Agribank records $9m loss

HARARE - Distressed government-owned Agribank’s losses widened to $9,2 million in the year to December 2013 from $5,6 million incurred in prior year due to non-performing loans (NPLs) , among other challenges.

The agro-focused financial institution said it was weighed down heavily by impairment provisions amounting to $5,8 million during the period under review.

Its chief executive Sam Malaba said as much as 62 percent of the total impairment was in respect to bad debts owed by three corporate entities, he could not name.

“The increased impairment provisions are reflecting deteriorating domestic economic conditions. On a sectoral basis, impairment was mainly dominated by corporate agriculture constituting 51 percent, distribution and services at 20 percent, primary agriculture at 10 percent and manufacturing at nine percent,” he said.

Malaba said the institution — created to provide loan funding to the agricultural sector — had attached properties of one of the corporates, currently under judicial management, in hope to recover a fair value of the amount owed.

He said the other debtors were struggling to pay off and Agribank was seeking legal recourse.

“...we are going to recover our money through the courts,” he said.

Malaba added that the group has adopted an aggressive debt recovery strategy to reduce NPLs and had also tightened pre-loan assessments.

“We want to strengthen credit granting process and ensure perfection before loan granting as well as close post disbursement monitoring,” he said.

This comes as the bank was inadequately capitalised to the tune of $12,5 million as at December 2013 against minimum regulatory requirements of $25 million following the extension of a minimum of $100 million by the central bank to 2020.

“Government allocated $4 million in the 2014 budget against a bid of $50 million. Inadequate capitalisation of the bank results in funding and liquidity challenges and the inability to underwrite business growth,”Malaba said.

He added that lack of capital also meant “having to make recourse to expensive market fixed deposits and the inability to attract significant deposits.”

During the period under review, the bank’s operating expenses increased by 1,8 percent from $22,3 million to $22,7 million, signalling a tough going ahead considering the tight budget.

Net interest income increased to $6,9 million from $5,3 million achieved in prior year while net non-interest income declined 12 percent from $14,6 million to $12,2 million.

Loans and advances surged to $90,4 million from $83,7 million while customer deposits remained stagnant at $52 million.

Malaba noted that the bank intends to set up a micro-finance division by May this year wholly dedicated for small to medium enterprises particularly those in agriculture, mining, retail and distribution.

“The bank has already designed appropriate products that are suited to this particular segment and carried out a study which brought insights into the sector,” he said.

 

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