Indigenous banks exposed to risks
http://www.theindependent.co.zw/
Friday, 13 May 2011 15:17
By Chris Muronzi
SEVERAL Zimbabwean banks are exposed to risks after RioZim Ltd failed to
settle loans amounting to US$50 million, forcing the financial institutions
to roll over the loans, businessdigest can reveal.
Documents seen by businessdigest show that a number of local banks were
reeling from RioZim’s non-performing loans and have resorted to rollovers.
Non-performing loans are loans that are in default or close to being in
default.
Trust Banking Corporation advanced US$3,4 million to RioZim. Trust Bank’s
loan book stood at US$1,436 million by December 31 2010. While the bank’s
loan book could have grown in the quarter to March and to date, there is
indication of concentration of RioZim’s US$3,4 million advances and their
exposure is 239% to the bank’s December loan book. Concentration risk is
very high on RioZim’s balance. Most of the loans were due in April and early
May while others are due later this month. RioZim CEO Josh Sachikonye is
also the Trust Holdings Ltd (THL) chairman. THL owns Trust Banking
Corporation.
When reached for comment yesterday, Sachikonye said he was in a meeting and
promised to call back but had not done so at the time of going to print.
Trust Bank MD Nyevero Hlupo was also said to be in a board meeting and had
not called back at the time of going to press.
Tetrad also advanced a series of loan facilities amounting to US$4,8
million, representing a 15% exposure compared to their December loan book.
Some of the loans were due last month while some of the loans are due later
this month. According to documents, Tetrad has been forced to revolve RioZim’s
Bankers Acceptance (BA). BA is a short-term credit investment created by a
non-financial firm and guaranteed by a bank. Tetrad group CEO Eugene Mlambo
said: “The loans are performing. Its not unusual for us to role over a loan.
Up to this day, they have never failed to meet their side of the bargain.”
Kingdom Bank has the highest exposure in terms of value of US$7,5 million to
RioZim, representing 9% of their December loan book. The loan facility is
due next month. Sources say the bank might also be forced to roll over the
facility on maturity.
ZB Bank is also exposed to the tune of US$5, 9 million. The ZB loan
facilities were due early May forcing the bank to roll over the facility.
The RioZim loan represents around 8% of ZB’s total loan book of US$70.4
million to December 31 2010.
Premier Banking Corporation is exposed to the tune of US$2,4 million, which
is 9% of the loan book as at December 31 2010. RioZim, according to
documents, accessed various loans. The bulk of the group’s loan facilities
matured last month. Again management at the bank is still to recover their
funds. Premier CEO Daniel Sackey had not responded to businessdigest’s
enquiries at the time of going to print. His personal assistant had earlier
claimed her boss was in a meeting.
BancAbc is exposed to the tune of US$3 million. RioZim failed to settle the
loans in April forcing management to roll over the facility. Africa Bank
Corporation Botswana is also exposed to the tune of US$5 million. Interfin
Bank is owed US$1,5 million by the company. But the Interfin facility will
be due early next month. When reached for comment the Interfin Bank MD Ray
Njanike refused to comment and referred all questions to RioZim management.
Other financial institutions owed funds by the mining group are IDBZ –
US$2,3 million, Metropolitan Bank US$1,3 million, Imara Corporate Finance –
US$1,5 million but their loans are due in August and September.
African Export and Import Bank is owed some US$8 million which has been due
since December last year.
Renaissance Merchant Bank is also exposed to the tune of US$2,9 million. The
bulk of the loans were due by end of last month with small chunk of about
US$204 578 maturing early June. Although the company has a US$2 million
facility with NMB Bank, the group is still to utilise the fund.
International banks like Stanchart Chartered, Barclays and Stanbic have
shunned advances to RioZim. The banks have been criticised for their very
low loan-to-deposit ratios but it is now their stringent credit risk
guidelines and policies that help them accurately assess risky borrowers
thus reducing default rates.
RioZim’s financials to December 2010 show that finance costs rose from
US$4,3 million to US$10,2 million, a figure representing 137% rise in
finance charges.
Some of the company’s debt attracts interest as high as 30% annually, the
documents show.
Finance costs at $10,2 million swallowed the group’s US$9,3 million
operating profit resulting in $570 000 loss before tax in the full year to
December 2010.
This comes after RioZim’s bid to raise US$40 million through a rights issue
fell through last month after the would be underwriter –– Essar Africa
Holdings –– pulled out of the deal.
Essar is said to have pulled the plug on the RioZim deal after a due
diligence examination found the Zimbabwe Stock Exchange-listed company was
heavily geared and had a sizeable short-term debt.