Barclays Bank Botswana says its half year performance is a reflection of the current low interest rate environment which has impacted the interest income business at a time of continued investment activity being undertaken to transform the business.
A close look at the interim financial results for the period ended 30 June 2014, shows the bank’s cost to income ratio is at 57 percent while loans and advances grew by 17 percent.
Barclays’ total income decreased by 6 percent to P608 million, with operating costs increased by 10 percent to P347 million and the profit after tax going down by 35 percent.
Releasing the results on Thursday, Barclays Bank Botswana Finance Director, Lipalesa Makepe, explained that the commercial bank remained focused on delivering on its strategic objectives, adding that growing its corporate customer base remains key.
She said in the reporting period, the bank achieved a 17 percent growth in loans and advances to customers, 70 percent of which was in corporate banking arising from continued support to the corporate customers with their regional growth directly aligning to the bank’s One Africa strategy.
“Given constrained consumer incomes, our key focus area in our retail business has been mortgages and Group scheme lending, with the sector achieving an 8 percent growth rate in the period,” said Makepe.
She added that by continually optimising the bank’s balance sheet, thus reducing its reliance on institutional deposits, the bank has been able to reduce interest expense by 33 percent.
Barclays Bank Botswana’s growth in the net fee and commission income increased by 10 percent due to increased transactional business, annuity income from its insurance business, and the launch of new channels such as cash send.
Also, total income decreased 6 percent and is reflective of the prevailing record low interest rate conditions in which the bank currently operates.
Makepe said that while the impairment charge increased by 24 percent on the prior year, the impairment loss rates have remained stable at 2.64 percent.
She added that the overall impairment coverage has increased from 4.9 percent in December 2013 to 5.1 percent in June 2014.
“Our operating expenses are in line with expectation and are reflective of the investment that is being made to transform this business,” she said.
Makepe admitted that higher spend on administrative costs is as a result of increased spend on training and system enhancements incurred in the reporting period.
She added that these are intended to support new product and service offerings to be rolled out progressively in this year and beyond.
Barclays Bank Botswana Managing Director,┬áReinette van der Merwe pointed out that┬áthe bank’s journey of innovation and transformation requires significant investment in the business in the short term to ensure they attain the vision to be the “Go-To” Bank in Botswana.
“As such we will invest in our colleagues and infrastructure to provide us with a solid foundation to improve our customer value proposition as we position Barclays as the “Go-To” bank in Botswana,” she said.
She noted that the key driver for the upturn has been the upward growth momentum in the advanced economies and strong performance in emerging markets.
The MD said that Botswana’s inflation has remained well controlled within the objective range of 3 percent to 6 percent, adding that the Bank of Botswana has consequently kept the bank rate unchanged from December 2013 at 7.5 percent.
“Our strong liquidity and capital base have positioned us to adequately fund our medium term growth plans. We will continue to maintain cautious capital levels in line with anticipated regulatory change,” said van der Merwe.
