FCB loan loss ratio still manageable

First Capital Bank (FCB) says the financial institution’s asset quality remains satisfactory with a loan loss ratio of 3.3 percent.

However, exposures with increased credit risk were largely within the agricultural portfolio.

The bank, in its half-year financials to June 30, 2023, said while the overall default risk increased, this was within the group’s appetite.

For the period under review, the bank’s loans to customers increased 23 percent over the same period to close at US$79.5 million compared to US$65.9 million as of December 2022, with 95 percent of business having been underwritten in US dollar as of June 2023.

Managing director, Ciaran McSharry, in a statement of the financials, said the bank mobilised a further US$20 million line of credit from the African Export – Import Bank (Afreximbank), which is now in the drawdown stage.

He said the EUR12.5 million from the European Investment Bank (EIB) line of credit was close to being fully drawn during the period under review, providing significant capital relief to medium-sized corporate customers.

FCB’s recorded operating profit after tax for the period under review increased by 602 percent to US$9,05 million, compared to US$1,29 million reported in the same period the previous year.

The group attributed this to several factors, including an expanded customer base, significant growth in the loan book, and notable gains in foreign exchange.

The growth also translated into earnings per share of US$0,42 cents for the period, which represented a 600 percent increase over the comparable period the prior year.

According to MacSharry, the growth in income over the period, totalling US$32,1 million, was propelled by marked improvements in the underlying business, with net interest income and net fees and commissions climbing by 35 percent and 23 percent, respectively.

However, operating expenses also experienced a 22 percent increase, rising from US$16.6 million to US$20,3 million in the current period. Consequently, the cost-to-income ratio moved from 58 percent in June 2022 to 63 percent in June 2023.

During the period under review, total deposits stood at US$109,5 million, reflecting a decline from US$136,1 million reported during the same period in the prior year.

This decrease was primarily a result of the devaluation of Zimbabwe dollar-denominated deposits due to a significant 735 percent depreciation of the Zimbabwe dollar over the period.

Zimbabwe dollar deposits constituted 8 percent of the total deposits at the end of June 2023, a decrease from 22 percent recorded at the end of 2022.

On the other hand, US dollar-denominated deposits experienced a 6,6 percent increase during the review period.

The bank’s US dollar-denominated core capital experienced a marginal 2 percent decrease, settling at US$48 million as of June 30, 2023, compared to US$49 million recorded on December 31, 2022, above the regulatory minimum of US$30 million.

The bank’s capital adequacy ratio stands strong at 37 percent, significantly surpassing the regulatory requirement of 12 percent.-ebusinessweekly