Finweek English Edition - - Companies & Markets -

THREE OF SOUTH AFRICA’S Big Four banks – Absa, Stan­dard and Ned­bank – that have their fi­nan­cial year end­ing on 31 De­cem­ber 2008 re­cently re­leased trad­ing up­dates for the first nine months and prospects for the full year. Th­ese are best re­flected in their own words: nor­malised head­line earn­ings for the year are likely to be sim­i­lar or slightly higher than for 2007. With the ad­di­tional shares is­sued to ICBC in March 2008, nor­malised head­line earn­ings per share for the year are likely to be lower than the com­par­a­tive fig­ure for 2007. with that of last year, de­spite chal­leng­ing mar­ket con­di­tions and the de­pre­ci­a­tion of the rand. Good in­come growth and well-con­trolled costs were broadly off­set by in­creased re­tail im­pair­ment. head­line earn­ings for the full year to 31 De­cem­ber 2008 to be at sim­i­lar lev­els to those of 2007. In the case of FirstRand, the group’s profit growth for the fi­nan­cial year to 30 June 2008 has more than bogged down and fallen by 11%. Due to var­i­ous un­cer­tain­ties, man­age­ment prefers not to make any fu­ture profit pro­jec­tions.

In plain lan­guage, all those trad­ing up­dates are warn­ings that for the time be­ing the Big Four don’t ex­pect sig­nif­i­cant growth in HEPS. Un­til re­cently they were fully con­fi­dent they could sus­tain profit growth of inflation plus 10 per­cent­age points. Even if the mid-point be­tween the inflation tar­gets of 3% to 6%/year is taken as a ba­sis, it still means ex­pected profit growth of 15%/year.

That has now evap­o­rated and in­vestors should treat the shares of the Big Four banks, plus oth­ers in the broader fi­nan­cial sec­tor, much more cir­cum­spectly.

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