Stanbic Bank Botswana’s profit after tax for the full year ended December 2014 fell by a significant 63 percent to P91 million from P241 million in the previous period as income contracted, while costs rose.
According to the bank, income declined to P666 million from P813 million in 2013 largely due to systematic pressures in the market, which include, the low interest rates environment, the freeze in bank charges increases as well as the prevailing liquidity squeeze.
On the other hand, costs increased for the country’s fourth largest bank by assets, as operational costs were catapulted by IT related costs while the costs of funds was pushed up by the tight liquidity in the market. As a result, the bank’s costs to income ratio deteriorated in 2014 to 66 percent from 47 percent in 2013.
“The internal pressures resulted from the processes of embedding a new core banking platform and the associated change management processes. This major investment in IT-related services impacted operating costs during the year, resulting in an increase of 15 percent to P438 million in 2014. The rollout impacted customer experience adversely and hence affected the volume of transaction.
“I wish to thank our customers for their continued loyalty and patience during the implementation of our banking system. I trust that they see the benefits of the new system, such as enhanced Internet Banking, e-statements, Cellphone Banking, SMS and Email Alerts amongst others,” said Managing Director of Stanbic Bank Botswana, Leina Gabaraane. The level of impairment charges to the income statement improved relative to 2013 by 15 percent to P104 million and the bank revealed that this was driven by close monitoring of credit quality, analysis of portfolios, strategic initiatives to manage rehabilitation and recoveries.
Stanbic said the personal and business banking units were the most adversely impacted by the systemic and internal pressures.
The external and internal factors resulted in a reduction in total comprehensive income by 61 percent to P89.45 million during the year under review.
Stanbic’s profit decline is significantly larger than its peers in the industry. On the back of similar systematic pressures, Standard Chartered’s profit after tax was flat at P320 million in the year, while FNBB’s profits dropped five percent to P343 million in the half-year to December 2014. On the other hand, Barclays bounced back to record a 16 percent jump in profit after tax to P335 million after registering profit declines for the past two years.
Looking ahead, the bank said the outlook for the retail banking capabilities looks positive, while the corporate and investment-banking unit continues to lead in catering to the needs of top corporate clients.
In view of the tough operating conditions and through deliberate management decision, the balance sheet growth was static at two percent to P10.9 billion. The bank’s liquidity position is prudently managed and remains within statutory limits. At the end of December, Stanbic’s loan to deposit ratio stood at 77 percent from 73 percent in 2014.
Despite these challenges, the bank says it remains committed to contributing to the growth of the economy and moving clients forward, a commitment that is fully supported by the capital base of the bank, with a capital adequacy ratio of over 20 percent.
“The year 2015 is promising. We already see a number of internal improvements, and the most exciting is how we are able to leverage the full potential of the new core-banking systems, to support new innovative products and service excellence to our committed customers,” added Gabaraane.