Nedbank's results may have been good, but the bank is stuck between a rock and a hard place: it's losing market share across numerous products which must be rectified, but it can't extend credit 'recklessly' not in the current interest rate environment. What does it do? A couple of nice SMSes on cellphone banking and Pieter says, how secure is cellphone banking, does it have an http equivalent?
Well Pieter the cellphone banking technology has advanced hugely and why don?t we ask Mike Brown, the chief financial officer at Nedbank. I know Mike that you are not a technical person, you are a financial person, but you have introduced cellphone banking at Nedbank as well and the security of all banking channels of course is always under discussion and cellphone banking, are you confident that it is as secure as at least internet banking is, if not more so?
comfortable with the security we have got in place on our cellphone banking. We have obviously built in what we think is the required level of security so we are very happy with that. That?
s right, you know generally we have the information available anyway so it is just all the packaging and presentation that will take up a little bit more of my time. Looking at some of the key performance indicators you published today. Your return on equity up to 18.
6 percent, you are targeting 20 percent at the end of the year and your cost to income ratio improving as well but both targets could be under threat as I see from your results today because of those big capital expenditure plans which you announced, I think last time you reported, that Yes, I think just to correct you, the target that we have got being the 20 percent ROE and 55 percent cost to income are 2007 targets and not the end of this year. We think we have made pretty good progress on the ROE front moving up to 18.6 percent for this nine months, so we are quietly confident that we are going to achieve the 20 percent target.
What we have always said about the 55 percent is that it is a tough target, prize A for us is certainly to meet that target whilst at the same time building out our retail distribution franchise and cutting our retail pricing like we have just done but that certainly does make it more difficult. Absolutely, as long as you can blunt those teeth a little bit. Staff costs up nearly 12 percent in the quarter, primarily new staff because you have got the smallest retail banking network in the country and you have had to bolster that quite significantly.
Yes, it is a combination effectively of a year-on-year increase in overall staff remuneration of just over six percent plus some head count increase, mostly as you say in the front line of our retail business, to help us with our customer How is that billion rand capital expenditure plan going? Have you rolled out new branches, have you begun that process? And the fastest growth though still very much in the corporate banking market as well.
I mean very impressive growth in corporate, nice growth in retail, and Nedbank Retail is now bigger than Nedbank Capital. From an overall headline earnings perspective we were very pleased with the growth in Nedbank Retail, 64 percent odd up in its headline earnings, and its ROE moving up to 26 percent, now much more in line with the peer group. What about the bad debt picture, we are hearing from the furniture retailers that they don't seem to be too concerned about bad debt.
Your bad debt actually dropped a bit. Yes we came in with a credit loss ratio of 50 basis points, which was down on the 61 basis points we reported in June, bearing in mind that the numbers to June did contain some impairment charges in Nedbank Capital that were not repeated. You are stuck in quite a difficult position in a rising interest rate environment, you have been losing market share across quite a view product segments in the last couple of years and on the one hand you have got to grow your market share and on the other you don't want to be extending credit recklessly, and I am not suggesting for a moment you would, but you don't want to be extending credit more quickly than you should and there is the pressure of the market here as well.
Yes absolutely, I think we would rather lose market share than have bad loans on our books, there is no doubt about that. We have been pretty pleased with what has happened in the market share space over the last couple of months, the most sort of prominent area of discussion has been our home loans market share. We have spent an awful lot of time fixing processes and turnaround times in home loans and we got that growth rate up to just over 27 percent for the nine months on an annualised basis.
So we are really pleased with the progress we have made there. Mike Brown thanks for talking to us this evening, the chief financial officer at Nedbank.
News RSS