FBCH shelves merger plans

HARARE - Listed financial services group FBC Holdings Limited (FBCH) has put on hold plans to merge its banking and mortgage lending units until the central bank clarifies the banks’ recapitalisation deadlines.

The group intends to combine FBC Bank and FBC Building Society as part of strategies to comply with the Reserve Bank of Zimbabwe (RBZ)’s revised minimum capital thresholds.

“While all the hurdles have been cleared, the bank and the society are still operating as separate legal entities as we await a formal announcement from the central bank with regard to the capitalisation timeline,” the group said in its financials for the half year to June 2013.

“In the event that the capitalisation deadline remains the same, the bank and the building society will be merged into one entity to comply with the capital requirements,” it said, adding that “if the banking subsidiaries’ current capital levels are in compliance with the new dispensation, the units will continue to operate separately.”

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.

As at June 30, 2013, all FBCH subsidiaries were in full compliance with the capital requirements.

Recently, Gono hinted that he might extend the banks’ recapitalisation deadlines due to liquidity constraints, among other challenges.

“We are going to relax (capitalisation deadlines) a little bit in the mid-term Monetary Policy statement to take into account these developments,” he said.

“Our telescopic view is that a lot of micro issues will be resolved in the medium and not short-term due to the multiplicity of far reaching macro issues that can only be tackled after a range of major events in the immediate horizon,” Gono said, while commenting on the extension one local bank’s curatorship.

John Mushayavanhu, FBCH’s chief executive, added that while preparations had been done to merge the two subsidiaries, “we are not ready to surrender our licence until such a time when the RBZ requirements force us to do so.”

“The group will continue holding on to its building society licence to avoid paying taxes,” he said, adding that shareholders had already approved the merger.

Building societies in Zimbabwe are exempted from paying taxes, as they promote mortgage lending.

However, Mushayavanhu said the group is yet to get official communication from the apex bank concerning the deadline deferment.

In the half year to June 2013, FBCH recorded $8,3 million profit after tax, up from $7 million posted in prior comparable period.

This improved performance was driven by increased revenues from group operations as well as costs containment.

Mushayavanhu said the group’s earnings capacity continues to be buttressed by its diversified business model, with all results from all subsidiaries except the manufacturing business significantly higher than for the corresponding period last year.

He noted that the subdued performance of the manufacturing business also weighed down revenues, adding that total income was expected to increase in the second half buoyed by increased volumes new products.

Net interest income registered a modest five percent growth to $9,9 million, contributing 27 percent to group’s total income.

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