Africa-Press – Botswana. The change of the capital structure upon demutualisation of BBS Limited has contributed to its negative performance.
The bank’s Managing Director, Pius Molefe, said in a foreword to financial statements for the year ended 31 December 2021 that “It is important to remind shareholders that the change was deliberate and necessary to transition the company into a commercial bank. The impact of this change on profitability was envisaged at the time and remains acceptable considering the company’s strategic objectives which will unfold and bear fruits once the company starts operating as a commercial bank.”
He said the turnaround strategy has a high dependency on the commercial banking license which has been delayed due to unforeseen circumstances.
“It was anticipated that the negative impact would subsist for a period of at least three years following demutualisation. Considering the delayed banking license and progress to date, this is likely to be longer and is profoundly regretted. However, management is confident that the long-term benefits which will be derived from ‘BBS Bank” will pay off,” he assured shareholders.
The company posted a loss of P25.347 million compared to a P14.252 million loss recorded the previous year.
The company’s total balance sheet reduced by 6% to P3.829 billion while Mortgage loans and advances reduced by 8% from P3.408 billion recorded as at 31 December 2020 to P3.127 billion as at 31 December 2021.
Molefe also singled out liquidity preservation and Impact of the Covid 19 pandemic as another contributor to the negative performance.
“The company has remained resilient on key liquidity metrics after the accelerated repayments of the International Finance Corporation (IFC) and Access Bank Botswana Limited facilities. The remaining Access Bank Botswana Limited facility will be fully settled by the end of March 2022. In addition, the economic pressures due to the effects of Covid-19 pandemic and retrenchments by some companies, whose employees are our customers, resulted in the increased level of cash withdrawals as customers used their savings to sustain their livelihoods/businesses. The prioritisation of liquidity preservation resulted in management considering prudent lending measures to guard against the continued impact of the pandemic and the significant deposit withdrawals, which unfortunately had an impact on the business performance.”
He said management worked tirelessly to raise funding in the form of short to long term deposits. “Our average cost of funding was adversely impacted by declining liquidity generally against elevated investor expectations due to rising inflation. This put pressure on yields as there was increased demand for better rates. The cost of this funding was not offset by the amount of business the company was generating from mortgage loans and advances thereby negatively impacting margins,” he said.
BBSL also had to contend with stagnant mortgage loans and advances book and operational losses. “Due to the withdrawal of the International Finance Corporation facility, the company incurred unanticipated costs of P3.9 million relating to a prepayment premium and P2.7 million relating to a “make whole amount”. These costs contributed to increased losses recorded for the year. Management is working hard to eliminate the effects of the above challenges and improve the company performance during the 2022 financial year,” he said.
The company is currently rationalising its staff across all levels so that it is fit for purpose going forward. “The intention is to ensure that BBS Limited has relevant skills that are aligned to the demands of the new organisation. It is a delicate process and it is being done in the most sensible manner possible. We want to make sure that we compete fully in the commercial banking space. We must have the right human capital to be able to do so. The intention is to have bedded down the bigger part of the human transformation agenda by the end of 2022/beginning of 2023,” Molefe declared.
He however remains very positive about the future, declaring that the future will be “replete with exciting possibilities”.
“As Shareholders and other stakeholders, you have been patient with our transformation agenda and now the time to reap the rewards of your facilitation is nigh. We hope you are as excited as we are about this imminent phase as a commercial bank. Your support has gotten us through the raft of requirements over the years which has led us to this moment with your support. We expect that 2022 will be a truly watershed year for BBS Limited,” he said.
BBS Limited Board chairperson Bernard Mzizi said: “As the Board, we have the utmost confidence that BBS Limited has an agile, fit for purpose corporate strategy with an exciting digital bent, supported by VISA capability. BBS Limited will be international in the truest sense. The Board, through the Board Human Resources and Remuneration Committee, ensures that the corporate strategy is supported by suitably qualified and experienced human capital. There is an on-going process to capacitate the business with appropriate staff while also providing those that have been with the business the opportunity to go and pursue other passions through a rationalisation process that is considerate”.
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