HomeBusiness DigestPOSB speaks on CFX deal

POSB speaks on CFX deal

THE People’s Own Savings Bank (POSB) recently took over 14% of the listed bank, CFX Financial Services, through an underwriting agreement. The deal has sparked market speculation that POSB might be moving away from being a poor man’s bank into a

niche bank. There have also been indications that POSB might be planning a reverse listing. POSB chief executive, Admore Kandlela (Kandlela) spoke to senior business reporter, Shakeman Mugari (Mugari) about the deal and POSB’s future plans.

Mugari: The market was quite surprised when you decided to underwrite CFX’s rights issue and eventually managed to get 14% of the bank. What really was the motivation for the deal especially coming from a parastatal?

Kandlela: Given the situation in the banking sector you find that POSB had to adopt an aggressive strategy to strengthen itself. One of the strategies was integration. We then looked at sectors from which we get synergic value, like insurance and banking and other non-interest income business such as underwriting. In this case there were many candidates at that time for underwriting given the Reserve Bank’s desire to increase capital adequacy. We decided that we would have business linkages if we underwrite CFX. We did a due diligence on them and decided they were the right candidate for our strategy that is why we moved in as underwriters.

Mugari: There are now questions whether POSB is going full time into investment business because we know that you have interests in five other listed companies?

Kandlela: Yes we have shareholding in five listed companies but they were purely incidental because they were due to the demerger of Delta. When government was pulling out we decided to take over that stake. That is how we came to own shares in Pelhams , Zimsum, OK Zimbabwe and Dawn which are all former Delta companies. We also have shares in Delta itself.

Mugari: How big is that portfolio including the recent CFX deal?

Kandlela: It’s about a $30 billion investment on the stock exchange as at October 26. We believe these interests are important for the business to balance the portfolio. We specifically moved into CFX to beef up revenues. We are not moving away from our rural market where we service the lower end of the market. The CFX deal was part of our plan to capture the top end of the market in the banking sector. Going into an established bank was one way of participating in the niche banking mark. Mugari: But why choose a bank that almost collapsed because of fraud?

Kandlela: Of course we are mindful of the fact that a partnership with CFX is like marrying a divorced woman considering the problems that it has in the past. People always ask what you see in her but for us we are saying we see the potential that the institution has. We believe they have gone past the troubled period.

Mugari: But that’s what CFX thought when it went into Century only to burn their fingers in the process. What do you plan to do with the partnership?

Kandlela: Of course it has problems. But you realise that many things have changed since then, for instance some people who were at the top at that time have left the bank. As for our plans, you realise that we now have influence through board representation. We have a board representation on the holding company and the bank. CFX has got massive infrastructure and a very strong network, and that is what we are looking for.

We are starting to expand POSB’s network by using their former branches in Gwanda and Karoi. We are also now in Zvishavane. This is the offshoot of the relationship.

Mugari: There has been a speculation that you might want to increase your stake and eventually reverse list.

Kandlela: I have heard that too and we are aware that once we reach 35% we will have to buy out minorities. However, that strategy is not in our plans at the moment. We want this to continue as a partnership between private and public sector. For now we are fine as we are. We will decide on the long-term plan on the fruits we derive from the venture. The options are open.

Mugari: I still need clarification on your rumoured listing.

Kandlela: When I joined POSB I had a personal mandate that by 2008 I should have the people’s bank listed on the market. I believe that target is still achievable.

Mugari: Is that certain?

Kandlela: Yes it’s certain because that is what we have set out in our plans. It is in fact one of our major aims that we have set for ourselves and we are working towards that goal.

Mugari: I ask about listing because some people have speculated that you are currently in talks with government’s Allied Financial Services (AFS) to buy their 17% shareholding in CFX to bring your stake to 30%?

Kandlela: Remember the government got into CFX by default. They will not be there forever. It’s only logical that we take over. There is no way they can remain there for good and we have been bold enough to say it. We await their decision on that matter. We hear they are consulting. But I must say this is not the last time that you will see POSB in the market. You will see more in the near future.

Mugari: Has POSB started moving away from being the poor man’s banker. I mean the popular red and green books for account holders?

Kandlela: No! Those small deposits are still part of our core business. We realise their importance. An analysis will show you that those big banks that kicked out the small depositors are now scrambling for them because it’s cheap money. We have over three million depositors and out client base has been growing. Now those small depositors will be able to derive benefits from the new strategy because from November we will be introduce our bank on Zimswitch for their convenience when shopping.

Mugari: The public perception of a commercial bank is this big capitalist who will rip you off when withdrawing and depositing with cost charges. Is POSB not going towards it as it moves towards commercialisation?

Kandlela: We remain the cheapest. We want to be the low cost bank which pays the above average interest. Our charges have remained extremely low.

Mugari: Is the business making money?

Kandlela: Oh yes. On a month on month, the deposit growth is about $40 million. It’s a small deposit but the volumes are big. Total deposits as at the full year to September were $5,5 billion of which $4 billion is in savings accounts.

Mugari: Are you affected by the recently introduced economic stabilisation bond?

Kandlela: We are not part of it but we have wilfully participated. We have put in over $2 billion although they did not force us to do it.

Mugari: Finally has POSB kicked its tradition of a bank that does not want to pay market rates and is haunted by job actions?

Kandlela: We have kicked the habit. We are now paying according to banking sector rates. Our workers are part of the union of banking employees.

Recent Posts

Stories you will enjoy

Recommended reading