We have extracted below the Chairman’s Statement from the 2018 annual report of Standard Chartered Bank Botswana Limited (STANCH.bw), listed on Botswana Stock Exchange:
It is my pleasure to present, on behalf of the Board, the Standard Chartered Bank Botswana Annual Report for the financial year ended 31st December 2018. We continued to face significant headwinds, but returned the Bank’s operations to profitability and declared a dividend to our shareholders in May 2019 subsequent to the finalisation of the Audited Financial Statements.
A lot was achieved during the year in refining the business fundamentals for a more sustainable growth trend, which I am convinced will be getting stronger. We maintained our market position in many fronts, enhanced our client propositions and improved customer experience.
Our brand promise – “Here for Good” remained a central campus for all our actions during the year; we have maintained our support to key sector of the economy, partnered with communities to solve real life problems and remained committed to our people-the human capital.
A review of the economic environment
The Botswana economic performance portrays some positivity, with the annual Gross Domestic Product growth rate reaching a 4-year high of 4.5% in 2018. The growth was influenced by recovery in mining output and continued improvement in non-mining sectors. Mining output expanded by 13.9% in the year to December 2018, buoyed by recovery in commodity prices. Without mining, the significant influences on domestic economic performance include conducive financing conditions as indicated by accommodative monetary policy and sound financial environment that facilitates policy transmission, intermediation and risk mitigation.
Headline inflation was 3.5 % in December 2018 and remains in the lower end of the target range, reflecting, in part, subdued domestic demand due to slower growth in household incomes. The Bank of Botswana maintained the bank rate at 5% throughout 2018 and the prevailing accommodative monetary policy stance is still consistent with maintaining inflation within the objective range of 3-6% in the medium term.
Official Government forecast peg the economic growth rate at 3.8% and 4.2% for 2019 and 2020 respectively, the macro-economic fundamentals are expected to remain stable, complimenting an accommodative monetary policy. The Bank, as a key player in the economy will benefit from the stability, and post a good performance run.
We recorded a Profit After Tax of BWP 24 million for the 2018 financial year, a milestone given the significance of the loss recorded in 2017, but we can do more. We focused on rebalancing the portfolio (and de-risking from certain assets), restoring our capital adequacy as well as reprofiling the structural liquidity- all with an intention to support planned growth. Owing to the above, business momentum was generally on a restraint and as such our Non Interest Income performance was not great, recording a 15% decline from prior year. Interest margins also took a knock as a market induced increase in cost of funds filtered through, notably in the last quarter of the year. We also shed off some interest earning assets during our portfolio re balancing exercise and top line performance was affected. Our Non Funded Income remained correlated, to a great degree with movement in interest earning assets and as such, experienced a similar year on year decline.
Although operating at marginal capital positions at some point during the year, specifically during third quarter, the Bank complied with all regulatory capital thresholds throughout the period. Capital positions were restored to confidence levels in October 2018 with a parental capital injection of P400 million in form of Additional Tier 1, the Capital Instruments. The Bank complied with all primary reserve ratios throughout 2018. I and my colleagues on the Board remained resolute in maintaining our fiduciary duties to the shareholders. The Board was further strengthened during the year as we welcomed to the team two additional Non-Executive Directors, Mr. Kweku Bedu-Addo and Ms. Doreen Khama, who are both seasoned professionals.
We hosted Mr. Andy Halford, the Standard Chartered Group Chief Financial Officer. During his visit, Andy spent time with some of our clients and paid a courtesy visit to the Central Bank Governor, among other key stakeholders. His visit highlights the significance of Botswana as a key member of the Standard Chartered Bank Group.
Although I admit the level of profitability, a key determinant of dividend pay- out is not yet restored to levels our shareholders are accustomed to, we are upbeat about milestones achieved in 2018 and I am confident on our future path as we usher in a new year.
We are the sum of our parts, without employees and clients the Bank does not exist, I therefore would like to thank the Bank employees and clients for their ongoing support and commitment to delivering on our purpose.
Thank you to my fellow Board members for your support, and a special word of appreciation to Mr Ish Kumar Handa and Mr Nathan Kgabi who stepped down from our Board.
Professor Bojosi Otlhogile