MIDLANDS STATE UNIVERSITY

GRADUATE SCHOOL OF BUSINESS LEADERSHIP

NAME: JULIET MAKUNDE

REG NO: R219379T

COURSE TITLE: DISSERTATION RESEACH PROPOSAL

CLASS: GWERU BLOCK RELEASE

COURSE CODE: MBA DISSERTATION

SUPERVISOR NAME: Dr MUTENHERI

The impact of COVID-19 on the financial performance of Commercial banks in

Zimbabwe
CHAPTER 1: INTRODUCTION

1.1 Introduction

Numerous lives have been lost and untold suffering caused as a result of the COVID-19 pandemic,
and the global economy has been severely impacted by the subsequent economic downturn. The
COVID-19 situation is dire, but it has sparked new avenues of inquiry. Comparable economic
destruction was brought on by the Great Depression that followed the Crash of 1929, and by the
Global Financial Crisis (GFC) that lasted from 2007 to 2009.

However, COVID-19 differs from other recessions in several crucial respects. Using a case study
approach, this dissertation looks at how COVID-19 has affected the bottom lines of Zimbabwe's
commercial banks. The banking sector in Zimbabwe is the primary focus of this inquiry. In this
section, we'll provide a high-level overview of the research's context. By the end of this section, you
should be able to visualize the problem description in fine detail. Here, we lay out the goals of the
study and the research questions that will help us get there. In this section, we'll talk about the
study's importance, but we'll also talk about the constraints that could potentially invalidate the
results.

1.2 Background of the study

Loss of faith in the banking system, as witnessed during the Great Depression and the Great
Recession, cooled relations between banks and their customers and, by extension, the ability of
banks to generate revenue, leaving them more vulnerable to economic downturns. Banks'
relationships with their employees have suffered as a result of the public's loss of faith in the
banking system (Belas, 2016; Bernanke, 2018). Some have called the Great Depression the worst
economic downturn ever. The Great Depression was a worldwide economic downturn that began in
1929 as a result of the Great Banking Crisis (Schwartz, 2017). Originating in the USA, it has since
spread to virtually everywhere else. As a direct result of people losing faith that their savings would
be returned, a banking panic broke out during the Great Depression. Armstrong (2016) argues that
banks are forced to liquidate loans to meet their short-term liquidity needs if they only keep a small
fraction of customer deposits in cash on hand.

By 1933, banks in every state had been temporarily closed, and those that were still operating did so
only under very tight controls. Almost nine thousand different types of financial organizations went
bankrupt during this time. As a result of the money supply not being able to keep up with the
growing demand for cash, people's distrust in their own banks increased. Countries like the United
States began imposing deliberate rate increases after numerous financial institutions failed to meet
the demand for cash. Directly due to this, the banking systems in several countries became unstable,
and many financial institutions failed.

Global Financial Crisis of 2008 was the second economic disaster after the Great Depression of the
1930s. The worldwide economic downturn that occurred between 2007 and 2008 is commonly
known as the Global Financial Crisis (GFC). The crisis at hand was serious. Up until the COVID-19
pandemic broke out, many economists' predictions that the financial crisis in 2020 would be the
worst since the Great Depression had proven accurate. The worldwide economy has been under
considerable stress as a result of the fallout from the liquidity crisis of 2008, which triggered the
worldwide recession of that year. Liquidity crises, as defined by Borio and Drehmann (2015), are
financial emergencies marked by a rapid and sustained decline in market liquidity and financing that
threatens the stability of the banking system. Many banks and other financial institutions around the
world suffered significant losses as a result of this crisis. Between 2008 and 2013, 489 banks that
were part of the FDIC's insurance program failed. Saleem (2019).

As Borio and Drehmann (2019) have discovered, a liquidity crisis can lead to instability in the banking
sector. Because most businesses rely on bank loans to keep running, the worldwide shortage of
lending facilities in 2008 affected the entire economy. There may be a connection between the
worldwide instability of banks and the credit crunch that emerged as a direct result of insufficient
lending facilities.

Zimbabwe's economy was negatively affected by the worldwide financial crisis that started in the
United States in 2008. Statistics compiled by the Reserve Bank of Zimbabwe show that international
trade has been negatively affected by the global financial crisis. The result was soaring inflation, and
in 2009 the government made the decision to adopt the US dollar as the new official currency. Trust
Bank, Tetrad Bank, and Royal Bank were just a few of the financial institutions that failed after the
dollarization of the Zimbabwean economy.

The banking sector in Zimbabwe has been struggling since 2009, when a multi-currency system was
implemented. Their inability to return customer deposits was a major factor in this (Phiri, 2019).
There were so many bad loans made during this time that it was largely responsible for the poor
performance of banks. Uncertainty in Zimbabwe's banking sector may be the result of a drop in
consumer trust and poor financial outcomes among the country's institutions. Banking institutions
such as Royal and Genesis failed during this period of economic uncertainty. Customers of these
banks did not receive refunds or their money.

The banking sector in Zimbabwe faced significant challenges due to the country's economic
downturn between 2000 and 2008. Zimbabwe's annual inflation rate hit 59.0% in 2000, up from the
previous year's figure of 58.5%, according to data provided by the Reserve Bank of Zimbabwe. (RBZ).
Before 2002, inflation had been relatively low, but it spiked sharply between 2002 and 2007. From
2001 (at 71.9%) to 2007 (at 66.21%), it dropped by 4.6 percentage points. (RBZ, 2008). Inflation hit a
record high of 231.150.89 percent by the end of July 2008. (RBZ, 2009). Drops in output, which were
7.1% lower in 1990 and -7.3% lower in 2000, further attested to the severity of the economic
collapse. (RBZ, 2000). Small businesses and regular people alike struggled to survive and make ends
meet in Zimbabwe as a result of the country's hyper-inflationary economic climate (Masaka, 2013).

A new global crisis has emerged in the wake of the Great Financial Catastrophe of 2008, and its
impact is more widespread across society than it is on the economy (Trump, 2020). When compared
to other financial crises, the one brought on by COVID-19 is truly unique. It was much more
widespread than the GFC, hitting both industrialized and developing nations. The global economy
went into recession as a direct result of the pandemic, with the United States experiencing its worst
economic decline on record. Due to the crisis, countries like the United States of America (USA)
swiftly delivered a stimulus package totaling billions of dollars. It was this crisis that prompted the
world to respond with the largest and quickest collection of policies ever seen. As we will see below,
the crisis also produced two outcomes in the United States that we consider to be extremely positive
"surprises," namely, the shortest recession in economic history and the avoidance of any banking or
other financial crises. Further discussion of both of these findings is provided below. Given its unique
characteristics, COVID-19 presents an excellent opportunity for those interested in studying the
financial crisis.

World Health Organization estimates that by November 2021, more than 200 million cases of COVID-
19 had been confirmed across the globe, with nearly 5 million deaths attributable to the virus itself
(2021). All over the world, people are feeling the effects of this disease. Governments took
precautionary measures, such as limiting travel, locking down areas, isolating people, and closing
down non-essential businesses, in order to stem the spread of the pandemic (Kunt, Pedraza &
Ortega, 2021). Chinese authorities have been on high alert ever since the first case of COVID-19 was
discovered in the country. Governments everywhere have been working hard to stem the tide of the
disease and lessen its devastating effects in terms of human lives lost and financial resources
expended (Yuan, 2021). To date, the Zimbabwean government's response to the coronavirus
outbreak has been less effective than that of other countries (WHO, 2022). Over 5,000 people have
died and over 250,000 have been infected within national borders due to SARS-CoV-2 (COVID-19)
virus (WHO, 2021).

The global competitiveness of the world's two major economies, the United States and China, is
shifting as a result of the responses of many nations to the deadly coronavirus pandemic (Shalal &
Grossley, 2020). Although China was the first country in the world to be hit by COVID-19, the
government there was able to quickly bring the disease under control, and the economy even
started to improve as a result. Based on these numbers, it appears that China avoided a recession in
2020, as it was the only major economy to post growth that year (See Figure 1). But the COVID-19
pandemic has caused millions of Americans to lose their jobs and fall into poverty as a result of
reduced consumer spending and firm investment (Mutikani, 2021). According to Mutikani (2021),
the United States experienced its worst economic downturn since the end of World War II in 2020,
with GDP falling by an estimated 3.5 percent.

