First Capital Bank Zimbabwe says the liquidity crisis and high interest rates may pose a risk to credit performance.
In September 2022, the Reserve Bank of Zimbabwe decided to hold its key policy rate at a record high of 200% to ensure the current disinflation trend is sustained in both the short and long term, that is, until monthly inflation attains desired levels of less than 5%.
The apex bank introduced gold coins during the quarter ended 30 September 2022 in order to tighten its framework for managing liquidity. The gold coins reportedly mopped up to more than ZWL$9 billion as at the end of September 2022.
“This measure was coupled with the introduction of minimum lending rates of 200% and 100% for corporates and individuals respectively, a move that curtailed credit expansion and consequently growth in money supply,” the bank said in a trading update.
The margin against the official rate had significantly declined by the end of the period thanks to these and other measures and the parallel market exchange rates had demonstrated some degree of stability.
FCB expects the tight money supply and active liquidity management strategies to continue to be used as tools to combat inflationary pressure.
“This may present downside risk on credit performance as borrower capacity to carry related costs is strained,” it said.
“The Bank will therefore remain cautious in its approach to asset creation, ensuring that a sufficient liquidity buffer is maintained to avert outages whilst borrower capacity is assessed rigorously, taking advantage of the apparent resurgence in key sectors of the economy.”
As of financials, the bank’s September 2022 year-to-date inflation adjusted total income increased to ZWL$26 billion, an increase of ZWL$9.6 billion from the second quarter of 2022.
This year-to-date performance is 82% higher than ZWL$14.3bn recorded for the comparative period ending September 2021.
“This performance is supported by strong performance on interest income which was driven by growth in the foreign currency loan book and the repricing of the ZWL book in line with the extant interest rate policy framework,” it said.
Earnings in foreign currencies accounted for 40% of all income for the period, up from around 22% in the prior quarter.
As expected, due to inflationary pressures in the market, the bank’s year-to-date operating expenses stood at ZWL$13.9 billion, representing a 43% increase from ZWL$9.7 billion in the comparative period.
Between December 2021 and September 2022, the total assets increased by 41% after adjusting for inflation, driven by increases in customer loans and deposits of 59% and 30%, respectively. With a non-performing loan ratio of 0.1% at the end of Q3 2022, down from 1% at the end of 2021, the portfolio’s credit quality remained high.
The bank’s capital position remained robust, with a satisfactory margin of safety beyond the US$30 million threshold and capital adequacy ratios substantially above the statutory minimums. Total equity increased by 24%.
It did not declare a dividend – Harare