Recession hammers FNB Nam results

Jo-Maré Duddy – “Disappointing,” was the first analyst’s reaction to the latest interim results released by FNB Namibia Holdings yesterday.

The group’s net profit for the six months ended December 2017 was nearly N$73.8 million or 12.3% less than that of the same half-year in 2016 and came in at approximately N$525.1 billion.

According to Megameno Shetunyenga, analyst at Simonis Storm, two issues are “getting out of hand”: FNB Namibia Holdings’ impairment charges on advances in its latest set of financials are about N$76.1 million – about N$62.7 million or 468% more than the comparable period in 2016.

SS will have a discussion with management to understand the entire picture, Shetunyenga said. “Non-performing loans (NPLs) up 25% since June 2017. Not entirely surprised given the country economic position,” he said in his initial comments on FNB Namibia Holdings’ performance.

Shetunyenga is also concerned about the group’s operating expenses of nearly N$954 million which is 20.5% higher than that of the corresponding half-year in 2016.

‘Resilient’

FNB Namibia Holdings released a statement saying “local economic growth in the second half of 2017 followed a similar trend to the first half, with economic sectors contracting, rising unemployment, year-on-year reduction in the growth of private sector credit extended (PSCE), rising debt levels and negative investor confidence”.

“Across the FNB portfolio, the six months to December 2017 was characterised by a reduction in topline growth, combined with a strong investment cycle. The group’s operating franchises (FNB Namibia, RMB, WesBank, Outsurance and Ashburton) however, continued to produce resilient operating performances despite the macroeconomic slowdown,” it said.

FNB Namibia’s advances grew at 5.8% (compared to industry PSCE growth reported for December of 5.1%) and the deposit raising franchises achieved a growth of 12%, the group said.

“Profit before tax decreased by 11.9% to N$780.0 million (2016: N$885.7 million). Profit before tax was mainly impacted by the increase in impairments, an increase in the cost of funding and the integration of Pointbreak and EBank which were acquired in the last quarter of the previous financial year. Normalised for Pointbreak and Ebank, profit before tax decreased by 9% to N$805.7 million,” FNB Namibia Holdings said.

Earnings

Earnings per share decreased to 198 cents (2016: 226.3 cents), while return on average equity reduced from 25.6% (June 2017) to 23.3% for December 2017. Return on average assets was slightly down to 2.8% (June 2017: 3.0%) with an accompanying cost to income ratio increase of 52.1% (June 2017: 48.9%).

“Overall fee and commission income benefited from strong volume growth of 8% with ongoing momentum across electronic channels, again demonstrating the success of the innovative financial group’s digital Bricks to Clicks migration strategy,” the group said.

“The group’s long-term digital strategy has had some short-term negative impact from a reduction in cash-related non-interest revenue (NIR), as well as from the cost of the newly introduced e-migration FNB Customer Cashback Rewards programme.

“However, the strategy to optimise customer experience is both mutually beneficial, and core, to the group’s sustainability and customer commitment. A resulting decline in branch volumes has also set it up to reduce legacy infrastructure costs going forward,” FNB Namibia Holdings said.

Six months into its financial year, with active accounts up 6.3%, and transactional volumes growth of 8%, new-to-bank and existing customers across all franchises have responded positively to the group’s end-to-end financial services offering, FNB Namibia Holdings said.