Nedbank Group Ltd.
Annual Report 2019

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Creating value by using our financial expertise to do good ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019 AR CONTENTS 1 MESSAGE FROM OUR CHIEF EXECUTIVE 2 RESULTS PRESENTATION 54 2019 RESULTS COMMENTARY 66 FINANCIAL RESULTS 67 Financial highlights 68 Consolidated statement of comprehensive income 69 Consolidated statement of financial position 70 Consolidated statement of changes in equity 72 Return on equity drivers 73 SEGMENTAL ANALYSIS 74 Our organisational structure, products and services 76 Operational segmental reporting 78 Nedbank Corporate and Investment Banking 81 Nedbank Retail and Business Banking 93 Nedbank Wealth 96 Nedbank Africa Regions 99 Geographical segmental reporting 100 INCOME STATEMENT ANALYSIS 101 Net margin analysis 105 Impairments 108 Non-interest revenue 110 Expenses 112 Non-trading and capital items 112 Taxation charge 112 Preference shares 113 Hyperinflation 115 STATEMENT OF FINANCIAL POSITION ANALYSIS 116 Loans and advances 122 Investment securities 123 Investments in associate companies 124 Intangible assets 126 Amounts owed to depositors 129 Liquidity risk and funding 132 Equity analysis 133 Capital management 136 Economic capital adequacy 137 External credit ratings 139 140 SUPPLEMENTARY INFORMATION Earnings per share and weighted-average shares 141 Nedbank Group employee incentive schemes 142 Long-term debt instruments 142 Holders of additional tier 1 capital instruments 143 Shareholders’ analysis 144 146 Basel III balance sheet credit exposure by business cluster and asset class Nedbank Limited consolidated statement of comprehensive income 147 Nedbank Limited consolidated statement of financial position 147 Nedbank Limited consolidated financial highlights 148 Definitions 150 Abbreviations and acronyms IBC Company details MESSAGE FROM OUR CHIEF EXECUTIVE GOOD STRATEGIC AND OPERATIONAL PROGRESS AND SOLID FRANCHISE FUNDAMENTALS, BUT FINANCIAL PERFORMANCE BELOW EXPECTATIONS In 2019 SA economic growth was much slower than expected as recessionary-like conditions prevailed. This was mainly due to severe and frequent power outages, the unsustainable fiscal trajectory and ongoing policy uncertainty, combined with a deteriorating global outlook. Under these difficult domestic conditions, company profits and household finances deteriorated during the year, resulting in subdued credit demand, lower transactional volume growth and rising defaults in the SA banking industry. In this environment Nedbank Group’s financial performance was below expectations as headline earnings declined 7,3% to R12,5bn and the group produced an ROE (excluding goodwill) of 16,0%. In addition to the challenging environment, headline earnings were impacted by additional items in the second half of the year, including hyperinflation in Zimbabwe (R142m headline earnings impact) and the raising of impairments against recoverability of recognised intercompany legacy debt (R44m), the exercise of an option that will increase our shareholding in Banco Único (R140m) from 50% plus one share to approximately 87,5% (subject to regulatory approval), the revaluing of a number of private-equity investments as the underlying investee company performance was weaker and public market multiples declined (R238m), and the increase in impairments to just above the midpoint of our target range of 60 bps to 100 bps as a result of increased impairments raised on certain CIB watchlist items and an increase in the central impairment. This was partially offset by good cost management due to the ongoing benefits from optimisation of processes and operations as part of our digital journey, and as a result our cost-to-income ratio improved from 57,2% to 56,5%. We continued to make good strategic and operational progress throughout the year and produced solid balance sheet growth with advances up 7% and deposits growing 9,5%. A key focus was the operational rollout of our digital onboarding capability for individuals visiting branches and using the Money app and online banking, alongside our ability to sell current accounts and personal loans digitally, as well as pilots for cards, investment products and overdrafts. In addition, we launched our refreshed loyalty and rewards programme together with various market-leading digital innovations. As our clients began to experience the value from our digital journey and improved service levels, Nedbank ended the year as the only SA bank to have improved its Net Promoter Score (NPS) and on client satisfaction metrics became the second highest-rated bank in SA. SA’s economic growth prospects remain subdued, undermined by persistent energy constraints, weak government finances and slow progress on structural reforms combined with a weaker outlook for global growth. In this difficult SA macroeconomic environment, where we currently forecast OVERVIEW OF OUR ANNUAL RESULTS GDP growth in 2020 to be only 0,7%, and given our 2019 base, our guidance for growth in diluted headline earnings per share for 2020 is to be around nominal GDP growth. Our medium-to-long-term financial targets for ROE (excluding goodwill) and the cost-to-income ratio in 2020 were communicated to the market in early 2018, when GDP growth was forecast to be materially higher than what has transpired, and as a result, credit growth and interest rates (endowment impact) were also forecast to be higher than what took place. To reflect the deterioration in these metrics since 2018 we have revised the timelines for achievement of these medium-to-long-term financial targets to be more reflective of the current weaker economic environment, which we expect to persist. For ROE (now including goodwill), our medium-term target (two to three years) is now greater than 17% and our long-term target (five or more years) is greater than cost of equity plus 4%. For the cost-to-income ratio we are now targeting less than 53% in the medium term and less than 50% in the long term as our digital journey matures and enables ongoing efficiencies. Mike Brown Chief Executive HEADLINE EARNINGS ▼ 7,3% R12 506m DHEPS ▼ 6,3% 2 565 cents ROE (excluding goodwill) ▼ 16,0% (2018: 17,9%) DIVIDEND PER SHARE 1 415 cents ▲ (2018: 1 415 cents) LOANS AND ADVANCES ▲ 7,2% R764bn AMOUNTS OWED TO DEPOSITORS ▲ 9,5% R904bn AUM ▲ 11,4% R331bn CET1 RATIO ▼ 11,5% (2018: 11,7%) GROSS OPERATING INCOME (including associate income) ▲ 3,0% EXPENSES ▲ 1,7% CLR ▲ 82 bps (2018: 53 bps) BBBEE Level 1 ▲ (2018: Level 1) NEDBANK GROUP – ANNUAL RESULTS 2019 1 ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019 NEDBANK GROUP LIMITED – Annual Results 2019 OVERVIEW ▪ Good strategic & operational progress ▪ Solid underlying growth in the franchise ▪ Financial performance below expectations Mike Brown Chief Executive NEDBANK GROUP LIMITED – Annual Results 2019 2 1 2 NOTES:NOTES:NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION Good strategic (cid:9) operational progress(cid:15) but financial performance belo(cid:90) e(cid:91)pectations Good strategic (cid:9) operational progress ▪ Te(cid:70)(cid:75)n(cid:82)l(cid:82)(cid:74)(cid:92) (cid:76)m(cid:83)lementat(cid:76)(cid:82)n (cid:82)n t(cid:85)a(cid:70)(cid:78) (cid:9) (cid:71)el(cid:76)(cid:89)e(cid:85)(cid:76)n(cid:74) e(cid:91)(cid:83)e(cid:70)te(cid:71) (cid:69)ene(cid:73)(cid:76)ts. ▪ Im(cid:83)(cid:85)(cid:82)(cid:89)e(cid:71) (cid:70)l(cid:76)ent sat(cid:76)s(cid:73)a(cid:70)t(cid:76)(cid:82)n (cid:82)ut(cid:70)(cid:82)mes – (cid:82)nl(cid:92) (cid:69)an(cid:78) t(cid:82) (cid:76)n(cid:70)(cid:85)ease NPS (cid:76)n 2019. Solid underl(cid:92)ing gro(cid:90)t(cid:75) in t(cid:75)e franc(cid:75)ise ▪ S(cid:82)l(cid:76)(cid:71) (cid:69)alan(cid:70)e s(cid:75)eet (cid:9) AUM (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (a(cid:71)(cid:89)an(cid:70)es (cid:14)7%(cid:15) (cid:71)e(cid:83)(cid:82)s(cid:76)ts (cid:14)9.5% (cid:9) AUM (cid:14)11%). ▪ St(cid:85)(cid:82)n(cid:74) (cid:73)(cid:82)(cid:70)us (cid:82)n (cid:70)(cid:82)st mana(cid:74)ement (cid:14)2%(cid:15) PPOP (cid:14)3% (cid:9) (cid:45)A(cid:58)S (cid:14)1%. ▪ (cid:38)ET1 (cid:85)at(cid:76)(cid:82) at t(cid:75)e m(cid:76)(cid:71)(cid:16)(cid:83)(cid:82)(cid:76)nt (cid:82)(cid:73) (cid:69)(cid:82)a(cid:85)(cid:71)(cid:16)a(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)e(cid:71) ta(cid:85)(cid:74)et (cid:85)an(cid:74)e (10.5 t(cid:82) 12.5%) (cid:9) (cid:73)ull(cid:16)(cid:92)ea(cid:85) (cid:71)(cid:76)(cid:89)(cid:76)(cid:71)en(cid:71) ma(cid:76)nta(cid:76)ne(cid:71). (cid:50)verall financial performance belo(cid:90) e(cid:91)pectations – (cid:43)E (cid:71)(cid:82)(cid:90)n 7% ▪ (cid:43)E (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:76)m(cid:83)a(cid:70)te(cid:71) (cid:69)(cid:92)(cid:29) (cid:3013) (cid:38)LR u(cid:83) (cid:73)(cid:85)(cid:82)m 53 (cid:69)(cid:83)s t(cid:82) 82 (cid:69)(cid:83)s – m(cid:82)(cid:89)e(cid:71) (cid:73)(cid:85)(cid:82)m (cid:69)el(cid:82)(cid:90) t(cid:75)e (cid:69)(cid:82)tt(cid:82)m en(cid:71) t(cid:82) m(cid:76)(cid:71)(cid:71)le (cid:82)(cid:73) t(cid:75)e TT(cid:38) ta(cid:85)(cid:74)et (cid:85)an(cid:74)e (60 t(cid:82) 100 (cid:69)(cid:83)s). (cid:3013) (cid:61)(cid:76)m(cid:69)a(cid:69)(cid:90)e (cid:75)(cid:92)(cid:83)e(cid:85)(cid:76)n(cid:73)lat(cid:76)(cid:82)n(cid:15) (cid:83)(cid:85)(cid:76)(cid:89)ate(cid:16)e(cid:84)u(cid:76)t(cid:92) (cid:85)e(cid:89)aluat(cid:76)(cid:82)ns (cid:9) Ban(cid:70)(cid:82) Un(cid:76)(cid:70)(cid:82) (cid:82)(cid:83)t(cid:76)(cid:82)n. NEDBANK GROUP LIMITED – Annual Results 2019 3 NOTES: (cid:36) reminder – st(cid:85)(cid:82)n(cid:74)e(cid:85) e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:71)e(cid:83)en(cid:71)ent (cid:82)n st(cid:85)u(cid:70)tu(cid:85)al (cid:85)e(cid:73)(cid:82)(cid:85)ms(cid:15) (cid:83)(cid:82)l(cid:76)(cid:70)(cid:92) (cid:70)e(cid:85)ta(cid:76)nt(cid:92)(cid:15) (cid:76)m(cid:83)(cid:85)(cid:82)(cid:89)e(cid:71) le(cid:89)els (cid:82)(cid:73) (cid:70)(cid:82)n(cid:73)(cid:76)(cid:71)en(cid:70)e(cid:15) (cid:76)n(cid:89)estment (cid:9) (cid:77)(cid:82)(cid:69) (cid:70)(cid:85)eat(cid:76)(cid:82)n P(cid:85)(cid:82)(cid:74)(cid:85)ess (cid:82)n st(cid:85)u(cid:70)tu(cid:85)al (cid:85)e(cid:73)(cid:82)(cid:85)ms (cid:9) (cid:83)(cid:82)l(cid:76)(cid:70)(cid:92) (cid:70)e(cid:85)ta(cid:76)nt(cid:92) – t(cid:82)(cid:82) sl(cid:82)(cid:90) Earl(cid:92) stages of an institutional turnaround in S(cid:36) Structural reforms (cid:9) polic(cid:92) certaint(cid:92) Improved levels of levels of local Increased (cid:9) foreign investment business (cid:9) consumer confidence Increased levels of inclusive economic gro(cid:90)t(cid:75) (cid:45)ob creation (cid:9) reduced(cid:29) (cid:237) unem(cid:83)l(cid:82)(cid:92)ment (cid:237) (cid:83)(cid:82)(cid:89)e(cid:85)t(cid:92) (cid:237) (cid:76)ne(cid:84)ual(cid:76)t(cid:92) Government(cid:15) business(cid:15) labour (cid:9) civil societ(cid:92) (cid:90)orking toget(cid:75)er to create a more prosperous S(cid:36) for all its people (cid:171) (cid:171) underpinned b(cid:92) improved skills (cid:9) educational outcomes(cid:17) NEDBANK GROUP LIMITED – Annual Results 2019 (cid:23) NOTES: NEDBANK GROUP – ANNUAL RESULTS 2019 3 S(cid:36) economic gro(cid:90)t(cid:75) in (cid:21)01(cid:28) muc(cid:75) slo(cid:90)er t(cid:75)an e(cid:91)pected S(cid:36) GD(cid:51) gro(cid:90)t(cid:75) forecasts revised1 (%) (cid:46)e(cid:92) drivers in (cid:21)01(cid:28) ▪ (cid:38)u(cid:85)(cid:85)ent SA e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) (cid:71)(cid:82)(cid:90)ns(cid:90)(cid:76)n(cid:74) t(cid:75)e l(cid:82)n(cid:74)est s(cid:76)n(cid:70)e (cid:85)e(cid:70)(cid:82)(cid:85)(cid:71)s (cid:69)e(cid:74)an (cid:76)n 1945. 2.0 ▪ Unsusta(cid:76)na(cid:69)le (cid:73)(cid:76)nan(cid:70)(cid:76)al (cid:9) (cid:82)(cid:83)e(cid:85)at(cid:76)(cid:82)nal (cid:83)(cid:82)s(cid:76)t(cid:76)(cid:82)n 1.8 (cid:82)(cid:73) Es(cid:78)(cid:82)m. 1.3 0.7 0.3 2019 2020 2021 (cid:41)e(cid:69) 19 A(cid:83)(cid:85) 19 (cid:45)un 19 N(cid:82)(cid:89) 19 (cid:45)an 20 1 (cid:49)ed(cid:69)an(cid:78) (cid:40)conomic (cid:56)nit (cid:73)orecasts at (cid:83)oint in time. NEDBANK GROUP LIMITED – Annual Results 2019 ▪ Se(cid:89)e(cid:85)e (cid:9) (cid:73)(cid:85)e(cid:84)uent (cid:83)(cid:82)(cid:90)e(cid:85) (cid:82)uta(cid:74)es (cid:76)n (cid:52)1 (cid:9) (cid:52)4 19. 1.1 ▪ Unsusta(cid:76)na(cid:69)le SA (cid:73)(cid:76)s(cid:70)al (cid:83)(cid:82)s(cid:76)t(cid:76)(cid:82)n ((cid:71)e(cid:69)t t(cid:82) GDP 61%) (cid:9) (cid:76)n(cid:70)(cid:85)eas(cid:76)n(cid:74) (cid:83)(cid:85)(cid:82)(cid:69)a(cid:69)(cid:76)l(cid:76)t(cid:92) (cid:82)(cid:73) a M(cid:82)(cid:82)(cid:71)(cid:92)(cid:182)s s(cid:82)(cid:89)e(cid:85)e(cid:76)(cid:74)n (cid:70)(cid:85)e(cid:71)(cid:76)t (cid:85)at(cid:76)n(cid:74)s (cid:71)(cid:82)(cid:90)n(cid:74)(cid:85)a(cid:71)e. ▪ On(cid:74)(cid:82)(cid:76)n(cid:74) (cid:83)(cid:82)l(cid:76)(cid:70)(cid:92) un(cid:70)e(cid:85)ta(cid:76)nt(cid:92) (E(cid:58)(cid:38)(cid:15) SARB(cid:15) N(cid:43)I(cid:15) S(cid:58)(cid:41)(cid:15) M(cid:76)n(cid:76)n(cid:74) (cid:38)(cid:75)a(cid:85)te(cid:85)(cid:15) (cid:83)(cid:85)es(cid:70)(cid:85)(cid:76)(cid:69)e(cid:71) assets(cid:15) et(cid:70)). ▪ Ga(cid:83) (cid:69)et(cid:90)een (cid:83)(cid:82)l(cid:76)(cid:70)(cid:92) (cid:83)(cid:85)(cid:82)n(cid:82)un(cid:70)ements (cid:9) un(cid:71)e(cid:85)l(cid:92)(cid:76)n(cid:74) le(cid:74)(cid:76)slat(cid:76)(cid:89)e ena(cid:69)lement. ▪ Im(cid:83)a(cid:70)t (cid:82)(cid:73) (cid:70)l(cid:76)mate (cid:70)(cid:75)an(cid:74)e (cid:9) se(cid:89)e(cid:85)e (cid:71)(cid:85)(cid:82)u(cid:74)(cid:75)ts (cid:76)n (cid:83)a(cid:85)ts (cid:82)(cid:73) t(cid:75)e (cid:70)(cid:82)unt(cid:85)(cid:92). (cid:24) NOTES: Corporate (cid:9) business clients – mute(cid:71) (cid:76)n(cid:89)estment a(cid:70)t(cid:76)(cid:89)(cid:76)t(cid:92) (cid:9) (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)ta(cid:69)(cid:76)l(cid:76)t(cid:92) un(cid:71)e(cid:85) (cid:83)(cid:85)essu(cid:85)e (cid:37)usiness confidence around (cid:26)(cid:16)(cid:92)ear lo(cid:90)s1 (cid:46)e(cid:92) drivers in (cid:21)01(cid:28) ▪ (cid:38)(cid:82)m(cid:83)an(cid:92) ea(cid:85)n(cid:76)n(cid:74)s (cid:9) (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)ts un(cid:71)e(cid:85) (cid:83)(cid:85)essu(cid:85)e. ▪ T(cid:82)tal (cid:73)(cid:76)(cid:91)e(cid:71)(cid:16)(cid:76)n(cid:89)estment a(cid:70)t(cid:76)(cid:89)(cid:76)t(cid:92) stalle(cid:71) ((cid:16)0.7% (cid:92)(cid:82)(cid:92)(cid:29) (cid:83)(cid:85)(cid:76)(cid:89)ate se(cid:70)t(cid:82)(cid:85) (cid:14)1.6%(cid:15) (cid:83)u(cid:69)l(cid:76)(cid:70) se(cid:70)t(cid:82)(cid:85) (cid:16)5.7% (cid:9) SOEs (cid:16)3.4%). (cid:3013) Un(cid:85)el(cid:76)a(cid:69)le (cid:9) e(cid:91)(cid:83)ens(cid:76)(cid:89)e ele(cid:70)t(cid:85)(cid:76)(cid:70)(cid:76)t(cid:92) su(cid:83)(cid:83)l(cid:92). (cid:3013) P(cid:82)l(cid:76)(cid:70)(cid:92) un(cid:70)e(cid:85)ta(cid:76)nt(cid:92). (cid:3013) (cid:43)(cid:76)(cid:74)(cid:75) (cid:70)(cid:82)m(cid:83)l(cid:76)an(cid:70)e (cid:70)(cid:82)sts (cid:9) (cid:85)e(cid:71) ta(cid:83)e. 26 (cid:3013) Ele(cid:89)ate(cid:71) (cid:70)(cid:82)st st(cid:85)u(cid:70)tu(cid:85)es (la(cid:69)(cid:82)u(cid:85)(cid:15) (cid:76)n(cid:73)(cid:85)ast(cid:85)u(cid:70)tu(cid:85)e). ▪ (cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)ate (cid:71)e(cid:69)t le(cid:89)els (cid:85)ema(cid:76)n (cid:85)elat(cid:76)(cid:89)el(cid:92) l(cid:82)(cid:90) (cid:69)(cid:92) eme(cid:85)(cid:74)(cid:76)n(cid:74)(cid:16)ma(cid:85)(cid:78)et stan(cid:71)a(cid:85)(cid:71)s – SA (cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)ate (cid:71)e(cid:69)t t(cid:82) GDP(cid:29) 74% (EM (cid:83)ee(cid:85) (cid:74)(cid:85)(cid:82)u(cid:83) (cid:85)an(cid:74)e). ▪ Ins(cid:82)l(cid:89)en(cid:70)(cid:76)es (cid:85)(cid:82)se 23% (cid:92)(cid:82)(cid:92). (cid:25) 100 75 50 25 0 94 99 04 09 14 19 Bus(cid:76)ness (cid:70)(cid:82)n(cid:73)(cid:76)(cid:71)en(cid:70)e (cid:76)n(cid:71)e(cid:91) 1 (cid:37)ureau o(cid:73) (cid:40)conomic (cid:53)esearc(cid:75)(cid:15) (cid:53)(cid:48)(cid:37) NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: 4 NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION Retail clients – (cid:71)(cid:76)s(cid:83)(cid:82)sa(cid:69)le (cid:76)n(cid:70)(cid:82)me (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) sl(cid:82)(cid:90)e(cid:71) (cid:51)ersonal disposable income gro(cid:90)t(cid:75) slo(cid:90)ing1 (%) (cid:46)e(cid:92) drivers in (cid:21)01(cid:28) 15 10 5 0 (cid:16)5 (cid:16)10 04 06 08 10 12 14 16 18 Pe(cid:85)s(cid:82)nal (cid:71)(cid:76)s(cid:83)(cid:82)sa(cid:69)le (cid:76)n(cid:70)(cid:82)me ((cid:92)(cid:82)(cid:92) (cid:70)(cid:75)an(cid:74)e) 1 (cid:49)ed(cid:69)an(cid:78) (cid:40)conomic (cid:56)nit | 2 (cid:37)ureau o(cid:73) (cid:40)conomic (cid:53)esearc(cid:75)(cid:15) (cid:41)(cid:49)(cid:37). NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: ▪ Sl(cid:82)(cid:90)(cid:71)(cid:82)(cid:90)n (cid:76)n n(cid:82)m(cid:76)nal (cid:90)a(cid:74)e (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) ((cid:14)5.2%(cid:15) t(cid:75)e l(cid:82)(cid:90)est (cid:83)a(cid:70)e s(cid:76)n(cid:70)e 2000). ▪ (cid:43)(cid:76)(cid:74)(cid:75)e(cid:85) (cid:71)(cid:76)(cid:85)e(cid:70)t (cid:9) (cid:76)n(cid:71)(cid:76)(cid:85)e(cid:70)t ta(cid:91)es. ▪ Slu(cid:74)(cid:74)(cid:76)s(cid:75) (cid:70)(cid:82)nsume(cid:85) s(cid:83)en(cid:71)(cid:76)n(cid:74) ((cid:14)1.1% (cid:92)(cid:82)(cid:92)) (cid:85)esult(cid:76)n(cid:74) (cid:76)n mute(cid:71) t(cid:85)ansa(cid:70)t(cid:76)(cid:82)nal a(cid:70)t(cid:76)(cid:89)(cid:76)t(cid:92). ▪ Unem(cid:83)l(cid:82)(cid:92)ment le(cid:89)els at 29.1% ((cid:75)(cid:76)(cid:74)(cid:75)est s(cid:76)n(cid:70)e 2008). ▪ Ele(cid:89)ate(cid:71) (cid:75)(cid:82)use(cid:75)(cid:82)l(cid:71) (cid:71)e(cid:69)t (cid:69)u(cid:85)(cid:71)ens (De(cid:69)t % t(cid:82) PDI(cid:29) 72.6% (cid:3013) sta(cid:69)le) ▪ (cid:38)(cid:82)nsume(cid:85) (cid:70)(cid:82)n(cid:73)(cid:76)(cid:71)en(cid:70)e (cid:76)n(cid:71)e(cid:91)2 at (cid:16)7 (l(cid:82)(cid:90)est le(cid:89)el s(cid:76)n(cid:70)e (cid:52)4 2017). ▪ L(cid:82)(cid:90)e(cid:85) (cid:76)nte(cid:85)est (cid:85)ates (cid:69)ene(cid:73)(cid:76)(cid:70)(cid:76)al t(cid:82) (cid:76)n(cid:71)e(cid:69)te(cid:71) (cid:70)(cid:82)nsume(cid:85)s(cid:15) (cid:69)ut t(cid:82)(cid:82) small t(cid:82) ma(cid:78)e an(cid:92) mate(cid:85)(cid:76)al (cid:71)(cid:76)(cid:73)(cid:73)e(cid:85)en(cid:70)e t(cid:82) e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75). (cid:26) Spine of t(cid:75)e Nedbank strateg(cid:92) Create great client e(cid:91)periences (cid:9) gro(cid:90) market s(cid:75)are in ke(cid:92) value(cid:16)creating areas Ena(cid:69)le(cid:71) (cid:69)(cid:92) Tec(cid:75)nolog(cid:92) (cid:14) (cid:51)eople (cid:9) brand (cid:71)el(cid:76)(cid:89)e(cid:85)e(cid:71) t(cid:75)(cid:85)(cid:82)u(cid:74)(cid:75) process(cid:18) operational e(cid:91)cellence Target operating model (TOM 1.0 (cid:9) TOM 2.0) lea(cid:71)(cid:76)n(cid:74) t(cid:82) Client gro(cid:90)t(cid:75) (cid:9) client satisfaction (cid:50)perating efficiencies (cid:85)esult(cid:76)n(cid:74) (cid:76)n Revenue gro(cid:90)t(cid:75) Cost savings Financial targets (me(cid:71)(cid:76)um (cid:9) l(cid:82)n(cid:74)te(cid:85)m) ▪ T(cid:50)(cid:48) 1(cid:17)0 – ne(cid:90) (cid:58)a(cid:92)s (cid:82)(cid:73) (cid:58)(cid:82)(cid:85)(cid:78) (cid:76)n(cid:70)lu(cid:71)(cid:76)n(cid:74) (cid:73)(cid:85)(cid:82)nt(cid:15) m(cid:76)(cid:71)(cid:71)le (cid:9) (cid:69)a(cid:70)(cid:78)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)e (cid:82)(cid:83)t(cid:76)m(cid:76)sat(cid:76)(cid:82)n (cid:9) (cid:71)(cid:76)(cid:74)(cid:76)tal (a(cid:74)(cid:76)le) (cid:71)el(cid:76)(cid:89)e(cid:85)(cid:92). Bene(cid:73)(cid:76)ts (cid:71)el(cid:76)(cid:89)e(cid:85)(cid:92) a(cid:75)ea(cid:71) (cid:82)(cid:73) ta(cid:85)(cid:74)ets (u(cid:83) t(cid:82) 2020) ▪ T(cid:50)(cid:48) (cid:21)(cid:17)0 – In t(cid:75)e (cid:70)(cid:82)nte(cid:91)t (cid:82)(cid:73) an (cid:76)n(cid:70)(cid:85)eas(cid:76)n(cid:74)l(cid:92) (cid:71)(cid:76)(cid:74)(cid:76)tal (cid:90)(cid:82)(cid:85)l(cid:71)(cid:15) (cid:70)u(cid:85)(cid:85)entl(cid:92) st(cid:85)ate(cid:74)(cid:76)s(cid:76)n(cid:74) a(cid:85)(cid:82)un(cid:71) t(cid:75)e s(cid:75)a(cid:83)e (cid:82)(cid:73) (cid:82)u(cid:85) (cid:69)(cid:85)an(cid:70)(cid:75) (cid:76)n(cid:73)(cid:85)ast(cid:85)u(cid:70)tu(cid:85)e(cid:15) a s(cid:75)(cid:76)(cid:73)t (cid:76)n (cid:82)u(cid:85) RBB st(cid:85)u(cid:70)tu(cid:85)e t(cid:82) (cid:69)e m(cid:82)(cid:85)e (cid:70)l(cid:76)ent(cid:16) (cid:70)ente(cid:85)e(cid:71)(cid:15) as (cid:90)ell as s(cid:75)a(cid:85)e(cid:71) se(cid:85)(cid:89)(cid:76)(cid:70)es (cid:82)(cid:83)t(cid:76)m(cid:76)sat(cid:76)(cid:82)n a(cid:70)(cid:85)(cid:82)ss t(cid:75)e (cid:74)(cid:85)(cid:82)u(cid:83) (ta(cid:85)(cid:74)ets (cid:90)(cid:76)ll (cid:69)e (cid:70)(cid:82)mmun(cid:76)(cid:70)ate(cid:71) ea(cid:85)l(cid:92) 2021). NEDBANK GROUP LIMITED – Annual Results 2019 (cid:27) NOTES: NEDBANK GROUP – ANNUAL RESULTS 2019 5 (cid:48)anaged Evolution strateg(cid:92) is enabling core banking s(cid:92)stem rationalisation(cid:15) standardisation (cid:9) simplification (cid:48)anaged Evolution approac(cid:75) Core s(cid:92)stems1 ((cid:6)) (cid:21)0(cid:21)0 outcomes (cid:181)B(cid:76)(cid:74) (cid:69)an(cid:74)(cid:182) R(cid:82)(cid:69)ust(cid:15) (cid:73)le(cid:91)(cid:76)(cid:69)le IT lan(cid:71)s(cid:70)a(cid:83)e t n e m e c n a v d a T I (cid:48)anaged Evolution Rat(cid:76)(cid:82)nal(cid:76)se(cid:15) stan(cid:71)a(cid:85)(cid:71)(cid:76)se (cid:9) s(cid:76)m(cid:83)l(cid:76)(cid:73)(cid:92) Digitise Delig(cid:75)t Disrupt ▪ 24(cid:18)7(cid:15) (cid:85)eal(cid:16)t(cid:76)me s(cid:92)stems ▪ A(cid:74)(cid:76)le(cid:15) (cid:73)le(cid:91)(cid:76)(cid:69)le mult(cid:76)la(cid:92)e(cid:85)e(cid:71) a(cid:85)(cid:70)(cid:75)(cid:76)te(cid:70)tu(cid:85)e ▪ D(cid:76)(cid:74)(cid:76)tall(cid:92) (cid:73)(cid:76)t (cid:9) anal(cid:92)t(cid:76)(cid:70)all(cid:92) st(cid:85)(cid:82)n(cid:74) (cid:82)(cid:85)(cid:74)an(cid:76)sat(cid:76)(cid:82)n O(cid:83)(cid:83)(cid:82)(cid:85)tun(cid:76)st(cid:76)(cid:70) ((cid:181)Pat(cid:70)(cid:75)(cid:76)n(cid:74)(cid:182)) 0 5 2 1 7 1 2 5 1 2 4 1 8 2 1 9 1 1 7 1 1 5 8 ▪ Plat(cid:73)(cid:82)(cid:85)ms t(cid:75)at a(cid:85)e (cid:76)nn(cid:82)(cid:89)at(cid:76)(cid:89)e (cid:9) (cid:85)es(cid:83)(cid:82)ns(cid:76)(cid:89)e t(cid:82) (cid:70)(cid:75)an(cid:74)e 5 7 (cid:16) 5 6 (cid:21)010 (cid:37)usiness value (cid:21)0(cid:21)0 10 14 15 16 17 18 19 20 LT ta(cid:85)(cid:74)ets ▪ Omn(cid:76)(cid:70)(cid:75)annel (cid:70)l(cid:76)ent (cid:82)n(cid:69)(cid:82)a(cid:85)(cid:71)(cid:76)n(cid:74) (cid:9) se(cid:85)(cid:89)(cid:76)(cid:70)(cid:76)n(cid:74) 1 (cid:43)istorical num(cid:69)ers (cid:75)a(cid:89)e (cid:69)een ad(cid:77)usted to ali(cid:74)n (cid:90)it(cid:75) t(cid:75)e current de(cid:73)inition o(cid:73) core to (cid:69)an(cid:78)in(cid:74) systems. (cid:55)(cid:75)e (cid:83)re(cid:89)iously stated tar(cid:74)et o(cid:73) (cid:25)(cid:19) (cid:69)y t(cid:75)e end o(cid:73) 2(cid:19)2(cid:19) (cid:75)as (cid:69)een re(cid:89)ised u(cid:83)(cid:90)ard due to our strate(cid:74)y to modernise(cid:15) rat(cid:75)er t(cid:75)an rationalise(cid:15) some systems (cid:9) includes ne(cid:90) systems suc(cid:75) as (cid:41)le(cid:91)cu(cid:69)e in our (cid:36)(cid:73)rica (cid:53)e(cid:74)ions cluster. NEDBANK GROUP LIMITED – Annual Results 2019 (cid:28) NOTES: T(cid:75)e (cid:48)anaged Evolution programme (cid:97)(cid:26)0(cid:8) complete1 (cid:9) forecast to be materiall(cid:92) complete b(cid:92) end of (cid:21)0(cid:21)0 Completed to date (R(cid:69)n s(cid:83)en(cid:71)) IT investment profile (cid:21)0(cid:21)0 outcomes ER(cid:51) – (cid:76)m(cid:83)lemente(cid:71) SAP Foundations – (cid:38)l(cid:76)ent 360(cid:15) SOA(cid:15) E(cid:38)M(cid:15) BPM(cid:15) A(cid:74)(cid:76)le(cid:15) (cid:38)(cid:92)(cid:69)e(cid:85)se(cid:70)u(cid:85)(cid:76)t(cid:92) Data – I(cid:41)RS 9(cid:15) POPI(cid:15) ED(cid:58) (Data la(cid:78)e)(cid:15) RDARR Strategic pa(cid:92)ments – m(cid:82)(cid:71)e(cid:85)n(cid:76)se(cid:71) (cid:83)a(cid:92)ment en(cid:74)(cid:76)ne(cid:15) (cid:69)as(cid:76)(cid:70) (cid:57)AS (e(cid:74) ele(cid:70)t(cid:85)(cid:76)(cid:70)(cid:76)t(cid:92))(cid:15) aut(cid:75)ent(cid:76)(cid:70)ate(cid:71) (cid:70)(cid:82)lle(cid:70)t(cid:76)(cid:82)ns Client s(cid:92)stems – 114 se(cid:85)(cid:89)(cid:76)(cid:70)es (cid:71)(cid:76)(cid:74)(cid:76)t(cid:76)se(cid:71) ((cid:73)(cid:85)(cid:82)m 51 (cid:76)n (cid:181)18)(cid:15) (cid:69)(cid:85)an(cid:70)(cid:75)(cid:16)(cid:82)(cid:73)(cid:16)(cid:73)utu(cid:85)e te(cid:70)(cid:75)n(cid:82)l(cid:82)(cid:74)(cid:92)(cid:15) E(cid:70)l(cid:76)(cid:83)se – (cid:71)(cid:76)(cid:74)(cid:76)tal (cid:82)n(cid:69)(cid:82)a(cid:85)(cid:71)(cid:76)n(cid:74)(cid:15) PL (cid:9) t(cid:85)ansa(cid:70)t(cid:76)(cid:82)nal sales(cid:15) (cid:70)all (cid:70)ent(cid:85)e m(cid:82)(cid:71)e(cid:85)n(cid:76)sat(cid:76)(cid:82)n(cid:15) (cid:38)RM(cid:15) D(cid:59)M (s(cid:76)n(cid:74)le (cid:73)(cid:85)(cid:82)nten(cid:71))(cid:15) AML(cid:15) L(cid:82)(cid:92)alt(cid:92) (cid:9) (cid:85)e(cid:90)a(cid:85)(cid:71)s(cid:15) (cid:76)nsu(cid:85)an(cid:70)e (cid:83)lat(cid:73)(cid:82)(cid:85)m Core banking modernisation – (cid:41)le(cid:91)(cid:70)u(cid:69)e (NAR su(cid:69)s(cid:76)(cid:71)(cid:76)a(cid:85)(cid:76)es)(cid:15) L(cid:82)an I(cid:52)(cid:15) (cid:41)(cid:85)(cid:82)nt A(cid:85)ena Ne(cid:90) tec(cid:75)nologies – (cid:70)l(cid:76)ent (cid:70)ent(cid:85)(cid:76)(cid:70) s(cid:82)lut(cid:76)(cid:82)ns (cid:69)u(cid:76)lt (cid:82)n ta(cid:85)(cid:74)et state s(cid:92)stems R0.6(cid:69)n R1.4(cid:69)n R0.8(cid:69)n R0.6(cid:69)n R3.5(cid:69)n R1.4(cid:69)n R1(cid:17)3bn R(cid:28)(cid:17)(cid:25)bn (cid:38)(cid:82)(cid:85)e (cid:69)an(cid:78)(cid:76)n(cid:74) m(cid:82)(cid:71)e(cid:85)n(cid:76)sat(cid:76)(cid:82)n St(cid:85)ate(cid:74)(cid:76)(cid:70) (cid:83)a(cid:92)ments (cid:38)l(cid:76)ent s(cid:92)stems Ente(cid:85)(cid:83)(cid:85)(cid:76)se (cid:71)ata (cid:41)(cid:82)un(cid:71)at(cid:76)(cid:82)ns Foundations – m(cid:82)stl(cid:92) (cid:70)(cid:82)m(cid:83)lete(cid:15) (cid:82)n(cid:74)(cid:82)(cid:76)n(cid:74) (cid:76)n(cid:89)estment (cid:76)n (cid:70)(cid:92)(cid:69)e(cid:85)se(cid:70)u(cid:85)(cid:76)t(cid:92) Data – A(cid:71)(cid:89)an(cid:70)e ma(cid:70)(cid:75)(cid:76)ne lea(cid:85)n(cid:76)n(cid:74)(cid:15) RPA(cid:15) a(cid:85)t(cid:76)(cid:73)(cid:76)(cid:70)(cid:76)al (cid:76)ntell(cid:76)(cid:74)en(cid:70)e(cid:15) s(cid:76)n(cid:74)le (cid:71)ata st(cid:82)(cid:85)e Client s(cid:92)stems – (cid:33)180 se(cid:85)(cid:89)(cid:76)(cid:70)es (cid:71)(cid:76)(cid:74)(cid:76)t(cid:76)se(cid:71)(cid:15) (cid:71)(cid:76)(cid:74)(cid:76)tal (cid:82)n(cid:69)(cid:82)a(cid:85)(cid:71)(cid:76)n(cid:74) (cid:9) se(cid:85)(cid:89)(cid:76)(cid:70)(cid:76)n(cid:74) – (cid:77)u(cid:85)(cid:76)st(cid:76)(cid:70) (cid:14) (cid:90)e(cid:69) (cid:9) a(cid:83)(cid:83)(cid:15) a (cid:73)u(cid:85)t(cid:75)e(cid:85) 5 (cid:83)(cid:85)(cid:82)(cid:71)u(cid:70)ts (cid:82)(cid:73)(cid:73)e(cid:85)e(cid:71) (cid:71)(cid:76)(cid:74)(cid:76)tall(cid:92)(cid:15) (cid:41)AT(cid:38)A(cid:18) (cid:41)I(cid:38)AA Ne(cid:90) tec(cid:75)nologies – (cid:83)lat(cid:73)(cid:82)(cid:85)ms (cid:9) e(cid:70)(cid:82)s(cid:92)stems (cid:21)0(cid:21)0(cid:14) outcomes (cid:37)u(cid:69)(cid:69)le si(cid:93)e indicates total estimated s(cid:83)end ERP Strategic pa(cid:92)ments – (cid:73)ull(cid:16)se(cid:85)(cid:89)(cid:76)(cid:70)e (cid:75)u(cid:69) ((cid:76)n(cid:70)l (cid:57)AS(cid:15) (cid:41)(cid:59)) n o i t u c e (cid:91) e f o r e d r o (cid:9) e c n e u (cid:84) e s g n i t r a t S 0% 20% 40% 60% 80% 100% (cid:8) completion Core banking modernisation – m(cid:82)(cid:71)e(cid:85)n(cid:76)sat(cid:76)(cid:82)n (cid:82)(cid:73) len(cid:71)(cid:76)n(cid:74) (cid:9) (cid:71)e(cid:83)(cid:82)s(cid:76)t s(cid:92)stems(cid:15) (cid:71)e(cid:70)(cid:82)mm(cid:76)ss(cid:76)(cid:82)n le(cid:74)a(cid:70)(cid:92) m(cid:76)(cid:71)(cid:71)le(cid:90)a(cid:85)e NEDBANK GROUP LIMITED – Annual Results 2019 1 (cid:36)s re(cid:83)orted(cid:15) (cid:48)(cid:40) (cid:83)ro(cid:74)ramme (cid:90)as (cid:97)(cid:25)(cid:19)(cid:8) com(cid:83)lete at (cid:39)ecem(cid:69)er 2(cid:19)1(cid:27). (cid:48)aterially com(cid:83)lete (cid:69)y 2(cid:19)2(cid:19) is (cid:97)(cid:27)(cid:19)(cid:8)(cid:15) includin(cid:74) (cid:41)oundations at (cid:97)(cid:28)(cid:22)(cid:8) 10 NOTES: 6 NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION Good progress on our digital strateg(cid:92) BOOKLET SLIDE To be (cid:36)frica(cid:10)s (cid:6)1 digital financial services pla(cid:92)er (cid:47)ong(cid:16)term aspirations 75% digital sales1 70% digitall(cid:92) active clients(cid:21) 60 N(cid:51)S3 (cid:31) 50% Cost(cid:16)to(cid:16) income ratio De(cid:70) 2019(cid:29) 30(cid:8) 75% 70% Ne(cid:71)(cid:69)an(cid:78) (cid:71)(cid:76)(cid:74)(cid:76)tal NPS (cid:33) 60% 60% 21% 9% 3% 24% 20% 12% 37% 38% 26% 58.6% 57.2% 56.6% (cid:31) 50% 17 18 19 As(cid:83)(cid:76)(cid:85)at(cid:76)(cid:82)n 17 18 19 As(cid:83)(cid:76)(cid:85)at(cid:76)(cid:82)n 17 18 19 As(cid:83)(cid:76)(cid:85)at(cid:76)(cid:82)n 17 18 19 MLT ta(cid:85)(cid:74)et 17 18 19 LT ta(cid:85)(cid:74)et 17 18 19 LT ta(cid:85)(cid:74)et 17 18 19 LT ta(cid:85)(cid:74)et 17 18 19 LT ta(cid:85)(cid:74)et 1 (cid:54)ales across di(cid:74)ital c(cid:75)annels as (cid:83)ercenta(cid:74)e o(cid:73) total sales. | 2 (cid:39)i(cid:74)itally acti(cid:89)e clients are t(cid:75)ose t(cid:75)at (cid:75)a(cid:89)e acti(cid:89)ely used a di(cid:74)ital c(cid:75)annel o(cid:89)er a (cid:28)(cid:19)(cid:16)day (cid:83)eriod as (cid:83)ercenta(cid:74)e o(cid:73) total clients. | (cid:22) (cid:49)(cid:51)(cid:54) re(cid:73)ers to consumer (cid:49)(cid:51)(cid:54) (cid:11)not only di(cid:74)ital c(cid:75)annels(cid:12). NEDBANK GROUP LIMITED – Annual Results 2019 11 NOTES: Eclipse – s(cid:76)m(cid:83)l(cid:76)(cid:73)(cid:76)e(cid:71) en(cid:71)(cid:16)t(cid:82)(cid:16)en(cid:71) (cid:71)(cid:76)(cid:74)(cid:76)tal (cid:70)l(cid:76)ent (cid:82)n(cid:69)(cid:82)a(cid:85)(cid:71)(cid:76)n(cid:74) (cid:73)(cid:82)(cid:85) (cid:76)n(cid:71)(cid:76)(cid:89)(cid:76)(cid:71)uals (cid:76)n 2019 End(cid:16)to(cid:16)end digital client onboarding(cid:15) digitising our top 10 products (cid:9) more t(cid:75)an 1(cid:27)0 services b(cid:92) end(cid:16)(cid:21)0(cid:21)0 (cid:43)1 2019 Clients(cid:29) In(cid:71)(cid:76)(cid:89)(cid:76)(cid:71)ual (cid:70)l(cid:76)ent (cid:82)n(cid:69)(cid:82)a(cid:85)(cid:71)(cid:76)n(cid:74) a C(cid:75)annels(cid:29) In (cid:69)(cid:85)an(cid:70)(cid:75) (cid:58)e(cid:69) (cid:9) a(cid:83)(cid:83) a (cid:43)2 2019 a (cid:45)u(cid:85)(cid:76)st(cid:76)(cid:70) (cid:70)l(cid:76)ent (cid:82)n(cid:69)(cid:82)a(cid:85)(cid:71)(cid:76)n(cid:74) (cid:43)1 2020 (cid:43)2 2020 (cid:43)2 2021 (cid:45)u(cid:85)(cid:76)st(cid:76)(cid:70) (cid:70)l(cid:76)ent (cid:82)n(cid:69)(cid:82)a(cid:85)(cid:71)(cid:76)n(cid:74) (cid:51)roducts1(cid:29) ▪ Pe(cid:85)s(cid:82)nal l(cid:82)ans ▪ T(cid:85)ansa(cid:70)t(cid:76)(cid:82)nal (cid:83)(cid:85)(cid:82)(cid:71)u(cid:70)ts a ▪ (cid:38)a(cid:85)(cid:71) (cid:76)ssu(cid:76)n(cid:74) (1) ▪ In(cid:89)estments (1) ▪ O(cid:89)e(cid:85)(cid:71)(cid:85)a(cid:73)ts (1) a ▪ (cid:38)a(cid:85)(cid:71) (cid:76)ssu(cid:76)n(cid:74) (2) ▪ In(cid:89)estments (2) ▪ O(cid:89)e(cid:85)(cid:71)(cid:85)a(cid:73)ts (2) In(cid:89)estments include unit trusts (cid:9) retirement annuities (cid:11)additional (cid:69)ene(cid:73)it(cid:12) ▪ (cid:43)(cid:82)me l(cid:82)ans (2) (cid:13) ▪ (cid:43)(cid:82)me l(cid:82)ans (1) (cid:13) ▪ (cid:57)e(cid:75)(cid:76)(cid:70)le (cid:41)(cid:76)nan(cid:70)e (cid:13) ▪ St(cid:82)(cid:70)(cid:78)(cid:69)(cid:85)(cid:82)(cid:78)(cid:76)n(cid:74) (cid:13) ▪ (cid:41)(cid:82)(cid:85)e(cid:91) (cid:13) ▪ Stu(cid:71)ent L(cid:82)ans (cid:13) Services(cid:29) 86 114 (cid:33) 180 NEDBANK GROUP LIMITED – Annual Results 2019 1 (cid:55)(cid:75)e num(cid:69)er (cid:11)1(cid:12) re(cid:73)ers to (cid:73)irst minimal (cid:89)ia(cid:69)le (cid:83)roduct launc(cid:75) on t(cid:75)e ne(cid:90) (cid:83)lat(cid:73)orm(cid:30) (cid:11)2(cid:12) re(cid:73)ers to additional en(cid:75)ancements. (cid:13) (cid:39)eli(cid:89)ery timelines remain under re(cid:89)ie(cid:90) (cid:74)i(cid:89)en de(cid:83)endencies on ot(cid:75)er core (cid:48)ana(cid:74)ed (cid:40)(cid:89)olution (cid:83)ro(cid:74)rammes. 1(cid:21) NOTES: NEDBANK GROUP – ANNUAL RESULTS 2019 7 Eclipse (cid:9) app – (cid:76)m(cid:83)(cid:85)(cid:82)(cid:89)e(cid:71) (cid:70)l(cid:76)ent e(cid:91)(cid:83)e(cid:85)(cid:76)en(cid:70)es (cid:9) unl(cid:82)(cid:70)(cid:78)(cid:76)n(cid:74) e(cid:73)(cid:73)(cid:76)(cid:70)(cid:76)en(cid:70)(cid:76)es Time to open a personal loan (cid:9) transactional product (m(cid:76)nutes(cid:15) ma(cid:77)(cid:82)(cid:85)(cid:76)t(cid:92) (cid:82)(cid:73) t(cid:85)ansa(cid:70)t(cid:76)(cid:82)ns) Sales t(cid:75)roug(cid:75) Eclipse (cid:9) app (% (cid:82)(cid:73) t(cid:82)tal) Pa(cid:83)e(cid:85) (cid:89)(cid:82)lumes (cid:76)n (cid:69)a(cid:70)(cid:78)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)es (cid:71)(cid:82)(cid:90)n 50–60% 45(cid:16)50 32 S(cid:78)(cid:76)lle(cid:71) sta(cid:73)(cid:73) (cid:70)an (cid:71)(cid:82) (cid:76)n (cid:31) 10 m(cid:76)ns E(cid:91)(cid:76)st(cid:76)n(cid:74) (cid:70)l(cid:76)ents 3 t(cid:82) 7 m(cid:76)ns (cid:148) 20 (cid:148) 20 (cid:148) 10 (cid:148) 10 2018 (cid:52)4 19 ((cid:69)(cid:85)an(cid:70)(cid:75)) (cid:52)4 19 ((cid:90)e(cid:69) (cid:9) a(cid:83)(cid:83)) 0% 0% 2018 79% 3% 75% 14% 61% 2% 76% 59% 61% 50% 9% 38% 1% 37% 41% 16% 2% 14% En(cid:71) (cid:52)2 19 ((cid:69)(cid:85)an(cid:70)(cid:75)) (cid:52)3 19 (cid:52)4 19 Pe(cid:85)s(cid:82)nal l(cid:82)an T(cid:85)ansa(cid:70)t(cid:76)(cid:82)nal (cid:83)(cid:85)(cid:82)(cid:71)u(cid:70)t A(cid:83)(cid:83)(cid:16)(cid:85)elate(cid:71) sales All (cid:70)(cid:75)annels NEDBANK GROUP LIMITED – Annual Results 2019 13 NOTES: NOTES: In addition(cid:15) our various ne(cid:90) innovations (cid:9) digital en(cid:75)ancements delivered improved client e(cid:91)periences BOOKLET SLIDE i(cid:50)S (cid:9) (cid:36)ndroid app store client ratings1 (sta(cid:85)s (cid:18) 5) Net promoter score(cid:21) (%) Onl(cid:92) SA (cid:69)an(cid:78) t(cid:82) (cid:76)n(cid:70)(cid:85)ease NPS (cid:76)n 2019 6 2 . 3 3 . 7 3 . 7 3 . 4 4 . 6 4 . 6 4 . Ban(cid:78) A Ban(cid:78) B Ban(cid:78) (cid:38) Ban(cid:78) D Ne(cid:71)(cid:69)an(cid:78) M(cid:82)ne(cid:92) Ne(cid:71)(cid:69)an(cid:78) (cid:58)ealt(cid:75) Ban(cid:78) E 6 2 17 7 3 18 8 3 19 Ne(cid:71)(cid:69)an(cid:78) (cid:31) 0 6 4 3 (cid:31) 5 5 D(cid:76)(cid:74)(cid:76)tal A(cid:89)e(cid:85)a(cid:74)e SA (cid:69)an(cid:78)s Lea(cid:71)(cid:76)n(cid:74) Inte(cid:85)nat(cid:76)(cid:82)nal (cid:69)an(cid:78)s 1 (cid:36)s at (cid:39)ec 2(cid:19)1(cid:28) (cid:11)sim(cid:83)le a(cid:89)era(cid:74)e o(cid:73) i(cid:50)(cid:54) (cid:9) (cid:36)ndroid a(cid:83)(cid:83) ratin(cid:74)s(cid:12). | 2 (cid:54)ource(cid:29) Consulta (cid:11)(cid:54)(cid:36)(cid:16)csi(cid:12)(cid:15) researc(cid:75) o(cid:73) (cid:89)arious international (cid:69)an(cid:78)s t(cid:75)at are leadin(cid:74) in t(cid:75)eir di(cid:74)ital (cid:77)ourneys includin(cid:74) (cid:54)(cid:69)er(cid:69)an(cid:78)(cid:15) C(cid:37)(cid:36)(cid:15) (cid:42)aranti(cid:15) (cid:39)(cid:37)(cid:54)(cid:15) (cid:48)oneta. NEDBANK GROUP LIMITED – Annual Results 2019 1(cid:23) 8 NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION (cid:57)alue to s(cid:75)are(cid:75)olders N(cid:36)(cid:57) per s(cid:75)are ((cid:70)ents) R(cid:50)E (cid:9) cost of e(cid:84)uit(cid:92) (%) Dividend per s(cid:75)are ((cid:70)ents) (cid:41)lat (cid:14)4% 17.0 16.5 16.4 17.9 E(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)t 16.0 14.2 14.0 14.1 14.1 13.0 5 8 6 5 1 15 0 3 8 5 1 16 0 9 9 6 1 17 0 6 5 7 1 18 4 0 2 8 1 19 15 16 17 18 19 7 0 1 1 15 0 0 2 1 16 5 8 2 1 17 5 1 4 1 18 5 1 4 1 19 (cid:38)AGR(cid:29) (cid:14)4% (cid:38)OE ROE (e(cid:91)(cid:70)l G(cid:58)) (cid:38)AGR(cid:29) (cid:14)6% NEDBANK GROUP LIMITED – Annual Results 2019 1(cid:24) NOTES: NOTES: (cid:50)ur role in societ(cid:92) ST(cid:36)FF ▪ Pa(cid:76)(cid:71) R1(cid:26)(cid:17)3bn in salaries (cid:9) benefits(cid:17) ▪ Staff engagement score strong at (cid:26)(cid:24)(cid:8) – (cid:90)ell a(cid:69)(cid:82)(cid:89)e (cid:76)n(cid:71)ust(cid:85)(cid:92) le(cid:89)els. ▪ A(cid:70)(cid:70)ele(cid:85)ate(cid:71) leaders(cid:75)ip (cid:9) culture c(cid:75)ange programmes(cid:17) ▪ Transforming our (cid:90)orkforce t(cid:82)(cid:90)a(cid:85)(cid:71)s SA (cid:71)em(cid:82)(cid:74)(cid:85)a(cid:83)(cid:75)(cid:76)(cid:70)s (79.5% (cid:69)la(cid:70)(cid:78) em(cid:83)l(cid:82)(cid:92)ees). C(cid:47)IENTS S(cid:43)(cid:36)RE(cid:43)(cid:50)(cid:47)DERS ▪ (cid:38)ele(cid:69)(cid:85)ate(cid:71) (cid:24)0 (cid:92)ears on t(cid:75)e (cid:45)SE in (cid:21)01(cid:28)(cid:17) ▪ Pa(cid:76)(cid:71) R(cid:26)(cid:17)1bn dividends t(cid:82) s(cid:75)a(cid:85)e(cid:75)(cid:82)l(cid:71)e(cid:85)s. ▪ Supportive outcomes at (cid:24)(cid:21)nd (cid:36)G(cid:48)(cid:17) ▪ En(cid:74)a(cid:74)(cid:76)n(cid:74) (cid:82)n ESG (cid:9) climate c(cid:75)ange matters(cid:17) (cid:50)ur purpose – t(cid:82) use (cid:82)u(cid:85) (cid:73)(cid:76)nan(cid:70)(cid:76)al e(cid:91)(cid:83)e(cid:85)t(cid:76)se t(cid:82) (cid:71)(cid:82) (cid:74)(cid:82)(cid:82)(cid:71) ▪ Ma(cid:76)nta(cid:76)ne(cid:71) a st(cid:85)(cid:82)n(cid:74) (cid:69)alan(cid:70)e s(cid:75)eet t(cid:82) REG(cid:56)(cid:47)(cid:36)T(cid:50)RS support a safe (cid:9) stable banking s(cid:92)stem(cid:17) ▪ Pa(cid:76)(cid:71) R11bn direct(cid:15) indirect (cid:9) ot(cid:75)er ta(cid:91)es(cid:17) ▪ R111bn invested in government (cid:9) public sector (cid:69)(cid:82)n(cid:71)s. S(cid:50)CIET(cid:60) ▪ R(cid:21)0(cid:27)bn ne(cid:90)(cid:16)loan pa(cid:92)outs(cid:15) u(cid:83) (cid:69)(cid:92) 15%. ▪ Sa(cid:73)e(cid:74)ua(cid:85)(cid:71)e(cid:71) R(cid:28)0(cid:23)bn deposits at (cid:70)(cid:82)m(cid:83)et(cid:76)t(cid:76)(cid:89)e (cid:76)nte(cid:85)est (cid:85)ates. ▪ E(cid:91)citing innovations launc(cid:75)ed – E(cid:70)l(cid:76)(cid:83)se(cid:15) (cid:43)e(cid:92)Ne(cid:71) ((cid:71)(cid:76)(cid:74)(cid:76)tal (cid:70)(cid:82)n(cid:70)(cid:76)e(cid:85)(cid:74)e)(cid:15) L(cid:82)(cid:92)alt(cid:92) (cid:9) Re(cid:90)a(cid:85)(cid:71)s(cid:15) (cid:9) API Ma(cid:85)(cid:78)et(cid:83)la(cid:70)e. ▪ (cid:41)(cid:76)(cid:85)st la(cid:85)(cid:74)e SA (cid:69)an(cid:78) t(cid:82) (cid:76)nt(cid:85)(cid:82)(cid:71)u(cid:70)e a (cid:93)ero(cid:16)mont(cid:75)l(cid:92)(cid:16)fee account(cid:17) ▪ (cid:50)nl(cid:92) S(cid:36) bank to increase N(cid:51)S score(cid:17) ▪ P(cid:85)(cid:82)(cid:70)u(cid:85)e(cid:71) (cid:26)(cid:25)(cid:8) of our goods (cid:9) services locall(cid:92)(cid:17) ▪ R130m SED spend – m(cid:82)(cid:85)e t(cid:75)an 50% (cid:82)n e(cid:71)u(cid:70)at(cid:76)(cid:82)n. ▪ (cid:50)ngoing deliver(cid:92) on t(cid:75)e SDGs – (cid:76)n(cid:70)lu(cid:71)(cid:76)n(cid:74) SA(cid:182)s (cid:73)(cid:76)(cid:85)st (cid:9) (cid:82)nl(cid:92) (cid:70)(cid:82)mme(cid:85)(cid:70)(cid:76)al (cid:69)an(cid:78) t(cid:82) l(cid:76)st a (cid:74)(cid:85)een (cid:69)(cid:82)n(cid:71) (cid:82)n t(cid:75)e (cid:45)SE. ▪ (cid:60)ES initiative – (cid:70)(cid:85)eate(cid:71) 3 315 mean(cid:76)n(cid:74)(cid:73)ul (cid:77)(cid:82)(cid:69) (cid:82)(cid:83)(cid:83)(cid:82)(cid:85)tun(cid:76)t(cid:76)es (cid:73)(cid:82)(cid:85) (cid:82)u(cid:85) (cid:92)(cid:82)ut(cid:75) (cid:76)n 2019. ▪ (cid:47)evel 1 (cid:37)(cid:37)(cid:37)EE (cid:70)(cid:82)nt(cid:85)(cid:76)(cid:69)ut(cid:82)(cid:85) (un(cid:71)e(cid:85) t(cid:75)e Amen(cid:71)e(cid:71) (cid:41)S(cid:38)). NEDBANK GROUP LIMITED – Annual Results 2019 1(cid:25) NEDBANK GROUP – ANNUAL RESULTS 2019 9 Being a responsible corporate citizen & focus on ESG BOOKLET SLIDE Delivering on our purpose Dow Jones Sustainability Index – one of only 27 banks & included for 14th year of using our financial expertise to do good >50% of SED spend on education First SA bank to launch a green bond on the JSE Launched 3 zero-monthly- fee accounts 76% procurement spend - support SA business YES – placed Committed R25m safeguarding critical water source areas >3 300 previously unemployed youth ESG AA rating NEDBANK GROUP LIMITED – Annual Results 2019 Africa’s first carbon-neutral financial organisation – carbon neutral since 2010 (& offset our water consumption) WWF Nedbank Green Trust Partnership – invested > R260m since inception in support of over 200 environmental & social projects Only SA company awarded overall winner at all three major reporting awards – IAS (SA), EY Integrated Reporting & JSE Chartered Secretaries Integrated Reporting - awards 2nd among all SA companies 2nd among global banks (similar size) Top 20 ESG among global banks & services companies 17 FINANCIAL OVERVIEW Financial performance reflects impact of higher impairments Raisibe Morathi CFO NEDBANK GROUP LIMITED – Annual Results 2019 18 10 NOTES:NOTES:NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION (cid:46)e(cid:92) performance indicators (cid:43)ea(cid:71)l(cid:76)ne ea(cid:85)n(cid:76)n(cid:74)s (Rm) E(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)t (Rm) ROE ROE (e(cid:91)(cid:70)l (cid:74)(cid:82)(cid:82)(cid:71)(cid:90)(cid:76)ll) D(cid:76)lute(cid:71) (cid:43)EPS ((cid:70)ents) P(cid:85)e(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)s(cid:76)(cid:82)n(cid:76)n(cid:74) (cid:82)(cid:83)e(cid:85)at(cid:76)n(cid:74) (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)t (Rm) Net (cid:76)nte(cid:85)est ma(cid:85)(cid:74)(cid:76)n (cid:38)(cid:85)e(cid:71)(cid:76)t l(cid:82)ss (cid:85)at(cid:76)(cid:82) (cid:38)(cid:82)st(cid:16)t(cid:82)(cid:16)(cid:76)n(cid:70)(cid:82)me (cid:85)at(cid:76)(cid:82) (cid:38)ET1 (cid:85)at(cid:76)(cid:82) (7%) (51%) (6%) (cid:14)3% (cid:21)01(cid:28) 1(cid:21) (cid:24)0(cid:25) 1 (cid:23)1(cid:21) 1(cid:24)(cid:17)0(cid:8) 1(cid:25)(cid:17)0(cid:8) (cid:21) (cid:24)(cid:25)(cid:24) 2018 13 495 2 868 16.8% 17.9% 2 736 (cid:21)(cid:21) (cid:24)(cid:26)(cid:26) 21 990 3(cid:17)(cid:24)(cid:21)(cid:8) 0(cid:17)(cid:27)(cid:21)(cid:8) (cid:24)(cid:25)(cid:17)(cid:24)(cid:8) 11(cid:17)(cid:24)(cid:8) 3.65% 0.53% 57.2% 11.7% NEDBANK GROUP LIMITED – Annual Results 2019 1(cid:28) (cid:43)eadline earnings do(cid:90)n b(cid:92) (cid:26)(cid:8) – (cid:76)m(cid:83)a(cid:70)t (cid:82)(cid:73) (cid:75)(cid:76)(cid:74)(cid:75)e(cid:85) (cid:76)m(cid:83)a(cid:76)(cid:85)ments (cid:43)eadline earnings (Rm) 22 1 348 (2 441) (547) 265 (296) 660 (cid:14)5% (cid:14)0% (cid:14)66% (cid:14)2% (cid:14)50% 13 495 2018 NII NIR Im(cid:83)a(cid:76)(cid:85)ments E(cid:91)(cid:83)enses Ass(cid:82)(cid:70)(cid:76)ate (cid:76)n(cid:70)(cid:82)me (cid:61)(cid:76)m(cid:69)a(cid:69)(cid:90)e net m(cid:82)neta(cid:85)(cid:92) l(cid:82)ss (1) D(cid:76)(cid:85)e(cid:70)t ta(cid:91) (cid:9) (cid:82)t(cid:75)e(cid:85) 12 506 2019 1 (cid:49)et monetary loss (cid:177) (cid:75)y(cid:83)erin(cid:73)lation accountin(cid:74) (cid:73)or o(cid:83)erations in (cid:61)im(cid:69)a(cid:69)(cid:90)e (cid:11)(cid:83)re(cid:16)minorities(cid:12). NEDBANK GROUP LIMITED – Annual Results 2019 (cid:21)0 NOTES: NOTES: NEDBANK GROUP – ANNUAL RESULTS 2019 11 (cid:52)ualit(cid:92) of earnings – (cid:76)llust(cid:85)at(cid:76)(cid:89)e (cid:76)m(cid:83)a(cid:70)t (cid:82)(cid:73) (cid:89)a(cid:85)(cid:76)(cid:82)us (cid:76)tems (cid:9) (cid:75)(cid:76)(cid:74)(cid:75)e(cid:85) (cid:76)m(cid:83)a(cid:76)(cid:85)ments (cid:43)eadline earnings (Rm) 500 238 140 186 75 61 96 12 506 2019 Net PRMA (cid:69)ene(cid:73)(cid:76)t A(cid:73)(cid:85)(cid:76)(cid:70)a Re(cid:74)(cid:76)(cid:82)ns (cid:82)n(cid:70)e(cid:16)(cid:82)(cid:73)(cid:73)s (cid:60)ES (cid:70)(cid:82)sts (cid:61)(cid:76)m(cid:69)a(cid:69)(cid:90)e (1) Ban(cid:70)(cid:82) (cid:210)n(cid:76)(cid:70)(cid:82) (cid:82)(cid:83)t(cid:76)(cid:82)n (2) P(cid:85)(cid:76)(cid:89)ate e(cid:84)u(cid:76)t(cid:92) (cid:85)e(cid:89)aluat(cid:76)(cid:82)ns (3) (cid:38)IB (cid:76)m(cid:83)a(cid:76)(cid:85)ments (4) 13 653 2019 a(cid:73)te(cid:85) (cid:76)tems (cid:43)1 (cid:21)01(cid:28) (cid:21)01(cid:28) (cid:43)(cid:21) (cid:21)01(cid:28) 1 (cid:61)im(cid:69)a(cid:69)(cid:90)e (cid:75)y(cid:83)erin(cid:73)lation accountin(cid:74) (cid:11)(cid:83)ost minorities(cid:15) (cid:53)1(cid:23)2m(cid:12) (cid:9) le(cid:74)acy de(cid:69)t im(cid:83)airment (cid:11)(cid:53)(cid:23)(cid:23)m(cid:12). | 2 (cid:36)ccountin(cid:74) (cid:73)or (cid:37)anco (cid:210)nico o(cid:83)tion. | (cid:22) (cid:51)ri(cid:89)ate(cid:16)equity re(cid:89)aluations o(cid:73) t(cid:90)o lar(cid:74)e CI(cid:37) counters. | (cid:23) CI(cid:37)(cid:182)s t(cid:75)ree lar(cid:74)est im(cid:83)airment c(cid:75)ar(cid:74)es. NEDBANK GROUP LIMITED – Annual Results 2019 (cid:21)1 NOTES: (cid:43)1 vs (cid:43)(cid:21) performance BOOKLET SLIDE (cid:43)1 (cid:21)01(cid:28) (cid:43)1 2018 (cid:43)(cid:21) (cid:21)01(cid:28) (cid:43)2 2018 NII 6% 1(cid:23) (cid:27)1(cid:28) 14 006 4% 1(cid:24) 3(cid:23)(cid:27) 14 813 Im(cid:83)a(cid:76)(cid:85)ments (40%) (cid:11)(cid:21) (cid:24)(cid:23)3(cid:12) (1 815) 91% (cid:11)3 (cid:24)(cid:27)(cid:25)(cid:12) (1 873) NIR E(cid:91)(cid:83)enses 5% 1(cid:21) (cid:27)(cid:26)(cid:23) 12 236 (5%) 13 1(cid:21)3 13 740 6% (cid:11)1(cid:24) (cid:24)(cid:25)(cid:24)(cid:12) (14 756) (2%) (cid:11)1(cid:25) (cid:25)1(cid:23)(cid:12) (16 876) Net m(cid:82)neta(cid:85)(cid:92) l(cid:82)ss – (cid:61)(cid:76)m(cid:69)a(cid:69)(cid:90)e (cid:33)100% (cid:11)(cid:21)(cid:28)(cid:25)(cid:12) Ass(cid:82)(cid:70)(cid:76)ate (cid:76)n(cid:70)(cid:82)me (cid:33)100% (cid:23)(cid:21)(cid:21) 207 (cid:14)16% 3(cid:26)1 321 D(cid:76)(cid:85)e(cid:70)t ta(cid:91) (6%) (cid:11)(cid:21) (cid:21)(cid:21)(cid:21)(cid:12) (2 362) (30%) (cid:11)1 (cid:26)(cid:21)0(cid:12) (2 445) (cid:43)ea(cid:71)l(cid:76)ne ea(cid:85)n(cid:76)n(cid:74)s 3% (cid:25) (cid:27)(cid:26)0 6 696 (17%) (cid:24) (cid:25)3(cid:25) 6 799 Round (cid:23) rene(cid:90)able energ(cid:92) (cid:71)eals (cid:76)n (cid:43)2 2018 (cid:69)ase(cid:15) n(cid:82)t (cid:85)e(cid:83)eate(cid:71) (cid:76)n 2019 Im(cid:83)a(cid:76)(cid:85)ment (cid:76)n(cid:70)(cid:85)ease (cid:73)(cid:85)(cid:82)m CI(cid:37) (cid:90)atc(cid:75)list clients in (cid:52)(cid:23)(cid:15) c(cid:92)clical increase in R(cid:37)(cid:37) (cid:9) central provision increase Ne(cid:74)at(cid:76)(cid:89)e private(cid:16)e(cid:84)uit(cid:92) revaluations (cid:74)(cid:76)(cid:89)en m(cid:82)(cid:85)e (cid:71)(cid:76)(cid:73)(cid:73)(cid:76)(cid:70)ult ma(cid:70)(cid:85)(cid:82)e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) en(cid:89)(cid:76)(cid:85)(cid:82)nment (cid:9) (cid:37)anco (cid:56)nico option (cid:61)imbab(cid:90)e (cid:75)(cid:92)perinflation(cid:29) (cid:74)(cid:85)(cid:82)ss u(cid:83) (cid:82)(cid:73) (cid:76)n(cid:70)(cid:82)me statement (cid:82)(cid:73)(cid:73)set (cid:69)(cid:92) R296m m(cid:82)neta(cid:85)(cid:92) l(cid:82)ss(cid:29) R142m (cid:43)E (cid:76)m(cid:83)a(cid:70)t (cid:49)ote(cid:29) (cid:50)nly (cid:78)ey lines o(cid:73) t(cid:75)e income statement s(cid:75)o(cid:90)n. NEDBANK GROUP LIMITED – Annual Results 2019 (cid:21)(cid:21) NOTES: 12 NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION Net interest income (cid:14)(cid:24)(cid:8) – st(cid:85)(cid:82)n(cid:74) AIEBA (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:82)(cid:73)(cid:73)set (cid:69)(cid:92) a (cid:71)e(cid:70)(cid:85)ease (cid:76)n NIM Net interest margin ((cid:69)(cid:83)s) (3) 2 (6) (4) (2) 365 2018 En(cid:71)(cid:82)(cid:90)ment (cid:76)m(cid:83)a(cid:70)t Asset m(cid:76)(cid:91) Asset (cid:83)(cid:85)(cid:76)(cid:70)(cid:76)n(cid:74) I(cid:41)RS 16 Ot(cid:75)e(cid:85) A(cid:89)e(cid:85)a(cid:74)e (cid:76)nte(cid:85)est(cid:16)ea(cid:85)n(cid:76)n(cid:74) (cid:69)an(cid:78)(cid:76)n(cid:74) assets(cid:29) (cid:14)8.6% 352 2019 NEDBANK GROUP LIMITED – Annual Results 2019 (cid:21)3 Net interest margin – e(cid:89)(cid:82)lut(cid:76)(cid:82)n (cid:82)(cid:73) T(cid:76)e(cid:85) 2 (cid:9) SUD (cid:83)(cid:85)(cid:76)(cid:70)(cid:76)n(cid:74) BOOKLET SLIDE (cid:51)ricing ((cid:69)(cid:83)s a(cid:69)(cid:82)(cid:89)e (cid:45)IBAR) ABIL Nene(cid:74)ate S(cid:82)(cid:89)e(cid:85)e(cid:76)(cid:74)n (cid:71)(cid:82)(cid:90)n(cid:74)(cid:85)a(cid:71)es S(cid:82)ut(cid:75) A(cid:73)(cid:85)(cid:76)(cid:70)an ele(cid:70)t(cid:76)(cid:82)ns Mar 14 Apr 14 Jun 14 Oct 14 Nov 14 Feb 15 Apr 15 May 15 Jun 15 Jul 15 Nov 15 Feb 16 May 16 Jul 16 Sep 16 Feb 17 Mar 17 May 17 Jun 17 Feb 18 Mar 18 Jul 18 Nov 18 Jan 19 Feb 19 Mar 19 Apr 19 May 19 Jun 19 Jul 19 Sep 19 Oct 19 Nov 19 Jan 20 3 year SUD 5 year SUD 7 year SUD 10 - 12 year SUD Tier 2 NEDBANK GROUP LIMITED – Annual Results 2019 (cid:21)(cid:23) NEDBANK GROUP – ANNUAL RESULTS 2019 13 NOTES: 450 400 350 300 250 200 150 100 50 - NOTES: Net banking advances (cid:14)(cid:26)(cid:8) (cid:237) m(cid:82)mentum (cid:76)n RBB (cid:9) s(cid:82)l(cid:76)(cid:71) (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:76)n (cid:38)IB BOOKLET SLIDE (cid:37)anking vs trading advances (R(cid:69)n) CI(cid:37) (cid:9) R(cid:37)(cid:37) banking advances (R(cid:69)n) 800 700 600 500 400 NOTES: 350 300 250 200 (cid:43)1 15 (cid:43)2 15 (cid:43)1 16 (cid:43)2 16 (cid:43)1 17 (cid:43)2 17 (cid:43)1 18 (cid:43)2 18 (cid:43)1 19 (cid:43)2 19 (cid:43)1 15 (cid:43)2 15 (cid:43)1 16 (cid:43)2 16 (cid:43)1 17 (cid:43)2 17 (cid:43)1 18 (cid:43)2 18 (cid:43)1 19 (cid:43)2 19 Ban(cid:78)(cid:76)n(cid:74) a(cid:71)(cid:89)an(cid:70)es T(cid:85)a(cid:71)(cid:76)n(cid:74) a(cid:71)(cid:89)an(cid:70)es (cid:38)IB (e(cid:91)(cid:70)l t(cid:85)a(cid:71)(cid:76)n(cid:74) a(cid:71)(cid:89)an(cid:70)es) RBB NEDBANK GROUP LIMITED – Annual Results 2019 (cid:21)(cid:24) Gross banking advances (cid:14)(cid:26)(cid:8) – sele(cid:70)t(cid:76)(cid:89)e (cid:82)(cid:85)(cid:76)(cid:74)(cid:76)nat(cid:76)(cid:82)n Gross banking advances (R(cid:69)n) (cid:37)(cid:36)(cid:28)00 market s(cid:75)are(cid:21) (%) (cid:58)(cid:75)(cid:82)lesale Reta(cid:76)l Le(cid:89)e(cid:85)a(cid:74)(cid:76)n(cid:74) (cid:85)elat(cid:76)(cid:82)ns(cid:75)(cid:76)(cid:83)s (cid:9) (cid:83)(cid:76)(cid:83)el(cid:76)ne Sele(cid:70)t(cid:76)(cid:89)e (cid:82)(cid:85)(cid:76)(cid:74)(cid:76)nat(cid:76)(cid:82)n (cid:9) un(cid:76)(cid:84)ue (cid:83)(cid:82)s(cid:76)t(cid:76)(cid:82)n(cid:76)n(cid:74) (cid:14)8% (cid:14)9% (cid:14)50% (14%) (cid:14)4% (cid:14)7% (cid:14)12% (cid:14)3% S(cid:75)are (cid:60)o(cid:92) trend (cid:38)(cid:82)mme(cid:85)(cid:70)(cid:76)al (cid:83)(cid:85)(cid:82)(cid:83)e(cid:85)t(cid:92) 3(cid:27)(cid:17)(cid:26) (0.4) (cid:38)(cid:82)(cid:85)e (cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)ate3 (cid:21)1(cid:17)(cid:21) (cid:14)0.6 (cid:43)(cid:82)me l(cid:82)ans 1(cid:23)(cid:17)(cid:23) (0.1) 6 6 1 0 8 1 2 8 1 9 9 1 2 2 5 1 4 3 9 2 6 5 1 2 6 1 1 2 1 0 3 1 2 2 5 2 (cid:57)e(cid:75)(cid:76)(cid:70)le (cid:73)(cid:76)nan(cid:70)e4 3(cid:25)(cid:17)(cid:23) (cid:14)0.6 Pe(cid:85)s(cid:82)nal l(cid:82)ans 10(cid:17)(cid:21) (0.2) 7 1 7 1 (cid:38)a(cid:85)(cid:71) 13(cid:17)0 (0.7) (cid:38)(cid:82)mme(cid:85)(cid:70)(cid:76)al (cid:83)(cid:85)(cid:82)(cid:83)e(cid:85)t(cid:92) Te(cid:85)m l(cid:82)ans 1 L(cid:82)ans t(cid:82) (cid:69)an(cid:78)s Ot(cid:75)e(cid:85) l(cid:82)ans (cid:43)(cid:82)me l(cid:82)ans (cid:57)e(cid:75)(cid:76)(cid:70)le (cid:73)(cid:76)nan(cid:70)e Pe(cid:85)s(cid:82)nal l(cid:82)ans (cid:38)a(cid:85)(cid:71) 2018 2019 1 (cid:55)erm loans include a reclassi(cid:73)ication o(cid:73) some in(cid:89)estment (cid:69)an(cid:78)in(cid:74) loans (cid:73)rom ot(cid:75)er loans. | 2 (cid:37)(cid:36)(cid:28)(cid:19)(cid:19) at (cid:39)ecem(cid:69)er 2(cid:19)1(cid:28) (cid:11)com(cid:83)ared (cid:90)it(cid:75) (cid:39)ecem(cid:69)er 2(cid:19)1(cid:27)(cid:12). (cid:22) Core cor(cid:83)orate loans e(cid:91)clude (cid:89)olatile s(cid:75)ort(cid:16)term lendin(cid:74). | (cid:23) (cid:57)e(cid:75)icle (cid:73)inance (cid:83)er (cid:37)(cid:36)(cid:28)(cid:19)(cid:19) com(cid:83)rises total lease (cid:9) instalment sales (cid:73)rom a (cid:75)ouse(cid:75)old (cid:83)ers(cid:83)ecti(cid:89)e. NEDBANK GROUP LIMITED – Annual Results 2019 (cid:21)(cid:25) NOTES: 14 NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION Deposits (cid:14)(cid:28)(cid:17)(cid:24)(cid:8) – (cid:70)(cid:82)mm(cid:76)tte(cid:71) t(cid:82) (cid:74)(cid:85)(cid:82)(cid:90) (cid:85)eta(cid:76)l (cid:9) (cid:70)(cid:82)mme(cid:85)(cid:70)(cid:76)al (cid:71)e(cid:83)(cid:82)s(cid:76)ts(cid:15) (cid:90)(cid:75)(cid:76)le mana(cid:74)(cid:76)n(cid:74) t(cid:75)e (cid:73)un(cid:71)(cid:76)n(cid:74) (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)le Deposits (R(cid:69)n) (cid:37)(cid:36)(cid:28)00 market s(cid:75)are1 31 1 16 1 (cid:27)(cid:21)(cid:25) 29 (cid:28)0(cid:23) S(cid:75)are (cid:60)o(cid:92) trend (cid:58)(cid:75)(cid:82)lesale (cid:21)3(cid:17)(cid:21) (cid:14)1.6 (cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)ate (n(cid:82)n(cid:16) (cid:73)(cid:76)nan(cid:70)(cid:76)al) 1(cid:25)(cid:17)(cid:24) (0.1) (cid:43)(cid:82)use(cid:75)(cid:82)l(cid:71) 1(cid:25)(cid:17)(cid:28) (1.1) (cid:41)(cid:82)(cid:85)e(cid:76)(cid:74)n (cid:70)u(cid:85)(cid:85)en(cid:70)(cid:92) 1(cid:21)(cid:17)0 (cid:14)1.6 (cid:14)5% (cid:14)1% (cid:14)9% (cid:14)3% (cid:14)34% 2018 RBB (cid:58)ealt(cid:75) (cid:38)IB A(cid:73)(cid:85)(cid:76)(cid:70)a Re(cid:74)(cid:76)(cid:82)ns (cid:38)ent(cid:85)e 2019 (cid:47)CR(cid:29) 1(cid:21)(cid:24)(cid:8) (m(cid:76)n (cid:85)e(cid:74)(cid:29) 100%) NSFR(cid:29) 113(cid:8) (m(cid:76)n (cid:85)e(cid:74)(cid:29) 100%) (cid:47)oan(cid:16)to(cid:16)deposit ratio(cid:29) (cid:27)(cid:27)(cid:8) (2018(cid:29) 89%) (cid:47)ong(cid:16)term funding ratio(cid:29) 30(cid:8) (2018(cid:29) 26%) 1 (cid:37)(cid:36)(cid:28)(cid:19)(cid:19) at (cid:39)ec 2(cid:19)1(cid:28). NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: (cid:21)(cid:26) NIR gro(cid:90)t(cid:75) flat – s(cid:82)l(cid:76)(cid:71) un(cid:71)e(cid:85)l(cid:92)(cid:76)n(cid:74) (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:82)(cid:73)(cid:73)set (cid:69)(cid:92) (cid:83)(cid:85)(cid:76)(cid:89)ate e(cid:84)u(cid:76)t(cid:92) (cid:85)e(cid:89)aluat(cid:76)(cid:82)ns NIR (Rm) (cid:14)3% (cid:14)2% (1%) (62%) (11%) 9 3 7 8 1 4 2 5 4 7 3 8 1 2 6 2 (cid:38)(cid:82)mm(cid:76)ss(cid:76)(cid:82)n (cid:9) (cid:73)ees T(cid:85)a(cid:71)(cid:76)n(cid:74) (cid:76)n(cid:70)(cid:82)me Insu(cid:85)an(cid:70)e (cid:76)n(cid:70)(cid:82)me P(cid:85)(cid:76)(cid:89)ate e(cid:84)u(cid:76)t(cid:92) 5 3 6 Ot(cid:75)e(cid:85)(cid:239) 1 (cid:53)e(cid:83)resents sundry income(cid:15) in(cid:89)estment income (cid:9) (cid:73)air(cid:16)(cid:89)alue ad(cid:77)ustments. NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: (cid:46)e(cid:92) drivers ▪ Commission (cid:9) fees – S(cid:82)l(cid:76)(cid:71) un(cid:71)e(cid:85)l(cid:92)(cid:76)n(cid:74) Reta(cid:76)l t(cid:85)ansa(cid:70)t(cid:76)(cid:82)nal NIR (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75)(cid:29) (cid:14)6% ((cid:71)ee(cid:83)e(cid:85) s(cid:75)a(cid:85)e (cid:82)(cid:73) (cid:90)allet (cid:9) ma(cid:76)n(cid:16) (cid:69)an(cid:78)e(cid:71) (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:76)n u(cid:83)(cid:83)e(cid:85) (cid:70)l(cid:76)ent se(cid:74)ments) – Su(cid:69)(cid:71)ue(cid:71) (cid:70)l(cid:76)ent a(cid:70)t(cid:76)(cid:89)(cid:76)t(cid:92) Trading – (cid:76)m(cid:83)a(cid:70)te(cid:71) (cid:69)(cid:92) l(cid:82)(cid:90) (cid:89)(cid:82)lumes(cid:15) l(cid:82)(cid:90) (cid:89)(cid:82)lat(cid:76)l(cid:76)t(cid:92) (cid:9) a (cid:73)(cid:76)(cid:85)m 2018 (cid:69)ase Insurance – (cid:74)(cid:82)(cid:82)(cid:71) sales (cid:89)(cid:82)lume (cid:76)n(cid:70)(cid:85)eases (cid:82)(cid:73)(cid:73)set (cid:69)(cid:92) (cid:75)(cid:76)(cid:74)(cid:75)e(cid:85) (cid:90)eat(cid:75)e(cid:85)(cid:16)(cid:85)elate(cid:71) (cid:70)la(cid:76)ms (cid:76)n (cid:43)1 19 (cid:51)rivate e(cid:84)uit(cid:92) – (cid:85)e(cid:73)le(cid:70)t(cid:76)(cid:89)e (cid:82)(cid:73) (cid:76)m(cid:83)a(cid:70)t (cid:82)(cid:73) (cid:90)ea(cid:78) SA e(cid:70)(cid:82)n(cid:82)m(cid:92) (cid:82)n (cid:85)e(cid:89)aluat(cid:76)(cid:82)ns (cid:82)(cid:73) a (cid:73)e(cid:90) s(cid:83)e(cid:70)(cid:76)(cid:73)(cid:76)(cid:70) (cid:70)(cid:82)unte(cid:85)s ▪ ▪ ▪ ▪ (cid:50)t(cid:75)er NIR – (cid:76)n(cid:70)lu(cid:71)es (cid:70)(cid:82)st (cid:82)(cid:73) e(cid:91)e(cid:85)(cid:70)(cid:76)s(cid:76)n(cid:74) an (cid:82)(cid:83)t(cid:76)(cid:82)n t(cid:82) (cid:76)n(cid:70)(cid:85)ease (cid:82)u(cid:85) s(cid:75)a(cid:85)e(cid:75)(cid:82)l(cid:71)(cid:76)n(cid:74) (cid:76)n Ban(cid:70)(cid:82) (cid:210)n(cid:76)(cid:70)(cid:82) (R140m) (cid:21)(cid:27) NEDBANK GROUP – ANNUAL RESULTS 2019 15 (cid:51)rivate e(cid:84)uit(cid:92) – 2019 (cid:85)e(cid:71)u(cid:70)t(cid:76)(cid:82)n (cid:71)(cid:85)(cid:76)(cid:89)en (cid:69)(cid:92) less (cid:71)(cid:76)(cid:89)(cid:76)(cid:71)en(cid:71)s (cid:85)e(cid:70)e(cid:76)(cid:89)e(cid:71) (cid:9) (cid:71)(cid:82)(cid:90)n(cid:90)a(cid:85)(cid:71) (cid:85)e(cid:89)aluat(cid:76)(cid:82)ns (un(cid:85)eal(cid:76)se(cid:71) (cid:76)n(cid:70)(cid:82)me) BOOKLET SLIDE (cid:51)rivate e(cid:84)uit(cid:92) investments1 (R(cid:69)n) (cid:46)e(cid:92) income statement drivers (Rm) 8 6 4 2 (cid:16) (cid:11)(cid:25)(cid:21)(cid:8)(cid:12) (cid:25)(cid:28)(cid:26) 15 330 509 (157) (cid:21)(cid:25)(cid:21) 144 45 534 (461) 15 16 17 18 19 Unl(cid:76)ste(cid:71) (cid:83)(cid:85)(cid:82)(cid:83)e(cid:85)t(cid:92) In(cid:89)estment Ban(cid:78)(cid:76)n(cid:74) 1 (cid:49)um(cid:69)ers (cid:75)a(cid:89)e (cid:69)een restated to included (cid:75)istoric in(cid:89)estments (cid:83)re(cid:89)iously disclosed in in(cid:89)estment in associates (cid:9) (cid:77)oint (cid:89)entures to ensure com(cid:83)ara(cid:69)ility. NEDBANK GROUP LIMITED – Annual Results 2019 18 Real(cid:76)se(cid:71) (cid:76)n(cid:70)(cid:82)me Un(cid:85)eal(cid:76)se(cid:71) (cid:76)n(cid:70)(cid:82)me 19 D(cid:76)(cid:89)(cid:76)(cid:71)en(cid:71)s (cid:85)e(cid:70)e(cid:76)(cid:89)e(cid:71) Ot(cid:75)e(cid:85) (cid:76)n(cid:70)(cid:82)me NOTES: Credit loss ratio up to (cid:27)(cid:21) bps – n(cid:82)(cid:85)mal(cid:76)sat(cid:76)(cid:82)n (cid:82)(cid:73) (cid:70)(cid:85)e(cid:71)(cid:76)t l(cid:82)sses (cid:82)(cid:73)(cid:73) a l(cid:82)(cid:90) (cid:69)ase (cid:9) (cid:76)n(cid:70)(cid:85)ease(cid:71) (cid:83)(cid:85)(cid:82)(cid:89)(cid:76)s(cid:76)(cid:82)n(cid:76)n(cid:74) (cid:76)n (cid:43)2 2019 Group C(cid:47)R1 ((cid:69)(cid:83)s) Cluster C(cid:47)R ((cid:69)(cid:83)s) 77 68 82 49 53 138 128 106 108 101 51 26 16 4 13 14 18 15 16 17 18 19 2 (cid:38)IB 3 RBB (cid:58)ealt(cid:75) 4 5 NAR (cid:36)ve banking advances 46.3% 46.5% 4.2% 3.0% 18 (cid:43)1 19 19 2 CI(cid:37) t(cid:75)rou(cid:74)(cid:75)(cid:16)t(cid:75)e(cid:16)cycle tar(cid:74)et ran(cid:74)e(cid:29) 1(cid:24)(cid:16)(cid:23)(cid:24) (cid:69)(cid:83)s. | (cid:22) (cid:53)(cid:37)(cid:37) t(cid:75)rou(cid:74)(cid:75)(cid:16)t(cid:75)e(cid:16)cycle tar(cid:74)et ran(cid:74)e(cid:29) 1(cid:22)(cid:19)(cid:177)1(cid:27)(cid:19) (cid:69)(cid:83)s. (cid:23) (cid:58)ealt(cid:75) t(cid:75)rou(cid:74)(cid:75)(cid:16)t(cid:75)e(cid:16)cycle tar(cid:74)et ran(cid:74)e(cid:29) 2(cid:19)(cid:177)(cid:23)(cid:19) (cid:69)(cid:83)s. | (cid:24) (cid:49)(cid:36)(cid:53) t(cid:75)rou(cid:74)(cid:75)(cid:16)t(cid:75)e(cid:16)cycle tar(cid:74)et ran(cid:74)e(cid:29) (cid:26)(cid:24)(cid:177)1(cid:19)(cid:19) (cid:69)(cid:83)s. 1 (cid:49)ed(cid:69)an(cid:78) t(cid:75)rou(cid:74)(cid:75)(cid:16)t(cid:75)e(cid:16)cycle tar(cid:74)et ran(cid:74)e(cid:29) (cid:25)(cid:19)(cid:177)1(cid:19)(cid:19) (cid:69)(cid:83)s. NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: 16 NEDBANK GROUP – ANNUAL RESULTS 2019 (cid:21)(cid:28) 30 RESULTS PRESENTATION Impairments (cid:14)(cid:25)(cid:25)(cid:8) – (cid:76)n(cid:70)(cid:85)eases a(cid:70)(cid:85)(cid:82)ss sta(cid:74)e 1(cid:15) 2 (cid:9) 3 (cid:76)m(cid:83)a(cid:76)(cid:85)ments Impairment drivers (Rm) Stage 1 coverage (%) 1 491 580 370 0.45 De(cid:70) 18 0.49 De(cid:70) 19 Stage (cid:21) coverage (%) 3 688 6 129 2018 Sta(cid:74)e 1 Sta(cid:74)e 2 Sta(cid:74)e 3 2019 4.97 De(cid:70) 18 5.31 De(cid:70) 19 NEDBANK GROUP LIMITED – Annual Results 2019 31 NOTES: Stage 3 advances – (cid:76)n(cid:70)(cid:85)ease (cid:76)n RBB (cid:71)e(cid:73)aults as t(cid:75)e ma(cid:70)(cid:85)(cid:82)e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) en(cid:89)(cid:76)(cid:85)(cid:82)nment (cid:71)ete(cid:85)(cid:76)(cid:82)(cid:85)ate(cid:71)(cid:15) (cid:82)(cid:73)(cid:73)set (cid:69)(cid:92) su(cid:70)(cid:70)ess(cid:73)ul (cid:85)est(cid:85)u(cid:70)tu(cid:85)es (cid:76)n (cid:38)IB Stage 3 advances1 (R(cid:69)n) Stage 3 coverage (%) Total Ot(cid:75)e(cid:85) (cid:38)IB (cid:14)6% (cid:21)(cid:24)(cid:17)(cid:21) 2.2 5.7 (5%) (cid:21)(cid:25)(cid:17)(cid:27) 2.3 5.4 (cid:14)4% (cid:21)(cid:26)(cid:17)(cid:25) 2.4 (cid:14)10% (cid:92)(cid:82)(cid:92) (24%) 4.1 (28%) (cid:92)(cid:82)(cid:92) 36.8 37.1 38.0 De(cid:70) 18 (cid:45)un 19 De(cid:70) 19 Stage 3 advances(cid:18)gross advances (%) RBB 17.3 (cid:14)11% 19.2 (cid:14)10% 21.1 (cid:14)22% (cid:92)(cid:82)(cid:92) De(cid:70) 18 (cid:45)un 19 De(cid:70) 19 De(cid:70) 18 (cid:45)un 19 De(cid:70) 19 3.47 3.57 3.55 1 (cid:40)(cid:91)cludes (cid:41)(cid:57)(cid:50)CI NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: 3(cid:21) NEDBANK GROUP – ANNUAL RESULTS 2019 17 E(cid:91)penses (cid:14)(cid:21)(cid:8) – (cid:74)(cid:82)(cid:82)(cid:71) (cid:70)(cid:82)st mana(cid:74)ement (cid:76)n (cid:85)es(cid:83)(cid:82)nse t(cid:82) sl(cid:82)(cid:90)(cid:76)n(cid:74) (cid:85)e(cid:89)enue (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:9) (cid:69)ene(cid:73)(cid:76)ts (cid:73)(cid:85)(cid:82)m (cid:71)(cid:76)(cid:74)(cid:76)t(cid:76)sat(cid:76)(cid:82)n E(cid:91)penses (Rm) (cid:46)e(cid:92) drivers D(cid:76)(cid:74)(cid:76)tal (cid:9) TOM (cid:69)ene(cid:73)(cid:76)ts (cid:14)5% (24%) (cid:14)12% (cid:14)1% 0 5 5 2 8 7 8 4 In(cid:70)ent(cid:76)(cid:89)es (STI (cid:9) LTI) (cid:38)(cid:82)m(cid:83)ute(cid:85) (cid:83)(cid:85)(cid:82)(cid:70)ess(cid:76)n(cid:74) 9 7 9 9 Ot(cid:75)e(cid:85) 2 7 7 4 1 Sta(cid:73)(cid:73) (cid:83)a(cid:70)(cid:78)a(cid:74)es (cid:9) (cid:82)t(cid:75)e(cid:85) ▪ ▪ Staff packages – A(cid:89)e(cid:85)a(cid:74)e sala(cid:85)(cid:92) (cid:76)n(cid:70)(cid:85)eases (cid:82)(cid:73) 5.4% – Re(cid:71)u(cid:70)t(cid:76)(cid:82)n (cid:76)n (cid:75)ea(cid:71)(cid:70)(cid:82)unt (cid:82)(cid:73) 1 874 Incentives – STI (cid:71)e(cid:70)l(cid:76)ne (cid:33) ea(cid:85)n(cid:76)n(cid:74)s (cid:71)e(cid:70)l(cid:76)ne ▪ Computer processing (cid:3013) S(cid:82)(cid:73)t(cid:90)a(cid:85)e am(cid:82)(cid:85)t(cid:76)sat(cid:76)(cid:82)n (cid:14)22% (cid:3013) St(cid:85)(cid:82)n(cid:74) (cid:89)(cid:82)lume (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) ▪ (cid:50)t(cid:75)er costs (cid:3013) Bene(cid:73)(cid:76)ts (cid:73)(cid:85)(cid:82)m TOM (R1.1(cid:69)n (cid:70)umulat(cid:76)(cid:89)e) (cid:3013) R134m (cid:60)ES (cid:70)(cid:82)sts (cid:3013) Res(cid:76)(cid:71)ual PRMA (cid:69)ene(cid:73)(cid:76)t(cid:29) R354m NEDBANK GROUP LIMITED – Annual Results 2019 33 NOTES: E(cid:91)penses – (cid:83)(cid:85)(cid:82)(cid:74)(cid:85)ess (cid:82)n (cid:78)e(cid:92) (cid:70)(cid:82)st (cid:82)(cid:83)t(cid:76)m(cid:76)sat(cid:76)(cid:82)n (cid:76)n(cid:76)t(cid:76)at(cid:76)(cid:89)es BOOKLET SLIDE Central costs(cid:15) propert(cid:92) (cid:9) procurement Tec(cid:75)nolog(cid:92) (cid:51)rocess optimisation R(cid:37)(cid:37) (cid:9) branc(cid:75) optimisation ▪ Group s(cid:75)ared services ▪ Improved IT pro(cid:77)ect deliver(cid:92) (cid:3013) Re(cid:71)u(cid:70)e(cid:71) num(cid:69)e(cid:85) (cid:82)(cid:73) sta(cid:73)(cid:73) ▪ (cid:51)rocurement savings (cid:3013) Pa(cid:83)e(cid:85) (cid:70)(cid:82)nsum(cid:83)t(cid:76)(cid:82)n (cid:378) (cid:21)(cid:24)(cid:8) (826 t(cid:82)ns (cid:73)(cid:85)(cid:82)m 1 104 t(cid:82)ns) (cid:3013) P(cid:85)(cid:82)(cid:70)u(cid:85)ement s(cid:83)en(cid:71) (cid:378) 3(cid:8) (R18.1(cid:69)n (cid:70)as(cid:75)(cid:73)l(cid:82)(cid:90) (cid:76)n (cid:181)19) ▪ Central propert(cid:92) savings (cid:3013) (cid:38)am(cid:83)us s(cid:76)tes(cid:29) (cid:378) (cid:23) (27 s(cid:76)tes(cid:15) LT ta(cid:85)(cid:74)et(cid:29) 22) (cid:3013) IT (cid:83)(cid:85)(cid:82)(cid:77)e(cid:70)ts us(cid:76)n(cid:74) a(cid:74)(cid:76)le (cid:9) (cid:75)(cid:92)(cid:69)(cid:85)(cid:76)(cid:71) met(cid:75)(cid:82)(cid:71)(cid:82)l(cid:82)(cid:74)(cid:76)es (cid:376) (cid:27)0(cid:8) ((cid:73)(cid:85)(cid:82)m 21% t(cid:90)(cid:82) (cid:92)ea(cid:85)s a(cid:74)(cid:82)) ▪ Cloud services (cid:3013) sa(cid:89)(cid:76)n(cid:74)s (cid:73)(cid:85)(cid:82)m m(cid:76)(cid:74)(cid:85)at(cid:76)(cid:82)n t(cid:82) (cid:70)l(cid:82)u(cid:71) (cid:82)(cid:89)e(cid:85) t(cid:76)me ((cid:181)19(cid:29) O(cid:73)(cid:73)(cid:76)(cid:70)e 360 (cid:9) sta(cid:73)(cid:73) ema(cid:76)l) ▪ IT s(cid:92)stems1 (cid:3013) (cid:38)(cid:82)(cid:85)e s(cid:92)stems (cid:378) t(cid:82) 11(cid:26) (ta(cid:85)(cid:74)et (cid:82)(cid:73) (cid:31) 85 (cid:69)(cid:92) (cid:181)20) ▪ Data(cid:16)driven intelligence (cid:3013) (cid:41)l(cid:82)(cid:82)(cid:85) s(cid:83)a(cid:70)e sa(cid:89)e(cid:71) (cid:376) (cid:24)(cid:23)k m(cid:21) (s(cid:76)n(cid:70)e (cid:181)16(cid:15) LT ta(cid:85)(cid:74)et(cid:29) (cid:33) 100(cid:78) m2) ▪ General costs – e(cid:91)(cid:83)ense (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75)(cid:29) ▪ T(cid:85)a(cid:89)el (cid:9) (cid:70)(cid:82)mms(cid:29) (cid:377)0(cid:8) ▪ Ma(cid:85)(cid:78)et(cid:76)n(cid:74)(cid:29) (cid:378)(cid:24)(cid:8) ▪ Digital client onboarding (cid:9) sales ((cid:82)n(cid:69)(cid:82)a(cid:85)(cid:71)(cid:76)n(cid:74) (cid:9) (cid:69)a(cid:70)(cid:78) (cid:82)(cid:73)(cid:73)(cid:76)(cid:70)e (cid:69)ene(cid:73)(cid:76)ts) ▪ Number of outlets (cid:177) ongoing optimisation (cid:3013) PL (cid:9) t(cid:85)ansa(cid:70)t(cid:76)(cid:82)nal sales (cid:376) (cid:33)(cid:28)0(cid:8) (T(cid:82)tal (cid:71)(cid:76)(cid:74)(cid:76)tal sales(cid:29) 21%(cid:15) LT (cid:71)(cid:76)(cid:74)(cid:76)tal sales ta(cid:85)(cid:74)et(cid:29) (cid:33) 75%) (cid:3013) (cid:38)l(cid:82)se(cid:71) (cid:21)1 (cid:83)(cid:82)(cid:76)nts (cid:82)(cid:73) (cid:83)(cid:85)esen(cid:70)e (ta(cid:85)(cid:74)et (cid:71)e(cid:83)en(cid:71)ent (cid:82)n (cid:71)(cid:76)(cid:74)(cid:76)tal u(cid:83)ta(cid:78)e). ▪ Self(cid:16)service (cid:9) staff(cid:16)assisted banking ▪ (cid:37)ranc(cid:75) floor space – Ne(cid:90) (cid:71)(cid:76)(cid:74)(cid:76)tal se(cid:85)(cid:89)(cid:76)(cid:70)es (cid:82)n m(cid:82)(cid:69)(cid:76)le(cid:15) a(cid:83)(cid:83) (cid:9) (cid:90)e(cid:69)(cid:29) (cid:376) 11(cid:23) (51 (cid:76)n 2018(cid:15) ta(cid:85)(cid:74)et(cid:29) (cid:33) 180 (cid:69)(cid:92) (cid:181)20) (cid:3013) Sa(cid:89)e(cid:71) (cid:376) (cid:23)(cid:21)k m(cid:21) t(cid:82) (cid:71)ate ((cid:73)(cid:85)(cid:82)m 33(cid:78) m2 (cid:76)n 18 (cid:9) ta(cid:85)(cid:74)et (cid:33) 49(cid:78) m2 (cid:69)(cid:92) (cid:181)20) – Sel(cid:73)(cid:16)se(cid:85)(cid:89)(cid:76)(cid:70)e (cid:70)as(cid:75) (cid:71)e(cid:83)(cid:82)s(cid:76)ts(cid:29) ▪ Sales (cid:9) service integration (cid:376) (cid:26)3(cid:8) (cid:82)(cid:73) all (cid:70)as(cid:75) (61% (cid:76)n (cid:181)18) ▪ Robotics (cid:9) automation (cid:3013) RPAs (cid:76)n use(cid:29) (cid:376) (cid:33) 300 ((cid:73)(cid:85)(cid:82)m 51 (cid:76)n 18(cid:15) e(cid:91)(cid:70)l t(cid:75)e (cid:57)BS (cid:33) 160 (cid:82)n(cid:69)(cid:82)a(cid:85)(cid:71)(cid:76)n(cid:74) (cid:69)(cid:82)ts) (cid:3013) ne(cid:90) (cid:82)(cid:83)e(cid:85)at(cid:76)n(cid:74) m(cid:82)(cid:71)el(cid:15) (cid:69)us(cid:76)ness (cid:85)e(cid:70)(cid:82)n(cid:73)(cid:76)(cid:74)u(cid:85)at(cid:76)(cid:82)n (cid:9) s(cid:76)m(cid:83)l(cid:76)(cid:73)(cid:76)(cid:70)at(cid:76)(cid:82)n (m(cid:82)stl(cid:92) (cid:70)(cid:82)m(cid:83)lete (cid:69)(cid:92) 2020) ▪ (cid:37)ackoffice (cid:9) R(cid:37)(cid:37) support function optimisation NEDBANK GROUP LIMITED – Annual Results 2019 3(cid:23) (cid:50)verall (cid:75)eadcount reduction (cid:378) 1 (cid:27)(cid:26)(cid:23) ((cid:90)(cid:76)t(cid:75) (cid:82)n(cid:74)(cid:82)(cid:76)n(cid:74) (cid:85)e(cid:71)u(cid:70)t(cid:76)(cid:82)n (cid:83)lanne(cid:71) (cid:76)nt(cid:82) 2020(cid:18)1) NOTES: 18 NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION IT spend reducing from (cid:21)0(cid:21)0 BOOKLET SLIDE IT soft(cid:90)are development spend (R(cid:69)n) Capitalised IT costs (R(cid:69)n) (cid:36)mortisation c(cid:75)arge (R(cid:69)n) Re(cid:74)ulat(cid:82)(cid:85)(cid:92) (cid:83)(cid:85)(cid:82)(cid:77)e(cid:70)ts alm(cid:82)st (cid:70)(cid:82)m(cid:83)lete (cid:9) (cid:71)e(cid:89)el(cid:82)(cid:83)ment (cid:70)(cid:82)st (cid:82)n ne(cid:90) te(cid:70)(cid:75)n(cid:82)l(cid:82)(cid:74)(cid:76)es (cid:71)e(cid:70)(cid:85)eas(cid:76)n(cid:74) 2.3 2.1 2.1 1.7 1.2 1.0 8.3 7.4 6.0 4.6 3.1 3.5 1.2 1.0 0.8 0.8 0.7 0.7 14 15 16 17 18 19 20 21 22 14 15 16 17 18 19 20 21 22 14 15 16 17 18 19 20 21 22 (cid:38)(cid:82)m(cid:83)l(cid:76)an(cid:70)e(cid:16)(cid:85)elate(cid:71) Illust(cid:85)at(cid:76)(cid:89)e (cid:82)nl(cid:92) NEDBANK GROUP LIMITED – Annual Results 2019 3(cid:24) NOTES: NOTES: (cid:61)imbab(cid:90)e – (cid:73)(cid:76)nan(cid:70)(cid:76)al (cid:76)m(cid:83)a(cid:70)ts (cid:82)(cid:73) (cid:75)(cid:92)(cid:83)e(cid:85)(cid:76)n(cid:73)lat(cid:76)(cid:82)n (cid:9) (cid:76)m(cid:83)a(cid:76)(cid:85)ment (cid:82)(cid:73) le(cid:74)a(cid:70)(cid:92) (cid:71)e(cid:69)t C(cid:51)I inde(cid:91) (cid:61)(cid:58)(cid:47) (cid:29) (cid:61)(cid:36)R e(cid:91)c(cid:75)ange rate 3.71 (cid:46)e(cid:92) drivers (cid:43)(cid:92)perinflationar(cid:92) accounting ▪ Re(cid:69)ase(cid:71) De(cid:70) (cid:182)18 e(cid:84)u(cid:76)t(cid:92) (R246m) (cid:25)(cid:17)(cid:21)1(cid:91) 2 5 5 ▪ Ga(cid:76)ns (cid:73)(cid:85)(cid:82)m (cid:76)n(cid:71)e(cid:91)(cid:76)n(cid:74) (cid:82)(cid:73) n(cid:82)n(cid:16)m(cid:82)neta(cid:85)(cid:92) assets2 R30m 3 7 4 3 0 4 ▪ In(cid:70)(cid:82)me statement (cid:76)n(cid:71)e(cid:91)(cid:76)n(cid:74)1 (R80m) Net m(cid:82)neta(cid:85)(cid:92) l(cid:82)ss (cid:11)R(cid:21)(cid:28)(cid:25)m(cid:12) ▪ In(cid:70)(cid:82)me statement (cid:76)n(cid:71)e(cid:91)(cid:76)n(cid:74)1 R80m 0 9 2 1.94 7 4 9 2 0 3 2 7 1 0 0 1 4 0 1 0 1 1 4 2 1 8 9 9 8 ▪ Less m(cid:76)n(cid:82)(cid:85)(cid:76)t(cid:76)es R74m (cid:11)R1(cid:23)(cid:21)m(cid:12) 0.83 (cid:50)t(cid:75)er c(cid:75)anges (cid:177) blocked funds ▪ Im(cid:83)a(cid:76)(cid:85)ment (cid:82)(cid:73) le(cid:74)a(cid:70)(cid:92) (cid:71)e(cid:69)t (R44m) Si(cid:93)e of Nedbank (cid:61)imbab(cid:90)e in Nedbank (cid:11)R1(cid:27)(cid:25)m(cid:12) De(cid:70) (cid:45)an (cid:41)e(cid:69) Ma(cid:85) A(cid:83)(cid:85) Ma(cid:92) (cid:45)un (cid:45)ul Au(cid:74) Se(cid:83) O(cid:70)t N(cid:82)(cid:89) De(cid:70) ▪ 0.1% (cid:82)(cid:73) t(cid:82)tal e(cid:84)u(cid:76)t(cid:92) (R123m (cid:18) R87.4(cid:69)n) 1 Inde(cid:91)in(cid:74) o(cid:73) I(cid:54) lines o(cid:73) (cid:53)(cid:27)(cid:19)m (cid:75)as an equal (cid:9) o(cid:83)(cid:83)osite c(cid:75)ar(cid:74)e in t(cid:75)e I(cid:54). 