NEDBANK GROUP LIMITED INTERIM RESULTS. for the six months ended 30 June 2015

Transcription

1 NEDBANK GROUP LIMITED INTERIM RESULTS for the six months ended 30 June 2015

2 DELIVERING GROWTH AND VALUE IN A DIFFICULT ENVIRONMENT STRATEGY & OVERVIEW MIKE BROWN

3 Overview Macro economic environment difficult Regulatory demands increasing Responding through strategic action = Delivering growth & value SA GDP growth trapped in 1,5-3,0% corridor Prudential Conduct Rest of Africa growing faster off a lower base NCA / NCR NAV per share: +6,1% ROE (excl gw): 17,3% Dividend per share: +16,7% 3

4 Slower GDP growth in SA with pockets of opportunity, faster growth in rest of Africa Macro economic developments Weak SA Q1 GDP growth: 1,3% - impacted by electricity constraints Rest of Africa GDP growth faster than SA at 4-5 % Increased volatility (FX, equity market, bond market, commodities, etc) Continued policy uncertainty Highly indebted consumers some relief from lower oil prices, but rising inflation a concern Rising interest rate cycle resumed SA credit ratings re-affirmed, underpinned by improved outlook for current account & fiscal deficits Expenses Transactional Cost of risk Advances Implications Retail credit extension likely to remain slow Pockets of wholesale credit growth, including infrastructure & rest of Africa Positive mix changes Increased wholesale tail-risk & focus on stress-testing Consumers currently resilient, but rising inflation & interest rates will increase pressure Slowdown in transactional activity across wholesale & retail Volatility in markets business Pressure from rising inflation Source: Nedbank Group Economic Unit 4

5 Regulatory agenda - demands increasing Basel III Twin peaks CARs LCR NSFR Leverage Under discussion globally: Trading book review, Capital floors, Total lossabsorbing capacity New SA regulatory structure Prudential Authority Market Conduct Authority Conglomerate supervision NCAA Consumer Financial Implications Higher capital levels Less client lending, more HQLA & lower NIM NIR pressures Additional opex & IT costs Greater consumer protection Lower retail loan payouts Unintended consequences could drive consumers to informal lenders NCR Various other NCR lending cap proposals Alignment of FSC & dti Codes Interchange reductions AML POPI RDR Solvency II/SAM BCBS 239 (RDAR&R) IFRS 9 Authenticated Collections RoA Risk-Return Lower risk in the banking system, but higher costs Pressure on industry ROEs, but cost of equity should also be lower Regulatory rollup: consolidated supervision implications in rest of Africa (Basel I to Basel III transition) 5

6 Responding through strategic action Client Centred Innovation Portfolio tilt Leveraging our strong wholesale positioning Growing our transactional banking franchise Optimise & invest Consolidation & expense control Pan African banking network Wholesale vs retail positioning: 60:40 Revenue & cross-sell opportunities from new CIB model Maximise opportunities in infrastructure growth Leverage dealflow from ETI & Bank of China alliances in rest of Africa Main banked retail clients up +8% Strong NIR growth: +10,2% CIB, RBB restructuring Synergies: Internal solid progress on synergy programmes: R261m savings ytd Synergies: Old Mutual Group on track to unlock R1bn synergies by 2017 (just less than 30% accrue to Nedbank) Managed evolution IT programme Groupwide regulatory change programme initiated Good expense control: +7,4% SADC & East Africa: Invested in governance, systems, distribution & skills Banco Unico pathway to control (2016) West & Central Africa: Invested approximately R6bn in ETI & deepening the strategic alliance 6

7 Delivering value to all stakeholders STAFF Leadership & structural changes completed Continued investment in staff development Good progress on staff transformation CLIENTS New loan payouts of R89bn #1 in Q1 Plexcrown rankings, AUM up 11% to R233bn Total clients up 6% to 7,3m & transactional banking gains across all clusters Retail main banked clients up 8% to 2,5m 197 branch of the future stores Digitally enabled clients up 31% & value of AppSuite TM transactions up 25% to R35bn TO BE AFRICA S MOST ADMIRED BANK BY OUR: COMMUNITIES SHAREHOLDERS ROE (excl goodwill): 17,3% Economic profit up 59,4% Interim dividend of 537c, up 16,7% R6bn invested to position for the rest of Africa growth opportunity REGULATORS Strong capital, liquidity & coverage ratios Focus on compliance & sustainable banking practices Continued to make banking more accessible Maintained level 2 BBBEE for 6 th consecutive year & the most transformed bank in the peer group Nedbank & OMEM committed R100m each over 3 years to initiatives linked to NDP, together with our BBPs Fair Share 2030 solutions for health, agriculture & manufacturing industries 7

8 Delivering value to shareholders NAV ROE > COE Dividends NAV per share (cents) ROE & Cost of equity (%) Interim dividend per share (cents) +6,1% 15,8 16,1 16,5 17,3 +16,7% 13,7 EP 13,0 13,1 13,0 13,5 13, ROE (excl GW) Cost of equity Underpinned by strong CET1, surplus liquidity & high coverage 8

