FINANCIAL powerhouse, Kingdom Financial Holdings Ltd (KFHL), has deposited $65 billion with the Reserve Bank of Zimbabwe (RBZ) to boost its liquidity situation and capital base in line with n
ew central bank requirements.
The move comes as the net closes in on troubled financial institutions that have until September 30 to deposit $10 billion with the RBZ.
Merchant banks need to deposit $7,5 billion, finance houses ($7,5 billion) while building societies and discount houses need $7,5 billion and $5 billion respectively.
The Zimbabwe banking sector, as at end of June, comprised a total of 41 banking institutions. There are 16 commercial banks, six merchant banks, five building societies, nine discount houses, and five finance houses.
Out of the 41 banking institutions, six are under curatorship, two under liquidation and four are still under the Troubled Bank Fund.
Kingdom chairman Richard Muirimi last week said his financial institution had “never” utilised the fund during the six months under review, making Kingdom one of the few indigenous-owned commercial banks that did not need to go cap in hand to the central bank for funds.
Others did so when RBZ governor Gideon Gono cracked the whip on the financial services sector after accusing it of “rampant profiteering” and concentrating on sectors that had nothing to do with core banking.
For the six months ended June 30, Kingdom’s attributable profits, however, declined by 66% from $20,1 billion to $6,8 billion for the same period ended June 30 2003.
“Despite the unpredictable and highly volatile nature of the first half, the group was able to manage the crisis (liquidity),” Muirimi said. “At a time when it would have been easier to erode the capital base rather than to grow it, we are pleased to report that our banking subsidiaries did not need to access the Troubled Bank Fund during the first half of the year.”
He said while RBZ had raised concerns of profitability and liquidity on all commercial banks, Kingdom had instead deposited an additional amount of $65 billion with the RBZ.
Reserve Bank governor Gideon Gono said the Troubled Bank Fund, which was introduced in January and supposed to end on March 31, was extended to allow the affected institutions to pursue strategic initiatives that would bolster their viability and solvency situations.
The majority of the country’s banks, however, still need to solve their liquidity situations before September 30 after which period the RBZ has threatened to take them over.
Some institutions are currently pursuing strategic initiatives that include mergers and acquisitions as well as engagement of technical partners.
Century Holdings Ltd recently merged with CFX Financial Services, First Banking Corporation Ltd is merging with the Southern Africa Reinsurance Corporation (Sare) while NMB Holdings Ltd is still courting the Merchant Bank of Central Africa (MBCA) for a possible marriage.
In an interview with businessdigest in Victoria Falls, MBCA managing director Denys Denya confirmed that there were talks for a possible merger but “small issues were still being finalised”.
“The nature of our business is basically the same,” he said.
Trust Bank is, however, currently in the cold after potential investors, insurance firm Old Mutual Ltd, were give a killer punch when they discovered that the institution was “seriously in the red”.
Not amused, Old Mutual shut the door on Trust after also “secretly” discovering that Trust’s interest bill with the RBZ was “almost impossible to clear” and needed to be written off and that directors had bolted with billions from the institution’s coffers.
Unconfirmed reports say Trust’s debt has now ballooned from $208 billion to $1,5 trillion.
“The liquidity crisis that destabilised the financial services sector meant that the group focussed its objectives on remaining liquid at the expense of profitability,” Muirimi said.
Muirimi said the profitability and liquidity concerns were further compounded by the new interpretation to the calculation of statutory reserves which resulted in the group depositing an additional amount of $65 billion with the RBZ.
Kingdom deputy chairman and founder, Nigel Chanakira, says he is looking not only regionally but internationally.
Kingdom currently has branches in Botswana, Malawi and South Africa.
“We are eyeing the New York Stock Exchange,” he said.