JOHANNESBURG - The Nedbank Group said yesterday that it would splash close to R2 billion a year on new technology after it recorded a 27 percent hike in headline earnings on the back of income from its once struggling Ecobank (ETI) subsidiary.
Chief executive Mike Brown said the group would use the money to grow its revenue and improve efficiencies. Brown said Nedbank would invest strongly in technology, innovation and digital delivery. “We are investing around R2bn a year on new technology and the benefits are showing,” Brown said.
“These investments and innovations have helped us reach some major milestones with total assets exceeding R1 trillion for the first time, total retail clients are now more than 8 million and more than 1 million downloads were reached on the Nedbank MoneyTM app since it was launched in November 2017.”
Nedbank said its headline earnings rose to R6.70bn during the six months to end June after Ecobank recovered from a loss of R1.2bn last year to a R134 million profit.
“The results were assisted by our share of associate income from ETI as it returned to profitability, while our managed operations delivered positive, but slower, earnings growth in line with our expectations,” Brown said.
Corporate and investment banking rose 2.65 percent to R3.30bn, while retail and business banking increased 1.45 percent to R2.58bn.
Nedbank Wealth recorded the same headline earnings of R519m as compared to last year.
The group also reported a 26.3 percent increase in diluted headline earnings per share and headline earning per share of 1 361 cents a share and 1 387c respectively.
The group said the increase was in line with its estimates of between 23 and 28 percent as set out in the trading statement towards the end of July.
Commission and fee income increased 3.2 percent to R8.71bn during the period and net inernational reserves grew by 4.3 percent to R12.24bn.
Insurance income rose 7 percent to R830m, and the bank said this was supported by a lower-claims experience in homeowner’s cover after the catastrophic weather events experienced the previous year, as well as the benefit of lower business strain relating to the funeral book.
Trading income increased by 4.5 percent to R2.10bn, with strong growth in equities and slower growth in debt trading as activity levels among wholesale clients remained muted particularly in the second quarter of the year.
The board declared an interim dividend of 695c a share, up by 14 percent as compared to last year’s 610c.
Ron Klipin, a senior analyst at Cratos Capital said Nedbank recorded tepid growth in loans and advances due to strict lending criteria and weak demand from corporates, which resulted in slow top-line growth.
Klipin said recovery in household credit was on the cards, although the market was still tenuous with uncertainty.
“The major turnaround in earnings growth came from a reported profit from Ecobank, as compared to a previous loss from it,” said Klipin.
Renier de Bruyn, an investment analyst at Sanlam Private Wealth, said earnings came in line with their expectations, driven by better cost control, while revenue growth disappointed slightly.
Nedbank shares closed 1.61 percent lower on the JSE yesterday at R260.14.