Barclays in positive trajectory

SHARE   |   Monday, 28 September 2015   |   By Kabelo Adamson
Barclays Botswana Managing Director Reinette Van Der Merwe Barclays Botswana Managing Director Reinette Van Der Merwe

In an economic environment of low interest rates and squeezed liquidity conditions, Barclays Bank Botswana posted what it says it’s a positive Profit before Tax (PBT) of P110 million. Mumba Kalifungwa - the bank’s new Financial Director having taken over Lipalesa Makepa - said the profit was achieved on the back of significant growth in income from business banking and treasury sales and market trading.
The bank presented its 2015 half year results for the period ended 30 June, which according Kalifungwa, have seen a significant growth in income year on year in the business banking segment and the markets business, both growing in excess of 50 percent in revenue realised. Barclays bank interest income grew year-on-year by three percent and the modest growth interest income is said to have been compounded by the interest rate cut in February this year. An estimated negative impact on income of P81 million for the full year is expected, according to the bank’s Financial Director.
“We have managed to claw back a significant portion in the first half. This performance was led by Business Banking and Corporate Banking, which registered strong interest growth driven by positive balance sheet momentum,” said Kalifungwa. Despite a 10 percent growth in the balance sheet, retail interest income was down by nine percent due to higher funding costs than planned and partly due to the interest cut rate.
During the six month period, interest expense increased by 35 percent. “Given the tight market liquidity, the cost of wholesale funding has been the major key driver of the increase in the interest expense,” said the financial director.
He said the net interest income decline was also further negated by a reduction in income from government securities by 28 percent year-on-year. This is said to have been driven by a reduction in investment in securities in response to liquidity challenges in the market.
Kalifungwa said their investment in technology is showing results and has seen the bank increase its revenue from both card issuing and acquiring businesses by an average of 40 percent. The bank’s cost to income ratio closed the half year at 61 percent compared to 57 percent for the same period last year and the movement is attributed to the challenges faced on income. The impairment charge went up by 11 percent, when compared to the previous year. The key driver in impairment charge, according to the bank, remains in the personal unsecured loans while the non-perfoming loans ratio improved from 6.7 percent to 6.2 percent.
The loan loss rate is reported to have remained stable at 1.4 percent in comparison to the previous year’s average loss rate of 1.3 percent. With respect to liquidity challenge, Kalifungwa said the bank managed to remain well above the regulatory Liquid Asset Ratio for the period under review at 22 percent against the 10 percent set by the regulator. Kalifungwa said the bank will continue to remain below the 100 percent Loan to Deposit ratios if all sources of funding are taken into account.
For her part, the Barclays Botswana Managing Director Reinette van der Merwe said the bank has laid a solid foundation to be the ‘Go-To’ bank in Botswana. She said the bank is committed towards delivering superior customer service by investing in people, technology and innovation. The bank’s goal, according to the MD, is to be the ‘Go-To’ bank in the chosen areas by the year 2018.
The chosen sectors that the bank has identified as areas of interest are public sector, mining, transport and communication to offer best in class corporate and investment banking products with emphasis on cash management solutions, debt, risk management products. The bank will also put more emphasis on trade, capital markets, corporate asset finance, structure deposits and foreign exchange.