9 DELIVERING GROWTH THROUGH STRATEGIC INITIATIVES FINANCIAL OVERVIEW RAISIBE MORATHI

10 Key performance indicators Jun 2015 Jun 2014 ROE (excl goodwill) 17,3% 16,5% Diluted HEPS growth 14,1% 16,1% Credit loss ratio 0,77% 0,83% NIR-to-expenses ratio 83,1% 80,9% Efficiency ratio 55,8% 56,5% Common-equity tier 1 CAR 11,4% 12,1% Dividend per share (cents) Note 1: Efficiency ratio includes associate income 10

11 Headline earnings growth drivers Headline earnings (Rm) ,7% ,7% (1,1%) +10,2% +7,4% +>100,0% 2014 NII Impairments NIR Expenses Associate 1 income Direct tax & other : Includes R426m associate income from ETI 11

12 Net interest margin impact of asset mix changes, increasing liquid-asset requirements & ETI funding (not in the base) Net interest margin (bps) 2 5 (11) (6) (2) 355 (7) Jun 2014 Endowment impact Asset pricing Asset mix HQLA Liability pricing & mix Pre-ETI ETI funding Jun

13 Interest-earning banking assets - mix & HQLA contribution driving change in NIM Interest-earning banking assets (Rbn) Lower margin assets +R53bn 15,7 Higher margin assets +R8bn 15,7 2,5 15,5 3,9 (2,3) 1,9 8,1 0,5 701,1 639,6 Jun 2014 Personal Loans Credit Cards Vehicle Finance Overdrafts Commercial Mortgages Home Loans Term Loans¹ Other Assets² Level 1 HQLA 3 Jun 2015 Lending spreads (%) 16,38 7,39 3,69 3,73 2,03 1,99 1,67 low negative carry 1: Term loans includes predominantly terms loans in CIB & BB 2: Other Assets include government securities & ST funds 3. HQLA in this analysis reflects Level 1 banking assets only 13

14 Net interest margin mix impact evident in lower lending spread & CLR Lending spread (bps) vs Credit loss ratio (bps) = 137 Mix = Lending spread CLR 14

15 Credit loss ratio BOOKLET SLIDE CLR (%) % of avg banking advances 2015 H FY 2014 Nedbank CIB 47,2 0,38 0,24 0,15 0,19 Through-thecycle target ranges Nedbank Capital 13,7 0,41 0,32 (0,04) 0,14 0,10 0,55 Nedbank Corporate 33,5 0,36 0,21 0,22 0,21 0,20 0,35 Nedbank RBB 46,2 1,22 1,23 1,55 1,39 Nedbank Business Banking 11,0 0,49 0,39 0,44 0,42 0,55 0,75 Nedbank Retail 35,2 1,44 1,50 1,90 1,70 1,90 2,60 Nedbank Wealth 4,2 0,18 0,13 0,21 0,17 0,20 0,40 Rest of Africa 2,4 0,86 0,06 0,42 0,23 Group 0,77 0,74 0,83 0,79 0,80 1,20 15

16 Credit loss ratio - reflective of quality portfolio Group credit loss ratio (bps) Group CLR (bps) Group CLR excl. PLs (bps) Impairments charge (Rm) Personal Loans Home Loans MFC BB Wholesale Other 2015 Note: Other includes rest of Africa, centre, credit card etc 16

17 Non-interest revenue - stronger growth post-2014 strategic actions Non-interest revenue (Rm) Non interest revenue growth (%) +10,2% ,9 15,8 15, ,1 14,7 14, , , ,6% (11,0%) +30,4% +50,3% 2,9 NIR Commission & fees 2014 Commission & fees Insurance income Trading income Other¹ 2015 (0,6) : Other represents Private equity, sundry income, fair value adjustments 17

18 Expenses - cost discipline in slower revenue growth environment Expenses (Rm) Revenue & expense growth (%) +5,6% +1,8% (261) ,4% 12,3% 11,1% 13,2% 12,7% 10,9% 8,0% 8,9% 8,7% 7,4% 919 Expense growth 4,6% Revenue growth JAWS (%) (1,2) 0,5 2,9 1,3 (4,4) 2014 Core growth Efficiency benefits 2015 Investing¹ for growth cost-to-income ratio 55,8% (June 2014: 56,5%) 1 Investing for growth includes: Strategic IT costs: R44m; Branch of future: R71m; Rest of Africa: R64m & Compliance cost: R29m 2 Revenue includes NII, NIR & Associate Income 18

19 Consolidated statement of financial position Period ended (Rm) Annualised % change Jun 2015 Dec 2014 Cash & securities 41, Advances 11, Other (7,7) Total assets 14, Ordinary shareholders equity 5, Minorities & preference shareholders 0, Deposits 11, Long-term debt instruments 54, Other 36, Total equity & liabilities 14, loan-to-deposit ratio of 94,0% 19

