Nedbank Group Ltd. Annual Report 2023

Plain-text annual report

Annual results for the year ended 31 December 2023 see money differently Message from our Chief Executive 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 162 Supplementary information 163 164 166 166 167 168 170 172 173 174 175 178 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 1 2 Results presentation 52 2023 results commentary 66 Financial results 67 68 70 72 76 Financial highlights Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Return-on-equity drivers 79 Segmental analysis 80 82 86 90 102 106 110 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 112 Income statement analysis 113 116 122 124 126 126 Net margin analysis Impairments Non-interest revenue and income Expenses Headline earnings reconciliation Taxation charge All 2023 targets met – a strong foundation from which we shift focus to deliver on our medium-term targets In 2023 the operating environment for South African banks was more challenging than initially forecast. In addition to a weaker global economy, domestic economic activity was impacted by record levels of load-shedding (electricity shortages), logistical constraints, higher-than-expected levels of inflation and, as a result, higher-than-expected increases in interest rates. Collectively, these conditions have put increasing pressure on consumers’ finances and led to reductions in business confidence and investment in most sectors other than energy. Progress, albeit slow, is being made in the partnership between government and business to help address the key issues of energy security, transport and logistics, and crime and corruption that are collectively resulting in very low levels of economic growth in South Africa (SA) and a weakening fiscal position. Despite this difficult and volatile operating environment, Nedbank Group produced a strong financial performance in 2023. Headline earnings (HE) grew by 11% to R15,7bn, underpinned by strong revenue and associate income growth of 12% and prudent expense management that enabled preprovisioning operating profit (PPOP) growth of 15%. This growth was partially offset by a 30% increase in the impairment charge, which is a decrease from the 57% increase reported in H1 2023. As a result, the group’s credit loss ratio (CLR) improved from 121 bps (H1 2023) to 109 bps for the full year. The diversification benefit across our portfolio of businesses was evident in very strong growth in HE from Nedbank Africa Regions, albeit off a low base, alongside solid performances in both HE and return on equity (ROE) from Nedbank Corporate and Investment Banking, Nedbank Retail and Business Banking and Nedbank Wealth. The group’s balance sheet metrics all remained strong, enabling the declaration of a final dividend of 1 022 cents per share, up by 18%, at a payout ratio of 57%. The R5bn capital optimisation initiative announced in March 2023 was completed successfully, through a share repurchase programme and odd-lot offer executed at attractive levels, enhancing both ROE and earnings growth on a per-share basis. A highlight of the year was achieving all the group’s post-Covid-19 targets for 2023 announced in March 2021. Two of these targets were already achieved in 2022 – being exceeding the 2019 diluted headline earnings per share (DHEPS) of 2 565 cents and ranking #1 on Net Promoter Score (NPS). In 2023 we further increased DHEPS to 3 199 cents, up by 14% yoy, and we maintained our #1 NPS ranking among South African banks. Pleasingly, at the end of 2023, we also met the remaining 2 targets, by reporting an ROE of 15,1% ahead of the target level of 15,0% and a cost-to-income ratio of 53,9%, which is lower than our target of 54,0%. These targets were achieved as a result of ongoing progress on delivery of our strategy, with a focus on growth, productivity, as well as risk and capital management. Growth trends across average interest-earning banking assets (AIEBA) (+7%), net interest income (NII) (+14%), non-interest revenue (NIR) (+6%) and associate income (+64%) remained robust. Levels of productivity improved, evident in our cost-to-income ratio declining to 53,9% from 55,8% in 2022. Capital and liquidity ratios remained strong, with a common-equity-tier 1 (CET1) ratio of 13,5%, an average fourth-quarter liquidity coverage ratio (LCR) of 135% and a net stable funding ratio (NSFR) of 117%, all well above board targets and regulatory minimums. The group’s total expected credit loss (ECL) coverage increased to an annual high of 3,62% (Dec 2022: 3,37%) and we remain conservatively provided in a difficult macroeconomic environment. Our world-class technology platform, delivered through our Managed Evolution (ME) programme, which has reached 95% completion, supported continued double-digit growth in all digital-related metrics; client satisfaction scores remaining at the top-end of the South African banking peer group; higher levels of cross-sell; main-banked client gains across all segments; market share gains in key product categories; and improved efficiencies. We continued to create positive impacts through R145bn of exposures that support sustainable development finance (SDF) aligned with the United Nations (UN) Sustainable Development Goals (SDGs); maintained high levels of employee satisfaction; supported clients during difficult times; retained our top-tier rankings on environmental, social and governance (ESG) scores; and maintained our level 1 broad-based black economic empowerment (BBBEE) status under the Amended Financial Sector Code (FSC) for the sixth year in a row. Looking forward, although geopolitical uncertainties increase forecast risk, we currently expect the economic environment in SA to remain challenging but improve off a low 2023 base. The Nedbank Group Economic Unit forecasts SA’s gross domestic product (GDP) to increase by 1% in 2024 and inflation to continue to decline. The forecast is for the South African prime lending rate to decline by a cumulative 75 bps in the second half of 2024 to end the year at 11,0% and private sector credit growth to be muted at around 5%. While we were pleased to have achieved all our 2023 targets while operating in a more difficult economic environment, we aspire to deliver ongoing improvements in ROE to increase shareholder value. Our strong financial performance in 2023, together with the progress made in executing on our strategy and underlying momentum in the business, gives us confidence in delivering on our medium-term targets* and, in particular, our aim to increase our ROE to 17% by 2025 and above 18% in the long term. As I reach the final stretch of my 14 years as Chief Executive of Nedbank Group, I look back with pride on our achievements and the challenges we have overcome together. When I retire at the annual general meeting in May 2024 and hand over to Jason Quinn, I know I leave behind a better Nedbank than what I was entrusted with, and that Jason and the Nedbank team will inherit strong foundations from which to build an even better future for all our stakeholders. Thank you to all the Nedbankers who have been part of this journey and to our more than 7,3 million retail and wholesale clients for choosing to bank with Nedbank. We also appreciate the ongoing support of the investment community, regulators, and our other stakeholders. As Nedbank, we continue to play a constructive and positive role in society as we fulfil our purpose of using our financial expertise to do good for the benefit of all our stakeholders. Mike Brown Chief Executive Headline earnings CLR 11% 109 bps ROE 15,1% CET1 RATIO 13,5% 2023 15 650 2022 14 061 2021 11 689 2020 5 440 2019 12 506 2023 109 2022 89 2021 83 2020 161 2019 79 2023 15,1 2022 14,1 2021 12,5 2020 6,2 2019 15,0 2023 13,5 2022 14,0 2021 12,8 2020 10,9 2019 11,5 * These targets are not profit forecasts and the group’s joint auditors have not reviewed or reported on them. 1 Nedbank Group Annual Results 2023Message from ourChief ExecutiveSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentation2023 Annual Results For the year ended 31 December 2023 5 March 2024 NEDBANK GROUP LIMITED – 2023 Annual Financial Results Agenda Overview Operating environment Strategic progress Financial overview Cluster overview Mike Brown Chief Executive Outlook & guidance NEDBANK GROUP LIMITED – 2023 Annual Financial Results 2 1 2 Notes:Notes:Nedbank Group Annual Results 2023Overview All 2023 targets met: DHEPS | Cost-to-income | ROE | NPS Strong foundations in place for delivery of medium- & long-term targets with a focus on continued ROE improvement Environment Strategy Operations Financial Volatile & difficult operating environment Strategic delivery showing results Good operational performance ▪ Weak 2023 SA GDP growth at ~0,5% ▪ Record electricity shortages, improved in H2 ▪ 125 bps yoy interest rate increases, flat in H2 ▪ Inflation high, but trending down ▪ Volatile markets – geopolitical & social risks ▪ Strong digital growth ▪ PPOP +15% ▪ JAWS +4% ▪ Cost-to-income 53,9% ▪ #1 in NPS ▪ Market share gains in HL, term-loans & retail deposits ▪ R2,2bn TOM 2.0 benefits ▪ ESG leadership in general & renewable energy in particular NEDBANK GROUP LIMITED – 2023 Annual Financial Results Strong revenue growth & prudent expense management, partially offset by higher impairments ▪ Headline earnings +11% ▪ DHEPS +14% ▪ Revenue +12% ▪ Impairments +30% H1: +57% yoy | H2: +8% yoy ▪ ROE 15,1% ▪ CET1 13,5% ▪ NAV per share +8% ▪ ECL coverage 3,62% ▪ Full-year DPS +15% 3 Operating environment – volatile & difficult environment Remains weak, no material investment outside of energy Business confidence index1 100 75 50 25 0 Confidence Lack of confidence SA Government bond yields (%) 14 12 10 8 Volatile year, but Q4 improvement 250 0 -250 -500 -750 -1000 Foreign bond & equity sales3 (Rbn) Risk off environ- ment & SA- specific risks Bonds Equities 19 20 21 22 23 19 20 21 22 23 19 20 21 22 23 Eskom EAF 2 (%) 95 85 75 65 55 45 Annual average Record levels of load- shedding in H1, improvement in H2 Rand vs US$ 25 20 15 10 Rand weaker vs 2022 SA GDP growth (Rtn) 6% 4% 2% 0% -2% -4% -6% -8% GDP growth less than population growth 17 18 19 20 21 22 23 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23 19 20 21 22 23 14 15 16 17 18 19 20 21 22 23 1 SA Bureau of Economic Research. | 2 Eskom electricity availability factor. | 3 Cumulative sales from 2019. | F: Forecast. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 4 3 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief Executive Operating environment – structural challenges to economic growth around energy supply, logistics & crime being addressed through Government- Business partnership Energy/Electricity1 Logistics/Transport2 Crime/Corruption6 30 20 10 0 ▪ ▪ ▪ TWh electricity shed H1 H2 25 20 15 10 5 Million tons of goods transported by rail 50 45 40 35 30 Corruption perception index score 41 19 20 21 22 23 13 15 17 19 21 23 13 15 17 19 21 23 Estimated GDP loss3 of Estimated GDP loss4 of 1% to 3% up to 5% Private sector investments5 – more than 6 GW registered & under construction over the past 2 years REIPPP – mixed progress Loadshedding possible to reduce7 to largely level 1 & 2 in the medium-term ▪ National Logistics Crisis Committee established ▪ Freight Logistics Roadmap published ▪ Preferred operator for Durban port announced ▪ Progress in clearing port backlogs ▪ ▪ FATF greylisting – some progress made, with key challenges in investigation & prosecution capability Limited success with state-capture- related prosecutions Business & Government working together through the B4SA platform to accelerate progress on these issues to increase levels of economic growth 1 Source: Eskom se Push & Nedbank GEU. | 2Source: Statistics SA. | 3Source: SARB (June 2023). | 4Source: SA National Treasury (November 2023). | 5Source: NERSA registrations. | 6Source: Transparency International. Best in class: Denmark with a 90 score; worst: Somalia with a score of 11. | 7NECOM. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 5 Operating environment – large renewable energy opportunity to reduce impact of load-shedding & ensure a Just Transition Renewable energy market potential up to 20301 (GW) NECOM estimates to reduce load-shedding4 (targeted additional power to be added to the grid, GW) Additional info Private power generation 12,4 GW 4,7 GW - Government procurement projects 4,0 GW 9,6 GW 1,2 GW 17,1 GW 14,8 GW Solar Wind BESS Total Financing Nedbank CIB estimates by 2030 > R650bn2 JET IP estimates by 2027 R475bn3 Renewable investments to be supported by: • Grid expansion accelerated through build-own-operate- and-transfer models • More energy storage capacity than currently in pipeline • Gas-to-power for peaking purposes 12 10 8 6 4 2 0 2 GW new wind power >5,5 GW new solar PV power >1,5 GW other >1 GW improved Eskom performance Q1 24 Q2 24 Q3 24 Q4 24 Q1 25 Q2 25 Q3 25 Q4 25 1 Based on assessment of Eskom Renewable Energy Grid Survey projects likelihood of reaching closure by 2030. BESS = Battery energy storage system. | 2Source: Nedbank CIB energy team estimates of new cumulative financing opportunities for the total SA market by 2030. | 3Source: SA Just Energy Transition Investment Plan. | 4Source: NECOM. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 6 4 Notes:Notes:Nedbank Group Annual Results 2023Operating environment – consumers have been under increasing pressure Prime interest rate (year-end, %) 20 15 10 5 0 Steep increase of +4,75% (since 2021), but flat in H2 2023 Inflation (annual average, %) 15 10 5 0 Trending down, including food & fuel Household savings rate (annual, % of PDI) 2 1 0 -1 -2 -3 -4 HH savings reduced to support debt service costs 05 07 09 11 13 15 17 19 21 23 05 07 09 11 13 15 17 19 21 23 05 07 09 11 13 15 17 19 21 23 Personal disposable income (quarterly, Rtn) No growth since 2021 Household debt service costs (quarterly, % of PDI) 15 ~35% more expensive to finance a home since 2020 3 2 1 10 5 05 07 09 11 13 15 17 19 21 23 NEDBANK GROUP LIMITED – 2023 Annual Financial Results 0 05 07 09 11 13 15 17 19 21 23 Slowdown in H2 2023 across all retail products Household credit growth (annual, % yoy) 30 25 20 15 10 5 0 05 07 09 11 13 15 17 19 21 23 Nedbank Group strategy Our purpose To use our financial expertise to do good for individuals, families, businesses & society Strategic value drivers Growth Productivity Risk and Capital Management Strategic value unlocks Digital leadership (DX) Market-leading client experiences (CX) Focusing on areas that create value (SPT) Efficient execution (TOM) Creating positive impacts (Purpose delivery) World-class technology platform Our employees & differentiated corporate culture (EX) NEDBANK GROUP LIMITED – 2023 Annual Financial Results 7 8 5 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief ExecutiveGrowth – strong revenue & client growth Nedbank revenue1 & average interest-earning banking asset growth (%) 15% 10% 5% 0% -5% -10% 19 20 21 22 23 NII NIR NIR growth excl restatements AIEBA 1 2022 NIR restated for IFRS 17 & card-processing costs. F= forecast. NEDBANK GROUP LIMITED – 2023 Annual Financial Results Strategic value drivers Growth Productivity Risk & capital management Strong client-driven growth ▪ New CIB primary client wins: 20 ▪ Retail main-banked clients: +9% to 3,5m ▪ NAR clients: +4% to 349k ▪ App volumes: +18% yoy & > 300% since 2019 ▪ Retail cross-sell ratio: up to 1,96 (2019: 1,71) Impact of financial markets ▪ AUM: +14% to R448bn ▪ Markets revenue: +7% Active interest rate risk management – positioning an appropriately sized residual endowment position as an offset against anticipated changes in impairments over the cycle. R1,4bn (pre-tax) sensitivity for every 1% change. (Average prime: 21: 7,0%, 22: 8,8%, 23: 11,4%, 24F: 11,5%) 9 Productivity – structural cost optimisation initiatives support a reduction in the group’s cost-to-income ratio Strategic value drivers Growth Productivity Risk & capital management Nedbank cost-to-income ratio 1 (%) , 5 6 5 19 , 1 8 5 20 , 8 7 5 21 , 8 5 5 22 , 9 3 5 23 4 5 < 2 5 < 0 5 < 23 target MT target LT target Structural cost optimisation benefits ▪ Managed Evolution IT build 95% complete, having delivered a world-class IT platform & leading client experience outcomes, enabling TOM 2.0 savings of R2,2bn to date ▪ Intangible software assets peaked at R9bn in 2020 with 2023 at R7,9bn & IT cash flow spend peaked in 2017 at R2,3bn with 2023 at R1,3bn ▪ Significantly increased levels of digital usage, eg digital volumes +12% yoy (with lower acquisition & operating costs) ▪ Headcount down by 2% yoy & down by 13% since 2019, largely through natural attrition ▪ Flexible work practices & real estate optimisation (branch & CRE) enabling ongoing cost savings PPOP growth +15% to R30bn 1 2022 restated for net monetary loss reclassification, card-processing costs & IFRS 17. Prior years have not been restated. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 10 6 Notes:Notes:Nedbank Group Annual Results 2023 Risk & capital management – a fortress balance sheet remains in place after the R5bn capital optimisation initiative Strategic value drivers Growth Productivity Risk & capital management Capital Liquidity Credit CET1 ratio (%) R12bn average surplus capital & CET1 well-above top end of board range LCR (%) CLR (bps) , 5 1 1 , 9 0 1 , 8 2 1 , 0 4 1 , 5 3 1 Dec 19 Dec 20 Dec 21 Dec 22 Dec 23 5 2 1 Q4 19 6 2 1 Q4 20 8 2 1 Q4 21 1 6 1 Q4 22 5 3 1 Q4 23 9 7 19 1 6 1 20 3 8 21 9 8 22 9 0 1 23 Dividends (cents/share) NSFR (%) Total ECL coverage (%) s d n e d v d i i o N 20 5 1 4 1 19 1 9 1 1 21 9 4 6 1 22 3 9 8 1 23 3 1 1 Dec 19 3 1 1 Dec 20 6 1 1 Dec 21 9 1 1 Dec 22 7 1 1 Dec 23 6 2 2 , 19 5 2 3 , 20 2 3 3 , 21 7 3 3 , 22 2 6 3 , 23 NEDBANK GROUP LIMITED – 2023 Annual Financial Results 11 Strategic overview ‘Our world-class technology platform & good strategic execution are delivering results’ Mfundo Nkuhlu Chief Operating Officer NEDBANK GROUP LIMITED – 2023 Annual Financial Results 12 7 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief Executive Nedbank Group strategy Our purpose To use our financial expertise to do good for individuals, families, businesses & society Strategic value drivers Growth Productivity Risk and Capital Management Strategic value unlocks Digital leadership (DX) Market-leading client experiences (CX) Focusing on areas that create value (SPT) Efficient execution (TOM) Creating positive impacts (Purpose delivery) World-class technology platform Our employees & differentiated corporate culture (EX) NEDBANK GROUP LIMITED – 2023 Annual Financial Results 13 A world-class technology platform for ongoing competitive advantage – Managed Evolution (ME) IT build 95% complete – on time, on scope, on budget Core banking systems 88% complete Product lifecycle management Pricing & billing Product catalogues Core product systems Deposit products Transactional Investment Lending products # of products1 Transactional ~60% From To Investment ~80% From To Lending Our focus beyond ME ▪ Product rationalisation & migration – 2,1 million MiGoals Accounts opened to date (including 1,4 million migrations) ▪ Product digitisation – 8/10 client journeys completed with home loans & VAF digital onboarding & sales to be completed in H2 2024 ▪ Converging for scale – leverage ME digital IT stack in NAR & mobile app convergence with target completion by end 2026 ▪ Payment modernisation ▪ Process automation ▪ AI & Data – 300 Microsoft Copilot licences in use & > 50 use cases being considered ▪ Cloud computing & storage2 – almost double usage over the next 3 years Foundational components 99% complete Enterprise content & master data management Client systems Enterprise security Enterprise data Modular architecture Not yet defined To From 1 Current estimated product rationalisation. Target state lending products & juristic deposit product definitions remain work in progress. | 2 2022: ~24% & 2023: ~45%. NEDBANK GROUP LIMITED – 2023 Annual Financial Results Project initiated In progress Completed 14 8 Notes:Notes:Nedbank Group Annual Results 2023Managed Evolution IT build programme – cash flow spend peaked in 2017 & intangible software assets peaked in 2020 at R9bn, while increasing benefits are being realised according to plan Additional info IT software development spend (Rbn annual cash flow) Intangible software assets on the balance sheet (Rbn) Investment vs benefit realisation to date (%) 2,3 9,0 8,9 8,3 8,3 7,9 2023: 68% of the full 2025 run-rate benefits achieved ~ 1,6 1,3 7,3 6,0 4,6 3,5 3,1 14 15 16 17 18 19 20 21 22 23 24 25 26 14 15 16 17 18 19 20 21 22 23 14 15 16 17 18 19 20 21 22 23 24 25 Illustrative only Spend Benefits NEDBANK GROUP LIMITED – 2023 Annual Financial Results 15 Benefits from our world-class technology platform & enhanced digital innovation Strategic value unlocks Benefits for our clients Benefits for Nedbank Digital onboarding Seamless FICA-compliant onboarding of individual & juristic clients Digital servicing > 200 Individual services on Eclipse & Money App > 400 Juristic services on Nedbank Business Hub Revenue growth Retail VAS cross-sell revenue 1,96 197% (2019: 1,71) (vs 2019) Beyond Banking Avo clients 2,5m (up by 26% yoy) APIs 64 (up by 14% yoy) Digital product sales Operational efficiencies % of new sales 55% (2019: 12%) Floor space 33% Headcount 13% (since 2019) Great client experiences NPS #1 bank (2019: #3) NEDBANK GROUP LIMITED – 2023 Annual Financial Results Target operating model benefits Nedbank brand value up by 15% to R4,2bn (cumulative 1.0 & 2.0 to date) R17bn (rank from #9 to #8 in SA) 16 9 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief Executive Digital uptake & usage continues to grow strongly – independent benchmarking ranks Nedbank’s digital capabilities highly Digital transaction volumes (# m) App transaction volumes (# m) Capability Servicing features offered (%) Strategic value unlocks Additional info +12% +98% +18% +315% 8 5 19 8 6 20 7 8 21 3 0 1 22 6 1 1 23 2 2 19 7 3 20 7 5 21 7 7 22 0 9 23 19 20 21 22 23 Digital transaction values (Rbn) App transaction values (Rbn) Digital sales contribution (%) +10% +19% +54% +298% 9 9 3 19 6 0 4 20 2 8 4 21 8 5 5 22 4 1 6 23 1 9 19 9 3 1 20 9 3 2 21 3 0 3 22 2 6 3 23 19 20 21 22 23 ‘Nedbank consistently above market on capability & features offered to its customers in mobile’ ‘Digital sales penetration grew strongly from 2019 with Nedbank extending its advantage over local peers’ Change since 2019 2022 vs 2023 Nedbank SA average Mobile leaders average NEDBANK GROUP LIMITED – 2023 Annual Financial Results Source: 2023 Finalta Survey (McKinsey & Company). 17 Our world-class technology platform is also enabling us to unlock new revenue streams Registered Avo clients (# m) API activity (# of active 3rd parties) +26% 2,5 2,0 +14% 0,7 0,1 20 21 22 23 20 21 22 23 Avo gross merchandise value1 (Rm) Value-added services revenue (Rm) +120% +29% Avo Auto Hosts > 800 MFC- accredited dealers and lists ~25 000 vehicles Avo B2B +R100m Avo B2B stock financing applications assessed, majority being Non-Nedbank businesses Strategic value unlocks Additional info Avo Solar Launched in Aug ‘23 with over 100 residential installations, 70% being financed by Nedbank Avo Home One of the top marketplaces for best value on Apple products Avo launched in NAR with Apple as the top merchant 20 22 1 GMV growth excluding internal spend +149% yoy 23 21 20 21 22 23 Driving acquisition, cross-sell & retention NEDBANK GROUP LIMITED – 2023 Annual Financial Results 18 10 Notes:Notes:Nedbank Group Annual Results 2023Operating model changes & efficient execution – supporting a lower cost-to-income ratio Strategic value unlocks Cumulative target operating model benefits (Rbn) Permanent employees (#) Annual IT amortisation charge (% growth) ▪ TOM 2.0 target of R2,5bn to be achieved in 2024 (initially 2023) given: o delayed or reconsidered some initiatives impacting revenues o a delay in some cost initiatives ▪ TOM 2.1 opportunities across data, Gen AI, payments & process optimisation. Benefits to be disclosed during H1 2024 results (13%) 3 1 2 9 2 1 7 2 8 2 1 6 8 6 2 4 2 9 5 2 7 7 4 5 2 2 2 3 2 9 1 9 ) 1 ( 19 20 21 22 23 19 20 21 22 23 Branch floor space (‘000 m2)1 Corporate real estate floor space (‘000 m2) TBC 111 Saved to date 178 Saved to date 1,0 1,5 2,2 2,5 1,1 19 1,8 20 2,0 21 2,0 22 2,0 23 2,0 MT target TOM 1.0 TOM 2.0 TOM 2.1 NEDBANK GROUP LIMITED – 2023 Annual Financial Results 4 0 2 19 0 9 1 2 8 1 4 6 1 7 3 1 20 21 22 23 8 2 3 3 1 3 19 20 5 6 2 21 8 3 2 3 0 2 22 23 1 Total branch floor space saved since 2014 equates to 111k sqm, 48% of the 2014 floor space. Change since 2019 19 Traction in gaining profitable market share in key areas, while remaining selective in a difficult environment (Strategic Portfolio Tilt 2.0) Strategic value unlocks BA900 market share (%) Dec 22 Dec 23 Yoy change Total core loans 17,9 17,9 Wholesale term loans 15,5 16,4 Home loans 14,1 14,4 Commercial property 36,8 36,0 Vehicle finance 35,4 35,5 Personal loans 11,9 11,0 Retail deposits 16,0 16,4 Commercial deposits 17,6 17,1 ► ▲ ▲ ▼ ▲ ▼ ▪ Yoy market share gains in term loans, retail home loans, retail overdrafts & key deposits categories as management actions start yielding results ▪ Unlocking growth opportunities – infrastructure & SDG-related financing, particularly in wholesale term lending ▪ Selective credit origination in areas where we have strong market positions – commercial property & vehicle finance ▪ Prudent credit granting in a more difficult macroeconomic environment – unsecured lending ▪ Deposits – retail deposits growth above industry levels & market share gains in notice deposits Total core loans include retail & corporate loans, excluding loans to SA, foreign currency loans, resale agreements & preference shares. | Retail deposits, a common lens used in the industry, is the sum of BA900 lines 26, 27, 28 & 35. Nedbank’s household deposit (line 27) decreased to 14,6% (December 2022: 14,8%), while Nedbank’s household non-transactional deposit (line 27) increased to 17,3% (December 2022: 17,1%). NEDBANK GROUP LIMITED – 2023 Annual Financial Results 20 11 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief Executive Creating positive impacts – R145bn of exposures at the end of December 2023 that support sustainable development financing (SDF) Strategic value unlocks Sustainable development finance1,2 (Rbn) >R150bn 20% 16% 145 13% 108 14% 123 2021 2022 2023 % of gross loans & advances loan support by 2025 2025 ambition NEDBANK GROUP LIMITED – 2023 Annual Financial Results R15bn sustainable finance across multiple SDGs for CIB clients (R27bn limits) R28bn support for farmers & the agriculture sector R3bn for affordable home loans, supporting >5 000 home purchases R22bn lending exposure to small businesses & their owners R30bn total renewable energy exposures (R46bn limits), supporting new generation capacity of almost 4GW R1,2bn financing for clean water & sanitation >11 000 student loans & >43 000 student beds financed since 2015 1 By the end of 2025, it is our ambition to have increased our SDF exposures to around 20% of the group’s total gross loans & advances, achieved by support for more than R150bn in new SDF that is aligned with the SDGs (from our 2021 base). 2 R15bn for the financing of buildings that include green interventions such as green energy, water & waste efficiencies has not yet been included as we consider its eligibility. 21 Creating positive impacts – building on our leadership in renewable energy Strategic value unlocks Renewable energy financing ( drawn exposures, limits, Rbn) Renewable energy financing opportunities to date Additional info Limits: +22% yoy 36 37 46 32 30 30 27 25 10 15 19 20 21 22 23 REIPPPP Private power generation Rooftop solar Nedbank supported 3,5 GW in REIPPPP rounds 1 to 4 Additional 0,5 GW supported in 2023 (projects closed) (out of a total 6,3 GW added) RBB renewable finance ▪ Strong growth in Commercial Banking & Retail. MFC solar finance in place with HL solar CVP & Avo Solar launched in H2 2023 >R2bn CIB mandated on 1,9 GW of new commercial private generation (from < 1 GW at 31 Dec 2022) ▪ 3 projects closed in 2023 (168 MW) ▪ 15 projects anticipated to close in 2024 (1,9 GW) CIB mandated 0,8 GW of Government projects1 ▪ 6 projects closed in 2023 (0,3 GW) ▪ 5 projects expected to close in 2024 (0,5 GW) R16bn R7bn Nedbank’s pipelines beyond 2024 support a further >2,5 GW of new renewable energy NEDBANK GROUP LIMITED – 2023 Annual Financial Results 1 0,3GW closed in 2023, 0,5GW in the pipeline & 0,4GW terminated (Out of the 1,15GW that was in the pipeline at the end of H1 2023). 22 12 Notes:Notes:Nedbank Group Annual Results 2023Creating positive impacts – ESG highlights Strategic value unlocks Nedbank ESG ratings Commitments & achievements AAA 60 Top 5% of global banks Top 9% of all global banks 17,1 Top 10% of diversified banks C Top 10% of all global banks 3,9 Top 26% of global banks 2030 financed emission targets for thermal-coal, oil & gas, and power generation (1st SA bank) Net-zero operational water use (since 2018) Zero exposure to fossil-fuel- related activities by 2045 82% AIC representation (from 78% in 2019) Level 1 BBBEE status for the past 6 years Cash taxation payments1 of R13,2bn up by 15% yoy 2 835 unemployed youth (YES) recruited (almost 10 000 since 2019) Employee experience (EX) NPS 2nd highest since inception (employee survey) World-class reporting #1 integrated report (EY & CGISA Top 40) #1 tax report (PWC) NEDBANK GROUP LIMITED – 2023 Annual Financial Results 23 1 Tax payments relating to direct, indirect & employee taxes, as well as other taxation. Creating positive impacts – progress on our journey to net zero 2020 2021 2024 Our journey to net zero Climate change resolutions passed with 100% votes of approval at our 53rd AGM Adopted & disclosed our market-leading Energy Policy & inaugural TCFD Report Disclose net-zero-aligned glidepath for upstream fossil fuels & power generation No provision of project financing for new thermal-coal mines Thermal-coal glidepaths (ktCO2e financed) Power generation (47%) Zero Adopted a cap aligning to NZE target of 188 gCO2e/kWh 2025 Reduce Nedbank’s own operations’ carbon emissions by >40% (from 2019 levels) 22 30 45 Generate >30% of Nedbank’s own energy needs from renewable sources Own operational GHG emissions (ktCO2e) 2030 Thermal-coal funding to be <0,5% of gross loans & advances 139 2035 No new finance for oil production 2045 Zero exposure to fossil-fuel-related activities 119 112 103 (40%) 88 2050 100% of lending & investing supporting a net-zero carbon economy 19 20 21 22 23 25 Own operational renewable energy sourced (% of total electricity) % 5 1 , 22 % 5 6 , 23 % 0 3 > 25 target Strategic value unlocks Additional info Oil & gas glidepaths (ktCO2e financed) (26%) Zero 22 30 45 NEDBANK GROUP LIMITED – 2023 Annual Financial Results 24 13 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief Executive External recognition received in 2023 – across business excellence, digital innovation & purpose/ESG-related Strategic value unlocks 2023 Global Banking and Finance Awards Best Investment Bank in South Africa (winner) 2023 African Banker Awards Debt Deal of the Year (winner) 2023 African Banker Awards Sovereign Bond Deal of the Year (winner) 2023 Top Companies Survey Awards Top Banking Institution in Zimbabwe (winner) 2023 Global Finance Magazine Awards Best Sub-custodian Banks Namibia (winner) 2023 Global Business & Finance Magazine Awards Best Financial Institution in South Africa (winner) 2023 Qorus Reinvention Awards SME Bank of the Year (winner) 2023 ActiveOps Awards Excellence in Operations (winner) 2023 The Asian Banker Excellence in Retail Financial Services Best SME Bank in South Africa (winner) 2023 Intellidex Top Private Banks and Wealth Managers Awards Top Private Bank (winner) 2023 ActiveOps ActiveOpsTeam of the Year Award - EMEIA region (winner) 2023 Raging Bull Best SA Multi-Asset Medium Equity Fund (winner) 2023 Private Asset Managers Awards Total Wealth Planning – High Net Worth (winner) 2023 Finnovex Awards Southern Africa Excellence in Mobile Banking (winner) 2023 Global Finance Magazine Awards Top Innovations in Finance in Mozambique (winner) 2023 Finance Derivative Magazine Awards Best Retail Banking Technology Implementation South Africa (winner) 2023 Euromoney Awards Best Digital Bank In Africa (winner) 2023 Global Finance Magazine Awards Best Bank for client facing technology (winner) 2023 Global Banking & Finance Awards Excellence in Innovation – Banking App (Nedbank Avo) South Africa (winner) 2023 Global Finance Magazine Awards Outstanding Leadership in Sustainable Bonds (winner) Additional info 2023 Banks and Banking Survey Awards Corporate Governance, Social Responsibility & Sustainability in Zimbabwe (winner) 2023 Global Banking & Finance Awards Best Corporate Sustainability Strategy South Africa (winner) 2023 Environmental Finance Awards Sustainability-linked Loan of the Year (Africa) (winner) 2023 African Banker Awards Sustainable Bank of the Year (winner) Business-impact- & expertise-related Technology- & innovation-related Purpose- & ESG-related NEDBANK GROUP LIMITED – 2023 Annual Financial Results 25 Financial overview ‘Headline earnings up by 11%, driven by strong revenue growth, partially offset by higher impairments. DHEPS up by 14%, benefiting from the R5bn capital optimisation initiative’ NEDBANK GROUP LIMITED – 2023 Annual Financial Results Mike Davis Chief Financial Officer 26 14 Notes:Notes:Nedbank Group Annual Results 2023Key drivers – the impact of a difficult operating environment in 2023 was offset by good strategic delivery Operating environment Strategic delivery Financial outcomes SA GDP growth SA inflation SA prime interest rate Business confidence Electricity constraints Global conflicts Technology/ Digital Global & local markets Efficient execution Currency impacts Regulation Competition Market share gains Cross-sell & main-banked client gains Creating positive impacts Revenues +12% ROE 15,1% Headline Diluted earnings HEPS +11% +14% Dividends per share +15% CET1 ratio 13,5% NEDBANK GROUP LIMITED – 2023 Annual Financial Results Positive Negative No material impact in 2023 27 Shareholder value creation – ROE improvement to above COE & dividends declared at the top of our payout ratio, while maintaining good NAV growth, even after the R5bn capital optimisation initiative ROE & cost of equity (%) Dividend per share (cents) NAV per share (cents) 2 2 0 1 1 7 8 3 3 5 1 2 2 9 1 3 2 i s d n e d v d o N i 09 11 13 15 17 19 21 23 09 11 13 15 17 19 21 23 09 11 13 15 17 19 21 23 ROE COE Interim Final ROE above COE Dividend at 57% payout ratio NAV/share +8% yoy NEDBANK GROUP LIMITED – 2023 Annual Financial Results 28 15 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief Executive Profitability metrics improved yoy, underpinned by robust capital, liquidity & provisioning Profitability Advances & deposits Asset quality yoy +11% +15% +30% +14% +10% +3% +5% Headline earnings (Rbn) Preprovisioning operating profit (Rbn) Total comprehensive income (Rbn) DHEPS (cents) Basic EPS (cents) ROE (%) Gross banking advances (Rbn) Deposits (Rbn) NIM (%) Credit loss ratio (bps) Total coverage (%) Liquidity Liquidity coverage ratio (%) Capital NSFR (%) CET1 (%) Risk-weighted assets (Rbn) +7% 2023 2022 2021 2020 2019 15,7 29,7 17,3 14,1 25,8 13,4 3 199 2 809 2 362 1 113 2 565 3 239 2 934 15,1 885 14,1 863 1 088 1 040 421 109 3,62 135 117 13,5 695 393 89 3,37 161 119 14,0 648 12,5 6,2 15,0 373 83 3,32 336 161 352 79 3,25 2,26 12,8 10,9 11,5 NEDBANK GROUP LIMITED – 2023 Annual Financial Results 29 Headline earnings up by 11% – driven by strong revenue growth & prudent expense management, partially offset by higher impairments Headline earnings (Rm) +14% +6% +64% +30% +8% +11% 1 538 565 5 193 2 730 753 2 224 19 133 14 061 HE 2022 NII NIR Associate income Impairments Expenses Direct tax & other 1Other’ includes indirect tax and minority & preference shareholders. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 15 650 HE 2023 30 16 Notes:Notes:Nedbank Group Annual Results 2023Average gross banking advances up by 7% – solid growth in RBB & CIB RBB average banking advances (Rbn) CIB average banking advances (Rbn) ▪ RBB 500 450 400 350 300 250 +7% +8% 1 1 4 9 3 4 4 6 3 1 9 3 19 20 21 22 23 19 20 21 22 23 ‒ Solid growth in our relationship businesses ‒ Gradual HL market share gains, but slowing demand ‒ Selective growth by leveraging our strong position in MFC ‒ More cautious in unsecured lending given elevated risk ▪ CIB ‒ Term lending businesses grew 4% ‒ Growth across multiple sectors, with continued momentum into 2024 ‒ Moderate growth in commercial property, supported by increased corporate activity NEDBANK GROUP LIMITED – 2023 Annual Financial Results 31 Actual gross banking advances up by 3% Moderate CPF growth in pockets & from corporate activity Term loans growth from selective sectors, but corporates remain cautious Good HL growth from market share gains, albeit slight decline in residential property market activity Leveraging MFC’s market-leading position, strong alliance relationships & an optimised digital platform, but more selective credit granting +2% +2% +6% +9% Additional info +3% 7 9 1 0 0 2 7 7 1 0 8 1 9 8 1 0 0 2 2 5 1 4 6 1 Remain deliberately cautious in unsecured lending (3%) 0 3 9 2 +1% 7 1 7 1 (1%) 7 2 6 2 Commercial property Term loans & other Home loans Instalment debtors Personal loans Credit cards Overdrafts 2019 2020 2021 2022 2023 3 6 8 5 8 8 Gross banking advances NEDBANK GROUP LIMITED – 2023 Annual Financial Results 32 17 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief ExecutiveDeposits up by 5% – with improving loan-to-deposit ratio to 82% (2022: 85%) Deposits (Rbn) Clients shifting to longer tenure in a higher-interest-rate environment with an expectation that rates have now peaked +6% (2%) (20%) +5% +7% +21% (1%) 1 9 1 8 5 1 7 2 1 9 1 1 3 5 1 0 5 1 0 0 1 9 7 9 0 4 5 3 4 2 7 6 7 9 2 9 2 CASA Cash management Call & term Fixed deposits NCDs Other deposits FX liabilities 2019 2020 2021 2022 2023 NEDBANK GROUP LIMITED – 2023 Annual Financial Results 33 NII up by 14% ‒ driven by AIEBA growth of 7% & NIM expansion of 28 bps, primarily from endowment (higher interest rates) Net interest margin* (bps) (16) (2) 8 38 (5) Mix +1 (7) Pricing (3) (4) Stage 3 . interest reversal 352 19 336 20 373 21 393 22 Endowment mix & rate Asset mix & pricing Liability mix & pricing BSM & other** 421 23 *Surplus cash in the SARB quota account, on which Nedbank earns repo, reclassified as AIEBA (R8,2bn reclassified, impacting NIM negatively by -3 bps). **Balance sheet management & other includes positive HQLA rate & mix impact, positive basis risk impact & higher yields in NAR. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 34 18 Notes:Notes:Nedbank Group Annual Results 2023 Endowment income – active interest rate risk management, positioning an appropriately sized residual endowment position as an offset against anticipated changes in impairments over time Change in endowment income vs impairments (Rbn) Directional drivers H1 23 H2 23 H1 24 H2 24 Average SA interest rates 11,1% 11,75% 11,75% 11,3% 11,4% 11,5% Endowment (yoy change) CLR (yoy change) ▲ ▲ ▲ ▼ ▲ ▼ ▼ ▼ 2025 10,6% ▼ ▼ 121 96 bps bps CLR within 60 to 100 bps range 10 bps CLR = R0,9bn pre-tax 10 bps NIM = R1,0bn pre tax >90% TTC hedge effectiveness Covid period Hedge resumed 07 09 11 13 15 17 19 21 23 Yoy endowment income Δ Yoy impairment Δ NEDBANK GROUP LIMITED – 2023 Annual Financial Results 35 NII sensitivity for 1% change in interest rates: R1,4bn NIR up by 6% – supported by solid growth in commission & fees, as well as FX devaluation. Excluding restatements, NIR growth was up by 9% Non-interest revenue & income1 (Rm) +5% 8 8 4 8 1 6 4 3 9 1 +3% 6 6 1 4 9 9 2 4 (16%) (7%)3 5 1 7 1 6 4 4 1 Commission & fees Trading income Insurance income 2022 2023 (6%) +88% 4 5 8 1 7 8 9 Other 2 5 1 8 4 6 7 Equity investment income ▪ Commission & fees – solid growth driven by cross-sell, main-banked client gains & value- added services ▪ Trading – positive outcomes in debt securities & commodities ▪ Insurance – impacted by lower traditional bancassurance volumes, new business strain & non-repeat of reserve releases, offset by improved non-life claims experience & positive shareholder returns ▪ Equity investment income – closely matched a high 2022 base ▪ Other – benefit from FX devaluation of ZWL & ZAR vs US$ given hard currency US$ exposure in Zimbabwe, partially offset by a higher net monetary loss 1 2022 restatements relate to net monetary loss from the face of the IS to NIR, card-selling costs & IFRS 17. Prior years not restated. | 2 Represents fair-value adjustments, sundry income & investment income. | 3 Excluding reclassifications, insurance declined by 7%. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 36 19 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief Executive Income statement restatements – net monetary loss, card-related costs & IFRS 17 (immaterial impact on headline earnings) Summary of restatements/ reclassification impact (Rm) Non-interest revenue 2023 2022 growth % As reported Restated 27 709 26 171 6% Reclassification on a like-for-like basis Net monetary loss RBB Visa/Mastercard costs IFRS 17 1 059 634 758 419 477 653 NIR (excl all reclassifications) 30 160 27 720 9% Summary of restatements/reclassification impact (Rm) 2023 2022 growth % As reported Restated Expenses 38 059 35 329 8% Reclassifications on a like-for-like basis RBB Visa/Mastercard costs IFRS 17 634 713 477 619 Expenses (excl all reclassifications) 39 406 36 425 8% Note: IFRS requires that costs directly attributable to revenue generation are included on the revenue line (ie NIR). NEDBANK GROUP LIMITED – 2023 Annual Financial Results Additional info ▪ Net monetary loss: reclassified from the face of the income statement to NIR (similar to what we reported in FY 2022) ▪ IFRS 17 (New standard effective FY 2023): Expenses of R713m (2022: R619m) & associated indirect tax of R45m (2022: R50m) related to the insurance products have been reclassified from expenses to NIR of R758m (2022: R653m) ▪ RBB Visa & Mastercard costs (New item in 2023): 2023: R634m & 2022: R477m have become material and therefore reclassified from expenses to NIR in accordance with IFRS 15 & to align with industry ▪ Commission & fees: +4,6% growth reported (excluding reclassification: +5,4%) ▪ Insurance income: 16% decline reported (excluding reclassification: 7% decline) 37 Impairment charge up by 30% – primarily driven by the macroeconomic pressures on consumers, but pleasingly H2 2023 materially down on H1 2023 as a result of management intervention Impairment charge (Rbn) 13,1 +30% 5,4 7,4 6,5 6,1 H2 3,6 3,2 4,0 9,6 4,3 H1 2,5 7,7 3,3 3,4 5,3 2019 2020 2021 2022 2023 ▪ RBB impairments +29% yoy – Consumer pressure from steep increases in SA prime rate, high levels of inflation & load-shedding, albeit easing in H2 2023. H1 2023 impairments up by 60% vs H2 2023 up by 3% – Management interventions delivering benefits, including better collections & loan origination, with impairments down in H2 2023 across all RBB products/ segments ▪ CIB impairments +17% yoy – higher H2 2023 reflecting the conclusion of material stage 3 loans ▪ Good outcomes in Wealth & NAR ▪ Central provision reduced to R150m (2022: R300m) & total overlays reduced to R1,1bn (2022: R1,4bn) as risks were incorporated in IFRS models NEDBANK GROUP LIMITED – 2023 Annual Financial Results 38 20 Notes:Notes:Nedbank Group Annual Results 2023Group credit loss ratio at 109 bps – increase from 89 bps in 2022, but down from the 121 bps reported in H1 2023 Credit loss ratios (bps) GFC 152 GLC 161 250 200 150 100 50 0 H2 2023 CLR reduction across all RBB products & segments H1: 121 H2: 96 109 89 Material conclusion of historic NPLs 2 3 4 2 2 2 6 1 1 6 1 6 2 2 4 6 1 4 9 1 1 2 2 1 3 2 0 1 3 1 1 7 8 0 0 1 ) 0 2 ( 7 9 11 13 15 17 19 21 23 CIB RBB Wealth NAR 2022 H1 23 H2 23 2023 Cluster TTC target ranges NEDBANK GROUP LIMITED – 2023 Annual Financial Results 39 Clusters within or below their TTC target ranges, with the exception of RBB, but CLRs improving from H1 2023 across all segments/products Additional info Credit loss ratio (bps) ECL coverage (%) 23 24 6 47 H2 23 32 3 H1 23 16 9 66 26 22 22 17 28 21 42 53 30 20 82 103 54 19 25 45 (2) TTC 23 22 21 20 19 15–45 1,14 1,29 1,35 1,07 0,61 1,56 1,41 1,56 1,23 0,75 0,81 1,19 1,14 0,91 0,44 CIB CIB excl CPF CPF RBB 194 164 226 161 134 240 138 120–175 5,35 4,92 4,83 5,09 3,87 CB Retail HL VAF PL Card 67 227 80 61 191 62 75 11 266 200 98 33 (21) 175 (9) 110 50 50–70 2,28 1,83 2,05 2,61 1,68 275 163 160–240 6,13 5,73 5,54 5,73 4,48 64 14 2,29 1,72 1,64 2,02 1,47 183 163 203 192 146 269 182 5,16 5,11 4,82 5,29 4,09 1025 943 1106 918 982 1062 639 27,1 24,1 22,8 20,0 16,8 566 341 794 490 633 897 542 16,3 15,9 16,8 17,6 13,2 Wealth NAR Group 12 100 109 21 87 96 3 113 121 (20) 102 89 9 72 83 64 18 20–40 1,29 1,33 1,56 1,42 0,74 185 101 85–120 5,71 5,19 4,85 3,94 3,34 161 79 60–100 3,62 3,37 3,32 3,25 2,26 NEDBANK GROUP LIMITED – 2023 Annual Financial Results 40 21 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief ExecutiveGLAA stage movements & coverage – overall coverage at multi-year highs given an increase in stage 3 loans, although set to reduce in coming reporting periods GLAA (Rbn) Coverage (%) 2019 2022 2023 2,26 3,37 3,62 ▪ Stage 1 loans ‒ Coverage well above pre-Covid levels 37,9 34,3 34,2 ▪ Stage 2 loans 818 58 Total: 778 28 72 762 45 98 772 39 99 807 52 78 77 5,3 7,0 6,8 Performing coverage (stage 1 &2) 0,94 1,26 1,28 678 619 634 678 682 0,48 0,60 0,66 2019 2020 2021 2022 2023 Stage 1 Stage 2 Stage 3 ‒ Levels more stable, with coverage still well above pre-Covid levels ▪ Stage 3 loans ‒ Expected stage 3 loan decline in 2024, resulting in NPL ratio below 2,5% ‒ RBB stage 3 loans: VAF & Card peaked, PL to reduce in 2024 & HL to remain elevated ‒ Coverage reflects Nedbank’s highly collateralised book 1 Total balance sheet ECL includes FVOCI & off-balance sheet ECL, whereas ECL coverage excludes FVOCI & off-balance sheet ECL. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 41 Expenses up by 8% – reflecting good expense management Expenses (Rm) +8% +9% +8% +7% 1 6 7 3 5 9 0 4 8 0 8 5 1 5 4 0 7 1 6 7 3 6 0 0 9 6 Salaries, wages & other employee costs Incentives (STI & LTI) Computer processing 2022 2023 4 8 3 9 9 1 0 0 1 Other ▪ Employee-related costs ‒ Salaries & wages: higher annual average salary increases (+6,3%), additional costs to retain talent, partially offset by 2% yoy decline in permanent headcount ‒ Variable-pay incentives aligned with profitability metrics & vesting probabilities (STI +5%, LTI +23%) ▪ Computer processing – driven by FX devaluation & higher digital volumes, partially offset by a decline in amortisation of intangible assets ▪ Other costs ‒ Discretionary spend at more normalised levels, incl marketing (+3%) & travel (+7%) ‒ Accommodation +8% driven by higher generator running-costs relating to load-shedding (up >100% to R107m) ‒ Fees & insurances +15% from card-issuing & acceptance costs, linked to strong revenue growth NEDBANK GROUP LIMITED – 2023 Annual Financial Results 42 22 Notes:Notes:Nedbank Group Annual Results 2023 Capital – CET1 ratio at 13,5% remains very strong, positioning us well for growth & sustainable dividend payments, while protecting against unexpected downside risk CET1 ratio (%) (1,2) 2,3 (0,9) (0,7) Board CET1 target SARB PA minimum CET 1 11% to 12% 8,5% 14,0 Dec 22 Capital generation Dividends RWA Capital optimisation 13,5 Dec 23 Completed R5bn capital optimisation initiative, with the following outcomes (full-year basis): ▪ CET1 reduction: ▪ ROE accretion: 0,7% ~0,5% ▪ HEPS growth accretion: ~4% Maintain CET1 ratio above our 11%-12% target range – considered appropriate in a difficult & volatile environment Retain capital for growth – infrastructure opportunities & SPT 2.0 growth objectives Complementary bolt-on M&A, should they arise Pay dividends at top-end of payout ratio, subject to board approval Further capital optimisation, if appropriate Possible Basel III PCN counter-cyclical buffer in 2026 NEDBANK GROUP LIMITED – 2023 Annual Financial Results 43 Average equity drivers – strong growth in earnings, partially offset by R5bn capital optimisation, dividends paid at the top end of payout ratio Equity movements (Rbn) Additional info 7,0 (5,2) (3,4) 0,1 ▪ Average HE of R7,0bn – R15,7bn actual throughout FY 2023, with H2 > H1 ▪ Average dividends paid of R5,2bn – R4,4bn (accrued in March 2023) & R4,2bn (accrued in August 2023) ▪ Average capital optimisation of R3,4bn –R5bn capital optimisation initiative executed, mostly in the April to June 2023 period ▪ Average FCTR, OCI & other reserves of R0,1bn – R0,6bn actual impacts from FX etc 103,5 Headline earnings Dividends R5bn capital optimisation initiative FCTR & OCI Average 2023 equity 105,0 Opening equity (1 Jan 2023) NEDBANK GROUP LIMITED – 2023 Annual Financial Results Average 44 23 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief ExecutiveRWA progression – RWA growth in 2023 driven by credit RWA aligned to overall loan growth & credit risk migration Risk-weighted assets (Rbn) Additional info 11 (15) (4) (1) 28 12 (1) 8 657 Dec 2021 Credit CCR 1 Market 648 Dec 2022 Other RWA Credit 1 CCR Market 695 Dec 2023 Other RWA 1 Counterparty credit risk. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 45 Capital management – strong capital position maintained in an uncertain macroeconomic environment Additional info Average capital allocation (Rbn) , 5 6 3 , 2 6 3 , 0 6 3 , 1 3 3 , 8 1 3 , 7 4 3 5 4 , , 3 4 5 4 , , 4 6 , 1 7 5 7 , , 9 2 1 , 5 0 2 , 8 0 2 CIB RBB Wealth NAR Centre 21 22 23 At 31 December 2023 the average surplus capital position increased by R0,5bn to R12,3bn, driven largely by strong organic capital generation offsetting the R5bn capital optimisation initiative. 20,5 20,8 12,9 11,8 12,3 4,2 2,5 1,4 4,8 21 3,3 1,1 4,3 22 3,2 1,0 4,3 23 Goodwill Intangibles Allocated capital Surplus capital NEDBANK GROUP LIMITED – 2023 Annual Financial Results 46 24 Notes:Notes:Nedbank Group Annual Results 2023Cluster financial overview – all business clusters reported positive HE growth & all ROEs were above the group’s COE Headline earnings (Rbn, growth %) Return on equity (%) NAR +94% 1,9 Wealth +6% 1,2 +6% 6,8 CIB Group R15,7bn +11% 5,6 RBB +9% Group ROE 15,1% COE 14,8% % 9 8 1 , % 0 6 1 , % 8 6 2 , % 2 5 2 , CIB RBB Wealth NAR NEDBANK GROUP LIMITED – 2023 Annual Financial Results 47 CIB overview ‘Good revenue growth & capital optimisation leading to higher returns’ Anél Bosman Group Managing Executive NEDBANK GROUP LIMITED – 2023 Annual Financial Results 48 25 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief ExecutiveCIB financial performance – CIB achieved a solid set of results in a difficult operating environment, with HE growing at 6% & ROE increasing to 18,9% Financial performance 17,7 17,7 18,9 15,3 9,4 +6% ▪ NII up by 7% ‒ Average interest-earning banking assets +7% ‒ NIM maintained at 2,42% – endowment benefit, offset by lower margins, improved risk ratings & suspended interest on stage 3 assets ▪ NIR up by 5% ‒ Commission & fees up by 3% as deal closure & transactional activity levels increased ‒ Equity investment income 1 matched a high 2022 base ‒ Markets NIR by 7% ▪ CLR below mid point of the TTC target range of 15-45 bps 7 6 1 6 19 6 3 6 3 20 5 0 6 5 21 9 9 3 6 22 9 9 7 6 23 – CLR at 24 bps includes adequate provisioning for stressed counters; single-name exposures in business rescue ▪ Expense growth of 7% – Expenses controlled, increasing by7% due to inflationary pressures & market-driven employee costs E O R ) % ( i s g n n r a e e n i l d a e H ) m R ( 1 Equity portfolios defined as private equity & not equity trading. NEDBANK GROUP LIMITED – 2023 Annual Financial Results Banking advances – strong performance in H2 2022 leading to higher average advances in 2023 Actual & average banking advances (Rbn) +8% ▪ Average banking advances up by 8% − Solid growth across multiple sectors, with continued momentum into 2024 2022 2023 Property Finance Markets & Other Average advances Investment Banking Transactional Services Average growth Total allocated capital (Rbn) ▪ Actual banking advances flat − Term lending businesses grew by 4% − Liquidity management impacts banking advances − Short-term transactional facility repayments (1%) ▪ Total allocated capital down by 1% − Continued focus on capital efficiency & optimisation of returns 2022 2023 NEDBANK GROUP LIMITED – 2023 Annual Financial Results 49 50 26 Notes:Notes:Nedbank Group Annual Results 2023 CLR below the mid-point of the CIB TTC target range Credit loss ratio (bps) 82 42 25 22 24 ▪ 24 bps CLR includes adequate provisioning for stressed counters, below the expected mid-point of our TTC target range ▪ Material conclusion of stage 3 loans in business rescue (commercial property, aviation & agriculture) 19 20 21 22 23 – Expected stage 3 loan decline in 2024 resulting in NPL Stage 3 loans (Rbn) & coverage ratio (%) ratio below 2,5% 24,6% 14,9% 23,7% 18,2% 16,4% ▪ Focus on stressed sectors/counters 11,6 10,5 7,1 6,5 ▪ Stage 2 exposures continue to reduce with increased coverage ratio ▪ African deals – well structured & secured 19 20 CIB excl PF 21 22 23 Property Finance NEDBANK GROUP LIMITED – 2023 Annual Financial Results 51 Commercial property finance – a high-quality, well-diversified & highly collateralised portfolio High-quality, well-diversified & highly collateralised portfolio Portfolio LTVs remain low at < 52% Adequate collateral – significantly reduces the risk of potential losses CLR at 47 bps (Dec 22: 28 bps) driven by large single-name exposure rather than general portfolio stress Large stage 3 exposure in business rescue largely resolved Low levels of arrears on performing book 0 to 90 days: R8m (Dec 22: R6m) NEDBANK GROUP LIMITED – 2023 Annual Financial Results Credit loss ratio (bps) & loan-to-value ratio (%) CLR (2) 54 30 28 47 48,0% 50,5% 53,4% 52,6% 52,0% LTV Dec 19 Dec 20 Dec 21 Dec 22 Dec 23 LTV 52 55 50 40 53 35% % of loans 25% 21% 11% 8% Retail Offices Industrial Residential Other 52 27 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief ExecutiveCommercial Property Finance – sector trends Additional info Office vacancies 1 Sector trends Listed sector ▪ Office vacancies maintain downward ▪ trajectory: ‒ Q2 2022: 16,7% (peak) ‒ Q4 2022: 16,1% ‒ Q4 2023: 15,2% Valuations appear to have stabilised: ‒ Valuations in the listed sector up by ~1% ‒ Property Finance valuations up by ~2% across the portfolio ▪ Continue to see negative rental reversions to protect vacancies ▪ Trading of assets: Retail vacancies1 ▪ Retail vacancies have largely remained flat: ‒ Improved sentiment & confidence returning to the sector ‒ Assets trading at book values ▪ ▪ ▪ ▪ Listed property sector the best- performing asset class in 2023: up by 10,7% Average LTV for the listed sector at 36%: well below typical covenant level of 50% Average listed sector ICR at 2,9x: well above typical covenant level of 2x Sustainability remains a key theme for the sector – particularly for listed funds ‒ Q1 2021: 7,1% (peak) ‒ Q4 2022: 5,0% ‒ Q3 2023: 5,1% ▪ Increase in corporate action – reflects more positive sentiment & opportunities being seen in the sector. This is expected to continue in 2024. