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Nedbank lifted by Ecobank recovery
Nedbank lifted by Ecobank recovery
Published Date: 2019-03-06 | Source: Stephen Gunnion | Author: Stephen Gunnion
While the bank's West African-associate weighed on 2017 earnings, a turnaround last year helped mitigate challenging conditions at home.
Nedbank has benefitted from a turnaround at its Ecobank Transnational International (ETI) associate as growth in its home market continues to stagnate.
Releasing full-year results yesterday, the banking group said conditions for the industry remained challenging last year, with the weak economic environment resulting in subdued growth across all categories of credit and transactional banking. However, after exiting the recession, Nedbank said activity improved in the second half of the year, off a low base, with consumer spending also picking up. This saw a gradual increase in bank credit to households.
Results on home soil were muted due to local the economic constraints, with Nedbank's managed operations generating growth of just 2.8% in headline earnings. Its share of income from ETI came to R608 million, while headline earnings from the Togo-based bank rose to R375 million from a R975 million loss a year earlier. That helped lift group headline earnings by 14.5% for the year to end-December.
It bought a 20% strategic stake in the pan-African lender for $500 million in 2014. Ecobank has the biggest banking network on the continent with 2,000 branches in 36 countries.
Nedbank extended R181 billion to customers, up from R153 billion in 2017, helping to finance homes, vehicles and education, and to grow their businesses. Deposits rose 7% to R826 billion.
Net interest income rose 4.3% to R28.8 billion, while non-interest revenue, which includes bank fees and commissions, grew 7.9% to R26 billion, helped by a strong performance from its Global Markets business.
Within its units, Corporate and Investment Banking increased headline earnings by 6.3% to R6.7 billion due to strong growth in non-interest revenue. It maintained strong credit quality as it closely monitored its exposure to stressed sectors of the economy, such as construction and cement, as well as certain state-owned enterprises.
Retail and business banking increased headline earnings by 1.5% to R5.4 billion as the introduction of new accounting standards changed the way it accounts for new business and loyalty schemes. This reduced headline earnings growth by 4.9%. It said it maintained momentum in its retail advances and its credit-loss ratio was flat, reflecting a high-quality portfolio. Nedbank Wealth grew headline earnings by 6.1% to R1.1 billion.
Headline earnings per share rose 13.9% to R27.93. It's paying a final dividend of R7.20, taking its total dividend for the year 10.1% higher to R14.15.
In October, former parent company Old Mutual unbundled most of its Nedbank shares to its shareholders, reducing its stake to 19.9%. Nedbank followed this up with an odd-lot offer, repurchasing 1.4% of its stock for about R2 billion. It said the Old Mutual unbundling had increased its shareholder base from about 20,000 to about half a million, with the majority of the new shareholders owning less than 100 shares each.
Its share rose 0.2% to R272 yesterday.
$JSENED Nedbank: excluding Ecobank Nedbank's managed operations produced 2.8% y/y growth in HEPS - tough operating environment for banks-- Martin Harris (@MartinZA_trader) March 5, 2019