Interfin to retrench

HARARE - Embattled Interfin Banking Corporation (IBC) plans to retrench nearly half of its 300 plus workforce as part of efforts to contain costs and streamline operations.

The group’s curator, Peter Bailey of KPMG Chartered Accountants, confirmed the development, but could not disclose further detail.

“Yes it is true (that IBC is retrenching), but I am not allowed to discuss such issues as I am prohibited from doing so by my letter of appointment,” Bailey told businessdaily.

Raymond Njanike, IBC’s managing director, refused to comment, referring questions to Bailey.

According to sources close to the development, the exercise is part of measures undertaken by the financial group to entice investors.

“Some of us are going to be served with retrenchment letters backdated to March. They (management) trimming down a bloated workforce to spruce up operations are try to attract investors,” said the insider.

This comes as one of IBC’s major shareholders last week told businessdaily that the group — placed under recuperative curatorship until June – is in talks with potential investors.

“Yes we are engaging investors, but I can’t disclose them at this point in time,” said the shareholder.

However, sources say two Russian investors have expressed interest in injecting $100m plus to recapitalise the troubled institution.

Bailey, who is expected to recommend the way forward on IBC’s future at the end of the curatorship, said he was not at liberty to disclose any developments.

“My mandate is to rescue Interfin out of its crisis and it is beyond my jurisdiction to comment on the issue you have raised,” he said.

Last year, the Reserve Bank of Zimbabwe (RBZ) extended IBC’s curatorship by six months following revelations of gross mismanagement, which led to the institution’s demise.

The central bank said it had placed IBC under “recuperative curatorship”.

“Take notice that the RBZ in full has extended the period of curatorship for Interfin Bank Limited from December 11, 2012 to June 9, 2013. At the same time, the Reserve Bank has extended the appointment of the curator accordingly,” the central bank said.

Interfin, was at its closure deemed to be in an “unsafe and unsound” financial position owing to undercapitalisation, allegations of abuse of corporate structures, high levels of non-performance insider loans and other corporate ills.

“The primary purpose of the curatorship is to protect depositors, preserve the assets of the Interfin Bank Limited and protect the stability of the financial system,” the RBZ said upon closure of the bank.

KPMG had recommended Bailey to consider civil action and criminal charges against the directors and shareholders of the bank.

The auditing firm unearthed four critical events that caused Interfin Bank’s liquidity crunch.

The first was that the directors and shareholders forced the bank to borrow expensively from the market and on-lend these funds to parent company Interfin Holdings.

In turn, Interfin Holdings used the borrowed funds to capitalise its banking subsidiary.

“Capital created this way was thus not sustainable as the risk of gain and loss in the capital created was with Interfin,” the KPMG report said.

Second, the bank was exposed as its assets were used to back speculative activities, for instance, in Art Corporation and Starafrica Corporation where it lost a massive $9,5m.

The bank also lost control over a $6,3 million speculative gold deal with Interfin Resources, a company substantially controlled by one of its shareholders.

The curator found that in the third instance, the bank lost $17,3m after it dipped into a government facility it was supposed to run separately, the Zimbabwe Export and Trade Revival Facility.

Lastly, the bank, due to acute undercapitalisation, could not fund related party loans from capital as stipulated by law.

Instead, it resorted to using depositors’ funds to the tune of $62m, resulting in a capital deficit of more than $59m as at March 31, 2012.An Interfin Bank branch in Harare. -  Kudzai Chawafambira

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