ONE of Zimbabwe’s financial institutions, First Capital Bank Zimbabwe says it foresees challenges in meeting the US$30 million capital requirement by year-end due to the depreciation of the exchange rate, eroding local currency capital in US dollar terms. BY MTHANDAZO NYONI Early this year, the Reserve Bank of Zimbabwe (RBZ) ordered large indigenous banks and all foreign banks to meet its minimum capital requirement of US$30 million, effectively hiking the threshold. Taking into consideration the impact of COVID-19, RBZ governor John Mangudya, in his mid-term monetary policy statement extended by a year from December 31, 2020 to December 31, 2021 the deadline for local financial institutions to meet the new minimum capital requirement. But in the reviewed financial results for the half year ended June 30, 2020, First Capital Bank chairperson Patrick Devenish said the depreciation of the exchange rate was making it difficult for them to meet their minimum capital requirement. “The board will continue to pursue strategies to preserve capital, improve cost efficiency, and support customers who are affected by COVID-19, while looking for opportunities to grow the business and safeguard the welfare and health of employees,” he said. “Going into the future, the bank foresees challenges in meeting the US$30 million capital requirement by December 2020 due to the continuing depreciation of the exchange rate, thus eroding local currency capital in US dollar terms,” Devenish said. Given the need to raise capital to US$30m by year end and the uncertainties in the operating environment, Devenish said the board did not propose an interim dividend for the period under review. Devenish said the period under review was characterised by strong headwinds including hyperinflation, depreciation of the local currency and very volatile business operating conditions. While June year-on-year inflation was 737,3%, a decline from May year-on-year inflation of 785,5%, a significant upward movement is observed for the overall period under review, with the continued depreciation of the exchange rate which drives inflation, this is not showing any signs of abating. In addition, the company said the COVID-19 pandemic had had a significant impact on both the global and local macro-economic environments, causing significant business disruption. The bank registered an inflation adjusted profit of $205 million for the period compared to a loss of $64 million in the same period last year. In historic cost terms, the profit was $767 million compared to $68 million in the same period last year.The growth in profit, the company said, was driven by solid balance sheet growth in its loan book, driving increased net interest income, together with increased transaction and trading income. “This overall growth in income was offset by cost incentives. We managed to achieve a strong performance on operating profit as a result of efforts to mitigate these cost increases,” he said. The loan book continued to perform well with non-performing loans at 0,16% compared