Nedbank Group · JSE:NED
Nedbank — FY2023 Earnings Presentation
98 slides from Nedbank's earnings presentation, Mar 5, 2024
Slide 1: 2023 Annual Results
2023 Annual Results For the year ended 31 December 2023 5 March 2024 NEDBANK GROUP LIMITED – 2023 Annual Financial Results 1
Slide 2: Agenda
Agenda Overview Operating environment Strategic progress Financial overview Mike Brown Cluster overview Chief Executive Outlook & guidance NEDBANK GROUP LIMITED – 2023 Annual Financial Results 2
Slide 3: Overview
Overview All 2023 targets met: DHEPS | Cost-to-income | ROE | NPS Strong foundations in place for delivery of medium- & long-term targets with a focus on continued ROE improvement Environment Strategy Operations Financial Strong revenue growth & Volatile & difficult Strategic delivery Good operation
Slide 4: Operating environment – volatile & difficult environment
Operating environment – volatile & difficult environment Business confidence index1 Remains weak, SA Government bond yields (%) Foreign bond & equity sales3 (Rbn) Volatile year, Risk off 100 no material 14 but Q4 250 Confidence environ- investment improvement ment & SA- 75 outside of 0 specific ener
Slide 5: Operating environment – structural challenges to economic growth
Operating environment – structural challenges to economic growth around energy supply, logistics & crime being addressed through Government- Business partnership Energy/Electricity1 Logistics/Transport2 Crime/Corruption6 30 25 50 TWh electricity shed 20 45 20 15 40 41 10 H1 H2 10 Million tons of goo
Slide 6: Operating environment – large renewable energy opportunity
Operating environment – large renewable energy opportunity to reduce impact of load-shedding & ensure a Just Transition Additional info Renewable energy market potential up to 20301 NECOM estimates to reduce load-shedding4 (GW) (targeted additional power to be added to the grid, GW) Private Governme
Slide 7: Operating environment – consumers under increasing pressure
Operating environment – consumers have been under increasing pressure Prime interest rate Steep increase Inflation Household savings rate HH savings reduced Trending (year-end, %) of +4,75% (since (annual average, %) (annual, % of PDI) to support debt down, including 20 2021), but flat in 15 food &
Slide 8: Nedbank Group strategy
Nedbank Group strategy Our purpose To use our financial expertise to do good for individuals, families, businesses & society Strategic value drivers Risk and Growth Productivity Capital Management Strategic value unlocks Digital Market-leading Focusing on areas Efficient Creating leadership client e
Slide 9: Growth – strong revenue & client growth
Strategic value drivers Growth – strong revenue & client growth Risk & capital Growth Productivity management Nedbank revenue1 & average interest-earning banking asset growth (%) Strong client-driven growth ▪ New CIB primary client wins: 20 15% ▪ Retail main-banked clients: +9% to 3,5m 10% ▪ NAR cli
Slide 10: Productivity – structural cost optimisation initiatives
Strategic value drivers Productivity – structural cost optimisation initiatives support a reduction Growth Productivity Risk & capital management in the group’s cost-to-income ratio Nedbank cost-to-income ratio 1 Structural cost optimisation benefits (%) ▪ Managed Evolution IT build 95% complete, ha
Slide 11: Risk & capital management – a fortress balance sheet
Strategic value drivers Risk & capital management – a fortress balance sheet remains in place Growth Productivity Risk & capital management after the R5bn capital optimisation initiative Capital Liquidity Credit R12bn average surplus CET1 ratio (%) capital & CET1 well-above LCR (%) CLR (bps) top end
Slide 12: Strategic overview
Strategic overview ‘Our world-class technology platform & good strategic execution are Mfundo Nkuhlu delivering results’ Chief Operating Officer NEDBANK GROUP LIMITED – 2023 Annual Financial Results 12
Slide 13: Nedbank Group strategy
