FINANCIAL services group AfrAsia Zimbabwe has said it is in the process of raising $20 million out of the $100 million required to recapitalise its loss-making commercial banking arm, as it completes its metamorphosis from the Nigel Chanakira-founded Kingdom Holdings.
"I am happy to announce that the first phase of the capitalisation programme to raise capital through a rights issue is underway," AfrAsia acting chairman Charles Wawn told shareholders at the group's annual general meeting.
At an extraordinary general meeting in November, shareholders approved a capitalisation programme aimed at raising $100 million by issuing ordinary shares through a rights offer and private placement.
Mauritian-headquartered AfrAsia, which now owns a controlling stake of 65.38 percent in the group after buying the Chanakira-owned Crustmoon Investment's 30 percent in September, has so far injected $10 million into the bank.
Another $80 million will be raised through private placement in the second phase of recapitalising the bank.
Wawn said the group operated in a difficult environment in the 18 months to June 30, characterised by high non-performing loans across the banking sector as well as a prolonged liquidity crunch.
He said the group's performance during the period under review was strained by the non-performing bank.
"The key driver of the bank losses is non-performing loans, staff voluntary separation exercise implemented during the reporting period as well as the liquidity crunch pervading the economy," he said.
As a result the group posted a loss after tax of $16.1 million for the 18 months to 30 June compared to a profit after tax of $782,000 for the 12 months ended 31 December 2011 largely driven by impairment allowances on the bank's loan book.
The micro-finance and asset management operations of the group posted profits.
However, Wawn said the group undertook a number of interventions aimed at strengthening its position and made changes to the structure and operational policies, including centralisation of credit risk analysis and introduction of new personnel.
It also carried out a voluntary retrenchment exercise to reduce the number of managerial employees and disposed of its stockbroking license.
The group is now made up of the commercial bank, micro finance and asset management units.
On the future prospects of the company, the Group CEO Lynn Mukonoweshuro said: "The prospects of the business are encouragingly good, especially due to the major shareholder's commitment to the Company and the opportunities in the streamlined areas of strategic focus."
"In addition, the recently announced Fiscal Policy showed the direction of the economy for the next five years. We will ensure that as AfrAsia we play our part in supporting this policy direction, participating in the growth sectors prioritized and directing FDI into the economy using our links with our major shareholder."