ZIMBABWE’s banking sector is slowly consolidating, and while still very competitive, is become slightly more concentrated, a leading Harare based research house has warned.
In a detailed research note on the banking sector performance for the year ended December 31, 2012, MMC Capital noted that concentration in the banking sector was increasing as shown by the increase in top five banks concentration ratios in 2012.
According to Chartered Financial Analyst and MMC Capital head of research, Itai Chirume, the analysis of the FY 2012 banking sector results indicated that the banking sector was reverting to higher concentration levels, effectively meaning that market power was slowly but surely reverting to fewer banking institutions.
Chirume said MMC tracks the industry measure called the Herfindahl-Hirschman Index (HHI) which has been rising steadily from 900 in 2010 to 1054 in 2011 and rose further to 1139 in 2012.
“The initial decline from 1300 in 2009 to 900 in 2010 could thus not be sustained. Further confirmation can be obtained from the increase in market share concentration in deposits, loans and total assets,” he said.
In 2009, 71% of deposits were concentrated among the top quartile banks before declining to 57% in 2010 and 2011, and then rose to 61,2% in 2012. According to MMC, the top quartile banks comprise CBZ with US$1,115 billion in assets, commanding a massive 19,6% market share of total bank sector assets at US$5,696 billion as at December 31, 2012; BancABC with assets of US$550 million (9,7%) , Cabs with US$488 million (8,6%) , Stanbic at US$395 million (6,9%) and Standard Chartered Bank with US$389 million (6,8%). The survey covered 22 of registered and operating banking institutions in Zimbabwe excluding Interfin, which is under curatoship, and Royal Bank which is under liquidation.
According to MMC,Trust Bank, Capital Bank and TN Bank results were not yet available when the survey was concluded.The HHI is a measure of the size of firms in relation to the industry and an indicator of the amount of competition among the players in that industry.
Analysts say it is an economic concept widely applied in the formulation of competition laws and understanding competitive dynamics in an industry. Increases in the Herfindahl-Hirshman Index generally indicate a decrease in competition and an increase of market power, whereas decreases indicate the opposite.
However, an HHI measure of 1500 and below generally indicates that the industry in question is competitive while a measure above 2500 reflect a highly concentrated or very uncompetitive industry.