Maputo, Mozambique — The Commercial Bank of Mozambique (BCM), the country's largest bank, is still making heavy losses, said BCM board chairman Mario Machungo Thursday.

Announcing the bank's results for the year 2000, he told reporters that the loss for the year was 508 billion meticais (27 million US dollars).

This is an improvement on 1999, however, when the BCM reported a staggering loss equivalent to 127 million US dollars. (Indeed the BCM boasts that the smaller losses this year are an improvement of 74 percent.)

In both 1999 and 2000, the losses were due to the need to make provisions to cover risks, mostly associated with non- performing loans.

In 2000 the bank allocated 48 million dollars as provisions for "credit risks and miscellaneous risks." Machungo said that this measure "strengthens the BCM's institutional solidity, and reflects harmonisation with internationally accepted accounting and risk criteria."

The BCM now admits that a third of its total credit portfolio consists of non-performing loans. A specialised department has been set up to recover credit, and the Board of Directors is officially optimistic that the bank will recover much of the provisions that it has been forced to make to cover bad loans.

Machungo and the bank's deputy chairman, Eneas Comiche, both insisted that the losses reported in 1999 and 2000 have nothing to do with the real performance of the BCM in those years, but are a hangover from the past.

Former finance minister Tomas Salomao declared shortly after the BCM had been privatised in 1996 that a financial clear- up had taken place, under which most of the non-performing loans had been taken over by the treasury.

But the picture painted by Machungo and Comiche was quite different. In their view any financial clean-up of the BCM in 1996 had been far from complete, and only in 1999 did the true financial state of the bank become clear.

For 2001, the BCM promises greater use of electronic methods, including Internet banking, and says that all its programmes will be geared to obtaining productivity gains and operational efficiency.