Figure 1: Global growth, real GDP

Source: Adapted from Reuters (2021)

The COVID-19 outbreak has not only posed a global economic risk, but it has also sent shockwaves
through the financial system and had profound effects on the market. An external shock has hit the
world's financial systems, including the banking industry (Elnahass, Trinh & Li, 2021). Banks face
difficulties in profitability, declines in income, and losses due to loan defaults as a result of the
sluggish economic environment brought on by COVID-19 (Perkins & Gnanarajah, 2021). Revisions to
growth projections by some of the world's largest financial institutions and banks (Elnahass, Trinh &
Li, 2021). Schroeder (2021) reports that more than half of US banks saw a decline in profits, and that
7.3% of lenders were losing money. Reason for this is that as the economy worsens, lenders are
being forced to write down overdue loans and set aside billions of dollars to cover potential losses.
Month-over-month increases in delinquent loans of 7.3%, as he estimates them to be, would be the
largest increase since 2010. New data shows that $38.8 billion has been put aside to cover potential
loan losses at the financial institution. To put it another way, this is an increase of about 280% from
the levels recorded the year before. Nonperforming loans to businesses increased by 87%, while
nonperforming bank loans increased by around 15%. (Schroeder, 2021).

Somasundaram (2020) claims that the COVID-19 epidemic poses a similar risk to Chinese banks,
which may have to set aside billions of dollars to meet their obligations. Prior to the onset of COVID-
19, the balance sheets of Chinese banks were already showing signs of pressure from the slowing
economy and the ongoing trade battle with the United States. The credit rating agency Standard &
Poor's has estimated that the coronavirus pandemic could cause China's banking industry to lose an
additional $497 billion in non-performing loans and $224 billion in provisions. In light of Standard &
Poor's belief that the pandemic will have far-reaching effects on economies around the world, this
forecast was made (Somasundaram, 2020). Financial profits at China's five largest commercial banks
fell for the first time since the 2008 financial crisis, despite a 6.8% drop in GDP from the first quarter
of 2020 and a 3.2% rebound in the second quarter (Lee & Ren, 2020).

Zimbabwe's financial sector reportedly did exceptionally well in the first quarter of 2020, despite the
country's increased vulnerability as a result of the COVID-19 pandemic. Although banks have been
aware of the working conditions since the global financial emergency of 2008, the RBZ still reported
them. (GFC). Capitalization, resource quality, acceptable and increased productivity, liquidity, and
growth potential are all positive indicators for Zimbabwe's financial sector (Mangudya, 2020).

As in other countries, Zimbabwe's financial institutions suffered after lockdowns were implemented.
Many people lost their jobs as a result of the pressure on businesses to reduce headcounts, and
some borrowers went bankrupt because they couldn't afford to pay back their loans. Many people
and businesses in the year 2020 were unable to repay their loans because they were no longer able
to produce at their previous levels due to firms operating at reduced capacity. Belas (2016) asserts
that this has an obvious impact on the stability of the economy.

1.3 Problem statement

Governments were compelled to implement containment measures, including social isolation,

lockdowns, and business closures, to prevent the virus from spreading further. Although these
restrictions were felt by both individuals and businesses, they had a detrimental impact on the
economy (Duan et al., 2021). Companies' financial woes have a direct impact on families, who may
see a drop in their income and/or their number of working hours as a result of the economic
slowdown (Barua, 2020). Due to this, the risk of default rises because more businesses and people
may go bankrupt or otherwise be unable to meet their financial obligations (Bartik et al., 2020). The
financial institution's profitability, solvency, and capital could all take a hit if these effects have a
domino effect by lowering income and increasing nonperforming loans (Beck & Keil, 2020). In turn,
this may lead to lower profits for banks as falling demand for their services leads to falling non-
interest income (Ozili & Arun, 2020). Since this directly affects financial institutions, it poses a risk to
the stability of the entire financial system (Duan et al., 2021).

Because banks are the primary providers of liquidity insurance for economies (Barattieri, Eden, &
Stevanovic, 2020), a healthy banking system promotes expansion by facilitating precise estimates of
future liquidity needs and a more equitable distribution of credit (Berger & Sedunov, 2017).
Anxieties have been raised about the banking industry's ability to continue to act as an intermediary
in the wake of the COVID-19 pandemic (Cecchetti & Schoenholtz, 2020). Because of this, it is crucial
to investigate how the COVID-19 pandemic has affected the bottom lines of Zimbabwe's commercial
banks.

1.4 Objectives of the study

The primary purpose of this research is to evaluate the effect that the COVID-19 epidemic
has had on the overall performance of commercial banks in Zimbabwe.

The objective will be supported by the following sub-objectives

• To ascertain whether or not commercial banks' bottom lines were affected by the COVID-19
pandemic.
 In the COVID-19 time frame, commercial banks' financial performance may have been
affected differently depending on a number of factors.

1.5 Research questions

1 Does the COVID-19 pandemic appear to have affected the financial health of Zimbabwe's
commercial banks?
2 When the COVID-19 pandemic first hit, or even while it was happening, how was Zimbabwe's
commercial sector doing financially?
3 What, if any, effects do you think the myriad variables which determine economic prosperity will
have on America's commercial banks?
3.6 Significance of the study
 Though this dissertation is being submitted in partial fulfillment of MBA requirements, the
researcher has loftier ambitions for its ultimate impact, as reflected in the following.
 The study's findings will be useful for both the banks under investigation (Zimbabwean
commercial banks) and other Zimbabwean banks by providing a baseline from which to track
the effects of crises like the COVID-19 crisis on the former. All Zimbabwean banks, whether
commercial or agricultural, would benefit from this. Financial institutions can use the study's
findings to strengthen their public trust policies, which in turn will increase their resilience
and effectiveness during economic downturns.
 This dissertation contains useful information that could be used by current investors and
those interested in making investments in the future to make more informed decisions. They
can use the information to make educated choices in the event of a financial crisis in the
future.
  This research is important for regulatory groups because it will show them which regulations
were helpful and which were counterproductive during times of crisis.
 Agents, this assignment presents a great chance to learn about and practice using
investigative stills. It is expected that if this study is conducted, the researchers will gain a
deeper comprehension of commercial banks.
 This article is expected to be cited frequently as a vital resource for banking studies
conducted during the crisis, making it a good bet for the institution's reputation. Potentially
useful to future researchers is the fact that these results can be used as a point of reference.
Scholars may use this study as a springboard for future research because it provides a solid
foundation for similar studies.

1.7 Delimitations (Scope) of the study

Since this study is about a crisis in Zimbabwe, it can't help but zero in specifically on the role
commercial banks play in that situation. The study projected outcomes for the years 2020 and 2021.
Focusing on this era was done because of the unique difficulties it posed to the banking industry and
the similarities it offered to the crisis currently affecting Zimbabwe's commercial banks.

1.8 Assumptions

The researcher assumed the following:

• We found that the questionnaire results were credible and impartial. If there is no bias or
fear of retaliation, then every respondent will give genuine, factual, and realistic
information.
• Everyone who could help did what they could to contribute. Zimbabwe's commercial banks
agree with the points of view presented by each respondent.
• The same transparency regulations apply to commercial banks' financial statements, and
these statements are not skewed in any way by unconventional bookkeeping methods.

1.9 Limitations of the study

It wasn't all smooth sailing getting ready for this trip. The researchers are concerned that if these
issues are ignored, the reliability of the methods and the veracity of the findings could suffer.

1.10 Definition of terms

• The SARS-CoV-2 virus is the causative agent of the worldwide epidemic known as
COVID-19.
• The term "financial performance" refers to the subjective measurement of how a bank
utilizes its assets and earns income under the primary business model it operates
under.

1.11 Organization of the study

The study consists of five chapters, each of which was carefully planned to serve a specific purpose
in furthering the study's overarching goal. Previously, we discussed the context of the research and
outlined the issues that must be addressed. Our subsequent discussion outlined the study's aims and
introduced the primary research question. In the second chapter, a literature review, the focus is on
the effectiveness of commercial banks in times of economic hardship. The commercial banks are
evaluated primarily based on their profitability. The study included a variety of authors' perspectives
on the topic in an effort to spark discussion. representational works of art that visually depict the
conceptual framework of the model.

