Johannesburg - Nedbank, majority-owned by Old Mutual, on Tuesday said its profits for the year ended December grew marginally by 5.9 percent after an underwhelming performance of its associate bank Ecobank in Togo.
Nedbank reported that Ecobank lost nearly R4 billion in value during the period, including an impairment provision of R1 billion.
Nedbank chief executive Mike Brown said Ecobank’s outlook for the current financial year remained volatile and uncertain. But, Brown said Nedbank still believed that Ecobank would be a solid investment in the long term.
“The carrying value of Nedbank Group’s strategic investment in Ecobank decreased from R7.8 billion to R4 billion during the year, due to a combination of foreign currency translation losses arising from the naira devaluation,” Brown said.
Nedbank bought a 20 percent stake in Ecobank for $493.4 million (R6.39 billion) in 2014, making it the second-largest shareholder in the Lomé-based bank after Qatar National Bank, which holds a 23.5 percent stake in the Pan-African financial institution.
The bank is the subject of a strategic overhaul by Old Mutual that could see the parent company cutting its stake from 54 percent as it seeks to reconfigure its complicated structure.
The restructuring is expected to be concluded next year.
Nedbank also announced the departure of two executive directors - David Adomakoh and Tom Boardman - with effect from May. Boardman had been an executive director of the company since 2002 and its chief executive from 2003 to 2010.
Nedbank's headline earnings grew 5.9 percent during the year to R11.4 billion, while headline earnings per share grew 5.1 percent to 2 400cents.
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The bank said had Ecobank performed in accordance with expectations, the growth would have shot up 15.1 percent compared to the corresponding period last year. Diluted headline earnings per share increased 4.8 percent to 2350c. Nedbank declared a final dividend of 630c per ordinary share.
Aeon Investment Management chief investment officer Asief Mohamed said while Nedbank lamented the Ecobank performance, the headline growth was still better than previous market estimates.
Mohamed, however, cautioned that Ecobank was not bearing the desired results.
“The disappointing part of the result was the R1 billion impairment provision on EcoBank. This investment has been fraught with difficulties for a number of years,” he said. But Nedbank narrowed its credit loss ratio to 0.68 percent from 0.77 percent in the period.
Last week, rival Barclays Africa reported that its credit-loss ratio for the year ended December widened to 1.08 percent from 0.92 percent.
The star performer across the company was its retail and business banking unit, which contributed 57 percent of the group’s R45 billion operating income and 43 percent of its R11.4 billion headline earnings.