Barclays Bank of Botswana believes its unimpressive financial results are a reflection of the challenging year in which the bank embarked on the journey to transform and rebuild its business.
The bank’s Finance Director, Lipalesa Makepe, said the poor performance can also be attributed to two things; firstly, the structural nature of the bank’s retail portfolio, with asset growth supported by lower yielding secured lending relative to the unsecured portfolio and secondly, the impact of lower rates on the unsecured consumer lending portfolio.┬á
She revealed that in prior years, Barclays had reported pressure on retail fees following the “Clearly Barclays” initiative but is now beginning to see growth in the annuity income supported by insurance and acquiring businesses.
However Makepe noted that the bank has successfully grown its Corporate and Business Banking by 45 percent to P1.4 billion.
“While the bulk of these balances converted in the latter part of the year, thus not contributing meaningfully to the 2013 financials, it has set the foundation for continued growth into 2014,” she said.
She pointed that on a positive note, non-interest income grew by 5.6 percent to P370 million on the back of improved treasury performance and higher transactional activity within the retail bank.
Makepe said that the bank’s income statement was driven by good sales momentum clearly seen in the segmental contribution of each business unit to overall performance.
She added that the 16.5 percent growth in customers assets was driven by a 40 percent increase in mortgages to┬áP1,2 billion while corporate growth was led by lending to parastatals and businesses.
“We continued to put in place and promote those products geared at driving retail deposits to enable funding of our balance sheet. Corporate deposits during the year were carefully managed given the cost of funds and the need to protect overall income,” said Makepe.
On the growth in costs in line with strategic investments, she pointed out that the operating expenses increased by 9.8 percent to P670 million reflecting the continued strategic intent to “fix the basics”.
Makepe highlighted that during the year under review, the impairment charge increased significantly to P198 million, a 58 percent increase over the comparative period.
“This is driven by two policy changes in our provisioning models introduced during the year.┬á┬áWithout this process change, our Loan Loss ratio would have closed at 2.16 percent. The second impact on impairment is due to continued stress in household income leading to losses on our unsecured portfolio,” she revealed.
The newly appointed Managing Director Reinette van der Merwe is optimistic that they┬áwill leverage the One Africa strategy, adding that they have started to realise the benefits of the approach.
She pointed out that the combination of ABSA and Barclays to form Barclays Africa Group had created a monolithic brand which would deliver world class products and services to the customers.
“Already we have used the power of One Africa to help some of our customers who are expanding into Africa. Our capability to deliver complex deals has also been enhanced through the One Africa approach,” said┬ávan der Merwe.
She emphasised that the importance of changing the income mix is highlighted by the recent reductions in the bank rate that has affected the Botswana banking industry coupled with the moratorium freeze on pricing.
┬á“One of our strategic priorities is therefore to diversify income streams.┬áWe remain focused on becoming the ‘Go-To’ bank in Botswana,” added van de Merwe.