Nedbank Group Ltd. Annual Report 2021

Plain-text annual report

Be the difference that impacts our world Annual results for the year ended 31 December 2021 see money differently 127 Statement of financial position analysis 128 146 147 148 150 152 155 156 Loans and advances Investment securities Investments in associate companies Intangible assets Amounts owed to depositors Liquidity risk and funding Equity analysis Capital management 161 Supplementary information 165 166 168 168 169 170 172 174 175 176 177 180 IBC Earnings per share and weighted-average shares Nedbank Group employee incentive schemes Long-term debt instruments External credit ratings Additional tier 1 capital instruments Shareholders’ analysis Basel III balance sheet credit exposure by business cluster and asset class Nedbank Limited consolidated statement of comprehensive income Nedbank Limited consolidated financial highlights Nedbank Limited consolidated statement of financial position Definitions Abbreviations and acronyms Company details Contents 1 2 Message from our Chief Executive Results presentation 50 2021 results commentary 64 Financial results 65 66 68 70 71 Financial highlights Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Return-on-equity drivers 77 Segmental analysis 78 80 82 86 100 104 108 Our organisational structure, products and services Operational segmental reporting Nedbank Corporate and Investment Banking Nedbank Retail and Business Banking Nedbank Wealth Nedbank Africa Regions Geographical segmental reporting 110 Income statement analysis 111 114 120 122 124 124 125 Net margin analysis Impairments Non-interest revenue and income Expenses Headline earnings reconciliation Taxation charge Preference shares Strong performance enabled by a more supportive environment, ongoing strategic delivery and a good operational performance The operating environment in 2021 was more supportive for Nedbank and our clients. The South African economy performed better than we expected at the start of the year, resulting in upward revisions of gross domestic product (GDP) growth to 4,9%. Off the low base in 2020, the rebound in economic growth was underpinned by higher commodity prices, lower levels of lockdown restrictions and some positive developments on key reforms in SA. The low-interest-rate environment supported demand for retail credit and transactional activity increased as lockdown levels eased. Demand for corporate credit remained muted, particularly in the first half of the year as excess cash was used to repay debt, and investment activity remained low. Encouragingly, demand for corporate credit saw a recovery in the second half. In the third quarter, the negative impacts of a prolonged third wave of Covid-19 infections, tighter lockdown restrictions, the July civil unrest in parts of the country and frequent power outages weighed heavily on economic activity. Trading conditions improved in the last quarter of 2021, supported by more lenient lockdown restrictions despite the onset of the fourth Covid-19 wave (Omicron variant). The Nedbank Group’s financial performance for 2021 reflects a strong rebound off a low 2020 base. Headline earnings (HE) in 2021 increased by 115% to R11,7bn, but remains 7% below 2019 levels. HE growth was driven by significantly lower impairments, a higher net interest margin, recovery in NIR growth, disciplined expense management and a stronger financial performance from our associate investment in ETI. Preprovisioning operating profit increased by 9% and JAWS was positive at 0,8%. The key drivers of shareholder value creation were also positive, with net asset value per share increasing by 11%, the group’s ROE improving to 12,5% (2020: 6,2%) and a full-year dividend of 1 191 cents per share at 2,02 times cover. Key balance sheet metrics have all strengthened to above pre-Covid-crisis levels. Capital and liquidity ratios increased as reflected in our tier 1 capital ratio of 14,3% (December 2020: 12,1%), common equity tier 1 (CET1) ratio of 12,8% (December 2020: 10,9%), average fourth-quarter liquidity coverage ratio (LCR) of 128% (December 2020: 126%) and net stable funding ratio (NSFR) of 116% (December 2020: 113%). Overall impairment coverage increased to multi-year highs of 3,32% (December 2020: 3,25%) and our credit loss ratio (CLR) declined to 83 bps (December 2020: 161 bps) and is now back within our board-approved through-the-cycle (TTC) target range of 60–100 bps. The strong financial performance was supported by ongoing strategic delivery. Our Managed Evolution (ME) technology journey to create a modern, modular and digital IT stack is at 85% completion. The benefits of this are evident in most of our digital metrics showing double-digit growth, as well as target operating model (TOM 2.0) benefits of R967m being realised, as we move forward towards our target of R2,5bn by the end of 2023. In the 2021 Consulta survey Nedbank achieved the #2 ranking among the five largest South African banks on client satisfaction metrics, with our Net Promoter Score (NPS) increasing further to 47. Progress on our strategic portfolio tilt strategy (SPT 2.0) was evident in market share gains in key product areas and main-banked clients, as well as improved levels of cross-sell. Nedbank recorded the largest retail main-banked market share gain among the large South African banks, while Corporate and Investment Banking (CIB) gained 35 new primary clients. We continued to create positive impacts by delivering against the United Nations Sustainable Development Goals (SDG)s and increasing our focus on environmental, social and governance (ESG) matters. In 2021 we released our Energy Policy and inaugural Taskforce on Climate-related Financial Disclosures (TCFD) report and successfully concluded Africa’s first green AT1 instrument, while maintaining ESG ratings at the top-end of the local and international peer group. After a strong rebound in South African GDP in 2021, we currently forecast the country's GDP to increase by a more modest 1,7% in 2022. Good strategic and operational delivery should support delivery of a solid financial performance for the full-year 2022, underpinned by revenue growth and an ongoing cost focus. We are on track to meet our medium-term targets* set for the end of 2023. Pleasingly, we now expect to meet the diluted headline earnings per share (DHEPS) target (greater than 2 565 cents per share) in 2022, a year ahead of our previous expectation. We continue to focus on achieving a return on equity (ROE) greater than the 2019 ROE level of 15%, reducing our cost-to-income ratio to below 54%, and ranking #1 on the NPS among South African banks, all by the end of 2023. The past two years have been unprecedented and extraordinarily difficult for our clients and employees. Thank you to all our Nedbank employees for remaining resilient throughout the Covid-19 crisis, continuing to follow the Covid-19 health protocols and diligently supporting our clients and the economy with unrelenting commitment. We extend our heartfelt condolences to the families, friends and communities of employees and clients who have lost their loved ones during this time. Our Chairperson, Vassi Naidoo passed away during 2021 after a long and brave battle with cancer. He led our board with integrity and passionately loved the Nedbank brand and all that we stand for. We will be forever grateful for his contribution to Nedbank. Mike Brown Chief Executive Headline earnings CLR ROE CET1 RATIO 115% 83 bps 12,5% 12,8% 0 4 4 5 6 0 5 2 1 9 8 6 1 1 161 15,0 79 83 6,2 12,5 11,5 10,9 12,8 2019 2020 2021 2019 2020 2021 2019 2020 2021 2019 2020 2021 * These targets are not profit forecasts and have not been reviewed or reported on by the group’s joint auditors. 1 Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Be the difference that impacts our world Nedbank Group Annual Results for the year ended 31 December 2021 NEDBANK GROUP LIMITED – 2021 Annual Financial Results 2021 Annual Financial Results For the year ended 31 December 2021 9 March 2022 1 Overview Mike Brown Chief Executive Agenda • Operating environment & strategic progress • Financial overview • Cluster overview • Outlook & guidance NEDBANK GROUP LIMITED – 2021 Annual Financial Results 2 2 Notes:Notes:Nedbank Group Annual Results 2021Overview A more supportive environment Strong financial performance Strong operational performance Good strategic delivery ▪ GDP growth recovery off a low base ▪ Corporates cautious ▪ Low interest rates supporting retail clients ▪ Less negative economic impact from Covid-19-related lockdowns in Q4 ▪ HE: + 115% ▪ ETI assoc: > 100% ▪ CET1: 12,8% ▪ LCR: ▪ NSFR: ▪ Coverage: ▪ Final DPS: 3,32% 128% 116% 758 cps NEDBANK GROUP LIMITED – 2021 Annual Financial Results ▪ PPOP: +9% ▪ JAWS: +0,8% ▪ Digital leadership ▪ Market-leading client experiences ▪ Market share gains in key areas ▪ Productivity improvements ▪ ESG leadership maintained 3 1. Operating environment – lower mortality & hospitalisations during the Omicron wave & less negative economic impact from lockdowns in Q4 2021 SA positive Covid-19 cases1 (7-day average) Stringency index2 25 000 20 000 15 000 10 000 5 000 100 75 50 25 0 Mar 20 Jun 20 Sep 20 Dec 20 Mar 21 Jun 21 Sep 21 Dec 21 0 Mar 20 Jun 20 Sep 20 Dec 20 Mar 21 Jun 21 Sep 21 Dec 21 Peak hospitalisations per wave (# 000, 7-day average) India Brazil South Africa Turkey 1 National Institute for Communicable Diseases: Peak average daily hospital admissions > 2 500 during the second wave & lowest during the fourth wave at ~1 400. | 2 Oxford University. 4 NEDBANK GROUP LIMITED – 2021 Annual Financial Results 3 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021Operating environment – vaccine roll-out has been slow, but closing in on 50% level SA vaccination roll-out stages Sisonke study Pfizer roll-out started J&J roll-out started Vaccine roll-out (million doses administered) <1% 5% 29% BOOKLET SLIDE 60+ year olds > 65% 46% 27,4 25,6 21,9 Apr 21 May Jun Jul Aug Sep Oct 21 Healthcare workers 50+ years of age 18+ years of age Booster shots approved 60+ years of age & healthcare workers 35+ years of age 12 to 17 years of age 17,5 12,6 7,5 3,0 0,2 0,3 1,0 Apr 21 May 21 Jun 21 Jul 21 Aug 21 Sep 21 Oct 21 Nov 21 Dec 21 Up to Mar 21 % of population vaccinated with at least 1 dose. NEDBANK GROUP LIMITED – 2021 Annual Financial Results 5 Operating environment – high-frequency data from our client transactional turnover1 shows a continued improvement in operating conditions Total monthly industry POS turnover (Rbn) Key sectors (indexed to March 2020) % of 2019 average Telecoms Retail Healthcare Restaurants Entertainment Hotels/Lodging Airlines Jan 19 Mar May Jul Sep Nov Jan 20 Mar May Jul Sep Nov Jan 21 Mar May Jul Sep Nov Jan 22 Mar May Jul Sep Nov Jan Mar May Jul Sep Nov 20 21 Hotels/Lodging & Airlines now above March 2020 levels, but at December 2021 only 87% & 50% of December 2019 levels, respectively. 1 Based on Nedbank POS & card-related digital payment data (client turnover). Indicators March 2020 < 50% < 80% < 100% ≥ 100% > 120% of March 2020 levels NEDBANK GROUP LIMITED – 2021 Annual Financial Results 6 4 Notes:Notes:Nedbank Group Annual Results 2021Operating environment – positive developments on key SA reforms, but business confidence still low Business confidence1 vs fixed investment 100 75 50 25 0 50% ▪ Business confidence remains below 50 (neutral position) evident in new corporate loan demand that is still weak ▪ Positive developments on key SA reforms2 25% ‒ ‘Red tape reduction drive’ ‒ Unbundling of Eskom transmission (by Dec 2022) ‒ Increased private energy generation capacity to 100 MW 0% ‒ RFP for public-private partnership in Ports ‒ Auctioning of 5G spectrum ‒ Third-party access to SA freight rail network -25% ▪ Renewable energy 00 02 04 06 08 10 12 14 16 18 20 -50% Business confidence index (LHS) Public sector GDFI growth (RHS) Private sector GDFI growth (RHS) ‒ Nedbank participated in 4 projects in the emergency renewable-energy round (500 MW to finalise Q1 2022) | Round 5 REIPPP concluded (2 600 MW) – thinly priced market | Round 6 bids (2 600 MW) open in due course ▪ Commodity boom beneficial to some clients but resulted in early repayments/limited financing needs NEDBANK GROUP LIMITED – 2021 Annual Financial Results 1 SA Bureau of Economic Research. | 2 Extracted from the SA President's State of the Nation Address 2022. Operating environment – households benefiting from lower interest rates, but pressure on consumers increasing Debt as % of income (LHS) Debt service costs as % of income (RHS) 90 80 70 60 50 40 94 96 98 00 02 04 06 08 10 12 14 16 18 20 Debt-to-income ratio Debt service cost ratio NEDBANK GROUP LIMITED – 2021 Annual Financial Results 18 16 14 12 10 8 6 4 2 0 ▪ Households have de-levered since the GFC ‒ Peak of 79% to current level of 68% ▪ Interest rates 250 bps lower since 2019, supporting: ‒ Demand for prime-linked credit (home loans, vehicle finance, etc) – evident in solid RBB loan growth ‒ Easier for households, businesses & corporates to service their debt – evident in lower CLRs ▪ Rising pressure on consumers ‒ Transport (oil), electricity & food price increases 7 8 5 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021Nedbank Group strategy Targets to 20231 DHEPS > 2 565 cents (2019 levels) ROE > 15% (2019 levels) Cost-to-income ratio < 54% Net Promoter Score #1 bank (from #2 in 2021) Strategic value drivers Growth Productivity Risk & capital management Strategic value unlocks Delivering market-leading client solutions Ongoing disruptive market activities Driving efficient execution (TOM 2.0) Focusing on areas that create value (SPT 2.0) Creating positive impacts 1 Set in March 2020. NEDBANK GROUP LIMITED – 2021 Annual Financial Results Growth & productivity – trends improving, revenue drivers up & cost-to- income down Growth 10% Revenue 5% & advances growth (%) 0% -5% -10% Dec 19 Jun 20 Dec 20 Jun 21 Dec 21 NII NIR Gross advances Productivity Excl MFVHA adjustments: +16% yoy H2 on H2 +21% yoy PPOP (Rm) 2 4 9 0 1 7 1 7 0 1 4 4 8 9 6 5 4 0 1 1 7 8 1 1 H2 19 H1 20 H2 20 H1 21 H2 21 Client gains & AUM CIB new primary clients +35 NAR clients1 +1% Retail main-banked clients +1% AUM growth +13% to R424bn Cost-to-income ratio (%) Excl MFVHA adjustments: 57,0% 5 , 6 5 Dec 19 1 , 8 5 Dec 20 7 , 7 5 Dec 21 1 Excl dormant-account closures growth was 14%. NEDBANK GROUP LIMITED – 2021 Annual Financial Results 6 9 10 Notes:Notes:Nedbank Group Annual Results 2021Risk & capital management – balance sheet metrics strong & above 2019 levels Capital CET1 ratio (%) Liquidity LCR (%) % 5 , 1 1 % 6 , 0 1 % 9 , 0 1 % 2 , 2 1 % 8 , 2 1 Dec 19 Jun 20 Dec 20 Jun 21 Dec 21 % 5 2 1 % 5 1 1 % 6 2 1 % 1 3 1 % 8 2 1 Dec 19 Jun 20 Dec 20 Jun 21 Dec 21 NSFR (%) % 3 1 1 % 4 1 1 % 3 1 1 % 4 1 1 % 6 1 1 Dec 19 Jun 20 Dec 20 Jun 21 Dec 21 NEDBANK GROUP LIMITED – 2021 Annual Financial Results Dividends Dividends/share (cents) 5 9 6 d n e d v d i i d n e d v d i i o N o N 3 3 4 8 5 7 Credit CLR (%) Total coverage (%) Dec 19 Jun 20 Dec 20 Jun 21 Dec 21 9 7 Dec 19 % 6 2 , 2 7 8 1 Jun 20 1 6 1 5 8 3 8 Dec 20 Jun 21 Dec 21 % 5 8 , 2 % 5 2 , 3 % 1 4 , 3 % 2 3 , 3 Dec 19 Jun 20 Dec 20 Jun 21 Dec 21 11 Nedbank Group strategy Targets to 2023 DHEPS > 2 565 cents (2019 levels) ROE > 15% (2019 levels) Cost-to-income ratio < 54% Net Promoter Score #1 bank (from #2 in 2021) Strategic value drivers Growth Productivity Risk & capital management Strategic value unlocks 1 2 3 4 5 Delivering market-leading client solutions Ongoing disruptive market activities Driving efficient execution (TOM 2.0) Focusing on areas that create value (SPT 2.0) Creating positive impacts Enabled by Managed Evolution technology strategy NEDBANK GROUP LIMITED – 2021 Annual Financial Results 12 7 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Managed Evolution – good progress on our technology strategy Managed Evolution 85% complete (2020: 78%) Digital leadership externally acknowledged Good ongoing strategic progress ▪ 78 core systems (2020: 90) ▪ Individual & juristic digital onboarding in place ▪ 6 of our top 10 product/client journeys digitised + various additional products ▪ ▪ IT cash flow spend peaked in 2017 at R2,3bn & 2021: R1,6bn Intangible software assets peaked in 2021 at R9bn ▪ Most Innovative Digital Bank1 ▪ Best Digital Bank2 ▪ Best Mobile & Internet Banking3,4 ▪ Best Bank for APIs1,2 ▪ Best Technology Transformation1, ▪ Best Innovation in Retail Banking5 NEDBANK GROUP LIMITED – 2021 Annual Financial Results Source: 1 WorldEco.2 Global Banking & Finance Awards. 3 Global Business Outlook. 4 International Business Magazine. 5 International Banker. 13 Managed Evolution – materially complete & delivering benefits as per plan Core systems (#) Rationalise, standardise & simplify Managed Evolution programme ~85% complete, R9,8bn by Dec 2021 (R13bn including new technologies) Core banking modernisation Client systems Enterprise strategic payments 5 7 - 5 6 1 7 1 2 5 1 2 4 1 8 2 1 9 1 1 7 1 1 0 9 8 7 5 7 - 5 6 = Dec 2019 Bubble size indicates total estimated spend Enterprise data Foundations ERPERP BOOKLET SLIDE IT software development spend (Rbn) Annual cash flow spend peaked1 The group’s intangible software assets are expected to have peaked in 2021 at R9bn, in line with reducing cash flow spend. 1,6 14 15 16 17 18 19 20 21 MT 0% 25% 50% 75% 100% 14 15 16 17 18 19 20 21 22 23 24 Completion 1 Project cash flow in 2021 was lower yoy as some large programmes came to an end. The expectation is to increase in 2022 as we aim to complete last few components of ME. Illustrative only Compliance-related NEDBANK GROUP LIMITED – 2021 Annual Financial Results 14 0 5 2 10 8 Notes:Notes:Nedbank Group Annual Results 2021 1 Delivering market-leading client solutions – client satisfaction & brand metrics continue on an upward trajectory SA Client Satisfaction Index1 Net Promoter Score1 Other metrics 90 85 80 75 70 #2 80 60 40 20 0 ▪ Brand sentiment ranking (#2) consistently above SA bank average2 #2 ▪ Nedbank brand value3: R15bn ▪ SA brand rank3 in SA: #8 ▪ Multiple wholesale & retail banking awards for business impact & expertise 15 16 17 18 19 20 21 15 16 17 18 19 20 21 Absa Capitec FNB Nedbank Standard 1 Annual Consulta survey. 2 1 January 2020 to June 2020: Brandseye & July 2020 to December 2021: Salesforce Social Studio. 3 Top 8 among Top 50 SA companies (Brand Finance). NEDBANK GROUP LIMITED – 2021 Annual Financial Results 15 1 External recognition received across all business clusters in 2021 – enabled by business excellence, digital innovation & ESG leadership The Banker Bank of the Year (South Africa) 2021 Nedbank Group The Banker GLOBAL 2021 Deal of the Year Africa: Infrastructure & Project Finance: Mozambique LNG 1 $15,4bn financing FINANCE 2021 Global Finance Investment Bank Awards: Best Debt Bank: Africa BOOKLET SLIDE GLOBAL FINANCE 2021 Global Finance Investment Bank Awards: Best Investment Bank: South Africa WorldEco Most Innovative Digital Bank: 2021 Nedbank WorldEco Best bank for API initiatives: 2021 Nedbank WorldEco Best Technology Transformation: Global Business Outlook Best Digital Bank in South Africa: 2021 Nedbank 2021 Nedbank GLOBAL BANKING & Financereview GLOBAL BANKING & Financereview AAPPII BBlloooommbbeerrgg GLOBAL BANKING & Financereview Best Corporate Bank South Africa | 2021 Best Investment Bank South Africa | 2021 Nedbank CIB Nedbank CIB Top Real Estate Bank of the Year Africa | 2021 DCM rankings South Africa | 2021 Best Digital Bank | South Africa | 2021 #2 by volume Nedbank Nedbank CIB & value GLOBAL BANKING & Financereview Best Open Banking APIs South Africa | 2021: Nedbank INTERNATIONAL BUSINESS MAGAZINE INTERNATIONAL BUSINESS MAGAZINE Best Mobile Banking Best Mobile Banking Best Internet Banking South Africa | 2021 Best Internet Banking South Africa | 2021 Nedbank RBB Nedbank NAR 2021 winner: Infrastructure Deal of the Year INTERNATIONAL BANKER GLOBAL BUSINESS Review Magazine Best Innovation in Retail Banking 2021 Nedbank RBB Best Retail Bank & Best CSR Bank South Africa 2021 WWEEAALLTTHHBBRRIIEEFFIINNGG MMIIDDDDLLEE EEAASSTT && NNOORRTTHH AAFFRRIICCAA AAWWAARRDDSS Best Boutique Private Bank | 2021 Nedbank Private Wealth International (third year in a row) GLOBAL BANKING & Financereview EEUURROOMMOONNEEYY Best Bank for Sustainable Development Best Bank for Sustainable Finance South Africa | 2021 Nedbank Africa | 2021 Nedbank 2021 winner: Investment Bank of the year (global award) Nedbank CIB Business-impact- & expertise-related Technology & innovation-related Purpose- & ESG-related NEDBANK GROUP LIMITED – 2021 Annual Financial Results OLIVER TOP EMPOWERMENT AWARDS Top Empowered Business of the Year 2021 Nedbank 16 9 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 20211 Delivering market-leading client solutions – our digital journeys are enabled by Eclipse & Nedbank Business Hub End-to-end digital client onboarding & digitising our products BOOKLET SLIDE 2019 Individual client onboarding Branch Web & app Clients Channels 1 Personal loans 2 Transactional 3 MVP 4 MVP 5 MVP 2020 Juristic client onboarding Branch Overdraft Credit card Investments 2021 2022 2023 2024 Ongoing juristic client onboarding enhancements Omnichannel1 Omnichannel2 Project Imagine enhancements 6 Forex Individual Juristic 7 MVP Home loans 8 Wealth: Stockbroking Individual Products Nedgroup Investments MVP MVP Transactional Investments Overdraft, RCF, VAF, Cash Online/Vault Services Individual Juristic 130+ MVP 171 10 VAF 9 Student loans MVP Wealth: Insurance MVP Retail Relationship Banking Ongoing enhancements Wealth: Banking MVP Everyday Banking Ongoing enhancements CX enhancements Payments (domestic & global) Credit digitisation Additional individual products Agency banking Juristic Servicing Onboarding Corporate card Issuing Card acquiring Complex lending All remaining services on legacy applications migrated to Eclipse or Nedbank Business Hub, incl juristic. Wealth Juristic 100+ Individual Juristic 17 NEDBANK GROUP LIMITED – 2021 Annual Financial Results 1 Branch, web, app, ATM, self-service kiosk, call centre. | 2 Branch, web, app, self-service devices. 1 Delivering market-leading client solutions – digital uptake & usage accelerated, driven by world-class delivery, enablement & innovation, as well as client behavioural shifts during Covid-19 Digitally active clients (% of total active clients) Digital sales (% of new sales1) Digital transaction volumes (# m) App transaction volumes (# m) % 8 2 19 % 2 3 20 % 6 3 21 % 2 1 19 % 8 2 20 % 2 3 21 8 5 19 +50% 8 6 20 7 8 21 2 2 19 +159% 7 3 20 7 5 21 Digitally active main-banked clients Money app active users (# 000) Digital transaction values (Rbn) App transaction values (Rbn) +96% +21% % 9 4 % 7 5 % 4 6 9 2 8 2 8 1 1 1 3 6 1 9 9 3 6 0 4 2 8 4 1 9 20 19 19 1 2019 based on applications, excl. MobiMoney. 2020 onwards measured on new funded sales – excl MobiMoney. Digitally active clients & Money app users have been restated to align to the new client active definition ie Client has either a non-zero balance asset product or a non-zero balance investment product; or a positive funded balance Transactional Product (TP), or a negative TP balance with a transaction done within the last 12 months. 21 20 21 21 19 19 20 NEDBANK GROUP LIMITED – 2021 Annual Financial Results 10 +163% 9 3 1 20 9 3 2 21 Change since 2019 18 Notes:Notes:Nedbank Group Annual Results 20212 Ongoing disruptive market activities – Nedbank is connecting individuals & businesses via marketplaces & APIs, now > 1 million clients1 Registered clients (’000) 4,7x 2020 2021 B2C >675 000 clients 3 1 Gross merchandise value (Rm) 3x 2 >1/4 million products & services B2B >20 250 businesses 11 verticals Merchants & partners (‘000) 3x 2020 2021 1 At the beginning of March 2022. 2020 2021 NEDBANK GROUP LIMITED – 2021 Annual Financial Results 19 3 Driving efficient execution – the benefits from our Managed Evolution technology investments & digitisation are being unlocked through TOM 1.0 & TOM 2.0 Cumulative TOM 1.0 & TOM 2.0 benefits (Rbn) TOM 2.0 Optimising the shape of our infrastructure in a more digital world, embedding a more client-centred RBB structure (incl back-office optimisation) & optimise groupwide shared services TOM 1.0 Modernised technology platform (ME), optimised digital innovation capabilities (DFL) & implementation of end-to-end digital client onboarding, & digital products & services e t a r n u r s t i f e n e B LT 1,0 2,5 0,2 0,7 1,1 1,8 2,0 17 18 19 20 21 22 2,0 23 target TOM 1.0 TOM 2.0 Shift to digital payments – optimise own physical channels (Imagine) Hybrid working practices – shrink own property Client-centred model – leaner RBB structure (Phoenix) Benefits from technology transformation Efficient & effective central Reset third-party spend – smarter supply chain & procurement functions NEDBANK GROUP LIMITED – 2021 Annual Financial Results 20 11 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 3 Driving efficient execution – benefits evident in optimisation of operations to enable lower expense growth over time & meet our 2023 cost-to-income ratio target of 54% Permanent employees (# of) SA outlets/branches (# of) Teller activity (# m)2 (8%) 1 7 2 8 2 20 1 6 8 6 2 21 7 7 8 0 3 18 3 1 2 9 2 19 (9%) 9 4 5 20 8 3 5 21 4 0 6 18 9 8 5 19 (55%) 1 3 18 3 2 19 3 1 20 1 1 21 Branch floor space (‘000 m2)1 Saved to date Corporate real-estate floor space (‘000 m2) Saved to date Annual amortisation charge (% growth) (3%) 65 2 8 1 21 2 1 2 18 4 0 2 19 0 9 1 20 116 5 6 2 21 6 5 3 18 8 2 3 19 3 1 3 20 1 Represents the total branch floor space we saved since 2018, equating to approximately 14% of our branch floor space since 2018 – floor space saved since 2014 equates to 65k sqm – equivalent of 28% of the 2014 floor space. | 2 Refers to the volume of interactions with tellers. NEDBANK GROUP LIMITED – 2021 Annual Financial Results 1 2 18 2 2 19 3 2 20 9 1 21 Change since 2019 21 4 Strategic portfolio tilt 2.0 – target growth where we are underweight & be selective in areas of strength, while growing the transactional banking franchise (main-banked client gains & higher cross-sell) BA 900 market share (%) Nedbank total lending market share: 17,7% Nedbank total deposit market share: 17,9% % 1 , 9 1 % 1 , 8 1 % 8 , 6 1 % 7 , 8 3 % 5 , 8 3 % 2 , 7 3 % 4 , 4 1 % 4 , 4 1 % 2 , 4 1 % 4 , 6 3 % 5 , 6 3 % 9 , 6 3 % 2 , 0 1 % 2 , 1 1 % 2 , 2 1 % 0 , 3 1 % 6 , 2 1 % 0 , 2 1 % 2 , 7 % 0 , 8 % 9 , 9 % 0 , 6 1 % 0 , 5 1 % 5 , 3 1 % 9 , 3 1 % 6 , 5 1 % 6 , 6 1 19 20 21 19 20 21 19 20 21 19 20 21 19 20 21 19 20 21 19 20 21 19 20 21 19 20 21 Wholesale term loans CPF Home loans Vehicle finance Personal loans Credit card Retail overdrafts NEDBANK GROUP LIMITED – 2021 Annual Financial Results Retail transactional deposits Commercial transactional deposits 22 12 Notes:Notes:Nedbank Group Annual Results 2021 5 Creating positive impacts – anchoring our position as an impact financier Sustainable funding (Rbn) Renewable energy (REIPPPP) financing (exposures, Rbn) Journey to zero exposure to fossil- fuel-related activities by 2045 Board limit up to R50bn 2020 Climate change resolutions passed with 100% votes of approval at our 53rd AGM 9,8 3,6x 7,6 2,7 19 20 21 Green AT1 IFC climate loan Green bonds NEDBANK GROUP LIMITED – 2021 Annual Financial Results 10 15 15 16 19 17 23 18 25 19 32 20 29 21 Added >3 500 MW renewable energy to the national grid (R35bn underwritten), excluding emergency round (Round 4.5) & Round 5 2021 Adopted & disclosed our market-leading energy policy & inaugural TCFD report 2025 No provision of project financing for new thermal-coal mines 2030 Thermal-coal funding to be < 0,5% of gross loans & advances 2035 No new finance for oil production 2045 Zero exposure to fossil-fuel-related activities 2050 100% of lending & investing supporting a net-zero carbon economy 23 5 Creating positive impacts – social/societal > R360m study loans to students3 > R5bn loans for student accommodation3 R121m CSI spend in 2021, with 47% allocated to education R57bn loans to SMEs, entrepreneurs, professionals2 > 1 900 job opportunities supported for unemployed youth (YES) 87% of Nedbank-owned buildings Green Carbon- neutral operations (since 2009) R5bn loans for affordable housing3 R25bn loans for green buildings3 Star-rated Level 1 BBBEE status (for past 4 years) Black staff1: > 79% 106 tons of food & supplies to employees, families & communities impacted by the July 2021 riots R800m lending towards water projects in 2021 Own operational total water consumption down by 18% yoy (39% since 2019) NEDBANK GROUP LIMITED – 2021 Annual Financial Results 1 African, Coloured & Indian population. | 2 Represents RRB loans & advances. | 3 Over past 5 years. 24 13 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 20215 Creating positive impacts – governance Nedbank Board Independent directors up to 69% (2020: 67%) Black (ACI1) directors up to 62% (2020: 60%) A supporting culture ESG ratings 17 19 ESG AA rating Top 33% of global banks Great place to work NPS: 7 19 20 21 4,3 out of 5 Top 6% of global banks 16,5 low risk 22nd out of 420 diversified banks C rating Top 20% of all global banks 25 Female directors up to 23% (2020: 20%) 9% employee attrition Attrition: (2020: 7% | 2019: 11%) Regular shareholder engagements on ESG matters (2021: eighth annual roadshow) 1 Defined as African, Coloured & Indian population. NEDBANK GROUP LIMITED – 2021 Annual Financial Results ESG incorporated in performance scorecards & remuneration Group-level corporate transactions completed in 2021 OM unbundling of its shareholding in Nedbank Group Repurchased 100% of Nedbank Limited preference shares 15 Oct 2018: OM unbundled 32% ▪ Offer to shareholders: 30% premium to ▪ ▪ 8 Nov 2021: OM unbundled 12,2% ▪ No impact on strategy, day-to-day management or operations of Nedbank, our employees or clients. Existing commercial relationship underpinned by arm’s length agreements ▪ Benefits: Increased free float of Nedbank shares (enhanced liquidity & more favourable position in relevant indices) ▪ OML shareholding: 5,2% (31 Dec 2021) the 30-day VWAP ▪ Rationale: Expensive funding that does not contribute to Basel III requirements ▪ Outcome: 100% votes of approval at Nedbank Limited AGM (19 Nov 2021) ▪ Shares suspended: 14 Dec 2021 ▪ No material impact on Nedbank’s funding or capital ratios NEDBANK GROUP LIMITED – 2021 Annual Financial Results 26 14 Notes:Notes:Nedbank Group Annual Results 2021Financial overview Mike Davis Chief Financial Officer ‘Strong HE recovery ahead of expectations & ROE up to 12,5%’ NEDBANK GROUP LIMITED – 2021 Annual Financial Results 27 Key drivers of shareholder value creation – strong NAV growth & ROE recovery, while dividend payments resumed NAV per share (cents) ROE & cost of equity (%) Dividend per share (cents) 5 1 4 1 1 9 1 1 12,5 1 9 3 8 1 3 9 4 0 2 i s d n e d v d o N i 07 09 11 13 15 17 19 21 07 09 11 13 15 17 19 21 07 09 11 13 15 17 19 21 COE ROE Interim Final Strong NAV recovery +11% yoy ROE improved to double digits Final dividend at 1,75x cover NEDBANK GROUP LIMITED – 2021 Annual Financial Results 28 15 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Strong capital & liquidity positions, supported by stronger profitability & prudent levels of provisioning yoy 115% 112% 223% 1% 2% Headline earnings (Rm) DHEPS (cents) Basic EPS (cents) ROE (%) Gross banking advances (Rbn) Deposits (Rbn) NIM (bps) Credit loss ratio (bps) Total coverage (%) Liquidity coverage ratio (%) NSFR (%) CET1 ratio (%) Risk-weighted assets (Rbn) (3%) 2021 11 689 2 362 2 317 2020 5 440 1 113 717 2019 12 506 2 565 2 500 12,5% 6,2% 15,0% 807 972 373 83 3,32% 128% 116% 12,8% 657 797 954 336 161 810 904 352 79 3,25% 2,26% 126% 113% 10,9% 674 125% 113% 11,5% 629 Profitability Advances & deposits Asset quality Liquidity Capital NEDBANK GROUP LIMITED – 2021 Annual Financial Results 29 Headline earnings up by 115% – driven by a significant decrease in impairments, strong revenue recovery & well-managed expenses Headline earnings (Rm) 8% 4% (50%) 6% 77% 1 868 347 6 593 2 129 2 419 887 5 440 HE 20 NII NIR Impairments Expenses Associate income Direct tax 1 & other 1 Other includes Indirect tax, net monetary loss, and minority & preference shareholders. NEDBANK GROUP LIMITED – 2021 Annual Financial Results 11 689 HE 21 30 16 Notes:Notes:Nedbank Group Annual Results 2021Headline earnings up by 115% – driven by a significant decrease in impairments, strong revenue recovery & well-managed expenses BOOKLET SLIDE Key earnings drivers (pre-tax, Rm) +10% excl MFVHA adjustments +2% excl incentives 8% 4% (50%) 6% 77% 0 0 5 2 3 7 6 1 0 3 1 8 0 0 3 NII 7 2 0 5 2 7 9 9 5 2 0 4 1 4 2 NIR 4 3 5 6 9 2 1 6 7 2 1 3 1 9 7 1 2 3 2 7 7 1 3 9 3 6 3 3 3 9 7 2 5 4 9 9 7 Impairments Expenses Associate income NEDBANK GROUP LIMITED – 2021 Annual Financial Results 31 19 20 21 Strong PPOP growth across all our clusters PPOP (Rm) CIB yoy 2021 2020 2019 yoy H1 2021 H1 2020 yoy H2 2021 H2 2020 8% 8 734 8 092 8 920 1% 4 423 4 363 16% 4 311 3 729 RBB 5% 11 432 10 931 12 175 3% 5 291 5 136 6% 6 141 5 795 Wealth 22% 1 275 1 048 1 358 13% 600 531 31% 675 517 NAR 76% 736 419 626 16% 279 241 156% 457 178 Centre 111% 150 71 (502) (131%) (138) 446 177% 288 (375) Group 9% 22 327 20 561 22 577 (2%) 10 456 10 717 21% 11 871 9 844 NEDBANK GROUP LIMITED – 2021 Annual Financial Results 32 17 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021Gross banking advances up 1% ‒ momentum in RBB continued, while CIB reversed the downward growth trend in the second half of 2021 CIB gross banking advances (Rbn) RBB gross banking advances (Rbn) 450 400 350 300 250 (2%) 1 +10% I B C B B R +7% Apr Jan 19 Jul Oct Jan 20 Apr Jul Oct Jan 21 Apr Jul Oct Apr Jan 19 Jul Oct Jan 20 Apr Jul Oct Jan 21 Apr Jul Oct 1 Annualised. NEDBANK GROUP LIMITED – 2021 Annual Financial Results 33 Retail loan application volumes – initial impact of strict lockdowns in 2020 but strong recovery on the back of lower interest rates & benefits from our enhanced digital channels BOOKLET SLIDE Home loan applications Vehicle finance applications +10% +15% Apr Jan 19 Jul Oct Jan 20 Apr Jul Oct Jan 21 Apr Jul Oct Apr Jan 19 Jul Oct Jan 20 Apr Jul Oct Jan 21 Apr Jul Oct Personal-loan applications Card applications +30% +35% Apr Jan 19 Jul Oct Jan 20 Apr Apr Jul Oct Jan 21 2019 Jul Oct Apr Jan 19 Jul Oct Jan 20 Apr Jul Oct Jan 21 Apr Jul Oct 2020 2021 Total 12-month yoy change NEDBANK GROUP LIMITED – 2021 Annual Financial Results 34 18 Notes:Notes:Nedbank Group Annual Results 2021Deposits up by 2% – good growth in transactional & core deposits, while reliance on wholesale funding continues to reduce Deposits (Rbn, % change yoy) Funding mix (% contribution 2021 vs 2019) 5% 8% (5%) (18%) (1%) 4 6 3 7 3 3 6 2 3 9 6 2 5 5 2 5 9 1 5,9% 6,8% 32,3% 8 9 1 8 9 1 7 9 1 18,5% 9 1 1 0 0 1 2 8 7 6 3 6 0 6 36,5% 2019 2021 CASA & cash management Call & term Fixed deposits NCDs Foreign currency & other Wholesale Commercial Household Dec 19 Dec 20 Dec 21 Capital markets Foreign funding NEDBANK GROUP LIMITED – 2021 Annual Financial Results 35 NII up by 8% ‒ NIM expansion driven by higher levels of endowment (capital & CASA), asset & liability mix changes, improved asset pricing, risk management & basis risk impact Net interest margin (bps) 12 6 20 (14) 13 354 Dec 16 362 Dec 17 365 Dec 18 352 Dec 19 336 Dec 20 Endowment pricing Endowment volume Liability mix & pricing Asset mix & pricing Balance sheet mgnt & other Positively positioned for a rising rate cycle – NII sensitivity for 1% change in interest rates: R1,6bn NEDBANK GROUP LIMITED – 2021 Annual Financial Results 373 Dec 21 36 19 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021NIR up by 4% – recovery in commission & fees, insurance income & equity revaluations, partially offset by the impact of a high 2020 trading base & fair-value unwinds NIR (Rm) 4% (15%) 24% > 100% > (100%) 4 2 5 4 5 7 4 4 2 5 2 5 9 3 7 8 1 7 3 1 7 1 4 5 7 7 1 7 3 8 1 2 2 6 1 5 0 0 2 ) 8 3 0 1 ( 2 6 2 0 5 6 2 5 3 0 6 5 1 8 6 7 9 5 7 5 Commission & fees Trading income Insurance income Equity revaluations Fair value ) 3 3 8 ( Other¹ 19 20 21 1 Represents sundry income & investment income. NEDBANK GROUP LIMITED – 2021 Annual Financial Results ▪ ▪ ▪ ▪ ▪ Commission & fees – recovery evident in increasing client transactional activity, main-banked client gains & cross-sell Trading – solid performance but growth impacted by high 2020 base Insurance – enhanced ALM strategy & improved investment performance, partially offset by an increase in death & funeral claims Equity revaluations – non-recurrence of negative revaluations in 2020 Fair value – unwind of the 2020 gains as a result of the group’s macro fair-value hedge accounting solution (no further volatility in H2 2021 & not expected to recur) 37 NIR – our technology strategy, along with shifts in RBB client transactional behaviours are driving NIR growth & cost optimisation opportunities Branch teller transactions1 POS volumes (21%) BOOKLET SLIDE +32% Apr Jan 19 Jul Oct Jan 20 Apr Jul Oct Jan 21 Apr Jul Oct Apr Jul Oct Jan 20 Jan 19 Digital payment & transfers2 Apr Jul Oct Jan 21 Apr Jul Oct ATM withdrawals (1%) +27% Apr Jan 19 Jul Oct Jan 20 Apr Jul Oct Jan 21 2019 Apr Jul Oct Apr Jan 19 Jul Oct Jan 20 Apr Jul Oct Jan 21 Apr Jul Oct 2020 2021 Total 12-month yoy change 1 Teller transactions include any cash-related transactions performed over the counter (eg deposits, withdrawals & transfers etc). | 2 App & web payment volumes combined. NEDBANK GROUP LIMITED – 2021 Annual Financial Results 38 20 Notes:Notes:Nedbank Group Annual Results 2021 Trading income & equity revaluations – growth impact of 2020 trading base effects, normalising to 2019 levels Trading income (Rm) Equity revaluations (Rm) BOOKLET SLIDE 3 129 2 174 2 350 2 123 2 273 2 202 293 396 254 H1 19 H2 19 H1 20 H2 20 H1 21 H2 21 H1 19 H2 19 H1 20 H2 20 H1 21 H2 21 Commodities & equities Debt securities Foreign exchange Unrealised gains/losses Realised gains, dividends, etc (31) (273) (765) ▪ Equities – non-linear derivatives book well positioned ▪ in volatile equity markets ▪ Debt securities & FX – lower due to high base & once-off income earned in H1 2020. Global macro environment creating high volatility levels, low liquidity & subdued client flows NEDBANK GROUP LIMITED – 2021 Annual Financial Results IB – normalisation of equity revaluations driven by improved underlying investee company profitability resulting in increased valuations ▪ CPF – lower negative revaluations than the prior year Insurance – improved investment returns due to strong JSE growth, offset by higher claims in the life portfolio, with a slight decrease in H2 2021 Death claims (volumes) Funeral claims (volumes) JSE all share index1 (points) +66% +22% 80 000 60 000 40 000 20 000 0 39 +24% Jan 19 Apr Jul Oct Jan 20 Apr Jul Oct Jan 21 Apr Jul Oct Jan 19 Apr Jul Oct Jan 20 Apr Jul Oct Jan 21 Apr Jul Oct Jan 19 Apr Jul Oct Jan 20 Apr Jul Oct Jan 21 Apr Jul Oct 2019 2020 2021 Total 12-month yoy change 1 Measured end of December 20 to end of December 21. NEDBANK GROUP LIMITED – 2021 Annual Financial Results 40 21 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021Asset Management – 13% growth in AUM supported by positive net flows & an increase in market share in international & money market funds Assets under management (Rbn) Market share (%) 424 s n o i l l i B 375 331 312 297 273 257 212 190 151 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 12 13 14 15 16 17 18 19 20 21 12 13 14 15 16 17 18 19 20 21 Local International International Passive Money Market Funds SA NEDBANK GROUP LIMITED – 2021 Annual Financial Results 41 Balance sheet ECL strong at R26,6bn – R6,5bn income statement charge, while recoveries & write-offs increased (conservatism) Balance sheet ECL (Rbn) 1,4 6,5 (8,1) Write-offs & post-write-off recoveries (Rbn) Recoveries 1,3 1,2 1,2 1,4 (4,0) (5,5) (7,4) (8,1) 15,8 Dec 18 18,2 Dec 19 26,1 Dec 20 IS charge NEDBANK GROUP LIMITED – 2021 Annual Financial Results Recoveries Write-offs Other 26,6 Dec 21 Write-offs Dec 18 Dec 19 Dec 20 Dec 21 42 22 Notes:Notes:Nedbank Group Annual Results 2021Impairment charge down by 50% Impairment charge (Rm) Key drivers 13 127 (50%) ▪ Gross loans & advances up by 1% 9 471 2 734 922 391 (110) Stage 1 Stage 2 Stage 3 & other Dec 20 Stage 1 Stage 2 Stage 3 & other Dec 21 ▪ Significantly better collections experience – benefits from interest rate cuts in 2020 & improved risk profile ▪ Macroeconomic benefits coming through in models – mainly as GDP growth improved 6 534 ▪ D3 loans1 reduced to R3bn (Jun 20: R119bn) 6 253 ▪ D7 loans2 reduced to R10bn (Dec 20: R13bn) – restructured loans cured ▪ Judgemental & macroeconomic overlays – R1,7bn emerged in our new IFRS models, R675m released through the IS & R1,5bn remain in place 1 D3 loans: Covid-related relief loans provided under PA D3/2020. | 2 D7 loans: Distressed restructured loans provided under PA D7/2015. NEDBANK GROUP LIMITED – 2021 Annual Financial Results 43 Credit loss ratio reduced to 83 bps – within our TTC range of 60 to 100 bps Group CLR (bps) Cluster CLR (bps) GFC 152 300 250 200 150 100 50 0 Covid-19 187 161 79 83 8 1 1 2 8 2 4 9 6 2 0 4 2 4 3 1 0 1 2 5 8 1 4 6 0 5 9 06 07 08 09 10 11 12 13 14 15 16 17 18 19 H1 20 20 21 CIB RBB Wealth NAR TTC target range Dec 19 Jun 20 Dec 20 Dec 21 NEDBANK GROUP LIMITED – 2021 Annual Financial Results 2 7 44 23 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021CLR ‒ declines across all key business units & products due to conservative provisioning in 2020 under IFRS 9, together with a materially better macroeconomic environment Credit loss ratio (bps) BOOKLET SLIDE Home loans VAF Unsecured lending Card BB 2 5 8 2 2 4 4 2 6 1 ) 9 ( 1 8 1 6 4 1 9 6 2 8 8 0 1 5 1 0 1 6 1 6 2 4 5 4 9 8 2 3 6 0 1 0 1 5 4 8 6 1 9 5 8 1 1 0 1 2 7 ) 1 2 ( 19 20 21 19 20 21 19 20 21 19 20 21 19 20 21 19 20 21 19 20 21 19 20 21 19 20 21 CIB RBB Wealth NAR NEDBANK GROUP LIMITED – 2021 Annual Financial Results 45 Credit risk – D3 (payment relief) loans & D7 (restructured) loans reduced significantly from Dec 2020 D3/2020 relief provided (Rbn) D7/2015 restructured loans (Rbn) BOOKLET SLIDE Balance sheet ECL: R2,9bn R0,5bn R0,2bn Not disclosed R2,8bn R2,0bn 119 65 28 D3 ends 1 April 2022 9 3 No D3 loans 13 10 9 9 7 Dec 19 Jun 20 Sep 20 Dec 20 Jun 21 Dec 21 Dec 19 Jun 20 Dec 20 Jun 21 Dec 21 CIB RBB Wealth NAR RBB CIB Other NEDBANK GROUP LIMITED – 2021 Annual Financial Results 46 24 Notes:Notes:Nedbank Group Annual Results 2021Covid-19 & macro-related adjustments/overlays – risks either emerged via our new IFRS models, did not emerge or still remain in place Covid-19 & macro-related adjustments/overlays Dec 2020 Dec 2021 Changes 2020 to 2021 (Rm) Other ▪ Central provision (emerging risk not yet in models/data/macroeconomic forecasts) ▪ NAR & Nedbank Wealth overlays CIB ▪ IB & TS overlays – D3/D7 migration risk ▪ CPF overlays R750m R500m R168m R75m R386m R440m R76m R370m 1 518 ▪ Interest rate benefit neutralisation overlay (MFC, the rest of Retail adjusted in the models from H2 20) R370m R0m ▪ Covid-19-related adjustments RBB ‒ Overlays on Retail loans to cater for short-term residual risk (reduction driven by RBB D3 loans declining to zero) R334m R0m ‒ BB overlays ‒ Longer-term impact using stressed forward-looking information (FLI) R416m R257m R1 027m ____________ R3 891m R240m ____________ R1 518m In addition to the R1,5bn Covid-19 overlays, new overlays were raised in RBB & CIB 675 1 698 Released through the IS In new IFRS models Remain in place (monitored) NEDBANK GROUP LIMITED – 2021 Annual Financial Results 47 Credit risk – strong coverage ratios across stage 1, 2 & 3 loans Stage 1 loans Stage 2 loans Stage 3 loans Coverage ratio (%) 0,45 0,48 0,65 0,69 +2% yoy 5,0 5,3 6,6 6,4 36,8 37,9 38,0 0% yoy 31,5 (13%) yoy Loans & advances (Rbn) 3 5 6 Dec 18 8 7 6 Dec 19 9 1 6 Dec 20 4 3 6 Dec 21 3 7 Dec 18 2 7 Dec 19 8 9 Dec 20 9 9 Dec 21 5 2 Dec 18 8 2 Dec 19 5 4 Dec 20 9 3 Dec 21 Stage 1 coverage – marginal increase driven by mix changes (RBB vs CIB growth) Stage 2 coverage – decrease driven by the reduction of the central provision & other overlays Stage 3 coverage – increase driven by D7 loans curing & higher CIB stage 3 coverage ratio NEDBANK GROUP LIMITED – 2021 Annual Financial Results 48 25 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021Expenses up by 6% – excluding incentives expenses up by 2%, reflecting good cost management, with focus on efficiencies & benefits from digitisation Expenses (Rm) ▪ Staff costs (1%) 75% 9% 2% 9 4 0 3 0 5 5 2 1 4 7 1 2 7 7 4 1 8 8 0 5 1 9 6 9 4 1 8 7 8 4 0 3 8 5 9 2 3 6 9 7 9 9 3 1 1 9 2 9 2 9 Staff packages & other Incentives (STI & LTI) Computer processing Other 19 20 21 ‒ ‒ ‒ Annual salary increases: +3,5% 5% decline in headcount (mainly through natural attrition) Variable-pay incentives up by 75%, aligned with improved profitability metrics (down 32% in 2020 & down 24% in 2019) ▪ Computer processing – amortisation growth rate slowing as ME journey matures (2021: +19%, 2020: +23%, 2019: +22%) ▪ Other costs – up by 2% (some normalisation in discretionary spend including marketing & YES, partially offset by savings from lower accommodation-related costs) ▪ TOM 2.0 – R967m benefits in 2021 (R2,5bn targeted by end-2023) NEDBANK GROUP LIMITED – 2021 Annual Financial Results 49 Capital – CET1 ratio above pre-Covid levels & above the top-end of our revised board-approved target range of 11% to 12% CET1 ratio (%) Active capital management (0,3) 0,3 Board CET1 target1: 1,9 12% to 11% 8,5% SARB PA minimum CET12 11,5 10,6 10,9 Dec 19 Jun 20 Dec 20 Profits Interim dividend RWA 12,8 Dec 2021 Maintain conservatism in a difficult, uncertain & volatile environment Retain adequate capital to grow the business ~R6bn surplus capital above the top end of target range (12%) & ~R28bn surplus capital Pay dividends in line with board above regulatory minimum (8,5%) policy of 1,75x – 2,25x cover Other management actions 1 During 2020 Nedbank’s internal board-approved target ranges were adjusted to reflect the lower new regulatory minimum requirements, in line with PA Directive 2/2020. | 2 Excluding idiosyncratic buffers & including the D-SIB capital requirement of 100 bps, in line with PA Directive 5/2021 (from 50 bps in December 2020). NEDBANK GROUP LIMITED – 2021 Annual Financial Results 50 26 Notes:Notes:Nedbank Group Annual Results 2021Risk-weighted assets – credit RWA optimisation & selective origination, along with normalisation of market RWA as volatility normalised through the models Risk-weighted assets (Rbn) BOOKLET SLIDE (4) 19 (3) (14) (0) 30 629 Dec 2019 Credit Market Other RWA 674 Dec 2020 Credit Market Other RWA 657 Dec 2021 NEDBANK GROUP LIMITED – 2021 Annual Financial Results 51 Pricing of capital & funding – reduced over time & within industry ranges Nedbank pricing vs SA banking peers (bps above JIBAR) BOOKLET SLIDE 800 700 600 500 400 300 200 100 0 16 17 18 20 21 Ned 3 Year SUD Ned 5 Year SUD Ned 7 Year SUD Ned Tier 2 Ned AT1 SA banks pricing during 2021 ▪ AT1 ‒ Peers: 391 to 480 (Ned: 391 to 467) ▪ Tier 2 debt ‒ Peers: 190 to 260 (Ned: 200 to 235) ▪ Senior unsecured ‒ Peers: 3 year: 101 to 110 (Ned: 110) ‒ Peers: 7 year: 145 to 149 (Ned: 135 to 150) NEDBANK GROUP LIMITED – 2021 Annual Financial Results 52 27 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021Dividends – strong capital position supported a final dividend at 1,75 times cover & dividend yield that is attractive for investors Dividend payout ratio (payout ratio %, times cover x) Forward dividend yield1 (%) 1,99x 1,84x 2,50x 1,75x Board-approved dividend policy: Dividend coverage range 1,75x to 2,25x e n i l n i d e r a c e d l & 0 2 0 2 / 4 G h t i w 1 2 0 2 / 3 G 40% 57% i s d n e d v d o N i 50% 54% 12 10 8 6 4 2 0 Interim 2019 Final 2019 Interim 2020 Final 2020 Interim 2021 Final 2021 1 Refinitiv (at 9 February 2022 based on consensus broker forecasts). NEDBANK GROUP LIMITED – 2021 Annual Financial Results 12 13 14 15 16 17 18 19 20 21 22 Nedbank All share 7,1 4,4 53 Return on equity (%) Cluster financial overview Headline earnings (Rbn, growth %) +45% Wealth >100% NAR 0,6 1,0 >100% RBB 4,5 R11,7bn >100% 5,6 +54% CIB % 3 , 5 1 % 7 , 3 1 % 2 , 1 2 % 3 9 , CIB RBB Wealth NAR 1 Average of 8 sell-side brokers. NEDBANK GROUP LIMITED – 2021 Annual Financial Results 28 Broker1 COE 14,4% Group ROE 12,5% 54 Notes:Notes:Nedbank Group Annual Results 2021 Nedbank CIB Anél Bosman Group Managing Executive ‘Strong HE recovery driven by significantly lower impairments, widening NIM & solid business performance’ NEDBANK GROUP LIMITED – 2021 Annual Financial Results 55 CIB financial performance – solid HE driven by growth in NII, lower impairments & NIR normalisation Financial performance 17,7 E O R ) % ( i s g n n r a e e n i l d a e H ) m R ( 7 6 1 6 19 9,4 6 3 6 3 20 15,3 ▪ NII up 9% ‒ NIM increased by 48 bps benefitting from strategic optimisation of the portfolio +54% ‒ Lower banking loans & advances (down 2% yoy) ▪ Impairments declined by 56% ‒ CLR at 42 bps within TTC target range ‒ Improvement in macro-economic factors ▪ NIR grew 9% ‒ Excellent performance of the private equity portfolio ‒ Solid trading performance but growth impacted by high 2020 base 5 0 6 5 21 NEDBANK GROUP LIMITED – 2021 Annual Financial Results 56 29 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 CIB financial performance – reduced credit risk & recorded second-half banking advances growth while maintaining optimal capital levels Credit loss ratio (%) 0,82% 0,25% 0,42% Coverage ratios (%) ▪ Impairments declined by 56% 24,6% 23,7% 3,30% 2,24% 2,26% 14,9% ‒ Proactive risk management ‒ Below initial expectations ▪ Coverage ratios ‒ Adequate impairments raised ▪ Sector focus 0,30% 0,17% 0,20% 19 20 21 CLR TTC Stage 1 Stage 2 Stage 3 19 20 21 ‒ Aviation & hospitality impacted by Covid-19 ‒ Construction & SOEs continued focus ‒ Property portfolio adequately covered Banking advances (Rbn) Allocated capital (Rbn) +10% * (2%) (6%) ▪ Banking advances declined by 2% Mar 19 Jun 19 Sep 19 Dec 19 Mar 20 Jun 20 Sep 20 Dec 20 Mar 21 Jun 21 Sep 21 Dec 21 Mar 19 Jun 19 Sep 19 Dec 19 Mar 20 Jun 20 Sep 20 Dec 20 Mar 21 Jun 21 Sep 21 Dec 21 * H2 growth annualised. NEDBANK GROUP LIMITED – 2021 Annual Financial Results ‒ Strong performance in H2 ‒ H1 2020 liquidity drawdowns repaid ‒ Unexpected early repayments ▪ Allocated capital declined by 6% ‒ RWA reduced by 9% ‒ Market risk reduced by 35% 57 BOOKLET SLIDE Commercial property finance – a high-quality, well-diversified & collateralised portfolio, with additional overlays for the risk of potential future stresses What gives us comfort? Credit loss ratio (bps) & Loan-to-value ratio (%) ▪ High-quality, well-diversified & collateralised CLR 53 (5) 10 (2) 54 portfolio ▪ Portfolio LTVs remain low ‒ Average LTV increased to 53% ‒ due to downward revaluations of collateral ‒ LTVs remain low, with adequate collateralisation – significantly reduces the risk of potential losses ▪ Covid-19-related and other overlays increased to R670m (Dec 20: R440m) to buffer against further deterioration in valuations & credit migration ▪ Low levels of arrears – 0 to 90 days: R5m (Dec 20: R22m) ▪ Minimal impact on debt servicing due to July unrest – all properties impacted were insured % of loans: 30 53% 49% 42% 44% 48% 50% LTV GFC peak Dec 17 Dec 18 Dec 19 Dec 20 Dec 21 LTV 56 35% 55 51 42 40 58 44 27% 19% 11% 4% 3% 1% Retail Office Industrial Residential Other Hotel Hospital Covid-19-impacted sectors: High Medium Low NEDBANK GROUP LIMITED – 2021 Annual Financial Results 58 30 Notes:Notes:Nedbank Group Annual Results 2021Nedbank commercial property finance – office portfolio Office exposure by client type (%) Vacancies (%) Nedbank Market* BOOKLET SLIDE % of exposure 43% 31% 17% 8% 2% Large Corporates Other clients, LTV<61% Non performing Listed Funds Other clients, LTV≥61% Loan-to-value (%) >91% 5% 81% - 90.99% 71% - 80.99% 61% - 70.99% 51% - 60.99% 41% - 50.99% 0 - 40.99% NEDBANK GROUP LIMITED – 2021 Annual Financial Results * Based on SAPOA Q4 2021. 11% 14% 19% 20% 17% 13% 16% Commercial vacancies ▪ Listed funds and large corporates comprise 74% of exposure – generally low gearing & well-diversified portfolios, able to absorb increased vacancies & reduced rentals 8% ▪ Other clients LTV < 61% – low gearing – able to absorb increased vacancies & reduced rentals while still meeting debt obligations ▪ Other clients (LTV ≥ 61%) – risk not significant ‒ Exposure at elevated gearing levels (>81% LTV) is less than R200m ‒ Lease expiry profile greater than 36 months across all exposures ‒ Vacancy level: 6,2% ▪ 93% of exposure in higher LTV buckets (> 81%) is to listed funds & large corporates ▪ While the office market will remain under pressure, the quality of the collateral pool & composition of our portfolio reduces our risk 59 Credit risk – CIB Covid-19 high-risk exposures BOOKLET SLIDE CIB high-risk sectors 48% (47%) Covid-19-impacted sectors (excl CPF) % of CIB exposure D3 % of sector exp D7 & NP % of sector exp ▪ SOEs/Municipalities – defaulted exposures being restructured, with 19% government-guaranteed 5% (7%) 0% (0%) 5% (5%) 11% (18%) ▪ Construction* – Stressed sector pre-Covid-19 with reduction in high-risk & defaulted exposure in 2020 2% (3%) 0% (13%) 16% (6%) 41% (35%) Covid impacted sectors Rest of CIB CPF ▪ Aviation – 29% of exposure guaranteed & remaining exposure secured at 70% average LTV 1% (1%) 9% (29%) 67% (28%) ▪ Hospitality – exposure to largest hotel & casino groups with substantial asset/equity base 2% (2%) 0% (95%) 3% (0%) NEDBANK GROUP LIMITED – 2021 Annual Financial Results * Construction includes Steel & Cement. | (%) denotes exposure at 31 December 2020. 60 31 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021Strategic growth levers – optimising our growth Portfolio optimisation Active management of the balance sheet to drive enhanced returns People Focussed investment in our people & capabilities to support continued strategic growth ▪ Active portfolio positioning ▪ Sustainable people plan to ▪ Trusted advisor that services clients across all their financial needs ▪ Significant RWA savings realised in 2020 & 2021 support strategic growth ▪ Attracting & retaining best-in-market skills ▪ Key focus on diversity, equity & inclusion NEDBANK GROUP LIMITED – 2021 Annual Financial Results 61 Digitising our transactional experience – the Nedbank Business Hub delivers a differentiated, ‘warm digital’ client platform experience The Nedbank Business Hub is an evolving channel that provides an all- in-one, convenient & self-serviced solution that enables business clients to: ▪ Apply for new products ▪ Transact ▪ Request & track services ▪ Set up & maintain user permissions Unlocking transactional business growth: ▪ Enhanced client access to products & services ▪ Strengthen client ‘stickiness’ & market share 62 NEDBANK GROUP LIMITED – 2021 Annual Financial Results 32 Notes:Notes:Nedbank Group Annual Results 2021Sustainably investing in South Africa Being the difference that impacts our world Sustainable finance expertise externally acknowledged Driving the transition to renewable energy ▪ Committed to supporting government’s infrastructure programme ▪ Mobilising capital, resources & networks to play our part in sustainably building South Africa ▪ Arranging innovative green bond solutions ▪ RMIPPPP & Round 5 projects ▪ Partnering with clients to drive ESG objectives through sustainability linked solutions ▪ Round 6 due out shortly ▪ Significant mining & industrial sector activity for Commercial & Industrial Generation 2021 Winner: Best Bank for Sustainable Development | SA Local Markets ESG and Sustainable Finance Adviser of the Year 2021 NEDBANK GROUP LIMITED – 2021 Annual Financial Results 63 Nedbank Corporate & Investment Banking – outlook 2022 outlook ▪ Capital – continued focus on optimisation & increase returns ▪ NII – targeting consistent NIM & optimal balance sheet growth ▪ NIR ‒ Trading conditions remain challenging with trading volumes under pressure ‒ Leverage our robust pipeline to increase fees & commissions ‒ Private equity to pursue new equity investments, continued focus on realisations & preserving the existing portfolio ▪ Banking advances growth – convert a robust/strong pipeline subject to confidence ▪ CLR – maintain around the midpoint of TTC target range Long-term outlook ▪ Position for growth while financing responsibly through differentiated offerings ▪ Global twin challenge of inflation & growth, increased levels of uncertainty NEDBANK GROUP LIMITED – 2021 Annual Financial Results 64 33 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021Nedbank RBB Ciko Thomas Group Managing Executive ‘Improved performance in 2021, after a difficult 2020’ NEDBANK GROUP LIMITED – 2021 Annual Financial Results 65 RBB financial performance – solid progress in building the franchise Financial performance 17,3 E O R ) % ( i s g n n r a e e n i l d a e H ) m R ( 3 9 2 5 19 5,4 5 9 5 1 20 13,7 > 100% ▪ NII up by 5% ‒ Advances growth momentum across all products ▪ Impairments down by 41% ‒ CLR at 134bps due to lower consumer stress & strengthening macro environment ‒ Includes R713m of once off net benefits relating to curing of accounts, re-grounding updates & release of Covid-19- related overlays ‒ Normalised CLR of 153bps falls into the middle of the TTC target range ▪ NIR up by 8% 2 3 5 4 21 ‒ Strong recovery seen in client transaction activity ‒ Full recovery remains impacted by Covid-19 restrictions ▪ Expense growth of 6% ‒ Higher incentive costs, offset by ongoing cost optimisation NEDBANK GROUP LIMITED – 2021 Annual Financial Results 66 34 Notes:Notes:Nedbank Group Annual Results 2021 RBB clients segment & product returns Return on equity (%) BOOKLET SLIDE Home loans VAF Unsecured lending Transactional Card Fx & investments 4 , 1 1 0 , 9 1 8 , 9 1 4 , 4 1 9 , 0 1 , 0 1 5 , 2 3 3 , 6 2 6 , 4 2 , 4 8 6 3 1 , ROE 12,4% including insurance 5 , 2 2 6 , 4 1 6 , 5 3 , 7 1 1 , 2 2 1 , 2 8 , 4 3 , 3 1 6 , 3 2 , 9 2 7 , 0 9 , 4 1 0 , 5 3 5 , 9 3 6 , 8 2 19 20 21 19 20 21 19 20 21 19 20 21 19 20 21 19 20 21 19 20 21 19 20 21 19 20 21 Business banking Consumer banking Relationship banking Product views, excl BB NEDBANK GROUP LIMITED – 2021 Annual Financial Results 67 6 , 0 1 - RBB metrics highlight the good quality of the book Vehicle finance New- vs used-vehicle distribution (%) 80% Personal loans Market share of disbursed business (%)1 Targeted risk High risk BOOKLET SLIDE 60% 40% 20% 0% 19 Home loans New Used 20 21 LTV distribution 2009 vs 2021 20% 15% 10% 5% 0% 18 19 20 21 Nedbank 60% 40% 20% 0% 18 19 20 21 80% 60% 40% 20% 0% 18 19 20 21 Tier 1 Tier 2 HL new business ‒ Low-risk clients proportion1 100% 80% 60% 40% 20% 0% <=50 50-80 80-90 90-100 >100% 50% 40% 30% 20% 10% 0% 200912 2009 202112 2021 09 10 11 12 13 14 15 16 17 18 19 20 21 NEDBANK GROUP LIMITED – 2021 Annual Financial Results 1 Source: Experian. Tier 1 refers to traditional 4 banks excluding Nedbank, while Tier 2 refers to remaining material providers of unsecured personal loans. | 2 Source: Lightstone. 