Interest income drives FNB revenue

The bank Chief Financial Officer, Dr. Mbako Mbo, told journalists this week that the growth was primarily propelled by a 36 percent increase in interest income rising from P1.4 billion to P1.9 billion by the end of the second half of the year. Total income jumped 15 percent to P2.9 billion as the Botswana Stock Exchange-listed bank saw a further rise in the number customers using its online services – eWallet and CashPlus.

Mbo elaborated on the factors contributing to this 36 percent growth, highlighting two key components. Firstly, advances experienced a year-to-year growth of 8 percent, reaching P16.3 billion. “The second factor is that as a commercial bank, we carry the duty to transmit monetary policy rate (MoPR) as and when it rises,” said Mbo. During the year under review, the central bank raised the MoPR to 151 basis points, which Mbo said is transmitted to clients.

“The same thing applies to our depositors.” We grew the amount of interest that we paid to customers by P200 million during the year, 75 percent over and above what we paid last year,” he explained. He shrugged off the 86 percent rise in impairments as normalisation that is continuing from 2020. During the year under review, FNBB’s Non-Interest Income (NII) grew by 7 percent year-on-year to P1.4 billion. Mbo explained that the NII is derived from initiatives around inclusive banking.

“This is the story of us facilitating financial transactions within communities, particularly the underbanked,” he said. “During the year under review, we facilitated 12.5 million eWallet transactions which translates to P7.5 billion worth of transactions.”

Mbo said eWallet transactions increased by 1.5 million from the previous year. Further, the bank facilitated 4.7 million transactions within its CashPlus network in 2023, an increase of 2.1 million from last year. Mbo added that the bank continues to grow its client base, attracting 25 000 new customers. “Last year we grew by 21,000 customers,” he said. The increase in mobile transactions such as eWallet, CashPlus and airtime purchases transactions also drove the banks non-interest income. For the period under review, Mbo stated that the bank’s operating expenses went up by 9 percent as a result of the new drive to innovate.

The bank’s balance sheet grew 9 percent year-on-year, driven mainly by growth in advances to customers across all segments. “Our advances which is the main investment grew by 8 percent year-on-year,” Mbo said. “Driving this growth we put P600 million more on a net basis on unsecured lending.”

The bank further put P320 million more into supporting some of the key sectors of the economy, particularly State Owned Enterprises (SOEs). “We put an additional P60 million in supporting the SMMEs,” said the FNBB CFO. Corporate advances went up 11 percent, while commercial and retail advances are at 8 percent and 7 percent respectively.

The growth in corporate advances was driven by working capital support to SOE and Fast Moving Consumer Goods (FMCG) sectors, as well as leverage finance deals in the financial services sector. The bank says key deals in the tourism, fuel, and agriculture sectors supported growth in the commercial advances book, while personal loans in the retail book grew on the back of extended tenures and ticket size limits to individuals within Group Schemes.

Non-Performing Loans (NPLs) increased by 8 percent year-on-year from P802 million to P863 million with the NPL/gross advances remaining flat at 5 percent year-on-year. FNBB says contributing to the somewhat significant growth in NPLs is a low base effect as prior year NPLs included the impact of accelerated write-offs. For the year under review deposits from customers increased by 9 percent year-on-year, which the bank says is in line with the growth in advances, which ensured a sustainably funded growth in assets.

The growth in the deposit base was led by an overall growth in retail and commercial current accounts. Retail deposits grew 11 percent year-on-year, which FNBB says is mainly reflective of better yields offered by the bank to retail customers on personal savings accounts. The commercial segment deposit base also increased by 11 percent, mostly on current and call accounts.

Corporate and Treasury deposits increased by 6 percent as the bank slowed down on term deposits amid heightened market cost of funds. The loan-to-deposit ratio remained relatively flat year-on-year at 70 percent, which is said to be a reflection of a well-funded position supported by additional funding lines available from the market.