2 (cid:49)ed(cid:69)an(cid:78) (cid:18) (cid:69)an(cid:78)s li(cid:78)ely to (cid:69)e small in (cid:83)ro(cid:83)ortion to ot(cid:75)er com(cid:83)anies(cid:15) t(cid:75)ere(cid:73)ore not enou(cid:74)(cid:75) to o(cid:73)(cid:73)set im(cid:83)act o(cid:73) re(cid:69)asin(cid:74) equity. NEDBANK GROUP LIMITED – Annual Results 2019 3(cid:25) NEDBANK GROUP – ANNUAL RESULTS 2019 19 ETI associate income – (cid:85)e(cid:73)le(cid:70)ts ETI (cid:83)(cid:85)(cid:82)(cid:74)(cid:85)ess(cid:15) alt(cid:75)(cid:82)u(cid:74)(cid:75) en(cid:89)(cid:76)(cid:85)(cid:82)nment (cid:76)n N(cid:76)(cid:74)e(cid:85)(cid:76)a (cid:85)ema(cid:76)ns (cid:70)(cid:75)allen(cid:74)(cid:76)n(cid:74) (cid:9) (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:75)as sl(cid:82)(cid:90)e(cid:71) (cid:36)ssociate income from ETI1 (Rm) 870 ETI (cid:28)(cid:48) (cid:21)01(cid:28) results (cid:52)1 191 ▪ N(cid:76)(cid:74)e(cid:85)(cid:76)an (cid:82)(cid:83)e(cid:85)at(cid:76)(cid:82)ns 608 668 (cid:52)2 190 (cid:3013) (cid:38)(cid:75)allen(cid:74)(cid:76)n(cid:74) e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) (cid:9) (cid:85)e(cid:74)ulat(cid:82)(cid:85)(cid:92) en(cid:89)(cid:76)(cid:85)(cid:82)nment (cid:3013) NPLs (cid:85)ema(cid:76)n ele(cid:89)ate(cid:71) 180 (cid:3013) (cid:7)1m (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)t (cid:9) ROE(cid:29) 0.1% 107 ▪ R(cid:82)(cid:69)ust (cid:83)e(cid:85)(cid:73)(cid:82)(cid:85)man(cid:70)e (cid:76)n (cid:82)t(cid:75)e(cid:85) ETI (cid:74)e(cid:82)(cid:74)(cid:85)a(cid:83)(cid:75)(cid:76)es (cid:3013) ROEs (cid:33) 25% (cid:52)3 (cid:52)4 (125) (744) 15 16 17 18 19 1 (cid:40)(cid:55)I accounted (cid:73)or one quarter in arrear. NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: ETI carr(cid:92)ing value – (cid:57)alue(cid:16)(cid:76)n(cid:16)use sl(cid:76)(cid:74)(cid:75)tl(cid:92) a(cid:69)(cid:82)(cid:89)e (cid:70)a(cid:85)(cid:85)(cid:92)(cid:76)n(cid:74) (cid:89)alue Carr(cid:92)ing value drivers vs market value (R(cid:69)n) (1.0) (2.1) (0.5) (1) (cid:57)alue(cid:16)(cid:76)n(cid:16)use (cid:33) R2.7(cid:69)n 6.3 O(cid:85)(cid:76)(cid:74)(cid:76)nal (cid:70)(cid:82)st (cid:82)(cid:73) (cid:76)n(cid:89)estment 3.2 (cid:38)a(cid:85)(cid:85)(cid:92)(cid:76)n(cid:74) (cid:89)alue De(cid:70) 2018 2.7 1.3 4.3 (cid:38)a(cid:85)(cid:85)(cid:92)(cid:76)n(cid:74) (cid:89)alue De(cid:70) 2019 Ma(cid:85)(cid:78)et (cid:89)alue De(cid:70) 2019 S(cid:75)a(cid:85)e (cid:82)(cid:73) ETI NA(cid:57) Se(cid:83) 2019 Im(cid:83)a(cid:76)(cid:85)ment (cid:83)(cid:85)(cid:82)(cid:89)(cid:76)s(cid:76)(cid:82)n Ass(cid:82)(cid:70)(cid:76)ate (cid:76)n(cid:70)(cid:82)me(cid:18)(l(cid:82)ss)(cid:15) (cid:41)(cid:38)TR (cid:9) (cid:82)t(cid:75)e(cid:85) 1 (cid:41)C(cid:55)(cid:53) (cid:9) ot(cid:75)er loss o(cid:73)(cid:73)set (cid:69)y (cid:53)(cid:19)(cid:15)(cid:26)(cid:69)n o(cid:73) associate income. NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: 20 NEDBANK GROUP – ANNUAL RESULTS 2019 3(cid:26) 3(cid:27) RESULTS PRESENTATION Capital – (cid:38)ET1 at t(cid:75)e m(cid:76)(cid:71)(cid:83)(cid:82)(cid:76)nt (cid:82)(cid:73) (cid:82)u(cid:85) ta(cid:85)(cid:74)et (cid:85)an(cid:74)e CET1 capital ratio (%) – a(cid:73)te(cid:85) (cid:73)ull I(cid:41)RS (cid:76)m(cid:83)lementat(cid:76)(cid:82)n (1.2) 2.1 (0.2) (0.7) (0.2) (cid:38)ET1 ta(cid:85)(cid:74)et (cid:85)an(cid:74)e(cid:29) 10.5 – 12.5% 11.7 De(cid:70) 2018 SARB m(cid:76)n(cid:76)mum (cid:38)ET1(cid:29) 7.5% I(cid:41)RS 16 (cid:76)m(cid:83)a(cid:70)t O(cid:85)(cid:74)an(cid:76)(cid:70) (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)t D(cid:76)(cid:89)(cid:76)(cid:71)en(cid:71)s (cid:83)a(cid:76)(cid:71) R(cid:58)A (cid:76)n(cid:70)(cid:85)ease Intan(cid:74)(cid:76)(cid:69)les 11.5 De(cid:70) 2019 11.3 (cid:45)un 2019 NEDBANK GROUP LIMITED – Annual Results 2019 3(cid:28) NOTES: Dividend – (cid:90)(cid:76)t(cid:75)(cid:76)n (cid:69)(cid:82)a(cid:85)(cid:71)(cid:16)a(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)e(cid:71) ta(cid:85)(cid:74)et (cid:85)an(cid:74)e(cid:15) su(cid:83)(cid:83)(cid:82)(cid:85)t(cid:76)n(cid:74) a (cid:71)(cid:76)(cid:89)(cid:76)(cid:71)en(cid:71) (cid:92)(cid:76)el(cid:71) t(cid:75)at (cid:76)s att(cid:85)a(cid:70)t(cid:76)(cid:89)e (cid:73)(cid:82)(cid:85) (cid:76)n(cid:89)est(cid:82)(cid:85)s Dividend cover (t(cid:76)mes) Dividend (cid:92)ield (%) B(cid:82)a(cid:85)(cid:71)(cid:16)a(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)e(cid:71) ta(cid:85)(cid:74)et (cid:85)an(cid:74)e(cid:29) 1.75–2.25(cid:91) 2.06 2.00 1.91 1.97 1.84 Pa(cid:92)(cid:82)ut (cid:85)at(cid:76)(cid:82)(cid:29) % 9 4 De(cid:70) 2015 % 0 5 De(cid:70) 2016 % 2 5 De(cid:70) 2017 % 1 5 De(cid:70) 2018 % 4 5 De(cid:70) 2019 6.6 3.6 8 7 6 5 4 3 2 1 0 2015 2016 2017 2018 2019 Ne(cid:71)(cid:69)an(cid:78) All S(cid:75)a(cid:85)e NEDBANK GROUP LIMITED – Annual Results 2019 (cid:23)0 NOTES: NEDBANK GROUP – ANNUAL RESULTS 2019 21 (cid:43)eadline earnings b(cid:92) cluster (cid:43)eadline earnings (Rm) Earnings contribution (Rm) (8%) (2%) (8%) (35%) (5%) (3%) 4% 8% 4 1 7 6 7 6 1 6 9 7 3 5 3 9 2 5 3 3 1 1 2 4 0 1 2 0 7 7 5 4 (cid:38)IB RBB (cid:58)ealt(cid:75) A(cid:73)(cid:85)(cid:76)(cid:70)a Re(cid:74)(cid:76)(cid:82)ns 2018 2019 ) 3 3 4 ( ) 3 5 4 ( (cid:38)ent(cid:85)e 49% RBB A(cid:73)(cid:85)(cid:76)(cid:70)a Re(cid:74)(cid:76)(cid:82)ns 42% (cid:38)IB (cid:58)ealt(cid:75) (cid:38)ent(cid:85)e NEDBANK GROUP LIMITED – Annual Results 2019 (cid:23)1 NOTES: Centre – (cid:78)e(cid:92) (cid:71)(cid:85)(cid:76)(cid:89)e(cid:85)s (cid:76)n(cid:70)lu(cid:71)e (cid:82)n(cid:70)e(cid:16)(cid:82)(cid:73)(cid:73)s (cid:43)eadline earnings (Rm) (433) (453) 26 (72) 75 (96) 187 (140) 2018 (cid:38)ent(cid:85)al (cid:83)(cid:85)(cid:82)(cid:89)(cid:76)s(cid:76)(cid:82)n (cid:76)n(cid:70)(cid:85)ease Net PRMA (cid:74)a(cid:76)n Net (cid:73)a(cid:76)(cid:85)(cid:16)(cid:89)alue (cid:74)a(cid:76)ns (cid:60)ES (cid:70)(cid:82)sts Ban(cid:70)(cid:82) Un(cid:76)(cid:70)(cid:82) (cid:82)(cid:83)t(cid:76)(cid:82)n Ot(cid:75)e(cid:85) 2019 ▪ ▪ ▪ ▪ (cid:38)ent(cid:85)al (cid:83)(cid:85)(cid:82)(cid:89)(cid:76)s(cid:76)(cid:82)n (cid:76)n(cid:70)(cid:85)ease (net R100m (cid:83)(cid:85)eta(cid:91)). N(cid:82)ne (cid:76)n 2018. PRMA (cid:70)(cid:85)e(cid:71)(cid:76)t (cid:82)(cid:73) R354m (cid:83)(cid:85)eta(cid:91) (cid:76)n (cid:43)1 19 (cid:89)s (cid:43)1 18(cid:29) R250m (cid:83)(cid:85)eta(cid:91) (cid:60)ES (cid:70)(cid:82)st (cid:82)(cid:73) R134m (cid:83)(cid:85)eta(cid:91) (ne(cid:90) (cid:76)n 2019) Ban(cid:70)(cid:82) Un(cid:76)(cid:70)(cid:82) (cid:82)(cid:83)t(cid:76)(cid:82)n (cid:70)(cid:82)st (cid:82)(cid:73) R140m (cid:76)n 2019 NEDBANK GROUP LIMITED – Annual Results 2019 (cid:23)(cid:21) NOTES: 22 NEDBANK GROUP – ANNUAL RESULTS 2019 NEDBANK CIB Stable revenues & impairment headwinds Brian Kennedy Group Managing Executive NEDBANK GROUP LIMITED – Annual Results 2019 43 Stable revenues & impairment headwinds Headline earnings, ROE Key messages 12 000 10 000 8 000 6 000 4 000 2 000 - 22.6 21.1 20.7 20.0 17.7 (8%) 8 0 2 5 15 4 1 0 6 16 5 1 3 6 17 4 1 7 6 18 7 6 1 6 19 Headline earnings (Rm) ROE (%) 28.0 23.0 18.0 13.0 8.0 3.0 -2.0 ▪ GOI flat: Maintained revenue in a difficult macroeconomic environment ▪ Advances +7%: Good advances growth but pressure on margins impacting NII ▪ NIR -4%: Impacted by negative private equity revaluations & a high 2018 base ▪ CLR at 26 bps (2018: 4 bps): Increased off a low base but still within target range ▪ Expenses < 1%: Well contained with continued investment in skills & technology NEDBANK GROUP LIMITED – Annual Results 2019 44 23 RESULTS PRESENTATIONNOTES:NOTES:NEDBANK GROUP – ANNUAL RESULTS 2019 Corporate (cid:9) Investment (cid:37)anking – (cid:73)(cid:76)nan(cid:70)(cid:76)al (cid:75)(cid:76)(cid:74)(cid:75)l(cid:76)(cid:74)(cid:75)ts BOOKLET SLIDE (cid:60)ear ended (cid:8) c(cid:75)ange F(cid:60) (cid:21)01(cid:28) F(cid:60) (cid:21)01(cid:27) Ne(cid:71)(cid:69)an(cid:78) (cid:38)IB Ot(cid:75)e(cid:85) (cid:70)luste(cid:85)s (cid:43)ea(cid:71)l(cid:76)ne ea(cid:85)n(cid:76)n(cid:74)s (Rm) G(cid:85)(cid:82)ss (cid:82)(cid:83)e(cid:85)at(cid:76)n(cid:74) (cid:76)n(cid:70)(cid:82)me (Rm) PPOP (Rm) Net (cid:76)nte(cid:85)est ma(cid:85)(cid:74)(cid:76)n (%) NIR(cid:16)t(cid:82)(cid:16)e(cid:91)(cid:83)ense (cid:85)at(cid:76)(cid:82) (%) (cid:38)(cid:82)st(cid:16)t(cid:82)(cid:16)(cid:76)n(cid:70)(cid:82)me (cid:85)at(cid:76)(cid:82) (%) (cid:38)(cid:85)e(cid:71)(cid:76)t l(cid:82)ss (cid:85)at(cid:76)(cid:82) (%) A(cid:89)e(cid:85)a(cid:74)e (cid:69)an(cid:78)(cid:76)n(cid:74) a(cid:71)(cid:89)an(cid:70)es (Rm) A(cid:89)e(cid:85)a(cid:74)e (cid:71)e(cid:83)(cid:82)s(cid:76)ts (Rm) (cid:43)ea(cid:71)l(cid:76)ne e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)t (Rm) 1 A(cid:89)e(cid:85)a(cid:74)e all(cid:82)(cid:70)ate(cid:71) (cid:70)a(cid:83)(cid:76)tal (Rm) ROE (%) 1 (cid:38)(cid:82)st (cid:82)(cid:73) e(cid:84)u(cid:76)t(cid:92) 2018(cid:29) 14.1% (cid:95) 2019(cid:29) 14.1% NEDBANK GROUP LIMITED – Annual Results 2019 (8) 0 (1) 7 8 (38) 4 NOTES: (cid:25) 1(cid:25)(cid:26) 1(cid:24) (cid:25)(cid:27)(cid:25) (cid:27) (cid:28)1(cid:28) 1(cid:17)(cid:28)(cid:28) 1(cid:21)3(cid:17)(cid:27) (cid:23)(cid:21)(cid:17)1 0(cid:17)(cid:21)(cid:25) 6 714 15 684 9 014 2.12 129.7 41.9 0.04 3(cid:23)(cid:25) (cid:23)(cid:24)(cid:21) 324 384 3(cid:25)(cid:26) (cid:27)0(cid:23) 339 676 51% 1 (cid:21)3(cid:23) 3(cid:23) (cid:27)(cid:27)(cid:24) 1(cid:26)(cid:17)(cid:26) 1 976 33 555 20.0 50% 50% A(cid:71)(cid:89)an(cid:70)es 49% (cid:43)ea(cid:71)l(cid:76)ne ea(cid:85)n(cid:76)n(cid:74)s NIR do(cid:90)n off a (cid:75)ig(cid:75) base NIR (Rm) (cid:46)e(cid:92) drivers (cid:11)(cid:23)(cid:8)(cid:12) (cid:27) (cid:24)(cid:21)1 954 (45%) (cid:27) 1(cid:26)(cid:24) 529 (cid:38)AGR (cid:14)(cid:25)(cid:8) (16%) 3 289 (1%) 3 256 (cid:14)8% 4 278 (cid:14)3% 4 390 (cid:14)10% (cid:25) (cid:24)0(cid:27) 1 068 2 430 3 010 ▪ T(cid:85)a(cid:71)(cid:76)n(cid:74) (cid:76)n(cid:70)(cid:82)me (cid:14)3% (cid:71)es(cid:83)(cid:76)te l(cid:82)(cid:90) (cid:89)(cid:82)lat(cid:76)l(cid:76)t(cid:92) (cid:9) (cid:71)e(cid:70)(cid:85)ease(cid:71) (cid:89)(cid:82)lumes (cid:76)n t(cid:75)e (cid:73)(cid:76)(cid:85)st (cid:75)al(cid:73) (cid:82)(cid:73) 2019 ▪ (cid:38)(cid:82)nt(cid:76)nue(cid:71) (cid:76)n(cid:89)estment (cid:76)n ma(cid:85)(cid:78)et(cid:16)lea(cid:71)(cid:76)n(cid:74) t(cid:85)a(cid:71)(cid:76)n(cid:74) (cid:70)a(cid:83)a(cid:69)(cid:76)l(cid:76)t(cid:76)es a(cid:70)(cid:85)(cid:82)ss t(cid:75)e asset (cid:70)lasses ▪ (cid:38)(cid:82)mm(cid:76)ss(cid:76)(cid:82)n (cid:9) (cid:73)ees (cid:71)(cid:82)(cid:90)n sl(cid:76)(cid:74)(cid:75)tl(cid:92) – su(cid:69)(cid:71)ue(cid:71) (cid:70)l(cid:76)ent a(cid:70)t(cid:76)(cid:89)(cid:76)t(cid:92) (cid:82)(cid:73)(cid:73)set (cid:70)(cid:82)nt(cid:76)nue(cid:71) (cid:83)(cid:85)(cid:76)ma(cid:85)(cid:92)(cid:16)(cid:70)l(cid:76)ent (cid:90)(cid:76)ns ▪ P(cid:85)(cid:76)(cid:89)ate(cid:16)e(cid:84)u(cid:76)t(cid:92) (cid:76)n(cid:70)(cid:82)me (cid:76)m(cid:83)a(cid:70)te(cid:71) (cid:69)(cid:92) ne(cid:74)at(cid:76)(cid:89)e (cid:85)e(cid:89)aluat(cid:76)(cid:82)ns (cid:71)ue t(cid:82) t(cid:75)e (cid:90)ea(cid:78)e(cid:85) (cid:83)e(cid:85)(cid:73)(cid:82)(cid:85)man(cid:70)e (cid:82)(cid:73) (cid:70)e(cid:85)ta(cid:76)n (cid:76)n(cid:89)estments 15 18 T(cid:85)a(cid:71)(cid:76)n(cid:74) (cid:76)n(cid:70)(cid:82)me P(cid:85)(cid:76)(cid:89)ate e(cid:84)u(cid:76)t(cid:92) (cid:9) (cid:82)t(cid:75)e(cid:85) 19 (cid:38)(cid:82)mm(cid:76)ss(cid:76)(cid:82)n (cid:9) (cid:73)ees NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: 24 NEDBANK GROUP – ANNUAL RESULTS 2019 (cid:23)(cid:24) (cid:23)(cid:25) RESULTS PRESENTATION Continuous improvement across all ma(cid:77)or league tables CI(cid:37) commercial propert(cid:92) market s(cid:75)are Ma(cid:85)(cid:78)et lea(cid:71)e(cid:85) (cid:33)30% Rene(cid:90)able(cid:16)energ(cid:92) financing Ma(cid:85)(cid:78)et lea(cid:71)e(cid:85) (cid:90)(cid:76)t(cid:75) R36(cid:69)n (cid:70)(cid:82)mm(cid:76)tte(cid:71) (cid:21)01(cid:24) (cid:21)01(cid:27) (cid:21)01(cid:28) DC(cid:48) rankings Dealmakers (cid:48)(cid:9)(cid:36) advisors ▪ (cid:57)alue ▪ (cid:57)olume (cid:18)(cid:41)lo(cid:90) Spire a(cid:90)ards ▪ (cid:37)est team (cid:74)o(cid:89)ernment (cid:69)onds ▪ (cid:37)est interest rate deri(cid:89)ati(cid:89)e (cid:75)ouse ▪ (cid:37)est (cid:69)ond (cid:75)ouse ▪ (cid:49)um(cid:69)er o(cid:73) 1st (cid:83)lace a(cid:90)ards (cid:51)rimar(cid:92)(cid:16)dealer rankings (cid:51)rimar(cid:92)(cid:16)client (cid:90)ins NEDBANK GROUP LIMITED – Annual Results 2019 (cid:49)(cid:53)(cid:29) (cid:49)ot ran(cid:78)ed NOTES: (cid:6)3 (cid:6)22 (cid:6)12 (cid:6)3 NR NR 1 (cid:6)4 (cid:6)1 (cid:6)10 (cid:6)2 (cid:6)1 (cid:6)4 (cid:6)3 2 (cid:6)1 (cid:6)1 (cid:6)4 (cid:6)1 (cid:6)1 (cid:6)1 (cid:6)1 6 (cid:6)1 (cid:33)25 (cid:83)e(cid:85) annum (cid:23)(cid:26) (cid:50)ngoing primar(cid:92)(cid:16)client (cid:90)ins position CI(cid:37) for revenue uplift BOOKLET SLIDE (cid:51)rimar(cid:92)(cid:16)client (cid:90)ins ((cid:6)) Selected primar(cid:92)(cid:16)transactional(cid:16)account (cid:90)ins 3(cid:28) 2 2 10 22 25 15 16 T(cid:76)e(cid:85) 4 T(cid:76)e(cid:85) 3 (cid:21)(cid:25) 3 7 11 5 17 30 2 2 10 16 3(cid:21) 4 8 20 18 19 T(cid:76)e(cid:85) 2 T(cid:76)e(cid:85) 1 NEDBANK GROUP LIMITED – Annual Results 2019 (cid:23)(cid:27) NOTES: NEDBANK GROUP – ANNUAL RESULTS 2019 25 Strong advances gro(cid:90)t(cid:75) amid competition for (cid:75)ig(cid:75)(cid:16)(cid:84)ualit(cid:92) assets (cid:37)anking advances(cid:15) including corporate bonds (R(cid:69)n) (cid:46)e(cid:92) messages (cid:14)(cid:28)(cid:8) 3(cid:25)(cid:27) 2 154 3(cid:28)3 4 163 3(cid:24)(cid:28) 4 151 204 211 227 (cid:43)2 18 1 (cid:43)1 19 (cid:43)2 19 Ban(cid:78)(cid:76)n(cid:74) P(cid:85)(cid:82)(cid:83)e(cid:85)t(cid:92) (cid:41)(cid:76)nan(cid:70)e Ot(cid:75)e(cid:85) 33(cid:27) 3 150 186 (cid:43)1 18 ▪ (cid:38)(cid:82)n(cid:89)e(cid:85)s(cid:76)(cid:82)n (cid:82)(cid:73) s(cid:76)(cid:74)n(cid:76)(cid:73)(cid:76)(cid:70)ant (cid:71)eals (cid:76)n (cid:43)2 2019 ▪ Le(cid:89)e(cid:85)a(cid:74)(cid:76)n(cid:74) lea(cid:71)e(cid:85)s(cid:75)(cid:76)(cid:83) (cid:76)n (cid:38)P(cid:41) (cid:9) ene(cid:85)(cid:74)(cid:92) (cid:237) (cid:38)(cid:82)nt(cid:76)nue(cid:71) (cid:71)(cid:85)a(cid:90)(cid:71)(cid:82)(cid:90)ns (cid:82)(cid:73) (cid:85)(cid:82)un(cid:71) 4 (cid:85)ene(cid:90)a(cid:69)le(cid:16) ene(cid:85)(cid:74)(cid:92) (cid:71)eals (cid:237) Sele(cid:70)t(cid:76)(cid:89)e (cid:82)(cid:85)(cid:76)(cid:74)(cid:76)nat(cid:76)(cid:82)n (cid:76)n P(cid:85)(cid:82)(cid:83)e(cid:85)t(cid:92) (cid:41)(cid:76)nan(cid:70)e (cid:82)(cid:73)(cid:73) lea(cid:71)(cid:76)n(cid:74) ma(cid:85)(cid:78)et s(cid:75)a(cid:85)e (cid:83)(cid:82)s(cid:76)t(cid:76)(cid:82)n ▪ NII (cid:76)m(cid:83)a(cid:70)te(cid:71) (cid:69)(cid:92) (cid:70)(cid:82)m(cid:83)et(cid:76)t(cid:76)(cid:89)e (cid:83)(cid:85)(cid:76)(cid:70)(cid:76)n(cid:74) ▪ A(cid:90)a(cid:85)(cid:71)e(cid:71) S(cid:83)(cid:82)ns(cid:82)(cid:85) (cid:82)(cid:73) t(cid:75)e (cid:60)ea(cid:85) (cid:76)n t(cid:75)e P(cid:85)(cid:82)(cid:77)e(cid:70)t (cid:41)(cid:76)nan(cid:70)e Inte(cid:85)nat(cid:76)(cid:82)nal (P(cid:41)I) A(cid:90)a(cid:85)(cid:71)s (Enel G(cid:85)een P(cid:82)(cid:90)e(cid:85)) (cid:9) In(cid:73)(cid:85)ast(cid:85)u(cid:70)tu(cid:85)e (cid:9) P(cid:85)(cid:82)(cid:77)e(cid:70)t (cid:41)(cid:76)nan(cid:70)e Deal (cid:82)(cid:73) t(cid:75)e (cid:60)ea(cid:85) (cid:76)n T(cid:75)e Ban(cid:78)e(cid:85) A(cid:90)a(cid:85)(cid:71)s (Ge(cid:76)ta G(cid:82)l(cid:71) M(cid:76)ne) 1 (cid:37)an(cid:78)in(cid:74) de(cid:73)ined as In(cid:89)estment (cid:37)an(cid:78)in(cid:74) (cid:9) (cid:58)or(cid:78)in(cid:74) Ca(cid:83)ital com(cid:69)ined. NEDBANK GROUP LIMITED – Annual Results 2019 (cid:23)(cid:28) NOTES: Client solutions leading to significant (cid:90)ins BOOKLET SLIDE 2019 2019 2019 2019 Appointed sole mandated lead arranger, sole bookrunner, sole coordinator and sole hedge coordinator for R10bn debt refinance Concluded a bespoke funding solution with Caterpillar Financial Services South Africa following their entrance into the South African market CIB was mandated as arranger and funder to Barloworld’s Kula Sizwe B-BBEE Share Scheme Concluded a refinancing of Tsogo Sun Gaming’s credit facility 2019 2019 2019 2019 Sole arranger and lender of R4bn credit facility Joint global coordinator of R5.5bn credit facility CIB concluded the inaugural bank issuance in Africa of green renewable energy bonds into the debt capital markets for R2.7bn Successfully concluded a record US$5bn international capital market raise for the Republic of South Africa in the international Eurobond market 2019 2019 2019 2019 Successfully concluded a credit facility positioning us as the largest funding partner to the group Successfully concluded a credit funding in the capacity of sole funder Successfully concluded a credit facility in the capacity of co- funder Appointed as co-lead arranger on MBSA’s Debt Capital Market auctions, successfully raising R3.6bn in listed bonds NEDBANK GROUP LIMITED – Annual Results 2019 (cid:24)0 NOTES: 26 NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION Coverage (cid:9) impairments increased as t(cid:75)e credit environment deteriorated in (cid:43)(cid:21) – (cid:84)ual(cid:76)t(cid:92) (cid:82)(cid:73) (cid:69)(cid:82)(cid:82)(cid:78) ma(cid:76)nta(cid:76)ne(cid:71) (cid:52)ualit(cid:92) of book (cid:9) C(cid:47)R ((cid:69)(cid:83)s) Stage 3 advances (R(cid:69)n) 0.40% C(cid:47)R 0.04% 0.26% 4.1 4.1 5.7 Investment grade 63% 65% 66% 15 18 19 Coverage ratios (%) 24.6 11.6 12.8 0.28 0.37 0.36 15 18 19 De(cid:70) 18 (cid:45)un 19 De(cid:70) 19 Sta(cid:74)e 1 (cid:9) 2 Sta(cid:74)e 3 NEDBANK GROUP LIMITED – Annual Results 2019 (cid:24)1 NOTES: Coverage (cid:9) impairments increased as t(cid:75)e credit environment deteriorated in (cid:43)(cid:21)(cid:29) (cid:52)ualit(cid:92) of book maintained BOOKLET SLIDE Top 10 client contribution (%) CI(cid:37) selected sector e(cid:91)posures (%) 13% 15% 87% 85% S(cid:83)e(cid:70)(cid:76)(cid:73)(cid:76)(cid:70) (cid:76)m(cid:83)a(cid:76)(cid:85)ment (sta(cid:74)e 3) Sta(cid:74)e 3 (cid:71)e(cid:73)aults 10 la(cid:85)(cid:74)est e(cid:91)(cid:83)(cid:82)su(cid:85)es Ot(cid:75)e(cid:85) (cid:38)P(cid:41) 28% Ot(cid:75)e(cid:85) 72% State O(cid:90)ne(cid:71) Ent(cid:76)t(cid:76)es 3.5% 3.4% Reta(cid:76)le(cid:85)s M(cid:76)n(cid:76)n(cid:74) 2.5% 1.9% 4.4% 4.3% S(cid:75)a(cid:85)e Base(cid:71) De(cid:69)t 4.8% 3.3% (cid:38)(cid:82)nst(cid:85)u(cid:70)t(cid:76)(cid:82)n 1.3% 1.3% P(cid:85)(cid:82)(cid:83)e(cid:85)t(cid:92) (cid:41)(cid:76)nan(cid:70)e 41.3% 40.1% 18 19 M(cid:76)(cid:74)(cid:85)at(cid:76)(cid:82)n (cid:85)(cid:76)s(cid:78) D(cid:82)(cid:90)ns(cid:76)(cid:71)e (cid:85)(cid:76)s(cid:78) (cid:38)(cid:75)an(cid:74)e – M(cid:76)(cid:74)(cid:85)at(cid:76)(cid:82)n R(cid:76)s(cid:78) (cid:38)(cid:75)an(cid:74)e – D(cid:82)(cid:90)ns(cid:76)(cid:71)e R(cid:76)s(cid:78) (cid:48) (cid:43) (cid:48) (cid:48) (cid:48) (cid:48) (cid:47) (cid:48) (cid:48) (cid:48) (cid:47) (cid:48) (cid:378) (cid:16) (cid:16) (cid:378) (cid:16) (cid:16) (cid:378) (cid:376) (cid:376) (cid:376) (cid:16) (cid:376) (cid:378) (cid:62) (cid:64) R(cid:76)s(cid:78) (cid:71)e(cid:70)(cid:85)ease (cid:62) (cid:64) N(cid:82) (cid:70)(cid:75)an(cid:74)e (cid:62) (cid:64) R(cid:76)s(cid:78) (cid:76)n(cid:70)(cid:85)ease (cid:376) (cid:16) NEDBANK GROUP LIMITED – Annual Results 2019 (cid:24)(cid:21) NOTES: NEDBANK GROUP – ANNUAL RESULTS 2019 27 (cid:52)ualit(cid:92) commercial propert(cid:92) book BOOKLET SLIDE C(cid:47)R ((cid:69)(cid:83)s)(cid:15) (cid:47)T(cid:57)s (%) (cid:46)e(cid:92) drivers C(cid:47)R 8 4 (5) 10 (2) ▪ St(cid:85)(cid:82)n(cid:74) (cid:70)l(cid:76)ent (cid:69)ase su(cid:83)(cid:83)(cid:82)(cid:85)te(cid:71) (cid:69)(cid:92) an e(cid:91)(cid:83)e(cid:85)(cid:76)en(cid:70)e(cid:71) team ▪ A(cid:90)a(cid:85)(cid:71)e(cid:71) T(cid:82)(cid:83) A(cid:73)(cid:85)(cid:76)(cid:70)an Real(cid:16)Estate Ban(cid:78) (API A(cid:90)a(cid:85)(cid:71)s) (cid:47)T(cid:57) 47% 45% 42% 44% ▪ (cid:58)ell(cid:16)(cid:71)(cid:76)(cid:89)e(cid:85)s(cid:76)(cid:73)(cid:76)e(cid:71) (cid:83)(cid:82)(cid:85)t(cid:73)(cid:82)l(cid:76)(cid:82) (cid:9) (cid:90)e(cid:76)(cid:74)(cid:75)te(cid:71) t(cid:82) t(cid:75)e (cid:70)(cid:82)(cid:85)(cid:85)e(cid:70)t se(cid:74)ments (cid:76)n t(cid:75)e ma(cid:85)(cid:78)et 48% ▪ (cid:38)LR (cid:69)el(cid:82)(cid:90) ta(cid:85)(cid:74)et (cid:85)an(cid:74)e (cid:82)(cid:73) 15 (cid:69)(cid:83)s t(cid:82) 35 (cid:69)(cid:83)s ▪ L(cid:82)(cid:90) (cid:74)ea(cid:85)(cid:76)n(cid:74) (cid:16) a(cid:71)e(cid:84)uate (cid:70)(cid:82)llate(cid:85)al(cid:76)sat(cid:76)(cid:82)n s(cid:76)(cid:74)n(cid:76)(cid:73)(cid:76)(cid:70)antl(cid:92) (cid:85)e(cid:71)u(cid:70)es (cid:83)(cid:82)tent(cid:76)al l(cid:82)sses ▪ P(cid:85)(cid:76)ma(cid:85)(cid:92) len(cid:71)(cid:76)n(cid:74) (cid:82)(cid:83)e(cid:85)at(cid:76)(cid:82)n su(cid:83)(cid:83)lemente(cid:71) (cid:69)(cid:92) (cid:83)(cid:85)(cid:76)(cid:89)ate(cid:16)e(cid:84)u(cid:76)t(cid:92) a(cid:85)m ▪ (cid:57)aluat(cid:76)(cid:82)ns a(cid:85)e u(cid:83)(cid:71)ate(cid:71) (cid:82)n an (cid:82)n(cid:74)(cid:82)(cid:76)n(cid:74) (cid:69)as(cid:76)s(cid:15) (cid:83)(cid:85)e(cid:71)(cid:82)m(cid:76)nantl(cid:92) (cid:69)(cid:92) (cid:82)u(cid:85) (cid:76)nte(cid:85)nal 15 16 17 18 19 (cid:89)alue(cid:85)s(cid:15) (cid:90)(cid:76)t(cid:75) a (cid:83)(cid:82)(cid:85)t(cid:76)(cid:82)n (cid:82)uts(cid:82)u(cid:85)(cid:70)e(cid:71) t(cid:82) e(cid:91)te(cid:85)nal (cid:89)alue(cid:85)s ▪ Sta(cid:74)e 2 (cid:9) 3 (cid:70)l(cid:76)ents (cid:89)alue(cid:71) e(cid:89)e(cid:85)(cid:92) 6 m(cid:82)nt(cid:75)s (cid:36)verage (cid:47)T(cid:57) b(cid:92) sector (%) (cid:9) propert(cid:92) t(cid:92)pe (%) (cid:51)ortfolio vie(cid:90) (cid:47)T(cid:57) 48 56 52 52 38 37 34 ▪ 82% (cid:70)(cid:82)n(cid:70)ent(cid:85)ate(cid:71) t(cid:82) t(cid:75)e (cid:70)(cid:82)(cid:85)e se(cid:74)ments (cid:82)(cid:73) (cid:82)(cid:73)(cid:73)(cid:76)(cid:70)e(cid:15) (cid:85)eta(cid:76)l (cid:9) (cid:76)n(cid:71)ust(cid:85)(cid:76)al ((cid:76)n(cid:70)lu(cid:71)(cid:76)n(cid:74) mult(cid:76)(cid:83)le (cid:83)(cid:82)(cid:85)t(cid:73)(cid:82)l(cid:76)(cid:82)) ▪ 10% (cid:85)elates t(cid:82) (cid:85)es(cid:76)(cid:71)ent(cid:76)al(cid:15) (cid:76)n(cid:70)lu(cid:71)(cid:76)n(cid:74) (cid:70)as(cid:75)(cid:73)l(cid:82)(cid:90) (cid:83)(cid:85)(cid:82)(cid:71)u(cid:70)(cid:76)n(cid:74) (cid:85)ental st(cid:82)(cid:70)(cid:78) (cid:83)(cid:82)(cid:85)t(cid:73)(cid:82)l(cid:76)(cid:82) ▪ (cid:57)a(cid:70)ant lan(cid:71) (cid:31) 2% (cid:82)(cid:73) t(cid:75)e (cid:83)(cid:82)(cid:85)t(cid:73)(cid:82)l(cid:76)(cid:82) ▪ LT(cid:57)s (cid:33) 90% am(cid:82)unt t(cid:82) 1% (cid:82)(cid:73) t(cid:75)e (cid:83)(cid:82)(cid:85)t(cid:73)(cid:82)l(cid:76)(cid:82) (cid:9) 83% (cid:82)(cid:73) t(cid:75)e (cid:69)(cid:82)(cid:82)(cid:78) (cid:76)s (cid:69)el(cid:82)(cid:90) 70% SECT(cid:50)R (cid:8) 26% 25% 18% 13% 10% 2% 6% LT(cid:57) (cid:69)ase(cid:71) (cid:82)n Ne(cid:71)(cid:69)an(cid:78)(cid:182)s (cid:76)nte(cid:85)nal (cid:89)aluat(cid:76)(cid:82)ns ▪ A(cid:89)e(cid:85)a(cid:74)e LT(cid:57)s (cid:85)e(cid:73)le(cid:70)t (cid:85)(cid:76)s(cid:78) a(cid:83)(cid:83)et(cid:76)te a(cid:70)(cid:85)(cid:82)ss se(cid:70)t(cid:82)(cid:85)s – l(cid:82)(cid:90)e(cid:85) LT(cid:57)s (cid:82)n (cid:75)(cid:76)(cid:74)(cid:75)e(cid:85)(cid:16)(cid:85)(cid:76)s(cid:78) Reta(cid:76)l O(cid:73)(cid:73)(cid:76)(cid:70)es In(cid:71)ust(cid:85)(cid:76)al Mult(cid:76)(cid:83)le (cid:83)(cid:82)(cid:85)t(cid:73)(cid:82)l(cid:76)(cid:82) Res(cid:76)(cid:71)ent(cid:76)al (cid:57)a(cid:70)ant Ot(cid:75)e(cid:85) lan(cid:71) se(cid:70)t(cid:82)(cid:85)s NEDBANK GROUP LIMITED – Annual Results 2019 (cid:24)3 NOTES: Commercial propert(cid:92) sector insig(cid:75)ts BOOKLET SLIDE (cid:50)ffice space – (cid:82)(cid:89)e(cid:85)su(cid:83)(cid:83)l(cid:76)e(cid:71) Retail sector – la(cid:85)(cid:74)el(cid:92) (cid:82)(cid:89)e(cid:85)su(cid:83)(cid:83)l(cid:76)e(cid:71) (cid:76)n met(cid:85)(cid:82)s ▪ O(cid:73)(cid:73)(cid:76)(cid:70)e (cid:89)a(cid:70)an(cid:70)(cid:76)es (cid:85)ema(cid:76)n (cid:75)(cid:76)(cid:74)(cid:75) (cid:69)ut sta(cid:69)le at 11.0% a(cid:70)(cid:85)(cid:82)ss t(cid:75)e (cid:69)(cid:82)a(cid:85)(cid:71) ▪ ▪ ▪ ▪ Rentals (cid:85)ema(cid:76)n un(cid:71)e(cid:85) (cid:83)(cid:85)essu(cid:85)e (cid:90)(cid:76)t(cid:75) ne(cid:74)at(cid:76)(cid:89)e (cid:85)e(cid:89)e(cid:85)s(cid:76)(cid:82)ns (cid:70)(cid:82)mm(cid:82)n T(cid:75)e (cid:38)(cid:16)(cid:74)(cid:85)a(cid:71)e se(cid:74)ment (cid:75)a(cid:71) la(cid:85)(cid:74)est (cid:76)m(cid:83)(cid:85)(cid:82)(cid:89)ement (cid:76)n (cid:89)a(cid:70)an(cid:70)(cid:76)es (cid:71)ue t(cid:82) (cid:85)es(cid:76)(cid:71)ent(cid:76)al (cid:70)(cid:82)n(cid:89)e(cid:85)s(cid:76)(cid:82)ns De(cid:89)el(cid:82)(cid:83)ment a(cid:70)t(cid:76)(cid:89)(cid:76)t(cid:92) (cid:76)s at a 13(cid:16)(cid:92)ea(cid:85) l(cid:82)(cid:90). De(cid:89)el(cid:82)(cid:83)e(cid:85)s (cid:82)(cid:83)t(cid:76)n(cid:74) (cid:73)(cid:82)(cid:85) tenant(cid:16)(cid:71)(cid:85)(cid:76)(cid:89)en a(cid:83)(cid:83)(cid:85)(cid:82)a(cid:70)(cid:75) (cid:69)e(cid:73)(cid:82)(cid:85)e (cid:70)(cid:82)mm(cid:76)tt(cid:76)n(cid:74) (cid:70)a(cid:83)(cid:76)tal 61% (cid:82)(cid:73) ne(cid:90) (cid:71)e(cid:89)el(cid:82)(cid:83)ment (cid:70)(cid:82)n(cid:70)ent(cid:85)ate(cid:71) (cid:76)n San(cid:71)t(cid:82)n(cid:15) R(cid:82)se(cid:69)an(cid:78)(cid:15) (cid:58)ate(cid:85)(cid:73)all (cid:9) Menl(cid:92)n ▪ ▪ ▪ ▪ Reta(cid:76)l (cid:89)a(cid:70)an(cid:70)(cid:76)es (cid:70)u(cid:85)(cid:85)entl(cid:92) at 4.4%(cid:15) a(cid:69)(cid:82)(cid:89)e t(cid:75)e l(cid:82)n(cid:74)(cid:16)te(cid:85)m a(cid:89)e(cid:85)a(cid:74)e (cid:82)(cid:73) 2.9% Rentals (cid:85)ema(cid:76)n un(cid:71)e(cid:85) (cid:83)(cid:85)essu(cid:85)e (cid:90)(cid:76)t(cid:75) ne(cid:74)at(cid:76)(cid:89)e (cid:85)e(cid:89)e(cid:85)s(cid:76)(cid:82)ns (cid:70)(cid:82)mm(cid:82)n as lan(cid:71)l(cid:82)(cid:85)(cid:71)s l(cid:82)(cid:82)(cid:78) t(cid:82) (cid:83)(cid:85)(cid:82)te(cid:70)t (cid:89)a(cid:70)an(cid:70)(cid:76)es. Reta(cid:76)le(cid:85)s(cid:182) (cid:70)(cid:82)st (cid:82)(cid:73) (cid:82)(cid:70)(cid:70)u(cid:83)an(cid:70)(cid:92) (cid:82)n an u(cid:83)(cid:90)a(cid:85)(cid:71) t(cid:85)en(cid:71) Reta(cid:76)l l(cid:76)(cid:78)el(cid:92) t(cid:82) (cid:85)ema(cid:76)n un(cid:71)e(cid:85) (cid:83)(cid:85)essu(cid:85)e (cid:71)ue t(cid:82) (cid:71)(cid:76)(cid:73)(cid:73)(cid:76)(cid:70)ult e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) (cid:70)(cid:82)n(cid:71)(cid:76)t(cid:76)(cid:82)ns (cid:9) (cid:70)(cid:82)nsume(cid:85) s(cid:83)en(cid:71)(cid:76)n(cid:74) (cid:70)(cid:82)nst(cid:85)a(cid:76)nts (cid:57)a(cid:70)an(cid:70)(cid:76)es (cid:76)n su(cid:83)e(cid:85) (cid:85)e(cid:74)(cid:76)(cid:82)nal (cid:70)ent(cid:85)es ((cid:33)100 000 s(cid:84)m) at 4.7% (cid:70)(cid:82)m(cid:83)a(cid:85)e(cid:71) t(cid:82) ne(cid:76)(cid:74)(cid:75)(cid:69)(cid:82)u(cid:85)(cid:75)(cid:82)(cid:82)(cid:71) (cid:9) small (cid:85)e(cid:74)(cid:76)(cid:82)nals at 5.5% an(cid:71) 4.9% (cid:85)es(cid:83)e(cid:70)t(cid:76)(cid:89)el(cid:92) Industrial sector – (cid:85)es(cid:76)l(cid:76)ent Residential – (cid:70)aut(cid:76)(cid:82)us ▪ ▪ ▪ In(cid:71)ust(cid:85)(cid:76)al (cid:89)a(cid:70)an(cid:70)(cid:92) (cid:70)u(cid:85)(cid:85)entl(cid:92) at 3.4% a(cid:70)(cid:85)(cid:82)ss t(cid:75)e (cid:69)(cid:82)a(cid:85)(cid:71) (cid:9) (cid:76)s l(cid:82)(cid:90)e(cid:85) t(cid:75)an (cid:85)eta(cid:76)l (cid:9) (cid:82)(cid:73)(cid:73)(cid:76)(cid:70)e se(cid:70)t(cid:82)(cid:85) (cid:89)a(cid:70)an(cid:70)(cid:76)es Rental (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:82)(cid:73) 5.3% (cid:76)n (cid:43)1 2019(cid:15) (cid:69)ut l(cid:82)(cid:90)e(cid:85) (cid:70)a(cid:83)(cid:76)tal (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) at 2.4% In(cid:71)ust(cid:85)(cid:76)al (cid:83)(cid:85)(cid:82)(cid:83)e(cid:85)t(cid:92) (cid:73)un(cid:71)amentals (cid:75)a(cid:89)e (cid:69)ene(cid:73)(cid:76)tte(cid:71) (cid:73)(cid:85)(cid:82)m (cid:85)elat(cid:76)(cid:89)el(cid:92) (cid:70)(cid:82)nst(cid:85)a(cid:76)ne(cid:71) su(cid:83)(cid:83)l(cid:92) (cid:9) sta(cid:69)le (cid:70)a(cid:83)a(cid:70)(cid:76)t(cid:92) ut(cid:76)l(cid:76)sat(cid:76)(cid:82)n ▪ ▪ ▪ St(cid:85)(cid:82)n(cid:74) (cid:71)eman(cid:71) (cid:73)(cid:82)(cid:85) (cid:85)es(cid:76)(cid:71)ent(cid:76)al (cid:83)(cid:85)(cid:82)(cid:71)u(cid:70)t (cid:76)n l(cid:82)(cid:90)e(cid:85) (cid:83)(cid:85)(cid:76)(cid:70)e (cid:69)(cid:85)a(cid:70)(cid:78)ets – (cid:83)u(cid:85)(cid:70)(cid:75)ase (cid:83)(cid:85)(cid:76)(cid:70)e (cid:69)el(cid:82)(cid:90) R1m (cid:9) m(cid:82)nt(cid:75)l(cid:92) (cid:85)ental un(cid:71)e(cid:85) R8 500 A(cid:73)(cid:73)(cid:82)(cid:85)(cid:71)a(cid:69)le (cid:85)ental st(cid:82)(cid:70)(cid:78) ma(cid:85)(cid:78)et (cid:69)u(cid:82)(cid:92)ant (cid:76)n t(cid:75)e (cid:70)u(cid:85)(cid:85)ent ma(cid:85)(cid:78)et De(cid:89)el(cid:82)(cid:83)e(cid:85)s (cid:76)n (cid:74)ene(cid:85)al a(cid:85)e (cid:70)aut(cid:76)(cid:82)us (cid:76)n t(cid:75)e (cid:70)u(cid:85)(cid:85)ent e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) en(cid:89)(cid:76)(cid:85)(cid:82)nment NEDBANK GROUP LIMITED – Annual Results 2019 (cid:24)(cid:23) NOTES: 28 NEDBANK GROUP – ANNUAL RESULTS 2019 Prospects for CIB A powerful wholesale business highly focused on its clients Financial targets1 Leverage strengths ROE Markets Best-in-class teams Property Finance Market leader Investment Banking Transactional Services Strong advisory & sector expertise Disruptive thinking & technology solutions ▪ Medium term: ≥ 18% ▪ Long term: ≥ 20% Strategic focus Cost-to-income Client Centricity Sustainability Transformation & optimisation Africa ▪ Medium term: ≤ 42% ▪ Long term: ≤ 40 % 1 Medium-term defined as 2 to 3 years. Long-term defined as 5+ years. NEDBANK GROUP LIMITED – Annual Results 2019 55 NEDBANK RBB Strong growth in pre-provisioning operating profit offset by higher impairments Ciko Thomas Group Managing Executive NEDBANK GROUP LIMITED – Annual Results 2019 56 29 RESULTS PRESENTATIONNOTES:NOTES:NEDBANK GROUP – ANNUAL RESULTS 2019 Strong gro(cid:90)t(cid:75) in pre(cid:16)provisioning operating profit offset b(cid:92) (cid:75)ig(cid:75)er impairments (cid:43)eadline earnings(cid:15) R(cid:50)E (cid:46)e(cid:92) messages 7 000 6 500 6 000 5 500 5 000 4 500 4 000 3 500 3 000 18.9 19.1 18.9 16.6 17.3 (2%) 0 6 4 4 15 0 6 9 4 16 2 0 3 5 17 9 7 3 5 18 3 (cid:28) (cid:21) (cid:24) 19 (cid:43)ea(cid:71)l(cid:76)ne ea(cid:85)n(cid:76)n(cid:74)s (Rm) ROE (%) 20.0 15.0 10.0 5.0 (cid:16) ▪ PPOP (cid:14)11% (cid:237) NII (cid:14)6%(cid:29) s(cid:82)l(cid:76)(cid:71) a(cid:71)(cid:89)an(cid:70)es (cid:9) (cid:71)e(cid:83)(cid:82)s(cid:76)t (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:237) NIR (cid:14)6%(cid:29) (cid:71)(cid:85)(cid:76)(cid:89)en (cid:69)(cid:92) (cid:76)n(cid:73)lat(cid:76)(cid:82)na(cid:85)(cid:92) (cid:83)(cid:85)(cid:76)(cid:70)(cid:76)n(cid:74) (cid:76)n(cid:70)(cid:85)eases (cid:9) (cid:89)(cid:82)lume(cid:16)(cid:85)elate(cid:71) (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:237) E(cid:91)(cid:83)enses (cid:14)2%(cid:29) (cid:69)ene(cid:73)(cid:76)t (cid:73)(cid:85)(cid:82)m (cid:82)(cid:83)t(cid:76)m(cid:76)s(cid:76)n(cid:74) (cid:83)(cid:85)(cid:82)(cid:70)esses (cid:9) (cid:82)(cid:83)e(cid:85)at(cid:76)(cid:82)ns (cid:237) (cid:38)LR at 138 (cid:69)(cid:83)s ((cid:14)32 (cid:69)(cid:83)s)(cid:29) (cid:76)m(cid:83)a(cid:76)(cid:85)ments (cid:76)n(cid:70)(cid:85)ease(cid:71) (cid:70)(cid:92)(cid:70)l(cid:76)(cid:70)all(cid:92) (cid:82)(cid:73)(cid:73) a l(cid:82)(cid:90) (cid:69)ase (cid:90)(cid:76)t(cid:75) (cid:90)(cid:82)(cid:85)sen(cid:76)n(cid:74) ma(cid:70)(cid:85)(cid:82)en(cid:89)(cid:76)(cid:85)(cid:82)nment (cid:76)n t(cid:75)e (cid:73)(cid:82)u(cid:85)t(cid:75) (cid:84)ua(cid:85)te(cid:85) NEDBANK GROUP LIMITED – Annual Results 2019 (cid:24)(cid:26) Retail (cid:9) (cid:37)usiness (cid:37)anking – (cid:73)(cid:76)nan(cid:70)(cid:76)al (cid:75)(cid:76)(cid:74)(cid:75)l(cid:76)(cid:74)(cid:75)ts BOOKLET SLIDE (cid:60)ear ended (cid:8) c(cid:75)ange (cid:43)ea(cid:71)l(cid:76)ne ea(cid:85)n(cid:76)n(cid:74)s (Rm) G(cid:85)(cid:82)ss (cid:82)(cid:83)e(cid:85)at(cid:76)n(cid:74) (cid:76)n(cid:70)(cid:82)me (Rm) PPOP (Rm) Net (cid:76)nte(cid:85)est ma(cid:85)(cid:74)(cid:76)n (%) NIR(cid:16)t(cid:82)(cid:16)e(cid:91)(cid:83)ense (cid:85)at(cid:76)(cid:82) (%) (cid:38)(cid:82)st(cid:16)t(cid:82)(cid:16)(cid:76)n(cid:70)(cid:82)me (cid:85)at(cid:76)(cid:82) (%) (cid:38)(cid:85)e(cid:71)(cid:76)t l(cid:82)ss (cid:85)at(cid:76)(cid:82) (%) A(cid:89)e(cid:85)a(cid:74)e (cid:69)an(cid:78)(cid:76)n(cid:74) a(cid:71)(cid:89)an(cid:70)es (Rm) A(cid:89)e(cid:85)a(cid:74)e (cid:71)e(cid:83)(cid:82)s(cid:76)ts (Rm) (cid:43)ea(cid:71)l(cid:76)ne e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)t (Rm)1 A(cid:89)e(cid:85)a(cid:74)e all(cid:82)(cid:70)ate(cid:71) (cid:70)a(cid:83)(cid:76)tal (Rm) ROE (%) 1 Cost o(cid:73) equity 1(cid:27)(cid:29) 1(cid:23).1(cid:8) | 1(cid:28)(cid:29) 1(cid:23).1(cid:8). NEDBANK GROUP LIMITED – Annual Results 2019 (2) 6 11 7 8 (29) 7 (cid:21)01(cid:28) (cid:24) (cid:21)(cid:28)3 33 1(cid:23)(cid:28) 1(cid:21) 1(cid:26)(cid:24) (cid:24)(cid:17)(cid:25)(cid:26) (cid:25)(cid:24)(cid:17)3 (cid:25)1(cid:17)(cid:24) 1(cid:17)3(cid:27) (cid:21)01(cid:27) 5 379 31 283 10 926 5.69 62.9 64.0 1.06 33(cid:24) 101 312 119 3(cid:21)(cid:27) (cid:21)(cid:26)(cid:21) 305 151 (cid:28)(cid:25)(cid:26) 1 359 30 (cid:24)(cid:26)3 28 471 1(cid:26)(cid:17)3 18.9 Ne(cid:71)(cid:69)an(cid:78) RBB Ot(cid:75)e(cid:85) (cid:70)luste(cid:85)s A(cid:71)(cid:89)an(cid:70)es 44% 42% 56% 58% (cid:43)ea(cid:71)l(cid:76)ne ea(cid:85)n(cid:76)n(cid:74)s (cid:24)(cid:27) NOTES: NOTES: 30 NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION Consumer (cid:37)anking – (cid:43)E (cid:71)(cid:82)(cid:90)n as (cid:76)m(cid:83)a(cid:76)(cid:85)ments n(cid:82)(cid:85)mal(cid:76)se(cid:71)(cid:15) (cid:69)ut (cid:90)ell (cid:83)(cid:82)s(cid:76)t(cid:76)(cid:82)ne(cid:71) (cid:73)(cid:82)(cid:85) (cid:73)utu(cid:85)e (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:36)dvances (R(cid:69)n) 17 18 19 Income statement drivers (cid:46)e(cid:92) messages (cid:14)(cid:24)(cid:8) (cid:43)E (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) 3.3% ▪ (cid:52)ualit(cid:92) business (cid:90)ell (cid:83)(cid:82)s(cid:76)t(cid:76)(cid:82)ne(cid:71) (cid:73)(cid:82)(cid:85) (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:14)(cid:21)(cid:8) 67 66 59 217 203 208 Asset (cid:83)a(cid:92)(cid:82)uts A(cid:89)e(cid:85)a(cid:74)e Balan(cid:70)es PPOP (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) 12.8% ▪ Strong gro(cid:90)t(cid:75) in (cid:51)(cid:51)(cid:50)(cid:51) (cid:9) an NIR (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) 4.7% Financial ratios ROE (cid:38)LR NIR(cid:16)t(cid:82)(cid:16)e(cid:91)(cid:83)enses (cid:38)(cid:82)st(cid:16)t(cid:82)(cid:16)(cid:76)n(cid:70)(cid:82)me 14.4% 1.95% 61.7% 60.3% (cid:76)m(cid:83)(cid:85)(cid:82)(cid:89)ement (cid:76)n (cid:70)(cid:82)st(cid:16)t(cid:82)(cid:16) (cid:76)n(cid:70)(cid:82)me (cid:85)at(cid:76)(cid:82) ▪ Gro(cid:90)t(cid:75) in impairments off a lo(cid:90) base mute(cid:71) (cid:43)E (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) ▪ (cid:48)ost improved (cid:82)(cid:73) SA(cid:182)s (cid:73)(cid:76)(cid:89)e (cid:85)eta(cid:76)l (cid:69)an(cid:78)s (cid:82)n t(cid:75)(cid:85)ee (cid:71)(cid:76)(cid:73)(cid:73)e(cid:85)ent measu(cid:85)es (cid:82)(cid:73) client e(cid:91)perience ▪ (cid:41)(cid:82)(cid:70)us (cid:76)s t(cid:82) (cid:69)e e(cid:89)en m(cid:82)(cid:85)e client(cid:16)centred(cid:15) (cid:9) (cid:71)el(cid:76)(cid:89)e(cid:85) e(cid:89)en better client e(cid:91)periences. NEDBANK GROUP LIMITED – Annual Results 2019 (cid:24)(cid:28) (cid:37)usiness (cid:37)anking (cid:90)ell positioned for gro(cid:90)t(cid:75) (cid:36)dvances (R(cid:69)n) Income statement drivers (cid:46)e(cid:92) messages 17 18 19 (cid:14)13(cid:8) 26.6 23.6 (cid:14)11(cid:8) 74.7 67.6 62.5 20.3 (cid:43)E (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75)1 PPOP (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) A(cid:89)e (cid:71)e(cid:83)(cid:82)s(cid:76)t (cid:69)alan(cid:70)e NIR (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) Financial ratios ROE (cid:38)LR NIR(cid:16)t(cid:82)(cid:16)e(cid:91)(cid:83)enses Asset (cid:83)a(cid:92)(cid:82)uts A(cid:89)e(cid:85)a(cid:74)e (cid:69)alan(cid:70)es (cid:38)(cid:82)st(cid:16)t(cid:82)(cid:16)(cid:76)n(cid:70)(cid:82)me ▪ (cid:52)ualit(cid:92) business (cid:90)ell (cid:83)(cid:82)s(cid:76)t(cid:76)(cid:82)ne(cid:71) (cid:73)(cid:82)(cid:85) (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) ▪ Client groups increased t(cid:82) 14 700 ▪ Favourable N(cid:51)S score (cid:82)(cid:73) 45.1% (u(cid:83) 2.7% (cid:92)(cid:82)(cid:92)) ▪ Good momentum e(cid:89)(cid:76)(cid:71)en(cid:70)e(cid:71) a(cid:70)(cid:85)(cid:82)ss assets (cid:9) l(cid:76)a(cid:69)(cid:76)l(cid:76)t(cid:76)es ▪ Stea(cid:71)(cid:76)l(cid:92) improving brand a(cid:90)areness (cid:9) consideration (cid:69)(cid:92) t(cid:75)e ma(cid:85)(cid:78)et 0.4% 14.0% 9.0% 8.8% 18.3% 52 (cid:69)(cid:83)s 51.5% 61.9% (cid:40)(cid:91)cludes internal client mi(cid:74)rations (cid:69)et(cid:90)een di(cid:89)isions | 1 (cid:43)(cid:40) (cid:16)(cid:24).(cid:23)(cid:8) includin(cid:74) mi(cid:74)rations. NEDBANK GROUP LIMITED – Annual Results 2019 (cid:25)0 NOTES: NOTES: NEDBANK GROUP – ANNUAL RESULTS 2019 31 Retail Relations(cid:75)ip (cid:37)anking consistentl(cid:92) delivering a profitable performance (cid:36)dvances (R(cid:69)n) 17 18 19 (cid:14)11(cid:8) 39.1 35.1 32.5 (cid:14)(cid:28)(cid:8) 9.6 8.8 6.9 Income statement drivers (cid:46)e(cid:92) messages (cid:43)E (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75)1 PPOP (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) NIR (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) Financial ratios ROE (cid:38)LR NIR(cid:16)t(cid:82)(cid:16)e(cid:91)(cid:83)enses ▪ (cid:52)ualit(cid:92) business (cid:76)n a (cid:85)es(cid:76)l(cid:76)ent se(cid:70)t(cid:82)(cid:85) (cid:82)(cid:73) t(cid:75)e e(cid:70)(cid:82)n(cid:82)m(cid:92) ▪ Good momentum e(cid:89)(cid:76)(cid:71)en(cid:70)e(cid:71) a(cid:70)(cid:85)(cid:82)ss all l(cid:76)nes – t(cid:85)ansa(cid:70)t(cid:76)(cid:82)nal(cid:15) assets (cid:9) l(cid:76)a(cid:69)(cid:76)l(cid:76)t(cid:76)es ▪ Stea(cid:71)(cid:76)l(cid:92) (cid:76)m(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)n(cid:74) client metrics (cid:9) market perception 28.8% 32.9% 9.5% 31.7% 32 (cid:69)(cid:83)s 57.4% 63.8% Asset (cid:83)a(cid:92)(cid:82)uts A(cid:89)e(cid:85)a(cid:74)e (cid:69)alan(cid:70)es (cid:38)(cid:82)st(cid:16)t(cid:82)(cid:16)(cid:76)n(cid:70)(cid:82)me (cid:40)(cid:91)cludes internal client mi(cid:74)rations (cid:69)et(cid:90)een di(cid:89)isions | 1 (cid:43)(cid:40) (cid:14)(cid:23)(cid:19).2(cid:8) includin(cid:74) mi(cid:74)rations. * (cid:53)(cid:53)(cid:37) core e(cid:91)cludes internal mi(cid:74)rations NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: Good gro(cid:90)t(cid:75) in advances (cid:9) deposits BOOKLET SLIDE (cid:36)verage banking advances (R(cid:69)n) (cid:36)verage deposits (R(cid:69)n) 17 18 19 (cid:26)(cid:17)(cid:23)(cid:8) 5 3 3 (cid:14)(cid:26)(cid:17)1(cid:8) 2 1 3 5 9 2 5 6 0 7 5 7 (cid:14)(cid:26)(cid:17)(cid:26)(cid:8) (cid:14)(cid:24)(cid:17)(cid:27)(cid:8) 3(cid:17)(cid:24)(cid:8) (cid:26)(cid:17)(cid:25)(cid:8) (cid:14)1(cid:26)(cid:17)1(cid:8) 9 1 2 7 0 2 7 9 1 8 5 8 3 8 8 4 8 8 1 9 9 3 3 5 3 1 4 (cid:14)(cid:24)(cid:17)(cid:28)(cid:8) (cid:14)(cid:26)(cid:17)1(cid:8) 6 1 7 1 8 1 4 1 4 1 5 1 8 2 3 5 0 3 2 8 2 RBB t(cid:82)tal Bus(cid:76)ness Ban(cid:78)(cid:76)n(cid:74) Relat(cid:76)(cid:82)ns(cid:75)(cid:76)(cid:83) Ban(cid:78)(cid:76)n(cid:74) (cid:38)(cid:82)nsume(cid:85) Ban(cid:78)(cid:76)n(cid:74) (cid:9) (cid:82)t(cid:75)e(cid:85) (cid:42)ra(cid:83)(cid:75)s not dra(cid:90)n to scale (cid:9) do not include (cid:37)(cid:37)(cid:18) (cid:53)(cid:53)(cid:37) restructure. (cid:51)roduct lines e(cid:91)clude (cid:53)(cid:53)(cid:37) (cid:9) (cid:37)(cid:37). NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: (cid:43)(cid:82)me l(cid:82)ans (cid:57)e(cid:75)(cid:76)(cid:70)le (cid:73)(cid:76)nan(cid:70)e Pe(cid:85)s(cid:82)nal l(cid:82)ans (cid:38)a(cid:85)(cid:71) De(cid:83)(cid:82)s(cid:76)ts 32 NEDBANK GROUP – ANNUAL RESULTS 2019 (cid:25)1 (cid:25)(cid:21) RESULTS PRESENTATION Impairments – (cid:75)(cid:76)(cid:74)(cid:75)e(cid:85) (cid:74)(cid:76)(cid:89)en t(cid:75)e (cid:76)m(cid:83)a(cid:70)t (cid:82)(cid:73) t(cid:75)e ma(cid:70)(cid:85)(cid:82)e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) en(cid:89)(cid:76)(cid:85)(cid:82)nment Impats (R m) Credit loss ratio ((cid:69)(cid:83)s) (cid:46)e(cid:92) messages PL Ot(cid:75)e(cid:85) BB M(cid:41)(cid:38) (cid:43)L 1.06 1.06 1.38 180 130 Ta(cid:85)(cid:74)et (cid:85)an(cid:74)e C(cid:47)R increased b(cid:92) 3(cid:21) bps(cid:29) ▪ (cid:58)(cid:76)t(cid:75)(cid:76)n t(cid:75)e 130 (cid:69)(cid:83)s t(cid:82) 180 (cid:69)(cid:83)s TT(cid:38) ta(cid:85)(cid:74)et (cid:85)an(cid:74)e ▪ (cid:38)(cid:92)(cid:70)l(cid:76)(cid:70)al (cid:76)n(cid:70)(cid:85)ease (cid:82)(cid:73)(cid:73) a l(cid:82)(cid:90) (cid:69)ase ▪ R(cid:76)s(cid:78) n(cid:82)(cid:85)mal(cid:76)se(cid:71)(cid:15) (cid:71)(cid:85)(cid:76)(cid:89)en la(cid:85)(cid:74)el(cid:92) (cid:69)(cid:92) (cid:71)ete(cid:85)(cid:76)(cid:82)(cid:85)at(cid:76)n(cid:74) ma(cid:70)(cid:85)(cid:82)e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) en(cid:89)(cid:76)(cid:85)(cid:82)nment ▪ M(cid:41)(cid:38) (cid:76)n(cid:70)(cid:85)ease (cid:71)ue t(cid:82) (cid:75)(cid:76)(cid:74)(cid:75)e(cid:85) le(cid:89)els (cid:82)(cid:73) (cid:85)e(cid:83)(cid:82)ssess(cid:76)(cid:82)ns (cid:9) (cid:90)(cid:85)(cid:76)te(cid:82)(cid:73)(cid:73)s ▪ BB (cid:76)n(cid:70)(cid:85)ease (cid:74)(cid:76)(cid:89)en (cid:70)(cid:82)nt(cid:76)nue(cid:71) (cid:76)m(cid:83)a(cid:70)t (cid:82)(cid:73) l(cid:82)(cid:90) (cid:69)us(cid:76)ness (cid:70)(cid:82)n(cid:73)(cid:76)(cid:71)en(cid:70)e ▪ Re(cid:74)ulat(cid:82)(cid:85)(cid:92) (cid:76)m(cid:83)a(cid:70)ts (cid:76)n(cid:70)lu(cid:71)(cid:76)n(cid:74) set(cid:82)(cid:73)(cid:73) t(cid:85)eatment 2017 2018 2019 NEDBANK GROUP LIMITED – Annual Results 2019 (cid:25)3 Retail transactional NIR gro(cid:90)t(cid:75) a(cid:75)ead of client gro(cid:90)t(cid:75) – (cid:71)ee(cid:83)e(cid:85) (cid:70)l(cid:76)ent (cid:83)enet(cid:85)at(cid:76)(cid:82)n Total retail client base ((cid:6)000) Retail NIR (Rm) Total Reta(cid:76)l(cid:15) e(cid:91)(cid:70)l ma(cid:76)n(cid:16) (cid:69)an(cid:78)e(cid:71) Ma(cid:76)n(cid:16) (cid:69)an(cid:78)e(cid:71) (cid:14)0.1% (0.3%) (cid:26) (cid:24)3(cid:27) (cid:26) (cid:24)(cid:23)3 (cid:26) (cid:24)(cid:21)3 4 755 4 567 4 578 (cid:14)6.9% (1.0%) 2 783 2 976 17 18 2 945 1 19 Total Ot(cid:75)e(cid:85) T(cid:85)ansa(cid:70)t(cid:76)(cid:82)nal (cid:9) (cid:70)(cid:82)nsume(cid:85) (cid:70)a(cid:85)(cid:71) (cid:76)ssu(cid:76)n(cid:74) (cid:14)1.8% (cid:14)6.1% 10 (cid:24)3(cid:26) 3 572 10 (cid:26)(cid:21)(cid:24) 3 507 11 3(cid:27)(cid:23) 3 714 (cid:14)3.6% (cid:14)6.3% 6 965 7 218 7 670 17 18 19 1 (cid:39)eclines in acquisition (cid:90)ere (cid:69)alanced out (cid:69)y im(cid:83)ro(cid:89)ements in attrition. NEDBANK GROUP LIMITED – Annual Results 2019 (cid:25)(cid:23) NEDBANK GROUP – ANNUAL RESULTS 2019 33 NOTES: NOTES: Client(cid:16)centred strateg(cid:92) intact – st(cid:85)(cid:82)n(cid:74) (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) a(cid:70)(cid:85)(cid:82)ss m(cid:82)st se(cid:74)ments (cid:48)ain(cid:16)banked(cid:15) (cid:6) 000 (cid:75) t u (cid:82) (cid:92) (cid:9) s (cid:71) K (cid:76) l e (cid:89) e l (cid:92) (cid:85) t n E l e (cid:71) (cid:71) M (cid:76) (cid:11)3(cid:8)(cid:12) (cid:11)10(cid:8)(cid:12) 382 372 336 (cid:14)(cid:27)(cid:8) (cid:11)(cid:21)(cid:8)(cid:12) 1 411 1 525 1 495 (cid:14)(cid:28)(cid:8) (cid:14)1(cid:8) 797 872 884 17 18 19 l a n (cid:82) s s e (cid:76) (cid:73) (cid:82) (cid:85) P s s e n s u B (cid:76) l l a m S s s e n s u B (cid:76) (cid:15) 3 2 s e (cid:70) (cid:89) (cid:85) e S (cid:76) (cid:15) (cid:76) 3 1 (cid:74) n (cid:78) n a B (cid:14)10(cid:8) (cid:14)(cid:28)(cid:8) 70 77 84 (cid:14)(cid:25)(cid:8) (cid:14)(cid:25)(cid:8) 116 123 130 (cid:14)(cid:21)(cid:8) (cid:14)(cid:21)(cid:8) 21.1 21.5 22.0 17 18 19 1 Client (cid:74)rou(cid:83)s (cid:90)it(cid:75) (cid:74)ross o(cid:83)eratin(cid:74) income contri(cid:69)utions in e(cid:91)cess o(cid:73) (cid:53)(cid:24)(cid:19)(cid:19) (cid:83)m. | 2 2(cid:19)1(cid:26) (cid:90)as re(cid:69)ased (cid:73)or mi(cid:74)ration o(cid:73) t(cid:75)e (cid:42)rey (cid:51)ort(cid:73)olio (cid:73)rom (cid:37)(cid:37) to (cid:54)(cid:37)(cid:54) on 1 (cid:45)une 2(cid:19)1(cid:27). (cid:22). 2(cid:19)1(cid:28) re(cid:73)lects a li(cid:78)e(cid:16)(cid:73)or(cid:16)li(cid:78)e com(cid:83)arison (cid:83)rior to mo(cid:89)e o(cid:73) (cid:26)(cid:78) client (cid:74)rou(cid:83)s (cid:73)rom (cid:37)(cid:37) to (cid:53)(cid:53)(cid:37) (cid:11)resultin(cid:74) in (cid:28)(cid:78) additional main(cid:69)an(cid:78)ed(cid:12). (cid:51)ost mo(cid:89)e actuals are 1(cid:23).(cid:26)(cid:78) and 1(cid:22)(cid:28)(cid:78) (cid:73)or (cid:37)(cid:37) (cid:9) (cid:53)(cid:53)(cid:37) res(cid:83)ecti(cid:89)ely | (cid:49)ote(cid:29) (cid:49)on(cid:16)resident(cid:15) non(cid:16)indi(cid:89)idual se(cid:74)ment not s(cid:75)o(cid:90)n. NEDBANK GROUP LIMITED – Annual Results 2019 (cid:25)(cid:24) NOTES: Nedbank Retail (cid:9) (cid:37)usiness (cid:37)anking – (cid:69)u(cid:76)l(cid:71)(cid:76)n(cid:74) m(cid:82)(cid:85)e en(cid:71)u(cid:85)(cid:76)n(cid:74) (cid:70)l(cid:76)ent (cid:85)elat(cid:76)(cid:82)ns(cid:75)(cid:76)(cid:83)s t(cid:75)(cid:85)(cid:82)u(cid:74)(cid:75) t(cid:85)ansa(cid:70)t(cid:76)(cid:82)nal (cid:83)(cid:85)(cid:82)(cid:71)u(cid:70)t (cid:70)(cid:85)(cid:82)ss(cid:16)sell BOOKLET SLIDE Total retail clients1 (cid:8) (cid:92)o(cid:92) gro(cid:90)t(cid:75) Number of product line clients (cid:90)it(cid:75) transactional products(cid:15) (cid:6)000 (cid:8) (cid:92)o(cid:92) gro(cid:90)t(cid:75) (cid:6) 000 18 19 Investments Card (cid:51)ersonal loans (cid:48)FC ((cid:89)e(cid:75)(cid:76)(cid:70)le (cid:73)(cid:76)nan(cid:70)e) (cid:43)ome loans Transactional products 1 570 1 501 1 024 1 048 5 974 5 946 451 453 589 603 296 295 (cid:11)(cid:23)(cid:15)(cid:23)(cid:12) (cid:14)(cid:21)(cid:15)3 (cid:14)0(cid:15)(cid:23) (cid:14)(cid:21)(cid:17)(cid:23) (cid:11)0(cid:15)3(cid:12) (cid:11)0(cid:15)(cid:24)(cid:12) 1(cid:15)086 69% 608 59% 257 57% 142 24% 118 40% 1(cid:15)000 67% 633 60% 273 60% 151 25% 122 41% Transactional clients (cid:90)it(cid:75) product line 1(cid:15)650 28% 18 1(cid:15)615 27% 19 (cid:11)(cid:26)(cid:15)(cid:28)(cid:12) (cid:14)(cid:23)(cid:15)1 (cid:14)(cid:25)(cid:15)(cid:21) (cid:14)(cid:25)(cid:15)3 (cid:14)3(cid:15)(cid:23) (cid:11)(cid:21)(cid:15)1(cid:12) (cid:25)(cid:25) 1 (cid:55)ransactional declines in acquisition (cid:90)ere (cid:69)alanced out (cid:69)y im(cid:83)ro(cid:89)ements in attrition NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: 34 NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION Nedbank Retail (cid:9) (cid:37)usiness (cid:37)anking – NIR (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) su(cid:83)(cid:83)(cid:82)(cid:85)te(cid:71) (cid:69)(cid:92) (cid:74)(cid:82)(cid:82)(cid:71) (cid:89)(cid:82)lume (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75)(cid:15) (cid:69)ut mute(cid:71) (cid:69)(cid:92) st(cid:85)ate(cid:74)(cid:76)(cid:70) (cid:70)(cid:75)(cid:82)(cid:76)(cid:70)es (cid:9) (cid:82)t(cid:75)e(cid:85) (cid:73)a(cid:70)t(cid:82)(cid:85)s BOOKLET SLIDE NIR gro(cid:90)t(cid:75) (Rm) 14 28 43 233 0 89 323 15 312 1 (cid:38)a(cid:85)(cid:71) 164 T(cid:85)ans(cid:16) a(cid:70)t(cid:76)(cid:82)nal Se(cid:70)u(cid:85)e(cid:71) len(cid:71)(cid:76)n(cid:74) 2 P(cid:85)(cid:76)(cid:70)e (cid:76)n(cid:70)(cid:85)eases M(cid:76)(cid:91) Pe(cid:85)s(cid:82)nal l(cid:82)ans (cid:57)(cid:82)lume(cid:16)(cid:85)elate(cid:71) (cid:21)01(cid:27) NIR gro(cid:90)t(cid:75) (Rm) 727 A(cid:70)t(cid:76)(cid:89)(cid:76)t(cid:92) (cid:38)a(cid:85)(cid:71) ma(cid:85)(cid:74)(cid:76)n I(cid:41)RS Ot(cid:75)e(cid:85) (cid:60)O(cid:60) NIR 4 5 (cid:9) (cid:83)(cid:85)(cid:82)(cid:71) m(cid:76)(cid:91) (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:14)160 (cid:14)517 (cid:14)73 3 (cid:14)288 (4) (cid:14)1 (cid:14)111 (300) (582) (cid:14)14 (cid:14)278 1 (cid:42)ro(cid:90)t(cid:75) (cid:83)redominantly dri(cid:89)en (cid:69)y t(cid:75)e acquisition and (cid:89)olume (cid:74)ro(cid:90)t(cid:75) o(cid:73) (cid:78)ey acce(cid:83)tance clients 2 Includes a(cid:89)era(cid:74)e (cid:83)rice increase o(cid:73) (cid:23).(cid:24)(cid:8) im(cid:83)lemented on 1 (cid:45)anuary 2(cid:19)1(cid:28). (cid:22) Includes a(cid:89)era(cid:74)e (cid:83)rice increase o(cid:73) (cid:24).(cid:22)(cid:8) im(cid:83)lemented on 1 (cid:45)anuary 2(cid:19)1(cid:27). (cid:23) (cid:48)ar(cid:74)in reduction dri(cid:89)en (cid:69)y a c(cid:75)an(cid:74)es in customer transactin(cid:74) (cid:69)e(cid:75)a(cid:89)iour as (cid:90)ell as industry (cid:73)orces (cid:24) Includes 2(cid:19)1(cid:27) s(cid:90)a(cid:83) (cid:83)ro(cid:73)its in (cid:48)(cid:41)C and timin(cid:74) di(cid:73)(cid:73)erence on re(cid:89)ie(cid:90) (cid:73)ees in (cid:37)(cid:37). NEDBANK GROUP LIMITED – Annual Results 2019 (cid:25)(cid:26) Strong results in t(cid:75)e annual Consulta S(cid:36)(cid:16)csi results (cid:9) (cid:37)randse(cid:92)e social media surve(cid:92) In(cid:71)ust(cid:85)(cid:92) Ne(cid:71)(cid:69)an(cid:78) (cid:38)(cid:82)m(cid:83)et(cid:76)t(cid:82)(cid:85)s Net (cid:51)romoter Score (cid:6)3 S(cid:36)(cid:16)csi (cid:6)(cid:21) 26.1% 37.1% 38.1% 79.3 80.2 76.3 4 7 4 1 4 4 5 1 2017 2018 2019 2017 2018 2019 Social (cid:48)edia Sentiment (cid:6)1 (cid:43)ome (cid:47)oans S(cid:36)(cid:16)csi (cid:6)1 (5.8%) (7.7%) 20.4% 70.2 74.7 74.3 2017 2018 2019 2017 2018 2019 SA(cid:16)(cid:70)s(cid:76) (cid:32) S(cid:82)ut(cid:75) A(cid:73)(cid:85)(cid:76)(cid:70)an (cid:38)ust(cid:82)me(cid:85) Sat(cid:76)s(cid:73)a(cid:70)t(cid:76)(cid:82)n In(cid:71)e(cid:91) (cid:9) NPS (cid:32) Net P(cid:85)(cid:82)m(cid:82)te(cid:85) S(cid:70)(cid:82)(cid:85)e S(cid:82)u(cid:85)(cid:70)e(cid:29) SA(cid:16)(cid:70)s(cid:76) an(cid:71) NPS a(cid:85)e measu(cid:85)e(cid:71) annuall(cid:92) as (cid:83)a(cid:85)t (cid:82)(cid:73) (cid:38)(cid:82)nsulta(cid:182)s Ban(cid:78)(cid:76)n(cid:74) In(cid:71)ust(cid:85)(cid:92) SA(cid:16)(cid:70)s(cid:76) su(cid:85)(cid:89)e(cid:92) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75) (cid:75)as (cid:69)een (cid:85)unn(cid:76)n(cid:74) s(cid:76)n(cid:70)e 2012. T(cid:75)e 2019 sam(cid:83)le s(cid:76)(cid:93)e (cid:73)(cid:82)(cid:85) Ne(cid:71)(cid:69)an(cid:78) (cid:90)as 3 015(cid:15) (cid:70)(cid:82)ns(cid:76)st(cid:76)n(cid:74) (cid:82)n a (cid:70)(cid:82)m(cid:69)(cid:76)nat(cid:76)(cid:82)n (cid:82)(cid:73) tele(cid:83)(cid:75)(cid:82)n(cid:76)(cid:70) an(cid:71) (cid:90)e(cid:69)(cid:16)(cid:69)ase(cid:71) su(cid:85)(cid:89)e(cid:92)s. Sam(cid:83)l(cid:76)n(cid:74) (cid:90)as (cid:71)(cid:82)ne (cid:82)n a (cid:70)(cid:75)annel(cid:15) (cid:83)(cid:85)(cid:82)(cid:71)u(cid:70)t an(cid:71) se(cid:74)ment le(cid:89)el (t(cid:75)e sam(cid:83)le s(cid:76)(cid:93)e (cid:73)(cid:82)(cid:85) (cid:43)(cid:82)me L(cid:82)ans (cid:90)as 334). S(cid:82)(cid:70)(cid:76)al Me(cid:71)(cid:76)a Sent(cid:76)ment (cid:76)s measu(cid:85)e(cid:71) (cid:69)(cid:92) B(cid:85)an(cid:71)sE(cid:92)e(cid:182)s. B(cid:85)an(cid:71)sE(cid:92)e(cid:10)s 2019 Ban(cid:78)(cid:76)n(cid:74) Sent(cid:76)ment In(cid:71)e(cid:91)(cid:15) anal(cid:92)se(cid:71) 1.9 m(cid:76)ll(cid:76)(cid:82)n s(cid:82)(cid:70)(cid:76)al me(cid:71)(cid:76)a (cid:83)(cid:82)sts a(cid:69)(cid:82)ut S(cid:82)ut(cid:75) A(cid:73)(cid:85)(cid:76)(cid:70)a(cid:182)s la(cid:85)(cid:74)est (cid:69)an(cid:78)s an(cid:71) (cid:76)n(cid:70)lu(cid:71)e(cid:71) an anal(cid:92)s(cid:76)s (cid:82)(cid:73) 68 500 (cid:83)(cid:82)sts a(cid:69)(cid:82)ut t(cid:75)e ne(cid:90) ent(cid:85)ants(cid:15) Ban(cid:78) (cid:61)e(cid:85)(cid:82)(cid:15) D(cid:76)s(cid:70)(cid:82)(cid:89)e(cid:85)(cid:92) Ban(cid:78) (cid:9) T(cid:92)me. NEDBANK GROUP LIMITED – Annual Results 2019 (cid:25)(cid:27) NOTES: NOTES: NEDBANK GROUP – ANNUAL RESULTS 2019 35 (cid:43)ig(cid:75)lig(cid:75)ts of client innovations in R(cid:37)(cid:37) Digital onboarding (cid:43)omebu(cid:92)ing (cid:77)ourne(cid:92) (cid:47)ending (cid:36)(cid:51)I Greenbacks programme Seamless onboarding for clients Digital (cid:75)omebu(cid:92)ing e(cid:91)perience Disruptive (cid:9) inclusive lending (cid:48)one(cid:92) management programme ▪ S(cid:76)m(cid:83)le t(cid:85)ansa(cid:70)t(cid:76)(cid:82)nal a(cid:70)(cid:70)(cid:82)unt (cid:82)(cid:83)en(cid:76)n(cid:74) laun(cid:70)(cid:75)e(cid:71) (cid:82)n t(cid:75)e sel(cid:73)(cid:16)se(cid:85)(cid:89)(cid:76)(cid:70)e (cid:78)(cid:76)(cid:82)s(cid:78) ▪ Ena(cid:69)le(cid:71) small (cid:69)us(cid:76)nesses t(cid:82) (cid:82)(cid:83)en a t(cid:85)ansa(cid:70)t(cid:76)(cid:82)nal a(cid:70)(cid:70)(cid:82)unt en(cid:71)(cid:16)t(cid:82)(cid:16)en(cid:71) (cid:82)n ne(cid:71)(cid:69)an(cid:78).(cid:70)(cid:82).