68 35 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021RBB strategic focus areas Delivering delightful client experiences through digital transformation RBB strategic focus areas Leading client experiences Digital First, First in Digital Efficient operating model (TOM 2.0) New growth vectors (SPT 2.0) Net Promoter Score #1 bank (from #2 in 2021) Digital sales2 > 75% (2021: 32% excl MobiMoney) Cost-to-income ratio1 < 57% Main-banked clients (2021: 3,1m) 1 Set in March 2021 ‒ target tor 2023. | 2 Long-term target. NEDBANK GROUP LIMITED – 2021 Annual Financial Results 69 Leading client experiences – RBB innovations Insurance Avo super app Nedbank Business Hub MyCover Life is a new life cover proposition, offers up to R2m cover with limited underwriting questions MyCover Funeral is a new funeral cover proposition offers competitive premiums for both individuals & families MyCover will offer convenient car, home & contents cover at one affordable price point Partnerships on Avo ‒ with 675 000 consumers1 & > 20 000 businesses registered • A partnership with Moya, a data-free instant messaging app A partnership with AfroCentric, a medical aid with 3,9m members, to be their loyalty & rewards and digital commerce partner. • Nedbank Business Hub enables clients to access products & services through a central point Solar energy finance Solar Energy Finance offering through a home loan product Consumer health Money Tracker is a digital money management tool that allows clients to track finances & create budgets Credit Health gives clients unlimited access to their credit profile & provides credit-scoring tips Money Message is a secure platform enabling payments through WhatsApp NEDBANK GROUP LIMITED – 2021 Annual Financial Results 70 1 At the beginning of March 2022: > 1 million. 36 Notes:Notes:Nedbank Group Annual Results 2021Digital First, First in Digital – retail credit growth supported by our digital channels, notwithstanding more stringent approval rates Home loans Vehicle finance Personal loans Credit card BOOKLET SLIDE Volume benefit from MFC’s 70% used- vehicle mix profile Approval rates Take-up rates Approval rates Take-up rates Approval rates Take-up rates Approval rates Take-up rates 13 11 11 (51%) Branch Digital 14,4 14,4 14,2 2 2 2 36,4 36,5 36,9 41 29 22 21 31 22 (78%) (15%) 10,2 11,2 12,2 13,0 12,6 12,0 19 20 21 NEDBANK GROUP LIMITED – 2021 Annual Financial Results 1 Vehicle finance share for households. 19 20 21 19 20 21 19 20 21 71 s e t a r p u - e k a t & l a v o r p p A l s e a s l a t i g D i l a t o t f o % s a n o i t i s u q c a i f o t s o C t e k r a m 0 0 9 A B 1 e r a h s Digital First, First in Digital BOOKLET SLIDE Personal Loans – our first fully digitised client journey/product now delivering tangible benefits Channels Digital sales Credit Channels (% of total) Personal loans market share (%) Cross-sell PL paid into a Nedbank Tx account Existing Nedbank clients (out of 10) 70% Physical 54% 11,2% 12,2% 5 7 30% Q4 20 Nedbank API Digital 46% Q4 21 Dec 20 Dec 21 Q1 19 Q4 21 Client satisfaction score (SA-csi) Loan approval & disbursal rates (%) Rank: #3 #3 75,8 #1 #3 75,9 2018 2021 19 21 Approval rates Disbursal rates NEDBANK GROUP LIMITED – 2021 Annual Financial Results 72 37 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Efficient operating model (TOM 2.0) – RBB restructure to become more client-centred & distribution footprint changes as we shift to smaller formats & enable self-service BOOKLET SLIDE Nedbank branches (# of) Nedbank in retailers (# of) Coverage (% coverage within 30 km) (24%) +18% Remain very competitive on coverage by against peers TOM 2.0 includes: ▪ Optimising the shape of our branch infrastructure ▪ Shifting our RBB structure so that it is more client- centred 559 15 427 21 Target 94 15 111 21 Target 86 15 85 21 85 Industry ▪ Optimising our shared- services functions ATMs, IDs & SSKs1 Branch square meterage (‘000 m2) (# of) Sales staff ratio2 (% of staff) RBB employees (# of) (20%) Ongoing reduction driven by size & number of branches +18% Branches supplemented by a growing number of convenient self- service options A larger % of our people will focus on sales (22%) Phoenix phase 1 & 2 complete with 425 FTE reduction 227 15 182 21 <120 Target 3 695 4 699 15 21 Target 36 15 37 21 Target 20,9 15 16,3 21 Target 1 Automated teller machines, Intelligent Depositors & self-service kiosks. | 2 Consumer, which includes Boxer & BDO. | All targets set in January 2022 ‒ target tor 2024. NEDBANK GROUP LIMITED – 2021 Annual Financial Results 73 New growth vectors (SPT 2.0) – growth in main-banked clients & improving levels of cross-sell on new sales Retail client base breakdown (# million) Cross-sell ratio1 Consulta2 main-banked market share 19 20 21 % growth on 19 3,1 3,0 3,1 2,3 2,1 1,8 2020 2021 Share 1.71 1.78 1.86 Nedbank +0,0% +1,1% 12,4% Capitec +4,0% +0,9% 40,1% Other banks +0,0% +0,6% 1,8% SBSA FNB Absa (0,6%) (0,4%) 13,6% (2,1%) (0,6%) 18,5% (1,3%) (1,6%) 13,6% Main-banked clients Digitally active clients Cross-sell on active clients 1 Based on new definition of active clients: Client has either a non-zero-balance asset product or a non-zero-balance investment product; or a positive-funded-balance transactional product (TP), or a negative TP balance with a transaction done within the past 12 months. | 2 Consulta surveys: 2020 & 2021 (released November 2021). NEDBANK GROUP LIMITED – 2021 Annual Financial Results 74 38 Notes:Notes:Nedbank Group Annual Results 2021New growth vectors (SPT 2.0) – focus on arresting household deposit market share losses CONSUMER Total household deposit market contribution Total household market share, Qoq change in 2021, bps Household notice market share, Qoq change in 2021, bps Term 31% CASA 30% -28 Q1 -26 Q2 -24 Q3 -16 Q4 -12 Q2 -28 Q1 -28 Q3 -26 Q4 Household CASA market share, Qoq change in 2021, bps Household term market share, Qoq change in 2021, bps Pricing driven 1 39% Notice -14 Q1 -17 Q2 -23 Q3 Franchise driven -9 Q4 -30 Q1 -60 Q2 -10 Q3 Q4 Q4 2021 was our best quarter of 2021 in arresting household deposit market share losses – driven by pricing strategy on term deposits & CASA improvement driven by main-banked-client gains NEDBANK GROUP LIMITED – 2021 Annual Financial Results Note: HH deposit categories have been adjusted for known differences in classification among the banks. 75 Nedbank Retail & Business Banking – outlook 2022 outlook ▪ Advances growth – momentum continues ▪ CLR – normalisation to around the midpoint of our TTC target range (130–180 bps) ▪ NIR – diversify revenue base & scale key growth vector strategies ▪ Expenses – optimisation continues ▪ Execution of key strategic initiatives Long-term outlook ▪ Ongoing focus to reduce cost-to-income ratio & increase ROE NEDBANK GROUP LIMITED – 2021 Annual Financial Results 76 39 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021Nedbank Wealth Iolanda Ruggiero Group Managing Executive ‘Strong growth in HE supported by improved markets, positive net flows & credit impairment releases’ NEDBANK GROUP LIMITED – 2021 Annual Financial Results 77 Wealth financial performance – strong growth in HE supported by improved markets, positive net flows & credit impairment releases Financial performance E O R ) % ( 24,8 15,3 21,2 45% ▪ Strong ROE above the group’s cost of equity ▪ Insurance HE up 77% – Due to the implementation of enhanced ALM strategy & an improved investment performance, offset by an increase in death and funeral claims i s g n n r a e e n i l d a e H ) m R ( 2 4 0 1 19 2 6 6 20 2 6 9 21 ▪ Asset Management HE up 12% ‒ Strong market rebound & positive net flows of R7bn ▪ Wealth Management HE up >100% ‒ Benefited from credit impairment releases due to a recovery on a large single client ‒ Negatively impacted by record-low interest rates, particularly in the international business NEDBANK GROUP LIMITED – 2021 Annual Financial Results 78 40 Notes:Notes:Nedbank Group Annual Results 2021 Strong growth in HE supported by improved markets, positive net flows & credit impairment releases Headline earnings per division (Rm) BOOKLET SLIDE +77% +12% >100% ▪ Improved investment returns Insurance ▪ Implementation of an enhanced asset and liability matching strategy ▪ Negatively impacted by higher death and funeral claims in the life portfolio Asset Management ▪ Strong market rebound ▪ Positive net flows Wealth Management ▪ Lower credit impairment charges due to the recovery of a large single client ▪ Strong growth in investment business lines in international ▪ Negatively impacted by record-low USD and GBP interest rates 79 1 7 4 1 0 3 2 3 5 9 1 3 1 4 3 0 8 3 0 5 0 2 2 5 2 Insurance Asset Management Wealth Management 19 20 21 NEDBANK GROUP LIMITED – 2021 Annual Financial Results Wealth strategic focus areas Building a sustainable business for the future Enhance client experiences Build data & digital capability Drive long-term performance for clients Invest in people & culture Leverage and collaborate within the cluster & across Nedbank NEDBANK GROUP LIMITED – 2021 Annual Financial Results 80 41 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021Insurance growth vectors – 20% growth in new business volumes • Focus on the diversification & digitisation of insurance products • Grow the MyCover portfolio • Accelerate mobile & digital delivery • Collaborate across Nedbank to increase client penetration NEDBANK GROUP LIMITED – 2021 Annual Financial Results 81 Asset management growth vectors – 13% growth in AUM driven by positive net flows & an increase in market share Maintain steady growth in the Best of Breed range Leverage access to group distribution & digital integration Q4 2021 Nedgroup Investments ranked • SA – fifth largest in total AUM (7% market share) • International – third largest in total AUM (12% market share) Grow institutional offering both locally & internationally Continue on the journey to become one of the leaders in responsible investing NEDBANK GROUP LIMITED – 2021 Annual Financial Results 82 42 Notes:Notes:Nedbank Group Annual Results 2021Wealth management growth vectors – 18% growth in NPW digital users & 41% growth in NPW app interactions yoy South Africa International ▪ Optimise business structure & operations ▪ Collaborate with Nedbank Group partners ▪ Continue to work closely with Nedbank Private Wealth (International) ▪ Digitise key processes ▪ Enhance digital innovation and adoption ▪ Collaborate with Nedbank Private Wealth SA ▪ Investing in solutions NEDBANK GROUP LIMITED – 2021 Annual Financial Results 83 Nedbank Wealth – outlook 2022 outlook ▪ NII – widening of NIM due to improved interest rate environment and growth in HNW client base ▪ CLR – remaining in TTC target range ▪ NIR ‒ growth in the Insurance MyCover portfolio ‒ normalised claims trends ‒ increased cross-sell opportunities due to greater penetration within the Nedbank Group ‒ AUM growth ‒ increase in market share ▪ Expenses ‒ optimisation continues through automation ‒ investment in strategic growth initiatives ▪ Sale of the international trust business Long-term outlook ▪ Maintain strong ROE above the group’s cost of equity NEDBANK GROUP LIMITED – 2021 Annual Financial Results 84 43 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021Nedbank Africa Regions Terence G Sibiya Group Managing Executive ‘SADC operations – growth in NII & lower impairments ETI associate investment – strong performance accompanied by balance sheet improvement’ NEDBANK GROUP LIMITED – 2021 Annual Financial Results 85 NAR financial performance – strong performance largely driven by ETI E O R ) % ( i s g n n r a e e n i l d a e H ) m R ( Financial performance 7,7 0,2 9,3 ▪ SADC operations HE up >100% ‒ HE of R71m up by >100% (R141m loss in 2020) ‒ Main drivers of performance: impairments declined by 62% & NII increased by +9% ‒ Slight decrease in NIR by 2%, although > 2019 levels > 100% ▪ ETI associate investment HE up > 100% 7 5 4 19 2 1 20 4 9 5 21 ‒ HE of R523m (R153m in 2020), driven by strong recovery across three core regions (UEMOA, AWA & CESA) ‒ Improved capital & liquidity – total CAR up to 14,5% (2020: 12,3%), with an improved ROTE of 18,8% ‒ Dividend payment to resume, subject to AGM approval ‒ Although profitable, Ecobank Nigeria’s performance remains suboptimal & continues to be a focus for shareholders NEDBANK GROUP LIMITED – 2021 Annual Financial Results 86 44 Notes:Notes:Nedbank Group Annual Results 2021 ETI associate investment financial performance – strong turnaround in financial performance accompanied by a material improvement in the balance sheet ) m R ( e m o c n i e t a i c o s s A 668 19 (178) 20 686 21 0,7 0,6 Value-in-use >R2,8bn s r e v i r d e u l a v g n i y r r a C 2,2 Carrying value Dec 2020 ) n b R ( 2,3 1,2 1,7 2,4 Associate income FCTR & other Carrying value Dec 2021 Market value Dec 2020 Market value Dec 2021 Market value Feb 2022 ETI Associate Investment ▪ Leading West & Central Africa franchise: top 3 in 13 of 16 countries ▪ Improvement in NPLs & liquidity, with three core regions reporting lower NPLs & higher coverage ratios ▪ Strong performance from three core regions, with regional ROEs all greater than 21%1 ▪ Signs of improvement in Ecobank Nigeria – with increased profitability & strengthened capital position 1 ROEs of UEMOA:21,4%, AWA:24,9% & CESA:22,2%. Note: ETI accounted for 1 quarter in arrear. | Associate income includes goodwill impairment. NEDBANK GROUP LIMITED – 2021 Annual Financial Results 87 SADC operations strategic growth drivers Doing more with what we have - Focus on growth opportunities in Mozambique by leveraging enterprise capabilities - Accelerate digital growth strategy #1 in NPS Top 2 in sentiment scores across four markets #1 in loyalty scores across three markets in Namibia & Mozambique - Continue to deliver great client experiences & grow market share Transform NAR - Reconfigure the size and shape of the business in line with TOM 2.0 - Leverage the group’s technology ecosystem to achieve increased efficiencies & product consistency NEDBANK GROUP LIMITED – 2021 Annual Financial Results 88 45 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Nedbank Africa Regions – outlook 2022 outlook SADC operations ▪ Transform the business & operating model ▪ Maximise Mozambique growth opportunities ▪ Accelerated digital growth strategy ETI associate investment ▪ Resolution of Ecobank Nigeria challenges to increase shareholder value Long-term outlook ▪ Increase ROE to > COE NEDBANK GROUP LIMITED – 2021 Annual Financial Results 89 Outlook Mike Brown Chief Executive ‘On track to meet our 2023 targets, with DHEPS target now expected to be delivered a year earlier’ NEDBANK GROUP LIMITED – 2021 Annual Financial Results 90 46 Notes:Notes:Nedbank Group Annual Results 2021Nedbank economic forecasts – 2022 & beyond Forecast: February 2021 Forecast: February 2022 19 20 21 22 23 24 21 22 23 24 21 Medium term SA GDP growth 0,1% (6,4%) 3,4% 2,2% 1,8% 1,5% 4,8% 1,7% 1,8% 1,0% YE prime interest rate 10,0% 7,0% 7,0% 7,5% 7,5% 7,5% 7,25% 8,5% 9,0% 9,5% Inflation (CPI) 4,1% 3,3% 4,2% 4,6% 4,3% 4,2% 4,6% 4,9% 4,2% 4,3% Industry credit growth Rand/US$ (year-end) SA fiscal deficit % of GDP1 SA govt debt % of GDP1 5,3% 1,2% 4,5% 5,7% 5,1% 5,2% 2,4% 4,5% 4,3% 4,7% 14,0 14,6 15,3 15,9 16,9 18,1 15,9 15,9 15,6 16,3 (3,6%) (5,1%) (14,2%) (10,6%) (9,8%) (9,7%) (10,0%) (6,5%) (5,7%) (4,5%) 52% 56% 82% 85% 90% 94% 67% 67% 70% 71% Source: Nedbank Group Economic Unit. 1 Year ending March. NEDBANK GROUP LIMITED – 2021 Annual Financial Results 2022 full-year financial guidance based on current economic forecasts 2021 performance 2022 guidance1 Key drivers NII growth +8% CLR 83 bps NIR growth +4% Expense growth +6% Upper single digits 125 bps interest rate increases in 2022 ▪ ▪ RBB advances growth > CIB advances growth ▪ Continued NIM expansion Within top half of our 60 to 100 bps TCC range ▪ Negative impact from mix change & rising interest rates, offset by a quality portfolio Upper single digits ▪ Ongoing benefits from SPT 2.0 (main-bank client gains, cross-sell, new revenue streams etc) ▪ MVFHA volatility removed Above mid-single digits ▪ Some costs return as lockdowns ease (eg travel, sponsorships) & new regulatory costs (eg deposit insurance, Twin Peaks) ▪ TOM 2.0 benefits DHEPS growth +112% > GDP + CPI + 5% Capital (CET1 ratio) 12,8% Dividend 2,02x cover Above TTC range of 11,0% to 12,0% Within target range of 1,75x to 2,25x ▪ Remain above the top end of board target range 1This guidance is not a profit forecast & has not been reviewed or reported on by the group’s joint auditors. NEDBANK GROUP LIMITED – 2021 Annual Financial Results 91 92 47 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 2021Meeting our medium-term targets supports shareholder value creation Targets to 2023 DHEPS > 2 565 cents (2019 levels) ROE > 15% (2019 levels) Cost-to-income ratio < 54% Net Promoter Score #1 bank (from #2 in 2021) Supported by the CLR remaining in the TTC range of 60 to 100 bps, meeting our cost-to-income target & delivering on SPT 2.0 & TOM 2.0 (targeting cumulative R2,5bn benefits over 3 years) CET1 ratio to remain above the revised board- approved TTC target range of 11% to 12% & well above regulatory levels. Dividend within cover range (1,75x ‒ 2,25x) Focus on areas that create value (SPT 2.0), ongoing investment in the franchise, efficient execution, cost optimisation (TOM 2.0) & digital leadership Market-leading client solutions, disruptive market activities & creating positive impacts (caring for employees, clients, society & the environment) Currently expected to be achieved a year earlier Remains a stretch target in 2022 Remains a stretch target Remains a stretch target Long-term targets DHEPS growth > GDP + CPI +5% ROE > 18% (COE + 3% to 4%) Cost-to-income ratio < 50% Net Promoter Score #1 bank NEDBANK GROUP LIMITED – 2021 Annual Financial Results 93 Conclusion – good strategic & operational delivery supports meeting our 2023 targets Resilience – completed Reimagine strategy – continue to execute well ▪ CET1 ratio: 12,8% ▪ LCR: ▪ NSFR: 128% 116% ▪ Coverage: 3,32% ▪ CLR back in TTC range: 83 bps Continue to lead in digital innovation & complete final phases of Managed Evolution Client satisfaction metrics – #1 ranking by 2023 Scale Avo beyond the 1 million clients (2022 target) already achieved SPT 2.0 – leverage our balance sheet to grow clients, cross-sell, grow transactional income & grow deposits Unlock R2,5bn in benefits via TOM 2.0 by 2023 ▪ Dividend payments resumed Creating positive impacts – using our financial expertise to do good. Continue to lead in SDG financing, ESG practices & ratings Focus on meeting our 2023 targets & thereby unlock shareholder value through: DHEPS growth, improvements in ROE & efficiencies, & ongoing dividend growth NEDBANK GROUP LIMITED – 2021 Annual Financial Results 94 48 Notes:Notes:Nedbank Group Annual Results 2021Thank you NEDBANK GROUP LIMITED – 2021 Annual Financial Results 95 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’, 'estimate', 'intend', 'project', 'target', 'predict' and 'hope'. 'anticipate', 'expect', 'plan', 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 are 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 or profits, or consequential loss or damage. NEDBANK GROUP LIMITED – 2021 Annual Financial Results 96 49 Notes:Notes:Resultspresentation2021 resultscommentaryFinancial resultsSegmentalanalysisIncome statementanalysisStatement of financialposition analysisSupplementaryinformationMessage from ourChief ExecutiveNedbank Group Annual Results 20212021 results commentary 50 Nedbank Group Annual Results 20212021 results commentary Banking and economic environment Global economic growth rebounded in 2021 following the deep contraction in 2020 caused by strict Covid-19-induced lockdowns. The International Monetary Fund (IMF) currently predicts that global growth will be a robust 5,9% in 2021. The relaxation of lockdowns, higher commodity prices and pent-up demand supported the rebound during the year, but the upside was contained by supply-chain constraints, rising inflation and the ongoing impact of new variants of Covid-19. The rebound in growth was broad-based, however, divergences between regions and countries persisted. Significant fiscal and monetary policy support coupled with widespread vaccinations supported growth in advanced economies. Robust vaccination programmes allowed many advanced economies to ease restrictions substantially, thereby enabling a quicker return to near-normal trading conditions. Despite the strong rebound in advanced economies, the pace of the recovery slowed in the second half of the year. The rapid spread of the Omicron variant towards the end of 2021 triggered renewed lockdowns in some parts of the world, mainly Europe and China. While Omicron proved far more contagious, it nonetheless presented milder symptoms. Supply shortages and transport disruptions persisted, contributing to global price pressures. Inflation is proving more than transitory, triggering a rapid shift towards faster monetary policy normalisation by major central banks throughout the second half of last year. Most emerging and developing countries entered the Covid-19 pandemic in a vulnerable state, with minimal fiscal policy space. As a result, output, investment, labour and consumption were hard hit over the past two years. The stop-start nature of recoveries throughout 2021 exacerbated the economic impact of the pandemic, partly due to uneven and insufficient vaccination rates. Despite these challenges, economic growth returned in most countries off 2020’s low base. Emerging economies in Latin America, Europe and Central Asia benefited from substantial remittances, a recovery in labour markets and a rebound in domestic and external demand. Higher commodity prices also boosted output and exports in almost all developing and emerging economies, particularly in the oil- and commodity-exporting nations of the Middle East, Africa, Latin America and Asia. While strong growth in China supported the recoveries of other developing countries in the first half of 2021, underlying activity slowed significantly over the second half of the year, weighed down by numerous Covid outbreaks, severe lockdowns as well as stricter environmental, property and financial regulations. In 2021 the South African economy bounced back faster than most forecasters expected from the low base of 2020 caused by the economic impact of strict lockdowns. The local economy benefited from a surge in global commodity prices and stronger global demand. After growing by 7,5% in H1 2021, GDP slowed in H2 2021. Multiple shocks disrupted SA’s economic recovery in the third quarter of the year. A prolonged third wave of Covid-19 infections, tighter lockdown restrictions, the July civil unrest in parts of the country and frequent power outages resulted in a sharp contraction in economic activity. Trading conditions improved in the fourth quarter, enabled by government’s decision to leave the country at the most lenient lockdown level 1 despite the onset of the fourth Covid wave triggered by the Omicron variant. We forecast South African GDP growth of 4,8% for calendar year 2021. High frequency data from our point-of-sale devices and card-related digital channels reflected strong growth in total turnover into H2 2021. Overall turnover levels are back above pre-Covid levels (March 2020) including in the telecommunication, retail, restaurant, healthcare and entertainment sectors. However, sectors that were most impacted by the various levels of Covid-19-related lockdowns, such as hotels/lodging and airlines, recorded turnover levels that are still below 2019 levels. Labour market conditions remained highly depressed as the many shocks experienced in Q3 2021 exacerbated job losses, forcing the unemployment rate up to a record high of 34,9%. The league of discouraged workers swelled to an unprecedented 3,8 million people. Towards the end of 2021, household income growth was supported by the gradual normalisation in economic activity following July’s unrest shocks, enabled by looser lockdown restrictions throughout the Omicron-led surge in new Covid cases over December. As a result, the fourth Covid wave was less disruptive to economic activity than the previous waves. Most South African households managed their finances relatively well throughout the pandemic, limiting borrowing and maintaining net savings. Household debt moderated to 66,7% of disposable income in the third quarter, while savings rose to 1,2% of disposable income. In the banking industry, credit growth improved in H2 2021. Household credit demand remained positive throughout last year, boosted by low interest rates, the economic recovery and stronger income growth. Higher levels of growth were evident in instalment sales and mortgages, but overdrafts declined further, and personal-loan growth slowed. Fixed-investment activity has generally remained depressed, undermined by uncertain long-term growth prospects, continued policy uncertainties and frequent power outages. The July riots also weighed heavily on business confidence and fixed investment decisions. Towards the end of 2021, growth in fixed investment started to gradually recover off a low base. The second half of the year saw a recovery in corporate credit demand as companies started to utilise overdraft facilities again, while vehicle finance also accelerated. Encouragingly, general loans to companies, often used to finance capital projects, rose marginally in November after eight months of steep declines. Inflation drifted higher off a low base in 2021. The main contributors were rising global oil and food prices and higher prices of a wide range of imported goods, primarily caused by global supply shortages and Covid-19-related disruptions to the world’s transport networks. Upward pressure also came from a weaker rand and higher electricity tariffs. The rate hiking cycle started in November 2021 when the Monetary Policy Committee (MPC) announced a 25 bps hike in the repo rate in response to the mounting upside risks to the inflation outlook. The upward trend continued in January 2022 when the MPC raised the repo rate by a further 25 bps, in line with consensus forecasts. After a volatile and difficult year for the South African banking sector in 2020, 2021 saw client transactional activity rebound and market volatility return to more normalised levels, although corporate deal flow across various sectors remained weak. Impairments declined significantly, underpinned by the improving operating environment and due to the normalisation of forward-looking IFRS 9 portfolio impairments. The South African banking sector continues to demonstrate strong levels of resilience, remaining well capitalised, liquid and profitable. 51 Nedbank Group Annual Results 20212021 resultscommentarySupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial resultsResultspresentationMessage from ourChief ExecutiveStrategic progress Our strategy gives us a clear framework on where we want to focus as a purpose-led organisation and what we need to do to meet our medium-term targets of achieving diluted headline earnings per share (DHEPS) greater than the 2019 level (2 565 cents), an ROE greater than the 2019 level (15,0%), a cost-to-income ratio lower than 54% (2019: 56,5%) and the #1 ranking in NPS (2019: 3) by the end of 2023. Through our strategy we seek to create value by growing revenue and increasing levels of productivity, both strongly enabled by technology, while maintaining world-class risk and capital management metrics. We are focusing on growing our share of transactional relationships and related deposits across all our businesses, and ensuring we deliver market-leading client experiences that will help us to attract new clients and a deepened share of wallet among existing clients. To boost our productivity and improve operational efficiency, we are building on and accelerating existing efforts in optimising our operating model in a more digital world, by leveraging the technology platforms we have put in place. Our world-class risk management capabilities ensure that we appropriately balance risk/reward trade-offs. Our strategy is delivered through five strategic value unlocks that include: delivering innovative market-leading client solutions; engaging in ongoing disruptive market activities (underpinned by digital leadership), focusing on areas that create value (strategic portfolio tilt, known as SPT 2.0), driving efficient execution (including target operating model enhancements, known as TOM 2.0) and creating positive impacts, including delivering on our purpose of using our financial expertise to do good. Underpinning these strategic value unlocks is our Managed Evolution (ME) strategy and technology transformation programme to build a modern, modular and digital IT stack that has reached 85% completion. Most foundational IT programmes are either complete or nearing completion, and the group’s intangible software assets are expected to have peaked in 2021 at around R9bn, in line with reducing levels of IT cash flow spend. The rationalisation, standardisation and simplification of our core banking systems that have resulted in a reduction from 250 systems down to 78 (final target of 65 to 75), are enabling reduced infrastructure, support and maintenance costs, less complexity and increased agility in adopting new innovations. The benefits of ME are evident in the digital progress we have made, as well as the realisation of benefits through TOM 1.0 and TOM 2.0. In 2021, the ME programme was benchmarked against a globally recognised peer group of 14 local and international banks across five key dimensions (business case, digital readiness, architecture, governance, people and adoption, and regulation and risk) to give insights into Nedbank's relative positioning to this peer group. The benchmarking exercise confirmed that the ME philosophy and approach of a stepwise technology modernisation was in line with that of successful international peers. The findings were very encouraging and concluded that ME has delivered value on an ongoing basis and that Nedbank is one of a few enterprises in the benchmarking peer group that has achieved revenue uplift from its IT transformation programme. Similarly, the assessment concurs with Nedbank’s focus of creating distinctive client experiences in support of digital penetration and sustainable client retention through increased cross-sell. The following progress was made in 2021: • Delivering innovative, market-leading client solutions • Digital client onboarding, sales and servicing (Eclipse for retail clients and Nedbank Business Hub for business clients): Our simplified digital client onboarding platforms for individual and juristic (business) clients continue to mature and expand, enabling clients to open FICA-compliant accounts remotely through our employee-assisted and self-service digital channels, by providing a seamless omnichannel experience. The processing of product sales to individuals via Eclipse currently includes six of our top retail products, being transactional products, personal loans, card issuing, 52 home loans, investments and overdrafts, as well as more than 170 services. Clients can also join the bank through our self-service kiosks, with a card issued immediately. Foreign exchange, the roll-out of student loans and selective Nedbank Insurance products, including MyCover Funeral and MyCover Life, will be available on the Eclipse platform during 2022. The Eclipse journey for individuals is now materially complete. In 2021, juristic client onboarding in Retail and Business Banking (RBB) and CIB started with the roll-out of the Nedbank Business Hub, leveraging our new digital token-less security and enabling a step change in client experience for businesses. The hub provides a convenient platform for clients from which they have a single view of relevant digital offerings and are able to transact, apply for products (transacting, lending and borrowing) or services to name a few. While migration to this modernised platform remains a key priority, the convergence of the various juristic digital channels has gained momentum, with a first release scheduled for July 2022. From a digital servicing perspective, an additional 100+ juristic services are intended to be digitised by the end of 2023. • Apps: The Nedbank Money app, which makes banking more convenient for our retail clients, continues to be rated highly on the Apple and Google app stores, with an average client rating of 4,4 (out of five). It is actively used by 1,6 million clients, up by 38% (2020: 1,2 million). Transaction volumes on the Money app increased by 54% and transaction values increased by 72% when compared to full-year 2020. New features introduced during the period include quote and fulfil functionality for funeral cover, life cover, car insurance and homeowners’ cover (HOC), as well as claims functionality for HOC and funeral policies. The functionality to make payments to cellphones and new investments has been enhanced and clients are now able to request real-time credit limit increases via the app. Revenue from value-added services increased by 53% across prepaid data, vouchers, electricity purchases, LOTTO and Send-iMali. The Nedbank Private Wealth app, which offers integrated local and international-banking capabilities, has an average rating of 4,6 (out of five) on the Apple and Google app stores. The Nedbank Money App (Africa) has proven to be the channel of choice across our Nedbank Africa Regions (NAR) subsidiaries owing to the convenience, wide functionality base and user experience, and achieved an app store rating of 3,7 (out of 5). The total number of enrolments at the end of December 2021 for the common monetary area (CMA) countries exceeded 63 000 users, with the total number of app users across NAR now more than 90 000. App volumes increased by 35% year on year (yoy), while value-added services (including airtime and electricity) purchases grew by 26%. • New innovations: During the period, in addition to the various app enhancements, we launched a number of new innovations. These include a new broad range of financial wellness tools, including credit score ratings with helpful tips for clients and enhanced MoneyTracker functionality tools allowing for spend categorisation and management. Retail Relationship Banking clients can now apply for an overdraft, and informal traders can join the bank and obtain a paycode through a simple USSD process. A host of user-friendly features were introduced, including the ability to redeem Greenbacks into a savings or investment account or to donate them to a charity, enhanced statements, and more seamless loan-offering processes. Significant transacting capabilities like the ability to get cash at an ATM by scanning a QR code (a first in SA), the ability for clients to withdraw cash using a digital voucher code at a wide network of retailers including: Pick n Pay, Shoprite and Checkers. RBB and Nedbank Private Wealth launched Apple Pay, which allows clients to make cashless, contactless payments using an Apple device. Since its launch in March 2021, we have seen excellent uptake in Nedbank Group Annual Results 2021client usage and payments continue to grow on a monthly basis. This mobile payment capability follows our scan-to-pay capability as well as Samsung, Garmin and Fitbit Pay solutions launched in prior periods. In addition, we launched Money Message, an innovative invoice-and-payment solution that enables small businesses to create and send invoices, and receive payments easily and securely on WhatsApp, which is the dominant messaging platform in SA. It also complements Nedbank’s tap-on-phone solution, a payments solution that enables businesses to accept payments by simply using an Android smartphone for contactless card payments. Enbi, our new artificial intelligence (AI)- driven chatbot, which was launched to meet client expectations for immediate and excellent personal assistance, now answers over 100 000 client enquiries a month. In NAR we continued to release new features, including digital wallets, self-enrolment and value-added services. The implementation of automated credit scoring enhanced our credit decisioning capability and provides integrated insights on managing credit risk and understanding our clients. In Nedbank Insurance, we have extended our insurance quoting, fulfilment and claims functionality on digital channels to 10 Insurance product offerings. As part of building Nedbank Private Wealth in Namibia, we extended our stockbroking services and international wealth offerings to clients. • Digital outcomes: Our digital initiatives helped us to increase the number of digitally active retail clients in SA by 11% to 2,3 million (December 2020: 2,1 million). This now represents 36% of total active clients (December 2020: 32% and December 2019: 28%) and 64% of main-banked clients (2020: 57% and 2019: 49%). Retail digital transaction volumes in SA increased by 28% and transaction values by 19%. Digitally active clients across the NAR business grew by 7% and represents 54% of the total active client base. • Creating great client experiences: The outcome of our digital innovations is evident in higher levels of client satisfaction, as illustrated in Nedbank again being rated the second-best large bank on NPS in 2021. We increased our score to 47% (2020: 41%) and similarly recorded an increase in the client satisfaction SAcsi score to 82% (2020: 81%). Nedbank was ranked the eighth most valuable brand among the top 50 South African companies for the second year in a row. In 2021 we have seen a continuation of high brand sentiment rankings; where Nedbank was consistently ranked as the #2 bank on social media brand sentiment as measured by Salesforce Social Studio. Independent external recognition, as reflected in the number and quality of international awards for business excellence, digital leadership and ESG, increased in the 12 months when compared with prior years. In 2021, relating to digital leadership, Nedbank won the Best Mobile and Internet Banking Awards at the International Business Magazine Awards, Best Digital Bank at the Global Business Outlook Awards and Best Digital Bank and Best Open Banking APIs (SA) at the 2021 Global Banking & Finance Awards. • Ongoing disruptive market activities • Avo super app: Our market-leading digital ecosystem Avo, which is a one-stop super app enabling clients to buy essential products and services online and have them delivered to their home, with seamless payments and credit enabled by the Avo digital wallet and Nedbank. Since its launch in June 2020, Avo has signed up more than 675 000 consumers (4,7x growth yoy), along with over 20 250 businesses (3x growth yoy) registering and offering their products and services on this e-commerce platform. Product orders continue to grow exponentially, with 3x yoy growth of gross merchandise value (GMV). We continue to enjoy favourable ratings across the Google and Apple app stores with ratings of 3,9 and 4,3 respectively. Avo Auto and the launch of Avo B2B marketplace are expected to strongly support further scaling efforts of the platform. • APIs: After having been the first bank in Africa to launch an API platform (API_Marketplace) that is aligned with the Open Banking Standard (PSD2), we made good progress in scaling the platform by allowing approved partners to leverage the bank’s financial capabilities through integrating into our standard, secure and scalable APIs. The number of third parties active on API_Marketplace has increased to 45 (2020: 17). Third-party interest in API_Marketplace continues to grow. The number of active APIs used increased from eight (December 2020) to nine. An example of a successful implementation is the enablement of personal-loans disbursals, which increased by 360% yoy, supporting our market share increase in this product. • Karri app: The Karri payments app made a strong recovery as schools reopened in 2021. Notwithstanding the big impact of Covid-19 on traditional event and sport tour collections (the main driver of usage and value of collections pre-Covid-19), we managed to increase active users back to pre-Covid-19 levels by adding new functionality and increasing the value offered to schools, enabling the highest active usage from March to May 2021. Karri now has well over 800 organisations that are using the app. The Karri app is now more relevant than ever, with a database of well over one million potential users and one of the highest app store ratings (currently 4,5). As schools return to normality, we are expecting a return to exponential growth. • Focusing on areas that create value (SPT 2.0) • We focus on areas that create value, particularly through strategic portfolio tilt (SPT 2.0) that is a groupwide strategy focused on right-sizing certain advances market shares, growing our transactional banking franchise and cross-selling into transactional deposits through integrated client value propositions. • Over the past 12 months we increased market share in key advances categories in line with the South African Reserve Bank (SARB) BA 900 returns, including personal loans (12,2% market share, up 1,0%) and household overdrafts (9,9% market share, up 1,9%). We also increased our share in vehicle finance (36,9% market share, up 0,4%), where we are leveraging our market-leading position and unique business model that is skewed to financing used and lower-value vehicles. These gains were supported by increased levels of client take-up rates, enabled by digital channels, notwithstanding tightening of credit criteria. Our home loans market share of 14,2% declined marginally by 0,2%. In wholesale lending we were selective in granting loans as we continued to manage risk and focus on increasing Net interest margins (NIM), resulting in a decline in market share (commercial mortgages 37,2% market share and wholesale term-loan market share 16,8%, both down 1,3%). • Main-banked clients in retail grew by 1% to 3,1 million and cross-sell was 1,9 products (compared with 1,8 in 2020). In the independent 2021 Consulta survey, Nedbank recorded the largest increase in main-banked market share of all large South African banks, increasing by 1,1% to 12,4%. CIB gained 35 new primary clients in the period. In NAR total clients increased by 1% to 338 000, of which 141 000 are main-banked. • From a deposit perspective, we have seen an increase in commercial funding and a decrease in wholesale funding, and gained market share in both commercial transactional (16,6% market share, up 1,0%) and non-transactional deposits (17,6%, market share, up 0,8%). Our focus on household deposit market share continues, with ongoing management actions focused on arresting household deposit market share losses, notwithstanding aggressive competition and pricing for retail deposits. Trends in Q4 2021 were pleasing, with an uptick recorded in term-related household deposit market share. 53 Nedbank Group Annual Results 20212021 resultscommentarySupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial resultsResultspresentationMessage from ourChief Executive• Driving efficient execution (TOM 2.0) • Creating positive impacts • Unlocking benefits through technology: After realising cumulative TOM 1.0 savings of R2,0bn in 2020 relating to the benefits from a modernised technology platform (ME) and agile innovation methodologies, in 2021 we launched TOM 2.0. TOM 2.0 is aimed at optimising the shape of our infrastructure (branches and corporate real estate), shifting our RBB organisational structure so that it is more client-centred and optimising our shared-services functions across the group as a direct result of the digital benefits from ME. In 2021 we recorded benefits of R967m, on our way to unlocking cumulative revenue uplift and cost savings of R2,5bn by the end of 2023 (of which approximately 90% relates to cost savings). The business case of our technology investments, including ME, evident in the value unlocks through TOM 1.0 and TOM 2.0, remains intact as the group’s annual amortisation charge (R1,7bn in 2021) remains below the cumulative benefit of these initiatives. In addition, annual IT cash flow spend has declined, after having peaked in 2017. • Branch optimisation: The digitisation of services in RBB and changing client behaviour, along with the impact of the Covid-19 lockdowns, has enabled us to reduce branch teller volumes by 21%. To date, as we optimise the shape of our infrastructure through Project Imagine, branch floor space has decreased by around 65 000 m2 (December 2020: 57 000 m2) from 2014 levels, while employee points of presence declined by 13 yoy to 538. Over the past 12 months our total group permanent headcount declined by 1 410, largely through natural attrition. • Real estate optimisation: Through our strategy of consolidating, standardising and optimising our own buildings to support new ways of working, our number of campus sites (offices) has decreased from 31 to 24 over the past four years, with a longer-term target of 19. Since 2016 we have saved over 116 000 m2 and over 47 000 m2 in 2021 alone. In the next few years, we will continue to optimise the portfolio by enhancing workstation use by enabling flexible office constructs to support more dynamic ways of work, as well as leveraging successful work-from-home experiences as a result of Covid-19, while creating further value and cost reduction opportunities. Our optimal workplace distribution mix is expected to settle at around 60% at Nedbank premises and 40% as a mix of hybrid and permanent work-from-home models to support an anticipated workforce distribution model of 50% full-time on premises, 30% hybrid and 20% permanent off-site. • RBB reorganisation and shared-services optimisation: In 2020 we started the implementation of Project Phoenix, which aims to shift our RBB organisational structure from being ‘product-led, supported by client and channel views’ to being ‘client-segment-led, supported by product and channel views’. We concluded phase one and two of our journey during 2021, moving from product-focused expert knowledge to centres of excellence with product insights present across the value chain. We also concluded the restructure of the cluster and divisional executive roles, as well as finalising the next tiers in line with the competencies required to deliver on the outcomes of the value chain accountabilities in 2021. The client-centred technology investments we have made enable digital client onboarding and enhanced cross-sell of additional products through simplified processes – these investments have assisted us in consolidating middle- and back offices within the cluster, unlocking efficiencies. • Groupwide shared-services optimisation: We have increased our focus to ensuring efficient and effective central group functions including marketing, risk, human resources (HR), finance and technology. In addition, we are in the process of further optimising smarter supply chain and procurement capabilities. • Understanding that banks play a central role in driving the sustainable socioeconomic development of our continent, Nedbank deliberately focuses on using its financial expertise to do good for its stakeholders. This strategic imperative is demonstrated through our market-leading Energy Policy that was released in H1 2021, which seeks to guide the transition away from fossil fuels, while accelerating efforts to finance non-fossil energy solutions needed to support socioeconomic development and build resilience to climate change. The Energy Policy will ensure that Nedbank has zero exposure to fossil-fuel-related activities (thermal coal, upstream oil and gas, and power generation) by 2045, with 100% of lending and investment activity supporting a net-zero carbon economy by 2050, while accelerating funding to key sectors such as renewable and embedded energy. To achieve this requires a significant amount of investment in innovation by the bank and this was evidenced with underwriting R35bn of renewable-energy lending to date and the launch of Africa’s first green AT1 instrument in 2021 as we raised a total of R910m, with the equivalent notional amount of funding to be directed to supporting the financing of new green infrastructure projects in SA. In addition, we successfully structured and arranged a R1,1bn Green Residential Development Bond for Nedbank Limited, issued under its domestic medium-term note programme and listed on the Sustainability Segment of the JSE in December 2021. • It is pleasing to have our efforts in this regard externally recognised, and we accept these awards of validation as evidence that we are progressing well while acknowledging there is always much more to be done. Recent awards include Nedbank being recognised as Africa’s Best Bank for Sustainable Finance 2021 by Euromoney and Best Bank for Sustainable Development South Africa 2021 by Global Banking & Finance. In recognition of the significant contributions made in the sustainable finance space, Nedbank won various awards including the Local Currency ESG and Sustainable Finance Deal of the Year and Local Markets ESG and Sustainable Finance Adviser of the Year at the Bonds, Loans and Sukuk Africa Awards in 2021. Review of results Nedbank Group delivered a strong financial performance for the year ended 31 December 2021 (the period), reflecting a significant decline in the impairment charge and strong revenue growth when compared to the low base in the year ended 31 December 2020 (the prior period). HE increased by 115% to R11 689m (2020: R5 440m) but remains 7% below our full-year 2019 HE of R12 506m. Preprovisioning operating profit growth increased by 9% (compared to a 2% decline reported at H1 2021). Change HE (Rm) ROE (%) (%) 2021 2020 2021 2020 54 5 605 > 100 4 532 45 > 100 962 594 3 636 1 595 662 12 (4) (465) 15,3 13,7 21,2 9,3 9,4 5,4 15,3 0,2 115 11 689 5 440 12,5 6,2 CIB RBB Wealth NAR Centre Group 54 Nedbank Group Annual Results 2021 HEPS and basic EPS increased by 114% to 2 410 cents and by 223% to 2 317 cents, respectively in line with the updated trading statement released on 14 February 2022. In this trading statement we noted that HEPS and basic EPS were expected to increase by between 108% and 118%, and 218% and 228%, respectively. DHEPS increased by 112% to 2 362 cents. As a result of the group’s strong financial performance, ROE for the period increased to 12,5%, well above the prior period of 6,2%, although still below the cost of equity and below the 2019 level of 15%. Return on assets increased from 0,45% to 0,98%, while return on risk-weighted assets (RWA) increased from 0,82% to 1,78%, assisted by an RWA decline of 3%. Net asset value (NAV) per share increased strongly by 11% to 20 493 cents. During the period, the group’s balance sheet strengthened further as we closed out the resilience phase of our strategic response to the Covid-19 pandemic. CET1 and tier 1 capital ratios of 12,8% and 14,3% respectively improved on the prior period and are now well above the pre-Covid 19 levels of 11,5% and 12,8% respectively (December 2019). These ratios are also well above the SARB minimum requirements and the group’s board-approved target ranges. The average LCR for the fourth quarter of 128% was well above the regulatory minimum level of 90%, with effect from 1 January 2022, which will be increased to 100% with effect from 1 April 2022, and an NSFR of 116% was well above the 100% regulatory minimum. After not paying dividends in 2020 as a result of Prudential Authority (PA) Guidance Note 4/2020, the group resumed dividend payments in H1 2021, in line with PA Guidance Note 3/2021, with an interim dividend of 433 cents at 2,50 times cover (payout ratio of 40%). A final dividend of 758 cents at 1,75 times cover (payout ratio of 57%) has been declared, at the bottom end of the group’s board-approved dividend target range of 1,75 times to 2,25 times. Cluster financial performance Nedbank Group’s HE increase of 115% to R11 689m was supported by strong growth in HE across all business clusters and group ROE of 12,5% improved from the prior year’s 6,2%. HE in CIB increased by 54% to R5,6bn, and the cluster delivered an ROE of 15,3%, above the group’s cost of equity. HE was primarily driven by a 56% decrease in impairments as reflected in the CLR declining to 42 bps (2020: 82 bps). NIM expanded and net interest income (NII) increased by 9%, despite average interest-earning banking assets (AIEBA) decreasing by 13% to R339bn. Actual gross banking advances decreased by 2% to R352bn due to muted corporate demand for new loans, particularly in the property sector, and early settlements as clients used excess liquidity to repay committed facilities, across multiple sectors. Actual trading advances decreased by 29% due to a decline in investments in foreign repo assets. Non-interest revenue (NIR) increased by 9%, benefiting from a normalisation of equity revaluations, partially offset by a lower trading performance given the high base in 2020. Expenses increased by 9%, driven by higher variable incentive costs, resulting in a cost-to-income ratio of 44%. HE in RBB increased by 184% to R4,5bn and ROE increased to 13,7% and remained below the group’s cost of equity. The main drivers for this performance were significantly lower impairment charges, due to relatively lower stress on the consumer driven by a stronger macroeconomic environment, as well as better-than-expected performance of Directive 7/2015 (restructured) loans exiting their monitoring period. The RBB CLR decreased to 134 bps from 240 bps in 2020 and from a H1 2020 peak of 269 bps, and it is now back within the cluster’s TTC target range of 130 bps to 180 bps. NII increased by 5%, driven by solid average advances growth, continuing its momentum from 2020, benefiting from both client demand for secured loans as a result of the 300 bps cuts in interest rates in 2020. Increased lending volumes originated through the group’s digital channels, notwithstanding lower loan approval rates across some products, also supported the growth. NIR increased by 8% as client-related transactional activity improved, evident in increased levels of spend, cash withdrawals and purchase of value-added services. An increase in expenses of 6% was driven by a higher incentive charge and higher computer processing costs, partially offset by good management of discretionary spend and ongoing optimisation of operations. HE in Nedbank Wealth increased 45% to R962m, with an ROE of 21,2%, above the group’s cost of equity. Insurance results were positively impacted by improved investment returns and the implementation of an enhanced asset and liability matching strategy, but these were partially offset by significantly higher death claims in the life portfolio. Asset Management delivered a robust performance on the back of positive net flows of R7bn, a 13% growth in assets under management (AUM) to R424bn and a strong market rebound. Wealth Management (SA) recorded a substantial growth in earnings off a low base, due to credit impairment releases and an increase in NII. Wealth Management (International) earnings were negatively impacted by record-low USD and GBP interest rates, offset by strong growth in investment business lines and steady client lending activity. HE in NAR increased to R594m, which is significantly higher than the R12m reported in the prior period, with its ROE improving to 9,3%, but still well below cost of equity. The performance reflects the impact of significantly lower impairments (CLR down to 72 bps from 185 bps) and a strong recovery in associate income from ETI with related HE increasing to R523m (2020: R153m). This was offset by a slight decline in NIR as a result of a high base in 2020, as well as lower transactional activity and general economic slowdown in some Southern African Development Community (SADC) regions in the first half of the year. The performance in the Centre reflects the benefits of higher levels of capital (endowment) held at the centre on NII and a R250 (pre-tax) decrease in the group central provision to R500m, partially offset by fair-value losses relating to the unwind of prior-period profits from the group’s fair-value hedge accounting solution. Financial performance Net interest income NII growth accelerated strongly from 2020, increasing by 8% to R32 500m. AIEBA declined by 3% to R870bn (compared to a 4% decline in H1 2021), negatively impacted by the first half reduction in CIB loans and advances as many clients used excess liquidity to repay committed facilities and demand for new wholesale credit was muted, offset by ongoing growth momentum in higher yielding RBB loans. NIM increased by 37 bps to 3,73% from 3,36% in 2020, and by 21 bps from the 3,52% reported in 2019. This increase was driven by higher levels of capital (endowment benefit), improved asset pricing and asset mix changes (retail advances grew faster than wholesale advances), improved liability mix, active balance sheet management and basis risk impacts. The increase was partially offset by the run-rate impact of the interest rate cuts in 2020 (endowment), as well as liability pricing pressure in a highly competitive household deposits market. Nedbank is positively positioned for a rise in interest rates, gaining an additional R1,6bn NII (pre-tax) for each 100 bps increase in interest rates over a 12-month period. 