CBZ seeks to improve its liquidity management

Business
CBZ Holdings has issued a US$10 million convertible debenture to foreign investors as the group seeks to get long-term liabilities.

CBZ Holdings has issued a US$10 million convertible debenture to foreign investors as the group seeks to get long-term liabilities and improve its liquidity management.

BY OUR STAFF

CBZ Holdings group chief executive officer, John Mangudya told an analysts briefing last week that the convertible debenture — a type of loan issued by a company that can be converted into stock by the holder and, under certain circumstances — had been fully subscribed by foreign investors.

By adding the convertibility option, the issuer pays a lower interest rate on the loan compared to if there was no option to convert. These instruments are used by companies to obtain the capital they need to grow or maintain the business.

Mangudya said the whole idea of the debenture was to ensure that there is liquidity and the bank would be able to lend money on the long-term.

Banks liabilities (deposits) are mainly short term or transitory in nature due to the harsh operating environment. As a result, banks have been offering loans on a short-term basis.

“We are happy that it [the convertible debenture] was taken up by foreign investors,” Mangudya said.

The loan’s tenure is three years and would be converted at the average price obtaining on the day of the conversion.

The group finance boss, Never Nyemudzo believes net profits would take a rebound in the second half of the financial year.

“One of the driving earnings in the second half of the year will be driven by volume rather than margins in the bank. We want to push up more transactions,” he said. “We want to ensure that there are quality earnings on our position by making sure that the loan book is clean and is earning what we can collect.”

Nyemudzo said the bank had seen an improvement in the loan to deposit ratio to 82,7% compared to 82,8% in December last year.

As at the end of December 2011, loan to deposit ratio stood at 95,2%. The improvement in this key ratio, Nyemudzo said, would create more liquidity on the balance sheet.

The cost to income ratio was at 60,8% and Nyemudzo attributed that to the cost of doing business in the country. The group’s asset management arm recorded a turnaround to a profit of US$180 000 from loss-making as a result of more cost- cutting measures and pushing in of new products into the market.

CBZ NET PROFIT DIPS

CBZ Holdings group chief executive officer, John Mangudya said CBZ was looking offshore for lines of credit and currently has facilities amounting to US$220 million.

In the six months to June 30, CBZ recorded a drop in its net profit to US$16 million from US$18,3 million recorded in the same period last year, attributed to the increased cost of doing business and a government directive for bank charges to be reduced.

Operating expenditure shot up to US$42 million from US$37 million.

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