FIRST Capital Bank (FCB) has reported strong growth in its foreign currency-denominated loan book against the backdrop of a conservative lending approach on the Zimbabwe dollar and persistent headwinds which have forced the economy to re-dollarise.
Zimbabwe’s monetary and fiscal policies have over the past months introduced a raft of measures to restore the value of the domestic currency such as mopping up excess liquidity and raising interest rates to discourage speculative borrowing in the local unit.
“With ZW$ liquidity on the market having been largely constrained throughout the period, the bank has experienced a notable shift in its operations with foreign-denominated business becoming increasingly prominent,” reads a statement accompanying the bank’s half-year financial results for the period ending 30 June.
“The bank’s total deposits adjusted for inflation grew by 14% from ZW$35.9bn as at 31 December 2021 to ZW$40.8bn as at 30 June 2022. On the same basis, the loans to customers also increased by 37% over the same period to close at ZW$21.4bn, compared to ZW$15.6bn at 31 December 2021, with 68% of business having been underwritten in foreign currency.
“Asset quality remained satisfactory, with a loan loss ratio of 1.6% during the period against a non-performing loan ratio of 1.7%, well within the bank’s appetite. “
Total income over the six months to 30 June 2022, at ZW$10.4bn, increased by 57% over the total income earned in the corresponding period in 2021 which amounts to ZW$6.6bn.
“This was supported by an improvement from underlying business, with net interest income and net fees and commissions having increased by 12% and 18% respectively,” the bank says.
“A 290% increase in foreign exchange trading income also contributed significantly to income growth, underlining the effects of exchange rate movements and growth in foreign currency-denominated business during the period.”
Operating expenses increased by 34% from ZW$4.5bn in the first half of 2021 to ZW$6.1bn in the period under review. However, an improvement in general cost efficiency was noted with the cost-to-income ratio having moved from 68% in June 2021 to 58% in June 2022.
The bank posted a profit of ZW$471.9m for the six months to June 2022, a slight 2% reduction from ZW$483.8m recorded for the same period in 2021.
This follows a significant increase in the monetary loss of 701% and a higher tax charge increase of 116% computed for 2022.
The total comprehensive income for the period, after incorporating revaluation credits on assets and the investment portfolio, amounted to ZW$5.3bn for the period under review, 598% higher than the ZW$754.4m reported in the corresponding period in 2021.