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Banks’ profits raise eyebrows

Cama bemoans exploitation

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Lyness Nkunguula

Consumers Association of Malawi (Cama) has faulted banks for exploiting customers and posting supernormal profits at a time progress has stalled in most sectors of the economy due to the Covid pandemic.

But Bankers Association of Malawi (Bam) Chief Executive Officer Lyness Nkungula defended the profitability Monday, saying banks managed to adapt to the pandemic by embracing digital technology.

The development comes as four of the country’s commercial banks have posted profit jumps of above 20 percent

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Among other commercial banks, Standard Bank Malawi has posted an after-tax profit of K23 billion in 2020, up from K15 879 in 2019, representing a jump of about 50 percent.

National Bank of Malawi saw its after-tax profit growing by 31 percent in 2020, from K17.16 billion in 2019 to K22.45 billion.

NBS Bank has seen its profitability jumping by 58 percent in 2020, from K4.458 billion in 2019 to K7.050 billion.

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Similarly, FDH Bank has issued a profit warning that its profit for 2020 would be 88 percent above that of 2019.

Reacting to the development, Cama Executive Director John Kapito said it was hard to imagine how commercial banks registered huge profit jumps in the tough environment of Covid.

“We have seen everything in the country coming to an economic standstill due to several factors such as economic mismanagement, corruption and negative effects of Covid; we have seen the collapse of both big and small scale businesses; we have seen many consumers retrenched due to downsizing or closure of businesses; we have seen the State fail to provide most basic services especially in health and education.

“The Reserve Bank of Malawi and the government have allowed this type of theft and daylight robbery by the banks. RBM, the government and banks must be ashamed of themselves,” Kapito said.

Just recently, Mangochi South West lawmaker Shadreck Namalomba attempted to revive the interest capping debate in Parliament.

But, in an interview Monday, Namalomba said there was nothing wrong with commercial banks making super profits.

He, however, said profits become an issue when they directly cause discomfort to borrowers.

“This is yet another form of slavery— economical slavery manifesting itself in charging exorbitant interest rates on poor but hard-working Malawians. It is why this economic madness and slavery must be stopped.

“The interest capping bill I am proposing would help to put a limit on the interest that banks charge on bad loans and is the only remedy to redeem Malawians from the jaws of powerful oligopolies in form of financial institutions. Come to think of it; Malawi is the only country in Sadc [Southern African Development Community], probably in the world, with high interest rates,” Namalomba said.

However, Nkungula attributed banks’ profitability status to innovation.

She said, apart from embracing digital transactions, banks embarked on product diversification, factors that have contributed to financial institutions keeping afloat in turbulent times.

“A new range of products is on the market as opposed to the traditional ones we used to have,” Nkungula said.

Commenting in RBM’s December 2020 Financial Stability Report, RBM Governor Wilson Banda said the banking sector continued to be resilient and sound in the six-month period to December 2020, adding that the sector remained well capitalised, profitable and liquid.

“Asset quality improved slightly in December 2020 compared to June 2020, but the NPL ratio remained above acceptable benchmark.

“The Registrar of Financial Institutions extended commercial banks’ moratorium arrangement on loan facilities for another six months to June 2021, in order to minimise the impact of the pandemic on the financial system,” Banda said.

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