Monday, September 21, 2020

Stanchart on a winning streak

In a nightmarish period in which  most businesses are experiencing downturns, Standard Chartered Bank Botswana has pushed back against the headwinds, tripling profit on the back of optimisation across key segments.

On Friday, the country’s oldest commercial bank, released financials for the six months ended 30 June 2020, which reflected the bank’s pleasing performance  amid the Covid-19 disruptions. The world was thrown in the tailspin when the novel coronavirus gained prominence in late January, forcing countries to take drastic measures to curtail the fast spreading pathogen. The containment measures affected business activities, with movements restricted.

Still, Stanchart has maintained resilience, sailing through the first six months of the year with a good income run. The operating income was up by 14 percent to P384.2 million, and though expenses rose slightly by 5 percent to P308.4 million, Stanchart delivered a strong profit after tax, up from last year’s P27 million to P90 million. The improvement in profit was mostly due to a P48 million impairment reversal resulting from a cancelled related party loan to the SCB Education Trust, with the reversal consolidated into the group’s results.

Stanchart’s recent performance has been remarkable, staging a recovery after a challenging period of declining profits and in some instances, steep losses. The latest strong set of financials build on last year’s momentum after the bank tripled its pre-tax profit for the financial year ended December 2019 to P69.5 million, up from P23 million registered in 2018 when the bank was just emerging from one of its toughest time since operating in Botswana. For the period of six months ended June 2019, Stanchart’s pre-tax profit was P33 million, up by 65 percent from 2018’s full year profit, which had kickstarted the bank’s return to profitability.

Stanchart, which has been operating in the country for 122 years has had a tough time in the last three years, falling from the list of the top three most profitable banks in the country. Trouble started in 2017 when Stanchart posted a P232 million loss, with the financial performance dragged by the closure of the BCL mines – one of the bank’s top clients. The steep loss 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.

During the mounting losses, Stanchart’s explained that profits were falling due to constrained revenue growth, and a significant loan impairment charges 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.

Presenting the results, Standard Chartered Bank Botswana Limited Chief Financial Officer, Dr Mbako Mbo remarked on a positive first half performance. 

“We are encouraged that our business is reflecting the kind of performance which speaks to a strong and well-balanced portfolio. Even more encouraging is that growth is consistently sustained, this is evidenced by not only by the fact that all our business segments are performing well, but that our margins are improving as well. Our cost-to-income ratio has reduced, our cost of funding is declining, and our impairment line is within the lower thresholds.”

Dr Mbo further outlined that whilst significant progress in line with the strategy has been made on strategy execution, the uncertainty surrounding COVID-19 could not be taken for granted.

“We do note that though half year performance was good, the effect of the COVID-19 pandemic in Botswana did slow progress in the second quarter. With the possibilities of intermittent national and localised lockdowns, the strains on supply chains and the very real effects on livelihoods, we remain alive to greater impacts to the local economy. We can say that we are confident that our balance sheet is robust and resilient enough for such eventualities.”

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