Nedbank called for more urgent government action to fix South Africa’s struggling economy on Tuesday after first-half earnings at its main domestic operations flatlined.
More of Nedbank’s corporate and retail clients defaulted on their debts or swerved riskier investments due to a tough economic environment as unemployment rose to an 11-year high and South Africa had its worst quarterly contraction in a decade.
Initial optimism around President Cyril Ramaphosa’s ability to revive the economy, dubbed ‘Ramaphoria’, has faded and left South Africa’s business community increasingly frustrated.
Nedbank said headline earnings at its retail and business bank and corporate and investment bank, the engines of its operation, rose by just 0.3% and 0.1% respectively.
The bank said the South African economy had performed worse than expected in the period and halved its economic growth forecast for 2019 from 1.3% to 0.5%. The latest Reuters poll gave a median growth forecast of 0.7%.
“Unfortunately we currently seem to be in an environment where infighting is dominating the national discourse and as a consequence, we are seeing very little action on delivering structural reform,” Nedbank Chief Executive Mike Brown said.
Brown highlighted ailing state power firm Eskom, which has had to implement rolling blackouts and take multiple state bailouts to stay afloat, saying projects could not get off the ground while it was impossible to accurately forecast the availability or price of electricity.
He also said a debate around reforming South Africa’s central bank was an “unnecessary distraction” and that more clarity was needed on proposed land reforms.
Nedbank also said it had cut its guidance for full-year diluted headline earnings per share to around nominal GDP growth, rather than greater than or equal to nominal GDP growth.
Nedbank’s performance was bolstered by its businesses elsewhere in Africa, which grew headline earnings by 19.6%, helping to lift headline earnings per share – the main profit gauge in South Africa – by 3.5% to 1,435 cents ($0.9687).
Many South African lenders have looked elsewhere in Africa for growth after their home market has in recent years become characterised by stagnant growth, job losses and high personal debt levels, hitting spending and investment.
Nedbank has benefited from a turnaround at its West African associate Ecobank, which contributed R264 million to headline earnings.
It holds a 21% in the Togo-based lender, however its growing profits were dampened by a 21.4% decline in Ecobank’s shares on the Nigerian Stock Exchange.