Nedbank interim results and dividend declaration for 6 months ended June 2024

The operating environment during the first 6 months of 2024 was challenging and economic activity remained weak, impacted by geopolitical uncertainty, high interest rates, persistent inflation and general uncertainty ahead of the national elections in South Africa (SA).

Household finances remained under pressure as real incomes contracted and job prospects remained muted. Corporate activity was also weak on the back of the uncertain political and economic environment. The financial implications of these difficult macroeconomic outcomes were evident in continued elevated levels of consumer strain and slow lending and transactional revenue growth across both wholesale and retail clients.

Optimism following national elections

A peaceful and fair election outcome and the swift formation of a government of national unity (GNU) spurred cautious optimism in financial markets resulting in lower bond yields, stronger equity markets and a stronger rand. Spreads on credit default swaps improved markedly, trending towards levels seen when the country’s sovereign credit ratings were at investment grade.

Against this backdrop, the Nedbank Group produced a relatively strong financial performance. Headline earnings (HE) increased by 8% yoy to R7,9 billion, underpinned by good non interest revenue growth, a lower impairment charge and tight cost control. The group’s return on equity (ROE) improved to 15,0% from 14,2% in the prior period. Diluted headline earnings per share (HEPS) increased by 12%, benefitting from the R5 billion capital optimisation programme.

Balance sheet metrics all remained very strong, enabling the declaration of an interim dividend of 971 cents per share, up by 11,5%, at a payout ratio of 57%.

The Nedbank Group’s world-class technology platform, delivered through the Managed Evolution (ME) programme, has now reached 95% completion. This has supported ongoing strong growth in digital-related metrics; client satisfaction scores at the top end of the South African banking peer group; good main-banked client growth; higher levels of cross-sell; market share gains in areas that create most value, including retail deposits, home loans, vehicle finance and overdrafts; and efficiency gains as we delivered on our Target Operating Model (TOM) 2.0 target of R2,5 billion.

The group has also continued to create wider positive impacts through R154 billion of funding that supports sustainable development finance, aligned with the United Nations Sustainable Development Goals. In particular, the Nedbank Group is proud of growing renewable energy finance by 20% ytd; retaining its top-tier rankings on environmental, social and governance (ESG) scores; and maintaining its level 1 broad-based black economic empowerment status for the sixth year in a row.

The group remains cautiously optimistic around the potential benefits associated with SA’s GNU and expect better macroeconomic conditions in the second half of 2024 and into the medium-to-long term. The Nedbank Group forecasts SA’s gross domestic product to increase by 0,9% in 2024, inflation to continue to decline and the South African prime lending rate to decline by a cumulative 50 bps in 2024 to end the year at 11,25%.

Strategic initiatives and leadership transition

On the back of an improving operating environment, the group continues to aspire to deliver ongoing improvements in ROE to increase shareholder value.

Nedbank’s strong financial performance in H1 2024, together with the progress made in executing on its strategy and better economic prospects, give them confidence in making progress towards its medium- term targets* and, in particular, the aim to increase their ROE to 17% by 2025 and above 18% in the long term.

The seamless transition from Mike Brown to the new leadership was well planned and executed. The new leadership is aligned with the board and the leadership teams, which has enabled Nedbank to continue running its business very smoothly. Improving performance is a key priority and the new leadership has adopted Nedbank’s medium-term performance targets. The new leadership is extremely comfortable with the strong foundations that Nedbank has built, including capital and liquidity levels and an improving financial performance, as well as the group’s strong and vibrant culture, its focus on transformation (diversity, equity and inclusion), leading ESG credentials and significant investments in technology. The group will continue to build on these strong foundations as it evolves and continuously refresh its strategy in response to an everchanging operating environment.

I extend my gratitude to all Nedbankers who have made me feel welcome as part of the organisation and contributed to our successes in the first half of the year. Thank you to our 7,5 million retail and wholesale clients who have entrusted Nedbank with serving their financial needs. My appreciation also goes out to the investment community, regulators and other stakeholders for their continued support. Nedbank remains strongly committed to making a meaningful and positive impact in society, using our financial expertise to do good for all stakeholders.

– Jason Quinn, Chief Executive

INTERIM RESULTS

Interim dividend declaration

Notice is given that an interim dividend of 971 cents per ordinary share has been declared, payable to shareholders for the 6 months ended 30 June 2024. The dividend has been declared from income reserves.

The dividend will be subject to a dividend withholding tax rate of 20% (applicable in SA) or 194,2 cents per ordinary share, resulting in a net dividend of 776,8 cents per ordinary share, unless the shareholder is exempt from paying dividend tax or is entitled to a reduced rate in terms of an applicable double-taxation agreement.

Nedbank Group’s tax reference number is 9375/082/71/7 and the number of ordinary shares in issue at the date of declaration was 488 020 500.

In line with the provisions of Strate, the electronic settlement and custody system used by JSE Limited, the relevant dates for the dividend are as follows: 

Share certificates may not be dematerialised or rematerialised between Wednesday, 4 September 2024, and Friday, 6 September 2024, both days inclusive.

Where applicable, dividends in respect of certificated shares will be transferred electronically to shareholders’ bank accounts on the payment date. In the absence of specific mandates, the dividend will be withheld until shareholders provide their banking information. Holders of dematerialised shares will have their accounts credited at their participant or broker on Monday, 9 September 2024.

* These targets are not profit forecasts and have not been reviewed or reported on by the group’s joint auditors.