Wesbank

Stan-Chart bounces back

SHARE   |   Friday, 31 August 2018   |   By Kabelo Adamson
Standard Chartered Bank Botswana CEO Mpho Masupe Standard Chartered Bank Botswana CEO Mpho Masupe

Having suffered declining income over the last couple years primarily due to impairments arising from the mining industry, Standard Chartered Bank Botswana CEO Mpho Masupe says the bank has bounced back to profitability.

“We have always insisted that the fundamentals of the business are quite strong and we know exactly what has gone wrong and we would fix it,” Masupe said on Wednesday this week as the listed bank unveiled its financial results for the half year ended 30 June, 2018.

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The bank has registered P28 million Profit before Tax (PBT) and Masupe considers this a significant improvement if one takes into account where the bank is coming from in the last three years.

“We have done this through a number of things and the tenants that we have spoken of in terms of the strategy have been the pillars to get to the positive at the first half year in 2018,” said Masupe, adding that one would expect that having attained growth in profit at half, they would certainly do better at the full year.

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Masupe says they are beginning to see green shoots which are indicating that the trajectory is good as the bank also continues to control its impairments.

Even though the commercial bank registered profit for the first time in three years, Masupe says business has not been good during the first six months of the year as they would have expected it to be.

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“We have been operating in an environment which has been benign to put it slightly, to an extent that you would have known that the economy only grew by 2.4 percent for the whole of 2017 which was not expected and therefore demonstrating exactly what was happening in the business environment that year.”

Masupe says they are however comforted by growth that has been witnessed in the first half of the year, though it remains relatively subdued.

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“Whist that was happening we have also seen that credit growth hasn’t necessarily been growing as much as it should have. We are seeing 6.8 percent in credit growth for the year, mostly from the household side,” says Masupe, adding that this is an area they are concerned about because it makes them a lot more cautious in terms of extending credit.

Though the bank exists to extend credit, Masupe says when they are cautious in terms of extending it, then it means there are indicators within the economy which are concerning for the bank not to extend credit fully.

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“You are aware of some of the organisations that are retrenching particularly within parastatal sector and every time that happens banks think credit risk and banks begin to be a little more careful in terms of the credit that we extend, not saying we are not going all out and extending credit, but we become a lot more careful,” Masupe explains.

The other thing that happens in the banking industry is liquidity which Masupe says affects everyone within the industry.

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“But it affects others a little bit more depending on maturities that a particular bank may find themselves in at any point in time,” he says.

Masupe says it would mean that reduction in liquidity or little growth of the total liquidity in the market will always play some strain in ensuring that intermediations happen as it should within the market.

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“We are not saying it has affected any more than it has affected the next ban, but we are just mentioning the environment within which were operated for the past six months,” he notes.

Indications, he says, are that it is all looking positive for the banking industry and hence he believes they would be able to continue the trajectory going into the second half of the year. They have geared the business to be able to do this.

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The bank’s Chief Financial Officer, Mbako Mbo, explains that the decline of the bank’s topline came through net financing and non-funded income. During the period, the bank carried out some certain portfolio rebalancing and to de-risk from certain assets and sub-sectors.

“The decline that is reflected in income is something which was expected due to the de-risking that was carried out,” says Mbo. They have also taken a look at the total operating costs.

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In terms of impairments, Mbo says they are reporting a net recovery of P9 million, compared to the P120 million that was reported last year.

Mbo says they are now sitting with a healthier portfolio which is reflecting on the low impairments. He says the decline in income that the bank is reporting is actually coming with the positives with the assets that are generating the income.

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The bank registered a three percent decline in overall assets, arising from the portfolio rebalancing and this happened only in two segments. The bank registered a five percent increase in the retail sector in terms of client assets.

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Overall liabilities declined by five percent in line with the market trends. Mbo says they are still confident that the resilience of the balance sheet remains strong.



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