Nedbank to stick with SARB dividend guidance


Nedbank to stick with SARB dividend guidance

Published Date: 2020-12-03 | Source: Stephen Gunnion | Author: Stephen Gunnion

Nedbank to stick with SARB dividend guidance

The bank has reported a continued improvement since August but says a dividend is unlikely this year.

Nedbank says it's unlikely to declare a dividend this year if the Reserve Bank's guidance on capital conservation remains in place. That's despite its liquidity and capital remaining well above minimum regulatory requirements as well as its own interal targets.

In a pre-close update, the bank said an improvement in its performance in the third quarter of the year, relative to the second quarter when it felt the full impact of Covid-19, had continued into October. While the negative impacts of the pandemic and subsequent lockdowns were still evident in parts of its client base, high frequency data from its transactional banking channels, its point-of-sale devices and card-related digital channels reflected positive growth in total industry turnover data from August onwards.

Asset growth for the ten months to end-October slowed to the mid-single digits, from 8.2% in the first six months of the year, and it expected the trend to continue, partly due to the repayment of loans drawn by corporate clients at the height of the crisis. This was offset by a small increase in advances growth to Retail and Business Banking customers.

While growth in net interest income (NII) decreased from the 1% reported in June, it said the decline was less than expected. Growth in credit impairments was also lower than the 202% reported in June, with its credit loss ratio declining from 194 basis points to within its guidance range of between 150 and 185 basis points. Non-interest revenue (NIR) was still likely to fall by between 7% and 11% for the year, also in line with its previous guidance, due to declining fees and commissions, slower growth in trading income and a drop in insurance income.

The bank said the most recent sovereign credit rating downgrade by Moody's, which affected its own rating, wasn't expected to have any significant impact on its cost of funds as it raised most of its deposits and funding in rand, with very little mismatch between foreign denominated funding and foreign denominated assets.

Nedbank said its previous guidance for a decline of more than 20% in earnings and headline earnings per share remained unchanged. It said it would issue a further trading statement once it had more certainty on its performance for the year to end-December. Its results are due out in the third week of March.

Its shares fell 0.6% to R120.90 yesterday.

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