Thursday, January 20, 2022

Barclays claws back despite compressed liquidity

Barclays Bank Botswana has raked in P110million in Profit Before Tax (PBT) during the 2015 half year, on the back of significant growth in income from business banking, treasury sales and market trading. The bank’s business banking and markets business also recorded significant growth in revenue, in excess of 50 percent.

However, Barclays’ sterling performance was despite sluggish economic growth and tough trading conditions, which continue to weigh heavily on the banking sector. Barclays Botswana Managing Director, (MD) Reinette van der Merwe revealed during the results presentation that the Bank of Botswana had to reduce its primary reserve requirements from 10 percent to five percent on April 1st in direct response to the tight liquidity conditions.

However, the Reserve Bank has steadfastly insisted on maintaining the low interest rates, as they are seen to be supportive of credit growth, which is in line with government’s economic diversification strategy. Barclays’ interest income grew year on year by a modest three percent, compounded by the interest rate cut effected in the earlier part of the year, with an estimated negative impact on income of P81m for the full year 2015. van der Merwe further stated that Barclays has managed to claw back a significant portion of its market share in the first half, buoyed by good performance in Business Banking and Corporate Banking, which registered strong interest income growth.

Though the bank registered a strong balance sheet growth of around 10 percent, retail interest income was down by nine percent due to higher funding costs and the interest rate cut.  Barclays’ interest expenses also increased by 35 percent year on year, led by high costs of wholesale funding in the tight market liquidity. Meanwhile, the bank’s newly appointed Finance Director, Mumba Kalifungwa noted the decline in net interest income was exacerbated by a reduction in income from government securities by 28 percent year on year, plus a further reduction in investment in securities in response to liquidity challenges experienced in the market. “On an overall basis our net interest margin reduced marginally to an average of 7.6 percent from an average of 8.4 percent from the previous year. This is in line with a reduction in net interest income,” said Kalifungwa.

Barclays’ net fee and commission income decreased by 14 percent mainly because the bank lowered insurance premiums for its credit life insurance customers.  This resulted in a reduction in annuity income from the bank’s insurance business, which has helped to reduce the cost of financial services to customers. The bank’s loans and advances increased by nine percent to P8.4 billion, with retail loans growing by 10 percent on the back of secured lending and term loans. Corporate loans also increased by three percent to P1.8 billion driven mainly by term loans. Going forward, Barclays’ strategy will be largely in support of local corporate expanding into Africa and mining entities.

“The core of our strategy is cross selling – to ensure that we become the primary banker for our clients and to capture ancillary revenue that comes with lending and operating accounts,” said Kalifungwa.

Barclays bank has sustained a dividend pay-out year on year.  The bank proposed a dividend payment of 11.735 thebe per share subject to regulatory approval.


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