Rikus Grobler | Oct 18, 2017 | 0
Capricorn Group ups capital adequacy to 15.6% despite very tight liquidity
Tight liquidity in the local market had a significant impact on the Capricorn Group’s performance for the second semester of 2016 as evidenced by the uninspiring results announced this week.
The Group, formerly Bank Windhoek Holdings this week released its interim results for the six-months period ending 31 December 2017.
“The six months under review have been challenging for the banking industry and the economy as a whole, with a slowdown in economic growth, sharp reduction in private sector credit extension (PSCE) and a decline in market liquidity. As a consequence, growth opportunities were limited and the cost of funding has increased” stated Thinus Prinsloo, the Group Managing Director.
The group posted a marginal increase in operating profit pointing out that a substantial forex trading income in the second semester of 2015, distorts the comparative 2016 result. Still, operating profit came to a substantial N$607.2 million. Were the forex windfall excluded from the 2015 results, the normalised growth in operating profit comes to 9.1%.
Net interest income increased by a meagre 3% to N$749.9 million. This poor performance is ascribed to a significant increase in the cost of funding.
While impairment charges decreased by almost 16% to N$26.5 million, non-performing loans as a percentage of the total loan book, increased slightly from 1.24% to 1.36%.
Normalised non-interest income increased by a comfortable 11.6% to N$466.5 million, again after stripping out the forex income of the previous year plus the income from the sale of Welwitschia Insurance Brokers which fell on the first day of the semester.
Revealing just how serious the group is about cutting costs, operating expenses increased by a very small 0.7% to N$582.7 million. The cost to income ratio is stable at 49.0%.
As a stand-alone operational unit, Bank Windhoek grew loans and advances by 6.2% from N$25.5 billion in 2015 to N$27.1 billion for the 2016 period.
The dismall growth in total funding of only 2.9% to N$27.3 billion shows just how tight the local market was on liquidity. “Although funding growth has been challenging in the current economic environment the group has managed to increase its maturity profile and decrease dependency on short term funding” Capricorn stated.
“The group remains well capitalised with the total risk-based capital adequacy ratio increasing to 15.6%, well above the minimum regulatory capital requirement of 10%.