First Capital Bank recorded steady growth across the board registering a 23 percent growth in profit after tax for the year ended December 31, 2018 despite a turbulent second half characterised by among other things soaring inflation, pressure on foreign currency, price distortions, widening current account deficit and regulatory changes.
“While the first half of the year was more promising with good indications of what was to come in terms of policies, the second half was notably more challenging as foreign currency shortages and inflation further constrained capacity to service cross-border payments and the overall level of business,” said the bank’s managing director Samuel Matsekete.
Matsekete said the first half of 2018 was associated with renewed confidence as the Government embarked on the implementation of reforms to improve both public and private sector confidence supported by a foreign policy that prioritised re-engagement with the international community “much more strongly.”
“We also saw some growth indicators in some of the sectors also pointing north, which was encouraging, said Matsekete as he highlighted the record breaking output in gold and tobacco.
“Second half we saw inflation soaring to levels that we had not anticipated while the external sector underperformed,” said Matsekete.
He pointed out that across the banking industry, there was a slowdown in transaction volumes in the last quarter of the year.
Despite the subsequent challenges, the bank recorded a profit after tax of RTGS$24,3 million in 2018, 23 percent up from RTGS$19,8 million in the prior year comparative. This resulted in a basic earnings per share of 1,13 cents up from 0,92 cents driven by higher interest rates. Profit before tax, however, went down to RTGS$25,1 million from RTGS$25,3 million in 2017.
The plausible performance came on the back of an 86 percent growth in net interest income to RTGS$40 million from RTGS$21,5 million driven by growth in interest earning assets.
Gross loans and advances to customers grew by 72 percent to RTGS$201 million from RTGS$117 million as at December 31, 2018.
Matsekete said the bank had invested its surplus liquidity mainly in Government securities to optimise return on assets, whilst efforts to grow customer assets also yielded a strong outcome.
At least $289 million was held in Treasury Bills and bonds up 157 percent from $111,3 million.
Matsekete said commercial loans had also done well registering a 123 percent growth, while interbank placement also went up to RTGS$20 million.
Capital base grew by 28 percent to RTGS$111,4 million in 2018 from RTGS$86,9 million in 2017.
This means core capital growth surpassed the 2020 minimum capital requirement of RTGS$100 million to $107 million. More so, liquidity ratio of 69 percent was above the minimum requirement of 30 percent.
Total assets grew to RTGS$698,7 million from RTGS$555,6 million, but the bank also issued a sensitivity analysis to highlight the change in currency which forced auditors to issue a qualified opinion on the 2019 numbers.
Total assets are split into RTGS$$606,3 million, US$55,7 million in monetary assets and US$36,7 million in non-monetary assets. If all this is reported in RTGS$ at the start rate of 1:2.5, the bank would have its total assets at $823,7 million.
Total liabilities would move to RTGS$664,8 million from a combination of RTGS$527,2 million from US$55,1 million.
Growth initiatives and consolidation
Matsekete highlighted some of the growth initiatives undertaken by the group including among other things the relaunch of investment banking, participation in various facilities of national significance with thrust on agricultural projects and ancillary services, new core banking system supported by applications, expansion of client base, enterprise risk management and the effective re-branding in October 2018.
“During the year (2018) the bank sustained and established new partnerships in areas of correspondent banking, lines of credit and technology solutions. Some of these especially in the technology space will start to bear fruits as the bank implements its new channel offering during the first half of 2019, said Matsekete.
Growth was further hinged on enhanced product and services according to the Managing Director. “New products were launched to enhance propositions across our targeted segments. A number of enhancements were done to existing products, including the bill payment platforms,” he said.
Technology systems migration is among the greatly credited moves. More growth in 2019 is projected due to plans underway to explore more opportunities in the technological space.
More growth is expected in 2019 and beyond due to a number of projects set to be completed in the first half. The promulgated fiscal and monetary policies which restored market confidence is also expected to play a crucial role. Despite projections of some headwinds, the fiscal and monetary changes provide tangible fundamentals for growth, noted Matsekete.