Annual Results for the year ended 31 December 2018
OVERVIEW A year of achievement across a broad front MIKE BROWN 2 NEDBANK GROUP LIMITED – Annual Results 2018
A year of achievement across a broad front ▪ Shareholders − Seamless conclusion of the managed separation process from Old Mutual ▪ Financial performance − Strong HE growth +14.5% boosted by ongoing ETI turnaround − NIR growth of +7.9% − Cost-to-income ratio improved from 58.6% to 57.2% − ROE (excl GW) increased from 16.4% to 17.9% − Dividend per share +10.1% ▪ Strategic − Retail main-banked clients up 7% & market share up to 13.1% − Retail NPS score increased 11% − the largest among all SA banks − 30 primary transactional client wins in CIB − Good progress on delivery of Managed Evolution IT Programme & Digital Fast Lane − Ongoing delivery of regulatory change programme − Level 1 BBBEE contributor 3 NEDBANK GROUP LIMITED – Annual Results 2018
Economic growth slow to recover GDP growth (%) Key drivers ▪ Supportive global environment in 2018, but 8,0 slowing – impacted by trade disputes & geopolitical tensions 6,0 ▪ SA economy started on weaker note in H1, but recovered somewhat in H2 4,0 ▪ SA policy uncertainties – some progress, but key issues currently unresolved 2,0 ▪ Progress on SOE governance, but strategic, 0,0 operational & financial pressures at Eskom ▪ Moody’s sovereign credit ratings maintained -2,0 at investment grade 00 02 04 06 08 10 12 14 16 18 World Sub-Saharan Africa South Africa 4 NEDBANK GROUP LIMITED – Annual Results 2018
Stronger economic growth dependent on structural reforms, policy certainty, improved levels of confidence, investment & job creation To move forward we need more certainty on Eskom, EWC (land) & general election outcomes Job creation & reduced … Increased − unemployment levels of Increased Improved inclusive − poverty levels of local levels of Structural economic Early stages of & foreign − inequality business & reforms political & growth investment consumer institutional & policy confidence turnaround in SA certainty Government, business, labour & civil society working together to create a more prosperous SA for all her people … … underpinned by improved skills & educational outcomes 5 NEDBANK GROUP LIMITED – Annual Results 2018
Delivering value to shareholders NAV per share 1 (cents) ROE & cost of equity (%) Dividend per share (cents) +3.3% +10.1% 17,9 (2) 17,2 17,0 16,5 16,4 (1) 14,1 14,2 14,0 13,5 13,0 14 395 15 685 15 830 16 990 17 559 1 028 1 107 1 200 1 285 1 415 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 CAGR: 5.1% CAGR: +8.3% COE ROE (excl GW) 1 NAV per share in 2018 excluding IFRS day 1 impact, odd-lot offer, ETI changing to the NAFEX exchange rate & Zimbabwe currency devaluation: 18 555 cents +9.2% yoy & CAGR +6.6%. | 2 Pro forma ROE (excl GW) including the impact of the odd-lot offer if implemented on 1 January 2018: 18.2%. 6 NEDBANK GROUP LIMITED – Annual Results 2018
Seamless completion of Old Mutual managed separation & subsequent odd-lot offer Finalisation of the Old Mutual managed separation, with OML reducing its shareholding in Nedbank Group to 19.9% Shareholding Completion of OM managed Completion of odd-lot offer separation (15 Oct 18) (18 Dec 18) changes ▪ ▪ ▪ R43bn of Nedbank shares > 98.5% votes of approval at the Free-float increased from c45% unbundled to OML shareholders 22 Nov 18 general meeting (before unbundling) to c80% (after unbundling) ▪ ▪ Potential overhang in share Reduction of ~430 000 shareholders ▪ Average daily volumes of shares price removed after unbundling (pricing at 5% premium) traded increased from ~1.1m to ~2.0m ▪ ▪ Nedbank the top performing SA Bought back & cancelled 7m shares bank share in 2018: +7.3% at a cost of R2.0bn ▪ Index holdings increased from − 11% to 19% CET1 impact: 34 bps, ▪ Advisory costs of R142m ▪ Foreign shareholding increased − ~R20m pa cost savings − 2016: R25m from 18% to 29% ▪ ROE & HEPS accretive for 2019 − 2017: R40m ▪ Some historically underweight − 2018: R77m SA funds now more in line Continue working with OML within the new relationship agreement to retain the competitive, arms’ -length & commercially viable arrangements with one another 7 NEDBANK GROUP LIMITED – Annual Results 2018