Crowdfunding sites present commercial banks with both opportunities and threats to their bottom
lines during times of economic uncertainty. Research methods that were employed prior to the
formulation of the research questions are discussed in Chapter 3. Further, the methods of data
collection, the selection of a representative sample, and the use of appropriate instruments for
elucidating a topic appropriate to the research goals are illustrated. In Chapter 4, we present and
discuss the study's findings. Findings are summarized, suggestions for future study are offered, and
suggestions for next steps are presented in the final chapter.
CHAPTER 2: LITERATURE REVIEW

2.1 Introduction

The purpose of this chapter is to lay the groundwork for assessing the theoretical and empirical
literature on the topic and to highlight the important facets that are central to the investigation. A
discussion of the theoretical literature is presented first, followed by a discussion of the empirical
literature.

2.2 Government policy responses

World financial markets and the banking industry are under intense pressure as a direct result of the
devastating economic impact of the COVID-19 epidemic. Many short-term policy measures, such as
lower reserve requirements, lower interest rates, and moratoria on debt repayment, have been
implemented by financial industry authorities. Here, I'll examine some of the published history on
government efforts to control the spread of COVID-19.

2.2.1 Financial markets

Study authors Feyen et al. look into how policymakers in emerging markets and developing
economies have reacted to this issue (2021). Results show that countries with higher levels of
private debt are more likely to take measures related to banking, liquidity, and finance earlier.
Countries with a higher population and income per capita were quicker to respond and enact more
policy changes. They further argue that policymakers' responses and actions are unaffected by the
spread of COVID-19, macroeconomic factors, or the current political climate. In contrast, Feyen et al.
(2021) point out that some policy measures, like relaxing the classification and treatment of non-
performing loans, are at odds with the foundations of international financial standards and the most
recent guidance provided by standard setting agencies, the International Monetary Fund and the
World Bank. They contend that the post-pandemic period can benefit from conventional monetary
policy in order to revive the financial markets and the economy. Even though Wei and Han (2021)
claim that the emergence of a pandemic has weakened the transmission of monetary policy to the
financial market, this is still the case. However, they claim that the post-pandemic economic
downturn can be stopped with the help of traditional monetary policy.

2.2.2 Banking sector

Berger et al. (2021) propose that the banking industry is more resilient to the COVID-19 shocks now
than it was before the Basel III reforms and other country-specific improvements in bank supervision
and regulation. The national government's involvement, they say, has made banks more secure and
mitigated the economic toll the pandemic took on the banking sector's core operations. Researchers
Kunt, Pedraza, and Ortega (2021) analyze the impact of liquidity support, prudential measures,
borrower aid, and monetary policy measures on abnormal bank returns as part of their study into
the role that different policy initiatives play in reducing bank stress. Banks with lower liquidity levels
benefit the most from liquidity assistance, and activities that provide support to borrowers also have
a positive effect on atypical bank returns.

Furthermore, Kunt, Pedraza, and Ortega (2021) argue that banks with lower liquidity benefit the
most from policy reductions in interest rates, suggesting that monetary policy has played an
important role in this worldwide crisis. Some financial institutions have been able to recover from
the effects of the pandemic with the help of these regulatory efforts.

As Elgin et al. (2021) note, CBI is related to economic policy; countries with a higher CBI have larger
fiscal and macro-financial packages, but they are also less able to cut monetary policy interest rates
and deposit reserve ratios.

2.2.3 U.S. Federal Reserve

It is predicted that the first half of 2020 will see one of the worst economic downturns in U.S. history
as a direct result of the restrictions placed on economic activity due to the COVID-19 epidemic
(Cachanosky et al., 2021). Monetary policy and emergency lending policy are two ways to classify
these initiatives. In March of 2020, the Federal Reserve started taking action to mitigate the
economic problems caused by the COVID-19 outbreak and the associated activity limits. The term
"monetary policy" is used to describe the Federal Reserve's (Fed) efforts to affect the economy as a
whole and the yield curve's slope, as defined by Cachanosky et al. (2021). Conversely, the efforts
made by the central bank to provide short-term loans to financial institutions, government agencies,
and other economic entities are known as emergency lending policy. Stock market appreciation and
easier access to long-term capital allowed the Federal Reserve to hasten economic growth, claim
Feldkircher, Huber, and Pfarrhofer (2021).

Additional credit initiatives, including municipal and non-bank business lending, have been launched
by the Federal Reserve, as reported by Cachanosky et al. (2021). Although the Federal Reserve's
monetary policy is aiding the economy's recovery, these critics insist that more be done to ensure
the currency's stability.

2.2.4 The impact of the COVID-19 pandemic on the financial markets

The burden of the unprecedented worldwide pandemic on the market was not limited to the health
of the population (Goldstein, Koijen & Mueller, 2021). Recession in the actual economy, a loss in
liquidity in the financial markets, and increased volatility are all outcomes of lockdown and labor
stoppage measures, as reported by Guo, Li, and Li (2021). They look at how the pandemic affects the
transmission of tail risk in international financial markets and conclude that the COVID-19 outbreak
had a negative effect on the system as a whole, resulting in more widespread tail risk spillovers. The
effects of the COVID-19 financial crisis on the stock markets of the G7 nations and 10 industries are
studied by Izzeldin et al. (2021). The impact of the crisis is the primary subject of their investigation.
According to their findings, the financial markets in the United States and the United Kingdom are
the most harmed due to the crisis. Most severely affected by the systemic shock were the utilities,
energy, and real estate sectors, as well as the consumer discretionary sector (including hotels and
luxury products), the industrial sector (including airplanes), and the government.

Goldstein, Koijen, and Mueller (2021) forecast that the United States economy would begin to
exhibit growth in March 2020. All bond markets, including those for Treasury bonds, corporate
bonds, and money market funds, were very stressed. They believe that the Federal Reserve's early
response, which helped avoid a full-scale financial crisis and contributed to averting the calamity, is
responsible for a large portion of the market's rapid recovery. Kwan and Mertens (2020) note that
there are still substantial disparities amongst enterprises, despite the fact that the Coronavirus Aid,
Relief, and Economic Security (CARES) Act has led to a reduction in unique shocks and default risks.
To the extent that the Fed's asset purchase program helps to reverse outflows for the most
vulnerable funds, the liquidity support also filters down to the real economy via funds, as pointed
out by Falat, Goldstein, and Hortacsu. Furthermore, the Fed's asset purchase program helps to
reverse withdrawals for the most vulnerable funds (2021). These funds were especially vulnerable to
loss during the pandemic; the authors of this study examine how Federal Reserve actions led to the
assets' eventual recovery. They argue that asset illiquidity, susceptibility to fire-sales, and exposure
to economically unstable industries are the primary causes of instability. Based on these findings, it's
crystal clear that the Federal Reserve's asset purchase program reduces risk by increasing the Fed's
bond holdings' liquidity.

2.2.5 The impact of the COVID-19 pandemic on the banking industry

Recently, research has been done to examine the banking industry's reaction to COVID-19. In this
part, I will elaborate on a selection of these issues, mainly addressing the issues of banking stability
and performance, as well as the worries of systemic risk, bank lending, and non-performing loans.

2.3.1 Banking stability and performance

According to Elnahass, Trinh, and Li (2021), the worldwide spread of the coronavirus is the worst
economic calamity in world history. Shocks from outside the system have had a significant impact on
the banking industry and the financial sector. Thus, it is crucial to investigate how this epidemic has
jeopardized the safety of the international monetary system. Accounting-, market-, and risk-based
metrics are used in Elnahass, Trinh, and Li's (2021) investigation of the effect of COVID-19 on
business finances and stability. Beginning in the first quarter of 2019, and continuing through the
second quarter of 2020, this research will mainly focus on 1090 banks situated in 116 different
countries.

Data shows that the COVID-19 issue had a severe effect on financial institutions' bottom lines, as
well as their money supply, productivity, and stock market valuations. The second quarter of 2020,
however, is expected to bring financial industry confidence.

