FirstRand earnings climb 12.2%
FirstRand Namibia’s profit rose 12.2% to N$2.15 billion in the year to June, despite a decline in interest income, as lower funding costs and a sharp fall in credit losses boosted earnings.
Headline earnings per share increased 12.3% to 802.5 cents, while return on equity remained strong at 28.5%, above the group’s target range of 22% to 25%.
The bank said the performance was supported by growth across its businesses, stronger customer deposits and improved credit quality.
Lower funding costs
Interest income fell 2.8% to N$5.69 billion, partly because of changes in the repo rate and a narrower gap between the prime lending rate and the repo rate.
But interest expense fell 19.2% as the bank reduced its reliance on institutional funding and benefited from stronger customer deposits.
Deposits increased 14.3% to N$52.13 billion, outpacing the 9.2% growth in advances to N$42.81 billion.
The faster growth in deposits strengthened the bank’s funding position and reduced its reliance on more expensive institutional funding.
Net interest income consequently increased 9.4% to N$3.67 billion, while the net interest margin rose to 6.4% from 5.9%.
Non-interest revenue, including the insurance service result, increased 2.8%, supported by higher transaction volumes, fees and card commissions.
The SME Digital Hub also completed its first full year of operation.
Credit losses fall
FirstRand Namibia also benefited from a sharp improvement in credit losses.
Impairment losses fell 52.8% to N$249 million, driven by higher recoveries and a significant reduction in business-as-usual specific impairments.
The credit loss ratio fell to 0.6% from 1.3%, while non-performing loans (NPL) declined to 3.8% of advances from 5.2%.
The bank’s NPL ratio was below the industry average of 4.2% at the end of June.
The improvement in credit losses provided a significant boost to earnings, although the 0.6% credit loss ratio is close to the lower end of the group’s long-term expected range of 0.5% to 1%.
RMB leads lending growth
Advances increased 9.2% during the year, although growth varied across the group’s businesses.
RMB advances rose 35%, while WesBank advances increased 12%.
FNB advances grew 2.4%, reflecting capital repayments and muted growth in home loans.
Private-sector credit extension increased 4.5%, with corporate and household credit both growing at the same rate.
Investment securities increased 39.8%, driven by higher holdings of higher-yielding Treasury bills.
Costs rise
The stronger income performance came alongside higher costs.
Operating expenses increased 11.5% to N$3.12 billion, pushing the cost-to-income ratio to 48.5% from 46.2%.
Staff costs rose 10.8% to N$1.78 billion and accounted for 57% of operating expenses.
Technology expenditure reached N$1.01 billion, covering technology operations, development, payment capabilities, software licences and increased capacity.
Despite the increase in costs, FirstRand Namibia said its cost-to-income ratio remained the lowest in the market and within its target range.
The group’s total risk-based capital adequacy ratio strengthened to 21.7% from 20.3%.
Dividend increases
The stronger capital position allowed the bank to increase shareholder distributions.
The final ordinary dividend rose 57.2% to 446.57c per share.
Total ordinary dividends for the financial year increased 40.3% to 668.34c per share.
