HARARE - Cash-strapped Agricultural Bank of Zimbabwe Limited (Agribank) says it will be able to meet the central bank’s capital requirements after concluding its deal to engage a new private investor.
The government-owned financial institution said the transaction — expected to be complete by year-end — would improve its capital position.
Agribank is among the five banks that are struggling to meet the central bank’s revised capital requirements.
Last year, RBZ governor Gideon Gono imposed that commercial banks and building societies up their minimum capital to $100 million and $80 million from $12,5 million and $10 million respectively, in a phased manner.
The institutions were supposed to increase their capital to $25 million by December 31 2012, then up to $50 million by June 30, 2013, $75 million by December 31, 2013 and $100 million by June 30, 2014.
“The bank expects to meet the revised capitalisation levels, on the backdrop of capital injection by the shareholder and also anticipated equity uptake by the strategic partner as part of the privatisation process,” said Agribank’s chairperson Sijabuliso Biyam.
Although the identity of the investor has not been established yet, financial and legal advisors have already completed a due diligence report on the agriculture sector lender.
Biyam said that the group was “moving on to the next phase of inviting bidders to submit their bids for evaluation with the entire process scheduled for completion by December 2013.”
In the half year to June 2013, Agribank’s losses escalated to $3,7 million from $2,4 million incurred in prior comparable period.
“The loss was mainly as a result of the low level of lending due to the prevailing liquidity conditions,” said Biyam, adding that the Memorandum of Understanding (MoU) between the Reserve Bank of Zimbabwe and Bankers Association of Zimbabwe (Baz) adversely impacted on the performance of the bank during the period under review.
Under the MoU, the financial groups agreed to scrap charges on deposits of $800 and below, and to cap interest rates among other measures.
Operating income declined from $9,2 million to $7,7 million.
Biyam pointed out that “the bank implemented far reaching cost containment measures which partly mitigated the loss with operating expenses declining from $11,7 million in the first half of 2012 to $11,2 million in 2013.”
During the period under review, loans and advances declined by 6,3 percent to $76,2 million, while the balance sheet declined by 8,9 percent to $116,4 million.
“The fall in the balance sheet was mainly due to the repayments on international credit lines made during the period under review and the recorded losses,” he said.
This comes as Agribank drew down $15 million under the Industrial Development Corporation of South Africa (IDCSA) $30 million facility.
“Further draw downs on the facility are envisaged during the second half of the year. Cumulatively, the bank has now drawn down $45 million under the IDCSA facilities,” said Biyam.
Going forward, Biyam said they hoped the coming on board of a strategic partner “will further capacitate the bank to broaden financial services provision and diversify the business for sustainable profitability.”