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Capricorn Group reports N$827m after-tax profit in 6 months

by editor
February 29, 2024
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Capricorn Group achieved solid results with profit after tax for the six months ended 31 December 2023, increasing by 18.5% to N$827.6 million, compared to N$698.2 million reported in the prior year.

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The profit represents an increase of 19.4% in earnings per share to 152.4 cents, while annualised return on equity at half year increased from 16.6% to 16.8% year-on-year, said Group CEO Thinus Prinsloo.

“The Group’s strong performance is attributable to loan book growth and increased transaction volumes, offset to some extent by escalated credit impairment charges. Furthermore, the group’s profitability benefited from implementing IFRS 17 – Insurance Contracts. This improvement primarily stems from reduced discretionary policyholder reserves following the application of IFRS 17,” he said.

Prinsloo added that excluding the positive impact of IFRS 17 on the Group’s capital reserves, return on equity would have been 17.3% for the half year period.

“IFRS 17 requires a full retrospective application for disclosure purposes. Consequently, the comparative figures for the six-month period ended on 31 December 2022 were restated. Following this restatement of the comparative period figures, the Group’s profit after tax for the six months ended 31 December 2023 represents a year-on-year increase of 7.5%,” he explained.

Furthermore, headline earnings and earnings per share for the same period experienced a year-on-year growth of 7.2%. 

Prinsloo said the Group created a value of N$2.42 billion during the six months ended 31 December 2023, with employees accounting for N$563 million, government through taxes N$574 million, ordinary shareholders N$314 million, N$515 million towards suppliers and N$19.8 million ploughed into the communities, including N$438 million on value retained for future expansion.

Furthermore, Capricorn Group experienced a noteworthy 12.0% year-on-year increase in net interest income, driven by higher interest rates, and an 8.5% year-on-year growth in the loan book. 

“The lending businesses managed their cost of funding very effectively, leading to a 23 basis point enhancement of the net interest margin to 5.1% for Bank Windhoek, while the net interest margin at Bank Gaborone commendably increased from 3.1% to 4.1%,” he stated.

Further achievement relates to the impairment charges which increased by N$98 million to N$252.8 million year-on-year. 

In the same vein, he said the ongoing economic impact of increased inflation rates caused by geopolitical instability combined with higher interest rates continued to pressure key credit risk indicators, with non-performing loans increasing from N$2.46 billion in June 2023 to N$2.66 billion in December 2023. 

Similarly, operating expenses increased, registering an 11.5% year-on-year increase, totaling N$137.1 million.

The rise is attributed to an increase of N$48.8 million (42.7%) in variable operational banking expenses, directly linked to increased transaction and trading volumes. 

Excluding these operational banking expenses, the growth in overall expenses was 8.1% at N$88.3 million.

However, Prinsloo said the Group continues to hold prudent provisions for expected credit losses. 

In the same vein, non-interest income for the half year increased by N$177.5 million (19.0%), mainly attributable to an increase in fee and commission income of N$67.0 million (10.1%) and net trading income of N$57.1 million (62.4%). 

Additionally, gross loans and advances increased by N$3.9 billion year-on-year, mainly driven by growth in term loans of N$2.4 billion (16.3%), instalment finance of N$750 million (18.9%) and overdrafts of N$423 million (6.8%).

Asset quality remained a key focus area for the Group. Despite the challenging economic environment, the Group’s total non-performing loans were contained to N$2.66 billion (June 2023: N$2.46 billion)

Meanwhile, asset management fees from Capricorn Asset Management increased by 13.4% due to strong growth in unit trusts, exceptional growth and satisfactory growth in Capricorn Private Wealth and satisfactory growth in pension fund assets. 

“All in all, Capricorn Group retained a healthy liquidity position as at 31 December 2023 as the Group’s liquid assets increased by 10.9% (N$1.56 billion) year-on-year. Liquid assets exceeded minimum regulatory requirements in Namibia and Botswana by 135% and 114%, respectively,” the CEO said. 

During the same period, the Group declared an interim dividend of 48 cents per ordinary share, which is 23.1% higher than the interim dividend per share of 39 cents declared in the comparative period.  

According to Prinsloo, the central banks of both Namibia and Botswana have adopted prudent monetary policy measures to counteract inflationary pressures and to protect local currencies in volatile global market conditions brought about by spreading geopolitical tensions. 

“The current outlook is that inflation will stay within the target range of both central banks in the short to medium term, with the possibility of interest rates decreasing in the coming 12 months. The Bank of Namibia’s Economic Outlook for December 2023 predicts a deceleration in economic growth, primarily attributed to weakened global demand and an expected contraction in the agriculture sector,” Prinsloo said.

The projections, he said, indicate real GDP growth rates of 3.9%, 3.4%, and 3.1% for the years 2023, 2024, and 2025 respectively. 

Despite these challenges, Prinsloo said the overarching commitment of Capricorn Group remains focused on sustained growth for the benefit of all stakeholders. 

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