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 1 SAPOA reports 53 Creating positive impacts – expanding our leadership in renewable energy through pipeline conversion Renewable energy exposures (Rbn) Strong activity in Q4 2023 will support book growth in 2024 Good pipeline of deals anticipated to close in 2024 Limits: +22% yoy 32 30 37 27 45 29 25 3 C&I projects closed in 2023 ▪ ▪ R3,7bn in facility limits 168 MW 1,9GW Pipeline/Mandates on C&I projects ▪ ▪ R16bn in facility limits ▪ 15 projects anticipated to close in 2024 6 government projects closed in 2023 ▪ 330 MW ▪ R8,2bn in facility limits Pipeline/Mandates on government projects ▪ 0,5GW ▪ R7bn in facility limits ▪ 5 projects anticipated to close in 2024 Book growth of R18bn expected for 2024 Progress on government projects RMIPPPP REIPPPP R5 REIPPPP R6 Awarded 4 (0,5GW) 4 (0,3GW) 2 (0,3GW) Closed in 2023 2 (0,15GW) 2 (0,15GW) Closing in 2024 1 (0,15GW) - Terminated 1 (0,2GW) 2 (0,15GW) - 2 (0,3GW) - 23 19 22 Private power generation 20 21 Government programmes NEDBANK GROUP LIMITED – 2023 Annual Financial Results 54 10 15 28 Notes:Notes:Nedbank Group Annual Results 2023Creating positive impacts – using glidepaths to shift the financing of our energy mix Reduction to achieve net zero by 2050 Science-based scenarios Attribution factors for share of GHG emissions/attributed emissions of the financed clients Adopted IEA Net Zero (NZE) 2050 pathway as a basis for our first targeted commitment date of 2030 (31 December 2029) Upstream fossil fuel emissions Power generation emissions Thermal coal 47% reduction Oil & gas 26% reduction Adopted a cap aligning to NZE target of 188 gCO2e/kWh ▪ Utilisation of Scope 1, 2 & 3 CO2e ▪ Utilisation of Scope 1 CO2e emissions emissions ▪ Absolute measurement metric & ▪ An intensity metric of CO2e/kWh target ▪ Use of limits instead of drawn amounts in the attribution factor ▪ Zero exposure to fossil fuels by 2045 NEDBANK GROUP LIMITED – 2023 Annual Financial Results Note: Carbon dioxide equivalent or CO2e is the number of metric tons of CO2 emissions with the same global warming potential as one metric ton of another greenhouse gas. 55 Creating positive impacts – supporting clients to achieve environmental & socioeconomic objectives Sustainable finance (exposures, Rbn) Sustainable fundraising in issue ( Rbn) Additional info Additional info Growing our exposures by refining our solutions – supporting our clients to achieve their strategic objectives 35% increase in facilities 36% increase in utilisation 3 1 21 Limits: + 35% yoy 20 11 27 15 10 15 17 23 2021 22 Use of proceeds (bonds) Use of proceeds (loans) Sustainability-linked loans Sustainability-linked bonds 2023 2022 loans Green Loans -linked loans Sustainability Linked Loans Climate Loans loans bonds Green Bonds Positive impacts created for our clients through funding green technologies & embedding KPIs* focused on emissions reductions, renewable energy & water efficiency Market recognition & thought leadership 2023 Global Finance Magazine Awards Outstanding Leadership in Sustainable Bonds (winner) 2023 Bonds, Loans and ESG Capital Markets Africa Awards ESG Loan Deal of the Year (winner) 2023 African Banker Awards Sustainable Bank of the Year (winner) NEDBANK GROUP LIMITED – 2023 Annual Financial Results *Measured through key performance indicators on sustainability-linked facilities extended to clients. 2023 Environmental Finance Awards Sustainability- linked Loan of the Year (Africa) (winner) 56 29 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief ExecutiveDigital – delivering capabilities to be the go-to transactional bank for SA businesses Completed TOM 2.0 organisational restructure ▪ Focus on digital, channel, client delivery & payments ▪ Embedding digital culture & leadership ▪ Innovation for efficiency & optimisation ▪ Delivering our Transactional Services & other capabilities to market Empowering clients through our warm digital capabilities ▪ Driving channel and client experience excellence ▪ Digital adoption through feature-rich Nedbank Business Hub platform ▪ Leverage client data insights & experience to inform design 83% client satisfaction survey score >95% of clients migrated onto FX & international payments channel NEDBANK GROUP LIMITED – 2023 Annual Financial Results 57 Our strategic growth levers to drive franchise value Additional info Accelerate growth mindset across our business Deliver client value through our sectorised approach Actively manage the balance sheet to enhance returns Grow our Transactional Services business Empower our clients through our warm digital capabilities Increase investment in our people Create positive impacts by embedding purpose in everything we do NEDBANK GROUP LIMITED – 2023 Annual Financial Results 58 30 Notes:Notes:Nedbank Group Annual Results 2023Nedbank Corporate & Investment Banking – outlook 2024 outlook ▪ NII – Banking advances – momentum built in H2 2023 continues into 2024 ▪ NIR ‒ Diverse revenue stream through transactional banking, trading & advisory ‒ Commission & fees to benefit from balance sheet activity & liquidity instruments ‒ Continued momentum in trading activities ‒ Targeted opportunities in Africa ▪ CLR – below mid point of the TTC target range ▪ Strategic execution – maintain focus under challenging conditions ▪ Capital – improve returns & optimise resources further Medium- & long-term outlook ▪ Reduce cost-to-income ratio to <44% & maintain ROE >19% NEDBANK GROUP LIMITED – 2023 Annual Financial Results 59 RBB overview ‘Headline earnings up by 9% after a good recovery in H2 2023’ Ciko Thomas Group Managing Executive NEDBANK GROUP LIMITED – 2023 Annual Financial Results 60 31 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief ExecutiveRBB financial performance – HE growth improved from a decline of 8% in H1 2023 to an increase of 24% in H2 2023, following lower impairments Financial performance 17,3 E O R ) % ( 5,4 16,0 16,0 13,7 ▪ NII up by 14% ‒ Average advances growth momentum continued at +7% ‒ Endowment benefit from higher interest rates +9% ▪ NIR up by 7% i s g n n r a e e n i l d a e H ) m R ( 3 9 2 5 19 5 9 5 1 20 2 3 5 4 21 7 9 0 5 22 6 6 5 5 23 ‒ Driven by main-banked client gains & improved cross- sell ‒ Higher card interchange volumes (+12%) & higher activity in value-added services (+27%) ▪ Impairments up by 29% ‒ CLR improved from 226 bps in H1 to 164 bps in H2 due to improved origination & collections ‒ CLR within TTC target range in H2 2023 ▪ Expense growth of 7% ‒ Ongoing cost optimisation & digitisation benefits NEDBANK GROUP LIMITED – 2023 Annual Financial Results 61 RBB financial performance – strong HE growth & attractive ROEs in NCB & RRB. Consumer Banking impacted by higher H1 2023 impairments, which improved in H2 2023 along with a lower cost-to-income ratio Additional info Headline earnings per division (Rm) ) % ( E O R 4 0 2 2 9 1 1 1 3 6 3 2 6 2 3 6 4 5 3 2 Nedbank Commercial Banking 4 1 1 0 1 0 1 8 ▪ Strong revenue growth of 17% driven by good advances & strong deposit growth, positive endowment & moderate NIR growth ▪ CLR at 67 bps (2022: 11 bps) at the top end of the TTC target range +15% +30% (16%) Retail Relationship Banking ▪ Strong revenue growth of 20% driven by good advances & strong deposit growth, positive endowment & well-managed expense base ▪ CLR up to 79 bps (2022: 41 bps), slightly above the TTC target range Consumer Banking ▪ >9% growth in main-banked clients & transactional NIR, supported by being #1 in client experience among the big 5 retail banks ▪ Digital & sales productivity enabling efficiencies, with the cost-to- income ratio declining to 58,5% (2022: 59,5%) ▪ Improved credit outcomes in H2 23 with CLR down to 217 bps (H2 22: 250 bps) while FY 23 CLR up to 262 bps (2022: 237 bps) 2 1 8 1 7 8 0 2 2 9 2 1 3 7 6 1 0 5 9 1 6 4 6 1 Commercial Banking Relationship Banking Consumer Banking 19 20 21 22 23 NEDBANK GROUP LIMITED – 2023 Annual Financial Results 62 32 Notes:Notes:Nedbank Group Annual Results 2023 Nedbank Commercial Banking & Retail Relationship Banking – strong growing & differentiated franchises, delivering great client experiences & leveraging digital Nedbank Commercial Banking Retail Relationship Banking Well-positioned & distinctive value propositions incorporating unique lending solutions Loyal established client base and a CVP focused on growing young professionals and start ups ▪ Market share increase to 23% owing to high CX • Client satisfaction at all-time high; improving cross-sell & attributes entrenchment metrics ▪ Positive momentum on digital journey, achieving critical • High levels of digital adoption (98% digitally enabled) scale on Nedbank Business Hub driving a lower cost-to income ratio ▪ Leveraging well-positioned industry CVPs resulting in competitive market share positions in manufacturing (26%), retail services sectors (28%) & growing brand presence in agriculture – secondary production (27%) ▪ Promotion of NCB sustainability proposition leveraging increased financing activity levels across key sustainability development goals ▪ Public sector activity focus – Impressive gains in transactional banking and financing across the sector ▪ The NCB Leveraged Finance Team acknowledged as one of the most innovative & forward-thinking teams • Best value and most accessible Private Clients proposition in market; market share in mid-teens • Small business offering strengthened with easy-to-access credit solutions, 6-month free banking; market share in early twenties (urban) • Market-leading ‘beyond’ offering with 47k SimplyBiz users providing coaching, tools and other business support • Opportunity to further grow client base in franchising, more focused merchant acquisition as well as leveraging our expansion of relationship services into underrepresented markets NEDBANK GROUP LIMITED – 2023 Annual Financial Results 63 Consumer Banking – our digital transformation is enabling enhanced CVPs, strong growth & outcomes in digital metrics & market-leading client experiences Improved CVPs ✓Digital onboarding & servicing ✓MiGoals – R99 account incl GB ✓Greenbacks 2.0 – relaunch in Q1 2024 ✓#2 ranking in mobile banking (SITEisfaction ®) ✓386 Imagine branches (71% converted) % 2 1 % 8 2 % 2 3 % 3 5 % 5 5 Digital sales (% of total sales) +11% 2,9 2,6 2,3 2,1 1,8 #2 k n a b d e N SITEisfaction® scores1 (Best SA digital bank) Big 5 retail banks New digital entrant NPS – client satisfaction (ranking out of top SA 5 banks) #1 #1 #2 +16% 2,3 2,0 #3 #3 1,6 1,2 0,8 19 20 21 22 23 19 20 21 22 23 Retail digitally active clients Retail active Money app users Consulta Kantar 19 20 21 22 23 NEDBANK GROUP LIMITED – 2023 Annual Financial Results 1 2023 SITEisfaction® Report (Human8). 64 33 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief ExecutiveConsumer banking – strong main-banked client gains & higher cross-sell, driving NIR growth, but deposits market share lagging Main-banked clients (million & growth %) Cross-sell ratio (number of products/clients) Household deposits (BA900 market share, Dec %) Growth +1% +9% +6% (1%) (4%) 3,14 3,02 3,05 3,24 3,53 1,78 1,71 1,94 1,96 1,86 16,9 15,7 14,5 14,8 14,6 Stabilised historic decline; focus now on growth 19 20 21 22 23 19 20 21 22 23 Consumer transactional NIR (Rbn & growth %) 4% 7% 4% 5% 9% 3,9 4,2 4,4 4,6 5,0 Correlation with main- banked client growth in 2023 NEDBANK GROUP LIMITED – 2023 Annual Financial Results 19 20 21 22 23 65 Main-banked growth is evident across most segments Main-banked clients1, # 000 Additional info h t u o y & s d K i l e v e l y r t n E l e d d M i (12%) (8%) +4% +4% 516 456 421 436 452 (4%) (4%) +8% +14% 1 425 1 365 1 309 1 412 1 609 0% +13% +6% +5% 891 892 1 005 1 062 1 120 s t n e i l C e t a v i r P s s e n s u B i l l a m S l i a c r e m m o C i s e c v r e S i 2 g n k n a B +7% 89 95 +9% +10% +9% 104 114 123 (1%) +2% +3% +2% 179 177 180 185 189 (1%) (1%) +1% (0%) 14,7 14,6 14,4 14,6 14,5 19 20 21 22 23 19 20 21 22 23 1 Definition of main-banked: Clients who achieved a minimum deposit or a number of quality transactions on average per month over 3 months. Consumer: Non-individuals; RRB: Non-residents & Embassy Banking not shown. | 2 Client groups with gross operating income contributions in excess of R500 pm. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 66 34 Notes:Notes:Nedbank Group Annual Results 2023 Consumer Banking – unlocking productivity gains through Project Imagine, supporting a lower cost-to-income ratio 2022 Finalta survey1 (yoy change) Branch staff sales (Sales/role/day) Branch floor space (sqr metres) Saved 2014 to date Sales per 1k active clients Branch sales per branch FTE Branches per active 10k clients Branch FTE per 10k active clients 30% 27% 5% 13% 1 Global survey conducted by McKinsey – 2022 v 2021. +24% +47% 111 Retail Consumer cost-to-income ratio (%) 4 0 2 0 9 1 2 8 1 4 6 1 7 3 1 60,3 62,0 61,4 19 20 21 22 23 Teller activity (# million) 59,5 58,5 21 22 23 (71%) Servicing staff Sales staff 3 2 3 1 1 1 9 7 19 20 21 22 23 19 20 21 22 23 NEDBANK GROUP LIMITED – 2023 Annual Financial Results 67 Our technology strategy, along with shifts in client transactional behaviours, is driving NIR growth & cost optimisation opportunities Branch teller transactions1 POS volumes (71%) (20%) +97% Additional info +9% 19 20 21 22 23 19 20 21 22 23 ATM withdrawals +3% Digital payment & transfers2 +12% +4% +98% 19 20 21 22 23 19 20 21 22 23 2019 vs 2023 2022 vs 2023 1 Teller transactions include any cash-related transaction performed over the counter (eg deposits, withdrawals & transfers). | 2 Total volumes across all digital channels. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 68 35 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief Executive RBB impairments – focus on collections, loan origination & credit policy tightening, leading to an ongoing improvement in CLRs & material slowdown in NPL formation RBB stage 3 loans (hoh growth, Rbn) RBB CLR (%) Business & product level CLRs (%) Drivers of improving trends 226 CLR 152 170 164 NPLs 0 1 , 2 2 , 0 6 , 0 2 , H1 22 H2 22 H1 23 H2 23 HL VAF PL Card NCB H1 22 H2 22 H1 23 H2 23 ▪ A more stable macroeconomic environment in H2 2023 ▪ Credit policy tightening, particularly in Unsecured Lending ▪ Assisting our clients via tailored rehabilitation & support ▪ Payment strategies & DebiCheck mandate increases, particularly on MFC & Card ▪ Enhanced collections strategies ▪ Client-specific interventions supporting clients in Commercial Banking NEDBANK GROUP LIMITED – 2023 Annual Financial Results 69 RBB credit quality – impacted by higher interest rates, higher inflation & lower levels of disposable income, but improved in H2 Additional info Home loans Vehicle finance Personal loans Credit card ▪ Interest rates & inflation ▪ More recent vintages initially most impacted; elevated trends across all vintages ▪ Entry-level & higher-end (lesser extent) clients impacted ▪ ▪ ▪ Interest rates & inflation Strain across most vintages & segments Impact not as severe as on home loans on a relative basis ▪ ▪ ▪ Inflation & unemployment ▪ Discretionary spend & Strain across most vintages & segments. Improvement in H2 Clients with other variable-rate exposures experiencing bigger relative strain vs expectations unemployment ▪ ▪ Strain across most vintages & segments. Improvement in H2 Clients with other variable-rate exposures experiencing bigger relative strain vs expectations 3 3 0 8 2 9 1 3 8 1 8 1 9 5 2 0 1 0 9 4 6 6 5 Approval rates Take-up rates Approval rates Take-up rates Approval rates Take-up rates Approval rates Take-up rates NEDBANK GROUP LIMITED – 2023 Annual Financial Results 70 19 20 21 22 23 k s i r y e K s r e v i r d s s o l t i d e r C ) s p b ( o i t a r s e t a r p u - e k a t & l a v o r p p A 36 Notes:Notes:Nedbank Group Annual Results 2023 Client income & expenditure – consumer disposable income under pressure Additional info Average client income & expenditure 2021 2022 2023 Income Loan repayments Essential expenditure Discretionary expenditure (3%) 10% 9% 15% 6% 5% (2%) 3% 6% 17% 6% (10%) 5% 4% (29%) 27% (9%) (4%) (3%) (1%) 8% 3% 1% (4%) Income Home Loans Vehicle finance Personal loans Groceries Education Healthcare Fuel Home improvement Fast food Clothing Alcohol Sample comprises Nedbank main-banked clients that have received income or transacted during the period reported (~1,5m clients). The yoy comparison is Jul-Dec for 2023, 2022 and 2021. Income growth reflects the average effect of some clients receiving increases above inflation, some clients below inflation as their employers could not afford higher increases & some clients that may have lost or seen a reduction in their income. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 71 RBB strategic progress – good progress on growth vectors Avo Value-added services Solar offerings Funeral insurance Township economy ▪ Avo Marketplace ▪ Avo Auto ▪ Avo Home ▪ Avo B2B ▪ Avo Solar Value-added services revenue (Rm) +29% 20 21 22 23 Registered Avo clients (# m) +26% 0,7 2,0 2,5 20 21 22 23 ▪ 101 deals approved & > R400m deals financed for commercial clients ▪ > 450 households financed with MFC solar # MFC deals approved >100% 22 23 Clients with funeral policies (#) +22% 20 21 22 23 Specialised Main Markets Team formed led by GM: Main Market Transactional Investments >45% >90% VAS >450% Funeral Insurance (Funeral policies) >55% PayShap 28% share of market transactions NEDBANK GROUP LIMITED – 2023 Annual Financial Results 72 37 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief ExecutiveNedbank Retail & Business Banking – outlook 2024 outlook ▪ NII ─ Advances & deposits growth – momentum continues ─ NIM is expected to decline as a result of ongoing product mix changes & margin squeeze in client spreads ▪ NIR – diversify revenue base & scale key growth vector strategies ▪ CLR ─ CLR within the top half of our TTC target range (120 bps to 175 bps) ─ Economic risk is on the downside, putting pressure on clients ▪ Expenses – optimisation continues ▪ Strategic execution – Phoenix, Imagine & collection strategies Medium- & long-term outlook ▪ Ongoing focus to reduce the cost-to-income ratio to <57% & increase ROE to between 20% & 23% NEDBANK GROUP LIMITED – 2023 Annual Financial Results 73 Wealth overview ‘Resilient HE & ROE, driven by higher interest rates & positive market movements’ Iolanda Ruggiero Group Managing Executive NEDBANK GROUP LIMITED – 2023 Annual Financial Results 74 38 Notes:Notes:Nedbank Group Annual Results 2023Wealth financial performance – resilient HE & ROE, driven by higher local & international interest rates & growth in AUM E O R ) % ( i s g n n r a e e n i l d a e H ) m R ( Financial performance 24,8 15,3 21,2 26,3 26,8 ▪ NII up by 42% – NIM expansion due to higher local & international interest rates – Significant growth in average deposit balances in WMSA +6% ▪ NIR down by 4% – Lower traditional bancassurance volumes – New business strain from new MyCover solutions – Lower advice & investment fees – Increase in shareholder returns in Insurance – Growth in AUM fees Impairments up by > 100% ▪ 2 4 0 1 19 2 6 6 20 2 6 9 21 0 4 1 1 22 0 1 2 1 23 – Lower client-specific overlay releases than in prior year & an increase in credit impairment charges in WMSA ▪ Expense growth of 10% – Investment in people, brand awareness, data & digital initiatives – Higher inflation rates internationally & exchange rate impacts NEDBANK GROUP LIMITED – 2023 Annual Financial Results 75 Wealth financial performance – resilient HE growth positively impacted by higher interest rates & market performance locally & internationally, offset by lower NIR in Insurance Additional info Headline earnings per division (Rm) (5%) Insurance ▪ Increased sales in MyCover suite ▪ Higher shareholder returns ▪ Lower traditional bancassurance volumes +10% ▪ New business strain from new MyCover solutions +22% Asset Management ▪ Positive local & international market performance ▪ Significant growth in inflows & positive FX impact Wealth Management 8 0 5 2 8 4 1 5 3 6 8 3 1 8 2 2 4 3 ▪ Higher local & international interest rates ▪ Significant growth in average deposit balances in Insurance Asset Management Wealth Management 19 20 21 22 23 WMSA ▪ Lower client-specific overlay releases in WMSA NEDBANK GROUP LIMITED – 2023 Annual Financial Results 76 39 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief Executive Insurance – lower traditional bancassurance volumes and new business strain, offset by positive shareholder returns Total group insurance income (Rbn) IFRS 17 implemented with 2022 restated results MyCover Funeral 16% 1,7 (16%) 1,4 Stable non-life claims ratio (improved HOC & unfavourable MyCover Personal Lines) 41% growth in GWP from the MyCover suite Negative reserve impact in 2023 vs reserve releases in 2022 Credit Life volumes negatively impacted by more prudent credit granting 22 23 NEDBANK GROUP LIMITED – 2023 Annual Financial Results MyCover Personal Lines MyCover Life Gross premium earned 2022 2023 487% Gross premium earned 2022 2023 25% Gross premium earned 2022 2023 77 Insurance – large growth opportunity driven by channel & product expansion as well as digital enhancements Gross written premium (Rm) 0 0 17 # of digital products 7 # of digital channels >50% >17 >7 Digital growth Digitally active clients Digital policies >100% +58% +240% +16% Life Non-life Life Non-life Life Non-life 2019 2023 Medium term (MT) 19 20 21 22 23 MT Launched the Insurance widget & Offers for you on Money app, driving increased traffic & sales Redesigned the insurance flow entry screen for enhanced client accessibility, resulting in improved user experience NEDBANK GROUP LIMITED – 2023 Annual Financial Results 78 40 Notes:Notes:Nedbank Group Annual Results 2023Insurance – significant progress made on product and channel diversification Additional info Pre-2010 Branch Credit Life Home- owner’s cover Current Branch | Bank insertion points MyCover Funeral MyCover Life Credit Life Home- owner's cover MyCover Personal Lines VVAPs Accident and health Call Centre MyCover Funeral MyCover Life Credit Life Home- owner's cover MyCover Personal Lines VVAPs Banker MyCover Personal Lines Digital channels Dotcoza Platform MyCover MyCover Funeral Funeral MyCover Life Personal Accident MyCover Personal Lines VVAPs MyCover Funeral MyCover Vehicle Life Non-life Eclipse In development Delivered from 2021 Financial advisor Risk consultants MyCover Funeral Savings & investments Home- owner's cover MyCover Personal lines MyCover Funeral MyCover Life MyCover Personal lines Home- owner's cover NEDBANK GROUP LIMITED – 2023 Annual Financial Results 79 Asset Management – good growth in NIR, driven by 14% increase in AUM Assets under management (Rbn) 375 331 312 297 273 257 212 190 151 +14% 448 393 424 20 years of Best of Breed™ Asisa stats ranking • SA – 6th largest in total AUM (7% market share) • International – 3rd largest in total AUM (9% market share) Outstanding industry recognition Good inflows into cash & low-cost core range 12 13 14 15 16 17 18 19 20 21 22 23 Local International NEDBANK GROUP LIMITED – 2023 Annual Financial Results 80 41 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief Executive) ( % M N I Wealth Management – HE growth of 22%, driven mainly by an increase in NII, offset by increased impairment charges locally Wealth Management average advances, average deposits & NIM 1,6 1,1 1,1 2,1 +11% 49 1,7 44 31 +0% 31 20% increase in average deposit book in WMSA Group collaboration driving increase in advice penetration Replacement of international wealth management platform on track 19 20 21 22 23 Avg advances Loans & Advances Deposits Avg deposits Top Private Bank in SA (Intellidex) Best Private Bank – Africa (Global Private Banking Innovation awards) WealthBriefing MENA Awards Best Boutique Private Bank and Best Private Bank – Overall Client Service NEDBANK GROUP LIMITED – 2023 Annual Financial Results 81 Nedbank Wealth – outlook 2024 outlook ▪ NII – NIM expected to decrease as international interest rates forecast to decline ▪ NIR ‒ Growth in Nedbank Insurance MyCover suite ‒ Increase in high-net-worth market share ‒ Higher AUM through attracting net inflows ▪ CLR – To remain within the lower end of the TTC target range ▪ Expenses ‒ Continued investment in strategic growth initiatives & key enablers (people & brand) Medium- & long-term outlook ▪ Reduce cost-to-income ratio to < 65% & maintain strong ROE > 10% above the group’s COE NEDBANK GROUP LIMITED – 2023 Annual Financial Results 82 42 Notes:Notes:Nedbank Group Annual Results 2023 NAR overview ‘Improved SADC performance & continued ETI turnaround’ Dr Terence G Sibiya Group Managing Executive NEDBANK GROUP LIMITED – 2023 Annual Financial Results 83 NAR financial performance – improved performance from our SADC operations & continued turnaround from ETI Financial performance E O R ) % ( 7,7 9,3 25,2 13,8 1 (0,8) ▪ SADC operations – HE of R662m, up by 80% ‒ NII up by 25%, driven by improved margins ‒ NIR up by 17%, driven by FX gains & increased revenue from digital channels ‒ Expenses up by 7% as a result of proactive cost management ‒ Impairments up by 15% & CLR of 100 bps remains within the +94% cluster TTC target range of 85 bps to 120 bps ‒ ROE of 9,9% (2022: 5,9%) i s g n n r a e e n i l d a e H ) m R ( 7 5 4 19 ) 4 2 ( 20 4 9 5 21 7 7 9 22 1 9 8 1 23 ▪ ETI associate investment – HE of R1,2bn; up by >100% ‒ Associate income up by 77% to R1 380m, including the reversal of the R175m Ghana sovereign bond provision raised by Nedbank in 2022 ‒ Dividends declared in the last 2 cycles ‒ ROI of 22,0% (2022: 12,4%) ‒ Ecobank Nigeria remains a focus to improve performance 1 ROE of 22,9% excluding the R175m reversal of the Ghana sovereign bond provision (equivalent HE of R1 716m). HE up by 76% on a similar basis. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 84 43 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief Executive SADC progress – good momentum underpinned by a strong foundation Client & digital progress Key subsidiary developments Additional info Net Promoter Score # 1 bank in 2 countries Avo SuperShop in Namibia a first in the market with potential to expand to other regions Digitally active clients (%) 64 54 57 47 Commenced technology convergence enabling a consistent Nedbank experience across the regions 20 21 22 23 NEDBANK GROUP LIMITED – 2023 Annual Financial Results ▪ Higher reserve requirements impact in Mozambique ▪ Ongoing changes in inflation measurement method in Zimbabwe ▪ Pricing directive continuing to impact revenue-earning potential in Lesotho ▪ Competition commission enquiry on banks in Namibia Zimbabwe advances (US$m loan book) 67,5 4,7 20 2,1 21 18,3 22 23 % contribution to SADC % of total clients % of total revenue % of total assets Namibia Mozambique Zimbabwe Eswatini Lesotho 32,7 12,3 20,7 18,7 15,6 31,3 21,4 25,3 13,4 8,6 48,4 18,8 6,7 18,0 8,1 85 ETI associate investment – positive momentum in financial performance & release of the R175m Ghana sovereign bond provision that Nedbank recognised in 2022 Associate income1 (Rm) ETI carrying value vs market value (Rbn) 668 686 779 (0,1) 1 380 1,4 (1,3) -178 19 20 21 22 23 Return on ETI investment2 (%) 10,7 11,0 12,4 5,6 22,0 19,2% excl R175m reversal 1,3 1,3 2,2 1,5 19 20 21 22 23 Note: ETI accounted for a quarter in arrear. | 1Associate income includes the reversal of the R175m estimated impact of the Ghana sovereign domestic bond provision accounted for in the prior financial year. | 2Return on original investment of R6,3bn (based on associate income). For 2020, ROI was calculated using IFRS associate income, which excludes goodwill impairment by ETI. | Market value at February 2024 reflects the impact of naira devaluation since December 2023. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 86 44 Notes:Notes:Nedbank Group Annual Results 2023ETI associate investment – resilient financial performance supported by encouraging progress on the value unlock agenda Ecobank top 3 in 15 African countries & #1 in 6 countries ROTE up to 25,6% from 21,0% in the prior year1 Growth, Transformation and Returns (GTR) strategy completed, with true client orientation at the core Total CAR of 13,9%3 showing resilience, despite macro environment shocks 1 Based on ETI’s 9M results. 2 ROEs of UEMOA: 28,8%, AWA: 28,5%, CESA: 34,4% & Nigeria: 5,5%. 3 At 30 September 2023. NEDBANK GROUP LIMITED – 2023 Annual Financial Results ETI share price (NGN) Continued benefits of a diversified business model with 3 of the core regions achieving ROEs >28%2 20 15 10 5 0 Additional info 20,94 Sept 2023 price-to- book ratio: 0,3x 19 20 21 22 23 ETI share price performance (% change end 2020 to end 2023) Naira (NGN) Rand (ZAR) US dollar (U$S) +248% +92% +52% 4 Increase in ETI share price +97% to NGN20,9 at December 2023 yoy, offset by the naira devaluation of ~44% against the US dollar. 87 Nedbank Africa Regions – outlook 2024 outlook SADC operations ▪ Execute on our technology convergence journey ▪ Transform the business & operating model to leverage group centres of excellence ▪ Continue our pan-African digital growth strategy ▪ Unlock further value in Mozambique ETI associate investment ▪ Collaborative shareholder focus to execute on value unlock agenda Medium- & long-term outlook ▪ Reduce SADC operations cost-to-income ratio to < 60% & increase ROE consistently >COE ▪ Target ETI ROI consistently >20% & price-to-book of ~1x NEDBANK GROUP LIMITED – 2023 Annual Financial Results 88 45 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief ExecutiveEconomic forecasts Short-term guidance & medium-/long-term targets CE succession Conclusion Outlook Mike Brown Chief Executive 89 NEDBANK GROUP LIMITED – 2023 Annual Financial Results Operating environment – forecasts highlight an improvement in key macroeconomic indicators at a time when geopolitical risk has increased Actual Forecast: Feb 2023 Forecast: Feb 2024 19 20 21 22 23 24 25 23 24 25 26 SA GDP growth 0,1% (6,4%) 4,7% 1,9% 0,7% 1,5% 1,6% 0,5% 1,0% 1,5% 1,6% Prime interest rate (year-end) Inflation (average CPI) Industry credit growth Rand/US$ (year-end) SA fiscal deficit % of GDP1 SA govt debt % of GDP1 10,0% 7,0% 7,25% 10,5% 11,0% 10,25% 10,25% 11,75% 11,0% 10,5% 10,5% 4,1% 3,3% 4,6% 6,9% 5,5% 4,8% 4,8% 5,9% 5,0% 4,6% 4,5% 5,3% 1,2% 4,4% 9,2% 5,0% 5,9% 6,4% 4,7% 5,2% 5,7% 6,2% 14,0 14,6 15,9 17,0 16,8 16,7 17,3 18,3 18,2 18,3 18,4 (3,6%) (5,1%) (9,9%) (4,6%) (4,2%) (4,0%) (3,2%) (4,9%) (4,8%) (4,4%) (4,2%) 52% 56% 70% 69% 72% 73% 74% 75% 76% 77% 77% Source: Nedbank Group Economic Unit. | 1 Year ending March. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 90 46 Notes:Notes:Nedbank Group Annual Results 2023Short-term guidance (2024) – progress towards our medium-term targets in a macroeconomic environment that remains difficult & volatile 2023 performance 2024 guidance1 Key drivers/risks in 2024 NII growth +14% Above mid-single digits ▪ Advances growth from renewables & SPT 2.0 gains, with H1 growth slow, before picking up in H2 ▪ NIM peaked in 2023, but endowment benefit remains elevated given average interest rates CLR 109 bps Back within the top half of the 60 bps to 100 bps TTC range ▪ Ongoing reduction in RBB’s CLR & resolution of material risk relating to CIB NPLs completed in 2023 Seasonality likely resulting in H1 CLR > H2 CLR ▪ NIR growth Expense growth Associate income Capital (CET1 ratio) Dividend +6% +8% +64% 13,5% 57% payout Above mid-single digits ▪ Main-banked client gains, cross-sell & deal closures ▪ Trading & insurance income off a lower 2023 base (outcomes market- dependent), but high base in fair-value & Zimbabwe FX gains Mid-to-upper single digits Slightly lower than 2023 Above TTC target range (11% to 12%) Top end of payout ratio ▪ Average annual salary increases of around 6% ▪ Ongoing cost optimisation focus – TOM 2.0 & 2.1 ▪ DIS (~R230m), Twin Peaks run rate, YES ramp up ▪ Ongoing associate income growth, but base impact from Nedbank’s R175m Ghana sovereign bond provision reversal in 2023 ▪ Remains above the top end of board target range ▪ Dividend cover range 1,75x to 2,25x or payout ratio of 57% to 44% 1This guidance is not a profit forecast, has not been reviewed or reported on by the group’s joint auditors & is based on the group’s economic forecasts at the time. NEDBANK GROUP LIMITED – 2023 Annual Financial Results 91 Our medium- & long-term targets support shareholder value creation Diluted headline earnings per share ROE Cost-to-income ratio Net Promoter Score Short term Medium term Long term By end 2023 > 2 565 cents (2019 levels) 3 199cents 15% (2019 levels) 15,1% < 54% 53,9% #1 bank (from #3 in 2019) #1 bank By end 2025 > CPI + GDP + 5% (CAGR to end-2025) 17% (around COE + 2%) < 52% #1 bank Not dated > CPI + GDP + 5% (CAGR through the cycle) > 18% (around COE + 3%) < 50% #1 bank NEDBANK GROUP LIMITED – 2023 Annual Financial Results 92 47 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief ExecutiveMedium-term targets – path towards ROE of 17% Solid NII growth CLR within target range Strong NIR Column9 & associate income growth Manage expense growth for + Jaws Capital 17% target Additional info 15,1% Advances growth Impairments ▪ RBB growth by ▪ CLR back to within the top half of our 60 bps to 100 bps TTC target range delivering on SPT 2.0 targets ▪ CIB growth from unlocking large infrastructure opportunities No material NIM contraction ▪ Prime rate remains ≥ 10,5% ▪ Ave prime: 23: 11,4%, 24F: 11,5%, 25F: 10,6%) 2023 NEDBANK GROUP LIMITED – 2023 Annual Financial Results NIR & associate income ▪ Main-banked client gains & higher cross-sell ▪ Leveraging balance sheet for NIR growth ▪ Continued momentum in trading activities ▪ Unlock large insurance growth opportunity ▪ Double-digit ETI- related growth Expenses ▪ Ongoing cost optimisation ▪ Delivering on TOM 2.0 target (R2,5bn by H1 2024) ▪ New TOM 2.1 opportunities ▪ Progress towards C:I target: <52% Capital ▪ Pay dividends at the top end of payout ratios of 57% ▪ Run-rate benefits of R5bn capital optimisation initiative & further capital optimisation if appropriate Medium-term targets – path towards ROE of 17% 2025 93 Additional info CIB RBB Wealth NAR ROE at >19% (2023: 18,9%) Cost-to-income ratio reduces to < 44% (2023: 45,2%) ROE increases to between 20% & 23% (2023: 16,0%) ROE maintained >25% (2023: 26,8%) SADC ROE increases to > COE (2023: 9,9%) Cost-to-income ratio reduces to < 57% (2023: 58,1%) Cost-to-income ratio reduces to < 65% (2023: 66,6%) SADC cost-to-income ratio reduces to < 60% (2023: 68,3%) ▪ Using deep sector expertise to unlock further balance sheet growth, particularly SDF & renewable energy ▪ CLR below the mid-point of the CIB TTC target range ▪ Leverage balance sheet for NIR growth ▪ SPT 2.0 targets – grow advances ahead of market, except for PL & maintain VAF. Grow deposit market share ▪ CLR towards the mid-point of the RBB TTC target range ▪ Main-banked client gains to >4 million ▪ Ongoing focus on capital ▪ Cross-sell increase to >2,0 efficiency & ROE optimisation ▪ Continued cost optimisation, driven by TOM 2.0 initiatives ▪ Insurance – grow MyCover suite ▪ Asset Management – expand international distribution & offering ▪ WMSA – increase high-net- ETI ROI consistently above >20% (2023: 22,0%) ▪ Leverage group IT technology & centres of excellence ▪ Digital growth strategy increasing NIR from digital channels worth market share ▪ Growth opportunities in ▪ WMI – bolster wealth Mozambique offering through new core platform ▪ Continue focus on value unlock agenda in ETI NEDBANK GROUP LIMITED – 2023 Annual Financial Results 94 48 Notes:Notes:Nedbank Group Annual Results 2023 Chief Executive succession – a seamless, well-managed process Announced appointment of Daniel Mminele as Chairperson- designate Daniel Mminele joined board 2023 AGM as Chairperson- designate Daniel Mminele became Chairperson Announced CE succession process started Announced appointment of Jason Quinn as CE-designate 2024 AGM Jason Quinn joins the board as CE Mike Brown retires from the board Jason Quinn joins Nedbank as CE-designate Mike Brown retained as Senior advisor for 3 months to facilitate seamless handover 22 May 24 15 Feb 23 1 May 23 2 Jun 23 11 Nov 23 31 May 24 NEDBANK GROUP LIMITED – 2023 Annual Financial Results 95 Conclusion – slightly improving macroeconomic environment, strong foundations & underlying business momentum position Nedbank well to deliver on 2025 targets & create shareholder value Macroeconomic environment improving Strong Momentum foundations in place in the business Medium- & long-term targets aligned to shareholder value creation ▪ Key SA economic ▪ Experienced board & ▪ Attractive lending ▪ Achieved all our 2023 indicators are forecast to improve in 2024 ▪ Initiatives around energy supply to reduce load- shedding to levels 1 or 2 by 2025 ▪ But geopolitical & sociopolitical risks remain (eg global conflict, international & local elections) leadership team pipelines ▪ Strategy that is unlocking ▪ Digital growth trends growth & enhancing productivity ▪ Track record of delivery ▪ World-class technology platform & leading digital capabilities ▪ Fortress balance sheet & excess levels of capital ▪ Great people & culture ▪ Purpose-driven bank – leading in sustainability & ESG matters continuing ▪ Main-banked client gains & higher levels of cross- sell ▪ Market share gains in key product areas ▪ Ongoing cost optimisation ▪ Impairments trending down (CLR peaked in H1 2023, RBB management actions & ~R11bn of stage 3 reductions in CIB expected in 2024) NEDBANK GROUP LIMITED – 2023 Annual Financial Results targets in a more difficult environment DHEPS Cost-to-income ROE NPS ▪ But we aspire to increase our ROE further to improve our price-to-book ratio from 0,9x DHEPS growth: CAGR GDP + CPI + 5% Cost-to-income: <52% ROE: >17% NPS: #1 bank 96 49 Notes:Notes:Nedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief ExecutiveThank you NEDBANK GROUP LIMITED – 2023 Annual Financial Results Celebrating 135 years of making a difference 97 Disclaimer Nedbank Group has acted in good faith and has made every reasonable effort to ensure the accuracy and completeness of the information contained in this document, including all information that may be defined as 'forward-looking statements' within the meaning of United States securities legislation. Forward-looking statements may be identified by words such as ‘believe’, 'anticipate', 'expect', 'plan', 'estimate', 'intend', 'project', 'target', 'predict' and 'hope'. Forward-looking statements are not statements of fact, but statements by the management of Nedbank Group based on its current estimates, projections, expectations, beliefs and assumptions regarding the group's future performance. No assurance can be given that forward-looking statements 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 – 2023 Annual Financial Results 98 50 Notes:Notes:Nedbank Group Annual Results 202351 NotesNedbank Group Annual Results 2023ResultspresentationSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryMessage from ourChief Executive2023 results commentary 52 Nedbank Group Annual Results 20232023 results commentary Economic and banking environment in 2023 The world economy fared better than most expected in 2023, although the International Monetary Fund (IMF) forecasts global growth in 2023 to have slowed to 3,1% (2022: 3,5%). A robust US economy and China’s modest recovery off the previous year’s low base provided some counter to the deeper economic downturns in Europe, the UK, and most other advanced countries, as the lingering effects of the earlier surge in inflation and much tighter monetary policies weighed on confidence and eroded demand. Global inflation receded in 2023 driven by the reversal in energy and food prices from the highs of 2022, the ongoing normalisation in global supply chains, slightly softer labour market conditions, and weaker consumer demand in many countries in response to restrictive monetary policies. The onset of disinflation brought some relief to households towards the end of last year, lifting real incomes, purchasing power and confidence, thereby preventing a sharper slowdown in the world economy. The US and most other major central banks raised their respective policy rates to restrictive territory and continued to reduce their sizeable balance sheets. Around Q3 2023, major central banks signalled a pause in their rate-hiking cycles as underlying price pressures started to subside more convincingly. Even so, the most aggressive monetary policy tightening in advanced countries in over 4 decades resulted in significant adjustments to global investor portfolios, sustaining the US dollar near its 2022 highs, weighing down commodity prices and reducing appetite for higher-risk emerging market assets. Sub-Saharan Africa experienced a loss of economic momentum, with GDP growth slowing to 3,3% in 2023 (2022: 4,0%). Falling commodity prices, caused by softer global demand and a firm US dollar, weighed on the region’s export earnings. At the same time, high inflation and interest rates subdued domestic demand in most countries. In addition, the fiscal position of many governments across the region weakened significantly as tax revenue dwindled while borrowing costs surged, leaving little to no policy space to stimulate growth. Several low-income African countries with high levels of dollar-denominated debt struggled to access capital markets and grappled with surging borrowing costs as a buoyant US dollar compounded the impact of higher global interest rates. As a result, more countries slipped into default, turning to the IMF for financial assistance. SA’s economy remained weak throughout 2023 in the face of crippling power outages and worsening transport bottlenecks. The inefficiencies at 2 of the country’s critical state-owned enterprises – Eskom and Transnet – increased sharply, reducing production, driving up operating costs and squeezing profits across all industries. Eskom managed to maintain an electricity availability factor of only 54,8% throughout 2023 and, as a result, the frequency and intensity of load-shedding more than doubled from 2022, with Eskom shedding 24 408 GWh in 2023. Unreliable rail and port services added more pressure to the private sector, undermining trade, disrupting supply chains, and eroding the country’s international competitiveness. The drag from these crippling challenges was further amplified by softer global demand, lower international commodity prices and weak domestic demand amid sticky inflation and sharply higher interest rates. By the third quarter, real GDP contracted by 0,2% qoq compared with modest growth of 0,5% and 0,4% over the second and first quarters. The Nedbank Group Economic Unit now forecasts GDP growth of only 0,5% for the year, down from 1,9% in 2022. Given the unfavourable environment, industry credit growth slowed to 4,7% yoy by the end of 2023 (2022: 9,2%). Fixed investment activity held up better than expected in 2023, with activity dominated by the private sector’s drive to secure alternative energy and transport options, supported by the ongoing rollout of projects under the official independent power producers’ renewable energy programme. However, by the third quarter of last year, private sector outlays stalled, suggesting that the difficult operating environment was starting to deter other capital expenditure, and convincing more companies to postpone non-energy-related investment plans. Consequently, corporate credit demand softened off the previous year’s higher base and company loan growth moderated to 5,0% in December 2023, down from 10,7% in December 2022. The strain on household finances increased throughout the year. Real personal disposable income declined by 1,2% yoy over the first 3 quarters of 2023. Elevated inflation largely offset the impact of further job creation and higher wage increases. At the same time, higher interest rates pushed debt service costs up to 8,9% qoq of personal disposable income, up from 8% qoq at the end of 2022, significantly reducing the funds available for discretionary spending. Households also depleted the savings they built up during the pandemic years, leaving little to no buffers to shield against more difficult financial conditions. As a result, households cut back on spending and borrowing, with household consumption expenditure growing by only 0,7% qoq over the first 3 quarters of 2023, down from a relatively strong 2,5% in 2022. As consumers reduced spending and commercial banks tightened lending standards amid rising defaults, household loans and advances growth slowed significantly to 4,3% yoy in December 2023 from 7,7% in December 2022. Mortgages and personal loans weakened, while vehicle finance and demand for transactional credit remained relatively firm. Inflation receded from 7,2% yoy at the end of 2022 to 5,1% by the end of 2023, averaging 5,9% over the year. The downward pressure came mainly from falling fuel prices as global oil prices declined, offsetting the impact of a weaker rand. As the year progressed, waning domestic demand helped keep core inflation steady at around 4,5%. However, food prices remained high and volatile, reflecting the surge in local production costs caused by load-shedding and transport bottlenecks. Animal diseases and extreme weather events also strained local food producers and placed upward pressure on prices. Encouragingly, food inflation started to decline more convincingly towards the end of 2023. As inflationary pressures eased, the Monetary Policy Committee (MPC) left the repo rate unchanged at 8,25% from May onwards after hiking by 125 basis points in the first half of the year. Financial markets were volatile throughout 2023, reflecting swings in global risk sentiment. At the beginning of the year the brief turmoil in parts of the US and Swiss banking sectors, uncertainties over the outlook for US interest rates, and speculation over the likely severity of the unfolding global economic downturn weighed on sentiment. However, global risk appetites improved later in the year as global inflation subsided and global economic activity proved to be relatively resilient, fuelling expectations of more accommodative monetary policies and a soft landing for the world economy in 2024. Investor sentiment towards SA remained muted, hurt by the country’s poor economic growth prospects, worsening fiscal metrics in the face of deepening structural constraints, the greylisting by the Financial Action Task Force, and persistent concerns about SA’s geopolitical stance against the backdrop of the conflicts in Ukraine and the Middle East. Investors priced in lower growth and higher risk, resulting in significant capital outflows and persistent rand weakness. 