daniel chigunwe
Business Writer
First Capital Bank (FCB) says growth in its USD loan book and balances and plans to roll out more foreign currency-denominated products has been the major push factor for the Bank’s intent to migrate its shares to the Victoria Falls Stock Exchange (VFEX).
The Bank which is now in the process of seeking shareholder approval at an extraordinary general meeting next month is targeting to have completed the migration process by end of the second quarter of 2023.
FCB will become the first listed banking firm to de-list its shares from the Zimbabwe Stock Exchange (ZSE) followed by the subsequent listing on VFEX.
On Friday, March 10, 2023, the FCB Board passed a resolution in support of the termination of First Capital’s ZSE Listing, with the intent to list the Company’s shares on the VFEX by way of Introduction.
In a circular to shareholders, FCB said the bank has seen a growth in its USD loan book and balances to over 70 percent, with foreign currency income contributions between 55 percent and 65 percent in recent months.
“Furthermore, the bank plans to roll out more foreign currency-denominated products to boost its foreign currency revenue.
“The potential increase in the Bank’s USD earnings increases the shareholders’ expectation to receive their return in USD through USD dividends and USD capital gains on share disposal which the VFEX offers in comparison to the ZSE,” read part of the circular.
The Bank noted it provides corporate services and funding to companies in Zimbabwe that are exposed to USD-denominated costs.
As a result, improved access to USD facilities for the Bank through the VFEX enables the Bank to maintain a competitive position in the market by offering USD capital to such corporates.
The Bank has mobilised lines of credit from regional and international partners that include the African Development Bank, Afreximbank, the European Investment Bank and the Trade and Development Bank.
“These facilities are expected to provide a boost to the economy through trade finance and medium-term capital opportunities which smoothen trade cycles and facilitate capital investment for long-term projects.
“Access to foreign currency capital through the VFEX can attract more facilities of this nature and provide sustainability to the existing relationships,” FCB said.
The Bank said the current reporting framework which is based on the ZWL and upon which adjustment is made for hyperinflation has created substantial complexity in the reporting process and volatility in the reported numbers.
Therefore, by listing on VFEX, the Bank is required to report its financial performance in USD which is a stable currency that will assist current and potential investors to better understand the performance of the entity.
According to the circular, the USD-implied valuation of FCB following its VFEX listing will mitigate valuation volatility and provide a more accurate reflection of the Bank’s market capitalization.
“This will result in shareholders realising the true value of their holdings on disposal,” the Bank said.
The VFEX offers lower foreign exchange risk arising from local currency depreciation, tax incentives and lower trading costs of 2,12 percent compared to 4,63 percent on the Zimbabwe Stock Exchange for shareholders and potential investors.
Bongani Ndlovu