Africa-Press – Botswana. In a strategic move to broaden its footprint, BBS Bank Limited, Botswana’s pioneering indigenous commercial bank, is eyeing an expansion of its customer base. The bank plans to enhance outreach by engaging third-party entities to deliver banking services on its behalf.
Pedzani Tafa, the Managing Director of BBS, revealed that following the acquisition of a commercial license from the Bank of Botswana in October 2023, the bank has dedicated the current year to establishing the foundation for future growth.
While acknowledging the upcoming shift in the bank’s operational approach, Tafa emphasised the institution’s commitment to maintaining its status as a mortgage bank. “As we grow, we must ensure accessibility. In the first or second quarter of this year, we will delve into agency banking rather than traditional brick-and-mortar expansion,” she explained.
Tafa noted the considerable challenges faced by the bank, which has operated at a loss for the past five years. The delayed acquisition of the license took a toll on the bank’s revenue, mainly generated through mortgages. Despite the challenges, Tafa expressed optimism about the forthcoming year’s agenda.
Addressing concerns from customers and shareholders regarding delayed dividend payments, Tafa attributed the delay to the absence of a group structure, necessitating the bank to secure funding independently for its growth and transformation.
Last year, BBS Bank announced the initiation of key banking functions, systems, processes, and skills aimed at diversifying its product portfolio beyond mortgages and savings accounts. Tafa affirmed, “This will ensure that the company diversifies its product offering from solely mortgage and savings accounts to new commercial banking products and services.”
The strategic move towards diversification is intended to bolster the bank’s competitiveness in comparison to its peers, enhancing income streams, reducing the cost of funding, and improving overall performance.
As part of its diversification strategy, BBS Bank introduced an insurance agency, a fully licensed subsidiary regulated by the Non-Bank Financial Institutions Regulatory Authority (NBFIRA). This subsidiary aims to generate income through Bancassurance, a move that has already yielded positive results.
Additionally, the bank has launched a visa debit card during the same period to enhance service offerings and provide added convenience to customers, thereby contributing to an improvement in non-interest income.
BBS Bank joins the commercial space when the industry profits have been racing to near record levels, with the lenders delivering huge profits as the industry proves its resilience amid sluggish economic growth and unemployment.
For the seven months of 2023, the nine commercial banks have generated post tax profit of P1.7 billion, higher than the P1.4 billion earned in the seven months period in 2022. At the current pace, the banking sector’s profitability for this year will likely surpass 2022’s cumulative profits of P2.7 billion, which improved on 2021’s profit of P1.8 billion and 2020’s P1.5 billion. According to the latest Bank of Botswana’s supervision report, the industry’s operational efficiency improved as the average cost-to-income ratio declined from December 2021’s 60.3 percent to 56.6 percent in 2022, while the return on average assets (RoAA) rose from 1.7 percent to 2.4 percent. Net interest income increased in 2022, reflecting the relatively high interest-rate environment after the central bank raised the interest rate 151 basis points, bringing the monetary policy rate (MoPR) to 2.65 percent, which has prevailed since 2022.
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