Nedbank fares well, amid wild write-offs

The Nedbank Group Limited’s over 7 million banking clients have earned the group N$8,1 billion in profit during the first six months of 2023 and shareholders will get 57% of that.

This translates to N$8,71 per share, up 11% from the previous interim dividend, and will be the 66th dividend the group will pay since listing on the Namibian Stock Exchange.

The interim financial results for the period ended 30 June were released yesterday, with the group’s chief executive Mike Brown crying foul over a difficult operating environment, especially in South Africa where the group predominantly operates.

Nedbank’s operations stretch over Namibia, Zimbabwe, Mozambique, Lesotho, Eswatini and the Isle of Man.

Brown, who has announced he is stepping down, said although all indicators show that the group is faring well – with an interim increase of 10% in headline earnings, strong liquidity, a return on equity of 14,2% and a growing client list – the environment makes medium-term targets to 2025 more difficult to achieve.

“The domestic economic activity continued to be negatively impacted by very high levels of load-shedding, logistical constraints, higher-than-expected levels of inflation and, as a result, higher-than-expected increases in interest rates,” he said.

It is this rough environment that saw the group increasing the impairment allowance by 57%, mainly in South Africa, and a slightly lower at 12% in Namibia. The average impairment tick for non-SA markets is around 20%.

According to the group, the in-house economic unit currently forecasts SA’s gross domestic product (GDP) to increase by only 0,3% this year and interest rates to remain at elevated levels, with the repo rate at 8,25% and the prime lending rate at 11,75% for the remainder of the year.

The link between South Africa and Namibia would suggest that this will be the same for Namibia, especially around interest rates.

Asked whether at this rate the green bank would also most likely see an increase in non-performing loans and further impairment, Terence Sibiya, the group’s managing executive for Africa regions, said all indicators are pointing towards stability.

Sibiya said to counter this, the bank-dominated financial services company will edge up on its collection efforts, while also pushing the creation of quality credit.

At group level, loans and advances sit at N$900 billion plus, against a N$1 trillion depositors balance.

The group, which will celebrate its 135th anniversary this month and 50th anniversary in the Namibian market, said among its interim notable achievements is the launching of the bespoke solar finance offering. Nedbank Namibia’s managing director Martha Murorua said this finance offering was fairing well, with more growth in uptake expected as customer education continues.

In the past months, Nedbank Namibia poached renowned small and medium enterprises (SME) banker Sem Ikela from FNB Namibia, which Murorua said was a good installation for the bank to gain access to small businesses that have been for sometime neglected.

Nedbank Namibia is expected to release its interim financial accounts sometime next month, as they are pending board approval.

Murorua, however, said preliminary numbers show steady growth of net interest income, as well as expenses growth below inflation.

At the group level, a presentation to analysts shows that the Nedbank Group plans not to give out new finance to oil production by 2035.

Sibiya and Murorua, however, said although Nedbank will not exactly fund exploration and production, it will still extend financing to other parts of the value chain and will not necessarily stop all funding to the oil and gas sector.

Going ahead, Nedbank said it expects the economic environment in South Africa and, to a smaller extent, the region to remain challenging, particularly given the high levels of electricity shortages and increased levels of pressure on consumers’ disposable income, due to high inflation and interest rates.

“To support our clients during these challenging times, we offer clients tailored payment plans to help address their temporary financial distress and provide restructures and debt consolidation options that reduce monthly debt payments to help clients deal with the increase in interest rates and keep them in their homes and in their vehicles,” read management commentary.

The group must still also appoint a new chief executive, a process Sibiya said is well underway and further updates will be provided early next year.

Brown will continue in his current role until a successor has been chosen and a suitable handover process has been completed.

As of 30 June, the Nedbank Group had a N$1,3 trillion balance sheet, and the full set of the interim financial statements is available on the website.

Email: lazarus@namibian.com.na