Nedbank said yesterday it expected headline earnings per share and basic earnings per share to increase more than 100 percent in the six months to June 30, 2021, when compared with the same period in 2020.

The bank said in a pre-close trading update it experienced a material reduction in the impairment charge in the five months to May 2021, compared to the five months to May 31, 2020, but the difficult macroeconomic environment impacted client activity and revenue growth.

The bank planned to resume dividend payments when reporting interim results in 2021, with the payout ratio still to be determined by the board.

In the five-month period average interest earning banking assets at the bank declined year-on-year, reflecting lower gross loans and advances in CIB as a result of clients using excess liquidity to repay committed facilities, and a conscious focus on portfolio optimisation by reducing lower yielding assets.

Demand for new wholesale loans remained low, with the timing of drawdowns uncertain, although recent developments are encouraging: these included the increase in private renewable energy generation capacity to 100 MW and the increase in the RMB BER SA business confidence index to 50 in the second quarter, from 35 in the first quarter of 2021.

Gross loans and advances growth continued its momentum from 2020, benefiting from client demand for secured loans as a result of the 300 basis point cuts in interest rates in 2020, as well as an increase in unsecured lending volumes originated through the group’s expanded digital channels, notwithstanding lower loan approval rates due to tighter credit criteria.

Net interest income (NII) growth momentum continued into May 2021 and first half growth this year was expected to be at the top end or slightly above guidance provided for the full year 2021, of zero to 3 percent.

The net interest margin (NIM) was expected to increase from the 336 basis point in the 2020 financial year, driven by ongoing improved asset pricing, mix changes and high-quality liquid assets optimisation.

At the end of May 2021, the group’s CLR (credit loss ratio) remained below the bottom end of the 110 bps to 130 bps guidance provided for the full 2021 year, and this performance was expected to remain in place for the first half of 2021.

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