The ratings are based on the following key factors:
The accorded ratings reflect Bank Windhoek Limited’s (“Bank Windhoek” or “the bank”) established domestic franchise value, improving asset quality/performance and risk appropriate capital cushioning. These are, however, partially offset by the uncertainties surrounding a stable and continuing global economic recovery given the impact of a regression on Africa.
The high probability of support from the Namibian authorities, if required, given that Bank Windhoek is the only locally owned bank in Namibia, was favourably considered. More importantly, the bank’s size and market presence poses significant systemic risk should the institution fail. The bank ranked second in terms of total banking industry deposits as at June 2012, with a market share of 29.4%.
The bank is adequately capitalised with a capital adequacy ratio of 12.6% as at FYE11 (FYE10: 13.2%), well in excess of the central bank’s minimum requirements as required under Basel II.
Bank Windhoek’s asset quality remained healthy with a gross nonperforming loans (“NPLs”) ratio of 1.1% as at FYE12 (FYE11: 1.5%), which compared favourably to the industry average of 1.5%. The favourable lower domestic interest rate environment, selective loan policy, write-offs and to a lesser extent recoveries contributed to improved asset quality. Relative to capital, net NPLs remain insignificant at 2.5% (FYE10: 4.7%).
Pre-tax profit was up 24.7% to N$509m for F12 (F11: 18.9%), driven by the expansion of the credit portfolio, growth in fee & commission income and slower growth in bad debt charges.
In June 2012, Bank of Namibia (“BoN”) announced its conditional approval for Barclays PLC to pursue the potential acquisition of a 49.9% stake in Bank Windhoek through its parent Capricorn Investment Holdings Ltd (“CIH”). Since the announcement, however, Barclays advised CIH that it would pursue the Bank Windhoek transaction only after the proposed combination of the majority of its African businesses with Absa is further progressed. Accordingly, discussions have been suspended. Though it is uncertain if negotiations will proceed in the future, the success of the acquisition could impact on the bank’s ratings.
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