NEDBANK GROUP LIMITED INTERIM ir RESUL TS 2018 FOR THE SIX MONTHS ENDED 30 JUNE 2018
OVERVIEW A strong financial performance in a difficult environment, boosted by the ongoing ETI turnaround. MIKE BROWN ir NEDBANK GROUP LIMITED – Interim Results 2018 2
Overview of our H1 2018 performance Strong financial performance – headline earnings +27.0% | dividend per share +13.9% Nedbank share of associate income from ETI returning to profitability off a low base in 2017 Hard work over the past few years paying off as ETI recorded 5 consecutive quarters of profitability − (6 quarters to June 2018) Positive growth from managed operations – headline earnings +2.0% Economic growth slow to recover after December 2017 political developments − Gradual recovery in household credit, while corporate credit demand remains weak − IFRS accounting changes impacted comparability of growth rates in lines of the income statement − − Solid underlying revenue growth, muted by impact of IFRS accounting changes − Impairment outcome reflects high quality of the book & IFRS accounting changes Expenses very well managed, benefit from PRMA credit & IFRS accounting changes − Accelerated digital delivery enhancing client experiences, revenue growth & improving efficiency Delivering value to all our stakeholders – ongoing focus on governance, sustainability, culture & ethics ir NEDBANK GROUP LIMITED – Interim Results 2018 3
Stronger economic growth dependent on structural reforms, policy certainty, improved levels of confidence, investment & job creation Job creation & reduced … Increased - unemployment levels of Increased Improved inclusive - poverty levels of local levels of Structural economic & foreign - inequality Early stages of business & reforms growth investment political & consumer & policy institutional confidence certainty turnaround in SA eg Land reform Mining Charter SOE performance Government, business, labour & civil society working together to create a more prosperous SA for all her people … … underpinned by improved skills & educational outcomes ir NEDBANK GROUP LIMITED – Interim Results 2018 4
Economic growth slow to recover after December 2017 political developments GDP growth (%) Key drivers Supportive global environment, but 8 trade disputes & geopolitical tensions on the rise 6 Bond & equity flows out of EMs that have political & structural vulnerabilities 4 SA economy started on weaker note 2 (Q1 GDP +0.8% yoy) & impact of upward revision of 2017 GDP by ~ 0.4% 0 Ongoing SA policy uncertainties -2 Progress on SOE governance SA sovereign credit ratings stable World Sub-Saharan Africa South Africa ir NEDBANK GROUP LIMITED – Interim Results 2018 5
Gradual recovery in retail credit, but demand for corporate credit remains weak Retail credit application volumes (000) Business & consumer confidence & loan payouts +33.1% +17.4% (5.4%) +1.4% +10.4% +16.1% 15 725 657 635 626 72 62 Personal loans Vehicle finance Home loans 39 BB & CIB loan payouts (Rbn) 18.7% (0.0%) 28.6 28.5 11.4 9.6 94 96 98 00 02 04 06 08 10 12 14 16 18 RMB/BER Business Confidence Index Business Banking CIB FNB/BER Consumer Confidence Index H1 17 H1 18 Loan payouts (growth) ir NEDBANK GROUP LIMITED – Interim Results 2018 6
Delivering value to shareholders NAV per share 1 (cents) ROE & cost of equity (%) Dividend per share (cents) +4.7% 18.9 +13.9% (2) 18.4 18.4 17.3 16.5 18.3 15.7 15.1 Economic profit 14.4 13.8 13.9 13.5 13.0 13 596 14 428 15 826 16 200 16 957 460 537 570 610 695 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 H1 H1 H1 COE CAGR: +10.9% CAGR: +5.7% ROE (excl GW & ETI) 1 NAV per share excluding IFRS day 1 impact: H1 2018: 176 20c ROE (excl GW) CAGR +6.7% & +8.8% yoy 2 ROE (excl GW), excluding IFRS impact: 17.8% ir NEDBANK GROUP LIMITED – Interim Results 2018 7
