ZNBS in K26.7m mortgage irregularities

The Zambia National Building Society (ZNBS) had 56 mortgages in amounts totalling K26.7 million with various irregularities, such as unregistered mortgages and missing mortgage deeds, the latest Auditor General’s Report reveals.

And ZNBS was found to have lost rental income totalling K375,468 during its three-year financial period between 2015-2017 due to failure by management to let out these properties despite being vacant.

Meanwhile, the Development Bank of Zambia’s (DBZ) profit margins declined to -118 per cent, triggered by the bank’s failure to generate adequate income to meet its expenditure.

According to Report of the Auditor General on the Accounts of Parastatal Bodies and other statutory institutions for the financial year ended December 31, 2017, ZNBS had a total of 56 mortgages in amounts totalling K26.7 million with various irregularities, such as unregistered mortgages and missing mortgage deeds.

The Report’s detailed analysis exposed the 56 irregularities, which also included six missing security documents amounting to K2,758,599; 34 loans registered below mortgage value of K17,205,683; nine unregistered mortgages totalling K4,210,973 and seven missing mortgage deeds amounting to K2,564,008 bringing the grand total to K26,739,263.

And despite the mortgage lender’s earnings of K18.96 million from its rental incomes during the period under review, it lost K375,468 from unoccupied property.

“It was observed that 17 offices in two properties were vacant for six months and the Society was not earning any income from these properties. In this regard, a total of K375,468 was lost as rental income by ZNBS during the period under review due to failure by management to let out these properties. As of June, 2018, the properties were still vacant,” the AG’s Report disclosed.
Meanwhile, DBZ’s profit margins declined to -118 per cent, triggered by the bank’s failure to generate adequate income to meet its expenditure.

In another detailed analysis, DBZ’s profit margins had been shrinking over the three-year period under review.

Profit margins express profits before taxation as a percentage of interest income.

It measures how much profit is generated for shareholders and taxation after all expenditure is removed, except tax.

“The Bank’s profit margins declined over the period under review. In 2015, the margin was 92 per cent, but reduced to two per cent in the following year before deteriorating even further to negative 118 per cent in 2017, reflecting the Bank’s failure to generate adequate income to meet its expenditure in full.
Increase in impairments of loans issued out to poor performing customers contributed significantly to the decline in profits,” it narrated.

Further analysis of DBZ’s Non-Performing Loans (NPLs) ratio revealed that the number of loans classified as “losses” had rapidly increased during the period under review.

“A review of the Portfolio Management Report for the month ended 30th November, 2017, revealed that 36 out of 91 loan accounts were categorized as losses. 15 customer accounts with total outstanding balances of K127,775,838, representing 24 per cent of the total loan portfolio were doubtful and loss accounts. This increased to 31 accounts with total account value of K235,231,830, representing 34 per cent of the loan portfolio in 2016. Further, doubtful and loss customer accounts increased to 36 accounts in 2017 with values in amounts totalling K237,791,373, representing 31 per cent of the total portfolio,” revealed the AG’s Report.

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