Nedbank expects double-digit earnings growth
DURBAN - THE NEDBANK Group said yesterday that it expected its half-year profits to increase more than 20 percent during the six months to end June from a 56.5 percent decline in earnings reported at the year-end.
The group said that its earnings declined to R5.44 billion for the year to end December from R12.51bn the prior half on higher impairments and lower revenues and achieved a return on equity (RoE) of 6.2 percent. It said impairments charges increased to R12.43bn from R5.95bn last year and revenue fell by 3.5 percent to R54.2bn.
Chief operating officer (COO) Mfundo Nkuhlu said the bank was bullish on the future as profits would come off from a softer base compared to the same period a year earlier due to a negative impact of Covid-19.
“However, to achieve that would also depend on the country’s ability to contain a further spread of Covid19 as the government rolls out the vaccination programme,” Nkuhlu said.
He added that forecasting remains difficult in a volatile health and economic environment, but Nedbank expects the country’s GDP to increase by 3.4 percent in 2021. Its diluted headline earnings per share (Heps) fell 56.6 percent to 1 113 cents a share while basic earnings per share fell by 71.3 percent to 717c.
Nkuhlu said they had revised their medium-term targets so that they reflect the current environment. “By the year 2023 we aim to exceed our 2019 diluted Heps level of 2 565c, achieve an RoE greater than the 2019 RoE level of 15 percent, reduce our cost-to-income ratio to below 54 percent,” Nkuhlu said.
The group did not declare a dividend, despite a strong capital and liquidity position after guidance of the Prudential Authority. However it said it would declare it in the near future.
Chief executive Mike Brown said Nedbank managed to provide significant levels of cashflow support to clients who were negatively impacted by the Covid lockdowns, while remaining well-capitalised, liquid and profitable, although at levels lower than that of last year. Brown said Nedbank supported clients with more than R120bn of loans at the peak of the crisis.
“We are pleased that by the end of the year our clients have been able to reduce this level of support to R28bn, with only R2bn remaining for retail clients as economic conditions improved,” Brown said.
Brown said the pace of the domestic economic recovery would depend on how quickly SA could achieve population immunity as the phased Covid-19 vaccine roll-out raced against new and more contagious variants of the virus.
“Simply put, in 2021 vaccination is the best economic policy. The outlook for the SA economy is nevertheless more promising, with the recovery supported by firmer consumer spending, the rebuilding of domestic inventories and stronger commodity prices and export growth, particularly during the second half,” Brown said.
Nedbank shares declined 2.12 percent on the JSE yesterday to close at R135.10.