CCR World Magazine

BOTSWANA - Despite the decline in profits before tax, First National Bank of Botswana (FNBB) has reported a strong growth in the balance sheet due to the retail expansion and financing of property.

FNB has said the demand for both residential and commercial property like office blocks has driven its loan advances which registered a growth of 13 percent and contributed to the overall growth of the balance sheet. The bank has said the challenges posed by the economic conditions impacted most businesses and individuals. “Despite this, the bank’s advances grew by 13 percent, albeit yielding a lower growth of four percent in net interest income before impairment of advances.” The bank said the relatively low growth in interest income in relation to the growth in advances, which also contributed to the loss in profits, is reflective of the significant margin compression being experienced in the low interest rate environment. “The period under review was challenging as interest rates contributed on a downward cycle. The central bank continued to reduce the bank rate despite inflation being at its lowest level since 2002.”

The Bank’s balance sheet has registered a 15 percent growth which was mainly driven by growth in the Bank of Botswana Certificates (BoBCs), which grew by 37 percent, as the bank exercises caution in lending with the emphasis being on credit risk. The bank has stated that it will strengthen its credit management which will focus on collections and debt restructuring.

Wesbank, the vehicle financing arm of the bank, has grown by eight percent compared to a growth of 20 percent in the same period last year. This is regardless of the decline in the market of vehicle sales by around 27 percent.

Going forward, the chief executive of the Bank, Lorato Boakgomo-Ntakhwana has said FNB will focus on increasing the retail market share, after the bank listed a growth in the sector. Boakgomo-Ntakhwana said the retail strategy has seen FNB roll out more branches, increasing its branch network from 12 to 18. “We have also embarked on increasing our footprints without increasing property costs and in that regard we have partnered with Pick n’ Pay and opened three kiosks. The bank will also use the existing branch infrastructure for product penetration and increase efficiency on the ATMs.”

Following the announcement by Government that it will tap into the local capital market to finance its 2010/11 budget deficit, FNB has announced that it is ready to help fund the deficit. Currently Government is running a P5 billion bond programme which the FNB has hoped will increase, and help clients and asset managers make use of the programme.