Nedbank Group strategy Our purpose To use our financial expertise to do good for individuals, families, businesses & society Strategic value drivers Risk and Growth Productivity Capital Management Strategic value unlocks Digital Market-leading Focusing on areas Efficient Creating leadership client e
Slide 14: A world-class technology platform – Managed Evolution IT build
A world-class technology platform for ongoing competitive advantage – Managed Evolution (ME) IT build 95% complete – on time, on scope, on budget # of products1 Our focus beyond ME Core Product Core product systems Transactional ▪ Product rationalisation & migration – banking lifecycle 2,1 million M
Slide 15: Managed Evolution IT build programme – spend and benefits
Managed Evolution IT build programme – cash flow spend peaked in 2017 & intangible software assets peaked in 2020 at R9bn, while increasing benefits are being realised according to plan Additional info IT software development spend Intangible software assets on the Investment vs benefit realisation
Slide 16: Benefits from our world-class technology platform
Benefits from our world-class technology platform & enhanced digital Strategic value unlocks innovation Benefits for our clients Benefits for Nedbank Digital Digital servicing Revenue growth Beyond Banking onboarding Retail VAS > 200 > 400 cross-sell revenue Avo clients APIs Seamless FICA-compliant
Slide 17: Digital uptake & usage continues to grow strongly
Digital uptake & usage continues to grow strongly – independent Strategic value unlocks benchmarking ranks Nedbank’s digital capabilities highly Additional info Digital transaction volumes App transaction volumes Capability (# m) (# m) Servicing features offered (%) +12% +18% ‘Nedbank +98% consisten
Slide 18: Technology platform unlocking new revenue streams
Our world-class technology platform is also enabling us to unlock Strategic value unlocks new revenue streams Additional info Registered Avo clients API activity (# of active (# m) 3rd parties) Avo Solar +26% +14% Avo Auto Launched in Aug 2,5 ‘23 with over 100 2,0 Hosts > 800 MFC- accredited dealers
Slide 19: Operating model changes & efficient execution
Operating model changes & efficient execution – supporting a lower Strategic value unlocks cost-to-income ratio Cumulative target operating model Permanent employees Annual IT amortisation benefits (Rbn) (#) charge (% growth) ▪ TOM 2.0 target of R2,5bn to be achieved in (13%) 2024 (initially 2023) g
Slide 20: Traction in gaining profitable market share
Traction in gaining profitable market share in key areas, while remaining Strategic value unlocks selective in a difficult environment (Strategic Portfolio Tilt 2.0) BA900 market share Dec Dec Yoy (%) 22 23 change Total core loans 17,9 17,9 ► ▪ Yoy market share gains in term loans, retail home loans
Slide 21: Creating positive impacts – sustainable development financing
Creating positive impacts – R145bn of exposures at the end of December Strategic value unlocks 2023 that support sustainable development financing (SDF) Sustainable development finance1,2 (Rbn) R15bn sustainable finance across multiple SDGs for CIB clients (R27bn limits) >R150bn 20% R28bn support fo
Slide 22: Creating positive impacts – leadership in renewable energy
Strategic value unlocks Creating positive impacts – building on our leadership in renewable energy Renewable energy financing Renewable energy financing opportunities Additional info ( drawn exposures, limits, Rbn) to date RBB renewable finance Limits: +22% yoy ▪ Strong growth in Commercial Banking
Slide 23: Creating positive impacts – ESG highlights
Strategic value unlocks Creating positive impacts – ESG highlights Nedbank ESG ratings Commitments & achievements Top 5% 2030 financed Net-zero Zero exposure AAA of global emission targets operational water to fossil-fuel- banks for thermal-coal, oil use (since 2018) related activities by & gas, and
Slide 24: Creating positive impacts – journey to net zero
Strategic value unlocks Creating positive impacts – progress on our journey to net zero Additional info 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 f
Slide 25: External recognition received in 2023
