Commercial banks loan loss provision soars

Loan loss provisions for commercial banks has soared to K34.6 billion as at end-November 2018, figures from the Reserve Bank of Malawi (RBM) have shown.

According to the November 2018 RBM Monthly Economic Report, this is despite continued growth of credit to private sector recorded an annual growth of 13.2 percent in November 2018, compared to 10.8 percent in October 2018, and 0.5 percent in November 2017.

In November for instance, commercial banks made provisions for loan losses of K4.4 billion while credit to private sector increased marginally by 0.3 percent (K1.5 billion) to K466.2 billion compared to a growth of 3.9 percent (K17.5 billion) in the preceding month and a contraction of 1.8 percent (K7.5 billion) in the corresponding period in 2017.

In the review month, foreign currency denominated loans, commercial and industrial loans and mortgages grew by K4.4 billion, K1.3 billion and K1.1 billion to K133.6 billion, K204.8 billion and K41.5 billion, respectively.

Meanwhile, household and individual loans slowed down by K732.5 million to K120.8 billion.In terms of economic sectors, credit expansions amounting to K13.3 billion, K2.5 billion, and K2.5 billion were recorded in Manufacturing; Wholesale and retail trade; and Transport, storage and communications sectors, respectively.

The banking system’s net credit to the public sector (government and statutory bodies) on the other hand totalled K685.1 billion as at end November 2018 from K613.2 billion and K489.8 billion in October 2018 and November 2017, respectively.

Commenting on the growing credit to the private sector, market analyst Armstrong Kamphoni said while continued growth of credit to the private sector is positive news, the credit spread gives direction as to where the economy should be going forward.

He said while the trend could signify demand for the outstanding sectors, it could as well mean it is due to their risk averse, banks are shunning them.

Earlier, businesses had continued to decry government’s continued borrowing, which they said was creating competition for funds for businesses, at a time production levels are dwindling due to reduced power generation.

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