(cid:93)a ▪ A(cid:70)(cid:70)ess t(cid:82) (cid:83)(cid:85)(cid:82)(cid:83)e(cid:85)t(cid:92) sea(cid:85)(cid:70)(cid:75)(cid:15) (cid:83)(cid:85)(cid:82)(cid:83)e(cid:85)t(cid:92) (cid:85)e(cid:83)(cid:82)(cid:85)ts an(cid:71) (cid:70)(cid:85)e(cid:71)(cid:76)t (cid:83)(cid:85)ea(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)als (cid:82)n a(cid:83)(cid:83) ▪ S(cid:76)m(cid:83)l(cid:76)(cid:73)(cid:76)e(cid:71)(cid:15) (cid:70)(cid:75)at (cid:69)ase(cid:71) (cid:75)(cid:82)me l(cid:82)an a(cid:83)(cid:83)l(cid:76)(cid:70)at(cid:76)(cid:82)n – a(cid:71)(cid:71)(cid:76)t(cid:76)(cid:82)nal (cid:71)(cid:76)(cid:74)(cid:76)tal sales (cid:70)(cid:75)annel ▪ A(cid:70)(cid:70)ess (cid:70)(cid:85)e(cid:71)(cid:76)t t(cid:82) (cid:73)(cid:76)nan(cid:70)e t(cid:85)ansa(cid:70)t(cid:76)(cid:82)ns (cid:82)n me(cid:85)(cid:70)(cid:75)ants(cid:182) s(cid:76)tes (cid:76)n un(cid:71)e(cid:85) 5 m(cid:76)nutes ▪ Ne(cid:90) G(cid:85)een(cid:69)a(cid:70)(cid:78)s m(cid:82)ne(cid:92) mana(cid:74)ement (cid:83)(cid:85)(cid:82)(cid:74)(cid:85)amme laun(cid:70)(cid:75)e(cid:71) ▪ 1st (cid:76)n A(cid:73)(cid:85)(cid:76)(cid:70)a t(cid:82) al(cid:76)(cid:74)n t(cid:82) ▪ In(cid:70)ent(cid:76)(cid:89)(cid:76)s(cid:76)n(cid:74) (cid:9) (cid:85)e(cid:90)a(cid:85)(cid:71)(cid:76)n(cid:74) O(cid:83)en Ban(cid:78)(cid:76)n(cid:74) stan(cid:71)a(cid:85)(cid:71)s t(cid:75)(cid:85)(cid:82)u(cid:74)(cid:75) API (cid:83)lat(cid:73)(cid:82)(cid:85)m (cid:71)es(cid:76)(cid:85)e(cid:71) (cid:69)e(cid:75)a(cid:89)(cid:76)(cid:82)u(cid:85)s(cid:15) en(cid:70)(cid:82)u(cid:85)a(cid:74)e(cid:71) t(cid:75)(cid:85)(cid:82)u(cid:74)(cid:75) (cid:83)(cid:85)(cid:82)m(cid:83)ts (cid:9) nu(cid:71)(cid:74)es NEDBANK GROUP LIMITED – Annual Results 2019 (cid:25)(cid:28) (cid:36)ccelerated digitisation of tec(cid:75)nolog(cid:92) (cid:9) operations Digitall(cid:92) enabled clients ((cid:6) 000) Digitall(cid:92) active clients ((cid:6) 000) Self(cid:16)service cas(cid:75) deposit volumes (%) (cid:14)3(cid:8) 1 1 9 5 18 4 8 7 5 17 (cid:14)(cid:24)(cid:8) 5 8 1 6 19 (cid:14)1(cid:24)(cid:8) (cid:14)10(cid:8) 4 4 4 4 5 5 1 1 18 4 4 7 7 4 4 1 1 17 7 7 7 1 19 (cid:14)(cid:21)(cid:23)(cid:8) 61 61 18 73 73 19 48 48 17 (cid:48)one(cid:92) app active users ((cid:6) 000) (cid:48)obile app t(cid:75)ird(cid:16)part(cid:92) pa(cid:92)ments (cid:9) transfers (R(cid:69)n) Digital vas1 NIR (Rm) (cid:14)(cid:27)(cid:24)(cid:8) (cid:14)(cid:27)(cid:21)(cid:8) 0 17 450 18 832 19 6 2 17 0 5 18 1 9 19 (cid:14)3(cid:25)(cid:8) 194 (cid:14)(cid:21)(cid:28)(cid:8) 250 18 19 134 17 1 (cid:57)alue(cid:16)added ser(cid:89)ices (cid:11)electricity(cid:15) data(cid:15) airtime(cid:15) instant (cid:83)ayments(cid:15) etc(cid:12). NEDBANK GROUP LIMITED – Annual Results 2019 (cid:26)0 NOTES: NOTES: 36 NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION (cid:50)ptimisation of processes (cid:9) operations Total R(cid:37)(cid:37) emplo(cid:92)ees ((cid:6)) (cid:37)ranc(cid:75) floor space saved ((cid:181)000 m2)1 Number of retail outlets ((cid:6)) (cid:16)(cid:26)(cid:8) 5 4 5 9 1 18 3 4 2 0 2 17 (cid:16)10(cid:8) 9 6 6 7 1 19 Teller activit(cid:92) ((cid:6) 000)2 36 860 30 911 0 6 8 6 3 17 1 1 9 0 3 18 23 343 3 4 3 3 2 19 24 17 33 18 42 19 613 17 604 18 589 19 Cumulative robotics process automation ((cid:6)) Cumulative efficiencies (Rm)3 1 17 48 18 125 19 4 4 4 17 7 1 0 1 18 7 0 5 1 19 1 (cid:53)e(cid:83)resents t(cid:75)e total (cid:69)ranc(cid:75) (cid:73)loor s(cid:83)ace (cid:90)e sa(cid:89)ed since 2(cid:19)1(cid:23) (cid:90)it(cid:75) a tar(cid:74)et o(cid:73) (cid:33) (cid:23)(cid:28) (cid:19)(cid:19)(cid:19)m2 equatin(cid:74) to a(cid:83)(cid:83)ro(cid:91)imately 2(cid:22)(cid:8) o(cid:73) our (cid:69)ranc(cid:75) (cid:73)loor s(cid:83)ace in 2(cid:19)1(cid:23) (cid:90)(cid:75)en (cid:90)e started t(cid:75)e (cid:77)ourney. (cid:95) 2 (cid:53)e(cid:73)ers to t(cid:75)e (cid:89)olumes o(cid:73) interactions. | (cid:22) 2(cid:19)1(cid:28) includes (cid:53)1(cid:69)n o(cid:73) (cid:55)(cid:50)(cid:48)(cid:16)related e(cid:73)(cid:73)iciencies. NEDBANK GROUP LIMITED – Annual Results 2019 (cid:26)1 NOTES: (cid:51)rospects for R(cid:37)(cid:37) (cid:37)uilding sustainable(cid:15) profitable businesses t(cid:75)roug(cid:75) t(cid:75)e c(cid:92)cle Financial targets1 (cid:47)everage strengt(cid:75)s R(cid:50)E Consumer (cid:70)l(cid:76)ent(cid:16)(cid:70)ent(cid:85)e(cid:71) m(cid:82)(cid:71)el (cid:71)el(cid:76)(cid:89)e(cid:85)(cid:76)n(cid:74) ma(cid:85)(cid:78)et(cid:16)lea(cid:71)(cid:76)n(cid:74) e(cid:91)(cid:83)e(cid:85)(cid:76)en(cid:70)es Retail Relations(cid:75)ip (cid:37)anking (cid:83)e(cid:85)s(cid:82)nal(cid:76)se(cid:71)(cid:15) (cid:73)le(cid:91)(cid:76)(cid:69)le (cid:9) (cid:83)(cid:85)(cid:82)a(cid:70)t(cid:76)(cid:89)e a(cid:83)(cid:83)(cid:85)(cid:82)a(cid:70)(cid:75) (cid:37)usiness (cid:37)anking ▪ Me(cid:71)(cid:76)um te(cid:85)m(cid:29) (cid:149) 1(cid:28)(cid:8) a(cid:70)(cid:70)(cid:82)unta(cid:69)le(cid:15) em(cid:83)(cid:82)(cid:90)e(cid:85)e(cid:71)(cid:15) (cid:71)e(cid:70)ent(cid:85)al(cid:76)se(cid:71) (cid:69)us(cid:76)ness se(cid:85)(cid:89)(cid:76)(cid:70)e m(cid:82)(cid:71)el ▪ L(cid:82)n(cid:74) te(cid:85)m(cid:29) (cid:149) (cid:21)0(cid:8) Strategic focus Cost(cid:16)to(cid:16)income ▪ Me(cid:71)(cid:76)um te(cid:85)m(cid:29) (cid:148) (cid:24)(cid:28)(cid:8) D(cid:76)(cid:74)(cid:76)tal (cid:41)(cid:76)(cid:85)st(cid:15) (cid:41)(cid:76)(cid:85)st (cid:76)n D(cid:76)(cid:74)(cid:76)tal D(cid:76)s(cid:85)u(cid:83)t(cid:76)(cid:89)e (cid:38)(cid:57)Ps Sales (cid:9) se(cid:85)(cid:89)(cid:76)(cid:70)e e(cid:91)(cid:70)ellen(cid:70)e L(cid:82)(cid:92)alt(cid:92) (cid:9) (cid:85)e(cid:90)a(cid:85)(cid:71)s Data anal(cid:92)t(cid:76)(cid:70)s (cid:9) BI ▪ L(cid:82)n(cid:74) te(cid:85)m(cid:29) (cid:148) (cid:24)(cid:26)(cid:8) 1 (cid:48)edium(cid:16)term de(cid:73)ined as 2 to (cid:22) years. (cid:47)on(cid:74)(cid:16)term de(cid:73)ined as (cid:24)(cid:14) years. NEDBANK GROUP LIMITED – Annual Results 2019 (cid:26)(cid:21) NOTES: NEDBANK GROUP – ANNUAL RESULTS 2019 37 NEDBANK WEALTH Earnings adversely impacted by revenue pressure Iolanda Ruggiero Group Managing Executive NEDBANK GROUP LIMITED – Annual Results 2019 73 Earnings adversely impacted by revenue pressure Headline earnings, ROE1 Key messages 41.5 35.2 27.5 26.8 24.8 (8%) 4 3 1 1 15 2 9 1 1 16 8 6 0 1 17 3 3 1 1 18 2 4 0 1 19 Headline Earnings ROE (%) 2001 1501 1001 501 1 42.0 37.0 32.0 27.0 22.0 17.0 12.0 7.0 2.0 -3.0 ▪ Headline earnings -8% − NII +3%: steady international deposit growth offset by a decline in US interest rates − NIR -1.4%: lower brokerage, portfolio & asset management fees & higher non-life claims ratio − Expenses +3%: below inflationary growth − CLR at 18 bps (+5 bps): increase in impairments off a low base with worsening macro environment in the fourth quarter 1 During 2016, the group changed its capital allocation methodology. The ROE for 2015 would have been 36.7% using the updated methodology. NEDBANK GROUP LIMITED – Annual Results 2019 74 38 NOTES:NOTES:NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION Earnings adversel(cid:92) impacted b(cid:92) revenue pressure BOOKLET SLIDE (cid:43)eadline earnings per division (Rm) (cid:46)e(cid:92) drivers (14.4%) (5.4%) (6.1%) 5 9 2 (cid:21) (cid:24) (cid:21) 7 3 3 (cid:28) 1 3 1 0 5 1 (cid:26) (cid:23) (cid:58)ealt(cid:75) Mana(cid:74)ement Asset Mana(cid:74)ement Insu(cid:85)an(cid:70)e 18 19 (cid:58)ealt(cid:75) (cid:48)anagement ▪ P(cid:82)(cid:82)(cid:85) l(cid:82)(cid:70)al ma(cid:85)(cid:78)et (cid:70)(cid:82)n(cid:71)(cid:76)t(cid:76)(cid:82)ns ▪ Stea(cid:71)(cid:92) (cid:76)nte(cid:85)nat(cid:76)(cid:82)nal (cid:71)e(cid:83)(cid:82)s(cid:76)t (cid:9) AUM ▪ De(cid:70)l(cid:76)n(cid:76)n(cid:74) US (cid:76)nte(cid:85)est (cid:85)ates (cid:36)sset (cid:48)anagement ▪ St(cid:85)(cid:82)n(cid:74) net (cid:76)n(cid:73)l(cid:82)(cid:90)s ▪ S(cid:75)(cid:76)(cid:73)t t(cid:82) l(cid:82)(cid:90)e(cid:85)(cid:16)ma(cid:85)(cid:74)(cid:76)n (cid:73)(cid:76)(cid:91)e(cid:71) (cid:76)n(cid:70)(cid:82)me (cid:9) (cid:83)ass(cid:76)(cid:89)e asset (cid:70)lasses ▪ (cid:38)(cid:82)nt(cid:76)nue(cid:71) (cid:83)(cid:85)essu(cid:85)e (cid:82)n ma(cid:85)(cid:74)(cid:76)ns Insurance ▪ G(cid:85)(cid:82)(cid:90)t(cid:75) (cid:76)n l(cid:76)(cid:73)e (cid:57)NB ▪ (cid:43)(cid:76)(cid:74)(cid:75)e(cid:85) n(cid:82)n(cid:16)l(cid:76)(cid:73)e (cid:70)la(cid:76)ms NEDBANK GROUP LIMITED – Annual Results 2019 (cid:26)(cid:24) (cid:58)ealt(cid:75) – (cid:73)(cid:76)nan(cid:70)(cid:76)al (cid:75)(cid:76)(cid:74)(cid:75)l(cid:76)(cid:74)(cid:75)ts BOOKLET SLIDE (cid:60)ear ended (cid:8) c(cid:75)ange (cid:43)ea(cid:71)l(cid:76)ne ea(cid:85)n(cid:76)n(cid:74)s (Rm) G(cid:85)(cid:82)ss (cid:82)(cid:83)e(cid:85)at(cid:76)n(cid:74) (cid:76)n(cid:70)(cid:82)me (Rm) PPOP (Rm) Net (cid:76)nte(cid:85)est ma(cid:85)(cid:74)(cid:76)n (%) NIR(cid:16)t(cid:82)(cid:16)e(cid:91)(cid:83)ense (cid:85)at(cid:76)(cid:82) (%) (cid:38)(cid:82)st(cid:16)t(cid:82)(cid:16)(cid:76)n(cid:70)(cid:82)me (cid:85)at(cid:76)(cid:82) (%) (cid:38)LR (%) Assets un(cid:71)e(cid:85) mana(cid:74)ement (Rm) L(cid:76)(cid:73)e em(cid:69)e(cid:71)(cid:71)e(cid:71) (cid:89)alue (Rm) L(cid:76)(cid:73)e (cid:89)alue (cid:82)(cid:73) ne(cid:90) (cid:69)us(cid:76)ness (Rm) (cid:43)ea(cid:71)l(cid:76)ne e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)t (Rm)1 A(cid:89)e(cid:85)a(cid:74)e all(cid:82)(cid:70)ate(cid:71) (cid:70)a(cid:83)(cid:76)tal (Rm) ROE (%) 1 Cost o(cid:73) equity 1(cid:27)(cid:29) 1(cid:23).1(cid:8) | 1(cid:28)(cid:29) 1(cid:23).1(cid:8). NEDBANK GROUP LIMITED – Annual Results 2019 (8) (0) (8) (cid:21)01(cid:28) 1 0(cid:23)(cid:21) (cid:23) (cid:24)(cid:27)(cid:23) 1 3(cid:24)(cid:26) (cid:21)(cid:17)1(cid:26) 110(cid:17)(cid:23) (cid:25)(cid:26)(cid:17)(cid:28) 0(cid:17)1(cid:27) (cid:21)01(cid:27) 1 133 (cid:23) (cid:24)(cid:28)(cid:26) 1 (cid:23)(cid:26)(cid:26) (cid:21)(cid:17)31 11(cid:24)(cid:17)(cid:26) (cid:25)(cid:24)(cid:17)(cid:24) 0(cid:17)13 11 14 11 (17) 331 3(cid:25)1 (cid:21)(cid:28)(cid:26) 33(cid:27) 3 1(cid:27)(cid:27) (cid:21) (cid:26)(cid:27)(cid:25) (cid:23)(cid:21)1 (cid:23)(cid:23)(cid:26) (cid:23) (cid:21)0(cid:23) (cid:21)(cid:23)(cid:17)(cid:27) 3(cid:27)0 (cid:24)3(cid:25) (cid:23) (cid:21)(cid:21)(cid:24) (cid:21)(cid:25)(cid:17)(cid:27) (cid:58)ealt(cid:75) Ot(cid:75)e(cid:85) (cid:70)luste(cid:85)s 8% 92% (cid:43)ea(cid:71)l(cid:76)ne ea(cid:85)n(cid:76)n(cid:74)s ▪ Net (cid:76)n(cid:73)l(cid:82)(cid:90)s ▪ L(cid:76)(cid:73)e APE ▪ N(cid:82)n(cid:16)l(cid:76)(cid:73)e G(cid:58)P R1(cid:24)bn (cid:11)1(cid:17)(cid:21)(cid:8)(cid:12) 0(cid:17)(cid:24)(cid:8) (cid:26)(cid:25) NEDBANK GROUP – ANNUAL RESULTS 2019 39 NOTES: NOTES: (cid:58)ealt(cid:75) (cid:48)anagement – st(cid:85)(cid:82)n(cid:74) (cid:76)nte(cid:85)nat(cid:76)(cid:82)nal (cid:70)l(cid:76)ent (cid:73)l(cid:82)(cid:90)s (cid:47)iabilities (cid:9) advances L(cid:76)a(cid:69)(cid:76)l(cid:76)t(cid:76)es A(cid:71)(cid:89)an(cid:70)es (cid:46)e(cid:92) drivers International (1.2%) ▪ St(cid:85)(cid:82)n(cid:74) AUM (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) 15 16 17 18 (cid:58)ealt(cid:75) (cid:48)anagement International % 4 . 1 (cid:14) 19 SA (cid:70)l(cid:76)ent (cid:73)l(cid:82)(cid:90)s SA (cid:70)l(cid:76)ents % 33% ▪ G(cid:85)(cid:82)(cid:90)t(cid:75) (cid:76)n len(cid:71)(cid:76)n(cid:74) (cid:69)alan(cid:70)es ne(cid:74)at(cid:76)(cid:89)el(cid:92) (cid:76)m(cid:83)a(cid:70)te(cid:71) (cid:69)(cid:92) B(cid:85)e(cid:91)(cid:76)t un(cid:70)e(cid:85)ta(cid:76)nt(cid:92) (cid:9) (cid:73)(cid:76)e(cid:85)(cid:70)e (cid:70)(cid:82)m(cid:83)et(cid:76)t(cid:76)(cid:82)n (cid:73)(cid:85)(cid:82)m (cid:85)(cid:76)n(cid:74)(cid:16) (cid:73)en(cid:70)e(cid:71) (cid:69)an(cid:78)s ▪ Stea(cid:71)(cid:92) (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:76)n (cid:71)e(cid:83)(cid:82)s(cid:76)ts (cid:47)ocal ▪ Ne(cid:74)at(cid:76)(cid:89)e (cid:76)n(cid:89)est(cid:82)(cid:85) (cid:70)(cid:82)n(cid:73)(cid:76)(cid:71)en(cid:70)e (cid:76)m(cid:83)a(cid:70)t(cid:76)n(cid:74) (cid:69)(cid:85)(cid:82)(cid:78)e(cid:85)a(cid:74)e (cid:9) (cid:83)lanne(cid:85) (cid:70)(cid:82)mm(cid:76)ss(cid:76)(cid:82)ns ▪ (cid:43)(cid:76)(cid:74)(cid:75)e(cid:85) (cid:76)m(cid:83)a(cid:76)(cid:85)ments (cid:82)(cid:73)(cid:73) a l(cid:82)(cid:90) (cid:69)ase 15 16 17 18 NEDBANK GROUP LIMITED – Annual Results 2019 % 6 1 19 NOTES: (cid:36)sset (cid:48)anagement – st(cid:85)(cid:82)n(cid:74) ma(cid:85)(cid:78)et s(cid:75)a(cid:85)e (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:76)n (cid:70)as(cid:75) (cid:9) (cid:83)ass(cid:76)(cid:89)e (cid:36)ssets under management (R(cid:69)n) (cid:46)e(cid:92) drivers L(cid:82)(cid:70)al Inte(cid:85)nat(cid:76)(cid:82)nal (cid:14)11% ▪ St(cid:85)(cid:82)n(cid:74) net (cid:76)n(cid:73)l(cid:82)(cid:90)s (cid:9) ma(cid:85)(cid:78)et s(cid:75)a(cid:85)e (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) ▪ (cid:38)(cid:75)an(cid:74)e (cid:76)n m(cid:76)(cid:91) as (cid:76)n(cid:89)est(cid:82)(cid:85)s (cid:70)(cid:82)nt(cid:76)nue t(cid:82) s(cid:75)(cid:76)(cid:73)t t(cid:82) (cid:83)ass(cid:76)(cid:89)e (cid:9) (cid:73)(cid:76)(cid:91)e(cid:71)(cid:16)(cid:76)n(cid:70)(cid:82)me asset (cid:70)lasses ▪ Gl(cid:82)(cid:69)al (cid:85)an(cid:74)e e(cid:91)(cid:83)an(cid:71)e(cid:71) (cid:9) (cid:90)ell (cid:83)(cid:82)s(cid:76)t(cid:76)(cid:82)ne(cid:71) ▪ T(cid:82)(cid:83) (cid:82)(cid:73)(cid:73)s(cid:75)(cid:82)(cid:85)e mana(cid:74)e(cid:85) (cid:73)(cid:82)(cid:85) 5 (cid:70)(cid:82)nse(cid:70)ut(cid:76)(cid:89)e (cid:92)ea(cid:85)s 257 273 312 297 331 15 16 17 18 19 (cid:48)arket s(cid:75)are1 (%) SA un(cid:76)t t(cid:85)ust (cid:41)S(cid:38)A a(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)e(cid:71) (cid:82)(cid:73)(cid:73)s(cid:75)(cid:82)(cid:85)e un(cid:76)t t(cid:85)ust 11% 8% 5% 2% 10 11 12 13 14 15 16 17 18 19 1 (cid:54)ource(cid:29) (cid:36)(cid:54)I(cid:54)(cid:36). (cid:52)ua(cid:85)te(cid:85)l(cid:92) NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: 40 NEDBANK GROUP – ANNUAL RESULTS 2019 (cid:26)(cid:26) (cid:26)(cid:27) RESULTS PRESENTATION Insurance – (cid:76)n(cid:70)(cid:85)ease(cid:71) (cid:70)la(cid:76)ms ne(cid:74)at(cid:76)(cid:89)el(cid:92) (cid:76)m(cid:83)a(cid:70)te(cid:71) (cid:85)e(cid:89)enue (cid:47)ife value of ne(cid:90) business (Rm) (cid:46)e(cid:92) drivers (cid:14)11% (cid:47)ife 500 450 400 350 300 250 200 150 100 50 (cid:16) 15 16 17 0 8 3 18 1 (cid:21) (cid:23) 19 Non(cid:16)life gross (cid:90)ritten premiums (Rm) ▪ (cid:43)(cid:76)(cid:74)(cid:75)e(cid:85) (cid:70)(cid:85)e(cid:71)(cid:76)t l(cid:76)(cid:73)e (cid:9) (cid:73)une(cid:85)al G(cid:85)(cid:82)ss (cid:58)(cid:85)(cid:76)tten P(cid:85)em(cid:76)ums ▪ G(cid:85)(cid:82)(cid:90)t(cid:75) (cid:76)n (cid:57)NB (cid:71)(cid:85)(cid:76)(cid:89)en (cid:69)(cid:92) (cid:76)n(cid:70)(cid:85)ease(cid:71) sales (cid:9) (cid:85)e(cid:71)u(cid:70)e(cid:71) a(cid:70)(cid:84)u(cid:76)s(cid:76)t(cid:76)(cid:82)n (cid:70)(cid:82)sts Non(cid:16)life ▪ (cid:43)(cid:76)(cid:74)(cid:75)e(cid:85) (cid:70)la(cid:76)ms (cid:73)(cid:85)(cid:82)m a l(cid:82)(cid:90) 2018 (cid:69)ase ▪ In(cid:70)(cid:85)ease(cid:71) (cid:83)enet(cid:85)at(cid:76)(cid:82)n (cid:76)nt(cid:82) Ne(cid:71)(cid:69)an(cid:78) (cid:57)A(cid:41) t(cid:75)(cid:85)(cid:82)u(cid:74)(cid:75) (cid:14)1% (cid:89)e(cid:75)(cid:76)(cid:70)le (cid:89)alue(cid:16)a(cid:71)(cid:71)e(cid:71) (cid:83)(cid:85)(cid:82)(cid:71)u(cid:70)ts 1 200 1 180 1 160 1 140 1 120 1 100 1 080 1 060 1 040 1 020 1 000 980 NOTES: 15 16 17 NEDBANK GROUP LIMITED – Annual Results 2019 (cid:24) (cid:26) 1 1 18 0 (cid:27) 1 1 19 (cid:51)rospects for Nedbank (cid:58)ealt(cid:75) Creating value in a c(cid:75)allenging environment (cid:47)everage strengt(cid:75)s (cid:58)ealt(cid:75) (cid:48)anagement (cid:36)sset (cid:48)anagement Insurance Inte(cid:85)nat(cid:76)(cid:82)nal (cid:82)(cid:73)(cid:73)e(cid:85)(cid:76)n(cid:74) Best(cid:16)(cid:82)(cid:73)(cid:16)(cid:69)(cid:85)ee(cid:71) (cid:83)(cid:75)(cid:76)l(cid:82)s(cid:82)(cid:83)(cid:75)(cid:92) (cid:43)(cid:82)l(cid:76)st(cid:76)(cid:70) a(cid:71)(cid:89)(cid:76)(cid:70)e Inte(cid:85)nat(cid:76)(cid:82)nal (cid:73)un(cid:71) (cid:83)e(cid:85)(cid:73)(cid:82)(cid:85)man(cid:70)e S(cid:76)n(cid:74)le (cid:83)(cid:82)l(cid:76)(cid:70)(cid:92) a(cid:71)m(cid:76)n(cid:76)st(cid:85)at(cid:76)(cid:82)n s(cid:92)stem A(cid:70)(cid:70)ess t(cid:82) Ne(cid:71)(cid:69)an(cid:78) (cid:70)l(cid:76)ents Strategic focus (cid:41)(cid:82)(cid:70)us (cid:82)n (cid:43)N(cid:58) a(cid:71)(cid:89)(cid:76)(cid:70)e Del(cid:76)(cid:89)e(cid:85)(cid:76)n(cid:74) l(cid:82)n(cid:74) te(cid:85)m (cid:83)e(cid:85)(cid:73)(cid:82)(cid:85)man(cid:70)e E(cid:91)(cid:83)an(cid:71)(cid:76)n(cid:74) (cid:82)(cid:73)(cid:73)e(cid:85)(cid:76)n(cid:74)(cid:15) le(cid:89)e(cid:85)a(cid:74)(cid:76)n(cid:74) (cid:71)ata (cid:9) (cid:71)(cid:76)(cid:74)(cid:76)tal Financial targets1 R(cid:50)E ▪ Me(cid:71)(cid:76)um te(cid:85)m(cid:29) (cid:149) (cid:21)(cid:27)(cid:8) ▪ L(cid:82)n(cid:74) te(cid:85)m(cid:29) (cid:149) 30(cid:8) Cost(cid:16)to(cid:16)income ▪ Me(cid:71)(cid:76)um te(cid:85)m(cid:29) (cid:148) (cid:25)(cid:24)(cid:8) ▪ L(cid:82)n(cid:74) te(cid:85)m(cid:29) (cid:148) (cid:25)(cid:24)(cid:8) 1 (cid:48)edium(cid:16)term de(cid:73)ined as 2 to (cid:22) years. (cid:47)on(cid:74)(cid:16)term de(cid:73)ined as (cid:24)(cid:14) years. NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: (cid:26)(cid:28) (cid:27)0 NEDBANK GROUP – ANNUAL RESULTS 2019 41 NEDBANK AFRICA REGIONS SADC – adversely impacted by Zimbabwe ETI – earnings growth slowing Mfundo Nkuhlu COO NEDBANK GROUP LIMITED – Annual Results 2019 81 Nedbank Africa Regions – SADC adversely impacted by Zimbabwe & ETI earnings growth slowing Headline earnings, ROE Key drivers 10.2 691 (35%) NAR – HE of R457m (-35%) & RoE of 7.7% 10.3 SADC 7.7 ▪ HE of R20m (-94%) 702 457 − Once-off tax adjustments & non-operational write- (287) (810) off (R61m) in H1 2019 − Hyperinflationary conditions (R142m) & impairment of legacy debt (R44m) in Zimbabwe (3.6) 15 16 (12.6) 17 − Gross operating income down (-2%) − Cost growth managed below inflation ETI (Ecobank Transnational Incorporated) ▪ Sustained recovery of profitability, with earnings 18 19 growth slowing Headline earnings (Rm) ROE (%) ▪ Associate income of R668m, up 10%, while HE was R437m, up 17% NEDBANK GROUP LIMITED – Annual Results 2019 82 42 NOTES:NOTES:NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION Nedbank (cid:36)frica Regions – (cid:73)(cid:76)nan(cid:70)(cid:76)al (cid:75)(cid:76)(cid:74)(cid:75)l(cid:76)(cid:74)(cid:75)ts BOOKLET SLIDE (cid:60)ear ended S(cid:36)DC (cid:43)ea(cid:71)l(cid:76)ne ea(cid:85)n(cid:76)n(cid:74)s (Rm) G(cid:85)(cid:82)ss (cid:82)(cid:83)e(cid:85)at(cid:76)n(cid:74) (cid:76)n(cid:70)(cid:82)me (Rm) Net m(cid:82)neta(cid:85)(cid:92) l(cid:82)ss (Rm) PPOP (Rm) Net (cid:76)nte(cid:85)est ma(cid:85)(cid:74)(cid:76)n (%) NIR(cid:16)t(cid:82)(cid:16)e(cid:91)(cid:83)ense (cid:85)at(cid:76)(cid:82) (%) E(cid:73)(cid:73)(cid:76)(cid:70)(cid:76)en(cid:70)(cid:92) (cid:85)at(cid:76)(cid:82) (%) (cid:38)(cid:85)e(cid:71)(cid:76)t l(cid:82)ss (cid:85)at(cid:76)(cid:82) (%) A(cid:89)e(cid:85)a(cid:74)e (cid:74)(cid:85)(cid:82)ss (cid:69)an(cid:78)(cid:76)n(cid:74) a(cid:71)(cid:89)an(cid:70)es (Rm) A(cid:89)e(cid:85)a(cid:74)e (cid:71)e(cid:83)(cid:82)s(cid:76)ts (Rm) (cid:43)ea(cid:71)l(cid:76)ne e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)t (Rm) A(cid:89)e(cid:85)a(cid:74)e all(cid:82)(cid:70)ate(cid:71) (cid:70)a(cid:83)(cid:76)tal (Rm) ROE (%) ETI investment (cid:43)ea(cid:71)l(cid:76)ne ea(cid:85)n(cid:76)n(cid:74)s (Rm) Total (cid:75)eadline earnings (cid:11)Rm(cid:12) NEDBANK GROUP LIMITED – Annual Results 2019 (cid:8) c(cid:75)ange F(cid:60) (cid:21)01(cid:28) F(cid:60) (cid:21)01(cid:27) (94) (2) (50) 0.3 2 (42) (12) 17 (35) (cid:21)0 3 0(cid:27)(cid:27) (cid:21)(cid:28)(cid:25) (cid:21)(cid:26)(cid:27) (cid:26)(cid:17)0 (cid:24)0(cid:17)3 (cid:26)(cid:27)(cid:17)(cid:24) 1(cid:17)01 (cid:21)(cid:21) (cid:26)(cid:23)(cid:27) 30 (cid:28)(cid:25)(cid:28) (cid:11)(cid:26)01(cid:12) (cid:24) 0(cid:28)(cid:23) 0(cid:17)(cid:23) (cid:23)3(cid:26) (cid:23)(cid:24)(cid:26) 327 3 157 (cid:16) 554 7.3 49.9 76.5 0.51 22 670 30 263 (495) 5 815 5.6 375 702 NAR Ot(cid:75)e(cid:85) (cid:70)luste(cid:85)s 3% 97% A(cid:71)(cid:89)an(cid:70)es 4% 96% (cid:43)ea(cid:71)l(cid:76)ne ea(cid:85)n(cid:76)n(cid:74)s (cid:27)3 NOTES: NOTES: S(cid:36)DC – st(cid:85)ate(cid:74)(cid:76)(cid:70) (cid:71)e(cid:89)el(cid:82)(cid:83)ments (cid:51)ortfolio optimisation (cid:36)dapting to market c(cid:75)anges Sale of Nedbank (cid:48)ala(cid:90)i1 ▪ Re(cid:89)(cid:76)e(cid:90)e(cid:71) st(cid:85)ate(cid:74)(cid:76)(cid:70) (cid:73)(cid:76)t ▪ Less t(cid:75)an 0.1% (cid:82)(cid:73) (cid:74)(cid:85)(cid:82)u(cid:83) assets (cid:9) ea(cid:85)n(cid:76)n(cid:74)s ▪ T(cid:85)ansa(cid:70)t(cid:76)(cid:82)n t(cid:82) (cid:69)e (cid:70)(cid:82)n(cid:70)lu(cid:71)e(cid:71) (cid:76)n (cid:43)1 2020 (cid:61)imbab(cid:90)e (cid:75)(cid:92)perinflation ▪ Ne(cid:71)(cid:69)an(cid:78) (cid:61)(cid:76)m(cid:69)a(cid:69)(cid:90)e(cid:29) R108m (cid:43)E l(cid:82)ss (2018(cid:29) R142m (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)t) ▪ Re(cid:16)(cid:70)(cid:82)n(cid:73)(cid:76)(cid:74)u(cid:85)(cid:76)n(cid:74) t(cid:75)e s(cid:75)a(cid:83)e (cid:82)(cid:73) t(cid:75)e (cid:69)alan(cid:70)e s(cid:75)eet an(cid:71) (cid:69)us(cid:76)ness (cid:82)(cid:83)e(cid:85)at(cid:76)(cid:82)ns Increased s(cid:75)are(cid:75)olding in (cid:37)anco (cid:56)nico Client e(cid:91)perience (cid:9) digital en(cid:75)ancements ▪ All(cid:82)(cid:70)at(cid:76)n(cid:74) (cid:70)a(cid:83)(cid:76)tal t(cid:82) ta(cid:83) (cid:76)nt(cid:82) (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:82)(cid:83)(cid:83)(cid:82)(cid:85)tun(cid:76)t(cid:76)es (cid:76)n M(cid:82)(cid:93)am(cid:69)(cid:76)(cid:84)ue ▪ In(cid:89)estment (cid:76)n (cid:76)nn(cid:82)(cid:89)at(cid:76)(cid:89)e ma(cid:85)(cid:78)et lea(cid:71)(cid:76)n(cid:74) (cid:70)l(cid:76)ent e(cid:91)(cid:83)e(cid:85)(cid:76)en(cid:70)es(cid:29) ▪ In(cid:70)(cid:85)eas(cid:76)n(cid:74) (cid:82)u(cid:85) s(cid:75)a(cid:85)e(cid:75)(cid:82)l(cid:71)(cid:76)n(cid:74) (cid:73)(cid:85)(cid:82)m 50% (cid:14)1 s(cid:75)a(cid:85)e t(cid:82) 87.5%(cid:15) su(cid:69)(cid:77)e(cid:70)t t(cid:82) (cid:85)e(cid:74)ulat(cid:82)(cid:85)(cid:92) a(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)al (cid:3013) M(cid:82)ne(cid:92) A(cid:83)(cid:83) (A(cid:73)(cid:85)(cid:76)(cid:70)a) en(cid:75)an(cid:70)ements(cid:15) 49 a(cid:71)(cid:71)(cid:76)t(cid:76)(cid:82)nal se(cid:85)(cid:89)(cid:76)(cid:70)es a(cid:71)(cid:71)e(cid:71) (cid:76)n 2019 ▪ T(cid:85)ansa(cid:70)t(cid:76)(cid:82)n t(cid:82) (cid:69)e (cid:70)(cid:82)n(cid:70)lu(cid:71)e(cid:71) (cid:76)n (cid:43)1 2020 (cid:3013) Laun(cid:70)(cid:75) (cid:82)(cid:73) PA(cid:60)U a(cid:70)(cid:70)(cid:82)unt (cid:90)(cid:76)t(cid:75) (cid:93)e(cid:85)(cid:82) ma(cid:76)ntenan(cid:70)e (cid:73)ees (cid:76)n Nam(cid:76)(cid:69)(cid:76)a (cid:3013) Laun(cid:70)(cid:75) (cid:82)(cid:73) ne(cid:90) (cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)ate (cid:76)nte(cid:85)net (cid:69)an(cid:78)(cid:76)n(cid:74) (cid:76)n Nam(cid:76)(cid:69)(cid:76)a (cid:9) eS(cid:90)at(cid:76)n(cid:76) 1 (cid:36)ccounted (cid:73)or under I(cid:41)(cid:53)(cid:54) (cid:24) (cid:177) (cid:49)on(cid:16)current (cid:36)ssets (cid:43)eld (cid:73)or (cid:54)ale (cid:9) (cid:39)iscontinued (cid:50)(cid:83)erations. NEDBANK GROUP LIMITED – Annual Results 2019 (cid:27)(cid:23) NEDBANK GROUP – ANNUAL RESULTS 2019 43 S(cid:36)DC – (cid:71)el(cid:76)(cid:89)e(cid:85)(cid:76)n(cid:74) (cid:76)nn(cid:82)(cid:89)at(cid:76)(cid:89)e ma(cid:85)(cid:78)et(cid:16)lea(cid:71)(cid:76)n(cid:74) (cid:70)l(cid:76)ent e(cid:91)(cid:83)e(cid:85)(cid:76)en(cid:70)es BOOKLET SLIDE Digital solutions Digital solutions Client value Improved value propositions Improved value propositions Improved value propositions Laun(cid:70)(cid:75)e(cid:71) Ne(cid:71)(cid:69)an(cid:78) M(cid:82)ne(cid:92) a(cid:83)(cid:83) (cid:76)n Ma(cid:92) 2019 M(cid:82)(cid:69)(cid:76)le (cid:69)an(cid:78)(cid:76)n(cid:74) s(cid:82)lut(cid:76)(cid:82)n laun(cid:70)(cid:75)e(cid:71) (cid:76)n N(cid:82)(cid:89)em(cid:69)e(cid:85) 2019 Laun(cid:70)(cid:75)e(cid:71) PA(cid:60)U a(cid:70)(cid:70)(cid:82)unt (cid:90)(cid:76)t(cid:75) (cid:93)e(cid:85)(cid:82) ma(cid:76)ntenan(cid:70)e (cid:73)ees (cid:47)esot(cid:75)o(cid:15) Namibia(cid:15) (cid:48)ala(cid:90)i(cid:15) eS(cid:90)atini (cid:61)imbab(cid:90)e Namibia NEDBANK GROUP LIMITED – Annual Results 2019 (cid:27)(cid:24) NOTES: NOTES: Nedbank (cid:36)frica Regions app – a(cid:71)(cid:71)(cid:76)t(cid:76)(cid:82)nal 49 (cid:73)un(cid:70)t(cid:76)(cid:82)nal (cid:9) (cid:71)(cid:76)(cid:74)(cid:76)t(cid:76)se(cid:71) se(cid:85)(cid:89)(cid:76)(cid:70)es laun(cid:70)(cid:75)e(cid:71) (cid:69)(cid:92) en(cid:71) (cid:82)(cid:73) 2019 BOOKLET SLIDE Selected (cid:18) uni(cid:84)ue features Laun(cid:70)(cid:75)e(cid:71) (cid:76)n (cid:48)a(cid:92) (cid:21)01(cid:28)(cid:15) over 1(cid:26)(cid:15)(cid:28)00 use(cid:85)s (cid:69)(cid:92) (cid:92)ea(cid:85) en(cid:71) 1(cid:28) additional features a(cid:71)(cid:71)e(cid:71) (cid:82)(cid:89)e(cid:85) (cid:83)(cid:85)e(cid:89)(cid:76)(cid:82)us A(cid:83)(cid:83) su(cid:76)te at laun(cid:70)(cid:75) Great platform (cid:73)(cid:82)(cid:85) (cid:73)utu(cid:85)e en(cid:75)an(cid:70)ements UI (cid:9) U(cid:59) aligned to S(cid:36) (cid:48)one(cid:92) a(cid:83)(cid:83)(cid:15) a(cid:70)(cid:75)(cid:76)e(cid:89)(cid:76)n(cid:74) (cid:70)(cid:82)ns(cid:76)sten(cid:70)(cid:92) 30 functional en(cid:75)ancements (cid:9) digitised services a(cid:71)(cid:71)e(cid:71) (cid:76)n N(cid:82)(cid:89) 19 ▪ S(cid:76)n(cid:74)le a(cid:83)(cid:83) st(cid:82)(cid:85)e (cid:83)u(cid:69)l(cid:76)(cid:70)at(cid:76)(cid:82)n (cid:90)(cid:76)t(cid:75) mult(cid:76)(cid:70)(cid:82)unt(cid:85)(cid:92) sele(cid:70)t(cid:76)(cid:82)n ▪ (cid:38)(cid:85)e(cid:71)(cid:76)t (cid:70)a(cid:85)(cid:71) ATM l(cid:76)m(cid:76)t (cid:70)(cid:75)an(cid:74)e ▪ ▪ Bl(cid:82)(cid:70)(cid:78) (cid:9) (cid:85)e(cid:82)(cid:85)(cid:71)e(cid:85) (cid:70)a(cid:85)(cid:71)s ▪ Inte(cid:85)nat(cid:76)(cid:82)nal (cid:70)a(cid:85)(cid:71) usa(cid:74)e n(cid:82)t(cid:76)(cid:73)(cid:76)(cid:70)at(cid:76)(cid:82)n (cid:85)e(cid:84)uest ▪ Pe(cid:85)s(cid:82)nal l(cid:82)an(cid:15) (cid:89)e(cid:75)(cid:76)(cid:70)le (cid:73)(cid:76)nan(cid:70)e (cid:9) (cid:75)(cid:82)me l(cid:82)an (cid:76)nstalment (cid:70)al(cid:70)ulat(cid:82)(cid:85)s (cid:181)A(cid:83)(cid:83)l(cid:92) n(cid:82)(cid:90)(cid:182) (cid:85)e(cid:84)uests ▪ Das(cid:75)(cid:69)(cid:82)a(cid:85)(cid:71) (cid:89)(cid:76)e(cid:90) (cid:82)(cid:73) (cid:70)(cid:82)ns(cid:82)l(cid:76)(cid:71)ate(cid:71) (cid:69)alan(cid:70)es ▪ S(cid:75)a(cid:85)e a(cid:70)(cid:70)(cid:82)unt (cid:76)n(cid:73)(cid:82) (cid:90)(cid:76)t(cid:75) t(cid:75)(cid:76)(cid:85)(cid:71) (cid:83)a(cid:85)t(cid:76)es us(cid:76)n(cid:74) (cid:58)(cid:75)atsA(cid:83)(cid:83)(cid:15) messa(cid:74)e (cid:82)(cid:85) ema(cid:76)l ▪ Lea(cid:89)e (cid:73)ee(cid:71)(cid:69)a(cid:70)(cid:78)(cid:182) (cid:9) (cid:181)(cid:38)(cid:82)nta(cid:70)t us(cid:182) (cid:90)(cid:76)t(cid:75)(cid:76)n a(cid:83)(cid:83) (cid:36)pp enrolments ((cid:10)000) 8.2 4.1 2.7 N(cid:82)(cid:89) 9.2 4.9 3.1 22(cid:16)(cid:45)an 5.4 2.9 2.1 Se(cid:83) 26(cid:16)Ma(cid:92) (cid:45)ul NEDBANK GROUP LIMITED – Annual Results 2019 (cid:27)(cid:25) Nam(cid:76)(cid:69)(cid:76)a Es(cid:90)at(cid:76)n(cid:76) Les(cid:82)t(cid:75)(cid:82) 44 NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION S(cid:36)DC – m(cid:76)(cid:91)e(cid:71) (cid:73)(cid:76)nan(cid:70)(cid:76)al (cid:83)e(cid:85)(cid:73)(cid:82)(cid:85)man(cid:70)e (cid:76)m(cid:83)a(cid:70)te(cid:71) (cid:69)(cid:92) (cid:61)(cid:76)m(cid:69)a(cid:69)(cid:90)e (cid:36)verage gross banking advances (R(cid:69)n) (cid:36)verage deposits (R(cid:69)n) Credit loss ratio ((cid:69)(cid:83)s) (cid:14)0.3% (cid:14)2% 50 (cid:69)(cid:83)s 23 18 NI(cid:48) ((cid:69)(cid:83)s) 27 (cid:69)(cid:83)s 727 18 23 19 700 19 30 18 NIR (Rm) 31 19 51 18 (cid:14)1% Cost(cid:16)to(cid:16)income ratio (%) (cid:14)3% 1 206 18 1 220 19 76 18 101 19 79 19 NEDBANK GROUP LIMITED – Annual Results 2019 (cid:49)ote(cid:29) (cid:40)(cid:91)cludin(cid:74) (cid:61)im(cid:69)a(cid:69)(cid:90)e(cid:29) a(cid:89)era(cid:74)e ad(cid:89)ances (cid:14)(cid:22).(cid:25)(cid:8)(cid:15) a(cid:89)era(cid:74)e de(cid:83)osits (cid:14)11.1(cid:8)(cid:15) (cid:49)I(cid:53) (cid:14)(cid:24).1(cid:8)(cid:15) (cid:49)I(cid:48) (cid:16)(cid:23)(cid:19)(cid:69)(cid:83)s (cid:9) cost(cid:16)to(cid:16)income (cid:27)(cid:19).(cid:23)(cid:8). (cid:27)(cid:26) NOTES: NOTES: S(cid:36)DC – n(cid:82)n(cid:16)(cid:73)(cid:76)nan(cid:70)(cid:76)al (cid:83)e(cid:85)(cid:73)(cid:82)(cid:85)man(cid:70)e met(cid:85)(cid:76)(cid:70)s s(cid:75)(cid:82)(cid:90) (cid:83)(cid:82)s(cid:76)t(cid:76)(cid:89)e (cid:83)(cid:85)(cid:82)(cid:74)(cid:85)ess Clients ((cid:6)000)1 (cid:36)ctive (cid:36)pp users ((cid:6))2 (cid:51)oint(cid:16)of(cid:16)sale devices ((cid:6)) (1%) (cid:14)94% (cid:14)27% 339 18 336 19 8 653 18 16 789 19 6 443 18 8 161 19 (cid:37)ranc(cid:75)es ((cid:6)) (cid:36)T(cid:48)s ((cid:6)) (cid:43)eadcount ((cid:6)) (cid:14)5% (1%) (1%) s r e v i r d e u n e v e R s r e v i r d t s o C 98 18 103 19 220 18 218 19 2 619 18 2 582 19 NEDBANK GROUP LIMITED – Annual Results 2019 1 (cid:55)a(cid:78)in(cid:74) into account auto closure rules (cid:11)2(cid:19)1(cid:27) re(cid:69)ased to cater (cid:73)or t(cid:75)is(cid:12) 2 (cid:40)(cid:91)cludin(cid:74) (cid:37)anco (cid:56)nico (cid:11)(cid:48)o(cid:93)am(cid:69)ique(cid:12) and (cid:61)im(cid:69)a(cid:69)(cid:90)e. (cid:27)(cid:27) NEDBANK GROUP – ANNUAL RESULTS 2019 45 Nedbank (cid:36)frica Regions – (cid:74)(cid:85)(cid:82)(cid:90)(cid:76)n(cid:74) t(cid:75)e asset (cid:9) t(cid:85)ansa(cid:70)t(cid:76)(cid:82)nal (cid:83)(cid:82)(cid:85)t(cid:73)(cid:82)l(cid:76)(cid:82) (cid:76)n 2019 BOOKLET SLIDE (cid:38)IB T(cid:85)ansa(cid:70)t(cid:76)(cid:82)n (cid:71)(cid:82)ne (cid:76)n (cid:70)(cid:82)lla(cid:69)(cid:82)(cid:85)at(cid:76)(cid:82)n (cid:90)(cid:76)t(cid:75) (cid:38)IB (cid:51)uma Namibia (cid:38)IB (cid:61)uva (cid:51)etroleum (cid:61)imbab(cid:90)e B(cid:82)(cid:85)(cid:85)(cid:82)(cid:90)(cid:76)n(cid:74) Base (cid:41)a(cid:70)(cid:76)l(cid:76)t(cid:92)(cid:18)(cid:41)a(cid:70)(cid:76)l(cid:76)t(cid:92) a(cid:74)ent (Ne(cid:90) T(cid:85)ansa(cid:70)t(cid:76)(cid:82)nal a(cid:70)(cid:70)(cid:82)unt (cid:82)(cid:83)ene(cid:71)) Lette(cid:85) (cid:82)(cid:73) (cid:70)(cid:85)e(cid:71)(cid:76)t (cid:73)a(cid:70)(cid:76)l(cid:76)t(cid:92) (Ne(cid:90) POS (cid:71)e(cid:89)(cid:76)(cid:70)es (cid:85)(cid:82)lle(cid:71) (cid:82)ut) Consolidated Tobacco (cid:51)rocessors (cid:61)imbab(cid:90)e T(cid:82)(cid:69)a(cid:70)(cid:70)(cid:82) t(cid:85)a(cid:71)e (cid:73)(cid:76)nan(cid:70)e (cid:73)a(cid:70)(cid:76)l(cid:76)t(cid:92) (cid:56)S(cid:7)1(cid:21)m (cid:48)atekane (cid:48)ining (cid:47)esot(cid:75)o M(cid:76)n(cid:76)n(cid:74) (cid:73)leet Asset(cid:16)(cid:69)ase(cid:71) (cid:73)(cid:76)nan(cid:70)e (cid:48)10(cid:28)(cid:17)(cid:27)m International (cid:43)ousing Solutions Namibia (cid:38)IB Res(cid:76)(cid:71)ent(cid:76)al P(cid:85)(cid:82)(cid:83)e(cid:85)t(cid:92) De(cid:89)el(cid:82)(cid:83)ment L(cid:82)an N(cid:7)131m (cid:47)et(cid:182)seng Diamonds (cid:47)esot(cid:75)o (cid:38)IB (cid:58)(cid:82)(cid:85)(cid:78)(cid:76)n(cid:74) (cid:70)a(cid:83)(cid:76)tal (cid:73)a(cid:70)(cid:76)l(cid:76)t(cid:92) (cid:48)1(cid:24)0m (cid:56)S(cid:7)13(cid:17)(cid:24)m Surface (cid:58)ilmar (cid:61)imbab(cid:90)e Lette(cid:85) (cid:82)(cid:73) (cid:70)(cid:85)e(cid:71)(cid:76)t (cid:73)a(cid:70)(cid:76)l(cid:76)t(cid:92) (Ne(cid:90) a(cid:70)(cid:70)(cid:82)unt (cid:82)(cid:83)ene(cid:71)) (cid:56)S(cid:7)(cid:24)m (cid:43)ilton (cid:43)otel eS(cid:90)atini Ro(cid:92)al S(cid:90)a(cid:93)iland Sugar Corporation eS(cid:90)atini Sugar (cid:36)ssociation P(cid:85)(cid:76)ma(cid:85)(cid:92) (cid:69)an(cid:78)(cid:76)n(cid:74) (cid:76)n(cid:70)lu(cid:71)(cid:76)n(cid:74) POS an(cid:71) e(cid:16) (cid:70)(cid:82)mme(cid:85)(cid:70)e s(cid:82)lut(cid:76)(cid:82)n Me(cid:71)(cid:76)um te(cid:85)m(cid:16)l(cid:82)an E(cid:21)00m Su(cid:74)a(cid:85) st(cid:82)(cid:70)(cid:78) (cid:73)un(cid:71)(cid:76)n(cid:74) l(cid:82)an E(cid:26)(cid:24)0m (cid:56)S(cid:7)30m Debmarine Namibia (cid:38)IB De(cid:69)t an(cid:71) (cid:73)a(cid:70)(cid:76)l(cid:76)t(cid:92) A(cid:74)ent (cid:56)S(cid:7)(cid:21)(cid:24)(cid:48) (cid:48)imosa (cid:48)ining (cid:61)imbab(cid:90)e Me(cid:71)(cid:76)um Te(cid:85)m L(cid:82)an (cid:56)S(cid:7)10m (cid:9) (cid:58)(cid:82)(cid:85)(cid:78)(cid:76)n(cid:74) (cid:38)a(cid:83)(cid:76)tal (cid:61)(cid:58)(cid:47)(cid:7)1(cid:21)m NEDBANK GROUP LIMITED – Annual Results 2019 (cid:27)(cid:28) NOTES: ETI – (cid:85)e(cid:70)(cid:82)(cid:89)e(cid:85)(cid:92) a(cid:70)(cid:85)(cid:82)ss t(cid:75)(cid:85)ee (cid:85)e(cid:74)(cid:76)(cid:82)ns(cid:15) (cid:90)(cid:75)(cid:76)le N(cid:76)(cid:74)e(cid:85)(cid:76)an (cid:70)(cid:75)allen(cid:74)es (cid:83)e(cid:85)s(cid:76)st (cid:43)eadline earnings (Rm) (cid:43)ig(cid:75)lig(cid:75)ts 644 375 437 Susta(cid:76)ne(cid:71) (cid:85)e(cid:70)(cid:82)(cid:89)e(cid:85)(cid:92) (cid:73)(cid:85)(cid:82)m t(cid:75)(cid:85)ee (cid:85)e(cid:74)(cid:76)(cid:82)ns(cid:15) (cid:82)(cid:73)(cid:73)set (cid:69)(cid:92) (cid:83)(cid:82)(cid:82)(cid:85) (cid:83)e(cid:85)(cid:73)(cid:82)(cid:85)man(cid:70)e (cid:73)(cid:85)(cid:82)m N(cid:76)(cid:74)e(cid:85)(cid:76)an (cid:73)(cid:85)an(cid:70)(cid:75)(cid:76)se ▪ A(cid:58)A (cid:9) UEMOA (cid:71)el(cid:76)(cid:89)e(cid:85)e(cid:71) st(cid:85)(cid:82)n(cid:74) ea(cid:85)n(cid:76)n(cid:74)s (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75)(cid:15) susta(cid:76)na(cid:69)l(cid:92) (cid:74)ene(cid:85)at(cid:76)n(cid:74) e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)ts ▪ (cid:38)ESA(cid:182)s (cid:73)(cid:76)nan(cid:70)(cid:76)al (cid:85)e(cid:70)(cid:82)(cid:89)e(cid:85)(cid:92) (cid:70)(cid:82)nt(cid:76)nue(cid:71)(cid:15) al(cid:69)e(cid:76)t at a sl(cid:82)(cid:90)e(cid:85) (cid:85)ate (374) ▪ E(cid:70)(cid:82)(cid:69)an(cid:78) N(cid:76)(cid:74)e(cid:85)(cid:76)a(cid:182)s (cid:83)e(cid:85)(cid:73)(cid:82)(cid:85)man(cid:70)e (cid:71)ete(cid:85)(cid:76)(cid:82)(cid:85)ate(cid:71) (975) 15 16 17 18 19 (cid:73)u(cid:85)t(cid:75)e(cid:85)(cid:15) (cid:71)ue t(cid:82)(cid:29) (cid:3013) (cid:83)e(cid:85)s(cid:76)stentl(cid:92) ele(cid:89)ate(cid:71) NPLs (cid:3013) a(cid:71)(cid:89)e(cid:85)se (cid:85)e(cid:74)ulat(cid:82)(cid:85)(cid:92) (cid:76)nte(cid:85)(cid:89)ent(cid:76)(cid:82)n (cid:3013) (cid:82)n(cid:74)(cid:82)(cid:76)n(cid:74) e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) (cid:75)ea(cid:71)(cid:90)(cid:76)n(cid:71)s NEDBANK GROUP LIMITED – Annual Results 2019 (cid:28)0 NOTES: 46 NEDBANK GROUP – ANNUAL RESULTS 2019 Prospects for Nedbank Africa Regions Leveraging enterprise capabilities to unlock opportunities Strengths SADC – manage, own & control banks ▪ Strong wholesale client service model ▪ Competitive digital platforms ▪ Strong credit risk management Focus Financial targets1 ROE West & Central Africa – ETI ▪ Widest Pan African network ▪ LocalknowledgeAfricaTM ▪ Medium term: ≥ 15% ▪ Long term: ≥ 20% ▪ Digitisation & automation ▪ Risk management & cost control ▪ Zimbabwe business reconfiguration & ▪ Support board-driven agenda ▪ Commercialise collaboration & increase deal flows Mozambique growth Cost-to-income ▪ Medium term: ≤ 65% Zimbabwe ▪ Long term: ≤ 60% 1 Medium-term defined as 2 to 3 years. Long-term defined as 5+ years NEDBANK GROUP LIMITED – Annual Results 2019 91 OUTLOOK & 2020, MT & LT TARGETS Well positioned to grow off 2019 base, but macroeconomic risks remain elevated Mike Brown Chief Executive NEDBANK GROUP LIMITED – Annual Results 2019 92 47 RESULTS PRESENTATIONNOTES:NOTES:NEDBANK GROUP – ANNUAL RESULTS 2019 (cid:50)ur environment – sl(cid:82)(cid:90) (cid:85)e(cid:70)(cid:82)(cid:89)e(cid:85)(cid:92)(cid:15) (cid:69)ut ma(cid:70)(cid:85)(cid:82)e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) (cid:85)(cid:76)s(cid:78)s (cid:85)ema(cid:76)n ele(cid:89)ate(cid:71) (cid:48)acroeconomic drivers1 (%) (cid:51)rospects (cid:21)01(cid:28) (cid:21)0(cid:21)0 (cid:21)0(cid:21)1 (cid:21)0(cid:21)(cid:21) ▪ (cid:37)alance s(cid:75)eet GD(cid:51) S(cid:36) 0.3% 0.7% 1.1% 1.3% – Sta(cid:69)le (cid:90)(cid:75)(cid:82)lesale (cid:9) (cid:85)eta(cid:76)l a(cid:71)(cid:89)an(cid:70)es (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) – L(cid:76)(cid:84)u(cid:76)(cid:71)(cid:76)t(cid:92) (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)le (cid:9) (cid:70)a(cid:83)(cid:76)tal le(cid:89)els t(cid:82) (cid:85)ema(cid:76)n st(cid:85)(cid:82)n(cid:74) GD(cid:51) SS(cid:36) (e(cid:91)(cid:70)l SA) 4.0% 4.1% 4.4% 4.6% ▪ Income statement Inflation ((cid:38)PI) 4.1% 4.3% 4.3% 4.9% – Im(cid:83)a(cid:76)(cid:85)ments t(cid:82) (cid:76)n(cid:70)(cid:85)ease(cid:15) (cid:69)ut at m(cid:82)(cid:85)e n(cid:82)(cid:85)mal(cid:76)se(cid:71) le(cid:89)els – Re(cid:89)enue (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:71)e(cid:83)en(cid:71)ent (cid:82)n SA e(cid:70)(cid:82)n(cid:82)m(cid:76)(cid:70) (cid:85)e(cid:70)(cid:82)(cid:89)e(cid:85)(cid:92) Industr(cid:92) credit gro(cid:90)t(cid:75) (cid:36)ve prime interest rate 5.3% 6.3% 7.0% 7.2% ▪ (cid:36)ssets under management – E(cid:91)(cid:83)ense mana(cid:74)ement (cid:85)ema(cid:76)ns a (cid:78)e(cid:92) (cid:73)(cid:82)(cid:70)us 10.1% 9.8% 9.8% 9.8% – (cid:58)ea(cid:78)e(cid:85) (cid:73)l(cid:82)(cid:90)s (cid:76)nt(cid:82) (cid:75)(cid:76)(cid:74)(cid:75)e(cid:85)(cid:16)ma(cid:85)(cid:74)(cid:76)n e(cid:84)u(cid:76)t(cid:92) (cid:83)(cid:85)(cid:82)(cid:71)u(cid:70)ts – S(cid:82)l(cid:76)(cid:71) (cid:73)l(cid:82)(cid:90)s (cid:76)nt(cid:82) l(cid:82)(cid:90)e(cid:85)(cid:16)ma(cid:85)(cid:74)(cid:76)n (cid:70)as(cid:75) (cid:9) (cid:83)ass(cid:76)(cid:89)e 1 (cid:36)ll (cid:49)ed(cid:69)an(cid:78) (cid:40)conomic (cid:56)nit (cid:73)orecasts at (cid:45)anuary 2(cid:19)2(cid:19). | (cid:42)(cid:39)(cid:51) (cid:54)(cid:54)(cid:36) as (cid:83)er I(cid:48)(cid:41) (cid:11)(cid:45)anuary 2(cid:19)2(cid:19)(cid:12). NEDBANK GROUP LIMITED – Annual Results 2019 (cid:28)3 NOTES: 3 2 1 0 12 9 6 3 0 NOTES: (cid:58)e (cid:75)ave revie(cid:90)ed our targets in t(cid:75)e conte(cid:91)t of t(cid:75)e material do(cid:90)n(cid:90)ard revision of t(cid:75)e macroeconomic environment since targets (cid:90)ere set S(cid:36) GD(cid:51) gro(cid:90)t(cid:75) – (cid:70)2% l(cid:82)(cid:90)e(cid:85) (cid:69)(cid:92) 2020 C(cid:51)I (cid:11)inflation(cid:12) – (cid:70)1% l(cid:82)(cid:90)e(cid:85) (cid:69)(cid:92) 2020 8 6 4 2 0 17 18 19 20 21 22 17 18 19 20 21 22 S(cid:36) credit gro(cid:90)t(cid:75) – (cid:70)3% l(cid:82)(cid:90)e(cid:85) (cid:69)(cid:92) 2020 Interest rates – (cid:70)1% l(cid:82)(cid:90)e(cid:85) (cid:69)(cid:92) 2020 12 11 10 9 8 17 18 19 20 21 22 17 18 19 20 21 22 Financial targets1 R(cid:50)E ▪ Me(cid:71)(cid:76)um te(cid:85)m(cid:29) (cid:149) 1(cid:26)(cid:8) ▪ L(cid:82)n(cid:74) te(cid:85)m(cid:29) (cid:149) C(cid:50)E (cid:14) (cid:23)(cid:8) ▪ P(cid:85)e(cid:89)(cid:76)(cid:82)us MLT(cid:29) (cid:149) C(cid:50)E (cid:14) (cid:24)(cid:8) (e(cid:91)(cid:70)l (cid:74)(cid:82)(cid:82)(cid:71)(cid:90)(cid:76)ll) ▪ P(cid:85)e(cid:89)(cid:76)(cid:82)us 2020(cid:29) (cid:149) 1(cid:27)(cid:8) (e(cid:91)(cid:70)l (cid:74)(cid:82)(cid:82)(cid:71)(cid:90)(cid:76)ll) ▪ Cost(cid:16)to(cid:16)income ▪ Me(cid:71)(cid:76)um te(cid:85)m(cid:29) (cid:148) (cid:24)3(cid:8) ▪ L(cid:82)n(cid:74) te(cid:85)m(cid:29) (cid:148) (cid:24)0(cid:8) ▪ P(cid:85)e(cid:89)(cid:76)(cid:82)us MLT(cid:29) (cid:24)0 to (cid:24)3(cid:8) ▪ P(cid:85)e(cid:89)(cid:76)(cid:82)us 2020(cid:29) (cid:148) (cid:24)3(cid:8) (cid:41)(cid:82)(cid:85)e(cid:70)asts at (cid:41)e(cid:69) 2018 (cid:41)(cid:82)(cid:85)e(cid:70)asts at (cid:41)e(cid:69) 2020 1 (cid:48)edium(cid:16)term(cid:29) 2(cid:16)(cid:22) years(cid:15) (cid:47)on(cid:74)(cid:16)term(cid:29) (cid:24)(cid:14) years. NEDBANK GROUP LIMITED – Annual Results 2019 (cid:28)(cid:23) 48 NEDBANK GROUP – ANNUAL RESULTS 2019 2020 financial guidance1 based on current macroeconomic forecasts ▪ Average interest-earning banking asset growth just above mid-single digits. NII ▪ NIM similar to the 2019 level of 3.52%. CLR ▪ Similar to the 2019 CLR of 82 bps (within our target range of 60–100 bps). NIR ▪ Around mid-single-digit growth. Expenses ▪ Below mid-single-digit growth. Growth in DHEPS for full-year 2020 around nominal GDP growth [H1 2020 expected to be down on H1 2019 & stronger H2 2020 growth expected on H2 2019] 1 Based on current economic forecasts. Nominal GDP forecast for 2020 at 5.2% (CPI: 4.5% + GDP: 0.7%) | ETI associate income based on ETI’s own guidance. NEDBANK GROUP LIMITED – Annual Results 2019 95 NEDBANK GROUP LIMITED – Annual Results 2019 96 49 RESULTS PRESENTATIONNOTES:NOTES:NEDBANK GROUP – ANNUAL RESULTS 2019 (cid:21)0(cid:21)0 (cid:9) medium(cid:16)to(cid:16)long(cid:16)term targets BOOKLET SLIDE (cid:48)etric ROE D(cid:76)lute(cid:71) (cid:43)EPS (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:21)01(cid:28) (cid:21)0(cid:21)0 outlook 1 1(cid:24)(cid:17)0(cid:8) (cid:11)(cid:25)(cid:17)3(cid:8)(cid:12) A(cid:85)(cid:82)un(cid:71) 2019 le(cid:89)els A(cid:85)(cid:82)un(cid:71) (cid:38)PI (cid:14) GDP (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:38)(cid:85)e(cid:71)(cid:76)t l(cid:82)ss (cid:85)at(cid:76)(cid:82) (cid:27)(cid:21) bps S(cid:76)m(cid:76)la(cid:85) t(cid:82) 2019 (cid:89)s 2019 (cid:48)edium(cid:16)term target (2(cid:16)3 (cid:92)ea(cid:85)s) (cid:47)ong(cid:16)term target (5(cid:14) (cid:92)ea(cid:85)s) (cid:376) (cid:378) (cid:376) (cid:376) (cid:149) 17% (cid:149) (cid:38)OE (cid:14) 4% A(cid:85)(cid:82)un(cid:71) (cid:38)PI (cid:14) GDP (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:149) (cid:38)PI (cid:14) GDP (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) (cid:14) 5% 60–100 (cid:69)(cid:83)s (cid:33) 85% NIR(cid:16)t(cid:82)(cid:16)e(cid:91)(cid:83)enses (cid:85)at(cid:76)(cid:82) (cid:38)(cid:82)st(cid:16)t(cid:82)(cid:16)(cid:76)n(cid:70)(cid:82)me (cid:85)at(cid:76)(cid:82) (cid:38)ET1 (cid:38)AR T(cid:76)e(cid:85) 1 (cid:38)AR T(cid:82)tal (cid:38)AR D(cid:76)(cid:89)(cid:76)(cid:71)en(cid:71) (cid:70)(cid:82)(cid:89)e(cid:85) (cid:27)0(cid:17)(cid:27)(cid:8) (cid:24)(cid:25)(cid:17)(cid:24)(cid:8) 11(cid:17)(cid:24)(cid:8) 1(cid:21)(cid:17)(cid:27)(cid:8) 1(cid:24)(cid:17)0(cid:8) 1(cid:17)(cid:27)(cid:23) (cid:91) In(cid:70)(cid:85)eases(cid:15) (cid:69)ut (cid:85)ema(cid:76)ns (cid:69)el(cid:82)(cid:90) ta(cid:85)(cid:74)ets De(cid:70)(cid:85)eases sl(cid:76)(cid:74)(cid:75)tl(cid:92)(cid:15) (cid:69)ut (cid:376) (cid:85)ema(cid:76)ns a(cid:69)(cid:82)(cid:89)e MT ta(cid:85)(cid:74)et (cid:148) 53% (cid:148) 50% (cid:58)(cid:76)t(cid:75)(cid:76)n ta(cid:85)(cid:74)et (cid:85)an(cid:74)e (cid:58)(cid:76)t(cid:75)(cid:76)n ta(cid:85)(cid:74)et (cid:85)an(cid:74)e (cid:376) (cid:376) Basel III (cid:69)as(cid:76)s(cid:29) 10.5–12.5% (cid:33) 12% (cid:33) 14% 1.75 t(cid:82) 2.25 t(cid:76)mes 1 2(cid:19)2(cid:19) outloo(cid:78) com(cid:83)ared (cid:90)it(cid:75) (cid:41)(cid:60) 2(cid:19)1(cid:28) (cid:69)ased on current economic (cid:73)orecasts. NEDBANK GROUP LIMITED – Annual Results 2019 (cid:28)(cid:26) NOTES: (cid:48)acroeconomic scenarios BOOKLET SLIDE (cid:181)(cid:48)ore of t(cid:75)e same(cid:182) ((cid:69)ase (cid:70)ase) (cid:181)Seeing lig(cid:75)t(cid:182) ((cid:83)(cid:82)s(cid:76)t(cid:76)(cid:89)e s(cid:70)ena(cid:85)(cid:76)(cid:82)) (cid:181)Sinking into darkness(cid:182) ((cid:75)(cid:76)(cid:74)(cid:75)(cid:16)st(cid:85)ess s(cid:70)ena(cid:85)(cid:76)(cid:82)) 1(cid:28) (cid:21)0 (cid:21)1 (cid:21)(cid:21) 1(cid:28) (cid:21)0 (cid:21)1 (cid:21)(cid:21) 1(cid:28) (cid:21)0 (cid:21)1 (cid:21)(cid:21) SA GDP (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) 0.3% 0.7% 1.1% 1.3% 0.3% 1.4% 2.0% 2.1% 0.3% 0.3% (0.2%) (0.4%) A(cid:89)e (cid:83)(cid:85)(cid:76)me (cid:76)nte(cid:85)est (cid:85)ate 10.1% 9.8% 9.8% 9.8% 10.1% 9.4% 9.0% 9.0% 10.1% 10.3% 10.5% 10.3% In(cid:73)lat(cid:76)(cid:82)n ((cid:38)PI) 4.1% 4.3% 4.3% 4.9% 4.1% 4.2% 4.3% 3.9% 4.1% 5.2% 6.1% 6.1% (cid:38)(cid:85)e(cid:71)(cid:76)t (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75) 5.3% 6.3% 7.0% 7.2% 5.3% 9.6% 10.7% 10.9% 5.3% 5.3% 3.7% 3.8% P(cid:85)(cid:82)(cid:69)a(cid:69)(cid:76)l(cid:76)t(cid:92)2 (%) (cid:24)0(cid:8) (cid:21)0(cid:8) 10(cid:8) 1 (cid:49)ed(cid:69)an(cid:78) (cid:73)orecasts (cid:9) scenarios u(cid:83)dated(cid:29) (cid:45)anuary 2(cid:19)2(cid:19) (cid:11)(cid:49)ed(cid:69)an(cid:78) (cid:42)rou(cid:83) (cid:40)conomic (cid:56)nit(cid:12). | 2 (cid:40)(cid:91)cludes mild(cid:16)stress scenario o(cid:73) 2(cid:19)(cid:8). NEDBANK GROUP LIMITED – Annual Results 2019 (cid:28)(cid:27) NOTES: 50 NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION (cid:48)acroeconomic scenarios BOOKLET SLIDE (cid:181)(cid:48)ore of t(cid:75)e same(cid:182) ((cid:69)ase (cid:70)ase) (cid:181)Seeing lig(cid:75)t(cid:182) ((cid:83)(cid:82)s(cid:76)t(cid:76)(cid:89)e s(cid:70)ena(cid:85)(cid:76)(cid:82)) (cid:181)Sinking into darkness(cid:182) ((cid:75)(cid:76)(cid:74)(cid:75)(cid:16)st(cid:85)ess s(cid:70)ena(cid:85)(cid:76)(cid:82)) 1(cid:28) (cid:21)0 (cid:21)1 (cid:21)(cid:21) 1(cid:28) (cid:21)0 (cid:21)1 (cid:21)(cid:21) 1(cid:28) (cid:21)0 (cid:21)1 (cid:21)(cid:21) (cid:47)imited structural reform ▪ (cid:41)(cid:76)(cid:74)(cid:75)t a(cid:74)a(cid:76)nst (cid:70)(cid:82)(cid:85)(cid:85)u(cid:83)t(cid:76)(cid:82)n (cid:70)(cid:82)nt(cid:76)nues ▪ On(cid:74)(cid:82)(cid:76)n(cid:74) (cid:71)e(cid:69)ate a(cid:85)(cid:82)un(cid:71) lan(cid:71)(cid:15) N(cid:43)I (cid:85)ema(cid:76)ns Significant improvements ▪ St(cid:85)u(cid:70)tu(cid:85)al (cid:85)e(cid:73)(cid:82)(cid:85)m a(cid:74)en(cid:71)a (cid:76)m(cid:83)lemente(cid:71) ▪ (cid:41)(cid:82)un(cid:71) s(cid:82)lut(cid:76)(cid:82)ns (cid:73)(cid:82)(cid:85) lan(cid:71) (cid:85)e(cid:73)(cid:82)(cid:85)m (cid:90)(cid:76)t(cid:75)(cid:82)ut a Domestic reform stalls and global conditions deteriorate ▪ Lan(cid:71) (cid:76)ssue lea(cid:71)s t(cid:82) (cid:85)(cid:76)s(cid:76)n(cid:74) tens(cid:76)(cid:82)ns (cid:9) s(cid:82)(cid:70)(cid:76)al Domestic drivers(cid:29) (n(cid:82) (cid:76)mme(cid:71)(cid:76)ate (cid:85)es(cid:82)lut(cid:76)(cid:82)n) ▪ Pa(cid:70)e (cid:82)(cid:73) st(cid:85)u(cid:70)tu(cid:85)al (cid:85)e(cid:73)(cid:82)(cid:85)ms (cid:85)ema(cid:76)ns sl(cid:82)(cid:90) ▪ M(cid:82)(cid:82)(cid:71)(cid:92)(cid:182)s (cid:71)(cid:82)(cid:90)n(cid:74)(cid:85)a(cid:71)e s(cid:82)met(cid:76)me (cid:76)n 2020(cid:15) (cid:69)ut (cid:71)(cid:76)s(cid:70)(cid:82)unte(cid:71) (cid:69)(cid:92) t(cid:75)e ma(cid:85)(cid:78)et (cid:9) sea(cid:85)(cid:70)(cid:75) (cid:73)(cid:82)(cid:85) (cid:75)(cid:76)(cid:74)(cid:75)e(cid:85) (cid:92)(cid:76)el(cid:71)s ▪ Es(cid:78)(cid:82)m – (cid:71)ete(cid:85)(cid:76)(cid:82)(cid:85)at(cid:76)(cid:82)n (cid:76)n (cid:73)(cid:76)nan(cid:70)e (cid:70)(cid:82)nt(cid:76)nues. Le(cid:89)el 1 (cid:9) 2 l(cid:82)a(cid:71)(cid:16)s(cid:75)e(cid:71)(cid:71)(cid:76)n(cid:74) (cid:73)(cid:82)(cid:85) ne(cid:91)t 18 m(cid:82)nt(cid:75)s(cid:15) (cid:90)(cid:76)t(cid:75) s(cid:82)me (cid:83)(cid:85)(cid:76)(cid:89)ate se(cid:70)t(cid:82)(cid:85) ene(cid:85)(cid:74)(cid:92) (cid:74)ene(cid:85)at(cid:76)(cid:82)n (cid:82)(cid:89)e(cid:85) t(cid:76)me ne(cid:74)at(cid:76)(cid:89)e (cid:76)m(cid:83)a(cid:70)t (cid:82)n (cid:70)(cid:82)n(cid:73)(cid:76)(cid:71)en(cid:70)e ▪ M(cid:82)(cid:85)e ma(cid:85)(cid:78)et (cid:9) (cid:76)n(cid:89)estment (cid:73)(cid:85)(cid:76)en(cid:71)l(cid:92) (cid:83)(cid:82)l(cid:76)(cid:70)(cid:76)es ▪ Pu(cid:69)l(cid:76)(cid:70) (cid:73)(cid:76)nan(cid:70)es (cid:76)m(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)n(cid:74) ▪ SA a(cid:89)e(cid:85)ts a M(cid:82)(cid:82)(cid:71)(cid:92)(cid:182)s (cid:71)(cid:82)(cid:90)n(cid:74)(cid:85)a(cid:71)e ▪ A(cid:70)(cid:70)ele(cid:85)ate(cid:71) Es(cid:78)(cid:82)m tu(cid:85)na(cid:85)(cid:82)un(cid:71) (cid:71)(cid:76)s(cid:70)(cid:82)ntent ▪ Inte(cid:85)nal (cid:70)(cid:82)n(cid:73)l(cid:76)(cid:70)t (cid:76)n(cid:70)(cid:85)eases an(cid:71) (cid:73)(cid:76)(cid:74)(cid:75)t a(cid:74)a(cid:76)nst (cid:70)(cid:82)(cid:85)(cid:85)u(cid:83)t(cid:76)(cid:82)n l(cid:82)ses m(cid:82)mentum ▪ St(cid:85)u(cid:70)tu(cid:85)al (cid:85)e(cid:73)(cid:82)(cid:85)ms (cid:73)a(cid:76)l ▪ Un(cid:76)(cid:89)e(cid:85)sal s(cid:82)(cid:89)e(cid:85)e(cid:76)(cid:74)n (cid:71)(cid:82)(cid:90)n(cid:74)(cid:85)a(cid:71)es – (cid:85)an(cid:71) un(cid:71)e(cid:85) s(cid:76)(cid:74)n(cid:76)(cid:73)(cid:76)(cid:70)ant (cid:83)(cid:85)essu(cid:85)e ▪ Es(cid:78)(cid:82)m l(cid:82)a(cid:71)s(cid:75)e(cid:71)(cid:71)(cid:76)n(cid:74) (cid:69)e(cid:92)(cid:82)n(cid:71) le(cid:89)el 1 (cid:9) 2. L(cid:76)ttle (cid:83)(cid:85)(cid:82)(cid:74)(cid:85)ess (cid:82)n tu(cid:85)na(cid:85)(cid:82)un(cid:71) Global drivers(cid:29) Global environment less favourable t(cid:75)an before(cid:15) but still supportive ▪ Sent(cid:76)ment s(cid:90)(cid:76)n(cid:74)s (cid:69)et(cid:90)een (cid:85)(cid:76)s(cid:78)(cid:16)(cid:82)n (cid:9) (cid:85)(cid:76)s(cid:78)(cid:16) (cid:82)(cid:73)(cid:73) (cid:70)(cid:82)n(cid:71)(cid:76)t(cid:76)(cid:82)ns (cid:43)ig(cid:75)l(cid:92) favourable environment ▪ S(cid:92)n(cid:70)(cid:75)(cid:85)(cid:82)n(cid:76)se(cid:71) (cid:74)(cid:85)(cid:82)(cid:90)t(cid:75)(cid:15) (cid:74)l(cid:82)(cid:69)al t(cid:85)a(cid:71)e (cid:90)a(cid:85)s su(cid:69)s(cid:76)(cid:71)e (cid:9) (cid:70)(cid:82)mm(cid:82)(cid:71)(cid:76)t(cid:92) (cid:83)(cid:85)(cid:76)(cid:70)es (cid:74)a(cid:76)n m(cid:82)mentum (cid:36)dverse global conditions emerge ▪ (cid:38)(cid:82)mm(cid:82)(cid:71)(cid:76)t(cid:92) (cid:83)(cid:85)(cid:76)(cid:70)e (cid:83)(cid:85)essu(cid:85)es(cid:15) (cid:76)n(cid:70)(cid:85)ease(cid:71) t(cid:85)a(cid:71)e (cid:83)(cid:85)(cid:82)te(cid:70)t(cid:76)(cid:82)n(cid:15) a(cid:71)(cid:89)e(cid:85)se B(cid:85)e(cid:91)(cid:76)t(cid:15) (cid:75)e(cid:76)(cid:74)(cid:75)tene(cid:71) (cid:74)l(cid:82)(cid:69)al tens(cid:76)(cid:82)ns ▪ (cid:38)(cid:75)(cid:76)nese (cid:85)e(cid:70)(cid:82)(cid:89)e(cid:85)(cid:92) (cid:83)(cid:82)st (cid:52)1 (cid:82)n (cid:70)(cid:82)(cid:85)(cid:82)na(cid:16)(cid:89)(cid:76)(cid:85)us ▪ R(cid:76)s(cid:78)(cid:16)(cid:82)n (cid:74)l(cid:82)(cid:69)al (cid:70)(cid:82)n(cid:71)(cid:76)t(cid:76)(cid:82)ns (cid:9) (cid:70)(cid:82)(cid:85)(cid:82)na (cid:89)(cid:76)(cid:85)us ▪ R(cid:76)s(cid:78)(cid:16)(cid:82)(cid:73)(cid:73) (cid:74)l(cid:82)(cid:69)al (cid:70)(cid:82)n(cid:71)(cid:76)t(cid:76)(cid:82)ns (cid:74)(cid:76)(cid:89)en (cid:38)(cid:82)(cid:85)(cid:82)na(cid:16)(cid:89)(cid:76)(cid:85)us (cid:76)m(cid:83)a(cid:70)t (cid:70)(cid:82)nta(cid:76)ne(cid:71) NEDBANK GROUP LIMITED – Annual Results 2019 (cid:28)(cid:28) NOTES: NOTES: Nedbank Group in a strong position BOOKLET SLIDE (cid:43)eadline earnings (Rm) (cid:47)oan gro(cid:90)t(cid:75) ((cid:38)AGR %) Gl(cid:82)(cid:69)al (cid:73)(cid:76)nan(cid:70)(cid:76)al (cid:70)(cid:85)(cid:76)s(cid:76)s (28%) 1 2 9 5 5 6 7 5 7 7 2 4 20.1 16.3 3.3 6.0 06–08 15–19 (cid:58)(cid:75)(cid:82)lesale Reta(cid:76)l NII sensitivit(cid:92) for 1(cid:8) c(cid:75)ange in interest rates (R(cid:69)n) 1.3 7 8 7 1 1 5 9 4 3 1 6 0 5 2 1 0.5 0.6 06 07 08 09 10 11 12 13 14 15 16 17 18 19 08 09 19 NEDBANK GROUP LIMITED – Annual Results 2019 100 NEDBANK GROUP – ANNUAL RESULTS 2019 51 Nedbank Group in a strong position BOOKLET SLIDE Number of clients (m) NIR income contribution (%) Defaulted advances (%) 83% 4.3% (2.3) 4.4 08 4.2 09 7.81 19 39.8 08 42.2 09 46.5 19 3.9 08 5.9 09 3.6 19 CET1 ratio (%) Funding tenor (%) Stage 3 overage (%) 1.6% 4% LT MT ST 19.2 19.9 21.1 21.0 60.9 57.9 30.2 22.9 46.9 08 09 19 8.22 08 9.92 09 11.5 19 1 Includes dormant account closures. | 2 Core equity tier 1. 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NEDBANK GROUP LIMITED – Annual Results 2019 10(cid:21) NOTES: 52 NEDBANK GROUP – ANNUAL RESULTS 2019 53 RESULTS PRESENTATIONNOTESNEDBANK GROUP – ANNUAL RESULTS 2019 2019 RESULTS COMMENTARY 54 NEDBANK GROUP – ANNUAL RESULTS 2019 NEDBANK GROUP – ANNUAL RESULTS 2019 55 RESULTS COMMENTARY 2019 RESULTS COMMENTARY BANKING AND ECONOMIC ENVIRONMENT The global landscape deteriorated and financial market volatility increased and persisted for much of 2019. International investors became more risk-averse on growing fears of a global recession as the evidence of slower growth in many countries accumulated, triggered by an escalation in the trade war between the US and China, although monetary conditions and trade tensions eased somewhat towards the end of the year. While US growth remained robust, most other developed countries experienced a significant loss of momentum. Emerging markets were hard hit by the rise in protectionism and the decline in global trade. Growth in China moderated to its slowest pace since 1992 and the emerging impact of the corona virus is expected to reduce growth even further. Country-specific political and structural factors, together with the disruptive impact of climate change, compounded the challenges of most other emerging markets, including those in sub-Saharan Africa. Hyperinflation eroded the value of the Zimbabwean dollar as the country transitioned from a dual-currency system to a mono-currency Zimbabwean dollar system, with the inflation index reaching 552% in December 2019. In SA power outages continued to disrupt production and spending in the economy. Financial and operational challenges at many state-owned enterprises (SOEs) and Eskom in particular resulted in further bailouts by government, placing more pressure on an already strained fiscus. Government’s debt metrics deteriorated further and SA’s last remaining investment-grade sovereign risk rating remains at risk. The process of restoring good governance and rebuilding institutional capacity has started, but there has been little visible progress in bringing those who were complicit in state capture and corruption to book and reforms at the critically important SOEs have been too slow. Business confidence reached seven-year lows as policy uncertainty increased. While some companies increased investment in new technologies, automation and improved processes, expansionary investment in new production capacity continued to decline, resulting in higher levels of unemployment and growing numbers of discouraged workers. The economy contracted over two quarters and is estimated to grow by only 0,3% in 2019, which will be down from an already modest 0,8% in 2018. Growth in consumer spending slowed down significantly, impacted by rising unemployment and slower wage growth. Encouragingly, household balance sheets were little changed as the ratio of household debt to disposable income was relatively steady at 72,7% throughout 2019. Inflation surprised on the downside in 2019, ending the year at a subdued 4,0%, contained mainly by weak domestic demand and low food prices, which offset the impact of a moderately weaker rand and volatile oil prices. In response to the benign inflation outcomes and improved inflation outlook, SARB’s Monetary Policy Committee cut interest rates by 25 bps in July 2019, followed by another cut of 25 bps in January 2020. The overall conditions in the banking sector remained very challenging in 2019, with the weak economic environment resulting in subdued client demand for most categories of credit and a slowdown in transactional banking activity and deal flow. Credit risks increased given the ongoing pressures on household incomes and company profits. REVIEW OF RESULTS Nedbank Group’s financial performance in 2019 was below our expectations in a very difficult macroeconomic environment as HE declined 7,3% to R12,5bn and the group produced an ROE (excluding goodwill) of 16,0%. In addition to the challenging environment, HE was impacted by additional items in the second half of the year, including hyperinflation in Zimbabwe (R142m HE impact) and the raising of impairments against recoverability on recognised intercompany legacy debt (R44m), the exercise of an option that will increase our shareholding in Banco Único (R140m) from 50% plus one share to approximately 87,5% (subject to regulatory approval), the revaluing of a number of private-equity investments as the underlying investee company performance was weaker and public market multiples declined (R238m), and the increase in impairments to just above the midpoint of our target range of 60 bps to 100 bps as a result of increased impairments raised on certain CIB watchlist items and an increase in the central impairment. Growth was also impacted by the high NIR base from the closure of round 4 renewable-energy deals in 2018 and the onset of Youth Employment Service costs (YES) (R96m) in 2019. Preprovisioning operating profit growth of 2,7% reflects good cost management offsetting slower revenue growth. The impact of buying back and cancelling seven million shares as a result of the odd-lot offer in December 2018 (following the conclusion of the Old Mutual Managed Separation process) resulted in a DHEPS decline of 6,3%, which was slightly lower than the decline in HE. IFRS 16, dealing with the accounting for leases, was implemented on 1 January 2019. This resulted in lower levels of equity, higher levels of assets and liabilities, as well as accounting changes between NII and expenses. These changes were prospective, with no restatements of the 2018 comparatives. ROE (excluding goodwill) and ROE were lower than December 2019 at 16,0% and 15,0% respectively. ROA decreased 20 bps to 1,13% and the return on RWA decreased from 2,40% to 2,02%. NAV per share of 18 204 cents increased 3,7%. The benefit to NAV from earnings was partially offset by the day 1 impact of IFRS 16 (R0,7bn). Our IFRS 9 fully phased-in CET1 and tier 1 capital ratios of 11,5% and 12,8% respectively, average LCR for the fourth quarter of 125% and an NSFR of 113% are all Basel III-compliant and reflective of a strong balance sheet. On the back of our solid capital and liquidity position, a final dividend of 695 cents was declared, with the total dividend for the year of 1 415 cents being in line with the prior year. 54 NEDBANK GROUP – ANNUAL RESULTS 2019 NEDBANK GROUP – ANNUAL RESULTS 2019 55 DELIVERING SUSTAINABLY TO ALL OUR STAKEHOLDERS Nedbank continues to play an important role in society and in the economy, and we remain committed to delivering on our purpose of using our financial expertise to do good. We contribute to the wellbeing and growth of the societies in which we operate by delivering value to our staff, clients, shareholders, regulators and society. For staff We currently employ 29 403 staffmembers and paid salaries and benefits of R17,3bn over the period under review. Our bargaining-unit staff received annual salary increases of 7,0% in 2019, ahead of inflation, and with management and executives receiving increases below 4,5%, the blended average staff salaries increased by 5,4%. We have refreshed our Employee Value Proposition by launching our People Promise, which is anchored in Nedbank being a purpose-led organisation, while actively working towards positioning the bank as an employer of choice for top talent. As part of our groupwide People 2020 programme aimed at transforming and aligning our culture and talent with our strategic objectives, our executive management programmes have evolved to be more digitally focused while equipping leaders to lead in environments of ambiguity and exponential change. During the year we invested over R337m in external training. Our new Ways of Work (nWoW) practices to transform Nedbank into a more agile organisation, holistically rethinking the way we work, communicate and manage talent on our journey to creating a more high-performing culture, are evident in the formation of more than 150 squads (involving 3 000 staffmembers) working according to this new approach. Through the Agility Centre we have enhanced our redeployment solutions to provide better support for staff displaced as a result of optimisation efforts and organisational changes. Consequently, 620 staffmembers were successfully redeployed during 2019 and retrenchments were limited to 158. Our staff engagement score was strong at 75% and is 8% above industry levels. Transformation remains a key imperative to ensuring Nedbank remains relevant in a transforming society and we have continued to focus on this across all levels at Nedbank, from our board of directors to all our staffmembers. Currently, black representation at board level is 69%, at executive level it is 46% and for our total staff it is just more than 79%. Female representation at board level is 25%, at executive level is 46% and for total staff is 62%. For clients We supported our clients by advancing R208bn (2018: R181bn) in new loans to enable them to finance their homes, vehicles and education, as well as to grow their businesses, while safeguarding R904bn of deposits at competitive rates. Our clients’ access to banking improved as digitally active retail users increased by 16% to 1,8 million. Rooted in deep client insights, we launched new market-leading digital innovations, such as end-to-end digital client onboarding of individuals (paperless, quicker and fully FICA-enabled), together with the ability to sell transactional accounts as well as personal loans, and pilots for investment products, credit cards and overdrafts. The Nedbank Money app has been downloaded 3,9 million times since its launch; the app and the Nedbank Private Wealth app, remained two of the highest-rated SA banking apps on the Apple and Google app stores. By the end of 2019 we had launched three zero-monthly-fee accounts: pay-as-you-use (PAYU), Unlocked.Me and MobiMoney. Our Money Secrets brand campaign has been positively received, getting South Africans to talk about money as a first step to making positive and sustainable money management changes. In terms of client experience, Nedbank was the only bank to improve its Net Promoter Score (NPS) in 2019, showing a positive move from 37% in 2018 to 38%, and on the SAcsi client satisfaction index we became the highest-rated large SA bank. CIB continued to lead industry league tables in various categories, coming first in deal flow for M&A advisors and third in deal value for M&A sponsors, as well as winning the BEE deal of the year. The business was also ranked number one for debt capital market bond issuances in 2019. Our asset management business, Nedgroup Investments, was named Offshore Management Company of the Year for the fifth consecutive year at the Raging Bull Awards. For shareholders On 20 August 2019 Nedbank celebrated its 50th year of being listed on the JSE, illustrating the group’s strong foundations and sustainable business model. We were disappointed that, following a strong performance in 2018, when our share price increased 7% (Banks index down 5% and FINI 15 down 8%), the Nedbank share price was down 22% in 2019 compared with the Banks index and the FINI 15, which were down 5% and 4% respectively. At our 52nd annual general meeting (AGM) all resolutions were passed and, following engagements with shareholders and enhancements to our remuneration practices, we were pleased that our remuneration policy and disclosure resolutions received more than 98% of votes in favour. We continued to ensure transparent, relevant and timeous reporting and disclosure to shareholders, and consequently Nedbank became the first SA company to be named the overall winner across three prestigious reporting and communication awards in the same year: overall winner among JSE-listed companies at the Investment Analyst Society Awards, the EY Excellence in Integrated Reporting Awards and the CSSA/JSE Integrated Reporting Awards. Additionally, our Remuneration Report was recognised at the 2019 South African Reward Association Awards for the outstanding contribution that Nedbank has made in reporting on remuneration issues in a trustworthy and transparent manner. In the context of greater shareholder focus on environment, social and governance (ESG) matters, we are proactively engaging with shareholders on climate change resolutions, discussing both our thermal coal lending policy and process for assessment of climate risk, and these will be tabled at our AGM in May 2020. Nedbank’s valuation metrics remain attractive, with price/earnings and price-to-book ratios of 8,2 times and 1,2 times respectively and a dividend yield of 6,6% at 31 December 2019. For regulators We achieved compliance with Basel III requirements ahead of the full compliance timelines, including having a strong capital position and achieving a CET1 ratio of 11,5% after the fully phased-in day 1 impact of IFRS 9 (9 bps impact in 2019), an average LCR of 125% in the fourth quarter of 2019 and an NSFR of 113% at December 2019. We have invested over R111bn in government and public sector bonds as part of our high-quality liquid asset (HQLA) requirements and, in doing so, remain committed to making a meaningful contribution to the countries in which we operate, thereby appropriately supporting the funding needs of governments. Cash taxation payments across the group of R11,5bn were made relating to direct, indirect and employee taxes, as well as other taxation. We continued to engage and work with all our relevant regulators to ensure effective delivery of the various regulatory programmes, with positive outcomes achieved in 2019 across various regulatory requirements, including a focus on the Financial Intelligence Centre Amendment Act (FICAA), IFRS 9 and Risk Data Aggregation and Risk Reporting (RDARR). Our compliance model ensures that appropriate controls are in place to enable compliance with applicable regulatory requirements and remediation where we fall short, and we continue to leverage compliance as a strategic differentiator. 