Big four banks taking knock

RESULTS: HEPS GROWTH IN SINGLE DIGITS

Nedbank has costs on tightest leash.

The results to end-June of SA’s four full-service banks paint a clear picture of an economy that’s barely growing. Excluding the impact of associate income, growth in headline earnings per share (HEPS) for all four was single digits.

Nedbank was boosted by a turnaround at ETI (Ecobank Transnational Incorporated), without which diluted HEPS growth would’ve been 1.4%. FirstRand was boosted by three months of profits from Aldermore in the UK.

Nedbank leads in dividend growth. FirstRand’s dividend was up 8%, but the final dividend (for the second half) is up just under 7%. Absa Group barely grew its payout in the six months.

FirstRand’s superiority in return on equity (ROE) is maintained, with 23% to end-June. But it’s the lowest in five years and has been on a downward trajectory since 2015. Excluding Aldermore, ROE was 22.8% for the year. The group says the UK bank “enhanced group earnings and ROE”.

Nedbank makes use of an ROE figure excluding goodwill of 18.4% for the first half. Its 2020 target is above or equal to 18%. The ROE without adjustments is 17.2%, up from 14% a year prior. Absa Group’s ROE has been between 16.1% and 17% for the past eight reporting periods, while Standard Bank’s is up from 12.7% in the first half of 2014 to this year’s 16.8%.

In terms of advances, Absa Group and FirstRand reported growth rates (7%) more than double those of Nedbank and Standard Bank. Deposit growth at FirstRand, excluding Aldermore, was up 11%, jumping to 29% with the UK operation. Growth in customer deposits at the other three banks was in the low-/midsingle-digit range. Nedbank had the tightest grip on costs, with expense growth of 2.7% in the six months. It and Absa both saw expense growth below inflation. FirstRand says, excluding Aldermore, full-year “operating cost growth (7%) continues to trend above inflation”.

Hilton Tarrant works at YFM