In one of rare occurrences in the domestic economy, local banker – Standard Chartered Bank Botswana (SCBB) has admitted that an accounting error was identified on its financial results published in the recent past years.
The banker which published its financial results for the for the six months ended June 2019 recently says the errors in question relate to revenue recognition and recognition of a contingent asset in 2016 and 2017.
SCBB Chief Executive Officer – Mpho Masupe confirmed this week that an account was identified where interest income on an overdraft facility was erroneously not charged since 2014, amounting to P6 155 255 as at 31 December 2016 and P1 297 956 as at 31 December 2017.
Masupe further stated that revenue was understated whilst deposits from customers were overstated as at 31 December 2016 and 31 December 2017 respectively. Furthermore, the bank’s fees and commission income in relation to arrangement and custody fees amounting to P6 442 943 were duplicated during the year ended 31 December 2016 and P625 000 during the year ended 31 December 2017.
“Other liabilities were understated whilst other assets were overstated as at 31 December 2016 and 31 December 2017 respectively,” said Masupe.
The bank’s financials also shows a receivable of P7 660 612 was recognised at 31 December 2016 relating to withholding tax (WHT) payments made to Botswana Unified Revenue Services (BURS) on VISA fees.
“There is an ongoing dispute between the banking industry and BURS as to whether VISA fees are subject to WHT under the act,” he stated.
Masupe also spoke of certain monies paid to BURS which is considered a contingent asset and should not have been recognised at 31 as such in December 2016.
Meanwhile Masupe added that the errors have been corrected by restating each of the affected financial line item for prior periods.
BACK TO THE GREEN
Meanwhile the baker continues to improve on its bottom-line registering an overall 20 percent growth in Profit before Tax to P33.1 million during the period under review.
The bank’s return to profitability started last year when it raked in P20 million in pre-tax profit, coming from a period of losses which knocked the bank out of the top three commercial banks in Botswana by profit.
The commercial bank which has been operating in the country for 122 years has had a tough time in the last three years. In 2017 the bank recorded a startling loss of about P66.5 million in the half year results, triggering in motion a larger loss in the 2017 full year results which came at a whooping loss of P232 million.
This was in contrast to the P79.7 million profit made in 2016, which of course was also a sign of the bank’s declining bottom line performance – falling from the highs of P319.2 million made in 2014, before plunging to P47.4 million in 2015.
SCBB’s explanation for its past dwindling profits had been attributed to constrained revenue growth, and a significant loan impairment charge on one client and increase in costs. The subdued performance in the past three years was mainly caused by once-off impairments – a diamond and jewellery client in 2015, a mining client in 2016 and another diamond and jewellery client in 2017.
The bank has since reduced its exposure in certain categories of its portfolio, particularly mining, and has also tightened its risk appetite. The effects of these became evident in the bank’s half year results for the period ending June 2018, when bank declared a profit after tax of P22.7 million.
While its fortunes are improving, SCBB’s stock price has been battered. Following periods of losses which might have spooked some investors, the share price started falling, from the highs of P15 to the current P3.80, and just this year alone, the share value dropped by 56 percent, making it the worst performer, a trend that has been ongoing in the last three years.