28 Aug 2016

First National Bank Botswana (FNBB) chief executive officer and chief financial officer are optimistic the bank would weather the storm after profits before tax declined by 13 per cent to P503 million.  

The loss has been attributed to investment in infrastructure, increased depreciation of assets and regulatory processes enhancements which had seen operating expenses increase by 31 per cent.

Speaking at the launch of the FNBB results for the financial year ending June 30, 2016 recently, FNBB CEO, Mr Stephen Bogatsu said the bank operated in difficult economic situation aggravated by low interest rates owing to inflation which had been within the bottom notch of Bank of Botswana’s medium term objective range.

Interest rates had been reduced by a total 150 basis points including the recent downward trajectory by 50 basis points. As a result, Mr Bogatsu said in a world where monetary policies were converging, investors were likely move their money to countries where interest rates were high. On the other hand, net interest income grew by two per cent to P1.3 billion.

Mr Bogatsu said inflation was expected to remain at 3.3 per cent this year but to normalise to four per cent in the medium term. He said FNBB registered credit growth of 7.1 per cent but majority was for household while loans for businesses declined due to the low confidence.

Mr Bogatsu explained that the majority of household loans were for consumption, adding the total amount borrowed to individuals stood at P30 billion against savings of P13 billion.

However, he said the biggest worry was that impairments would grow when interest rates started going up.
Bank of Botswana lifted the moratorium on banking fees but FNBB was able to introduce their new rates on August 15, hence were not part of the current financial results.

That, Mr Bogatsu said, had impacted their fees. Further, he said stringent regulation to guard against fraud, money laundering and terrorism funding, required additional resources which had led to the bank increasing its expenses.

The bank, listed in the Botswana Stock Exchange (BSE), was also affected by increased competition due to new entrants which had led to reduction of market share.

Faced with increased competition, Mr Bogatsu said they did not want any of them to encroach in their space and thus would respond accordingly through a number of strategies.

As such, he said they would focus on ensuring their 480 000 customers got the best services by investing in new systems to improve their delivery.

Meanwhile, the FNBB share price had been on the downward trajectory since the beginning of the year and had declared a dividend of 11 thebe per share, down from 16 thebe declared last year.

For his part, FNBB chief finance officer, Mr Makgau Dibekwane said the bank had experienced growth in advances spurred by long term loans.

Mr Dibekwane added that the bank had also improved funding which had led to increased long term borrowings. Also, he said overdrafts had slowed down in line with businesses and need for capital had declined. ENDS