BBS Bank’s loss after tax widened sharply to P71.5 million in the six months ended June 2026, as high funding costs, rising credit losses and continued investment in its commercial banking transformation weighed on earnings.
The loss compares with P17.5 million recorded in the corresponding period of 2025, representing an increase of about 310%. The bank’s net interest income, its main source of revenue, fell by more than half to P50.8 million from P106.6 million a year earlier.
BBS attributed the deterioration primarily to the continued effect of expensive funding raised during the period of market liquidity pressure in 2025. Although liquidity conditions improved during the first half of 2026 and funding costs began to ease, the bank said it continued to carry the impact of high-cost deposits.
Interest income increased to P284.6 million from P265.3 million, but this was more than offset by a sharp increase in interest expense, which rose to P233.9 million from P158.7 million. As a result, net interest income fell by 52.4% year-on-year.
The pressure on earnings was compounded by deterioration in credit quality. Expected credit loss charges increased to P38.5 million, up from P23.6 million in the first half of 2025. BBS said pressure on customers’ repayment capacity and the seasoning of its unsecured lending portfolio contributed to the increase.
The bank has responded by tightening lending criteria, increasing its collections capacity and strengthening early-arrears management and recoveries.
Operating expenses also increased, reaching P110 million from P102.7 million a year earlier. BBS said the higher costs reflected continued investment in systems, people and organisational capabilities as it works to complete its transition into a commercial bank.
The combined pressure pushed BBS’s cost-to-income ratio to 143%, compared with 120.3% at the end of December 2025. The bank said the deterioration was driven by lower net interest income alongside higher operating expenditure.
Despite the loss, BBS maintained capital and liquidity above regulatory minimums. Its capital adequacy ratio stood at 17.3% at the end of June, down from 19.5% at December 2025 but above the Bank of Botswana’s 12.5% minimum.
The liquid asset ratio stood at 10.4%, marginally above the statutory minimum of 10%, with approximately P461.2 million in liquid assets.
The bank also continued to shrink its balance sheet as part of what management described as a disciplined approach to funding and balance-sheet optimisation. Total assets declined 6.9% to P5.22 billion from P5.60 billion at December 2025, while loans and advances edged down to P4.50 billion from P4.61 billion.
Customer deposits fell more sharply, declining 8.5% to P4.18 billion from P4.57 billion. BBS said the reduction was deliberate, reflecting efforts to offload expensive deposits and replace them with a more diversified base of current and savings accounts.
The strategy has, however, pushed the bank’s loan-to-deposit ratio to 108%, up from 101% at the end of 2025.
The deterioration in profitability has also weakened the bank’s equity position. Shareholders’ equity fell 17.2% to P343.4 million, from P414.9 million at the end of 2025, with retained losses increasing to P144.1 million.
BBS’s non-interest income also declined, with net fee and commission income falling to P15.6 million from P18.4 million. The bank said it is seeking to increase recurring fee income through transactional banking, foreign exchange, business banking, bancassurance and other services.
Its insurance subsidiary, BBS Insurance Agency, recorded a P630,000 profit after tax during the period and had net assets of P10.14 million. The bank said it intends to increase the subsidiary’s contribution to the group as part of its broader diversification strategy.
The results come as BBS enters the fourth year of its five-year Pilediwa Corporate Strategy, under which it is completing its transition from a building society into a commercial bank. The strategy includes expanding its product offering, reducing funding costs, strengthening transactional banking, improving digital channels and building a more efficient operating platform.
For the remainder of 2026, management said it will focus on lowering the cost of funds, growing transaction volumes and recurring fee income, strengthening loan recoveries, maintaining disciplined lending and increasing the use of its digital channels.