an analysis shows.
This means the combined net profit, according to financial results of the country’s eight commercial banks, jumped by 65 percent from K172 billion in 2022, a year marred by high inflation and interest rates on top of 25 percent devaluation of the kwacha.
Four Malawi Stock Exchange (MSE)-listed banks, namely National Bank of Malawi (NBM) plc, Standard Bank plc, FDH Bank plc and NBS Bank plc posted a combined K189 billion profit, 67 percent up from K126.9 billion in 2022.
NBM plc, which led all the banks with a net profit of K71.9 billion, decried net impairment losses which continued to increase, reflecting the realities of a tough operating environment.
Reads a commentary from the bank: “The Malawi kwacha devalued by 63 percent between January 2023 and December 2023.
“Despite the devaluation, foreign exchange supply challenges persisted. Generally, the operating environment was challenging.”
In an interview yesterday, Stockbrokers Malawi Limited equity investment analyst Kondwani Makwakwa said high interest rates continue to give commercial banks leverage as they earn huge interest income from government’s borrowing through Treasury bills (T-bills).
“The economic environment in Malawi, where we have seen interest rates rising and the government maintaining a significant appetite for local borrowing through T-bills and bonds, has enabled banks to increase their interest revenue,” he said.
Makwakwa said it is highly likely that this situation will remain the same, at least in the short to medium-term, as it is unlikely that interest rates will decrease soon.
In a separate interview yesterday, Financial Market Dealers Association secretary general James Mbingwa described the banking sector’s strong performance as critical to the country’s economy.
“The strong performance of the banking sector may be attributed to growth in both interest and non-interest revenue, reflecting that banks effectively utilised their assets,” he said.
Consumers Association of Malawi executive director John Kapito said banks are benefiting from the unfriendly structure of the country’s lending system which favours financial institutions.
He said: “The high street banks in Malawi start demanding and collecting interest immediately when you have signed the loan contract which does not give the borrower enough time to carry out any meaningful business to repay the loans.
“The government needs to seriously establish a development bank whose objective is to grow the private sector on affordable borrowers’ packages that can grow businesses.”
Financial market analyst Armstrong Kamphoni yesterday said there two main sources of income for banks, namely interest income and non-funded income.
“In a high-interest environment, banks benefit from a high interest spread, cheap deposits whose interest expenses tend to be sticky while on the other hand they charge high interest rates for loans,” he said.
In its Financial Stability Report for December 2023, the Reserve Bank of Malawi attributed the bank’s growth to stability of the sector, which it said has remained sound and well capitalised during the period up to December 2023.
