FNB Namibia Holdings yesterday announced its annual financial results for the year ended June 30, 2016, which indicate that the group’s profit increased close by to 22 percent to just over N$1.2 billion, compared to about N$999 million the previous financial year.
Headline earnings – adjusted for the sale of the bank’s former head office – increased by 15.7 percent to N$1.13 billion, while earnings per share increased to 459.7 cents, compared to 377.5 cents in 2015.
“FNB positioned all its operating entities to make the most of limited growth opportunities and produced another set of excellent results in an increasingly difficult operating environment. We thank all our stakeholders, including the shareholders, staff, customers and the government, for making these results possible so that we, in turn, can be partners to increased wealth for our country and its people,” said FNB Namibia’s chief executive officer, Sarel van Zyl.
During a breakfast presentation attended by Minister of Finance Calle Schlettwein, key shareholders, as well as FNB Namibia’s board members and top brass, van Zyl said normalised earnings, which have been reworked for headline earnings adjustments, non-operational items and regulatory anomalies, are a more accurate reflection of the group’s performance.
“Normalised profits for the year increased by 18.2 percent to N$1119 million. Key ratios all remained good. An applying headline earnings, return on average equity was 31 percent (2015: 32.2 percent) return on average assets rose to 3.6 percent (2015: 3.5 percent) and cost to income ration improved to 43.7 percent (2015: 43.9 percent),” said Van Zyl.
According to Oscar Capelao, FNB Namibia’s chief financial officer, the banking arm dominated contributions by the group’s subsidiaries, with net interest income growing by 13.8 percent to N$1653.6 million, compared to N$1452.8 million in 2015.
“Margins have not widened to the extent experienced previously when interest rates increased, mostly due to the relative increased cost of funds during the cycle. Net interest margin improved slightly, mainly through higher interest income on advances. Advances priced mostly from the prime overdraft rate, which effectively increased by 75 basis points,” he said.
Also, net fee and commission income increased by 13.5 percent, impacted by the Bank of Namibia’s directive exempting fees charged on cash deposits by individuals and SMEs. The directive from BoN came into effect during April 2015 and net fee and commission income was also impacted by the Namibia Financial Institution Supervisory Authority’s directive on policy fees for FNB insurance brokers.
The latest financials from FNB further indicate that total non-interest revenue increased by 19.6 percent to N$1506 million (2015: N$1260 million), bolstered by a once-off N$67 million profit on the disposal of the Talas building, where FNB Namibia was previously headquartered.
Meanwhile, Group operating costs increased by 16 percent, while generating an operating income growth of 19.6 percent.
“This positive trend is certified in the continued improvement of our cost to income ratio of 43.7 percent (2015: 43.9 percent). Staff related costs are up 15 percent, including growth in head count, largely due to reinforcing our risk and compliance team. Other triggers of the above inflationary increase include property costs, reflecting constant investment investment in our footprint,” said Van Zyl.
FNB Namibia’s Group’s total assets grew by close to 15 percent to N$3.2 billion. Year-end advances, making up 75.4 percent of the balance sheet, reflected a year-on-year increase of 12.9 percent to N$25.8 billion. Average advances grew 14 percent on the back of business and corporate portfolios. Capelao noted that growth throughout the year has remained mostly ahead of private credit extension, which stood at 12.1 percent in June 2016, although interest rate hikes have impacted on national credit extension growth.
Van Zyl says FNB Namibia remains the market leader for home loans, vehicle asset finance and credit cards. Mortgage loans increased 10.4 percent year-on-year to N$11.8 billion and constitutes 45 percent (2015: 46 percent) of FNB’s loan book.