FNBB shifts focus to retail banking

BRIAN BENZA
Staff Writer | Tuesday August 31, 2010 00:00

 

Announcing the group's financial results for the year ended June 30 2010, Chief Financial Officer Steven Bogatsu, said their interest income came under heavy pressure in the last financial period as the central bank cut interest rates by 5.5 percentage points.

'We were terribly affected by the cut in interest rates and I hope that the worst is now behind us.  Bogatsu said in an interview.  'Just the stabilising of the rates, and not necessarily an increase, would be quite welcome now.

'This is part of the reason why we have decided to focus our energies towards improving our share of the retail market.'

For the period under review, the group - which traditionally was the star performer in treasury business - saw interest income weakening by 18 percent due to the fall in interest rates. Although he could not say how much they will invest towards improving their market share from the current 15 percent, Bogatsu said the group would seek to enhance its structures so as to lure clients.

Head of Distribution and Retail Banking, Martin Knollys, said the bank's strategy will not be to increase its retail braches but to capture more customers in a bid to boost non-interest income through higher volume transactions.

'Our plan is to first look after what we have,' he said.  'We are going to do that through refurbishing our braches and invest in our staff and other infrastructure.  'We have recently opened branches in Letlhakane and Molepolole, but we have no plans to open more branches at the moment.  However, we are going to add 20 more ATMs to the 100 currently in use.'

Asked about stiff competition from other big banks which have performed strongly in the retail market, Knollys said that 'those with greater market have lesser new opportunities and us with a lesser market share have greater opportunities.'

For the period, FNBB reported a 7.2 percent increase in Earnings Per Share (EPS) to P 0.17.  Net interest income grew by a marginal four percent to P 543.6 million, with interest income declining by 18 percent and the interest expense declining by 32.9 percent, both on the back of a reduction in interest rates by the Bank of Botswana.

The rate reduction countered the 25 percent growth in loans and advances, which grew to P 5.8 billion.

Total income growth was slightly higher at 6.6 percent to P952 million, following a nudge from a 10 percent increase in non-interest income to P 408.3 million as the group's income diversification efforts bore fruit.

Impairments increased by 6.5 percent to P 43.4 million, albeit not impacting the impairment ratio, which was fairly flat at 0.8 percent of average loans.

Operating expenses surged 16.6 percent to P 378.9 million, pushing the cost to income ratio up 340 basis points to 39.8 percent, largely on the back of increases in staff costs and refurbishment expenses as the bank added on two new branches and a new regional head office (Francistown), as well as revamps on existing branches.

Profit before tax grew marginally by 1 percent to P 532 million, while profit after tax grew by 7.2 percent to P436.1 million. Management efforts continued to be directed towards restructuring the balance sheet, with increasing focusing on growing retail lending.

As a result, the loan book growth of 25 percent was largely on the back of a growth in retail (47.4 percent), property (46.6 percent) and corporate lending (45.8 percent), with the retail book growing by 440 basis points to 28.9 percent of total loans.