GOVERNMENT has injected $30 million to recapitalise Agribank which makes the institution compliant with the Reserve Bank of Zimbabwe (RBZ) minimum capital requirements and enables it to underwrite increased business volumes, the bank said yesterday.
RBZ requires commercial banks to have minimum equity thresholds of $25 million.
The recapitalisation came via a 10-year Treasury bond issued by RBZ on behalf of the government. This takes the bank’s Tier 1 capital to $37,5 million.
In a statement accompanying the bank’s financial results for the year ended December 31 2014, board chairman Sijabuliso Biyam said the recapitalisation was done last month.
“Government, as the shareholder, has recapitalised the bank to the tune of $30 million. The capital injection in May 2015 has, therefore, enabled Agribank to achieve a Tier 1 core capital level in excess of the Reserve Bank of Zimbabwe minimum capital threshold of $25 million,” Biyam said.
Agribank recorded a loss after tax of $9,06 million for the year ended December 31 2014 attributed to impairment charges of $6,8 million and low level lending due to prevailing liquidity conditions.
Net interest increased to $7,38 million in 2014 from $6,9 million in the previous year. Non-interest income grew by 9,4% to $12,89 million last year.
“The increase in non-interest income was mainly attributable to increased transaction activity resulting from enhanced business development initiatives, including introduction of new products and services in line with demand and evolving business environment,” Biyam said.
He said the undercapitalisation of the bank in 2014 affected its funding and liquidity, resulting in constrained capacity to trade and underwrite increased business volumes.
As a result of undercapitalisation, net loans and advances declined by 14,92% to $76,9 million in 2014.
Biyam said the bank was undertaking a restructuring exercise to realign business operations. The staff rationalisation exercise resulted in 115 staffers being reduced.
The affected staff comprises three executives, 17 managers and 95 non-managerial staff.
The exercise is expected to result in an annual staff cost saving of $360 000.
Agribank is jointly owned by the ministries of Finance and Economic Development and Agriculture with 50% shareholding apiece.
Undercapitalised banks have a June 30 deadline to shape up or ship out.