GCR has reaffirmed MBCA Bank Limited’s (“MBCA”) long term national scale rating of A(ZW) (single A). The rating, however, remains on “Rating Watch”. The rating is supported by the fact that MBCA is an incorporated subsidiary of the Nedbank Group of South Africa, which is in turn controlled by Old Mutual Plc. Old Mutual Plc also controls an additional 18.3% stake in MBCA through its stake in Old Mutual Zimbabwe Limited. To bolster reserves in order to grow the bank, no dividend was declared for F11. As such, the declared core capital amounted to US$19.7m, exceeding the minimum regulatory capital level for commercial banks of US$12.5m at FYE11, though falling short of the revised minimum of US$25m to be effective by year end 2012. MBCA expects to meet the requirement through a combination of retained earnings and a capital raising exercise. The risk-weighted capital adequacy ratio (“RWCAR”) remained at 15%, comfortably above the required regulatory minimum of 12%.
Asset quality improved with the gross non-performing loans ratio decreasing to 1.6% at FYE11 (FYE10: 4.3%) and the arrears fully covered with provisions. Nonetheless, the loan portfolio revealed some degree of concentration risk. MBCA evidenced very little liquidity risk, supported with facilities secured from Afreximbank, together with a relatively liquid balance sheet. Resultantly, liquid assets to total funding improved to 51% (FYE10: 41.6%). Furthermore, the bank’s maturity profile revealed a sizeable liquidity buffer for maturities in the less than one month bucket. On the back of consistent non funded income growth, MBCA recorded a pre-tax profit of US$3.9m for F11. Notably, the cost ratio remained high at 79%, as the benefits of cost reductions from a staff rationalisation exercise in Q4F11 are only expected to be reflected in 2012.
The “Rating Watch” reflects the continued uncertainty surrounding the proposed indigenisation of foreign owned banks. Although a Government Gazette recently set a one year timeline for the transfer of 51% of all foreign owned banks to Zimbabweans, the Reserve Bank Governor has disputed this move and the outcome remains uncertain. Notwithstanding this, the enforcement of the indigenisation policy may lead to a change in the support policy from the parent and would prompt an immediate review of the rating by GCR.
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