Mpinganjira orders forensic audit in Malawi Savings Bank: ‘There was systematic fraud’

FDH Financial Holdings Limited Chief Executive Officer, Thom Mpinganjira has ordered a forensic audit to be conducted on the newly acquisition Malawi Savings Bank (MSB) after it registered a K3.1
billion (before tax) loss in 2014.

Contrary to reports before FDH acquired majority shareholding of the bank that it posted a profit of K811 million as at 31 December, 2014, the bank infact made a huge loss.

Mpinganjira has, however, suspected the bank was involved in a systematic financial mismanagement and/ or fraud.

MSB as of 31 December, 2014 posted a loss (after tax) of K2.471 billion compared to K249 million profit made in the year ending 31 December, 2013.

Media reports as of 1 July, 2015 suggested that MSB made a profit before tax of K2.5 billion for the period to May 2015, justifying calls for government not to dispose of the bank.

However the bank’s audited accounts have revealed a contrary report, forcing the new majority shareholders to demand for forensic audit.

”The audited accounts show that the business is in a more serious financial and liquidity situation. A loss before tax of K3.1 billion was made for the ending 31 December, 2013. All the key business
performance indicators show that MSB was indeed heading for a catastrophic failure,” said Mpinganjira in a statement made available to Nyasa Times on Wednesday.

Mpinganjira said the forensic audit would help to bring to light any malpractices that were occured resulting in the bank to register such huge loss.

According to the financial mogul, MSB staff costs increased by 56 percent in the year 2014 despite inflation averaged at 19 percent, and in some areas quadrupling as compared to 2013.

Total staff costs were K3.9 billion in 2014 as compared to K2.5 billion in 2013. Other expenses increased from K460 million in 2013 to K740 million in 2014.

Mpinganjira has since suggested that government gave his company inaccurate accounts information, forcing it into believing that MSB was performing impressively and that was still making profits.

He then revealed that FDH needs to inject about K3.1 billion or more into MSB than was originally anticipated, in order to meet the capital requirements.

”These results are very sobering. During the period we were negotiating the purchase of 80 percent of MSB shares, FDH Financial Holdings Limited anticipated that the Basel II Recapitalization capital shortfall would be K3.2 billion. However these results show that the actual capital shortfall as at 31 December, 2014 is now at K6.3 billion, twice the original estimate, which was based on the
inaccurate accounts information presented to FDH,” lamented Mpinganjira.

”We will therefore conduct forensic audit of the bank to ensure that if any malpractices occurred they are brought to light. We will ensure that we protect the resources of this bank and vigorously pursue anyone found to have carried out any malpractices and criminal activities that were aimed at stripping the bank of its assets”.

Meanwhile, Mpinganjira has pledged to continue operating MSB as a separate bank from FDH bank as long as it is stipulated under the Financial Services Act.

Mpinganjira added: ”This period will allow us to clean up Malawi Savings Bank and turn into from a ‘bad bank’, creating value for the Malawi economy in general and all the stakeholders of Malawi Savings Bank in particular”.