Credit growth across industry registered -1.7 percent in July
First National Bank Botswana (FNBB) is once again listed in a group of losers after its 12 thebe plunge of last week. The once greatest performer on the Botswana Stock Exchange, especially before the first lockdown, went into a downward spiral in the course of the nationwide lockdown in April. FNBB stock had lost 55 thebe by July after losing 20 thebe in March.
According to the latest Weekly Financial Markets Highlights by Motswedi Securities, FNBB lost 12 thebe for the week, reaching P2.20/share and levels last seen in June 2018 when the bank’s share price was on the rise. According to Motswedi, the FNBB stock now stands at a year-to-date of negative 22.8 percent and is the third largest loser in the market.
“Sentiment has somewhat changed for the stock in the last couple of months, as the COVID-19 pandemic takes its toll on the company’s various business lines,” Motswedi researchers note.
Garry Juma and Salome Makgatlhe also warn that further distress is on the way for FNBB following the Bank of Botswana’s decision to cut the bank rate. “This will surely strain the bank’s interest income and will force banks to think of more innovative ways to cover the interest income pinch,” they observe.
At its meeting on 8 October 2020, the Bank of Botswana’s (BoB) Monetary Policy Committee (MPC) decided to cut the Bank Rate by 50 basis points to 3.75 percent. BoB noted that despite short-term adverse developments in the economy occurring against a potentially supportive environment that includes accommodative monetary conditions, reforms to further improve the business environment, concerted efforts by the government to mitigate the impact of COVID-19, as well as the likely impact of the Economic Recovery and Transformation Plan, it is projected that the economy will still operate below full capacity in both the short and medium-term.
Banks are feeling the pinch of stunted credit growth that is adding salt to their business demons like poor performance of stock and strain on interest income. Recently, a Kgori Capital study showed a deceleration in credit growth. Credit growth was -1.3 percent in June before going further down to -1.7 percent in July.