Kingdom booted out of Malawi

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Kingdom Financial Holdings Limited (KFHL) is disposing off its 38,15% stake in First Discount House Financial Holdings of Malawi (FDH) after the Reserve Bank of Malawi (RBM) said KFHL was not a fit and proper organisation to hold shares in a banking institution.

KFHL was the majority shareholder in the FDH and the other shareholders include Thompson Frank Mpinganjira Trust with 37,85%, Old Mutual Life Assurance Company (Malawi) 19% and FDH ESOP 5%.

FDH has four subsidiary companies, FDH Bank, First Discount House Limited, FDH Stock Brokers and FDH Money Bureau Limited.

This is contained in documents detailing arbitration proceedings between Old Mutual Life Assurance and The Thompson Frank Mpinganjira Trust who are the first and second applicants while KFHL are cited as the respondents.

KFHL corporate communications and public relations executive Sekai Chitemerere confirmed the development in emailed responses: In consultation with the Reserve Bank of Malawi, Kingdom Financial Holdings Limited has agreed to dispose of its investment in Malawi.

This is in line with the groups strategy of constantly reviewing its regional expansion and with the macroeconomic challenges currently prevailing in Malawi, KFHL believes that its capital can be better deployed elsewhere.

Chitemerere said the Reserve Bank of Zimbabwe was aware of this matter and was working together with the central bank of Malawi.

However, the modalities and timing for the ultimate disinvestment are still subject to legal review and therefore the group is unable to comment further. Shareholders are also negotiating on the disposal pricing and modalities of the disinvestment, she said.

Chitemerere added: Further announcements on this transaction are expected as soon as there are material developments to report. KFHL also hopes to shortly provide an update on the capitalisation of the group which is now nearing completion.

According to arbitration documents in our possession, the RBM says in the course of carrying out its supervisory functions over financial institutions in 2010, it came across some information, which led it to believe Kingdom was not in a good financial position.

In a letter to First Discount Financial Holdings, the RBM said in its fact-finding mission to Harare it noted KFHL was going through financial problems.

On April 26 2011 the Malawi central bank wrote to KFHL directing the group to exit FDH financial holdings with immediate effect.

The bank said its decision was based on the assessment that KFHL was undercapitalised and as such could no longer remain a shareholder in a prudently regulated financial institution in Malawi.

Please note that as a consequence of our direction on this matter, all individuals representing KFHL on FDH financial holdings board and on the boards of other subsidiaries cease to serve as a directors with immediate effect, reads part of the document.

On July 28, Kingdom responded to the Malawi central bank making an undertaking to sell its shareholding of 72 408 988 shares at a share price of $0,1381.

On August 5 the claimants made a written acceptance to purchase the shares, but were not prepared to accept the price demanded by the respondent.

As a result of the differing share price, a dispute between the claimants and respondent then ensued forcing the issue to be taken to an independent arbitrator.

In passing judgment the arbitrator said: The price for each share the respondent has offered for sell to the claimants is K8,70 as determined by Nico Asset Managers Limited being an investment bank appointed by Deloitte and Touche auditors of First Discount House Financial Holdings Limited.