daniel chigunwe
Enacy Mapakame
Listed financial services group, First Capital Bank (FCB), is expected to yield a net income of US$13,36 million this current financial year, representing a growth of 25 percent on prior year aided by fair value adjustments.
The banking group is also expected to leverage credit lines to boost its loan book with the bank currently pursuing additional lines of credit from the African Development Bank and Trade Development Bank.
According to FCB, negotiations for these credit lines were at various stages as at the time of reporting for its results for the year to December 31, 2023.
Despite constrained liquidity supply in during the second half of FY23 negatively impacting asset expansion in the financial sector, the bank grew its loan book by 30 percent year-on-year to US$86,1 million.
US dollar-denominated loans constituted 92 percent of loans disbursed in the period with retail loans increasing from 26 percent of the loan book in FY22 to 43 percent in FY23 whilst loans to the trade and services sector shrunk from 13 percent of the loan book to 1 percent.
According to research firm IH Securities, while there may be growth in interest income, there are still factors that will weigh on income.
“Yields in the industry have been elevated relative to prior averages aiding in the growth of interest income, however, there is downside risk of a correction in the medium term leading to decreased income.
“Central banks have started turning dovish with rate cuts expected in the year as inflation moderates hence putting pressure on yields on interest-earning assets. In our view, non-funded income will continue to be the lead driver of income for the bank,” said IH Securities.
The research firm also pointed out other factors that are likely to affect performance across sector. The local economy is projected to expand by 3,5 percent in 2024 according to Treasury estimates, whilst the International Monetary Fund (IMF) has pinned their forecast at 3,2 percent.
However, the adverse impacts of a drought stricken agricultural summer cropping season and the expected moderation of hard commodity prices will have a knock-off effect on growth.
“Consumer activity is foreseen to be depressed in the year on account of lower bottom-of-the-pyramid liquidity pointing to lower economic activity and transaction values,” said IH Securities.
In the recently released monetary policy, the RBZ mandated all banking institutions to put exemption clauses on monthly maintenance service charges for both FCA and ZiG deposit accounts that maintain a consecutive minimum daily balance of US$100 for a period of up to 30 days.
“This will likely put some pressure on ledger fees as sizeable deposits in the system are transient in nature,” IH Securities explained.
During the past financial year, FCB saw impairment losses on financial assets of US$4,64 million whilst the group’s joint venture in Makasa Sun yielded a loss of US$5,27 million on account of fair value adjustments to property. The co-owned hotel has been under renovation since January 2023 with no rental income accrued in the period.
Bongani Ndlovu