FMB | Summary Audited Consolidated and Results for the year ended 31 December 2016
REVIEW OF THE YEAR
The macro-economic shocks of 2015 in Malawi, Mozambique and Zambia continued to be felt at the beginning of 2016. The major challenges included drought and reduction in agricultural production in Malawi and Mozambique, electricity shortages in Zambia and Malawi, and the discovery of previously undisclosed state linked foreign debt in Mozambique. In all these countries central banks adopted very tight monetary policies manifested in high domestic interest rates, which initially stabilized currencies and then led to their appreciation. Inflation reduced as the year progressed and, in response, central banks began the easing of interest rates. These factors, combined with increases in hard commodity prices and good rains at the end of 2016, make the outlook for 2017 significantly brighter in these countries. Needless to say, this environment posed challenges for the banking sectors in all these countries. Botswana was the exception amongst our territories of operation as it continued to enjoy relative macro-economic stability throughout the year.
Notwithstanding these adverse economic conditions, the group posted profit after tax of K7.66 billion, representing an 80% increase from 2015. Robust business growth and cost reduction strategies implemented across all markets resulted in this significant improvement in profitability in all countries. Total group assets increased to K327 billion from K262 billion representing 25% growth. Net loans by the group grew by a lesser 21% to MK126.5 billion due to the even more conservative lending practices which we adopted. Customer deposits recorded 18% growth over the previous year with the group continuing to pursue its strategy of building transactional balances and reducing expensive term deposits.
Even after suffering equity revaluation losses of MK1.4 Billion on our Malawi Stock Exchange listed investments, our non-funded income during the year improved by 59% year on year due to increased transaction banking activities. During the year US$10 million subordinated debt was replaced with local currency debt in order to remove related exchange rate risks. Despite significant increases in staff pay levels, persistent power outages with resultant unbudgeted generator running costs and increased tariffs on utilities and services, total operating expenses were kept in check with a 30% growth year on year, and our cost/income ratio improved from 71% to 65%.
A final dividend for 2015 of K467.25 million (20 tambala per share) was paid during the year, but interim dividends have not been declared in 2016 in order to build up capital to permit exploitation of growth opportunities. In view of better than expected profits, the directors have recommended a final dividend of K 1,168.125 million (50 tambala per share) for approval at the forthcoming Annual General Meeting.
The improved economic outlook in all the countries where we operate is expected to underpin growth in our business volumes and contribute positively to the group’s performance in 2017.
By order of the Board,
Dheeraj Dikshit – Group Managing Director
Michael Kadumbo – Chief Finance Officer
FMB FY2016 financial results.pdf
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