TRUST Bank is in talks with Allied Bank, owned by Mines minister Obert Mpofu, over a potential partnership to enable the two financial insititutions to meet the Reserve Bank of Zimbabwe (RBZ)’s first stage of minimum capital requirements of US$25 million whose deadline was December 2012.
Happiness Zengeni / Clive Mphambela
The two banks had not fully complied by the December deadline and were among seven out of 26 institutions in the financial sector not to do so.
As at the deadline Trust Bank had minimum capital US$18,70 million while, ZABG was on US$15,8 million, according to Reserve Bank governor Gideon Gono’s monetary policy statement in February this year.
Under the Reserve Bank’s new minimum capital requirements for financial institutions, commercial banks had to be capitalised at US$25 million by December 31, 2012, US$50 million by June 30, 2013, and 75% by December 31, 2013.
The banks must be in full compliance at US$100 million by June 31, 2014. According to sources, Trust and Allied reportedly concluded due diligence exercises on each other last week.
Now, the requisite regulatory approvals are being sought from various authorities.
If the deal goes through, both Trust and Allied banks would be the first to comply with Gono’s desire to see a more consolidated financial services sector through mergers or acquisitions.
The deal would also need to be cleared by the Competition and Tariffs Commission. As Trust is listed on the Zimbabwe Stock Exchange the merger would also need to be cleared by the same and the Securities and Exchanges Commission of Zimbabwe (Sec).
Trust Bank demerged from Allied Bank (formerly ZABG ) in November 2010 when it reclaimed its assets from the combined ZABG, which in itself incorporated Trust Bank, Royal Bank and Barbican Bank and was formed in 2001.
The Reserve Bank, which had directed the amalgamation, gave back Trust its banking licence and flagship branches in 2010. But having been out of the market for so long, Trust struggled to lure back its former clients and managed to get back some of its former key staff.
A senior banking analyst said the deal would be good for both parties.
“There is a very clear and natural strategic fit here,” said the analyst. “On one hand Allied Bank is looking for strategic space, a reasonable branch network, banking skills and an open market listing, all of which Trust has. On the part of Trust, Allied Bank has demonstrated the capacity to raise capital.
The anchor shareholder, Mpofu’s Trebor & Khays, has already resuscitated Allied Bank. The combined entity is likely to be a better whole, bigger than the sum of the parts,” the analyst said.
He pointed out that the strategic fit also becomes pertinent considering that Trust was the first local bank to aggressively build a sound client base in the southern region, building a strong presence in the farming, commercial and tourism communities in and around Bulawayo.
Trebor & Khays has developed an interest in banking and properties; the same business segments that Trust has a footprint in.Trust has been trading under a cautionary notice to investors.
Trust Bank corporate affairs executive Gloria Mutekwa could not be drawn into confirming the deal.
“All I can say is that it is a matter of public record that Trust has been in discussion with various potential partners. We are being courted and we are also courting investors, but we cannot say at this stage whether a deal has not been concluded with any particular party, nor can we divulge the terms of any such discussions,” Mutekwa said.