Namibian bank’s assets have recorded a 10.7% growth to reach N$161.4 billion at the end of September 2022, the central bank’s Macroprudential Oversight Committee has revealed, but warns of inflationary pressure threats to the sector.
“The banking sector remains liquid, profitable and adequately capitalised, although not performing at pre-covid levels. Further, the banking sector maintained adequate capital levels to meet the regulatory requirements and to absorb potential losses. The non-performing loans (NPL) ratio has improved, declining further by 0.4 percentage points to 5.7% during the third quarter of 2022,” Bank of Namibia Deputy Governor Ebson Uanguta said.
“The improved NPL ratio was on the back of the slightly better economic conditions owing to the lifting of COVID-19 restrictions. The ratio could, however, potentially deteriorate going forward if inflationary pressures and the subsequent monetary policy tightening continues.”
According to BoN, Namibia’s Non-Bank Financial Institutions (NBFI) sector, although profitable and sufficiently capitalised, recorded marginal growth in the third, with assets up 0.8% year-on-year to N$356.9 billion.
“The Non-Bank Financial Institutions (NBFI) sector growth slowed during the review period but remained profitable and sufficiently capitalised. Over the third quarter of 2022, NBFI assets grew marginally by 0.8 percent year-on-year to N$356.9 billion.This was the slowest annual growth since the first quarter of 2020.
“The slower annual growth in NBFI’s assets as at the third quarter of 2022 is as a result of the effects of high inflation, recessionary pressures, and the geopolitical tension in Europe which lead to unfavourable developments in the financial markets,” he said.
BoN, however, warned of a notable gap between retirement funds’ benefits paid and contributions received, with benefits paid exceeding contributions received during the period.
“It should, however, be noted that retirement funds hold sufficient reserves from which shortfalls in contributions are recoverable. In addition, investment returns enjoyed over time are sufficient to cover the gap between benefits paid and contributions received.
“Thus, the retirement funds industry remained fully funded. Although, the situation requires monitoring going forward, there are no risks to financial stability in the short term,” Uanguta said.
“The Long-term Insurance (LTI) industry and Collective Investment Schemes (CIS) remained solvent and stable during the period under review. The LTI industry realized a positive performance in 2022, despite the bearish financial markets.
“Furthermore, the LTI industry remained profitable in 2022, continuing its recovery from the losses recorded in 2021, owing to a moderation in its claims experience. Companies and households remain the dominant source of funds for CIS.”
The Committee maintained the view that the relief measures that were implemented at the onset of the COVID-19 pandemic by the Bank of Namibia and the Namibia Financial Institutions Supervisory Authority (NAMFISA) continue to cushion the financial system against a potentially severe impact, buttressed by domestic economic recovery.
“However, the Bank will continue to monitor the impact on households and SMEs and take appropriate corrective measures if warranted. The Macroprudential Oversight Committee is of the view that despite the prevailing risks and vulnerabilities, the financial system remains sound, thus requires no macroprudential policy interventions at this stage.
“The Bank will continue to monitor unfolding developments and when warranted, take the necessary remedial macroprudential actions with the tools at its disposal,” the BoN Deputy Governor said.
