Nedbank mid-year profit takes knock on Ecobank losses

(File)
(File)

Johannesburg - Nedbank's [JSE:NED] resilience against South Africa's challenging political and economic environment has been undermined by the poor performance of its West African banking partner.

The bank reported a 3.7% fall in mid-year profit on Wednesday, despite increasing its interim dividend by 7.0% to 610 cents per share.

Nedbank's West African partner Ecobank Transnational Incorporated was its Achilles heel. The group said its performance was negatively impacted by its share of the loss from Ecobank, which decreased 6.7% growth in headline earnings in managed operations to an overall 2.9%.

Nedbank has a 16% share in Ecobank. The bank sees its investment into the West African bank as a strategic investment, even though Ecobank took hits due to currency and commodity volatility in that market.  

The bank said while the risks remain in its Ecobank investment, it believes the outlook for Ecobank is improving.

In its results for the six months to end-June 2017, the bank reported that headline earnings dropped by 2.9% to R5.3bn. Ecobank was the main culprit for the decrease.

The bank said its managed operations produced a solid result, with headline earnings growth of 6.7% and an improved return on equity of 18.9%. It reported that slower revenue growth was offset by reduced impairments and good cost management.

Despite South Africa’s challenging economic conditions, Nedbank said its strategies implemented over the past few years in preparation for a tougher economic environment have positioned the group well. This helped the bank weather the storm during the recession and the credit ratings downgrade that followed President Jacob Zuma's Cabinet reshuffle.

Nedbank chief executive Mike Brown said despite ongoing geopolitical tensions, economic growth in developed markets improved.

"This was supported by accommodative monetary policies as well as manufacturing and trade activity gaining momentum."

The bank believes its capital generation and liquidity levels are strong.

It currently has 7.9 million clients, 2.7 million of whom are main-banked clients.

Nedbank also said that in the slower growth environment, the bank is accelerating the delivery of its digital products. Its digitally active and enabled clients grew strongly, increasing the value of Nedbank App Suite transactions by 68% to R18.6bn.

“We aim to create a more agile, competitive and digital Nedbank,” the bank said. 

Nedbank shares were 0.47% down at R216.27 at about 12:00 on the JSE.

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