Impairments in the Botswana unit of First National Bank Botswana increased by 31 percent in the half year period to end-December, propped up by the country’s tough economic environment which has dented the ability by debtors to service loans.
FNB said in its 2012 annual report that it had increased the number of branches it has in Botswana to 21. It reported after tax income of P568.8 million ($71 million) for the year to the end of June 2012, although the 1 percent increase from the 2011 income of P573.8 million ($71.4 million) was nominal.
Loans, advances, instalment credit and investment securities are major income drivers for FNB Botswana. However, these have been affected by the inability of some of the bank’s customers to pay back loans and advances.
This forced FNB Botswana’s impairments for the interim period to December to rise by 31 percent to P65.6 million ($8 million). The bank’s loan book during the same period advanced by 14 percent to P9.2 billion ($1.4 billion).
“The strain that the consumer is experiencing on the back of job losses and overall slowed economic activity has impacted debt serviceability levels,” said chief executive officer, Lorato Boakgomo-Ntakhwana.
She said the company had now adopted stricter provisioning methodologies as a stop gap measure to tighten credit risk management.
“This area has received significant management focus over the period which has also resulted in the tightening and centralising of the bank’s collections and on-going risk management functions.
“The positive results of this focus have started to be evident and are expected to continue to further strengthen the credit-risk management,” Boakgomo-Ntakhwana said while presenting the bank’s interim results.
Despite the rise in impairments, the bank recorded a 14 percent increase in loans and advances. These were mainly dominated by loans advanced to the property sector, with the segment registering a significant 21 percent increase to P3.5 billion ($436 million). Corporate advances also rose 15 percent to P1.5 billion ($187 million).
Costs around the bank’s workers firmed by 9 percent while Boakgomo-Ntakhwana also said the bank had increased the number of its Automated Teller Machines (ATM) in the country to 132.
“Despite this investment into the business, the cost-to-income ratio declined from the corresponding period.”
