Nedbank expects Ecobank to recover despite losses
NEDBANK chief executive Mike Brown said yesterday that the group expected Ecobank (ETI) to deliver the results in the future after incurring losses during the six months to the end to June.
The Old Mutual-owned lender reported losses yesterday after Ecobank dragged headline earnings down 2.9 percent to R5.27bn.
Ecobank’s loss amounted to R1.16bn.
“We are disappointed with the performance of Ecobank and we made that clear in the Ecobank’s results in April. But are pleased that its outlook is looking much better than before,” Brown said.
Nedbank owns about 16 percent of Ecobank,the operations of which across West Africa have been hurt by lower commodity prices and unfavourable currency swings.
Nedbank-managed operations produced headline earnings growth of 6.7 percent to R6.43bn for the six months to end June, driven by slower revenue growth, reduced impairments and good cost management.
The group’s managed operations amounted to R6.03bn last year.
Richard Hasson, a fund manager at Electus Fund Managers, said Nedbank results were in line with expectations.
He said managed operations showed a reasonable performance in a tough domestic growth environment, growing earnings 7 percent, with lower credit impairments a key driver of this growth.
“Offsetting this was the poor performance from their associate investment in ETI which reported a loss of R1bn in the period, leading to an overall decline in reported earnings of 3 percent,” Hasson said, adding that operations outside South Africa proved extremely challenging for the lender.
Nedbank said that despite all the troubles, Ecobank remained a strategic investment which provided clients with a pan-African transactional banking network across 39 countries and access to deal flow in Central and West Africa.
Jordan Weir, an equities trader at BayHill Capital, said the results were a mixed bag with headline earnings missing expectations. “They were on the downside due to a weaker set of results by Nedbank’s African associate, Ecobank, for the first half of the year,” Weir said. “But the interim dividend was raised by 7 percent, against an expected increase of 2.1 percent, and return on equity figures came in more favourably.” he said. Africa had also proven to be an extremely tough and risky environment for any business to operate in.
Nedbank saw its diluted headline earnings per share (Dheps) declining by 3.7 percent to 1 078 cents a share, down from 1 119c as compared to the same period last year. The board declared a 7 percent increase in interim dividend per share to 610c for the period. page 19