The operating environment during the first half of the year saw resurgence of hyperinflation as the country’s month-on-month blended inflation rate spiked from 0.73% in January to 75.5% by June 2023. Contractionary interventions by monetary authorities saw the benchmark interest rate in the period reverting to 150% after being revised down to 140% in the first quarter. In the period under review, First Capital Bank (FCB) completed its migration to the dollar-denominated bourse, Victoria Falls Stock Exchange, paving way for the bank to adopt the United States Dollar as its functional reporting currency. Due to the devaluations in the local currency, the bank’s capital position decreased 2% in the 6 months to June to US$48mn. This level is still above the regulatory minimum of US$30m, with the bank’s capital adequacy closing the period at 37%. Loan activity for FCB in the first half remained firm with loans and advances to non-banking entities growing 23% to US$79.5mn and 95% of business having been underwritten in foreign currency. The EUR12.5mn line of credit from the European Investment Bank (EIB) was close to being fully drawn during the period under review with funding mainly geared towards medium-sized corporates. The bank managed to secure a further US$20mn line of credit from the Afreximbank which is now at the drawdown stage. As a result of increased loan activity from the bank, funded income saw a 33% uplift to US$12.2mn from US$9.17mn in 1H22. Fee and commission income grew 22% y/y to US$6.2mn whilst the fastest growth was witnessed in cash withdrawal fees which increased 36% y/y to US$3.06mn. Total income for FCB registered a 13% growth to US$32.1mn, with 64% of income coming from non-funded income versus 70% in the same period last year. Operating expenses in the period grew at a faster 22% to US$20.3mn, and as a result the cost-to-income ratio for the bank grew from 58% in 1H22 to 63% in 1H23. The bank saw impairment losses of financial assets of US$2.85mn and fair value losses on investment of US$ 1.14mn. The group’s joint venture in Makasa Sun yielded a loss of US$3.8mn on account of fair value adjustments to property. The co-owned hotel has been under renovation since January 2023 with no rental income. The bank subsequently closed the year with a PAT of US$4.28mn, up 232% from the same period last year. The Board subsequently declared an interim dividend of USc0.14 per share, giving a dividend yield of 4.7% at current levels.