20 Advances BOOKLET SLIDE Period ended (Rm) Annualised Jun Dec % change Home loans 4, Commercial mortgages 10, Properties in possession (8,8) Term loans 6, Personal loans (8,3) Other term loans 9, Leases & instalment sales 5, Credit cards 11, Overnight loans 14, Overdrafts 1, Other 33, Banking advances 16, Trading advances 86, Impairment of advances (1,7) (11 004) (11 095) 11,

21 Advances up 11,8% wholesale growth ahead of retail growth Advances (Rbn) Annualised growth (%) Payouts (Rbn) Homeloans Commercial mortgages Personal loans Term loans (Wholesale¹) 4,0 10,8 (8,3) 9,1 Vehicle finance² Credit cards Foreign client lending Overdrafts & overnight loans 3 5,0 11,4 126,3 5, Other 4 35,7 June 2015 Dec 2014 Jun 2011 Jun 2012 Jun 2013 Jun 2014 Jun : Term loans (Wholesale) includes CIB & Business Banking 2: Leases & instalment debtors 3: Overdrafts & Overnight loans, also include Pref shares & debentures, Deposits placed under repurchase agreements 4. Other loans in CIB 21

22 Deposits BOOKLET SLIDE Period ended (Rm) Annualised % change Jun 2015 Dec 2014 Current accounts (0,1) Savings accounts 8, Term deposits & other 7, Call & term deposits 7, Fixed deposits 50, Cash management deposits (1,8) Other deposits (8,6) Foreign currency liabilities 51, NCDs 41, Deposit repurchase agreements (34,7) ,

23 Deposits up 11,4% diversifying & lengthening the funding profile Deposits (Rbn) Annualised growth (%) Funding profile (%) Current accounts (0,1) 25,4 27,6 23,7 Savings accounts 8,7 Call & term deposits 7,6 18,7 18,3 15,8 Fixed deposits 50,2 Cash management (1,8) 55,9 54,1 60,5 Foreign currency 51,4 NCDs Other June 2015 Dec ,3 (12,0) Nedbank Dec 2014 Jun 2015 Long-term (>181 days) Medium-term ( days) Short-term (0-31 days) Peer average Note : Other deposits include overnight loans & deposits placed under repurchase agreements Nedbank funding profile Q average, Peers as at May 2015 per BA

24 Strong capital within Basel III target range Common equity tier 1 ratio (%) 0,6 1,3 0,3 0,2 0,2 0,2 11,6 11,4 Basel III target range: 10,5% -12,5% Dec 2014 Organic reserves Dividends paid Increase in RWA CVA Ratings migration Share of ETI1 FCTR impact Jun 2015 Additional Tier 1 & Tier 2 capital R1,8bn hybrid debt instruments redeemed in January 2015 R2,3bn Basel III compliant tier 2 capital subordinated debt issued 1Calculation based on Nedbank s share of ETI s FCTR losses as reported by ETI: R1 332m offset by Nedbank related FCTR gains of R279m 24

25 Lower risk profile with higher capital & sources of quick liquidity Capital ratios (%) Total sources of quick liquidity, 2 Total HQLA (Rbn) & LCR (%) 76,3 Average long-term funding & loan to deposit ratio (%) 97,0 9,9 0,9 0,8 11,6 11,4 1 51,5 113,3 66,4 126,0 34,6 148,4 39,3 93,8 94,0 35,0 78,3 91,4 109,1 18,0 25,4 27,6 Dec 2009 Dec 2014 ETI impact Regulatory minima Jun 2015 Jun 2014 HQLA Dec 2014 Other liquidity 1: ETI impact on CET 1 of 80bps includes 60bps from our investment & 20bps FCTR 2. HQLA includes CLF, cash reserves, level 1 &2 liquid assets as per SARB definition for LCR purposes 25 June 2015 LCR Dec 2009 Dec 2014 Jun 2015 Loan-to-deposit ratio Ave. LT funding ratio

26 Strong performance across all clusters Headline earnings (Rm) +12,3% +16,4% ROE (%) +11,9% >100,0% CIB RBB Wealth Rest of Africa 344 4,4% 26,3% 22,9% 13,9% 15,9% 33,9% 38,9% 15,3% CIB RBB Wealth Rest of Africa Note: Cost of equity 2014: 13,5% 2015: 13,0% 26

27 BUILDING THE CORPORATE & INVESTMENT BANKING FRANCHISE NEDBANK CORPORATE & INVESTMENT BANKING BRIAN KENNEDY

28 Corporate & Investment Banking Financial highlights ROE (%) 26,9% 26,3% 30,0% PPOP up 26,3% Key drivers 22,9% 23,0% 22,9% 25,0% Revenue increased 16,8% Headline earnings (Rm) +12% Capital Corporate 20,0% 15,0% 10,0% 5,0% 0,0% Good average advances growth underpinned by commercial property & investment banking Expense base very well controlled benefiting from integration process CLR increase driven by once-off impairment & portfolio rating migration ROE down as a result of increased ECAP driven by prevailing economic conditions & internal parameter changes 28

