FBC Holdings End of Year 2009 Audited Financial Results

For a bank that i worked for, one would naturally want to see how it is performing. The bank is obviously driven by entrepreneurs who are looking at the slightest opportunity to create value for its shareholders.

The profit results were largely a reflection of 2 main things, low interest income as reflected by the high cost to income ratio of 80% and once off gain of USD4,8m on acquisition of turnall holdings limited which was a conversion of debt to equity. This gain had a favourable effect on the profit of the group.

The disposal of non core properties and equipment also created value for the group translating positively on the cashflows too. This reminds me of the Path to Growth (PTG) initiative that was followed by Unilever some time ago to create value through disposal of non-core operations. Such strategies are obviously needed for survival and unlocking shareholder value.

FBC Building society still reflects the challenges of the mortgage market with disposable incomes of households still limited to fund house development. However the proposed recapitalisation of the society should put it on a solid footing for the future.

One remains to see how the Turnall investment will be handled as it is definately non-core but this could herald a diversification stragegy on the part of the group.

The stragetic alliance of the group with NSSA was reflected in the board with the appointment of Mr Matiza to the group board. NSSA continues to be a significant shareholder in the group with significant stake in FBC Building Society.

There was no impairment of investment properties showing that there was no excessive valuations done in the 2008 periods and the marginal fair value gain of USD12K had a positive contribution to the total income of the group. Other companies have been posting impairment losses on properties.

Operational Risk remains a major concern for the bank as it is for many banks in the country which have been affected by roberries and thefts. However the bank seems to have put in place strategies to curb further losses by having staff rotations and Operational Risk Assessments.

The country is behind Basel II implementation targets as many other jurisdictions such as South Africa have already rolled out Basel II. With Basel III already being mooted on the back of revisions to Basel II, one can only hope that the implementation of th Capital Accord is fast-tracked so that the country keeps pace with the global financial and prudential developments.

FBC has however already implemented the piecemeal guidelines on Basel II outlined by Reserve Bank.

One sincerely hopes the stock market will reflect the performance of the bank as the shareprice has been heavily discounted over the years trailing the likes of NMB Bank which has a very small balance sheet compared to FBC Holdings!

Dony Mazingaizo has interest in Financial Management and Financial Reporting