CBZ off­loads $40m bad debts

Chronicle (Zimbabwe) - - Business Chronicle - Oliver Kazunga

CBZ Hold­ings has in the half year ended June 30, 2016 in­creased to $40 mil­lion bad debts that have been ac­quired as Non-Per­form­ing Loans by the Zim­babwe As­set Man­age­ment Com­pany (ZAMCO).

In 2015, the fi­nan­cial ser­vices group closed the year with $24 mil­lion hav­ing been writ­ten off in bad debts and sur­ren­dered to ZAMCO.

In a state­ment ac­com­pa­ny­ing CBZ fi­nan­cial re­sults for the six months ended June 30, 2016, the fi­nan­cial in­sti­tu­tion said: “The group writes off a loan or an in­vest­ment debt se­cu­rity bal­ance, and any re­lated al­lowances for im­pair­ment, when the rel­e­vant com­mit­tees de­ter­mine that the loan or se­cu­rity is un­col­lectible.

“This de­ter­mi­na­tion is made after con­sid­er­ing in­for­ma­tion such as the oc­cur­rence of sig­nif­i­cant changes in the bor­rower’s or is­suer’s fi­nan­cial po­si­tion such that the bor­rower or is­suer can no longer pay the obli­ga­tion, or that pro­ceeds from col­lat­eral will not be suf­fi­cient to pay back the en­tire ex­po­sure.” The group’s di­rec­tors be­lieve that the con­cen­tra­tion risk is lim­ited due to the cus­tomer base be­ing large and un­re­lated.

As a re­sult, the group was not ex­posed to any cus­tomer by more than 10 per­cent of the to­tal ad­vance book. CBZ in­di­cated that im­pair­ments and write offs had been min­imised by the sale of $40 mil­lion to ZAMCO.

ZAMCO is a spe­cial pur­pose ve­hi­cle es­tab­lished by the Gov­ern­ment in 2014 with a man­date to ab­sorb NPLs in the bank­ing sec­tor with a view to clean the banks’ bal­ance sheets so that the in­sti­tu­tions can con­fi­dently trade and lend. The as­set man­age­ment, which started op­er­at­ing last year, has so far ab­sorbed $528 mil­lion and tar­gets to clear all the $750 mil­lion NPLs by end of year.

Dur­ing the pe­riod un­der re­view, the group recorded a 13 per­cent re­duc­tion in profit after tax to $11,9 mil­lion due to poor per­for­mance by its busi­ness units. CBZ’s to­tal in­come amounted $73,2 mil­lion dur­ing the pe­riod com­pared to $83,2 mil­lion in 2015. The group’s bank­ing di­vi­sion posted the largest chunk of profits record­ing $7,4 mil­lion profit after tax from $8,6 mil­lion dur­ing the same pe­riod last year. — @okazunga.

Dr Nigel Chanakira

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