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      The Mares need P7.2m for Africa Cup of Nations – Letshwiti

      Debswana boosts Mares’ preparations for AWCON

      Two local softball players move to Canada

      Two local softball players move to Canada

      Record breaker Tebogo was advised against the 400m race

      Record breaker Tebogo was advised against the 400m race

      BONA unveils P234K Tournament Sponsorship

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      The Mares need P7.2m for Africa Cup of Nations – Letshwiti

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      Mohohlo breaks silence on dented banking margins

      mm by Staff Writer
      November 23, 2021
      in Uncategorized
      Reading Time: 2 mins read
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      GABORONE, BOTSWANA,APRIL 5,2011, The Governor of the Bank of Botswana Linah Mohohlo  (Pic:Press Photo)

      The central bank has said strong competition among commercial banks has pulled down banking profitability, but said the new transition will spur innovation in the cutthroat banking business.

      The banking sector profitability has recorded a steady decline, tumbling from P1.8 billion in 2013 to P1.5 billion, recorded in 2014, according to the latest Annual Banking Supervision Report published in 2014.

      An uptick in cost of funding – as competing banks upped the ante in campaigning for deposits – drove bank interest margins southwards, which historically had been very high. 

      Bank of Botswana (BoB) governor Linah Mohohlo points out in the report that the Botswana banking sector is transitioning from a period of historically high levels of excess liquidity and high interest rates. The governor notes that historically, the sector was characterised by rapid growth in bank balance sheets and high profits, against the backdrop of high interest margins. “The situation has now changed to that of significant reduction in excess liquidity in a low interest rate environment and a more competitive market,” she said.  

      The governor welcomes this transition citing that it is a move towards a normal banking environment expected to spur banks into being more innovative and enhancing risk management systems in the process. “In particular, banks are expected to adopt more prudent and effective liquidity and economic capital management policies and practices.”

      She points out to what she describe as a marginal decline in asset quality during the year as banks experienced an increase in non-performing loans. Mohohlo also stated that the sector’s liquid asset ratio of 14.5 percent continued on a downward trend as the amount of outstanding Bank of Botswana Certificates (BoBCs) held by banks declined; historically, BoBCs constituted a larger proportion of banks’ liquid assets. “The funds which used to be invested in BoBCs were channeled into lending and/or offshore investments, thereby exerting pressure on the liquid asset ratios of banks.”

      The supervision report says household sector continued to account for a larger proportion of total loans and advances at 55.8 percent, and deposits remained highly concentrated in the private business sector. The non-performing loans to total loans and advances ratio remained constant at 3.6 percent as in 2013. It further states that the prudential ratio of aggregate banking sector large exposures to unimpaired capital increased from 148.2 percent in 2013 to 230 percent, and was within and significantly below the 800 percent prudential maximum limit, thus signifying that banks were prudently managing their credit concentration risk.

      The report further explains that while the four large banks continued to dominate the commercial banks’ market share, their share of total deposits declined slightly, from 80 percent in 2013 to 79 percent in 2014. Their share of total assets and total loans and advances remained unchanged at 81 percent.

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