External recognition received in 2023 – across business excellence, digital Strategic value unlocks innovation & purpose/ESG-related Additional info 2023 Global Banking 2023 Global Finance 2023 The Asian 2023 Private Asset 2023 Euromoney 2023 Banks and and Finance Awards Magazine Awards Banker Excel
Slide 26: Financial overview
Financial overview ‘Headline earnings up by 11%, driven by strong revenue growth, partially offset by higher impairments. DHEPS up Mike Davis by 14%, benefiting from Chief Financial Officer the R5bn capital optimisation initiative’ NEDBANK GROUP LIMITED – 2023 Annual Financial Results 26
Slide 27: Key drivers – impact of difficult environment offset by strategic delivery
Key drivers – the impact of a difficult operating environment in 2023 was offset by good strategic delivery Operating environment Strategic delivery Financial outcomes SA GDP Global Technology/ Revenues ROE growth conflicts Digital +12% 15,1% SA Global & local Efficient inflation markets execution H
Slide 28: Shareholder value creation – ROE, dividends and NAV
Shareholder value creation – ROE improvement to above COE & dividends declared at the top of our payout ratio, while maintaining good NAV growth, even after the R5bn capital optimisation initiative ROE & cost of equity (%) Dividend per share (cents) NAV per share (cents) 1 022 No dividends 21 533 23
Slide 29: Profitability metrics improved yoy
Profitability metrics improved yoy, underpinned by robust capital, liquidity & provisioning yoy 2023 2022 2021 2020 2019 Headline earnings (Rbn) +11% 15,7 14,1 Preprovisioning operating profit (Rbn) +15% 29,7 25,8 Total comprehensive income (Rbn) +30% 17,3 13,4 Profitability DHEPS (cents) +14% 3 199
Slide 30: Headline earnings up by 11%
Headline earnings up by 11% – driven by strong revenue growth & prudent expense management, partially offset by higher impairments Headline earnings (Rm) +14% +6% +64% +30% +8% +11% 565 1 538 2 224 2 730 753 5 193 19 133 14 061 15 650 HE NII NIR Associate Impairments Expenses Direct tax HE 2022 inco
Slide 31: Average gross banking advances up by 7%
Average gross banking advances up by 7% – solid growth in RBB & CIB RBB average banking advances CIB average banking advances (Rbn) (Rbn) ▪ RBB ‒ Solid growth in our relationship 500 businesses +7% ‒ Gradual HL market share gains, but slowing demand 450 ‒ Selective growth by leveraging our strong po
Slide 32: Actual gross banking advances up by 3%
Actual gross banking advances up by 3% Additional info Moderate CPF Term loans growth Good HL growth Leveraging MFC’s growth in pockets & from selective from market market-leading from corporate sectors, but share gains, albeit position, strong alliance activity corporates remain slight decline in r
Slide 33: Deposits up by 5%
Deposits up by 5% – with improving loan-to-deposit ratio to 82% (2022: 85%) Deposits (Rbn) Clients shifting to longer tenure in a higher-interest-rate environment with an expectation +6% that rates have now peaked (2%) (20%) +5% +7% +21% (1%) 191 158 127 119 29 29 409 435 100 150 153 76 79 72 CASA C
Slide 34: NII up by 14%
NII up by 14% ‒ driven by AIEBA growth of 7% & NIM expansion of 28 bps, primarily from endowment (higher interest rates) Net interest margin* (bps) (16) (2) 8 38 (5) Mix +1 (7) Pricing (3) (4) Stage 3 . interest reversal 352 336 373 393 421 19 20 21 22 Endowment Asset Liability BSM 23 mix & rate mix
Slide 35: Endowment income – active interest rate risk management
Endowment income – active interest rate risk management, positioning an appropriately sized residual endowment position as an offset against anticipated changes in impairments over time Change in endowment income Directional drivers vs impairments (Rbn) H1 H2 H1 H2 23 23 24 24 2025 Average SA 11,1%
Slide 36: NIR up by 6%
NIR up by 6% – supported by solid growth in commission & fees, as well as FX devaluation. Excluding restatements, NIR growth was up by 9% Non-interest revenue & income1 (Rm) ▪ Commission & fees – solid growth driven by cross-sell, main-banked client gains & value- +5% added services ▪ Trading – posi
Slide 37: Income statement restatements
