First Capital Bank sees increase in demand for Zimdollar loans

BY MISHMA CHAKANYUKA

FIRST Capital Bank (FCA) says demand for Zimdollar loans rose in the third quarter to September 30, 2019 as most companies sought to fund their working capital requirements.

In a trading update, company secretary Violet Mutandwa said the growth in demand for local currency loans was largely from the corporate segment.

“During the third quarter the bank witnessed an increased demand for local currency loans largely from the corporate segment to fund mainly their working capital requirements,” Mutandwa said.

Most banking institutions have been revising their lending rates upwards to levels ranging from 25% to 40%, to cushion against negative interest rates and skyrocketing inflation.

During the period, FCA increased its minimum lending rate to 35% after the central bank raised its overnight accommodation rate from 50% to 70%.

The RBZ took the step to curb speculative borrowing, but has since cut it by half to stimulate growth as government seeks economic recovery next year.

The bank’s total balance sheet increased to $2,17 million from $1,44 million owing to growth in loans, deposits and exchange impact on foreign currency balances.

As such, the bank’s financial position continued on an upward trajectory driven by growth in transactional and foreign currency trading volumes.

Deposits grew by 22% to $1,26 million while loans grew by 38% to $391 million. The bank’s liquidity ratio was 60% and capital adequacy ratio was 32%.

Mutandwa said growth in the money supply was leading to a growth in the bank’s deposit base.

Treasury has been converting more bank balances into hard cash to increase physical cash in the market.

“Total income grew by 159% from $121,8 million reported in the first half to $315,5 million, including fair value adjustments on investment properties,” Mutandwa said.

The bank’s operating costs grew by 151% to $116,3 million from $46,4 million recorded in the first half of the year due to inflation and exchange rate movements, while operating profit increased to $111,2 million from a comparative $68 million.

The bank shifted its core banking system, enabling it to introduce new products during the period.

Mutandwa said the group was working with the central bank on its legacy debt position and expects this to be resolved for the year-end.

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