The National Development Bank (NDB) commercialisation will not only unlock more value for the bank but also strengthen the financial sector and the general economy.
The Lorato Morapedi-headed bank has just completed transforming into a limited liability company, being the gateway to entering the commercial banking sector, according to Public Enterprises Evaluation and Privatising Agency (PEEPA). Chief Executive Officer Kgotla Ramaphane revealed this week that the state-owned development bank would be privatised soon, and that it was ready for an Initial Public Offering (IPO) at the Botswana Stock Exchange (BSE).
The news has excited local stockbroker, Garry Juma who feels that NDB would now flourish. Juma’s optimism was shared by a local senior banking executive, who said with the right strategies and products NDB could bring increased dividends for government while benefiting citizens who would also be shareholders under the new commercialial set-up. However, CEO Morapedi has not yet publicised the banking strategy that her bank plans on taking post-privatisation. She only said the privatisation will make the bank a bigger player in the sector. “The bank continues to adequately prepare for this major transition and a clear strategy exercise conducted considered key priorities,” she said, without revealing more.
But analysts said with the right strategy, NDB could become a banking behemoth. “As a commercial bank, they would now be taking deposits from customers, and this will boost their financial position as well as their balance sheet,” said the senior banker. According to him, NDB’s income is currently generated mostly through Interest Income, given that as a development bank, they only give out loans and do not take deposits. NDB’s operating income has grown to P178 million for the year ending 31st March 2013 from P156 million recorded previously. “When taking deposits, their interest income will surely see a boost, also driven by increased funding that would also boost the bank’s loan book,” explained the banking executive.
NDB’s loan book had grown to P1.2 billion for the financial year under review. It is expected that NDB would after listing on the BSE, introduce more products that would broaden their funding scope thereby boosting the loan book significantly. The 2013 annual report shows that NDB currently funds mostly agricultural businesses taking over 50 percent of the loanbook, while commercial, industrial, mortgage property and retail account for a limited share in the loan book. However, the banking insider confirmed that NDB would after privatisation come up with more products supported by technology, innovation and a widened scope that would see more sectors of the economy being catered for in the funding strategy.
“They are also likey to start funding household loans,” he said, adding that with so much appetite for cash locally, NDB’s loan book would swell instantly. “But they would keep their development banking taste and continue funding economic development projects, which will give them a competitive edge in the financial sector,” he said adding that since NDB was funding mostly citizens it would now fund foreign businesses,” as well. NDB is also expected to improve Botswana’s commercial banking sector competition, while banking clients will get variety of products and services. “Being commercialised, NDB would possibly expand their branches, giving employment to more Batswana,” Juma said. Further, the banking executive also said that citizens would have the privilege of being shareholders in a private bank through the share structure approved by government.
While 5 percent shares are reserved for citizen employees, 30 percent is reserved for general citizens and 14 percent is for both citizens and foreigners. Government will remain the major shareholder at 51 percent.