FBCH moves to buy real assets

FBC Holdings (FBCH) Ltd will move to acquire fixed and real assets to preserve value amid inflation worries in the economy, CE John Mushayavanhu said.

Chris Muronzi

Mushayavanhu told analysts and journalists at an analyst briefing in Harare the financial services group was feeling inflation creep up and needed to increase the group’s fixed assets.

“We have seen inflation creeping up in the past few months,” he said. “We need to maximise our fixed assets. We need hard and real assets on our book. We can go up 25% as required by the regulators.”

This comes amid concerns inflation is rising faster despite official figures portraying consumer prices coming off.

Inflation had been trending up since February and reversed the trend in June and July, according to Zimstat, a government statistical agency.

As part of the group’s strategy to invest in real assets, Mushayavanhu said he was looking at developing part of its land bank.

FBCH also had free capital amounting to US$42 million sitting on its books after meeting all its capital raising targets.

Mushayavanhu said all other strategic business units except the bank had been contributing dividends to the group.

The building society also became the largest contributor to FBCH profitability.

Profit after taxation surged 3% to US$9,6 million buoyed by cost-containment in the group.

A central bank cap on interest rates saw FBCH interest income come down by 7% to US$21 million with non-funded income remaining flat in the half year to June.

The reduction in interest income stemmed from decreased gross interest income margins.

Central bank chief John Mangudya last year lowered rates from around 20% to 12%, ostensibly to stimulate production.

Interest income contributed 47% to total revenues, 1% down on last year.

“Net interest income decreased by 7% to US$21 million, constituting 47% of total income compared to US$22 million and 48% respectively for the same period last year. The decrease was mainly due to reduced gross interest income as a result of the capping of lending rates by the central bank leading to an increased interest expense as the interest cap on lending was not matched by a corresponding decrease in deposit rates which culminated in a reduced net interest margin,” the group said.

Net fee and commission was US$12,2 million from US$12,5 million thanks to another directive from the central bank to lower transactional charges.

Mushayavanhu said the decrease in pricing was partially offset by an increase in transactional volumes.

In the period under review, transactions valued around US$21 million were recorded for online transactions in the first half of the year. Last year, the same transactions had a total value of US$16 million.

Mushayavanhu sees transaction volumes increasing into the year. On the insurance and reinsurance businesses, he said, softening of demand had been recorded.

Valuation

As at June, FBCH had a book value of US$131,3 million and a market cap of US$94,4 million. This means FBCH is trading at 71% of its book value. With a US$1,5 million dividend or around 3,2% dividend yield, FBCH has augmented its position in the market as a counter that is rewarding shareholders.

Since dollarisation, a total US$15,5 million has gone into the pockets of shareholders.

As at July 31, FBC was ranked number five with a 3,82% dividend yield. CBZ, the biggest bank in the country, is not as popular and was last week trading at a discount of 67% to its book value with a market cap of US$68,7 million.