That is the question. But FNBB is unfazed as it navigates the bottom end of the interest rate cycle by lending as a key catalyst of growth without overburdening customers while pursuing digitisation as a safe transaction mechanism of reducing human contact and thus the spread of COVID-19. Steven Bogatsu, the CEO of FNBB, has been speaking with KITSO DICKSON of The Business Weekly & Review about this and other transformational issues at the bank of the future


Q: In light of economic conditions that resulted in low consumer spending levels, low inflation rates and a historically low bank rate of 3.75 percent, FNBB’s margins continue to be under pressure. In the first half of the year, loans and advances declined as FNBB took a cautious approach to lending. How difficult is it navigating the bank under these circumstances?

A: FNBB has extended credit to many businesses. However, businesses have been hesitant to take it up due to limited business growth opportunities in the market.  We have continued to be cautious in our approach of extending new credit to retail customers due to financial pressures on income for the consumer.

Q: Can things get any worse going forward? What is your expected trend in the near and long term?

A: There remains a lot of uncertainty in the outlook at it stands. We expect that with the successful rollout of the vaccine, the business environment will open up and businesses will take up the credit line availed to grow business. Employment opportunities will also be created, easing pressure on consumer income and allowing credit extension in the consumer space. With the increased inflationary pressures on consumers, we expect discretionary spending to come under pressure.

Q: Over the years, interest rates have been coming down, coupled with slow credit growth. What has FNBB been doing to prepare itself for things getting worse and how has it paid off to the bank?

A: We continue to actively participate in lending as it is a key economic catalyst and will continue to do so responsibly. We ensure that the customers we lend money to are able to pass rigorous tests in affordability such that we help them avoid becoming over-indebted.

Q: From a banking perspective, and with interest income margins forever getting slimmer, where can growth come from?

A: Although the pressure in margins will continue, we see lending opportunities for business in the five areas that are identified under the economic recovery plan, which are agriculture, tourism, information and communications technology, pharmaceutical manufacturing, and construction.

Q: What income lines is the bank looking to expand on or introduce to cushion the impact of monetary policies?

A: Our service offering will continue to grow in line with our digitisation strategy. The pandemic has propelled us to structure our services towards the bank of the future. Customers can look forward to developments that will enhance their banking experience.

Q: In the half-year ended December 2020, we saw the bank’s deposits outpace credit growth. The bank decided to park excess liquidity in securities. The bank has previously done this. Is this a trend we will see often and how does it pay off?

A: The exercise of placements is to ensure that optimal returns are made while managing liquidity risk. This investment portfolio and the bank’s funding position are reviewed frequently and carefully managed.

Q: Does FNBB play any role in such investment services and to what extent?

A: The decision around the structure of the bank’s balances, i.e. what investments the bank undertakes, be it customer or loans of investments in securities, is a dynamic one which is constantly being reviewed in line with the bank’s strategy along with prevailing economic conditions and our overall outlook for the country’s economy. FNBB is a primary dealer and does facilitate investment into government securities on behalf of our customers.

Q: During the half-year period, the bank’s non-interest income as a percentage of total income from operations increased to 52.53 percent (H1 20: 49.19 percent), which is significantly higher than its regional peer average of 37.79 percent. What trend is expected for this sector going forward? Is this what the bank wants?

A: The bank’s success in Non-Interest Revenue (NIR) translates from an extremely high uptake in value added services such as eWallet, pay2cell, POS, online and app banking, as well as the bank’s broad customer base. The NIR lines have proved to be resilient as we continue to invest heavily in our technology and infrastructure to enable easy and safe banking for our customers.

Q: What role do you think non-interest income will play going forward vs interest income?

A: The balances of NII vs interest income is largely driven by the Bank Rate. Our view is that we are at the bottom end of the interest rate cycle and as such the mix of NIR and interest income is approximately stable. Should the Bank Rate increase, the relative proportions of these components will also shift.

Q:  What is the bank doing to build on to the momentum of the non-funded income lines in light of digitalisation?

A:   We continue to innovate, invest and introduce new products in the market.  Our customers can look forward to products and services in the not so distant future that will enhance their banking experience and solve any angst that they may have.

Q: FNBB is pro-clicks. However, digital services do not gather as much as traditional services when visiting an office. How does FNBB make up for this while it pushes for the cashless society agenda?

A:   We have experienced a significant shift from traditional banking services to digital banking over the past year. Digital banking has proven to be a safe transaction mechanism, reducing the need for human contact and thereby reducing the potential spread of the COVID -19 virus. We are of the view that the high levels of convenience will continue to attract new clients.

Q:  What is the trade-off of reducing cash circulation whilst digital services cost less, especially during COVID -19 when the bank moved to reduced charges to cushion customers?

A:   We have aimed to make the cash lifecycle more efficient with initiatives like Cash Plus. Through this model, shop owners can use their cash floats to provide cash services to walk-in clients. This has enabled the shop owners to better manage their float levels, reduce their cash transportation costs and extend the reach of cash points for customers.