BancABC profits plunge 50%
Isaac Pinielo | Thursday October 2, 2014 09:00
In the period, the banking group recorded a 53 percent fall in profit after tax to P59 million largely due to a combination of high impairments, reduced business volumes and a squeeze in margins.
“This was exacerbated somewhat by the fact that huge investments were made in people, systems and infrastructure on the back of projected increase in business volumes. Consequently costs have increased at a higher pace than revenue which was broadly flat when compared to the previous year,” said Group CEO Douglas Munatsi in a commentary.
Group pre-tax profit at P100 million was 41 percent below P169 million achieved in the prior period in 2013 while attributable profit to shareholders at P63 million was 56 percent lower than P143 million posted in the comparative period last year.
However, total assets in the period were slightly higher at P16.3 billion, 4 percent ahead of the December 2013 position of P15.8 billion.
According to Munatsi, the balance sheet growth was not as expected largely due to lower growth in Botswana and Zimbabwe.
The banking group, which is in the final stages of a takeover by Atlas Mara, has operations in Botswana, Mozambique, Tanzania, Zambia and Zimbabwe.
In a bid to improve liquidity, the bank says took a decision to curtail lending in Botswana during the first quarter of this year, whereas tough economic conditions in Zimbabwe meant that ‘we had to be very conservative on lending hence the low growth in loans and advances.
When compared to June 2013, total assets increased by 27 percent. The group has expanded its physical outlets to 161 branches and agencies compared to 65 in the prior year and 73 as at end of December 2013.
From the four listed commercial banks BancABC joins Barclays in posting a fall in profits while Standard Chartered and FNBB improved their profit levels. Profitability among banks has reduced in the past few years as the Bank of Botswana cut interest rates.
In the past five years, the central bank has cut the benchmark bank rate from 15.5 percent to the current 7.5 percent compressing the banks margins on advances.
On the other hand, the central bank’s 2011 move to limit the amount of the risk free BoBCs and also slash their attracting interest rates has also dented the banks profitability. The high household indebtedness coupled with stagnation of disposal personal incomes has also seen most banks adopting a risk averse approach preferring to concentrate more on secured lending. BancABC however stated that all the banking subsidiaries, with the exception of BancABC Zambia and BancABC Mozambique, posted growth in net interest income when compared to prior year.
The bank revealed that its operations in Zambia had a reduction in net interest margins largely due to an increase in deposit interest rates in that market during the first half of the year.
“This put pressure on the funding cost of the bank and consequently net interest margins. BancABC Mozambique posted a marginally lower net interest income largely due to the decline in rates that has been taking place for some time now,” the bank said last week.