55 Nedbank Group Annual Results 20212021 resultscommentarySupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial resultsResultspresentationMessage from ourChief ExecutiveImpairment charge on loans and advances The group’s impairment charge decreased by 50% to R6 534m. The key drivers of the decline include the benefits of an improved macroeconomic environment (coming through in IFRS 9 models as South African GDP growth in 2021 improved from the 6,4% decline in 2020), better-than-expected collection outcomes in a low interest rate environment, a reduction in stage 3 loans as clients cured, including the decline in Directive 7/2015 (restructured) loans and a reduction in some of the overlays that were raised during the Covid-19 crisis as risks either did not emerge or are now captured in the new IFRS 9 models. The group’s CLR decreased from 161 bps in December 2020 to 83 bps in December 2021, an outcome that is now back within the group’s TTC target range of 60 bps to 100 bps. The support of clients in good standing and impacted by the Covid-19-related events, provided through Directive 3/2020 payment relief, declined from a peak of R121bn in July 2020 to R28bn in December 2020 and to R3,2bn in December 2021. Restructured (Directive 7/2015) loans declined from R13bn at December 2020 to R10bn as clients cured and exited their monitoring period, leading to these loans moving from stage 3 to performing. Average banking advances (%) 2021 20201 TTC target ranges 0,15–0,45 1,30–1,80 0,20–0,40 0,75–1,00 0,82 2,40 0,64 1,85 1,61 0,60–1,00 44 49 4 3 100 0,42 1,34 0,09 0,72 0,83 CLR (%) CIB RBB Wealth NAR Group 1 CLR for 2020 restated due to reclassification of listed corporate bonds into loans and advances. In CIB impairments decreased by 56% to R1 418m and its CLR, at 42 bps, is well below the 82 bps reported in 2020 and back within its TTC target range of 15 bps to 45 bps. The reduction in impairments was driven by the improvement in the latest macroeconomic factors in forward-looking macro models against the prior year, a decline in exposures as loans and advances declined and a lower level of stage 3 impairment charge as stage 3 loans declined. The commercial-property portfolio continues to perform ahead of expectations and reported a CLR of 30 bps, improving from 54 bps in 2020. Stage 3 loans in CIB declined by 26% from December 2020 and impairments raised for specific counters remain adequate. In RBB impairments decreased by 41% to R5 172m, reflecting the same key drivers as described above for the group, and its CLR, at 134 bps, is within its TTC target range of 130 bps to 180 bps. When the net benefit in RBB of once-off items of R713m relating to the curing of accounts in line with Directive 7/2015, annual parameter regrounding updates as well as the Covid-19-related overlay releases are normalised, the adjusted CLR at 153 bps falls into the middle of the RBB target range. Nedbank Wealth reported a CLR of 9 bps benefiting from a recovery on a single large client in 2021. NAR reported a decline in impairments of 62% to R168m, and CLR of 72 bps, at the lower end of its TTC target range of 75 bps to 100 bps, driven by improved collections and subdued growth in the loan portfolio. The group decreased Covid-19- and macro-related judgemental overlays to R1,5bn (December 2020: R3,9bn) as risks were either now accounted for in the refined IFRS 9 models (R1 698m – impairment neutral), released through the income statement (R675m – credit to impairments as these risks did not emerge) or retained (R1 518m – impairment neutral) and remain relevant for elevated risk in specific portfolios or new risks identified. 56 The group’s central provision decreased by R250m to R500m as some of these risks have been accounted for in new cluster models and the remainder is held to cater for new risks that may emerge, including inflation and interest rate vulnerability and associated impacts on the credit portfolios. The group’s balance sheet expected credit loss (ECL) increased from R26,1bn (December 2020) to R26,6bn and is also higher than the R18,2bn reported in 2019. This increase was driven by the R6,5bn impairment charge and accounts for post-write-off recoveries increasing to R1,4bn (December 2020: R1,2bn) and higher levels of write-offs at R8,5bn (December 2020: R7,4bn). Overall coverage increased from 3,25% of total loans and advances at December 2020 to 3,32% at December 2021, reflecting prudent credit risk management. The stage 1 coverage ratio increased to 0,69% (June 2020: 0,63%; December 2020: 0,65%). Stage 2 coverage was 6,44% (June 2020: 7,04%; December 2020: 6,61%) reflecting the impact of an improved macroeconomic environment moving clients to stage 1, and a decrease in overlays, including the group’s central provision. The stage 3 coverage ratio increased to 38,0% (June 2020: 34,6%; December 2020: 31,5%), as a result of a decrease in Directive 7/2015 loans in both RBB and CIB (so-called performing restructures or technical cures), which attract a lower coverage than non-Directive 7/2015 restructures and the 13% decline in stage 3 loans after successful implementation of restructures and sale of distressed debt. Non-interest revenue and income NIR increased by 4% to R25 027m, primarily as a result of a more favourable operating environment in H2 2021. The increase was driven by increased levels of client-related transactional activity, a normalisation of equity revaluations off the 2020 base and higher levels of insurance income. This growth was partially offset by the unwind of a significant proportion of the group’s fair-value gains recorded in 2020 and the impact of a high trading revenue base in the prior period. NIR growth, excluding macro fair-value hedge accounting adjustments, was 10%. • Commission and fee income increased by 4% to R17 754m, driven by improving transactional activity as evident in increased levels of client spend, cash withdrawals and purchase of value-added services, main-banked client gains, as well as improved levels of cross-sell. • Insurance income increased by 24% to R2 005m, benefiting from the implementation of a more appropriate asset-and-liability matching strategy, increased investment performance and an improved non-life claims experience. This was partially offset by higher funeral and death claims in the life portfolio. Loss-of-income claims declined from a high in September 2020, and while claims were above pre-Covid-19 levels in the first quarter of 2021, they declined to 2019 levels in June 2021. • Trading income remained robust but decreased by 15% to R4 475m, given the 2020 high base as a result of the benefit of the volatile market conditions in the prior period. • Equity revaluations of R650m (2020: R1 038m loss) were driven by improved underlying investee company profitability, resulting in increased valuations. • Fair-value adjustments, including those from the group’s fair-value hedge accounting solution, was a loss of R833m (2020: R352m gain). The trend was stable into H2 2021 (H1 2021 loss of R740m) as actions have been taken in models to reduce volatility. The impact of Covid-19 and the resultant impact on financial markets resulted in accounting volatility during 2020 and H1 2021. The accounting volatility in the group’s macro fair-value hedge accounting solution remained well within the accounting effectiveness thresholds, but model methodology enhancements were implemented during H2 2021 that are expected to reduce accounting volatility going forward during periods of extreme market movements. Nedbank Group Annual Results 2021Expenses The increase in expenses of 6% to R33 639m reflects the impacts of higher variable-pay incentives, off a low 2020 base, and ongoing investment in technology and digital solutions, partially offset by ongoing optimisation benefits. Excluding variable-pay incentive costs, expenses increased by 2%, highlighting diligent cost management. Statement of financial position Banking loans and advances Gross banking loans and advances increased by 1% to R807bn (improving from the 7% annualised decline reported in H1 2021), driven by ongoing momentum in RBB advances growth and CIB banking loans and advances growing from the June 2021 levels. • Staff-related costs increased by 7% following: • an average 2021 annual salary increase of 3,5% and a 5% reduction in permanent employee numbers since 31 December 2020 (8% decline since 2019), largely through natural attrition; and • a 67% increase in short-term incentives (STIs) and a 117% increase in long-term incentives (LTIs) (combined variable pay up 75%), driven by the impact of the group’s improved financial performance on variable incentives off the low base in 2020. • Computer-processing costs increased by 9% to R6 329m, reflecting an increase in the amortisation charge of 19%, as well as investment in digital solutions, partially offset by efficiency gains. As our ME technology strategy reaches material completion, the growth rates in computer-processing costs and amortisation are beginning to slow. • Marketing costs increased by 24% to R1 332m off a low 2020 base and reflects the group’s increased focus on increasing Nedbank’s share of voice in the market in support of revenue growth. • Other cost lines reflect the good management of discretionary spend. Savings were recorded on lower levels of occupation and accommodation. The group’s increase in expenses of 6% was lower than the increase in revenue and associate income of 7%, resulting in a positive JAWS ratio of 0,8% and our cost-to-income ratio decreasing to 57,7% (2020: 58,1%). Hyperinflation accounting in Zimbabwe Given the further depreciation of the Zimbabwean dollar and slowing inflation, the group reported a net monetary loss of R138m (2020: R205m loss). Earnings from associates Associate income of R686m, relating to the group’s 21% shareholding in ETI for the period has been recognised (up more than 100% when compared to a loss of R178m in 2020). This includes accounting for our share of ETI’s Q4 2020 and 9M 2021 earnings (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 R523m (2020: R153m), including the R245m (R177m post-tax) impact of funding costs. On 28 January 2022, ETI reported unaudited attributable earnings growth of more than 100% to US$257m and ROE of 18,8% (2020: 0,3%) for the 12 months to 31 December 2021. The performance was supported by solid growth in their West and Central Africa regions and ROEs in these regions were all above 21%. Ecobank Nigeria remains a drag on the overall ETI performance and we continue to work with management and other shareholders to address this. Non-performing loans continued to decline, while market-leading in-country franchises drove strong growth in deposits. The group’s capital position strengthened further, reflected in a total capital adequacy ratio (CAR) of 14,5% (ratio published by ETI in February 2022) at 31 December 2021 (2020: 12,3%). On 28 February 2022, the ETI Board recommended the payment of a dividend of USD 0,16 cents per share being a total amount of circa $USD40m, subject to shareholders’ approval at the upcoming Annual General Meeting of ETI. Our share of this dividend from ETI is estimated to be just over $USD8m. Gross banking loans and advances growth by cluster was as follows: Rm CIB RBB Wealth NAR Centre2 Group Change (%) (2) 7 (3) (8) (75) 2021 20203 352 487 400 301 30 729 22 325 1 112 361 280 375 385 31 567 24 186 4 438 1 806 954 796 856 2 Includes macro fair-value hedge-accounted portfolios and disclosure reallocations. 3 The group reclassified listed corporate bonds of R22bn in December 2020 from ‘Government and other securities’ to ‘Loans and advances’ to align with peer disclosure and so that they better reflect the group’s management of these assets. CIB gross banking loans and advances declined by 2% to R352bn as a result of many clients using excess liquidity to repay committed facilities in H1 2021 and muted corporate demand. Current demand for new wholesale loans remains low, with the timing of drawdowns uncertain, although recent developments are encouraging, including the increase in private renewable-energy-generation capacity up to 100 MW. RBB gross loans and advances increased by 7% to R400bn. Gross loans and advances growth in RBB continued its momentum from 2020, benefiting from both client demand for secured loans as a result of the 300 bps cuts in interest rates in 2020, as well as an increase in unsecured-lending volumes originated through the group’s expanded digital channels, notwithstanding lower loan approval rates due to tighter credit criteria. BB loans and advances increased by 7%, driven by strong growth in new-loan payouts achieved through judicious client acquisition and support given to meet clients’ funding needs. Residential mortgage loans grew by 8%, broadly in line with the industry. MFC (vehicle finance) loans increased by 6%, ahead of the industry average, as we continue to benefit from our business model that is more geared towards second-hand vehicles. Unsecured lending grew by 10% as a result of the shift to digital, which continues to gain momentum and is driving increased take-up rates of approved loans. Deposits Deposits increased by 2% to R972bn, with total funding-related liabilities increasing by 2% to R1,0 trillion, while the loan-to-deposit ratio decreased to 86% (December 2020: 88%). Within the clusters, CIB grew deposits by 3% and RBB by 6%. Deposits in Wealth declined marginally by 0,2% and NAR increased deposits by 5%. Current and savings accounts (CASA), along with cash management deposits, increased by 6%, driven by some clients holding cash for short-term operational requirements and potential rate hikes in 2022. Individually, current accounts increased by 8%, cash management accounts increased by 3% and savings accounts increased by 5%. Call and term deposits increased by 8% and fixed deposits decreased by 5% as retail and commercial 57 Nedbank Group Annual Results 20212021 resultscommentarySupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial resultsResultspresentationMessage from ourChief Executive clients opted to keep their cash short or in notice deposits due to forecast rate hikes into the future. Negotiable certificate of deposits (NCDs) decreased by 18%, as surplus cash was used to pay down expensive marginal deposits. Nedbank’s wholesale funding mix contribution has decreased by 4%, while the commercial funding mix pleasingly increased by 4%. Foreign funding, although small in relative terms for Nedbank, decreased by 9%. Funding and liquidity The group achieved a quarterly average long-term funding ratio of 26,6%, which is above the industry average of around 22,5% as a result of proactively managing Nedbank’s long-term funding profile. The group’s December 2021 average LCR of 128,1% (December 2020: 125,7%) exceeded the minimum regulatory requirement, with the group maintaining appropriate operational buffers designed to absorb seasonal, cyclical and systemic volatility observed in the LCR. Nedbank Group LCR 2021 2020 HQLA (Rm) Net cash outflows (Rm) Liquidity coverage ratio (%)4 Regulatory minimum (%) 4 Average for the quarter. 207 105 161 678 128,1 80,0 206 943 164 583 125,7 80,0 More details on the LCR are available in the ‘Additional information’ section of the condensed consolidated interim financial results. Nedbank’s portfolio of LCR-compliant HQLA increased marginally to a December 2021 quarterly average of R207,1bn, while the lower quarterly arithmetic average net cash outflows were driven by an increased demand for longer-dated deposits. Nedbank’s proactive management of its HQLA liquidity buffers, and close monitoring of its net cash outflows, resulted in an increase in the LCR to 128,1%. The HQLA portfolio, together with Nedbank’s portfolio of other sources of quick liquidity, equated to total available sources of quick liquidity of R264,2bn, representing 21,6% of total assets. Nedbank exceeded the minimum NSFR regulatory requirement of 100% effective from 1 January 2018 and reported a December 2021 ratio of 116,1% (December 2020: 112,8%). The structural liquidity position of the group has strengthened from December 2020 as a result of the effective management of balance sheet growth. Capital The group remains strongly capitalised, with ratios significantly above the minimum regulatory requirements and a CET1 ratio of 12,8% (December 2020: 10,9%) and a tier 1 ratio of 14,3% (December 2020: 12,1%). The improvement in the CET1 ratio was driven by strong organic earnings growth and lower RWA, including the benefits of deliberate optimisation initiatives. This was partly offset by the payment of the interim dividend of R2,2bn in August 2021. From 1 January 2022 the group’s CET1 capital adequacy target range has been recalibrated to 11,0% to 12,0% (previously 10% to 12%) as the PA announced its intention to reinstate Pillar 2A in line with Directive 5/2021. The tier 1 ratio was also impacted positively by the issuance of additional tier 1 instruments amounting to R3,5bn (including an industry-first R910m green AT1 instrument), offset by redemptions of R2bn, the buyback of old-style preference shares that still qualified as capital in 2021 and the further grandfathering of these old-style preference shares (R531m) from January 2021 in line with the Basel III transitional arrangements. The total CAR was further enhanced by the issuance of Basel III qualifying tier 2 instruments of R2,95bn, offset by redemptions of R2bn, in line with group’s capital plan. Basel III capital ratios (%) 2021 2020 Internal target range Regulatory minimum5 CET1 Tier 1 12,8 14,3 10,9 12,1 10,0–12,0 > 11,25 Total CAR 17,2 14,9 > 13,0 8,0 9,5 11,5 (Ratios include unappropriated profits.) 5 PA minimum requirements are disclosed with Pillar 2A at 0% in line with Directive 2/2020 (April 2020) and excluding bank-specific Pillar 2b capital requirements. The Pillar 2A capital requirement will be reinstated back to 50 bps at CET 1, 75 bps at tier 1 and 100 bps for the total capital ratio, with effect from 1 January 2022. Using our financial expertise to do good 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 and to contribute to the well-being and growth of the societies in which we operate by delivering value to our employees, clients, shareholders, regulators and society. Employees • We maintained our focus on the physical, mental and financial well-being of our employees through various interventions, including a bankwide virtual campaign on mental well-being, together with a variety of webinars that were attended by more than 22 400 employees during the year. We are saddened by the loss of 55 of our employees who succumbed to Covid-19 in 2021. • Despite the difficult operating environment, employee engagement levels remained high and our ‘Great place to work’ NPS improved to 19 (from 17 in 2020 and 7 in 2019). • We have not retrenched any employees as a result of Covid-19. Our Agility Centre successfully redeployed 242 employees into alternative roles within Nedbank, while 70 employees were regrettably retrenched as a result of changes in operational requirements. • We have paid our 26 861 employees’ salaries and benefits of R18bn. We concluded annual salary increases of 4,0% for our bargaining-unit employees, with non-bargaining-unit employees receiving increases of 3,0% and the blended average employee salaries increasing by 3,5% in 2021. • In 2021 training spend increased to R1,1bn (2020: R924m). Our Digital Learning platform was launched in February 2021 with more than 18 000 learners completing 982 417 digital learning courses. The total number of learning hours (including compliance training) increased to 49 hours per person (2020: 31 per person) with 24 746 learning beneficiaries (2020: 24 391). • During 2021, 62% of our employees worked from home (excluding branch employees) as business continuity plans were invoked on the back of Covid-19-related lockdown levels and during the July civil unrest that broke out in parts of Gauteng and KwaZulu-Natal. • Nedbank has implemented a ‘hybrid work model’ approach since the onset of the pandemic. A portion of our workforce will continue to work from a Nedbank office or branch, while a blended approach will be followed, with employees working on-site or remotely. We plan to accommodate a split of on-site/off-site employees, which will see approximately 60% of all office employees working at the various Nedbank campus sites on any given day. 58 Nedbank Group Annual Results 2021• We continued to focus on transformation as a key imperative to ensure that Nedbank remains relevant in a transforming society. ACI (African, Indian, Coloured) representation at board level improved to 61,5% (2020: 60,0%), at executive level it was maintained at 46,2% and among our total employees it was 79,9% (2020: 78,0%). Pleasingly, we have recorded improvements in ACI employee representation at senior and middle management levels. Female representation at board level improved to 23,1% (2020: 20,0%), at executive level it remained at 46,2% and among total employees it was 61,4% (2020: 61,2%). • We were formally recognised for our efforts towards transformation and diversity and won the Top Empowered Business of the Year Award at the 2021 Oliver Top Empowerment Awards. Nedbank also won the ‘Best digital campaign’ for the #YoungDifferenceMaker and was as voted as runner-up in the ‘2021 Employer of Choice: Commercial and Retail Banking’ category by the South African Graduate Employers Association (SAGEA). Clients • Delivering market-leading client experiences remains a key priority for us. On the back of the 2020 Consulta survey, where we achieved second position among the five largest South African banks on client satisfaction metrics, we maintained this position in 2021 and improved our scores further in both client satisfaction (SAcsi score of 82%, 2020: 81%) and NPS (score of 47%, 2020: 41%). • Nedbank’s brand ranking among South African companies, which increased from 11th in 2019 to eighth in 2020, remained at eighth position in 2021, in Brand Finance’s Most Valuable Brands in SA report. Brand Finance estimates Nedbank’s brand value at around R15bn. We also consistently ranked the #2 bank on social-media net brand sentiment, measured by Salesforce Social Studio. • We safeguarded R972bn (2020: R954bn) of deposits at competitive rates. • We supported clients by advancing R228bn (2020: R210bn) in new loans to enable them to finance their homes, vehicles and education, as well as grow their businesses, and to help them manage through a difficult period in 2021. • The payment relief (payment holidays) we provided to clients under the PA’s Directive 3/2020 has mostly matured after assisting more than 400 000 clients on R121bn of loans since the Covid-19 crisis emerged. • Our clients’ access to banking improved, and as the Covid-19 lockdowns resulted in an accelerated shift of clients to digital channels, digitally active retail users increased by 11% to 2,3 million. Our end-to-end digital onboarding, sales and servicing capabilities, as part of our ME technology journey, supported the increase in digital sales as a percentage of total sales in RBB to 32% (from 28% in 2020 and 12% in 2019). • In recognition of the value-add to our clients and our leadership position in key industries, segments and products, Nedbank won various awards, including Global Finance’s 2021 Best Investment Bank in South Africa, Global Banking & Finance’s 2021 Best Corporate Bank in South Africa, African Banker’s 2021 Infrastructure Deal of the Year, Global Business Review Magazine’s 2021 Best Retail Bank and City of London’s 2021 Best Private Bank. Shareholders • After declining by 40% in 2020, in 2021 the Nedbank Group share price increased by 35%, outperforming the South African bank index that increased by 29%. This strong performance was underpinned by the group’s improved financial results and good strategic and operational progress, supported by enhanced disclosures to address key issues investors raised in 2020, particularly in respect of our commercial-property finance portfolio which has been significantly more resilient than predicted at the onset of the Covid-19 lockdowns. The group’s strong capital and liquidity position at 31 December 2021 supported the declaration of a final dividend for 2021 of 758 cents per share. • We successfully hosted our second virtual annual general meeting (AGM) in May 2021. On the back of a remuneration implementation vote of 65,9%, being below the required 75%, we reached out to engage with shareholders and we have made a number of remuneration-related amendments during 2021. Given the high level of our ongoing shareholder engagements, only one shareholder requested a meeting after the AGM and the meeting was constructive. Nedbank Group continues to value feedback from our shareholders to enhance our disclosures and ESG practices, including those from our annual Board ESG Roadshow. In acknowledgement of Nedbank’s leadership and progress made on ESG-related disclosures, Nedbank was announced the winner of Best Sustainability Reporting in Financials (Banking) and the overall winner, as well as Best Climate-related Reporting, in ESG Investing’s 2021 ESG Reporting Awards. Our ESG ratings remain on the top tier among local and global peers – MSCI: AA (top 33% of global banks), FTSE Russell: 4,3 (top 6% of global banks), Sustainalytics: 16,5 (top 6% of diversified banks) and ISS: C (top 20% of global banks). • We ensured transparent, relevant and timeous reporting; enhanced our disclosures to shareholders; and participated in numerous virtual investor engagements throughout 2021, which were accompanied by high levels of investor attendance. Foreign equity shareholding levels increased to 31,4% (December 2020: 24,1%). • In November 2021 Old Mutual Limited (Old Mutual) concluded the unbundling of 62,1 million Nedbank Group shares (comprising 12,2% of the issued ordinary share capital of Nedbank Group) to Old Mutual shareholders by way of a distribution in specie. As expected, the Nedbank share’s free-float increased further, resulting in a marked increase in index-related shareholders as well as many of the group’s largest 20 shareholders increasing their holdings. At year-end, Old Mutual owned 5,2% of Nedbank Group. • In December 2021 Nedbank Group repurchased all the non-redeemable, non-cumulative, non-participating, variable rate preference shares of Nedbank Limited by way of a scheme of arrangement, following approval by the requisite majority of shareholders (100% votes of approval). Regulators • We continued to work closely with the government, regulators and the Banking Association South Africa (BASA) to ensure the safety and soundness of the South African banking system. • Key developments included the following: • On 31 March 2020, the PA issued Directive 1/2020, which provided for the minimum regulatory LCR requirement to be reduced from 100% to 80%. This requirement remained effective for the 2021 financial year in line with Circular 1/2021. With effect from 1 January 2022, the LCR temporary relief measure was withdrawn in line with Directive 8/2021 issued by the PA. Banks are now directed to comply with the revised minimum regulatory LCR requirements with effect from 1 January 2022 of 90%, and from 1 April 2022 of 100%. • Directive 3/2020 dealt with Covid-19-related distressed restructures and remained effective for 2021 in line with Circular 1/2021. However, as the PA has issued Directive 7/2021, D3/2020 will not apply to any restructured 59 Nedbank Group Annual Results 20212021 resultscommentarySupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial resultsResultspresentationMessage from ourChief Executivecredit exposures granted after 1 January 2022, whether new or reapplications. Directive 3/2020 will be withdrawn with effect from 1 April 2022. • The PA issued Directive 2/2020, which allows for the temporary removal of the systemic risk buffer, or Pillar 2A capital requirement, which was reduced from 1% in total CAR to zero, and which remained in effect for 2021 in line with Circular 1/2021. • Every year our sponsorship of the Thuthuka Education Upliftment Fund supports 45 students who are pursuing an academic qualification towards becoming chartered accountants in SA, and in 2021 we have funded the qualification of 62 (2020: 56) black chartered accountants. • Our CSI spend totalled almost R121m (2020: R103m) in 2021 and included over R57m that was allocated to skills development and education. • The PA issued Directive 5/2021, which directs banks to • Nedbank partnered with an alternative student funding matters related to the prescribed minimum-required capital ratios as well as the application of various components of the previously mentioned capital requirements, such as the systemic risk capital requirement (Pillar 2A), the domestic systemically important bank (D-SIB) capital requirement, the countercyclical buffer range and the capital conservation buffer range. This in effect seeks to reinstate the Pillar 2A capital requirement back to the pre-Covid-19 levels of 50 bps, 75 bps and 100 bps for CET1, tier 1 and total capital respectively. The Pillar 2A reinstatement has been in effect from 1 January 2022. • SARB believes the current money market shortage system (cash deficit system) is proving to be both difficult and costly to implement and it is therefore proposing a replacement of the current monetary policy transmission mechanism to a floor system (also known as a cash surplus system) where the resultant effect is that the banking system will operate on the basis of a surplus liquidity position. We believe that movement from a cash deficit system to cash surplus system should be net positive for the banking sector, with the most significant potential benefit being a reduction in the cost of funding at the short end of the funding curve, while also offering banks an option to diversify their HQLA portfolios and/or extend additional credit and liquidity to the real economy. • We continued to strengthen our capital position, with a tier 1 capital ratio of 14,3% and CET1 ratio of 12,8%. • We maintained a strong liquidity position, with an average LCR of 128% in the fourth quarter of 2021 and an NSFR of 116% at 31 December 2021. Both ratios improved on the levels achieved at December 2020. • We hold investments of over R175bn in government and public sector bonds as part of our HQLA requirements. • We made cash taxation payments across the group of R11,2bn, up 29% (2020: R8,7bn), relating to direct, indirect and employee taxes, as well as other taxation. 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 aim to play our part in enabling a thriving society, create long-term value and maintain trust to ensure the ongoing 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 SDGs as a framework for measuring delivery on our purpose, and this has proven very important during this time. Key highlights include the following: Quality education (SDG 4) • Over the past five years we have provided approximately 5 977 students with student loans to the value of R364m, a total of R36m of which was disbursed to support 575 students in 2021. In addition, we have provided R5,1bn in funding for the development of additional student accommodation for over 42 758 student beds since 2015, including R169m and 573 beds in 2021. 60 organisation to provide a R10m facility to create approximately 800 new tertiary education loans for the students in the ‘missing middle’ – those who do not qualify for state funding (the National Student Financial Aid Scheme) but are also unable to obtain a traditional student loan. Clean water and sanitation (SDG 6) • During 2021 Nedbank was awarded five public sector infrastructure finance tenders to the value of R363m. The Mpumalanga Municipality will leverage the funds for wastewater treatment and replacement of old water networks and the Western Cape Municipality will upgrade and replace ageing sewer infrastructure. • During the 2021 financial year funding transactions were completed to the value of R437m. Many of these transactions were concluded in the agricultural sector, where recipients used the money to replace ageing and inefficient irrigation systems with improved technology. There has also been a notable increase in interest in the funding solutions from commercial and industrial businesses that are becoming increasingly aware of the risks of water scarcity to their sustainability, and the importance of water recycling, purifying and rainwater harvesting. • We decreased our own total water consumption by a further 18% (2020 to 2021) and by 39% when compared to the 2019 base year. This decline was driven by floorspace consolidations and reduced levels of occupancy in our campus sites due to the lockdowns. Affordable and clean energy (SDG 7) • We have achieved many firsts in this space. Our pioneering green AT1 R910m issuance highlights the scope and breadth of opportunity that the sustainability agenda holds for Africa. To date we have raised a total of R6,8bn on green bonds, with R2,1bn raised during 2021. • In the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) we have arranged 42 transactions in renewable-energy projects to date, underwriting a total of R35bn and current exposures of R29bn. • The lifting of the licensing floor for energy projects in the private sector (embedded generation) from 1 MW to 100 MW is a positive development that will enable many of our clients to reduce their carbon footprint, while ensuring energy certainty. Deal flow in 2021 saw our Investment Banking division complete three material transactions totalling over R420m and our Business Banking division complete 40 transactions totalling R191m, with a healthy pipeline of future deals in place. Decent work and economic growth (SDG 8) • Nedbank’s Small Business Services continued to promote our newly launched Startup Bundle for new small businesses, offering zero monthly maintenance fees for the first six months, access to a dedicated banker and beyond-banking support. New merchant features were landed to support cashless trading on smartphones (tap on phone) and on WhatsApp (Money Message). Nedbank Group Annual Results 2021• A total of 662 new Nedbank Stokvel Accounts were opened in 2021, with an average of just over 32 000 active lives insured through its innovative burial cover solution. With 55% new Stokvel Accounts converted from the USSD channel following the restrictions on movement and gatherings, the pandemic has prompted stokvel members to adopt digital payment methods. • In 2021 we reactivated our commitment to the Youth Employment Service (YES), through which corporate SA aims to provide internship opportunities for more than one million South Africans. From our 2019 participation we have onboarded 239 YES participants into permanent Nedbank jobs and another 1 390 at Nedbank’s partners. We have placed more than 1 900 previously unemployed youth internally and through sponsored placements, and we continue to encourage other South African corporates to follow our example. Reduced inequalities (SDG 10) • We partnered with the 67CEOs Foundation, Gift of the Givers and UNICEF, providing both rand value support and on-the-ground assistance to rebuild small and micro businesses, as well as to expedite humanitarian relief. • We provided R6,4m to support initiatives, helping to clean up and repair damage caused to communities and infrastructure due to civil unrest, and, in addition, made a R7,5m donation to the Humanitarian Crisis Relief Fund under the Solidarity Fund. We supported employees, their families and communities in KwaZulu-Natal with 106 tons and 5 000 food parcels and supplies during the July 2021 civil unrest. In addition, we contributed R1m assistance to informal traders, helping them to rebuild their businesses and unlock economic activities, while investing into the township economy to support micro entrepreneurs with R2m additional funding. • We maintained our level 1 BBBEE status and were acknowledged at the Oliver Top Empowerment Awards as 2021’s Top Empowered Business of the Year. The award is given to the organisation that best demonstrates excellence in all spheres of the general criteria and the seven pillars of empowerment. • In our own operations, 76% of our procurement spend was used to support South African businesses. In an effort to support the cash flow needs of small businesses as part of our commitment to the #PayIn30 Campaign, 91% of the total amount paid to 1 606 qualifying small and medium enterprises (SMEs) was paid within 30 days of our receiving their invoices. Sustainable cities and communities (SDG 11) • We disbursed R640m towards the development of affordable housing for lower-income households in 2021, bringing the total invested in the sector to over R5bn over the past five years. • To date, we have provided funding of R25bn for buildings that are linked to green-certified properties and those that contain sustainable features. • We successfully structured and arranged a R1,1bn Green Residential Development Bond for Nedbank Limited, issued under its domestic medium-term note programme and listed on the Sustainability Segment of the JSE on 10 December 2021. Economic outlook The world economic outlook has become murkier in recent weeks. Initial expectations were for another year of relatively robust global growth, with the IMF forecasting 4,4% growth for 2022. However, downside risks have increased significantly. Russia’s invasion of Ukraine adds another layer of uncertainty to the outlook. The conflict is likely to push global oil prices higher for longer, adding further fuel to the global inflationary fire already raging on the back of persistent supply shortages, disruptions to global logistics and transport networks, and the lingering impact of the pandemic. Surging global oil prices amid already high and rising inflation will erode households’ purchasing power, companies’ profits and investors’ returns, weighing on confidence and slowing global growth in the process. This situation also complicates monetary policy decisions, possibly forcing the US and other major central banks to tighten monetary policies more aggressively. Fiscal policies in the US and other advanced countries are also shifting towards rebuilding and expanding infrastructure while accelerating the transition to clean energy to mitigate climate change. The focus on infrastructure could boost the demand for commodities in the years ahead, supporting growth in commodity-exporting countries. However, these benefits are only likely to materialise from 2023 onwards. The IMF projected slower growth of 3,8% for advanced countries in 2022 from an estimated 5,2% in 2021. In emerging and developing economies, economic growth was expected to slow to 4,8% in 2022, down significantly from approximately 6,5% in 2021. Growth is expected to remain fragile throughout 2022 as countries deal with geopolitical tensions, new Covid-19 variants, slow vaccination progress, weak policy support, sharply higher global oil prices, higher general inflationary pressures, and tighter global financial conditions. Expectations of slower Chinese economic growth will weigh on the outlook for other emerging and developing economies, given its significance as an export destination for most countries in this group. The recovery in Sub-Saharan Africa is likely to continue, slightly slower than the 4,0% in 2021. The region’s economy is projected to expand by 3,7% in 2022. However, downside risks have increased. The Russia-Ukraine war is likely to benefit oil-exporting nations, but prices of non-energy commodities are expected to ease off last year’s peak and stabilise at lower levels. Given the region’s low vaccination rates, resurgent Covid infections and associated lockdowns continue to pose downside risks. SA’s economic recovery is expected to moderate off 2021’s higher base in the year ahead. Encouragingly, consumer spending is likely to increase steadily, underpinned by firmer income growth and relatively favourable interest rates. Fragile consumer confidence, hurt by a weak job market, will still limit the upside. Fixed-investment spending is forecast to rise off a low base but faces ongoing headwinds. A sustainable rise in private sector capital outlays will only occur once government accelerates structural reforms and eradicates electricity shortages. The restocking of depleted inventories should support domestic demand. In contrast, government spending will likely remain weak. At the same time, softer global demand and commodity prices will weigh on exports. Real GDP growth is forecast to grow by 1,7% in 2022. Accelerated structural reforms and energy security remain key to unlocking faster economic growth and job creation over the medium-to-longer term. Inflation is forecast to remain close to the upper 6% limit of SARB’s target range throughout Q1 2022. The upside risks to the inflation outlook are unlikely to recede quickly as bottlenecks and shortages in the global supply chain are expected to ease only during Q2 2022. The rand remains a major source of uncertainty for the year ahead. Headline inflation is forecast to average 4,8% in 2022. Price-sensitive domestic demand is expected to keep inflation in check over the next three years. We expect another four interest rate hikes of 25 bps each this year, followed by more hikes of a cumulative 100 bps spread over the following two years, taking the repo rate up to 6,00% by the end of 2024. Conditions in the South African banking industry continue to improve. Growth in loans to households and companies is forecast to increase further in 2022, supported by the anticipated normalisation in economic activity. However, the rise in household demand could be dampened by a hesitancy to borrow given rising interest rates and fragile confidence on concerns about job losses. Corporate credit demand should hold up relatively well, underpinned by improving profits and firmer fixed investment. 61 Nedbank Group Annual Results 20212021 resultscommentarySupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial resultsResultspresentationMessage from ourChief Executive Prospects Our guidance on financial performance for the financial year 2022, in a global and domestic macroeconomic environment with high forecast risk and uncertainty, and based on our current economic forecasts, is currently as follows: • NII growth to be around high-single digits. Loan growth is expected to be faster than the 1% reported in 2021 and the group’s NIM is expected to increase from the 2021 level of 3,73%. • CLR to be within the top half of our TTC target range of 60 bps to 100 bps, being 80 bps to 100 bps. • NIR growth to be around high single digits as transactional activity continues to recover, as strategic initiatives including main-banked client gains, cross-sell and new revenue streams contribute to growth and as the volatility relating to the group’s fair-value hedge accounting solution is not expected to recur. • Expense growth to be above mid-single digits, reflecting the impact of ongoing investment in our technology platform and digital solutions, the return of some discretionary spend such as sponsorships, and new regulatory costs such as deposit insurance and Twin Peaks, partially offset by TOM 2.0 savings. • Liquidity metrics, including LCR and NSFR, to remain well above PA minimum requirements. • CET1 capital ratio to remain above the top end of the board-approved target range of 11% to 12%. • Dividend payments, within the group’s board-approved dividend policy and target range of between 1,75 times to 2,25 times. • DHEPS growth greater than nominal South African GDP (GDP + CPI) +5%. As part of 2020 year-end reporting we set new medium-term targets that we believe are appropriate to drive value creation in the current and expected economic environment. These, together with our 2022 guidance for these, as well as long-term targets, are as follows: Metric 2021 Full-year performance6 2022 outlook Medium-term target Long-term target ROE 12,5% Improve on 2021 Greater than 2019 levels (15%) by 2023. > 18% (COE + 3% to 4%) Growth in DHEPS 112% Solid positive growth Greater than 2019 levels > consumer price index (2 565 cents) by 2022, a year earlier than initially planned. + GDP growth + 5% CLR 83 bps Between 80 bps and 100 bps Between 60 bps and 100 bps of average banking advances Cost-to-income ratio (including associate income) 57,7% Improve on 2021 Below 54% by 2023 < 50% CET1 capital adequacy ratio 12,8% Above the top end of target range Dividend cover 2,02 times Within our target range of 1,75–2,25 times 11,0–12,0%7 1,75–2,25 times 6 The COE is currently forecast to be around 14,5% to 15,0% in 2022 to 2024. 7 The group’s CET1 capital adequacy ratio target range has been refined by the board to 11,0% to 12,0%, previously 10,0% to 12,0%. Shareholders are advised that all guidance is based on organic earnings and our latest macroeconomic outlook and has not been reviewed or reported on by the group’s joint auditors. Board and leadership changes during the period Iain Williamson stepped down as a non-executive director of Nedbank Limited and Nedbank Group Limited (companies) with effect from the close of the companies’ AGMs on 26 May and 28 May 2021 respectively. Iain’s appointment was in terms of the relationship agreement previously concluded between Old Mutual Limited (OML) and Nedbank Group, which provided for OML to nominate one director to the boards of Nedbank Group and Nedbank Limited for as long as OML’s shareholding was equal to or greater than 15% in Nedbank Group. Following OML’s unbundling of the majority of its shareholding in Nedbank Group to OML shareholders, this provision no longer applies. The companies’ previous Chairperson, Vassi Naidoo, was granted medical leave of absence in January 2021 and Mpho Makwana stepped in as Acting Chairperson. On 28 September 2021 a SENS was released advising shareholders of the sad passing of Vassi Naidoo. Mpho Makwana (the former Lead Independent Director and Acting Chairperson) was appointed as Non-executive Chairperson and Hubert Brody was appointed as Lead Independent Director of the companies' boards on 2 December 2021. Anna Isaac, Group Chief Compliance Officer, has resigned with effect from 30 April 2022 to join a bank in the United Arab Emirates. The appointment of a successor for Anna will be announced once Nedbank Group's succession process has been completed and regulatory approvals have been received. Forward-looking statements This announcement is the responsibility of the directors and 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 62 Nedbank Group Annual Results 2021 that could cause actual results to differ materially from those in the forward-looking statements include global, national and regional health conditions; 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, the financial information on which all forward-looking statements is based has not been reviewed or reported on by the group’s joint auditors. Final dividend declaration Notice is hereby given that a final dividend of 758 cents per ordinary share has been declared, payable to shareholders for the year ended 31 December 2021. 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 151,6 cents per ordinary share, resulting in a net dividend of 606,4 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 508 870 678. 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: Share certificates may not be dematerialised or rematerialised between Wednesday, 06 April 2022, and Friday, 08 April 2022, both days inclusive. Where applicable, dividends in respect of certificated shares will be transferred electronically to shareholders’ bank accounts on the payment date. The acceptance/collection of cheques has ceased, effective from 31 December 2020. In the absence of specific mandates, the dividend will be withheld until such time that shareholders provide their banking information. Holders of dematerialised shares will have their accounts credited at their participant or broker on Monday, 11 April 2022. The above dates are subject to change. Any changes will be published on SENS and in the press. For and on behalf of the board Mpho Makwana Chairperson Mike Brown Chief Executive Directors PM Makwana (Chairperson), MWT Brown** (Chief Executive), HR Brody*, BA Dames, MH Davis** (Chief Financial Officer), NP Dongwana, EM Kruger, RAG Leith, L Makalima, Prof T Marwala, Dr MA Matooane, MC Nkuhlu** (Chief Operating Officer), S Subramoney. Event Date * Lead Independent Director ** Executive Last day to trade (cum dividend) Tuesday, 05 April 2022 Shares commence trading (ex dividend) Record date (date shareholders recorded in books) Wednesday, 06 April 2022 Friday, 08 April 2022 Payment date Monday, 11 April 2022 63 Nedbank Group Annual Results 20212021 resultscommentarySupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial resultsResultspresentationMessage from ourChief ExecutiveFinancial results 65 66 68 70 74 Financial highlights Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Return-on-equity drivers 64 Nedbank Group Annual Results 2021Financial 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 shareholders Total comprehensive income Preprovisioning operating profit Economic profit/(loss) 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 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 Total income growth less expense growth rate (JAWS ratio) Effective taxation rate Group capital adequacy ratios (including unappropriated profits): – CET1 – Tier 1 – Total 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 Change % 2021 2020 1 1 >100 >100 >100 9 74 >100 >100 >100 >100 (38) 508,9 485,6 485,1 494,8 11 689 11 238 13 171 22 327 (1 735) 2 410 2 362 2 317 2 271 1 191 433 758 433 2,02 502,1 483,9 483,2 488,7 5 440 3 467 5 345 20 561 (6 580) 1 126 1 113 717 709 – 695 N/A 3 1 645 383 1 602 683 1 221 054 1 228 137 424 329 374 546 12 14 11 14 35 37 (5) (4) 4 039 322 20 493 17 770 17 502 7,3 0,9 89,1 26 861 27 303 12,5 14,8 0,98 1,78 3,73 43,5 74,4 0,83 57,7 0,8 24,2 12,8 14,3 17,2 3 606 283 18 391 15 549 12 948 11,5 0,7 65,0 28 271 28 324 6,2 7,4 0,45 0,82 3,36 44,5 76,0 1,61 58,1 (2,7) 23,7 10,9 12,1 14,9 65 Financial resultsStatement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysis2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Consolidated statement of comprehensive income for the year ended 31 December Rm Interest and similar income Interest expense and similar charges Net interest income Non-interest revenue and income Net commission and fees income Commission and fees revenue Commission and fees expense Net insurance income Fair-value adjustments Net trading income Equity revaluation gains/(losses) Investment income Net sundry income Share of gains/(losses) of associate companies Total income Impairments charge on financial instruments Net income Total operating expenses Zimbabwe hyperinflation Indirect taxation Impairments charge on non-financial instruments and other gains and losses Profit before direct taxation Total direct taxation Direct taxation Taxation on impairments charge on non-financial instruments and other gains and losses Profit for the year Other comprehensive income (OCI) 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 Property revaluations Equity instruments at FVOCI – net change in fair value Change 2020 Note 1 3 % (9) (21) 8 4 10 >100 8 (50) 26 6 (33) (7) (68) >100 >100 2 4 5 6 2021 (restated)1 65 772 33 272 32 500 25 027 17 754 22 085 (4 331) 2 005 (833) 4 475 650 263 713 786 58 313 6 534 51 779 33 639 138 1 073 499 16 430 4 043 4 104 72 300 42 219 30 081 24 140 17 137 20 653 (3 516) 1 622 352 5 252 (1 038) 212 603 (76) 54 145 13 127 41 018 31 772 205 1 148 1 562 6 331 1 877 1 994 (61) (117) >100 (12) 12 387 784 4 454 891 1 029 (722) (5) (21) 389 36 78 672 (189) 119 395 (80) (26) Total comprehensive income for the year >100 13 171 5 345 66 Nedbank Group Annual Results 2021 Rm Profit attributable to: – Ordinary shareholders – Non-controlling interest – ordinary shareholders – Non-controlling interest – holders of preference shares – Non-controlling interest – holders of participating preference shares – Non-controlling interest – holders of additional tier 1 capital instruments Profit for the year Total comprehensive income attributable to: – Ordinary shareholders – Non-controlling interest – ordinary shareholders – Non-controlling interest – holders of preference shares – Non-controlling interest – holders of participating preference shares – Non-controlling interest – holders of additional tier 1 capital instruments Total comprehensive income for the year Headline earnings reconciliation Profit attributable to equity holders of the parent Less: Non-headline earnings items Impairments charge on non-financial instruments and other gains and losses Taxation on impairments charge on non-financial instruments and other gains and losses Share of associate impairment of goodwill Headline earnings Change 2020 Note % 2021 (restated)1 7 7 7 7 >100 80 (25) >100 >100 >100 >100 (25) >100 >100 >100 70 98 >100 11 238 99 188 125 737 12 387 11 941 180 188 125 737 13 171 11 238 (438) (499) 61 (13) 11 689 3 467 55 251 (58) 739 4 454 4 358 55 251 (58) 739 5 345 3 467 (1 445) (1 562) 117 (528) 5 440 1 During the year, the group reviewed its statement of comprehensive income presentation. As a result of the review, certain line descriptions have been updated, subtotals have been removed and the 'Non-interest revenue and income' line item has been disaggregated. These changes represent reclassifications to the statement of comprehensive income presentation. It is the group's view that these changes provide more relevant disclosures on its financial performance. To provide comparability, the prior-year balances have been restated accordingly. The reclassifications had no impact on the group’s statement of financial position, statement of changes in equity and statement of cash flows. 