Banking sector demonstrates resilience
Sector to return to familiar orbit
The banking sector has performed well despite inflationary pressures.
The banking sector was able to show resilience despite the tightening of interest rates during the course of 2023, a report prepared by stockbroking firm PSG Namibia noted.
The report noted, among others, the performance of the big four commercial banks and the current macroeconomic conditions at play.
“The banking environment in the past year has been shaped by tightening monetary policy, elevated inflation and muted private sector credit growth (PSCE). Despite these challenging macroeconomic conditions, the banking sector has shown resilience,” PSG said.
“Banks have demonstrated resilience by enhancing their cost efficiency, as evidenced by a decreasing cost-to-income ratio. This improvement has been achieved despite the challenges posed by high inflation on cost management. Furthermore, the rise in interest rates had a positive impact on profit margins, effectively offsetting the effects of inflation,” it added.
New confidence
According to PSG, the return of positive interest rates has pulled banking into a more predictable and familiar orbit. “This has led to a resurgence in product innovation, with rising rates acting as the catalyst,” it said.
PSG said it expected the repo rate to remain stable to support borrowing, which it said could support economic activity.
“PSCE has been muted since the pandemic. The continued high-interest-rate environment and the moderation in economic growth in 2023. PSCE is expected to recover in 2024 as the market regains its confidence that the repo rate will remain stable, which should support corporate credit growth. This in turn is expected to support economic activity and employment creation,” PSG said.
Ranked
Ranking the commercial banks by performance, PSG found First National Bank Namibia (FNB) continued to lead the pack in terms of profitability. Bank Windhoek Limited (BWL) outperformed FNB in other categories, notably cost efficiency and credit risk categories, the report noted.
“FNB retains the top spot for the third consecutive year, with Bank Windhoek (BW) in second place by a narrow margin. FNB outperformed its peers in the profitability and advances categories, while BW outperformed FNB in cost efficiency and credit risk categories. Standard Bank claimed the first spot in terms of capital adequacy. All Namibian banks are well capitalised, ahead of requirements,” PSG said.
Measuring other metrics regarding the performance of banks, PSG found FNB held the largest market share, eclipsing BWL, which held that position in 2021.
“FNB claims the largest market share in terms of total assets for the second consecutive year for which BWL had the largest market share in 2021. FNB recorded the highest growth year-on-year in gross advances, for which BW still has the largest market share among local banks,” PSG said.
The report noted, among others, the performance of the big four commercial banks and the current macroeconomic conditions at play.
“The banking environment in the past year has been shaped by tightening monetary policy, elevated inflation and muted private sector credit growth (PSCE). Despite these challenging macroeconomic conditions, the banking sector has shown resilience,” PSG said.
“Banks have demonstrated resilience by enhancing their cost efficiency, as evidenced by a decreasing cost-to-income ratio. This improvement has been achieved despite the challenges posed by high inflation on cost management. Furthermore, the rise in interest rates had a positive impact on profit margins, effectively offsetting the effects of inflation,” it added.
New confidence
According to PSG, the return of positive interest rates has pulled banking into a more predictable and familiar orbit. “This has led to a resurgence in product innovation, with rising rates acting as the catalyst,” it said.
PSG said it expected the repo rate to remain stable to support borrowing, which it said could support economic activity.
“PSCE has been muted since the pandemic. The continued high-interest-rate environment and the moderation in economic growth in 2023. PSCE is expected to recover in 2024 as the market regains its confidence that the repo rate will remain stable, which should support corporate credit growth. This in turn is expected to support economic activity and employment creation,” PSG said.
Ranked
Ranking the commercial banks by performance, PSG found First National Bank Namibia (FNB) continued to lead the pack in terms of profitability. Bank Windhoek Limited (BWL) outperformed FNB in other categories, notably cost efficiency and credit risk categories, the report noted.
“FNB retains the top spot for the third consecutive year, with Bank Windhoek (BW) in second place by a narrow margin. FNB outperformed its peers in the profitability and advances categories, while BW outperformed FNB in cost efficiency and credit risk categories. Standard Bank claimed the first spot in terms of capital adequacy. All Namibian banks are well capitalised, ahead of requirements,” PSG said.
Measuring other metrics regarding the performance of banks, PSG found FNB held the largest market share, eclipsing BWL, which held that position in 2021.
“FNB claims the largest market share in terms of total assets for the second consecutive year for which BWL had the largest market share in 2021. FNB recorded the highest growth year-on-year in gross advances, for which BW still has the largest market share among local banks,” PSG said.
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