Capricorn Group Limited achieved solid results with profit after tax for the six months ended 31 December 2022, increasing by 20.3%, compared to the prior period.
The annualised return on equity also increased to 16.6% (December 2021: 14.9%).
“The group’s strong performance is due to a better operating environment with dedicated and committed staff, with Bank Windhoek and Bank Gaborone reporting marked improvement in their results, compared to the previous Covid-19 affected period,” said Thinus Prinsloo, group CEO.
Capricorn Group Limited is a Namibian financial services group, listed on the Namibian Stock Exchange, with diversified operations and business interests in Namibia and Botswana.
According to Prinsloo, the group expects further economic recovery and improved economic conditions within its operating regions in the medium to long term.
“Covid-19 has ‘edged’ closer to endemic status, while the severity of the initial economic fall-out from global geo-political tensions, spawned by the war in Ukraine, has reduced. The significant pressures from increased energy and food costs, high inflation and high-interest rates will continue to have a negative impact for the foreseeable future,” added Prinsloo.
The group created a value of N$2.15 billion during the six months ended 31 December 2022, which was shared by its main stakeholders: N$644 million to employees, N$411.1 million to government, N$206 million to ordinary shareholders, N$311.8 million to suppliers, N$8.6 million to Capricorn Foundation and N$564.8 million on value retained for future expansion.
Group financial performance highlights
Net interest income increased by 14.9% year-on-year, aided by year-on-year increases in the repo rate in Namibia and Botswana of 300 basis points and 151 basis points, respectively.
Bank Windhoek managed its cost of funding effectively, which resulted in a 54-basis point improvement in the net interest margin to 4.88%.
However, Bank Gaborone’s net interest margin declined from 3.5% to 3.1% due to a sharp increase in the cost of funding in a market with low levels of liquidity.
Furthermore, impairment charges decreased by 14.9% in credit impairment charges.
Impairment charges for the six months ended 31 December 2022 of N$154.9 million are still well above the pre-Covid charges of N$54.3 million for the same period in 2019, illustrating the ongoing pandemic impact.
The group continues to hold prudent provisions for expected credit losses.
Non-interest income also increased by N$103.1 million (12.3%), mainly attributable to a 23.3% increase in transaction-based fees, driven by increased transaction volumes, specifically using digital channels, particularly EasyWallet, digital fund transfers, ATM withdrawals and point-of-sale transactions.
Asset management fees from Capricorn Asset Management increased by 11.3% year-on-year in line with expectations.
Operating expenses increased by 16.1% (N$165.3 million) year-on-year from a low base environment, attributable to Covid-related economic restrictions in the comparative period.
The year-on-year increase is mainly due to operational banking expenses, which increased by N$52.6 million (46.8%); staff costs increased by N$67.9 million (11.9%), mainly driven by the filling of vacancies and annual increases. The remainder of expenses increased by N$44.8 million, accounting for 4.4% of the year-on-year growth.
Income from associates increased by 34.6% year-on-year, following a significant reduction in the volume and value of life insurance claims received by Sanlam Life, relative to the comparative period, which was impacted by the Covid-19 third wave in Namibia during the months of July and August 2021.
Capricorn Group retained a healthy liquidity position as at 31 December 2022 as the Group’s liquid assets increased by 8.7% (N$1.1 billion) year-on-year.
Liquid assets exceeded minimum regulatory requirements in Namibia and Botswana by 139% and 119%, respectively, as at 31 December 2022.
Gross loans and advances increased by N$1.4 billion year-on-year, mainly driven by mortgage loan growth of N$460.8 million (2.4%), commercial loan growth of N$453.6 million (4.2%) and article finance growth of N$388.0 million (10.8%).
Asset quality remained a key focus area for the Group.
Despite the challenging economic environment, the Group’s total non-performing loans (NPLs) decreased to N$2.38 billion (June 2022: 2.44 billion) as the group continues to manage credit risk on a pro-active basis.
This decreased the NPL ratio from 5.8% to 5.3% over the six months ended 31 December 2022.
The NPL ratio remains below the industry average in Namibia.
It further enhanced its already-robust capital position with a total risk-based capital adequacy ratio of 16.6% as at 31 December 2022 (June 2022: 15.8%).
The Group declared an interim dividend of 39 cents per ordinary share. The interim dividend per share for the period under review is 21.9% higher than the interim dividend per share of 32 cents declared in the comparative
period.