Edward West
6 November 2009
Johannesburg — NEDBANK Group has said annual profit may fall as much as 35% as unemployment rises in recession- hit SA and consumers struggle to repay debts.
Julian Roberts, CEO of Old Mutual , Nedbank's parent, said: "In my view there shouldn't be surprise at Nedbank's result. It is still a tough market (for retail banks) ... there was an improved position in the third quarter."
The third quarter update appeared to be liked by the market, with the share price rising 1,46% to R114,47 yesterday, while the JSE's bank sector index rose only 0,99%.
Nedbank, SA's fourth-biggest bank, was the best performer on the five-member FTSE/JSE Africa Banks Index after its share price rose 20,5% so far this year.
Earnings per share were expected to fall 25%-35% in the year to December 31, from R15,58 at the same time a year earlier.
"The group continues to be cautious about prospects and its forecasts for the rest of the year. Uncertainty about potential job losses and property prices, as well as the effect of increases in the electricity price, continue to restrict consumer spending," the bank said.
Bad debt among retail clients at SA's banks has surged after 10 interest rate increases in the two years to June last year hurt consumer spending. The Reserve Bank's Financial Stability Review noted this week that bank credit impairments had reached R124,9bn in the first six months of this year.
Nedbank's credit loss ratio improved to 1,47% in the third quarter from 1,57% in the six months to June 30 due to improvements in wholesale banking areas, although the figure was still higher than the 1,02% in the third quarter of last year.
The Reserve Bank has cut interest rates by five percentage points from December, which has narrowed the difference between the interest banks pay on deposits and earn on loans. This has hurt bank profits at the same time that consumers have borrowed less.
Nedbank's net interest margins in the three months to end September dropped to 3,4% from 3,44% at the end of June. Net interest income grew 1,1% to R12,2bn for the nine months to September 30.
Nedbank said the economic environment was likely to remain weak for the rest of the year and consumers and companies were likely to stay under pressure.
Be the first to Write a Comment!
Copyright © 2009 Business Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
