Huge impairments drag BancABC into red
Brian Benza | Friday April 3, 2015 12:06
Addressing the media on Tuesday, acting group Chief Executive Officer (CEO), Blessing Mudavanhu, said the significant jump in impairments was a result of efforts to clean up the balance sheet after the banking group was in August last year acquired by London Stock Exchange (LSE) listed Atlas Mara.
“Despite the loss, the groups’ operations still have a high economic value due to a sound balance sheet. The loss was largely due to increased impairments as well as reduced margins compared to the prior year. The new shareholders would want to start on clean slate,” he said.
ABC, which trades as BancABC, recorded an 11 percent increase in its balance sheet to P17.5 billion as at 31 December 2014 from P15.8 billion in 2013. In the period, the group which has operations in Botswana, Zimbabwe, Zambia, Tanzania and Mozambique, registered a 35 percent drop in total income to P892 million, while operating expenditure rose marginally to P1.3 billion from P1.1 billion.
According to the CEO, since its takeover last year, Atlas Mara has already injected $100 million into the group, $27 million of which has been used to recapitalise the loss making Tanzanian operations.
On the local subsidiary, BancABC Botswana made an attributable profit of P71 million, which was 53 percent lower than prior year. Performance was impacted by net interest income, which declined by six percent from P391 million in prior year to P367 million in the year under review, as well as higher impairments that increased from P42 million in 2013 to P110 million in 2014.
According to the acting group CFO Wallace Siakachoma, the Botswana impairments were mainly from the corporate sector where the bank had to totally write off three loans amounting to P75 million. “ We have a client in the mining industry that owed about P45 million while another financial services firm borrowed P25 million. Both of these have been total written off. The third one is another that owed P5 million that has since been liquidated. The corporate sector constituted about 78 percent of the P110 million impairments for Botswana,” he said.
Loans and advances increased by six percent from P3.8 billion in prior year to P4.0 billion and customer deposits increased by 13 percent from P4.7 billion to P5.4 billion. During the last six months, the group has been able to close fund-raising transactions with European Investment Bank (EIB), African Development Bank (AfDB) and World B0usiness Capital (WBC).
The EIB line of credit is for €65 million (P699.5 million) to be drawn down by BancABC Botswana (€25 million), BancABC Zambia (€25 million) and BancABC Mozambique (€15 million). “It will be used to support on-lending to a wide range of customer categories in the emerging corporate space and also to improve financial inclusion,” the company said in statement.
The AfDB facility of US$50 million (P485 million) will be utilised by BancABC Botswana (US$30 million), BancABC Mozambique (US$15 million) and BancABC Zimbabwe (US$5 million) for on lending to SMEs and small corporates, to provide medium to long-term loans. The group plans to raise further lines of credit during the current year.