29 Corporate & Investment Banking Financial highlights BOOKLET SLIDE Six months ended % change June 2015 June 2014 Headline earnings (Rm) 12, Operating income (Rm) 10, PPOP (Rm) 26, NIR-to-expenses ratio (%) Efficiency ratio (%) 38,9 43,8 Credit loss ratio (%) 0,38 0,15 Average banking advances (Rbn) 11, Average deposits (Rbn) 10, Nedbank CIB Other clusters 51% Assets 49% 46% Average allocated economic capital (Rm) 28, % Headline economic profit (Rm) 0, ROE (%) 22,9 26,3 Headline earnings 29

30 Investment Banking developing the African continent with our clients IB average loans & advances (Rbn) NIM & CLR (bps) Resource Finance & IET average loans & advances % % 150% % 50% % South Africa Lending Margin (RHS) Outside South Africa CLR (RHS) Resource Finance Infrastructure Energy & Telecoms 30

31 Markets business continue to focus on flow Trading income (% change yoy) Markets income distribution >100% % % ,8% % of trading days 30% 20% 10% % (7,8%) < to to to -5-5 to 0 0 to 5 5 to to to to to to 35 > Value at risk R million Forex Equities Debt Securities Commodities Value at risk (1) (Rm) Days profit (%) 95% 98% 97% Note 1: Average VaR (99%, one day) 31

32 Corporate Banking impacted by impairments & macro economics Average advances (Rbn) CLR (bps) Total income (Rm) ,7% 0,8% Average Advances CLR (RHS) NII NIR 32

33 Property Finance very strong performance Average advances (Rbn) & CLR (bps) Total income (Rm) ,1% 50 46,5% ,6% Average Advances CLR (RHS) NII NIR 33

34 Prospects for Corporate & Investment Banking Macro environment Negative impact for SA & African economies due to China slowdown Negative commodity cycle commodity prices under pressure resulting in less investment activity on the continent Regulatory environment Business outlook Numerous regulatory changes continued investment in headcount & systems to ensure compliance Basel III increasing cost of funding & capital allocation across all businesses Commercial property growth rates to moderate levels Corporate SA not investing in new capacity Significant client mandates in realising revenue synergies Renewable energy & coal baseload provide growth opportunities Project opportunities on the continent remain attractive Continued focus on revenue generation synergies from integration as well as cost benefits Continue to build out transactional banking capabilities 34

35 ONGOING STRATEGIC MOMENTUM WITH IMPROVING RISK PROFILE NEDBANK RETAIL & BUSINESS BANKING PHILIP WESSELS

36 Retail & Business Banking Financial highlights ROE (%) 15,9% 13,3% 13,9% 11,7% 11,0% Headline earnings (Rm) +16% Key drivers Resilient performance Retail ROE up to 14,9% & BB at 19,9% Operating income growth of 9,1% Significantly lower defaults down 6,7% to R13bn 33 bps improvement in CLR to 122 bps Active cost management restricting expense growth to 6,4% driven by strategic choices Proactive de-risking of the business & prudent provisioning 2014 fee decisions enabling 8% growth in main banked clients Consistent investment for sustainable growth: distribution, marketing & innovation RBB efficiencies: R147m 36

37 Retail & Business Banking Financial highlights BOOKLET SLIDE Six months ended % change June 2015 June 2014 Headline earnings (Rm) 16, Operating income (Rm) 9, Nedbank Retail & Business Banking Other clusters 38% Preprovisioning operating profit (Rm) 1, Margin (%) 4,90 4,95 62% Credit loss ratio (%) 1,22 1,55 NIR-to-expenses ratio (%) 64,1 65,7 Assets Efficiency ratio (%) 63,2 62,1 40% Average banking advances (Rm) 4, Average deposits (Rm) 10, Average allocated economic capital (Rm) 1, Headline economic profit (Rm) > % Headline earnings ROE (%) 15,9 13,9 37

38 Underlying business showed an improved performance Headline Earnings (Rm) +14% +43% +3% June 2014 June % Key drivers Personal Loans: reduced impairments partially offset by lower volumes. MFC: growth in HE despite reduction in new business volumes following NCA % (2%) (244) +9% (221) Home Loans: reduced impairments & increasing payouts. Card: strong NIR growth despite interchange impact. RRB: underlying income growth impacted by reduced pricing in H PL MFC HL Card RRB BB Other ROE (%) 26,4 17,0 13,5 24,6 15,9 19,9 15,6 15,4 11,0 26,2 17,9 19,5 2 BB: Maintained momentum as evidenced by solid growth in income but similarly impacted by reduced pricing in H Profitability relates to the advances book & excludes some transactional, deposit & insurance income derived from strong Personal Loans positioning in the market 2 Other: Includes Client Engagement improvement in HE loss of 19% to R152m 38

