Positive developments in economy buoy FBC

As at 30 June 2022, all of FBC Holdings Limited subsidiaries were in compliance with their regulated capital thresholds

Analysts project financial services group, FBC Holdings Limited (FBCH), to see an uplift in earnings for the financial year 2022 and beyond on the back of among other factors, increased transaction volumes.

Despite the existing economic environment, positive milestones have been noted in the country such as increased foreign currency receipts, increased activity in the mining sector and high infrastructure investments.

“On this background, we are of the view that net fees and commission income will continue registering positive performance driven by anticipated increased transaction volumes,” said IH Securities in an earnings update for the financial services provider.

In addition to that, the Reserve Bank of Zimbabwe (RBZ) increased its grip on money supply, in its quest to stabilise the exchange rate and curb inflation, by increasing bank policy rates.

With effect from 1 July 2022, interest rates across the banking sector were increased with interest rates of 100 percent per annum and 200 percent per annum being adopted as minimum lending rates to individuals and corporates respectively.

Said IH Securities: “We believe this will result in higher returns for the bank which translates to increased profitability. The group’s higher foreign currency lending portfolio proportion speaks to increased hard currency earnings reflecting real returns.

“We don’t anticipate revaluations gains to significantly increase in the second half of the year owing to the current relative Zimbabwe dollar stability.”

During the half year to June 30, 2022, FBCH’s net interest and related income improved by 89 percent to $7,3 billion, leveraging on the group’s higher foreign currency lending portfolio proportion.

The operating environment remained challenging characterised by exchange rate volatility while the impact of geo-political developments in Eastern Europe continued to weigh down the growth potential of the local economy, as both fiscal and monetary policy authorities face the mammoth task of continuously addressing macro–economic adversities on the back of an unfolding global recession.

However, despite these challenges, the group’s financial performance showed resilience and tenacity during the six months to June 2022.

Net fees and commission income registered a growth of 219 percent largely emanating from its digital thrust which has positively impacted payments and processing systems.

The group’s net earned insurance premium increased by 109 percent to $1,1 billion compared to $524,48 million realised same period prior year, which is relatively low compared to other lines of business revenue growth, reflecting subdued consumer capacity in the face of declining disposable incomes.

The use of multi-currencies in the economy has however provided an opportunity for the group’s insurance subsidiaries to increase underwriting in foreign currency.

The real estate sector remained suppressed as evidenced by low volumes of transaction, increasing voids in office occupancy levels in the central business district (CBD) and limited availability of long-term mortgage finance.

Demand however has remained high for residential properties and on this backdrop, FBC continues to actively participate in the residential housing market.

As at 30 June 2022, all of FBC Holdings Limited subsidiaries were in compliance with their regulated capital thresholds.

According to chairman Herbert Nkala, the group’s strategy to invest in inflation-hedging assets has contributed immensely to sustainable capital growth for the subsidiaries, thereby withstanding the negative effects of the deteriorating exchange rate on the capital positions of the banking subsidiaries which are pegged in USD equivalents.

“Positive developments within the domestic macro-environment however, signal prospects of sustainable economic growth and stability. In line with regulatory statutes, FBC Holdings Limited will continue to seek opportunities to preserve and grow shareholder value as well as enhance customer experience,” he said.-ebusinessweekly