Our role in society SHAREHOLDERS STAFF ▪ Successful completion of managed separation & odd-lot offer ▪ Paid R17.5bn in salaries & benefits to support ▪ Paid R6.7bn dividends to shareholders who our 31 277 staffmembers & their families represent pension funds & investments of all ▪ Training spend of R468m South Africans | TSR of 12.6% ▪ Implemented a leadership & culture change ▪ Supportive outcomes at 51st AGM – all programme supporting strategy, incl New Ways resolutions passed with > 90% votes of Our purpose – of Work approval REGULATORS ▪ Transforming our workforce towards SA to use our demographics (> 78% black employees) financial ▪ Maintained a strong balance sheet to support a safe & stable banking system expertise to CLIENTS ▪ Paid R10.3bn direct, indirect & other taxes do good ▪ R181bn new-loan payouts to enable clients to ▪ Invested more than R100bn in government finance their homes, vehicles & education, & & public sector bonds to support the funding grow their businesses needs of governments SOCIETY ▪ Increased retail main-banked clients by 7% (market share up to 13.1%) & 30 CIB primary client wins ▪ Procured 78% of our goods & services locally ▪ Enhanced client convenience – 60% digitally focused ▪ R124m SED spend branches & various new innovative solutions such as ▪ Good progress across all spheres of contribution to SDGs, MobiMoney , Stokvel, Ecobank−Nedbank crossborder including R23bn of renewable-energy payouts to date, & through remittance solution & Extraordinary Life TM chatbot investments effectively became a net-zero operation water user ▪ Safeguarded R826bn deposits at competitive interest rates ▪ Active participant in the CEO Initiative – R20m contribution to SME fund & 2019 participation in YES ▪ Supported SARB in banking > 17 000 VBS clients ▪ Level 1 BBBEE contributor (under the Amended FSC) 8 NEDBANK GROUP LIMITED – Annual Results 2018
FINANCIAL OVERVIEW Resilient financial performance RAISIBE MORATHI 9 NEDBANK GROUP LIMITED – Annual Results 2018
Key performance indicators – resilient financial performance Managed operations 2017 2017¹ 2018 2018¹ Headline earnings (Rm) 14.5% 11 787 2.8% 12 762 13 495 13 119 Economic profit (Rm) 69.2% 1 695 2 868 ROE (excl goodwill) 17.9% 16.4% 17.7% 18.1% Diluted HEPS growth 13.7% 2.4% 2.1% 7.3% Preprovisioning operating profit growth 13.6% (3.2%) 6.3% (0.3%) Net interest margin 3.65% 3.62% Credit loss ratio 0.53% 0.49% Efficiency ratio 58.6% 57.4% 57.2% 57.5% CET1 CAR 12.6% 11.7% Dividend per share (cents) 10.1% 1 415 1 285 1 Excluding ETI associate income/losses, as well as ETI-related funding costs. ETI-related expenses included in managed operations. 10 NEDBANK GROUP LIMITED – Annual Results 2018
Headline earnings – resilient financial performance Headline earnings (Rm) (384) 1 366 (1 820) 1 913 (562) 1 195 13 495 11 787 +4.3% +7.9% >100.0% +11.6% +6.1% 2017 NII NIR Associate Impairments Expenses Direct tax 2018 income & other 11 NEDBANK GROUP LIMITED – Annual Results 2018
Revenue growth stronger in H2 2018 H1 vs H2 (Rbn) & growth (%) NII Impairments HE managed operations +5.2% +3.4% +3.6% +2.0% +9.5% +13.9% 13 548 14 006 14 076 14 813 1 594 1 815 1 710 1 873 6 433 6 562 6 329 6 557 H1 H2 H1 H2 H1 H2 NIR Expenses Associate income +49.3% >100% +9.3% +11.4% +2.7% +4.3% 207 (1053) 321 215 12 236 12 333 13 740 14 369 14 756 15 443 16 876 11 730 H1 H2 H1 H2 H1 H2 2017 2018 12 NEDBANK GROUP LIMITED – Annual Results 2018
IFRS 9 & 15 changes impacted the shape of the income statement – adjusting for these show like-for-like business performance Growth adjusted for IFRS impacts NII Impairments +4.8% +4.3% +11.6% +14.4% HE managed operations 27 624 28 819 28 950 3 304 3 688 3 779 +4.8% +2.8% NIR Expenses 12 762 13 381 13 119 +10.4% +7.9% +7.0% +6.1% 24 063 25 976 26 557 29 812 31 632 31 891 2017 2018 Adjusted 2018 13 NEDBANK GROUP LIMITED – Annual Results 2018
Net interest margin – driven by asset pricing & mix, offset to a degree by endowment Net interest margin (bps) (1) 1 1 4 (2) 365 364 362 354 2017 Endowment Asset Liability Prime/Jibar Other 2018 impact pricing pricing basis & mix & mix squeeze Average interest-earning banking assets: +3.6% H1 +0.8% vs H2 +2.8% 14 NEDBANK GROUP LIMITED – Annual Results 2018
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