• Balance sheet up 11% to P17.9 billion
• Profit before tax down 5%
• Non-interest income up 11%
• Declares Five Thebe Dividend
First National Bank Botswana (FNBB) announced its half year financial results on Friday, which have been termed fair by the management looking at the prevailing economic conditions.
The results for the half year ended 31 December 2014 shows that the bank’s balance sheet grew by 11 percent to arrive at P17.9 billion compared to the P16.2 billion that was recorded during the previous corresponding period.
FNBB Chief Financial Officer (CFO), Boitumelo Bogopa, said during the results presentation that the bank operates in hostile environment which includes low interest rate and warned that the situation will continue to worsen coupled with tight liquidity constraints.
As a way of responding to the trading climate, Bogopa said they have since redefined the credit risk appetite and continued to grow the balance as well as increase transactional volumes. While the bank’s profit before tax decreased by 5 percent the bank maintained its conservative credit risk appetite and growth in advances is predominately in secured asset classes.
As way of achieving the level of growth in advances, the bank had to manage its liquidity position amid increasing liquidity pressures in the market. This was successful and as a result the bank managed to grow deposits from customers by 11 percent and therefore maintaining its leading position in market share.
The bank has noticed a significant increase in transaction volume during the period which resulted in an 11 percent increase in non-interest income. The increase in volume is said to have been driven by the introduction of innovative banking solutions such as launch of Automated Deposit Taking Machines (ADTs), Rand dispensing ATMs and phone banking channels among others.
The bank’s balance was improved as a result of Bank of Botswana Certificates (BOBCs) reducing by 25 percent year-on-year as the liquidity in the market tightened, leading to an increased loan-to-deposit ratio.
The bank says during the period it put more focus on ensuring that cost containment was realised through rationalisation of service providers as well as standardisation of prices for consumables.
This practice assisted the bank in curtailing costs which only increased by six percent. As a result, profit before tax registered five percent year-on-year decline while key metrics remained strong with acceptable levels of return on assets being at four percent and return on equity at 31 percent.
Looking ahead, the management is of the view that within the current difficult economic climate, the bank’s fundamentals remain strong.
“Opportunities lies in the customer-centric strategy that the bank has embarked on which is on the back of a reined segmentation model,” said Richard Wright, FNBB acting CEO.
For the period under review, FNNB has declared an interim dividend of five Thebe per share. FNBB has a market capitalisation of around P9.5 billion and by Friday its shares were trading at 380 Thebe per share, increasing twice within a week after initially increasing by Five Thebe on Monday to trade at 375 Thebe per share.