Nedbank Group · JSE:NED
Nedbank — H1 2024 Earnings Presentation
40 slides from Nedbank's earnings presentation, Aug 6, 2024
Slide 1: 2024 Interim Results
2024 Interim Results for the 6 months ended 30 June 2024 6 August 2024 NEDBANK GROUP LIMITED – 2024 Interim Financial Results 1
Slide 2: Operating environment – difficult start ahead of SA elections, cautious optimism on GNU
Operating environment – a difficult start to the year ahead of the SA elections, but cautious optimism on the back of GNU outcomes SA Government bond yields (%) SA foreign bond & equity sales1 (Rbn) 14 Bond yields 50 Stability reflect risk in foreign reduction 0 buying/selling Pre-elections 12 activ
Slide 3: Operating environment – business confidence, energy and CDS spreads
Operating environment – a difficult start to the year ahead of the SA elections, but cautious optimism on the back of GNU outcomes Business confidence index SA rail freight (kt) JSE Index (000, LHS) & volumes (#m) 100 Business 25 No further 85 Higher JSE 4 500 Confidence confidence deterioration in
Slide 4: Operating environment – consumers remain under pressure
Operating environment – consumers remain under pressure, but the environment is expected to improve from here Prime interest rate Inflation High but Sticky but (year-end, %) (annual average, %) slowly trending stable rates 15 since H2 2023 8 down 6 ▪ Consumers remain under 10 pressure, given high in
Slide 5: Operating environment – forecasts point to improvement in macro-economic indicators
Operating environment – our forecasts point to some improvement in key macro- economic indicators, with the possibility of a more optimistic scenario emerging slowly SA GDP growth (%) Inflation (average, %) Industry credit growth (ye, %) GNU upside: 9,2% +1,0% to +1,5% 6,1% 6,3% 6,2% 2,3% 6,9% 2,1%
Slide 6: Government of National Unity (GNU) – environment for banks and clients
Government of National Unity (GNU) – the environment for banks & our clients could become more positive should the GNU be effective & enable an environment that delivers higher levels of GDP growth SA elections GNU outcomes Potential upside for Nedbank … may result in higher GDP growth ▪ Benefit giv
Slide 7: Nedbank Group strategy – well-positioned for refresh
Nedbank Group strategy – well-positioned for refresh, building on strong foundations Our purpose To use our financial expertise to do good for individuals, families, businesses & society Strategic value drivers Risk & Growth Productivity Capital Management Strategic value unlocks Digital Market-lead
Slide 8: Steady execution across the board with further opportunities to improve
Steady execution across the board with further opportunities to improve Strategic value drivers Risk & Growth Productivity Capital Management • Gross banking advances: • Good collection outcomes in Strong balance sheet +4% yoy RBB & resolution of stage 3 loans in CIB • CET1 ratio: 13,3% • Retail mai
Slide 9: Our world-class technology platform – Managed Evolution
Our world-class technology platform – Managed Evolution (ME) IT build materially on time, on scope, on budget ME completion – 95% Key focus areas ME completion Rationalisation ▪ Core banking modules Targeted product reduction1: (increased focus & more ▪ Transactional 60% resources allocated) ▪ Inves
Slide 10: Managed Evolution IT build programme – spend and benefits
Managed Evolution IT build programme – cash flow spend peaked in 2017 at R2,3bn & intangible software assets peaked in 2020 at R9bn, while benefits are being realised according to plan IT software development spend Intangible software assets on the Investment vs benefit realisation to (Rbn annual ca
Slide 11: Benefits from our technology platform and digital innovation
Benefits from our world-class technology platform & enhanced digital Strategic value unlocks innovation continue to differentiate Nedbank Benefits for our clients Benefits for Nedbank Digital Digital servicing Revenue uplift Beyond Banking onboarding Retail Main-banked VAS > 200 > 400 cross-sell cli
Slide 12: Digital uptake and usage continue to grow strongly
Digital uptake & usage continue to grow strongly – independent Strategic value unlocks benchmarking ranks Nedbank’s digital capabilities highly Digital transaction volumes App transaction volumes Digitally active clients Capability (# m) (# m) (# m) Servicing features offered (%) +7% +13% +9% ‘Nedba
Slide 13: Main-banked growth is evident and sustained across most segments
Strategic value unlocks Main-banked growth is evident & sustained across most segments Main-banked clients1, # 000 Private Clients Kids & youth +10% +10% (6%) +1% +8% (2%) +8% +10% 108 118 129 447 422 413 446 450 91 100 Small Business +11% Entry level +1% +1% +15% 4% +1% +3% +4% Services 1 273 1 281
