Cabs’ deposit base grows

Ngoni Chanakira

Central Africa Building Society (Cabs) says it now has a deposit base that exceeds $75,5 billion despite the current economic downturn.



lvetica, sans-serif”>Cabs managing director Derek Stephenson said $24 billion of the $75,5 billion had been lent as mortgages during the first eight months of the financial year to the end of February alone.


He said the building society was stable as was pointed out by the Reserve Bank of Zimbabwe (RBZ) in its evaluation of building societies.


The RBZ described Cabs as being “strong”.

“Cabs remains stable and profitable even in the current environment, with a deposit base exceeding $75,5 billion, with $24 billion having been lent on mortgages during the first eight months of the financial year to the end of February alone,” Stephenson said. “While some exposure to troubled institutions within the banking sector has been experienced, Cabs is confident that, as loans were in the most part secured, the majority of capital invested will be recovered.”


Cabs last week told employees that it would be retrenching staff to reduce overheads.


Stephenson said the exercise had already begun at the highest level with four members of the general management team accepting packages.

He said the retrenchment exercise should be viewed as part of the society’s initiative to improve future prospects by prudent financial management, rather than as a reaction to the current banking crisis.


“This exercise in fact started in November 2001 when we implemented a staff freeze,” he said. “Smaller margins in the future mean that we need to reduce our cost base and restructure the organisation accordingly.”


The managing director said the retrenchment exercise was “voluntary” and would help ensure continued growth in future.


RBZ governor Gideon Gono has said despite the current turbulence in the financial sector, the country’s banking system remains fundamentally sound and stable as a whole.


“Deficiencies noted to-date mainly relate to imprudent banking practices which have been swiftly contained and localised to avoid system-wide effects,” Gono said.


Cabs recently said the introduction of statutory reserves that “earn O%” while lodged with the RBZ would however result in loss of revenue for the society.


Cabs said however mortgage loans are still available to interested customers.


Last year building societies pointed out that finance raised through investment activities continued to be utilised for mortgage lending at rates that were considerably lower than those on offer in other sectors of the financial market.


The building societies said the high density areas continued to be their priority for lending activities but they had experienced difficulties lending to this sector due to the ever increasing costs of serviced stands and construction.


Mortgage interest rates for the medium and lower density housing had been increased during the year but the inflation-driven growth in the value of properties had far outstripped the average income earner’s ability to obtain loans of any meaningful amount to purchase a property.


Responding to written questions from businessdigest Cabs said the statutory reserve loss would influence an increase in mortgage loan interest rates as a recovery measure.


In its monetary policy statement the RBZ introduced statutory reserves of 30% of 75% of funds that do not support mortgage loans.


“This loss will influence an increase in mortgage loan interest rates as a recovery measure,” Cabs said. “In turn this will have a negative effect on affordability of loans for potential borrowers across the board but moreso for the low income earners. On existing loans this will have the effect of increasing monthly repayments to levels that may be unaffordable for home-owners resulting in increase in the default rate.”


The prominent building society said there was a high likelihood of pre-mature repayment of loans in order to avoid the high interest rates resulting in a reduction in the society’s mortgage loan portfolio.


“On the positive side of the monetary policy statement, if the RBZ allows the society to access funds from statutory reserves for onlending to the construction industry which is classified as a segment of the productive sector, then this will enable resumption of activity on housing schemes and mortgage lending in all sectors of housing,” Cabs said.


The building society last year issued a total of 9 190 loans valued at $37 million.


There were 6 065 high density loans for $1,4 million and 3 125 low density loans valued at $36,3 million.


“Currently mortgage funds are available,” Cabs said.


The building society said it currently did not have any new housing schemes.


“Of late we have noticed an apparent slow-down in the rate of increase of property prices indicating a possible stabilisation rather than a reduction in property values,” Cabs said. “We have also noticed a shortage in the properties available for sale, presumably because some sellers are adopting a ‘wait and see’ attitude on the effects of the RBZ monetary policy statement and its effects on exchange rates.”

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