Income statement restatements – net monetary loss, card-related costs & IFRS 17 (immaterial impact on headline earnings) Additional info Summary of restatements/ 2023 2022 growth % ▪ Net monetary loss: reclassified from the face reclassification impact of the income statement to NIR (similar to (Rm)
Slide 38: Impairment charge up by 30%
Impairment charge up by 30% – primarily driven by the macroeconomic pressures on consumers, but pleasingly H2 2023 materially down on H1 2023 as a result of management intervention Impairment charge (Rbn) ▪ RBB impairments +29% yoy 13,1 – Consumer pressure from steep increases in SA prime rate, high
Slide 39: Group credit loss ratio at 109 bps
Group credit loss ratio at 109 bps – increase from 89 bps in 2022, but down from the 121 bps reported in H1 2023 Credit loss ratios (bps) H2 2023 CLR reduction across 250 all RBB products & segments GFC GLC 200 161 152 150 H1: 121 Material H2: 96 conclusion of historic NPLs 109 100 32 24 22 21 89 16
Slide 40: Clusters within or below TTC target ranges
Clusters within or below their TTC target ranges, with the exception of RBB, but CLRs improving from H1 2023 across all segments/products Additional info Credit loss ratio (bps) ECL coverage (%) H2 H1 23 22 21 20 19 TTC 23 22 21 20 19 23 23 CIB 24 32 16 22 42 82 25 15–45 1,14 1,29 1,35 1,07 0,61 CIB
Slide 41: GLAA stage movements & coverage
GLAA stage movements & coverage – overall coverage at multi-year highs given an increase in stage 3 loans, although set to reduce in coming reporting periods GLAA (Rbn) Coverage (%) 2019 2022 2023 ▪ Stage 1 loans 818 2,26 3,37 3,62 807 ‒ Coverage well above pre-Covid levels Total: 778 772 58 37,9 34
Slide 42: Expenses up by 8%
Expenses up by 8% – reflecting good expense management Expenses (Rm) ▪ Employee-related costs +8% +9% +8% +7% ‒ Salaries & wages: higher annual average salary increases (+6,3%), additional costs to retain talent, partially offset by 2% yoy decline in permanent headcount ‒ Variable-pay incentives ali
Slide 43: Capital – CET1 ratio at 13,5%
Capital – CET1 ratio at 13,5% remains very strong, positioning us well for growth & sustainable dividend payments, while protecting against unexpected downside risk CET1 ratio (%) Completed R5bn capital optimisation initiative, (1,2) with the following outcomes (full-year basis): (0,9) ▪ CET1 reduct
Slide 44: Average equity drivers
Average equity drivers – strong growth in earnings, partially offset by R5bn capital optimisation, dividends paid at the top end of payout ratio Additional info Equity movements (Rbn) ▪ Average HE of R7,0bn – R15,7bn actual throughout FY 2023, with H2 > H1 (5,2) 7,0 ▪ Average dividends paid of R5,2b
Slide 45: RWA progression
RWA progression – RWA growth in 2023 driven by credit RWA aligned to overall loan growth & credit risk migration Additional info Risk-weighted assets (Rbn) 12 (1) 8 11 (15) (4) 28 (1) 657 648 695 Dec Credit CCR 1 Market Other Dec Credit CCR 1 Market Other Dec 2021 RWA 2022 RWA 2023 1 Counterparty cr
Slide 46: Capital management – strong capital position maintained
Capital management – strong capital position maintained in an uncertain macroeconomic environment Additional info Average capital allocation (Rbn) 20,5 20,8 12,9 11,8 12,3 4,2 2,5 3,3 3,2 1,4 4,5 4,5 4,3 1,1 1,0 36,0 20,8 36,5 20,5 36,2 34,7 31,8 33,1 12,9 6,4 7,5 4,8 4,3 7,1 4,3 CIB RBB Wealth NAR
Slide 47: Cluster financial overview
Cluster financial overview – all business clusters reported positive HE growth & all ROEs were above the group’s COE Headline earnings Return on equity (Rbn, growth %) (%) NAR +94% 1,9 Wealth 1,2 +6% +6% Group Group ROE 6,8 CIB 15,1% R15,7bn +11% COE 14,8% RBB 5,6 26,8% +9% 25,2% 16,0% 18,9% CIB RBB
Slide 48: CIB overview
CIB overview ‘Good revenue growth & capital optimisation leading to higher returns’ Anél Bosman Group Managing Executive NEDBANK GROUP LIMITED – 2023 Annual Financial Results 48
Slide 49: CIB financial performance
CIB financial performance – CIB achieved a solid set of results in a difficult operating environment, with HE growing at 6% & ROE increasing to 18,9% Financial performance 18,9 ▪ NII up by 7% 17,7 17,7 15,3 ‒ Average interest-earning banking assets +7% ROE 9,4 (%) ‒ NIM maintained at 2,42% – endowme
