Standard Bank forecasts turbulent economic environment in Malawi

By Saidi Winnes

Standard Bank plc says it expects the operating environment in Malawi to remain turbulent in the second half of the year as the country and global economies are adjusting and responding to the impact of the COVID-19 pandemic, socio-economic challenges and the Russia-Ukraine crisis.

In its financial statement for the six months ended June 30, 2022 signed by CEO Phillip Madinga, the Bank says it expects that Malawi’s exchange rate path will remain volatile due to continuing exchange supply challenges.

“The ongoing supply constraints and commodity crisis will impact prices of the country’s key imports and commodities,” says Madinga.

While painting a turbulent economic outlook in the second half of the year, the Bank believes that the successful conclusion of a new Extended Credit Facility (ECF) programme with the International Monetary Fund (IMF) can improve currency stability in the country.

 “We expect inflationary pressures to persist partly due to lagged effects of the May 2022 devaluation, the ongoing supply constraints and commodity crisis which will impact prices of Malawi’s key imports and commodities,” reads the statement.

Despite the challenging environment, characterized by foreign currency demand and supply imbalances, inflationary pressures, and currency depreciation, the Group grew its earnings and balance sheet supported by a strong funding base.

In the first half of the year, the Bank registered a Group after tax profit of MK15.8bn, which was 37% above same period in prior year.

Total income grew by 37% year on year, buoyed by strong growth in both net interest income and non-interest revenue. Net interest income grew by 32% year on year driven by growth in interest earning assets. Loans and advances to customers grew by 18% year on year while financial investments grew by 90 % year on year. The growth in interest earning assets was due to growth in customer deposits which also grew by 35% year on year.

Non-interest revenue grew by 44% year on year due to the increase in transactional volumes on fees and commissions as well as strong performance on trading revenue.

Credit impairments were 68% above prior year mainly attributable to growth in the performing customer loan book as well as downgrades of non-performing exposures due to lagged effects of the COVID-19 pandemic.

Operating costs were 28% above prior year as a result of elevated inflation levels, fuel price hike and impact of the 25% depreciation of the Kwacha on foreign currency denominated costs.

The Group has therefore assured the public that it will continue to focus on cost optimization initiatives in order to drive operational efficiency and maximize business value.

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