Nedbank Group · JSE:NED
Nedbank — 27th UBS SA Financial Services Conference 2024
24 slides from Nedbank's conference presentation, October 2024
Slide 1: Capitalising on the GNU opportunity – cautious optimism
Capitalising on the GNU opportunity – cautious optimism 27th UBS SA Financial Services Conference October 2024 NEDBANK GROUP LIMITED – 2023 Interim Financial Results 1
Slide 2: Agenda
Agenda ▪ The GNU opportunity o What went well? ‘…. we have united as the 10 political parties working together & o Are there green-shoots? ensuring that we have a strong, effective government that will lead the process of development, transformation, ▪ How Nedbank is positioned & economic growth in
Slide 3: What went well? Peaceful elections, swift formation of GNU
What went well? Peaceful elections, swift formation of a Government of National Unity (GNU)… 60% of the SA SA elections Expected GNU outcomes population believes ‘the GNU is working Higher GDP growth, through… well’ – SRF poll1 ▪ Fair & peaceful elections Ongoing fiscal Further policy reform consoli
Slide 4: What went well? Financial markets have started discounting potential GNU benefits
What went well? Financial markets have started discounting potential GNU benefits CDS spreads down SA Government bond yields (%) SA CDS spreads (bps) (150 to 175 bps when SA had investment 300 grade credit ratings) 14 Bond yields reflect risk 250 reduction 12 200 Rand vs US$ 22 10 150 Rand strength
Slide 5: Green-shoots? Feedback from our clients highlights cautious optimism
Green-shoots? Feedback from our clients, highlights cautious optimism ‘The GNU has brought about policy ‘Energy & water are concerning factors certainty across many elements in for the manufacturing sector to be globally Government’ – Diversified Industrial client competitive & these are not quick t
Slide 6: Green-shoots? Fixed investment, business confidence and company loan growth
Green-shoots? Good correlation between fixed investment, business confidence & company loan growth – and to date highlight a slow start Gross fixed capital formation vs company loans Business confidence vs company loans (% growth yoy) (% loan growth – LHS, confidence index – RHS) 40 40 100 Fixed cap
Slide 7: Green-shoots? Structural constraints and weak demand drive spare capacity
Green-shoots? Structural constraints, along with weak demand (slow GDP growth) drove higher levels of spare capacity/lower levels of capacity utilisation The causes of low levels of capacity utilisation Gross fixed capital formation vs capacity utilisation GFCF (yoy %) Capacity utilisation (%) 20 90
Slide 8: Green-shoots? Structural constraints have eased slightly
Green-shoots? Structural constraints have eased slightly Eskom EAF1 Logistics (%) (1 000 tonnes) 80 100 25 80 20 60 60 15 ▪ Higher electricity availability 40 10 40 ▪ No load-shedding for > 6 months: Years of fixing Eskom (better ▪ Reduction in road maintenance, added resources & freight in 2024 ski
Slide 9: Green-shoots? Higher fixed investment expected, 4x increase in announced capex projects
Green-shoots? Higher levels of fixed investment expected to follow on the back of a 4x yoy increase in the value of capex projects announced Nedbank Capital Investment Schedule1 (Rbn, constant 2022 prices) 1650 1500 1350 Significant R943bn investment ahead of SA government 1200 2010 Infrastructure 1
Slide 10: Green-shoots? Notable progress on structural reforms
Green-shoots? In summary, notable progress is being made on structural reforms, suggesting that the economic impact will be positive going forward H1 23 H2 23 Q1 24 Q2 24 Q3 24 Q4 24 Boost from… Political ▪ More stable & reliable electricity supply uncertainty ▪ Logistics bottlenecks to improve slig
Slide 11: Green-shoots? Household credit growth to benefit from lower rates and inflation
Green-shoots? Household credit growth to benefit from lower interest rates & inflation, but initially remain modest just below 6% p.a, with upside potential Interest rates & household credit growth Household credit growth (%) (year end, %) 15 12 14 10 13 12 8 11 10 6 9 4 8 7 2 5,8% 5,9% 5,9% 5,4% 4,