From the data collected in the United States, China, the United Kingdom, and Europe, it is clear that
COVID-19 has a negative relationship with the return on assets and the return on equity of banks in
general, and of Chinese and American banks in particular. These results suggest that COVID-19 has
harmed the financial institutions in both nations. Elnahass, Trinh, and Li (2021) report that during the
outbreak, U.S. banks' ROE ratios and other accounting-based measures like ROA and cost/income
ratios were poor, while Chinese banks showed only minimal evidence of the negative effect of the
pandemic on ROE ratio and other accounting-based measures. During the pandemic, U.S. banks'
profitability was poorly positioned according to both accounting-based and market-based standards.
Based on their findings, Elnahass, Trinh, and Li conclude that the market value of Chinese banks was
much lower than the value of U.S. institutions during the epidemic (2021). However, compared to
their Chinese counterparts, U.S. banks face far more asset risk.

In their study of the banking industry's response to the COVID-19 pandemic, Kunt, Pedraza, and
Ortega (2021) focus on whether or not this shock has any distinguishing features as compared to its
impact on businesses in general. In other words, they are concerned with the issue of whether or
not the shock has a noticeable effect on financial institutions. In agreement with Elnahass, Trinh, and
Li, this evidence suggests that the COVID-19 pandemic has negative effects on financial institutions
(2021). They find that banks are hit harder and for a longer period of time by the shock than
corporations and other non-bank financial institutions. They also claim that banks with lower
liquidity have seen greater declines in returns, which is consistent with the view that such
institutions are more vulnerable to shocks. They go on to say that the fall in stock price performance
has been much more pronounced for the equities of publicly traded and bigger banks.

2.3.3 Bank lending and non-performing loans

Several governments have passed lockdown laws in an effort to stem the spread of the pandemic,
but these measures have put many businesses and people in a bind financially (Colak & ztekin,
2021). As a result, the credit risk that borrowers face has increased dramatically due to the
epidemic. Colak and Ztekin (2021) analyze data from banks in 125 countries to assess how the
current epidemic has affected international lending patterns. According to this article, COVID-19 will
have different effects on the expansion of bank loans in different banks and countries. They argue
that the most vulnerable financial institutions in terms of lending are those that are small, foreign,
government-backed, and have a poor return on assets. It has hurt less-established financial
intermediaries, bank lending, and credit markets, and as a result, they find that credit is increasingly
harder to come by. However, the current system of regulation and oversight has helped to lessen
the impact of the health crisis on the accessibility of bank loans.

A large proportion of non-performing loans (NPL) that are in default or very near to default is one of
the most prevalent features of many financial crises, as argued by Ari, Chen, and Ratnovski (2021).
They note that due to the severe economic downturn brought on by the COVID-19 crisis, banks'
balance sheets are weaker and their non-performing loan rates are higher. Ari, Chen, and Ratnovski
(2021) examine the growth of NPLs by concentrating on the 92 financial crises that occurred in the
1990s. The findings demonstrate that throughout the pandemic, most banks saw an increase in their
NPLs and that many nations did not settle their NPLs in a timely way. According to the research,
several countries also failed to provide proper care for its NPLs. Finding such a large number of
unresolved non-performing loans is a major setback to recovery efforts after the financial crisis.
Rapid credit expansion, high levels of government debt, fixed exchange rates, poor levels of bank
profitability, and high levels of corporate debt were identified as the most critical risk factors in a
study by Ari, Chen, and Ratnovski (2021). Those in the know attribute much of the health crisis's
positive outcomes to shifts in the macroeconomy and the finance industry. During this time of
medical emergency, nonperforming loans are a major cause for concern.

2.4 Determinants of bank financial performance

The profitability of a financial institution is the single most essential factor in evaluating its overall
performance. Making money requires an enterprise to make more revenue than it expends each
period of operation (Borroni & Rossi, 2019). Based on previous studies, we know that a lot of factors
contribute to a bank's profitability. In the next part, you will learn about many of the most crucial
factors. Depending on the context, these factors might be classified as either bank-specific or
cyclical. The purpose of this portion of my literature review is to address the topics of the impact of
capital ratios, non-performing loan ratios, and efficiency ratios on the efficiency and profitability of
banks.

2.4.1 Bank financial performance determinants

Capital is a major factor in bank success, according to Elekdag, Malik, and Mitra (2020), although
their studies show conflicting results. Based on their research, Bitar, Pukthuanthong, and Walker
(2018) conclude that higher capital ratios have a beneficial impact on both banks' ability to mitigate
risk and their overall efficiency. Athanasoglou, Brisimis, and Delis found that a higher capital ratio is
related to increased bank profitability and higher expected returns (2008). High-liquidity banks, as
reported by Bitar, Pukthuanthong, and Walker (2018), find that capital has the opposite impact on
their business. That is to say, they determined that risk-based capital levels were ineffective in
mitigating bank risk. Tran, Lin, and Nguyen find that there is a level-dependent relationship between
banks' capitalization and their profits (2016). They talk about how, due to their size, smaller banks
benefit the most from the favorable correlation between regulatory capital and liquidity production.
To lower the risk of default and boost bank performance, they stress the need of strengthening
regulatory capital for banks that are not as well funded as others.

The Nonperforming Loan (NPL) Ratio is also identified by Elekdag, Malik, and Mitra (2020) as a key
factor influencing banks' overall performance. The Nonperforming Loan (NPL) Ratio is a Key
Performance Indicator (KPI) for banks due to its importance as a Risk Management Metric. Their
findings indicate that the real GDP growth and the nonperforming loan (NPL) ratio are the most
consistent determinants of bank profitability across significant Eurozone banks. These results show
that an increase in GDP would, on average, boost profits, but they also show that a rebound in the
economy may not be enough to overcome the long-term profitability issues that many banks are
suffering.

They argue that a combination of a reduction in nonperforming loans and improvements in cost
efficiency is the best strategy for increasing profits in the long run. Those involved reason that this is
the best chance of success among the available options. Athanasoglou, Brissimis, and Delis (2008)
state that efficiency is directly related to bank expenditures, which play a major role in a bank's
bottom line. The ratio of these costs to total assets was shown to have a negative correlation with a
company's profitability, which is consistent with the findings of Elekdag, Malik, and Mitra (2020). The
authors of the essay "Better Management of These Costs," Athanasoglou, Brisimis, and Delis (2008),
argue that successful cost management may boost productivity and revenue.

2.4.2 Cyclical determinants

Research that takes the economy as a whole has shown that profits rise and fall with the economic
cycle (Elekdag, Mallik & Mitra, 2020). The severe recession and subsequent financial crisis, as
reported by Bolt et al. (2012), have refocused attention on the procyclical character of bank profits.
They look into the hypothesis that during severe economic downturns, bank profits are more cyclical
than during times of relative economic stability. Loan losses have been shown to be the primary
driver of banks' procyclical profitability, which shows up as stronger results during times of severe
economic depression. As real GDP falls by a percentage point during a severe recession, the rate of
return on bank assets falls by 0.25 percentage points, as calculated by the authors. They reason that
this must be the case since a rise in net provisions and expenses is causally related to a decline in
actual economic output. The importance of long-term interest rates in determining bank profitability
during periods of sustained economic expansion is further highlighted by Bolt et al. (2012). Expected
inflation (or long-term interest rates) has also been proven to have a positive and substantial effect
on a company's profitability, according to the work of Athanasoglou, Brissimis, and Delis [Citation
required] (2008). As the Greek economy was hit by disinflation throughout the studied period,
deposit rates fell more precipitously than lending rates.

2.4 Summary

In this section, we analyzed what other scholars have said about the effect of COVID-19 and
subsequent crises on the bottom lines of commercial banks. Multiple academics have voiced the
view that commercial banks often do poorly in times of crisis. The analyst claims that little
investigations have been conducted into the manner in which Zimbabwe's commercial banks have
fared financially in times of crises. This research will assist fill a knowledge gap by elaborating on
material that has already been published. In light of these and other data pertaining to commercial
banks, COVID-19, and previous emergency situations in Zimbabwe, the analyst was instructed to
focus on open coin on the impact of COVID-19 on the financial performance of the country's
commercial banks. What follows is a more in-depth description of the research technique.