67 Financial resultsStatement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysis2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Consolidated statement of financial position at 31 December Rm Assets Cash and cash equivalents1 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 Intangible assets Total assets Equity and liabilities Ordinary share capital Ordinary share premium Reserves Total equity attributable to ordinary shareholders Holders of preference shares Holders of participating preference shares Holders of additional tier 1 capital instruments Non-controlling interest attributable to ordinary shareholders 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 Change % 2021 2020 (restated)1 8 8 8 9 10 11 12 8 14 (51) 14 (34) 3 (29) (27) >100 (24) (4) >100 2 35 (5) 14 (4) 44 586 60 037 39 179 41 382 52 605 80 325 149 340 130 468 1 158 751 656 50 431 29 648 33 877 124 1 753 731 214 71 251 40 838 16 802 164 25 498 26 425 638 3 395 889 28 10 739 6 610 13 221 69 3 322 657 11 334 5 777 13 751 (1) 1 221 054 1 228 137 486 18 768 80 259 99 513 59 9 319 620 109 511 36 042 971 795 23 451 330 80 458 2 427 17 959 842 58 159 484 18 583 69 925 88 992 3 222 (58) 7 822 466 100 444 65 130 953 715 23 704 590 390 2 604 20 868 922 59 770 1 111 543 1 127 693 1 221 054 1 228 137 1 15 12 (100) >100 19 33 9 (45) 2 (1) (44) 17 (7) (14) (9) (3) (1) (1) 1 During the year, the group reviewed the presentation of the mandatory reserve deposits with central banks, which was previously disclosed separately on the statement of financial position. As a result of this review, the mandatory reserve deposits with central banks have now been aggregated within the cash and cash equivalents balance, as the nature of the mandatory reserve deposits represents cash and cash equivalents. The amount of mandatory reserve deposits with central banks that was reclassified to cash and cash equivalents is R26 491m for 2020, and consequently the prior-year balances have been restated to provide comparative information. The group is of the view that the updated disclosure provides more relevant information for users to better understand the group’s cash and cash equivalents. 68 Nedbank Group Annual Results 2021 69 NotesFinancial resultsStatement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysis2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021Consolidated statement of changes in equity for the year ended 31 December Rm Number of ordinary shares Ordinary share capital Ordinary share premium Foreign currency translation reserve Property revaluation reserve Other non- distributable reserves1 FVOCI reserve Other distri- butable reserves2 Total equity attributable to ordinary shareholders Holders of preference shares Holders of participating preference Holders of additional tier 1 capital shares instruments shareholders Non- controlling interest attributable to ordinary Balance at 1 January 2020 481 174 379 481 18 096 (2 244) 1 839 (55) 594 67 374 87 597 3 222 6 850 780 98 449 Share movements in terms of long-term incentive and BEE scheme3 2 718 388 3 487 Share- based payment reserve 1 512 (435) Additional tier 1 capital instruments issued Preference share dividend paid Additional tier 1 capital instruments interest paid Dividends paid to shareholders Total comprehensive income for the year Profit attributable to ordinary shareholders and non-controlling interest Exchange differences on translating foreign operations Movement in fair-value reserve Property revaluations Remeasurements of long-term employee benefit assets Share of OCI of investments accounted for using the equity method Transfer (from)/to reserves Value of employee services (net of deferred tax)4 Transactions with non-controlling interests Other movements 146 (26) – – 456 672 (526) 103 (26) (41) (15) 119 337 (89) (337) 292 401 (56) (251) 251 251 (58) (58) 972 (739) 739 739 (49) 55 (3 500) 5 345 55 4 454 (3 451) 3 782 (3 451) 4 358 3 467 3 467 (53) (80) 395 66 173 (11) 2 – – – 672 119 (26) (80) 206 – 292 205 (11) Total equity 2 972 (251) (739) 672 119 (26) (80) 206 – 292 (115) (11) (320) Balance at 31 December 2020 483 892 767 484 18 583 (1 995) 1 757 1 032 290 961 67 880 88 992 3 222 (58) 7 822 466 100 444 1 Represents other non-distributable revaluation surpluses on capital items and non-distributable reserves transferred from other distributable reserves, to comply with various banking regulations. 2 Represents the accumulated profits after distributions to shareholders and appropriations of retained earnings to other non-distributable reserves. 3 During the year, the group reviewed its presentation of the statement of changes in equity. As a result of this review, the 'Shares issued in terms of employee incentive schemes' and 'Shares (acquired)/no longer held by group entities and BEE schemes' line items, which were previously presented in separate lines, have been aggregated into one line item, 'Share movements in terms of long-term incentive and BEE scheme'. The group is of the view that the updated disclosure provides more relevant information for users to better understand the group’s changes in equity. 4 Preference share dividends include total dividends paid of R209m less preference dividend earned in respect of preference shares, held by group entities, of R188m. 70 Nedbank Group Annual Results 2021 Rm scheme3 Balance at 1 January 2020 481 174 379 481 18 096 (2 244) 1 839 Share movements in terms of long-term incentive and BEE 2 718 388 3 487 Number of ordinary shares Ordinary share capital Ordinary share premium Foreign currency translation reserve Property revaluation reserve Share- based payment reserve 1 512 (435) Other non- distributable reserves1 FVOCI reserve Other distri- butable reserves2 Total equity attributable to ordinary shareholders Holders of preference shares Holders of participating preference shares Holders of additional tier 1 capital instruments Non- controlling interest attributable to ordinary shareholders Total equity (55) 594 67 374 87 597 3 222 6 850 780 98 449 (53) 2 – – – (3 451) 3 782 (3 451) 4 358 3 467 3 467 (251) 251 251 (58) (58) 972 (739) 739 739 2 972 (251) (739) (49) 55 (3 500) 5 345 55 4 454 Additional tier 1 capital instruments issued Preference share dividend paid Additional tier 1 capital instruments interest paid Dividends paid to shareholders Total comprehensive income for the year Profit attributable to ordinary shareholders and non-controlling interest Exchange differences on translating foreign operations Movement in fair-value reserve Property revaluations Remeasurements of long-term employee benefit assets Share of OCI of investments accounted for using the equity method Transfer (from)/to reserves Value of employee services (net of deferred tax)4 Transactions with non-controlling interests Other movements 146 (26) – – 456 672 (526) 103 (26) (41) (15) 119 337 (89) (80) 395 66 173 (11) 672 119 (26) (80) 206 – 292 205 (11) (337) 292 401 (56) 672 119 (26) (80) 206 – 292 (115) (11) (320) Balance at 31 December 2020 483 892 767 484 18 583 (1 995) 1 757 1 032 290 961 67 880 88 992 3 222 (58) 7 822 466 100 444 71 Financial resultsStatement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysis2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Consolidated statement of changes in equity (continued) for the year ended 31 December Rm Number of ordinary shares Ordinary share capital Ordinary share premium Foreign currency translation reserve Property revaluation reserve Share movements in terms of long-term incentive and BEE scheme3 1 708 780 2 185 Additional tier 1 capital instruments issued Additional tier 1 capital instruments redeemed Preference share capital redeemed Preference share dividend paid4 Additional tier 1 capital instruments interest paid Dividends paid to shareholders Total comprehensive income for the year Profit attributable to ordinary shareholders and non-controlling interest5 Exchange differences on translating foreign operations6 Movement in fair-value reserve Property revaluations Remeasurements of long-term employee benefit assets Share of OCI of investments accounted for using the equity method Transfer (from)/to reserves Value of employee services (net of deferred tax)7 Transactions with non-controlling interests Other movements 499 28 – – (192) 11 606 180 13 171 956 (457) (12) 28 (24) 3 Balance at 31 December 2021 485 601 547 486 18 768 (1 508) 1 764 1 205 273 769 77 756 99 513 – 59 9 319 620 109 511 Other non- distributable reserves1 FVOCI reserve Other distri- butable reserves2 Total equity attributable to ordinary shareholders Holders of preference shares Holders of participating preference Holders of additional tier 1 capital shares instruments shareholders Non- controlling interest attributable to ordinary Share- based payment reserve (132) 78 73 (265) (332) 637 (95) (3 222) (188) 188 188 (8) 125 125 3 497 (2 000) (737) 737 737 (2 178) (2 178) 11 941 11 238 11 238 (36) 389 (21) 451 35 (2) 19 78 – – – – 956 73 28 389 (743) – 637 26 (2) Total equity 19 3 497 (2 000) (3 144) (196) (737) (2 178) 12 387 1 029 73 36 389 (743) 637 – – (2) 99 73 8 (26) 1 Represents other non-distributable revaluation surpluses on capital items and non-distributable reserves transferred from other distributable reserves, to comply with various banking regulations. 2 Represents the accumulated profits after distributions to shareholders and appropriations of retained earnings to other non-distributable reserves. 3 During the year, the group reviewed its presentation of the statement of changes in equity. As a result of this review, the 'Shares issued in terms of employee incentive schemes' and 'Shares (acquired)/no longer held by group entities and BEE schemes' line items, which were previously presented in separate lines, have been aggregated into one line item, 'Share movements in terms of long-term incentive and BEE scheme'. The group is of the view that the updated disclosure provides more relevant information for users to better understand the group’s changes in equity. 4 Preference share dividends include total dividends paid of R209m less preference dividend earned in respect of preference shares, held by group entities, of R188m. 5 The R125m gains attributable to holders of participating preferences shares relate to economic gains allocated to participating preference shareholders in accordance with an operating-profit-share preference share agreement. 6 Exchange differences of R1 029m disclosed in the statement of other comprehensive income includes R148m for the conversion of our investment in ETI from USD to ZAR. The R499m decrease in the FCTR includes R457m relating to the conversion of our investment in ETI and a R881m decrease related to foreign subsidiaries. 7 During the year, the group reviewed its presentation of the statement of changes in equity presentation. As a result of this review, the 'Share-based payment movements' line item was renamed 'Value of employee services (net of deferred taxation)' to better reflect the nature of the line item. The group is of the view that the updated disclosure provides more relevant information for users to better understand the group’s changes in equity. 72 Nedbank Group Annual Results 2021 Rm scheme3 Share movements in terms of long-term incentive and BEE 1 708 780 2 185 Number of ordinary shares Ordinary share capital Ordinary share premium Foreign currency translation reserve Property revaluation reserve Share- based payment reserve (132) Other non- distributable reserves1 FVOCI reserve Other distri- butable reserves2 Total equity attributable to ordinary shareholders Holders of preference shares Holders of participating preference shares Holders of additional tier 1 capital instruments Non- controlling interest attributable to ordinary shareholders 78 (36) (2 178) 19 – – 78 – – (2 178) 11 941 (3 222) (188) 188 188 (8) 125 125 3 497 (2 000) (737) 737 737 Total equity 19 3 497 (2 000) (3 144) (196) (737) (2 178) 180 13 171 99 73 8 (26) 12 387 1 029 73 36 389 (743) – 637 – (2) 499 28 – – (192) 11 606 956 (457) (12) 28 (24) 3 11 238 11 238 73 (265) 389 (21) 451 35 (2) 956 73 28 389 (743) – 637 26 (2) (332) 637 (95) Additional tier 1 capital instruments issued Additional tier 1 capital instruments redeemed Preference share capital redeemed Preference share dividend paid4 Additional tier 1 capital instruments interest paid Dividends paid to shareholders Total comprehensive income for the year Profit attributable to ordinary shareholders and non-controlling interest5 Exchange differences on translating foreign operations6 Movement in fair-value reserve Property revaluations Remeasurements of long-term employee benefit assets Share of OCI of investments accounted for using the equity method Transfer (from)/to reserves Value of employee services (net of deferred tax)7 Transactions with non-controlling interests Other movements Balance at 31 December 2021 485 601 547 486 18 768 (1 508) 1 764 1 205 273 769 77 756 99 513 – 59 9 319 620 109 511 73 Financial resultsStatement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysis2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Return-on-equity drivers for the year ended 31 December Rm NII Impairments charge on financial instruments Non-interest revenue and income Income from normal operations Total operating expenses Zimbabwe hyperinflation Share of gains 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 (2020: 366-day) basis. 2021 2020 32 500 (6 534) 25 027 50 993 (33 639) (138) 799 18 015 (1 073) (4 104) 12 838 (1 149) 11 689 30 081 (13 127) 24 140 41 094 (31 772) (205) 452 9 569 (1 148) (1 994) 6 427 (987) 5 440 870 382 895 880 1 195 860 1 209 835 93 359 88 602 88 021 82 897 74 Nedbank Group Annual Results 2021NII/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/Average interest-earning banking assets Interest-earning banking assets/Daily average total assets Return on total assets Leverage ROE 2021 2020 3,73% 3,36% less less 0,75% 1,47% add add 2,88% 2,69% 5,86% 4,58% less less 3,86% 3,55% less less 0,02% 0,02% add add 0,09% 0,05% 2,07% 1,06% multiply multiply 0,71 0,67 multiply multiply 0,91 0,85 1,34% 0,60% multiply multiply 72,8% 74,0% = = 0,98% 0,45% multiply multiply 12,81 = 13,74 = 12,5% 6,2% 75 Financial resultsStatement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysis2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 76 NotesNedbank Group Annual Results 2021Segmental analysis 78 Our organisational structure, products and services 80 Operational segmental reporting 82 86 Nedbank Corporate and Investment Banking Nedbank Retail and Business Banking 100 Nedbank Wealth 104 Nedbank Africa Regions 108 Geographical segmental reporting Nedbank Group Annual Results 2021 77 Our organisational structure, products and services We deliver our products and services through four main business clusters. Cluster Areas of strength and differentiation Nedbank Corporate and Investment Banking Corporates, institutions and parastatals with an annual turnover of over R750m • Market leader with strong expertise in commercial property, corporate advances, advisory services and renewable-energy financing. • Market-leading trading franchise with excellent trading capabilities across all asset classes. • Leading industry expertise in public sector, mining and resources, infrastructure and telecoms. Integrated model, delivering high levels of client service and better coverage. • • Ability to attract and retain high-quality intellectual capital. • Efficient franchise. Nedbank Retail and Business Banking Individual clients and businesses • Strong and growing market share across segments. • Digital capabilities enabling clients to join and engage with the bank through multiple channels, eg app, online, USSD, self-service kiosk, contact centre, ATMs/Intelligent Depositors, third-party channels and branches, as well as end-to-end digital onboarding capability for transactional and lending products across various channels. • Differentiated and disruptive CVPs across our different client segments, including Unlocked.Me, MobiMoney, Avo, MoneyTracker, the USSD-based Stokvel Account, Home-buying Toolkit, Karri school payments app, tap on phone, SimplyBiz, Apple Pay, Money Message and API_Marketplace. In Business Banking, well-positioned and distinctive value propositions incorporating unique lending solutions and digital network platforms to facilitate commercial growth have been developed for public sector, as well as for the agriculture, franchising and manufacturing sectors. • • Highly competitive relationship banking offering for our affluent and small-business clients. • Digitally enabled, reimagined distribution network with five different store types, including retailer partnerships and flexible workforce. Nedbank Wealth High-net-worth individuals, and other retail, business and corporate clients Insurance • Leverages existing distribution channels and digital platforms to market short-term, life and other insurance products to Nedbank clients. Asset Management • Top fund managers identified through Nedgroup Investments' Best of Breed investment approach. • Nedgroup Investments is committed to responsible investing through continuous engagement with partner fund managers to assess progress on agreed ESG focus areas and to gain a deeper appreciation of the real-life impact of investments. Wealth Management • An award-winning, integrated and holistic advice-led, high-net-worth offering for local and international clients. Nedbank Africa Regions Retail, small and medium enterprises, and business and corporate clients across the countries we operate in SADC operations (own, manage and control banks) • Presence in five SADC countries – well positioned for growth on the back of a standardised model customised for market context. • Ongoing technology investments to ensure digital leadership, and competitive and locally relevant CVPs. • Winner of the 2021 International Business Magazine Awards for Best Internet Banking Africa and Best Mobile Banking Africa. • Aiming for #1 in client service in every market that we operate in (#1 in NPS scores in Namibia and Mozambique). ETI associate investment (21,2% shareholding) • Ecobank-Nedbank alliance is the widest banking network on the African continent, covering 39 countries. • Aiming to increase dealflow by leveraging ETI’s local presence and knowledge and Nedbank’s structuring expertise. • ETI has a very strong West and Central Africa franchise: it is in the top three in 13 of 16 countries in the region. 78 Nedbank Group Annual Results 2021Outputs Contribution to group > 600 large corporate clients. • Full suite of wholesale banking solutions, including investment banking and corporate lending, global markets and treasury, commercial-property finance, transactional banking and deposit-taking. Approximately three million retail main-banked clients. • > About 300 000 business clients are served through our Small Business Service offering (tailored to businesses with annual turnover of less than R30m and the business owner). • > 14 376 business-banking client groups catering to mid- and large-sized commercial entities. • Differentiated and disruptive client-centred value propositions that help our clients manage money better. Full range of Banking and Beyond services including, transactional banking, card and payment solutions, lending solutions, deposit-taking services, risk management, investment products, card-acquiring services for businesses, ecosystems and platforms-based solutions. > 18 100 high-net-worth clients locally and internationally (SA, UK, Jersey, Isle of Man and the UAE). • Wide range of financial services, including high-net-worth banking and wealth management offering, as well as asset management and insurance solutions. Advances HE Contribution 47,9% 47,9% 48,0% 48,0% ROE CIB 15,3% R399bn 2020: R429bn 2019: R424bn R5 605m 2020: R3 636m 2019: R6 167m Advances HE Contribution 45,8% 45,8% 38,8% 38,8% 2019 2020 2021 ROE RBB 13,7% R381bn 2020: R356bn 2019: R349bn R4 532m 2020: R1 595m 2019: R5 293m 2019 2020 2021 Advances HE Contribution ROE 3,6% 3,6% 8,2% 8,2% 21,2% R30bn 2020: R31bn 2019: R31bn R962m 2020: R662m 2019: R1 042m 2019 2020 2021 > 337 800 clients. • Full range of banking services, including transactional, lending, deposit-taking services and card products, as well as selected wealth management offerings. • Bancassurance offering in selected markets. Advances HE Contribution 2,6% 2,6% 5,1% 5,1% ROE NAR 9,3% R21bn 2020: R23bn 2019: R22bn R594m 2020: R12m 2019: R457m 2019 2020 2021 79 SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisMessage from ourChief ExecutiveResultspresentation2021 resultscommentaryFinancial resultsNedbank Group Annual Results 2021Operational segmental reporting for the year ended 31 December Rm 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 Intergroup assets Total assets Equity and liabilities Total equity1 Derivative financial instruments Amounts owed to depositors Provisions and other liabilities Long-term debt instruments Intergroup liabilities Total equity and liabilities Summary of consolidated statement of comprehensive income (Rm) NII NIR Share of gains of associate companies2 Total income Impairments charge on financial instruments Net 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 Headline earnings/(losses) Selected ratios Average interest-earning banking assets (Rm) Average risk-weighted assets (Rbn) ROA (%) RORWA (%) ROE (%) Interest margin (%)3 NIR to total income (%) NIR to total operating expenses (%) CLR – banking advances (%) Cost-to-income ratio (%) Effective taxation rate (%) Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 44 586 60 037 39 179 150 498 831 735 95 019 – 41 382 52 605 80 325 132 221 843 303 78 301 – 2 122 30 058 39 151 68 887 398 622 33 504 997 24 403 80 264 54 232 428 992 18 460 1 221 054 1 228 137 572 344 607 348 390 598 80 986 80 244 42 847 109 857 108 858 109 511 36 042 971 795 45 547 58 159 – 100 444 65 130 953 715 49 078 59 770 – 36 536 35 998 437 651 7 305 316 54 538 38 691 65 079 423 046 10 095 543 69 894 1 221 054 1 228 137 572 344 607 348 415 020 390 598 42 847 41 089 109 857 108 858 7 966 7 881 100 15 947 1 418 14 529 7 011 202 7 316 1 711 5 605 7 339 7 229 115 14 683 3 245 11 438 6 432 159 4 847 1 211 3 636 32 500 25 027 799 58 326 6 534 51 792 33 639 138 1 073 16 942 4 104 12 838 99 313 737 30 081 24 140 452 54 673 13 127 41 546 31 772 205 1 148 8 421 1 994 6 427 55 193 739 11 689 5 440 5 605 3 636 4 532 1 595 962 662 594 12 870 382 655 675 895 880 665 119 339 442 312 716 392 089 340 490 382 661 228 299 364 417 211 606 59 958 28 461 59 590 29 060 33 126 44 636 53 808 39 678 46 658 39 327 26 726 (548) 18 79 570 612 22 939 (19 460) 25 123 (542) 26 77 162 3 673 22 090 (18 674) 29 002 21 382 80 278 8 146 55 875 (63 444) 99 187 7 247 57 369 (76 327) 1 475 (856) 619 (252) 871 (629) 171 1 329 406 923 2 188 737 (4) 879 324 1 203 491 712 (207) 346 573 45 528 3 251 739 (465) 5 137 6 468 380 985 11 858 17 040 415 020 356 272 11 917 15 941 33 060 29 573 374 972 354 243 5 447 1 541 5 242 1 540 20 745 12 783 33 528 5 172 28 356 21 442 529 6 385 1 728 4 657 1,13 1,99 13,7 5,42 38,1 59,6 1,34 64,0 27,1 19 692 11 830 31 522 8 746 22 776 20 161 488 2 127 590 1 537 0,42 0,75 5,4 5,40 37,5 58,7 2,40 64,0 27,7 125 (58) 2 526 25 477 9 268 30 273 22 433 4 528 34 43 840 23 678 8 906 80 986 866 3 788 4 654 28 4 626 3 280 99 1 247 285 962 1,18 3,38 21,2 1,44 81,4 115,5 0,09 70,5 22,9 284 1 976 1 981 25 105 2 31 133 22 023 4 327 12 43 945 25 527 6 433 80 244 897 3 303 4 200 208 3 992 3 061 91 840 178 662 0,81 2,28 15,3 1,51 78,6 107,9 0,64 72,9 21,2 35 2 115 8 075 5 050 1 1 773 21 243 4 285 2 420 6 385 10 35 054 971 427 1 448 1 431 699 3 578 168 3 410 2 535 138 72 665 (26) 691 97 34 513 46 520 1,41 1,28 9,3 4,20 49,7 56,4 0,72 70,8 (3,9) (365) 2 309 6 813 3 639 33 827 23 233 3 811 2 733 41 089 6 471 39 33 294 967 318 1 274 1 454 337 3 065 437 2 628 2 325 205 64 34 (30) 64 52 0,03 0,03 0,2 3,85 53,3 62,5 1,85 75,9 (88,2) (929) 2 352 (428) 16 304 (2 693) 17 267 (1 351) 3 912 (1 019) 4 067 0,98 1,79 15,3 2,35 49,7 112,4 0,42 44,0 23,4 125 2 360 0,60 1,07 9,4 1,87 49,6 112,4 0,82 43,8 25,0 (1 974) 2 470 0,98 1,78 12,5 3,73 43,5 74,4 0,83 57,7 24,2 0,45 0,82 6,2 3,36 44,5 76,0 1,61 58,1 23,7 Contribution to group economic profit/(loss) (Rm) Number of employees (permanent staff) (1 735) 26 861 (6 580) 28 271 1 Total equity includes non-controlling interests in Centre. Total equity of the client-facing Clusters is based on average allocated capital whereas the group’s equity is based on actual equity. The difference between average allocated capital and actual equity resides in Centre. 80 Nedbank Group Annual Results 2021 Rm Assets Cash and cash equivalents Other short-term securities Derivative financial instruments Government and other securities Loans and advances Other assets Intergroup assets Total assets Equity and liabilities Total equity1 Derivative financial instruments Amounts owed to depositors Provisions and other liabilities Long-term debt instruments Intergroup liabilities Total equity and liabilities Summary of consolidated statement of comprehensive income (Rm) NII NIR Share of gains of associate companies2 Total income Impairments charge on financial instruments Net 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 Headline earnings/(losses) Selected ratios Average interest-earning banking assets (Rm) Average risk-weighted assets (Rbn) ROA (%) RORWA (%) ROE (%) Interest margin (%)3 NIR to total income (%) NIR to total operating expenses (%) CLR – banking advances (%) Cost-to-income ratio (%) Effective taxation rate (%) 44 586 60 037 39 179 150 498 831 735 95 019 – 109 511 36 042 971 795 45 547 58 159 – 32 500 25 027 799 58 326 6 534 51 792 33 639 138 1 073 16 942 4 104 12 838 99 313 737 0,98 1,78 12,5 3,73 43,5 74,4 0,83 57,7 24,2 41 382 52 605 80 325 132 221 843 303 78 301 – 100 444 65 130 953 715 49 078 59 770 – 30 081 24 140 452 54 673 13 127 41 546 31 772 205 1 148 8 421 1 994 6 427 55 193 739 0,45 0,82 6,2 3,36 44,5 76,0 1,61 58,1 23,7 2 122 30 058 39 151 68 887 398 622 33 504 36 536 35 998 437 651 7 305 316 54 538 7 966 7 881 100 15 947 1 418 14 529 7 011 202 7 316 1 711 5 605 0,98 1,79 15,3 2,35 49,7 112,4 0,42 44,0 23,4 125 2 360 997 24 403 80 264 54 232 428 992 18 460 38 691 65 079 423 046 10 095 543 69 894 7 339 7 229 115 14 683 3 245 11 438 6 432 159 4 847 1 211 3 636 0,60 1,07 9,4 1,87 49,6 112,4 0,82 43,8 25,0 (1 974) 2 470 Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Summary of consolidated statement of financial position (Rm) 5 137 6 468 1 221 054 1 228 137 572 344 607 348 380 985 11 858 17 040 415 020 356 272 11 917 15 941 2 526 25 477 9 268 30 273 22 433 1 981 25 105 2 31 133 22 023 8 075 5 050 1 1 773 21 243 4 285 2 420 390 598 80 986 80 244 42 847 6 813 3 639 33 827 23 233 3 811 2 733 41 089 6 471 39 33 294 967 318 26 726 (548) 18 79 570 612 22 939 (19 460) 25 123 (542) 26 77 162 3 673 22 090 (18 674) 109 857 108 858 29 002 21 382 80 278 8 146 55 875 (63 444) 99 187 7 247 57 369 (76 327) 42 847 41 089 109 857 108 858 1 221 054 1 228 137 572 344 607 348 415 020 390 598 33 060 29 573 374 972 354 243 5 447 1 541 5 242 1 540 20 745 12 783 33 528 5 172 28 356 21 442 529 6 385 1 728 4 657 19 692 11 830 31 522 8 746 22 776 20 161 488 2 127 590 1 537 125 (58) 4 528 34 43 840 23 678 8 906 80 986 866 3 788 4 654 28 4 626 3 280 99 1 247 285 962 4 327 12 43 945 25 527 6 433 80 244 897 3 303 4 200 208 3 992 3 061 91 840 178 662 6 385 10 35 054 971 427 1 448 1 431 699 3 578 168 3 410 2 535 138 72 665 (26) 691 97 1 274 1 454 337 3 065 437 2 628 2 325 205 64 34 (30) 64 52 11 689 5 440 5 605 3 636 4 532 1 595 962 662 594 12 1 475 (856) 619 (252) 871 (629) 171 1 329 406 923 2 188 737 (4) 879 324 1 203 491 712 (207) 346 573 45 528 3 251 739 (465) 870 382 655 675 895 880 665 119 339 442 312 716 392 089 340 490 382 661 228 299 364 417 211 606 59 958 28 461 59 590 29 060 1,13 1,99 13,7 5,42 38,1 59,6 1,34 64,0 27,1 0,42 0,75 5,4 5,40 37,5 58,7 2,40 64,0 27,7 (428) 16 304 (2 693) 17 267 1,18 3,38 21,2 1,44 81,4 115,5 0,09 70,5 22,9 284 1 976 0,81 2,28 15,3 1,51 78,6 107,9 0,64 72,9 21,2 35 2 115 34 513 46 520 1,41 1,28 9,3 4,20 49,7 56,4 0,72 70,8 (3,9) (365) 2 309 33 126 44 636 53 808 39 678 46 658 39 327 0,03 0,03 0,2 3,85 53,3 62,5 1,85 75,9 (88,2) (929) 2 352 (1 351) 3 912 (1 019) 4 067 Contribution to group economic profit/(loss) (Rm) Number of employees (permanent staff) (1 735) 26 861 (6 580) 28 271 1 Total equity includes non-controlling interests in Centre. Total equity of the client-facing Clusters is based on average allocated capital whereas the group’s equity is based on actual equity. The difference between average allocated capital and actual equity resides in Centre. 2 On an IFRS basis Nedbank Africa Regions earned associate income of R686m (2020: R178m loss) as IFRS require associate income to be presented net of our share of ETI's goodwill impairment of R13m (2020: R528m). Our share of ETI's goodwill impairment is excluded from HE. 3 Cluster margins include internal assets. 81 SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisMessage from ourChief ExecutiveResultspresentation2021 resultscommentaryFinancial resultsNedbank Group Annual Results 2021 Nedbank Corporate and Investment Banking Headline earnings (Rm) Headline earnings (Rm) Return on equity (%) Return on equity (%) 5 1 3 6 4 1 7 6 7 6 1 6 6 3 6 3 5 0 6 5 , 7 0 2 , 0 0 2 , 7 7 1 , 4 9 , 3 5 1 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Financial performance CIB continued on the path to recovery with a solid underlying business performance. HE increased by 54% to R5 605m, supporting ROE recovery to 15,3%. GOI increased by 9% to R15 947m, with NII and NIR both growing by 9%. Impairments decreased by 56% due largely to risk management efforts and an improvement in the latest forecast macroeconomic factors in the forward-looking models. The concerted efforts to balance income, enhance returns and the needs of our clients, as well as lower market volatility, resulted in a 6% reduction in capital utilisation and a 9% reduction in RWA. Financial highlights Net interest income increased by 9% to R7 966m and the NIM increased 48 bps while banking advances decreased by 2% to R352bn. The NIM benefited from management efforts to optimise exposures, returns and capital utilisation across all portfolios. The decline in banking advances was driven by 2020 liquidity drawdown repayments, muted corporate demand for new loans and unexpected early settlements. However, we have seen an increase in credit demand in the second half of the year, with banking advances growing by 10% on an annualised basis, most notably in the telecoms, mining and resources and agriculture sectors. Average deposits increased by 2% to R414bn, arising from a strategic focus on growing deposits through the formation of a specialised working capital sales team, which aims to retain operational deposits. Change % 54 9 (56) 9 9 9 Corporate and Investment Banking Property Finance Corporate and Investment Banking, excluding Property Finance 2021 2020 2021 2020 2021 2020 4 494 5 284 923 7 331 12 715 5 800 3 386 5 228 2 334 7 083 12 425 5 476 5 605 7 966 1 418 7 881 15 947 7 011 15,3 0,98 0,42 112,4 44,0 2,35 3 636 7 339 3 245 7 229 14 683 6 432 9,4 0,60 0,82 112,4 43,8 1,87 1 111 2682 495 550 3 232 1 211 11,8 0,56 0,30 45,4 37,5 1,40 250 2 111 911 146 2 258 956 2,7 0,12 0,54 15,3 42,4 1,07 (6) (6) (7) (9) 3 2 (6) 572 344 607 348 171 035 174 587 401 309 432 761 569 247 608 288 170 934 172 680 398 313 435 608 398 622 428 992 165 635 168 832 232 987 260 160 405 553 446 176 164 981 166 942 240 572 279 234 437 651 423 046 414 248 407 418 262 303 341 357 437 389 422 705 413 945 407 061 36 536 38 691 9 416 9 222 27 120 29 469 Headline earnings (Rm) NII (Rm) Impairments charge (Rm) NIR (Rm) Gross operating 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) 82 Nedbank Group Annual Results 2021 Impairments decreased by 56% to R1 418m (2020: R3 245m). The CLR reduced to 42 bps, outperforming initial expectations, and returning to the TTC target range of 15 to 45 bps. The total coverage ratio increased from 107 to 135 bps, driven by a conservative approach to higher-risk sectors and stage 3 impairments. Stage 3 advances decreased from R10,9bn to R9,4bn, representing 2,7% of banking advances. The increased stage 3 impairments relate mostly to a single counter. Altogether R3,2bn of Directive 3 restructures, representing 0,9% of banking advances, was still outstanding at the end of the period, with exposures mainly in the hospitality and aviation sectors. High-risk Covid-19-impacted sectors such as aviation and hospitality are top of mind and pre-Covid-19 stressed sectors, such as construction and state-owned entities, continue to be challenging. Adequate impairments have been raised. NIR increased by 9% to R7 881m mainly due to a good performance from the private-equity portfolio after a difficult 2020. This was partly offset by lower trading income, down by 16% from a high base and once-off income in the prior year. Trading conditions have remained challenging throughout the year due to high volatility. Commission and fees income decreased by 7% to R2 710m due to increased interchange fees that was somewhat negated by the continued gains made in primary-banked wins. Expenses increased by 9% and the efficiency ratio declined slightly to 44,0%, as a result of variable incentive costs increasing. Positively the NIR:expense ratio remained at 112,4%. Looking forward The strong results from CIB in a challenging macroeconomic environment are a testament to the overall resilience of the business, the strength of our people and the depth of the relationships we have with our clients. While the economic environment remains challenging, CIB continues to focus on optimising the business to increase the overall efficiency while investing for growth. Portfolio optimisation is one of the strategic levers for delivering value and ensuring deliberate and considered asset growth. This improves our ability to assess deals, ensuring appropriate returns at a client level, and enhances our agility in positioning the portfolio for Financial highlights expected macroeconomic conditions and emerging themes such as ESG. We believe that this enhanced agility is critical to navigating the business through complexity and maximising our ability to deliver enhanced returns on equity outcomes. People remain core to delivering on our strategy and we have a sustainable people plan, which will support the strategic growth of the business. This will be achieved by addressing the skills required to grow our business, with an emphasis on accelerating our digital change agenda as well as developing leadership programmes to build the right skill sets to lead the agile organisation of the future. Focus will also be applied to nurturing a culture with diversity, equity and inclusion at its heart. Transactional Services is a key enabler and remains focused on client solutions and product innovation, allowing our clients to manage their various products in a self-service manner. To position us for the future, we will continue our focus on digital technologies and internal optimisation to transform and improve our juristic client experiences. Our long-term sustainability and success are contingent on the degree to which we play our role to add value to society and be the difference that supports the development of a sustainable SA and Africa as a whole. Through our sustainable finance solutioning expertise, we have remained at the forefront of arranging innovative green-funding instruments and channelling these towards the further development of the green economy through projects, such as renewable energy and green building developments. We continue to drive the energy transition with our support of government’s renewable-energy programme, as well as commercial and industrial generation projects. Our support of the energy transition is underpinned by our Energy Policy. The global twin challenge of inflation and growth, now coupled with more uncertainty, continues to be top of mind for us and our clients. Although the economic climate remains challenging, our focus is on our strategy to deliver strong financial results while making a meaningful contribution to building a strong, equitable and inclusive SA. It is this focus on fulfilling our purpose to be money experts who do good, that empowers and drives our people to innovate, to be bold, and to lead. Property Finance Investment Banking Markets Working capital and Transactional Services 2021 2020 2021 2020 2021 2020 2021 2020 Gross operating income (Rm) Average total advances (Rm) 3 232 2 258 4 270 3 460 5 299 5 682 3 146 3 283 164 981 166 942 151 916 198 942 70 658 58 455 17 998 21 837 83 SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisMessage from ourChief ExecutiveResultspresentation2021 resultscommentaryFinancial resultsNedbank Group Annual Results 2021 Strategic progress The macroeconomic environment remains challenging, with economic activity yet to return to 2019 levels. Macroeconomic factors impact the financial sector’s operating environment in an already fast-changing reality. As such, we are continuing our focus on portfolio optimisation to maximise opportunities for enhanced returns on our existing portfolio, increase our product offerings and ultimately improving ROE and HE. This enables CIB to take a much more active approach to managing the portfolio, also responding to ESG and climate change challenges. Our clients remain at the centre of our strategy, with key tilts to address the areas where significant growth exists – Advisory and Transactional Services. We are focused on identifying the right clients and products in the sectors that we have selected to optimise capital allocation. We aim to be a trusted advisor that services clients across all their financial needs. Strong deal closure across our franchise was a vital catalyst in the second half, creating forward-looking momentum. This solid origination across the franchise resulted in CIB being recognised for our leading offering, with a number of accolades received over the past year. Technology is integral in running our business, while quality client relationships are paramount to our success. Combined, these form the basis for our ‘warm digital’ approach. This means that we invest in meaningful client relationships while creating a digital ‘self-service’ experience for our clients’ day-to-day needs. Our recent digital investments such as the Nedbank Business Hub alongside our other recognised products and solutions ensure that we continue to deliver a seamless, end-to-end warm digital client experience. The Nedbank Business Hub is a single secure digital interface that enables CIB and RBB juristic clients to apply for, maintain and transact on their accounts in a self-service manner. It empowers our clients with full access to the CIB and Business Banking product offerings through a single platform. Sustainably investing in SA and the rest of Africa is a key focus for CIB. As we entrench this focus into the ethos of our organisation, we believe we will enhance our broader impact and outcomes for the communities we operate in, as well as our shareholders. Thinking differently about environmental and social performance can drive change that delivers more business value while channelling the power of the enterprise to deliver better outcomes for people and the planet. We expanded our sustainable finance products to our client base in 2021 and have structured and delivered sustainable finance solutions to our clients under the sustainability-linked lending product. We partnered with our clients to encourage sustainability objectives by embedding sustainability performance targets into financing products. Sustainability objectives have been aligned with the following themes: reduction in carbon emissions, improvements in water quality, energy efficiencies, local sourcing of goods and improvement of overall ESG score. On the liabilities side, we have delivered leading solutions such as the Green Residential Development Bond and the Green AT1. We continue to explore sustainable finance solutions for our clients to help them adapt to the risks and opportunities within a green economy and broader global environment that is increasingly focused on sustainability. We are proud to have been recognised as the Best Bank for Sustainable Finance in Africa by Euromoney for 2021. We are also proud to have received the 2021 Investment Bank of the Year Award by Environmental Finance as well as winning the Infrastructure Deal of the Year in the 2021 African Banker Awards. Segmental performance Property Finance The property sector has been significantly more resilient than predicted at the onset of the lockdown period. While some parts of the sector are likely to remain under pressure for the foreseeable future, the sector as a whole has performed better than expected and we anticipate this to continue. We believe that the downward trend in property values in general will ease and that further downward adjustments are likely to be asset-specific or related to specific parts of the sector. We have been impressed with the resilience of our client base and their ability to service debt over the past two years, despite the impact of Covid-19 and the related lockdowns as well as the impact of the riots on many businesses. We will continue working with clients to understand the ongoing themes that are evolving in the sector. Gross operating income increased by 43%, driven mainly by an increase in NIR in excess of 100%, as a result of negative equity revaluations in the prior year, coupled with NII increasing by 27%, due to higher margins. Banking advances decreased by 2% to R168bn, driven by deleveraging in the listed sector and a slowdown in new business growth, given market conditions. Our impairment experience has been better than expected in 2021, with the CLR improving to 30 bps (2020: 54 bps) and we expect to remain within the TTC target range of 15 to 35 bps going forward. Importantly in this environment, our portfolio contains good-quality collateralised assets and is well diversified. This is underpinned by a strong client base and supported by an experienced property team. Investment Banking The period under review for Investment Banking was characterised by greater stability across its portfolios, although certain sectors like aviation, hospitality and tourism remain under pressure. There was a marked turnaround in the performance of the business achieved via client origination, portfolio optimisation and cross-sell initiatives to enhance the overall returns of the business. NIR was driven by strong growth from the private-equity and investment income portfolio. There was positive momentum in the mining, agriculture and telecoms sectors. We continue to work closely with our clients during the continued waves of Covid-19 to ensure that they have access to sufficient liquidity to navigate these uncertain conditions. Cross-selling into the broader CIB offering will continue to be a core focus. There has been a continued investment in people, particularly in the advisory franchise. Investment Banking gross operating income increased by 23%, driven by NIR increasing over 100% mainly due to a stronger performance in underlying investee companies in the private equity portfolio. Selective origination, unexpected early repayments, extra-ordinary high drawdowns in the base and enhanced focus on returns across the portfolio resulted in NII decreasing by 6%, against banking advances, including corporate bonds, decreasing by 9%. The lower impairment charge was partly driven by the improvement in the latest macroeconomic factors applied to the impairment models, a decline in exposures as loans and advances declined and a lower level of stage 3 impairment charge, as exposures returned to performing buckets and stage 3 loans declined. The CLR remained above our TTC target range of 20 to 50 bps, mainly 84 Nedbank Group Annual Results 2021due to a single large stage 3 exposure that required further restructuring and additional liquidity support. Commission and fees decreased by 2%, due to some client activity rolling into 2022, with equity revaluations increasing in excess of 100%. Investment Banking has leading industry expertise in mining and resources, infrastructure, oil and gas, telecoms and energy. The current advances pipeline is focusing on optimising return on risk-weighted assets and cross-selling into the broader CIB client offering. Markets Trading conditions have remained challenging throughout the year, due to high volatility, which was driven by renewed global inflationary expectations. This volatility was accompanied by poor market liquidity, making monetisation more challenging. Initial forecasts accounted for the expected drop-off in trading income after a very high 2020, driven by once-off items and outsized performance in the last three months of H1 2020. The business was, however, able to deliver better outcomes than projected over the first three quarters of 2021 with a significant slowdown in the last quarter. GOI decreased by 7% and trading income decreased by 16% for the comparable period. There was a strong performance from equities, increasing by 31%. Debt securities declined 28% as once-off benefits in the first half of 2020 impacted year-on-year performance. Foreign exchange dropped by 8% with a sharp but expected fall-off in volatility trading revenue, buffered by robust outcomes in our client franchise. Trading conditions have remained challenging into the first quarter of 2022, with an expectation of some recovery after US Federal Reserve interest rate decisions towards the end of the first quarter. Transactional Services The transactional business places strategic focus in enabling our clients’ daily liquidity management with our working capital and transactional solutions. Our range of products are aimed at delivering value to our clients and supporting our strategic focus on improving our clients’ experience. Preprovisioning operating profit for the business decreased by just under 1%. Reduced interest rates drove a decline in endowment earned, however this was more than offset by an increase in net interest income earned on deposits. Many of our clients experienced a positive working capital cycle that translated into increased deposits, with a corresponding drop in working capital borrowings. The continuous support of our clients’ working capital and transactional needs has resulted in a healthy growth in our deposit balances during a time where clients retained cash balances. The average amount owed to depositors increased by 18% from R226bn in 2020 to R265bn in 2021. This was driven by growth in both transactional and investment deposits. There was a 2% decline in non-interest revenue due to a slow recovery in the documentary trade and guarantee business, and on the payments portfolio. Economic recovery and additional client wins achieved in 2021 should result in increased volumes in these portfolios, which will support the growth in non-interest revenue. Certain sectors, however, are expected to lag economic recovery due to varying impacts from the past two years. We recorded 35 new primary-banked client wins in the past year and continue to see the accretive value of past primary-banked client wins. We have a strong pipeline that we expect will further increase our footprint in the transactional-banking space. Ongoing and continued investment in the business is centred around digitising our processes to improve our client experience, built on the modernised technology stack invested in by the bank. The first of these projects was the launch of the Nedbank Business Hub. Transactional Services continues to deliver innovation in our product offering that is supported by client input. From an industry and regulatory perspective, the business continues to play a significant role through its thought leadership in cash and payment modernisation. Return on capital invested is at the forefront of all decision-making, as the business continues to optimise capital through higher-return products and deals. Favourable Unfavourable • ROE increased to above cost of equity, driven by higher HE. • Trading income down off a high base and once-off items in • RWA and allocated capital reduced owing to lower advances the prior year. and portfolio optimisation. • Improvement in NIM driven by optimisation of the portfolio. • NIR increased owing to good performance from Private Equity portfolio, coupled with 35 primary client wins for the year. • Significant decline in impairments. • Increase in expenses, driven by normalised incentive costs resulting in a slightly higher cost-to-income ratio. 85 SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisMessage from ourChief ExecutiveResultspresentation2021 resultscommentaryFinancial resultsNedbank Group Annual Results 2021Nedbank Retail and Business Banking Headline earnings (Rm) Headline earnings (Rm) Return on equity (%) Return on equity (%) 2 0 3 5 9 7 3 5 3 9 2 5 5 9 5 1 2 3 5 4 , 1 9 1 , 9 8 1 , 3 7 1 4 5 , , 7 3 1 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Financial performance RBB’s financial performance has continued to show a good recovery from the impact of the Covid-19 pandemic and associated lockdown measures, with HE for the year increasing by more than 180% to R4 532m. Allocated capital increased off the back of balance sheet growth, but given the much higher earnings, ROE increased significantly to 13,7% from 5,4% in December 2020 but remains below the cost of equity. The main drivers of the HE growth were a 41% lower impairment charge and 6% higher revenues, while expenses increased by 6% on the back of higher incentive charges related to a strong financial recovery off the base of 2020. The modest increase in revenues is largely due to R1,6bn lower endowment revenue, compared to 2020, as a result of lower interest rates. The increase in revenues offset by higher incentive charges has resulted in PPOP increasing by 5%. Besides the stronger financial performance, RBB also showed positive traction on several key non-financial metrics, including a 11,4% increase in digitally active clients to 2,3 million and 1% growth in main-banked clients to 3,1 million, with 12% growth in the economic-profit-rich middle and affluent segments. Nedbank’s share of main-banked clients grew to 12,4% (2020: 11,2%) in the annual independent Consulta Survey. We also saw market share gains in small-business and business banking single-banked clients as measured by an annual survey conducted by KPI Research (to 24% from 23% and to 24% from 21% respectively). We received the Global Business Outlook (GBO) Award for Best Digital Bank in South Africa 2021; the Global Business Review Magazine Award 2021 for Best Retail Bank in South Africa 2021; and the International Banker Award for Best Innovation in Retail Banking 2021. NII increased by 5% to R20 745m driven by an increase in advances and a slight widening in the interest margin from 5,40% to 5,42%. The lending-book margin increased 26 bps due to the widening of the prime-cost-of-funds differential, offset by a 23 bps impact from lower endowment income. Deposit margins have declined slightly as a result of our strategy to adjust pricing in line with increased market pricing behaviour. Average annualised banking advances increased by 5% to R366bn, continuing the momentum from 2020, benefiting from both client demand for secured loans following the 300 bps cuts in interest rates in 2020, as well as increased unsecured lending volumes originating through our digital channels, notwithstanding lower loan approval rates across some products. Overall new-loan payouts increased substantially to R118bn. Household advances market share increased marginally to 17,7% in December 2021, from 17,6% a year earlier. Average annualised deposits increased by 5% to R359bn. Our market share of household deposits declined to 14,5% at December 2021 (15,7% December 2020), driven mainly by reduced market share in notice deposits (to 14,4% from 16,1%); term deposits (to 17,3% from 18,1%); and current account deposits (to 13,0% from 13,7%). As from 1 May 2021, RBB introduced a new pricing strategy to price more competitively on term deposits. This strategy has stabilised the decline in term deposits market share. Sales productivity in transactional products is also growing in both digital and physical channels, which is supporting efforts to stem overall household market share declines. Defaulted advances decreased by 15% to R26,7bn from R31,3bn in December 2020, reducing the defaulted book to 6,7% from 8,3% in December 2020. Balance sheet impairments decreased to 4,83% of total advances (December 2020: 5,09%) and coverage on the performing stage 1 book increased to 1,08% (December 2020: 0,99%). The RBB CLR of 134 bps decreased from 240 bps in December 2020 and from the June 2020 peak of 269 bps. The decrease in impairments was due to relatively lower consumer stress driven by a strengthening macroeconomic environment. When the net benefit of once-off items of R713m relating to the curing of accounts in line with Directive 7/2015, annual parameter regrounding updates, as well as the Covid-19-related overlay releases (R652m) are normalised, the adjusted CLR at 153 bps falls into the middle of our-through-the-cycle target range of 130 bps to 180 bps. NIR increased by 8% to R12 783m, driven by growth in client activity, including increased levels of client spend, cash withdrawals and purchase of value-added services. The recovery of card-acquiring revenue, which was impacted negatively by Covid-19-related lockdowns last year, has boosted NIR, with domestic volumes recovering to 2019 levels. The July civil unrest had a negative impact on sales as the related two-month fee waivers reduced NIR and has impacted the full recovery to pre-Covid-19 levels. Expenses increased by 6% to R21 442m, driven primarily by higher incentive costs as RBB’s financial performance improved, but this was partially offset by additional cost-saving initiatives of R495m. Permanent headcount decreased by 963 to 16 304 from December 2020, achieved mostly through natural attrition as we continue to leverage our investment in digital and Managed Evolution technology. In 2017 we launched our cost optimisation programme through the Business Transformation Office and by the end of 2020 we had achieved R1,4bn in cumulative savings, driven mainly by our branch optimisation programme and robotic process automation (RPA), combined with continued digital transformation initiatives. Our cost-to-income ratio remained flat at 64,0% (2020: 64,0%) due to the higher incentive and sales-related charges, which offset cost-saving initiatives. 