AFRASIA Kingdom Bank Ltd (Kingdom) has suffered a major decline in its capital base tumbling to US$2,4 million from US$31 million end of December, businessdigest can reveal.
The bank’s capital base plunged from the US$31 million, which was reported as its capital and reserves position at the end of 2012, to US$2,411,028, according to the bank’s latest Statement of Assets and Liabilities.
A month before banks are expected to have US$50 million in shareholders’ funds, the bank’s statement of Assets and Liabilities issued at May 31 2013 shows Kingdom is miles away from this objective.
Share capital is indicated as only US$1 million. Total bank assets have tumbled a massive 27% since the beginning of the year.
The statement published by the bank as at May 31 reflects the steep decline in its total assets from US$195,3 million at the end of last year to US$142,7 million as at end of May.
The bank’s deposit base declined from US$138 million to just over US$106 million during the period.
The financial statement shows the bank had demand deposits of US$20,243 million, while savings and time deposits stood at US$39,280 million and US$47,078 million.
The bank also owed US$15,664 million to banks from abroad.
Kingdom’s problems began earlier this year when it attempted to take over the assets of its client –– Valley Technologies –– over unpaid loans and interest totaling US$21 million, which have become the centre of a major dispute between the bank and Valley technologies founder Zachary Wazara.
Wazara has been challenging all the moves by Kingdom to recover its dues from the mobile broadband services company.
Early this year on January 12 Kingdom, through a special purpose vehicle, took over effective control of Valley Technologies through a debt-share swap agreement.
Investigations by this paper also reveal that Lalela Trading, a Special Purpose Vehicle created by Kingdom, was a sole bidder at the recent auction of Valley Technologies’ assets conducted by the Deputy Sherriff at the behest of the bank.
Impeccable sources privy to the auction told businessdigest the equipment, whose estimated market value was placed at over US$12 million, was sold for a mere US$98 000.
“This is an oddity in itself, that a bank which was attempting to recover a huge loan of US$21 million, allows a sale to go through for such a paltry sum,” the source said.
Another potential bidder, who felt disenfranchised by the auction process, said: “I was an interested bidder but couldn’t raise the required US$10 000 deposit.
“Ruby then pestered me to participate without putting anything down for both the scheduled and deferred dates of the auction because there were only four bidders who had showed up and Valley Technologies had objected to the auction going ahead as there were too few participants.”
A source alleged that only bidders licensed by the Postal and Telecommunications Regulatory Authority of Zimbabwe were allowed, adding that the list of equipment in the publication was also understated.
Investigations by this paper into the conduct of the auction revealed it was held under very obscure conditions for a public auction.
An administration executive with Ruby Auctions, Rose Zhou, declined to give details of the auction to this paper and threatened to institute legal proceedings for pursuing the matter.
Wazara claimed the bank entered the debt-to-equity deal with his company in an attempt to hoodwink the Reserve Bank of Zimbabwe (RBZ) by covering up the true state of its financial position during the December reporting period.
A damning letter written by Wazara to the RBZ claimed Kingdom was wary the authorities would force the bank to provide for the US$21 million loan, with dire consequences for the financial institution’s banking license.
Initial findings, according to one source at the RBZ, have unearthed the need for recapitalisation of Kingdom after its entire investment was wiped out by non-performing loans which were not provided for in December as required by statutory provisions. The latest financial statement lends credence to this assertion.
Kingdom’s head of Public Relations and Corporate Communications, Sekai Chitemerere, said the general economic environment had resulted in a decline in bank deposits as alluded to by the Bankers Association of Zimbabwe, which recently indicated a decline from US$4,2 billion in December 2013 to US$3,7 billion by mid-June 2013 in bank deposits.
“A deliberate position has been taken by the bank not to pick expensive and short-term wholesale deposits hence non-renewal of maturing facilities during the period in question. This is reflective of an economy which has stagnated and is shrinking,” Chitemerere said.
“This, coupled with high default rates as reported by regulatory authorities as well as various media, has led to a cautious approach to the creation of assets. The half-year fiscal policy should shed more light on the business conditions prevailing in the economy and paint the right picture with regard to the way forward for business into the future.”