FDH Bank profit hits K3.2bn in 6 months

FH Bank, which is set to list on the 15-counter Malawi Stock Exchange on August 3, has posted a profit after-tax of K3.22 billion in the half-year ended June 30 2020.

This is a slight drop from K3.35 billion achieved during the same period last year.

Published financial statements signed by managing director Elias Ngalande, among others, show that total income grew by seven percent from K14.4 billion to K15.3 billion.

During the same period, net-interest income jumped by 65 percent on the back of an increase in interest income by 45 percent due to the increase in loan book and government securities portfolio.

The statement says interest expenses increased by 22 percent largely due to the increase in deposits which supported the loan book growth.

Reads the statement in part: “Notwithstanding the growth in deposits, enhanced balance sheet management has seen the bank’s cost of funding going down.

“The bank continues to put more focus on effective cost management as we continue to bring down the cost-to-income ratio.”

In the year under review, the FDH Bank’s total assets increased by 19 percent pushed by an increase in loan book by 10 percent, government securities by 17 percent and placements with other banks by 81 percent.

“This is part of the bank’s strategy to grow the interest earning assets,” reads the statement.

The financials show that despite the growth in the loan book, non-performing loans (NPLs) ratio stood at 0.99 percent against the industry average of 6.3 percent.

The bank’s deposits grew by 19 percent from K137 billion as at December 31 2019 to K164 billion June 30 this year.

The bank’s performance during the period was also affected by the political environment.

Reads the statement: “The elections court case, continued demonstrations and fresh presidential election 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.”

The bank has also bemoaned the impact of Covid-19 which affected its half-year performance because economic activities slowed down.

“Even though there was no government-sanctioned lockdown, most of the corporates and businesses were operating at reduced capacity with the intention of maintaining social distance and curbing the spread of the pandemic.”

As a result, this slowed down both credit and non-funded business growth as the number of customer transactions went down. Covid-19 prevention measures also affected the bank’s digital revenue. 

Earlier in the year, the Reserve Bank of Malawi directed a 40 percent reduction in fees charged on digital transactions to encourage people to transact on digital platforms to reduce the spread of the pandemic.

“The expected credit losses have increased as a result of the increase in credit risk due to the Covid-19 induced slowing down of business activities and the economic environment in general which will result in some customers not being able to meet their financial obligations.

“This has also resulted in the significant drop in bad debt recoveries due to the economic slowdown.”

FDH Bank is offering 1.38 billion shares at K10 per share through an initial public offer (IPO) to allow the public to own 20 percent stake in the bank.

The offer will remain open until Friday this week.

FDH Bank will be the second firm this year to list on the local shares market after Airtel Malawi plc listed in February. n