• First Capital Bank reported a 52% increase in profit after tax to US$30.1 million in 2025, driven by a 14% growth in net income and a 16% improvement in cost-to-income ratio to 47%
• Stage 3 non-performing loans (NPLs) increased by 434% to US$6.857 million, representing 5.2% of the gross loan book, up from 1.1% in 2024
• Total assets grew 12% to US$332 million, deposits rose 12% to US$200 million, and capital adequacy remained strong at 26%, with a return on equity of 33%

Harare- First Capital Bank Limited, the Victoria Falls Stock Exchange-listed commercial bank whose parent is FMBcapital Holdings PLC of Mauritius, has reported profit after tax of US$30.1 million for the year ended 31 December 2025, a 52% increase from the restated US$19.8 million reported in 2024, making 2025 the most profitable year in the bank's thirty-year operating history in Zimbabwe.

This comes after the bank executed a significant retrenchment exercise in 2024 that cost US$5.5 million but reduced the headcount from 515 to 462 employees and reset the cost base for the year under review. Total net income grew 14% to US$84.4 million from US$74.3 million, driven by a 20% increase in net interest income to US$39.7 million and a 16% increase in net fee and commission income to US$33.2 million.

Net interest income benefited from a 14% increase in the loan book to US$128.7 million and a 21% increase in interest income on loans to US$41.5 million, while the net interest margin benefited from the high interest rate environment that the RBZ's 35% Bank Policy rate has sustained across the banking sector. Fee and commission income, at US$37.4 million, grew 22% on the back of expanded card-based transaction volumes, transfers, and account maintenance fees from a customer base that onboarded over 60,000 new individual accounts and more than 1,000 new corporate relationships during the year.

The most analytically significant improvement in the income statement is not the revenue growth but the quality of the earnings that generated the US$30.1 million PAT. In 2024, the bank's trading and foreign exchange income included US$6 million in FX revaluation gains, a volatile and non-recurring component of earnings that reflected mark-to-market benefits from foreign currency balance sheet positions rather than underlying banking activity.

In 2025, FX revaluation gains fell to less than US$0.5 million, a reduction of US$5.5 million. Despite losing US$5.5 million of FX-driven income, the bank still grew PAT by US$10.3 million, or 52%. The earnings that replaced the FX revaluation contribution are structural, net interest income from a growing loan book, fee income from a growing transaction base, and cost reductions from the 2024 restructuring.

This is the most important earnings quality improvement in the results and the one that makes the 52% PAT growth analytically more credible, not less, than the headline figure initially suggests.

The cost-to-income ratio improvement from 63% to 47% is the single most striking operational metric in the results and deserves its own analytical treatment. A 16 percentage point improvement in CIR in a single year is exceptional by any standard in African banking. The improvement is driven by three simultaneous forces working in the same direction.

Revenue grew 14%, expanding the denominator. Total operating expenses fell from US$47.4 million to US$43.9 million, compressing the numerator. And within expenses, the composition shifted decisively, staff costs fell from US$20.3 million to US$15.8 million, a 22% reduction, as the full-year benefit of the 2024 retrenchment removed the cost base without yet incurring the replacement hiring that expansion typically requires.

Infrastructure costs fell from US$10.5 million to US$9.6 million and general expenses held broadly flat at US$16.4 million. The 47% CIR positions First Capital among the most efficiently operated banks in Zimbabwe and within competitive range of regional peers, a structural achievement that the 2024 restructuring made possible and the 2025 revenue growth embedded.

The The bank identified an error in the computation of prior year numbers, resulting in an adjustment that reduced 2024 general expenses by US$579,000, increased tax expense by US$1.548 million, reduced profit after tax by US$2.127 million from US$21.96 million to US$19.84 million, and reduced basic EPS from 1.02 US cents to 0.92 US cents. The adjustment also affected the statement of financial position, increasing other liabilities by US$1.02 million and current tax liabilities by US$3.07 million while reducing retained earnings by US$4.09 million. Its effect on the year-on-year PAT comparison is to widen the growth rate from a restated base that is US$2.1 million lower than originally reported, making the 52% growth figure marginally more impressive than it would have been against the original 2024 number.

Stage 3 loans, those classified as credit-impaired under IFRS 9, with borrowers more than 90 days past due and where default has effectively occurred, increased from US$1.285 million at 31 December 2024 to US$6.857 million at 31 December 2025, an increase of US$5.572 million or 434% in a single financial year. To contextualise the magnitude, Stage 3 NPLs have grown from 1.1% of the gross loan book to 5.2% of the gross loan book in twelve months, a fourfold increase in the non-performing ratio within a year when total loans grew only 14%.