53 Nedbank Group Annual Results 20232023 resultscommentarySupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial resultsResultspresentationMessage from ourChief ExecutiveStrategic progress Our strategy gives us a clear framework of where we want to focus as a purpose-led organisation and what we need to do to meet our short-, medium- and long-term targets. accounts onto new products (where appropriate), converging for scale – across all segments, all channels and all geographies (including harmonisation of Nedbank Africa Regions (NAR) IT systems), optimising processes end to end, and leveraging data and generative artificial intelligence (AI) for commercial advantage. At the start of 2021 Nedbank was one of the first South African banks post the disruptions of Covid-19 to set new medium-term targets, including financial targets for diluted headline earnings per share (DHEPS), return on equity (ROE) and cost-to-income ratio, as well as a non-financial target, being Net Promoter Score (NPS). This was done in an environment of uncertainty, but importantly to inform our shareholders of the value creation potential of post-Covid-19 recovery given the fact that analyst consensus forecasts for ROE in 2023 was around 13% and above 56% for the cost-to-income ratio at the time. In 2022 we reported DHEPS of 2 809 cents, greater than the 2023 DHEPS target of 2 565 cents, being the DHEPS level achieved in 2019. We also achieved a #1 ranking in the Kantar NPS survey, and both these targets were achieved a year earlier than we initially planned, and both were achieved again in 2023. At the end of 2023 we met the remaining 2 targets, being reporting an ROE of 15,1%, above the 2019 level of 15,0% and a cost-to-income ratio of 53,9%, below our target of 54,0%, and well below the 56,5% reported in 2019. Achieving these targets is an important milestone, but we aspire to improve our profitability metrics further as we now focus on our medium- and long-term targets, including higher ROEs (17% in the medium term and 18% in the long term) and lower cost-to-income ratios (52% in the medium term and below 50% in the long term). This requires diligent execution of our strategy by growing revenues faster than expenses and increasing levels of productivity – both strongly enabled by our world-class technology platform – and maintaining strong risk and capital management metrics. We are focusing on gaining profitable market share in key lending categories, increasing our share of transactional main-banked clients and related deposits, and ensuring delivery of market-leading client experiences that will help us attract new clients and deepen our share of wallet among existing clients. To boost productivity and improve operational efficiency, we are building on and accelerating efforts in optimising our operating model in a more digital world by leveraging the digital platforms we have put in place. Our world-class risk management capabilities will ensure that we balance risk and reward trade-offs appropriately. Our strategy, which is enabled by a world-class technology platform and our employees as our most important asset, is delivered through 5 strategic value unlocks: digital leadership and digital experiences (DX); market-leading client experiences (CX); focusing on areas that create value (known as strategic portfolio tilt); driving efficient execution (including target operating model enhancements); and creating positive impacts, including delivering on our purpose of using our financial expertise to do good while maintaining our leadership in ESG matters. Our technology strategy and managed evolution transformation programme have enabled us to build a world-class modern, modular, and digital information technology (IT) stack. At the end of December 2023 we reached 95% build completion, and the programme is aiming for full completion by the end of 2024, with the refactoring and modernisation of our core banking systems and the digitisation of the 2 remaining client onboarding and servicing journeys, with home loans and vehicle finance being the key remaining deliverables. The benefits of ME are evident in the digital progress we have made, as well as the realisation of benefits through our target operating model and expense optimisation programmes. The group’s intangible software assets on the balance sheet ended December 2023 at R7,9bn, down from R8,3bn at the end of 2022 and having peaked in 2020 at R9,0bn. This decline is aligned to lower levels of IT cash flow spend, which peaked at around R2,3bn in 2017, and are expected to remain around the R1,6bn level going forward (2023: R1,3bn). As we close out the ME programme, our focus shifts to leveraging our new technology stack to simplify our product range, making banking easier and more affordable for our clients by migrating existing The following are some highlights of the strategic progress we have made in 2023: • Digital leadership • Simplified sets of products off our new core banking platform: 3 new MiGoals transactional products for our retail consumer banking clients were launched in May 2023 and are the first transactional products released off our new core banking systems. The launch of these MiGoals products is part of the optimisation process of our transactional product range from 46 (36 current accounts and 10 savings products) to 18. MiGoals will be followed by the release of similar transactional products for Private Clients, high-net-worth clients, and businesses, including a relaunch of an optimised set of investment and lending products. Since the launch, 2,1 million MiGoals accounts were opened on our new core banking platform, of which 1,4 million were account migrations and 0,7 million were new sales. • Apps: Active Nedbank Money app clients reached 2,3 million in 2023, up by 16% yoy. Transaction volumes on the Money app increased by 18% yoy (up by 315% since 2019) and transaction values increased by 19% (up by 298% since 2019). Revenue from value-added services grew by 29% yoy (up by 197% since 2019) across prepaid data, voucher, and electricity purchases, as well as LOTTO and the sending of money to cellphones. The Nedbank Private Wealth app, which offers integrated local and international banking capabilities, continued to be enhanced regularly to deliver a leading client experience. Nedbank Insurance further improved its digital offering by launching the Insurance widget and ‘Offers for you’, increasing activity and sales on the Money app. The Nedbank Money App (Africa), offering convenience, a wide range of functionality and great user experiences for our NAR clients, reported a 24% yoy increase in app users. • Digital outcomes: Our digital initiatives helped us increase the number of digitally active retail clients in SA by 11% yoy to 2,9 million, representing 69% of retail main-banked clients (2022: 68% and 2019: 49%). Retail digital transaction volumes in SA increased by 12% (and by 98% since 2019) and transaction values were up by 10% (up by 54% since 2019). Digitally active clients across the NAR business increased from 57% to 64% of its total active client base. Nedbank Insurance has extended its quoting, fulfilment, and claims functionality on digital channels to 17 product offerings (2022: 10) and 7 channels. In recognition of our market-leading digital positioning, Nedbank was recently recognised as the Best Digital Bank in Africa in 2023 at the Euromoney Awards and as the Best Bank for Client-facing Technology at the 2023 Global Banking & Finance Awards. • Avo super app: Since its launch in 2020, the Avo super app (SuperShop) has signed up 2,5 million customers (up by 26% yoy), with over 23 000 businesses registered to offer their products and services on this e-commerce platform. Avo continues to grow exponentially, with a more than 100% yoy increase in gross merchandise value (GMV) as all 3 Avo ecosystems gain momentum. Avo Auto, a virtual vehicle mall launched in 2021, now hosts over 880 MFC-accredited dealers (up more than 100%) with close to 25 000 vehicles on the platform (up more than 100%) and has grown GMV 3,5 times yoy. Avo B2B launched to market in 2022 and offers a stock financing or working capital solution to businesses through a secure facility and is well on its way to contributing to significant GMV growth in 2023. Avo Home continues to increase its number of partners to drive scale, with GMV growth of 23% yoy. Avo Solar launched in August 2023, with over 100 residential installations, of which 70% is being financed by Nedbank. The Avo SuperShop launch in Namibia 54 Nedbank Group Annual Results 2023in August 2023 is showing good progress with 15 merchants, of which Apple is the top merchant. This is expected to continue to improve as more merchants are added to the platform. In recognition of the progress we have made, Nedbank won the Excellence in Innovation Banking App South Africa (Nedbank Avo) Award at the Global Banking & Finance Awards 2023. • Data and generative AI: We have invested significantly in our data capabilities, leveraging big data and AI through strong analytics teams. While it is early in the AI journey, the progress we have made on our technology journey is foundational for seamless integration and fast adoption of AI capabilities. We have already delivered numerous AI solutions that have generated benefits by using machine learning and data science techniques to make intelligent decisions based on data, including next-best-action strategies to drive higher levels of cross-sell. Going forward we will accelerate our AI capabilities with a further 53 data and AI analytics use cases being explored. In partnership with Microsoft, the M365 Copilot early access program was launched with the allocation of 300 licences. Early adopters participating in the access programme from across the bank are identifying and validating high-value use cases in support of its organisational readiness and the adoption of generative AI. A number of use cases have already been implemented, resulting in productivity gains and quality improvements to business correspondence, research, and the maintenance and application of policies. These pilot users have noticed an average time saving of 42 minutes a day, with the top time-saving activities relating to creating and summarising documents, emails and chats. Copilot Web, formerly known as Bing Chat Enterprise, was launched in October 2023, providing personal and company data protection, and extending generative AI capabilities to all Nedbank employees. • Payments: The modernisation of our payments domain is progressing well. Our participation in industry modernisation initiatives and our own payments efforts are enabling Nedbank to create a fully interoperable enterprise payment service hub that will optimise the cost to serve, increase innovation cadence, respond to open-finance opportunities, and unlock competitive advantages by enabling contextual and embedded payments. We participated in the industry rapid payments programme, PayShap, which is a low-cost, immediate, interoperable digital payments solution that was successfully launched in March 2023. To date there has been steady growth in its use with 2,3 million consumers registered and 11 million payments processed, worth over R7bn across all participating banks. Nedbank clients contributed approximately 28% to the overall volumes. Since the launch we remain the bank that offers clients the widest range of options of transactional channels, with more than 200 000 ShapIDs having been registered, culminating in over 3 million transactions. • Market-leading client experiences • Great client experiences: The success of our digital innovations was evident in higher levels of client satisfaction, as illustrated in Nedbank being rated #1 in NPS among South African banks in 2022 and 2023 (Kantar survey). In 2023 we also experienced a continuation of high sentiment rankings, with Nedbank ranked as the #1 bank on social-media brand sentiment as measured by Brandwatch. • Competitive brand: Nedbank was ranked the #8 most valuable brand among South African companies, up from the #9 position in the prior year, with the group’s brand value having increased by 15% to R17,3bn. • External recognition: In recognition of the value-add to our clients and our leadership position in key industries, segments and products, we have won various awards in 2023, including the Best Investment Bank in South Africa Award and Best Retail Bank South Africa Award at the 2023 Global Banking & Finance Awards, Best Private Bank Africa Award at the Global Private Banking Awards 2023, and Top Private Bank of the Year Award at the (Krutham) Intellidex Top Private Banks and Wealth Managers Awards 2023. • Focusing on areas that create value • Main-banked client gains and cross-sell: We continue to focus on areas that create value, particularly through our Strategic Portfolio Tilt 2.0 (SPT 2.0) initiative, which is a groupwide strategy focused on growing profitable market share in selected areas through integrated client-led asset and liability client value propositions (CVPs), leveraging the point of origination to increase the levels of cross-sell with a keen focus on growing the transactional-banking relationship and main-banked market share. In 2023 main-banked clients in retail grew by 9% to 3,53 million and cross-sell increased to 1,96 (compared with 1,94 in 2022 and 1,71 in 2019). Importantly, the correlation between main-banked client growth and transactional NIR growth in the Retail and Business Banking (RBB) consumer segment was strong. Corporate and Investment Banking (CIB) gained 20 new primary clients in the period. In NAR total clients increased by 4% to over 349 000, of which around 147 000 are main-banked clients. The opportunity to cross-sell insurance products across the group is significant, with steady progress achieved through collaboration between Nedbank Insurance and RBB. The MyCover suite showed good growth, with gross earned premiums up 16% in MyCover Funeral, 25% in MyCover Life and more than 487% in MyCover personal lines, albeit off a low base. • BA900 market share: As reported in the December 2023 SARB BA900 returns, we increased market share yoy in home loans (from 14,1% to 14,4%), retail overdrafts (from 12,9% to 15,1%) and commercial term loans (from 15,5% to 16,4%). Total retail deposits increased (from 16,0% to 16,4%) supported by retail transactional deposits (from 15,1% to 15,3%) and retail- non-transactional deposits (from 18,1% to 18,7%). Commercial transactional deposits, excluding tax and loans, increased from 11,8% to 12,2%. In areas where we have strong market share positions, we have been more selective in credit origination in the current economic environment, including for vehicle finance (from 35,4% to 35,5%) and commercial mortgages (from 36,8% to 36,0%). Given increasing risks in the environment, we have deliberately slowed growth in some product areas and, as a result, we reported market share declines in personal loans (from 11,9% to 11,0%) and credit card (from 11,0% to 10,0%). • Driving efficient execution • TOM 2.0: Our Target Operating Model 2.0 (TOM 2.0) programme, which was launched in 2021, 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. At the end of 2023 the cumulative cost benefits realised have increased to R2,2bn, slightly below our target of R2,5bn following decisions to reconsider the timing of the implementation of some initiatives that are linked to revenue uplift and a delay in some cost initiatives. Our R2,5bn target remains in place and is expected to be met in H1 2024. The implementation of Project Phoenix aimed at shifting 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’ is materially complete, including the consolidation of middle and back offices within the cluster, thereby unlocking efficiencies. In addition, the digitisation of services in RBB and changing client behaviours have enabled us to reduce branch teller volumes by 71% since 2019. To date, as we optimise the shape of our infrastructure through Project Imagine (our new digitally focused outlets), branch floor space has decreased by 27 000 m2 in 2023 (cumulatively by 111 000 m2 from 2014 levels) to 137 000 m2. Through our strategy of consolidating and standardising our own buildings, the number of campus sites (offices) has decreased from 31 to 23 over the past 4 years. Since 2016 we have saved more than 178 000 m2 in floor space, including around 35 000 m2 in 55 Nedbank Group Annual Results 20232023 resultscommentarySupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial resultsResultspresentationMessage from ourChief Executive2023. We have also focused on ensuring efficient and effective central group functions, including marketing, risk, human resources, finance, and technology. Savings in technology include efficiencies in network costs, a reduction of printing costs, the implementation of agile methodologies, and new ways of work (nWoW), with overall reductions in headcount, rigorous licence and service vendor management as well as the implementation of our cloud migration plans, with reductions in on-premise costs. At the end of December 2023 our total group permanent headcount declined by 456 or 2% yoy (and 3 745 or 13% since 2019) to 25 477, largely through natural attrition. • TOM 2.1: Our ongoing focus on extracting value from our technology investments and our world-class technology platform has resulted in the launch of TOM 2.1, which builds on our TOM 2.0 initiatives. TOM 2.1 will focus on extracting additional benefits from maturing our data and analytics capabilities, modernising key processes and payments, as well as implementing generative AI strategies. We are in the process of estimating associated revenue and cost benefits to be extracted over the medium term, and more detail will be communicated as part of our H1 2024 results. • Creating positive impacts • Sustainable development finance: Fulfilling our purpose of using our financial expertise to do good is best demonstrated through our ongoing delivery against the UN SDGs, our continued focus on leading in ESG matters, and our sustainable-development finance (SDF) commitments as we tilt our portfolio to areas that create positive impacts. At 31 December 2023 we had exposures of R145bn (December 2022: R123bn) that support SDF, representing 16% of the group’s gross loans and advances (2022: 14%). By the end of 2025, it is our ambition to have increased our SDF exposures to around 20% of the group’s total gross loans and advances, achieved through the support of more than R150bn in new SDF that is aligned with the SDGs (from our starting base in 2021). • 2030 glidepaths: Building on our history of climate and environmental leadership, including the commitment to have zero fossil fuel exposure by 2045 (in line with science-based targets), we have finalised our first sectoral glidepaths that inform our exit over time from the thermal coal, oil, and gas sectors in support of our net-zero 2050 commitment. Nedbank will use the widely adopted International Energy Agency (IEA) Net Zero Emissions by 2050 scenario (NZE) as a basis for our first targeted commitment to 2030 (31 December 2029) for our fossil fuel and power generation pathways. This science-based pathway aligns with the goals of the Paris Agreement, keeping global warming well below 2 °C by 2050 and to pursue efforts to limit the temperature increase to 1,5 °C. This will result in targeted reductions from 2022 to 2030 of 47% for thermal coal and 26% for oil and gas. As a result of our significant renewable energy power generation book, the current carbon intensity of the energy book is already below the 2030 NZE target of 188gCo2e/kWh, and we have therefore adopted the 2030 IEA target as a cap, with a cap beyond 2030 to be assessed closer to the time. • ESG ratings: We retained our top-tier ESG ratings with the following scores and rankings: MSCI – AAA (upgraded from AA and now within the top 5% of global banks); Sustainalytics – low-risk score of 17,1 (top 10% of 339 diversified banks); S&P Global – score of 60 out of 100 (top 9% of global banks); ISS – C rating (within the top 10% of global banks); FTSE Russell – 3,9 rating out of 5 (top 26% of global banks and a FTSE4Good Index constituent). • Our efforts in sustainability and ESG matters were recognised externally, including through our winning the Best Corporate Sustainability Strategy South Africa Award at the prestigious Global Banking & Finance Awards 2023, the Sustainability-linked Loan of the Year (Africa) Award at the Environmental Finance Awards 2023, and the Sustainable Bank of the Year Award at the African Banker Awards 2023. Overview of 2023 results Nedbank Group delivered a strong financial performance for the 12 months to 31 December 2023 when compared with the 12 months to 31 December 2022 (prior period). Headline earnings (HE) increased by 11% to R15 650m, enabled by a strong operational performance as preprovisioning operating profit (PPOP) increased by 15%, underpinned by 12% revenue growth, including associate income and prudent expense management, partially offset by a 30% higher impairment charge. Headline earnings per share (HEPS) increased by 15% to 3 312 cents and diluted HEPS (DHEPS) increased by 14% to 3 199 cents respectively, ahead of the HE growth of 11%, driven by the benefits of the R5bn capital optimisation initiative executed via an odd-lot offer as well as a share purchase programme that were materially completed in H1 2023, with the resultant cancellation of 23,4m shares. Basic earnings per share (EPS) increased by 10% to 3 239 cents. Return on equity (ROE) for the period increased to 15,1%, above the prior period of 14,1% and the group’s estimated cost of equity (COE) of 14,8%. This improvement was assisted by an increase in return on assets from 1,14% to 1,21% and slightly higher gearing post the finalisation of the R5bn capital optimisation initiative. Net asset value (NAV) per share of 23 192 cents increased by 8% compared with 21 533 cents in 2022, while tangible NAV of 20 614 cents increased by 9% compared with the 18 937 cents in the prior period. The group’s balance sheet remained very strong. CET1 and tier 1 capital ratios of 13,5% and 15,0% were well above board-approved target ranges and SARB minimum requirements. The average liquidity coverage ratio (LCR) for the fourth quarter of 135% and a net stable funding ratio (NSFR) of 117%, were well above the 100% regulatory minimums and board-approved targets. Following solid earnings growth and strong capital and liquidity positions, the group declared a final dividend of 1 022 cents per share, up by 18% (December 2022: 866 cents per share), bringing the total dividend for 2023 to 1 893 cents per share, up by 15% (2022: 1 649 cents). The dividend was declared at a payout ratio of 57% at the bottom end of the group’s board-approved dividend target range of 1,75 to 2,25 times. Cluster financial performance The group’s HE increase of 11% to R15 650m was driven by very strong HE growth in the NAR cluster, as well as solid performances across CIB, RBB and Nedbank Wealth. The group and all the clusters delivered ROEs above the group’s COE. HE (Rm) ROE (%) Change (%) 2023 2022 2023 2022 CIB RBB Wealth NAR Centre Group 6 9 6 94 (59) 6 799 5 566 1 210 1 891 184 6 399 5 097 1 140 977 448 18,9 16,0 26,8 25,2 17,7 16,0 26,3 13,8 11 15 650 14 061 15,1 14,1 56 Nedbank Group Annual Results 2023 HE in CIB increased by 6% to R6,8bn, and the cluster delivered an ROE of 18,9%. HE growth was solid despite a 17% increase in impairments. NII increased by 7%, supported by average banking loans and advances growth of 8% to R391bn, while NIR increased by 5%, supported by an increase in net commission and fees, growth in trading revenue and fair value gains, partially offset by a decline in equity investment income off a high 2022 base. The cluster CLR at 24 bps (2022: 22 bps) was below the midpoint of its through-the-cycle (TTC) target range of 15 bps to 45 bps and includes additional impairments in respect of a few counters that reached the finals stages of business rescue. Expenses increased by 7%, driven mainly by higher costs associated with the retention and attraction of talent, resulting in a cost-to-income ratio of 45,2%. HE in RBB increased by 9% to R5,6bn, with HE in H2 2024 increasing by 24% compared with the decline of 8% reported in H1 2023, delivering an ROE of 16,0%. Very strong PPOP growth of 17% was driven by revenue growth of 11% and expense growth that was well managed. Impairments increased by 29%, primarily as a result of the impact of the more difficult macroeconomic environment, elevated risk outcomes, and a weaker collections performance in H1 2023. While the RBB CLR increased to 194 bps yoy, above the cluster’s TTC target range of 120 bps to 175 bps, it declined to 164 bps in H2 2023 from the 226 bps reported in H1 2023 as we improved our risk and collections strategies. NII grew by 14%, driven by a 7% increase in average banking loans and advances and a widening of NIM that benefited from positive endowment (higher interest rates). NIR, on a restated basis, increased by 7%, underpinned by higher levels of cross-sell and strong main-banked client gains, as well as good growth in card interchange and value-added services revenue. Expenses were very well managed, increasing by 7%, enabling the cluster cost-to-income ratio to decrease to 58,1% from 60,5% in 2022. Nedbank Wealth’s HE increased by 6% to R1,2bn, maintaining a high ROE of 26,8%. The cluster’s financial performance was driven primarily by the benefit of higher local and international interest rates on NII (positive endowment), and growth in assets-under-management (AUM) fees locally and internationally, partially offset by a decline in traditional bancassurance volumes and new business strain in insurance. HE growth slowed from the 41% reported in H1 2023, primarily as a result of the base impacts of SA and international interest rates increasing in H2 2022 and H1 2023 while remaining steady in H2 2023; the base impact of the KwaZulu-Natal floods on insurance income in H1 2022; and higher shareholder returns in H1 2023 relative to H2 2023. HE in NAR increased by 94% to R1,9bn and its ROE improved to 25,2%. The performance of the Southern African Development Community (SADC) operations improved strongly as HE was up 80% to R662m (2022: R367m) and ROE increased to 9,9% but remains below our target. Our associate investment, Ecobank Transnational Incorporated (ETI), continued its ongoing recovery with a higher HE contribution to Nedbank and growth of more than 100% to R1 229m (2022: R610m), benefiting from operational performance improvements and the reversal of the R175m provision that Nedbank raised in 2022 for the estimated impact on associate income from ETI from the Ghana sovereign domestic debt restructure. The stronger performance of the SADC operations was driven mainly by increases in NII (up by 25%) and NIR (up by 17%), as well as benefitting from foreign exchange gains on US dollar capital in Zimbabwe, partially offset by an increased net monetary loss. The performance in the Centre reflects primarily the endowment benefit from higher interest rates on the average R12bn surplus capital held in the Centre, fair value gains relating to the group’s hedge-accounted portfolios of R280m, and a R150m reduction in the group’s central provision as these risks emerged in the underlying impairment models. Financial performance Net interest income NII increased by 14% to R41 470m, supported by 7% growth in average interest earning banking assets (AIEBA) to R986bn and an increase in the group’s NIM. The increase in AIEBA was driven by 8% growth in average CIB banking loans and advances and 7% growth in average RBB banking loans and advances. NIM increased by 28 bps to 4,21% from the 3,93% reported in 2022. This increase was driven primarily by a positive endowment impact of 38 bps due to higher interest rates, positive basis risk impacts (+3 bps) and NAR (+3 bps). The increase was partially offset by a negative asset mix impact (-5 bps) due to slower growth in high-yielding assets such as unsecured loans and faster growth in lower-yielding assets such as term loans, home loans and vehicle finance, as well as negative liability (-3 bps) and asset pricing (-7 bps) impacts largely due to increased levels of competition and due to stage 3 loan interest reversals (-4 bps). Nedbank’s interest rate sensitivity is around R1,4bn NII (pre-tax) for each 100 bps change in interest rates over 12 months. At this point in the cycle, the accounting impact of higher interest rates on endowment income continues to exceed the change in impairments, in line with management’s hedging objectives. Impairments charge on loans and advances The group’s impairment charge increased by 30% to R9 605m, largely as a result of the impact of a more difficult macroeconomic environment on consumers. The group’s CLR of 109 bps (2022: 89 bps) improved from the 121 bps reported at H1 2023, but remained above the group’s TTC target range of 60 bps to 100 bps, in line with the guidance provided. The yoy increase in CLR reflects the impacts of higher-than-expected interest rates, higher levels of inflation (mainly in food and energy), and higher levels of load-shedding, all of which had an adverse impact on our clients, particularly in the consumer segment in RBB. Average banking advances (%) 44 50 3 3 100 CLR (%) CIB RBB Wealth NAR Group 2023 2022 TTC target ranges 0,24 1,94 0,12 1,00 1,09 0,22 0,15–0,45 1,61 1,20–1,75 (0,20) 0,20–0,40 1,02 0,85–1,20 0,89 0,60–1,00 Impairments in CIB increased by 17% to R939m and its CLR, at 24 bps, incorporated additional provisioning for stage 3 counters in the second half of the year. The CIB CLR ended the year within the bottom half of its TTC target range of 15 bps to 45 bps, slightly up from the 22 bps reported in 2022. The commercial-property portfolio reported a CLR of 47 bps, outside its TTC target range, due to impairments raised on stage 3 counters as business rescue processes were concluded. In RBB impairments increased by 29% to R8 520m, driven by the negative economic impacts mentioned earlier that resulted in increased client migration into stages 2 and 3, as well as the impact of updating our macroeconomic assumptions and annual model regrounds. The RBB CLR, at 194 bps, was above its TTC target range of 120 bps to 175 bps but below the 226 bps reported in H1 2023 as a result of focussed management interventions in respect of collections and origination. These benefits are expected to continue into 2024. Higher impairments in the secured-lending portfolios (home loans and vehicle finance, with mostly variable interest rates) primarily reflect the 57 Nedbank Group Annual Results 20232023 resultscommentarySupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial resultsResultspresentationMessage from ourChief Executive• Trading income increased by 3% to R4 299m, reflecting good performances in debt securities and commodities, partially offset by a deterioration in the performance of equities and the impact of the introduction of the SARB’s new Monetary Policy Implementation Framework (MPIF), which reduced financing margins across certain asset classes. • Equity investment income declined by 6% to R764m (2022: R815m), returning to more normalised levels as compared with a high 2022 base, driven by revaluations, realisations, dividends, and operational revenues with limited disposals. • Fair-value adjustments of R577m (2022: R187m) include R260m, mainly from fair value gains on structured loans within the CIB banking book and gains of R280m relating to the group’s hedge-accounted portfolios (Centre). • Foreign currency gains in Zimbabwe on US dollar capital as a result of currency devaluation were partially offset by a higher net monetary loss, resulting in a net gain in NIR of R501m. In 2023 NIR has been restated to reflect the reclassification of the net monetary loss (2022: R419m loss) on the face of the income statement to NIR, as was done as part of the group’s 2022 annual results announcement. Expenses The increase in expenses of 8% to R38 059m reflects the impacts of higher salary-related costs, higher fees linked to revenue growth and ongoing investment in technology and digital solutions. • Employee-related costs increased by 8% to R21 040m following: • an 8% increase in salaries, wages, and other staff costs, reflecting the impacts of an average 2023 annual salary increase of 6,3% (bargaining-unit increase of 7,3%) and higher costs to attract and retain key talent, partially offset by a 2% reduction in permanent employee numbers, largely through natural attrition; and • a 5% increase in short-term incentives (STIs), aligned to the group’s financial performance, and a 23% increase in long-term incentives (LTIs), driven by higher anticipated vesting outcomes from meeting corporate performance targets. • Computer-processing costs increased by 8% to R6 900m, reflecting the impact of continuous investment in digital and cloud solutions, an increase in payments infrastructure such as ATMs and intelligent depositors, increased IT volumes, and the impact of the rand’s devaluation related to foreign currency IT contracts. As our ME technology IT build reaches material completion, the growth rate in the related amortisation charge continues to slow, along with benefits from lower depreciation as we increasingly leverage cloud-based solutions. • Marketing costs increased by 3% to R1 585m and communication and travel costs increased by 7% after having normalised post-Covid-19. Fees and insurance-related costs increased by 15%, largely as a result of increases in card-issuing and acceptance costs. • While the group continues to benefit from its real estate optimisation initiatives, the 8% increase in occupation and accommodation costs reflects the impact of more than 100% growth in generator-related costs to R107m (2022: R44m) due to increased use during load-shedding. The group’s increase in expenses of 8% was lower than the 12% increase in revenue, including associate income, resulting in a positive JAWS ratio of 4% and the cost-to-income ratio decreasing to 53,9% (2022: 55,8%). impact of higher interest rates on clients’ ability to repay their debt. The increase in impairments in Personal Loans (mostly a fixed-rate product) and Card was driven mainly by the impact of higher levels of food and transport price inflation on disposable income, despite our credit policy tightening in Personal Loans since 2021. The increase in impairments in Commercial Banking was largely the result of the impacts of load-shedding and higher input costs, primarily on certain sectors in the agriculture portfolio. Pleasingly, CLRs across all RBB products and segments improved from the levels reported in H1 2023. Nedbank Wealth reported a CLR of 12 bps, below its TTC target range of 20 bps to 40 bps, benefitting from the release of local client-specific overlays as a result of better-than-expected recoveries, while NAR reported a CLR of 100 bps, within its TTC target range of 85 bps to 120 bps. Total overlays decreased slightly to R1,1bn (December 2022: R1,4bn), including a R150m reduction in the group’s central provision (2022: R300m) as the risks have now been accounted for in our International Financial Reporting Standards (IFRS) impairment models. The remaining R150m in the central provision relates to potential risks that have emerged but are not yet showing in the data and resultant IFRS impairment models. The group’s balance sheet expected credit loss (ECL) increased by 9% to R30,4bn (December 2022: R27,9bn), reflecting prudent provisioning in the current economic environment. The increase was driven by the R9,6bn impairment charge, which includes post-write-off recoveries of R1,4bn (2022: R1,6bn) and higher write-offs at R10,2bn (2022: R8,8bn). The overall ECL coverage ratio increased to 3,62% (December 2022: 3,37%) as a result of the increase in stage 3 loans with higher coverage. The group’s stage 1 coverage ratio increased slightly to 0,66% (December 2022: 0,60%) and remained higher than the pre-Covid-19 level of 0,48% (December 2019). The stage 2 coverage ratio declined slightly to 6,8% (December 2022: 7,0%) and remained well above the pre-Covid-19 levels of 5,3% (December 2019). The stage 3 coverage ratio remained steady at 34,2% (December 2022: 34,3%) as RBB loans, with higher coverage, migrated from stage 2 to stage 3 (RBB stage 3 loans up by 20%) and stage 3 loans in CIB, with lower coverage, declined by 3% as some counters cured. Non-interest revenue and income NIR increased by 6% to R27 709m, slightly above the group’s guidance of around mid-single digits. The increase was underpinned by solid growth in commission and fees, the benefits of fair-value gains, and foreign currency gains in Zimbabwe on US dollar capital. Trading revenue growth remained muted, while overall NIR growth was impacted by lower insurance income and equity investment income. NIR includes restatements relating to IFRS 17, card-processing costs and the reclassification of net monetary loss in 2022 into NIR as reported in H1 2023. Excluding these restatements, NIR grew by 9% on a like-for-like basis. • Net commission and fees income increased by 5% to R19 346m, supported by strong growth across RBB and NAR. RBB recorded increased levels of purchases of value-added services, main-banked client growth of 9%, improved levels of cross-sell, as well as growth in card acceptance and interchange volumes. This growth was partially offset by a slowdown in client activity following the difficult macroeconomic environment. • Insurance income declined by 16% to R1 446m, impacted by a slowdown in traditional bancassurance volumes, the non-repeat of reserve releases in the prior year, and new business strain relating to new insurance solutions. The 2022 financials have been restated to account for IFRS 17 as expenses (R619m) and associated indirect tax (R51m) related to insurance products are now recognised in NIR. 58 Nedbank Group Annual Results 2023(%) 2023 2022 NSFR regulatory minimum (%) Earnings from associates Associate income increased by 64% to R1 443m and includes associate income of R1 380m relating to the group’s 21% shareholding in Ecobank Transnational Incorporated (ETI) for the period (up by 77% compared with R779m in 2022). This includes accounting for our share of ETI’s Q4 2022 and 9-month 2023 earnings (in line with our policy of accounting for our share of ETI’s attributable earnings a quarter in arrear) and the reversal of the R175m estimate provided for by Nedbank for our share of the impact of the Ghanaian sovereign domestic debt restructure programme on associate income in our 2022 results. The total effect of ETI on the group’s HE was a profit of R1 229m (2022: R610m). The gross return on the original ETI investment increased to 22,0% (2022: 12,4%) or 19,2%, excluding the R175m reversal. Statement of financial position Banking loans and advances Gross banking loans and advances increased by 3% to R885bn. Actual banking loans and advances growth was lower than the 7% growth in average banking loans and advances, primarily as a result of the benefit of strong growth in CIB in H2 2022 (benefiting average growth in 2023), while actual growth in H2 2023 was impacted by higher levels of client repayments and reduced placements with foreign correspondent banks in CIB. Gross banking loans and advances growth by cluster was as follows: Change Rm CIB RBB Wealth NAR Centre1 Group (0) 6 1 (3) 380 455 453 498 29 059 22 176 > 89 (141) 382 250 429 564 29 395 22 902 (1 342) 3 885 047 862 769 1 Includes macro fair-value hedge-accounted portfolios and disclosure reallocations. CIB gross banking loans and advances decreased slightly to R380bn as the growth in the leverage and diversified lending businesses, coupled with growth in the energy sector, was offset by a decrease in foreign client lending owing to lower overnight interbank placements. Commercial-property loans and advances grew by 3%, indicative of a level of confidence returning to the sector and an improvement in sentiment. Average banking advances grew by 8%. RBB gross loans and advances increased by 6% to R453bn, driven by solid growth in secured lending. Home Loans grew by 7%, MFC (vehicle finance) grew by 8%, Commercial Banking grew by 3%, and Credit Card grew by 1%. Unsecured-lending disbursal growth remained subdued as we deliberately remain cautious in the current environment, with Personal Loans declining by 4%. Overall new-loan payouts decreased slightly to R118bn (2022: R121bn), mainly due to the slowdown in unsecured lending and slowing demand in home loans. Deposits Deposits increased by 5% to R1 088bn and the group’s loan-to-deposit ratio decreased to 82% (December 2022: 85%). Within our business clusters, CIB deposits remained flat, RBB grew by 8%, Wealth by 4% and NAR by 7%, with the Centre growing by 8%. Many clients termed out short-term cash into longer-term deposits due to the favourable interest rate environment. As a result, savings accounts, short-dated foreign currency liabilities as well as cash management deposits decreased by 13%, 0,5% and 20% respectively. In contrast, call and term deposits increased by 6%, fixed deposits by 5% and other deposits by 21%. Negotiable certificates of deposit (NCDs) increased by 7% as our need for wholesale funding remains muted. Foreign funding, although small in relative terms for Nedbank at 3% of total funding, was flat. Funding and liquidity The group achieved a quarterly average long-term funding ratio of 28,4%, which is above the industry average of around 23,2% as a result of the proactive management of Nedbank’s long-term funding profile. The group’s December 2023 quarter average LCR of 135% (December 2022: 161%) exceeded the minimum regulatory requirement of 100%, with the group maintaining appropriate operational buffers to absorb seasonal, cyclical, and systemic volatility. Liquidity metrics remained strong, with no implications evident from the adverse global banking and other developments. HQLA (Rm) Net cash outflows (Rm) Liquidity coverage ratio (%)2 LCR regulatory minimum (%) NSFR (%) 2023 2022 238 182 177 000 134,6 100,0 117,3 224 963 140 138 160,5 100,0 119,1 100,0 2 Average for the quarter. Nedbank’s proactive management of its high-quality liquid asset (HQLA) buffers resulted in the bank operating well within its risk tolerance levels. The group has significant sources of quick liquidity (R285bn), including HQLA, representing 22% of total assets. Nedbank exceeded the minimum regulatory NSFR requirement of 100% with the December 2023 ratio of 117%. The structural liquidity position of the group continued to be strong as a result of the effective management of balance sheet growth. Capital The group remains strongly capitalised. Capital ratios are well above the minimum regulatory requirements and board-approved target ranges, with a CET1 ratio of 13,5% (Dec 2022: 14,0%) and a tier 1 ratio of 15,0% (Dec 2022: 15,5%). The movement in the CET1 ratio reflects the impact of the R5bn capital optimisation initiative, the payment of the 2022 final dividend and 2023 interim dividend, and a 7,3% increase in risk-weighted assets (RWA). The RWA increase was mainly due to movements in credit risk, market risk and operational risk. Group capital adequacy ratios (%) CET1 Tier 1 Total CAR 2023 2022 13,5 15,0 16,9 14,0 15,5 18,1 Internal target range 11,0–12,0 > 12,0 > 14,5 Regulatory minimum 8,5 10,3 12,5 Note: Ratios include unappropriated profits. 59 Nedbank Group Annual Results 20232023 resultscommentarySupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial resultsResultspresentationMessage from ourChief Executive Clients • We retained our #1 rank in NPS among the large South African banks (Kantar survey) and ranked #1 in social-media net sentiment (Brandwatch). • We safeguarded R1,1tn in deposits at competitive rates. • We supported clients by advancing R332bn (2022: R341bn) in new loans to enable them to finance their homes, vehicles, and education and grow their businesses, increasingly in support of the UN SDGs. • Our clients’ access to banking products and services improved as clients continue their shift to digital channels, evident in digitally active retail users increasing by 11% to 2,9 million (up by 61% since 2019). During the year we also increased the number of Imagine branches, which are more digitally and sales-focused, to 386 (71% of total branches from 39% in 2022). • To support our clients during challenging times, we offered tailored payment plans to help address their temporary financial distress and gradually normalise their payment obligations over time. For clients who have temporarily fallen behind on their loans, while being mindful of all regulatory requirements, we strive to help them keep their homes or vehicles by providing restructures that reduce their monthly debt payments, assisting them in getting back on track. We also encouraged clients to consolidate their existing debt, thereby lowering their monthly debt repayments, or assisted in selling their property or vehicle at the best possible price to help settle their loan. During 2023 we rehabilitated 936 000 clients, assisted 53 600 clients to keep their vehicles and homes, and a further 15 500 clients to sell their assets on the open market through our Assisted Sales programmes. • The launch of the MiGoals Premium and MiGoals Plus Accounts in 2023, with their more competitive pricing and value to clients, resulted in Nedbank ranking very well in the Solidarity 2024 Bank Charges Report. Nedbank was recognised as best priced in the higher middle-class income segment and second best in the middle-class income segment. In the low-income segment, Nedbank ranked third among the big 5 retail banks. Nedbank was commended for the progress made on competitiveness as well as the transparency and simplicity of fees. • In recognition of the value-add to our clients and our leadership position in key industries, segments and products, Nedbank won various awards, including the Best Investment Bank in South Africa Award at the 2023 Global Banking & Finance Review Awards, Best Retail Bank in South Africa Award at the 2023 Global Banking & Finance Awards, Best Private Bank Africa Award at the Global Private Banking Awards 2023, and Top Private Bank of the Year Award at the Intellidex Top Private Banks and Wealth Managers Awards 2023. Shareholders • Following a strong share price performance in 2021 and 2022, when the Nedbank share price increased by 35% and 21% respectively, the increase was more moderate in 2023 at 2%, below the SA Banks Index that increased by 11%. Including dividends, total shareholder return was 10% in 2023. • All financial drivers of shareholder value creation improved. DHEPS increased by 14%, ROE improved to 15,1%, above the group’s cost of equity, and NAV per share increased by 8%. Strong capital and liquidity positions at 31 December 2023 supported the declaration of a final dividend of 1 022 cents per share for 2023, and a total dividend of 1 893 cents per share, increases of 18% and 15% respectively. The group continues to focus on maintaining an optimal capital structure using a full range of capital instruments. The group's total tier 1 capital position was impacted by the issuance of additional tier 1 instruments of R1bn, partly offset by redemptions of R750m. The group's total capital was further impacted by the issuance of tier 2 capital instruments of R2,1bn and redemptions amounting to R4,5bn, in line with the group's capital plan. Using our financial expertise to do good We remain committed to fulfilling our purpose of using our financial expertise to do good and 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 • Employee satisfaction levels remained high, as evident in our 2023 ‘great place to work’ NPS score of 20 (2022: 22), the second highest since inception of our employee Pulse survey conducted annually to track employee satisfaction and engagement. • We maintained our focus on the physical and mental well-being of our employees by continuing to provide well-being solutions and interventions. In light of a more difficult economic environment, we increased our support to employees through various financial education awareness programmes and financial support initiatives. The continuation of FLOW time on Wednesday afternoons, where employees are encouraged to focus on their development or focussed work, is a further commitment towards supporting a balanced lifestyle and improved well-being. • We paid our 25 477 permanent and temporary employees’ salaries and benefits of R21,1bn and concluded annual salary increases of 7,3% for our bargaining-unit employees, with non-bargaining-unit employees receiving increases of 5% to 6%. • Skills development spend in 2023 increased to R1 169m (2022: 939m). • Our hybrid work model saw 67% of employees working in some hybrid fashion. This promotes flexibility and enables employees to return to the workplace in an integrated and natural manner. • Our employee attrition rate improved to 9,2% in 2023 (2022: 10,6%), with regrettable voluntary attrition declining to 3,8% (2022: 5,0%). During the year, our Agility Centre successfully redeployed 421 employees into alternative roles within Nedbank, while 75 employees have regrettably been retrenched due to necessary operational changes. A key focus has been on timeous reskilling and upskilling to enable employees to transition to future internal or external roles. • We continued to focus on diversity, equity, and inclusion (DEI) as a key imperative to ensure that we remain relevant in a transforming society. The group remains strongly representative of a diverse talent complement, with 82% of total employees being black African, Coloured, or Indian (ACI), increasing from 81% in 2022, while we continue to record improvements in ACI employee representation, and African representation in particular, at senior- and middle-management levels. Total female employee representation remained around 62%. • Nedbank has been recognised at the 2023 ESG Africa Conference, not only for being the biggest contributor to the Youth Employment Services (YES) Programme among South African banks, but also for the purpose-driven social impact that it has realised through the Nedbank YES Programme over the years, where we have now given close to 10 000 youth a first-time work experience. In addition, we won the UN Women’s Empowerment Principles (UNWEP) Gender Responsive Marketplace Award at the 2023 UNWEP Gender Mainstream Awards and were placed second for listed companies on both the Economic Empowerment and the Women in the Community Awards. 60 Nedbank Group Annual Results 2023• We successfully executed a R5bn capital optimisation initiative, which is beneficial to ROE and per share metrics. • We hosted our 56th AGM and all resolutions were passed, although votes in support of our remuneration implementation report at 74,8% were slightly below the required 75%. From engagement with shareholders, we understand that some of the votes against the group’s remuneration implementation report were because of a vote against the remuneration policy of the prior year by the same shareholders. Pleasingly, our remuneration policy received 90,4% votes of support in 2023. • We ensured world-class transparent, relevant, and timeous reporting as evidenced in various reporting awards and ongoing positive shareholder feedback. In 2023 Nedbank’s activities related to investor relations were rated #2 among all JSE companies in the Krutham (Intellidex) Top Investor Relations 2023 survey for the second year in a row. We also ranked #1 company for best market communications, #1 company for best integrated report, #2 company for best disclosure of ESG metrics, and #7 company for most accessible management. • We remained at the top end of various ESG ratings when compared with local and international peers. 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 regulatory developments in 2023 included the following: • Basel III reforms: During H2 2023 the Prudential Authority (PA) published the second draft of the proposed directives with amendments to the regulations relating to banks, addressing key matters related to the Basel III post-crisis reforms; revisions to the standardised and the internal ratings-based approaches for credit risk; the new standardised approach for operational risk; refinements to the definition of the leverage ratio exposure measure; and revised output floors that place a limit on the regulatory capital benefits that a bank, using internal models, can derive relative to the standardised approaches. With implementation starting mid-2025, the impact on the capital holdings of the group is currently estimated to emerge through 2026 to 2027, with the phase-in of the capital floor requirements. We are working through the various committees and subcommittees to optimise not only the capital holdings, but also the product offerings to absorb the impact of these Basel III reforms. Nedbank is well positioned to absorb these changes through current capital buffers. • In November 2023 the PA issued a Proposed Directive pertaining to the implementation of a positive cycle-neutral countercyclical capital buffer (PCN CCyB). The PA proposed increasing the CCyB rate from 0% to 1%, effective from 1 January 2026, which will increase the regulatory minimum capital requirement and consequently will impact the group’s surplus capital position, if implemented. • The Financial Sector Laws Amendment Bill (FSLAB) was promulgated in January 2022, giving rise to the Financial Sector Laws Amendment Act (FLSAA), 23 of 2021, establishing the following: • SARB as the resolution authority (RA). In March 2023, the Minister of Finance published the FSLAA commencement schedule, which stipulated that the Resolution Framework became effective in June 2023. • The Corporation for Deposit Insurance (CODI) was established as a legal entity in terms of the Financial Sector Regulation Act (FSR Act), 9 of 2017. Banks automatically became members of CODI, and it is noted that CODI will become fully operational only from 1 April 2024. The group’s initial impact assessments suggest, once secondary legislation has been promulgated, an annual CODI cost of approximately R240m for a covered deposit balance of approximately R120bn and a liquidity tier of approximately R3,6bn. The covered deposit balance is the amount covered by CODI for a qualifying depositor and a qualifying deposit product, which is currently proposed at a maximum of R100 000. • In 2023 S&P Global (S&P) and Moody’s affirmed their ratings of Nedbank. S&P revised their outlook from ‘positive’ to ‘stable’, similar to Moody’s, following S&P’s decision to revise its outlook on the SA sovereign from ‘positive’ to ‘stable’. • We hold investments of over R184bn in government and public sector bonds as part of our HQLA requirements. All government bonds held in the Trading Book are held at fair value and all government bonds held in the Banking Book for LCR purposes are hedged, with interest rate swaps through Nedbank’s Macro Fair-value Hedge Accounting solution. From an LCR perspective all HQLA are measured at their fair value. • We made cash taxation payments relating to direct, indirect and employee taxes as well as other taxation of R13,2bn across the group, up by almost 15% yoy. Society Banks play a central role in driving sustainable socioeconomic development for the benefit of all stakeholders and helping create a better future by providing capital for investment in the real economy. Our purpose, of using our financial expertise to do good, guides our strategy, behaviour, and actions towards the delivery of long-term system value for us and our stakeholders. We have adopted the UN SDGs as a framework for measuring delivery on our purpose and prioritised 9 SDGs where we believe we have the greatest ability to deliver meaningful impact through our core business, thereby creating positive social and environmental outcomes. Key highlights for 2023 include the following: • Quality education (SDG 4): We provided financing towards student loans and student accommodation, supporting 1 099 student loans (over 11 000 since 2015) and 967 student beds (almost 44 000 since 2015). • Clean water and sanitation (SDG 6): We are committed to supporting this vital sector. However, given the reliance on public sector readiness, investing continues to be a challenge. We have exposure of R1,2bn towards clean-water provision relating to public sector reticulation and sanitation projects, the agricultural sector, and commercial and industrial businesses. In our own operations we have been a net-zero operational water user since 2018 through our support of the World Wide Fund for Nature South Africa Water Balance Programme, which removes invasive alien trees in key water source areas. • Affordable and clean energy (SDG 7): On the back of our leadership position in the first 4 rounds of the South African Renewable Energy Independent Power Producers Procurement Programme (REIPPPP), where we supported 3,5 GW of renewable energy, we closed 6 additional deals across the emergency round Risk Mitigation IPPPP and the REIPPPP in H2 2023, which will contribute a further 0,3 GW to the grid. There are another 5 projects that we expect to close in 2024, supporting a further 0,5 GW in additional capacity. We also maintain a strong pipeline in private power generation, wherein we are mandated on 1,9 GW of new projects. We anticipate closing most of these deals in 2024 and for clients to start drawing down on some of their facilities during the year. Growth in solar financing, off a low base, was strong in RBB, supported by solutions for Commercial Banking clients, as well as MFC solar finance, home loans solar readvance, and Avo Solar that launched in the second half of 2023. At 31 December 2023 the group’s total renewable energy exposures across REIPPPP and private power generation in CIB, RBB and NAR was around R30bn, with client facilities (limits) increasing by 22% to R45bn. In our own operations, to 61 Nedbank Group Annual Results 20232023 resultscommentarySupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial resultsResultspresentationMessage from ourChief Executivesupplement our own solar-photovoltaic-produced electricity towards greener and self-generated renewable energy, we commenced wheeling green power from IPPs to reduce our own carbon emissions and aim to increase this from around 6,5% in 2023 (2022: 1%) to more than 30% of energy consumption by the end of 2025. • Decent work and economic growth (SDG 8): We increased our support for small businesses and their owners, evident in loan exposures of R22bn, and provided banking solutions to more than 300 000 small-and-medium-enterprise (SME) clients. In 2023 we welcomed our fourth intake of 2 835 YES participants as we continue to make an impact on South African youth and their families and communities. With this intake included, close to 10 000 previously unemployed youth have been afforded the opportunity of employment through participating in Nedbank’s YES programme. To date, 1 140 of them have been permanently employed within Nedbank and our YES programme partners. • Industry, innovation and infrastructure (SDG 9): Infrastructure remains a key priority for Nedbank as we seek to unlock bottlenecks for growth in SA and across the continent. We have exposures of R15bn to infrastructure related projects spanning roads, rail, ports and telecommunications infrastructure. • Reduced inequalities (SDG 10): We maintained our level 1 BBBEE status and were acknowledged at the 22nd Top Empowerment Awards by being awarded the Legends of Empowerment Award. Within the township economy we continue to innovate and leverage partnerships to co-create solutions with clients. In 2023 we continued with hosting Kasi Business Workshops across the country, creating shared value through our partnership with the Township Entrepreneurs Alliance (TEA). We have impacted more than 48 000 township SMMEs, sponsored more than 165 township exhibitors with Nedbank point-of-sale devices and created supplier procurement opportunities for more than 180 black-youth-owned service providers. Significant work was done to launch a CVP for informal traders, customised to their unique needs and behaviours in 2024. • Sustainable cities and communities (SDG 11): The value of affordable home loans paid out for lower-income households was R3bn, equating to over 5 000 home purchases in 2023. To date, we provided R25bn worth of funding for the construction of buildings that conform to green building standards and buildings with green aspects. We also continuously pursue green star ratings for our own premises, and at the end of 2023, 85% of our space was Green Star-rated. • CEO pledge: In July 2023 CEOs from more than 130 of SA’s leading corporations, including Nedbank, signed a pledge underpinning their collective belief in SA and their determination to assist in realising its potential. Businesses are committed to working with government to play its part in helping address the economic challenges facing the country, with the aim of achieving higher levels of sustainable and inclusive economic growth. Economic outlook Global growth is widely expected to remain relatively subdued but resilient in 2024. The softer trend will probably intensify in the first half of 2024 as higher interest rates continue to weigh on demand in advanced and emerging economies. However, the world economy is expected to recover in the second half, supported by much lower inflation and falling interest rates, which should lift real incomes and boost confidence. The IMF expects steady global growth of 3,1% in 2024. Advanced economies are forecast to expand by 1,5%, while emerging and developing economies are expected to grow at the same pace as last year of around 4,1%. The IMF sees sub-Saharan Africa’s economy picking up some pace, growing by 3,8% in 2024. Global disinflation will likely deepen, creating space for monetary policy easing by the US and other major central banks later this year. As a result, global financial conditions should improve as the year progresses, potentially driving a recovery in global risk sentiment and capital inflows to emerging markets. Although encouraging, downside risks remain significant given high public debt burdens in advanced and developing countries, the ongoing war in Ukraine, the escalating conflict in the Middle East and the threat of heightened political instability as 63 countries head to the polls in 2024. SA’s economy will remain constrained by electricity shortages and deteriorating rail and port services. Load-shedding is expected to decline in 2024 as Eskom eases unplanned outages and private power generation increases. In contrast, transport bottlenecks are expected to persist and intensify, while public service delivery will likely remain relatively poor. These structural constraints will continue to weigh on producers and exporters, undermining production, inflating operating costs, and squeezing profitability. Given the difficult operating environment and the uncertainties surrounding the outcome of SA’s general elections, business confidence will remain weak, and fixed investment activity is forecast to slow, with private firms likely to delay or postpone expansionary projects other than in energy until the business cycle turns positive and the political and policy outlooks become clearer. Furthermore, high interest rates will continue to weigh on household confidence, eroding discretionary income and constraining spending, particularly in H1 2024. On the upside, consumer spending should recover as inflation reduces and interest rates start to decline in H2 2024. The Nedbank Group Economic Unit expects real GDP growth of 1,0% in 2024, which is moderately higher than 2022. Average inflation for South Africa is forecast to ease further, ending 2023 at 5,9% and averaging 5,0% in 2024, before receding to the SARB’s preferred target of 4,5% in 2025. However, upside risks remain, consisting of the threat posed by the conflict in the Middle East to global oil supplies and prices, a vulnerable rand sensitive to changes in US interest rate expectations, further aggressive hikes in electricity tariffs and cost implications of persistent load-shedding and logistical constraints. The SARB MPC is, therefore, likely to remain cautious. The Nedbank Group Economic Unit expects monetary policy easing to begin in July 2024 and interest rates to reduce by a cumulative 75 bps, taking the prime lending rate down to 11,00% by the end of 2024. Conditions in the banking industry are likely to remain challenging. Credit extension is forecast to gradually pick up to 5,2% by year-end, supported by the anticipated decline in domestic interest rates and the recovery in the global economy. However, risks to the outlook for credit growth are tilted to the downside. Households are likely to be highly sensitive to the timing of anticipated interest rate cuts. If inflation proves sticky and interest rates stay higher for longer, household demand for credit will weaken more than anticipated. Equally, fragile business confidence and the country’s poor economic growth prospects will continue to weigh on corporate credit demand, discouraging large new capital projects and subduing demand for general loans. Encouragingly, the downside will be limited by continued growth in renewable energy projects, which should provide some foundation for corporate loan growth. The risk of bad debt is expected to remain elevated for as long as interest rates stay at current levels. 