Battle for Nam’s banking industry

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Battle for Nam's banking industry
Battle for Nam's banking industry

Africa-Press – Namibia. NAMIBIA’S two biggest banking-backed financial institutions, Capricorn Group Limited and FirstRand Namibia, have made a whopping combined profit of N$2,3 billion for the 2022 financial year.

NAMIBIA’S two biggest banking-backed financial institutions, Capricorn Group Limited and FirstRand Namibia, have made a whopping combined profit of N$2,3 billion for the 2022 financial year.

The two have a combined asset base of N$112 billion and control over 70% of banking activities in the country.

Headed by two powerful men, Thinus Prinsloo and Conrad Dempsey, who earned a combined salary of N$13 million, the financial institutions have holdings in banking, insurance, micro-lending, properties and information technology.

The two powerhouses released their final 2022 financial statements late last week, showing that although they play in the same league, and are of almost equivalent muscle, FirstRand Namibia and owners of FNB Namibia earned a better profit, will pay shareholders more, and returned more on invested capital.

Financial statements released by FirstRand show that the company earned a net profit after tax of N$1,2 billion, N$100 million more than Capricorn’s N$1,1 billion after tax profit.

Although Capricorn had a smaller bottom line, its net interest revenue of N$2,3 billion was more than the N$2,2 billion earned by FirstRand.

The OUTsurance owner, however, earned better non-interest income, at N$1,9 billion, beating Capricorn to a better operating profit recorded at N$1,8 billion.

Capricorn earned an operating profit of N$1,5 billion.

Other comparables, such as assets, deposits and the size of the loan book, saw Capricorn emerge as the biggest bank-backed financial institution, with a N$60 billion asset base, N$43,6 billion worth of deposits, and loans issued to the tune N$43,3 billion.

FirstRand’s assets are at N$37,1 billion, N$37 billion worth of deposits, and loans at N$31,9 billion.

Capricorn has lent to the bone, with a narrowed gap between deposits and advances of about just N$300 million.

The company’s group chief financial officer, Johan Maass, last Friday attributed this to the group lending more, as opposed to the rest of the market, achieving private sector extension growth of over 4% when the market was just slightly above 3%.

FirstRand is considered to be very conservative, and has over the years earned much from fees and commissions, as opposed to pumping funds into the market. Its capital requirement is at 21,2%, way more than the requirement, explaining the N$5,2 billion deposits to the advances gap.

Capricorn has a capital requirement ratio of just 15,8%.

Dempsey said the slow demand for credit in a rising interest and inflation environment poses challenges for accelerated economic growth.

“However, we are clear on our role and responsibility to Namibians, experienced in our expertise, and we not only remain ready to facilitate economic growth, but we also continue to actively seek it out,” he noted.

It is not quite clear what this would mean, especially considering the bank has been on the fence in terms of participating heavily in credit extension.

FirstRand, although with a smaller balance sheet, has returned to its shareholders 21,4%, beating Capricorn with a return on investments of just 15%.

Running FirstRand is, however, expensive, as the group has a cost to income ratio, or spends at least 52,8% of its income to cover operating costs, while Capricorn’s cost to income ratio, on the other hand, is at 51,1%.

Unlike FirstRand Namibia, which only has its focus in Namibia, Capricorn has roots in Botswana and has divested from Zambia.

Prinsloo says the Capricorn Group has no actionable strategy to penetrate another market yet, but will focus on creating value and deepening its roots in the market it now operates in.

The group has launched Peo Finance in Botswana, which at the end of the financial year disbursed advances worth some 200 million pula.

Prinsloo said despite Botswana being the play market of Letshego, Peo will penetrate the market there because the opportunities are vast, with Peo leveraging technology and good service provision to steal some market from Letshego.

Both Capricorn and FirstRand have recorded way better non-performing loan ratios for the financial year under review, at 4,8% and 4,5%, respectively.

During the financial year, FirstRand also took a hit and launched a green bond, an area Capricorn has led, scooping N$353 million from the market, making it a first for the FirstRand Namibia group, and the largest publicly traded green bond in Namibia.

Capricorn is, however, ahead, having issued a sustainability bond and attracting some N$277 million over the financial year.

The two financial institutions have been at the forefront of pushing technology in the market, having spent a combined N$2 billion on research and development over the past two financial years.

On the outlook, FirstRand’s chief financial officer Oscar Capelao said 2023 is expected to be a great year.

“The economy should start returning to usual terms, with interest rates rising. We are gearing the whole group to deliver on our strategy and become a purpose-driven organisation. FirstRand Namibia has the ability and the talent to do that. Over the next few years, we’ll be showing how we’re enhancing service for our clients, how we’re managing costs and how we’re rationalising our product offering,” he said.

Maass said despite difficult conditions “the 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,” Maass said.

Capricorn declared a final dividend of 40 cents per ordinary share, which will be paid to shareholders on 26 October 2022, while FirstRand declared a better dividend at N$3,19 per ordinary share.

Dividend yields were at 15,7% for First­Rand, and 5,5% for Capricorn.

Equity analysts at Simonis Storm had Capricorn in a hold rating, and FirstRand in a buy at the date of the release of the financial statements.

Shaun Lahner of Simonis Storm said he sees the Capricorn Group in good stead to continue riding the wave, as the country recovers from a global pandemic and recession, and the good set of results for FirstRand Namibia exceeded expectations.

