Botswana’s oldest commercial bank, Standard Chartered Bank Botswana, this week notified its shareholders that the bank will report an improved bottom line when it releases its financial results.
The trading statement released on Monday through Botswana Stock Exchange, where the bank is listed, announced that the profit for the half year financial results will be significantly higher than those achieved in the previous year’s first half. The bank did not give guidance on how much they have made but expectations are that it will be a profit, signalling that the bank is finally turning around a corner after a period of losses.
In its 2017 half year results, the bank recorded a startling loss of about P66.5 million, triggering in motion a larger loss in the 2017 full year results which came at a whooping P189.3 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 has been attributed to constrained revenue growth, and a significant loan impairment charge on one client and increase in costs. The subdued performance in the last 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. Moreover, in a commentary accompanying the 2017 full year results, SCBB said the implementation and adoption of IFRS 9 will materially influence banks’ financial statements, with impairment calculations affected most.
Recently, the bank established in 1893 as the first bank in Botswana, said it intends to raise P400 million through issuance of undated unsecured non cumulative subordinated debt to its parent company, the London based Standard Chartered Bank (SCB), which is also the major shareholder.
“In order to continue to meet the minimum capital requirements of Bank of Botswana and to create a cushion against unexpected impairments caused by a difficult business environment SCBB intends to issue the Capital Securities in the total amount of BWP 400 million, which will comprise Additional Tier 1 Capital for the Bank, to SCB and utilise part of that capital to retire the BWP 247.26 million of Tier 2 Capital by exercise of SCBB’s right of redemption,” the bank’s board said in the statement.