First Capital Bank loan book set for 87% growth

FIRST Capital Bank’s loan book is projected to grow by 86,97% in full-year 2020, in tandem with deposit growth, with a loan-to-deposit ratio of about 32%, reflecting a conservative asset growth strategy.

Melody Chikono

Financial services firm IH Securities anticipates the bank to register deposits of approximately ZW$4,17 billion this year on the back of an increase in reserve money driven by likely stimulus packages related to Covid-19 relief to drive broad money supply, leading to higher deposits in the banking sector in general . According to this website,in full-year 2019, the bank’s net impairment charge increased significantly to ZW$30 million from ZW$2,46 million, largely due to the growth in the loan book. However, the bank continued to restrict its non-performing loans ratio to below 1%.

During the period, First Capital Bank reported 79,9% year-on-year growth in interest income to ZW$74,64 million from ZW$41,48 million, largely sustained by the growth in interest from loans and advances to customers, offsetting a decline in interest income from banks and investment securities. IH Securities says the perception that banks like First Capital are less risky will benefit the financial group. The revaluation of foreign currency deposits will also filter through to an increase in deposits, IH Securities said.

“Going forward, we anticipate that the loan book will grow by 86,97% in FY20, in tandem with deposit growth, we anticipate a loan-to-deposit ratio of circa 32%, which still speaks to a conservative asset growth strategy. The bank’s deposits, which include US$59 million, have surpassed ZW$2 billion. We are forecasting the bank will register deposits of approximately ZW$4,17 billion in FY20 as we anticipate an increase in reserve money driven by likely stimulus
packages related to COVID relief to drive broad money supply leading to higher deposits in the banking sector in general,” IH Securities noted.

On the back of a dislocation between interest rates and inflation, the bank is expected to focus on growing its non-interest income in the short run.
The increase in the adoption of mobile and electronic money has seen all banks, including First Capital, adopting strategies to increase their non-funded income.

Apart from tepid growth in interest rates, interest income has also been adversely affected by decrease in the number of quality borrowers given the uncertain economic environment.

“We expect interest income to grow by 210,47% to ZW$231,72 million for FY20. We expect the bank to register 138,54% growth in total income in FY20, while total income growth rates soften to 42,79% inFY21,” IH Securities said.

First Capital Bank reported 79,9% year-on-year growth in interest income to ZW$74,64 million from ZW$41,48 million, largely sustained by the growth in interest from loans and advances to customers, offsetting a decline in interest income from banks and investment securities. IH Securities says the perception that banks like First Capital are less risky will benefit the financial group. The revaluation of foreign currency deposits will also filter through to an increase in deposits, IH Securities said.The Bank’s loan book is projected to grow by 86,97% in full-year 2020, in tandem with deposit growth, with a loan-to-deposit ratio of about 32%. You can visit this Website for more information on Loan and forex book .