By Benadetta Chiwanda Mia:
Improved performance in three of the five countries where FMBCH group operates has driven continued growth in the conglomerate’s profit and market capitalisation.
Positive strides were recorded in Botswana, Mozambique and Zimbabwe.
First Capital Bank’s regional business has allowed the group to offset economic weaknesses in certain countries with strength in others, effectively spreading country-specific risks.
Investors, who appreciate consistent profitability, have responded positively to this strategy. As a result, the group’s combined operations have yielded a return on equity of 36 percent as of June 2024, and dividend growth remains robust, with dollar dividends in 2024 up by 17 percent compared to 2023.
Cedar Capital Chief Executive Officer Armstrong Kamphoni said investors prefer steady earnings and dividends rather than fluctuations year-to-year.
“What the First Capital Bank Group has achieved with its regional expansion is the ability to reduce reliance on the volatility of the Malawi economy, which is heavily dependent on agriculture and weather patterns,” Kamphoni said.
For the six months ended June 2024, First Capital Bank’s profitability increased in Botswana, Mozambique, and Zimbabwe, but saw a decline in Zambia and a significant 40 percent drop in Malawi.
However, the decrease in Malawi’s performance in US dollar terms is attributed to the devaluation of the Malawian Kwacha in November 2023, and not a decline in local currency profitability.
Kamphoni notes that, due to the stable exchange rate throughout 2024, it is likely that Malawi will report a healthy increase in Kwacha-based profits for the full year.
“What we’re seeing is that, while Malawi’s contribution in dollar terms has fallen, its profit in local currency is likely to recover, much like Zambia’s situation where the Kwacha has been at an all-time low, affecting dollar-denominated profits.”
While some may perceive Malawi as a drag on the group’s overall profitability, Kamphoni clarifies that the group’s operations outside Zambia, particularly in Botswana, Mozambique, and Zimbabwe, are becoming more profitable, thereby increasing their share of the group’s growing total earnings.
A major factor in First Capital Bank’s success has been the strategic consolidation of operations, especially following the 2017 acquisition of Barclays Zimbabwe, which marked a turning point for the group.
Although Zimbabwe was grappling with economic challenges at the time, this acquisition allowed First Capital Bank to become a truly regional banking group. Kamphoni recalls that the initial years after the purchase saw significant exchange rate losses, but the long-term benefits have far outweighed the early challenges.
Group Managing Director Jaco Viljoen, who joined First Capital Bank in Botswana when it was still Capital Bank, has observed a shift in profitability over the last five years.
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