Barclays profits fall 30% on market headwinds
Isaac Pinielo | Friday September 25, 2015 15:35
During the period, the bank registered profit before tax of P110 million, which is lower than the P160 million recorded in the same period last year.
However, Barclays managing director, Reinette van der Merwe said the results were satisfactory considering the current unfavourable economic environment that the bank is operating under.
She said the P110 million profit before tax was achieved at the back of growth in income from business banking, treasury sales and market trading.
“We experienced significant growth in income year-on-year in the business banking segment and the markets business which both grew in excess of 50 percent in revenue realised due to increased strategic focus,” she said.
Announcing the results, the bank’s financial director, Mumba Kalifungwa said the bank’s interest income grew year-on-year by three percent.
The performance was driven by business banking and corporate banking, which registered strong interest income growth driven by positive balance sheet momentum.
He said despite registering a balance sheet growth of about 10 percent, retail interest income was down by nine percent due high funding costs.
“Net other income increased by 42 percent on the prior year mainly due to increased income in treasury sales and market-making activities driven by increased volumes,” he said.
Kalifungwa attributed this result to the bank’s strategic focus of growing its corporate and investment banking businesses.
Interest expenses increased by 35 percent from P94 million last year to P126 million this year. He said given the tight market liquidity, the cost of wholesale fund has been the major driver of the increase in the interest expense.
According to Kalifungwa, operating expenses are in line with inflation with an annual growth rate of three percent year-on-year.
“Overall our cost income ratio closed the half at 61 percent in comparison to 57 percent for the same period last year. The adverse movement is largely as a result of challenges faced on income,” he explained.
Furthermore, the impairment charge increased by 11 percent on the prior year, in line with the growth in retail advances. The key driver of growth in impairment charge is attributed to the personal unsecured loans space.
Kalifungwa also said the non-performing loans ratio improved from 6.67 percent to 6.16 percent, adding that loan loss rate remained stable at 1.35 percent in comparison to the previous year’s average loss rate of 1.32 percent.
Loans and advances to customers increased by nine percent to P8.4 billion year-on-year with retail loans growing by 10 percent on the back of the bank’s secured lending and term loans and corporate loans increasing by three percent to P1.8 billion driven mainly by term loans.
Kalifungwa said this strategy is largely in support of local corporates expanding into Africa and mining entities.
Customer liabilities grew year-on-year by five percent to P5.9 billion, largely driven by corporate banking, which grew its deposits by 15 percent to P4.2 billion. The growth was driven by positive flows of foreign currency deposits and call deposits, he said.
He pointed out that the bank continues to deepen relationships with its customers, which has resulted in increased transactional activity in both the markets and corporate businesses.
“The core of Barclays Bank of Botswana’s strategy is cross selling – to ensure that the bank becomes the primary banker for its clients and to capture the ancillary revenue that comes with lending and operating accounts,” said the financial director.