Our opinion on the current state of NEDBANK(NED)Nedbank (NED) is the smallest of South Africa's five big banks with a client base of just over 8 million. It has (10-10-18) separated from Old Mutual (which is busy selling its remaining stake). In its results for the year to 31st December 2023, the company reported revenue up 11% and headline earnings up by 11%. The company said, "In 2023 we further increased DHEPS to 3 199 cents, up 14% yoy, and we maintained our #1 NPS ranking among South African banks. Growth trends across average interest-earning banking assets (AIEBA) (+7%), net interest income (NII) (+14%), non-interest revenue (NIR) (+6%) and associate income (+64%) remained robust. Levels of productivity improved, evident in our cost-to-income ratio declining to 53.9% from 55.8% in 2022."
At current levels, it is on a P:E of 6.9 with a dividend yield (DY) of 6.63% and looks like good value. In an update on the first 4 months to 30th April 2024, the company said, "The financial performance of the group in the first four months to 30 April 2024 compared to the first four months to 30 April 2023 ('the prior period') reflects headline earnings growth of around mid-single digits, supported by strong growth in Retail and Business Banking (RBB), albeit off a low base, and solid growth in Corporate and Investment Banking (CIB), partially offset by a decline in headline earnings in Nedbank Wealth and Nedbank African Regions (NAR)."
Nedbank is extremely well-capitalised and is making good progress in managing costs and implementing technical improvements. The company is clearly benefiting from higher interest rates. Overall, we view this share as being a solid blue chip which is undervalued at current prices. Nedbank's share peaked at 31300 in March 2018 at the height of Ramaphoria. The share's price fell to 7320c in March 2020 and is now recovering from these levels in a steady upward trend which we expect to continue. On 22nd November 2023, the company announced that Jason Quinn would take over from Mike Brown as chief executive with effect from 31st May 2024.