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Friday, 01 December 2023

FNBBs focus on customer-centric strategy fired up the balance sheet

Business

First National Bank Botswana FNBB released its unaudited summarised consolidated financial results recently in Gaborone. The financials depict a strong balance sheet for the six months ended 31 December 2019.

During the past six months, the Bank continued to place focus on improving credit discipline with concentrated efforts on the distressed debt portfolio. According to the Bank, priority was given to customer-centric strategy through continued investment in infrastructure and digital customer solutions, with the roll-out of new products such as Cash Plus together with contactless POS devices and cards.  When announcing the results, FNBB’s Chief Financial Officer, Luke Woodford noted that the Bank’s funding increased year-on-year by 5 percent, with customer deposits increasing by 10 per cent. ‘’This is largely attributable to a 12 percent increase in demand deposits in line with the Bank’s strategy to enhance its transactional offering base, and a 3 percent decline in fixed and notice deposits.

During the year under review, the Bank increased the funding pool by issuing Tier II Capital amounting to P196 Million. Woodford announced that gross customer advances growth of 3 percent year-on-year was predominantly driven by retail lending although offset by further reductions in the business portfolio due to the intentional reduction of key high-risk accounts.
He further shared that ewallet volumes increased by 31 percent over the period while Pay 2 Cell increased by 41 percent, as customer continued to take up to the Bank’s convenient solutions. These factors combined with an overall increase in digital transactions resulted in a 29 percent growth in card and merchant commissions.

FNBB says its forward-thinking approach to technology and innovation will remain a constant focus point as the Bank enters the next era of rapid technological development around the world. The Bank has launched contactless point of sale devices and cards to further streamline and develop the customer and merchant experience.  ‘’Creating a seamless channel experience for our customer remains a focal point, with further developments planned for the FNB banking App. The Bank seeks to provide its clients with the flexibility to serve themselves in the form of convenient, value-added services. Combatting the ever-changing nature of cyber security remains paramount. The Bank deploys significant resources in this area and remains constantly vigilant to the evolving nature of the risk,’’ reads a statement from the Bank.

According to the Bank’s financial results, profit after tax jumped 12 percent due to the strong growth in income and resulting in an improved return on equity of 25.4 percent as compared to 24.6 percent in 2018. Interest income rose by 5 per cent against a gross advances growth of 3 percent.  ‘’The increase in average client rates was driven by a change in the portfolio mix towards retail as the Commercial portfolio continued to experience attrition. Set against the significant liquidity pressures seen in the prior period, the easing of liquidity in the current period and the success of the Bank in increasing transactional balances across all segments saw the interest expenses reduce significantly by 17 percent,’’ said Woodford.

Woodford also indicated that the impairment charge for the period indicated an increase of 10 percent against the prior year, following continued default pressure in the retail portfolio and further impacted by an extension of the collateral realisation period in the provisioning models. The impairment charge was further increased by the rise in retail personal loans which in turn now carry a higher expected credit loss provisions at initial origination.

Furthermore, the Bank’s non-interest revenue grew surged by 10 percent over the period from increases in volumes of customer transactions, as well as, from merchant service revenue following improved connectivity in the point-of-sale machines and an increase in machines in use. Revenue from foreign exchange reduced by 3 percent on the prior year, during which exchange rate volatility increased demand above usual levels.

The improvement in the cost-to-income ratio from 48 percent to 47 percent is largely due to the strong growth in NIR and reduced funding costs. It also reflects continued cost management initiatives, with the overall expenditure remaining within an acceptable range. For the six months ended 31 December 2019, the Bank continued to operate above the regulatory minimum capital adequacy ratios. As at the end of the final year period, the total capital adequacy ratio was 20.77 percent and is above the regulatory minimum of 15 percent.

FNBB declared an interim dividend of 6 thebe per share for the half year ended 31 December 2019. This dividend is payable to all shareholders registered in the books of the company at close business on 31 March 2020. The dividend will be paid on or about 25 March 2020 less withholding tax at the rate of 7.5 percent. Meanwhile, FNBB reiterated its commitment to its social responsibility to the community and performs this function through its foundation. The Bank has committed to contributing up to 1 percent of each year’s profit after tax to the Foundation. Since its inception in 2001, the Bank has made grants of more than P57 Million to the Foundation, which has been invested appropriately in qualifying beneficiaries.

