Nedbank warns investors to expect a sharp decline in profits

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Nedbank has warned investors to expect a sharp decline in profits when it releases its annuals results later this month. The bank made no mention of whether it will declare a dividend or not.

In a trading statement, the banking group said its underlying performance was in line with the guidance it provided in a pre-close update in December, when it reported an improvement for the third quarter of its financial year relative to the second quarter when it felt the full impact of Covid-19 on its operations. While the negative impacts of the pandemic and subsequent lockdowns were still evident in parts of its client base, high frequency data from its transactional banking channels, its point-of-sale devices and card-related digital channels reflected positive growth in total industry turnover data from August onwards.

At the time, it said it was unlikely to declare a dividend for the year after the Reserve Bank advised banks to conserve capital. However, since then the SARB has relaxed its guidance, saying banks can resume payouts as long as they remain prudent with their use of capital. In December, Nedbank said its liquidity and capital remained well above minimum regulatory requirements as well as its own internal targets.

For the year to end-December, it expect headline earnings per share to be 55% to 60% below 2019’s level, while basic earnings per share will be down by between 69% and 74% due to a R750 million impairment of its investment in pan-African lender Ecobank Transnational Incorporated (ETI), as well as impairments of its own goodwill due to the impact of Covid-19.The second wave of the Covid-19 pandemic that emerged in parts of SA since December 2020 proved worse than the first wave and as we have done throughout 2020, we continue to be vigilant and remain on high alert while observing Covid-19 health protocols,” the bank said. “As a purpose-led organisation, our primary focus remains on ensuring the health and safety of our stakeholders, including staff and clients and serving and supporting clients in good standing in managing their finances through this difficult period and in so doing providing support to the economy.”

Nedbank’s results are scheduled for release on 17 March. Its shares closed 0.9% higher at R138.26 on Friday.

Main Image: MoneyWeb

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