Slide 50: Banking advances – higher average advances in 2023
Banking advances – strong performance in H2 2022 leading to higher average advances in 2023 Actual & average banking advances (Rbn) +8% ▪ Average banking advances up by 8% − Solid growth across multiple sectors, with continued momentum into 2024 ▪ Actual banking advances flat 2022 2023 Property Fina
Slide 51: CLR below the mid-point of the CIB TTC target range
CLR below the mid-point of the CIB TTC target range Credit loss ratio (bps) 82 ▪ 24 bps CLR includes adequate provisioning for stressed counters, below the expected mid-point of our TTC target 42 range 25 22 24 ▪ Material conclusion of stage 3 loans in business rescue (commercial property, aviation
Slide 52: Commercial property finance – high-quality, collateralised portfolio
Commercial property finance – a high-quality, well-diversified & highly collateralised portfolio Credit loss ratio (bps) & loan-to-value ratio (%) High-quality, Portfolio LTVs CLR at 47 bps (2) 54 30 28 47 well-diversified remain low at (Dec 22: 28 bps) CLR & highly < 52% driven by large collaterali
Slide 53: Commercial Property Finance – sector trends
Additional info Commercial Property Finance – sector trends Office vacancies 1 Sector trends Listed sector ▪ Office vacancies maintain downward ▪ Valuations appear to have ▪ Listed property sector the best- trajectory: stabilised: performing asset class in 2023: up by 10,7% ‒ Q2 2022: 16,7% (peak) ‒
Slide 54: Expanding leadership in renewable energy through pipeline conversion
Creating positive impacts – expanding our leadership in renewable energy through pipeline conversion Renewable energy exposures Strong activity in Q4 2023 will Good pipeline of deals anticipated to close (Rbn) support book growth in 2024 in 2024 Limits: +22% yoy 45 3 C&I projects closed in 2023 Pipe
Slide 55: Using glidepaths to shift the financing of our energy mix
Creating positive impacts – using glidepaths to shift the financing of our energy mix Adopted IEA Net Zero (NZE) 2050 pathway as a basis for our first targeted commitment date of 2030 (31 December 2029) Upstream fossil fuel Power generation Reduction to achieve emissions emissions net zero by 2050 T
Slide 56: Supporting clients to achieve environmental & socioeconomic objectives
Creating positive impacts – supporting clients to achieve environmental & socioeconomic objectives Additional info Sustainable finance (exposures, Rbn) Sustainable fundraising in issue ( Rbn) Growing our exposures Limits: + 35% yoy 17 27 15 by refining our solutions – 20 supporting our clients to 15
Slide 57: Digital – go-to transactional bank for SA businesses
Digital – delivering capabilities to be the go-to transactional bank for SA businesses Completed TOM 2.0 organisational restructure ▪ Focus on digital, channel, client delivery & payments ▪ Embedding digital culture & leadership ▪ Innovation for efficiency & optimisation ▪ Delivering our Transaction
Slide 58: Our strategic growth levers to drive franchise value
Our strategic growth levers to drive franchise value Additional info Accelerate growth mindset across our business Deliver client value through our sectorised approach Actively manage the balance sheet to enhance returns Grow our Transactional Services business Empower our clients through our warm d
Slide 59: Nedbank Corporate & Investment Banking – outlook
Nedbank Corporate & Investment Banking – outlook 2024 outlook ▪ NII – Banking advances – momentum built in H2 2023 continues into 2024 ▪ NIR ‒ Diverse revenue stream through transactional banking, trading & advisory ‒ Commission & fees to benefit from balance sheet activity & liquidity instruments ‒
Slide 60: RBB overview
RBB overview ‘Headline earnings up by 9% after a good recovery in H2 2023’ Ciko Thomas Group Managing Executive NEDBANK GROUP LIMITED – 2023 Annual Financial Results 60
Slide 61: RBB financial performance
