IR Results 17 for the six months ended 30 June 2017 Using our - - PowerPoint PPT Presentation
Interim IR Results 17 for the six months ended 30 June 2017 Using our financial expertise to do good OVERVIEW Creating value in a challenging political & economic environment MIKE BROWN IR NEDBANK GROUP LIMITED Interim Results
for the six months ended 30 June 2017
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NEDBANK GROUP LIMITED – Interim Results '17
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MIKE BROWN
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NEDBANK GROUP LIMITED – Interim Results '17
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Nedbank & client business impacts
– Delayed investment & strong repayment behaviours – Increased savings with focus on lower risk assets/cash – Liquidations & insolvencies down – Slower transactional activity & increasing levels of in-bundle behaviour
– Wholesale pipelines strong, but conversion slower & early repayments increased, leading to slower wholesale advances growth – Muted retail advances growth – Strong deposit growth & excellent liquidity metrics – Strong organic capital generation
– Slower revenue & expense growth – Improvement in impairments – particularly wholesale – Currently no material impact of sovereign-credit downgrades on funding costs
– Good growth, particularly in cash & offshore
Reduced confidence
As at Jul 16 Feb 17 Jul 17 SA GDP 1.0% 0.7% 0.6% Ave prime rate 10.3% 10.4% 10.3% Ave inflation (CPI) 6.5% 5.7% 5.3% Pvt sector credit growth 8.0% 6.2% 5.2%
Key indicators – 2017 forecasts
Jun 16 Dec 16 Jun 17 SACCI BCI1 95.1 93.8 94.9 RMB/BER BCI2 32 38 29 FNB/BER CCI3
1 SACCI Business Confidence Index. 2 RMB/BER Business Confidence Index (50 indicates neutral position, 100 extremely positive). 3 FNB/BER Consumer Confidence Index (+10 very positive | -10 very negative).
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NEDBANK GROUP LIMITED – Interim Results '17
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NAV per share1 (cents)
12 180 13 596 14 428 15 826 16 200 13 14 15 16 17 390 460 537 570 610 13 14 15 16 17 16.1 16.5 17.3 15.7 15.1 13.0 13.5 13.0 14.4 13.9 18.4 18.9 13 14 15 16 17
ROE (excl GW) COE ROE (excl GW & ETI)
ROE & cost of equity (%) Dividend per share (cents) NAV ROE > COE Dividends
+2.4% +7.0% CAGR: +7.4% CAGR: +11.8% H1 H1 H1
1 NAV per share excluding ETI: CAGR +8.8% & +6.6% yoy.
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NEDBANK GROUP LIMITED – Interim Results '17
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STAFF CLIENTS SHAREHOLDERS REGULATORS COMMUNITIES
behalf of staff to government
supporting strategy
demographics (> 77% black employees)
finance their homes, vehicles, education & grow their businesses
Intelligent Depositors, reformatted 303 digitally focused branches to date & added 234 video-banking stations
committed
rates
managing our clients’ investments
represent pension funds & investments of all South Africans (incl GEPF, a 6.5% shareholder in Nedbank)
resolutions passed with > 90% votes of approval
safe & stable banking system
public sector bonds to support the funding needs of government
spent on education)
TO BE THE MOST ADMIRED FINANCIAL SERVICES PROVIDER IN AFRICA BY OUR STAKEHOLDERS Our purpose - to use our financial expertise to do good for individuals, families, businesses & society
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NEDBANK GROUP LIMITED – Interim Results '17
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RAISIBE MORATHI
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NEDBANK GROUP LIMITED – Interim Results '17
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H1 2017 H1 2016 H1 2017¹ H1 2016¹ Headline earnings (Rm) (2.9%) 5 271 5 427 6.7% 6 433 6 030 ROE (excl goodwill) 15.1% 15.7% 18.9% 18.4% Diluted HEPS growth (3.7%) 1.6% 5.9% 19.7% Preprovisioning operating profit growth (5.7%) 1.5% (0.1%) 11.6% Net interest margin2 3.58% 3.52% CLR 0.47% 0.67% NIR-to-expenses ratio 81.6% 83.0% CET1 CAR 12.3% 11.6% Assets under management (Rbn) 15.2% 295 256 Dividend per share (cents) 7.0% 610 570
1 Excluding associate income/losses, as well as funding costs. | 2 H1 2016 rebased.
Managed
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Headline earnings (Rm) 5 427 5 427 5 947 6 320 6 254 5 632 5 271 5 271 520 373 617 (683) (622) (361)
H1 2016 NII NIR Impairments Expenses Associate income Direct tax & other H1 2017
+4.0% (27.9%) +3.3% +5.0% (>100.0%)
(2.9) 6.7
Group Managed
HE growth (%) 15.1 18.9
Group Managed
ROE excl GW (%)
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Net interest margin (bps)
1 Rebased NIM for six months ended 30 June 2016 would have been 352 bps & AIEA of R745m, had HQLA been removed from the banking book & included in the trading book from 1 January 2016. 2 HQLA -1 bps included in Other.
