First Capital Bank Maintains Strong Capital, Liquidity Position

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By Alois Vinga

LEADING financial institution, First Capital Bank (FCA) has managed to sustain a sound capital, liquidity position and a quality loan book for the period ended December 31, 2020.

The achievement was realised through the application of strategic management practices which respond to the obtaining economic dynamics.

In an update this week, FCA chairman Patrick Devenish said the bank closed the year on a strong capital and liquidity base, with a total capital adequacy ratio of 29%, which is way above the regulatory minimum threshold of 12%.

During the period, the liquidity ratio was at 70% against the regulatory minimum of 30%.

“This strong base gives the business capacity to issue more loans in the future. Core capital is US$26 million at year end compared to a regulatory target of US$30 million required by 31 December 2021.

“Given the mix in the capital base between local and foreign currency denominated assets, the tracking towards the US$30 million target will be impacted by the volatility in the exchange rates, and will demand that we build a capital buffer to protect against devaluation,” he said.

The bank however is also on track and confident of meeting the set targets.

The loan book also continues to perform well, with a non-performing loans ratio of 0.16% compared to the market average of 0.3%.

During the period, the bank also posted a solid performance with operating profit excluding property gains standing at $606 million in inflation adjusted terms.

The cost to income ratio improved from 95% to 50% on the back of growth in income.

Funded income grew by 695%, driven by increase in loans and advances together with an improved loans yield.

Improved economic confidence in the second half of 2020 saw transactional activity grow, coupled with targeted price increases due to inflationary pressure which saw increased fee and commission income.

Operating costs increased on the back of inflation, exchange rate depreciation and Covid-19 related expenses.

The bank capital adequacy and liquidity ratio closed the year at 29% and 70% respectively, up from 26% and 55% in prior year whilst core capital stood at US$26 million.

“2021 continues to pose many local and global uncertainties. However, this has not limited our focus in achieving strong relationships with our customers who demand reliability, require innovation and expect excellent service delivery,” added Davenish.