Money News

Market doubts as South Africa's Nedbank hopes worst is over

JOHANNESBURG (Reuters) - South Africa’s Nedbank said on Wednesday it hoped the worst impacts of the COVID-19 pandemic were over after half-year profits fell almost 70%, but its shares fell as traders tended towards a more pessimistic view.

Customers look on outside Nedbank, after the bank closed due to load shedding, at the Mall of the South in Johannesburg, South Africa, March 17, 2019. REUTERS/Siphiwe Sibeko/Files

The lender, which last week flagged a hit to its interim profits from bad debt charges, said on Wednesday its full-year profits would be at least 20% lower.

But its results statement said it hoped the “worst impacts of COVID-19 and the (Great Lockdown Crisis) are behind us” and Nedbank CEO Mike Brown said data showed some activities returning towards pre-lockdown levels.

“We expect H2 credit losses to be lower than H1,” he said, adding a provision taken for potential future loan losses should not recur, although any forecasts were subject to uncertainty.

Nedbank’s credit impairment charge increased 202% to almost 7.7 billion rand ($458 million) during the six months to June 30.

This lowered its headline earnings per share - the main profit measure in South Africa - to 438 cents, versus 1,435 cents a year earlier.

Last week, it warned of a HEPS fall to between 402 and 472 cents.

Around 3 billion rand of the charge was a provision for future possible losses, less than made by some peers, such as Absa, which took a heftier hit upfront.

While investors cheered Absa’s approach, Nedbank’s shares fell by more than 3% before recovering to stand 1.4% lower at 0810 GMT. The Johannesburg Stock Exchange’s banking index was 0.12% higher.

“Banks are finding market support for taking an extra conservative approach,” Stuart Theobald, chairman at research house Intellidex, said.

Brown said Nedbank would only consider dividends when guidance changed from the central bank, which has asked lenders to halt payouts to preserve capital during the COVID-19 crisis.

($1 = 16.7955 rand)

Reporting by Emma Rumney; Editing by Promit Mukherjee, Amy Caren Daniel and Barbara Lewis