Speaking at the First National Bank Botswana (FNNB) financial results briefing last week Thursday, the Chief Executive Officer (CEO) Steven Bogatsu told an audience that credit expected to be extended to businesses in 2016 is a sign that they are starting to realize growth opportunities. He said despite the declining business confidence that has been observed, the credit extension is evidence that most businesses are optimistic about the environment going into the future.
According to FNB Chief Financial Officer (CFO) Magau Dibakwane, credit extension is in need of improvement in terms of rationalising the funding portfolio, adding that the bank’s focus is to increase long term loans. Dibakwane explained that due to limited lending and investment opportunities, the bank finds it fitting to focus on the growth of loans which he however emphasised should demonstrate palatable risk. He added that rationalising the funding sources bears an impact on the cost of funds that the bank extends. He cited the growth of the balance sheet, from which loans grew by 12 percent to 14.4 billion, adding that the growth was spurred in particular by term loans. Broadly speaking, he said that the retail sector was the biggest contributor of loans.
In terms of diversifying the bank’s portfolio, Bogatsu said that the bank intends to move away from core banking services into new territories, highlighting in that regard that competition is encroaching the banking space and therefore eating into their revenue. It seemed from his expression that this is a subject that is rankling FNBB. “We will respond, they’re coming to eat our lunch, we’ll go into their supper,” he said.
Regarding the bank’s positioning into the future, Bogatsu said that the bank continues to refine its business model so as to ensure that it works as well as the bank desires. He said that the bank’s large customer base, at 480 000 requires systems and relationships to be in place, hence the focus on the self-service provisioning.
In reference to the bank’s decline in profitability, Bogatsu said FNBB has “weathered the storm and is now turning a corner.” He said that despite that Bank of Botswana lifted the bank charges moratorium at the beginning of the year FNBB however continued to operate within its limitation which as a result impacted the bank’s financial performance. The two year moratorium came into effect on 1 January 2014 restricting local retail banks to make upward adjustments on bank charges and fees.
FNBB’s profit before tax declined by 13 percent compared to the corresponding period ended 30 June 2015. Prior to the financial results briefing FNBB released a cautionary statement through the stock exchange warning shareholders that the bank’s overall growth for the period ended 30 June 2016 will be lower than was reported for the period ended 30 June 2015. Bogatsu proclaimed that it was last time his bank was issuing a cautionary on a downside performance and shareholders should in the future expect announcements on the upside of the company’s financial performance.
FNBB’s Chief Financial Officer (CFO) Magau Dibakwane said that despite the difficult environment FNBB will not take its eyes off its investment activities, citing that the bank’s market growth is yielding dividends growing at a rate of 12 percent outpacing the industry’s growth at 8 percent.