When there is one bidder: the case of MSB deal
On Tuesday morning, Malawians woke up to the news that one of the commercial banks, FDH Bank Limited, has expressed interest to buy stakes in the struggling government wholly owned bank, Malawi Savings Bank (MSB).
The sale of the bank has continued to stir relentless debate with members of Parliament vehemently rejecting the sale of the financial institution which is wobbling in the thick of dismal performance in both capital and liquidity requirements.
The bank, according to Reserve Bank of Malawi (RBM) records, is yearning for a minimum financial bailout of K23.7 billion by June 2015 to meet its capital and liquidity demands.
MSB’s balance sheet is soiled by bad debts, hence at risk of not meeting Basel II financial and regulatory requirement an international standard for banking regulators that guard against financial and operational risks.
With its shareholder, government-reeling from other shocks such as the withdrawal of budget support by major donors-does not have such a huge amount to recapitalise the ailing bank, hence the sale.
On Tuesday, the Public Private Partnership Commission (PPPC) opened tenders to identify a strategic investor to buy a controlling stake in the bank.
And ironically, only FDH Bank Limited expressed interest to buy the stake.
A critical peep into FDH Bank’s financial muscle is, however, key in the sale of MSB.
The bank, founded in 2008, is a 100 percent subsidiary of FDH Financial Holdings Limited.
On Tuesday Business News took time to dig deeper into the financial performance of FDH Bank, named the best retail bank and fastest growing bank in 2014 by Global Banking and Finance Review.
It is understood that as at December 31 2014, the bank made a consolidated after-tax profit of K3.3 billion compared to a profit of K20.1 million by December 2013.
That represents a monstrous 16 400 percent jump in profit after tax in just one financial year, according to our calculations.
The bank registered significant growth in both deposit and loan portfolio in 2014.
The bank’s total assets growth is also something worth applauding.
RBM spokesperson Mbane Ngwira said Tuesday that at this point when FDH Bank has just expressed interest to buy MSB, there is nothing the financial market regulator can do up until the bank fully writes to RBM in applying to undertake such a transaction.
Said Ngwira: “This is when we will have to assess the bank [FDH] to see if it will have aligned its risks to capital requirements.”
The minimum capital threshold for Malawi banks is at $5 million (about K2.2 billion).
The figure, however, changes as banks take on new risks, according to Ngwira.
FDH’s performance needs more investigation. How on earth can a bank make profit from 20Million to 3.3 billion in one year? Isn’t it of public interest to investigate the bank’s transcations so that any issues of corruption are cleared considering the manner in which banks operated during the cashgate scandal. Unfortunately the central bank seems to be either deep in slumber or plays accomplice to loot!
NPL, mmalo mochita analyse, all you do is endorse the sale? Really? For you and your editor a 16400% leap in profits in just ONE financial year is worth praising? No questions? Zoona? Then that there is just one bidder aint no question worth exploring for answers? Are you guys proud of the quality of such stories when you read them back?