2
Average interest-earning banking assets1 +2.4%
337 352 358 15 9 6 (5) (1) (4) 1
H1 2016 Trading LAP Rebased H1 2016 Endowment impact Asset mix Asset pricing Liability pricing & mix Net prime - JIBAR impact Other H1 2017
1 1
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H1 2016 H1 2017
Prime – 3-month average JIBAR spread (bps)
H2 2016
Ave: 345 bps Ave: 320 bps Ave: 320 bps
3.00 3.10 3.20 3.30 3.40 3.50 3.60 Jan 16 Mar 16 May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17
Narrowing of the prime - JIBAR spread H1 2017 vs H1 2016 as short end JIBAR rates priced in prime interest rate hikes that have not materialised in H2 2016 & H1 2017
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NEDBANK GROUP LIMITED – Interim Results '17
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142 158 127 144 101 18 15 154 156 122 148 107 19 16
Commercial property Term loans Other loans Home loans Vehicle finance Personal loans Card H1 2016 H1 2017
2 1
Share3 Trend Commercial property 40.3 Core corporate4 21.2 Home loans 14.5 Vehicle finance 27.6 Personal loans 10.8 Card 14.1
Selective origination & unique positioning
Gross advances (Rbn)
Mostly ST & volatile
Wholesale
BA900 market share
+8.3% +2.8% (1.1%) (4.0%) +6.0% +5.1% +6.9%
Leveraging relationships & pipeline
Retail
1 Terms loans & other longer-dated loans in CIB. 2 Other loans include overdrafts, overnight loans, preference shares, deposits placed under reverse repurchase agreements & other smaller corporate loans. 3 BA900 – May 2017 (Compared to June 2016). 4 Core corporate loans comprise commercial mortgages, corporate overdrafts, corporate credit cards, corporate instalment credit, foreign sector loans, public sector loans, preference shares, factoring accounts &
. other corporate loans (other loans and advances excluding household personal loans). | Negative impact of ~R4bn on CIB loan book as a result of ZAR strength.
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BA900 market share
Share3 Trend Wholesale 22.0 Commercial 17.1 Household 19.1 Foreign currency 13.9
Deposits (Rbn)
1 Nedbank’s market share of medium- & long-term wholesale funding is 25% and 26% respectively (May 2017). The favourable Basel III treatment of longer-term funding reduces the need to hold HQLA, thereby
. positively impacting the all-in marginal cost of longer-term wholesale funding vs short-term wholesale funds. Including NCDs with tenure of > 30 days.
2 Includes foreign currency liabilities, deposits received under repurchase agreements & other. 3 BA900 – May 2017 (Compared to June 2016).
102 64 89 52 50 277 160 108 67 81 56 55 294 157
Current & savings acc Cash Mgmt NCDs L/T debt Fixed deposits Call & term Other H1 2016 H1 2017 Driven by client behaviour in the cycle Increasing contractual tenure (+ for Basel III)
Transactional franchise +6.1% +8.0% +5.4% (8.6%) +9.2% +6.3% (1.9%)
Increasing behavioural tenure (+ for Basel III)
Lengthen funding profile
Linked to trading activities
2 1
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4 1 (2) (6) (1) 13 14 15 16 17 Endowment (bps) HQLA (bps) Total liability mix change & pricing (bps) (4) 6 5 15 9 (6) (2) (1) 13 14 15 16 17 1 (17) (11) (13) 6
Asset mix change (bps)
BOOKLET SLIDE H1 H1
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Funding sources Funding base mix Foreign currency downgrade (what we expected1) Foreign currency downgrade (what actually happened2) Local currency downgrade (what we expect3) Mild stress Mild stress High stress Households 20%
Limited impact – closed domestic market Limited impact – closed domestic market Limited impact – closed domestic market
Commercial 25%
Cost of new term funding: + 5 bps
Wholesale 40%
Reprice marginally Cost of new term funding: + 5−8 bps Cost of new term funding: + 10 bps
Capital markets 8%
Reprice on new issuances Down 25−35 bps (having overshot events of Nenegate) Cost of new capital markets funding: + 25 bps
Foreign – asset matched 6%
Matched to US$ lending – no material impact Matched to US$ lending – no material impact Matched to US$ lending – no material impact
Foreign – general funding pool 1%
Reprice on contractual repricing date Cost of new foreign funding: + 15−25 bps (1 year) Cost of new foreign funding: + 25−50 bps (1 year)
Volume-weighted total 100% circa 0 bps circa +5 bps
BOOKLET SLIDE
Total funding (deposits + long-term debt) at 30 June 2017: R819bn.
1 From Dec 2016 year-end presentation | 2 Post sovereign-credit-ratings downgrades in April 2017 (S&P & Fitch to subinvestment grade) | Volume-weighted increase would have been an additional +4 bps if capital
markets increased by + 25 bps | 3 Downgrade to subinvestment grade by Moody’s and S&P (impact over & above initial foreign currency downgrade). Overall impact remains immaterial at + 5 bps for scenarios.
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Sovereign downgrades Nenegate ABIL
100 150 200 250 300 350 400 450 Feb 12 Aug 12 Jul 13 Nov 13 Mar 14 Apr 14 Jun 14 Oct 14 Nov 14 Feb 15 Apr 15 May 15 Jun 15 Jul 15 Nov 15 Feb 16 May 16 Jul 16 Sep 16 Feb 17 Mar 17 May 17 Jun 17 3-year SUD 5-year SUD 7-year SUD 10- to 12-year SUD Tier 2
BOOKLET SLIDE
Pricing (bps above JIBAR)
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8 436 2 006 776 203 309 Commission & fees Trading income Insurance income Private equity Other¹
NIR growth per cluster (%) Non-interest revenue (Rm)
+3.1% +13.3% (15.7%) (52.8%)
1 Represents sundry income, investment income & fair-value adjustments. | 2 C&F 72% of NIR. Growth > 5% ▲
Decline (> 5%) ▼
CIB RBB Wealth RoA H1 16 H1 17 H1 16 H1 17 H1 16 H1 17 H1 16 H1 17 14.1 (3.9) 7.4 5.6 9.1 (7.9) (12.9) 30.9
72.8
(53.0)
(11.6)
(8.0)
12.7
(16.8)
5.5
11.6
25.3
(6.6)
7.7
5.2
(9.5)
9.2
2
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131 83 77 67 47 13 14 15 16 17
Group CLR1 (bps) Cluster CLR (bps)
Banking advances
1 Nedbank through-the-cycle target range: 60–100 bps.
H1
48.7% 44.2% 4.3% 3.0%
31 123 16 76 (3) 114 9 80 CIB RBB Wealth RoA
H1 2016 H1 2017
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564 578 16 17 701 409 350 350 16 17
RBB Centre
Specific coverage (%) Portfolio coverage (%) Overlays & central provision (Rm)
Defaulted advances (Rbn, %) 36.2 37.2 16 17 0.71 0.65 16 17 18.4 20.2 16.6 16.6 2.6 2.8 2.3 2.3
1 2 3 10 20 30
16 17 16 17
Defaulted advances Defaulted advances as % of book +9.5% +0.3% H1 H1 H1 H1
Postwriteoff recoveries (Rm)
H1 Defaulted advances Defaulted advances (excl performing defaults)1
1 Defaulted advances, excluding performing defaults, is defined as Retail advances held in default due to regulatory requirements but are otherwise performing.
