Nedbank Group Q1 2015 Trading Update

RNS Number : 6940M

Old Mutual PLC

11 May 2015

 



Old Mutual plc

Ref 360/15

11 May 2015

NEDBANK GROUP - FIRST QUARTER 2015 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, 11 May 2015.

The following is the full text of Nedbank Group's announcement:

"NEDBANK GROUP - FIRST QUARTER 2015 TRADING UPDATE

"Economic conditions in South Africa remained weak in the first quarter as the benefits of lower oil prices and benign interest rates were largely offset by electricity supply constraints, negatively impacting business confidence.

In the context of this challenging environment, Nedbank Group has had a strong first quarter. We continue to make good progress in the delivery of our strategic focus areas. Non-interest revenue grew 18,1% with good growth in trading revenues and commissions and fees. The mix and quality of our advances book resulted in the credit loss ratio improving on the first quarter of last year.

Our expectation of organic growth in diluted headline earnings per share in 2015 to be above nominal GDP growth remains unchanged".

Mike Brown

Chief Executive

OPERATIONAL PERFORMANCE

Net interest income for the three months ended 31 March 2015 ("the period") increased 4,4% to R5 811m (Q1 2014: R5 566m) with average interest-earning banking asset growth, including increased prudential liquid asset requirements, of 9,2% (Q1 2014: growth of 10,4%).

The net interest margin narrowed to 3,41% (Q1 2014: 3,57%), mainly as a result of the change in advances mix, holding higher levels of low-yielding high-quality liquid assets in line with regulatory requirements and the effects from funding our shareholding of approximately 20% in Ecobank Transnational Incorporated (ETI). The overall margin impact from funding our investment in ETI was negative 8 basis points (bps). The income from our share of the profits of ETI is disclosed outside of the net interest margin as part of associate income, accounted for one quarter in arrears at the average US dollar to SA rand exchange rate for the period.

The credit loss ratio of 80bps (Q1 2014: 89bps) is at the low end of our through-the- cycle target range. This is reflective of the mix changes in our advances book, good collections and continued improvements in retail impairments, and consistent performance in wholesale impairments.

Non-Interest Revenue (NIR) increased 18,1% to R5 318m (Q1 2014: R4 505m). The main underlying drivers of growth in NIR were:

§ Commission and fee income up 9,4%, led by ongoing client acquisitions, cross sell, inflation-related fee increases in retail and income from renewable energy transactions;

§ Trading income growth of 50,8% was primarily driven by strong performance from our global markets business on the back of increased client flows. The growth in trading income is expected to moderate over the full year;

§ Insurance income decreased 8,2% due to the run-rate effect in our credit life business of lower personal loans volumes since deliberately slowing down growth of this portfolio since 2013;

§ Private equity income increased to R65m (Q1 2014: loss of R4m) following realisations in our listed property investments; and

§ Fair value gains of R104m (Q1 2014: loss of R52m) comprised of movements in basis risk in the banking book and accounting mismatches in the hedged fixed rate portfolios.

Total advances growth of 16,0% (annualised) to R637,2bn was mostly attributable to banking advances increasing 10,8% (annualised). Deposits grew 15,9% (annualised) to R679bn. Assets under management increased 27,4% (annualised) to R226,3bn.

The group remains well capitalised with our common equity tier 1 ratio at 11,7%  (December 2014: 11,6%). Our Tier 1 and Total capital adequacy ratios reflect the effects of Basel III regulatory requirements in respect of the grandfathering of old-style tier 1 and tier 2 instruments and hybrid debt instruments. During the period the group redeemed R1,8bn of hybrid debt instruments and issued R225m of Basel III compliant tier 2 debt instruments.

 The capital ratios are as follows:

Nedbank Group	Q1 2015	December 2014	Internal target range	Regulatory minimum*
Common-equity tier 1 ratio	11,7%	11,6%	10,5% - 12,5%	5,5%
Tier 1 ratio	12,4%	12,5%	11,5% - 13,0%	7,0%
Total capital ratio	14,5%	14,6%	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.

EXECUTIVE MANAGEMENT CHANGES

The group's executive leadership team is key to the delivery of our strategic focus areas and during the period we progressed towards the full integration of our Corporate and Investment Bank and finalised the appointment of the cluster executive team under the leadership of Brian Kennedy.

Following Dave Macready's appointment as Chief Executive of Old Mutual South Africa, Iolanda Ruggiero was appointed as Managing Executive of Nedbank Wealth and as a member of our Group Executive Committee (Exco) with effect from 1 May 2015.

We bid farewell to Graham Dempster and John Bestbier as Group Exco members as they reach their scheduled retirement dates on 31 May and 30 June 2015, respectively. We announced at the time of our annual results that Mfundo Nkuhlu had succeeded Graham Dempster as Chief Operating Officer and was appointed to the board as an executive director with effect from 1 January 2015, and that Priya Naidoo had joined the Group Exco and would succeed John Bestbier as Group Executive for Strategic Planning and Economics upon his retirement.

BOARD CHANGES

The following board directors are scheduled to retire with effect from 11 May 2015:

§ Dr Reuel Khoza, Non-executive Chairman.

§ Mustaq Enus-Brey as Non-executive Director.

§ Gloria Serobe as Non-executive Director.

§ Graham Dempster as Executive Director.

We welcome Vassi Naidoo who was appointed Non-executive Director of Nedbank Group and Nedbank and Chairman designate with effect from 1 May 2015. The boards of these companies have resolved to elect Vassi as Chairman of the companies immediately following the conclusion of the Nedbank Group AGM scheduled to be held on 11 May 2015.

PROSPECTS

The group currently anticipates that the SA gross domestic product (GDP) will grow by 2,2% in 2015, with risk remaining on the downside. Interest rates are currently expected to increase by 25 basis points in the last quarter of the year.

Our financial guidance for 2015, as communicated at the 2014 Annual Results presentation, 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

11 May 2015"

Enquiries

External communications

Patrick Bowes                           UK        [phone]

Investor relations

Dominic Lagan                           UK        [phone]

Sizwe Ndlovu                             SA        [phone]

Media

William Baldwin-Charles                         [phone]

                                                            [phone]

Notes to Editors

Old Mutual provides investment, savings, insurance and banking services to more than 17 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 2014, the Group reported adjusted operating profit before tax of £1.6 billion (on an IFRS basis) and had £319 billion of funds under management from core operations.

For further information on Old Mutual plc, please visit the corporate website at www.oldmutual.com 

 

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