Pressure mounts on banks
JAMA MAJOLA | 15 January, 2012 00:34
A dark cloud is hanging over several Zimbabwean commercial banks, which are
struggling due to chronic capitalisation problems and a prolonged liquidity
crisis in the market.
Latest information gleaned from Ministry of Finance, Reserve Bank and
banking sector reports show only six out of 26 banks in the market are
strong, while the rest are just keeping their heads above water.
“Six banking institutions continued to dominate the market in terms of
deposits, commanding close to $2-billion of the total banking sector
deposits, representing about 70% of the total market deposits,” one of the
documents says. “CBZ Bank retains the highest systemic importance, with
market share for deposits of close to 25%.”
Main banks in Zimbabwe in terms of core capital include CBZ, Standard
Chartered, Barclays, Stanbic, BancABC and ZB Bank.
This means the other 20 banks are just breaking even.
ZABG is critically undercapitalised, with a negative core capital position
of about $8-million. The deterioration in capital is attributed to
cumulative losses for the current and prior years.
The bank has been given until September 30 2012 to meet minimum capital
requirements following a protracted demerger process in the last quarter of
2010.
ZABG has been trying in vain to get its major shareholders and investors to
inject capital.
A consortium of Russian investors is said to be trying to take over the
bank, which has requested $5-million from the Ministry of Finance to cover
its operational expenses.
Other banks which have been struggling include ReNaissance, which is now
under the management of a curator, TN Bank, Kingdom Bank, Genesis Investment
Bank and Royal Bank.
Following its closure and management by a curator, ReNaissance’s future has
become gloomy, with the old shareholders fighting vicious battles for
ownership and control with the curator and central banks officials.
Genesis Bank has been trying to get foreign investors to strengthen its weak
position. The central bank has approved in principle the proposed
acquisition of a 93% stake in the bank by a consortium of investors led by
FMB of Malawi.
Several banks failed to meet their minimum statutory capital requirements –
a buffer against contingency risk and a cushion for depositors – last year
due to low capitalisation and poor balance sheets. They were given new
deadlines which stretched into this year.
The International Monetary Fund has expressed concern over “rising
vulnerabilities in the banking system” in Zimbabwe.
The IMF has advised that small and weak banks must be recapitalised, merged
or closed, something which several struggling banks are considering.
Owners of small banks have been hanging onto their assets, hoping to secure
funds for capitalisation or new shareholders, something which has been
difficult mainly due to the macro-economic environment and policy problems.
Foreign-owned banks – which underpin the banking sector – have been under
growing threat of seizure or being pushed out of the market as they continue
to resist government’s controversial indigenisation laws, which amount to
expropriation disguised as empowerment.
Empowerment and Indigenisation Minister Saviour Kasukuwere has accused banks
of defiance and has threatened punitive measures.
“We have Standard [Chartered] Bank who show a lot of disrespect for our
laws,” Kasukuwere said recently.
“Barclays Bank is still trying to find all the excuses that it can and
Stanbic Bank ignores its own commitments to the people of this country. It
must be made clear to them that they will not escape the law.”
Zimbabwe experienced a chain of bank collapses in 2004 at the height of the
economic meltdown and hyperinflation.
A number of banks are battling for survival due to poor economic
performance, low-capacity utilisation by industry and depressed demand
against a backdrop of low disposable incomes.