The First National Bank of Botswana said on Friday it was coming up with a raft of measures to respond to effects of the economic recession which is weighing heavily on the banking sector as results start to trickle in.
The bank admitted that the consumer is under tremendous pressure and new ways of doing business in the competitive industry are needed.
FNBB Deputy CEO, Richard Wright, said at the presentation of the company’s half year results ended December, 31, 2012 that some of the moves include getting closer to customers and the workforce.
The bank currently has 375, 000 clients with one client taking over 3 to 4 products with the BSE listed bank.
“The FNBB response to the crisis is to improve our relationship with the staff and deepen our relationships with the consumer,” said Wright. The bank will also move to diversify its portfolio under its shareholder strategy. Currently, property is FNBB’s largest portfolio followed by Westbank, then consumer lending and commercial.
“The strategy is to have quality loan book,” said Wright, adding that the bank will focus on secure advances as opposed to the traditional unsecured lending. FNBB hopes to keep the ration at 70- 30 percent.
“The strategy is to prepare the bank for Basil II. We have started to improve efficiencies in the bank,” added Wright.
FNBB’s interim results showed the bank is operating under pressures of economic crisis. Botswana GDP growth was sluggish in the past 6 months as it grew at 4.7 percent compared to 6 percent in the prior year.
However, it weathered the storm as Profit Before Tax rose 17 percent from P376.7 million to P440.9 million while Non Interest Income rose 14 percent from P320.9 million to P364.8 million. Total assets rose by 10 percent from P13.9 billion to P15 billion.
Customer deposits rose from P11.56 billion to P12.25 billion while advances to customers grew 14 percent from P8.06 billion to P9.22 billion.
The property portfolio is already responding to the strategy of growing the secured space as it grew by 19 percent followed by Wesbank, which grew 18 percent to P1.7 billion. Retail grew by 14 percent to P2.4 billion and corporate grew to P1.5 billion.
FNBB’s Chief Financial Officer, Boitumelo Mogopa, said consumer credit is picking up, but the major concern remains servicing the credit. Businesses like retail consumers are now struggling to ‘pay their debt’, she observed.
“There have not been any salary increments, but the cost of living continues to grow,” said the CFO.
However, she said the bank showed resilience as it registered a 10 percent growth on the balance sheet under the tough trading environment.
Impairments were up 31 percent on the back of national strikes that caused havoc in the economy with many government workers losing their jobs, but Mogopa assured investors this space will be dealt with.
“Consumers are over-borrowed in this market,” she warned, adding they are tightening collections and said this line will be contained because the bank will focus on it. The bank said it is happy the non interest income is growing as it went up 14 percent P320.9 million to P364.8 million.
“We grew non-interest revenue more than we grew our interest income. The mix in the past two years has been on the up,” said the CFO, adding that the idea is to cover costs with non interest income.
FNBB is also facing rising costs as it attempts to beat competition in the banking industry. Its staff cost went up 9 percent in line with inflationary pressures. In the past 6 months, the bank installed 10 Automatic Teller Machines (ATMs) and one mobile ATM in Pandamatenga.
The bank also invested in ATM software and opened two new branches; one at Railpark Mall that came with service centre and new state of the art Airport Junction Mall branch.
“We are maintaining our costs by growing revenues,” said the CFO.
FNBB has disclosed a gross 5 thebe dividend set to be distributed on 22 March 2013 with LDR of 11 March 2013.
“We are trying conserve cash to prepare for the Basil II and that is why we are conservative on dividends,” the banks CEO, Lorato Boakgomo- Ntakhwana said in response to quires that the dividend was too little.
Basil II, an international banking standard, is expected to make local banks risk sensitive and the deadline was set for last year.