First Capital records 29% increase in income durin...

First Capital records 29% increase in income during Q3

Audrey Galawu

First Capital Bank has reported a 29% increase in total income during the third quarter on a year-on-year basis to US$48.7 million compared to US$37.9 million for the same period in 2022.

This was driven by strong performance in both net interest and non-funded income, which increased by 22% and 33% respectively.

Interest income growth was driven by year-to-date loan growth of 32% to US$89 million at Q3 2023 with 12% having been funded by offshore lines of credit.

The increased usage of the US$ on the local market has also been reflected in customer balances with 85% of customer deposits being foreign denominated whilst foreign currency loans constituted 90% of total advances.

In a report, the Bank said prospects for economic growth in the medium term remain strong. However, the forecast El-Nino-induced drought and the continued pressure on exports from depressed mineral commodity prices will pose downside risk.

“The currency mix on the balance sheet has impacted on the income generation pattern for both interest income and transactional fees with foreign earnings accounting for 70% of total income.

“Operating expenses increased by 18% to USD28.6m for the nine months ended 30 September, 2023 compared to US$24.2 million incurred during the same period in 2022. Cost stabilisation remains a critical strategic imperative in the short-term to guarantee the sustainability of operations against the background of tightening interest margins.

“The Bank increased its impairment coverage ratio by 320 basis points from 4.5% reported on 30 June 2023 to 7.7% on 30 September 2023 to reflect the adverse effects of the operating environment on the business prospects of selected borrowers.

“The resultant charge to the income statement amounted to US$5.7 million at September 30, 2023 with further refinement being expected towards year end.

“Despite a strong rally in foreign currency balances, total asset growth for the nine months to 30 September 2023 was restricted to 3.6%. This followed the devaluation of the local currency during the period by 696% to September 2023 which affected the underlying value of that component on the balance sheet,” reads the report.

Capital increased by 12% to 30 September 2023 with the capital adequacy ratio being 25.6%, well above the regulatory threshold of 12%.

There were no declared dividend for the quarter under review.

The bank added that certainty around the subsistence of the multicurrency system up to 2030 as confirmed through Statutory Instrument 218, will have a positive impact in increasing confidence in the business sector.