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FNBB sees personal credit rising despite headwinds

MBONGENI MGUNI
Bagatsu's executives are strategising on new growth pathways
The country’s largest bank by balance sheet, First National Bank Botswana (FNBB) expects household credit to expand by six percent this year and into next, despite static incomes and stubborn arrears amongst individuals.

FNBB has forecast that the Bank of Botswana will lower interest rates by 0.25% at the Monetary Policy Committee (MPC) meeting to be held on Monday. Should the MPC follow FNBB’s predictions, the rate drop will be the first since October 2017. FNBB is the country’s most profitable bank and also the largest by clientele numbers, with more than 500,000 customers.  The bank’s executives, writing in the recently released 2018 Annual Report, listed a litany of challenges to the banking industry’s collective retail sector, but said growth was still possible.  The chief executive officer, Stephen Bogatsu said households’ disposable incomes were expected to remain under strain despite the prevailing low inflation. Inflation dropped to 2.9% in September, sinking below the central bank’s three to six percent target range. “While we expect business credit growth to exceed growth in lending to households, we caution that total market credit growth is likely to remain muted at below seven percent through to 2020.  “With household disposable income under pressure, and only a moderate increase in business production capacity, we expect that the drawdown on working capital facilities is likely to remain constrained,” he said.

FNBB’s retail sector accounted for P9.99 billion of its P16.3 billion loan book for the financial year ended June 30, 2018. The sector was also a major contributor of impairments for

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the year, with FNBB writing off P110.8 million in bad debts.

However, the bank’s executives said the sector was still expected to expand this year.

“Household advances are forecast to grow at six percent in the coming financial year with a rate cut of 25 basis points expected in October 2018.

“Retail credit is generally anticipated to grow, but this growth is expected to be slow and gradual,” the executive said. FNBB’s research suggests that the bank expects much of this growth in the group scheme lending sector, with other channels such as property largely muted. “The property industry has been depressed in the past financial year owing primarily to oversupply and under demand,” the bank said.

“Recent waves of job losses within government and at parastatals, which have since also extended to the private sector with the closure of some mines, continue to create an air of uncertainty that is not being countered by sustainable job creation.

“While government has made commitments towards ensuring sustainable job creation, in the meantime consumers continue to experience pressure on their disposable income as their salaries fail to be adjusted, at least relative to inflation.”

FNBB said it was committed to the Treat the Customer Fairly (TCF) principles under which it would not allow customers to over commit on credit products, thus ensuring dignity for all Batswana.



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