VBS crisis gives Nedbank a boost

Nedbank assisted 17 000 former VBS clients after it was appointed by the Reserve Bank to administer depositor funds of the beleaguered mutual bank earlier this year.

Although some people elected to withdraw their savings, Nedbank [JSE:NED] CEO Mike Brown said on Tuesday that many more opened accounts.

"We were surprised at the number of people who were happy with seeing a positive bank balance on their statements and decided not to withdraw all their money," he said.

Government provided a guarantee to the South African Reserve Bank to facilitate the repayment of all VBS retail deposits, up to R100 000 per retail depositor, after the mutual bank was placed under curatorship. 

The bank came under scrutiny after it was revealed more than R1.5bn of its capital had allegedly been looted by its own management, who allegedly used the bank’s funds to splash out on luxury vehicles and other goods.

Nedbank’s half-year financial results for the period ended June 30, released on Tuesday in Johannesburg, showed that its client base stood at over 8 million, in what it described as a "challenging and volatile" domestic macroeconomic environment. 

"Policy uncertainty around land reform, the mining charter and systemically-important SOEs (state-owned enterprises) like Eskom, are eroding business and investor confidence," Brown noted.

He said addressing these challenges was vital for the economy, including job creation.

However, he stated that there had been some green shoots in the bank’s business, with an increase in credit application volumes, vehicle finance and home loan applications.

Nedbank increased headline earnings 27.0% to R6,7bn, boosted by associate income from Ecobank - the pan-African partner it bought into in 2008 - returning to profitability and providing a broader footprint in the African continent.

Nedbank now owns a 20% stake in the Togo-based bank, and Brown said there was no option of taking up a bigger share in the lender.

Nedbank’s managed separation from Old Mutual is on track for completion by year end, and the unbundling will reduce Old Mutual’s 54% shareholding in the bank to 19.9%.

According to Brown, the separation will not affect Nedbank operations and the bank will "continue an arm’s length and mutually beneficial commercial relationship with OML".

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