BANKING services and microlending group Letshego Namibia’s half-year financial update has shown improvement, sounding the drums of a possible recovery to pre-Covid-19 levels.
In its recently released interim financial statements, Letshego said it recorded a rebound in profit after a 26% tax of N$159 million for this year.
This is after profits shrank by 39% to N$126,5 million for the same half-year period by last June.
The company said its positive growth is the result of increases in net advances to customers, which grew by 23% (N$3,9 billion), from N$3,1 billion in the same period last year.
Letshego’s costs to achieve these improvements increased by a significant 44%, compared to the 3% margin it increased by last year.
Costs increased from N$106 million last year to N$152 million this year.
The company, however, said the overall costs include insurance taken out to cover a portion of its loan book, which was not insured against defaults previously.
Deterioration in the credit quality of the loan book meant loss buffers, usually referred to as ‘credit-impairment provisions’, doubling from last year’s N$11,4 million in provisions to N$22 million this year.
The result is a loan loss ratio of 0,6%, which indicates the reserve Letshego has set aside to cover losses as a result of borrowers not paying.
Excluding what was paid out to savers, Letshego generated a net interest income of N$271 million for the period, compared to N$257 million last year, from its primary business activity, which is lending.
However, the company’s financial statements show that after adjusting to accommodate these impairment provisions, net interest income only increased by a meagre percent.
Banks’ interest revenues have a direct relationship with policy rates: As rates are reduced by the central bank, so does revenue through interest shrink.
And as interest rates rise, banks earn more income through interest, because they are able to charge more for loans.
The Bank of Namibia cut the policy rate by 275 basis points last year, or 2,75%, to contain inflation, which has since remained unchanged at 3,75%.
According to updates issued by most local banks, they have had to follow prudent cost-management efforts, as well as diversify revenue sources.
Banks have tried to achieve the latter mostly through leveraging digital channels to generate more non-interest revenue.
As a result, Letshego grew its non-interest revenue from sources, such as ATM charges, cellphone banking charges, and other non-interest streams, by 61% – from N$2,1 million to N$3,3 million in June last year.
Compared to industry peers, Capricorn Group earlier this year reported a non-interest income increase of 13% to N$77,4 million, and FNB’s non-interest revenue improved by 3,4% from over N$1 billion.
Standard Bank Namibia and Nedbank Namibia both shed 5,6% and 0,9% respectively.
The banking group paid dividends totalling N$112,5 million in ordinary shares by June this year, and has stated that an interim dividend would be declared on or before 30 September this year.
Last month the group announced it would receive a loan from the International Finance Corporation (IFC) of over N$738 million to finance low-cost housing – a move set to benefit those typically overlooked by commercial banks, the IFC said.
In its recent financial statements, the company did not indicate when this product would be rolled out.
Letshego’s shares started the week off at N$1,70.
Email: bottomline@namibian.com.na
