FMB, one of the Malawi Stock Exchange (MSE)-listed commercial banks, has reduced its stake in Botswanaâ€™s Capital Bank Limited it acquired in 2008 to 38.4 percent from 53.8 percent.
The bank said Malawiâ€™s subdued economic environment largely characterised by shortages of foreign exchange constrained the bank from participating in a rights offerâ€”the issuing of additional shares by a company to raise capitalâ€”undertaken in Botswana.
“The subsequent reclassifications of this investment from subsidiary associated company status has resulted in a technical fair value gain of K79 million being included in other operating income of the group,” said the bankâ€™s statement accompanying unaudited resulted for the half year ending June 30 2012.
But the bank in the half-year has beaten its profit forecast of 20 percent. The bank has posted K1.6 billion profit, a 61 percent higher than the K1.038 billion recorded over the same period last year.
The bank said at the start of the year, trading operations were affected by very low foreign exchange trading volumes and pressure on net interest margins due to an artificially high level of liquidity in the economy.
“We, however, retained our conservative approach to lending and our resultant balance sheet liquidity enabled us to respond to the opportunities that arose following liberalisation of the foreign exchange market and adjustment of interest rates to a level more reflective of the prevailing macroeconomic reality,” said the bank whose assets have dropped 9.1 percent to K49.7 billion from K54.9 billion the year before.
FMB has hailed product diversification and further expansion of their retail footprint which has contributed to strong growth in transactional income, adding that the bankâ€™s equity portfolio has proved to be an effective inflation hedge generating substantial fair value gains in addition to increase dividend income.
“Operating expenditure was constrained in line with expectations and as a result of the increased level of operating income, the overall group cost to income ratio has been reduced to 42 percent. In light of the continuing challenging economic environment, it was considered prudent to make a relatively high provision for impairment of those advance accounts showing signs of weakness,” explained the bank.