Bank profits head for new record

Mbongeni Mguni | Monday September 23, 2024 11:31

Banking is amongst the country’s most profitable sectors, with local banks’ collective profits breaking historic records in two of the three years since the pandemic year of 2020. Banks’ profits have defied downturns such as COVID-19, with nearly all entities digitising and boosting their non-interest income, tightening their operating structures and innovating around credit products and services.

Bank of Botswana figures released recently show that as at June 30, the country’s commercial banks had reaped a collective P1.97 billion in after-tax profits, putting them well on track to exceed the record P3.2 billion in profits they made last year.

This year, the banks’ profits have benefited from their decision to tighten credit assessments after the pandemic, as the collective provisions for bad and doubtful debts reached a negative P18 million in the six months to June 30, compared to a positive P142 million in the same period last year.

Collective net interest incomes for the banks reached P3.6 billion in the first six months of the year, more than 21% higher than last year, as warming economic conditions helped healthy loan growth.

The strong net interest income growth also defied the 75 basis point interest rate deduction made between December and August by the Bank of Botswana.

The robust numbers in the industry were confirmed this week, as some of the country’s biggest commercial banks unveiled interim financials showing increases of up to 45% in pretax profits.

Absa Bank Botswana’s pretax profits for the first months of the year rose 26% to P562.6 million, with executives noting strong net interest income, restrained growth in operating expenses and the fruits of a diversification effort.

“Our commitment to diversifying revenue streams is bearing fruit, as evidenced by an 11% growth in fee and commission income, supported by digital initiatives and broader diversification efforts,” directors noted. “Operational efficiency remains at the heart of our strategy. “Our cost containment measures have been effective, with overall operational costs increasing just first percent year on year, aligning closely with inflation rates.”

At Stanbic Bank Botswana, pre-tax profits in the first half of the year rose 45% from the corresponding period last year, reaching P420 million, on improved loan quality and lower costs of liquidity. Stanbic directors noted that efforts to improve loan book quality paid off during the period, with the credit loss ratio declining to 0.25 percent as at June 2024, compared to 0.7 percent during the half-year to June 2023. Credit impairment charges dropped by 63.5% to P24 million, despite a near 10% growth in loans and advances.

Standard Chartered’s pretax profits in the first six months of the year rose by a modest six percent to P254.5 million, helped by a “steady growth in operating income, cost management strategies and quality of the loan book”.

At First National Bank Botswana, for whom June 30 was the end of the financial year, net interest income was up 24% to P1.8 billion compared to the corresponding period last year, while non-performing loans were down by P89 million or 10%.

Profit before tax for the period was up 26% to P1.8 billion.

“The bank will continue placing client experience as a high priority, with significant investments planned for the year ahead,” directors at the country’s biggest bank said last Friday. “This will be a continuation of a number of product and channel enhancements rolled out during the current year.”