Botswana’s banking sector remained firmly profitable in the first quarter of 2026, but rising funding costs and growing credit risk pressures weighed on earnings, signalling a more challenging operating environment for lenders.
According to Bank of Botswana data, the country’s nine commercial banks posted a combined net profit of P851.5 million in the three months to March, down 13.8 percent from P988.1 million in the same period last year.
The decline reflects a growing squeeze on margins despite continued growth in lending income. Interest income rose 14.5 percent to P3.17 billion as banks benefited from larger loan books and interest-bearing assets. However, the cost of funding those assets climbed much faster.
Interest expenses surged 75.9 percent to P1.6 billion from P908.5 million a year earlier, reducing net interest income by 15.5 percent to P1.57 billion.
The figures suggest that banks are paying significantly more to attract and retain deposits at a time when liquidity conditions have tightened and competition for funding has intensified.
To offset the pressure, lenders increasingly relied on non-interest income. Revenue from fees, commissions, foreign exchange transactions and trading activities climbed 31.4 percent to P1.3 billion, raising its contribution to total operating income to about 45 percent from 35 percent a year earlier.
Even so, higher costs continued to weigh on profitability. Non-interest expenses rose 9.8 percent to P1.63 billion, while provisions for bad and doubtful debts increased 35.2 percent to P121.1 million, indicating growing caution about potential loan defaults.
The results come as Botswana’s economy continues to feel the effects of weak diamond demand, which has slowed growth and put pressure on household and business finances.
While profits have declined from last year’s highs, the sector remains resilient. Earnings were still above levels recorded in 2024 and 2023, suggesting banks remain well positioned despite a more demanding operating environment.