Creating value by using our financial expertise to do good ANNUAL AR RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019 CONTENTS 1 MESSAGE FROM OUR 115 STATEMENT CHIEF EXECUTIVE OF FINANCIAL POSITION ANALYSIS 116 Loans and advances 2 RESULTS 122 Investment securities PRESENTATION 123 Investments in associate companies 54 2019 RESULTS 124 Intangible assets COMMENTARY 126 Amounts owed to depositors 129 Liquidity risk and funding 66 FINANCIAL RESULTS 132 Equity analysis 67 Financial highlights 133 Capital management 68 Consolidated statement of comprehensive income 136 Economic capital adequacy 69 Consolidated statement of 137 External credit ratings financial position 70 Consolidated statement of changes in equity 72 Return on equity drivers 139 SUPPLEMENTARY INFORMATION 140 Earnings per share and 73 SEGMENTAL weighted-average shares ANALYSIS 74 Our organisational structure, 141 Nedbank Group employee products and services incentive schemes 76 Operational segmental 142 Long-term debt instruments reporting 142 Holders of additional tier 1 78 Nedbank Corporate and capital instruments Investment Banking 143 Shareholders’ analysis 81 Nedbank Retail and 144 Basel III balance sheet credit Business Banking exposure by business cluster 93 Nedbank Wealth and asset class 96 Nedbank Africa Regions 146 Nedbank Limited consolidated statement of 99 Geographical segmental comprehensive income reporting 147 Nedbank Limited consolidated statement of financial position 100 INCOME STATEMENT ANALYSIS 147 Nedbank Limited 101 Net margin analysis consolidated financial highlights 105 Impairments 148 Definitions 108 Non-interest revenue 150 Abbreviations and acronyms 110 Expenses IBC Company details 112 Non-trading and capital items 112 Taxation charge 112 Preference shares 113 Hyperinflation MESSAGE FROM OUR CHIEF EXECUTIVE GOOD STRATEGIC AND OPERATIONAL PROGRESS AND SOLID FRANCHISE FUNDAMENTALS, BUT FINANCIAL PERFORMANCE BELOW EXPECTATIONS In 2019 SA economic growth was much an increase in the central impairment. GDP growth in 2020 to be only 0,7%, and slower than expected as recessionary-like This was partially offset by good cost given our 2019 base, our guidance for conditions prevailed. This was mainly due management due to the ongoing benefits growth in diluted headline earnings per to severe and frequent power outages, the from optimisation of processes and share for 2020 is to be around nominal GDP unsustainable fiscal trajectory and ongoing operations as part of our digital journey, growth. Our medium-to-long-term financial policy uncertainty, combined with a and as a result our cost-to-income ratio targets for ROE (excluding goodwill) and deteriorating global outlook. Under these improved from 57,2% to 56,5%. the cost-to-income ratio in 2020 were difficult domestic conditions, company profits communicated to the market in early 2018, We continued to make good strategic and and household finances deteriorated during when GDP growth was forecast to be operational progress throughout the year the year, resulting in subdued credit demand, materially higher than what has transpired, and produced solid balance sheet growth lower transactional volume growth and rising and as a result, credit growth and interest with advances up 7% and deposits growing defaults in the SA banking industry. rates (endowment impact) were also 9,5%. A key focus was the operational forecast to be higher than what took place. In this environment Nedbank Group’s financial rollout of our digital onboarding capability To reflect the deterioration in these metrics performance was below expectations for individuals visiting branches and since 2018 we have revised the timelines for as headline earnings declined 7,3% to using the Money app and online banking, achievement of these medium-to-long-term R12,5bn and the group produced an ROE alongside our ability to sell current financial targets to be more reflective of (excluding goodwill) of 16,0%. In addition to the accounts and personal loans digitally, the current weaker economic environment, challenging environment, headline earnings as well as pilots for cards, investment which we expect to persist. For ROE (now were impacted by additional items in products and overdrafts. In addition, including goodwill), our medium-term target the second half of the year, including we launched our refreshed loyalty and (two to three years) is now greater than hyperinflation in Zimbabwe (R142m rewards programme together with various 17% and our long-term target (five or more headline earnings impact) and the raising market-leading digital innovations. As our years) is greater than cost of equity plus of impairments against recoverability of clients began to experience the value 4%. For the cost-to-income ratio we are now recognised intercompany legacy debt from our digital journey and improved targeting less than 53% in the