Malawi’s First Merchant Bank amasses K3.5bn in profits for six months

First Merchant Bank (FMB) has said it managed to register profits after tax of K3.558 billion for the six months period ended June 30, 2013.

This translates into over 100% of profits in comparison with the same time last year when FMB declared K1.7 billion after tax profits.

The unaudited consolidated results that announced this information were signed by FMB managing director Dheeraj Dikshit, general manager for finance Lucas Kondowe and director John O’Neil.

FMB is also listed at the Malawi Stock Exchange and due to its profitability it has a first interim dividend of K934.5 million.

“The directors have declared a first interim dividend of K934.5million or 40 tambala per share (2012: 35 tambala) payable on Friday, 23rd August 2013 to shareholders whose names appear in the register at the close of business on Friday, 16th August 2013. The register will be closed from Monday, 19th August 2013 to Wednesday 21st August 2013 both days inclusive,” said FMB.

FMB Managing Director, Dheeraj Dikshit: Profit
FMB Managing Director, Dheeraj Dikshit: Profit

In its review of operations the bank said through careful balance sheet management, including curtailment of expansion of our credit portfolio, it avoided the need to compete aggressively in a generally illiquid market for high cost deposits yet maintained an acceptable credit deposit ratio of 75 percent.

It also highlights the inclusion in other assets of approximately K4 billion in connection with the acquisition of the operations of International Commercial Bank in Malawi, Mozambique and Zambia.

“These entities will be consolidated in the group accounts with effect from 1 July 2013. The group continues to deploy a significant proportion of its asset base in liquid low risk money market investments and cash equivalents totaling some K18.5billion which equates to over 30% of total group assets and more than 50 percent of
customer deposits,” FMB said.

The bank noted that monetary policy remained contractionary throughout the period resulting in higher yields being available on all domestic monetary assets including low risk instruments and this has led to a marked improvement in the overall net interest margin earned by the group.

It further said strong growth was achieved in all categories of non interest income with major contributing factors being increased foreign exchange trading volumes and continuing gains on our equity investment portfolio in a firming equity market.

FMB emphasized that the general economic environment remained challenging and the level of impairment provisions against its advances portfolio is prudent though somewhat higher than anticipated.

However, the bank expressed confidence on efforts to rehabilitate or recover non performing accounts which will see future reversals of provisions made on largely technical grounds.

In its outlook for the second half of the year, FMB said it foresees a declining rate of inflation and improving market liquidity should, assuming no unforeseen external shocks to the economy, lead to an easing of interest rates.

“The end of the tobacco marketing season will see reduced availability of foreign exchange from the private sector and it remains to be seen whether the monetary authorities are prepared to deplete official foreign exchange reserves to meet unfulfilled market demand.

“We, therefore, expect interest margins to narrow and foreign exchange trading volumes to contract somewhat in the second half of the year. However, the market appears to be stabilizing after absorbing the impact of major macroeconomic policy shifts and this presents us with the opportunity for renewed balance sheet growth within our risk tolerance levels. Overall, we anticipate continuing robust group performance in the second half of the year,” FMB said.

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