Nedbank leadership calls for urgency in structural reforms in SA

Nedbank CFO Raisibe Morathi decries challenging economy and difficult operating environment.

Nedbank Group announced that it had made “good strategic and operational progress and delivered a resilient financial performance in a tough economic climate” in the half-year ended 30 June 2019.

The company reported a 2.6 percent increase in headline earnings to R6.9 billion and a ROE of 17.9 percent that was above the estimated cost of equity of 14.2 percent. 

Nedbank CFO Raisibe Morathi said: 

“ROEs in most of our SA client-focused clusters declined as headline earnings growth was muted in a difficult environment and capital levels increased in line with advanced growth.” 

The company also reported headline earnings per share growth of 3.5 percent and a 3.6 percent increase to an interim dividend of 720 cents per share. 

According to the statement, revenue growth was ahead of cost growth, resulting in pre-provisioning operating-profit growth of 7 percent and the cost-to-income ratio improved to 55.4 percent. Impairments increased off the low prior-year base. 

“The normalisation of impairments resulted from some recoveries in the 2018 base that did not repeat in 2019, and new defaults given the challenging economic environment,” explained Raisibe. “We expect that the credit loss ratio for the full year will remain within the bottom half of our target range.”

Echoing Raisibe’s statements about a tough economical year, Nedbank Group CEO Mike Brown addressed the “far too slow” progress on structural reforms and policy certainty in South Africa. 

“South Africa is fast running out of both time and money. Significantly more urgency is required to institute structural reforms to stem the economic and fiscal deterioration currently being experienced in the South African economy,” Brown said. 

He added: 

“If we are unable to do this, all the hard work done on maintaining our last investment-grade rating from Moody’s will be in vain, at great cost to all South Africans ? due to higher inflation and higher interest rates as well as lower growth and lower levels of employment than would otherwise have been the case.