Nedbank on Tuesday slashed its growth forecast for South Africa and called for more urgency in dealing with problems in the economy as it reported earnings growth of 3.5% in the first six months of the year.
Nedbank, the first of South Africa’s major lenders to report for the period, said the economy had performed worse than expected in the six months to June 30 and cut its annual growth forecast to 0.5% from 1.3%.
“Significantly more urgency is required with the implementation of structural reforms to stem the economic and fiscal deterioration currently being experienced,” the lender said in a statement.
The company’s headline earnings per share – the main profit measure in South Africa – for the period rose to 1,435 cents ($0.9687), from 1,387 cents a year ago, the statement said.
The results come after news that unemployment in South Africa was at an 11-year high and the country has experienced its worst quarterly contraction in a decade. Meanwhile, government finances have been hit by the need to bailout a host of state-run enterprises, including ailing power utility Eskom.
Even before the most recent deterioration, South African lenders had had a difficult few years with their home market characterised by stagnant growth, job losses and high personal debt levels, hitting spending and investment.
Many, Nedbank included, have looked elsewhere on the continent for growth. Headline earnings at the lender’s operations outside of South Africa grew by 19.6% during the period.
Comparatively, earnings at the Nedbank’s South African retail and business bank grew by just 0.3%, while they were flat at its corporate and investment bank. Together, these make up the bulk of Nedbank operations.
Nedbank said it had revised down its guidance for full-year diluted earnings per share to around nominal GDP growth, rather than greater than or equal to nominal GDP growth.