Cape Town – Nedbank announced its financial results for 2017 on Friday, showing headline earnings growing 2.8%.

In a statement the bank describes it operating in a very difficult environment, characterised by weak economic growth and heightened political and policy uncertainty.

Headline earnings from managed operations, which include all operations except Nedbank’s approximate 20% share in associate Ecobank Transnational Incorporated (ETI), grew by 7.8%.

Net asset value grew by 7.3%, dividends were up 7.1%, and return on equity (excluding goodwill) was steady at 16.4%.

Nedbank Group CEO Mike Brown said the bank has proven its resilience in a tough economic environment.

“Our headline earnings of R11.8bn reflects a good performance from our managed operations, underpinned by tight cost management and a high-quality advances book,” said Brown.

The impact of Nedbank’s share of the loss from ETI following its fourth quarter of 2016 results (included in Nedbank’s first quarter of 2017 results) decreased in the second half of the year as the ETI business returned to profitability. This, together with the strong performance of managed operations, resulted in full-year headline earnings being up 2.8% – an improvement on the 2.9% reduction in headline earnings Nedbank reported in the first half of 2017.

Brown said he was optimistic about the 2018 outlook.

“While during 2017 consumer and business confidence had slumped to the lowest levels in many years, contributing to a slowdown in lending and transactional activities, particularly in our corporate and investment and wealth businesses, there was a marked change in confidence after the election of Cyril Ramaphosa as ANC President and, subsequently, as president of SA," said Brown.

"Challenges remain, but we expect the political and macro conditions in SA to continue to improve this year. This, combined with the ongoing turnaround at ETI, should help Nedbank deliver a stronger performance in 2018.”

Old Mutual

The Old Mutual-managed separation process is expected to be materially concluded in 2018. Old Mutual plc previously stated that a new SA holding company, to be named Old Mutual Limited (OML), would retain a strategic minority shareholding in Nedbank Group after the implementation of the managed separation.

OML will do a primary listing on the JSE and a secondary listing on the London Stock Exchange at the earliest opportunity in 2018, following the publication of Old Mutual plc’s 2017 full-year results.

The decrease in OML’s shareholding in Nedbank Group will be achieved through the unbundling of Nedbank Group ordinary shares to OML’s shareholders. This will result in OML, immediately after the implementation of the unbundling, holding a 19.9% strategic minority shareholding in Nedbank Group.

“Nedbank has an independent strategy and governance led by the Nedbank Group board and we have not integrated our systems or brands, so the managed separation will not affect our operations, staff or clients,” said Brown.

The unbundling of shares expected in the second half of 2018 will lead to a much wider shareholder base for Nedbank and substantially increase the free float.

“We are supportive of the managed separation process and look forward to welcoming our new shareholders and continuing to demonstrate the strong case for investing in Nedbank,” said Brown.

“I’m pleased to report that our 2018 guidance is for stronger earnings growth, driven by a recovery in revenue, progress with the turnaround at ETI, and continued focus on expense optimisation and risk management.”

Nedbank’s guidance for 2018 is for growth in diluted headline earnings per share of at least gross domestic product growth, plus consumer price inflation, plus five percentage points.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER