South Africa’s Nedbank lifted its first-quarter headline earnings per share (EPS) by 26,3%, helped by solid retail and corporate lending growth but said it expected bad debts to increase.
Nedbank, majority-owned by insurer Old Mutual, said on Wednesday its headline EPS increased to 322 cents per share while on a fully-diluted basis headline EPS rose 25% to 310 cents.
A Cape Town-based fund manager said the results showed that Nedbank was winning back market share in home loans and the credit-card market while bad debts were lower than expected.
”The results are ahead of the expected full-year trend and it is mostly driven by lower-than-expected bad debts. It seems the retail back is busy winning back market share,” said Jan Meintjies, portfolio manager at Gryphon Asset Management.
Nedbank’s retail business increased headline earnings by 88,1% to R523-million while average advances increased by 34,9% compared to the same period a year ago.
Shares in Nedbank were 0,26% firmer at R149,39, slightly underperforming the JSE Securities Exchange’s banking sector which gained 0,93% by 7.49am GMT.
Net interest income increased by 31,2% to R3,176-billion while non-interest revenue rose 0,9% to R1,28-billion.
Chief executive Tom Boardman said the group’s return on equity (RoE) ratio of 20,4% and its internal efficiency ratio of 53,3% were ahead of the group’s targets for the full 2007 financial year.
”While we have attained an efficiency ratio of less than 55% for the period, the cost of additional retail outlets, ATMs, marketing and frontline staff, combined with price reductions instituted in 2006 across a range of products to benefit the group and its clients in the long term, still makes the short-term efficiency ratio target of 55% in 2007 challenging,” Boardman said in a statement.
Nedbank launched a three-year recovery programme in 2004 to turn its business around after a host of problems including wrong interest-rate calls, slashed profits and triggered a multibillion-rand cash call.
The company’s impairment ratio — bad debts or non-performing loans as a percentage of total advances — increased to 0,59% from 0,52% for the full 2006 financial year.
”The group anticipates that the impairment charge will increase in the medium term as a result of higher interest rates and increasing levels of household debt,” Nedbank said. – Reuters