56 NEDBANK GROUP – ANNUAL RESULTS 2019 NEDBANK GROUP – ANNUAL RESULTS 2019 57 RESULTS COMMENTARY For society Our long-term sustainability and success are contingent on the degree to which we deliver value to society. Through the considered development and delivery of products and services that satisfy societal needs and through our own operations, we play our part to enable a thriving society, create long-term value and maintain trust to ensure the success of our brand. This is particularly important in the current context of SA as well as the broader African continent. We have adopted the United Nations Sustainable Developments Goals (SDGs) as a framework for measuring delivery on our purpose. We continued to make progress in driving groupwide adoption, awareness and delivery of the targeted nine SDGs goals in order to bring our purpose truly to life. Key highlights include the following: • Quality education (SDG 4) – Over the past five years Nedbank has provided approximately 5 500 students with student loans to the value of R191m. A total of R45,3m of this was disbursed to support almost 758 students in 2019. The provision of affordable accommodation close to tertiary institutions was a key focus for the year, with an investment of R1,8bn to clients that delivered an additional 8 292 beds. More than 50% of our R130m of CSI spend was directed to a mix of early-childhood development, primary, secondary and tertiary education initiatives. Included in this is support of programmes such as the Ikusasa Student Financial Aid Programme (ISFAP) and provision of bursaries for scarce skills to nearly 240 students. We also provided education support through bursaries to 860 Nedbank staffmembers and once-off education grants to 2 150 of our staffmembers’ children – the value of this combined investment was almost R18m for 2019. Our sponsorship of the Thuthuka Education Upliftment Fund supports 45 students a year and since inception we have contributed more than R26m and funded the qualification of 49 new black chartered accountants in SA. • Clean water and sanitation (SDG 6) – We provided a R550m general banking facility for Rand Water to assist in the provision of bulk potable water in SA, as well as the provision of R556m to the Trans-Caledon Tunnel Authority for three water projects that are of key importance to the country’s water supply. In terms of our own operations, as a result of strict water restriction measures and floorspace consolidation, our own total water consumption across all Nedbank campus sites decreased by 10,3% in 2019. In addition, through the WWF Nedbank Green Trust we have invested more than R93m in 41 water and conservation projects over the past five years. Altogether 11 of those projects and an investment of nearly R23m focused on water (fresh and marine) in particular. • Affordable and clean energy (SDG 7) – In 2019 we became the first SA commercial bank to launch a green bond on the JSE, raising R1,7bn in the first issuance and a further R1,0bn in the second issuance to fund solar and wind renewable-energy projects. To date we have arranged 42 renewable-energy projects in South Africa’s Renewable Energy Independent Power Producing Procurement (REIPPP) programme, with 2019 seeing us advancing significant capital into the construction of the fourth round of projects, which will start coming on stream in 2020. Through the deployment of pioneering financing solutions, we also concluded transactions worth over R700m with leading developers in the embedded-generation space as well as our commercial and agriculture clients. In addition, R800m of our property lending over the past financial year went towards funding the installation of solar power facilities. Nedbank also hosted bi-monthly Energy Dialogues in partnership with EE Publishers, bringing together over 1 000 energy sector stakeholders looking for solutions to SA’s energy challenges. In our insurance business we commercialised our geyser telemetry product, Senseable, benefitting clients through electricity savings and consequently reducing carbon emissions. • Decent work and economic growth (SDG 8) – The Nedbank Stokvel Account, which was launched in 2018 to provide safe, easy and effective ways for groups of individuals to pool their savings and grow their money, has attracted over 4 500 stokvel groups with more than 155 000 members. We continued to participate in the CEO Initiative and the projects it initiated, working with government, business and labour towards a more inclusive SA society. In April 2019 we activated our commitment to the YES initiative, through corporate SA aims to provide internship opportunities for more than one million South Africans. This is estimated to translate into an annual investment of approximately 1,5% of net profit after tax (SA business) and in 2019 cost us R134m pretax. We placed 3 315 previously unemployed youth both directly and through sponsored placements. • Industry, innovation and infrastructure (SDG 9) – In addition to funding water and energy infrastructure, we participated in the loan facility for Ethiopian Railways to assist with the construction of a 404 km strategic railway corridor linking passengers and freight in the northern, central and eastern regions of Ethiopia. We also provided R400m for the expansion of telecommunications across the continent and provided dollar-based funding for the provision of hospitals in support of the Zambian government. • Reduced inequalities (SDG 10) – In 2019 we reached a total of 141 000 clients through financial wellness workshops. A further 6,1 million individuals were reached through radio and television shows, reinforcing our message around money management, touching on topics such as budgeting, savings and debt management. We have also provided financial training to almost 400 000 youths and more than 1 200 entrepreneurs. From 1 April 2019 fees for the PAYU Account were reduced from R5,50 monthly to zero and during the year we opened more than 400 000 accounts. In our own operations, we retained our BBBEE contributor status of level 1 as measured under the Amended Financial Sector Code (FSC) and 76% of our procurement spend was used to support local SA business. • Sustainable cities and communities (SDG 11) – We provided R1,1bn for the development of affordable housing for lower-income households, bringing our five-year investment in this key sector to R4,2bn. We also provided funding of R277m for the construction of buildings that conform to green-building standards. • Responsible consumption and production (SDG 12) – Over the period we invested nearly R800m in the recycling sector through the provision of funding that will create jobs in the sector and develop new facilities to reuse plastic, thereby stopping it from ending up in landfill. We also applied our investment expertise to the agriculture sector to contribute to its transformation, its farming practices as well as secondary agriculture industries. Particular interventions include the positive uptake of R100m for our shade-netting offering, building on the positive takeup of water efficiency interventions in 2018. • Life on land (SDG 15) – Nedbank provided mining rehabilitation guarantees of R320m in 2019 as well as a R700 000 investment in a WWF Nedbank Green Trust Project – the Mining Incubator, which is encouraging more sustainable practices in the mining sector. In addition, through our water source partnership with the WWF-SA we are focused on safeguarding critical water source areas, biodiversity hotspots and rural livelihoods. This partnership sees R5m invested annually to coordinate efforts by a range of stakeholders in chosen water source areas. Activities include alien invasive tree removal, the rehabilitation of springs, implementation of grazing programmes and piloting of new rural development models. 56 NEDBANK GROUP – ANNUAL RESULTS 2019 NEDBANK GROUP – ANNUAL RESULTS 2019 57 CLUSTER FINANCIAL PERFORMANCE Nedbank Group’s HE declined 7,3% to R12 506m and an ROE (excluding goodwill) of 16,0% remains above our estimated cost of equity of 14,1%. ROEs were lower across all our frontline clusters as HE declined given the difficult environment. Change (%) HE (Rm) 2019 6 167 5 293 1 042 2018 6 714 5 379 1 133 (8,1) (1,6) (8,0) ROE (excluding goodwill) (%) 2019 17,7 17,3 24,8 2018 20,0 18,9 26,8 (35,0) (4,6) 457 (453) 702 (433) 7,7 10,3 (7,3) 12 506 13 495 16,0 17,9 CIB RBB Wealth Nedbank Africa Regions Centre Group CIB HE declined 8,1% to R6,2bn while delivering an ROE of 17,7%. HE was primarily impacted by an increase in the CLR to 26 bps from 4 bps in the prior year, as well as lower private-equity revaluations. NII growth of 2,0% was underpinned by solid growth in banking advances (+6,8%) as pipeline deals were converted. NIR declined by 4,1%, impacted by subdued client activity, a decrease in private-equity income and base effects from the fourth round of renewable-energy deals concluded in H2 2018. Notwithstanding the increase in CLR to within CIB’s TTC target range of 15 bps to 45 bps, credit quality remained sound in a difficult environment, supported by proactive risk management, and close monitoring and management of specific counters and exposures to stressed sectors of the economy, such as cement, construction, retail and selected SOEs. Preprovisioning operating profit (PPOP) growth was down 1,1%. HE in RBB declined 1,6% to R5,3bn and ROE was 17,3%. The lower HE was mainly due to cyclically higher impairment charges. The CLR increased to 138 bps and is now within the lower half of the cluster’s TTC target range of 130 to 180 bps. Revenue growth was solid as NII increased by 6,1%, while NIR increased by 5,8% as main-banked clients in the middle and professional segments grew while main banked clients in the entry-level and youth segments decreased. Low expense growth was enabled by ongoing optimisations of processes and operations, including headcount reductions of 1 876, largely through natural attrition. RBB delivered a strong PPOP increase of 11,4%, reflecting continuing growth of the franchise. Nedbank Wealth HE was down by 8,0% to R1 042m, with ROE of 24,8% due to 0,3% revenue decline in a challenging macroeconomic environment and poor market conditions. Negative investor confidence and lacklustre GDP growth in SA impacted revenue streams in the local Wealth Management businesses. The international Wealth Management business achieved good underlying growth despite being adversely impacted by declining interest rates. The Insurance business was negatively affected by an increase in weather-related claims in the first half of the year. Asset Management was impacted by AUM outflows experienced in the latter part of 2018 as well as changing investor behaviour towards lower-margin and lower-risk asset classes. As of January 2020, the Rest of Africa business rebranded and changed its name to Nedbank Africa Regions. Africa Regions’ HE decreased by 35,0% to R457m and ROE declined to 7,7% mainly due to hyperinflation accounting in Zimbabwe implemented from 1 July 2019, once-off adjustments, higher impairments and lower associate income in Q4 2019 as we accounted for ETI’s Q3 2019 results. The SADC business performance was affected by continued macroeconomic pressures across the region, especially in Zimbabwe, where the application of hyperinflation accounting resulted in a net monetary loss of R296m and HE loss of R142m. The performance in the Centre reflects the increase in the central impairment in the second half of the year of R250m to account for risks that have been incurred but not yet emerged and a final postretirement medical-aid (PRMA) credit amounting to R255m (after tax) booked on the ongoing policy uncertainty in the first half of the year following finalisation of outstanding tax matters, compared with a R180m (after tax) credit in 2018. These were offset by YES costs of R96m (after tax) and R140m (after tax) relating to Nedbank accounting for the exercise of an option that will increase our shareholding in Banco Único from 50% plus one share to 87,5% (subject to regulatory approval). FINANCIAL PERFORMANCE Net interest income NII increased 4,7% to R30 167m, supported by AIEBA growth of 8,6%. The AIEBA growth was driven by solid growth in advances and higher levels of HQLA held in the banking book. NIM decreased by 13 bps to 3,52% from 3,65% in December 2018. A negative endowment impact due to lower net endowment balances, partially offset by the slightly higher average prime rate in 2019 of 10,14% compared with 10,09% in 2018, decreased NIM by 3 bps. Asset pricing contributed a 6 bps decline, with pressure most evident in Personal Loans (NCA pricing caps) and competitive pricing on wholesale advances. The implementation of IFRS 16 on 1 January 2019 decreased NIM by 4 bps. Impairments charge on loans and advances Impairments increased strongly off the low prior-year base, impacted by the deteriorating SA macroeconomic environment. The impairment charge increased 66,2% to R6 129m and CLR was up from 53 bps to 82 bps and as a result moved from below the bottom end to around the midpoint of the group’s TTC target range of 60 bps to 100 bps. Impairments in CIB increased off a low base, with its CLR at 26 bps, now within the lower half of its TTC target range of 15 bps to 45 bps. Stage 2 impairments increased as a result of favourable movements from stage 3 advances, and this is evident in the CLR for Commercial Property Finance improving to -2 bps, underpinned by proactive restructuring and resolution of defaulted counters. Stage 3 impairments increased in specific counters, particularly those operating in the construction and cement, retail and telecommunication sectors. Stage 3 impairments are individually determined in CIB and are dependent on the value of the collateral we hold for each exposure. RBB’s CLR, at 138 bps, increased cyclically to just above the bottom end of its TTC target range of 130 bps to 180 bps as a result of risk normalisation off a low base and increased levels of consumer stress driven by a deteriorating macroeconomic environment. The CLR for MFC increased to 182 bps due to higher levels of repossessions and writeoffs as well as increased inflow into debt counselling. Business Banking has seen an increase in CLR to 50 bps, with risk becoming increasingly evident in the portfolio as clients experience the continued impact of the low business confidence and constrained economy intensified by rising costs, low demand and intermittent load-shedding. The CLR increase for Unsecured Lending to 639 bps is marginally higher than expectations, driven primarily by the deteriorating macroeconomic environment as well as the negative collections impact of a change to regulation around setoff. Home Loans credit losses, at 14 bps, continue to reflect a high-quality book. The group’s central provision decreased in the first half of the year by R50m to R100m as the underlying risks for which these central provisions had been raised emerged in the clusters. In the second half we increased the provision by R150m to R250m to account for risks that have been incurred but have not yet emerged. 58 NEDBANK GROUP – ANNUAL RESULTS 2019 NEDBANK GROUP – ANNUAL RESULTS 2019 59 RESULTS COMMENTARY CLR (%) CIB RBB Wealth Nedbank Africa Regions Group Banking advances (%) 46,3 46,5 4,2 3,0 100,0 2019 2018 TTC target ranges 0,26 1,38 0,18 1,01 0,82 0,15–0,45 0,04 1,06 1,30–1,80 0,13 0,20–0,40 0,51 0,75–1,00 0,53 0,60–1,00 Stage 3 (defaulted) advances increased 9,5% to R27,6bn, driven by a 22,5% increase in RBB as the weaker economic environment placed additional stress on consumers, which in turn led to increased levels of defaults, particularly in MFC (vehicle finance), Business Banking and Unsecured Lending. This was partially offset by a 28,1% reduction in CIB stage 3 advances, primarily as a result of the successful restructuring, curing and rerating of clients. Approximately 85% of CIB stage 3 advances are concentrated in 10 counters. The stage 1 coverage ratio increased to 0,49% (December 2018: 0,45%), and the stage 2 coverage ratio increased to 5,31% (December 2018: 4,97%) as portfolio provisioning levels increased largely in line with advances growth. The stage 3 coverage ratio increased to 38,0% (December 2018: 36,8%) given the mix impact from the higher contribution of RBB stage 3 advances. RBB stage 3 coverage decreased from 46,0% to 41,6%, mainly as a result of lower loss expectations for stage 3 clients, an increase in distressed restructures and a revision of point of writeoff in Card. Stage 3 coverage for CIB increased to 24,6% from 11,6% as a result of the change of composition in defaults. Non-interest revenue NIR was flat at R25 997m, primarily impacted by lower private-equity revaluations and a high base from renewable-energy deals in 2018. • Commission and fee income grew 2,5% to R18 739m as RBB reported solid underlying retail transactional NIR growth of 6,3%, supported by solid main-banked client growth in the more profitable middle, professional and SME client segments, while youth and entry-level client segments decreased. Commission and fee income in CIB fell 1,0% and was adversely impacted by subdued client activity and a high 2018 base. • Insurance income was slightly down at R1 837m due to higher weather-related claims in the first half of 2019 and lower life reserve releases, partly offset by improved investment returns and volume growth. • Trading income increased 2,1% to R4 524m despite low volatility and decreased volumes from a high base in 2018. • Private-equity income declined, primarily due to downward revaluation of unrealised investments as the subdued macroeconomic environment impacted the profitability of certain counters. • Other NIR declined, mainly as a result of Nedbank accounting for the exercise of an option that will increase our shareholding in Banco Único from 50% plus one share to 87,5% (subject to regulatory approval). Expenses Expenses grew 1,7% to R32 179m. Higher levels of amortisation from the ongoing investment in technology as part of our Managed Evolution IT strategy were offset by ongoing optimisation initiatives. • Staff-related costs decreased by 0,7%, following: » average annual salary increases of 5,4% and a reduction in staff numbers of 1 874 in 2019 largely through natural attrition; » a 24,6% decrease in STIs impacted by the group’s financial performance and a 22,2% decrease in LTIs as expected vesting ratios have reduced due to underperformance against corporate performance targets; and » finalisation in the first half of the settlement with our staff with regard to PRMA obligations and benefits, resulting in a final pretax credit of R354m in respect of a reversal of actuarially estimated liabilities previously expensed. In the first half of 2018 an initial pretax credit of R250m was raised. • Computer-processing costs increased 12,4% to R4 878m, driven by the expected increase in the amortisation charge of 21,8% and higher processing volumes, offset by reduced network-related costs as a result of efficiency savings. • Fees and insurance increased by 4,1% as a result of association fees and fees related to digital innovations. • Other cost lines are being well managed, with increases below inflation. In addition, we unlocked cumulative benefits of R1 147m (2018: R680m) from process enhancements and implementing our Target Operating Model (TOM). Other costs also include Nedbank’s first-time participation in the YES initiative to the value of R134m pretax (2018: nil). The group’s growth in expenses of 1,7% was below total revenue and associate income growth of 3,0%, resulting in a positive jaws ratio of 1,3% and a cost-to-income ratio of 56,5%, compared with 57,2% in December 2018. The JAWS ratio, excluding associate income, was 0,8%. Hyperinflation accounting in Zimbabwe On 11 October 2019 the Zimbabwe Public Accountants and Auditors Board’s announced that Zimbabwe is in hyperinflation. Consequently, Nedbank applied IAS 29 in accounting for our operations in Zimbabwe, where we hold 66% of the company’s equity. The key drivers included: a) adjusting opening equity with the closing CPI index at 6,21 times and similarly reducing the income statement by R246m (this adjustment had no impact on NAV), b) recording gains from the indexing of non-monetary assets (eg fixed assets) of R30m and c) indexing the income statement, resulting in an increase in certain lines and an equal and opposite charge in the monetary loss line in the income statement of R80m. The HE impact of these adjustments is R142m after adjusting for minorities. The NAV of Nedbank Zimbabwe at 31 December 2019 was R123m. The HE loss is driven by inflation as well as the weaker Zimbabwean dollar versus the rand. Earnings from associates Associate income includes R668m (2018: R608m) relating to ETI as a result of ETI reporting an attributable profit in the fourth quarter of 2018 and the first three quarters of 2019, in line with our policy of accounting for our share of ETI’s attributable earnings a quarter in arrear. The total effect of ETI on the group’s HE was a profit of R437m (2018: R375m), including the R231m of funding costs. Accounting for associate income, together with Nedbank’s share of ETI’s other comprehensive income and movements in Nedbank’s FCTR, resulted in the carrying value of the group’s strategic investment in ETI decreasing from R3,2bn at 31 December 2018 to R2,7bn at 31 December 2019. ETI’s listed share price on the Nigerian Stock Exchange decreased 53,6% during 2019, which resulted in the market value of the group’s investment in ETI (at the Nafex rate) decreasing to R1,3bn at 31 December 2019. Due to the prolonged decline of ETI’s listed share price below its carrying value, Nedbank reviewed its impairment provision at 31 December 2019. Management’s value-in-use analysis supports the current carrying value of our investment. Our position will be reassessed again at 30 June 2020 and at year-end. 58 NEDBANK GROUP – ANNUAL RESULTS 2019 NEDBANK GROUP – ANNUAL RESULTS 2019 59 STATEMENT OF FINANCIAL POSITION Capital The group remains well capitalised, at levels significantly above the minimum regulatory requirements. The CET1 ratio of 11,5% was impacted by the implementation of IFRS 16 on 1 January 2019 (R658m reduction in equity and R3,4bn increase in RWA), the ongoing investment in software development costs as part of the group’s Managed Evolution programme, the adverse impact of changes in foreign currency translation reserves, increase in RWA due to migration in certain credit portfolios, credit model updates and capital optimisation initiatives. The total tier 1 CAR was positively impacted by the issuance of additional tier 1 instruments totalling R3,5bn. This was offset by the further grandfathering of old-style preference shares (R531m) in January 2019 in line with the Basel III transitional arrangements. The total CAR was further impacted by the redemption of R2,5bn tier 2 capital instruments (NED 15 and NED 16) and the issuance of new-style tier 2 capital of R2,5bn in line with the group’s capital plan. Basel III capital ratios (%) CET1 Tier 1 Total CAR 2019 2018 Internal target range Regulatory minimum1 11,5 12,8 15,0 11,7 12,5 14,8 10,5–12,5 > 12,0 > 14,0 7,5 9,25 11,5 (Ratios calculated with full IFRS 9 phase-in and include unappropriated profits.) 1 The Basel III regulatory requirements exclude any idiosyncratic or systemically important bank minimum requirements. Funding and liquidity Optimising our funding profile and maintaining a strong liquidity position remain a priority for the group. The group’s three-month average long-term funding ratio was 30,2% for the fourth quarter supported by the group’s successful capital market issuances. The group's December 2019 quarterly average LCR of 125% exceeded the minimum regulatory requirement of 100% effective from 1 January 2019 and represents the end of the Basel III LCR phase-in period. To ensure ongoing compliance Nedbank maintains appropriate operational buffers designed to absorb seasonal and cyclical volatility in the LCR. Nedbank Group LCR HQLA (Rm) Net cash outflows (Rm) Liquidity coverage ratio (%)2 Regulatory minimum (%) 2 Average for the quarter. 2019 177 985 142 421 125,0 100,0 2018 162 678 148 694 109,4 90,0 Further details on the LCR are available in the 'Additional information' section of the condensed consolidated financial results. Nedbank’s portfolio of LCR-compliant HQLA increased by 9,4% to a December 2019 quarterly average of R178,0bn. Looking forward, growth in the HQLA portfolio will be more aligned with balance sheet growth, without the incremental HQLA growth requirements that have emanated from the increasing LCR phase-in of minimum regulatory requirements since 2015. The HQLA portfolio, together with Nedbank’s portfolio of other sources of quick liquidity, equates to total available sources of quick liquidity of R227,7bn, representing 19,9% of total assets. Nedbank exceeded the minimum NSFR regulatory requirement of 100% effective from 1 January 2018 and reported a December 2019 ratio of 113,0%, compared with the December 2018 ratio of 114,0%. The focus going forward will be on achieving continued NSFR compliance within the context of balance sheet optimisation. Banking loans and advances Total banking loans and advances increased by 7,2% to R764,2bn, driven by continued solid growth in RBB and an increase in CIB banking advances growth. Banking loans and advances growth by cluster was as follows: Rm CIB RBB Wealth Nedbank Africa Regions Centre3 Impairment of advances Group 3 Intercompany eliminations. Change (%) 8,3 6,9 (1,2) 3,0 54,1 13,2 7,2% 2019 2018 362 911 349 396 30 741 21 678 (571) (17 534) 335 002 326 762 31 111 21 037 (1 244) (15 488) 764 155 712 668 CIB banking loans and advances grew 8,3% to R362,9bn, driven by strong pipeline conversion and momentum from the second half of 2018 across energy, mining and public sector segments. Property Finance loans and advances in CIB increased 7,9% to R145,6bn as quality clients refinanced, and we grew in the rest of Africa off a low base. The CPF portfolio contains good-quality collateralised assets with low loan-to-value ratios and is managed by a highly experienced property finance team. RBB loans and advances grew 6,9% to R349,4bn, supported by growth across all asset classes in line with our risk appetite and selective origination strategies. Business Banking grew advances by 4,5% (the core growth of 9,3% is exclusive of the client migrations to RRB) due to an increase in new-loan payouts, client drawdowns of existing facilities as well as new-client acquisitions. MFC (vehicle finance) advances increased by 7,4% due to a combination of increases in average payout per deal as well as a slowdown in rundown/attrition. Unsecured Lending grew by 7,9% as a result of product and process enhancements, mostly through digital channels, driving increased takeup. Card advances increased by 4,6% in line with our transactional banking strategy. Consumer segment residential-mortgage loans grew by 3,0%, broadly in line with the industry. Deposits Deposits grew by 9,5% to R904,4bn, with total funding-related liabilities increasing by 9,4% to R964,1bn, while the loan-to-deposit ratio declined to 88,1%. RBB and CIB grew deposits faster than nominal GDP of 4,4%, with growth rates of 5,1% and 9,0% respectively. Wealth grew deposits by 1,4% and Nedbank Africa Regions by 2,5% as a result of softer markets in these jurisdictions. Transactional deposits increased by 1,9% while investment deposits increased by 8,0% as both retail and commercial clients managed liquidity into term investments. RBB transactional deposits grew by 4,3% while non-transactional deposits grew faster, at 5,1%. CIB transactional deposits remained flat while non-transactional investment deposits grew by 10,9% as clients managed liquidity into investments instead of working capital mainly due to the uncertain economic environment and the low expected GDP growth. From a group perspective call and term deposits grew by 6,7% while savings and fixed deposits grew marginally. NCDs and other deposits, which include structured deposits, grew by 21,7% and contributed positively to managing Nedbank’s contractual longer-term funding ratio. Group strategic focus During 2019 we continued to focus on delivering on our strategic focus areas, which are designed to create market-leading client experiences and support growth in selected value-creating areas. We made good progress in delivering market-leading CVPs and digital innovations. This focus enabled us to grow new 60 NEDBANK GROUP – ANNUAL RESULTS 2019 NEDBANK GROUP – ANNUAL RESULTS 2019 61 RESULTS COMMENTARY revenue streams and unlock operating efficiencies. Our strategic enablers – which include technology investments (with our Managed Evolution IT strategy and Digital Fast Lane (DFL) as key components), our people and our brand – are delivered through process and operational excellence, our target operating model and by embracing nWoW. This is enabling us to create a more client-focused, agile, competitive and digital Nedbank. • Delivering innovative, market-leading client experiences » A key highlight for 2019 was the operationalisation of Eclipse, our new platform that enables simplified digital client onboarding for individual clients by allowing them to open a FICA-compliant account through our staff-assisted and self-service channels. The staff-assisted channel was rolled out to more than 3 400 frontline users in RBB and onto web and app channels in the second half of the year. Client and transactional product onboarding for individual clients are now following the full end-to-end process on this platform and resulted in the following benefits: client-centred onboarding (once for life), single onboarding foundation for most of our core products (transactional account, personal loans, selected investment products, card and overdrafts), automated front-, middle- and backoffice processes (reduced account opening times and disbursals), digital FICA, biometrics and signing of contracts (no paper) and lower cost of client onboarding. Initial highlights include more than 90% of transactional products and personal loan sales inbranch done through Eclipse. Transactional sales through Eclipse increased from 37% in Q2 2019 to 76% in Q4 2019, while personal-loan sales increased from 14% to 61% over the same period. In addition, personal-loan sales through the Money app increased from 2% to 14%. The cross-selling of transactional accounts linked to the sales of personal loans was three times higher than before. Account- and product-opening times reduced significantly and reduction in paper volumes of more than 50% contributed to significantly improved client satisfaction levels. Juristic client onboarding is currently in pilot in RBB and planned to be rolled out in 2020. » The Money app, which makes banking more convenient for our retail clients, has been downloaded 3,9 million times, with more than 832 000 clients using it actively. The Money App Lite was launched in the second half of 2019, giving clients with limited data and device memory access to online banking. Building on our capability of rolling out new functionality on our apps, we introduced a market-first lifestyle capability, HeyNed, a digital concierge that gives clients a 24/7 personal assistant in their pockets and the ability to purchase funeral policies on the app. The Nedbank Private Wealth app, which had been ranked second best globally by Cutter Associates International Research, increased app downloads by 58% yoy. MobiMoney, our mobile-based account with zero monthly fees and which anyone with a valid SA identity number can open anywhere in seconds, attracted almost 240 000 users, up by 53% yoy. » Our Stokvel Account, which offers members of stokvels a discount up to 10% at our retail partners, a burial benefit of R10 000 per member for only R20 a month, zero transaction fees and good interest rates, has attracted over 4 500 stokvel groups, representing more than 155 000 members since its launch in March 2018. We have enhanced our digital onboarding process to enable account-opening on any USSD-enabled phone, catering for all cellphone users. » MyPocket, a free budgeting and savings pocket linked to any Nedbank transactional account, was launched during the period and reached balances of R161m. It offers clients up to 10 savings pockets, with each dedicated to a specific saving goal such as daily expenses and emergencies. Clients earn more interest than with a normal savings account and have instant access to their money – no notice period is required to access funds. » The Karri app continued to achieve exponential growth in 2019 across all measures, with strong growth in active users of almost 74 000, compared with 31 000 in 2018. The school payment app is now used in more than 500 of the top schools in SA, with a highlight being the signup of AdvTech, one of the largest educational corporate groups in SA, towards the end of 2019. The Karri app continues to achieve mostly five-star ratings in the app store. » As far as our integrated channels are concerned, we have converted 64% of our outlets to new-image digital branches to date. Significant progress has been made in enhancing functionality across self-service and online channels, which provide our clients with significantly enhanced convenience. Our self-service kiosks within our branches enable our clients to perform a range of self-service, including making ATM limit changes, submitting overseas travel notifications and opening transactional accounts seamlessly. » Nedbank was the first bank in Africa to launch an application programming interface (API) platform that is aligned with the Open Banking Standard. The Nedbank API Marketplace is an easy-to-use, secure offering that allows approved partners to create innovative and disruptive solutions that put client experience first. By using the Nedbank API Marketplace, approved partners can leverage the bank’s data and financial capabilities to integrate with our standard, secure and scalable APIs. • In the second half of 2019 we launched our new, enhanced loyalty and rewards solution – a money management programme offering triple benefits (incentives for better money management and doing good for society and towards earning rewards). • Growing our transactional banking franchise faster than the market » Our SA retail main-banked client numbers declined slightly to 2,95 million, reflecting a disappointing reduction in the entry-level and youth segment but strong increases in the more profitable middle-market, professional and small-business segments. These increases, along with deepening our share of wallet, supported solid underlying retail transactional NIR growth of 6,3%. The 2019 Consulta Survey estimated Nedbank’s share of main-banked clients at 11,2%, down from 13,1% in 2018 (market share in ELB and youth was down by 1,7% and by 4,3% respectively, but increased by 1,9% in the middle-market segments). Value-added services sold through our digital channels increased by 29% to R250m. » Our SADC business client base declined by 1,0% to 336 000. Newly launched products and digital innovations started delivering benefits, attracting new clients, but the overall number of client numbers decreased given the closure of dormant accounts. » Our integrated model in CIB enabled deeper client penetration and increased cross-sell. Competitive transactional product and capabilities and leveraging our strong balance sheet supported 32 primary-bank client wins during the year. • Being operationally excellent in all we do » Cost discipline remains an imperative as we balance investment with growth. We have ongoing initiatives to optimise our cost base. These include the reduction of our core systems from 250 to 117 since the inception of the Managed Evolution programme, and we are on our way to reaching our target of fewer than 85 core systems by 2020. (During 2019 we revisited the definition of core systems as part of our modernisation journey and are building new systems not initially planned for. As a result our target of 60 by 2020 has been revised). The rationalisation, standardisation and simplification of core banking operating systems enable reduced infrastructure, support and maintenance costs, as well as reduced complexity and 60 NEDBANK GROUP – ANNUAL RESULTS 2019 NEDBANK GROUP – ANNUAL RESULTS 2019 61 increased agility in adopting new innovations. The time and cost of bringing new products and services to market have been reduced significantly as many of the foundational capabilities are built into our onboarding and servicing programmes. Overall, investments in various foundational IT programmes are either complete or nearing completion and we expect IT cashflow spend to decline from 2019 levels. » During 2019 additional self-service options for functions that were available previously only in branches or through staffed channels were released on the Nedbank Money app and the new Nedbank Online Banking site, taking the total digital functions to 114 (compared with 70 in 2018). We deployed 27 new self-service kiosks across our branch network, up by 6,6% yoy to 438, enabling clients to undertake a range of self-service transactions, including ATM limit changes and overseas travel notifications. This digitisation of services in RBB has enabled us to reduce branch teller volumes by 24,5% and branch floor space by 41 500 m2 to date, and we plan to achieve more than 49 000 m2 of optimisation by 2020 (equating to approximately 23% of our branch floor space in 2014 when we started the journey). Over the past 12 months we reduced total group headcount by 1 874 (mainly through natural attrition) and optimised our staffed points of presence by closing 21 points of presence. Through our Intelligent Depositor devices we now process more than 1,8 million deposits and more than 375 000 requests for bank statements monthly – transactions and services that previously could be done only over the counter in a branch. Self-service cash deposit volumes increased to 73%, up from 61% in 2018. » We implemented more than 300 software robots to date (robotic process automation), up from 51 in 2018, to enhance efficiencies and reduce processing errors in administratively intense processes. • Through our strategy of consolidating and standardising corporate real estate, our number of campus sites (offices) decreased from 31 to 27 over the year, with a longer-term target of 23. Since 2016 we have saved 53 000 m2 (over and above the 41 500 m2 saved in our branches). In the next few years we will continue to optimise the portfolio by enhancing workstation utilisation to greater than 100% (from the current 90%) by enabling flexible office constructs to support more dynamic ways of work, while creating further value and cost reduction opportunities. • Our TOM 1.0 recorded savings of R480m in 2019, cumulative savings of R1 147m to December 2019, which is ahead of our R1,0bn pretax target by 2019 and on track to exceed the R1,2bn target by 2020 as disclosed in the corporate performance targets in our long-term incentive scheme. The 2019 savings include R322m relating to our front-, middle- and backoffice optimisation initiatives mainly in RBB and R121m related to our digital (agile delivery) strategy. As we progress our Managed Evolution journey, we are currently strategising about a TOM 2.0, which will look at the shape of our branch infrastructure in the context of an increasingly digital world, a shift in our RBB structure to be more client-centred, as well as shared services optimisation across the group. We anticipate targets for TOM 2.0 will be communicated to the market in early 2021. » Our total procurement cashflow spend declined by 3%, reflecting good cost management and centralisation of purchasing. Over the past 12 months we reduced paper consumption by 25% mainly through reduced printing and digitisation of forms and statements. • Managing scarce resources to optimise economic outcomes » We maintained our focus on growing activities that generate higher levels of EP, such as transactional deposits and transactional-banking revenues. Our market share in household deposits declined in 2019 due to proactive pricing decisions to ensure an appropriate balance between margin and volume. 62 NEDBANK GROUP – ANNUAL RESULTS 2019 » Our selective origination of personal loans, home loans and commercial-property finance has proactively limited downside credit risk in this challenging operating climate. » During 2019 we embedded our commitment to the United Nations SDGs. This will see lending flowing into targeted areas that contribute to a better society. A key example is our renewable-energy funding solutions, where R27,0bn has been drawn as part of a R40bn commitment to the SA Department of Energy’s renewable-energy independent power producer procurement programme, while in response to further rounds of renewable energy our board has increased our risk limits to R50bn. In 2019 we became SA’s first commercial bank to launch a green bond on the JSE, raising a total of R2,7bn, having placed R1,7bn in April and a further R1,0bn in October. • Providing our clients with access to the best financial services network in Africa » In Central and West Africa, where we have adopted a partnership approach, ETI remains an important strategic investment for us by providing us with access to deal flow in Central and West Africa and our clients with access to a pan-African transactional banking network across 36 countries. ETI has reported 11 consecutive quarters of profit to 30 September 2019 and is making good progress with its transactional banking and digital strategy while optimising its cost base. Asset quality and risk management remain key priorities for the ETI board and executive, particularly in a challenging Nigerian environment where regulatory changes and economic challenges persist. For the third quarter of 2019 ETI achieved a strong performance from core West African operations and an improved performance in the Central, Eastern and Southern Africa (CESA) business, while the economic environment and ETI’s performance in Nigeria remained challenging. Through our collaboration 118 Nedbank wholesale clients are banking with ETI across the continent in countries where Nedbank is not present. Our gross return on the original cost of our ETI investment improved to 10,7%. » In SADC where we currently own, manage and control five banks (excluding Nedbank Malawi), we continue to build scale and optimise costs. » To drive digital and transactional business we launched the Nedbank Money app in Namibia, Eswatini, Malawi and Lesotho, leveraging off the Nedbank Money app platform in SA. The new app has an additional 60 new features when compared to its predecessor, the Nedbank App Suite. It has been well received by clients as we registered a 94% increase in active app users during the year. In Namibia we launched a new pay-as-you-use (PAYU) account targeting the entry-level and middle segments. » In December 2019 following a strategic review we announced the disposal of our 100% shareholding in Nedbank Malawi to MyBucks, a wholly owned subsidiary of a Frankfurt-listed fintech. All conditions precedent for the sale have been fulfilled and the transaction is on course for completion during Q1 2020. Nedbank Malawi is a small bank in a small market and contributed less than 0,1% to Nedbank Group’s HE and total assets, with its market share in Malawi approximately 1%. Nedbank Malawi has been accounted for under IFRS 5: Non-Current Assets Held for Sale and Discontinued Operations. » Operating in Zimbabwe remains challenging as policy uncertainty, increased government expenditure and a lack of foreign direct investments have severely damaged the Zimbabwean economy, contributing to hyperinflationary conditions. Annual inflation rates exceeded 500% in 2019, and hyperinflation eroded the value of the Zimbabwean dollar. The country officially adopted hyperinflationary reporting effective 1 July 2019 and this resulted in Nedbank Group booking a net monetary loss of R296m in H2 2019, with the resultant headline loss after tax and minorities amounting to R142m. NEDBANK GROUP – ANNUAL RESULTS 2019 63 RESULTS COMMENTARY » We accounted for the exercise of an option, that will increase our shareholding in Banco Único (Mozambique) from 50% plus one share to approximately 87,5%. The transaction is expected to be concluded in H1 2020 and is subject to regulatory approval. Economic outlook The outlook for the global economy remains uncertain with risks increasing. The conclusion of a first-round US–China trade deal and the 75 bps reduction in US interest rates since August 2019 have been overshadowed by the outbreak of the highly contagious corona virus in early 2020. These developments have fuelled renewed risk aversion and re-awakened concerns over global growth prospects. The situation in China is currently expected to stabilise, whereafter the world economy is forecast to regain some momentum. The International Monetary Fund expects moderately faster growth of 3,3% in 2020 and 3,4% in 2021 from a disappointing 2,9% in 2019. Growth in advanced countries are forecast to hold up relatively well, while softer, improving conditions are projected for emerging and developing countries. Growth in sub-Saharan Africa has also been revised down to 3,5% for both 2020 and 2021, which is an improvement on the 3,3% recorded in 2019. SA’s growth prospects remain subdued, undermined by persistent energy constraints, weak government finances and slow progress in structural reforms. Eskom announced that load-shedding will be implemented on a consistent basis over the next 18 months to allow for better maintenance at both old and new power stations. To compensate for the disruption the mining industry will be allowed to generate electricity for internal consumption, although this regulation is not yet in place. Government has also promised to allow for greater private sector participation in the energy market, but legislation has not yet been changed. Added to these pressures, the public sector’s finances are too weak to increase either consumption or capital expenditure. The possibility of a Moody’s downgrade to subinvestment grade has increased due to government’s weak fiscal position and the impact of taxpayer-funded bailouts of many struggling SOEs (particularly Eskom and South African Airways). Fixed investment is forecast to remain weak given unreliable and limited electricity supply, sluggish demand, considerable spare capacity and elevated cost structures. Consumer spending is expected to grow moderately, supported by slightly lower interest rates. However, the upside will be contained by limited job creation, effects of fading wealth and relatively high debt burdens. Real GDP is currently forecast to grow around 0,7% in 2020, before gradually moving higher from 2021 onwards. Inflation is expected to rise off a low base in early 2020 before moderating to just below the 4,5% midpoint of the Reserve Bank’s inflation targeting range. Cost-push shocks are likely to be kept The current outlook for our revised targets is as follows: in check by the absence of any demand pressure on prices. Given the benign inflation outlook, the Monetary Policy Committee cut interest rates by another 25 basis points in January 2020. There may be some scope for further monetary policy easing in 2020, although our forecast is for flat interest rates over the next two years. Despite the difficult operating environment in which to generate growth, the SA banking system remains sound, liquid and well capitalised. The relatively favourable inflation and interest rate outlook is likely to support a modest improvement in credit demand, but the underlying environment will remain difficult throughout 2020. Household demand for credit will be contained by job insecurity, high unemployment, slow income growth and relatively high existing debt burdens. Corporate demand is likely to remain volatile and weak, constrained by low business confidence coupled with weak growth prospects and tough operating conditions. The gradual rollout of the latest renewable-energy projects may provide some support to corporate loans. Prospects Our guidance on financial performance for the full year 2020, in a global and domestic macroeconomic environment with increased forecast risk, is currently as follows: • Average interest-earning banking assets to grow slightly above mid-single digits. • NIM to be similar to the 2019 level of 3,52%. • CLR to be similar to the 2019 CLR of 82 bps (around the midpoint of our target range of 60 bps to 100 bps). • NIR to grow around mid-single digits. • Expenses to increase below the mid-single digits. Given the expectations of a slowly improving SA economy, the weaker base in 2019 and ongoing delivery on our strategy, our current guidance for growth in DHEPS for the full 2020 year is to be around nominal GDP growth. Given the 2019 base effects, we anticipate DHEPS growth to be negative in the first half of the year and up more strongly in the second half of the year. In 2018 we set ourselves specific 2020 targets of ROE (excluding goodwill) of greater than or equal to 18% and a cost-to-income ratio of lower than or equal to 53% as a pathway to ongoing and sustainable improvements in the key metrics that support shareholder value creation. The actual macroeconomic conditions have been materially worse than our 2018 forecasts and the targets we set for 2020 are unlikely to be met. As a result we have revisited our guidance on these two measures and introduced targets for the medium (two to three years) and long term (five years and more). We have also revised our ROE target to include goodwill. Metric ROE Growth in DHEPS CLR NIR-to-expense ratio Efficiency ratio (including associate income) CET1 capital adequacy ratio (Basel III) Dividend cover 2019 performance4 Full-year 2020 outlook Medium-term target Long-term target 15,0% (6,3%) 0,82% 80,8% 56,5% Similar to 2019 ≥ 17% ≥ 4% above COE ≥ consumer price index + GDP growth Around consumer price index + GDP growth ≥ consumer price index + GDP growth + 5% Similar to 2019 Between 0,6% and 1,0% of average banking advances Between 0,6% and 1,0% of average banking advances Increases Decreases > 85% ≤ 53% > 85% ≤ 50% 11,5% Within target range 10,5–12,5% 10,5–12,5% 1,84 times Within target range 1,75–2,25 times 1,75–2,25 times 4 The COE is currently forecast at 14,2% in 2020. 62 NEDBANK GROUP – ANNUAL RESULTS 2019 NEDBANK GROUP – ANNUAL RESULTS 2019 63 Shareholders are advised that these forecasts are based on organic earnings and our latest macroeconomic outlook, and have not been reviewed or reported on by the group’s auditors. consolidated financial statements are available for inspection at the company’s registered office, together with the financial statements identified in the respective auditors’ reports. Board and leadership changes during the period Rob Leith, who stepped down from the Nedbank Group Limited Board on 15 October 2018 following Old Mutual Limited’s unbundling of its controlling interest in Nedbank Group Limited, was reappointed as a non-executive director with effect from 1 January 2019. Malcolm Wyman retired as Lead Independent Director with effect from the close of Nedbank Group’s AGM on 10 May 2019. Mpho Makwana was appointed in the role of Lead Independent Director effective from the same date. Professor Tshilidzi Marwala was appointed as independent non-executive director on 27 May 2019. Anna Isaac was appointed as Group Chief Compliance Officer and a member of the Group Executive Committee with effect from 1 January 2019 following the retirement of Thabani Jali. In addition, Jackie Katzin was appointed Group Company Secretary, effective from the same date. On 31 March 2020 Brian Kennedy, Group Managing Executive: Nedbank CIB, will reach the group’s mandatory retirement age of 60. Following an extensive internal and external process, Anél Bosman has been appointed to succeed Brian as the Group Managing Executive: Nedbank CIB and as a member of the Group Executive Committee with effect from 1 April 2020. Given Nedbank’s ongoing focus on growth in the rest of Africa, Dr Terence Sibiya, Managing Executive: Nedbank Africa Regions, has been appointed as a member of the Group Executive Committee with effect from 1 April 2020 (subject to regulatory approval). Basis of preparation* Nedbank Group Limited is a company domiciled in SA. The summary consolidated financial statements of the group at and for the year ended 31 December 2019 comprise the company and its subsidiaries (group) and the group’s interests in associates and joint arrangements. The summary consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for provisional reports and the requirements of the Companies Act, 71 of 2008, applicable to summary financial statements. In terms of the Listings Requirements, provisional reports have to be prepared in accordance with the framework concepts and the measurement and recognition requirements of IFRS and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and also, as a minimum, to contain the information required by IAS 34: Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated financial statements, from which the summary consolidated financial statements were derived, are in terms of IFRS and are consistent with those used for the previous annual financial statements, except for changes arising from the adoption of IFRS 16, as set out in the notes to the consolidated financial statements. Events after the reporting period* There are no material events after the reporting period to report on. Audited summary consolidated financial statements – independent auditors’ opinion The summary consolidated financial statements for the year ended 31 December 2019 have been audited by Ernst & Young and Deloitte & Touche, who expressed an unmodified opinion thereon. The auditors also expressed an unmodified opinion on the annual consolidated financial statements from which these summary consolidated financial statements were derived. Copies of the auditors’ report on the summary consolidated financial statements and of the auditors’ report on the annual The auditors’ report does not necessarily report on all of the information contained in this results announcement. Shareholders are therefore advised that, to obtain a full understanding of the nature of the auditors’ engagement, they should obtain a copy of the auditors’ report, together with the accompanying consolidated financial statements. Forward-looking statements This announcement contains certain forward-looking statements with respect to the financial condition and results of operations of Nedbank Group and its group companies that, by their nature, involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. Factors that could cause actual results to differ materially from those in the forward-looking statements include global, national and regional political and economic conditions; sovereign credit ratings; levels of securities markets; interest rates; credit or other risks of lending and investment activities; as well as competitive, regulatory and legal factors. By consequence, all forward-looking statements have not been reviewed or reported on by the group’s auditors. Final dividend declaration Notice is hereby given that a final dividend of 695 cents per ordinary share has been declared, payable to shareholders for the six months ended 31 December 2019. The dividend has been declared out of income reserves. The dividend will be subject to a dividend withholding tax rate of 20% (applicable in SA) or 139 cents per ordinary share, resulting in a net dividend of 556 cents per ordinary share, unless the shareholder is exempt from paying dividend tax or is entitled to a reduced rate in terms of an applicable double-tax agreement. Nedbank Group’s tax reference number is 9375/082/71/7 and the number of ordinary shares in issue at the date of declaration is 497 053 536. In accordance with the provisions of Strate, the electronic settlement and custody system used by the JSE, the relevant dates for the dividend are as follows: Event Last day to trade (cum dividend) Shares commence trading (ex dividend) Record date (date shareholders recorded in books) Payment date Date Tuesday, 14 April 2020 Wednesday, 15 April 2020 Friday, 17 April 2020 Monday, 20 April 2020 Share certificates may not be dematerialised or rematerialised between Wednesday, 15 April 2020, and Friday, 17 April 2020, both days inclusive. On Monday, 20 April 2020, the dividend will be electronically transferred to the bank accounts of shareholders. Holders of dematerialised shares will have their accounts credited at their participant or broker on Monday, 20 April 2020. The above dates are subject to change. Any changes will be published on the JSE SENS and in the press. For and on behalf of the board Vassi Naidoo Chairman 3 March 2020 Mike Brown Chief Executive 64 NEDBANK GROUP – ANNUAL RESULTS 2019 NEDBANK GROUP – ANNUAL RESULTS 2019 65 RESULTS COMMENTARY Registered office Nedbank Group Limited, Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, 2196. PO Box 1144, Johannesburg, 2000. Transfer secretaries in SA Link Market Services South Africa Proprietary Limited, 19 Ameshoff Street, Braamfontein, Johannesburg, 2001, SA. Group Company Secretary: J Katzin Reg number: 1966/010630/06 JSE share code: NSX share code: NED NBK ISIN: ZAE000004875 Sponsors in SA: Merrill Lynch SA Proprietary Limited PO Box 4844, Marshalltown, 2000, SA. Nedbank CIB Transfer secretaries in Namibia Transfer Secretaries Proprietary Limited, Robert Mugabe Avenue No 4, Windhoek, Namibia. Sponsor in Namibia: Old Mutual Investment Services (Namibia) Proprietary Limited Nedbank Group Limited: JSE alpha code: NEDI PO Box 2401, Windhoek, Namibia. Directors V Naidoo (Chairman), MWT Brown** (Chief Executive), HR Brody, BA Dames, NP Dongwana, EM Kruger, RAG Leith, L Makalima, PM Makwana***, Prof T Marwala, Dr MA Matooane, RK Morathi** (Chief Financial Officer), MP Moyo, JK Netshitenzhe, MC Nkuhlu** (Chief Operating Officer), S Subramoney. ** Executive *** Lead Independent Director This announcement is available on the group’s website at nedbank.co.za, together with the following additional information: • Detailed financial information • Financial results presentation • Link to a webcast of the presentation For further information please contact Nedbank Group Investor Relations at NedGroupIR@nedbank.co.za. 64 NEDBANK GROUP – ANNUAL RESULTS 2019 NEDBANK GROUP – ANNUAL RESULTS 2019 65 FINANCIAL RESULTS 67 Financial highlights 68 Consolidated statement of comprehensive income 69 Consolidated statement of financial position 70 Consolidated statement of changes in equity 72 Return on equity drivers 66 NEDBANK GROUP – ANNUAL RESULTS 2019 FINANCIAL RESULTS FINANCIAL HIGHLIGHTS for the year ended 31 December Statistics Number of shares listed Number of shares in issue, excluding shares held by group entities Weighted-average number of shares Diluted weighted-average number of shares Headline earnings Profit attributable to ordinary equity holders Total comprehensive income Preprovisioning operating profit Economic profit Headline earnings per share Diluted headline earnings per share Basic earnings per share Diluted basic earnings per share Ordinary dividends declared per share Interim Final Ordinary dividends paid per share Dividend cover Total assets administered by the group Total assets Assets under management Life insurance embedded value Life insurance value of new business Net asset value per share Tangible net asset value per share Closing share price Price/earnings ratio Price-to-book ratio Market capitalisation Number of employees (permanent staff) Number of employees (permanent and temporary staff) Key ratios (%) ROE ROE (excluding goodwill) Return on tangible equity ROA Return on RWA NII to average interest-earning banking assets NIR to total income NIR to total operating expenses CLR – banking advances Cost-to-income ratio Gross operating income growth less expense growth rate (JAWS ratio) Effective taxation rate Group capital adequacy ratios (including unappropriated profits): – CET1 – Tier 1 – Total Change (%) 2019 2018 m m m m Rm Rm Rm Rm Rm cents cents cents cents cents cents times Rm Rm Rm Rm Rm cents cents cents historical historical Rbn 0,8 0,9 (0,7) (1,2) (7,3) (10,3) (14,9) 2,7 (50,8) (6,7) (6,3) (9,7) (9,2) 3,6 (3,5) 5,1 (6,6) 9,9 9,5 11,4 14,4 10,8 3,7 3,4 (22,0) (21,4) (5,4) (6,0) 497,1 481,2 480,0 487,5 12 506 12 001 11 735 22 577 1 412 2 605 2 565 2 500 2 462 1 415 720 695 1 440 1,84 1 474 485 1 143 349 331 136 3 188 421 18 204 15 426 21 430 8,2 1,2 106,5 29 213 29 403 15,0 16,0 17,8 1,13 2,02 3,52 46,3 80,8 0,82 56,5 1,3 22,8 11,5 12,8 15,0 493,2 477,1 483,2 493,2 13 495 13 376 13 794 21 990 2 868 2 793 2 736 2 768 2 712 1 415 695 720 1 370 1,97 1 341 250 1 043 912 297 338 2 786 380 17 560 14 917 27 472 9,8 1,6 135,5 30 877 31 277 16,8 17,9 19,8 1,33 2,40 3,65 47,4 82,1 0,53 57,2 2,7 25,2 11,7 12,5 14,8 NEDBANK GROUP – ANNUAL RESULTS 2019 67 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December Rm Interest and similar income Interest expense and similar charges Net interest income Impairments charge on financial instruments Income from lending activities Non-interest revenue Operating income Total operating expenses Zimbabwe hyperinflation Indirect taxation Profit from operations before non-trading and capital items Non-trading and capital items Profit from operations Share of income of associate companies Profit from operations before direct taxation Total direct taxation Direct taxation Taxation on non-trading and capital items Profit for the year Other comprehensive income/(losses) net of taxation Items that may subsequently be reclassified to profit or loss Exchange differences on translating foreign operations Share of OCI of investments accounted for using the equity method Debt investments at FVOCI – net change in fair value Items that may not subsequently be reclassified to profit or loss Share of OCI of investments accounted for using the equity method Remeasurements on long-term employee benefit assets Gains/(Losses) on property valuations Total comprehensive income for the year Profit attributable to: – Ordinary equity holders – Non-controlling interest – ordinary shareholders – Holders of preference shares – Holders of additional tier 1 capital instruments Profit for the year Total comprehensive income attributable to: – Ordinary equity holders – Non-controlling interest – ordinary shareholders – Holders of preference shares – Holders of additional tier 1 capital instruments Total comprehensive income for the year Headline earnings reconciliation Profit attributable to ordinary equity holders Less: Non-headline earnings items Non-trading and capital items Taxation on non-trading and capital items Headline earnings 68 NEDBANK GROUP – ANNUAL RESULTS 2019 Note % change 1 2 3 4 5 6 7 7 10,2 13,6 4,7 66,2 (4,3) 0,1 (2,1) 1,7 16,3 (11,2) > 100 (13,9) 50,2 (12,1) (20,3) (9,4) > 100 2019 83 680 53 513 30 167 6 129 24 038 25 997 50 035 32 179 296 1 096 16 464 (651) 15 813 793 16 606 3 796 3 942 (146) 12 810 (1 075) (159) (1 025) (232) (145) 300 186 2018 75 941 47 122 28 819 3 688 25 131 25 976 51 107 31 632 942 18 533 (164) 18 369 528 18 897 4 762 4 807 (45) 14 135 (341) 449 (318) (20) (16) (345) (91) (14,9) 11 735 13 794 (10,3) (89,3) (3,1) 79,0 (9,4) (16,4) > (100) (3,1) (79,0) (14,9) (10,3) > 100 12 001 18 313 478 12 810 11 017 (73) 313 478 11 735 12 001 (505) (651) 146 (7,3) 12 506 13 376 169 323 267 14 135 13 175 29 323 267 13 794 13 376 (119) (164) 45 13 495 FINANCIAL RESULTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION at 31 December Rm Assets Cash and cash equivalents Other short-term securities Derivative financial instruments Government securities Other dated securities Loans and advances to clients Trading loans and advances Loans and advances to banks Other assets Current taxation assets Investment securities Non-current assets held for sale Investments in associate companies Deferred taxation assets Investment property Property and equipment Long-term employee benefit assets Mandatory reserve deposits with central banks Intangible assets Total assets Equity and liabilities Ordinary share capital Ordinary share premium Reserves Total equity attributable to ordinary equity holders Non-controlling interest attributable to ordinary shareholders Holders of preference shares Holders of additional tier 1 capital instruments Total equity Derivative financial instruments Amounts owed to depositors Provisions and other liabilities Current taxation liabilities Non-current liabilities held for sale Deferred taxation liabilities Long-term employee benefit liabilities Investment contract liabilities Insurance contract liabilities Long-term debt instruments Total liabilities Total equity and liabilities Note 2019 2018 9 9 10 11 12 13 14 149 64 451 35 243 97 286 31 224 741 906 32 678 22 249 15 393 281 28 961 735 3 917 389 56 11 977 5 602 23 486 13 366 13 162 79 362 22 692 70 974 25 817 697 846 23 637 14 822 19 836 186 22 404 305 4 041 254 9 371 4 966 21 629 12 608 1 143 349 1 043 912 481 18 096 69 020 87 597 780 3 222 6 850 98 449 27 991 904 382 23 297 161 598 939 2 533 24 571 715 59 713 1 044 900 1 143 349 477 17 315 65 986 83 778 874 3 222 3 397 91 271 20 003 825 804 25 602 363 669 2 749 20 035 1 829 55 587 952 641 1 043 912 NEDBANK GROUP – ANNUAL RESULTS 2019 69 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December Rm Balance at 31 December 2017 Impact of adopting IFRS 9 and IFRS 15, net of taxation Balance at 1 January 2018 Shares issued in terms of employee incentive schemes Odd-lot repurchase of shares Additional tier 1 capital instruments issued Shares (acquired)/no longer held by group entities and BEE schemes Preference share dividend paid Dividends paid to shareholders Total comprehensive income for the year Profit attributable to ordinary equity holders and non-controlling interest Exchange differences on translating foreign operations Movement in fair-value reserve Losses on property revaluations Remeasurements on long-term employee benefit assets Share of OCI of investments accounted for using the equity method Transfer to/(from) reserves Share-based payment reserve movements Additional tier 1 capital instruments interest paid Other movements Balance at 31 December 2018 Impact of adopting IFRS 16, net of taxation Balance at 1 January 2019 Shares issued in terms of employee incentive schemes Additional tier 1 capital instruments issued Shares (acquired)/no longer held by group entities and BEE schemes Preference share dividend paid Dividends paid to shareholders Total comprehensive income for the year Profit attributable to ordinary equity holders and non-controlling interest Exchange differences on translating foreign operations5 Movement in fair-value reserve Gains on property revaluations Remeasurements on long-term employee benefit assets Share of OCI of investments accounted for using the equity method Transfer to/(from) reserves Share-based payment reserve movements Additional tier 1 capital instruments interest paid Other movements Number of ordinary shares Ordinary share capital Ordinary share premium Foreign currency translation reserve1 Property reserve revaluation Share-based payment reserve Other non- Available- Other to ordinary attributable attributable distributable Fair-value for-sale distributable equity to ordinary to preference tier 1 capital shareholders’ reserves2 reserves reserve3 reserves4 holders shareholders shareholders instruments Equity Holders of additional 481 568 888 482 18 688 (1 580) 1 944 1 334 60 546 81 823 3 222 2 635 Total equity attributable Non- controlling interest 481 568 888 482 18 688 (1 580) 1 944 1 334 3 222 2 635 2 130 389 (7 056 639) 2 (7) 486 097 626 (1 972) (27) 191 (91) – – 60 – 589 (398) 477 128 735 477 128 735 4 170 790 (125 146) 477 477 4 17 315 (1 389) (1 389) 17 315 825 (44) (91) (128) 1 725 1 725 (4) 177 1 507 1 507 (632) (855) 186 – – (470) (68) (787) 186 (72) 46 591 25 859 (14) 845 29 169 (140) (323) 323 323 25 25 1 004 1 004 384 (384) – (20) 80 (105) (80) 1 064 (80) 1 064 (232) (238) – – – (3 838) 56 708 (59) (6 744) 13 015 13 376 (345) (16) 237 2 63 159 (651) 62 508 (197) (7 112) 12 156 300 (145) 1 18 (3 218) 78 605 628 (1 979) – – (86) (6 744) 13 175 13 376 589 (20) (91) (345) (334) – 177 – 2 83 778 (651) 83 127 – – – (44) (7 112) 11 017 (68) (232) 186 300 (1 170) – 591 – 18 874 (7) 867 3 222 3 397 3 222 3 397 12 001 12 001 (313) 313 313 (14) (73) 18 (91) Total equity 88 539 (3 232) 85 307 628 (1 979) 750 (86) (323) (6 744) 13 794 14 135 449 (20) (91) (345) (334) – 177 (255) 2 91 271 (658) 90 613 3 500 (44) (313) (7 126) 11 735 12 810 (159) (232) 186 300 (1 170) – 591 (525) 18 750 267 267 (255) 3 500 478 478 (525) Balance at 31 December 2019 481 174 379 481 18 096 (2 244) 1 839 1 512 (55) 594 – 67 374 87 597 780 3 222 6 850 98 449 1 The initial application of IAS 29 resulted in an opening adjustment of R246m (non-controlling interest of R84m and R162m attributable to the parent). The effect of hyperinflation is further described in note 8. 