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Barclays’ performance defies harsh trading conditions

Publishing Date : 04 June, 2018

Author : REARABILWE RAMAPHANE

Barclays Bank of Botswana this week released its 2017 financial year report which indicates that the company has outperformed expectations considering unfavourable trading circumstances such as lacklustre economic conditions, interest rates reductions and closure of some major corporate clientele in 2016.


Figures contained in the annual report indicate that the company collected profit before tax of P558 million, which reflects a satisfactory 13% increase compared to that of 2016.  Financial highlights also mirror an increase in net fee and commission income of 9%, a 14% increase in loans and advance while credit impairments dropped by a respectable 45% year-on-year .Cost-to-income ratio remained controlled at 52%. The bank has delivered a steady return on equity of 22% and declared a stellar dividend growth of 12%.  


Chairman of Barclays Board, Oduetse A. Motshidisi observed that 2017 was a difficult trading period for the banking sector due to slow economic growth. “This phenomenon was present not just in Botswana, but in the region and to some extent even globally,” he said, also noting that interest rate reductions in October 2017, following on another in August 2016 resulted in margin compression and impacted the bank’s earnings negatively. Motshidisi also noted that the liquidation of one of Barclay’s major clients reduced the bank’s Corporate and Investment Banking asset balance sheet by P1 billion in the previous year. “This unexpected shortfall had to be filled in 2017.”


The Board Chairman also reiterated that the retail banking sector realized suppressed personal incomes since several years back, resulting in a number of businesses forced to close their operations in 2016 and 2017, which constrained people’s ability to access banking facilities. “The effects of this situation were felt in the 2017 financial year.”


Motshidisi however underscored that Barclays Bank of Botswana’s strategy, in the context of the current conditions, has been a broad-based one, and entailed extracting as much return as possible out of its Retail and Business Banking as well as Corporate and Investment Banking divisions. “The Bank has managed to significantly grow profit before tax, contain costs and nearly halved credit impairments, delivering sound return on equity.”


The Chief Executive Officer of Barclays Botswana Reinnet Van der Merwe highlights in the report that the company’s total income remained flat mainly due to low economic growth as well as margin compression caused by interest rate cuts in August 2016 and October 2017. “Our trading activities were also negatively affected by reduced overall corporate margins, which were competitor-driven.”


Van der Merwe noted that the reduction of credit impairments by 45% from the 2017 figures was commendable. She explained that it was largely driven by the bank’s revised collections model and enhanced collections strategies. “Our costs remained well contained registering a 4% year-on-year growth. This was in line with our continued focus on managing costs through various control programmes and rationalization activities.”


Mumba Kalifungwa, Finance Director at Barclays deliberated further on the finical performance of the company for the period under review  saying the full-year results demonstrate  Barclays’  commitment to delivering on the  five-year strategy, as well as contribution to various economic sectors through credit extension and the provision of a variety of payment solutions. “Our performance continues to be driven by positive momentum in our key business segments, which all achieved positive results, the competitive environment in which we operate remains challenging due to slow economic growth. The banking sector as a whole continues to be faced with challenges such as financially stressed consumers and the closure of companies, in the process impacting impairments,” he said


He further added that net interest income was impacted severely by the two interest rate cuts and therefore remained fairly flat, showing a decrease of 1% year-on-year. “Nevertheless, we continued to show resilience as a business and drove credit growth in our chosen segments of operation.”


Barclays Bank Executive observe that growing non-interest income remains critical to the company strategy, reiterating that the bank will continue to focus in that area in a bid to expand its income base. “We will also continue to control costs and manage impairments in 2018, through selective credit processes and collections strategy. Our balance sheet remains solid, albeit largely flat, at P15 billion, with strong liquidity and capital levels.”


The Bank Chief Finance Executive added that Barclay’s regulatory liquid asset ratio remains well above the requirement of 10%, at 15.49%. The annual report states that the Bank’s balance sheet was driven by customer assets and liabilities, with a 14% year-on-year growth in loans, mainly in corporate business while the company liabilities decreased by 2% to P10.98 billion.

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