62 Nedbank Group Annual Results 2023Prospects Our current guidance on financial performance for the full year 2024, in a difficult macroeconomic environment with high forecast risk and uncertainty, is as follows: • NII growth of above mid-single digits. The group’s NIM is expected to reduce slightly from the 2023 level of 4,21%, while average banking loans and advances growth is likely to see stronger growth in H2 2024 when compared with H1 2024, as lower interest rates and inflation start benefiting retail credit growth and as wholesale clients start drawing down on renewable energy deals. • CLR for the full year moving back into the group’s TTC target range of 60 bps to 100 bps, with the likelihood of being above 100 bps in the first half of the year given seasonality impacts. While upside risks remain given macroeconomic challenges, progress in consumer collections in RBB remains steady and risks around several stage 3 loans in CIB have been resolved in 2023. • NIR growth being above mid-single digits, supported by higher levels of cross-sell, main-banked client gains and new revenue streams in RBB, ongoing dealflow in CIB and insurance improving off a low 2023 base. Trading and equity investment income is expected to improve but remain exposed to macro risks. Fair-value gains and foreign exchange gains in Zimbabwe create high base effects. • Expense growth being around the mid-to-upper single digits as we continue to focus on managing costs in a more difficult environment while absorbing new regulatory costs such as deposit insurance. • Associate income likely to continue showing good underlying growth from ETI, although the base effect of Nedbank’s R175m Ghana sovereign bond provision release in 2023 will create headwinds to growth in 2024. • CET1 capital ratio remaining well above the top end of the board-approved target range of 11% to 12%. • Dividend payments, subject to board approval, being at the top end of our payout ratio of 57% (ie bottom end of the group’s target range of 1,75 times to 2,25 times). Our medium-term targets to 2025, and long-term (undated) targets support our focus on ongoing value creation for shareholders and remain in place. They have, however, become more difficult to achieve in the macroeconomic environment that has deteriorated when compared to assumptions when targets were set in February 2022. By the end of 2025 we aim to have grown DHEPS by more than a compound annual growth rate (CAGR) of GDP growth + CPI + 5% from the 2022 base and achieved an ROE of more than 17,0% (around COE plus 2%). Our cost-to-income ratio target of below 52,0% is now likely to be achieved a year later in 2026. In the long term we aim to increase our ROE further to 18,0% or more (around COE plus 3%) and decrease our cost-to-income ratio to below 50,0%. Metric 2023 Full-year Medium-term performance6 2024 outlook target Long-term target ROE 15,1% Increase 17,0% (around COE + 2%) by 2025 > 18,0% (around COE + 3%) Growth in DHEPS 14% Solid growth, driven by lower impairments > consumer price index + GDP growth + 5% CAGR CLR 109 bps Within the top half Between 60 bps and 100 bps (80 bps to 100 bps) of the group’s TTC target range of average gross banking advances Cost-to-income ratio (including associate income) 53,9% Increase slightly < 52,0% by 2026 < 50,0% CET1 capital adequacy ratio 13,5% Above the top end of the target range Dividend cover 1,75 times At the bottom end of our target range of 1,75– 2,25 times 6 COE is currently forecast to be 15,0% in 2024 to 2026. 11,0%–12,0% 1,75–2,25 times Shareholders are advised that all guidance is based on organic earnings and our latest macroeconomic outlook. The group’s joint auditors have not reviewed or reported on this guidance. 63 Nedbank Group Annual Results 20232023 resultscommentarySupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial resultsResultspresentationMessage from ourChief Executive Final dividend declaration Notice is hereby given that a final dividend of 1 022 cents per ordinary share has been declared, payable to shareholders for the year ended 31 December 2023. 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 204,4 cents per ordinary share, resulting in a net dividend of 817,6 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 taxation 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 was 488 105 724. In line with the provisions of Strate, the electronic settlement and custody system used by the JSE Limited, the relevant dates for the dividend are as follows: 2024 Last day to trade (cum dividend) Tuesday, 9 April Shares commence trading (ex dividend) Record date (date shareholders recorded in shareholders’ register) Wednesday, 10 April Friday, 12 April Payment date Monday, 15 April Share certificates may not be dematerialised or rematerialised between Wednesday, 10 April 2024, and Friday, 12 April 2024, both days included. Where applicable, dividends in respect of certificated shares will be transferred electronically to shareholders’ bank accounts on the payment date. In the absence of specific mandates, the dividend will be withheld until shareholders provide their banking information. Holders of dematerialised shares will have their accounts credited at their participant or broker on Monday, 15 April 2024. For and on behalf of the board Daniel Mminele Chairperson Mike Brown Chief Executive Directors AD Mminele (Chairperson), MWT Brown** (Chief Executive), HR Brody*, BA Dames, MH Davis** (Chief Financial Officer), NP Dongwana, EM Kruger, P Langeni, RAG Leith, L Makalima, MC Nkuhlu** (Chief Operating Officer), TM Nombembe, S Subramoney. * Lead Independent Director ** Executive Board and executive leadership changes during the period Daniel Mminele was appointed as an independent non-executive director and Chairperson-designate with effect from 1 May 2023, and assumed the role of Independent Chairperson following Mpho Makwana’s retirement from the Nedbank Group Board at the AGM on 2 June 2023. Dr Mantsika Matooane also retired as an independent non-executive director at the AGM on 2 June 2023, having reached her 9-year tenure. Brian Dames was due to retire from the Nedbank Group Board on 2 June 2023, and the board resolved to extend his tenure given the continued search for additional directors with climate risk expertise. Having served on the board for more than 9 years, Brian Dames became a non-independent non-executive director on 2 June 2023. Terence Nombembe was appointed as an independent non-executive director with effect from 1 January 2024. Professor Tshilidzi Marwala and Mteto Nyati resigned as independent non-executive directors on 28 February and 9 October 2023, respectively. In terms of executive leadership changes, Trevor Adams, former Group Chief Risk Officer, and Fred Swanepoel, former Group Chief Information Officer, reached the group’s mandatory retirement age of 60 during H1 2023. In line with Nedbank Group’s executive succession plan, Dave Crewe-Brown was appointed to succeed Trevor and Ray Naicker was appointed to succeed Fred. Both have accordingly been appointed members of the Group Executive Committee with effect from 1 April and 1 July 2023, respectively. Following the successful completion of the group’s Chairperson succession process and the subsequent appointment of Daniel Mminele as the Chairperson, the Nedbank Group Board commenced a process to choose a successor to Mike Brown, who joined Nedbank Group 30 years ago and has been the Chief Executive (CE) since 2010 and an executive director since 2004. In line with Nedbank Group’s executive succession plan and after a thorough process overseen by the Nedbank Group Board, Jason Quinn was appointed as CE-designate of Nedbank Group and Nedbank with effect from 22 May 2024, subject to regulatory approval, which was subsequently granted in February 2024. After joining Nedbank on 22 May 2024, he will assume the role of CE on Mike Brown’s planned retirement from the boards at the close of the Nedbank Group AGM, currently scheduled for 31 May 2024. Mike will remain at Nedbank as a senior adviser for a period of three months after he steps off the boards to ensure a seamless handover to Jason. 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 that could cause actual results to differ materially from those in the forward-looking statements include global, national, and regional health; 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 group’s joint auditors have not reviewed or reported on the financial information on which all forward-looking statements are based. The group, in the ordinary course of business, enters into transactions that expose it to taxation, legal and business risks. The group does not expect the ultimate resolution of any of these other matters to have a material adverse effect on the group’s consolidated financial position. 64 Nedbank Group Annual Results 2023 65 NotesNedbank Group Annual Results 20232023 resultscommentarySupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial resultsResultspresentationMessage from ourChief ExecutiveFinancial results Financial highlights Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Return-on-equity drivers 67 68 70 72 76 66 Nedbank Group Annual Results 2023Financial 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 Net life insurance contractual service margin Nedbank Wealth 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) Number of employees (permanent and temporary) 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 % 2023 2022 (5) (2) 11 7 30 15 >100 15 14 10 10 15 11 18 13 7 (37) 8 9 2 (3) (2) (2) 488,1 464,6 472,5 489,2 15 650 15 305 17 338 29 739 970 3 312 3 199 3 239 3 128 1 893 871 1 022 1 737 1,75 511,5 487,3 486,9 500,7 14 061 14 287 13 354 25 753 (222) 2 888 2 809 2 934 2 854 1 649 783 866 1 541 1,75 1 759 875 1 645 968 1 311 408 1 252 904 448 467 393 064 1 071 372 23 192 20 614 21 623 6,5 0,9 105,5 25 477 25 984 15,1 17,2 1,21 2,31 4,21 40,1 72,8 1,09 53,9 3,8 20,5 13,5 15,0 16,9 997 595 21 533 18 937 21 258 7,4 1,0 108,7 25 924 26 480 14,1 16,2 1,14 2,18 3,93 41,9 74,1 0,89 55,8 3,8 22,1 14,0 15,5 18,1 67 Nedbank Group Annual Results 2023Financial resultsSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysis2023 resultscommentaryResultspresentationMessage from ourChief Executive 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 investment income 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 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/(losses) (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 Cash flow hedge losses 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 Note Change % 2023 2022 42 65 14 6 65 12 30 9 8 2 >100 8 2 1 3 9 2 4 5 6 116 915 75 445 41 470 27 709 19 346 25 296 (5 950) 1 446 577 4 299 764 142 1 135 1 449 70 628 9 605 61 023 38 059 1 129 403 21 432 4 432 4 484 82 104 45 827 36 277 26 171 18 488 24 197 (5 709) 1 715 187 4 166 815 96 704 879 63 327 7 381 55 946 35 329 1 102 (245) 19 760 4 330 4 311 (52) 19 10 >100 17 000 338 15 430 (2 076) 1 492 (1 556) 242 (190) 75 191 53 31 (2) (1 821) 146 (1) (245) (106) (47) Total comprehensive income for the year 30 17 338 13 354 68 Nedbank Group Annual Results 2023 Rm Profit attributable to: – Ordinary shareholders – Holders of participating preference shares – Holders of additional tier 1 capital instruments – Non-controlling interest – ordinary shareholders Profit for the year Total comprehensive income attributable to: – Ordinary shareholders – Holders of participating preference shares – Holders of additional tier 1 capital instruments – Non-controlling interest – ordinary shareholders 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 Less: Share of associate (ETI) impairments charge on non-financial instruments and other gains and losses Note Change % 2023 2022 7 57 47 48 10 28 57 47 73 30 7 >(100) 14 287 106 873 164 15 430 12 239 106 873 136 13 354 14 287 226 245 (19) 15 305 166 1 286 243 17 000 15 651 166 1 286 235 17 338 15 305 (351) (403) 52 6 Headline earnings 5 11 15 650 14 061 69 Nedbank Group Annual Results 2023Financial resultsSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysis2023 resultscommentaryResultspresentationMessage from ourChief Executive Consolidated statement of financial position at 31 December Note Change % 2023 2022 7 7 8 9 10 11 14 24 52 5 95 2 (22) 28 6 >100 7 >100 35 >100 (1) 18 (5) 52 082 87 769 13 812 45 618 70 661 9 101 167 138 158 661 3 579 1 834 855 445 835 560 36 174 35 575 156 378 27 287 493 2 489 921 371 10 913 4 849 11 977 46 605 27 827 147 156 25 465 244 2 496 683 26 11 064 4 107 12 649 5 1 311 408 1 252 904 (5) (25) 9 3 >100 2 27 3 45 5 36 (3) (5) >100 4 20 (8) 5 5 465 14 332 92 952 487 19 208 85 281 107 749 104 976 106 10 469 887 119 211 14 141 51 10 219 698 115 944 9 738 1 087 645 1 039 622 22 715 16 722 313 507 43 17 512 1 544 47 777 322 533 6 16 832 1 282 51 903 1 192 197 1 136 960 1 311 408 1 252 904 Rm Assets Cash and cash equivalents Other short-term securities Derivative financial instruments Government securities Other dated securities Banking loans and advances Trading loans and advances Other assets Current taxation assets Insurance contract 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 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 Investment contract liabilities Insurance contract liabilities Long-term debt instruments Total liabilities Total equity and liabilities 70 Nedbank Group Annual Results 2023 71 NotesNedbank Group Annual Results 2023Financial resultsSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysis2023 resultscommentaryResultspresentationMessage from ourChief ExecutiveConsolidated 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 reserve1 Property revaluation reserve Share-based payment reserve Other non- distributable reserves2 FVOCI reserve Other distri- butable reserves3 Total equity attributable to ordinary shareholders Holders of participating preference shares Holders of additional tier 1 capital instruments Balance at 1 January 2022 485 601 547 486 18 768 (1 508) 1 764 1 205 273 769 77 792 99 549 59 9 319 620 109 547 Share movements in terms of long-term incentive and BEE scheme 1 650 168 1 440 (384) (82) (25) Additional tier 1 capital instruments issued Additional tier 1 capital instruments redeemed Preference share dividend paid Additional tier 1 capital instruments interest paid Dividends paid to shareholders Total comprehensive (losses)/income for the year Profit attributable to ordinary shareholders and non-controlling interest4 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) Transactions with non-controlling interests Other movements (1 391) (97) – – (317) 14 044 11 (1 402) (17) (97) (58) 2 1 500 (600) (873) 873 873 (114) 106 106 – – – – 11 102 (97) (242) – 979 20 2 (7 788) (7 788) 12 239 14 287 14 287 102 (419) (1) (1 822) (242) 125 35 2 (70) 979 3 Non- controlling interest attributable to ordinary shareholders Total equity (25) 1 500 (600) (114) (873) (7 826) 13 354 15 430 (2) 99 (106) (245) (1 822) 979 – – 2 (38) 136 164 (13) (3) (9) (3) (20) Balance at 31 December 2022 487 251 715 487 19 208 (2 916) 1 611 1 730 276 452 84 128 104 976 51 10 219 698 115 944 72 Nedbank Group Annual Results 2023 Number of ordinary shares Ordinary share capital Ordinary share premium Foreign currency translation reserve1 Property revaluation reserve Share-based payment reserve Other non- distributable reserves2 FVOCI reserve Other distri- butable reserves3 Total equity attributable to ordinary shareholders Holders of participating preference shares Holders of additional tier 1 capital instruments Non- controlling interest attributable to ordinary shareholders Total equity Balance at 1 January 2022 485 601 547 486 18 768 (1 508) 1 764 1 205 273 769 77 792 99 549 59 9 319 620 109 547 1 650 168 1 440 (384) (82) (25) (1 391) (97) – – (317) 14 044 (7 788) – – – – (7 788) 12 239 11 (1 402) (17) (97) (58) 2 14 287 14 287 102 (242) 11 102 (97) (242) (419) (1) (1 822) 125 35 2 – 979 20 2 (70) 979 3 1 500 (600) (873) 873 873 (114) 106 106 (25) 1 500 (600) (114) (873) (7 826) 13 354 15 430 (2) 99 (106) (245) (1 822) – 979 – 2 (38) 136 164 (13) (3) (9) (3) (20) Balance at 31 December 2022 487 251 715 487 19 208 (2 916) 1 611 1 730 276 452 84 128 104 976 51 10 219 698 115 944 Rm scheme Share movements in terms of long-term incentive and BEE Additional tier 1 capital instruments issued Additional tier 1 capital instruments redeemed Preference share dividend paid Additional tier 1 capital instruments interest paid Dividends paid to shareholders Total comprehensive (losses)/income for the year Profit attributable to ordinary shareholders and non-controlling interest4 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) Transactions with non-controlling interests Other movements 73 Nedbank Group Annual Results 2023Financial resultsSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysis2023 resultscommentaryResultspresentationMessage from ourChief Executive Consolidated statement of changes in equity (continued) Rm Share movements in terms of long-term incentive and BEE scheme Share buyback Additional tier 1 capital instruments issued Additional tier 1 capital instruments redeemed Preference share dividend paid Additional tier 1 capital instruments interest paid Dividends paid to shareholders Total comprehensive (losses)/income for the year Profit attributable to ordinary shareholders and non-controlling interest4 Number of ordinary shares Ordinary share capital Ordinary share premium Foreign currency translation reserve1 Property revaluation reserve Share-based payment reserve Other non- distributable reserves2 FVOCI reserve Other distri- butable reserves3 Total equity attributable to ordinary shareholders Holders of participating preference shares Holders of additional tier 1 capital instruments 709 349 (23 395 066) 1 (23) 145 (5 021) (411) (154) (419) (5 044) (63) 27 – – 303 15 384 Exchange differences on translating foreign operations 1 515 Cash flow hedge losses 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) (1 578) 27 (54) Balance at 31 December 2023 464 565 998 465 14 332 (2 979) 1 584 337 742 90 614 107 749 106 10 469 887 119 211 1 Exchange differences of R1 515m credit (2022: R11m) in the foreign currency transaction reserve include a credit of R168m (2022: R190m) for the conversion of our investment in ETI from USD to ZAR and a credit of R1 347m (2022: R179m) for the translation of the other foreign subsidiaries. The R1 578m debit (2022: R1 402m) relates to our share of ETI's other comprehensive income on foreign exchange gains and losses. 2 Represents other non-distributable revaluation surpluses on capital items and non-distributable reserves transferred from other distributable reserves to comply with various banking regulations. 3 Represents the accumulated profits after distributions to shareholders and appropriations of retained earnings to other non-distributable reserves. 4 The R166m gains (2022: R106m) 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. Non- controlling interest attributable to ordinary shareholders Total equity (419) (5 044) 1 000 (750) (111) (1 286) (190) 273 53 191 (1 481) – 1 154 (23) 1 492 (8) 26 (3) 1 000 (750) (1 286) (111) 166 166 (8 569) (8 569) 15 651 (46) (8 615) 1 286 235 17 338 15 305 15 305 1 286 243 17 000 – – – – 1 515 (190) 281 27 194 (1 481) – 1 154 281 22 (13) (190) 194 75 (175) 61 181 1 154 2 654 74 Nedbank Group Annual Results 2023 Number of ordinary shares Ordinary share capital Ordinary share premium Foreign currency translation reserve1 Property revaluation reserve Share-based payment reserve Other non- distributable reserves2 FVOCI reserve Other distri- butable reserves3 Total equity attributable to ordinary shareholders Holders of participating preference shares Holders of additional tier 1 capital instruments 709 349 (23 395 066) 1 (23) 145 (5 021) (411) (154) (419) (5 044) (63) 27 – – 303 15 384 (8 569) – – – – (8 569) 15 651 Share movements in terms of long-term incentive and BEE Rm scheme Share buyback Additional tier 1 capital instruments issued Additional tier 1 capital instruments redeemed Preference share dividend paid Additional tier 1 capital instruments interest paid Dividends paid to shareholders Total comprehensive (losses)/income for the year Profit attributable to ordinary shareholders and non-controlling interest4 Cash flow hedge losses 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) Exchange differences on translating foreign operations 1 515 Balance at 31 December 2023 464 565 998 465 14 332 (2 979) 1 584 (1 578) 27 (54) 181 1 154 2 654 15 305 15 305 281 22 (13) (190) 194 75 (175) 61 1 515 (190) 281 27 194 (1 481) – 1 154 (111) 166 166 Non- controlling interest attributable to ordinary shareholders Total equity (419) (5 044) 1 000 (750) (111) (1 286) 1 000 (750) (1 286) (46) (8 615) 1 286 235 17 338 1 286 243 17 000 (23) 1 492 (8) 26 (3) (190) 273 53 191 (1 481) – 1 154 337 742 90 614 107 749 106 10 469 887 119 211 75 Nedbank Group Annual Results 2023Financial resultsSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysis2023 resultscommentaryResultspresentationMessage from ourChief Executive 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 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 Note: Averages calculated on a 365-day basis. 2023 2022 41 470 (9 605) 27 709 59 574 (38 059) 1 443 22 958 (1 129) (4 484) 17 345 (1 695) 15 650 986 060 36 277 (7 381) 26 171 55 067 (35 329) 879 20 617 (1 102) (4 311) 15 204 (1 143) 14 061 922 197 1 297 206 1 233 772 103 501 99 996 76 Nedbank Group Annual Results 2023NII/Average interest-earning banking assets Impairments/Average interest-earning banking assets NIR/Average interest-earning banking assets Total expenses/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 2023 2022 4,21% 3,93% less less 0,97% 0,80% add add 2,81% 2,84% 6,05% 5,97% less less 3,86% 3,83% add add 0,15% 0,10% 2,34% 2,24% multiply multiply 0,76 0,74 multiply multiply 0,90 0,92 1,59% 1,52% multiply multiply 76,0% 74,7% = = 1,21% 1,14% multiply multiply 12,5 = 12,3 = 15,1% 14,1% 77 Nedbank Group Annual Results 2023Financial resultsSupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysis2023 resultscommentaryResultspresentationMessage from ourChief Executive 78 NotesNedbank Group Annual Results 2023Segmental analysis Our organisational structure, products and services 80 Operational segmental reporting Nedbank Corporate and Investment Banking Nedbank Retail and Business Banking Nedbank Wealth Nedbank Africa Regions Geographical segmental reporting 82 86 90 102 106 110 79 Nedbank Group Annual Results 2023Our organisational structure, products and services We deliver our products and services through 4 main business clusters. Cluster Areas of strength and differentiation Nedbank Corporate and Investment Banking • Market leader with strong expertise in commercial-property, corporate advances and renewable-energy financing. • Market-leading South African trading franchise with excellent trading capabilities across all asset classes. • Leading expertise across various sectors such as mining, telecoms and infrastructure. A comprehensive suite of wholesale banking solutions for corporates, institutions, governments and parastatals Nedbank Retail and Business Banking Individual clients and businesses Individual, business and corporate clients Nedbank Wealth Nedbank Africa Regions Retail, small and medium enterprises as well as business and corporate clients across the countries where we operate • Leading digital capabilities enabling clients to join and engage with the bank through multiple channels. • #1 bank in client satisfaction metrics. • Differentiated and disruptive client value propositions (CVPs) across different client segments. • Highly competitive relationship banking offering for our affluent and small-business clients. • Well-positioned and distinctive CVPs in Commercial Banking. • Digitally enabled and reimagined distribution network. Insurance • Leveraging existing distribution channels and platforms to sell insurance solutions to Nedbank clients. Asset Management • Top fund managers are contracted through the 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. Wealth Management • An integrated and holistic advice-led and high-net-worth offering for local and international clients. SADC (own, manage and control banks) • Presence and positioned for growth in 5 SADC countries with ongoing technology investments to enhance CVPs and achieve scale. Central and West Africa (ETI alliance – 21,2% shareholding) • Access to the largest banking network in Africa through our ETI strategic alliance. The group’s frontline business clusters are supported by various shared-services functions related to compliance, finance, human resources, marketing and corporate affairs, risk, technology and strategy, including sustainability. 80 Nedbank Group Annual Results 2023Products and services Contribution to group HE contribution ROE > 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 products and services. Approximately 3,5 million main-banked retail clients and 7 million active retail clients • Offering a 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. • > 300 000 business clients are served through our Small Business Services offering (tailored to businesses with an annual turnover of less than R30m and the business owner). • > 14 521 commercial-banking client groups catering to mid-size and large commercial entities. Entry-level to high-net-worth clients (SA) and high-net-worth clients (UK, Jersey, Isle of Man & UAE) • Providing insurance, asset management and wealth management solutions to a wide spectrum of clients. > 349 000 retail and corporate 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. 43,4% R6 799m 2022: R6 399m 2021: R5 605m 2020: R3 636m 35,6% R5 566m 2022: R5 097m 2021: R4 523m 2020: R1 595m 7,7% R1 210m 2022: R1 140m 2021: R962m 2020: R662m 12,1% R1 891m 2022: R977m 2021: R594m 2020: R12m 18,9% 2020 2021 2022 2023 16,0% 2020 2021 2022 2023 26,8% 2020 2021 2022 2023 25,2% 2020 2021 2022 2023 81 Nedbank Group Annual Results 2023SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief ExecutiveOperational segmental reporting for the year ended 31 December Banking advances contribution to the group 44,1% R377bn 2022: R378bn 2021: R348bn 2020: R358bn Rm 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre Summary of consolidated statement of financial position (Rm) Assets Cash and cash equivalents Other short-term securities Derivative financial instruments Government and other securities Banking loans and advances Trading loans and advances Other assets Intergroup assets Total assets Equity and liabilities Total equity1 52 082 87 769 13 812 45 618 70 661 9 101 170 717 160 495 1 513 54 628 13 777 81 417 814 38 245 9 019 79 524 855 445 835 560 376 882 378 037 429 244 408 430 28 711 29 025 36 174 95 409 – 46 605 84 864 – 36 174 38 789 46 605 31 983 10 320 33 210 9 281 17 669 22 478 21 018 895 29 295 17 213 1 723 28 511 39 255 10 583 4 831 4 1 979 20 909 3 663 3 937 5 331 5 629 33 760 30 404 1 311 408 1 252 904 603 180 584 227 478 105 441 009 81 609 80 571 45 906 42 853 102 608 104 244 119 211 115 944 35 957 36 249 Total equity attributable to ordinary shareholders 107 749 104 976 35 957 36 249 Non-controlling interest attributable to ordinary shareholders Holders of participating preference shares Holders of additional tier 1 capital instruments 887 106 698 51 10 469 10 219 Derivative financial instruments Banking amounts owed to depositors Trading amounts owed to depositors Provisions and other liabilities Long-term debt instruments Intergroup liabilities Total equity and liabilities 14 141 9 738 14 100 9 708 10 14 1 029 746 983 582 383 601 385 846 436 283 402 114 36 846 34 327 124 804 115 104 57 899 42 634 47 777 – 56 040 35 697 51 903 57 899 5 831 56 040 2 803 – 105 792 93 581 1 311 408 1 252 904 603 180 584 227 478 105 441 009 81 609 80 571 45 906 42 853 102 608 104 244 1 Total equity includes non-controlling interests in the Centre. Total equity of the client-facing clusters is based on average allocated capital while the group’s equity is based on actual equity. The difference between average allocated capital and actual equity resides in the Centre. Includes the variance between average allocated capital, which is computed using the average-equity month-end balances and actual equity. 7 048 4 787 23 2 095 21 714 3 438 3 748 7 023 7 023 (985) 14 87 108 (301) 20 159 (37 147) (882) 20 78 621 (1 646) 19 144 (21 417) 36 552 36 411 25 090 25 443 887 106 698 51 10 469 10 219 34 690 34 690 31 843 31 843 4 520 4 520 4 418 4 418 7 492 7 492 31 48 212 16 46 191 21 125 19 719 7 721 10 227 5 891 1 241 5 811 1 241 1 129 429 1 061 428 8 658 46 107 6 303 50 234 (113 513) (103 808) 82 Nedbank Group Annual Results 2023 Nedbank Group Corporate and Investment Banking 170 717 160 495 52 082 87 769 13 812 36 174 95 409 – 45 618 70 661 9 101 46 605 84 864 – 1 513 54 628 13 777 81 417 36 174 38 789 814 38 245 9 019 79 524 46 605 31 983 50,2% 3,4% 2,5% R429bn 2022: R408bn 2021: R381bn 2020: R356bn Retail and Business Banking R29bn 2022: R29bn 2021: R30bn 2020: R31bn Wealth R21bn 2022: R22bn 2021: R21bn 2020: R23bn Nedbank Africa Regions Centre Summary of consolidated statement of financial position (Rm) 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 855 445 835 560 376 882 378 037 429 244 408 430 28 711 29 025 10 320 33 210 9 281 17 669 22 478 21 018 5 331 5 629 895 29 295 17 213 1 723 28 511 39 255 10 583 4 831 4 1 979 20 909 3 663 3 937 7 048 4 787 23 2 095 21 714 3 438 3 748 33 760 30 404 (985) 14 87 108 (301) 20 159 (37 147) (882) 20 78 621 (1 646) 19 144 (21 417) 1 311 408 1 252 904 603 180 584 227 478 105 441 009 81 609 80 571 45 906 42 853 102 608 104 244 Total equity attributable to ordinary shareholders 107 749 104 976 35 957 36 249 Non-controlling interest attributable to ordinary shareholders Holders of participating preference shares Holders of additional tier 1 capital instruments 887 106 698 51 10 469 10 219 119 211 115 944 35 957 36 249 34 690 34 690 31 843 31 843 4 520 4 520 4 418 4 418 7 492 7 492 7 023 7 023 36 552 36 411 25 090 25 443 887 106 698 51 10 469 10 219 1 029 746 983 582 383 601 385 846 436 283 402 114 5 891 1 241 5 811 1 241 14 141 9 738 14 100 9 708 57 899 42 634 47 777 – 56 040 35 697 51 903 57 899 5 831 56 040 2 803 – 105 792 93 581 31 48 212 16 46 191 21 125 19 719 7 721 10 227 10 14 36 846 34 327 124 804 115 104 1 129 429 1 061 428 8 658 46 107 6 303 50 234 (113 513) (103 808) 1 311 408 1 252 904 603 180 584 227 478 105 441 009 81 609 80 571 45 906 42 853 102 608 104 244 Rm Assets Cash and cash equivalents Other short-term securities Derivative financial instruments Government and other securities Banking loans and advances Trading loans and advances Other assets Intergroup assets Total assets Equity and liabilities Total equity1 Derivative financial instruments Banking amounts owed to depositors Trading amounts owed to depositors Provisions and other liabilities Long-term debt instruments Intergroup liabilities Total equity and liabilities 83 Nedbank Group Annual Results 2023SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Operational segmental reporting (continued) for the year ended 31 December Rm 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre Summary of consolidated statement of comprehensive income (Rm) NII NIR Share of gains of associate companies1 Total income Impairments charge on financial instruments Net income Total operating expenses Indirect taxation Profit before direct taxation Direct taxation Profit after taxation Profit attributable to: – Non-controlling interest – ordinary shareholders – Holders of participating preference shares – Holders of additional tier 1 capital instruments Headline earnings Selected ratios 9 386 8 678 63 18 127 939 17 188 8 196 259 8 733 1 934 6 799 8 755 8 241 100 17 096 805 16 291 7 628 215 8 448 2 049 6 399 41 470 27 709 1 443 70 622 9 605 61 017 38 059 1 129 21 829 4 484 36 277 26 171 879 63 327 7 381 55 946 35 329 1 102 19 515 4 311 17 345 15 204 243 166 1 286 164 106 873 15 650 14 061 6 799 6 399 5 566 5 097 1 210 1 140 1 891 977 Average interest-earning banking assets (Rm) Average risk-weighted assets (Rbn) 986 060 922 197 678 142 645 499 387 929 295 120 361 987 289 929 445 309 257 017 405 760 240 061 61 359 34 603 59 017 32 013 36 318 49 896 34 759 46 039 55 145 41 506 60 674 37 457 ROA (%) RORWA (%) ROE (%) Interest margin (%)2 NIR to total income (%) NIR to total operating expenses (%) CLR – banking advances (%) Cost-to-income ratio (%) Effective taxation rate (%) Contribution to group economic profit/(loss) (Rm) 1,21 2,31 15,1 4,21 40,1 72,8 1,09 53,9 20,5 970 1,14 2,18 14,1 3,93 41,9 74,1 0,89 55,8 22,1 (222) Number of employees (permanent) 25 477 25 924 1,11 2,30 18,9 2,42 48.0 105,9 0,24 45,2 22,1 1 477 2 272 1,10 2,21 17,7 2,42 48,5 108,0 0,22 44,6 24,3 989 2 347 1 On an IFRS basis Nedbank Africa Regions earned associate income of R1 386m (2022: R779m) as IFRS requires associate income to be presented net of our share of ETI’s impairment charge on non-financial instruments and other gains and losses of R6m (2022: R0m). Our share of ETI’s impairment charge on non-financial instruments and other gains and losses is excluded from HE. 2 Cluster margins include internal assets. 84 1 696 (56) 1 640 (144) 1 784 146 3 1 635 160 1 475 1 286 184 1 366 (70) 1 296 (194) 1 490 (18) 166 1 342 17 1 325 4 873 448 166 106 238 160 5 26 413 14 306 40 719 8 520 32 199 23 678 747 7 774 2 042 5 732 1,20 2,17 16,0 5,93 35,1 60,4 1,94 58,1 26,3 432 23 203 13 372 36 575 6 613 29 962 22 138 587 7 237 2 034 5 203 1,20 2,12 16,0 5,72 36,6 60,4 1,61 60,5 28,1 345 1 749 2 924 4 673 37 4 636 3 111 64 1 461 251 1 210 1,46 3,50 26,8 2,85 62,6 94,0 0,12 66,6 17,2 541 1 233 3 047 4 280 (63) 4 343 2 838 59 1 446 306 1 140 1,43 3,53 26,3 2,09 71,2 107,4 (0,20) 66,3 21,2 493 1 826 2 226 1 857 1 380 5 463 253 5 210 2 928 56 2 226 97 2 129 4,16 3,79 25,2 6,13 45,5 63,4 1,00 53,6 4,4 783 2 157 1 720 1 581 779 4 080 220 3 860 2 743 75 1 042 (95) 1 137 2,31 2,12 13,8 4,94 47,9 57,6 1,02 67,2 (9,1) (76) 2 191 15 157 15 671 1 835 (2 263) 4 056 (1 973) 3 889 Nedbank Group Annual Results 2023 Summary of consolidated statement of comprehensive income (Rm) Rm NII NIR Share of gains of associate companies1 Total income Impairments charge on financial instruments Net income Total operating expenses Indirect taxation Profit before direct taxation Direct taxation Profit after taxation Profit attributable to: – Non-controlling interest – ordinary shareholders – Holders of participating preference shares – Holders of additional tier 1 capital instruments Headline earnings Selected ratios ROA (%) RORWA (%) ROE (%) Interest margin (%)2 NIR to total income (%) NIR to total operating expenses (%) CLR – banking advances (%) Cost-to-income ratio (%) Effective taxation rate (%) Contribution to group economic profit/(loss) (Rm) 17 345 15 204 41 470 27 709 1 443 70 622 9 605 61 017 38 059 1 129 21 829 4 484 243 166 1 286 1,21 2,31 15,1 4,21 40,1 72,8 1,09 53,9 20,5 970 36 277 26 171 879 63 327 7 381 55 946 35 329 1 102 19 515 4 311 164 106 873 1,14 2,18 14,1 3,93 41,9 74,1 0,89 55,8 22,1 (222) 9 386 8 678 63 18 127 939 17 188 8 196 259 8 733 1 934 6 799 1,11 2,30 18,9 2,42 48.0 105,9 0,24 45,2 22,1 1 477 2 272 8 755 8 241 100 17 096 805 16 291 7 628 215 8 448 2 049 6 399 1,10 2,21 17,7 2,42 48,5 108,0 0,22 44,6 24,3 989 2 347 Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 26 413 14 306 40 719 8 520 32 199 23 678 747 7 774 2 042 5 732 23 203 13 372 36 575 6 613 29 962 22 138 587 7 237 2 034 5 203 166 106 1 749 2 924 4 673 37 4 636 3 111 64 1 461 251 1 210 1 233 3 047 4 280 (63) 4 343 2 838 59 1 446 306 1 140 2 226 1 857 1 380 5 463 253 5 210 2 928 56 2 226 97 2 129 1 720 1 581 779 4 080 220 3 860 2 743 75 1 042 (95) 1 137 1 696 (56) 1 640 (144) 1 784 146 3 1 635 160 1 475 238 160 5 15 650 14 061 6 799 6 399 5 566 5 097 1 210 1 140 1 891 977 1 286 184 1 366 (70) 1 296 (194) 1 490 (18) 166 1 342 17 1 325 4 873 448 Average interest-earning banking assets (Rm) Average risk-weighted assets (Rbn) 986 060 922 197 678 142 645 499 387 929 295 120 361 987 289 929 445 309 257 017 405 760 240 061 61 359 34 603 59 017 32 013 36 318 49 896 34 759 46 039 55 145 41 506 60 674 37 457 Number of employees (permanent) 25 477 25 924 15 157 15 671 1 835 1,20 2,17 16,0 5,93 35,1 60,4 1,94 58,1 26,3 432 1,20 2,12 16,0 5,72 36,6 60,4 1,61 60,5 28,1 345 1,46 3,50 26,8 2,85 62,6 94,0 0,12 66,6 17,2 541 1,43 3,53 26,3 2,09 71,2 107,4 (0,20) 66,3 21,2 493 1 826 4,16 3,79 25,2 6,13 45,5 63,4 1,00 53,6 4,4 783 2 157 2,31 2,12 13,8 4,94 47,9 57,6 1,02 67,2 (9,1) (76) 2 191 (2 263) 4 056 (1 973) 3 889 85 Nedbank Group Annual Results 2023SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Nedbank Corporate and Investment Banking Headline earnings (Rm) Return on equity (%) 7 6 1 6 6 3 6 3 5 0 6 5 9 9 3 6 9 9 7 6 , 7 7 1 , 4 9 , 3 5 1 , 7 7 1 , 9 8 1 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Financial performance CIB achieved good results against a challenging local and global operating environment characterised by high inflation, low economic growth and geopolitical tension. This shows the strength of our strategic plan to build robustness through changing and complex business environments. By focusing on delivering purposeful solutions to our clients in key sectors, CIB delivered headline earnings (HE) growth of 6% at a significantly improved ROE of 18,9%, up from 17,7% in 2022. NII increased by 7% to R9,4bn, driven by average banking advances growth of 8% to R391bn and average deposit growth Financial highlights of 5% to R451bn. The net interest margin remained stable at 2,42% (2022: 2,42%) as endowment benefit was offset by lower margins, improved risk ratings and suspended interest on stage 3 assets. The credit loss ratio rose marginally to 24bps but remained below the midpoint of the TTC target range of 15bps to 45bps, despite a 17% increase in impairments to R939m. The commercial-property portfolio reported a CLR of 47 bps, impacted by a single-name client, with low levels of arrears on the rest of the portfolio. The total coverage ratio decreased to Corporate and Investment Banking Property Finance Corporate and Investment Banking, excluding Property Finance Change % 2023 2022 2023 2022 2023 2022 6 7 17 5 6 7 3 5 (3) 6 5 (1) 5 643 6 591 134 7 602 14 256 6 732 4 989 6 063 343 7 181 13 343 6 272 6 799 9 386 939 8 678 18 127 8 196 18,9 1,11 0,24 105,9 45,2 2,42 6 399 8 755 805 8 241 17 096 7 628 17,7 1,10 0,22 108,0 44,6 2,42 1 156 2 795 805 1 076 3 871 1 464 13,0 0,66 0,47 73,5 37,8 1,64 1 410 2 692 462 1 060 3 753 1 356 15,7 0,82 0,28 78,2 36,1 1,63 603 180 584 227 182 371 175 962 420 809 408 265 610 718 581 580 176 434 170 968 434 284 410 612 413 056 424 642 176 474 170 513 236 582 254 129 431 398 405 855 170 890 165 618 260 508 240 237 441 500 441 886 450 640 429 663 155 204 286 283 441 345 441 600 450 436 429 380 35 957 36 249 8 893 8 975 27 064 27 274 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) 86 Nedbank Group Annual Results 2023 All of this is underpinned by our digital strategy that enables growth and efficiencies across our business, increases productivity, enhances the client experience, builds differentiated and digitally enabled products and services, and fosters a culture of innovation to deliver market-leading capabilities and client solutions. Strategic progress Our client-centred strategy has enabled us to grow and maintain a robust client and asset portfolio in an increasingly complex operating context. We continued to showcase our deep sector expertise and alignment in our product areas. We have completed the business reorganisation changes under Target Operating Model 2.0 (TOM 2.0), which delivers our transactional, digital and client services capabilities to the market and embeds our sector-focused approach within TS. Innovation continues throughout our business, ensuring we deliver a warm digital experience and equipping our employees and clients with the right digital and data capabilities to provide differentiated journeys. Key highlights of our digital strategy include the launch of Voice of the Client to capture client sentiment, and more than 95% of global clients were migrated from our previous system onto the Nedbank Business Hub (NBH). Survey results show that multibanked clients feel the NBH experience surpasses competitors on critical metrics, including true channel convergence. Further benefits from our digital initiatives include our data-driven approach to origination, client management and enhanced client profitability that supports primary client wins and increases large transactions. Our Markets business was also bolstered by the significant investments in technology capabilities and increased sales presence. We embed purpose in everything we do as we contribute towards growing a sustainable and inclusive economy. In 2023 we published our fossil fuels and power generation glidepath methodology, which is already being advanced through the closure of multiple renewable energy deals. Partnering with our Property Finance clients to promote a sustainable property sector, we launched a new value-added service, EDGE, to assist property clients with greening and certification of their buildings. The Property Finance business continued to advance access to affordable social housing and student accommodation, with total disbursements of R1,2bn for developing new units. As a people-led business we continually strive to attract and retain diverse talent. Continued investment in our bespoke leadership and management programmes remains a priority to equip our best talent with the tools they need to execute our strategy. 1,14% (Dec 2023) from 1,29% (Dec 2022) due to the restructure and write-off of a single significant exposure in Property Finance (PF) and some stage 3 exposures in Investment Banking (IB) and Transactional Services (TS) migrating to the performing book. Stage 2 exposures continue to decrease, and stage 1 exposures remain stable. NIR grew by 5% to R8,7bn. Trading income grew 3% with solid performances in the debt securities and commodities markets and weaker performance in foreign exchange due to reduced client flows. This resulted, alongside fair value gains on structured deals, in total NIR growth of 7% in the Markets business. Commission and fees increased by 3%, with a strong performance in our trade finance business benefiting from our investment in capabilities as a key growth driver in Africa. Deal closure in our lending businesses towards the end of 2023 generated fee growth from a high 2022 base. Equity investment income and dividends decreased by 5%, coming off a high 2022 base. Expenses have been controlled and increased by 7%, despite inflationary cost pressures and our firm commitment to attract and retain top talent. Employee-related costs account for 70% of CIB's operational cost base. The cost-to-income ratio increased to 45,2% from 44,6%, which we believe to be transitory. The medium-term target of below 44% remains. Our deliberate and disciplined approach to business selection and focus on capital efficiency helped improve our ROE to 18,9%. This focus has been embedded across our organisation to maximise value against the changing regulatory capital backdrop. Looking forward Positive advances growth is anticipated in most of our businesses, particularly in renewable energy. A robust energy and related infrastructure pipeline is likely to see the asset growth momentum gained in H2 2023 continuing this year. We continue to focus on entrenching our market leadership in this sector by looking across the value chain and following our clients to new geographies to help deliver on their ambitions. Deep relationships with our clients in the property sector will ensure we maintain a good quality and well-diversified portfolio. Our trading business should benefit from continued focus on refreshing our FX franchise through driving digital adoption, optimising technological capabilities and improving data-led acquisition. The rates business will continue to benefit from hedging in the energy sector, and there is likely to be continued benefit from our investment in talent as new products in the credit space and targeted African strategies are executed. With a slower growth South African economy, we continue to accelerate the delivery of targeted opportunities across the African continent where our expertise, capabilities and resources align. The new TS operating model solidifies our sector-focused approach and positions the business for growth and added revenue diversification through increased NIR. An enhanced understanding of our clients will enable us to deliver purposeful solutions and differentiated service excellence. Emphasis will be placed on streamlined product groupings, sectorised sales and service models, and reducing manual handoffs. 