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First Capital posts strong Q3 earnings on interest income


First Capital Bank income for the third quarter (Q3) to September was up 82 percent ahead of prior year comparative period thanks to strong performance on interest income which was driven by growth in the foreign currency loan book and the re-pricing of the ZW$ book in line with the extant interest rate policy framework.

The policy rate was increased from 60% in January 2022 to 80 percent at the end of April 2022 and further to 200 percent on 24 June 2022.

In its Q3 trading update, foreign denominated earnings at 40 percent of total income for the quarter show an increase from about 22 percent in the first quarter.

“The Bank expects the aggressive liquidity management policies and high interest rates monetary framework to subsist as means to counteract inflationary pressure,” said First Capital.

“This may present downside risk on credit performance as borrower capacity to carry related costs is strained. The Bank will therefore remain cautious in its approach to asset creation, ensuring that a sufficient liquidity buffer is maintained to avert outages whilst borrower capacity is assessed rigorously, taking advantage of the apparent resurgence in key sectors of the economy.”

This week, the RBZ Governor, Dr John Mangudya reiterated that the Bank has no appetite to review the interest rates downwards stating that the tight monetary policy stance has helped achieve stability in the exchange rate.

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Meanwhile, year-to-date operating expenses of ZW$ 13.9 billion in the 3rd Quarter is a 43 percent increase from ZW$ 9.7 billion in the comparative period indicating cost expansion in response to the inflationary pressure.

Total assets grew by 41 percent between December 2021 and September 2022 driven by customers’ loans and deposits growth of 59 percent and 30 percent respectively.

Portfolio credit quality remained strong with a non-performing loan ratio of 0.1 percent being recorded at the end of Q3 2022 down from 1 percent recorded at the end of 2021.

Total equity increased by 24 percent with the Bank’s capital position remaining strong with a satisfactory margin of safety above the US$30 million threshold and capital adequacy ratios well above the regulatory minimums.

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