Banking Business, No Longer A One Man Show
HARARE â€“ There was a time when Zimbabweâ€™s banks were associated with certain individuals who were either founders or leaders running them.
Kingdom Bank was associated with founder, Nigel Chanakira, Trust bank was known for William Nyemba while Julius Makoni and James Mushore were the symbols for National Merchant Bank (NMB) and Enock Kamushinda was the face of Metropolitan bank.
However, Reserve Bank of Zimbabwe (RBZ) Gideon Gono’s crackdown on the banking sector in 2004, which unearthed serious irregularities, changed all this.
Gono’s crackdown exposed that some banks were not on a sound footing after all and were lending out loans to companies linked to directors.
Trust, Royal and Barbican were amalgamated to form the Zimbabwe Allied Banking Group (ZABG) that commenced trading in 2005.
Nyemba and Mzwimbi could not take it lying down and approached the courts over the unconstitutional manner in which their assets were amalgamated to form ZABG.
The High Court ruled that the takeover of assets was illegal setting the stage for an out of court settlement to return the assets. The process began last year and Mzwimbi, Nyemba and Mthuli Ncube will get their assets back.
But the 2004 banking storm shook the sector and players scrambled for partners. John Moxon’s Meikles Africa Limited (MAL) shored up its shareholding to over 40 percent in Kingdom Bank, leaving Chanakira as a minority shareholder.
And so when Meikles and Kingdom agreed to merge in 2007 together with Tanganda and Cotton Printers, Chanakira assumed a minority stake in the enlarged entity.
Boardroom squabbles between Chanakira and Moxon led to demerger of the entity.
Work is underway to formulate the demerger in which Chanakira and his allies will have a controlling shareholding in Kingdom. At the same time, Chanakira will divest from MAL.
Metropolitan roped in Loita Capital International, which snapped up 60 percent stake in the commercial bank, a deal which provided the much needed international partner that came in handy in scouting for lines of credit.
Kamushinda took a back seat and relocated to Malaysia.
The use of multiple currencies last year, although it brought stability to banks, also meant that financial institutions had to adopt a new model to survive. They had to bring in new partners.
Gono announced a phased capitalisation approach for banks to shore up their capital bases.
By September 30, 2009, commercial banks were supposed to have US$6.25 million as minimum capital. By March 31, 2010, commercial banks were required to have US$12, 5 million as minimum capital.
In the run up to the first phase of the September 30, 2009 minimum capital requirement deadline, CFX hopped from one place to another as it searched for a strategic partner to bring the much needed capital.
Interfin Holdings Limited was begged to underwrite CFX rights issue on condition that it would get a controlling shareholding post the capital raising initiative. The US$10 million rights issue was subscribed for only three percent and Interfin assumed the driving seat at the commercial bank.
Having sweated to meet the US$6,250 million required on September 30 2009, shareholders of Premier Finance Group okayed a German financial services investment company, African Development Corporation (ADC) to take up 54 percent in the group.
NMBZ, the holding company of NMB Bank, announced that African Century would take up 25 percent stake in the group.
African Century was created to develop a portfolio of investments in sub-Saharan Africa, principally in East and Southern Africa.
The new-look NMB will see the return of Mushore to the financial services group. Makoni, Mushore, Francis Zimuto and Otto Chekeche, NMB’s top brass, fled the country in 2004 as monetary authorities closed in on the quartet on foreign currency externalisation claims.
The charges were later quashed by the courts.
Analysts said locally owned banks had to look for reputable international partners to bolster their bases.
“It’s in line with the economic environment. Banks have not been doing well and they need fresh capital injection which is not available locally,” said Witness Chinyama, head of research at Kingdom Financial Holdings Limited (KFHL).
Capital raising initiatives by locally owned companies had been undersubscribed by shareholders with underwriters getting a big chunk in the process.
What had made the situation difficult for locally owned banks was that they were failing to mobilise deposits.
Statistics from the Reserve Bank of Zimbabwe (RBZ) show that five major banks namely Standard Chartered, Stanbic, Barclays, CBZ and FBC, contributed more than half of the US$1,3 billion total deposits as at December 18 last year.
The failure to mobilise deposits had led to smaller banks pushing the innovation envelope too far by offering higher rates on money market investments.
Whilst the heavy weight financial institutions were quoting rates averaging 15 percent for 60 to 90 day deposits, the weaker ones had made the rates juicier by picking the same liabilities at rates in the range of 25 to 30 percent.
Despite the attractive rates, there were no foreigner takers due to the country’s perceived risk.
“Due to increased uncertainty on the economy, depositors remain unwilling to deposit their funds beyond the 90 day area, putting so much pressure on banks’ ability to create attractive assets with a tenor beyond 90 days,” KFHL said in a market report.
The report also said default risk had also been elevated by the prevailing high lending rates as well as the short dated nature of the assets created. These conditions were making it difficult for borrowers to service their debts upon maturity.
Analysts said the days of banks driven by personalities had come to an end and a solid base was linked with survival.
“If you don’t have foreign partners, you should have a solid base like CBZ. The solution for third tier banks is to look for foreign partners,” said an economist with a leading commercial bank.