By ETimes
HARARE – FBC Holdings has seen significant growth in customer deposits, with total customer deposits rising to ZWG4.06 billion in the half year ended 30 June 2024 from ZWG2.66 billion at the end of 2023, an increase of 52%. This demonstrates strong confidence in the group’s banking operations and highlights FBC’s liquidity mobilization efforts.
However, the increase in deposits is accompanied by risks. FBC’s debt-to-equity ratio of 3.14 reveals a high level of leverage, and while deposit growth enhances liquidity, it also creates liabilities that must be managed carefully. The group’s current ratio of 0.46, indicating a lower proportion of liquid assets relative to short-term liabilities, shows that FBCH may face liquidity pressure if economic conditions worsen, particularly if there is a sudden increase in demand for withdrawals or a liquidity crunch in the broader financial system.
FBC’s reliance on deposit growth to fund its operations underscores the need for careful risk management. The significant concentration of deposits in sectors like financial services at 28%, mining at 12% and the public sector at 10% highlights potential sectoral vulnerabilities if these industries face disruptions. Maintaining a balanced and diversified deposit base will be critical as the group navigates economic uncertainties.
While FBC remains profitable and has successfully grown its deposit base, these results come with clear risks. The group will need to manage declining profitability from non-core income sources and leverage liquidity prudently to sustain performance.
FBC Holdings’ Profitability: Strong but Facing Pressures
FBC delivered a ZWG613.2 million net profit in the first half of 2024, indicating that the group remains profitable despite a challenging economic backdrop. However, compared to ZWG1.47 billion net profit in the same period last year, the group’s profitability has clearly taken a hit. The drop in profit is primarily driven by a ZWG774 million monetary loss, reflecting the hyperinflationary environment and its impact on the group’s financial assets.
The operating profit margin of 68.7% demonstrates that the group is efficiently managing its operations, containing costs well, and maintaining a strong focus on core business functions. However, the net profit margin has declined to 29.1%, underscoring how monetary losses and shrinking revenue streams, particularly from non-core activities like foreign currency trading and fair value adjustments, have squeezed overall profitability.
The group has also seen a notable drop in other income, particularly from financial assets and foreign currency trading, which fell sharply from last year. This could pose a challenge to FBC’s ability to maintain its profit levels, especially if the local currency remains stable, limiting opportunities for trading gains.