39 Asset payouts aligned to risk appetite & pricing Asset payouts Book growth New business pricing 2 Rbn YoY % % Personal Loans MFC 1 37,1 38,4 5,1 4,1 13,8 16,0 34,9 3,6 14,6 42,2 3,9 16,2 38,7 3,9 14,1 (11,9) 11,4 14,9 17,5 17,6 16,9 16,6 2,36 2,41 2,30 2,43 2,44 Home Loans 1 Business Banking Other 4 3,7 4,1 5,5 3,9 5,2 11,3 11,6 10,2 13,1 11,9 3,2 2,5 2,6 3,5 3,5 1,0 8,6 3 0,65 0,84 0,70 0,57 0,48 (0,15) (0,12) (0,23) (0,12) (0,17) H2 H H2 H Excludes lending products in RRB 2 Client premium relative to prime with home loans excluding staff & re-advances 3 Excluding impact of client migrations 4 Other includes RRB 39

40 Retail client & NIR growth influenced by risk appetite & pricing Total retail client base Retail NIR #000 Rm +5,8% +8,0% Total Total Personal 332 Loans Personal 402 Loans 1 Retail excl Personal Loans ,7% ,3% Transactional Card +1,4% ,0% ,7% ,3% Secured Personal Loans clients excluding transactional product line clients 2 Includes total growth excluding personal loans, the impact of card interchange (R88m) in 2015 & selected price reductions implemented in H in RRB (R38m) 40

41 CLR impacted by advances mix & credit cycle Credit loss ratio (bps) Other MFC Personal Loans Home Loans Business Banking I/S 1 (Rm) 1,113 1,202 1,664 3,890 5,928 5,169 4,053 4,134 4,765 3,771 1,686 NPLs 2 (%) Total coverage 3 (%) Income statement impairments 2 Percentage defaulted advances including legal & non legal to 2008 numbers exclude MFC 41

42 Prospects for Retail & Business Banking Macro environment Regulatory environment Heightened competition from banks & non-banks Consumer indebtedness at concerning levels Businesses under strain from rising energy cost, load shedding & labour dynamics NCAA & interchange reducing volumes & acquiring margins AML remediation costly & impacting clients Proposed rate caps further reduction in unsecured volumes anticipated Risk of higher risk consumers driven to informal lenders Quality acquisitions & selective asset origination, enabled by: Business outlook Improved physical & digital distribution Simplifying client on boarding & ongoing servicing Continued prudent risk management to meet CLR target levels Active cost optimisation to balance investment needs Building sustainable, profitable businesses through the cycle 42

43 A SOLID PERFORMANCE IN VOLATILE TIMES NEDBANK WEALTH IOLANDA RUGGIERO

44 Nedbank Wealth Financial highlights RoE (%) Key drivers 35,9% 33,9% 38,9% Growth momentum in Wealth & Asset Management 25,4% 29,3% EP up 24,0% to R346m Headline earnings (Rm) +11,9% NIR growth of 4,3% impacted by decline in Insurance NII up 21,1% supported by strong advances & liabilities growth Expense growth well maintained at 7,0% Significant ROE uplift to 38,9%

45 Nedbank Wealth Financial highlights BOOKLET SLIDE Six months ended % change June 2015 June 2014 Headline earnings (Rm) 11, Operating income (Rm) 7, Nedbank Wealth Other clusters 10% Margin (%) 2,01 1,94 Credit loss ratio (%) 0,18 0,21 NIR-to-expenses ratio (%) 129,8 133,1 Efficiency ratio (%) 63,0 63,1 Assets under management (Rm) 11, Life embedded value (Rm) 10, Life value of new business (Rm) 4, Average allocated economic capital (Rm) (2,6) Headline economic profit (Rm) 24, ROE (%) 38,9 33,9 90% Headline earnings AUM net inflows R13,4bn Life APE +2,0% ST GWP +7,0% 45

46 , , , , , , , , , , ,00 - Wealth Management Continued momentum Liabilities & advances +9,5% Key drivers Improved international flows & contribution +15,6% Banking performance underpinned by liability & advances growth Liabilities Advances Stockbroking AUA increased 32,0% on the back of strong inflows & market NFP scale & productivity increasing Stockbroking AuA +3,3% +36,7% War for talent increasing ,0%

47 Asset Management Performance & scale benefits Assets under management (Rbn) 209,5 167,2 125,5 106,1 233,5 Key drivers Ranked one of SA s top domestic unit trust companies Markets & record net inflows supporting AUM growth of 11,4% International Local 13,4 Net flows (Rbn) 9,2 9,8 8,4 Momentum in cash & international solutions EB offering with OM gaining traction Fund performance & awards 3,

