CBZ plans $200m bond, earnings down

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CBZ HOLDINGS has announced plans to issue a $200 million bond in April this year, double what it raised in the fixed income market last year.
The bond is expected to to boost the underwriting capacity of Zimbabwe’s largest banking group, an official said on Wednesday as the group reported an 18,4 percent dip in after-tax profit.
CBZ Holdings’ after-tax profit was $36,7 million for the full year to December 31 on Wednesday, weighed down by a significant 322 percent increase in its impairment provision and growth in staff expenses.
The group has sought to curb its lending activities, but saw its loan book grow to $1 billion, from $855 million the previous year.
Chief executive officer, John Mangudya said CBZ remained committed to funding the productive sectors of Zimbabwe’s struggling economy.
“We have a number of international initiatives–we shall be renewing our bond in April. The first bond is expiring in April this year,” Mangudya told an analyst briefing.
We are renewing that bond at a level of $200 million as well as its tenure. Those funds will be very important to this economy, our customers and for industrial development. We are quite happy about it.”
The African Export and Import Bank (Afrexim) had committed to underwrite the bond, which would have a coupon rate of seven percent, Mangudya added.
He said funds would be loaned out to productive sectors at an average interest rate of 10 percent per annum.
Last year, the bank raised over $100 million offshore through a successful $86 million bond and a $10 million long term debenture.
Mangudya said the $86 million bond was largely funded by international banking institutions.
The group has also established a global fund based in Mauritius to raise offshore capital. It sought and secured a Mauritius-based strategic partner, Safari Quantum Investments which now controls 10 percent of its issued share capital.
The group’s lines of credit rose from $33,9 million at the start of the multiple currency regime in 2009 to $289,67 million in 2013.
On interest rates and bank charges, Mangudya said the Reserve Bank of Zimbabwe had tightened regulations following the expiry of a year-long cap on fees and rates by the central bank.
“There is now a policy saying that if you want to change interest rates and fees, you have to seek advice from the central bank,” he said.Advertisement

CBZ’s headline earnings per share fell to 6.18 cents from 6.80 cents in the prior year, but the final dividend figure of $2, 289 million was 10 percent higher on the 2012 total.
Total income rose to $150,5 million during the period under review from $144,1 million driven by growth in loans and advances. The group’s deposits grew to $1,332 billion from just over $1 billion previously.
The group’s flagship banking unit, CBZ Bank contributed 89 percent of the group’s profits while its insurance arm contributed 10 percent and the remainder were from its asset management arm.
Total expenditure increased to $88,8 million, up 6,6 percent from the comparative prior period.
“More prudential banking practices were implemented to take account of what is happening in the economy, resulting in an increase in charge for impairments from $4,6 million to $19,4 million which is a 322 percent increase,” group finance director, Never Nyemudzo told an analysts briefing.
The group maintained an aggressive lending approach resulting in its loan book growing to $1 billion from $855 million and non-performing loans climbing to 47 percent from 41 percent in prior year.
Staff costs rose to $48,9 million from $44,8 million, but administration expenses were down 0,4 percent to $32,2 million.