| Wed 2 Nov 2011, 8:00 | | NED - Nedbank Group Limited - Third quarter 2011 Trading update |
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NED
NED
NED - Nedbank Group Limited - Third quarter 2011 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 2011 TRADING UPDATE
"The growth outlook for South Africa has become less certain given the
potential for contagion from the northern hemisphere sovereign debt crisis with
many countries starting to report slower growth.
Despite the uncertain trading conditions Nedbank Group continues to make
good progress in growing its franchise and remains well placed to deliver
diluted headline earnings per share growth for the year in excess of its
medium-to-long term target."
Mike Brown
Chief Executive
OPERATING ENVIRONMENT
The operating environment in South Africa remained tough during the third
quarter as northern hemisphere sovereign debt difficulties reduced confidence
globally.
Domestic credit demand remains subdued with producers and consumers adopting
a cautious approach. Household spending was mainly supported by personal
income gains. Corporates are still maintaining surplus liquidity and although
wholesale credit extension recently outpaced that of households, these tend to
be specific large deals and consequently less predictable.
Domestic public sector spending on infrastructure remains positive and
will support the economy to grow in the short term while improving the
economy`s long-term capacity to perform.
OPERATIONAL PERFORMANCE
The group continues to deliver on its key strategic initiative of growing
non-interest revenue (NIR), whilst good progress continues in the
repositioning of Nedbank Retail and the group`s portfolio tilt towards
more economically attractive activities, including those in the rest of
Africa.
Net interest income (NII) grew by 8,9% to R13 299 million for the nine months
ended 30 September 2011 ("the period") (Q3 2010: R12 214 million). The net
interest margin increased to 3,45% for the period from 3,43% for the six months
ended June 2011 (Q3 2010: 3,32%). Overall margins continued to improve through
gains in asset repricing and benefits from changes in the mix of advances,
together with a lower cost of term liquidity. These benefits were partially
offset by negative endowment due to lower average interest rates, the cost of
holding higher liquidity buffers and lengthening the group`s funding profile.
The group`s credit loss ratio improved to 1,13% for the period from 1,21% for
the six months to June 2011 (Q3 2010: 1,36%) whilst maintaining appropriate
coverage ratios and increasing portfolio impairments. Nedbank Retail`s credit
loss ratio remains the largest contributor to this improvement.
NIR increased by 15,6% to R10 885 million (Q3 2010: R9 413 million) with strong
growth in fee and commission income of 15,9%. This positive growth trend was
achieved as a result of transactional volume growth from primary client and
continued focus on cross-selling products and services. Trading income decreased
by 3,0% in a volatile global environment. Private equity income benefited from
improved market valuations off a low base. Fair value adjustments for the period
improved as a result of a reduced loss of R51 million (Q3 2010 R207 million
loss) as credit spreads from the group`s own subordinated debt continued to
narrow.
Expenses remain controlled in line with the group`s intent of maintaining a
positive NIR-to-expense `jaws` ratio whilst continuing to invest for growth.
Total assets increased by an annualised 7,5% to R642,7 billion. Advances grew
by 3,3% (annualised) to R487,0 billion. This rate of growth reflects the
portfolio tilt strategy of growing selected advances categories that are
considered more economically attractive. The wholesale sector continued to
experience early repayments as well as delayed take-up of approved credit
applications.
Deposits increased 6,4% (annualised) to R513,9 billion, benefiting from growth
in fixed and term deposit levels as a result of surplus liquidity in the
wholesale sector. The group`s long term funding ratio and liquid asset buffers
remained at similar levels to prior periods.
The group`s capital ratios remain well above current Basel II and anticipated
Basel III regulatory minima. The core tier 1 ratio of 10,8% (June 2010: 10,7%)
showed further strengthening as a result of profitability and reasonably low
growth in risk weighted assets, offset by the payment of the interim ordinary
dividend in September 2011.
Basel II capital Q3 2011 Internal target Regulatory
adequacy ratios ratio range minimum
Core Tier 1 10,8% 7,5% to 9,0% 5,25%
Tier 1 12,5% 8,5% to 10,0% 7,00%
Total 15,3% 11,5% to 13,0% 9,75%
Ratios calculated including unappropriated profits
PROSPECTS
The South African economic climate is expected to remain subdued. The group`s
GDP growth forecast for 2011 is marginally above 3% and interest rates are
currently anticipated to remain unchanged until the second half of
2012.Continued global economic weakness could increase prospects of further
interest rate reductions.
Nedbank Group remains in a good position to deliver solid earnings growth,
notwithstanding the stronger performance in the second half of 2010. Although
management remains cautious, the guidance for Nedbank Group`s financial
performance in 2011 given at the half year remains unchanged.
Shareholders are advised that these forecasts and the figures stated in this
trading update 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
2 November 2011
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: 02/11/2011 08:00:01 Produced by the JSE SENS Department.
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