Interim Results for the six months ended 30 June 2019 OVERVIEW - PowerPoint PPT Presentation

Interim Results for the six months ended 30 June 2019

OVERVIEW Good strategic & operational progress & a resilient financial performance in a difficult environment MIKE BROWN 2 NEDBANK GROUP LIMITED – Interim Results 2019

Stronger economic growth dependent on structural reforms, policy certainty, improved levels of confidence, investment & job creation Progress on structural reforms & policy certainty – too slow 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 its people … … underpinned by improved skills & educational outcomes 3 NEDBANK GROUP LIMITED – Interim Results 2019

SA economic growth in 2019 slower than expected, while confidence levels remain low SA GDP growth forecasts 1 (%) Business & consumer confidence 2 2.5 100 30 20 2.0 75 10 1.5 50 0 1.0 -10 25 0.5 -20 0.0 0 -30 2019 2020 2021 94 97 00 03 06 09 12 15 18 Business confidence index (LHS) Feb 19 Apr 19 Jun 19 Consumer confidence index (RHS) 1 Nedbank Economic Unit forecasts at point in time. 2 Bureau of Economic Research, RMB, FNB. 4 NEDBANK GROUP LIMITED – Interim Results 2019

Fixed investment declined as key structural reforms delayed & policy uncertainty continues Gross domestic capital formation 1 (Rbn) Structural reforms & policies 2 Potential Implementation growth impact likelihood Energy policy clarity H M Delay risk 450 250 Eskom – operational stability & Urgent issues M Delay risk electricity pricing (upside/downside) / M VH 225 Land reform & clarity on EWC Delay & / H M VH (upside/downside) fallout risk 400 SARB nationalisation/policy changes H M Fallout risk 200 Prescribed assets L Fallout risk VH Short-term wins Visas – Tourism/Skills / / M H H L 350 175 H Spectrum auctions L Delay risk Mining charter M H Improved infrastructure coordination H L 300 150 08 09 10 11 12 13 14 15 16 17 18 19 Longer-term Education reform VH VL Private sector (LHS) Labour market/Empowerment reforms / L M VH Government and public sector (RHS) National Health Insurance VH M Fallout risk 1 Nedbank Economic Unit. 2 Source: Adapted from Intellidex. 5 NEDBANK GROUP LIMITED – Interim Results 2019 M VL Very high Very low VH

Good strategic & operational progress & a resilient financial performance in a difficult environment ▪ Good strategic progress − Ongoing progress on delivery of Managed Evolution IT Programme & Digital Fast Lane – building a leading digital bank − Delivered capability to digitally onboard retail clients (Eclipse) + sell a transactional account & personal loan − Retail main-banked clients up +4.9% yoy & 16 primary transactional client wins in CIB ▪ Resilient financial performance − HE growth of +2.6%, PPOP +7.0% − Solid revenue growth +6.3% (incl associate income) − Impairment normalisation off a low prior year base (CLR at 70 bps within the lower half of our 60―100 bps TTC range) − Cost-to-income ratio improved from 55.8% to 55.4% – ongoing benefits from optimisation − Interim dividend per share +3.6% ▪ Contributing to society − Largest corporate participant in YES initiative: created > 3 300 new job opportunities in 2019 − First SA commercial bank to launch a green bond on the JSE − Level 1 BBBEE contributor 6 NEDBANK GROUP LIMITED – Interim Results 2019

Nedbank strategic enablers – creating great client experiences & growing market share Create great client experiences & grow market share in key value-creating areas Enabled by Technology People & + (Managed Evolution & brand Digital Fast Lane) delivered through process / operational excellence Target operating model (TOM) (largely by New Ways of Work) leading to Operating efficiencies Client growth & client satisfaction resulting in Revenue growth Cost savings ROE (excluding goodwill)  18% 2020 financial Cost-to-income ratio 1  53% targets 7 NEDBANK GROUP LIMITED – Interim Results 2019 1 In March 2019 we noted to the market that our 2020 cost- to-income target has become more challenging to achieve.