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NEDBANK GROUP LIMITED – Interim Results '17
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86% 76% 14% 24% Specific impairment NPLs 10 largest exposures Other
CPF 12% Other 88%
Top 10 client contribution (%) CLR driven by large recoveries & underpinned by quality book (bps)
4 10 31 (3) 20 4 5 (3)
June 2017 Performing portfolio
(1)
Resolutions
(11)
New defaults Existing defaults
Dec 2016 to June 2017 Dec 2015 to June 2016
June 2016 Performing portfolio Resolutions New defaults Existing defaults
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HL new business – low-risk clients proportion1 (%) Vehicle finance 3- months+ arrears benchmarking3 HL new business – low-risk properties proportion² (%) PL market share of new business by risk band4 (%)
40% 50% 60% 70% 80% 09 10 11 12 13 14 15 16 17 30% 40% 50% 60% 70% 09 10 11 12 13 14 15 16 17 Nedbank Competitors 11 12 13 14 15 16 17 0.00 1.00 2.00 3.00 4.00 5.00 6.00 6% 5% 4% 3% 2% 1% 0%
1 Source: Experian Delphi Score. 2 Source: Lightstone Risk Quality Grade. 3 Source: TransUnion. 4 Source: Experian.
**
Nedbank Tier 1 Tier 2
High risk Medium risk Low to medium risk Low risk *
20% 15% 10% 5% 0% 14 17 16 15 80% 60% 40% 20% 0% 17 16 15 14 80% 60% 40% 20% 0% 17 16 15 14
* Low risk (Bureau score >= 658); low-medium risk (Bureau score 644-657); medium risk (Bureau score 626-643); high risk (Bureau score <= 625). ** Tier 1 refers to big 4 banks, excluding Nedbank, while Tier 2 refers to remaining material providers of unsecured personal loans.
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NEDBANK GROUP LIMITED – Interim Results '17
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20 40 60 80 100 120 Group CIB Home loans Vehicle finance Personal loans Card Nedbank (Jun 17) Nedbank (Dec 16) Bank A Bank B Bank C
Big 4 banks’ specific coverage ratios1 (%)
1 Peer information from last reported financials (Dec 2016).
Wholesale advances contribution
Selective origination since 2010 & high- quality book CPF 37% of CIB book (higher levels of security) & coverage in CIB less relevant as provisions individually determined
Total retail coverage 41.8 42.9 36.3 ND 61% 47% 49% 47%
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Expense growth (%)
8.0 8.9 7.4 8.8 5.0 6.5 8.4 3.4 5.7 6.2 4.4 6.4 5.4 13 14 15 16 17 Expense growth Excl RoA Inflation H1
Expenses by cluster (Rm, % growth)
2 911 9 374 1 404 1 092 CIB RBB Wealth RoA +8.1% +4.7% +28.5% +0.4%
2
1 Excluding the consolidation of Banco Único, RoA increased 13%. | 2 Rest of Africa cluster disclosures from 2015.
1
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Expenses (Rm) Key drivers
1 Investments, including IT projects, branch reformatting costs, etc.
13 686 13 910 14 369 566 342 265 66 128
H1 2016 BAU growth Efficiencies BAU growth Investments Regulatory Banco Único H1 2017
+1.6% +3.4%
Dec ̓16
controlled
digital innovation & outlets to grow the franchise
compliance
Único
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11.2 8.1 6.1 18.8 1.7 8.8 12.7 5.4 8.5 6.9 (7.6) 5.9 Fees & insurances Occupation & accommodation Marketing Computer processing Incentives Staff costs H1 2017 H1 2016
Key initiatives driving positive jaws into the future Expense growth drivers (%) Contribution to total (%) 46.0 8.5 14.8 6.1 8.1 10.8
through natural attrition (~ 10% pa)
lower cost to serve & revenue benefits
R1bn by 2019
replacement
intelligence
procurement & property strategy
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Target operating model 2019
Shared services cost optimisation RBB cost
Revenue
R1bn pretax synergies
shared services functions (eg finance, HR, risk, compliance)
221 initiatives across 5 broad areas
with accelerators/incubators/Fintechs
± 30% ± 40% ± 30%
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NEDBANK GROUP LIMITED – Interim Results '17
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0.9 1.0 1.0 1.2 1.7 12 13 14 15 16 17 18 19
Nedbank IT cashflow spend1 (Rbn)
1 Costs including software & development costs, as well as computer equipment | Note: Increased amortisation costs more than offset by reduction in licence fees, maintenance costs & process benefits ensuring all
IT projects are NPV positive, apart from a few regulatory driven IT implementations.
Projected to reduce by 2018/19 as regulatory projects complete
Illustrative only Core systems (#)
Target 211 194 176 166 145 138 60 12 13 14 15 16 H1 17 20 BOOKLET SLIDE
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NEDBANK GROUP LIMITED – Interim Results '17
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Associate income from ETI1 (Rm)
148 278 292 152 (676) 230 171 150 (1 203) 142 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 870 (125) 15 16 17 (1 061)
ETI FY 2016 results (announced
environment in Nigeria & adverse currency movements
legacy loan portfolio
ETI H1 ̓17 expected around 24 Aug ̓17
1 ETI accounted for one quarter in arrear
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7 808 3 978 3 083 3 045 4 586 (2 830) (895) (1 000) Carrying value Dec 2015 Carrying value Dec 2016 Carrying value Jun 2017 Market value Jun 2017 Share of ETI NAV Mar 2017 Associate income/(loss), FCTR, OCI & dividends
Carrying value drivers vs market value (Rm)
Impairment provision
50 100 150 200 250 300 350 400 450Dec 16 Feb 17 Apr 17 Jun 17
ETI share price Nigerian Bank Index
ETI share price vs Nigerian bank index 398 14 274 10
FY16 results: 7
Note: R895m negative adjustment made up of R1 061m associate loss & R166m positive FCTR and OCI movements.
