FBCH diversification pays dividends

Published: 28 August 2017

Financial services group, FBC Holdings (FBCH), said it is now reaping rewards from its investments in various sectors of the economy.

The group's chairperson, Herbert Nkala, said FBCH's six business units recorded positive performances in the half year to June 2017 resulting in a $11,9 million profit before tax compared to a $9,6 million profit in the previous corresponding period.

"The group takes pride in the diversity of its business model, particularly in view of the prevailing market vulnerabilities. Our business development activities will remain anchored in our digital capabilities and innovation," he said.

FBCH has wide interests in banking, insurance and housing, and was until recently the majority shareholder in Turnall Holdings.

Nkala noted that the group's profit after tax for the period increased by a lower rate of three percent compared to the seven percent growth in profit before tax, mainly due to a higher effective tax rate arising from a change in the composition of income and expenses allowable for tax deduction.

"The group's total revenues decreased by four percent to $45 million from $47 million for the same period last year, largely impacted by the central bank's directive to cap interest rates and transactional charges to prescribed lower levels with effect from April 1, 2017, the softening of the market in the microfinance segment due to heightened competition and reduced demand for insurance products," he said.

FBCH's net interest income decreased by seven percent to $21 million, constituting 47 percent of total income compared to $22 million and 48 percent respectively for the same period last year.

Nkala said the decrease was mainly due to reduced gross interest income as a result of the capping of lending interest rates by the Reserve Bank of Zimbabwe leading to an increased interest expense as the interest cap on lending was not matched by a corresponding decrease in deposit rates, which culminated in a reduced net interest margin.

He added that the group deliberately maintained increased liquidity in the second quarter of the year in order to accommodate the repayment of the $60 million syndicated loan facility guaranteed by Afreximbank that was due for payment on July 14, 2017.

"Net fee and commission income remained relatively flat when compared to the same period last year due to the central bank's directive for banking institutions to reduce transactional charges to promote financial inclusion and increased usage of electronic delivery channels.

"The decrease in pricing was partially offset by an increase in transactional volumes following a countrywide acceptance of the electronic mode of payment, achieved against a background of cash challenges," he said, adding that the increase in transactional volumes is expected to continue firming for the second half of the year as the group improves its digital delivery foot print.

FBCH's gross profit on property sales increased significantly compared to the same period last year, driven by improved efficiencies in delivering completed housing units.

The gross sales of $1,2 million were less than the $3,2 million recorded for the same period last year, largely as a result of timing differences in completing the housing projects.

The group's insurance businesses registered a 10 percent decline in premium revenues and a 16 percent decrease in net earned insurance premium.

Nkala said the decrease was primarily due to low activity in the economy and the shift in demand from some traditional insurance products such as the bankers' blanket bond which is no longer in significant demand as a result of countrywide cash challenges.countrywide cash challenges.

In the period under review, the group's cost to income ratio improved to 74 percent from 76 percent compared to the same period last year primarily as a result of cost containment.

"An impairment allowance of $3,5 million was recorded against $4,3 million for the corresponding period last year, benefiting from tangible security cover improvement. The group remains focused on cost containment while at the same time investing in expansionary expenses essential for revenue growth," he said.

FBCH's financial position by end of June increased by 11 percent to $677 million from the December 31, 2016 position of $610 million as a result of a 14 percent increase in deposits.

Nkala further indicated that the group's total equity attributable to shareholders of the parent company increased by six percent to $131 million from $124 million by December last year due to retained revenue reserves for the period.

"This translated to a half year end tangible net asset value of 20,48 cents per ordinary share, up seven percent from 19,2 cents as at December 31, 2016," he said.

The listed financial services group paid a dividend of $1,9 million from the revenue reserves in April 2017.
- dailynews