Tuesday, October 19, 2021

Impairments sinks Standard Chartered bank further

Standard Chartered Bank Botswana has blamed its recent poor financial performance on significant loan impairment due to its exposure to the mining sector. Several companies in the sector have since closed shop.

One of them, H & A Cutting Works, which is a member of the Exelco Group used to operate a diamond polishing factory in the capital Gaborone and is one of the 16 sightholders that was appointed by DTC to purchase rough diamond for cutting and polishing. The company has since left the country.

This week details emerged that Standard Chartered Bank which has exposure to the mining sector had extended facility of P2 billion to H & A Cutting Works.

As a result, the Botswana Stock Exchange (BSE) quoted bank says its financial results of the period that ended 31st December 2017 will be significantly lower than those achieved in the corresponding period in the prior year.

In 2008 Standard Chartered Bank announced its funding of the construction of the sightholder H&A Cutting Works’ Diamond Cutting facility.  

Meanwhile Standard Chartered Bank Botswana Chief Executive Officer (CEO) Mpho Masupe last year announced and confirmed that the bank has considered de-risking and exiting the diamond and jewellery sector and he added that the bank has taken long more it was suppose to since 2015.

“The bank is pleased that the core fundamentals of the bank remain strong despite experienced headwinds. The bank’s balance sheet has proven to be resilient and well structured to support Management’s refreshed strategy to sustainably grow the business,” reads the bank’s recent cautionary statement.

The bank’s previous financials for the six months ended 30 June 2017, the Group’s profitability was adversely impacted by a one off impairment for a specific client in our corporate business which resulted in a significant impairment loss.

Profit before Tax (PBT) is P147 million (182 percent) lower than prior year mainly by one impairment and slow momentum in non-funded income (13 percent).

The bank’s total cost increased by P35 million largely due to one off costs attributed to the re-oraginisation while Net impairment charges increased from P30 million to P128 million largely to a one off significant provision taken in Corporate Business.

The bank’s 2017 income is down by 3 percent year on year and the loss for the period is at P57 million due to one off loan impairments. Cost closed the period 10 percent higher year on year, on the back of investment and organization cost.

Standard Chartered Bank has been a partner with the diamond industry, especially given that Botswana is the leading producer of diamonds in the world, and that diamonds contribute to a significant portion of the country’s GDP. 

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