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Happiness Zengeni Business Editor
THE calibre of directors of First Merchant Bank (FMB) Malawi , which is eyeing a controlling stake in Barclays Bank of Zimbabwe, has raised eyebrows amid revelations that they were implicated in alleged corporate misgovernances and malpractices in lending, some of them as recently as last year.

This comes as FMB Malawi yesterday issued a cautionary statement saying it was in discussions with Barclays Bank Plc over the potential acquisition of the group’s controlling stake (67,68 percent) in Barclays Zimbabwe. FMB is listed on the Malawi Stock Exchange while it also has equity interests in banking operations in Botswana, Mozambique and Zambia.

The group, which is also undergoing a restructuring, said discussions with Barclays Plc are ongoing and may or may not result in the announcement of a transaction involving the acquisition by FMB of the interest of Plc in Barclays Zimbabwe. The Anadkat family owns the majority stake in FMB.

However, several shareholders and financial analysts have raised concern that the Malawi headquartered group has been involved in past controversies, which do not bode well with the traditionally conservative Barclays Zimbabwe and which go against the new rules contained in the Banking Amendment Act.

Two of the directors Dheeraj Dikshit (the managing director) and Rasik Kantaria have been in the news over allegations of lending malpractices and failure to comply with Malawian laws over money laundering and externalisation. Information sifted by The Herald Business from various regional publications, shows that the main shareholders of the banking group are alleged to have been involved in externalisation and money laundering.

According to Nyasa Times in 2013, the banking group under the management of Mr Dikshit was implicated in the Capital Hill cash-gate scandal.

More recently (in November 2016) Mr Kantaria was in the eye of a storm after Ugandan authorities placed Crane Bank in receivership over irregular lending practices. Mr Kantaria was a director and the second largest shareholder in Crane Bank with a 47,32 percent stake.

Ugandan authorities placed Crane Bank in receivership on October 20, 2016 and immediately suspended the nine-member board of directors, as well as the bank’s executives, saying the bank had failed to meet the legal requirements of its operating licence.

In Zimbabwe, under the Banking Amendment Act, a director or manager of a failed bank whether in the country outside, is not allowed to take up a role in any local bank.

The Act also says that directors should not have been involved in any money laundering acts within or outside the country.

Concerns have also been raised over the size of FMB when compared to Barclays Zimbabwe. At the close of the 2016 financial year, Barclays Zimbabwe had a market capitalisation of $65,19 million against the FMB group’s of $33,76 million.

In terms of deposits, Barclays Zimbabwe was at $391,7 million against FMB’s $144,48 million. There is also a huge gap on total assets with Barclays Zimbabwe at $476,2 million against FMB’s $208,75 million.

Ideally, according to financial analysts, depositors and stakeholders of the banking group, expect the ultimate Barclays Zimbabwe acquirer to have a similarly strong reputation and view them as partners who will bring value to not only the bank but the economy as a whole.

“FMB is a relatively small, family-run business and this is reflective in its current structures. Do they have capacity to deal with the level of sophistication of the local market? Do they have a clean track record,” said Fiona Chigwida a market analyst.

Analysts were agreed that continuity was the single most important factor in the Barclays case and any acquirer would have to be a large brand that has demonstrated capacity to build and improve on the Barclays Zimbabwe heritage.

Well placed sources told The Herald Business that Plc had signed an exclusive agreement with FMB over its 67,68 percent stake and after having issued cautionary statements, due diligence would commence.

The sources said it was likely that Barclays Plc would keep a residual investment and also keep its brand over the transitional period in the event that the transaction sails through.

Former bankers DBF Capital and the National Social Security Authority were also said to have been keen on the Barclays Zimbabwe stake. In yesterday’s trades on the Zimbabwe Stock Exchange, Barclays Zimbabwe gained 8,76 percent to 3 cents but still has a year-to-date loss of 6 percent.