FILE PHOTO: Customers look on outside Nedbank, after the bank closed due to load shedding, at the Mall of the South in Johannesburg
FILE PHOTO: Customers look on outside Nedbank, after the bank closed due to load shedding, at the Mall of the South in Johannesburg

Nedbank earnings down 6.3% in tough domestic environment

By ANA Reporter Time of article published Mar 3, 2020

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JOHANNESBURG - Banking group Nedbank on Tuesday reported a 6.3 percent drop in diluted headline earnings per share to R25.65 in the year to December 31, citing difficult domestic conditions.

South Africa's economic growth in 2019 -- which the National Treasury has estimated at just 0.3 percent -- was slower than expected mainly due to severe and frequent power outages, an unsustainable fiscal trajectory and ongoing policy uncertainty, combined with a deteriorating global outlook, Nedbank chief executive Mike Brown noted.

"Under these difficult domestic conditions, company profits and household finances deteriorated during the year, resulting in subdued credit demand, lower transactional volume growth and rising defaults in the South Africa banking industry," he said.

"In this environment Nedbank Group’s financial performance was below expectations."

He said headline earnings were also impacted by additional items in the second half of the year, including hyperinflation in Zimbabwe and the raising of impairments against recoverability of recognised inter-company legacy debt.

“What is much more important ... is GDP growth in the year ahead,” said Nedbank CEO Mike Brown.

He said the bank was forecasting growth of 0.7% for 2020, but this could be revised if power cuts are worse than expected or if global conditions worsen as a result of the coronavirus.

The bank’s impairment charges surged by 66.2% to 6.1 billion rand ($396 million), with rising defaults in the retail bank as well as in corporate and investment banking, in a sign that the deteriorating economy is starting to hurt consumers and businesses.

Impairments in the retail bank had this time last year were below its target range.

Nedbank declared a final dividend of 695 cents per ordinary share payable to shareholders for the six months ended December out of income reserves.

- African News Agency (ANA) / REUTERS 

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