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Golden Sibanda Senior Business Reporter
ANALYSTS have called for merging of troubled banks to save them from total collapse in the wake of liquidity problems threatening survival of the undercapitalized banks.

The central bank has, ostensibly, been patient with under capitalised banks for a long time pampering them in the hope they would recuperate to become strong banks again.

But looking at the history of troubled banks in Zimbabwe, it certainly is about time that the issue of the struggling banks is brought to some decent and logical conclusion.

This is because the majority of banks that have been maligned by liquidity problems in the country have never really been able to recover.

In the process, unsuspecting depositors and creditors have to contend with losses and inconveniences relating to the fate or state of financial affairs at the troubled banks.

This also comes against the background that Zimbabwe is not, in any way, short of banks and the merging of the troubled small banks would not in any way be felt in the economy.

According to RBZ governor Dr John Mangudya banks with weak capitalisation levels include AfrAsia and Metropolitan.

Allied Bank had its licence cancelled by RBZ after it voluntarily surrendered it and Tetrad is barred from taking deposits until it has recapitalised.

Regulatory authorities need not wait until the banks themselves decide to surrender licences after failing to secure investors, as the potential losses by then would be huge.

Looking at the general scarcity of capital and the slim chances of a rebound within macro-economic conditions, it looks increasingly unlikely that troubled banks may get investors.

While banks got the reprieve to maintain at least $25 million minimum capital until 2020, after that they will need to push their minimum capitalisation to above $100 million in five years.

Legacy issues also are likely to haunt any troubled bank that pulls the surprise of securing investment enough to cover liquidity problems and holes on some banks’ balance sheets.

While liquidation should be last option, merging certainly appears a viable alternative for troubled banks. The banking sector crisis of 2003-04, when more than 15 banks collapsed, is living testimony of how difficult it is to rebuild banks beset by liquidity problems.

The RBZ recently approached the High Court for permission to liquidate Interfin after the bank failed to tie down a deal with any of the over 12 potential investors that had shown interest.

Interfin was placed under curatorship in 2011 following allegations of looting by shareholders, which left the bank saddled with none performing loans amounting to $60 million.

The bank required a whopping $50 million fresh capital to entertain hope of successful revival. Analysts said despite poor capitalisation, liquidation should be considered as the last straw in effort to save the troubled banks from collapse because merging presented the best viable option.

An executive with a thriving bank said South Africa’s ABSA was living testimony that if properly executed merging of troubled banks could save troubled banks from going under.

“They should be encouraged to merge. While it is difficult to get investors, if they come together they can form one big bank; liquidation should be the final decision,” he said.

“If you add up their capital levels you will see that they will be able to come up with the minimum capital levels required.

“If you look at ABSA, it was an amalgamation of failed or banks that were about to fail, but look at ABSA now its force to reckon with,” he said.

Few banks in Zimbabwe have ever been able to pick up the pieces and forge together a successful recovery once afflicted by serious challenges related capitalisation.

Liquidation is often a nightmare for depositors and creditors as they normally do not the full value of what they would be entitled to, as the banks’ liabilities often far outweigh assets.

Since dollarisation, none of the banks that faced capitalisation problems have been able to secure investment to inject a fresh lease of life. Genesis Investment Bank and Capital Bank were both liquidated after both banks had surrendered its banking licences.

The bank had negative core capital of $13,3 million while shareholders funds had declined to a negative $17,3 million as a result of alleged irregular related part transactions with sister companies during its period as unit of Renaissance Financial Holdings.

Despite interest from 20 suitors, Genesis failed to secure investment and due to under capitalisation, persistent losses, poor asset quality, small deposit base and liquidity problems its board of directors chose to voluntarily surrender the bank’s licence.

Trust Bank escaped potential direct liquidation after successfully challenging the central bank’s liquidation order arguing it was about to secure investment from South Africa.

Its licence had been revoked on the grounds that it had abused depositors’ funds, violated provisions of the Banking Act, was critically undercapitalised and posted persistent losses.