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12.1 12.3 13.0 1.0 (0.6) (0.2) 13.2
Dec 2016 Organic profits Dividends paid RWA increase Jun 2017
RWA growth vs yoy change in CET1 (excl ETI) (%)
CET1 & Tier 1 capital ratio (%)
CET1: 10.5–12.5% SARB minimum CET1: 7.25%
CET1 Tier 1
Note: Capital adequacy ratios are underpinned by ongoing organic profit generation & RWA optimisation opportunities. IFRS 9 is not anticipated to have a significant impact on capital adequacy.
CAR enhancing RWA < Capital growth
0% 2% 4% 6% 8% 10% 10% 11% 12% 13% 14% H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17
CET1 ratio (LHS) CET1 ratio, excl ETI (LHS) RWA growth (RHS)
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NEDBANK GROUP LIMITED – Interim Results '17
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BOOKLET SLIDE
Fully loss-absorbent capital adequacy ratios1 (%)
13.9 11.8 13.6 13.0 12.8
Bank A Bank B Bank C Nedbank Nedbank Tier 1 Tier 2
15.6 13.0 14.4 15.3
Mar 2017 Jun 2017
1 Nedbank analysis based on peer disclosures. Fully loss-absorbent capital excludes old-style capital instruments & therefore represents fully loss-absorbent capacity before gone concern.
AT 1 issuances (Rbn, bps above JIBAR)
1 500 500 600 700 625 565
May 16 Nov 16 Jun 17 Value issued Pricing above JIBAR
15.2
Dec 2016
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NEDBANK GROUP LIMITED – Interim Results '17
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Dividend cover (x times) Dividend yield1 (%)
1.93 2.16 2.20 2.18 2.16 2.10 1.99 1.80 13 14 15 16 17 Dividend cover excluding ETI associate income Dividend cover
Board-approved target range: 1.75–2.25x
5.8 2.9 13 14 15 16 17 NED JSE All-share index
1 Source: I-Net
H1
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Earnings contribution (Rm) Headline earnings (Rm)
61% 48% 10% 1% (22%) 2% CIB RBB Wealth Rest of Africa ETI Centre 3 004 2 371 614 53 (12) 3 211 2 544 519 70 89 CIB RBB Wealth Rest of Africa (SADC) Centre H1 2016 H1 2017
+6.9% +7.3% (15.5%) +32.1%
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BRIAN KENNEDY
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NEDBANK GROUP LIMITED – Interim Results '17
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penetration
impairments
investment in disruptive technologies Key drivers 1 870 2 212 2 485 3 004 3 211 26.9 26.3 22.9 21.3 20.8
13 14 15 16 17
Headline earnings (Rm) ROE (%)
Headline earnings, ROE +7%
H1
4.3% 4.5% 5.4% 6.1% 6.4%
Capitalisation rates:
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NEDBANK GROUP LIMITED – Interim Results '17
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60.9% 39.1%
Headline earnings
49.6% 50.4%
Assets Nedbank CIB Other clusters Six months ended % change H1 2017 H1 2016 Headline earnings (Rm) 6.9 3 211 3 004 Operating income (Rm) 5.3 7 041 6 688 PPOP (Rm) (8.4) 4 059 4 431 Net interest margin (%) 2.13 1.97 NIR-to-expense ratio (%) 115.8 130.1 Efficiency ratio (%) 41.6 37.5 CLR (%) (0.03) 0.31 Average banking advances (Rm) 2.2 331 599 324 519 Average deposits (Rm) (0.1) 339 930 340 140 Headline economic profit (Rm) 11.1 1 065 959 Allocated capital (Rm)1 9.7 31 071 28 329 ROE (%) 20.8 21.3
BOOKLET SLIDE
1 Cost of equity H1 2016: 14.4%. | H1 2017: 13.9%.
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NEDBANK GROUP LIMITED – Interim Results '17
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100 150 200 250 300 350 13 14 15 16 17
Total Banking Total Property Finance Other
Average loans & advances (Rbn)
2%
1 Total banking defined as Investment Banking & Client Coverage combined.
1
Investment grade & NIM
H1
(1%)
71% 72% 70% 70% 74% 1.92% 1.92% 1.99% 1.97% 2.13% 1.91% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 0% 20% 40% 60% 80% 100% 13 14 15 16 17
Investment Grade (LHS) NIM (RHS)
