NEDBANK has shown an improvement in "just about every metric" by which a bank is measured and shows potential to further grow earnings in SA and the region, analysts at Nomura said yesterday.

The Old Mutual-owned group is expected to report double-digit growth next month in half-year earnings, helped by an increase in interest and noninterest income and gross advances. Its full-year earnings were expected to rise more than 20%, Patrice Rassou, head of equities at Sanlam Investment Management, said yesterday.

Nomura said in a report Nedbank was a "strong growth story in itself" having registered robust growth in headline earnings of 26% in the year to December.

"Nedbank's net interest margin has improved from 3,35% in 2010 to 3,46% in 2011, whereas its credit loss ratio has fallen (improved) from 1,36% to 1,14%," Nomura said.

Nedbank's stock was "slightly undervalued" relative to its peers, Nomura said, although Mr Rassou felt the stock - which has grown by more than 19% in the past year - was fully priced.

"We find that Old Mutual possesses yet another business that is well placed to exploit the generic growth opportunity in SA and the rest of Africa," Nomura said.

Some analysts have begun questioning whether Old Mutual, with a 55% stake in Nedbank valued at almost £3,5bn, should sell the bank which has in the past been linked to HSBC and Standard Chartered Bank.

Nomura said Nedbank would benefit from growth in consumer and corporate lending and expansion into sub-Saharan Africa.

The group's Africa growth plans are pinned on it exercising the option to acquire up to 20% of Ecobank after giving the Togo-based group a convertible loan of $285m to fund an acquisition and other activities.

Nedbank CEO Mike Brown recently said that investing in Ecobank would make Nedbank one of the largest banks in the region and the number four by market share in Nigeria, where Ecobank owns Oceanic Bank.

Nomura said the group's earnings in SA would benefit from growth in wholesale and corporate advances, fuelled in part by the planned trillion-rand infrastructure spend by the government and state-owned enterprises.

"Consumer credit demand is also expected to improve as consumer balance sheets improve," said Nomura. The big four banks are fighting for market share in the unsecured lending segment to make up for tepid demand for mortgages, where Standard Bank is the market leader with Nedbank and First National Bank trailing closely.

Absa, which has been hit by high impairments in its legal mortgage book, is battling to regain market share it lost to Standard after it tightened its risk appetite for housing loans.

Nomura said with a core tier 1 ratio, tier 1 ratio and total capital ratio of 11%, 12,6% and 15,3%, respectively (10,1%, 11,7% and 15% in 2010), Nedbank would easily be able to comply with tougher Basel 3 capital rules.

kamhungas@bdfm.co.za