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Business

PROTECT YOUR FINANCES THIS HOLIDAY SEASON: A GUIDE TO FRAUD PREVENTION

17th November 2023

November marks Fraud Awareness Month across the world and Bank Gaborone has a dedicated mission to inform the public of evolving threats. The holiday season is a time for celebration, togetherness, and giving. However, it’s also a time when the risk of financial fraud increases.

Common Types of Financial Fraud During the Holidays

  • Online Shopping Scams: With the rise of online shopping, scammers often create fake e-commerce websites to steal your money and personal information.
  • Sim Swap: Fraudsters may try to gain control of your phone number by swapping your SIM card, which can lead to unauthorized access to your accounts.
  • Application Fraud: Be cautious when downloading apps, as some may be malicious and designed to steal your data.
  • Travel Scams: Planning a holiday trip? Watch out for fake travel deals and websites that can lead to disappointment and financial loss.
  • Identity Theft: Protect your personal information, as identity theft can have far-reaching consequences, both financially and emotionally.
  • Phishing and Email Scams: Scammers often send deceptive emails and messages, trying to trick you into revealing sensitive information or making payments.
  • Mobile Network Fraud: Be cautious about unsolicited calls or messages requesting personal information or payments.

How You Can Identify Potential Fraud

To protect yourself from financial fraud, keep an eye out for the following signs:

  • Unexpected Transactions: Check your account statements regularly for any transactions, withdrawals, or purchases that you didn’t initiate.
  • Unauthorized Account Activity: Pay attention to notifications of login attempts or changes to your account details that you didn’t initiate.
  • Phishing Attempts: Be cautious about emails, calls, or messages requesting sensitive information or payments, especially from unknown or suspicious sources.

Security Measures

At Bank Gaborone, we are committed to ensuring the security of your finances. Our Bank Gaborone 360 initiative encompasses several security features:

  • 3D Secure Cards: All our cards are equipped with 3D secure technology, which means that an OTP (One-Time Password) is sent with every purchase for your approval, adding an extra layer of security.
  • 24/7 Call Centre: Our round-the-clock customer centre is ready to assist you at any time. If you have questions, concerns, or need assistance related to your account’s security, simply give us a call 3158681   at any hour of the day.
  • Secure Online Mobile app: To enhance security and ease of access, you can use your biometric authentication to log in to the app and authenticate transaction. An additional layer of protection is provided through two-factor authentication.

Security tips for customers

  • Avoid sharing personal information – the Bank will never ask for login credentials, personal details, card numbers, or OTPs.
  • Exercise caution when receiving unexpected links or messages.
  • Ensure your device is protected with a screen lock and refrain from storing passwords on the device or in the cloud.
  • Promptly report lost or stolen devices to the bank for immediate action.

What to Do If You Fall Victim to Fraud

If you suspect that you have fallen victim to a fraud attempt, it’s essential to act quickly:

  • Report the incident to the bank immediately.
  • Block your card.
  • Contact the customer centre at 3158681 for assistance and guidance.

As you enjoy the holiday season, we urge you to stay vigilant and prioritise the security of your finances. Safeguarding your assets is a shared responsibility, and Bank Gaborone is committed to supporting you in this effort. Remember that you are not alone in this journey. Your bank is here to protect your financial interests and guide you through any challenges you may face. By being proactive and following the tips and security measures outlined in this article, you can ensure that your holidays are joyful, secure, and free from financial fraud.

 

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Business

Challenging times as GROWTH IS EXPECTED TO SLOW DOWN IN 2023

17th November 2023

The third quarter of 2023 has been characterised by a worsening of global economic conditions, with global growth forecasts revised downwards by the IMF, rising fuel prices, and the expectation that interest rates will remain “high for longer”. This has impacted on the global diamond market, which has experienced a persistent weakening of demand through the year. Domestically, annual GDP growth has fallen, but remains in line with expectations. Inflation has risen, also as expected, and is likely to rise further in the coming months, driven mainly by global factors.

Economic Growth

The IMF released its new World Economic Outlook (WEO) in early October, just after the end of the quarter. The IMF predicts a slowdown in global growth to 3.0% in 2023, down from 3.5% in 2022. Growth is projected to fall slightly further, to 2.9%, in 2024. Current and projected global GDP growth rates remain well below historical averages. The IMF notes that three factors are driving the slowdown in growth.

