…as banking group delivers strong performance in the first half year
Herbert Moyo
NEDBANK Group has delivered a strong performance for the first six months of the year from 1 January to 30 June 2021. This as headline earnings increased by 148 percent to R5,3 billion (M5, 3 billion) from a low base in 2020. The earnings however, remained 24 percent shy of the earnings for the first half-year of 2019 (H1) before the Covid-19 pandemic set in.
Significantly lower impairments, higher net interest margin and disciplined expense management boosted headline earnings. Underlying non-interest revenue growth was strong thanks to higher levels of client activity and improved insurance income. However, this growth was negatively impacted by a high H1 2020 trading revenue base and an unwind of prior-year fair-value gains.
As part of the group results, headline earnings in the Nedbank Africa Regions increased to R182 million from a loss of R24 million in the prior year, with its Return on Equity (ROE) improving to 5,8 percent.
Announcing the results in an exclusive interview with the Lesotho Times, the Group Managing Executive for the Nedbank Africa Regions, Terence Sibiya, said the strong performance came on the back of a low base brought on by the Covid-19 induced slowdown in global business activity. Dr Sibiya said that due to the strong half-year performance, the banking group had made huge strides towards returning to pre-Covid levels. The strong performance had also enabled the group to declare an interim dividend of 433 cents per share. This allows the group to resumes dividend payments, Dr Sibiya said.
Nedbank’s Africa businesses in the SADC region includes the countries of Namibia, ESwatini, Mozambique, Zimbabwe, and Lesotho.
Nedbank Group CEO Mike Brown also weighed in from the results announcement, saying the group’s performance in the first half of 2021 “reflects a strong financial recovery off a low base”. “Operating conditions in the first half of 2021 were better than we had expected at the start of the year helped by improved commodity prices. This was evident in upward revisions to South Africa’s GDP growth, vaccine rollouts gathering pace and positive developments on key reforms.
“A 53-year low in interest rates supported robust demand for retail credit while transactional activity increased off a low base and benefited from ongoing strong digital growth. Against this progress, demand for corporate loans remained muted and excess cash was used to repay debt, particularly in the commodity sector,” Mr Brown said.
“On the back of the performance in the first half and strong capital and liquidity positions, Nedbank declared an interim dividend of 433 cents per share.
“We remain well prepared to manage risks associated with the impact of the third wave of Covid-19 infections, which appears to have passed its peak, and helping our clients deal with any further waves as well as the impact of recent civil unrest and looting in parts of South Africa,” Mr Brown said.
This was in reference to last month’s unrest in several areas of South Africa which saw looters ransack shopping malls and other businesses as tensions boiled over the incarceration of former President Jacob Zuma.
The South African government subsequently said the death toll from the violence and civil unrest stood at 72. “The total number of people who have lost their lives since the beginning of these protests has risen to 337 with most of the deaths in the Gauteng and KwaZulu-Natal provinces.
At the time of the violence, Nedbank Group issued a statement calling for decisive action to restore normalcy.
This week, Mr Brown and Dr Sibiya both said during the first week of unrest, 226 branches (52 percent of total branches) and 60 of their Boxer Stores outlets (55 percent of outlets) were closed.
“In total 55 branches of these were vandalised. In addition, 325 ATMs were vandalised. At the end of July 2021, 29 branches and 23 Boxer stores were damaged and remain closed. All damages to Nedbank premises and equipment, currently estimated at R250 million to R300 million, are fully recoverable under Sasria (government’s unrest insurance cover) with zero excess.
“Our primary focus during the unrest and looting was to ensure the safety and security of our employees and clients. We are grateful that there were no related injuries or casualties. These developments are a stark reminder of the importance of accelerating structural economic reforms to deliver higher levels of sustainable economic growth to address the challenges of poverty, unemployment and inequality.
“Law and order and the protection of citizens’ assets are the foundation for investment and economic growth, and it will be vital for government to provide suitable explanations as to what happened, why it happened and assurances that this will not be allowed to happen again and those responsible must be speedily held to account,” Mr Brown said.
Key highlights
Although the individual countries’ banks like Lesotho are yet to announce their results, Nedbank Lesotho Managing Director, Nkau Matete, hinted at a stable performance by the bank.
Mr Matete said as an indication that the bank had done well, there were no staff retrenchments or salary cuts. For the second year running, Nedbank Lesotho also scooped the Best Digital Bank in Lesotho award highlighting its ongoing digital transformation journey to provide new additional services that enhance access and convenience for the banks’ customers, especially in the current Covid-19 pandemic environment.
Other key highlights for the Group in the first half year include:
- Overall number of clients grew by more than 14 percent.
- During this first half year, Nedbank Namibia and Mozambique achieved the highest net promoter score in their respective markets.
- Nedbank Zimbabwe and Nedbank Lesotho achieved the highest net brand sentiment in their markets, with the Nedbank brand sentiment continuing to improve in most other subsidiaries.
- Digitally active clients across the Africa Regions business grew by 62 percent as new services were rolled out and now make up 47 percent of the active retail base.
- The Nedbank Money App (Africa) volumes have grown by 15 percent year-on-year, while airtime or data and electricity purchases grew by 32 percent and 13 percent respectively.
- The bank provided support to clients during this difficult time: To date, 2 177 accounts have been restructured across the Africa Regions portfolios with a total exposure of R4,1 billion (17,7percent of the total book). Covid-19 relief granted in 2021 has been limited (R202 million) and focused around extensions granted in Namibia (tourism industry) and Nedbank Mozambique.
- Nedbank Private Banking in Namibia launched the new ‘Young Professional’ offering, while Nedbank Private Wealth in Namibia launched new stock broking and international offering.
- Awarded for “Best Internet Banking Africa” and “Best Mobile Banking Africa” for 2021, awarded by International Business Magazine.
- Nedbank Lesotho won award for the Best Digital Bank of Lesotho by the Global Banking and Finance Review for the second year in a row.
- In June 2021, Banco Único was successfully rebranded to Nedbank Mozambique: serving as a catalyst to address opportunities in growth sectors and leveraging group enterprise capabilities.
Outlook
Dr Sibiya said the group expects the recovery momentum on the subcontinent and in southern Africa to improve going into 2022.
“In terms of the SADC subsidiaries, we expect improvement in revenue and lower impairments, while continuing to manage expenses. Our focus is on continuing our digitisation and automation journey, transforming our business model for efficiency and scale through leveraging the rebranded Mozambican business to capture opportunities in the country and the ongoing reconfiguration of the Zimbabwe business.
“From a West and Central Africa perspective, the recovery is expected to continue from Ecobank’s (ETI) market-leading franchises”, Dr Sibiya said.
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