Slide 14: Profitable market share gains in areas that create most value
Profitable market share gains in areas that create most value Strategic value unlocks (Strategic Portfolio Tilt) BA900 market share May May Yoy (%) 23 24 change Total core loans 18,8 18,5 ▼ ▪ Yoy market share gains in retail home loans, retail vehicle finance, retail overdrafts & retail deposits Who
Slide 15: Efficient execution – operating model changes to lower cost-to-income ratio
Efficient execution – ongoing operating model changes to support a lower Strategic value unlocks cost-to-income ratio over the medium term Branch floor space1 Corporate real estate floor Target operating model (TOM) (’000 m2) space (’000 m2) Saved Saved 60 since 201 since ▪ TOM 2.0 – cumulative bene
Slide 16: Creating positive impacts – sustainable development financing
Creating positive impacts – more than R150bn support for sustainable Strategic value unlocks development financing (SDF) Sustainable development finance1 (Rbn) R23bn lending exposure to small businesses & their owners R16bn 20% sustainable finance 17% R28bn across multiple Registered business users
Slide 17: Creating positive impacts – leadership in renewable energy
Creating positive impacts – building on our leadership in renewable energy: Strategic value unlocks exposures +20% & limits +27% since December 2023 Renewable energy financing Renewable energy financing opportunities ( drawn exposures, limits, Rbn) to date RBB renewable finance 58 ▪ Solid growth in
Slide 18: Creating positive impacts – ESG highlights
Strategic value unlocks Creating positive impacts – ESG highlights Nedbank ESG ratings Top 5% 2030 financed Nature position Zero exposure AAA of global emissions targets statement to fossil-fuel- banks1 set for thermal-coal, oil published related activities by & gas, and power Top 9% (1st SA bank) 2
Slide 19: Nedbank's climate change journey – commitment to net zero
Nedbank’s climate change journey – our commitment to net zero Our journey to net zero Climate change resolutions passed with Thermal-coal glidepaths Power generation Oil & gas glidepaths 2020 100% votes of approval at our 53rd AGM (ktCO2e financed) (ktCO2e financed) Adopted & disclosed our market-le
Slide 20: Financial overview
Financial overview NEDBANK GROUP LIMITED – 2024 Interim Financial Results 20
Slide 21: Key drivers – difficult operating environment offset by strategic delivery
Key drivers – the impact of a difficult operating environment in H1 2024 was offset by good strategic delivery Operating environment Strategic delivery ▪ Geopolitical ▪ High interest rates uncertainty Technology/Digital ▪ Reduced levels of ▪ SA political & social load-shedding risk Cross-sell & main
Slide 22: Profitability metrics improved and a strong balance sheet maintained
Profitability metrics improved & a strong balance sheet maintained +8% 15,0% +4% 13,3% 127% R7,9bn (H1 23: 14,2%) R913bn (H1 23: 13,3%) (Q2 23: 143%) Headline ROE Gross banking CET1 ratio LCR earnings advances +12% 104 bps +3% +11,5% 114% 1 650 cents (H1 23: 121 bps) R1 120bn 971 cents (Q2 23: 119%)
Slide 23: Shareholder value creation – ROE and interim dividend
Shareholder value creation – seasonally lower interim ROE, but higher yoy & now equal to COE, with interim dividend declared at the top of our payout ratio ROE & cost of equity (%) Dividend per share (cents) NAV per share (cents) 1 COE around 15% No dividends 23 097 22 548 15,0% 14,2% 871 971 H1 H1
Slide 24: Headline earnings up by 8%
Headline earnings up by 8% – driven by good NIR growth, lower impairments & tight cost control Headline earnings (Rm) +2% +7% (26%) (12%) +8% +8% 204 651 1 546 978 213 490 7 329 7 911 HE NII NIR Associate Impairments Expenses Direct tax1 HE H1 23 income & other H1 24 1Other’ includes indirect tax an
Slide 25: Banking advances up by 4% yoy
Banking advances up by 4% yoy – slowed momentum with consumers under pressure & corporates cautious ahead of the SA elections RBB gross actual & average CIB gross actual & average banking advances (Rbn) banking advances (Rbn) 550 +5% ▪ RBB 500 ‒ Solid growth in RRB with more +5% muted growth in NCB
Slide 26: NII up by 2% – AIEBA growth and NIM compression
NII up by 2% ‒ driven by AIEBA growth of 3% & NIM compression of 5 bps, primarily from asset & liability pricing pressure, partly offset by ongoing positive endowment benefit Net interest margin (bps) 8 (5) (4) (4) +2 Mix 0 (7) Pricing (3) DIS** (1) 336 373 393 421 418 413 20 21 22 23 H1 Endowment A
Slide 27: Endowment income – interest rate risk management
