Nedbank‘s CEO Mike Brown joined Alec Hogg on CNBC Africa’s Power Lunch to chat about Nedbank’s interim results, as well as his stewardship of Nedbank in the future. The group delivered satisfactory results for the six month period that ended in June, especially when considering peer company results. For more insight into the results from market analyst Shaun Murison of IG, scroll to the bottom of the page. Before that, enjoy Mike’s relaxed demeanour that mirrors the sturdy foundation that Nedbank has set up for itself. – LF
ALEC HOGG: Something big did happen: an earth tremor there with Ingrid Johnson. She’s top-class and your parent comes along and steals her from you.
MIKE BROWN: Well, I don’t think we quite see it like that. Ingrid’s certainly done a great job for us and she’s built a very good foundation in our retail business. We know that there’s still a lot of work that lies ahead from our point of view, in a retail world. When Ingrid left, we had mixed emotions: sad, because we’d lost a great executive, but happy for her because it’s a job that she certainly, very much wanted to do. She’s looking forward to living in London.
ALEC HOGG: But she’s still young, isn’t she?
MIKE BROWN:Â She is.
ALEC HOGG: Wouldn’t she have been a possible successor of yours?
MIKE BROWN: Certainly, it’s not my job to choose my successor. That’s what happens to the board. I’m still 48 years old, so I hopefully still have a reasonable tenure left in this job, but I think that Nedbank has a number of very talented executives, all of whom would be worthy successors.
ALEC HOGG: You might be 48, but people are already talking about your successor. Business Day’s article about the promotion of Mfundo Nkuhlu is that ‘here’s the man whose now going to be taking over when Mike Brown leaves’. Have you given any indication to the board of an intention to step away?
MIKE BROWN:Â None, whatsoever.
ALEC HOGG: In theory, you could be there for at least… What’s your retirement age, 65?
MIKE BROWN:Â Sixty.
ALEC HOGG: Okay, so you have 12 more years to go. Is Mfundo going to stick around for that long?
MIKE BROWN: Look, I said I think we have a number of talented executives in the organisation. When I was appointed, I was asked what people thought the tenure of a Chief Executive is and I think consistently answered ‘I don’t think there is one, provided that Chief Executive still feels energised and can give value into the organisation’.
ALEC HOGG: But you look great. We’ve seen 48-year olds come into this studio here, who look 68 and you certainly look your age, Mike. It looks as if you must have a pretty good team around you or maybe the business is just going in the right direction, because you don’t look over-stressed.
MIKE BROWN:Â I think I have a fantastic team, both at Nedbank and a great support structure at home, all of which makes my life much easier.
ALEC HOGG: It does. You don’t have that toxicity of problems and stresses that come into the work environment. Into the future…with your team pulling in the right direction, is Nedbank set fair?
MIKE BROWN: Yes, I think we’re in really good shape from a team perspective. We announced a number of changes to our executive team on Friday last week, but as a Chief Executive, what’s absolutely fantastic is to be able to announce all of those changes internally with candidates who are on our succession plan. I think we’re in a good place to make sure that our transition of both Ingrid having moved to London, and Graham Dempster, who’s done a fantastic job for us over nearly 30 years and retires in May next year, and we’ve really catered for both of those movements in our planning process.
ALEC HOGG: Mike Brown is the Chief Executive of Nedbank. Really, strong numbers out today. You can go and read them on SENS, but headline earnings are up 16 percent, dividend up nearly 18 percent – it’s a company that we’ve been telling you on this program, was turning around (quietly, quietly), but delivering the goods and its done so again for the six months to end June.
Nedbank interim results magnified by reduced impairment
By Shaun Murison
South Africa’s fourth largest bank and the second major bank to report earnings this season, has released an improved set of financial results for the first half of the year.
Headline earnings grew by 17.5% over the interim period bolstered by strong net interest income and a noticeable improvement in impairments. Diluted headline earnings per share, which grew +16.1%, far exceeded its sector peer, Barclays Africa Groups’ 10% growth as well as Nedbank’s adjusted real GDP benchmark target for growth.
The 2013 comparative period did however include a large single-client impairment which does exaggerate the headline earnings growth as well as the ROE figure. Impairments decreased 29.8% from the previous interim comparative as a result, further improving the company’s credit loss ratio to 0.83% from 1.31% previously.
While net interest income (NII) added 9.3%, non-interest revenue (NIR) actually declined by 0.58% in the interim period. Excluding fair value movements, cited as part of the reason for NIR decline, NIR increased a lacklustre 0.8%. With a debt laden consumer in an increasing interest rate cycle and amidst slow economic growth, the outlook for NII does deteriorate and a return to material NIR growth is necessary for future growth.
Investors will be pleased with the interim dividend being raised by 17.9% which equates to a total shareholder return since December 2013 of 11.5%.
