Results for the year ended 31 December 2014 at a glance:
Loans and advances: N$15.6 billion up 19%
Total income: N$1.68billion up 20%
Net profit before tax: N$523 million up 23%
Net profit after tax: N$362 million up 13%
Total capital adequacy ratio: 13.17% (FY13: 12.49%)
Cost to income ratio: 62.04% improved from 64.99%
Standard Bank Namibia Holdings (SBNH) produced a satisfactory performance for 2014, increasing profit before tax by 23%, profit after tax by 13% and loans and advances by 19%. The group return on equity (ROE) has decreased to 17.67% from 18.47% in 2013. Total income grew by 20% (N$280 million) and expenses grew by 15% (N$134 million) reflecting the continued investment made in systems and infrastructure.
The bank’s performance has been under pressure due to a high cost base, high levels of impairments and other challenges resulting from the implementation of the new core banking system. The bank’s plan for the 2014 financial year, with the theme “Focus on Basics” had a key objective of building a foundation for sustained growth and success in the years from 2015. From the results at the end of the year, it is clear that the key areas identified as Focus Areas for 2014 had been correctly identified and the actions appropriately executed.
The domestic economy is expected to grow by 6% in 2015, up from the initial estimate of 5.4%, and then 5.5% in 2016. The growth in 2015 and over the next two years is expected to be driven mainly by the construction and infrastructure sectors supported by some large investments such as the Husab Uranium mine,
Tschudi Copper, B2 Gold mine and public works programmes. The growth over the next three years will largely be linked to momentum garnered within the mining, energy and construction sectors. Continued spending by government and foreign investors will accelerate nominal growth levels, and with the current low inflation, the result should lead to higher levels of real growth.
As a banking group servicing the real economy, we will continue to provide our customers with the financial services products and services they need to grow. We will continue to manage the group for long-term profitability by investing appropriately in our diverse portfolio of businesses and in the capability and wellbeing of our people, while applying a disciplined and prudent approach to risk. We understand that our primary aim to improve the returns we deliver to our shareholders requires that we create lasting value for all our stakeholders.
Net interest income increased 29% mainly as a result of growth in interest-earning assets, funding mix and higher margins. Margins improved due to re-pricing new business in the mortgage, business and personal term lending books to better reflect the risk and costs of anticipated regulatory changes, together with the increase in higher-margin unsecured lending.
Non-interest revenue grew by 11% during the year with net fee and commission revenue up 23% mainly as a result of increased transaction volumes. Trading revenue increased by 6%, while other revenue was 22% lower than in the prior year.
Other revenue decreased due to a reduction in the investment portfolio during the year.
2014 has been a challenging year for credit impairments at Standard Bank Namibia. In particular, instalment sale and finance leases, unsecured lending and card debtors required higher provision due to higher levels of customers defaulting during the year. However, decisive action to reduce the risk profile and the tightening of lending parameters has seen a softening of the impairments towards the end of 2014.
It is our continued duty to ensure that all levels of customers and potential customers are able to gain access to credit whilst still ensuring that the bank remains a safe-haven for depositors.
The group continues to invest in both staff and infrastructure in order to provide excellent customer service and deliver on our strategic priorities. We maintained a tight control on costs while investing for long-term growth.
The main contributor to the increase in operating costs was staff costs which grew 8% for the year due to annual salary and other benefit increases offset by reduced temporary headcount as a result of the completion of our core banking implementation.
Other operating expenses increased by 22% largely as a result of increased IT expenditure, including higher consultancy and software licence fees.
Loans and advances
Total loans and advances were up 19%. Contributing to the increase in loans and advances was a 9% increase in mortgage loans. Other term loans increased by 37% mainly due to the increased term loans to corporates. Instalment sale and finance leases increased by 19% due to growth in the passenger vehicle market. Deposit and current accounts increased by 10% to N$17.5 billion (2013: N$15.9 billion) through a focus on deposits and current accounts, higher foreign currency balances and higher client working capital requirements.
Trading assets decreased substantially due to decreased repurchase agreement trading positions.
Derivative assets and liabilities increased, mainly as a result of Forex derivative assets and liabilities being higher than the prior year following increased client flows. Liabilities to group companies decreased largely due to reduced term placements from Standard Bank Group entities.
Capital, funding and liquidity
The group’s tier I capital, including un-appropriated profit, was N$1 854 million at 31 December 2014 (2013: N$1 771 million) and total capital, including un-appropriated profit, was N$2 078 million at 31 December 2014 (2013: N$1 879 million). The change in the group’s capital was primarily due to an increase in retained earnings and the introduction of tier 2 capital. The group maintained a well-capitalised position based on tier I, total capital adequacy and leverage ratios as set out in the announcement.
The group’s liquidity position remains strong with appropriate liquidity buffers of N$1.86 billion in excess of regulatory requirements at 31 December 2014. These significant levels of liquidity are appropriately conservative given the group’s liquidity stress-testing philosophy, growth prospects and in view of potential changes in regulatory requirements.
The group’s long-term funding ratio (which measures funding-related liabilities with a remaining maturity of six months or more as a percentage of total funding-related liabilities) increased to 21.7% from 17.5% at 31 December 2013.
Banking competition is high in Namibia and business operating environments remain challenging. However, the group’s capital and liquidity strength, together with our firm commitment to our strategy which includes the building of world-class systems, provides substantial opportunity to elevate our ROE and deliver higher levels of economic value to our shareholders over the medium term. The Bank is now well positioned to deliver more banking services digitally in 2015, which will greatly extend our customer reach.
Vetumbuavi Mungunda, Chief Executive, Standard Bank Namibia, says: “A great deal of our success relies on the interactions with our staff and our customers. We thank our customers for their support and promise to strive for excellence in customer service and to tailor our banking offering to meet the ever-changing requirements of the market. We value and appreciate the contribution of all our stakeholders who had made 2014 a successful year for the group. We are looking forward to your support during 2015 and beyond. Tuyende! Let’s Move!”
Surihe Gaomas-Guchu; Manager: PR & Corporate Communication
Standard Bank Namibia: Marketing Department
Tel: +264 (61) 294 2529
Cell: 081 2187473
E-mail: [email protected]