Agribank on schedule for $100m capitalisation

Michael Tome Business Reporter
AGRICULTURE development bank, Agribank says it expects to attain US$100 million capitalisation by January 2020, predominantly for agriculture financing and development.

This development comes on the back of Government’s approval for the bank’s search for a strategic partner in April last year which is expected to help the bank access long-term capital and lines of credit.

By December 2018 the bank’s Tier 1 capital stood at US$73 million against capital regulatory minimum of US$25million and US$67 million.

Agribank received US$5 million capital injection in December 2018 making a total of US$10 million in 2018. The bank was also allocated US$10 million in the 2019 fiscal budget.

Speaking at an analyst briefing last week, Agribank chief executive officer Sam Malaba said the amount will be realised through “gradual growth and shareholder support”.

“The bank anticipates achieving tier 1 capitalisation of US$100 million by January 2020 through both shareholder support and organic growth.

“As at December 31, 2018 the bank’s tier 1 capital was US$73 million under Basel I against regulatory minimum of US$25 million and US$67 million using Basel II, which sets aside capital for market and operational risk,” Malaba said.

Meanwhile on performance the bank posted a 63 percent growth in profit after tax to $12,9 million for the year up to December 2018 from $7,9 million recorded the prior comparable period.

Interest income grew by 21,2 percent to $37,1 million from $30,5 million recorded in 2017.

The profit for the year was attributed to growth in non–interest income and interest income contributing 69 and 31 percent respectively for the year 2018 on the back of marked growth in the loan book during the year.

Non-interest income grew by 35 percent to $16,4 million from $12,2 million recorded in 2017 owing to increased transactions from the electronic banking and ICT delivery channels, making up 75 percent of non-interest income.

Total operating expenses grew by 17 percent to $27,9 million for the year up to December 2018 from $23,8 million in the same period in 2017.

The growth in operating expenses was credited to business growth initiatives undertaken during the year as most customer transactions were conducted electronically thereby reducing the cost of doing business.

Non-performing loans (NPL) ratio improved to 8,75 percent (a better result compared to industry average of 9,35 percent) as at the end of December 2018 from 13,5 percent in 2017 owing to sustained debt recovery initiatives and more prudent lending methods.

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