The Banking Industry was Profitable in 2021 – BoB

  • Net after-tax profit increases to P1.8bn
  • Ratio of Non-Performing Loans to gross loans and advances declined
  • BoB ensured supply of clean banknotes and coins



The banking industry was profitable in 2021, with net after-tax profit increasing by 24.4 percent from P1.5 billion as at the end of 2020 to P1.8 billion for 2021, the Bank of Botswana (BoB) 2021 Annual Report shows.

According to the released recently report, the increase in net after-tax profit largely reflects improved banking business activity. “Banks maintained good quality assets in 2021, with a decline in credit default rates,” the report reads.

Risk to asset quality
“The ratio of Non-Performing Loans (NPLs) to gross loans and advances declined from 4.3 percent in December 2020 to 4.2 percent in December 2021.”

The report says there continues to be a risk to asset quality associated with the high proportion of the relatively more expensive unsecured lending (at 72.5 percent of household credit in December 2021) in commercial bank credit.

“The average capital adequacy ratio (CAR) and liquid asset ratio (LAR) for the banking industry were 18.6 percent and 16.6 percent, respectively, in December 2021, both higher than the minimum prudential and statutory thresholds of 12.5 percent and 10 percent, respectively, indicating that the banking industry was adequately capitalised and liquid,” it notes.

Overall, the BoB annual report shows that the statement of financial position for the banking sector grew, with total assets increasing by 4.6 percent from P103.6 billion in December 2020 to P108.4 billion in December 2021.

Customer deposits up
“Loans and advances, which constituted 63.6 percent of assets, rose by 5.1 percent to P68.9 billion in December 2021 compared with P65.6 billion in December 2020,” it says. “With regard to liabilities, customer deposits increased by 3.6 percent, from P81.2 billion to P84.1 billion, in the same period.”

The report shows that the overall performance of the banking industry was satisfactory in 2021 as banks complied with the prescribed statutory and prudential minimum thresholds for capital and liquidity and were therefore assessed to be operating in a safe and sound manner.

Meanwhile, BoB used the report to indicate that it continued to manage the supply of banknotes and coins to ensure availability of high-quality currency in circulation in the country.

“Furthermore, in line with the Clean Banknote Policy, the Bank took a decision to issue into circulation only new banknotes and coins, save for denominations with low stock cover,” the report reads.

“Moreover, the Bank started receiving soiled, discoloured and damaged coin deposits from commercial banks on November 2, 2021 in a bid to maintain clean coins in circulation.”

BoB says the number of banknotes in circulation decreased significantly by 12.3 percent from 49.6 million in 2020 to 43.5 million in 2021, reversing the upward trajectory recorded in the past years.