Nedbank headline earnings up 14.5%

Nedbank Group on Tuesday (5 March) published its financial results for the year ended December 2019, showing headline earnings increased 14.5% to R13.5 billion, while ROE improved from 16.4% to 17.9%.

This translated into an increase in diluted headline earnings per share of 13.7% to R27.36 and an increase in HEPS of 13.9% to R27.93.

Chief executive Mike Brown said that progress in 2018 enabled the bank to grow its market share of main-banked clients across all business clusters.

“Our strategic enablers, including ongoing technology investments through our managed evolution programme, our people, our culture and our brand continue to create a more client-focused, agile, competitive and digital Nedbank.

“The innovations we plan to launch during 2019 are expected to result in another step change in client experiences, enabling ongoing revenue growth and efficiencies over time.”

Nedbank, which employs 31,277 people, said it increased its retail main-banked clients by 7%, giving it a market share up to 13.1%.

“From the low base in the SA economy in 2018 we anticipate a slow improvement in business and consumer confidence, and economic and credit growth in the year ahead. These assumptions, along with ongoing delivery on our strategy, support our current guidance for growth in diluted headline earnings per share for 2019 to be at or above nominal GDP growth,” Brown said.

Nedbank said that while the local economy recorded a technical recession in the first half of 2018, real GDP growth for the year recovered to 0.7%.

“Although the pace of the recovery remained modest, given the very low base, the improvement was relatively widespread, with most major industries recording mild output growth, driven by firmer domestic spending and stronger exports.”

The bank noted that consumer spending picked up in the second half, but household finances remain fragile due to high unemployment, subdued income growth, lower net wealth levels and higher indirect taxes as a result of the VAT increase.

“Consumer spending was largely financed through increased borrowing, with bank credit extended to households increasing gradually throughout the year,” it said.

In contrast to the gradual improvement in economic growth, the slump in fixed investment activity deepened. Capital outlays by private sector and state-owned enterprises (SOEs) declined further, while growth in capital expenditure by government slowed. Consequently, growth in loans to companies was slow, Nedbank said.

Despite the many challenges faced by the SA economy, the SA banking system remains sound, liquid and well capitalised.

The operating environment is forecast to improve in 2019 off a low base. A recovery in corporate credit demand is expected, mainly buoyed by the start of the next phase of renewable-energy projects and a slight improvement in fixed-investment activity towards the end of the year.

The gradual recovery in household credit demand is also forecast to continue throughout 2019, supported by lower inflation and relatively steady interest rates.

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Nedbank headline earnings up 14.5%