banner_9.jpg
banner_274.jpg
Home » News » Business » Impairments shrink FNBB profits

Impairments shrink FNBB profits

Publishing Date : 12 September, 2017

Author : REARABILWE RAMAPHANE

The First National Bank Botswana (FNBB) has reported a decline in profits for the full financial year ended June 30, 2017. This contraction in the bank’s output has been noted as mainly due to poor performance of the mining sector in 2016.

FNB submits that the year under review registered rising impairments which were mainly driven by the liquidation of BCL group. The bank’s profit after tax has gone down by one percent compared to the year ended June 2016 “This is due to impairments attributable predominantly to the liquidation of BCL mining group which occurred in October 2017,” highlighted FNB Chief Executive, Steven Bogatsu.


Impairment registered in the financial year under review was 2.3 percent up compared to year ended June 2016. However FNB observed that as a reasonable figure, this rise in impairments was realized even after cautionary measures in lending approach were put in place. The bank announced when delivering the financial results this past week that a proactive approach had been put in place to absorb the effects of the current and possible coming economic strain.


Meanwhile notable figures from the bank’s financial highlights indicate that the company registered a profit before tax of P680.3 million, an increase of three percent for the full-year ended June 30, 2017 compared to the previous year ended June 2016.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.


Though Bank of Botswana (BoB) recently announced that the banking system is safe and sound, Bogatsu said the contrary highlighting that the banking sector, especially the lending segment which is currently undergoing a period of low credit growth realized slight growths at insignificant levels. The First National Bank boss said the commercial banking sector is also faced with issues of compliance and regulatory enforcement from BoB.


According to the bank’s financial report the bank’s credit book was contracted by the low credit demand from the mining sector, which declined by 32.2% due to low global demand in 2016. The bank’s loan book amounted to P15 million during the year under review. Bogatsu  further observed that though credit demand from the mining sector has been low, at just 0.6% of total loans as of  February 2017, the sector’s health feeds into the manufacturing, transport and trade sectors, which, combined, account for 16.6% of loans.“Credit to all four sectors was weak in a downtrend over the last year, but viable credit demand should improve as these sectors benefit from the improvement in mining activity,” he said.


According to Bogatsu consumer credit demand could also benefit from subdued inflation and low interest rates, although growth will be restricted by limited household income. “The bank also continues with efforts to improve and lengthen the tenure book which will see the bank enjoy benefits under the Basel III framework, which requires enhanced capital and liquidity sustainability,” he said. Bogatsu asserted that the growth in total advances emanated mainly from the retail short term loans but with mild growth also posted in the then Wes bank book.


The bank also took advantage of investment vehicles available offshore. As consequence and following the bank’s initiative to improve efficiencies, investment securities posted good growth of 35% which contributed to the growth in gross interest income whilst non-interest bearing assets in the form of cash grew by 20%.


The FNB has also been prudent around its property portfolio where additional provisions have been taken to cater for the ailing property values. According to the Chief Executive Officer the bank seeks to establish and manage a portfolio of businesses and associated risks that will deliver sustainable returns to its shareholders within appropriate levels of earnings volatility.


FNB generally pins its hopes on possible increase in credit demand anticipated 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. 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, mobilization of financial resources and financial sector development.

Cartoon

Polls

Do you think the closure of BCL will compel SPEDU to double their efforts in creating job opportunities in the Selibe Phikwe?

banner_14.jpg
banner_12.jpg

POPULER BRANDS