By Staff Reporter
JOHANNESBURG, Aug. 8 – Nedbank Group exhibited a commendable financial performance for the first six months of 2023, with headline earnings (HE) increasing by 10% to R7.3 billion, despite facing challenges in the operating environment. The return on equity (ROE) also showed improvement, rising to 14.2% compared to 13.6% in H1 2022. The growth in HE was primarily driven by robust revenue growth, including associate income, at 14%, coupled with efficient expense management, leading to a noteworthy 22% increase in pre-provisioning operating profit. However, this growth was partially offset by a 57% surge in the impairment charge, particularly in the retail consumer banking segment in South Africa.
Nedbank’s CEO, Mike Brown, acknowledged that the operating environment during the first half of the year was more challenging than initially forecasted. Factors such as a weak global economy, declining commodity prices, prolonged load-shedding, logistical constraints, higher-than-expected inflation, and increased interest rates impacted domestic economic activity negatively.
Despite the obstacles, Nedbank’s solid financial performance and strong balance sheet metrics enabled the group to declare an interim dividend of 871 cents per share, representing an 11% increase, at a payout ratio of 57%.
Impressive Performance in Nedbank Africa Regions (NAR) Cluster
Dr. Terence G. Sibiya, Nedbank Group Managing Executive for Nedbank Africa Regions, expressed his satisfaction with the exceptional performance of the NAR cluster. This success was driven by improved performances from the SADC operations and robust earnings from the Ecobank Transnational Incorporated (ETI) associate investment. Additionally, the release of the R175 million Ghana domestic sovereign bond provision, which was taken in 2022, contributed to the stellar performance.
The NAR cluster comprises operations in Eswatini, Lesotho, Mozambique, Namibia, and Zimbabwe, along with representative offices in Ghana and Kenya. Nedbank Group also holds a 21.2% shareholding in ETI, a leading private pan-African banking group present in 35 sub-Saharan African countries, covering Francophone West Africa, Nigeria, Anglophone West Africa, and Central, Eastern, and Southern Africa (CESA).
Dr. Sibiya expressed his contentment with ETI’s continued impressive performance under the leadership of the new Group Chief Executive, Jeremy Awori, who assumed full executive responsibility in March 2023.
Key Achievements and Growth in Nedbank Africa Regions
The Nedbank Africa Regions’ performance saw headline earnings surge by 97% to R1.132 billion from R575 million in 2022, while returns on equity improved to 29.2%. The cluster’s cost-to-income ratio decreased to 47.8% from 62.5% in H1 2022. The SADC operations within the cluster recorded HE of R461 million, representing over 100% growth from R191 million in H1 2022, with an ROE of 13.5%.
Cluster net interest income (NII) increased by 40%, and non-interest revenue (NIR) grew by 30%, primarily due to improved margins from rising interest rates and unrealized forex gains in Zimbabwe. However, slower-than-anticipated business activity across the countries and a higher net monetary loss in Zimbabwe of R630 million (H1 2022: R277 million) partially offset these gains.
Nedbank Africa Regions experienced positive developments in customer numbers, digital engagement, and value-added services. The cluster also received prestigious awards, reinforcing its commitment to excellence and innovation.
Commitment to Sustainable Development and Economic Growth
Nedbank remains committed to fulfilling its purpose by using financial expertise for the greater good, demonstrated through delivering against the UN Sustainable Development Goals (SDGs), leading in environmental, social, and governance (ESG) matters, and supporting sustainable-development finance (SDF) commitments. In H1 2023, new SDF-related payouts exceeded R10 billion, and the group had exposures of R134 billion that supported SDF.
Looking Ahead
The economic environment in South Africa is expected to remain challenging, especially with high levels of electricity shortages and increased pressure on consumers’ disposable income due to inflation and interest rate hikes. Despite the hurdles, Nedbank aims to achieve its 2023 targets, including an ROE greater than the 2019 level of 15% and a cost-to-income ratio below 54%. Additionally, the bank maintains its commitment to addressing key economic challenges in partnership with the government and other stakeholders.
CEO Succession Process
Nedbank Group is currently in the process of choosing a successor to CEO Mike Brown, who has played a significant role in the organization for 30 years. The Board is actively considering internal and external candidates, and updates on the CEO succession process will be provided alongside the year-end results in Q1 2024.
Overall, Nedbank’s resilient performance and strategic initiatives position the bank for continued growth and positive impacts in the African financial landscape.
