allAfrica.com: Botswana: Lobtrans Saga Cost Banking Sector P160m (Page 1 of 1)

Share prices of Lobtrans saga-shaken Barclays Bank and Standard Chartered Bank have taken a knock in the past few days as risk averse investors pull out due to poor profit margins at the two banks.

Their 2007 profits have taken a slump on the back of high provisions for Lobtrans loans which were not secured. After StanChart announced lukewarm results last week, its share price on the bourse plunged 5.63 percent while Barclays' went down 1.59 percent, pulling the DCI down 0.11 percent in the week.

For Barclays, which officially announced their results on Monday, the slump spilled over into this week. The Lobtrans saga has cost the banking sector around P160 million in impairment charges. Although share prices of financial institutions have been on a free fall due to a price correction exercise since October last year, the latest developments are likely to leave the banks' stock at the lowest end of the curve. Standard Chartered and Barclays, two of the large cap counters whose shares dominate the domestic board, have lost close to half of their value in the six-month bear run. Stanchart fell from around 1,000 thebe in September last year to 600 thebe by close of trade on Tuesday. Barclays Bank had a P73 million exposure which pulled down its 2007 year-end profit before tax by 16 percent from P349 million (2006) to P295 million. StanChart, on the other hand, had a huge P74.9 million impairment charge mainly to cover for losses in the Lobtrans saga which dragged down its profits by 7 percent for the year ended 31 December 2007.

Another bank, ABC which had an exposure understood to be around P20 million, set aside P13 million in its 2007 books to cover for potential losses from the Lobtrans case. Although investors have moved to the sidelines temporarily, the banks still have strong fundamentals which can restore investor confidence. Barclays bank has embarked on a massive retail expansion programme which saw it opening 14 new branches and employing 600 new staff in 2007. Standard Charted has a strong consumer banking rollout strategy which has seen it come up with new products to support SMEs in 2007.

Speaking at a media briefing on Monday, Barclays Managing Director Thuli Johnson said the Lobtrans issue was nothing out of the ordinary and that his bank was expecting to bounce back strongly in 2008, on the back of the massive investments it made in 2007. "I believe in the 2007 results there were actually more positives than negatives as our net interest income was up 30 percent, total income was up 25 percent on the previous year and the quality of our balance sheet continued to improve," Johnson said. "We made significant investments in 2007.

We opened 14 additional branches to reach a total of 42, we increased our ATM distribution from 45 to 98 and further introduced eight sales and service centres."

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