FDH BANK LTD RECAPITALIZATION UPDATE

On 2 July 2015 FDH Financial Holdings Ltd (FDHFHL) signed a Share Sale, Purchase and Investment Agreement with the Malawi Government (Seller) through the Public Private Partnership Commission (PPPC) with regards to the acquisition of Malawi Savings Bank Ltd (MSB). Clause 10 of the Agreement contained Post-Completion Undertakings by FDHFHL. The undertakings included that FDHFHL:

  • Provide financial investment in the business and commit to the investment program
  • Recapitalize the bank to the required minimum levels by the Registrar of Financial Institutions on Basel II and liquidity requirements
  • Transfer commercial know-how, management expertise, technology systems and software
  • Invest in a more robust core banking system and Information Technology Infrastructure
  • Improve Infection ratio of the bank
  • Create an employee share ownership scheme to facilitate bank ownership by employees

Following the acquisition, an Integration Management Office (IMO), made up of external consultants led by EY South Africa, was established to assist Management, Shareholders and the Board of Directors with the smooth and timely integration of FDH Bank Limited and MS8, in accordance with contractual agreements with the Government of Malawi and best practice. The merger process was successfully completed by 30 June 2016 and this was followed by a Stabilization, Optimization and Rebranding phase inclusive of the creation of an Employee Share Ownership Scheme (ESOP).

FDHFHL is proud to inform all relevant stakeholders that all conditions have been met and any outstanding obligations will be satisfied by 30 June 2017 including the optimization and re-branding work.

FDH Financial Holdings Limited invested MWK5.1billion on the acquisition of Malawi Savings Bank Limited, MWK337.5 million on the ESOP Scheme, while the Integration, Stabilization, Optimization and Rebranding processes have cost FDHFHL MWK4.9 billion, with an additional MK400 million expected to be spent to 30 June 2017. A total of MWK10.7 billion (USD14.7 million) will have been spent on Acquisition, Integration, Stabilisation, Optimisation and Rebranding of FDH Bank Ltd by 30 June 2017.

Following a review of the bank, capital requirements as at 31 December 2016, FDH Financial Holdings Limited has on 31 March 2017 injected a total of MWK6.6 billion (USD9.1 million) in FDH Bank Limited. MWK1.1 billion of the MWK6.6 billion is on the restructuring of the Group that has led to FDHFHL acquiring 100% of FDH Money Bureau Limited from FDH Bank Ltd. The Balance MWK5.5 billion is direct equity injection. This is the first phase of the recapitalization of the Bank.

The second and final phase will be completed on 31 May 2017 through an additional capital injection of MWK5 billion ahead of the 30 June 2017 deadline set by the Registrar of Financial Institutions in Malawi.

FDH Financial Holdings Ltd will therefore inject a total of MWK11.6 billion (USD16 million) by 31 May 2017 in FDH Bank Ltd. The capital will enable the bank to comfortably comply with Basel II requirements and compete by continuing to offer innovative products on the market such as the recently launched unique FDH Mobile. In total, including acquisition, integration, stabilization, optimization and recapitalization, MWK26.7 billion (USD30.7million) will have been invested by 30 June 2017, repositioning FDH Bank as a key player on the Malawi banking market.

Currently FDH Financial Holdings Ltd through its subsidiary FDH Bank Ltd, is the largest financial institution in Malawi by Footprint with 53 branches and points of representations in all 27 districts of Malawi as well as 91 Auto Teller Machines (ATMs) countrywide. FDH Bank is also the first bank in Malawi to develop and launch a mobile banking App.
FDH Financial Holdings Ltd is indebted to the Reserve Bank of Malawi, Public Private Partnership Commission, Malawi Government, FDH Bank Employees and FDH Bank Customers for their unwavering support during this integration period.

Dr. Thomson Frank Mpinganjira
CHIEF EXECUTIVE OFFICER
FDH FINANCIAL HOLDINGS LTD

3 April 2017
FM Financial Holdings

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Umoyo House, No. 8 Victoria Avenue North, Blantyre, Malawi +2651820219 info@ fdh.co.mw