Saturday, October 31, 2020

Banking Sector: The ever-changing narrative

As rightfully described by Bogatsu, the banking sector in Botswana has been at the centre of all the financial storms – the 2008 global financial recession, the 2014/15 liquidity crisis and now the Covid – 19 sponsored economic uncertainties. Here is how the banks have performed financially in the first half of the year 2020, which also doubles as the pandemic period.

FNBB

On Wednesday, the First National Bank Botswana (FNBB) announced its Full Year Results for the year ended 30 June 2020. The biggest highlight from the bank is a 5 percent decline in Profit Before Tax and Profit After Tax. Both have been attributed to an increase in credit risk associated with Covid 19.

The FNBB figures also shows that the absence of new business growth due to the effects of lockdowns and other COVID-19 restrictions led to sharp amortisation of the portfolios, together with a halting of the working capital cycle as businesses preserve liquidity and secure affordability in a “wait and see” approach.

At the same time, during the early months of Covid 19 FNBB offered support to its customers through the economic uncertainty caused by COVID-19 by providing cash flow relief through debt restructuring as well as reduced pricing on certain transactional services.

“This cash flow relief was designed to enable individuals and businesses withstand immediate cash flow pressures presented by COVID-19”, the bank said on Wednesday.

Going forward, Bogatsu says FNBB will rely on technology and innovation which will remain a central focus despite increased competition.

“The majority of the bank’s workforce has been enabled to work remotely with a view to long flexible working arrangements”, Bogatsu told financial analysts and journalists in the capital Gaborone.

SCBB   

In early September, the country’s oldest commercial bank – Standard Chartered Bank Botswana (SCBB) released its financials for the six months ended 30 June 2020, which reflected the bank’s pleasing performance amid the Covid-19 disruptions. The highlights of the financials centres around the bank’s operating income which went up by 14 percent to P384.2 million. The bank’s financials also show strong profit after tax pegged at P90 million from last year’s P27 million. The improvement in profit can be directly linked to a P48 million impairment reversal resulting from a cancelled related party loan to the SCB Education Trust, with the reversal consolidated into the group’s results. SCBB Chief Financial Officer –  Dr Mbako Mbo says that whilst significant progress in line with the strategy has been made on strategy execution, the uncertainty surrounding COVID-19 could not be taken for granted, “We do note that though half year performance was good, the effect of the COVID-19 pandemic in Botswana did slow progress in the second quarter. With the possibilities of intermittent national and localised lockdowns, the strains on supply chains and the very real effects on livelihoods, we remain alive to greater impacts to the local economy. We can say that we are confident that our balance sheet is robust and resilient enough for such eventualities.”

ABSA BOTSWANA

Absa Botswana makes three of the top four banks that are listed at the Botswana Stock Exchange. The four banks financials are easily accessible given their trade and listing requirements by the BSE. Of these banks, Absa is yet to release its interim results for the period ended 30 June 2020. The bank has however released a cautionary statement to the capital markets, warning shareholders of a more than two thirds drop in pre-tax profit. The decline, according to Absa officials is as a result of credit impairments made worse by the strategies implemented by the government to curb the spread of the Covid – 19 pandemic.

Profit before tax is expected to plunge by as much as 60 to 70 percent, lowering this year’s interim pre-tax profit by as much as P230 million to P270 million from June 2019’s pre-tax profit of P387 million.

“The outbreak of Covid-19 has had a significant impact on the economy and business community across different industries at large. In our business, the impact has been significant on the credit impairment provisions line given the size of our business as well the strategies we deployed to support our customers during this difficult time, through extension of payment holidays and other relief programs”, reads part of the Absa statement.

The anticipated massive drop in profit is unusual for Absa which has been resilient over the recent years even when competitors were on the red.

The BSE quoted banker ended 2019 with stellar performance, with financials for the full year ended December 2019, reflecting a strong financial position, boasting of an asset base of P18.8 billion, up by 10.6 percent from 2018.

BANCABC BOTSWANA

The bank is largely classified as a fish in a big pond mainly due to its ‘tight marking’ of the big four banks. BancABC Botswana whose parent company ABC Holdings delisted from the local bourse a few years ago and listed the local unit alone continues to make the bigger banks run for prospective customers money. The bank’s latest financials show that despite two rate cuts of 50bps in August 2019 and April 2020 its Net Income interest has gone up. The banker’s unaudited results for the period ending 30 June 2020 shows that the Net Income Interest grew by 8 percent.

At the same time, during the period under review, overall profit after tax stood at P55.7 million representing a 9 percent increase.

The bank’s balance sheet has grown by about 3 percent driven primarily by the growth in the loans and advances at about 4percent.

BancABC’s Chief executive – Kgotso Bannalotlhe says although the bank’s key income lines reflect strong performance, during the second quarter of 2020 it began to see a reduction in activity within its branch network as well as the corporate and SME segment due to the lockdowns imposed as containment measures to curb the spread of COVID-19.

““The second quarter of 2020 was characterised by muted economic activity due to containment measures put in place locally and globally to contain the COVID-19 outbreak,” says Bannalotlhe.

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