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Nedbank delivers solid earnings growth

As fee income, rest of Africa earnings climb.
Nedbank CEO, Mike Brown.

JOHANNESBURG – Old Mutual Plc’s banking subsidiary, Nedbank said growth in first-half headline earnings was boosted by fee and commission income, cost control, improvement in impairments and faster growth from its rest of Africa businesses.

For the six months to June 30 2015, Nedbank reported a 15.7% climb in headline earnings to R5.3 billion. Return on equity (ROE), excluding goodwill, climbed to 17.3%.

Nedbank’s business clusters, including Retail and Business Banking (RBB) and Corporate and Investment Banking (CIB), reported headline earnings growth just shy of 20% to R5.5 billion, with ROE of 19.7%.

Net interest income increased 3.7% to R11.7 billion. Non-interest revenue (NIR), which primarily accounts for fee income, increased 10.2% to R10.5 billion.

Nedbank said that income from commission and fees grew 7.6% to R7.5 billion led by “net client gains, higher transactional volumes and inflation-related annual fee increases in RBB”.

At group level, client numbers increased 5.8% to 7.3 million, with main banked clients growing 8.2%.

Gross loans and advances climbed 11.8% to R648.8 million, with a 7.7% growth in retail banking loans to R210.7 million.

Nedbank’s credit loss ratio improved to 0.77% from 0.83% in the prior period. This was primarily driven by an improvement in RBB’s credit loss ratio, Nedbank said, “demonstrating the outcome of selective asset origination and strong collections management”.

Total defaulted advances declined to R16.7 billion over the period from R17.4 billion in June 2014, “as the residential-mortgage and personal-loan books continued to improve”, Nedbank said.

Rest of Africa headline earnings grew from R64 million for the six months to June 2014 to R344 million for the current period.

Nedbank said this was boosted by associate income of R436 million (June 2014: R11 million) from its 20% shareholding in Ecobank Transnational Incorporated, a stake it purchased in October 2014 for R6 billion.

Wayne McCurrie, head: wealth portfolio management at Momentum, said the results were better than the market was expecting and the share price will likely climb as a result. McCurrie added that Nedbank’s results were stronger than Absa’s.

Barclays Africa last week reported an 11% rise in headline earnings to R6.8 billion, declaring an ordinary dividend per share of 450 cents, 13% ahead of the prior period.

Nedbank reported an interim dividend per share up 16.7% to 537 cents.

“The strategic choices we have made continue to support our ability to grow in an increasingly demanding macro and regulatory environment. We have simplified our businesses and are generating synergies from integrating our Retail and Business Banking Clusters and from combining our wholesale businesses to form Nedbank Corporate and Investment Banking,” Nedbank CEO, Mike Brown said in a statement.

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