Nedbank beats expectations as bad debt declines

2014-08-05 17:55

Nedbank has released its interim results showing a double digit increase in headline earnings for the six months to June.

Nedbank today said it earned R4.6 billion in the first half of this year, a 17.5% increase compared with the same period last year.

The bank attributed its earnings performance to “good net interest income growth and a substantial reduction in impairments”. Impairments are bad debts, which are eventually written off.

Net interest income reached R11.3 billion in the first half, 9.3% up from the R10.3 billion it earned last year. The bulk of this was because of growth in average interest-earning banking assets.

Impairments fell 29.8% to R2.3 billion. Personal loans, which “attract a higher level of impairments”, now made up a smaller proportion of the overall loan advances categories.

Antswisa Management Group executive director Miyelani Mkhabela said the slowdown in household credit demand continued in the first half of 2014 – a clear indication that consumers were still in “a depressed spending mood”.

But tamping down personal loans took a toll on the bank’s bottom line. It was one of the reasons cited for its slightly lower non-interest income.

“In line with our commitment to sustainable banking practices, we maintained our transactional banking fees at 2013 levels and proactively reduced our personal-loans book size and associated credit life pricing with improved benefits,” said bank chief executive Mike Brown.

Meanwhile, Sanlam Investment Management head of equities Patrice Rassou said the bank’s performance was better than expected driven by improvement in retail non-performing loans, which led to bad debts declining over 60 basis points.

“Personal-loan bad debts appear to have peaked and are declining now from 13% to 11%, and home-loan bad debts almost zero,” he said, likening it to the “good experience” at rival Barclays.

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