87 Nedbank Group Annual Results 2023SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief ExecutiveFinancial highlights Property Finance Investment Banking Markets Working capital and Transactional Services 2023 2022 2023 2022 2023 2022 2023 2022 Gross operating income (Rm) Average total advances (Rm) 3 871 3 753 4 929 4 472 5 368 5 035 3 959 3 836 170 890 165 618 167 170 156 087 69 913 63 426 23 425 20 724 Segmental performance Property Finance (PF) PF provides development and term finance solutions to clients and partners with them through equity investment and mezzanine structures. Some positive trends in the sector emerged during H2, including the stabilising of property values. Increased trading of properties and corporate action indicate some improvement in sentiment and a level of confidence returning to the sector. We noticed an increase in business activity related to lending opportunities over the last quarter of 2023, and we expect this to continue should interest rates reduce in line with expectations. In H2 a significant focus was placed on resolving a high-risk counter in business rescue. The process of transferring these assets to the new purchasers has started. We continue to focus on partnering with our clients, originating high-quality transactions, and managing the risk across our portfolio. GOI increased by 3%. An increase in suspended interest impacted NII due to the year-on-year increase in stage 3 exposures and higher interest rates. NIR increased by 2%, supported by a 23% increase in commission and fee income following deal closures in the latter part of the year. This was partly offset by lower equity investment income coming off a high 2022 base. The CLR increased to 47 bps (Dec 2022: 28 bps) due to a specific stage 3 exposure. Due to this exposure, the CLR was expected to exceed the top of the TTC target range of 15 bps to 35bps by year-end. However, despite the high-interest-rate environment, particularly the rapid rise in rates experienced in H1, our impairment experience across the rest of the portfolio has been lower than expected, indicating the resilience of our client base. Good-quality, well-diversified assets secure our portfolio, underpinned by a solid client base with whom we have deep relationships. Investment Banking (IB) IB is responsible for the advisory, debt and equity capital markets, private equity, long-term debt finance, sustainable finance, and syndication businesses. It has leading industry expertise in mining and resources, energy, infrastructure, telecoms, transport, freight and logistics, as well as the travel and leisure sectors. Our sector expertise, thought leadership, and purpose-driven approach to delivering solutions to our clients received ongoing recognition. We won multiple awards in the period under review: 2023 Bonds, Loans & ESG Capital Markets Africa Awards: 2023 Sovereign Bond Deal of the Year and 2023 Syndicated Loan Deal of the Year, 2023 Global Finance Sustainable Finance Awards: 2023 Outstanding Leadership in Sustainable Bonds, 2023 African Banker Awards:2023 Debt Deal of the Year, and 2023 ANSARADA DealMakers Awards: first place in the Sponsor Mergers & Acquisitions category by deal flow as well as second place in the Investment Advisers Mergers & Acquisition category by deal flow. IB GOI increased by 10%. NII increased by 13%, as average banking advances grew by 7%, with a strong performance in our Leverage and Diversified Finance, Infrastructure, Water and Telecoms, and Mining businesses. Impairments decreased by 7% and the CLR for the period was 9 bps. NIR increased by 8%, driven by fair value adjustments and investment income with commission and fees maintained at prior-year levels, which is reasonable in the economic environment, reflecting improved underlying client activity. The portfolio optimisation initiatives within our target sectors and client base remain a key focus. The pipeline of opportunities remains robust across all sectors, particularly in energy and related infrastructure. In Q4 2023 the energy team closed transactions in renewable energy programmes and private power commercial and industrial projects. The pipeline remains strong into the first half of 2024, with further projects expected to close. We continue to invest in the advisory business, focusing on growing our NIR contribution and cross-selling into the broader CIB franchise with a solid pipeline of opportunities into 2024. The private equity franchise will focus on new investment activity while realising certain existing investments for value. There will be a continued focus on sustainable finance where we play a crucial role in leading, structuring and coordinating these transactions, for which Nedbank has been recognised globally as a leading sustainable finance provider. Markets The Markets business trades in the foreign currency, equity, commodity and interest rate markets. The Markets business grew operating income by 7% year on year despite continuing challenging trading conditions, with particularly strong client revenues across corporate and institutional structured deals. This growth was driven by good outcomes in Debt Securities trading (up by 6%) and Commodities trading, which increased by more than 100% off a low base. The rates business benefited from good client flow in the second half and an incredibly strong performance in credit trading – a growth focus over 2023. This was offset by weaker FX trading income, down 2%, due to a waning trade impulse and the continuing impact of margin compression from MPIF. The equities trading business mounted a strong comeback, particularly in the non-linear derivatives business in the second half of the year, to finish down by 5% year on year. 88 Nedbank Group Annual Results 2023 are largely dominated by renewable energy, which has kept our CO2e intensity well below the 2030 IEA NZE target of 188 gCo2e/kWh. As a result, we will adopt this target as a cap for power generation. The scenarios adopted consider the latest available science, our African context, and the African Just Transition. We will regularly review the latest science to ensure that our pathways remain aligned, and targets beyond 2030 will be considered and communicated closer to 2030. After disclosing these sector pathways, the group plans to set targets for other segments of its portfolio, if data permits. These plans will be prioritised based on materiality regarding emissions to the country and Nedbank. Focus will remain on continued digitisation, building a diverse revenue base by strengthening areas in which we are under-indexed and investing in targeted opportunities in Africa. Transactional Services (TS) The TS business provides working capital products in conjunction with transactional solutions. GOI increased by 3% as NII increased by 6%, benefiting from higher deposits and short-term asset growth of 5% and 13% respectively. Impairments benefited from releases as distressed debt cured. NIR decreases slightly by 2%, with growth in domestic payments, guarantees and trade risk participation offset by lower cash withdrawal volumes. The business grew confirmation commissions strongly by participating in primary market transactions in Africa, which enabled us to be more of a market maker and increase returns. We worked with large exporters to increase our participation in essential commodity transactions. This was largely possible due to the reorganisation of the business to focus on cross-border trade activity. The investment in our trade finance team is increasing our ability to participate in larger and more complex transactions. We recorded 20 new primary-banked wins, including 2 noteworthy successes in the public sector domain. A sector-based strategy and refined operating model underpin a strong pipeline for 2024 and beyond. We have undergone a significant internal realignment that will result in fewer touchpoints for clients, faster service delivery and enhanced processes. This will contribute to our goal of being the go-to transactional bank for all juristic clients. The business prioritises client experience by continually improving and investing in the innovation of our digital channels and plays a significant role in the South African banking landscape through thought leadership in various industry bodies. Developing our fossil fuel and power generation glidepaths In 2021, building on a history of climate and environmental leadership, we released our Energy Policy, including a commitment to zero fossil fuel exposure by 2045. The policy recognises the need for a zero-carbon energy system by 2050 and that an orderly exit from fossil fuel financing is necessary well before then. In line with our energy policy, our reduction targets will initially focus on the emissions related to our lending in the upstream fossil fuel and power generation sectors. For our fossil-fuel-related lending, a methodology encompassing Scopes 1, 2, and 3 client emissions is most appropriate for managing the full impact of the industry in the long term. For our generation pathway, we will use a physical intensity metric (CO2e/MWh) encompassing Scope 1 emissions of generated electricity. Nedbank will use the widely adopted IEA Net Zero Emissions by 2050 scenario (NZE) as a basis for our first targeted commitment date of 31 December 2029 for our fossil fuel and power generation pathways. This science-based pathway aligns with the goals of the Paris Agreement, keeping global warming well below 2 °C by 2050 and pursuing efforts to limit the temperature increase to 1,5 °C. This will result in targeted reductions from 2022 to 2030: thermal coal 47% and oil and gas 26%. Nedbank’s power generation financing activities 89 Nedbank Group Annual Results 2023SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief ExecutiveNedbank Retail and Business Banking Headline earnings (Rm) Return on equity (%) 3 9 2 5 5 9 5 1 2 3 5 4 7 9 0 5 6 6 5 5 , 3 7 1 , 4 5 , 7 3 1 , 0 6 1 , 0 6 1 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Financial performance RBB’s financial performance has shown a strong recovery in the second half of 2023, with headline earnings (HE) up by 9% to R5 566. HE in H2 2023 increased by 24% compared to the decline of 8% reported in H1 2023. Higher earnings, partially offset by an increase in capital, resulted in ROE remaining flat at 16,0%, above the group’s cost of equity. Revenue growth of 11% and expense growth that was well managed at 7%, were partially offset by a 29% increase in impairments. Impairment growth slowed down in H2 2023, increasing by only 3% compared with the increase of 60% reported in H1 2023. Higher revenue resulted in PPOP growth of 17% and the cost-to-income ratio improving to 58,1% (2022: 60,5%). In addition to the strong revenue growth, RBB made good progress on several key non-financial metrics, including an 11% increase in digitally active clients to 2,9 million and a 9% growth in main-banked clients to 3,53 million. NII increased by 14% to R26 413m, driven by advances growth following strong payouts and a widening of NIM from 5,72% to 5,93%. NIM benefited from positive endowment as interest rates increased, partially offset by higher funding costs, lower liability margins, and net lower asset margins, mainly comprising changes in asset mix, suspended interest, and lower client margins in Unsecured Lending. Average banking advances increased by 7% to R439bn, driven by good growth in our relationship businesses and solid growth in secured lending. Unsecured lending volumes have slowed due to the deliberate adoption of a more cautious approach to new lending as a result of elevated risk. Overall new-loan payouts have decreased to R118bn (2022: R121bn), mainly due to the slowdown in unsecured lending and the slowing demand in home loans. Household advances market share increased to 17,5% in December 2023 from 17,3% in December 2022. Average deposits increased by 10% to R421bn. Our market share in transactional deposits of 13,6% at the end of December 2023 remains a core focus area. We have seen a slight decrease in household deposits, with market share at 14,6% in December 2023 from 14,8% in December 2022. The 29% growth in impairments to R8,5bn (2022: R6,6bn) was mainly driven by an unfavourable book performance due to the deteriorating macro environment, elevated risk outcomes, and increased provisions for parameter regrounds and net macro updates. While the CLR increased to 194 bps (2022: 161 bps) and is above the upper end of the TTC target range of 175bps, the CLR trend improved from 226 bps in H1 2023 to 164 bps in H2 2023, as we improved our risk and collections strategies and operational efficiencies through the creation of a Debt Management and Recoveries (CDR) business unit. As noted during our H1 2023 results, management reviewed the presentation of certain card-processing-related expenses against industry practice. These expenses were directly attributable to income and recognised in NIR and were restated to ensure that they are presented as part of NIR to align with the Nedbank Group accounting policy. Consequently, there was a reallocation of R477m for full year ended 31 December 2022 from operating expenses to NIR. This restatement is a reallocation between line items and had no impact on profits for the period or HE for the cluster or group. NIR, on a restated basis, increased by 7% to R14 306m and by 8% before the restatement of card-processing fees, reflecting the benefits of cross-sell, the increase in main-banked clients, the 8% growth in card-issuing volumes and the 14% increase in card-acquiring volumes. Value-added services (VAS) volumes grew by 27% and revenues by 29%. Expenses increased by 7% to R23 657m (pre-restatement of card-processing fees by 7,5%), supported by judicious management of discretionary spend and ongoing optimisation of operations through Project Phoenix, Project Imagine and other Target Operating Model 2.0 (TOM 2.0) initiatives. Permanent headcount decreased by 514 to 15 157, achieved mostly through natural attrition as we continue to leverage our investments in digital and the Managed Evolution (ME) technology strategy. 90 Nedbank Group Annual Results 2023 Strategic progress Clients – The 9% increase in main-banked clients to 3,53 million, coupled with an increase in the digital adoption of products and services, impacted NIR growth positively. We continue to scale several key growth vector products to expand our value propositions and support sustainable NIR growth by diversifying the revenue base. Nedbank continued to lead in client experience (CX) and retained our #1 NPS (Net Promoter Score) ranking among South African banks. This is a position we wish to retain through great client service, underpinned by human interactions, digital touchpoints, and fair client principles. Pleasingly, our efforts are being recognised in the market by external and independent reviews across various categories through numerous awards and accolades. In 2023 the business was recognised as the Best Bank for Transaction Banking Services for 2023 in the Middle East and Africa Innovation Awards by the Digital Banker; Best Retail Bank in South Africa by the Global Banking & Finance Awards 2023; Best SME Bank in South Africa in the Middle East and Africa Awards 2023 from The Asian Banker; SME Bank of the Year in the Qorus Reinvention Awards 2023; Most Popular Bank of the Rising Sun Readers’ Choice Awards 2023; and Best Financial Institution in South Africa awarded by the Global Business & Finance Magazine 2023. We continue to strive for ‘first in digital; digital first’ and in that vein, have been awarded Excellence in Innovation for our Avo super app by the Global Banking & Finance Awards 2023 and Best Digital Bank in Africa as awarded by the Euromoney Awards for Excellence 2023. We were also awarded Best Corporate Sustainability Strategy South Africa 2023 by the Global Banking & Finance Awards 2023; Best Corporate Social Responsibility Initiative in South Africa by Global Business & Finance Magazine as well as Excellence in Operations and Executive of the Year at the ActiveOps Awards 2023. We continued to bolster our behavioural economics (BE) capability within RBB through a skills development strategy developed with a top-tier South African university. This strategy includes 3 tailored programmes designed to empower business areas to deliver rigorously tested, behaviourally informed and impactful solutions. So far over 1 300 employees have been trained on these programmes, with a special focus on frontline employees who engage with clients daily. Through our financial wellness programmes (Consumer Financial Education and Financial Fitness) we reached close to 11,5 million consumers through a combination of radio, television, virtual and face-to-face interventions. We continue to explore social media as a channel to drive financial education through platforms like MoneyEdge, X Spaces (formerly Twitter Spaces), TikTok and WhatsApp. In H2 we added partners MoyaApp and Digify to drive demand-based learning as we follow client behaviour and preferences to help them manage their money better. Digital innovation – Digitally active clients increased by 11% to 2,9 million, of which 2,3 million clients are now using the Nedbank Money app (up by 16% yoy). Digital platform sales grew by 16% yoy, driven by a significant focus on digital marketing and sales funnel capabilities, offset by pressure on lending products following credit tightening. Funded current accounts grew by 20%, investments by 28% and credit cards by 78% yoy. Total payment and Money app volumes grew by 12% and 18% respectively yoy. Nedbank’s chatbot, Enbi, is assisting clients at scale, with over 10 million interactions recorded to date, 78% of all engagements are managed through this chat function, freeing up the capacity of agents to support clients with more complex queries. Enbi is now also available on our website, nedbank.co.za, and assists clients in real time within the digital onboarding flows. The Money app and other self-service channels play the primary role in providing clients with simple and convenient banking, anytime, anywhere. Our digital innovation journey continues to improve through enhanced onboarding capabilities as a new credit card or a MiGoals transactional account can be opened in less than 5 minutes via our digital channels. We have successfully opened more than 240 000 new MiGoals Accounts on our digital platforms since its launch in May 2023. The rapid-payments solution, PayShap, was a key enabler for real-time payments, and we were the only bank to enable this across all digital channels and completed more than 200 000 outgoing transactions successfully. Further innovative features included ‘application save and resume’ and card tracker functions, enabling clients to track the status of card delivery via the app. In addition, children can now use the Money app to do their daily banking and clients can change limits up to R250 000. In 2024 we will focus on a significant shift in how we meet the needs of our clients digitally. We will introduce new products and features such as the capability to manage and receive POS devices via the app, servicing stokvel accounts and its members seamlessly, a new JustInvest product, improved document and market-leading insurance claim features and providing foreign nationals access to the Money app. In parallel, we will fundamentally redesign and improve the client experience on the Money app. The Nedbank Business Hub (NBH) continues to evolve for our Commercial Banking clients by providing seamless access to an array of day-to-day banking functions through an integrated and secure platform, driving wider access to our ecosystem of products (including lending) and services. In 2023 over 82 000 service requests were received via NBH, the bulk of which were straight-through requests, meaning immediate delivery to clients, and 28 000 of these requests were actioned via the self-service channel. Nedbank’s API_Marketplace expanded operations to Namibia, Lesotho and Eswatini, aligning with Nedbank’s NAR ambitions with accounts, payments and wallets now available in these countries. PayShap (rapid payments) and Send-iMali APIs, among others, were added to the product offering. Overall, the product offering increased by 14% yoy from 2023. At a platform level, the key focus remains on developer experience and third-party and platform support. Client security remained a core focus area, and we implemented several new features and enhancements (pinpoint biometrics and QR code access) on our Online Banking platform during 2023. Facial recognition will be launched shortly as well as making all these capabilities available on our app. We have invested significantly in our data capabilities, leveraging big data and AI through a strong analytics team. The commercialisation of data delivers beyond-banking and cutting-edge capability, including actionable insights that drive and unlock value for both Nedbank as a business as well as our individual and corporate juristic clients. The Adam AI engine has generated R250m in additional benefits by using machine learning and data science techniques to make intelligent decisions based on data. 91 Nedbank Group Annual Results 2023SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief ExecutiveIntegrated physical distribution – In response to shifts in client behaviour and preferences, 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. We have a new operating model in 386 points of presence, which we will roll out to the balance of our footprint over the next 2 years, including an innovative mix of branches – from full-service and express to easy-access smaller branches. By the end of 2025, 57% of branches will be smaller than 200 m2, which is a significant shift from our current branch mix. Our continued focus on sales productivity and the sales strategy has resulted in branch sales and service productivity improving by 24%, with servicing employees now contributing 22% (2022: 17%) of overall sales. We have seen a 21% decrease yoy in selected simple services provided at branches and through the contact centre as clients shift towards self-service via our digital channels. There has been an increase of 8% in the use of digital channels for financial servicing transactions and 17% for non-financial servicing transactions. We have rightsized our ATM footprint by 135 devices, with the cash dispensed through ATMs increasing by 3%. Altogether 92% of client cash deposits at branches are now being processed through cash-accepting ATM devices. Our network of 573 self-service kiosks in our branches enables clients to complete self-service actions at their convenience, such as changing their ATM limit, maintaining their profile, issuing statements, as well as blocking and replacing cards for Pay-as-you-use (PAYU) and Savvy Plus Accounts. Clients can also collect cards 24/7 by using our 222 lockers located in the self-service zone at branches, or have their cards delivered to them. Our kiosks now also enable clients to open PAYU accounts seamlessly, with a card issued instantly. Growth vectors – In our value-added services portfolio, the addition of new products and services, such as bill payments and more digital vouchers, has resulted in volumes growing by 27% and revenue by 29% yoy for more than 1,44 million clients. The expansion of the redemption network and enhanced digitisation of services on our money transfer solution resulted in volume growth of 80% yoy, with more than 16% of redemptions being completed at our partners monthly. Various innovations are planned for 2024 to expand our offerings. Avo SuperShop has been in the market for 3 and a half years and has signed up over 2,5 million clients (up by 26% yoy) and continues to grow exponentially, with a further 120% increase yoy in total gross merchandise value (GMV) across all 3 Avo ecosystems. Avo Home reflected GMV growth of 23% yoy and was recently highlighted as one of the top 3 marketplaces for best value in Apple devices. We further introduced Avo Solar for consumers in Q3, with over 100 residential installations completed with 70% of their financing being fulfilled through the MFC Solar Financing solution, attracting new-to-bank clients and driving cross-sell. Avo Auto, a virtual vehicle mall that was launched in 2021, now hosts over 880 MFC-accredited dealers (up 4 x yoy), with close to 25 000 vehicles available on the platform and growing GMV 3,5 x yoy. Avo B2B launched to market in 2022, offering a stock-financing or working capital solution to businesses through a secure facility, and introduced the trade of solar goods to suppliers or installers in 2023, which contributed to the yoy GMV lift. Insurance remains a significant growth opportunity for both RBB and Nedbank Insurance to build a sustainable business partnership together for the benefit of Nedbank’s clients. We offer a broad range of life and non-life insurance products and focus on continually exploring new solutions to meet the changing needs of our clients. Within the Township economy, we continue to innovate and leverage partnerships to co-create solutions with clients. We will soon launch a CVP for informal traders, customised to their unique needs and behaviours. In 2023 we continued hosting Kasi business workshops across the country, creating shared value through our partnership with the Township Entrepreneurs Alliance (TEA). We have impacted more than 48 000 township SMMEs, sponsored close to 170 township exhibitors equipped with Nedbank POS machines, created supplier procurement opportunities for more than 180 black-youth-owned service providers, and crowned 11 pitch challenge winners across 11 township communities nationwide with a collective allocation of R550 000 in cash and business support. We remain pleased with the strategic partnership and alliances capability that we are building as a strategic unlock for scale and to give value back to clients. 2023 saw a continuation of the expansion of our Greenbacks 2.0 headline partners to unlock additional merchant discount deals that provide best-in-market deals for Nedbank clients, with a strategic focus on fuel, travel, movies, and data discounts. For Avo, we signed up 108 new partners and co-created a CVP to broaden our Amex-accepting merchants. Our collaboration partnerships team continued to identify and engage potential strategic partners who have access to large markets in support of scaling RBB strategic client value propositions and solutions. Looking forward The first 6 months of the year were marked by a difficult macroeconomic environment marred by slow GDP growth, high inflation, continued high interest rates, load-shedding and a worsened credit lending outlook. These challenges led to increased financial strain on our clients, resulting in elevated impairments. However, during H2, through dedicated focus and improved collections and recovery capabilities, we managed to claw back significantly in impairments, leading to HE growth of 9%. Going into 2024, we remain acutely aware of some of the macro challenges that clients will continue to face, and we will tighten our collections and recoveries capabilities further, while at the same time, maintaining our strategies to originate quality business. Key challenges will be balancing our growth ambitions with acceptable risk tolerance, managing our operational costs judiciously, and managing our impairment levels while providing our clients with appropriate assistance through this difficult period. Our 5 core strategy pillars remain relevant, focused on a client-centred growth strategy by creating leading client experiences anchored by disruptive CVPs and purpose-led objectives. We remain steadfast in driving our ‘first in digital; digital first’ strategy by continuing to deliver digital capabilities that enable us to develop innovative products and solutions and enhance digital experiences for our clients. Our strategic execution in delivering our growth vectors is aimed at yielding results and remains a focus for unlocking growth and gearing up for future competitiveness. We will continue focusing rigorously 92 Nedbank Group Annual Results 2023on our operating model agility to enhance our operational effectiveness, manage credit losses, and develop world-class capabilities like the commercialisation of data, behavioural economics, innovative risk management, strategic partnerships, and digital capabilities. All these will help reduce our cost-to-income ratio and improve our ROE to the required target range. Leading client experiences – We will continue developing and commercialising our new CVPs, innovative products and solutions for our clients. To defend against competitors and disruptors, we will continue adapting our operations to deliver leading client experiences to match heightened client expectations. We will focus on Strategic Portfolio Tilt 2.0 (SPT 2.0), which concentrates on growing profitable market share in selected areas through world-class sales effectiveness and productivity while maintaining a culture of providing an unrivalled client experience, aided by behavioural economics principles to deliver personalised experiences and seamless interactions. First in digital; digital first – We will drive the commercialisation of new and landed capabilities and the cadence of innovation deployments and leverage enterprise capabilities on our digitisation journey to being Africa’s #1 digital service provider by completing priority individual and juristic journeys through our Managed Evolution programme. We will continue focusing on a full migration to NBH for our commercial and corporate businesses, expanding our beyond-banking capabilities across other verticals and elevating our mobile-first priorities through integrated and synchronised channel experiences to provide leading digital experiences for our clients. Banking and Beyond growth vectors – We continue to derisk our plans and gear ourselves for future competitiveness through the commercialisation of growth vectors, including scaling the Avo super app, accelerating VAS through new commercial models and channels, accelerating growth and penetration of our insurance offerings, and driving our go-to-market micro markets strategy for the township economy. We intend to start increasing the percentage contribution of growth vectors to our total revenue. Efficient and agile operating model – We will continue driving cost efficiencies through the execution of business transformation objectives through Project Phoenix, Project Imagine, Processes Automation and other TOM 2.0 initiatives that will yield cost savings derived from centralised capabilities such as solution innovation, credit and pricing, and operations. Putting purpose into practice – Our purpose strategic pillars will accelerate our focus on green finance, development finance, inclusive distribution, financial inclusivity for individuals as well as businesses and financial wellness. We are encouraged by the significant progress we see within Commercial Banking initiatives to strategically increase investment in green industries and the accelerated take-up of solar solutions within Consumer Banking. We will also be expanding funding of projects that create or improve physical, social, or economic assets for sustainable growth. We intend to accelerate purpose-driven initiatives to give us a competitive edge. We will continue focusing on enhancing and improving employee wellness capabilities to assist our employees amid the challenging economic climate. We will place added focus on attracting and retaining talent, reducing the loss of critical skills, and improving transformation targets at management levels. We will drive the upskilling and reskilling of our employees to meet the needs of our clients and business operations in an ever-changing environment. We will continue our culture journey shift by driving diversity, inclusivity, and equity goals to ensure a diverse and inclusive workplace to make Nedbank the best place to work at. Nedbank Retail and Business Banking segmental review Commercial Banking Commercial Banking (NCB) provides relationship-based banking services to mid-sized and large commercial entities, including tailored banking and financial propositions for agricultural, retail services sector and manufacturing industries and the public sector. NCB increased HE by 15% to R2,1bn at an attractive ROE of 26% through solid product volume growth, coupled with an improvement in NIM of 30 bps to 3,1%, driven mainly by endowment. NIR growth improved by 6% with transactional banking volumes increasing by 4%. Average deposits grew strongly by 10% yoy, driven mainly by growth in non-transactional deposits. The business remains a strong generator of funding for the group, increasing the net surplus funds generated to R100bn. Average advances grew by 6% yoy, supported by new-loan payouts of R27bn. The CLR of 67 bps (2022: 11 bps) was at the top end of the TTC target range of 50 bps to 70 bps and includes various client inflows into non-performing loans, particularly the horticulture subsector of the agricultural portfolio, which is evidence of the macroeconomic strain taken by this sector of the economy. New ECL models were implemented in the latter part of the year, increasing the ECL by R243m (27 bps). The commercial operating environment has been and continues to be, beleaguered by many external factors such as intensified load-shedding, increased input costs, margin pressure as well as logistical and transportation challenges. Although downside risk in the current economy persists, our ECL coverage ratio of 2,28% is prudent. NCB increased their overall market share from 22% to 23% according to an annual study concluded by KPI Research. NCB has migrated all domestic and global electronic banking clients onto its newly developed electronic NBH banking platform with the focus for 2024 being on adoption and the phased rolling out of new capabilities. NBH enables a positive change in client (and employee) experience for businesses by providing convenience for the day-to-day banking needs of our clients and a single view of our digital offerings. Clients can seamlessly transact, apply for products (including lending) and services, maintain profiles and more. Security remains a top priority and we offer advanced protection through the combination of a password certificate and choice of 2-factor authentication (mobile or token). To date, approximately 53% of service volumes now take place via self-service. 93 Nedbank Group Annual Results 2023SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief ExecutiveFinancial highlights for the year ended 31 December Segmental view Total Retail and Business Banking Commercial Banking Consumer Banking Relationship Banking Other1 Change % 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 9 14 5 566 5 097 26 413 23 203 2 087 5 762 1 812 1 646 1 950 4 735 16 304 15 006 1 673 4 278 1 292 3 375 160 69 43 87 7 7 29 8 520 6 613 613 98 14 306 13 372 2 024 1 917 7 349 8 205 6 249 7 658 514 249 44 1 774 1 686 2 303 17 2 111 23 678 22 138 4 205 3 984 14 338 13 489 3 164 2 994 1 971 1 671 16,0 1,20 16,0 1,20 25,9 1,11 23,8 1,06 7,7 0,61 10,2 0,78 42,6 1,40 36,3 1,21 1,94 1,61 0,67 0,11 2,62 2,37 0,79 0,41 60,4 60,4 48,1 48,1 57,2 56,8 56,1 56,3 58,1 60,5 54,0 59,9 58,5 59,5 52,3 59,2 5,93 5,72 3,10 2,80 6,24 6,08 3,59 3,16 5 429 244 408 430 90 150 87 866 271 514 257 919 66 328 61 433 1 252 1 212 6 415 361 391 022 89 034 83 862 261 272 246 802 63 678 59 118 1 377 1 240 8 436 283 402 114 178 438 167 651 134 909 125 165 122 507 108 977 429 321 10 421 416 383 010 178 783 162 321 128 566 120 416 113 727 100 053 340 220 9 34 690 31 843 8 057 7 607 21 399 19 076 3 924 3 557 1 310 1 603 Headline earnings (Rm) NII (Rm) Impairments charge on financial instruments (Rm) NIR (Rm)2 Operating expenses (Rm)2 ROE (%) ROA (%) CLR – banking advances (%) NIR to total operating expenses (%)2 Cost-to-income ratio (%)2 Interest margin (%) Total advances (Rm) Average total advances (Rm) Total deposits (Rm) 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 During 2023 management reviewed the presentation of certain card-processing fees and found that these expenses have now become material. These are directly attributable to income recognised in NIR. As a result, these expenses have been restated to ensure that they are presented as part of NIR in the SOCI to align with the Nedbank Group accounting policy. Consequently, there was a reallocation of R477m for 31 December 2022, from operating expenses to NIR in the SOCI. This restatement is a reallocation between line items and had no impact on profit for the period or HEs for the group. As a result, the comparative NIR and expenses and impacted ratios have been restated. The Leveraged Finance Team had a particularly good year, with record payout numbers of R7,6bn and total asset-related fees of R48m. Specific transactions finalised in the secondary agriculture and manufacturing industries are recognised as milestone transactions for the mid-corporate market. The manufacturing portfolio has seen an improvement in financial performance with top-line gross operating income up 18% yoy, driven by stronger NII, coupled with pleasing growth in client numbers. NCB’s market share within the industry stands at 26% confirmed by KPI Research. The portfolio is being closely monitored to gauge the ongoing impact of logistical and load-shedding disruptions, with defaulted advances remaining within the targeted range. The agricultural sector experienced significant financial challenges that played out, particularly in export horticulture, which was significantly impacted by logistical and energy challenges, as well as reducing international prices due to prevailing global economic challenges. This impacted the profitability of this subsector where rising financial distress became evident in early 2023, leading to an increase in impairments. It is, however, expected that most impacted businesses can recover over the next seasons (12 to 24 months). Apart from horticulture, the risk profile of the primary agricultural book is in good shape and has seen an improvement over the past 4 years, with gross operating income up by a pleasing 20% yoy. 94 Nedbank Group Annual Results 2023 The retail services sector, like all businesses in South Africa, has been impacted by load-shedding disruptions. However, the sector has shown signs of resilience and in some cases recovery to pre-Covid levels. During the year we have seen positive results from new-client acquisition gains due to the continued implementation of a differentiated transformation funding solution with major oil companies. NCB’s market share stands at 28% within the sector according to a KPI Research study. The portfolio has shown satisfactory financial performance, underpinned mainly by NII, despite a subdued macro, while NIR continues to remain under pressure due to aggressive competitor offerings covering cash solutions and related pricing. In the public sector, NCB won 18 tenders in 2023, of which the bulk represents funding for water and energy in support of sustainable development goals. Approximately R1bn has been disbursed to various municipalities across the country for much-needed infrastructure improvements. This portfolio continues to attract favourable investments and maintains a healthy net funding position of R19bn. A total of 6 municipalities have also awarded NCB their full transactional banking, and NCB defended market share in 5 of these municipalities. NCB's climate resilience initiatives continue demonstrating encouraging positive traction. During 2023 we extended over R800m in finance associated with the UN Sustainable Development Goals, covering clean water and sanitation (SDG6), affordable and clean renewable energy (SDG7), as well as responsible consumption and production (SDG12). Retail Relationship Banking RRB provides tailored banking services to affluent individuals and their households (salaried and self-employed clients), as well as SMEs with an annual turnover of less than R30m. We also cater for non-resident and embassy clients through a unit with specialised exchange control knowledge. The relationship banking offering is designed for clients seeking a personalised, flexible, and proactive approach, and caters for more complex financial needs typically associated with the above-mentioned client segments. Benefiting from the higher interest rate environment and the strong relationship banking foundations built over many years, RRB’s HE grew by 30% yoy to R1,7bn, delivering an ROE of 42,6%. The CLR increased from 41 bps to 79 bps, which exceeded the upper end of the 40 bps to 70 bps TTC target range as recurring rate hikes, extended power outages and steady increases in costs placed significant strain on the otherwise robust affluent and small-business sector. Average advances grew by 8%, while average deposits increased by 14%, resulting in an improvement in the net funding contribution to the group to R59bn. NIR grew moderately at 5,2% with the affluent base performing strongly to compensate for the more muted growth coming from small businesses. Affluent clients: The private-banking CVP, based on the promise of ‘Digital when you want it, human when you need it’, continues to resonate with the market as demonstrated by the 8% increase in main-banked client gains. Clients have embraced our feature-rich Online Banking and Money app channels, and digital use and satisfaction scores are at an all-time high. This, in turn, frees up bankers to focus on the relationship aspects of their role, including assisting with more complicated credit applications and promoting the broader set of wealth solutions, namely Nedgroup Investments, Nedbank Online Share Trading and our wealth advisory services. Small Business Services: Our focus for small businesses is the provision of affordable transactional banking, innovative payment solutions and seamless lending to unlock growth for this important sector of our economy. Our beyond-banking offering, SimplyBiz, remains a differentiator through which we have provided over 47 000 business owners free beyond-banking assistance in the form of advertising, coaching, access to relevant business support materials and other strategic initiatives. Our initial efforts to offer pre-approved finance and digital and data-driven lending applications have received great interest and uptake. Despite a challenging economic outlook and an increasingly competitive market, there are still many opportunities for RRB to grow. The launch of an enhanced loyalty programme for individuals, expansion of our automated lending options for smaller businesses, and a streamlined, modernised POS offering are expected to fuel growth and aid client retention in 2024. The quality of bankers we attract and develop from within also remains a key success factor along this journey. Consumer Banking Consumer Banking predominantly serves individuals earning less than R750 000 per year in 3 subsegments – middle market, entry-level banking and youth. Consumer Banking also serves a few non-individual client types, such as stokvels, clubs and societies. HE declined by 16% yoy to R1 646m, driven primarily by an increase in impairments as interest rate hikes and high inflation placed strain on consumers. Consumer CLR increased to 262 bps (2022: 237 bps), driven by higher impairments of R1,1bn yoy. Home loans and personal loans were the largest contributors to the yoy increase, with R0,6bn and R0,4bn respectively. Consumer Banking’s performance improved materially in H2 2023, with HE growth of 22% yoy following the challenging 62% yoy decline in HE in H1 2023. The improvement in H2 2023 growth was enabled by specific initiatives across origination and collections, resulting in the CLR returning to a pleasing 217 bps, within the target range for Consumer Banking, from 308 bps in H1. PPOP grew by a solid 7%, underpinned by NIR growth of 7% and strong NII growth of 9%, partially offset by expense growth of 6%. The performance in PPOP resulted in the cost-to-income ratio improving to 58,5% (2022: 59,5%). NII growth was underpinned by average loans and advances growth of 7% after growth of 8% in home loans; 7% in vehicle finance, and 3% in unsecured lending. Average deposits grew by 7% yoy, with a 10% growth in the notice and term deposits book, offset by a 2,4% decline in current and savings account balances as clients took advantage of high interest rates to improve returns. NIR growth was pleasing at 7% yoy, supported by 9% growth in transactional NIR. This was underpinned by a 9% yoy increase in main-banked clients to over 3,21 million in Consumer Banking, with total active clients growing by 5% yoy to 6,5 million. The cross-sell ratio improved to 1,90 products per client (December 2022: 1,89), which reflects the continued success of AI-enabled Next Best Action strategies. We bolstered our CVP with the launch the MiGoals product range in May 2023. MiGoals has simplified our consumer current account range from 6 to 3 products - MiGoals (R5 per month); MiGoals Plus (R99 per month); and MiGoals Premium (R240 per month). The MiGoals range introduces pricing simplicity with only round numbers used for transaction pricing and categorised 95 Nedbank Group Annual Results 2023SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executivetransaction price points. MiGoals products offer highly competitive value, and our analysis suggests that the MiGoals Premium Account is the best value premium account in South Africa. Market reception has been favourable, and the monthly sales of MiGoals Plus have been approaching triple-digit growth compared to its predecessor, the Savvy Plus Account. Expense growth was well managed at 6% growth yoy. This was underpinned by strong digital adoption, with Money app users growing to 2,1 million from 1,8 million a year earlier. The digitisation of the business is enabling cost optimisation through a reduced headcount and floorspace in the branch network, as well as enabling headcount efficiencies in operations as processes become increasingly automated and standardised across products. 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 our existing products and newly launched transactional suite of products, namely MiGoals. Transactional Banking continued to be a significant contributor to NIR during the year, enabled by the MiGoals product set and solutions that meet the needs of our clients at all life stages. VAS volumes increased by 27% across all products, including bill payments and digital vouchers, with over 1,45 million clients buying products via the platform. As we continue our digital journey, all our transactional products are now enabled for straight-through processing on the Money app and Online Banking, which enables convenient and seamless account activation. We can also FICA our clients remotely, eliminating the need to go to a branch. When opening a transactional account, our clients can take up an overdraft and credit card seamlessly, which eliminates unnecessary delays. We continue migrating clients to enhanced product offerings with up-to-date features in a frictionless manner. Card and Payments Card and Payments provides card-issuing (individual and commercial), card-acceptance, and payment products and solutions across all client segments, extending beyond RBB into Nedbank Private Wealth, CIB and NAR. It is also responsible for the American Express® network in South Africa, offering global solutions for individuals and global companies. These offerings include key innovations such as tap- and scan-to-pay options, GAP access, dynamic currency conversion, BTA Powerlink, virtual cards, Apple Pay, Samsung Pay, Google Pay and Money Message. The card and payments industry continues to be a dynamic and rapidly evolving sector, marked by technological advancements and shifting client preferences. There is an increased emphasis on digital transactions and a landscape influenced by regulatory changes, cybersecurity concerns and heightened competition. Against this backdrop, Nedbank continues to invest in emerging payment methods and improve the overall client payment experience. Nedbank Card and Payments experienced strong growth in card-issuing volumes of 8% and card-acquiring volumes of 14%. The card-issuing growth was driven by our continued focus on user-centric services, digitisation, and innovation. Contactless payments are now prevalent, and we have seen strong adoption of virtual card and device-based digital wallets (Apple Pay, Samsung Pay and Google Pay) at >500% and 164% respectively. Card acceptance growth has been driven by increased merchant acquisition, improved retention rates and strong partnerships, and we continue to build a strong inclusive payments ecosystem in South Africa. Nedbank was part of the first cohort of banks that launched PayShap in South Africa in March 2023. PayShap is a real-time, interbank payment offering aimed at addressing the high use of cash in South Africa while playing a key role in modernising the national payment system of South Africa. Since its launch, there has been steady growth in use, with 2,3 million consumers registered and 11 million payments worth over R7bn being processed across all the participating banks. Nedbank clients contributed approximately 28% to the overall volume. There are ongoing efforts to make PayShap more usable with additional features planned for 2024. Investments The expansion of our digital investment capabilities since 2018 has resulted in 82% of all new investment accounts being opened digitally and 97% of all withdrawal notices given via digital channels, reducing our reliance on physical infrastructure and making positive contributions to our cost-to-income ratio. As a result of the expansion of our digital capabilities, competitive pricing strategies and significant marketing presence, we have seen strong yoy growth of 15% in the Nedbank household demand and term deposit book. We have enhanced our fraud prevention capabilities by introducing an account verification service to help ensure that funds paid from investments are to our clients’ accounts, regardless of the bank that the client uses. Forex The Forex business continues to enhance and deliver innovative segment CVPs and optimised client-centred journeys by enabling clients to transact and invest across multiple foreign currencies in different countries. Forex-related NIR is up by 14%, driven mainly by increased volumes of incoming and outgoing payments. The weaker rand has also had a positive impact on incoming payments and foreign banknote revaluations. Digital adoption of key forex capabilities continues to increase significantly, with digital payments showing the most significant uplift in adoption. Digital outgoing and incoming payments contribute 73% and 57% respectively across all segments. Unsecured Lending Unsecured Lending provides personal loans, overdrafts, and student loans and solutions across all client segments. A headline loss of R125m was reported due to the CLR increasing to 968 bps, which remains above the upper end of our TTC target range of 650 bps to 850 bps. The increase in the CLR is due to the ongoing deterioration in the macro and elevated consumer stress, despite credit policy tightening. The credit policy and system changes made throughout 2023 have resulted in a deliberate reduction in disbursals and market share levels to improve the quality of new business within acceptable levels. Disbursal growth is expected to remain subdued in the short term but is anticipated to improve as macroeconomic conditions recover and new digital solutions are commercialised. 96 Nedbank Group Annual Results 2023Product views, excluding commercial banking Home loans VAF Unsecured lending Transactional1 Card and payments1 Forex and investment 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 NII (Rm) 3 587 3 259 6 128 5 526 4 215 4 163 3 676 2 488 1 391 1 419 1 551 1 546 Consumer banking and other 2 605 2 347 5 937 5 350 3 940 3 911 1 422 Relationship banking 982 912 190 176 275 252 2 255 1 390 1 419 1 011 1 477 975 576 988 558 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 1 312 507 2 442 2 408 3 087 2 719 106 71 71 961 961 811 811 1 008 304 304 230 74 427 80 283 215 68 2 357 2 379 2 962 2 581 106 85 709 694 14 29 701 686 15 125 876 799 77 138 891 6 423 5 966 3 665 3 342 288 249 819 72 4 975 1 448 4 581 1 385 3 637 3 314 28 28 156 132 132 117 1 838 1 772 1 872 1 787 2 113 1 977 8 739 8 101 2 983 2 709 1 618 1 579 1 286 552 1 198 574 1 765 1 673 1 929 1 785 6 804 6 403 2 969 2 692 1 247 107 114 184 192 1 936 1 698 15 17 370 1 179 400 Headline earnings (Rm) 498 890 1 631 1 342 (125) 279 759 185 806 859 126 150 Consumer banking and other Relationship banking 362 136 655 235 1 623 1 308 (153) 283 (494) 7 34 28 (4) 1 253 (653) 838 797 10 851 8 (114) 240 (48) 198 ROE (%) CLR – banking advances (%) Cost-to-income ratio (%) Interest margin (%)2 Average total advances (Rm) 7,1 14,5 17,2 15,5 (2,9) 7,4 33,9 8,8 34,2 36,6 42,8 50,6 0,80 0,33 1,83 1,92 9,68 8,73 28,53 39,55 5,66 4,90 47,2 2,19 50,0 2,12 27,4 4,17 28,7 4,02 41,5 15,10 39,1 15,21 86,5 5,43 95,8 3,85 59,0 7,78 56,9 7,97 87,9 0,87 88,0 0,97 161 404 149 525 126 379 119 249 23 956 24 287 186 69 14 279 13 957 (1) 2 The table does not include CB HE of R2 087m (Dec 2022: R1 812m) and other unallocated costs of -R216m (Dec 2022: -R419m) relating to Channel, Clients and Shared Services. Therefore, the table does not cross-cast. 1 During 2023 management reviewed the presentation of certain card-processing fees and found that these expenses have now become material. These are directly attributable to income recognised in NIR. As a result, these expenses have been restated to ensure that they are presented as part of NIR in the SOCI to align with the Nedbank Group accounting policy. Consequently, there was a reallocation of R477m for 31 December 2022, from operating expenses to NIR in the SOCI. This restatement is a reallocation between line items and had no impact on profit for the period or HE for the group. As a result, the comparative NIR and expenses and impacted ratios have been restated. 2 Transactional's 2022 interest margin has been restated to reflect a more accurate position. 