The newly launched Namibia Deposit Guarantee Authority (NDGA) recorded a market value in its fund of N$4.902 million by the end of the fourth quarter of 2020.
This is just over N$35 000 higher than the N$4.867 million at its inception on 18 October 2020, representing a portfolio value growth of 0.727% for the quarter.
“Global and domestic economic performance has direct implications on the performance of the Deposit Guarantee Fund (DGF). It is thus important that economic and industry developments are closely monitored from the NDGA’s perspective as the above factors point to potentially challenging economic and industry performances. All of these elements characterised the environment in which the NDGA operated in its first year, as well as the performance of the DGF,” said head of the authority Emma Haiyambo in their 2020 annual report.
She added that the negative impact of Covid-19 saw a deterioration in the banking industry’s asset quality as the non-performing loans’ ratio reached a weaker level of 6.4% during 2020. This is significantly worse when compared with 4.8% recorded in 2019.
In terms of the banking industry, their overall liquidity position declined in 2020. Average surplus liquidity was recorded at N$2.1 billion in 2020, lower than the average of N$2.9 billion recorded during the previous year.
The industry, however, remained profitable and well-capitalised in 2020, despite the observed deterioration in asset quality. The banking industry recorded a positive return on equity, although it has decreased from 20.1% at the end of December 2019 to 13.5% at the end of December 2020. Capital adequacy has remained broadly flat at 15.2% in 2020, compared with 15.3% in 2019.
The report stated that this level is, however, substantially higher than the statutory minimum requirement of 10% of risk-weighted assets.
The lower demand for credit amidst the uncertainties of the reporting year has resulted in stronger liquidity levels for the industry. The liquidity ratio of the banking industry stood at 15.6% at the end of 2020, slightly higher than the 15.3% registered at the end of December 2019.
“This position is well above the prudential requirement of 10% of average total liabilities to the public. Despite slower balance-sheet growth, the commercial banks still managed to record profits, although much lower when compared with the previous year,” reads the report.
According to Haiyambo, the performances of both the economy and the banking industry are critical for the operations of the NDGA and its scheme.