- SVB debacle shakes global banking sector
- ZSE banking stocks remain resilient
- Zim banks may be safe from bank-run
Harare - The banking sector has come under scrutiny globally, with the listed biggest banks in the world recording a bloodbath from the prior week to date. However, the banking stocks on the Zimbabwe Stock Exchange (ZSE) have remained resilient in the face of a bear run in the sector at a global scale.
Silicon Valley Bank, which was the 16th largest bank in the United States, recently succumbed to a bank run following higher demand for withdrawals by customers and the consequent fire sale of the bank’s bond portfolio. This led to a bloodbath in the stock, losing more than 60% of its value in one day before having the shares halted from trading by regulators. The development raised panic across the globe as most depositors started withdrawing cash in fear of a repetition of the 2008 banking sector failure. This saw most banking stocks plunging by as far as 50% in less than a week.
However, the financial sector in Zimbabwe seems to have remained nonchalant, recording sustained growth on ZSE since the beginning of March. The Financials Index is up 5% this month and 19% since the beginning of the year. The Reserve Bank of Zimbabwe has an account with the Federal Reserve System of the United States due to the prevalent use of the United States Dollar in Zimbabwe, and developments affecting the US$ and the US banking system should typically have some degree of effect in Zimbabwe.
Zimbabwe, however, seems to be no stranger to bank failure as the country has seen more and more banks shutting down while confidence in the banking sector has remained at an all-time low for a long time. Back home, the financial sector has succumbed to inconsistent policies from the government which has seen most people losing their savings and pensions as they are wiped out in the banks.
Therefore, the banks have since adopted new operating models to withstand the challenges faced by the sector. Zimbabwe-based banks have moved from the traditional dependency on deposits for investments, and have capitalized on commissions on service use. The banks have moved from long-term investments in highly liquid asset classes and directed investable capital into immovable assets and less liquid asset classes. The Central Bank has also made a mandate of ensuring every bank meets liquidity needs on a regular basis.
The panic running across the globe will have no impact in Zimbabwe and investors can be guaranteed no effect on the banking stocks in Zimbabwe as they have already gone past the phase the US is currently facing.
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