Johannesburg, 05 Aug 2013 — Global Credit Ratings has today affirmed the long term national scale and affirmed the short term national scale issuer ratings assigned to FBC Bank of A-(ZW) and A2(ZW) respectively; with the ratings placed on Rating Watch. The rating(s) are valid until 8/2014.
Global Credit Ratings has accorded the above credit rating(s) to FBC Bank (“the bank”) based on the following key criteria:
The Reserve Bank of Zimbabwe (“RBZ”) increased the minimum capital requirements for banking institutions in July 2012. Commercial banks are required to raise their minimum capital from US$12.5m to US$100m, by 30 June 2014. The proposed plan for enforcement also states that commercial banks must comply with 50% (US$50m) of the prescribed minimum by 30 June 2013.
In order for the bank to comply with the new capital requirements, FBC Holdings (“FBCH”) proposed that its subsidiaries, the bank and FBC Building Society (“FBCBS” or “the society”), be merged into a single entity, FBC Bank. The merger would result in the two institutions bringing their capital together and this coupled with other initiatives would enable the emergence of a commercial bank that is in compliance with the minimum capital requirements.
In pursuance of the merger transaction, a corporate restructuring was carried out by FBCH as follows: The National Social Security Association’s (“NSSA”) 40% shareholding in FBCBS was transferred to FBCH via a share swap, resulting in an increase of NSSA’s shareholding in FBCH to 35%. The execution of this restructuring transaction resulted in both the bank and the society being owned 100% by FBCH.
Nevertheless, at 5 August 2013, the bank and the society are still operating as separate legal entities, awaiting a formal position from the RBZ with regard to the capitalisation timeline.
The Monetary Policy Statement announcement (delayed until August 2013, due to the national elections) will determine the course of action for the bank in relation to the merger. If the capitalisation remains as stated in the July 2012 Monetary Policy Statement, FBCH will amalgamate the banking subsidiaries into one entity. If there are changes to the capitalisation requirements, and the bank and the society’s current capital levels are in compliance with these changes, the two will continue to operate as separate subsidiaries.
Given this stance, and the ratings’ 30 day review period expiry, GCR has affirmed the ratings while changing the rating outlook from evolving to rating watch.
|NATIONAL SCALE RATINGS HISTORY|
|Initial rating (Jun/2006)|
|Long term: BBB+(ZW);|
|Outlook: Rating watch|
|Last rating (Jun/2013)|
|Long term: A-(ZW); Short term: A2(ZW)|
|Primary Analyst||Secondary Analyst|
|Dirk Greeff||Kurt Boere|
|Sector Head: Financial Institution Ratings||Junior Analyst|
|+27 11 784 1771||+27 11 784 1771|
|+27 11 784 1771|
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.
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SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
FBC Bank participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The credit rating/s has been disclosed to FBC Bank with no contestation of the rating.
The information received from FBC Bank and other reliable third parties to accord the credit rating included the latest available audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements, most recent year to date management accounts, corporate governance and enterprise risk framework, reserving methodologies, capital management policy, Industry comparative data and regulatory framework and a breakdown of facilities available and related counterparties.