This week Absa Bank Botswana released their condensed consolidated interim financial statements for the period ended 30 June 2021.
Profit before tax grew for the six(6) months grew significantly by 125% against the previous year interim period , a material recovery from the June 2020 position.
According to the company directors the performance was driven mainly by positive performance of the impairment line together with the positive momentum on cost lines. Pre-provision profit has also grown year-on-year by 9%.
Consequently, the bank ‘s Return on Equity (ROE) went up to 19%.Total revenue declined 1% year-on-year. Net interest income declined 8% due to margin compression driven by interest rate cuts in 2020, however the sales and transactional banking franchise realised impressive recovery rates with volumes going up to almost pre COVID-19 levels, fee revenue grew 20% year-on-year.
Absa boasted that their operating costs remain well contained, on a reducing trend compared to prior year.
On a statutory basis operating expenses totaled P460 million representing a 7% decrease year-on-year.
This was achieved by an overall reduction in spend as the bank continues to leverage on a leaner, rotational and digitally-led operating model.
Costs in the current year have benefited from the absence of Voluntary Staff Separation exercise that happened in the first half of 2020, together with a significant reduction in separation expenses as the rebranding exercise has been completed.
Cost-to- income ratio declined 4% and
ended at 58% for the period under review.On a year-on-year basis our credit losses decreased materially by 74%.
This significant drop was driven primarily by better-than-expected performance of the macroeconomic variables, predominantly GDP which carries a higher weighting in the bank
risk models, together with improved and stable portfolio performance, loan loss rate improved to less than 1% for period ended 30 June 2021.
Absa balance sheet continued on its growth trajectory with an overall growth of 14%. Customer loans and deposits remained key components of the balance sheet and the key drivers of balance sheet growth.
The balance sheet position remains solid at a total financial position of P21.5 billion.Customer loans grew by 9% year-on-year to P14.8 billion.
“We have seen increased momentum in our loan conversion rates especially in RBB where growth was driven by scheme loans, mortgage loans and Enterprise Supply-chain Development (ESD) loans” the bank said in a commentary that accompanied the financials.
Directors explained that growth is in line with their strategy to continue to lend a hand to the bank customers who need support during this period and support the initiatives around the citizen economic empowerment and economic diversification.
Customer deposits have registered pleasing momentum growing 15% in comparison to same period last year reaching P16 billion as of 30 June 2021.
“Although we have seen tightening liquidity in the market our client penetration, acquisition and retention strategy has borne much fruit especially in our CIB segment, We have noted a stable upward trend in our deposit book, a momentum which is expected to last into the rest of the months of 2021″ Directors observed.
Directors further noted that the solid balance sheet position, recovery in profitability has strengthened further the bank ‘s capital position which stands at P2.9 billion and representing a capital adequacy ratio of 18% against a regulatory requirement of 12.5%. Liquid assets ratio stood at 14.6% well above a regulatory limit of 10%.
Zooming deep into segmental performances corporate and Investment Banking (CIB)closed off the first half of 2021 with year-on-year decline of 3% on total income, this is on the back of slow recovery in economic activity felt in key economic sectors which have previously contributed positively to revenue.
Business sentiment and confidence remains subdued even in 2021 as uncertainty still prevails due to impact of COVID-19.Profitability of CIB however is onthe move, on an upward trajectory with 36% growth year-on-year.
This performance was supported by the
resilience of the non-funded income lines and the performance of the impairment lines.
For the Retail Banking segment the first half of the year, both loans and advances and deposits due to customers grew by 14% and 16% year-on-year respectively.
Overall revenue has remained flat year-on-year. Growth was realised from non interest income. This is line with the bank ‘s strategy to become the go to transactional and digitally-led bank.
Going forward Absa directors noted the volatile, unpredictable environment that continues to prevail due to COVID-19 pandemic which comes with new waves of infections and variants, restricted movement and trade.
” However, we remain resolute in executing our refreshed strategy and focus on offering our employees and customers support in collaboration with the various stakeholders that we have partnered with. As part of our strategy to provide customer centric transactional
banking solutions, we will continue to roll out enhancements to our existing digital platforms and develop new solutions that offer our customers convenience and safety”
For the period Absa Bank Botswana Limited Board pproved an interim dividend of 9.74 thebe per share, amounting to a total dividend of P83 million.