By Hilary Mare
WITH the Namibian economy having faced severe challenges over 2016, growth opportunities for banks were stifled, with profits coming under severe pressure, Capricorn Investment Group Limited Managing Director, Thinus Prinsloo, has revealed.
Capricorn Investment Group Limited was previously known as Bank Windhoek Holdings Limited. While commenting on the group’s performance over the period ended 30 June 2017, Prinsloo stated that the economy was enduring its biggest challenges, since independence.
“The Namibian economy experienced one of its biggest challenges since independence, with GDP declining significantly from a 3.3 percent growth during the prior financial year of the group, to a contraction of 1.8 percent during the first three quarters of the group’s current financial year,” Prinsloo said. “The Namibian banking sector has been significantly impacted by this downturn, which resulted in a sharp reduction in private sector credit extension (PSCE) and severe market liquidity constraints. As a consequence, growth opportunities for banks were stifled. Banks’ profits also came under severe pressure, following reduced interest margins, due to a substantial increase in cost of funding, as the market competed for limited liquid funds.”
However, the group’s net interest income increased by 13.1 percent to N$1.649 billion (June 2016: N$1.458 billion), largely as a result of the acquisition of CIHB and CCHZ, which contributed 9.8 percent to the year-on-year growth. Impairment charges for bad and doubtful debts decreased by 4.6 percent to N$58 million (June 2016: N$60.8 million), and Bank Windhoek specifically decreased its figure by 23.4 percent, which bears testimony to the quality of the group’s loans and advances.
The group’s normalised operating expenses increased by 7.1 percent to N$1.214 billion (June 2016: N$1.134 billion), evidencing management’s focus to control costs during the year under review. The cost to income ratio increased from 50.2 percent to 53.9 percent, largely as a result of the higher cost to income ratios of the new subsidiaries in Botswana and Zambia. CIHB and CCHZ contributed N$4.092 billion (12.2 percent) and N$833.5 million (2.5 percent), respectively, to the N$33.4 billion total advances. In Namibia, compared to the prior year, Bank Windhoek’s growth in loans and advances has slowed down to 7.2 percent, mirroring the decline in industry growth in credit to the private sector. Bank Windhoek’s non-performing loans, as a percentage of gross advances, remained stable, with a slight increase from 1.32 percent to 1.44 percent. Total funding of the group increased by 34.9 percent to N$37.2 billion (June 2016: N$27.6 billion) mainly due to the acquisition of CIHB and CCHZ. On a normalised basis, Bank Windhoek’s funding increased by 7.6 percent, largely due to good growth in term and notice deposits, as well as senior debt. Although funding growth has been challenging in the current economic environment, the group has managed to further lengthen its funding maturity profile, and decrease its dependency on short-term funding.
The group remains well-capitalised with a risk-based capital adequacy ratio on 30 June 2017 of 16.6 percent, well above the minimum regulatory capital requirement of 10 percent. “The group is expecting the challenging operating environment with sluggish economic growth in Namibia to continue in the short to medium-term. Our outlook, however, remains positive with an expectation that the expansion of the group to Botswana and Zambia will contribute to growth of both our balance sheet as well as profit, that our strong drive towards operational excellence will realise cost savings and improve revenue streams and that the recent enhancements to our service offering will improve our delivery of stakeholder value,” Prinsloo added.
A final dividend of 38 cents per ordinary share was declared on 15 August 2017 for the year ended 30 June 2017. Taking into account the interim dividend of 30 cents per share, paid in March 2017, this represents a total dividend of 68 cents per ordinary share for the year ended 30 June 2017 (June 2016: 66 cents per share).
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