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Bank Windhoek share price in overdrive

Bank Windhoek Holdings share price continues to surprise on the upside despite sentiments by a local stock broking firm that the shares were overvalued when the bank first listed on the Namibia Stock Exchange in June.
Stock Broking firm Simonis Storm Securities (SSS) cautioned investors during Bank Windhoek’s Initial Public Offering saying that at N$8.75, the bank’s shares were overvalued advising investors to exercise caution until the shares started trading on the open market. SSS believed that the share price was at a 12.69% premium, valuing the shares at N$7.76.
However, the market has reacted positively to Bank Windhoek’s listing. The listing was 3.5 times oversubscribed, and on the first day of trading, the share price jumped 14% to end the day on N$10.02 with an intra-day high of N$10.10.
As at 13 August, three days before Bank Windhoek released its financial results for the year ended 30 June 2013, the share price had jumped 18.5% to trade at 10.37. This Wednesday, days after the release of the bank’s financial results in which the group announced a 10,7% asset growth to N$20.9 billion, the share price reacted positively to end the day on N$10.50.
The latest financial statement by the bank show that the bank has now recorded a 17th consecutive year of growth in income and profit from operations. Christo de Vries, Managing Director of Bank Windhoek said this growth is underpinned by controlled asset growth, prudent risk and capital management and continued focus on efficiencies.
The latest financial year also marked the first time that the bank has exceeded the half billion Namibia Dollar mark in total comprehensive income. Group total comprehensive income for the year amounted to N$516 million, a 24% increase on the prior year.
The results also showed that the group is well capitalised with a Core Tier I capital ratio of 13.2%, well above the minimum statutory requirement of 7%.
The group realised a normalised return on average equity of 23.7% while net interest income increased by 16.8% to N$914 million compared to N$783 million in 2012.
The bank said credit management remains a key focus, coupled with prudent risk pricing and good recoveries of delinquent debt. During the year under review, the loan loss rate decreased from 0.18% to 0.16% and non-performing loans as a percentage of gross advances decreased from 0.90% to 0.86%.
Total non-interest income increased by 12.9% to N$523 million up from N$463 million in the previous year. Non-interest income mainly comprises fee and commission income, trading income and other operating income.
The growth in operating expenses slowed down to 8% compared to 10% the prior year, attributed mainly to increased efficiencies, a focused effort to contain costs and an underspend in IT related projects.
The reduction in the operating expense growth, coupled with good income growth, resulted in an improved cost to income ratio of 54.1% (2012: 57.9%).
Loans and advances to customers grew by 14.0% to N$17.7 billion mainly due to growth in the overdraft and mortgage loan books.
Of the N$361.2 million capital raised through the listing, the group said it invested N$200 million in Bank Windhoek to further increase the bank’s Tier 1 capital in anticipation of the implementation of Basel III. This capital will also fund further investment in information technology and innovative payment systems and channels to market, in order to enable the bank to better service its existing client base as well as to better penetrate the unbanked and under-banked market in Namibia.
Going forward, the bank said it expects the 2014 growth in total comprehensive income to be in line with the forecast of 14%, as indicated in the prospectus. The group will continue to invest in capacity to support future growth and expansion of business activities.

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