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Johannesburg - Nedbank’s [JSE:NED] share price soared on Monday morning as the market loved the banking group’s strong results in the first half of the year.
Nebank’s gain of more than 7% also gave the rest of the financial sector a lift and by mid-morning on Monday the financial sector was already 2.04% higher.
With the Resources index also 1.94% stronger due to a weaker dollar after disappointing growth figures in the US, the All-share index was 0.71% up at 53 171 points, while the Top 40 index traded 0.61% higher at 46 198 points. The Industrial index hardly moved.
Nedbank traded 7.78% stronger at R214.48 by mid-morning. This meant the share on Monday gained almost as much as the previous three months, when it improved by 8.35%. Before Monday’s run the stock was 22.8% lower for the year.
Nedbank reported a rise in headline earnings of only 2% to R5.4bn for the six months to end-June 2016, but that was mainly due to losses suffered by its African arm Ecobank Transnational Incorporated (ETI) in the fourth quarter of last year. If the negative impact from ETI, which was accounted for in the first quarter this year, were excluded from the results, headline earnings would have been 20.1% higher.
READ: Nedbank first-half profit growth slows as Ecobank makes losses
Nedbank CEO Mike Brown said headline earnings growth was underpinned by strong revenue generation and an improved credit loss.
Old Mutual [JSE:OML], Nedbank’s holding company, was 1.86% stronger at R39.57. Old Mutual said last week that it would list a new holding company for the group’s emerging market activities in Johannesburg, and that the new company would distribute most of Old Mutual’s shares in Nedbank to its shareholders.
Nedbank’s run also supported other banking shares and by mid-morning Standard Bank [JSE:SBK] was 4.14% higher at R144.29, as well as being one of the busiest shares on the JSE. Barclays Africa [JSE:BGA] traded 3.52% stronger at R158.90, in line with its British parent company Barclays, which gained more than 5% in London on Friday. FirstRand [JSE:FSR] was 3.64% higher at R50.36.
The local financial sector was unperturbed by a drop in financial shares in Europe as investors remained sceptical about European banks, although stress test results showed most of the banks would have an adequate level of capital in a crisis.
Investors in the financial sector instead focused on the stronger rand, which traded at R13.81 on Monday morning, the highest level in more than eight months, after a stronger-than-expected trade surplus was announced on Friday.
READ: It’s an importers' market as rand finds strength
The dollar is also under pressure worldwide after disappointing US economic growth data reduced expectations that the Federal Reserve would raise interest rates in the next few months. US gross domestic product increased at a 1.2% annual rate in the April-June period, less than half of the 2.6 % growth rate economists had expected.
The Fed’s president in New York, William Dudley, said on Monday the bank should be cautious in considering an interest rate increase, due to lingering risks to the US economy.
A softer dollar is good news for commodities and platinum shares in particular rallied strongly, with most of the big platinum producers trading at 52-week highs.
Impala Platinum [JSE:IMP] gained 3.58% to reach a new high of R63.35 and Anglo American Platinum [JSE:AMS] traded 2.98% stronger at a high of R453.13. Northam [JSE:NHM] was 2.98% up at a high of R52.70 and Royal Bafokeng Platinum [JSE:RBP] lifted 1.54% to a high of R52.70.
Gold and platinum producer Sibanye [JSE:SGL] added 3.29% to a new high of R66.31. The Gold index gained 1.34%.
The
recovery of Kumba [JSE:KIO] remained one of the big turnarounds of the year with the
share price reaching a new 52-week high of R141.38, 4.33% up on
Friday’s close. The share price as recently as January 17 traded at a
52-week low of R25.35. Its holding company, Anglo American [JSE:AGL], gained 2.50% to R156.84.