CHAPTER 3: METHODOLOGY

3.1 Introduction

This study aims to quantify the effect that COVID-19 has on the bottom lines of commercial banks
operating in Zimbabwe. This chapter follows the advice of Saunders et al. by looking for a methodical
strategy that may help answer research questions affected by the reliability of the methods used
(2017). In-depth descriptions of the study's data collection, research methodology, model
specifications, and justification for the variables are provided in this chapter. This chapter gives the
reader a thorough breakdown of the various estimation methods, data kinds, and data sources.

3.2 Research Design

Given that this study's overarching goal was to ascertain how COVID-19 affected the bottom lines of
Zimbabwe's commercial banks, the researchers opted to conduct explanatory research. Tobias and
(2021) argue that this approach is superior because it better takes into account individual
differences, has less co-linearity variables, and is able to track patterns in the data. To learn how
much of an impact COVID-19 had on the bottom lines of Zimbabwe's commercial banks, researchers
used a Pooled Regression Model (PRM). The researcher settled on this approach after combining
financial data from several companies throughout time.

3.3 Model Specification

The extent to which an organization is in charge of and manages its own resources is one measure of
its financial performance. Profitability, leverage, capital adequacy, liquidity, and solvency are some
additional metrics that may be used to assess a bank's financial performance. The two definitions of
financial performance provide examples of how an organization's resource management and control
might be evaluated (Tatihudin, 2019). The next thing we do is employ a vector error correction
(VECM) model to see whether the 2009 COVID-19 epidemic had any impact on the profits of
Zimbabwe's commercial banks. Here's a quick rundown of why this specific model was chosen:

△Yt=ἀ+Ø(Inrem-∑ƴXt)+∑β△Y+ε

Where:

In the Return on Assets (ROA) model, where Xt is a vector of variables, Inrem is the natural logarithm
of the performance of commercial banks in the nation, Yt is the initial difference of each variable,
and is a typical error term, the letter Yt denotes the starting difference of each variable. Appropriate
approximations of the,, and parameters are required. The pace at which the model recovers from an
unstable condition is captured by the parameter measuring the error correcting term (ECT). With
this parameter, we can describe the long-term equilibrium connection between Inrem and Xt. As can
be seen in Equation, the parameter not only keeps track of the constant term throughout the short
run, but also the dynamic consequences of changes across all variables. To rephrase, the equation
represents the short-term behavior of the parameter.

3.4 Justification of Variable

The variables inputted in the model above are each justified as below:

Return on Assets

For the purposes of the regression model, ROA will play the role of the dependent variable (ROA). A
ratio that compares a company's earnings to its total assets (Petersen & Schoeman, 2008). The
researchers employ a metric called return on assets (ROA) to evaluate the financial health of the
banks. This metric is most useful when compared with those of other, comparable businesses or
with the banks' own past performance. Subtract the net income from the total assets to get the
return on assets (ROA) ratio. Higher efficiency of assets is achieved when the return on assets (ROA)
is higher. A good return on assets (ROA) may suggest that the business is making a profit from its
operations; conversely, a negative ROA may indicate that the business is losing money from its
activities. Whether or not a corporation is able to earn a profit from its total assets utilized in
operations may be gauged by looking at its return on assets (ROA) and return on assessment (ROA)
ratios (Ichsan et al., 2021). Icsan et al. (2021)

Capital Adequacy Ratio

According to Fatima, a bank's capital adequacy ratio (CAR) is the ratio of its own capital to the bank's
risk-weighted credit exposure (2014). The primary goal of this measure is to protect depositors while
also bolstering the stability and performance of international financial markets. The recession
caused by COVID-19, as discussed in earlier chapters, poses a threat to the profitability of banks and
generates losses due to the inability of borrowers to repay loans. Leverage ratios in the financial
sector serve as insurance against loan default. As banks raise their capital ratios, they become more
efficient and profitable (Bitar, Pukthuanthong & Walker, 2018). Capital adequacy ratios, as
discovered by Nugroho, Arif, and Halik, guarantee that banks and other financial institutions have
enough money to weather typical losses without going under (2021). In this study, we examine the
relationship between CAR and bank profitability. According to Fatima (2014), banks are allowed to
keep operating with Tier 1 capital deficits, while losses incurred after liquidation are offset by Tier 2
capital. There is a risk that CAR will cause distortions in a bank's capital and cost of capital because it
does not account for expected losses in the event of a bank run or financial crisis. This danger exists
because CAR does not account for CAR.

Non-Performing Loans

A non-performing loan, or NPL, is a loan on which the borrower has defaulted, meaning that the
borrower has failed to make the required loan payments by the due date or within the grace period
given by the lender (Messai & Jouini, 2013). The banking industry considers a commercial loan to be
"non-performing" when the borrower has not made a payment on the loan's interest or principal for
90 days or more. Based on their research, Ari, Chen, and Ratnovski conclude that the large recession
caused by the COVID-19 crisis was directly responsible for the high amount of nonperforming loans
and the weakening of bank balance sheets (2021). Lenders' bottom lines can take a hit if a large
proportion of their loans are considered to be non-performing. To gauge whether or not the
pandemic has an impact on commercial banks' profitability, non-performing loan balances (NPLs) are
a crucial indicator to examine.

Efficiency Ratio

A financial institution's efficiency ratio can be determined by dividing its noninterest expenses by its
net income. Financial institutions prefer a low efficiency ratio, as this demonstrates that their
earnings are greater than their expenditures. A ratio below 50% is considered optimal. (Hays, 2009).
The efficiency ratio is one of many important factors that I will consider in my study of commercial
bank profitability during the COVID-19 pandemic. This is because, as stated by Athanasoglou,
Brissimis, and Delis (2008), bank expenditures are a major factor in determining a bank's
profitability. When a bank's efficiency ratio drops, that's a sign that its operations have improved.
Increases in the efficiency ratio could mean that either the bank's expenses or its earnings are
growing (Olson and Zoubi, 2011).

COVID-19 Cases

An indicator of the severity of the pandemic is the average weekly increase in the number of new
COVID-19 cases, as stated by Cheng (2020). The first case of COVID-19 in Zimbabwe was confirmed
in March 2020, according to the country's Ministry of Health. (2020). Studies were conducted using
data collected from January through March of 2020, with the first confirmed occurrence occurring in
March (the first quarter of 2020). Our study will consistently use the dummy variable "Instances." to
refer to the actual number of occurrences in Zimbabwe.

3.4 Data types and sources

The quantitative nature of the investigation necessitated the use of time series data that spanned
multiple years in order to adequately evaluate ROA, ER, NPLs, LR, and CAR. The data ranged from
1995 to 2021 and came from reports by the Zimbabwe Statistical Agency (ZIMSTATS) and the
Reserve Bank of Zimbabwe. Twenty-seven (27) observations were collected, which is a respectable
number and guarantees reliable results. The variables under study are those between which the
researcher hopes to find a correlation during the time period under study, so the sample is
appropriate for identifying this correlation. Secondary data was found to be the most trustworthy
and pertinent method for assessing the extent to which COVID-19 affected the financial
performance of commercial banks across a range of market conditions. Because all the necessary
information for the study was readily available in the public domain via the Central Bank's and
ZIMSTAT's respective online data repositories.

3.6 Data Presentation and Analysis

Data collected quantitatively will be applied to the next section (Chapter 4). The researcher used
appropriate data presentation methodologies to investigate whether or not the COVID-19 pandemic
had an effect on the solvent status of Zimbabwe's commercial banks. Ordinary Least Squares
regression and the E-Views statistical program will be used to analyze the data we've collected.
Presentation and analysis of the regression results will make heavy use of tables.

3.7 Summary

We discussed the methodology used to carry out the study in Chapter 3. Model building, variable
justification, diagnostic tools, and data collection were all covered. To determine if the pandemic
crisis affected the financial performance of commercial banks in Zimbabwe, an explanatory research
strategy was employed. Return on Assets (ROA) is modeled as a function of a wide variety of other
financial metrics, including Return on Equity (ROE), Capital Adequacy Ratio (CAR), Efficiency Ratio
(ER), Non-Performing Loans (NPLs), Liquidity Ratio (LR), and COVID-19 occurrences. Return on equity
is an economic performance measure. The acronym CAR refers to the Capital Adequacy Ratio.
Efficiency Ratio is an often-used statistical measure. In addition to the enumerated diagnostic
techniques, a variety of alternatives for data analysis and presentation were also proposed. Results,
data presentation, and analysis will all be included in the following chapter.
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1 Introduction

This part will be devoted to the presentation and discussion of the findings obtained from the
research carried out in Chapter 3. The results are a summary of the findings from the original
E-Views study, which investigated the statistical link between periods of economic crisis and
the financial performance of commercial banks. Tables will be given as a way to enhance and
summarize some of the results that were presented in the E-Views package.

