Nedbank gave a guardedly upbeat 2025 outlook, forecasting that 1.4% growth in the economy and half a percentage point cut in the prime lending rate may lead to a pick up in corporate lending to make up for subdued household demand.
“From a macro perspective, we remain cautiously optimistic and expect the economic environment in SA to improve off a low 2024 base, although risks associated with global geopolitics and trade wars remain,” CEO Jason Quinn said in a results filing on Tuesday.
The SA economy is forecast to show modest growth in 2024 as the dismantling of structural bottlenecks, particularly in the electricity sector, and the loosening of monetary policy slowly take effect. Stats SA is due to release the fourth-quarter GDP data later on Tuesday.
Quinn tempered his expectations, recognising the uncertainty posed by geopolitical factors, including US President Donald Trump’s trade policy agenda, which threatens to raise the cost of goods, and his foreign policy priorities, which have left many countries, like SA, with big financial holes. Trump recently defunded USAID, which had been plugging budget holes and providing essential humanitarian support.
Nedbank’s 2024 earnings report gave the first glimpse of the R7-trillion banking sector’s recovery from bad loans write-offs driven by higher interest rates, where households are already shouldering a dangerously high debt to personal income of more than 60% — almost double the recommended cap.
Nedbank reported 8% to R16.93bn in headline earnings as lower impairment charge, targeted cost management offset muted interest income growth and slower loan growth.
Revenue was 4% higher at R72.22bn.
Net interest income rose to R41.8bn from R41.47bn before and non-interest revenue increased to R30.41bn from R27.71bn
The group’s credit loss ratio declined to 87 basis points (bps) from 109 bps the previous year.
A final dividend of 1,104c per share was declared, up 8%, making a total dividend of 2,075c, up 10% from the year-earlier period.
Household credit growth, however, slowed to 3% by the end of the year, while corporate credit growth increased by 5.4%, remaining relatively volatile and not yet reflective of a material improvement in fixed-investment activity, Nedbank said.
Nedbank group’s return on equity strengthened to 15.8% from 15.1% in the previous period, reflecting steady progress towards its return on equity (ROE) targets.
The group said from a strategy perspective, a key highlight of 2024 was the completion of its Managed Evolution IT transformation, which has delivered a refreshed modern technology platform.
Corporate lending should pick up while growth in household lending was expected to remain muted, he said.
“Our improved financial performance in 2024 — together with the progress made in executing on our strategy, our new transform agenda and better economic prospects — gives us confidence that we will continue to make progress to increase our ROE to greater than 16% in 2025, greater than 17% in the medium term and above 18% in the longer term,” Quinn said.
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