BY TATIRA ZWINOIRA
FBC Holdings Limited (FHL) has overturned its loss-making position and registered a profit-after-tax of $1,61 billion for the half year ended June 30, 2020 driven by the non-funded income.
The profit-after-tax was from a loss of $742,65 million in the comparative 2019 period.
In a statement accompanying the results for the period under review, FHL group chairperson Hebert Nkala said the group benefited from a diversified business model in addition to its strong risk management culture and the early adoption of digitalisation.
“The group performance was mainly driven by the non-funded income derived from its effective hedging strategy. The hedging strategy resulted in noteworthy exchange gains and fair value gains being recorded as the local currency depreciated against major currencies,” he said.
“The group recorded a total income of $3,5 billion, which is 82% higher than the $1,9 billion recorded for the same period last year. The level of total net income was, however, affected by the low contribution of net interest income as a result of the unsustainable low interest rate regime on local borrowings in a hyperinflationary environment.”
He said net interest income of $451,3 million was achieved, registering a growth of 20% compared to the same period last year.
As a result of the profit-after-tax, FHL’s basic earnings per share was 265,42 cents, an improvement from a loss of 119,95 cents in the 2019 comparative period.
Net fees and commission income decreased by 16% to $286,7 million from $340,7 million achieved for the same period last year.
Nkala said this was as a result of significant reductions in the transaction volumes as customers transacted less as a result of the COVID-19 pandemic lockdown measures.
“This revenue stream is expected to improve as the lockdown measures are eased. The repricing of services in a hyperinflationary environment was inadequate to compensate for the decrease in volumes,” he said.
“The country started the COVI-19 pandemic at Level 4 (the highest level) at the end of March 2020 to the current Level 2, which is a moderate level and has culminated in an improvement in the volume of transactions.”
During the period under review, FHL’s net profit from property sales decreased by 51% to $5,5 million from $11,2 million in the 2019 comparative as a result of the challenging and unsustainable operating environment.
FHL’s administrative expenses also increased by 56% to $1,4 billion mainly driven by the repricing of overheads to match the devaluation of the local currency, and “concomitant distorted and speculative pricing”.
A net monetary gain of $153 million was recorded for FHL compared to the corresponding period net monetary loss of $1,2 billion.
“The group’s statement of financial position as at 30 June 2020 increased by 29% to $20,9 billion from the 31 December 2019 position of$16,3 billion. The growth in the statement of financial position was mainly driven by a 31% increase in deposits riding on foreign currency denominated deposits and credit lines,” Nkala said.
Nkala warned that the economy would remain unpredictable largely due to the uncertainties brought about by the COVID-19 pandemic though the group was hopeful of some government interventions.
“The group will continue to seek opportunities to preserve its balance sheet and reconstitute its business model. The business model will be reconfigured in line with regulatory requirements and the changes to the macroeconomic landscape,” he said.