Absa Bank Botswana aims to grow its retail and business banking by continuously investing in strategic initiatives to ensure its competitiveness.
Keabetswe Pheko-Moshagane, Managing Director of Absa Bank Botswana, stated that the banking sector, in general, is predominantly led by retail. In 2023, it constituted 72 percent of Absa’s total revenue.
She said her bank has launched several initiatives to support and grow this division.
“We launched a first-to-market payments solution – Absa Mobi Tap driving financial inclusion for entrepreneurs, merchants, especially Micro and Small to Medium enterprises, by giving them the option to use their mobile phones in place of a traditional Point-of-Sale device to process contactless card transactions,” Pheko-Moshagane said at the recent presentation of the bank’s full-year financial results.
In an effort to become a digitally powered bank, Pheko-Moshagane mentioned that Absa digitized its credit card offering. This allows clients to activate their cards, freeze or unfreeze them, and request credit limit increases or decreases through the bank’s internet banking platforms.
Additionally, Absa has introduced a Buy Now Pay Later capability on its credit cards, further enhancing convenience for its clients. The bank has also launched Absa Card Send to provide added convenience.
“This enables our customers to send and receive money locally and internationally from other visa card holders,” she said.
“We launched our Retail and Business Banking customers’ self-onboarding solutions which provide an enhanced customer experience in opening current and savings accounts online.”
Thanks to Absa’s investment in technology, Pheko-Moshagane highlighted that the bank has seen growth in digitally active customers for Retail and Business Banking, with a 7 percent increase for Retail and a substantial 50 percent increase for Business Banking.
According to Absa’s Managing Director, Business Banking has sustained its support for local businesses participating in large corporate value chains through the Enterprise Supply Chain Development program.
“The ESD has stood the test of time and is yielding great dividends for our clients and the economy at large,” she said.
Additionally, Pheko-Moshagane noted that Business Banking has played a significant role in supporting the government’s strategic drive for food security and sufficiency by financing the agriculture sector. This effort has resulted in an impressive 89 percent growth in the agribusiness lending portfolio.
Pheko-Moshagane said the efforts resulted in a 6.4 percent year-on-year growth in Absa Business Banking customer numbers and a remarkable 23 percent growth in topline revenue.
In 2023, Absa’s Corporate Banking division saw a remarkable 25 percent increase in revenue year-on-year. This outstanding performance can be attributed to the strategic development and expansion within the bank’s key focus sectors, including mining and energy, infrastructure development, retail, and tourism.
“Global Markets business on the other hand delivered strong y/y revenue growth driven by performance from the sales and trading businesses,” said the Absa MD.
“The Markets business executed the first to market FX linked deposit which is in line with our strategy to contribute to the development of capital markets.”
Financial performance
In 2023, Absa witnessed a double-digit revenue growth, reaching a total revenue of P2.1 billion, up from P1.9 billion in the previous corresponding period.
Pheko-Moshagane highlighted that excluding one-off costs, Absa’s underlying performance demonstrates a steady momentum, with profit before tax increasing by 14 percent year-on-year, while the cost-to-income ratio improved to 52 percent compared to 2022.
Absa’s Finance Director, Cynthia Morapedi, elaborated that the bank’s revenue mix remains aligned with its primary purpose as a commercial bank, with Net Interest Income (NII) currently standing at P1.4 billion, contributing 68 percent to total revenue.
However, the interest income was annulled by the increase in interest expense of 44 percent.
According to Morapedi, the increase is a result of two factors.
These are the significant growth in deposit books coupled with the increase in market rates for deposits.
“This culminated in net interest income growth of 18 percent y/y,” she explained.
“Growing our non-interest income remains a key priority for us, and we aim to continue with our strategic intent to drive fee income and make sure that we diversify our revenue streams.”
During the year, Absa’s gross fee income grew by 12 percent y/y.
The performance was driven by the growth in transactional volumes which was due to innovative and dynamic product solutions that the bank offered to its clients during the period under review.
Morapedi noted that Absa’s operating expenses remain a material contributor to the bank’s performance for 2023.
“At a total of P1.2 billion expenses have grown by 23 percent y/y.”
“This signifies a reported cost-to-income ratio of 58 percent on a statutory basis.”
In 2023, Morapedi said Absa had some material once-off transactions which contributed to the overall cost growth.
In this growth is the impact of once-off costs relating to the restructuring exercise which amounted to P91 million.
In addition, in the current year, Morapedi mentioned that the bank had to restate the financial statements for 2022 and 2021 to reflect the correct performance of the impacted years and in accordance with the requirements of International Accounting Standards.
“If we strip these out, our underlying cost growth is 8 percent, and the underlying cost-to-income ratio of 52 percent which is reflective of a normalised business performance,” explained Morapedi.
