ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020 Contents MESSAGE FROM OUR 1 CHIEF EXECUTIVE RESULTS 2 PRESENTATION 2020 RESULTS 52 COMMENTARY FINANCIAL 64 RESULTS STATEMENT OF FINANCIAL 65 Financial highlights POSITION ANALYSIS 66 Consolidated statement 118 of comprehensive income 67 Consolidated statement 120 Loans and advances of financial position 134 Investment securities 68 Consolidated statement 135 Investments in associate of changes in equity companies 70 Return on equity drivers 136 Intangible assets 138 Amounts owed to depositors SEGMENTAL 142 Liquidity risk and funding 71 ANALYSIS 145 Equity analysis 146 Capital management 72 Our organisational structure, products and services 74 Operational segmental SUPPLEMENTARY reporting 152 INFORMATION 76 Nedbank Corporate and Investment Banking 153 Earnings per share and 79 Nedbank Retail and Business weighted-average shares Banking 154 Nedbank Group employee 94 Nedbank Wealth incentive schemes 97 Nedbank Africa Regions 155 Long-term debt instruments 101 Geographical segmental 155 Additional tier 1 capital reporting instruments 156 Shareholders’ analysis INCOME STATEMENT 158 Basel III balance sheet credit 102 ANALYSIS exposure by business cluster and asset class 103 Net margin analysis 160 Nedbank Limited consolidated statement of comprehensive 107 Impairments income 112 Non-interest revenue 161 Nedbank Limited consolidated 114 Expenses statement of financial position 116 Headline earning reconciliation 161 Nedbank Limited consolidated 116 Taxation charge financial highlights 117 Preference shares 162 Definitions 165 Abbreviations and acronyms IBC Company details Nedbank Group Annual Results 2020 MESSAGE FROM RESULTS RESULTS FINANCIAL SEGMENTAL INCOME STATEMENT SUPPLEMENTARY OUR CHIEF PRESENTATION COMMENTARY RESULTS ANALYSIS STATEMENT OF FINANCIAL INFORMATION EXECUTIVE ANALYSIS POSITION ANALYSIS IN A VERY DIFFICULT OPERATING ENVIRONMENT, NEDBANK GROUP REMAINED RESILIENT, MADE GOOD STRATEGIC PROGRESS AND DELIVERED AN IMPROVED FINANCIAL PERFORMANCE IN THE SECOND HALF OF THE YEAR. The year 2020 was unprecedented as The impact of the very difficult operating complete for all the foundation projects and the Covid-19 pandemic and subsequent environment was evident in Nedbank overall 78% complete (2019: 70%). Our Target lockdowns led to a rapid slowdown in global Group’s HE for the year ended 31 December Operating Model 1.0 (TOM 1.0) optimisation economic growth. In SA the pandemic and 2020, as it declined by 56,5% to programme recorded additional savings of resultant domestic lockdowns had a severe R5,4bn, compared to a decline of 69,2% in R675m in 2020, translating to cumulative impact on economic activity as the country's H1 2020. Nedbank remained solidly profitable savings of R1,8bn to end-2020. GDP declined by 7,0%, the largest fall in this and, despite the challenges of forecasting The group’s long-term sustainability journey metric since World War II. Businesses and in such a complex environment, performed continues. Our focus remains on the delivery of individuals came under severe pressure and in line with the guidance we provided to the United Nations SDGs and we look forward to transactional volumes fell significantly in the market, supported by an improved publishing our first TCFD report as part of our Q2 2020 before recovering somewhat in the financial performance in H2 2020. HE for the integrated reporting suite in April 2021. second half of the year. In response to the year was affected by higher impairments and economic crisis the SARB cut interest rates lower revenues, mainly due to lower levels of The Nedbank franchise is well positioned for by 300 bps, which proved beneficial to clients’ client activity and the impact of lower interest growth, as reflected in our ‘Reimagine’ strategy, cashflow as instalments on floating-rate rates on endowment income. Expenses were which includes delivering market-leading loans declined, but this also resulted in lower well managed and declined by 1,3% from the client solutions, unlocking value through our endowment income for Nedbank. On the prior period. Our ROE of 6,2% was lower than Strategic Portfolio Tilt 2.0 and Target Operating back of these economic pressures, job losses in the year before but improved from the 4,8% Model 2.0 (TOM 2.0) initiatives, and leading increased and many clients’ current and future reported in H1. Improving the ROE from these sustainably as we deliver on our purpose of ability to repay debt declined, resulting in levels back to above our cost of equity is a using our financial expertise to do good for all higher levels of impairment charges, now key focus of management. Despite our strong our stakeholders. determined under more-forward-looking capital and liquidity position at 