2 H1 2017 NIM would have been 1.91% if adjusted for liquid asset portfolio (like-for-like to H1 16).
2
H1
10%
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NEDBANK GROUP LIMITED – Interim Results '17
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42 15 38 31 (3) 13 14 15 16 17
CIB sector exposures
22.3 21.6 18.1 14.8 24.6 13 14 15 16 17
Specific coverage (%) CLR (bps)
Target range (15−45 bps)
Migration risk Down- side risk Change
H1 33.2% 1.8% 1.1% 3.3% 3.5% 1.9% 7.4% 32.5% 2.1% 1.0% 3.5% 4.0% 1.3% 7.7%
Property Finance Oil & Gas Construction Equity Mining Retailers State Owned Entities 2016 2017
Change in risk profile on the prior period:
▼
[ ] Risk decrease [ ] No change [ ] Risk increase
H H M L M L L L
H
M
M
H1 16 H1 17
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NEDBANK GROUP LIMITED – Interim Results '17
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2 000 3 000 4 000 13 14 15 16 17
Trading Income Fees & Comms Private Equity & Other
H1
Key drivers
business continues to focus on providing solutions to all our clients
lower corporate activity
economic conditions & high base in prior years
enhance our value proposition to clients
retention of top-tier clients to contribute to commission & fee growth in H2 2017 & expand
NIR (Rm)
(7%) 11% (60%) Comm & fees
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NEDBANK GROUP LIMITED – Interim Results '17
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2017 2017 2017 2017 2017 2017
Co-mandated lead arranger, underwriter & lender of a R3.3bn debt facility Concluded innovative R2bn debt facility R1.5bn preference share facility Co-mandated lead arranger, underwriter & lender of US$43m in senior debt & US$10m fuel L/C facility Mandated lead arranger of R1.6bn funding package & maintained its position as primary banker TBC Maintained its position as the primary banker to & funder of Growthpoint Properties Ltd by concluding an innovative R2.4bn debt refinancing facility Preferred supplier of cash-handling solutions to Tsogo Sun Group, maintained current primary banker status as well as addition of Sun 1 Hotels Group Reappointed as the primary banker to the
Western Cape Government (WCG) for a third consecutive five-year term
2017 2017 2017
Concluded successful leveraged Management buy-out (MBO)
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NEDBANK GROUP LIMITED – Interim Results '17
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investment slowdown to persist in H2 2017
& efficiencies over the long term
Investment Banking, Markets, Property, Coverage & Transactional
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CIKO THOMAS
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NEDBANK GROUP LIMITED – Interim Results '17
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1 403 1 831 2 132 2 371 2 544 11.0 13.9 15.9 18.3 18.7
13 14 15 16 17
Headline earnings (Rm) ROE (%)
Key drivers
− NII: Solid advances & strong deposit growth, offset by NIM compression − NIR growth robust despite weak economic growth impacting transactional volumes − Ongoing active cost management, balancing investments in digital & distribution
release of overlays no longer required
Headline earnings, ROE 7.3%
H1
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NEDBANK GROUP LIMITED – Interim Results '17
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48.3% 51.7%
Headline earnings
32.3% 67.7%
Assets Nedbank RBB Other clusters Six months ended % change H1 2017 H1 2016 Headline earnings (Rm) 7.3 2 544 2 371 Operating income (Rm) 4.9 13 086 12 477 PPOP (Rm) 3.1 5 248 5 088 Net interest margin (%) 5.93 6.12 NIR-to-expense ratio (%) 64.0 63.5 Efficiency ratio (%) 63.4 62.8 CLR (%) 1.14 1.23 Average banking advances (Rm) 3.7 291 400 280 914 Average deposits (Rm) 9.1 274 012 251 187 Headline economic profit (Rm) 32.4 650 491 Allocated capital (Rm)1 5.3 27 415 26 040 ROE (%) 18.7 18.3
BOOKLET SLIDE
1 Cost of equity H1 2016: 14.4%. | H1 2017: 13.9%.
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NEDBANK GROUP LIMITED – Interim Results '17
IR 1 542 1 702 1 781 916 942 1 064 2 049 2 230 2 306 15 16 17
Total retail client base (000s) Retail NIR (Rm)
4 512 4 617 4 829 2 526 2 712 2 702 15 16 17
Retail excl main- banked Total
7 531 7 329 7 038
+4.1% +7.3% (0.3%) Main- banked +2.8% Transactional Other Total
4 874 4 507
+5.7% +8.2% +6.2% +7.0%
5 151
H1 H1
Consumer Card Issuing
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NEDBANK GROUP LIMITED – Interim Results '17
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Main-banked (000s)
Kids & youth Entry level Middle Professional Small business
Business banking
Note: Non-resident, non-individual segment not shown.
Jun 17
761
Jun 16
757
Jun 15
714 109 103 97 69 67 64 376 409 383
(6%)
Jun 17 Jun 15 Jun 16
21.7 21.9 22.0 1 267 1 374 1 369
+9% +0% +8% +1% +6% +3% +5% +6% +6% (0%) +1%
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Change in 2017
Devices
Volumes
Digital clients1 (000s) Deposit volumes (000s)
>100%
1 Digitally enabled & active clients have been restated to include all digital channels & to allow for only last 90 days of recent activity. 2 Growth largely as a result of the Digital Activation programme run in Q4 2016.
+39%
Enabled
3 861 2 936 5 6802
Jun 15 Jun 16 Jun 17
829 748
Active
+8% 869 (3%) 38% 48%
Launched 2016
12% (6%) 3% 32% 33% 20%
H1 2015
13 460
H1 2017
+5% 42% 14 793 14 691
H1 2016
32%
Self Service Deposits Traditional Deposits
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NEDBANK GROUP LIMITED – Interim Results '17
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Products Jun 2017 Jun 2016 Dec 2016 Home loans 25.0 25.5 25.7 Vehicle asset finance2 60.2 63.4 61.4 Personal loans 71.5 70.4 72.4 Card 92.8 94.6 95.6 Other loans 96.2 95.9 96.2 Total Retail 52.7 52.7 52.9 Business Banking 37.1 38.7 37.6 Total RBB 49.6 49.7 49.9 0% 5% 10% 15% 2011 2012 2013 2014 2015 2016 2017 Home loans Personal loans Vehicle asset finance Card Retail total Business Banking
Non-performing default % of total advances1 Non-performing specific coverage (%)
