GCR has retained Tetrad Investment Bank Limited’s (“Tetrad”) long term national scale Z$ rating of BB+ (double B plus). Tetrad, formerly Tetrad Securities Limited, was founded in October 1995 as a fund management and financial advisory services organisation. In November 1996, it was registered as a discount house. On 5 March 2009, TSL converted to a merchant bank and became Tetrad Investment Bank. Tetrad is a wholly-owned subsidiary of Tetrad Holdings with interests in the financial services, property and insurance sectors. As at 1HF11, the group had a capital base of US$41m and total assets amounting to US$100m.
Total capital & reserves contracted 6% to US$11.9m as at 1HF11 (FYE10: US$12.6m), on the back of cumulative losses, although remaining above the regulatory minimum of US$10m. The total risk weighted capital adequacy ratio of 47% as at 1HF11 was well above the statutory minimum of 10%.A pre-tax loss of US$0.8m was recorded for 1HF11, up 14% from 1HF10. Despite strong growth (189%) in total operating income, operating costs remain high, fuelled by industry-wide salary adjustments and IT related costs (post dollarisation). Tetrad’s current asset/liability structure translates to a considerable amount of liquidity and cash refinancing risk, evident from the large cumulative liquidity gaps over the entire maturity curve as at 1HF11 (and this partly due to a significant reliance on short-dated wholesale funding). Furthermore, liquidity risk for Zimbabwean banks is exacerbated by low market liquidity, the limited capacity of the central bank to act as a lender of last resort and the lack of a functional interbank market. As at 1HF11, Tetrad’s liquidity ratio amounted to 23%, against a prudential minimum of 20%. Impaired loans declined to 2.8% of gross loans as at 1HF11 (FYE10: 4.1%), on the back of an expanded loan book. Provisions were raised in line with prudential standards.
Tetrad is primarily funded via customer deposits. Albeit coming from a low base, total deposits grew by a robust 206% to US$29m as at FYE10 (industry average: 79%) and further by 61% to US$47m as at 1HF11. As a merchant bank, deposits are predominantly wholesale, with roughly 86% of the book sourced from corporates as at 1HF11. Relatively expensive term/money market funding constituted 71% of total deposits. In a bid to reposition the bank post dollarisation, as well as diversify its funding and product mix, the bank submitted an application to the regulatory authorities to convert to a commercial bank and is in the process of raising additional capital to meet the minimum regulatory capital of US$12.5m for commercial banks via the parent and/or foreign investors.
Jennifer Mwerenga https://globalratings.net/uploads/files/December_2011.pdf
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