This has resulted in the withdrawal of the bank’s operating licence, the first in the financial services industry since last year’s adoption of multiple currencies.
NDH Holdings Ltd executive director Tinashe Chimanikire yesterday told businessdigest that FM Eiving, the bank’s major shareholder holding a 13% stake in NDHH and AfricaCapacity, a South African company, failed to raise US$4 million and US$10 million respectively in a last minute attempt to bail it out.
The central bank last year set varying capital requirements for the financial services sector with merchant banks expected to meet a US$10 million threshold by March 31.
“There was a delay in raising US$4 million pledged by one of our shareholders and this has resulted in us willingly surrendering our licence to the RBZ,” the executive said.
“The economy is currently not viable for an investment bank like ours. We are not a transacting bank like many other players but an investment bank, so with no significant savings our operations are not viable.”
He added that the prevailing economic conditions have made Zimbabwe’s economy “over-banked” saying the situation could only improve once savings improve when workers start earning “normal” salaries.
The NDH director further revealed that the bank began to “unwind its activities” in March when FM Eiving said it would only inject the capital once it had generated income from its operations.
“FM Eiving and AfricaCapacity made a commitment in writing to raise the capital but as time lapsed the central bank demanded the cash. We are still hopeful that the former will eventually get the payment but we can only reconsider applying for a licence once the economy improves,” the official said.
FM Eiving owner Givie Chizema refused to comment referring all questions to NDH management.
He said: “I am not even aware that the operating licence was cancelled. I am out of town. Talk to NDH management.”
Asked how the group would remain viable after it disposed of NDH Securities earlier this year to a consortium led by former Premier Bank boss Exodus Makumbe, Chimanikire said NDHH would generate income from investment income and its private companies.
He said NDHH now has a 9% stake in Trust Holdings from about 30% during the formative days of Trust.
The group, according to the official, has less than 1% stake in Interfin Merchant Bank.
NDHH ran into problems in 2004 after it had been exposed to the tune of then Z$24.7 billion following the collapse of three financial institutions, a situation that severely eroded the group’s capital base. But a timely intervention by a consortium of local investors, who poured in Z$30 billion towards the recapitatlisation of the banking group rescued the institution from liquidation.
NDHH comprises of National Discount House, NDH Equities and NDH Asset Managers.
Meanwhile, the International Monetary Fund has advised treasury to “step up” efforts to strengthen the banking sector amid fears of exposure. With no banker of last resort since the central bank was rendered redundant due to dollarisation, the financial services sector remains exposed.
“It is also important to step up efforts in containing risks in the banking system, and to improve the business climate, in particular with respect to property rights,” reads the IMF statement released on Monday.