1 Excludes performing defaulted advances 2 Vehicle asset finance includes MFC & vehicle loans in RRB.
2
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NEDBANK GROUP LIMITED – Interim Results '17
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Floor space saved (m2)
639 593 453 391 324 171 255 304 303 2010 2014 2015 2016 2017 H1
Traditional New image
2010 2014 2015 2016 2017 H1
Outlets format mix (#) Total & new-image outlets (#)
Floor space saved since 2014
13 695 18 743 764 708 695 7 273 Target > 30 000 m2 by 2020 639 452 500 504 507 512 43 71 55 40 144 193 149 148 115 2010 2014 2015 2016 2017 H1
Branches Personal loans Inretailers
764 708 695 639 24 819 627 627
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NEDBANK GROUP LIMITED – Interim Results '17
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221 initiatives in five areas Credit Evolved distribution Organisation simplification Procurement Operational excellence
RBB initiatives
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NEDBANK GROUP LIMITED – Interim Results '17
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enabled by: − Digital First, First in Digital − Disruptive CVPs − Sales & service excellence − Loyalty & rewards
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NEDBANK GROUP LIMITED – Interim Results '17
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IOLANDA RUGGIERO
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NEDBANK GROUP LIMITED – Interim Results '17
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421 464 519 614 519 35.9 33.9 38.9 35.9 27.8
13 14 15 16 17
Headline Earnings ROE (%)
Key drivers
by weaker Insurance earnings & currency impact
locally & internationally
Insurance & subdued market activity
conditions as well as an increase in allocated capital Headline earnings, ROE (15.5%)
H1 Headline earnings
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NEDBANK GROUP LIMITED – Interim Results '17
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9.8% 90.2% Headline earnings Wealth Other clusters Six months ended % change H1 2017 H1 2016 Headline earnings (Rm) (15.5) 519 614 Operating income (Rm) (4.9) 2 137 2 247 PPOP (Rm) (16.1) 685 816 Net interest margin (%) 2.15 2.07 NIR-to-expense ratio (%) 118.2 129.1 Efficiency ratio (%) 65.3 61.5 CLR (%) 0.09 0.16 Assets under management (Rbn) 15.2 295 323 256 325 Life embedded value (Rm) (9.8) 2 805 3 110 Life value of new business (Rm) (14.0) 148 172 Headline economic profit (Rm) (29.2) 259 366 Allocated capital (Rm)1 9.3 3 764 3 445 ROE (%) 27.8 35.9
R15.6bn
(11.2%)
+4,1%
BOOKLET SLIDE
1 Cost of equity H1 2016: 14.4% | H1 2017: 13.9%
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Key drivers
clients & NCCF
by subdued investor sentiment
banking app Liabilities & advances (Rbn) Wealth Management Intl
H1 H1 +4.2% (0.7%) 13 14 15 16 17 Liabilities Advances +34.1% 27% 13 14 15 16 17 SA client flows SA clients %
1 December numbers, all other periods at June
1
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NEDBANK GROUP LIMITED – Interim Results '17
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Key drivers
consecutive year & top offshore manager for 3rd year
manager in SA
income, passive & cash solutions, resulting in market share growth
solutions Assets under management (Rbn)
167.2 209.5 233.5 256.3 295.3
13 14 15 16 17
Local International
H1 15.2% 8% 12% 0% 5% 10% 15% 09 10 11 12 13 14 15 16
SA unit trust FSB approved offshore unit trust
Market share1 (%)
Quarterly
1 Source: ASISA
17
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NEDBANK GROUP LIMITED – Interim Results '17
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172 148
13 14 15 16 17 583 607
400 450 500 550 60013 14 15 16 17
Key drivers
partially offset by a release of reserves
& an increase in lapses in credit life & funeral policies
impacted by lower-than-expected homeowner’s cover volumes Life value of new business (Rm) Non-life gross written premiums (Rm)
H1 H1 (14.0%) 4.1%
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innovation
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MFUNDO NKUHLU
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Key drivers ETI
previously reported on 18 April 2017
by treasury, fixed income & cash management SADC
base
16 17
HE SADC HE ETI
Headline earnings +32.1% (550) (1 092) H1 (92.7%) (98.5%)
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NEDBANK GROUP LIMITED – Interim Results '17
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(20.7%) 120.7%
Headline earnings
3.7% 96.3%
Assets Rest of Africa Other clusters Six months ended % change H1 2017 H1 2016 SADC Headline earnings (Rm) 32.1 70 53 Operating income (Rm) 35.5 1 260 930 PPOP (Rm) 46.8 182 124 Net interest margin (%) 7.09 6.36 NIR-to-expense ratio (%) 44.6 43.8 Efficiency ratio (%) 81.4 83.3 CLR (%) 0.80 0.76 Average banking advances (Rm) 19.8 19 828 16 544 Average deposits (Rm) 22.9 27 462 22 345 Economic profit (Rm)1 (10.4) (254) (230) Allocated capital (Rm) 20.3 4 691 3 901 ROE (%) 3.0 2.7 ETI investment Headline earnings (Rm) (92.7) (1 162) (603) Total headline earnings (98.5) (1 092) (550) Total ROE (%) (32.4) (15.2)
BOOKLET SLIDE
1 Cost of equity H1 2016: 14.4%. | H1 2017: 13.9%.
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NEDBANK GROUP LIMITED – Interim Results '17
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Namibia Mozambique Malawi Zimbabwe Swaziland Lesotho
+28%
Clients (# 000) Digital activation (# 000)
+33%
Branches (#)
+25%
ATMs (#) Core system & product rollout
Flexcube/Core banking system Mobile Card
Rolled out to date
Note: Banco Único operates on its own new core banking system.
