Bank of Botswana (BoB) 2016 Annual Report says year-on-year growth in commercial bank credit decelerated from 7.1 percent in 2015 to 6.2 percent in 2016, against a background of subdued economic activity and restrained growth in personal incomes.
The bank states in the report that the slowdown in annual credit expansion was mostly associated with the decrease in growth in lending to the household sector from 12.8 percent in 2015 to 7.6 percent in 2016. The report added that, in contrast, yearly growth in business credit increased from -0.3 percent to 4.2 percent in the same period.
“As at December 2016, household credit constituted a larger share of total private commercial bank credit at 60.1 percent,” reads the report.
By component of household credit, BoB stated that annual growth of unsecured lending decreased from 15.5 percent in 2015 to 8.3 percent in 2016, while yearly expansion in mortgage loans declined from 7.2 percent to 6.3 percent. Contained in the report is that the slower growth in these categories of credit was consistent with the subdued activity in the property market and modest growth of personal incomes, which engendered a cautious approach to lending by banks.
“Overall, banking system performance indicators suggest a stable financial environment. Specifically the moderation of mortgage credit growth in the context of a slowdown in the property market bodes well for maintaining potential risks in this area at modest levels,” reads the report.
Contained in the report signed by BoB Governor Moses Pelaelo is that the concentration of household credit in the unsecured lending category (66 percent) continues to be a cause for concern. He added that nonetheless, any risks emanating from this type of lending to households is moderated by the extent to unsecured credit diversified and its potential contribution to economic activity, wealth-creation and growth activities that it finances.
On other Depository Corporations, BoB stated that the overall balance sheet of commercial banks increased by 5.2 percent from P76.7 billion in December 2015 to P80.7 billion in December 2016. The report adds that on the assets side, loans and advances increased by 5.7 percent from P47 billion to P49.7 billion, while debt securities held by banks rose by 59.5 percent. Year-on-year to December 2016, deposits of domestic banks in foreign banks decreased by 2.3 percent, while “other assets” increased by 2.5 percent.
Contained also in the 2016 annual report is that with respect to liabilities, deposits at commercial banks rose by 4.4 percent in the same period. The bank added that wholesale business deposits remained the main source of commercial banks’ funding (73 percent of total deposits in December 2016), sustaining the net debtor position of households. BoB stated that that the ratio of commercial bank assets to nominal GDP was relatively stable at around 50 percent in both 2015 and 2016, while the credit to GDP ratio was 42.1 percent in 2016.