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FNBB profits P732 million after tax

Publishing Date : 10 September, 2019

Author : ALFRED MASOKOLA

First National Bank Botswana (FNBB), the country’s largest commercial banking services outfit by market share ended their 2018/19 financial year on a high note raking a whooping P732,536 ,000 in profit after tax.


When presenting their audited consolidated summarised financial results to an audience of shareholders, stakeholders and members of the media in Gaborone on Wednesday, the bank Chief Executive Officer (CEO), Steven Bogatsu said during the financial year focus was placed on improving credit discipline with concentrated efforts on the distressed debt portfolio.


“Additionally, priority was given to our customer-centric strategy through continued investment in infrastructure and digital customer solutions, to upgrade management of risk and liquidity, and to achieving prompt compliance with the continued introduction of new regulatory requirements,” he said. Zooming into financial highlights the bank realized 4 % growth in deposits, driven by increases in the call and current account portfolios. Statistics available as at May 2019 indicate a comparable twelve-month market growth of 12%.


Bogatsu explained that the bank’s level of participation in the market was appropriately managed by growing the transactional base for short term funding and keeping term deposits relatively flat year on year to match advances growth achieved. Gross customer advances registered a growth of 5% year-on-year. FNBB top brass say this increases was slightly behind the twelve-month market growth of 7% as at May 2019, and was largely driven by consumer term loans and asset-based finance on the back of the Government wage increase.


“We continue to manage our credit risk profile with high amortisation in higher risk business advances being largely offset by the growth in the lower risk corporate advances,” shared Bogatsu. NPLs remained relatively flat closing the year at P1.14billion, being a significant improvement on the P1.3 billion disclosed in the December half year 2018 results and indicating some success from our focus on credit discipline and accelerated collection processes. The Bank improved its efficient deployment of cash and short- term funds and increased its investment portfolio.


Giving an in-depth detailed account on the financial performance, FNBB Chief Finance Officer Luke Woodford said both profit before tax and profit after tax rose by 13% due to efficient management of all the key income and expense drivers resulting in an improved return on equity of 22.7% compared to 22.1% in 2018. Gross interest income increased by 7% against gross advances growth of 5%. Woodford explained that net interest income benefitted from a reclassification of interest in suspense between interest income and impairments in accordance with the implementation of IFRS 9.


“Interest earned on investments followed the increase in the investment portfolio, the benefits were partially offset by reduced average client rates driven by a change in the portfolio mix and compressed margins,” he said. The CFO further added that notwithstanding the rollover effect of the liquidity pressures experienced in the prior year, the interest expense increased by 7%, largely driven by a reduction in professional funding and by strong growth in the call and current deposits.


The impairment charge for the year showed a reduction of 3% against the prior year, following prudent credit extension and focus on the management of distressed advances. The stage 1 and stage 2 impairment charge of P42m reduced by 68% compared to the P110m prior year portfolio impairment charge, largely due to the prior year charge including significant downward revisions to the key provisioning assumptions. The stage 3 impairment charge increased by 17% following reductions in the expected realisable value of the collateral supporting the Home Loans, WesBank and Commercial portfolios.


Non-interest revenue grew by 7% in the year. This follows a 7% increase in the customer base and a successful roll-out of new products such as the savings pocket. The improved connectivity in the point-of-sale machines and an increase in machines in use, combined with the swipe-and-win campaign resulted in an 18% growth in card and merchant commissions. Revenue from foreign exchange grew by 15%, partly from volatility in the South African Rand.


An improvement in the cost-to-income ratio reflects continued cost management initiatives, with several expenditure items remaining flat year-on-year. Increasing resources in the collections department together with the overall annual salary review resulted in staff costs rising 7%, whilst other costs were well maintained at a 4% increase.


FNBB Boss explained that the capital management philosophy of the Bank is to maintain sound capital ratios to ensure confidence in the solvency and the quality of its capital during both calm and turbulent periods in the economy and in the financial markets. “We therefore, aim to maintain capital ratios aligned to its risk appetite and appropriate to safeguarding its operations and stakeholder interests,” he said.


For the financial year ended 30 June 2019, FNBB continued to operate above the regulatory minimum capital adequacy ratios. As at the end of the financial year, the total capital adequacy ratio was 17.42% and is above the regulatory minimum of 15.00%.

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