Malawi’s commercial banks posted super profits in 2024, with some more than doubling their earnings.
The biggest source of their windfall profits? Their most loved, debt-addicted and almost risk free client—government.
A Nation on Sunday analysis of audited financial statements from eight licensed commercial banks also shows high lending rates on their already suffering poorer and purportedly high-risk clients—firms and households—also propelled the super profits.
Data we have reviewed suggests banks are serving government more than producers and consumers of goods and services since the surge in profitability is not primarily driven by real-sector financing, but by a structural shift toward investment in low-risk government securities.
The review shows that while loans and advances to customers grew at a moderate pace, banks dramatically increased their holdings in treasury bills and notes—shifting their balance sheets away from productive sectors such as agriculture, manufacturing as well as small and medium enterprises (SMEs) in favour of low-risk, high-yielding sovereign instruments.
Profits surge, driven by interest income
All eight commercial banks listed on the Malawi Stock Exchange posted strong earnings growth in 2024.
National Bank of Malawi led with K101.7 billion profit after tax, up 41.3 percent from K71.96 billion in 2023, followed by Standard Bank at K86.4 billion (64.6 percent from the previous year) and FDH Bank at K74.1 billion (107.9 percent growth from the previous year).
In terms of growth in percentage terms, Centenary Bank led with a 249.7 percent increase in profit after tax, followed by NBS Bank (148.5 percent) FDH Bank (107.9 percent), and the Export Development Fund (EDF) (94.8 percent).
The primary driver behind this earnings boom was a sharp rise in net interest income.
Most banks reported net interest growth in the range of 44 to 136 percent, with FDH Bank and NBS Bank showing the most substantial jumps. This was largely fuelled by aggressive investment in interest-earning assets—especially government securities.
Government paper: The surging lending frontier
While private sector loans did grow across the board, data reveals that banks expanded their investment in government securities at a much faster rate.
In six of the eight banks analysed, investments in government securities outpaced lending to businesses and households.
For example, Ecobank allocated over five times more to treasury investments (K302.3 billion) than to loans (K56.16 billion). NBS Bank now holds nearly half of its assets (49.6 percent) in government paper, while loans make up just 19.7 percent.
Even Centenary Bank, which is positioning itself as a recovery player, directed more funds to government securities (K61.2 billion) than to loans (K58.4 billion) despite its low absolute figures.
From serving people to serving government
This shift reflects a calculated strategy: treasury investments are low-risk, high-yielding and nearly zero-default, offering banks stable earnings in an uncertain macroeconomic environment.
In contrast, lending to consumers and SMEs exposes banks to non-performing loans, foreign currency risk, and regulatory capital charges.
But the implications are far-reaching.
A sustained retreat from consumer and business lending threatens to choke off credit to sectors that drive job creation, innovation, and inclusive economic growth.
This includes agriculture, manufacturing, and small-scale enterprises—pillars of the government’s Agriculture, Tourism, Mining and Manufacturing (ATMM) Strategy.
EDF: An outlier in purpose-driven lending
Only the Export Development Fund (EDF), a government-owned enterprise maintained a deliberate focus on productive sector lending. EDF slashed its holdings in government-linked promissory notes by 78 percent in 2024 and allocated nearly 34 percent of its assets to private sector loans—financing exporters, agribusiness, and industrial projects.
This makes EDF the only institution among the eight to actively reduce reliance on government debt in favour of development financing.
Economists warn of recession
The Bankers Association of Malawi had not yet responded to our questionnaire but National Working Group on Trade and Policy chairperson Frederick Changaya says the profitability of banks investing in government securities should not be vilified, but rather understood as a rational response to weak industrial policy and excessive public borrowing.
“Commercial banks are not the problem—they are behaving like any sensible capitalist player would,” he said.
“The failure lies in decades of misguided government policies and donor focus that have weakened the industrial base while pushing up government borrowing,” said Changaya.
He argues that industrial transformation—not agriculture—must lead the growth agenda, stating that no country has developed by prioritising agriculture.
Instead, industry—with its strong multiplier effects—should be the engine that drives agriculture, mining, and tourism.
Changaya further warns that the current structure of the economy, which favours services over industry, has resulted in low employment generation, minimal agricultural transformation, and the derailment of key development targets, including Malawi’s Vision 2030.
