Economic meltdown hits FNB Namibia

The challenges in the economy have caught up with FNB Namibia which has seen less credit being extended to the private sector, debt levels going up and downcast investor confidence.


Commenting on the bank’s latest results, analysts have remarked that they are mostly poorer than the previous financial year.


PSG Namibia said this is however in line with expectations as the Namibian economy continues to struggle and the amount of non-performing loans and also impairments increase.


FNB managed to grow gross loans and advances by 1.2% compared to an expectation of 6.3%.


Dividends per share of 204 cents are the same as the previous financial year.


Dividends remaining the same will appease investors at a good yield of 4.6%, said PSG.


According to PSG Namibia’s “At First Glance” report, the bank’s growth in net interest income slowed to 3.2 %, contrary to expectations of  5.3% from an increase of 6.7% in 2017.


The net interest margin had narrowed from 5.0% in the financial year 2017 to 4.9% in FY18 (PSG: 4.9%).


Pressure on the expenditure side led to profit before tax declining by 4.8% against expectations of 5.6%.


The cost-to-income ratio increased from 48.9% in 17 to 50.3% according to FNB’s normalised figures in FY18 (PSG: 52.1% unadjusted).


Return on assets has Said PSG Namibia, “declined in line with our expectations, from 3.0% in FY17 to 2.7% in FY18 (PSG: 2.6%). And the return on equity has also come down from 25.8% in FY17 to 22.1% in FY18 (PSG: 21.7%). Expenses did increase significantly, and profits are lower, as expected.”


In this economic climate, it is not a surprise that the non-performing loans ratio deteriorated from 1.3% in FY17 as a percentage of average gross loans and advances, to 1.7% (PSG: 1.8%).


 Bad debt ratio increased from 0.22% in FY17 to 0.45% in FY18 (PSG: 0.45%). The number of impaired mortgage loans increased by 43.8% as mortgage loans in arrears, but not yet impaired, reduced by 36.3%.


The total amount of non-performing loans in FNB’s book increased by 42.0% compared to FY17, compared to our forecasts of a 54.5% increase.