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Banking sector assets up 4.4%

Total banking sector assets grew by 4.4 percent to K1, 744.1 billion in the first half of 2019, recent Reserve Bank of Malawi (RBM) figures show.

The increase was largely driven by growth in gross loans and leases of 12.7 percent to K578.2 billion in June 2019.

The sector’s assets growth was, however, lower than the 10.3 percent experienced in the six-month period to December 2018.

Nevertheless, it was an improvement from a decline of 3.7 percent registered within the six months’ period leading to June 2018.

In its June 2019 Financial Stability Report, RBM says investments and securities also contributed to the growth as they increased by 2.8 percent to K699.0 billion in June 2019.

The investments and securities continue to account for the largest share of total assets at 40.1 percent, followed by gross loans and leases at 33.2 percent.

On the other hand, total liabilities increased to K1, 457.2 billion in June 2019 from K1, 403.5 percent in December 2018.

“The growth in total liabilities was largely attributed to an increase in total deposits by 4.9 percent to K1,132.8 billion in June, 2019 from K1,088.1 billion registered in December 2018.

“Other notable developments contributing to the overall growth of total liabilities included growth in borrowed funds and all other liabilities by 22.7 percent and 40.1 percent to K119.8 billion and K82.7 billion, respectively, in June, 2019,” reads the report issued last week.

RBM says the sector remained well capitalised with capital ratios above regulatory benchmarks.

Core and total capital ratios stood at 16.4 percent and 20.4 percent and were above the regulatory minimum benchmarks of 10.0 and 15.0 percent, respectively.

This was an improvement from the December 2018 positions of 15.4 percent and 18.8 percent, respectively.

In absolute terms, both core and total capital increased by 16.2 percent and 17.7 percent to K200.5 billion and K248.6 billion, respectively in June, 2019.

Risk weighted assets also increased with a proportionately lower percentage of 8.8 percent to K1, 219.3 billion in June 2019 from K1,120.6 billion registered in December 2018.

RBM attributes the sector’s asset quality improvement to the falling Non Performing Loans (NPL) ratio which it says fell within acceptable limit of 5.0 percent, for the first time since December 2012.

As at June, 2019, the industry NPL ratio stood at 4.8 percent and was an improvement from 6.1 percent reported in December 2018.

In absolute terms, the level of NPLs declined by 12.4 percent to K27.5 billion in June, 2019, while gross loans and leases increased by 12.7 percent to K578.2 billion in June 2019.

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