NEDBANK GROUP LIMITED - Nedbank Group H1 2025 Pre-Close Investor Update

Nedbank Group H1 2025 Pre-Close Investor Update

Nedbank Group Limited                                 Nedbank Limited
(Incorporated in the Republic of South Africa)        (Incorporated in the Republic of South Africa)
Registration number: 1966/010630/06                   Registration No. 1951/000009/06
JSE share code: NED                                   JSE alpha code: BINBK
NSX share code: NBK
A2X share code: NED
ISIN: ZAE000004875
JSE alpha code: NEDI
('Nedbank Group')
(collectively the 'group')


NEDBANK GROUP H1 2025 PRE-CLOSE INVESTOR UPDATE


Operating environment

The operating environment during the first five months of 2025 ('5M 2025') remained challenging, while
uncertainty in US economic policies and geopolitical alignments resulted in significant financial market
volatility. The escalating and broadening conflict in the Middle East also threatens the world economy,
given the risk of potential disruptions to global oil supplies and a renewed upturn in international oil
prices.


In South Africa, the economy relapsed in early 2025 after promising signs of recovery towards the end
of 2024. Real GDP growth slowed from 0,4% qoq in Q4 2024 to only 0,1% in Q1 2025, negatively
impacted by reduced government spending, shrinking fixed investment and a weaker net trade position.
While consumer spending supported the services sector, the weakness in the mining and manufacturing
sectors intensified, weighed down by SA's structural inefficiencies, modest domestic and global demand,
and soft commodity prices.


Economic activity is however expected to gain modest upward traction in the quarters ahead, driven
mostly by consumer demand, underpinned by rising real incomes, subdued inflation and lower interest
rates. Upside may continue to be capped by sluggish fixed investment due to fragile business confidence
amid fading global growth, persistent policy uncertainty and ongoing structural obstacles. We now
expect GDP to grow by only 1,0% in 2025, revised down from 1,4% in February 2025.


On the back of a subdued inflation outlook, the SARB's Monetary Policy Committee (MPC) reduced
interest rates by a cumulative 50 bps in H1 2025. We expect inflation to average 3,4% in 2025, providing
the MPC with space for further monetary easing. As a result, we forecast one more 25 bps rate cut in
July 2025, taking the prime lending rate down to 10,5%. Thereafter, interest rates will likely remain
steady.
Industry-wide credit extension has remained relatively weak. Corporate loans and advances growth was
moderate, hovering around 5% throughout Q1 2025 before improving off last year's low base to 7,5%
in April 2025. Despite the April bounce, corporates remain cautious as evident in the decline in business
confidence in Q2 2025 and lower fixed capital investment, although our pipelines remain robust.
Following a prolonged slowdown, household credit growth improved slightly to a weak 3,0% yoy. Overall,
we expect a more meaningful recovery in credit demand during H2 2025.


Pre-close update

The group's financial performance in the first 5 months of the year when compared to the first 5 months
of 2024 ('5M 2024') reflects the impact of a difficult SA macroeconomic environment. Flat headline
earnings growth for 5M 2025 was in line with the guidance we provided as part of the group's 2024
results for earnings for the first half of the year (H1 2025) to be 'broadly flat', before improving into the
second half of the year. The 5M 2025 financial performance reflects soft, but slowly improving, net
interest income (NII) growth, reasonable non-interest revenue (NIR) growth, an ongoing improvement
in the impairment charge, strong associate income growth off a low base, and underlying expenses that
were well managed.


NII growth of low single digits for 5M 2025 when compared to the prior period was driven by muted
average gross banking advances growth, which was below management expectations, and a decline in
the group's net interest margin (NIM). Average gross banking advances growth in Corporate and
Investment Banking (CIB) picked up to above mid-single digits when compared to the prior period while
growth in Retail and Business Banking (RBB) was below mid-single digits. Deposit growth remained
well ahead of loan growth, supported by ongoing retail deposit market share gains. The group's NIM
declined as we expected when compared to the 4,05% reported in FY 2024, driven primarily by asset
mix changes, price pressure and the negative endowment impact from interest rate decreases. We
expect NII growth to remain at low single digits in H1 2025 before picking up in H2 2025.


At the end of May 2025, the group's impairment charge and the annualised credit loss ratio (CLR)
improved period on period to well within the top half of the group's through the cycle (TTC) target range
of 60 bps to 100 bps. RBB's CLR was within the top half of its TTC target range, CIB and Wealth CLRs
were below their TTC target ranges, while the Nedbank Africa Regions (NAR) CLR was slightly above
its TTC target range. Our guidance remains for the group's CLR to be around the midpoint of the group's
TTC target range for FY 2025, seasonally higher in H1 2025 when compared to H2 2025.


NIR growth was above mid-single digits in 5M 2025 when compared to the prior period, driven by,
amongst others, double digit growth in both commission and fees, and trading income, flat insurance
income and a negative impact from fair value adjustments off a high 2024 base. Transactional activity
was negatively impacted by muted SA GDP growth and deal closures were delayed given the uncertain
macroeconomic environment. NIR growth is expected to remain above mid-single digits for H1 2025.


Associate income relating to ETI for H1 2025 is estimated to be approximately R700m, up 38%
compared to the R509m reported in H1 2024. Our review of ETI as a financial investment is ongoing.
Expense growth at mid-to-upper single digits in 5M 2025 when compared to the prior period was in line
with management expectations, benefiting from below mid-single digit growth across computer
processing and accommodation costs, and a lower incentive charge. Expense growth is expected to
remain at mid-to-upper single digits for H1 2025.


The Nedbank Group CET1 capital adequacy ratio remains well above the upper end of the group's
board-approved target range of 11% to 12%, and liquidity metrics similarly remained very strong.


Strategic reorganisation on track

The organisational restructure of our Retail and Business Banking and Nedbank Wealth Clusters into
Personal and Private Banking (PPB) and Business and Commercial Banking (BCB) is on track for
implementation effective 1 July 2025.


Investor call

Nedbank Group CFO, Mike Davis, will host a pre-close investor call based on this release at 17:30 (SA-
time) on Tuesday, 24 June 2025. Please contact NedgroupIR@nedbank.co.za for the details of this
meeting.


Nedbank Group's results for the six months ended 30 June 2025 are currently expected to be released
on SENS on or about Tuesday, 5 August 2025.


Shareholders are advised that the financial information contained in this pre-close update has not been
reviewed or reported on by the Nedbank Group's joint auditors.


Sandton
24 June 2025

Investor Relations contact
Alfred Visagie (Head: Investor Relations)
Alfredv@nedbank.co.za
NedgroupIR@nedbank.co.za


Sponsor to Nedbank Group in South Africa:
Nedbank Corporate and Investment Banking, a division of Nedbank Limited


Sponsor to Nedbank Group in Namibia:
Old Mutual Investment Services (Namibia) (Pty) Ltd


Debt Sponsor to Nedbank Limited:
Nedbank Corporate and Investment Banking, a division of Nedbank Limited

Date: 24-06-2025 05:00:00
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