FirstRand Namibia fights back
The recession and the implementation of an international financial reporting standard had a massive impact on the group’s impairment charges in its past half-year.
Jo-Maré Duddy – FirstRand Namibia bounced back to positive profit growth in the six months ended 31 December 2018 after taking a knock in the same half-year in 2017.
The latest interim results of the locally listed group, released on the Namibian Stock Exchange (NSX) yesterday, show a net profit of nearly N$552.7 million, about N$27.2 million or 5.2% more than the same six months in 2017. FirstRand’s 2017 interim results reported a drop of about 12% in net profit compared to the corresponding period in 2016.
The group says its latest set of results “demonstrates strong performance in spite of the difficult economic climate experienced by all”.
“The impact of the challenging economic climate was certainly felt in the financial services sector. The Namibian economy had to endure the main elements that detract from economic growth, namely high unemployment, harsh environmental conditions, increasing inflation, low commodity prices and lower investor confidence,” FirstRand Namibia says in its financials.
Impairments, NPLs
FirstRand Namibia’s total impairment charge jumped by N$41.1 million or 54% to N$117.2 million. In the latest half-year, its impairment charge represented 0.39% of total advances compared to 0.26% in the corresponding half-year in 2017.
The group says its credit loss rates increased as expected and attributed it to a “more challenging macroeconomic environment”, as well as the implementation of IFRS 9. IFRS 9 is an international financial reporting standard promulgated by the International Accounting Standards Board.
FirstRand Namibia’s portfolio impairment charge grew from N$13.3 million to N$31.3 million due to adherence to IFRS9, the group says. As such, it was the main contributor to the impairment charge increase for the period, it adds.
FirstRand Namibia says the performance is “acceptable and within risk appetite”. “Credit origination strategies have been aligned to the group’s macroeconomic outlook,” it says.
The group’s ratio of non-performing loans (NPLs) to gross advances ended the half-year under review at 2.31% compared to 1.69% in 2017.
“In dollar terms [it] increased from N$489 million to N$687 million. This is below the industry average of 3.4%, further highlighting relatively acceptable portfolio performance,” FirstRand Namibia says.
According to the financials, “the group impairment levels remain well within acceptable levels through the cycle, and coverage ratios remained in line with industry”.
EBank
First National Bank of Namibia impaired the EBank trademark after management reviewed the value of the trademark and found that it would no longer meet the future needs of the group, the latest report states. FNB Namibia acquired the total shareholding of EBank in 2016.
“The trademark has been impaired to a carrying amount of N$ nil based on its anticipated value in use to the business and an impairment loss of N$13.7 million recognised,” FirstRand Namibia indicated yesterday.
It added that software was impaired after “management reviewed their technology platform and found that the software would no longer meet future needs as EBank customers were migrated to the FNB core banking system. This software has been impaired to carrying amount of N$ nil based on its anticipated value in use to the business and an impairment loss of N$25.6 million recognised.”
Prospects
FirstRand Namibia says it outlook is “influenced by conservative economic growth expectations”.
“The group is in a unique position to not only contribute but capitalise on the opportunities that may emerge in the current economic environment.
“FirstRand Namibia’s continued investment in digitalisation and innovation provides the group with a solid platform to weather many an economic storm and continue to provide customer-centric service that ultimately translates to improved bottom-line performance and sustainable balance sheet growth,” the group says.
FirstRand Namibia is listed on the Local Index of the NSX. With a total market capitalisation of N$11.579 billion, it is the biggest company on the index.
FirstRand Namibia closed at N$43.27 per share on Wednesday, 17c a piece or 0.39% lower than the end of 2018.
The latest interim results of the locally listed group, released on the Namibian Stock Exchange (NSX) yesterday, show a net profit of nearly N$552.7 million, about N$27.2 million or 5.2% more than the same six months in 2017. FirstRand’s 2017 interim results reported a drop of about 12% in net profit compared to the corresponding period in 2016.
The group says its latest set of results “demonstrates strong performance in spite of the difficult economic climate experienced by all”.
“The impact of the challenging economic climate was certainly felt in the financial services sector. The Namibian economy had to endure the main elements that detract from economic growth, namely high unemployment, harsh environmental conditions, increasing inflation, low commodity prices and lower investor confidence,” FirstRand Namibia says in its financials.
Impairments, NPLs
FirstRand Namibia’s total impairment charge jumped by N$41.1 million or 54% to N$117.2 million. In the latest half-year, its impairment charge represented 0.39% of total advances compared to 0.26% in the corresponding half-year in 2017.
The group says its credit loss rates increased as expected and attributed it to a “more challenging macroeconomic environment”, as well as the implementation of IFRS 9. IFRS 9 is an international financial reporting standard promulgated by the International Accounting Standards Board.
FirstRand Namibia’s portfolio impairment charge grew from N$13.3 million to N$31.3 million due to adherence to IFRS9, the group says. As such, it was the main contributor to the impairment charge increase for the period, it adds.
FirstRand Namibia says the performance is “acceptable and within risk appetite”. “Credit origination strategies have been aligned to the group’s macroeconomic outlook,” it says.
The group’s ratio of non-performing loans (NPLs) to gross advances ended the half-year under review at 2.31% compared to 1.69% in 2017.
“In dollar terms [it] increased from N$489 million to N$687 million. This is below the industry average of 3.4%, further highlighting relatively acceptable portfolio performance,” FirstRand Namibia says.
According to the financials, “the group impairment levels remain well within acceptable levels through the cycle, and coverage ratios remained in line with industry”.
EBank
First National Bank of Namibia impaired the EBank trademark after management reviewed the value of the trademark and found that it would no longer meet the future needs of the group, the latest report states. FNB Namibia acquired the total shareholding of EBank in 2016.
“The trademark has been impaired to a carrying amount of N$ nil based on its anticipated value in use to the business and an impairment loss of N$13.7 million recognised,” FirstRand Namibia indicated yesterday.
It added that software was impaired after “management reviewed their technology platform and found that the software would no longer meet future needs as EBank customers were migrated to the FNB core banking system. This software has been impaired to carrying amount of N$ nil based on its anticipated value in use to the business and an impairment loss of N$25.6 million recognised.”
Prospects
FirstRand Namibia says it outlook is “influenced by conservative economic growth expectations”.
“The group is in a unique position to not only contribute but capitalise on the opportunities that may emerge in the current economic environment.
“FirstRand Namibia’s continued investment in digitalisation and innovation provides the group with a solid platform to weather many an economic storm and continue to provide customer-centric service that ultimately translates to improved bottom-line performance and sustainable balance sheet growth,” the group says.
FirstRand Namibia is listed on the Local Index of the NSX. With a total market capitalisation of N$11.579 billion, it is the biggest company on the index.
FirstRand Namibia closed at N$43.27 per share on Wednesday, 17c a piece or 0.39% lower than the end of 2018.
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