Companies and families with credit from commercial banks are not paying back the principal and interest properly. As a result, the Bank of Mozambique says that asset quality, measured by the ratio of non-performing loans (NPL) to total credit to the economy, increased in the first half of the year, Carta de Moçambique reported on Wednesday, 13 December.
Data in the Financial Stability Bulletin published by the central bank, quoted by the portal, indicates that until last June, total credit to the economy was just over 300 billion meticais, but the NPL ratio stood at 10.58% compared to 10.02% in June 2022, above the conventional benchmark of 5.0%.
In addition, the coverage of the NPL by specific provisions increased from 67.99% in June 2022 to 70.61% in June 2023, after 71.84% in December 2022.
At sectoral level, the document points to Trade as the sector with the largest share of the total NPL in June, with 30.50 per cent (28.76 per cent in December 2022), followed by Industry, with 23.01 per cent (21.53 per cent in December 2022), and Transport and Communications, with 19.46 per cent (20.38 per cent in December 2022).
The Financial Stability Bulletin shows, however, that despite commercial banks recording high levels of non-performing loans, they continued to make a profit in the period under review, as net profits for the year increased by 1.2 billion meticais to 14.6 billion meticais in June 2023.
“This variation is fundamentally due to the 4.4 billion meticais increase in net interest income. Return on assets (ROA) stood at 4.64 per cent and return on equity (ROE) was 18.38 per cent,” explains the Bulletin.
The document also points out that the net interest income ratio shows that 69 per cent of banking income comes partly from financial intermediation (attracting savings and granting credit). The cost-benefit ratio in commercial banking operations stood at 54.42 per cent, an increase of 1.09 percentage points on the same period last year, indicating a slight reduction in banking efficiency.
