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Banking sector pulls through the pandemic

Banking sector pulls through the pandemic
PORTFOLIO MANAGER: Tshegofatso Tlhong

Other industries suffer ‘mixed implications’

The banking sector is said to have fared better than expected during the Coronavirus pandemic, largely due to support from the central bank.

Providing market insights on Kgori Capital’s third-quarter report, Portfolio Manager, Tshegofatso Tlhong revealed restrictions put in place to control the spread of Covid-19 have had mixed economic implications.

She noted some sectors have been decimated, some have thrived while others remain ‘somewhere in-between’.

According to Tlhong, one of the areas that remained resolute is the banking sector, which benefitted from interventions put in place by the Bank of Botswana (BoB) at the beginning of the outbreak.

“The banking sector results showed that credit impairments increased due to the prevailing economic environment and the cost of funding decreased because of capital being released from the BoB interventions,” explained Tlhong.

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The total portfolio at risk, which Tlhong said they define as the total value of restructured loans, was on average 10 percent to 15 percent of the total loan books for listed banks.

“Given the increased provisioning by banks for this risk, we are confident that the sector will be able to absorb this shock,” she stated.

However, Tlhong admitted they are wary of an impending ‘second wave economic impact’ which will be labour related as some businesses buckle under the pressure.

Despite property companies cautioning against declining revenues, Tlhong says the sector has fared better than expected. She noted that even though revenues did take a hit with expansion plans halted, profitability remained broadly intact in the industry.

“We expect distribution yields to recover as tenants trade uninterrupted but we do expect rental yields to track lower as lease renewals are negotiated,” she said.

Regarding the tourism sector, Tlhong said Kgori Capital expects the industry will continue in the doldrums going into the first quarter of 2021 as cross border travel remains minimal.

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Tlhong further pointed out one sector that is under pressure is telecommunications due to the shift in consumer behaviour, while the mining sector is slowly starting to ramp up again.

“We are cautiously optimistic as we go into the last quarter of the year,” concluded the Portfolio Manager at Kgori Capital, a Botswana-focused investment manager.

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