• Growth in advances 6% on prior year
• Interest income down 2% on prior year
• Performance improving – CEO
The First National Bank Botswana (FNBB) intends to continue with its policy of embedding segmentation model aimed at providing tailor made products, solutions and superior service in line with customer-centric strategies.
Announcing the bank’s unaudited financial results for the half year ended 31st December 2015, FNBB’s CEO Steven Bogatsu said the past financial phase was volatile and hence required the bank to exercise caution while striving to provide customers with the right products.
Despite operating in an economy which is expected to post growth of no more than 1 percent in 2015, the First National Bank Botswana has successfully grown its balance sheet by 14 percent.
This growth, according to Bogatsu, was led by an increase in customer deposits of 13 percent, as a result of the bank embarking on a successful deposit raising strategy following the banking sector experiencing tight liquidity constraints in the first half of 2015.
Additionally, to lengthen the liability tenure of the bank, a senior debt funding programme was launched and P238 million was successfully raised, bringing total borrowing to P642 million.
“In an environment of low market credit growth, the excess liquidity was placed in investment securities. This positions the bank well for productive credit growth opportunities,” he said.
The bank was also able to be prudent in its lending, but still achieved growth in advances of 6 percent on the prior year. This growth emanated mainly from group schemes, where deductions are from source and from both home loans and Wesbank where each loan is secured by the asset.
This deliberate approach is geared towards ensuring a healthy advances book and hence preserving and ensuring sustainability in the Bank’s overall earnings. The bank will continue to be cautious in extending credit and optimising recoveries, with a view to enhancing the quality of overall lending.
On its comprehensive income the bank, according to Bogatsu, FNBB was faced with limited viable lending opportunities and declining interest rate cycle hence income fell by 2 percent on the prior period.
“Credit extension to corporates went down as institutions were more cautious and were not investing because of lack of investing opportunities,” said the FNBB CEO.
However despite the difficult economic conditions, and assisted by both priority focus on collection strategies and selective lending practices, growth in impairments was confined to 10 percent.
The bank’s non-interest income increased by 11 percent, reflecting its success in increasing transactional volumes through cross-selling to its customer base and by increasing the number of Automated Teller Machines (ATMs), Advance Deposit Tasking Machines (ADTs) and clients using online Banking.
Investments in the bank’s operating systems, resourcing for the increasing requirements for risk management and compliance, and introduction of new products, resulted in an increase in operating expenses of 19 percent.
Profit before tax declined by 15 percent from first half of the prior year, compared to a year-on-year decline of 18 percent for the full year ended 30 June 2015.
“Our performance in the first half of the current year indicates an improving trend,” said Bogatsu.
As part of its management strategy the FNB group assesses on a regular basis if it is appropriately capitalised from an economic risk point of view.8
The group’s capital adequacy ratio, which excludes the dividend reserve, has been maintained at 19. 22 percent as at 31 December 2015, and is above the Group’s internal limit as well as the Bank of Botswana required ratio of 15 percent.