|Profit before tax increased by 81% to P659 million|
|Credit losses reduced by 70% to P79 million|
|Trading income increased by 19% to P164 million|
|Cost-to-income ratio decreased to 55% from 60%|
|Return on equity increased to 19.5% from 12.7%|
|Net fee and commission income increased by 14%|
|Loans and advances to customers increased to P14.9 billion from P13.9 billion|
|Customer deposits increased to P16.3 billion from P15.9 billion|
|Capital adequacy ratio of 18%, well above regulatory requirement|
Absa Bank Botswana today reported 81% increase in profit before tax which amounted to P659 million, the main drivers of the close to double profits was due to 70% reduction in credit losses, 19% increase in trading income,14% increase in net fee and commission income and a 4% decrease in operating expenses.
Our strategic intent to drive fee income together with digital income while continuing to embark on our cost containment strategies yielded fruit with most of our income lines, including interest income closing of the year on a high note while our expenses remained contained, results of the containment being visibly noticed on the interest expense and operating expenses.
“Our overall strategy as a bank has yielded stellar results, signaling the recovery of both our financial performance and business environment, together with our digital growth amidst challenges faced in the market post COVID-19 recovery.” said Keabetswe Pheko-Moshagane, Managing Director.
The Bank maintained strong liquidity position throughout the year despite market liquidity challenges. “Pleasingly, our digital strategy, portfolio management strategies, revenue diversification strategies together with operational efficiency strategy have all contributed positively our salient performance features, which is a strong reflection of our performance for the year.” said Cynthia Morapedi, Financial Director.
The recovery was broad-based as all business units reported strong growth from a low base in the prior year, while still maintaining strong capital position at 18%, and capacity to pay off dividend which resulted in performance efficiency and improving overall return on equity.
Retail and Business Banking
Retail and Business Banking have turned up resilient in terms of delivering its strategy despite the challenging times we are currently experiencing. We have displayed solid assets (advances) YOY growth of 9%. Overall revenue grew by 10% YOY largely driven by non – interest income growth of 6% whilst net-interest income grew 7% year on year.
The availability of self- service and alternative banking channels have led to a 21% YOY growth in the number of customers utilizing our digital platforms. We continue to enhance these channels to create seamless customer experience. We believe that digitalization is a key cornerstone for banking going forward and therefore have a clear focus on growing our self-service capability which remains imperative and an area of focus.
Corporate and Investment Banking
2021 brought with it some semblance of recovery in key sectors like mining as we saw the economic activities spin back to pre-covid days especially in the diamond sector. As CIB we are a key contributor to the diamond sector and this presented us with an opportunity to review our appetite which ultimately contributed positively to our trade business.
A notable strain was evident in market liquidity with deposits constrained as Public Sector spending budgets reduced and fiscal policy adjustments were made to accommodate the economic impact of COVID-19. This led to tighter liquidity and margin compression in our market. We undertook deliberate efforts to attract the right deposits through our various strategies that delivered healthy growth in our deposit base. We must hasten to state that the slowdown in most economic activity gave us the opportunity to embed our digital agenda with a view of ensuring we provide sustainable, future-fit solutions. This bolstered our growth on client acquisition, propelled us to deepen relationships with existing clients and deliver double digit growth in our fee income, earning us notable recognition as ‘Market Leader Cash Management’ awarded by Euromoney Awards of Excellence 2021 & ‘Best Investment Bank of the year’ awarded by African Banker Awards 2021.
We supported our clients by extending credit relief measures during very tough economic conditions, a measure we deemed critical in ensuring the sustainability of the businesses of our clients. This intervention resulted in strong recovery by businesses, resulting in positive impairment recovery in excess of 140% YOY which contributed to the overall profit before tax (PBT) growth of 81%.
Absa Bank Botswana remains confident in the interventions that it has developed to address the continued social and economic development of the communities in which we operate. We have made significant progress in delivering our citizenship strategy which is anchored on Thought Leadership, Education and Skills development and Environmental Sustainability.
Absa projects Botswana ‘s real GDP growth to soften from 12.5% in 2021 to 5.2% in 2022 as activity levels out following an initial rebound. Growth in 2022 will be underpinned by the recovery in key sectors such as mining as the effects of the pandemic recede and commodity prices rebound. The rise in diamond output will continue to be driven by additional investment in productive capacity and increased international demand for luxury goods caused by the continuing economic recovery in developed markets. The non-mining sectors are also expected to improve supported by accommodative monetary conditions, implementation of business environment reforms and government interventions against COVID–19, including the Economic Recovery and Transformation Plan (ERTP).
Upside risks to the inflation outlook remain elevated in 2022. The rise in commodity prices, particularly fuel and food prices, remain a key threat to Botswana’s inflation outlook in 2022 The country’s monetary policy will undergo a major overhaul as the Central Bank has revealed plans to make operational changes to improve the effectiveness of the transmission mechanism and its ability to influence monetary conditions.
We continue to focus on our strategy on being a digitally powered bank with a renewed focus on diversifying our revenue and being our customers primary partner.