ANNUAL RESULTS 2017 - Nedbank · exciting digital innovations such as the new Nedbank Money app, the Nedbank Private Wealth app and Karri app, chatbots and UNLOCKED.ME (an exclusive

ANNUAL RESULTSFOR THE YEAR ENDED 31 DECEMBER 2017

ar

Segmental analysis 6970 Our organisational structure,

products and services

72 Operational segmental reporting

74 Nedbank Corporate and

Investment Banking

76 Nedbank Retail and

Business Banking

84 Nedbank Wealth

87 Nedbank Rest of Africa

89 Geographical segmental reporting

Supplementary information 130132 Earnings per share and weighted-

average shares

133 Nedbank Group employee

incentive schemes

134 Long-term debt instruments

134 Additional tier 1 capital

instruments

135 Shareholders’ analysis

136 Basel III balance sheet credit

exposure by business cluster and

asset class

138 Nedbank Limited consolidated

statement of comprehensive

income


statement of financial position


financial highlights

140 Definitions

142 Abbreviations and acronyms

IBC Company details

Income statement analysis 9091 Net margin analysis

95 Impairments

104 Non-interest revenue

106 Expenses

108 Non-trading and capital items

108 Taxation charge

108 Preference shares

Statement of financial position analysis 109110 Loans and advances

115 Investment securities

115 Investments in private-equity

associates, associate

companies and joint

arrangements

117 Intangible assets

118 Amounts owed to depositors

121 Liquidity risk and funding

123 Equity analysis

125 Capital management

Contents

Message from our Chief Executive 1

Results presentation 2

2017 results commentary 52

Financial results 6263 Financial highlights

64 Consolidated statement

of comprehensive income

65 Consolidated statement of

financial position


of changes in equity

68 Return on equity drivers

MES

SAG

E FR

OM

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HIE

F EX

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Nedbank continued to create value for all our stakeholders in a challenging political

and economic environment. Our headline earnings of R11,8bn, up 2,8%, reflect a

good performance from our managed operations, with headline earnings growth of

7,8% and a ROE (excluding goodwill) of 18,1%. Slower revenue growth was offset by

reduced impairments and good cost management, while our share of the loss from

our associate ETI following its Q4 2016 results decreased in the second half of the

year as the ETI business returned to profitability.

The achievements of the last few years have provided us with a solid base and we

continue delivering on our strategies and building the capabilities that will enable us

to meet the 2020 targets we have now set of an ROE (excluding goodwill) of greater

than or equal to 18% and an efficiency ratio of less than or equal to 53%. We released

exciting digital innovations such as the new Nedbank Money app, the Nedbank Private

Wealth app and Karri app, chatbots and UNLOCKED.ME (an exclusive e-commerce

marketplace for millennials) and continued to gain share of transactional banking

clients in both our retail and wholesale businesses. We are actively optimising our

cost base, as reflected in cost growth at 5,1%, and maintained a strong balance sheet

as evident in a CET1 ratio of 12,6%, above the top end of our internal target range.

Our strategic enablers are making a difference for our operations and for our clients

as we create a more agile, competitive and digital Nedbank.

Looking forward, 2018 started with positive changes to SA’s political and

socioeconomic landscape and brought renewed prospects for higher levels of inclusive

growth. Nedbank is acutely aware of the increased responsibility that we, and indeed

all businesses, have to work alongside government, labour and civil society to play our

part in improving the lives of all South Africans.

Reflecting on the impact on the group of the greater levels of business and consumer

confidence evident in the early part of 2018, an improving economic outlook, ongoing

delivery on our strategy and ETI’s returning to sustained levels of profitability, our

guidance for growth in diluted headline earnings per share for 2018 is to be in line with

our medium-to-long-term target of greater than or equal to GDP plus CPI plus 5%.

Mike BrownChief Executive

A solid performance in a volatile and challenging domestic environment

TO BE UPDATED

DHEPS 2,4%

2 406 cents

(excl ETI 7,3%)

Dividend per share

7,1%1 285 cents

ROE (excl goodwill)

16,4%(excl ETI 18,1%)

CET1 ratio 12,6%

(December 2016: 12,1%)

CLR 19 bps 49 bps

Headline earnings 2,8%

R11 787m

(excl ETI 7,8%) R12 762m

Revenue growth 3,5%

Expense growth 5,1%

Nedbank Group – Annual Results 2017 1

NOTES:

NOTES:

Nedbank Group – Annual Results 20172

NEDBANK GROUP LIMITED – Annual Results '17

Solid performance during a difficult and volatile year

NEDBANK GROUP LIMITED

2017

ANNUALarFOR THE YEAR ENDED 31 DECEMBER

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challenges, exacerbated by cyclical downturn in SA

GDP growth (%)

-2

-1

0

1

2

3

4

5

6

7

8

00 02 04 06 08 10 12 14 16World Sub-Saharan Africa South Africa

Structural challenges

S

Infrastructural deficits – eg roads, water, education

Institutional deficits – particularly in key SOEs, but strong judiciary, SARB

Fiscal issues – eg high government wage bill, SOEs (Eskom, SAA etc), tax pressures

Policy deficits – unlikely to promote investment eg Mining Charter.

… exacerbated by prolonged period of political uncertainty, leading to credit rating downgrades


– headline earnings +2.8% (H1 2017: -2.9%)

– headline earnings +7.8% (H1 2017: +6.7%)

Unresolved structural challenges in SA economy compounded by political & policy uncertainty

Cyclical economic downturn in SA

Multiple event risks resulted in high levels of volatility – Nedbank navigated these well

Business & consumer confidence at multiyear lows – slowdown in asset growth & transactional activity, particularly evident in CIB & Wealth

Selective loan origination & quality advances book with high levels of resolutions of historically problematic accounts

Expenses well managed

– returned to profitability in the 9 months to 30 September 2017, boosting Nedbank Group's H2 growth rates

Accelerated digital delivery to enhance client experience & improve efficiency

Delivering value to all our stakeholders – ongoing focus on governance & sustainability

NOTES:

NOTES:



– slight improvement in last quarter

0

10

20

30

40

50

60

70

80

90

100

94 96 98 00 02 04 06 08 10 12 14 16-25

-20

-15

-10

-5

0

5

10

15

20

25

94 96 98 00 02 04 06 08 10 12 14 16


– Nedbank navigated these wellUSD/ZAR JSE top 40

SA 10 year government bond yield (%) 5-year CDS spreads (%)

Pravingate

Fitch downgrade

Surprise rate cut

S&P downgrade

ANC elective conference

11

12

13

14

15

Jan 17 Mar 17 May 17 Jul 17 Sep 17 Nov 17

8

9

10


Pravingate

Fitch downgrade

Surprise rate cut

S&P downgrade

ANC elective conference

40 000

45 000

50 000

55 000

60 000


150

200

250


Steinhoff

Steinhoff

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149176

123 143

Home loans Net client cashflows16 17

(000)

1 271

1 403

1 286

1 381

Personal loans Vehicle finance

(2017, indexed from Q1)

91

100

58

6765

Q1 Q2 Q3 Q4

Nedbank JP Morgan FICC & equities

CITI FICC & equities BAML FICC & equities

+1%

(2%)

(17%)

SA industry NCCF1 (Rbn)

(19%)

1 Source: ASISA


– decline more pronounced in wholesale given political & policy uncertainty

(%)

-10

0

10

20

30

40

00 02 04 06 08 10 12 14 16

Households (yoy%) Companies (yoy%)

81 8964 54

23 23

2020

5458

61 66

915

17 13

14 15 16 17

CIB BB Retail Other

(Rbn)

NOTES:

NOTES:



– contributing by delivering value to all our stakeholders

STAFF

CLIENTS

SHAREHOLDERS

REGULATORS

SOCIETY

Paid R16.5bn in salaries & benefits to support our 31 887 staffmembers & their familiesFacilitated transfer of R3.7bn payroll taxes on behalf of staff to government Implemented a leadership & culture change programme supporting strategy, incl New Ways of WorkTransforming our workforce towards SA demographics (> 78% black employees)

R153bn new loan payouts to enable clients to finance their homes, vehicles, education & grow their businessesEnhanced client convenience – 234 new Intelligent Depositors, 55% reformatted digitally focused branches & new innovative apps & CVPs Safeguarded R772bn deposits at competitive interest rates Voted top SA asset manager – managing our clients’ investments

NAV per share up 7.3% to 169 90 centsPaid R6.1bn dividends to shareholders who represent pension funds & investments of all South Africans (incl GEPF, a 6.8% shareholder in Nedbank)

Supportive outcomes at 50th AGM – all resolutions passed with > 90% votes of approval

Maintained a strong balance sheet to support a safe & stable banking system Paid R9.8bn direct, indirect & other taxesInvested more than R100bn in government & public sector bonds to support the funding needs of government

Procured 75% of our goods & services locallyContributed R168m to socioeconomic development (50% spent on education) Active participant in the CEO InitiativeOverall winner at the 2017 Independent Top Empowered Companies Awards. Remained a Level 2 BBBEE contributor, now measured under the Amended FSC

TO BE THE MOST ADMIRED

FINANCIAL SERVICES PROVIDER IN AFRICA

BY OUR STAKEHOLDERS

Our purpose - to use our financial expertise to do good for individuals, families, businesses & society


1314

3

1439

5

1568

5

1583

0

1699

0

13 14 15 16 17

895

102

8

110

7

120

0

128

5

13 14 15 16 17

17.2 17.2 17.0

16.5 16.4

13.0 13.5 13.0

14.2 14.0

16.8

18.1 18.1

13 14 15 16 17

ROE (excl GW)COEROE (excl GW & ETI)

+7.3% +7.1%

NAV per share (cents) ROE & cost of equity (%) Dividend per share (cents)

CAGR: +6.6% CAGR: +9.5%

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– good performance from managed operations

Headline earnings (Rm) 2.8% 11 465 7.8% 11 839

ROE (excl goodwill) 16.5% 18.1%

Diluted HEPS growth 4.8% 15.1%

Preprovisioning operating profit growth 4.4% 10.0%

Net interest margin2 3.54%

Credit loss ratio 0.68%

CET1 CAR 12.1%

Dividend per share (cents) 7.1% 1 200

1 Excluding ETI associate income/losses, as well as ETI-related funding costs. Managed operations reporting provided to assist in analysis of group performance during the period of ETI Q4 2015/16 losses, but we will revert to blended results in 2019. 2 2016 rebased.


Good performance from managed operations in a challenging macroeconomic environment

FINANCIAL OVERVIEW

RAISIBE MORATHI

NOTES:

NOTES:



– improved H2 2017 performance from both managed operations & ETI

(Rm)

1302

8

1339

8

1354

8

1407

6

H1 H2

1135

7

1214

6

1173

0

1233

3

H1 H2

221

1

234

3

159

4

171

0

H1 H2

1368

6

1468

0

1436

9

1544

3

H1 H2

603

0

580

9

643

3

632

9

H1 H2

(431

) 326

(1 0

53)

215

H1 H2

Associate income

+4.0% +5.1%

+3.3%+1.5%

(27.9%) (27.0%)

+5.0% +5.2%

+6.7% +9.0%

(144%) (34%)

16 17 ETI: (446) (1061) 321 317


– good performance from managed operations

11 465 11 787

1 198 560

1 250 (1 446)

(733) (507)

2016 NII NIR Impairments Expenses Associateincome

Direct tax& other

2017

+4.5% (27.4%)+2.4% +5.1% (> 100.0%)

2.8

7.8

Group Managedoperations

16.4 18.1

Group Managedoperations

(Rm) (%)

(%)

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2(3)

(10)

(3) (2)

13 14 15 16 17

(2)

105

18

5

(5)(2)

0

13 14 15 16 17

3

(12) (12)

(4)

8

– driven by endowment & asset mix change

Asset mix change (bps) Endowment (bps)

BOOKLET SLIDE

Liability mix & pricing (bps) HQLA (bps)


– driven by endowment & asset mix

(bps)

Average interest-earning banking assets1: +2.2%

341 354

362

13 58 (2) (2) (2) 1

2016 Removal oftrading LAP

2016rebased

Endowmentimpact

Assetmix

Assetpricing

Liabilitypricing& mix

Prime-JIBARimpact

Other 2017

1 Rebased NIM for twelve months ended 31 December 2016 would have been 354 bps & AIEBA of R745bn, had HQLA been removed from the banking book & included in the trading book from 1 January 2016.

NOTES:

NOTES:



152

162

121

145

106 19 15

162

148

114

150

112 20 16

Commercialproperty

Termloans

Otherloans

Homeloans

Vehiclefinance

Personalloans

Card

Dec 16 Dec 17

21

Selective origination & unique positioning

(Rbn)

Mostly ST &

volatile

Wholesale

Advances up 0.5% – solid growth & market share gains across retail portfolios offset by early repayments in CIB

BA900 market share3 (%)

+6.5% +3.2%(8.3%)

(5.2%) +6.3%

+4.1% +6.3%

Leveraging relationships &

pipeline

Retail

1 Terms loans & other longer-dated loans. | 2 Other loans include overdrafts, overnight loans, preference shares, deposits placed under reverse repurchase agreements & other smaller corporate loans. | 3 BA900 – Dec 2017 (Compared to Dec 2016). | 4 Core corporate loans comprise commercial mortgages, corporate overdrafts, corporate credit cards, corporate instalment credit, foreign sector loans, public sector loans, preference shares, factoring accounts & other corporate loans (other loans and advances excluding household personal loans). | 5 VAF per BA 900 comprises total lease & Instalment sales.

Share Trend

Commercial property 40.5 (0.3)

Core corporate4 21.0 (1.3)

Home loans 14.5 0.0

Vehicle finance5 28.1 +0.4

Personal loans 10.3 +0.1

Card 14.0 +0.3


(what we expected1) (what actually happened2) (what we expect3)

21.5% Limited impact – closed domestic market Limited impact – closed

domestic marketLimited impact – Closed

domestic market28.0% Cost of new term funding:

+5 bps

37.6% Cost of new term funding: +10 bps

Cost of new term funding: +5 8 bps

Cost of new term funding: +5 10 bps

6.8% Cost of new capital markets funding: +25 bps

Reprice on new issuances, however, capital market spreads have decreased

given demand for good credit

Reprice on new issuances: +25 35 bps

5.1% Matched to US$ lending – no material impact

Matched to US$ lendingNo material impact

Matched to US$ lendingNo material impact

1.0% Cost of new foreign funding: +25 50 bps (1 year)

Reprice on contractual repricing date, however,

funding costs have decreased on the back of risk-on foreign appetite

Cost of new foreign funding: +15 25 bps (1 year)

circa +5 bps 0 bps circa +4 bps

– impact of sovereign-credit-ratings downgrades on funding costs not material BOOKLET SLIDE

Total funding (deposits + long-term debt) at 31 December 2017: R823bn.1 From June 2017 year-end presentation | 2 On 24 November 2017 S&P downgraded the sovereign long-term local currency rating from BBB- to BB+ while Moody’s placed SA on Review | 3Moody's is expected to announce the outcome of their credit rating review in March 2018. Assuming they decrease SA’s sovereign long-term local currency rating from Baa3 to Ba1 (sub-investment grade), SA would be excluded from the WGBI. The potential impact is expected to have reduced substantially given that foreign investors have had time to pro-actively pre-position their portfolios for this potential event. Following the ANC elective conference, SA 2018 budget announcement & Presidential & Ministerial changes, markets appear to be pointing to a lower probability of a sovereign-credit ratings downgrade. Assuming a rating downgrade, continued risk-on EM demand is likely to dampen the potential impact..

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17 355

3 900

1 566

708

534

Commission& fees

Tradingincome

Insuranceincome

Privateequity

Other¹

– resilient underlying performance, offset by high base, the impact of a challenging economic environment & weak insurance result

(%)(Rm)

1 Represents sundry income, investment income & fair-value adjustments. | 2 C&F 72% of NIR.Rest of Africa & Centre excluded as not material.

