The country’s biggest commercial banker, First National Bank Botswana (FNBB) which saw its 2020 interim profit dip by almost a quarter says it is expecting a higher Profit Before Tax for the same period in 2021.
The bank, which is listed at the local bourse, issued a market cautionary statement this week announcing to its shareholders and market that its overall profit before tax for the interim period ended 31 December 2021 will be higher than that reported in the previous corresponding period.
The banker says it expects an increase of between P147 million and P168 million in its interim PBT results to be announced on the first week of March 2022. FNBB’s Profit before Tax for 2020 ended 31 December 2020 was P419 Million and the banker says it expects to grow as much as 35 – 40 percent.
The bank stated in the cautionary statement that the 2020 numbers reflected the effects of the Covid-19 pandemic which disrupted economic activities, especially in the first half of 2020.
“The Board recognises that the December 2020 results were significantly lower than the current reporting period primarily due to the provisioning for expected credit losses related to the economic impact of Covid-19”, reads part of the statement.
The pandemic has also halted the bank’s strong momentum that began three years ago. Business boomed for FNBB in 2019, bringing in the record setting P945.3 million in profit before tax for the year ended June 2019, up from P838 million in 2018.
At the same time, the commercial banking industry in Botswana is moderately becoming concentrated, with lenders restructuring and moving more towards digital channels and in the process cutting jobs.
Bank of Botswana’s bank supervision report for 2020, which uses the Herfindahl-Hirschman Index (HHI), which is commonly used to measure of market concentration and assess the degree of competition in the Botswana banking industry, says the HHI marginally increased from 0.1756 in 2019 to 0.1770 in 2020, remaining lower than 0.1800, indicating continuance of a moderately concentrated market.
With a number of nine licensed commercial and three statutory banks, the four large banks (FNBB, ABSA, Stanbic and Stanchart) continued to dominate the banking sector and accounted, in aggregate, for 79.1 percent, 79.2 percent and 77.4 percent in total assets, total deposits and total loans and advances, respectively in 2020, compared with 78.7 percent, 78.6 percent and 76.7 percent of the same in 2019.
“The net interest margin (NIM) for the banking industry decreased marginally from 4.9 percent in 2019 to 4.7 percent in 2020, signalling enhanced competition and efficiency of the banking system in 2020,” the BoB report noted.