48 Insurance Rebasing for lower volumes Life value of new business Key drivers Life earnings impacted by lower retail volumes +4,0% ST gross written premium +10,7% Funeral & single premium sales support VNB uplift of 4,0% Continued growth in niche ST products Progress on Insurance reorganisation Green property fund launched +7,0%

49 Prospects for Nedbank Wealth Slower growth in tougher times Macro environment Regulatory environment Global economic concerns could result in further market volatility Rising interest rates would impact consumers & impairment levels Shortage of skills resulting in increased war for talent Regulatory developments impacting resources, systems & processes Credit life competitively priced for future potential caps RDR reshaping advisory model & commission structures SAM on track for implementation Business outlook Diversified portfolio supporting growth prospects Maintain momentum in Asset & Wealth Management Complete Insurance reorganisation Focus on growing new products & services Leverage group collaboration Investment in specialist IP & skills 49

50 BUILDING OUR PAN-AFRICAN BANKING NETWORK REST OF AFRICA MFUNDO NKUHLU

51 Building our pan-african banking network A client-centred, risk-mitigated, capital-efficient, longer-term strategy SADC & East Africa (A) Grow presence from 6 to 10 countries in the medium-term Standardised operating model & IT system Banco Unico (Mozambique): 37% shareholding (with pathway to control in 2016) Coverage bankers in East & West Africa West & Central Africa (B) Partnership approach ETI: approximate 20% shareholding, board representation, new CEO, strategic & technical banking alliance Ecobank strengthening its franchise Presence in 36 countries #1 in 6, top 3 in 14 countries ROE: 15: 18,5% ( 14: 17,7%) Efficiency ratio: 15: 62,5% ( 14: 68,1%) One bank experience for clients across 39 countries & >2 000 staffed outlets 51

52 Rest of Africa Financial highlights ROE (%) Key drivers 7,9% 7,3% 10,4% 4,4% 15,3% Significant capital deployed into rest of Africa Headline earnings (Rm) >100% Headline earnings for the five SADC subsidiaries increased 43,8%, while headline earnings including head office costs increased by 5,2% ETI associate income & funding cost of investment included, but not in the prior year base Investment into staff, systems, distribution & additional headcount for growth 52

53 Rest of Africa Financial highlights BOOKLET SLIDE Six months ended % change June 2015 June 2014 Headline earnings (Rm) 437, Rest of Africa Other clusters 3% Operating income (Rm) (7,0) Preprovisioning operating profit (Rm) 215, Margin (%) 3,11 4,94 Credit loss ratio (%) 0,86 0,42 NIR-to-expenses ratio (%) 57,8 49,2 Efficiency ratio (%) 63,5 79,2 Average banking advances (Rm) (0,1) Average deposits (Rm) 18, Average allocated economic capital (Rm) 56, Headline economic profit (Rm) 139,7 52 (131) ROE (%) 15,3 4,4 97% Assets 6% 94% Headline earnings 53

54 SADC & East Africa banking subsidiaries & head office ROE (%) Headline earnings (Rm) 138 (68) Financial performance +43,8% 70 Banking subsidiaries Head office costs Return on statutory capital: 18,2% 14,7% 6,9% 14,6% 5,0% 198 (124) Banking subsidiaries incl head office costs +5,2% 74 Key drivers Strong advances growth, up 25% Increasing margin CLR increased to 88bps Solid NIR growth of 20% Continued investment in the franchise - Head office staffing - Implementation of Flexcube in Namibia - 8 new ATMs in Lesotho, Malawi & Swaziland new & refurbished branches to be completed by the end

55 Strategic Associate Investments ETI investment (30 June 2015): - Cost: R5,9bn - Book value: R5,6bn - Market value: R6,4bn Invested to become c20% ETI shareholder Entry price of less than 1,0x NAV Long-term strategic shareholding & alliance Financial performance Value from Ecobank-Nedbank Alliance Headline earnings (Rm) (7) Return on investment (annualised): - ROI: 14,5% - Funding cost: 6,1% - Positive carry: 8,4% 70 Nedbank wholesale banking clients now bank with Ecobank Good progress across all cluster alliance committees Ecobank SA representative office colocating into Nedbank offices in H

56 Prospects for Rest of Africa Macro environment Lower oil & commodity prices impacting major African economies Volatile exchange rates & infrastructure spend will continue to impact certain countries Rest of Africa still likely to offer higher growth rates than SA Regulatory environment Major focus on anti-money laundering Move from Basel I through to Basel III Readiness to address ongoing regulatory reforms Business outlook SADC & East Africa: - Continue to explore expansion opportunities - Flexcube IT system implementation in progress for remaining subsidiaries West & Central Africa: Opportunities to leverage off & collaborate with Ecobank 56

