Bogatsu, the accomplished FNBB banker

Bogatsu was Head of Finance at Stanbic  Bank Botswana (Standard Bank Group) from October 2003 to December 2006 and Financial and Business Analyst at Barclays Africa Finance from March 2002 to October 2003.

Before then he worked as a Project Accountant for Breweries (subsidiary of SAB) from May 2001 to March 2002; Management Accountant at Kgalagadi Breweries October 1999 to April; Group Internal Auditor KBL June 1998 to October 1999 and Senior Auditor Ernst & Young February 1994 to June 1998.

Bogatsu holds ACCA and MSc from Botswana Accountancy College and University of Derbyshire. The man who took over from Lorato Boakgomo-Ntakhwana in March 2015, explains the ever-existent synergies and collaborations between the subsidiaries which enables one to be in touch with the entire FNB Group business.

First impressions, turnaround plan
Asked about his expectations and observations when first appointed, Bogatsu indicates that, the banking industry he left in 2013 when he took his plum post in Swaziland is structurally different from the current one.

“It is characterised by heightened competition, increased regulation and a low interest rate environment. The moratorium on fee rate increases continues to impact on fees and commissions for banks and puts pressure on our non-interest income. There has been a rapid shift from a market awash with liquidity to one characterised by liquidity constraints, chiefly due to structural reforms and aggressive lending on the one hand, and slowing deposits on the other. Streamlined government disbursements and the direct payment of taxes into government accounts have also negatively affected liquidity. Higher real rates in other emerging markets and capital flights from money markets indicate that more structural reforms are necessary,” says Bogatsu.

Notwithstanding the challenging operating environment, FNBB has shown its true measure as a stable and profitable organisation properly positioned for a successful future. He attributes this to the leadership success of “My predecessors and the tireless efforts of our staff across all corners of the country.” Leading a well laid foundation, he says, does not necessitate a turnaround plan, but rather enhances the solid foundation.

Bogatsu’s strategy is founded on four pillars: Customer centricity, service excellence, sales and solutions, and people. The success of FNBB and its growth as a company will continue to be bound directly to its determination to deliver outstanding, world-class customer service and its culture of innovation, which will continue to grow the Bank’s impressive list of market firsts. “Making all of this possible are people: our employees who live the service vision, the people we serve and the communities in which we operate,” adds Bogatsu.

The bank aspires to be a customer centric Bank, competitively and efficiently delivering fitting solutions and quality service to its customers. As a result, its operational model is focused on catering to the customer’s needs and expectations at all levels, and this permeates all it does.

Challenges
Falling interest rates in a low inflation environment have had a negative impact on the bank’s net interest margins, and credit extension is slowing despite the rate cuts. According to Bogatsu, increased costs to align the Bank’s systems and reporting requirements to comply with new regulations such as the National Credit Act will further erode interest margins.

He adds that FNBB expects increased competition from new entrants, particularly non-bank financial service providers, whose offering competes directly with some of the bank’s e-channel solutions, saying this will challenge its ability to maintain its market share. The Bank’s market capitalisation in the Botswana Stock Exchange currently sits at P9.4 billion.

Both businesses and households are under pressure in the prevailing tough economic conditions, increasing impairments and nonperforming loans, and banks are enforcing tighter credit requirements. The stringent requirements around the impending implementation of the Basel III regulations are expected to further have negative effect on liquidity and intermediation, as well as on capital, and therefore, on dividends. Basel III calls for enhanced standards on minimum capital and liquidity requirements, supervisory review processes, risk management, capital planning, risk disclosure and market discipline which no doubt will be achieved at considerable expense, he adds.

In January 2014 the Central Bank imposed a two year moratorium on fee rate increases which the banking industry says has had negative impact to its margins. In response to this, FNBB then developed diversified revenue streams such as eSolutions to contribute to its Non-Interest Revenue which increased by 11 percent. The bank also intensified its efforts to attract more customers through development of innovative products such as flexi-fixed accounts that create long terms benefits for the customers.

The moratorium ended in December 2015 and discussions are ongoing with the central bank to establish prospects around fee structures. Bogatsu says, “We expect to continue to price our product offerings competitively so that undue pressure is not put on our customers. Households are facing pressures of minimal growth in employment; eroded purchasing power as wages on average grow below inflation trends; high levels of indebtedness and rising cost of debt. All these points to a consumer under pressure, hence why there is a declining trend in consumer spending and borrowing.”

A further observation is that, credit frameworks have shifted to reflect the pressures faced by the consumer and thus lending to households has softened and gravitated more towards short-term financing and a concentration on low risk profiles.

The pressure on residential properties has also meant mortgages have significantly declined. This has seen an increase in unsecured lending against secured lending. The extension of short-term credit by the industry is prudential in managing non-performing-loans and impairments as the expectation is for interest rates to start rising beyond 2017.

However, Bogatsu indicates that, despite all the economic pressures, there is still a healthy credit demand from households. He said household lending is still expected to remain sound and outperform business lending in the short-term as fixed investments have declined to reflect the business environment which is undergoing weak demand.

“We expect credit growth in the banking sector to average around 10 percent in 2016, primarily led by households at around 15 percent growth, year-on-year,” he says. The growth concentration for households will be primarily led by short-term as opposed to long-term financing.

The future
Taking a peep into the crystal ball, the FNBB chief says the Bank continues with its policy of embedding its segmentation model aimed at providing tailor-made products and solutions and superior service in line with customer-centric strategies and accordingly is well positioned in what is a very competitive banking environment.

Notwithstanding the subdued expectations for the local and regional economies, he remains confident that the Bank is well placed to take advantages of certain carefully selected opportunities.