FNB earnings up despite global financial crisis

THE FNB Namibia Group yesterday announced a seven per cent increase in its headline earnings for the financial year ended June 30 2009, boasting a positive growth performance despite the impact of the global financial crisis.

But the increase in earnings from 2008’s N$330 million to N$353 million this year doesn’t mean the Group didn’t suffer some major blows in the midst of the crisis.’The headline earnings were negatively impacted by a compression on interest margins and equity losses incurred by Swabou Life on the shareholders’ investment portfolio,’ which saw a 10 per cent dip in profits.The largest growth for the group came from its banking group, which saw a profit growth by 8 per cent to N$317 million from N$294 million, with normalised earnings experiencing a 15 per cent growth. Every other area, however, though profitable, experienced a negative growth impact, with Swabou Life’s profits taking a 47 per cent dip down to N$33 million from N$65 million last year. The dip was explained to have resulted from equity losses on the shareholders’ portfolio, as well as due to a special dividend of N$100 million which was paid out in October last year.OUTsurance also saw a 60 per cent drop in profits to N$2 million from last year’s N$5 million, but the decrease in profit was due to the cost of introducing new personal line products, which Group Chief Financial Officer Erwin Tjipuka said would ‘position the business well for the future’.In terms of cost, the Group saw a 12 per cent increase in year-on-year operating costs up N$76 million to N$694 million this year. Tjipuka however noted that the increase included ‘costs relating to the core banking system being localised as required by the Bank of Namibia, as well as FNB Card costs not included in the previous year’s figure.’ The Group also saw a N$698 million increase in total assets to N$14,1 billion – a year-on-year growth of five per cent.On the interest front, Tjipuka stated that despite the positive growth experienced on the banking side, net interest income before impairment only grew by two per cent to N$743 million, compared to N$729 million last year.’This clearly reflects the considerable pressure on interest margins. Both the timing and the extent of the rate cuts caused margins to contract. The cost of longer-term funding and the repo rate differential, combined with the negative endowment effect of a decreasing interest rate, contributed significantly to margin pressure,’ he said.The Bank of Namibia has made several calls on the banks to decrease their interest rates in line with the cuts in the BoN’s repo rate, which saw an overall decrease of 3 per cent in the repo rate since the beginning of this year.Tjipuka said that in this regard, ‘The FNB Group will focus on improving our efficiencies and cost management to counter continued pressure on both interest and non interest income.’Non-interest income for the banking group saw a 30 per cent increase to N$491 million from N$376 million in 2008, with the migration of the credit card book to FNB Namibia from South Africa late last year contributing to the increase.