LIVINGSTONE MARUFU
Financial services group, FBC Holdings Limited, is considering merging its two banking units into a single entity to meet the US$30m minimum capital threshold set by the central bank ahead of the December 31 deadline, Business Times can report.
The deal to merge the commercial banking and building society units has been on the table for about 10 years.
FBC Holdings chairman, Herbert Nkala said a detailed capitalisation plan was in place to ensure full compliance.
He was optimistic the group would be able to raise the funds through normal trading or the merger of the two units.
“These subsidiaries are expected to self-capitalise through normal trading and/ or merging the two institutions by the regulated deadline,” Nkala said in a statement contained in the 2020 annual report.
The Reserve Bank of Zimbabwe has directed commercial banks to have a minimum capital buffer of US$30m or its local currency equivalent at the prevailing auction rate to absorb shocks and militate against the risk of insolvency.
In its financial results for the year 2020 published last week, FBC Holdings swung into a profit of ZWL$1.5bn from a loss of ZWL$1.6bn reported in 2019.
“While 2020 was an unprecedented, challenging year, the group posted a commendable set of financial results,” Nkala said.
Total income for the period under review was ZWL$8.1bn, reflecting a 14% increase from ZWL$7.2bn achieved in 2019.
The group attributed the increase to foreign currency revaluation gains, which contributed significantly to the group’s reported total income.
The lending operations which recorded a modest growth, as a result of a combination of loan growth and re-pricing, despite the prevailing macro- economic challenges, also contributed significantly to the income growth.
Consequently, net interest income grew 20% to ZWL$1.7bn from ZWL$1.4bn recorded in the previous year.
A 5% decline in interest expense was also registered as a result of an improvement in the funding mix.
Nkala said net fees and commission income receded 12% to ZWL$1.2 bn from ZWL$1.4bn recorded in 2019, mainly as a result of a marked slowdown in the volume of transactions, in line with the reduced economic activity induced by the Covid-19 pandemic lockdown measures.
The repricing of this revenue stream, implemented during the year, was inadequate to counterbalance the decrease in the volume of transactions.
The insurance business recorded a decrease of 5% in net earned insurance premium to ZWL$845m from ZWL$886m achieved in the previous year.
The significant decrease in insurance premium revenues of 21% was offset by an improvement in premium ceded to reinsures and retrocessionaires of 44%.
The Covid-19 pandemic lockdown effects and the hyperinflationary environment had an initial negative effect on the insurance industry at large.
This, however, took a positive turn when the regulatory authorities subsequently permitted the underwriting of insurance policies in foreign currency, Nkala said.
The group’s administration expenses increased by 16% to ZWL$4.5bn from ZWL$3.9bnb reported in 2019, mainly as a result of the repricing of expenses to match the inflationary environment.
The cost to income ratio excluding the monetary loss remained static at 64%.
The monetary loss improved to ZWL$1.4bn from ZWL$1.8bn recorded last year, following the slowing down of inflation and an improvement in the hedging of monetary assets.
The net monetary loss represents the effect of inflation on the net monetary assets of the group.
Total assets for the group increased by 19% to ZWL$32.4bn in the reviewed period from ZWL$27.1bn in 2019.
The growth was mainly driven by increase in deposits and the translation of foreign denominated assets.
The group projects a positive outturn for 2021 on the back of a very strong recovery in the agricultural and energy sectors with transaction volumes and values across the group are expected to increase, resulting in much stronger performance in 2021.
