eBusiness Weekly
Enacy Mapakame
First Capital Bank (FCB) is expected to remain profitable during the financial year 2022 (FY22) on the basis of its recovering business interest in the tourism sector, and a balanced model in the core banking segment.
Brokerage firm, IH Securities sees the group maintain its solid profit growth and forecast FY22 net income more than double to $10,36 billion compared to $4,92 billion reported in the prior year.
This is despite a challenging operating environment due to both local and international shocks that slowdown aggregate economic activity.
Market watchers have warned inflationary pressures for instance coupled with currency volatility and exchange rates will remain the main challenges for businesses, and likely to offset economic prospects.
The economy is projected to grow by 5,5 percent this year.
“The current spike in inflation will potentially go into fueling sub-inflation return to banks as revisions in nominal interest rates will likely be outpaced by the current resurgence in inflation.
“Against this background, FCB has indicated it will exercise caution in its balance sheet expansion to ensure that a sufficient buffer is maintained on its capital and liquidity position to accommodate stress factors,” said IH Securities.
For the past financial year, economic activity was subdued by various lockdown measures implemented by the Government to limit the spread of the Covid-19, which contributed to slowed down economic growth momentum.
Yields on interest earning assets remained depressed in real terms as inflation picked up within the last quarter of the year. FCB’ total deposits grew by 90 percent year on year, driven by a 279 percent growth in local currency deposits to an aggregate figure of $16,94 billion.
The bank reported a 244 percent growth year on year in interest income to $2,19 billion from $63,85 million.
Cost of funding remained moderate in the period leading to a net interest income growth of 282 percent to $2,15 billion. Loan to deposit ratio greatly improved within the period growing to 42 percent from 27 percent in the prior year reflective of an increased risk appetite commensurate with a more stable monetary space.
Loan composition, however, remained skewed towards short term loans due to the current transitory nature of deposits.
The non – funded income segment continued to drive revenue pulling in $4,25 billion at the end of the period against $2,07 billion recorded in the prior year.
In line with the growing digitalisation, which was spurred by the pandemic, the bank continued investment into digitizing operations yielding a net fee and commission income of $2,26 billion.
While banks are also expected to cash in on the digitalization drive, experts are also becoming skeptical following the ban on lending recently announced by the Government.
President Mnangagwa ordered banks to stop lending with immediate effect on May 07 in a move that was meant to stop speculation against the Zimbabwean dollar.
Market watchers have argued such pronouncements were ruinous and likely to cripple businesses that rely on borrowing for capacitating their operations.
The Zimbabwe National Chamber of Commerce said such a move would also scare away investors who find the environment unattractive where “lending can be suspended overnight.”
IH upgraded FCB to a buy recommendation on the local bourse, the Zimbabwe Stock Exchange.