16 17 16 17 16 17

14.5 (3.9) 6.9 5.0 (5.1) (0.6)

2.3 (24.1)

(4.5) (10.0)

18.9 3.1

16.4 (4.3) 7.1 5.3


BA900 market share1Deposits (Rbn)

Deposits up 1.3% – good household deposit growth, particularly in RBB, up 8.5%, evident in ongoing market share gains

Share Trend

Wholesale 21.2 (1.1)

Corporate (non-financial) 16.5 +0.2

Household 18.9 +0.2

Foreign currency 12.8 +0.2

1 BA900 – Dec 2017 (Compared to Dec 2016).

761772

23

2 1 (4)

(11)

2016 RBB Wealth Rest ofAfrica

CIB CentralMgnt

2017

+8.5% +4.8% +4.2% (1,3%) (13,3%)

Basel III + Basel III -

NOTES:

NOTES:



16 17

1 157 1 224 654 350

500150

16 17

RBB Centre

(%) (%)

(Rm)

(Rbn, %)

37.4 36.2

16 17

0.69 0.70

16 17

19.6 19.6 16.2 15.4

2.7 2.7

2.32.1

0

1

2

3

0

10

20

30

16 17 16 17

Defaulted advances Defaulted advances as % of book

+0.0%

(4.9)%

(Rm)

Defaulted advances Defaulted advances (excl performing

defaults)1

1 Performing defaults is defined as Retail advances held in default for longer due to regulatory requirements, but are otherwise performing.


– improvement underpinned by a quality portfolio & proactive risk management

47.3% 45.5% 4.3% 2.9%

106

79 7768

49

13 14 15 16 17

34

112

8

98

6

106

9

102

CIB RBB Wealth RoA16 17

1

(bps) (bps)

1 Nedbank through-the-cycle target range: 60–100 bps.

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– CLR underpinned by quality origination

Nedbank Competitors1 Source: Experian Delphi Score2 Source: Lightstone Risk Quality Grade3 Source: Experian

1 (%)

² (%)

0%

10%

20%

30%

40%

09 10 11 12 13 14 15 16 17

0%

10%

20%

30%

40%

09 10 11 12 13 14 15 16 17

3 (%)

0%

5%

10%

15%

20%

14 15 16 17

Low Risk * Low-Medium Risk Medium Risk High risk

Nedbank Tier 1 ** Tier 2 **

0%

20%

40%

60%

80%

14 15 16 170%

20%

40%

60%

80%

1714 15 16

3

0%1%2%3%4%5%6%

13 14 15 16 17

* Low risk (Bureau score 658); Low medium risk (Bureau score 644 657); Medium risk (Bureau score 626 643); High risk (Bureau score 625)** Tier 1 refers to traditional 4 banks excluding Nedbank while tier 2 refers to remaining material providers of unsecured personal loans


84%70%

16%30%

Specificimpairment

NPLs

10 largest exposures Other

CPF18%

Other82%

– CLR improvement underpinned by resolution of stressed counters & resultant provision reversals

(%) (bps)

610

10 (12)

(2)

Dec 17ResolutionsNew

advancesExisting

advancesPostwriteoffrecoveries

NOTES:

NOTES:



– good cost management in response to slowing revenue growth

(%)

9.0 9.4

6.4

8.6

5.15.7

7.7

4.35.7

6.2

4.6

6.4 5.3

13 14 15 16 17Expense growth Excl RoA Inflation

(Rm, % growth)

6 044 19 136 2 880 2 200

CIB RBB Wealth RoA

+5.1%

+3.8%

+16.6%+6.5%

1

1 Rest of Africa cluster disclosures from 2015.


0

20

40

60

80

100

120

Group CIB Home loans Vehicle finance Personal loans CardNedbank (Dec 17) Nedbank (Dec 16) Bank A Bank B Bank C

– reflecting wholesale & retail asset mix profile

(%)

1 Peer information from last reported financials (June 2017).

Selective origination since 2010 & high-

quality book

CPF 40% of CIB book (higher levels of security) & coverage in CIB individually

determined

42.8 43.0 35.5

59% 39% 32% 38%

BOOKLET SLIDE

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R238m run-rate savings in 2017, include:

Optimisation of branch footprint

reduction in floor space

closed 53 PL & 32 inretailer outlets

Self-service banking

Sales & service integration

Headcount reduction

– various initiatives in place to support meeting our efficiency ratio target of < 53% by 2020

Adoption of automation & robotics

Procurement benefits from SAP implementation – eg live auctions

Managed evolution of core IT systems – decommissioned 122 since 2010 (16 in 2017) (target < 60 by 2020)

Headcount reduction

1 Target Operating Model initiatives enable Nedbank to operate with greater agility, leading to revenue & cost savings benefits

(costs & revenues)

Nedbank >30% of R1bn by 2017Target & completiondate:

(costs & revenues)

R1.0bn by 2019 & R1.2bn by 2020 Ongoing

Delivered > R1bn pretaxsynergies with Old Mutual, of which R393m accrued to Nedbank. Synergies include:

IT collaboration to achieve scale

Joint procurement savings

Wholesale banking revenue initiatives


28 366 28 850

29 812

1 105 (621) 617 107 238

2016 BAUgrowth

Efficiencies BAUgrowth

Investments Regulatory BancoÚnico

2017

– good cost management in response to slowing revenue growth

(Rm)

1 R621m includes TOM, OM synergies & other cost savings. R444m accrues to RBB2 Investments, including IT projects, branch reformatting costs, etc.

+1.7% +3.4%

21

NOTES:

NOTES:



148278 292

152

(676)

230 171 150

(1 203)

142 152 165

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Associate income – ETI performance reflective of tough but improving environment, particularly in Nigeria

Associate income from ETI1 (Rm)

870 (125) (744)

1 ETI accounted for one quarter in arrear. | 2 Source: ETI disclosures. ETI reported COE at ~ 17%.

ETI H1 2017 resultsaudited

15 16 17

ETI medium-to-long term guidance2

ROTE target: COE + 5%(H1 2017: 15.3%)

Efficiency ratio: 50 55% (H1 2017: 60.6%)


1.0 1.01.2

1.7

2.3

13 14 15 16 17 18 19 20

(Rbn)(Rbn)

Projected to peak as regulatory projects complete & development costs on new technologies reduce

1.62.4

1.3

1.21.0

1.20.3

0.7

0.4

0.5

16 17DigitalPaymentsSupportCore product & clientDevelopment costs

Developing new technologies with longer

lifespans (longer amortisation

periods)

Increasing investment in

digital channels & payments

BOOKLET SLIDE

194176

166145

129

< 60

13 14 15 16 17 20target

(#)

Rationalise, standardise & simplify

Digital includes client onboarding & servicing eg. various apps & web enablement.Payments include Authenticated collections & payment switch.

Support includes core foundation programmes: SAP ERP, IT security, Enterprise Data & IFRS 9 (credit modelling). Core product & client include Flexcube (RoA), IB loan mgnt(CIB), Client CIS & AML.

Compliance related

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12.1

13.0 12.6

12.6

2.1(1.2) (0.4)

Dec2016

Organicprofits

Dividendspaid

RWA increases

Dec2017

– CET1 above the top end of our target range

(%)

CET1: 10.5–12.5%

SARB minimum CET1: 7.25%

(%)

Jun 17 Dec 2017

16.714.9 14.7 15.2 15.2

14.3 13.7 13.912.8 13.1

Bank A Bank B Bank C Nedbank Nedbank

Tier 1 Tier 2

16.214.9 14.7 15.2 15.4


(Rbn)

7.8

4.0 3.3 3.6 4.1 4.7

(2.8)

(0.7)

(1.0)

Carrying valueDec 2015



Market valueDec 2017

Market valueFeb 2018

Share of ETINAV Sep 2017

Associate income/(loss), FCTR, OCI & dividends Impairment provision

1 As at 28 Feb 2018.

1

NOTES:

NOTES:



Key drivers of IAS 39 to IFRS 9 transition

Balance sheet impairments (Rbn, illustration)

Mix of the lending bookNedbank more wholesale than retail compared with industry (impact from lengthening of emergence period under IFRS 9 greater on retail portfolio provisions than wholesale portfolio provisions)Nedbank has relatively large CPF book –appreciating assets mitigate lifetime ECL impacts

Relative proportion of book on AIRBAIRB book already includes downturn EL deduction from capital, thereby partially offsetting impact of IFRS9 on CET1 in AIRB portfoliosNedbank proportion of book on AIRB at 94% (peer average at ~ 80%)

Cash tax implicationsDepends on individual banks’ tax practices Nedbank historically conservative

IFRS 9 drivers

12.0

~15.2

IAS 39 Stage 1 Stage 2 Stage 3 IFRS 9

Removal of emergence periods

& replacing with 12-month ECL on all

exposures

Retail more impacted than

wholesale

Inclusion of off-balance sheet

exposures

Lifetime ECL on exposures that have

a significant increase in credit

risk

Minor impact as default definition

remains unchanged

BOOKLET SLIDE


1 – strengthened balance sheet coverage with immaterial impact on CET1

66.4~ 65.7

~ 3.22.0

~ 0.9 ~ 0.2 ~ 0.2

31 Dec 2017 IFRS 9Impairments

Excess ofdownturn ECLover provisions

Tax effect

IFRS 9Classification &measurement

IFRS 15Revenue

1 Jan 2018proforma

(Rbn)

0.70% ~1.05%

12.6% >12.4%< 0.1%

~ 0.35%

2

< 0.1%

1 These estimates are based on accounting policies, assumptions, judgements & estimation techniques that will be regularly reviewed & assessed during 2018. | 2 Excess downturn expected credit loss over provisions reversed due to increase in IFRS provisions. | Excludes ETI IFRS 9 impacts to be announced in H1 2018.

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– group headline earnings up 2.8%

601

4

496

0 119

2

(287

)

(414

)

631

5

530

2 106

8

(810

) (88)

CIB RBB Wealth Rest ofAfrica

Centre

16 17

+5.0%

+6.9%

(10.4%)

(Rm)(Rm)

54%

45%

9%

1%(8%) (1%)

CIB RBBWealth Rest of AfricaETI Centre


– dividend cover within our target range

2.11 2.07 2.06 2.001.91

13 14 15 16 17

Board-approved target range:1.75 – 2.25x

(times) (%)

Payoutratio: 47% 48% 48% 50% 52%

3.9

4.8

2.7 2.8

13 14 15 16 17

Nedbank JSE all-share index

NOTES:

NOTES:



397

1

472

7

520

8

601

4

27.6 27.0

22.621.1

- 2.0

3.0

8.0

13.0

18.0

23.0

28.0

-

2 000

4 000

6 000

8 000

10 000

12 000

13 14 15 16 17

Headline earnings (Rm) ROE (%)

Operating Income +3.9%: Lack of business confidence translating to lower advances & revenue

CIB integration providing significant client penetration & cross-sell opportunities

CLR 6 bps: Strong risk management, collections & high-quality portfolio

Expenses +5.1%: Efficient franchise

(ROE > 20%)

+5%


Strong risk management in a difficult and volatile environment

NEDBANK CORPORATE AND INVESTMENT BANKING

BRIAN KENNEDY

NOTES:

NOTES: RES

ULT

S P

RES

ENTA

TIO

N



– financial highlights BOOKLET SLIDE

3 035

4 012 4 584

3 1103 056 3 551

4 703

3 070

Property Finance Investment Banking Markets Short-term &Transactional

16 17

HE (Rm) 1 540 1 560 4 474 4 755

ROE (%) 21.6% 20.6%

CLR (%) 0.04% (0.05%)

(Rm)


54%46%

Headline earnings

50%50%

Assets

Nedbank CIB Other clustersHeadline earnings (Rm) 5.0 6 014

Operating income (Rm) 3.9 13 649

PPOP (Rm) (7.9) 8 878

Net interest margin (%) 1.97

NIR-to-expense ratio (%) 129.6

Efficiency ratio (%) 39.0

Credit loss ratio (%) 0.34

Average banking advances (Rm) 0.7 325 428

Average deposits (Rm) 0.1 336 878

Headline economic profit 1 (Rm) 3.5 1 970

Allocated capital (Rm) 6.9 28 462

ROE (%) 21.1

– financial highlights

1 Cost of equity 2016: 14.2%. | 2017: 14.0%.

BOOKLET SLIDE

NOTES:

NOTES:



36.0%

1.2%

4.4%

3.7%

2.0%

4.4%

32.5%

1.0%

3.8%

4.0%

1.3%

4.2%

PropertyFinance

Construction

Equity

Mining

Retailers

StateOwnedEntities

16 17

(%)

(%)

23.627.7

17.1

26.321.0

0.21 0.24 0.29 0.290.45

13 14 15 16 17

Portfolio Specific

(%)

Migration risk

Down-side risk

Change

1 State Owned Entities restated to exclude direct Government related entities

1

[ ] Risk decrease [ ] No change [ ] Risk increaseChange on prior period:

-

0.30 0.19

0.40 0.34

0.06

13 14 15 16 17


138187 182

85

128 1387

11 8

13 16 17Other Property finance Banking

Average advances growth affected by early repayments, although pipeline remains steady

Average banking advances (Rbn)

1 Banking defined as Investment Banking & Client Coverage combined. | 2 NIM restated for prior years for the removal of the liquid-asset portfolio out of interest-earning banking assets.

(3%)

8%

+7%

+13%

+4%

CAGR

+9%

230

325 328

Investment grade & NIM

71% 73% 74%

1.89%1.97%

2.10% 2.14% 2.12%

1.00%

1.50%

2.00%

2.50%

0%

20%

40%

60%

80%

100%

13 16 17Investment grade exposure Reported NIM (RHS)Restated NIM (RHS)

1%

1

2

NOTES:

NOTES: RES

ULT

S P

RES

ENTA

TIO

N



Difficult trading conditions with environment characterised by low volatility & client activity, interspersed with large event risk

Commission & fee growth weak from lower levels of corporate activity

Private-equity valuations impacted by economic conditions & a high base in the prior year

Embedded client intelligence platforms enhancing our value proposition to clients

Maximising deeper client penetration through cross-sell of a number of products to key clients

Good transactional client gains

(Rm)

2 3473 578 3 689

2 043

2 829 2 708631

1 046 767

13 16 17Private equity & other Commission & feesTrading income

(4%)

3%+12%

+7%

+5%

CAGR

(27%)


47% 46% 47% 45%42%

13 14 15 16 17

(%)

(%)

22

22

1211

5

9

2

34

10

OfficesRetailersWarehouseMultiple portfoliosManufacturingResidentialVacant landHotel & BBOther mortgagesOther loans

Strong client base supported by an experienced team

Lending access to existing collateral pools

Vacant land < 3% & Residential < 10% of portfolio

Retail centre developments funded on > 70% pre-lets

One third of book lending into listed property funds

Primary lending operation supplemented by private equity arm

(%)

BOOKLET SLIDE

: LTVs >90%119.4% 4.6% 3.0% 2.5%17.5%

0.27 0.21

0.08 0.04

(0.05)13 14 15 16 17

1 Excludes unsecured loans to listed REITS – by regulation these REITS have gearing ratios of less than 60%.

NOTES:

NOTES:



2017

2017

2017

2017

2017

Jointly acted as bookrunner in the placement of 19.1m shares into the market as part of its empowerment

entity’s BEE structure unwind

Appointed as co-MLA & coordinator to refinance and upsize its existing

US $250m revolving credit facility

Jointly mandated to lead MTN’s first local bond issuance in four years raising R2.5bn Capital raising of R1bn through the debt

capital market

Appointed as joint lead bookrunner for the second consecutive year for the National

Treasury’s dollar-denominated bond issuance in the international debt capital

markets

Appointed as the primary banker to the Parliament of RSA for a second

consecutive 5 year term

Successfully raised R500m Tier 2 subordinated debt for Old Mutual Insure

Appointed as the primary banker to the Sedibeng District Municipality for a

5 year term

2017

20172017

BOOKLET SLIDE

2017

Re-appointed as the primary banker to the Western Cape Government (WCG) for a

third consecutive five-year term


25

5

10

11

2

7

22 21 22

2

3

13 14 15 16 17Tier 4 Tier 3 Tier 2Tier 1 Target

– ongoing new primary client wins in CIB

(#)

Target = 25 p.a.

NOTES:

NOTES: RES

ULT

S P

RES

ENTA

TIO

N



A powerful wholesale business focused on its clientsRenewed optimism in the country hopefully leading to an increase in SA corporate investment

Good pipeline that is expected to convert as business confidence improves

Leveraging off strategic partners to benefit clients on the continent & globally

Continued focus on people with a shift towards ‘digital’ talent

2018: Headline earnings growth in line with nominal GDP growth

2020 targets:

ROE 20% maintain strong returns

Cost to income 40% leverage technology to retain industry-leading efficiency ratio


TM

Real-time client & management information insight

Robotics Process Automation

Improve efficiencies, accuracy & quality of work

Technology

Enhancing client experiences

Client Intelligence

Platform

First implementations delivering benefits Implementations | PilotsCross-sell & client

servicing benefits

135 processes identified Potential cost-savings in man hours

Insight into client cross-or up-sell opportunities

Continuous enhancements leading to management insights & predictive analytics

Implementation of systems to enhance client experience Continuous testing of disruptive technologies to improve the way we do business

NOTES:

NOTES:



346

8

403

1

446

0

496

0

13.014.6

16.618.9

-2.0

3.0

8.0

13.0

18.0

23.0

28.0

(1 000)

1 000

3 000

5 000

7 000

9 000

11 000

13 14 15 16 17

Headline earnings (Rm) ROE (%)

PPOP +4.0%

NII +2.6%: Advances & deposits market share gains, offset by prime 3-month JIBAR compression

NIR +5.0%: Solid growdth despite weak economic conditions impacting transactional volumes.