86 Nedbank Group Annual Results 2021 Strategic progress Clients – The number of main-banked clients was up 1% to 3,1 million at December 2021. This increase in main-banked activity, the recovery of card spend and the digitisation of our client base have all driven the NIR recovery this year. We also continue to scale several key growth vector products to supplement our value proposition and to support sustainable NIR growth by diversifying the revenue base. Nedbank Consumer Banking continues to significantly close the gap on the #1 position in the market across Net Promoter Score (NPS) and Client Satisfaction (CSAT) as per the Consulta South African Customer Satisfaction Index (SA-csi). Having retained our #2 position for both metrics, we have steadily increased our NPS for the fourth consecutive year to 46,7 in 2021 (40,8 in 2020), and improved our SA-csi score to 82 points in 2021 (81 points in 2020). The annual 2021 study concluded by KPI showed again that Business Banking produced high-quality relationship scores and continues to maintain high relative NPS scores at a business manager level as an important outcome to its ‘high touch’ relationship-based service model. Nedbank achieved #1 position in both NPS and CSAT for our ATM channel and improved NPS across all physical and digital channels. Continued improvements were made in loyalty, perceived value and complaints-handling scores, as measured in SA-csi. Nedbank has maintained #2 position on client loyalty and perceived value. Nedbank’s client experience (CX) continues to improve, in support of the RBB goal to consistently deliver leading client experiences. This is supported by the Service Excellence Programme initiated in 2019, with 12 416 (75%) of employees completing initial programme training to drive a client-centred culture and the aspirational goal of setting the benchmark for service excellence in SA. A gold standard client journey management capability will enable improved solutions design and the overall CX. Understanding and solving client pain points through prioritised process and product enhancements will simplify services to better meet client needs. Nedbank remains a leader in client conduct, improving the 2021 Consulta Treat Customers Fairly (TCF) score by 1,7 points and remaining #2. After the July unrest that significantly impacted mostly informal traders and small-business owners who did not have insurance to rebuild their business, we launched a programme, Together Beke le Beke. This was a campaign to provide funding and support to informal traders and small businesses. We partnered with Sefa and disbursed R40m in grant relief, targeting 13 000 informal traders, each receiving a R3 500 grant. By end of 2021, we received more than 8 000 applications with R13m already dispersed and the remainder to be dispersed in 2022. Through our ‘Proud of my Town’ community programme in partnership with Ranyaka, we assisted 113 small-business owners in KwaZulu-Natal and Gauteng with grants ranging from R500 to R50 000 to help rebuild structures and restock shops. Thirty of these businesses have been onboarded onto the Proud of my Town six-month Building Business programme including mentorship and training. We also partnered with Township Entrepreneurs Association (TEA). Lastly, through our partnership with The Side Hustle – a daily grant and skills development programme to help aspiring entrepreneurs bring their ideas to fruition, in partnership with The Slow Fund, founded and run by Nic Haralambous – we helped to support over 20 000 individuals to start their own business by providing grants of R2 500 and supporting with this business coaching to the value of R10 000 each. Through our financial wellness programme (Consumer Financial Education and Financial Fitness) we reached more than three million clients through education programmes delivered via a combination of radio, virtual and face-to-face interventions. We continue to be pleased with the progress we are making to educate consumers and help them manage their money better. Digital innovation – 2021 has seen a continuation of growth in core digital metrics, with digitally active clients increasing by 11,4% to 2,3 million, of which 1,6 million clients are now using the Nedbank Money app (up 38% yoy). Digital sales grew strongly by 28% yoy, with the digital contribution to total funded consumer sales increasing from 28% in 2020 to 32% in 2021. The new nedbank.co.za platform delivered client journeys for personal loans, credit cards and transactional accounts, which are showing a marked improvement in the generation of sales leads. Digital payment volumes continued to grow, up by 27% yoy, with Money app payment volumes increasing by 54% yoy. Driving factors behind the growth have been core capabilities built to make clients’ lives easier and more convenient, enhanced security to counter cybercrime, improved onboarding journeys, transactional capability, increased access to services through API_Marketplace and our fast-growing Beyond Banking offerings in Avo, all these enabled by the strong commercialisation capability we built within the business. Digital innovation continues to be at the heart of the organisation, with a new broad range of financial wellness tools, including credit health checks, as well as credit score ratings, with helpful tips for clients and enhanced MoneyTracker functionality tools allowing for spend categorisation and management. Joining the bank and taking up banking products via the digital platforms has never been easier, with continued enhancements and automation of processes. Clients can now apply for homeowner’s insurance and claim directly through the bank’s digital platforms. Clients can now apply for an overdraft, and informal traders can join the bank and obtain a paycode through a simple USSD process. In 2021 we have onboarded close to 8 000 new informal traders through this process, helping us to drive inclusivity of informal traders through simple, easy-to-use and cost-effective platforms. Clients can also join the bank through our self-service kiosk devices, with a card issued immediately. Our digital transformation journey has enabled us to expand options from which clients can join the bank and also take up more products like third- party channels, API_ Marketplace and Avo our super app, which will be discussed later. Buying journeys and offerings were also improved, with a new array of unit trusts, additional choice of over 230 airtime and data products, an improved experience for claiming free basic electricity for qualifying clients, and an enhanced gaming and software product catalogue. A host of user-friendly features were introduced, including the ability to redeem Greenbacks into a savings or investment account or to donate them to a charity, enhanced statements, and more seamless loan-offering processes. Significant transacting capabilities like the ability to get cash at an ATM by scanning a QR code (a first in SA), the ability for clients to withdraw cash using a digital voucher code at a wide network of retailers (including Pick n Pay, Shoprite and Checkers and the launch of Apple Pay have proved to be valuable and convenient features as the various Covid-19 lockdown conditions prevailed through 2021. 87 SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisMessage from ourChief ExecutiveResultspresentation2021 resultscommentaryFinancial resultsNedbank Group Annual Results 2021Financial highlights for the year ended 31 December Segmental view Total Retail and Business Banking Business Banking Consumer Banking Relationship Banking Other1 Change % 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 >100 4 532 1 595 5 20 745 19 692 1 408 3 847 803 2 109 161 907 815 3 784 14 276 13 257 2 585 2 635 108 37 (184) 16 8 6 (41) 5 172 8 746 (167) 12 783 11 830 1 844 853 1 777 5 144 7 353 7 480 7 070 150 379 45 34 1 568 1 475 2 018 1 508 21 442 20 161 3 864 3 561 13 287 12 601 2 728 2 587 1 563 1 412 13,7 1,13 5,4 0,42 19,8 0,90 11,4 0,55 10,1 0,90 0,9 0,07 24,6 0,97 26,3 0,90 1,34 2,40 (0,21) 1,10 2,00 3,32 0,29 0,82 59,6 58,7 47,7 49,9 55,3 56,1 57,5 57,0 64,0 64,0 67,9 64,0 61,4 62,0 65,7 63,0 5,42 5,40 2,48 2,60 6,01 5,86 2,76 2,91 7 380 985 356 272 80 363 74 860 242 390 233 644 57 312 46 938 920 830 5 365 656 347 598 76 912 75 668 236 192 225 428 51 625 45 585 927 6 374 972 354 243 156 796 143 442 123 017 124 635 95 023 85 750 136 917 416 5 359 221 343 724 148 684 139 408 121 904 121 763 88 251 82 197 382 356 12 33 060 29 573 7 116 7 023 20 789 18 160 3 684 3 092 1 471 1 298 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 (%)2 Total advances (Rm)3 Average total advances (Rm) Total deposits (Rm)3 Average total deposits (Rm) Average allocated capital (Rm) 1 “Other” includes income, impairments and costs relating to Channel, Card Acquiring, Central and Shared Services. 2 Consumer Banking interest-earning assets have been restated to reflect a net funding position vs the previous product-focused reporting, which resulted in a restatement of the margin. 3 Consumer Banking assets and deposits have been restated to reflect a more accurate position vs the previous product-focused reporting. Client expectations for immediate and excellent personal assistance was addressed through the launch of Enbi, our new AI-driven chatbot, now answering over 100 000 client queries a month. Business Banking continues to roll out the Nedbank Business Hub (NBH) to clients, enabling a positive change in client experience for businesses, and remains on track to achieve critical scale in 2022. The hub provides for a convenient platform for clients from which they have a single view of relevant digital offerings and will be able to transact, apply for products (transacting, lending and borrowing) or services and more. Nedbank’s partnership strategy enabled the establishment of key strategic relationships that will consume products through API_ Marketplace, further extending the digital distribution capability beyond Nedbank-owned channels. Notably, Gumtree has partnered with MFC to use the vehicle asset finance (VAF) APIs to better connect buyers and sellers on Gumtree Auto. Global small-business cloud accounting platform Xero has collaborated with Nedbank to provide SME clients with access to their financial data through a fully digital, API-enabled bank feed. Legacy Group is consuming the Rewards API 88 Nedbank Group Annual Results 2021 to allow its customers to redeem Greenbacks into Legacy Points. The Nedbank and Takealot relationship continues to yield benefits for both parties, whereby Nedbank Personal Loans are offered to Takealot customers. Several fintechs are pilot-testing the Wallet API aiming to go live in H1 2022. In addition to the afore-mentioned products, API_ Marketplace launched the value-added services (VAS) API in Q1 2021 and the Nedbank Credit Card Account Details API in Q4 2021 with a select group of third parties for the initial commercialisation. VAS API provides a single integration point for approximately 360 prepaid and voucher products, with new ones added to the product catalogue as they become available. The Nedbank Credit Card Details API retrieves various credit card account and card-related details. The platform architecture is premised on a cloud-first strategy, enhancing the support and product capability, and further laying the foundation for the scaling of the existing products. Physical distribution – Our physical footprint reflects both the increased drive towards client self-service and a diverse South African consumer base that still requires face-to-face assistance. In response to shifts in client behaviour and preferences that were fast-tracked by Covid-19, we continued to optimise our branch footprint, while investing in more mobile and self-service channels, as we aim to change in line with the way clients bank in a digital world. During 2021 we closed 17 points of presence and opened two new branches and four in-retailer outlets. This reduction has not affected our coverage of the bankable population in SA, which remains around 85%, very much in line with that of the industry. Since 2014 we achieved actual floor space reduction of 64 857 m2. In 2021 we tested a new operating model in 40 branches, which will now be rolled out over the next three-year cycle and includes an innovative mix of branches from full service to express and easy-access smaller format branches. By the end of 2024, 52% will be smaller than 150 sqm, a significant shift from our current mix of branches. We have also tested various in-market operating models through taxi rank branches and nine mobile sales teams in township economies. We expanded access to Nedbank’s products through new partners both in market and online through APIs, acknowledging that clients are coming to branch less and we need to be mobile and in the community. To complement our in-market and digital channels we have a contact centre available to clients 24/7 through email, chat and voice. Clients can now call our Contact Centre free of charge through our 0800 number. With self-service options expanding we further invested in our ATM footprint by rolling out a further 37 devices, and during this period cash dispensed through branches and ATMs decreased by 3%. Altogether, 89% of client cash deposits at branches are now being processed through cash-accepting ATM devices. We continued to improve the experience of clients at our devices through the rollout of our new ATM front-end, which enabled first-in-market functionality such as app-initiated withdrawals using QR codes, meaning that clients will not have to insert cards into our ATMs when drawing cash. We have also landed the ability to pay all Nedbank accounts and beneficiaries at cash-deposit-taking devices and enabled real-time deposits in Q4 2021 at deposit-taking ATM devices. Significant progress has been made in enhancing functionality across self-service and online channels, providing our clients with enhanced convenience. In the past six months we simplified the password reset function for Online Banking and added great functions such as the ability to change card PINs in-app. Our network of 438 self-service kiosks in our branches allows clients to complete self-service actions at their own convenience, such as changing their ATM limit, maintaining their profile, issuing statements, and blocking and replacing personalised cards for PAYU and Savvy Plus accounts. The long-term aim is to offer this across all accounts and for all clients, making the card process much faster as we continue to offer convenient options for clients. Clients can also pick up cards 24/7 without having to go into a branch. They can do this from our 107 lockers or have their cards delivered to them. The kiosks also now offer the ability to open PAYU accounts seamlessly, including getting an instantly issued card, which we are looking to expand to other third parties. Ecosystems – Avo by Nedbank, the super app, continues to scale significantly, having turned one year old in June 2021. Consumers have grown by five times yoy to over 675 000 and over 20 000 businesses have signed up on Avo, at the end of 2021. The app continues to play a key part in consumers’ lives and helps them find solutions to their everyday needs and wants conveniently, with great optionality, at great value and with predictable delivery. We have seen three times the growth in gross merchandise value (GMV) yoy and financial services revenue growing by 22 times. Collaborating closely with partners to help consumers and businesses grow, we launched our partnership with the AfroCentric group that has over 3,9 million medical aid members. Through this partnership, Avo has been positioned as AfroCentric’s loyalty and rewards and digital commerce partner serving their schemes’ members. Avo has also been established as a data-free offering through our partnership with Moya (the data-free instant-messaging app). Through this partnership, Avo can reach 6,5 million consumers and has seen significant growth in this consumer market interacting with Avo’s offerings and value propositions. As a growing business, Avo has launched a new vertical ‘Avo Auto’, a platform for dealers to create a virtual dealership with ease of consumer financing for vehicle purchases. Further, Avo is readying to launch its B2B marketplace in Q1 2022, which would allow businesses to trade with access to financial service offerings. Our collaboration with communities in the township economy to test a new ecosystem-based go-to-market approach to co-create simple, cost-effective and accessible solutions has gathered momentum, with the first proof of concepts (POC) showing green shoots. Traders have an option to choose between four different types of digital payments options: MobiMoney through Paycode (USSD-based); QR payments through Masterpass; tap on phone, which enables businesses to accept payments by simply using an Android smartphone; Money Message, an innovative solution that allows clients to make or receive payments through WhatsApp, and PocketPOS – a contactless POS device from a minimum of R89 per device. Through these solutions we have unlocked ecosystem-based solutions between traders, their suppliers and consumers. Business Banking continues to see pleasing progress following the successful implementation of a unique ‘transformation funding’ solution in the franchise sector for well-known fuel and retail concepts. Since implementation, 58 outlets have been afforded this type of funding to the tune of R180m, with R140m of this directly supporting transformational funding transactions in the fuel sector. To date 94% of Pick ‘n Pay market stores now bank with Nedbank Business Banking, as a result of this lending assistance being provided. 89 SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisMessage from ourChief ExecutiveResultspresentation2021 resultscommentaryFinancial resultsNedbank Group Annual Results 2021Product views, excluding business banking Home loans VAF Unsecured lending1 Transactional Card and payments Forex and investment 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 NII (Rm) 2 979 2 729 5 121 4 392 3 998 3 613 1 820 2 299 1 488 1 435 1 475 1 525 Consumer banking and other 2 215 1 907 4 977 4 272 3 862 3 551 766 1 080 1 488 1 435 Relationship banking 764 822 144 120 136 62 1 054 1 219 988 487 1 023 502 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 (138) 9 275 212 63 551 291 252 206 46 (129) 842 1 727 3 015 2 619 2 521 1 702 2 958 2 502 2 489 25 57 117 32 64 64 44 1 059 1 472 44 1 059 1 472 708 701 726 656 4 992 4 858 3 904 3 450 230 194 694 14 690 11 676 50 621 35 3 670 3 581 3 879 3 428 1 322 1 277 25 22 136 94 110 84 1 683 1 655 1 662 1 548 1 843 1 648 7 107 6 961 3 582 3 349 1 500 1 368 Headline earnings (Rm) 1 215 334 1 612 422 Consumer banking and other Relationship banking 1 019 196 304 30 1 592 20 427 (5) 1 137 546 1 119 536 105 81 1 557 1 467 1 727 1 589 5 545 5 425 3 565 3 335 116 185 218 (33) 59 67 63 4 1 562 1 536 17 (276) 91 517 (862) (600) 586 691 511 6 14 19 13 6 1 117 383 142 (1) 143 1 007 361 249 87 162 ROE (%) CLR – banking advances (%) Cost-to-income ratio (%) Interest margin (%) Average total advances (Rm) 22,5 6,4 17,3 5,6 4,8 2,1 (10,6) 3,6 14,9 0,7 28,6 39,5 (0,09) 0,64 1,46 2,69 10,15 10,88 34,75 23,66 6,32 8,94 51,7 2,08 55,5 2,03 28,5 3,95 30,4 3,64 39,0 38,6 104,3 15,23 15,29 3,17 97,3 4,48 66,4 8,08 68,5 8,24 88,0 0,97 79,6 1,00 138 952 130 552 112 468 106 781 23 342 21 040 99 114 13 895 13 855 2 2 The table does not include BB HE of R1 408m (Dec 2020: R803m) and other unallocated costs of -R271m (Dec 2020: R391m) relating to Channel, Central and Shared Services. Therefore, the table does not cross-cast. 1 Excludes additional insurance income in Nedbank Wealth which would result in ROE of 12,4%. 90 Nedbank Group Annual Results 2021 Nedbank Retail and Business Banking segmental review Internal transfers In line with the strategic intent of Project Phoenix to service clients holistically in a given segment, a clean-up of clients and products was conducted to ensure all income is accounted for in the correct segment. As a result, R6,2bn of advances were transferred from Consumer to Retail Relationship Banking in August 2021, with the full-year impact as follows: • R3,7bn in home loans (average balance impact of R1,5bn) • R1,3bn in VAF (average balance impact of R0,5bn) • R1,2bn in personal loans (average balance impact of R0,5bn) • R19m in HE (for five months) Business Banking Business Banking provides relationship-based banking services to mid- and large-sized commercial entities, including tailored banking and financial propositions for agricultural, franchising, manufacturing industries as well as the public sector. Benefiting from impairment releases, Business Banking generated HE of R1,4bn, up more than 75%, and achieved a strong ROE of 19,8%. New-loan payouts of R26,4bn were up by 12,5% yoy due to judicious client acquisition and support given to meet clients’ funding needs, resulting in average advances growth of 2% yoy. Business Banking remains a strong generator of funding, with R83bn in net surplus funds generated, supported by an increase of 5% in average deposits and, in particular, strong growth in transactional deposits. Following the significant Covid-19-related overlays that were raised in the prior year, we welcomed the release of impairments in the current year to achieve a negative CLR of 21 bps (2020: +110 bps), as the Business Banking client portfolio showed resilience despite a challenging operating environment. Despite the reversals, we consider ourselves adequately provided at an impairment coverage of 2%, which remains well above pre-Covid levels. Business Banking has provided assistance of R670m to qualifying businesses via the SME loan guarantee scheme, including R25m in H1 2021. Business Banking has also been instrumental in actively driving awareness of our new innovative market trading platform, Avo, to assist merchants in their effort to sustain business and trade through the various Covid-19 alert levels. Our digital journey continues to advance and is underpinned by both ongoing delivery toward a clear roadmap of strategic digital priorities, as well as incremental positive shifts in client experience, owing to the steady stream of functionality that we are taking to market. At the forefront of this is our juristic onboarding and servicing initiatives culminating in the release of the Nedbank Business Hub (NBH) to employees and to the market. The NBH aims to enhance client experience, reduce attrition and increase cross-sell by providing a single point of entry through which clients can self-service, apply for products, or transact. Much of this year has been focused on crafting and executing a migration plan to introduce clients to the new capabilities with positive feedback thus far. At the end of December 2021, 8 668 users were migrated to the NBH, comprising 3 650 clients with 1 242 General Authorising Extract of Minutes forms, which allow businesses to nominate authorised persons to procure banking and financial products and services. The overall migration remains well on track. The employee version was rolled out in 2021 and was well received with the focus in 2022 being on increasing adoption and developing further enhancements. There was success in the employee adoption at scale, evidenced by the 53 393 service requests on behalf of our clients. We have successfully implemented a service model aimed at focusing the delivery of a unique proposition to the lucrative mid-corporate segment, within Business Banking, and plan to build on and evolve our proposition to support sustainability through the provision of differentiated mechanisms to finance our clients’ clean-energy investments coupled with advisory-based services. Our plans for 2022 will see the promotion of a bespoke industry-based proposition aimed at the manufacturing sector, as well as introducing a shariah compliant investment-based solution for the Islamic business market. Retail Relationship Banking Retail Relationship Banking (RRB) provides private-banking services to affluent individuals and their households (salaried and self-employed), to non-resident clients and embassies, as well as small-business services to SMEs with a turnover of less than R30m. 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 above-mentioned client segments. Notwithstanding the protracted economic recovery to pre-Covid-19 levels, the July riots and a >R400m post-tax reduction in NII as a direct consequence of rate reductions, the core business (excluding the benefits of the internal transfers) delivered a 9% increase in HE to R888m at an attractive ROE of 24,9%. This affirms both the resilience of the client base (albeit with small-business clients under more strain than affluent clients) and the quality of the business itself. The CLR decreased from 82 bps to 22 bps, which included the reversal of Covid-19-related overlays, but also highlighted the quality of the book and effectiveness of the risk practices. Average advances growth of 8% was driven by record home loan and good vehicle sales, while average deposits increased by 7%, resulting in a net funding contribution to the group of R46,8bn. Despite the lower base in 2020, core NIR grew moderately at 5,5%, as a result of various industrywide and Nedbank-specific pricing concessions, impact of further lockdowns and overall more muted activity in the small-business sector. Professional Banking (now rebranded as Private Clients): Nedbank provides a well-priced, high-value offering to the sought-after affluent market. Main-banked client numbers increased by 9% yoy, leading to a 1% improvement in Nedbank’s affluent market share to 15%. Service levels and client satisfaction remained stable yoy, with more clients willing to promote Nedbank, off the back of continued efforts to provide a seamless experience to this demanding client base. Small Business: Nedbank also remains well positioned in the small-business segment, with the urban market share increasing by 1% to 24%, as a result of positive perceptions regarding our ability to understand and serve the needs of this 91 SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisMessage from ourChief ExecutiveResultspresentation2021 resultscommentaryFinancial resultsNedbank Group Annual Results 2021important sector. According to the 2021 Small Business Tracker (a Nedbank-commissioned survey that has been running for 13 years and is conducted by independent research company KPI Research), small-business owners continue to rank Nedbank as the market leader in the provision of banking services to this market for the second year running. The above client momentum enabled strides in market share on the advances side of our business, notably in personal loans, overdrafts and vehicle finance. The home loans market share was relatively flat in 2021. On the deposits side, we experienced a decline in market share, however, we started to see some green shoots of recovery in the closing months of the year. Consumer Banking increased HE to R2,1bn (2020 R0,2bn) and ROE to 10,1% (2020: 0,9%), largely off the back of a material improvement in impairments, with the CLR improving to 200 bps (2020: 332 bps). This improvement in CLR was enabled by improved loan repayment behaviour in our client base as the macroeconomy improved, releases of Covid-19-related overlays, and annual parameter regrounding updates. Strong NII growth of 8% was the second-largest contributor to the HE growth. The strong NII growth was enabled by robust average gross advances growth of 5%, including 10% on average in personal loans, 5% yoy on average in home loans, and 5% on average in vehicle loans. Margins were also relatively similar to prior year at 6,0%. Deposit growth was flat at 0,1% on average. Within this, we recorded a pleasing 11% average growth in transactional deposits, offset by a reduction of 3% on average in notice and term deposits. Transactional deposits growth was supported by a 1% yoy growth in main-banked clients to 3,1 million. This growth was skewed towards the higher-economic-profit segments of the middle market (up 13% to 1,00 million main-banked clients). While main-banked clients declined by 4% yoy to 1,31 million in entry-level banking and declined by 8% to 0,42 million in youth, this was largely due to material migrations of clients to the middle segments. In both ELB and youth, acquisition rates improved materially from 2020, and in each of these segments exceeded rates of attrition from Nedbank. In Consumer Banking, we enhanced Nedbank’s client value proposition with the launch of several exciting products in 2021. We launched a simple life insurance product called MyCover Life, offering clients cover up to R2m, with minimal, simple underwriting questions. We launched MyCover Funeral, with extremely competitive price points for Nedbank main-banked clients. In addition, we launched a Gold Credit Card with a monthly fee of R40 per month, which matches the lowest-cost credit card in the market. These products are seeing extremely encouraging sales performance in the first few months since their launch and will support growth in NIR going forward. We have also seen encouraging sales growth in insurance funeral plan sales over the last year. We have materially improved enablement of cross-sell in our Eclipse onboarding platform with the launch of Everyday Banking. Everyday Banking makes it materially easier for clients to know if they qualify for an overdraft facility or a credit card as they apply for a transactional product. This will enable us to more easily fulfil more client needs at onboarding, and support improvements in our cross-sell ratio. SimplyBiz, a free business development platform powered by Nedbank, available to all entrepreneurs, (whether banked with Nedbank or not), has provided over 43 000 business owners free Beyond Banking assistance, in the form of advertising, coaching, relevant business support materials and strategic initiatives. This represents an 84% yoy growth and actively supports the United Nations Sustainability Goals (SDG 4 and SDG 9) through an expert community with resources, ongoing learning and tangible support. The many enhancements made to Online Banking and the Money app since the full migration of clients to the new platform in early 2021 have driven an improvement in digital satisfaction. Some of the highlights for this client base include the ability to receive and make international payments and to access and manage wealth products (stockbroking, unit trusts, retirement annuities and life cover); the launch of MoneyTracker, an integrated financial management tool; and the ability for clients to book appointments with their banker. Despite another tumultuous year and economic challenges, there are still many opportunities for Nedbank to grow in both markets. The recently landed digital onboarding capabilities for both private clients and small businesses with more than one director or shareholder is expected to boost acquisition volumes. MyCover comprehensive personal-lines insurance and life cover have better positioned us to compete in insurance, and we see significant cross-sell opportunities with regard to our wealth offerings, just to name a few. Over and above, financial performance will be boosted by the growth in endowment earnings in an increasing rate cycle. Consumer Banking Consumer Banking predominantly serves individuals earning less than R750 000 per year, in three subsegments – middle market, entry-level banking and youth. Consumer Banking also serves a few non-individual client types, such as stokvels, clubs, societies and informal traders. The year 2021 saw improvements in all major client metrics. Main-banked clients grew 1% yoy, which supported growth in Nedbank’s share of main-banked clients to 12,4% (2020: 11,2%), as measured by an independent survey by Consulta. Main-banked client growth was driven by improved sales performance particularly in digital channels, a focus on cross-selling transactional products to lending clients, as well as reductions in levels of client attrition, as client lifecycle management initiatives bore fruit. The cross-sell ratio grew to 1,81 (2020: 1,72), driven by several purposeful cross-sell strategies including Core+ in the frontline, and the use of artificial intelligence to enable ‘Next Best Action’ recommendations to clients. The share of consumer clients who are digitally active grew to 33%, powered by a strong rise in clients on the Money app to 1,4 million (2020: 1,0 million). We also grew the share of sales done on digital channels to 32% (2020: 28%), reflecting a digital-first go-to-market strategy. Client experience scores improved significantly, for instance, NPS rose to 46,7 (2020: 40,8). 92 Nedbank Group Annual Results 2021Looking forward Despite expectations of economic growth being slower than in 2021, we are encouraged by the multiple opportunities the economic landscape presents to us, with easing Covid-19 restrictions worldwide, offering businesses some reprieve. Consumers should feel some pressure on income as higher inflation and interest rates increase the cost of living. Digital adoption by both businesses and consumers continues to accelerate, causing shifts to the client experience and operating models, with businesses reinventing operations to design seamless interactions between digital and physical sales and servicing channels, as well as their operations. We also remain cognisant of continuing disruption and intensifying competition in the banking landscape as retailers, telcos and fintechs democratise banking-leveraging-evolving technologies. We have built solid capabilities that enable us to continue to support our clients, and we will do so through our ongoing commitment to delivering delightful client experiences, enabled by digitally transforming the bank. Our client-centred growth strategy and execution plans focus on five core strategic levers to help us achieve our aspirations. These are set out below and the strong capabilities we have built over the years, more so our digital and data capabilities, will allow us to create new and disruptive products and solutions to address clients’ rapidly evolving needs and expectations, allowing us to expand access to new markets, reduce operational costs and help develop new revenue generating opportunities. Create leading client experiences – We are enhancing our client value propositions in the Consumer and Relationship Banking segments. The enhancements will see improvements across components such as financial wellness, ease of access and service quality. We will also continue to enhance client journeys, to build on the improvements in client experience metrics over the past years. Digital first and first in digital – We have seen pleasing improvements in key digital metrics, such as the number of active Money app users, and the share of our sales delivered on digital channels. We will continue to use digital to drive a lower cost-operating model, and improved client experience. Efficient and agile operating model – Project Phoenix is a total restructure of our Retail and Business Banking cluster into a more client-centred organisational model. Project Phoenix has also enabled the efficiencies that derive from centralised important capabilities such as solution innovation, credit and pricing, and operations. Project Imagine sees us fundamentally transform our frontline branch infrastructure, so it is fit for a digital world, more cost-effective, and more geared to growing market share at micro-market level. As part of our digital transformation, we have adopted the Scaled Agile Framework (SAFE) to ensure more effective and efficient delivery of technology. Exploring new growth vectors – We are driving several new growth vectors. These include improving Retail cross-sell, which has improved to 1,86 (2020 1,78); growth through digital eco-systems such as Avo (which reached over 675 000 users by Dec 2021); enhanced growth in insurance funeral plan sales; and enhanced penetration of the township economy. Equipping our people – The group has instituted several major initiatives for our employees, in areas including leadership development, wellness and improved benefits. We are also investing enormously in better communication with our people, including regular Exco stand-ups, which serve to energise and align our people. Nedbank Retail and Business Banking Product review 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, PAYU (consumers and small businesses) and savings pockets. The business continues to improve onboarding and servicing capabilities across physical and digital channels. The year 2021 was characterised by a strong recovery in transaction volumes as the economy rebounded from the pandemic and severe lockdown restrictions implemented in 2020 to curb the spread of the virus. This has also led to an accelerated adoption of self-service and digital channels. There is a sustained shift in behaviour away from the branch to ATMs and digital channels for cash withdrawals and deposits. Payments for goods and services resulted in increased usage of EFTs, instant payments, which grew by 69%, and payments to a cellphone number, which grew by 37%. The purchasing of value-added services such as airtime, electricity and LOTTO also increased, demonstrating the value and convenience of the availability of these services. The launch of our voucher capability, which allows clients to purchase vouchers for retailers such as Google Play, Makro, Pick n Pay and Spotify, has seen volume growth of over 500%. Savings pockets opened during the year have grown by 84%. Key servicing capabilities introduced have seen significant growth, including debit order switching instructions by 70% and card activation by 295%. As we continue on our digital journey, all our transactional products are now enabled for straight-through processing on the Money app and Online Banking. This supports the delivery of delightful client experiences that enable convenient and seamless account activation. The client experience has been further enhanced with card delivery to lockers, home or office, thereby ensuring our clients can bank safely. We endeavour to ensure clients get access to relevant product offerings with up-to-date features and benefits and continue to migrate clients to these enhanced products in a frictionless manner. We continue to deliver client-centred innovations with MobiMoney. Our targeted acquisition strategies have been focused on key industries and client subsegments, enabling wallets for previously underserviced individuals. We have opened over 1,4 million wallets to date and this innovative and market-leading solution has zero monthly maintenance fees, allows free deposits up to R4 000 per month, and gives clients the ability to pay bills, buy airtime and electricity, and withdraw and deposit money at retailers. Payment options have been increased through the enablement of Masterpass and a unique feature called Paycode, which enables informal traders with a MobiMoney wallet to receive payments from customers, and for traders to be able to pay for goods from wholesalers and other retailers. Card and Payments Card and Payments provides card issuing, card acceptance and payment products and solutions across all client segments, extending beyond RBB into Nedbank Private Wealth. It is also responsible for the bank’s commercial card offerings. These offerings include key innovations such as tap on phone, scan to pay, Market Edge, GAP Access and the recently launched Apple Pay and Money Message. 93 SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisMessage from ourChief ExecutiveResultspresentation2021 resultscommentaryFinancial resultsNedbank Group Annual Results 2021Nedbank Card and Payments is poised for growth as the economy emerges from the pandemic and unrests experienced in 2021.This is evidenced by the strong growth in card issuing of 16%, and card acquiring volume growth at 31% for the same period. This joint growth was driven by the economic recovery, seasonality, increased client acquisition, limit increases for card issuing as well as new innovations and enhanced CVPs. Digital payment trends where further accelerated in 2021 as consumers and merchants are minimise the risk of exposure to Covid-19 through person-to-person contact or shared surfaces. The pandemic has prompted surges in online shopping and the use of contactless payment technologies. It has also fuelled the popularity of recent shopping innovations, including app-based shopping, curbside pick-up and QR-code-based ordering and purchasing. There was a significant increase in the use of our digital payment methods, with growth of 52% in e-commerce volumes, over 237% growth in contactless payments and 4% growth in QR payments. These trends are fast becoming the new normal in transacting behaviour. Our Card and Payments innovation agenda was dominated by digitally enabled, simple, secure and cost-effective payments. Nedbank is a leader in mobile payments and during 2021 enabled clients to use the much-anticipated Apple Pay. This mobile payment capability was created in addition to the existing scan-to-pay capability, Masterpass acceptance, Samsung, Garmin and Fitbit Pay solutions, as well as market-leading e-commerce solutions across a broad network of merchants. Nedbank is also the first in Africa to launch tap on phone, a payments solution that enables businesses to accept payments by simply using an Android smartphone for contactless card payments. This in addition to the market-leading PocketPos offering. Nedbank also launched Money Message during 2021, an innovative solution that allows clients to make or receive payments through WhatsApp, which is the dominant messaging platform in SA. Card and Payments digitised its client onboarding and servicing capabilities by going live on the Eclipse platform in the consumer card segment, enabling our frontline channels and client self-service area to digitally onboard clients, assess their credit, open accounts and issue cards covered under Consumer Banking as Everyday Banking. Similarly, in the commercial card environment, Nedbank has launched a juristic servicing and onboarding platform aimed at enabling digital statements, real-time transaction listings and balances, as well as offering other unique commercial card services to a range of small-business, business banking and corporate clients. Investments We continue to expand our digital investment capabilities with a number of new features landed in 2021, which have enabled clients to: • open an account online for Nedbank and non-Nedbank clients; • switch investments on-app and online and transfer between differing term offerings; • redeem Greenbacks into a notice deposit, into which we have seen growing redemptions to date; • place a notice of withdrawal in-app without the need of a Nedbank transactional account; and • make use of USSD channels for investment servicing requests, to cater to all markets. Planned enhancements include enabling new-to-Nedbank clients to open an investment account in-app and differentiated notice deposit pricing. New digital investments sales now contribute to 72% of total sales and 84% of withdrawals notices. According to the 2020 SA-csi report on notices and savings, client-perceived value, client satisfaction and client loyalty increased by 1%, 2% and 3% respectively. The above improvements in digital capabilities, together with competitive investment pricing strategies in select product categories, has resulted in a reversal of our declining household term deposit market share, improving to 17,3% at December 2021. Forex The forex business continues to create and improve segment CVPs enabling clients to transact, trade and invest across a number of foreign currencies, further supporting their financial goals. Forex-related NIR has gradually started to recover and is now 20% up yoy and 5% above pre-Covid levels. Digital adoption of key forex capabilities continues to increase and is now on average above 60% across key services and segments. We continue to focus on digital transformation and in the past year have: • enhanced our international payments offering in-app and web, enabling small-business clients, in addition to individual clients, to process incoming payments digitally in over 25 currencies; • enhanced our Send Money to Africa remittance solution, in partnership with Ecobank, allowing clients to submit payments 24x7 and improving ease of access; and • increased campaigning of our foreign currency accounts (FCA) resulting in FCA market share growth from 6,1% to 8,5% and account growth of 29%, moving us from fifth to third position. Unsecured Lending Unsecured Lending provides personal loans, overdrafts and student loan products and solutions across all client segments. The gross loan book grew by 9% to R28bn, mainly driven by a 17% increase in personal loan disbursals, with the shift to digital continuing to gain momentum and now contributing to 40% of total sales in Q4 2021 from 24% in Q4 2020. Our Personal Loans market share increased to 12,2% from 11,2% in the prior year. New-business market share in targeted lower-risk segments was maintained at approximately 17% compared to historic levels of about 13%. This reflects close management of risks while striking a balance with our SPT 2.0 targets. HE remained subdued at R218m due to credit risk levels remaining elevated in the personal loans portfolio with the core CLR remaining near the top of the target range. HE including insurance profits reported in Nedbank Wealth is R429m at an ROE of 12,4%. Credit risk management and collections remain the key priority in a challenging environment. Nedbank was first to market in migrating to DebiCheck and efforts will now focus on increasing onboarding levels to improve collections. 94 Nedbank Group Annual Results 2021Overdrafts continue to benefit from being enabled on a new technology stack. This has enabled yoy growth of 178% across the overdraft product spectrum. In total, 67% of overdrafts were originated via digital channels, an increase from 62% in 2020. Our overdrafts market share increased to 9.9% from 8.0% in 2020. Our fully digital personal-loans API solution launched in July 2020 enables both Nedbank and non-Nedbank clients to take out personal loans or pay for goods and services with just a few clicks in less than 10 minutes. The loans API solution has shown good growth with loan volumes increasing by 345% since its launch in 2020 and now represents 5% of the total of new-business sales. This, together with other digital initiatives, is supporting our market share increase in this product. A free credit health monitoring tool was launched for all Nedbank clients in-app in September 2021 allowing clients to monitor their credit scores and receive guidance on how to improve credit behaviour. At the end of December 2021, 280 000 clients have registered on the tool of which the majority are actively engaging monthly with insights shared. Home Loans Home Loans provides home ownership product solutions to the consumer and relationship segments. The South African property market has shown strong growth during 2021, house price inflation (HPI) ended 2021 at 4,35%, up from 3,05% in 2020. The year started strongly with HPI growing steadily each month to a five-year high of 5,07% in June 2021. This growth was primarily driven by the low interest rate environment, as well as increased activity in the luxury (R1,5m—R3m) and high value (R700 000–R1,5m) segments of the property market, driven by consumers adjusting to their new post-Covid way of living, which increased demand for properties with space for home offices, as well as some semigration. The second half of the year saw a slowdown and then a decline in HPI as the interest rate impact started to fade, while unemployment and salary cuts started to play more of a role in curbing demand growth and we saw more sale-in-execution notices being issued by lenders as borrowers got into difficulty. Nedbank’s new business granted increased by 10%, with application volumes exceeding the pre-Covid-19 levels by 62%. The residential market share declined marginally to 14,2%. HE recovered strongly to R1 215m at an ROE of 22,5%, aided by the reduction in the CLR ratio to a negative -9 bps. The core CLR, excluding once-offs, is however within the target range. Given the muted GDP growth outlook together with the expectation of rising rates, we expect the downward trend in HPI that we have witnessed throughout H2 2021 to continue into 2022. To capitalise on the favourable outlook and to ensure sustained value, Home Loans seeks continually to improve client experience, launch new CVPs, strengthen existing business relationships and seek ways to support our clients. Highlights include the following: • We continue to develop our relationship with the mortgage origination channel to enhance access for our clients. • As part of our commitment to sustainable development goals we have developed a green residential mortgage CVP linked to EDGE accreditation. This CVP offers clients LTV up to 103% in EDGE-certified developments for first-time home buyers and provides main-banked clients rate discounts on their bonds. • We launched a product to assist first-time home buyers, which includes bond plus costs up to 105% LTV and affords main-banked clients rate discounts on their bonds. • We are bolstering our offering for self-employed individuals by improving the ease of doing business. • Nedbank is currently offering solar finance through our home loan product features (NedRevolve, Readvance or a further loan). Through this offering our clients who wish to install a solar solution are connected with a reputable supplier. • Another major area of focus is to significantly reduce our cost-to-income ratio by streamlining and re-engineering the origination and operational processes that link with providing better client service and improve the ease of doing business with us. MFC MFC provides secured-lending products to the consumer, relationship and business banking segments. RRB and Business Banking vehicle finance is booked directly to their respective segments, leveraging off the MFC product line infrastructure for several administrative processes. The South African vehicle finance market, according to the National Association of Automobile Manufacturers of South Africa, has shown a reassuring recovery, with new-vehicle sales volumes growing at 22% in H2 2021, albeit still 13,8% lower than 2019 levels. Lower interest rates have provided more affordable financing and new and used-vehicle price inflation has normalised to 2% and 7% respectively (according to TransUnion). Despite the negative impacts of the July civil unrest and destruction of numerous dealerships, together with new vehicle stock shortages, MFC’s sales volume and value grew by 14% and 22% respectively. New-business market share increasing to 30,39% (TransUnion, December 2021), 36,9% (BA900, December 2021) and overall vehicle finance balances increasing by 5%. New-vehicle finance deal sizes have increased to an average of R323 000, while used-vehicle deal sizes increased to R243 000. MFC’s used-to-new-vehicle finance ratio remained flat at 70:30 (2020: 70:30). HE recovered strongly to R1,6bn at an ROE of 17,3%, aided by the reduction in the CLR ratio to 146 bps. The core CLR, excluding once-off impacts, is within the through-the-cycle target range. To ensure the safety of our clients during the current pandemic, a fully integrated digital origination and finance payout process has been implemented. Going forward, we will continue leveraging our digital channels and platforms, including working with our dealer partners to grow their reach and efficacy while providing a superior client experience to clients searching for a vehicle that suits their needs. The Avo Auto Channel launched in H2 2021, linked into the MFC API app to bring bank-approved dealers to our clients offering them a platform to showcase their vehicles in a virtual dealer mall to afford our clients the comfort and safety of shopping for their vehicles online. To date there are 101 dealers, 3 644 cars listed and 8 000 views a day. Our intention is to maintain market share while cross-selling transactional and insurance products. 95 SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisMessage from ourChief ExecutiveResultspresentation2021 resultscommentaryFinancial resultsNedbank Group Annual Results 2021Unfavourable • Sector specific earnings still being impacted by the Covid-19 national lockdown, particularly related to foreign-travel. • Aggressive competitor pricing driving lower household deposit market share. • The cost-to-income and ROE ratios recovering but still requiring further improvement. • Lower endowment income, driven by lower average interest rates. Favourable • Improvement in CLR. • Accelerated digital uptake ( incl Avo) and usage continues, with several awards. • Landing of multiple client-led solutions including the Money Management tools such as Money Coach, the credit health tool and SimplyBiz Academy and digital café. • Digital solutions landed include microloans on USSD, and enabling MyCoverLife insurance and onboarding for small businesses on the MoneyApp (companies with up to 3 directors). • Strong franchise in card acquiring, MFC and Small Business. • Various types of funding and support offered to informal traders and small business after the July civil unrest. • Increase in NPS maintaining number 2 spot, reducing the gap to market leader. • Improving enablement of cross-sell in our Eclipse onboarding platform using strong data capability. • Project Phoenix gaining traction with continued headcount reductions driving efficiencies. 96 Nedbank Group Annual Results 2021Retail and Business Banking: Key business statistics 2021 2020 Business Banking New client acquisitions – groups Average product holding Home Loans Number of applications received Average loan-to-value percentage of new business registered Average balance-to-original-value percentage 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-end1 Retail active clients Retail main-banked clients2 Retail cross-sell ratio3 Business Banking groups Small Business Services segment Home Loans4 MFC Personal Loans Card Issuing Investment products Distribution Number of business banking locations Number of retail outlets Number of new-image branches5 Number of ATMs Number of ATMs with cash-accepting capabilities6 Digitally active retail clients7 Money app clients POS devices 336 4,85 200 94 79 53 85 48 1 832 70 1 419 59,5 43,3 79 83 6 417 3 052 1,86 14 376 299 364 580 433 1 079 1 428 59 538 366 4 261 1 278 2 289 1 631 105 278 4,56 182 93 78 52 83 32 1 601 70 1 088 61,4 44,2 73 78 6 390 3 017 1,78 14 583 297 348 574 433 1 067 1 462 58 549 364 4 224 1 244 2 054 1 182 102 thousands % % % % Rm thousands % thousands R000s months rand billions rand billions thousands thousands ratio thousands thousands thousands thousands thousands thousands thousands thousands thousands 1 All Retail clients are based on the new active client rule, which defines active clients as those that have either a non-zero-balance asset or investment product or a positive-funded-balance transactional product (TP), or a negative TP balance with a transaction done within the past 12 months. 2 The main-bank rule has been updated to include clients that achieved a minimum deposit or number of quality transactions on average per month over three months, and includes stabilisation assumptions. 3 The number of needs met (products) per active client. 4 Home Loans now includes joint-bond clients. 5 Included in the number of retail outlets – shown separately for additional disclosure. 6 Cash-accepting devices and Interactive teller machines are included in total number of ATMs. 7 The definition of digitally active clients has been updated to include clients that are part of the active client base. 97 SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisMessage from ourChief ExecutiveResultspresentation2021 resultscommentaryFinancial resultsNedbank Group Annual Results 2021 Balance sheet average advances and impairments Daily gross average advances Rm Stage 1 % Stage 21 % Stage 3 % % of total advances Credit loss ratio1 % 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Home loans VAF 141 629 132 437 118 450 111 965 Personal loans 25 812 23 177 Card Other loans 16 717 16 414 3 294 2 754 Total Retail 305 902 286 747 Business Banking 78 860 77 361 85,1 81,2 65,8 79,3 81,3 81,6 83,1 82,8 80,3 67,2 76,8 83,3 80,2 75,0 Total RBB 384 762 364 108 81,9 79,1 9,8 13,4 13,6 6,8 6,7 11,4 11,7 11,4 10,4 11,5 14,2 9,4 6,4 11,1 18,2 12,5 5,1 5,4 20,6 14,0 12,0 7,0 5,2 6.7 6,8 8,3 18,6 13,8 10,3 8,7 6,8 36,7 31,3 6,7 4,0 0,8 79,5 20,5 36,4 31,5 6,5 4,4 0,8 79,5 20,5 (0,09) 1,46 9,82 6,33 4,46 1,75 (0,21) 0,64 2,69 10,62 8,97 3,78 2,75 1,10 8,3 100,0 100,0 1,34 2,40 1 Impairments charge and resultant CLR include charges housed centrally within RBB. Balance sheet impairment as a percentage of book % of total Stage 1 % Stage 2 % Performing stage 3 % Non-performing stage 3 % Total stage 3 % 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Home loans VAF 1,64 4,82 2,02 5,29 Personal loans 22,75 20,04 Card Other loans Total Retail Business Banking 16,81 12,80 5,54 2,05 17,57 11,17 5,73 2,61 0,19 1,32 6,18 4,67 1,95 1,28 0,34 0,23 1,16 4,27 4,36 1,66 1,10 0,54 3,38 10,74 24,22 5,07 11,47 9,11 10,78 28,04 17,29 21,72 62,92 24,18 71,80 22,32 19,31 42,71 36,84 24,51 58,35 56,99 55,20 49,58 20,44 34,64 77,12 70,12 76,73 74,69 73,43 76,47 67,08 69,40 29,36 27,51 30,00 50,00 78,33 79,11 77,10 77,78 10,61 3,43 11,94 3,68 19,13 21,31 57,16 54,84 46,76 40,28 26,10 22,66 26,10 22,66 Total RBB 4,83 5,09 1,08 0,99 9,11 9,48 19,13 21,31 50,67 46,44 43,43 37,35 Balance sheet actual advances Total advances Rm Stage 1 Rm Stage 2 Rm Performing stage 3 Rm Non-performing stage 3 Rm Total stage 3 Rm 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Home loans VAF 147 005 136 703 125 083 113 190 14 407 14 268 2 272 3 359 5 243 5 886 7 515 9 245 125 250 118 103 101 647 94 781 16 839 13 552 2 996 6 820 3 768 2 950 6 764 9 770 Personal loans 26 687 24 274 17 563 16 307 3 625 3 440 16 040 16 474 12 714 12 658 1 087 1 545 3 273 2 963 2 662 2 468 218 189 713 137 10 758 384 14 4 786 3 769 5 499 4 527 2 102 1 887 2 239 383 292 393 2 271 306 Card Other loans Total Retail 318 255 298 517 259 669 239 404 36 176 32 994 6 128 11 335 16 282 14 784 22 410 26 119 Business Banking 82 046 76 868 68 191 57 659 9 559 13 988 4 296 5 221 4 296 5 221 Total RBB 400 301 375 385 327 860 297 063 45 735 46 982 6 128 11 335 20 578 20 005 26 706 31 340 98 Nedbank Group Annual Results 2021 Balance sheet actual impairments Total impairments Rm Stage 1 Rm Stage 2 Rm Performing stage 3 impairments Rm Non-performing stage 3 impairments Rm Total stage 3 impairments Rm 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Home loans 2 404 2 766 240 257 487 724 VAF 6 043 6 250 1 346 1 097 1 808 1 554 Personal loans 6 071 4 864 1 086 Card Other loans 2 696 2 894 419 331 594 52 697 552 41 878 600 64 843 766 52 207 518 416 28 3 362 1 470 1 423 1 677 1 785 1 481 2 371 2 118 2 889 3 599 432 133 3 691 2 892 4 107 3 324 1 474 1 443 1 502 1 576 7 300 231 303 238 Total Retail 17 633 17 105 3 318 2 644 3 837 3 939 1 172 2 415 9 306 8 107 10 478 10 522 Business Banking 1 683 2 008 234 310 328 515 1 121 1 183 1 121 1 183 Total RBB 19 316 19 113 3 552 2 954 4 165 4 454 1 172 2 415 10 427 9 290 11 599 11 705 Income statement impairments Income statement impairments charge1,2 Rm Stage 1 Rm Stage 2 Rm Stage 3 Rm Interest on impaired advances Rm Post-write-off recoveries Rm 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Home loans (129) 842 (5) VAF 1 727 3 014 Personal loans 2 536 2 460 Card Other loans 1 059 1 473 146 104 Total Retail 5 339 7 893 Business Banking (167) 853 307 389 36 13 740 (83) 16 441 87 14 375 92 (199) 274 59 (56) (166) 11 179 212 358 455 1 205 776 1 745 2 917 (75) 14 (82) (42) (55) (45) (613) (448) 3 173 2 927 (792) (653) (293) 1 611 172 1 411 133 (34) (29) (58) (25) (388) (21) (264) (279) (21) (21) 1 205 6 906 8 164 (916) (860) (1 370) (1 057) (207) 366 150 415 (6) 5 (21) (20) Total RBB 5 172 8 746 657 528 (228) 1 571 7 056 8 579 (922) (855) (1 391) (1 077) 1 Impairment charge and resultant CLR include charges housed centrally within RBB. 2 The income statement charge includes the charge associated with unutilised balances. 