| Tue 4 May 2010, 8:53 | | OML - Old Mutual Plc- First Quarter 2010 trading update |
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OML
OLOML
OML - Old Mutual Plc- First Quarter 2010 trading update
OLD MUTUAL PLC
ISIN CODE: GB0007389926
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOML
Ref 32/10
NEDBANK GROUP LIMITED - FIRST QUARTER 2010 TRADING UPDATE
Nedbank Group Limited ("Nedbank Group"), the majority owned South African
banking subsidiary of Old Mutual plc, released its first quarter trading
update today, 4 May 2010. The full Nedbank Group first quarter 2010 trading
update can be found on the company`s website www.nedbank.co.za .
The following is the full text of Nedbank Group`s announcement:
""The worst of the economic downturn appears to be behind us. Whilst the
global recovery is fragile and we remain cautious about short term growth
prospects, the improving domestic economic conditions are starting to reflect
positively in Nedbank Group`s performance. This should lead to improved
earnings in 2010 in line with our expectations given at the time of
announcing the 2009 results."
"It is encouraging to see solid growth in core transactional revenue as part
of our focus on improving non-interest revenue. This focus will continue as
we strive to build Africa`s most admired bank."
Mike Brown
Chief Executive
OPERATING ENVIRONMENT
In March 2010 interest rates were reduced by a further 50 basis points,
lowering the prime rate to 10.0%. South African banks continued to advance
credit to households and businesses, supported by the healthy liquidity and
capital profile of the industry.
The economic recovery is expected to be gradual as high levels of household
indebtedness and resultant de-leveraging remain in place. In the corporate
sector, although balance sheets have proven resilient through the cycle,
downside risk remains, resulting in conservative risk appetites and
restrained business volumes.
OPERATIONAL PERFORMANCE
The group has performed in line with the guidance given in the 2009 annual
results announcement for our key financial indicators.
Net interest income (NII) decreased by 2.0% to R4,046 million for the quarter
ended 31 March 2010 ("the quarter") (Q1 2009: R4,128 million). The prime rate
averaged 10.47% for the quarter, 3.89% lower than the average rate in Q1
2009. Average interest-earning banking assets increased by 0.8%. The net
interest margin (NIM) narrowed from 3.39% for the 2009 year to 3.38% for the
quarter (Q1 2009: 3.48%). Continued focus on risk-adjusted asset pricing has
partially offset the compression in margins which was primarily driven by
lower endowment resulting from the reduction in interest rates and liability
margin compression.
Improved economic conditions and risk management practices resulted in the
group credit loss ratio improving to 1.46% for the period (Q1 2009: 1.67%).
This ratio is in line with seasonal expectations for the first quarter. The
credit loss ratio for Nedbank Corporate worsened slightly from the ratio for
the year to December 2009, mainly in the Property Finance portfolio. Nedbank
Capital`s credit loss ratio for the quarter also increased relative to the
2009 year. Nedbank Business Banking`s credit loss ratio improved aided by
client rehabilitations. Nedbank Bancassurance and Wealth improved and Nedbank
Retail showed a modest improvement in its credit loss ratios primarily across
the unsecured lending product categories compared to December 2009. Improved
client affordability, combined with stabilising house prices has contributed
towards the ongoing improvement of early arrears in home loan advances. As
anticipated defaulted home loan advances continued to rise albeit at a slower
rate and cure rates on older defaulted advances remain challenging.
Non-interest revenue (NIR) increased by 18.9% to R3,034 million (Q1 2009:
R2,551 million). On a like-for-like basis, excluding the acquisition of the
balance of the Bancassurance & Wealth joint ventures in June 2009, NIR growth
was 10.4%. Commission and fee income grew by 25.6% (18,4% excluding the joint
ventures) from good transactional volume in all clusters and annual inflation-
linked price increases. Trading income increased by 31.8% to R555 million on
the back of improved equity trading. Nedbank Corporate`s property private
equity earnings showed an improvement over the comparative period. These
improvements were offset to an extent by negative fair value adjustments and
lower private equity earnings in Nedbank Capital.
