Rikus Grobler | Feb 8, 2018 | 0
Capricorn Group net interest income increases by 13.1%
Capricorn Investment Group, previously known as Bank Windhoek Holdings Limited recorded an increase in its net interest income to N$1.649.5 million (13.1%) as on 30 June.
This is an increase from last year’s N$1,458.1 million and was largely as a result of the acquisition of its Botswana and Zambia based branches, which contributed 9.8% to the year on year growth.
Impairment charges for bad and doubtful debts decreased by 4.6% to N$58.0 million, while in June last year it was N$60.8 million, and Bank Windhoek specifically decreased by 23.4%, bearing testimony to the quality of the group’s loans and advances.
“The Namibian economy experienced one of its biggest challenges since independence with GDP declining significantly from a 3.3% growth during the prior financial year of the group, to a contraction of 1.8% during the first three quarters of the group’s current financial year. The Namibian banking sector has been significantly impacted by this downturn, which resulted in a sharp reduction in private sector credit extension 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,” Thinus Prinsloo, Group Managing Director said.
According to the bank, the Botswana and Cavmont Capital Holdings Zambia contributed N$4,092.7 million (12.2%) and N$833.5 million (2.5%) respectively to 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%, 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% to 1.44%.
The group’s normalised operating expenses increased by 7.1% to N$1,214.9 million (June 2016: N$1,134.1 million), evidencing management’s focus to control costs during the year under review. The cost to income ratio increased from 50.2% to 53.9%, largely as a result of the higher cost to income ratios of the new subsidiaries in Botswana and Zambia.
“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 stressed.
Total funding of the group increased by 34.9% to N$37.2 billion (June 2016: N$27.6 billion) mainly due to the acquisition of the two other branches. On a normalised basis, Bank Windhoek’s funding increased by 7.6% 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.
“Notwithstanding the challenging operating environment, the group delivered a solid performance with operating profit before tax for the year ended 30 June 2017 increasing by 2.0% from N$1,171 million in the prior year to N$1,194.7 million. On a normalised basis, excluding once-off income from Angolan Kwanza trading in the prior year and the profits of the Botswana branch and Cavmont Capital Holdings Zambia plc, acquired during the year, growth in operating profit before tax is 4.0% year on year,” Chief Operations Officer at the bank, Jaco Esterhuyse said.
The research arm of IJG Securities commented: “The results reflect the difficult operating conditions prevalent in Namibia characterized by low liquidity, higher cost of funding, slowing GDP growth and slower private sector credit extension. However, the results were also below our, admittedly optimistic, expectations. Profit after tax grew by 1.4% from N$905 million to N$917.6 million, and by 2.7% on a normalized basis. Headline earnings per share increased by 0.2% to 181.6 cps and dividends increased by 3.0% to 68 cps.”
“During the year, The Government Institutions Pension Fund of Namibia increased its shareholding in the group to 26%, making it the second largest shareholder after Capricorn Investment Holdings. These two shareholders can now be viewed as the shareholders of reference and have jointly pledged N$1 billion contingency funding facilities, which greatly reduces liquidity risk. Furthermore, the group has lengthened its funding maturity profile and decreased its reliance on short term deposits” stated IJG.