Stanchart’s ‘slow and steady’ approach pays dividends
Standard Chartered Bank Botswana (SCBB) says its cautious approach adopted after a shock P189 million loss three years ago, helped it ride over the COVID-19 impact on the local banking sector, minimising credit losses and providing room for growth.
In the 2017 financial year, SCBB posted one of the local banking sector’s worst losses, due to impairments associated with over-exposure to a client in the diamond industry. In 2015 and 2016, the bank again had its performance dampened by impairments in the diamond polishing sector and exposure to BCL Mine.
Stanchart CEO, Mpho Masupe told BusinessWeek the bank had tightened the credit risk management strategy since 2018 and while this meant lower than possible profits, the move also helped SCBB minimise the impact of COVID-19 on its business.
While some banks in the local market grew their loan books by up to 36% last year, SCBB grew its own by a measured 2.5 percent, while impairment charges rose by 28% compared to an industry high of 674% for one other bank. SCBB’s pretax profits for 2020 were up 47% to P102.1 million, helped by the once-off write-off of a P48 million liability. Without the write-off, pretax profits were down 22%, a performance falling generally within the median of the published industry results for 2020.
“Our celebration is in the trajectory and not necessarily the numbers,” Masupe said in an interview.
“Our first port of call in any situation of shocks is to protect the balance sheet and ensure it gives us fruits going forward.
“Protecting the balance sheet is not about slowing down in asset growth; it’s about being more careful.
“We have done very good credit and you can see that with the trend in credit losses year after year.”
Stanchart’s chief financial officer, Mbako Mbo said the bank’s results spoke to the culture of risk management SCBB has adopted since 2018, which involves redefining its portfolio and how credit origination is done going forward. He said the bank was not heavily exposed to the sectors that were hard hit by COVID-19 and had an opportunity to deal with the weaker areas of its portfolios in the years prior to the pandemic so that by the time the virus arrived, it found a resilient balance sheet and culture.
“In 2018, we were coming from a big loss and we did not want a path that says huge profits this year and huge losses the next.
“We want sustainable growth and consistency.
“The growth trajectory with our book is a four percent growth, which is decent for us and is the model we have chosen to participate through.”
He added: “We are not totally happy with the levels of profit we are reporting but we are happy with the trajectory. You can have a 10% growth in the book through aggressive underwriting but the expected credit losses will be a totally different picture.
“We want to protect the growth in the bottom line to be able to increase our ability to absorb shocks.
“We have to stay disciplined in our underwriting. Our levels will grow from that bottom line and we improve that.”
Masupe said SCBB’s balance sheet gave the bank room to grow for some time to come. The bank’s fast-growing digitisation drive, greater uptake of technological solutions and the planned roll-out of new products would beef up the onboarding of customers, ticking up of key financial numbers and improve costs per customer.
“The advance to loan ratios of others in the market are burning up, while we have a lot of room,” he said.
“We have been seen as laggards in technology, but we have leapfrogged quite a lot.
“Should COVID-19 continue for some time, we will still be able to do business through the digitisation we have done. “The pandemic accelerated what we were already doing in terms of digitisation.”
SCBB expects to roll out cardless cash, agency banking for financial inclusion for remote areas as well as various innovations in the affluent segment and private banking.
The bank is due to pay a final dividend of 16 thebe next month. As at Wednesday, SCBB was up 3.5 percent for the year on the Botswana Stock Exchange, the second best performance on the Domestic Companies Index.