Nedbank strong despite Ecobank loss
Nedbank, the fourth-biggest bank in South Africa by market value, posted a 3,7% fall in mid-year profit in a results presentation on Wednesday, with a sharp fall in its Ecobank holding muffling an otherwise impressive set of results.
Nedbank has a shareholding of about 16% in Ecobank, the leading pan-African bank with operations in 36 countries across the continent and a larger African footprint than any other bank in the world. The bank has been hit by economic woes in oil exporters including Angola and its largest market, Nigeria, as well as currency weakness and foreign currency shortages, which resulted in a R1,2 billion loss incurred by Nedbank.
Despite this shortfall, Nedbank CEO Mike Brown was at pains to stress the strategic importance of Ecobank to the group. "Ecobank remains a strategic investment for Nedbank, providing our clients with a pan-African transactional banking network across 39 countries and access to deal flow in Central and West Africa," he said. "While risks remain, we believe the outlook for Ecobank is improving."
Diluted headline earnings per share fell to R10,78 for the six months to 30 June from R11,19 a year earlier, said Nedbank. If it wasn't for the damage incurred by the Ecobank, Nedbank would have realised a 6% increase in earnings and it manage to increase its interim dividend by seven percent to 610 cents per share for the six months ended 30 June despite facing tough political and economic challenges.
Brown reiterated his faith in the strategies Nedbank had put in place to counter the prevailing winds of volatility that had proved to be worse than expected. He said the company had proved to be resilient under the circumstances and also commented on the liquidity and well capitalised nature of the South African banking system.
"Our managed operations produced headline earnings growth of 6,7 percent to R6,433 billion from R6,030 billion in June 2016, driven by slower revenue growth, reduced impairments and good cost management," Brown said.
"In an environment of slower revenue growth, and as we accelerate the delivery of our digital products, we are intensifying our focus on cost-efficiencies to create investment capacity and to improve efficiency ratios. We aim to create a more agile, competitive and digital Nedbank."
In 2016, Nedbank's former mother company Old Mutual confirmed a split of its divisions and an offloading of its stake in the bank. It retains a 20% shareholding.