Smaller banks have managed to chirp market share from dominant banks despite operating in a tight market, reveals the latest Bank of Botswana’s supervision report.
The nine commercial banks regulated by the central bank are fighting for a shrinking market, which the big players are trying too hard to maintain grip. The Herfindahl-Hirschman Index (HHI), an index that measures the market concentration of an industry, marginally increased from 0.1732 in 2018 to 0.1756 last year, indicating a modest loss in market competition.
With the HHI lower than 0.1800, Botswana’s banking industry is said to be moderately concentrated, also an indication of waning competition as the big banks dominate. The domestic banking assets amounted to P98.7 billion in 2019, up by 8 percent from the prior year but lower than the 9.4 percent growth between 2018 and 2017. The growth in assets was mainly driven by gross loans and advances, which increased by 7.6 percent from P58.3 billion in 2018 to P62.8 billion in 2019. Of the total liabilities, customer deposits, increased by 9.3 percent from P69.3 billion in 2018 to P75.7 billion in 2019.
Five large banks continued to dominate the banking sector and accounted for 84.7 percent, 85.3 percent and 87.5 percent of total assets, total deposits and total loans and advances, respectively, in 2019, which were lower than the respective proportions of 88.7 percent, 87.9 percent and 87.8 percent in 2018, reflecting some market gains by small banks, the central bank showed in the supervision report.
All banks made profit last year, with net after-tax profits increasing by 5.1 percent from P1.7 billion in 2018 to P1.8 billion. However, the number of people directly employed in the banking sector decreased from 5,270 in 2018 to 5,172 last year, representing a decline of 1.9 percent. The reduction in employment was distributed across five banks. Rationalisation of operations, including increased automation and use of digital channels, along with staff resignations and retirement, accounted for the reduced employment at the respective banks, the report said.
While there was a decrease in staff complement for some banks, there was an increase with respect to seven banks. Overall, the staff complement for small banks increased by 9.2 percent from 500 in 2018 to 546 in 2019. For large banks, the level of employment declined by 2.2 percent from 4 226 in 2018 to 4 134 in 2019.