Ecobank buy pays off for Nedbank
NEDBANK has reported headline earnings growth of 15.7% for the six months to end-June, boosted in part by associate income of R246m from the 20% stake it had bought in Ecobank.
NEDBANK’s share price jumped 5% to R271.02 yesterday after it reported headline earnings growth of 15.7% for the six months to end-June — a slowdown from the matching period’s 17.5%.
Nedbank reported headline earnings of R5.3bn for the six month period, boosted in part by associate income of R246m from the 20% stake it had bought in the Togo-headquartered pan-African banking group, Ecobank. Ecobank reported $111m in profits during the first quarter of this year after posting $60m in profits in the previous period, and CEO Mike Brown said yesterday his company accounted for a 20% share of both amounts in its books.
Other operations in the rest of Africa brought in R98m.
The Rest of Africa operations are the fastest-growing division within Nedbank, although they do not yet match the billions brought in by its corporate and investment banking division.
Mr Brown said the Rest of Africa operations had grown strongly off a low base and Nedbank planned to leverage off its Ecobank investment in Central and West Africa, and invest in building the Nedbank franchise in the Southern African Development Commu- nity (SADC) and East Africa.
Despite the slowdown in headline earnings growth, Nedbank beat most analyst expectations, according to Bloomberg data.
The bank posted higher than expected earnings per share at R11.29, pretax profit of R7.2bn, and a 537c dividend per ordinary share, among other surprises.
It fell short on revenue and operating profit, but Mr Brown said the most important number was earnings per share, which surprised on the upside.
Sanlam Investments head of equities Patrice Rassou said the results were better than expected. “(There was) strong noninterest revenue of more than 10% as they gain clients and put through fee increases,” he said. “Bad debts are well contained, and Africa is still doing well.”
Noninterest revenue reached R10.5bn on an increase in retail and business banking clients to 7.3-million — the same number rival FNB reported at the end of last year.
Impairment charges were also 1.11% lower, resulting in higher income from lending.
Business banking client numbers declined more than 12%, but Mr Brown said some clients moved from this division to an area in retail banking for small business services.
“They required the better infrastructure in our retail banking environment,” he said. “You have individuals and business all in one branch.”
Nedbank’s results show that the business banking division shed 3,087 client groups, while small business services gained 11,000 clients.
In the corporate and investment banking division, Nedbank investor relations head Alfred Visagie said it had more than 600 clients, each with annual revenue of more than R700m.
Mr Brown said the gains were due to improvements in distribution, an area where Nedbank has spent R71m on self-service devices, including “intelligent” depositor ATMs.
It also added 22 new branches and upgraded outlets inside retailers.
In Mozambique, Nedbank owns 37% of Banco Unico.
“In Mozambique, we will go to between 50%-70% next year and we intend to pay in cash,” Mr Brown said, adding that the payment would not have a material effect on Nedbank’s capital position.
“Nedbank delivered good fee growth, ongoing improvement in the credit-loss ratio and disciplined cost management,” said Neelash Hansjee, bank analyst at Old Mutual’s Cape Town-based investment unit.
“The environment is tough, but Nedbank seems defensively positioned with the wholesale business being a bigger part of its mix versus its peers.” With