Cavmont Bank sinks Capricorn’s profit

It is now quite clear why the Capricorn Investment Group is selling its Cavmont Bank operations in Zambia – it has dropped profits for the entire group by over N$155 million.

These losses are not new, but are too severe for the 2020 financial year, and have now caused overall profit to drop from over N$1 billion to N$856 million – a 15,6% dip.

According to financials released yesterday, the group said if it weren’t for Zambia, profit after tax would have remained above N$1 billion, only dropping by 2,2% when compared to last year.

Although the entire economy was under severe pressure in 2019, financial statements for the year ending June 2020 show that the group recorded increases at both net-interest income and non-interest income categories.

Net-interest income clocked the year at N$2,08 billion from N$2,03 billion last year, while non-interest income edged up from N$1,2 billion reported last year, to settle at N$1,4 billion this year.

Taking out expenses from income, profit before tax for the period under review stood at N$1,3 billion, from the N$1,4 billion reported for last year. After tax, profit for the year was N$1,01 billion for this year.

Early last month, an announcement was made that the group was selling off through a merger its Zambian operations to Access Bank Zambia for N$285 million.

This then led to Cavmont Bank being classified as a discontinued operation and brought along a N$155 million loss.

It is this loss that downed the group’s profit at consolidation to N$856 million .

The profit earned by Capricorn this year is, however, a significant figure, it has for the first time surpassed rivals the FirstRand Namibia group, whose profit sunk by 23% to N$833 million.

Capricorn is still the biggest bank-backed financial group in the country in terms of assets, now reaching N$56 billion for the 2020 financial year, from N$50 billion recorded last year.

It also has the biggest loan book at N$40 billion, from N$38 billion registered last year. FirstRand follows at N$30 billion, with the gap somewhat widening.

The bigger share of the loan book is still locked in mortgage loans.

On segments, the group’s Bank Windhoek brand remains the biggest sole contributor to profit after tax at 66% this year, while Bank Gaborone added a 5% share.

Entrepo, the group’s cashloan business, did better than Botswana’s banking operations, adding over 11% to income.

Investment in subsidiaries also grew, shooting past half a billion Namibia dollar.

Its subsidiary companies include well-known brands in the banking, microlending, property development, unit trust management, asset management as well as information, communications and technology sectors.

Entrepo Holdings (Pty) Ltd, Sanlam Namibia Holdings (Pty) Ltd and Paratus Namibia Holdings Ltd are some of its well-known entities in which Capricorn invested.

Key indicators such as return to equity, return on average assets and capital adequacy slowed to 12,6%, 1,6% and 14,7%, respectively.

The credit impairment charged for the year also increased, shooting up to N$304 million from N$123 million reported last year.

This has led to impairment charges to average a gross loans-and-advances ratio, edging up to 0,76% from 0,3%.

The group announced it has declared a 20 cents per share final dividend – the lowest ever. In 2014, when the group was just growing, it had even declared a better dividend.

However, given the restrictions from the central bank and the uncertainty presented by Covid-19, the group said it declared the lower dividend to preserve capital and liquid asset positions, among other things.

The 20 cents will bring the total dividend payable for the 2020 financial year to 50 cents per share. On Wednesday, Capricorn’s shares were going for N$13,02.

The full statements on the financial results are available on the group’s website.