CBZ writes off $24m bad debts

Oliver Kazunga Senior Business Reporter—
FINANCIAL group CBZ Holdings has written off $24 million in bad debts after considering that some of its borrowers can no longer pay back and the monies cannot be recovered. The move is captured in the giant bank’s Friday audited financial results for the year ended December 31, 2015. During the period the bank clocked a seven percent after tax profit of $35 million.

“The group writes off a loan or an investment debt security balance, and any related allowances for impairment, when the relevant committees determine that the loan or security is uncollectible,” said CBZ.

An economist with a leading commercial bank who preferred anonymity citing professional reasons said the writing off of the bad debts by CBZ Bank means that it has tried all the means to recover the debts but to no avail.

“Writing off the bad debts means that CBZ has tried various ways to recover the loans advanced but to no avail. Bad debts are consistent with the challenges that the economy is facing,” said the analyst.

“The loans could’ve been advanced to some businesses, which have gone down due to the prevailing economic climate and in most cases such debtors would have secured the loans without collateral that the issuer sees it necessary to simply write-off the bad loans to clean its balance sheet.

“Ideally, CBZ would want to recover the $24 million from bad debts but considering its loan book of about $883 million, the bad debts shouldn’t cause any serious damage to its balance sheet.”

The financial analysts observed that the Zimbabwe Asset Management Company (ZAMCO) does not takeover non-performing loans for loans issued without collateral.

As part of its contribution to economic revival, the group through its banking division, CBZ Bank, advances loans to individuals and industries in various sectors such as agriculture, manufacturing, distribution, construction, transport and financial services.

In 2014, the government established ZAMCO as a special purpose vehicle whose mandate is to takeover banks’ non-performing loans. In the 2016 monetary policy statement, Reserve Bank of Zimbabwe governor John Mangudya said ZAMCO had so far absorbed close to $300 million, a development that has seen financial institutions improving on their asset quality.

CBZ Holdings assets grew by 18 percent to $1.974 billion while the group’s insurance business also improved registering a net underwriting income of $12.5 million compared to $8 million registered the previous year.

In the period ending December 31, 2015, the group’s after-tax profit increased by seven percent to $35.2 million.

The group’s commercial banking unit during the period under review recorded a profit after-tax amounting to $26.1 million, up from $16.3 million in 2014.

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