BBS profit down by 4%

WANETSHA MOSINYI
Staff Writer | Tuesday August 11, 2009 00:00

 

Despite the profit knock, the Society's mortgage book grew by 20 percent while operating income was P135 million, an increase of P13 million on the previous year.

BBS Managing Director Pius Molefe said the reduction on profitability was caused by an increase in provisions as a result of difficult trading conditions emanating from the general slowdown in the economy.

The mortgage lender also attributed profit loss to high levels of inflation seen during most of the year and a 15-percent salary increment that resulted in operating costs going up.

'Nonetheless, while our profit has declined, the results are still impressive and bear testimony to the continued buoyancy of the local property market,' Molefe said.

BBS Chairman Cross Kgosidiile said the results are 'impressive given the difficult trading conditions' during the year under review.

He said it should be noted that challenges in the year under review were unique having been occasioned by the global economic crisis, which led to the reduction of business in general.

'The mortgage business was therefore also negatively affected as potential customers became reluctant to commit to building or buying property due to declining job security,' Kgosidiile said.

During the year, Paid Up and Subscription Shares increased by 15 percent (P71 million) to stand at P554 million.

For the year ended March 31, 2009, BBS reserves increased by P27 million from P127 million in 2008 to P154 million.  The increase in reserves, the Society said, is mainly as a result of transfers to the statutory reserve and general reserves amounting to P25 million. BBS said savings deposits continue to grow and now amount to P280 million, which is an increase of P37 million.

The mortgage lender will excite its shareholders, which include the government, institutional investors and investors after its dividends paid amounted to P40 million compared to P39 million it paid the previous year.

Molefe said the impact of the economic slowdown calls for BBS to approach the future adequately prepared.

'The Society is addressing these challenges and others by restructuring its balances to ensure earnings are more stable in the future,' he said.

Molefe, who took BBS as an ailing bank with profits of less than half a million in 2004, has built its assets to over P1.7 billion and it now controls close to 70 percent of the residential mortgage market.

Some local commercial banks, especially those with global ties, last year suspended property financing due to the sub-prime crisis that emanated from mortgage arrears in the US.