4.2 Diagnostic test results

After carrying out a series of diagnostic tests, the researcher has come to the conclusion that
the following results should be disclosed. The tests of multicollinearity and autocorrelation
are used throughout the diagnostic process.

4.2.1 Multicollinearity tests

The method known as the correlation matrix was used in order to test for multicollinearity.
Both variables have been shown to have coefficients that are less than 0.8. When there is a
coefficient of greater than 0.8 between the independent variables, it is against the established
principles of econometrics to accept the null hypothesis. This is a principle that is generally
recognized and adhered to. The researcher is able to draw the conclusion that the model does
not suffer from considerable multicollinearity since there was not one variable that was found
to have a coefficient that was more than 0.8. It is possible to claim that inflation and
exchange rates in Zimbabwe do not have a strong connection given that eliminating either
COVID-19 indicators or lagged residuals would not significantly affect the remaining
variable's coefficients. Because COVID-19 indicators are already connected to lagged
residuals, there should not be a major reduction in accuracy as a consequence of this change.

4.2.2 Autocorrelation tests

The Durbin-Watson test, often known as the DW test, is frequently used in the role of an
autocorrelation measure. According to Gujarati (2004), while doing time series regression, it
is possible to produce results that are deceptive due to the regression. At first look, the
findings can seem to be quite promising; nevertheless, further analysis reveals several
questions. Therefore, the presence of autocorrelation in Ordinary Least Squares regression
leads to underestimating the Variance, overestimating the R-Squared, and the inability of the
t and F tests of significance to correctly assess the statistical significance of the estimated
regression coefficients, which can lead to potentially misleading inferences being drawn from
the analysis. The results of the autocorrelation are shown in the table that may be seen below.

It is possible to draw the conclusion that the model did not have any issues with
autocorrelation since the D-W Statistic, which was calculated to be 1.980112, was within the
range of values that were permissible, which were 1.662 to 2.338. As a result, the D-W
Statistic falls within the acceptable range; this suggests that the model does not exhibit any
serial correlation. In the event that the Durbin-Watson statistic is greater than the squared
coefficient of determination (R-Squared), then it is probable that the model contains spurious
regression. Because the D-W Statistic in the regression results is greater than the R-Squared,
there is no possibility of a fake regression being found. The relationship that has been
established between ROA, COVID-19, and some delayed residuals may thus be considered
believable despite the fact that there is no direct connection between the mistakes that
occurred over the different time periods.
4.3 Interpretation of Regressed Results

△Yt=ἀ+Ø(Inrem-∑ƴXt)+∑βΐ△Y+ε

△Yt=2.5885-0.244827(Inrem-∑ƴXt)+∑0.8591△Y+ε

The estimate of the financial performance of commercial banks in Zimbabwe during the
COVID-19 epidemic may be found in the model that has been described above.

4.3.1 R-Squared

The R-Squared value of a model reveals the amount to which the explanatory factors
contribute to explaining the variation in the dependent variable, which in this case is the
Return on Assets (ROA) that commercial banks in Zimbabwe report earning. As a
consequence of doing this study, we have learned that the factors that serve as explanations
are responsible for about 74.97% of the total changes in the ROA of Zimbabwean
commercial banks, whilst the error term is responsible for approximately 25.03% of these
variations. This is due to the fact that the model does not take into account some of the other
factors that influence the commercial banks' financial performance but does take them into
account.

Due to the large value of R-Squared, it can be deduced that both the COVID-19 indicators
and the lagged residuals contribute significantly to the explanation of the financial
performance of Zimbabwe's commercial banks. It is very improbable that demand pull factors
are to blame for Zimbabwe's inflation due to the shortage of accessible cash in the economy.
Because not much is occurring in the manufacturing sector either, it is probable that the high
inflation rate in Zimbabwe is not being caused only by reasons that are based inside the
nation. It is obvious that the COVID-19 has a significant influence on the bottom lines of
commercial banks in Zimbabwe, as shown by the remarkable R-squared value of 0.749786,
which was found for it.

4.3.2 F-Statistic
The F-statistic, which is a measure of the entire model's significance, has to be more than five
in order for conventional econometric theory to be satisfied. Given that the F-statistic for the
model that was used in this investigation has a value that is more than 5, as required by the
econometric rule of thumb, we are able to draw the conclusion that it is a statistically
significant one. The value of the Durbin Watson Statistic, which was 1.980112, was higher
than the value of the R-Squared statistic, which was 0.749786. This indicates that the data did
not include any problematic or false regression.

4.4.3 COVID-19

In light of the fact that the t-statistic for the impact of COVID-19 on the financial
performance of commercial banks in Zimbabwe during the pandemic crisis period was found
to be -0.006424, which is less than the required 2.000000, it was concluded that the impact of
COVID-19 was statistically insignificant. A negative correlation between ROA and the
COVID-19 indicators is shown by the value of 0.244827, which represents this association.
These findings provide an explanation for the correlation between ROA and COVID-19
variation, showing that a rise in COVID-19 instances and fatalities is associated with poor
business outcomes. Specifically, the correlation between ROA and COVID-19 variation was
found to have a positive relationship. As a result of an increase in the number of COVID-19
cases, the rate at which financial institutions recouped their initial investments gradually
slowed down.

COVID-19 cases.
 Accumulated covid-19 cases
250000

200000

150000

100000

50000

0
0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1
-2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2
ar Apr ay Jun Jul ug S ep Oct ov Dec Jan F eb ar Apr ay Jun Jul ug S ep Oct ov Dec
M M A N M M A N

Accumulated covid-19 cases

Bank Profitability

ROA
18
16
14
12
10
8
6
4
2
0
4 4 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 0 0 0 1 1 1
-1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -2 -2 -2 -2 -2 -2
ar Jul ov ar Jul ov ar Jul ov ar Jul ov ar Jul ov ar Jul ov ar Jul ov ar Jul ov
M N M N M N M N M N M N M N M N

ROA

The observed connection thus lends credence to the hypothesis that changes in covid-19
indexes were not the key drivers of financial performance during the pandemic crisis. It's
possible that this was required due to the fact that the implementation of covid-19 law in
Zimbabwe caused some banks to close their doors. As a result of the outbreak, Zimbabwe's
manufacturing industry went into a tailspin, which in turn had a detrimental effect on the
country's commercial banking sector. Evidence from RBZ may be found to support this
argument (2020)

4.3 Result Presentation and Analysis

Our major objective is to conduct research on the ways in which the COVID-19 epidemic
may have an impact on the soundness of Zimbabwean banks' finances. In this section, we
accomplish what needs to be done by doing a regression analysis of bank performance vs
COVID19. There is strong evidence suggesting that the pandemic repercussions of COVID-
19 in Zimbabwe have led to an increase in low deposits and loans, as well as having a severe
influence on the financial performance of commercial banks during times of crisis. In the
short term, the effects of COVID-19 may be felt more keenly by Zimbabwe's financial
institutions than those in other nations', but only in the short run. According to the findings of
the study, the outbreak brought to a short fall in Zimbabwe's economy.

According to the findings of our investigation, the influence of COVID-19 on bank

performance was not significant. Based on the findings of the Hausman test, it is possible to
draw the conclusion that the estimate with fixed effects is superior than the estimator with
random effects. among the countries that were considered for the study. It demonstrates that
the negative sign and statistical insignificance of the COVID-19 coefficients non relation to
ROA of bank performance indicators are supported by the data. Additionally, it demonstrates
that the data support the fact that there is no relation between ROA and COVID-19
coefficients.

