By Hilary Mare
BANK Windhoek Limited has continued its dominance as a solid performer for the Capricorn Investment Group Limited (Capricorn Group) portfolio; the group’s consolidated group financial results for the year ending 30 June 2018 reveals.
The group has always been very dependent on Bank Windhoek which, during the year under review, contributed 86 percent of group profit after tax (2017: 83percent).
In pursuit of its strategic intent to diversity its profit streams, the group increased its investment in Bank Gaborone from 68.7percent to 84.3 percent with effect from 1 January 2018. The group expects strong growth over the next few years from Bank Gaborone, increasing its contribution to between 8 percent and 10 percent of the group profit after tax.
Commenting on the operating environment during the year under review, Thinus Prinsloo, Group Managing Director said, “With the Namibian economy still in a technical recession, the second since 2009, the Capricorn Group (the group) delivered resilient results with total comprehensive income increasing by 5.9percent year on year. Bank Windhoek Limited continued to be a solid performer for the group, while other operations in Namibia and Botswana delivered good growth. The results from the Zambian operations were, however, disappointing. The group has taken the necessary steps and implemented appropriate actions to enhance the performance of Cavmont Bank and improve the contribution by the Zambian operations to the group’s results in future,” Prinsloo stated.
The group’s normalised total comprehensive income decreased by 5.5 percent when compared to the year ended 30 June 2017. The decrease is to some extent reflective of the challenging economic conditions but was largely caused by the disappointing results of the Zambian operations.
“The group’s net interest income increased by 10.3percent to N$1,818.9 million (June 2017: N$1,649.5 million) largely due to the acquisition of Capricorn Investment Holdings Botswana (CIHB) and Cavmont Capital Holdings Zambia (CCHZ) that is now included for a full year. On a normalised basis, the subdued growth in net interest of 1.1 percent is mainly due to increased pressures on interest margins in all three territories. Namibia experienced a 0.25 percent interest rate cut in August 2017, while Botswana had a 0.5percent reduction in the repo rate to 5.0percent in October 2017. Zambia saw the repo rate cut by an aggregate of 2.75 percent over the period from July 2017 to March 2018 to 9.75 percent. The margin squeeze was exacerbated in Botswana due to market liquidity challenges resulting in an increase in cost of funding”, said Jaco Esterhuyse, Group CFO.
Loans and advances increased by 8.4percent to N$36.2 billion (June 2017: N$33.4 billion), of which 2.6percent relates to the acquisition of Entrepo. The modest normalised growth of 5.8percent is due to subdued demand in both Namibia and Botswana, as well as the focused restructuring of the Bank Windhoek balance sheet to improve the group’s loans to funding ratio. Non-performing loans as a percentage of gross advances increased from 2.2 percent to 3.3 percent mainly as a result of a substantial increase in the value of non-performing loans at Bank Windhoek.
Income from associates increased by 6.6 percent to N$83.2 million (June 2017: N$78.1 million) and contributed 8.9 percent (June 2017: 8.5percent) to profit after tax. The year on year increase is mainly due to good performance by Santam Namibia in the current year offset to some extent by a decrease in profit reported by Sanlam Namibia following a number of large life insurance claims settled during the year under review.
Non-interest income increased by 22.7percent to N$1,225.2 million (June 2017: N$998.2 million). Included in the increase is the capital profit of N$77.3 million on the sale of a portion of the shareholding in Visa Inc. On a normalised basis, non-interest income increased by 4.0 percent compared to the prior year.
“There was a deliberate strategic focus on improving the funding ratios of the group at all levels during the year under review. Growth in Bank Windhoek funding well exceeded growth in loans and advances, thereby improving the group’s loans to funding ratio to 95.2percent (2017: 96.7percent). Total funding increased by 8.4percent to N$40.3 billion (June 2017: N$37.2 billion). Bank Windhoek’s funding increased by 8.5percent, largely due to good growth in term and cheque deposits and senior debt. The group remains well capitalised with the total risk-based capital adequacy ratio of 15.3percent (June 2017: 16.6percent) remaining well above the minimum regulatory capital requirement of 10percent”, said Jaco Esterhuyse.
Confidente. Lifting the Lid. Copyright © 2015