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Results for the year ended 31 December 2019
NEDBANK GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1966/010630/06
JSE share code: NED
NSX share code: NBK
ISIN: ZAE000004875
JSE alpha code: NEDI
('Nedbank Group' or 'the group')
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019
Good strategic and operational progress and solid franchise fundamentals,
but financial performance below expectations
In 2019 SA economic growth was much slower than expected as recessionary-
like conditions prevailed. This was mainly due to severe and frequent power
outages, the unsustainable fiscal trajectory and ongoing policy
uncertainty, combined with a deteriorating global outlook. Under these
difficult domestic conditions, company profits and household finances
deteriorated during the year, resulting in subdued credit demand, lower
transactional volume growth and rising defaults in the SA banking industry.
In this environment Nedbank Group’s financial performance was below
expectations as headline earnings declined 7,3% to R12,5bn and the group
produced an ROE (excluding goodwill) of 16,0%. In addition to the
challenging environment, headline earnings were impacted by additional
items in the second half of the year, including hyperinflation in Zimbabwe
(R142m headline earnings impact) and the raising of impairments against
recoverability of recognised intercompany legacy debt (R44m), the exercise
of an option that will increase our shareholding in Banco Único (R140m)
from 50% plus one share to approximately 87,5% (subject to regulatory
approval), the revaluing of a number of private equity investments as the
underlying investee company performance was weaker and public market
multiples declined (R238m), and the increase in impairments to just above
the midpoint of our target range of 60 bps to 100 bps as a result of
increased impairments raised on certain CIB watchlist items and an increase
in the central impairment. This was partially offset by good cost
management due to the ongoing benefits from optimisation of processes and
operations as part of our digital journey, and as a result our cost-to-
income ratio improved from 57,2% to 56,5%.
We continued to make good strategic and operational progress throughout the
year and produced solid balance sheet growth with advances up 7,2% and
deposits growing 9,5%. A key focus was the operational rollout of our
digital onboarding capability for individuals visiting branches and using
the Money app and online banking, alongside our ability to sell current
accounts and personal loans digitally, as well as pilots for cards,
investment products and overdrafts. In addition, we launched our refreshed
loyalty and rewards programme together with various market-leading digital
innovations. As our clients began to experience the value from our digital
journey and improved service levels, Nedbank ended the year as the only SA
bank to have improved its net promoter score (NPS) and on client
satisfaction metrics became the second highest-rated bank in SA.
SA’s economic growth prospects remain subdued, undermined by persistent
energy constraints, weak government finances and slow progress on
structural reforms combined with a weaker outlook for global growth. In
this difficult SA macroeconomic environment, where we currently forecast
GDP growth in 2020 to be only 0,7%, and given our 2019 base, our guidance
for growth in diluted headline earnings per share for 2020 is to be around
nominal GDP growth. Our medium- to long-term financial targets for ROE
(excluding goodwill) and the cost-to-income ratio in 2020 were communicated
to the market in early 2018, when GDP growth was forecast to be materially
higher than what has transpired and as a result credit growth and interest
rates (endowment impact) were also forecast to be higher than what took
place. To reflect the deterioration in these metrics since 2018 we have
revised the timelines for achievement of these medium- to long-term
financial targets to be more reflective of the current weaker economic
environment, which we expect to persist. For ROE (now including goodwill),
our medium-term target (two to three years) is now greater than 17% and our
long-term target (five or more years) is greater than cost of equity plus
4%. For the cost-to-income ratio we are now targeting less than 53% in the
medium term and less than 50% in the long term as our digital journey
matures and enables ongoing efficiencies.