Slide 12: Green shoots? Latest forecasts point to improvement in key macro indicators
Green shoots? Our latest forecasts point to improvement in key macro-economic indicators, with the possibility of a more optimistic scenario slowly emerging SA GDP growth (%) Inflation (average, %) Industry credit growth (ye, %) Some market forecasts at GNU upside: 2% to 3% 9,2% > 1,0% 6,1% 6,3% 6,2
Slide 13: Nedbank well-positioned to capitalise on the GNU opportunity
Nedbank well- positioned to capitalise on the GNU opportunity NEDBANK GROUP LIMITED – 2023 Interim Financial Results 13
Slide 14: Nedbank well-positioned: more SA oriented, strong CIB franchise
Nedbank well-positioned More SA oriented, a strong & large CIB franchise and strategic growth ambitions in RBB, notwithstanding the GNU potential South Africa Corporate & Investment Banking Retail & Business Banking (% of group advances) (% of group advances) (% of group advances) 91% Bank A & C inc
Slide 15: Corporate & Investment Banking: sector focused teams that are market leaders
Corporate & Investment Banking Sector focused teams that are market leaders in key areas Experienced sector focused teams … with strong credentials & expertise Holding Entities, Real Retail Private Equity & Estate ICT & Family Offices Technology Winner Winner Winner Best Bank for Best Bank for Green
Slide 16: Corporate & Investment Banking: well-positioned in large infrastructure opportunity
Corporate & Investment Banking Nedbank well-positioned to participate in the large infrastructure opportunity as a top-tier financier Estimated market share of SA infrastructure spend1 Finance required between 2025 & 20302 (%) (Rbn) 5000 Stanlib 2% 4 500 Old Mutual 3% 4000 NinetyOne 4% 3000 Futuregr
Slide 17: Corporate & Investment Banking: growth potential in pipelines and momentum
Corporate & Investment Banking The growth potential is evident in pipelines & momentum in private sector participation Renewable energy finance ( drawn exposures, limits, Rbn) Concluded a 58 15-year R4,5bn term loan facility to 46 support 75 million litre m3/pa Limpopo 37 36 37 water supply 36 32 30
Slide 18: Retail & Business Banking: ytd market share gains
Retail & Business Banking Despite slower industry credit growth, we have recorded ytd market share gains in retail & commercial deposits, and in key secured & term loans Household industry credit growth1 Nedbank market Dec Jul Yoy (% yoy) share1 (%) 23 24 change HL applications2 10 Total core loans
Slide 19: Retail & Business Banking: focus on key growth drivers
Retail & Business Banking Focus on key growth drivers, while optimising the cost base to reduce the RBB cost-to-income ratio to <54% & increase ROE to >20% over time Main-banked clients Branch floor space Great client experiences (’000 m2) (m) NPS Saved 60 since #1 bank 2020 (2020: #3) 130 164 182 1
Slide 20: Capital Management: flexibility in capital management
Capital Management Flexibility in capital management should credit growth not emerge as expected Nedbank Group CET1 ratio Active capital management (%) ▪ CET1 ratio > our 11%-12% target range ▪ Capital earmarked for growth – infrastructure opportunities & SPT 2.0 growth objectives Board ▪ Complement
Slide 21: Pathway to higher ROEs
Pathway to higher ROEs Diligent strategic execution, an improved economic environment & GNU upside would be supportive of higher Nedbank ROEs >18% Stronger Strong NIR & Manage 17% target CLR to associate expense Capital NII around income growth for management target (COE + 3%) growth 80 bps growth +
Slide 22: Conclusion – cautious optimism
Conclusion – cautious optimism ▪ The GNU opportunity – Financial markets have responded positively (stronger rand, lower bond yields etc) – Strong corporate growth potential supporting infrastructure investment, but currently still moderate given spare capacity & weak demand (except for pockets of g
Slide 23: Thank you
Thank you NEDBANK GROUP LIMITED – 2023 Interim Financial Results 23
Slide 24: 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
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