Johannesburg - Nedbank’s chief operating officer, Graham Dempster, said yesterday that the better-than-expected results for the full year to December last year was “a pretty good performance” given the tough economic environment that prevailed.
The Nedbank share price closed 3.22 percent higher at R209.30 following news that diluted headline earnings a share had increased by 15 percent to R18.29 and the full-year dividend payment was up 19 percent to R8.95 a share.
The group increased its return on assets to 1.23 percent from 1.13 percent. This lifted return on equity to 17.2 percent, which was comfortably ahead of the 13 percent cost of equity.
Dempster said that a particularly pleasing aspect of the performance was the 11.8 percent increase in non-interest revenue. He attributed this to increased client activity rather than a muted increase in fees and noted that for this year the group was planning zero price increases.
“This will cost the bank just under R350 million but we believe it makes us an attractive value proposition,” he said.
The star performers during the year were Nedbank Corporate and Nedbank Capital. The corporate division increased its contribution to headline earnings by 23.6 percent to R2.2 billion on the back of an excellent performance by the property finance segment.
“Good drawdowns in the investment banking pipeline” and improvements in impairments helped the Nedbank Capital division to increase earnings by 20.6 percent to R1.7bn from R1.4bn.
Business banking and retail put in a comparatively subdued performance in line with the tougher conditions in those sectors of the market.
Business banking had a particularly tough first half when it had to make a R182m provision on a R240m loan to First Strut, which defaulted in the first half of the year.
During the first half, management also decided to implement an unexpectedly conservative approach to retail impairments.
Management said that the full year credit loss ratio was 0.65 percent, which was within target range “due to the quality of client advances and proactive risk management practices”.
Dempster and the group’s chief financial officer, Raisibe Morathi, said the bank was well positioned to deal with the difficult trading conditions expected in the current year.
Morathi said that the more cautious approach to the personal loan market had seen Nedbank’s personal loan book reduce by 9 percent.
“We have positioned ourselves with a high-quality loan book, which is appropriate as we head into a period of possible increasing interest rates.”
Dempster said that by the end of last year, the group’s personal loan book had been reduced to R2.1bn. This compared with an increase for the formal banking sector to a total R12bn. “In the category of personal loans, we have slowed the most among the banks.”
For 2014, management was forecasting gross domestic product growth of 2.6 percent.
“This was higher than the expected 1.8 percent growth in 2013, but remains below growth rates required to reduce unemployment levels meaningfully. The key drivers are likely to be better export performance and an increase in gross fixed capital formation.”
Growth in household credit demand was not expected to improve and growth in most retail lending was expected to remain muted, while consumer credit risks were likely to increase.
Corporate credit demand was expected to remain above retail credit demand “but will continue to be subdued as corporates delay committing to new projects in an environment of infrastructure constraints and low levels of confidence”. - Business Report