FNBB moans as COVID 19 cuts profits
First National Bank Botswana’s latest financial results have indicated that profit plunged in the last half of 2020. According to the bank’s unaudited financial results for the six months profit before tax and profit after tax declined by 23 percent due to pressure on top line revenue and increased credit provisioning, to adequately provide for the effects of COVID- 19. “The resultant return on equity was 17.9 percent”, FNBB Chief Executive Officer Steve Bogatsu said, citing that ROE was at 25.4 percent in 2019. Despite the drop, FNBB says the December 2019 results were within the expected parameters given the prevailing operating environment. “The overwhelming impact on the December 2020 results was the difficult trading environment created by COVID- 19, which the banking industry as a whole continues to navigate responsibly. “The pandemic has presented itself as a real and severe economic test, and FNBB has shown that its income streams are resilient while a key focus has been on strengthening the balance sheet”, Bogatsu said.
FNBB remains uncomfortable due to the current uncertainty surrounding the rollout and impact of the COVID- 19 vaccine and the second wave of infection being seen across the world.
“We expect that 2021 will continue in a state of overall uncertainty”, said Bogatsu highlighting that the bank anticipates that pressures on discretionary household income will be sustained and businesses will defer capital expenditure to conserve cash reserves pending stronger signs of imminent recovery. The bank expects credit default pressure rates to mount despite low interest rates, adding that the operating environment for financial services is likely to remain challenging. “Interest income decreased following both an eight percent decrease in gross advances, and the cumulative bank rate cut of 100 basis points”, Bogatsu said. Furthermore, the deposit mix shifted towards overnight funding, resulting in the interest expense reducing significantly by 12 percent while customer deposits increased by six percent. Bogatsu highlighted that the impairment charge for the year increased by 16 percent year- on- year with a charge of P199m, due largely to an increase in stage one and two impairments in the tourism and transport industries. He said the bank continues to provide prudently for the expected downward pressure on customer risk profiles and realisable collateral values in the overall context of COVID- 19. Meanwhile the bank’s non- interest revenue ( NIR) decreased four percent year- on- year following a decrease in foreign income revenue, while other core revenue lines remained resilient.