2 Represents other non-distributable revaluation surplus on capital items and non-distributable reserves transferred from other distributable reserves to comply with various banking regulations of R168m (2018: R143m). This balance is offset by the difference between the at-acquisition fair value (net basis) and gross value of the Banco Único put option of R223m. 3 The available-for-sale reserve is no longer applicable from 1 January 2018 due to the implementation of IFRS 9. 4 Represents the accumulated profits after distributions to shareholders and appropriations of retained earnings to other non-distributable reserves. 5 Exchange differences of R159m disclosed in the statement of comprehensive income includes R70m for the conversion of ETI from USD to ZAR. The R68m decrease in the FCTR includes R70m relating to the conversion of ETI and a R2m increase related to foreign subsidiaries. 70 NEDBANK GROUP – ANNUAL RESULTS 2019 FINANCIAL RESULTS Other non- distributable reserves2 Fair-value reserves Available- for-sale reserve3 Other distributable reserves4 Total equity attributable to ordinary equity holders Non- controlling interest attributable to ordinary shareholders Number of Ordinary Ordinary Property Share-based ordinary shares share capital share translation reserve payment premium reserve1 revaluation reserve Foreign currency 481 568 888 482 18 688 (1 580) 1 944 1 334 481 568 888 482 18 688 (1 580) 1 944 1 334 2 130 389 (7 056 639) 2 (7) 486 097 626 (1 972) (27) 477 128 735 477 128 735 4 170 790 (125 146) 477 477 4 17 315 (1 389) (1 389) 17 315 825 (44) (4) 177 1 507 1 507 (632) 589 (398) (68) (787) (91) (128) 1 725 1 725 186 (72) Rm taxation schemes Balance at 31 December 2017 Impact of adopting IFRS 9 and IFRS 15, net of Balance at 1 January 2018 Shares issued in terms of employee incentive Odd-lot repurchase of shares Additional tier 1 capital instruments issued Shares (acquired)/no longer held by group entities and BEE schemes Preference share dividend paid Dividends paid to shareholders Total comprehensive income for the year Profit attributable to ordinary equity holders and non-controlling interest Exchange differences on translating foreign operations Movement in fair-value reserve Losses on property revaluations Remeasurements on long-term employee benefit assets Share of OCI of investments accounted for using the equity method Transfer to/(from) reserves Share-based payment reserve movements Additional tier 1 capital instruments interest paid Other movements Balance at 31 December 2018 Impact of adopting IFRS 16, net of taxation Balance at 1 January 2019 Shares issued in terms of employee incentive schemes Additional tier 1 capital instruments issued Shares (acquired)/no longer held by group entities and BEE schemes Preference share dividend paid Dividends paid to shareholders Total comprehensive income for the year Profit attributable to ordinary equity holders and non-controlling interest Exchange differences on translating foreign operations5 Movement in fair-value reserve Gains on property revaluations Remeasurements on long-term employee benefit assets Share of OCI of investments accounted for using the equity method Transfer to/(from) reserves Share-based payment reserve movements Additional tier 1 capital instruments interest paid Other movements 1 The initial application of IAS 29 resulted in an opening adjustment of R246m (non-controlling interest of R84m and R162m attributable to the parent). The effect of hyperinflation is further described in note 8. 2 Represents other non-distributable revaluation surplus on capital items and non-distributable reserves transferred from other distributable reserves to comply with various banking regulations of R168m (2018: R143m). This balance is offset by the difference between the at-acquisition fair value (net basis) and gross value of the Banco Único put option of R223m. 3 The available-for-sale reserve is no longer applicable from 1 January 2018 due to the implementation of IFRS 9. 4 Represents the accumulated profits after distributions to shareholders and appropriations of retained earnings to other non-distributable reserves. 5 Exchange differences of R159m disclosed in the statement of comprehensive income includes R70m for the conversion of ETI from USD to ZAR. The R68m decrease in the FCTR includes R70m relating to the conversion of ETI and a R2m increase related to foreign subsidiaries. 25 25 1 004 1 004 384 (384) – 191 (91) – – 60 – (20) 80 (105) (80) 1 064 (80) 1 064 (855) 186 – – (470) (232) (238) 46 591 25 – – – 60 546 81 823 (3 838) 56 708 (59) (6 744) 13 015 13 376 (345) (16) 237 2 63 159 (651) 62 508 (197) (7 112) 12 156 (3 218) 78 605 628 (1 979) – (86) – (6 744) 13 175 13 376 589 (20) (91) (345) (334) – 177 – 2 83 778 (651) 83 127 – – (44) – (7 112) 11 017 12 001 12 001 (68) (232) 186 300 (1 170) – 591 – 18 300 (145) 1 18 Equity attributable to preference shareholders Holders of additional tier 1 capital instruments Total shareholders’ equity 3 222 2 635 88 539 859 (14) 845 29 169 (140) 3 222 2 635 (323) 323 323 750 267 267 (255) 874 (7) 867 3 222 3 397 3 222 3 397 (313) 313 313 (14) (73) 18 (91) 3 500 478 478 (525) (3 232) 85 307 628 (1 979) 750 (86) (323) (6 744) 13 794 14 135 449 (20) (91) (345) (334) – 177 (255) 2 91 271 (658) 90 613 3 500 (44) (313) (7 126) 11 735 12 810 (159) (232) 186 300 (1 170) – 591 (525) 18 Balance at 31 December 2019 481 174 379 481 18 096 (2 244) 1 839 1 512 (55) 594 – 67 374 87 597 780 3 222 6 850 98 449 NEDBANK GROUP – ANNUAL RESULTS 2019 71 RETURN ON EQUITY DRIVERS for the year ended 31 December Rm NII Impairments charge on financial instruments NIR Income from normal operations Total operating expenses Zimbabwe hyperinflation Share of profits of associate companies Net profit before taxation Indirect taxation Direct taxation Net profit after taxation Non-controlling interest Headline earnings Daily average interest-earning banking assets Daily average total assets Daily average shareholders’ funds Daily average shareholders’ funds, excluding goodwill Note: Averages calculated on a 365-day basis. NII/average interest-earning banking assets Impairments/average interest-earning banking assets NIR/average interest-earning banking assets Total expenses/average interest-earning banking assets Zimbabwe hyperinflation/average interest-earning banking assets Associate income/average interest-earning banking assets 100% – Effective direct and indirect taxation rate 100% – Income attributable to minorities Headline earnings Interest-earning banking assets/daily average total assets Return on total assets Leverage ROE ROE, excluding goodwill 72 NEDBANK GROUP – ANNUAL RESULTS 2019 2019 30 167 (6 129) 25 997 50 035 (32 179) (296) 793 18 353 (1 096) (3 942) 13 315 (809) 12 506 857 981 1 104 160 83 579 78 402 2019 3,52% less 0,71% add 3,03% 5,84% less 3,75% less 0,03% add 0,09% 2,15% multiply 0,73 multiply 0,94 1,48% multiply 77,7% = 1,13% 2018 28 819 (3 688) 25 976 51 107 (31 632) 528 20 003 (942) (4 807) 14 254 (759) 13 495 790 376 1 010 989 80 420 75 264 2018 3,65% less 0,47% add 3,29% 6,47% less 4,0% less add 0,07% 2,54% multiply 0,71 multiply 0,95 1,71% multiply 78,2% = 1,33% multiply multiply 13,21 = 15,0% 16,0% 12,57 = 16,8% 17,9% SEGMENTAL ANALYSIS SEGMENTAL ANALYSIS 74 76 78 81 93 96 Our organisational structure, products and services Operational segmental reporting Nedbank Corporate and Investment Banking Nedbank Retail and Business Banking Nedbank Wealth Nedbank Africa Regions 99 Geographical segmental reporting NEDBANK GROUP – ANNUAL RESULTS 2019 73 OUR ORGANISATIONAL STRUCTURE, PRODUCTS AND SERVICES We deliver our products and services through four main business clusters. NEDBANK CORPORATE AND INVESTMENT BANKING NEDBANK RETAIL AND BUSINESS BANKING Corporates, institutions and parastatals with a turnover of over R750m per annum. Individual clients and businesses. I S T N E L C R U O S T C U D O R P R U O I S E C V R E S D N A > 600 large corporate clients. Full suite of wholesale banking solutions, including investment banking and corporate lending, global markets and treasury, commercial-property finance, deposit-taking, and transactional banking. • Strong franchise providing good returns. • Market leader with strong expertise in commercial property, corporate advances, advisory and renewable-energy financing. • Leading industry expertise in public sector, mining and resources, infrastructure and telecoms. • Solid advances pipeline (growth opportunities when business confidence improves). • Integrated model delivering improved client service and better coverage/deeper client penetration. • Ability to attract and retain high-quality intellectual capital. • Efficient franchise (best efficiency ratio) and high-quality portfolio (low CLR). H T G N E R T S F O S A E R A R U O I I N O T A T N E R E F F D D N A I > 7,5 million clients including: • > 296 000 small and medium enterprises (typically businesses with an annual turnover of less than R30m). • > 14 700 business-banking client groups with an annual turnover of between R30m and R750m per annum (client groups with turnover < R30m previously managed under Business Banking were migrated to small and medium enterprises). Of the total clients 2,95 million are retail main-banked. Full range of services on ‘banking and beyond’, including transactional banking, card solutions, lending solutions, deposit-taking, risk management, investment products, card-acquiring services for businesses, ecosystems and platforms-based solutions. • A leader in business banking, underpinned by an accountable, empowered, decentralised business service model. • Differentiated and disruptive CVPs across our different client segments, including Unlocked.Me, MobiMoney, Home-buying Toolkit, Karri school payments app, SimplyBiz® and API Marketplace. • Digital onboarding capability for transactional products across various channels. • Awarded accolades for the ‘best innovation in retail banking in SA’, the ‘best customer service provider in Africa’, and ‘most innovative Retail Bank South Africa’ in 2019. • Highly competitive relationship banking offering for our affluent (Professional Banking) and small-business clients. • Continued and strong improvement in the annual Consulta SAcsi survey, NPS and social media sentiment. I S C R T E M Y E K ASSETS R544bn HE R6 167m ROE 17,7% ADVANCES HE CONTRIBUTION 49,6% 49,3% ADVANCES HE CONTRIBUTION 43,8% 42,3% ASSETS R378bn HE R5 293m ROE 17,3% 74 NEDBANK GROUP – ANNUAL RESULTS 2019 SEGMENTAL ANALYSIS NEDBANK WEALTH NEDBANK AFRICA REGIONS High-net-worth individuals, as well as other retail, business and corporate clients. Retail, small and medium enterprises, and business and corporate clients across the countries we operate in. > 17 200 high-net-worth clients locally and internationally (United Kingdom, Guernsey, Jersey, Isle of Man and the UAE). > 336 000 clients. Wide range of financial services, including high-net-worth banking and wealth management solutions, as well as asset management and insurance offerings. Full range of banking services, including transactional, lending, deposit-taking and card products, as well as selected wealth management offerings. Bancassurance offering in selected markets. Nedbank Insurance SADC (own, manage and control banks) • Access to Nedbank clients - opportunities for greater penetration and collaboration. • Market-leading digital innovations. Nedbank Private Wealth • Locally, first place for ESG/social impact investing in SA and philanthropic advice. • Internationally, Best Boutique Private Bank at the 2019 WealthBriefing MENA Region Awards. Unique Best of Breed™ asset management model • Nedgroup Investments has maintained its top-three ranking in offshore asset management companies in SA for the fifth consecutive year. • Presence in five SADC countries – well positioned for growth on the back of a standardised model nuanced for market context. • Technology investments to enhance CVPs and achieve scale (winner of ‘best internet bank’ in Mozambique). • Winner of the fastest growing bank in Mozambique (Banco Único) at the Global Banking & Finance Awards. Central and West Africa (ETI alliance – 21,2% shareholding) • The Ecobank–Nedbank Alliance: footprint across • 39 countries, the largest in Africa. Increase dealflow by leveraging ETI’s local presence and knowledge and Nedbank’s structuring expertise. ADVANCES HE CONTRIBUTION 3,9% 8,3% AUM R331bn HE R1 042m ROE 24,8% ADVANCES HE CONTRIBUTION 2,7% 3,7% ASSETS R38,4bn HE R457m ROE 7,7% NEDBANK GROUP – ANNUAL RESULTS 2019 75 OPERATIONAL SEGMENTAL REPORTING for the year ended 31 December Rm 2019 2018 2019 2018   2019 2018 2019 2018 2019 2018 2019 2018 Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre Summary of consolidated statement of financial position (Rm) Assets Cash and cash equivalents Other short-term securities Derivative financial instruments Government and other securities Loans and advances Other assets Intragroup assets Total assets Equity and liabilities Total equity Average allocated capital Non-controlling interest Other equity1 Derivative financial instruments Amounts owed to depositors Provisions and other liabilities Long-term debt instruments Intragroup liabilities Total equity and liabilities Summary of consolidated statement of comprehensive income (Rm) NII Impairments charge on financial instruments Income from lending activities NIR Operating income Total operating expenses Zimbabwe hyperinflation Indirect taxation Profit/(Loss) from operations Share of income/(losses) of associate companies Profit before direct taxation Direct taxation Profit after taxation Profit attributable to: – Non-controlling interest – ordinary shareholders – Holders of preference shares – Holders of additional tier 1 capital instruments Headline earnings Selected ratios Average interest-earning banking assets (Rm) Average risk-weighted assets (Rbn) ROA (%) RORWA (%) ROE (%) Interest margin (%)2 NIR to total income (%) NIR to total operating expenses (%) CLR – banking advances (%) Cost-to-income ratio, including associate income (%) Effective taxation rate (%) Contribution to group EP/(loss) (Rm) Number of employees (permament staff)3 37 635 64 451 35 243 128 510 796 833 80 677 – 1 143 349 98 449 85 111 10 852 2 486 27 991 904 382 52 814 59 713 – 1 143 349 30 167 6 129 24 038 25 997 50 035 32 179 296 1 096 16 464 793 17 257 3 942 13 315 18 313 478 12 506 857 981 620 113 1,13 2,02 15,0 3,52 46,3 80,8 0,82 56,5 22,8 1 412 29 213 34 791 79 362 22 692 96 791 736 305 73 971 – 1 043 912 91 271 81 620 7 493 2 158 20 003 825 804 51 247 55 587 – 1 043 912 28 819 3 688 25 131 25 976 51 107 31 632 – 942 18 533 528 19 061 4 807 14 254 169 323 267 13 495 790 376 561 356 1,33 2,40 16,8 3,65 47,4 82,1 0,53 57,2 25,2 2 868 30 877 1 798 30 773 35 174 63 270 395 589 17 122 4 719   53 946   22 653   51 131 358 639   16 719   543 726 507 807   34 885 34 885 27 973 379 656 8 426 705 92 081 543 726 7 390 917 6 473 8 175 14 648 6 604 181 7 863 121 7 984 1 836 6 148 (19) 33 555   33 555   19 986   348 310   15 878   979   89 099   507 807   7 246   103   7 143   8 521 15 664   6 572   86   9 006   (83)   8 923   2 197   6 726   12   6 167 6 714   1 042 1 133 457 371 862 302 360 1,15 2,04 17,7 1,99 52,5 123,8 0,26 42,1 23,0 1 234 2 553 341 863   264 108 1,36   2,54 20,0   2,12   54,0   129,7   0,04   41,9   24,6   1 976   2 681 6 168 3 105 349 396 10 610 11 577 377 751 30 573 30 573 326 763 10 762 14 984 355 614 28 471 28 471 338 901 5 829 2 448 322 520 3 534 1 089 377 751 355 614 19 831 4 823 15 008 13 318 28 326 20 384 548 7 394 7 394 2 059 5 335 42 5 293 349 599 203 383 1,44 2,60 17,3 5,67 40,2 65,3 1,38 61,5 27,8 967 17 607 18 692 3 433 15 259 12 591 27 850 20 032 275 7 543 7 543 2 114 5 429 50 5 379 328 676 186 876 1,58 2,88 18,9 5,69 40,2 62,9 1,06 64,0 28,0 1 359 19 430 1 746 20 701 7 30 741 24 238 77 433 4 204 4 204 6 40 060 29 703 3 460 77 433 1 148 57 1 091 3 436 4 527 3 113 113 1 301 1 301 259 1 042 52 968 26 468 1,40 3,94 24,8 2,17 75,0 110,4 0,18 67,9 19,9 447 2 207 1 562 18 833 6 31 111 19 630 71 142 4 225 4 225 5 39 495 24 764 2 653 71 142 1 113 39 1 074 3 484 4 558 3 012 108 1 438 1 438 305 1 133 1,69 4,56 26,8 2,31 75,8 115,7 0,13 65,5 21,2 536 2 173 38 385 37 518 106 054 6 341 4 083 38 848 21 678 4 898 499 38 385 5 943 5 943 11 30 223 1 891 317 1 547 233 1 314 1 220 2 534 2 427 296 58 (247) 672 425 (64) 489 32 1,19 0,93 7,7 5,01 44,1 50,3 1,01 70,6 (15,0) (384) 2 581 5 615 4 776 10 668 21 037 4 915 497 37 518 6 812 6 812 12 29 472 894 328 1 627 113 1 514 1 206 2 720 2 416 37 267 611 878 23 855 153 702 1,79 1,43 10,3 5,25 42,6 49,9 0,51 70,2 2,6 (259) 2 617 21 582 8 894 24 64 392 (571) 23 809 (12 076) 106 054 22 844 9 506 10 852 2 486 1 115 542 6 965 56 243 (95 541) 251 99 152 (152) – (349) 196 153 153 (148) 301 5 271 478 (453) 19 790 1 807 23 44 992 (1 245) 21 945 (15 481) 71 831 18 208 8 557 7 493 2 158 86 007 6 177 53 191 (91 752) 71 831 (400) 141 141 174 315 436 279 279 168 111 4 273 267 (433) 40 623 36 485 (852) 4 265 (744) 3 976 48 216 24 823 30 848 48 938 30 998 49 064 52 704 38 964 1 Other equity includes the variance between average allocated capital, which is computed using the average-equity month-end balances and actual equity. 2 Cluster margins include internal assets, which are not material to NIM. 3 During the year 325 staffmembers transferred from RBB to the Centre as part of an efficiency initiative. Excluding this transfer, at 31 December 2019, staffmembers in the Centre would have been 3 940. 76 NEDBANK GROUP – ANNUAL RESULTS 2019                               SEGMENTAL ANALYSIS Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre 2019 2018 2019 2018   2019 2018 2019 2018 2019 2018 2019 2018 6 168 3 105 349 396 10 610 11 577 377 751 30 573 30 573 326 763 10 762 14 984 355 614 28 471 28 471 338 901 5 829 2 448 322 520 3 534 1 089 377 751 355 614 19 831 4 823 15 008 13 318 28 326 20 384 548 7 394 7 394 2 059 5 335 42 5 293 349 599 203 383 1,44 2,60 17,3 5,67 40,2 65,3 1,38 61,5 27,8 967 17 607 18 692 3 433 15 259 12 591 27 850 20 032 275 7 543 7 543 2 114 5 429 50 5 379 328 676 186 876 1,58 2,88 18,9 5,69 40,2 62,9 1,06 64,0 28,0 1 359 19 430 1 746 20 701 7 30 741 24 238 77 433 4 204 4 204 6 40 060 29 703 3 460 77 433 1 148 57 1 091 3 436 4 527 3 113 113 1 301 1 301 259 1 042 1 562 18 833 6 31 111 19 630 71 142 4 225 4 225 5 39 495 24 764 2 653 71 142 1 113 39 1 074 3 484 4 558 3 012 108 1 438 1 438 305 1 133 1 042 1 133 457 52 968 26 468 1,40 3,94 24,8 2,17 75,0 110,4 0,18 67,9 19,9 447 2 207 48 216 24 823 1,69 4,56 26,8 2,31 75,8 115,7 0,13 65,5 21,2 536 2 173 30 848 48 938 1,19 0,93 7,7 5,01 44,1 50,3 1,01 70,6 (15,0) (384) 2 581 19 790 1 807 23 44 992 (1 245) 21 945 (15 481) 71 831 18 208 8 557 7 493 2 158 86 007 6 177 53 191 (91 752) 71 831 141 141 174 315 (400) 436 279 279 168 111 4 273 267 (433) 40 623 36 485 6 341 4 083 38 848 21 678 4 898 499 38 385 5 943 5 943 11 30 223 1 891 317 5 615 4 776 10 668 21 037 4 915 497 37 518 6 812 6 812 12 29 472 894 328 21 582 8 894 24 64 392 (571) 23 809 (12 076) 106 054 22 844 9 506 10 852 2 486 1 115 542 6 965 56 243 (95 541) 38 385 37 518 106 054 1 547 233 1 314 1 220 2 534 2 427 296 58 (247) 672 425 (64) 489 32 251 99 152 (152) – (349) 196 153 153 (148) 301 5 271 478 (453) 52 704 38 964 1 627 113 1 514 1 206 2 720 2 416 37 267 611 878 23 855 153 702 30 998 49 064 1,79 1,43 10,3 5,25 42,6 49,9 0,51 70,2 2,6 (259) 2 617 (852) 4 265 (744) 3 976 NEDBANK GROUP – ANNUAL RESULTS 2019 77 Summary of consolidated statement of financial position (Rm) Rm Assets Cash and cash equivalents Other short-term securities Derivative financial instruments Government and other securities Loans and advances Other assets Intragroup assets Total assets Equity and liabilities Total equity Average allocated capital Non-controlling interest Other equity1 Derivative financial instruments Amounts owed to depositors Provisions and other liabilities Long-term debt instruments Intragroup liabilities Total equity and liabilities Summary of consolidated statement of comprehensive income (Rm) NII NIR Impairments charge on financial instruments Income from lending activities Profit/(Loss) from operations Share of income/(losses) of associate companies Operating income Total operating expenses Zimbabwe hyperinflation Indirect taxation Profit before direct taxation Direct taxation Profit after taxation Profit attributable to: – Non-controlling interest – ordinary shareholders – Holders of preference shares – Holders of additional tier 1 capital instruments Average interest-earning banking assets (Rm) Average risk-weighted assets (Rbn) Headline earnings Selected ratios ROA (%) RORWA (%) ROE (%) Interest margin (%)2 NIR to total income (%) NIR to total operating expenses (%) CLR – banking advances (%) Cost-to-income ratio, including associate income (%) Effective taxation rate (%) Contribution to group EP/(loss) (Rm) Number of employees (permament staff)3 37 635 64 451 35 243 128 510 796 833 80 677 – 1 143 349 98 449 85 111 10 852 2 486 27 991 904 382 52 814 59 713 – 1 143 349 30 167 6 129 24 038 25 997 50 035 32 179 296 1 096 16 464 793 17 257 3 942 13 315 18 313 478 12 506 857 981 620 113 1,13 2,02 15,0 3,52 46,3 80,8 0,82 56,5 22,8 1 412 29 213 34 791 79 362 22 692 96 791 736 305 73 971 – 1 043 912 91 271 81 620 7 493 2 158 20 003 825 804 51 247 55 587 – 1 043 912 28 819 3 688 25 131 25 976 51 107 31 632 – 942 18 533 528 19 061 4 807 14 254 169 323 267 13 495 1,33 2,40 16,8 3,65 47,4 82,1 0,53 57,2 25,2 2 868 30 877 543 726 507 807   1 798 30 773 35 174 63 270 395 589 17 122 34 885 34 885 27 973 379 656 8 426 705 92 081 543 726 7 390 917 6 473 8 175 14 648 6 604 181 7 863 121 7 984 1 836 6 148 (19) 1,15 2,04 17,7 1,99 52,5 123,8 0,26 42,1 23,0 1 234 2 553 4 719   53 946   22 653   51 131 358 639   16 719   33 555   33 555   19 986   348 310   15 878   979   89 099   507 807   7 246   103   7 143   8 521 15 664   6 572   86   9 006   (83)   8 923   2 197   6 726   12   1,36   2,54 20,0   2,12   54,0   129,7   0,04   41,9   24,6   1 976   2 681 6 167 6 714   790 376 561 356 371 862 302 360 341 863   264 108 1 Other equity includes the variance between average allocated capital, which is computed using the average-equity month-end balances and actual equity. 2 Cluster margins include internal assets, which are not material to NIM. 3 During the year 325 staffmembers transferred from RBB to the Centre as part of an efficiency initiative. Excluding this transfer, at 31 December 2019, staffmembers in the Centre would have been 3 940.                               NEDBANK CORPORATE AND INVESTMENT BANKING CIB’s HE decreased by 8,1% to R6 167m as the economic environment worsened in the second half of the year, and impairments increased off a low base. GOI was maintained at R15 686m, while expenses were well contained with only a 0,5% increase despite continued investment in skills and technology. Economic capital grew by 4,0% notwithstanding the higher level of advances growth as a result of capital optimisation and increased RWA efficiencies. ROE decreased to 17,7% due to the decline in HE and increase in economic capital. HEADLINE EARNINGS (Rm) RETURN ON EQUITY (%) 8 0 2 5 4 1 0 6 5 1 3 6 4 1 7 6 7 6 1 6 , 6 2 2 1 , 1 2 , 7 0 2 , 0 0 2 , 7 7 1 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 FINANCIAL HIGHLIGHTS Headline earnings (Rm) NII (Rm) Impairments charge on financial instruments (Rm) NIR (Rm) Gross operating income (incl Associate income) (Rm) Operating expenses (Rm) ROE (%) ROA (%) CLR – banking advances (%) NIR to total operating expenses (%) Cost-to-income ratio (%) Interest margin (%) Total assets (Rm) Average total assets (Rm) Total advances (Rm) Average total advances (Rm) Total deposits (Rm) Average total deposits (Rm) Average allocated capital (Rm) FINANCIAL HIGHLIGHTS Gross operating income (incl Associate income) (Rm) Average total advances (Rm) 78 NEDBANK GROUP – ANNUAL RESULTS 2019 Corporate and Investment Banking Property Finance Corporate and Investment Banking, excluding Property Finance 2019 6 167 7 390 917 8 175 15 686 6 604 17,7 1,15 0,26 123,8 42,1 1,99 543 726 538 064 395 589 381 215 379 656 367 804 34 885 2018 6 714 7 246 103 8 521 15 684 6 572 20,0 1,36 0,04 129,7 41,9 2,12 507 807 494 972 358 639 352 318 348 310 339 676 33 555 2019 1 654 2 106 (32) 1 207 3 313 1 051 16,7 0,9 (0,02) 114,8 31,7 1,12 167 975 159 412 148 473 142 432 268 503 9 921 2018 1 499 2 044 138 1 202 3 246 1 029 17,8 0,81 0,10 116,8 31,7 1,14 155 778 152 578 140 169 140 848 875 781 8 417 2019 4 513 5 284 949 6 968 12 373 5 553 2018 5 215 5 202 (35) 7 319 12 438 5 543 375 751 378 652 247 116 238 783 379 388 367 301 24 964 352 029 342 394 218 470 211 470 347 435 338 895 25 138 Property Finance Investment Banking Markets Working capital and transactional services 2019 2018 2019 2018 2019 2018 2019 2018 3 313 142 432 3 246 140 848 3 649 174 179 3 972 154 488 5 106 38 724 5 258 32 154 3 618 25 880 3 208 24 828       SEGMENTAL ANALYSIS NII increased by 2,0% to R7 390m, with good growth in AIEBA of 8,8% to R372bn. NIM decreased by 13 bps to 1,99% as asset margins came under pressure due to competition for high-quality assets. Average banking advances increased by 6,8% to R346bn, supported by ongoing drawdowns from previous deals, as well as a substantial number of new transactions that closed in 2019. Actual banking advances inclusive of corporate bonds increased by 9,4% to R393bn underpinned by good growth in the Investment Banking book following the conclusion of a number of significant deals. The pipeline for 2020 is healthy with continued drawdowns of current deals expected. Average deposits increased by 8,3% to R368bn from growth in call and term deposits. The CLR at 0,26% is well within our TTC target range of 0,15% – 0,45%. Impairments increased to R917m (2018: R103m) as the credit environment deteriorated in the second half of the year with increased stress in certain industries. Due to early engagements and initiating restructures of clients in 2018, as well as no significant new defaulted clients in 2019, stage 3 advances decreased from R5,7bn to R4,1bn. However, the worsening environment resulted in increased impairments and a higher specific coverage ratio against these counters. The portfolio coverage ratio on the performing book increased from 0,28% to 0,36% as increased economic pressure resulted in the deterioration of risk ratings for counters in stressed industries. We continue to closely monitor stressed sectors of the economy, such as construction and cement, commercial property clients with large office/government exposures and parts of the retail sector. Focus on certain SOEs will continue given ongoing concerns about the constrained fiscus as well as delays in executing turnaround plans that continue to be impacted by liquidity and debt repayment concerns over the medium term. We have observed an improvement in the governance structure of the various boards and are encouraged by the appointment of new independent boards of directors. NIR decreased by 4,1% to R8 175m largely due to revaluations in private-equity income as the challenging economic environment impacted the profitability of certain counters. This was offset by a good performance in trading income and resilient commission and fee income. Trading income grew by 2,6% despite low volatility and decreased volumes from a high base in 2018. Fee and commission income declined marginally to R3 256m, with subdued client activity offsetting continued primary-client wins. The NIR-to-expense ratio decreased to 123,8%. Efficiencies allowed us to continue to spend on digital opportunities and upskilling our staff to ensure an ever-improving client experience. The cost-to-income ratio of 42,1% remains at the lower end of the SA peer group. Property Finance Conditions in the property sector were challenging in line with the economic environment in SA and the resultant challenges faced by tenants across all segments. Negative rental reversions were common across the office and retail segments as landlords looked to manage vacancies. While some new developments are taking place in specific nodes, general activity remains slow and we anticipate this to continue until a sustained improvement in economic conditions is observed. Gross operating income increased by 2,1%, driven mainly by NII growth of 3,0% due to good growth in advances. Actual banking advances, including bonds, increased by 7,8% to R163bn with an uptick in deals concluded in the latter part of the year. CLR decreased to -0,02% from 0,10% and remains below our TTC target range of 0,15% to 0,35%. Importantly in this environment, our portfolio contains good-quality collateralised assets with low average loan-to-value ratios, underpinned by a large secure asset pool and a strong client base. The business sustained its strong history of cost containment, maintaining the cost-to-income ratio at 31,7%. Property Finance has maintained a leading market share over many years in SA and seeks to capitalise on this position by further expansion into the rest of Africa. The business was announced as the Top African Real Estate Bank of the Year at the Africa Property Investment Awards. Investment Banking Investment Banking was impacted by the deteriorating environment, with higher impairment charges and negative mark-to-market adjustments on certain equity exposures. Gross operating income decreased by 8,1% despite good advances growth. Actual banking advances, including corporate bonds, increased by 8,3% due to increased drawdowns and new client wins. Advances growth will be impacted in 2020 by low GDP growth, although this will be partially offset by payouts of deals concluded in the latter part of 2019. The pipeline is fairly robust across sectors, with an expected uplift as the market cycle turns. NII increased by 1,2% as a result of advances growth and the associated endowment income, but was impacted by margin pressure in a very competitive market for assets. NIR decreased by 26,6% and was impacted by negative revaluations in the private-equity portfolio as well as the performance of certain investments that were converted from debt into equity. Fees and commissions decreased by 1,9%, noting the 2018 base year contained fees from renewable-energy deals that were not repeated in the 2019 financial year. Defaulted exposures increased due to large counters in the telecommunication, sugar, construction, cement and retail sectors. The CLR increased to 0,45% as a result of increased impairments as the credit environment worsened, causing delays in implementing restructures as well as putting pressure on asset values. The business has leading industry expertise in mining and resources, infrastructure, oil and gas, telecoms and energy, and ranked number one for debt capital market bond issuances for 2019. In 2019 Investment Banking ranked first by deal flow for M&A advisors, third by deal value for M&A sponsors and won the M&A BEE Deal of the Year. The business won the Infrastructure and Project Finance Deal of the Year 2019 at The Banker Awards, Sponsor of the Year at the Project Finance International Awards and was placed first in the Venture Capital/Start-up category at the Southern African Venture Capital and Private Equity Association (SAVCA) 2019 Industry Awards. Markets GOI in Markets declined by 2,9% due to the decrease in NII from R1 039m in 2018 to R779m. This was due to decreased endowment after capital optimisation and declining volumes in interest-earning funding. Deliberate investment in the Markets sales and trading franchises is generating growth against a challenging backdrop characterised by persistently low volatility and volumes – particularly in the flow-sensitive asset classes of interest rates and equities. Foreign exchange flows broadly tracked the weak local economic picture and high precious-metal prices resulted in an increase in hedging activity in the commodities space. Market-focused investment over the past four years is bearing fruit, with trading debt securities, in particular, growing by 10,3%. There are promising signs appearing from our recent investment in cash equities, where the breadth and quality of client engagements, as well as activity, has increased significantly. The 4% decline in equities was largely driven by base effects of large once-off derivative transactions in 2018. NEDBANK GROUP – ANNUAL RESULTS 2019 79 Transactional Services GOI increased by 12,8% as a result of strong growth in deposits enabled by our competitive deposit offerings. Transactional income was flat, with subdued client activity offsetting the 32 primary-banked-client wins. The income from these new wins will be realised during 2020 once these new clients are onboarded with our specialist migration team. Notable wins include Airports Company South Africa, Supercare and Ekurhuleni Water Care Company. The transactional business has placed strategic focus on growing the short-term lending, trade finance and asset-based finance books through the formation of a specialised working capital sales team to facilitate additional deposit growth. The overall environment remains difficult with impairments increasing and a slowdown in domestic transactional income, but this has been offset by good growth in trade finance. Transactional Services continues to deliver on innovation in our product areas, as well as retain focus on efficiencies, robotics and API initiatives and solutions in conjunction with selected clients. Looking forward Growth prospects for SA are currently expected to improve slightly in 2020, but will remain sluggish as a result of slow structural reforms and low business confidence. We are intensifying our efforts to counteract this through highly focused client service, as well as providing innovative, valueadding solutions, coupled with strong relationships to ensure that CIB remains a strong contender in the market. We do, however, expect decreased client activity, but this will be offset by drawdowns in new transactional-client wins and advances payouts following the significant deals won. We will focus on leveraging the strengths of our business units, with maintained momentum in Market’s client acquisitions and technology drive over the next year. Transactional Banking will remain focused on client solutions and product innovation, allowing our clients to manage their various products and interactions with us in a more effective and digital-friendly manner. We also seek to capitalise on our leading property expertise as well as our deep sector knowledge in Investment Banking, with increased transactions across the continent. We will also continue to build on our advisory business, as it is a key enabler to growing NIR. We are well positioned to use our financial expertise to play a part in achieving a sustainable future for the country. In 2019 we concluded the first issuance of a green renewable bond in SA and we plan to continue to lead in this space by providing first-to-market products. Continued cost containment will be aided by creating efficiencies through optimisation, while still transforming the business by upskilling our talent and improving technologies to position us for the future. Developing leadership capability and building key teams, as well as attracting and retaining top talent, are significant levers in growing our businesses. Essential to our strategy is using our strategic partners to benefit clients on the continent and globally, and expanding our presence in Africa. We also continue to emphasise proactive risk management and focus on resolutions in stressed sectors, while ensuring that we remain compliant with regulatory requirements. Over the medium term we are committed to achieving ROE of ≥ 18% and a cost-to-income ratio of ≤ 42% with the long-term targets set at achieving ROE of ≥ 20% and a cost-to-income ratio of ≤ 40%. Favourable Unfavourable • Strong advances growth amidst competition for • Impairments increased as the credit environment deteriorated. high-quality assets. • NIM came under pressure due to competition for • Expense growth contained to 0,5% despite continued investment in high-quality assets. technology and talent. • Worsening economic environment led to negative revaluations in • • Increase in trading income off a high 2018 base. private-equity income. Improved rankings in the M&A league tables and good results at the annual JSE Spire Awards. 80 NEDBANK GROUP – ANNUAL RESULTS 2019 NEDBANK RETAIL AND BUSINESS BANKING OVERVIEW RBB HE decreased 1,6% to R5 293m, with quality earnings growth offset by a higher impairment charge. NII was underpinned by good growth in advances and strong growth in deposits, although the NIM decreased slightly. NIR growth was driven by inflation-related price increases and volume growth. Impairments increased as a result of risk normalisation off a low base and consumer stress driven by a worsening macroeconomic environment. Low expenses growth reflected the impact of optimising processes and operations as well as lower incentives driven from the lower profits. Economic capital increased in line with advances growth and this, coupled with the lower earnings, resulted in a lower ROE of 17,3%. SEGMENTAL ANALYSIS LOOKING AT OUR BUSINESS FROM OUR CLIENTS' POINT OF VIEW At the centre of our strategy is our intent to deliver delightful client experiences. To delight clients we ensure that we are solving real client problems and pain points by integrating banking seamlessly into their daily lives. We have launched a client-centred design capability, combining human-centred design principles and digital innovations to deliver relevant, easy-to-use and market-leading solutions, and we are improving our products and services by leveraging the benefits of technology and increased digitisation. HEADLINE EARNINGS (Rm) RETURN ON EQUITY (%) 0 6 4 4 0 6 9 4 2 0 3 5 9 7 3 5 3 9 2 5 , 6 6 1 , 9 8 1 1 , 9 1 , 9 8 1 , 3 7 1 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 FINANCIAL HIGHLIGHTS for the year ended 31 December Headline earnings (Rm) NII (Rm) Impairments charge on financial instruments (Rm) NIR (Rm) Operating expenses (Rm) ROE (%) ROA (%) CLR – banking advances (%) NIR to total operating expenses (%) Cost-to-income ratio (%) Interest margin (%) Total advances (Rm) Average total advances (Rm) Total deposits (Rm) Average total deposits (Rm) Average allocated capital (Rm) Total Retail and Business Banking 2019 5 293 19 831 4 823 13 318 20 384 17,3 1,44 1,38 65,3 61,5 5,67 349 396 335 101 338 901 328 272 30 573 2018 5 379 18 692 3 433 12 591 20 032 18,9 1,58 1,06 62,9 64,0 5,69 326 763 312 119 322 520 305 151 28 471 Business Banking Consumer Banking Relationship Banking 2019 1 383 4 129 382 1 934 3 724 19,0 0,94 0,50 51,9 61,4 2,83 77 658 75 459 139 603 139 301 7 292 2018 1 462 4 123 117 1 866 3 823 22,2 1,05 0,15 48,8 63,8 2,99 74 287 70 408 139 354 131 800 6 600 2019 2 789 13 238 4 238 7 852 12 726 14,4 1,28 1,95 61,7 60,3 3,72 225 689 217 198 118 872 116 022 19 412 2018 2 884 12 583 3 239 7 496 12 656 15,6 1,34 1,51 59,2 63,0 3,89 216 179 207 557 114 052 108 738 18 495 2019 969 2 556 131 1 465 2 536 32,5 1,20 0,32 57,8 63,1 3,17 44 779 41 041 80 627 72 548 2 980 2018 691 2 215 74 1 274 2 453 27,4 0,98 0,21 51,9 70,3 3,14 37 246 35 122 68 400 64 285 2 520 The total includes unallocated costs relating to Channel, Commercial Issuing and Acceptance, Clients and Shared Services, which are not reflected separately. NEDBANK GROUP – ANNUAL RESULTS 2019 81 Consumer banking and other Relationship banking Impairments charge on financial instruments (Rm) Consumer banking and other Relationship banking NIR (Rm) Consumer banking and other Relationship banking Operating expenses (Rm) Consumer banking and other Relationship banking Headline earnings (Rm) Consumer banking and other Relationship banking ROE (%) CLR – banking advances (%) Cost-to-income ratio (%) Interest margin (%) Average total advances (Rm) PRODUCT VIEWS, EXCLUDING BUSINESS BANKING Home Loans VAF Unsecured Lending Transactional Card and Payments Forex and Investment 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 NII (Rm) 2 408 2 257 4 315 3 940 3 456 3 206 2 631 2 640 1 454 1 446 1 549 1 327 1 759 649 1 688 569 4 206 109 3 852 88 3 423 33 3 180 26 1 262 1 369 1 437 1 203 1 453 1 1 446 1 109 440 957 370 157 61 96 249 203 46 86 44 42 240 197 43 1 910 1 446 1 372 1 021 1 007 14 1 899 11 712 702 10 1 429 17 667 658 9 1 349 23 707 677 30 41 41 42 42 923 923 766 766 677 5 198 4 885 4 254 4 077 240 649 28 3 920 1 278 3 776 1 109 4 228 26 4 055 22 164 76 193 130 63 1 537 1 489 1 434 1 379 1 624 1 522 7 228 7 418 3 441 3 280 1 430 1 320 1 102 435 680 562 118 13,8 0,12 57,9 1,86 1 063 426 651 547 104 14,3 0,07 59,6 1,85 1 360 74 1 083 1 059 24 14,6 1,81 28,5 3,82 1 312 67 1 168 1 159 9 16,0 1,50 29,9 3,79 1 585 39 832 831 1 22,1 6,16 1 485 37 948 946 2 5 579 1 649 395 5 811 1 607 48 (324) 719 (459) 507 3 425 16 936 928 8 3 265 15 1 076 1 071 5 1 108 322 254 114 140 1 019 301 142 47 95 28,0 13,3 1,9 29,2 36,2 35,0 24,7 124 366 116 823 101 218 93 443 19 546 17 902 117 100 14 658 14 121 5,88 22,08 25,14 5,42 39,0 15,36 39,2 15,71 92,3 5,91 98,6 6,54 60,3 7,87 4,67 59,4 8,31 79,9 1,07 2 86,9 1,00 1 Does not include unallocated costs relating to Channel, Clients and Shared Services, therefore the table does not cross-cast. Investing in our people to enable them to make a difference in our clients' experiences remains key. Strong results in the annual Consulta SA Consumer Satisfaction Index (SAcsi) and BrandsEye social media sentiment survey showed: 1. For the second year in a row Nedbank posted the largest improvement in its Net Promoter Score (NPS) among the top five retail banks and was the only bank to show positive movement, to 38%, in 2019. 2. Nedbank was rated number one in respect of social media net sentiment, with a score of 20,4% – the first time the bank has attained the top position on this important measure. 3. Nedbank’s SAcsi improvement was the largest among the big five banks. In 2019 Nedbank rose to number two among the top five retail banks, posting the largest improvement. This improvement was driven mainly by key metrics such as perceived value and complaints handling. 4. Nedbank Home Loans outperformed the industry, rising to number one in respect of client satisfaction. Nedbank Home Loans also had the best performance in respect of NPS, placing the bank in second place across the home loan industry. Client numbers – Total client numbers remained at 7,5 million, as declines in acquisition were balanced by improved client attrition. Approximately 296 000 small-and-medium-enterprise clients and 14 700 Business Banking client groups are included in this total. Progress on quality-client acquisition is reflected in an 11,7% increase in clients who have been main-banked consistently for the past 12 months (main-banked clients total 2,95 million). Middle-market, affluent and small-business clients continued to increase strongly. Entry-level main-banked client growth has shown a decline (-2,0%); however, entry-level revenue (GOI) growth remains positive at 5,5%. Digital innovation – We made significant progress in the past year, accelerating our digital transformation journey with core capabilities built to make it easier for our clients to engage with us. Examples include digital onboarding on the app, the web and through USSD; eFica; digital credit preapproval using data to personalise offers for clients; and Client 360 and a marketplace API, which allows other ecommerce platforms to use our lending APIs to offer loans. We enjoyed recognition for this by winning two awards from International Banker for the best innovation in retail banking in SA and the best client service provider in Africa for 2019. We were also voted the Most Innovative Retail Bank South Africa 2019 at the Global Banking & Finance Awards®. 82 NEDBANK GROUP – ANNUAL RESULTS 2019 SEGMENTAL ANALYSIS The Nedbank Money app has been downloaded more than 3,9 million times and now offers over 70 client-servicing functions. Our total digitally active base is now 1,8 million, of which we have 832 000 digitally active clients using the Money app. Functionality developed through our client-centred design process includes the ability to: open savings pockets and create goals; chat directly to a banker using Live Chat; request overdraft and credit card limit increases; and manage Greenbacks effortlessly, including redeeming them to invest in unit trusts or buy forex. In line with our aim to delight our clients by providing them with worldclass digital experiences, we introduced HeyNed – a market-first digital concierge in clients' pockets to assist with any non-banking needs they may have, sourcing deals from over 350 000 suppliers and negotiating on clients' behalf. The Nedbank Money app allows new clients to open transactional accounts without having to submit documents or visit the branch – a market-leading experience. In addition, existing app users can open investment accounts and meet their investment needs, and also access customised offers for personal loans, overdrafts and credit cards based on individual assessments driven by advanced analytics and artificial intelligence (AI). Clients also have the ability to switch their salary and debit orders to their Nedbank accounts as well as open accounts for their children. Our online banking platform has 73 digitised client services that empower our clients to bank using this self-service channel through their personal devices and include the capability to download stamped bank statements and tax certificates conveniently. The small-business segment remains a key focus area and businesses are now able to register companies with the CIPC through nedbank.co.za as well as to open a business bank account online. They can also switch between their personal and business accounts while logged into the app or online banking for a seamless and consistent experience. Commercialisation of data – Data is a critical asset in Nedbank and an enabler of Nedbank’s strategic focus areas. While Nedbank is committed to protecting the privacy and confidentiality of its clients, employees and other associated parties, managing data effectively has become key to unlocking client insights, improved personalisation and significantly improved service levels. The need to understand our clients better and to retain them more effectively, while providing them with a range of value-added products, is essential to unlocking Nedbank’s growth ambitions. We view data commercialisation as a source of competitive advantage and a necessary step change in the way we do business going forward. We are developing a real-time marketing decisioning engine geared for tailored, relevant, channel-of-choice offers to optimise processes with improved response rates and cost savings. We continue to identify automation opportunities to increase productivity. Since the inception of the RBB automation centre of excellence in 2018 we have made good progress in creating a worldclass robotics process automation (RPA) delivery function and now have a fully fledged internal delivery team. According to a recent KPMG independent maturity assessment of the delivery of automated services, we scored higher than our peers in SA, and only marginally lower than our international peer group. With our AI and machine-learning capabilities we have a deeper understanding of our clients, which helps us to personalise and customise offerings to meet their needs and serve them better. Our enhanced RPA enables us to automate manual processes, improving our speed and accuracy. We have deployed a further 77 robotic solutions across RBB, increasing the total to 125. Physical distribution – In response to shifts in client behaviour and preferences we continued to optimise our branch footprint. For the period under review we closed 21 points of presence and opened two new branches and four inretailer outlets, resulting in a net reduction of 15 physical points of presence. The reduction has not affected our coverage of the bankable population in SA. We also upgraded 19 branches to our new format, bringing the total completed upgrades to 379 branches (64% of total branches). Regarding branch space, we exceeded our 2020 targeted reduction of 30 000 m2 by achieving an actual space reduction of 41 516 m2 at 31 December 2019, with the total branch floor space decreasing by 23% of total branch space occupied in 2014. In response to the continued increase in transaction volumes through our self-service channels we revised our targeted reduction in branch space to more than 49 000 m2 by the end of 2020. We expanded our ATM footprint with a further 158 devices during 2019. These included 156 cash-accepting ATM devices. During this period cash dispensed increased by 8%, with 73% of all client cash at branches now being processed through cash-accepting ATM devices – an increase from 35% in 2016. Significant progress has been made in enhancing functionality across self-service and online channels, providing our clients with enhanced convenience. Our network of 438 self-service kiosks within our branches enable our clients to perform a range of self-service transactions, including ATM limit changes and overseas travel notifications. We have also launched a functionality that allows clients to open simple transactional accounts seamlessly using the self-service kiosk. Client service through branch-located video banking and contact centre access provides further convenient alternatives for clients. A further addition to our 24/7 zone in select branches is a locker to which clients can send their cards or any bank documents for collection. It also extends beyond banking and provides clients with a convenient collection point for items ordered on ecommerce sites such as Takealot or our Unlocked.Me platform. We plan to roll out more of these to stores across the country as well as selected Engen garages. We are pleased with our progress in making it easier and more convenient for clients to access our services – and at a lower cost. Our physical footprint reflects both the increased drive towards client self-service and a diverse SA consumer base that still requires face-to-face assistance. Our contact centre is available to clients 24 hours a day. Client experience and security have been improved through the deployment of voice biometrics as well as a new online live chat capability, enabling clients to access services and advice through text-based interaction with our agents. Non-voice contact centre interaction now represents 25% of all interactions following the deployment of multimedia access across our contact centre. Value propositions – We launched several disruptive CVPs. These include Unlocked.Me for the youth, delivering banking value through a zero-monthly-fee account; lifestyle value through great deals on tech and fashion, such as 50% off laptops; and assistance to clients in unlocking their career potential with job search support, including access to up to 500 jobs online. We have noted good progress in brand awareness and consideration scores. We are also recording good levels of engagement and client registrations on the Unlocked.Me platform, with client registrations now exceeding 100 000. Following the early success NEDBANK GROUP – ANNUAL RESULTS 2019 83 of the Unlocked.Me Account with students, we have opened the proposition to all young adults between the age of 16 and 26 years. These are strong foundations on which to grow clients in the youth segment going forward. We continued to see sustained growth in our stokvel proposition, which offers members a market-leading investment account, funeral benefit, as well as grocery discount benefits. Since its launch in March 2018, 4 500 stokvels have been banked, with 155 000 members enjoying benefits. We also launched a first-in-market, USSD-based onboarding system, allowing stokvels to onboard themselves to the account anywhere. This benefit was aimed at ensuring a better client experience for stokvels, while recognising that the collective makes the decisions and that this benefit empowers them to do so, in their own spaces. Our MobiMoney wallet, which allows for client onboarding within seconds, has seen client numbers grow to 249 000 since its launch in August 2018. A Youth Employment Service (YES) team of 120 people is fully in-field and has netted over 40 000 MobiMoney sales. The team has been given sales and client training, as well as etiquette and social media training. They have also written comprehensive product tests to ensure that they understand our products and can be true ambassadors for the Nedbank brand. To make MobiMoney more inclusive and to provide greater opportunities for access points consumers can now deposit money into their MobiMoney wallet at over 9 000 retail store points in addition to Nedbank ATM points of presence. Early 2019 saw the launch of the Home-buying Toolkit, a digital tool that allows Nedbank clients to search for homes, access property research reports and apply for preapproved credit conveniently using their cellphones. In July 2019 further enhancements to the toolkit resulted in an additional digital sales channel for the business, allowing clients to apply for a home loan on the Nedbank Money app using a shorter, simplified chat-based application. This includes prepopulation of clients' contractual debt information directly from credit bureaus, enabling simpler and faster completion of the form. In support of business owners as they start, run and grow their business, Nedbank relaunched its SimplyBiz® resource platform with enhanced functionality, including access to a network of like-minded entrepreneurs, business owners and specialists, business solutions and special offers; funding advice; and a marketplace. The platform has approximately 12 000 registered members. The top-rated Karri payments app is an innovative solution that allows parents to make