FBC Holdings Ltd (FBC) says its newly acquired subsidiary, Zimbabwe Building Society (ZBS) Ltd, has turned around and is now poised to record a profit.
Chief executive officer of FBC, Livingstone Gwata, said they had managed to turnaround the loss-making building society. “We are confident that it will make a profit and the results will be favourable,” Gwata said at an FBC Golf Day last week.
“We have since incorporated it into the group,” he said. ZBS has been renamed FBC Building Society in line with the group profile. The turnaround comes as a relief for customers of ZBS, which in 1998 had to be saved by the Reserve Bank of Zimbabwe from collapse. FBC took control of the building society in a share swap deal with Francis Nhema, the Minister of Environment and Tourism, in January.
Nhema is a founding owner of ZBS through his investment vehicle called Nhema Trust that held more than 60% of ZBS.
FBC took 60% in ZBS in exchange for a 3,5% stake (59 million shares) in FBC given to Nhema Trust. FBC bought ZBS at a time the building society was persistently making losses.
“ZBS has not been a flourishing business as such. Up until the takeover, ZBS was making losses,” Gwata recently said.
Last year the building society made losses resulting in it having to fund a steep rise in operating expenses from the slim reserves that it had accumulated the previous year. ZBS’s core business of mortgage lending failed to generate funds to support the costs.
The FBC injected $3,5 billion into the ZBS, taking the society’s capitalisation above the $7,5 billion minimum statutory requirement for building societies. However, the new owners of the ZBS could be looking to restructure the building society’s mortgage book, which has traditionally been weighted in favour of the high-density home ownership sector.
The building society announced its new mortgage interest rates this week. For low density, the rate for new building is 90%, for existing properties it is 100% and the same rates apply for high density.
For non-owner occupied the interest rate is now 140%.
The rate for industrial or commercial property is now 140% and short-term loans are attracting an interest of 150%. Diversifying the mortgage book would not only spread risk, but also free up depressed margins, analysts say.
Southern African Reinsurance, which was also acquired by FBC, has made a significant contribution to FBC’s profits in the past year. The ZBS has 16 branches across Zimbabwe.