97 Nedbank Group Annual Results 2023SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Predetermined offers have driven an increase in straight-through processed loans and have performed well in a challenging macroeconomic environment, with over 196 000 credit agreements concluded across personal loans and overdraft products in 2023. At the end of December 2023, 58% of all personal-loan disbursals and 70% of overdraft disbursals were being originated via a digital channel. Personal-loan API sales volumes have increased by 14% in 2023. Our free credit score tool on the Money app, which enables clients to monitor their credit scores and receive guidance on how to improve their credit behaviour, has over 1,2 million subscribers with around 30% returning every month. We have also added a new functionality that enables clients to see how their score has changed, the reason for the change, and any judgments that they may have at the bureau. All South African citizens, regardless of their relationship with Nedbank, can use this tool without impacting their score. Home Loans Nedbank Home Loans enables residential home ownership solutions across all client segments. Our solar financing solution, leveraged off the MFC platform, launched in August 2022 and has delivered over R88m of disbursals to date. As a result of higher debt servicing costs, reduced affordability, and tighter lending standards, residential property market volumes declined by 29% in 2023, now slightly below prepandemic levels. Given the lower demand, house price index growth (according to Lightstone) remained subdued at 2,5% yoy, a contraction of 0,2% in 2023. HE declined by 44% to R498m (2022: R890m) at an ROE of 7,1% (2022: 14,5%). The decline in HE was driven by an increase in the CLR to 80 bps (2022: 33 bps), influenced by the deteriorating macroeconomic environment and the cumulative impact of interest rate hikes. Despite the decline in new business, average advances grew by 8% yoy, driven by a slowdown in the paydown rate of the book. New-business market share improved to 14,3% (2022: 13.1%), resulting in a 30 bps gain in BA900 market share. PPOP grew by 15% to R2 008m (2022: R1 751m). As we move forward, our focus remains on amplifying sales growth through a series of forward-thinking initiatives: MFC MFC facilitates smooth, frictionless vehicle finance to our consumer and juristic client segments. MFC grew vehicle and asset finance volumes by 6% in 2023, despite a 0,4% decline in domestic passenger vehicle unit sales via dealerships across the market. MFC’s new-to-used vehicle finance ratio increased in 2023 to 36:64 (2022: 33:67). MFC remains a leading financier in the vehicle finance market, with a new-business and total book market share of 28% (Experian Rand Value, Dec 2023) and 35,5% (BA900, Dec 2023) respectively. HE increased by 22% to R1 631m at an ROE of 17,2% with the CLR improving to 183 bps (2022: 192 bps). PPOP grew by 10%, driven by advances growth of 6% and increased endowment income. The efficiency ratio has been maintained at 27%. MFC remained focused on supporting their dealer partners and customers with new solutions such as step payment plans, payment holidays and finance for first-time buyers to assist customer demand in a tough macro environment. Loyalty and rewards The revamped Greenbacks programme continued to deliver strong membership growth, with new enrolments up by 15% yoy to 1,9 million members. Greenbacks membership has grown by 21% CAGR since 2019. From an engagement perspective, Greenbacks earned were up by 8% yoy to R316m (46% CAGR since its launch in 2019) as clients increased their card swipe and debit order volumes. Greenbacks redeemed increased 10% yoy to R296m (41% CAGR since its launch in 2019). The new digital redemption mechanisms launched, which enable clients to do more with their Greenbacks, yielded good engagement, as can be evidenced below: • Greenbacks into MyPockets savings tools were up 40% yoy. • Greenbacks to buy airtime, data and electricity increased by 24% yoy. • Greenbacks redeemed into investment products increased by 34% yoy. • We are strengthening our partnerships, focusing on mutual benefits that enhance long-term sustainability in a dynamic market landscape. In addition to the earning of Greenbacks on swipes, strategic partnerships with bp and Nu Metro delivered additional value of more than R81,2m to the Greenbacks base since its inception. • By introducing flexible home loan repayment plans, we aim to enhance cash flow for our clients at the crucial early stages of their homeownership journey. • We are enabling clients to incorporate renewable energy financing solutions into their new and existing home loans, underscoring our commitment to sustainable homeownership. • Our investment in leading-edge digital front-end systems is set to redefine the client onboarding experience, simplifying, and enhancing the entire home loan application process. The Avo SuperShop also launched the Greenbacks Exclusive store on the Avo platform, and delivered R2,1m of additional value to clients, through the additional 10% discount on products such as tech and appliances, exclusive to Greenbacks members. From a financial standpoint, Greenbacks members, on average, generated double the monthly net operating income compared with clients who are not Greenbacks members, with a higher cross-sell ratio of 2,2 versus 1,2 for non-members. The current Greenbacks programme is undergoing further changes and enhancements to create additional value for clients and improve the competitiveness of the programme. The enhanced programme will be launched in Q1 2024. 98 Nedbank Group Annual Results 2023Retail and Business Banking: Key business statistics 2023 2022 Commercial 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 Owned-properties book MFC Number of applications received Percentage of used vehicles financed Personal Loans Number of applications received Average loan size Average term Retail deposits Total value of deposits taken in Total value of deposit withdrawals Number of clients at period-end Retail active clients Retail main-banked clients Retail cross-sell ratio1 Commercial Banking groups Small Business Services segment Home Loans2 MFC Personal Loans Card Issuing Investment products Distribution Number of retail outlets Number of ATMs Number of ATMs with cash-accepting capabilities3 Digitally active retail clients Money app clients POS devices 1 The number of needs met (products) per active client. 2 Home Loans now includes joint-bond clients. 3 Cash-accepting devices and interactive teller machines are included in the total number of ATMs. 428 4,80 153 93 82 49 42 2 057 64 1 266 54.9 39,1 111 89 6 963 3 529 1,96 14 521 305 378 590 404 1 102 1 492 547 4 199 1 350 2 879 2 329 110 442 4,83 183 95 81 49 44 1 951 67 1 534 57,7 41,6 94 85 6 624 3 245 1,94 14 585 305 377 584 426 1 108 1 449 545 4 334 1 328 2 593 2 006 106 thousands % % % Rm thousands % thousands R000s months rand billions rand billions thousands thousands ratio thousands thousands thousands thousands thousands thousands thousands thousands thousands 99 Nedbank Group Annual Results 2023SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Balance sheet average advances and impairments Daily gross average advances Rm Stage 1 % Stage 21 % Stage 3 % % of total advances Credit loss ratio % 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Home loans VAF Personal loans Card Other loans 164 743 151 997 133 516 125 397 27 874 27 562 16 982 16 547 4 509 3 848 Total Retail 347 624 325 351 Commercial Banking 90 971 85 558 79,8 82,4 56,6 77,1 71,2 78,9 82,9 83,7 79,6 61,8 78,9 75,9 80,0 83,0 12,5 12,0 17,2 8,5 9,9 12,4 9,9 Total RBB 438 595 410 909 79,7 80,6 11,9 10,8 14,9 15,4 7,3 10,4 12,6 11,7 12,4 7,7 5,6 26,2 14,4 19,0 8,7 7,2 8,4 5,5 5,5 22,8 13,9 13,8 7,4 5,3 7,0 37,6 31,5 5,9 3,7 1,0 79,7 20,3 37,1 30,8 6,5 3,8 0,9 79,2 20,8 0,80 1,83 10,25 5,66 7,47 2,27 0,67 0,33 1,92 9,18 4,90 6,73 2,00 0,11 100,0 100,0 1,94 1,61 Balance sheet impairment as a percentage of book % of total Stage 1 % Stage 2 % Performing stage 3 % Non-performing stage 3 % Total stage 3 % 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Home loans VAF 2,29 5,16 1,72 5,11 Personal loans 27,09 24,08 Card Other loans Total Retail Commercial Banking 16,32 21,28 6,13 2,28 15,95 16,54 5,73 1,83 0,24 1,39 6,36 4,52 4,23 1,27 0,35 0,21 1,24 5,31 5,16 3,22 11,28 21,01 42,84 2,98 30,05 1,20 0,23 9,62 2,52 3,66 11,35 23,47 31,47 29,41 15,10 11,97 23,81 23,34 22,06 20,83 20,86 18,94 67,06 59,03 78,37 62,19 17,95 20,00 17,09 12,50 64,35 78,46 72,04 82,55 54,93 27,23 47,55 75,84 63,76 80,61 45,31 24,17 44,15 75,43 69,22 81,52 46,98 27,23 66,11 81,36 51,42 24,17 10,19 24,97 23,04 1,71 Total RBB 5,35 4,92 1,08 0,99 8,42 8,53 24,97 23,04 45,54 49,38 41,62 43,85 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 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Home loans VAF Personal loans Card Other loans Total Retail 170 540 159 330 136 091 133 288 21 345 17 277 2 629 1 930 10 475 6 835 13 104 8 765 143 044 132 511 117 837 105 464 17 190 19 736 3 385 3 252 4 632 4 059 8 017 26 681 27 813 15 102 17 202 4 584 4 273 1 095 986 5 900 5 352 6 995 16 662 16 472 12 840 12 990 1 424 4 319 3 931 3 073 2 982 426 1 198 408 117 10 117 8 2 281 2 167 2 398 810 533 820 7 311 6 338 2 284 541 361 246 340 057 284 943 271 926 44 969 42 892 7 236 6 293 24 098 18 946 31 334 25 239 Commercial Banking 92 252 89 507 76 494 74 322 9 125 10 440 6 633 4 745 6 633 4 745 Total RBB 453 498 429 564 361 437 346 248 54 094 53 332 7 236 6 293 30 731 23 691 37 967 29 984 100 Nedbank Group Annual Results 2023 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 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Home loans VAF Personal loans Card Other loans Total Retail 3 898 7 387 7 228 2 720 919 2 742 6 775 6 698 2 628 650 320 284 687 1 636 1 307 1 939 960 581 130 914 670 89 963 610 128 632 2 240 1 003 377 120 397 706 681 21 2 231 616 582 20 1 2 494 3 106 4 624 1 508 659 1 595 2 612 4 199 1 561 440 2 891 3 812 5 305 1 529 661 1 826 3 228 4 781 1 581 441 22 152 19 493 3 627 3 264 4 327 4 372 1 807 1 450 12 391 10 407 14 198 11 857 Commercial Banking 2 102 1 641 269 170 230 179 1 603 1 292 1 603 1 292 Total RBB 24 254 21 134 3 896 3 434 4 557 4 551 1 807 1 450 13 994 11 699 15 801 13 149 Income statement impairments Income statement impairments charge1 Rm Stage 1 Rm Stage 2 Rm Stage 3 Rm Interest on impaired advances Rm Post-write-off recoveries Rm 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Home loans VAF Personal loans Card Other loans 1 312 2 442 2 857 961 335 507 2 408 2 530 811 259 Total Retail 7 907 6 515 Commercial Banking 613 98 37 324 45 (91) 52 367 103 42 (82) (172) 78 39 (95) (63) Total RBB 8 520 6 613 470 (158) 88 (309) 17 231 4 31 51 82 156 453 140 1 445 2 767 3 976 (223) 1 282 56 401 464 2 566 3 728 1 398 218 (191) (11) (914) 5 (87) (94) 22 (858) (14) (42) (67) (329) (267) (466) (35) (61) (551) (308) (428) (12) 582 (164) 9 871 8 374 (1 198) (986) (1 164) (1 360) 535 410 4 6 (80) (91) 418 10 406 8 784 (1 194) (980) (1 244) (1 451) 1 The income statement charge includes the charge associated with unutilised balances. 101 Nedbank Group Annual Results 2023SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Nedbank Wealth Headline earnings (Rm) Return on equity (%) 0 4 1 3 1 1 1 1 0 4 1 1 0 1 1 3 2 1 1 1 0 1 2 1 Cluster Cluster total total Cluster total 8 9 0 9 5 4 8 0 5 2 9 8 9 4 4 2 8 4 1 5 1 5 3 3 1 5 3 6 1 8 5 3 3 6 8 3 1 8 1 8 2 2 1 8 2 2 4 1 8 3 2 2 4 3 Insurance Insurance Insurance Asset Asset Asset Management Management Management Wealth Wealth Wealth Management Management Management 2022 2022 2022 2023 2023 2023 Financial highlights for the year ended 31 December 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 (%) Change % 2023 2022 6 42 >100 (4) 10 1 210 1 749 37 2 924 3 111 26,8 1,46 0,12 94,0 66,6 2,85 1 140 1 233 (63) 3 047 2 838 26,3 1,43 (0,20) 107,4 66,3 2,09 Assets under management (Rm) 14 448 467 393 064 Net life insurance contractual service margin (Rm) Life insurance 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) 9 1 019 (37) 372 936 595 1 3 (1) 4 10 2 81 609 80 571 82 779 80 175 28 711 29 025 30 551 30 457 48 212 46 191 48 641 44 286 4 520 4 418 , 8 4 2 , 3 5 1 , 2 1 2 , 3 6 2 , 8 6 2 2019 2020 2021 2022 2023 Financial performance Nedbank Wealth delivered a resilient financial performance in 2023, with HE up 6% to R1 210m and an increase in ROE to 26,8%, well above the group’s cost of equity. The local and international wealth management businesses benefited from a higher-interest-rate environment, delivering strong NII growth. Growth in Asset Management can be attributed to higher AUM fees as a result of positive market performance and net inflows. Insurance, however, experienced a challenging year, negatively impacted by lower traditional bancassurance volumes, new business strain and non-repeat of reserve releases. HE growth slowed from the 41% reported in H1 2023, primarily as a result of the base impacts of SA and international interest rates increasing in H2 2022 and H1 2023 while remaining steady in H2 2023; the base impact of the KwaZulu-Natal floods on insurance income in H1 2022; and higher shareholder returns in H1 2023 relative to H2 2023. NII increased by 42% to R1 749m due to higher SA, US, UK and EU interest rates, which led to a widening of NIM from 2,09% to 2,85%. Total average deposits grew by 10%, with average deposit balances in Wealth Management (South Africa) up by 20% as clients favoured on-balance-sheet investments in the rising-interest-rate environment. Deposits in Wealth Management (International) decreased by 15% in GBP due to Nedbank Private Wealth (International)’s deliberate exit from the corporate e-gaming sector, but remained positive in ZAR given exchange rate movements. Average loans and advances declined locally and internationally, as high-net-worth clients opted to pay down debt in the higher-interest-rate environment, however due to favourable exchange rates in ZAR terms, balances remained largely steady compared to the prior year. The CLR deteriorated to 12 bps (2022: -20 bps), driven primarily by an increase in credit impairments and lower client-specific overlay releases in the Wealth Management (South Africa) business, but remains below the cluster TTC target range of 20 bps to 40 bps. NIR decreased by 4% to R2 924m, driven by lower traditional bancassurance volumes as RBB adopted a more cautious approach to unsecured lending as a result of elevated risk, new business strain from new MyCover solutions, and lower advice and investment fees in Wealth Management (South Africa), as clients displayed preference for on-balance-sheet deposits in a high-interest-rate-environment. This was partially offset by increased shareholder returns in Insurance and higher AUM fees owing to strong growth in AUM balances in Asset Management. Expenses increased by 10% due to ongoing investment in people, brand awareness, data and digital initiatives, the adverse impact of exchange rates and higher inflation internationally. The cost-to-income ratio remained steady at 66,6% (2022: 66,3%). 102 Nedbank Group Annual Results 2023 Looking forward Local and international geopolitical risks, the ever-changing regulatory environment, high inflation, and the scarcity of power supply in SA are presenting a threat to the operating environment. Local markets are expected to remain volatile in 2024, with investors continuing to be hesitant to invest in equities and showing a preference for on-balance-sheet investments and cash. In line with forecast decreases in local and international interest rates, NIM is expected to decline. From a credit impairment perspective, we do not anticipate that the CLR will exceed the TTC target range. We expect expenses to grow marginally above inflation as we continue to invest in key initiatives and, assuming that revenue is not adversely impacted by negative market performance or high non-life insurance claims from weather-related events, Nedbank Wealth expects the cost-to-income ratio to remain steady. Nedbank Insurance will continue to prioritise growth efforts with Retail and Business Banking, with focus on growing the MyCover suite of solutions. Use of data and digital remains a key growth enabler and Nedbank Insurance will continue to enhance its digital proposition, leveraging new technologies and improved access to client data to deliver enhanced client experiences. The business remains committed to increasing penetration of its MyCover suite through brand awareness, an improved omnichannel offering, data-driven targeted campaigns, and collaboration across the group. Nedgroup Investments remains committed to delivering long-term investment performance, acting in the best interest of clients, and taking further steps in its journey of becoming a leader in responsible investing. The business will continue to leverage its competitive advantage of being part of the group by integrating with the Money app to access the Nedbank client base and other online digital channels, making investing easier and more accessible for clients. In addition, Nedgroup Investments will continue to focus on growing its international offering by expanding its European distribution capability and launching additional boutique franchises aimed at the non-SA market. Wealth Management (South Africa) will continue to entrench its market presence as an advice-led business that connects clients’ holistic wealth needs in line with its Connected Wealth™ value proposition. Key focus areas will be growing the high-net-worth client base, increasing penetration across the group through collaboration, and leveraging the market-leading Nedbank Private Wealth (International) offering. Technology, data and digital have been identified as high-priority enablers to optimise processes, create efficiencies and enhance client experiences. Implementation of the remaining initiatives in Nedbank’s Managed Evolution journey will assist in achieving this. Wealth Management (International) will continue to execute on its strategy to provide an international wealth offering for Nedbank Private Wealth (SA) clients, while also delivering advice-led international business growth from its operations in the Isle of Man, UK, Jersey, and Dubai to high-net-worth clients outside South Africa. The business will focus on implementation of its new core wealth management platform to enhance client experience, enable intelligent use of data, and improve automation. Wealth Management (International) will look to enhance the business through potential acquisitions aimed at increasing its high-net-worth proposition and adding scale to its advice-led capabilities. Strategic progress In 2023 Nedbank Wealth continued to make good progress on strategic priorities through enhancing client experiences, building data and digital capabilities, driving long-term performance for clients, collaborating within the cluster and across the group, and investing in people and culture. Nedbank Insurance remained focused on growing penetration of the Nedbank client base, through various channels, with its MyCover suite of solutions achieving 41% growth in gross premiums earned. MyCover Funeral benefited from increased sales of the fixed package offerings, improved digital positioning, and enhanced collaboration efforts with Retail and Business Banking. MyCover Personal Lines reported substantial growth off a low base, with a 487% increase in gross premiums earned, due to an expansion of the omnichannel offering, which now includes risk consultants, branches and bank insertion points, call centres, digital, financial advisers and platform channels. MyCover Life sales grew by 25% and is forecast to improve further in 2024 with the recent addition of the Life risk consultant channel. Digital remained a key focus area for the business, with digital quoting, fulfilment and claims functionality enabled on 17 products (2022:10) and 7 channels, and the launch of the Insurance widget and ‘Offers for you’ increasing activity and sales on the Nedbank Money app. At the 2023 International ActiveOps Awards, the Nedbank Insurance non-life claims team won Team of the Year in the EMEIA region across all industries. In 2023 Nedgroup Investments celebrated 20 years of its Best of BreedTM fund range. The business has grown unitised assets from R10bn to over R400bn over the past 2 decades, remains the third largest offshore manager for the sixth year in a row, and is the sixth largest SA manager according to Q4 2023 ASISA stats. Overall, the Nedgroup Investments fund range performed well relative to peers, reporting a 14% increase in AUM, on the back of improved market performance and strong net inflows, particularly in the Cash and low-cost Core ranges. In line with the business’s strategy to grow its European client base, Nedgroup Investments introduced an in-house multi-boutique model. The first Fixed Income boutique and fund was launched in January 2024 with positive market response. Nedbank Wealth is a member of the UNPRI, with the latest assessment report indicating alignment with other signatories on the majority of the pillars of assessment. In 2023, 3 Best of BreedTM funds transitioned from Article 6 to Article 8 in accordance with the EU’s Sustainable Finance Disclosure Regulation (SFDR), which recognises that these funds actively promote ESG principles. At the 2023 Raging Bull Awards, Nedgroup Investments won Best SA Multi-Asset Medium Equity Fund on both a stand-alone and risk-adjusted basis. In addition, the business won the Lipper award in the Mixed Assets USD Flexible Global category (UK) and the CityWire SA award for Best Mixed Assets Balanced (ZAR) and Mixed Assets (USD). Wealth Management (South Africa) has made good progress in optimising its business structure and operations to enhance client experience. As part of the group-led Target Operating Model 2.0 initiative, there has been good collaboration with Retail and Business Banking to increase the penetration of financial planning and advice into the Nedbank client base. In line with the group’s Strategic Portfolio Tilt 2.0 initiative, Nedbank Private Wealth (South Africa) has focused on growing banking market share in the high-net-worth segment. Initiatives implemented to enhance client centricity and leverage digital resulted in a significant increase in average deposits of 20%, with good net client growth. This includes regular enhancements to the Nedbank Private Wealth app to deliver a secure and 103 Nedbank Group Annual Results 2023SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executiveenhanced client experience that continues to be highly rated by our clients and has resulted in consistently high digital adoption rates. Nedbank Private Wealth (South Africa) was recognised as Top Private Bank at the 2023 Intellidex awards, and Best Private Bank (Africa) at the 2023 Global Private Banking Innovation Awards. Wealth Management (International) has made good progress in transforming, simplifying, and building its high-net-worth proposition, through digital innovation and adoption, the decision to exit corporate e-gaming, bolstering its advice-led capabilities, and leveraging its collaborative efforts with the South African business. Increased engagements with high-net-worth clients (> £1m) resulted in AUA and AUM balances remaining stable in an environment where clients are showing preference for on-balance-sheet products. The project to replace the business’s core wealth management platform is still in early phases and is on track to be delivered in 2025. At the 2023 WealthBriefing MENA Awards Nedbank Private Wealth (International) won Best Boutique Private Bank and Best Private Bank – Overall Client Service. Segmental performance Insurance The insurance industry remained resilient in 2023 despite the turbulent economic environment owing to volatile market conditions and additional strain on already financially burdened clients. The non-life insurance industry benefited from improved weather conditions and a resultant decrease in claims in comparison to the impact of the KZN floods in 2022. The change in reporting standards for insurers to IFRS 17 became effective on 1 January 2023, compliance to which has become a key focus area for insurers, including Nedbank Insurance. Nedbank Insurance’s HE declined by 5% to R482m, driven largely by lower traditional bancassurance volumes, particularly in credit life, new business strain and non-repeat of reserve releases. This was offset by an improved non-life claims experience due to the base effect of the KZN floods in 2022, higher investment returns owing to positive market performance in the second half of the year, and a 41% increase in gross premiums earned in the MyCover suite. As reported in the interim results, the transition to IFRS 17 has been successful and as of December 2023, financial statements have been prepared in accordance with these requirements. We have undertaken the necessary steps to restate the comparative period to align with the IFRS 17 framework. The transition did not have a material impact on the group’s reserves, and reclassification of operating expenses to NIR has resulted in a 3% improvement in Nedbank Wealth’s cost-to-income ratio. The contractual service margin (CSM) represents unrecognised shareholders’ future profit on long-term products. The CSM increased by 9% to R1 019m (2022: R936m), due primarily to a higher CSM from new business related to the MyCover suite as well as a positive impact from basis changes. The value of new business (VNB) declined by 37% to R372m owing to a reduction in total new business volumes from the traditional bancassurance book, a change in product mix, and the adverse impact of non-economic assumption changes, which had a positive impact on the prior year compared with an adverse impact in the current year. Non-life GWP increased by 15% due to the growth in new solutions, offset by a reduction in vehicle value-added products (VVAPs) premiums. Assets under management (Rbn) 1 3 3 7 6 4 6 2 5 7 3 8 7 7 9 2 4 2 4 9 9 5 2 3 3 9 3 5 9 8 9 2 8 4 4 5 1 1 3 3 3 2019 2020 2021 2022 2023 Local International Asset Management The asset management industry continued to experience pressure on fees and net flows, with challenging macro conditions impacting clients’ ability to invest. Notwithstanding this, Nedgroup Investments has grown HE by 10% to R386m, driven by strong growth in AUM of 14% resulting in an increase in NIR, with the business achieving R448bn in client assets. The high-interest-rate environment resulted in risk-free assets offering reasonable returns, reflected in both global and local flows. Nedgroup Investments benefited from exchange rate movements and positive net flows of R10bn, particularly in the lower-risk Cash and the low-cost Core range, as well as solid market performance locally and internationally. Wealth Management The wealth management industry has benefited from an increase in interest rates both locally and internationally. The negative effect of this higher-interest-rate environment is increased credit impairments, high inflation, and clients’ opting for on-balance-sheet investments and repaying debt faster. Overall, Wealth Management’s HE improved by 22% to R342m, driven mainly by higher NII, partially offset by an increase in credit impairments and a decrease in NIR due to lower advice fees. Wealth Management (South Africa) benefited from an increase in NII due to higher local interest rates, driving a higher endowment impact and significant growth in average deposit balances, due largely to client migration to on-balance-sheet investments. Credit impairments increased due to lower client-specific overlay releases, and higher portfolio provisioning, as clients exhibited strain from the higher-interest-rate environment. This was partially offset by a marginal decline in average lending balances due to earlier repayments. NIR declined due to lower fees earned on trading, advice, and asset management activities, offset by strong growth in estates revenue. Wealth Management (International) benefited from increases in UK, US and EU interest rates, resulting in improved NII and HE, notwithstanding a decrease in client lending balances, with some clients opting to pay down debt in the higher-interest-rate environment. Deposit balances have decreased and, despite challenging investment market conditions, AUM has remained in line with expectations, with AUA levels higher in comparison to the prior year. NIR declined due to lower FX income from reduced trading activity in a difficult macroeconomic environment. 104 Nedbank Group Annual Results 2023Assets under management Rm Fair value of funds under management – by type Unit trusts Third parties Private clients Fair value of funds under management – by geography SA Rest of the world Rm 2023 2022 392 468 341 045 1 163 54 836 1 008 51 011 448 467 393 064 333 067 298 460 115 400 94 604 448 467 393 064 Unit trusts Third party Private clients Total Reconciliation of movement in funds under management – by type Opening balance at 31 December 2022 Inflows Outflows Mark-to-market value adjustment Foreign currency translation differences 341 045 746 577 (734 714) 30 707 8 853 1 008 10 (16) 11 150 51 011 6 247 393 064 752 834 (8 217) (742 947) 4 590 1 205 35 308 10 208 Closing balance – 31 December 2023 392 468 1 163 54 836 448 467 Rm Reconciliation of movement in funds under management – by geography Opening balance at 31 December 2022 Inflows Outflows Mark-to-market value adjustment Foreign currency translation differences SA Rest of the world Total 298 460 741 862 94 604 10 972 393 064 752 834 (727 526) (15 421) (742 947) 20 271 15 037 10 208 35 308 10 208 Closing balance – 31 December 2023 333 067 115 400 448 467 105 Nedbank Group Annual Results 2023SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Nedbank Africa Regions Headline earnings (Rm) Return on equity (%) 7 5 4 2 1 4 9 5 7 7 9 1 9 8 1 , 7 7 , 2 0 , 3 9 , 8 3 1 , 2 5 2 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Financial performance Nedbank Africa Regions (NAR) produced a strong financial performance with HE increasing by 94% to R1 891m, generating an ROE of 25,2% (2022: 13,8%), now above the group’s cost of equity (COE). This growth was driven by improved performances in the Southern African Development Community (SADC) operations and our ETI associate investment, including the release of the R175m Ghana sovereign bond provision that Nedbank raised in 2022. Our SADC operations delivered HE of R662m, up by 80% off a low base (2022: R367m). This resulted in an improved ROE of 9,9% (2022: 5,9%), which remains lower than the group’s COE and our desired target of greater than 18%. The improved performance was largely driven by a 21% increase in revenue to R4 290m, due to the higher-interest-rate environments and unrealised forex gains on US dollar capital in Zimbabwe, partially offset by net monetary losses. NII in the cluster increased by 29% to R2 226m largely driven by a widening NIM to 6,13% (2022: 4,94%). This was offset by a decrease in average total loans and advances of 2% to R21bn, given muted demand and economic activity, particularly in the common monetary area (CMA) countries. NIR for the cluster increased by 17% to R1 857m, driven mainly by higher unrealised forex gains in Zimbabwe partially offset by a higher net monetary loss and an increase in revenue from digital and channels. The impairment charge increased by 15% to R253m, offset by an improvement in arrears management in Lesotho, better-than-expected recoveries and releases in Stage 1 and Stage 2 ECL in Namibia. This included an ECL overlay of R24m in Mozambique attributable to the bank’s sovereign bond exposure. As a result, the CLR was 100 bps (2022: 102 bps), within the cluster TTC target range of 85 bps to 120 bps. Expenses increased by 7% to R2 928m, impacted by proactive management actions taken to manage costs such as a decrease in headcount of 2%, through natural attrition and our continued focus to transform and right-size the business by automating manual processes and leveraging the group’s capabilities. The cluster’s cost-to-income ratio declined to 53,6% from 67,2% in 2022. Associate income, relating to the group’s 21% shareholding in ETI, increased by 77% to R1 380m (2022: R779m). This includes accounting for our share of ETI’s Q4 2022 and 9M 2023 earnings (in line with our policy of accounting for our share of ETI’s attributable earnings a quarter in arrear), as well as the reversal of the R175m provision that Nedbank raised in 2022 for the estimated impact on associate income from ETI from the Ghana sovereign domestic debt restructure. The continued strong performance from ETI was driven largely by increased net revenues in Francophone West Africa (UEMOA) and Central, East and Southern Africa (CESA). Looking forward The macroeconomic environment in sub-Saharan Africa continues to remain challenging, albeit improving. Forecasts suggest lower average inflation, a continuation of higher interest rates although improving in the second half of 2024, resulting in limited availability of affordable capital to most sovereigns. The IMF forecasts that the region is projected to grow by an estimated 3,8% in 2024, up from 3,3% in 2023. We continue to monitor the impact of higher interest rates on our clients and the markets we operate in, as well as the progress of the liquefied-natural-gas (LNG) projects in Mozambique and the hyperinflationary and general macroeconomic environment in Zimbabwe. The work we have done to leverage the group’s enterprise capabilities is expected to continue to yield benefits for our SADC operations, driving business growth. ETI is expected to continue on a recovery path, and our focus as a shareholder remains on supporting the business in resolving the challenges that face Ecobank Nigeria and other subscale markets. Our key focus areas for 2024 include the following: • Executing on our board-approved technology convergence journey, convergence into Managed Evolution and unlocking our ability to leverage group capabilities. • Continuing the transformation of our business, complementing the technology convergence, and having in place a fit-for-purpose operating model that leverages the group’s capabilities. • Continuing the digitisation and automation of the business as we deliver on our digital growth strategy. • Continuing to unlock further value in Mozambique, leveraging local expertise and enterprise capabilities. • Leveraging our brand sentiment market positions and client experience scores to accelerate growth in revenue market share. • Unlocking value with the other shareholders in our ETI associate investment by increasing deal flows. We are committed to long-term and profitable growth and are dedicated to seizing growth opportunities that are fit for the 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 generate an ROE consistently above COE. 106 Nedbank Group Annual Results 2023 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 Change % 2023 2022 2023 2022 2023 2022 94 29 15 17 7 77 7 5 (4) (2) 7 8 7 1 891 2 226 253 1 857 2 928 1 380 25,2 4,16 22,0 1,00 63,4 53,6 6,13 45 906 41 347 20 909 21 012 36 846 36 331 7 492 977 1 720 220 1 581 2 743 779 13,8 2,31 12,4 1,02 57,6 67,2 4,94 42 853 39 542 21 714 21 415 34 327 33 768 7 023 662 2 433 253 1 857 2 928 9,9 1,71 1,00 63,4 68,3 7,78 44 658 39 747 20 909 21 012 36 846 36 331 6 713 367 1 954 220 1 581 2 743 5,9 1,03 1,02 57,6 77,6 6,49 41 567 37 382 21 714 21 415 34 327 33 768 6 119 1 229 (207) 610 (234) 1 380 157,7 18,45 22,0 779 67,5 8,93 12,4 1 248 1 600 1 286 2 160 779 904 1 Associate income on an IFRS basis is R1 386m (2022: R779m) as IFRS requires associate income to be presented net of our share of ETI’s impairment charge on non-financial instruments and other gains of R6m (2022: R0m). Our share of ETI’s impairment charge on non-financial instruments and other gains and losses is excluded from HE. 2 ROE on subsidiary in-country statutory capital is 18,5% (2022: 15,7%). Strategic progress Our strategy on the continent remains to own, manage, and control banking operations in SADC and East Africa, and to give our clients access to a banking network in West and Central Africa through our strategic investment in the pan-African banking group, ETI, which has subsidiaries in 33 African countries. Nedbank’s strategy is to achieve scale in the current markets in which we operate, while exploring opportunities to expand in large, fast-growing markets on the continent when they arise. Our investment in ETI presents great potential as we continue to unlock further value and look to generate and maintain a return on the original cost of the investment of above 20% (2023: 22,0%). Our focus across the SADC operations is to transform the business and converge our technology infrastructure, enabling closer alignment to the enterprise, continue to deliver our digital growth strategy and unlock further value in Mozambique as a key market for growth. The journey to converge into Managed Evolution, an important component in integrating the business into the enterprise ecosystem, is under way and progressing well. This will enable the business to seamlessly leverage group capabilities, unlocking greater efficiencies and providing a more consistent brand experience to clients across the regions. In 2024 the focus will be on implementing the foundational elements, and we expect that 3 of the markets we operate in, will start to experience the benefits of leveraging the enterprise technology infrastructure in 2025. Our aspiration to lead in digital is delivered through our digital growth strategy and although a deliberate decision was made to slow down capital investments in technology solutions because of our converging into the group's technology infrastructure, 64% of our client base is digitally active (2022: 57%). This has been achieved through efforts and focus on enhancements of existing solutions and implementation of solutions that make us highly competitive. The Avo SuperShop launch in Namibia in August 2023 was well received by the market, a first in the market, and we continue to enhance the value proposition. This is expected to continue to improve as more merchants are loaded on the platform. Our digital growth strategy focus will remain on limited enhancements and the implementation of new solutions, outside of our convergence journey, that are necessary to remain competitive. 107 Nedbank Group Annual Results 2023SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Innovations and improvements launched in 2023 include the following: • Nedbank MobiMoney, an electronic wallet-based account, in Eswatini as part of our efforts for financial inclusion. MobiMoney is also available in Namibia and Lesotho. • In Namibia, a bespoke solar offering where we can re-advance or offer a further loan on a home loan or asset-based finance for solar purchases and installations. • An expanded Avo proposition, offering shopping and value-added-services with selected local service providers, merchants and partners, who are onboarded onto the platform. • An improved online banking experience for our corporates in Eswatini, Lesotho and Namibia, which includes new features and functionalities enhancing convenience for clients. • An enhanced Nedbank Marketplace API, enabling clients using our wallet API to transact using our vast ecosystem, accounts API for authorised transactional information and those using the payment API to use alternative payment mechanisms for card payments. • An expanded robotics process automation programme where we have automated 11 additional processes, freeing up capacity of our employees to focus on their core functions. • Launched a group card acquiring solution in Zimbabwe, including Amex Card acquiring to bolster our POS merchant offering. • An added Gold cheque card offering in Eswatini and Lesotho to support our middle and affluent CVPs in the respective markets. • Intelligent depositor ATMs in Eswatini and Lesotho respectively, to improve availability of cash deposits to improve client experience and liquidity for the bank. • The only floating rate fixed-term deposit account available in the market in Eswatini, allowing clients to benefit from changes in interest rate, especially during the increasing interest rate cycle. Our bold aspiration is to be rated number 1 in client experiences across the markets in which we operate. In 2023 Nedbank was the market leader in client experience (NPS) in Eswatini and Mozambique and the leader in brand sentiment in Lesotho and Zimbabwe. In recognition of the progress we have made, Nedbank in 2023 received the following awards: Excellence in Mobile Banking at the Finnovex Awards Southern Africa 2023; Best Digital Bank Mozambique 2023 by Global Banking & Finance Awards; Top Innovations in Finance Award in Mozambique for 2023 in the User Experience category by Global Finance magazine; Top Banking Institution Award at the Top Companies Survey Awards 2023 in Zimbabwe, Corporate Governance, Social Responsibility and Sustainability Award at the Banks and Banking Survey Awards 2023 in Zimbabwe; Outstanding ESG/CSI Award for Inclusive Development of SDGs at the 7th Zimbabwe National ESG and Responsible Business Achievement Awards 2023, Governance, Compliance and Risk Team of the Year in Zimbabwe at the Women in Governance, Risk and Compliance Awards 2023, Best Sub-Custodian Bank 2023 of Namibia at the Global Finance Awards and Nedbank Namibia was recognised as one of the most exciting, innovative, and promising businesses from around the world by the Next 100 Global Awards 2023 for Corporate Banking. Regarding ETI, we are working through our representation on the ETI board with fellow shareholders and management to ensure an appropriate focus on capital, liquidity, and growth to unlock value, including addressing the challenges in Ecobank Nigeria. Through ongoing collaboration efforts, we continue to work on increasing business flows between ETI and Nedbank. Segmental performance SADC operations Our SADC operations delivered HE of R662m up by 80% (2022: R367m) and an ROE of 9,9% (2022: 5,9%). This was a result of strong growth in revenue, up 21% to R4 290m, largely driven by an expansion in NIM and unrealised forex gains in Zimbabwe. This strong growth in revenue was achieved despite increased reserve requirements in Mozambique and muted economic growth across the regions. NII increased by 25% to R2 433m, mainly driven by higher interest rates with NIM widening to 7,78% (2022: 6,49%), loans and advances growth across most of the regions, and significant growth in the US$ loan book in Zimbabwe, despite a marginal 2% decrease in average total loans and advances to R21bn (2022: R21,4bn). NIR for the SADC operations increased by 17% to R1 857m, driven largely by unrealised forex gains in Zimbabwe and an increase in revenue from digital and channels. If we excluded Zimbabwe, NIR was up by 8%. The unrealised forex gains of R1 560m were offset by the net monetary loss of R1 059m (2022: R419m). Our impairment charge increased by 15% to R253m, offset mainly by an improvement in arrears management in Lesotho, better-than-expected recoveries and releases in Stage 1 and Stage 2 ECL. The SADC CLR improved to 100 bps from 102 bps and was within the cluster TTC target range of 85 bps and 120 bps. Clients – The overall number of clients increased by 4% to 349 254 (2022: 337 287), despite the bulk dormant account closures in Zimbabwe. Our MobiMoney electronic wallet offering, which forms part of efforts towards addressing financial inclusion, continued to be the most significant client growth driver in Eswatini, Lesotho and Namibia, together with continued enhancements to our current offerings to increase our client base, particularly main-banked clients. Distribution – Our focus remains on transforming the business for overall efficiency while driving growth to achieve scale. In line with this, our distribution strategy remains to ensure an efficient, optimally staffed, fit-for-purpose distribution. Our physical points of presence remained the same at 79 and ATMs increased by 1% to 199 (2022: 197). Digital – As we continue to focus on enabling digital offerings to deliver on our aspirations to lead in digital, our digitally active clients increased to 64% (2022: 57%) of the total client base. The Money App (Africa) remains clients' digital channel of choice with 94% of digitally active clients preferring to use the app. The number of app users is up by 20% to 116 498. The number of users of MobiMoney wallets has increased by more than 100% to 42 017 wallets opened in 2023 (2022: 5 756). Value-added services (including airtime and electricity) purchases increased by 25% yoy and SendMoney volumes have increased by 8% yoy. 108 Nedbank Group Annual Results 2023Nedbank Africa Regions: Key business statistics Client Number of clients1 Main-banked clients2 Cross-sell ratio2 Digital Digitally active clients Mobile app users3 MobiMoney wallets Distribution Number of branches4 Number of ATMs Number of cash-accepting ATMs POS devices5 % ratio % 2023 2022 349 247 337 287 42 1,37 45 1,45 64 116 498 42 017 57 97 303 5 756 79 199 1 79 197 1 8 276 9 213 Notes: 1 Restated, taking into account the closure of dormant accounts as a result of seasonal tobacco merchants in Zimbabwe. 2 The December 2023 percentage/ratio includes MobiMoney Accounts (ie electronic wallets). If MobiMoney wallets were excluded, main-banked clients would be 45% of the base and the cross-sell ratio 1,4 for December 2023. 3 Money App (Africa) used in 3 countries (Lesotho, Namibia and Eswatini). The other 2 countries (Zimbabwe and Mozambique) use different versions. 4 The total number includes agencies (4 agencies across the regions). 5 Reduced number of devices in Mozambique after regulatory changes removing monthly rentals. ETI associate investment ETI’s strong performance continued in 2023, with associate income from our investment up by 77% yoy to R1 380m, generating over a 100% increase in HE to R1 229m. This includes accounting for our share of ETI’s Q4 2022 and 9M 2023 earnings (in line with our policy of accounting for our share of ETI’s attributable earnings a quarter in arrear) as well as the reversal of the R175m estimated provision that Nedbank raised in 2022, as the final Ghana sovereign domestic debt restructure impact on ETI was materially less than expected. Excluding the impact of Nedbank’s R175m reversal, associate income was up 26% yoy, generating a HE of R1 054m. ETI’s 9M 2023 performance saw attributable earnings increase by 14% to US$224m, driven by: • resilience and continued benefits of a diversified business model; • strong revenue growth of 12% (34% in constant currency); and • increased efficiencies, which led to an improved cost-to-income ratio yoy, despite the high inflationary environment as well as the investments made into business growth, distribution, and technology. The continued turnaround in ETI’s performance has generated a ROTE of 25,6% up from 21% in the prior year. Total CAR was 13,9% (as at 30 September 2023). The ETI share price was NGN16 (as at end of period 30 September 2023), up 42% yoy in Naira. These gains were offset by an approximate 44% devaluation of the Naira against the US dollar. The ETI share price rose a further 31% in Q4 2023, ending the year at NGN20,90. Following the strong performance, our investment in ETI generated a return on the original cost of investment of 22% (2022: 12,4%), or 19,2% excluding the reversal of the R175m. The market value of our investment in ETI rose to R2,2bn in 2023, notwithstanding the depreciation of the Naira and Cedi. ETI’s 3 core regions continued to show strong performance, with all 3 of the regions achieving ROEs above 28%, UEMOA (28,8%), Anglophone West Africa (AWA) (28,5%) and CESA (34,4%). Nigeria continues to be sub-optimal with an ROE of 5,5%, albeit improved from 4,6%. Ecobank’s strengths include local knowledge and experience, clients, technology, digital platforms, and a geographic footprint. ETI is ranked in the top 3 banks across 15 African countries, number 1 in 6 countries, number 2 in 2 countries and number 3 in 7 countries. Its focus is on growth and remaining at the forefront of trade, payments, remittances and financial inclusion by continuously leveraging technology and appropriate partnerships. ETI can transact in 33 markets, facilitating trade and money transfer services. Its key partners include MTN, Airtel and PalmPay, and it is working with them to drive financial inclusion across the network. ETI has now completed its growth, transformation and returns strategy, which has true client orientation at its core. ETI is focusing on improving performance in subscale markets, accelerating growth of the consumer and commercial banking business, entrenching the leadership positions in markets where they are a top 3 bank and continuing to provide support to the Nigerian team to turn around and grow that business. 109 Nedbank Group Annual Results 2023SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Geographical 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 Indirect taxation Profit before direct taxation Direct taxation Profit after taxation Profit attributable to non-controlling interest Headline earnings 1 Includes all group eliminations. Nedbank Group 2023 2022 South Africa1 Nedbank Africa Regions2 Rest of the world 2023 2022 2023 2022 2023 2022 52 082 87 769 13 812 170 717 891 619 95 409 – 45 618 70 661 9 101 160 495 882 165 84 864 – 40 747 59 853 13 756 168 738 819 673 85 773 (3 937) 37 261 43 043 8 989 158 400 811 010 75 578 (3 748) 10 583 4 831 4 1 979 20 909 3 663 3 937 1 311 408 1 252 904 1 184 603 1 130 533 45 906 42 853 80 899 79 518 119 211 14 141 1 087 645 42 634 47 777 – 115 944 9 738 1 039 622 35 697 51 903 – 1 311 408 1 252 904 1 184 603 1 130 533 45 906 42 853 80 899 79 518 41 470 27 709 1 443 70 622 9 605 61 017 38 059 1 129 21 829 4 484 17 345 1 695 36 277 26 171 879 63 327 7 381 55 946 35 329 1 102 19 515 4 311 15 204 1 143 15 650 14 061 12 598 12 043 1 161 1 041 752 23 085 52 51 037 5 973 1 309 22 831 89 49 441 5 848 16 568 14 536 52 66 445 1 069 47 64 604 871 (3 235) (540) 1 467 1 217 2 684 (11) 2 695 1 277 29 1 389 228 1 161 1 071 1 206 2 277 41 2 236 1 035 19 1 182 141 1 041 7 048 4 787 23 2 095 21 714 3 438 3 748 7 023 14 1 061 428 1 720 1 581 779 4 080 220 3 860 2 743 75 1 042 (95) 1 137 160 977 984 354 940 691 36 846 34 327 95 151 14 079 40 436 47 348 3 235 37 777 24 635 63 62 475 9 363 53 112 33 854 1 044 18 214 4 159 14 055 1 457 94 385 9 677 33 765 51 475 540 33 486 23 384 100 56 970 7 120 49 850 31 551 1 008 17 291 4 265 13 026 983 7 492 10 1 129 429 2 226 1 857 1 380 5 463 253 5 210 2 928 56 2 226 97 2 129 238 1 891 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 exclude transactions concluded with clients resident in the rest of Africa by other group entities within CIB and transactional-banking revenues. For example, CIB has a credit exposure to clients resident in the Africa regions of R55,9bn (2022: R50,6bn). 110 Nedbank Group Annual Results 2023 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 Indirect taxation Profit before direct taxation Direct taxation Profit after taxation Headline earnings 1 Includes all group eliminations. Profit attributable to non-controlling interest 1 087 645 1 039 622 52 082 87 769 13 812 170 717 891 619 95 409 – 119 211 14 141 42 634 47 777 – 41 470 27 709 1 443 70 622 9 605 61 017 38 059 1 129 21 829 4 484 17 345 1 695 45 618 70 661 9 101 160 495 882 165 84 864 – 115 944 9 738 35 697 51 903 – 36 277 26 171 879 63 327 7 381 55 946 35 329 1 102 19 515 4 311 15 204 1 143 Nedbank Group 2023 2022 South Africa1 Nedbank Africa Regions2 Rest of the world 2023 2022 2023 2022 2023 2022 40 747 59 853 13 756 168 738 819 673 85 773 (3 937) 37 261 43 043 8 989 158 400 811 010 75 578 (3 748) 10 583 4 831 4 1 979 20 909 3 663 3 937 7 048 4 787 23 2 095 21 714 3 438 3 748 752 23 085 52 51 037 5 973 1 309 22 831 89 49 441 5 848 1 311 408 1 252 904 1 184 603 1 130 533 45 906 42 853 80 899 79 518 95 151 14 079 94 385 9 677 7 492 10 7 023 14 984 354 940 691 36 846 34 327 40 436 47 348 3 235 33 765 51 475 540 1 129 429 1 061 428 16 568 14 536 52 66 445 1 069 47 64 604 871 (3 235) (540) 1 311 408 1 252 904 1 184 603 1 130 533 45 906 42 853 80 899 79 518 37 777 24 635 63 62 475 9 363 53 112 33 854 1 044 18 214 4 159 14 055 1 457 33 486 23 384 100 56 970 7 120 49 850 31 551 1 008 17 291 4 265 13 026 983 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 exclude transactions concluded with clients resident in the rest of Africa by other group entities within CIB and transactional-banking revenues. For example, CIB has a credit exposure to clients resident in the Africa regions of R55,9bn (2022: R50,6bn). 15 650 14 061 12 598 12 043 2 226 1 857 1 380 5 463 253 5 210 2 928 56 2 226 97 2 129 238 1 891 1 720 1 581 779 4 080 220 3 860 2 743 75 1 042 (95) 1 137 160 977 1 467 1 217 2 684 (11) 2 695 1 277 29 1 389 228 1 161 1 071 1 206 2 277 41 2 236 1 035 19 1 182 141 1 041 1 161 1 041 111 Nedbank Group Annual Results 2023SegmentalanalysisSupplementaryinformationStatement of financialposition analysisIncome statementanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Income statement analysis Net margin analysis Impairments Non-interest revenue and income Expenses Headline earnings reconciliation Taxation charge 112 113 116 122 124 126 126 Nedbank Group Annual Results 20231 Net margin analysis Net interest income (Rm) Interest margin trends versus prime rate (%) 10,14 7,85 7,03 8,60 11,41 7 6 1 0 3 1 8 0 0 3 0 0 5 2 3 7 7 2 6 3 0 7 4 1 4 2 5 3 , 6 3 3 , 3 7 3 , 3 9 3 , 1 2 4 , 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Nedbank Group NIM Average prime rate Nedbank Group Closing average interest-earning banking assets (year-to-date average) Opening NIM/NII Growth in banking assets Endowment Endowment rate impact Endowment mix impact Asset margin pricing and mix Impact due to pricing Stage 3 interest reversals 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 Foreign loan classification Balance sheet management and other 2023 Bps 2022 Rm Bps Rm 986 060 922 197 393 36 277 373 32 500 38 40 (2) (16) (7) (4) (5) (2) (6) (6) 4 3 1 8 2 512 3 746 3 954 (208) (1 587) (642) (423) (522) (185) (557) (581) 24 372 245 127 707 23 24 (1) (5) 1 (2) (4) 8 5 6 (1) 3 3 (7) 1 1 935 2 128 2 220 (92) (496) 90 (210) (376) 726 464 511 (47) 262 (44) 306 (621) 105 Closing NIM/NII for the period 421 41 470 393 36 277 113 Nedbank Group Annual Results 2023Income statementanalysisSupplementaryinformationStatement of financialposition analysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Net interest margin (Bps) 40 (2) 393 (7) (4) (5) (3) 1 8 421 2022 Endowment rate impact Endowment mix impact Asset pricing Stage 3 interest reversals Asset mix Liability pricing Liability mix Balance sheet management and other 2023 Key drivers • Positive endowment rate impact due to interest rate increases in H2 2022 and H1 2023, partly offset by a negative endowment mix impact due largely to slower growth of CASA deposits relative to the growth in interest-earning assets. • Negative asset pricing due to higher levels of competition for good quality assets. • Higher yields in Nedbank Africa Regions. • Higher stage 3 interest reversals. • Negative asset mix as a result of slower growth in higher-yielding assets such as unsecured loans and faster growth in lower-yielding assets such as term loans, home loans and vehicle finance. • Negative liability pricing due to squeeze in deposits spreads. NII sensitivity analysis • At 31 December 2023, the NII sensitivity of the group’s banking book for a 1% parallel decrease in interest rates, measured over 12 months, was 1,34% of total group ordinary shareholders’ equity, which is below the board’s approved risk limit of 2,25%. • This exposes the group to a decrease in NII of approximately R1 449m before tax should interest rates decrease 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 decrease in interest rates and Nedbank Zimbabwe is measured at a 30% instantaneous decrease in interest rates. • The group’s NII sensitivity exhibits very little convexity and will therefore also result in an increase in pre-tax NII of approximately similar amounts should interest rates increase by 1%. • The group’s NII sensitivity is actively managed through on- and off-balance-sheet interest rate risk management strategies for the group’s expected interest rate view and impairment sensitivity over the cycle. • Nedbank Limited’s economic-value-of-equity (EVE) sensitivity for a 1% decrease in interest rates remains at a low level of 0,76% (R601m) of ordinary shareholders’ equity, which is below the board’s approved risk limit of 1,25%. 