Windhoek-The operating profit of N$607.2 million for the Capricorn Group, previously known as Bank Windhoek Holdings, for the six months ending December 31, 2016 only increased marginally compared to the same period in the prior year. The group says this was due to the challenging market conditions combined with the inclusion of substantial one-off kwanza trading income in the prior period. “On a normalised¹ basis, which excludes this one-off revenue, growth in operating profit is 9.1 percent relative to December 31, 2015,” the group says.
Capricorn released its consolidated interim group results on Thursday for the period.
“The six months under review have been challenging for the banking industry and the Namibian 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,” commented Thinus Prinsloo, Group Managing Director.
Net interest income increased by 3.0 percent to N$749.9 million. The group says the muted growth is mainly due to a significant increase in cost of funding as a result of the current liquidity shortage experienced in the Namibian market, combined with a lower growth in interest bearing assets.
Impairment charges decreased by 15.8 percent to N$26.5 million. Non-performing loans as a percentage of gross loans and advances increased marginally from 1.24 percent to 1.36 percent.
“In the current economic environment the above ratios are testimony to the quality of the group’s advances book and collateral obtained,” read a statement from the group.
Excluding one-off kwanza trading income and the income of Welwitschia Insurance Brokers (WIB) (sold in July 2016) from the prior period results, non-interest income increased by 11.6 percent to N$466.5 million. The normalised increase is mainly due to strong growth in transaction income, which was partially offset by a contraction in trading revenue.
Operating expenses increased by 0.7 percent to N$582.7 million (December 2015: N$578.7 million). After adjustment of the prior period results with the WIB expenses, operating expenses increased by 4.5 percent, evidencing management’s focus to control costs during the period under review. The cost to income ratio remained stable at 49.0 percent.
Income from associates decreased by 22.7 percent to N$36.8m (December 2015: N$47.6m) and contributed 8.0 percent (December 2015: 10.4 percent) to profit after tax. The decrease is mainly due to exceptional performance by Santam Namibia in the prior year and an increase in life insurance claims experienced by Sanlam Namibia during the current period under review.
Other comprehensive income is derived from the valuation of foreign currency denominated available-for-sale financial assets. The significant reduction in other comprehensive income is due to foreign currency exchange differences arising from the strengthening of the Namibian Dollar against the US Dollar during the period under review.
Bank Windhoek grew loans and advances to N$27.1 billion (December 2015: N$25.5 billion). The fairly modest growth of 6.2 percent is mainly due to growth in overdrafts and mortgage loans. Compared to the prior period, the growth in loans and advances has slowed down, mirroring the decline in industry growth in credit to the private sector.
Total funding increased by only 2.9 percent to N$27.3 billion (December 2015: N$26.6 billion) in the wake of a decline in market 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.
The group remains well capitalised with the total risk-based capital adequacy ratio increasing to 15.6 percent, well above the minimum regulatory capital requirement of 10 percent.
According to the statement, the group is expecting the challenging operating environment with sluggish economic growth and liquidity constraints in Namibia to continue in the short to medium-term.
“Despite this, we remain positive about the recent expansion of Capricorn Group to Botswana and Zambia as well as the imminent enhancements to our service offering in the Namibian market to continue delivering stakeholder value.”
“A major milestone during the reporting period was the launch of the Capricorn Group brand in September 2016. Capricorn Group wants to be the most trusted and inspiring connector of positive change in Namibia and beyond. As our identity and ethos is closely linked to the well-being of our country, we share the responsibility to bring positive change, thereby creating an environment of empowerment and prosperity. It means positive change for our people, our government, our shareholders and positive change for the people of Namibia,” said Prinsloo.
“We will differentiate ourselves through our unique service offering and our ability to create sustainable opportunities for Namibians. Our customers are the reason we exist. Our customer-centric strategy and culture is underpinned by our unrelenting drive to provide customer experiences that are meaningful. Capricorn Group will continue to achieve our goals responsibly and we believe that sustainability comes from a firm focus on not only profit, but also our people and the planet.”
“We want to continue delivering relevant solutions, convenient products with a responsive network of people and channels that enable these opportunities to be created. We recognise the value of a positive reputation and strong brands and will continue to invest in the powerful brands in our group, with Bank Windhoek as the flagship brand and Capricorn Asset Management as a leader in wealth and asset management,” Prinsloo concluded.
• (¹Adjusted for Welwitschia Insurance Brokers sold on 1 July 2016 and one-off kwanza trading income.)