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NED
NED
NED - Nedbank Group - Press Release By Ca-Ratings: Nedbank Group Receives A
Rating Upgrade
NEDBANK GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1966/010630/06
JSE share code: NED
NSX share code: NBK
ISIN: ZAE000004875
PRESS RELEASE BY CA-RATINGS: NEDBANK GROUP RECEIVES A RATING UPGRADE
Nedbank Group`s credit ratings:
Long-term: zaAA (Indicates very strong capacity of
the issuer to pay interest and
repay capital relative to other
South African obligors)
Outlook: Stable
Short-term: zaA1+ (Indicates that the degree of safety
regarding timely payment is either
overwhelming or very strong,
relative to other South African
obligors. Issues determined to
possess overwhelming safety
characteristics are denoted with a
plus (+) sign designation)
CA-Ratings announces that it has raised Nedbank`s national long-term rating from
zaAA- to zaAA and affirmed the short-term rating at zaA1+. The rating outlook is
stable.
The ratings of Nedbank reflect the bank`s position as one of the big four local
banking groups, sizeable South African franchise, sound capital adequacy, good
asset quality, high-income levels, good liquidity and the strategic changes
brought about by the current management team. Furthermore, shareholder support
from its parent, Old Mutual that controls 51% of its equity, remains sound.
With total reported group assets of R425 billion at December 2006, Nedbank
remains one of the four largest banking groups in South Africa. The bank has a
strong market position in the domestic corporate market but the retail and asset
finance segments are smaller than that of its peers. The investment banking
activities, through Nedbank Capital, are comparable to that of the other major
groups and provide good deal flows to the bank.
Capital remains sound, supported by the strong and diversified business profile,
good risk weighted asset mix, sound risk and capital management as well as
adequate retained earnings. At year-end the regulatory capital adequacy for the
Nedbank Group was 11,8%. Subsequently the bank issued Tier 2 capital that raised
its capital adequacy to more than 12%. Knowing that this would be the case the
group was relaxed about it going slightly lower than 12% over the short-term.
Ongoing efforts to improve risk management and thereby improving asset quality
have had a positive effect on Nedbank`s balance sheet and assisted in dampening
the impact of volatile economic conditions. Non-performing loans remain low but
higher levels are expected over the short-term due to the interest rate hikes
during the latter half of 2006. Provision coverage of non-performing loans
remains high. Relatively large exposures to corporate clients remain a
characteristic of the local banking landscape.
Profitability is strong with RoE of roughly 18,6% supported by a diverse
earnings base, good cost control and improving interest margin.
Liquidity is good and the bank has a diversified retail branch network to access
retail deposits. The strategy of the bank is to grow its business banking and
retail banking activities through the rollout of branches and more personalised
service to small and medium sized businesses and individual clients.
The competition from local and foreign banks as well as non-bank financial
service providers coupled with the focus on the fees charged by the big banks
and continued pressure on interest margins, remain challenges for Nedbank.
These ratings reflect its capacity to repay debt in SA Rand.
23 April 2007
Issued by CA-Ratings
Contact: Leon Claassen +27 11 786 7000
Date: 23/04/2007 14:25:22 Produced by the JSE SENS Department.
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