Capricorn Group Limited, a financial services company that is proudly Namibian and is listed on the Namibian Stock Exchange, today announced its annual financial results for the fiscal year that concluded on June 30, 2022.
The Group came out under the shadow of COVID-19 in 2022, which was a year of recovery. Through the robust performances of all of its companies, the Group achieved strong results, with profit after tax rising by 16.6% to N$1.15 billion. The Group was able to quickly recognize and respond to ever-changing difficulties thanks to its flexibility and speedy decision-making.
Despite a rebound that was seen in the latter few months of the fiscal year 2022, COVID-19 continued to hurt enterprises in all industries. The forecast is for Namibia and Botswana’s economies to develop, albeit from a lower foundation. The war between Russia and Ukraine, together with the ensuing sanctions, has escalated inflation and increased pressure on the local environment. However, the Group’s outcomes show how Capricorn Group made use of our locality, agility, and responsiveness. As a result, despite the challenging economic environment, the Group was able to maintain and increase value for our stakeholders.
“This year, we commemorated the 40th anniversary of Bank Windhoek and the 15th anniversary of Bank Gaborone. Without the tireless efforts and commitment of our exceptional staff, these milestones would not have been achieved. These ethical companies make me proud, and I hope they continue to expand for many years to come. According to Group CEO Thinus Prinsloo, “all our subsidiaries did well this financial year, giving the Group a strong basis to continue growing and increasing its leadership in the various areas.
“Despite the economic pressures made worse by growing inflation as a result of higher global oil and food costs, the Group produced solid earnings. Fortunately, once COVID-19-related constraints were relaxed, economic activity in our region grew, according to Group Chief Financial Officer Johan Maass.
Group financial performance highlights
Net interest income
Net interest income before impairments for the Group increased by 3.6% to N$2.34 billion (compared to N$2.26 billion in 2021). Due to an increase in interest-earning assets of 7.6% from the previous year, Bank Windhoek had a 7.4% gain in net interest revenue in 2022. The Bank of Namibia raised its repo rates by 100 basis points between February and June 2022, although the bank’s average net interest margin stayed relatively steady at 4.37% (2021: 4.36%) even though average funding costs rose during that time.
In April 2022 and June 2022, respectively, the Bank of Botswana raised interest rates by 51 basis points and 50 basis points. Despite these increases, Bank Gaborone saw its net interest income fall by 7.6%. While interest income increased by 6.6% in 2022, interest costs rose by 23.2% as Bank Gaborone’s interest margin declined to 2.91% (from 3.79% in 2021) as a result of low market liquidity and higher funding costs.
Growing non-interest income
A 13.1% increase brought non-interest income to N$1.67 billion (up from N$1.48 billion in 2021). The non-interest income of Bank Windhoek climbed by 10.3%, while the non-interest income of Bank Gaborone jumped by 33.3% to BWP106.2 million. The improvements in this revenue line were a direct result of increasing transaction volumes, more foreign exchange rate volatility, and higher trading margins, which led to higher foreign exchange trading income and higher trading margins. The Group’s diverse income sources, including CAM’s contribution of asset management fee income of N$164.6 million (2021: N$158.7 million), underpin non-interest income. Net premium revenue for Entrepo fell slightly from N$163.3 million in 2021 to N$161.3 million.
Managing our operating expenses
We intend to support the local industry as far as possible. 87.8% of our total operating expenses incurred were paid to suppliers and employees located within the regions in which we operate. Increases in operating expense lines were mostly contained to below inflation rate. Notable exceptions were staff costs and operational banking expenses. Operating expenses increased by 6.7% compared to the prior year’s 5.1% increase. The above inflation increase in staff cost of 7.7% is largely due to increasing capacity in information technology and cyber security to deliver on our strategic objectives on data and digitisation and to manage our general IT and cyber security risk. Containing costs to only essential and value-adding spending will remain a focus area for 2023. We were able to contain our cost-to-income ratio at 51.1% (2021: 51.7%), below our target of 52%.
Improved Credit Quality
Asset quality remains a key focus for the Group. Despite the challenging economic conditions, the Group’s non-performing loans decreased marginally to N$2.44 billion (2021: N$2.46 billion). This resulted in the non-performing loan ratio (excluding interest in suspense) decreasing to 4.8% (2021: 5.2%). Our loan loss rate decreased from 1.07% to 0.85% and remains low against current industry norms. Impairment charges decreased by 17.2% (N$76.4 million) to N$367.3 million, mainly as a result of our proactive approach to credit risk management and an improved operating environment for our customers as COVID-19 restrictions were eased. Gross loans and advances increased by 6.1% to N$44.7 billion this year. This is well above annualised Namibian private sector credit extension growth of 3.4% and confirms our ability and intention to continue extending financing to support clients during difficult times. This growth was mainly attributable to increases in commercial loans, mortgage loans and article finance.
Sound Liquidity position
COVID-19 underlined the importance of having sufficient liquidity to withstand a crisis. The Group maintained a sound liquidity position with liquid assets increasing by 14.3% year-on-year. Liquid assets exceeded regulatory requirements in Namibia and Botswana by 107.5% and 121.1%, respectively. Additionally, the Group’s loan-to-funding ratio improved to 87.2% (2021: 88.6%). Notwithstanding these surpluses, the Group maintains N$1.0 billion contingency funding, which is available to the two banking subsidiaries within three to seven days.
Strong Capital depth
The Group remains well capitalised, with a total risk-based capital adequacy ratio of 15.8% (2021: 15.0%). This is well above the minimum regulatory capital requirement of 10%. This strong capital position has supported the Group through the difficulties brought about by the pandemic.
Shared financial value as an outcome
Capricorn Group created financial value through its strong performance and as a result, several stakeholders directly benefit as follows:
- Employees: N$1.2 billion (7.4% increase) – in addition to remuneration, our more than 2000 employees receive rewards, recognition and opportunities for career and personal development
- Government and Regulators: N$678 million (8.6% increase) – the Group pays taxes, duties and license fees in the territories where we operate
- Suppliers: N$530 million (3.3% increase) – we intend to support the local industry as far as possible through the procurement of goods and services
- Shareholders: N$354 million (72.5% increase) – our almost 4000 shareholders receive dividends and benefit from funds retained for future growth opportunities
- Communities: N$15.4 million (26.9% increase) – the Capricorn Foundation and the Group’s subsidiaries invest in corporate social responsibility programmes
- Retained for future expansion: N$928 million (1.1% increase) – the Group retains funds for future expansion and growth opportunities
Dividend declaration
The Group declared a final dividend of 40 cents per ordinary share which will be paid to shareholders on 26 October 2022. Considering the interim dividend of 32 cents per ordinary share, this represents a total dividend of 72 cents per ordinary share, 20.0% higher than the total dividend for 2021 of 60 cents per ordinary share. The Group believes that the dividend offers our investors solid cash returns in difficult economic conditions where earnings and income are under pressure, while also preserving the capital and liquid asset position of the Group during these uncertain economic times.
“Despite difficult conditions, 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.”, said Johan Maass.
“I also thank our loyal clients, partners, and suppliers for the value they add to our business. As a Group, we remain committed to our purpose of improving lives through leadership in financial services by being Connectors of Positive Change.”, concluded Thinus Prinsloo.
