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ZB speaks on TBs

02 May, 2019 - 00:05 0 Views
ZB speaks on TBs Ronald Mutandagayi

eBusiness Weekly

Govt should honour TBs to protect sector
Loan uptake subdued amid low credit quality

Business Writer
The smart thing to do will be for Government to honour Treasury Bills as they mature, a senior banking official has said amid fears that the budget constrained Government will resort to rolling them over as opposed to meeting its obligations.

At least $2,2 billion worth of TBs are expected to mature this year.

There are fears within the banking sector that other fiscal pressures and the need to cut on Government borrowing will result in failure to honour TB obligations and or compulsorily roll over the financial instruments.

ZB Financial Holdings chief executive Ronald Mutandagayi, however, prefers Government to honour its debt first before making any new proposals.

This is a view shared by most bankers who believe not honouring TB maturities will have far reaching adverse consequences on the entire banking sector and the rest of the economy than honouring them.

“I think Government, will not, in my view, be smart if they dishonour TBs without arrangement with the holders of those instruments, otherwise the market will experience impairment (on the income statement and balance sheet).”

“I think the smarter choice is to retire all the bills as they mature, but reissue longer tenure ones, and I think that’s the way to restructure the portfolio,” Mutandagayi said.

He said, despite challenges, Government has been honouring some of the TBs that had matured.

“So given our current experience, we have had very good track record, TBs that were
due have been paid on time and where we were happy to reinvest we have also done so,” he said.

ZB’s holdings of TBs went up by 25 percent to $194 million for the full year to December 2018 up from $155,95 million prior year comparative.

The financial services group showed a strong appetite for the Government paper after it increased its purchases from the secondary market by 28 percent to $134,77 million up from $105,69 million prior year comparative.

Holdings from the primary market also jumped 99 percent to $22,75 million.

The bulk of the TB holdings of at least 47 percent or $91,87 million of the total will mature within one year followed by $36,97 million worth of TBs, which will mature between one year and two years.

Coupon on the primary market acquisitions ranged between 7 percent and 10 percent whilst discounts on secondary market trades ranged between 4 and 14  percent.

The bank also made significant investment into the RBZ’s savings bond up 1390 percent to $52,75 million from $3,54 million.

Another $121,91 million was invested in investment securities while $56 million is in investment properties.

The bulk of the bank’s interest earning assets were in the TBs at $194 000.

However, gross lending increased by 19 percent to $152,23 million with significant increase in the mining, construction and private sectors. At least 41 percent or $61,79 million of the loan book is in private lending while mortgage loans accounted for 14 percent or $21,2 million.

Mutandagayi, however, said the uptake of mortgage loans was subdued while credit quality for loan advances were also low.

He added that credit expansion continues to suffer from adverse macro factors affecting borrowers.

“Pervasive low credit quality on the market has had negative effects on loan uptake whilst mortgage facilities have struggled to find favour with property sellers.”

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