Old Mutual PLC (OML) - Nedbank Group - Third Quarter 2012 Trading Update RNS Number : 6758P Old Mutual PLC 29 October 2012 Ref 102/12 29 October 2012 Old Mutual plc Nedbank Group - Third Quarter 2012 Trading Update Nedbank Group Limited ("Nedbank Group"), the majority-owned South African banking subsidiary of Old Mutual plc, released their third quarter 2012 trading update today, 29 October 2012. The following is the full text of Nedbank Group's announcement: ""Against the background of a slowdown in global economic growth and an increasingly challenging economic environment in South Africa, Nedbank has continued to focus on delivering on its key strategic focus areas. Our balance sheet remains well capitalised and liquid, and we are delivering sustainable value to all our stakeholders comprising staff, clients, shareholders, regulators and communities. In this regard we fully support initiatives to ensure responsible lending by all service providers in the unsecured lending market. Importantly, the group is still on track to achieve its earnings growth target in 2012, notwithstanding the more challenging economic environment". Mike Brown Chief Executive OPERATING ENVIRONMENT The global economic slowdown continued into the third quarter of 2012 with the Eurozone facing significant economic challenges. Furthermore, most emerging markets, including South Africa (SA), experienced slower growth as exports came under pressure. Domestically, the unexpected 50 basis point reduction in interest rates in July 2012 provided some relief to consumers, although private sector credit demand remained low. Fixed investment continues to be delayed in light of worsening economic prospects and uncertainty, further exacerbated by the strikes taking place across a number of vital sectors of the SA economy. The downgrade of SA's sovereign debt ratings and the foreign currency deposit ratings of the five largest SA banks by credit rating agencies, Moody's Investor Services and Standard & Poor's, highlighted the growing concerns around the deteriorating macro environment in SA. OPERATIONAL PERFORMANCE Net interest income for the nine months ended 30 September 2012 ("the period") grew by 9,2% to R14 523m (Q3 2011: R13 299m). The net interest margin of 3,50% (Q3 2011: 3,45%) improved as a result of continued benefits from mix change towards higher yielding assets and improved risk-adjusted pricing. This was partly offset by the cost of enhancing the group's liquidity profile in line with the impending requirements of Basel III and the effect of lower endowment income from the reduction in interest rates in July. Ongoing improvements in the level of impairments contributed to the lower credit loss ratio of 1,03% (Q3 2011: 1,13%). The group continues with regular reviews of all industry sectors, including mining, and remains satisfied with the mix, performance and levels of impairments on these portfolios. Non-Interest Revenue increased by 13,9% to R12 403m (Q3 2011: R10 885m). The increase was largely driven by growth in fee and commission income of 12,7%, insurance income of 27,1% and trading income of 28,3%. Negative fair value adjustments of R228m (Q3 2011: R12m profit) were recorded in the hedged portfolios. Total advances grew 6,8% (annualised on December 2011) to R521bn. Excluding trading advances, banking advances growth was 3,4%. Deposits increased 8,6% (annualised) to R555bn as the group maintained a strong focus on building and enhancing its deposit base. On 1 August 2012 the group obtained approval from the South African Reserve Bank (SARB) to include the MFC vehicle financing book in the use of its existing Advanced Internal Ratings based credit approach. This along with good earnings growth, partly offset by the distribution of the interim dividend in September 2012,contributed to an improved Core Tier 1 ratio of 10,7%. Q3 2012 ratio Jun 2012 Internal target Regulatory range minimum (Basel II.5) ratio (Basel II) (Basel II) (Basel II.5) Core Tier 1 10,7% 10,6% 7,5% to 9,0% 5,25% ratio Tier 1 ratio 12,2% 12,1% 8,5% to 10,0% 7,00% Total capital 14,3% 14,4% 11,5% to 13,0% 9,50% ratio Ratios calculated including unappropriated profits The SARB issued a guidance note on the prescribed Basel III minimum required capital levels for SA banks on 15 October 2012. The group remains in a strong position to meet the new capital requirements and will communicate its revised internal target capital ratios incorporating the new Basel III capital levels to the market at the release of the 2012 annual results. PROSPECTS The SA economy is slowing as reflected in the group's revised gross domestic product (GDP) growth forecast for 2012 of 2,5%. Interest rates are currently anticipated to remain unchanged for the remainder of 2012, but further economic weakness either globally or domestically could increase the probability of further rate cuts. Given the prevailing economic slowdown and uncertainty combined with the effects of wage related strike actions, the group remains cautious on its outlook. However, the strength of the Nedbank franchise together with the momentum built in the first nine months of the year allows the group to re-affirm its previous financial guidance to achieve its medium-to-long-term diluted headline earning per share growth target (being, greater than or equal to GDP plus consumer price index plus 5%) in 2012. Shareholders are advised that these forecasts and the figures stated in this trading update have not been reviewed or reported on by the group's auditors. FORWARD-LOOKING STATEMENT This announcement contains certain forward-looking statements with respect to the financial condition and results of operations of Nedbank Group and its group companies, which by their nature involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, global, national and regional economic conditions, levels of securities markets, interest rates, credit or other risks of lending and investment activities, together with competitive and regulatory factors. Sandton 29 October 2012" Enquiries External communications Patrick Bowes UK +44 (0)20 7002 7440 Investor relations Kelly de Kock SA +27 (0)21 509 8709 Media William Baldwin-Charles +44 (0)20 7002 7133 +44 (0)7834 524 833 Notes to Editors Old Mutual Old Mutual is an international long-term savings, protection and investment Group. Originating in South Africa in 1845, the Group provides life assurance, asset management, banking and general insurance to more than 12 million customers in Africa, the Americas, Asia and Europe. Old Mutual has been listed on the London and Johannesburg Stock Exchanges, among others, since 1999. In the year ended 31 December 2011, the Group reported adjusted operating profit before tax of £1.5 billion (on an IFRS basis) and had £267 billion of funds under management from core operations. For further information on Old Mutual plc, please visit the corporate website at www.oldmutual.com This information is provided by RNS The company news service from the London Stock Exchange END TSTFESFDMFESEIS -0- Oct/29/2012 07:00 GMT
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Old Mutual PLC OML Nedbank Group - Third Quarter 2012 Trading Update
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