Expenses +3.8%: Active cost management, balancing investments in digital & distribution

CLR benefitting from quality book & collections

6.9%


Ongoing ROE improvement and good earnings growth in a difficult environment

NEDBANK RETAIL & BUSINESSBANKING

CIKO THOMAS

NOTES:

NOTES: RES

ULT

S P

RES

ENTA

TIO

N



3 713 4 019 4 184

1 385 1 430 1 616

4 223 4 566

4 737

15 16 17

(#000) (Rm)

4 377 4 633 4 755

2 703 2 784 2 783

15 16 17

Retail exclmain-banked

+4.8%

+3.0%0.0%

Main-banked

+1.6%

Transactional

Other

+5.2%+7.4%

+6.0%+6.9%

Consumer card issuing


45%55%

Headline earnings

33%

67%

Assets

Nedbank RBB Other clustersHeadline earnings (Rm) 6.9 4 960


PPOP (Rm) 4.0 10 199




Credit loss ratio (%) 1.12

Average banking advances (Rm) 4.2 282 992

Average deposits (Rm) 9.2 257 968

Headline economic profit 1 (Rm) 13.3 1 230


ROE (%) 18.9

– financial highlights BOOKLET SLIDE

1 Cost of equity 2016: 14.2%. | 2017: 14.0%.

NOTES:

NOTES:



9.0% 9.5% 9.4% 8.8%9.6% 10.1%

12.7%

1210 11 13 1714 1615

(%)

AMPS

Consulta

Same question asked:ONE bank do you regard as your main bank for personal banking

AMPS discontinued


# 000

Kids

& y

outh

Ent

ry le

vel

Mid

dle

Prof

essi

onal

Sm

all B

usin

ess

Bus

ines

sB

anki

ng1

1 Client groups with gross operating income contributions in excess of R500 pm.Note: Non-resident, non-individual segment not shown.

15 16 17

739 786 797

1615

107

17

101 113

7066 68382407 410

22,2 22,3 22,41 404 1 4111 381

NOTES:

NOTES: RES

ULT

S P

RES

ENTA

TIO

N



Jun2017

Dec2016

Home loans 24.4 25.0 25.7

Vehicle asset finance 56.7 60.2 61.4

Personal loans 71.7 71.5 72.4

Card 92.1 92.8 95.6

Other loans 89.6 96.2 96.2

51.7 52.7 52.9

Business Banking 38.0 37.1 37.6

49.1 49.6 49.9

0%

5%

10%

15%

11 12 13 14 15 16 17Home loans Personal loansVehicle asset finance CardRetail total Business Banking

(%)

1 Excludes performing defaulted advances.


Total retail clients

Transactional clients1

Active clients2

Main-banked clients

(#000)

Consistently activeclients3

2 7832 784

6 026

7 417 7 538

5 925

3 7463 870

1 723 1 795

16 17YOY% Growth

1 Clients with a transactional product. | 2 Active clients within the last 6 months. | 3 Main-banked for each of the past 12 months.Definition of main-banked clients: Youth & ELB 3 debits, 1 credit ; Middle market 6 debits, 1 credit ; Professionals 12 debits, 1 credit ; SBS 25 debits ; All over 3-month period.

NOTES:

NOTES:



Accelerated digitisation of technology & operations

Change in 2017Deposit volumes (# 000)

48%

2015

23%

2017

34%

2016

27 81829 594 29 256

+3%

Traditional deposits Self-service deposits

>100%

(5%)

30%

Launched 2017

21%

38%

18%

(13%)

130k

39%

Digital clients1 (# 000)

5 784

Enabled

5 3442

3 354

+31%

Dec’15 Dec’17Dec’16

891

Active

788 852

+6%

Devices

Intelligent Depositors

ATMs

Video bankers

Self-service kiosks

Interactive tellers

Volumes

Digital volumes

Total App usage

Money App registrations

ID deposits

Teller activity

1 Digitally enabled & active clients have been restated to include all digital channels & to allow for only last 90 days of recent activity.2 Growth largely as a result of the Digital Activation Programme run in Q4 2016.


Market1

Maximum term (months) 60 84

Minimum term (months) 12 1

Maximum loan amount 250k 350k

Restructuring policy Debt

counselling only

Yes

Readvances to clients in arrears No Unknown

Recent growth primarily in low & low-to-medium risk categories

Current term offering more conservative than the industry (no pay-day loans)

Maximum loan below industry, but increased to R250k for best-risk customers only

Do not restructure accounts other than those accounts in debt counselling (DC)

Do not settle internal loans in arrears or who have previously been restructured with a re-advance

1 Based on market information as available; includes traditional four banks & material providers of personal loans. It reflects the maximum or minimum available from 1 or more market competitors

NOTES:

NOTES: RES

ULT

S P

RES

ENTA

TIO

N



– contributor to ongoing efficiencies & savings

Branch optimisation – slowdown in new rollouts, closure of 53 inretailers & 32 personal-loan outlets & 10 branches Sales & service integration & reducing layers of management – headcount reduction of 267

Self-service initiatives – 46 new video bankers, 234 new Intelligent Depositors, 249 self-service kiosk & 200k statements processed on IDs monthly

Credit function simplification in BB & operational improvements in NRR & Debt Collections

Adoption of robotic automation (33 robots deployed) Support function optimisation, eg finance, human resources & risk

Rationalise vendor listPET (Professional fees, entertainment & technology spend) savings achieved

(#)

(Rm)

21 305 20 243

16 17

358444

16 17


(m2)

639 593453 391

277

171

255304

336

10 14 15 16 17

Traditional New-image

– efficient use of space & staff, optimising branch footprint

10 14 15 16 17

(#)(#)

13 695

18 743

764708 695

7 273

Cumulative target >30 000 m2

by 2020

639

452 500 504 507 512

4371 55 40 0

144

193 149 148101

10 14 15 16 17Branches Personal LoansInretailers

764708 695

63924 485613 613

BOOKLET SLIDE

NOTES:

NOTES:



Grow transactional clients faster than the market through focus on acquisition, retention & cross-sell, enabled by:

– accelerate digitisation of key client journeys & services to make it simple & easy for clients to transact with us

– accelerate financial inclusivity of our banking propositions & to find ways to reduce transacting costs for our clients, & tapping into ecosystem-based propositions

– continue to innovate & rollout digital branches to enable clients to migrate to digital channels, & empower our staff with digital tools to serve clients

– deliver new differentiated loyalty & reward programme

Headline earnings growth in line with nominal GDP (H1 2018 growth likely to be slower than H2 2018)

ROE 20% ongoing improvement, underpinned by lower cost-to-income ratio & relative CLR outperformance through the cycle

Cost to income 58% enabled by improved client experience, transactional market share gains, continued quality origination & operational efficiencies


Innovative lifestyle e-commerce platform

UNLOCKED.ME brings together three pillars, It is a platform which will allow you to your , your and your .

It is full of unique , sure to thrill our youth target audience. It is our , designed with our clients in mind.

Worldclass banking apps

features user-centred design for basic banking with self service capabilities.

The Karri App is an , to reduce the handling of cash at

schools

SA’s first digital branch – entirely self-service

Launched at Gautrain Sandton Station (Sept ‘17)

Technology available: Intelligent Depositor, video banking, quick-chat banking, self service kiosk, virtual reality, grab-and-learn wall, interactive demo station, facial recognition

NOTES:

NOTES: RES

ULT

S P

RES

ENTA

TIO

N



900

104

2

113

4

119

2

36.2 36.841.5

35.2

37.0

13 14 15 16 17Headline earnings ROE (%)Adjusted ROE (%)

(10.4%)

(Rm)

370

312

510

Wealth Management Asset Management Insurance

16 17

Catastrophic weather events

Lower volumes in traditional bancassurance products

Higher lapses in funeral policies

Subdued market conditions

Continued growth in international &cash offerings

Subdued market conditions

Negative exchange rate impact

Once-off Visa income in 2016

1 Adjusted ROE for the increase in allocated capital due to methodology changes in 2016 & 2017.

1

(22.7%) 7.1%

(12.2%)


A challenging year

NEDBANK WEALTH

IOLANDA RUGGIERO

NOTES:

NOTES:



+4.1

%

(1.7%)

13 14 15 16 17

Liabilities Advances

– investing in an integrated offering

Integrated international offering continues to attract new clients & NCCF

Negative investor sentiment impacting portfolio management, brokerage fees & financial planning productivity

Numerous accolades as a top wealth manager

Continued enhancements to Nedbank Private Wealth app

(Rbn)

+20.

7%

29.0%

13 14 15 16 17

SA client flows SA clients %


Headline earnings (Rm) (10.4) 1 192


PPOP (Rm) (11.2) 1 572




CLR (%) 0.08

Assets under management (Rbn) 14.3 273 327

Life embedded value (Rm) 0.2 2 740

Life value of new business (Rm) (12.5) 399

Headline economic profit 1 (Rm) (26.6) 711


ROE (%) 35.2

BOOKLET SLIDE

9%

91%

Headline earnings

Wealth Other clusters

Net inflows

Life APE

Non-life GWP

– financial highlights

1 Cost of equity 2016: 14.2%. | 2017: 14.0%.

NOTES:

NOTES: RES

ULT

S P

RES

ENTA

TIO

N



399

-

50

100

150

200

250

13 14 15 16 17

– a tough year

Earnings impacted by catastrophic weather events resulting in higher claims & lower volumes in traditional bancassurance products, partially offset by a release of reserves

Decline in VNB driven by lower single-premium investment policies, an increase in lapses & funeral acquisition costs as well as pressure on margins

Digital solutions launched, including chatbot &geyser telemetry

(Rm)

(Rm)

(12.5%)

1 11

8

13 14 15 16 17

2.3%


190 212257

273

13 14 15 16 17

Local International

Asset Management – a solid performance

Key drivers

4th-largest UT manager & 3rd-largest offshore manager in SA

Maintained position as top offshore manager in SA for third consecutive year

Leading net flows of R28.5bn

Digitisation of business processes & development of innovative solutions such as chatbot & robo-advisor

Assets under management (Rbn)

Market share1 (%)

14.3%

1 Source: ASISA

09 10 11 12 13 14 15 16 17

SA unit trust FSB approved offshore unit trust

8%11%

5%

1%

NOTES:

NOTES:



Enhanced client value propositions through accelerated digital innovation, investment in systems & brand positioning

Delivering long-term investment performance & driving market share growth

Exploring new opportunities for growth & deepening group collaboration

HE growth in line with nominal GDP, benefiting from expected improvement in market & investor sentiment

ROE 30% benefiting from high EP businesses

Cost to income 60%


Developing innovative solutions Digitising business processesBest-in-class client experience & full financial suite of digital services

1 Rated 6th out of 34 apps globally in the Mobile Apps for Wealth Management 2017 survey

Reduced paperwork

Same-day processing

Safe & secure

Market-leading robo-advisor

Chatbot, NIC, a pioneering digital insurance assistant. First in market in the African insurance industry

Chatbot, EVA, allows simple transactions 24/7. First in market in the SA asset management industry

Geyser telemetry, innovative connected home solution. First in the SA banking market

Focus on digitising processes in asset management

Enhancing client onboarding experience in wealth & asset management

Single-policy administration system for life & non-life insurance

Independently rated a top SA high-net-worth banking app & 6th-best globally1

App provides international & local consolidated view of assets & liabilities

NOTES:

NOTES: RES

ULT

S P

RES

ENTA

TIO

N



-15

-10

-5

0

5

10

-1400.0

-1200.0

-1000.0

-800.0

-600.0

-400.0

-200.0

0.0

200.0

400.0

600.0

16 17

HE SADC (Rm) HE ETI (Rm)

Rest of Africa – Improving SADC earnings reduced by historic Q4 2016 ETI losses

Headline earnings, ROE

+90%

(287)

(810)

FY

(161%)

Key messages

SADC

Operating income up 25.3%, reflecting the integration of Banco Único & initial benefits from investments

Expenses up 16.6%, driven by Banco Únicoconsolidation, technology enablement, risk management costs & lower headoffice support costs

ETI

Q3 2017 results reflect a material turnaround from the loss recorded in Q4 2016

(3.6%)

(12.6%)

ROE


SADC – investing for growth and driving client valueETI – steady progress, outlook improving

REST OF AFRICA

MFUNDO NKUHLU

NOTES:

NOTES:



15668

178

73

28

19

30

20

SADC – Enhanced client value propositions to drive growth

Clients (# 000)

Branches & ATMs

Other subsidiariesBanco Único

Investments made

the following key outcomes

Enhanced digital channel access

Deeper client relationships

Improved client value propositions

Improved service

Improved risk management capabilities

Banking app (#000)

Online activations (#000)

18462

4

+148%

29 36

910

+22%46

38

50

20274 314

21 22

+14%336

1716

295

Core banking systems Mobile platforms

Risk management

Payment solutionsCard offering

BranchATM BranchATM

184

87

208

93

1716

1716 1716


4%

96%

Assets

Rest of Africa Other clusters

Rest of Africa – financial highlights

NEDBANK GROUP LIMITED – ANNUAL RESULTS ‘17

Year ended % change 2017 2016SADCHeadline earnings (Rm) 89.7 165 87

Operating income (Rm) 25.3 2 579 2 058

PPOP (Rm) 67.5 449 268Net interest margin (%) 7.14 6.69NIR-to-expense ratio (%) 45.3 46.5Efficiency ratio (%) 78.8 82.9Credit loss ratio (%) 1.02 0.98Average banking advances (Rm) 14.9 20 366 17 724

Average deposits (Rm) 19.4 28 061 23 492

Headline economic profit 1 (Rm) (8.8) (534) (491)

Allocated capital (Rm) 22.2 4 981 4 076ROE (%) 3.3 2.1ETI investment Headline earnings (Rm) (>100) (975) (374)Total headline earnings (>100) (810) (287)

(7%)

107%Headline earnings

BOOKLET SLIDE

1 Cost of equity 2016: 14.2%. | 2017: 14.0%.

NOTES:

NOTES: RES

ULT

S P

RES

ENTA

TIO

N



– Steady progress on a recovery path for 2017

Changes to the board composition & MIS representation on various board subcommittees

Strengthened ETI management team

Conclusion of the US $400m convertible bond issue in September 2017

Financial turnaround, as reflected by:

Audited H1 2017 results

Solid Q3 2017 performance

ETI management guidance for FY 2017

Increasing levels of collaboration between Nedbank & ETI

1 IMF forecasts

7.7

3.5

(1.6)

6.7 6.8

0.8

6.67.7

2.2

Côte d'Ivoire Ghana Nigeria17 18

Key ETI markets

16


SADC – Delivering innovative market-leading client experiences

Transactional

Online product application & debit order switching

Insurance

Life & funeral cover offering

Improved value propositions

Build bancassurancebusiness

Digital

A unique mobile banking solution for business

Leading in digital

Banco Único Mozambique MBCA1Nedbank Namibia 1 To be rebranded Nedbank Zimbabwe in H1 2018

NOTES:

NOTES:



Prospects for Rest of Africa

SADCCreate shared value with clients from investments made & reposition the business for the digital age through improved client experience, improved data analytics, work with partners to accelerate digital capabilities, implement regional talent management programme & enhanced risk management.

