Banks rake P800m profits in six months
Mbongeni Mguni | Friday September 7, 2018 18:00
Figures released by the Bank of Botswana (BoB) this week indicate that the good times have returned to the local commercial banking sector following several lean years owing to a fee moratorium and tight spreads. The six-month profits for banks are nearly 64% higher than the corresponding period last year and hold the promise of a record performance by the sector by the end of the year.
The only times half-year profits for banks were higher than this year was in 2013 (P941.4 million) and 2012 (P864.9 million).
The BoB data shows that the banks powered into 2018 with after-tax profits of P143 million in January, rising to P190.4 million in May. The stronger performance was supported by data coming from the listed banks, who by virtue of Botswana Stock Exchange regulations, are required to publish periodic financial performance figures.
In the first six months of the year, Standard Chartered Bank Botswana bounced back to profitability with P27.5 million in profit before tax, compared to a P66.5 million loss over the same period last year. The bank’s recovery from its record losses in 2017 is part of the factors behind the stronger general profitability in the sector this year. First National Bank Botswana, the country’s most profitable bank, is due to publish another sparkling set of full year results today (Friday). Ahead of the results, the bank issued a cautionary, advising investors that its results for the year to June 30, 2018 would be materially higher than the previous reporting period.
According to the BSE’s listing rules, such cautionaries are published only when “the expected profit or loss before tax for the period to be reported upon next will differ by at least 10% from the previous corresponding period”.
In the year to June 30 2017, FNBB posted P680.3 million in pretax profits, up from P659 million in the previous corresponding period.
Barclays, which was due to publish its on Thursday, is also expected to continue a recovery from previous difficult years. The bank, which is rebranding to Absa, posted pretax profits of P558.1 million for the full year to December 2017, up from P494.7 million in the previous corresponding period.
Things appear rosy even for the smaller banks, with Capital Bank posting a P35.7 million profit before tax for the full year to December 2017, up from P31.3 million. Botswana Bank Employees Union general secretary, Lebogang Keabetswe told BusinessWeek the banks were reaping the dividends of interventions they had been instituting in the past years. “In the past years, the banks have been actively restructuring their functions so as to better leverage their competitive edges,” she said on Wednesday.
“Year after year, we have seen banks diversifying their revenue streams. There has been a lot of focus on foreign exchange and use of channels or digital solutions.
“Products are being tailor made to suit end users and in return, the uptake sustains the banks in the profits they make.
“We have seen banks, through their restructuring, aligning their processes and the right skills to the relevant roles.” Keabetswe said the rigidity of the bank rate, last reviewed in October 2017, had been a plus for local banks. The BoB’s numbers also suggest that the record profits for banks in the first six months of the year, have been helped by lower impairments which for the period stood at P280 million, down from P646 million in the corresponding period last year.
Keabetswe said it would be interesting to see how banks factor in impairments this year, as the adoption of the International Financial Reporting Standard 9 by the local banking sector meant a different treatment of provisions for bad and doubtful debts. The new standard ushers in a different method of accounting for impairments, a shift that could result in higher figures on banks’ results.
“It will be interesting how these are factored in given the rising retrenchment across the economy. But then again, banks continue to be a step ahead in terms of products and measures put in place for such eventualities,” she said.