>100 % 69 20 H1 17 89 H1 16 67
Other Subsidiaries Banco Único
162 30 H1 16 154 H1 17 192 246 292 H1 17 314 22 H1 16 6 20 11 H1 16 H1 17 31
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Leading to improved client value propositions
Deployment of new core banking system Enabling mobile & value-added services Investment in improved risk management with a focus on financial crime, market conduct & other regulatory risks
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− Commodity exporters under pressure but promising recovery in GDP growth off a low base − Foreign currency liquidity improving in Nigeria
− $400m convertible bond approved by shareholders & expected to be fully subscribed − Funding of resolution vehicle for legacy assets in Nigeria & the restructuring of the profile of maturing debt
− Strategic turnaround focusing on:
− Good progress in strengthening governance & shareholder representation on the ETI board − Brian Kennedy (CIB) to join Mfundo Nkuhlu (nominated Chair: Risk Committee) on ETI board1
1 Subject to regulatory approval
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SADC
banking, card, digital, distribution & people
ETI investment
For the full year, Rest of Africa is expected to show a significant improvement in H2 2017 compared to H1 2017 (reducing the effect of the Q4 2016 ETI associate loss)
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MIKE BROWN
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− Initially consist of OMEM, the Group’s Nedbank shareholding & Old Mutual plc − Subsequent distribution of a significant proportion of the shareholding in Nedbank from OML − OML will retain an appropriate strategic minority shareholding in Nedbank to underpin the ongoing commercial relationship
− Managed Separation materially complete by the end of 2018 − Anticipate the listing of the SA holding company (OML) – at the earliest opportunity in 2018 after Old Mutual plc’s 2017 full-year results
− No impact on strategy, day-to-day management or operations, nor on staff or clients − Technology, brand & businesses have not been integrated − Engagements have been at arm’s length – overseen by independent board structures − R1,0bn joint synergies will continue
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BOOKLET SLIDE Old Mutual plc (listed on the LSE & JSE)
Old Mutual Life Assurance Company (SA) Ltd
Nedbank Group Ltd (listed on the JSE)
~ 16%
Old Mutual Group Holdings (SA) (Pty) Ltd OM Portfolio Holdings (SA) (Pty) Ltd
~ 37%
Old Mutual Emerging Markets (SA) Ltd Strategic minority: % shareholding to be determined
Old Mutual Ltd* (listed on the JSE & LSE) Nedbank Group Ltd (listed on the JSE) Current shareholding structure Envisaged shareholding structure
To be finalised
~ 53%**
Old Mutual Life Assurance Company (SA) Ltd Old Mutual Group Holdings (SA) (Pty) Ltd OM Portfolio Holdings (SA) (Pty) Ltd Old Mutual Emerging Markets (SA) Ltd
Distribution of Nedbank shares to shareholders of new SA holding company in an orderly manner, at an appropriate time
* Shareholders of this company will receive Nedbank shares to be distributed ** Additional < 1% included from managing third party funds
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− Initiatives in place to drive positive JAWS
− Selective origination & strong collections expected to result in ongoing relative
− Appropriately conservative provisioning (R578m recoveries in H1 2017)
− Capital: well above regulatory requirements & at the top end of board-approved target ranges − Liquidity: surplus liquidity, low foreign currency reliance, extended tenure & Basel III compliant
− Well positioned to manage the impact of a local currency downgrade (high-stress event) Short-to-medium-term focus
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NEDBANK GROUP LIMITED – Interim Results '17
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Growth in DHEPS for full-year 2017 to be positive, but less than or equal to growth in nominal GDP
NII
range of 60–100 bps
CLR NIR
Expenses
Associate income2
1 To align with industry practice from November 2016 average balances of R6bn in the CIB liquid-asset portfolio were included in our trading book and removed from average interest-earning banking assets used as the denominator in the NIM
2 Based on ETI FY 2017 guidance.
Note: 2017 guidance based on current economic forecasts.
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revenue growth & unlock efficiencies
enabling NIR growth & market share gains in key deposit categories
board representation & involvement | Risks remain, but the outlook is improving Delivering innovative market-leading client experiences Growing transactional banking franchise faster than the market Being operationally excellent in all we do Providing our clients access to the best financial services network in Africa Managing scarce resources to optimise economic outcomes
Medium-to-long-term focus
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Metric H1 2017 Medium-to-long-term target1 Anticipated trajectory over the medium-to-long-term ROE (excl goodwill) 15.1%
5% above COE
Diluted HEPS growth (3.7%)
≥ CPI + GDP growth + 5%
CLR 47 bps
60–100 bps
NIR-to-expenses ratio 81.6%
> 85%
Efficiency ratio 59.3%
50–53%
CET1 CAR Tier 1 CAR Total CAR 12.3% 13.2% 15.7%
Basel III basis: 10.5–12.5% > 12% > 14%
Dividend cover 1.80x
1.75 to 2.25 times
An update on our strategy & timing of targets to be provided at FY 2017 year end
Note: Guidance & targets based on current economic forecasts.
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Metric H1 2017 vs MLT Medium-to-long-term target 2017 outlook1 ROE (excl goodwill) 15.1% ▼
5% above COE Below target
Diluted HEPS growth (3.7%) ▼
≥ CPI + GDP growth + 5% Below target
CLR 47 bps ▼
60–100 bps Around lower end
NIR-to-expenses ratio 81.6% ▼
> 85% Below target
Efficiency ratio2 59.3% ▲
50–53% Above target
CET1 CAR Tier 1 CAR Total CAR 12.3% 13.2% 15.7% ▲ ▲ ▲
Basel III basis3: 10.5–12.5% > 12% > 14% Within target
Dividend cover 1.80x ▼
1.75 to 2.25 times Within target range
1 2017 outlook based on current economic forecasts. 2 Efficiency ratio includes associate income. 3 Tier 1 & total CAR targets were revised in 2016 from 11.5–13.0% & 14.0–15.0% respectively.
BOOKLET SLIDE
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NEDBANK GROUP LIMITED – Interim Results '17
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5 921 5 765 4 277 10 831 11 465 05 06 07 08 09 10 11 12 13 14 15 16
16.3 6.3 20.1 4.8 06–08 13–H1 17
Wholesale Retail
0.5 0.6 1.4 08 09 H1 17 (28%)
Global financial crisis
Headline earnings (Rm) Loan growth (CAGR %) Endowment benefit for 1% change in interest rates (Rbn)
BOOKLET SLIDE
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NEDBANK GROUP LIMITED – Interim Results '17
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1 Core equity tier 1.
