I&M Bank Rwanda (RSE:IMR) has bought Phoenix Metals, a tin smelting plant, in a public auction after the smelter failed to settle loan.
The lender bought Phoenix Metals at Rwf1.2 billion ($1.4 million), a mining industry player who closely followed the liquidation process revealed.
However, The EastAfrican could not independently verify this figure as both I&M Bank Rwanda officials and the receiver manager were cagey on the details of the deal.
Robin Bairstow, managing director of I&M Bank Rwanda confirmed the deal, saying the bank bought the assets but has no intention of running the plant.
While I&M Bank has managed to keep credit risk book in check through tightening credit underwriting and trough recoveries, it reported Rwf4.5 billion ($5.3 million) in non-performing loans.
Investment advisors said given the challenges in the mining industry, it could take I&M Bank two years to sell Phoenix Metals.
This means I&M Bank Rwanda will hold on Phoenix Metals’ assets until it gets a new buyer to recover the debt as it seeks to clean up its balance sheet and protect earnings.
At the same time experts have warned that the banking industry is headed for a higher provision for bad debts as it starts implementing the International Financial reporting Standard (IFRS) 9.
The financial Instrument, which requires banks to provide for future potential defaults breaks from the old system which requires the lenders to set aside a buffer for actual non-performing loans.
“It is generally expected that IFRS 9 will lead to increased provisions. This is why the central bank has requested banks to submit data by end of first quarter,” said Stephen Ineget, Partner KPMG Rwanda.
Hannington Namara, chief executive of Equity Bank Rwanda said lenders are cautious in their approach to finance agriculture and mining, which are perceived to be risky.
