Barclays Bank Botswana, one of the coun- try’s biggest lenders has lost millions of Pula as a result of the central bank’s deci- sion to cut key lending rate twice last year. Finance Director of the BSE listed bank, Mumba Kalifungwa told attendants at the recent an- nouncement of the bank’ full year results that P100 million was wiped off the bank’s balance sheet during 2015, a development that is beyond its control.
Bank of Botswana (BoB), the country’s regulator of commercial banks reduced interest rate by a cumulative 150 basis points to 6 percent last year. The rate was slashed in a bid to spur the struggling economy, which grew by 1 percent in the past. As per regulation, banks are forced to cut lending rates of existing and new loans, in the event that the central announces rates adjustments.
Commercial banks’ prime lending rate is now 7, 5 percent from 9 percent. “These (rate cuts) have affected our performance,” stressed Kalifungwa, who was speaking after the pre- sentation of the company financial results for the year ended 2015 in Gaborone. During the period under review, interest income for the bank increased marginally to P1, 13 billion from P1 billion made the year before.
The central bank, which is headed by Linah Mohohlo, is yet to make any rate adjustment this year. “The current state of the economy and both the domestic and external economic outlook, including the inflation fore- cast suggest that the prevailing monetary policy is consistent with maintaining inflation within the Bank’s medium term objective range of 3-6 percent,” the bank’s Monetary Policy Committee MPC) said last month. Meanwhile, Barclays’ Managing Director Reinette van de Merwe said they have also been affected by the two-year moratorium imposed on the banking industry since January 2014. Under the moratorium, which has since been lifted by BoB, banks were barred from making any upward adjustments on non-interest linked products or services. Meanwhile, Botswana Guardian un- derstands that, even though the moratorium has been lifted, ‘banks are required to go to the central bank if they want to increase fees’.
This was said by a Chief Executive Officer of a listed bank who refused to be named for fear of reprimand by the regulator for sharing the information with third parties. Merwe also told the media that, despite a cut in lending rate, the bank which boasts a market capitalisation of P3, 8 billion managed to increase loans and advances book by 20 percent.
At the end of last year, Barclays’ advances and loan book closed at P9, 8 billion. Barclays bank executives told stakeholders key business seg- ments ‘in our chosen sectors of operation’ boosted that loan book. During the period under review, customers’ deposits stood at P6, 1 billion. Merwe told Botswana Guardian after the results presen- tation that, they managed to return strongly in the second half of 2015 after the liquidity squeeze that nearly brought the whole banking sector to its knees. “Most of our profits were made in the second half of the last year,” she said.
The bank posted a profit of P260 million, lower than P335, 8 million made last year. The Barclays boss is upbeat of the year ahead (2016) despite poor economic performance at a global level, which also impacts Botswana. The bank also plans to introduce more products in the near future, said the Barclays boss.