57 DELIVERING GROWTH AND VALUE IN A DIFFICULT ENVIRONMENT SUMMARY & PROSPECTS MIKE BROWN

58 Macro & industry environment Global macro environment Mixed outlook for developed economies Emerging market volatility likely to continue Impact of oil & commodity prices continues to play out Rest of Africa structurally higher growth trajectory intact, but short-term volatility 2015 GDP growth: 2,0% with downside risk Domestic macro environment Inflation increasing off Q1 lows (2015: 6,6%) Repo rate: further 25 bps increase forecast for September 2015 Consumers have been resilient, but remain highly indebted Electricity constraints continue to impact business confidence & growth Low levels of asset growth (wholesale growth > retail growth) SA banking industry Margin pressure from mix changes & increasing LCR compliance Consumer advances & transactional volume growth to remain slow Capital market volatility to continue Regulatory change remains intense Competition remains fierce 58

59 2015 guidance Volatile economic environment Forecast risk increased Growing our franchise for the long-term NII Advances to grow above mid-single digits (changed from: at mid-single digits) NIM slightly below the 2015 level of 3,36% (changed from: below 2014 level) CLR At the lower end of our target range of bps NIR Above mid-single digit growth (excluding fair-value adjustments) Expenses Above mid-single digit growth DHEPS growth Growth in DHEPS greater than growth in nominal GDP (no change in 2015 guidance) 59

60 THANK YOU

61 Medium-to-long-term targets BOOKLET SLIDE Metric ROE (excl goodwill) 2015 vs MLT Medium-to-long-term target 2015 outlook 1 vs 2015 outlook 17,3% 5% above COE Below target Diluted HEPS growth 14,1% CPI + GDP growth + 5% > CPI + GDP growth Credit loss ratio 77bps bps At the lower end of our target range NIR-to-expenses ratio 83,1% > 85% Below target Efficiency ratio 2 55,8% 50% - 53% Above target CET 1 CAR Tier 1 CAR Total CAR B III 11,4% 12,1% 14,5% Basel III basis: 10,5% - 12,5% 11,5% - 13,0% 14,0% - 15,0% Within target range Dividend cover 2,10 1,75 to 2,25 times outlook based on current economic forecasts 2 Efficiency ratio includes associate income & going forward this target will be reviewed in line with this change 61

62 Key factors impacting NIR growth BOOKLET SLIDE Non interest revenue (Rm) +1,5% +10,2% +8,7% 150 Reducing impact of 2014 strategic choices (202) (97) (126) (88) 2014 Quality growth¹ 2015 Core NIR Other 2015 PL slowdown & credit life pricing Bank fee decisions Interchange Private equity 1: Quality growth represents commission & fees, insurance, & trading income 62

63 ETI investment accounting vs investment value BOOKLET SLIDE Return on investment a. Investment cost R5 928m b. Associate income for 2015 R426m Book value Carrying value (31 Dec 2014) plus Associate income R6 223m R426m Q share of ETI earnings Q share of ETI earnings R148m R278m c. Return on investment* (b / a) 14,5% Q share of ETI earnings R148m Q share of ETI earnings R278m plus FCTR change (R1 053m) Nedbank share of ETI FCTR (R1332m) Funding cost d. Funding cost (post tax) R180m e. Cost of funding* (d / a) 6,1% Carry Nedbank FCTR on ETI investment Carrying value (30 June 2015) Market value (based on ETI share price) R279m R5 596m Annualised carry (c e) +8,4% Market value (31 Dec 2014) Market value (30 June 2015) R 5 483m R6 433m Notes: - Return on investment & Cost of funding annualised - The group s CET1 ratio has been diluted by 80bps as at June 2015 due to the ETI investment and ETI FCTR losses, offset to a degree by the positive impact of associate income. - ETI 2015 financial performance excludes the impact of capital held in the centre for these investments. Capital in the centre is held against the capital impairment for investments in other financial entities above the threshold of 10%. It is planned to allocate this capital from 1 July 2015 to the Rest of Africa Cluster. 63

64 Nedbank Retail & Business Banking NIR growth support by good volume growth, but muted by strategic choices & other factors BOOKLET SLIDE YoY NIR growth (Rm) (108) (73) 169 (97) (12) Transactional lending Card Secured 1 Volume related price increases repricing Mix & activity Personal Loans Others 4 YoY NIR growth 2014 YoY NIR growth (Rm) Reduced due to R43m revised forex profit-sharing agreement with CIB 2 Volume growth and proactive management actions compensating for reduced interchange revenues of R88m 3 Average price increase of 5,6% in January Includes non-transactional banking in BB and fair value swaps in MFC & BB 64

65 Nedbank Retail & Business Banking Transactional income per retail client impacted by strategic choices Service charges & commissions per client Per annum annualised BOOKLET SLIDE Key drivers Steady increase in client numbers - Kids & Youth +5% - Entry level +7% - Middle market +4% - Professional +7% - Small business +5% No fee increases 1 implemented in 2014 to assist in slowing client attrition & selected fee reductions 2 in H H2 H Average 5,6% price increases in 2015 Total clients Total transactional clients Note: 2015 NIR annualised Excludes NIR earned on lending products 65

