London-listed financial services and insurance giant Old Mutual says it is confident that its subsidiary Nedbank is well on the road to recovery.
“It’s still lagging its competitors in some regards, but we are confident of their [Nedbank’s] return,” said the group’s financial director, Julian Roberts, who will soon take over as CEO of Skandia, the Swedish assurer recently taken over by Old Mutual.
Old Mutual CEO Jim Sutcliffe said that management actions taken at Nedbank had moved the business into the next stage of its turnaround, with the majority of the strategic recovery benefits planned for 2005 now firmly in place.
“Nedbank has become more outward-looking, with the focus shifting to building a sustainable business through the delivery of world-class service.
The business is seeking to improve innovation and deliver quality transactional banking growth, with a view to optimising risk and capital management and creating profitable asset growth,” he said.
Roberts added that Nedbank was also on track to achieving its target of a 20% return on equity (ROE) by 2007.
“ROE of 15,5% for the year significantly improved from the 2004 level of 11%, and whilst still being below Nedbank’s peers, is now comfortably above the cost of capital. Despite the dilutive effects of the BEE transaction and the accounting impacts of IFRS, Nedbank remains committed to achieving the 20% ROE target by 2007 through the continued improvement in profit and the application of sound capital management.”
He added that Nedbank continued to be well capitalised with the tier one capital adequacy ratio increasing from 8,1% at 31 December 2004 to 9,4% at 31 December 2005.
“The total capital adequacy ratio has increased to 12,9%, compared with 12,1% at 31 December 2004. This improved capital position has prompted the initiation of a share repurchase programme by Nedbank, with just over one million ordinary shares repurchased to date. This initiative further supports the efficient management of Nedbank’s tier one capital and improves the business’s overall capital mix. Nedbank has also changed its dividend cover policy, reducing the cover ratio from between three to 3,5 times headline earnings to between 2,5 to three times headline earnings.” – I-Net Bridge