Saturday, June 6, 2020

It’s a bumper year for Botswana’s banking sector

BY BONNIE MODIAKGOTLA

Botswana’s banking sector is in for another bumper year of profits as indications from Bank of Botswana point to strong growth that stretched up to the third quarter of the year. The growth figures are reflected in the central bank’s latest October financial statistics.

Despite Bank of Botswana maintaining the interest at 5 percent for over a year now, commercial banks have shown resilience with interest income rising quarter on quarter – outperforming 2017 in all quarters. In the first quarter of the year, banks delivered P1.34 billion, then P1.4 billion, and P1.44 billion in the third quarter.

However, interest expenses were on the up, resulting in a lower net interest income (NII). In the first quarter, NII came at about P966.7 million, then retreated in second quarter to P953.3 million, and rebounded slightly in the third quarter to P963.4. This was a weak showing compared to 2017’s quarterly performances.

In another strong showing for the year, the banks tightened the bolts on credit risk, resulting in lower provision for bad debts and doubtful debts ÔÇô an incredible performance compared to the previous year.

The positive momentum was also reflected in non-interest income which also grew quarter on quarter. In the first three months of the year it was P633.6 million, increasing again to P685.7 million and ended the third quarter with P729.7 million. This quarter on quarter growth outpaced the ones recorded in 2017. However, when it comes to reigning in expenses, the bank once again failed to improve on figures recorded last year.

In the current year, due to strong performances, the banks were paying increasing taxes every quarter of the year, more than amounts paid in 2017. In the end, the banks’ net income was marginally higher than 2017: the first quarter shows profits of P397 million, then up again in second quarter to P463.4 million and finished the third quarter strong at P313.2 million.

The impressive performance from banks was on the bank of growth in deposits and credit. Total deposits held by commercial banks increased 0.9 percent to P68.5 billion in September from P67.9 billion in August. This was on the back of increases in deposits from resident businesses and households. The latest data shows that businesses continue to hold the most deposits as they account for 75.9 percent of total deposits compared to 20.3 percent held by households.

The October financial statistics (which actually shows data for September) reveal that credit growth edged 1.6 percent to P57.6 billion. There was an uptake of credit in the resident businesses, advancing by 2.3 percent, while non-resident businesses’ borrowings were up 51.7 percent.

Commercial banks annual credit growth in September was at 8.1 percent, higher than 7 percent recorded in August. The share of credit to the household sector was 59.9 percent, down 0.4 percent from the previous month. So far this year, household borrowing on average has been on upward trend.

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