First Capital Bank Zimbabwe retrenched more than 60 workers between March and April this year as part of a major cost cutting drive, joining a list of financial institutions that have “right-sized” in the past months.
Zimbabwe Banks and Allied Workers’ Union assistant general secretary Shepherd Ngandu this week said continued job losses are expected to continue in the industry.
“I can confirm that First Capital Bank has retrenched 60 employees between March and April as part of its restructuring exercise with 55 being our members,” Ngandu said.
He said the latest job cuts should not have caught anyone by surprise as the bank has been eliminating jobs since FMB Capital Holding, the parent company of First Capital Bank, took over the financial institution from Barclays Plc six years ago.
Ngandu said since 2017, over 300 workers have been retrenched so far since the change of name and more are expected.
In a letter dated March 22, 2023, First Capital Bank MD Ciaran McSharry cited technological developments and economic hardships.
“The bank has embarked on a restructuring and rationalisation exercise to adapt to the current economic dictates and technological developments and to curtail costs.
“Certain posts have been permanently withdrawn and or rendered redundant and or merged with other posts consequent upon the downsizing,” McSharry said.
He added: “The bank’s total income is increasing at a slower pace than its costs, after stripping off technical credits such as revaluation gains and foreign exchange revaluation credits.
“This therefore poses a serious challenge to the future sustainability of the bank’s business.
“Staff costs are high and contribute a significant component of the bank’s total costs. Accordingly, the restructuring has been done to increase efficiency and to reduce the staff costs.”
According to information at hand, negotiations for retrenchment packages, most workers are not happy with the pay outs.
The current job haemorrhage is linked to currency shocks stemming from the depreciation of the ZWL$ in the past months.
The bank reported a 27% profit decrease to ZWL$ 8.4bn in 2022 from ZWL$11.5bn achieved in 2021 due to the erosion of value largely caused by inflation.
Total income, however, increased by 42% to ZWL$36.7bn in 2022 from ZWL$25.9bn in 2021, attributed to broad-based performance improvement across all revenue lines.
Net interest income increased by 37% following a 77% increase in interest-earning assets and its contribution to total income however reduced to 34% from 36% in the prior year.
The bank posted a 25% increase in fees and commissions.
Fees and commissions contributed 33% to total income, a reduction from 38% recorded in 2021.
First Capital Bank’s trading and foreign exchange income increased by 267%, contributing 31% to total income, up from 12% in 2021, reflecting implications of the devaluation of the local currency at a level not fully captured in the inflation index.
Fair value loss on investment property was ZWL$400m, compared to a profit of ZW$2.8bn in 2021.
The impairment charge related to credit risk on financial assets increased by 174% to ZWL$700m from ZWL$200m in 2021.
This was driven primarily by the growth in the loan book, with the non-performing loans ratio remaining low at 0.8%, which is well within the business’s appetite.
“Against the backdrop of pricing models for supplies that track movements in the exchange rate, and the need for the regular cost of living adjustments on staff expenses, operating expenses increased by 37% from ZW$15.0bn in 2021 to ZW$20.6bn in 2022.
“This yielded a cost-to-income ratio of 56%, an improvement from 58% in 2021. Whilst a 4% positive jaws ratio was achieved for 2022, cost pressure remains an area of significant concern and future focus is given the technical nature of some of the credits included under total income,” McSharry said.
A net monetary loss arising from holding a substantial monetary net asset portfolio was recognised at ZW$6.5bn, increasing from ZW$1.9bn in 2021.