Steward Bank is still grappling with legacy issues since taking over TN Bank.
STEWARD Bank, a unit of mobile telecommunications giant, Econet Wireless Zimbabwe, has written off US$15,5 million from a debt inherited from a beleaguered furniture group from which it was bought-out a few years ago. The Financial Gazette’s Companies & Markets understands that Steward Bank failed to recover debts taken over from de-listed Lifestyle Holdings’ subsidiary TN Harlequin Luxaire Limited.
The debt emanates from an arrangement made by Steward Bank when it was still TN Bank last year under which it took control of TN Harlequin Luxaire’s debtors’ book worth over US$50 million. TN Bank was a unit of TN Holdings, which later changed its name to Lifestyle Holdings, before it was bought by Econet and rebranded to Steward Bank.
TN Harlequin Luxaire, the largest household furniture manufacturer and retailer in the country, emerged from the takeover by Tawanda Nyambirai of Tedco Retail and Springmaster Corporation, a holding company which used to house the bed, case goods and lounge suites manufacturing divisions of Tedco.
Econet bought the financial institution from Lifestyle Holdings in a cash and swap deal which saw the country’s largest mobile network operator by subscribers increasing its stake to 97,96 percent. Steward Bank was then demerged from Lifestyle Holdings, resulting in its rebranding. The bank had financed Lifestyle Holdings’ expansion programme and provided working capital particularly for the operations of TN Harlequin Luxaire.
According to the bank’s financial results for the six months to August 2014, the financial institution was sitting on a US$23,02 million debtors book from the furniture concern at the beginning of the year, but now only has US$7,5 million.
The remaining debt is what has been deemed collectable. Effectively, the bank has written-off over US$30 million in less than two years after it was also forced to write-off more than US$15,5 million from the same book last year.
It is understood that the situation is even more worrying as managing these debtors has proven to be the most difficult task for the bank. Sources said Steward Bank was still grappling with legacy issues, although most of these had been dealt with since the separation of the banking unit from Lifestyle Holdings and the consequent rebranding.
The bank disentangled itself from deep ties with Lifestyle Holdings by moving out of Lifestyle Holdings premises and opening stand-alone branches throughout the country. The bank had 24 branches country-wide, with 23 of them co-habiting with Lifestyle Holdings’ furniture outlets.
“Steward Bank wants to set up a distinct brand that has nothing to do with Lifestyle Holdings anymore. It will open its own branch at Eastgate centre this September and other branches country-wide and this might take them up to June next year,” a source told C&M in August last year.
‘It could not be immediately established how many branches are still housed in Lifestyle Holdings’ furniture outlets, but C&M understands that its country-wide brand network is now at 11. Steward Bank reported a US$3,7 million loss in the six months to August 2014, attributable to the extra-ordinary expenditure incurred in the ongoing business model re-alignment. The loss was however an improvement from US$22 million recorded in the same period last year.
The re-alignment costs included staff retrenchments and the impairment of property and equipment as a result of marginal bank branches. Net income increased to US$2,3 million from US$2 million a year earlier due to higher margins on lending.
Similarly, non-interest income rose to US$7,75 million from US$3,9 million on increased transaction fees.
For the period under review, the bank allowed for US$15,5 million credit relating to furniture loans losses from a gross furniture loan book of about 23,02 million, leaving a net loan of about US$7,6 million. The bank’s total assets grew by 31 percent to US$181,7 million from US$138,7 million as at February 2014. Total deposits from customers grew by 63 percent from US$62,1 million to US$100,1 million. The bank’s core capital stood at US$51,3 million in the period under review, doubling the current prescribed regulatory level of US$25 million.
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