Namibia’s financial system still stable and sound

Both the banking and non-banking sector of the country remain stable and sound.

This is according to the Bank of Namibia’s macroprudential oversight committee.

However, a small decline was recorded in the banking sector’s total assets by 2.1% to N$182.7 billion during the first quarter of 2025.

“The banking sector’s total assets declined due to a significant decline in cash and balances, primarily because of dividend payouts,” says central bank deputy governor Ebson Uanguta.

He says the banking sector remained sound, well capitalised and liquid during the first quarter of 2025, with improvement in asset quality.

The liquidity ratio stood at 20.9% during the review period, compared to 19.7% observed in the preceding period.

This was mainly attributed to higher investments in securities.

“In terms of profitability, both the return on equity and return on assets declined on a quarterly basis to 19.6% and 2.5%, from 21.9% and 2.7%, respectively,” Uanguta says.

This was mostly due to a decline in total income because of weaker fee-based income and a reduction in interest earnings.

Additionally, both the tier 1 and total risk-weighted capital ratios were lower during the first quarter of 2025.

“Mainly due to the increase in risk-weighted assets, coupled with a decline in total eligible capital. Despite this decline, the level of capital remained above the prudential requirement,” Uanguta says.

The non-performing loans (NPLs) ratio recorded an improvement particularly driven by a reduction in mortgage NPLs.

The reduction was supported by write-offs, recoveries, and the growth in total loans and advances.

As at the end of May, non-performing mortgage loans were standing at N$3.29 billion, making up more than half of the total for non-performing loans.

The total for NPLs stood at N$6.2 billion, with the total loan book value standing at N$116 billion.

A loan is categorised as an NPL if it remains unpaid for more than 90 days.

The second-largest category of NPLs is overdrafts worth N$1.1 billion.

An overdraft is a temporary loan that allows bank customers to continue paying bills or withdrawing money even when their accounts are depleted.

‘Overdrafts’ are followed by ‘other loans and advances’, which stood at N$1.07 billion.

‘Personal loans’ stood at N$392 million, followed by ‘instalment sales and lease’ at N$327 million.

This normally comprises car loans, furniture store financing, and home appliances.

The ‘credit cards’ category contribution to NPLs the least at N$45 million.

“Notwithstanding the growth of the latter, the banks have sufficient provisions and adequate capital to absorb potential credit losses,” Uanguta says.

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