The country’s smallest commercial banks are having hard time to grow their market share as competition remains highly concentrated within their top five banks. The top market players in the domestic banking sector include First National Bank Botswana, Barclays Bank Botswana, Stan chartered Bank Botswana, Stanbic Bank Botswana and Atlas Mara’s BancABC. Three of these banks, Barclays, FNBB and Stanchart are listed on the Domestic Companies Index of the Botswana Stock Exchange (BSE). BancABC delisted from the local bourse whilst Stanbic Bank has continuously shun the call to list its shares.
In its annual supervisory report, the banking sector regulator – Bank of Botswana (BoB) says as a result of the struggle encountered by small banks to penetrate, the degree of competition within the country’s banking sector during 2016 deteriorated slightly with much competition recorded only in the top five banks. The bank says the modest differences in market shares for the top five banks suggest wider dispersion and competition at that level.
The BoB figures shows that by the end of 2016, the top five commercial banks kept a tight leash on their dominance holding 90 percent of the industry’s assets, deposits, loans and advances.
The Bank of Botswana also used the Net Interest Margin (NIM) as an indicator of competition in the market which showed an increase from 4.7 percent in 2015 to 5.4 percent in 2016.
The bank says in addition to competitive forces, the NIM can be driven by different factors, such as operating costs, loan quality and the macroeconomic environment, including inflation and interest rates.
“In this case, the indicator of weak competition in the market could be attributed to the fall in the average cost of deposits compared to 2015, where banks had to compete aggressively for deposits in response to tightening of liquidity in the market”, reads part of the BoB report.
The BoB report further states that the market share of statutory banks, in terms of total assets, decreased slightly from 7.3 percent in December 2015 to 6.9 percent in 2016. In terms of loans and advances, statutory banks’ share increased from 8.1 percent in 2015 to 8.5 percent in 2016. National Development Bank, Botswana Savings Bank (BSB) as well as the Botswana Building Society (BBS) are classified by BoB as statutory banks.
Meanwhile the report also shows that the banking sector’s total assets increased by 5.3 percent in 2016 (December 2015: 12.7 percent) from P76.6 billion in December 2015 to P80.6 billion.
The growth has been attributed to a 6.2 percent increase in gross loans and advances to P51.3 billion in December 2016. Net loans and advances constituted a larger proportion of total banking sector assets (62 percent), followed by investment and trading securities (14 percent).