| Fri 6 May 2011, 8:05 | | OML - Old Mutual Plc - Nedbank Group Limited - First Quarter 2011 Trading |
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OML - Old Mutual Plc - Nedbank Group Limited - First Quarter 2011 Trading
Update
OLD MUTUAL PLC
ISIN CODE: GB0007389926
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOML
Old Mutual plc
Nedbank Group Limited - First Quarter 2011 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, 6 May 2011. The announcement can be found on the company`s
website www.nedbankgroup.co.za .
The following is the full text of Nedbank Group`s announcement:
"NEDBANK GROUP - FIRST QUARTER 2011 TRADING UPDATE
"The group had a good first quarter and made strong progress against its
strategic objectives.
We have seen ongoing improvement in performance, building on the momentum
created in the 2nd half of 2010. This resulted in continued revenue growth,
improvement in impairments and margins are showing signs of recovery. The
group`s focus on growth is evident from the strong progress in the delivery
of our NIR growth strategy, the turnaround in our retail business and our
focus on "portfolio tilt" towards businesses that generate higher levels of
economic profit."
Mike Brown
Chief Executive
OPERATING ENVIRONMENT
Local economic conditions improved in early 2011. Momentum mainly came from
stronger consumer spending, improved labour market conditions, improving
household disposable income and continued low interest rates. Household
demand for credit has continued to favour instalment sales, leasing finance
and personal loans while home loan demand remains muted.
Manufacturing production and exports also increased, after a slow start to
the year, resulting in improved business confidence.
Globally, doubts about the strength and sustainability of the current
economic recovery remain. Concerns over the impact of tighter monetary
policies in China, surging global food and fuel prices, the devastating
impact of Japan`s natural disaster on supply chains globally and continued
high levels of sovereign debt in Europe and the United States of America have
made businesses hesitant to overextend and commit to capital expenditure
whilst corporate activity remains subdued.
OPERATIONAL PERFORMANCE
Nedbank Group`s earnings momentum that developed in the second half of 2010
continued in the first quarter of 2011 with performance in line with the
guidance provided on key financial indicators in the 2010 annual results
announcement.
Net interest income grew by 5,9% to R4 284 million (Q1 2010: R4 046 million).
Average interest-earning banking assets increased by 4,4%. The net interest
margin improved from 3,35% for the 2010 financial year to 3,42% for the
quarter (Q1 2010: 3,38%). This was primarily due to the ongoing benefit of
pricing assets to more appropriately reflect risk and funding costs, asset
mix changes and the lower funding cost of term liquidity during the quarter.
These factors were partially offset by the ongoing endowment effect of the
2010 interest rate cuts with the average interest rate being 1,47% lower than
in Q1 2010.
Proactive risk management and the lower interest rates contributed to the
credit loss ratio improving to 1,15% (Q1 2010: 1,46%). The reduction of
impairments has moved the credit loss ratio closer towards the top end of the
group`s 0,60% to 1,00% target range with improvements in Nedbank Capital and
Nedbank Retail. There has been improvement in specific impairments and the
group has maintained a prudent approach to portfolio provisions.
Non-interest revenue increased by 16,4% to R3 531 million (Q1 2010: R3 034
million). Commission and fee income grew by 14,0% primarily as a result of
continued growth in primary clients and transactional volumes in electronic
banking. Nedbank Wealth achieved good growth in advice-based sales, insurance
income and assets under management. Insurance income grew by 12,2%. Trading
income increased by 13,2% to R628 million, driven by improved foreign
currency trading performance and increased foreign exchange volumes in the
Global Markets division, in addition to good performance from the Equity
Trading division. Nedbank Corporate`s property private equity earnings
decreased as a result of slower growth in asset valuations. Nedbank Capital`s
improved private equity earnings were partially offset by lower levels of
positive fair value adjustments compared to Q1 2010. NIR included negative
fair-value adjustments of R46 million (Q1 2010: negative R45 million) on the
group`s subordinated debt resulting from the tightening of credit spreads.
Total fair value adjustments improved from negative R116 million in Q1 2010
to negative R28 million.
The NIR-to-expenses ratio improved from the levels achieved in 2010
reflecting strong growth in NIR and disciplined expense control.
Total assets grew 0,6% (annualised) to R609,7 billion (December 2010: R608,8
billion). Advances increased modestly by 0,8% (annualised) to R476,2 billion
(December 2010: R475,3 billion) reflecting the generally muted demand for
credit. The group`s focus on portfolio tilt resulted in slower home loan
advances growth offset by an increase in other advances categories, such as
wholesale advances, credit card balances, personal loans and vehicle and
asset finance. Deposits of R488,9 billion decreased by 1,2% (annualised) from
the December 2010 balance of R490,4 billion reflecting slow asset growth and
limited demand for deposits while interest rates remain at their lowest
levels for 36-years.
The group continued to increase liability duration and during the quarter the
group exceeded its 2011 long term funding target ratio of 25% and further
increased liquidity buffers. Investor appetite for Nedbank Limited debt
issuances was strong and resulted in over R3 billion of senior debt being
issued at competitive rates. This issue was 1,7 times oversubscribed
The group`s capital adequacy ratios remained well above current and expected
Basel III regulatory minima and continued to increase resulting in a 10,8%
Core Tier 1 ratio. We expect these ratios to benefit further from the group`s
ongoing risk weighted asset optimisation programme and increased earnings.
Q1 2011 FY 2010 Internal Regulator
ratio ratio target range y minimum
(Basel II) (Basel
II)
Core Tier 1 ratio 10,8% 10,1% 7,5% to 9,0% 5,25%
Tier 1 ratio 12,4% 11,7% 8,5% to 10,0% 7,00%
Total capital ratio 15,7% 15,0% 11,5% to 13,0% 9,75%
(Ratios include unappropriated profits)
PROSPECTS
The South African economic recovery is expected to strengthen and broaden in
2011. Gross domestic product is currently forecast to grow by 3,3% driven
mainly by improving consumer spending and continued growth in exports.
Consumers should benefit from rising household incomes, increased social
benefits, a modest increase in employment and low interest rates.
The group expects interest rates to remain unchanged throughout 2011, but the
upside risks have increased due mainly to rising global food and fuel prices.
Rising cost pressures and the risk of potential interest rate hikes may
constrain household spending and borrowing later in the year. Producers
should benefit from continued demand for commodities driven by rapid growth
in China and other emerging markets, but capital expenditure is likely to
remain subdued due to pressure on power supply should the economy expand too
quickly together with other infrastructure constraints and continued
concerns over global growth prospects.
The group`s earnings guidance for 2011 given at the time of the 2010 results
announcement remains unchanged.
Shareholders are reminded that this outlook and the figures mentioned in the
"operational performance" 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
6 May 2011"
Enquiries
External Communications
Patrick Bowes +44 (0)20 7002 7440
Investor Relations
Deward Serfontein SA +27 (0)82 810 5672
Aleida White UK +44 (0)20 7002 7287
Media
William Baldwin-Charles +44 (0)20 7002 7133
6 May 2011
Ref 52/11
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 to more than
15 million customers in Europe, the Americas, Africa and Asia. Old Mutual
plc is listed on the London Stock Exchange and the Johannesburg Stock
Exchange, among others.
In the year ended 31 December 2010, the Group reported adjusted operating
profit before tax of GBP1.5 billion (on an IFRS basis) and had GBP309 billion
of funds under management, from core operations.
For further information on Old Mutual plc, please visit the corporate website
at www.oldmutual.com
Sponsor:
Merrill Lynch SA (Pty) Limited
Date: 06/05/2011 08:05:01 Produced by the JSE SENS Department.
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