First National Bank of Botswana (FNBB) has admitted that liquidity remains a nagging problem in the banking sector as it announced its half year results for the year ended December, 2014. The Botswana Stock Exchange (BSE) quoted banking technology trailblazer ushered in new local Chief Executive Officer, Steven Bogatsu with a sterling performance as it managed to grow advances to customers by 16 percent to hit a new high of P12.7 billion.
However, the bank bemoaned the tight liquidity conditions in the market, which led to commercial banks’ deposits growing by only 9 percent year – on – year as at October 2014. The market loan-to-deposit ratio (excluding foreign currency) was reported at 97 percent in October 2014, said FNBB, which boasts of a strong mortgage book.
“This presents a challenge for financial institutions to participate in growth opportunities in the country,” read the bank’s financial statement. “However, offshore investments remain relatively high at 56percent for October 2014, which presents an opportunity to develop structured products so as to compete with international markets.”
FNBB revealed that despite the low interest rate environment, total credit extension by commercial banks slowed down year – on – year from 20 percent to 15 percent. Credit extension to households continued on a downward trend whilst credit growth to business started rising to levels exceeding that of households. Bank of Botswana (BoB) slashed the bank rate by 1 percentage point to 6.5 percent this week in response to falling national inflation numbers. The Monetary Policy Committee (MPC) has maintained the bank rate at a decade low of 7.5percent since December 2013 due to a benign inflationary environment.
“Recent trends show a decline in household arrears, whilst arrears in business and non-financial institutions are increasing,” the bank said.
“In September 2014, household arrears as a percentage of advances were 4.24percent, whilst business and non – financial institutions were 5.86percent of advances. Much of household debt is still held in unsecured loans at 63.8percent compared to 36.2percent in secured loans.”
Chief Investment Officer of Afena Capital Botswana, Alphonse Ndzinge said household credit extension growth was decelerating, despite rate cuts, while commercial banks were reducing unsecured credit exposure. He added that business credit growth gradually picking up off the lower base. FNBB is one of the largest companies on the BSE with a market capitalisation of US$ 1, 2 million. It was recently named among the Top 30 companies in Sub-Sahara Africa ex SA by market capitalisation.