HomeBusiness DigestGroup income buoys FBC earnings

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The performance of the group was sustained by the increase in the customer base and improvement in operational efficiencies arising from the bank’s adopted e-commerce strategy.

“We established an e-commerce strategy whereby we are automating whatsoever can be automated and this has improved our operating efficiencies,” said group CEO John Mushayavanhu.

The group’s profit after tax increased by 644% to US$12,5 million after it managed to contain costs whilst investing in business expansion.
The cost to income ratio for the banking division improved to 72% from 89% in the prior year as a result of savings from a retrenchment exercise that the bank undertook in 2010.

The group’s business units recorded positive results with the flagship businesses, FBC Bank and FBC Building Society, contributing a combined 57% to group profitability.

During the year, the holding company acquired two more businesses, Eagle Insurance Company and Micro Plan Financial Services. Eagle Insurance, which was acquired for US$1,1 million in March last year, contributed US$400 000 to the group’s profit before tax from a loss position at half year.
The microfinance firm posted a US$600 000 profit after tax.

FBC Bank posted a US$6,5 million profit before tax as the group managed to grow its deposits to US$150,7 million from US$136,8 million. Despite the increase in deposits during the period, Mushayavanhu indicated that the bank was adopting a prudent lending strategy, with the loan to deposit ratio at 75%.

He highlighted that the ratio could have been lower ranging between 60%-65% but due to the high withdrawals during the tight month of November 2011, the ratio was pushed upwards.

With total loans of US$113,2 million, the bank made provisions for impairments of only US$3,6 million, with Mushayavanhu claiming that the bulk of the loans totalling US$106,4 million were in grade A/B, with the loans in the lower grade which exhibit signs of stress totalling US$6,8 million.

FBC Building Society recorded a US$2,9 million profit before tax during the period. The building society secured US$5 million lines of credit from PTA Bank for property development during the period. The building society’s loan book grew by 114%.

The subsidiary is at an advanced stage in accessing a 10-year offshore credit line for mortgage lending in 2012.

Turnall posted a US$5,1 million profit before tax, with volumes going up 23% on the back of  the successful launch of its Newtech plant. Turnover increased by 49%, with exports contributing 3,2% to turnover.  Profit margins reduced to 14,2% from 15,1% due to an increase in the cost of production, including  imported raw materials.

Mushayavanhu indicated that 2012 started on a good note, with all business units performing ahead of budget. He highlighted that the banking businesses will focus on improving liquidity management and asset quality.

The group will also focus on managing working capital requirements for Turnall and also grow its exports.

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