FNB performs well
The results of First National Bank show that despite the economic crunch, the group has demonstrated above average growth for the year.
FNB Namibia Holdings year-end results show good organic growth, prudent risk management and investment for growth. The group executed well on its growth strategy of its core business during the year under review, with advances growing at 9.6% compared to market credit extension of 8%. Deposits were grown by 9.7% and the number of active accounts increased by 4%, despite the high number of retrenchments in the country. As a result of the good growth of our core business, interest revenue increased by 15%, and normalised non-interest revenue grew by 7%.
The macroeconomic environment however remained tough in the period under review, globally, in the rest of sub-Saharan region and locally. A number of countries, including Namibia, had to deal with ongoing commodity price challenges and increased cost of liquidity (up 26%).
“During the year, the Namibian economy continued to struggle as gross domestic product numbers confirmed that the economy remained in the grip of a recession for four consecutive quarters. Being a responsible lender, we continued our prudent approach to good quality asset growth, maintaining the group's strong capital levels, and managing liquidity needs dynamically. Although the group continued its investments in staff, infrastructure and risk management (operating expenses were up 17%), its performance is still positively correlated to Namibia's economic performance. The group positioned all its operating entities to make the most of the limited growth opportunities and produce another set of satisfactory results in an increasingly difficult operating environment”, said Oscar Capelao, FNB's chief financial officer.
Profit for the year ended 30 June 2017 was N$1 113.1 million (2016 saw N$1 217.6 million). Headline earnings, being adjustments for the profit on sale of properties during the periods, decreased by 4.4% to N$1 086.3 million. Earnings per share decreased to 418.9 cents (2016 saw 459.7 cents).
Return on average equity reduced to 25.6% (2016: 31.0%), return on average assets was 3.0% (2016: 3.6%) and cost to income ratio increased to 48.9% (2016: 43.7%).
Normalised profit before tax, which caters for headline earnings adjustments, and the impact of the acquired subsidiaries which did not form part of the group for the full year, increased by 3.8% to N$1 768 million. The normalised ROE is still a very healthy 28.4%.
The banking group and OUTsurance are the two key operations with banking operations dominating the contribution to earnings. The group results include the consolidation of Pointbreak and Ebank for the three months to year end as well as the newly launched Ashburton Investments.
Net interest income grew by 6.7% to N$1 764.6 million (2016: N$1 653.6 million).
Margins came under severe pressure with no upward adjustment in the repo rate during the period, while interest expenses increased by 25% linked to liquidity challenges in the economy and deposit growth of longer term products which are more expensive.
Total unadjusted non-interest revenue increased by 3.1% to N$1 553 million (2016: N$1 506 million). The prior year figure was boosted by the sale of the Talas building at a gain of N$ 67 million (compared to an N$7 million gain on sale of property in the current year) and the net forex gain from trading in Kwanza as allowed for in the prior year.
The increase of 17.0% in the group's operating expenses is reflected in our increased cost to income ratio of 48.9% (2016: 43.7%). Cost reduction of the operating base is lagging the migration of clients to digital channels from our branches. The consolidation of Pointbreak and Ebank entities during the final quarter of the year also contributed to the increase in operating expenses.
Regulatory changes during the year, the introduction of mandatory deposits for instalment sales and for secondary home loans, contributed to cooling of demand for credit in home loans and vehicle finance
Mortgage loans increased year on year by 6.5% to N$12.6 billion and constitute 44.5% (2016: 45%) of FNB's advances book while the granting of instalment credit slightly reduced by 0.1% as 2017 reported the worst industry vehicle sales figures since 2012.
Growth in the RMB and FNB Business advances was 14%, compared to corporate private sector credit extension of 7.5% for June 2017.
Total dividend declared for the year is 204 cents per ordinary share.
Capelao concluded: “FNB Namibia is a significant stakeholder in the financial services sector and the effect of the down turn in the economy directly impacted performance. The group continues to exercise discipline in allocating capital and will not chase market share growth at the expense of returns. We believe these results demonstrate the quality of our underlying businesses and strike the right balance between growth, prudent risk management and investment for growth.”
The macroeconomic environment however remained tough in the period under review, globally, in the rest of sub-Saharan region and locally. A number of countries, including Namibia, had to deal with ongoing commodity price challenges and increased cost of liquidity (up 26%).
“During the year, the Namibian economy continued to struggle as gross domestic product numbers confirmed that the economy remained in the grip of a recession for four consecutive quarters. Being a responsible lender, we continued our prudent approach to good quality asset growth, maintaining the group's strong capital levels, and managing liquidity needs dynamically. Although the group continued its investments in staff, infrastructure and risk management (operating expenses were up 17%), its performance is still positively correlated to Namibia's economic performance. The group positioned all its operating entities to make the most of the limited growth opportunities and produce another set of satisfactory results in an increasingly difficult operating environment”, said Oscar Capelao, FNB's chief financial officer.
Profit for the year ended 30 June 2017 was N$1 113.1 million (2016 saw N$1 217.6 million). Headline earnings, being adjustments for the profit on sale of properties during the periods, decreased by 4.4% to N$1 086.3 million. Earnings per share decreased to 418.9 cents (2016 saw 459.7 cents).
Return on average equity reduced to 25.6% (2016: 31.0%), return on average assets was 3.0% (2016: 3.6%) and cost to income ratio increased to 48.9% (2016: 43.7%).
Normalised profit before tax, which caters for headline earnings adjustments, and the impact of the acquired subsidiaries which did not form part of the group for the full year, increased by 3.8% to N$1 768 million. The normalised ROE is still a very healthy 28.4%.
The banking group and OUTsurance are the two key operations with banking operations dominating the contribution to earnings. The group results include the consolidation of Pointbreak and Ebank for the three months to year end as well as the newly launched Ashburton Investments.
Net interest income grew by 6.7% to N$1 764.6 million (2016: N$1 653.6 million).
Margins came under severe pressure with no upward adjustment in the repo rate during the period, while interest expenses increased by 25% linked to liquidity challenges in the economy and deposit growth of longer term products which are more expensive.
Total unadjusted non-interest revenue increased by 3.1% to N$1 553 million (2016: N$1 506 million). The prior year figure was boosted by the sale of the Talas building at a gain of N$ 67 million (compared to an N$7 million gain on sale of property in the current year) and the net forex gain from trading in Kwanza as allowed for in the prior year.
The increase of 17.0% in the group's operating expenses is reflected in our increased cost to income ratio of 48.9% (2016: 43.7%). Cost reduction of the operating base is lagging the migration of clients to digital channels from our branches. The consolidation of Pointbreak and Ebank entities during the final quarter of the year also contributed to the increase in operating expenses.
Regulatory changes during the year, the introduction of mandatory deposits for instalment sales and for secondary home loans, contributed to cooling of demand for credit in home loans and vehicle finance
Mortgage loans increased year on year by 6.5% to N$12.6 billion and constitute 44.5% (2016: 45%) of FNB's advances book while the granting of instalment credit slightly reduced by 0.1% as 2017 reported the worst industry vehicle sales figures since 2012.
Growth in the RMB and FNB Business advances was 14%, compared to corporate private sector credit extension of 7.5% for June 2017.
Total dividend declared for the year is 204 cents per ordinary share.
Capelao concluded: “FNB Namibia is a significant stakeholder in the financial services sector and the effect of the down turn in the economy directly impacted performance. The group continues to exercise discipline in allocating capital and will not chase market share growth at the expense of returns. We believe these results demonstrate the quality of our underlying businesses and strike the right balance between growth, prudent risk management and investment for growth.”
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