FNBB positive results defy sluggish economy
First National Bank Botswana (FNBB) continues to swim through difficult times of slow economic growth caused by amongst others the fall out of BCL Mine and generally sluggish economy.
The Group which is listed on the Botswana Stock Exchange (BSE) as FNB Holdings registered 9 percent increase in profits before tax for half year trading period ended 2017 December 31st . This was revealed by the company’s top brass at a financial results briefing in Gaborone on Wednesday. FNBB Chief Executive Officer (CEO), Steven Bogatsu shared that his bank continues to deliver positive results despite the unfavorable environment. He attribute the bank’s gains to innovative customer tailored products that best satisfy FNBB clientele.
Bogatsu highlighted that 95% of volumes were accumulated from clicks, that is to say growth in digital banking transactions significantly contributed to their positive financial output. “Click transactions involve both online banking and cell phone banking. These are platforms the bank continues to provide to customer to ensure ease of banking,” he said.
Bogatsu revealed that in response to the aftermath of BCL closure and general sluggish economy, his bank has remained cautious on lending and focused more on recoveries and operational efficiencies which are positively impacting the profitability growth and ensuring sustainability of the banks’s performance into the future.
Giving an in-depth look into the financial results FNBB Chief Finance Officer (CFO), Makgau Dibakwane highlighted that the 9 % increase in profit before tax was due to over 444 million pula registered compared to 407 million pula recorded in the six month ended 31st December 2016. The Bank also realized 10 percent increase in noninterest income registering over 548 million pula compared to 499 million pula accumulated in the previous corresponding half year period.
This, according to the FNBB CFO, was due to significant increase in the volumes of electronic transactions. “This reflects success of promotional campaigns over the period to encourage customers to make less use of branches and greater use of the lower-priced electronic options, with a view to providing customers with greater convenience,” said Dibakwane.
A further scrutiny of the financial highlights indicates that advances to customers did not record any significant change in figures. Deposits from customers climbed by 4 percent from 17, 077, 199 000 in half period ended 31st December 2016 to 17, 818,762, 000 in trading period under review.
Dibakwane said although advances growth fell slightly below the market rate, the Bank still holds the largest market share of advances of 30% , adding that Growth of 10% was achieved in retail advances, mainly through employer schemes, while muted demand for business credit of the right risk profile subdued the overall advances growth. “There have, however, been recent signs of improved business confidence for 2018,” he said.
The bank also revealed that in overall their balance sheet grew by 6.7% from P22.4 billion to P23.9 billion on the back of growth in its retail and business deposit base, particularly in current accounts, which strengthens the Bank’s customer base. The Chief Finance Officer explained that this growth was posted in the term deposits, coupled with a further issuance of senior debt during the second quarter. “Both these initiatives are aimed at further lengthening the Bank’s funding profile. As a result, the deposits to customers and borrowings which represent senior debt posted growth of 4% and 21% respectively leading to a stable loan to deposit ratio of 85%.”
FNBB executives also shared that the Bank redeemed non-compliant Tier II capital instruments and reissued compliant instruments to enhance the capital position of the Bank and lengthen the maturity profile. As such, the Bank’s total capital adequacy ratio before dividend has been maintained at 19.88% as at 31 December 2017. “This is well above Bank of Botswana’s required minimum ratio of 15%,” said FNBB Chief Finance Officer explaining that as at 31 December 2017, Tier I capital ratio stood at 15.41% above the regulatory minimum of 7.50% whilst Tier II capital ratio was 4.47% in the same period.
He noted that the current Tier II capital ratio can be built up to the regulatory minimum of 7.50% over time, depending on the Bank’s strategy, capital demand and supply dynamics. “However, as per the regulations, the entire minimum capital adequacy ratio of 15% can be covered with Tier I capital. When the strategy dictates, the Bank would keep on tapping the capital markets for Tier II capital instruments in line with the Capital Management Framework,” he said.
INVESTING IN CAPITAL AND SKILLS
Meanwhile the Chief Executive Officer of FNBB, Bogatsu said Botswana needs to differentiate itself as a destination for investments in capital and skills. He indicated that the local growth slowed to 1.8% year on-year in the third quarter of 2017, 0.5% lower than at the same time in 2016. “Growth was led by the services sectors of transport, communications and financial services, whereas the trade sector has suffered from the downturn in the mainstream cutting and polishing diamond industry,” he said.
Bogatsu said In the short term, growth prospects were anticipated to reach 4% by 2019 with a medium-term average of 4.1% however he underscored that local growth should improve saying government must take deliberate actions in oiling growth dynamics, such as improving business confidence, policies and business regulations that will allow for more business to operate effectively as well as identifying specific economic zones.
The FNBB Boss noted that moving forward his bank will be focused on specific strategies such as building partnerships, improving customer service, investing in digital transformation and automation as well as banking efficiencies. "It has been an environment of efficiencies and we will continue building momentum for growth. The bank has worked on improving costs efficiently and as a result the bank has experienced 3.0% growth on assets,” he said.
Bogatsu also shared that despite resistance from some customers, FNB was 97% compliant of "Know Your Customers" popularly known as KYC. The company directors proposed an interim dividend of 5.0 thebe per share, the group says cautious approach to lending in recent times, has impacted on its net interest income growth, but reduced the Bank’s exposure to impairments, leaving the Bank well-placed to take advantage of future opportunities
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Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
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