Nedbank shoots the lights out with return to pre-pandemic profits
Nedbank shareholders are smiling all the way to the … well, to the bank, with an interim dividend that is up 81% to 783 cents a share. The first of the big banks to put out its financial results for the first half of this year, Nedbank showed off 26% growth in headline earnings per share and an 81% increase in the interim dividend, taking dividends back to pre-Covid levels.
Nedbank’s headline earnings increased 27% to R6.7-billion, driven by strong revenue growth and a well-managed expense base.
Nedbank chief executive Mike Brown said the group’s performance in the first half of 2022 reflects improvements across all key metrics in a complex and difficult operating environment.
The group’s balance sheet remained very strong despite a challenging second quarter, which saw local economic activity disrupted by the floods in KwaZulu-Natal, rolling blackouts, weaker global demand, escalating inflation and a faster-than-expected rise in interest rates.
“Electricity supply is a binding constraint on economic growth and job creation, and urgent implementation of the Energy Action Plan is needed,” Brown said.
During the past six months, Nedbank continued to make good progress on its strategic value drivers of growth, productivity and risk and capital management. Levels of productivity improved – evident in the cost-to-income ratio declining to 56.2% and a 17% increase in pre-provisioning operating profit.
Brown said the company’s improved productivity is largely due to a managed evolution technology strategy that has enabled continued double-digit growth in the more cost-effective digital channels, propelling the number of digitally active retail clients 10% to 2.4-million, up 60% since the first half of 2019.
It is also largely responsible for savings of R1.2-billion to date, while the bank says flexible work practices have enabled ongoing cost savings. Project Imagine has resulted in a reduction of 69,000m² in branch space from 2014 levels, while the actual number of branches declined by eight this year, bringing the total number of branches to 419.
The bank has reduced the number of campus or office sites from 31 to 24 over the past four years, and plans to reduce further to a target of 19.
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“In the next few years, we will continue to enhance workstation use by enabling flexible office constructs to support more dynamic ways of work, as well as leveraging successful work-from-home experiences as a result of Covid, while creating further value and cost reduction opportunities,” Brown said.
Nedbank’s optimal workplace distribution mix is expected to settle at around 60% at Nedbank premises and 40% as a mix of hybrid and permanent work-from-home models, to support an expected workforce distribution model of 50% full time on premises, 30% hybrid and 20% permanently offsite.
The Nedbank Money app is actively used by 1.8-million clients, up 13% year on year and 167% since the first half of 2019. Transaction volumes on the app increased by 35% year on year, up 289% the first half of 2019 and transaction values increased by 39% year on year.
Looking ahead, Brown said a continuation of the strategic and operational delivery should support ongoing earnings growth for the bank, which remains on track to meet its medium-term target of exceeding its diluted headline earnings per share level of 2,565 cents by the end of 2022 – a year ahead of schedule. BM/DM