Absa mourns as Covid-19 hits interim profits
Keikantse Lesemela
Absa Bank Botswana as recorded a 70 percent decline in profits from over P298 million to P90.6 million for the interim period to June 2020. The bank which is among the biggest in the country has blamed Covid-19 and successive lockdowns for the sharp loss.
Presenting the results this week, Managing Director Keabetswe Pheko-Moshagane indicated that total Corporate and Investment Banking (CIB) income remained subdued compared to the same period in the first half of 2019 mainly due to lowered business activity emanating from the lockdown imposed by the government to combat the COVID-19 pandemic. Margin compression was greatly impacted by the interest rate cut totaling 50 basis points in April 2020 and a 25 percent reduction on digital banking fees between April and June 2020 aimed at providing relief to clients during the pandemic. “Contributing significantly to this performance is the overall dampened business sentiments for the first half in 2020. Assets and Liabilities growth has been muted during the period and are up 1percent and 4 percent respectively.”
She highlighted that Botswana’s economic outlook for the remainder of 2020 remains highly uncertain with the considerable economic disruption caused by the lockdowns across both the local, regional and global economies. “The full impact on the economy is expected to be further felt in the second half of the year with the IMF projecting up to 4.9% global economic contraction for this year,” she said. Pheko –Moshagane explained that on a year-on-year basis, the bank’s credit losses significantly increased in comparison to the previous year. This sharp increase was largely impacted by the outbreak of the COVID-19 with a high volume of customers requesting for debt relief in the form of payment holidays restructures and forbearance programs. “Lockdown restrictions also impacted the performance of our debt collection as well as customer mobility to make payments. Further, macro-economic variables required revision in June 2020 to reflect the impact of the declining macros mainly the GDP growth. The effect of these factors resulted in a higher credit impairment charge during the period under review.”
However,Retail and Business Banking (RBB) has remained resilient in terms of delivering its strategy despite the challenging times. The bank highlighted that in the first half of the year retail banking was focused on bringing solutions to clients that were largely focused on enhancing digital platform and the launch of the contactless card in order to enable clients to transact safely during the current pandemic.
Going forward Pheko-Moshagane Absa will re-align their strategy to ensure that they have a relevant and competitive business model that will see the bank emerge from this crisis as a strong and resilient business.“Our strategic focus includes accelerating and refining our digital strategies, agility of our organization, skills and capabilities we invest in, and our approach to strategic partnerships and deepening our Citizenship activities.”
In the past six months the business has driven the Purchase order finance, the Absa Internet Banking product, Enterprise Supply Chain Development program (ESD), and Commercial Asset Finance (CAF). The bank also entered into a Memorandum of understanding with Debswana to drive
the Citizen Economic Empowerment Program, as well as Local Enterprise Authority (LEA) to assist with the Capacity building of the Small as well as Medium Enterprises. Pheko-Moshagane also revealed that the COVID-19 pandemic has compelled them to review their approach towards the implementation of the citizenship agenda. “Our first priority has been to support the efforts of our government with a donation of P 1.5 million towards the COVID-19 Relief Fund. An additional P500 000 will be donated to support educational initiatives throughout the year.”