One of the top tier commercial banks in the local market, Standard Chartered Bank Botswana, is reeling from a double blow and commentators opine that the bank may find it difficult to overcome the headwind.
On Friday last week the bank released a statement to the capital markets players announcing that the its financial results for the period ended June 2017 will be significantly lower than those achieved in the corresponding period in 2016.
The statement advised shareholders to exercise caution when dealing in the company’s stock. The results contrast the last financials released in March for the year ended December 31, 2016 which recorded a profit of P79.7 million compared to P47.4 million that had been registered for the year ended December 31, 2015. This was a jump of 68 percent. The imploded financial performance is one of the two difficulties besetting the bank.
The sharp decline of its share price observed over the second quarter of the year is the other challenge it encountered. “Stanchart saw a massive 14.1% price slip, the biggest move of the quarter. We do not believe that the bank is out of the waters just yet, although activity on the counter is slowly improving, with volumes showing participation by institutional investors and not only desperate to sell retail investors. It might be too soon to say the company has turned a corner, but the last financials (Dec 2016), showed an improvement on profits before tax of over 50%, enough to raise interest on the counter,” reads the second quarter economic bulletin compiled by Motswedi Securities. Against its peers Stanchart registered a lackluster share performance. “Barclays momentum has slowed following a sterling performance in Q1, up by 13.1%, to close Q2 2017, up by a modest 3.5%, at P5.90 per share. FNBB’s performance was flat for the quarter, dipping by 0.7%,” says the report. Among these three stocks Barclays’ share price is the only one which realised a gain while FNBB’s share price slumped but by a lesser size than Stanchart. Stanchart closed the quarter at P6.31 per share, FNBB at P2.73 per share and Barclays at P5.90 per share.
The bulletin generally observed a salient trait in the local banking sector which was also seen in the first quarter being that the key driver of growth was non-interest income. “the sector is transforming and the primary objective of banks as intermediaries between savers and borrowers is no longer the key the driver of profitability, with complimentary services and fees taking a leading role. Under the current interest rate regime margins remain under pressure with banks forced to improve efficiencies and cost management to remain afloat,” it says. It adds that should the Central Bank have room to introduce another rate cut before the end of the year it will cause further strain to the banking sector. Similarly the local think tank, Econsult in its second quarter economic review cited that the banking sector is currently stressed, a condition which the review expressed as worrying. In that sense the lower performance of Stanchart is consistent with the knock that the whole sector is experiencing.