Choppies Cookoff

Impairments cost FNBB  

SHARE   |   Monday, 04 September 2017   |   By Kabelo Adamson
FNBB CEO, Steven Bogatsu FNBB CEO, Steven Bogatsu

The First National Bank Botswana (FNBB) has reported a drop in profits for the full year ended June 30, 2017 due to rising impairments driven mainly by the closure of BCL mines. The bank’s profit after tax has gone down by one percent from the previous year which is said to have arisen from impairments attributable predominantly to the liquidation of BCL mining group which happened last October. This led to the impairment going up by 2.3 percent which the bank says is a reasonable figure. The impairments came even when the bank says it applied cautious approach to lending risk in order to combat such. To control the impairments going into the future FNBB CEO Steven Bogatsu says a proactive approach has been and will continue to be adopted in respect of provisioning against the effects of possible economic strain. FNBB has recorded a profit before tax of P680.3 million – an increase of three percent from the previous year – for the full-year ended June 30, 2017.  Total advances grew by 4 percent which is above the market credit growth of 2 percent while deposits grew by 3 percent emanating predominately from good growth in short-term funding over the year with current and call accounts posting growth of 28 percent and 9 percent respectively as well as the improvement in the market liquidity over the period leading to a decline of 27 percent in interest expense. While the central bank has recently said the banking system is safe and sound, Bogatsu says the industry is currently undergoing a period of low credit growth which he says is growing at worrying levels. Other issues in the banking industry, according to Bogatsu, is compliance and regulations enforced by the regulator – Bank of Botswana (BoB).

Following a period of low credit growth, Bogatsu and his bank are optimistic that this would soon be a thing of the past as they expect credit demand to be supported by the feed-through from a recovering mining sector and government’s recently launched NDP11 which leans on Public-Private Partnerships (PPP) to finance major infrastructure projects. While credit demand from mining sector has reportedly been low at just 0.6 percent of total loans as at February 2017, Bogatsu says the sector’s health feeds into the manufacturing, trade and transport sectors which when combined accounts for 16.6 percent of total loans. It is said that credit growth to all these sectors was weak and on downward trend over the last year but viable credit demand should improve as these sectors benefit from the improvement in the mining sector, according to Bogatsu. It is also expected that consumer credit demand could also benefit from subdued inflation rates, although growth is expected to be restricted by limited household income. The Mid-Term Review of the 2017 Monetary Policy Statement released by BoB says overall the current levels of credit growth continue to be supportive of economic activity and augur well for durable stability of the financial system. The review also states that the current levels of interest rates is considered appropriate to support economic activity, mobilisation of financial resources and financial sector development.