Saturday, May 25, 2024

FNBB to drive revenue diversification strategy as PRR hits bottom line

First National Bank of Botswana said Friday it will continue to diversify its revenue streams and accepted that Central Bank’s reserving requirement hit its half year bottom line.

The interim results for the period ended 31, December 31, showed the BSE listed blue chip bank with market capitalisation of P6. 8 billion grew its advances to customers by 24 percent.

Deposits grew by 16 percent from P9.9 billion to P11.5 billion driven mainly from the retail market. Profit before tax went up 13 percent from P333 million to P376.7 million from the corresponding period.

Profit for the period sits at P296 million, which is 14 percent better than P260 million reported in the prior year.

The bank said its net interest income before impairment of advances grew by 12 percent from P325 million to P365 million. Non-interest income increased by 31 percent from P245.5 million to P320 million.

FNBB Chief Financial Officer, Steven Bogatsu, said the growth in non-interest income showed the bank’s drive to diversify income streams was bearing fruit.

“We are happy that revenue diversification strategy is working,” Bogatsu said.

The bank said non-interest income grew as a result of increase in the number of ATMs to 123 around the country and improved uptime from 92 percent to 97.3 percent and higher transaction volumes.
FNBB revealed it wants to make ATMs profitable rather than the conventional service support.

The non-interest income was also boosted by once-off sale of shares in VISA as the bank pocketed P25 million out of the transaction.

“Focus on non-interest income continues to be a critical strategy to mitigate risks associated with the negative impact of interest income, which in the period under review was affected by increase in reserving requirement and a lower interest rate cycle,” the bank said in a statement accompanying the results.

The Central Bank has of late kept its key Bank Rate unchanged at 9.5 percent in a bid to help the recovering economy.

Last year, the Bank of Botswana surprised the markets by hiking the Primary Reserve Requirement (PRR) from 6.5 percent to 10 percent in a move aimed at protecting consumers against commercial banks.

The decision meant that commercial banks are to deposit an equivalent of 10 percent of customers deposit holdings in a non-interest earning account with the Central Bank in an attempt to mop up excess liquidity in the market.

The BoB decision has two-pronged benefits; the money will not go into a risk-free 90-day financial paper, namely the Bank of Botswana CertificateÔÇöthereby protecting national asset — and on the asset side, consumers will be protected from high interest rates as bank rate would not go up.
Bogatsu said the policy decision impacted on the FNBB earnings as the bank had to move cash from interest earning account to non interest earning account ‘in order to meet the reserving requirement’.

Although the bank’s cost to income ratio is still low at 38 percent, it saw its operating expenditure growing by 27 percent as the bank is currently in high expenditure mode.

FNBB is currently expanding its branch network and had spent money in the rest past to increase ATMs to 123.

The bank said its car financing division, Westbank, was hard hit by the slowdown in mining activity in the country in the past four years.

FNBB controls 57 percent of the car auto financing market, but a reduction of 16 percent in car purchases affected the division’s profitability.


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