Standard Bank Namibia Holdings Group produced a strong performance in 2015, increasing profit after tax by 45 percent and loans and advances by 11 percent.
The Group’s return on equity (ROE) has improved to 23.56 percent from 17.67 percent in 2014. Total income grew by 20 percent and expenses grew by 13 percent, reflecting an appropriate balance between cost management, long-term investment and revenue enhancing activities.
This focus also manifested into efficiencies as indicated by cost-to-income ratio, improving to 58.34 percent from 62.04 percent.
The bank’s net interest income increased 30 percent, mainly as a result of growth in interest earning assets, funding efficiencies mix and higher margins. Margins improved due to re-pricing of new business in the mortgage, business and personal term lending books to better reflect the risk and costs of anticipated regulatory changes.
Non-interest revenue grew by 9 percent during the year with net fee and commission revenue up 12 percent, mainly as a result of increased transaction volumes offset by higher costs. Trading revenue increased by 31 percent on the back of higher volumes, while other revenue was 30 percent lower than in the prior year.
For the year, credit impairments were 24 percent lower than the prior year at N$85.3 million and the credit loss ratio improved to 0.51 percent (2014: 0.76 percent). Non-performing loans as a percentage of gross loans and advances increased from 2.06 percent in 2014 to 2.73 percent in 2015 with the deterioration across most of the portfolios.
Staff costs, which grew by 11 percent for the year due to annual salary and other benefit increases offset by reduced temporary headcount, was the main contributor to the increase in operating costs. In addition, the 2015 cost reflect a full year of the training levy implemented during April 2014.
Other operating expenses increased by 14 percent largely as a result of increased Information technology expenditure including higher consultancy and software license fees. Branch expansion and revamps also contributed to cost increases.
Total assets increased by 10 percent to N$24 billion. The main contributors to this growth were increases in loans and advances, financial investments and trading assets.
Total loans and advances were up 11 percent. Contributing to the increase in loans and advances was a 7 percent increase in mortgage loans. Other term loans increased by 21 percent mainly due to the increased term loans to corporates. Instalment sale and finance leases increased 11 percent due to growth in the passenger vehicle market.
Deposit and current accounts increased 4 percent to N$18.2 billion (2014: N$17.5 billion) through a focus on deposits and current accounts, higher foreign currency balances and higher client working capital requirements.
The group’s tier I capital was N$2 300 million at December 31, 2015 (2014: N$1 703 million) and total capital was N$2 674 million at December 31, 2015 (2014: N$2 012 million). The change in the Group’s capital was primarily due to an increase in retained earnings and the introduction of additional Tier II capital.
The SBN Holdings maintained a well-capitalised position based on tier I total capital adequacy and leverage ratios throughout 2015. The group’s liquidity position remains strong with appropriate liquidity buffers of N$2.10 billion in excess of regulatory requirements at 31 December 2015.
These significant levels of liquidity are appropriately conservative, given the group’s liquidity stress-testing philosophy and in view of potential change in regulatory requirements.
The group maintains adequate levels of highly marketable liquid securities to meet prudential, regulatory and internal stress-testing requirements as protection against unforeseen disruptions in cash flows.
Prospects
Standard Bank noted that the outlook for 2016 is uncertain given the significant fluctuations in the value of the Namibia Dollar and its uncertain impact on inflation levels in 2016. The expected increases in interest rates in 2016 add to these uncertainties, compounded by the continued low levels of commodity prices and the drought experienced in the last three years.
However, the Namibian economy has, to a large extent, remained resilient during these challenging times, growing at rates higher than other countries on the sub-continent.
“Our capital and liquidity strength, together with our firm commitment to our strategy which includes the building of world-class systems, provides substantial opportunity to elevate our ROE and deliver higher levels of economic value to our stakeholders over the medium term.
“The realistic and clear prioritisation, co-ordination and implementation of our agreed actions is important, and it is a matter receiving priority attention from the whole executive management team which should see to a successful 2016,” said the bank’s chief executive Vetumbuavi Mungunda.
Standard Bank Namibia’s 2015 results represent both the first year of the bank’s three-year strategy journey and its 100th year of existence in Namibia. With over 50 points of representation and more than 1 500 employees, the bank has been adapting to the profound changes in the financial services industry and the expectations of its stakeholders – anticipating the changes and responding decisively and effectively – a measure of the bank’s ability to stay relevant.
“Our industry is changing faster than ever before and we must be able to respond effectively to this change to stay relevant to the economies and societies we serve. It is this, ultimately, that underpins sustainable profitability and value creation,” Mungunda noted.