The Botswana Building Society (BBS), the titanic mortgage-lending bank, is to issue P 75 million bond in the coming months in a bid to matchÔÇôup the rising appetite in the market, especially in the home-ownership bracket.
By Friday, the details of the bond were still kept under wraps; however, the organization confirmed that the initiative “is in the pipe-line”. Top management and their consultants were understood to be still courting potential investors and it was said to be closer to be concluded.
“I can confirm that we are in the process of issuing P 75 million bond largely because we are facing an upsurge in mortgage applications,” spokesperson for the bank, Sipho Sowa, said.
The latest bond initiative is the third in the history of the bank with the last one having a face-value of P 50 million and having being privately placed. At its maturity in 2004, the BBS got an approval for a P 500 million programme which was to be issued in tranches.
And in December 2004, BBS issued its first tranche of bond with a face-value of P 100 million priced at 12 percent per annum. The bond, which was over-subscribed, is to mature in 2016.
The proposed bond is two-pronged and is targeted at the mortgage interest rate reduction campaign and a new product is slated to be launched onto the market in January next year.
The reduction rate scheme cuts variable mortgage interest rates from 16 percent to 14.75 percent variable while fixed will be lowered from 15.5 percent to 14.5 percent. That represents a reduction of 100 basis points for fixed mortgages and 125 basis points for variable.
“We are an indigenous financial institution and our believe is that, where possible, we should make it possible for Batswana and other clients to borrow at affordable rates,” Showa has said.
BBS’s bond comes at a time when the entire banking sector is gearing for heated competition which is focused on product designsÔÇöespecially towards consumer banking.
BBS’s latest decision comes at a time when it has reported outstanding results at the end of the year profits to the end of March 31, which showed profits up 88 percent, up to P 58 million, while its income ÔÇô cost- ratio was slashed aggressively from P 72 to 45 percent.
“Our profits this year were phenomenal. This can be attributed to the young and educated employees we have recruited. I am confidant that even going forward, we will be able to achieve our set targets,” BBS Chief Executive Officer, Pius Molefhe, said, adding that the situation was being aided by the improved relations between the major shareholdersÔÇöincluding government.
However, the banking institutions said the mortgage demand has slowed down but they are crossing their fingers on the upcoming mining development in the northern parts of the country. Palapye, Francistown and Mahalapye are expected to have a windfall because of the mining activities taking place within their doorsteps. Gaborone is expected to be jerked up by DTC Botswana and Block 10.
“The banks are fighting to get their piece of the cake and are providing cheap funding. But, we are not afraid of that because we are a brand. Our turn around time is much better, our administration charges are the lowest compared to competition,” Molefhe said.
Molefhe, who took BBS as an ailing bank with profits of less than half a million in 2004, has built its assets to over P 1.3 billion within a period of three years.
“In 2004, we decided that we should take the institution to a higher level and profile. And that included a process of re-engineering, such as rationalization and the introduction of performance management system,” he added.
The transformation saw BBS controlling close to 70 percent of the residential mortgage market as it fights against the monied banking houses such as Barclays and Standard Chartered Bank.