Mike Brown
Chief Executive
FINANCIAL HIGHLIGHTS
- Headline earnings R12 506m, down 7,3% (2018: R13 495m)
- Revenue R56 164m, up 2,5% (2018: R54 795m)
- Credit loss ratio 82 bps (2018: 53 bps)
- Expenses R32 179m, up 1,7% (2018: R31 632m)
- Cost-to-income ratio 56,5% (2018: 57,2%)
- Diluted headline earnings per share 2 565 cents, down 6,3% (2018:
2 736 cents)
- Headline earnings per share 2 605 cents, down 6,7% (2018: 2 793
cents)
- Basic earnings per share 2 500 cents, down 9,7% (2018: 2 768 cents)
- Final dividend per share 695 cents, down 3,5% (2018: 720 cents)
- Full year dividend per share 1 415 cents, flat on the prior year
(2018: 1 415 cents)
- Net asset value per share 18 204 cents, up 3,7% (2018: 17 560 cents)
- Common-equity tier 1 ratio 11,5% (2018: 11,7%)
This short-form announcement is the responsibility of the directors. It is
only a summary of the information contained in the full announcement and
does not contain full or complete details. Any investment decision should
be based on the full announcement, which can be accessed from Tuesday, 3
March 2020, using the following JSE link:
https://senspdf.jse.co.za/documents/2020/jse/isse/ned/ye2019.pdf
Alternatively, the full announcement is available on our website at
https://www.nedbank.co.za/content/nedbank/desktop/gt/en/investor-
relations/information-hub/financial-results/2019.html
The full announcement is available for inspection at Nedbank Group's
registered office on weekdays from 09:00 to 16:00, and copies thereof may
be requested free of charge from Nedbank Investor Relations at
NedgroupIR@Nedbank.co.za.
The auditors’ unmodified report (with key audit matters) to the
shareholders of Nedbank Group, is contained in our annual financial
statements for the year-ended 31 December 2019. The annual financial
statements can be accessed using the following link to our annual financial
statements at
https://www.nedbank.co.za/content/nedbank/desktop/gt/en/investor-
relations/information-hub/financial-results/Other.html
This announcement itself is not audited and therefore the audit report does
not cover this announcement.
FINAL DIVIDEND DECLARATION
Notice is hereby given that a final dividend of 695 cents per ordinary
share has been declared, payable to shareholders for the six months ended
31 December 2019. The dividend has been declared out of income reserves.
The dividend will be subject to a dividend withholding tax rate of 20%
(applicable in SA) or 139 cents per ordinary share, resulting in a net
dividend of 556 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-tax 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 is 497 053 536.
In accordance with the provisions of Strate, the electronic settlement and
custody system used by the JSE, the relevant dates for the dividend are as
follows:
Event Date
Last day to trade (cum dividend) Tuesday, 14 April 2020
Shares commence trading (ex dividend) Wednesday, 15 April 2020
Record date (date shareholders recorded Friday, 17 April 2020
in books)
Payment date Monday, 20 April 2020
Share certificates may not be dematerialised or rematerialised between
Wednesday, 15 April 2020, and Friday, 17 April 2020, both days inclusive.
On Monday, 20 April 2020, the dividend will be electronically transferred
to the bank accounts of shareholders. Holders of dematerialised shares will
have their accounts credited at their participant or broker on Monday, 20
April 2020.
The above dates are subject to change. Any changes will be published on the
JSE SENS and in the press.
For and on behalf of the board
Vassi Naidoo Mike Brown
Chairman Chief Executive
3 March 2020
Directors
V Naidoo (Chairman), MWT Brown** (Chief Executive), HR Brody, BA Dames, NP
Dongwana, EM Kruger, RAG Leith, L Makalima, PM Makwana***, Prof T Marwala,
Dr MA Matooane, RK Morathi** (Chief Financial Officer), MP Moyo,
JK Netshitenzhe, MC Nkuhlu** (Chief Operating Officer), S Subramoney.
** Executive *** Lead independent director
Registered office
Nedbank Group Limited, Nedbank 135 Rivonia Campus, 135 Rivonia Road,
Sandown, Sandton, 2196.
PO Box 1144, Johannesburg, 2000.
nedbankgroup.co.za
Sponsors in SA
Merrill Lynch SA Proprietary Limited, Nedbank CIB
Sponsor in Namibia
Old Mutual Investment Services (Namibia) (Proprietary) Limited
Company Secretary: J Katzin
Transfer secretaries in SA
Link Market Services South Africa Proprietary Limited, 19 Ameshoff Street,
Braamfontein, Johannesburg, 2001, SA.
PO Box 4844, Marshalltown, 2000, SA.
Transfer secretaries in Namibia
Transfer Secretaries (Proprietary) Limited, Robert Mugabe Avenue No 4,
Windhoek, Namibia.
PO Box 2401, Windhoek, Namibia.
Date: 03-03-2020 07:05:00
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