South Africa’s fourth biggest bank Nedbank posted a 2% drop in full-year diluted headline earnings per share on Thursday, and said it expected earnings to be lower in 2009.
Nedbank Group, majority owned by insurer Old Mutual, said diluted headline earnings per share for the year to end December stood at 1,401 cents, compared to 1,429 cents in the previous year.
Nedbank Corporate posted an 11,1% rise to R2,92-billion in full-year headline earnings, while headline earnings at Nedbank Retail fell to R1-billion rand from R1,876-billion as bad debts rose.
The group’s credit loss ratio increased to 1,17% from 0,62% in 2007, and it expects that to rise further in 2009, although it was still targeted to remain below 1,3%.
The impairment charge more than doubled to R4,822-billion as defaults rose, particularly on home and car loans.
It forecast a 10% drop in headline earnings in 2009, and said basic and diluted earnings per share would be 20% lower, provided South Africa’s central bank cuts interest rates further.
The central bank has cut rates by 150 basis points since December, the latest move of a 100 basis points in early February. It raised rates by 500 basis points between June 2006 and June 2008.
South African banks have so far escaped the worst of the global crisis, thanks mainly to exchange controls that limit foreign exposure, and relatively conservative lending practices.
However, higher borrowing costs have dented consumer demand, hitting retail banking hard at the country’s four big banks.
Africa’s biggest bank by assets, Standard Bank, has forecast lower full-year headline earnings per share and FirstRand is also expected to post lower earnings.
Absa Group, which owns the country’s largest retail bank, reported a rise in annual profit earlier this month as lower defaults at its corporate banking unit offset rising bad loans on the retail side.
Headline earnings per share is the main profit gauge in South Africa and strips out certain one-off, financial and non-trading items.
Nedbank reiterated chief executive Tom Boardman would retire in February 2010 and said it expects to appoint a replacement within the first half of this year. — Reuters