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Enacy Mapakame Business Reporter
Listed banking firm, First Capital Bank (FCB), says it will adopt a cautious lending approach that involves extensive assessment of borrower capacity as part of efforts to avert risk.
This comes as the bank expects aggressive liquidity management policies and high-interest rates to subsist as means to counteract inflationary pressures.
According to the bank, this may present downside risks on credit performance as borrower capacity to carry related costs is strained.
“The bank will therefore remain cautious in its approach to asset creation, ensuring that a sufficient liquidity buffer is maintained to avert outages whilst borrower capacity is assessed rigorously, taking advantage of the apparent resurgence in key sectors of the economy,” said FCB in a third-quarter trading update.
Until about four months, the 2022 operating environment had been volatile for Zimbabwe, due to exchange rate instability and the global economy due to inflation pressures caused by the effects of the conflict in Ukraine, which impacted on food security and access to energy amongst other supply chain disruptions worldwide.
On the local front, the economy has been impacted by the effects of long-term instability in the monetary system, recording average month-on-month inflation for the quarter at 13,8 percent, increasing from an average of 3,8 percent during the same quarter of 2021.
However, there has been a notable trend of receding month-on-month inflation, which reduced from 30,7 percent at the end of the 2nd quarter to 3,5 percent at end of the 3rd quarter.
Additionally, the Reserve Bank of Zimbabwe (RBZ) has maintained a tight liquidity management framework, introducing gold coins in the quarter under review which are reported to have mopped up to more than $9 billion as of the end of September 2022.
The RBZ increased its bank policy rate to 200 percent from 80 percent, a move that curtailed credit expansion and consequently growth in money supply, bringing some stability and reducing margins between the black market and the official exchange rate.
Meanwhile, FCB total income for the quarter increased to $26 billion, an increase of $9,6 billion from the second quarter of 2022.
“This year-to-date performance is 82 percent higher than $14,3 billion recorded for the comparative period ending September 2021.
“This performance is supported by strong performance on interest income which was driven by growth in the foreign currency loan book and the repricing of the local currency book in line with the extant interest rate policy framework,” said FCB.
Foreign-denominated earnings at 40 percent of total income for the quarter show an increase from about 22 percent in the first quarter.
The year-to-date operating expenses rose 43 percent to $1,9 billion in the 3rd quarter under review compared to $9,7 billion in the comparative period indicating cost expansion in response to the inflationary pressure.
Total assets grew by 41 percent between December 2021 and September 2022 driven by customers’ loans and deposits growth of 59 percent and 30 percent respectively.
According to the bank, portfolio credit quality remained strong with a non-performing loan ratio of 0,1 percent being recorded at the end of the quarter, down from 1 percent in the prior year period.
Total equity increased by 24 percent with the bank’s capital position remaining strong with a margin of safety above the US$30 million threshold and capital adequacy ratios well above the regulatory minimums.
Online Reporter