Banking and economic environment in the first half of 2021


Operating conditions in the first half of 2021 were better than we expected at the start of the year. This was evident in upward revisions to GDP growth, vaccine rollouts gathering pace and positive developments on key reforms in SA.

A 53-year low in interest rates supported robust demand for retail credit, while transactional activity increased off a low base and benefited from ongoing strong digital growth.

Against this progress, demand for corporate loans remained muted and excess cash was used to repay debt, particularly in the commodity sector. The third wave of COVID-19 infections in SA led to the government imposing stricter adjusted level 4 lockdowns towards the end of June.

The impact of civil unrest on economic growth

More recently, civil unrest in parts of Gauteng and KwaZulu-Natal is expected to negatively impact economic growth, with damage to physical assets, temporary interruptions of supply chains and many people left without an income.

Law and order and the protection of citizens and their assets are foundations for democracy, investment and economic activity, and it is important that steps are urgently put in place to prevent any recurrence and that those responsible are held accountable. It has been encouraging to see images of a united SA replace images of unrest and violence.

Thousands of South Africans joined clean-up efforts, distributed food to communities in need, and generally spread a message of positivity and togetherness.

Nedbank has joined these efforts and has positioned its support in a manner that will maximise the value we can provide to the country, in line with our purpose: to use our financial expertise to do good.

We thank all our committed Nedbank employees for remaining resilient during an extraordinarily difficult time, and for continuing to follow the COVID-19 health protocols while diligently supporting our clients and the economy throughout the COVID-19 crisis as well as the recent unrest in KwaZulu-Natal and parts of Gauteng. We extend our deepest condolences to the families, friends and communities of employees and clients who have lost their loved ones during this time.

– Mike Brown, Chief Executive at Nedbank

A strong financial recovery off a low base

The Nedbank Group’s financial performance in the first half of 2021 reflects a strong financial recovery off a low base, and key resilience metrics have all strengthened to above pre-crisis levels.

Capital and liquidity ratios increased as reflected in our tier 1 capital ratio of 13,6% (Dec 2020: 12,1%), CET1 ratio of 12,2% (Dec 2020: 10,9%), average second-quarter LCR of 131% (Dec 2020: 126%) and NSFR of 114% (Dec 2020: 113%). Overall impairment coverage improved to multi-year highs of 3,41% (Dec 2020: 3,25%) and we increased our judgemental COVID-19 and macroeconomic overlays to R4,5bn (Dec 2020: R3,9bn).

We remain well prepared to manage risks associated with the impact of the third wave of COVID-19 infections, which appears to have passed its peak, the effect of the higher-than-expected lockdown restrictions during the third wave of infections and helping our clients deal with the residual impact of recent civil unrest in parts of SA.

Nedbank Group’s HE in H1 2021 increased by 148% on H1 2020 to R5,3bn, but remains 24% below H1 2019 levels. HE growth benefited from significantly lower impairments, higher net interest margin and disciplined expense management.

Underlying NIR was strong, due mainly to higher levels of client activity and strong insurance income, but this growth was negatively impacted by a high H1 2020 trading revenue base and an unwind of the prior-year fair-value gains.

Key drivers of shareholder value creation also showed positive trends, with net asset value per share up 8% yoy, the group’s ROE increasing to 11,7% (H1 2020: 4,8%) and our resumption of dividend payments, declaring an interim dividend of 433 cents per share.




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