The National Development Bank (NDB)’s balance sheet bulged up 31 percent to P 741 million to add yet another successful year to its history, thanks to an increased borrowing by the corporate clients.
According to its financial results to end of March 2006, the bank was awash with cash as turnover reached P 109 million, as against P 96 million in the same period last year. And net profits shot up by P 13 million, or 35 percent.
The bank, which is at the initial stages of its turn around strategy, ascribed its performance to a raft of factors, such as, changes in fair value, decrease in interest expense and long-term borrowing.
Further, cost containment played a major role ÔÇô as it put the bank on a better shape of cost income ratio of 30 percent.
“ The bank’s total assets grew by P 175 million or 31 percent. The growth is mainly attributable to the borrowing that increased by P 137 million as of the result of the loan sourced from African Development Bank (ADB) and profits generated during the year,” the company said in its results.
“The bank’s total assets are 31 percent financed by long term debt, one percent current liabilities and 68 percent equity.
The level of profitability translated into an increased return on equity of 10.1 percent as compared to 8.25 percent in 2005, stated the annual report by the bank.
In spite of that, the bank experienced a decrease of P2.4 million in interest income, chiefly attributed to constricted margins on pricing of assets and liabilities, high inflationary environment that put a burden on loan repayments and restrictions on Bank of Botswana Certificates towards the end of the financial year.
Inflation defied Bank of Botswana’ s targets as it moved into double digits as against the four-to- seven percent set by the central bank at the beginning of the year. Further, BoB restricted the sale of BoBcs to commercial banks starting from the end of the first half.
As part of its long term strategy the bank said it was working on plans to hedge against its Japanese Yen borrowings.
Moreover, on the general economic front, inflation shot up to double digits, eroding the real value of the profits reported.
In addition, this year saw the bank looking into its continued relevance for the foreseeable future. It was decided that the bank should focus on customer centricity in the next 5 years.