First Capital secures US$20m line of credit

The bank announced this year that it was targeting to secure US$90 million worth of lines of credit from four offshore funders.
THE Victoria Falls Stock Exchange (VFEX) –listed First Capital Bank (FCB) has secured an additional US$20 million line of credit from African Export-Import Bank (Afreximbank) as it focuses on foreign currency-denominated business.

The bank announced this year that it was targeting to secure US$90 million worth of lines of credit from four offshore funders.

In a statement accompanying financial results for the period ended June 30, 2023, the bank said the US$20 million line of credit was now at drawdown stage.

This comes as the EUR12,5 million that the bank secured from European Investment Bank (EIB) line of credit was almost depleted.

The line was secured to develop eligible investment projects undertaken by small to medium enterprises and midcap companies under FCB locally.

“The EUR12,5 million European Investment Bank line of credit was close to being fully drawn during the period under review providing significant capital relief to medium-sized corporate customers. A further US$20 million line of credit has been mobilised with the African Export-Import Bank and is now at drawdown stage,” the bank said.

The regional bank has been looking for more ways to remain relevant in the inflationary environment with the hope that securing fresh lines will protect the balance sheet from inflation.

During the period, the group’s loans increased by 23% to close at US$79,5 million, compared to US$65,9 million as of December 31, 2022, with 95% of business having been underwritten in the greenback as at June 2023.

Asset quality remained satisfactory, with a loan loss ratio of 3,3% while exposures with increased credit risk were largely within the agriculture portfolio.

The bank closed the period posting an adjusted profit of US$9,05 million for the six months to June 2023, barring the impact of the change in functional currency.

“This was supported by income growth over the period, at US$32,1 million. This growth was driven by an improvement in the underlying business, with net interest income and net fees and commissions having increased by 35% and 23%, respectively.

“Operating expenses increased by 22% from US$16,6 million in the first half of 2022 toUS$20,3 million in the period under review. This resulted in the cost to income ratio moving from 58% in June 2022 to 63% in June 2023. The group continues to actively pursue cost optimisation strategies to manage the overall cost base,” it said.

The adjusted total comprehensive income for the period stood at US$8,2 million, 43% lower than the US$14,4 million total comprehensive income reported for the corresponding period in 2022. Meanwhile, the bank said the rapid depreciation of the Zimdollar exerted pressure on capital, resulting in the bank’s United States dollar-denominated core capital decreasing marginally by 2% to US$48 million.

“The bank’s capital adequacy ratio remained strong, closing the period at 37% which is well above the regulatory minimum of 12%. With a liquid assets ratio of 49%, the bank carried a comfortable buffer above the regulatory minimum of 30% representing capacity to underwrite more business,” FCB said.-newsday