Nedbank lifts year earnings by 65%

JOHANNESBURG – South African banking group Nedbank increased annual headline earnings per share by 65 per cent, helped by robust loan demand, and said yesterday it had reduced earnings volatility significantly.

Headline earnings per share – which exclude non-trading, capital and certain extraordinary items – increased to 797 cents in the year ended Dec. 31.On a fully diluted basis, headline EPS rose 64.1 per cent to 791 cents.Nedbank shares gained 0.87 per cent to 115.50 rand, outperforming the JSE Securities Exchange’s banking sector as analysts said Nedbank’s annual results exceeded market expectations.”The fully diluted headline EPS number beat market expectations by 10 to 20 cents …These are good results, and what management wants the group to achieve appears to be on track,” said one Johannesburg-based analyst.Nedbank launched a three-year recovery programme in 2004 to turn its business around after a host of problems – including wrong interest-rate calls – slashed profits and triggered a multi-billion-rand cash call.The group said the improved 2005 performance was driven by benefits from the programme, better results from retail banking business Nedbank Retail and ongoing solid performances from its corporate and investment banking businesses.Nedbank said in November it expected full-year headline EPS to increase by 44 to 62 per cent.Advances rose 12.4 per cent to 248.4 billion rand, and Nedbank said residential mortgages increased by 24.5 per cent, which narrowed the gap between the group and its competitors.The company – majority-owned by insurer Old Mutual – increased net interest income by 19.4 per cent to 8.53 billion rand.”Despite margin compression experienced by the industry, the group’s net interest margin for the period was 3.55 per cent, up from 3.18 per cent for the year to December 2004,” Nedbank said in a statement.The banking group’s return on equity margin (RoE) increased to 15.5 per cent from 11.0 per cent.Nedbank is still seen as expensive at a price around 21 times earnings.Its competitors including Standard Bank , Absa and FirstRand are priced between 12 and 15 times earnings, according to Reuters Knowledge data.-Nampa-Reuters31.On a fully diluted basis, headline EPS rose 64.1 per cent to 791 cents.Nedbank shares gained 0.87 per cent to 115.50 rand, outperforming the JSE Securities Exchange’s banking sector as analysts said Nedbank’s annual results exceeded market expectations.”The fully diluted headline EPS number beat market expectations by 10 to 20 cents …These are good results, and what management wants the group to achieve appears to be on track,” said one Johannesburg-based analyst.Nedbank launched a three-year recovery programme in 2004 to turn its business around after a host of problems – including wrong interest-rate calls – slashed profits and triggered a multi-billion-rand cash call.The group said the improved 2005 performance was driven by benefits from the programme, better results from retail banking business Nedbank Retail and ongoing solid performances from its corporate and investment banking businesses.Nedbank said in November it expected full-year headline EPS to increase by 44 to 62 per cent.Advances rose 12.4 per cent to 248.4 billion rand, and Nedbank said residential mortgages increased by 24.5 per cent, which narrowed the gap between the group and its competitors.The company – majority-owned by insurer Old Mutual – increased net interest income by 19.4 per cent to 8.53 billion rand.”Despite margin compression experienced by the industry, the group’s net interest margin for the period was 3.55 per cent, up from 3.18 per cent for the year to December 2004,” Nedbank said in a statement.The banking group’s return on equity margin (RoE) increased to 15.5 per cent from 11.0 per cent.Nedbank is still seen as expensive at a price around 21 times earnings.Its competitors including Standard Bank , Absa and FirstRand are priced between 12 and 15 times earnings, according to Reuters Knowledge data.-Nampa-Reuters