FBC eyes 5pc annual growth

Business Reporter
FBC Holdings could register an average of 5 percent growth in profitability over the five year period to 2020, group chief executive Mr John Mushayavanhu has said.
This also comes as the CEO announced during the financial group’s annual general meeting last week that most of the group’s units were trading ahead of forecast, except Turnall and reinsurance subsidiary FBCRe.
Group profit came in at $14,1 million for the full year to March 2013 and profitability could match last year’s performance despite the group scaling down lending in light of the rapid growth in non-performing loans in the sector.

Lending has been reduced, without effect on profits, to focus on collections with NPLs now averaging 10 percent compared to an industry average of 16 percent.
The positive performance outlook has in fact made previously announced plans to merge FBC’s bank and building society a remote possibility with the units expected to trade their way to minimum capital compliance.

The idea to merge the financial institutions was first mooted in line with the Reserve Bank of Zimbabwe’s initial phased minimum capital thresholds compliance framework that was scheduled to run until the end of this month.

The initial plan required commercial banks to have minimum capital of $100 million and building societies $80 million. The deadline was last year moved back to 2020, but banks must submit compliance plans by next week.

“We have submitted a recapitalisation plan for both the Bank and the Building Society to the Reserve Bank of Zimbabwe. Our plan is indicating that at a minimum growth of about 5 percent in profitability, both small business units will be able to trade themselves into compliance by year 2020, the FBC boss said.

Merging the bank and the building society would only be considered in the event of the unlikely scenario where the units register a 10 percent drop in profits consecutively.

“We have done a sensitivity analysis of our plan and in the event of a 10 percent annual decrease in profitability, for both the Bank and the Building Society through to 2020, we will proceed to merge the 2 units and the merged unit will still meet the required minimum capital,” Mr Mushayavanhu said after the AGM.

He stressed that the group would be able to trade its way to compliance without the need for input from shareholders, pointing out however that in the worst case scenario, the group had the option to sell its tile manufacturing business, Turnall, to recapitalise the bank.

FBC Holdings is most worried about compliance by its flagship, FBCBank, which currently accounts for roughly 54 percent of the financial services group’s profits.
However, FBC Building Society is also significantly important to the group. The society accounts for about 46 of profits before tax and also trading ahead of budget.