The country’s biggest commercial banker, First National Bank Botswana (FNBB) has said that it is expecting a higher Profit before Tax for the interim period that ended 31 December 2022.
In a cautionary statement issued to the capital markets leading banker said that its interim profit will be higher than that reported in the previous corresponding period by between 15 and 20 percent, which in number terms is an increase of between P87 million and P116 million. FNBB’s profit before tax for the corresponding period ended 31 December 2021 was P578 Million.
“Shareholders should note that the financial information on which this trading statement is based has not been reviewed or reported on by the external auditors. The full details will be provided to shareholders at the announcement of the period ended December 2022 interim financial results, due to be released on 16 February 2023”, reads part of the cautionary statement from the banker.
Mending the cracks….
The latest performance by FNBB and its competitors in the banking sector suggest a mending of cracks on the sector which was first discovered in 2015.
During that year, profits fell from 2013’s P1.7 billion, touching new lows of P1 billion. The fall in profitability was largely due to a slash in bank rate from 7.5 percent to 6 percent. In 2016 profitability started improving following the suspension of the moratorium on banking fees and charges, resulting in an increase of P1.4 billion in net income, despite another bank rate cut to 5.5 percent. By 2019, the expectation was high that the commercial banks will reach another record year of earnings following the P2 billion net income recorded in 2018, the highest bank earnings in the history of the country. For the first half of that year, the net income outperformed 2018’s corresponding period but the gains were reversed in the second half after the central bank reduced the banking rate to 4.75 percent. During that period, loan impairments also soared, resulting in total net income of P1.7 billion – the third highest after the 2018 and 2013 net incomes.
Fast forward to 2021, the central bank says the sector’s net after-tax profit increased by 24.4 percent from P1.5 billion (2020) to P1.8 billion largely reflecting improved business activity. During that year, commercial Banks maintained good quality assets with a decline in credit default rates.
The latest gains by the sector were all driven, in one way or another by appetite for credit by both business and households, with the latter bolstered mainly by government workers who continue to benefit from increased salaries. While household credit accounted for a larger proportion of credit, at 66.2 percent of total bank credit in 2021, central bankers maintained that indebtedness level is considered low by international standards.
