HomeBusiness DigestBanks under fire for fleecing clients

Banks under fire for fleecing clients

EIGHT banks accused of fleecing unsuspecting customers by levying exorbitant charges, fees and commissions have come under fire and will be hauled over the coals next week when their bosses are summoned by the Reserve Bank to discuss the issue causing tensions within the banking sector.

Report by Faith Zaba

Reserve Bank governor Gideon Gono is set to confront bankers over the issue of inflated charges and demand corrective measures.
The Zimbabwe Independent last week reported banks were making a killing through extortionate charges. Contacted for comment on the issue this week, Gono confirmed he will next week summon CEOs and board chairpersons of at least eight banks accused of ripping off depositors.

The banks on the firing line include Standard Chartered, Stanbic, Barclays, Agribank, MBCA, NMB, Ecobank and ZABG, whose incomes from bank fees and other charges and commissions comprised between 39% and 77% of their gross earnings between January and June this year.

“They are meeting their profitability objective without lending and without doing their core business,” Gono said.
“It is much safer (for them) not to lend or to extend short-term loans and compensate themselves through high bank charges.”

A number of banks and other financial institutions have reported good financial results for the half year to June 30, making huge profits from levying high charges.
“Analysis of the banking sector half-year results to June 2012 shows the sector’s profitability is largely dependent on high interest rates and excessive bank charges, as well as subdued costs of funding due to low rates offered on deposits,” Gono admitted.

The worst culprits are foreign-owned banks, with Barclays leading the pack after earning 77,3% of its gross profits through charges, fees and commissions, followed closely by Standard Chartered at 76,3% and the two South African-owned banks, Stanbic and MBCA at 55,3% and 44,1%, respectively.

Of the US$18,6 million gross earnings by Barclays Bank, about US$14,39 million was non-interest income. Standard Chartered earned a total US$30,59 million of which US$23,35 million was non-interest income, while Stanbic’s gross income of US$35,6 million included US$19,7 million non-interest income.

Local banks involved include ZABG whose non-interest income was 82,2% of earnings, Agribank with 55,5%, Kingdom with 46,7% and Ecobank at 42,4%.
Generally, banks are supposed to generate the bulk of their revenue from interest on loans, with non-interest income contributing marginally.

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