ETIShareholders are supportive of the strategic agendaLeveraging the investment in ETI by:

capitalising on improved growth prospects across the region, especially West Africaexploiting opportunities for greater collaboration

2018: From a headline earning loss in 2017 to a profit in 2018 – expect to be the largest contributor to the Nedbank Group’s earnings growth rate in the year ahead

2020 targets: ROE cost of equity1

Cost-to-income 60% creating scale from investments & cost optimisation

1 COE approximately 16%


– integrated crossborder transfer solution (initially outbound only)

African migrants

Market size: Remittance value SA – Rest of Africa

Through mobile/digital channels internationally

Through international cash transfers

Through traditional banking channels internationally

Access & distributionOpportunity Differentiation 1

Lowest cost to client in the industry (no third parties)

Cheap

Instant cross border transfer– subject to regulatory & compliance checks (other solutions 10 min to 2 days)

Quick

Usage across all channels – initially account to account, mobile app & website. Moving to wallet, USSD, ATM, branches, etc

Available in 33 countries

24 hours – initially business operating hours, moving to 24/7

Easy

1 Key competing products include Mukuru, hello (PAISA), Western Union (BGA), MoneyGram (FNB & Standard Bank)

NOTES:

NOTES: RES

ULT

S P

RES

ENTA

TIO

N



& the structural challenges remaining will be tackled. Improving business & consumer confidence should lead to

– enhancing client experiences & improving levels of efficiency through digital innovation is key focus for 2018

– for Nedbank this provides increased shareholder certainty with free float benefits & for clients & staff it remains business as usual

– stronger earnings growth than in 2017

– Revenue growth recovery off low base

– Ongoing focus on expense optimisation & risk management

– ETI turnaround is a key driver

– pathway to ongoing & sustainable improvements in key metrics that support shareholder value creation


Ongoing delivery into 2018, supported by recovery in ETI, laying the foundation for 2020 targets

STRATEGY & 2018 GUIDANCE

MIKE BROWN

NOTES:

NOTES:



– enhancing client experiences & efficiency through digital innovation is a key focus for 2018

Growing our transactional banking franchise faster

than the market

Being operationally excellent

in all we do

Managing scarce resources to optimise economic

outcomes

Providing our clients with access to the best financial services network in Africa

– rationalise, simplify & standardise core systems (reduced by 122, < 60 by 2020)

– more client-focused, competitive, digital & agile

– Nedbank Private Wealth (rated 6th globally), Nedbank Money, Karri (school payments)

– NZone (self-service digital branch), Solar Turtle (deep-rural solar-powered branch), Intelligent Depositors, video banking

– Executive EySightTM, Robotic Process Automation (50 software robots)

– Chatbots, robo-advisors, Blockchain

– UNLOCKED.ME (millennial market place),Refreshed Nedbank internet banking platform

– convenient, FICA-compliant account opening from your couch

Ability

New

– reduce electricity usage

– a community savings solution

Further rollout of

Integration with to reach 2.7m people


– Increasing levels of consumer & business confidence. Initial benefits likely in CIB & Wealth

– Stronger wholesale & retail advances growth

– Liquidity metrics & capital levels to remain strong

– Revenue growth in 2018 higher than 2017

– Impairments to increase cyclically; & IFRS 9 impact

– Expenses continue to be well managed

Assets under management– Good growth, particularly in cash & offshore

2017 2018 2019 2020

GDP SA 0.9% 1.6% 1.8% 2.4%

GDP SSA 2.4% 3.2% 3.5% 3.5%

Inflation (CPI) 5.3% 5.1% 5.5% 5.5%

Industry credit growth 5.0% 6.5% 7.9% 10.1%

Average prime interest rate 10.4% 10.3% 10.3% 10.7%

Macroeconomic drivers1 (%)

1 Assuming no local currency downgrade | All Nedbank economic unit forecasts as at 15 February 2018 | GDP SSA as per World Bank.

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Average interest-earning banking asset1 growth to increase in line with nominal GDP growthNIM slightly above the 2017 level of 3.62%

To increase to within the bottom half of our target range of 60–100 bps (under IFRS 9)

Above mid-single-digit growth

Mid-single-digit growth

To be positive (ETI associate income reported quarterly in arrear)Associate

income


No impact on strategy, day-to-day management or operations, nor on staff or clients

Technology, brand & businesses have not been integrated

Engagements have been at arm’s length – overseen by independent board structures

No impact on ongoing OM collaboration in SA & Rest of Africa. > R1bn synergies achieved in 2017 (R393m to Nedbank)

Allow OML shareholder base to transition to an SA & EM investor base

At the earliest opportunity in 2018, following OM plc’s 2017 full-year results announcement

Unbundling of Nedbank Group ordinary shares to OML shareholders & OML retaining a strategic minority shareholding1

of 19.9% in Nedbank Group (underpins the ongoing commercial relationship)

Sufficient time for OML’s shareholder register to transition to an SA & EM focused & mandated investor base

Exit of non-EM shareholders

Nedbank Group shareholding post

unbundling

Increased index weightings (free-float from ~45% to ~80%)

Normalisation of SA shareholding (mostly underweight given holding via OM)

‘Independent’ Nedbank attractive for SA & international investors

1 Calculated as OML shareholder funds divided by the total Nedbank Group ordinary shares in issue

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– an attractive investment

An improving macroeconomic environment

Supportive global environmentCyclical improvement in SA growth as confidence levels improve with structural changes now more likelyRest of Africa growth ahead of SA

Strong & growing franchises

CIB – strong wholesale franchise (ROE 20%) benefiting as business confidence improvesRBB – ongoing revenue growth momentum, CLR outperformance & efficiencies/ digital to drive C:I 58% & ROE 20% by 2020Wealth – attractive ROE business ( 30% by 2020) leveraging Nedbank distributionRest of Africa

ETI turnaround underway - share price up 65% in 2017Investments made to unlock scale in SADC subsidiaries

KPIs that support shareholder value creation

2018 DHEPS growth nominal GDP growth + 5%ROE (excluding goodwill) 18% by 2020Cost to income 53% by 2020Strong governance & enterprise wide risk management

Attractive valuation metrics

SA & EM flows likely to continueNedbank price to book at the lower end of SA peer groupNedbank dividend yield at the higher end of SA peer groupImproved free-float post unbundling, with any overhang reduced during transition of OML shareholder base post OML listing & prior to Nedbank unbundling

Building a more digital, agile & competitive Nedbank


vs MLT vs 2017

ROE (excl goodwill) 5% above COE 3 Increase, but remain below MLT

Diluted HEPS growth CPI + GDP growth + 5% Grow in line with MLT, supported by ETI recovery

Credit loss ratio 60–100 bps Increase to within the bottom half of MLT (under IFRS 9)

NIR-to-expenses ratio > 85% Increase, but remain below MLT

Efficiency ratio 2 50–53% Decrease, but remain above MLT

CET 1 CARTier 1 CARTotal CAR

Basel III basis:10.5–12.5%

> 12%> 14%

Within target range

Dividend cover 1.75 to 2.25 times Within target range

1 2018 outlook based on current economic forecasts. | 2 Efficiency ratio includes associate income. | 3 Target to be revised should Nedbank make future acquisitions that increase goodwill

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– attractive relative valuation

1,2 (x)

12.210.8

16.013.9

21.7

9.6

NED BGA FSR SBK CPI EMbanks

1,2 (x) 1,2 (%)

Source: 1 I-Net consensus as at 22 Feb 2018. | 2 EM banks include Brazil, Russia, Turkey & SA (Data from JP Morgan). | All data based on 1-year forward forecasts.

1.7 1.6

3.5

2.2

5.6

1.7


4.4

5.2

3.54.1

1.7

4.3


‘3 year forecast EPS growth1

(CAGR %)7.4 6.3 9.8 10.2 20.0 10.4

BOOKLET SLIDE

THANK YOU

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592

1

576

5

427

7

1146

5

1178

7

06 07 08 09 10 11 12 13 14 15 16 17

16.3

4.5

20.1

5.4

06–08 14–17Wholesale Retail

481 584

1 363

08 09 17

(28%)

Globalfinancial

crisis

(Rm) (CAGR %)

(Rm)

BOOKLET SLIDE

CAGR13.4%


– strategy in place to improve financial metrics in RBB & RoA, while maintaining good returns in CIB & Wealth

Nedbank 2017

Peer average2

Nedbank 2020 target

Nedbank 2017

Peer average2

Nedbank 2020 target

42.3% 48% 40% 20.7% 21% 20%

63.6% 56% 58% 19.1% 27% 20%

65.6% 64% 60% 27.5% 24% 30%

Rest of Africa3 127.1% 54% 60% (12.6%) 19% COE

1 Nedbank ROE target at group excluding goodwill for comparability purposes. | 2 Peer averages based on Dec 2016 for BGA & SBK, June 2017 for FSR | CIB – BGA CIB, RMB & SBK CIB | RBB – BGA SA RBB, FNB & Wesbank, SBK SA PBB, Wealth – BGA WIMI, RoA – BGA RoA (Barclays Africa acquisition), SBK RoA Legal 3 Rest of Africa includes ETI. COE estimated at >16%.

BOOKLET SLIDE

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3.0

3.1

3.2

3.3

3.4

3.5

3.6

Jan '16 Mar '16 May '16 Jul '16 Sep '16 Nov '16 Jan '17 Mar '17 May '17 Jul '17 Sep '17 Nov '17

– narrowing of prime JIBAR spread in 2016 & 2017

month average JIBAR spread (bps)

H2 2016

Ave: 345 bps Ave: 320 bps Ave: 320 bps

Narrowing of the prime JIBAR spreads 2017 vs 2016, continued

volatility due to political uncertainty & prospects of sovereign-credit-rating

downgrades.

H2 2017Ave: 317 bps

H1 2016

20172016Ave: 332 bps NII: R77m

Ave: 318 bps NII: (R151m)

H1 2017

BOOKLET SLIDE


0.45 0.470.70

08 09 H1 17

32.0 33.9 36.2

08 09 17

1 Core equity tier 1.

(m) (%) (%)

(%) (%) (%)

4.4 4.2

7.9

08 09 17

39.842.2

46.6

08 09 17

3.9

5.9

2.7

08 09 17

8.219.91

12.6

08 09 17

88% 4.4% (3.2)

BOOKLET SLIDE

2.7%

Spe

cific

Por

tfolio

60.9 57.9 51.2

19.9 21.0 21.8

19.2 21.1 27.0

08 09 17

ST

MT

LT

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289

189

33247

14 13

(179) (18)

588

Trans-actional

Card Securedlending

Priceincreases

Other Cardmargin

Mix &activity

Personalloans

YOY NIRgrowth

1

NIR growth support by good volume growth, but muted by strategic choices & other factors

(Rm)

(Rm)

Volume–related

+217 +332 +47 +176 +86 (97) +23 (31) +753

BOOKLET SLIDE

1 Includes average price increase of 4.6% implemented on 1 January 2017.2 Includes average price increase of 4.3% implemented on 1 January 2016 .

2


23

(2) (1)

1

(9)

NIM decline mainly due to the compressed spread between prime & the 3-month Jibar linked cost of funding

(bps) (bps)(bps)

(bps)Asset pricing impact (bps)Net interest margin (bps)

559 497 582 608 581

3 2 6 3

(16)

(5)18

928

(0)

13 14 15 16 17

(5) (6)

6 5

(3)

13 14 15 16 17

(0) (1)(13) (12)

1

13 14 15 16 17

BOOKLET SLIDE

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395

560

358

444

14 15 16 17

17 0

07

17 0

78

18 4

33

19 1

37

14 15 16 17

RBB historic expense growth – efficiencies offsetting investment

(Rm)(Rm)

64% of total RBB capital spend related to technology investments.

Sales & service integration across front line channels

CAGR 4,0%CAGR 2,9% (core expenses)

(Rm)

235

194

175

98

198 22

3

215

72

14 15 16 17

Sales Related Distribution

BOOKLET SLIDE


Building more enduring client relationships through transactional product cross-sell

72%74%

57% 58%

51% 54%

24% 24%

40%38%

27%Dec 17Dec 16

27%

1 432

478

1 534

560

939

985

448

573

306

300

6 026

5 925

BOOKLET SLIDE

Dec 16 Dec 17

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Nedbank Group has acted in good faith and has made every reasonable effort to ensure the accuracy andcompleteness of the information contained in this document, including all information that may be defined as'forward-looking statements' within the meaning of United States securities legislation.Forward-looking statements may be identified by words such as ‘believe’, 'anticipate', 'expect', 'plan','estimate', 'intend', 'project', 'target', 'predict' and 'hope'.Forward-looking statements are not statements of fact, but statements by the management of NedbankGroup based on its current estimates, projections, expectations, beliefs and assumptions regarding thegroup's future performance.No assurance can be given that forward-looking statements to be correct and undue reliance should not beplaced on such statements.The risks and uncertainties inherent in the forward-looking statements contained in this document include,but are not limited to: changes to IFRS and the interpretations, applications and practices subject thereto asthey apply to past, present and future periods; domestic and international business and market conditionssuch as exchange rate and interest rate movements; changes in the domestic and international regulatoryand legislative environments; changes to domestic and international operational, social, economic andpolitical risks; and the effects of both current and future litigation.Nedbank Group does not undertake to update any forward-looking statements contained in this documentand does not assume responsibility for any loss or damage arising as a result of the reliance by any partythereon, including, but not limited to, loss of earnings, profits, or consequential loss or damage.


BOOKLET SLIDE

weighting pointsNedbank

2016 score(verified)

Amended FSCweighting points

Nedbank2017 score(verified)

Key changes

Ownership 14 + 3 bonus 17.00 23 + 5 bonus 23.00 • Introduction of priority elements ownership, skills development, enterprise & supplier development (ESD) & empowerment financing.

• Discounting by one level on the total scorecard if 40% subminimum on each of the priority elements are not met.

• Higher thresholds for BBBEE recognition levels.

• Increased targets:

– Economic interest in the hands of black designated groups: 2.5% to 3.0%.

– Empowering suppliers that are > 51% black-owned (BO): 12% to 30%, & Black-women-owned (BWO) suppliers: 8% to 10%.

– Black employees in top management: 40% to 60% & Junior management: 80% to 88%.

• Supplier development as a new element

• Change in construct of the scorecard:

– Consolidated EE into MC.

– African people measured in MC now applying representation according to the economically active population (EAP).

– Skills development expenditure based on occupational levels as a % of leviable amount for that level.

– Consumer education moved from Access to financial services to SED.

– Addition of supplier development.

Management control (MC) 8 + 1 bonus 8.27 MC 5 + EE 15 14.90

Employment equity (EE) 15 + 3 bonus 12.74

Consolidated in management

controlN/A

Skills development 10 8.19 20 + 3 bonus 12.75

Preferential procurement 16 16.00 15 + 4 bonus 15.00

Empowerment financing * 15 15.0 15 15.00

Enterprise development 5 5.00 3 + 2 bonus 5.00

Supplier development N/A N/A 7 + 2 bonus 7.00

Socioeconomic development 3 3.00 5 + 3 bonus 6.00

Access to financial services * 14 13.36 12 11.32

Total 100 + 7 bonus 98.56 120 + 19 bonus 109.97

Level 2 (125% BBBEE recognition) points Level 2 points Level 2

* New industry targets to be set through the Banking Association South Africa (BASA) for 2018 & beyond - likely to reduce in future scores

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2017 results commentary

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2017 results commentary

BANKING AND ECONOMIC ENVIRONMENTEconomic growth in developed markets improved, despite

ongoing geopolitical tensions, supported by accommodative

monetary policies and stronger manufacturing production,

and reinforced by increased global trade. Emerging and

developing economies also improved as a consequence of

better-than-expected growth in China and higher global

commodity prices. Emerging-market equity and bond markets

benefited from increased capital inflows as global investors

search for higher yields.

SA’s slow economic recovery continued into the second half

of the year, with 2017 GDP growth estimated at 0,9%, driven

mainly by a recovery in agricultural production following good

summer rainfall and some improvement in mining production

in response to stronger global demand and firmer international

commodity prices. A revival in consumer spending added further

momentum in the second half of 2017 as households benefited

from lower inflation and the marginal reduction in interest rates

in July. Despite this recovery and reflective of weak business and

consumer confidence, business volumes in 2017 were generally

lower than in the prior year, as evident in client loan applications

across multiple products and in slower client trading activity.

The pace of economic activity picked up moderately in

sub-Saharan Africa, with agricultural and mining output

recovering on the upturn in global demand and international

commodity prices, and the prolonged El Niño-induced drought

finally broke in many countries. According to the International

Monetary Fund (IMF), sub-Saharan Africa is expected to record

GDP growth of 2,6% in 2017.

Domestic inflation averaged 5,3% in 2017, significantly lower

than the 6,4% recorded in 2016, brought about mainly by sharply

lower food inflation given the strong summer harvest. Relatively

moderate and selective consumer demand coupled with a

resilient rand also helped contain price pressures during

the course of the year. After a year of volatile trade the

rand ended 2017 2,5% stronger against the trade-weighted

basket of currencies. The largest gains occurred near

year-end as sentiment surged following the election of

Mr Cyril Ramaphosa as the new leader of the ruling ANC in

mid-December on expectations of a change in the country’s

leadership, improved governance and structural reforms

that are likely to support investment and higher levels of

inclusive growth.

