Absa Bank Botswana has reaffirmed its commitment to supporting the country’s diversification agenda and contributing to the growth of the domestic economy, with a focus on infrastructure development and key economic sectors.
According to the bank’s Managing Director, Keabetswe Pheko-Moshagane, Absa exists primarily to support Botswana’s economic growth.
With the economy facing challenges, contracting by 5.3 percent in Q1 2024, Pheko-Moshagane stated that Absa aims to play a critical role by leveraging its experience in financing major infrastructure projects. She was speaking during the bank’s presentation of its 2024 interim financial results.
“Absa has played a significant role in supporting the government’s key infrastructure projects,” she said. “We have stepped in several times to assist State-Owned Entities when they were struggling.”
Pheko-Moshagane emphasised that the bank’s expertise will be crucial in continuing to lend to the government to help meet its strategic and economic objectives. She noted that during difficult economic periods, there is often a greater willingness to take on more debt.
“This is where we pause and say, we want to grow and meet our strategic objectives, but it has to be in a sustainable manner,” she said. “Given the strain on consumer spending, our current focus is on how to sustain the customers we’ve been serving through this challenging cycle.”
Pheko-Moshagane highlighted that Absa’s mission has always been to drive economic growth in Botswana.
“Our goal has always been to achieve a ratio of 60 percent net interest income and 40 percent non-funded income,” she said. “This aligns with the license we’ve been given.” She further mentioned that the bank is on track to reach the 40 percent target for non-funded income, currently standing at around 35 percent.
She expressed confidence in the bank’s direction, citing key drivers such as deposits, the commercialisation of digital platforms, and rising transaction volumes.
Meanwhile, for the period under review, Absa recorded a total revenue growth of 9 percent, closing at P1.1 billion.
Absa’s interim Finance Director, Leroy Klein, explained that this growth was driven by a 12 percent increase in net interest income, reflecting the bank’s strategic focus on optimising its balance sheet and effectively managing margins. Non-interest income grew by 3.5 percent, which Klein attributed to diversified revenue streams and the resilience of fee-generating businesses.
One of the most encouraging aspects of Absa’s performance, according to Klein, was the significant 98 percent reduction in impairments.
“This substantial decline, resulting in a P1 million charge for the period, is largely due to the strong performance of our retail portfolio and once-off management adjustments,” he said. “This achievement underscores our prudent credit risk management and the improving quality of our loan book.”
Absa’s loans and advances remained relatively flat, with a marginal growth of 0.4 percent compared to the same period last year, closing at P17.1 billion. The deposit base grew by 4.7 percent year-on-year, reaching P18.3 billion.
Due to revenue growth and effective cost management, profit before tax rose by 26 percent to P563 million, up from P448 million in the same period last year.
“This demonstrates our ability to convert top-line growth into bottom-line success, with pre-provision profits increasing year-on-year by 14 percent to P563 million,” said Klein.
During the period under review, Absa’s loan loss rate improved to 0.01 percent, down from 0.5 percent for the same period last year. Klein attributed this improvement to a proactive risk management approach and robust underwriting standards that continue to safeguard the bank’s asset quality.
As part of its strategy to diversify its overall portfolio, Absa aims to grow its Corporate and Investment Banking (CIB) segment and reduce its reliance on Retail and Business Banking (RBB), which currently contributes 70 percent to the bank’s revenue for the first half of the year.
The Managing Director said Absa has continued to invest in its corporate clients’ digital platform, Absa Access Online. She noted that recent enhancements have resulted in an improved customer experience, delivering streamlined and secure processes and ensuring seamless access to a range of financial services. These efforts earned the bank recognition at the 2024 Digital Banker CX Awards for Outstanding Digital CX-Trade Finance Initiative.
