Nedbank Group | Dependent on economic reforms
Nedbank's (NED) FY '19 pre-close guidance reflected the impact of challenging operating conditions in SA, as management's guidance for revenue growth and credit impairment charges was disappointing. In our view, NED continues to gain market/revenue share in the SA market. Therefore, we believe NED's performance reflects weak earnings growth opportunities for banks in the SA market in H2 '19. While many of the key trends were similar to management's commentary after the H1 '19 results, the outcomes have been worse than management's guidance. We expect 1% earnings growth in FY ‘19f (5% previously) and have reduced our FY ‘20f earnings growth forecast to 5.5%. The share is trading at undemanding valuation multiples (7.4x forward P/E using through-the-cycle earnings and 1.3x P/B). However, we remain cautious in our recommendation considering weak SA economic conditions and a slow pace of economic reforms.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.
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