Maravi

Govt sells Finance Bank

Govt sells Finance Bank
By Chiwoyu Sinyangwe
Tue 13 Sep. 2011, 14:00 CAT

FINANCE Bank Zam-bia has been sold for K27 billion to First National Bank Zam-bia, a bank whose parent, FirstRand Limited provided top officers to run the bank after it was forcibly taken over by the Bank of Zambia last December.

Under the terms of the transaction, FNB Zambia was to take over about 96 per cent of the total assets of FBZL and the remaining - "toxic" assets of five loans worth K300 billion would remain with FBZ (under possession) to be administered by BoZ. With this acquisition, FNBZ would leap to become the fifth largest bank in the country from its current position where it is among the smallest.

Finance Bank was seized by the BoZ last year for allegedly breaching financial laws and was then managed by FirstRand. It has about 1,000 employees and 39 branches. FNB already operates in Zambia and has a presence in six other African countries excluding South Africa and Zambia.

BoZ director for bank supervision Lameck Zimba said FNB didn't want to acquire those which had some encumbrances and also excluded certain assets and liabilities which were still in court.

"The new buyer didn't want to acquire those which had some encumbrances, and also when we did an inspection, there was a lot of non-performing loans because there was a lot of insider lending and some of those assets are uncollectable," Zimba said during a media briefing yesterday.

"Taking that into account, the net asset value of Finance Bank at the time the due diligence was done, the net asset value was about K22 billion and then when you take into account those excluded related part advances, excluded first assets, also deferred taxes, you come to the fair value adjustment to treasury Bills and Government Bonds and then you come to the net asset value of K3 billion, and taking into account the intangible assests - goodwill valued...you find that the purchase price comes to K27 billion."

The value should not be looked at in isolation on its own. It has to factor in the fact that the whole set of liabilities which the institution is taking over. They are taking over a lot of liabilities. So you have to look at the net position of the institution after that you look at the asset and their quality, and the burden the institution taking over is taking And BoZ deputy governor for operations Dr Austin Mwape claimed that officers from FirstRand Bank did not influence the decision to award FBZL to FNBZ.

He said the deal was not "plain-sailing" for FirstRand as BoZ's financial advisors - London's Deloitte had helped to give advice on the competing interests which had been expressed which came from other competing banks.

"On the face value, one might have views that probably there was something wrong. The people who were managing Finance Bank Zambia Limited were engaged in their personal capacities and they were employed and reporting to the Central Bank," Dr Mwape claimed.

"To facilitate independence in determining the value, we engaged Deloitte LLP of London, a reputable accounting firm which we retained as our financial advisors in the consummation of the whole transaction. Even the offer that was given by FNB Zambia was subject to assessment by an independent accounting body which had a lot of experience in this matter, and it was only after they had given us the comfort that the value which was offered did meet the normal standards which any other bidder would have put through did we agree."

BoZ secretary said applications for injunctions by FBZL shareholders in the three cases before the courts of law had been dismissed, allowing BoZ to perform its statutory mandate.

Other institutions that expressed interest in acquiring Finance Bank included First Alliance Bank, Eximbank of Tanzania, I&M bank Limited from Kenya, JM Capital and Quantile Capital - both from South Africa.

BoZ governor Dr Caleb Fundanga said, on May 20 this year, FirstRand made an offer in terms of which FNB Zambia would purchase selected assets and liabilities of FBZL.

"Upon agreeing appropriate terms, BoZ accepted the offer by FirstRand Bank on June 30th June, 2011," said Dr Fundanga.

FNB Zambia managing director Sarel Van Zyl said it would take about nine month before the takeover of FNBZL was completed.

He said the transaction would not result in job losses for FNBZL.

Labels: BANKING, CALEB FUNDANGA, FINANCE BANK, FIRST RAND GROUP

posted by MrK @ 2:31 PM