FBC Holdings (FBCH) says it will be retreating from bonds and debentures business to higher yielding lending as the company moves towards more profit-oriented ventures.
The bank cited less profitable nature of bonds in the current environment, thus digressing to other undertakings that have grown lucrative in recent times.
A bond is a fixed income instrument that represents a loan made by an investor to a borrower, typically corporate or governmental. They are used by companies, municipalities, states, and sovereign governments to finance projects and operations.
In its results for the half year up to June FBC Holdings posted $182 million in bonds and debentures a 19, 1 percent slump from $226 million recorded in the prior comparable period in 2018 reflecting a decline in business in this regard.
In a brief with Business Weekly on the sidelines of the bank’s analyst briefing FBC Holdings chief executive John Mushayavanhu, hinted his company will be looking into some other lending activity since treasury bills have become a lesser returns venture and not ideal.
“Lending to corporates, lending to anyone including agriculture, because the treasury bills yielding is 5 percent savings bond is yielding 7 percent but minimum lending rates have gone up, so if you take the same money and put it into lending you will earn more.
“In the past there was not much significant difference between the yield on a treasury bill and what you would receive from lending so we are pushing money more towards productive lending, because the returns are higher,” said Mushayavanhu.
Furthermore, the bank said it would be making more investments in digitalisation financial inclusion, bolstering cyber systems and land banking going forward.
Mushayavanhu opined that land purchase was a form of hedging and a critical business piece considering that FBC was a building society.
He said,” We are a building society our core business is building and selling houses so the raw material for that is land if you don’t have land you can’t grow your construction business, so we need land bank so that we can say going into the future say 10, 15, 20 years we have enough land to build on.
These advances come on the back of a $54,3 million profit after tax for the half year to June 30, 2019 from $14,8 million realised in the same period last year translating to a 267 percent growth.
The bank realised a total income of $198 million from $64,5 million in the prior comparable period in 2018, all attributable mainly to the group’s diversified business model.
FBC Holdings Limited is an Investment holding company listed on the Zimbabwe Stock Exchange and whose principal activities are in Zimbabwe.
The Group offers diverse financial services through subsidiaries that span commercial banking, mortgage financing, short-term insurance, re-insurance, securities trading and micro financing.
In all, FBC Holdings group comprises FBC Bank Limited, FBC Building Society, FBC Reinsurance, FBC Securities (Private) Limited, MicroPlan Financial Services (Private) Limited and an insurance company.