Bank Gaborone bounces back to profitability
Brian Benza | Friday November 25, 2016 16:01
While the 45% drop in impairment charges to P21 million helped shore up profits, the bank also gained from a 30% rise in net interest income to P133 million.
“Cost to income ratio reduced from 92% in June 2015 to 73% as at June 2016, mainly due to increase in net interest income, while costs decreased marginally following an enhancement of the effectiveness and efficiencies of processes,” said the bank.
In the period, the bank’s total assets increased by 13% to P4.4 billion, a development the company says is commendable given the current competitive environment in the banking industry.
Deposits from customers also rose by 13% to P3.8 billion while funding was also enhanced, during the period, through issuance of debentures.
Looking ahead, the bank says it will continue to focus on its three-year strategy, which has thus far delivered a significant turnaround in performance.
The bank, which is owned by Namibian-based Capricorn Investments, is this month celebrating 10 years of operating in Botswana after it opened its first retail branch in Gaborone in September 2006.
The turnaround at Bank Gaborone follows a difficult 2015 for the industry where banks suffered the effects of low interest rates, a freeze in bank charges hike and negative economic growth.
According to the Bank of Botswana 2015 Annual Report, profitability amongst the banks as measured by Return on Equity (RoE) as well as Return on Assets (RoA) declined with one smaller bank recording a loss in the year.
Although the report did not show profitability by individual banks, the central bank says the maximum RoE registered by the banks fell to 21.4% from 27% in 2014 while the bank that had the lowest profitability registered a negative (6.2 %) RoE in 2015.
As measured by RoA, statistics from the central bank show that the bank that was most profitable recorded maximum of 2.6% while the least profitable recorded a negative RoA of (0.4%).
The dwindling profitability came as its core business, lending, fell to a decade low of seven percent largely due to slower credit uptake by businesses.
In the year, annual growth in commercial banks credit eased from 13.5% in 2014 to 7.1% in 2015 due to a decline in growth of lending to the business sector from 17.2% to a negative (0.3%).
On the other hand, banks have become very cautious in issuing new loans, due to concerns about the volatility of the deposit base and the ability of customers to repay.
Despite the absence of figures of profitability by unlisted smaller banks, analysts fear that the four largest banks make almost all of the profit in the industry, meaning that some of the medium-sized and small banks were probably making losses.