Windhoek, March. 9 — The Nedbank Africa Regions (NAR) business delivered a good set of results-driven by a good performance from our ETI investment and rebound from the SADC operations. HE increased by greater than 100% to R594m, which is significantly higher than the R12m reported in 2020, with ROE improving to 9,3% from 0,2% in 2020. The performance reflects
the impact of significantly lower impairments, an increase in NII of 14% to R1 448m, and a strong recovery in associate income from ETI with related HE increasing to R523m (2020: R153m).
Dr. Terence Sibiya, NAR Managing Executive says, “I am pleased that the business across SADC has improved in key client metrics, especially in client experience: We are #1 in NPS in Namibia and Mozambique. We have the highest loyalty scores in three of our markets (Eswatini, Namibia, and Zimbabwe), and we are also in the top two in brand sentiment scores
in four of the markets (Lesotho, Mozambique, Namibia, and Zimbabwe) we operate in.” “We grew our digitally active clients, who now make up 54% of our active retail client base. We also significantly grew transactional volumes on our apps, online banking, and prepaid value-added services (PVAS): Nedbank Money App (Africa) has proven to be the channel of choice for our clients with payment and transfer volumes up 35% year on year and value-added services (airtime, data, prepaid electricity, etc) up 26% year on year.”
Performance highlights:
- Impairments declined by 62% to R168m, with a CLR of 72 bps (from 185 bps in 2020), which is at the lower end of its TTC target range of 75 bps to 100 bps, driven by improved collections, recoveries, and subdued growth in the
loan portfolio. - Despite an improved H2 2021, NIR for full-year 2021 declined marginally by 2% to R1 431m due to subdued transactional activity and lower foreign exchange translation gains.
- The third wave of the pandemic in H1 2021 saw extended lockdowns across the regions, which resulted in lower economic activity.
- Expenses were well managed and up by only 3% to R2 088m off a low base in the prior year.
- Our SADC operations generated an HE of R71m, up by >100% from a loss of R141m in 2020. Nedbank delivers
- strong financial performance driven by solid revenue growth and a significant decline in impairments.
Salient features
- Headline earnings increased by 115% to R11,7bn;
- Key balance sheet metrics have strengthened to above pre-Covid crisis levels: CET1 and tier 1 capital ratios of 12,8% and 14,3% respectively;
- Preprovisioning operating profit increased by 9% and revenue grew by 7% (including associate income);
- Cost to income ratio improved to 57,7%;
- The credit loss ratio declined from 161bps to 83bps;
- Ranked #2 among the five largest SA banks on client satisfaction metrics;
- Recognized as Africa’s Best Bank for Sustainable Finance 2021 by Euromoney, Best Bank for Sustainable Development South Africa 2021 by Global Banking & Finance;
- Final dividend declared of 758 cents per share, bringing the full-year dividend to 1 191 cents per share.
JOHANNESBURG, 9 March 2022 – Nedbank Group delivered a strong financial performance for the year ended 31 December 2021 as headline earnings increased by 115% to R11,7bn, although remaining 7% below 2019 levels. Headline earnings growth was driven by significantly lower impairments, a higher net interest margin, a recovery in non-interest revenue growth, disciplined expense management, and a stronger financial performance from the group’s associate investment in ETI. Preprovisioning operating profit increased by 9%.
Nedbank CE Mike Brown said: “The operating environment was more supportive for Nedbank and its clients during the period under review. The South African economy bounced back faster than most forecasters expected from the low base of 2020. In the third quarter, the negative impacts of a prolonged third wave of Covid-19 infections, tighter lockdown restrictions, the July civil unrest in parts of the country, and frequent power outages weighed heavily on economic activity but trading conditions improved in the last quarter of 2021.
“The importance of accelerating structural reforms and energy supply security cannot be overemphasized and they remain key to unlocking faster economic growth and job creation in SA over the medium-to-longer term.”
“The past two years have been unprecedented and extraordinarily difficult for our clients and employees. Thank you to all our Nedbank employees for remaining resilient throughout the Covid-19 crisis. We extend our heartfelt condolences to the families, friends, and communities of employees and clients who have lost their loved ones during this time,” Brown said.
In 2021, the group’s balance sheet continued to strengthen as it closed out the resilience phase of its strategic response to the Covid-19 pandemic. CET1 and tier 1 capital ratios of 12,8% and 14,3%, respectively improved on the prior period and are now above the pre-Covid 19 levels of 11,5% and 12,8%, respectively (December 2019). These ratios are
also well above the SARB minimum requirements and above the top end of the group’s board-approved target ranges.
Brown said: “Our balance sheet capital strength enables us to support future client growth as well as declare a final dividend of 758 cents at 1,75 times cover (pay-out ratio of 57%).”
