Capricorn Group, a Namibia-based investment holding company, reported a profit of 580 million dollars in 2021, a 23 percent increase over the previous financial cycle’s profit of 469.1 million.
When compared to the six months ended 31 December 2020, the Namibian and Botswana economies benefited from a better operating environment and less stringent COVID-19 restrictions during the six months ended 31 December 2021.
The increased economic activity, albeit from a low base, boosted Capricorn Group’s (“the Group’s”) performance, with profit from continuing operations increasing by N$111.4 million.
Profit from continuing operations of N$580.5 million, however, is slightly lower than the pre-COVID profit of N$587.8 million reported for the six months ended 31 December 2019.
Cavmont Bank Limited, a subsidiary of the group, was sold on January 4, 2021. As a result, the N$40.9 million losses incurred by their Zambian operations in the prior period were not repeated in the current period.
This is revealed in the company’s interim results for the six months ended December 31, 2021, which were released this week.
Net interest income increased by 4.9 percent year on year, owing primarily to an improvement of 50 basis points (“bps”) in Bank Windhoek’s net interest margins as a result of effective funding repricing.
Furthermore, impairment charges decreased by 21.6 percent year on year to the fiscal year ended 30 June 2021.
Meanwhile, N$182 million is primarily attributable to the improved operating environment, which has a positive impact on the banks’ key credit risk indicators.
However, the severe impact of the COVID-19 pandemic remains widespread, as evidenced by impairment charges for the six months ending 31 December 2019 that were significantly higher than pre-COVID charges of N$54.3 million.
Non-interest income increased by N$130.1 million (18.4 percent), owing primarily to a N$69.7 million (180.2 percent) increase in net trading income, primarily from foreign exchange trades and derivatives.
Transaction-based fee income increased by N$42.9 million (8.6 percent), owing primarily to higher transaction volumes as a result of increased economic activity.
Furthermore, the group’s non-interest income was well supported by its diverse revenue streams, with net insurance income increasing by N$11 million (20.9 percent) and asset management fee income increasing by N$3.9 million (5.1 percent), respectively.
Despite Namibian inflation rising to 4.5 percent as of December 31, 2021, year-on year operating expense growth was well contained at 4.1 percent. This demonstrates the group’s focus and ability to control costs.
Following a significant volume of life insurance claims resulting from the COVID-19 third wave in Namibia during the months of July and August 2021, income from associates decreased by 33.9 percent year on year.
Furthermore, Capricorn Group had a healthy liquidity position as of 31 December 2021, with liquid assets increasing by 10.1 percent year on year. In Namibia and Botswana, liquid assets exceeded regulatory requirements by 109 percent and 55 percent, respectively.
During the six months ended 31 December 2021, gross loans and advances increased by 3.6 percent to N$43.7 billion. Bank Windhoek’s growth rate of 2.6 percent is significantly higher than the annualised rate.
Namibian private sector credit extension increased by 1.2 percent, indicating the group’s ability and intention to extend financing to continue supporting clients during the pandemic.
During the six-month period, Bank Gaborone increased its loan book by 2.8 percent to 5.1 million pula.
The group’s primary focus area has remained asset quality.
Despite the challenging economic environment, the group’s total non-performing loans (“NPLs”) increased by 4.5 percent to N$2.57 billion since June 2021.
As a result, the NPL ratio increased slightly from 5.8 percent to 5.9 percent. This is significantly lower than the industry average NPLs in Namibia, demonstrating the effectiveness of the group’s proactive approach to credit risk management.
The group maintained its strong capital position and remains well capitalised, with a total risk-based capital adequacy ratio of 15.1 percent, well above the minimum regulatory capital requirement of 10 percent.
The group declared a 32-cent interim dividend per ordinary share. The interim dividend per share declared for the period under review is 45.5 percent higher than the interim dividend per share declared in February 2021, which was 22 cents.
As always, the group intends to declare an interim dividend that strikes a balance between prudence in preserving the Group’s capital and liquid asset position and a reasonable dividend yield for investors in the current low interest rate environment.
Its principal investments include 100 percent stakes in Bank Windhoek Ltd (BW), Namib Bou (Pty) Ltd, Capricorn Capital (Pty) Ltd, Capricorn Investment Group (Pty) Ltd, and Capricorn Hofmeyer Property (Pty) Ltd.
The company owns an 84.8 percent stake in Capricorn Investment Holdings (Botswana) Ltd, which owns 100% of Bank Gaborone Ltd (BG), a 95.7 percent stake in Capricorn Asset Management (Pty) Ltd and Capricorn Unit Trust Management Company Ltd, a 29.5 percent stake in Sanlam Namibia Holdings (Pty) Ltd, a 28 percent stake in Santam Namibia Ltd, and a 30 percent stake in Paratus Group Holdings, amongst others.