agribank - Agribank raises US$5 million for recapitalisation

The country's biggest agricultural bank, Agricultural Development Bank of Zimbabwe (AGRIBANK), has received a whooping US$5 million for recapitalisation.The Bank’s board chairman Dr Robby Mupawose said his Bankis currently working on modalities to list on the country’s bourse, theZimbabwe Stock Exchange and is mulling over a recapitalization plan, which wouldresult in additional shareholders to the bank in an endeavor to meet thecapital threshold of US$12, 5 million requirement for commercial banks as wellas to underwrite more business.

“The Bank has received a capital injection of US$5 millionin the first quarter of the year from its shareholders and has also grantedauthority to re-capitalise through engagement of strategic partners,” he said.

Dr Mupawose said the restoration of the country’s votingrights at the International Monetary Fund (IMF) is a positive development andhopefully consensus can also be developed on dealing with the country’sexternal payment arrears.

The country urgently needs balance of payment support forthe projects such as infrastructure development, energy sector, investment andrehabilitation as well as lines of credit for working capital and capilizationof productive sectors.

He added that the Bank has reached agreement with aforeign bank for a US$30 million line of credit to support tobacco,horticulture and cotton sectors. Dr Mupawose however said the bank began aprocess of staff and branch rationalizations in line with the reduction inbusiness level to reduce its operating expenses.

The process is expected to be completed during the courseof this year as the Bank tries to realign expenditure to income generation.

On its financial results for the year ended December 31,2009, the company recorded a loss of US$6,28 million against a backdrop of lowtraded volumes that were dictated by liquidity challenges coupled with thesmall margins associated with trading in hard currencies.

“The Bank’s position was worsened by the negative impactof illegal sanctions arising from the Bank being placed on the US sanctionslist. The bank’s ability to meet the requirements of our large agriculturalclientele was, therefore, not fully realized due to theses factors,” lamentedDr Mupawaose. However, the bank was adequately capitalized in line with ReserveBank of Zimbabwe (RBZ) guidelines as of September 30, 2009.

The Bank’s position was subsequently affected by thecombination of losses incurred and the impairment on its immovable propertyfrom US$16, 6 million as at December 31, 2009.

The impairment cost of US$3,2 million was written offagainst the capital reserve, which is part of the tier on capital.

The bank’s capital adequacy ratio of 15 percent is abovethe regulated minimum of 10 percent indicating the bank’s desire to balancerisk and rewards through judious and prudent risk management.