First National Bank of Botswana (FNBB) says earnings will continue to be depressed in the coming six months of the year as the economy along with its clients emerge from the recession.
Presenting their results for the six months ended 31 December 2009, in Gaborone on Friday FNBB chief financial officer Steven Bogatsu says that the company 's profits before tax fell 3 percent to P265 million in the period whose operating environment was challenging.
Apart from the weakened clients' disposable incomes, which pushed impairment losses up 12 percent, the bank also faced a challenge with the low interest rates environment, which squeezed margins despite advances growing by 13 percent.
The Bank of Botswana cut interest rates by 5 percentage points in 2009.
" As we emerge from the recession, our earnings will continue to be under pressure particularly for the next six months, but we shall continue with our sound credit vetting process and closely monitor all sectors of the economy. In the last six months of 2009, our strong credit vetting systems paid dividends resulting in impairment losses growing by only 12 percent from a low base.
"Although the level of retrenchments in the mining sector has reduced, consumers are still experiencing financial strain with diminishing income levels.
"On the other hand we managed to contain our costs in the period, our initiatives to manage costs have been very successful with growth in costs being only 8 percent, which is in line with the level of inflation during the period," he said.
Total income was virtually
An interim dividend of BWP 0.05 was declared (last date to register 12 March 2010).
The bank's balance sheet on the other hand remained strong with a growth of 15 percent mainly driven by Bank of Botswana Certificates (BoBCs), which went up 37 percent.
The growth in deposits of 17 percent contributed to the strong financial position as excess funds were invested in BoBCs.
"Going forward, we look forward to do even better in the area as the bank should take advantage of government decision to float more bonds on the local market as it tries to obtain funds to cover its budget deficit," he added.
CEO Lorato Boakgomo-Ntakhwana also expressed her excitement over government decision to tap into the local capital markets. "We are very excited that finally government has decided to fund their deficit from local sources," she said.
Last week, Finance Minister, Kenneth Matambo announced that government would go to the local capital market - starting next month - searching for part of the P12.1 billion shortfalls expected in the next financial year. The Bank of Botswana is soon expected to announce a bond issue, while an updated bond issuance programme will be prepared for Parliament's approval.