RBB financial performance – HE growth improved from a decline of 8% in H1 2023 to an increase of 24% in H2 2023, following lower impairments Financial performance 17,3 16,0 16,0 ▪ NII up by 14% 13,7 ‒ Average advances growth momentum continued at +7% ROE (%) 5,4 ‒ Endowment benefit from higher inter
Slide 62: RBB financial performance by division
RBB financial performance – strong HE growth & attractive ROEs in NCB & RRB. Consumer Banking impacted by higher H1 2023 impairments, which improved in H2 2023 along with a lower cost-to-income ratio Additional info Headline earnings per division (Rm) 43 Nedbank Commercial Banking ROE (%) 36 33 26 2
Slide 63: Nedbank Commercial Banking & Retail Relationship Banking
Nedbank Commercial Banking & Retail Relationship Banking – strong growing & differentiated franchises, delivering great client experiences & leveraging digital Nedbank Commercial Banking Retail Relationship Banking Well-positioned & distinctive value propositions Loyal established client base and a
Slide 64: Consumer Banking – digital transformation enabling enhanced CVPs
Consumer Banking – our digital transformation is enabling enhanced CVPs, strong growth & outcomes in digital metrics & market-leading client experiences #2 NPS – client satisfaction Improved CVPs (ranking out of top SA 5 banks) ✓Digital onboarding & 12% Nedbank #1 #1 servicing 55% 53% 28% 32% ✓MiGoa
Slide 65: Consumer banking – main-banked client gains & higher cross-sell
Consumer banking – strong main-banked client gains & higher cross-sell, driving NIR growth, but deposits market share lagging Main-banked clients Cross-sell ratio (number of Household deposits (million & growth %) products/clients) (BA900 market share, Dec %) Stabilised +9% historic +6% 16,9 decline
Slide 66: Main-banked growth is evident across most segments
Main-banked growth is evident across most segments Main-banked clients1, # 000 Additional info Private Clients Kids & youth +10% +9% (12%) +4% +9% (8%) +4% +7% 104 114 123 516 456 421 436 452 89 95 Small Business Entry level (4%) (4%) +8% +14% (1%) +2% +3% +2% Services 1 425 1 365 1 309 1 412 1 609
Slide 67: Consumer Banking – productivity gains through Project Imagine
Consumer Banking – unlocking productivity gains through Project Imagine, supporting a lower cost-to-income ratio 2022 Finalta survey1 Branch staff sales Branch floor space (yoy change) (Sales/role/day) (sqr metres) Saved 2014 to date Retail Consumer cost-to-income Sales per 1k +24% 111 active client
Slide 68: Technology strategy driving NIR growth & cost optimisation
Our technology strategy, along with shifts in client transactional behaviours, is driving NIR growth & cost optimisation opportunities Additional info Branch teller transactions1 POS volumes +9% +97% (71%) (20%) 19 20 21 22 23 19 20 21 22 23 ATM withdrawals +3% Digital payment & transfers2 +12% +4%
Slide 69: RBB impairments – improving CLRs
RBB impairments – focus on collections, loan origination & credit policy tightening, leading to an ongoing improvement in CLRs & material slowdown in NPL formation RBB stage 3 loans (hoh growth, Rbn) Business & product level CLRs Drivers of improving trends RBB CLR (%) (%) ▪ A more stable macroecono
Slide 70: RBB credit quality
Additional info RBB credit quality – impacted by higher interest rates, higher inflation & lower levels of disposable income, but improved in H2 Home loans Vehicle finance Personal loans Credit card ▪ Interest rates & inflation ▪ Interest rates & inflation ▪ Inflation & unemployment ▪ Discretionary
Slide 71: Client income & expenditure
Additional info Client income & expenditure – consumer disposable income under pressure Average client income & expenditure 2021 2022 2023 Income Loan repayments Essential expenditure Discretionary expenditure (3%) 10% 9% 15% 6% 5% (2%) (9%) 17% 6% (10%) (3%) 3% 6% (1%) (4%) 5% 4% (29%) 27% 1% 8% 3%
Slide 72: RBB strategic progress – growth vectors
RBB strategic progress – good progress on growth vectors Avo Value-added services Solar offerings Funeral insurance Township economy Specialised Main Markets Team Value-added services Clients with funeral formed led by GM: Main Market revenue (Rm) policies (#) ▪ Avo >45% Transactional Marketplace +2
