THE Reserve Bank of Zimbabwe (RBZ) yesterday cancelled Allied Bank’s operating licence owned by Transport minister Obert Mpofu, saying the institution was no longer in a safe and sound condition.
The closure comes barely three years after Mpofu’s family vehicle Trebo & Khays had rescued the bank from the brink of collapse in an asset- banked transaction.
In a notice yesterday, RBZ said the cancellation, in terms of section 14(4) of the Banking Act [Chapter 24:20] followed a voluntary surrender of the licence by the banking institution.
“The Reserve Bank has determined that the banking institution is no longer in a safe and sound condition in that the institution is grossly undercapitalised and is facing chronic liquidity challenges,” the Registrar of Baking Institution said.
RBZ said the action was considered to be in the best interests of the banking institution, its depositors and creditors, and the banking sector in general.
RBZ said it will apply for the liquidation of the institution in terms of section 57(1) (a) of the Banking Act.
Allied has been facing liquidity constraints and had failed to attract a new investor to bolster its capital and liquidity position.
A team of Wall Street bankers led by Terrence Mukupe had earlier last showed interest in the troubled bank. The deal, however, collapsed at the eleventh hour.
Allied was formed from the ashes of the then ZABG, then coalition of three troubled banks—Trust, Royal and Barbican.
When the three banks took out its assets after RBZ reversed the forced merger, ZABG was left on the brink.
In his maiden monetary policy statement, RBZ governor John Mangudya said Allied—alongsideTetrad, AfrAsia and Metbank— was under the monetary authorities’ watch as the quartet was facing liquidity challenges.
Mangudya said Allied’s board and senior management was “working on various capital-raising initiatives including engaging the major shareholder to raise funds to bolster the institution’s capital and liquidity position”.
Mangudya directed shareholders and boards of the distressed banks to finaliseimplementation of their turnaround plans warning that RBZ wouldintervene and “institute appropriate supervisory action in terms of the Banking Act”.
In its six months to June 2014, Allied widened its losses to $4,2 million from $2,4 million recorded in the same period in 2013 attributed to a decline in operating income and a rise in interest expenses.
Operating income nose-dived to $291 001 in the period under review from $2 344 999 in the prior period in 2013 led by declines in net interest income and fees and commission income.
Net interest income was in the red at -$463 874 after the bank got $186 096 in interest paid on loans. It paid out $649 970 as interest on deposits and other investments.
In the same period in 2013, the bank recorded a net interest income of $120 620.
In the statement accompanying the bank’s financial results for the six months ended June 30 2014, board chairman Farai Mutamangira said recapitalisation initiatives would result in the injection of capital into the bank.
“The bank and its shareholders’ efforts initiated in the first quarter of 2014 will see the first tranche of 25% of capital being booked in the third quarter of 2014 with the remaining 75% expected in the fourth quarter of 2014,” Mutamangira said.
“This will be followed up with significant credit lines in the first quarter of 2014.”
But the deal never came through after the Mauritian investor pulled out.