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Bad loans in Mozambique’s banking sector increased by 66 percent between 2015 and 2016, up from 10.6 to 17.6 billion meticais (EUR 245 million), according to a study seen by Lusa.
The deterioration of the credit portfolio leads the list of the sector’s challenges, according to the “Survey on the banking sector” put together by KPMG for the Mozambican Association of Banks and based on 2016 data made available by 16 of them.
The financial crisis peaked last year, reflected in the inability of companies and individuals to meet their financial responsibilities, and the 2017 accounts are likely to reveal an even worse scenario, the document adds.
“Default credit ratios are expected to worsen in 2017, considering that further downgrades are expected,” meaning more deterioration, the study says.
The ratios measure the percentage of overdue and doubtful loans to total credit, with the average non-performing credit ratio of the 16 banks surveyed surpassing the 5 percent threshold for the first time in the last three years, up from 3.9 percent in 2015 to an average of 6.1 percent in 2016.
“In line with the challenges faced by the economy, the banking sector risks seeing increasing levels of default. The quality of customers accepted depends on the effectiveness of the risk management process in each bank,” the study notes.
“Overall, the ratio worsened for all stakeholders, except for the Banco Único and Ecobank Moçambique, which showed improvements in their non-performing loan ratios,” it said.
Banco Único is 30.2 percent owned by Gevisar SGPS, a partnership between Portugal’s Visabeira and Corticeira Amorim.
The three best ratios are the Banco Nacional de Investimento (1.8 percent), Banco Único (2.3 percent) and Ecobank (2.7 percent).
Societé Generale (41.4 percent), First National Bank (16.3 percent) and Banco Terra (14.7 percent) were ranked at the bottom of the log.
Of Mozambique’s two largest banks, Millenium Bim is in fifth place on the list with a ratio of 4 percent, while BCI is seventh with 4.5 percent.
The study concludes that there was deterioration in all sectors of the economy, but mainly in agriculture, manufacturing, construction and retail trade.
“Market players indicated that downgrades were more pronounced in retail trade, which was affected by some redundancies and corporate restructuring in response to difficult economic conditions,” the report reads.
On the other hand, “the withdrawal of support from the State Budget by the majority of the donor community and the high interest rates observed during the year may have played a role in the level of default credit ratios in banks”.Source: Lusa