114 Nedbank Group Annual Results 2023 Average banking statement of financial position and related interest 2023 2022 Average balance Margin statement interest Average balance Margin statement interest Assets Received % Assets Received 11,41 % 8,60 Rm Average prime rate Assets Listed corporate bonds 23 913 2 293 9,59 23 412 1 634 6,98 Home loans (including properties in possession) Commercial mortgages Instalment debtors Credit card balances Overdrafts Term loans and other1 Personal loans 195 041 196 662 152 218 17 372 25 387 239 245 30 342 20 789 20 748 19 087 2 692 2 916 31 198 5 780 10,66 10,55 12,54 15,50 11,49 13,04 19,05 182 925 190 240 141 994 16 950 23 467 217 559 29 929 14 711 15 210 14 581 2 267 2 156 17 042 5 684 Gross banking loans and advances 880 180 105 503 11,99 826 476 73 285 Impairment of loans and advances Government and other securities Short-term funds and securities Interest-earning banking assets Other2 Total assets Equity and liabilities Deposit and loan accounts Current and savings accounts Negotiable certificates of deposit Other interest-bearing liabilities Long-term debt instruments (29 914) 84 720 51 074 986 060 229 091 7 835 3 577 116 915 9,25 7,00 11,86 (26 450) 81 524 40 647 922 197 205 191 7 338 1 481 82 104 1 215 151 116 915 9,62 1 127 388 82 104 7,28 Liabilities Paid % Liabilities Paid % 597 983 142 800 124 842 153 744 49 854 46 134 2 507 10 624 11 289 4 891 7,71 1,76 8,51 7,34 9,81 542 794 145 637 108 849 130 881 53 738 27 940 1 045 6 677 6 047 4 118 8,04 8,00 10,27 13,37 9,19 7,83 18,99 8,87 9,00 3,64 8,90 5,15 0,72 6,13 4,62 7,66 4,67 Interest-bearing banking liabilities 1 069 223 75 445 7,06 981 899 45 827 Revaluation of FVTPL-designated liabilities Ordinary and minority shareholders' equity Other3 (2 887) 111 452 37 363 (2 174) 107 795 39 868 Total shareholders’ equity and liabilities 1 215 151 75 445 6,21 1 127 388 45 827 4,06 Interest margin on average interest-earning banking assets 986 060 41 470 4,21 922 197 36 277 3,93 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. 115 Nedbank Group Annual Results 2023Income statementanalysisSupplementaryinformationStatement of financialposition analysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive 2 Impairments Nedbank Group impairments charge (Rm) Nedbank Group credit loss ratio trends (%) 1,00 0,60 9 2 1 6 7 2 1 3 1 4 3 5 6 1 8 3 7 5 0 6 9 9 7 0 , 1 6 1 , 3 8 0 , 9 8 0 , 9 0 1 , 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 CLR TTC lower range TTC upper range 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 2023 Corporate and Investment Banking (CIB) CIB, excluding Property Finance Property Finance Retail and Business Banking (RBB) Commercial Banking Retail Wealth Nedbank Africa Regions Centre1 Nedbank Group 1 The Centre impairment of R144m includes the R150m central provision release. Rm (20) (49) 29 457 100 357 (5) 12 444 Rm (30) (11) (19) 82 51 31 2 (36) (141) (123) Rm 566 (229) 795 7 973 464 7 509 40 257 8 836 Rm 507 507 – 29 (3) 533 Rm (84) (84) 8 (2) 10 (9) Rm 939 134 805 8 520 613 7 907 37 253 (144) % 44,3 24,7 19,6 49,7 10,3 39,4 3,5 2,5 % 0,24 0,06 0,47 1,94 0,67 2,27 0,12 1,00 % 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 (85) 9 605 100,0 1,09 0,60–1,00 116 Nedbank Group Annual Results 2023 Nedbank Group impairment drivers (Rm) 613 7 381 765 9 605 (33) 746 133 2022 Stage 1 Stage 2 Stage 3 Non-LAA and FVOCI Off- balance-sheet 2023 Nedbank Group income statement impairment charge and credit loss ratio 2023 Corporate and Investment Banking (CIB) CIB, excluding Property Finance Property Finance Retail and Business Banking (RBB) Commercial Banking Retail Wealth Centre1 Nedbank Group Nedbank Africa Regions 1 The Centre impairment of R144m includes the R150m central provision release. Rm (20) (49) 29 457 100 357 (5) 12 444 Rm (30) (11) (19) 82 51 31 2 (36) (141) (123) Rm 566 (229) 795 7 973 464 7 509 40 257 8 836 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 507 507 – 29 (3) 533 Rm (84) (84) 8 (2) 10 (9) Rm 939 134 805 8 520 613 7 907 37 253 (144) % 44,3 24,7 19,6 49,7 10,3 39,4 3,5 2,5 % 0,24 0,06 0,47 1,94 0,67 2,27 0,12 1,00 % 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 (85) 9 605 100,0 1,09 0,60–1,00 117 Nedbank Group Annual Results 2023Income statementanalysisSupplementaryinformationStatement of financialposition analysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive 2022 Corporate and Investment Banking (CIB) CIB, excluding Property Finance Property Finance Retail and Business Banking (RBB) Commercial Banking Retail Wealth Nedbank Africa Regions Centre Nedbank Group Nedbank Group credit loss ratio per cluster (%) 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 (67) (3) (64) (161) (63) (98) (1) 60 (169) Rm Rm (1 093) (251) (842) 433 (149) 582 (9) (3) (197) (869) 2 241 873 1 368 6 351 324 6 027 (53) 164 8 703 Rm (224) (224) – (11) 3 (232) Rm (52) (52) (10) (14) 4 10 (52) Rm 805 343 462 6 613 98 6 515 (63) 220 (194) 7 381 % 43,9 23,7 20,2 49,7 10,4 39,3 3,7 2,7 % 0,22 0,17 0,28 1,61 0,11 2,00 (0,20) 1,02 % 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 0,85–1,20 100,0 0,89 0,60–1,00 1,38 1,01 0,25 0,18 2019 2,40 1,85 0,82 0,64 2020 1,34 0,72 0,42 0,09 2021 1,61 1,02 0,22 (0,20) 2022 CIB RBB Wealth Africa Regions 1,94 1,0 0,24 0,12 2023 118 Nedbank Group Annual Results 2023 2022 Corporate and Investment Banking (CIB) CIB, excluding Property Finance Property Finance Retail and Business Banking (RBB) Commercial Banking Retail Wealth Centre Nedbank Group Nedbank Africa Regions Stage 1 Stage 2 Stage 3 Rm Rm Rm (67) (3) (64) (161) (63) (98) (1) 60 (169) (1 093) (251) (842) 433 (149) 582 (9) (3) (197) (869) 2 241 873 1 368 6 351 324 6 027 (53) 164 8 703 Non-LAA and FVOCI Off- balance-sheet Impairment charge, net of recoveries Mix of average banking advances CLR Target CLR range Rm (224) (224) – (11) 3 (232) Rm (52) (52) (10) (14) 4 10 (52) Rm 805 343 462 6 613 98 6 515 (63) 220 (194) 7 381 % 43,9 23,7 20,2 49,7 10,4 39,3 3,7 2,7 % 0,22 0,17 0,28 1,61 0,11 2,00 (0,20) 1,02 % 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 0,85–1,20 100,0 0,89 0,60–1,00 Key drivers • Yoy increase in CLR, reflecting the adverse impact of higher-than-expected interest rates, higher levels of inflation (mainly in food and energy), and higher levels of load-shedding on our clients, particularly in the consumer segment in RBB. • Increased impairments in CIB with a CLR, at 24 bps, incorporating additional provisioning for stage 3 counters in the second half of the year. • Increased impairments in RBB, driven by negative economic impacts that resulted in increased client migration into stages 2 and 3, as well as the impact of updating our macroeconomic assumptions and annual model regrounds. The RBB CLR, at 194 bps, was above the TTC target range of 120 bps to 175 bps but below the 226 bps reported in H1 2023 as a result of focused management interventions in respect of collections and origination and an H2 2023 RBB CLR of 164 bps. • A reduction of R150m in the group’s central provision, with risks now being accounted for in our underlying International Financial Reporting Standards (IFRS) impairment models. 119 Nedbank Group Annual Results 2023Income statementanalysisSupplementaryinformationStatement of financialposition analysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Impairments charge of financial instruments 2023 Corporate and Investment Banking Retail and Business Banking Nedbank Group Balance at the beginning of the year 27 893 4 788 21 215 Stage 1 ECL allowance Stage 2 ECL allowance Stage 3 ECL allowance 4 261 5 554 18 078 517 538 3 733 Statement-of-comprehensive-income charge net of recoveries Stage 1 ECL allowance Stage 2 ECL allowance Stage 3 ECL allowance Off-balance-sheet allowance Non-loans and advances FVOCI loan impairment charge 9 605 444 (123) 8 836 (85) 26 507 939 (20) (30) 566 (84) 507 3 487 4 564 13 164 8 520 457 82 7 973 8 Wealth 370 42 29 299 37 (5) 2 40 Nedbank Africa Regions Centre 1 216 304 215 120 881 253 12 (36) 257 (9) 29 303 1 (144) (141) (3) (7 112) (1 477) (5 391) (59) (185) – (62) 3 348 40 31 277 348 348 42 28 (150) (76) (29) 1 284 188 72 1 024 1 284 1 267 17 (3) 3 160 163 (3) 160 160 Adjusted for: Recoveries Interest in suspense Amounts written off 1 444 1 630 158 408 1 244 1 194 (10 215) (1 700) (8 303) Foreign exchange and other transfers Non-loans and advances FVOCI loans 379 (26) (324) (19) 474 (324) ECL allowance – closing balance 30 386 4 250 24 344 Stage 1 Stage 2 Stage 3 4 674 5 337 20 375 484 500 3 266 3 962 4 571 15 811 Split by measurement category 30 386 4 250 24 344 Loans and advances 29 602 3 573 24 254 Loans and advances in FVOCI Off-balance-sheet allowance 530 254 530 147 90 120 Nedbank Group Annual Results 2023 Corporate and Investment Banking Retail and Business Banking Nedbank Africa Regions Wealth Centre 2022 Balance at the beginning of the year Stage 1 ECL allowance Stage 2 ECL allowance Stage 3 ECL allowance Statement-of-comprehensive-income charge net of recoveries 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 Nedbank Group 26 581 4 573 6 543 15 465 7 381 (169) (869) 8 703 (52) (8) (224) 19 406 3 600 4 194 11 612 6 613 (161) 433 6 351 (10) 5 114 681 1 692 2 741 805 (67) (1 093) 2 241 (52) (224) 456 44 39 373 (63) (1) (9) (53) (6 069) (1 131) (4 804) (23) 1 587 1 195 (8 757) (138) 8 36 79 198 (1 216) (228) 36 1 451 980 (7 393) 158 ECL allowance – closing balance 27 893 4 788 21 215 Stage 1 Stage 2 Stage 3 4 261 5 554 18 078 517 538 3 733 3 487 4 564 13 164 Split by measurement category 27 893 4 788 21 215 Loans and advances Loans and advances in FVOCI Off-balance-sheet allowance 27 209 347 337 4 213 347 228 21 134 81 (20) (3) 370 42 29 299 370 370 1 105 500 248 118 739 220 60 (3) 164 10 (11) (109) 57 17 (128) (66) 11 500 (194) (197) 3 (2) 1 (3) 1 216 304 215 120 881 1 216 1 188 28 303 1 304 304 121 Nedbank Group Annual Results 2023Income statementanalysisSupplementaryinformationStatement of financialposition analysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive 3 Non-interest revenue and income Non-interest revenue (Rm) Non-interest revenue to total operating expenses (%) 7 9 9 5 2 0 4 1 4 2 9 8 8 4 2 1 7 1 6 2 9 0 7 7 2 , 8 0 8 , 0 6 7 , 0 4 7 , 1 4 7 , 8 2 7 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Nedbank Group Corporate and Investment Banking Wealth Nedbank Africa Regions Centre 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 Equity investment income/(losses) Realised gains, dividends, interest and other income Unrealised (losses)/gains1 Investment income Sundry income/(expenses)2 Total non-interest revenue and income Change % 5 4 2 6 16 (13) 5 5 1 8 (16) >100 >100 46 3 >100 6 (5) (1) (6) >100 >(100) 48 61 6 2023 2022 19 346 18 488 1 556 3 711 1 151 851 247 276 3 738 3 135 4 681 1 446 577 297 280 4 299 75 2 013 642 1 569 764 856 (92) 142 1 135 1 502 3 623 1 084 734 283 262 3 552 3 114 4 334 1 715 187 (5) 192 4 166 1 1 897 679 1 589 815 384 431 96 704 2023 3 144 57 24 191 257 178 1 425 957 55 260 260 2022 3 057 54 29 179 214 217 1 420 890 54 58 35 23 4 032 3 898 – 128 120 75 2 013 646 1 298 853 926 (73) 107 282 1 1 897 679 1 321 921 463 458 86 221 27 709 26 171 8 678 8 241 14 306 13 372 2 924 3 047 Retail and Business Banking 2023 2022 13 258 12 478 495 3 540 923 306 35 260 2 334 1 100 4 265 580 – 143 143 (16) (16) 17 324 487 3 457 875 283 33 256 2 079 1 057 3 951 617 15 15 148 148 (27) (27) 17 124 2023 2 070 912 1 96 7 (209) 1 204 59 820 – (3) (3) 10 27 2022 2 058 798 1 108 (161) 1 257 55 1 056 – – – (19) (48) 2023 2022 2023 2022 (98) (73) 972 77 146 36 189 34 9 168 11 302 44 49 49 968 148 136 29 123 33 6 200 19 274 45 8 8 128 – 120 – 664 1 857 440 1 581 15 1 3 20 (137) 2 268 (12) 280 (4) (4) (70) (70) 8 (162) (56) 15 1 6 14 (109) (3) 106 (48) 154 – (79) (79) 12 (33) (70) 1 Unrealised losses relate to equity investments in associates and joint ventures, which are estimated and converted to realised or dividends once they have been earned. 2 Sundry income comprises mainly security dealings, rental income, fair-value movements on non-trading investments, forex gains and losses partially offset by the R1 059m net monetary loss (2022: R419m). 122 Nedbank Group Annual Results 2023 Key drivers • Solid commission and fees growth, driven by the purchase of value-added services, main-banked client growth and improved levels of cross-sell. • Impact on insurance income of a slowdown in traditional bancassurance volumes due mainly to the deliberate slowing in personal loans in the current risk environment, the non-repeat of reserve releases in the prior year, and new business strain relating to new insurance solutions. • Fair-value adjustments, mainly from fair-value gains on structured loans within the CIB banking book and gains relating to the group’s hedge-accounted portfolios (Centre). • Positive trading outcomes reflecting good performances in debt securities and commodities, partially offset by a deterioration in the performance of equities and the impact of the introduction of the SARB’s new Monetary Policy Implementation Framework (MPIF). • Foreign currency gains in Zimbabwe on US dollar capital as a result of currency devaluation, partially offset by a higher net monetary loss, resulting in a net gain. Wealth Nedbank Africa Regions Centre Rm Net commission and fees income Change % 2023 2022 19 346 18 488 Nedbank Group Corporate and Investment Banking Retail and Business Banking 2023 2022 13 258 12 478 495 3 540 923 306 35 260 2 334 1 100 4 265 580 – 143 143 (16) (16) 17 324 487 3 457 875 283 33 256 2 079 1 057 3 951 617 15 15 148 148 (27) (27) 17 124 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 Equity investment income/(losses) Realised gains, dividends, interest and other income Unrealised (losses)/gains1 Investment income Sundry income/(expenses)2 5 4 2 6 5 5 1 8 16 (13) (16) >100 >100 46 3 >100 6 (5) (1) (6) >100 >(100) 48 61 6 1 556 3 711 1 151 851 247 276 3 738 3 135 4 681 1 446 577 297 280 4 299 75 2 013 642 1 569 764 856 (92) 142 1 135 1 502 3 623 1 084 734 283 262 3 552 3 114 4 334 1 715 187 (5) 192 4 166 1 1 897 679 1 589 815 384 431 96 704 2023 3 144 57 24 191 257 178 1 425 957 55 260 260 75 2 013 646 1 298 853 926 (73) 107 282 2022 3 057 54 29 179 214 217 1 420 890 54 58 35 23 1 1 897 679 1 321 921 463 458 86 221 4 032 3 898 2023 2 070 912 1 96 7 (209) 1 204 59 820 – – (3) (3) 10 27 2022 2 058 798 1 108 (161) 1 257 55 1 056 – – – (19) (48) Total non-interest revenue and income 27 709 26 171 8 678 8 241 14 306 13 372 2 924 3 047 1 Unrealised losses relate to equity investments in associates and joint ventures, which are estimated and converted to realised or dividends once they have 2 Sundry income comprises mainly security dealings, rental income, fair-value movements on non-trading investments, forex gains and losses partially offset been earned. by the R1 059m net monetary loss (2022: R419m). 2023 2022 2023 2022 972 77 146 36 189 34 9 168 11 302 44 49 49 968 148 136 29 123 33 6 200 19 274 45 8 8 128 120 128 – 120 – 664 1 857 440 1 581 (98) (73) 15 1 3 20 (137) 2 268 (12) 280 (4) (4) (70) (70) 8 (162) (56) 15 1 6 14 (109) (3) 106 (48) 154 – (79) (79) 12 (33) (70) 123 Nedbank Group Annual Results 2023Income statementanalysisSupplementaryinformationStatement of financialposition analysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive 4 Expenses Total operating expenses (Rm) Cost-to-income ratio (%) 9 7 1 2 3 2 7 7 1 3 9 3 6 3 3 9 2 3 5 3 9 5 0 8 3 , 5 6 5 , 1 8 5 , 8 7 5 , 8 5 5 , 9 3 5 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 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 8 12 21 (1) 25 11 15 8 3 7 (16) 749 99 1 850 212 3 990 4 336 2 247 1 585 920 931 – 671 82 1 864 169 3 590 3 778 2 089 1 546 863 1 108 – Total operating expenses 8 38 059 35 329 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 15 3 12 10 2023 3 421 2022 2 976 2 698 2 617 4 270 10 389 3 826 9 419 1 2 3 4 Includes the depreciation of right-of-use assets of R786m (2022: R827m). Includes a building depreciation charge of R398m (2022: R386m). Includes a furniture depreciation charge of R337m (2022: R335m), consumables and sundry expenses. Includes consulting and professional fees (included in fees and insurance), communication and travel expenses, and other IT-related spend (included in computer processing). 124 Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre 2023 2022 21 140 19 569 2023 3 932 2022 3 585 2023 8 572 2022 8 287 2023 1 671 2022 1 434 2023 1 320 2022 1 206 2023 5 645 2022 5 057 17 474 4 095 3 040 1 055 16 017 3 761 2 900 861 Change % 8 9 9 5 23 <(100) (429) (209) 6 900 6 376 445 432 2 053 1 866 247 303 322 342 3 833 3 433 523 200 72 328 85 2 611 8 196 534 203 67 309 71 2 427 7 628 2 810 1 639 749 420 564 6 871 2 426 1 682 748 379 578 6 172 99 107 92 41 34 820 29 118 66 28 95 765 371 186 68 75 90 496 343 198 73 102 75 404 533 115 604 56 158 446 (112) 592 45 289 (10 798) (9 768) 23 678 22 138 3 111 2 838 2 928 2 743 146 (18) Nedbank Group Annual Results 2023 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 <(100) (429) (209) 8 9 9 5 23 8 12 21 (1) 25 11 15 8 3 7 8 (16) 17 474 4 095 3 040 1 055 749 99 1 850 212 3 990 4 336 2 247 1 585 920 931 – 16 017 3 761 2 900 861 671 82 1 864 169 3 590 3 778 2 089 1 546 863 1 108 – 523 200 72 328 85 2 611 8 196 534 203 67 309 71 2 427 7 628 Total income growth rate less expenses growth rate (JAWS ratio) (%) Total employees (Permanent) 3 1 , 0 1 , 8 3 , 8 3 , ) , 7 2 ( 3 1 2 9 2 1 7 2 8 2 1 6 8 6 2 4 2 9 5 2 7 7 4 5 2 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre Change % 2023 2022 21 140 19 569 2023 3 932 2022 3 585 2023 8 572 2022 8 287 2023 1 671 2022 1 434 2023 1 320 2022 1 206 2023 5 645 2022 5 057 6 900 6 376 445 432 2 053 1 866 247 303 322 342 3 833 3 433 Total operating expenses 38 059 35 329 23 678 22 138 3 111 2 838 2 928 2 743 146 (18) 2 810 1 639 749 420 564 6 871 2 426 1 682 748 379 578 6 172 99 107 92 41 34 820 29 118 66 28 95 765 371 186 68 75 90 496 343 198 73 102 75 404 533 115 604 56 158 446 (112) 592 45 289 (10 798) (9 768) Key drivers • Average annual salary increases of 6,3% and higher costs to attract and retain key talent. • 2% reduction in permanent employee numbers, largely through natural attrition. • Alignment of incentive costs with the group’s financial performance and higher anticipated vesting outcomes from meeting the group's corporate performance targets. • Continuous investment in digital and cloud solutions, an increase in payments infrastructure such as ATMs and Intelligent Depositors, increased IT volumes, and the impact of the devaluation of the rand related to foreign currency IT contracts. • Decrease in the growth in amortisation charge as our ME technology journey nears completion. • Increase in cost savings from our TOM 2.0 optimisation programme to R2,2bn. • Fees and insurance-related cost increases, largely as a result of increases in card issuing and acceptance costs. 125 Nedbank Group Annual Results 2023Income statementanalysisSupplementaryinformationStatement of financialposition analysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive 5 Headline earnings reconciliation Change % 7 >100 Rm Profit attributable to ordinary shareholders Impairment charge on non-financial instruments and other gains and losses IAS 16 – loss/(profit) on disposal of property and equipment IAS 36 – impairment of goodwill IAS 36 – impairment of intangible assets IAS 36 – impairment of property and equipment IAS 40 – profit on revaluation of investment properties IFRS 10 – profit on sale of subsidiaries/associates IFRS 16 – impairment/(reversal of impairment) of right-of-use assets Share of associate (ETI) impairments charge on non-financial instruments and other (gains)/losses 2023 2022 Gross 403 66 298 85 34 Net of taxation 15 305 351 42 298 62 29 (81) (81) 1 (6) 1 (6) Gross (245) (155) Net of taxation 14 287 (226) (111) 93 67 (181) (2) (181) (1) Headline earnings 11 15 650 14 061 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 Share of profits of associate companies Capital items Effects of profits taxed in different jurisdictions1 Additional tier 1 capital instruments Assessed losses not subject to deferred tax and special allowances Non-deductible expenses2 Prior-year adjustments3 Tax rate change4 Total taxation on income as a percentage of profit before taxation Effective tax rate, excluding associate headline earnings 2023 4 484 2022 4 311 27,0 28,0 (1,3) (1,8) 0,1 (1,1) (1,6) (0,2) 0,5 (1,1) 20,5 22,0 (1,0) (1,3) (0,7) (1,5) (1,3) (0,2) 0,7 (0,7) 0,1 22,1 23,1 1 This consists mainly of the effects of the lower tax charge in Nedbank Zimbabwe, Nedbank Namibia, Nedbank Private Wealth Isle of Man and Nedgroup Investments Isle of Man. 2 Non-deductible expenses include the impact of share-based payments and other non-deductible expenses. 3 Prior-year adjustments include reduced assessments from SARS related to prior years. 4 The corporate tax rate was reduced from 28% to 27% during 2022 and is applicable from the 2023 year of assessment for South African companies in the group. 126 Nedbank Group Annual Results 2023 Statement of financial position analysis Loans and advances Investment securities Investments in associate companies Intangible assets Amounts owed to depositors Liquidity risk and funding Equity analysis Capital management 128 146 147 148 150 152 155 156 127 Nedbank Group Annual Results 20237 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 Gross banking loans and advances Impairment of advances Net banking loans and advances Trading loans and advances Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre1 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 200 089 199 601 207 17 003 26 228 29 235 189 370 196 619 189 16 816 26 613 30 166 22 20 160 095 157 626 3 009 3 987 179 969 176 877 155 710 153 203 11 483 8 782 12 393 18 764 164 477 151 582 12 749 7 641 28 054 (471) – 11 503 8 572 25 027 (1 722) – 10 121 7 707 3 275 12 462 11 041 17 192 2 940 11 214 28 054 25 027 885 047 862 769 380 455 382 250 (29 602) (27 209) (3 573) (4 213) 453 498 429 564 (24 254) (21 134) 29 059 (348) 29 395 (370) 22 176 (1 267) 22 902 (1 188) 855 445 835 560 376 882 378 037 429 244 408 430 28 711 29 025 20 909 21 714 15 943 7 727 14 150 2 4 891 15 756 8 112 14 149 10 5 039 176 855 29 461 64 16 855 19 992 27 484 14 295 1 127 450 7 631 166 247 28 628 52 16 667 19 259 28 469 13 288 1 126 255 16 8 544 159 284 147 013 45 287 42 273 2023 7 269 2 246 129 148 3 077 1 749 4 815 235 625 1 873 2022 7 347 2 164 123 149 3 218 1 687 5 058 226 1 317 1 585 10 28 72 89 258 289 2 (471) (1 722) (141) (160) (301) (1 342) (304) (1 646) Change % 6 2 10 1 (1) (3) 2 (7) (53) 9 11 (11) 12 73 3 9 2 (22) 36 174 46 605 36 174 46 605 Loans and advances 1 891 619 882 165 413 056 424 642 429 244 408 430 28 711 29 025 20 909 21 714 (301) (1 646) Banking loans and advances to banks (45) 10 701 19 392 7 769 15 925 2 220 1 706 712 1 761 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 (2019–2023) (%) Commercial mortgage loans (2019–2023) (%) , 1 4 1 , 4 4 1 , 6 9 1 , 9 9 1 , 8 4 3 , 1 4 3 , 8 3 2 , 7 3 2 , 7 7 9 7 , , 8 6 3 , 0 6 3 0 7 , 5 7 , , 1 8 1 , 9 6 1 , 1 6 1 , 9 6 1 , 0 2 2 , 7 2 2 Nedbank FirstRand Standard Bank Absa Other Nedbank FirstRand Standard Bank Absa Other 128 Nedbank Group Annual Results 2023 7 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 Gross banking loans and advances Impairment of advances Net banking loans and advances Trading loans and advances Change % 6 2 10 1 (1) (3) 2 (7) (53) 9 11 (11) 12 73 3 9 2 1 179 969 176 877 155 710 153 203 200 089 199 601 207 17 003 26 228 29 235 11 483 8 782 12 749 7 641 28 054 (471) – 189 370 196 619 189 16 816 26 613 30 166 12 393 18 764 11 503 8 572 25 027 (1 722) – 164 477 151 582 22 20 160 095 157 626 3 009 3 987 10 121 7 707 3 275 12 462 11 041 17 192 2 940 11 214 28 054 25 027 Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre1 2023 2022 2023 2022 2023 2022 2023 2022 176 855 29 461 64 16 855 19 992 27 484 14 295 1 127 450 166 247 28 628 52 16 667 19 259 28 469 13 288 1 126 255 15 943 7 727 14 150 2 4 891 15 756 8 112 14 149 10 5 039 159 284 147 013 7 631 16 8 544 45 287 42 273 2023 7 269 2 246 129 148 3 077 1 749 4 815 235 625 1 873 2022 7 347 2 164 123 149 3 218 1 687 5 058 226 1 317 1 585 10 28 885 047 862 769 380 455 382 250 (29 602) (27 209) (3 573) (4 213) 453 498 429 564 (24 254) (21 134) 29 059 (348) 29 395 (370) 22 176 (1 267) 22 902 (1 188) 855 445 835 560 376 882 378 037 429 244 408 430 28 711 29 025 20 909 21 714 (22) 36 174 46 605 36 174 46 605 2023 2022 72 89 258 289 2 (471) (1 722) (141) (160) (301) (1 342) (304) (1 646) Loans and advances 891 619 882 165 413 056 424 642 429 244 408 430 28 711 29 025 20 909 21 714 (301) (1 646) Banking loans and advances to banks (45) 10 701 19 392 7 769 15 925 2 220 1 706 712 1 761 1 Centre includes the group’s centrally managed macro fair-value hedge accounting adjustment and a central impairment provision. Credit cards (2019–2023) (%) Personal loans (2019–2023) (%) , 4 0 1 , 2 1 1 , 5 5 2 , 2 6 2 , 4 4 2 , 8 2 2 , 7 5 2 , 5 5 2 , 2 3 1 , 1 5 1 , 9 1 1 , 0 1 1 , 6 0 2 , 3 1 2 , 7 4 1 , 5 8 1 , 6 0 1 , 8 0 1 , 2 2 4 , 4 8 3 Nedbank FirstRand Standard Bank Absa Other Nedbank FirstRand Standard Bank Absa Other Core corporate loans (2019–2023) (%) Instalment sales and leases (2019–2023) (%) , 4 8 1 , 2 8 1 , 2 1 2 , 8 2 2 , 1 1 2 , 5 0 2 , 3 3 2 , 5 2 2 , 0 6 1 , 0 6 1 , 5 8 2 , 1 8 2 , 6 4 2 , 4 5 2 , 8 9 1 , 9 8 1 , 7 2 2 , 9 2 2 , 4 4 , 7 4 Nedbank FirstRand Standard Bank Absa Other Nedbank FirstRand Standard Bank Absa Other 129 Nedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive 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 7,00 6,80 31,55 34,29 34,17 37,90 37,97 5,30 0,48 0,65 0,69 0,60 0,66 4 9 5 7 2 3 4 2 5 4 5 3 3 9 3 5 7 6 1 5 1 8 1 8 5 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Stage 1 coverage Stage 1 coverage Stage 2 coverage Stage 2 coverage Stage 3 LAA (amortised cost) Stage 3 Coverage 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 2023 Rm Corporate and Investment Banking (CIB) 280 664 CIB, excluding Property Finance Property Finance 120 170 160 494 Rm 367 253 114 % Rm 0,13 17 084 0,21 0,07 10 140 6 944 Rm 421 368 53 Retail and Business Banking (RBB) 361 437 3 896 1,08 54 094 4 557 Commercial Banking Retail Wealth Nedbank Africa Regions Centre1 Gross loans and advances/ECL held at amortised cost 76 494 284 943 22 804 19 561 (2 002) 269 3 627 40 179 0,35 1,27 0,18 0,92 9 125 44 969 2 778 794 2 332 230 4 327 31 70 163 % 2,46 3,63 0,76 8,42 2,52 9,62 1,12 8,82 682 464 4 482 0,66 77 082 5 242 6,80 58 181 19 878 34,17 817 727 29 602 3,62 885 047 6,73 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 53 884 36 174 10 699 (471) 58 1 793 64 1 415 408 134 31 89 782 750 4 674 78 875 5 337 59 596 20 375 921 221 30 386 921 221 Off-balance-sheet ECL Total GLAA/ECL 1 The total ECL for Centre of R160m includes the central provision. 130 GLAA excluding of GLAA excluding Stage 3 GLAA as a % 37 967 15 801 41,62 453 498 24 254 Rm 16 968 6 499 10 469 6 633 31 334 1 425 1 821 Rm 2 785 1 519 1 266 1 603 14 198 277 1 018 (3) % Rm 16,41 314 716 23,37 12,09 136 809 177 907 24,17 45,31 19,44 55,90 92 252 361 246 27 007 22 176 330 57 092 36 174 10 699 (471) Rm 3 573 2 140 1 433 2 102 22 152 348 1 267 160 530 254 % 1,14 1,56 0,81 5,35 2,28 6,13 1,29 5,71 Rm 380 455 202 548 177 907 453 498 92 252 361 246 29 059 22 176 (141) 36 174 % 4,83 3,91 5,88 8,37 7,19 8,67 4,90 8,21 Nedbank Group Annual Results 2023 Nedbank Group coverage (%) Stage 3 advances as a percentage of gross banking loans and advances (Rm) 8,35 5,89 6,67 5,06 6,98 6,14 8,37 6,73 3,51 3,08 5,21 4,83 4 5 9 6 4 7 1 8 0 4 5 6 9 2 5 6 9 5 9 5 5,82 3,46 1,15 2 4 0 8 2 6 2 2 , 5 2 3 , 2 3 3 , 7 3 3 , 2 6 3 , 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 RBB Total Nedbank Group CIB Total Stage 3 LAA 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 2023 Rm % Rm Corporate and Investment Banking (CIB) 280 664 0,13 17 084 Rm 16 968 6 499 10 469 Rm 2 785 1 519 1 266 % Rm 16,41 314 716 23,37 12,09 136 809 177 907 Rm 3 573 2 140 1 433 Retail and Business Banking (RBB) 361 437 3 896 1,08 54 094 4 557 37 967 15 801 41,62 453 498 24 254 6 633 31 334 1 425 1 821 1 603 14 198 277 1 018 (3) 24,17 45,31 19,44 55,90 92 252 361 246 27 007 22 176 330 2 102 22 152 348 1 267 160 % 1,14 1,56 0,81 5,35 2,28 6,13 1,29 5,71 Rm 380 455 202 548 177 907 453 498 92 252 361 246 29 059 22 176 (141) % 4,83 3,91 5,88 8,37 7,19 8,67 4,90 8,21 682 464 4 482 0,66 77 082 5 242 6,80 58 181 19 878 34,17 817 727 29 602 3,62 885 047 6,73 58 1 793 64 1 415 408 134 31 89 57 092 36 174 10 699 (471) 530 254 36 174 782 750 4 674 78 875 5 337 59 596 20 375 921 221 30 386 921 221 Rm 367 253 114 269 3 627 40 179 Rm 421 368 53 230 4 327 31 70 163 % 2,46 3,63 0,76 8,42 2,52 9,62 1,12 8,82 0,21 0,07 10 140 6 944 0,35 1,27 0,18 0,92 9 125 44 969 2 778 794 2 332 CIB, excluding Property Finance Property Finance Commercial Banking Nedbank Africa Regions Retail Wealth Centre1 cost 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 1 The total ECL for Centre of R160m includes the central provision. 120 170 160 494 76 494 284 943 22 804 19 561 (2 002) 53 884 36 174 10 699 (471) 131 Nedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Stage 3 GLAA as a % of total GLAA excluding trading book GLAA, excluding trading book % 1,29 1,41 1,19 4,92 1,83 5,73 1,33 5,19 Rm 382 250 209 723 172 527 429 564 89 507 340 057 29 395 22 902 (1 342) 46 605 % 5,21 3,98 6,71 6,98 5,30 7,42 3,85 8,39 6,14 29 984 13 149 43,85 429 564 21 134 Rm 18 631 7 054 11 577 4 745 25 239 1 133 1 922 5 Rm 3 387 1 529 1 858 1 292 11 857 299 881 1 % Rm 18,18 326 491 22,68 16,05 156 475 170 016 27,23 46,98 26,39 45,84 89 507 340 057 27 846 22 902 380 42 824 46 605 14 484 (1 722) Rm 4 213 2 199 2 014 1 641 19 493 370 1 188 304 347 337 Stage 1 Stage 2 Stage 3 Total GLAA ECL Coverage GLAA ECL Coverage GLAA ECL Coverage GLAA ECL Coverage 2022 Rm Corporate and Investment Banking (CIB) 288 066 CIB, excluding Property Finance Property Finance 136 572 151 494 Rm 379 294 85 % Rm 0,13% 19 794 0,22% 0,06% 12 849 6 945 Retail and Business Banking (RBB) 346 248 3 434 0,99% 53 332 Commercial Banking Retail Wealth Nedbank Africa Regions Centre Gross loans and advances/ECL held at amortised cost 74 322 271 926 24 871 19 708 (1 065) 170 3 264 42 197 0,23% 1,20% 0,17% 1,00% 10 440 42 892 1 842 1 272 1 440 Rm 447 376 71 4 551 179 4 372 29 110 303 % 2,26 2,93 1,02 8,53 1,77 10,19 1,57 8,65 677 828 4 052 0,60% 77 680 5 440 7,00 51 675 17 717 34,29 807 183 27 209 3,37 862 769 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 40 533 46 605 14 484 (1 722) 64 1 001 32 1 290 251 Off-balance-sheet ECL Total GLAA/ECL 145 82 110 777 728 4 261 78 681 5 554 52 965 18 078 909 374 27 893 909 374 132 Nedbank Group Annual Results 2023 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 2022 Rm % Rm Corporate and Investment Banking (CIB) 288 066 0,13% 19 794 Rm 18 631 7 054 11 577 Rm 3 387 1 529 1 858 % Rm 18,18 326 491 22,68 16,05 156 475 170 016 Rm 4 213 2 199 2 014 Retail and Business Banking (RBB) 346 248 3 434 0,99% 53 332 29 984 13 149 43,85 429 564 21 134 4 745 25 239 1 133 1 922 5 1 292 11 857 299 881 1 27,23 46,98 26,39 45,84 89 507 340 057 27 846 22 902 380 1 641 19 493 370 1 188 304 % 1,29 1,41 1,19 4,92 1,83 5,73 1,33 5,19 Rm 382 250 209 723 172 527 429 564 89 507 340 057 29 395 22 902 (1 342) 677 828 4 052 0,60% 77 680 5 440 7,00 51 675 17 717 34,29 807 183 27 209 3,37 862 769 64 1 001 32 1 290 251 145 82 110 42 824 46 605 14 484 (1 722) 347 337 46 605 777 728 4 261 78 681 5 554 52 965 18 078 909 374 27 893 909 374 Rm 379 294 85 170 3 264 42 197 0,22% 0,06% 12 849 6 945 0,23% 1,20% 0,17% 1,00% 10 440 42 892 1 842 1 272 1 440 Rm 447 376 71 4 551 179 4 372 29 110 303 % 2,26 2,93 1,02 8,53 1,77 10,19 1,57 8,65 CIB, excluding Property Finance Property Finance Commercial Banking Nedbank Africa Regions Retail Wealth Centre cost 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 136 572 151 494 74 322 271 926 24 871 19 708 (1 065) 40 533 46 605 14 484 (1 722) % 5,21 3,98 6,71 6,98 5,30 7,42 3,85 8,39 6,14 Key drivers • Slight decrease of CIB gross banking loans and advances as the growth in the leverage and diversified lending businesses, coupled with growth in the energy sector, was offset by a decrease in foreign client lending owing to lower overnight interbank placements. • Increased commercial-property loans and advances, indicative of confidence returning to the sector and an improvement in sentiment. • Increased RBB gross loans and advances, driven by solid growth in secured lending, while deliberate caution is maintained in unsecured lending in the current economic environment. • Increased group balance sheet expected credit loss (ECL), reflecting prudent provisioning in the current economic environment. • Increase in overall ECL coverage ratio to 3,62% as a result of the increase in stage 3 loans with higher coverage. • Slight increase in the stage 1 coverage ratio to 0,66%, still higher than the pre-Covid-19 level of 0,48%. • Slight decrease in the stage 2 coverage ratio to 6,80%, still well above the pre-Covid-19 levels of 5,30%. • Stable stage 3 coverage ratio at 34,17% as RBB loans, with higher coverage, migrated from stage 2 to stage 3, and stage 3 loans in CIB, with lower coverage , declined as some counters cured or have been written off. 133 Nedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Stage 1 Stage 2 Stage 3 Total ECL Coverage GLAA ECL Coverage Coverage Stage 1 Stage 2 Stage 3 Total ECL Coverage GLAA ECL Coverage Coverage Coverage GLAA Rm 15 114 14 242 8 575 5 092 13 066 2 055 37 58 181 GLAA Rm 10 760 14 024 7 766 4 373 11 850 2 867 35 51 675 19 878 34,17 ECL Rm 3 580 2 078 4 015 2 890 6 786 530 (1) ECL Rm 2 417 2 360 3 395 2 760 6 256 530 (1) 17 717 Coverage % 23,69 14,59 46,82 56,76 51,94 25,79 % 22,46 16,83 43,72 63,11 52,79 18,49 34,29 GLAA Rm 198 443 199 452 164 476 35 339 143 499 68 289 8 229 817 727 GLAA Rm 187 889 193 838 151 582 35 546 149 327 80 900 8 101 807 183 ECL Rm 4 694 2 434 7 658 4 638 9 221 1 024 (67) 29 602 ECL Rm 3 408 2 651 7 007 4 267 8 807 1 128 (59) 27 209 % 2,37 1,22 4,66 13,12 6,43 1,50 3,62 % 1,81 1,37 4,62 12,00 5,90 1,39 3,37 % 3,11 1,36 9,76 17,35 8,64 13,62 6,80 % 3,56 1,33 10,25 10,29 8,34 11,66 7,00 GLAA, ECL and coverage, by product 2023 Residential mortgages Commercial mortgages Instalment debtors Credit cards and overdrafts Term loans Other client loans Other including credit and zero balances GLAA Rm 159 354 173 806 135 904 25 370 115 751 64 142 8 137 Rm 368 201 1 692 902 1 167 209 (57) % 0,23 0,12 1,24 3,56 1,01 0,33 Rm 23 975 11 404 19 997 4 877 14 682 2 092 55 Rm 746 155 1 951 846 1 268 285 (9) GLAA/ECL held at amortised cost 682 464 4 482 0,66 77 082 5 242 2022 Residential mortgages Commercial mortgages Instalment debtors Credit cards and overdrafts Term loans Other client loans Other including credit and zero balances GLAA Rm 158 725 168 438 121 720 25 369 121 044 74 499 8 033 Rm 336 140 1 348 910 1 180 186 (48) % 0,21 0,08 1,11 3,59 0,97 0,25 Rm 18 404 11 376 22 096 5 804 16 433 3 534 33 Rm 655 151 2 264 597 1 371 412 (10) GLAA/ECL held at amortised cost 677 828 4 052 0,60 77 680 5 440 134 Nedbank Group Annual Results 2023 GLAA/ECL held at amortised cost 682 464 4 482 0,66 77 082 5 242 GLAA, ECL and coverage, by product 2023 Residential mortgages Commercial mortgages Instalment debtors Credit cards and overdrafts Term loans Other client loans Other including credit and zero balances 2022 Residential mortgages Commercial mortgages Instalment debtors Credit cards and overdrafts Term loans Other client loans Other including credit and zero balances GLAA Rm 159 354 173 806 135 904 25 370 115 751 64 142 8 137 GLAA Rm 158 725 168 438 121 720 25 369 121 044 74 499 8 033 ECL Coverage GLAA ECL Coverage Rm 368 201 1 692 902 1 167 209 (57) Rm 336 140 1 348 910 1 180 186 (48) % 0,23 0,12 1,24 3,56 1,01 0,33 % 0,21 0,08 1,11 3,59 0,97 0,25 Rm 23 975 11 404 19 997 4 877 14 682 2 092 55 Rm 18 404 11 376 22 096 5 804 16 433 3 534 33 Rm 746 155 1 951 846 1 268 285 (9) Rm 655 151 2 264 597 1 371 412 (10) Stage 1 Stage 2 ECL Coverage GLAA ECL Coverage % 3,11 1,36 9,76 17,35 8,64 13,62 6,80 % 3,56 1,33 10,25 10,29 8,34 11,66 7,00 GLAA/ECL held at amortised cost 677 828 4 052 0,60 77 680 5 440 Stage 1 Stage 2 Stage 3 Total GLAA Rm 15 114 14 242 8 575 5 092 13 066 2 055 37 58 181 GLAA Rm 10 760 14 024 7 766 4 373 11 850 2 867 35 51 675 ECL Rm 3 580 2 078 4 015 2 890 6 786 530 (1) Coverage % 23,69 14,59 46,82 56,76 51,94 25,79 19 878 34,17 Stage 3 ECL Rm 2 417 2 360 3 395 2 760 6 256 530 (1) 17 717 Coverage % 22,46 16,83 43,72 63,11 52,79 18,49 34,29 GLAA Rm 198 443 199 452 164 476 35 339 143 499 68 289 8 229 817 727 GLAA Rm 187 889 193 838 151 582 35 546 149 327 80 900 8 101 807 183 ECL Rm 4 694 2 434 7 658 4 638 9 221 1 024 (67) 29 602 Total ECL Rm 3 408 2 651 7 007 4 267 8 807 1 128 (59) 27 209 Coverage % 2,37 1,22 4,66 13,12 6,43 1,50 3,62 Coverage % 1,81 1,37 4,62 12,00 5,90 1,39 3,37 135 Nedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Economic scenarios Scenario Probability weighting (%) Total ECL allowance Difference to weighted scenarios Percentage difference to weighted scenarios (%) 2023 Economic measures GDP Base case 50 30 330 (56) (0,2) Prime Mild stress 21 30 611 225 0,7 Prime HPI GDP Positive outcome 21 30 100 (286) (0,9) Prime HPI GDP High stress 8 30 898 512 1,7 Prime HPI GDP Weighted scenarios 100 30 386 1 Forecast at 31 December 2023. HPI 2022 Economic forecast1 (%) 2024 2025 2026 1,1 10,8 3,2 0,1 11,5 2,4 2,1 10,5 4,0 (0,8) 12,3 1,8 1,6 10,3 3,5 1,3 10,8 2,6 1,9 10,0 4,6 1,0 11,5 1,8 1,4 10,3 4,2 1,1 10,5 3,3 1,9 9,8 5,4 0,8 11,0 2,4 Scenario Probability weighting (%) Total ECL allowance Difference to weighted scenarios Percentages difference to weighted scenarios (%) Economic measures GDP Base case 50 27 817 (76) (0,3) Prime Mild stress 21 28 122 229 0,8 Prime HPI GDP HPI GDP Positive outcome 21 27 630 (263) (0,9) Prime High stress 8 28 446 553 2,0 Prime HPI HPI GDP Economic forecast1 (%) 2023 2024 2025 1,3 11,0 2,5 (0,1) 11,8 2,1 1,9 10,0 3,3 (1,2) 12,8 1,6 1,8 10,5 3,0 0,4 12,0 2,4 2,3 9,8 3,9 (0,5) 12,8 1,7 1,7 10,5 3,6 1,0 12,3 2,7 2,3 9,8 4,7 0,8 12,8 1,8 Weighted scenarios 100 27 893 1 Forecast at 31 December 2022. 136 Nedbank Group Annual Results 2023 Climate-related disclosures Rm % of GLAA 2023 2022 Change 2023 2022 Thermal coal1 Limit2 Drawn exposure Upstream oil3 Limit2 Drawn exposure Upstream gas3 Limit2 Drawn exposure 2 296 1 233 2 324 1 002 (28) 231 18 902 12 479 19 592 11 081 (690) 1 398 4 632 1 525 1 698 1 380 2 934 145 Non-renewable-power-generation exposure Limit2 Drawn exposure 8 093 4 049 9 964 5 375 (1 871) (1 326) Renewable Energy Independent Power Producer Procurement Programme Limit2 Drawn exposure Private power generation – CIB Limit2 Drawn exposure Private power generation – RBB Limit2 Drawn exposure Private power generation – NAR Limit2 Drawn exposure African renewable energy projects Limit2 Drawn exposure Total renewable energy Limit2 Drawn exposure 41 155 26 844 3 371 2 107 561 561 94 56 376 285 34 910 25 941 1 575 735 220 220 91 68 402 304 6 245 903 1 796 1 372 341 341 3 (12) (26) (19) 45 557 29 853 37 198 27 268 8 359 2 585 1 Excludes derivative products and environmental guarantees. 2 Limits include all currently committed facilities approved to clients in respective portfolios, aligned with the Nedbank Energy Policy. 3 Includes all limits and exposures, including all products and derivatives, aligned with the Nedbank Energy Policy. 0,3 0,1 2,1 1,4 0,5 0,2 0,9 0,5 4,7 3,0 0,4 0,2 0,1 0,1 0,0 0,0 0,0 0,0 5,1 3,4 0,3 0,1 2,3 1,3 0,2 0,2 1,2 0,6 4,0 3,0 0,2 0,1 0,0 0,0 0,0 0,0 0,0 0,0 4,3 3,2 137 Nedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive 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 are 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. Loans and advances (Rm) Net balance at 31 December 2022 New loans and advances originated Loans and advances written off Repayments net of readvances, capitalised interest, fees and ECL remeasurements1 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 2023 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 Stage 1 Stage 2 Stage 3 Total GLAA ECL Amortised cost GLAA ECL GLAA ECL cost GLAA ECL Amortised Amortised cost 669 795 331 612 (281 155) 29 812 (51 326) (20 953) (3 458) 4 197 3 542 5 182 651 (3 222) (5 791) 57 665 598 328 070 – (286 337) 29 161 (48 104) (15 162) (3 515) 77 647 5 522 72 125 51 640 17 827 33 813 799 082 27 546 771 536 (16 696) (27 436) 56 625 (13 576) 463 671 (452) 3 635 (4 104) (10 215) (10 478) (2 376) (5 299) (10 215) 2 823 (199) (413) 9 895 249 (9 472) 34 529 331 612 3 542 328 070 (10 215) (10 215) (13 301) (308 329) 8 676 (317 005) (2 177) (4 886) 24 634 – – – – – – – 1 462 343 94 (2 652) 307 (2 959) 674 327 4 616 669 711 77 027 5 273 71 754 58 144 19 967 38 177 809 498 29 856 779 642 8 137 8 137 55 55 37 37 8 229 8 229 682 464 4 616 677 848 77 082 5 273 71 809 58 181 19 967 38 214 817 727 29 856 787 871 53 884 36 174 10 699 (471) 58 53 826 36 174 10 699 (471) 1 793 64 1 729 1 415 408 1 007 530 57 092 36 174 10 699 (471) 56 562 36 174 10 699 (471) 782 750 4 674 778 076 78 875 5 337 73 538 59 596 20 375 39 221 921 221 30 386 890 835 (58) (134) 58 134 (64) (31) (408) (89) 408 89 – – (530) (254) 530 254 – – – – – – – – – – – – Amortised cost – – (17 367) (26 984) 52 990 – – – 64 31 Loans and advances at 31 December 2023 782 750 4 482 778 268 78 875 5 242 73 633 59 596 19 878 39 718 921 221 29 602 891 619 138 Nedbank Group Annual Results 2023 Reconciliation of loss allowance relating to 'financial assets measured at amortised cost' and FVOCI because of changes in the associated ECL are 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 Loans and advances (Rm) Net balance at 31 December 2022 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 Total credit and zero balances Balance at 31 December 2023 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 669 795 331 612 (281 155) 29 812 (51 326) (20 953) (3 458) 53 884 36 174 10 699 (471) 4 197 3 542 5 182 651 (3 222) (5 791) 57 665 598 328 070 – (286 337) 29 161 (48 104) (15 162) (3 515) 53 826 36 174 10 699 (471) (58) (134) 58 134 Stage 1 Stage 2 Stage 3 Total GLAA ECL Amortised cost GLAA ECL Amortised cost GLAA ECL Amortised cost GLAA ECL Amortised cost 77 647 5 522 72 125 51 640 17 827 33 813 799 082 27 546 771 536 – – (17 367) (26 984) 52 990 (10 215) (10 478) (2 376) (5 299) (9 472) 34 529 671 (452) 3 635 (4 104) 1 462 343 (10 215) 2 823 (199) (413) 9 895 249 – – 331 612 3 542 328 070 (10 215) (10 215) – (13 301) (308 329) 8 676 (317 005) (2 177) (4 886) 24 634 – – – – – – – – – 94 (2 652) 307 (2 959) (16 696) (27 436) 56 625 (13 576) 463 674 327 4 616 669 711 77 027 5 273 71 754 58 144 19 967 38 177 809 498 29 856 779 642 8 137 8 137 55 55 37 37 8 229 – 8 229 682 464 4 616 677 848 77 082 5 273 71 809 58 181 19 967 38 214 817 727 29 856 787 871 58 1 793 64 1 729 1 415 408 1 007 – – – – – – 57 092 36 174 10 699 (471) 530 – – – 56 562 36 174 10 699 (471) 782 750 4 674 778 076 78 875 5 337 73 538 59 596 20 375 39 221 921 221 30 386 890 835 (64) (31) 64 31 (408) (89) 408 89 – – (530) (254) 530 254 Loans and advances at 31 December 2023 782 750 4 482 778 268 78 875 5 242 73 633 59 596 19 878 39 718 921 221 29 602 891 619 139 Nedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive 5 188 (7 781) (5 066) (3 762) 120 170 120 170 53 884 36 174 8 647 CIB, excluding Property Finance (Rm) Net balance at 31 December 2022 New loans and advances originated Loans and advances written off GLAA 136 572 138 862 Repayments net of readvances, capitalised interest, fees and ECL remeasurements (143 843) 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 2023 GLAA for assets held at FVOCI Trading book GLAA held at FVTPL Banking book GLAA held at FVTPL Total GLAA/ECL ECL on loans at FVOCI Off-balance-sheet ECL Stage 1 Stage 2 Stage 3 Total ECL 368 1 013 (630) 234 (230) (455) 12 312 312 58 Amortised cost 136 204 137 849 – (143 213) 4 954 (7 551) (4 611) (3 774) 119 858 – 119 858 53 826 36 174 8 647 GLAA 12 849 (6 281) (4 734) 8 942 (789) 153 10 140 10 140 1 793 GLAA 6 945 (1 352) (4 296) 6 409 (762) ECL 435 (72) (126) 260 (120) 6 383 383 64 ECL 71 (15) 8 4 (15) – – – – – – – – – Amortised cost GLAA ECL cost GLAA ECL Amortised 12 414 7 054 1 624 5 430 156 475 Amortised cost 154 048 137 849 – – 138 862 (132) 2 427 1 013 (132) (4 428) (154 897) (1 047) (153 850) (6 209) (4 608) 8 682 (669) 147 (132) (4 773) (454) (1 161) 5 855 110 (132) (345) (108) (30) 575 8 (346) (1 131) 5 280 102 (3 499) 26 (3 525) 9 757 6 499 1 592 4 907 136 809 2 287 134 522 9 757 1 729 6 499 1 415 1 592 4 907 136 809 2 287 134 522 408 1 007 530 57 092 36 174 8 647 56 562 36 174 8 647 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Amortised cost GLAA ECL cost GLAA ECL Amortised Amortised cost 6 874 11 577 1 858 9 719 170 016 2 014 168 002 (1 568) (1 568) (1 568) (1 568) (1 064) (56 615) 958 (57 573) 66 074 29 66 045 (1 360) (4 281) 6 405 (747) (100) (273) (4) 837 964 (3) 15 (270) (4) 822 Loans and advances at 31 December 2023 218 875 253 218 622 11 933 368 11 565 7 914 1 519 6 395 238 722 2 140 236 582 Stage 1 Stage 2 Stage 3 Total Property Finance (Rm) Net balance at 31 December 2022 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 Balance at 31 December 2023 Banking book GLAA held at FVTPL GLAA 151 494 66 074 (55 163) 4 569 (6 405) (75) ECL 85 29 (14) 18 (4) Amortised cost 151 409 66 045 (55 149) 4 551 (6 401) (75) – 160 494 114 160 380 6 944 53 6 891 10 469 1 266 9 203 177 907 1 433 176 474 – Loans and advances at 31 December 2023 160 494 114 160 380 6 944 53 6 891 10 469 1 266 9 203 177 907 1 433 176 474 140 218 875 370 218 505 11 933 447 11 486 7 914 2 000 5 914 238 722 2 817 235 905 (58) (59) 58 59 (64) (15) 64 15 (408) (73) 408 73 (530) (147) 530 147 Nedbank Group Annual Results 2023 Repayments net of readvances, capitalised interest, fees and ECL remeasurements (143 843) CIB, excluding Property Finance (Rm) Net balance at 31 December 2022 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 Total credit and zero balances Balance at 31 December 2023 GLAA for assets held at FVOCI Trading book GLAA held at FVTPL Banking book GLAA held at FVTPL Total GLAA/ECL ECL on loans at FVOCI Off-balance-sheet ECL Property Finance (Rm) Net balance at 31 December 2022 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 2023 Banking book GLAA held at FVTPL Repayments net of readvances, capitalised interest, fees and ECL remeasurements GLAA 136 572 138 862 5 188 (7 781) (5 066) (3 762) 120 170 120 170 53 884 36 174 8 647 GLAA 151 494 66 074 (55 163) 4 569 (6 405) (75) ECL 368 1 013 (630) 234 (230) (455) 12 312 312 58 Amortised cost 136 204 137 849 – (143 213) 4 954 (7 551) (4 611) (3 774) 119 858 – 119 858 53 826 36 174 8 647 (58) (59) 58 59 ECL 85 29 (14) 18 (4) Amortised cost 151 409 66 045 (55 149) 4 551 (6 401) (75) – – Stage 1 Stage 2 Stage 3 Total GLAA 12 849 (6 281) (4 734) 8 942 (789) 153 10 140 10 140 1 793 ECL 435 (72) (126) 260 (120) 6 383 383 64 Amortised cost GLAA ECL Amortised cost GLAA ECL Amortised cost 12 414 7 054 1 624 5 430 156 475 – – (6 209) (4 608) 8 682 (669) 147 (132) (4 773) (454) (1 161) 5 855 110 (132) (345) (108) (30) 575 8 – – 138 862 (132) 2 427 1 013 (132) 154 048 137 849 – (4 428) (154 897) (1 047) (153 850) (346) (1 131) 5 280 102 – – – – – – – – – (3 499) 26 (3 525) 9 757 6 499 1 592 4 907 136 809 2 287 134 522 – 9 757 1 729 – – – – – – 6 499 1 415 1 592 4 907 136 809 2 287 134 522 408 1 007 – – 57 092 36 174 8 647 530 – – 56 562 36 174 8 647 Loans and advances at 31 December 2023 218 875 253 218 622 11 933 368 11 565 7 914 1 519 6 395 238 722 2 140 236 582 218 875 370 218 505 11 933 447 11 486 7 914 2 000 5 914 238 722 2 817 235 905 (64) (15) 64 15 (408) (73) 408 73 – – (530) (147) 530 147 Stage 1 Stage 2 Stage 3 Total Loans and advances at 31 December 2023 160 494 114 160 380 6 944 53 6 891 10 469 1 266 9 203 177 907 1 433 176 474 160 494 114 160 380 6 944 53 6 891 10 469 1 266 9 203 177 907 1 433 176 474 – – – – – GLAA 6 945 (1 352) (4 296) 6 409 (762) ECL 71 8 (15) 4 (15) Amortised cost GLAA ECL Amortised cost GLAA ECL Amortised cost 6 874 11 577 1 858 9 719 170 016 2 014 168 002 – – (1 360) (4 281) 6 405 (747) – (1 568) (1 568) (100) (273) (4) 837 964 (3) 15 – – 66 074 29 66 045 (1 568) (1 568) – (1 064) (56 615) 958 (57 573) (270) (4) 822 – – – – – – – – – – – – – 141 Nedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Stage 1 Stage 2 Stage 3 Total Commercial Banking (Rm) Net balance at 31 December 2022 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 74 322 26 907 (20 073) 4 276 (6 450) (2 488) ECL 175 262 (70) 120 (54) (155) Amortised cost 74 147 26 645 – (20 003) 4 156 (6 396) (2 333) Amortised cost GLAA ECL cost GLAA ECL Amortised 10 258 4 745 1 306 3 439 89 507 26 907 (243) – – (2 079) (23 919) (24 361) Amortised cost 87 844 26 645 1 663 262 (243) 442 – – – (243) (1 566) (439) (415) 4 551 (243) 513 (66) (78) 180 (373) (337) 4 371 Balance at 31 December 2023 76 494 278 76 216 9 125 234 8 891 6 633 1 612 5 021 92 252 2 124 90 128 Off-balance-sheet impairment allowance (9) 9 (4) 4 (9) 9 (22) 22 Loans and advances at 31 December 2023 76 494 269 76 225 9 125 230 8 895 6 633 1 603 5 030 92 252 2 102 90 150 Stage 1 Stage 2 Stage 3 Total Retail — Mortgage loans (Rm) Net balance at 31 December 2022 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 133 080 23 502 (10 100) 5 582 (12 354) (3 792) ECL 284 166 908 15 (412) (641) Amortised cost 132 796 23 336 – (11 008) 5 567 (11 942) (3 151) Amortised cost GLAA ECL cost GLAA ECL Amortised Amortised cost 16 640 8 758 1 826 6 932 159 110 2 742 156 368 – – 23 502 (338) 166 (338) 23 336 (11 918) 1 328 (13 246) (338) (935) (505) (1 524) 7 641 (338) 96 (2) (54) 1 363 (1 031) (503) (1 470) 6 278 135 918 320 135 598 21 341 687 20 654 13 097 2 891 10 206 170 356 3 898 166 458 Total credit and zero balances/Off-balance-sheet impairment allowance 173 173 4 4 7 7 184 184 Loans and advances at 31 December 2023 136 091 320 135 771 21 345 687 20 658 13 104 2 891 10 213 170 540 3 898 166 642 Stage 1 Stage 2 Stage 3 Total GLAA 10 440 (2 280) (3 837) 6 865 (2 063) GLAA 17 272 (883) (5 077) 13 878 (3 849) ECL 182 (1) (54) 132 (25) ECL 632 324 (13) 466 (722) – – (2 279) (3 783) 6 733 (2 038) – – (1 207) (5 064) 13 412 (3 127) Retail — Instalment debtors (Rm) Net balance at 31 December 2022 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 105 464 52 252 (32 730) 8 494 (10 872) (4 771) ECL 1 307 911 1 732 199 (1 167) (1 346) Amortised cost 104 157 51 341 – (34 462) 8 295 (9 705) (3 425) Loans and advances at 31 December 2023 117 837 1 636 116 201 17 190 1 939 15 251 8 017 4 205 143 044 7 387 135 657 GLAA ECL GLAA ECL cost GLAA ECL Amortised 19 736 2 240 17 496 7 311 3 228 4 083 132 511 52 252 (2 611) – – Amortised cost 6 775 125 736 911 51 341 (2 611) 2 312 (3 622) (39 108) (41 420) Amortised cost – – (3 336) (7 884) 11 223 (2 248) (3 385) (8 070) 12 565 (3 656) (49) (186) 1 342 (1 408) (2 611) (2 993) (424) (1 693) 8 427 (2 611) 629 (13) (175) 2 754 3 812 (411) (1 518) 5 673 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 142 Nedbank Group Annual Results 2023 Stage 1 Stage 2 Stage 3 Total – – 89 507 26 907 (243) 10 258 4 745 1 306 3 439 (2 079) (23 919) (373) (337) 4 371 – – – Amortised cost GLAA ECL Amortised cost GLAA ECL Amortised cost 1 663 262 (243) 442 – – – 87 844 26 645 – (24 361) – – – GLAA 10 440 (2 280) (3 837) 6 865 (2 063) ECL 182 (1) (54) 132 (25) – – (2 279) (3 783) 6 733 (2 038) (243) (1 566) (439) (415) 4 551 (243) 513 (66) (78) 180 Repayments net of readvances, capitalised interest, fees and ECL remeasurements Repayments net of readvances, capitalised interest, fees and ECL remeasurements Commercial Banking (Rm) Net balance at 31 December 2022 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 2022 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 2022 New loans and advances originated Loans and advances written off Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 GLAA 74 322 26 907 (20 073) 4 276 (6 450) (2 488) GLAA 133 080 23 502 (10 100) 5 582 (12 354) (3 792) GLAA 105 464 52 252 (32 730) 8 494 (10 872) (4 771) ECL 175 262 (70) 120 (54) (155) Amortised cost 74 147 26 645 – (20 003) 4 156 (6 396) (2 333) ECL 284 166 908 15 (412) (641) Amortised cost 132 796 23 336 – (11 008) 5 567 (11 942) (3 151) ECL 1 307 911 1 732 199 (1 167) (1 346) Amortised cost 104 157 51 341 – (34 462) 8 295 (9 705) (3 425) Balance at 31 December 2023 76 494 278 76 216 9 125 234 8 891 6 633 1 612 5 021 92 252 2 124 90 128 Off-balance-sheet impairment allowance (9) 9 (4) 4 (9) 9 – (22) 22 Loans and advances at 31 December 2023 76 494 269 76 225 9 125 230 8 895 6 633 1 603 5 030 92 252 2 102 90 150 Stage 1 Stage 2 Stage 3 Total GLAA 17 272 (883) (5 077) 13 878 (3 849) ECL 632 324 (13) 466 (722) Amortised cost GLAA ECL Amortised cost GLAA ECL Amortised cost 16 640 8 758 1 826 6 932 159 110 2 742 156 368 – – (1 207) (5 064) 13 412 (3 127) (338) (935) (505) (1 524) 7 641 (338) 96 (2) (54) 1 363 – – 23 502 (338) 166 (338) 23 336 – (1 031) (503) (1 470) 6 278 (11 918) 1 328 (13 246) – – – – – – – – – Total credit and zero balances/Off-balance-sheet impairment allowance 173 173 4 4 7 7 184 – 184 Loans and advances at 31 December 2023 136 091 320 135 771 21 345 687 20 658 13 104 2 891 10 213 170 540 3 898 166 642 135 918 320 135 598 21 341 687 20 654 13 097 2 891 10 206 170 356 3 898 166 458 Stage 1 Stage 2 Stage 3 Total GLAA ECL Amortised cost GLAA ECL Amortised cost GLAA ECL Amortised cost Repayments net of readvances, capitalised interest, fees and ECL remeasurements (3 385) (8 070) 12 565 (3 656) (49) (186) 1 342 (1 408) – – (3 336) (7 884) 11 223 (2 248) (2 611) (2 993) (424) (1 693) 8 427 Loans and advances at 31 December 2023 117 837 1 636 116 201 17 190 1 939 15 251 8 017 (2 611) 629 (13) (175) 2 754 3 812 6 775 125 736 911 51 341 (2 611) 2 312 – (41 420) – – – – – – (3 622) (39 108) (411) (1 518) 5 673 – – – 19 736 2 240 17 496 7 311 3 228 4 083 132 511 52 252 (2 611) – – 4 205 143 044 7 387 135 657 143 Nedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Stage 1 Stage 2 Stage 3 Total Retail — Card, term and other (Rm) Net balance at 31 December 2021 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 25 350 12 851 (7 213) 782 (4 309) (4 259) ECL 1 721 979 3 302 62 (1 292) (3 044) Amortised cost 23 629 11 872 – (10 515) 720 (3 017) (1 215) ECL Amortised cost GLAA ECL cost GLAA ECL Amortised Amortised cost 1 510 4 341 9 134 6 804 2 330 – – (1 931) (643) 3 404 (488) (5 111) 211 (84) (458) 6 492 638 (55) 1 363 (1 745) 40 335 12 851 (5 111) (8 295) 10 035 979 (5 111) 5 032 30 300 11 872 (13 327) – – (881) (77) (387) 1 703 – – – 23 202 1 728 21 474 6 394 1 711 4 683 10 184 2 688 39 780 10 935 28 845 Total credit and zero balances/Off-balance-sheet impairment allowance 7 813 (57) 7 870 40 (10) 50 29 (1) 30 7 882 (68) 7 950 Loans and advances at 31 December 2022 31 015 1 671 29 344 6 434 1 701 4 733 10 213 7 495 2 718 47 662 10 867 36 795 Stage 1 Stage 2 Stage 3 Total GLAA 5 851 (1 293) (698) 4 767 (2 233) GLAA 1 842 (306) (388) 1 707 (112) 35 2 778 GLAA 1 272 (915) (337) 591 (112) 284 783 11 794 (5 111) 1 092 (7) (71) 4 789 7 496 ECL 299 (62) (35) (1) 63 13 ECL 881 (150) (81) (1) (6) 153 228 (6) – – – – – – – – – – – – – – – – – – 5 – Amortised cost 834 – – 76 (113) (23) 382 (8) GLAA 27 846 6 094 (62) (8 056) – – – 1 185 ECL 370 64 (62) (29) Amortised cost 27 476 6 030 (8 027) 1 180 Amortised cost 21 686 4 986 (5 370) cost GLAA ECL 1 041 22 902 5 102 (150) – – – 1 216 116 (150) (173) – – – (281) (5 543) (301) 275 (576) 166 (17) 183 (83) (15) 127 – – 8 6 2 709 1 425 277 1 148 27 007 348 26 659 – 2 052 2 052 Amortised Amortised ECL 29 (7) (1) 20 (7) (3) 31 ECL 120 (29) (3) 47 (61) (2) 72 (2) 70 Amortised cost GLAA 1 813 1 133 (62) 41 (113) (24) 445 5 GLAA 1 922 (150) (362) (84) (21) 280 236 (299) (387) 1 687 (105) – – – – cost 1 152 – – (886) (334) 544 (51) 286 711 13 724 ECL 42 64 13 1 (19) (56) (5) 40 Amortised cost 24 829 6 030 – (7 804) 500 (1 664) (277) 1 150 22 764 2 052 40 24 816 2 778 31 2 709 1 425 277 1 148 29 059 348 28 711 Stage 1 Stage 2 Stage 3 Total ECL 215 116 (63) 4 (41) (92) 49 Amortised cost 19 493 4 986 – (4 203) 417 (529) (76) (870) 19 406 188 19 218 155 (9) 164 1 821 1 024 797 22 010 1 284 20 726 421 (570) (168) (821) Wealth (Rm) Net balance at 31 December 2022 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 2023 Nedbank Africa Regions (Rm) Net balance at 31 December 2022 New loans and advances originated Loans and advances written off GLAA 24 871 6 094 (7 791) 501 (1 683) (333) 1 145 22 804 2 052 24 856 GLAA 19 708 5 102 Repayments net of readvances, capitalised interest, fees and ECL remeasurements (4 266) Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Foreign exchange and other movements Net balances Off-balance-sheet ECL Loans and advances at 31 December 2023 19 561 179 19 382 1 821 1 018 803 22 176 1 267 20 909 144 Nedbank Group Annual Results 2023 Stage 1 Stage 2 Stage 3 Total GLAA 5 851 (1 293) (698) 4 767 (2 233) ECL Amortised cost GLAA ECL Amortised cost GLAA ECL Amortised cost 1 510 4 341 9 134 6 804 2 330 – – (1 931) (643) 3 404 (488) (5 111) 211 (84) (458) 6 492 638 (55) 1 363 (1 745) (5 111) 1 092 (7) (71) 4 789 7 496 – – (881) (77) (387) 1 703 40 335 12 851 (5 111) (8 295) 10 035 979 (5 111) 5 032 30 300 11 872 – (13 327) – – – – – – – – – 23 202 1 728 21 474 6 394 1 711 4 683 10 184 2 688 39 780 10 935 28 845 Total credit and zero balances/Off-balance-sheet impairment allowance 7 813 (57) 7 870 40 (10) 50 29 (1) 30 7 882 (68) 7 950 Loans and advances at 31 December 2022 31 015 1 671 29 344 6 434 1 701 4 733 10 213 7 495 2 718 47 662 10 867 36 795 Stage 1 Stage 2 Stage 3 Total GLAA 1 842 (306) (388) 1 707 (112) 35 2 778 ECL 29 (7) (1) 20 (7) (3) 31 Amortised cost GLAA 1 813 1 133 – – (299) (387) 1 687 (105) – (62) 41 (113) (24) 445 5 ECL 299 (62) (35) (1) 63 13 Amortised cost 834 – – 76 (113) (23) 382 (8) GLAA 27 846 6 094 (62) (8 056) – – – 1 185 ECL 370 64 (62) (29) – – – 5 Amortised cost 27 476 6 030 – (8 027) – – – 1 180 2 709 1 425 277 1 148 27 007 348 26 659 – – 2 052 – 2 052 40 24 816 2 778 31 2 709 1 425 277 1 148 29 059 348 28 711 Stage 1 Stage 2 Stage 3 Total Repayments net of readvances, capitalised interest, fees and ECL remeasurements Repayments net of readvances, capitalised interest, fees and ECL remeasurements Retail — Card, term and other (Rm) Net balance at 31 December 2021 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 2022 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 2023 Nedbank Africa Regions (Rm) Net balance at 31 December 2022 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 GLAA 25 350 12 851 (7 213) 782 (4 309) (4 259) GLAA 24 871 6 094 (7 791) 501 (1 683) (333) 1 145 22 804 2 052 24 856 GLAA 19 708 5 102 421 (570) (168) (821) ECL 1 721 979 3 302 62 (1 292) (3 044) Amortised cost 23 629 11 872 – (10 515) 720 (3 017) (1 215) ECL 42 64 13 1 (19) (56) (5) 40 ECL 215 116 (63) 4 (41) (92) 49 Amortised cost 24 829 6 030 – (7 804) 500 (1 664) (277) 1 150 22 764 2 052 Amortised cost 19 493 4 986 – (4 203) 417 (529) (76) (870) Repayments net of readvances, capitalised interest, fees and ECL remeasurements (4 266) Loans and advances at 31 December 2023 19 561 179 19 382 19 406 188 19 218 155 (9) 164 GLAA 1 272 (915) (337) 591 (112) 284 783 11 794 ECL 120 (29) (3) 47 (61) (2) 72 (2) 70 – – (886) (334) 544 (51) 286 711 13 724 Amortised cost GLAA 1 152 1 922 ECL 881 (150) (81) (1) (6) 153 228 Amortised cost GLAA ECL Amortised cost 1 041 22 902 – – 5 102 (150) (281) (5 543) (83) (15) 127 8 – – – 1 216 116 (150) (173) – – – 21 686 4 986 – (5 370) – – – (301) 275 (576) (150) (362) (84) (21) 280 236 1 821 1 024 797 22 010 1 284 20 726 (6) 6 166 (17) 183 1 821 1 018 803 22 176 1 267 20 909 145 Nedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive 8 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 2023 7 290 1 914 1 118 1 585 2 673 28 3 238 586 163 2 489 10 556 13 648 3 083 2022 6 612 1 598 1 176 1 592 2 246 347 2 930 526 163 2 241 9 889 11 851 3 725 16 731 15 576 27 287 25 465 2023 2022 13 045 12 385 10 556 2 489 1,0 6,8 9 889 2 496 1,0 7,4 Rm Rm Rm % % • Equity risk in the banking book is assumed primarily in CIB, which actively makes private equity investments with clearly defined strategies. • Additional investments are undertaken in liquid funds for investment purposes and for operational requirements. • The equity portfolio that is held at fair value increased by R667m year on year, due largely to positive revaluations and new investments. • 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 2023 9 Investments in associate companies Equity-accounted earnings Rm Carrying amount Rm Net exposure to/(from) associates1 Rm Name of company and nature of business 2023 2022 2023 2022 2023 2022 Associates Listed ETI2 Unlisted Equity investments: Tracker Technology Holdings Proprietary Limited Other equity investments Other strategic investments 1 386 779 1 248 1 286 (249) 782 35 (1) 29 50 14 36 565 205 471 530 238 442 929 492 106 1 615 437 67 2 901 Total 1 449 879 2 489 2 496 1 278 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 2023 remains unchanged at 21,2%. Accounting recognition of ETI Rm Opening carrying value Share of associate gains Share of other comprehensive losses Foreign currency translation Dividends Closing carrying value pre-impairment provision Impairment provision Closing carrying value 2023 2022 3 036 1 386 (1 481) 168 (111) 2 998 (1 750) 4 022 779 (1 822) 190 (133) 3 036 (1 750) 1 248 1 286 The associate income includes our share of ETI's earnings from 1 October 2022 to 30 September 2023, in line with our policy of accounting for our share of ETI's attributable earnings a quarter in arrear, adjusted for any significant transactions or events that occurred between 1 October 2023 and 31 December 2023. The market value of the group’s investment in ETI, based on its quoted share price, was R2,2bn on 31 December 2023 and R1,5bn on 29 February 2024. 147 Nedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive 10 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 Foreign exchange and other moves Commissioned during the year Impairments Closing balance 148 2023 7 944 4 011 22 2022 8 316 4 292 41 11 977 12 649 2023 2022 6 578 1 916 1 970 2 092 600 1 366 690 248 319 109 6 958 1 882 1 903 2 567 606 1 358 574 422 243 119 7 944 8 316 6 958 320 1 221 8 (1 850) (79) 7 763 101 1 018 (4) (1 864) (56) 6 578 6 958 1 358 1 237 (2) (1 221) (6) 1 138 1 279 (4) (1 018) (37) 1 366 1 358 Nedbank Group Annual Results 2023 149 NotesNedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive11 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: – Banking amounts owed to depositors – Trading amounts owed to depositors Total amounts owed to depositors Change % 2 (13) 6 6 5 (20) 22 (1) 7 100 1 5 5 3 5 Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre 2023 2022 2023 113 231 36 466 110 590 42 095 9 402 2022 8 672 768 158 726 686 399 550 399 552 435 331 409 270 155 884 162 380 75 890 79 479 72 277 99 734 12 392 67 885 177 458 145 405 163 389 15 586 87 459 134 127 29 032 127 142 (3) 13 619 29 180 118 892 (1 367) 13 546 19 428 20 116 13 120 13 546 2023 2022 2023 2022 2023 2022 2023 89 206 14 123 88 662 13 796 323 465 290 669 248 022 56 475 9 354 9 614 9 489 223 350 49 835 9 459 8 025 8 987 2 287 21 440 24 462 1 738 234 1 124 23 2 275 27 422 16 473 1 124 262 1 119 21 21 366 13 968 10 050 12 150 903 19 764 5 285 1 827 2 602 92 3 438 499 10 758 877 18 819 9 567 5 732 2 385 1 135 56 3 817 2022 223 1 173 5 169 999 186 917 9 179 729 123 704 115 075 (3) (1 367) 1 087 645 1 039 622 441 500 441 886 436 283 402 114 48 212 46 191 36 846 34 327 124 804 115 104 1 029 746 983 582 383 601 385 846 436 283 402 114 48 212 46 191 36 846 34 327 124 804 115 104 57 899 56 040 57 899 56 040 1 087 645 1 039 622 441 500 441 886 436 283 402 114 48 212 46 191 36 846 34 327 124 804 115 104 Market share according to BA900 Household deposits1 (2019–2023) (%) Non-financial corporate deposits2 (2019–2023) (%) , 8 4 1 , 6 4 1 , 4 2 2 , 7 2 2 , 0 9 1 , 8 8 1 , 2 1 2 , 0 1 2 , 6 2 2 , 8 2 2 , 5 7 1 , 3 6 1 , 9 7 2 , 9 8 2 , 7 3 2 , 5 4 2 , 1 7 1 , 5 6 1 , 9 3 1 , 8 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 2023 Other deposits and loan accounts 768 158 726 686 399 550 399 552 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: – Banking amounts owed to depositors – Trading amounts owed to depositors Change % (20) 22 (1) 7 100 2 6 6 5 1 5 5 3 5 113 231 36 466 110 590 42 095 (13) 9 402 2022 8 672 435 331 409 270 155 884 162 380 75 890 79 479 72 277 99 734 12 392 67 885 177 458 145 405 163 389 15 586 87 459 134 127 29 032 127 142 (3) 13 619 29 180 118 892 (1 367) 13 546 19 428 20 116 13 120 13 546 Nedbank Group Corporate and Investment Banking Retail and Business Banking Wealth Nedbank Africa Regions Centre 2023 2022 2023 2023 2022 2023 2022 2023 2022 2023 89 206 14 123 88 662 13 796 323 465 290 669 2 287 21 440 24 462 2 275 27 422 16 473 12 150 903 19 764 248 022 56 475 9 354 9 614 9 489 223 350 49 835 9 459 8 025 8 987 21 366 13 968 10 050 1 738 234 1 124 23 1 124 262 1 119 21 5 285 1 827 2 602 92 3 438 499 10 758 877 18 819 9 567 5 732 2 385 1 135 56 3 817 2022 223 1 173 5 169 999 186 917 9 179 729 123 704 115 075 (3) (1 367) Total amounts owed to depositors 1 087 645 1 039 622 441 500 441 886 436 283 402 114 48 212 46 191 36 846 34 327 124 804 115 104 Total amounts owed to depositors 1 087 645 1 039 622 441 500 441 886 436 283 402 114 48 212 46 191 36 846 34 327 124 804 115 104 1 029 746 983 582 383 601 385 846 436 283 402 114 48 212 46 191 36 846 34 327 124 804 115 104 57 899 56 040 57 899 56 040 Wholesale deposits3 (2019–2023) (%) Foreign currency liabilities4 (2019–2023) (%) , 9 8 1 , 9 9 1 , 3 4 1 , 3 5 1 , 7 4 2 , 7 4 2 , 6 4 2 , 8 4 2 , 5 7 1 , 3 5 1 , 9 3 1 , 2 2 1 , 1 8 1 , 5 7 1 , 1 3 2 , 6 5 2 , 7 5 1 , 2 8 1 , 2 9 2 , 3 6 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 Nedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Liquidity risk and funding Summary of Nedbank Group liquidity risk and funding profile Total sources of quick liquidity Total HQLA1 Other sources of quick liquidity Total sources of quick liquidity (as a percentage of total assets) Long-term funding ratio (3-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 LCR2 Minimum regulatory LCR requirement NSFR3 Minimum regulatory NSFR requirement 2023 2022 285 251 285 688 238 182 47 069 224 963 60 725 21,8 28,4 32 815 2 702 47 777 11,7 2,7 82,0 134,6 100,0 117,3 100,0 22,8 28,4 34 561 2 697 51 903 11,4 2,8 84,9 160,5 100,0 119,1 100,0 Rm Rm Rm % % Rm Rm Rm % % % % % % % 1 Total HQLA includes government securities fair-valued in the trading portfolio or fair-valued for interest-rate risk purposes in the macro fair-value hedge-accounting solution. 2 Only banking and/or deposit-taking entities are included in the group LCR and the group ratio represents a consolidation 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 consolidated HQLA number in the case of all non-South African banking entities. The above values reflect the simple average of daily observations over the quarter ending 31 December 2023 for Nedbank and simple average of the month-end values at 31 October 2023, 30 November 2023 and 31 December 2023 for all non-South African banking entities. 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 well below 100% and a low reliance on interbank and foreign currency funding. • The group's LCR exceeded the minimum regulatory requirement of 100%, with the group maintaining appropriate operational liquidity buffers designed to absorb seasonal, cyclical and systemic volatility. • The consolidated group LCR of 134,6% was calculated using the simple average of daily observations over the quarter ending 31 December 2023 for Nedbank Limited and the simple average of the month-end values at 31 October 2023, 30 November 2023 and 31 December 2023 for all non-South African banking entities. • Nedbank's portfolio of LCR-compliant HQLA measured at fair value (comprising mainly government bonds and treasury bills) increased to a quarterly average of R238,2bn, up from December 2022, when the portfolio amounted to R225,0bn. • The decrease in the LCR to 134,6% (Dec 2022: 160,5%) was primarily attributable to an increase in net cash outflows. The net cash outflows increased in line with the bank's balance sheet growth, which was effectively managed through the increase in HQLA liquidity buffers. • 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 identifies other sources of quick liquidity that 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 R285,3bn at December 2023 and representing 21,8% of total assets. 152 Nedbank Group Annual Results 2023 Nedbank Group LCR exceeds minimum regulatory requirements 125,0 125,7 128,1 160,5 134,6 , 0 8 7 1 , 4 2 4 1 , 9 6 0 2 , 6 4 6 1 , 1 7 0 2 , 7 1 6 1 , 0 5 2 2 , 1 0 4 1 , 2 8 3 2 , 0 7 7 1 2019 2020 2021 2022 2023 HQLA (Rbn) HQLA (Rbn) LCR (%) Net cash outflows (Rbn) LCR (%) Total sources of quick liquidity (Rbn) Other sources of quick liquidity contribution (%) R47,1bn , 7 7 2 2 , 7 9 4 , 0 8 7 1 , 4 4 5 2 , 5 7 4 , 9 6 0 2 , 2 4 6 2 , 1 7 5 , 1 7 0 2 , 7 5 8 2 , 7 0 6 , 0 5 2 2 2019 2020 2021 2022 Total HQLA Other sources of quick liquidity (0,1)% (22,4)% 5,9% , 3 5 8 2 , 1 7 4 , 2 8 3 2 2023 11,2 15,4 6,2 67,2 Corporate bonds and listed equities Unencumbered trading securities Price-sensitive overnight loans Other assets Nedbank exceeded the minimum regulatory NSFR requirement of 100%, with a December 2023 ratio of 117,3% (Dec 2022: 119,1%). The structural liquidity position of the group remained strong. Nedbank’s primary focus is the optimisation of the balance sheet within the Board risk appetite and Regulatory compliance. Nedbank Group NSFR exceeds minimum regulatory requirements 113,0 112,8 116,1 119,1 117,3 , 7 9 0 7 , 3 8 2 6 , 7 9 4 7 , 5 4 6 6 , 1 7 6 7 , 5 1 6 6 , 7 6 0 8 , 6 7 7 6 , 5 3 3 8 , 6 0 1 7 2019 2020 Available stable funding (Rbn) Available stable funding (Rbn) NSFR (%) 2021 2022 2023 Required stable funding (Rbn) NSFR (%) Required stable funding (Rbn) 153 Nedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive • A strong funding profile was maintained in 2023, with Nedbank recording a three-month average long-term funding ratio of 28,4% 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 23,2%. • Nedbank opportunistically issued R2,8bn of long-term debt via its alternative funding book at a lower cost than senior unsecured debt in 2023, while R4,6bn matured during the year. • Nedbank issued tier 1 capital instruments of R1,0bn during 2023, while it redeemed R750m. The bank also issued tier 2 capital instruments of R2,1bn, while R4,5bn was redeemed in line with the group’s capital plan. • While foreign currency funding reliance remains small, at 2,7% of total deposits, Nedbank continues to focus on growing this funding source in support of funding base diversification, and to meet funding requirements for foreign advances growth. Nedbank Group funding and liquidity profile, underpinned by strong liquidity risk metrics 84,9 28,4 82,0 28,4 91,2 30,2 88,4 25,4 85,6 26,6 , 1 8 1 , 6 8 7 , 1 3 , 3 9 4 – , 7 1 7 , 0 8 4 2019 2020 2021 2022 2023 ) , 6 1 ( ) , 3 6 ( ) 1 4 , ( Loan-to-deposit ratio (%) Annual growth in deposits (Rbn) Three-month average long-term funding ratio (%) Annual growth in capital market issuance, excluding additional tier 1 capital (Rbn) Annual growth in deposits (Rbn) Annual growth in capital market issuance, excluding additional tier 1 capital (Rbn) Loan-to-deposit ratio (%) Three-month average long-term funding ratio (%) The group's 2023 Internal Liquidity Adequacy Assessment Process (ILAAP) and Internal Capital Adequacy Assessment Process (ICAAP) reports were approved by the board and submitted to the PA, in accordance with the annual business-as-usual process. In addition, the group's Recovery Plan (RP), which sets out in detail Nedbank’s approach to dealing with a capital, liquidity and/or business continuity crisis, was approved by the board on 27 October 2023 and incorporates the Nedbank African Regions, Nedbank London Branch and Nedbank Private Wealth International RPs. Exchange rates UK pound to rand US dollar to rand US dollar to naira Rand to naira US dollar to Zimbabwe dollar1 Zimbabwe dollar to rand1 Average Closing Change % 2023 2022 Change % 2023 2022 14 13 49 32 22,94 18,45 636,59 34,36 n/a n/a 20,17 16,36 426,47 26,02 n/a n/a 15 9 98 81 23,54 18,53 911,68 49,21 >100 6114,27 (88) 0,003 20,43 16,98 460,82 27,14 669,25 0,025 1 In terms of hyperinflation accounting, the inflation-indexed income statement is translated at the year-end closing spot exchange rate. 154 Nedbank Group Annual Results 2023 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 Cash flow hedge losses 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 % 2023 2022 115 944 109 547 28 15 651 12 239 15 305 (63) 1 347 168 14 287 (1 391) (179) 190 (1 578) (1 402) 303 281 22 (190) 194 75 27 (317) 102 (419) (242) (1) (97) Transactions with ordinary shareholders (89) (12 878) (6 814) Dividends paid Equity-settled share-based payments Value of employee services (net of deferred tax)3 Share buyback Other transactions3 Transaction with non-controlling shareholders Additional tier 1 capital instruments Other movements Balance at the end of the year (8 569) (7 788) 1 154 (419) (5 044) 244 250 979 (25) 20 70 900 2 >100 (72) (100) 3 119 211 115 944 1 Exchange differences on translating foreign operations as shown in the statement of comprehensive income of R1 492m gain (2022: R2m loss). 2 Share of other comprehensive income of investments accounted for using the equity method as shown in the statement of comprehensive income of R1 556m (2022: R1 821m). 3 Share movements in terms of long-term incentive and BEE schemes were previously included in 'Other transactions'. Comparatives have been adjusted to disclose these movements separately in the current year. Movements in group foreign currency translation reserve Balance at the beginning of the year Foreign currency translation reserve (FCTR) ETI Nedbank Mozambique Nedbank Private Wealth Limited Nedbank London branch Other subsidiaries Change % 96 2023 (2 916) (63) 2022 (1 508) (1 408) (1 410) (1 212) 120 368 650 209 63 (55) (114) (90) Balance at the end of the year (2) (2 979) (2 916) 155 Nedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Capital management Regulatory capital adequacy and leverage Capital ratios (including unappropriated profit) (%) Nedbank Group Nedbank Limited 15,0 2,2 1,3 11,5 14,9 2,8 1,2 10,9 17,2 2,9 1,5 12,8 18,1 2,6 1,5 16,9 1,9 1,5 14,0 13,5 15,5 2,7 1,6 11,2 15,3 3,3 1,6 10,4 17,6 3,6 1,7 12,3 18,2 3,1 2,0 13,1 16,3 2,4 1,9 12,0 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 CET1 AT1 Tier 2 Total CET1 AT1 Tier 2 Total Nedbank Group Including unappropriated profits CET1 Total tier 1 Total CAR Surplus tier 1 capital1 Dividend cover Cost of equity Excluding unappropriated profits CET1 Total tier 1 Total CAR Leverage Nedbank Limited Including unappropriated profits CET1 Total tier 1 Total CAR Surplus tier 1 capital Excluding unappropriated profits CET1 Total tier 1 Total CAR PA minimum Internal targets 2023 2022 % % % Rm times % % % % times % % % Rm % % % 11,0–12,0 > 12,0 > 14,5 1,75–2,25 <20 11,0–12,0 > 12,0 > 14,5 13,5 15,0 16,9 32 828 1,75 14,8 11,8 13,3 15,3 15,1 12,0 13,9 16,3 14,0 15,5 18,1 34 221 1,75 14,9 12,2 13,8 16,4 14,8 13,1 15,0 18,2 20 287 25 079 11,0 12,9 15,3 11,6 13,6 16,7 8,5 10,25 12,5 <25 8,5 10,25 12,5 1 The surplus tier 1 capital is the difference between the qualifying total tier 1 capital and the total tier 1 capital requirement at the PA minimum of 10,25%. 156 Nedbank Group Annual Results 2023 • Nedbank Group maintained a strong capital adequacy position, with ratios well above the minimum regulatory requirements and board-approved targets. • 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. • During 2023 the Group completed a capital optimisation initiative of R5,0bn which included a share repurchase of 23,4 million shares. The capital optimisation initiative included an odd lot offer of 2,7 million shares valued at R638m. The repurchased shares were cancelled and delisted, resulting in a 70bps reduction in CET1 capital ratios and a full year ROE accretion of approximately 50bps. • 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. • The Prudential Authority issued a Proposed Directive in November 2023 pertaining to the implementation of a positive cycle-neutral countercyclical capital buffer (PCN CCyb). The PA proposes an increase in the countercyclical buffer rate from 0% to 1%, effective from 1 January 2026. The proposed PCN CCyb will increase the regulatory minimum capital requirement and consequently will impact the surplus capital position, if implemented. Overview of risk-weighted assets Nedbank Group (Rbn) 55 55 674 41 74 41 42 629 45 74 22 41 446 Nedbank Limited 49 49 510 26 63 21 26 551 22 62 39 26 47 528 27 62 26 20 45 523 23 65 22 21 54 657 46 75 27 36 52 648 38 80 23 37 53 695 39 87 31 40 476 474 470 498 374 402 393 393 46 559 24 70 29 20 416 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Credit Equity Market Operational Other Total RWA density (%) Nedbank Group Credit risk2 Counterparty credit risk Credit valuation adjustment Equity risk Market risk Operational risk Amounts below the thresholds for deduction Other assets Total 2023 RWA MRC1 2022 RWA 478 194 59 774 449 982 13 441 6 104 40 407 30 862 86 834 17 124 22 274 1 680 763 5 051 3 858 10 854 2 141 2 784 14 450 5 858 37 119 23 037 79 853 16 910 20 998 695 240 86 905 648 207 1 Total minimum required capital (MRC) is measured at 12,5% and excludes bank-specific Pillar 2b add-on. 2 Including the securitisation exposures in the banking book. 157 Nedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive • The group's total RWA/total assets density was 53,0% at December 2023 (51,6% at December 2022), driven by an increase of 7,3% in total RWA versus growth in total assets of 4,7%. • The increase in total RWA is attributable mainly to the following: • The increase in Credit risk RWA is driven mostly by growth in banking book advances in RBB, and increased risk weights in RBB and CIB. • Equity risk RWA increased as a result of movements in equity exposures. • Market risk RWA increased due to continued market volatility which was driven by interest rate hikes, the depreciation of the rand, and higher growth in the credit trading and rates businesses. • Operational risk RWA increased due to the review of the group's operational risk scenarios and the update of the internal loss data used, including the AMA floor, which is driven by movements in GOI. • The other asset RWA increase was mainly due to business-as-usual movements. Nedbank Limited Credit risk2 Counterparty credit risk Credit valuation adjustment Equity risk Market risk Operational risk Amounts below the thresholds for deduction Other assets Total 2023 RWA MRC1 2022 RWA 400 059 50 007 376 775 9 583 6 060 20 230 29 079 69 920 8 399 15 424 1 198 758 2 529 3 635 8 740 1 050 1 928 9 960 5 798 21 389 21 727 64 576 7 109 15 481 558 754 69 845 522 815 1 Total MRC is measured at 12,5% and excludes the bank-specific Pillar 2b add-on. 2 Including the securitisation exposures in the banking book. Summary of regulatory qualifying capital and reserves Nedbank Group (Rbn) Nedbank Limited 94,2 13,8 7,9 100,4 18,6 8,3 72,5 73,5 113,1 19,4 9,3 84,3 117,4 16,8 10,2 117,8 13,7 10,5 79,3 13,8 8,4 84,2 18,0 8,9 93,1 18,9 9,3 95,1 16,4 10,2 91,0 13,5 10,5 90,4 93,6 57,0 57,3 64,9 68,4 67,1 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 CET 1 AT1 Tier 2 Total CET 1 capital AT1 capital Tier 2 capital Total capital 158 Nedbank Group Annual Results 2023 Rm 2023 2022 2023 2022 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 Perpetual subordinated debt instruments Tier 2 capital Subordinated debt instruments Excess of eligible provisions over downturn expected losses General allowance for credit impairment 104 090 100 662 93 621 90 443 14 797 92 952 809 (14 937) 10 469 10 469 13 691 12 998 438 255 19 695 85 233 670 (15 155) 10 219 10 219 16 757 15 431 966 360 77 559 67 090 20 111 58 719 78 668 68 449 20 111 60 160 (11 739) (11 822) 10 469 10 469 13 464 12 998 462 4 10 219 10 219 16 387 15 431 954 2 Total capital 117 781 117 419 91 023 95 055 Excluding unappropriated profits CET1 capital Tier 1 capital Total capital 82 024 92 493 106 185 79 297 89 516 106 272 61 578 72 047 85 511 60 633 70 852 87 240 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 CET 1 capital was impacted by the capital optimisation initiative of R5bn, final 2022 and interim 2023 dividends of R8.6bn, partly offset by organic earnings. • The group's total tier 1 capital position was further impacted by the issuance of additional tier 1 instruments of R1bn, partly offset by redemptions of R750m. • The group's total capital was further impacted by the issuance of tier 2 capital instruments of R2,1bn and redemptions amounting to R4,5bn, in line with the group's capital plan. • These form part of the group's capital management strategy to optimise the group's capital structure. 159 Nedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive 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. 2023 2022 Total capital requirement (host country) % 12,0 14,0 8,0 8,0 12,0 13,0 RWA Rm 5 369 12 339 5 488 2 484 3 532 9 719 Total capital ratio % 22,3 18,1 18,3 26,9 28,4 26,2 RWA Rm 4 406 13 195 5 268 1 831 1 954 9 415 Total capital ratio % 21,4 16,1 18,0 34,2 33,9 18,0 Nedbank Africa Regions Nedbank Mozambique Nedbank Namibia Nedbank Eswatini Nedbank Lesotho1 Nedbank Zimbabwe2 Isle of Man Nedbank Private Wealth3 1 The decrease was mainly due to an increase in credit risk RWA, which is driven by higher placements with financial entities (at a higher risk weighted factor). 2 The decrease was due to an increase in credit risk RWA, which was driven by higher customer loans and the depreciation of the local currency. 3 The increase was due to additional earnings generated in 2023 and a decline in balance sheet lending. 160 Nedbank Group Annual Results 2023 Economic capital adequacy Nedbank Group economic capital requirement Credit risk Market risk Business risk Operational risk Insurance risk Other assets risk Model Risk Minimum economic capital requirement Add: Stress-tested capital buffer 1 Total economic capital requirement AFR Tier A capital Tier B capital Total surplus AFR AFR: Total economic capital requirement (%) 2023 2022 Rm Mix % Rm Mix % 47 609 9 590 3 722 4 912 331 1 284 1 471 68 919 5 274 74 193 123 896 100 429 23 467 49 703 167 69 14 5 7 1 2 2 100 100 81 19 47 266 8 836 3 568 4 612 277 1 184 1 701 67 444 4 873 72 317 123 264 97 614 25 650 50 947 170 70 13 5 7 <0 2 3 100 100 79 21 1 The stress-tested capital buffer is calculated as: (the sum of credit risk, market risk, business risk, operational risk, insurance risk and other asset risk, multiplied by 10%) less the portion recognised separately for model risk. • Nedbank Group’s minimum economic capital requirement increased by R1,5bn during the FY 2023, driven primarily by the following: • An increase of R343m in credit risk, driven primarily by a combination of growth in the CIB portfolio as well as deterioration of risk profiles in CIB and RBB. • An increase of R754m in market risk, driven primarily by an increase in investment exposure and interest rate risk in the banking book (IRRBB) due to higher stochastic results and changes in the yield curves, resulting from higher interest rates. • An increase of R300m in operational risk due to the review of the risk scenarios and the update of internal loss data used, including the AMA floor, which is driven by movements in GOI. • An increase of R100m in other assets due to balance sheet movements. • An increase of R154m in business risk due to annual model parameter updates, reflective of the higher risk environment. • A decrease in model risk due to an enhancement of the allocation approach for model risk to clusters, which is based on multipliers of total minimum economic capital linked to model materiality. • Nedbank Group’s AFR increased by R632m in FY 2023, mainly as a result of the following: • A R2,8bn increase in tier A capital, which was driven by organic capital generation over the period, offset with dividends and the execution of the capital optimisation initiative of R5,0bn, including an odd-lot offer. • A R2,2bn decrease in tier B capital following the redemption of R5,3bn of tier 1 and tier 2 debt instruments, which were offset by the issuance of tier 1 and tier 2 instruments amounting to R3,1bn. 161 Nedbank Group Annual Results 2023Statement of financialposition analysisSupplementaryinformationIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Supplementary information 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 162 163 164 166 166 167 168 170 172 173 174 175 178 IBC Nedbank Group Annual Results 2023Earnings per share and weighted-average shares Earnings per share 2023 Earnings for the year Basic Diluted basic Headline Diluted headline 15 305 15 305 15 650 15 650 Weighted-average number of ordinary shares 472 509 532 489 235 413 472 509 532 489 235 413 Earnings per share (cents) 2022 Earnings for the year 3 239 3 128 3 312 3 199 14 287 14 287 14 061 14 061 Weighted-average number of ordinary shares 486 867 063 500 654 864 486 867 063 500 654 864 Earnings per share (cents) 2 934 2 854 2 888 2 809 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 having taken 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 2023 2022 Weighted- average dilutive shares Weighted- average dilutive shares Potential shares1 25 484 15 167 12 229 20 973 4 511 1 592 1 559 1 559 33 12 988 2 179 1 559 1 559 1 559 10 376 1 853 1 559 1 559 1 559 27 076 16 726 13 788 1 Potential shares are the total number of shares arising from historic grants, schemes or awards available for distribution. 163 Nedbank Group Annual Results 2023SupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Nedbank Group employee incentive schemes for the year ended 31 December Nedbank Group employee incentive schemes 2023 2022 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 Time-based – restricted shares 16 577 839 16 946 909 2 917 857 3 238 649 19 495 696 20 185 558 10 149 887 9 908 892 6 427 952 7 038 017 Deferral (compulsory) subject to time-based and match subject to performance-based (CBSS1) 2 022 676 2 096 140 Deferral (voluntary) and match subject to performance-based (VBSS2) 895 181 1 142 509 Instruments outstanding at the end of the year 19 495 696 20 185 558 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 for deferral of short-term incentives. 2 Voluntary Bonus Share Scheme for deferral of short-term incentives. 20 185 558 19 490 024 6 188 628 5 567 475 (4 542) (21 569) (6 201 894) (3 801 327) (672 054) (1 049 045) 19 495 696 20 185 558 Nedbank Group (2005) Matched- and Restricted-share Schemes Matched shares Instrument expiry date 1 April 2024 1 April 2025 1 April 2026 Matched shares outstanding not exercised at 31 December 2022 Shares exercised and forfeited during the year Total potential shares Weighted-average dilutive shares applicable for the year Number of shares 689 531 890 193 1 338 133 2 917 857 1 592 684 4 510 541 2 178 640 – 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 existed at 31 December 2023 and therefore had a dilutive effect. – Matched shares are not issued and are therefore not recognised as treasury shares. However, until they have been issued, there remains a potential dilutive effect. 164 Nedbank Group Annual Results 2023 Restricted shares1 Details of instruments granted and not exercised at 31 December 2023 and the resulting dilutive effect: Instrument expiry date 26 March 2024 27 March 2024 20 August 2024 21 August 2024 18 March 2025 19 March 2025 19 August 2025 20 August 2025 23 March 2026 24 March 2026 18 August 2026 19 August 2026 Restricted shares not exercised at 31 December 2023 Unallocated shares Treasury shares Shares exercised and forfeited during the year Additional shares expected to vest Total potential shares Weighted-average dilutive shares applicable for the year P P P P P P P P Number of shares 4 265 198 3 237 496 82 902 72 898 2 573 158 1 587 203 68 301 40 149 3 046 592 1 454 421 113 736 35 785 16 577 839 342 553 16 920 392 2 426 114 1 626 788 20 973 294 12 987 793 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 achieving performance conditions). Participants have full rights and receive dividends. P Awarded subject to corporate performance targets and/or minimum individual performance conditions. 165 Nedbank Group Annual Results 2023SupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Long-term debt instruments Instrument code Subordinated debt Callable notes (rand-denominated)1 Callable notes and long-term debentures (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) 2023 2022 13 648 16 041 9 073 429 4 146 1 241 30 114 72 2 702 13 594 428 2 018 1 240 31 864 61 2 697 Total long-term debt instruments in issue 47 777 51 903 1 Loss-absorbing instruments. More information is available 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 Dec 2023 Dec 2023 Aug 2023 Aug 2023 Stable Stable Stable Stable BB- B BB- B Ba2 Ba2 Not prime Not prime Ba2 Not prime Ba2 N/A zaAA zaA-1+ zaAAA zaA-1+ Aa1.za 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 166 Nedbank Group Annual Results 2023 Additional tier 1 capital instruments The group has issued additional tier 1 capital instruments as follows: Instrument code Subordinated Callable notes (rand-denominated) NGLT1B NGT103 NGT104 NGT105 NGT106 NGT107 NGT108 NGT1G – Green AT1 NGT109 NGT110 NGT111 NGT112 NGT113 Instrument terms 2023 2022 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 3-month JIBAR + 3,79% per annum 3-month JIBAR + 3,40% per annum 3-month JIBAR + 3,28% per annum 750 671 1 829 1 000 500 472 1 537 910 700 350 1 000 500 671 1 829 1 000 500 472 1 537 910 700 350 1 000 500 1 000 Total non-controlling interest attributable to additional tier 1 capital instruments 10 469 10 219 The additional tier 1 notes represent perpetual and subordinated instruments, with no redemption date. These instruments are redeemable subject to regulatory approval at the sole discretion of the issuer, Nedbank Group Limited or Nedbank Limited, 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 certain circumstances, the regulator may prohibit Nedbank from making interest payments. Accordingly, these instruments are classified as equity instruments and disclosed as a separate category of equity. 167 Nedbank Group Annual Results 2023SupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Shareholders’ analysis Register date 29 December 2023 Authorised share capital 600 000 000 shares Issued share capital 488 105 724 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 Nedbank Foundation Trust Nedbank Social Development Fund Trust Public Investment Corporation (SA) Allan Gray Investment Council (SA) Coronation Fund Managers (SA) BlackRock Incorporated (international) Dimensional Fund Advisors (international) The Vanguard Group Incorporated (international) GIC Asset Management Proprietary Limited (international) Sanlam Investment Management Proprietary Limited (SA) Lazard Asset Management (international) Old Mutual Life Assurance Company (SA) Limited and associates (includes funds managed on behalf of other beneficial owners) Major beneficial shareholders2 Government Employees Pension Fund (SA) Allan Gray Balanced Fund (ZA) 1 Source: JP Morgan Cazenove at 29 December 2023. 2 Source: Vaco Ownership at 29 December 2023. Number of shares 2023 % holding 2022 % holding 23 539 726 2 597 880 2 482 790 115 090 16 920 392 47 512 2 055 3 971 887 71 984 634 45 804 806 23 888 472 22 097 549 18 630 117 18 598 031 16 757 561 14 980 915 13 032 543 9 903 310 75 003 214 33 557 680 4,82 0,53 0,51 0,02 3,47 0,01 0,81 14,75 9,38 4,89 4,53 3,82 3,81 3,43 3,07 2,67 2,03 15,37 6,88 4,74 1,29 1,26 0,03 3,44 0,01 13,55 9,79 4,61 4,01 1,09 3,28 5,61 2,43 2,91 2,58 14,69 6,97 Index classified shareholding (%) Foreign shareholding (%) , 3 1 2 , 1 1 2 , 5 6 2 , 5 6 2 , 4 8 2 , 2 6 2 , 1 4 2 , 4 1 3 , 2 3 3 , 7 5 3 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 168 Nedbank Group Annual Results 2023 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 at 29 December 2023. Number of shares 2023 % holding 2022 % holding 313 911 736 291 324 765 8 971 203 13 615 768 174 193 988 77 017 235 28 557 175 23 348 512 15 205 866 30 065 200 64,31 59,68 1,84 2,79 35,69 15,78 5,85 4,78 3,12 6,16 66,84 59,74 1,90 5,20 33,16 14,38 8,15 4,80 3,27 2,56 488 105 724 100,0 100,00 23 539 726 464 565 998 169 Nedbank Group Annual Results 2023SupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Basel III balance sheet credit exposure by business cluster and asset class 2 23 180 213 57 004 22 050 389 676 177 909 451 499 22 496 Specialised lending – HVCRE4 4 920 4 920 Rm AIRB Approach Corporate Nedbank CIB Property Finance Nedbank Retail and Business Banking Nedbank Wealth Nedbank Africa Regions Centre Nedbank Group 2023 Change (%) weighting1 Downturn Risk expected loss Nedbank Group 2022 Downturn expected loss (dEL)2 BEEL3 Specialised lending – IPRE5 112 487 112 428 1 356 4 933 Specialised lending – project finance 46 338 SME – corporate Public sector entities Local governments and municipalities Sovereign Banks Retail mortgage Retail revolving credit Retail – other SME – retail Securities firms Securitisation exposure 4 375 5 274 7 296 7 220 21 211 5 337 3 557 42 683 1 721 19 2 599 27 12 169 592 17 760 162 287 32 942 172 4 671 9 335 66 126 1 619 10 10 88 166 951 847 18 815 938 945 8 499 16 681 88 166 202 275 4 943 118 776 46 338 48 779 5 293 9 895 95 413 25 894 178 927 17 826 162 413 34 566 337 172 (dEL)2 9 176 988 47 234 191 278 88 67 37 234 1 141 952 4 341 569 9 – Mix (%) 91,40 19,42 0,47 11,41 4,45 4,68 0,51 0,95 9,16 2,49 17,18 1,71 15,60 3,32 0,03 0,02 6,81 0,54 0,17 0,05 2,42 1,67 1,27 0,03 0,32 0,33 0,02 1,77 39,27 40,54 91,79 30,24 54,73 53,17 65,16 57,55 14,13 58,48 28,52 62,12 50,65 43,97 16,55 55,24 98,31 68,44 86,72 99,27 60,85 33,62 32,25 33,22 68,92 64,43 142,66 1,37 (0,83) (3,80) 2,98 7,72 2,33 (40,53) (4,06) 10,38 (38,84) 6,40 2,97 4,65 (0,15) (8,92) 5,16 39,04 6,90 25,85 (54,55) 58,27 (33,54) 3,21 7,42 3,61 23,38 9,52 4,72 1,68 1 754 203 960 329 455 46 1 120 201 48 3 076 1 869 9 075 842 5 138 115 338 43 016 47 667 8 901 10 314 86 444 42 336 168 160 17 312 155 199 34 618 370 172 4 062 1 682 441 44 15 938 26 226 12 812 256 3 187 2 780 189 17 577 27 991 9 176 18 815 (28 430) (439) BEEL3 2 132 257 515 135 733 243 39 20 2 023 1 765 7 938 881 940 44 197 160 331 29 44 19 98 955 949 4 177 556 25 180 8 499 16 681 (26 146) (966) TSA6 – – 307 35 373 35 226 – 70 906 – 67 428 – – 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 18 366 307 1 491 5 648 555 20 13 217 12 008 14 349 5 945 301 70 14 3 081 7 278 275 3 001 3 360 129 64 41 5 648 1 798 555 20 25 225 17 430 13 223 275 3 302 3 430 207 18 407 Total Basel III balance sheet exposure7 408 042 177 909 451 911 57 883 35 365 88 166 1 041 367 100.00 9 176 18 815 1 024 139 8 499 16 681 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 provisions8 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. 170 Nedbank Group Annual Results 2023 Mix (%) 91,40 19,42 0,47 11,41 4,45 4,68 0,51 0,95 9,16 2,49 17,18 1,71 15,60 3,32 0,03 0,02 6,81 0,54 0,17 0,05 2,42 1,67 1,27 0,03 0,32 0,33 0,02 1,77 Total Basel III balance sheet exposure7 408 042 177 909 451 911 57 883 35 365 88 166 1 041 367 100.00 Nedbank Retail and Nedbank Property Business Nedbank CIB Finance Banking Wealth Regions Centre 389 676 177 909 451 499 22 496 88 166 951 847 Nedbank Africa 10 10 2 23 Specialised lending – HVCRE4 4 920 4 920 Specialised lending – IPRE5 112 487 112 428 1 356 4 933 Specialised lending – project finance 46 338 180 213 57 004 22 050 3 557 42 683 1 721 Local governments and municipalities 88 166 4 375 5 274 7 296 7 220 21 211 5 337 2 599 19 27 12 169 592 17 760 162 287 32 942 172 4 671 9 335 66 126 1 619 TSA6 – – 307 35 373 35 226 – 70 906 Rm AIRB Approach Corporate SME – corporate Public sector entities Sovereign Banks Retail mortgage Retail revolving credit Retail – other SME – retail Securities firms Securitisation exposure Corporate SME – corporate Public sector entities Sovereign Banks Retail mortgage Retail revolving credit Retail – other SME – retail PiPs Local government and municipalities 13 217 12 008 307 1 491 14 349 5 945 301 70 14 64 41 5 648 555 20 3 081 7 278 275 3 001 3 360 129 Nedbank Group 2023 202 275 4 943 118 776 46 338 48 779 5 293 9 895 95 413 25 894 178 927 17 826 162 413 34 566 337 172 5 648 1 798 555 20 25 225 17 430 13 223 275 3 302 3 430 207 18 407 Non-regulated entities 18 366 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 provisions8 Change (%) Risk weighting1 Downturn expected loss (dEL)2 Nedbank Group 2022 Downturn expected loss (dEL)2 BEEL3 BEEL3 39,27 40,54 91,79 30,24 54,73 53,17 65,16 57,55 14,13 58,48 28,52 62,12 50,65 43,97 16,55 142,66 55,24 98,31 68,44 86,72 99,27 60,85 33,62 32,25 33,22 68,92 64,43 1,37 (0,83) (3,80) 2,98 7,72 2,33 (40,53) (4,06) 10,38 (38,84) 6,40 2,97 4,65 (0,15) (8,92) 5,16 39,04 6,90 25,85 (54,55) 58,27 (33,54) 3,21 7,42 3,61 23,38 9,52 4,72 1,68 9 176 18 815 938 945 8 499 16 681 988 47 234 191 278 88 67 37 234 1 141 952 4 341 569 9 – 1 754 203 960 329 455 46 1 120 201 48 3 076 1 869 9 075 842 5 138 115 338 43 016 47 667 8 901 10 314 86 444 42 336 168 160 17 312 155 199 34 618 370 172 940 44 197 160 331 29 44 19 98 955 949 4 177 556 2 132 257 515 135 733 243 39 20 2 023 1 765 7 938 881 – 67 428 – – 4 062 1 682 441 44 15 938 26 226 12 812 256 3 187 2 780 189 17 577 9 176 18 815 1 024 139 8 499 16 681 27 991 9 176 18 815 (28 430) (439) 25 180 8 499 16 681 (26 146) (966) 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 Excess impairments compared to downturn expected loss for IRB exposures totaled R439m at 31 December 2023 (2022: R966m). 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 amounted to R2 720m at 31 December 2023 (2022: R2 576m). 171 Nedbank Group Annual Results 2023SupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive 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 expense Fair-value adjustments Net trading income Equity investment income 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 % 42 65 11 7 (20) 10 31 6 8 2 >100 3 (4) 2023 2022 111 796 74 645 37 151 22 033 78 612 45 224 33 388 20 573 16 528 15 667 21 599 (5 071) (78) 533 20 229 (4 562) (47) 171 3 559 3 403 689 125 677 80 59 264 9 380 49 884 33 625 1 019 175 15 065 3 259 3 306 (47) 776 103 500 100 54 061 7 154 46 907 31 274 1 002 (50) 14 681 3 378 3 362 16 Profit for the year 4 11 806 11 303 172 Nedbank Group Annual Results 2023 Rm Other comprehensive income/(losses) (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 Cash flow hedge losses 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 Total comprehensive income for the year Profit attributable to: – Ordinary shareholders – Holders of participating preference shares – Non-controlling interest – ordinary shareholders Profit for the year Total comprehensive income attributable to: – Ordinary shareholders – Holders of participating preference shares – 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 Change % >100 2023 837 651 235 (190) (37) 201 (23) 2022 (496) (110) 132 (160) (359) 1 17 4 57 >100 12 643 10 807 11 634 11 194 166 6 106 3 4 11 806 11 303 17 57 >100 17 4 >(100) 12 471 10 698 166 6 106 3 12 643 10 807 11 634 11 194 (128) (175) 47 34 50 (16) Headline earnings attributable to ordinary and preference shareholders 5 11 762 11 160 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 2023 2022 14,5 1,00 4,07 1,10 56,7 13,9 1,00 3,93 0,90 57,8 173 Nedbank Group Annual Results 2023SupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief Executive Nedbank Limited consolidated statement of financial position at 31 December Rm Assets Cash and cash equivalents Other short-term securities Derivative financial instruments Government securities Other dated securities Banking loans and advances Trading loans and advances 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 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 debt instruments Total liabilities Total equity and liabilities 174 Change % 2023 2022 10 41 59 6 96 4 (22) 28 63 6 >100 6 61 (1) 18 (4) 40 611 59 299 13 539 36 950 42 043 8 522 164 961 156 325 3 563 1 820 870 768 840 269 36 174 8 643 96 7 675 315 1 089 570 9 353 4 690 9 210 46 605 6 770 59 7 252 38 1 031 354 9 467 3 982 9 594 5 1 230 556 1 171 081 28 20 073 65 485 28 20 073 64 842 85 586 84 943 106 10 469 22 96 183 13 802 51 10 219 16 95 229 9 182 1 058 634 1 003 663 16 190 12 939 51 156 228 187 45 540 49 653 1 134 373 1 075 852 1 230 556 1 171 081 1 1 >100 2 38 1 50 5 25 (78) (17) (8) 5 5 Nedbank Group Annual Results 2023 Definitions 12-month expected credit loss (ECL) Expected credit loss 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. Black persons A generic term that refers to South African citizens who are African, Coloured or Indian. 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) The 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. Contractual service margin (Rm) for general measurement model (GMM) products represents unrecognised shareholders’ future profit on long-term products. Countercyclical buffer (CCyB) CCyB is a capital buffer requirement that aims to protect the banking sector through increased capital requirements in periods when credit growth consistently exceeds economic growth. Default In line with the Basel III definition, default 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 the Nedbank 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 6-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 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. Dividend cover (times) Headline earnings per share divided by dividend per share. Economic profit (EP) (Rm) Headline earnings less the cost of equity (total equity attributable to equity holders of the parent, less goodwill, multiplied by the group's cost-of-equity percentage). 175 Nedbank Group Annual Results 2023SupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief ExecutiveEffective 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. Expected credit losses Difference between all contractual cash flows that are due to the bank in terms of the contract and all the cash flows that the bank expects to receive (ie all cash shortfalls), discounted at the original effective interest rate related to default events on financial instruments that are possible within 12 months after the reporting date (stage 1) or that result from all possible default events over the life of the financial instrument (stage 2 and 3). Flac instruments A new tranche of loss-absorbing and non-regulatory debt instruments that will be subordinated to other unsecured liabilities. These debt instruments are intended for bail-in resolution. Forward-looking economic expectations The impact of forecast macroeconomic conditions in determining a SICR and ECL. 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. High-quality liquid assets (HQLA) Assets that can be converted easily and immediately into cash at little or no loss of value. 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 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. Loss-given default The estimated amount of credit losses when a borrower defaults on a loan. 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 or 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 classified as having defaulted due to regulatory requirements, ie Directive 7/2015 or the curing definition. Positive cycle-neutral CCyB (PCN CCyB) PCN CCyB is a macroprudential tool that can be used to build up and maintain capital buffers when risks are assessed to be neither subdued nor elevated to be released in the event of sudden shocks, including those unrelated to the credit cycle. 176 Nedbank Group Annual Results 2023Preprovisioning 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 the total days in the year, divided by the 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 (%) Associate income from the group’s ETI investment 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 having applied prescribed risk weightings according to the relative risk of the counterparty. Stage 1 Financial assets for which the credit risk (risk of default) at the reporting date has not significantly increased since initial recognition. Stage 2 Financial assets for which the credit risk (risk of default) at the reporting date has significantly increased since initial recognition. Stage 3 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. 177 Nedbank Group Annual Results 2023SupplementaryinformationStatement of financialposition analysisIncome statementanalysisSegmentalanalysisFinancial results2023 resultscommentaryResultspresentationMessage from ourChief ExecutiveAbbreviations and acronyms AFR available financial resources AGM annual general meeting AI artificial intelligence AIEBA average interest-earning banking assets AIRB advanced internal ratings-based AMA advanced measurement approach AML anti-money-laundering API application 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 CASA current account savings account 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 CSM contractual service margin CVP client value proposition CX client experience 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 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 FX foreign exchange 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 HPI house price index 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 178 M&A mergers and acquisitions MFC Motor Finance Corporation (vehicle finance division of Nedbank) MRC minimum required capital MZN Mozambican metical N/A not applicable Nafex 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 REIPPPP Renewable Energy Independent Power Producer Procurement Programme 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 South African Customer Satisfaction Index SADC Southern African Development Community SAICA South African Institute of Chartered Accountants S&P Standard & Poor’s 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 UN United Nations 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 2023Company 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 One Exchange Square | Gwen Lane | Sandown | Sandton | 2196 Instrument codes Nedbank Group ordinary shares NED JSE share code NSX share code A2X share code NBK NED ISIN ZAE000004875 JSE alpha code ADR code ADR CUSIP NEDI NDBKY 63975K104 PO Box 4844 | Marshalltown | 2000 | SA Namibia Transfer Secretaries Proprietary Limited Robert Mugabe Avenue No 4 | Windhoek | Namibia PO Box 2401 | Windhoek | Namibia More information 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 10 234 5329 Company Secretary Sponsors in SA Sponsor in Namibia J Katzin Merrill Lynch SA Proprietary Limited t/a BofA Securities Nedbank Corporate and Investment Banking, a division of Nedbank Limited. 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 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 them. The risks and uncertainties inherent in the forward-looking statements include changes to IFRS and the interpretations, applications and practices related to these standards 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 in this document and does not assume responsibility for any loss or damage arising as a result of any party’s reliance on them, including loss of earnings, or profits, or consequential loss or damage. nedbankgroup.co.za

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