66 Nedbank Retail & Business Banking Client-centred strategy driving growth in all segments BOOKLET SLIDE 1 ELB and Middle segment growth is negatively impacted by reduction in Personal Loans 2 Bases readjusted due to Professional s migration to Consumer segments in Feb 14 of ~6k 3 Adjusted for the Medical Professional groups that migrated from BB to RRB in 2015 Note: Non-residential, Non-individual segment not shown 66

67 Nedbank Retail & Business Banking Building more enduring client relationships through increased levels of transactional products cross-sell BOOKLET SLIDE # 000 Total Retail clients as at Jun 15 % YOY Growth Number of product line clients with transactional products % YOY Growth Investments 1,281 9, % % 7,4 Card 1,051 4, % % 4,1 Personal Loans 517 (14,0) % 48% (8,1) MFC 541 0, % % 1,1 Home Loans 326 (1,4) % % (1,3) Transactional clients with product line 1,442 1,502 TP ,4 28% 27% 4,1 Jun-14 Jun-15 67

68 Nedbank Retail & Business Banking Defaulted advances reduced - coverage at highest levels Defaults over time Default % of total advances 20% 15% Defaulted advances & specific impairments 17,5 BOOKLET SLIDE 15,0 13,7 Defaulted advances Specific impairments 12,3 12,7 7,1 6,5 6,5 5,8 5,8 10% 5% 0% Home Loans VAF Card HL Back Prime Personal Loans MFC Retail Total HL Front Business Banking Specific Coverage (%) 40,5 43,3 47,6 47,6 45,8 Portfolio impairments Other Personal Loans Home Loans 3,0 3,1 3,0 2,6 2,0 1,3 1,4 1,6 1,6 1,2 0,3 0,6 0,8 0,7 0,7 0,6 0,7 0,8 0,7 0,

69 Nedbank Retail Home Loans Fundamental redesign of home loans business model to address underperformance on risk & sources of competitive distinctiveness BOOKLET SLIDE Back book 2 RoE, % 1,2 2,2 6,3 5,0 R9bn (25%) good quality 1, but mispriced by 115 bps R38bn: Loss of R685m since 2009 (36,7) (46,8) (6,4) R0,8bn in defined processes with 24% coverage R4,1bn restructures (still on book) with 11,3% coverage (R2,7bn performing) Total balance sheet impairments 3,1%: Portfolio 1,2%; Specific 27,8% Front book 2 R43bn: Profit of R1bn since (8,6) 1,2 7,7 16,1 19,3 21, HLs embedded in CVPs Priced for risk & better quality Origination via own channels (79% from existing clients; 9% online) R1.5bn restructures (still on book) with 11,3% coverage (R0,9bn performing Total balance sheet impairments 1,1%: Portfolio 0,6%; Specific 19.8% 1 Loans which would pass current credit policy utilising current pricing 2 Average Retail Home loan book excluding Retail Relationship Banking & Business Banking 69

70 Nedbank Retail Home Loans Early actions taken since mid 2009 to resolve vintages with adequate coverage, while judiciously growing new business Average advances (Rbn) FY Pre Lending margin (%) 2 1,5 1,3 ~300bps higher margin required 3 1,2 1,2 0,8 Pre ,0 BOOKLET SLIDE LTV distribution (%) 4 Jun > Pre Post-09 Defaulted loans (%) 1 Credit loss ratio (%) 1 Headline earnings (Rm) 1 7,2 5,2 14,7 7,9 3,4 Pre Vintages 2,8 (0,02) (0,06) Pre Vintages 1 Retail Home loan book excluding Retail Relationship Banking & Business Banking 2 Based on Nedbank MMFTP, Liquidity & Balance Sheet Management charges, excluding endowment on ECAP 3 Margin required for profile to be EP neutral in 2010, assuming no drop-off due to higher price 4 LTV based on original loan amount & valuation at point of registration 2,2 2,5 1,0 0, (111) (45) (748) Pre Vintages 70

71 Disclaimer Nedbank Group has acted in good faith & has made every reasonable effort to ensure the accuracy & 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' & '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 & assumptions regarding the group's future performance. No assurance can be given that forward-looking statements will prove to be correct & undue reliance should not be placed on such statements. The risks & uncertainties inherent in the forward-looking statements contained in this document include, but are not limited to: changes to IFRS & the interpretations, applications & practices subject thereto as they apply to past, present & future periods; domestic & international business & market conditions such as exchange rate & interest rate movements; changes in the domestic & international regulatory & legislative environments; changes to domestic & international operational, social, economic & political risks; & the effects of both current & future litigation. Nedbank Group does not undertake to update any forward-looking statements contained in this document & does not assume responsibility for any loss or damage whatsoever & howsoever arising as a result of the reliance by any party thereon, including, but n limited to, loss of earnings, profits, or consequential loss or damage. 71