Windhoek-Despite an extremely challenging economic environment in 2016, Standard Bank managed to post satisfactory annual results and made significant strides in transforming its operational environment, operational processes, products and operational structures.
For the year under review Standard Bank generated profits amounting to N$540 million, which represents a growth of 3 percent above that of the previous year.
“During 2016, Standard Bank not only reaffirmed our commitment to understanding and meeting our customers’ needs, but we started to implement a revolutionary programme aimed at changing the culture and ways of working in the bank with the objective of improving our processes and products from a customer’s perspective,” said Vetumbuavi Mungunda chief executive of Standard Bank Namibia.
The bank also reported a reduction in turnaround times for home loans from 170 days in 2014 to 51 days in 2016 and an increase in market share for vehicle and asset finance to over 27 percent from below 25 percent in 2015.
The bank has also continued to stabilise its information technology systems and channels during the course of the year following focused initiatives and actions implemented. Technology optimisation and innovation remained a high priority during 2016 with the successful launch of BlueWallet, a refreshed online banking platform, the SmartApp and EMV debit cards.
“We continued with investments in the expansion of our points of representation in our quest to bring our services closer to our customers. We opened four new points of representation across the country – at Ruacana, Okuryangava, the waterfront in Swakopmund and Okongo. We upgraded the Keetmanshoop, Nkurenkuru, Otjinene and Game Shopping Centre branches to enhance customer experience. We further relocated a number of our points of representation into new refurbished facilities in Gobabis, Eenhana and Aussenkehr, signifying our commitment and trust in the future of these towns,” Mungunda added.
According to Bryan Mandy, chief financial officer and finance director of Standard Bank Namibia, the results were impacted by interest expense growth of 21 percent, which was significantly higher than the 12 percent growth in interest income. The increase in interest expense was driven by the increasing costs of funds and liquidity holdings, as well as divergence in the correlation between local prime interest rates and JIBAR rates from which most of the local liquidity costs are derived.
The results were further impacted by one-off systems implementation related costs amounting to N$54 million written off during the current year. Normalised earnings, excluding these one-off written-off costs, would show a growth of 14.3 percent on the 2015 earnings.
The results for 2016 were supported by growth in quality assets at 12 percent over the prior year while the growth in loans and advances to customers of 11 percent is satisfactory when compared to the industry growth of 8.9 percent for the year, he said.
“Our capital position continues to exceed regulatory capital thresholds at 15.35 percent capital adequacy and 8.76 percent leverage ratios respectively,” said Mandy.
During 2016 the bank’s loans and advances increased by 12 percent while the group’s return on equity decreased to 19.5 percent from 23.56 percent. The group experienced a negative JAWS ratio of 2 percent, partly due to significant investments in staff. This is also reflected in the cost-to-income ratio, which increased from 58.34 percent to 59.53 percent.
Net interest income increased by 5 percent while interest income grew by 12 percent, and interest expense grew by 21 percent. Net interest income benefited from a positive endowment effect of higher average interest rates during the year, and the effect was compromised by competitive pricing in CIB, as well as increased funding costs arising from the interest rate differential between Namibia and South Africa being eroded, leading to an overall margin compression. Limited liquidity in the market further contributed to the need to obtain higher cost funding.
Non-interest revenue grew by 9 percent in 2016, representing stable growth, with the same percentage growth having been achieved in 2015. Net fee and commission revenue grew by 12 percent, trading revenue decreased by 12 percent and other revenue grew by 15 percent.
Net fee and commission revenue increased despite limited increases in account transaction fees. Increases were experienced due to higher volumes on electronic banking channels even though these carry lower fees than the more traditional banking channels.
An increase was seen on the corporate side in the form of higher guarantee and arrangement fee income earned. This was offset by substantial increases in cash handling fees and other direct costs.
Credit impairments increased by 7 percent. At the same time, the credit loss ratio improved to 0.49 percent from 0.51 percent. Despite the negative and often uncertain trend in the economy, as well as rising interest rates, which adversely impacted consumer spending, the bank was able to control its growth in impairments. This was partly due to new recovery strategies and enhanced monitoring that proved to be effective. Total assets increased by 13 percent to N$27 billion of which the main contributor was the growth in loans and advances.
Total liabilities increased by 13 percent to N$24 billion. The increase is mostly as a result of increases in deposits from customers.
Deposits from customers increased by 17 percent. Significant growth was achieved on the cash management product, which grew by 75 percent. Due to its higher interest rates, this has had a negative impact on the bank’s endowment effect.