One of the country’s leading commercial banks, Barclays Bank Botswana, says its consolidated profit for the period ended 31 December 2014 will be significantly higher than the prior financial year’s, BG Business has learnt.
This week, the bank issued a statement to shareholders indicating profits for the period under review will be up. Barclays did no state the amount of profit it will posts. The news is a relief to shareholders who have seen profits for the bank taking a nosedive in the past three years. Even at the stock exchange, the bank performed poorly during the period of stressed margins. The bank ended 2014 on low trading at P3.43 in December, says its highest price over the last 12 months was P4.20 and the lowest P3.39. Barclays became one of the biggest losers on the Botswana Stock Exchange in 2014.
However, the bank could be seeing its road to recovery as it closed the week for Friday 6 March 2015 trading at P3.56, by Wednesday it was on a high of P3.70. According to Garry Juma of Motswedi Securities, Botswana’s banking sector is going through a tough period mainly as a result of the country’s low interest rate environment, low deposit levels, rising impairments and tight liquidity situation. “(The Year) 2015 is going to be a very tough year for the banking sector at large and the moratorium, which is still hanging around their necks, will further impact on the growth of non-interest income. Already we are witnessing a slower growth in credit growth while arrears in the business and non-financial institutions are increasing.”
This is an area of serious concern as it impacts negatively on the growth of the banking sector and the economy at large. According to Juma, banks that are innovative will have a healthy loan book with low impairments and that those with an ability to harness deposits will survive.In its 2013 full year results, Barclays’ interest income fell by five percent despite a 17 percent growth in the loan book. This unexpected decline in interest income was a reflection of pressure on margins and structural changes in the retail portfolio where the book is now skewed towards lower yielding secured lending.
Fees and commission income were virtually static for Barclays while other operating income increased by 24 percent, reflecting increased activity in the treasury division. Impairments continued to be a problem area for the bank, growing by 58 percent, pushing the impairment ratio up to 2.7 percent from 1.9 percent in 2012. Profit after tax nosedived by 34 percent to P295.8million from P450.9 million in 2012.
Looking into the analysis by Motswedi Securities at the time, Juma had indicated that the bank’s ability to have a cleaner loan book would remain key to its turnaround strategy. “Our upside view of the bank is relatively subdued due to intense competition, a low interest rate environment and to some extent ‘in-house’ issues which still need to be addressed,” said Juma then.
Meanwhile, earlier this month (March 2015), the Barclays’ officials said Barclays Africa aimed to claim back the Number One spot as the preferred commercial bank in Botswana.
Speaking during the Barclays Africa results presentation over a week ago, Barclays Africa Group Chief Executive Maria Ramos and, Barclays Africa Group Deputy Chief Executive David Hodnett said they were geared up to take back the command they once had.
Hodnett pointed out that despite their troubled financial performance, the bank’s liquidity base in Botswana was in good position, a status boosted by its well-established international operations. He added that Botswana operations were important to the Barclays group as their African expansion strategy aimed to turn the operations into one of their top three revenue contributors.
“We are looking at enhancing our operations and speeding up growth in Botswana. We know we lost some ground. However, with focus we will once again become the number one financial institution in Botswana,” he said.