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Agribank mulls listing on ZSE |
Business Reporter - The Herald
AGRIBANK is mulling an initial public offering on the Zimbabwe Stock Exchange as part of options it is considering to raise funds for recapitalisation of the bank in line with Reserve Bank requirements.
The land bank, which is 100 percent owned by the Government of Zimbabwe, has been given the thumbs-up to raise capital through a strategic partner or, alternatively, through listing on the ZSE.
Either way, the bank is set to bring in new shareholders that are expected to pump in fresh capital to enable the bank to underwrite more business and recover from its loss-making position.
Agribank chairman Dr Robbie Mupawose said the bank was now actively considering the most suitable way to recapitalise.
"The bank is now actively working on a recapitalisation plan, which will result in additional shareholders for the bank. This is an endeavour to ensure that the bank meets the (Reserve Bank of Zimbabwe ) capital threshold of US$12, 5 million requirement for commercial banks as well as underwrite more business," said Dr Mupawose.
Agribank joins Telecel Zimbabwe on the list of companies that have hinted on an IPO this year although the latter’s reason is largely motivated by the need to comply with indigenisation and empowerment laws.
A number of companies have already raised or are mulling raising funds for recapitalisation and the majority have taken the route of rights offers and or private placement for the much needed cash.
Companies that have so far raised cash through rights offers and private placements include Africa Sun, OK Zimbabwe, NicozDiamond and Fidelity Life Assurance. FBC Holdings has been given the nod by shareholders to raise capital through rights offers while resource firm RioZim would table the request at its AGM.
A rights offer is a capital raising initiative through which companies approach existing shareholders of the company to make financial contributions in return for more shares.
Shareholders who fail to exercise their rights during that process risk having their shareholding in the company significantly diluted.
Government is presently facing serious financial limitations and is therefore ill equipped to provide all the capital the land bank requires to be able to fund more clients and expand its revenue base.
Agribank said in efforts to keep in line with its mandate of financing farmers the land bank has reached an agreement, in principle, with a foreign bank for US$30 million lines of credit to support tobacco and horticulture farmers across the country.
Dr Mupawose said a more liquid position would help improve profitability after the bank posted a US$7 million loss in the full year to December 2009 due to low trading volumes resulting from a liquidity crisis coupled with small margins in a dollarised economy.
He also pointed out that operating expenses, at US$9, 28 million, were above acceptable levels and were a result of 52 outlets the bank ran across the country, which were disproportionate to the volume of business the bank was handling.
The bank intends to rationalise its staff and branch network before the end of the year.
Most of the bank’s income was derived from fees and commissions, which were so limited that Agribank’s total operating income amounted to a negative US$9, 3 million for the period under review.
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