One is the tailing off of the post-COVID economic recovery, particularly following the very strong 2022 recovery in travel and tourism. The second is the consequence of the tighter monetary policy implemented in most countries to bring inflation down, with tightening of credit conditions impacting on aggregate demand. Third, the impact of the commodity price shock following Russia’s invasion of Ukraine persists, notably through higher energy prices, reducing real incomes in energy importing countries and of consumers generally. To what extent have these factors had an impact on Botswana? Certainly economic growth is tailing off, with annual GDP growth down to 5.0% in Q2 2023, with a projected further decline to 3.8% for the year as a whole.

However, the slowdown appears to be having a greater impact on sectors that have a domestic focus (such as agriculture, food manufacturing, wholesale and retail, and other domestic services). The main outward-facing sector that has experienced a severe slowdown is diamond trading (discussed more below). With regard to monetary policy tightening, Botswana is feeling the impact of global developments, but there has been no real domestic impact given that the Bank of Botswana has hardly tightened monetary policy while many other central banks have raised policy rates significantly. But Botswana has felt the impact of higher energy prices, which remain elevated despite some easing earlier in 2023, and there has been a squeeze on real incomes and living standards as a result.

Diamond Market

The major impact of adverse global conditions has been experienced in the diamond market. This has not yet fed through to diamond mining which, perhaps surprisingly, was up 7.1% in the 12 months to June 2023. This may just be “the calm before the storm”, however. Diamond sales through DBGSS are down 31% over the first eight sales cycles of 2023 compared to the same period last year, and Okavango Diamond Company is experiencing similar pressures. It will not be possible to continue expanding mining with sales contracting, as the required stockpiling becomes increasingly expensive. The global diamond market has been buffeted by multiple adverse factors during the year. Restrained consumer demand in the US, notwithstanding some resilience in the US economy, has been one factor, compounded by weak post-COVID recovery in China. Recent demand may have been impacted by a sharp increase in diamond prices in 2022, when demand was strong, but the industry is now paying the price. Synthetic diamonds are taking increasing market share, at much lower prices than natural diamonds. With slowing demand, downstream participants in the diamond value chain (cutters and polishers, traders, jewellery manufacturers and retailers) have all cut back on purchases as their stocks have risen, impacting rough diamond demand. As a result, De Beers have announced that sightholders would be permitted to defer up to 100% of their contracted purchases for the remainder of 2023 while Okavango Diamond Company cancelled its planned November auction.

Inflation and interest rates

After the sharp drop in inflation from its peak of 14.6% in August 2022 to 1.2% a year later, the increase to 3,2% in September was not unexpected. Fuel prices have been the main driver of changes in inflation over the past two years, in part because international oil prices have been so volatile, combined with their very high weight in the Botswana Consumer Price Index (CPI) basket. After the upsurge in oil prices caused by Russia’s invasion of Ukraine, to over US$110 per barrel in June 2022, prices fell to just over $70 a barrel in March this year. The decline enabled pump prices to be reduced, leading to the dramatic fall inflation as the previous year’s increases dropped out of the annual inflation calculation. In recent months, however, the deliberate actions by OPEC+ member states to restrict production and supply have pushed prices back over $90 per barrel, a selfish move seemingly calculated to put further pressure on households across the world who have already been badly impacted by the cost-of living crisis. In Botswana, regulated pump prices – which are determined under a highly politicised adjustment mechanism – have lagged the increase in global prices. For instance, the price increase in late October came about a month after the relevant increases in global prices. Following this increase, we expect inflation to continue to rise through to the end of 2023 and into 2024, when it is likely to temporarily go above the upper end of the BoB’s 3-6% inflation objective range. This means that there is unlikely to be any reduction in the BoB’s monetary policy rate (MoPR) in the near future.

Fiscal Developments

The Ministry of Finance’s draft Budget Strategy Paper (BSP) was released in September, and provided updated information on the outturn of the 2022-23 budget, revisions to the current year (2023-24) budget, and the medium-term fiscal framework out to 2026-27. The fiscal data shows a continuation of recent trends, with an (unplanned) balanced budget for 2022-23; a (planned) deficit budget for 2023-24 and 2024-25, and a (planned) balanced or surplus budget for the outer years of the projections, which would mark the beginning of the NDP 12 period. There is a consistent story in the BSP which relates to the need for fiscal consolidation (discussed further in our special feature). In a parallel with Saint Augustine’s famous prayer (“Lord, make me chaste, but not yet”), fiscal consolidation – in the form of a balanced or surplus budget – is always a year or two away. For instance, the BSP released in September 2022 projected a balanced budget from 2023/24 onwards. However, the September 2023 BSP now indicates a balanced budget two years later, from 2025/26 onwards. This largely reflects the dramatic increase in development spending first proposed in the 2023 Budget for 2023/24 and set to be continued in subsequent years. That relates to planned budgets. Outturns are quite different. In both 2021/22 and 2022/23 large projected deficits did not materialise, and in both years, budgets were broadly balanced, due mainly to significant underspending on the development budget, along with higher-than-expected mineral revenues. Notwithstanding a large (47%) planned increase in development spending in the current fiscal year, it seems quite possible that, as in the last two years, the development budget will be underspent and the budget will end up being broadly balanced – although there may be risks on the revenue side if the diamond market continues to deteriorate. Even though the outcomes are good (balanced budgets), the fact that these are unplanned reflects negatively on the quality of fiscal planning and budgetary control.

