Nedbank interim financial results

Nedbank released its interim financial results for 2016 on Monday. According to Nedbank’s presentation, total defaults at the bank increased by 10.4% in the six months to June 2016 compared to June 2015.

According to Nedbank, total defaulted advances increased to R18.437 million up from R16.695 million in June 2015. This represents 2.6% of advances up from 2.5% last year.

The bank has put this increase down to a number of factors. One of these includes “certain wholesale counters within the stressed sectors of the economy and the seasonal effects in Home Loans, MFC and Card. The South African Reserve Bank (SARB) directive 7/2015, which was implemented in the second half of 2015 and requires that distressed restructures be classified as defaulted advances for a minimum period of six months after being restructured, contributed to the increase in defaulted advances.”

If the directive 7/2015 is excluded from the results, defaulted advances were R15.397 million for the six months ended June 2016.

Impairments decline

Despite defaulted advances increasing, impairments at Nedbank declined by 4.5% to R2.211 million for the six months ended June 2016. The credit loss ration also improved during this time to 0.67% compared to 0.77% in June 2015.

According to Nedbank, the improvement in its Corporate Investment Banking impairments was “driven by a combination of oil and commodity prices stabilising at higher levels, as well as the successful settlement or restructuring of certain counters during the period.”

However, the Retail and Business Banking credit loss ratio was at the lower end of its target range. Nedbank put this down to “reduced impairments in personal loans and in business banking.”

Looking forward, Nedbank noted that economic conditions look set to remain weak. “Household credit demand will remain weak, impacted by the weak job market, softer income growth and increasing levels of consumer indebtedness due to rising cost pressures from food inflation and higher fuel prices contributing to rising debt service costs.”

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