2020 Full Year Financial Highlights:
Operating income up 4% YoY to BWP753 million, growth is broad based; Retail, Financial Markets and Corporate all up.
Retail segment registers a 3% growth in income, driven by a 6% growth in client assets.
The Corporate segment registers a 28% year-on-year growth in income and 7% growth in margin income.
Interest expense down 14% YoY, driven by focused liability management operating expenses increased by 6% driven by a once-off provision, underlying expenses relatively flat YoY Expected Credit Losses up 28% YoY, reflective of uncertainties across credit market segments Profit Before Tax BWP102 million; up 47% YoY, underlying profits (net-of extraordinary item) are 10% up.
Loans and advances to clients up 2% to BWP8 billion CAR stable at 17.6%, CET1 at 7.2%
Consistent positive return on equity at 4.7% Standard Chartered Bank Botswana Limited today announced full year results for the period ended 31 December 2020.
Notwithstanding the significant negative impact of COVID-19 on business performance, the Bank demonstrated resilience and continued sustainable momentum that has been a feature of the business since the launch of a refreshed strategy in 2018. Significantly, all segments contributed to the collective gains of the business which enabled a 47% increase in Profit Before Tax (PBT) to BWP102 million, seeing the business returning to a PBT level above the BWP100 million mark for the first time since 2016.
Across operating indicators, the combination of the continued pursuit of management’s strategy and a measured approach to the COVID-19 pandemic showed further positives for the business. Operating income grew 4%, while loans and advances to clients grew 2% to partially offset pressure on non-funded income emanating from stunted transacting volumes, while interest expenses fell by 14%. Underlying operating expenses remained relatively flat year-on-year with a 1% spike, this despite the introduction of large-scale health measures to protect staff and clients against the pandemic and contributions totaling BWP5.1 million expended to the national fight against COVID-19. A once-off provision increased overall operating expenses by 6%.
Following the strong start to the year, the negative impacts of COVID-19 began in earnest at the beginning of the second quarter. Margin income was significantly impacted by a substantial reduction in sales during the national lockdown period and were further impacted by a cumulative 100-bps reduction of the Policy Rate by the Monetary Policy Committee of the Central Bank as an intervention to assist in promoting economic activity.
Understanding the pressures on clients and their businesses, the Bank extended several initiatives to assist in easing the strain including temporary discounted fees on our digital platforms, and repayment holidays to the personal and corporate segments. Inevitably, underlying credit provisions went up 28%, reflecting a credit market impacted by COVID-19.
The Retail segment – renamed to Consumer, Private and Business Banking – registered a 3% growth in income, driven by a 6% growth in client assets. Non-interest income was 4% down on account of substantially reduced transaction volumes during lockdown periods. However, the non-funded income base was expanded during the year with a successful rollout of Cash Depositing Machines across the country, a main feature of the Bank’s reconfigured client interface centres (Express Banking Centres or EBCs). These unique hybrid channels come with increased convenience for clients, but a lower cost to the Bank. Overall segment profitability was down on account of once off provisions in 2020.
The Corporate, Commercial and Institutional segment saw a 28% year-on-year growth in income as the commercial sub segment broke into profitability. A strong run in client transactions, including Corporate Finance delivered a 10% growth in non-funded income, with another 4% growth in trade income coming from currency trades. There was also a strong conversion rate on the lending business including trade facilities, resulting in a 7% growth in margin income. Costs were contained closely to a 4% reduction, although credit impairments grew 2.9 times to BWP20 million mainly driven by COVID-19 impacts on clients. However, there were no significant write offs. The segment emerged from a marginal loss in the prior year to record a PBT of BWP57 million.
Mbako Mbo, Chief Financial Officer at Standard Chartered Botswana, when presenting the results said: “we are very encouraged by the performance of our business and its returns in the face of the pandemic. The great uncertainty that the pandemic has introduced tested the resilience and agility of our business but all indicators have shown that our base was and remains solid, our business segments are operating effectively and efficiently and our operations are offering value through cost-effective efficiencies. Operating from this strong foundation allowed the business to make the necessary investments to support our staff, our clients and the national effort against the pandemic.”
Mpho Masupe, Chief Executive Officer at Standard Chartered Botswana, added: “Despite the uncertainty, our strategy continues to deliver the results that we were confident it would. It has taken great commitment by our team, Management, and the trust shown in us by our clients to glean these sustainable results. Moreover, the momentum we have created and are harnessing has allowed us to continue our digital enhancements. Our SC Mobile app continues to entrench its foothold in the market, reaching further into the country and demographics that are new to the banking sector. Coupled to this, our roll out of Express Banking Centres is gaining momentum and supporting the efficacy of our digital platforms. Our market-leading Straight2Bank platform for corporates has stretched its market adoption even further and with the launch of Straight2Bank Next Gen, we foresee even greater penetration in the market.”
“The pandemic has given us yet another important opportunity to test the efficacy of our Business Continuity Plans, which we invoked at the onset of COVID-19. Across the various levels of lockdown, movement restrictions and curfews, the majority of our staff have operated effectively from home. The Bank’s digital innovations and home support ensured minimal-to-no disruptions to our clients banking service. Management has also been very aware of how demanding this present environment can be, and has been on our team, Management has therefore made a host mental and physical wellbeing tools and services available, the cost of which has been borne by the Bank.
“In addition to the solid business achievements that our team has made in this present environment, the health and safety of our team has rightfully taken centre stage. We have not hesitated to make investments where they are needed to protect our colleagues and our clients. I am especially proud of our frontline team members who throughout 2020, were diligently showing up for duty in our branches every day to ensure our clients were served. In addition, our digital innovations showed the depth of their relevance during the lockdowns and movement restrictions, allowing our clients to bank seamlessly from the safety of their homes.”
The full effects of the pandemic are unknown to all of us, but we are confident in our business, our strategy and our team to maintain our momentum, deliver the best we can for our clients and be a responsible citizen contributing to the country and the national response efforts.”