Despite a tough economic environment induced by the Covid-19 pandemic which slowed down business, Malawi Stock Exchange (MSE), listed counters in the banking sector seem to have braved the pandemic storm.
Published caution statements from three out of the five counters in the banking sector—NBS Bank plc, Standard Bank plc and FMBCH trading as First Capital Bank—expect to post profits for the year ending December 31 2020.
Standard Bank plc projects its profit after tax for the year to be about 45 percent higher than the previous corresponding period.
This is, however, lower when compared to last year as the bank’s profit grew by 50 percent to K15.9 billion from K10.5 billion in 2018 on account of a 12 percent increase in net income, emanating from growth of the customer loan book.
On the other hand, NBS Bank plc also expects its profit after tax for the review period to be 25 percent higher than the previous corresponding period.
In 2019, NBS Bank plc posted a K4.46 billion profit after tax, a growth of over 162 percent from a loss of K1.69 billion reported in the prior period.
For FMBCH plc, the parent company of First Capital Bank, also expects its profit after tax for the period to be approximately 200 percent higher than the previous corresponding period.
FMBCH estimates the profit for the year to be over $12 million (about K9.2 billion) compared to a loss of $4.97 million (K3 billion) for the same period up to December 31 2019.
In her explanation on the bank’s profitability, Bankers Association of Malawi (BAM) chief executive officer Lyness Nkungula observed that banks were also impacted by Covid-19, but indicated that risk was minimal.
“Banks have a better business risk management that has helped them to sail through the turbulent times. The diversification of products and technology has helped to intensify the resilience to the pandemic.”
Market analysts have also indicated that banks’ resilient performance is not surprising, arguing that they have diversified incomes sources.
In an interview on Wednesday, Alliance Capital Limited research manager Bond Mtembezeka said the resilience in the banking sector is owed to the central bank’s vigilance in trying to ensure that they are well capitalised all the time.
“There is a tendency for banks to thrive in times of economic downturn. This can be attributed to little competition on the market and there is a general feeling that Malawian banks overprice their services compared to other banking industries in the region,” he said.
On his part, economic statistician Alick Nyasulu said banks have thrived on investment in public debt, but also noted that they have diverse sources of income beyond traditional loans and their electronic services have had the general public hooked.
Published results from other sectors show mixed projections.
TNM plc, for instance, expectis profit to be at least 25 percent lower than the corresponding period while Airtel plc anticipates its profits to be 40 percent higher than what was reported last year, according to a published caution statement.
Sunbird Tourism plc expects to make a loss which will be 150 percent lower than the profit reported in the previous period.