Once again, Absa Bank Botswana has successfully defended its position as one of the leading financial services providers in the Botswana banking landscape. This is due to the ability of the Bank to navigate the challenging operating environment and achieving a strong set of results, evidenced by the recent announcement of profit before tax increase of 36% YOY to 395 million pula. Based on this financial performance, the stability of the balance sheet and the adequacy of the capital levels, the Board of Absa Bank Botswana has resolved to declare an interim dividend of 103 million pula which translates to 12 thebe per share.
The bank’s strategic intent to drive fee income together with digital income, while continuing to embark on its cost containment strategies, yielded fruit with most of its income lines, including interest income ending the half year on a high note while expenses remained contained. The results of the containment being visibly noticed on the interest expense and operating expenses. “Amidst a challenging operating and dynamic economic environment in H1 2022, we remain optimistic that as economies are opening with lessened restrictions; we can expect to close the year on a positive note. Our performance thus far validates that with the measures that we have put in place for our colleagues and clients, we see ourselves emerge victorious against the unpredictable macro-economic conditions,” said Keabetswe Pheko-Moshagane, Managing Director.
Some of the highlights of the results include fees and commissions income growth of 23% YOY. The Bank’s impairment reduced by 72% YOY to 13 million pula. According to Absa Bank Botswana’s Chief Financial Officer Cynthia Morapedi, the cost-to-income ratio decreased to 54% from 58%. In terms of the return on Equity increase to 24% from 18% reported at the same time in 2021.
“Our capital adequacy ratio stands at 20%, which is way above the regulatory threshold. We remain committed to give a good return to our shareholders. For the period ended 30 June 2022 our profit before tax closed at 395 MILLION pula which is a 36% improvement from our results as at half year 2021.Our pre provision profit also improved from 336 million pula to 408 million pula which is a 21% improvement YOY. To this effect we have also seen an improvement in our return on equity which is now sitting at 24%, coming from 18% for the comparable period in 2021. Our basic earnings per share have also increased from 25 thebe in June 2021 to 36 thebe for the period under review. Reflecting a 42% uplift. What is pleasing about our profitability for this period is that all material lines of our income statement continue to contribute to this improvement, which is key to the sustainability of our performance in the long-term,” said Morapedi.
Additionally, she noted that the profitability growth is wholistic, with improved returns noted across the CIB and RBB businesses. Further to that, at a total of 881-million-pula, Absa’s revenue showed up resiliently, reflecting an 11% growth. On the revenue mix, the net interest income grew 8% in aggregate compared to the previous year on account of strong balance sheet momentum. The gross interest income remained upbeat, ending the period with a 13% improvement, however cost of funding increased substantially by 30% year on year.
Morapedi explained, “We have seen a sprout on the cost of funding curve which speaks to the challenges in our trading environment. Despite this growth, net interest income ended the period above what it was in prior year. Further to this, fee and commission lines grew 16% YOY in total. Gross Fee and commission income grew 23% with net trading income up 42% year on year. This is due to a noticeable improvement in transactional volumes as the economy opened up with minimal restriction in place, especially in the entertainment and tourism sectors. Our revenue performance is commendable given the challenged and disrupted economic and trading environment we had to navigate in 2022.”
For the period ended 30 June 2022, Absa’s expected credit losses materially recovered by 72% closing the period at a total charge of 13 million pula. This current performance in the bank’s impairments is owing to portfolio stability and prudent risk management across all segments as well as robust credit modelling. Consequently, the loan loss ratio has improved to 0.16% in the current period, and the Bank still maintains adequate levels of provision to absorb future shocks. The expected credit losses performance remains contained, despite the growth in the Bank’s loan book, owing to effective and efficient credit risk management frameworks.
To add on, Absa’s operational costs, have also delivered very fair performance during the financial period under review. At a total of 473 million pula, the operating costs remain well contained and have increased by only 3% year on year which is below average inflation. “We achieved this through prudent cost management strategies together with leveraging the benefits of digital investments. This resulted in our cost to income ratio improving to 54%, which compares favourably to 58% we had in the previous period. The bank still shows notable positive income statement jaws of 7.4%, which has improved from 6% in the prior period. Indeed, this performance is reflective of our efforts to build both operational excellence and efficiencies. Our balance sheet-maintained stability, continuing above the 21 billion pula mark as reported in the previous period. For the period under review, customer loans and deposits remain key drivers of our balance sheet and we have maintained structure and integrity of our balance sheet year on year,” concluded Morapedi.