| Thu 5 Nov 2009, 8:30 | | NED - Nedbank Group - Third Quarter 2009 Trading Update |
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NED
NED
NED - Nedbank Group - Third Quarter 2009 Trading Update
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
(`Nedbank Group` or `the group`)
NEDBANK GROUP - THIRD QUARTER 2009 TRADING UPDATE
OPERATING ENVIRONMENT
Global economic indicators show that conditions in the major economies may have
started to stabilise. However, the outlook remains challenging as a sustained
recovery is vulnerable to potential setbacks and large imbalances still exist in
the global economy.
The South African domestic recovery is expected to lag global markets with
consumer spending remaining slow and confidence weak. Uncertainty about
potential job losses and property prices, as well as the effect of increases in
the electricity price, continue to restrict consumer spending. As local
conditions stabilise and confidence builds, the lower interest rate environment
and improved consumer debt servicing ability should see a slow improvement in
household credit demand. Local banking institutions have also started to ease
lending criteria where appropriate.
Similarly, with businesses remaining cautious private sector capital investment
and corporate credit demand continued to contract, albeit at a slower rate. The
level of planned public sector infrastructure spending remains encouraging and
should provide support for modest GDP growth in 2010, although the main impetus
is likely to be from the recovery in the global economic environment.
OPERATIONAL PERFORMANCE
Net interest income grew by 1,1% to R12 198 million for the nine months ended
September 2009 (the period) (Q3 2008: R12 069 million). The net interest margin
reduced from 3,44% for the six months ended June 2009 to 3,40% for the period
(Q3 2008: 3,75%). This reduction can be attributed mainly to non-repricing
current and savings accounts as average interest rates for the period have been
lower than the comparative period, as well as the effect of lower endowment on
capital. These were partially offset by ongoing advances pricing initiatives
which will take some time to filter through to the net interest margin.
The group credit loss ratio improved from 1,57% for the six months to June 2009
to 1,47% for the period (Q3 2008: 1,02%), driven largely by improvements in the
wholesale banking areas. Although no large corporate defaults were experienced
in the quarter, credit risk in the wholesale banking businesses remains high
while recessionary operating conditions persist. Caution remains appropriate
given the propensity for further insolvencies which may follow the recession.
Retail impairments remain challenging.
Non-interest revenue (NIR) grew by 19,6% to R8 542 million (Q3 2008: R7 141
million). This growth includes the consolidation of the Bancassurance & Wealth
joint ventures with Old Mutual with effect from June 2009. Like-for-like NIR
growth was 14,4% driven by trading income private equity income, electronic
banking fees, cash handling volumes and increases in commission and fee income.
Expenses remain tightly controlled, despite the group continuing to invest for
the future.
Nedbank remains focused on the domestic market and 91,2% of the group`s assets
are based in South Africa. Total assets at 30 September 2009 increased by 0,4%
(annualised) from December 2008 to R565 billion. The 11,7% increase in average
interest-earning banking assets (Q3 2008: 23,1%) was off-set by a decrease in
trading assets. Advances grew by 2,8% (annualised) to R443,3 billion and growth
is expected to remain modest across most of the banking asset classes.
The bank`s funding and liquidity remains strong. During September 2009, the
group successfully placed R5,4 billion JSE-listed unsecured notes, thereby
further diversifying and lengthening the group`s funding maturity profile.
The group continues to be well capitalised at capital ratios well above
regulatory requirements and the group`s own internal targets.
Q3 2009 Internal Regulatory
Ratio Target range minimum
Core Tier 1 ratio 9,2% 7,5% to 9,0% 5,25%
Tier 1 ratio 10,7% 8,5% to 10,0% 7,00%
Total capital ratio 14,0% 11,5% to 13,0% 9,75%
UPDATE ON ACQUISITION OF IMPERIAL BANK
On 16 September 2009, the group announced that it had entered into a binding
agreement to acquire the remaining 49,9% share in Imperial Bank from Imperial
Holdings with effect from 30 June 2009 for a purchase consideration of
approximately R 1 775 million. The purchase consideration will be settled in
instalments, in a mix of shares and cash, over a six month period commencing on
the fulfilment of the conditions precedent, including Regulatory approval.
This transaction includes an offer to acquire the non-redeemable, non-
participating, non-cumulative preference shares of Imperial Bank, announced on
16 October 2009.
PROSPECTS
The economic environment is likely to remain weak for the balance of the year.
In this tough climate consumers and corporates are likely to remain under
pressure which is expected to impact on transaction volumes and asset growth.
The credit loss ratio is expected to continue to improve slowly, as
affordability improves and impairments slow.
Nedbank Group remains alert to benefit from opportunities that arise as the
cycle improves and is well-positioned to capitalise on these through its strong
balance sheet, solid banking franchise, focus on risk management and strong cost
management.
Earnings forecasts remain within the ranges communicated at the interim stage,
but being closer to the financial year end the group has narrowed these ranges.
Diluted headline earnings per share and diluted earnings per share for 2009 are
currently expected to be between 25% and 35% lower than the 1 401 cents per
share and 1 558 cents per share respectively reported for the comparative period
to December 2008.
The group continues to be cautious about prospects and its forecasts for the
rest of the year.
Shareholders are advised that these forecasts and the figures stated in the
"Review of results" section have not been reviewed or reported on by the group`s
auditors.
FORWARD-LOOKING STATEMENT
This announcement contains certain forward-looking statements with respect to
the financial condition and results of operations of Nedbank Group and its group
companies, which by their nature involve risk and uncertainty because they
relate to events and depend on circumstances that may occur in the future.
Factors that could cause actual results to differ materially from those in the
forward-looking statements include, but are not limited to, global, national and
regional economic conditions, levels of securities markets, interest rates,
credit or other risks of lending and investment activities, together with
competitive and regulatory factors.
Sandton
5 November 2009
For further information kindly contact
Tier 1 Investor Relations
Tel: +27 (0)21 702 3102
Sponsors to Nedbank Group in South Africa:
Merrill Lynch South Africa (Pty) Limited
Nedbank Capital
Sponsor to Nedbank Group in Namibia:
Old Mutual Investment Services (Namibia) (Pty) Ltd
Date: 05/11/2009 08:30:01 Produced by the JSE SENS Department.
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