By Megameno Shikwambi
At the back of an economic crunch worsened by one of Namibia’s worst droughts ever, FirstRand Namibia has reported solid financial results with a growth in assets.
The group paid out N$ 465 billion worth of taxes, while profit before tax increased by 2.2% to N$ 1.58 billion (2018: N$ 1.55 billion) for the period under review.
According to the group’s Chief Financial Officer, Oscar Capelao, cost to income ratio increased to 52.9% (2018 normalized: 50.3%), “which remains commendable” while, cost growth was contained at 4.4% for the year as demonstrating the efficiency focus in the current year.
An amount of N$ 533 million got paid to providers of capital (shareholders) while N$ 10.3 million was spent as part of continued investment in society.
Said Capelao, “The impact of the challenging economic climate was certainly felt in the financial services sector. Credit demand showed improvement although it was still relatively low in comparison to the past few years. The improvement in credit demand was mainly influenced by improved business sentiment especially in the commercial property loans space.”
As such, return on average equity decreased to 20.8% (2018: 22.1%), still in the long- term target range of 21% to 24%
The group’s total assets increased by 12.0% to N$ 44.1 billion (2018: N$ 39.4 billion).
Net advances making up 69% of the balance sheet reflected a year-on-year increase of 6.2% to N$ 30.3 billion.
Growth in private sector credit extension for the period has been on an upward trend and was 8.3% at the end of the period.
The ratio of non-performing loans (NPLs) to gross advances ended the period at 2.7% up from 1.9% in 2018 and in dollar terms increased from N$ 549 million to N$ 845 million.
“Security held against NPL’s stands at N$ 556 million, demonstrating our commitment to responsible lending,” said the CFO.
Mortgage loans increased year on year by 3.3% to N$ 13.5 billion and constitute 44% (2018: 46%) of gross advances.
Capelao said the groups’ exposure to home loans is reflective of the Namibian banking industry where home loans tend to average 40% of credit extended in the local market. As a result, the growth rate of mortgage loans dragged the overall growth of the advances portfolio. In line with our risk appetite, we have selectively grown the home loans book in segments where we believe the risk is lower,” he remarked.
The group impairment levels remain well within acceptable levels through the cycle, and coverage ratios remained in-line with industry levels.
Normalized group operating costs have increased by 7.2% to N$ 2 069 million (2018: N$ 1 930 million).
This is reflected in FirstRand Namibia’s cost to income ratio of 52.9% (2018: 50.3%).
This level of cost growth is in-line with inflation and demonstrates the measures taken by the group to manage discretionary spending, while managing structural cost programmes to realize efficiency gains that can be invested in growth initiatives.
Staff costs increased by 6.2%
According to the bank, staff cost growth is influenced by the above inflationary wage increase settlement with the union for non-managerial staff and the continued conversion of staff from basic pay to Cost-to-Company. It is also worth noting that, this trend may continue in the short-term due to the need for specialist and skilled resources needed to assist with the large-scale information technology and digital transformation programmes as well as helping with the evolving compliance and regulatory requirements of the industry at large
“We find ourselves in particularly challenging times. Globally, emerging markets are enduring macroeconomic headwinds. The latest annual figures reaffirm the recessionary pressures experienced by all economic agents, with -0.1% recorded at the end of 2018.
Negative investment growth eroded any gains experienced by the improving trading balance with foreign and domestic gross fixed capital formation, printing -14.1%. Despite this mixed economic and political backdrop, FirstRand Namibia’s portfolio of businesses once again produced quality results for the year to June 2019.
The Group has maintained its vision of an integrated financial services model that ensures the Group fully capitalizes on its portfolio of leading businesses to deliver long-term sustainable returns for our shareholders.
It is a very compelling strategy which accommodates a broad set of growth opportunities across the financial services universe from a product, market, segment and geographic perspective,” said the group’s chairperson, Inge Zaamwani-Kamwi.
Normalized Net Interest Revenue increased by 3.8%, reflecting a fee and commission income growth of 4.8%, supported by higher volumes across digital and electronic channels.
According to Capelao, at year end, the group had over 2 695 shareholders including a number of institutions and 17 pension funds.