First Capital edges closer towards capital threshold

LIVINGSTONE MARUFU

Listed financial services provider, First Capital Bank, is inching closer to reaching the regulatory minimum capital threshold of US$30m by December 31 to attain a top tier status, Business Times can report.

The Reserve Bank of Zimbabwe has set US$30m or equivalent as the minimum capital requirement for Tier 1 banks as it moves to strengthen the soundness of the banking sector.

First Capital Bank’s chairman, Patrick Devenish, said the lender reported US$26m at the end of December 2020 and was on track to attain Tier 1 status.

“Given the mix in the capital base between local and foreign currency denominated assets, the tracking towards the US$30m target will be impacted by the volatility in the exchange rates, and will demand that we build a capital buffer to protect against devaluation,” Devenish said, adding the bank was confident of meeting the target.

The bank closed the year on a strong capital and liquidity base, with total capital adequacy ratio of 29% compared to a regulatory minimum of 12% while liquidity ratio was 70% against regulatory minimum of 30%. A strong base gives the business capacity to issue more loans in the future.

The lender’s loan book continues to perform well, with a non-performing loans ratio of 0.16% compared to market average of 0.3%.

Customers in the tourism and other services sectors significantly affected by Covid-19 are on the watch list and constitute 5% of the loan book.

In its financial results for the year to December 31, 2020, First Capital Bank posted a profit of ZWL$472.2m during the reviewed period from a loss of ZWL$732.4m reported in prior year.

Interest income grew to ZWL$955m from ZWL$784m while non-interest income grew to ZWL$2.5m from ZWL$1.7m.

The bank’s total deposits grew by 331% driven by a 298% growth in local currency deposits to ZWL$4bn, while foreign currency deposits grew by ZWL$3.7bn. 

The local currency deposits were deployed into loans, which grew by 279% to ZWL$2.3bn, a 63% loan to deposit ratio. 

Foreign currency loans declined in value due to the repayments of high value corporate loans held prior year, although volumes increased compared to prior year.

Cost to income ratio improved to 50% from 95% on the back of growth in income. 

Within the retail banking space, First Capital Bank introduced its first money transfer agency partnership with Ria Financial Services, offering customers a safe and secure channel to send and receive money internationally. 

“Our strategic partnership with Zimnat Insurance saw the launch of an inflation sensitive funeral plan which has helped customers to retain value. The ATM services were resuscitated to allow customers to safely access cash services, thereby reducing footfall in branches,” the bank said.

On the commercial front, the product development was driven by customer feedback and the evolving needs of corporates and SME businesses. 

The bank introduced Infinipay, a bulk payment platform, USD Lending, increased Capex facilities, Loyalty Lending, and Invoice Discounting. 

The lender said 2020 was a challenging year which saw the resilience and dedication of colleagues in ensuring minimal disruption of service delivery, allowing customers access to financial services across our networks. 

Going forward, the board says it will continue to focus on delivering the bank’s strategy with key issues being growth and value preservation.

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