NEDBANK Group’s headline earnings per share (Heps) increased 115 percent in the year to December 31 due to lower impairments, a recovery in revenue and well managed expenses, and further growth is anticipated in the new financial year.
The past year’s Heps was, however, still 7 percent below 2019 levels. The 2021 results were supported by a better than expected economy at the start of the year, the low interest rate environment that drove retail credit demand, and higher levels of transactional activity post-Covid 19, chief executive Mike Brown said in a presentation yesterday.
“We are on track to meet our medium-term target set for the end of 2023. We now expect to meet the diluted headline earnings per share target (greater than 2 565 cents per share) in 2022, a year ahead of our previous expectation,” he said.
In the past year, Heps was up 112.2 percent to 2 362 cents, so the minimum anticipated targeted Heps increase for the new financial year is about 8.5 percent. The 2022 growth target also falls within a slowing and uncertain economic growth environment.
The bank said at the release of its annual results yesterday that demand for corporate credit had remained muted throughout the year, as excess cash was used to repay debt, but demand for corporate credit recovered in the second half.
Rebounding off a low base in 2020, headline earnings in 2021 increased by 115 percent to R11.7bn. Pre-provisioning operating profit increased by 9 percent.
Net asset value per share increased by 11 percent and return on equity improved substantially to 12.5 percent from 6.2 percent.
A final dividend of 758 cents per ordinary share was declared versus none in the same period in 2020, bringing the full-year dividend to 1 191 cents per share.
Overall impairment coverage increased to multi-year highs of 3.32 percent (December 2020: 3.25 percent) and the credit loss ratio declined to 83 basis points from 161 basis points and was back within a target range of 60–100 bps.
The Managed Evolution (ME) technology journey to create a modern, modular and digital IT stack was at 85 percent completion.
The benefits already evident included most digital metrics showing double-digit growth, as well as targeted operating model benefits of R967m being realised – the hope was to reach a R2.5bn benefit by the end of 2023.
Nedbank claimed to have recorded the largest retail main-banked market share gain among the large South African banks, while Corporate and Investment Banking (CIB) gained 35 new primary clients.
“We continued to create positive impacts by delivering against the United Nations Sustainable Development Goals (SDG) and increasing our focus on environmental, social and governance (ESG) matters,” said Brown.
In 2021 the Energy Policy and inaugural Taskforce on Climate-related Financial Disclosures (TCFD) report was released and the bank concluded Africa’s first green AT1 (Tier One bond) instrument, while maintaining ESG ratings at the top-end of local and international peers. The bank also continued to invest strongly in renewable energy projects.
A solid financial performance was anticipated for the 2022 financial year.
In November Old Mutual unbundled 12.2 percent of its stake in Nedbank – it had already unbundled 32 percent in 2018. This had no impact on strategy, day-to-day management or operations of the bank. Existing commercial relationships were being kept by arm’s-length agreements.
The unbundling would, however, increase Nedbank’s free float of its shares, which would enhance share liquidity and put it in a more favourable position in relevant indices. Old Mutual’s shareholding as at December 31 was 5.2 percent.
BUSINESS REPORT ONLINE