After cutting the repo rate by 25 bps to 6,75% in July, SARB’s

Monetary Policy Committee left interest rates unchanged

at both the September and November 2017 policy meetings.

The central bank’s more cautious approach was driven

by concerns over the upside risk that the rand posed to

the inflation outlook at that time. Fears mounted that

SA’s rand-denominated sovereign debt ratings could be

downgraded to subinvestment grade by all three major

rating agencies, given the escalation in political uncertainty

and the sharp deterioration in the country’s fiscal position,

as set out in the Medium Term Budget Policy Statement.

In November 2017 Fitch affirmed the country’s BB+ rating

with a stable outlook (one notch below investment grade).

Moody’s placed SA’s Baa3 foreign and local currency

ratings on review for downgrade, with the decision to

follow the 2018 National Budget in February. However,

S&P Global downgraded SA’s local currency rating to

BB+ (one notch below investment grade) and our foreign

currency rating to BB (two notches below investment

grade), while changing the rating outlook to stable. All three

rating agencies highlighted similar concerns, including

weaker-than-expected public finances, weak economic

growth, ineffective government spending and policies as

well as the paralysing impact of political infighting and

poor governance.

REVIEW OF RESULTSNedbank produced a solid performance in a domestic macro

and political environment that has proved volatile and

challenging. Headline earnings, including losses in associate

income from ETI of R744m, increased 2,8% to R11 787m. This

translated into an increase in DHEPS of 2,4% to 2 406 cents

and an increase in HEPS of 2,2% to 2 452 cents. As in prior

periods, we highlight our results both including and excluding

ETI (referred to as managed operations) to provide a

better understanding of the operational performance of

the business given the volatility in ETI’s results in 2016 and

2017. However, we will revert to group-level reporting in

2019. Our managed operations produced headline earnings

growth of 7,8% to R12 762m, with slower-than-expected

revenue growth more than offset by reduced impairments

and good cost management.

ROE (excluding goodwill) and ROE remained flat at 16,4%

and 15,3% respectively. ROE (excluding goodwill) in managed

operations also remained stable at 18,1%. ROA decreased

0,01% to 1,22% and, excluding ETI, ROA in managed

operations improved from 1,29% to 1,33%. Return on RWA

increased from 2,23% to 2,30%.

Our CET1 and tier 1 capital ratios of 12,6% and 13,4%

respectively, average LCR for the fourth quarter of 116,2%

and an NSFR of above 100%, are all Basel III-compliant and

are a reflection of a strong balance sheet. On the back of

solid earnings growth in managed operations and a strong

capital position, a final dividend of 675 cents was declared,

an increase of 7,1%. The total dividend per share increased

7,1% to 1 285 cents.


For staff

We had 31 887 staffmembers in our employ, invested

R355m in training and paid salaries and benefits of R16,5bn.

As part of our People 2020 groupwide programme aimed

at transforming and aligning our leadership culture and

talent to our strategic objectives, we refreshed our executive

management programmes to be more digitally focused.

We brought together 500 of our leaders across the group

at the Leadership Accelerator to ensure the adoption of

new insights that will drive accelerated levels of change.

We are implementing New Ways of Work practices

to transform Nedbank into a more agile organisation,

holistically rethinking the way we work, communicate and

manage talent on our journey to creating a high-performing

culture. Transformation remains a key imperative and we

have continued to focus on this fundamental change across

all levels at Nedbank, from our board of directors to all our

staffmembers. Currently black representation at board level

is 61%, at executive level 50% and 78% for our total staff.

A total of 62% of our staff is female.

For clients

Our clients’ access to banking improved through our

network of 1 003 Intelligent Depositor devices and we

increased the total number of digitally focused new-image

branches to 336 or 55% of all outlets. Digitally active and

enabled clients grew as we launched new market-leading

digital innovations, with the new Nedbank Money app

having been downloaded more than 300 000 times since

its launch in November 2017. We supported our clients by

advancing R153bn of new loans in 2017. Our Net Promoter

Score is second-highest among full-service banks in

SA. Nedgroup Investments has grown to be the fifth-largest

unit trust manager and fourth-largest offshore unit trust

manager in SA, with overall assets under management

growing by 14% to R312bn. Nedgroup Investments has for

the third consecutive year maintained its first position in the

2017 Annual Raging Bull Awards offshore category.

For shareholders

Nedbank’s net asset value per share increased 7,3% to

16 990 cents, with our share price up 7,5% over the year.

Our total dividend increased 7,1%, ahead of growth in

HEPS. We engaged constructively with shareholders in over

400 meetings in the past 12 months, and at our 50th annual

general meeting all resolutions were passed, with more than

90% of votes in favour. We ensure transparent, relevant

and timeous reporting and disclosure to shareholders,

as acknowledged by the Nedbank Group Integrated

Report having been ranked in the top tier of JSE-listed

companies. Nedbank’s valuation metrics remain attractive

with price/earnings and price-to-book ratios of 10,4 times

and 1,5 times respectively and a dividend yield of 4,8% at

31 December 2017.

For regulators

We maintained Basel III requirements ahead of full compliance

timelines. We improved the group’s capital position, achieving a

CET1 ratio of 12,6%, strengthened the average LCR ratio to 116,2%

in the fourth quarter of 2017 and maintained an NSFR of above

100%, positioning us well for the compliance date of 1 January 2018.

We have invested over R100bn in government and public sector

bonds as part of our HQLA requirements and, in doing so, remain

committed to making a meaningful contribution to the countries

in which we operate, thereby appropriately supporting the funding

needs of governments. Cash taxation contributions of R9,8bn

were made relating to direct, indirect, pay-as-you-earn and other

taxation, increasing from R8,9bn in 2016. We continued to work

closely with all our regulators to ensure efficient delivery of the

various regulatory programmes, and implemented IFRS 9 and

IFRS 15 on 1 January 2018, with an estimated impact of less than

20 bps on our CET1 ratio at 1 January 2018.

For society

We understand that our long-term success is contingent on the

degree to which we deliver value to society. We have defined our

purpose as ‘using our financial expertise to do good for individuals,

families, businesses and society’. It follows then that it is through the

considered development and delivery of products and services that

satisfy societal needs that we can enable a thriving society, create

long-term value, maintain trust and ensure the success of our brand.

This is particularly important in the current context of SA.

In addition to the R66bn made available to retail clients in new loans

and advances in 2017, evidence of how we have delivered on our

purpose includes:

A focus on sustainable-development finance that was evident

in more than R1,1bn of new lending to support student

accommodation, R1,3bn lent to construct green buildings,

R18,4bn dispersed for renewable-energy deals and R863m to

affordable-housing developments.

Having maintained our level 2 broad-based black economic

empowerment (BBBEE) contributor status for nine years, as

well as in 2017 when the Amended Financial Sector Code (FSC),

gazetted in terms of section 9(1) of the BBBEE Act, 53 of 2003,

came into effect on 1 December 2017. We invested R168m in

socioeconomic development, with more than 50% allocated

to education and 75% of our procurement spend used to

support local SA business. While Nedbank has achieved industry

leadership based on the old FSC, we recognise that the Amended

FSC, which comprises stricter weighting, higher targets and

higher thresholds, will lead to an industry rebasing and as a result

possibly lower BBBEE levels in future.

Water efforts focused on support for drought-impacted clients

and national relief efforts as well as our own internal reduction

initiatives.

Continuing to participate in the CEO Initiative, working with

government, business and labour towards a more inclusive SA

society. We committed R20m to the R1,5bn SME Fund and will

become one of the first participants in the Youth Employment

Scheme, in which we, as corporate SA, aim to provide internship

opportunities for more than one million South Africans.

DELIVERING SUSTAINABLY TO ALL OUR STAKEHOLDERSNedbank continues to play an important role in society and in the economy, and we remain committed to delivering on our purpose of

using our financial expertise to do good and contributing to the societies in which we operate by delivering value to our staff, clients,

shareholders, regulators and society.


2017

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It was pleasing to have some of our efforts to build a thriving

society recognised by external bodies. These included

being recognised as the winner at the 2017 Independent

Top Empowered Companies Awards (in conjunction with

Business Report, Empowerdex and Intellidex), being included

as a member of the Carbon Disclosure Project Climate A-list

(recognition for efforts to address climate change) and being

the only African company among the top 20 in the global

2017 Thomson Reuters Diversity and Inclusion Index, which is

informed by environmental, social and governance outcomes.

CLUSTER FINANCIAL PERFORMANCE Nedbank’s managed operations generated headline earnings

growth of 7,8% to R12 762m and delivered an ROE (excluding

goodwill) of 18,1%. CIB and Wealth were impacted the most

by the challenging operating environment, RBB made a strong

earnings contribution and RoA subsidiaries delivered an

improved performance off a low base.

Change

Headline

earnings

ROE (excluding

goodwill)

(%) (Rm) (%)

2017 2016 2017 2016

CIB 5,0 6 315 6 014 20,7 21,1

RBB 6,9 5 302 4 960 19,1 18,9

Wealth (10,4) 1 068 1 192 27,5 35,2

RoA subsidiaries 89,7 165 87 3,3 2,1

Centre 78,7 (88) (414)

Nedbank managed operations 7,8 12 762 11 839 18,1 18,0

ETI (> 100) (975) (374)

Group 2,8 11 787 11 465 16,4 16,5

CIB maintained an attractive ROE of above 20% and produced

solid results, driven by lower credit losses and good expense

management. Revenue lines were affected by slowing economic

activity as clients postponed projects and borrowed and

transacted less. Early repayments and managed settlements,

together with slower drawdowns resulted in weaker advances

growth, although the pipelines remained stable. Credit quality

remained strong through proactive risk management as

we continued to monitor stressed sectors of the economy,

such as certain areas in retail and certain state-owned

enterprises, closely.

RBB delivered an improved ROE and good headline earnings

growth, underpinned by solid transactional NIR growth, lower

impairments and expense growth, and achieved PPOP growth

of 4,0%. NII was underpinned by solid growth in advances

and strong growth in deposits, offset by a lower NIM due in

part to the impact of prime–JIBAR squeeze. Lower expense

growth reflects the initial impact of optimising processes and

operations, including headcount reductions.

Nedbank Wealth maintained an attractive ROE, although

headline earnings were impacted by subdued markets and

negative investor sentiment, further compounded by entropic

weather conditions and the strengthening rand, as well the

once-off profit from the sale of our Visa share in the 2016 base.

RoA headline earnings were negatively impacted by the

fourth-quarter 2016 ETI associate loss accounted for quarterly

in arrear. The loss was reported on in our interim results and

was followed by subsequent quarterly profits from ETI up to

30 September 2017. Our subsidiaries grew headline earnings

off a low base, supported by the consolidation of Banco Único

(included for three months in 2016), notwithstanding continued

investment in infrastructure, systems and skills.

The improvement in the Centre was largely due to the R350m

release from the central provision, of which R150m was in

the first half of the year, and fair-value gains on certain

hedging portfolios.

FINANCIAL PERFORMANCE Net interest incomeNII increased 4,5% to R27 624m, ahead of average

interest-earning banking asset growth of 2,2% (adjusted for the

removal of the liquid-asset portfolio).

NIM expansion of 8 bps to 3,62% (2016: 3,54% rebased) was

largely driven by an endowment benefit of 5 bps and improved

asset mix changes of 8 bps. Asset pricing pressure, in part due

to the NCA interest rate caps, the narrowing of the prime–

JIBAR spread and the increased cost associated with enhancing

the funding profile each reduced NIM by 2 bps.

Impairments charge on loans and advances Impairments decreased by 27,5% to R3 304m. The CLR declined

by 0,19% to 0,49%, driven by lower specific impairments mostly

from resolutions and settlements in CIB. The decrease in

impairments reflects the quality of the portfolio across all our

businesses and we have specific coverage ratios levels of 36,2%.

Impairments in CIB declined by 82,4% to R193m, driven by lower

specific impairments relating largely to resolutions of historic

client matters. Impairments are individually determined in CIB

and 84% of impairments are concentrated in approximately

10 counters. RBB impairments declined by 1,2% to R3,2bn as

a result of ongoing lower risk origination strategies and an

improvement in collections. The decrease in unsecured lending

and home loan CLRs reflects the benefits of historic selective

origination improving the quality of the book over time and the

release of additional impairment overlays previously raised for

risks and events that did not materialise. Continued proactive

collection and resolution strategies within CIB and RBB

contributed to group writeoffs decreasing 6,0% to R4 675m and

postwriteoff recoveries increasing 5,8% to R1 224m.

The group’s central provision decreased to R150m (from

R500m at 31 December 2016 and R350m in June 2017) as a

result of risks that had previously been identified but had not

materialised. The balance is retained for prudency in a volatile

macroeconomic environment. Excluding the central provision

release, the group CLR would have been 0,54%.

CLR (%)

Banking

advances

(%) 2017 2016

TTC target

ranges

CIB 47,3 0,06 0,34 0,15–0,45

RBB 45,5 1,06 1,12 1,30–1,80

Wealth 4,3 0,09 0,08 0,20–0,40

RoA 2,9 1,02 0,98 0,65–1,00

Group 100,0 0,49 0,68 0,60–1,00

All business units successfully applied selective origination

strategies that enabled an overall derisking of the advances

portfolio, leading to defaulted advances remaining flat at

R19,6bn. Lower defaulted advances in CIB resulting from

positive client resolutions were offset by increased defaulted

advances in RBB.

The decrease in specific coverage from 37,4% to 36,2% was

primarily due to lower specific coverage in RBB as well as

increased resolutions of various client issues in CIB resulting

in lower specific impairments. The lower coverage reflects

increased performing defaults in RBB and the recovery success

in CIB. Nedbank considers the coverage ratios appropriate given

the higher proportion of wholesale lending, compared with

the mix of its peers, high recovery rates and the collateralised


nature of the commercial-mortgages portfolio, with low

loan-to-value ratios.

Portfolio coverage increased marginally from 0,69% to 0,70%,

reflecting the offsetting effects of higher portfolio impairments

due to stronger advances growth in RBB and the reduction of

the central provision and RBB overlays.

Non-interest revenueNIR growth of 2,4% to R24 063m reflects the impact of weak

business and consumer confidence levels.

Commission and fee income grew 4,0% to R17 355m.

RBB reported good transactional NIR growth of 6,0%,

notwithstanding an increasing number of clients who are

transacting within fixed-rate bundles and spending less.

CIB experienced lower corporate activity off a high base the

previous year.

Insurance income decreased 9,3% to R1 566m as a result of

an abnormal number of significant weather-related claims,

lower homeowner’s cover and credit life volumes, and an

increase in lapses.

Trading income increased 3,7% to R3 900m, given muted

activity levels among wholesale clients, particularly in the

second half of the year, and avoidance of the potential

negative impacts in markets around event risks such as

political changes and credit rating downgrades.

Private-equity income, including positive realisations in the

Commercial Property Finance portfolio, decreased 23,7% to

R708m, given the high base in the comparative period.

ExpensesExpense growth of 5,1% to R29 812m was below inflation and

in line with the guidance we provided for the full 2017 year

(being growth of mid-single digits), demonstrating disciplined

and careful management of discretionary expenses in an

environment of slower revenue growth. The underlying

movements included:

Staff-related costs increasing at a slower rate of

6,5%, following:

an average annual salary increase of 6,5% and a

859 reduction in staff numbers since December 2016; and

a 0,1% decrease in short-term incentives.

Computer-processing costs increasing 3,8% to R4 201m off a

higher base the previous year.

Fees and insurance costs being 7,8% higher at R3 277m, due

mostly to additional regulatory-related costs.

The group’s growth in expenses exceeded total revenue

growth (including associate loss) of 2,1% (3,2% in managed

operations), resulting in a negative JAWS ratio of 3,0% and

an efficiency ratio of 58,6%, compared with 56,9% in 2016.

Excluding associate income, our efficiency ratio was 57,8%.

Expense growth, excluding RoA where we continued to invest in

distribution, technology and new-product rollouts, was 4,3%.

Earnings from associatesThe loss of R838m in earnings from associates was attributed

largely to ETI’s loss of R1 203m in the fourth quarter of 2016

(announced on 18 April 2017), partly offset by the profit of

R459m reported by ETI for the nine months to 30 September

2017, in line with our policy of accounting for ETI earnings a

quarter in arrear. The total effect of ETI on the group’s headline

earnings was a loss of R975m, including the R321m impact of

funding costs.