31 December, IFRS 9 models. Despite these challenges, having considered the spirit of Prudential Forecasting remains difficult in a volatile health the SA banking sector and Nedbank Authority Guidance Notes 4/2020 and and economic environment, but we currently demonstrated strong levels of resilience and 3/2021 and noting growth opportunities and expect the country's GDP to increase by 3,4% was able to support clients while remaining our responsibility to support clients and the in 2021. Given the economic forecasts from the well capitalised, liquid and profitable, albeit at economy, alongside the current uncertainty Nedbank Group Economic Unit, our strategic levels lower than in the prior year. about the progression of the virus, possible drivers and particularly our expectation of an future waves, and the vaccine rollout and its ongoing improvement in the credit loss ratio, Nedbank’s primary focus has been on the effectiveness, the group has decided not to our current guidance on financial performance health and safety of our stakeholders, including declare a final dividend for 2020. Based on for the half-year 2021 is to grow HEPS and EPS employees and clients, as well as on helping our current forecasts the group expects to by more than 20%, as referred to in our trading our clients in good standing to navigate the resume dividend payments when reporting statement. financial challenges that arose in their business interim results in 2021. and personal finances. At the peak of the We have revised our medium-term targets* so crisis we supported our clients with cashflow We made excellent progress on our that they reflect the current environment, and relief on more than R120bn of loans. We are goal of delivering market-leading client by 2023 we aim to exceed our 2019 diluted pleased that our clients reduced this level of experiences, as is evident in improved client HEPS level of 2 565 cents, achieve an ROE support to R28bn by the end of the year as satisfaction rankings. In the 2020 Consulta greater than the 2019 ROE level of 15%, reduce economic conditions improved. We pivoted our survey Nedbank increased its position to our cost-to-income ratio to below 54%, and rank strategy to focus on resilience and maintaining number two in the Net Promoter Score number one on the NPS among SA banks. a well-capitalised and liquid balance (NPS) among the five large SA banks, We thank all our committed Nedbank sheet. Capital and liquidity ratios remained and maintained the second-highest-rated employees for remaining resilient during an strong and most finished the year at higher position in the SAcsi survey on customer extraordinarily difficult time, and for continuing levels than those reported in June, reflected in satisfaction. During the lockdown our digital to follow the Covid-19 health protocols our tier 1 capital ratio of 12,1% (June 2020: 11,7%), capabilities were vital as we launched while diligently supporting our clients and the CET1 ratio of 10,9% (June 2020: 10,6%), average various innovations such as Avo (our super economy throughout this crisis. We extend fourth-quarter LCR of 126% (June 2020: app). We also introduced more retail digital our deepest condolences to the families, 114,5%) and NSFR of 113% (June 2020: 114%) onboarding (Eclipse) capabilities to new friends and communities of employees and – all well above regulatory minima. Overall products such as investments, cards and clients who have succumbed to Covid-19 and impairment coverage also increased from overdrafts, and started the rollout of juristic related illnesses. 2,26% in 2019 to 3,25% at year-end. We remain client onboarding. This resulted in retail digital on high alert for the risks associated with new sales increasing to 49% of all sales (2019: rounds of infections and variants and continue 21%) and digitally active clients increasing Mike Brown to monitor the effect that new lockdown by 25% to 2,2m. Our digital successes were Chief Executive restrictions may have on our clients and the underpinned by our Managed Evolution (ME) economy as a whole. technology strategy, which is materially HEADLINE EARNINGS CLR ROE CET1 RATIO (56,5%) 161CLR bps 6,2% CET110,9% RATIO (56,6%) 15,0 10,9% 12 506 187 161 11,5 10,6 10,9 6,2 5 440 79 4,8 2019 2020 2019 H1 2020 2020 2019 H1 2020 2020 2019 H1 2020 2020 H1 2020: (69,2%) * These targets are not profit forecasts and have not been reviewed or reported on by the group’s joint auditors. Nedbank Group Annual Results 2020 1 Nedbank Group Annual results for the year ended 31 December 2020 NEDBANK GROUP LIMITED – Annual Results 2020 1 NOTES: OVERVIEW Recovery in H2 2020 after peak Covid-19 impact in H1 2020 ▪ 2020 a very difficult environment for clients & banks ▪ Excellent outcomes on ‘resilience’ metrics ▪ Good