N$918m profit for Capricorn
The Capricorn Group says it expects a challenging operating environment with sluggish economic growth in Namibia to continue in the short to medium term.
Capricorn Group Holdings last week released its financial results, reporting a slight increase in operating profit before tax of N$1.19 billion.
According to its group managing director Thinus Prinsloo, the downturn in the economy stifled growth opportunities for the banking sector.
Commenting on the operating environment during the year under review, Prinsloo said: “The Namibian banking sector has been significantly impacted by this downturn, which resulted in a sharp reduction in private-sector credit extension and severe market liquidity constraints.
“As a consequence, growth opportunities for banks were stifled. Banks' profits also came under severe pressure following reduced interest margins due to a substantial increase in cost of funding as the market competed for limited liquid funds.”
The group's net interest income increased by 13.1% to N$1.64 billion largely as a result of the acquisition of CIHB and CCHZ, which contributed 9.8% to the year on year growth.
Impairment charges for bad and doubtful debts decreased by 4.6% to N$58 million, and Bank Windhoek specifically decreased by 23.4% which bears testimony to the quality of the group's loans and advances.
“Notwithstanding the challenging operating environment, the group delivered a solid performance with operating profit before tax for the year ended 30 June 2017 increasing by 2% from N$1.17 billion in the prior year to N$1.19 billion.
“On a normalised basis, excluding one-off income from Angolan kwanza trading in the prior year and the profits of Capricorn Investment Holdings Botswana (CIHB) and Cavmont Capital Holdings Zambia (CCHZ) acquired during the year, growth in operating profit before tax is 4% year on year,” said Jaco Esterhuyse, chief financial officer.
The group's normalised operating expenses increased by 7.1% to N$1.21 billion, evidencing management's focus to control costs during the year under review. The cost to income ratio increased from 50.2% to 53.9%, largely as a result of the higher cost to income ratios of the new subsidiaries in Botswana and Zambia.
CIHB and CCHZ contributed N$4 billion (12.2%) and N$833.5 million (2.5%) respectively to N$33.4 billion total advances. In Namibia, compared to the prior year, Bank Windhoek's growth in loans and advances has slowed down to 7.2%, mirroring the decline in industry growth in credit to the private sector. Bank Windhoek's non-performing loans as a percentage of gross advances remained stable with a slight increase from 1.32% to 1.44%.
Total funding of the group increased by 34.9% to N$37.2 billion mainly due to the acquisition of CIHB and CCHZ. On a normalised basis, Bank Windhoek's funding increased by 7.6% largely due to good growth in term and notice deposits as well as senior debt. Although funding growth has been challenging in the current economic environment, the group has managed to further lengthen its funding maturity profile and decrease its dependency on short term funding.
“The group is expecting the challenging operating environment with sluggish economic growth in Namibia to continue in the short to medium term. Our outlook, however, remains positive with an expectation that the expansion of the group to Botswana and Zambia will contribute to growth of both our balance sheet as well as profit, that our strong drive towards operational excellence will realise cost savings and improve revenue streams and that the recent enhancements to our service offering will improve our delivery of stakeholder value,” concluded Prinsloo.
In its initial impressions, IJG said the results were below expectation.
“The results reflect the difficult operating conditions prevalent in Namibia characterised by low liquidity, higher cost of funding, slowing gross domestic product growth and slower private-sector credit extension. However, the results were also below our, admittedly optimistic, expectations,” IJG analyst Dylan van Wyk said in an initial report released by his firm.
STAFF REPORTER
According to its group managing director Thinus Prinsloo, the downturn in the economy stifled growth opportunities for the banking sector.
Commenting on the operating environment during the year under review, Prinsloo said: “The Namibian banking sector has been significantly impacted by this downturn, which resulted in a sharp reduction in private-sector credit extension and severe market liquidity constraints.
“As a consequence, growth opportunities for banks were stifled. Banks' profits also came under severe pressure following reduced interest margins due to a substantial increase in cost of funding as the market competed for limited liquid funds.”
The group's net interest income increased by 13.1% to N$1.64 billion largely as a result of the acquisition of CIHB and CCHZ, which contributed 9.8% to the year on year growth.
Impairment charges for bad and doubtful debts decreased by 4.6% to N$58 million, and Bank Windhoek specifically decreased by 23.4% which bears testimony to the quality of the group's loans and advances.
“Notwithstanding the challenging operating environment, the group delivered a solid performance with operating profit before tax for the year ended 30 June 2017 increasing by 2% from N$1.17 billion in the prior year to N$1.19 billion.
“On a normalised basis, excluding one-off income from Angolan kwanza trading in the prior year and the profits of Capricorn Investment Holdings Botswana (CIHB) and Cavmont Capital Holdings Zambia (CCHZ) acquired during the year, growth in operating profit before tax is 4% year on year,” said Jaco Esterhuyse, chief financial officer.
The group's normalised operating expenses increased by 7.1% to N$1.21 billion, evidencing management's focus to control costs during the year under review. The cost to income ratio increased from 50.2% to 53.9%, largely as a result of the higher cost to income ratios of the new subsidiaries in Botswana and Zambia.
CIHB and CCHZ contributed N$4 billion (12.2%) and N$833.5 million (2.5%) respectively to N$33.4 billion total advances. In Namibia, compared to the prior year, Bank Windhoek's growth in loans and advances has slowed down to 7.2%, mirroring the decline in industry growth in credit to the private sector. Bank Windhoek's non-performing loans as a percentage of gross advances remained stable with a slight increase from 1.32% to 1.44%.
Total funding of the group increased by 34.9% to N$37.2 billion mainly due to the acquisition of CIHB and CCHZ. On a normalised basis, Bank Windhoek's funding increased by 7.6% largely due to good growth in term and notice deposits as well as senior debt. Although funding growth has been challenging in the current economic environment, the group has managed to further lengthen its funding maturity profile and decrease its dependency on short term funding.
“The group is expecting the challenging operating environment with sluggish economic growth in Namibia to continue in the short to medium term. Our outlook, however, remains positive with an expectation that the expansion of the group to Botswana and Zambia will contribute to growth of both our balance sheet as well as profit, that our strong drive towards operational excellence will realise cost savings and improve revenue streams and that the recent enhancements to our service offering will improve our delivery of stakeholder value,” concluded Prinsloo.
In its initial impressions, IJG said the results were below expectation.
“The results reflect the difficult operating conditions prevalent in Namibia characterised by low liquidity, higher cost of funding, slowing gross domestic product growth and slower private-sector credit extension. However, the results were also below our, admittedly optimistic, expectations,” IJG analyst Dylan van Wyk said in an initial report released by his firm.
STAFF REPORTER
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