First National Bank Namibia’s financial results for the six months that ended on December 31, 2015, indicate that profit for the period increased by 20.5 percent to N$597.4 million (2014: N$495.6 million), while earnings per share increased by 21 percent to 226.5 cents (2014: 187.2 cents).
Return on average equity improved to 35.4 percent (2014: 35.0 percent) and return on average assets increased to 3.9 percent (2014: 3.7 percent), while cost-to-income ratio was a very efficient 42.4 percent. Non-interest income increased by 15.6 percent to N$744.2 million (2014: N$643.9 million). Net fee and commission income increased by 11.9 percent. Consumers benefited from a waiver of cash deposit fees on individual and SME transactions which came into effect in April 2015.
Year on year FNB’s customer numbers grew by 15 percent. The group continues to see traction in the migration of its customers onto electronic channels, with growth of 18 percent in electronic transactions, compared to a decrease in branch-based transactions.
“Despite a deteriorating Namibian and global economic climate, FNB Namibia Holdings performed well for the six months ended 31 December 2015. The first-half results were achieved by consistently executing our strategies and focussing on delivering sustainable value to all stakeholders.” said Oscar Capelao, chief financial officer at FNB Namibia.
Net interest income increased by 15.6 percent to N$815.5 million (2014: N$705.5 million). “Although in an increasing interest rate cycle, the group is benefiting from the positive endowment effect. Due to an increase in the average cost of deposits, banks have been experiencing a margin squeeze. Interest expense increased by 22 percent, compared to interest income growth of 18 percent,” adds Capelao.
For the first six months of the financial year, the total impairment charge was N$31.7 million (2014: N$30.1 million), amounting to a 0.27 percent (2014: 0.20 percent) charge of average advances. The portfolio provision charge of N$3.3 million (2014: N$18.9 million) is in line with the group’s strategy of maintaining an appropriate level of provisioning on the performing book.
Total operating expenses increased by 12.5 percent to N$677.5 million (2014: N$602.4 million), while staff related costs amounted to more than 50 percent of operating expenses, and are up 11.0 percent. Staff numbers grew by 7.4 percent, largely due to the strengthening of the risk and compliance team. A minimum annual salary increase of 7.75 percent was agreed with the union, which resulted in an average salary increase of 8.6 percent.
FNB’s total tax contribution amounted to N$397 million for the period, for direct and indirect taxes collected.
The group continues to incur investment costs in increasing its footprint. An additional outlet was opened in Rundu in December 2015 to alleviate congestion in the main branch and 31 new ATMs/mini ATMs were installed with associated data lines and rental costs.
Advances, making up 76.7 percent of total assets, reflected a year on year increase of 15.1 percent to N$24.9 billion. Growth was ahead of private credit extension, which grew by 13.6 percent in December. FNB’s home loan book has surpassed the N$11 billion mark, representing 45.9 percent (2014: 47.1 percent) of FNB’s advances book.
Deposits increased by 11.7 percent to N$25.7 billion, trailing the growth in advances. The slower growth in general customer deposits, particularly influenced by large corporate clients, was supported by the issuance of additional NCDs (negotiable certificate of deposit ) in the professional market.
FNB remains well capitalised with a total capital adequacy of 15.8 percent – the same level as December 2014. This is well above the regulatory requirement of 10 percent and the internal board approved target of 14.2 percent. Economic risk is still backed by a strong Tier 1 capital level of 13.1 percent. The group declared an interim dividend of 91 cents for the six months ended December 2015.
On the future outlook Capelao said the Group forecasts economic growth to slow in 2016. “Falling commodity prices and looming water shortages pose downside risks. Water intensive sectors, such as construction, agriculture, manufacturing, and hydro-power generation will be negatively affected. Rising inflation, slower employment growth and higher interest rates will weigh on real disposable income growth and constrain credit growth. The economy is unlikely to see a meaningful increase in household consumption growth in the face of higher food prices. In light of muted export growth, rising imports and rising inflation, it is likely the weak local currency will accelerate inflation.”
He concluded by saying FNB Namibia expects operating conditions to become more challenging on both the economic and regulatory fronts. “However, we believe our strong balance sheet, diversified earnings base and innovative initiatives at providing cost-effective and efficient banking for all will ensure a sustainable performance.”