Slide 73: Nedbank Retail & Business Banking – outlook
Nedbank Retail & Business Banking – outlook 2024 outlook ▪ NII ─ Advances & deposits growth – momentum continues ─ NIM is expected to decline as a result of ongoing product mix changes & margin squeeze in client spreads ▪ NIR – diversify revenue base & scale key growth vector strategies ▪ CLR ─ CLR
Slide 74: Wealth overview
Wealth overview ‘Resilient HE & ROE, driven by higher interest rates & positive market Iolanda Ruggiero Group Managing Executive movements’ NEDBANK GROUP LIMITED – 2023 Annual Financial Results 74
Slide 75: Wealth financial performance
Wealth financial performance – resilient HE & ROE, driven by higher local & international interest rates & growth in AUM Financial performance 24,8 26,3 26,8 ▪ NII up by 42% 21,2 15,3 – NIM expansion due to higher local & international interest rates ROE (%) – Significant growth in average deposit b
Slide 76: Wealth financial performance – headline earnings by division
Wealth financial performance – resilient HE growth positively impacted by higher interest rates & market performance locally & internationally, offset by lower NIR in Insurance Additional info Headline earnings per division (Rm) Insurance ▪ Increased sales in MyCover suite (5%) ▪ Higher shareholder
Slide 77: Insurance – lower bancassurance volumes and new business strain
Insurance – lower traditional bancassurance volumes and new business strain, offset by positive shareholder returns Total group insurance IFRS 17 implemented with 2022 MyCover Funeral 16% income (Rbn) restated results Gross premium earned 1,7 (16%) Stable non-life claims ratio 41% 2022 2023 1,4 (imp
Slide 78: Insurance – growth opportunity from channel & product expansion
Insurance – large growth opportunity driven by channel & product expansion as well as digital enhancements Gross written premium (Rm) Digital growth 0 17 >17 Digitally active clients Digital policies # of digital products 0 7 >7 >100% # of digital channels +58% +240% >50% 19 20 21 22 23 MT +16% Laun
Slide 79: Insurance – product and channel diversification
Additional info Insurance – significant progress made on product and channel diversification Pre-2010 Current Branch | Bank insertion points MyCover Home- MyCover Funeral MyCover Credit owner's Personal Life Life VVAPs Accident cover Lines and health Call Centre Banker Branch Home- MyCover MyCover M
Slide 80: Asset Management – growth driven by 14% increase in AUM
Asset Management – good growth in NIR, driven by 14% increase in AUM Assets under management (Rbn) Asisa stats ranking • SA – 6th largest in +14% 20 years total AUM (7% 424 448 of market share) 393 Best of • International – 375 331 Breed 3rd largest in total 312 297 AUM (9% market 257 273 share) 212
Slide 81: Wealth Management – HE growth of 22%
Wealth Management – HE growth of 22%, driven mainly by an increase in NII, offset by increased impairment charges locally Wealth Management average advances, 20% Group Replacement of average deposits & NIM increase collaboration international in average driving increase in wealth 2,1 NIM (%) deposit
Slide 82: Nedbank Wealth – outlook
Nedbank Wealth – outlook 2024 outlook ▪ NII – NIM expected to decrease as international interest rates forecast to decline ▪ NIR ‒ Growth in Nedbank Insurance MyCover suite ‒ Increase in high-net-worth market share ‒ Higher AUM through attracting net inflows ▪ CLR – To remain within the lower end of
Slide 83: NAR overview
NAR overview ‘Improved SADC performance & continued ETI turnaround’ Dr Terence G Sibiya Group Managing Executive NEDBANK GROUP LIMITED – 2023 Annual Financial Results 83
Slide 84: NAR financial performance
NAR financial performance – improved performance from our SADC operations & continued turnaround from ETI Financial performance ▪ SADC operations – HE of R662m, up by 80% 25,2 ‒ NII up by 25%, driven by improved margins 13,8 1 ROE 7,7 ‒ NIR up by 17%, driven by FX gains & increased revenue from (%)
Slide 85: SADC progress – good momentum