Endowment income – interest rate risk management, net of impairments is a focus, while new strategies are being evaluated Change in endowment income Directional drivers vs impairments (Rbn) H1 H2 H1 H2 23 23 24 24 2025 Average SA 11,07% 11,75% 11,75% 11,54% 10,78% interest rates 11,41% 11,65% Endowm
Slide 28: NIR up by 7%
NIR up by 7% – supported by solid growth in commission & fees and strong trading income performance. NIR, excluding the Zimbabwe FX base impact & Eqstra acquisition, was +9,5% Non-interest revenue & income1 (Rm) ▪ Commission & fees – growth driven by deal closures in CIB, as well as strong VAS & car
Slide 29: Impairment charge down by 12% yoy to R4,7bn
Impairment charge down by 12% yoy to R4,7bn – driven by a decline in RBB impairments Impairment charge (Rbn) ▪ RBB impairments down by 15% yoy – Consumer pressure remained elevated given the high SA prime rate & sticky inflation, but the environment has been more stable since H2 2023 – Stage 3 loan
Slide 30: Group CLR 104 bps – almost back within target range
Group CLR 104 bps – further improvement to almost back within target range Credit loss ratios (bps) H1 24 H1 23 H1 22 H1 21 H1 20 TTC 250 GFC Covid CIB 19 16 20 38 118 15–45 CIB excl CPF 19 9 26 31 156 200 CPF 20 26 13 46 63 RBB 183 226 152 122 269 120–175 150 NCB 26 75 12 9 150 50–70 121 Retail 222
Slide 31: GLAA stage movements and coverage
GLAA stage movements & coverage – significant reduction of CIB stage 3 loans GLAA (Rbn) Coverage (%) 1 H1 22 H1 23 H1 24 840 ▪ Stage 1 loans 816 3,37 3,67 3,51 800 799 51 ‒ Increase driven by book growth & CIB loan migrations from stage 2 & 3 40 57 34,3 34,5 38,2 748 52 ▪ Stage 2 loans 75 39 80 7,3
Slide 32: Commercial property finance – high-quality, diversified portfolio
Commercial property finance – a high-quality, well-diversified & highly collateralised portfolio Credit loss ratio (bps) & loan-to-value ratios (%) Portfolio LTVs 54 30 28 47 20 High-quality, CLR: 20 bps CLR well-diversified low at 51% Adequate collateral – Client resilience & highly 50,5% 53,4% 52,
Slide 33: Commercial Property Finance – sector trends
Commercial Property Finance – sector trends Office vacancies 1 Sector trends Listed sector ▪ Office vacancies maintain downward ▪ Valuations appear to have ▪ Listed property sector continues to trajectory: stabilised: outperform (up 6% ytd vs All Share up 3%) ‒ Q2 2022: 16,7% (peak) ‒ Valuations in
Slide 34: Expenses up by 8,5%
Expenses up by 8,5% – reflecting good expense management. Excluding Eqstra acquisition, expense growth was 7,9% Expenses (Rm) ▪ Employee-related costs +9% +7% +7% (3%) +14% ‒ Salaries & wages – driven by annual average salary increase (+6%), use of additional contractors to complete ME & additional
Slide 35: ETI associate investment – carrying value vs market value
ETI associate investment – carrying value insignificant in the group context & well below market value Associate income1 ETI carrying value vs market value (Rm) (Rbn) 24,1 Return on ETI investment2 15,1 8,7 0,51 5,6 18,5 16,3 excl R175m (%) reversal 1,15 (32%) 76 509 470 749 270 1,25 0,61 1,35 H1 H1
Slide 36: Capital – CET1 ratio at 13,3%
Capital – CET1 ratio at 13,3% well above target range, positioning us well for growth, sustainable dividend payments & active capital management opportunities CET1 ratio (%) Active capital management ▪ Maintain CET1 ratio above our 11%-12% target range – considered appropriate in a (0,7) difficult &
Slide 37: Short-term guidance (2024)
Short-term guidance (2024) – slower NII offset by good performance across other income statement lines H1 2024 2024 guidance1 Updated 2024 guidance1 performance (March 2024) (August 2024) Above Below NII growth +2% mid-single digits mid-single digits Back within the top half of the Back within the t
Slide 38: Medium-term and long-term targets – path towards ROE of >17%
Medium-term & long-term targets – path towards ROE of >17% Stronger Strong NIR & Manage >18% CLR to associate expense Active NII around income growth for capital 17% target 80 bps management growth growth + Jaws target Advances growth Impairments NIR & associate Expenses Capital income ▪ Deliver on
Slide 39: Our medium- and long-term targets support shareholder value creation
Our medium- & long-term targets support shareholder value creation Diluted headline ROE Cost-to-income Net Promoter earnings per share ratio Score Medium term (2025) > CPI + GDP + 5% 17% 52% #1 bank (CAGR to end-2025) (around COE + 2%) (delayed beyond 2025) Long term (not dated) > CPI + GDP + 5% > 1
Slide 40: Disclaimer
Disclaimer Nedbank Group has acted in good faith and has made every reasonable effort to ensure the accuracy and completeness of the information contained in this document, including all information that may be defined as 'forward-looking statements' within the meaning of United States securities le