ZABG is in big trouble

The Zimbabwe Allied Banking Group failed to publish year-end results last
month amid reports that PricewaterhouseCooper has refused to certify its
financials as it is bankrupt.


PwC managing partner Tinashe Rwodzi declined to comment on the issue, citing
client confidentiality.

Bank spokeswoman Theresa Munjoma confirmed ZABG was hobbled by the return of
the assets of Barbican, Royal and Trust banks, hence its failure to meet the
mandatory deadlines for results publication.

"The unbundling affects balance sheet items and publication of the bank's
financials will be done when the exercise is complete," she said, adding
that Stephen Gwasira's bank had also completed reorganising its branch
network countrywide.

Although several other banks have published results by the March 31
deadline, the Reserve Bank did not reply to queries on what action it would
take against the distressed bank.

Central bank governor Gideon Gono created ZABG seven years ago under the
guise of preserving the assets of its three antecedent banks, but it has
always been dogged by underfunding and a 2005 Supreme Court ruling that the
takeover of the assets of Royal, Barbican and Trust was illegal.

Following the court order and ZABG's progressive descent into disaster, Gono
was compelled to hand back the banks' assets in August last year.

Around the time, two Deloitte & Touche Corporate Finance and RBZ
verification reports revealed that the bank had debts of nearly $15-million,
which precipitated PwC's refusal to certify the stricken bank's numbers, as
liabilities far outstrip assets.

While Gwasira and his team were installed "to turnaround" the fortunes of
the bank, the Deloitte report said the amalgamation was in financial ruin
owing to several inept decisions and inadequate oversight mechanisms.

The team, for example, inflated the three former independent banks'
head-count by 300 staffers - out of Royal and Trust's combined 232 employees
at closure - while also acquiring a record 132 cars in five years.

At a time when the wider financial sector was beginning to feel the pinch of
a dollarised economy, the ZABG hierarchy awarded themselves generous
salaries, with Gwasira netting $16000 a month.

The hefty wage bill and costs, which further bled the bank, saw ZABG fail to
pay for utilities, including electricity, rental and telephones for its
various offices. It also owed the National Social Security and Zimbabwe
Revenue Authority vast amounts in staff pensions, and other taxes.

This dire financial state not only showed how Barbican, Royal and Trust
banks' inherited assets were wrecked and shrunk, but also brought into
question whether the new team brought in any new and serious business, if
not fresh capital, at all.

At closure, Royal and Trust were jointly ranked number five in terms of
trading market share, but the Deloitte report showed they had slipped to a
lowly number 13 as at September 2009. The two also had an 11% market share.

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