99 SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisMessage from ourChief ExecutiveResultspresentation2021 resultscommentaryFinancial resultsNedbank Group Annual Results 2021 Nedbank Wealth Headline earnings Headline earnings (Rm) (Rm) Headline earnings (Rm) Return on equity (%) Return on equity (%) 2 6 6 2 2 6 6 9 6 2 6 9 1 0 3 2 1 3 0 5 3 2 3 5 1 4 3 0 1 8 4 3 3 0 8 3 2 0 5 2 2 2 0 0 5 5 2 2 0 5 , 5 7 2 , 8 6 2 , 8 4 2 , 3 5 1 , 2 1 2 Cluster total Cluster total Insurance Insurance Asset Management Asset Management Wealth Management Wealth Management 2020 2020 2021 2021 Financial highlights for the year ended 31 December Change % 2021 2020 Headline earnings (Rm) NII (Rm) Impairments charge (Rm) NIR (Rm) Operating expenses (Rm) ROE (%) ROA (%) CLR – banking advances (%) NIR to total operating expenses Cost-to-income ratio (%) Interest margin (%) 45 (3) (87) 15 7 962 866 28 3 788 3 280 21,2 1,18 0,09 115,5 70,5 1,44 662 897 208 3 303 3 061 15,3 0,81 0,64 107,9 72,9 1,51 Assets under management (Rm) 13 424 329 374 546 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) 12 14 1 (3) (4) (2) 5 4 039 3 606 322 283 80 986 80 244 81 673 81 428 30 273 31 133 30 978 32 134 43 840 43 945 44 070 45 170 4 528 4 327 100 2017 2018 2019 2020 2021 Financial performance Nedbank Wealth reported a strong recovery from the impact of Covid-19 in the prior year, delivering growth in HE of 45% to R962m, with an ROE of 21,2%, above the group’s cost of equity. Insurance results were positively impacted by a significant market rebound, offset by higher claims in the life portfolio. Asset Management delivered a robust performance on the back of strong growth in AUM. Wealth Management (SA) recorded a substantial growth in earnings largely due to lower credit impairments. Wealth Management (International) earnings were negatively impacted by record-low USD and GBP interest rates, partially offset by strong growth in investment business lines. NII declined by 3% to R866m due to record-low interest rates both locally and internationally, which led to NIM contracting to 1,44% from 1,51% in the prior year. CLR improved significantly to 9 bps as a result of credit impairment releases due to a recovery on a large single client locally, and IFRS 9 model releases in the international business, on the back of an improved economic outlook. NIR increased by 15% to R3 788m due to strong investment returns, the implementation of an enhanced asset-and-liability matching strategy and a reduced non-life claims ratio in Insurance, partially offset by an increase in death and funeral claims in the life portfolio. Asset Management further contributed to the strong growth in NIR, with positive net flows both locally and internationally and a rebound in markets. Higher investment fees in the local and international Wealth Management businesses, combined with an increase in foreign exchange income due to strong client activity in the international business, also led to an improved NIR. Expenses increased by 7% off a low base in the prior year, due to investment in people and strategic initiatives. The cost-to-income ratio decreased to 70,5% (2020: 72,9%), due primarily to strong growth in NIR. Strategic progress Nedbank Wealth remains committed to providing market-leading client experiences, building data and digital capabilities, investing in people and culture, driving long-term performance for clients and collaborating across the Nedbank Group. Insurance continued to focus on diversification and digitisation of solutions, with the business having made good traction on two new products launched in late 2021. MyCover, a personal lines solution with a total sum insured of almost R3bn, and Nedbank Group Annual Results 2021 MyCover Life, a semi-underwritten life solution with a total sum assured of more than R3bn. MyCover and MyCover Life are both available on various digital channels, Nedbank call centres, Nedbank branches and through risk consultants. The business has extended its insurance quoting, fulfilment and claims functionality on digital channels to 10 Insurance product offerings. Nedbank Insurance aims to further improve sales through digital and in-branch campaigns in collaboration with Nedbank Group partners. Asset Management experienced solid growth in AUM, with good traction in the key multi-asset, cash, global and passive ranges. According to the Q4 2021 ASISA stats, Nedgroup Investments ranked fifth largest in total AUM locally with a 7% market share, and third largest in total AUM internationally, maintaining its 12% market share. The Best of Breed range has shown steady growth, with R270bn in AUM locally and $5,2bn in AUM internationally. The Nedgroup Investments SA multi-asset Assets under management (Rbn) 2 1 3 6 5 6 5 2 7 9 2 6 5 1 4 2 1 3 3 7 6 4 6 2 5 7 3 8 7 7 9 2 4 2 4 9 9 5 2 3 2017 2018 2019 2020 2021 International Local Looking forward On the back of a solid market rebound, strong JSE growth and a significant improvement in the credit environment in 2021, Nedbank Wealth expects moderate market growth and an improved interest rate environment in 2022, both locally and internationally. The volume of death and funeral claims in Insurance will depend on the impact of possible future Covid-19 waves, as well as progress made on the national vaccination programme. The business will continue to focus on attracting positive net flows into Asset Management and growing the high-net-worth client base in Wealth Management SA and International. Nedbank Wealth expects an increase in expenses due to the continued investment in strategic growth initiatives across the business. Insurance will focus on enhancing client experiences, growing the MyCover portfolio, improving data capabilities, expanding its mobile and digital offerings, and collaborating within the group to increase client penetration. Nedbank Insurance products, including MyCover Funeral and MyCover Life, will be available on the Eclipse platform during 2022. Asset Management remains committed to delivering long-term investment performance, acting in the best interest of clients, and taking further steps towards becoming a leader in responsible investing. The business will continue to integrate with the Nedbank Money app and other online digital channels. Wealth Management (SA) will focus efforts on entrenching its market presence as an advice-led business that connects client’s wealth and developing digital assets to create efficiencies and enhance client experiences. In addition, the business will continue to optimise its structure and operations to remain future-fit and aligned with client needs. Collaboration with the Nedbank Group will be paramount to increasing client penetration and providing a full spectrum of services for high-net-worth clients. Wealth Management (International) will continue to raise its profile within the client base and collaborate with the local business to provide an integrated, holistic high-net-worth client experience. The business is committed to simplifying the technology landscape by investing in solutions, with a specific focus on digital, data, integration and automation. fund range (Flexible Income, Opportunity, Stable and Balanced funds) and global range continue to perform well and present opportunities for further growth. The business has focused on digital automation, with more than 80% of transactions now automated. Furthermore, the 2021 edition of the Nedgroup Investments Responsible Investments Research Report, which assessed 25 local and 21 global asset managers on their ESG efforts, has been published and is a further step in the business’s journey towards becoming one of the leaders in responsible investing. This is the second report since the inaugural publication in 2020. Wealth Management (SA) continued to optimise its business structure and operations to enhance client experiences through improved segment-specific client value propositions, a single distribution business and digitisation of key processes. In line with current trends, the business has experienced an increase in digital activity on the Nedbank Private Wealth app, with 41% more interactions yoy. The app, which offers integrated local and international banking capabilities, has an average rating of 4,6 on the Apple and Google app stores. Wealth Management (SA) has made good progress in collaborating with Nedbank Group partners to increase cross-sell opportunities and continues to work closely with Nedbank Private Wealth (International) to enhance the integrated high-net-worth client experience and increase flows. In the 2022 Euromoney Private Banking and Wealth Management Survey, Nedbank Private Wealth (SA) took top honours in SA in the Family Governance/Succession Planning category. Wealth Management (International) has made steady progress on digital innovation and adoption, with the business deploying digital signatures to improve client experience and help reduce its carbon footprint, with eKYC technology to follow in the coming months. Visa self-service functions have been incorporated in online wealth services to improve security and combat fraud. Nedbank Private Wealth (International) has won Best Boutique Private Bank for the third consecutive year and Best Private Bank, Overall Service at the 2021 WealthBriefing Middle East and North Africa (MENA) Awards. In 2021 Nedbank Private Wealth achieved an NPS of 42%, which is higher than the industry benchmark of 38%. Nedbank Private Wealth (International) has signed an agreement to sell its Channel Islands trust businesses, Nedgroup Trust Limited (Guernsey) and Nedgroup Trust Limited (Jersey), to Suntera Global, an independent global provider of fund, 101 SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisMessage from ourChief ExecutiveResultspresentation2021 resultscommentaryFinancial resultsNedbank Group Annual Results 2021corporate and private-wealth services. This transaction is subject to regulatory approval and is expected to be completed by no earlier than 31 March 2022. This will enable Nedbank Private Wealth to focus on its core business of investment management, wealth planning, lending and banking. Segmental performance Insurance The life insurance industry continues to be severely impacted by Covid-19-related death claims, while non-life claims have improved compared to the prior year. Insurance experienced an increase in HE of 77% to R532m, due primarily to improved investment performance as a result of a rebound in markets, and a better non-life claims experience. The business also benefited from the implementation of an enhanced asset-and-liability matching strategy in 2021 to minimise the impact of future interest rate moves on earnings. The life portfolio has been substantially impacted by an increase in death and funeral claims due to the pandemic, and includes reserves raised for the next Covid-19 wave. Life EV increased by 12% to R4 039m due to higher profits as a result of a better-than-expected retrenchment claims experience, offset by increased mortality rate and higher dividends compared to prior year. VNB improved by 14% to R322m due to a significant increase (20%) in new business volumes, off a low base in the prior year. Non-life GWP increased by 3% toR1 113m owing to higher average premium increases and improved pricing on the existing portfolio. Asset Management The asset management industry continues to experience pressure on fees due to the shift to cash and lower-margin asset classes. Notwithstanding this, AUM increased by 13% to R424bn, supported by positive net flows of R7bn. The business delivered strong HE of R380m, up by 12% due to a solid overall performance, strict expense control and growth in market share. Wealth Management The wealth management industry continues to be impacted by low interest rates and cautious investor sentiment both locally and internationally. Overall, Wealth Management’s HE improved by >100% to R50m, driven mainly by credit impairment recoveries and an increase in NIR, partially offset by a reduction in NII due to the low-interest-rate environment. Wealth Management (SA) benefited from credit impairment releases due to a recovery on a large single client. In addition, the business recorded improved margins, an increase in banking and investment management fees, and higher new-business volumes in financial planning. This was offset by lower brokerage income, off a high base in the prior year, and continued delays in the winding up of estates due to the impact of Covid-19 on the Master’s Office. Wealth Management (International) earnings were impacted by record-low USD and GBP interest rates, resulting in lower NII, with lending balances remaining steady compared to the prior year. The business has maintained good growth in AUM and AUA due to strong inflows and a focus on client retention, resulting in solid growth rates as markets have rallied. NIR increased due to strong growth in AUM and AUA, partially offset by lower foreign exchange fees, off a high base in the prior year. Favourable Unfavourable • Credit impairment recoveries. • Significant market rebound. • Strong AUM net flows. • Enhanced asset and liability matching strategy. • Numerous awards received during the year. • Low non-life claims ratio. • Increased digital activity. • Launch of MyCover and MyCover Life products. • Significantly higher death and funeral claims. • Competitive lending environment, particularly in the international business. • Low US and UK interest rate environment impacting NII. 102 Nedbank Group Annual Results 2021Assets under management Rm Fair value of funds under management – by type Unit trusts Third party Private clients Fair value of funds under management – by geography SA Rest of the world Rm Reconciliation of movement in funds under management – by type Opening balance at 31 December 2020 Inflows Outflows Mark-to-market value adjustment Foreign currency translation differences 2021 2020 359 404 314 539 1 105 63 820 957 59 050 424 329 374 546 325 318 99 011 296 971 77 575 424 329 374 546 Unit trusts Third party Private clients Total 314 539 675 612 (666 918) 29 483 6 688 957 59 050 374 546 13 (32) 95 72 6 647 682 272 (8 129) (675 079) 5 711 541 35 289 7 301 Closing balance – 31 December 2021 359 404 1 105 63 820 424 329 Rm Reconciliation of movement in funds under management – by geography Opening balance at 31 December 2020 Inflows Outflows Mark-to-market value adjustment Foreign currency translation differences SA Rest of the world Total 296 971 668 816 77 575 13 456 374 546 682 272 (665 345) (9 734) (675 079) 24 876 10 413 7 301 35 289 7 301 Closing balance – 31 December 2021 325 318 99 011 424 329 103 SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisMessage from ourChief ExecutiveResultspresentation2021 resultscommentaryFinancial resultsNedbank Group Annual Results 2021 Nedbank Africa Regions Headline earnings (Rm) Headline earnings (Rm) Return on equity (%) 2 0 7 7 5 4 2 1 4 9 5 , 3 0 1 7 7 , , 2 0 , 3 9 ) 0 1 8 ( ) , 6 2 1 ( 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Financial performance HE of the Nedbank Africa Regions (NAR) business was up by greater than 100%, with performance largely driven by ETI. Overall, NAR HE was up from R12m in 2020 to R594m in 2021, with ROE improving from 0,2% in 2020 to 9,3% for 2021. Although positive, ROE was below our ambition of greater than COE. The results reflect a muted performance from the SADC subsidiaries and an improvement in ETI’s performance. The main drivers of the performance were the decline in impairments by 62% and an increase in NII of 14% to R1 448m. Despite an improved H2 2021, NIR for full-year 2021 declined by 2% due to lower client transactional activity. Given the further depreciation of the Zimbabwean dollar and slowing inflation, NAR reported a net monetary loss of R138m (2020: R205m loss). Average total advances grew by less than 1% to R22,5bn, while average total deposits grew by 6% to R34,4bn. NIM improved to 4,20% from 3,85% in 2020. Despite sluggish growth in loans and advances, NII growth was driven by high lending rates in Zimbabwe, coupled with increased investments in high-interest yielding assets, as well as lower cost of funds in Mozambique. NIR declined marginally by 2% to R1 431m due to subdued transactional activity and lower foreign exchange translation gains. The third wave of the pandemic in H1 2021 saw extended lockdowns across the regions we have a presence in, which resulted in lower economic activity. Branches Branches The impairment charge declined by 62% to R168m as economic conditions improved during 2021 with improved collections and recoveries. CLR decreased to 72 bps (2020: 185 bps), which is also below 2019 levels (101 bps). Expenses increased by 9% to R2 535m mainly due to hyperinflationary pressures in Zimbabwe. Excluding Zimbabwe, NAR expenses were well managed and up by only 3% to R2 088m off a low base in the prior year. Headcount decreased by 2% to 2 309 as we focused on managing overall costs, but at the same time filling key vacancies. NAR’s cost-to-income ratio decreased to 70,8% from 75,9% in the prior period. Associate income, relating to the group’s 21% shareholding in ETI for the period, increased significantly to R686m in 2021 from a R178m loss in 2020, including a goodwill impairment. This includes accounting for our share of ETI’s Q4 2020 and 9M 2021 earnings (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 Nedbank Group’s HE was a profit of R523m (2020: R153m), including a R245m impact of funding costs. The ETI Board has recommended a dividend of USD 0.16 cents per share (circa US$40m), which will be presented to shareholders for approval at the upcoming AGM. ATMs ATMS 3 9 8 9 3 0 1 4 8 0 8 8 0 2 0 2 2 8 1 2 3 9 1 2 9 1 2017 2018 2019 20201 2021 2017 2018 2019 20201 2021 1 Malawi disposed of in H12020 (11). 1 Malawi disposed of in H12020 (22). 104 Nedbank Group Annual Results 2021Strategic progress Our strategy on the continent remains to own, manage and control banking operations in the SADC and East Africa, and to give our clients access to a banking network in West and Central Africa regions through our strategic associate investment in the pan-African banking group ETI, which has subsidiaries in 33 African countries. As part of the Ecobank–Nedbank alliance, Nedbank Group offers clients access to the widest banking network in Africa, with a presence in 39 countries on the continent. Nedbank’s strategy is to achieve scale in the current markets where we operate, while exploring opportunities to expand in large, fast-growing markets on the continent, when opportunities arise. We are continuing to transform the NAR business to ensure readiness for the future and to also ensure we get our fair share of revenue pools. As part of portfolio optimisation, we have made good progress in integrating the Mozambican business into the group, so that we can leverage our enterprise capabilities to unlock value. Having increased our stake in the business to 87,5% in H1 2020, in June 2021 we rebranded Banco Único as Nedbank Mozambique. Operating as Nedbank in Mozambique has served as a catalyst in addressing opportunities in growth sectors. We have made progress in reconfiguring the Zimbabwe business and the impact of monetary loss due to hyperinflation has reduced. As of 9 February 2022, Nedbank Zimbabwe completed its recapitalisation to ensure that the bank complies with the minimum capital requirement of a Zimbabwe dollar equivalent of US$30m as required by the Reserve Bank of Zimbabwe. Nedbank and Old Mutual Zimbabwe, the main shareholders, took up the capital issue on a pro rata basis. As part of optimisation and improving efficiency, the bank closed three branches in 2021 and has continued its transformation to be more digital and automated, with a special focus on wholesale and transactional banking, trade finance and cash management. We are also transforming and reimagining the NAR business to be more digital, automated, more competitive and more client obsessed. In 2021, digitally active clients across NAR made up 54% of the total active client base. The Nedbank Money App (Africa) has proven to be the channel of choice in Namibia, Lesotho and Eswatini, with payment and transfer volumes up 35% yoy and value-added services (airtime, data, prepaid electricity, etc) maintaining a steady upward trajectory of 26% yoy. A total of 29 new functionalities and enhancements were deployed on the app in 2021. Nedbank Zimbabwe and Mozambique each have their unique apps, called Nedbank Mobile and Nedbank Mobile Banking respectively. Financial highlights Headline earnings (Rm) NII (Rm) Impairments charge (Rm) NIR (Rm) Operating expenses (Rm) Associate income1 ROE (%)2 ROA (%) Return on cost of ETI investment (%) CLR (%) 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) Nedbank Africa Regions SADC ETI 2021 2020 2021 2020 2021 2020 594 1 448 168 1 431 2 535 686 9,3 1,41 11,0 0,72 56,4 70,8 4,20 42 847 39 235 21 243 22 469 35 054 34 413 6 385 12 1 274 437 1 454 2 325 (178) 0,2 0,03 5,6 1,85 62,5 75,9 3,85 41 089 38 739 23 233 22 409 33 294 32 470 6 471 71 1 693 168 1 431 2 535 1,3 0,20 0,72 56,4 81,1 5,68 40 575 37 070 21 243 22 469 35 054 34 413 5 614 (141) 1 549 437 1 454 2 325 (2,6) (0,42) 1,85 62,5 77,8 5,42 38 909 36 004 23 233 22 409 33 294 32 470 5 366 523 (245) 153 (275) 686 67,8 7,62 11,0 (178) 14,0 2,09 5,6 2 272 2 165 2 180 2 735 771 1 105 Change % >100 14 (62) (2) 9 >100 4 1 (9) 5 6 (1) 1 Associate income on an IFRS basis is R686m (Dec 2020: R178m loss) as IFRS requires associate income to be presented net of our share of ETI's goodwill impairment of R13m (Dec 2020: R528m). Our share of ETI's goodwill impairment is excluded from HE. 2 December 2021 ROE on subsidiary in-country statutory capital is 5,2% with Namibia 7,6% (2020: 4,1%); Eswatini 14,0% (2020: 9,2%); Lesotho 5,3% (2020: 5,1%); Zimbabwe 26,9% (2020: 6,8%); Nedbank Mozambique 5,4% (2020:-4,5%). 105 SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisMessage from ourChief ExecutiveResultspresentation2021 resultscommentaryFinancial resultsNedbank Group Annual Results 2021 We received the following awards in 2021: • Best Internet Banking Africa and Best Mobile Banking Africa for 2021, awarded by International Business Magazine. • Best Bank for Digital Banking Services in Lesotho for 2021, awarded by the Global Banking & Finance Review (Nedbank Lesotho). • Most Innovative Retail Banking App in Eswatini for 2021, awarded by Global Banking & Finance Review (Nedbank Eswatini). Nedbank Mozambique won four awards: • Digital Banking Brand of the Year Mozambique in 2021, awarded by Global Banking & Finance Review, • Most Innovative Digital Branch Design in Mozambique for 2021, for the Business Lounge by Nedbank Mozambique, awarded by Global Banking & Finance Review, • Best Digital Transformation Bank in Mozambique for 2021, awarded by International Finance Magazine. • Best Digitally Re-engineered and Rebranded Bank in Mozambique for 2021, awarded by International Finance Magazine. • Nedbank Zimbabwe was recognised as the first runner-up for Best Digital Innovation in the Banks and Banking Survey 2021. Nedbank’s bold aspiration is to be rated #1 in client experiences in most markets in which we operate. To deliver improved client experiences across the NAR business, we rolled out the Service Excellence programme to all NAR employees in H1 2021. In 2021, we achieved improvements in many key client metrics. During 2021 Namibia and Mozambique businesses achieved the highest NPS in their respective markets, while four of our businesses (Lesotho, Mozambique, Namibia and Zimbabwe) achieved #2 position for net sentiment in their markets. Nedbank Eswatini, Namibia and Zimbabwe also have the highest loyalty score in their markets. In ETI our focus remains to increase the value of our investment. We are working through our representation on the board to ensure an appropriate focus on capital, liquidity and growth to underpin value creation. We are collaborating with the other major shareholders to resolve the challenges in Ecobank Nigeria so that we can unlock shareholder value. We are continuing to work with the ETI team to increase business flows across the two businesses. Looking forward Economic growth in sub-Saharan Africa is forecast to accelerate slightly to 3,7% in 2022 and rise further in 2023. For 2022, we expect to build on the improved businesses performance in 2021. Of course, risks remain - new Covid-19 variants and socioeconomic and political issues across the continent may still negatively impact African economies, and in turn our business performance. The ongoing unrest in Eswatini is something we are continuingly monitoring for its impact on the economy in the country. In Mozambique, even as SADC forces have helped stabilise the areas affected by jihadist insurgents, there remains a risk if the main causes of the attacks are not addressed. Stabilisation will facilitate the resumption of construction operations at the liquefied-natural-gas fields. Other issues to consider include the impact of inflationary 106 pressures due to global supply challenge and the renewed monetary policy tightening by central banks and its impact on the population. Rising commodity prices on the other hand will also likely benefit commodity-driven economies. Performance in the SADC operations for 2022 is expected to continue to improve yoy. We expect yoy improvements in revenue (NIR and NII) and normalised impairment charges, while continuing to manage overall expenses. From an ETI perspective, the recovery is expected to continue, especially from the three core regions, as evident in their recently released FY 2021 results. Our key focus areas for 2022 are the following: • Accelerating the implementation of our Africa digital growth strategy, leveraging our group capabilities. • Maximising growth opportunities in Mozambique on the back of our increased stake in the business and the successful rebranding of the business, focusing on the key sectors of energy, agriculture and agro-processing. • Continuing the transformation of our NAR business and operating model for overall efficiency, while driving overall growth to achieve scale. • Increasing business flows while working with the other major ETI shareholders to resolve challenges in Ecobank Nigeria to increase shareholder value. Nedbank is committed to the long-term and profitable growth of our NAR business. 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. In the medium to long term, we expect the NAR business to continue to grow its overall contribution to group earnings and improve its returns earnings to closer to our ambition of ROE>COE. Segmental performance SADC operations Our SADC operations generated an HE of R71m, up by >100% from a loss of R141m in 2020. The business achieved these results even though the Namibian economy has been in recession over the past few years, as well as hyperinflation in Zimbabwe, the ongoing unrest in Eswatini and the slowdown in the economies across the region that was exacerbated by the extended Covid-19-related lockdowns. HE in SADC operations, excluding Zimbabwe, improved from a loss of R193m in 2020 to a loss of R12m. HE in the Zimbabwe business increased to R84m from R53m in 2020. NIR in SADC operations declined by 2% to R1 431m, with NII increasing by 9% to R1 693m (2020: R1 549m). The impairment charge declined by 62% to R168m as economic conditions improved during 2021, improved collections and recoveries, and subdued growth in the loan portfolio. CLR decreased to 72 bps (2020: 185 bps), which is also below 2019 levels (101 bps), which is at the lower end of its TTC target range of 75 bps to 100 bps. Nedbank Group Annual Results 2021Clients – The overall number of clients in the NAR business grew by 1% in 2021 to 337 860 (2020: 334 000) with the growth rate impacted by bulk closure of small-business tobacco farmer accounts in Zimbabwe that were dormant due to their seasonal usage. Altogether, 42% of these are main-banked clients. Distribution – We are transforming our business model for overall efficiency while driving growth to achieve scale. In line with this, we have been reviewing our distribution strategy to ensure an efficient, optimally staffed, fit-for-purpose distribution model for our business. We reduced our branches by 5% to 80 and ATMs by 1% to 192. As we tilt to become more digital, new investments into our physical presence are limited to high-growth micro-markets and the minimum presence that regulation requires. We have also focused on growing our point-of-sale (POS) devices across the region. We have grown the number of POS devices by 9% to 9 574 (2020: 8 780), resulting in an increase in card-acquiring turnover of 21% to R14,3bn (2020: R11,7bn) with NIR up 23% to R175m (2020: R142m). The number of merchant devices in NAR now make up 9,5% of the Nedbank devices across the group. ETI associate investment ETI’s financial recovery continued, resulting in an increase in Nedbank HE of >100% to R523m (2020: R153m), including the R245m (R177m post-tax) impact of funding costs. Associate income increased significantly from a loss of R178m in 2020 to R686m in 2021, which is also higher than its 2019’s performance of R668m. Overall, ETI achieved solid revenue growth despite pandemic-induced headwinds. ETI’s performance was driven by the following: • Strong financial performance and solid returns registered in its three core regions, namely Francophone West Africa (UEMOA), Anglophone West Africa (AWA) and Central, Eastern and Southern Africa (CESA). Ecobank is a market leader in six countries and among the top three in 16 countries where it does business. • Continued stabilisation of the Nigerian business. Although it is profitable, Ecobank Nigeria’s performance remains suboptimal. Its NPL levels reduced to 16,3% (2020: 19,9%) although still elevated. In December 2021, ETI reported further reduction in NPLs by $66m as asset quality metrics improved. The improvement was predominantly driven by recoveries of $32m in the resolution vehicle (RV). Ecobank’s strengths include management experience, number of clients, technology, digital platforms and geographic footprint. Its focus is on growing the business and to remain at the forefront of trade, payments, remittances and financial inclusion by continually leveraging technology and appropriate partnerships. To improve its operational and financial performance, it has restructured its businesses in Nigeria and the CESA regions, implementing a suite of efficiency initiatives, including closing physical branches and reducing headcount. The firm’s cost base has been reset through stringent cost management, operational discipline, and overall strategy of manufacture centrally’ and distribute locally, which has begun delivering efficiency gains. The majority of CESA countries delivered returns above the cost of equity and had a robust return profile driven by strong net interest income growth and fees and commission income across payments and trade. Macro headwinds in Zimbabwe are progressively improving. From a Nigeria perspective, there are signs of a turnaround from successful cost reduction efforts, a focused NPL recovery strategy and conservative lending. In December 2021, the business reported that profit before tax increased by $19m to $54m and had an ROE of 6,9%. The turnaround strategy is in progress, supported by improvement in asset quality metrics, while capital and funding have been strengthened, with successful local tier 2 issuance in 2020 and senior issuance of US$300m Eurobonds in Feb 2021. Nigeria holds upside future potential for the Ecobank Group, given it’s the largest market in sub-Saharan Africa for the group. The business has made progress in managing costs, portfolio issues are more under control and the business now has improved capital. ETI is focusing on delivering returns above the cost of equity. The group has been focusing on improving business performance by regions. The group reported strong profitability across most regions. ROEs were 21,4%, 24,9%, 22,2% and 6,9% for UEMOA, AWA, CESA and Nigeria respectively. Focus has been on entrenching the leadership positions in UEMOA and AWA, which is reflected in the strong financial performance across both regions. CESA’s ROE has improved following restructuring exercises. Although still profitable, Nigeria’s performance remains suboptimal and a drag on the group’s overall financial performance and returns. ETI has achieved a material improvement in capital position – total CAR was up, at 14,5% (estimated ratio published by ETI in February 2022) on 31 December 2021 (2020: 12,3%). The firm’s capital metrics have improved since 2019 continuing to meet increasing requirements. Favourable Unfavourable • Good liquidity and capital positions across subsidiaries. • Zimbabwe affected by hyperinflation, resulting in a monetary • Excellent growth in digitally active clients. • Increasing recognition for digital progress resulting in many awards. • Strong and growing returns from ETI's three core regions. • Significant improvement in associate income from ETI. • Top 2 in brand sentiment score in four of the markets we operate in. • Leading net promoter scores in Namibia and Mozambique. • Significant reduction in impairments. • Well managed expenses. loss, albeit improving. • SADC subsidiaries negatively impacted by Covid-19 and socio-political issues. • Low but improving return on equity. • Growing market share of revenue pools, but still sub-scale. • Low growth in main banked clients. • Ecobank Nigeria (ENG) improved but performance remains suboptimal. 107 SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisMessage from ourChief ExecutiveResultspresentation2021 resultscommentaryFinancial resultsNedbank Group Annual Results 2021Geographical segmental reporting for the year ended 31 December Rm Summary of consolidated 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 Intergroup assets Total assets Equity and liabilities Total equity Derivative financial instruments Amounts owed to depositors Provisions and other liabilities Long-term debt instruments Intergroup liabilities Total equity and liabilities Summary of consolidated statement of comprehensive income NII NIR Share of income of associate companies Total income Impairments charge on financial instruments Net income Total operating expenses Zimbabwe hyperinflation Indirect taxation Profit before direct taxation Direct taxation Profit after taxation Profit attributable to non-controlling interest Headline earnings/(losses) 1 Includes all group eliminations. Nedbank Group 2021 2020 South Africa1 Nedbank Africa Regions2 Rest of the world 2021 2020 2021 2020 2021 2020 44 586 60 037 39 179 150 498 831 735 95 019 – 41 382 52 605 80 325 132 221 843 303 78 301 – 1 221 054 1 228 137 1 106 191 1 115 045 42 847 41 089 72 016 72 003 109 511 36 042 971 795 45 547 58 159 – 100 444 65 130 953 715 49 078 59 770 – 1 221 054 1 228 137 1 106 191 1 115 045 42 847 41 089 72 016 72 003 32 500 25 027 799 58 326 6 534 51 792 33 639 138 1 073 16 942 4 104 12 838 1 149 11 689 30 081 24 140 452 54 673 13 127 41 546 31 772 205 1 148 8 421 1 994 6 427 987 5 440 878 759 854 767 35 054 33 294 34 563 34 459 39 099 148 722 767 051 84 717 (2 420) 32 642 27 702 80 173 131 277 777 395 68 589 (2 733) 89 896 35 956 43 341 57 732 507 30 296 22 289 100 52 685 5 810 46 875 30 146 979 15 750 4 100 11 650 1 052 81 974 65 004 46 924 59 452 6 924 27 703 21 559 115 49 377 11 815 37 562 28 576 1 065 7 921 1 986 5 935 935 8 075 5 050 1 1 773 21 243 4 285 2 420 6 385 10 971 427 1 448 1 431 699 3 578 168 3 410 2 535 138 72 665 (26) 691 97 594 6 813 3 639 33 827 23 233 3 811 2 733 6 471 39 967 318 1 274 1 454 337 3 065 437 2 628 2 325 205 64 34 (30) 64 52 12 1 948 20 528 79 3 43 441 6 017 1 927 21 264 119 117 42 675 5 901 13 230 11 999 76 57 982 1 235 87 65 654 1 187 (507) (6 924) 756 1 307 2 063 556 1 507 958 22 527 30 497 1 104 1 127 2 231 875 1 356 871 19 466 38 428 10 598 5 000 497 428 2 The Nedbank Africa Regions 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, or transactional-banking revenues. For example, CIB has a credit exposure to clients resident in the Africa regions of R41,5bn (December 2020: R34,0bn). 108 Nedbank Group Annual Results 2021 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 Intergroup assets Total assets Equity and liabilities Total equity Derivative financial instruments Amounts owed to depositors Provisions and other liabilities Long-term debt instruments Intergroup liabilities Total equity and liabilities Summary of consolidated statement of comprehensive income NII NIR Share of income of associate companies Total income Impairments charge on financial instruments Net income Total operating expenses Zimbabwe hyperinflation Indirect taxation Profit before direct taxation Direct taxation Profit after taxation Headline earnings/(losses) 1 Includes all group eliminations. Profit attributable to non-controlling interest Nedbank Group 2021 2020 South Africa1 Nedbank Africa Regions2 Rest of the world 2021 2020 2021 2020 2021 2020 34 563 34 459 39 099 148 722 767 051 84 717 (2 420) 32 642 27 702 80 173 131 277 777 395 68 589 (2 733) 8 075 5 050 1 1 773 21 243 4 285 2 420 6 813 3 639 33 827 23 233 3 811 2 733 1 948 20 528 79 3 43 441 6 017 1 927 21 264 119 117 42 675 5 901 1 221 054 1 228 137 1 106 191 1 115 045 42 847 41 089 72 016 72 003 89 896 35 956 81 974 65 004 6 385 10 6 471 39 878 759 854 767 35 054 33 294 43 341 57 732 507 46 924 59 452 6 924 971 427 967 318 13 230 11 999 76 57 982 1 235 87 65 654 1 187 (507) (6 924) 1 221 054 1 228 137 1 106 191 1 115 045 42 847 41 089 72 016 72 003 30 296 22 289 100 52 685 5 810 46 875 30 146 979 15 750 4 100 11 650 1 052 27 703 21 559 115 49 377 11 815 37 562 28 576 1 065 7 921 1 986 5 935 935 10 598 5 000 1 448 1 431 699 3 578 168 3 410 2 535 138 72 665 (26) 691 97 594 1 274 1 454 337 3 065 437 2 628 2 325 205 64 34 (30) 64 52 12 756 1 307 2 063 556 1 507 958 22 527 30 497 1 104 1 127 2 231 875 1 356 871 19 466 38 428 497 428 44 586 60 037 39 179 150 498 831 735 95 019 – 109 511 36 042 971 795 45 547 58 159 – 32 500 25 027 799 58 326 6 534 51 792 33 639 138 1 073 16 942 4 104 12 838 1 149 11 689 41 382 52 605 80 325 132 221 843 303 78 301 – 100 444 65 130 953 715 49 078 59 770 – 30 081 24 140 452 54 673 13 127 41 546 31 772 205 1 148 8 421 1 994 6 427 987 5 440 2 The Nedbank Africa Regions 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, or transactional-banking revenues. For example, CIB has a credit exposure to clients resident in the Africa regions of R41,5bn (December 2020: R34,0bn). 109 SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisMessage from ourChief ExecutiveResultspresentation2021 resultscommentaryFinancial resultsNedbank Group Annual Results 2021 Income statement analysis 111 Net margin analysis 114 Impairments 120 Non-interest revenue and income 122 Expenses 124 Headline earnings reconciliation 124 Taxation charge 125 Preference shares 110 Nedbank Group Annual Results 20211 Net margin analysis Net interest income (Rm) Net interest income (Rm) Interest margin trends versus prime rate (%) Net interest margin (Rm) 10,39 10,09 10,14 7,85 7,03 4 2 6 7 2 9 1 8 8 2 7 6 1 0 3 1 8 0 0 3 0 0 5 2 3 2 6 3 , 5 6 3 , 2 5 3 , 6 3 3 , 3 7 3 , 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Nedbank Group NIM Average prime rate 2021 2020 Nedbank Group Bps Rm Bps Rm Closing average interest-earning banking assets (year-to-date average) 870 382 895 880 336 30 081 352 Opening NIM/NII Growth in banking assets Endowment Endowment rate impact Endowment mix impact 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 Impact of changes in the funding profile Impact due to pricing Impact due to mix change Balance sheet management and other Closing NIM/NII for the period (1) (14) 13 20 8 12 6 3 (2) 5 3 1 2 (856) (111) (1 293) 1 182 1 744 683 1 061 504 207 (162) 369 297 62 235 12 373 1 138 32 500 30 167 1 333 (2 128) (2 821) 693 1 237 1 357 (120) (788) (742) (851) 109 (46) (28) (18) 260 (24) (32) 8 14 15 (1) (9) (9) (10) 1 – 3 336 30 081 111 Income statementanalysisSupplementaryinformationStatement of financialposition analysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Net interest margin (Bps) Net interest margin (Bps) (14) 13 8 12 (1) 7 12 336 373 2020 Endowment rate impact Endowment mix impact Asset pricing Asset mix Liability pricing Liability mix Balance sheet management and other 2021 Favourable Version 3 - 17 FEB 2022 Unfavourable • Endowment mix benefit largely due to strong growth in CASA deposits and capital levels due to higher earnings and the issuance of tier 1 capital instruments. • Negative endowment rate impact due to the full run rate impact of the 2020 interest rate cuts. • Liability pricing pressure in highly competitive household and • Improved asset pricing on new retail and commercial deposit markets. commercial advances. • Positive asset mix changes due to higher-yielding retail advances growing faster than lower-yielding CIB advances. • Liability mix benefits as a result of stronger growth in higher-margin deposits relative to wholesale funding. • Stronger growth in higher margin Nedbank Africa Region businesses. NII sensitivity • At December 2021 the NII sensitivity of the group’s banking book for a 1% parallel increase in interest rates, measured over 12 months, was 1,58% of total group ordinary shareholders’ equity, which is below the board’s approved risk limit of < 2,25%. • This exposes the group to an increase in NII of approximately R1 577m before tax, should interest rates increase by 1% across the yield curve, measured over a 12-month period. Nedbank London branch and Wealth International NII sensitivities are, however, measured at a 0,5% instantaneous increase in interest rates and Nedbank Zimbabwe is measured at a 3,0% instantaneous increase in interest rates. • The group’s NII sensitivity exhibits very little convexity and will therefore also result in a decrease in pretax NII of approximately similar amounts should interest rates decrease 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. • Nedbank Limited’s economic value of equity (EVE) for a 1% increase in interest rates remains at a low level of 0,39% (+R300m) of ordinary shareholders’ equity, which is below the board’s approved risk limit of 1,25%. 112 Nedbank Group Annual Results 2021 % 7,85 6,80 7,39 7,43 9,81 13,47 8,21 6,40 20,53 8,04 8,67 3,56 8,07 Average banking statement of financial position and related interest 2021 2020 Average balance Margin statement interest Average balance Margin statement interest Rm Assets Received % Assets Received Average prime rate Assets 7,03 Listed corporate bonds 22 236 1 287 5,79 28 138 1 912 Home loans (including properties in possession) Commercial mortgages Instalment debtors Credit card balances Overdrafts Term loans and other1 Personal loans 173 839 187 550 134 137 17 072 21 316 195 198 28 454 11 314 12 516 12 199 2 138 1 576 11 357 5 528 6,51 6,67 9,09 12,52 7,39 5,82 19,43 165 603 186 240 128 006 16 752 23 554 236 647 25 963 12 234 13 834 12 559 2 256 1 933 15 147 5 330 Gross banking loans and advances 779 802 57 915 7,43 810 903 65 205 Impairment of loans and advances Government and other securities Short-term funds and securities Interest-earning banking assets Other2 Total assets (25 214) 76 635 39 159 870 382 188 668 6 837 1 020 8,92 2,60 (21 268) 64 884 41 361 5 623 1 472 65 772 7,56 895 880 72 300 141 385 1 059 050 65 772 6,21 1 037 265 72 300 6,97 Liabilities Paid % Liabilities Paid % Equity and liabilities Deposit and loan accounts Current and savings accounts Negotiable certificates of deposit Other interest-bearing liabilities Long-term debt instruments 513 248 140 660 91 839 104 440 58 278 18 957 523 4 378 5 465 3 949 Interest-bearing banking liabilities 908 465 33 272 Revaluation of FVTPL-designated liabilities Ordinary and minority shareholders' equity Other3 5 285 103 619 41 681 3,69 0,37 4,77 5,23 6,78 3,66 483 084 22 943 127 150 114 620 104 982 61 035 663 7 212 6 683 4 718 890 871 42 219 4,75 0,52 6,29 6,37 7,73 4,74 146 394 Total shareholders’ equity and liabilities 1 059 050 33 272 3,14 1 037 265 42 219 4,07 Interest margin on average interest-earning banking assets 870 382 32 500 3,73 895 880 30 081 3,36 1 2 3 Includes term loans, preference shares, factoring debtors, foreign lending, loans to banks and other lending-related instruments. Includes cash and banknotes, derivative financial instruments, insurance assets, associates and investments, property and equipment, mandatory reserve deposits with central banks, intangible assets and other assets. Includes derivative financial instruments, investment contract liabilities, other liabilities, equity and elimination entries. 113 Income statementanalysisSupplementaryinformationStatement of financialposition analysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 20212 Impairments Nedbank Group impairments charge Nedbank Group impairments charge (Rm) (Rm) Nedbank Group credit loss ratio trends Group credit loss ratio trends (%) (Rm) 4 0 3 3 8 8 6 3 9 2 1 6 7 2 1 3 1 4 3 5 6 1,00 0,60 9 4 0 , 3 5 0 , 9 7 0 , 1 6 1 , 3 8 0 , 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 CLR TTC upper range TTC lower range Covid-19 restructured credit exposures in line with Directive 3/2020 and Directive 7/2015 Restructured credit exposure transactions Directive 3/2020 restructures Directive 7/2015 restructures GLAA, excluding trading book Directive 3/2020 restructures as a % of cluster/ business unit GLAA Total number Exposure (Rm) Impairments (Rm) Total number Exposure (Rm) Impairments (Rm) Exposure (Rm) % 0,92 0,19 1,73 3 249 345 2 904 167 38 129 18 5 13 2 513 400 352 487 2 258 255 360 40 184 965 167 522 14 1 13 – – – 35 603 6 852 1 462 400 301 0,00 67 35 536 29 104 115 6 737 194 275 26 82 046 1 436 318 255 67 75 30 729 22 325 1 112 14 3 249 167 35 754 9 834 2 004 806 954 0,40 Nedbank cluster/business unit 2021 Corporate and Investment Banking CIB, excl Property Finance Property Finance Retail and Business Banking Business Banking Retail Wealth Nedbank Africa Regions Centre Group 114 Nedbank Group Annual Results 2021 Restructured credit exposure transactions Directive 3/2020 restructures Directive 7/2015 restructures GLAA, excluding trading book Directive 3/2020 restructures as a % of cluster/ business unit GLAA Total number Exposure (Rm) Impairments (Rm) Total number Exposure (Rm) Impairments (Rm) Exposure (Rm) 53 19 34 25 355 18 160 7 195 15 241 2 051 61 15 180 1 179 1 872 4 281 250 31 189 4 185 138 333 3 24 6 18 2 061 1 792 269 516 361 280 433 83 190 891 170 389 59 073 10 540 2 196 375 385 257 448 51 76 868 58 816 10 092 2 145 298 517 73 143 249 144 14 34 31 567 24 186 4 438 % 7,02 9,51 4,22 0,55 0,23 0,63 0,01 1,38 15 433 27 743 473 59 313 12 994 2 760 796 856 3,48 Nedbank cluster/business unit 2020 Corporate and Investment Banking CIB, excluding Property Finance Property Finance Retail and Business Banking Business Banking Retail Wealth Nedbank Africa Regions Centre Group Favourable Unfavourable • The group’s impairment charge has decreased to R6,5bn (Dec 2020: R13,1bn) as a result of an improved macro-economic environment and proactive credit risk management. • The central provision decreased to R500m (2020: R750m), driven by a release of overlays that were raised in the clusters. • The Unsecured Lending impairment charge increased, driven by higher-than-anticipated risk emergence in the portfolio. • Retail overlays were raised for elevated risk in Card and for changes in the collection environment based on the DebiCheck implementation. • The CLR decreased to 83 bps (2020: 161 bps) and returned to • Amounts written off increased 10% to R8 139m (2020: within the target range of 60 bps to 100 bps. • There were better-than-expected collection outcomes, a reduction in stage 3 loans as some clients cured and Directive 7/2015 (restructured) loans decreased. R7 419m), offset by an increase in post-write-off recoveries of 22% to R1 425m (2020: R1 165m). 115 Income statementanalysisSupplementaryinformationStatement of financialposition analysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Nedbank Group income statement impairment charge and credit loss ratio Stage 1 Stage 2 Stage 3 FVOCI balance-sheet net of recoveries banking advances CLR Target CLR range Non-LAA and Off- Impairment charge, Mix of average 2021 Corporate and Investment Banking (CIB) CIB, excluding Property Finance Property Finance Retail and Business Banking (RBB) Business Banking Retail Wealth Nedbank Africa Regions Centre Nedbank Group 2020 Corporate and Investment Banking (CIB) CIB, excluding Property Finance Property Finance Retail and Business Banking (RBB) Business Banking Retail Wealth Nedbank Africa Regions Centre Nedbank Group Nedbank Group impairment drivers (Rm) Rm (291) (129) (162) 669 (75) 744 (18) 16 376 Rm 453 150 303 (207) (187) (20) (3) (7) (249) (13) Rm 1 178 824 354 4 763 141 4 622 49 170 6 160 Stage 1 Stage 2 Stage 3 FVOCI balance-sheet net of recoveries banking advances CLR Target CLR range Non-LAA and Off- Impairment charge, Mix of average Rm 271 137 134 519 10 509 22 101 Rm 435 136 299 1 533 366 1 167 31 54 500 Rm 1 941 1 463 478 6 619 415 6 204 155 267 (1) 913 2 553 8 981 389 13 127 100,0 1,61 0,60–1,00 Rm 290 290 – (2) (3) 285 Rm 293 293 – 6 (8) 291 (274) 6 534 1 00,0 0,83 0,60–1,00 Rm (212) (212) (53) (46) (7) (9) Rm 305 305 75 62 13 9 Rm 1 418 923 495 5 172 (167) 5 339 28 168 (252) Rm 3 245 2 334 911 8 746 853 7 893 208 437 491 % 43,6 22,3 21,3 49,1 10,1 39,0 4,0 3,0 0,3 % 48,4 29,6 18,8 44,7 9,5 35,2 4,0 2,9 0,0 % 0,42 0,53 0,30 1,34 (0,21) 1,75 0,09 0,72 % 0,82 1,03 0,54 2,40 1,10 2,75 0,64 1,85 % 0,15–0,45 0,20–0,50 0,15–0,35 1,20–1,75 0,50–0,70 1,60–2,40 0,20–0,40 0,85–1,20 % 0,15–0,45 0,20–0,50 0,15–0,35 1,30–1,80 0,50–0,70 1,60–2,40 0,20–0,40 0,75–1,00 (537) (2 566) (2 821) 13 127 (6) (663) 2020 Stage 1 Stage 2 Stage 3 FVOCI and non-LAA Off- balance-sheet 116 6 534 2021 Nedbank Group Annual Results 2021 2021 Corporate and Investment Banking (CIB) CIB, excluding Property Finance Property Finance Retail and Business Banking (RBB) Business Banking Retail Wealth Centre Nedbank Group Nedbank Africa Regions 2020 Corporate and Investment Banking (CIB) CIB, excluding Property Finance Property Finance Retail and Business Banking (RBB) Business Banking Retail Wealth Centre Nedbank Group Nedbank Africa Regions Rm (291) (129) (162) 669 (75) 744 (18) 16 376 Rm 271 137 134 519 10 509 22 101 Rm 453 150 303 (207) (187) (20) (3) (7) (249) (13) Rm 435 136 299 1 533 366 1 167 31 54 500 Rm 1 178 824 354 4 763 141 4 622 49 170 6 160 Rm 1 941 1 463 478 6 619 415 6 204 155 267 (1) 913 2 553 8 981 Nedbank Group income statement impairment charge and credit loss ratio Stage 1 Stage 2 Stage 3 Non-LAA and FVOCI Off- balance-sheet Impairment charge, net of recoveries Mix of average banking advances CLR Target CLR range Rm 290 290 – (2) (3) 285 Rm (212) (212) (53) (46) (7) (9) Rm 1 418 923 495 5 172 (167) 5 339 28 168 (252) % 43,6 22,3 21,3 49,1 10,1 39,0 4,0 3,0 0,3 % 0,42 0,53 0,30 1,34 (0,21) 1,75 0,09 0,72 % 0,15–0,45 0,20–0,50 0,15–0,35 1,20–1,75 0,50–0,70 1,60–2,40 0,20–0,40 0,85–1,20 (274) 6 534 1 00,0 0,83 0,60–1,00 Stage 1 Stage 2 Stage 3 Non-LAA and FVOCI Off- balance-sheet Impairment charge, net of recoveries Mix of average banking advances CLR Target CLR range Rm 293 293 – 6 (8) 291 Rm 305 305 75 62 13 9 Rm 3 245 2 334 911 8 746 853 7 893 208 437 491 % 48,4 29,6 18,8 44,7 9,5 35,2 4,0 2,9 0,0 % 0,82 1,03 0,54 2,40 1,10 2,75 0,64 1,85 % 0,15–0,45 0,20–0,50 0,15–0,35 1,30–1,80 0,50–0,70 1,60–2,40 0,20–0,40 0,75–1,00 389 13 127 100,0 1,61 0,60–1,00 Nedbank Group credit loss ratio per cluster (%) 1,06 1,02 0,09 0,06 2017 1,06 0,51 0,13 0,04 2018 1,38 1,01 0,25 0,18 2019 2,40 1,85 0,82 0,64 2020 CIB RBB Wealth Africa Regions 1,34 0,72 0,42 0,09 2021 117 Income statementanalysisSupplementaryinformationStatement of financialposition analysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Impairments charge of financial instruments 2021 Corporate and Investment Banking Retail and Business Banking Nedbank Group Nedbank Africa Regions Wealth Balance at the beginning of the year 26 077 4 638 19 257 Stage 1 ECL allowance Stage 2 ECL allowance Stage 3 ECL allowance 4 237 6 772 15 068 935 1 306 2 397 3 015 4 504 11 738 Statement of comprehensive income charge net of recoveries 6 534 1 418 5 172 Stage 1 ECL allowance Stage 2 ECL allowance Stage 3 ECL allowance Off-balance-sheet allowance Non-loans and advances FVOCI loan impairment charge 376 (13) 6 160 (274) (5) 290 (291) 453 1 178 (212) 290 669 (207) 4 763 (53) 434 46 56 332 28 (18) (3) 49 (6 030) (942) (5 023) (6) Adjusted for: Recoveries Interest in suspense Amounts written off Foreign exchange and other transfers Non-loans and advances FVOCI loans 1 425 1 062 (8 139) (19) 5 (364) 4 152 (691) (43) (364) 1 391 922 (7 380) 44 Centre 765 748 17 (252) (249) (3) (13) (16) 3 983 241 158 584 168 16 (7) 170 (9) (2) (46) 30 (12) (63) (3) 2 1 105 500 248 118 739 1 105 1 082 23 500 500 500 (5) (1) 456 44 39 373 456 456 ECL allowance – closing balance 26 581 5 114 19 406 Stage 1 Stage 2 Stage 3 4 573 6 543 15 465 681 1 692 2 741 3 600 4 194 11 612 Split by measurement category 26 581 5 114 19 406 Loans and advances 25 650 4 296 19 316 Loans and advances in FVOCI Off-balance-sheet allowance 535 396 535 283 90 118 Nedbank Group Annual Results 2021 2020 Corporate and Investment Banking Retail and Business Banking Nedbank Group Nedbank Africa Regions Wealth Centre Balance at the beginning of the year 18 152 2 745 14 144 Stage 1 ECL allowance Stage 2 ECL allowance Stage 3 ECL allowance 3 428 3 931 10 793 658 767 1 320 2 507 2 819 8 818 Statement of comprehensive income charge net of recoveries 13 127 3 245 8 746 Stage 1 ECL allowance Stage 2 ECL allowance Stage 3 ECL allowance Off-balance-sheet allowance Non-loans and advances FVOCI loan impairment charge Adjusted for: Recoveries Interest in suspense Amounts written off Foreign exchange and other transfers Non-loans and advances FVOCI loans 913 2 553 8 981 389 (2) 293 271 435 1 941 305 293 519 1 533 6 619 75 (5 178) (1 328) (3 633) 1 165 1 059 (7 419) 15 2 (24) 6 74 (1 378) (30) (24) 1 077 855 (5 979) 414 ECL allowance – closing balance 26 077 4 638 19 257 Stage 1 Stage 2 Stage 3 Split by measurement category Loans and advances Loans and advances in FVOCI Off-balance-sheet allowance 4 237 6 772 15 068 26 077 24 804 609 664 935 1 306 2 397 4 638 3 539 609 490 3 015 4 504 11 738 19 257 19 113 144 229 24 25 180 208 22 31 155 (3) (3) 434 46 56 332 434 434 771 240 72 459 437 101 54 267 9 6 (225) 82 130 (59) (372) (6) 983 241 158 584 983 953 30 263 (1) 248 16 491 500 (1) (8) 11 3 8 765 748 17 765 765 119 Income statementanalysisSupplementaryinformationStatement of financialposition analysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 3 Non-interest revenue and income Non-interest revenue (Rm) Non-interest revenue (Rm) Non-interest revenue to total operating expenses (%) Non-interest revenue to total operating expenses (%) 3 6 0 4 2 6 7 9 5 2 7 9 9 5 2 0 4 1 4 2 7 2 0 5 2 , 7 0 8 , 1 2 8 , 8 0 8 , 0 6 7 , 4 4 7 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Rm Net commission and fees income Administration fees Card fees 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 Trading income Commodities Debt securities Equities Foreign exchange Change % 4 6 15 1 (8) (14) 9 1 3 1 24 >(100) 62 >(100) (15) (51) (28) 31 (5) Realised gains, dividends, interest and other income Unrealised gains/(losses)1 Investment income Sundry income/(expenses)2 Total non-interest revenue and income 10 95 24 18 4 Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 17 754 17 137 2 710 2 907 1 403 3 646 1 027 648 267 442 3 958 2 041 4 322 2 005 (833) (128) (705) 1 327 3 178 1 017 707 311 406 3 910 1 989 4 292 1 622 352 (338) 690 50 21 193 192 195 1 250 753 56 (83) (94) 11 57 17 202 200 229 1 420 724 58 (357) (373) 16 4 475 5 252 4 295 5 094 11 965 505 3 511 802 242 41 243 2 623 98 3 900 487 25 25 109 109 43 43 16 138 11 268 525 3 065 785 216 51 245 2 386 98 3 897 329 29 29 74 74 (19) (19) 12 137 2021 2 210 766 1 110 194 (178) 1 264 53 1 474 – – – 2020 2 099 664 1 120 156 (110) 1 221 47 1 250 – – – 161 (57) 4 (50) 953 68 111 31 129 31 5 250 15 313 65 (14) (14) 71 71 – 356 1 431 839 67 95 29 96 31 5 201 25 290 70 8 8 84 84 (15) (15) 13 455 1 454 (84) 14 3 (25) 13 (89) (21) (761) (20) (741) – (59) (59) (1) 70 (856) 24 14 1 75 13 (79) (27) 672 27 645 – (143) (144) 1 29 (231) 324 26 2 267 842 1 160 666 786 (120) 87 206 53 3 142 642 1 257 (861) 818 (1 679) 154 292 727 (77) 263 713 659 (1 697) 212 603 25 027 24 140 7 881 7 229 12 783 11 830 3 788 3 303 26 2 267 842 1 340 53 3 142 642 1 415 Equity revaluation gains/(losses) >100 650 (1 038) 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 comprises mainly security dealings, rental income, fair-value movements on non-trading investments and forex gains and losses. 