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Nedbank Group Limited Nedbank Limited
(Incorporated in the Republic of South Africa) (Incorporated in the Republic of South Africa)
Registration number: 1966/010630/06 Registration No. 1951/000009/06
JSE share code: NED JSE alpha code: BINBK
NSX share code: NBK
A2X share code: NED
ISIN: ZAE000004875
JSE alpha code: NEDI
('Nedbank Group')
(collectively the 'group')
NEDBANK GROUP VOLUNTARY TRADING UPDATE FOR THE FOUR MONTHS ENDED 30 APRIL
2024
Operating environment
The operating environment during the first four months of 2024 remained challenging, despite lower
levels of electricity outages (loadshedding) and the easing of some transportation bottlenecks in South
Africa. Generally, economic activity was weak, impacted by geopolitical uncertainty, high interest rates
and high inflation. Household finances remained under pressure as real incomes contracted and job
prospects remained muted. Corporate activity was also weak, impacted by the uncertain political and
economic environment.
Economic activity is expected to remain weak before gradually improving into the second half of the
year as inflation reduces further, potentially enabling the SARB's Monetary Policy Committee (MPC) to
start cutting interest rates. As a result, the Nedbank Group Economic Unit revised its SA GDP growth
forecast for 2024 from 1,0% (February 2024) to 0,9%. Inflation is expected to end 2024 at around 4,7%
and as a result we now forecast 2 interest rate cuts of 25 bps each during the final four months of 2024
with the prime interest rate at 11,25% at the end of the year.
The implications of the difficult macroeconomic environment for our clients and therefore banks are
evident in continued elevated levels of consumer strain and slowing credit and transactional revenue
growth across both wholesale and retail portfolios.
Financial performance
The financial performance of the group in the first four months to 30 April 2024 ('the period' or '4M 2024')
compared to the first four months to 30 April 2023 ('the prior period') reflects headline earnings growth
of around mid-single digits, supported by strong growth in Retail and Business Banking (RBB), albeit off
a low base, and solid growth in Corporate and Investment Banking (CIB), partially offset by a decline in
headline earnings in Nedbank Wealth and Nedbank African Regions (NAR). Headline earnings growth
was driven by softer net interest income (NII) and non-interest revenue (NIR) growth when compared to
our 2024 full year guidance, a decline in the impairments charge and good expense management.
Headline earnings per share growth continued to benefit from the R5bn capital optimisation initiative
completed in 2023.
NII growth for 4M 2024 was just below mid-single digits when compared to the prior period. This increase
was driven by moderate growth in average interest earning banking assets and a slight period on period
increase in the group's net interest margin (NIM) as a result of the run-rate benefit of interest rate
increases (endowment) in the prior period. Average interest earning banking assets increased period
on period by low-to-mid single digits, reflecting slow growth in CIB average gross banking loans and
advances and solid, although slowing growth, in RBB average gross banking loans and advances. We
expect stronger advances growth in H2 2024 when compared to H1 2024 as lower interest rates and
inflation start benefitting retail credit growth and as wholesale clients start drawing down on approved
and committed renewable energy deals. Deposit growth was slightly ahead of advances growth,
supported by our various initiatives to grow retail deposits faster than the market, as evident in the
SARB's March 2024 BA900 disclosures. The group's NIM decreased slightly from the 4,21% reported
in FY 2023 largely as a result of negative asset mix changes due to slower growth in high-yielding assets
owing to our continued cautious approach in unsecured lending in the current environment.
Impairments for 4M 2024 decreased when compared to the prior period and the group's credit loss ratio
(CLR) declined period on period but remained above the top end of the group's board-approved through
the cycle (TTC) target range (60 bps to 100 bps). This outcome and the view that the group's CLR
peaked in H1 2023 is in line with management expectations. RBB's CLR declined period on period due
to better collections and improved loan origination but remained above its TTC target range of 120 to
175 bps given the impact of a continued high interest rate environment and normal seasonality in the
first few months of the year alongside updates to the macroeconomic models. The CLRs for CIB and
Nedbank Wealth were within their respective TTC target ranges, while the Nedbank Africa Regions
(NAR) CLR was slightly above its TTC target range. Stage 3 loans in CIB declined by just over R7bn
since December 2023 post the resolution of a few high-profile exposures, while the average monthly
increase in stage 3 loans in RBB in the period slowed materially when compared to H1 2023 and was
broadly similar to the average monthly increase in stage 3 loans in H2 2023. The group's CLR is
expected to remain elevated but decline further from the levels in 4M 2024 in line with the full year 2024
guidance provided (being to move back to within the top half of the group's TTC target range), although
the risk of interest rates remaining higher for longer and/or unexpected corporate defaults could pose
upside risk.
