INCREASED liquidity in the economy from the bumper harvest achieved from the 2020/21 farming season is seen driving FBC Holdings’ performance in the second half of the year, with net interest income increasing 185.5% to ZW$3.3 billion.
This extra liquidity, coupled with the relaxed Covid-19 restrictions, is also expected to result in improved economic activity in the second half of the banking industry’s fiscal year.
Local equities research firm IH Securities said on account of this background, transaction volumes are set to increase, with the group seen taking advantage of prevailing economic stability to, among other outcomes, grow its loan book.
“We therefore forecast interest income to maintain an upward trend at least in the short term. We believe there is increased liquidity in the economy from the bumper harvest achieved from the 2020/21 farming season. We expect this extra liquidity, coupled with the relaxed Covid-19 restrictions will result in improved economic activity in the second half of the banking industry’s fiscal year. We also expect the group will take advantage of the prevailing economic stability and continue to grow its loan book,” IH said.
IH forecasts that FBC’s interest income will maintain an upward trend in the short term. However, digital banking fees are expected to continue rising as the banking industry moves from the brick-and-mortar business model.
“We therefore forecast FBC FY21 net interest income to increase by 185.5% to ZW$3.3 billion from ZW$1.16 billion in FY20 (full-year 2020) underpinned by an increase in lending. Net fees and commissions income is expected to continue growing on the back of the ongoing digitisation initiative and increased transaction volumes. We estimate this revenue stream to close the year at ZW$2.5 billion from ZW$838.7 million. Revaluations in foreign currency are expected to continue moderating on account of stabilising inflation presenting a downside risk to earnings relative to the high base set in FY20,” IH noted.
In the first half of the year, the group registered a 115.48% increase in operating expenses on the back of inflation-driven salaries and allowances adjustments which resulted in administrative expenses going up 95% year-on-year.
Resultantly, cost-to-income ratio increased from 31.63% in HY20 (half-year 2020) to 45.4% in the period under review with the combined effect of reduced net trading and dealing income and significantly high operating expenses. This resulted in the group realising a 21.8% reduction in profit after tax (PAT) from ZW$1.9 billion to ZW$1.49 billion in the period under review.
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