UNDER-CAPITALISED banks may be forced to merge in a bid to meet revised Reserve Bank of Zimbabwe (RBZ) minimum capital requirements, a local research unit has said.
Report by Bernard Mpofu
In its forecast for the year 2013, IH Securities, a brokerage and advisory firm, said amalgamations were expected to take centre stage in the financial services sector following an upward revision in prescribed capital levels.
The brokerage firm also warned that indigenisation and empowerment regulations compelling foreign-owned firms to sell 51% stakes to locals may also undermine plans by some weaker banks to raise capital offshore as liquidity constraints continued to bite local investors.
“In 2013 we anticipate heightened corporate activity within this sector, due to several proposed reforms announced in the second half of 2012,” reads the report in part.
“With indigenisation laws potentially restricting foreign capital, we see local banks potentially forced to consolidate to achieve the set targets.
“Evidence of this is already present with both FBC Bank and ZB (Bank) each merging their commercial banking units with their building societies to shore up capital.”
The central bank last year raised minimum capital requirements for commercial banks to $100 million from $12,5 million in a phased capitalisation exercise.
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Under this exercise, there are incremental targets in place with banks required to have reached $25 million by December 2012, $50 million by June 2013, $75 million by December 2013 and then finally $100 million by June 2014.
RBZ governor Gideon Gono last week announced that 14 out of 24 banking institutions had met the December 31 threshold, despite reassuring that the banking sector remained sound.
He said some undercapitalsied banks had made “significant progress towards compliance” while others had submitted recapitalisation plans in need of improvement.
“In addition, further reforms were announced by the Ministry of Finance to cap bank service charges and interest rates,” the report reads.
“Banks are expected, effective January 2013, to cease levying fees on deposits below $800 and to return interest on deposits of +$1 000 held over 30 days at a minimum rate of 4% per annum.
“With +70% of banking customers earning less than $800 and an estimated 40% of banking income derived from non-interest income, this carries severe implications for the profitability of local banks.
“With the sector still battling with deteriorating asset quality, high credit risk and prevailing liquidity constraints, it is our opinion that these measures cannot be passed in their current form.”
Figures released by the central bank last week show that CBZ Bank Limited, the largest bank in the country by size and market share, has already surpassed the $100 million threshold expected by 2014. Among some of the banks yet to raise the capital are Agribank, ZB Building Society, FBC Building Society, Capital Bank and ZABG.