Accounting for this associate loss, together with Nedbank’s

share of ETI’s other comprehensive income and movements

in Nedbank’s foreign currency translation reserves, resulted

in the carrying value of the group’s strategic investment in

ETI declining from R4,0bn at 31 December 2016 to R3,3bn at

31 December 2017. Since the introduction of the new foreign

exchange regime by the Central Bank of Nigeria on 21 April

2017, confidence has improved and the Nigerian banking index

has increased by 73%. In line with this ETI’s quoted share

price – albeit illiquid – increased by 65% during 2017 which

resulted in the market value of the group’s investment in ETI

increasing during the year to R3,6bn at 31 December 2017 and

R4,1bn at 28 February 2018. While risks remain, the actions

taken to improve ETI’s financial position and governance, along

with an improving macroeconomic environment, is expected to

drive an improved financial performance from ETI in 2018.

As required by IFRS, the R1bn impairment provision recognised

at 31 December 2016 was reviewed at 31 December 2017 and

it was determined that currently no change to the provision

was required.

A R96m associate loss was incurred due to operational losses in

an associate, which is the cash-processing supplier to the four

large banks.

STATEMENT OF FINANCIAL POSITIONCapitalThe group continued to strengthen its capital position, with

our CET1 ratio of 12,6% now above the top end of our internal

target range of 10,5–12,5%, following organic capital generation

through earnings growth, lower asset growth and some

RWA optimisation.

In the current environment of slower advances growth, capital

generation has been stronger following lower credit RWA

growth and continued refinement of Basel models. This was

partially offset by the impact of the rand strengthening

at the back end of 2017, which adversely impacted foreign

currency translation reserves and led to higher credit valuation

adjustment RWA. Higher levels of equity exposure resulted in

increased equity RWA. As a result overall RWA increased 3,7%

to R528,2bn.

The group’s tier 1 ratio improved to 13,4% and includes the

issuance of R600m of new-style additional tier 1 capital

instruments during the year, offsetting the progressive

grandfathering of old-style perpetual preference shares as we

transition towards end-state Basel III requirements. The group’s

total capital ratio has improved to 15,5% and includes the

issuance of R2,5bn of new-style tier 2 capital instruments

during the year, partially offsetting the redemption of R3,0bn in

old-style tier 2 capital instruments.

Basel III (%) 2017 2016

Internal

target

range

Regulatory

minimum1

CET1 ratio 12,6 12,1 10,5–12,5 7,25

Tier 1 ratio 13,4 13,0 > 12,0 8,75

Total capital ratio 15,5 15,3 > 14,0 10,75

(Ratios calculated include unappropriated profits.)

1 The Basel III regulatory requirements are being phased in between 2013 and 2019, and exclude any idiosyncratic or systemically important bank minimum requirements.

Funding and liquidity Optimising our funding profile and maintaining a strong liquidity

position remain a priority for the group, especially in the current

environment.

The group’s three-month average long-term funding ratio was

27,0% for the fourth quarter of 2017, supported by growth in

Nedbank Retail Savings Bonds of R5,7bn to R24,9bn and the

successful capital market issuances of R3,5bn senior unsecured

debt, R2,5bn new-style tier 2 debt and R1,0bn in securitisation

notes.


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The group's quarterly average LCR of 116,2% exceeded the

minimum regulatory requirement of 80% in 2017 and 90%

effective from 1 January 2018. The group maintains appropriate

operational buffers designed to absorb seasonal and cyclical

volatility in the LCR.

Nedbank Group LCR 2017 2016

HQLA (Rm) 138 180 137 350

Net cash outflows (Rm) 118 956 125 692

Liquidity coverage ratio (%)3 116,2 109,3

Regulatory minimum (%) 80,0 70,0

3 Average for the quarter.

Further details on the LCR are available in the table section of

the Securities Exchange News Service (SENS) announcement.

Nedbank’s portfolio of LCR-compliant HQLA increased by 0,6%

to a quarterly average of R138,2bn. Notwithstanding the low

growth in HQLA, the LCR still increased yoy as a result of a

decrease in LCR net cash outflows attributable to a positive tilt

in our deposit mix towards proportionally more Basel III-friendly

deposits in the form of RBB and Wealth deposits together

with market share gains in commercial deposits. The HQLA

portfolio, taken together with our portfolio of other sources

of quick-liquidity, resulted in total available sources of quick

liquidity of R195,4bn, representing 19,9% of total assets.

Nedbank has maintained the NSFR at above 100% on a pro

forma basis and is compliant with the minimum regulatory

requirements that are effective from 1 January 2018.

Loans and advancesLoans and advances increased by 0,5% to R710,3bn, driven by

solid growth in RBB offset by a decline in term and other loans

in CIB.

Loans and advances by cluster are as follows:

Rm Change

(%) 2017 2016

CIB (3,8) 356 029 370 199

Banking activities (3,1) 324 673 335 113

Trading activities (10,6) 31 356 35 086

RBB 5,3 305 198 289 882

Wealth 2,9 29 413 28 577

RoA 4,9 20 541 19 582

Centre4 26,7 (852) (1 163)

Group 0,5 710 329 707 077

4 Intercompany eliminations.

RBB loans and advances grew 5,3% to R305,2bn, with MFC

(vehicle finance) increasing by 8,6% as new-business volumes

improved despite the contracting vehicle sales market. RBB’s

growth was achieved across all asset classes by increasing the

contribution from lower-risk clients in line with risk appetite and

prudent origination strategies. We take comfort in the quality

and overall performance of the unsecured-lending portfolio

based on the conservative rules we apply to consolidation,

restructuring and term strategies. Home loans grew at

below-inflation levels, but market share was maintained.

CIB loans and advances decreased 3,8% to R356,0bn due to a

combination of unexpected early repayments and managed

selldowns, which allowed for the diversification of risk. Demand

for new loans was weak as a result of muted client capital

expenditure in a competitive market in the subdued economic

climate. Commercial-mortgage loans and advances grew by

6,5% to R161,6bn, maintaining our leading share of the SA

market. The portfolio contains good-quality collateralised

assets with low LTVs, underpinned by a large secure asset pool

and a strong client base, and is managed by a highly experienced

property finance team.

DepositsDeposits grew 1,3% to R771,6bn, with total funding-related

liabilities increasing 1,2% to R823,2bn, while the loan-to-deposit

ratio improved to 92,1%.

Through the active management of the RBB franchise, deposits

grew 8,5% to R295,3bn, resulting in household deposits market

share gains increasing yoy to 18,9% from 18,7%, supported by

Nedbank’s strong market share in household current account

deposits of 19,1%. Through the growth in current accounts,

savings and fixed deposits and other structured deposits

Nedbank has successfully reduced the proportion of funding

from negotiable certificates of deposit as well as more

expensive foreign currency funding used in the general rand

funding pool.

This positive tilt towards more Basel III-friendly deposits

achieved across RBB, Nedbank Wealth and RoA and through

market share gains in commercial deposits has resulted in lower

HQLA and long-term funding requirements as well as a stronger

LCR in terms of ensuring cost-effective regulatory compliance

and a strong balance sheet position.

Group strategic focusDuring 2017 we continued to focus on delivering on our five

strategic focus areas designed to make Nedbank a more agile,

competitive and digital bank, and underpin sustainable earnings

growth and improving returns.

Delivering innovative market-leading client experiences. We launched various market-leading

innovations such as the new Nedbank Private Wealth mobile

app. This was one of the first products delivered through

our Digital Fast Lane capability. It ranked joint sixth in the

global Mobile Apps for Wealth Management 2017 survey

and was placed third among 600 apps in the Best Enterprise

Solution category at the MTN Business App of the Year

Awards. The new Nedbank Money app, which makes banking

more convenient for our retail clients, was downloaded more

than 300 000 times since November 2017. We launched

UNLOCKED.ME, an exclusive e-commerce marketplace for

millennials. Karri, our mobile payment app that enables

users to make cash-free payments for school activities

quickly, securely and hassle-free, has been rolled out to more

than 100 schools across the country. In Nedbank Wealth

we piloted geyser telemetry, an innovative smart home

solution that reduces electricity consumption. As far as

our integrated channels are concerned, we have converted

55% of our outlets to new-image branches to date, and

our investment in distribution channels over the next three

years (until 2020) will result in 73% of our retail clients being

exposed to the new-image branch format and self-service

offerings. The introduction of chatbots and robo-advisors

will continue to enhance client experiences through our

contact centre and web-servicing capabilities. We launched

NZone, our digital self-service branch at the Sandton

Gautrain station, as well as Africa’s first solar-powered

branch to enable banking in deep-rural communities.

The foundations put in place through Managed Evolution

(our core systems and technology platform transformation),

digital enhancements and New Ways of Work will lead to

ongoing incremental digital benefits and enhanced client

service. In 2018 Nedbank will bring further exciting digital

innovations to market to enhance client experiences and

drive efficiencies. Some of these include a refreshed internet

banking experience in line with our mobile banking apps, the

ability to sell an unsecured loan bundled with a transactional

account, simplified client onboarding with convenient,

FICA-compliant account opening from your couch, a new

and exciting loyalty and rewards solution, and further rollout

of chatbots, robo-advisors and software robots (robotic

process automation).


Growing our transactional banking franchise faster than the market. Nedbank’s RBB franchise grew its total client

base 1,6% to 7,5 million, with 6,0 million clients having a

transactional account and 2,8 million main-banked clients

supporting retail transactional NIR growth of 6,0%.

Our main-banked client numbers remained flat as slower

transactional activity caused some of our existing clients

to fall outside our main-banked definition, particularly in

the youth segment, while the middle-market, professional

and small business client segments continued to increase.

The newly launched Consulta survey estimates Nedbank’s

share of main-banked clients at 12,7%, up from the 10,1%

recorded through the 2015 AMPS survey (using a similar

methodology) as we aim to reach a share of more than

15% by 2020. Our integrated model in CIB enabled deeper

client penetration and increased cross-sell, resulting in

26 primary-bank client wins in 2017.

Being operationally excellent in all we do. Cost discipline is

an imperative in an environment of slower revenue growth.

We have ongoing initiatives to ensure this, such as having

reduced our core systems from 251 to 129 since inception of

the Managed Evolution programme, with us being well on

our way to reaching a target end state of less than 60 core

systems by 2020; and the reduction of floor space in RBB

by more than 30 000 m² by 2020; of which 24 485 m² has

been achieved to date. We worked with our sister companies

in the Old Mutual Group to deliver synergies of just in

excess of R1bn, R393m of which accrued to Nedbank. Good

progress was also made with our target operating model

(TOM) initiatives, which aim at generating R1,0bn pretax

benefits for Nedbank by 2019 (and R1,2bn by 2020) and

are linked to our long-term incentive scheme. Most cost

initiatives have been identified in RBB and we delivered

savings of R621m in 2017, which includes TOM savings.

During the year we reduced headcount by 859 (mostly

through natural attrition), optimised our staffed points

of presence by closing 32 inretailer and 53 personal-loan

outlets (while maintaining our coverage of the bankable

population at 84%). We achieved efficiencies through

the recycling of cash through our increased footprint of

Intelligent Depositor devices. Four client-servicing functions,

previously only accessible through branches, as well as

the new Nedbank Money app were launched during the

fourth quarter of 2017, while another 33 are planned for

deployment across our digital channels by March 2018.

We implemented 50 software robots (robotic process

automation) to enhance efficiencies and reduce processing

errors in administrative-intense processes, with more than

200 planned for rollout in 2018.

Managing scarce resources to optimise economic outcomes. We maintained our focus on growing activities that

generate higher levels of EP, such as growing transactional

deposits and increasing transactional banking revenues,

with commission and fees in RBB up 5,3%, and achieved

earnings growth of 6,9% in RBB and 5,0% in CIB.

Our selective origination of personal loans, home loans

and commercial-property finance has proactively limited

downside risk in this challenging operating climate, enabling

a CLR of 0,49%, below the bottom end of our TTC target

range. At the same time our balance sheet metrics remain

strong and we continue to deliver dividend growth above the

rate of HEPS growth.

Providing our clients with access to the best financial services network in Africa.

In Central and West Africa ETI remains an important

strategic investment for Nedbank, providing our clients

with access to a pan-African transactional banking

network across 39 countries and Nedbank with access

to dealflow in Central and West Africa. We have made

good progress in working with ETI’s board and other

institutional shareholders to strengthen its board

and management. We have increased our board

representation and our involvement in the group as Brian

Kennedy joined Mfundo Nkuhlu on ETI’s board. Mfundo

was appointed Chair of the ETI Risk Committee and

Brian was appointed to the Remuneration and Audit

Committees. Risk management practices are being

enhanced and the audit of ETI’s 2017 interim results

provides comfort that the risk of another fourth-quarter

loss as in 2015 and 2016 has decreased. We are pleased

that ETI reported a profit for the nine months to

30 September 2017. We remain supportive of ETI’s

endeavours to deliver an ROE in excess of its COE over

time. While risk remains, economic conditions in Nigeria

and other economies in West Africa are improving and

ETI should provide a strong underpin to Nedbank Group’s

earnings growth in 2018.

In SADC we continue to build scale and optimise

costs. Our core banking system, Flexcube, which was

successfully rolled out in Namibia in 2016, was also

implemented in Lesotho, Malawi and Swaziland in

2017 and we plan to roll it out in Zimbabwe during 2018.

We also launched a number of new digital products and

we continue to grow our distribution footprint. As a result,

clients increased 14% and online digital activations were

up 22%. The acquisition of a majority stake in Banco Único

in 2016 continued to deliver value and positioned Nedbank

well to leverage off higher levels of economic growth in

Mozambique. In 2018 we will rebrand MBCA in Zimbabwe

to Nedbank while completing the last of our core banking

system implementations in our subsidiaries.

Old Mutual plc managed separationOn 1 November 2017 Old Mutual plc announced that the

strategic minority shareholding to be retained in Nedbank

Group by Old Mutual Limited (OML) to underpin the ongoing

commercial relationship between the companies has been

agreed at 19,9% of the total Nedbank Group ordinary

shares in issue, as held by shareholder funds. This followed

the 11 March 2016 announcement by Old Mutual plc about

the Old Mutual managed separation, and the subsequent

communication on 25 May 2017 in which Old Mutual plc

stated that the new SA holding company, to be named OML,

would retain a strategic minority shareholding in Nedbank

Group after the implementation of the managed separation.

The 19,9% shareholding will be held by OML, which will have

a primary listing on JSE Limited and a secondary listing on

the London Stock Exchange. OML will be listed at the earliest

opportunity in 2018, following the publication of Old Mutual

plc’s 2017 full-year results.

The decrease in OML’s shareholding in Nedbank Group will

be achieved through the unbundling of Nedbank Group

ordinary shares to OML’s shareholders. This will result in

OML, immediately after the implementation of unbundling,

holding a 19,9% strategic minority shareholding in Nedbank

Group. The unbundling will occur at an appropriate time and

in an orderly manner, after the listing of OML and allowing

suitable time for the transition of the OML shareholder

register to an investor base with an SA and emerging-market

focus and mandate. After the unbundling, Nedbank Group

is likely to see an increase in the number of its shares held by

emerging-market-mandated index funds, which will adjust

according to the improved free float (from about 45% before

unbundling to about 80% after unbundling) and a normalisation

of SA institutional shareholding (some of which are currently

underweight on a straight-market-capitalisation basis given

some Nedbank Group holding through the Old Mutual plc

shareholding). As part of this process Nedbank Group will

continue to market itself as an attractive investment for local

and international investors.


2017

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Nedbank Group will continue business as usual and the

managed separation will have no impact on our strategy,

our day-to-day management or operations, our staff and

our clients. Our engagements have been at arm’s length and

overseen by independent board structures. Old Mutual operates

predominantly in the investment, savings and insurance

industry, which has little overlap with banking, even though we

compete in the areas of wealth and asset management and

personal loans. Our technology systems, brands and businesses

have not been integrated.

As noted before, our collaboration with Old Mutual to unlock

synergies by the end of 2017 was successful. Future synergies

will continue to be underpinned by OML’s strategic shareholding

in Nedbank Group. We are fully committed to working with OML

to deliver ongoing synergistic benefits at arm’s length.

Economic and regulatory outlookWhile structural challenges remain, 2018 has started with

renewed optimism that these will be addressed and that

improving business and consumer confidence should lead to

a cyclical upturn off a low base. The SA economy is forecast

to grow about 1,6% in 2018 as a resilient world economy and

relatively firm international commodity prices are expected to

provide further support to domestic production and exports.

Business and consumer confidence should also improve from

very weak levels in 2017, boosted by newly elected SA President

Ramaphosa’s promises to restore good governance, take

immediate action against corruption and state capture, and

make changes to many cabinet portfolios. Moderate growth in

consumer spending and credit are forecast for 2018, while fixed

investment, as well as government consumption and capital

expenditure, is forecast to remain subdued.

