COVID-19 puts brakes on banks' superprofits

For banks, the coronavirus crisis means higher loan defaults by clients and lower deposits as businesses dig into their reserves. The Bank of Botswana’s (BoB) reduction of the bank rate will also hit banks’ major profit line of loan interest income, while depressed economic conditions for clients will hit the other income line of fees and charges on transactions and services.

After a decade of healthy returns, including an all-time record of P2 billion in net incomes for 2018, local bank investors face an uncertain future particularly as South Africa, where the parent groups of four of Botswana’s largest banks are based, is reportedly pressuring banks there to cut dividends and executive bonuses for this year.