The operating environment in the year under review saw sustained depreciation of the ZWL and slower economic growth. In the first half of the year, 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. Despite constrained liquidity supply in 2H23 negatively impacting asset expansion in the financial sector, the bank grew its loan book by 30% y/y to US$86.1mn. USD-denominated loans constituted 92% of loans disbursed in the period. Notably, retail loans grew from 26% of the loan book in FY22 to 43% in FY23 whilst loans to the Trade and Services sector shrunk from 13% of the loan book to 1%. Notably, the loan loss ratio increased from 2% in FY22 to 5% in the period under review with increased credit risk exhibited in the Trade and Services sector as well as the agriculture portfolio. The EUR12.5mn line of credit from the European Investment Bank (EIB) was 81% 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 was 30% utilized as of 31 December 2023. As a result of increased loan activity from the bank, funded income saw a 28% uplift to US$24.68mn. Non-funded income grew 38% y/y to US$48.26mn spurred by a 69% increase in the Transaction Fees income line and a 45% increase in Net Trading and Foreign Exchange income. Despite the change in functional currency resulting in fair value losses of US$2.23mn, total income in the period saw a 33% increase to US$71.24mn from the US$53.38mn registered in the previous year. Operating expenses in the year saw a 55% increase to US$46.70mn. Infrastructure costs saw the biggest jump growing 83% y/y whilst general expenses and staff costs grew 67% and 32% respectively. Cost-to- income ratio consequently increased from 56.3% in FY22 to 65.6% in FY23. FCB saw impairment losses on financial assets of US$4.64mn in the period whilst the Group’s joint venture in Makasa Sun yielded a loss of US$5.27mn on account of fair value adjustments to property. The co-owned hotel has been under renovation since January 2023 with no rental income accrued in the period. FCB closed the period with a profit of US$10.62mn. The bank remained adequately capitalized in the period with core capital of US$52.5mn versus a regulatory minimum of US$30mn. The bank closed the period on a deposit base of US$123.2mn, 9% lower than FY22 due to loss of value of ZWL-denominated deposits. The bank declared a final dividend of USc0.22 bringing the total dividend to USc0.32 for the year, representing a dividend yield of 14% at current levels. Shares will be trading cum-dividend until the 3rd of May 2024.
