Botswana Building Society (BBS), the┬álargest mortgaged lender’s loan book bulged in the six months to the end of September, prompting it to predict better results┬ádespite the worst┬áeconomic conditions since the Great War.
Advances during the period moved up to P 1.5 billion from P 1.3 billion in the previous year, but overall profits tumbled by 3 percent to P 34.6 million largely due to lower interest rates in the market.
“The decrease in profitability is as a result of reduction in the margins due to lower interest environment,” Pius Molefe, Managing Director of the society said.
Further profits were also battered by rising costs, which were partly ascribed to an increase in Value Added Tax (VAT) from 10 percent to 12 percent, which government increased during the current fiscal year in a bid to bolster its revenue.
“Operating and administrative costs increased by 14 percent and eight percent , respectively, as a results of inflationary pressures in the economy and particularly the increase in Value Added Tax from 10 percent to 12 percent,” Molefe said, adding that┬á his management teams is working on plans┬á to maintain the profitability of the organisation.┬á
The society also saw an increase in its asset base to over P 2 billion and its income to cost ratio edged up to 65.7 percent.
However, collections improved over the period leading to lower provision for bad and doubtful debts in the midst of a very challenging economic environment.
“The level of loan provision, however, reduced┬áfrom P 23 million in September┬á2009 to P 9 million┬áas at┬á30 September┬á2010 on an account of improved collection strategies by the Society,” he added.
The society has decided on an interim dividend of  P 24 million, which will be  structured  on the basis of 10.7 per share.
