Saturday, October 24, 2020

BBS loan book powered by home-ownership boom

Botswana Building Society (BBS) mortgage banks came with strong loan book, which was buoyed by an upsurge in residential property, the company’s full year results indicated last week.

The Society’s long term loan jumped 31 percent to P 749 million leading to total assets of P 1.16 billion, while total income from lending activities stood at P 107 million from P 86.7 million in the prior year, but net profit remained flat at P 30 million.

“The Society’s total assets and advance grew by 38 percent and 31 percent respectively for the last financial year. While demand for commercial property was subdued, demand for residential property finance was good,” it said in a statement.

“These are pretty results considering that we have been in a high interest rates environment. However, net profit was flat because of the once-off charges which related to restructuring,” Tapologo Motshubi, an analyst at Allan Gray said Friday.

According to the financial statement, the Society took a once off charge of P 14 million, which was blamed on the restructuring exercise, and a further P 9 million on taxes, which stifled profits to P 30 million from P 27 million in the previous year.

Further, analysts said given the fact that BBS was able to maintain a lead in the market, although with a lesser widespread network compared to the commercial banks, speaks volumes.

BBS is being threatened by First National Bank of Botswana, which saw its property finance wing growing 46 percent at full year to June to stand at P 1 billion.

“The advantage with FNBB is that it has a wider-spread compared to BBS, which makes its distribution a lot better,” Motshubi said.

However, the markets were unsettled with the Society’s operating costs which ballooned by 78 percent to P 41 million from P 23 million and the cost income ratio which shifted from 54 percent to 72 percent over the period to March 31, 2006.

“Obviously, I do have concern with the cost income ratio which has grown from 54 percent to 72 percent and it is not clear as what happened. And it is difficult to know that because the company is not listed,” Leutwetse Tumelo, an analyst at Capital Securities said.

But the Society said the one-off charges were to be blamed for the shift, which it said on the outlook is expected to stabilize in the coming year.

“The cost/income ratio has increased from 54 percent to 72percent during the year under review. The increase in the ratio was caused by the once-off cost of costs related to retrenchments and payment of withholding taxes. We expect the ratio to normalize in the current financial year,” the Society said.

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