Africa-Press – Namibia. THE nine commercial banks in Namibia last year made a combined profit of N$3 billion – an increase of 33,5%, Bank of Namibia (BoN) data shows.
This massive increase according to the central bank was primarily due to the higher interest earned on loans, following the increase in the repo rate during 2022, coupled with the growth in loans advanced to customers.
The BoN this week released its annual report, which shows that the commercial banks are indeed making a killing.
The total income amounted to N$11,1 billion, representing a growth of 5,8%. Net interest was recorded at N$6,7 billion.
Net interest income continued to be the principal source of income for the banking sector, standing at N$6,7 billion in 2022, and constituting 60% of total income.
This was largely driven by the interest income from residential mortgages, fixed-term loans, and other interest-related income.
Operating income closed off the year at N$5,1 billion owing to higher transaction volumes.
This high income was also matched by a stubborn N$6,7 billion expenses bill, which continues to drive the cost-to-income ratio up and settling at 60,7% – the highest in the last five years.
The BoN’s balance sheet at the end of December shot up 11% by N$164,4 billion – mainly on the back of cash and balances held with the banks, short-term negotiable securities, and loans and advances.
The asset structure was still largely concentrated on net loans and advances accounting for more than half of total assets (64,4%), whereas cash and balances was at 16,1%.
Short-term negotiable securities took third place at 12,5% of total assets.
According to the central bank’s data, the banking industry was mainly funded by non-bank funding in the form of deposits and borrowing.
Demand deposits accounted for the largest portion of non-bank funding, while negotiable certificates of deposit and fixed and notice deposits lagged.
Demand deposits increased from N$61,2 billion to N$63,5 billion during 2022, while negotiable certificates of deposit stood at N$23,3 billion.
Fixed-notice deposits were at N$22,9 billion.
The commercial banks had some rotten apples too.
The stock of non-performing loans (NPLs) for 2022 was at N$6,1 billion, dropping from N$6,7 billion, which the central bank said was driven by recoveries of non-performing mortgages, improving the NPL ratio to 5,6%.
“The NPL ratio of 5,6% stood below the crisis trigger benchmark ratio of 6% and indicates that the quality of assets was satisfactory during 2022,” reads the central bank’s report.
The rotten apples are mainly found among individual, real estate and business services.
Non-performing loans of the individual sector made up 46,5% of total NPLs, while the real estate and business services sector recorded the second-highest in NPLs at N$833,7 million, or 13,7%.
The construction and agriculture sectors followed and were also among the most-affected sectors in terms of NPLs, standing at N$618,1 million (10,2%) and N$491,7 million (8,1%), respectively, of the total non-performing book share.
The remaining percentage share of 21,5% of total NPLs was distributed among manufacturing, transport, fishing, mining, electricity, gas and water, trade and accommodation, government services, and finance sectors.
Despite these bad loans, the banks set aside provisions to contain the NPL portfolio. Total provisions were at N$3,4 billion in 2022.
The banking sector in Namibia comprises nine authorised banking institutions, which are categorised as seven commercial banking institutions, a branch of a foreign banking institution, and a representative office.
These banking institutions are the primary mobilisers of funds for the public and the main source of financing for business operations and economic activities in Namibia.
They include Bank Windhoek Namibia Limited, First National Bank Namibia Limited, Standard Bank Namibia Limited, Nedbank Namibia Limited, Bank BIC Namibia Limited, Trustco Bank Namibia Limited, Letshego Bank Namibia Limited (micro-finance banking institution) and Banco Atlántico (branch of a foreign banking institution).
They remain adequately capitalised with capital and reserves increasing to N$19,9 billion due to an increase in general reserves.
The banking sector in Namibia has 134 physical branches, and 82 agencies.
In 2018, the number was much higher at 167 branches and 64 agencies.
The banks have been remodelling operations, cutting out many physical branches and embracing technology.
The sector employed 6 228 staff members at the end of 2022, of which 5 700 are permanently employed.
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