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Johannesburg - JSE-listed banking group Nedbank [JSE:NED] set the bar low for growth in 2010 and said it would take longer than expected to flush bad debts from its system.
Tom Boardman, Nedbank's outgoing CEO, told shareholders activity in fixed investment would "remain modest" as projects related to the Fifa Soccer World Cup drew to a close. There was also excess capacity in the private sector, he added.
"These developments are likely to contain corporate demand for credit, while strong competition will place pressure on margins." Boardman was commenting in notes to Nedbank's full-year earnings ended-December which were published on Thursday.
Nedbank reported a 29.8% decrease in headline share earnings of 983c, weaker than rival Absa Group [JSE:ASA] who kicked off the reporting season last week with a 23.5% earnings decrease. Standard Bank [JSE:SBK], due to report figures next week, said recently earnings would be 20% lower.
The final dividend dropped from 310c per share to 230c bringing the full year dividend to 440c, down from 620c the previous financial year.
Nedbanks' net asset value per share increased 6.8% to 9100 cents.
In line with Absa, Nedbank's bad debt provisions continued to rise with the banker increasing its provision 24.7% to R9.8bn.
"Although early arrears have improved for the last seven consecutive months of the year, defaulted advances have continued increasing, albeit at a slower rate," Boardman said.
Nedbank "remained cautious about impairments" as commercial bad debts are "difficult to predict" and tend to be of a larger once-off nature, he said.
Last week, Absa cautioned that it remained wary of the potential for rising bad debt in the commercial sector, particularly in property and transport deals.
It offered little hope of growth in lending and transactional activities, saying it expected advances growth in the "mid-single digits". Demand for credit was muted in most sectors of the economy, Absa said.
Nedbank was factoring in growth of 2.2% for South Africa?s gross domestic product, said Boardman.
- Fin24.com