Simonis had FirstRand at a target share price of N$36,17 and Capricorn at N$13,95. Shares started off the week trading at N$30,56 and N$12,50, respectively.

Despite making a better profit, FirstRand paid less in taxes, at N$636 million, while Capricorn paid N$678 million.

The full set of financial statements are available on the companies’ websites.

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The two have a combined asset base of N$112 billion and control over 70% of banking activities in the country.

Headed by two powerful men, Thinus Prinsloo and Conrad Dempsey, who earned a combined salary of N$13 million, the financial institutions have holdings in banking, insurance, micro-lending, properties and information technology.

The two powerhouses released their final 2022 financial statements late last week, showing that although they play in the same league, and are of almost equivalent muscle, FirstRand Namibia and owners of FNB Namibia earned a better profit, will pay shareholders more, and returned more on invested capital.

Financial statements released by FirstRand show that the company earned a net profit after tax of N$1,2 billion, N$100 million more than Capricorn’s N$1,1 billion after tax profit.

Although Capricorn had a smaller bottom line, its net interest revenue of N$2,3 billion was more than the N$2,2 billion earned by FirstRand.

The OUTsurance owner, however, earned better non-interest income, at N$1,9 billion, beating Capricorn to a better operating profit recorded at N$1,8 billion.

Capricorn earned an operating profit of N$1,5 billion.

Other comparables, such as assets, deposits and the size of the loan book, saw Capricorn emerge as the biggest bank-backed financial institution, with a N$60 billion asset base, N$43,6 billion worth of deposits, and loans issued to the tune N$43,3 billion.

FirstRand’s assets are at N$37,1 billion, N$37 billion worth of deposits, and loans at N$31,9 billion.

Capricorn has lent to the bone, with a narrowed gap between deposits and advances of about just N$300 million.

The company’s group chief financial officer, Johan Maass, last Friday attributed this to the group lending more, as opposed to the rest of the market, achieving private sector extension growth of over 4% when the market was just slightly above 3%.

FirstRand is considered to be very conservative, and has over the years earned much from fees and commissions, as opposed to pumping funds into the market. Its capital requirement is at 21,2%, way more than the requirement, explaining the N$5,2 billion deposits to the advances gap.

Capricorn has a capital requirement ratio of just 15,8%.

Dempsey said the slow demand for credit in a rising interest and inflation environment poses challenges for accelerated economic growth.

“However, we are clear on our role and responsibility to Namibians, experienced in our expertise, and we not only remain ready to facilitate economic growth, but we also continue to actively seek it out,” he noted.

It is not quite clear what this would mean, especially considering the bank has been on the fence in terms of participating heavily in credit extension.

FirstRand, although with a smaller balance sheet, has returned to its shareholders 21,4%, beating Capricorn with a return on investments of just 15%.

Running FirstRand is, however, expensive, as the group has a cost to income ratio, or spends at least 52,8% of its income to cover operating costs, while Capricorn’s cost to income ratio, on the other hand, is at 51,1%.

Unlike FirstRand Namibia, which only has its focus in Namibia, Capricorn has roots in Botswana and has divested from Zambia.

Prinsloo says the Capricorn Group has no actionable strategy to penetrate another market yet, but will focus on creating value and deepening its roots in the market it now operates in.

The group has launched Peo Finance in Botswana, which at the end of the financial year disbursed advances worth some 200 million pula.

Prinsloo said despite Botswana being the play market of Letshego, Peo will penetrate the market there because the opportunities are vast, with Peo leveraging technology and good service provision to steal some market from Letshego.

Both Capricorn and FirstRand have recorded way better non-performing loan ratios for the financial year under review, at 4,8% and 4,5%, respectively.

During the financial year, FirstRand also took a hit and launched a green bond, an area Capricorn has led, scooping N$353 million from the market, making it a first for the FirstRand Namibia group, and the largest publicly traded green bond in Namibia.

Capricorn is, however, ahead, having issued a sustainability bond and attracting some N$277 million over the financial year.

The two financial institutions have been at the forefront of pushing technology in the market, having spent a combined N$2 billion on research and development over the past two financial years.

On the outlook, FirstRand’s chief financial officer Oscar Capelao said 2023 is expected to be a great year.

“The economy should start returning to usual terms, with interest rates rising. We are gearing the whole group to deliver on our strategy and become a purpose-driven organisation. FirstRand Namibia has the ability and the talent to do that. Over the next few years, we’ll be showing how we’re enhancing service for our clients, how we’re managing costs and how we’re rationalising our product offering,” he said.

Maass said despite difficult conditions “the 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,” Maass said.

Capricorn declared a final dividend of 40 cents per ordinary share, which will be paid to shareholders on 26 October 2022, while FirstRand declared a better dividend at N$3,19 per ordinary share.

Dividend yields were at 15,7% for First­Rand, and 5,5% for Capricorn.

Equity analysts at Simonis Storm had Capricorn in a hold rating, and FirstRand in a buy at the date of the release of the financial statements.

Shaun Lahner of Simonis Storm said he sees the Capricorn Group in good stead to continue riding the wave, as the country recovers from a global pandemic and recession, and the good set of results for FirstRand Namibia exceeded expectations.

Simonis had FirstRand at a target share price of N$36,17 and Capricorn at N$13,95. Shares started off the week trading at N$30,56 and N$12,50, respectively.

Despite making a better profit, FirstRand paid less in taxes, at N$636 million, while Capricorn paid N$678 million.

The full set of financial statements are available on the companies’ websites.

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