CFX Financial Services is in talks with Deutsche Bank, Germany’s largest financial institution, for a possible cash injection that could strengthen
its balance sheet size, businessdigest established this week.
CFX is also understood to have started discussions with Zimre Holdings in a bid to secure investment to shore up the financial institution’s capital ahead of new US dollar-linked capital requirements.
Commercial banks are required to raise their capital from current levels of $100 billion to US$10 million or $1 trillion at the ruling exchange rate by September 30.
Businessdigest understands that CFX approached Germany’s largest bank for a possible deal after it became apparent that current shareholders could not raise cash to recapitalise the bank on their own.
Sources said CFX had also opened talks with cash-rich Zimre to widen local institutional participation.
A source close to the talks said there had been behind-the-scenes discussions between CFX and Zimre since January this year, and a deal was now likely to be sealed soon.
The sources indicated that Zimre had expressed interest in acquiring a significant stake in CFX, currently recovering from the negative effects of a fraud-induced liquidity crunch in December 2004.
Zimre is expected to conduct a due diligence exercise in the next few weeks to ascertain CFX’s financial position before the deal is consummated.
Businessdigest understands that there had been contacts between CFX and Deutsche Bank over a possible deal or a strategic arrangement in international transactions.
Although the details of the talks are still sketchy, sources said officials from Deutsche Bank, which has 1 588 branches globally valued at 1 035 billion euros by way of assets, were in Zimbabwe three weeks ago for a brief surveillance on CFX.
CFX chief executive Wilson Gwatiringa refused to confirm that the bank was in discussions with Zimre and Deutsche Bank.
But he told a press conference recently that CFX would have “new institutional investors on board” before September 30.
In refusing to discuss talks with Deutsche Bank, Gwatiringa said CFX was bound by Zimbabwe Stock Exchange (ZSE) regulations that prohibit listed firms from making public statements on on-going transactions.
He said the company would issue a cautionary statement once at the appropriate time.
“When the time is ripe for us to discuss such things we will certainly come to you,” Gwatiringa said. “When that time arrives we will tell the market through a cautionary statement. I would suggest we talk then.”
The managing director of CFX Bank, Simon Monckton, was equally evasive, saying the bank was not in a position to comment on such transactions.
An official at Deutsche Bank’s head office in Frankfurt also refused to comment on the issue, saying it was a confidential matter.
“We are not authorised to give out information on on-going transactions. We are not allowed to do that,” said the senior official.
Reserve Bank governor Gideon Gono warned that banks have been given ample time to meet new capital requirements and so the central bank would not accept non-compliance on September 30.
CFX is currently owned 15,9% by government through Allied Financial Services (AFS) and 39,1% by depositors, most of whom might fail to raise funds should the bank decide to raise cash through a rights issue. Sean Maloney, who controlled 25% before the banking crisis, now holds 10,9%, while Century Holdings Ltd owns 4,2%.
Wolpert Investments holds a 3,4% stake.