Nedbank meets its targets in 2023 and lifts final dividend

Nedbank’s headline earnings grew by 11% to R15.7 billion. Photo: Armand Hough/ Independent Newspapers

Nedbank’s headline earnings grew by 11% to R15.7 billion. Photo: Armand Hough/ Independent Newspapers

Published Mar 6, 2024


Nedbank Group met all its targets in the 2023 financial year in spite of increasing pressure on consumers’ finances and lower business confidence and investment in most sectors of the economy, CEO Mike Brown said yesterday.

Ending the year with a strong balance sheet saw the final dividend raised by 18% to1 022 cents per share, at a payout ratio of 57%, the annual results showed.

The share price reacted well, climbing by 4.14% to R225.48 early yesterday afternoon, at a time when the JSE’s banking index was down slightly by 0.38%.

“Looking forward, although geopolitical uncertainties increase forecast risk, we expect the economic environment in SA to remain challenging, but improve off a low 2023 base,” he said in connection with the outlook for the 2024 financial year.

“Our strong financial performance in 2023, together with the progress in executing our strategy and underlying momentum in the business, gives us confidence in delivering on our medium-term targets and, in particular, our aim to increase our ROE (return on equity) to 17% by 2025 and above 18% in the long term,” he said.

ROE was 15.1% in the 2023 financial year, against a target of 15%.

The bank’s headline earnings (HE) grew by 11% to R15.7 billion following strong revenue and associate income growth of 12% and prudent expense management. Pre-provisioning operating profit growth came to 15%, partially offset by a 30% rise in the impairment charge.

“The diversification benefit across our portfolio of businesses was evident in very strong growth in HE from Nedbank Africa Regions, off a low base, alongside solid performances in both HE and ROE from Nedbank Corporate and Investment Banking, Nedbank Retail and Business Banking and Nedbank Wealth,” the bank directors said in the results.

A R5bn capital optimisation initiative announced in March 2023 was completed via a share repurchase programme and odd-lot offer, enhancing ROE and earnings growth on a per-share basis.

The directors said a highlight of the year was achieving all the group's post-Covid targets for 2023, announced in March 2021.

“These were achieved as a result of ongoing progress on delivery of our strategy, with a focus on growth, productivity, as well as risk and capital management.

“Growth trends across average interest-earning banking assets (+7%), net interest income (NII) (+14%), non-interest revenue (NIR) (+6%) and associate income (+64%), remained robust. Levels of productivity improved,” Nedbank’s directors said.

Brown said their technology platform had supported continued double-digit growth in all digital-related metrics; client satisfaction scores remained at the top end of the South African banking peer group; there were higher levels of cross-sell, while there had also been good main-banked client gains across all segments. There were market share gains in key product categories and improved efficiencies.

Headcount fell in 2023 year-on-year by 2% due to natural attrition. Bank floors space had declined a third since 2019.

Brown said the operating environment for South African banks in 2023 was more challenging than initially forecast due to a weaker global economy, and local economic activity that was impacted by record levels of load shedding, logistical constraints, higher-than-expected inflation and, as a result, higher-than-expected increases in interest rates.

Brown said the bank continued to create positive impacts through R145bn of exposures that support sustainable development finance aligned with the UN Sustainable Development Goals.

He said the Nedbank Group Economic Unit forecast South Africa’s gross domestic product (GDP) to increase by 1% this year, and inflation to continue to reduce.

The forecast for the South African prime lending rate would likely decline by 75 bps in the second half of 2024 to end the year at 11%, and private sector credit growth to be muted at around 5%.