Johannesburg - Nedbank Group, the local bank controlled by Old Mutual, left its profit guidance for this year unchanged and said the economic outlook in its home market remains challenging.

Net interest income rose 8.7 percent to R5.57 billion in the first quarter from a year earlier, the Johannesburg-based bank said yesterday.

Non-interest revenue added 2.7 percent to R4.5bn, while loans rose 15 percent to R601bn.

The credit-loss ratio improved to 0.89 percent from 1.06 percent in December, the bank said.

“These improvements reflect the quality of the advances portfolio and the more conservative credit lending policies implemented in the second half of 2012,” Nedbank said. “The economic outlook for the balance of the year remains challenging.”

Nedbank is searching for growth in the rest of Africa through an alliance with Togo’s Ecobank Transnational and the acquisition of a stake in Banco Unico in Mozambique. While the Banco Unico transaction may be completed by June, Nedbank has until the end of November to convert the $285 million (R3 billion) loan it made to Ecobank in 2011 into an equity holding and then increase the stake to as much as 20 percent.

The company reiterated that full-year profit per share excluding one-time items will increase by more than growth in nominal gross domestic product (GDP), and said it expected GDP to grow 2.5 percent this year.

Nedbank has gained 13 percent this year, beating the average 11 percent increase on the seven-member FTSE/JSE Africa banks index. Yesterday, the Africa banks index gained 0.49 percent, while Nedbank shares lost 1.35 percent to close at R234. – Bloomberg