NEDBANK said yesterday that it anticipates full year profits would almost double for the year ended December. This was hard on the heels of Absa, which a few days ago saw profits more than doubling in 2021 compared with a year earlier.
Nedbank said it now expected full-year headline earnings a share to increase by more than 90 percent and a 180 percent jump in earnings per share when compared with a year earlier.
The strong profits from Nedbank comes after Absa said on Friday it expected normalised headline earnings per share for the year to December to be more than double the 946.5 cents for 2020.
However, Nedbank flagged that a severe fourth wave would impact its financial performance.
“Risk to our guidance includes a significantly more severe fourth wave of Covid-19 and consequential lock downs than currently expected,” said the group. South Africa is entering a fourth wave of Covid-19 infections with a rate of daily infections increasing five-fold in the last week driven by the Omicron variant.
Nedbank said it expected growth in net interest income for the year ended December to be at or above the top end of the 5 percent to 7 percent guidance.
Expenses for the period are expected to be at or below the bottom end of the group’s guidance of 6 percent to 8 percent.
The group said its final 2021 dividend was expected to be declared at a dividend cover within the board-approved target range of 1.75 times to 2.25 times.
Commenting on the results chief executive, Mike Brown, noted: “Despite the challenging environment I am very pleased with the group’s performance to date. We continue to support our staff, clients and stakeholders during these difficult times and wish to thank them for their loyalty.”
Nedbank said its latest forecast is for South Africa’s interest rates to increase by a further four increments of 25 basis points (BPS) throughout 2022 and by a further 50 bps in both 2023 and 2024.
The group said industry credit growth for 2021 was expected to be around 3.2 percent.
“An emerging fourth wave of Covid-19 infections in South Africa, particularly the impact of the new Omicron variant and ongoing global and domestic reactions thereto, pose downside risks towards the end of 2021 and into 2022. Currently data on the Omicron variant is limited and points to higher infection rates but mild severity and the next few weeks will be important as more data emerges,” said the group.
Nedbank said the civil unrest in KwaZulu-Natal and parts of Gauteng in July 2021 had resulted in significant damage to property and temporary interruptions to supply chains, although almost all Nedbank clients, which were impacted were covered by South African Special Risks Insurance Association (Sasria) insurance.
“The uncertainty following this unrest and slow progress with the arrests of the organisers are weighing on businesses’ willingness to invest for the longer term as evident in the Bureau of Economic Research’s business confidence index declining to 43 in both the third and fourth quarters of 2021 from 50 in the second quarter of 2021,” said the group.
Nedbank said household borrowings continued to benefit from the low interest rate environment.
“Industry-wide credit growth to September 2021 reflects solid retail credit demand, while corporate credit growth remains weak and levels of repayment remain high,” said Nedbank.
BUSINESS REPORT ONLINE