Staff Writer
Capricorn Group Limited delivered strong results through the solid performances of all its subsidiaries, with profit after tax increasing by 16.6% to N$1.15 billion.
The agility and quick decision-making within the Group allowed it to swiftly sense and respond to ever-changing challenges.
The outlook is for improved economic conditions in Namibia and Botswana, albeit from a lower base.
The Group says they were 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 Johan Maass, Group Chief Financial Officer.
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 by 23.2% as Bank Gaborone’s interest margin deteriorated to 2.91% (2021: 3.79%) due to poor market liquidity, driving the 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. Non-interest income is supported by the Group’s diversified income streams, including a contribution from CAM of asset management fee income of N$164.6 million (2021: N$158.7 million). Entree’s net premium income decreased marginally from N$163.3 million in 2021 to N$161.3 million.
Managing Operating Expenses
Operating expenses increased by 6.7% compared to the prior year’s 5.1%, with 87.8% of total operating expenses paid to suppliers and employees.
The above inflation increase in staff cost of 7.7% is largely due to increasing capacity in information technology and cyber security to deliver on our strategic objectives on data and digitisation and to manage our general IT and cyber security risk.
Containing cost to only essential and value-adding spending will remain a focus for 2023.
Improved Credit Quality
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) falling to 4.8% (2021: 5.2%).
The loan loss rate decreased from 1.07% to 0.85% and remained low against current industry norms.
Impairment charges decreased by 17.2% (N$76.4 million) to N$367.3 million, mainly due to our proactive approach to credit risk management and an improved operating environment for our customers as COVID-19 restrictions were eased.
This year, gross loans and advances increased by 6.1% to N$44.7 billion. This is well above annualised Namibian private sector credit extension growth of 3.4% and confirms our ability and intention to continue extending financing to support clients during difficult times. This growth was mainly attributable to commercial loans, mortgage loans and article finance increases.
Sound Liquidity Position
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. 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.
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%.
Capricorn Group created financial value through its strong performance, and as a result, a number of stakeholders directly benefit.
Employees received a combined N$1.2b (7.4% increase) in addition to remuneration, and more than 2000 received rewards, recognition and career and personal development opportunities.
The Group paid the government and regulators N$678m in taxes, duties and license fees. This is an 8.6% increase, while suppliers received N$530m (3.3% increase).
About 4 000 shareholders received dividends and benefits amounting to N$354m (72.5% increase), and communities got N$15.4m (26.9% increase in corporate social responsibility programmes.
The Group retained N$928m (1,1% increase) for future expansion and growth opportunities.
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.
“Despite difficult conditions, 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.
