Johannesburg - Tight cost controls enabled Nedcor, the most profitable of
South Africa`s major banking groups, to maintain its record yesterday when
it reported a "conservative" 28 percent increase in headline earnings to
R969 million for the half-year to June 30.
Although total income before provisions grew 13 percent to R3,8 billion,
costs rose by only 5 percent to R2,1 billion, pushing the banking group`s
cost-to-income ratio, a key measurement of banking efficiency, down to 54,1
percent at the interim stage.
Richard Laubscher, Nedcor`s chief executive, said: "If we continue at this
rate, a ratio of 52 percent is achievable by year end, putting us in top
territory internationally."
Earnings a share climbed 26 percent to 415c, broadly in line with analysts`
expectations, giving an interim dividend of 128c a share. Earnings a share
have grown at a compound growth rate of 25 percent over three years.
Laubscher said: "The major driver of earnings growth was not the top line,
it was the expense line. Our cost increase is well below inflation even
though we continued to spend on upgrading our information technology and
training, which means our fundamental cost increase is well below 5 percent.
"On the top line we also did very well in asset growth, helped by our
(infrastructure) project finance team. Our corporate guys did spectacularly
well, as did our export trade finance team."
Year-on-year growth in average total assets was 18 percent and net interest
income broadly tracked it, rising by 19 percent in better money market
conditions.
Nedcor`s margin was almost constant, improving from 3,69 percent last year
to 3,72 percent this year.
Laubscher said the principal reason for the constant figure was the 100
percent increase in interest reserved, reflecting the "concerning credit
environment".
The ratio of non-interest income to total income improved to 43 percent from
46 percent year-on-year.
Laubscher said this was "on target" although the overall level of
non-interest income declined because revenue from deconsolidated operations
was now equity accounted.
Laubscher indicated that the R1 billion Nedcor would receive from the
listing of Nedcor Investment Bank would be tucked away in its "acquisition
war chest" and deployed on network investments locally and overseas.
Chris Liebenberg, Nedcor`s chairman, said: "We now have 25 percent of our
capital deployed overseas" and the banking group was an unsung rand hedge
stock.
Nedcor`s shares shed 220c yesterday to close at R129,40 on the JSE.
n Business Watch, Page 2