The recovery in sub-Saharan Africa is expected to gather

pace in 2018, underpinned by the ongoing global commodity

price upswing as well as improved government finances and

structural reforms in some African countries. The International

Monetary Fund expects sub-Saharan Africa to grow faster at

3,4% this year.

Domestic inflation is forecast to recede moderately in the

early part of 2018, before edging higher towards the end of

the year, averaging about 5,1% over the year as a whole. Early

in the year a stronger rand, coupled with easing food and fuel

prices, should help contain inflation off the higher base that

prevailed at the start of 2017. The rand remains the key risk to

the inflation outlook. High expectations of political, policy and

fiscal reforms have been built into the rand’s recent rally. If the

new ANC leadership fails to deliver, especially on the fiscal

concerns, SA still runs the risk of being downgraded to universal

subinvestment grade status, which could place the rand under

pressure and alter the inflation outlook for the year. Given these

uncertainties, the anticipated rise in US interest rates, the

gradual tapering of quantitative easing programmes by other

major central banks and the expected upturn in the domestic

inflation cycle towards year-end, the SARB’s Monetary Policy

Committee is forecast to keep interest rates unchanged at

current levels throughout 2018 and into 2019.

Fitch indicated that a failure to implement credible fiscal

consolidation and any further economic deterioration could

trigger another rating downgrade. S&P will act if both the

economy and standards of public governance weaken further,

while Moody’s will downgrade the country if the measures to

address the fiscal funding gap lack credibility or the chosen

structural reforms fail to encourage investment and growth.

Overall economic conditions should improve off a low base and,

despite the many challenges faced by the SA economy, the SA

banking system remains sound, liquid and well capitalised.

ProspectsOur guidance on financial performance for the full year 2018 is

currently as follows:

Average interest-earning banking assets to grow in line with

nominal GDP.

NIM to be slightly above the 2017 level of 3,62%.

CLR to increase into the bottom half of our target range of

60 to 100 bps (under IFRS 9).

NIR to grow above mid-single digits.

Associate income to be positive (ETI associate income

reported quarterly in arrear).

Expenses to increase by mid-single digits.

Given the loss in associate income from ETI in the 2017 base

and continued delivery on the Nedbank strategy, our financial

guidance is for growth in DHEPS for the full 2018 year to be in

line with our medium-to-long-term target of greater than or

equal to GDP + the consumer price index + 5%.

The outlook for our medium-to-long-term targets in 2018 is as

follows, and we have now set ourselves specific 2020 targets of

ROE (excluding goodwill) of greater than or equal to 18% and

cost to income of lower than or equal to 53% as a pathway to

ongoing and sustainable improvements in the key metrics that

support shareholder value creation.

Metric2017

performance Full-year 2018 outlook Medium-to-long-term target

ROE (excluding goodwill) 16,4% Improves, but remains below target

5% above COE5 (≥ 18% by 2020)

Growth in DHEPS 2,4% ≥ consumer price index + GDP growth + 5%, supported by ETI recovery

≥ consumer price index + GDP growth + 5%

CLR 0,49% Increases into the bottom half of our target range (under IFRS 9)

Between 0,6% and 1,0% of average banking advances

NIR-to-expenses ratio 80,7% Improves, but remains below target

> 85%

Efficiency ratio (including associate income)

58,6% Improves, but remains above target

50–53% (≤ 53% by 2020)

CET1 capital adequacy ratio (Basel III)

12,6% Within or above target 10,5–12,5%

Economic capital Internal Capital Adequacy Assessment Process (ICAAP):

A debt rating, including 10% capital buffer

Dividend cover 1,91 times Within target range 1,75–2,25 times

5 The COE is forecast at 13,2% in 2018. Nedbank Group – Annual Results 2017 59

Shareholders are advised that these forecasts are based on

organic earnings and our latest macroeconomic outlook, and

have not been reviewed or reported on by the group’s auditors.

Board and leadership changes during the periodTom Boardman and David Adomakoh resigned from the board

as independent non-executive directors with effect from the

end of Nedbank Group’s Annual General Meeting on Thursday,

18 May 2017.

Neo Dongwana and Linda Manzini were appointed as

independent non-executive directors of the group with effect

from 1 June 2017 and Hubert Brody with effect from 1 July 2017.

Thulani Sibeko, Group Executive of Group Marketing,

Communications and Corporate Affairs, resigned with effect

from 27 June 2017. In October 2017 Abe Thebyane, Group

Executive of Human Resources, announced his early retirement,

to be effective on the appointment of a suitable successor to

ensure a seamless handover of responsibilities. These positions

are expected to be filled in the first half of 2018.

Basis of preparation*Nedbank Group Limited is a company domiciled in SA.

The summary consolidated financial statements of the group

at and for the year ended 31 December 2017 comprise the

company and its subsidiaries (‘group’) and the group’s interests

in associates and joint arrangements.

The summary consolidated financial statements comprise

the summary consolidated statement of financial position

at 31 December 2017, summary consolidated statement of

comprehensive income, summary consolidated statement of

changes in equity and summary consolidated statement of

cashflows for the year ended 31 December 2017 and selected

explanatory notes, which are indicated by the symbol*.

The summary consolidated financial statements and the full

set of consolidated financial statements have been prepared

under the supervision of Raisibe Morathi CA(SA), the Chief

Financial Officer.

The summary consolidated financial statements are prepared

in accordance with the requirements of the JSE Limited

Listings Requirements for preliminary reports, and the

requirements of the Companies Act applicable to summary

financial statements. In terms of the Listings Requirements

preliminary reports have to be prepared in accordance with the

framework concepts and the measurement and recognition

requirements of IFRS and the SAICA Financial Reporting

Guides as issued by the Accounting Practices Committee and

Financial Pronouncements as issued by the Financial Reporting

Standards Council and also, as a minimum, to contain the

information required by IAS 34 Interim Financial Reporting.

The accounting policies applied in the preparation of the

consolidated financial statements, from which the summary

consolidated financial statements were derived, are in terms of

IFRS and are consistent with the accounting policies applied in

the preparation of the previous consolidated annual financial

statements.

IFRS 9 Financial instruments*IFRS 9 is effective and will be implemented by the group

from 1 January 2018. IFRS 9 replaces IAS 39 and sets out the

updated requirements for the recognition and measurement of

financial instruments. These requirements specifically deal with

the classification and measurement of financial instruments,

measurement of impairment losses based on an expected credit

loss model, and closer alignment between hedge accounting and

risk management practices.

As permitted by the transitional provisions of IFRS 9, the

group has elected not to restate comparative figures.

Any adjustments to the carrying amount of financial assets and

financial liabilities at the date of transition will be recognised in

the opening retained earnings and other reserves at 1 January

2018. The group has elected to continue to apply the hedge

accounting requirements of IAS 39 on adoption of IFRS 9.

The estimates below are based on accounting policies,

assumptions, judgements and estimation techniques, which

will be regularly reviewed and assessed during the year in

preparation for the financial statements for the year ending

31 December 2018.

Classification and measurement* The group has implemented the following on adoption of IFRS 9:

Revocation of the fair value through profit or loss

designation for certain loans and advances, amounts owed

to depositors and long-term debt instruments to facilitate

the implementation of macro fair-value hedge accounting of

interest rate risk and hedge accounting of inflation risk. It is

anticipated that the aforementioned changes will reduce

accounting volatility experienced with respect to fair value

through profit or loss accounting.

Reclassification of certain loans from amortised cost to fair

value through other comprehensive income and fair value

through profit or loss to align with the business-model-driven

classifications of IFRS 9.

Review of the effective interest rate calculation for certain

loans based on the additional guidance provided in IFRS 9.

The implementation of the above IFRS 9 classification and

measurement requirements decreased reserves at 1 January

2018 by approximately R200m.

Impairment*The IFRS 9 impairment implementation progressed during 2017.

The following were the main areas of focus for 2017:

Finalisation of the IFRS 9 impairment model methodology.

Implementation of an IT framework facilitating efficient

model execution and management.

Development, build and testing of IFRS 9 impairment

models with respect to a substantial portion of the group’s

portfolios, leveraging off the aforementioned IT framework.

Documentation and implementation of the relevant control

environment and related governance processes.

The following areas will continue to receive the required

attention as the implementation of IFRS 9 progresses during

the 2018 financial reporting period:

Further refinement of certain models.

Finalisation of the interim and year-end reporting and

disclosure frameworks.

Observing local and international industry trends with

respect to IFRS 9 adoption.

The implementation of the IFRS 9 expected credit loss model

requires increases in balance sheet impairments at 1 January

2018 of approximately R3,2bn, with reserves decreasing by

approximately R2,3bn on an after-tax basis.

IFRS 15 Revenue from contracts with customers*IFRS 15 replaces all existing revenue requirements in IFRS and

applies to all revenue arising from contracts with clients, unless

the contracts are in the scope of the standards on leases,

insurance contracts and financial instruments. The standard

is effective and will be implemented by the group from

1 January 2018.

The group has concluded that the loyalty points awarded to

clients are accounted for as consideration payable to clients in

terms of new IFRS 15 guidance. The standard requires revenue

to be decreased by the amount of consideration expected to be

paid to clients, with this amount recognised as a liability until

payment is effected. The liability for the amount expected to

* Refer to the second paragraph under Basis of preparation.


2017

RES

ULT

S C

OM

MEN

TARY

be paid to clients under the loyalty programme increased by

approximately R300m on 1 January 2018 due to the application

of IFRS 15 requirements. Reserves at 1 January 2018 decreased

by approximately R216m on an after-tax basis.

Events after the reporting period*There are no material events after the reporting period to

report on.

Audited summary consolidated financial statements – independent auditors’ opinionThe summary consolidated financial statements for the year

ended 31 December 2017 have been audited by KPMG Inc

and Deloitte & Touche, who expressed an unmodified opinion

thereon. The auditors also expressed an unmodified opinion on

the annual consolidated financial statements from which these

summary consolidated financial statements were derived.

The copies of the auditors’ report on the summary consolidated

financial statements and of the auditors’ report on the annual

consolidated financial statements are available for inspection

at the company’s registered office, together with the financial

statements identified in the respective auditors’ reports.

The auditors’ report does not necessarily report on all of

the information contained in this results announcement.

Shareholders are therefore advised that, to obtain a full

understanding of the nature of the auditors’ engagement, they

should obtain a copy of the auditors’ report, together with

the accompanying consolidated financial statements, from

Nedbank Group’s registered office.

Forward-looking statementsThis announcement contains certain forward-looking

statements with respect to the financial condition and results

of operations of Nedbank Group and its group companies that,

by their nature, involve risk and uncertainty because they relate

to events and depend on circumstances that may or may not

occur in the future. Factors that could cause actual results to

differ materially from those in the forward-looking statements

include global, national and regional political and economic

conditions; levels of securities markets; interest rates; credit

or other risks of lending and investment activities; as well as

competitive, regulatory and legal factors. By consequence,

all forward-looking statements have not been reviewed or

reported on by the group’s auditors.

Final dividend declaration Notice is hereby given that a final dividend of 675 cents per

ordinary share has been declared, payable to shareholders for

the six months ended 31 December 2017. 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 135 cents per ordinary share, resulting

in a net dividend of 540 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 498 108 914.

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, 3 April 2018

Shares commence trading (ex dividend) Wednesday, 4 April 2018

Record date (date shareholders recorded in books) Friday, 6 April 2018

Payment date Monday, 9 April 2018

Share certificates may not be dematerialised or rematerialised

between Wednesday, 4 April 2018, and Friday, 6 April 2018, both

days inclusive.

On Monday, 9 April 2018, 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, 9 April 2018.

The above dates are subject to change. Any changes will be

published on SENS and in the press.

For and on behalf of the board

Vassi Naidoo Mike BrownChairman Chief Executive

2 March 2018

Registered officeNedbank Group Limited, Nedbank 135 Rivonia Campus,

135 Rivonia Road, Sandown, Sandton, 2196.

PO Box 1144, Johannesburg, 2000.

Transfer secretaries in SAComputershare Investor Services Proprietary Limited

15 Biermann Avenue, Rosebank, Johannesburg, 2196, SA.

PO Box 61051, Marshalltown, 2107, SA.

Transfer secretaries in NamibiaTransfer Secretaries (Proprietary) Limited, Robert Mugabe

Avenue No 4, Windhoek, Namibia.

PO Box 2401, Windhoek, Namibia.

DirectorsV Naidoo (Chairman), MWT Brown** (Chief Executive),

HR Brody, BA Dames, NP Dongwana, ID Gladman (British),

JB Hemphill, EM Kruger, RAG Leith, PM Makwana, L Manzini,

Dr MA Matooane, NP Mnxasana, RK Morathi** (Chief Financial

Officer), JK Netshitenzhe, MC Nkuhlu** (Chief Operating

Officer), S Subramoney, MI Wyman*** (British).

** Executive *** Lead independent director

Company Secretary: TSB Jali

Reg number: 1966/010630/06

JSE share code: NED

NSX share code: NBK

ISIN: ZAE000004875

Sponsors in SA: Merrill Lynch SA Proprietary Limited

Nedbank CIB

Sponsor in Namibia: Old Mutual Investment Services

(Namibia) (Proprietary) Limited

This announcement is available on the group’s website at

nedbankgroup.co.za, together with the following additional

information:

Detailed financial information.

Financial results presentation.

Link to a webcast of the presentation.

For further information please contact Nedbank Group Investor

Relations at [email protected].

* Refer to the second paragraph under Basis of preparation.


63 Financial highlights


of comprehensive income

65 Consolidated statement of

financial position


of changes in equity

68 Return on equity drivers

Financial results

FIN

AN

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L R

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LTS

Financial highlightsfor the year ended 31 December

Change (%) 2017 2016

Statistics

Number of shares listed m 498,1 495,9

Number of shares in issue, excluding shares held by group entities m 481,6 478,4

Weighted-average number of shares m 480,8 477,8

Diluted weighted-average number of shares m 490,0 487,9

Headline earnings Rm 2,8 11 787 11 465

Profit attributable to equity holders of the parent Rm 14,7 11 621 10 132

Total comprehensive income Rm 83,5 12 330 6 718

Preprovisioning operating profit Rm (3,2) 19 358 20 004

Economic profit Rm 8,3 1 695 1 565

Headline earnings per share cents 2,2 2 452 2 400

Diluted headline earnings per share cents 2,4 2 406 2 350

Basic earnings per share cents 14,0 2 417 2 121

Diluted basic earnings per share cents 14,2 2 372 2 077

Ordinary dividends declared per share cents 7,1 1 285 1 200

Interim 610 570

Final 675 630

Ordinary dividends paid per share cents 8,8 1 240 1 140

Dividend cover times 1,91 2,00

Total assets administered by the group Rm 4,5 1 295 627 1 239 349

Total assets Rm 1,8 983 314 966 022

Assets under management Rm 14,3 312 313 273 327

Life insurance embedded value Rm 0,2 2 745 2 740

Life insurance value of new business Rm (12,5) 349 399

Net asset value per share cents 7,3 16 990 15 830

Tangible net asset value per share cents 6,6 14 626 13 723

Closing share price cents 7,5 25 610 23 813

Price/earnings ratio historical 10,4 9,9

Price-to-book ratio historical 1,5 1,5

Market capitalisation Rbn 8,0 127,6 118,1

Number of employees (permanent staff) (2,7) 31 531 32 401

Number of employees (permanent and temporary staff) (2,6) 31 887 32 746

Key ratios (%)

ROE 15,3 15,3

ROE (excluding goodwill) 16,4 16,5

Return on tangible equity 17,8 17,6

ROA 1,22 1,23

Return on RWA 2,28 2,23

NIM 3,62 3,41

NIR to total income 46,6 47,1

NIR to total operating expenses 80,7 82,9

CLR – banking advances 0,49 0,68

Efficiency ratio 58,6 56,9

Gross operating income growth less expense growth rate (JAWS ratio) (3,0) (1,5)

Effective taxation rate 25,5 24,9

Group capital adequacy ratios (including unappropriated profits):

– CET1 12,6 12,1

– Tier 1 13,4 13,0

– Total 15,5 15,3


Consolidated statement of comprehensive incomefor the year ended 31 December

%

Rm Note change 2017 2016

Interest and similar income 2,6 75 299 73 395

Interest expense and similar charges 1,5 47 675 46 969

Net interest income 1 4,5 27 624 26 426

Impairments charge on loans and advances 2 (27,4) 3 304 4 554

Income from lending activities 11,2 24 320 21 872

Non-interest revenue 3 2,4 24 063 23 503

Operating income 6,6 48 383 45 375

Total operating expenses 4 5,1 29 812 28 366

Indirect taxation 8,0 1 001 927

Profit from operations before non-trading and capital items 9,3 17 570 16 082

Non-trading and capital items 5 83.6 (224) (1 363)

