Nedbank’s plea for urgency in dealing with SA’s deterioration
Plea for urgency in dealing with SA’s deterioration as difficult local trading conditions take their toll on bank earnings
It has never been a more difficult environment in which to achieve flat earnings, says Nedbank CEO Mike Brown, who this week unveiled the bank’s interim results to June.
Nedbank also revised down its growth forecast for SA, and called for urgency in dealing with the country’s deteriorating economic and fiscal situation.
The bank reported a modest 2.6% improvement in earnings. But this was entirely due to a 20% increase in the rest-of-Africa earnings, to R293m.
Its weakest link is its wealth business, which is down 12% to R455m, due to subdued demand for higher-margin local equity products.
Its two main engines, the corporate & investment bank (CIB) and the retail & business banking division (RBB), reported flat earnings, with a lower interest margin and higher bad debts.
Nedbank still has an appetite to lend and it increased its loans to customers by 6.7% to R759bn. It has gained market share in vehicle finance and home loans and reduced it in the more volatile personal loans and cards businesses.
CIB accounts for 48% of headline earnings and RBB for 38%.
Brian Kennedy, head of CIB, says it is the market leader in renewable energy finance and in commercial property. A highlight was that commercial property advances increased by 2.8% in spite of the competition to offer high-quality loans. And it has reduced its exposure to state- owned enterprises from 5.2% to 3.9%.
Exposure to retailers is just 2.3% of the book.
Nedbank has shrunk its base, closing 14 branches during the half-year, and its retail clients have fallen 3% to 7.4-million. But RBB head Ciko Thomas is happy with the growth in key segments such as small business services (up 10%) and professionals (up 8%).
Brown says Nedbank looks attractive, with the p:e and price:book ratios well below Standard Bank and FirstRand and in line with Absa, the weakest of SA’s major banks.