BancABC Botswana interest income down by 15% in HY2021

By Published On: November 1st, 2021Categories: Corporate announcement, Earnings

African Banking Corporation of Botswana Limited (ABC.bw) HY2021 Interim Report

OUR ECONOMY AND ENVIRONMENT

The COVID-19 pandemic continues to have a strong impact on economic conditions and financial performance. The economy continued to open during the year amidst the increase in infections and deaths throughout the second quarter of the year largely due to the third wave caused by the Delta variant. The Government of Botswana intervened by banning the sale of alcohol and keeping nightly curfews in place to contain the spread of the pandemic. The heightened infections and deaths coupled with delayed arrival of vaccines pose significant risk to the recovery of the economy.

In nominal terms GDP for the first quarter 2021 was P47.7 billion compared to P45.6 billion from the closing quarter of 2020, showing an encouraging 4.6% increase. Major positive contributors were public administration and defence (18.4%) and wholesale and retail (11.4%). Real GDP for the first quarter was up 0.7% compared to contraction of 4.6% in the previous quarter. The improving growth is in response to more business activity pick up due to the continuous opening of the economy. A much better rate of recovery and vaccine uptake in the developed world has boosted diamond sales and demand – prompting possibilities of further upward revisions on growth for the local economy fueled by this recovery in mining GDP. The economy is expected to grow by 8.3% according to IMF projections. The recovery is expected to vary across different sectors, depending on improvement in both domestic and external environment. Disease trajectory, local and international vaccination drives remain the singular greatest hope for economic growth going forward.

The banking sector and, indeed, BancABC continues to operate under these difficult times, where there is a surge of COVID-19 cases. The bank observes all set rules and regulations and ensures that the impact to both customers and employees is contained.

SUMMARY OF FINANCIAL PERFORMANCE

The Bank has managed to achieve resilience in this period with growth in non funded income being largely enough to contain pressure on interest income margins from subdued interest rates and loan uptake volumes consistent with the tough market landscape. Overall, whilst most of the first half saw recovery from difficult trading conditions in 2020, some good traction has been made our strategy and have seen diversification of income efforts made from prior years cushioning the impact of decreasing interest margins on total income.

OUR INCOME STATEMENT

Interest income has been impacted by the cumulative 1% bank rate cuts made in 2020. Interest income reduced by 15% compared to HY’2020.