SADC progress – good momentum underpinned by a strong foundation Additional info Client & digital progress Key subsidiary developments ▪ Higher reserve requirements Zimbabwe advances Avo SuperShop in impact in Mozambique (US$m loan book) Net Promoter Score ▪ Ongoing changes in inflation Namibia 67,5
Slide 86: ETI associate investment – financial performance
ETI associate investment – positive momentum in financial performance & release of the R175m Ghana sovereign bond provision that Nedbank recognised in 2022 Associate income1 ETI carrying value vs market value (Rm) (Rbn) 1 380 668 686 779 (0,1) 1,4 (1,3) -178 19 20 21 22 23 Return on ETI investment2
Slide 87: ETI associate investment – value unlock agenda
ETI associate investment – resilient financial performance supported by encouraging progress on the value unlock agenda Additional info ETI share price (NGN) 20,94 20 Continued benefits Ecobank top 3 in ROTE up to 25,6% of a diversified 15 15 African from 21,0% in the business model 10 Sept 2023 cou
Slide 88: Nedbank Africa Regions – outlook
Nedbank Africa Regions – outlook 2024 outlook SADC operations ▪ Execute on our technology convergence journey ▪ Transform the business & operating model to leverage group centres of excellence ▪ Continue our pan-African digital growth strategy ▪ Unlock further value in Mozambique ETI associate inves
Slide 89: Outlook
Economic forecasts Short-term guidance & medium-/long-term targets CE succession Conclusion Outlook Mike Brown Chief Executive NEDBANK GROUP LIMITED – 2023 Annual Financial Results 89
Slide 90: Operating environment – forecasts of macroeconomic indicators
Operating environment – forecasts highlight an improvement in key macroeconomic indicators at a time when geopolitical risk has increased Actual Forecast: Feb 2023 Forecast: Feb 2024 19 20 21 22 23 24 25 23 24 25 26 SA GDP growth 0,1% (6,4%) 4,7% 1,9% 0,7% 1,5% 1,6% 0,5% 1,0% 1,5% 1,6% Prime interes
Slide 91: Short-term guidance (2024)
Short-term guidance (2024) – progress towards our medium-term targets in a macroeconomic environment that remains difficult & volatile 2023 2024 Key drivers/risks in 2024 performance guidance1 ▪ Advances growth from renewables & SPT 2.0 gains, with H1 growth NII Above mid-single slow, before picking
Slide 92: Medium- & 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 Short By end 2023 term > 2 565 cents 15% < 54% #1 bank (2019 levels) (2019 levels) (from #3 in 2019) 3 199cents 15,1% 53,9% #1 bank Medium By end 2025 te
Slide 93: Medium-term targets – path towards ROE of 17%
Medium-term targets – path towards ROE of 17% Additional info Strong NIR Manage Solid NII CLR within Column9 & associate expense Capital 17% growth target range income growth for target growth + Jaws 15,1% Advances growth Impairments NIR & associate Expenses Capital ▪ RBB growth by ▪ CLR back to inc
Slide 94: Medium-term targets – path towards ROE of 17% by cluster
Medium-term targets – path towards ROE of 17% Additional info CIB RBB Wealth NAR ROE at >19% (2023: 18,9%) ROE increases to between 20% ROE maintained >25% SADC ROE increases to > COE Cost-to-income ratio reduces & 23% (2023: 16,0%) (2023: 26,8%) (2023: 9,9%) to < 44% (2023: 45,2%) Cost-to-income ra
Slide 95: Chief Executive succession – a seamless process
Chief Executive succession – a seamless, well-managed process Announced Daniel Mminele 2023 AGM Announced 2024 AGM appointment of joined board appointment of Daniel Mminele as Chairperson- Daniel Mminele Jason Quinn as Chairperson- designate Jason Quinn joins the became Chairperson as CE-designate d
Slide 96: Conclusion
Conclusion – slightly improving macroeconomic environment, strong foundations & underlying business momentum position Nedbank well to deliver on 2025 targets & create shareholder value Medium- & long-term Macroeconomic Strong Momentum targets aligned to environment improving foundations in place in
Slide 97: Thank you
Thank you Celebrating 135 years of making a difference NEDBANK GROUP LIMITED – 2023 Annual Financial Results 97
Slide 98: 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