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Dream start for new FBC boss [posted on 16-Mar-2012]

IT is difficult to replace a good chief executive officer (CEO), particularly one who has led an institution to greater heights. The bar can be unsettling to a successor, and the task looks more challenging when the predecessor has led a successful listing and effectively directed his group for eight years, transforming it into a fully-fledged provider of a range of financial solutions, from a commercial banking operation to a unit with diverse interests in the financial services sector.

Elsewhere on the world markets, share prices can tumble with moves to replace such a CEO, and staff moral can plunge to unprecedented lows.

But a completely different scenario has shaped up at the Zimbabwe Stock Exchange-listed financial services group, FBC Holdings Limited, which last week reported a 21 000 percent rise in basic earnings per share for the full-year ending December 31, 2011.

Long time deputy CEO, John Mushayavanhu, replaced Livingstone Gwata as boss last year, just as the Ministry of Finance was raising the red flag on the banking sector, which was struggling to fulfill tough Reserve Bank of Zimbabwe minimum capital requirements.

Mushayavanhu, essentially a product of Gwata's succession plan and the president of the Bankers Association of Zimbabwe (BAZ), knew so much was expected of him - growing the firm's market share, realigning the group's structures after a US$3 million retrenchment programme, and sustaining a profitability trend carved by the man whose shoes he was trying to fit into.

Under Gwata's stewardship, FBC Holdings had diversified into reinsurance, building society, microfinance, short-term insurance, manufacturing and securities, from First Banking Corporation, a commercial bank, just over a decade ago to FBC Holdings in later years.

Last week, Mushayavanhu released to FBC Holdings shareholders US$2,5 million in dividends, as the group reported a 283 percent rise in pre-tax profits to US$15,7 million during the review period, from US$4,1 million during the full-year to December 31, 2010.

Basic earnings per share climbed to 2,11 US cents in 2011, from 0,01 US cents per share in 2010, as post tax profit surged 644 percent to US$12,5 million, from US$1,7 million in 2010.

Across the sector, banks and insurance enterprises are fighting massive overheads, with cost to income ratios as high as 90 percent at some banks.

Mushayavanhu and his team brought the ratio down to 72 percent in 2011, from 89 percent in 2010 during a lucky year in which he stepped in after Gwata expended over US$3 million in the staff rationalisation programme.

Prevailing interest rates, at about 16 percent per annum, were on his side as he took over, helping him turn over US$13, 8 million in net interest income in 2011, from US$11,4 million during the full-year to December 31, 2010.

They had put in place a block of cash generating enterprises just before Gwata left, whose positive results filtered in last week.

"The group established a micro finance business to help tap and develop the informal sector, the unit managed to contribute US$572 000 to the overall group profit before tax," Mushayavanhu said in his maiden financial statement accompanying the results.

"The unit is well positioned to play a significant role in the development of the informal sector," he added.

In March 2011, FBC Holdings splashed US$1,1 million as it pounced on short-term insurer, Eagle Insurance Company.

The acquisition, back then, had the dynamics of a poor investment given the viability crisis rattling the insurance sector where players like TristarInsurance Company are battling to survive.

Two weeks ago, The Financial Gazette's Companies & Markets reported that TristarInsurance, a unit of the listed financial counter, Africa First ReNaissance Corporation (Afre), had axed several senior staff and a string of support staff in a restructuring plan aimed at arresting a deteriorating cash flow crisis after losing 39 percent of revenue since 2009.

At Eagle Insurance, Mushayavanhu and his mentor saw a jewel that could be dragged out of a crisis and play a significant role in achieving an ambitious dream to dominate the financial services sector.

The positive results came in last week.

"Eagle Insurance Company . . . contributed 2,8 percent of the group total income and 3,4 percent of the group profit before tax," said Mushayavanhu.

"The outlook is quite positive with insurance business poised to benefit from increased economic activity and the introduction of e-commerce based products," he added.

Then there is the listed Turnall Holdings, another recent acquisition that reported a 49 percent rise in turnover to 51,9 million during the review period.

Mushayavanhu will not take all the credit as Gwata had also helped him lay a solid foundation for 2011 before he chose to retire.

The extraordinary thing at FBC Holdinds was the well-thought-out succession plan, one of the greatest in recent times, which Gwata implemented to guarantee a smooth transition.

People aware of developments at FBC say the BAZ boss had already started running the show before Gwata left.

Colleagues at FBC Holdings said Mushayavanhu is a workaholic who has very little time to spare, but when he has time, he goes for golf and socialise with friends.

With a string of business qualifications, including an MBA, and many years experience gained through working for several institutions in Zimbabwe, the new FBC Holdings CEO said last week he was ready to take on the challenge.

"I look forward to the further strengthening of FBC and the consolidation of the revenue capacity of the group for the benefit of all the stakeholders," he said in his commentary.

A career banker, Mushayavanhu has over 24 years working in banking and has held senior positions in corporate and retail banking with Standard Chartered Bank.

He joined FBC Bank as an executive director in the corporate banking division in October 1997 and became managing director in 2004.