[2008-03-27]  Lobtrans Saga Impinges on Stanchart Profits
A massive P74.9 million impairment charge. mainly to cover for losses in the Lobtrans saga, has dragged down Standard Chartered Botswana's profits by 7 percent for the year ended 31 December 2007.

According to the company's statement of results for the period under review, profits after tax went down from P257.9 million in 2006 to P239.3 million in 2007. In an interview with Mmegi last week, on the sidelines of the launching of government's P5billion bond, Stanchart boss David Cutting would not disclose to what extent the bank was exposed when transporter Lobtrans sank, admitting only that the fall in profit figures was mainly due to provisions made to cover for the losses. "Although I cannot disclose to you the full amount we had invested in Lobtrans, it is true that the impairment has put a huge dent on our numbers as it grew by more than 230 percent from P22 million in 2006 to P74.9 million last year," Cutting said.

"However, the profits are only down by 7 percent, and I believe we have done better than most people thought we would. I also must emphasise that the bulk of the P74.9 million is mostly to cover Lobtran losses, but it is not the whole amount. There are other provisions as well covered in that impairment charge. Stanchart is not the only bank to be dragged down by the collapse of the transport company. Barclays Bank has also suffered heavy losses, which, reports say, could lead to heads rolling there. Already, Stanchart has suspended one of its branch executives in Lobatse, pending investigations into loans to Lobtrans. The transport company was placed under provisional liquidation in January after it was discovered that the company was in debt amounting to millions of Pula. Subsequently, Barclays Bank and Standard Chartered Bank petitioned for Lobtrans to be put under provisional liquidation.

Barclays, which has already advised shareholders and investors of a 20 to 25 percent fall in profits, is expected to announce its 2007 full year results soon, which should give a clearer picture of the exposure of Botswana's financial sector in the sinking transport company. African Banking Corporation has not been spared in the Lobtrans saga either. ABC was forced to put up a P13million impairment charge in its 2007 financial results to cover for anticipated losses. It is understood ABC had sunk close to P20 million in financing Lobtrans operations.

But despite the Lobtrans setback, which has somewhat spoilt Cutting's first year in office as the head of the bank, Stanchart's net revenue went up by 13.6 percent to P 633 million from 557 million in 2006, while dividend per share also went up 10.6 percent to 79.84 thebe compared to 72.2 thebe in 2006.

Return on equity at 87.2 percent also took a knock from the 2006 figures of 147.9 percent.In a joint statement with board Chairman Vincent Seretse, Cutting said in 2007, Consumer Banking assets grew by 13 percent to P2.4 billion, while earning assets in Wholesale Banking grew modestly by 4,6 percent, largely reflecting the reality of a fiercely competitive environment.

Commenting on the outlook, the statement read: "We are cautiously optimistic about 2008. We expect increasing momentum on the back of the strong foundations we built in 2007."Stanchart introduced three new products last year - the new Smart Credit Card, the SME Credit Express Facility and the Diva Account for women - as part of its diversification and niche marketing strategy.
Source: Copyright © 2008 Mmegi/The Reporter.