FNBB profit up 9%
First National Bank Botswana (FNBB) has beat analysts’ expectations to report a 9% increase in profit despite earlier cautions that its exposure to BCL group might affect drag down performance. This was revealed in the bank recently released half year results for the year ended December 2016.
The country’s largest bank by market value and assets has reported a 35% increase in Net Interest Income to P580.7 million. This was achieved in part by a 10% increase in Interest and similar income which came at P705.6 million and a massive 40% reduction in interest expense and similar charges. The Net Interest income was reduced by a spike in impairments of advances which surged to P150.3 million or up by 56% to bring down the Net Interest Income by 28%.
However, a 7% increase in Non Interest Income(NII) brought in P499.6 million, bringing the total Income from operations to P930 million, up by 16%. The growth in NII was spurred by the resultant increase in transactional volumes. In August last year the bank increased its bank charges and fess after the Bank of Botswana lifter the two year moratorium on banking charges and fees.
The total income from operations was subsequently eroded by increases in operating expenses (up by 28% to P271.3 million) and employee benefits (up by 15% to P235.9 million). FNBB says significant investment costs were incurred in establishing customer-focused initiatives and in developing and maintaining systems platforms.
Further investment costs were incurred from opening two additional branches (Mogoditshane and Mochudi), expanding the Bank’s branch representation to 24. The bank says the success of the above, together with other initiatives to improve and diversify services, resulted in customer numbers growing from 445k to 477k, being a 7% increase year-on-year.
In the end profit for the period was up by 9% to P317.7 million, bringing to an end a slump in profits that the bank has been experiencing in the last two years. The bank’s profit was 15% down in its last previous full year results. An improvement in the first half of the year results will buoy FNBB to double down on its efforts to beat analysts’ estimates for the next reporting period even though the bank itself is cautions about future prospects.
“The business environment continues to be challenging, and characterised by business closures and restricted consumer spending power. The most significant closure was that of BCL, with an impact on banks both through direct and indirect credit exposures. The prudent provisioning adopted by the Bank against the BCL exposures caused impairments to increase by 56%. Discounting the BCL effect, impairments would otherwise have increased by 23.6%, reflecting the Bank’s credit structures, and its careful and selective approach to lending”, said Steven Bogatsu, FNBB CEO, in a written statement accompanying the results.
The bank’s balance sheet grew by 9% to P22.4 million on the back of a 13% increase in Net Advances to Customers which now stands at P15 billion. The 13% increase in advances is above the average level in a market where national bank credit extension was at 7.8% in the last 6 months.
Another notable increase in the balance sheet was cash and short term funds which increased by 24% to P3.7 billion. Still on the balance sheet, the bank’s investment securities and other investments went down by 16% to P2.7 billion, reflecting the downturn equities markets especially in Botswana where the benchmark index declined by as much as 11%.
The group is made up of five segments; retail banking, business banking, Rand Merchant Bank (RMB), Wesbank and treasury. The retail segment grew by 41.4% from the previous period and is the largest contributor to revenues. The segment contributed P520.9 million to the group’s operating income, reflecting a 48% contribution. The business banking segment registered modest growth of 15.3% and has contributed 28.8% to the total operating income after bringing in P577 million.
The investment arm of the bank, RMB, showed slight growth of 7.3% from the previous period. RMB’s contribution to total operating income stood at P171.3 million, representing a contribution of 15.8% to the group. Another notable performance was from the vehicle and asset financing division, Wesbank, which grew by 77% while contributing P69.1 million or 6.4% of the group’s operating income. The treasury segment, which manages the group’s liquidity and funding, was the worst performer as interest expenditure continues to depress income margins. The segment’s operating income declined by 87.2% to P7.6 million from the previous year.
The latest results from FNNB will help quell shareholders and investors who have been losing faith in the stock which plummeted by 20% in 2016 and has since dropped by 9.12% this year to trade at P2.69. Despite the fall in stock price, FNBB remains the largest company on the local bourse with a market capitalization of P6.9 billion. FNBB says in line with the impact of the market conditions on the bank’s profitability, the Board of Directors believe that it is appropriate to continue with the prudent approach to capital management and proposed an interim dividend of 5.0 thebe per share.
“Despite facing a number of uncertainties and subdued current economic conditions, the Bank continues to adopt a positive approach to future growth, and has positioned itself to take advantage of any turn in the economy through continuing to invest appropriately in people, infrastructure, and innovation. The results of this strategy are partly evident in the results for 31 December 2016 notwithstanding future benefits to be derived when the economy improves”, the bank said.
FNBB also added that given the challenging business environment, the bank will continue with its focus on efficiency which will culminate in its overall goal of being a customer centric bank and the pursuits of diversifying revenue streams.
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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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