TRUST Holdings Ltd will be able to meet regulatory capital requirements set by the Reserve Bank of Zimbabwe for its flagship commercial banking subsidiary, Trust Banking Corporation (TBC), amid indications that negotiations with potential investors are at an advanced stage and nearing conclusion.
Sources close to developments at Trust towers told businessdigest this week the bank had been in closed door discussions with investors believed to be from the Netherlands.
The foreigners were ready to inject US$20 million immediately into Trust Bank but a few issues relating to the regulatory environment remained outstanding.
The sources also revealed that existing shareholders had committed to raise the capital required to meet the US$25 million required by December 31 2012, while the foreign investors would chip in with at least US$20 million by the June 2013 deadline.
Trust, whose other interests are in properties and agriculture, has been trading under a cautionary notice to investors.
According to sources, when the Reserve Bank of Zimbabwe announced the new capital requirements for commercial banks of US$100 million, Trust Bank was compliant with regard to the previous minimum capital requirements of US$12,5 million.The bank was at the time in the process of concluding a deal for more operational capital with a consortium of foreign investors believed to be from the Netherlands.
However, the conclusion of the transaction stalled when new capital thresholds of US$100 million by June 2014 were announced. The foreign investors needed their local partners to confirm capacity to support further capital calls required to raise equity of the bank to US$100 million.
Recapitalisation will enable Trust Bank to improve the quality of its capital and empower the bank to underwrite a bigger loan book with a longer tenor and reduce the average cost of funds.
Sources said the deal was affected by the announcement as the foreign investor needs other investors to confirm capacity to get to US$100 million.
"Negotiations with these investors have also been very sensitive to the indigenisation laws especially against the backdrop of the financial capacity constraints of local investors," the sources said
However, when probed for comment, Trust officials kept their cards close to their chest.
"We have made good progress in our fundraising programme and all I can assure you is discussions are progressing very well. The Reserve Bank of Zimbabwe is being kept informed of the progress being made as well as the specific details including, but not limited to; the parties being negotiated with, the time frames, and other pertinent conditions. Unfortunately, we are unable to disclose some of the specific details to the market as yet," TBC managing director Nyevero Hlupo said.
However, analysts believe the new capital requirements may deter would-be investors who may not be keen to increase their equity exposures to the high levels of US$100 million now required by the law.
Late last year, Finance minister Tendai Biti introduced a raft of measures aimed at lowering the cost of banking for consumers and borrowers in a bid to encourage financial inclusion.
However these policies are seen by analysts to militate against the profitability of banks, with potential investors taking the view proposed legislation on bank charges and interest rates may have a negative impact on the viability and vibrancy of the financial services sector.