NIR growth for 4M 2024 was below mid-single digits. Removing the base effect of foreign currency gains
on US$ capital in Zimbabwe in the prior period given the change to US$ as the functional currency for
Nedbank Zimbabwe in 2024, NIR growth was slightly above mid-single digits. Fee and commission
growth at mid-to-upper single digits remained robust, driven by arranging fees on deal closures in CIB
and higher-levels of cross-sell and continued growth in both main-banked clients and value-added
services in RBB, partially offset by slowing client volumes on the back of the difficult macroeconomic
environment. Trading income growth was encouraging at above mid-single digits but remains volatile.
NIR growth was negatively impacted by insurance income that declined period on period mainly as a
result of lower personal loans premiums given our cautious approach in unsecured lending in the current
environment and lower shareholder investment returns. Other NIR was lower than the prior period,
impacted by the base effect from foreign currency gains on US$ capital in Zimbabwe in the prior period
that will not repeat. We remain focused on achieving our guidance for NIR growth for FY 2024 of above
mid-single digits despite early headwinds in the start of the year, although this will be more challenging.
Expense growth for 4M 2024 was above mid-single digits and slightly better than management
expectations, partly as a result of slower than expected variable costs in line with revenue growth. Our
guidance for expense growth for FY 2024 of mid-to-upper single digits remains in place and will be a
key focus for us.
Associate income relating to Nedbank Group's 21% shareholding in Ecobank Transnational
Incorporated (ETI) for H1 2024 is estimated to be approximately R510m and materially in line with
management's expectations; but down 32% compared to ETI-related associate income of R749m in H1
2023 given the base effect of the reversal in H1 2023 of the R175m estimate provided by Nedbank for
our share of the impact of the Ghana sovereign domestic debt restructure programme that will not
repeat. Nedbank Group's associate income in H1 2024 relating to ETI includes ETI's reported
attributable income to shareholders of US$64m in Q4 2023 and US$69m in Q1 2024 (accounted for a
quarter in arrear).
The group's JAWS ratio (revenue growth, including associate income, less cost growth) was slightly
negative, as expected, and as a result the cost-to-income ratio increased. ROE for 4M 2024 increased
on the prior period but was seasonally lower than the 15,1% reported for FY 2023. Basic earnings per
share, headline earnings per share and diluted headline earnings per share all grew by early double
digits, benefitting also from the R5bn capital optimisation initiative that was executed in 2023.
At 31 March 2024, Nedbank Group reported a CET1 capital adequacy ratio of 13,1% (31 December
2023: 13,5% and 31 March 2023: 13,5%), above the upper end of the group's board-approved target
range of 11% to 12%, reflecting the benefit of ongoing earnings growth, offset by the declaration of the
group's final 2023 dividend and balance sheet growth. Liquidity metrics remained strong.
Eqstra acquisition
All conditions relating to the acquisition of Eqstra Investment Holdings Proprietary Limited (Eqstra) by
Nedbank Group have been fulfilled, and various regulatory and Competition Commission approvals
were received. Eqstra will likely be consolidated into the group's financials from 1 June 2024.
Termination of Nedbank/Transnet mediation
As noted in the group's media statement that was released on 28 May 2024, mediation between
Nedbank and Transnet, in respect of interest rate swap transactions between the parties that took place
in December 2015 and March 2016, and which have been widely reported in the media for many years,
has ended after it became apparent that there is no likelihood of resolving the matter amicably despite
extensive engagements.
Considering internal and independent external reviews commissioned by the Nedbank board, the board
and management remain satisfied that Nedbank internal governance procedures were followed in
respect of the transactions and that there is no evidence of any Nedbank staff dishonesty, corruption or
collusion. Nedbank will strongly defend itself in any litigation proceedings that may follow.
Chief Executive (CE) transition
Jason Quinn (CE designate) joined the group on 22 May 2024 and assumes the role of CE on Mike
Brown's planned retirement from the boards at the conclusion of the group's annual general meeting on
31 May 2024. Mike will remain employed by Nedbank for another 3 months as a senior advisor to ensure
a seamless handover to Jason.
Shareholders are advised that the financial information contained in this voluntary trading update has
not been reviewed or reported on by the Nedbank Group's joint auditors.
Sandton
31 May 2024
Sponsors to Nedbank Group in South Africa:
Merrill Lynch SA Proprietary Limited t/a BofA Securities
Nedbank Corporate and Investment Banking, a division of Nedbank Limited
Sponsor to Nedbank Group in Namibia:
Old Mutual Investment Services (Namibia) (Pty) Ltd
Debt Sponsor to Nedbank Limited:
Nedbank Corporate and Investment Banking, a division of Nedbank Limited
Date: 31-05-2024 07:30:00
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