FDH Financial Holdings posts K5.8 billion half year profit: Up 18 %
FDH Financial Holdings Limited (FDHFHL), the parent company of FDH Bank, has posted a profit after tax of K5.87 billion for the half year ended 30th June 2020 representing 18% increase from K4.96 billion achieved over a similar period last year.
A statement on unaudited consolidated and separate financial statements signed by FDHFHL Board Chairman Noel Nkulichi, FHDFHL Acting chief executive officer George Chitera and Chairman of Audit and Finance Committee of the Board Ulemu Katunga said total income grew by 13% from K18.3 billion to K20.6 billion while Net Interest Income (NII) grew by 73% due to the growth of the asset book by both the Bank and the Discount House compared to same period last year.
“The Group continues to invest in customer centric financial solutions and human resource development. Operating costs grew by 13% year on year while full revenue benefits will take a bit longer to materialise. The Group continues to put more focus on effective cost management as we continue to bring down the cost to income ratio,” reads the statement in part.
FDHFHL also said total assets have increased by 17% from 31 December2019 mainly due to the Group’s drive to prudently grow the asset book while diversifying the portfolio.
“This initiative has seen the government securities book increase by 14% from K68.6 billion to K78.2 billion and Loans and Advances grew by 26% from K54.5billion to MK68.8 billion as at 31 December 2019 to 30 June 2020 respectively.”
“Customer deposits increased by 22% from K133.0 billion as at 31 December 2019 to K162.7 billion as at 30 June 2020. The increase in customer deposits is in line with the Group’s strategy of focusing on growing demand deposits through the digital service delivery channels and the Bank’s wide branch network,” reads the statement.
FDHFHL also decried the impact of the Covid-19 pandemic saying the 2020 half year financial performance was affected by the disease as economic activities slowed down significantly.
“Although there was no government sanctioned lockdown, most of the corporates and small businesses were operating at reduced capacity with the intention of maintaining social distance. The slowing down in business was also contributed by the lockdowns in the countries where there are trading partners for the local businesses. This in turn slowed down the credit growth and non-funded business growth as the number of customer transactions went down,” reads the statement in part.
FDHFHL also said measures by Government on Covid-19 prevention on the domestic scene also affected the Group’s digital revenue.
“The Reserve Bank of Malawi (RBM) with the Bankers Association of Malawi (BAM)directed a 40% reduction in fees charged on digital transactions, the reduction was prescribed as a measure to encourage people to transact more on the digital platforms than visiting the service centres to reduce the spread of Covid-19,” reads the statement in part.
On the operating environment, FDHFHL said the operating environment saw headline inflation remain relatively stable averaging 9% on account of stability of food prices and the Kwacha had a year on year depreciation of 0.8% against the dollar and the all-type Treasury bill rate has averaged 10% in 2020 while the reference rate closed at 13.4% as at 30 June 2020.
The group also said the political environment affected growth of business in the first half of 2020.
“The elections court case, continued demonstrations and Fresh Presidential Elections worsened the economic environment by increasing business uncertainty. The customers, therefore, took a wait and see approach and delayed draw down on their facilities thereby slowing down business operations,” reads the statement in part.
Looking ahead, FDHFHL said inflation is expected to average around 9.4% and the Kwacha/US Dollar exchange rate to average K750/US$ in 2020 and that the policy rate is expected to remain at 13.5% while the Malawi growth domestic product (GDP) growth is projected to average between 1.5% and 2% in 2020.
“The Group anticipates the low interest rates regime to continue in order to reduce the impact of the pandemic and stimulate other sectors of the economy. The pandemic is also expected to reduce credit growth across the globe, therefore the Group has put in place strategies to allocate capital into other high yielding investments to ensure that the 2020 performance is not significantly affected,” reads part of the statement.
“The Group’s focus is to continue improving and consolidating its Net interest income and non-interest income through its digital offerings and customer centric innovative solutions. Additionally, the Group will continue to prudently manage credit risk while helping businesses in the economy to grow through provision of credit facilities,” the statement adds.
On the listing of one of its subsidiaries, FDH Bank, FDHFHL said FDH Bank will be listing on the Malawi Stock Exchange (MSE) on 3 August 2020 and this will give an opportunity to the public to own 20% stake in the home-grown and leading digital Bank.
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Good development for those who just bought shares from this promising bank irrespective of those on the drive to pull the bank down.
Interest rates of 9% cannot be described as a low interest rate regime. What type of Economists work in this bank?
Internationally the IBOR rate has fallen to 0.45%.
We will wait and see FDH profitability in the post Mulhakho dispensation. There is strong suspicion that this bank has been the conduit for all illegal payments by the Government. When they talk of clients deposit growth, they are referring to dirty money.
Thanks for not including Thom Mpinganjira’s picture in the article. He is a toxic influence