FIRSTRAND NAMIBIA REMAINS STRONG, RESILIENT & WELL-POSITIONED

Oscar Capelao, FirstRand Namibia Chief Financial Officer

MEDIA RELEASE: 10 September 2020

FirstRand Namibia Limited today announced its financial results for the year ending 30 June 2020, on the back of one of the greatest health threats of a generation – one that greatly impacts the global economy and all of its citizens. Despite this, FirstRand Namibia’s portfolio of businesses still produced a satisfactory top line growth and delivered earnings above cost of capital for the financial year which ended 30 June 2020.

Key group highlights are as follows:

Profit before tax decreased by 23.7% to N$1.21 billion (2019: N$1.58 billion) for the period under review.
Pre-lockdown PBT growth was 6.1%.
Normalised cost to income ratio decreased to 52.6% (2019: 52.9%) and
ROE was 16.0% for the period.
Costs were well managed, and growth was at 5.1% for the year.
Headline earnings decreased by 19.1% to N$867 million.
Earnings per share decreased to 313.4 cents (2019: 409.9 cents).

Oscar Capelao, FirstRand Namibia Chief Financial Officer commented: “FirstRand Namibia entered this crisis in a position of strength in terms of capital, liquidity, technology and, importantly, talent. Considering the repo rate and prime rate reduction during the reporting period of 275bps, net interest income remained flat, N$2 013.4 million (2019: N$2 012.2 million). Interest expense decreased by 0.4% while interest income decreased by 0.2%.”

Other financial outcomes include:

The total impairment charge increased year-on-year to N$559.7 million (2019: N$214.8 million). The impairment charge is 1.79% (2019: 0.72%) of gross advances. The increased pressure on customers due to COVID-19 also impacted the group’s impairments.
IFRS 9 requires the group to consider forward-looking information in the calculation of expected credit losses, therefore the group has estimated an increase in customer stress caused by the pandemic and resultant economic pressures anticipated over the next twelve to eighteen months. This stress has been incorporated into the calculation of the group’s expected credit losses and has resulted in a material increase in provisioning, even though the year to June 2020 only includes three months of the pandemic.
Non-interest revenue grew 4.7%, led by fee and commission income growth of 6.2% driven by strong electronic transaction volumes and ongoing customer acquisition. Volumes growth on our self-service platforms increased by 14% and the traditional in branch volumes are down 9%. Net fee and commission income represent 85.4% (2019: 87.9%) of group operational NIR.
Insurance premiums have declined to N$161 million (2019: N$167 million). Key drivers are the low premium inflation environment, increased competition and affordability witnessed by the increase in lapses due to non-payment of premiums. Claims paid for the period declined by 10.1% to N$77 million (2019: N$86 million).

Group operating costs (normalised) have increased by 2.6% to N$2 122 million (2019: N$2 069 million).
Staff costs increased by 5.5%. Staff cost growth is influenced by the above inflationary wage increase settlement with the union for non-managerial staff. Leave days utilisation in the second half of the financial year was lower given the lockdown restricting movement in the country, contributing to the overall increase in staff cost.
The FNB Staff Assistance Trust activities are consolidated in the group results and paid out benefits of N$1.9 million, which is included under other operating expenses funded out of the trusts dividend income.
Included in operating expenses is the FirstRand Namibia Foundation’s contribution for the year amounting to N$10.7 million (2019: N$ 10.3 million). During the year FirstRand

Namibia further contributed N$3.8 million to the HOPE Fund (Health Optimisation in a Pandemic Emergency), our vehicle to support Government with much needed COVID-19 assistance to the Namibian public.

Regarding the impact of COVID-19 on the group’s earnings, Capelao stated that “comparing the earnings run rate to pre-March 2020 lockdown period to post, our estimate of earnings lost approximate N$465 million for the current financial year, being decreased NII N$97 million, NIR N$108 million, higher impairments of N$252 million and PPE expenditure N$3.3 million and HOPE Fund CSR initiative N$3.8 million.”

“The group remained well capitalised with levels above the minimum regulatory requirements. Capital adequacy ratio for the group was 18,2% and CET 1 capital 15,9%. As we deal with the spiralling effects of this pandemic, we continue to focus on what we as a group can do to remain strong, resilient and well-positioned to support our employees, clients, customers and communities across Namibia,” concludes Capelao.

For further details, access the full report at https://www.fnbnamibia.com.na/about-fnb/index.html