First Capital’s profits surge 35%
Mbongeni Mguni | Tuesday July 2, 2024 10:45
FCB Botswana is part of the FMB Capital Holdings, a Malawi-born but Mauritius headquartered financial group with other operations in Malawi, Mozambique, Zambia and Zimbabwe.
According to the results made available last week, FCB Botswana enjoyed a rosy period in the year to December 2023, with its loan book rising to P4.2 billion, from P3.7 billion. The Bank of Botswana (BoB) kept interest rates flat for most of 2023, effecting a 25 basis point reduction in December, which further eased borrowing conditions for customers.
The latest level of FCB Botswana’s loan book is more than double what it was in 2019, when outstanding loans were just under P2 billion.
FCB Botswana’s deposit book grew to P5.3 billion in the year to December 2023, from P4.5 billion the prior year, helping to fund its loan book growth. The growth in deposits saw interest expense rise 47% in the year to P260.3 million.
Commenting on the results, FMB Capital Holdings’ directors singled out FCB Botswana’s performance for the year, within the group.
“FCB Botswana continues to excel, achieving the local industry’s highest return on equity through diversified ventures beyond the mining sector,” the group’s directors said.
Within the FMB group, FCB Botswana’s after-tax profits of P224.6 million were the third highest after Malawi and Mozambique.
The local bank’s strong performance in 2023 is in line with the generally robust numbers reported by commercial banks last year. According to the BoB estimates, the country’s commercial banks last year raked in a collective P3.2 billion in after-tax profits, the second year running that the banks broke historical records with the levels of their earnings.
Local analysts said the explosion in bank profits was partly due to cumulatively higher interest rates since the pandemic, as well as warming economic climate which has increased credit appetites amongst borrowers.
“Most notable is the high-interest rate environment that has persisted since 2022 on the back of the central bank increasing policy rates in efforts to tame domestic inflation,” Kgori Capital investment analyst, Godfrey Matale previously told MonitorBusiness. “This high-interest rate environment has translated to higher net interest Income margins for banks and has positively affected the sector’s profitability.”
The central bank, meanwhile, believes bank profits are being helped by the broader economic environment since the pandemic.
“The enduring stability of the financial system is further supported by a conducive macroeconomic environment, characterised by accommodative monetary conditions and positive economic growth prospects,” Governor Cornelius Dekop said in the recently launched annual report.
The BoB cut interest rates earlier this month and is maintaining a loose monetary policy stance, meaning it will look for opportunities to further reduce interest rates, in order to support growth in the economy.
The interest rate cuts, should they happen, will put the brakes on banks’ runaway profits since the pandemic, analysts have said.
“Banks from this point forth should see downward pressure on net interest income margins which are the major profitability drivers for banks tied to their loan book growth. “However, this reduction in top-line growth should be somewhat offset by the cost containments borne out of the digitisation drive that most banks have embarked on,” Matale previously said.