120 Nedbank Group Annual Results 2021 Favourable Unfavourable • Commission and fee growth recovering off the low 2020 base, • Solid trading performance, with growth impacted by a high driven by increased levels of client transactional activity. 2020 base. • Insurance benefited from the implementation of an enhanced • Unwinding of 2020 gains from the group's fair-value hedge asset and liability matching strategy. accounting solution (no volatility into H2 2021). • Unrealised equity revaluation losses in 2020 not repeated. Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre Net commission and fees income 17 754 17 137 2 710 2 907 Administration fees Card fees 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 Trading income Commodities Debt securities Equities Foreign exchange Change 24 >(100) 62 >(100) % 4 6 15 1 (8) (14) 9 1 3 1 (15) (51) (28) 31 (5) 10 95 24 18 4 1 403 3 646 1 027 648 267 442 3 958 2 041 4 322 2 005 (833) (128) (705) 26 2 267 842 1 340 727 (77) 263 713 1 327 3 178 1 017 707 311 406 3 910 1 989 4 292 1 622 352 (338) 690 53 3 142 642 1 415 659 (1 697) 212 603 50 21 193 192 195 1 250 753 56 (83) (94) 11 26 2 267 842 1 160 666 786 (120) 87 206 57 17 202 200 229 1 420 724 58 (357) (373) 16 53 3 142 642 1 257 (861) 818 (1 679) 154 292 4 475 5 252 4 295 5 094 Equity revaluation gains/(losses) >100 650 (1 038) Realised gains, dividends, interest and other income Unrealised gains/(losses)1 Investment income Sundry income/(expenses)2 Rm 2021 2020 2021 2020 2021 2020 11 965 505 3 511 802 242 41 243 2 623 98 3 900 487 25 25 109 109 43 43 16 138 11 268 525 3 065 785 216 51 245 2 386 98 3 897 329 29 29 74 74 (19) (19) 12 137 2021 2 210 766 1 110 194 (178) 1 264 53 1 474 – – – 2020 2 099 664 1 120 156 (110) 1 221 47 1 250 – – – 161 (57) 4 (50) Total non-interest revenue and income 25 027 24 140 7 881 7 229 12 783 11 830 3 788 3 303 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 comprises mainly security dealings, rental income, fair-value movements on non-trading investments and forex gains and losses. 2021 2020 2021 2020 953 68 111 31 129 31 5 250 15 313 65 (14) (14) 71 71 – 356 1 431 839 67 95 29 96 31 5 201 25 290 70 8 8 84 84 (15) (15) 13 455 1 454 (84) 14 3 (25) 13 (89) (21) (761) (20) (741) – (59) (59) (1) 70 (856) 24 14 1 75 13 (79) (27) 672 27 645 – (143) (144) 1 29 (231) 324 121 Income statementanalysisSupplementaryinformationStatement of financialposition analysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 4 Expenses Total operating expenses (Rm) Cost-to-income ratio (%) Cost-to-income ratio (%) 2 1 8 9 2 2 3 6 1 3 9 7 1 2 3 2 7 7 1 3 9 3 6 3 3 , 6 8 5 , 2 7 5 , 5 6 5 , 1 8 5 , 7 7 5 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Excluding hedge-accounted portfolios, the group’s cost-to-income ratio would be 57,0% (2020: 58,8%). 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 insurances Occupation and accommodation1,2 Marketing and public relations Communication and travel Other operating expenses3 Activity-justified transfer pricing Total operating expenses Change % 7 2 75 67 >100 <(100) 9 (6) (6) 19 (12) 9 (5) 24 3 6 Analysis of total IT-related function spend included in total expenses Change % 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)4 Total IT-related functional spend 11 10 7 9 Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre 2021 2020 2021 2020 18 018 16 829 3 172 2 721 2021 7 963 2020 7 486 2021 1 719 2020 1 608 2021 1 113 2020 1 084 2021 2020 4 051 3 930 15 412 3 049 2 427 622 15 171 1 741 1 455 286 (443) (83) 6 329 5 830 481 501 2 625 2 267 414 365 425 379 2 384 2 318 574 212 58 260 108 2 146 7 011 664 233 43 287 58 1 925 6 432 2 563 1 844 698 328 540 4 881 21 442 2 494 1 933 562 317 462 4 640 20 161 230 153 48 23 37 656 207 156 54 27 45 599 291 192 56 83 61 314 260 179 42 64 18 299 451 (216) 472 24 202 469 (197) 376 22 338 (7 997) (7 463) 3 280 3 061 2 535 2 325 (629) (207) 718 760 83 1 705 198 3 625 4 109 2 185 1 332 718 948 – 88 1 436 224 3 322 4 094 2 304 1 077 717 921 – 33 639 31 772 2021 2020 2 326 2 094 2 506 2 284 3 881 8 713 3 613 7 991 1 2 3 4 Includes the depreciation of right-of-use assets of R863m (December 2020: R915m). Includes a building depreciation charge of R385m (December 2020: R422m). Includes a furniture depreciation charge of R332m (December 2020: R352m), consumables and sundry expenses. Includes consulting and professional fees (that are included in fees and insurance), communication and travel, and other IT-related spend (included in computer processing). 122 Nedbank Group Annual Results 2021 Total income growth rate less expenses growth rate (JAWS ratio) (%) Total income growth rate less expenses growth rate (JAWS ratio) (%) Total employees (Permanent staff) Total employees (Permanent staff) , 7 2 3 1 , ) 0 3 , ( ) , 7 2 ( , 8 0 1 6 8 6 2 1 3 5 1 3 7 8 8 0 3 3 1 2 9 2 1 7 2 8 2 1 6 8 6 2 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Excluding hedge-accounted portfolios, the group’s JAWS ratio would be 3,4% (2020: -3,8%). Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre Change 2021 2020 2021 2020 18 018 16 829 3 172 2 721 2021 7 963 2020 7 486 2021 1 719 2020 1 608 2021 1 113 2020 1 084 2021 2020 4 051 3 930 6 329 5 830 481 501 2 625 2 267 414 365 425 379 2 384 2 318 574 212 58 260 108 2 146 7 011 664 233 43 287 58 1 925 6 432 2 563 1 844 698 328 540 4 881 21 442 2 494 1 933 562 317 462 4 640 20 161 230 153 48 23 37 656 207 156 54 27 45 599 291 192 56 83 61 314 260 179 42 64 18 299 451 (216) 472 24 202 469 (197) 376 22 338 (7 997) (7 463) 3 280 3 061 2 535 2 325 (629) (207) Favourable Unfavourable • As client digital adoption increases, employee numbers decreased by 1 021, largely through natural attrition. • Increased incentive costs as a result of the group's improved financial performance. • Good management of discretionary spend during the • Increased computer-processing costs, driven by an increase crisis contributed to savings being recorded across travel, communication, occupation and accommodation. • Optimisation initiatives delivered cost savings, including cumulative run-rate savings from TOM 2.0 of R967m. in the amortisation charge of 19%. • Increased levels of marketing spend off a low base. Includes the depreciation of right-of-use assets of R863m (December 2020: R915m). Includes a building depreciation charge of R385m (December 2020: R422m). 1 2 3 4 computer processing). Includes a furniture depreciation charge of R332m (December 2020: R352m), consumables and sundry expenses. Includes consulting and professional fees (that are included in fees and insurance), communication and travel, and other IT-related spend (included in 123 Depreciation of computer equipment 718 760 Rm Staff costs Salaries and wages Total incentives Short-term incentives Long-term incentives Other staff costs Computer processing Depreciation of right-of-use assets: computer equipment Amortisation of intangible assets Operating lease charges for computer processing Other computer processing expenses Fees and insurances Occupation and accommodation1,2 Marketing and public relations Communication and travel Other operating expenses3 Activity-justified transfer pricing >100 <(100) (443) (83) 15 412 3 049 2 427 622 83 1 705 198 3 625 4 109 2 185 1 332 718 948 – 15 171 1 741 1 455 286 88 1 436 224 3 322 4 094 2 304 1 077 717 921 – Total operating expenses 33 639 31 772 Analysis of total IT-related function spend Change included in total expenses 2021 2020 IT staff-related costs within Group Technology 2 326 2 094 Depreciation and amortisation of computer equipment, software and intangibles Other IT costs (including licensing, development, maintenance and processing charges)4 Total IT-related functional spend 2 506 2 284 3 881 8 713 3 613 7 991 % 7 2 75 67 9 (6) (6) 19 (12) 9 (5) 24 3 6 % 11 10 7 9 Income statementanalysisSupplementaryinformationStatement of financialposition analysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 5 Headline earnings reconciliation 2021 2020 Rm Profit attributable to ordinary shareholders Non-trading and capital items IAS 16 – loss on disposal of property and equipment IAS 36 – impairment of associates: ETI IAS 36 – impairment of goodwill IAS 36 – impairment of intangible assets IAS 40 – loss on revaluation of investment properties IFRS 5 – impairment of non-current assets held for sale IFRS 10 – profit on sale of subsidiaries/associates IFRS 16 – impairment of right-of-use assets Share of losses/(gains) of associate companies IAS 36 share of associate impairment of goodwill Change % >100 (70) Gross 499 41 306 153 (11) 10 13 Net of taxation 11 238 438 26 306 110 (11) 7 Gross 1 562 89 750 345 207 2 17 Net of taxation 3 467 1 445 72 750 345 149 2 17 152 110 13 528 528 5 440 Headline earnings >100 11 689 6 Taxation charge Direct taxation Taxation rate reconciliation (excluding non-trading and capital items) (%) Standard rate of South African normal taxation Reduction of taxation rate: Dividend income Capital items Foreign income and section 9D attribution Additional tier 1 capital instruments Revenue losses not recognised Exempt income and special allowances NAR non-taxable amounts Share of gains of associate companies Non-deductible expenses Prior-year adjustments Total taxation on income as percentage of profit before taxation Effective tax rate, excluding associate headline earnings 2021 2020 4 104 1 994 28,0 28,0 (1,3) (0,1) (0,5) (1,2) 0,1 (0,4) (0,5) (1,3) 1,0 0,4 24,2 25,4 (2,4) 0,4 (1,1) (2,5) 1,2 (0,2) (0,5) (1,5) 3,0 (0,7) 23,7 26,8 During the year, the group reviewed the presentation of its taxation rate reconciliation. As a result of this review, certain reconciling line items have been disaggregated in order to provide our users with additional information. 'Non-taxable income' has been disaggregated into 'Dividend income' (2020: -2,4%) and 'NAR non-taxable amounts' (2020: -0,5%) and 'Exempt income and special allowances' (2020: -0,2%). 'Non-deductible expenses' (2020: 2.3%) has been aggregated with 'Net monetary loss' (2020: 0,7%). To provide comparability, the prior-year balances have been restated accordingly. 124 Nedbank Group Annual Results 2021 7 Preference shares Profit attributable to preference shareholders 2020 Number of shares Cents per share Amount Rm Nedbank – final (dividend no 34) declared for 2019 – paid April 2020 358 277 491 42,11186 Nedbank – interim (dividend no 35) declared for 2020 – paid September 2020 358 277 491 35,94033 Total of dividends declared Less: Dividends declared in respect of shares held by group entities Dividends declared to holders of preference shares Nedbank (MFC) – participating preference shares1 2021 Nedbank – final (dividend no 36) declared for 2020 – paid April 2021 358 277 491 29,45696 Nedbank – interim (dividend no 37) declared for 2021 – paid September 2021 358 277 491 28,92693 Total of dividends declared Less: Dividends declared in respect of shares held by group entities Dividends declared to holders of preference shares Nedbank (MFC) – participating preference shares1 1 Share in economic profit/(loss) calculated semi-annually. 151 129 280 (29) 251 (58) 193 106 103 209 (21) 188 125 313 125 Income statementanalysisSupplementaryinformationStatement of financialposition analysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 126 NotesNedbank Group Annual Results 2021Statement of financial position analysis 128 Loans and advances 146 Investment securities 147 Investments in associate companies 148 Intangible assets 150 Amounts owed to depositors 152 Liquidity risk and funding 155 Equity analysis 156 Capital management 127 Nedbank Group Annual Results 20218 Loans and advances 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 Listed corporate bonds Fair-value hedge-accounted portfolios Trade, other bills and bankers' acceptances Loans and advances before impairments Impairment of advances Total banking loans and advances Comprises: – Loans and advances to clients – Loans and advances to banks Change % 6 (1) 26 (3) (2) 8 (4) (7) 4 5 (1) 40 6 (82) (75) 1 (3) 1 3 (27) Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre1 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 178 840 189 576 187 16 297 23 042 29 175 168 900 190 583 149 16 721 23 593 26 916 19 152 413 33 155 016 3 733 4 008 168 584 175 489 146 040 9 479 5 793 10 175 5 580 142 559 135 269 12 204 7 188 23 279 750 1 12 274 5 130 21 910 4 163 4 8 341 3 799 2 880 11 977 23 279 6 153 534 8 681 3 146 2 877 11 973 21 910 102 806 954 796 856 352 487 (25 650) (24 804) (4 296) 361 280 (3 539) 400 301 375 385 (19 316) (19 113) 30 729 (456) 31 567 (434) 22 325 (1 082) 24 186 (953) 781 304 772 052 348 191 357 741 380 985 356 272 30 273 31 133 21 243 23 233 751 656 29 648 731 214 40 838 321 379 26 812 323 233 34 508 380 985 356 269 3 29 185 1 088 28 027 3 106 19 495 1 748 20 012 3 221 612 3 673 17 257 8 424 13 17 135 9 014 13 151 188 154 272 26 782 68 16 154 16 048 27 277 13 278 878 330 16 7 185 144 512 24 879 50 16 584 16 089 24 954 11 562 909 206 133 5 084 138 013 130 423 32 211 46 168 4 641 5 003 261 244 2021 7 292 1 855 106 143 3 110 1 898 4 364 260 1 664 1 629 3 1 2020 7 220 1 550 86 137 3 308 1 962 5 146 585 2 228 1 914 46 4 102 124 5 9 744 4 061 1 112 (500) 612 4 438 (765) 3 673 Total loans and advances after impairments 1 781 304 772 052 348 191 357 741 380 985 356 272 30 273 31 133 21 243 23 233 612 3 673 Trading loans and advances (29) 50 431 71 251 50 431 71 251 1 Centre includes the group’s centrally managed macro fair-value hedge accounting adjustment and a central impairment provision. Market share according to BA900 Home loans (2018–2021) (%) Commercial mortgage loans (2018–2021) (%) , 2 4 1 , 5 9 1 , 2 5 3 , 5 3 2 6 7 , , 2 7 3 0 7 , , 6 6 1 , 3 6 1 , 9 2 2 Nedbank FirstRand Standard Bank Absa Other Nedbank FirstRand Standard Bank Absa Other 128 Nedbank Group Annual Results 2021 8 Loans and advances 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 Listed corporate bonds Fair-value hedge-accounted portfolios Trade, other bills and bankers' acceptances Loans and advances before impairments Impairment of advances Comprises: – Loans and advances to clients – Loans and advances to banks Change % 6 (1) 26 (3) (2) 8 (4) (7) 4 5 (1) 40 6 (82) (75) (3) 1 1 (27) 3 1 Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre1 2021 2020 2021 2020 2021 2020 2021 2020 168 584 175 489 146 040 153 534 178 840 189 576 187 16 297 23 042 29 175 9 479 5 793 12 204 7 188 23 279 750 1 168 900 190 583 149 16 721 23 593 26 916 10 175 5 580 12 274 5 130 21 910 4 163 4 142 559 135 269 19 33 152 413 155 016 3 733 4 008 8 341 3 799 2 880 11 977 23 279 6 8 681 3 146 2 877 11 973 21 910 102 154 272 26 782 68 16 154 16 048 27 277 13 278 878 330 144 512 24 879 50 16 584 16 089 24 954 11 562 909 206 17 257 8 424 13 17 135 9 014 13 151 188 4 641 5 003 138 013 130 423 16 7 185 133 5 084 32 211 46 168 2021 7 292 1 855 106 143 3 110 1 898 4 364 260 1 664 1 629 3 1 2020 7 220 1 550 86 137 3 308 1 962 5 146 585 2 228 1 914 46 4 Total banking loans and advances 781 304 772 052 348 191 357 741 380 985 356 272 30 273 31 133 21 243 23 233 806 954 796 856 352 487 (25 650) (24 804) (4 296) 361 280 (3 539) 400 301 375 385 (19 316) (19 113) 30 729 (456) 31 567 (434) 22 325 (1 082) 24 186 (953) 2021 2020 102 124 261 244 5 9 744 4 061 1 112 (500) 612 4 438 (765) 3 673 Total loans and advances after impairments 781 304 772 052 348 191 357 741 380 985 356 272 30 273 31 133 21 243 23 233 612 3 673 751 656 29 648 731 214 40 838 321 379 26 812 323 233 34 508 380 985 356 269 3 29 185 1 088 28 027 3 106 19 495 1 748 20 012 3 221 612 3 673 Trading loans and advances (29) 50 431 71 251 50 431 71 251 1 Centre includes the group’s centrally managed macro fair-value hedge accounting adjustment and a central impairment provision. Credit cards (2018–2021) (%) Personal loans (2018–2021) (%) , 0 2 1 , 4 5 2 , 5 5 2 , 4 5 2 , 8 1 1 ,  2  2  1 , ,  3  1  2 , ,  4  7  1 , ,  2  0  1 , , ,  9  8  3 Nedbank FirstRand Standard Bank Absa Other Nedbank FirstRand Standard Bank Absa Other Core corporate loans (2018–2021) (%) Instalment sales and leases (2018–2021) (%) , 7 9 1 , 7 0 2 , 7 0 2 , 9 2 2 , 0 6 1  1 ,  , 9  2  1 ,  , 4  2 , ,  0  0  2 , ,  6  2  2 Nedbank FirstRand Standard Bank Absa Other Nedbank FirstRand Standard Bank Absa Other , 2  4  , 129 Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Summary of loans and advances and coverage ratios Stage 1 and stage 2 coverage (%) Stage 3 advances and coverage ratio (Rm) (%) 6,61 6,44 5,30 0,48 0,65 0,69 37,90 37,97 31,55 3 4 2 5 4 4 9 5 7 2 5 3 3 9 3 2019 2020 2021 2019 2020 2021 Stage 1 coverage Stage 2 coverage Stage 3 coverage Stage 3 loans and advances GLAA, ECL and coverage ratios, by cluster, by stage Stage 1 Stage 2 Stage 3 TOTAL GLAA ECL Coverage GLAA ECL Coverage GLAA ECL Coverage GLAA ECL Coverage trading book trading book % Rm Rm % Rm Rm % Rm Rm 2021 Rm Corporate and Investment Banking (CIB) 260 775 CIB, excluding Property Finance Property Finance 116 082 144 693 Rm 529 382 147 0,20 49 193 1 543 0,33 0,10 31 747 17 446 631 912 Retail and Business Banking (RBB) 327 860 3 552 1,08 45 735 4 165 Business Banking Retail Wealth Nedbank Africa Regions Centre Gross loans and advances/ECL held at amortised cost 68 191 259 669 25 453 19 118 302 234 3 318 44 230 0,34 1,28 0,17 1,20 9 559 36 176 2 538 1 248 62 328 3 837 39 112 500 3,14 1,99 5,23 9,11 3,43 10,61 1,54 8,97 633 508 4 355 0,69 98 776 6 359 6,44 39 335 14 936 37,97 771 619 25 650 3,32 806 954 5,06 GLAA/ECL for assets held at FVOCI Trading GLAA held at FVTPL Banking book GLAA held at FVTPL GLAA for fair-value hedge-accounted portfolios 21 279 50 431 9 131 750 60 2 694 48 1 481 427 Off-balance-sheet ECL Total GLAA/ ECL 130 158 136 102 715 099 4 573 101 470 6 543 40 816 15 465 857 385 26 581 857 385 GLAA excluding of GLAA excluding Stage 3 GLAA as a % % 3,08 4,33 1,71 6,67 5,24 7,04 4,17 8,77 % 1,35 1,56 1,14 4,83 2,05 5,54 1,56 4,85 Rm 352 487 184 965 167 522 400 301 82 046 318 255 30 729 22 325 1 112 50 431 26 706 11 599 43,43 400 301 19 316 9 384 6 520 2 864 4 296 22 410 1 282 1 959 4 2 224 1 396 828 1 121 10 478 373 740 23,70 319 352 21,41 28,91 154 349 165 003 26,09 46,76 29,10 37,77 82 046 318 255 29 273 22 325 368 25 454 50 431 9 131 750 4 296 2 409 1 887 1 683 17 633 456 1 082 500 535 396 Nedbank Group Annual Results 2021 Nedbank Group coverage (%) Stage 3 advances as a percentage of gross banking loans and advances (Rm) 5,82 3,46 1,15 2 4 4 9 0 5 8 7 2 2 8,35 5,89 3,51 4 3 5 4 9 2 6 5 4 4 6,67 5,06 3,08 7 6 1 3 8 3 0 9 4 3 2019 2020 2021 RBB Total Nedbank Group CIB Stage 3 loans and advances 6 2 2 , 2019 5 2 3 , 2020 2 3 3 , 2021 GLAA, ECL and coverage ratios, by cluster, by stage Stage 1 Stage 2 Stage 3 TOTAL GLAA ECL Coverage GLAA ECL Coverage GLAA ECL Coverage GLAA ECL Coverage GLAA excluding trading book Stage 3 GLAA as a % of GLAA excluding trading book Rm % Rm Rm % Rm Rm % Rm Rm Corporate and Investment Banking (CIB) 260 775 0,20 49 193 1 543 9 384 6 520 2 864 2 224 1 396 828 23,70 319 352 21,41 28,91 154 349 165 003 4 296 2 409 1 887 Retail and Business Banking (RBB) 327 860 3 552 1,08 45 735 4 165 26 706 11 599 43,43 400 301 19 316 4 296 22 410 1 282 1 959 4 1 121 10 478 373 740 26,09 46,76 29,10 37,77 82 046 318 255 29 273 22 325 368 1 683 17 633 456 1 082 500 % 1,35 1,56 1,14 4,83 2,05 5,54 1,56 4,85 Rm 352 487 184 965 167 522 400 301 82 046 318 255 30 729 22 325 1 112 % 3,08 4,33 1,71 6,67 5,24 7,04 4,17 8,77 633 508 4 355 0,69 98 776 6 359 6,44 39 335 14 936 37,97 771 619 25 650 3,32 806 954 5,06 60 2 694 48 1 481 427 158 136 102 25 454 50 431 9 131 750 535 396 50 431 715 099 4 573 101 470 6 543 40 816 15 465 857 385 26 581 857 385 131 Rm 529 382 147 234 3 318 44 230 0,33 0,10 31 747 17 446 631 912 0,34 1,28 0,17 1,20 9 559 36 176 2 538 1 248 62 328 3 837 39 112 500 3,14 1,99 5,23 9,11 3,43 10,61 1,54 8,97 2021 Retail Wealth Centre cost CIB, excluding Property Finance Property Finance Business Banking Nedbank Africa Regions Gross loans and advances/ECL held at amortised GLAA/ECL for assets held at FVOCI Trading GLAA held at FVTPL Banking book GLAA held at FVTPL GLAA for fair-value hedge-accounted portfolios Off-balance-sheet ECL Total GLAA/ ECL 116 082 144 693 68 191 259 669 25 453 19 118 302 21 279 50 431 9 131 750 Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 2020 Corporate and Investment Banking (CIB) CIB, excluding Property Finance Property Finance Rm 272 163 120 921 151 242 Rm 812 504 308 0,30 48 642 1 093 0,42 0,20 32 918 15 724 485 608 Retail and Business Banking (RBB) 297 063 2 954 0,99 46 982 4 454 Business Banking Retail Wealth Nedbank Africa Regions Centre Gross loans and advances/ECL held at amortised cost 57 659 239 404 28 511 20 489 383 310 2 644 46 217 0,54 1,10 0,16 1,06 13 988 32 994 735 2 072 515 3 939 56 152 748 2,25 1,47 3,87 9,48 3,68 11,94 7,62 7,34 Stage 1 Stage 2 Stage 3 TOTAL GLAA ECL Coverage GLAA ECL Coverage GLAA ECL Coverage GLAA ECL Coverage % Rm Rm % Rm Rm % Rm Rm Stage 3 GLAA as a % of total GLAA excluding trading book GLAA, excluding trading book % 1,07 1,23 0,91 5,09 2,61 5,73 1,42 3,94 Rm 361 280 190 891 170 389 375 385 76 868 298 517 31 567 24 186 4 438 71 251 % 3,51 4,90 1,95 8,35 6,79 8,75 4,18 6,72 5,89 10 964 1 634 14,90 331 769 3 539 7 643 3 321 993 641 12,99 19,30 161 482 170 287 1 982 1 557 31 340 11 705 37,35 375 385 19 113 5 221 26 119 1 320 1 625 (6) 1 183 10 522 332 584 17 22,66 40,28 25,15 35,94 76 868 298 517 30 566 24 186 377 18 811 71 251 11 599 4 163 2 008 17 105 434 953 765 609 664 618 609 4 029 0,65 98 431 6 503 6,61 45 243 14 272 31,55 762 283 24 804 3,25 796 856 GLAA/ECL for assets held at FVOCI Trading GLAA held at FVTPL Banking book GLAA held at FVTPL GLAA for fair-value hedge-accounted portfolios 12 501 71 251 11 599 4 163 54 4 599 71 1 711 484 Off-balance-sheet ECL Total GLAA/ECL 154 198 312 718 123 4 237 103 030 6 772 46 954 15 068 868 107 26 077 868 107 132 Nedbank Group Annual Results 2021 Stage 1 Stage 2 Stage 3 TOTAL GLAA ECL Coverage GLAA ECL Coverage GLAA ECL Coverage GLAA ECL Coverage Stage 3 GLAA as a % of total GLAA excluding trading book GLAA, excluding trading book Rm 812 504 308 310 2 644 46 217 0,42 0,20 0,54 1,10 0,16 1,06 32 918 15 724 485 608 13 988 32 994 735 2 072 515 3 939 56 152 748 2,25 1,47 3,87 9,48 3,68 11,94 7,62 7,34 2020 Retail Wealth Centre cost CIB, excluding Property Finance Property Finance Business Banking Nedbank Africa Regions Gross loans and advances/ECL held at amortised GLAA/ECL for assets held at FVOCI Trading GLAA held at FVTPL Banking book GLAA held at FVTPL GLAA for fair-value hedge-accounted portfolios Off-balance-sheet ECL Total GLAA/ECL Rm 272 163 120 921 151 242 57 659 239 404 28 511 20 489 383 12 501 71 251 11 599 4 163 Corporate and Investment Banking (CIB) 0,30 48 642 1 093 10 964 1 634 14,90 331 769 3 539 % Rm Rm % Rm Rm % Rm Rm 7 643 3 321 993 641 12,99 19,30 161 482 170 287 1 982 1 557 Retail and Business Banking (RBB) 297 063 2 954 0,99 46 982 4 454 31 340 11 705 37,35 375 385 19 113 5 221 26 119 1 320 1 625 (6) 1 183 10 522 332 584 17 22,66 40,28 25,15 35,94 76 868 298 517 30 566 24 186 377 2 008 17 105 434 953 765 % 1,07 1,23 0,91 5,09 2,61 5,73 1,42 3,94 Rm 361 280 190 891 170 389 375 385 76 868 298 517 31 567 24 186 4 438 618 609 4 029 0,65 98 431 6 503 6,61 45 243 14 272 31,55 762 283 24 804 3,25 796 856 54 4 599 71 1 711 484 154 198 312 18 811 71 251 11 599 4 163 609 664 71 251 718 123 4 237 103 030 6 772 46 954 15 068 868 107 26 077 868 107 % 3,51 4,90 1,95 8,35 6,79 8,75 4,18 6,72 5,89 Favourable Unfavourable • RBB gross loans and advances (GLAA) continued growth momentum from 2020, benefiting from the 300 bps total cut in interest rates in 2020. • Total group ECL increased 2,3% yoy, slightly higher than the banking book growth of 1,3% and reflective of the higher contribution from Retail of 39,4% (2020: 37,5%). • An increase in lending volumes originated through the group’s • CIB GLAA declined, driven by subdued credit demand in the digital channels. current environment. • Continuing to benefit from our MFC business model that is more geared towards lower-value and second-hand vehicles as clients buy down in a difficult economic environment. • Turnaround in CIB GLAA in the second half of the year, up 10% annualised from June 2021. 133 Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Stage 1 Stage 2 Stage 3 TOTAL ECL Coverage GLAA ECL Coverage Stage 1 Stage 2 Stage 3 TOTAL ECL Coverage GLAA ECL Coverage Coverage Coverage 39 335 14 936 37,97 25 650 3,32 GLAA Rm 9 887 4 825 7 275 3 964 11 161 2 187 36 GLAA Rm 11 656 5 644 10 468 4 277 10 847 2 293 58 45 243 ECL Rm 2 340 1 119 3 106 2 460 5 260 651 ECL Rm 2 318 999 3 876 2 476 4 331 272 Coverage % 23,67 23,19 42,69 62,06 47,13 29,77 % 19,89 17,70 37,03 57,89 39,93 11,86 14 272 31,55 GLAA Rm 177 374 186 821 142 558 31 214 136 941 88 369 8 342 771 619 GLAA Rm 167 893 185 298 135 269 32 889 152 698 80 636 7 599 762 282 ECL Rm 3 157 2 315 6 339 4 159 8 031 1 705 (56) ECL Rm 3 469 2 069 6 660 4 404 6 780 1 483 (61) 24 804 Coverage % 1,78 1,24 4,45 13,32 5,86 1,93 % 2,07 1,12 4,92 13,39 4,44 1,84 3,25 3,26 4,81 10,16 16,49 6,23 4,59 6,44 % 5,01 3,78 9,84 14,43 4,94 7,39 6,61 GLAA, ECL and coverage, by product 2021 Residential mortgages Commercial mortgages Instalment debtors Credit cards and overdrafts Term loans Other client loans Other including credit and zero balances GLAA Rm 151 227 161 636 117 158 21 890 103 688 69 617 8 292 Rm Rm % Rm 287 217 1 392 815 1 395 294 (45) % 0,19 0,13 1,19 3,72 1,35 0,42 16 260 20 360 18 125 5 360 22 092 16 565 14 530 979 1 841 884 1 376 760 (11) GLAA/ECL held at amortised cost 633 508 4 355 0,69 98 776 6 359 2020 Residential mortgages Commercial mortgages Instalment debtors Credit cards and overdrafts Term loans Other client loans Other including credit and zero balances GLAA Rm 140 249 161 287 108 290 21 031 115 254 64 978 7 519 Rm 350 376 1 159 834 1 136 223 (49) % 0,25 0,23 1,07 3,97 0,99 0,34 Rm 15 988 18 367 16 511 7 581 26 597 13 365 22 Rm 801 694 1 625 1 094 1 313 988 (12) GLAA/ECL held at amortised cost 618 608 4 029 0,65 98 431 6 503 134 Nedbank Group Annual Results 2021 GLAA, ECL and coverage, by product 2021 Residential mortgages Commercial mortgages Instalment debtors Credit cards and overdrafts Term loans Other client loans Other including credit and zero balances 2020 Residential mortgages Commercial mortgages Instalment debtors Credit cards and overdrafts Term loans Other client loans Other including credit and zero balances GLAA Rm 151 227 161 636 117 158 21 890 103 688 69 617 8 292 GLAA Rm 140 249 161 287 108 290 21 031 115 254 64 978 7 519 ECL Coverage GLAA ECL Coverage Rm Rm % Rm 287 217 1 392 815 1 395 294 (45) Rm 350 376 1 159 834 1 136 223 (49) % 0,19 0,13 1,19 3,72 1,35 0,42 % 0,25 0,23 1,07 3,97 0,99 0,34 16 260 20 360 18 125 5 360 22 092 16 565 14 Rm 15 988 18 367 16 511 7 581 26 597 13 365 22 530 979 1 841 884 1 376 760 (11) Rm 801 694 1 625 1 094 1 313 988 (12) 3,26 4,81 10,16 16,49 6,23 4,59 6,44 % 5,01 3,78 9,84 14,43 4,94 7,39 6,61 ECL Coverage GLAA ECL Coverage GLAA/ECL held at amortised cost 618 608 4 029 0,65 98 431 6 503 Stage 1 Stage 2 Stage 3 TOTAL GLAA/ECL held at amortised cost 633 508 4 355 0,69 98 776 6 359 39 335 14 936 37,97 Stage 1 Stage 2 Stage 3 GLAA Rm 9 887 4 825 7 275 3 964 11 161 2 187 36 ECL Rm 2 340 1 119 3 106 2 460 5 260 651 Coverage % 23,67 23,19 42,69 62,06 47,13 29,77 GLAA Rm 11 656 5 644 10 468 4 277 10 847 2 293 58 45 243 ECL Rm 2 318 999 3 876 2 476 4 331 272 Coverage % 19,89 17,70 37,03 57,89 39,93 11,86 14 272 31,55 GLAA Rm 177 374 186 821 142 558 31 214 136 941 88 369 8 342 771 619 GLAA Rm 167 893 185 298 135 269 32 889 152 698 80 636 7 599 762 282 ECL Rm 3 157 2 315 6 339 4 159 8 031 1 705 (56) Coverage % 1,78 1,24 4,45 13,32 5,86 1,93 25 650 3,32 TOTAL ECL Rm 3 469 2 069 6 660 4 404 6 780 1 483 (61) 24 804 Coverage % 2,07 1,12 4,92 13,39 4,44 1,84 3,25 135 Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Economic scenarios Scenario Probability weighting (%) Total ECL allowance Difference to weighted scenarios Percentage difference to weighted scenarios (%) 2021 Economic measures GDP Base case 50 26 491 (90) (0,33) Prime HPI GDP Mild stress 21 26 857 276 1,04 Prime HPI GDP Positive outcome 21 26 263 (319) (1,20) Prime High stress 8 27 259 678 2,55 Prime HPI GDP Weighted scenarios 100 26 581 1 Forecast at 31 December 2021. Scenario Probability weighting (%) Total ECL allowance Difference to weighted scenarios HPI 2020 Percentages difference to weighted scenarios (%) Economic measures GDP Base case 50 25 949 (128) (0,5) Prime Mild stress 21 26 466 389 1,5 Prime HPI GDP Positive outcome 21 25 613 (464) (1,8) Prime HPI GDP High stress 8 27 034 957 3,7 Prime HPI Weighted scenarios 100 26 077 HPI GDP 136 Economic forecast1 (%) 2022 2023 2024 1,75 8,25 4,04 (0,09) 8,50 3,54 3,08 7,50 4,90 (1,41) 8,75 3,04 1,74 8,75 3,96 0,66 9,75 3,39 2,86 7,50 4,89 (0,23) 10,00 2,82 0,97 9,25 4,15 0,61 10,75 3,50 1,92 7,75 5,00 0,30 11,00 2,85 Economic forecast (%) 2021 2022 2023 3,04 7,00 2,10 2,84 7,25 1,81 3,85 7,00 3,60 2,14 7,42 1,51 2,22 7,38 2,30 1,65 8,00 2,12 2,44 7,00 4,10 1,68 8,46 1,94 1,52 7,50 3,50 1,15 8,00 3,08 1,57 7,00 4,80 0,92 8,50 2,66 Nedbank Group Annual Results 2021 Climate-related disclosures Thermal coal1 Limit2 Drawn exposure Upstream oil3 Limit2 Drawn exposure Upstream gas3 Limit2 Drawn exposure Non-renewable-power-generation exposure Limit2 Drawn exposure Renewable Energy Independent Power Producer Procurement Programme4 Limit2 Drawn exposure Embedded-energy generation projects5 Limit2 Drawn exposure African renewable-energy projects Limit2 Drawn exposure Total renewable energy Limit2 Drawn exposure Rm % of GLAA 2021 2020 Change 2021 2020 2 817 1 221 5 707 3 600 (2 890) (2 379) 13 559 9 110 15 900 10 900 (2 341) (1 790) 468 424 4 600 1 800 (4 132) (1 376) 10 741 6 557 11 480 10 240 (739) (3 683) 35 347 28 741 36 200 31 500 (853) (2 759) 513 417 614 438 365 246 657 550 148 171 (43) (112) 36 474 29 596 37 222 32 296 (748) (2 700) 0,3 0,1 1,6 1,1 0,1 0,0 1,3 0,8 4,1 3,4 0,1 0,0 0,1 0,1 4,3 3,5 0,7 0,4 1,8 1,3 0,5 0,2 1,3 1,2 4,2 3,6 0,0 0,0 0,1 0,1 4,3 3,7 1 Excludes derivative products and environmental guarantees. 2 Limits include all committed facilities approved to clients, in respective portfolios, aligned to the Nedbank Energy Policy. 3 Includes all limits and exposures, including all products and derivatives, aligned to the Nedbank Energy Policy. 4 Board-approved limit of R50bn, as well as a 15% (R7,5bn) buffer to be applied for a period of 6 months. 5 Board-approved limit of R2bn. 137 Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Gross advances and ECL movement Reconciliation of loss allowance relating to financial assets measured at amortised cost and FVOCI because of changes in the associated ECL is recognised in impairment charges. The reconciliation excludes loans measured at FVTPL and fair-value hedge-accounted portfolios because changes in fair values are recognised in NIR. Repayments net of readvances, capitalised interest, fees and ECL remeasurements1 (174 538) 31 581 (62 010) (13 375) 2 791 3 673 1 208 (3 694) (3 902) 113 – (178 211) 30 373 (58 316) (9 473) 2 678 Stage 1 Stage 2 Stage 3 Total GLAA ECL Amortised cost 611 089 229 678 4 183 2 932 606 906 226 746 625 216 4 513 620 703 98 762 6 495 92 267 39 299 15 038 24 261 763 277 26 046 737 231 8 292 8 292 14 14 36 36 8 342 8 342 633 508 4 513 628 995 98 776 6 495 92 281 39 335 15 038 24 297 771 619 26 046 745 573 21 279 50 431 9 131 750 60 21 219 50 431 9 131 750 2 694 48 2 646 1 481 427 1 054 535 715 099 4 573 710 526 101 470 6 543 94 927 40 816 15 465 25 351 857 385 26 581 830 804 GLAA ECL GLAA ECL cost GLAA ECL Amortised Amortised cost Amortised cost 98 409 6 701 91 708 45 185 14 584 30 601 754 683 25 468 729 215 (32 518) (26 595) 66 795 (7 880) 551 (1 379) (31 139) (713) (25 882) 4 221 (2 391) 56 62 574 (5 489) 495 (8 139) (9 963) (4 986) (4 785) 21 255 732 (8 139) 3 207 (495) (527) 6 293 115 229 678 2 932 226 746 (8 139) (8 139) (13 170) (217 019) 5 501 (222 520) (4 491) (4 258) 14 962 – – – 617 4 074 284 3 790 – – – – – 25 454 50 431 9 131 750 – – – – – – – – – – – 24 919 50 431 9 131 750 535 396 831 735 – – – – – Loans and advances (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Foreign exchange and other movements Net balances Total credit and zero balances Balance at 31 December 2021 GLAA for assets held at FVOCI Trading book GLAA held at FVTPL Banking book GLAA held at FVTPL GLAA for fair-value hedge-accounted portfolios Total GLAA/ ECL ECL on loans at FVOCI Off-balance-sheet ECL Loans and advances at 31 December 2021 138 Nedbank Group Annual Results 2021 Gross advances and ECL movement Reconciliation of loss allowance relating to financial assets measured at amortised cost and FVOCI because of changes in the associated ECL is recognised in impairment charges. The reconciliation excludes loans measured at FVTPL and fair-value hedge-accounted portfolios because changes in fair values are recognised in NIR. Repayments net of readvances, capitalised interest, fees and ECL remeasurements1 (174 538) Loans and advances (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Foreign exchange and other movements Net balances Total credit and zero balances Balance at 31 December 2021 GLAA for assets held at FVOCI Trading book GLAA held at FVTPL Banking book GLAA held at FVTPL GLAA for fair-value hedge-accounted portfolios Total GLAA/ ECL ECL on loans at FVOCI Off-balance-sheet ECL Loans and advances at 31 December 2021 Stage 1 Stage 2 Stage 3 Total GLAA ECL Amortised cost GLAA ECL Amortised cost GLAA ECL Amortised cost 98 409 6 701 91 708 45 185 14 584 30 601 754 683 25 468 729 215 – – (32 518) (26 595) 66 795 (7 880) 551 (1 379) (31 139) (713) (25 882) 4 221 (2 391) 56 62 574 (5 489) 495 (8 139) (9 963) (4 986) (4 785) 21 255 732 (8 139) 3 207 (495) (527) 6 293 115 – – 229 678 2 932 226 746 (8 139) (8 139) – (13 170) (217 019) 5 501 (222 520) (4 491) (4 258) 14 962 – – – – – – – – – 617 4 074 284 3 790 625 216 4 513 620 703 98 762 6 495 92 267 39 299 15 038 24 261 763 277 26 046 737 231 8 292 8 292 14 14 36 36 8 342 – 8 342 633 508 4 513 628 995 98 776 6 495 92 281 39 335 15 038 24 297 771 619 26 046 745 573 60 2 694 48 2 646 1 481 427 1 054 – – – – – – 25 454 50 431 9 131 750 535 – – – 24 919 50 431 9 131 750 715 099 4 573 710 526 101 470 6 543 94 927 40 816 15 465 25 351 857 385 26 581 830 804 GLAA ECL Amortised cost 611 089 229 678 4 183 2 932 606 906 226 746 3 673 1 208 (3 694) (3 902) 113 – (178 211) 30 373 (58 316) (9 473) 2 678 31 581 (62 010) (13 375) 2 791 21 279 50 431 9 131 750 21 219 50 431 9 131 750 535 396 831 735 139 Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 CIB, excluding Property Finance (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off Repayments net of readvances, capitalised interest, fees and ECL remeasurements Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Foreign exchange and other movements Net balances Total credit and zero balances Balance at 31 December 2021 GLAA for assets held at FVOCI Trading book GLAA held at FVTPL Banking book GLAA held at FVTPL GLAA for fair-value hedge-accounted portfolios Off-balance-sheet ECL Stage 1 Stage 2 Stage 3 Total GLAA 120 921 81 519 (61 962) 7 359 (32 829) (1 023) 2 097 ECL 573 445 (113) 635 (959) (120) 13 Amortised cost 120 348 81 074 – (61 849) 6 724 (31 870) (903) 2 084 ECL 627 Amortised cost 32 291 (517) (337) 970 (24) 13 (25 862) (6 954) 31 904 (585) 221 GLAA 7 643 – (534) (2 203) (68) (45) 1 632 95 ECL 1 272 – (534) 893 (298) (11) 144 20 230 (34) 1 488 75 Amortised cost GLAA ECL Amortised cost 6 371 161 482 2 472 159 010 81 519 (534) 445 (534) 263 81 074 (3 096) (90 544) (90 807) 2 426 46 2 380 116 082 474 115 608 31 747 732 31 015 6 520 1 486 5 034 154 349 2 692 151 657 116 082 474 115 608 732 31 015 6 520 1 486 5 034 154 349 2 692 151 657 – 21 279 50 431 5 156 6 21 279 50 431 5 156 6 92 (92) 2 694 1 481 1 481 101 (90) 90 (283) Loans and advances at 31 December 2021 192 954 382 192 572 34 441 33 810 8 001 1 396 6 605 235 396 2 409 232 987 Stage 1 Stage 2 Stage 3 Total Property Finance (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off GLAA 151 242 40 004 ECL 308 116 Amortised cost 150 934 39 888 – Repayments net of readvances, capitalised interest, fees and ECL remeasurements (44 468) (279) (44 189) Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Foreign exchange and other movements Balance at 31 December 2021 Banking book GLAA held at FVTPL 3 914 (5 607) (384) (8) 56 (51) (3) 3 858 (5 556) (381) (8) 144 693 147 144 546 17 446 912 16 534 2 864 828 2 036 165 003 1 887 163 116 2 519 2 519 2 519 2 519 Loans and advances at 31 December 2021 147 212 147 147 065 17 446 912 16 534 2 864 828 2 036 167 522 1 887 165 635 GLAA 32 918 (26 379) (7 291) 32 874 (609) 234 31 747 2 694 GLAA 15 724 269 (3 753) 5 615 (409) (101) 631 ECL 608 279 (22) 51 (4) – – – – – – – – – – – – – – 6 – 25 454 50 431 5 156 – – – – – – – – – – – – – – – 25 454 50 431 5 156 6 283 Amortised cost 39 888 – – – – (8) – – – – – – – – – – – – – Amortised cost GLAA cost GLAA ECL Amortised 15 116 3 321 2 680 170 287 1 557 168 730 ECL 641 (157) 371 (34) 7 (10) (3 731) 5 564 (405) (157) (924) (161) (8) 793 40 004 (157) 116 (157) 371 (1 295) (45 123) (45 494) (127) (8) 786 – – – (8) 140 Nedbank Group Annual Results 2021 Stage 1 Stage 2 Stage 3 Total – – – 2 426 46 2 380 230 (34) 1 488 75 – – 81 519 (534) (3 096) (90 544) 445 (534) 263 – – – 81 074 – (90 807) – – – Amortised cost GLAA ECL Amortised cost 6 371 161 482 2 472 159 010 GLAA 32 918 (26 379) (7 291) 32 874 (609) 234 ECL 627 (517) (337) 970 (24) 13 Amortised cost 32 291 – – (25 862) (6 954) 31 904 (585) 221 GLAA 7 643 – (534) (2 203) (68) (45) 1 632 95 ECL 1 272 – (534) 893 (298) (11) 144 20 Repayments net of readvances, capitalised interest, fees and ECL remeasurements CIB, excluding Property Finance (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Foreign exchange and other movements Net balances Total credit and zero balances Balance at 31 December 2021 GLAA for assets held at FVOCI Trading book GLAA held at FVTPL Banking book GLAA held at FVTPL GLAA for fair-value hedge-accounted portfolios Off-balance-sheet ECL Property Finance (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Foreign exchange and other movements Balance at 31 December 2021 Banking book GLAA held at FVTPL GLAA 120 921 81 519 (61 962) 7 359 (32 829) (1 023) 2 097 21 279 50 431 5 156 6 GLAA 151 242 40 004 3 914 (5 607) (384) (8) ECL 573 445 (113) 635 (959) (120) 13 Amortised cost 120 348 81 074 – (61 849) 6 724 (31 870) (903) 2 084 – 21 279 50 431 5 156 6 92 Amortised cost 150 934 39 888 – 3 858 (5 556) (381) (8) (92) ECL 308 116 56 (51) (3) 116 082 474 115 608 31 747 732 31 015 6 520 1 486 5 034 154 349 2 692 151 657 116 082 474 115 608 31 747 2 694 Loans and advances at 31 December 2021 192 954 382 192 572 34 441 – – – – – 732 31 015 6 520 1 486 5 034 154 349 2 692 151 657 2 694 1 481 – – – 101 1 481 – – – 90 25 454 50 431 5 156 6 – – – – – (283) 25 454 50 431 5 156 6 283 (90) 33 810 8 001 1 396 6 605 235 396 2 409 232 987 (101) 631 Repayments net of readvances, capitalised interest, fees and ECL remeasurements (44 468) (279) (44 189) Stage 1 Stage 2 Stage 3 Total GLAA 15 724 269 (3 753) 5 615 (409) ECL 608 279 (22) 51 (4) Amortised cost GLAA 15 116 3 321 – – (10) (3 731) 5 564 (405) – (157) (924) (161) (8) 793 ECL 641 (157) 371 (34) 7 Amortised cost GLAA ECL Amortised cost 2 680 170 287 1 557 168 730 – – 40 004 (157) (1 295) (45 123) 116 (157) 371 39 888 – (45 494) (127) (8) 786 – – – – (8) – – – – – – – (8) Loans and advances at 31 December 2021 147 212 147 147 065 17 446 912 16 534 2 864 828 2 036 167 522 1 887 165 635 144 693 147 144 546 17 446 912 16 534 2 864 828 2 036 165 003 1 887 163 116 2 519 2 519 – – 2 519 – 2 519 141 Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Stage 1 Stage 2 Stage 3 Total Business Banking (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off Repayments net of readvances, capitalised interest, fees and ECL remeasurements Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 GLAA 57 659 26 450 (17 560) 7 853 (5 037) (1 174) ECL 310 185 (352) 258 (55) (108) Amortised cost 57 349 26 265 – (17 208) 7 595 (4 982) (1 066) Amortised cost GLAA ECL cost GLAA ECL Amortised 13 473 5 221 1 183 4 038 – – (1 965) (7 190) 5 706 (812) (232) (1 377) (459) (877) 2 020 (232) 247 (54) (153) 142 (405) (724) 1 878 76 868 26 450 (232) – – 2 008 185 (232) (243) – – – (1 624) (21 040) (20 797) Amortised cost 74 860 26 265 Balance at 31 December 2021 68 191 238 67 953 9 212 4 296 1 133 3 163 82 046 1 718 80 328 Off-balance-sheet impairment allowance (4) 4 19 (12) 12 (35) 35 Loans and advances at 31 December 2021 68 191 234 67 957 9 559 9 231 4 296 1 121 3 175 82 046 1 683 80 363 Stage 1 Stage 2 Stage 3 Total Retail — Mortgage loans (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off Repayments net of readvances, capitalised interest, fees and ECL remeasurements Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Net balances GLAA 113 027 8 829 3 385 5 266 (3 885) (1 740) ECL 257 35 330 12 (187) (206) Amortised cost 112 770 8 794 – 3 055 5 254 (3 698) (1 534) Amortised cost GLAA ECL cost GLAA ECL Amortised Amortised cost 13 540 9 236 1 785 7 451 136 527 2 766 133 761 – – (42) (3 906) 5 671 (1 348) (295) (1 348) (1 352) (2 062) 3 325 (295) (163) (4) (89) 443 8 829 (295) 1 728 – – (1 185) (1 348) (1 973) 2 882 35 (295) (100) – – – 8 794 1 828 – – – – 124 882 241 124 641 14 403 488 13 915 7 504 1 677 5 827 146 789 2 406 144 383 Total credit and zero balances/Off-balance-sheet impairment allowance 201 (1) 202 4 (1) 5 11 11 216 (2) 218 Loans and advances at 31 December 2021 125 083 240 124 843 14 407 487 13 920 7 515 1 677 5 838 147 005 2 404 144 601 GLAA 13 988 (2 103) (7 394) 5 914 (846) 9 559 GLAA 14 264 (309) (3 914) 5 947 (1 585) ECL 515 (138) (204) 208 (34) 347 (19) 328 ECL 724 (267) (8) 276 (237) Retail — Instalment debtors (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off Repayments net of readvances, capitalised interest, fees and ECL remeasurements Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Net balances Stage 1 Stage 2 Stage 3 Total GLAA ECL Amortised cost GLAA ECL GLAA ECL cost GLAA ECL Amortised Amortised cost Amortised cost 94 781 46 962 (31 132) 5 072 (9 317) (4 719) 1 097 629 1 603 139 (1 282) (840) 93 684 46 333 – (32 735) 4 933 (8 035) (3 879) 101 647 1 346 100 301 16 839 1 808 15 031 6 764 3 875 125 250 6 043 119 207 Total credit and zero balances – Loans and advances at 31 December 2021 101 647 1 346 100 301 16 839 1 808 15 031 6 764 2 889 3 875 125 250 6 043 119 207 142 13 552 1 554 11 998 9 770 3 599 6 171 118 103 (2 282) (2 994) 10 656 (2 093) (616) (71) 1 458 (517) (1 666) (2 923) 9 198 (1 576) – – – (2 425) (3 976) (2 078) (1 339) 6 812 (2 425) 602 (68) (176) 1 357 2 889 (2 010) (1 163) 5 455 – – – 6 250 629 111 853 46 333 46 962 (2 425) (2 425) (4 578) (37 390) 1 589 (38 979) – – – – – – – – – – – – – – – – – – – – – – – – Nedbank Group Annual Results 2021 Stage 1 Stage 2 Stage 3 Total GLAA 13 988 (2 103) (7 394) 5 914 (846) 9 559 9 559 GLAA 14 264 (309) (3 914) 5 947 (1 585) ECL 515 (138) (204) 208 (34) 347 (19) 328 Amortised cost GLAA ECL Amortised cost GLAA ECL Amortised cost 13 473 5 221 1 183 4 038 – – (1 965) (7 190) 5 706 (812) (232) (1 377) (459) (877) 2 020 (232) 247 (54) (153) 142 76 868 26 450 (232) – – (1 624) (21 040) (405) (724) 1 878 – – – 2 008 185 (232) (243) – – – 74 860 26 265 – (20 797) – – – 9 212 4 296 1 133 3 163 82 046 1 718 80 328 19 (12) 12 – (35) 35 9 231 4 296 1 121 3 175 82 046 1 683 80 363 Stage 2 Stage 3 Total ECL 724 (267) (8) 276 (237) Amortised cost GLAA ECL Amortised cost GLAA ECL Amortised cost 13 540 9 236 1 785 7 451 136 527 2 766 133 761 – – (42) (3 906) 5 671 (1 348) (295) (1 348) (1 352) (2 062) 3 325 (295) (163) (4) (89) 443 – – (1 185) (1 348) (1 973) 2 882 8 829 (295) 1 728 – – – 35 (295) (100) – – – 8 794 – 1 828 – – – Total credit and zero balances/Off-balance-sheet impairment allowance 201 (1) 202 4 (1) 5 11 11 216 (2) 218 Loans and advances at 31 December 2021 125 083 240 124 843 14 407 487 13 920 7 515 1 677 5 838 147 005 2 404 144 601 124 882 241 124 641 14 403 488 13 915 7 504 1 677 5 827 146 789 2 406 144 383 Stage 1 Stage 2 Stage 3 Total GLAA ECL Amortised cost GLAA ECL Amortised cost GLAA ECL Amortised cost GLAA ECL Amortised cost Repayments net of readvances, capitalised interest, fees and ECL remeasurements Balance at 31 December 2021 68 191 238 67 953 Off-balance-sheet impairment allowance (4) 4 Loans and advances at 31 December 2021 68 191 234 67 957 Repayments net of readvances, capitalised interest, fees and ECL remeasurements GLAA 57 659 26 450 (17 560) 7 853 (5 037) (1 174) GLAA 113 027 8 829 3 385 5 266 (3 885) (1 740) ECL 310 185 (352) 258 (55) (108) Amortised cost 57 349 26 265 – (17 208) 7 595 (4 982) (1 066) Stage 1 ECL 257 35 330 12 (187) (206) Amortised cost 112 770 8 794 – 3 055 5 254 (3 698) (1 534) 94 781 46 962 (31 132) 5 072 (9 317) (4 719) 1 097 629 1 603 139 (1 282) (840) 93 684 46 333 – (32 735) 4 933 (8 035) (3 879) – Business Banking (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Retail — Mortgage loans (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Net balances Retail — Instalment debtors (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Net balances Total credit and zero balances Repayments net of readvances, capitalised interest, fees and ECL remeasurements (2 282) (2 994) 10 656 (2 093) (616) (71) 1 458 (517) – – (1 666) (2 923) 9 198 (1 576) (2 425) (3 976) (2 078) (1 339) 6 812 101 647 1 346 100 301 16 839 1 808 15 031 6 764 (2 425) 602 (68) (176) 1 357 2 889 46 962 – – (2 425) (2 425) 6 250 629 111 853 46 333 – (4 578) (37 390) 1 589 (38 979) (2 010) (1 163) 5 455 – – – – – – – – – 3 875 125 250 6 043 119 207 13 552 1 554 11 998 9 770 3 599 6 171 118 103 Loans and advances at 31 December 2021 101 647 1 346 100 301 16 839 1 808 15 031 6 764 2 889 3 875 125 250 6 043 119 207 – – – – – 143 Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Stage 1 Stage 2 Stage 3 Total Retail — Card, term and other (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off GLAA ECL Amortised cost 24 077 16 694 1 290 1 277 22 787 15 417 – Repayments net of readvances, capitalised interest, fees and ECL remeasurements (10 409) 2 593 (13 002) Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Net balances 1 109 (3 049) (3 572) 87 (1 098) (2 374) 1 022 (1 951) (1 198) 24 850 1 775 23 075 4 920 1 551 3 369 8 106 2 193 37 876 9 239 28 637 Total credit and zero balances/Off-balance-sheet impairment allowance 8 089 (43) 8 132 10 (9) 19 25 (1) 26 8 124 (53) 8 177 Loans and advances at 31 December 2021 32 939 1 732 31 207 4 930 1 542 3 388 8 131 5 912 2 219 46 000 9 186 36 814 Stage 1 Stage 2 Stage 3 Total Wealth (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off Repayments net of readvances, capitalised interest, fees and ECL remeasurements Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Foreign exchange and other movements Net balances Banking book GLAA held at FVTPL Loans and advances at 31 December 2021 Nedbank Africa Regions (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off GLAA 28 511 5 558 (6 990) 129 (1 960) (416) 621 25 453 1 456 26 909 GLAA 20 489 3 594 Repayments net of readvances, capitalised interest, fees and ECL remeasurements (5 399) Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Foreign exchange and other movements Net balances Off-balance-sheet ECL 879 (265) (342) 162 19 118 ECL 46 69 19 1 (10) (78) (3) 44 Amortised cost 28 465 5 489 – (7 009) 128 (1 950) (338) 624 25 409 1 456 44 26 865 2 538 39 2 499 1 282 373 909 30 729 456 30 273 Stage 1 Stage 2 Stage 3 Total ECL 241 176 (66) 20 (52) (173) 102 248 (18) Amortised cost 20 248 3 418 – (5 333) 859 (213) (169) 60 18 870 18 Loans and advances at 31 December 2021 19 118 230 18 888 1 136 1 959 1 219 22 325 1 082 21 243 144 ECL 56 Amortised cost 679 Amortised cost GLAA Amortised cost 988 30 566 GLAA ECL GLAA ECL cost GLAA ECL Amortised Amortised cost Amortised cost 5 156 1 661 3 495 7 056 5 138 1 918 36 289 16 694 8 089 1 277 28 200 15 417 (4 428) (4 428) (10 679) 4 301 (14 980) (744) (845) 3 493 (2 140) 245 (68) 1 199 (1 486) – – (989) (777) 2 294 (654) (4 428) 474 (264) (444) 5 712 – – – – – – – – – – – – 30 132 5 489 (7 443) 639 Amortised cost 23 203 3 418 (6 228) – – – – – – – – ECL 434 69 (5) (42) 983 176 (63) (263) – – – – – (989) (245) (343) 1 852 (312) (136) (40) 404 – – 5 – 1 041 – – (102) (450) 27 200 504 – – – – – – – 5 558 (5) (7 485) – – – 639 24 186 3 594 (63) (6 491) (4 428) 1 463 (19) (101) 3 860 5 913 ECL 332 (5) (59) – (4) 107 2 373 ECL 584 (63) (143) (18) 7 245 127 739 1 740 2 499 1 282 909 29 273 456 28 817 1 456 1 456 Amortised cost GLAA cost GLAA ECL Amortised 1 914 1 625 GLAA 735 (124) 7 2 004 (95) 11 2 538 GLAA 2 072 (847) (411) 231 (103) 306 1 248 1 248 GLAA 1 320 (5) (371) (136) (44) 511 7 (63) (245) (468) 34 445 631 (122) 1 990 (66) 10 – – 8 – – – (793) (409) 186 (31) 263 6 (2) (1) 14 (29) 1 39 ECL 158 (54) (2) 45 (72) 43 118 (6) 112 1 130 1 959 1 220 22 325 1 105 21 220 1 099 272 827 (1) (23) 23 Nedbank Group Annual Results 2021 Stage 1 Stage 2 Stage 3 Total GLAA ECL Amortised cost GLAA ECL Amortised cost GLAA ECL Amortised cost GLAA ECL Amortised cost 2 193 37 876 9 239 28 637 – – (989) (245) (343) 1 852 5 156 1 661 3 495 7 056 5 138 1 918 36 289 16 694 8 089 1 277 (4 428) (4 428) 28 200 15 417 – (10 679) 4 301 (14 980) – – – – – – – – – Repayments net of readvances, capitalised interest, fees and ECL remeasurements (10 409) 2 593 (13 002) (744) (845) 3 493 (2 140) 245 (68) 1 199 (1 486) – – (989) (777) 2 294 (654) (4 428) 474 (264) (444) 5 712 24 850 1 775 23 075 4 920 1 551 3 369 8 106 (4 428) 1 463 (19) (101) 3 860 5 913 Repayments net of readvances, capitalised interest, fees and ECL remeasurements Retail — Card, term and other (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Net balances Wealth (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Net balances Foreign exchange and other movements Banking book GLAA held at FVTPL Loans and advances at 31 December 2021 Nedbank Africa Regions (Rm) Net balance at 31 December 2020 New loans and advances originated Loans and advances written off Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Net balances Off-balance-sheet ECL Foreign exchange and other movements 24 077 16 694 1 290 1 277 1 109 (3 049) (3 572) 87 (1 098) (2 374) 22 787 15 417 – 1 022 (1 951) (1 198) GLAA 28 511 5 558 (6 990) 129 (1 960) (416) 621 25 453 1 456 26 909 GLAA 20 489 3 594 879 (265) (342) 162 19 118 ECL 46 69 19 1 (10) (78) (3) 44 ECL 241 176 (66) 20 (52) (173) 102 248 (18) Amortised cost 28 465 5 489 – (7 009) 128 (1 950) (338) 624 25 409 1 456 Amortised cost 20 248 3 418 – (5 333) 859 (213) (169) 60 18 870 18 Repayments net of readvances, capitalised interest, fees and ECL remeasurements (5 399) Loans and advances at 31 December 2021 19 118 230 18 888 Total credit and zero balances/Off-balance-sheet impairment allowance 8 089 (43) 8 132 10 (9) 19 25 (1) 26 8 124 (53) 8 177 Loans and advances at 31 December 2021 32 939 1 732 31 207 4 930 1 542 3 388 8 131 5 912 2 219 46 000 9 186 36 814 Stage 1 Stage 2 Stage 3 Total GLAA 735 (124) 7 2 004 (95) 11 2 538 ECL 56 (2) (1) 14 (29) 1 39 Amortised cost GLAA 679 1 320 – – (122) 8 1 990 (66) 10 (5) (371) (136) (44) 511 7 2 499 1 282 ECL 332 (5) (59) – (4) 107 2 373 Amortised cost GLAA 988 30 566 – – (312) (136) (40) 404 5 5 558 (5) (7 485) – – – 639 ECL 434 69 (5) (42) – – – – Amortised cost 30 132 5 489 – (7 443) – – – 639 909 29 273 456 28 817 – – 1 456 – 1 456 44 26 865 2 538 39 2 499 1 282 373 909 30 729 456 30 273 Stage 1 Stage 2 Stage 3 Total GLAA 2 072 (847) (411) 231 (103) 306 1 248 1 248 ECL 158 (54) (2) 45 (72) 43 118 (6) 112 Amortised cost GLAA 1 914 1 625 – – (793) (409) 186 (31) 263 (63) (245) (468) 34 445 631 1 130 1 959 6 1 136 1 959 ECL 584 (63) (143) (18) 7 245 127 739 1 740 Amortised cost GLAA ECL Amortised cost 1 041 – – (102) (450) 27 200 504 24 186 3 594 (63) (6 491) – – – 983 176 (63) (263) – – – 23 203 3 418 – (6 228) – – – 1 099 272 827 1 220 22 325 1 105 21 220 (1) – (23) 23 1 219 22 325 1 082 21 243 145 Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 9 Investment securities Rm Equity investments Associates – Property Partners Associates – Investment Banking Unlisted investments – Property Partners Unlisted investments – 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 Total policyholder investments Total investment securities Equity risk in the banking book Total equity portfolio Accounted for at fair value Equity-accounted, including investment in ETI Percentage of total assets Percentage of group minimum economic-capital requirement 2021 2020 6 287 1 799 1 020 1 228 2 240 23 3 349 550 163 2 636 7 380 1 842 1 128 1 339 3 071 136 3 150 470 143 2 537 9 659 10 666 11 638 4 201 13 129 2 630 15 839 15 759 25 498 26 425 2021 2020 13 054 13 988 9 659 3 395 1,1 4,8 10 666 3 322 1,1 4,8 Rm Rm Rm % % • Equity risk in the banking book is primarily assumed in CIB, which actively makes investments with clearly defined strategies. • Additional investments are undertaken as a result of operational requirements or strategic decisions, or as part of debt restructuring. • The equity portfolio that is held at fair value declined by R1bn year on year, largely due to the realisation of assets. • The value of the portfolio that is equity-accounted increased by R73m to R3 395m (2020: R3 322m ). This was largely due to a R92m increase in the ETI carrying value. The strong financial performance from ETI is accompanied by a material improvement in the balance sheet. • The ETI investment is accounted for under the equity method of accounting and is therefore not carried at fair value. • The 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. 146 Nedbank Group Annual Results 2021 10 Investments in associate companies Equity-accounted earnings Rm Carrying amount Rm Net exposure to/(from) associates1 Rm Name of company and nature of business 2021 2020 2021 2020 2021 2020 Associates Listed ETI2 Unlisted Equity investments: Tracker Technology Holdings Proprietary Limited Other equity investments Other strategic investments Total 686 (178) 2 272 2 180 81 (7) 51 33 16 786 56 37 9 480 237 406 570 156 416 (76) 3 395 3 322 1 246 271 35 1 633 774 767 1 Includes on-balance-sheet and off-balance-sheet exposure. 2 ETI is a pan-African bank and its shares are listed on the stock exchanges of Nigeria, Ghana and Ivory Coast. The percentage holding in ETI at 31 December 2021 was 21,2% (31 December 2020: 21,2%). Accounting recognition of ETI Rm Opening carrying value Share of associate gains/(losses)1,3 Share of other comprehensive (losses)/income2,3 Foreign currency translation4 Closing carrying value pre-impairment provision Impairment provision Closing carrying value 2021 2020 3 930 3 674 686 (742) 148 4 022 (1 750) (178) 207 227 3 930 (1 750) 2 272 2 180 1 Applicable period: 1 October 2020 (audited) – 30 September 2021 (audited). 2 Applicable period: 1 October 2020 (audited) – 31 December 2021 (unaudited). 3 Applicable average exchange rate: 1 January 2021 – 31 December 2021. 4 Applicable period: 1 January 2021 – 31 December 2021, ie the cumulative difference at each quarter of the earnings and other comprehensive income converted at an average USD/ZAR rate when compared with the related US dollar balances converted at the quarter-end spot rate. The USD/ZAR exchange rate weakened from R14,70 on 31 December 2020 to R15,90 on 31 December 2021. The market value of the group’s investment in ETI, based on its quoted share price, was R1,7bn on 31 December 2021 and R2,1bn on 03 March 2022. 