Nedbank lifted its interim dividend 11.5% to 971 cents per share in a challenging trading environment and a stronger economy in the second half, a good pipeline of renewable energy projects and further strides in executing strategy should see the lender meet its medium-term targets, its executives said yesterday.
The bank has fallen under the media spotlight recently as it gears up for a legal battle with the Special Investigating Unit and Transnet over alleged R2.7 billion in interest rate swaps transactions dating back to the state capture-era in 2015/16.
The bank has said it was confident that it “did no wrong” in the transactions, and no provisions were set aside for the legal case in the interim results.
Diluted headline earnings a share (Heps) increased by 12%, benefiting from the R5bn capital optimisation programme. Revenue was up by 4% to R35.16bn. The credit loss ratio of 104 basis points was “pleasingly” lower from 121 points at the same time last year, said chief financial officer Mike Davis in an online presentation.
“We remain cautiously optimistic about the potential benefits associated with SA’s GNU. And we expect better macroeconomic conditions in the second half of 2024 and into the medium-to-long term,” said CEO Jason Quinn.
Earnings increased 8% to R7.91bn in the six months to June 30. Net asset value per share of 23 097 cents was up by 2%.
Economic activity in the first half was impacted by geopolitical uncertainty, high interest rates, persistent inflation, and general uncertainty ahead of the national elections.
Household finances remained under pressure as real incomes contracted, and job prospects were muted. Corporate activity was also weak due to the uncertain political and economic environment, he said.
The financial implications of these outcomes were evident in elevated levels of consumer strain, slow lending, and transactional revenue growth across wholesale and retail clients. The bank had been cautious in its unsecured lending, said Davis.
However, the swift formation of a government of national unity (GNU) spurred cautious optimism in financial markets resulting in lower bond yields, stronger equity markets, and a stronger rand.
Headline earnings growth was underpinned by good non-interest revenue growth, a lower impairment charge and tight cost control. The group return on equity improved to 15% from 14.2%.
Balance sheet metrics all remained strong, enabling the declaration of the interim dividend of 971 cents per share, up by 11.5% at a payout ratio of 57%, said Davis.
Some R154bn of funding went to support sustainable development finance (SDF), aligned with the United Nations Sustainable Development Goals (SDGs). Renewable energy finance grew by 20% in the year to date.
There was a strong pipeline of renewable energy projects to finance, said Quinn. The R154bn of exposures that support SDGs represented 17% of the group’s gross loans and advances.
In March, 2024 it became the first South African bank to publish sectoral glide paths that inform its exit from the thermal coal and oil and gas sectors over time, in support of the bank’s net-zero 2050 commitment to have zero fossil fuel exposure by 2045.
The bank said its client satisfaction scores were at the top-end of the South African banking peer group, that it had maintained good main-banked client growth, there were higher levels of cross-sell and there had been market share gains in areas that created most value including retail deposits, home loans, vehicle finance, and overdrafts.
A target of R2.5bn in efficiency gains was met. The bank forecast gross domestic product to increase by 0.9% in 2024.
BUSINESS REPORT