PSG Wealth Namibia reports that the combined mortgage loans, encompassing both commercial and residential loans from the country’s four major commercial banks, reached approximately N$53 billion in 2023.
Although the N$53 billion is a slight uptick from the N$52.4 billion recorded in 2022, PSG said it underlines the sector’s resilience amidst a sluggish economic backdrop, with mortgage loans displaying incremental growth amid economic headwinds in 2023.
PSG noted that, against a backdrop of an economic slowdown, mortgage loans continue to be a bedrock of revenue for local commercial banks.
“This sector constitutes the highest proportion of gross advances across all banks, demonstrating its pivotal role in sustaining the financial health of the banking sector,” revealed the firm’s banking sector review for 2023.
PSG highlighted that the combined mortgage loans represent, on average, around 50% of the total gross advances, emphasising their strategic importance.
“Mortgage loans continue to be a significant source of revenue for local commercial banks, making up the highest proportion of gross advances across all banks,” the report noted.
A closer look at the banking sector reveals varied trajectories among the major players.
Nedbank Namibia (NED) according to the report, holds the largest portion of gross advances dedicated to mortgage loans at 63.1%.
Notably, “NED has witnessed the most substantial increase in mortgage loan allocation, signalling a strategic emphasis on real estate financing.”
In contrast, other local banks exhibit diverse patterns. SNBH (Second National Bank of Namibia) holds the second-largest allocation at 51.4%, experiencing a decline year on year.
FNB (First National Bank) and BWL (Bank of Windhoek Limited) showcase divergent trajectories, reflecting the complexity of the banking landscape.
Over the past five years, NED and SNBH have emerged as noteworthy performers, showcasing consistent growth in their exposure to mortgage advances.
NED’s exposure rose from 43.7% to 63.1% in FY22, while SNBH elevated its exposure from 46.2% in FY13 to 51.4% in FY22.
PSG said this positions SNBH as the fastest grower in the mortgage loan sector over the specified period.
This comes as corporate credit uptake continues to decline and household credit growth appears to be slowing down.
Private sector credit extension growth slowed to 1.6% year-on-year in September, with credit extended to businesses contracting by 2.1% year-on-year.
“Commercial banks maintain a robust pipeline of bankable projects across various sectors. However, clients’ hesitancy to commit to loan contracts stems from uncertainties about interest rates,” said the firm.
PSG expects that the Bank of Namibia (BoN) will keep rates unchanged until the first cut in Q4 2024, contributing to the cautious approach of businesses and individuals alike.