Our role in society – contributing by delivering value to all our stakeholders Our purpose – to use our financial expertise to do good for individuals, families, businesses & society SHAREHOLDERS STAFF NAV per share up 4.7% to 16 957 cents Paid R8.1bn in salaries & benefits to support Paid R3.4bn dividends to shareholders who our 31 592 staffmembers & their families represent pension funds & investments of all Facilitated transfer of R2.6bn payroll taxes on South Africans (incl GEPF, a 6.2% shareholder behalf of staff to government in Nedbank) Implemented a leadership & culture change Supportive outcomes at 51st AGM – all TO BE THE programme supporting strategy, incl New Ways resolutions passed with > 90% votes of MOST ADMIRED of Work approval REGULATORS FINANCIAL SERVICES Transforming our workforce towards SA demographics (> 78% black employees) PROVIDER IN AFRICA Maintained a strong balance sheet to support a BY OUR safe & stable banking system CLIENTS STAKEHOLDERS Paid R5.7bn direct, indirect & other taxes R82bn new-loan payouts to enable clients to Invested more than R100bn in government & finance their homes, vehicles, education & grow public sector bonds to support the funding their businesses needs of government Increased main-banked clients by 2.5% SOCIETY Enhanced client convenience – 1 034 Intelligent Depositors, Procured 75% of our goods & services locally 57% digitally focused branches & various innovative CVPs & Contributed more than R55m to socioeconomic innovations including 1 million Money app downloads development (50% spent on education) Safeguarded R801bn deposits at competitive interest rates Active participant in the CEO Initiative Supported SARB in banking > 17 000 VBS clients (> R250m Remained a level 2 BBBEE contributor, now measured under deposits) the Amended FSC ir NEDBANK GROUP LIMITED – Interim Results 2018 8
FINANCIAL OVERVIEW Strong financial performance RAISIBE MORATHI ir NEDBANK GROUP LIMITED – Interim Results 2018 9
Key performance indicators – strong financial performance Managed operations H1 H1 H1 H1 2017 2017¹ 2018 2018¹ Headline earnings (Rm) 27.0% 5 271 2.0% 6 433 6 696 6 562 Economic profit (Rm) >100% 393 1 685 ROE (excl goodwill) 18.4% 2 15.1% 18.9% 18.3% Diluted HEPS growth (3.7%) 5.9% 26.3% 1.4% Preprovisioning operating profit growth (5.7%) (0.1%) 20.2% 5.2% Net interest margin 3.58% 3.67% Credit loss ratio 0.47% 0.53% Efficiency ratio 59.3% 56.5% 55.8% 56.0% CET1 CAR 12.3% 12.4% Dividend per share (cents) 13.9% 610 695 1 Excluding ETI associate income/losses, as well as ETI-related funding costs. Approximately R113m STI in H1 2018 related to ETI included in managed operations 2 ROE (excl GW), excluding IFRS impact: 17.8% ir NEDBANK GROUP LIMITED – Interim Results 2018 10
Headline earnings – strong financial performance Headline earnings (Rm) HE growth (%) 27.0 (191) 1 260 2.0 (221) 506 Group Managed (387) 458 operations ROE excl GW (%) 18.4 18.3 6 696 5 271 +3.4% +4.3% (13.9%) +2.7% >100.0% H1 NII NIR Impairments Expenses Associate Direct tax H1 Group Managed 2017 income & other 2018 operations ir NEDBANK GROUP LIMITED – Interim Results 2018 11
IFRS 9 & 15 changes impacted the shape of the income statement Growth adjusted for IFRS impacts Impairments HE managed operations NII +3.8% +3.4% +3.2% +13.9% +19.6% +2.0% 13 548 14 006 14 057 1 594 1 815 1 906 6 433 6 562 6 639 H1 17 H1 18 Adjusted H1 17 H1 18 Adjusted H1 17 H1 18 Adjusted H1 18 H1 18 H1 18 NIR Expenses Associate income +6.6% >100% +4.3% No impact +3.6% +2.7% (1 053) 207 207 12 236 12 507 14 369 14 756 14 880 11 730 H1 17 H1 18 Adjusted H1 17 H1 18 Adjusted H1 17 H1 18 Adjusted H1 18 H1 18 H1 18 ir NEDBANK GROUP LIMITED – Interim Results 2018 12
IFRS 9 & 15 changes impacted the shape of the income BOOKLET SLIDE statement New- Suspended business Initiation Loyalty H1 H1 % Adjusted % interest strain fees schemes Rm 2017 2018 change (IFRS 9) (IFRS 9) (IFRS 9) (IFRS 15) H1 2018 change NII 13 548 3.4 192 (141) 3.8 14 006 14 057 Impairments 1 594 13.9 192 (101) 19.6 1 815 1 906 NIR 11 730 4.3 126 145 6.6 12 236 12 507 Expenses 14 369 2.7 124 3.6 14 756 14 880 Headline earnings 5 271 27.0 0 73 (11) 15 28.5 6 696 6 773 ROE (excl GW) 15.1% 17.8% 1 18.4% NIM 3.58% 3.67% 3.67% CLR 0.47% 0.53% 0.56% Efficiency ratio 59.3% 55.8% 55.6% Suspended interest on the non- New-business strain – impact of higher Loyalty schemes – costs of the reward recoverable portion of the specific levels of portfolio provisions raised on Initiation fees previously recognised as programme were previously recognised defaulted book is no longer recognised as new loans under IFRS vs IAS 39 (RBB) NIR now amortised to NII through the as an expense & now recognised as a NII, for which impairments were previously & adjusting for base effects from overlays effective interest rate method (RBB) reduction in NIR (RBB) raised (RBB: R181m & CIB: R11m) releases in the unsecured portfolio 1 Excludes day one R3.2bn adjustment ir NEDBANK GROUP LIMITED – Interim Results 2018 13
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