BBS expects commercial banking launch by June 2023
Mbongeni Mguni | Monday October 10, 2022 06:00
In a statement accompanying the group’s results for the half year ended June 30, directors said BBS Ltd was finalising approval of its commercial banking licence with the Bank of Botswana (BoB).
The group previously declared a closed period from August 16 to October 15, during which members of the board, management, and staff were prohibited from dealing with BBS shares in any manner, as part of the process towards a commercial banking licence.
“Once the banking license has been issued, there will be a need to implement relevant systems and refine products and services before fully opening doors as a bank which is anticipated to be in the first half of 2023,” directors said in the interim results report released last week. “This work is in progress.”
The latest developments follow a protracted process in which BBS Ltd has undergone legislative and structural changes to prepare for the consideration of its commercial banking licence application by the BoB.
Following members’ approval of the demutualisation in 2018 and a subsequent listing on the Botswana Stock Exchange, BBS Ltd has battled to transition itself towards approaching the BoB for a banking licence. The original application was withdrawn in October 2019 due to problems with the banking system BBS had acquired in preparation for commercial banking activities.
In the intervening period, the group has recorded a string of losses, which directors say is mainly the result of changes in the capital structure necessary to transition BBS Ltd into a commercial bank.
“Part of the funds that formed equity under the building society model changed to liabilities (deposits) in the new company thereby attracting interest expense as opposed to dividends,” directors said. “The impact of this change on profitability was envisaged at the time and remains tolerable considering the group and company’s strategic objectives which will bear fruit once the company starts operating as a commercial bank.”
In the six months to June 30, BBS Ltd recorded losses of P19.9 million, compared to profits of P14.5 million over the corresponding period last year, the only positive outturn for any financial period in the group’s books since the demutualisation in 2018.
“As shareholders are aware, BBS Ltd currently operates with very low margins relative to the industry in which it operates. “This is mainly because BBS Ltd relies on one core product, mortgage loans whereas competitors have a diversified asset base and income streams,” directors said.
In the half year to June 30, BBS Ltd launched an insurance agency and introduced VISA card services.
“As the banking licence is imminent, management is now implementing projects to prepare for the bank rollout. BBS Ltd will roll out a wider range of products in the near future,” the directors stated.
Last November, the central bank granted BBS Ltd provisional approval of its application, noting that several conditions would have to be met before full approval.