| Tue 8 Aug 2006, 10:05 | | Nedbank unveils R1bn growth plan |
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Nedbank unveils R1bn growth plan
Stephen Gunnion
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Financial Services Editor
NEDBANK would spend more than R1bn over the next two-and-a-half years expanding its distribution network to position it for further growth, the banking group said yesterday.
Nedbank said it would open 400 more sales outlets by the end of 2008, including more than 80 full service branches and 30 personal-lending branches. Its ATM and self-service terminals would be increased by 50%.
CEO Tom Boardman said most of these would be in underserviced parts of the country serving the mass market.
Releasing results for the six months to June, Boardman said the group was in a stronger position where it could send out a ôstrong signalö it was building for the future. ôWe have the resources and the capacity not just to fix but to grow,ö he said.
NedbankÆs recovery programme continued to show benefits in the first half, with headline earnings soaring 50,5% to R2,1bn. Headline earnings a share were 47,5% higher at 522c. This came on the back of 25% growth in interest income to R5bn. Noninterest revenue was 18% higher at R4,6bn. Growth in expenses was limited to 7% at R5,5bn.
The group lowered its dividend cover from 2,75 to 2,5 times, resulting in an interim dividend of 209c a share. The groupÆs capital adequacy strengthened to 13,3% from 12,9%. Its return on equity improved to 18,3% from 14,8%, while the low expense growth led to an improvement in its cost-to-income (efficiency) ratio from 65,1% to 57,3%.
Finance director Mike Brown said Nedbank CapitalÆs trading businesses had benefited from volatile market conditions, while its property private equity investments had also done well.
Credit impairments were higher than expected, growing 30% to R806m, and Brown said this was due largely to impairments at Nedbank Capital.
Impairments at its retail and corporate banking divisions eased slightly.
Nothando Ndebele, portfolio manager at Renaissance Asset Management, said: ôI think these are very good numbers, although the impairment charge at Nedbank Capital was a lot higher than expected. However, management has said this should be lower in the second half.ö
Following strong first-half growth the 22%-42% growth Nedbank expected in headline earnings for the full year was slightly disappointing, Ndebele said.
She said the group was on track to meet its return-on-equity target of 20% next year. This would be helped by the lower dividend cover of 2,5 times, which would reduce the size of its equity base and boost returns. The 55% efficiency ratio would be tougher to meet, she said, as acknowledged by the company.
