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Resilient banks ride over Covid crisis

MBONGENI MGUNI
In the black: The lockdown hits banks' books but they have largely remained profitable PIC: KENNEDY RAMOKONE
The country’s local banks tapped into digital channels and used momentum from strong performances pre COVID-19 to rake in a collective P698 million in the first six months of the year, BusinessWeek has established.

Individual full and interim results for listed banks released in the last two weeks show that while several suffered drops in pretax profits, none of them sank into losses as a result of the pandemic.

All but one of the listed banks were also able to pay dividends to their shareholders, bucking a trend on the Botswana Stock Exchange where a number of counters have withheld payouts in order to shore up cash.

In April, the sector’s heads had forecast a dire period ahead, noting that despite adequate liquidity and capital across the industry, weaker loan uptake and higher credit defaults by clients coupled with lower deposits as businesses dug into their reserves, would eat deep into banks’ pockets. In addition, the costs of measures to support customers through the pandemic, such as loan repayment holidays and discounts on fees and charges, would worsen the situation.

First National Bank Botswana, the country’s biggest bank by balance sheet, saw its pretax profits for the year ended June 30 drop by only four percent to P927 million, with executives saying the momentum from the months prior to the onset of COVID-19 had helped the numbers.

“Quite importantly, in the first nine months (prior to COVID-19), we saw an increase in volumes that impacted transactions and non-interest income,” FNBB CEO, Steven Bogatsu told BusinessWeek during a virtual results announcement recently. “During the first nine months of our year, we were performing in line with budget until the lockdown and the results are reflective of that.“For the year in general, the balance sheet was under a lot of stress without many opportunities for growth.

“There were a lot of deliberate actions towards transactional growth and that is what has resulted in an 11% growth in non-interest income.

“We experienced good growth with products such as Cash Plus and we also saw our iniiatives around costs bearing fruit.”

FNBB, which for years has led digitisation initiatives in the local banking sector, netted P1.2 billion in non-interest income in the year to June 30, about 11% up year-on-year.

Absa Botswana, the country’s second largest bank, posted pretax profits of P128.9 million for the half year to June 30, representing a 67%

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drop year on year, the largest profit drop amongst listed banks. The profits were possible despite the bank spending P1 billion on customers’ COVID-19 relief measures.

“On a year-on-year basis our credit losses significantly increased in comparison to the previous year,” the bank’s directors said in a commentary accompanying the recent results.

“This sharp increase was largely impacted by the outbreak of the COVID-19 with a high volume of customers requesting for debt relief in the form of payment holidays restructures and forbearance programmes.

“Lockdown restrictions also impacted the performance of our debt collection as well as customer mobility to make payments.”

Standard Chartered Bank Botswana, the third largest bank, saw its pretax profits for the half year to June 30 jump more than threefold to P109 million helped by a once off transaction, while Banc ABC’s pretax profits rose nearly 10% over the same period to P73 million.

Bank of Botswana (BoB) figures show that the sector’s performance had collective net incomes of P698.4 million in the first six months of the year, representing a 21% drop from the corresponding period last year.

The banking sector’s non-interest incomes for the first six months of this year were pegged at P1.31 billion flat from P1.3 billion last year. Analysts said the flatness of the non-interest income, despite movement restrictions in April and May, showed the rising digitisation in banking was helping resilience.

Impairments, however, rose 87% to P485 million in the first six months of this year, fuelled by COVID-19.

“The COVID-19 pandemic and the necessary disease containment measures will continue to have an adverse effect on economic performance in the short term,” the Financial Stability Council said this week.

“If protracted, (the pandemic could) further elevate risks to financial stability in particular potential increase in default of bank loans and insurance premiums payments or contributions to pension funds.”

However, the Council, which comprises the BoB, Non-Bank Financial Institutions Regulatory Authority and the Financial Intelligence Agency, said despite the pandemic, the local financial sector continued to be resilient, characterised by “strong capital buffers, liquidity position and profitability”.



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