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Nedbank records E22m profit

Business Section


MBABANE – Despite the tough economic conditions affecting the financial services industry, Nedbank (Swaziland) Limited surpassed expectations by recording an increase of 14.5 per cent in interim profits.

The bank headline earnings increased from E19.2 million during the same period last year to E22 million for the six months ended June 30, 2009. Had it not been for the challenging conditions and the persistent reduction in interest rates, the growth would have been substantial.

“The country’s economic conditions have been challenging in the first half of the year. The growth in gross domestic product (GDP) declined sharply, from 2.4 per cent in 2008 to the projected growth of 0.4 per cent. This situation impacted negatively on the financial services industry and was aggravated by the 450 basis points reduction in interest rates, impacting negatively on the bank’s earnings,” the half year end commentary for Nedbank says.

“Nedbank’s interim results to June 30, 2009 reflect growth in headline earnings (profits) of 14.5 per cent to E22 million from E19.2 million in 2008,” it says. As a result, earnings per share also increased from 81 cents to 92 cents. Client assets improved significantly by 25.5 per cent to E1.1 billion when compared to the E854.9 million recorded the previous year. Nedbank attributed this impressive growth to the manufacturing industry. Meanwhile, the statement says net income interest also shot up by 8.5 per cent to E44.4 million from E40.1 million the previous year.

“This is attributable to the increase in interest-bearing assets and an improvement in the statement of financial position structure of the bank. The endowment effect as a result of lower interest rates resulted in a reduction of E5.2 million in net interest income, and margin management has been a major focus during this difficult period,” the bank noted.

The bank’s strategic focus on growing transactional volumes through improved distribution channels was seen in the 20.1 per cent growth in net interest revenue to E40.05 million, from E33.3 million in 2008. “This was seen in the bank’s expanded client base and the increased use of electronic banking products by most clients contributing significantly to the net interest revenue growth,” it says.

On the downside however, it seems the bank’s expenses also grew. The statement says; “Expenses grew by 13 per cent to E48.6 million from E43 million year-on-year, mainly due to a higher than anticipated increase in operating expenses. However, the bank’s cost-to-income ratio has slightly improved to 57.5 per cent from 57.9 per cent, mainly as a result of improved operational efficiencies through automation and continuous review of the bank’s processes.”

The bank’s capital position improved year-on-year, resulting in Tier1 capital of E173.7 million (from E140.1 million in 2008), and total capital of E188.1 million from E154 million the previous year. Its capital adequacy ratio reached 20.1 per cent (from 19.7 per cent), complying with the minimum regulatory requirement of eight per cent, the statement says.

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