Nedbank Group - First Quarter 2014 Trading Update
Old Mutual plc
Ref 47/14
13 May 2014
NEDBANK GROUP - FIRST QUARTER 2014 TRADING UPDATE
Nedbank Group Limited ("Nedbank Group"), the majority-owned South African banking subsidiary of Old Mutual plc, released its first quarter trading update today, 13 May 2014.
The following is the full text of Nedbank Group's announcement:
"Globally the first quarter of the year was marked by macro-economic concerns in many emerging markets. In South Africa, the economy was impacted by protracted and ongoing strikes in the platinum mining sector. The weaker rand and increasing inflationary pressures resulted in a 50 basis point increase in interest rates in January.
Against these headwinds, we continue to make good progress in our strategic focus areas. Net interest income growth at 8,7% was solid, and although total non-interest revenue growth was only 2,7%, commission and fees were up 6,1%. We have seen a pleasing improvement in the credit loss ratio following the risk management actions undertaken in prior years.
Our financial guidance for 2014, including for organic growth in diluted headline earnings per share to be greater than the growth in nominal GDP, remains unchanged".
Mike Brown
Chief Executive
OPERATIONAL PERFORMANCE
Net interest income for the three months ended 31 March 2014 ("the period") increased 8,7% to R5 566m (Q1 2013: R5 121m) with average interest-earning banking assets growth of 10,4% (Q1 2013: growth: 5,9%). The net interest margin remained at the same level as the 2013 full year at 3,57% (Q1 2013: 3,62%).
The credit loss ratio of 0,89% improved more than expected from 1,22% for the comparative 2013 period and from 1,06% at December 2013. These improvements reflect the quality of the advances portfolio and the more conservative credit lending policies implemented in the second half of 2012. There were no large wholesale defaults and retail impairments improved during the period.
Non-Interest Revenue (NIR) increased 2,7% to R4 505m (Q1 2013: R4 385m) with:
· Commission and fees income increasing 6,1% through net client acquisitions and cross sell. Overall, growth rates were impacted by reduced personal loans volumes, the decision taken to not increase transactional banking fees in 2014 to facilitate increased long term client growth and lower levels of general transactional activity in the consumer and small business sector;
· Strong trading income growth of 17,8% driven largely by client flows;
· Insurance income decreasing 0,3% following higher levels of short-term claims ratios, slower growth in personal loans volumes and the impact of the lower priced credit life product introduced in July 2013;
· Private equity income decreasing by R27m from R23m in the comparative period to a loss of R4m due to lower market revaluations of investments held in Nedbank Corporate Property Finance; and
· Negative fair value adjustments of R76m from a gain of R24m in the comparative period to a loss of R52m following lower fair value movements in our hedged portfolios.
Total advances grew 14,9% (annualised) to R601bn. Excluding volatile foreign client lending, advances growth was 11,2% (annualised). Deposits increased 9,8% (annualised) to R618bn with strong growth in call, term and cash management deposits. Assets under management increased 17,5% (annualised) to R198,6bn.
Our common equity tier 1 ratio was maintained at 12,5%, the same level as the 2013 full year. Our tier 1 and total capital ratios decreased slightly to 13,5% and 14,9%, respectively (2013: Tier 1 ratio of 13,6% and Total ratio of 15,7%) following increased Basel III transitional requirements in respect of the grandfathering of tier 1 and tier 2 instruments increasing from 10% to 20% and the redemption of R1,7bn of old style Basel II compliant tier 2 debt instruments in February 2014. In April 2014, we issued R2,1bn of Basel III compliant tier 2 debt instruments which is anticipated to favourably impact the group's total capital ratios.
The capital ratios are as follows:
|
Nedbank Group (Basel III) |
Q1 2014
|
December 2013
|
Internal target range
|
Regulatory minimum*
|
|
Common-equity tier 1 ratio |
12,5% |
12,5% |
10,5% - 12,5% |
5,5% |
|
Tier 1 ratio |
13,5% |
13,6% |
11,5% - 13,0% |
7,0% |
|
Total capital ratio |
14,9% |
15,7% |
14,0% - 15,0% |
10,0% |
(Ratios include unappropriated profits.)
* The Basel III regulatory minima are being phased in between 2013 and 2019, and exclude Pillar 2B add-ons.
PROGRESS ON BANCO UNICO TRANSACTION
We continue to make steady progress on the acquisition of our initial shareholding of 36,4% of Banco Unico. To date, regulatory approvals have been received from the Mozambican and South African Banking regulators as well as from the Mozambican Investment Ministry and the South African Exchange Control division of the South African Reserve Bank. The administrative process is being finalised and financial closure of the transaction is expected to take place in June 2014.
PROSPECTS
The economic outlook for the balance of the year remains challenging. The group currently anticipates interest rates to increase by a further 50 basis points and that gross domestic product (GDP) will grow by 2,5% in 2014.
Our financial guidance for 2014, as communicated at the 2013 Annual Results presentation, including for organic growth in diluted headline earnings per share to be greater than the growth in nominal GDP, remains unchanged.
Shareholders are advised that these forecasts and the figures stated in this trading update have not been reviewed or reported on by the group's auditors.
FORWARD-LOOKING STATEMENT
This announcement contains certain forward-looking statements with respect to the financial condition and results of operations of Nedbank Group and its group companies, which by their nature involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, global, national and regional economic conditions, levels of securities markets, interest rates, credit or other risks of lending and investment activities, together with competitive and regulatory factors.
Sandton
13 May 2014
Enquiries
External communications
Patrick Bowes UK +44 20 7002 7440
Investor relations
Dominic Lagan UK +44 20 7002 7190
Kelly de Kock SA +27 21 509 8709
Media
William Baldwin-Charles +44 20 7002 7133
+44 7834 524833
Notes to Editors
Old Mutual provides life assurance, asset management, banking and general insurance to more than 16 million customers in Africa, the Americas, Asia and Europe. Originating in South Africa in 1845, Old Mutual has been listed on the London and Johannesburg Stock Exchanges, among others, since 1999.
In the year ended 31 December 2013, the Group reported adjusted operating profit before tax of £1.6 billion (on an IFRS basis) and had £294 billion of funds under management from core operations.
For further information on Old Mutual plc, please visit the corporate website at www.oldmutual.com
This information is provided by RNS
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