2020 a bad year, feels COVID-19 pinch
Profits decreased by 23% in H1 of 2020
Bank still expecting uncertainty in 2021
First National Bank of Botswana (FNBB) saw its balance sheet growing slightly by 5% driven by an increase in customer deposits of 6% after suffering a significant 23% in its profits for the six months ended December 31, 2020.
FNBB disclosed this week in its unaudited condensed consolidated financial results for the first six months ended 31 December 2020 that the deposits are in line with market growth of 6% (BoB Statistics).
According to the well diversified bank, this was largely attributable to a whopping 11% increase in demand deposits which offset a 4% decline in Fixed and Notice deposits during the period under review.
“In an environment of low credit growth in the market as a whole and in order to ensure prudent liquidity management, excess liquidity was placed in investment securities. This positions the bank well for productive credit growth and opportunities in the future,” the bank has said in its results statement.
Meanwhile, FNBB says both its profit after tax and profit before tax declined by 23% due to the pressure on top line revenue and increased provisioning to adequately provide for effects of COVID-19. The resultant return on equity was at 17.9% lower than the 25.4% accrued in the same period in 2019.
“The December 2019 results were within the expected parameters given the current prevailing operating environment. The overwhelming impact on the December 2020 results was the difficult trading environment created by a COVID-19, which the banking industry as a whole continues to navigate responsibly,” buttressed Chief Executive Officer, Steven Bogatsu-led commercial bank.
The bank further said that its interest income decreased following both an 8% decrease in gross advances and the cumulative Bank Rate Cut of 100 basis points that was effected by Bank of Botswana (BoB).
“The deposit mix shifted towards overnight funding, resulting in the interest expense reducing significantly by 12% while customer deposits increased by 6%. The impairment charges for the year increased by 16% year-on-year with a charge of P199m, due largely to an increase in stage 1 and 2 impairments in the tourism and transport industries,” said FNBB, regretting the losses.
Moreover, FNBB said it continues to provide prudently for the expected downward pressure on customer risk profiles and realisable collateral values in the overall context of COVID-19 trauma.
“Given the current uncertainty surrounding the rollout and impact of the COVID-19 vaccine and the second wave of infection being seen across the world, we expect that 2021 will continue in a state of overall uncertainty. We anticipate that pressures on discretionary household income will be sustained and that businesses will defer capital expenditure to conserve cash reserves pending stronger signs of imminent recovery,” the bank said anticipating better in a year 2021.