Friday, October 30, 2020

BBS warns of losses as it transitions

Leading local mortgage lender – Botswana Building Society Limited (BBSL), which is planning to morph into a commercial bank, has finally reported part of its late financials, reflecting losses which are expected to roll over in the coming years. 

On Thursday, BBSL finally announced the financial statements for the year ended December 2018, which have been delayed by over a year, resulting in the bank’s shares being suspended from trading on the Botswana Stock Exchange’s Serala OTC Board, which is a springboard for companies that intend to list on the main board of the BSE.

“This is the first time in the history of BBS Limited that we have brought you audited financials of a particular financial year very late. The audit for the period ended 31 December 2018 was delayed by challenges we experienced with our core banking system, Temenos T24,” said Pelani Siwawa-Ndai, the bank’s board chairperson.

“This was after we upgraded it in preparation for commercial banking operations. Admittedly, the system experienced some bugs following the upgrade resulting in the integrity of the numbers coming out of it being questioned,” she added. 

According to the latest set of financial results that only cover a nine-month period, BBSL recorded a loss of P26 million in December 2018 compared to P49.9 million profit registered in March 2018. The bank has changed its financial year end from March to December and has explained that the registered loss was not due to poor performance but due to in BBSL’s capital structure following its conversion to a company as well as the effects of the implementation of IFRS 9 Financial Instruments.

In April 2018, BBSL went through a demutualisation process by converting from a building society to a company limited by shares. This process was part of the company’s journey to convert to a commercial bank. The process involved selling shares to existing account holders and listing of 487 million shares on the Serala board at P1.20 per share. BBS’ biggest shareholders include the Botswana Privatisation Asset Holdings, Motor Vehicle Accident Fund and the Botswana Police Savings and Loans Guarantee Scheme. 

BBSL managing director Pius Molefe says they are now updating the banking licence application with the latest financial results and will resubmit it once they have finalised the audit for the period ended December 2019. He says they are confident that they will not recall the banking licence application again, adding that at the latest, they should be operating as a commercial bank by the second quarter of 2021. 

“I would like to assure you that BBSL is in full mode to run the commercial bank in the event that the Bank of Botswana issues it with a licence,” said Molefe. 

He said  they have finalised a new organisational structure which is in line with the envisaged banking operation. Besides introducing a number of new roles, the bank will also roll out new products and services offering and fine-tuning a new digitalisation strategy.

However, the bank warned that some initiatives and many others require a lot of financial investment thus future performance will not be comparable to what the markets have been used to and the situation will subsist for the next two to three years. 

The loss-making position is expected to continue for a period exceeding 12 months, largely driven by the envisaged increased costs as part of journey to transition into a fully-fledged bank. 

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