Avior Financials | Nedbank CPF update | Bank lazy deposits | JSE | SNT | DSY
In this week's Avior Financials note:Nedbank's Commercial Property Finance presentation showed that Nedbank's book is suitably diversified to withstand challenging economic conditions. Management expects credit impairment charges to increase to within the CIB target range (15bps to 45bps) while aggregate Stage 3 (default) exposure increases. The trends are in line with our expectations (credit loss ratio H2 '19f: 15bps, H1 '20f: 20bps).
Capitec recently conducted a survey and found that 86% of participants do not know what lazy money is (i.e. transactional accounts that offer no interest). The statistic is interesting because consumers perceive Capitec as a “value-for-money†or as a cheaper alternative bank to the traditional/big four banks.
The JSE announced the acquisition of 75% of Link Market Services South Africa (Link) for R225m. We believe this is a positive acquisition as it allows the JSE to diversify revenue away from cash equity trading. Cash equity value traded has increased 5% y/y in H2 '19 to date. A2X value traded has increased to May '19 levels, supported by Naspers and ETFs.
Santam released a solid set of H1'19 results. The outlook for SNT is for low-single to mid-single digit premium growth in SA and mid-teens premium growth in Africa. Our expectation is for sustainable premium growth of between 6% and 10% for the next three years. We expect the benefits of a JV with Saham to raise premium growth from FY'23. Our recommendation and target price are under review.
Discovery's (DSY) FY'19 trading statement guides to a fall in operating profit between -1% to -5% y/y (Avior:+4%, Consensus +2%). Earnings from VitalityLife (UK) were below our expectations due to the sensitivity of future cash flows to a reduction in bond yield assumptions. Encouragingly, new business API rose 13% and debt to total capital (financial leverage ratio) fell from 25.2% to 23% (Avior: 23.3%).
Discovery is an integrated financial services organisation, focusing on health insurance, life assurance, investments and savings products, wellness and short-term insurance. Co. operates primarily through six subsidiaries which operate in South Africa: Discovery Health, Discovery Life, Discovery Collective Investments and Discovery Investment Services, Discovery Vitality and Discovery Insure. In the U.K., Co., via a subsidiary, Discovery Offshore Holdings Limited, has a joint venture with Prudential plc., the PruProtection group of companies, which provide health and life insurance products. In the U.S., The Vitality Group Inc. provides Vitality as a stand-alone product.
JSE provides a range of products and services from trading to post-trade services and market data sales relying on automated systems. Co.'s segmants include: Cash Equities, which provides trading in equities, warrants and exchange-traded products; equity and currency derivatives, which provides trading in currency futures and options; Commodity derivatives, which provides trading in agricultural grain products and cash-settled rand-denominated derivatives on various international benchmark commodities; interest rate market, which provides trading in interest rate products in both the cash and the derivative Markets; and Market data, which sells live, statistical, historical and data.
Nedbank is a bank holding company, engaged in providing a range of banking and financial services. Co.'s business operations include: Nedbank Capital, which provides investment banking solutions; Nedbank Corporate, which provides lending, deposit-taking, transactional banking and commercial property finance; Nedbank Business Banking, which provides Commercial banking solutions for small-to medium-sized businesses; Nedbank Retail, which provides financial solutions for individuals, startups and small businesses; and Nedbank Wealth, which offers wealth management, asset management and insurance solutions. As of Dec 31 2014, Co. had total assets of R809,313,000,000.
Santam is an insurance group based in South Africa. Co. and its subsidiaries are primarily engaged in short-term insurance activities with a focus on corporate, commercial and personal markets. Insurance activities comprise commercial insurance, personal insurance and alternative risks. Co. operations are organized along two business segments: Insurance Activities and Investment Activities. Co.'s product offering includes four divisions: Personal; Commercial; Specialist; and Agriculture. Co. operates predominantly in South Africa and maintains business interests in Zimbabwe, Malawi, Uganda, Tanzania and Zambia.
Avior is a globally recognised capital markets research and trading firm, with the broadest research coverage within the region, with 100+ SA and 20+ SSA companies under coverage. Avior services clients from offices in London, Cape Town and Johannesburg.
Our research quality is consistently recognised in local and global surveys, with 18 analysts currently rated in their respective sectors (FM 2017). Value add through in-depth, innovative, high quality and consistent research with comprehensive underlying fundamental modelling supported by regular analyst and roadshow interactions.
Avior has proven that by working closely with our clients we can mutually develop dominant positions in certain sectors, going from strength to strength. Avior has a dedicated ESG team, having been ranked #1 in Corporate Governance research since 2008.
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