safe, quick and convenient payments to the school or other community organisation. It continued to achieve exponential growth in 2019 across all measures, with strong growth in both active users (up 240% yoy), transactional value (up 280% yoy) and volume (up 230% yoy). The school payment app is now used in more than 500 of the top schools in SA, with a highlight being the recent signup of AdvTech, one of the largest educational corporate groups in SA. The Karri app continues to achieve mostly five-star ratings in the app store. Treating clients fairly and market conduct – Nedbank has been on a journey to develop a more client-centred culture for several years. We embrace good market conduct practices and seek to operationalise our brand promise with the view to consistently deliver fair client outcomes. Our Market Conduct and Culture Programme is a systematic approach that applies a conduct lens to our review of our current practices. This is used to identify and implement operational 84 NEDBANK GROUP – ANNUAL RESULTS 2019 improvements in the full client journey across all products, channels and touch points. The programme will continue in 2020 as we incorporate the FSCA draft conduct standards, together with worldclass conduct practices, to deliver better client experience. Marketing – We have aligned our marketing efforts with our brand purpose, which is to use our financial expertise to do good. We base our approach on a universal insight that money, when well managed, can make a real difference in people's lives, as well as the lives of their family, their business, their communities and society. Through the creation of a brand world construct, which came alive through the use of Sbu the cab driver, we have created better consistency not only in look and feel, but also in messaging and meaning, which allows us to build strong memory structures and recall for our brand. We continue to fast-track our data-led marketing, together with our digital-marketing capabilities, to be more relevant and connect better with our clients. This is being demonstrated through data-led, personalised, and highly targeted messaging at scale, backed by an increase in digital-marketing spend that is comparable to global industry norms. Loyalty and rewards – We successfully launched our new Greenbacks programme in the second half of 2019. The new Greenbacks is not just a rewards programme but a money management programme that prompts, incentivises and rewards good money behaviours. It incorporates our long-standing Nedbank Affinity Programme and allows Greenbacks members to easily support an Affinity of their choice, at no cost to them. The new programme consists of packages linked to products. We launched the Card Swiper package (credit card) as well as the Money Manager package (transactional products) last year, with Responsible Borrower (lending products) to be launched in the second quarter of this year. To date we have around 600 000 clients on the new platform and new enrolments are steadily increasing. The ability for our clients to be rewarded across these product holdings with Nedbank and not just their card products, (as was the case with the old Greenbacks programme), enables improved client retention. In addition, the digital redemption mechanisms on the Money app (whereby clients can donate to an Affinity, redeem to invest in unit trusts, buy airtime, data, electricity or pay service fees) have seen a significant increase in usage, albeit off a low base. KEY DRIVERS OF THE 2019 FINANCIAL PERFORMANCE NII increased 6,1% to R19 831m and was underpinned by 6,4% growth in AIEBA and good growth in deposits, while NIM is marginally down due to mix and the personal-loans business impact of the NCA-driven reduction in the maximum interest rate. Average total banking advances increased 7,7% to R348,4bn, with new-loan payouts increasing to R103,9bn, on the back of payouts in Consumer Banking, which increased 2,4% to R67,3bn; Relationship Banking, which increased 9,5% to R9,6bn; and Business Banking (post internal restructure), which increased 12,6% to R26,6bn. Average deposits increased 7,6% to R328,2bn. Our market share of household deposits declined to 16,9% at December 2019 due to proactive pricing decisions to ensure an appropriate balance between margin and volume. Defaulted advances increased to R21,2bn from R17,3bn in December 2018, increasing the defaulted book to 5,8% of the advances portfolio, up from 5,1% in December 2018. SEGMENTAL ANALYSIS Balance sheet impairments rose to 3,87% of total advances and the coverage on the performing book increased to 0,81%. Our strategy to grow selected categories of advances ahead of the market within acceptable risk categories remains. The CLR, of 1,38%, increased from 1,06% in the previous year to just within our target range of 1,30% to 1,80%. The traditional seasonality improvements on impairments in the second half of the year were offset by the tough economic environment, particularly in vehicle finance. NIR increased 5,8% to R13 318m, underpinned by growth in quality transactional income and revenue from client card issuing (with combined growth of 6,3% yoy, as well as average product price increases of 4,5% from 1 January 2019). Expense growth of 1,8% to R20 384 includes investment in distribution of R60m and growth in revenue-related costs of R82m offset by the benefit from IFRS 16 of R104m and reduced STI and LTI. Additional cost savings of R490m have been delivered through ongoing, active cost management, with headcount decreasing by 1 876 to 17 699 since December 2018, achieved through natural attrition, with retrenchments limited to 145. We have made significant progress in enhancing operational efficiencies, unlocking cost savings and improving client experience by leveraging technologies such as robotics, AI, machine learning and data analytics as outlined in our 'Commercialisation of data' section above. Staff Developments RBB is going through complex changes with regard to organisational restructure, systems and processes. To cater for these changes our employees are given face-to-face change management counselling and provided with change tools through our portals to access as and when required. Employees were further engaged through our People expos to manage the change anxiety and create excitement about working for Nedbank. This will be further enhanced by our group initiative People Promise, currently being rolled out across the business. Our focus has been to prepare for the future skills requirements, ie digital skills, leadership skills/EQ and other scarce and critical skills. Training has taken place in classrooms (face to face) as well as on LinkedIn. As a result, Nedbank won the LinkedIn award for best digital learning. We have also partnered with various entities, including the University of Johannesburg, Mail & Guardian, YES and BANKSETA, to develop and grow pipeline talent, especially in scarce-skills areas such as data science, analytics, sciences, technology and the arts. Our staff composition remains broadly representative of our society across gender, age and race – EE representation stands at 80%, women at 67% and millennials at 60% – which contributes to innovation and diverse thinking. We are focusing on service excellence as a deliberate training intervention, as we believe that this will be a lever of differentiation for us going forward. We are planning to introduce 15 000 to 17 000 employees to this initiative in 2020. Looking forward We remain committed to delivering on our client-centred growth strategy and boldly executing our plans to deliver delightful client experiences through digital transformation using the five strategic levers of Digital First, First in Digital; Disruptive CVPs; Data-led Sales and Service Excellence; Loyalty and Rewards; and Data Analytics and Insights. We have revised our financial targets in context of a deteriorating macroeconomic environment and aim to achieve an ROE of ≥ 19% over the medium term (two to three years); ≥ 20% over the long term (five years or more) and a substantially lower cost-to-income ratio of less than or equal to 59% over the medium term and 57% over the long term. Our focus remains on accelerating financial inclusivity of our banking propositions to meet evolving client needs by commercialising existing CVPs and developing new disruptive CVPs, delivering competitively priced products, actively reducing transacting costs for our clients through digital banking services, and tapping into platform-based propositions to offer beyond-banking solutions. Therefore, 2020 will see us also fast-track rollout of additional Greenbacks money management features such as Responsible Borrower. In the first half of 2019 we rolled out our enterprise client-onboarding platform (Eclipse) to all frontline users. This platform provides our clients with a seamless onboarding experience, the ability to open a transactional account and apply for a personal loan through a single digital process (currently more than 95% of all new applications in the branch are processed through Eclipse) and an additional incentive to bank with us. This sets us on a great path to digitising our top 10 client journeys, adding more straight-through-processing and digitising client journeys such as making and receiving payments and making or opening an investment account using staff-assisted and self-service channels. We have digitised 114 services to date and are on track to digitise the remaining 70 services across web, app and self-service kiosk channels to end up with more than 180 digitised services by the end of 2020, as is our goal. Future distribution investment is aimed at ensuring an optimal client channel footprint. This will provide more self-service device options for clients, a marginally reduced branch footprint, as well as a reformatted strategy aimed at unlocking more space efficiencies and equipping branches with self-service capabilities to provide convenient alternatives for our clients. There is also a focus on quality-client acquisition. We aim to achieve this through deepening the relationship with our clients by improving the client experience and ensuring we have value-adding, cost-effective products that will drive improvement in our key Net Promoter Score (NPS). We have launched our new staffed interface for account opening and servicing, which will further enhance growth in our transactional banking franchise by reducing the amount of staff-assisted time required to onboard new clients by facilitating better cross-selling and client experiences. Continued focus will also be on equipping our staff to deliver delightful client experiences. This will be done by rolling out our People Promise, the Service Excellence programme and providing staff with data insights toolkits. There has been and will continue to be focus on building data analytics, RPA, digital marketing, client-centred design and commercial partnership capabilities as strategic assets for our business. Our policies on credit granting have remained consistent and should ensure relative risk outperformance in the market through-the-cycle. HE growth should continue to be supported by various cost efficiency strategies, including the reduction of the cost to acquire and serve clients through our convenient and functionally rich mobile and digital channels. NEDBANK GROUP – ANNUAL RESULTS 2019 85 NEDBANK RETAIL AND BUSINESS BANKING SEGMENTAL REVIEW Business transfers Following an indepth review of industry practices and internal capabilities, the annual turnover threshold for Business Banking clients was lifted from R10m to R30m, motivated by a need for Business Banking to create capacity to focus on larger SMEs, coupled with a business model in Retail Relationship Banking that is well geared to serve small businesses with lower complexity. As a result about 17 000 clients with a turnover of R10m to R30m were transferred from Business Banking to Retail Relationship Banking. This has resulted in the following movements for the period under review: • R3,9bn in advances (average balance impact of R1,9bn) • R7,2bn in deposits (average balance impact of R3,6bn) • R78m in headline earnings for six months • 7 297 client groups (equivalent to 17 000 client records) Business Banking Business Banking (BB) provides relationship-based banking services to corporates, institutions and parastatals with an annual turnover of less than R750m but more than R30m. This minimum limit was lifted from R10m with effect from 1 July 2019 and clients falling below this threshold have been migrated to Retail Relationship Banking. Comments below reflect the Core Business Banking results, restated to be exclusive of the client migration to enable a like-for-like comparison. Core Business Banking delivered strong preprovisioning operating profit growth of 14,0%, aided by savings of R50m achieved through the successful reduction in headcount as well as judicious cost management practices, also resulting in an ROE of 18,3%. Despite the sluggish economic growth that has seen deteriorating levels of business confidence, with business owners taking a more cautionary approach to key investment decisions, average advances growth is up 10,6%, largely due to a 12,6% increase in new-loan payouts to R26,6bn, coupled with an increase in client drawdowns of existing facilities as well as new-client acquisitions. We remain a strong generator of funding, with average total deposits increasing by 9,0%, giving rise to the generation of R69,7bn in net surplus funds. The CLR of 52 bps is at the bottom end of the TTC target range of 50 bps to 70 bps. However, it is up significantly from the 15 bps in 2018 and is the main driver of the flat core headline earnings growth of 0,4%, while preprovisioning operating profit grew by 14,0%. The CLR for 2018 benefitted from significant impairment releases of R147m following the improvement in the drought conditions, and when normalising for adjustment, CLR increased by 15 bps. Downside risk does, however, remain, as we continue to see the pressure in the operating environment of our clients, cashflow constraints in the public and private sectors, and general economic uncertainty driving cautious borrowing behaviour. Our core CVP is based on the premise of being the trusted partner for our clients by offering bespoke solutions that enable their growth aspirations. Through our deep knowledge and insights about their business and their related industry, we are able to unlock future possibilities and options that allow clients to take their business to the next level. This ensures that our clients benefit from a structured approach combining relevant, cutting-edge and unique solutions customised to their business needs. A full range of banking and financial services includes tailored CVPs designed especially for the agriculture and franchising sectors, as well as public sector institutions. Our offering also includes debtor factoring, fleet solutions, specialised finance and innovative deposit and transactional solutions for high-volume and high-value deposit and transactional requirements for medium and large businesses. The strategic choice of collaborating with various external partners, including the public sector, has been enormously successful, resulting in the award of 18 banking tenders in the public sector over the past year. Business Banking is well positioned to support the growth of SA and our people by enabling business growth through the delivery of key initiatives to the business sector that will add to the future sustainability of SA. This includes our investment in enterprise development, supplier development finance and creating easier access to finance mechanisms for black-owned SMEs. We will also continue to focus on delivering delightful client experiences through the consistent performance of our core banking propositions. To do so we will continue to leverage our capability in developing digital advances, which includes providing machine-learning tools to our frontline client service teams. These tools offer rich insights into our clients' banking behaviours that will help the teams deliver enhanced client value. A further focus will be developing propositions that will unlock new markets and new revenue streams, including high-end disruption through the delivery of ecosystem-led CVPs that are enabled by digital innovation. Retail Relationship Banking RRB provides relationship-based banking services to affluent individuals and their households (salaried and self-employed), to non-resident clients and embassies, and to SMEs with a turnover of less than R30m and their business owners. The relationship banking CVP is designed for clients seeking a personalised, flexible and proactive approach and caters for the more complex financial needs typically associated with the abovementioned segments. Notwithstanding the benefit from internal client moves mentioned earlier, the core business performed strongly, delivering on ROE of 31,7% and remains a significant contributor to the overall performance of the cluster. A 9,5% increase in loan payouts led to 11,4% growth in average assets. The average liabilities growth of 7,3% was slower than in previous years, but the business still remains a R35bn net funding contributor to the cluster and group. The CLR has increased from 21 bps to 32 bps; however, this risk outcome is still well below the TTC target range and once again confirms RRB's entrenched risk management capabilities and the high quality of the portfolio. From a strategic perspective the professional-banking proposition for the affluent segment provides excellent value for money and access to exclusive benefits for clients (such as a dedicated banker for the entire family, unlimited domestic and 10 international airport lounge visits annually, preferential investment rates and tailored credit). We are making progress in building a client base for the future (19% CAGR in young professional clients over two years), which is compensating for the generally low switching rates in the established-professional segment. The Nedbank Money app has been well received in this market, with more than 70% of potential users having registered. 86 NEDBANK GROUP – ANNUAL RESULTS 2019 SEGMENTAL ANALYSIS Nedbank remains well positioned in the small-business segment, with urban market share increasing to 22% as a result of positive perceptions of our ability to understand and serve the needs of this important sector. We continue to invest in both our banking offering and support services, including business registration with the CIPC, issuing of BEE certificates and providing support through our Simplybiz.co.za platform. From June 2019 business users (previously registered for Nedbank Internet Banking) can use the Nedbank Money app, online banking channels and associated self-service functionality for their business and, if applicable, toggle seamlessly between their personal and business profile. A key focus across both segments is the automation and fine tuning of our credit assessment and pricing approach to maximise takeup as well as transactional cross-sell on the back of these assets. The broader efforts of the bank to create more self-service functionality, digitise the onboarding processes, expand the new Greenbacks money management programme and create a worldclass forex offering will greatly benefit this business area in coming years. Consumer Banking Consumer Banking serves approximately 7,1 million clients in three primary subsegments, namely youth, entry-level banking and the middle market. These consist mostly of individuals earning less than R750 000 per annum, but include some non-individual clients as well, primarily stokvels, clubs and societies. Consumer Banking registered strong underlying growth in 2019. Strong growth in advances and deposits were complemented by judicious expense management. We saw particularly good advances growth in emerging-middle-market (13,4%) and upper-entry-level banking (27,5%). This resulted in preprovisioning operating profit increasing to 12,8% yoy and the cost-to-income ratio decreasing to 60,3%. Growth in impairments off a low base has, however, muted headline earnings growth. Our focus in Consumer Banking is to be even more client centred and deliver even better client experiences. We were the most improved of SA's five retail banks in three measures of client experience: the Net Promoter Score (NPS), South Africa Consumer Satisfaction Index (SAcsi) and Social Media Net Sentiment Score. Digital has been a huge enabler in improving client experiences. For example, clients can now easily open an investment product on the Nedbank Money app and receive preapproved offers for personal loans, credit cards and overdrafts. We are seeing exponential growth in the number of clients enjoying these experiences on the app. We have implemented a client-centred, opportunity-based cross-sell strategy to close the gap between us and our competitors. The strategy is focused on clients’ core banking needs, and consists of four pillars, namely everyday banking, lending, savings and protection. Early pilot results were highly encouraging, and we will be expanding the impact of the programme across our branch network in 2020. We have also developed a machine-learning tool to help with client engagement and cross-selling. This will empower our frontline sales staff to have more needs-based and more impactful conversations with clients. We are also putting added emphasis on switching our lending clients into transactional relationships, both through targeted client value propositions and better processes. Transactional Banking Transactional Banking provides fully inclusive access to banking by offering affordable and meaningful banking to clients across all income levels, enabling financial inclusion and effective money management through key innovations such as MobiMoney, Unlocked.Me and savings pockets. Transactional Banking delivered 3,8% growth in NIR, despite client transactional volumes migrating to affordable electronic channels and the launch of zero-fee products. The NIR increase was driven by new acquisitions and strong growth in the number of consistently main-banked clients and value-added services. Lowering our banking fees, specifically in respect of our PAYU zero-fee product and Unlocked.Me Account, has saved clients banking fees while giving them significant access to value. Despite the decrease in transactional clients, we continue to acquire quality clients, as consistently main-banked clients increased 11,7%. As part of our digital journey and providing delightful client experiences, we launched a simplified onboarding process that enables straight-through processing on most of the transactional products on the app and online banking. Additional services added to the app, such as MyPocket, have offered convenience and improved client experience. These digital solutions, as well as offerings such as Unlocked.Me and MobiMoney, continued to contribute towards growth in revenue and the number of consistently main-banked clients. These digital solutions and platforms also place Nedbank in a strong position to compete with new entrants and existing players in the market. Card and Payments Card and Payments provides card-issuing, acceptance and payment products and solutions across all client segments. Card and Payments offerings include key innovations such as POSplus, scan to pay, Market Edge™ and GAP Access™. Card and Payments’ headline earnings were driven by good NIR growth but was offset by increased impairments that have been negatively affected by the impact of macroeconomic conditions and other factors. NIR growth was driven by an increase in card-issuing volumes of 6% and acceptance of 21%. Competitive pressures intensified by the arrival of new entrants, changes in client behaviour and regulation continue to put pressure on NIR growth. Active cost management remains a focus area, with ongoing strategic investments being made into payment solutions and client experience. Our innovation momentum continues in a landscape that is experiencing accelerated structural changes driven by regulation, innovation and disintermediation caused by the arrival of new entrants. Our innovation agenda is dominated by value-adding payments and transactions solutions that drive differentiated and competitive value propositions. New releases include virtual payments, which increase clients' control over spending as well as reduce fraud. As part of our evolved channels, distribution strategy and commitment to creating great client experiences, we rolled out our first-in-market card delivery solution through Nedbank Lockers and at retailers. Nedbank Lockers enable our clients to collect their cards 24/7 from convenient locations. Our inretailer card collection solution is the result of a strategic partnership with retailers to facilitate more accessible and convenient card collection and banking for our clients. Card Acceptance launched an instore finance service that provides clients and merchants with alternative forms of payment and checkout. Additionally, Nedbank Card has become the joint market leader in the 2019 overall South African Customer Satisfaction Index. NEDBANK GROUP – ANNUAL RESULTS 2019 87 Forex and investment products Our purpose is to create investment and forex products that provide easy and quick client experiences. Nedbank's market share of household investments contracted from 19,0% (December 2018) to 17,9% (December 2019), impacted by our proactive pricing decisions to ensure an appropriate balance between margin and volume. We are enhancing our analytics to identify the right prospects to optimise our marketing and campaigns’ successes. Following the launch of our online investment capabilities on the Nedbank Money app and Online Banking, 36% of new accounts were opened digitally for full-year 2019, compared with 6% in 2018. For 2019, 53% of notices of withdrawal were submitted digitally, compared with 35% in the prior year. Account opening is a fully straight-through process that is an easy experience for the client. This has resulted in capacity creation inbranch, which will lead to cost optimisation over time. We are on the journey to further enhance our online investment platforms and continue to shift volumes from physical to digital. We have introduced maturing investments and have progressed well with the development of Nedgroup Investments products to be included in the investments product catalogue, which we plan to launch in the first quarter of 2020. Several investment value propositions have been enhanced, including stokvels, tax-free savings accounts, onboarding on USSD, new tax-free fixed-deposit accounts, the Corporate Saver third-party funds administration platform and a deposit note programme at the top end of our commercial base. With regard to Forex, our aim is to create new and improved trade and crossborder payment value propositions across all RBB segments. This includes travel cards, foreign banknotes, remittances and foreign currency accounts among the business-related services that enable clients to import and export with well-managed risks. We have fully digitised the Travel Card capability on the app and online banking and continue to focus on digitising other services, including investing, saving for travel and transferring funds between Foreign Currency Accounts and the Travel Card. We have optimised the inward payments processes and will later in 2020 optimise the outward payments processes which represent a significant portion of the Forex turnover. Unsecured Lending Unsecured Lending provides all segments of Consumer Banking lending products, which include personal loans, overdrafts and student loans, but exclude credit cards. The personal-loans portfolio of R22,7bn represents the majority (97%) of Unsecured Lending's total advances. Unsecured Lending headline earnings were negatively impacted by a R53m decrease relating to the tail end of the impact of the reduced maximum NCA rate and a R110m decrease relating to increased impairments due to the negative macroeconomic forecast, negative collections impact of setoff regulatory change and risk normalisation to within the target range, in addition to digital-related expense growth, all of which are offset somewhat by portfolio growth driving increased revenues and effective non-digital-related cost management. Personal Loans average advances increased 13,0%, while period-end advances were up 10,2% to R22,7bn. New-business market share in targeted lower-risk segments was 13%, marginally lower than in the previous year as competition for increased shares of primary-banked clients intensifies. The shift to digital continues to gain momentum, as evidenced by the increased origination contribution from the direct channel (call centres and digital solution) to more than 32% of total volumes, driven primarily by the scaling of personal loans in the Nedbank Money app. More than 20% of personal loans disbursed to Nedbank clients in the fourth quarter of 2019 were applied for through this channel, up from < 1% in the prior year. Consumer Overdraft was introduced in the Money app in the fourth quarter of 2019, with the app becoming the biggest channel for new Nedbank overdrafts – three to four times greater than the branch channel. The same digital experience enabling existing clients to take up a loan in six clicks and in under three minutes was also launched across ATMs and kiosks. More offers and growth in Money app users and other digital channels will continue to provide material benefits from both a growth and expense perspective into 2020 and beyond. The number of personal loans paid into a Nedbank transactional account has increased from < 70% to about 80% after the scaling of our new client-centred onboarding system, which enables onboarding of clients for life through a single digital process, materially reducing turnaround time. Numerous other new digital products and processes for both Nedbank and non-Nedbank clients will be launched over the coming months and are expected to provide further impetus to digital growth and enhance the market share trajectory for both Personal Loans and Transactional Banking. Furthermore, machine-learning techniques have been enhanced in credit-scoring models, which will, along with embedded risk and collections excellence, enable sustainable growth within the current risk appetite while improving client experiences and assisting in growing our main-banked transactional franchise. Home Loans Home loans make homeownership dreams a reality by providing secured-lending products to the consumer segment, with RRB and BB providing these products to their segments directly, leveraging off the Home Loans infrastructure for several of the administrative processes. Continued financial pressure on households, coupled with low consumer confidence, resulted in a subdued housing market throughout 2019, with the national house price inflation index increasing by only 1,7%, compared to December 2018 (Lightstone). Nedbank Home Loans grew new business by 6%, compared with industry growth of around 4%. Normalising for the migration of R1,8bn of mortgage balances from Business Banking to Retail Relationship Banking, HE grew 2,7%, driven by a 6% increase in NII off the back of book growth of 5,7%, partially offset by an increase in the CLR to 12 bps, which is below the target range. The stage 2 portfolio decreased to 10,4% as a result of amendments made to the SICR partial-arrear methodology. The stage 3 portfolio increased to 4,6% and has been impacted by changes in court processes and foreclosure delays. Impairment coverage on the stage 3 portfolio decreased to 20,03%. 88 NEDBANK GROUP – ANNUAL RESULTS 2019 SEGMENTAL ANALYSIS The business continues to invest in initiatives to drive profitable growth. These include the following: • The Home Loans digital channel, which delivered 24% growth in sales and represented 13% of total sales. • The Home Loans online portfolio, which added an additional digital sales channel in July 2019. Clients are now able to apply on the Nedbank Money app for their home loan, using a shorter, simplified chat-based application. The app includes prepopulation of details of clients' contractual debt from credit bureaus which makes the form much quicker for clients to complete. • The Home Loans digital channel 1% cashback initiative, which continued to reward clients for applying online. Clients are given 1% cash back (capped at R15 000), based on the value of the loan amount registered. The cashback amount is paid into a Nedbank salary-funded transactional account. Continued investment in client experience, resulting in Nedbank Home Loans outperforming the industry, rising to number one in respect of client satisfaction. Nedbank Home Loans also had the best performance in NPS, placing the bank in second place across the home loan industry in the latest Consulta SAcsi NPS client satisfaction survey. We remain committed to helping clients who face financial hardship and provide a website to educate them about their options should they fall behind on their home loan repayments. Since launching the programme in 2009, over 36 780 families have been able to retain their homes as a result of loan restructures, with the programme offering an effective rehabilitation process, and the redefault rate on these loans being only 18,12%. In addition, over 5 100 financially distressed clients were given a fresh start through the Nedbank-assisted Sales programme since the start of this offering in 2009. This programme gives clients the option to sell their house on the private market through an estate agent appointed by Nedbank, thereby allowing them to avoid the repossession and distressed sale of the house through sheriff auction. Nedbank-assisted Sales is fast becoming the preferred choice for distressed clients, with 78% of them opting for this in 2019. MFC MFC's core business is providing vehicle finance to the consumer segment through motor dealerships. Used-car finance comprises 70% of the total loan book, which adds an economic buffer when new-car sales are under sustained pressure. In addition, motor dealer floor plans (wholesale finance of dealership stock) and key vehicle distributor joint ventures are housed in MFC. The automotive industry has had a very challenging 2019 due largely to a declining economy. The vehicle market contracted by 1% in 2019, with a further decline of 3,5% anticipated in 2020. Headline earnings were impacted by a higher impairment charge due to the negative economic climate. This has resulted in more repossessions and subsequent writeoffs yoy, as well as an increased number of clients requesting debt counselling. MFC remains committed to providing a quality service to clients. The social media launch of the MFC brand in 2019 has seen MFC providing educational awareness on the car-buying process to both MFC and non-MFC clients. Strong alliance relationships and our striving to deliver worldclass digitally enhanced CVPs for our clients ensure a consistent and sustainable business. Favourable Unfavourable • Landed digital onboarding capability for transactional products • Cost-to-income ratio and ROE ratio still below peers. across various channels (enabled through Eclipse rollout). • Aggressive competitor pricing driving lower household deposit • Increased digital product origination. market share. • Quality origination across all asset classes at appropriate • Slowdown in client transacting activity. • Worsening macro environment driving increase in impairments. • Economic uncertainty influencing borrowing activity. • Loss of main-banked market share in the entry-level and youth segments. risk-based pricing, driving asset mix benefit and selective market share gains. • First in Africa to launch Application Programming Interface (API) platform in line with international Open Banking standards. • Leveraged technologies like robotics, AI, machine learning and data analytics capability to enhance operational efficiencies and improve client experience. • Strong lending franchise to drive cross-sell investment into platform solutions. • Launched revised money management Loyalty & Rewards programme to drive desired client banking behaviours. • Continued, strong improvement in the annual Consulta SA Consumer Satisfaction Index (SAcsi) survey and NPS scores. • Received awards for the best innovation in retail banking in SA, the best customer service provider in Africa and most innovative retail bank South Africa. NEDBANK GROUP – ANNUAL RESULTS 2019 89 RETAIL AND BUSINESS BANKING: KEY BUSINESS STATISTICS Business Banking New client acquisitions – groups1 Cross-sell product holding1 Home Loans Number of applications received Average loan-to-value of new business registered Average balance-to-original-value of portfolio Proportion of new business written through own channels Proportion of book written since 2009 Owned-properties book MFC Number of applications received Percentage of used vehicles financed Personal Loans Number of applications received Average loan size Average term Retail deposits Total value of deposits taken in Total value of deposit withdrawals Number of clients at period-end Retail main-banked clients2 Business Banking groups3 Small Business Services segment4 Home Loans MFC Personal Loans Card issuing Investment products Transactional products Distribution Number of Business Banking locations Number of retail outlets Number of new-image branches5 Number of ATMs6 Number of ATMs with cash-accepting capabilities7 Digitally enabled retail clients Digitally active retail clients POS devices 2019 2018 1 087 83 380 1 465 105 548 thousands % % % % Rm thousands % thousands R000s months rand billions rand billions thousands thousands thousands thousands thousands thousands thousands thousands thousands thousands thousands 157 93 77 67 79 28 1 664 70,6 1 380 52,8 41,8 81 80 2 945 14 709 296 295 603 453 1 048 1 501 5 946 63 589 379 4 180 1 232 6 185 1 777 101 148 91 77 59 74 45 1 524 71,1 1 295 52,7 40,2 84 80 2 976 21 538 268 296 589 451 1 024 1 570 5 974 68 604 363 4 022 1 076 5 911 1 544 96 1 Impacted by the client migration to RRB. Excluding this migration the prior-year new client acquisitions (group) and cross-sell product holdings would have been 1 176 and 79 766, respectively. 2 2019 retail main-banked client definition has been revised to include MobiMoney and Card. 3 7 297 client groups migrated to RRB on 1 July 2019. 4 17 000 CISs migrated from BB on 1 July 2019. 5 Included in the number of retail outlets – shown separately for additional disclosure. 6 Includes four corporate cash devices. 7 Cash-accepting devices and interactive teller machines included in total number of ATMs. 90 NEDBANK GROUP – ANNUAL RESULTS 2019 SEGMENTAL ANALYSIS BALANCE SHEET AVERAGE ADVANCES AND IMPAIRMENTS Daily gross average advances Rm Stage 1 % Stage 2 % Stage 3 % % of total advances Credit loss ratio % 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Home loans VAF Personal loans Card Other loans Total Retail Business Banking 126 054 105 384 21 143 17 022 2 150 271 753 76 659 118 338 96 152 19 228 16 413 1 865 251 996 71 577 Total RBB 348 412 323 573 85,0 79,5 71,3 85,2 79,6 81,7 87,7 83,0 83,7 80,7 73,2 80,5 75,7 81,4 88,7 83,1 10,4 15,1 11,9 4,3 9,5 12,0 8,0 11,1 12,0 15,0 12,4 8,5 12,0 13,0 4,0 11,8 4,6 5,4 16,8 10,5 10,9 6,2 4,3 5,8 4,4 4,3 14,5 10,9 12,3 5,6 3,4 5,1 35,9 31,1 6,1 4,6 0,6 78,3 21,7 35,9 30,7 5,9 4,8 0,5 77,8 22,2 100,0 100,0 0,14 1,82 6,39 5,42 3,27 1,63 0,50 1,38 0,07 1,48 5,21 4,57 2,92 1,32 0,15 1,06 BALANCE SHEET IMPAIRMENT AS A PERCENTAGE OF BOOK % of total Stage 1 % Stage 2 % Performing stage 3 % Non-performing stage 3 % Total stage 3 % 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Home loans VAF1 Personal loans Card Other loans Total Retail Business Banking Total RBB 1,47 4,09 16,83 13,18 12,59 4,48 1,68 3,87 1,56 3,84 15,44 14,37 16,19 4,4 1,48 3,75 0,20 0,85 3,85 4,27 1,48 0,96 0,33 0,81 0,17 0,72 3,78 3,20 1,80 0,83 0,33 0,71 3,72 7,67 17,07 44,22 24,41 7,69 2,84 6,94 4,05 6,91 15,30 35,33 24,60 7,56 2,99 6,89 15,65 22,42 54,85 14,08 57,32 24,59 14,36 22,82 50,58 10,13 53,19 23,59 24,59 23,59 21,30 65,85 75,61 77,45 84,52 53,38 27,24 47,70 23,65 76,74 80,56 85,34 97,82 59,43 27,7 53,18 20,03 41,78 71,85 72,81 83,57 44,40 27,24 41,65 21,23 51,31 74,54 80,25 95,88 49,16 27,70 45,96 BALANCE SHEET ACTUAL ADVANCES Total advances Rm Stage 1 Rm Stage 2 Rm Performing stage 3 Rm Non-performing stage 3 Rm Total stage 31 Rm 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Home loans VAF Personal loans Card Other loans 130 455 112 956 22 010 16 817 2 245 121 745 104 248 20 004 16 341 1 755 110 930 89 814 15 699 14 332 1 787 Total Retail Business Banking 284 483 78 988 264 093 75 400 232 562 69 277 101 862 84 081 14 641 13 160 1 329 215 073 66 886 Total RBB 363 471 339 493 301 839 281 959 13 578 17 027 2 618 720 213 34 156 6 315 40 471 14 553 15 662 2 471 1 395 210 34 291 5 939 1 340 3 390 674 129 9 5 542 1 383 2 122 583 121 9 4 218 40 230 5 542 4 218 4 607 2 725 3 019 1 636 236 12 223 3 396 15 619 3 947 2 383 2 309 1 665 207 10 511 2 575 13 086 5 947 6 115 3 693 1 765 245 17 765 3 396 21 161 5 330 4 505 2 892 1 786 216 14 729 2 575 17 304 1 During 2018 an LGD overlay created in lieu of anticipated modelling changes of R285m was allocated entirely to stage 3. In 2019 this LGD overlay was built into the model resulting in it being allocated across all stages. December 2018 was therefore inflated and a comparable total stage 3 coverage for VAF would be 47,0%. NEDBANK GROUP – ANNUAL RESULTS 2019 91 BALANCE SHEET ACTUAL IMPAIRMENTS Total impairments Rm Stage 1 Rm Stage 2 Rm Performing stage 3 Rm Specific impairments Rm Total specific impairments Rm 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 Home loans VAF Personal loans Card Other loans Total Retail Business Banking Total RBB 1 921 4 620 3 705 2 216 283 12 745 1 330 14 075 1 897 4 001 3 088 2 347 284 11 617 1 114 12 731 225 761 605 612 26 2 229 226 2 455 176 607 554 421 24 1 782 223 2 005 505 1 305 447 319 52 2 628 179 2 807 589 1 082 378 493 52 2 594 178 2 772 210 760 370 18 5 1 363 199 484 295 12 5 995 1 363 995 981 1 794 2 283 1 267 200 6 525 925 7 450 933 1 828 1 861 1 421 203 6 246 713 6 959 1 191 2 554 2 653 1 285 205 7 888 925 8 813 2018 1 132 2 312 2 156 1 433 208 7 241 713 7 954 Income statement impairments charge1,2 Rm Stage 1 Rm Stage 2 Rm Stage 3 Rm Interest on impaired Rm Postwriteoff recoveries Rm 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Home loans VAF Personal loans Card Other loans Total Retail Business Banking 178 1 919 1 351 923 70 4 441 382 86 1 427 1 001 750 55 3 319 105 Total RBB 4 823 3 424 64 154 52 205 3 478 13 491 (27) (8) 52 5 (2) 20 (96) (76) (59) 251 76 (178) 1 91 3 94 (5) 272 67 (9) 4 329 16 345 294 1 963 2 095 1 200 121 5 673 400 6 073 241 1 556 1 550 1 063 101 4 511 202 4 713 (71) 14 (549) (21) (23) (650) 11 (639) (68) (1) (291) (19) (18) (397) 23 (374) (50) (463) (323) (283) (32) (1 151) (45) (1 196) (55) (392) (377) (290) (30) (1 144) (40) (1 184) 1 Impairment charge and resultant CLR include charges housed centrally within RBB. 2 December 2018 reflects charges associated with debit balances. 92 NEDBANK GROUP – ANNUAL RESULTS 2019 SEGMENTAL ANALYSIS NEDBANK WEALTH HEADLINE EARNINGS (Rm) RETURN ON EQUITY (%) 2 4 0 1 3 3 1 2 4 0 1 1 3 3 1 1 1 7 4 1 1 7 4 0 5 1 0 5 9 1 3 7 3 3 9 1 3 7 3 3 2 5 2 5 9 2 2 5 2 5 9 2 5 , 1 4 , 2 5 3 , 5 7 2 , 8 6 2 , 8 4 2 Cluster total Cluster Insurance Insurance Asset Management Asset Management Wealth Management Wealth Management Dec 2019 Dec 2019 Dec 2018 Dec 2018 FINANCIAL HIGHLIGHTS for the year ended 31 December Headline earnings (Rm) NII (Rm) Impairments charge on financial instruments (Rm) NIR (Rm) Operating expenses (Rm) ROE (%) ROA (%) CLR – banking advances (%) NIR to total operating expenses (%) Cost-to-income ratio (%) Interest margin (%) Assets under management (Rm) Life assurance embedded value (Rm) Life assurance value of new business (Rm) Total assets (Rm) Average total assets (Rm) Total advances (Rm) Average total advances (Rm) Total deposits (Rm) Average total deposits (Rm) Average allocated capital (Rm) 2019 1 042 1 148 57 3 436 3 113 24,8 1,40 0,18 110,4 67,9 2,17 331 136 3 188 421 77 433 74 302 30 741 31 141 40 060 41 072 4 204 2018 1 133 1 113 39 3 484 3 012 26,8 1,69 0,13 115,7 65,5 2,31 297 338 2 786 380 71 142 66 982 31 111 28 908 39 495 37 217 4 225 Nedbank Wealth’s HE declined 8,0% to R1 042m, with ROE at 24,8%, due primarily to the difficult macroeconomic environment and poor market conditions. Wealth Management experienced a challenging year, with local revenue significantly impacted by negative investor confidence and lacklustre GDP growth. The international Wealth Management business achieved good underlying growth despite being adversely impacted by declining interest rates. The Insurance business was negatively affected by lower life reserve releases and an increase in weather-related claims in the first half of the year. Asset Management’s performance was predominantly impacted by AUM outflows experienced in the latter part of 2018 and a change in investor behaviour toward lower-margin and lower-risk asset classes. 20151 2016 2017 2018 2019 1 During 2016, the group changed its capital allocation methodology. The ROE for 2015 would have been 36,7% using the updated methodology. NII increased 3,1% to R1 148m, with steady deposit growth in the international business, partially offset by the declining interest rate environment in the US, resulting in a decrease in NIM to 2,17%. The difficult local economic environment contributed to an increase in impairments off a low base, resulting in a slightly higher CLR of 0,18%. Negative NIR growth of 1,4% to R3 436m was due to lower brokerage income and portfolio management fees in the local Wealth Management business, continued pressure on asset management fees and a higher non-life claims ratio. This was partly offset by robust growth in the international Wealth Management business on the back of increased client activity and strong growth in AUM. The NIR-to-expenses ratio declined 5,3% as a result of pressure on revenue and higher frontline staff expenses. The increase in costs was due to the international Wealth Management business building bench strength for future growth, product expansion in Insurance and investment in innovation and digital initiatives. Despite this, the business managed to contain cost growth at 3,4%, which is below inflation. Wealth Management The local wealth management industry has experienced a challenging environment, with poor economic growth and negative investor confidence affecting general trading and business volumes. Internationally, private banks were impacted by a decline in US interest rates, prolonged Brexit uncertainty and competition from ringfenced banks. Overall Wealth Management HE declined 14,4% to R252m. Poor local market activity negatively impacted brokerage fees, with portfolio management fees and commission income declining due to clients derisking portfolios to lower-margin products. The international Wealth Management business achieved good underlying growth in AUM despite difficult macroeconomic factors. NEDBANK GROUP – ANNUAL RESULTS 2019 93 The local Nedbank Private Wealth business was named Top Private Bank and Wealth Manager in SA for ESG/Social Impact Investing and Philanthropic Advice in the 2020 Euromoney Private Banking and Wealth Management Survey. Nedbank Private Wealth International was named Best Boutique Private Bank at the 2019 WealthBriefing MENA Region Awards. Asset Management Muted equity performance across the local asset management industry over the past three to five years resulted in a change in the AUM mix to lower-margin and lower-risk products. Asset Management’s HE declined 5,4% to R319m due to continued pressure on margins and the full-year impact of a large institutional outflow in 2018. AUM increased 11,4% to R331bn, with net inflows of R14,9bn. The low-cost passive business remained the largest unit trust multiasset passive provider, while cash and fixed-income assets continued to grow with material net inflows. At the 2020 Raging Bull Awards, Nedgroup Investments was recognised as the Top Offshore Manager for the fifth consecutive year and won the award for the Best global Equity Fund at the 2020 Morningstar award. Insurance Insurance HE decreased 6,1% to R471m, driven by higher non-life claims and lower life reserve releases, partly offset by improved investment returns. The life portfolio was impacted by actuarial assumption changes relating to an improvement in mortality for credit life, worsening mortality for funeral and deteriorating lapse experience. In the first half of the year the non-life portfolio was affected by catastrophic weather events resulting in a higher non-life claims ratio relative to 2018. Looking forward We anticipate continued economic headwinds locally, with negative investor confidence contributing to the derisking of portfolios to lower-margin products; decreased trading and general business volumes; and unpredictable weather patterns. Internationally, strong competition from UK ringfenced banks is set to further impact lending growth while interest rates are expected to decline. Despite this, Nedbank Wealth is continuously exploring opportunities for growth and will focus on providing innovative, market-leading client experiences, commercialising digital capabilities and investing in our people. Given the pressure on traditional income lines, the business is committed to creating new revenue streams and managing growth in expenses through cost containment initiatives. The local and international Wealth Management businesses will continue to work together and focus on the high-net-worth-client strategy, with the goal of moving from an affluent-banking-led business to a high-net-worth advice-led business. The businesses will leverage opportunities within the group, build the Nedbank Private Wealth brand and embed digital capabilities that enhance client experience. ASSETS UNDER MANAGEMENT (Rm) 4 9 9 9 4 1 0 3 7 0 2 8 8 5 9 4 9 3 7 3 2 2 5 5 2 6 5 8 5 0 6 5 2 4 7 9 5 5 4 6 3 1 4 2 8 8 6 6 6 8 4 4 4 6 2 2015 2016 2017 2018 2019 International Local Robust growth in life EV of 14,4% to R3 188m was due to strong VNB and the reduction of acquisition costs, offset by deteriorating lapse experience. Life VNB increased 10,8% to R421m as a result of growth in credit life policy sales and higher average funeral premiums. Non-life gross written premiums remained flat at R1 180m due mainly to pressure on non-life volumes, offset by an increase in vehicle value-added product premiums. Asset Management will focus efforts on delivering excellent long-term performance and leveraging its Best of Breed™ track record. Continued industry pressure is anticipated, but the business is well positioned with best-in-class offerings in the growing global, cash, multiasset and low-cost categories. Asset Management will continue to invest in digital properties, grow the international franchise and leverage Nedbank’s brand and distribution footprint. Insurance remains committed to enhancing client experience through expanding its innovative solutions while further improving data and digital capabilities. The business will continue to focus on penetrating the Nedbank client base in line with its bancassurance strategy. We remain committed to achieving our ROE of greater than or equal to 28% in the medium term and 30% in the long term. We have revised our cost-to-income ratio to less than or equal to 65% in the medium and long term as a result of structural changes exerting pressure on revenue streams. To this end we will focus on creating internal efficiencies, delivering delightful client experiences and building new income streams. Favourable Unfavourable • Strong AUM growth and steady deposit growth internationally. • Higher non-life claims ratio. • Positive net AUM inflows in Asset Management. • Negative investor confidence and reduced market activity. • Growth in life VNB. • Shift in AUM mix towards lower-margin income and cash solutions. • Increased penetration into Nedbank VAF. • Declining USD interest rates. 94 NEDBANK GROUP – ANNUAL RESULTS 2019 SEGMENTAL ANALYSIS ASSETS UNDER MANAGEMENT Rm Fair value of funds under management – by type Unit trusts Third parties Private clients Fair value of funds under management – by geography South Africa Rest of the world Rm Reconciliation of movement in funds under management – by type Opening balance at 31 December 2018 Inflows Outflows Mark-to-market value adjustment Foreign currency translation differences Closing balance – 31 December 2019 Unit trusts Third party 241 421 550 540 (536 004) 18 497 (1 211) 273 243 839 14 (24) 110 7 946 Rm Reconciliation of movement in funds under management – by geography Opening balance at 31 December 2018 Inflows Outflows Mark-to-market value adjustment Foreign currency translation differences Closing balance – 31 December 2019 South Africa Rest of the world 241 364 550 173 (535 803) 8 714 264 448 55 974 10 559 (10 101) 11 420 (1 164) 66 688 2019 2018 273 243 946 56 947 331 136 264 448 66 688 331 136 Private clients 55 078 10 178 (9 876) 1 527 40 56 947 241 421 839 55 078 297 338 241 364 55 974 297 338 Total 297 338 560 732 (545 904) 20 134 (1 164) 331 136 Total 297 338 560 732 (545 904) 20 134 (1 164) 331 136 NEDBANK GROUP – ANNUAL RESULTS 2019 95 NEDBANK AFRICA REGIONS Although sub-Saharan Africa GDP growth was mixed in 2019, it continues to grow faster than that of SA and provide opportunities for diversifying earnings and returns over the longer term. GDP growth in most of the SADC countries in which we operate was more than 1,0%; Mozambique grew at 3,0%. Our strategy remains to own, manage and control banking operations in SADC and East Africa, and to provide our clients with access to a banking network in West and Central Africa through our strategic investment in and alliance with the pan-African banking group ETI, which operates in 36 African countries. SADC SUBSIDIARIES Our SADC subsidiaries’ performance was impacted by several unusual items. Policy uncertainty, increased government expenditure and a lack of foreign direct investments have severely damaged the Zimbabwean economy, contributing to hyperinflationary conditions. By year-end the CPI inflation index reached 552. Zimbabwe officially adopted hyperinflationary accounting effective 1 July 2019 with an overall HE impact of R186m. HEADLINE EARNINGS (Rm) RETURN ON EQUITY (%) 1 9 6 2015 ) 0 1 8 ( ) 7 8 2 ( 2016 2 0 7 7 5 4 2018 2019 2017 FINANCIAL HIGHLIGHTS Headline earnings (Rm) NII (Rm) Impairments charge on financial instruments (Rm) NIR (Rm) Operating expenses (Rm) Associate income ROE (%)1 ROA (%) Return on cost of ETI investment (%) CLR – banking advances (%) NIR to total operating expenses (%) Cost-to-income ratio (%) Interest margin (%) Total assets (Rm) Average total assets (Rm) Total advances (Rm) Average total advances (Rm) Total deposits (Rm) Average total deposits (Rm) Average allocated capital (Rm) , 2 0 1 2015 , ) 6 3 ( 2016 , ) 6 2 1 ( , 3 0 1 7 7 , 2018 2019 2017 Total Africa Regions SADC 2019 457 1 547 233 1 220 2 427 672 7,7 1,19 10,7 1,01 50,3 70,6 5,01 38 385 37 641 21 678 21 959 30 223 30 780 5 943 2018 702 1 627 113 1 206 2 416 611 10,3 1,79 9,7 0,51 49,9 70,2 5,25 37 518 39 123 21 037 21 866 29 472 30 263 6 812 2019 20 1 868 233 1 220 2 427 4 0,4 0,06 1,01 50,3 78,5 7,00 35 711 34 738 21 678 21 959 30 223 30 780 5 094 2018 327 1 951 113 1 206 2 416 3 5,6 1,03 0,51 49,9 76,5 7,27 34 273 36 042 21 037 21 866 29 472 30 263 5 815 ETI 2019 437 (321) 668 52,0 6,20 10,7 2018 375 (324) 608 37,7 5,19 9,7 2 674 2 903 3 245 3 081 849 997 1 FY2019 ROE on subsidiary and associate incountry statutory capital is 4,9% (2018: 8,9%), with Namibia 13,1% (2018:13,3%); Eswatini 14,6% (2018: 17,9%); Lesotho 10,7% (2018: 15,1%); Malawi -58,9% (2018: -7,2%); Zimbabwe -57,2% (2018: -27,8%) and Banco Único 13,5% (2018: 12,9%). 96 NEDBANK GROUP – ANNUAL RESULTS 2019 SEGMENTAL ANALYSIS Once-off tax adjustments and non-operational writeoffs reported in H1 2019, reduced HE by R61m thereby contributing to the poor performance. These new products and services have been well received in their respective markets and we expect an improved performance going forward. We continue to build a strong core business to deliver an improved performance into the future. The business had a marginal decline in client numbers, due mainly to new account closure rules introduced mid-2019. Notwithstanding this, revenue per client rose by 4,5% as we acquired quality clients and deepened client relationships. Client retention in retail improved as we improved our digital transactional and lending client value propositions. In line with transforming our business for a digital age, we registered a 94% increase in our active app users and grew the number of point-of-sale (POS) devices by 27%, resulting in a 10% increase in merchant turnover to R9bn. Headcount decreased by 1% to 2 582, while our branch footprint increased by 5% to 103 and the number of ATMs declined by 1%. In our markets our branch and ATM footprint is much lower than that of our key competitors and new investments are limited to high-growth micro markets and the minimum required presence by regulation. The decline in ATMs is due to optimisation of our footprint and driving our POS cash-back strategy. We continued investing in our businesses to give our clients improved offers and client experiences. Some of the initiatives included the following: • Rolling out the award-winning Nedbank Money app offering to our businesses in Lesotho, Namibia, Malawi and Eswatini. The new Money app (Africa) had an additional 49 new features compared to the old Nedbank App Suite (Africa); in Zimbabwe, we also enhanced our mobile solution. • Launching a new pay-as-you-go account in Namibia, targeting the entry-level and middle-market client segments. This was part of making our solutions simpler and more convenient for our clients while understanding that these clients are interested in managing and controlling their overall banking costs. • Automating the overall business to improve efficiency and client service. Branches BRANCHES ETI (WEST AND CENTRAL AFRICA) ETI’s financial recovery continued albeit with earnings growth slowing. The performance is driven by sustained recovery from three regions, offset by ongoing poor performance from the Nigerian franchise. The performance for the nine months to 30 September 2019 has been driven by the following: • Strong earnings growth and good returns were registered in the Anglophone West Africa and Francophone West Africa regions reflecting the quality of the franchise. • The recovery in the financial performance in the Central, Eastern and Southern Africa (CESA) region continued. • Nigeria’s performance deteriorated further, due to persistently elevated NPLs, adverse regulatory intervention and ongoing economic headwinds. The collaboration between ETI and Nedbank continued during the year, with some business opportunities between the two groups yielding positive results. We continued to increase the number of Nedbank wholesale clients doing their transactional banking with ETI to 118 from 110 in 2018. More than 245 accounts have been opened at Ecobank businesses across the continent. We have also continued to grow treasury activities. Financial highlights Africa Regions delivered HE of R457m, a 35% decrease from 2018, and produced an ROE of 7,7%. This performance was primarily impacted by the poor results from Zimbabwe. In ETI, the financial recovery has continued with sustained profitability albeit at a slower growth rate. Associate income from ETI was R668m, growing by 10%, while HE grew by 17% to R437m. ATMs ATMS 2 8 7 8 3 9 8 9 3 0 1 1 7 1 4 8 1 8 0 2 0 2 2 8 1 2 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 NEDBANK GROUP – ANNUAL RESULTS 2019 97 This result reflects the sustained strong performance from ETI’s core West African operations, including Côte d’Ivoire and Ghana; a recovery in Central, Eastern and Southern Africa’s business performance; while the Nigerian business continued to underperform. Our SADC banking subsidiaries had a mixed performance amid a challenging macroeconomic environment. HE declined by 94% to R20m, largely driven by losses in Nedbank Zimbabwe as a result of a hyperinflationary environment and once-offs. Excluding Nedbank Zimbabwe, the HE of our SADC operations grew by 0,6%. Notwithstanding the challenging macroeconomic environment, average gross advances grew by 0,3% and, excluding Zimbabwe, by 3,6%. Average deposits grew by 2,0%, excluding Zimbabwe at 11,1%. NIM declined by 27 bps, reflecting the competitive conditions in the market. NIR increased by 1,2% in an environment of limited fee increases, reflecting our focus on acquiring primary-banked clients. Excluding Zimbabwe, NIR grew by 5,1%. The CLR increased to 101 bps due to a significant increase in impairments from R113m to R232m, marginally breaching the upper limit of our CLR target of 100 bps. Excluding unusual recoveries in the prior year our CLR is in line with 2018. Expenses have been well managed and only increased by 0,5% to R2 427m, underpinned mainly by the management of headcount growth and other costs. Our cost-to-income ratio increased by 2,7% to 78,5%; excluding Zimbabwe the cost-to-income ratio was 80,4%. Looking forward Sub-Saharan Africa GDP is expected to grow by 3,5% in 2020, which is a slight improvement on the 3,3% growth in 2019. Nedbank remains committed to long-term and profitable growth in our Africa Regions business and seeks to leverage these growth opportunities. Our ambition is to give our clients access to the best financial services network in Africa and we will deploy capital to optimise returns for the group. Despite a challenging macroeconomic environment, we expect Africa Regions to be a positive contributor to group earnings. In SADC, for 2020, we expect earnings to improve off a low base, with continued difficult economic conditions in SA spilling over to growth in the southern Africa region. We will adapt our businesses to the new economic normal to drive stronger revenue growth through: • investing in digitisation and automation to be more competitive; • continuing to focus on credit risk management and a stronger control environment; • tapping into Mozambican growth opportunities; and • reconfiguring the shape of balance sheet and business operations in Zimbabwe. Our focus will remain on the delivery of the ETI board-driven strategic agenda, commercialisation of collaboration initiatives and the increase of business flows. Our financial outlook in the next two to three years is to deliver returns greater than 15% and cost-to-income of below 65%. Over the long term, greater than five years, we aim to deliver ROEs above 20% and cost-to-income less than 60%. Favourable Unfavourable • ETI financial performance improved but growth slowing. • Difficult economic conditions most of our markets. • Revenue per client increased. • Cost grew by less than inflation. • Developed new CVPs enabling growth in transactional clients, assets and deposits. • Nedbank Zimbabwe negatively affected by hyperinflation resulting an a headline loss of R108m (2018: profit of R142m). • Once-off tax adjustments and non-operational writeoffs in H1. • CLR increased due to challenging economic environment. • Challenging environment for ETI in Nigeria. 