CBZ mulls tapping new lines of credit

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LISTED financial services group CBZ Holdings (CBZ) plans to introduce a host of measures to achieve its annual performance targets including possible doubling of lines of credit to US$400 million in the short-term, group CEO John Mangudya said.

Taurai Mangudhla

In an interview with businessdigest, Mangudya said the company is currently sitting on over US$220 million in lines of credit including a US$68 million diaspora bond which matures this year.

Mangudya said the bank hopes to extend the bond and increase it to US$200 million from the current US$68 million.

“The diaspora bond is US$68 million so if you add the difference which is US$130 million it means you have the current lines of credit worth US$220 million plus the new US$130 million which brings us to US$350 million and closer to our target of at least US$400 million,” he said.

Mangudya said the new money was expected to come from African Export and Import Bank, Afrexim Bank and other funding partners.

The diaspora bond, with special features like prescribed assets and tax exemptions, has a four-year tenure.

The new lines of credit are in line with CBZ’s objective to access cheaper and long-term funding and improve its liquidity as well as non-fee income.

Last week Mangudya told analysts at a briefing, while presenting the half-year results for the period to June 30 2013, that the company had issued US$10 million worth of convertible debentures which had been given to foreign investors to boost liquidity.

Mangudya told businessdigest a transaction with two unnamed Mauritian asset management investors had been concluded after receiving exchange control approval from the Reserve Bank of Zimbabwe (RBZ).

“Everything has been done, but I can’t tell you the names of the investors at this point except that they are not exactly into banking, but asset management,” he said.

“The debentures have three-year tenure at a 10% interest rate.”
Mangudya said the group had spent US$39 million building an office complex near Sam Levy’s Village in the plush Borrowdale area which acts as a one-stop-shop for the group’s insurance business and private banking.

“We have realised most of our clients come from that direction and we had to give convenience as well as improve ambiance,” Mangudya said.
“The complex also houses our Borrowable branch and now we do not have to lease from someone else at a huge cost. This is money well spent for the shareholders because the building is their asset.”

Commenting on the current panic withdrawals in the formal banking system, Mangudya said his bank was not affected because of the nature of its major clients who are mostly corporates and government institutions.

He added that there was no need to fear a hurried return of the Zimbabwe dollar as authorities had clearly outlined the national plan in that regard.

“You must see that confidence is a precious and fragile resource and I don’t see why depositors are in a panic after the RBZ governor (Gideon Gono) and other key people have clearly indicated the return won’t be any time soon.”

After tax profit for the group plunged 12,9% to US$16 million compared to US$18,3 million in the same period in 2012 on account of reduced fee income after the Bankers Association of Zimbabwe signed a Memorandum of understanding (MoU) with the central bank to reduce bank charges effective January this year.

Mangudya said the bank was calm despite the profit reduction as most of the costs associated with the MoU had been factored in the first half with improved performance expected in the final half of the year.

He said the bank also took a knock due to an 11% increase in the cost of doing business after reduction in bank charges and challenges arising from erratic power supply which has seen most companies running on generators. The bank also recently awarded a salary increase to its employees.

Gross income for the period was 8,1% above prior period last year at US$69,2 million while underwriting income went up by 77,3% to US$3, 9 million.

At the briefing, FD Never Nyemudzo said total expenditure grew 12,9% to US$42,1 million with the group’s cost-to-income ratio standing at 60,8% versus industry averages of around 71%.

The group’s banking units are adequately capitalised with combined capital at US$175,9 million by the end of June 2013.

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