Barclays Bank of Botswana says it is converting new business opportunities in the highly contested Corporate and Investment Banking segment (CIB), into unlocking greater value, over the third quarter of the year.
The Bank is the most profitable in the CIB segment ahead of the once dominant and unlisted Stanbic. According to estimates it sits on 20-25 percent of the competitive market turf.
This week, Barclays Bank Managing Director, Reinette van der Merwe announced that they have started to see a steady build up in momentum for the corporate business, “as we start converting new business opportunities in the third quarter of the year, in various key sectors of our operations”.
Barclays is known for tenacity in targeting and financing dominant players with financial muscle and less chances of defaults, even within the tumultuous mining sector. In spite of the mining downturn the bank’s impairments only grew by 1 percent in the six months to June 2017 when competitors, the likes of Stanchart and the First National Bank of Botswana (FNBB) grappled with mine closures. “This stable performance is attributable to our enhanced collection capability and conservative credit extension.”
Market analysts argue that Barclays is the single largest financier in Botswana’s diamond mining sector, after sealing a US$125 million deal with the Overseas Private Investment Corporation (OPIC), the United State Government’s development finance institution. OPIC signed the loan guarantee with Barclays Bank of Botswana, a subsidiary of Barclays Africa Group, together with Lazare Kaplan International (LKI) acting through its subsidiary Botswana Finance LLC, that will establish a revolving framework facility in which OPIC will share credit risk.
Referencing by the deal, the MD this week revealed, “we have an appetite for the diamond industry. We cannot be in Botswana and not be a player in the diamond industry. We cautiously lend and pick partners carefully.”
CIB is the cornerstone of the Bank, making 59 percent of the group’s profits. The sector garnered over P120 million in the reporting period while Retail segment registered P87 million. “The RBB strategy continues to be centred on an enhanced customer experience and deepening customer relationships. We are constantly exploring new ways of improving our customer experience and satisfaction, which we see as a pillar for sustainable business growth,” the Bank wrote.
According to the Financial Report, the performance for the first half of the year has been driven by muted revenue growth across segments, save that of the Business Banking segment that registered a 5 percent income growth year-on-year. Net interest income remained relatively flat year-on-year driven partly as a result of the interest rate cut applied in August 2016, as well as competitive pricing aimed at attracting both deposits and assets. Net fee and commission income increased year-on-year by 7 percent. This growth was driven mostly by the Retail and Business Banking (RBB) segment in which the bank had an increase in transactional and activity fees from their various digital channels such as Point of Sale (POS) machines that continued to propel Issuing and Acquiring incomes upwards.
Despite the challenging start to the year the bank achieved a Return on Equity of 22 percent, which is above banking industry market average of 11 percent for the first part of the year.
Operating costs were well contained and came in flat in comparison to the same period last year. “Our cost efficiencies resulted in an overall cost to income ratio of 52 percent for the period to 30 June 2017, which is below the market average of 60 percent.” Further, the Bank says prudence in incurring operating expenditure continues to be at the heart of their strategic agenda as they look to grow the business.
The Bank achieved an overall Profit Before Tax of P249m for the period ended 30 June 2017. “It is however, gratifying to note that in comparison to the second half of 2016 our profits have grown by P25million or 11 percent.” The bank anticipates posting a stronger second half of the year profitability, as momentum in its key business segments starts to pick up in earnest.