FBC has no immediate capitalisation pressure

Published: 10 June 2013

FBC Holdings will not be selling Turnall Holdings any time soon because there is no immediate capitalisation pressure in the group's subsidiaries, chief executive officer, John Mushayavanhu told analysts yesterday.

"We went through a period of negotiations with people who wanted to buy Turnall. But at the end of the day we realised that maybe it was not the opportune time to selling Turnall. For one to be selling a company at a time when the fortunes of a country and the country rating are about to change for the better may not make much sense… we have decided to push the sale of Turnall until a much later date," he said.

Concerning capitalisation of the group's subsidiaries, Mushayavanhu said they are under no immediate pressure because they are adequately capitalised whilst plans are on course to meet future deadlines.

The bank had capital of $29 million by 31 December 2012 compared to the minimum requirement of $25 million while the building society was just $1 million shy of the $20 million stipulated by the central bank. He, however added that as of 28 February this year the building society capital had gone up to $20.9 million which made it compliant.

Mushayavanhu was confident of meeting the June 2013, $50million minimum capital requirement set by the central bank.

"We are doing the preparatory work for the merger of the bank and the building society."

The plan involves acquiring NSSA's 40% stake in the building society and allocation of commensurate FBCH shares as payment to the social authority.

However, he said it is not their intention to do the merger sooner but will do it "by midnight of 30th June" as they want to continue enjoying the non-tax benefits of the building society and also await the possible extension of capital deadlines which the central bank governor is reported to be mooting.

The insurance businesses are way beyond the minimum requirements.

The group's total income at $74 million registered a growth of 19% over last year, "buoyed by strong performance in the banking and insurance subsidiaries."

Net interest income contributed 27% as opposed to 22% in 2011 which means the lending banks are increasing their lending activities.

Claims and commissions went up by 69% but it is also in line with the increase in the gross premium return for the insurance business.

Expenses went up 20% from $37.5 million to $44.9 million.

Profit before tax (PBT) for the group increased by 8% to $16.9 million and Mushayavanhu emphasized that it could have been much better had it not been weighed down heavily by subdued performance at Turnall.

PBT was also weighed down by higher overheads, incurred mainly to enhance the group's competitiveness through implementing technology driven business solutions (e-commerce).

"There will be continued emphasis on e-commerce as traditional methods of service delivery will be loss making after the charges were reduced in the MOU."

He said their mobile money product Mobile Moola has now gone commercial and is charging fees below the rates that are contained in the memorandum of understanding (MOU).

"Telecel and Netone have opened up their gateways to enable users to move money from an FBC account direct to a beneficiary but for some reason Econet have been delaying opening that gateway…but they have since agreed and are offering to charge us 5c per text and we have no problem with that," he said.

Profit after tax increased by 25% to $15.6 million, and this was ahead of PBT growth because the building society is not taxed.
Mushayavanhu said earnings per share were 2.42c up from 1.78c.

"Looking at the financial position of the group the balance sheet went up 40% driven mainly by our ability to attract more deposits and also our ability to attract more external lines of credit," he said.

He also said the "loan book remains heavily secured" with the loans advances going 57% up from $121million to $191 million.

Going forward the group will prioritise liquidity because "we don't want to be found wanting when depositors want their money", lending will be against security even from the so-called blue chip companies and e-commerce will be at the centre of transaction banking. Mushayavanhu also reckons that 2013 could be a particularly good year if the elections are held smoothly.

- zfn