Number of clients (m) NIR income contribution (%) Defaulted advances (%) CET1 ratio (%) Funding tenor (%) Coverage (%)
4.4 4.2 7.8 08 09 H1 17 39.8% 42.2% 46.4% 08 09 H1 17 3.9 5.9 2.8 08 09 H1 17 8.21 9.91 12.3 08 09 H1 17 60.9 57.9 51.2 19.9 21.0 15.7 19.2 21.1 33.1 08 09 Q2 17 32.0 33.9 37.2 08 09 H1 17 86%
ST MT LT
4.2% (53%) BOOKLET SLIDE 24% 0.45 0.47 0.65
08 09 H1 17Specific Portfolio
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33 (19) 23 (2) (1)
Funding cost impact (bps) Liability (bps) Endowment impact (bps) Mix & volume change impact (bps) Asset pricing impact (bps) Net interest margin (bps)
557 557 578 612 593 5 (2) 6 15 (25) (11) 13 10 29 6
2013 2014 2015 2016 2017
(5) (6) (1) 7 1
2013 2014 2015 2016 2017
(2) 13 (22) (15) (0)
2013 2014 2015 2016 2017 BOOKLET SLIDE
H1 H1 H1
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NEDBANK GROUP LIMITED – Interim Results '17
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158 104 22 138 (131) 48 (8) (12) 320
Trans- actional Card Secured lending Price increases Mix & activity Other Card margin Personal loans Yoy NIR growth
1
NIR growth (Rm) 2016 NIR growth (Rm)
2
Volume-related
+105 +182 +18 +111 +28 +35 (72) (13) +394
BOOKLET SLIDE
1 Includes average price increase of 4.6% implemented on 1 January 2017. 2 Includes R23m fees received on the MTN Zakhele Futhi shares, R23m unclaimed balances recognised in income in HL & BB non-transactional banking offset by fair-value swaps in MFC of -R16m. 3 Includes interchange impact of R88m in 2016 and R261m in 2015 4 Includes average price increase of 4.3% implemented on 1 January 2016 and 5.6% in January 2015
3 4
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NEDBANK GROUP LIMITED – Interim Results '17
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+1.0
Card1 Personal loans MFC (vehicle finance) Home loans
Total retail clients
Investments Transactional products
1.5 8.1 2.5 (5.8) (2.8) 3.6 % YOY growth 000s
Transactional clients with product line
74% 74% 55% 59% 50% 52% 24% 24% 38% 39% 27% 27% Number of product line clients with transactional products
1 Prior-year card client numbers restated to align with a definition change implemented in 2016.
917 1 406 1 521 940 486 458 310 553 562 302 5 847 6 055 % YOY growth
Jun ̓̓17 Jun ̓16
Jun ̓16 Jun ̓17 +0.2 (0.7) +4.0 +2.6 +0.5
BOOKLET SLIDE
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NEDBANK GROUP LIMITED – Interim Results '17
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More entrenched
Jun 16 Jun 17
Clients (000s)
285 Active < 3 months 266 603 3,591 Credits fine, debits not qualifying 3,669 (2.1%) 1,760 (0.3%) (12.6%) Consistent main-banked =12 months 1,681 2,702 2,712 Main-banked +4.7% +7.0% No credits, debits fine 690 BOOKLET SLIDE
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4.6 4.8 4.6 4.8 4.7 1.9 2.1 2.4 3.0 3.2 0.5 0.6 0.6 0.8 0.8 7.0 7.5 7.7 8.6 8.8
2013 2014 2015 2016 2017
Lending Funding Notional Total
25.8 26.7 27.0 26.0 27.4 189.7 212.2 228.9 256.7 279.3 2013 2014 2015 2016 2017 27.0 27.6 30.1 35.5 43.0 97.9 115.1 124.6 141.9 153.4 2013 2014 2015 2016 2017 56.0 59.0 63.6 67.3 70.2 Fixed deposits (Rbn) Average capital allocation (Rbn) Total client deposits (Rbn) Interest income (Rbn) Call & term (Rbn) Current & savings (Rbn)
5.8%
CAGR 2013 to 2017
12.4% 1.5% 11.9% 10.2% 5.7%
%
BOOKLET SLIDE
H1 H1 H1
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NEDBANK GROUP LIMITED – Interim Results '17
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158 147 154 269
2014 2015 2016 2017
7 756 8 250 8 956 9 374
2014 2015 2016 2017
Efficiencies (Rm) Expenses (Rm)
64% of total RBB capital spend related to technology investments.
Integration of Retail & Business Banking backoffice
CAGR 6,5% CAGR 4,6% (core expenses)
Distribution & sales-related cost growth (Rm)
60 71 95 56 44 137 88 42
2014 2015 2016 2017
Sales-related Distribution BOOKLET SLIDE
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NEDBANK GROUP LIMITED – Interim Results '17
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Nedbank Group has acted in good faith and has made every reasonable effort to ensure the accuracy and completeness of the information contained in this document, including all information that may be defined as 'forward-looking statements' within the meaning of United States securities legislation. Forward-looking statements may be identified by words such as 'believe', 'anticipate', 'expect', 'plan', 'estimate', 'intend', 'project', 'target', 'predict' and 'hope'. Forward-looking statements are not statements of fact, but statements by the management of Nedbank Group based on its current estimates, projections, expectations, beliefs and assumptions regarding the group's future performance. No assurance can be given that forward-looking statements will prove to be correct and undue reliance should not be placed on such statements. The risks and uncertainties inherent in the forward-looking statements contained in this document include, but are not limited to: changes to IFRS and the interpretations, applications and practices subject thereto as they apply to past, present and future periods; domestic and international business and market conditions such as exchange rate and interest rate movements; changes in the domestic and international regulatory and legislative environments; changes to domestic and international operational, social, economic and political risks; and the effects of both current and future litigation. Nedbank Group does not undertake to update any forward-looking statements contained in this document and does not assume responsibility for any loss or damage whatsoever and howsoever arising as a result of the reliance by any party thereon, including, but not limited to, loss of earnings, profits, or consequential loss