Sunday, November 29, 2020

Verdict could be out soon for the local banking innovation prize

First National Bank Botswana (FNBB)’s industry peers have in recent times demonstrated zeal to strip it of its coveted title as the most innovative bank in the local market and on Thursday last week FNBB admitted to losing its tight grip. FNBB had set itself apart as the leader of the pack with a current customer base of 466 thousand people.

Speaking at the bank’s financial results briefing Steven Bogatsu, FNBB Chief Executive Officer (CEO), shared the observation on the narrowing of the innovative gap. He attributed the closing gap to the technology advancements the bank’s competitors are using to play catch up. It goes without saying that digitisation in the local banking industry has over the years established itself as the new normal with regular product launches a clear sign of this sweeping wave. Along with the sophistication and convenience of digitisation comes a difficult trade off, as was allueded to by Bogatsu. He pointed out that the move from the use of brick and mortar to clicks by consumers has unfavorably resulted in the bank making less money from transactions. In other words, transactions carried out inside the bank cost the customers but they make the bank money. This means that the tables have now turned with customers now saving money by transacting through clicks resulting in the bank making less money. With the change unlikely to reverse Bogatsu proposed that navigating through the bank’s cost base in terms of rationalising it can potentially assist the bank to maintain its bottomline.

It would appear that competition isn’t the only thing the bank is grappling with given its lackluster performance for the year ended June 30, 2017. The numbers, for the main part, are reflective of the tough low interest environment which the whole industry has inevitably succumbed to. The bank’s profit after tax declined by 1 percent but perhaps considering the distress that the industry is experiencing, the loss gives credence to the industry’s ‘new’ normal. The profit before tax showed slightly better growth of 3 percent which the Chief Financial Officer (CFO) Makgau Dibakwane referred to as “showing great resilience.” He said this on the backdrop of what he described as unprecedented level of impairment suffered at the hands of the untimely closure of BCL. The results show a healthy growth of net interest income at 23 percent but after the dent of impairments the net interest income imploded. The impairment of loans rose sharply by 58 percent. Another issue which the industry is contending is the current low credit extension, which was said to be ‘growing at worryingly low rates.’

Bogatsu said though that the bank may find leverage in its customers who are in the Agriculture and tourism sectors who are expecting buoyancy in the future. He anticipates that going into 2018 things will get better, what he termed ‘crawling out of the hole.’ To support his forecast, he cited the recovery observed in the diamond market and the strands of business confidence indicated by the local business community. 

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Sunday Standard November 29 – 5 December

Digital copy of Sunday Standard issue of November 29 - 5 December, 2020.