medium term (R44m), the exercise of an option that service levels, Nedbank ended the year and less than 50% in the long term as our will increase our shareholding in Banco as the only SA bank to have improved its digital journey matures and enables ongoing Único (R140m) from 50% plus one share to Net Promoter Score (NPS) and on client efficiencies. approximately 87,5% (subject to regulatory satisfaction metrics became the second approval), the revaluing of a number highest-rated bank in SA. of private-equity investments as the SA’s economic growth prospects remain Mike Brown underlying investee company performance Chief Executive was weaker and public market multiples subdued, undermined by persistent energy declined (R238m), and the increase in constraints, weak government finances impairments to just above the midpoint and slow progress on structural reforms of our target range of 60 bps to 100 bps combined with a weaker outlook for global as a result of increased impairments growth. In this difficult SA macroeconomic raised on certain CIB watchlist items and environment, where we currently forecast OVERVIEW OF OUR ANNUAL RESULTS HEADLINE EARNINGS DHEPS ROE DIVIDEND PER SHARE (excluding goodwill) ▲ ▼ 7,3% ▼ 6,3% 1 415 cents R12 506m 2 565 cents ▼ 16,0% (2018: 1 415 cents) (2018: 17,9%) LOANS AND ADVANCES AMOUNTS OWED AUM CET1 RATIO TO DEPOSITORS ▲ 7,2% ▲ 11,4% ▼ 11,5% R764bn ▲ 9,5% R331bn (2018: 11,7%) R904bn GROSS OPERATING EXPENSES CLR BBBEE INCOME ▲ (including associate income) ▲ 1,7% ▲ 82 bps Level 1 ▲ 3,0% (2018: 53 bps) (2018: Level 1) NEDBANK GROUP – ANNUAL RESULTS 2019 1 ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019 NEDBANK GROUP LIMITED – Annual Results 2019 1 NOTES: OVERVIEW ▪ Good strategic & operational progress ▪ Solid underlying growth in the franchise ▪ Financial performance below expectations Mike Brown Chief Executive NEDBANK GROUP LIMITED – Annual Results 2019 2 NOTES: 2 NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION Good strategic operational progress but financial performance belo epectations Good strategic operational progress ▪ Tenl mlementatn n ta elen eete enets. ▪ Ime lent satsatn utmes – nl an t nease NPS n 2019. Solid underling grot in te francise ▪ Sl alane seet AUM t (aanes 7% ests 9.5% AUM 11%). ▪ Stn us n st manaement 2% PPOP 3% AS 1%. ▪ ET1 at at te mnt aae taet ane (10.5 t 12.5%) ullea en mantane. verall financial performance belo epectations – E n 7% ▪ E t mate LR u m 53 s t 82 s – me m el te ttm en t mle te TT taet ane (60 t 100 s). mae enlatn ateeut ealuatns Ban Un tn. NEDBANK GROUP LIMITED – Annual Results 2019 3 NOTES: reminder – stne enm t eenent n stutual ems l etant me leels nene nestment eatn Pess n stutual ems l etant – t sl ob creation Increased reduced unemlment Increased levels of Improved levels of local inclusive et levels of Structural foreign economic Earl stages business neualt reforms investment grot of an institutional polic consumer turnaround in S confidence certaint Government business labour civil societ orking togeter to create a more prosperous S for all its people underpinned b improved skills educational outcomes NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: NEDBANK GROUP – ANNUAL RESULTS 2019 3 S economic grot in 01 muc sloer tan epected S GD grot forecasts revised1 (%) e drivers in 01 ▪ uent SA enm nsn te lnest sne es ean n 1945. 2.0 ▪ Unsustanale nanal eatnal stn 1.8 Esm. ▪ Seee euent e utaes n 1 4 19. 1.3 ▪ 1.1 Unsustanale SA sal stn (et t GDP 61%) neasn alt a Ms seen et atns nae. 0.7 ▪ Onn l unetant (E SARB NI 0.3 S Mnn ate ese assets et). ▪ Ga eteen l nunements uneln leslate enalement. 2019 2020 2021 e 19 A 19 un 19 N 19 an 20 ▪ Imat lmate ane seee uts n ats te unt. 1 edan conomic nit orecasts at oint in time. NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: Corporate business clients – mute nestment att talt une essue usiness confidence around ear los1 e drivers in 01 100 ▪ man eanns ts une essue. ▪ Ttal enestment att stalle (0.7% ate set 1.6% ul 75 set 5.7% SOEs 3.4%). Unelale eense elett sul. 50 Pl unetant. mlane sts e tae. 25 26 Eleate st stutues (lau nastutue). 0 ▪ ate et leels eman elatel l 94 99 04 09 14 19 emenmaet stanas – SA ate Busness nene ne et t GDP 74% (EM ee u ane). ▪ Inslenes se 23% . 1 ureau o conomic esearc NEDBANK GROUP LIMITED – Annual Results 2019 NOTES: 4 NEDBANK GROUP – ANNUAL RESULTS 2019 RESULTS PRESENTATION Retail clients – ssale nme t sle ersonal disposable income grot sloing1 (%) e drivers in 01 15 ▪ Sln n nmnal ae t (5.2% te lest ae sne 2000). 10 ▪ e et net taes. ▪ Slus nsume senn (1.1% ) 5 esultn n mute tansatnal att. ▪ Unemlment leels at 29.1% (est sne 0 2008). ▪ Eleate usel et uens 5 (Det % t PDI 72.6% stale) ▪ nsume nene ne2 at 7 10 (lest leel sne 4 2017). 04 06 08 10 12 14 16 18 ▪ Le nteest ates eneal t nete nsumes ut t small t mae an mateal Pesnal ssale nme ( ane) eene t enm t.