Botswana Savings Bank (BSB) saw its annual profit almost wiped out during the year ended March 31, 2026, as a severe liquidity crunch across the banking sector pushed funding costs sharply higher and squeezed lending activity.
The state-owned lender reported profit after tax of just P405,000, down from P76.8 million a year earlier, representing a decline of more than 99%. The dramatic fall came despite the bank maintaining adequate capital and liquidity buffers in what management described as one of the most challenging operating environments in recent years.
BSB attributed the weaker performance primarily to higher funding costs as banks competed aggressively for deposits amid tight liquidity conditions. The pressure significantly compressed interest margins, offsetting growth in interest income.
Interest income increased to P701.1 million from P569 million, reflecting higher interest rates. However, interest expenses surged even faster, rising from P283.7 million to P467.3 million, leaving net interest income down by 25% to P233.8 million.
The challenging conditions also weighed on lending. Net loans and advances declined to P4.02 billion from P4.39 billion, as subdued credit demand combined with the bank's cautious lending approach amid economic uncertainty.
Fee-generating business also slowed considerably. Non-funded income fell to P12.7 million from P60.3 million, with management citing lower transaction volumes, weaker fee-based activity and reduced commission income from its insurance subsidiary following slower loan growth.
The bank's deposit base also contracted during the year, falling to P3.96 billion from P4.08 billion, highlighting the fierce competition for customer deposits across the financial sector. Even so, BSB improved its liquidity asset ratio from 11% to 20% through deliberate liquidity preservation measures, while maintaining a capital adequacy ratio of 15.9%, comfortably above regulatory requirements.
Management said the difficult financial performance came during what was intentionally designated as a strategic transition year following the completion of its Lesedi Strategy (2022–2025). Rather than embarking on a new expansion phase immediately, the bank focused on consolidating investments made during the previous strategy cycle and strengthening operational resilience.
The broader economic backdrop remained difficult throughout the year. The slowdown in Botswana's diamond sector, persistent domestic liquidity constraints, elevated inflation and rising funding costs created a difficult operating environment for both banks and borrowers. During the period, the central bank also increased the Monetary Policy Rate by 200 basis points to 5.5% as inflation accelerated above its target range.
Looking ahead, BSB said it expects economic conditions to gradually improve as the diamond market recovers and diversification efforts begin to support broader economic activity. The bank will now implement its new Pinagare Strategy, with management saying its priorities will centre on resilience, operational efficiency and long-term sustainability while positioning the institution to capture future growth opportunities.