• MetBank incurred a net interest expense of ZWL 3.8 billion
  • The bank recorded an operating loss of ZWL 51 billion
  •  MetBank's profitability was primarily driven by a fair value gain on investment property amounting to ZWL 412 billion

Harare - MetBank experienced a significant disparity between its interest expenses and interest income in the first half of 2023. With interest expenses of ZWL 4.9 billion outweighing interest income of ZWL 1 billion, the bank incurred a net interest expense of ZWL 3.8 billion. This indicates that the bank is paying more in interest on its liabilities, such as deposits and borrowings, than it is earning from interest on its assets, such as loans and investments. This situation is concerning as it implies that the bank's interest expenses are surpassing its interest income, resulting in a negative net interest margin.

Adding to the challenges, MetBank's non-interest income declined by 45% to ZWL 2.5 billion from ZWL 4.5 billion. This drop signifies reduced fee-based revenue, reflecting decreased customer activity and a decline in demand for fee-based services. This decline in non-interest income has further impacted the bank's revenue streams during the first half of the year.

As a result, the bank's overall income plunged into a net loss of ZWL 1.3 billion from a net profit of ZWL 4.4 billion. While other banks have been able to attain profitability through non-interest income, MetBank has struggled on both fronts. The current operating environment for banks in Zimbabwe has compelled them to heavily rely on non-interest income for profitability. However, MetBank's inability to generate substantial income from both interest and non-interest sources indicates a failure to perform its core lending and interest-earning activities. Interestingly, the bank still managed to post an overall profit of ZWL 374 billion.

 MetBank's profitability was primarily driven by a fair value gain on investment property amounting to ZWL 412 billion, which was nearly ten times the operating loss of ZWL 51 billion. The operating loss was exacerbated by a significant increase in operating expenditure, rising to ZWL 49 billion from ZWL 8.8 billion in the previous period. These numbers indicate a concerning downward spiral for the bank, which is expected to worsen in the second half of the year.

Metbank's poor performance follows its struggles in the previous year, marked by lawsuits and a ban imposed by the Reserve Bank of Zimbabwe (RBZ). The RBZ had suspended foreign currency trading for Metbank due to foreign exchange violations, but this suspension was lifted on June 8th 2022, as announced by the then RBZ governor, John Mangudya.

In April 2022, Metbank faced censure from the central bank amid the deteriorating value of the Zimbabwean dollar against the US dollar. The parallel market exchange rate had reached US$1:$400, while the official market rate stood at US$1:$325.

Initially, Metbank was limited to engaging solely in foreign currency trading. However, a statement by RBZ governor John Mangudya announced the immediate lifting of the suspension. The RBZ concluded investigations into Metbank's foreign exchange trading and imposed an administrative fine for breaching Exchange Control Regulations.

During the same period, the RBZ also suspended InnBucks and initially suspended Access Forex, although the latter was later allowed to resume business while InnBucks remained under suspension. Amid the crisis, the government directed banks to prohibit lending to address speculative borrowing that was destabilizing the exchange rate markets.

In conclusion, MetBank's latest financial report reveals a deepening crisis as both interest income and non-interest revenue plummeted. The bank's net interest expense surpassed interest income, indicating a negative net interest margin and a concerning imbalance in its interest-related activities. Furthermore, a significant drop in non-interest income reflects decreased customer activity and a decline in demand for fee-based services, further impacting the bank's revenue streams. While other banks have managed to maintain profitability through non-interest income, MetBank struggled on both fronts, failing to generate substantial income from core lending and interest-earning activities. Although the bank still recorded an overall profit driven by a fair value gain on investment property, the substantial operating loss and increased operating expenditure signify a troubling downward spiral that is expected to continue in the second half of the year. MetBank's poor performance, coupled with previous challenges and regulatory actions, highlights the urgent need for strategic measures to address the bank's underlying issues and restore stability in its operations.