A sedate and uneventful annual general meeting for the Nedbank Group on Thursday belied a business preparing for continued bad news from local and other African economies, ranging from low growth to sovereign credit downgrades. CEO Mike Brown said a total shareholder return of -20% in 2015 had been a disappointment, even while the rest of the large banks in South Africa traded in similar fashion and the index returned -16%.He expects 2016 to be even more challenging for banks, with Nedbank expecting South African GDP to come in at 0.2% for the year - with "risk to the down side" - and interest rates to rise a further 50 basis points in the second half of the year."Despite this, bank valuations remain attractive and Nedbank is in a stronger position than in 2008 to weather the downturn."Nedbank's 2016 forecast for diluted headline earnings per share would be down on 2015's 8.5% growth, and below medium- to long-term targets.mini_story_image_hleft1Nedbank's outlook for the local banking market involves rising interest rates and regulatory costs and lower bank returns on equity given the impact of slower growth on credit extension, impairments and transactional activity.Brown said the group had been working to strengthen its balance sheet by stress-testing for a sovereign downgrade by rating agencies, and is likely to fare better than the 30% peak-to-trough earnings loss the sector experienced in 2008."Our lending strategies have become more conservative. Retail loan growth has averaged 4.9% since 2013 compared with an average of 20% in the lead-up to 2008, putting us in a strong position to manage consumer bad debts as interest rates rise," he said.Provisioning levels were more conservative, Nedbank's liquidity ratios were stronger and capital levels were well within target ranges.Nedbank has also grown its retail customers by 76% in the last seven years, improving its Basel 3-friendly deposit levels and adding more stable non-interest income which now contributes close to half of its earnings.Nedbank continued to believe it should roll out branches under its own brand in southern and eastern Africa, where it had expertise, but remained committed to the partnership model with its 20% stake in Ecobank in Central and West Africa.Brown hinted at acquisitions in East Africa, while Nedbank will also increase its position in Mozambique's Banco Unico this year to a majority holding of 50% plus one.story_article_right1Ecobank returned a loss in the last quarter of 2015, where the flagging oil price indirectly hit Nedbank's bottom line this quarter, but the pan-African lender returned to profitability in the first quarter of this year, which will benefit Nedbank by R278-million."We still believe Africa is a long-term growth opportunity. We've said there will be bumps in the road, and this is one. It's a bump caused by a significant downturn in commodity prices which exposed fiscal challenges in African countries that were previously supported by unsustainably high commodity prices."There will be headwinds, but it has to be a 10- to 20-year strategy to complement the South African business. By the time we get to the long term we believe it will be a price worth paying," Brown said.A local analyst said at 1.2 times book value Nedbank, and other South African banks, offered value.Nedbank's first-quarter trading update contained few figures aside from Ecobank's performance, reported earlier. But the analyst believed the market had already priced in a tough few years domestically and in the rest of Africa - economies would need to turn before Nedbank's continental investments would really be vindicated. From that point of view, domestic banks would offer value for some time to come, particularly given uncertainty over a sovereign downgrade...