The last financial year was one of recovery from the Capricorn Group as it emerged from the shadows of Covid-19. In its financial results for the year ended 30 June 2022, the group delivered strong results through the solid performances of all its subsidiaries, with profit after tax increasing by 16.6% to N$1.15 billion. 

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. 

“Despite difficult conditions, the Capricorn Group delivered strong shareholder returns. We will maintain this position by building on the strength of our diversified operations and revenue streams while investing in our digital customer experience”, said Johan Maass, Group Financial Manager.

While Covid-19 continued to impact businesses across all sectors, a recovery was noticed in the last few months of the 2022 financial year. The outlook is for improved economic conditions in Namibia and Botswana, albeit from a lower base. The Russia-Ukraine war and resulting sanctions have accelerated inflation, placing additional pressure on the local environment. Yet, the Group’s results demonstrate how Capricorn Group used our advantage of being local, agile and responsive.  As a result, the Group was able to preserve and grow value for our stakeholders, despite the difficult economic circumstances.

“This year, we celebrated two important milestones: Bank Gaborone’s 15th and Bank Windhoek’s 40th anniversaries. These milestones would not have been possible without our talented employees’ hard work and dedication.  I am proud of these sustainable businesses, and look forward to many more years of growth.  All our subsidiaries performed well this financial year, giving the Group a strong foundation to continue growing and expanding its leadership in the various markets”, said Thinus Prinsloo, Group CEO.    

“The Group delivered strong results, despite the economic pressures exacerbated by rising inflation on the back of increased global oil and food prices. Our region, fortunately, witnessed increased economic activity as Covid-19-related restrictions were eased,” said Maass. 

Net interest income

The Group’s net interest income before impairments increased by 3.6% to N$2.34 billion (2021: N$2.26 billion). Bank Windhoek’s net interest income increased by 7.4% in 2022, thanks to year-on-year growth of 7.6% in interest-earning assets. Notwithstanding repo rate increases of 100 basis points between February and June 2022 by the Bank of Namibia, the bank’s average net interest margin remained relatively flat at 4.37% (2021: 4.36%) as the average cost of funding increased over the period.

The Bank of Botswana increased rates by 51 basis points in April 2022, and 50 basis points in June 2022. Despite these increases, Bank Gaborone experienced a 7.6% decline in net interest income.  While interest income grew by 6.6% in 2022, interest expenses increased 23.2% as Bank Gaborone’s interest margin deteriorated to 2.91% (2021: 3.79%), due to poor market liquidity driving a higher cost of funding.

Growing non-interest income

Non-interest income increased by 13.1% to N$1.67 billion (2021: N$1.48 billion). Bank Windhoek increased its non-interest income by 10.3%, and Bank Gaborone’s non-interest income grew 33.3% to BWP106.2 million. The increases in this revenue line were described as a direct consequence of increased transaction volumes and an increase in foreign exchange trading income on the back of higher transaction volumes, increased foreign exchange rate volatility, and higher trading margins. Non-interest income is supported by the Group’s diversified income streams, including a contribution from Capricorn Asset Management (CAM) of asset management fee income of N$164.6 million (2021: N$158.7 million).  Entrepo’s net premium income decreased marginally from N$163.3 million in 2021 to N$161.3 million.

Improved Credit quality

Asset quality remains a key focus for the Group. Despite the challenging economic conditions, the Group’s non-performing loans decreased marginally to N$2.44 billion (2021: N$2.46 billion). This resulted in the non-performing loan ratio (excluding interest in suspense) decreasing to 4.8% (2021: 5.2%).  “Our loan loss rate decreased from 1.07% to 0.85%, and remains low against current industry norms. Impairment charges decreased by 17.2% (N$76.4 million) to N$367.3 million, mainly as a result of our proactive approach to credit risk management and an improved operating environment for our customers as Covid-19 restrictions were eased. Gross loans and advances increased by 6.1% to N$44.7 billion this year,” the Group stated. 

This is well above annualised Namibian private sector credit extension growth of 3.4%, and confirms the Group’s ability and intention to continue extending financing to support clients during difficult times. This growth was mainly attributable to increases in commercial loans, mortgage loans and article finance.

Sound Liquidity position

Covid-19 underlined the importance of having sufficient liquidity to withstand a crisis. The Group maintained a sound liquidity position, with liquid assets increasing by 14.3% year-on-year. Liquid assets exceeded regulatory requirements in Namibia and Botswana by 107.5% and 121.1%, respectively.  Additionally, the Group’s loan to funding ratio improved to 87.2% (2021: 88.6%). Notwithstanding these surpluses, the Group maintains N$1.0 billion contingency funding, which is available to the two banking subsidiaries within three to seven days.

Strong Capital depth

The Group remains well-capitalised, with a total risk-based capital adequacy ratio of 15.8% (2021: 15.0%).  This is well above the minimum regulatory capital requirement of 10%. This strong capital position has supported the Group through the difficulties brought about by the pandemic.

Dividend declaration

The Group declared a final dividend of 40 cents per ordinary share, which will be paid to shareholders on 26 October 2022. Considering the interim dividend of 32 cents per ordinary share, this represents a total dividend of 72 cents per ordinary share, 20.0% higher than the total dividend for 2021 of 60 cents per ordinary share.  The Group believes the dividend offers investors solid cash returns in difficult economic conditions where earnings and income are under pressure, while also preserving the capital and liquid asset position of the Group during these uncertain economic times.