- FNBB sees sharp increase in the non-interest revenue (NIR) base
- Bank at 50 percent of resizing branches
- Customers can use its services without increased costs
The banks says this was underpinned by a normalisation of credit losses and a sharp increase in its non-interest revenue (NIR) base.
Non-interest revenue increased by 19 percent year-on-year, driven primarily by recovery in the foreign exchange business. Service fees increased marginally by 6 percent and card commission by 10 percent, due to increased volumes as economic activity resumed. FNBB saw 27 percent growth in the foreign exchange revenue which it says came from a return to growth in the pre-pandemic trading volumes, with increased overall activity across all sectors and customer segments.
Growth was supported by increased volumes across the bank’s digital and electronic channels, most noticeably in merchant transactions. “The bank continued to broaden its financial inclusion with further expansion of its CashPlus channel, thereby bringing services to more remote locations and enhancing convenience for our customers,” CEO Steven Bogatsu said.
FNBB reported that in the retail segment there was 14 percent growth, 17 percent in business and a 33 percent in corporates following increased dividend payments. The increase in service and other fees emanated from 2 percent increase in the customer base as well as digital take-up across a group of the bank’s platforms. FNBB saw 12 percent increase in ewallet.
The bank started the journey of migrating customers to digital platforms some years ago. In order to realise benefits, the bank wanted to look at operations and ensure they are aligned to digital transformation. It used to operate branches as big as 1 000 square meters. The current optimisation project that the bank has ongoing is reducing the sizes of branches because it believes that it needs to strike the right balance as a migration from bricks to clicks.
“We target 2/3 branches on an annual base, depending on how old the branch is and how much work it requires.” Bogatsu said. “We have been doing it over the last years. I estimate we are at 50 percent.”
FNBB’s uptake in banking applications increased by 54 percent. Bogatsu said this means “our customers are able to continue utilising banking services without us increasing cost to cater for them”. Online banking increased by 4 percent aligned to “our strategy around discontinuation of cheques”. FNBB has seen a decline of about 34 percent in the number of people using cheques.
On the interest income front, the bank noted a decrease of 2 percent, driven in part by the full-period effect of the reduction in the Bank Rate in October 2020, as well as the decline in the advances book and a change in the advances portfolio mix. The bank said this was offset by a 22 percent increase in the cash and investment portfolio interest income due the sharp increase in the rates of government securities over the period.
Interest expense decreased by 8 percent following a 4 percent decrease in deposits and the Bank Rate reduction in October 2020. “The deposit mix shifted from overnight deposits to term deposits as clients sought higher yields,” Bogatsu said. Impairments declined by 51 percent year-on-year driven by sharp decreases in portfolio impairments (Stage 1 and Stage 2) and offset by elevated Stage 3 impairments.
Bogatsu said the portfolio impairment decline followed normalisation of impairments in December 2021 with the prior period taking account of the risk in the SME portfolio prevailing at the time. The Stage 3 impairments increase is attributed to a significant commercial write-offs over the current period as well as an increase in retail defaults over the current period, the CEO said. The P102 million reduction in impairments led to a reduction in the credit loss ratio to 1.3 percent (2020: 2.5 percent).
