After FNBB share price took a hit in the first half of 2017 (H1), First National Bank of Botswana (FNBB), the most valuable by market capitalisation shed P589, 6 million to close (H1) below P7 billion from the start of the year. Market data indicates that FNBB share price slowed down 7.8 percent on a year to date basis, wiping out P589, 6 million between the month of January and June. At close of business on Wednesday the colossal commercial bank was trading at P2.73 compared to P2.96 at the beginning of the year.
The bank which has been plagued by allegations of poor investments and collateral on loans, is today P6, 9 billion in the pale compared to P7, 5 billion, representing about 7.7 percent drop. Brokers warn of mounting pressure ahead, no extra ordinary move however. Brokers blame over selling lead by fund managers, putting pressure on market capitalization, which falls alongside the share price. If portfolios don’t work for fund managers or there is some winding down, fund managers choose to sell their shares, Moemedi Mosele a Market Analyst Motswedi Securities argues. Similar to the behemoth unsecured lender Letshego Holdings Limited, Mosele says shares of the South African owned bank are in the hands of fund managers who can choose to trade at any given time depending on their strategies. “Fund managers are overweight with these shares and it means that whenever they choose to sell and the market has gone quiet, it triggers the share price on a downward spiral.”
To other observers, it appears that FNB results, when they reported a 9 percent profit of the year ended 2016, provided no impetus to the share price. There was no significant knee-jerk reaction and the market had already factored in this aspect, even when percentage profit was a surprise to investors. The developments precede widely publicized allegations on questionable governance, subjecting the bank to investor scepticism. The Bank’s Chief Executive Officer (CEO) Steven Bogatsu has also confirmed that the bank will undergo a leadership shake up which will allay investor concerns.
Mosele argues that investors are always watching with bated breath to get a sense of a clear direction the Bank will take once the process is completed. This is despite FNBB advising that they will still use some of their structures. “We expect negative pressure but nothing that will be shocking,” Mosele argues.
The bank still remains the most valuable company listed on Botswana Stock Exchange (BSE) domestic equities board, ahead of the Botswana Insurance Limited valued at P5, 5 billion. Over the years, FNBB has grown to reach a record high of P9.9 billion in market capitalization. It is now P3 billion shy of its prime value. The sensational trajectory began in 2009/10 when the banking sector experienced a boom, with interest rates pegged at profitable levels. During that period, FNBB created a massive gap over other commercial banks, proving to be a powerful competitor.
FNBB’s market capitalisation was P5.6 billion in 2010, surpassing Barclays by P1 billion, following handsome profits of P436 million. The following year (2011) the bank’s market value increased to P6.7 billion followed by yet another rosy year when it struck the P7.1-billion mark. During these two years, then CEO Lorato Boakgomo-Ntakhwana and her team were in their element delivering P573 million and P568 million respectively in profits.
In 2013, FNBB broke records, announcing a majestic P700 million in profits, almost 50 percent in growth. After such awe-inspiring growth in profit, FNBB’s market value took a giant leap to P9.9 billion to become the most valuable bank in the country as well the Botswana Stock Exchange (BSE). Those were FNBB’s glory years, particularly 2014 when profitability reached a record high of P719 million.
However, 2015 was a bad year for the entire commercial banking sector due to the tight liquidity that befell the industry. Subdued economic activity saw interest rates hit record lows which squeezed margins, culminating in a slump for FNBB profits to just over P500 million. The decline in profitability had a ripple on effect as it brought down FNBB share value. Under the stewardship of Steven Bogatsu FNBB, which once topped P9.9 billion in market value, FNB dropped a whopping P3 billion, and it is now valued at P6,9 billion.