eBusiness Weekly
Business Writer
Tetrad Investment Bank’s board of directors will, in the near future, propose to its shareholders a banking business model that takes into account its recent history and resources with a potential to acquire a competitive position in the financial sector landscape of Zimbabwe, company spokesperson John Graham said.
In emailed responses, Tetrad Investment Bank (Tetrad) said the new board of directors is considering a number of options and is committed to ensuring that its shareholders regain value for their investments in the shorter possible time period.
Tetrad was removed from provisional judicial management and handed over to its new directors by the Deposit Protection Corporation (DPC) in terms of the High Court order HC 219/15.
When the DPC took over as Provisional Judicial Manager on 1 July 2015, Tetrad’s net asset position was a negative $33,5 million.
As at 31 August 2018, the banking institution’s net asset position had improved to $33,4 million following the successful implementation of the scheme of arrangement that involved conversion of debt to equity and a partial cash pay-out to creditors and depositors, according to a statement released by DPC.
Bank will have to comply with regulations first
The DPC said Tetrad will be required to demonstrate full compliance with all the requisite prudential and regulatory requirements before it can resume operations and start mobilising deposits.
“The new board is in the process of completing some statutory requirements including audit of financials as well as preparations for inspection by
the Reserve Bank ahead of the application to lift the suspension of its banking licence.
“At the moment, our focus is on correcting the administrative matters which the Reserve Bank requires before we can resume the banking business. Our plans are very much in the immediate future,” said Tetrad.
Still have a strong balance sheet
The Investment Bank believes, it has a strong balance sheet to resume operations and is hopeful this will be sufficient without the need for new capital.
“As a result of the Scheme of Arrangement approved by TIB creditors and the High Court, TIB has a clean balance sheet,” Tetrad said.
The Investment Bank, however, said “a significant portion of the bank assets are not liquid, a situation that needs to be addressed in order to start normal banking operations”.
“We are being cautious and approaching the issue carefully. We would not be allowed to commence or offer banking business if we did not meet the capital requirements of the Reserve Bank.
“It is our intention to meet these requirements before we commence banking business,” Tetrad said.
“If we have to find new capital we will first engage our shareholders with the proposal. We would treat each approach with serious purpose as it is always a good idea to have adequate capital to do business.”
Further commenting on the path that the bank will follow into the future, Tetrad said its activities with regards the historical banking model of taking deposits and lending money will “be a necessity” on a much smaller scale.
It said historically acceptance houses and merchant banks, focused on the needs of the businessman and company to do trade finance.
“These are certainly possibilities (for the Bank to embark on). We are also looking at other business areas.”
The Bank, however, said as an acceptance house and merchant bank, its activities are governed by the Banking Act which in Section 7 sets out the business that can be done by a bank and which is stated on the licence issued.
“We would have to obtain the Reserve Bank approval for the business we intend to do. We are certainly looking at the possibility of other business areas which we are allowed to do and which we believe may be convincing to undertake.”
Shareholders already lost money
The Bank said it would not engage in activities that will result in shareholders losing money again.
Tetrad was placed under judicial management after it failed to adequately protect its assets, earning capacity and reputation as evidenced by high levels of non-performing loans (NPLs).
In 2015, the bank’s provisional judicial manager, Winsley Militala, said 99 percent of the bank’s loan book comprised NPLs, 40 percent being unsecured loans amounting to $25,1 million, while 30 percent was made up of loans to related parties amounting to $19 million, the majority of which were unsecured.
At that time, Militala indicated the existence of material uncertainty, which cast doubt on the bank’s ability to continue as a going concern.
Given the background and the new lease of life, the new board is conscious on what businesses it can engage in.
“We are very conscious that our shareholders have already ‘lost’ their money once and would not wish us to do business where the risk of ‘losing’ it again was high. So we need to be careful.”
The Bank said it will need to tailor available capital with the capacity of its people to leverage their skills.
“We are also engaging with our senior staff with their skills and abilities. Lending and recovering loans takes expertise, knowledge and capability and we need to tailor our available capital with the capacity of our people to leverage their skills.
“It is a continuing process and we are not likely to do something new if our skills are best applied to what we know we can do and to do it well.”