Our Managed Evolution strategy is enabling core banking system rationalisation, standardisation & simplification Managed Evolution approach Core systems (#) 2020 outcomes Digitise Delight Disrupt Rationalise, standardise & simplify Robust, ‘Big bang’ flexible IT ▪ landscape 24/7, real-time systems ▪ Agile, flexible multilayer IT advancement architecture Managed Evolution ▪ Digitally fit & analytically strong organisation ▪ Platforms that are innovative & responsive to change Opportunistic 250 176 166 145 129 (‘Patching’) 114 112 60 ▪ Omnichannel client 10 14 15 16 17 18 H1 20 onboarding & servicing 2020 2010 19 target Business value 8 NEDBANK GROUP LIMITED – Interim Results 2019

The Managed Evolution & IT rationalisation programmes are ~65% complete 1 & forecast to be materially complete by end of 2020 Completed to date (Rbn spend) IT investment profile 2020/2021 outcomes ERP – implemented SAP R0.6bn ERP – completed Core banking Foundations – Client 360, SOA, ECM, modernisation Foundations completed – ongoing R1.4bn BPM, Agile, Security (60% to 83%) investment in security Starting sequence & order of execution Client Data – IFRS 9, POPI, EDW (Data lake), R0.8bn Data – RDARR compliance, Advance systems RDARR (60% to 74%) Machine Learning, RPA, artificial New technology intelligence, single data store Strategic payments – modernised enhancements R0.6bn payment engine, basic VAS (eg Strategic payments – full service hub electricity), authenticated collections (incl VAS, FX) Strategic Client systems – 86 services digitised Client systems – > 180 services payments (from 51), branch-of-future technology, digitised, digital onboarding & servicing Eclipse – digital onboarding, servicing – juristic + web & app, a further 8 R3.0bn + PL & transactional sales (inbranch), products offered digitally, loyalty & Enterprise call centre modernisation, CRM, DXM rewards (H2 2019), FATCA/ FICAA data (single front-end), AML, loyalty & rewards New technologies – platforms & (pilot), insurance platform ERP ecosystems New technologies – Karri app, Nedbank R0.9bn Core banking modernisation – Money & Private Wealth app, MobiMoney, Foundations Bubble size indicates modernisation of lending & deposit crossborder remittances, Unlocked.Me, total estimated spend systems, decommission legacy chatbots, scan to pay, PL ghost account middleware 0% 20% 40% 60% 80% 100% Core banking modernisation – Flexcube R1.3bn (RoA subsidiaries), Loan IQ, Front Arena % completion R8.5bn 9 NEDBANK GROUP LIMITED – Interim Results 2019 1 As reported, ME programme was ~60% complete at December 2018.

Eclipse – simplified end-to-end digital client onboarding for individuals rolled out in June 2019 H2 2019 H2 2020 H1 2019 H1 2020 Juristic client Individual client Client: onboarding onboarding Channel: Inbranch Web & app aligned to product releases ▪ Card issuing (2) ▪ Card issuing (1) ▪ Home loans (2) ▪ Personal loans ▪ Investments (2) ▪ Investments (1) ▪ Vehicle finance Product 1 : ▪ Transactional products ▪ Overdrafts (2) ▪ Overdrafts (1) ▪ Wealth products ▪ Home loans (1) From legacy To digital ▪ ▪ Client centred onboarding – once for life Legacy, product-centred operations spanning front-, middle- & backoffice ▪ Single onboarding process for most core products ▪ Sequential paper-based processes ▪ Automated front-, middle- & backoffice processes ▪ High ‘not taken up’ rate reducing turnaround times to minutes ▪ Uncompetitive turnaround times – hours/days ▪ Single digital application form, enabling frictionless cross-sell ▪ Low cross-sell rates (particularly transactional) ▪ Digital FICA, biometrics & contract/signature ▪ Legacy rules-based KYC/ FICA 10 NEDBANK GROUP LIMITED – Interim Results 2019 1 The number (1) refers to first minimal viable product launch on the new platform | (2) refers to additional enhancements.

Eclipse delivering great client experiences & efficiencies, building on the progress made across other digital & servicing initiatives iOS App Store client ratings 2 (stars / 5) Initial benefits from Eclipse Nedbank Wealth app rated 2nd best globally Time to open a PL & Time to cross-sell a PL & transactional product 1 (min) transactional product (min) 45-50 90 32 2.1 2.3 2.8 3.1 4.1 4.3 4.5 4.7 ≤ 20 ≤ 20 35 Old Bank A Bank B Bank C Bank D Bank E Nedbank Nedbank PL TP PL TP Nedbank Money Wealth App 2018 Jun 2019 2018 Jun 2019 Nedbank consumer NPS score 3 (%) Sales through Eclipse Digitised products (#) Largest yoy increase among SA banks (% of total) 37% 10 14% 2 26.1 37.1 Top 0 0% 0% PL TP 10 PL 2018 Jun 2019 2018 Jun 19 Dec 20 17 18 1 For 57% of all TPs opened in June 2019. For 50% of all PLs accounts opened in June 2019. | 2 As at June 2019 | 3 Source: Consulta (SA-csi). 11 NEDBANK GROUP LIMITED – Interim Results 2019