Absa Bank Botswana’s strong first-half earnings were driven less by lending and more by a deliberate push into fee-generating and market-related businesses.
While profit after tax rose 18% to P377 million and total income increased 14% to P1.3 billion, management highlighted the growing importance of non-interest income as pressure mounted on traditional lending margins.
Managing Director Keabetswe Pheko-Moshagane said earnings diversification had become a defining feature of the bank’s performance.
“A defining feature of our performance was the continued diversification of our earnings,” she said. “Non-interest income delivered strong growth, reflecting continued progress in diversifying our revenue base.”
According to the bank, growth in non-interest income was driven by stronger foreign exchange trading, increased transactional activity, greater adoption of digital banking solutions and deeper client engagement across its businesses.
“Due to the volatility we continue to observe in the operating environment, we deliberately focused on operational efficiencies to ensure positive operating leverage, with cost growing marginally by 4%, which is below average inflation for the period,” Pheko-Moshagane said.
The expansion helped offset pressure on net interest margins caused by higher funding costs and liquidity constraints in the market.
“Importantly, the strong growth in non-interest income helped offset pressure on net interest margins arising from higher funding costs and market liquidity constraints,” Pheko-Moshagane said.
The shift was particularly evident in Corporate and Investment Banking, where Global Markets net trading income surged 157% to P262 million.
The bank also launched a custody services business aimed at expanding its institutional banking offering and creating additional revenue streams.
Management said the bank had deliberately invested in technology and new capabilities even as it kept a tight rein on costs.
“Due to the volatility we continue to observe in the operating environment, we deliberately focused on operational efficiencies to ensure positive operating leverage, with cost growing marginally by 4%, which is below average inflation for the period,” Pheko-Moshagane said.
She added that the bank continued investing in “technology, digital capabilities, cyber resilience, customer experience improvements aimed at driving future growth opportunities and risk management.”
Looking ahead, Absa intends to deepen the diversification strategy.
“We will therefore seek to broaden non-interest income beyond sources that may be cyclical or exceptional, while ensuring that pricing reflects the value we provide and the risks we undertake,” she said.
