Market loves Nedbank’s results

Nedbank’s share price rose by nearly 7% to R212.71 on Monday morning after the group reported a seemingly solid set of results.

Headline earnings rose by 2% to R5.4 billion for the six months to the end of June 2016. The results were however hit by its African arm Ecobank Transnational Incorporated (ETI) and, if this negative impact was excluded from the results, headline earnings would have been 20.1% higher.

“Nedbank Group’s managed operations, excluding ETI, produced a very strong performance for the first six months of the year,” Mike Brown said in statement. “Headline earnings growth was underpinned by strong revenue generation and an improved credit loss ratio of 67 basis points, while strengthening our portfolio impairment coverage ratios.”

The ROE rose from 15.9% to 18.3%

Brown said the results were hit by the loss ETI suffered in the fourth quarter of last year, which was accounted for in Nedbank’s first quarter of the financial year.

“ETI continues to navigate a difficult operating environment and following its comprehensive review of processes and portfolios, which led to elevated impairment charges in the fourth quarter of 2015, ETI has produced a much-improved performance in the first quarter of 2016. We believe in the long-term growth potential of the rest of Africa and remain supportive of ETI’s management and board.”

Brown added that the guidance regarding its profitability for the rest of 2016 remains unchanged. “We continue to expect positive growth in this metric, albeit that in the current economic environment this is expected to be lower than the growth we achieved in 2015 and below our medium-to-long-term target of the consumer price index plus GDP growth plus 5%.’

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