.jpeg)
Absa Bank Botswana delivered a stronger first-half performance, with profit after tax rising 18% to P376.7 million for the six months ended June 2026, despite elevated funding costs, higher credit impairments and a difficult domestic economic environment.
The bank’s results show that growth in non-interest income, particularly trading income, was central to the improvement in earnings. Total income increased 14% to approximately P1.29 billion, while profit before tax rose 17% to P481.5 million.
Net interest income, traditionally a major contributor to bank earnings, declined 4% to P727.1 million. Although effective interest income increased 11% to P1.28 billion, interest expense jumped 40% to P555.1 million as the bank continued to deal with elevated funding costs following liquidity pressures experienced in the first quarter.
The pressure on interest margins was partly offset by a sharp increase in non-interest income, which rose 63% to P561 million. Net fee and commission income increased 7% to P284.2 million, while net trading and investing income surged 157% to P262.3 million.
The bank attributed the trading income growth to increased foreign exchange activity among clients, stronger treasury trading performance and higher bond trading income. Other income also increased substantially, reaching P14.5 million from P2.9 million a year earlier.
The shift towards non-funded revenue provided Absa with greater earnings diversification at a time when higher funding costs were weighing on its traditional lending margins.
Cost growth remained comparatively contained. Operating expenses increased 4% to P670.8 million, well below the 14% increase in total income. Staff and infrastructure costs each increased 9%, while administration and general expenses fell 3% to P282 million.
This resulted in what the bank described as positive operating leverage, with pre-provision profit increasing 29% to P617 million. The improvement was also visible in the financial statements’ three-year comparison, where pre-provision profit rose from P479 million in June 2025 to P617 million in June 2026.
Credit quality, however, emerged as a pressure point. Expected credit losses more than doubled, increasing 104% from P66.7 million to P135.9 million. Absa said the increase reflected changes in portfolio risk profiles, higher lending utilisation and updated forward-looking macroeconomic assumptions.
The balance sheet also contracted during the period. Total assets stood at P25.4 billion at the end of June, compared with P26.9 billion in December 2025. Net loans and advances to customers declined 3% to P18.1 billion on a December basis.
The movement was uneven across business segments. Personal and Private Banking loans increased marginally to P11.9 billion, while Business Banking loans grew 7% to P1.6 billion. Corporate and Investment Banking loans fell 7% to P4.5 billion.
Customer deposits, meanwhile, declined from P20.7 billion at December 2025 to P19.8 billion. Absa said the reduction was largely due to the deliberate run-off of higher-cost fixed deposits raised during the period of market liquidity constraints. Deposits nevertheless remained the bank’s primary source of funding.
Absa’s capital position strengthened during the period. Total regulatory capital increased to P3.94 billion, while the capital adequacy ratio improved to 19.79%, comfortably above the regulatory minimum of 12.5%. The bank’s liquid asset ratio also increased from 14.9% at December 2025 to 17.8% in June, above the 10% regulatory minimum.
The performance came against a challenging domestic backdrop. Botswana’s economy grew 3.5% year-on-year in the first quarter of 2026, but domestic consumption declined 1.4% while gross fixed capital formation fell 10.4%. Inflation accelerated from 4.1% in January to 10.7% in June, prompting the Bank of Botswana to raise the Monetary Policy Rate by 200 basis points to 5.5% in April.
Absa’s corporate businesses also faced pressure. Business Banking revenue declined 8% year-on-year, with net interest income falling 16.2% as funding costs compressed margins. Non-funded income in the segment nevertheless increased 13.2%, while gross loans grew 4.2%.
Corporate and Investment Banking recorded stronger momentum, closing the first half 6.2% ahead of the prior year. Transaction fee income from contingent trade finance increased 53%, while revenue from the telecommunications sector rose 42%.
The bank also continued investing in digital and sustainable finance. It launched custody services in April, expanded digital payment offerings and relaunched the Spark wallet. During the first half, P32.3 million was disbursed through its Green Energy Loan towards renewable energy solutions, while P96.6 million was provided in funding to SMEs.
The stronger earnings have also translated into shareholder distributions. On 3 September, the board approved an interim dividend of 28.87 thebe per share, amounting to approximately P246 million, subject to regulatory approval. The dividend is scheduled to be paid on 16 October to shareholders registered at the close of business on 6 October.
Looking ahead, Absa expects Botswana’s economy to grow 3.1% in 2026, while inflation is projected to remain elevated, with the Bank of Botswana expecting average inflation of 8.7%.