Good strategic delivery
Nedbank’s strategy is delivered through five strategic value unlocks that include: delivering innovative market-leading client solutions; engaging in ongoing disruptive market activities (underpinned by digital leadership), focusing on areas that create value (strategic portfolio tilt), driving efficient execution (including target operating model enhancements) and creating positive impacts, including delivering on our purpose of using our financial expertise to do good.
Underpinning these strategic value unlocks is the Managed Evolution strategy and technology transformation program to build a modern, modular, and digital IT stack that has reached 85% completion and helped deliver a number of wins over the past year:
- Digital initiatives helped to increase the number of digitally-active Nedbank retail clients in SA by 11% to 2,3 million (December 2020: 2,1 million). This now represents 64% of main-banked clients (2020: 57% and 2019: 49%).
- The Nedbank Money app, which makes banking more convenient for retail clients, continues to be rated highly on the Apple and Google app stores, with an average client rating of 4,4 (out of five). It is actively used by 1,6 million clients, up by 38% (2020: 1,2 million). Transaction volumes on the Nedbank Money app increased by 54% and transaction values increased by 72% when compared to full-year 2020
- Simplified digital client onboarding platforms for individual and juristic (business) clients continue to mature and expand, enabling clients to open FICA-compliant accounts remotely through our employee-assisted and self-service digital channels, by providing a seamless omnichannel experience. The digitizing of product sales to individuals currently includes six of Nedbank’s top retail products; transactional products, personal loans, card issuing, home loans, investments, and overdrafts, as well as more than 170 services.
- Since its launch in June 2020, Avo (Nedbank’s super app) signed up more than 675 000 consumers (4,7x growth year on year) by December 2021, along with over 20 250 businesses registering and offering their products and services on this e-commerce platform. Product orders continue to grow exponentially, with 3x year on year growth of gross merchandise value. At the start of March 2022, Avo exceeded 1 million clients.
- In the 2021 Consulta survey, Nedbank achieved the #2 ranking among the five largest South African banks on client satisfaction metrics, with Net Promoter Score (NPS) increasing further to 47. Progress on the strategic portfolio tilt strategy was evident in market share gains in key product areas and main-banked clients, as well as improved levels of cross-selling. Nedbank recorded the largest retail main-banked market share gain among the large South African banks, while Corporate and Investment Banking (CIB) gained 35 new primary clients.
Creating positive impacts
Nedbank’s long-term sustainability and success are contingent on the degree to which we deliver value to society. The bank continued to create positive impacts by delivering against the United Nations Sustainable Development Goals and increasing our focus on environmental, social, and governance matters (ESG). In 2021 Nedbank released its market-leading Energy Policy and inaugural Taskforce on Climate-related Financial Disclosures report and successfully concluded Africa’s first green AT1 instrument, while maintaining ESG ratings at the top end of the local and international peer group.
“It is pleasing to have our efforts in this regard externally recognized, and we accept these awards of validation as evidence that we are progressing well while acknowledging there is always much more to be done,” Brown said. Recent awards include Nedbank being recognized as Africa’s Best Bank for Sustainable Finance 2021 by Euromoney and Best Bank for Sustainable Development South Africa 2021 by Global Banking & Finance, among many others.
Outlook
“The world economic outlook has become murkier in recent weeks. Initial expectations were for another year of relatively robust global growth as we emerge from the impacts of Covid, with the IMF forecasting 4,4% growth for 2022. However, downside risks have increased significantly following Russia’s invasion of Ukraine. We strongly condemn the violence and are deeply concerned by the devastating loss of lives we are witnessing,” Brown said.
While Nedbank has no direct exposures in the region, the conflict is likely to push global oil prices higher for longer, adding further fuel to the global inflationary fire already raging on the back of persistent supply shortages, disruptions to global logistics and transport networks, and the lingering impact of the pandemic. Surging global oil prices amid already high and rising inflation will erode households’ purchasing power, companies’ profits, and investors’ returns, weighing on confidence and slowing global growth in the process.
After a strong South African GDP rebound in 2021, Nedbank is currently forecasting the country’s GDP to increase by a more modest 1,7% in 2022.
“Good strategic and operational delivery should support a solid financial performance from Nedbank Group for the full-year 2022, underpinned by revenue growth and an ongoing cost focus. We are on track to meet our medium-term targets set for the end of 2023 with the DHEPS target likely to be met a year sooner than previously expected,” Brown said.
Nedbank now expects to meet the diluted headline earnings per share (DHEPS) target (greater than 2 565 cents per share) in 2022. It continues to focus on achieving a return on equity (ROE) greater than the 2019 ROE level of 15%, reducing its cost-to-income ratio to below 54%, and ranking #1 on the NPS among South African banks, all by the end of 2023.
For a detailed breakdown of business unit performance, please refer to the SENS announcement and analyst booklet.
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