Monday, October 3, 2022

Lobtrans saga pushes banking sector’s bad debt provisions to the limit

Barclays Bank of Botswana, the largest bank in the country, posted lukewarm results like other major banks as Lobtrans’ potentially “fraudulent scandal” weighted heavily on its balance-sheet.

According to the full year results to the end of December 2007, new developments, which are aimed at repositioning the bank against its peers in the market and bad debtsÔÇömainly attributed to Lobtrans ÔÇö pushed its provision up by 940 percent, the bulk of it being Lobtrans.

The banking scandal by Lobtrans, which fell into judicial management, last month, is bigger than the Hyundai Motor Company scandal of 1999. But by then, the only bank that suffered a lot was the First National Bank of Botswana.

However, Lobtrans did not spare any big bank in the country, save FNBB, whose loans were secured against its assets.
Barclays Bank is expected to officially detail the magnitude of the losses tomorrow (Monday), at its breakfast briefing at the Gaborone Sun Hotel.
But the picture is already bad given the figure on its financial results. Although interest income for the year was 28 percent better at P 1.4 billion against P 1 billion on the corresponding period, it had to provide provision against bad debts to the tune of P 94.9 million or 940 percent higher against P 9 million in the previous year.

Further, the profits for the year were also shaved by 18 percent to P 240 million from P 293 million like for like.

“In the fourth quarter Barclays Bank of Botswana experienced losses related to the impairment of advances, principally reflecting one significant corporate credit. The bank is working to further strengthen its credit risk assessment procedures to ensure that stricter management of the bank credit exposure,” Thuli Johnson, Barclays Managing Director, said in a statement.

He further pointed out that some of the once-off charges were related to the expansion programme which is aimed at repositioning the company for the future.

“I do not think that these huge provisions could be attributed to the indecision or poor credit risk assessment. From what we gather, Lobtrans colluded with people at the Ministry of Transport to issue multiple blue books.

“It appears the banks were misled and defeated by the company and those who colluded with them,” Managing Director of Capital Securities, Gregory Matsake, said on Friday.

Standard Chartered Bank of Botswana and the African Banking Corporation also suffered the same fate as they lost P 75 million and P 13 million, respectively, due to bad debt provision, mainly prompted by the Lobtrans saga.

SCBB came out in a bad picture, with its profits tumbling from P 258 million in the previous year to P 239 million, and provisions being hiked more than double to the tune of P 53 million to P 75 million. That also affected its standing as its costÔÇôto-income ratio paddled back from 38 percent to 40 percent.

The three banks, ABC, Barclays and SCBB, loans were not secured against property of the bank thus why the two biggest banks had to go to the High Court.
All told, Lobtrans went away with close to P 300 million of shareholders’ money in the form of loans which turned into bad debts.


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