Botswana underpins BancABC interim earnings

MBONGENI MGUNI
Staff Writer | Friday August 27, 2010 00:00

BancABC executives were quick to point out that far from being the result of poor performance, the reduction in net profits was more a reflection of a once off P13-million tax credit earned in the six months up to June 30, 2009.

The pan-African group's interim results for 2010, released on Wednesday, indicate that Botswana retail operations were among the drivers of a 244 percent year-on-year jump in net interest income to P129.8 million in the period under review.

BancABC's local operations were also positive in other indicators such as loan book growth and impairments on loans and advances.

'BancABC Botswana recorded net profits of P11 million, up 88 percent from the prior interim period, driven primarily by improved net interest margins and significant balance sheet growth,' said Group CEO, Douglas Munatsi.  'Impairments are 63 percent lower at P2 million. However, non-interest income declined on account of reduced volumes and margins in foreign currency trading. Expenses for this subsidiary were in line with the comparative period.' Having opened its first retail banking branch in Gaborone in the first half (H1) of 2010 and with plans already underway for a second and larger one, BancABC's expects Botswana operations to continue positive, reflecting the recovering domestic economy.

BancABC Botswana's performance was indicative of the general upswing across the group's operations in Mozambique, Tanzania, Zambia and Zimbabwe. All the subsidiaries indicated recovery from last year's global recession characterised by low business volumes, high impairment charges and costs.

The pan-African group turned its Zambian subsidiary around from a loss of P13 million in H1 of 2009 to profits of P7.5 million for H1 2010.

The group also posted a P7-million profit in Zimbabwe, although this was negatively affected by higher operating expenses due to normalisation of input costs and higher staff costs as a result of market-wide salary increases to unionised staff.

Business volumes in Zimbabwe continued to rise, with the recovering economy driving the group's loan book to P2.3 billion as at June 30, 2010.

BancABC Tanzania and Mozambique also recorded leaps in profitability, with Tanzanian operation's net profits at P6 million for H1 2010, reflecting a 183 percent leap from the corresponding period in 2009.

Mozambique's performance was dented by a higher tax rate of 32 percent, compared to 16 percent in 2009 when tax incentives were still in place. As a result, the subsidiary's net profits declined to P13 million or 23 percent year-on-year, although total income was marginally higher at P49 million.

In addition, net interest income of P15.5 million for the period ended 30 June 2010 was 27 percent lower than the corresponding period for the previous year, owing to volatile interest rates.

'Market conditions in Zambia, Botswana and Tanzania, while improving, still dictate that a cautious approach to lending be adopted,' Munatsi said. 'Additionally, turbulent Mozambican interest rates also presented a significant challenge to profitability increasing the loan book.

'For these reasons, the loan books in each of these markets remained almost stagnant during the period. The group will continue to seek opportunities to grow its loan book in both its wholesale and retail banking divisions whilst maintaining a cautious approach to risk.'

The group's directors recommended that no interim dividend be declared, preferring to fund the growth of the retail banking operation in which 14 branches are expected to be open by year end.