Ned­bank breaks through

Healthy earn­ings growth ex­pected de­spite large ex­pen­di­ture to ex­pand mar­ket share

Finweek English Edition - - Creating wealth - LU­CAS DE LANGE

FOR THOSE WHO in­vested in the Ned­bank Group as a re­cov­ery share there was good news re­cently when it broke through an im­por­tant re­sis­tance level at R138,80. That’s where the price bogged down in March 2006 af­ter a very strong run. It re­cently broke through de­ci­sively, backed by good vol­umes when it reached a high of R142/share.

The share is still some dis­tance from its peak of R182,20 reached in Jan­uary 2001 and re­sis­tance can be ex­pected at R150 and R168.

Though Ned­bank treated share­hold­ers well by climb­ing 171% since its low of R52,40 in Au­gust 2004, it’s nev­er­the­less mov­ing more or less in line with the bank in­dex. For ex­am­ple, in the same pe­riod Absa rose by 175%, Stan­dard by 145% and FirstRand 147%.

Ned­bank’s half-year re­port to June last year showed that al­though it had made good progress in over­com­ing the set­backs of the past, it still had some way to go be­fore its re­turn on eq­uity (RoE) will reach the same level as that of its main ri­vals.

In or­der to halt and turn around its loss of mar­ket share, Ned­bank has taken dras­tic steps, such as re­duc­ing bank charges for in­di­vid­ual ac­counts by 13%, while, for the fourth con­sec­u­tive year, the charges for Ned­bank Re­tail’s small busi­ness ser­vices re­mained un­changed. Charges for Mzansi ac­counts were re­duced. It hopes to make up for the loss of in­come by larger vol­umes.

To achieve that, it’s in­vest­ing ag­gres­sively in its dis­tri­bu­tion net­work. For ex­am­ple, be­tween 2006 and 2008, 110 new branches (400 out­lets) will be opened, while its ATM net­work will be ex­panded by 50%. Its tar­get is a re­turn of 20% on av­er­age or­di­nary share­hold­ers’ eq­uity, af­ter that stood at 18,6% at end-June 2006. In­di­ca­tions are that it should achieve its tar­get.

A healthy in­crease in earn­ings and div­i­dend is ex­pected for the year to De­cem­ber.

The McGre­gor BFA con­sen­sus is an in­crease of 35% to 1 076c (797c) and a div­i­dend of 437c (394c). The div­i­dend yield is cur­rently 2,8%.

Its price break­ing through the re­sis­tance level of March 2006 con­firmed that in­vestors now rate it in line with its ma­jor com­peti­tors and Ned­bank should there­fore con­tinue its bull trend.

Try­ing to halt loss of mar­ket share.

Tom Board­man


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