VBS Mutual Bank is preparing to apply for a full commercial banking licence to continue its upward slide of accumulating assets and posting profits. It is also busy backing up its aggressive growth plans.
VBS is the bank that lent President Jacob Zuma R7.8 million to reimburse the state for nonsecurity upgrades made to his private home in Nkandla in KwaZulu-Natal.
In an exclusive interview with City Press this week, VBS chairman Tshifhiwa Matodzi said when he and a group of black investors acquired the bank in 2012, it was “an obscure and lossmaking entity” hidden in Thohoyandou in Limpopo.
“We wanted to revive it as it is the only fully black-owned banking licence in the country,” he said.
“It was a regional bank and we saw an opportunity to turn it into a national bank.
“The turnaround strategy is going very well. The rapid growth in the bank’s balance sheet and productive diversification has resulted in VBS becoming too big to remain a mutual bank,” said Matodzi.
Because of this, he said, it was no longer practical for the bank and the regulator that VBS be managed and regulated through the Mutual Banks Act.
He said processes to convert it into a commercial bank would commence in the next financial year.
The bank’s latest financial report, tabled at the company’s annual general meeting in Thohoyandou last Friday, shows that VBS’s assets grew from R337 million in 2015 to R1 billion last year and R2.1 billion at the end of the current financial year, which ended in June.
Net profit before tax has grown from R1 million in the group’s 2015 financial year to R5.9 million in the 2017 financial year.
The report also shows that the bank has about R920 million in cash reserves, made up of about R800 million in hard cash and R120 million invested in short-term money markets.
It also shows that the bank has financed contracts and home loans to the tune of R420 million and R323 million, respectively.
The two are also the bank’s best-performing products.
VBS CEO Andile Ramavhunga said: “The bank has grown. It was making losses. We now have a national footprint. We have opened up a branch in Johannesburg’s central business district. Seven new branches are planned for 2018 and we have plans for offices in KwaZuluNatal, Mpumalanga and North West.”
THE GROWTH STRATEGY
Ramavhunga said now that the turnaround strategy was completed, the next phase would involve an aggressive growth strategy.
“We do not have ambitions to compete with the big guys; we have a totally different strategy and market,” he said.
“Growing a bank organically by opening up hundreds of branches, which, in turn, compete with each other is prohibitively expensive. That is not what we are going to do. We are in the process of acquiring and launching an IT system which will allow our clients and customers to deposit and withdraw money from a host of retailers across the country.”
The bank, he said, planned to partner with traditional and indigenous African churches and their members.
“We will differ from traditional banks that probably have single accounts, with a few signatories, for most of these churches.
“We will have the main account, but every single member of our church partners will also have their own accounts and bank cards. These cards, which will be branded in the particular church’s corporate colours, will also double up as the same church’s membership card.”
In December, VBS announced a similar partnership with the Twelve Apostles’ Church in Christ, which has branches all over the country.
The truth, said Ramavhunga, was that the churches and their members banked a lot of money with traditional banks, but derived no value out of doing so as the banks refused to finance the building of churches and homes on communal land.
We wanted to revive it as it is the only fully black-owned banking licence in the country
HOME LOANS ON COMMUNAL LAND
Ramavhunga said one of the reasons their home loan book was doing well was that the bank was prepared to fund the building of homes on communal land.
“Traditional banks do not do this. It is a deliberate strategy on our part. Many creditworthy clients who want to build family homes in rural areas, and who get rejected by other banks, eventually come to us,” he said.
“It is tedious and takes no less than six months to register a bond on communal land, but it is possible.”
A study commissioned by the bank, he said, revealed that it was nigh impossible for rural folk to default on their bonds.
“This is because it is a family home that is owned by many people. If the bondholder fails, other family members chip in and pay because they all own the home. We have even dealt with the case of a man who has been jailed, but the monthly premiums have not stopped”.
Ramavhunga said the bank’s affordability check included criteria such as the social status of the family members of the applicant.
“If a rural man has five children who are engineers and doctors, he is unlikely to default on his bond,” he said.
The bank plans to list on the JSE in less than five years.