CBZ to use TBs for long-term funding

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CBZ Holdings Limited is moving into money markets to entice investors and offer longer term funding, as the financial group had $760,53 million worth of Treasury Bills (TBs) at the end of 2016.

BY TATIRA ZWINOIRA

Of that amount, the financial group has increased above five years maturity TBs to $529,38m from $262,87m recorded in the previous year.

In 2015, the group’s TBs holdings were $471,93m.

CBZ Holdings chief executive officer, Never Nyemudzo told NewsDay on Tuesday that due to the size of the group, they were looking at other opportunities.

“With TBs, we are using them for long-term funding. So when you look at the overall picture, it now addresses the liquidity gap. The productive sector of this country is very much funded because of the size of the bank and the availability of resources, there are so many resources, and it means that you cannot only focus on the productive sectors” he said.

“There are also other opportunities elsewhere where you can invest in TBs, money markets and trading but there have always been enough resources in CBZ to fund plausible productive sector activities.”

Nyemudzo said the group was holding onto the TBs, as they noticed movement on interest rates per annum were skewing lower, which would allow them to offer longer term funding.

Money markets is where financial instruments with high liquidity and very short maturities are traded and used by participants as a means for borrowing and lending usually in the short term.

Such financial instruments include TBs among others.

With growing uncertainty on the international commodity markets, investors are moving towards money markets as they are a lesser risk due in large part to TBs.

It has a lesser risk due to the government being the borrower.

As such by holding onto TBs, CBZ Holdings is hoping to attract these investors as they can sell these financial instruments for a profit or liquidity as the market runs dry of investment.

By holding TBs longer, CBZ Holdings can provide finance over a longer period and thus generate income.

“We are eagerly waiting for the Reserve Bank of Zimbabwe to come and publicly tender TBs,” he said.

“The bank is looking to the markets for income and not liquidity. We have other sources of income so the issue to sell them (TBs) is of no use to me so I will hold onto TBs until they mature. This is how we are capacitating ourselves.”

However, Nyemudzo said he was aware of the default rate, but had no doubt in the capacity to recover that debt on the back of favourable interests rates that would attract investors.

“We need significant muscle to be able to use to generate more money,” he said.

2 COMMENTS

  1. Please there is huge risk when the transaction involve the ZANU PF mafia. The article is very misleading the risk of losing your money invested in these TBs is certain.

    • I tend to agree with you. $760m in TBs is a lot, and if CBZ believes they will get $760m US dollars upon maturity of these instruments, they are joking. The TBs issued by RBZ and denominated in US$ are not the same as the TB issued by the Fed Reserve of the US. The question we should be asking ourselves is, if these instruments are really risk free (like US Treasuries) and are issued at a very lucrative interest rate, why is it that there is ZERO interest from international investors? It’s because they know these are very high risk instruments. They know that RBZ has no capacity whatsover to pay back this maoney, at least in real dollars. At the moment I estimate gvt borrowing on the domestic market alone to be around $3bn, and rising, which explains why one bank alone can hold $760m of this debt. This is a bubble waiting to explode. One thing our finacial sector is really good at is creating fake things/instruments. At some point in time we had fake unit trusts and people lost their money. We also had fake options trading which were being offered by Trust bank, Kingdom bank, and Barbican bank. Where are they now? Today we have fake US$ TBs and fake RTGS dollars, and if you catch the drift, you know what’s going to happen to these as well..

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