THE Reserve Bank of Zimbabwe (RBZ) yesterday cancelled the operating licence of troubled Allied Bank, owned by Transport minister Obert Mpofu, saying the institution was no longer in a safe and sound condition.
The closure comes barely three years after Mpofu’s family investment vehicle, Trebo & Khays, rescued the bank from the brink of collapse in an asset-banked transaction.
In a notice yesterday, RBZ said the cancellation, in terms of section 14(4) of the Banking Act [Chapter 24:20], followed a voluntary surrender of the licence by the bank.
“The Reserve Bank has determined that the banking institution is no longer in a safe and sound condition in that the institution is grossly undercapitalised and is facing chronic liquidity challenges,” the Registrar of Banking Institutions said.
The RBZ said the action was considered to be in the best interest of the banking institution, its depositors and creditors, and the banking sector in general.
The central bank said it would apply for the liquidation of the institution in terms of section 57(1) (a) of the Banking Act.
Allied Bank has been facing severe liquidity constraints and failed to attract a new investor to bolster its capital and liquidity position.
Early last year, a team of Wall Street bankers led by Terrence Mukupe showed interest in the bank. The deal however collapsed at the eleventh hour.
Allied was formed from the ashes of ZABG, then a coalition of three troubled banks —Trust, Royal and Barbican.
When the three banks withdrew their assets after RBZ reversed the forced merger, ZABG was left on the brink of collapse.
In his maiden monetary policy statement RBZ governor John Mangudya said Allied — alongside Tetrad, AfrAsia and Metbank — was under the monetary authorities’ watch as the quartet was facing liquidity challenges.
Mangudya said Allied’s board and senior management were “working on various capital-raising initiatives including engaging the major shareholder to raise funds to bolster the institution’s capital and liquidity position”.
He directed shareholders and boards of the distressed banks to finalise implementation of their turnaround plans, warning that RBZ would intervene and “institute appropriate supervisory action in terms of the Banking Act”.
In its six months to June 2014, Allied widened its losses to US$4,2 million from US$2,4 million recorded in the same period in 2013, attributed to a decline in operating income and a rise in interest expences.
Operating income nose-dived to US$291 001 in the period under review from US$2 344 999 in the prior period in 2013, led by declines in net interest income and fees and commission income.
Net interest income was in the red at US$463 874 after the bank got US$186 096 in interest paid on loans. It paid out US$649 970 as interest on deposits and other investments.
In the same period in 2013, the bank recorded a net interest income of US$120 620.
In the statement accompanying the bank’s financial results for the six months ended June 30 2014, board chairman Farai Mutamangira said recapitalisation initiatives would result in the injection of capital into the bank. But this was not to be as a deal never came through after potential Mauritian investor pulled out.