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Nedbank delivers impressive financial performance

Silence Charumbira

THE Nedbank Group has delivered an excellent financial performance in the first half of 2022 ending 30 June 2022, with 26 percent growth in headline earnings per share.

The group yesterday said the increased earnings were “driven by strong revenue growth, a flat credit loss ratio, an improved performance from associate ETI, and a well-managed expense base”.

The growth has enabled the group to post robust balance sheet metrics enabling an 81 percent increase in the interim dividend, now back above the 2019 pre-Covid interim dividend level.

The growth is also characterised by a 27 percent increase in headline earnings to R6,7 billion and a 13,6 percent of return on equity (RoE).

In a statement yesterday, Nedbank CE, Mike Brown, said the group’s performance in the first half of 2022 reflected improvements across all key metrics in a complex and difficult operating environment.

“The group’s ROE increased to 13, 6 percent (June 2021: 11,7 percent), and all frontline business units generated ROEs above the group’s cost of equity,” Mr Brown said.

The group’s balance sheet remained “very strong”, the group said.
CET1 and tier 1 capital ratios of 13,5 percent and 15,1 percent respectively increased from the 31 December 2021 levels and are well above SARB minimum regulatory requirements. The average Liquidity Coverage Ratio (LCR) for the second quarter of 144 percent and a net stable funding ratio (NSFR) of 119 percent were well above the 100 percent regulatory minimums.

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

The group said the South African economy held up relatively well at a time when global economic conditions deteriorated significantly into the first half of 2022. This was mainly on the back of Russia’s invasion of Ukraine, the hard lockdowns in China and supply chain constraints resulted in a surge in global inflationary pressures, particularly in energy and food prices, and faster-than-expected monetary policy tightening. These conditions dampened global demand and triggered fears of recession in both advanced and developing countries, the group said.

However, the second quarter was considerably more challenging as local economic activity was disrupted by the floods in KwaZulu-Natal, severe load-shedding, weaker global demand, escalating inflation and the faster-than-expected rise in interest rates.

“Electricity supply is a binding constraint on economic growth and job creation, and urgent implementation of the Energy Action Plan is needed,” Brown said.

In an interview yesterday, Nedbank Africa Region (NAR) managing executive, Dr Terence Sibiya, said the impressive performance was on the back of the easing of Covid-19-induced lockdowns in the different jurisdictions in which the group operates.

The easing of lockdowns resulted in increased transactional volumes, provision of more financial services like lending as well as more activity on the banks online platforms, Dr Sibiya said.

During the past six months, the group also said this yesterday, Nedbank continued making good progress on its strategic value drivers of growth, productivity and risk and capital management. “Growth trends across net interest income (NII) (+9 percent), non-interest revenue (NIR) (+13 percent) and gross advances (+7 percent) improved from the Covid-19 pandemic lows, supported by main-banked client gains across business clusters and strong growth in digital activity.

“Levels of productivity improved, evident in the cost-to-income ratio declining to 56,2 percent (from 58,5 percent in H1 2021) and a 17 percent increase in pre-provisioning operating profit.

Nedbank’s Managed Evolution technology strategy has reached 89 percent completion of the IT build, enabling continued double-digit growth in client digital metrics. These initiatives helped to increase the number of digitally active retail clients in SA by 10 percent to 2,4 million (H1 2021: 2,3 million) and by 60 percent since H1 2019. This now represents 67 percent of main-banked clients (H1 2021: 61 percent and H1 2019: 47 percent.”

The group’s Nedbank Money app continues to be rated highly on the Apple and Google app stores, with lifetime store client ratings exceeding four (out of five). The Nedbank Money app is actively used by 1, 8 million clients, up by 13 percent year on year and 167 percent since H1 2019 (H1 2021: 1,6 million).

This is coming after Nedbank Lesotho’s Nedbank Money (Africa) application was recently named the Most Innovative Retail Banking App Lesotho 2022 in the Global Banking and Finance Awards. For the third consecutive year, the bank was also named the Best Bank for Digital Banking Services Lesotho 2022.

Speaking after the award, Nedbank Lesotho managing director, Nkau Matete, said the bank was committed to innovation in line with the group strategy.

“In line with our broader group strategy, we at Nedbank Lesotho are committed to delivering innovative, market-relevant solutions to enhance how Basotho and all customers enjoy financial services.

“Through a deliberate focus on simplifying banking, making it more convenient, efficient, and accessible; we are looking to provide even more solutions to complement our full suite of comprehensive digital financial services and tools to support consumers.

“We, therefore, welcome this acknowledgement, and wish to reinforce our commitment to doing even more to meet our financial inclusion aspirations as a sector, taking full advantage of the capabilities enabled by technology,” Mr Matete said at the time.

The Nedbank Group is a bank holding company listed on the JSE Limited, with a market capitalisation of R106bn as at 30 June 2022. Nedbank is one of Africa’s largest banking groups, with operations in South Africa, Namibia, eSwatini, Mozambique, Lesotho and Zimbabwe, and offshore in the Isle of Man and Jersey.