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BizDay Zimbabwe

FBCH Reports Solid Showing with a 34% Growth

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Harare, March 21, 2013- For the Financial Year 2012, FBCH reported solid financials showing a 34% growth in net income to USD 13.0m for eps of US 2.39c.

According to economists the solid performance was anchored by strong performances of the building society, microfinance as well as insurance businesses accompanied by a slow-down in the manufacturing unit.

The 19% growth in total income was on account of a 47% growth in NII, a 67% jump in net earned premiums as well as a 37% increase in trading income.

Some analysts expressed their displeasure noting that “what disappointed us was the deterioration of the cost to income ratio to 77% from 75% as opex grew ahead of income growth at 23%”.

The surge in opex expenses was on the back of a 28% increase in staff costs and a 37% growth in directors’ fees. This was despite the group having undergone a restructuring and/ rationalisation exercise in the prior period. Staff costs increased to 51% of total admin. expenses from 47%.

Management had guided for a CIR of approximately 65% post the restructuring.

Analysts argued that a reduction in the effective tax rate to 8% from 20% (due to increased contribution by the building society) also boosted net income growth.

The commercial bank contributed USD 6.7m (+3% y-o-y) to group PBT, mortgage USD 5.5m (+90%), reinsurance USD 2.1m (+50%), Eagle Insurance USD 0.7m (+74%), microfinance USD 0.9m (+54%) and Turnall USD 1.2m (-76%).

The stockbroking unit posted a loss of USD 0.3m.

The group balance sheet grew by 40% to USD 392.1m driven by a 57% growth in both in advances and deposits. The loan to deposit ratio remained static at 75%. NPLs to total advances book were 9.6% from 8.1% while absolute figures NPLs grew 87% to USD 18.3m. Impairments to total advances improved to 1.9% from 3.1%.

While the insurance businesses posted excellent results analysts confirmed to BizDay that their worry was about premium collections for the industry in general given the tight liquidity conditions.

Collections, although improved, still remain a challenge with premium receivables ratio at 41% of gross premiums versus 48% in the prior period. In the current environment, the incidences for underwritten risks to materialize, for which premiums are still to be received increases. Nonetheless, for FBCH, analysts note that they believe management is prudent with provisions for unearned premiums at 15% of GWP.

Most of the group’s subsidiaries have surpassed the minimal capital requirements. Advances to merge the mortgage business and the bank are well advanced which will result in the merged entity exceed the USD 50.0m minimum capital requirement by June 2013.

The mortgage business continues to grow propelled by the tie up with NSSA.

BizDay has it in high authority that the e-commerce drive is expected to result in improved efficiencies, reduced costs and the launch of new products.

Analysts believe the performance of Turnall will recover given the demand for infrastructural development. Ratings are undemanding at PER of 3.7x and PBV of 0.7x against peer averages of PER 4.9x and PBV of 0.9x.

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