Diversification pays dividends for FNBB
Keikantse Lesemela | Friday October 17, 2014 16:44
In her commentary in the bank’s 2014 annual report released this week, outgoing FNB Chief Executive, Lorato Boakgomo-Ntakhwana, said with the delivery of the diversification strategy aimed at reducing dependence on interest income, the bank’s non-interest income during the year increased by seven percent.
She said ensuring that they were sufficiently resourced to comply with new regulatory requirements had been a costly but necessary exercise.
Boakgomo-Ntakhwana explained that the bank had embarked on strategies meant to reduce the exposure to the impact of the macroeconomic factors and to deepen penetration of key segments in which they do not have a natural market share.
This has consequently resulted in growth of 12 percent to 17.6 billion on the balance sheet. The advances increased by 17 percent to P12.1 billion while the interest income increased by three percent to P1. 2 billion, due to growth in advances.
The central bank halved the benchmark bank rate to 7.5 percent in the past five years, in response to inflation and economic trends. In July 2011, the BoB increased commercial banks’ primary reserve ratios and also capped Bank of Botswana Certificates (BoBCs) at P10 billion, as part of measures to restrain runaway interest costs.
This has plunged down commercial banks profitability, with Barclays bank recording a 35 percent decline in profits. Low interest rates were highlighted as the major contributor on the decline as the total income reduced by six percent while the operating costs increased by ten percent.
However, FNB pointed out that the launch of Rand Merchant Bank (RMB) Botswana last year had further broadened its corporate and investment offering as it had sharpened its competitive edge. The bank’s profitability increased marginally by two percent to P922 million in the year to June 2014. The report also indicated that non-interest income would continue to be a key focus area as the bank endeavours to diversify revenue streams.
The sector growth was mainly driven by e-solutions including prepaid electricity sales. During this period, the bank increased cellphone banking functionalities and slim line and ATM advance.
“We will continue to introduce new products and services in order to grow volumes particularly as margins will be under pressure for some time,” says FNB chief Finance Officer, Boitumelo Mogopa.