NEDBANK GROUP LIMITED - Nedbank Group Pre-Close Investor Update

Nedbank Group Pre-Close Investor Update

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 PRE-CLOSE INVESTOR UPDATE


Operating environment

The operating environment into the second half of 2024 continued to be challenging, although gradually
improving given lower levels of inflation and recent cuts in interest rates. Economic activity in Q3 2024
was relatively weak as evident in SA GDP that declined by 0,3% (quarter on quarter, seasonally
adjusted). We now expect SA GDP growth of 0,5% for 2024, improving to 1,5% in 2025. Headline
inflation (CPI) dropped below the SARB's 3% to 6% range in October 2024, the lowest levels since the
Covid-19 pandemic. The SARB's Monetary Policy Committee (MPC) cut the SA repo rate by 25 bps in
September and November 2024, and we expect a further 75 bps of cuts in 2025, with the prime interest
rate bottoming out at 10,5%. However, the risk to the interest rate outlook is on the upside given the
potential impact of the incoming US administration's economic policies.

Private sector credit growth remained muted at 4,4% yoy (October 2024). Within this, household credit
growth slowed to 3,2%, which is likely the bottom of the current cycle, improving from here as lower
inflation boosts real disposable income, easing interest rates reduce debt service costs and the two-pot
system gives households access to a portion of their retirement funds. Corporate credit growth increased
by 5,6% yoy but remains relatively volatile and not yet reflective of a material improvement in fixed
investment activity, which will likely materialise in 2025 as business confidence improves on the back of
the outcomes of the Government of National Unity.

Financial performance

The financial performance of the group in the 10 months to 31 October 2024 ('the period' or '10M 2024')
compared to the 10 months to 31 October 2023 ('the prior period') reflects headline earnings growth
above mid-single digits, driven by a decline in the impairment charge, strong non-interest revenue (NIR)
growth and good expense management, partially offset by soft net interest income (NII) growth.
NII growth for 10M 2024 was flat to low single digits when compared to the prior period and below
management's expectations. NII was negatively impacted by slower-than-expected average interest
earning banking asset (AIEBA) growth and a decline in the group's net interest margin (NIM). AIEBA
grew below mid-single digits, reflecting low-single digit CIB average loans and advances growth and
below mid-single digit RBB average loans and advances growth. The slower-than-expected loan growth
was primarily driven by slow industry-level household credit growth and delayed, although improving,
corporate loan growth. Pleasingly, Nedbank reported year to date market share gains across wholesale
term loans, home loans and vehicle finance (SARB September 2024 BA900 disclosures) which, along
with an improvement in both corporate and retail credit extension during Q4 2024, positions the group
well for higher NII growth in 2025. Deposit growth remained well ahead of advances growth, supported
by Nedbank's year to date market share gains in retail deposits (SARB September 2024 BA900
disclosures). The NIM contraction from the 413 basis points reported in H1 2024 was largely the result
of competitive pricing for good quality assets and deposits, and 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. NII growth for the full year is likely to remain flat to low single digits, before
improving in 2025.

Impairments for 10M 2024 decreased when compared to the prior period and the group's credit loss
ratio (CLR) declined period on period to within the top half of our board-approved through the cycle
(TTC) target range (60 bps to 100 bps), slightly better than management's expectations. RBB's CLR
declined period on period and is currently within its TTC target range of 120 to 175 bps, while the CLRs
for CIB, Nedbank Wealth and Nedbank Africa Regions (NAR) are below or within the lower half of their
respective TTC target ranges. Our CLR guidance for 2024 remains unchanged – that is to return to
within the top half of the group's TTC target range.

NIR growth for 10M 2024 was in the early double digits, slightly ahead of management expectations.
Excluding the impact of the Eqstra acquisition in June 2024, NIR growth was in the high-single digits.
Commission and fees growth of mid-to-upper single digits remained robust, driven by arranging fees on
deal closures in CIB and our ongoing focus on cross-sell, main-banked client gains and value-added
services in RBB. Trading income growth was strong, offsetting lower levels of insurance income and
equity revaluations. Our NIR growth guidance for 2024 remains unchanged – that is to grow at upper-
single digits, requiring the closure of various corporate transactions and resilient client transactional
activity over the holiday period, off a high 2023 base.

Expense growth for 10M 2024 was at mid-to-upper single digits, slightly better than management
expectations. Our expense growth guidance for 2024 remains unchanged – that is to grow at upper-
single digits, including the Eqstra acquisition, although the group's 10M 2024 growth suggests the
potential for slight outperformance.

Associate income relating to Nedbank Group's 21% shareholding in Ecobank Transnational
Incorporated (ETI) for FY 2024 is estimated to be approximately R1 160m, based on ETI's reported
attributable income to shareholders of US$64m in Q4 2023 and US$232m in their 9M 2024 results
(accounted for a quarter in arrear).
As a result of the slow NII growth due to muted credit demand and selective origination, the group's
cost-to-income ratio increased period on period. Basic earnings per share, headline earnings per share
and diluted headline earnings per share all grew by mid-to-upper single digits. The group's ROE for 10M
2024 increased on the prior period and is expected to continue to increase further above the group's
cost of equity.

Investor call

Nedbank Group CFO, Mike Davis, will host a pre-close investor call based on this release at 17:30 (SA-
time) on Tuesday, 10 December 2024. Please contact NedgroupIR@nedbank.co.za for the details of
this meeting.

Nedbank Group's results for the year ended 31 December 2024 are currently expected to be released
on SENS on or about 4 March 2025.

Shareholders are advised that the financial information contained in this pre-close update has not been
reviewed or reported on by the Nedbank Group's joint auditors.

Sandton
10 December 2024

Sponsors to Nedbank Group in South Africa:
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: 10-12-2024 05:00:00
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