Fast growth in investment holdings at banks

Local banks continue to increase their investment holdings at a faster pace than credit extension to their clients, Simonis Storm said.This once again confirms that banks have become more risk averse in the current economic environment while demand for credit remains relatively high despite the interest rate hiking cycle. Over the last five years, investment holdings have increased by 13.2% on an annualised basis at First National Bank (FNB), 5.7% (Capricorn Group) and 12.1% (Standard Bank), compared to annualised growth in advances of 2.1% (FNB), 4.5% (Capricorn Group) and 2.8% (Standard Bank), Simonis Storm pointed out.Risk aversion among some banks would need to turn in order to supply capital to growing sectors of the economy. “With the approval and near finalisation of the Special Economic Zone (SEZ) Bill, we do expect increased demand from both local entrepreneurs and foreign investors. With credit extension being a leading indicator of investments which impacts economic growth, the slowdown in credit growth is concerning and would be a constraint on our growth forecasts for the medium-term,” Simonis Storm added.FiguresAccording to the Bank of Namibia, private sector credit extension (PSCE) growth stood at 4.1% at the end of September 2022 compared to 4.6% at the end of August 2022.The lower growth in credit uptake is explained by a lower demand and repayments by the corporate sector, more specifically corporates in the construction and services sectors, BoN said.Growth in credit extended to businesses slowed to 5.9% at the end of September 2022, relative to a growth rate of 8.2% in August 2022.In addition, growth in credit extended to households rose to 2.8% year-on-year at the end of September 2022, compared to a growth rate of 2.0% reported at the end of the previous month, BoN added.The central bank on Wednesday announced a 50 basis points increase in the repo rate from 6.25% to 6.75%. The prime lending rate currently stands at 10.5%, on par with South Africa.According to IJG Securities, the Bank of Namibia’s 50 basis points hike brings the prime lending rate at just 25 basis points below the highest lending rate of the past decade.“The rapidly rising borrowing costs, coupled with the muted economic activity means that PSCE growth will possibly remain subdued in the short-term. On the supply side, we see little change from the current status quo over the near term,” IJG said.-phillep@nmh.com.na

Fast growth in investment holdings at banks

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Namibian Sun 2025-07-17

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Fast growth in investment holdings at banks

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Namibian Sun 2025-07-17

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