A LOCAL bank has rejected President Robert Mugabe’s teenage son Bellarmine Chatunga’s predatory US$380 000 loan application to fund his obscure businesses and lavish lifestyle as it seeks to contain non-performing credit to politically exposed persons on its books, it has been established.
By Bernard Mpofu
Informed banking sources told the Zimbabwe Independent this week that Chatunga (19) — Mugabe’s last born — approached a local commercial bank, BancABC through its branch in Mt Pleasant last month pushing for a loan at its corporate finance division to fund his nondescript businesses and extravagant way of life.
Chatunga is well-known in social circles for profuse drinking and hanging out with a harem of girls.
This comes as the Independent has also found out that as of June BancABC’s total politically exposed persons debt portfolio stood at US$2,28 million. The list of the bad debtors includes politicians, bankers, military commanders and judges, although the majority of BancABC’s politically exposed persons are sugarcane farmers in Chiredzi in the Lowveld under an out-grower facility.
Chatunga’s failure to secure a loan from BancABC is a rare example of prudent credit risk assessment by a local bank as most of them would be keen to lend to such a high-profile and well-connected individual — even if he is a teenager — as he comes from the First Family which can potentially offer political protection in times of trouble.
While banks are supposed to conduct risk assessments on their clients whatever their station in life, in Zimbabwe the well-connected always secure loans even if they do not have adequate or quality collateral, sometimes entirely without security.
This has contributed to non-performing loans (NPLs) which two years ago scaled over US$700 million before Zimbabwe Asset Management Corporation (Zamco), a special purpose vehicle set up by government to clean up the balance sheets of financial institutions, was established. As at December 2015, Zamco had acquired NPLs amounting to US$357 million.
Most banks in the market made profits during their recent reporting season largely because they sold off NPLs worth millions. Zamco’s portfolio is dominated by technically insolvent state enterprises, big corporates, well-connected individuals and banks.
Most individuals, businesspeople and companies in Zimbabwe have made money by corruptly using Mugabe’s name and Zanu PF networks, or name-dropping.
Chatunga’s loan application came at a time when his own family business empire, Gushungo Holdings, has been surviving on bank loans which it is struggling to service.
Gushungo Holdings, touted as a model of success to sanitise the disastrous land reform programme, is reeling under an unsustainable US$20 million debt. The situation has been exacerbated by perennial losses incurred by its subsidiary Alpha Omega Dairy (Pvt) Ltd, forcing the First Family to seek bailouts to rescue the company.
Sources said the President’s son — who has business interests in retail and entertainment — had a meeting with Lincoln Farai Chirinda who works for BancABC’s corporate finance department to get money. His proposal, the sources said, was however rejected by the financial institution, citing high political risk.
“Chatunga approached the bank around August 23 for a loan. He wanted to secure funding for his business interests, but this application was rejected by the corporate finance department,” a banking source said. “The bank is currently owed millions by many politically exposed individuals and businesses, and thus its management is now strict on lending.”
BancABC managing director Joe Sibanda could not be reached for comment as he was said to be in a meeting with the group chief executive John Vitalo. Chatunga could also not be reached for comment.
BancABC is a member of the Atlas Mara Group which is co-owned by former Barclays Plc CE Bob Diamond and billionaire Ashish Thakkar. The acquisition was the first major deal by Diamond who was forced out of the global bank last year when it was fined US$450 million for allegedly manipulating the Libor interbank lending rate.
Atlas Mara has embarked on a major restructuring exercise that could result in up to 35% job cuts at ABC Holdings — BancABC’s parent company — and its Dubai office. Around US$8 million is expected in savings annually.
Atlas Mara has moved to lower its cost-to-income ratio which had risen to 102% in the six months to June from 95% in prior year as expenses rose.
While official figures from the Reserve Bank of Zimbabwe show there has been a decline in the banking sector’s non-performing loans to 10,05% as at June 30 2016, from 10,82% as at 31 December 2015, and a peak of 20,45% as at 30 September 2014, some banks such as BancABC have recorded bad debts levels above the industry level.
The declining trend in NPLs, according to the central bank, is a reflection of successful efforts by banks to reduce their exposure to non-performing assets, including strengthening of credit risk management systems and intensified collections and workout plans, among others.
The banking sector has not been spared the challenges affecting the wider economy. Challenges in the banking sector include cash shortages and liquidity crunch, payment gridlocks, low confidence among the banking public and a limited number of quality borrowing clients. Deposits in the banking sector have improved while credit to the private sector has gone down, resulting in a reduction in loan-to-deposit ratios.
Central bank sources said BancABC’s gross interest income earned from interbank placements, Treasury Bills, government and corporate bonds during the first six months of the year was US$0,743m against a budget of US$1,27m.
“The overall level of risk in the Bank was rated high as at 30 June 2016, and on a stable trend. During the period, credit, compliance and business risk, were above the bank’s risk appetite,” a source said. “Credit risk was considered extreme as at 30 June 2016, and on a stable trend. The loan book decreased from US$332 million as at 31 March 2016 to US$317 million as at 30 June 2016. The nonperforming loans ratio decreased from 34,3% to 26.28%.
Actual non-performing fell from US$114 million to US$83,4 million. The ratio is expected to fall to 22% by end of Q3 (end of September) with Starafrica Corporation (US$16,9m) likely to be closed during that period.
“The bank has started using the new tighter Risk Acceptance Criteria which is expected to result in higher credit quality being underwritten. Active monitoring and early engagement of problematic relationships is also being done.”