Nedbank Group reports strong earnings

Nedbank Group reported a 27% jump in headline earnings to R6.7 billion in first half (H1) of 2022.

According to Nedbank, the growth in headline earnings is driven by strong revenue growth, a flat credit loss ratio, an improved performance from associate Ecobank Transnational Incorporated (ETI) and a well-managed expense base.

Non-interest revenue increased by 79%. Although this was driven largely by higher unrealised forex gains in Zimbabwe, there was an overall uplift in transaction volumes across the regions.

“Our non-interest revenue levels have surpassed our 2019 pre-Covid-19 levels by more than 100% (H1 2019: R481 million),” the Group pointed out.

The impairment charge increased by 18% to R113 million, mainly as a result of a low base in the prior year on the back of releases in Namibia. The Nedbank Africa Regions (NAR) credit loss ratio increased to 110 basis points (bps) (H1 2021: 84 bps) due to an increase in impairments, particularly in Mozambique and Eswatini; however, this is comparable to our 2019 levels of 109 bps.

The impairment increase in Mozambique was a result of changes in risk classifications to better align with group models and an impairment raised on a single corporate client. The impairment increase in Eswatini was a result of changes in the risk profiles of some clients.

Expenses increased by 9%, driven mainly by growth in employee costs and inflationary pressures in Zimbabwe. The cluster’s cost-to-income ratio decreased from 75.0% to 55.1%, with the Southern African Development Community (SADC) operations showing a significant improvement, decreasing to 65.0% (H1 2021: 83.5%).

The group’s balance sheet remained very strong enabling an 81% increase in the interim dividend, now back above the 2019 pre-Covid interim dividend level.

Nedbank CE Mike Brown Mike Brown said the banking group's financial performance in the first half of 2022 reflected "an excellent performance across all key metrics in a complex and difficult external environment.”