98 NEDBANK GROUP – ANNUAL RESULTS 2019 SEGMENTAL ANALYSIS GEOGRAPHICAL SEGMENTAL REPORTING for the year ended 31 December Rm 2019 2018 2019 2018 2019 2018 2019 2018 Nedbank Group South Africa1 Rest of Africa2 Rest of world Summarised statement of financial position Assets Cash and cash equivalents Other short-term securities Derivative financial instruments Government and other securities Loans and advances Other assets Intragroup assets 37 635 64 451 35 243 128 510 796 833 80 677 – 34 791 79 362 22 692 96 791 736 305 73 971 – 29 655 42 562 35 075 126 171 722 532 70 739 (499) 27 763 58 537 22 525 94 329 669 363 64 398 (497) 6 341 4 083 38 848 21 678 4 898 499 Total assets 1 143 349 1 043 912 1 026 235 936 418 38 385 Equity and liabilities Total equity Derivative financial instruments Amounts owed to depositors Provisions and other liabilities Long-term debt instruments Intragroup liabilities 98 449 27 991 904 382 52 814 59 713 – 91 271 20 003 825 804 51 247 55 587 – 81 926 27 913 812 008 49 922 59 396 (4 930) 74 727 19 913 747 532 49 474 55 259 (10 487) 5 943 11 30 223 1 891 317 5 615 4 776 10 668 21 037 4 915 497 37 518 6 812 12 29 472 894 328 Total equity and liabilities 1 143 349 1 043 912 1 026 235 936 418 38 385 37 518 Summarised statement of comprehensive income (Rm) NII Impairments charge on financial instruments Income from lending activities NIR Operating income Total operating expenses Zimbabwe hyperinflation Indirect taxation Profit/(Loss) from operations Share of income/(losses) of associate companies Profit before direct taxation Direct taxation Profit after taxation Profit attributable to non-controlling interest Headline earnings 1 Includes all group eliminations. 30 167 28 819 27 548 26 331 6 129 24 038 25 997 50 035 32 179 296 1 096 16 464 793 17 257 3 942 13 315 809 12 506 3 688 25 131 25 976 51 107 31 632 – 942 18 533 528 19 061 4 807 14 254 759 13 495 5 824 21 724 23 598 45 322 28 940 1 014 15 368 121 15 489 3 885 11 604 777 10 827 3 642 22 689 23 829 46 518 28 505 894 17 119 (83) 17 036 4 649 12 387 606 11 781 1 547 233 1 314 1 220 2 534 2 427 296 58 (247) 672 425 (64) 489 32 457 1 627 113 1 514 1 206 2 720 2 416 37 267 611 878 23 855 153 702 1 639 17 806 130 1 491 52 623 5 040 1 413 16 049 157 1 794 45 905 4 658 78 729 69 976 10 580 67 62 151 1 001 4 930 78 729 1 072 72 1 000 1 179 2 179 812 24 1 343 1 343 121 1 222 9 732 78 48 800 879 10 487 69 976 861 (67) 928 941 1 869 711 11 1 147 1 147 135 1 012 1 222 1 012 2 The Rest of Africa geographical segmental income statement and balance sheet consist of the SADC banking subsidiaries and the investment in ETI. These statements do not include transactions concluded with clients resident in the rest of Africa by other group entities within CIB nor transactional banking revenues. For example, CIB has credit exposures to clients resident in the rest of Africa of R35,1bn (December 2018: R27,7bn). NEDBANK GROUP – ANNUAL RESULTS 2019 99   INCOME STATEMENT ANALYSIS 101 Net margin analysis 105 Impairments 108 Non-interest revenue 110 Expenses 112 Non-trading and capital items 112 Taxation charge 112 Preference shares 113 Hyperinflation 100 NEDBANK GROUP – ANNUAL RESULTS 2019 1 NET MARGIN ANALYSIS Nedbank Group Closing average interest-earning banking assets Opening NIM/NII Growth in banking assets Endowment Capital, net of working capital Deposits Asset margin pricing and mix Impact due to pricing Impact due to mix change Liability margin pricing and mix Deposits pricing and mix Impact due to pricing Impact due to mix change Enhancing funding profile Prime – JIBAR basis HQLA IFRS 9: Financial instruments IFRS 16: Leases Other Closing NIM/NII for the year NET INTEREST MARGIN (YOY) (Bps) (3) (6) 365 INCOME STATEMENT ANALYSIS 2019 Bps 365 (3) (3) (4) (6) 2 1 (1) 1 (2) (4) (1) Rm 857 981 28 819 2 465 (268) (226) (42) (357) (555) 198 31 62 123 (61) (31) 77 (204) (293) (103) 352 30 167 2018 Bps 362 (2) (2) 4 3 1 1 (2) (2) 3 (1) (1) Rm 790 376 27 624 987 (184) (146) (38) 340 224 116 99 (169) (159) (10) 268 (100) (49) (21) 2 365 123 28 819 352 2 1 (1) 1 (2) (4) (1) 2018 Endowment impact Asset pricing Asset mix Liability pricing Liability mix Prime – JIBAR basis HQLA IFRS 16 Other 2019 NEDBANK GROUP – ANNUAL RESULTS 2019 101           NET INTEREST INCOME (Rm) INTEREST MARGIN TRENDS VERSUS PRIME RATE (%) 10,4 10,4 10,1 10,1 9,4 5 8 8 3 2 6 2 4 6 2 4 2 6 7 2 9 1 8 8 2 7 6 1 0 3 0 3 3 , 4 5 3 , 2 6 3 , 5 6 3 , 2 5 3 , 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Nedbank Group NIM Average prime rate NET INTEREST INCOME Favourable Unfavourable • Positive mix changes due to stronger growth in RBB average • Negative endowment impact due to lower net endowment advances with higher margins, compared with slower growth in CIB average advances with lower margins. • Liability rate benefit as a result of improved pricing on fixed deposits. balances. • A decline in the Personal Loans margin due to the treatment of interest on the stage 3 portfolio and the extended writeoff period as well as the impact of NCA pricing caps. • Widening of the prime – JIBAR spread in 2019 versus 2018. • Competitive pricing on wholesale advances. • Negative liability mix due to stronger growth in wholesale sources of funding. • The implementation of IFRS 16 resulted in an interest expense on the lease liability for operating leases being included in NII. Previously, operating lease expenses were included in total operating expenses. • Higher levels of low-yielding HQLA held in the banking book. NII SENSITIVITY ANALYSIS • At December 2019 the NII sensitivity of the group’s banking book for a 1% parallel reduction in interest rates, measured over 12 months, was 1,54% of total group ordinary shareholders’ equity, which is below the board’s approved risk limit of < 2,25%. • This exposes the group to a decrease in NII of approximately R1 346m before tax, should interest rates decrease by 1% across the yield curve, measured over a 12-month period. Nedbank London and Wealth International NII sensitivities are, however, measured at a 0,5% instantaneous decrease in interest rates. • The group’s NII sensitivity exhibits very little convexity and will therefore also result in an increase in pretax NII of approximately similar amounts should interest rates increase by 1%. • The group’s NII sensitivity is actively managed through on- and off-balance-sheet interest rate risk management strategies for the group’s expected interest rate view and impairment sensitivity over the cycle. 102 NEDBANK GROUP – ANNUAL RESULTS 2019 INCOME STATEMENT ANALYSIS LENDING SPREAD VERSUS CREDIT LOSS RATIO (INCLUDING TARGET RANGE) OF NEDBANK GROUP (Bps) 254 238 231 240 241 Δ = 177 Δ = 170 Δ = 182 Δ = 187 Δ = 159 77 2015 68 2016 49 2017 53 2018 82 2019 Lending spread (banking financial assets) Credit loss ratio (CLR) Current CLR target range (60–100 bps) • The group’s lending spread increased by 1 bp in the current year to 241 bps. This was primarily due to positive advances mix changes, with RBB average advances growing faster than CIB average advances. • The group’s CLR increased by 29 bps yoy to 82 bps at 31 December 2019, which is within the group TTC target range of 60 bps to 100 bps. NEDBANK GROUP – ANNUAL RESULTS 2019 103 AVERAGE BANKING STATEMENT OF FINANCIAL POSITION AND RELATED INTEREST 2019 2018 Average balance Margin statement interest1 Average balance Margin statement interest1 Rm Assets Received Average prime rate Assets Loans and advances Home Loans (including properties in possession) Commercial mortgages Instalment debtors Credit card balances Overdrafts Term loans and other2 Personal loans Impairment of loans and advances Government and public sector securities Short-term funds and trading securities Interest-earning banking assets Other3 Total assets 159 406 170 087 121 231 17 378 22 954 229 811 23 907 (16 297) 84 501 45 003 857 981 106 974 964 955 15 073 16 369 14 277 2 581 2 373 18 358 5 151 7 162 2 336 83 680 83 680 % 10,14 9,46 9,62 11,78 14,85 10,34 7,99 21,55 8,48 5,19 9,75 8,67 Assets Received 152 545 161 473 112 521 16 621 20 052 212 525 21 219 (14 383) 53 134 54 669 790 376 96 537 886 913 14 314 15 581 13 099 2 461 2 081 17 582 4 764 4 388 3 271 77 541 (1 600) 75 941 Liabilities Paid % Liabilities Paid Equity and liabilities Deposit and loan accounts Current and savings accounts Negotiable certificates of deposit Other interest-bearing liabilities 1,4 Long-term debt instruments Interest-bearing banking liabilities Other5 Total shareholders’ equity and liabilities Interest margin on average interest-earning banking assets 456 578 111 379 117 088 85 887 57 306 828 238 136 717 964 955 30 628 1 074 9 259 7 214 5 338 53 513 53 513 857 981 30 167 6,71 0,96 7,91 8,40 9,31 6,46 5,55 3,52 427 747 107 761 104 236 66 586 53 810 760 140 126 773 886 913 28 469 1 016 8 236 5 885 5 116 48 722 (1 600) 47 122 790 376 28 819 % 10,09 9,38 9,65 11,64 14,81 10,38 8,27 22,45 8,26 5,98 9,81 8,56 % 6,66 0,94 7,90 8,84 9,51 6,41 5,31 3,65 1 Yields are before incorporating the impact of hedging derivatives. 2 Includes term loans, preference shares, factoring debtors, interest on derivatives and other lending-related instruments. 3 Includes cash and banknotes, derivative financial instruments, insurance assets, associates and investments, property and equipment, mandatory reserve deposits with central banks, intangible assets, other assets and elimination entries. 4 Net interdivisional assets – trading book, previously disclosed as a negative in the other non-interest-earning banking assets, now included in other interest-bearing liabilities. 5 Includes derivative financial instruments, investment contract liabilities, other liabilities and elimination entries. 104 NEDBANK GROUP – ANNUAL RESULTS 2019     2 IMPAIRMENTS INCOME STATEMENT ANALYSIS NEDBANK GROUP IMPAIRMENTS CHARGE (Rm) NEDBANK GROUP CREDIT LOSS RATIO TRENDS (%) 1,00 10,4 10,4 10,1 0,60 9 8 7 4 4 5 5 4 4 0 3 3 8 8 6 3 9 2 1 6 7 7 0 , 9 6 0 , 9 4 0 , 3 5 0 , 2 8 0 , 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 CLR Upper range Lower range NEDBANK GROUP INCOME STATEMENT IMPAIRMENT CHARGE AND CREDIT LOSS RATIO December 2019 (Rm) Rm Rm Rm Stage 1 Stage 2 Stage 3 Corporate and Investment Banking (CIB) CIB excluding Property Finance Property Finance Retail and Business Banking (RBB) Business Banking Retail1 Wealth Africa Regions Centre Nedbank Group (1) 30 (31) 476 13 463 (1) 71 254 179 75 102 7 95 4 23 99 616 693 (77) 4 241 369 3 872 54 129 545 482 5 040 1 For further disaggregation, refer to the RBB segmental report on page 92. Off- balance- sheet Impairment charge, net of recoveries Mix of average banking advances CLR Target Rm 46 46 4 (8) 12 6 56 Rm % % % 917 949 (32) 4 823 382 4 441 57 233 99 46,3 27,2 19,1 46,5 10,2 36,3 4,2 3,0 0,26 0,15 – 0,45 0,45 (0.02) 0,15 - 0,35 1,38 1,30 – 1,80 0,50 0,50 - 0,70 1,63 1,60 - 2,40 0,18 0,20 - 0,40 1,01 0,75 - 1,00 6 129 100,0 0,82 0,60 – 1,00 Non- LAA Rm 2 1 1 – 4 6 December 2018 (Rm) Corporate and Investment Banking (CIB) CIB excluding Property Finance Property Finance Retail and Business Banking (RBB) Business Banking Retail Wealth Africa Regions Nedbank Group Stage 1 Rm Stage 2 Rm Stage 3 Non-LAA Rm Rm Off- balance- sheet Rm Impairment charge, net of recoveries Rm Mix of average banking advances % 142 96 46 (76) (96) 20 108 174 (399) (420) 21 344 16 328 (5) (4) 386 315 71 3 155 185 2 970 44 15 (64) 3 600 5 5 – 5 (31) (31) 10 12 (2) (6) (27) 103 (35) 138 3 433 117 3 316 39 113 46,5 26,2 20,3 46,3 10,2 36,1 4,2 3,2 CLR % Target % 0,04 0,15 – 0,45 0,01 0,10 0,15 - 0,35 1,06 1,30 – 1,80 0,15 0,50 - 0,70 1,32 1,60 - 2,40 0,13 0,20 – 0,40 0,51 0,65 – 1,00 3 688 100,0 0,53 0,60 – 1,00 NEDBANK GROUP – ANNUAL RESULTS 2019 105 Favourable Unfavourable • While impairments have increased significantly off a low base, the CLR remains around the midpoint of our target range. • The adverse macroeconomic environment continued to place pressure on corporates and consumers. • The portfolios secured by mortgage bonds continue to perform well with CLRs for Home Loans and Property Finance at 0,07% and negative 0,02%, respectively. • High delinquency levels increased impairments by 66,2% to R6 129m. • The RBB portfolio deteriorated due to higher distressed restructures in MFC and poor collections in December 2019. 1,39 0,23 0,19 0,17 Nedbank Group credit loss ratio per cluster (%) NEDBANK GROUP CREDIT LOSS RATIO PER CLUSTER (%) 1,25 1,14 0,40 0,15 1,12 0,98 0,34 0,08 2015 2016 1,06 1,02 0,09 0,06 2017 1,06 0,51 0,13 0,04 2018 CIB RBB Wealth Africa Regions 1,38 1,01 0,26 0,18 2019 NEDBANK GROUP IMPAIRMENT DRIVERS (Rm) 1 440 1 83 546 371 3 688 6 129 2018 Stage 1 Stage 2 Stage 3 Non-LAA 2019 Off- balance -sheet 106 NEDBANK GROUP – ANNUAL RESULTS 2019 INCOME STATEMENT ANALYSIS IMPAIRMENT CHARGE OF FINANCIAL INSTRUMENTS December 2019 (Rm) ECL allowance – opening balance Stage 1 Stage 2 Stage 3 Statement of comprehensive income charge net of recoveries Stage 1 Stage 2 Stage 3 Non-loans and advances Off-balance-sheet allowance Adjusted for: Recoveries Interest in suspense Amounts written off/Other transfers ECL allowance – closing balance Stage 1 Stage 2 Stage 3 Split by measurement category Loans and advances Loans and advances in FVOCI Non-loans and advances Off-balance-sheet allowance December 2018 (Rm) ECL allowance – opening balance Stage 1 Stage 2 Stage 3 Statement of comprehensive income charge net of recoveries Stage 1 Stage 2 Stage 3 Non-loans and advances Off-balance-sheet allowance Adjusted for: Recoveries Interest in suspense Amounts written off/Other transfers ECL allowance – closing balance Stage 1 Stage 2 Stage 3 Split by measurement category Loans and advances Loans and advances in FVOCI Non-loans and advances Off-balance-sheet allowance Corporate and Investment Banking Retail and Business Banking Nedbank Group Nedbank Africa Regions Wealth Centre 15 845 2 889 3 587 9 369 6 129 545 482 5 040 6 56 (3 795) 1 247 723 (5 765) 18 179 3 455 3 932 10 792 18 179 17 534 340 34 271 1 866 601 548 717 917 (1) 254 616 2 46 (37) 20 83 (140) 2 746 659 768 1 319 2 746 2 217 340 8 181 12 796 2 042 2 791 7 963 4 823 476 102 4 241 4 (3 475) 1 196 640 (5 311) 14 144 2 507 2 819 8 818 14 144 14 075 69 187 25 22 140 57 (1) 4 54 (15) (15) 229 24 25 180 229 229 816 220 78 518 233 71 23 129 4 6 (269) 31 (300) 780 249 72 459 780 749 9 22 Corporate and Investment Banking Retail and Business Banking Nedbank Group Nedbank Africa Regions Wealth 14 447 2 806 3 886 7 755 3 688 174 (64) 3 600 5 (27) (2 290) 1 271 434 (3 995) 15 845 2 889 3 587 9 369 15 845 15 488 122 25 210 2 040 456 910 674 103 142 (399) 386 5 (31) (277) 26 40 (343) 1 866 601 548 717 1 866 1 603 122 6 135 11 320 2 106 2 739 6 475 3 433 (76) 344 3 155 10 (1 957) 1 185 394 (3 536) 12 796 2 042 2 791 7 963 12 796 12 731 65 160 39 10 111 39 (5) 44 (12) (12) 187 25 22 140 187 187 758 189 78 491 113 108 (4) 15 (6) (55) 60 (115) 816 220 78 518 816 802 3 11 180 1 148 31 99 99 1 1 280 16 248 16 280 264 17 (1) Centre 169 16 149 4 – 11 11 180 1 148 31 180 165 16 (1) NEDBANK GROUP – ANNUAL RESULTS 2019 107 3 NON-INTEREST REVENUE NON-INTEREST REVENUE Non-interest revenue (Rm) (Rm) NON-INTEREST REVENUE TO TOTAL Non-interest revenue to total OPERATING EXPENSES operating expenses (%) (%) 8 4 7 1 2 3 0 5 3 2 3 6 0 4 2 6 7 9 5 2 7 9 9 5 2 , 3 3 8 , 9 2 8 , 7 0 8 1 , 2 8 , 8 0 8 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre Rm Commission and fees income Administration fees Card income Cash-handling fees Exchange commission Guarantees income Insurance commission Other commission Other fees Service charges Insurance income Fair-value adjustments Fair-value adjustments Hedge-accounted portfolios Fair-value adjustments – own long-term debt Trading income Commodities Debt securities Equities Foreign exchange Private-equity income Realised gains, dividends, interest and other income Unrealised losses1 Investment income Sundry income2 Total non-interest revenue 2019 18 739 1 252 3 743 1 136 652 267 516 4 391 2 239 4 543 1 837 60 (49) 109 – 4 524 99 2 708 426 1 291 262 723 (461) 198 377 2018 18 279 1 201 3 656 1 056 554 275 544 3 986 2 664 4 343 1 859 (2) (30) 28 – 4 429 42 2 482 445 1 460 697 854 (157) 29 685 25 997 25 976 2019 3 256 53 222 198 185 1 508 1 034 56 (13) (23) 10 4 390 99 2 708 426 1 157 267 727 (460) 174 101 8 175 2018 3 289 26 235 175 197 1 198 1 403 55 (8) (20) 12 4 278 42 2 482 445 1 309 699 854 (155) 21 242 8 521 1 Unrealised losses relate to equity investments in associates and joint ventures, which are estimated and converted to realised or dividends once earned. 2 Sundry income mainly comprises security dealings, rental income, fair value movements on non-trading investments and forex gains and losses. 2019 12 622 522 3 652 880 259 44 309 2 715 96 4 145 460 41 41 73 73 – 2018 12 002 509 3 583 788 249 41 284 2 515 89 3 944 442 15 15 84 84 – 13 109 13 318 (3) 51 12 591 2019 2 045 588 3 88 200 (65) 1 188 43 1 352 – 2018 2 063 567 2 71 1 223 (27) 1 188 38 1 400 – – – (1) (1) 4 (2) (2) 3 36 3 436 20 3 484 2019 872 70 90 31 102 38 7 213 22 299 70 4 4 61 61 – 1 212 1 220 2018 928 82 72 31 57 36 37 282 25 306 54 (1) (1) 67 67 – 2 156 1 206 2019 (56) 19 1 5 20 (101) (45) 28 (30) 58 – (4) (4) 6 (81) (152) 2018 (3) 17 1 2 18 (41) (37) (8) (9) 1 – – 6 216 174 108 NEDBANK GROUP – ANNUAL RESULTS 2019   INCOME STATEMENT ANALYSIS Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre Rm Commission and fees income Administration fees Card income Cash-handling fees Exchange commission Guarantees income Insurance commission Other commission Other fees Service charges Insurance income Fair-value adjustments Trading income Commodities Debt securities Equities Foreign exchange Private-equity income Unrealised losses1 Investment income Sundry income2 Fair-value adjustments Hedge-accounted portfolios Fair-value adjustments – own long-term debt Realised gains, dividends, interest and other income 2019 18 739 1 252 3 743 1 136 652 267 516 4 391 2 239 4 543 1 837 60 (49) 109 – 4 524 99 2 708 426 1 291 262 723 (461) 198 377 2018 18 279 1 201 3 656 1 056 554 275 544 3 986 2 664 4 343 1 859 (2) (30) 28 – 4 429 42 2 482 445 1 460 697 854 (157) 29 685 2019 3 256 53 222 198 185 1 508 1 034 56 (13) (23) 10 4 390 99 2 708 426 1 157 267 727 (460) 174 101 8 175 2018 3 289 26 235 175 197 1 198 1 403 55 (8) (20) 12 4 278 42 2 482 445 1 309 699 854 (155) 21 242 8 521 Total non-interest revenue 25 997 25 976 1 Unrealised losses relate to equity investments in associates and joint ventures, which are estimated and converted to realised or dividends once earned. 2 Sundry income mainly comprises security dealings, rental income, fair value movements on non-trading investments and forex gains and losses. 2019 12 622 522 3 652 880 259 44 309 2 715 96 4 145 460 41 41 73 73 – 2018 12 002 509 3 583 788 249 41 284 2 515 89 3 944 442 15 15 84 84 – 13 109 13 318 (3) 51 12 591 2019 2 045 588 3 88 200 (65) 1 188 43 1 352 – 2018 2 063 567 2 71 1 223 (27) 1 188 38 1 400 – – – (1) (1) 4 (2) (2) 3 36 3 436 20 3 484 2019 872 70 90 31 102 38 7 213 22 299 70 4 4 61 61 – 1 212 1 220 2018 928 82 72 31 57 36 37 282 25 306 54 (1) (1) 67 67 – 2 156 1 206 2019 (56) 19 1 5 20 (101) (45) 28 (30) 58 – (4) (4) 6 (81) (152) 2018 (3) 17 1 2 18 (41) (37) (8) (9) 1 – – 6 216 174 Favourable Unfavourable • Deeper share of wallet with clients. • Subdued client transactional activity. • Mainbanked client gains in middle, private, small-business and • Reduced off high 2018 base transactions. corporate segments. • Growth in commission and fees income in RBB of 5,2%. • High weather-related insurance claims in H1 2019. • Worsening economic environment led to negative revalauations in private-equity income. • Impact of Banco Único option to increase our shareholding. NEDBANK GROUP – ANNUAL RESULTS 2019 109   4 EXPENSES Total operating expenses TOTAL OPERATING EXPENSES (Rm) (Rm) COST-TO-INCOME RATIO (%) Efficiency ratio (%) 0 1 1 6 2 6 6 3 8 2 2 1 8 9 2 2 3 6 1 3 9 7 1 2 3 1 , 6 5 , 9 6 5 , 6 8 5 , 2 7 5 , 5 6 5 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Rm Staff costs Salaries and wages Total incentives Short-term incentives Long-term incentives Other staff costs Computer processing Depreciation of computer equipment Depreciation of right-of-use assets: computer equipment Amortisation of intangible assets Operating lease charges for computer processing Other computer processing expenses Fees and insurances1 Occupation and accommodation2,3 Marketing and public relations Communication and travel Other operating expenses4 Activity-justified transfer pricing Total operating expenses Analysis of total information technology-related function spend included in total expenses IT staff-related costs within group technology Depreciation and amortisation of computer equipment, software and intangibles Other IT costs (including licensing, development, maintenance and processing charges)5 Total IT-related functional spend Nedbank Group 2019 17 322 15 089 2 550 1 980 570 (317) 4 878 746 79 1 167 217 2 669 4 152 2 274 1 455 845 1 253 – 32 179 2019 2 110 1 993 2 923 7 026 2018 17 450 14 240 3 358 2 625 733 (148) 4 341 753 958 336 2 294 3 989 2 416 1 532 841 1 063 – 31 632 2018 2 027 1 818 2 668 6 513 Corporate and Investment Banking 2019 2 783 2018 3 003 Retail and Business Banking Wealth Nedbank Africa Regions Centre 2019 7 940 2018 8 036 2019 1 608 2018 1 562 2019 1 068 2018 1 097 2019 3 923 2018 3 752 503 398 1 771 870 321 220 83 48 2 200 2 805 667 231 89 304 55 1 972 6 604 1 208 226 93 297 214 1 133 6 572 2 509 1 954 677 327 555 4 651 1 738 1 947 724 329 357 6 031 20 384 20 032 210 149 89 52 69 615 3 113 174 145 96 61 72 682 3 012 437 180 60 68 188 343 2 427 296 213 67 60 152 483 2 416 329 (240) 540 94 386 (7 581) (349) 573 (115) 552 94 268 (8 329) (400) 1 During the year the group's Cash Operating Division was transferred from CIB to RBB and the concurrent review of the activity-justified transfer pricing led to some costs shifting to CIB, reflected in the fees and insurance and activity-justified transfer pricing lines. This had no impact on the group's expenses or expense growth. 2 Includes depreciation of right-of-use asset of R813m. 3 Includes building depreciation charges of R451m (December 2018: R423m). 4 Includes furniture depreciation charges of R358m (December 2018: R328m), consumables and sundry expenses. 5 Includes consulting and professional fees, included in fees and insurances, communication and travel, and other IT-related spend, included in computer processing. 110 NEDBANK GROUP – ANNUAL RESULTS 2019   INCOME STATEMENT ANALYSIS GROSS OPERATING INCOME GROWTH RATE LESS EXPENSES GROWTH RATE (JAWS RATIO) (%) TOTAL EMPLOYEES (Permanent staff) Total employees (permanent staff) 2,7 1,3 0,6 (1,5) Dec 2015 Dec 2016 (3,0) Dec 2017 Dec 2018 Dec 2019 2 1 3 1 3 1 0 4 2 3 1 3 5 1 3 7 8 8 0 3 3 1 2 9 2 2015 2016 2017 2018 2019 Rm Staff costs Salaries and wages Total incentives Short-term incentives Long-term incentives Other staff costs Computer processing Depreciation of computer equipment Depreciation of right-of-use assets: computer equipment Amortisation of intangible assets Operating lease charges for computer processing Other computer processing expenses Fees and insurances1 Occupation and accommodation2,3 Marketing and public relations Communication and travel Other operating expenses4 Activity-justified transfer pricing Total operating expenses Analysis of total information technology-related function spend included in total expenses IT staff-related costs within group technology Depreciation and amortisation of computer equipment, software and intangibles Other IT costs (including licensing, development, maintenance and processing charges)5 Total IT-related functional spend 2019 17 322 15 089 2 550 1 980 570 (317) 4 878 746 79 1 167 217 2 669 4 152 2 274 1 455 845 1 253 – 32 179 2019 2 110 1 993 2 923 7 026 2018 17 450 14 240 3 358 2 625 733 (148) 4 341 753 958 336 2 294 3 989 2 416 1 532 841 1 063 – 31 632 2018 2 027 1 818 2 668 6 513 1 During the year the group's Cash Operating Division was transferred from CIB to RBB and the concurrent review of the activity-justified transfer pricing led to some costs shifting to CIB, reflected in the fees and insurance and activity-justified transfer pricing lines. This had no impact on the group's expenses or expense growth. 2 Includes depreciation of right-of-use asset of R813m. 3 Includes building depreciation charges of R451m (December 2018: R423m). 4 Includes furniture depreciation charges of R358m (December 2018: R328m), consumables and sundry expenses. 5 Includes consulting and professional fees, included in fees and insurances, communication and travel, and other IT-related spend, included in computer processing. Nedbank Group Corporate and Investment Banking 2019 2 783 2018 3 003 Retail and Business Banking Wealth Nedbank Africa Regions Centre 2019 7 940 2018 8 036 2019 1 608 2018 1 562 2019 1 068 2018 1 097 2019 3 923 2018 3 752 503 398 1 771 870 321 220 83 48 2 200 2 805 667 231 89 304 55 1 972 6 604 1 208 226 93 297 214 1 133 6 572 2 509 1 954 677 327 555 4 651 1 738 1 947 724 329 357 6 031 20 384 20 032 210 149 89 52 69 615 3 113 174 145 96 61 72 682 437 180 60 68 188 343 3 012 2 427 296 213 67 60 152 483 2 416 329 (240) 540 94 386 (7 581) (349) 573 (115) 552 94 268 (8 329) (400) Favourable • Headcount reduction of 1 874. • STI and LTI decreases given the group's financial performance. • Final PRMA credit of R354m. • Optimisation initiatives delivering cost savings, including cumulative run-rate savings from our target operating model of R1 147m. Unfavourable • Increase in computer processing costs relating to software amortisation as we invest in technology and digital channels. • Higher fees related to digital innovations. • The R134m cost of creating more than 3 300 job opportunities through YES. NEDBANK GROUP – ANNUAL RESULTS 2019 111   5 NON-TRADING AND CAPITAL ITEMS Rm Profit attributable to ordinary equity holders Non-trading and capital items IAS 16 – loss on disposal of property and equipment IAS 36 – goodwill impairment IAS 36 – impairment of property and equipment IFRS 5 – impairment of non-current assets held for sale IFRS 16 – impairment of right-of-use assets IAS 36 – impairment of intangible assets IAS 40 – profit on revaluation of investment properties 2019 2018 Gross 651 18 117 148 48 33 289 (2) Net of taxation 12 001 505 13 117 107 48 24 198 (2) Gross 164 29 Net of taxation 13 376 119 22 135 97 Headline earnings 12 506 13 495 6 TAXATION CHARGE Direct taxation Taxation rate reconciliation (excluding non-trading and capital items) (%) Standard rate of SA normal taxation Reduction of taxation rate: – Non-taxable income – Capital items – Foreign income and section 9D attribution – Share of profits of associate companies – Additional tier 1 taxation on interest paid1 – Non-deductible expenses – Zimbabwe hyperinflation – Prior-year overprovision Total taxation on income as percentage of profit before taxation Effective tax rate excluding ETI associate income/(loss) 2019 3 942 2018 4 807 28,0 (1,8) (0,2) (1,0) (1,3) (0,8) 0,8 0,3 (1,2) 22,8 24,0 28,0 (1,4) (0,1) (0,6) (0,9) 0,7 (0,5) 25,2 26,1 1 With effect from 1 January 2019 the accounting treatment of additional tier 1 capital instruments changed in terms of IFRS. The taxation relief on interest paid on additional tier 1 capital instruments is now accounted for in comprehensive income (previously in equity). However, the underlying interest paid on additional tier 1 capital instruments is still accounted for in equity. Comparative information has not been restated as the amounts are not material. 7 PREFERENCE SHARES Dividends declared Number of shares Cents per share Amount Rm 2020 Nedbank – Final (dividend number 34) declared for 2019 – payable April 2020 358 277 491 42,11186 150,9 2019 Nedbank – Final (dividend no 32) declared for 2018 – paid March 2019 Nedbank – Interim (dividend no 33) declared for 2019 – paid September 2019 358 277 491 358 277 491 42,23172 42,35729 Total of dividends declared Nedbank (MFC) – Participating preference shares1 Less: Dividends declared in respect of shares held by group entities 2018 Nedbank – Final (dividend no 30 ) declared for 2017 – paid March 2018 Nedbank – Interim (dividend no 31) declared for 2018 – paid August 2018 Total of dividends declared Nedbank (MFC) – Participating preference shares1 Less: Dividends declared in respect of shares held by group entities 1 Share in economic profit calculated biannually. 358 277 491 358 277 491 43,17350 41,82076 151,3 151,8 303,1 41,7 (31,6) 313,2 154,7 149,8 304,5 50,0 (31,7) 322,8 112 NEDBANK GROUP – ANNUAL RESULTS 2019   8 HYPERINFLATION Headline earnings R'm Core earnings Impairment of legacy debt1 Hyperinflation of income statement items Hyperinflation adjustment – net monetary loss Rebase of Dec 2018 equity and gains from indexing non-monetary assets2 Hyperinflation of income statement items Headline earnings 1 Included in Sundry income within NIR. INCOME STATEMENT ANALYSIS Non- controlling interest 2019 Nedbank Group 2019 Zimbabwe 2019 135 (67) 80 (296) (216) (80) (148) 78 (44) 53 (195) (142) (53) (108) (101) (74) (27) Nedbank Group 2018 142 142 2 Rebase of December 2018 equity, R246m, and gains from indexing non monetary assets, R30m. ZIMBABWE TIMELINE 1 OCT 2018 Monetary policy statement, presented by the Governor of the Reserve Bank of Zimbabwe, introduces RTGS as a means of exchange 22 FEB 2019 Zimbabwe gazetted two legal instruments1; resulting in recognition of RTGS$ as legal tender and the initial exchange rate (set by government) was RTGS$ 2,5 to 1 US$ 11 OCT 2019 The Zimbabwe Public Accountants and Auditors Board’s announced that Zimbabwe is in hyperinflation effective from 1 July 2019 31 DEC 2018 NAV: R170m RTGS$ 3,88 : 1 US$ RTGS$ 0,27 : 1 ZAR 31 DEC 2019 NAV: R123m ZIM$ 16,77 : 1 US$ ZIM$ 1,20 : 1 ZAR EFFECTS OF CHANGE IN EXCHANGE RATES At 31 December 2018 a FCTR loss of R755m (R499m after non-controlling interests) was recognised by Nedbank Group for the application of an implied Old Mutual rate (RTGS$3,88: US$1) on the net assets of Nedbank Zimbabwe. At a statutory level Nedbank Zimbabwe was required by law to report its NAV using the official exchange rate RTGS$1:1US$. During the period, due to the effects of weakening of the RTGS$ and ultimately the Zimbabwe dollar (ZIM$ 16,77: US$ 1), there was an impairment of legacy assets (amounts due in foreign currency prior to 22 Feb 2019) of R89m (R67m post tax) due to uncertainty regarding the recovery thereof. Key drivers of hyperinflation IAS 29 requires transactions and balances to be stated in terms of the measuring unit current at the end of the reporting period, using a general price index, to account for the effect of loss of purchasing power during the period. The group elected to use the Zimbabwe CPI index, provided by the Reserve Bank of Zimbabwe, as the general price index as this provides an observable published indicator of changes in the general purchasing power of the country. At the beginning of the period of applying IAS 29, the components of equity are restated by applying a general price escalation factor from 1 January 2019 to 31 December 2019. The Zimbabwe CPI index increased 6,21 times during this period which resulted in a monetary loss of R246m by debiting current-year earnings against a credit in equity. Hyperinflation accounting will result in an equity rebase every period. The rebase is impacted by changes in the Zimbabwe CPI index, changes in the Zimbabwean dollar foreign exchange rate and underlying balance sheet growth. All items recognised in the statement of comprehensive income are adjusted by applying the change in the general price index from the dates when the items of income and expenses were initially earned or incurred to the end of the reporting period. This resulted in an increase in certain lines of the income statement, totalling R80m, and an equal but opposite loss included in the net monetary loss. The net headline earnings of the income statement indexing is nil. The carrying amounts of non-monetary assets (ie fixed assets, debtor prepayments, etc) accounted at historical cost have been adjusted to reflect the change in the general price index from 1 January 2019 to 31 December 2019. This resulted in an increase in assets of R30m and the recognition of a monetary gain of R30m. NEDBANK GROUP – ANNUAL RESULTS 2019 113 114 NEDBANK GROUP – ANNUAL RESULTS 2019 STATEMENT OF FINANCIAL POSITION ANALYSIS STATEMENT OF FINANCIAL POSITION ANALYSIS 116 Loans and advances 122 Investment securities 123 Investments in associate companies 124 Intangible assets 126 Amounts owed to depositors 129 Liquidity risk and funding 132 Equity analysis 133 Capital management 136 Economic capital adequacy 137 External credit ratings NEDBANK GROUP – ANNUAL RESULTS 2019 115 9 LOANS AND ADVANCES SEGMENTAL BREAKDOWN Rm Home loans Commercial mortgages Properties in possession Credit cards Overdrafts Personal loans Term and other loans Overnight loans Foreign client lending Instalment debtors Preference shares and debentures Factoring accounts Macro fair-value hedge-accounted portfolios Other loans and advances Loans and advances before impairments Impairment of advances Total banking loans and advances Comprises: – Loans and advances to clients – Loans and advances to banks Total loans and advances after impairments Trading loans and advances Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Africa Regions Centre1 2019 162 238 179 801 150 17 089 26 747 24 829 199 040 14 945 6 508 130 067 12 766 6 563 941 5 781 689 (17 534) 764 155 741 906 22 249 764 155 32 678 2018 156 414 166 221 152 16 608 22 587 22 219 181 907 14 616 5 241 121 003 15 312 5 815 48 13 728 156 (15 488) 712 668 697 846 14 822 712 668 23 637 2019 10 145 602 2018 11 134 984 2 5 557 3 594 180 446 13 078 5 166 2 795 12 440 163 340 12 644 4 790 2 170 15 077 34 (7) 365 128 (2 217) 362 911 344 366 18 545 362 911 32 678 336 605 (1 603) 335 002 323 734 11 268 335 002 23 637 4 738 4 892 (259) (292) 2019 138 811 23 668 44 16 958 17 871 22 663 10 028 1 270 170 125 285 140 6 563 363 471 (14 075) 349 396 349 394 2 349 396 2018 133 163 20 765 68 16 501 14 809 20 005 10 680 1 220 163 116 229 76 5 815 339 494 (12 731) 326 763 326 770 (7) 326 763 2019 16 988 8 814 11 171 2018 17 068 8 915 22 174 62 186 68 159 30 970 (229) 30 741 28 393 2 348 30 741 31 298 (187) 31 111 27 909 3 202 31 111 2019 6 941 1 721 95 131 3 148 2 166 4 087 597 1 172 2 364 5 22 427 (749) 21 678 20 324 1 354 21 678 2018 6 672 1 523 60 107 4 010 2 214 3 287 752 288 2 914 12 21 839 (802) 21 037 20 689 348 21 037 2019 (512) (4) 2018 (500) 34 (439) (378) 907 (307) (264) (571) (571) (571) 55 1 (1 080) (165) (1 245) (1 256) 11 (1 245) 1 Centre includes the group's centrally managed macro fair-value hedge-accounting adjustment, intercluster adjustments relating to deferred revenue recognised in Market share as per BA900 loans and advances, a central impairment provision and an impairment on other assets. Home loans (2016–2019) Market share as per BA900 (%) HOME LOANS (2016–2019) (%) COMMERCIAL MORTGAGE LOANS (2016–2019) (%) Commercial mortgage loans (2016–2019) (%) , 4 4 1 0 , 1 2 , 9 3 3 1 , 3 2 6 7 , , 7 8 3 0 7 , , 9 6 1 , 2 5 1 , 2 2 2 Nedbank FirstRand Standard Bank Absa Other Nedbank FirstRand Standard Bank Absa Other 116 NEDBANK GROUP – ANNUAL RESULTS 2019 STATEMENT OF FINANCIAL POSITION ANALYSIS SEGMENTAL BREAKDOWN Rm Home loans Commercial mortgages Properties in possession Credit cards Overdrafts Personal loans Term and other loans Overnight loans Foreign client lending Instalment debtors Preference shares and debentures Factoring accounts Macro fair-value hedge-accounted portfolios Other loans and advances Loans and advances before impairments Impairment of advances Total banking loans and advances Comprises: – Loans and advances to clients – Loans and advances to banks Total loans and advances after impairments Trading loans and advances Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Africa Regions Centre1 2019 162 238 179 801 150 17 089 26 747 24 829 199 040 14 945 6 508 130 067 12 766 6 563 941 5 781 689 (17 534) 764 155 741 906 22 249 764 155 32 678 2018 156 414 166 221 152 16 608 22 587 22 219 181 907 14 616 5 241 121 003 15 312 5 815 48 13 728 156 (15 488) 712 668 697 846 14 822 712 668 23 637 2019 10 145 602 180 446 13 078 5 166 2 795 12 440 365 128 (2 217) 362 911 344 366 18 545 362 911 32 678 5 557 3 594 34 (7) 2018 134 984 11 2 163 340 12 644 4 790 2 170 15 077 336 605 (1 603) 335 002 323 734 11 268 335 002 23 637 2019 138 811 23 668 44 16 958 17 871 22 663 10 028 1 270 170 125 285 140 6 563 363 471 (14 075) 349 396 349 394 2 349 396 2018 133 163 20 765 68 16 501 14 809 20 005 10 680 1 220 163 116 229 76 5 815 339 494 (12 731) 326 763 326 770 (7) 326 763 2019 16 988 8 814 11 171 4 738 62 186 30 970 (229) 30 741 28 393 2 348 30 741 2018 17 068 8 915 22 174 4 892 68 159 31 298 (187) 31 111 27 909 3 202 31 111 2019 6 941 1 721 95 131 3 148 2 166 4 087 597 1 172 2 364 5 22 427 (749) 21 678 20 324 1 354 21 678 2018 6 672 1 523 60 107 4 010 2 214 3 287 752 288 2 914 12 21 839 (802) 21 037 20 689 348 21 037 2019 (512) (4) 2018 (500) 34 (259) (292) (439) (378) 907 (307) (264) (571) (571) (571) 55 1 (1 080) (165) (1 245) (1 256) 11 (1 245) 1 Centre includes the group's centrally managed macro fair-value hedge-accounting adjustment, intercluster adjustments relating to deferred revenue recognised in loans and advances, a central impairment provision and an impairment on other assets. Credit cards (2016–2019) (%) CREDIT CARDS (2016–2019) (%) Personal loans (2016–2019) (%) PERSONAL LOANS (2016–2019) (%) , 0 3 1 , 4 7 2 1 , 5 2 1 , 5 2 4 9 , , 2 0 1 , 6 3 2 , 3 6 1 1 , 1 1 , 8 8 3 Nedbank FirstRand Standard Bank Absa Other Nedbank FirstRand Standard Bank Absa Other CORE CORPORATE LOANS (2016–2019) (%) Core corporate loans (2016–2019) (%) INSTALMENT SALES AND LEASES (2016–2019) (%) Instalment credit (2016–2019) (%) 2 , 1 2 5 , 1 2 1 , 9 1 1 , 1 2 1 , 7 1 , 7 8 2 , 6 7 2 , 7 8 1 , 3 0 2 , 7 4 Nedbank FirstRand Standard Bank Absa Other Nedbank FirstRand Standard Bank Absa Other NEDBANK GROUP – ANNUAL RESULTS 2019 117 SUMMARY OF LOANS AND ADVANCES AND COVERAGE RATIOS GLAA, ECL and Coverage ratios, by Cluster, by Stage Stage 1 Stage 2 Stage 3 TOTAL Coverage Coverage On-B/S GLAA Stage 3 (including GLAA as % of FVOCI) total GLAA Coverage % 2,25 2,79 1,83 6,97 2,97 7,69 5,53 5,29 5,31 Coverage Coverage TOTAL On-B/S GLAA Stage 3 (including GLAA as % of FVOCI) total GLAA Coverage % 1,52 2,5 1,08 6,89 3,00 7,56 4,06 6,83 4,97 38,0 759 684 2,31 775 557 3,62 GLAA Rm 4 074 2 914 1 160 21 161 3 396 17 765 929 1 422 3 27 589 448 28 037 GLAA Rm 5 702 3 555 2 147 17 304 2 575 14 729 812 1 413 25 231 25 231 86 10 792 Stage 3 ECL Rm 1 003 788 215 8 813 925 7 888 180 459 16 10 471 235 ECL Rm 663 386 277 7 954 713 7 241 140 521 16 9 294 75 9 369 % 24,6 27,0 18,5 41,6 27,2 44,4 19,4 32,3 % 11,6 10,9 12,9 45,9 27,7 49,2 17,2 36,9 36,8 GLAA Rm 343 123 199 652 143 471 363 471 78 988 284 483 30 970 22 427 (307) 15 873 37 897 907 6 814 367 GLAA Rm 318 061 177 239 140 822 339 494 75 401 264 093 31 298 21 839 (1 080) 709 612 18 426 23 755 ECL Rm 2 217 1 519 698 14 075 1 335 12 740 229 749 264 17 534 340 34 271 18 179 ECL Rm 1 603 950 653 12 731 1 114 11 617 187 802 165 122 25 210 % 0,65 0,76 0,49 3,87 1,69 4,48 0,74 3,34 % 0,50 0,54 0,46 3,75 1,48 4,40 0,60 3,67 Rm 358 996 215 525 143 471 363 471 78 988 284 483 30 783 22 427 (308) Rm 336 487 177 239 159 248 339 494 75 401 264 093 31 298 21 839 (1 080) % 1,26 1,56 0,81 5,82 4,30 6,24 3,02 6,34 % 1,69 2,01 1,35 5,10 3,42 5,58 2,59 6,47 3,47 15 488 2,18 728 038 751 793 15 845 December 2019 Corporate and Investment Banking (CIB) CIB excluding Property Finance Property Finance Retail and Business Banking (RBB) Business Banking Retail Wealth Africa Regions Centre Gross loans and advances/ECL held at amortised cost GLAA/ECL for assets held at FVOCI GLAA held at FVTPL1 GLAA for fair-value hedge-accounted portfolios other balances ECL held for non-LAA Off-balance-sheet ECL GLAA Rm 309 039 183 602 125 437 302 019 69 457 232 562 29 589 19 700 (310) 660 037 14 848 37 897 907 6 ECL Rm 539 365 174 2 455 228 2 227 24 221 – 3 239 67 34 115 Coverage % 0,17 0,20 0,14 0,81 0,33 0,96 0,08 1,12 GLAA Rm 30 010 13 136 16 874 40 291 6 135 34 156 452 1 305 0,49 72 058 577 Total GLAA/ ECL2 713 695 3 455 72 635 December 2018 Corporate and Investment Banking (CIB) CIB excluding Property Finance Property Finance Retail and Business Banking (RBB) Business Banking Retail Wealth Africa Regions Centre Gross loans and advances/ECL held at amortised cost GLAA/ECL for held at FVOCI GLAA/ECL for held at FVTPL1 ECL held for non-LAA Off-balance-sheet ECL Total GLAA/ECL GLAA Rm 285 122 165 232 119 890 281 960 66 887 215 073 29 944 19 314 (1 080) 615 260 14 913 23 755 Stage 1 ECL Rm 526 353 173 2 005 223 1 782 25 205 1 Coverage % 0,18 0,21 0,14 0,71 0,33 0,83 0,08 1,06 2 762 0,45 24 25 78 GLAA Rm 27 237 8 452 18 785 40 230 5 939 34 291 542 1 112 69 121 3 513 653 928 2 889 72 634 1 Includes GLAA for fair-value hedge-accounted portfolios of R55m. 2 Total GLAA includes trading loans and advances of R32 678m (2018: R23 637m). ECL Rm 675 366 309 2 807 182 2 625 25 69 248 3 824 38 70 3 932 Stage 2 ECL Rm 414 211 203 2 772 178 2 594 22 76 148 3 432 98 57 3 587 118 NEDBANK GROUP – ANNUAL RESULTS 2019 Stage 1 Stage 2 Stage 3 TOTAL December 2019 Corporate and Investment Banking (CIB) CIB excluding Property Finance Property Finance Retail and Business Banking (RBB) Business Banking Retail Wealth Africa Regions Centre cost other balances ECL held for non-LAA Off-balance-sheet ECL Total GLAA/ ECL2 Gross loans and advances/ECL held at amortised GLAA/ECL for assets held at FVOCI GLAA held at FVTPL1 GLAA for fair-value hedge-accounted portfolios December 2018 Corporate and Investment Banking (CIB) CIB excluding Property Finance Property Finance Retail and Business Banking (RBB) Business Banking Retail Wealth Africa Regions Centre cost GLAA/ECL for held at FVOCI GLAA/ECL for held at FVTPL1 ECL held for non-LAA Off-balance-sheet ECL Total GLAA/ECL Coverage Coverage GLAA Rm 309 039 183 602 125 437 302 019 69 457 232 562 29 589 19 700 (310) 660 037 14 848 37 897 907 6 GLAA Rm 285 122 165 232 119 890 281 960 66 887 215 073 29 944 19 314 (1 080) 615 260 14 913 23 755 ECL Rm 539 365 174 2 455 228 2 227 24 221 – 3 239 67 34 115 ECL Rm 526 353 173 2 005 223 1 782 25 205 1 24 25 78 % 0,17 0,20 0,14 0,81 0,33 0,96 0,08 1,12 GLAA Rm 30 010 13 136 16 874 40 291 6 135 34 156 452 1 305 0,49 72 058 577 % 0,18 0,21 0,14 0,71 0,33 0,83 0,08 1,06 GLAA Rm 27 237 8 452 18 785 40 230 5 939 34 291 542 1 112 69 121 3 513 ECL Rm 675 366 309 2 807 182 2 625 25 69 248 3 824 38 ECL Rm 414 211 203 2 772 178 2 594 22 76 148 3 432 98 57 3 587 713 695 3 455 72 635 Stage 1 70 3 932 Stage 2 Coverage Coverage % 2,25 2,79 1,83 6,97 2,97 7,69 5,53 5,29 5,31 % 1,52 2,5 1,08 6,89 3,00 7,56 4,06 6,83 4,97 Gross loans and advances/ECL held at amortised 2 762 0,45 1 Includes GLAA for fair-value hedge-accounted portfolios of R55m. 2 Total GLAA includes trading loans and advances of R32 678m (2018: R23 637m). 653 928 2 889 72 634 GLAA Rm 4 074 2 914 1 160 21 161 3 396 17 765 929 1 422 3 27 589 448 28 037 GLAA Rm 5 702 3 555 2 147 17 304 2 575 14 729 812 1 413 25 231 25 231 ECL Rm 1 003 788 215 8 813 925 7 888 180 459 16 10 471 235 86 10 792 Stage 3 ECL Rm 663 386 277 7 954 713 7 241 140 521 16 9 294 75 9 369 Coverage % 24,6 27,0 18,5 41,6 27,2 44,4 19,4 32,3 GLAA Rm 343 123 199 652 143 471 363 471 78 988 284 483 30 970 22 427 (307) 38,0 759 684 15 873 37 897 907 6 814 367 GLAA Rm 318 061 177 239 140 822 339 494 75 401 264 093 31 298 21 839 (1 080) 709 612 18 426 23 755 Coverage % 11,6 10,9 12,9 45,9 27,7 49,2 17,2 36,9 36,8 ECL Rm 2 217 1 519 698 14 075 1 335 12 740 229 749 264 17 534 340 34 271 18 179 TOTAL ECL Rm 1 603 950 653 12 731 1 114 11 617 187 802 165 STATEMENT OF FINANCIAL POSITION ANALYSIS On-B/S GLAA (including FVOCI) Stage 3 GLAA as % of total GLAA Coverage % 0,65 0,76 0,49 3,87 1,69 4,48 0,74 3,34 Rm 358 996 215 525 143 471 363 471 78 988 284 483 30 783 22 427 (308) % 1,26 1,56 0,81 5,82 4,30 6,24 3,02 6,34 2,31 775 557 3,62 On-B/S GLAA (including FVOCI) Stage 3 GLAA as % of total GLAA Coverage % 0,50 0,54 0,46 3,75 1,48 4,40 0,60 3,67 Rm 336 487 177 239 159 248 339 494 75 401 264 093 31 298 21 839 (1 080) % 1,69 2,01 1,35 5,10 3,42 5,58 2,59 6,47 3,47 15 488 2,18 728 038 122 25 210 751 793 15 845 NEDBANK GROUP – ANNUAL RESULTS 2019 119 NEDBANK GROUP COVERAGE (%) Nedbank Group coverage ratio (Rm) STAGE 3 ADVANCES AS A PERCENTAGE OF GROSS BANKING LOANS AND ADVANCES (Rm) 4,25 2,53 1,14 4,76 2,72 1,12 4,82 2,71 0,82 5,10 3,47 1,69 5,82 3,62 1,26 6 6 , 1 4 0 3 3 8 1 , 2 1 3 2 , 2017 2018 2019 17 559 2015 19 553 19 576 22 785 2016 2017 25 231 2018 28 037 2019 RBB Total Nedbank Group CIB Stage 3 loans and advances GLAA, ECL AND COVERAGE, BY PRODUCT Stage 1 Stage 2 Stage 3 TOTAL December 2019 Residential mortgages Commercial mortgages Instalment debtors Credit cards and overdrafts Personal, term and other loans Other1 GLAA/ECL held at amortised cost December 2018 Residential mortgages Commercial mortgages Instalment debtors Credit cards and overdrafts Personal, term and other loans Other1 GLAA/ECL held at amortised cost 1 Includes credit and zero balances. GLAA Rm 140 062 152 930 105 416 29 216 210 385 22 028 660 037 GLAA Rm 133 726 138 998 84 686 25 380 192 370 40 100 615 260 ECL Rm 287 219 802 860 1 103 (32) 3 239 Coverage % 0,21 0,14 0,76 2,95 0,52 0,49 GLAA Rm 14 181 18 701 18 043 5 209 12 733 3 191 72 058 ECL Rm 538 336 1 321 524 1 023 82 3 824 Coverage % 3,79 1,80 7,32 10,06 8,03 5,31 Stage 1 Stage 2 Stage 3 TOTAL ECL Rm 236 300 631 619 909 67 2 762 Coverage % 0,18 0,22 0,75 2,44 0,47 0,45 GLAA Rm 15 574 19 856 12 924 4 874 14 728 1 165 69 121 ECL Rm 616 238 1 013 686 866 13 3 432 Coverage % 3,96 1,20 7,84 14,07 5,88 4,97 Coverage Coverage FVOCI) total GLAA On-B/S LAA Stage 3 (including GLAA as % of GLAA Rm 7 826 2 488 6 607 3 081 7 520 67 27 589 GLAA Rm 6 965 2 957 4 967 3 027 6 710 605 25 231 ECL Rm 1 573 505 2 704 1 912 3 941 (164) 10 471 ECL Rm 1 430 435 2 532 2 048 2 758 91 9 294 % 20,1 20,3 40,9 62,0 52,5 38,0 % 20,5 14,7 51,0 67,7 41,1 36,8 GLAA Rm 162 069 174 119 130 066 37 506 230 638 25 286 759 684 Rm 156 265 161 811 102 577 33 281 213 808 41 870 709 612 ECL Rm 2 398 1 060 4 827 3 296 6 067 (114) 17 534 Rm 2 282 973 4 176 3 353 4 533 171 15 488 % 1,48 0,61 3,71 8,79 2,63 2,31 % 1,46 0,60 4,07 10,07 2,12 2,18 Rm 162 069 174 119 130 066 37 506 247 424 24 373 775 557 Rm 156 265 161 811 102 577 33 281 232 234 41 870 728 038 % 4,83 1,43 5,08 8,22 3,05 3,62 % 4,46 1,83 4,84 9,10 2,89 3,47 Coverage GLAA ECL Coverage On-B/S LAA Stage 3 (including GLAA as % of FVOCI) total GLAA Favourable Unfavourable • The bank's credit portfolio remains resilient despite the continued • The increase in stage 3 GLAA was particularly prominent in the weak macroeconomic environment. MFC and Unsecured Lending. • Banking book GLAA increased by 6,65% to R775,6bn. • CIB experienced growth across the energy and mining sectors. • RBB experienced growth across all asset classes. • The stage 1 and stage 2 coverage ratios increased for the wholesale portfolios due to the recalibration of models. • RBB stage 3 coverage decreased as a result of lower loss expectations for stage 3 clients based on empirical data. • CIB stage 3 GLAA increased for specific counters within the cement, retail and telecommunications sectors. 120 NEDBANK GROUP – ANNUAL RESULTS 2019 STATEMENT OF FINANCIAL POSITION ANALYSIS STAGE 3 ADVANCES AND COVERAGE RATIO (Rm) STAGE 1 AND STAGE 2 COVERAGE (%) 39,6 19 576 36,8 38,0 25 231 27 589 4,97 5,31 Jan 2018 Dec 2018 Dec 2019 0,45 2018 0,49 2019 Stage 3 coverage Stage 3 loans and advances Stage 1 coverage Stage 2 coverage GLAA, ECL AND COVERAGE, BY PRODUCT Stage 1 Stage 2 Stage 3 TOTAL December 2019 Residential mortgages Commercial mortgages Instalment debtors Credit cards and overdrafts Personal, term and other loans Other1 GLAA/ECL held at amortised cost December 2018 Residential mortgages Commercial mortgages Instalment debtors Credit cards and overdrafts Personal, term and other loans Other1 GLAA/ECL held at amortised cost 1 Includes credit and zero balances. Coverage Coverage GLAA Rm 140 062 152 930 105 416 29 216 210 385 22 028 660 037 GLAA Rm 133 726 138 998 84 686 25 380 192 370 40 100 615 260 ECL Rm 287 219 802 860 1 103 (32) 3 239 ECL Rm 236 300 631 619 909 67 2 762 % 0,21 0,14 0,76 2,95 0,52 0,49 % 0,18 0,22 0,75 2,44 0,47 0,45 GLAA Rm 14 181 18 701 18 043 5 209 12 733 3 191 72 058 GLAA Rm 15 574 19 856 12 924 4 874 14 728 1 165 69 121 ECL Rm 538 336 1 321 524 1 023 82 3 824 ECL Rm 616 238 1 013 686 866 13 3 432 Stage 1 Stage 2 Coverage Coverage % 3,79 1,80 7,32 10,06 8,03 5,31 % 3,96 1,20 7,84 14,07 5,88 4,97 Favourable Unfavourable • The bank's credit portfolio remains resilient despite the continued • The increase in stage 3 GLAA was particularly prominent in the weak macroeconomic environment. MFC and Unsecured Lending. • Banking book GLAA increased by 6,65% to R775,6bn. • RBB stage 3 coverage decreased as a result of lower loss • CIB experienced growth across the energy and mining sectors. • RBB experienced growth across all asset classes. • The stage 1 and stage 2 coverage ratios increased for the wholesale portfolios due to the recalibration of models. expectations for stage 3 clients based on empirical data. • CIB stage 3 GLAA increased for specific counters within the cement, retail and telecommunications sectors. ECL Rm 1 573 505 2 704 1 912 3 941 (164) 10 471 Coverage % 20,1 20,3 40,9 62,0 52,5 38,0 GLAA Rm 162 069 174 119 130 066 37 506 230 638 25 286 759 684 On-B/S LAA (including FVOCI) Stage 3 GLAA as % of total GLAA Coverage % 1,48 0,61 3,71 8,79 2,63 2,31 Rm 162 069 174 119 130 066 37 506 247 424 24 373 775 557 % 4,83 1,43 5,08 8,22 3,05 3,62 ECL Rm 2 398 1 060 4 827 3 296 6 067 (114) 17 534 Stage 3 TOTAL Coverage GLAA ECL Coverage On-B/S LAA (including FVOCI) Stage 3 GLAA as % of total GLAA % 20,5 14,7 51,0 67,7 41,1 36,8 Rm 156 265 161 811 102 577 33 281 213 808 41 870 709 612 Rm 2 282 973 4 176 3 353 4 533 171 15 488 % 1,46 0,60 4,07 10,07 2,12 2,18 Rm 156 265 161 811 102 577 33 281 232 234 41 870 728 038 % 4,46 1,83 4,84 9,10 2,89 3,47 ECL Rm 1 430 435 2 532 2 048 2 758 91 9 294 GLAA Rm 7 826 2 488 6 607 3 081 7 520 67 27 589 GLAA Rm 6 965 2 957 4 967 3 027 6 710 605 25 231 NEDBANK GROUP – ANNUAL RESULTS 2019 121 10 INVESTMENT SECURITIES Rm Private-equity investments Private-equity associates – Property Partners Private-equity associates – Investment Banking Private-equity – Property Partners Private-equity – Investment Banking Listed investments Unlisted investments Taquanta asset managers portfolio Strate Limited Other Total listed and unlisted investments Listed policyholder investments at market value Unlisted policyholder investments at directors' valuation Net policyholder liabilities Total policyholder investments Total investment securities EQUITY RISK IN THE BANKING BOOK Total equity portfolio Disclosed at fair value Equity-accounted, including investment in ETI Percentage of total assets Percentage of group minimum economic-capital requirement (Rm) (Rm) (Rm) (%) (%) 2019 7 315 1 885 898 1 559 2 973 896 2 758 468 143 2 147 10 969 13 253 4 750 (11) 17 992 28 961 2019 14 886 10 969 3 917 1,3 4,8 20181 5 543 1 361 1 070 1 551 1 561 25 3 060 463 143 2 454 8 628 10 048 3 742 (14) 13 776 22 404 2018 12 669 8 628 4 041 1,2 4,7 • Equity investments in the banking book are primarily undertaken by CIB as part of its private-equity business. Any additional investments are undertaken as a result of operational or strategic requirements or as part of debt restructuring. • The ETI strategic investment value has declined by R571m since 2018, resulting in an overall decrease in the portfolio that is equity-accounted. • The Nedbank board sets the overall risk appetite and strategy of the group for equity risk, and business develops portfolio objectives and investment strategies for its investment activities. These address the types of investment, expected business returns, desired holding periods, diversification parameters and other elements of sound investment management oversight. • The ETI strategic investment is accounted for under the equity method of accounting and is therefore not carried at fair value. 122 NEDBANK GROUP – ANNUAL RESULTS 2019 STATEMENT OF FINANCIAL POSITION ANALYSIS 11 INVESTMENTS IN ASSOCIATE COMPANIES Name of company and nature of business Associates Listed ETI1 Unlisted Private equity: Tracker Technology Holdings Proprietary Limited Private equity: Other investments Other strategic investments Total Equity-accounted earnings Rm Carrying amount Rm Net exposure to/(from) associates3 Rm 2019 20182 2019 20182 2019 20182 668 49 33 43 793 608 2 674 3 245 856 333 549 285 409 3 917 506 42 248 4 041 (80) 528 69 333 1 Ecobank Transnational Incorporated is a pan-African bank and its shares are listed on the stock exchanges of Nigeria, Ghana and Ivory Coast. 2 Equity-accounted earnings included a R25m profit in December 2019 and a R96m loss in December 2018 related to SBV Services Proprietary Limited. 3 Includes on-balance-sheet and off-balance-sheet exposure. The percentage holding in ETI at December 2019 was 21,2% (December 2018: 21,2%). The net exposure movement is due to loan repayment and the reduction of off-balance-sheet exposure. ACCOUNTING RECOGNITION OF ETI Rm Opening carrying value – as previously reported IFRS 9 transitional adjustment Opening carrying value Share of associate earnings/(losses)1,2 Share of other comprehensive (losses)/income1,2 Foreign currency translation3 Closing carrying value (pre-impairment provision) Impairment provision Closing carrying value 2019 4 245 4 245 668 (1 169) (70) 3 674 (1 000) 2 674 2018 4 320 (780) 3 540 608 (332) 429 4 245 (1 000) 3 245 1 Applicable period: 1 October 2018–31 March 2019. 2 Applicable average exchange rate: 1 January 2019–30 December 2019. 3 Applicable period: 1 January 2019–30 December 2019, i.e the cumulative difference at each quarter of the earnings and other comprehensive income converted at an average USD/ZAR rate compared with the related US dollar balances converted at the quarter-end spot rate. Accounting for associate income, together with Nedbank's share of ETI's other comprehensive income and movements in Nedbank's FCTR, resulted in the carrying value of the group's strategic investment in ETI decreasing by 17,6% from R3,2bn at 31 December 2018 to R2,7bn at 31 December 2019. ETI's share price, which is thinly traded, decreased by 53,4% during the year, which resulted in the market value of the group's investment in ETI decreasing to R1,3bn (28 February 2020: R1,2bn). Due to the prolonged decline of ETI's listed share price below its carrying value, Nedbank performed a VIU test and reviewed its impairment provision at 31 December 2019. Since management's VIU analysis exceeds the current carrying value of our investment no adjustment to the R1,0bn impairment provision was required. The VIU calculation includes inputs from external sources and is a key area of judgement. NEDBANK GROUP – ANNUAL RESULTS 2019 123 12 INTANGIBLE ASSETS Rm Computer software and capitalised development costs Goodwill1 Client relationships, contractual rights and other2 2019 8 254 5 057 55 13 366 2018 7 251 5 173 184 12 608 1 The group's annual impairment test indicated that the goodwill relating to the Nedgroup Trust subsidiary within Nedbank Wealth was impaired, hence R117m of goodwill has been written off. This impairment was recognised in non-trading and capital items (note 5). 2 Client relationships, contractual rights and other for 2019 includes a R58m impairment recognised in non-trading and capital items during the year. COMPUTER SOFTWARE AND CAPITALISED DEVELOPMENT COSTS – CARRYING AMOUNT Rm Computer software1 Core product and client systems Support systems Digital systems Payment systems Amorti- sation periods 2–10 years Development costs not yet commissioned none Core product and client systems Support systems Digital systems Payment systems Computer software Opening balance Additions Commissioned during the period Disposals and retirements Foreign exchange and other moves Amortisation charge for the period Impairments Closing balance Development costs not yet commissioned Opening balance Additions Commissioned during the period Impairments Closing balance * 1 The categories of computer software for December 2018 have been revised. * 2 929 6 502 1 689 2 435 1 721 657 1 752 447 326 869 110 8 254 5 310 378 2 082 (2) (1 167) (99) 6 502 1 941 2 025 (2 082) (132) 1 752 2018 5 310 1 630 2 053 935 692 1 941 454 584 847 56 7 251 3 592 393 2 313 (17) 3 (958) (16) 5 310 2 411 1 971 (2 313) (128) 1 941 124 NEDBANK GROUP – ANNUAL RESULTS 2019 125 NOTESSTATEMENT OF FINANCIAL POSITION ANALYSISNEDBANK GROUP – ANNUAL RESULTS 2019 Retail and Business Banking Wealth Nedbank Africa Regions Centre 2019 69 996 10 661 252 231 187 061 49 079 10 979 5 112 6 013 2018 67 200 10 141 240 128 172 663 52 385 10 497 4 583 5 051 2019 1 838 21 130 17 070 12 964 677 1 384 2 045 22 2018 1 777 21 354 16 354 11 662 669 1 939 2 084 10 338 901 322 520 40 060 39 495 339 359 (458) 338 901 321 244 1 276 322 520 40 054 6 40 060 39 486 9 39 495 2019 7 645 794 17 335 11 044 3 299 1 524 1 468 455 3 699 295 30 223 28 827 1 396 30 223 2018 7 846 947 16 275 11 075 1 424 1 136 2 640 322 3 648 434 29 472 28 341 1 131 29 472 2019 92 (161) 3 79 (243) 2018 59 (203) 3 (1) 71 (276) 115 285 326 86 271 (120) 115 542 86 007 113 497 2 045 115 542 83 561 2 446 86 007 13 AMOUNTS OWED TO DEPOSITORS SEGMENTAL BREAKDOWN Rm Current accounts Savings accounts Other deposits and loan accounts Call and term deposits Fixed deposits Cash management deposits Other deposits Foreign currency liabilities Negotiable certificates of deposit Macro fair-value hedge accounting adjustments Deposits received under repurchase agreements Total amounts owed to depositors Comprises: – Amounts owed to clients – Amounts owed to banks Total amounts owed to depositors Nedbank Group Corporate and Investment Banking 2019 86 199 32 586 614 909 325 730 66 735 75 748 146 696 25 734 118 984 326 25 644 904 382 846 625 57 757 904 382 2018 85 267 32 442 573 103 305 251 66 314 73 659 127 879 23 316 89 919 (120) 21 877 825 804 765 516 60 288 825 804 2019 6 628 1 328 434 114 658 13 680 61 782 138 314 19 244 25 349 379 656 324 888 54 768 379 656 2018 8 385 300 549 109 848 11 837 60 016 118 848 17 933 21 443 348 310 292 884 55 426 348 310 Nedbank Group remains committed to grow its retail and commercial deposits, while managing the funding profile DEPOSITS BY CLUSTER (Rbn) 9,5% 29,5 904,4 16,4 0,6 0,8 31,3 825,8 9,0% 5,1% 1,4% 2,5% 34,3% 2018 CIB RBB Wealth Africa Regions Centre 2019 • Deposits grew by 9,5% to R904,4bn, with total funding-related liabilities increasing by 9,4% to R964,1bn. » With 93,8% of all funding-related liabilities emanating from client deposits, Nedbank’s loan-to-deposit ratio improved to 88,1% as growth in deposits outpaced growth in loans and advances. » RBB and CIB grew deposits faster than nominal GDP of 4,4%, with growth rates of 5,1% and 9,0%, respectively. Wealth grew deposits by 1,4% and Africa Regions by 2,5% as a result of softer markets in these jurisdictions. The Centre grew by 34,3%, largely driven by growth in NCDs on the back of increased appetite for duration, based on client interest rate expectations and slower economic growth. » Transactional deposits increased by 1,9% while investment deposits increased by 8,0% as retail and commercial clients managed more liquidity into non-transactional term investments. RBB transactional deposits grew by 4,3% while it grew non-transactional investment deposits faster at 5,1%. CIB transactional deposits remained flat while non-transactional investment deposits grew by 10,9%. Slow economic growth and the search for higher yields in a weak economic environment were the primary drivers for commercial depositors rotating out of short-term working capital or transactional deposits into longer-term non-transactional investment deposits. 