The rise and rise of FBC

recognition as he steered the bank out of the tough conditions in the 14 years he was at the helm of the bank.

It seems Gwata thrived on short time periods to turn around the status quo, no wonder he completed his A- Level education in six months through distance education, an impressive feat indeed.

The bank is a quoted company on the Zimbabwe Stock Exchange and opened the week at US8 cents with about 9 794 shares traded by the close of the week, a 6,67 percent upward move year to date. Price earnings ratio of about 3,65 points against an average of 7,81 for the industrial index tells an emotional story of a depressed stock by all matrices.

From a small banking institution under the then MD, Anthony Bigwood, FBC is now highly rated among the local banks. It acquired its building society in 2005 after the dust had settled following the corporate shake-up which saw most banks closing shop.
It is arguably the most active housing unit provider in the country.

The building society posted a net surplus of US$5,5 million during the 2012 financial period, representing a 90 percent increase from the US$2,9 million which was recorded for the prior period.
In his presentation of financial results for 2012, incumbent CEO Mr John Mushayavanhu told an analyst briefing what the future could hold for a “bouquet” of tiles, insurance premiums and a bank account tied in one.

The group posted US$15,6 million profit, a 25 percent increase in profits from last year. Basic earnings per share improved to US$2,42 cents per share from US$1,78 cents and, as expected, no dividends were declared in the midst of changing banking policies time and again.
The plans to merge the building society and the commercial banking arm could bring about a banking behemoth which could rattle the comfort of both CBZ and BancABC.

This is an exercise which will be complete within the first half of 2013 and which could be a source of leverage given the new capital requirements which had been a source of headache for most indigenous banks.
It could also be a case of attempting to streamline operations as the group had amalgamated tiles, bank accounts and insurance policies.

This means economies of scale alongside diversification, the interesting observation being at one point the group had reached its decision to dispose Turnall as it had been viewed as a misfit which was acquired through default as debt had to be converted into equity following the threat of default risk.
The Memorandum of Understanding by the central bank and the bankers is yet to take off, from FBC position, the group fees and commission income was almost static at US$20,6 million recording almost 1 percent growth leaving its contribution to revenue at 28 percent from 33 percent same time last year.

This does not necessarily mean the bank will not feel the pinch as the call to restructure the interest rate regime and bank charges gathers momentum.
However, the bank will not be threatened in comparison to small, narrow viewed banks which seems to contribute a bigger population but less deposit base.

The cost income ratio remains a burden to the group after it had risen by 2 percentage points to 77 percent from 75 percent.
A noticeable US$3,6 million charge for impairment loss on financial assets is testimony to a depressed business environment. This could buttress the argument that the official non-performing loan ratio of 13,1 percent is a gross understatement. Of the US$4,4 billion total deposits in the market, it is alleged more than US$1,2 billion might not be recoverable within a dollarised scenario.

The adverse macro-economic conditions will continue stunting growth of the banking sector as one of the major drivers of financial services sector, the capital market looks constricted.
Most equity firms are struggling to pick business, FBC Securities included. Renewed foreign interests in the last quarter of 2012 struck a ray of hope for the sector with the domestic market experiencing a liquidity crunch which makes it a poor candidate to steer growth.

The securities arm recorded a loss of US$300 000 with the only good news that it met the capital requirements of US$150 000 by more than a US$100 000 margin.
It is their prerogative to attempt taping into the foreign market knowing well that Zimbabwe’s domestic market will remain depressed as long as we are in a dollarised environment, interbank market is disabled, and uncertainty exists and the euphoria on indigenisation remains.

Turnall Holdings Limited’s turnover of US$42,5 million was 18 percent lower than the previous year with profit before tax decreasing from US$5,1 million to US$1,2 million, the company is planning to commission a state-of-the-art concrete tile plant and a pavers production line in June this year.
I do not foresee the tile manufacturing unit remaining part of the FBC family projecting into 2013 as senior management stance on bad times of the unit shows a faint-hearted view of the unit.

The unfair competition their product faces in the informal sector calls for Government intervention as a stroll past Magaba in Mbare shows how their product can go for a song without any remorse.
The significant jump in directors’ fees from about US$1,9 million in 2011 to over US$2,5 million itches my boot knowing well that cost income ratio has already been stubborn and remains so.

This would also leave me wondering on what could be the possible loan to employee ratio given the bank’s impressive loan book quality compared to the market average.

Christopher Takunda Mugaga is an economist. He is the Head of Research at Econometer Global Capital, a regional finance and economics research firm. He can be contacted on: [email protected] or +263 772 340 353 / +263 776 266 062.