Banking in Mozambique to accelerate next year, but still below pre-crisis pace – BMI Research

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Banking in Mozambique to accelerate next year, but still below pre-crisis pace – BMI Research

11:14 CAT | 15 Aug 2017

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Consultant BMI Research expects a second half of low growth in the Mozambican banking sector to recover significantly in 2018, but remain still below pre-debt crisis figures.

“The outlook for the evolution of the commercial banking sector in Mozambique is more positive than the indications at the beginning of the year, due to a higher economic growth than initially expected and inflation being more controlled,” BMI analysts write in a note to investors.

In the analysis of the Mozambican banking sector, which Lusa had access to, BMI Research writes that “banking assets are expected to grow 7% this year” and adds that the increase in loans to clients is expected to be 17.5% by 2018 and 2019, “falling below the 27.7% average registered between 2008 and 2016”.

Also Read: Mozambique banking likely to grow less than 5 percent this year – BMI research

To justify credit growth, BMI points out that the construction industry “was more resilient than expectations” in the aftermath of the debt crisis. “The current crisis caused us to foresee a decline in investment in infrastructure initially, but first quarter results show that construction companies are more resilient to sovereign risk than we had imagined,” analysts write.

This, BMI says, “provides banks with an important source of credit demand at a time when other opportunities are not plentiful, underlining the modest upturn in loans in the coming months”.

Also Read: Is Mozambique on the brink of a banking crisis? – Deutsche Welle

The forecast of growth for credit granted by banks in this and the next two years, however, does not mean that the country is free of danger, analysts say, noting that “financial institutions will continue to face risks which may undermine forecasts, particularly with regard to the current budget crisis”.

For BMI, “the fact that negotiations with creditors have not yet begun shows that there is a substantial risk that the meetings will not pay off, delaying the involvement of the International Monetary Fund”.

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The deterioration “of investor sentiment that would arise after a failure in the negotiations could end the appreciation of the metical, which would keep inflation and interest rates high, which in turn would slow the recovery of loans,” the BMI report concludes.

Source: Lusa