Commercial Bank Loan Exposure Grows

THE total loan exposure by commercial banks grew by 37,5% between December 2012 and June 2013, from N$3,8 billion to N$5,2 billion, the Financial Stability Report for the period ending 31 March released by the Bank of Namibia says.

Commercial banks in Namibia often lend a large portion of total corporate loans to individual companies and groups of companies in a single sector.

By so doing, these loans have the potential to become a systemic risk to overall financial stability, as this could amount to excess concentration risk to individual companies or sectors, the central bank noted.

The central bank says large exposures of the domestic commercial banks stabilised towards the end of December 2013, but still remained significant for specific sectors.

“Large exposure to fishing and tourism unwind, while exposures to manufacturing remained sizeable, but unchanged with respect to levels reached by end of June 2013. Overall, large exposures to the manufacturing and food and transport and logistics sectors made up 56% of total large exposures during the period under review. This constitutes concentration risk for domestic commercial banks and warrants monitoring,” the report says.

The banking sector continued to be characterised by an upward trend in total assets. The total assets of the banking sector rose by an annual growth of 14,7% at end December 2013, as compared to 12,7% at end June 2013.

The banking sector remained above the regulatory liquidity and above the regulatory minimum asset holding requirements. The sector also increased surplus stock between June 2013 and December 2013 by approximately N$500 million, the report revealed.

Source : The Namibian