JOHANNESBURG — Nedbank’s operations in the rest of Africa contributed almost 4% to full-year earnings, with the inclusion for the first time of its recently-acquired stake in the West African Ecobank Transnational Incorporated.
Headline earnings from the South African group’s rest of Africa operations rose from a low base of R8 million in 2013 to an estimated R133 million last year. Total headline earnings were R9,9 billion.
SA’s four largest banks — Nedbank, FirstRand, Standard and Barclays Africa Group — are all pursuing growth strategies in the rest of Africa as SA’s economy slows.
Ecobank’s full-year results have not yet been released, so Nedbank has estimated its fourth-quarter earnings to determine the South African bank’s share.
SA’s fourth-largest bank by assets bought a 20% share in Ecobank for R5,5 billion in October last year.
Nedbank’s subsidiaries in Malawi, Swaziland, Lesotho, Namibia and Zimbabwe grew earnings by just more than 30% year on year, chief executive officer Mike Brown said yesterday. Although the rest of Africa’s contribution was still “tiny”, it was important for the “longer-term growth trajectory of Nedbank”, he said.
“Growing our businesses into the rest of Africa shouldn’t be something that people measure in quarters. The success is really going to be measured in years and decades,” Brown said.
Nedbank’s medium-term strategy is to have operations in 10 countries in East and Southern Africa. It is now in six countries. It gives clients access to West and central Africa through its investment in Ecobank, which operates in 36 countries.
Nedbank bought a 36,4% stake in Banco Único in Mozambique last year, with the option of a controlling stake next year.
Kagiso Asset Management analyst Jihad Jhaveri said the inclusion of the 20% Ecobank stake increased the contribution from the rest of Africa to 3,6% of earnings.
“The underlying results from Africa were strong in 2014, especially from Nedbank’s longstanding Sadc businesses.”
Jhaveri said the way Ecobank navigated the macro-economic headwinds in the oil-producing countries in which it operated would be crucial to Nedbank’s performance.
Nedbank grew its diluted headline earnings per share 13% for the year ended December 2014. PSG Wealth portfolio manager Adrian Cloete said this was “quite pleasing” in the difficult environment and ahead of a consensus forecast of 11%.
“Overall, Nedbank produced a very solid set of results and continued its track record of exceeding market expectations.”
Noninterest income, mainly from transaction and commission fees, grew 5% to R20,3 billion, with strong growth in the second half.
In SA’s low interest rate environment, banks are on a drive to increase noninterest income, which is less risky than net interest income, a measure of earnings from lending.
Brown said Nedbank had chosen not to increase business and personal banking fees and to shrink its personal loans book.
“All of those were a deliberate decision to give up some noninterest revenue growth in the short term for greater growth over the longer term,” he said.
Net interest income grew 8,2% to R22,9 billion.
Jhaveri said: “The actual net interest margin was down a bit as there was less high-margin personal loans business in the mix, and they seem to have lost some low-cost retail deposit market share.”
Nedbank said its broad-based black economic empowerment deal had matured, creating R8,2 billion in value in 10 years.
— BD Live