Financial services group, FBC Holdings, is projected to record an 84 percent growth in net income to $81 million for the 2019 financial year as it leverages on non-funded income as well as a strong diversified business portfolio.
Analysts have guided the financial services group will also leverage on its upgraded systems for seamless product offering and improved customer experience.
Management has also indicated that the group will focus on digital transformation for all business units so as to retain and acquire potential customers through an improved customer experience.
“Going forward, we anticipate an upward movement in the net income from $44,4 million to $81,8 million in FY19.
“Growth of the net income is anticipated to be on the back of a 172 percent increase in the non-interest income from $80,7 million to $219,6 million offsetting a 19,9 percent decline in net interest income from $65,2 million to $52,2 million,” said brokerage firm IH Securities.
In the half year to June 30, 2019, the group’s diversified business model, saw it record a 207 percent increase in revenue on the back of a 410 jump in non funded income.
This helped offset a 11 percent decline in net interest income that was a result of the repricing of interest expenses after the upward review of the overnight window by the Reserve Bank of Zimbabwe (RBZ) to 50 percent per annum from 15 percent, which outpaced the repricing of the group’s loan book as well as the reintroduction of the local currency resulting in the uplifting of the total income by circa $27,1 million from the revaluation of investment properties.
While the revised service fees and technology are expected to drive non-funded income, IH also sees net interest margins falling in the full year as core banking function of lending remains under pressure.
Inflation is seen continuing to outpace the rise in lending rates. Inflationary pressures are also expected to increase operating expenses going forward, while on the other hand property sales will remain subdued on pricing distortions and dislocation of valuations.
IH said: “Net interest margin (NIM) is expected to come under pressure as the cost of funds continues to increase as the depositors are expected to reprice deposit interest rates to match the RBZ overnight window rates.
“We forecast a 19,9 percent decline in NIM from $65,2 million to $52,2 million. The group is expected to leverage on its upgraded systems for seamless product offering and improved customer experience.
“We, therefore, anticipate that the decline in NIM is expected to be offset by the growth in non-funded income up circa 172,0 percent to $219,6 million sustained by growth in net fees and commissions, which are sustained by the upward review of service fees and net trading income.”
Cost to income ratio is expected to reduce to 50,4 percent in financial year 2019 from 63 percent largely from the rise in exchange rate gains pushing up non-funded income.
Deposits and borrowings are projected to grow at a rate of 50 percent to $941,9 million largely due to the translation of foreign currency denominated balances.
IH made a hold recommendation as the introduction of the local currency gives a clearer picture of the solvency and potential mismatches in individual balance sheets.