Mozambican Banks

Mozambican Banks

Resilient results despite tougher business backdrop

Economic activity slowed in 2015

Mozambique witnessed a deceleration in economic activity last year, with real GDP growth standing at 6.3%. This is below the 7.4% in 2014, which is also the average annual growth recorded in the last decade. A continued decline in global commodity prices, weak growth amongst the country's main trading partners, a regional drought and the need for fiscal consolidation all contributed to this slowdown. Meanwhile, Banco de Moçambique, the central bank, kept an accommodative monetary policy to support economic activity. This meant that interest rates remained at historical lows throughout most of the year. However, in an effort to contain the depreciation of the metical and manage inflation, the central bank intervened by selling foreign reserves and tightening monetary policy in the last quarter of the year.

Banking sector landscape

There were 18 banks registered at Banco de Moçambique at the end of 2015. A new bank, Banco BIG (controlled by Portuguese investors), started its operations this March, lifting the total number of banks to the current 19. Nearly 90% of the total assets, loans and deposits of the banking sector are held by the six largest players. These banks are foreign-owned (mostly by Portuguese and South African investors). We believe the performance of these six banks provides us with a fairly accurate picture of how the sector as a whole has behaved in a certain period of time.

Balance sheet continued to expand rapidly

Our analysis of the 2015 results of these banks leads us to several conclusions. First, the key balance sheet figures continued to expand at impressive growth rates. Assets, loans and deposits all continued to increase at nearly 20% from the previous year. Second, about 70% of the total loans and deposits of these banks were denominated in meticais. Third, more than 60% of the deposits were sight deposits, a level that has remained stable in recent years. Fourth, asset quality ratios remained relatively unchanged from 2014 and at a comfortable level. And fifth, the banking sector is well capitalized, with all of the six players recording a solvency ratio that is above the regulatory requirement of 8%. 

Strong operating results lift bottom-line

The combined net profit of the six banks increased once again last year, as a robust operating performance continued to offset higher loan provisions and taxes. Despite a continued low interest rates and a more competitive business environment in 2015, these banks were able to deliver higher net interest income than in 2014, benefiting from substantial volume growth once again. Banking income was also boosted by abnormally strong trading and FX gains, which in 2015 accounted for a third of total revenues. Costs continued to reflect the branch expansion strategy of the sector as well as the higher wages from a more competitive labor market. However, they were also impacted by the depreciation of the metical in 2015, as some costs are linked to foreign currency. Meanwhile, loan provisions increased significantly again, owing to the strong expansion of the loan portfolio and also the precautionary measures for potential future risks taken by some banks. In a nutshell, the sector saw a modest improvement in efficiency ratios, but its overall profitability levels in 2015 remained rather unchanged from the previous year.