Nedbank Group Ltd. (NED), the South African bank controlled by insurer Old Mutual Plc (OML), said first-half profit rose 27 percent after consumers borrowed more.
Net income climbed to 3.49 billion rand ($422 million) from 2.76 billion rand a year earlier, the Johannesburg-based lender said in a statement today. The bank extended 69 billion rand of new loans to customers in the period, helping to increase net interest income by 11 percent to 9.64 billion rand.
Nedbank, South Africa’s fourth-largest lender by assets, has been boosting lending to consumers to win a bigger share of South Africa’s consumer market from rivals such as Standard Bank Group Ltd. (SBK) and Barclays Plc’s Absa Group Ltd. (ASA) The company added 76 outlets, 385 ATMs and developed software for smart-phones in the period to lure more customers.
“Nedbank has been growing in high-margin areas like personal loans and cards, but not in problem areas like commercial property finance or home loans, so it’s doing the right thing,” Patrice Rassou, who helps oversee about $41 billion as head of equities at Sanlam Investment Management in Cape Town, said today.
The company raised its half-year dividend 28 percent to 340 cents. The stock rose 0.3 percent higher to 181.18 rand in Johannesburg. Nedbank is the third-best performing stock on the six-member FTSE/JSE Africa Banks Index (JBNKS) this year after rising almost 25 percent.
The results were “underpinned by good revenue growth, prudent provisioning, responsible expense management and increased capital and liquidity ratios,” Chief Executive Officer Mike Brown said in the statement. Percentage growth in lending should be in the “mid-single digits” in the second half, he said.
The bank increased the amount of money it sets aside for mortgages that sour to 29.5 percent of total home loans, up from 28 percent. Absa, which experienced a 39 percent jump in bad debts in the first half, increased its so-called coverage ratio to 22.6 percent last week.
Nedbank may lose market share in mortgage lending by focusing on existing customers rather than taking on unknown clients, Brown said in a telephone interview today.
“We have tailored our risk appetite on different products,” he said, adding that the bank may also lose some share of the unsecured loans market because it doesn’t want to increase the size and duration of the personal loans it grants.
South Africa’s 50 basis point interest-rate cut last month will cost the lender 160 million rand after tax in the second half, Brown said. Nedbank’s expenses and the number of bad debts should continue to fall in that period, he said. Lending is likely to increase and profit margins may widen, he added.
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