Nedbank expects profit to slow

Nedbank forecasts slower profit growth this year as it feels the effects of weak consumption and investment spending.

Johannesburg - South Africa's fourth-largest lender Nedbank forecast slower profit growth this year as it feels the effects of weak consumption and investment spending in Africa's most advanced economy.

Lending to companies had become the mainstay for banks as they pull back from high margin but risky unsecured credit, which relies solely on a customer's promise to pay it back, due to dangerously high personal debt levels.

But a slowing economy, estimated to grow at less 1 percent in 2016, due to drought and a collapse in commodity prices has tempered corporate credit demand, Nedbank said.

Nedbank, majority-owned by Anglo-South African financial conglomerate Old Mutual , reported an 8.5 percent increase in annual diluted headline EPS, a widely watched profit measure in South Africa.

“We currently forecast that growth in diluted headline EPS for 2016 will be lower than the growth we achieved in 2015,” Nedbank said.

Read also: Nedbank improves on client gains

The economy is expected to slow this year after expanding by 1.3 percent last year - a pace rating agencies say might put South Africa's investment grade rating at risk.

Nedbank said 2015 diluted headline EPS came in at 2,242 cents in the year to end December, largely in line with a forecast by Thomson Reuters StarMine SmartEstimates.

Non-interest revenue, or income from transaction and deposit fees, rose 7.1 percent to almost R22 billion ($1.41 billion) while net-interest income, a closely watched measure of how much money banks make from their loans, grew marginally, helped by corporate credit demand.

Full-year dividend per share was up 7.7 percent to 1,107 cents. Shares in Nedbank gained 1.9 percent to R189.42, outpacing a 0.9 percent gain the blue-chip JSE Top-40 index .

REUTERS