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TRUSTCO Bank Namibia is insolvent, with its liabilities exceeding its assets, and also unable to pay its debts, Bank of Namibia governor Johannes !Gawaxab says in a sworn statement filed at the Windhoek High Court in support of an application to have the bank wound up.

!Gawaxab is also saying in his affidavit that Trustco Bank’s sole shareholder, the stock exchange-listed Trustco Group Holdings (TGH), has defaulted on the repayment of a loan of N$76,3 million to the Development Bank of Namibia (DBN), reported a loss of N$988 million in its annual financial statements to the end of August 2021 – after a loss of N$343 million the previous year – and does not have the ability to recapitalise Trustco Bank, which the central bank is requiring TGH to do.

Trustco Bank has been in default since September this year on a loan of N$10 million that it received from the DBN, and by the end of June this year the bank also owed N$17,4 million to the Namibia Revenue Agency, !Gawaxab adds in his sworn statement.

By the end of August this year, Trustco Bank’s balance sheet showed assets of N$75,5 million, while its liabilities stood at N$85,9 million, he states as well.

“Trustco Bank is insolvent […] in that its liabilities exceed its assets,” !Gawaxab says. “Trustco Bank is, in any event, commercially insolvent in that it is unable to pay its debts as they fall due.”

!Gawaxab’s affidavit is among documents the Bank of Namibia filed at the High Court on Wednesday last week, when the central bank launched an application in which it is asking the court to order the winding up of Trustco Bank Namibia.

The central bank took this step a day before High Court judge Eileen Rakow, in a separate case, on Thursday ordered that all steps and actions, limited to legal action, taken to implement a decision of the central bank to apply for Trustco Bank’s winding up is temporarily put on hold until 6 December.

This is to allow for the payment system of the company Collexia Payments to be moved from Trustco Bank to First National Bank, Rakow stated in her order.

Collexia Payments sued the Bank of Namibia, Trustco Bank and the Payments Association of Namibia last month in connection with a decision of the central bank’s board, taken on 5 September, to apply for the winding up of Trustco Bank.

Contacted for comment on the Bank of Namibia’s winding-up application that was filed last week, Trustco Group Holdings spokesperson Neville Basson on Friday responded by referring The Namibian to a post on the Collexia case that had been placed on the Facebook page of the Trustco Group’s publication Informanté.

“No further comment in this regard,” Basson added.

In the Facebook post, it was stated that the Collexia case was the second time under the leadership of !Gawaxab that the Bank of Namibia has acted in non-compliance with its empowering legislation, and that the bank had been rebuked by a judge in June for overstepping its mandate and not complying with a court order.

MONEY WOES

!Gawaxab says in his affidavit the Bank of Namibia carried out an examination on Trustco Bank, which was granted a banking licence in late 2016, in September 2020, and made 25 findings requiring action from Trustco Bank.

He further says as a result of poor financial performance and poor risk managements systems, which cast doubt on Trustco Bank’s operations as a going concern, the central bank was of the view that Trustco Bank “was likely to be conducting its business in a manner that is detrimental to the public”.

In December 2020, !Gawaxab recounts, the Bank of Namibia directed that TGH should make a capital injection of N$100 million, consisting of three annual payments of N$33,3 million, into Trustco Bank, “to address the precarious financial position and the poor liquidity risk management”.

He says TGH “ostensibly complied” with this directive by making a first cash injection of N$33,3 million, which was due by the end of March last year – but that payment was almost immediately channelled back to the Trustco group through management fees and the redemption of intra-group deposits, creating the illusion that Trustco Bank had been recapitalised in accordance with the central bank’s directive.

“The second tranche of N$33,3 million was due on 31 March 2022, but Trustco group simply failed to comply with the directive and this amount remains outstanding to date,” !Gawaxab states.

He says Trustco Bank has failed to establish a solvent, commercially viable bank, and now does not have the required financial foundation to establish that either.

The bank’s auditors have informed the Bank of Namibia that Trustco Bank stopped extending credit last year, !Gawaxab records as well, adding: “I stress that a commercial bank cannot operate and will not remain viable if it does not extend credit.”

The Bank of Namibia has informed the court that its application for Trustco Bank’s winding up is to be heard on 9 December, if its legal action is not opposed.