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Old Mutual’s Nedbank Loaned Failed First Strut $24 Million

Nedbank Group Ltd. (NED) said it loaned 240 million rand ($24 million) to First Strut (Pty) Ltd., which collapsed last month after the murder of its chairman.

“We estimate our exposure is about 10 percent of the total industry’s, with 2.5 billion rand being our best guess,” Mike Brown, chief executive officer of Nedbank, which is controlled by Old Mutual Plc (OML), said today in a telephone interview.

First Strut’s liquidation came after Chairman Jeff Wiggill was found shot in June in Soweto, southwest of Johannesburg. The company had a 925 million-rand floating-rate note outstanding and borrowed money from South African banks including FirstRand Ltd. (FSR), Investec Plc (INVP), Nedbank and Barclays Africa Group Ltd. (BGA)

Nedbank said today that net income climbed 12 percent to 3.91 billion rand in the six months through June from 3.48 billion rand a year earlier. While the dividend increased 15 percent to 3.90 rand, earnings per share excluding one-time items climbed to 8.31 rand, missing the median estimate of 8.46 rand in a survey of four analysts by Bloomberg.

‘Delivered Guidance’

“Nedbank released a pleasing set of results, broadly in line with their medium-to-long-term target,” Adrian Cloete, an analyst at Cadiz Asset Management in Cape Town, said today in an e-mailed response to questions. “For the last five years Nedbank’s management has consistently delivered on guidance.”

The bank, South Africa’s fourth-largest lender by assets, is seeking to attract low-income earners with more affordable products. It’s winning a bigger share of South Africa’s consumer market as rivals such as Standard Bank Group Ltd. (SBK) and Barclays Africa. lose customers. Nedbank’s group client numbers rose 10 percent to 6.4 million from a year earlier, it said.

Nedbank said loans in the second half are expected to rise between 5 and 10 percent, while net interest income is expected to gain at less than 5 percent, Nedbank said.

The credit-loss ratio is expected to be “below the 1.31 percent in June 2013, but above 1 percent,” it said.

Nedbank’s business banking unit showed a decrease in earnings excluding one-time items and return on equity because of First Strut’s liquidation, the lender said in the statement, adding that it had a 182 million-rand impairment charge in June related to the engineering company’s failure.

“Excluding the provision, Nedbank’s results would have been up 17 percent -- a strong result in our view,” Greg Saffy, an analyst at RMB Morgan Stanley, said in an e-mailed response to questions.

Nedbank has dropped 4.8 percent this year, less than the average 5.6 percent decline on the six-member FTSE/JSE Africa Banks Index. It fell 1.4 percent to 179 rand by the close in Johannesburg.

To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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