Brian Benza
1 April 2008
Barclays Bank Botswana is strengthening its risk assessment procedures following the sudden collapse of long-haulage truck company, Lobtrans.
The collapse of Lobtrans saw the bank suffer a P73 million exposure and this pulled down its 2007 year end profit before tax by 16 percent from P349 million to P295 million.
Speaking at a media briefing in Gaborone yesterday, Barclays managing director, Thuli Johnson said that following the unfortunate fall of Lobtrans, they have started a review of their credit risk assessment procedures to ensure stricter management of the bank's credit exposure.
"We have to increase robustness in our credit policy as well as eliminate some procedures and at the same time, we are now trying to deepen our relationship with our corporate customers so that we understand each other's functions more closely.
"However we do not believe this is going to affect our relationship or the way we do business with our customers. Obviously there is an expectation of compliance, we will treat every customer equally and this one isolated event will not distract us," he said. On the back of the 940 percent increase in impairment charge to provide for the Lobtrans debt and high operational expenses due to massive retail expansion programme, Barclays has realised a slow down in profits for the first time in recent years.
Lobtrans was placed under provisional liquidation in January this year after it was discovered that it was reeling in heavy debt. Barclays and Standard Chartered Bank Botswana petitioned for the company to be put under provisional liquidation. Stanchart has already made a massive P74.9 million impairment charge mainly to cover for losses in the Lobtrans collapse. The ABC bank has also made a P13 million provision in their 2007 results for the same reasons. Two weeks ago, Barclays published a cautionary statement advising shareholders and investors of a projected 20-25 percent fall in profits.
Johnson said he believes 2007 is a year of growth and the bank shareholders should have absolutely no worries over the loss because such things are expected in the banking business. "Although the only place to get the shareholders feeling on this is at the AGM, I think the Lobtrans issue is nothing really out of the ordinary and besides, it is an event which took place outside our stronghold, which is retail, and therefore should not shake us much "I believe in the 2007 results, there were actually more positives than negatives as our net interest income went up 30 percent, total income by 25 percent and the quality of our balance sheet continues to improve. We made significant investments in 2007. We opened 14 additional branches to reach a total of 42, we increased our ATMs distribution from 45 to 98 and further introduced eight sales and service centres," he said. The bank's finance director, Wilfred Mpai said they realised a 43 percent growth in operational expenses due to the retail expansion programme. He explained that personnel expenses ballooned by 32 percent as the bank employed 600 new permanent staff and 500 lead generators to support the expansion drive. Mpai added that the bank is working on cutting down the cost to income ratio which was very high.
They are actively pursuing the idea of cutting out middlemen in getting supplies. "In 2007, customer deposits grew by 21 percent with loans and advances to customers going up 30 percent while total assets increased by 15 percent to P10.7 billion," he said.
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