This conclusion is consistent with the results of Elnahass et al. (2021), and it suggests that the
banking sector in Zimbabwe has not seen a significant decrease in profitability as a direct
consequence of the COVID-19 outbreak. In order to simplify the process of economically
interpreting the regression coefficients of our major variables of interest, we apply a
logarithmic (Inrem) transformation to COVID-19. According to the COVID-19 coefficient,
there would be a change of COVID-19% in the returns that banks get for every 1% change in
the number of disease cases per million. In light of this revelation, governments have been
obligated to put into effect a number of preventive measures in reaction to the proliferation of
the virus. These measures include social isolation, lockdowns, and the shutdown of
commercial establishments (Duan et al., 2021). In response, these acts have a detrimental
impact on the financial well-being of families and enterprises. This has resulted in a decrease
in revenue and an increase in expenditures for enterprises, in addition to a loss of income and
job opportunities for families (Duan et al., 2021).

As a consequence of this, businesses and households may have difficulty making their debt
payments, which increases the risk of default (Bartik et al., 2020). It is certain that financial
institutions, such as banks, will experience the repercussions of this as well. Banks' bottom
lines, capital levels, and capacity to weather economic storms will all suffer as a result of
decreased revenue and an increase in non-performing loans (Beck and Keil, 2021). A decline
in the demand for banking services may also result in a fall in non-interest income, which
would have a detrimental effect on the profitability and performance of banks (Beck and
Keil, 2021).

The Reserve Bank of Zimbabwe (RBZ), which is Zimbabwe's central bank, asserts that the
pandemic did not have any effect on the performance of the country's economy. As can be
seen in this chart, the returns on assets have been going in the right direction since 2014, and
the outbreak did not halt this general rising trend.

ROA
18
16
14
12
10
8
6
4
2
0
4 4 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 0 0 0 1 1 1
-1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -2 -2 -2 -2 -2 -2
ar Jul ov ar Jul ov ar Jul ov ar Jul ov ar Jul ov ar Jul ov ar Jul ov ar Jul ov
M N M N M N M N M N M N M N M N

ROA

In spite of the fact that this time period corresponds to the height of the covid-19 pandemic
outbreak, the statistics shown above demonstrates that the Return on Assets was on the rise
between March 2020 and December 2020. This is not only attributable to the factors of
Covid-19.
As seen by the coefficients that we compute, there is a positively correlated and statistically
significant association between the size of the bank (SIZE) and ROA and ROE. This
conclusion is in line with the findings of study carried out by Adesina (2021) and Dang and
Dang (2021), who both discovered that large banks often have high ROA and ROE. This
discovery is compatible with both sets of findings. Both the return on assets (ROA) and the
return on equity (ROE) benefit equally well from capitalization's (CAR) positive influence
(ROE). These findings provide empirical support for the conclusion reached by Chortareas et
al. (2012) and Adesina (2021), namely, that well-capitalized banks are more efficient than
their counterparts that have less well-developed financial resources. A more advantageous
asset structure boosts a bank's profitability, as seen by the significant positive effect that the
coefficients of asset structure have on return on assets and return on equity (LTA). In
conclusion, there is a positive relationship between the diversification of a bank's assets and
its ROA and ROE. These results provide further evidence that the bank's diversified edge is
real and illustrate how the bank's bottom line may benefit from non-interest income sources.

On the other hand, in regard to the control variables that are related with particular countries.
According to this conclusion, more competition in the banking industry likely leads to
improvements in both performance and efficiency. There is a correlation that can be
supported by statistical analysis that shows a positive link between GDP per capita
coefficients and bank performance. Concurrently, there is a negative association that is
statistically significant between estimated inflation coefficients and all indices of a bank's
performance. This link holds even when controlling for other factors. The concentration
coefficient of a bank has an effect on both the return on assets and the return on equity that
the bank generates.

Indicators of Soundness financial Performance of commercial banks

Table 4.6

Key indicators BENCHMARH DEC JUNE DEC

2019 2020 2020

Total assets (ZW$ billion) 60.44 193.56 349.59

Total loans (ZW$ billion) 12.63 37.77 82.41

 Net capital base (ZW$ 9.75 29.47 53.18
billion)

Total deposits (ZW$ billion) 34.50 97.40 154.47

Net profit (ZW$ billion) 6.41 13.36 34.24

ROA (%) 8.99 10.53 13.55

ROE (%) 33.02 27.38 45.54

CAR (%) 12 39.56 61.72 34.62

Tier 1 ratio 8 27.87 34.35 22.65

Liquidity ratio (%) 30 72.42 74.85 73.06

NPLs 1.75 1.03 0.31

Source: RBZ

The indicators of a healthy financial system are shown above, with particular focus placed on
the confidence, productivity, and consistency of commercial banks (RBZ). According to the
results, Zimbabwe's commercial banks managed to weather the storm of the COVID-19 issue
pretty well. The core capital of commercial banks increased by 94.08% between the 30th of
June 2020 (ZW$20.99billion) and the 31st of December 2020 (ZW$53.18billion).

Additionally, the capital levels of the commercial banks remained consistent during this time
period, with CAR and Tier 1 ratios averaging 34.6% and 22.5% respectively as of the 31st of
December, 2020. These financial institutions were able to keep their stability since they
exceeded the statutory minimums of 112% and, respectively, 8% of their capital reserves.

Between the 31st of December 2019 and the 31st of December 2020, a total of ZW$208.9
billion was placed, representing a significant increase over the ZW$34.50 billion that was
deposited on the 31st of December 2019. As a direct consequence of this, public faith in
commercial banks continues to increase. The fact that people's faith in commercial banks was
not damaged by the CIVID-19 issue is also shown by this fact.

The resilience of Zimbabwe's commercial banking system was shown during the COVID-19
crisis by the fact that the average prudential liquidity ratio of the country's commercial banks
was higher than the minimum regulatory threshold of 30%. This suggests that the COVID-19
issue did not have a substantial impact on the liquidity of commercial banks.

The assets held by Zimbabwe's commercial banks (loans and advances) increased from
ZW$12.63 billion on the 31st of December to ZW$82.41 billion on the 31st of December
2020, assuring the continuing stability of the sector. During the COVID-19 crisis,
commercial banks observed an improvement in the overall quality of their loan portfolios.
The proportion of loans that were considered to be NPLs (loans that were not being repaid)
decreased from 1.75 percent on December 31, 2019, to 31.1 percent on December 31, 2020.

According to Mangudya's reporting, during the time of the 2020 COVID-19 crisis,
Zimbabwean commercial banks made a total of ZW$34.2 billion, which is an increase over
the ZW$6.4 billion they made in the previous year (2021). Despite the effects of the 2020
COVID-19 crisis, Zimbabwe's commercial banks emerged relatively unscathed. This is
reflected in the ratios of return on equity (ROE) and return on assets (ROA), which have
increased from 9% and 33% in 2010 to 13.61% and 45.53% in 2020, respectively. ROE and
ROA ratios have increased because of this.

Chart Title
400

350

300 total assets

total loans
250 total deposits
net profit
200
ROE (%)
Axis Title
150 ROA (%)
LIQUIDITY RATIO
100

50

0
9 0 0 0 0 0 0 0 0 0 0 0 0
ec-1 an-2 eb-2 ar-2 pr-2 ay-2 un-2 Jul-2 ug-2 ep-2 ct-2 ov-2 ec-2
D J F M A M J A S O N D

4.4 Summary

This chapter covers a variety of topics, including data analysis, the presentation of findings,
and a discussion of those findings. To determine the extent of COVID-19's impact on the
bottom lines of Zimbabwe's commercial banks, research was conducted there. The conceptual
underpinning laid forth in Chapter 2 offers a helpful perspective for understanding the results
in the areas of performance, stability, and public trust. According to Professor Ncube (2021),
the current age of crisis is unique from those that have come before it due to the fact that it is
a crisis that produces more significant human suffering than economic issues. The outcomes
of the study as well as some recommendations for more research will be presented in the next
and last chapter.

CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATION

5.1 Introductions

This chapter provides a concise summary of the findings of the research, draws a conclusion
based on those findings, and offers some recommendations as a consequence of those
findings. The results of this research are meant to be helpful for commercial banks that are
looking to improve their financial performance during times of economic uncertainty. In
addition, suggestions as to where the attention of future research should be concentrated will
be provided in this section.

