Bears hit banking shares on BSE
Brian Benza | Tuesday March 11, 2014 15:11
Apart from the prevailing low interest rate regime which has squeezed margins, banks’ income steams will this year be further constrained by the recently announced central bank’s two year moratorium on commercial banks’ charges.
Among the three listed commercial banks, Barclays Bank has been the hardest hit, plunging by 50thebe last week to trade at a new 12 month low of 400thebe. This followed its appalling results where their profit after tax came down by 34%.
'The second largest bank in the country which also has the largest dividend yield within the banking industry has lost 27% for the year thus far, reflecting the skepticism investors have on the bank, which will have quite a hectic year ahead considering the bank rate cut during 2013.
'FNBB which brought good interims despite a challenging financial period slumped by 21thebe as investors shun the banking stocks after the central bank’s directive to restrict them from increasing their bank charges.
The largest bank which has a loan book of about P10.9 billion and has been consistently increasing their non interest income was trading at 379thebe,” said Motswedi Securities in a commentary. The country’s third largest bank, Standard Chartered bank also took a knock last week losing 0.1 percent to settle at 1183 thebe.
On a year to date basis, Barclays has shed 27%, FNBB has lost 6 percent while Stanchart, which is the only listed bank yet to release it financials, has however traded a marginal 1.1 percent in the black since the beginning of the year.
For the 6 months ended 31 December 2013, FNBB posted a 5 percent increase in profit after tax year on year, with the marginal increase reflecting the tough year 2013 which was characterised by the 200 basis points bank rate cuts from 9.5 percent to 7.5 percent.
As a result of the central bank’s directive which is set to impact on banks’ non- interest income, the country’s 11 commercial banks say they have launched a study aimed at evaluating their charges, as public attention focuses on banking costs in the wake of the Bank of Botswana’s two year moratorium on tariff increases.
In an earlier interview with Mmegi Business, Bankers Association of Botswana (BAB) CEO, Oabile Mabusa, said the study - initially scheduled to have taken place last year - would focus on gauging whether local tariffs are too high.
The study, to commence this month, will compare the local tariff structure against regional countries, with the hired consultants making recommendations after the six-month probe.
While banking stocks plunged on the BSE, fellow financial giant, BIHL last week recorded significant gains on the bourse buoyed by its recent results which saw the counter pocketing a huge 34thebe to trade at 1100 thebe. BIHL is now trading at a 52 week high.
Other top performers include, Sefalana, which is also trading at a new 12 month high, as investors remain optimistic about the retailer’s expansion into Namibia and its future outlook, which will be expected to be significantly bolstered by remunerative tenders to supply food products and trucks.
Overall the Domestic Companies Index (DCI) lost 15 basis points last week on the back of some profit taking. However, on a year to date basis the DCI is 1.1 percent in the black.