Windhoek
Bank Windhoek Holdings Limited’s (BWH)’s consolidated group financial results for the year ending 30 June 2016 show a solid performance with profit after tax increasing by 20.2 percent year-on-year to N$905 million realising a return on average equity of 22.9 percent.
This was the fifth consecutive year of profit growth in excess of 20 percent for BWH, emphasising the consistent performance of the group, the results that were released on August 12.
The group’s net interest income increased by 15.1 percent to N$1.458 billion (June 2015: N$1.267bn), which is mainly due to growth in interest earning assets of 13.1 percent and the net interest margin improving slightly to 4.8 percent (June 2015: 4.7 percent).
The improved interest margin has been achieved notwithstanding the increase in the average cost of funding resulting from the group’s strategy to diversify sources of funding.
Impairment charges remained stable, increasing by 4.2 percent to N$60.8 million (June 2015: N$58.3m). Non-performing loans as a percentage of gross loans and advances increased from 1.09 percent to 1.32 percent, still well within generally accepted banking norms.
As a result of the group’s strategy and focus to further diversify its revenue streams, non-interest income growth exceeded the growth in net interest income after loan impairment charges for the third consecutive year, increasing by 17.4 percent to N$953.8 million (June 2015: N$812.6m).
This is mainly due to growth in transaction-based fee income and trading income.
Transaction-based fees continue to be the largest contributor and increased by 8.1 percent despite the implementation of zero cash handling fees from 1 April 2015.
Trading income’s contribution to non-interest income increased to 15 percent (June 2015: 11.8 percent) due to the income earned from the Kwanza trading activities and the volatility in the currency markets during the year under review.
The dispensation from Bank of Namibia for Namibian banks to trade in Kwanza was withdrawn in December 2015. The group continues to improve its efficiency ratios with non-interest income covering 80.8 percent (June 2015: 78.0 percent) of operating expenses and contributing 40.6 percent to operating income (June 2015: 40.2 percent).
The group’s operating expenses increased by 13.2 percent to N$1,180.2 million (June 2015: N$1,042.2m).
This growth is in line with the prior year and the average of the last 5 years. The increase in operating expenses is mainly due to the increase in staff costs and technology related expenses.
The cost to income ratio improved to 50.2 percent (June 2015: 51.6 percent), with operating income growth of 16.3 percent exceeding operating expenses growth.
Income from the group’s associates increased to N$97.1 million (June 2015: N$87.2m) and contributed 10.7 percent (June 2015: 11.6 percent) to profit after tax.
Bank Windhoek grew loans and advances to N$26.6 billion (June 2015: N$23.6bn). The 12.6 percent increase is mainly due to growth in overdrafts and mortgage loans.
Compared to the prior year the growth in loans and advances has slowed down, mirroring the industry growth in credit to the private sector.
Reacting to the more challenging economic environment, Bank Windhoek reviewed its credit assessment process during the first half of the year, adopting a more cautious lending approach. However, the bank says it will continue to support customers and act in their best interests through responsible lending.
The total funding of the group increased by 12.1 percent to N$27.6 billion (June 2015: N$24.6bn), comprising a 7.9 percent increase in deposits to N$23.7 billion (June 2015: N$22.0bn) and in other borrowings of N$1.2 billion.
Other borrowings consist of long-term loans from the International Finance Corporation and the Deutsche Investitions- und Entwicklungsgesellschaft of N$920 million and N$250 million, respectively.
The group remains well capitalised and is generating sufficient profits to fund the growth in the loans and advances book.
At 15.8 percent, the risk-based capital adequacy ratio remains well above the minimum regulatory capital requirement of 10 percent.
“We have been privileged to experience a year with many highlights and achievements for our group. I am particularly proud of how the group continues to deliver on our promise to shareholders to deliver long-term sustainable value in a responsible manner.
“We do however expect the more challenging economic conditions to persist in the near term with slower economic growth, inflationary pressures, increases in interest rates and a weakening of our currency.
“We will continue to strive to improve the ease of doing business and the level of service to our customers. With our respected brands, good relationships, a prudent approach to credit and a strong capital adequacy position, we will remain focused on meeting the banking and financial services needs of Namibians”, said Group managing director Thinus Prinsloo.
“As a Group, we take pride in our Namibian heritage. Our solid foundation gives us the advantage of being able to decisively utilise our local insight and local decision-making power, ensuring that we can respond quicker to the local environment and to the needs of our clients.
“Furthermore, our success enables us to reinvest in the development of Namibia’s economy and, as a responsible corporate citizen, contribute to the socioeconomic development of our country through active involvement and support to government on achieving the targets set out in the Harambee objectives”.