Three months just before the arrival of its newly appointed Chief Executive Officer (CEO) Steven Bogatsu, First National Bank Botswana (FNBB) has delivered a fair set of results for the half year ended December 2014, considering the prevailing strenuous economic conditions.
When presenting the bank’s HY financial results, FNBB Chief Financial Officer (CFO) Boitumelo Mogopa said the bank’s balance sheet grew by 11 percent to P17.9 billion from P16.2 billion in December 2013 while advances to customers grew by 16 percent to reach a new high of P12.7 bn.
“This growth came from property finance, WesBank and RMB term loans. The bank has maintained its conservative credit risk appetite and the growth in advances was predominately in secured asset classes,” she said.
In order to achieve its 16 percent growth in advances, FNBB had to actively manage its liquidity position amid increasing liquidity pressures in the market. The bank was successful in this regard and managed to grow deposits from customers by 11 percent, thus maintaining its leading position in market share. Mogopa said FNBB improved efficiency in its balance sheet as evidenced by a 25 percent year-on-year reduction in Bank of Botswana Certificates (BOBCs) in the face of tightening liquidity in the market, which resulted in an increased loan to deposit ratio. Notwithstanding a growth of 16 percent in advances, combined with a decline of 25 percent in BOBCs, FNBB’s total interest income and similar income grew by 2 percent; a result of the prudent approach taken by the bank to grow its assets in more secure asset classes which typically exhibit lower yields.
“This strategy will help preserve the income-generating ability of the book in the future,” said Mogopa.
The increase in cost of funding in the market has led to a 15 percent increase in interest expense. Impairment of advances increased by 55 percent, which reflects the bank’s prudent provisioning methodology.
For her part, FNBB Director-Credit Ogone Masisa-Kgwarae explained that given the current stress in the market, the bank has maintained a more stringent credit assessment process. Also the bank has seen a significant increase in transaction volumes which translated into 11 percent increase in non-interest income.
FNBB Acting CEO, Richard Wright said the bank’s fundamentals remain strong within the current difficult economic climate.
“Opportunity lies in the customer-centric strategy that the bank has embarked on which is on the back of a refined segmentation model,” he said.
During the period under review, FNBB maintained focus on ensuring that cost containment was realised through rationalisation of service providers as well as standardisation of prices for consumables. Overall, this adoption of procurement best practice assisted the bank in curtailing costs which only increased by 6 percent. As a result, profit before tax declined by 5 percent year-on-year with key metrics remaining strong, while return on assets were at an acceptable 4 percent and return on equity at 31 percent.