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┬ámoved up┬áto P 1.5┬ábillion┬áfrom 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┬ábattered by rising costs, which were partly ascribed to┬áan 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┬áincome to cost ratio edged up to┬á65.7 percent.
However,┬ácollections improved over the period leading to lower provision for bad and doubtful debts in the midst of a very challenging┬áeconomic 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┬áhas decided┬áon an interim dividend of┬á P 24 million, which will be┬á structured┬á on the basis of 10.7 per share.