Investrust fails to meet BoZ’s K104 million capital requirement

Investrust Bank Plc has failed to meet the minimum capital requirement despite having raised over K100 million over a year ago that was meant to recapitalize the bank.

According to a statement of its final results for the period ending December 31, 2017, Investrust, who incurred losses of K37.9 million last year, down from K47.6 million in 2016, partly driven by its reduced net fees and commission income, among others, disclosed that it fell short of the Bank of Zambia’s (BoZ) minimum capital requirement by K53 million.

The BoZ’s minimum primary capital requirement for local banks currently stands at K104 million, raised from K12 million back in 2012.

“The Bank closed the year with a shortfall of K53 million in meeting its minimum regulatory capital of K104 million,” Investrust stated in a statement availed by company secretary and legal counsel, Cuthbert Tembo.

According to Tembo, Investrust has, however, undertaken initiatives to address this requirement.

“The Board has undertaken the following initiatives: entered into discussions to secure additional equity funding from current and prospective shareholders; undertaken a programme to continue to monitor the bank’s ongoing capital requirements and minimum capital expenditure commitments,” the statement read.

On measures to address the bank’s profitability, Tembo stated that the board would continue to put in place long-term measures to ensure Investrust fulfils its potentiation and returns to profitability.

“Key focus areas include: raising capital so as to increase capacity and improve liquidity which will be deployed in growing the revenue base especially interest income; aggressive recoveries on all Non-Performing Loans (NPLs); managing liquidity prudently; deposit mobilisation and growing the retail segment, thereby diversifying the deposit book structure,” Tembo stated.

Investrust recovered a total of K105 million in NPLs last year, compared to K56 million in 2016, according to the statement.

In December 2016, Investrust successfully raised over K100 million following an overwhelming approval by its shareholders to issue cumulative shares to Meanwood Financial Services Limited.

The bank had entered into a subscription agreement with Meanwood in which the bank was to issue 20,024 cumulative, redeemable, non-voting preference shares with a par value of K1 each at a subscription price of K5,000 each at an Extraordinary General Meeting (EGM) of Investrust shareholders.

That extra capital at the time should have meant that Investrust complied with the BoZ’s minimum primary capital requirement for local banks.

Meanwood Financial Services Limited has a common shareholder, Robinson Zulu, with Meanwood Venture Capital Limited, which has a 14.3 per cent shareholding in Investrust and was, therefore, considered to be a related party to the transaction in terms of Section 10.1 (b) of the LuSE listings requirements.

Zulu has a 25 per cent shareholding in Meanwood Financial Services Limited, the subscriber to the 20,024 cumulative redeemable non-voting preference shares, and also has indirect beneficial interest in Investrust, through his 16.67 per cent direct and 66.67 per cent indirect shareholding in Meanwood Venture Capital.

         

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