Windhoek-The holding company for Bank Windhoek, Capricorn Investment Group Limited, and Bank Windhoek Limited, has had its national ratings affirmed positively by the Global Credit Rating agency.
The agency has given Capricorn Investment Group a rating of AA (NA) for long term and A1+ (NA) for short-term, while the credit outlook has been rated as stable. Bank Windhoek Limited has been rated AA(NA) in the long term and A1+(NA) in short term respectively, with the outlook accorded as stable.
Global Credit Ratings (GCR) agency says it accorded the rating to “reflect Capricorn Group’s strong domestic market share in the Namibian banking industry and significant presence in the asset management and insurance markets.” Further, the ratings also reflect Capricorn Group’s risk appropriate capitalisation, comfortable liquidity, resilient earnings performance, as well as further earnings and geographic diversity from January acquisitions of banking operations in Zambia and Botswana, contributing a combined 17.9 percent to group consolidated assets at 30 June 2017 and 3.8 percent of pre-tax profits.
“While GCR expects the group to remain resilient, the prevailing economic challenges, including weak growth prospects in Namibia, and an uncertain global economic outlook, will continue to put pressure on Capricorn Group’s, and the financial sector in general, earnings and asset quality metrics. 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,” the agency said in a statement.
Further underpinning the ratings was the potential support from the Group’s largest shareholders Capricorn Investment Holdings Limited (CIH) with a 40.7 percent stake and Government Institutions Pension Fund (GIPF) with 26 percent shareholding.
GIPF, the largest institutional investor in Namibia with a net asset value of about N$100 billion, acquired 25 percent of the Group’s shares in Bank Windhoek in May 2017. The GIPF, together with CIH, became shareholders of reference for the Group. 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. GCR believes that timely financial support would be provided by GIPF and CIH in their role as reference shareholders, or ultimately by the Bank of Namibia due to BW’s status as a systemically important financial intuition,” said the statement.
Bank Windhoek is the group’s leading operating subsidiary, and the largest locally owned bank and second largest commercial bank in Namibia. Bank Windhoek contributed a lower 80.1 percent of the group’s consolidated assets at for the 2017 financial year, and a marginally higher 87.0 percent of pre-tax profit following recent acquisitions.
Other non-banking subsidiaries, offering asset management, unit trust management products and services, property development and long and short term insurance, contributed 2 percent of consolidated assets and 10.6 percent of pre-tax. While the group’s ratings have largely replicated Bank Windhoek’s ratings, GCR has taken cognisance of added diversification benefits from recent acquisitions at group level.
Further, the group’s gross non-performing loan ratio rose to 2.2 percent in current financial year, up from 1.3 percent of the previous financial year, mainly due to acquired loan books. Unreserved non-performing loans relative to regulatory capital remained low at 10 percent.