126 NEDBANK GROUP – ANNUAL RESULTS 2019 SEGMENTAL BREAKDOWN Rm Current accounts Savings accounts Other deposits and loan accounts Call and term deposits Fixed deposits Cash management deposits Other deposits Foreign currency liabilities Negotiable certificates of deposit Macro fair-value hedge accounting adjustments Deposits received under repurchase agreements Total amounts owed to depositors Comprises: – Amounts owed to clients – Amounts owed to banks Total amounts owed to depositors Nedbank Group Corporate and Investment Banking 2019 86 199 32 586 614 909 325 730 66 735 75 748 146 696 25 734 118 984 326 25 644 904 382 846 625 57 757 904 382 2018 85 267 32 442 573 103 305 251 66 314 73 659 127 879 23 316 89 919 (120) 21 877 825 804 765 516 60 288 825 804 2019 6 628 1 328 434 114 658 13 680 61 782 138 314 19 244 25 349 379 656 324 888 54 768 379 656 2018 8 385 300 549 109 848 11 837 60 016 118 848 17 933 21 443 348 310 292 884 55 426 348 310 STATEMENT OF FINANCIAL POSITION ANALYSIS Retail and Business Banking Wealth Nedbank Africa Regions Centre 2019 69 996 10 661 252 231 187 061 49 079 10 979 5 112 6 013 2018 67 200 10 141 240 128 172 663 52 385 10 497 4 583 5 051 2019 1 838 21 130 17 070 12 964 677 1 384 2 045 22 2018 1 777 21 354 16 354 11 662 669 1 939 2 084 10 338 901 322 520 40 060 39 495 339 359 (458) 338 901 321 244 1 276 322 520 40 054 6 40 060 39 486 9 39 495 2019 7 645 794 17 335 11 044 3 299 1 524 1 468 455 3 699 295 30 223 28 827 1 396 30 223 2018 7 846 947 16 275 11 075 1 424 1 136 2 640 322 3 648 434 29 472 28 341 1 131 29 472 2019 92 (161) 3 79 (243) 2018 59 (203) 3 (1) 71 (276) 115 285 326 86 271 (120) 115 542 86 007 113 497 2 045 115 542 83 561 2 446 86 007 DEPOSITS BY PRODUCT (Rbn) CONTRIBUTION (%) 9,5% 21,9 17,9 825,8 3,0 20,5 0,1 0,4 52,2 2,4 904,4 1,9% 6,7% 0,4% 0,6% 21,7% 10,4% 36,0 13,2 3,6 7,4 2019 Current and cash management deposits Call and term deposits 2018 Current and cash management deposits Call and term deposits Savings accounts Fixed deposits NCDs and other deposits Foreign currency liabilities 2019 Fixed deposits Savings accounts Negotiable certificates of deposit Other » Call and term deposits grew by 6,7% while savings and fixed deposits grew marginally. NCDs and other deposits, which include structured deposits, grew by 21,7% as clients lengthened their deposit duration in an environment of slow growth where interest rate expectations have started to favour the downside. » Foreign currency liabilities, which represent only 2,8% of Nedbank’s total deposits, increased by 10,4%. It should be noted that foreign currency liabilities are largely matched against foreign currency assets, resulting in an insignificant foreign currency mismatch when expressed as a percentage of the total balance sheet. » Nedbank has maintained a strong balance sheet position in 2019 as observed through the funding profile, liquidity buffers and key liquidity risk metrics. NEDBANK GROUP – ANNUAL RESULTS 2019 127 Market share as per BA900 HOUSEHOLD DEPOSITS1 (2016–2019) (%) NON-FINANCIAL CORPORATE DEPOSITS2 (2016–2019) (%) , 9 6 1 9 , 1 2 , 9 8 1 , 0 2 2 , 3 0 2 , 5 6 1 , 7 4 2 , 3 7 2 , 0 7 1 , 5 4 1 Nedbank FirstRand Standard Bank Absa Other Nedbank FirstRand Standard Bank Absa Other WHOLESALE DEPOSITS3 (2016–2019) (%) FOREIGN CURRENCY LIABILITIES4 (2016–2019) (%) , 2 3 2 , 4 8 1 2 , 1 2 3 , 1 2 , 9 5 1 , 0 2 1 , 6 4 1 , 4 6 2 1 , 6 1 , 9 0 3 Nedbank FirstRand Standard Bank Absa Other Nedbank FirstRand Standard Bank Absa Other 1 Includes 'households' as per the PA BA900 return. 2 Includes 'private non-financial corporate sector deposits', 'unincorporated businesses' and 'non-profit and charities' as per the PA BA900 return. 3 Includes 'insurers', 'pension funds', 'private financial corporate sector deposits', 'collateralised borrowings' and 'repurchase deposits' as per the PA BA900 return. 4 Includes 'foreign currency deposits' and 'foreign currency funding' as per the PA BA900 return. • • In 2019 Nedbank’s funding mix tilted towards increased funding from commercial and wholesale deposits. These depositors, through increased appetite for term products, contributed to a stronger contractual funding profile, where Nedbank’s quarterly average long-term funding ratio of 30,2% compared favourably with the industry average of approximately 26,5%. The increase in commercial and wholesale funding contributions, which supported a stronger funding and liquidity profile, was offset by a reduction in funding contributions from households, capital markets and foreign funding sources, where the latter sources of funding are typically more expensive. In 2020 Nedbank will continue to focus on growing retail and commercial deposits, with a focus on providing competitive and innovative transactional and investment products, as well as an ongoing emphasis on meeting client needs through product, pricing, innovation and digital client experiences. NEDBANK GROUP’S DEPOSIT MIX (%) 6,8 6,6 37,4 20,2 R825,8bn 6,4 6,4 19,3 R904,4bn 38,4 29,0 2018 29,5 2019 Wholesale Commercial Household Capital markets Foreign funding 128 NEDBANK GROUP – ANNUAL RESULTS 2019 LIQUIDITY RISK AND FUNDING SUMMARY OF NEDBANK GROUP LIQUIDITY RISK AND FUNDING PROFILE Total sources of quick liquidity Total HQLA Other sources of quick liquidity Total sources of quick liquidity (as a percentage of total assets) Long-term funding ratio (three-month average) Senior unsecured debt including green bonds Green bonds Total capital market issuance (excluding additional tier 1 capital) Reliance on negotiable certificates of deposit (as a percentage of total deposits) Reliance on foreign funding currency deposits (as a percentage of total deposits) Loan-to-deposit ratio Basel III liquidity ratios LCR1 Minimum regulatory LCR requirement NSFR2 Minimum regulatory NSFR requirement STATEMENT OF FINANCIAL POSITION ANALYSIS 2019 227 713 177 985 49 728 19,9 30,2 42 295 2 644 59 713 13,2 2,8 88,1 125,0 100,0 113,0 100 2018 213 255 162 678 50 577 20,4 26,5 39 254 55 587 10,9 2,8 89,2 109,4 90,0 114,0 100 (Rm) (Rm) (Rm) (%) (%) (Rm) (Rm) (Rm) (%) (%) (%) (%) (%) (%) (%) 1 Only banking and/or deposit-taking entities are included in the group LCR and the group ratio represents an aggregation of the relevant individual net cash outflows (NCOF) and the individual HQLA portfolios across all banking and/or deposit-taking entities, where surplus HQLA holdings in excess of the minimum requirement of 100% have been excluded from the aggregated HQLA number in the case of all non-SA banking entities. The above figures reflect the simple average of daily observations over the quarter ending December 2019 for Nedbank Limited and the simple average of the month-end values at 31 October 2019, 30 November 2019 and 31 December 2019 for all non-SA banking entities. 2 Only banking and/or deposit-taking entities are included in the group NSFR and the group data represents a consolidation of the relevant individual assets, liabilities and off-balance-sheet items. • Nedbank Group remains well funded with a strong liquidity position, underpinned by a significant quantum of long-term funding, an appropriately sized surplus liquid-asset buffer, a strong loan-to-deposit ratio consistently below 100% and a low reliance on interbank and foreign currency funding. • The group's quarterly average LCR exceeded the minimum regulatory requirement of 100% applicable in 2019, with the group maintaining appropriate operational buffers designed to absorb seasonal and cyclical volatility in the LCR. » The LCR, calculated using the simple average of daily observations over the quarter ending December 2019 for Nedbank Limited and the simple average of the month-end values at 31 October 2019, 30 November 2019 and 31 December 2019 for all non-SA banking entities, was 125,0%. — Nedbank's portfolio of LCR-compliant HQLA increased to a quarterly average of R178,0bn, up from 2018 when the portfolio totalled R162,7bn. — The increase in the LCR is attributable to growth in the HQLA portfolio as well as a decrease in net cash outflows. The increase in the long-term funding profile was the primary contributor to the decrease in LCR net cash outflows. — Nedbank will continue to procure additional HQLA to support balance sheet growth while maintaining appropriately sized surplus liquid-asset buffers. NEDBANK GROUP LCR EXCEEDS MINIMUM REGULATORY REQUIREMENTS 109,4 162,7 148,7 178,0 125,0 142,4 2018 2019 HQLA (Rbn) Net cash outflows (Rbn) LCR (%) NEDBANK GROUP – ANNUAL RESULTS 2019 129 » In addition to the HQLA portfolio maintained for LCR purposes, Nedbank also identifies other sources of quick liquidity, which can be accessed in times of stress. Nedbank’s combined portfolio of HQLA and other sources of quick liquidity collectively amounted to R227,7bn at December 2019 and represented 19,9% of total assets. Nedbank Group has significant sources of quick liquidity TOTAL SOURCES OF QUICK LIQUIDITY (Rbn) 6,8% 227,7 (1,8%) 49,7 213,3 50,6 9,4% 162,7 178,0 2018 2019 Total HQLA Other sources of quick liquidity OTHER SOURCES OF QUICK LIQUIDITY CONTRIBUTION (%) 2 12 R49,7bn 43 36 7 2019 Corporate bonds and listed equities Unencumbered trading securities Price-sensitive overnight loans Other banks’ paper and unutilised bank credit lines Other assets • Nedbank exceeded the minimum NSFR regulatory requirement of 100% effective from 1 January 2018, with a December 2019 ratio of 113,0%. The slight decrease in the NSFR is largely attributable to business-as-usual mix changes across both assets and liabilities. The key focus in terms of the NSFR is to achieve ongoing compliance within the context of balance sheet optimisation. NEDBANK GROUP NSFR EXCEEDS MINIMUM REGULATORY REQUIREMENTS 114,0 664,5 582,7 113,0 709,7 628,3 2018 2019 Available stable funding (Rbn) Required stable funding (Rbn) NSFR (%) 130 NEDBANK GROUP – ANNUAL RESULTS 2019 STATEMENT OF FINANCIAL POSITION ANALYSIS » A strong funding profile was maintained in 2019, with Nedbank recording a three-month-average long-term funding ratio of 30,2% in the last quarter of the year. The focus on proactively managing Nedbank’s long-term funding profile contributed to a strong balance sheet position and improved liquidity risk metrics. Nedbank has continued to run a more prudent long-term funding profile when compared with the industry average of approximately 26,5%. — Nedbank successfully issued R8,9bn in senior unsecured debt, while R5,8bn matured during the year. Nedbank successfully issued R2,7bn at its green bond auctions in 2019, contributing to overall senior unsecured debt issuance. — Nedbank issued tier 2 capital instruments of R2,5bn and redeemed R2,5bn during the year, in line with the group’s capital plan. » While foreign currency funding reliance remains small, at 2,8% of total deposits, Nedbank continues to focus on growing this funding source in support of funding base diversification where the proceeds can be applied to meet funding requirements for foreign advances growth at attractive interest rates. • The group’s 2019 ICAAP, ILAAP and Recovery Plan Reports were updated and approved by the board in accordance with annual business-as-usual processes and submitted to the Prudential Authority. NEDBANK GROUP FUNDING AND LIQUIDITY PROFILE IS UNDERPINNED BY STRONG LIQUIDITY RISK METRICS 93,9 28,7 72,4 92,8 29,6 92,1 27,0 35,6 89,2 26,5 54,2 88,1 30,2 78,6 9,4 9,1 10,0 4,0 3,1 2015 2016 2017 2018 2019 Loan-to-deposit ratio (%) Three-month-average long-term funding ratio (%) Annual growth in deposits (Rbn) Annual growth in capital market issuance, excluding additional tier 1 capital (Rbn) NEDBANK GROUP – ANNUAL RESULTS 2019 131 Change (%) EQUITY ANALYSIS ANALYSIS OF CHANGES IN NET ASSET VALUE Balance at the beginning of the year Impact of adopting IFRS 9, IFRS 15 and IFRS 16, net of taxation IFRS 9 and IFRS 15 IFRS 16 Additional shareholder value Profit attributable to ordinary equity holders Currency translation movements Exchange differences on translating foreign operations – foreign subsidiaries1 Exchange differences on translating foreign operations – ETI1 Share of other comprehensive income of investments accounted for using the equity method – ETI2 Fair-value adjustments Fair-value adjustments on debts instruments Share of other comprehensive income of investments accounted for using the equity method2 Defined-benefit fund adjustment Share of other comprehensive income of investments accounted for using the equity method (included in other distributable reserves) Other direct reserve movements Transactions with ordinary shareholders Dividends paid Odd-lot repurchase Equity-settled share-based payments Net repurchase of share capital and premium and capitalisation of reserves Transaction with non-controlling shareholders Exchange differences on translating foreign operations1 Other transaction with non-controlling shareholders Additional tier 1 capital instruments Other movements Balance at the end of the year 2019 91 271 (658) (658) 11 017 12 001 (855) 2 (70) (787) (470) (232) (238) 300 (145) 186 (6 565) (7 112) 591 (44) (134) (91) (43) 3 500 18 98 449 2018 88 539 (3 232) (3 232) 13 175 13 376 191 160 429 (398) 60 (20) 80 (345) (16) (91) (8 004) (6 744) (1 979) 177 542 41 (140) 181 750 2 91 271 1 Exchange differences on translating foreign operations disclosed in the statement of other comprehensive income of R159m (December 2018: R449m). 2 Share of other comprehensive losses of investments accounted for using the equity method as disclosed in the statement of comprehensive income of R1 025m (December 2018: R318m). MOVEMENTS IN GROUP FOREIGN CURRENCY TRANSLATION RESERVE Balance at the beginning of the year Foreign currency translation reserve (FCTR) ETI Banco Único Other subsidiaries Balance at the end of the year EXCHANGE RATES Change (%) 2019 (1 389) (855) (857) (37) 39 2018 (1 580) 191 31 7 153 (2 244) (1 389) UK pound to rand US dollar to rand US dollar to naira Rand to naira US dollar to RTGS dollar (Zimbabwe)1 RTGS dollar (Zimbabwe) to rand1 Change (%) 4,5 9,1 (8,3) Average 2019 18,43 14,44 361,64 25,05 n/a n/a 2018 Change (%) 17,64 13,24 361,50 27,31 n/a n/a 0,6 (2,6) 0,3 3,9 >100 (77,4) Closing 2019 18,43 14,01 364,47 26,05 16,77 0,84 2018 18,32 14,38 363,50 25,08 3,88 3,71 1 In terms of hyperinflation accounting, the inflation-indexed income statement is translated at the year-end closing spot exchange rate. 132 NEDBANK GROUP – ANNUAL RESULTS 2019 STATEMENT OF FINANCIAL POSITION ANALYSIS CAPITAL MANAGEMENT REGULATORY CAPITAL ADEQUACY AND LEVERAGE CET1 CAPITAL RATIO TREND ANALYSIS 1,0 (0,6) 1,1 (0,6) (0,2) (0,5) (0,1) CET1 target range: 10,5–12,5% (0,2) (0,1) 11,7 11,3 11,5 9 The group capital ratios are well above regulatory minima and have strengthened since June 2019. 9 An optimal capital structure has been maintained through the issuance of additional tier 1 and tier 2 capital instruments at favourable pricing. Dec 2018 IFRS 16 impact Organic profit Dividends paid Intangibles RWA increase Jun 2019 Organic profit Dividends paid RWA increase Intangibles Dec 2019 Nedbank manages capital levels incorporating its own internal assessment of the level of risk being taken, expectations of the rating agencies, the requirements of the regulators and the returns expected by shareholders. Nedbank also seeks to ensure that its capital structure makes use of the range of capital instruments and capital management activities available in optimising the financial efficiency and loss absorption capacity of its capital base. Nedbank performed extensive and comprehensive stress testing during this period and concluded that the group remains well capitalised relative to its business activities, the board’s strategic plans, risk appetite, risk profile and the external environment in which the group operates. The group remains well capitalised at levels significantly above the minimum regulatory requirements. The CET1 ratio of 11,5% was impacted by the implementation of IFRS 16 on 1 January 2019 (R658m reduction in equity and R3,4bn increase in RWA), the ongoing investment in software development costs as part of the group’s Managed Evolution programme, the adverse impact of changes in foreign currency translation reserves, an increase in RWA due to migration in certain credit portfolios, credit model updates and capital optimisation initiatives. Nedbank Group Including unappropriated profits Total CAR Total tier 1 CET1 Surplus tier 1 capital Leverage Dividend cover Cost of equity Excluding unappropriated profits Total CAR Total tier 1 CET1 Nedbank Limited Including unappropriated profits Total CAR Total tier 1 CET1 Surplus tier 1 capital Excluding unappropriated profits Total Total tier 1 CET1 SARB minimum1 Internal targets 2019 2018 (%) (%) (%) (Rm) (times) (times) (%) (%) (%) (%) (%) (%) (%) (Rm) (%) (%) (%) > 14 > 12 10,5–12,5 < 20 1,75–2,25 > 14 > 12 10,5–12,5 < 25 11,50 9,25 7,50 11,50 9,25 7,50 15,0 12,8 11,5 22 245 15,0 1,84 14,1 14,8 12,6 11,4 15,5 12,8 11,2 18 202 15,1 12,4 10,8 14,8 12,5 11,7 21 460 14,7 1,97 14,1 14,2 11,9 11,1 15,7 12,7 11,6 18 185 15,2 12,3 11,1 1 SARB minimum requirements for 2019 reflect the phase-in of the conservation buffer at 2,5% and are disclosed excluding bank-specific Pillar 2b and D-SIB capital requirements. NEDBANK GROUP – ANNUAL RESULTS 2019 133 OVERVIEW OF RISK-WEIGHTED ASSETS Rm Credit risk Standardised Approach (TSA) Supervisory Slotting Approach Advanced Internal Ratings-based Approach Counterparty credit risk Current Exposure Method Credit valuation adjustment Equity positions under Simple Risk-weight Approach Securitisation exposures in banking book Internal Ratings-based Approach External Ratings-based Approach, including Internal Assessment Approach Market risk Standardised Approach Internal Model Approach Operational risk Standardised Approach Advanced Measurement Approach (AMA) Floor adjustment Amounts below the thresholds for deduction (subject to 250% risk weighting) Other assets (100% risk weighting) Total Nedbank Group Nedbank Limited1 2019 RWA 419 286 35 052 10 234 MRC2 48 218 4 031 1 177 2018 RWA 390 688 38 598 8 612 2019 RWA MRC2 2018 RWA 348 376 40 063 318 549 133 9 290 15 1 068 150 8 612 374 000 43 010 343 478 338 953 38 980 309 787 9 713 9 713 16 476 41 021 589 382 207 22 199 2 027 20 172 74 139 7 208 63 539 3 392 1 117 1 117 1 895 4 717 68 44 24 2 553 233 2 320 8 526 829 7 307 390 5 072 5 072 10 378 35 205 504 300 204 31 489 4 204 27 285 71 083 6 599 60 838 3 646 9 456 9 456 15 668 26 534 589 382 207 20 971 699 20 272 62 795 1 60 059 2 735 1 087 1 087 1 802 3 051 68 44 24 2 412 81 2 331 7 221 < 1 6 907 314 15 228 30 074 628 725 1 751 3 458 72 303 14 942 27 265 586 626 1 633 24 867 510 889 188 2 860 58 752 4 855 4 855 9 683 22 677 504 300 204 28 141 1 162 26 979 60 720 5 57 594 3 121 2 167 23 835 471 131 1 Nedbank Limited refers to the SA reporting entity in terms of regulation 38 (BA700) of the regulations relating to banks, issued in terms of the Banks Act (Act No 94 of 1990). 2 Total MRC is measured at 11,5%, in line with the transitional requirements, and excludes bank-specific Pillar 2b and D-SIB capital requirements. • Credit RWA increased by R28,6bn, largely as a result of book growth, model updates and the rating migrations of certain counters within the CIB portfolio. • Counterparty credit risk and credit valuation adjustment RWA increased by R4,6bn and R6,1bn respectively, driven by an increase in hedging activities and the performance of the rand against major currencies over the period. • Equity RWA growth of R5,8bn, includes new investments and fair-value revaluations of existing equity exposures. • Trading market RWA decrease of R9,3bn, driven primarily by lower exposures to foreign exchange, interest rates, inflation and credit spreads on the back of reduced trading activity during the period. • Operational RWA growth of R3,1bn, mainly driven by the migration to the second-generation model, which resulted in an increase in the AMA capital as well as an increase in TSA capital, driven by movements in GOI. 134 NEDBANK GROUP – ANNUAL RESULTS 2019 STATEMENT OF FINANCIAL POSITION ANALYSIS SUMMARY OF REGULATORY QUALIFYING CAPITAL AND RESERVES1 Rm Including unappropriated profits Total tier 1 capital CET1 Share capital and premium Reserves Minority interest: Ordinary shareholders Deductions Additional tier 1 capital Preference share capital and premium Perpetual subordinated debt instruments Regulatory adjustments Tier 2 capital Subordinated debt instruments General allowance for credit impairment Regulatory adjustments Total capital Excluding unappropriated profits Tier 1 capital CET1 capital Total capital Nedbank Group Nedbank Limited 2019 2018 2019 2018 80 401 72 506 18 577 68 534 848 (15 453) 7 895 1 594 6 850 (549) 13 840 13 810 300 (270) 94 241 79 315 71 420 93 155 73 523 68 625 17 792 65 493 1 038 (15 698) 4 898 2 125 3 350 (577) 13 428 13 797 289 (658) 86 951 70 068 65 170 83 496 65 459 57 015 19 221 50 521 (12 727) 8 444 1 594 6 850 13 812 13 810 2 59 959 54 484 19 221 47 375 (12 112) 5 475 2 125 3 350 13 799 13 797 2 79 271 73 758 63 532 55 088 77 344 57 730 52 255 71 529 1 For comprehensive 'composition of capital' and 'capital instruments main features' disclosure please refer to nedbank.co.za/content/nedbank/desktop/gt/en/aboutus/information-hub/capital-and-risk-management-reports.html. • Nedbank Group maintained a solid capital adequacy position, with the capital ratios having improved since 30 June 2019 after absorbing the adverse impact of IFRS 16 implemented in January 2019, adverse changes in foreign currency translation reserves, further investment in software development costs as part of the group’s Managed Evolution programme, and an increase in RWA due to migration in certain credit portfolios and credit model updates. The CET1 capital was supported by reasonable earnings generation in a tough macroeconomic environment, an appropriate dividend policy and capital optimisation across the balance sheet. The group’s sound capital structure is further supported by the following: » A focus on issuing fully loss-absorbent capital, with Basel III fully compliant capital making up 98% of the group’s total capital structure, having issued R19,3bn of new-style tier 2 capital and R6,9bn of new-style additional tier 1 capital since the implementation of Basel III in 2013. » RWA density of 55% (RWA/total assets), which compares favourably with local and international peers. • The group’s tier 1 capital position was positively impacted by the issuance of new-style additional tier 1 instruments of R3,5bn in 2019, offset by the further grandfathering of preference shares in January 2019, in line with the Basel III transitional arrangements. • The group’s total capital position was further impacted by the redemption of new-style tier 2 capital instruments of R2,5bn and the issuance of new-style tier 2 capital instruments of R2,5bn in 2019, in line with the group’s capital plan. • Nedbank Group’s gearing (including unappropriated profits) remains below the Regulatory Leverage Ratio Framework requirement of less than 25 times at 15,0 times. NEDBANK GROUP – ANNUAL RESULTS 2019 135 REGULATED BANKING SUBSIDIARIES Nedbank Group banking subsidiaries are well capitalised for the environments in which they operate, with CARs well in excess of respective host regulators’ minimum requirements. Africa Regions Banco Único Nedbank Namibia Limited Nedbank (Swaziland) Limited Nedbank (Lesotho) Limited Nedbank (Malawi) Limited Nedbank (Zimbabwe) Limited Isle of Man Nedbank Private Wealth (IOM) Limited 2019 2018 Total capital requirement (host country) % Total capital ratio % RWA Rm 11,0 11,0 8,0 8,0 15,0 12,0 11,0 3 863 13 047 4 966 2 051 349 1 042 7 627 16,7 15,0 17,3 26,4 22,1 21,3 15,7 RWA Rm 3 901 12 647 4 654 2 282 364 3 5211 7 607 Total capital ratio % 15,8 18,0 17,3 20,8 28,7 29,91 14,9 1 As reported incountry in the December 2018 BA Regulatory Return, before any functional currency changes. ECONOMIC CAPITAL ADEQUACY NEDBANK GROUP ECONOMIC CAPITAL REQUIREMENT Credit risk Market risk Business risk Operational risk Insurance risk Other assets risk Minimum economic capital requirement Add: Stress-tested capital buffer (10%) Total economic capital requirement AFR Tier A capital Tier B capital Total surplus AFR AFR:total economic capital requirement (%) 2019 2018 Rm Mix % Rm Mix % 43 847 8 088 7 960 4 770 472 3 166 68 303 6 830 75 133 97 184 74 977 22 207 22 051 129 64 12 12 7 < 1 5 100 100 77 23 38 476 8 094 7 223 3 972 474 2 958 61 197 6 120 67 317 90 350 71 125 19 225 23 033 134 63 13 12 6 1 5 100 100 79 21 • Nedbank Group’s minimum economic capital requirement increased by R7,1bn during the year, primarily due to the following: » A R5,4bn increase in credit risk economic capital largely as a result of book growth and rating migrations of certain portfolios within CIB. Counterparty credit risk increased, as a result of an increase in hedging activities and the performance of the rand against major currencies over the period. » Respective increases of R737m and R798m in business risk economic capital and operational risk economic capital, which were driven mainly by annual model parameter updates, reflective of a higher risk environment. • Nedbank Group’s AFR increased R6,8bn in 2019, mainly as a result of the following: » Financial reserves increasing R3,0bn post dividend payments to shareholders of R7,2bn. » A R3,0bn increase in tier B AFR following the issuance of R3,5bn new-style additional tier 1 capital and the issuance of R2,5bn of new-style tier 2 capital instruments, which was offset by the grandfathering of old-style preference shares of R531m and the redemption of new-style tier 2 capital instruments of R2,5bn. 136 NEDBANK GROUP – ANNUAL RESULTS 2019 EXTERNAL CREDIT RATINGS Outlook Foreign currency deposit ratings Long-term Short-term Local currency deposit ratings Long-term Short-term National scale rating Long-term deposits Short-term deposits STATEMENT OF FINANCIAL POSITION ANALYSIS Standard & Poor’s Moody’s Investors Service Nedbank Limited Sovereign rating SA Nedbank Limited Sovereign rating SA Nov 2019 Nov 2019 Nov 2019 Nov 2019 Negative Negative Negative Negative BB B BB B BB B BB+ B zaAA+ zaA-1+ zaAA+ zaA-1+ Baa3 P-3 Baa3 P-3 Aa1.za P-1.za Baa3 P-3 Baa3 P-3 NEDBANK GROUP – ANNUAL RESULTS 2019 137 138 NOTESNEDBANK GROUP – ANNUAL RESULTS 2019 SUPPLEMENTARY INFORMATION SUPPLEMENTARY INFORMATION 140 Earnings per share and weighted-average shares 141 Nedbank Group employee incentive schemes 142 Long-term debt instruments 142 Holders of additional tier 1 capital instruments 143 Shareholders’ analysis 144 146 147 147 Basel III balance sheet credit exposure by business cluster and asset class Nedbank Limited consolidated statement of comprehensive income Nedbank Limited consolidated statement of financial position Nedbank Limited consolidated financial highlights 148 Definitions 150 Abbreviations and acronyms IBC Company details NEDBANK GROUP – ANNUAL RESULTS 2019 139 EARNINGS PER SHARE AND WEIGHTED-AVERAGE SHARES Earnings per share December 2019 Earnings for the year Basic Diluted basic Headline Diluted headline 12 001 12 001 12 506 12 506 Weighted-average number of ordinary shares 479 960 027 487 478 442 479 960 027 487 478 442 Earnings per share (cents) December 2018 Earnings for the year 2 500 2 462 2 605 2 565 13 376 13 376 13 495 13 495 Weighted-average number of ordinary shares 483 240 926 493 159 191 483 240 926 493 159 191 Earnings per share (cents) 2 768 2 712 2 793 2 736 Basic earnings and headline earnings per share are calculated by dividing the relevant earnings amount by the weighted-average number of shares in issue. Fully diluted basic earnings and fully diluted headline earnings per share are calculated by dividing the relevant earnings amount by the weighted-average number of shares in issue after taking the dilutive impact of potential ordinary shares to be issued into account. Number of weighted-average dilutive potential ordinary shares (000) Traditional schemes Nedbank Group Restricted-share Scheme (2005) Nedbank Group Matched-share Scheme Total BEE schemes BEE schemes – South Africa Community Black executives Black management BEE schemes – Namibia Total 2019 2018 Weighted- average dilutive shares Weighted- average dilutive shares 5 808 4 200 1 608 1 711 1 703 1 690 12 1 8 7 519 8 119 6 426 1 693 1 799 1 785 1 690 83 12 14 9 918 Potential shares1 12 569 9 415 3 154 1 845 1 812 1 690 116 6 33 14 414 1 Potential shares are the total number of shares arising from historic grants, schemes or awards, available for distribution. Potential shares are the total number of shares arising from historic grants, schemes or awards, available for distribution. Matched shares Instrument expiry date 1 April 2020 1 April 2021 1 April 2022 Matched shares outstanding not exercised at 31 December 2019 Movements due to shares exercised/forfeited during the year Total potential shares Weighted-average dilutive shares applicable for the year Number of shares 672 956 633 687 928 799 2 235 442 918 242 3 153 684 1 608 451 The obligation to deliver the matched shares issued under the voluntary and compulsory share scheme is subject to time and other performance criteria. This obligation exists over 31 December 2019 and therefore has a dilutive effect. Matched shares are not issued and are therefore not recognised as treasury shares. However, until they are issued, there remains a potential dilutive effect. 140 NEDBANK GROUP – ANNUAL RESULTS 2019 NEDBANK GROUP EMPLOYEE INCENTIVE SCHEMES for the period ended SUPPLEMENTARY INFORMATION Nedbank Group employee incentive schemes Summary by scheme Nedbank Group Restricted-share Scheme (2005) Nedbank Group Matched-share Scheme (2005) Instruments outstanding at the end of the year Analysis Performance-based – restricted shares Non-performance-based – restricted shares Performance-based – matched shares (CBSS1) Non-performance-based – matched shares (VBSS2) Instruments outstanding at the end of the year Movements Instruments outstanding at the beginning of the year Granted Exercised Surrendered Instruments outstanding at the end of the year 1 Compulsory Bonus Share Scheme. 2 Voluntary Bonus Share Scheme. P Performance-based instruments. NEDBANK GROUP (2005) RESTRICTED- AND MATCHED-SHARE SCHEMES Restricted shares1 Details of instruments granted and not exercised at 31 December 2019 and the resulting dilutive effect: Instrument expiry date 16 March 2020 17 March 2020 11 August 2020 12 August 2020 16 March 2021 15 March 2021 17 August 2021 18 August 2021 15 March 2022 16 March 2022 16 August 2022 17 August 2022 Restricted shares not exercised at 31 December 2019 Unallocated shares Treasury shares Average shares exercised or forfeited during the year Total potential shares Weighted-average dilutive shares applicable for the year 2019 2018 9 067 832 2 235 442 11 303 274 5 094 706 P 3 973 126 1 544 042 P 691 400 11 303 274 11 548 674 4 421 294 (4 265 176) (401 518) 11 303 274 9 369 675 2 178 999 11 548 674 5 168 775 P 4 200 900 1 493 277 P 685 722 11 548 674 11 646 502 3 699 952 (3 234 541) (563 239) 11 548 674 Number of shares 1 565 247 P 1 267 795 44 153 P 39 423 1 440 889 P 1 167 063 102 600 P 85 954 1 879 376 P 1 350 470 P 62 441 62 421 9 067 832 144 725 9 212 557 202 527 9 415 084 4 200 040 1 Restricted shares are issued at a market price for no consideration to participants, and are held by the scheme until the expiry date (subject to achievement of performance conditions). Participants have full rights and receive dividends. P Performance-based instruments. NEDBANK GROUP – ANNUAL RESULTS 2019 141 LONG-TERM DEBT INSTRUMENTS Instrument code Subordinated debt Callable notes (rand-denominated) Long-term debenture (Namibian dollar-denominated) Callable notes (MZN-denominated) Securitised liabilities – callable notes (rand-denominated) Senior unsecured debt – senior unsecured notes (rand-denominated) Unsecured debentures (rand-denominated) Green bonds (rand-denominated) Total long-term debt instruments in issue 2019 14 229 13 912 317 3 152 39 651 37 2 644 59 713 2018 14 233 13 905 316 12 2 069 39 254 31 55 587 Further information can be accessed on our group website: nedbank.co.za/content/nedbank/desktop/gt/en/aboutus/information-hub/capital-and-risk-management-reports.html nedbank.co.za/content/nedbank/desktop/gt/en/aboutus/debt-investor/debt-investors-programme.html HOLDERS OF ADDITIONAL TIER 1 CAPITAL INSTRUMENTS The group issued new-style (Basel III-compliant) additional tier 1 capital instrument as follows: Instrument code Instrument terms 2019 2018 Subordinated Callable notes (rand-denominated) NEDT1A NEDT1B NGLT1A NGLT1B NGT103 NGT104 NGT105 3-month JIBAR + 7,00% per annum 3-month JIBAR + 6,25% per annum 3-month JIBAR + 5,65% per annum 3-month JIBAR + 4,64% per annum 3-month JIBAR + 4,40% per annum 3-month JIBAR + 4,50% per annum 3-month JIBAR + 4,25% per annum 1 500 500 600 750 671 1 829 1 000 1 517 505 613 762 Total non-controlling interest attributable to additional tier 1 capital instruments 6 850 3 397 The additional tier 1 notes represent perpetual, subordinated instruments, with no redemption date. The instruments are redeemable, subject to regulatory approval, at the sole discretion of the issuer from the applicable call date and following a regulatory or tax event. The payment of interest is at the discretion of the issuer and interest payments are non-cumulative. In addition, in certain conditions the regulator may prohibit Nedbank from making interest payments. Accordingly, for accounting purposes the instruments are classified as equity instruments and disclosed as part of the non-controlling interest. 142 NEDBANK GROUP – ANNUAL RESULTS 2019 SHAREHOLDERS’ ANALYSIS Register date: Authorised share capital: Issued share capital: 27 December 2019 600 000 000 shares 497 053 536 shares Major shareholders/managers Old Mutual Life Assurance Company (SA) Limited and associates (includes funds managed on behalf of other beneficial owners)1 Nedbank Group treasury shares BEE trusts Eyethu scheme – Nedbank SA Omufima scheme – Nedbank Namibia Nedbank Group (2005) Restricted- and Matched-share Schemes Nedbank Namibia Limited Public Investment Corporation (SA) Coronation Fund Managers (SA) Allan Gray Investment Council (SA) BlackRock Incorporated (International) The Vanguard Group Incorporated (international) Sanlam Investment Management Proprietary Limited (SA) Dimensional Fund Advisors (US, UK and AU) Lazard Asset Management (International) GIC Asset Management Proprietary Limited (international) Major beneficial shareholders Old Mutual Life Assurance Company (SA) Limited and associates (SA)1 Government Employees Pension Fund (SA) GIC Asset Management Proprietary Limited (SG) Geographical distribution of shareholders Domestic South Africa Namibia Unclassified Foreign United States of America Asia Europe United Kingdom and Ireland Other countries Total shares listed Less: Treasury shares held Net shares reported Number of shares 2019 % holding 2018 % holding 119 908 542 15 879 157 6 619 088 6 466 786 152 302 9 212 557 47 512 53 464 674 37 407 848 27 048 653 17 839 104 14 888 988 11 741 655 10 597 596 10 590 138 10 437 041 119 764 615 54 095 899 10 437 041 366 809 012 351 196 730 9 095 314 6 516 968 130 244 524 65 892 178 22 306 373 22 173 199 10 181 196 9 691 578 497 053 536 15 879 157 481 174 379 24,12 3,19 1,33 1,30 0,03 1,85 0,01 10,76 7,53 5,44 3,59 3,00 2,36 2,13 2,13 2,10 24,09 10,88 2,10 73,79 70,65 1,83 1,31 26,21 13,26 4,49 4,46 2,05 1,95 24,54 3,26 1,32 1,29 0,03 1,93 0,01 9,38 7,31 5,14 3,71 2,91 1,88 1,62 2,96 2,65 24,51 9,66 2,67 70,69 67,38 1,47 1,84 29,31 14,89 5,06 4,78 2,96 1,62 100,00 100,00 1 Old Mutual Limited retains a strategic minority shareholding of 19,9% in Nedbank Group, held through its shareholder funds, under the terms of the relationship agreement. The above shareholding is inclusive of funds held on behalf of other beneficial owners and increased after the Old Mutual Managed Seperation had been completed as a result of the subsequent odd-lot offer and due to movements in shares held on behalf of policyholders. The relationship agreement with Old Mutual Limited is available at https://www.nedbank.co.za/content/dam/nedbank/site-assets/AboutUs/About%20Nedbank%20Group/Old%20Mutual/Nedbank%20Old%20 Mutual%20Limited%20Relationship%20Agreement%202018.pdf. INDEX CLASSIFIED SHAREHOLDING (December, %) FOREIGN SHAREHOLDING (December, %) , 3 0 1 , 0 2 1 5 , 1 1 , 8 9 1 3 , 1 2 , 8 3 1 , 8 7 1 1 , 8 1 , 3 9 2 , 2 6 2 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 143 SUPPLEMENTARY INFORMATIONNEDBANK GROUP – ANNUAL RESULTS 2019 BASEL III BALANCE SHEET CREDIT EXPOSURE BY BUSINESS CLUSTER AND ASSET CLASS Advanced Internal Ratings-based Approach 265 339 162 280 358 726 22 721 7 74 097 CIB, excluding Property Finance Property Finance RBB Wealth Nedbank African Regions Centre Corporate Specialised lending – HVCRE4 Specialised lending – IPRE5 Specialised lending – project finance SME – corporate Public sector entities Local government and municipalities Sovereign Banks Retail mortgage Retail revolving credit Retail – other SME – retail Securitisation exposure The Standardised Approach6 Corporate SME – corporate Public sector entities Local government and municipalities Sovereign Banks Retail mortgage Retail revolving credit Retail – other SME – retail Properties in possession Non-regulated entities Total Basel III balance sheet exposure7 Downturn expected loss (AIRB Approach) Expected loss performing book BEEL on defaulted advances IFRS impairment on AIRB loans and advances Excess of downturn expected loss over eligible provisions 142 150 46 501 1 105 16 773 10 906 10 105 37 753 46 – 49 944 8 090 100 448 3 593 37 168 – 18 106 1 569 29 942 141 966 5 129 050 16 995 129 540 31 943 469 160 160 55 55 6 051 4 2 118 42 279 1 727 10 255 84 189 1 862 18 475 1 310 7 413 2 614 5 807 1 331 19 308 44 11 134 31 71 835 2 097 7 – – – 42 066 10 513 813 30 7 467 6 626 7 118 731 4 630 4 138 95 284 647 162 280 358 930 41 207 42 168 74 097 7 268 6 851 1 Risk weighting is shown as a percentage of exposure at default (EAD) for the AIRB Approach and as a percentage of total credit extended for The Standardised Approach (TSA). 2 dEL is in relation to performing loans and advances. 3 Best estimate of expected loss (BEEL) is in relation to defaulted loans and advances. 4 High-volatility commercial real estate. 5 Income-producing real estate. 6 A portion of the legacy Imperial Bank book in Nedbank RBB, Nedbank Private Wealth (UK) and the non-SA banking entities in Africa are covered by TSA. 7 Balance sheet credit exposure includes on-balance-sheet, repurchase and resale agreements and derivative exposure. Nedbank Group Dec 2019 Change weighting1 loss (dEL)2 Downturn expected Nedbank Group Dec 2018 Downturn expected loss (dEL)2 (Rm) 883 170 210 389 8 145 108 068 46 505 36 758 16 987 12 151 83 672 39 894 139 305 17 079 129 729 33 851 637 60 701 10 513 1 470 813 30 14 880 9 240 12 925 731 5 961 4 138 150 19 308 963 329 Mix (%) 91,7 21,8 0,8 11,2 4,8 3,8 1,8 1,3 8,7 4,1 14,5 1,8 13,5 3,5 0,1 6,3 1,1 0,2 0,1 1,5 1,0 1,3 0,1 0,6 0,4 2,0 100,0 (%) 11,3 12,8 26,8 6,4 5,1 12,0 (5,5) 32,2 13,6 134,3 4,9 5,5 9,0 (4,1) 34,4 3,4 33,3 (15,3) 27,0 7,1 6,5 (32,4) 1,3 120,8 14,5 67,1 1,3 19,8 9,9 Risk (%) 40,5 44,9 112,8 32,1 65,5 50,8 71,6 29,2 10,1 52,0 25,1 62,1 49,1 40,3 92,5 50,0 82,4 95,6 70,7 94,3 61,1 19,9 40,5 42,0 72,4 67,2 6 851 959 119 220 146 214 52 6 17 89 624 786 3 122 497 – (Rm) 793 243 186 575 6 424 101 610 44 247 32 812 17 967 9 193 73 653 17 026 132 751 16 194 119 014 35 303 474 58 693 7 884 1 736 640 28 13 971 13 660 12 762 331 5 204 2 477 152 24 083 876 171 Mix (%) 90,5 21,3 0,7 11,6 5,1 3,7 2,1 1,0 8,4 1,9 15,2 1,8 13,6 4,0 0,5 6,8 0,9 0,2 0,1 1,6 1,6 1,5 0,6 0,3 2,7 100 (Rm) 7 268 1 108 124 316 168 238 118 5 19 66 706 776 3 130 494 BEEL3 (Rm) 9 993 867 133 88 289 15 1 348 1 318 5 182 753 9 993 17 261 7 268 9 993 (17 358) (97) BEEL3 (Rm) 8 759 496 110 154 147 1 287 1 457 4 470 638 – 8 759 15 610 6 851 8 759 (14 860) 750 144 NEDBANK GROUP – ANNUAL RESULTS 2019 Advanced Internal Ratings-based Approach 265 339 162 280 358 726 22 721 7 74 097 CIB, excluding Property Property Finance Finance RBB Wealth Centre Nedbank African Regions Corporate Specialised lending – HVCRE4 Specialised lending – IPRE5 Specialised lending – project finance Local government and municipalities The Standardised Approach6 SME – corporate Public sector entities Sovereign Banks Retail mortgage Retail revolving credit Retail – other SME – retail Securitisation exposure Corporate SME – corporate Public sector entities Sovereign Banks Retail mortgage Retail revolving credit Retail – other SME – retail Properties in possession Non-regulated entities Local government and municipalities Total Basel III balance sheet exposure7 Downturn expected loss (AIRB Approach) Expected loss performing book BEEL on defaulted advances IFRS impairment on AIRB loans and advances Excess of downturn expected loss over eligible provisions 142 150 46 501 1 105 16 773 10 906 10 105 37 753 46 – 49 944 8 090 100 448 18 106 1 569 3 593 29 942 37 168 – 141 966 5 129 050 16 995 129 540 31 943 469 160 160 55 55 6 051 4 2 118 42 279 1 727 10 255 84 189 1 862 18 475 1 310 7 413 2 614 5 807 1 331 71 835 2 097 7 134 31 – 42 066 10 513 813 30 7 467 6 626 7 118 731 4 630 4 138 95 19 308 44 11 284 647 162 280 358 930 41 207 42 168 74 097 (Rm) 883 170 210 389 8 145 108 068 46 505 36 758 16 987 12 151 83 672 39 894 139 305 17 079 129 729 33 851 637 60 701 10 513 1 470 813 30 14 880 9 240 12 925 731 5 961 4 138 150 19 308 963 329 Mix (%) 91,7 21,8 0,8 11,2 4,8 3,8 1,8 1,3 8,7 4,1 14,5 1,8 13,5 3,5 0,1 6,3 1,1 0,2 0,1 1,5 1,0 1,3 0,1 0,6 0,4 2,0 100,0 Nedbank Group Dec 2019 Change (%) Risk weighting1 (%) Downturn expected loss (dEL)2 (Rm) BEEL3 (Rm) (Rm) 9 993 793 243 40,5 44,9 112,8 32,1 65,5 50,8 71,6 29,2 10,1 52,0 25,1 62,1 49,1 40,3 92,5 50,0 82,4 95,6 70,7 94,3 61,1 19,9 40,5 42,0 72,4 67,2 11,3 12,8 26,8 6,4 5,1 12,0 (5,5) 32,2 13,6 134,3 4,9 5,5 9,0 (4,1) 34,4 3,4 33,3 (15,3) 27,0 7,1 6,5 (32,4) 1,3 120,8 14,5 67,1 1,3 19,8 9,9 186 575 6 424 101 610 44 247 32 812 17 967 9 193 73 653 17 026 132 751 16 194 119 014 35 303 474 58 693 7 884 1 736 640 28 13 971 13 660 12 762 331 5 204 2 477 152 24 083 876 171 7 268 1 108 124 316 168 238 118 5 19 66 706 776 3 130 494 867 133 88 289 15 1 348 1 318 5 182 753 – – 7 268 9 993 17 261 7 268 9 993 (17 358) (97) SUPPLEMENTARY INFORMATION Nedbank Group Dec 2018 Mix (%) 90,5 21,3 0,7 11,6 5,1 3,7 2,1 1,0 8,4 1,9 15,2 1,8 13,6 4,0 0,5 6,8 0,9 0,2 0,1 1,6 1,6 1,5 0,6 0,3 2,7 100 Downturn expected loss (dEL)2 6 851 959 119 220 146 214 52 6 17 89 624 786 3 122 497 – 6 851 BEEL3 (Rm) 8 759 496 110 154 147 1 287 1 457 4 470 638 – 8 759 15 610 6 851 8 759 (14 860) 750 NEDBANK GROUP – ANNUAL RESULTS 2019 145 NEDBANK LIMITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December Rm Interest and similar income Interest expense and similar charges Net interest income Impairments charge on financial instruments Income from lending activities Non-interest revenue Operating income Total operating expenses Indirect taxation Profit from operations before non-trading and capital items Non-trading and capital items Profit from operations Share of income/(losses) of associate companies and joint arrangements Profit before direct taxation Total direct taxation Direct taxation Taxation on non-trading and capital items Profit for the year Other comprehensive income/(losses) net of taxation Items that may subsequently be reclassified to profit or loss Exchange differences on translating foreign operations Debt investments at FVOCI – net change in fair value Items that may not subsequently be reclassified to profit or loss Remeasurements on long-term employee benefit assets Gains/(Losses) on property revaluations Total comprehensive income for the year Profit attributable to: – Ordinary and preference equity holders – Non-controlling interest – ordinary shareholders Profit for the year Total comprehensive income attributable to: – Ordinary and preference equity holders – Non-controlling interest – ordinary shareholders Total comprehensive income for the year Headline earnings reconciliation Profit attributable to ordinary and preference equity holders Less: Non-headline earnings items net of taxation Non-trading and capital items Taxation on non-trading and capital items Headline earnings attributable to ordinary and preference equity holders 2019 79 240 51 888 27 352 5 953 21 399 20 905 42 304 27 891 961 13 452 (424) 13 028 121 13 149 3 076 3 205 (129) 10 073 144 (37) (294) 330 145 10 217 10 087 (14) 10 073 10 231 (14) 10 217 10 087 (295) (424) 129 10 382 2018 72 739 46 774 25 965 3 547 22 418 20 884 43 302 27 616 804 14 882 (164) 14 718 (83) 14 635 3 854 3 899 (45) 10 781 (368) 70 7 (345) (100) 10 413 10 765 16 10 781 10 397 16 10 413 10 765 (119) (164) 45 10 884 146 NEDBANK GROUP – ANNUAL RESULTS 2019 NEDBANK LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION at 31 December SUPPLEMENTARY INFORMATION Rm Assets Cash and cash equivalents Other short-term securities Derivative financial instruments Government securities Other dated securities Loans and advances to clients Trading loans and advances Loans and advances to banks Other assets Current taxation assets Investment securities Non-current assets held for sale Investments in associate companies Deferred taxation assets Investment property Property and equipment Long-term employee benefit assets Mandatory reserve deposits with central banks Intangible assets Total assets Total equity and liabilities Ordinary share capital Ordinary share premium Reserves Total equity attributable to ordinary equity holders Preference share capital and premium Additional tier 1 capital instruments Non-controlling interest attributable to ordinary shareholders Holders of preference shares Total equity Derivative financial instruments Amounts owed to depositors Other liabilities Current taxation liabilities Deferred taxation liabilities Long-term employee benefit liabilities Long-term debt instruments Total liabilities Total equity and liabilities NEDBANK LIMITED CONSOLIDATED FINANCIAL HIGHLIGHTS for the year ended 31 December ROE (%) ROA (%) NII to average interest-earning banking assets (%) CLR – banking advances (%) Cost-to-income ratio 2019 2018 8 199 42 395 34 923 96 536 31 126 735 886 32 678 18 546 10 544 213 9 007 90 1 229 42 56 10 403 5 505 21 424 9 508 7 931 57 844 22 412 70 330 25 793 691 260 23 637 10 895 12 040 105 6 787 305 786 40 8 367 4 764 19 789 8 538 1 068 310 971 623 28 19 182 53 582 72 792 3 561 6 850 9 7 83 219 27 621 881 297 13 473 42 645 2 401 59 612 985 091 1 068 310 28 19 182 49 636 68 846 3 561 3 416 23 561 76 407 19 761 806 487 10 414 272 224 2 648 55 410 895 216 971 623 2019 15,1 1,04 3,45 0,83 57,7 2018 16,6 1,19 3,57 0,54 58,9 NEDBANK GROUP – ANNUAL RESULTS 2019 147 DEFINITIONS 12-month ECL This ECL represents an ECL that results from a default event on financial instruments occurring within the 12 months after the reporting date (or a shorter period if the expected life of the financial instrument is less than 12-months), weighted by the probability of that default occurring. Assets under administration (AUA) (Rm) Market value of assets held in custody on behalf of clients. Assets under management (AUM) (Rm) Market value of assets managed on behalf of clients. Common-equity tier 1 (CET1) capital adequacy ratio (%) CET1 regulatory capital, including unappropriated profit, as a percentage of total risk-weighted assets. Cost-to-income ratio (%) Total operating expenses as a percentage of total income, being net interest income, non-interest revenue and share of profits or losses from associates and joint arrangements. Coverage (%) On-balance-sheet ECLs divided by gross banking loans and advances. Coverage excludes ECLs on off-balance-sheet amounts, ECL and gross banking loans and advances on the fair value through other comprehensive income (FVOCI) portfolio and loans and advances measured at fair value through profit or loss (FVTPL). Credit loss ratio (CLR) – (% or bps) ECL charge on banking loans and advances as a percentage of daily average gross banking loans and advances. Includes the ECL recognised in respect of the off-balance-sheet portion of loans and advances. Default Default occurs in respect of a particular client in the following instances: • When the bank considers that the client is unlikely to pay its credit obligations to the bank in full without the bank having recourse to actions such as realising security (if held). • When the client is past due for more than 90 days on any material credit obligation to the bank. Overdrafts will be considered as being past due if the client has breached an advised limit or has been advised of a limit smaller than the current outstanding amount. • In terms of Nedbank‘s Group Credit Policy, when the client is placed under business rescue in accordance with the Companies Act, 71 of 2008, and when the client requests a restructure of his facilities as a result of financial distress, except where debtor substitution is allowable in terms of the regulations. At a minimum a default is deemed to have occurred where a material obligation is past due for more than 90 days or a client has exceeded an advised limit for more than 90 days. A specific impairment is raised against such a credit exposure due to a significant perceived decline in the credit quality. Diluted headline earnings per share (DHEPS) (cents) Headline earnings divided by the weighted-average number of ordinary shares, adjusted for potential dilutive ordinary shares. Dividend cover (times) Headline earnings per share divided by dividend per share. Economic profit (EP) (Rm) Headline earnings less the cost of equity (total equity attributable to equity holders of the parent, less goodwill, multiplied by the group's cost-of-equity percentage). Effective taxation rate (%) Direct taxation as a percentage of profit before direct taxation, excluding non-trading and capital items. Earnings per share (EPS) (cents) Earnings attributable to ordinary shareholders, divided by the weighted-average number of ordinary shares in issue. Forward-looking economic expectations The impact of forecast macroeconomic expectations in determining significant increase in credit risk (SICR) and the measurement of ECL. Gross operating income growth rate less expenses growth rate (JAWS ratio) (%) Measure of the extent to which the total income growth rate exceeds the total operating expenses growth rate. Headline earnings (Rm) The profit attributable to equity holders of the parent, excluding specific separately identifiable remeasurements, net of related tax and non-controlling interests. Headline earnings per share (HEPS) (cents) Headline earnings divided by the weighted-average number of ordinary shares in issue. Lifetime ECL An ECL on any default event between the reporting date and the end of the lifetime of the financial asset. Life insurance embedded value (Rm) The embedded value (EV) of the covered business is the discounted value of the projected future after-tax shareholder earnings arising from covered business in force at the valuation date, plus the adjusted net worth. Life insurance value of new business (Rm) A measure of the value added to a company as a result of writing new business. Value of new business (VNB) is calculated as the discounted value, at the valuation date, of projected after-tax shareholder profit from covered new business that commenced during the reporting period, net of frictional costs and the cost of non-hedgeable risk associated with writing new business, using economic assumptions at the start of the reporting period. 148 NEDBANK GROUP – ANNUAL RESULTS 2019 DEFINITIONS & ABBREVIATIONS Net asset value (NAV) (Rm) Total equity attributable to equity holders of the parent. Net asset value (NAV) per share (cents) NAV divided by the number of shares in issue, excluding shares held by group entities at the end of the period. Net interest income (NII) to average interest-earning banking assets (AIEBA) (%) NII as a percentage of daily average total assets, excluding trading assets. Also called net interest margin (NIM). Net monetary gain/(loss) (Rm) Represents the gain or loss in purchasing power of the net monetary position (monetary assets less monetary liabilities) of an entity operating in a hyperinflation environment. Non-interest revenue (NIR) to total income (%) NIR as a percentage of operating income, excluding the impairments charge on loans and advances. Number of shares listed (number) Number of ordinary shares in issue, as listed on the JSE. Off-balance-sheet exposure Undrawn loan commitments, guarantees and similar arrangements that expose the group to credit risk. Ordinary dividends declared per share (cents) Total dividends to ordinary shareholders declared in respect of the current period. Performing stage 3 loans and advances (Rm) Loans that would otherwise not be in default, but are classified as defaulted due to regulatory requirements, ie directive 7 and the new curing definition. Preprovisioning operating profit (PPOP) (Rm) Headline earnings plus direct taxation plus an impairments charge on loans and advances. Profit attributable to equity holders of the parent (Rm) Profit for the period less non-controlling interests pertaining to ordinary shareholders, preference shareholders and additional tier 1 capital instrument noteholders. Profit for the period (Rm) Income statement profit attributable to ordinary shareholders of the parent, before non-controlling interests. Return on equity (ROE) (%) Headline earnings as a percentage of daily average ordinary shareholders' equity. Return on equity (ROE) (excluding goodwill) (%) Headline earnings as a percentage of daily average ordinary shareholders' equity less goodwill. Return on tangible equity (%) Headline earnings as a percentage of daily average ordinary shareholders' equity less intangible assets. Risk-weighted assets (RWA) (Rm) On-balance-sheet and off-balance-sheet exposures after applying prescribed risk weightings according to the relative risk of the counterparty. Stage 1 Financial assets for which the credit risk (risk of default) at the reporting date has not significantly increased since initial recognition. Stage 2 Financial assets for which the credit risk (risk of default) at the reporting date has significantly increased since initial recognition. Stage 3 (Defaulted loans and advances, non-performing defaulted advances) Any advance or group of loans and advances that has triggered the Basel III definition of default criteria and is in line with the revised SA banking regulations. For retail portfolios this is product-centred and a default would therefore be specific to a client or borrower account (a specific advance). For all other portfolios, except specialised lending, it is client- or borrower-centred, meaning that should any transaction within a borrowing group default, all transactions within the borrowing group would be treated as having defaulted. At a minimum a default is deemed to have occurred where a material obligation is past due for more than 90 days or a client has exceeded an advised limit for more than 90 days. A specific impairment is raised against such a credit exposure due to a significant perceived decline in the credit quality. Stage 3 ECL (Rm) ECL for banking loans and advances that have been classified as stage 3 advances and specifically impaired, net of the present value of estimated recoveries. Tangible net asset value (Rm) Equity attributable to equity holders of the parent, excluding intangible assets. Tangible net asset value per share (cents) Tangible net asset value (NAV) divided by the number of shares in issue, excluding shares held by group entities at the end of the period. Tier 1 capital adequacy ratio (CAR) (%) Tier 1 regulatory capital, including unappropriated profit, as a percentage of total risk-weighted assets. Total capital adequacy ratio (CAR) (%) Total regulatory capital, including unappropriated profit, as a percentage of total risk-weighted assets. Value in use (VIU) (Rm) The present value of the future cashflows expected to be derived from an asset or cash-generating unit. Weighted-average number of shares (number) The weighted-average number of ordinary shares in issue during the period listed on the JSE. NEDBANK GROUP – ANNUAL RESULTS 2019 149 ABBREVIATIONS AND ACRONYMS AFR available financial resources AGM annual general meeting AI artificial intelligence AIEBA average interest-earning banking assets AIRB Advanced Internal Ratings-based AMA Advanced Measurement Approach AML anti-money-laundering API application programme interface AUA assets under administration AUM assets under management BBBEE broad-based black economic empowerment BEE black economic empowerment bn billion bps basis point(s) CAGR compound annual growth rate CAR capital adequacy ratio CET1 common equity tier 1 CIB Corporate and Investment Banking CIPC Companies and Intellectual Properties Commission CLR credit loss ratio COE cost of equity CPI consumer price index CPF commercial-property finance CSI corporate social investment CVP client value proposition DHEPS diluted headline earnings per share D-SIB domestic systemically important bank ECL expected credit loss EE employment equity ELB entry-level banking EP economic profit EPS earnings per share ESG environmental, societal and government EV embedded value ETI Ecobank Transnational Incorporated FCTR foreign currency translation reserve FSC Financial Sector Code FSCA Financial Sector Conduct Authority FVOCI Fair value through other comprehensive income FVTPL Fair value through profit or loss GDP gross domestic product GLAA gross loans and advances GOI gross operating income group Nedbank Group Limited HE headline earnings HEPS headline earnings per share HQLA high-quality liquid asset(s) IAS International Accounting Standard(s) ICAAP Internal Capital Adequacy Assessment Process IFRS International Financial Reporting Standard(s) ILAAP Internal Liquidity Adequacy Assessment Process IMF International Monetary Fund JIBAR Johannesburg Interbank Agreed Rate JSE JSE Limited LAA loans and advances LAP liquid-asset portfolio LCR liquidity coverage ratio LIBOR London Interbank Offered Rate LTI long-term incentive m million 150 NEDBANK GROUP – ANNUAL RESULTS 2019 M&A mergers and acquisitions MFC Motor Finance Corporation (vehicle finance lending division of Nedbank) MRC minimum required capital MZN Mozambican Metical NAFEX The Nigerian Autonomous Foreign Exchange Rate Fixing Methodology NAR Nedbank Africa Regions NCA National Credit Act, 34 of 2005 NCD negotiable certificate of deposit NCOF net cash outflows NGN Nigerian naira NII net interest income NIM net interest margin NIR non-interest revenue NPL non-performing loan(s) NPS Net Promoter Score NSFR net stable funding ratio nWoW New Ways of Work OCI other comprehensive income OM Old Mutual PAT profit after tax PAYU pay as you use account plc public listed company PPOP preprovisioning operating profit PRMA post-retirement medical aid R rand RBB Retail and Business Banking Rbn South African rands expressed in billions REITS real estate investment trusts Rm South African rands expressed in millions ROA return on total assets ROE return on equity RORWA return on risk-weighted assets RPA robotic process automation RRB Retail Relationship Banking RTGS real-time gross settlement RWA risk-weighted assets SA South Africa SAcsi The South African Customer Satisfaction Index SADC Southern African Development Community SAICA South African Institute of Chartered Accountants SARB South African Reserve Bank SDGs Sustainable Development Goals SICR Significant increase in credit risk SME small to mid-size enterprise STI short-term incentive TSA The Standardised Approach TTC through the cycle UK United Kingdom US United States USSD unstructured supplementary service data VAF vehicle and asset finance VaR value at risk VIU value in use VNB value of new business YES Youth Employment Service yoy year on year ytd year to date ZAR South African rand (currency code) COMPANY DETAILS NEDBANK GROUP LIMITED Incorporated in the Republic of SA Registration number 1966/010630/06 Registered office Nedbank Group Limited, Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, 2196 PO Box 1144, Johannesburg, 2000 Transfer secretaries in SA Link Market Services South Africa Proprietary Limited, 19 Ameshoff Street, Braamfontein, Johannesburg, 2001, SA. PO Box 4844, Marshalltown, 2000, SA. Namibia Transfer Secretaries (Proprietary) Limited Robert Mugabe Avenue No 4, Windhoek, Namibia PO Box 2401, Windhoek, Namibia INSTRUMENT CODES Nedbank Group ordinary shares NED JSE share code: NBK NSX share code: ZAE000004875 ISIN: NDBKY ADR code: 63975K104 ADR CUSIP: Nedbank Limited non-redeemable non-cumulative preference shares JSE share code: ISIN: NBKP ZAE000043667 FOR MORE INFORMATION CONTACT INVESTOR RELATIONS Email: NedGroupIR@nedbank.co.za RAISIBE MORATHI Chief Financial Officer Tel: +27 (0)11 295 9693 ALFRED VISAGIE Executive Head, Investor Relations Tel: +27 (0)11 295 6249 Email: alfredv@nedbank.co.za This announcement is available on the group’s website at nedbankgroup.co.za, together with the following additional information: • Financial results presentation to analysts. • Link to a webcast of the presentation to analysts. For further information please contact Nedbank Group Investor Relations at NedGroupIR@nedbank.co.za. 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 legislation. Forward-looking statements may be identified by words such as ‘believe’, ‘anticipate’, ‘expect’, ‘plan’, ‘estimate’, ‘intend’, ‘project’, ‘target’, ‘predict’ and ‘hope’. Forward-looking statements are not statements of fact, but statements by the management of Nedbank Group based on its current estimates, projections, expectations, beliefs and assumptions regarding the group’s future performance. No assurance can be given that forward-looking statements will be correct and undue reliance should not be placed on such statements. The risks and uncertainties inherent in the forward-looking statements contained in this document include, but are not limited to: changes to IFRS and the interpretations, applications and practices subject thereto as they apply to past, present and future periods; domestic and international business and market conditions such as exchange rate and interest rate movements; changes in the domestic and international regulatory and legislative environments; changes to domestic and international operational, social, economic and political risks; and the effects of both current and future litigation. Nedbank Group does not undertake to update any forward-looking statements contained in this document and does not assume responsibility for any loss or damage arising as a result of the reliance by any party thereon, including, but not limited to, loss of earnings, profits, or consequential loss or damage. NEDBANK SAYS ‘YES’ TO YES The Youth Employment Service (YES) was launched by President Cyril Ramaphosa in 2018 as an initiative between government, business, labour and civil society to tackle a national plan to build economic pathways for the youth with the aim of reducing the youth unemployment rate in SA through the creation of one million work opportunities over three years. At Nedbank we are committed to our role in the broader SA society and to delivering on our purpose of using our financial expertise to do good. On 26 April Nedbank signed the YES CEO Pledge, committing to go beyond business as usual by creating meaningful job opportunities for our youth, thereby becoming the biggest corporate contributor to the YES initiative to date. Of the more than 3 300 YES recruits for 2019, Nedbank has onboarded 250 into the organisation and the balance was placed with our sponsored implementation partners. nedbankgroup.co.za

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