Africa-Press – South-Africa. Nedbank has cut its SA growth forecast for 2023 in half, to 0.1%. The banking group said on Monday it also expects a 25 basis point interest rate hike in July, but so far, the positive endowment effect of higher borrowing costs has still exceeded the effect of higher impairments.
The group, however, said in a pre-close update on Monday that much of the other guidance it gave at the beginning of June was unchanged, including that global economic activity has slowed and that the operating environment in SA has become much more challenging when compared to its expectations at the start of the year.
The group still expects “muted” headline earnings growth in its first half to end-June, and an improvement in the second half, saying it continued to see strong net interest income in May. The group said its credit-loss ratio – a measure of estimated bad debts – remained above the group’s through-the-cycle target range of 60 bps to 100 bps, but also improved slightly in May.
Banks usually get a profit boost from higher interest rates, at least in the short term. Their massive cash balances earn higher interest, and their net interest margins generally improve, though this also dampens economic activity and puts more pressure on customers trying to make debt repayments.
“At the end of May 2023, the benefit of increased endowment income was still ahead of the incremental increase in impairments,” it said on Monday.
Non-interest revenue grew by high single digits up to the end of May 2023, supported by, amongst others, solid fee and commission growth, Nedbank said. Strong insurance income growth and foreign currency exchange gains on US dollar capital in Zimbabwe also helped, offset to some extent by the net monetary loss, it said.
Nedbank’s pre-close update was released after the JSE closed on Monday, when its shares fell marginally, having risen just over 2% in the past year. Click here for details of the group’s shares as well as other info.
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