FNBB braces for P221m loan defaults
Lewanika Timothy | Monday March 9, 2026 09:26
The impairment provision marks a stark increase from the provision of P8 million for the half year in 2024, highlighting the bank’s rising concern over credit risk in the current economic cycle, as well as the ability of customers to service loans and repay debts on time.
In its half-year results for the period ending December 2025, FNBB grew its loan book to close to P22 billion with pretax profits reaching P1 billion. Despite these strong financial results, the bank revealed its concern over prevailing macroeconomic conditions that could add strain to financial results going into the full financial year.
“Overall, deposits increased by two percent to P25.75 billion, up from P25.26 billion in the previous half-year, indicating strong customer confidence and the bank’s ability to attract and retain deposits,” directors said. “Profit before tax closed at P1,002 million, broadly in line with the prior period’s P1,004 million.”
Despite growth in its loan book and a stable profit level, FNBB was affected by liquidity pressures and increases in the cost of capital, as seen through the increase in interest expense, which went up by 100% from around P232 million in the prior year to P500 million in the current financial year.
Interest expenses represent the cost the bank pays to depositors and other funders for access to capital used to extend loans.
“Liquidity pressures remained pronounced throughout the period, driving funding costs up, resulting in a more than double increase in interest expense, hence a nine percent overall decline in pre-provision net interest income. “Impairment provisions for the period surged to P221 million (compared to P8 million for the same period in the prior year). “This level of provisioning is driven by forward-looking indicators as the economy finds its way out of a difficult cycle,” directors said.
The local banking sector has been under pressure from a liquidity squeeze, driven by slow revenues for government, which in turn has subdued deposit growth. With credit demand rising but deposits lagging, banks have had fewer readily available funds, forcing them to compete for deposits, in the process hiking their lending rates to protect margins.
The Bank of Botswana last year responded by easing reserve requirements and extending repurchase agreements to support liquidity. The central bank has also frozen interest rate hikes for banks, as it seeks a return to calm for the financial market.
Beyond lending, FNBB recorded strong growth in non-interest income, which surged 47% to P1.3 billion. Non-interest income refers to revenue generated from sources other than loans, including transaction fees, foreign exchange trading, digital banking services, and card transactions.
The increase was driven largely by heightened foreign exchange trading activity amidst global currency volatility, as well as increased transaction volumes across eWallet, account transactions, card payments and CashPlus services.