- Tsaone Segaetsho
Absa Bank Botswana reported a decline in profitability for the year ended 31 December 2025, with profit before tax falling to P951.6 million from P1.06 billion in the prior year, as margin compression, higher impairments and rising operating costs weighed on earnings.
The Bank, through its financial results released on Thursday, said despite the softer bottom-line performance, it delivered moderate top-line growth, with total income increasing by 5% to P2.39 billion. This was largely supported by strong non-interest revenue performance, which helped offset pressure on interest income.
Net interest income declined by 7% to P1.42 billion, reflecting a sharp 41% increase in interest expense to P876.4 million amid elevated funding costs and tightening liquidity conditions. In contrast, non-interest revenue remained a key driver of performance. Net fee and commission income rose 10% to P589.5 million, supported by higher transaction volumes, while trading income surged 67% to P374.9 million on the back of improved market activity and derivative trading.
Operating costs increased significantly, rising 17% to P1.33 billion, driven by higher staff costs, continued investment in technology, and increased administrative and professional expenses. As a result, the cost-to-income ratio deteriorated to 56%, from 52% in 2024, underscoring mounting cost pressures across the business.
Asset quality remained under pressure, with credit impairment charges increasing by 22% to P109.3 million. However, recoveries from previously written-off loans helped to partially cushion the impact, pointing to a gradually stabilising credit environment.
The Bank’s balance sheet remained resilient, with total assets increasing by 5% to P26.89 billion, supported by a 6% expansion in loans and advances to P18.55 billion. Customer deposits grew by 7% to P20.74 billion, reflecting sustained customer confidence, while total equity rose 8% to P3.56 billion, supported by retained earnings.
Capital and liquidity levels remained strong and above regulatory thresholds, despite some moderation. The capital adequacy ratio declined to 18.05% from 20.65%, largely due to growth in risk-weighted assets, while the liquid asset ratio closed at 14.8%. The Bank also maintained compliance with the newly introduced liquidity coverage ratio requirements, reporting levels above the 60% regulatory minimum.
Across business segments, performance reflected prevailing economic headwinds. Corporate and Investment Banking delivered strong growth in trading and market-related activities, while Retail Banking recorded an 8% increase in revenue, supported by both interest and non-interest income streams. Business Banking, however, faced continued pressure, with net interest income declining by 11% and non-funded income falling by 21% amid reduced client activity.
Looking ahead, the Bank expects liquidity conditions to remain tight and competition for funding elevated. Management indicated that focus will remain on disciplined balance sheet management, cost optimisation, and continued investment in digital capabilities to sustain long-term growth and resilience.
