Harare - First Capital Bank demonstrated robust profit growth in the first half of 2023, as its profit after tax skyrocketed by 602% to $9 million, compared to $1.3 million in the same period last year. This impressive result was achieved after the bank made adjustments to its profit, raising it from $4.3 million to $9 million by accounting for day one adjustments related to its joint venture investment, investment properties, and other items. The bank's total income also experienced significant growth, reaching $32.1 million in the first half of 2023. This growth was primarily driven by improvements in the underlying business, with net interest income and net fees and commissions rising by 35% and 23% respectively. Notably, First Capital Bank made history by becoming the first bank to be listed on the Victoria Falls Stock Exchange (VFEX), adopting the United States Dollar (USD) as its functional and reporting currency.
The exceptional earnings performance translated into an impressive Earnings per Share of $0.42 cents for the period, marking a remarkable 600% increase compared to $0.06 cents in the prior year. This success can be attributed to the bank's expansion of its customer base, growth in its loan book, and gains from currency exchange. Reflecting the positive financial results, the Board declared an interim dividend of $0.14 cents per share. However, operating expenses for the group rose by 22% from $16.6 million in the first half of 2022 to $20.3 million in the current period. As a result, the cost-to-income ratio increased from 58% in June 2022 to 63% in June 2023. The adjusted total comprehensive income for the period amounted to $8.2 million, reflecting a 43% decrease from the $14.4 million reported for the corresponding period in 2022.
The first half of 2023 witnessed a remarkable 36% surge in net interest income for the bank, reaching $11.6 million compared to the same period in 2022. This growth was primarily driven by a 33% increase in interest income, which amounted to $12.2 million. The bank's strategic focus on expanding its lending activities resulted in a substantial 21% rise in loans and advances, reaching $79.5 million. The bank's strong liquidity and funding base played a crucial role in facilitating this improved lending performance, despite a marginal decline in deposits, which remained substantial at $109.5 million.
However, it is worth noting that the group's total deposits as of June 30, 2023, amounted to $109.5 million, which was lower compared to $136.1 million as of December 31, 2022. This reduction was mainly attributed to the devaluation of ZWL-denominated deposits, resulting from a significant 735% depreciation of the ZWL currency over the period. ZWL deposits accounted for 8% of the total deposits as of June 30, 2023, compared to 22% as of December 31, 2022. On the other hand, USD-denominated deposits experienced a 6.6% increase during the period under review. Furthermore, loans to customers witnessed a 23% growth to reach $79.5 million, compared to $65.9 million as of December 31, 2022, with 95% of the business being underwritten in USD by June 2023. The overall asset quality remained satisfactory, with a loan loss ratio of 3.3%. Although there were increased credit risks within the agriculture portfolio, the group's risk appetite accommodated this incremental default risk.
Non-interest income exhibited a 4% increase, reaching $20.5 million. The primary contributors to this growth were net fee and commission income, which rose by 23% to $11.5 million. This increase reflected the recovery of business activity, resulting in higher transaction volumes. Net trading and foreign exchange income remained steady at $9.8 million as exchange rate volatility stabilized. However, the bank recorded a fair value loss of $1.1 million on investment property, in contrast to a gain reported in the previous year.
Regarding asset quality, the bank proactively increased its impairment charge from $0.9 million to $2.9 million, demonstrating a prudent approach to provisioning in light of mounting credit risk concerns amidst economic uncertainty. However, impaired loans remained at a low level, accounting for only 1.6% of the gross loan book.
The bank's balance sheet maintained a strong level of capitalization, with a capital adequacy ratio of 60.6%, significantly surpassing the regulatory minimum of 12%. Furthermore, the bank showcased its robust capital buffers by recently executing a share buy-back.
The rapid devaluation of the ZW$ had an impact on the bank's capital position, resulting in a marginal 2% decrease in its US$-denominated core capital, which amounted to $48 million as of June 30, 2023, compared to $49 million reported as of December 31, 2022. Despite this decrease, the bank's core capital remained comfortably above the regulatory minimum of $30 million, maintaining a sufficient safety margin. Additionally, the bank's capital adequacy ratio remained strong at 37% by the end of the period, well exceeding the regulatory minimum of 12%. With a liquid assets ratio of 49%, the bank possessed a comfortable buffer above the regulatory minimum of 30%, indicating its capacity to undertake additional business activities.
Despite the challenging operating environment in Zimbabwe, First Capital Bank has demonstrated a focused execution strategy that positions it well to achieve positive results. The bank is poised to sustain its momentum and deliver value across its consumer and corporate banking franchises.
First Capital Bank has achieved significant milestones in securing new lines of credit, which are instrumental in funding business expansion and upgrading its digital capabilities to enhance customer service. One notable accomplishment is the full utilization of a €12.5 million credit line from the European Investment Bank (EIB), providing crucial funding for medium-sized corporate clients. This long-term financing has enabled the bank to meet the increasing demand for capital from Zimbabwean enterprises seeking to upgrade equipment, expand facilities, and pursue growth opportunities.
Additionally, the bank has mobilized a $20 million line of credit from the African Export-Import Bank (Afreximbank). This supplementary funding can be deployed to support a wide range of corporate banking and trade finance solutions offered by First Capital Bank. These external credit facilities enable the bank to enhance lending without straining its deposit base or balance sheet capacity, while also providing room for future asset growth.
In parallel to strengthening its funding base, First Capital Bank is actively investing in improving its digital banking channels. Upgrades such as enabling Visa and USD transactions on its Gold Card offer customers greater convenience, security, and accessibility when conducting transactions. The bank has also expanded customer options by allowing USD payments on its point-of-sale machines and integrating with popular mobile wallets like EcoCash. The aim is to continuously refine its digital platforms to seamlessly interact with tech-savvy customers through their preferred channels.
The bank is also focused on supporting small businesses by collaborating with partners like Zimnat to bundle banking solutions with essential services like insurance. Networking events and workshops facilitate connections with local SMEs, helping the bank understand their unique needs and provide tailored support.
Through these initiatives, First Capital Bank is equipping itself to drive business growth while adapting to serve Zimbabwean companies and consumers in the digital era. The bank's commitment to supporting customers across segments and its emphasis on innovation and financing initiatives demonstrate its dedication to meeting evolving customer needs and preparing for the future.
In conclusion, First Capital Bank has showcased an impressive financial performance in the first half of 2023, with a significant increase in profit after tax, total income, and earnings per share. The bank's strategic adjustments to its profit and listing on the Victoria Falls Stock Exchange have contributed to its success. Despite the challenging economic environment in Zimbabwe, First Capital Bank has demonstrated resilience and adaptability by securing new lines of credit, investing in digital banking channels, and supporting small businesses. With a strong capital position and a focus on customer-centric innovation, the bank is well-positioned to sustain its positive momentum and deliver value to its customers and shareholders.
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