First Capital Bank bails out hotels
FIRST Capital Bank (FCB) executives on Friday revealed a strategic plan to bail out the teetering tourism sector out of bankruptcy following the global health scare precipitated by COVID-19.
From March 2020, governments grounded international flights to prevent contagion as COVID-19 spiralled out of control.
But the full wrath of the global economic shutdowns was felt hardest in tourism-dependent economies like Zimbabwe, which saw operators winding down, sending staff home and losing US$1 billion in potential revenue in the process.The tourism industry generates about US$2 billion for Zimbabwe’s economy.
Foreign tourist arrivals plummeted by 90% between January and October, the sharpest downturn in 40 years, according to Zimbabwe Tourism Authority data.
On Friday, FCB said quick decisions were made at the financial services giant to extend the tenure of existing loans and deploy more resources to help the leisure sector ride out of the storms.
It was not sheer generosity though.
According to FCB chairman Pat Devenish, the plan was to demonstrate to affected firms what the former Barclays Bank was capable of doing during the most volatile time and build sustainable business ties for future growth.
“With the strategic thrust of building long-term relationships and supplementing government efforts on COVID-19, the bank continued to support the tourism sector with extension of loan repayments, reduced interest rates and provision of new facilities were required,” Devenish said in a statement to the bank’s financial results for the year ended December 31, 2020.
“Certain sectors in the economy like tourism were operating substantially below capacity even after easing of lockdown. Persistent depreciation of the local currency against the United States dollar, high inflation and COVID-19 uncertainty resulted in low business confidence and a pessimistic overall view of the economy in the first half. However, the easing of lockdown, improvement in the operation and price discovery on the auction system and allowing customers with funds to pay in foreign currency brought stability and more business optimism in the second half of the year,” the FCB chief said.
Interventions to the tourism sector were part of FCB’s $2,3 billion loan book during the period.
Devenish said FCB loaned out $3,7 billion, which translated to a 63% loan to deposit ratio.
He said 5% of the loan book represented interventions into sectors worst affected by COVID-19, including tourism.
“The loan book continues to perform well, with non-performing loans ratio of 0,16% compared to market average of 0,3%. Customers in the tourism and other services sectors significantly affected by COVID-19 are on the watch list and constitute 5% of the loan book,” he said.
FCB’s inflation adjusted total income increased to $3,4 billion during the review period, from $2,4 billion during the comparable period in 2019, with pre-tax profit rising to $901 million, from a loss of $494 million previously.