August 7, 2018 / 5:49 AM / a month ago

UPDATE 2-South Africa's Nedbank sticks to FY profit outlook

(Adds CEO comment, shares)

JOHANNESBURG, Aug 7 (Reuters) - South African lender Nedbank stuck to its annual profit guidance on Tuesday after a strong performance from its west African associate, Ecobank, offset a weak showing at home.

South African banks have struggled to grow lending at a faster rate in their home market as a stagnant economy, job losses, and high personal debt hit investment and spending.

But Nedbank is faring better this year thanks to a recovery at Ecobank, whose operations in Nigeria had been pressured by a slide in commodity prices and unfavourable currency swings.

Nedbank owns roughly 21 percent of Ecobank but that stake could be cut to about 16 percent if and when some convertible securities are exchanged into shares.

Nedbank’s diluted headline earnings per share (EPS), the primary measure of profit in South Africa that excludes certain one-off items, rose by 26 percent to 1,361 cents in the six months to the end of June, compared with 1,078 cents a year earlier.

Chief Executive Mike Brown said he expected diluted headline EPS for the full year to exceed or equal growth in South Africa’s gross domestic product, plus 5 percent.

“We expect that this growth momentum will continue for the rest of the year,” Brown said in a statement.

“We are anticipating earnings growth for our Rest of Africa businesses to be the leading contributor to Nedbank’s overall headline earnings growth for 2018.”

Ecobank accounted for the bulk of the 207 million rand in associate income reported by Nedbank in the first half.

Nedbank said its first-half performance was assisted by its share of associate income from Ecobank “as it returned to profitability”.

Shares in Nedbank jumped as much as 3 percent during the session before paring gains to trade 0.7 percent higher at 266.23 rand as of 1325 GMT.

Nedbank’s rival Absa Group reported a 4 percent fall in half-year profit on Monday, weighed down by costs related to its separation from former parent Barclays. (Reporting by Tiisetso Motsoeneng Editing by Ed Stoddard and Adrian Croft)

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