Nedbank earnings driven by strong revenue growth

Nedbank Group this week released strong financial results for the six months ended June 30, 2022, with overall profit (ET) up 27% to R6.7 billion, driven by strong revenue growth, a stable credit loss rate, improved ETI associate performance and a well-managed spend base.

Nedbank CE Mike Brown said the group’s performance in the first half of 2022 reflected improvements across all key indicators in a complex and challenging operating environment.

“The group’s return on equity (ROE) increased to 13.6% (June 2021: 11.7%), and all frontline business units generated ROEs above the cost of equity (COE) of the group. group,” Brown said.

The latest half-year results show that the group’s balance sheet remains very solid. The CET1 and Tier 1 capital ratios of 13.5% and 15.1%, respectively, have increased from December 31, 2021 levels and are well above the minimum regulatory requirements of the South African Reserve Bank (SARB). ).

The average Liquidity Coverage Ratio (LCR) for the second quarter of 144% and a Net Stable Funding Ratio (NSFR) of 119% were well above the regulatory minimum of 100%.

“Based on strong earnings growth and strong capital and liquidity positions, the group declared an interim dividend of 783 cents, up 81% year on year and back above the 2019 interim dividend before Covid-19,” Brown said.

Meanwhile, the HE of the Nedbank Africa Regions (NAR) business increased by more than 100%, from R182m to R574m for the period, generating an ROE of 15.9%, higher to the COE of the group.

The increase is attributable to the improved performance of the Southern African Development Community (SADC) operations and the continued recovery of the group’s associated investment Ecobank Transnational Incorporated (ETI).

Outside of South Africa, Nedbank is present in five SADC countries through subsidiaries and banks in Eswatini, Lesotho, Mozambique, Namibia and Zimbabwe, with representative offices in Kenya ( Nairobi) and Ghana (Accra).

To ensure coverage and revenue in West and Central Africa, Nedbank holds a 21% stake in ETI (also known as Ecobank Group).

“I am delighted that the NAR business has generated good results thanks to an excellent performance of our associated investment in ETI and improved performance of SADC operations,” said Dr. Terence Sibiya, Group Managing Director, Nedbank Africa regions.

Nedbank’s SADC operations generated an HE of R190m and ROE of 6.1% in H1 2022, compared to an overall loss of R11m and ROE of -0.4% in H1 2021.

The improvement in performance is mainly explained by the increase in income; Gross operating income (GOI) from SADC operations increased by 41% to R1,966 million.

Outlook

Looking ahead, Nedbank expects SA’s GDP to grow by 1.8% in 2022; interest rates rise another 75 basis points, bringing the repo rate to 6.25% and the prime rate to 9.75% by the end of
year.

Inflation is expected to peak in the third quarter at around 7.8% and average 6.8% for 2022.

Economic growth in sub-Saharan Africa, slowed by the impact of the conflict between Russia and Ukraine, is expected to grow by 3.8% in 2022 and accelerate to 4.0% in 2023, lower than previous projections of 4, 5%.

“This ongoing conflict along with lockdowns in China and slowing global demand pose a risk to business performance as various supply chains remain under strain and the cost of living increases in the countries in which we operate. We continue to monitor the socio-political situations in Eswatini and Mozambique for their potential impact on their economies and growth Responsive management action plans are in place to deal with Zimbabwe’s hyperinflationary environment and the uncertainties of the macroeconomic policy,” Nedbank said.

2022-08-12 Staff reporter

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