- Diluted Headline Earnings Per Share: Up 12%
- Return on Equity (ROE): Increased to 15%
- Interim Dividend: Increased by 11.5% to ZAR9.71 per share
- Assets Under Management: Increased by 5% to ZAR463 billion
- Trading Non-Interest Revenue (NIR) in CIB: Increased by 18%
- Cost Benefits from TOM 2.0 Program: ZAR2.6 billion
- Common Equity Tier 1 (CET1) Ratio: 13.3%
- Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR): Exceeded 100%
- Credit Loss Ratio (CLR): Improved to 104 basis points
- Total Impairment Coverage Ratio: 3.51%
- Headline Earnings Growth: 8%
- Net Interest Income (NII): Increased by 2%
- Non-Interest Revenue (NIR): Increased by 7%
- Impairments: Decreased by 12%
- Expenses: Increased by 8%
- Net Asset Value Per Share: ZAR230.97, increased by 2% year on year
- Gross Banking Advances Growth: Muted
- Deposits: Increased by 3%
- Net Interest Margin (NIM): Declined by 5 basis points to 413 basis points
- Commission and Fees Income: Increased by 8%
- Trading Income: Increased by 14%
- Insurance Income: Declined by 9%
- Impairment Charge: ZAR4.7 billion
- Stage 3 Coverage: Increased to 38.2%
- Expenses (Excluding Eqstra Acquisition): Increased by 7.9%
- Associate Income: Decreased by 26%
- Headline Earnings Growth in CIB: 13%
- ROE in CIB: Almost 21%
- Headline Earnings Growth in RBB: 24%
- ROE in RBB: 14.6%
- Headline Earnings in Nedbank Wealth: Decreased by 18%
- ROE in Nedbank Wealth: Close to 25%
- Headline Earnings in Nedbank Africa Regions: Decreased by 6%
- ROE in Nedbank Africa Regions: 18.2%
Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Diluted headline earnings per share increased by 12%, and ROE improved to 15%.
- Interim dividend increased by 11.5% to ZAR9.71 per share.
- Strong balance sheet with CET1 ratio at 13.3%, above the Board target range.
- Nedbank Wealth's assets under management increased by 5% to ZAR463 billion.
- Successful acquisition of Eqstra to strengthen the fleet management market position.
Negative Points
- Economic activity remained weak due to high interest rates, persistent inflation, and uncertainty ahead of South African national elections.
- Transactional income growth was pressured by high interest rates and persistent inflation.
- Debt service costs remained high, straining consumer finances and slowing household credit growth.
- Commercial property loans and advances grew slower due to election uncertainty and high interest rates.
- Vehicle and asset finance portfolio experienced high loan losses due to lower asset realization values at auctions.
Q & A Highlights
Q: The effective tax rate came in a bit lower in the first half. How should we think about your effective tax rate into the second half and also into 2025?
A: The effective tax rate for the first half is slightly lower than expected, largely due to higher dividend flows and the resolution of a small tax issue. For the full year 2024 and into 2025, we expect the effective tax rate to be around 20% to 21%. β Michael Davis, CFO
Q: Can you provide more color on the timing and size of the buybacks, and whether market conditions could affect this?
A: We have all necessary approvals for a share buyback. The timing and size will depend on market conditions, including volume and price points. We aim to execute buybacks at levels attractive to shareholders. β Jason Quinn, CEO
Q: Your consumer banking ROE is down at around 6%, held back by mortgages and unsecured personal lending. What do you see as a desired outcome for this unit, perhaps into 2025?
A: To achieve our 17% ROE target, we need to improve the consumer business's risk-adjusted returns. This involves leveraging our technology investments to drive client experience, cross-sell, and main bank client growth, as well as managing impairments. β Michael Davis, CFO
Q: Can you touch on the origination pipeline in RBB and CIB since year-end? How has this improved post-elections?
A: While it's only been a month since the half-year, we expect better loan growth in the second half, particularly in mortgages, vehicles, and renewable energy finance. The pipeline looks strong, and we are optimistic about the second half and beyond. β Jason Quinn, CEO
Q: What additional levers are available to improve the credit loss ratio for VAF in the second half? Do you see a similar downward trajectory for other products?
A: The main issue in VAF is collateral values. We are focusing on improving this portfolio. Overall, we expect the credit loss ratio to improve and get back within our target range in the second half. β Jason Quinn, CEO
Q: What are the key concerns you have regarding retail credit impairment charges going into the second half of the year?
A: The main risk is the collateral values in the VAF portfolio. However, we have strong coverage levels and macro provisions in place. We expect the overall portfolio to improve in the second half. β Jason Quinn, CEO
Q: What are your latest thoughts on interest rate hedging against negative endowment?
A: We are considering complementary strategies for interest rate hedging. Historically, we've run endowment sensitivity as a natural hedge against impairments, but we are exploring other options to ensure NIM stability. β Michael Davis, CFO
Q: How do you see the two-port pension system contributing to retail asset quality and loan growth? Could CLR fall faster than you currently expect?
A: The two-port pension system is expected to have a positive impact on retail asset quality and loan growth. While it's hard to quantify the exact impact, we see it as a positive factor for CLR. β Jason Quinn, CEO
Q: Are you seeing actual signs of improved drawdown in the corporate segment post-elections?
A: It's still early, but we are optimistic about the pipeline. Improved sentiment post-elections should lead to increased corporate activity over time. β Jason Quinn, CEO
Q: The 4 basis points impact on NIM from the deposit insurance, is this the run rate going forward?
A: The impact of deposit insurance on NIM is actually 1 basis point for the first quarter. For a full year, it would be around 3 basis points. β Michael Davis, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
