First Capital Bank, formerly Barclays Bank of Zimbabwe, has since put in place measures to mitigate credit risk in the wake of COVID-19 lockdown, which has seen some of the financial institution’s clients requesting for the restructuring of their loan facilities and repayments.
Banks, just like other businesses in the country, have since the beginning of the year been operating in an inflationary environment where the local currency has been depreciating daily before COVID-19 set in further worsening the situation.
To survive beyond the lockdown, company secretary, Violet Mutandwa, in the latest trading update, First Capital Bank evoked business continuity plans for critical operations and processes to enable customer transactions flow.
“We have put in place measures to mitigate credit risk by conducting a complete review of our loan portfolio to ensure that we focus our support and attention on the right sectors and businesses,” said Mutandwa.
“The tourism sector has been significantly impacted due to travel restrictions, with this sector contributing 4% of the bank’s loan book, the impact is expected to be minimal in the event of default from this sector. Clients constituting 6.5% of the loan book including tourism sector have requested for restructuring of their loan facilities and repayments, with the bank working with these businesses to support them as best we can.”
She said COVID -19 would impact the business directly and indirectly.
“Due to the lockdown non-funded income for quarter two is expected to decline by 15%, whilst costs are also expected to increase from quarter two on the back of the costs necessary for COVID-19 preventative measures. There will inevitably be an impact on impairment, which is expected to materialise in quarter two onwards, with the full impact to be assessed.”
However, the bank had a strong performance during the first quarter with total income in inflation-adjusted terms increasing by 86% from ZWL$136 million to ZWL$253million while profit after tax grew by 100% from a loss of ZWL 58m to a profit of ZWL59m in inflation-adjusted terms.
“Customer deposits and loans are concentrated in various sectors. Local currency and foreign currency deposits have remained stable since the lockdown period, with the bank settling daily transactions without any issues,” she added.