Foreigners acquire $10m CBZ debentures

HARARE - Foreign investors may acquire a stake in Zimbabwe’s largest banking group by deposits, CBZ Holdings Limited (CBZ), after taking up $10 million debentures convertible to shareholding on maturity.

The debentures have a three-year tenure.

Based on CBZ’s $0,15 closing share price yesterday, the foreigners could acquire a 9,74 percent stake in the group — whose market capitalisation is around $102 million.

Although the group’s chief executive John Mangudya was unable to comment on whether the foreign investors would consider converting the facility into ordinary shares, he told analysts last week that the debentures had been fully subscribed.

“The option to convert into ordinary shares will be done at the going share price,” he said, adding the rationale behind the transaction was “to ensure there is liquidity and that the group’s banking operations would be able to lend money in the long-term.”

The investors’ identity was not disclosed.

A debenture is a certificate of loan or a loan bond evidencing the fact that a company is liable to pay a specified amount with interest and although the money raised by the debentures becomes a part of the company’s capital structure.

By adding the convertibility option, the issuer pays a lower interest rate on the loan compared to if there was no option to convert.

Because of the short-term or transitory nature of bank deposits due to the difficult operating environment, most Zimbabwean banks have been facing challenges in obtaining capital necessary to grow or maintain their business.

This comes as CBZ declared a $0,17 interim dividend per share — translating to $1,1million — after posting a $16 million profit after tax in the half-year to June 2013.

Most listed companies have struggled to declare dividends due to economic challenges, particularly an acute liquidity crisis, since adoption of a multi-currency system in 2009.

During the period under review, the group’s post tax profit went down 13 percent from $18,3 million realised in prior comparable period while net interest income increased to $43,9 million from $41,4 million.

Non-interest income went down to $20,3 million from $21,3 million. Basic earnings per share dropped from 5,84 cents to 5,64 cents.

The group’s share price closed the June interim period at 13,5c from 10c in January, reaching a high of 16,5c in the intervening period.

Total assets increased to $1,35 billion from $1,2 billion while liabilities increased to $1,17 billion from $1 billion.

Its banking operations remained fully compliant with the Reserve Bank of Zimbabwe capital thresholds for banks while the company’s insurance business is sitting on a capital base of $4 million, surpassing the minimum capital requirement of $2 million set for next year by Insurance and Pensions Commission (Ipec).

“The group has enjoyed synergistic benefits, maximised efficiencies and productivity through the consolidation of activities of its respective units,” CBZH’s group chairperson Luxon Zembe said.

Deposits during the period surged to $1,155 billion up from $1 billion in the previous period while advances rose to $917 million compared to $855 million in 2012.

CBZ’s total assets grew to $1,3 billion in the period under review up from $1,22 billion in December 2012.

Profits came down significantly despite an increase in interest income from $63,2 million to $71,2 million during the interim period.

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