Bank Windhoek shares a safe bet

WINDHOEKDENVER ISAACS

Bank Windhoek Holdings (BWH) is gearing up for a historic occasion on Thursday, when the commercial bank officially lists on the Namibian Stock Exchange (NSX).
The company's initial public offering of 44,331,048 BWH shares at N$8,75 has drawn not only interested citizens and would-be public shareholders, but also an enthusiastic response from analysts.
"We are pleased that the public offer process went according to plan and we are grateful for the support from all role players," Bank Windhoek managing director Christo de Vries said last week.
He said the results will be announced on the NSX's Namibian Exchange News Service (NENS) on Wednesday, following which it will be published in the local media on Thursday.
Commenting on the development, professional services companies IJG Securities and PSG Namibia were in favour of the BWH share price, mentioning various positive factors including a currently upbeat Namibian economy, positive income generation and profits from Bank Windhoek and its subsidiaries, and limited risk of further entries into the Namibian banking sector, as grounds.
"At a forecasted growth rate of 4,6%, the Namibian economy offers positive growth differentials when compared to most other developed and developing economies," IJG Securities said in a report issued last week.
"BWH is strategically well positioned to offer exposure to the Namibian economy and to the up-and-coming Namibian consumer with a constantly growing need for financial services", the analysts argue, referring to efforts at job creation, citizen welfare and an already low interest-rate environment.
"We believe the recent tax breaks (9% average increase in disposable income), along with lower for longer interest rates for a favourable macroeconomic environment to achieve growth in loans and advances," IJG Securities says.
In terms of Bank Windhoek's own performance, the lender's ability to have grown interest income at a compounded annual rate (CAGR) of 13,2% over the past nine years was another counting in its favour.
Bank Windhoek Holdings managed to increase interest income from N$499 million in 2004, to N$1 526 million in 2012.
"This performance was despite a macro environment which entailed generally lower interest rates, thus growth mainly resulted from strong growth in interest earning assets," IJG Securities say.
Interest-earning assets include loans, advances and investment securities.
Like others in the banking sector, Bank Windhoek is said to have increased its efforts to improve non-interest income - which include transaction and related fees, brokerage commission and net trading income.
"There has been some hype surrounding the Bank of Namibia clamping down on bank fees in general, and cash deposit fees specifically, that banks are allowed to charge. We are not confident in the regulator going through with the proposed cutting of this component of income, as the possible repercussions could be severe, including compensative hikes in withdrawal charges and restricting bank operations in areas where cash deposits occur frequently," IJG Securities says.
Bank Windhoek's non-interest income grow 7,8% in 2011, 15% in 2012 (N$463 million) and according to the bank's own prospectus, is expected to grow by 15,5% in 2013, to N$535 million.