The Stage 3 ECL allowance correspondingly increased from US$910,000 to US$1.905 million, representing a provision coverage ratio of approximately 28% on Stage 3 exposures, which is materially below the full loss given default assumptions that Stage 3 classification implies under IFRS 9 and suggests that significant collateral recovery is anticipated on these positions.

The sectoral composition of the Stage 3 NPLs provides important analytical granularity. Light and heavy industry accounts for US$2.796 million of Stage 3 gross loans, trade and services accounts for US$2.466 million, and physical persons account for US$1.595 million. The concentration in light and heavy industry and trade and services reflects the compression that Zimbabwe's manufacturing and commercial sectors have faced under the high interest rate environment, ZiG liquidity constraints, and the fuel price shock of 2026 that was already affecting business cash flows in the latter part of 2025.

The impairment loss recognised in the income statement rose sharply to US$3.346 million from US$156,000 in 2024, a more than twentyfold increase, with the increase driven primarily by new Stage 3 provisioning. The bank also wrote off US$865,000 in loans during the year and recovered US$622,000 from previously written-off accounts, indicating active management of the legacy NPL stock alongside the new formations.

The second undisclosed risk in the results is the US$2.132 million loss on derecognition of financial assets, a new line item in the income statement that did not exist in 2024. The note to the financial statements identifies the affected instruments as treasury bills and bonds, with the loss arising from the derecognition of these instruments during the year. The treasury bill and bond portfolio moved from US$7.294 million at the end of 2024 to US$19.361 million at end of 2025, reflecting US$18.475 million in new purchases, US$583,000 in accrued interest, US$4.334 million in maturities, and the US$2.132 million derecognition loss alongside a US$578,000 impairment charge on treasury bills.

The simultaneous recognition of a derecognition loss and an impairment on treasury bills, instruments that are sovereign obligations of the Zimbabwe government, raises a specific credit quality question about the government paper that the bank was holding and chose to derecognise. For a bank that grew its treasury bill holdings by US$12 million in net terms during the year, the quality and recoverability of that portfolio is a material forward risk that the headline numbers do not surface.

The balance sheet presents a fundamentally strong position built on genuine business growth. Total assets grew 12% to US$332 million, deposits grew 12% to US$200 million, and net loans grew 14% to US$128.7 million, all driven by organic customer acquisition rather than inorganic transactions. The liquid asset ratio strengthened to 65% from 53%, comfortably above the RBZ minimum of 30% and providing substantial buffer against funding stress.

The liquidity coverage ratio of 212% is exceptional and reflects the bank's conservative asset-liability management discipline. Capital adequacy at 26% exceeds the regulatory minimum and provides adequate headroom for the loan growth trajectory the bank is pursuing. The return on equity of 33% is the most competitive ROE in the Zimbabwean banking sector and reflects the combined effect of profitability improvement and a modestly sized equity base relative to the earnings generated.

Deposits are well diversified across trade and services at 48%, physical persons at 22%, light and heavy industry at 11%, and financial services at 10%, with local currency deposits representing US$25 million or 12.5% of the total deposit base, confirming that First Capital's franchise is predominantly USD-funded, which reduces currency risk but maintains exposure to the USD liquidity dynamics of the broader Zimbabwean economy.

The dividend paid during 2025 was US$13.447 million, representing approximately 45% of the year's PAT of US$30.1 million and 147% of the prior year's PAT of US$19.8 million. The total proposed dividend for the year was US$0.90 US cents per share, comprising an interim of US$0.31 cents and a proposed final of US$0.59 cents, representing a generous return to shareholders that is supportable at the current capital adequacy level but one whose sustainability depends on the NPL trajectory normalising in 2026 rather than continuing to accelerate.

Reading First Capital Bank's FY2025 results in full produces a picture that is genuinely exceptional in most dimensions and genuinely concerning in two specific ones. The exceptional dimensions are real and verifiable, the earnings quality transformation from FX-dependent to structurally driven, the CIR improvement to 47% from 63%, the 52% PAT growth, the 33% ROE, the 65% liquidity ratio, the 26% capital adequacy, and the share price appreciation of 126.5% that reflects sustained investor recognition of the bank's operational improvement. These are the results of a bank that executed its 2024 restructuring well and has compounded the efficiency gains into a genuinely strong earnings outcome in its thirtieth year.

The concerning dimensions are equally real, Stage 3 NPLs up 434%, impairment charges up more than twentyfold, a US$2.1 million loss on derecognition of treasury bills, and a prior year restatement that required expert auditor attention.

The headline numbers from First Capital's FY2025 are the best in the bank's history.

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