5.2 Summary of the Study

The introduction of lockdowns and other measures was the culmination of the worldwide
economic and social issues linked with the COVID-19 pandemic period. The challenges that
slowed down the banking sector were recognized, and laws were adopted to address those
challenges. People in Zimbabwe were understandably curious about this matter and wanted to
know: "Did the COVID-19 affect the financial performance of commercial banks?"
The objective of this study was to investigate the ways in which the COVID epidemic that
broke out in 2009 impacted the bottom lines of commercial banks in Zimbabwe. This
investigation was driven by the observation that commercial financial performance has a
tendency to deteriorate during times of crisis, and the possibility that the contrary might result
in liquidity problems for the economy. In addition, some financial institutions do not make it,
while others have thrived despite the challenges faced by the business. The relationships and
conclusions on the subject that is the focus of the inquiry are, however, difficult to nail down
and inconsistent. The report presented a succinct history of the challenges faced by
commercial banks in Zimbabwe beginning in 1930.

Finally, the researcher provided some quantitative background information on the

achievements of the surviving financial institutions. An historical context was given for the
inquiry, beginning with the Great Depression in the 1930s and continuing all the way up to
the Global Financial Crisis in 2008. According to the findings of the research, the banking
industry responds uniquely to each crisis, which makes it difficult to make any definitive
conclusions about the sector. The bottom lines of banks and the confidence of customers are
likely to suffer during times of crisis, according to the opinions of several experts. There are a
variety of factors that might have an impact on the level of financial success enjoyed by
commercial banks. The inquiry that was conducted along this line led to the establishment of
a number of research questions as well as an empirical study that accompanied them.

There was a focus on both theoretical and empirical literature in this review. We looked at a
wide range of perspectives and recommendations made by scholars who had come before us
about times of crisis and commercial banks. Academics are almost unanimous in their belief
that commercial banks are among the first financial institutions to experience the impacts of a
recession or other kind of economic slowdown. The current age of crisis, on the other hand, is
exceptional in contrast to previous. This is owing to the fact that it is causing a level of
human misery as well as economic pressures that has never been seen before. Therefore,
researchers in Zimbabwe examined the commercial banks in the nation to see whether or not
the Covid-19 outbreak had any effect on them. To have a better idea of how the issue may
affect commercial banks, we looked at how other countries that were affected by COVID-19
dealt with it.

According to the findings of several studies, economic crises involving commercial banks,
such as the Great Depression of the 1930s and the Global Financial Crisis of 2008, may be
traced back to inflation (GFC). Other academics have come to the conclusion that times of
pandemic crises do not have an effect on inflation in any nation in particular, since they
consider inflation as a purely monetary problem, which means that it does not impact the
overall functioning of the economy. The COVID-19 pandemic was said by some academics
to be unique in comparison to other pandemics, such as Ebola and Malaria, due to the fact
that it affected the whole globe and had some influence on the economics of every country on
the planet.

The results of an exploratory research were analyzed in order to determine the extent to
which COVID-19 has had an impact on the profitability of Zimbabwe's commercial banks. In
addition to the exploratory study, an explanatory research design was carried out so that it
could be determined whether or not the pandemic had an impact on the financial performance
of commercial banks during the crisis that was going on in Zimbabwe. The information
needed for the research was given by the thirteen (13) commercial banks that, in 2014,
fulfilled the requirements for full-scale operation. The thirteen (13) commercial banks that
have been in full operation in the country since 2014 all provided annual financial statements
to the Central Bank of Zimbabwe, which were used to compile data for a regression model.
Since 2014, the Central Bank of Zimbabwe has had full control over the banking industry in
Zimbabwe (RBZ).

According to these statistics, it would seem that Zimbabwe's commercial banks were not
affected in any way by the COVID-19 pandemic situation. This conclusively demonstrates
without a shadow of a doubt that the COVID-19 pandemic concern did not have a significant
effect on the banking sector. The financial performance metrics (ROA, ROE) for banks point
to an uptick in profitability.

5.3 Conclusions

To sum up everything that has been stated above so far, the following conclusions have been
made:

• The findings suggest that there is a link between the level of confidence that
individuals have in commercial banks, the health of their economies, and the stability
of their organizations. The public's faith in commercial banks is influenced in part by
a number of variables, including their profitability and their dependability. If people
have a significant amount of trust in their financial institutions, this will help to
improve the stability of commercial banks, which in turn will have a positive effect on
 the financial performance of commercial banks. The level of public confidence in
Zimbabwe's commercial banks did not significantly decrease even in the midst of the
COVID-19 crisis. Barth et al. (2019) discovered some hopeful changes in the public's
trust, which they attributed to recent events. This crisis witnessed an increase in total
deposits, similar to what was seen during prior times of crisis, such as the Great
Financial Crisis of 2008, which saw a rise in total deposits. When there was a crisis in
the past, deposits in commercial banks went down, which indicated a comparable
decline in confidence. The significant increase in the number of deposits and
withdrawals led to enormous revenues for the financial institutions.
• Another important finding from the research was that there is a direct connection
between the success of commercial banks and their level of consistency. The link is
still evident even when difficult events are occurring. As a result of commercial
banks' inability to weather past crises, such as the Global Financial Crisis of 2008,
overall performance throughout these periods was subpar. Commercial banks were
able to maintain their stability despite the COVID-19 situation, which contributed to
an increase in the banks' financial profits.
• The statistics also show that throughout the COVID-19 crisis period, the level of faith
that people had in Zimbabwe's commercial banks did not decrease, which is in
contrast to previous occasions when there was a crisis. People's confidence in
commercial banks did not suffer as a result of the financial crisis. Both the operations
of commercial banks and their profitability will gain from the greater confidence
displayed by the general public. Despite all that was going on, commercial banks saw
their profits go up. This is shown by increases in positive metrics of the company's
financial health, such as return on equity and return on assets. This indicates that the
financial performance of commercial banks during the COVID-19 issue were not
negatively impacted in any way. In spite of the worldwide pandemic, there were no
indications of instability in the commercial banking sector. The thirteen commercial
banks in Zimbabwe each posted profits at the end of the year. During the time span
covered by this crisis, there was not a single case of a commercial bank failing. The
effects of the COVID-19 crisis periods on individuals were shown to be far more
severe than their effects on economy. The nation of Zimbabwe's commercial banks
were mostly unaffected by the outbreak.
 • The pandemic did not have a negative impact on the financial performance of
commercial banks, despite the fact that the model generated a negative signal based
on the COVID-19 indicators.

The pandemic did not cause a drop in the determinants of financial performance of
commercial banks, despite the fact that the COVID-19 indicators have a negative sign on the
model. This is the overall conclusion.

5.4 Recommendations

To ensure that the financial performance of commercial banks is not affected or is improved
during crisis periods, it is recommended that:

• Depositor protection programs should examine the effectiveness of their

compensation plans during times of crisis, in addition to maintaining transparency and
candor with the general public.
• It is very necessary for the Reserve Bank of Zimbabwe (RBZ) to continue playing the
historical role it has played, which is to provide support for commercial banks,
especially during times of crisis. It is extremely important to have adequate financial
laws in place during times of crisis.
• The central bank need to keep the bank reserves in a stable currency; doing so will aid
the banking sector in remaining stable even in the event that the crisis period has an
effect on the currency of the country in which it operates.
• It is imperative that commercial banks ensure that all relevant information is made
available to the general public. A lack of public access to information at a time of
crisis may result in a drop in consumer trust, which may then lead to an increase in the
number of customers withdrawing money from banks. To guarantee that their clients
continue to get services even during difficult economic times, commercial banks need
to stay current with the latest technological developments.

5.5 Suggestions for Further Studies

The impact that COVID-19 has on the overall financial health of commercial banks is the
primary area of investigation for this research. However, due to the limitations of the
research, it was only possible to investigate how COVID-19 affected the bottom lines of
commercial banks. The author of the study suggests that additional research into the effects
of COV ID-19 on other types of banks, such as building societies, microfinance institutions,
asset management organizations, and merchant banks, is warranted. This recommendation
was made in light of the findings presented in the study. It is important that future study take
into account other elements that may have an effect on the performance of commercial banks
in a dollarized economy. A few examples of these considerations include things like
ownership, capital structure, government regulation, firm governance, and the number of
branches. In addition, the author is of the opinion that more research should investigate the
factors that contribute to the performance of commercial banks by taking a closer look at
indicators like as the net interest margin and return on equity.