‘We don’t need ZAMCO’

FBC group chief executive Mr John Mushayavanhu

FBC group chief executive Mr John Mushayavanhu

Golden Sibanda : Senior Business Reporter

FBC Holdings says it will not volunteer additional non-performing loans to the central bank’s sector cleansing company, ZAMCO, as it can do better to recover its money. This comes as FBC is looking to manage NPLs more tightly and the group is targeting to reduce the rate of bad loans to less than 5 percent by year end from the current 7,96 percent.FBC group chief executive Mr John Mushayavanhu said a total of $8 million had been parcelled out to the Zimbabwe Asset Management Company, but FBC’s board once considered recalling the debts for the group to recover on its own.

Mr Mushayavanhu said that the FBC board was strongly convinced that the bank would have done better than ZAMCO to collect the debts if it had pursued defaulters by way of litigation.

The CEO of the financial services group, which has done well to sustain profitability under difficult circumstances, said turning to ZAMCO would be the last resort going forward.

He made the remarks when presenting the group’s financials for the year to December 2015, which showed the group’s profit rose 270 percent to $18,1 million while total group income was 6 percent up on prior year at $82 million.

FBC’s loans and advances for the year to December 2015 totalled $283 million made up of 92,04 percent performing loans and 7,96 percent NPLs.

ZAMCO, is a special purpose vehicle established by the Reserve Bank of Zimbabwe to rid banks of NPLs, which are secured, to free up their balance sheets to extend more credit.

A recent IMF delegation visiting Zimbabwe for Article IV consultations and Staff Monitored Programme review expressed reservations over ZAMCO saying there were broader implications on its strategy of taking up debt especially from struggling companies.

“From the Monetary Policy Statement by the Reserve Bank of Zimbabwe governor, it was noted that the Zamco operation had taken over half a billion worth of debt. While this strengthened the balance sheets of commercial banks, the reality is much of the debt is on companies which are technically insolvent; companies like CSC and Cottco. Government is taking over debt which is going to be a liability to the State,” the IMF said.

According to Finance and Economic Development Minister Patrick Chinamasa, ZAMCO has to date assumed just over $373 million from banks and the process is continuing.

This comes after the central bank indicated that it would not want to see a bank with an NPLs rate that is over 10 percent.

“So we had to move from a figure of about 15 percent NPLs to where we are now at end of 2015, 7,96 percent, and the way we went about was first of all very aggressive collections. We have security; where you have security (we) go to the courts, get judgment and sell. So we managed to collect a significant amount through that route,” he said.

“The second route was to go the ZAMCO route. We reluctantly handed over $8 million worth of debt to ZAMCO, I say reluctantly . . . because some of our board members even said take it back, we don’t want that example.”

He said the TBs that they got from ZAMCO are long dated and are at 5 percent interest, but if “we had proceeded with litigation, buy now we would have recovered that money.”

Alternatively, Mr Mushayavanhu said the feeling within FBC is that, buy now, the group would also have rehabilitated the debts because the defaulters were viable companies.

For the year under review, FBC said total assets went up by 2,8 percent to $490 million, equity attributable to shareholders grew by 19 percent to $104 million while dividend was 0,298c (total $2m), same as 2013. There was dividend in specie in 2014, valued at slightly over $3,9 million.

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