The group has maintained good expense management discipline whilst investing
for growth. As expected, slower NII growth has contributed to a slight
increase in the cost-to-income ratio. Importantly the ratio of NIR to
expenses has improved from the December 2009 ratio.
Total assets grew 5.8% (annualised) to R578.9 billion (December 2009: R570.7
billion). Advances growth remained muted and increased by 3.9% (annualised)
to R454.7 billion (December 2009: R450.3 billion). Deposits of R470.8 billion
were 1.3% (annualised) higher than the December 2009 balance of R469.4
billion.
Capital and liquidity management remains fundamental to the group. As
previously communicated, the strong capital ratios which are above the
group`s internal targets, allowed for the acquisition of the minority
shareholding in Imperial Bank to be settled in cash. This resulted in a
marginal decrease of approximately 0.5% in the group`s capital adequacy
ratios as the full purchase consideration has been accounted for during the
period. The group`s capital ratios remain well above target levels and it is
anticipated that for the 2010 year these ratios will return to levels similar
to those reported at the end of 2009.
Q1 2010 FY 2009 Internal Regulator
ratio ratio Target range y minimum
Core Tier 1 9.8% 9.9% 7.5% to 9.0% 5.25%
ratio
Tier 1 ratio 11.4% 11.5% 8.5% to 7.00%
10.0%
Total capital 14.7% 14.9% 11.5% to 9.75%
ratio 13.0%
(ratios calculated including unappropriated profits)
Nedbank Group has continued to manage funding and liquidity prudently.
Funding markets have improved and there has been good appetite for Nedbank
Limited debt issuances. During the first quarter of 2010, Nedbank Limited
issued over R3 billion of senior debt. In addition, a further R3 billion was
issued in April. This has enabled the group to further diversify its funding
base and lengthen the average term of funding.
UPDATE ON ACQUISITION OF IMPERIAL BANK
Nedbank Group reported in the annual results announcement that final
regulatory approvals were received for Nedbank Limited to acquire 100% of the
ordinary and preference shares in Imperial Bank. The section 54 application
has subsequently been submitted to the Regulator and the Minister of Finance
to request approval to merge Nedbank Limited and Imperial Bank Limited. The
purchase consideration of R1,775 million plus interest is being settled in
four cash instalments, with the first payment having being made during the
period.
The merged businesses will have a combined 30% share of the South African
consumer vehicle and asset financing market.
PROSPECTS
The South African economy is expected to gather momentum as the year
progresses with GDP growth of 2.8% currently forecast for 2010, driven by
improving commodity prices and increasing exports, although retail
consumption expenditure is anticipated to remain muted.
Whilst we believe that the worst of the economic cycle has passed, our
outlook remains cautious. Our current outlook for earnings remains unchanged
with growth in diluted headline earnings per share for 2010 expected to be in
line with the guidance given at the time of announcing the 2009 results.
Shareholders are reminded that these forecasts 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."
For further information on Old Mutual plc, please visit the corporate website
at www.oldmutual.com
Enquiries
External
Communications
Patrick Bowes UK +44 (0)20 7002
7440
Investor Relations
Deward Serfontein SA +27 (0)82 810 5672
Aleida White UK +44 (0)20 7002
7287
Media
Don Hunter UK +44 (0)20 7251
(Finsbury) 3801
Date of notification 4 May 2010
Sponsor: Merrill Lynch South Africa (Pty) Limited
Notes to Editors
Old Mutual
Old Mutual plc is an international long-term savings, protection and
investment Group. Originating in South Africa in 1845, the Group provides
life assurance, asset management, banking and general insurance in Europe,
the Americas, Africa and Asia. Old Mutual plc is listed on the London Stock
Exchange and the JSE, among others.
In the year ended 31 December 2009, the Group reported adjusted operating
profit before tax of GBP1.2 billion (on an IFRS basis) and had GBP285 billion
of funds under management at the year end. The Group has approximately
54,000 employees.
Date: 04/05/2010 08:53:04 Produced by the JSE SENS Department.
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