The dramatic decline in the economy in 2020 has left banking groups under severe strain, but SA has seemingly managed to avoid a banking crisis. But the results statements released over the past two weeks suggest it was close.
Stephán Engelbrecht, fund manager at Anchor Capital, believes results for the period to end-December 2020 indicate that the pain has been less severe than many expected in June, when large credit provisions were raised. “SA banks have been incredible dividend payers since they listed. We must appreciate that the Covid crisis and the reaction of the SARB [South African Reserve Bank] that caused the SA banks to suspend their dividends were truly Black Swan events.
Most of the decline in profitability came in the first half of the year, when headline earnings toppled 82% compared with the first half of 2019. In the second six months they were just 19% below the comparative period.In Nedbank’s case, revenue for the year to end-December fell 3.5% to R54.2-billion. Expenses were trimmed by 1.3% to R31.8-billion, but its credit loss ratio swelled to 161 basis points from 79 basis points. The group’s impairment charge increased by 114% to R13.
“Most of their earnings across the rest of the continent are generated by the Corporate and Investment Banking franchise, while the retail business remains a relatively small profit contributor,” Barker added. “Credit impairment charges were 2.6 times those reported in the prior period, reflective of the strain experienced by our clients.”
It reintroduced its dividend, with a 110c per share payout, after it recovered faster than expected from the depth of the Covid-19 pandemic. Although first-half earnings were down from a year ago, CEO Alan Pullinger said the economy had rebounded better than it anticipated, supporting transactional volumes, growth in deposits and its earnings. The bank had also accreted capital and strengthened its balance sheet, supporting the case for an interim dividend.
When I was a newbie I really lost all my investment cause I was new and didn't meet the right account manager to invest with . I was at the verge of quitting till I was introduced to Mr Claw and my story changed. its worth a try I can testify on this platform CLAWLEACH0