Moneyweb
‘Big six’ banking group Nedbank sees the balance of the 2023 year remaining challenging as load shedding, pain from higher interest rates and constraints on economic growth linger, its chief executive Mike Brown said on Tuesday.
"Looking forward, we currently expect the economic environment in SA to remain very challenging, particularly given the high levels of electricity shortages and increased levels of pressure on consumers’ disposable income," he said in the release of Nedbank’s interim results on the JSE.
The bank described its first half, for the period ended 30 June, as ‘more challenging than initially forecast’.
It reiterated concerns about the constraints on the economy, including incessant power cuts, logistical challenges, inflation, and higher interest rates.
This, he said, was "made worse by the potential economic consequences of the government’s non-aligned stance in Russia’s war in Ukraine."
Nedbank’s economic unit sees SA GDP increasing by a mere 0.3% in 2023, slightly lower than the South African Reserve Bank’s (Sarb) 0.4%. It also expects interest rates to remain at elevated levels for the rest of the year.
Despite a challenging first half, the bank posted higher interim profits but said earnings growth was partly offset by higher impairment charges which surged nearly 60% as higher interest rates put a strain on consumers.
The lender was forced to put aside R5.3 billion to cover bad debts in the wake of higher interest rates that have compromised consumers’ spending power and made the cost of repaying debt even more expensive.
While Nedbank’s’ topline earnings have had a good run over the year from the endowment effect of tighter monetary policy that has helped it rake in higher interest income, the higher interest rates have largely depressed consumer confidence levels.
For the six-month period ended 30 June 2023, Nedbank reported an 11% increase in headline earnings per share (Heps) to 1 525 cents, compared with 1 370 cents per share in the comparative period.
Headline earnings were up 10% to R7.3 billion for the period, compared to R6.6 billion previously, underpinned by revenue growth of 13% to R33.7 billion.
This article first appeared in Moneyweb
