Monday, January 17, 2022

Banking sector Woes: Statutory banks profits also tumbles

Botswana’s three statutory banks, National Development Bank (NDB), Botswana Savings Bank (BSB) and Botswana Building Society (BBS) have also not been spared from the financial woes that local commercial banks are currently facing. 

According to the 2014 Banking Supervision Annual Report released by the Bank of Botswana this past week, the aggregate net profit of the statutory banks in the five-year period had been fluctuating.

The figures presented in the BoB report shows that in 2014, the three bank’s aggregated net profit  went down to a low of P82 million (December 2013: P121 million).

The central bank attributes the downward movement to rising operating expenses and interest expenses, which increased by 3.4 percent and 7.1 percent, respectively. At the same time, the report further shows that the three banks recorded a decline in interest income to P525 million compared to P561 million the previous year.

The profitability of the three banks, as measured by Return on Equity (ROE) and Return on Average Total Assets (ROAA), experienced a downward trend, with ROA going down by 1.3 percent while ROE declined by 4.4 percent (December 2013: 2.2 percent and 6.5 percent, respectively).

At the same time, the BoB figures also shows that the Cost to Income ratio of the three banks increased significantly to 70 percent, compared to previous years when it was fluctuating between 50 percent and 60 per cent.

“The sharp increase of the ratio indicates that the banks’ expenses increased by a wider margin compared to income growth in the period under review”, BoB noted.

BoB further noted that statutory banks continued to account for a small share of the industry assets, deposits and advances even in 2014. The combined market share of total assets for the three statutory banks remained almost unchanged at 8.9 percent in 2014; it was 9 percent in 2013. Statutory banks’ share of total deposits increased to 4.1 percent, compared to 3.5 percent in the previous year, while loans and advances remained constant at 11 percent.

Meanwhile the BoB figures shows that although financial position of the three statutory banks trended upwards, the movement was sponsored by growth in deposits borrowing from international lending agencies. The banks recorded a 12.6 percent increase in total assets from P5.9 billion in 2013 to P6.7 billion in 2014. A breakdown shows that deposits grew by 25.3 percent to P2.2 billion in 2014 (December 2013: P1.7 billion) while borrowing from international lending agencies increased by 13.4 percent to P1.1 billion (December 2013: P0.9 billion). 


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