FBC Holdings Limited (FBC.zw) 2021 Annual Report
At a difficult time of unprecedented Covid-19 induced global uncertainty, coupled with local economic challenges, the Group believes it has a pivotal role to nurture sustainable solutions that enable the financial well-being of the communities we serve. This ambition and focus is set to be realised through our desire to deliver a unique customer experience through value adding relationships, simplified processes and relevant technologies. This we believe, anchored by our foundational core values of integrity, teamwork, commitment, communication, life-long learning and entrepreneurship, will buttress and sustain our future growth for the benefit of all our stakeholders.
Financial Performance Review –Inflation Adjusted
Notwithstanding that 2021 was another challenging year, the Group achieved a solid financial performance, posting a profit before tax of ZWL5.0 billion in inflation adjusted terms, 93% ahead of ZWL2.6 billion recorded in 2020. The Group reported a profit after tax of ZWL4.3 billion with earnings per share of ZWL cents 689.22 and a return on equity of 30%. The Group benefited from improved performance by all business subsidiaries.
Total income for the Group was up 37% to ZWL17.9 billion primarily on the back of improved revenue growth across all income streams, with the exception of net foreign currency dealing and trading income which experienced a decline. Net interest income increased by 86% to ZWL5 billion on the back of increased lending and an improved interest margin, while net fee and commission income was up 71% to ZWL3.4 billion, aided by the Group’s digitalised infrastructure that supported increased volume of transactions by customers. Net earned insurance premium was up 31% to ZWL1.8 billion from ZWL1.4 billion recorded in 2020 on the back of increased demand and revaluation of insured risks. Gross profit on property sales significantly increased from ZWL7.7 million to ZWL260.5 million in 2021 in line with an increased number of units sold. The net gain from financial assets at fair value increased by 113% to ZWL2.4 billion, driven primarily by the quality of the Group’s portfolio holding and market repricing. Other income which is mainly comprised of fair value adjustment on investment property, increased to ZWL1.7 billion from ZWL318 million, buoyed by increased investment in the portfolio and the repricing of the investment property portfolio in the ZWL functional currency. Net foreign currency dealing and trading income declined by 41% to ZWL3.3 billion in line with a relatively stable foreign currency regime experienced during the year.
Through various cost containment measures implemented during the period under review, the Group’s cost to income ratio excluding monetary loss improved to 58% from 64% recorded in the comparable period. Given the inflationary pressures experienced throughout 2021, total administration costs increased by 24% to ZWL9 billion compared to ZWL7.2 billion recorded in the prior year. Similarly, insurance claims were up 21% owing to the inflation adjusting components of various claims. Insurance commission expense significantly went down by 38%, signifying a decrease in insurance business from brokers. Due to the revised retention limits, insurance claims and loss adjustment expenses recovered from reinsurers was down 43% to ZWL96 million against ZWL169 million recorded in 2020.
At 31 December 2021, Group total assets were ZWL63.3 billion, 22% ahead of ZWL52.1 billion recorded during the prior comparable period. This growth was largely driven by an increase in total deposits of 12% to ZWL37 billion, translation of foreign currency denominated assets into ZWL at closing rate, property investments and increased retained earnings. Loans and advances stood at ZWL23.5 billion, 10% higher than ZWL21.4 billion for prior year, as we continued to focus on supporting our customers in the productive sectors of the economy through sustainable lending.
The Group’s total equity, year after returning ZWL625 million to our shareholders through dividends, remains strong with total capital of ZWL14.3 billion from ZWL8.2 billion recorded in the previous year. The Group’s continued capital generation means we are well positioned to champion our customers’ growth plans, invest for growth and continue driving sustainable returns to our shareholders.
The year under review was once again another challenging year for the business community in general. The Group was not spared by some of the regressive effects of the Covid-19 pandemic and the general macroeconomic challenges. The Covid-19 pandemic further brought about a number of emerging risks, which put to test our resilience, flexibility and disaster recovery preparedness. It is pleasing to note that the Group was able to offer services and products through the use of online and digital platforms. This augured well with the current digital transformation thrust of the organization.
To foster macro-economic stability, bolster capacity utilisation, curb the widening disparity between the official exchange rate and parallel market, as well as curtail the Covid-19 disruptions, the government and regulatory authorities implemented a number of fiscal and monetary policy interventions. The central bank reviewed the bank rate up to 60% and Medium Term Bank Accommodation (MBA) Facility interest rate up to 40%. Similarly, the minimum deposit interest rates for ZWL savings and time deposits was increased from 5% and 10% per annum to 7.5% and 20%, respectively. A US$ denominated cost of living adjustment was timeously introduced for all civil servants as a safety net against the debilitating effects of Covid-19.
In an endeavour to ensure responsible, continuous and sustainable use of foreign currency, the Reserve Bank of Zimbabwe maintained the use of the foreign currency auction system. Since inception in June 2020 and up to 31 December 2021, 77 Main and 71 SMEs foreign currency auctions have been successfully conducted. During the period under review, US$1.97 billion was allotted, equating to about 30% of all foreign payments. The Foreign Exchange Auction System managed to provide the much-needed liquidity to key productive sectors and thus contributing to the 7.8% economic growth recorded in 2021. To further buttress price stability, statutory instrument 127 of 2021 was gazetted to instil discipline in the foreign exchange market and safeguard adherence to prescribed policy guidelines.
While the ZWL/USD exchange rate closed the year at ZWL108.666 per US$1 compared to ZWL81.787 at the end of December 2020, the alternative market premiums continued to exert significant pressure on inflation. A premium of between 40% and 90% was recorded during the course of 2021. However, while we appreciate the efforts by the regulators and fiscal authorities to stabilise the foreign currency exchange market, as well as enhancing domestic use of the local currency, there is still a strong need to bolster and strengthen this framework.<