Outlook

The rest of 2023 and early 2024 looks likely to be an uncertain and somewhat challenging time for the economy. The main concern is the depressed state of the global diamond market, and the potential impact on economic growth, exports and government revenues – although it is important to note that no negative impact on these important economic indicators has yet been realised. The likelihood that inflation will rise in the coming months means that domestic interest rates are likely to be maintained – at levels that are low by international standards – for the foreseeable future. Projections of adverse climatic conditions in the coming months – with forecasts of higher temperatures and lower rainfall – are likely to have a negative impact on agriculture, water supplies and tourism, and illustrate the longer-term challenges posed by global climate change. Fortunately, Botswana’s critical financial buffers – in the form of the Government Investment Account at the BoB and the foreign exchange reserves – have been rising, assisting the ability of the economy to withstand possible shocks, at least in the short term.

(Adopted from Econsult Economic Review Q3)

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Business

Thamane Launches AADFI Working Group on Climate Change to Support African DFIs

15th November 2023

The Association of African Development Finance Institutions (AADFI) has taken a significant step towards addressing the pressing issue of climate change by launching a working group dedicated to this cause. The working group aims to support AADFI member institutions and the wider African DFI community in tackling the challenges posed by climate change.

The launch of the working group occurred on November 9, 2023, immediately following the opening ceremony of the AADFI 2023 Annual General Assembly in Egypt. The theme of the assembly was “The Role of African DFIs in Achieving Just Energy Transition,” highlighting the importance of sustainable energy practices in combating climate change.

Thabo Thamane, Chairman of AADFI and CEO of Citizen Entrepreneurial Development Agency (CEDA), announced the launch of the working group and introduced its members and objectives. The group was approved by the AADFI Board of Directors on August 28, 2023, following a resolution made at the previous annual general assembly.

The working group is chaired by the Development Bank of Southern Africa (DBSA), with Boitumelo Mosako, CEO of DBSA, leading the efforts. Mr. Olymous Manthata, Head of Climate Finance at DBSA, will coordinate the working group’s activities.

Comprised of member institutions dedicated to driving the climate agenda within their organizations and communities, the working group plays a crucial role in supporting AADFI member institutions and the wider African DFI community in addressing climate challenges. It serves as a strategic platform for generating ideas and actions that will enable the association and its members to remain relevant in the climate change agenda.

The working group has several key responsibilities. Firstly, it will support efforts to create a roadmap for African DFIs to accelerate their involvement in addressing climate challenges. This includes leading the effort in attracting technical assistance and support to build the skills and capacity of member DFIs in dealing with climate change.

Additionally, the working group will guide African national DFIs in mobilizing finance and identifying funding opportunities for green projects. It will also play a crucial role in raising green bonds and collaborating with the African Financial Alliance on Climate Change (AFAC) to represent the interests of AADFI members in the alliance. Furthermore, the working group will leverage support from partners such as the African Development Bank (AfDB), the Global Center on Adaptation, and the Green Climate Fund (GCF) to facilitate member DFIs’ actions on climate change.

The working group’s ultimate goal is to drive meaningful change and accelerate Africa’s just energy transition by collaborating with various stakeholders and partners. Thamane urged all member institutions to actively support the working group and participate in its activities. He expressed his gratitude to the DBSA for taking the lead role in the working group and expressed confidence in its ability to deliver on its mandate.

In conclusion, the launch of the AADFI working group on climate change marks a significant step towards addressing the challenges posed by climate change in Africa. By supporting member institutions and the wider African DFI community, the working group aims to drive meaningful change and accelerate Africa’s just energy transition. With the support of various stakeholders and partners, the working group has the potential to make a significant impact in combating climate change and ensuring a sustainable future for Africa.

 

 

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