147 Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 11 Intangible assets Rm Computer software and capitalised development costs Goodwill Client relationships, contractual rights and other Computer software and capitalised development costs – Carrying amount Rm Computer software Core product and client systems Support systems Digital systems Payment systems Amortisation 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 year Foreign exchange and other moves Amortisation charge for the year Impairments Closing balance Development costs not yet commissioned Opening balance Additions Commissioned during the year Foreign exchange and other moves Impairments Closing balance 148 2021 2020 8 901 4 295 25 8 981 4 747 23 13 221 13 751 2021 2020 7 763 1 928 2 244 2 790 801 1 138 390 327 296 125 7 352 1 724 2 438 2 492 698 1 629 523 343 578 185 8 901 8 981 7 352 272 1 928 15 (1 705) (99) 6 502 475 1 949 18 (1 436) (156) 7 763 7 352 1 629 1 495 (1 928) (4) (54) 1 752 1 877 (1 949) (51) 1 138 1 629 Nedbank Group Annual Results 2021 149 NotesStatement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 202112 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 adjustment Deposits received under repurchase agreements Total amounts owed to depositors Comprises: – Amounts owed to clients – Amounts owed to banks Change % 8 5 3 8 (5) 3 (3) 7 (18) (94) 26 2 4 Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 106 751 46 343 98 886 44 233 6 170 8 105 698 075 675 363 400 175 389 077 267 822 255 150 363 857 60 238 115 634 158 346 22 688 82 429 83 15 426 337 197 137 404 63 429 111 832 162 905 14 361 102 170 146 240 123 311 16 404 97 678 151 684 21 146 15 880 13 597 6 741 7 025 100 405 1 415 12 267 15 426 12 267 87 005 13 404 206 433 42 237 11 287 7 865 79 768 12 300 192 121 43 562 11 748 7 719 2 256 32 066 9 471 7 652 651 382 786 47 1 874 31 083 10 957 9 311 614 424 608 31 11 224 873 19 182 12 364 2 989 1 702 2 127 20 3 755 9 052 850 18 947 12 451 2 857 1 893 1 746 493 3 952 96 87 1 425 1 232 4 93 1 328 3 (8) 89 1 148 78 674 83 96 453 1 415 971 795 953 715 437 651 423 046 374 972 354 243 43 840 43 945 35 054 33 294 80 278 99 187 941 506 905 081 409 719 (38) 30 289 48 634 27 932 378 581 44 465 375 078 353 315 43 840 43 945 (106) 928 33 972 1 082 32 240 1 054 78 897 1 381 97 000 2 187 Total amounts owed to depositors 2 971 795 953 715 437 651 423 046 374 972 354 243 43 840 43 945 35 054 33 294 80 278 99 187 Market share according to BA900 Household deposits1 (2018–2021) (%) Non-financial corporate deposits2 (2018–2021) (%) , 5 4 1 , 2 2 2 , 5 8 1 , 1 2 2 , 7 2 2 , 1 7 1 , 7 6 2 , 6 4 2 , 4 8 1 , 2 3 1 Nedbank FirstRand Standard Bank Absa Other Nedbank FirstRand Standard Bank Absa Other 1 2 Includes households according to the BA900 return. Includes private non-financial corporate sector deposits, unincorporated businesses, as well as non-profit organisations and charities according to the BA900 return. 150 Nedbank Group Annual Results 2021 Segmental breakdown Rm Current accounts Savings accounts Call and term deposits Fixed deposits Cash management deposits Other deposits Foreign currency liabilities Negotiable certificates of deposit Macro fair-value hedge accounting adjustment Deposits received under repurchase agreements Comprises: – Amounts owed to clients – Amounts owed to banks Change % 8 5 3 8 (5) 3 (3) 7 (18) (94) 26 2 4 2 Other deposits and loan accounts 698 075 675 363 400 175 389 077 Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 87 005 13 404 79 768 12 300 267 822 255 150 206 433 42 237 11 287 7 865 192 121 43 562 11 748 7 719 21 146 15 880 13 597 6 741 7 025 106 751 46 343 98 886 44 233 6 170 8 105 337 197 137 404 14 361 102 170 146 240 123 311 16 404 97 678 151 684 363 857 60 238 115 634 158 346 22 688 82 429 83 15 426 63 429 111 832 162 905 100 405 1 415 12 267 15 426 12 267 2 256 32 066 9 471 7 652 651 382 786 47 1 874 31 083 10 957 9 311 614 424 608 31 11 224 873 19 182 12 364 2 989 1 702 2 127 20 3 755 9 052 850 18 947 12 451 2 857 1 893 1 746 493 3 952 96 87 1 425 1 232 4 93 1 328 3 (8) 89 1 148 78 674 83 96 453 1 415 Total amounts owed to depositors 971 795 953 715 437 651 423 046 374 972 354 243 43 840 43 945 35 054 33 294 80 278 99 187 Total amounts owed to depositors 971 795 953 715 437 651 423 046 374 972 354 243 43 840 43 945 35 054 33 294 80 278 99 187 941 506 905 081 409 719 (38) 30 289 48 634 27 932 378 581 44 465 375 078 353 315 43 840 43 945 (106) 928 33 972 1 082 32 240 1 054 78 897 1 381 97 000 2 187 Wholesale deposits3 (2018–2021) (%) Foreign currency liabilities4 (2018–2021) (%) , ,  3  0  2 ,  2  4  1 , , ,  0  5  2 , ,  4  2  2  , 1  8  1 , , 0 2 1 , 3 7 1 , 9 8 2 , 2 4 1 , 6 7 2 Nedbank FirstRand Standard Bank Absa Other Nedbank FirstRand Standard Bank Absa Other 3 4 Includes insurers, pension funds, private financial corporate-sector deposits, collateralised borrowings and repurchase deposits according to the BA900 return. Includes foreign currency deposits and foreign currency funding according to the BA900 return. 151 Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 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 NCDs (as a percentage of total deposits) Reliance on foreign currency deposits (as a percentage of total deposits) Loan-to-deposit ratio Basel III liquidity ratios LCR1 Minimum regulatory LCR requirement2 NSFR3 Minimum regulatory NSFR requirement 2021 2020 264 224 254 400 207 105 206 943 57 119 47 457 21,6 26,6 39 193 3 829 58 159 8,5 2,3 85,6 128,1 80,0 116,1 100,0 20,7 25,4 41 649 2 628 59 770 10,5 2,2 88,4 125,7 80,0 112,8 100,0 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-South African banking entities. The above figures reflect the simple average of daily observations over the quarter ending December 2021 for Nedbank Limited and the simple average of the month-end values at 31 October 2021, 30 November 2021 and 31 December 2021 for all non-South African banking entities. 2 The PA issued Directive 1/2020 on 31 March 2020 reducing the minimum LCR requirement from 100% to 80%, with effect from 1 April 2020. The PA subsequently issued Directive 8/2021 specifying a phased-in approach to increase the minimum LCR regulatory requirement from 80% to 90%, with effect from 1 January 2022, and subsequently to 100%, with effect from 1 April 2022. 3 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 that is consistently below 100% and a low reliance on interbank and foreign currency funding. • The group's LCR exceeded the minimum regulatory requirement, with the group maintaining appropriate operational liquidity buffers designed to absorb seasonal, cyclical and systemic volatility observed in the LCR. On 31 March 2020 the PA issued Directive 1/2020 temporarily reducing the minimum regulatory LCR requirement from 100% to 80%, with effect from 1 April 2020. The reduction in the minimum regulatory LCR requirement was in direct response to financial market volatility brought on by the Covid-19 pandemic and the resulting lockdown. This requirement currrently remains effective for 2021 in line with Circular 1/2021. As a result of observed normalisation in the financial markets and banks demonstrating healthy liquidity positions during 2021, on 29 October 2021 the PA issued Directive 8/2021 specifying a phased-in approach to increase the minimum regulatory LCR requirement from 80% to 90%, with effect from 1 January 2022, and subsequently to 100%, with effect from 1 April 2022. • The LCR, calculated using the simple average of daily observations over the quarter ending December 2021 for Nedbank Limited, and the simple average of the month-end values at 31 October 2021, 30 November 2021 and 31 December 2021 for all non-South African banking entities, was 128,1%. – Nedbank's portfolio of LCR-compliant HQLA (mainly comprising government bonds and treasury bills) increased slightly to a quarterly average of R207,1bn, up from December 2020, when the portfolio amounted to R206,9bn. – The increase in the LCR is primarily attributable to a decrease in the quarterly arithmetic average net cash outflows driven by increased demand for longer-term deposits. – Nedbank will continue to manage the HQLA portfolio, taking into account balance sheet growth, while maintaining appropriately sized surplus liquid-asset buffers based on cyclical, seasonal and systemic market conditions. – 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 Group has significant sources of quick liquidity, as is evident in the combined portfolio of HQLA and other sources of quick liquidity, collectively amounting to R264,2bn at December 2021 and representing 21,6% of total assets. 152 Nedbank Group Annual Results 2021 Nedbank Group LCR exceeds minimum regulatory requirements Nedbank Group LCR exceeds minimum regulatory requirements (Rm) 125,0 125,7 128,1 116,2 109,4 , 2 8 3 1 , 0 9 1 1 , 7 2 6 1 , 7 8 4 1 , 0 8 7 1 , 4 2 4 1 , 9 6 0 2 , 6 4 6 1 , 1 7 0 2 , 7 1 6 1 2017 2018 2019 2020 2021 HQLA (Rbn) Net cash outﬂows (Rbn) LCR (%) Total sources of quick liquidity (Rbn) Other sources of quick liquidity contribution (%) , 4 5 9 1 , 2 7 5 , 2 8 3 1 , 0 9 1 1 , 3 3 1 2 , 6 0 5 , 7 2 6 1 , 7 7 2 2 , 7 9 4 , 0 8 7 1 , 7 8 4 1 , 4 4 5 2 , 5 7 4 , 4 2 4 1 , 9 6 0 2 3,9% 20,2% 0,1% , 2 4 6 2 , 1 7 5 , 1 7 0 2 2017 2018 2019 2020 2021 Total HQLA Other sources of quick liquidity R57,1bn 9,6 5,6 31,5 48,2 5,1 2021 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 regulatory NSFR requirement of 100%, with effect from from 1 January 2018, with a December 2021 ratio of 116,1%. The structural liquidity position of the group has strengthened from December 2020 as a result of the effective management of the balance sheet growth. The key focus in terms of the NSFR is to achieve ongoing compliance in the context of balance sheet optimisation. Nedbank Group NSFR exceeds minimum regulatory requirements Nedbank Group NSFR exceeds minimum regulatory requirements (Rm) 114,4 114,0 113,0 112,8 116,1 , 6 7 4 6 , 7 5 6 5 , 5 4 6 6 , 7 2 8 5 , 7 9 0 7 , 3 8 2 6 , 7 9 4 7 , 5 4 6 6 , 1 7 6 7 , 0 1 6 6 2017 2018 2019 2020 2021 Available stable funding (Rbn) Required stable funding (Rbn) NSFR (%) 153 Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 • A strong funding profile was maintained in 2021, with Nedbank recording a three-month, average long-term funding ratio of 26,6% in the fourth quarter of the year. The focus on proactively managing Nedbank’s long-term funding profile contributed to a strong balance sheet position and sound liquidity risk metrics. Nedbank has continued to run a more prudent long-term funding profile when compared with the industry average of 22,5%. – Nedbank successfully issued R3,4bn in senior unsecured debt, while R5,9bn matured during the year. – Nedbank issued tier 2 capital instruments of R3,0bn and redeemed R2,0bn during 2021, in line with the group’s capital plan. • While foreign currency funding reliance remains small, at 2,3% 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. • The group's 2021 Internal Capital Adequacy Assessment Process (ICAAP) and Internal Liquidity Adequacy Assessment Process (ILAAP) reports were approved by the board and submitted to the PA, in accordance with annual business-as-usual process. The group’s recovery plans, which incorporate Nedbank London, were updated and approved by the board on 4 March 2022. The parliamentary processes relating to the promulgation of the Financial Sector Laws Amendment Bill (FSLAB) have been concluded and the Bill was endorsed by the National Council of Provinces (NCOP) in December 2021, after which it was transmitted for assent by the President and promulgation took place on 28 January 2022. With SARB now having been established as SA’s Resolution Authority (RA), the industry is awaiting further discussion papers and draft resolution standards to be issued in order to establish SA's Resolution Framework. Nedbank Group funding and liquidity profile, underpinned by strong liquidity risk metrics 92,1 27,0 , 0 0 1 0 0 , 2017 89,2 26,5 91,2 30,2 88,4 25,4 85,6 26,6 , 2 4 5 0 4 , 2018 , 6 8 7 , 1 3 2019 , 3 9 4 0 0 , 2020 , 1 8 1 ) , 6 1 ( 2021 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) Exchange rates UK pound to rand US dollar to rand US dollar to naira Rand to naira 154 Average Closing Change % 2021 2020 Change % 2021 2020 6 7 8 (3) 21,11 15,86 408,99 25,88 19,99 14,87 381,21 26,64 7 8 11 21,48 15,90 424,83 25,86 20,07 14,70 381,20 25,94 Nedbank Group Annual Results 2021 Equity analysis Analysis of changes in net asset value Balance at the beginning of the year Additional shareholder value Profit attributable to equity holders of the parent 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 equity and debt 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) Property revaluations Change % >100 2021 2020 100 444 11 941 11 238 499 808 148 (457) (192) 73 (265) 389 (21) 28 98 449 4 358 3 467 146 445 227 (526) 456 119 337 (80) 395 (26) Transactions with ordinary shareholders 52 (1 418) (2 952) Dividends paid Value of employee services (net of deferred tax) Other transactions Transaction with non-controlling shareholders3 Additional tier 1 capital instruments Other movements Balance at the end of the year (2 178) (3 451) 637 123 (2 951) 1 497 (2) 292 207 (372) 972 (11) 109 511 100 444 <(100) 54 82 9 1 Exchange differences on translating foreign operations as shown in the statement of comprehensive income of R1 029m (December 2020: R672m). 2 Share of other comprehensive income of investments accounted for using the equity method as shown in the statement of comprehensive income of R722m (December 2020: R189m). 3 The group repurchased all of the non-redeemable, non-cumulative, non-participating preference shares in issue on 21 December 2021. Movements in group foreign currency translation reserve Balance at the beginning of the year Foreign currency translation reserve (FCTR) ETI Nedbank Mozambique Other subsidiaries Change % 96 2021 2020 (1 995) 487 (309) 198 598 (2 244) 249 (299) (116) 664 Balance at the end of the year 24 (1 508) (1 995) The movements in the group FCTR table have been revised from prior years to provide more granular information. Comparative information has been reclassified accordingly. 155 Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Capital management Regulatory capital adequacy and leverage CET1 Capital ratio (%) CET1 capital ratio (%) Board CET1 target1 11,5 SARB PA minimum CET12 10,6 10,9 1,9 (0,3) 0,3 12,8 12,0% to 11,0% 8,5% Dec 2019 Jun 2020 Dec 2020 Proﬁts Interim dividend RWA decrease Dec 2021 1 During 2020 Nedbank’s internal board-approved target ranges were adjusted to reflect the lower new regulatory minimum requirements according to Directive 2/2020. In line with Directive 5/2021 which results in the reinstatement of the Pillar 2A capital requirements, the board has recalibrated the targets to 11% to 12% (currently 10% to 12%), with effect from 1 January 2022. 2 Excluding idiosyncratic buffers and including the D-SIB capital requirement of 100 bps, in line with PA Directive 5/2021 (from 50 bps in December 2020). Risk-weighted assets (Rbn) 19 (4) 30 (3) (14) (0) 629 674 657 Dec 2019 Credit risk Market risk Other RWA Dec 2020 Credit risk Market risk Other RWA Dec 2021 Nedbank Group strengthened its capital adequacy position significantly, on the back of strong organic earnings generation in 2021 and lower RWA. Nedbank Group manages its capital levels based on the board-approved risk appetite, taking cognisance of rating agency and shareholder expectations, in line with regulatory requirements. The group further seeks to ensure that its capital structure uses the full range of capital instruments and capital management activities available to optimise the financial efficiency and loss absorption capacity of its capital base. Nedbank performs extensive and comprehensive stress testing to ensure 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. During H1 2021, the PA published Guidance Note 3/2021, which encouraged boards of banks to be prudent when making decisions relating to distributions of dividends on ordinary shares and the payment of cash bonuses to executive officers and material-risk-takers in 2021. Within the context of this guidance, Nedbank resumed paying dividends after the release of the 2021 interim results. Furthermore, the PA published Directive 5/2021, which confirmed the recalibration of the D-SIB capital requirement to 100 bps at a CET1 level and the reinstatement of the Pillar 2A to 50bps. 156 Nedbank Group Annual Results 2021Nedbank Group Including unappropriated profits Total CAR Total tier 1 CET1 Surplus tier 1 capital Dividend cover Cost of equity Excluding unappropriated profits Total CAR Total tier 1 CET1 Leverage Nedbank Limited Including unappropriated profits Total CAR Total tier 1 CET1 Surplus tier 1 capital Excluding unappropriated profits Total CAR Total tier 1 CET1 PA minimum1 Internal targets 2 2021 2020 % % % Rm times % % % % times % % % Rm % % % > 13,0 > 11,25 10,0–12,0 1,75–2,25 <20 > 13,0 > 11,25 10,0–12,0 17,2 14,3 12,8 31 292 2,02 15,1 16,4 13,4 12,0 14,3 17,6 14,0 12,3 14,9 12,1 10,9 19 462 N/A 14,5 14,8 12,1 10,8 15,4 15,3 12,0 10,4 23 993 15 219 16,7 13,1 11,3 15,0 11,8 10,1 11,5 9,5 8,0 <25 11,5 9,5 8,0 1 PA minimum excludes the idiosyncratic buffer and includes the recalibrated D-SIB capital requirement in line with Directive 5 of 2021, with the Pillar 2A currently at nil, but increasing by 50 bps, 75 bps and 100 bps at a CET1, tier 1 and total level when it is reinstated from 1 January 2022, in line with Directive 5/2021. 2 Taking into account Directive 5/2021 the internal targets have been increased effective from 1 January 2022 as follows: Total CAR > 14,5%, tier 1 > 12,0%, CET1 11% to 12%. 157 Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Nedbank Group overview of risk-weighted assets Credit risk (excluding counterparty credit risk) 438 544 50 433 436 948 2021 RWA MRC1 2020 RWA Standardised approach (TSA) Supervisory slotting approach Advanced internal ratings-based approach (AIRB) Counterparty credit risk Standardised approach (SA-CCR)2 Credit valuation adjustment Equity risk3 Equity positions under simple risk-weight approach Equity investments in funds – look-through approach Equity investments in funds – fall-back 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 (IMA) 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) 39 511 6 375 392 658 15 932 15 932 18 797 35 601 30 195 4 017 1 389 415 83 332 26 815 2 222 24 593 74 879 7 151 64 730 2 998 19 203 26 360 4 544 733 45 156 1 832 1 832 2 162 4 094 3 472 462 160 48 10 38 3 084 256 2 828 8 611 822 7 444 345 2 208 3 031 36 951 7 287 392 710 16 613 16 613 22 279 42 291 42 291 445 91 354 40 916 3 024 37 892 73 665 7 318 63 973 2 374 13 989 26 542 Total 656 546 75 503 673 688 1 Total minimum required capital (MRC) is measured at 11,5% and excludes bank-specific Pillar 2b add-on. 2 The standardised approach for measuring counterparty credit risk (SA-CCR) was applied from 1 January 2021, to calculate counterparty credit risk exposure (in line 3 with Guidance Note 7/2020), while the current exposure method (CEM) was applied in prior periods. In line with Guidance Note 7/2020, Nedbank implemented the Capital Requirements for Equity Investments in Funds (CREIF) Framework. The RWA for the investments in funds was previously measured using the simplified risk weight approach. • The group's total RWA/total assets density improved marginally to 53,8% in 2021 from 54,9% in 2020 , driven by a decrease of 2,5% in RWA relative to a decrease in total assets of 0,6%. • The decrease in total RWA is attributable mainly to the following: • Credit risk RWA increased due to growth in banking booking advances, particularly in RBB and NAR portfolios. • Counterparty credit risk RWA was impacted by the implementation of the new SA-CCR methodology, with effect from 1 January 2021. The increase due to the implementation of SA-CCR, was offset by a significant change in the profile of the counterparty credit risk portfolio. • Market risk RWA decreased due the calibration of the bank’s historical VaR model and the subsequent roll-off in 2021 of the Covid-19 extreme market movements observed during 2020. • Equity risk RWA decreased as a result of the implementation of the CREIF Framework and the realisation of a number of equity investments. • The increase in amounts below the thresholds for deduction was driven by increases in deferred tax assets due to temporary differences and investments in financial entities. 158 Nedbank Group Annual Results 2021 Nedbank Limited overview of risk-weighted assets 2021 RWA MRC1 2020 RWA Credit risk (excluding counterparty credit risk) 361 345 41 555 364 557 Standardised approach (TSA) Supervisory slotting approach 144 5 510 17 634 134 6 375 Advanced internal ratings-based approach (AIRB) 355 691 40 904 358 048 Counterparty credit risk Standardised approach (SA-CCR)2 Credit valuation adjustment Equity risk3 Equity positions under simple risk-weight approach Equity investments in funds – look-through approach Equity investments in funds – fall-back 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 (IMA) 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) 12 856 12 856 18 283 19 742 18 832 503 407 415 83 332 26 081 1 678 24 403 62 360 60 246 2 114 7 596 19 821 1 478 1 478 2 103 2 270 2 165 58 47 48 10 38 2 999 193 2 806 7 171 6 928 243 874 2 279 14 898 14 898 21 620 25 841 25 841 445 91 354 39 322 1 624 37 698 61 818 1 59 848 1 969 1 633 20 514 Total 528 499 60 777 550 648 1 Total MRC is measured at 11,5% and excludes the bank-specific Pillar 2b add-on. 2 The SA-CCR was applied from 1 January 2021 to calculate counterparty credit risk exposure (in line with Guidance Note 7/2020), while the CEM was applied in 3 prior periods. In line with Guidance Note 7/2020, Nedbank implemented the CREIF Framework. The RWA for the investments in funds was previously measured using the simplified risk weight approach. 159 Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Summary of regulatory qualifying capital and reserves1 Rm 2021 2020 2021 2020 Nedbank Group Nedbank Limited Including unappropriated profits Total tier 1 capital CET1 Share capital and premium Reserves Minority interest: Ordinary shareholders Deductions Additional tier 1 capital 93 664 84 345 19 254 80 259 623 (15 791) 9 319 Preference share capital and premium Perpetual subordinated debt instruments 9 319 Regulatory adjustments Tier 2 capital Subordinated debt instruments Excess of eligible provisions over downturn expected losses General allowance for credit impairment Regulatory adjustments 19 425 16 554 2 496 385 (10) 81 779 73 455 19 067 69 925 463 74 200 64 881 20 111 57 322 66 154 57 269 20 111 49 771 (16 000) (12 552) (12 613) 8 324 1 063 7 822 (561) 18 574 15 604 2 626 391 (47) 9 319 9 319 18 913 16 554 2 357 2 8 885 1 063 7 822 18 014 15 604 2 408 2 Total capital 113 089 100 353 93 113 84 168 Excluding unappropriated profits Tier 1 capital CET1 capital Total capital 88 130 78 811 107 555 81 380 73 056 99 954 69 267 59 948 88 179 64 769 55 884 82 783 1 For comprehensive 'composition of capital' and 'capital instruments main features' disclosure please refer to https://www.nedbank.co.za/content/nedbank/desktop/gt/en/investor-relations/information-hub/capital-and-risk-management-reports.html. • The group's tier 1 capital position was positively impacted by the issuance of new-style additional tier 1 instruments of R3,5bn, which was offset by the, redemptions of R2,0bn and the buyback of old-style preference shares that still qualified as regulatory capital. • The group's total capital was further impacted by the issuance of Basel III qualifying tier 2 capital instruments of R2,95bn, offset by the redemptions of R2,0bn, in line with the group's capital plan. • The focus remains on issuing fully loss-absorbent capital, with Basel III fully compliant capital making up 99,95% of the group's total capital structure. • The group's gearing remains below the Regulatory Leverage Ratio Framework requirement of less than 25 times, at 14,3 times. 160 Nedbank Group Annual Results 2021 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. 2021 2020 Total capital requirement (host country) % 12,0 10,0 8,0 8,0 12,0 13,0 RWA Rm 5 251 13 057 5 397 2 076 1 908 10 184 Total capital ratio % 15,5 16,7 17,2 29,2 26,3 17,4 RWA Rm 3 697 14 419 5 549 2 033 1 184 8 986 Total capital ratio % 17,4 13,1 14,8 28,1 21,1 16,2 Nedbank Africa Regions Nedbank Mozambique Nedbank Namibia Limited Nedbank Eswatini Limited Nedbank Lesotho Limited Nedbank Zimbabwe Limited1 Isle of Man Nedbank Private Wealth Limited 1 The Reserve Bank of Zimbabwe confirmed on 9 February 2022 that Nedbank Zimbabwe met the minimum capital requirement of USD 30m equivalent, following a rights issue of USD 8m. 161 Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 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 (%) 2021 2020 Rm Mix % Rm Mix % 47 902 6 020 7 930 5 426 492 3 953 71 723 7 172 78 895 117 769 91 943 25 826 38 874 149 67 8 11 8 < 1 6 100 100 78 22 45 101 5 852 6 601 4 020 505 3 301 65 380 6 538 71 918 105 111 80 669 24 442 33 193 146 69 9 10 6 < 1 5 100 100 77 23 • Nedbank Group’s minimum economic capital requirement increased by R6,3bn during the year, driven primarily by the following: • The annual model parameter updates, which resulted in an increase of R1,3bn and R1,4bn in business risk economic capital and operational risk economic capital, respectively. • A R2,8bn increase in credit risk economic capital, driven primarily by a combination of advances growth in RBB and rating migrations of clients in both RBB and CIB due to the prevailing macroeconomic environment. • Nedbank Group’s AFR increased by R12,7bn in 2021, mainly as a result of the following: • A R11,3bn increase in tier A capital, which was driven by growth in organic earnings over the period. • A R1,4bn increase in tier B capital following the issuance of R3,5bn new-style additional tier 1 capital and R3,0bn of new-style tier 2 capital instruments, which was offset by the buyback of old-style preference shares that qualified as regulatory capital, the redemption of R2,0bn new-style additional tier 1 capital and R2,0bn new-style tier 2 capital instruments, in line with the group’s capital plan. 162 Nedbank Group Annual Results 2021 163 NotesStatement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021Supplementary information 165 Earnings per share and weighted-average shares 166 Nedbank Group employee incentive schemes 168 Long-term debt instruments 168 External credit ratings 169 Additional tier 1 capital instruments 170 Shareholders’ analysis 172 Basel III balance sheet credit exposure by business cluster and asset class 174 Nedbank Limited consolidated statement of comprehensive income 175 Nedbank Limited consolidated financial highlights 176 Nedbank Limited consolidated statement of financial position 177 Definitions 180 Abbreviations and acronyms IBC Company details 164 Nedbank Group Annual Results 2021Earnings per share and weighted-average shares Earnings per share 2021 Earnings for the year Basic Diluted basic Headline Diluted headline 11 238 11 238 11 689 11 689 Weighted-average number of ordinary shares 485 071 919 494 841 155 485 071 919 494 841 155 Earnings per share (cents) 2020 Earnings for the year 2 317 2 271 2 410 2 362 3 467 3 467 5 440 5 440 Weighted-average number of ordinary shares 483 208 526 488 738 145 483 208 526 488 738 145 Earnings per share (cents) 717 709 1 126 1 113 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 – SA Community BEE schemes – Namibia Total 2021 2020 Weighted- average dilutive shares Weighted- average dilutive shares Potential shares1 17 755 15 128 2 627 1 593 1 559 1 559 33 8 210 6 729 1 481 1 559 1 559 1 559 3 840 2 846 994 1 690 1 690 1 690 19 348 9 769 5 530 1 Potential shares are the total number of shares arising from historic grants, schemes or awards available for distribution. 165 SupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Nedbank Group employee incentive schemes for the year ended 31 December Nedbank Group employee incentive schemes 2021 2020 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 Accelerated Exercised Surrendered Instruments outstanding at the end of the year 1 Compulsory Bonus Share Scheme. 2 Voluntary Bonus Share Scheme. Matched shares Instrument expiry date 1 April 2022 1 April 2023 1 April 2024 Matched shares outstanding not exercised at 31 December 2021 Shares exercised and forfeited during the year Shares not expected to vest Total potential shares Weighted-average dilutive shares applicable for the year 16 193 982 11 054 244 3 296 042 3 302 997 19 490 024 14 357 241 9 291 564 6 319 602 6 902 418 4 734 642 2 118 190 2 216 960 1 177 852 1 086 037 19 490 024 14 357 241 14 357 241 11 303 275 9 349 301 7 298 988 (16 011) (2 675) (3 253 593) (3 584 901) (946 914) (657 446) 19 490 024 14 357 241 Number of shares 784 187 1 724 422 787 433 3 296 042 728 320 (1 397 658) 2 626 705 1 481 071 – The obligation to deliver the matched shares issued under the Voluntary and Compulsory Bonus Share Schemes is subject to time and other performance criteria. – This obligation exists over 31 December 2021 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. 166 Nedbank Group Annual Results 2021 Nedbank Group (2005) Restricted- and Matched-share Schemes Restricted shares1 Details of instruments granted and not exercised at 31 December 2021 and the resulting dilutive effect: Instrument expiry date 15 March 2022 16 March 2022 16 August 2022 17 August 2022 20 March 2023 21 March 2023 26 March 2024 27 March 2024 20 August 2024 21 August 2024 Restricted shares not exercised at 31 December 2021 Unallocated shares Treasury shares Shares exercised and forfeited during the year Shares not expected to vest Total potential shares Weighted-average dilutive shares applicable for the year P P P P P Number of shares 1 707 799 1 231 115 51 604 51 589 2 867 794 2 043 827 4 578 504 3 500 029 85 863 75 858 16 193 982 541 989 16 735 971 1 840 356 (3 448 159) 15 128 168 6 728 717 1 Restricted shares are issued at a market price for no consideration to participants, and are held by the schemes until the expiry date (subject to achievement of performance conditions). Participants have full rights and receive dividends. P Performance-based instruments. 167 SupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Long-term debt instruments Instrument code Subordinated debt Callable notes (rand-denominated)1 Callable notes and long-term debenture (Namibian-dollar-denominated) Green bonds (rand-denominated)1 Securitised liabilities – callable notes (rand-denominated) Senior unsecured debt – senior unsecured notes (rand-denominated) Unsecured debentures (rand-denominated) Senior unsecured green bonds (rand-denominated) 2021 2020 17 059 15 994 14 620 13 665 426 2 013 1 856 35 364 51 3 829 317 2 012 2 084 39 021 43 2 628 Total long-term debt instruments in issue 58 159 59 770 1 Loss absorbing instruments. Further information can be accessed on our group website Capital and risk management reports: https://www.nedbank.co.za/content/nedbank/desktop/gt/en/investor-relations/information-hub/capital-and-risk-management-reports.html Debt investors programme: https://www.nedbank.co.za/content/nedbank/desktop/gt/en/investor-relations/debt-investor/debt-investors-programme.html External credit ratings Standard & Poor’s Moody’s Investors Service Nedbank Limited Sovereign rating SA Nedbank Limited Sovereign rating SA Feb 2022 May 2021 Dec 2021 May 2021 Stable Stable Negative Negative BB- B BB B BB- B Ba2 Ba2 Not prime Not prime BB B Ba2 Not prime Ba2 N/A zaAA zaA-1+ zaAAA zaA-1+ Aa1/NP P-1.za 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 168 Nedbank Group Annual Results 2021 Additional tier 1 capital instruments The group issued new-style (Basel III-compliant) additional tier 1 capital instruments as follows: Instrument code Subordinated Callable notes (rand-denominated) NEDT1A NEDT1B NGLT1A NGLT1B NGT103 NGT104 NGT105 NGT106 NGT107 NGT108 NGT1G – Green AT1 NGT109 NGT110 Instrument terms 2021 2020 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 3-month JIBAR + 4,95% per annum 3-month JIBAR + 4,55% per annum 3-month JIBAR + 4,67% per annum 3-month JIBAR + 4,10% per annum 3-month JIBAR + 3,91% per annum 3-month JIBAR + 3,91% per annum 1 500 500 600 750 671 1 829 1 000 500 472 600 750 671 1 829 1 000 500 472 1 537 910 700 350 Total non-controlling interest attributable to additional tier 1 capital instruments 9 319 7 822 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 a tax event. The payment of interest is at the discretion of the issuer and interest payments are non-cumulative. In addition, if certain conditions are reached, the regulator may prohibit Nedbank from making interest payments. Accordingly, the instruments are classified as equity instruments and disclosed as part of the non-controlling interest. 169 SupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Shareholders’ analysis Register date: 31 December 2021 Authorised share capital: 600 000 000 shares Issued share capital: 508 870 678 shares Major shareholders/managers1 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) Allan Gray Investment Council (SA) Coronation Fund Managers (SA) Old Mutual Life Assurance Company (SA) Limited and associates (includes funds managed on behalf of other beneficial owners) BlackRock Incorporated (international) Lazard Asset Management (international) The Vanguard Group Incorporated (international) Sanlam Investment Management Proprietary Limited (SA) GIC Asset Management Proprietary Limited (international) Ninety One (SA) Major beneficial shareholders2 Government Employees Pension Fund (SA) Allan Gray Balanced Fund (ZA) Old Mutual Life Assurance Company (SA) Limited and associates (SA) 1 Source: JP Morgan Cazenove. 2 Source: Vaco Ownership. Number of shares 2021 % holding 2020 % holding 23 269 131 6 485 648 6 336 586 149 062 16 735 971 47 512 69 667 537 54 083 505 35 632 689 26 326 444 23 143 128 16 438 722 15 729 896 15 663 050 15 100 406 14 830 894 76 316 690 38 066 319 24 662 527 4,58 1,28 1,25 0,03 3,29 0,01 13,69 10,63 7,00 5,17 4,55 3,23 3,09 3,08 2,97 2,91 15,00 7,48 4,85 3,62 1,32 1,29 0,03 2,29 0,01 10,39 8,95 8,58 21,96 4,17 2,79 2,51 2,16 1,69 0,32 11,36 5,74 21,47 Index classified shareholding Index classiﬁed shareholding (%) (December, %) Foreign shareholding Foreign shareholding (%) (December, %) , 5 1 1 , 8 9 1 , 3 1 2 , 1 1 2 , 5 6 2 , 1 8 1 , 3 9 2 , 2 6 2 , 1 4 2 , 4 1 3 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 170 Nedbank Group Annual Results 2021 Geographical distribution of shareholders1 Domestic SA Namibia Unclassified Foreign USA Asia Europe UK and Ireland Other countries Total shares listed Less: Treasury shares held Net shares reported 1 Source: JP Morgan Cazenove. Number of shares 2021 % holding 2020 % holding 349 309 703 68,64 318 612 839 13 211 454 17 485 410 159 560 975 79 164 152 28 019 991 21 447 861 14 908 598 16 020 373 62,61 2,59 3,44 31,36 15,56 5,51 4,21 2,93 3,15 75,91 71,70 3,06 1,15 24,09 12,67 3,56 3,51 2,47 1,88 508 870 678 100,00 100,00 23 269 131 485 601 547 171 SupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Nedbank CIB Property Finance Nedbank Retail and Business Banking Nedbank Wealth Nedbank Africa Regions Centre Nedbank Group 2021 Downturn Risk expected loss weighting1 (dEL)2 BEEL3 Nedbank Group 2020 Downturn expected loss (dEL)2 387 446 168 096 399 083 22 056 79 599 – 888 184 8 490 14 000 957 110 Basel III balance sheet credit exposure by business cluster and asset class Specialised lending – HVCRE4 5 072 5 073 167 156 52 623 16 874 110 60 44 Specialised lending – IPRE5 105 994 105 834 1 543 5 389 Specialised lending – project finance 45 577 1 6 613 4 417 36 825 1 928 13 660 9 493 5 920 27 767 45 149 56 1 480 10 1 145 610 16 480 147 176 32 853 30 107 79 465 90 3 075 9 632 65 135 1 525 149 174 Rm AIRB Approach Corporate SME – corporate Public sector entities Local governments and municipalities Sovereign Banks Retail mortgage Retail revolving credit Retail – other SME – retail Securitisation exposure TSA6 Corporate SME – corporate Public sector entities Local government and municipalities Sovereign Banks Retail mortgage Retail revolving credit Retail – other SME – retail PiPs Non-regulated entities 16 399 184 184 5 132 112 926 45 578 45 366 13 746 10 973 85 502 30 933 155 242 16 545 147 311 34 423 323 135 34 522 – 39 314 73 971 18,03 50,14 – – 62 674 – – 135 918 8 421 16 798 6 812 599 974 13 68 104 5 923 244 22 10 365 9 225 7 304 315 3 312 2 604 106 5 923 1 053 244 22 18 786 26 023 14 116 315 3 911 3 578 187 16 503 Mix (%) 90,74 18,82 0,52 11,52 4,66 4,63 1,40 1,12 8,73 3,16 15,86 1,69 15,05 3,52 0,03 0,002 7,56 0,61 0,11 0,02 1,92 2,66 1,44 0,03 0,40 0,37 0,02 1,69 Change (%) (7,20) (11,72) (6,62) (2,07) (3,28) 9,33 (29,65) (9,92) 0,37 (64,51) 7,35 (1,83) 6,43 (0,95) (5,65) (43,68) (35,31) (60,22) (20,09) 2,54 214,02 0,60 (44,14) (21,20) (3,85) 25,28 (2,64) (5,60) 38,55 45,01 103,13 28,28 52,69 50,90 33,09 40,44 12,95 39,71 25,44 62,77 50,55 42,04 128,59 102,00 67,04 83,09 96,96 68,30 20,59 38,84 34,16 63,76 63,22 1 601 52 233 148 243 20 21 21 63 786 823 3 967 512 750 167 693 132 536 324 26 – 1 933 1 587 6 946 906 BEEL3 13 626 1 030 52 469 103 418 207 16 1 947 1 619 6 837 928 7 700 1 480 62 225 119 233 70 8 17 48 746 789 3 388 515 208 648 5 496 115 317 47 124 41 493 19 539 12 181 85 184 87 161 144 608 16 854 138 411 34 752 342 10 518 1 627 614 27 18 320 8 287 14 032 565 4 963 3 721 149 16 950 22 489 8 490 14 000 (24 985) (2 496) 21 326 7 700 13 626 (24 643) (3 317) Total Basel III balance sheet exposure7 8 403 845 168 096 399 390 56 591 79 705 39 314 978 845 100,00 8 490 14 000 1 036 883 7 700 13 626 dEL (AIRB Approach) Expected loss performing book BEEL on defaulted advances IFRS impairment on AIRB loans and advances Excess of downturn expected loss over eligible provisions9 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-South African banking entities in Africa are covered by TSA. 7 Balance sheet credit exposure includes on-balance-sheet, repurchase and resale agreements and derivative exposure. 8 The decreases in credit exposure for the bank, corporate and public sector entity asset classes are attributable mainly to the implementation of the new standardised approach for the measurement of counterparty credit risk (SA-CCR). Previously total credit exposure included a gross exposure measure including potential future exposure (PFE) for OTC derivative exposure, the new measurement takes into account counterparty netting and collateralisation. 9 Excess impairments compared to downturn expected loss for IRB exposures total R2 496m at 31 December 2021. However, in line with the Bank’s Act Regulations the total amount that may be included in tier 2 unimpaired reserve funds is limited to 0,6% of total IRB risk-weighted assets, which amounts to R2 587m at 31 December 2021 (2020: R2 626m). 172 Nedbank Group Annual Results 2021 Mix (%) 90,74 18,82 0,52 11,52 4,66 4,63 1,40 1,12 8,73 3,16 15,86 1,69 15,05 3,52 0,03 7,56 0,61 0,11 0,02 0,002 1,92 2,66 1,44 0,03 0,40 0,37 0,02 1,69 Total Basel III balance sheet exposure7 8 403 845 168 096 399 390 56 591 79 705 39 314 978 845 100,00 Nedbank Property Business Nedbank CIB Finance Banking Wealth Regions Centre Nedbank Africa Nedbank Group 2021 Nedbank Retail and 387 446 168 096 399 083 22 056 79 599 – 888 184 167 156 52 623 16 874 44 Specialised lending – HVCRE4 5 072 5 073 Specialised lending – IPRE5 105 994 105 834 1 543 5 389 Specialised lending – project finance 45 577 6 613 4 417 36 825 1 928 Local governments and municipalities 1 56 1 480 10 1 145 610 16 480 147 176 32 853 13 660 9 493 5 920 27 767 45 149 107 79 465 90 Securitisation exposure 149 174 TSA6 135 34 522 – 39 314 73 971 Local government and municipalities 135 918 Rm AIRB Approach Corporate SME – corporate Public sector entities Sovereign Banks Retail mortgage Retail revolving credit Retail – other SME – retail Corporate SME – corporate Public sector entities Sovereign Banks Retail mortgage Retail revolving credit Retail – other SME – retail PiPs 184 184 5 132 112 926 45 578 45 366 13 746 10 973 85 502 30 933 155 242 16 545 147 311 34 423 323 5 923 1 053 244 22 18 786 26 023 14 116 315 3 911 3 578 187 16 503 5 923 244 22 10 365 9 225 7 304 315 3 312 2 604 110 60 30 3 075 9 632 65 135 1 525 8 421 16 798 6 812 599 974 13 Non-regulated entities 16 399 68 104 106 dEL (AIRB Approach) Expected loss performing book BEEL on defaulted advances IFRS impairment on AIRB loans and advances Excess of downturn expected loss over eligible provisions9 Change (%) Risk weighting1 Downturn expected loss (dEL)2 Nedbank Group 2020 Downturn expected loss (dEL)2 BEEL3 (7,20) (11,72) (6,62) (2,07) (3,28) 9,33 (29,65) (9,92) 0,37 (64,51) 7,35 (1,83) 6,43 (0,95) (5,65) 38,55 45,01 103,13 28,28 52,69 50,90 33,09 40,44 12,95 39,71 25,44 62,77 50,55 42,04 128,59 8 490 14 000 957 110 1 601 52 233 148 243 20 21 21 63 786 823 3 967 512 750 167 693 132 536 324 26 – 1 933 1 587 6 946 906 208 648 5 496 115 317 47 124 41 493 19 539 12 181 85 184 87 161 144 608 16 854 138 411 34 752 342 7 700 1 480 62 225 119 233 70 8 17 48 746 789 3 388 515 BEEL3 13 626 1 030 52 469 103 418 207 16 1 947 1 619 6 837 928 18,03 50,14 – – 62 674 – – 102,00 67,04 83,09 96,96 68,30 20,59 38,84 34,16 63,76 63,22 (43,68) (35,31) (60,22) (20,09) 2,54 214,02 0,60 (44,14) (21,20) (3,85) 25,28 (2,64) (5,60) 10 518 1 627 614 27 18 320 8 287 14 032 565 4 963 3 721 149 16 950 8 490 14 000 1 036 883 7 700 13 626 22 489 8 490 14 000 (24 985) (2 496) 21 326 7 700 13 626 (24 643) (3 317) 173 SupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 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 Non-interest revenue and income Net commission and fee income Commission and fee revenue Commission and fee expense Net insurance income Fair-value adjustments Net trading income Equity revaluation gains/(losses) Investment income Net sundry income Share of gains of associate companies Total income Impairments charge on financial instruments Net income Total operating expenses Indirect taxation Impairments charge on non-financial instruments and other losses Profit before direct taxation Total direct taxation Direct taxation Taxation on impairments charge on non-financial instruments and other losses Change % (9) (21) 9 (1) 2021 62 452 32 348 30 104 18 801 2020 (restated)1 68 654 41 146 27 508 19 026 14 838 14 393 18 012 (3 174) 15 (827) 3 654 516 98 507 79 48 984 6 169 42 815 29 314 935 205 12 361 3 113 3 175 (62) 16 846 (2 453) 1 336 4 550 (945) 183 508 115 46 649 12 425 34 224 27 705 1 017 417 5 085 1 164 1 283 (119) (31) 5 (50) 25 6 (8) (51) >100 >100 Profit for the year >100 9 248 3 921 174 Nedbank Group Annual Results 2021 Rm Other comprehensive income (OCI) 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 Property revaluations Remeasurements on long-term employee benefit assets Equity instruments at FVOCI – net change in fair value Change % >100 2020 (restated)1 256 199 96 (40) 1 2021 560 222 9 9 322 (2) Total comprehensive income for the year >100 9 808 4 177 Profit attributable to: – Ordinary and preference shareholders – Non-controlling interest – ordinary shareholders Profit for the year Total comprehensive income attributable to: – Ordinary and preference shareholders – Non-controlling interest – ordinary shareholders Total comprehensive income for the year Headline earnings reconciliation Profit attributable to ordinary shareholders Less: Non-headline earnings items Impairments charge on non-financial instruments and other losses Taxation on impairments charge on non-financial instruments and other losses >100 >100 >100 >100 >100 52 9 246 2 9 248 9 806 2 9 808 9 121 (143) (205) 62 3 919 2 3 921 4 175 2 4 177 3 977 (298) (417) 119 Headline earnings attributable to ordinary and preference shareholders >100 9 264 4 275 1 During the year, the group reviewed its statement of comprehensive income presentation. As a result of the review, certain line descriptions have been updated, subtotals have been removed and the 'Non-interest revenue and income' line item has been disaggregated. These changes represent reclassifications to the statement of comprehensive income presentation. It is the group's view that these changes provide more relevant disclosures on its financial performance. To provide comparability, the prior-year balances have been restated accordingly. The reclassifications had no impact on the group’s statement of financial position, statement of changes in equity and statement of cash flows. Nedbank Limited consolidated financial highlights for the year ended Rm ROE (%) ROA (%) NII to average interest-earning banking assets (%) CLR – banking advances (%) Cost-to-income ratio 2021 2020 12,2 0,86 3,77 0,81 59,8 6,0 0,39 3,35 1,61 59,4 175 SupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021 Nedbank Limited consolidated statement of financial position at 31 December Rm Assets Cash and cash equivalents1 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 Property and equipment Long-term employee benefit assets Intangible assets Total assets Total equity and liabilities Ordinary share capital Ordinary share premium Reserves Total equity attributable to equity holders of the parent Preference share capital and premium Holders of participating preference shares Holders of additional tier 1 capital instruments Non-controlling interest attributable to ordinary shareholders Total equity Derivative financial instruments Amounts owed to depositors Provisions and other liabilities Current taxation liabilities Deferred taxation liabilities Long-term employee benefit liabilities Long-term debt instruments Total liabilities Total equity and liabilities Change % 2021 2020 (restated)1 4 23 (51) 14 (31) 4 (29) (22) (7) (44) (17) 84 (9) 66 (5) 14 (1) 34 056 33 425 38 840 32 597 27 082 79 933 147 297 129 710 1 144 1 670 760 028 729 807 50 431 26 813 9 664 42 6 867 127 944 573 9 140 6 487 10 142 71 251 34 510 10 407 75 8 269 69 1 037 346 9 661 5 709 10 225 (1) 1 136 020 1 152 358 28 20 073 60 694 80 795 59 9 319 13 90 186 35 623 937 736 13 942 260 120 2 268 55 885 28 20 073 53 512 73 613 3 561 (58) 7 822 11 84 949 64 649 929 761 12 359 516 155 2 366 57 603 1 045 834 1 067 409 1 136 020 1 152 358 13 10 (100) >100 19 18 6 (45) 1 13 (50) (23) (4) (3) (2) (1) 1 During the year, the group reviewed the presentation of the mandatory reserve deposits with central banks, which was previously disclosed separately on the statement of financial position. As a result of this review, the mandatory reserve deposits with central banks have now been aggregated within the cash and cash equivalents balance, as the nature of the mandatory reserve deposits represents cash and cash equivalents. The amount of mandatory reserve deposits with central banks that was reclassified to cash and cash equivalents is R24 482m for 2020, and consequently the prior-year balances have been restated to provide comparative information. The group is of the view that the updated disclosure provides more relevant information for users to better understand the group’s cash and cash equivalents. 176 Nedbank Group Annual Results 2021 Definitions 12-month expected credit loss (ECL) This expected credit loss represents an ECL that results from default events 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 the defaults 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. Basic earnings per share (cents) Attributable income divided by the weighted-average number of ordinary shares. Central counterparty (CCP) A clearing house that interposes itself between counterparties for contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer, thereby ensuring the future performance of open contracts. 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 income, and share of profits or losses from associates and joint arrangements. Coverage (%) On-balance-sheet ECLs divided by on-balance-sheet 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) Income statement impairment 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 In line with the Basel III definition, default occurs in respect of a client in the following instances: • When the bank considers that the client is unlikely to pay their 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 their 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 stage 3 impairment is raised against such a credit exposure due to a significant perceived decline in the credit quality. For retail portfolios this is product-centred, and a default would therefore be for a specific advance. For all other portfolios, except specialised lending, it is client- or borrower-centred, meaning that should any transaction with a legal-entity borrower default, all transactions with that legal-entity borrower would be treated as having defaulted. To avoid short-term volatility, Nedbank employs a six-month curing definition where subsequent defaults will be an extension of the initial default. Diluted headline earnings per share (DHEPS) (cents) Headline earnings divided by the weighted-average number of ordinary shares, adjusted for potential dilutive ordinary shares. Directive 1/2020 A directive from the Prudential Authority (PA) that provides temporary measures to aid compliance with the liquidity coverage ratio during the Covid-19 pandemic stress period. The PA deemed it appropriate to amend the minimum liquidity coverage ratio (LCR) requirement temporarily to 80%, effective from 1 April 2020. Directive 2/2020 A directive from the PA that provides temporary capital relief to alleviate risks posed by the Covid-19 pandemic. The PA has implemented measures to reduce the specified minimum requirement of capital and reserve funds to be maintained by banks, to provide temporary capital relief to enable banks to counter economic risks to the financial system as a whole, and to individual banks. These measures are intended to provide relief to banks in response to the Covid-19 pandemic, thereby enabling banks to continue providing credit to the real economy during this period of financial stress. Directive 3/2020 A directive from the PA that implements measures to ensure that various types of relief to qualifying borrowers that were up to date at 29 February 2020, such as payment holidays, do not result in unintended consequences such as inappropriate higher capital requirements. The PA has provided temporary relief for qualifying loans from portions of Directive 7/2015 dealing with distressed restructures. Importantly, this relief covers retail, small and medium enterprises (SMEs) and corporate loans, including all specialist asset classes such as commercial property. Directive 7/2015 A directive from the PA that provides clarity on how banks should identify restructured credit exposures and how these exposures should be treated for purposes of the definition of default. 177 SupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021Dividend 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 impairments charged on non-financial instruments and sundry gains or losses. 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 conditions in determining a significant increase in credit risk (SICR) and ECL. Guidance Note 4/2020 A guidance note from the South African Reserve Bank that recommends banks no longer make dividend distributions on ordinary shares to conserve capital, in light of the negative economic impact of the Covid-19 pandemic and the temporary regulatory-capital relief provided. Guidance Note 3/2021 A guidance note from the South African Reserve Bank that recommends banks be prudent and consider the adequacy of their current and forecast capital and profitability levels, internal capital targets and risk appetite, as well as current and potential future risks posed by the ongoing pandemic, when making distributions of dividends on ordinary shares and the payment of cash bonuses to executive officers and material risk-takers. Guidance Note 3/2021 replaces Guidance Note 4/2020. 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 The ECL of default events between the reporting date and the end of the lifetime of the financial asset, weighted by the probability of the defaults occurring. 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. 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 and income (NIR) to total income (%) Non-interest revenue and income as a percentage of total income, excluding the impairments charge on loans and advances and share of gains/losses of associate companies. 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 are up to date (not in default) but are classified as defaulted due to regulatory requirements, ie Directive 7/2015 or the curing definition. 178 Nedbank Group Annual Results 2021Preprovisioning operating profit (PPOP) (Rm) Headline earnings plus direct taxation plus impairment charge on loans and advances. Price/earnings ratio (historical) Closing share price divided by the headline earnings multiplied by total days in the year divided by total days in the period. Price-to-book ratio (historical) Closing share price divided by the net asset value per share. 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 assets (ROA) (%) Net contribution (headline earnings) divided by the average daily assets multiplied by the total days in the year divided by the total days in the period. Return on equity (ROE) (%) Headline earnings as a percentage of daily average ordinary shareholders’ equity. Return on cost of ETI investment (%) Headline earnings from the group’s ETI investment pre-funding costs divided by the group’s original cost of investment (R6 265m). Return on tangible equity (%) Headline earnings as a percentage of daily average ordinary shareholders' equity, less intangible assets. Return on risk-weighted assets (RWA) (%) Headline earnings as a percentage of monthly average risk-weighted 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. SME loan guarantee scheme An initiative by National Treasury and the South African Reserve Bank, in partnership with participating commercial banks, aimed at giving financial support to SMEs affected by the lockdown. 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 Any advance or group of loans and advances that has triggered the Basel III-definition of default criteria, in line with South African banking 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 stage 3 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. Tangible net asset value (Rm) Equity attributable to equity holders of the parent, excluding intangible assets. Tangible net asset value per share (cents) Tangible 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. Total 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. Value in use (VIU) (Rm) The present value of the future cash flows 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. Year-to-date annualised or ytd annualised The growth rate for the six-month period to 30 June annualised by 366 days, divided by 182 days. 179 SupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2021 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Group Annual Results 2021Abbreviations and acronyms ACI African, Coloured and Indian 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 programming 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 CCP central counterparty CET1 common-equity tier 1 CIB Corporate and Investment Banking CIPC Companies and Intellectual Property 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, social and governance 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 GFC great financial crisis GLAA gross loans and advances GLC great lockdown crisis GOI gross operating income 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 180 M&A mergers and acquisitions MFC Motor Finance Corporation (vehicle finance lending division of Nedbank) MRC minimum required capital MZN Mozambican metical N/A not applicable 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 NIR non-interest revenue and income NIM net interest margin 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 PA Prudential Authority PAT profit after tax PAYU Pay-as-you-use account Plc Public limited company PPOP preprovisioning operating profit PRMA postretirement medical aid R rand RBB Retail and Business Banking Rbn South African rand expressed in billions REITs real estate investment trusts Rm South African rand expressed in millions ROA return on 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 medium enterprise STI short-term incentive TSA The standardised approach TTC through the cycle UK United Kingdom USA United States of America USD United States dollar (currency code) 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) Nedbank Group Annual Results 2021Company 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 JSE Investor Services 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: NSX share code: NBK ISIN: ZAE000004875 JSE alpha code: ADR code: ADR CUSIP: NEDI NDBKY 63975K104 For more information contact Investor Relations Email: NedGroupIR@nedbank.co.za Mike Davis Chief Financial Officer Email: MichaelDav@nedbank.co.za Alfred Visagie Executive Head, Investor Relations Tel: +27 (0)10 234 5329 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. • Link to a webcast of the presentation to investors. For further information please contact Nedbank Group Investor Relations at NedGroupIR@nedbank.co.za. Company Secretary: J Katzin Sponsors in SA: Merrill Lynch SA Proprietary Limited Nedbank Corporate and Investment Banking, a division of Nedbank Limited Sponsor in Namibia Old Mutual Investment Services (Namibia) Proprietary Limited 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 US 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 Group Annual Results 2021 nedbankgroup.co.za

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