Despite recording high impairments driven mainly by liquidation of companies led by the closure of BCL that occurred in the previous year, FNB Botswana was able to see an increase in its profits for the half year period ending December 2016.
On Thursday, the bank CEO Steven Bogatsu announced his organisation’s financial results, showing a 9 percent jump in profits from P290.8 million the previous period to P317.8 million. Bogatsu said the closure of BCL has had a huge impact on their margins as they had significant exposure to the fallen mining company together with former employees of the mine. This resulted in impairments shooting to 56 percent to P150.3 million from P96.6 million in the previous corresponding period.Removing the closure of the BCL mine, FNBB calculates impairments would otherwise have been 23.6 percent which would reflect the bank’s credit structures and its approach to lending. On the bank rate, which is currently at 5.5 percent having been last reduced in August 2016, Bogatsu said it is expected that the rate will normalise at a slower pace than inflation increase. While at that level the rate is considered very low, Bogatsu said there is still scope for further easing of the bank rate by the central bank before the cycle begins going up again.
The interest rates are expected to slowly rise in 2018 due in part to normalisation in domestic Consumer Price Index (CPI) inflation. As has been happening in the previous periods, credit is said to have been extended mostly to individuals rather than businesses and the result of this - Bogatsu said – is that employment opportunities are squeezed with very few created. The bank, however, says it expects credit extension to advance on a steady growth pattern and forecast it at 13 percent in 2017, reflecting a return of some business confidence in investment prospects. During the period under review, advances from the bank are said to have grown by 13 percent in a market where overall credit extension over the period was at 7.8 percent, leading to growth in market share from 29 percent to 30 percent. Growth was reportedly led by primarily by retail term loans in an environment where business and corporate clients are said to have experienced low growth opportunities.