Nedbank’s JSE rally continues

Nedbank surged 8.3% in early trade before retreating slightly after the company posted headline earnings of R5.4bn for the six months to end June.

Johannesburg - Nedbank continued its rally on the JSE yesterday, surging 8.3 percent in early trade before retreating slightly after the company surprised market expectations by posting headline earnings of R5.4 billion for six months to end June, up by 2 percent compared to the previous period last year.

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The bank’s share price has recorded a 12.6 percent increase year to date. The bank reported a 2 percent growth in profits to R5.4bn that were undermined by a weak performance from its business in the rest of Africa.

Funding costs

The bank said its headline earnings would have been 20.1 percent higher had the results excluded Ecobank Transnational Incorporated (ETI) which showed a loss of R446 million and a further R157m relating to its funding costs in the period.

Ecobank is the leading pan-African bank with operations in 36 countries across the continent.

Chief financial officer Raisibe Morathi said the fundamentals of the business remained strong.

“The economy remains under pressure and we are very pleased with the results. We see the results as two parts: the managed operations and ETI. The results which showed a 2 percent growth were better than expected, considering the low growth in the economy,” said Morathi.

The bank said net interest income rose by 10.3 percent to R12.11bn, up from R10.98bn in 2015 and headline earnings per share grew by 0.6 percent to 1 135 cents per share.

In March Old Mutual, which owns Nedbank, said it wanted to reduce its shareholding in the bank by way of disposing its shares in an orderly manner and at an appropriate time in the managed separation.

The process is expected to be completed in 2018.

“Old Mutual will make further announcement when they are ready. Old Mutual believes in the Nedbank business and that is why they will still retain a stake in the bank,” said Morathi.

Morathi said the bank expected the interest rates to go up by 25 basis points in September, but noted that the recent strengthening of the rand would help soften inflation.

Dividend

The bank declared an interim dividend of 570c per share - up 6.1 percent compared to 2015.

Brad Preston, a chief investment officer at Mergence Investment Managers, said Nedbank results were ahead of expectations.

Preston said losses in ETI were expected from the market, but the SA business performed strongly.

“The beat from the SA business mainly came from slightly better than expected non interest revenue growth, but the main beat was the credit loss ratio coming in lower than expected with Nedbank actually releasing R150m of portfolio provisions,” Preston said.

Nedbank shares rose 6.68 percent to close at R212.30 yesterday.

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