Sovereign downgrade does not affect strong financial sector players
South African based credit rating agency, Global Credit Ratings, last week kept Bank Windhoek’s rating unchanged, affirming it at AA (long term) and A1+ (short term) on the national NA scale.
On the back of this rating, the bank’s ultimate parent, Capricorn Investment Group Ltd, was also re-affirmed at AA (long term) and A1+ (short term) on the national scale.
The outlook for both entities is stable.
Futhermore, Global Credit Ratings has affirmed the long term South African national scale (Rand) issuer rating of A+(ZA) assigned to Bank Windhoek Limited with a stable outlook.
“While the Group’s ratings have largely replicated Bank Windhoek’s ratings, Global Credit Ratings has taken cognisance of added diversification benefits from recent acquisitions at Group level,” Global Credit stated on Wednesday last week when it released the updated, re-affirmed credit ratings.
The agency said the rating reflects the group’s strong market share in the Namibian banking industry as well as its prominence in asset management and in insurance.
The group’s risk profile is appropriate for its level of capitalisation, its comfortable liquidity and its resilient earnings. Expected future earnings and its geographic diversity are positive elements supporting the current rating.
Global Credit expects Capricorn Group to remain strong but it noted the prevailing economic challenges and the weaker growth prospects in Namibia compared to the group’s banking interests in Zambia and Botswana.
On future ratings, Global Credit stated “The South African national scale rating may also be influenced by the relative sovereign ratings of South Africa and Namibia and the Group’s credit quality relative to the South African peer universe.”
“Further underpinning the ratings is the potential support from the Group’s largest shareholders Capricorn Investment Holdings Limited (“CIH”) with a 40.7% stake and the Government Institutions Pension Fund (“GIPF”) with 26% shareholding. The GIPF, the largest institutional investor in Namibia with a net asset value of about N%100 billion, acquired 25% of the Group’s shares in May 2017. The GIPF, together with CIH, became shareholders of reference for the Group.”
According to Global Credit, the GIPF has shown its commitment as Capricorn Group’s reference shareholder by extending long term senior debt funding of N$1.3 billion to the Group. Likewise, CIH also committed to provide 10-year debt funding amounting to N$900 million. The funding lines enabled the Group to make available committed contingent funding facilities of N$1 billion to its three operating banks, significantly mitigating liquidity risk within the Group.
The Group’s leading operating subsidiary, Bank Windhoek, is the largest locally-owned bank and second largest commercial bank in Namibia. The bank contributed 80.1% of the Group’s consolidated assets in the 2017 financial year, down from 98.2% in 2016. In terms of pre-tax profit, the bank’s contribution was 87% in the 2017 financial year, marginally higher than the 86.6% in 2016.
The group is comfortably above the minimum adequacy ratios for all capital classes.