25 June 2012

Zimbabwe: BANCABC to Get U.S.$15 Million Boost

BANCABC Zimbabwe is set to get US$15 million from the group's proposed US$50 million rights issue to improve its capital base. In a circular to shareholders last week, the banking group said proceeds from the rights issue would be made available at the beginning of July this year.

The bank is also expected to embark on the expansion of branch and infrastructure network and increase lending using the rights offer funds.

BANCABC Botswana is also going to get US$15 million while Tanzania and Zambia operations will each receive US$7 million. BANCABC Mozambique will get US$3,5 million while share issue expenses will take up US$2,5 million.

Meanwhile, ABC Holdings major shareholders are supportive of the fund-raising initiative underwritten by major shareholders, African Development Corporation, which holds a 23 percent stake in the group.

ADC is likely to increase its shareholding in ABC Holdings if shareholders fail to follow their rights. But, if the investment group increases its stake to more than 35 percent, they would not offer to buy out the minorities in the group.

In terms of the Botswana Stock Exchange, ADC was obliged to make an offer to all other shareholders to acquire the shares but the company applied for the waiver of such an offer.

The BSE ruled in favour of the waiver, meaning that ADC would not offer to buy out the minorities. They will only increase their stake by underwriting the unsubscribed shares.

The group has confidence in the Zimbabwean market, after local operations contributed the most to group attributable profits, weighing in with 39 percent for the financial year ended December 2011.

Zimbabwe operations registered a 106 percent increase in attributable profits of 55 million pula in the period under review. Interest and non-income rose 137 percent to 136 million pula and 51 percent to 129 million pula, respectively.

The group decided to direct more funding into Zimbabwe operations due to liquidity constraints compounding the market. The lender-of-last-resort function is not well capitalised and the inter-bank market is effectively non-existent.

This significant liquidity constraint will likely be addressed through the market liquidity returning to normality, resulting in additional customer deposits.

"Should the market not return to normality, it will have a significant impact on the profit forecast. The impact of not achieving 10 percent of the forecast growth in total income from Zimbabwe operations is approximately 9,4 million pula on the group forecast profit after tax," said BANCABC.

As at December 31, 2011, BANCABC Zimbabwe had total assets of 2,6 million pula, total loans and advances of 2 million pula and total deposits of 1,9 million pula.

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