AfrAsia Bank collapses

HARARE - Troubled AfrAsia Bank Zimbabwe Limited (ABZL) has surrendered its banking licence after its Mauritian shareholder gave up on turning around the bank’s fortunes.

Apart from a Reserve Bank of Zimbabwe (RBZ) statement confirming the development, insiders said the bank’s $100 million contingency liabilities — arising from Zach Wazara’s $80 million lawsuit and others — had proven to be an albatross around the bank’s future.

“…cancellation (of ABZL’s licence) followed board resolutions by AfrAsia Zimbabwe Holdings Limited (AZHL) and AfrAsia Bank Zimbabwe Limited to voluntarily surrender the banking licence,” the RBZ said. “… the banking institution is no longer in a safe and sound condition in that the institution is grossly undercapitalised and is facing chronic liquidity challenges,” it said, adding that “all efforts by the shareholders to recapitalise the institution… have failed.

The apex bank said the board “had advised that AfrAsia Bank Limited was constrained in availing any further support to the Zimbabwe operations”.

ABZL’s collapse not only comes hard on the heels of Allied, Tetrad Investment Bank (Tetrad) and Trust’s demise, but expected to further dampen confidence in the already fragile financial sector.

Owned by Transport minister Obert Mpofu, Allied was the first to voluntarily surrender its licence in January followed by Eugene Mlambo’s Tetrad, which was placed under judicial management after its recapitalisation deal with Russia-based Horizon Capital flopped.

Even though AfrAsia Bank Limited (ABL) chief executive James Benoit had repeatedly assured the market and Zimbabwean authorities that they were confident of the bank’s turn around, it is understood that they have thrown in the towel.

ABZL failed to meet the RBZ’s June 2014 minimum capitalisation of  $25 million, as its capital stood at $13 million in September.

Wracked by bad loans from its forerunner Kingdom Bank Limited, ABZL has succumbed to almost similar circumstances and market challenges that are ravaging the country’s financial sector.

According to international media reports, the Mauritian group had also been failing to take out money from its Mauritius base to undertake various transactions, which could have also affected its local unit.

In his latest monetary policy, Reserve Bank of Zimbabwe governor John Mangudya said AZHL was “negotiating with potential investors to take up significant equity in the institution” with the development expected to “ameliorate the institution’s funding constraints”.

The central bank chief gave the distressed institution, among others, until June 30 to put its house in order.

And as the solvency crisis escalated in the past months — with the bank limiting depositors’ withdrawals — ABZL even tried to rope in former BancABC managing director Hashmon Matemera to stabilise the situation.

Apart from the non-performing loans burden, the bank — which last December engaged Imara Capital Finance to market its medium-term secured note it expected to raise $15 million — is facing lawsuits of nearly $100 million from various clients. To minimise exposure and “isolate any additional risks” from the vulnerable Zimbabwean investment, ABL in January said it decided to exclude the troubled subsidiary from the group’s consolidated accounts.

Arnaud Lagesse, ABL chairman, said “entities of the group will be split between a banking cluster and a non-banking cluster, and within the banking cluster, the Zimbabwe entities will cease to be subsidiaries of the Bank and will be held separately”.

“…dealing in Africa is not risk free, as our investment in Zimbabwe has demonstrated,” he said in the group’s 2014 annual report, adding that “concurrently, we have ensured that the risks of Zimbabwe are ring-fenced and do not affect our main stream operations on the AfrAsia Bank balance sheet.”

Comments (2)

ko ini ndanga ndichiine mari ikoko yandaitadza kutora,ndichaitawo sei?

dzetse - 26 February 2015

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