Profit from operations 17,8 17 346 14 719

Share of losses of associate companies and joint arrangements > (100) (838) (105)

Profit from operations before direct taxation 13,0 16 508 14 614

Total direct taxation 6 6,4 4 209 3 955

Direct taxation 4 267 3 985

Taxation on non-trading and capital items (58) (30)

Profit for the year 15,4 12 299 10 659

Other comprehensive income net of taxation > 100 31 (3 941)

Items that may subsequently be reclassified to profit or loss

Exchange differences on translating foreign operations (1 046) (1 902)

Share of other comprehensive income of investments accounted for using the equity method 169 (1 688)

Fair-value adjustments on available-for-sale assets 22 (73)

Items that may not subsequently be reclassified to profit or loss

Gains on property revaluations 190 32

Remeasurements on long-term employee benefit assets 387 (297)

Actuarial profit/(losses) on long-term employee benefit assets 309 (13)

Total comprehensive income for the year 83,5 12 330 6 718

Profit attributable to:

– Equity holders of the parent 14,7 11 621 10 132

– Non-controlling interest – ordinary shareholders 88 88

– Holders of preference shares 7 (6,4) 338 361

– Non-controlling interest – additional tier 1 capital instrument noteholders > 100 252 78

Profit for the year 15,4 12 299 10 659

Total comprehensive income attributable to:

– Equity holders of the parent 88,0 11 625 6 183

– Non-controlling interest – ordinary shareholders 19,8 115 96

– Holders of preference shares 7 (6,4) 338 361

– Non-controlling interest – additional tier 1 capital instrument noteholders > 100 252 78

Total comprehensive income for the year 83,5 12 330 6 718

Headline earnings reconciliation

Profit attributable to equity holders of the parent 14,7 11 621 10 132

Less: Non-headline earnings items (166) (1 333)

Non-trading and capital items (224) (1 363)

Taxation on non-trading and capital items 58 30

Headline earnings 2,8 11 787 11 465


FIN

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Consolidated statement of financial positionat 31 December

Rm Note 2017 2016

Assets

Cash and cash equivalents 16 900 26 384

Other short-term securities 92 775 84 679

Derivative financial instruments 29 904 17 633

Government and other securities 49 241 51 048

Loans and advances 8 710 329 707 077

Other assets 14 589 14 077

Current taxation assets 211 574

Investment securities 9 16 634 14 225

Non-current assets held for sale 388 287

Investments in private-equity associates, associate companies and joint arrangements 10 6 722 6 567

Deferred taxation assets 189 494

Investment property 22

Property and equipment 8 902 8 969

Long-term employee benefit assets 5 924 5 203

Mandatory reserve deposits with central banks 19 222 18 700

Intangible assets 11 11 384 10 083

Total assets 983 314 966 022

Equity and liabilities

Ordinary share capital 482 478

Ordinary share premium 18 688 18 043

Reserves 62 653 57 212

Total equity attributable to equity holders of the parent 81 823 75 733

Non-controlling interest attributable to ordinary shareholders 859 756

Holders of preference shares 3 222 3 222

Non-controlling interest attributable to holders of additional tier 1 capital instruments 2 635 2 000

Total equity 88 539 81 711


Amounts owed to depositors 12 771 584 761 542

Provisions and other liabilities 23 292 34 667

Current taxation liabilities 259 214

Deferred taxation liabilities 761 804

Long-term employee benefit liabilities 3 525 3 448

Investment contract liabilities 18 134 15 342

Insurance contract liabilities 2 277 2 922

Long-term debt instruments 51 576 52 076

Total liabilities 894 775 884 311

Total equity and liabilities 983 314 966 022


Consolidated statement of changes in equity for the year ended 31 December

Rm

Number of

ordinary

shares

Ordinary

share

capital

Ordinary

share

premium

Foreign

currency

translation

reserve

Property

reserve

revaluation

Balance at 31 December 2015 476 555 787 477 17 569 3 318 1 885

Additional tier 1 capital instruments issued3

Shares issued in terms of employee incentive schemes 1 453 765 1 275

Shares (acquired)/no longer held by group entities and BEE trusts4 379 155 199

Preference shares held by group entities

Acquisition of shareholding in subsidiary company Buyout of non-controlling interests Transactions with non-controlling shareholders Preference share dividend paid

Dividends paid to ordinary shareholders

Total comprehensive income for the year (3 575) 32

Transfer (to)/from reserves (54)

Additional tier 1 capital instruments interest paid Regulatory risk reserve provision5 Share-based payment reserve movements

Other movements Balance at 31 December 2016 478 388 707 478 18 043 (257) 1 863 Additional tier 1 capital instruments issued3 Shares issued in terms of employee incentive schemes 2 795 439 3 684 Shares delisted – BEE schemes (552 246) (1) Treasury shares no longer held by BEE schemes 552 246 1 Shares (acquired)/no longer held by group entities and BEE schemes4 384 742 1 (39) Preference share dividend paid Dividends paid to shareholders Total comprehensive income for the year (1 323) 190 Transfer to/(from) reserves (109) Share-based payment reserve movements Additional tier 1 capital instruments interest paid Other movements Balance at 31 December 2017 481 568 888 482 18 688 (1 580) 1 944 1 Represents other non-distributable revaluation surplus on capital items and non-distributable reserves transferred from other distributable reserves in order to

comply with the Banks Act (94 of 1990).2 Represents other non-distributable revaluation surplus on capital items and non-distributable reserves transferred from other distributable reserves to comply with

various banking regulations of R248m. This balance is offset by the difference between the at-acquisition fair value (net basis) and gross value of the Banco Único put option of R223m.

3 The group issued a new-style (Basel III-compliant) additional tier 1 capital instrument of R0,6bn in June 2017 at JIBAR + 5,65% in line with bank regulations. The instruments are callable only at the option of the issuer on 21 May 2021, 26 November 2021 and 1 July 2022 and on any interest payment date thereafter.

4 Shares acquired by group entities and BEE schemes R547m (December 2016: R179m) less shares that vested and are no longer held by group entities R509m (December 2016: R378m) resulting in ordinary share capital of R1m and reduction in ordinary share premium of R39m.

5 Regulatory risk reserves for African subsidiaries.


FIN

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Share-

based

payment

reserve

Other non-

distributable

reserves1

Available-

for-sale

reserve

Other

distributable

reserves2

Total equity

attributable

to equity

holders of

the parent

Non-

controlling

interest

attributable

to ordinary

shareholders

Preference

shareholders

Non-

controlling

interest

attributable

to additional

tier 1 capital

instruments

Total

shareholders’

equity

1 312 199 35 49 959 74 754 436 3 561 78 751

– 2 000 2 000

276 276

199 199

– (339) (339)

(223) (223) (223)

– (6) (6)

– 239 239

– (361) (361)

(5 587) (5 587) (11) (5 598)

(97) 9 823 6 183 96 361 78 6 718

(118) 34 138 – –

– (78) (78)

(8) (8) 2 (6)

136 136 136

3 3 3

1 330 2 (62) 54 336 75 733 756 3 222 2 000 81 711 – 600 600 687 687 (1) (1) 1 1

(33) (71) (71) – (338) (338) (6 080) (6 080) (12) (6 092) 441 12 317 11 625 115 338 252 12 330

69 23 5 12 – –(65) (65) (65)

– (217) (217) (6) (6) (6)

1 334 25 384 60 546 81 823 859 3 222 2 635 88 539


Return on equity driversfor the year ended 31 December

Rm 2017 2016

NII 27 624 26 426

Impairment of loans and advances (3 304) (4 554)

NIR 24 063 23 503

Income from operations 48 383 45 375

Total operating expenses (29 812) (28 366)

Share of losses of associate companies and joint arrangements (838) (105)

Net profit before taxation 17 733 16 904

Indirect taxation (1 001) (927)

Direct taxation (4 267) (3 985)

Net profit after taxation 12 465 11 992

Non-controlling interest (678) (527)

Headline earnings 11 787 11 465

Daily average interest-earning banking assets 763 112 775 092

Daily average total assets 968 029 931 151

Daily average shareholders’ funds 77 036 74 845

Daily average shareholders’ funds, excluding goodwill 71 826 69 666

Note: Averages calculated on a 366/365-day basis.

2017 2016

NII/average interest-earning banking assets 3,62% 3,41%

less less

Impairments/average interest-earning banking assets 0,43% 0,59%

add add

NIR/average interest-earning banking assets 3,15% 3,03%

6,34% 5,85%

less less

Total expenses/average interest-earning banking assets 3,91% 3,66%

add add

Associate income/average interest-earning banking assets (0,11%) (0,01%)

2,32% 2,18%

multiply multiply

1 – effective direct and indirect taxation rate 0,70 0,71

multiply multiply

Income attributable to minorities 0,95 0,96

Headline earnings 1,54% 1,49%

multiply multiply

Interest-earning banking assets/daily average total assets 78,8% 83,2%

= =

Return on total assets 1,22% 1,23%

multiply multiply

12,57 12,44

= =

ROE 15,3% 15,3%

ROE, excluding goodwill 16,4% 16,5%


70 Our organisational structure, products

and services

72 Operational segmental reporting

74 Nedbank Corporate and Investment Banking

76 Nedbank Retail and Business Banking

84 Nedbank Wealth

87 Nedbank Rest of Africa

89 Geographical segmental reporting

Segmental analysis

Our organisational structure, products and services

We deliver our products and services through four

main business clusters.

Nedbank Corporate and Investment Banking

Corporates, institutions and parastatals with a turnover of over R750m per annum.> 600 large corporate clients.

Nedbank Retail and Business Banking

Individual clients, as well as businesses > 7,5m clients including 255 000 small and medium enterprises (typically businesses with an annual turnover of less than R10m). > 22 400 business-banking client groups with an annual turnover of less than R750m per annum.

Nedbank Wealth

High-net-worth individuals as well as other retail, business and corporate clients.> 16 400 high-net-worth clients locally and internationally.

Nedbank Rest of Africa

Retail, small and medium enterprises, and business and corporate clients across the countries we operate in.> 336 707 clients.

OUR CLIENTS


SEG

MEN

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SIS


Nedbank Retail and Business Banking

Nedbank Wealth

Rest of Africa

Advances

Advances

Advances

Advances

HE contribution

HE contribution

HE contribution

HE contribution

50,1%

43,0%

4,1%

2,9%

53,6%

45,0%

9,1%

(6,9)%

Full suite of wholesale banking solutions, including investment banking and lending, global markets and treasury, commercial-property finance, deposit-taking, and transactional banking.

Strong franchise providing good returns (ROE > 20%)

Market leader with strong expertise and relationships in commercial property, corporate advances and renewable-energy financing

Leading industry expertise in mining and resources, infrastructure, oil and gas and telecoms

Solid advances pipeline (growth opportunities when business confidence improves)

Integrated model delivering improved client service and better coverage/deeper client penetration and to attract and retain high-quality intellectual capital

Efficient franchise (best efficiency ratio) and high-quality portfolio (low CLR)

Assets R487,6bn

HE R6 315m

ROE 20,7%

Full range of services, including transactional banking, card solutions, lending solutions, deposit-taking, risk management, investment products, and card-acquiring services for business.

Investments delivering benefits as earnings grow and ROE continues to increase

Strong market position in deposit-taking (19%), vehicle finance (34%), business banking (19%) and card acquiring (> 20%)

Track record of solid NIR growth

Historic selective origination and quality portfolio continue enabling relative CLR outperformance

Digitisation and backoffice optimisation to drive transactional client growth and efficiency ratio to < 58%

Assets R326,2bn

HE R5 302m

ROE 19,1%

Wide range of financial services, including high-net-worth banking and wealth management solutions, as well as asset management and insurance offerings.

Integrated local and international high-net-worth franchise

Rich heritage and strong client base

Market-leading digital innovations

A top SA asset manager

Ranked top offshore asset manager in SA

Solid long-term performance with net flows of R28,5bn

R312,3bn AUM – fourth-largest unit trust manager in

SA and third-largest offshore unit trust manager in SA

Growing insurance business

Opportunities for greater penetration and collaboration

within Nedbank

Innovative digital solutions

AUM R312,3bn

HE R1 068m

ROE 27,5%

Full range of banking services, including transactional, lending, deposit-taking and card products, as well as selected wealth management offerings.

SADC (own operations)

Investment into technology and digital to enhance CVPs

and create scale (Flexcube core banking and mobile

implemented in four countries)

Central and West Africa (ETI alliance)

The Ecobank–Nedbank Alliance: footprint across

39 countries, the largest in Africa

Increase dealflow by leveraging ETI’s local presence and

knowledge and Nedbank’s structuring expertise and

balance sheet

Transactional banking to > 80 Nedbank wholesale clients

Assets R37,5bn

HE (R810m)

ROE (12,6%)

OUR PRODUCTS AND SERVICES

OUR AREAS OF STRENGTH AND DIFFERENTIATION

KEY METRICS


Operational segmental reportingfor the year ended 31 December

Nedbank Group

Corporate and

Investment Banking

Rm 2017 2016 2017 2016

Consolidated statement of financial position (Rm) Assets Cash and cash equivalents 36 122 45 084 5 025 15 306 Other short-term securities 92 775 84 679 60 750 46 625 Derivative financial instruments 29 904 17 633 29 840 17 582 Government and other securities 49 241 51 048 21 312 27 775 Loans and advances 710 329 707 077 356 029 370 199 Other assets 64 943 60 501 14 676 13 993 Intergroup assets – – Total assets 983 314 966 022 487 632 491 480 Equity and liabilities Total equity 88 539 81 711 30 437 28 462

Average allocated capital 77 976 75 561 30 437 28 462 Non-controlling interest 6 716 3 978 Other equity1 3 847 2 172 Derivative financial instruments 23 367 13 296 23 236 13 239 Amounts owed to depositors 771 584 761 542 338 792 343 153 Provisions and other liabilities 48 248 57 397 11 690 25 128 Long-term debt instruments 51 576 52 076 1 350 1 378 Intergroup liabilities – – 82 127 80 120 Total equity and liabilities 983 314 966 022 487 632 491 480 Consolidated statement of comprehensive income (Rm) NII 27 624 26 426 7 216 7 291 Impairments charge on loans and advances 3 304 4 554 193 1 095 Income from lending activities 24 320 21 872 7 023 6 196 NIR 24 063 23 503 7 164 7 453 Operating income 48 383 45 375 14 187 13 649 Total operating expenses 29 812 28 366 6 044 5 751 Indirect taxation 1 001 927 83 96 Profit/(Loss) from operations 17 570 16 082 8 060 7 802 Share of losses of associate companies and joint arrangements (838) (105) (96) (20) Profit/(Loss) before direct taxation 16 732 15 977 7 964 7 782 Direct taxation 4 267 3 985 1 665 1 769 Profit/(Loss) after taxation 12 465 11 992 6 299 6 013 Profit attributable to: – Non-controlling interest – ordinary shareholders 88 88 (16) (1) – Holders of preference shares 338 361 – Non-controlling interest – additional tier 1 capital instrument noteholders 252 78 Headline earnings 11 787 11 465 6 315 6 014 Selected ratios Average interest-earning banking assets (Rm) 763 112 775 092 340 065 369 525 ROA (%) 1,22 1,23 1,31 1,28 ROE (%) 15,3 15,3 20,7 21,1 Interest margin (%)2 3,62 3,41 2,12 1,97 NIR to total income (%) 46,6 47,1 49,8 50,5 NIR to total operating expenses (%) 80,7 82,9 118,5 129,6 CLR – average banking advances (%) 0,49 0,68 0,06 0,34 Efficiency ratio, including associate income (%) 58,6 56,9 42,3 39,0 Effective taxation rate (%) 25,5 24,9 20,9 22,7 Contribution to group EP/(loss) (Rm) 1 695 1 565 2 039 1 970 Number of employees 31 531 32 401 2 756 2 729 1 Other equity includes the variance between actual equity and average allocated capital.2 Cluster margins include internal assets, which are not material to NIM.


SEG

MEN

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Retail and

Business Banking Wealth Rest of Africa Centre

2017 2016 2017 2016 2017 2016 2017 2016

3 692 3 765 2 354 994 6 791 7 166 18 260 17 853

16 652 15 604 4 383 2 580 10 990 19 870 1 9 39 44 24 (2) 493 488 27 436 22 785

305 198 289 882 29 413 28 577 20 541 19 582 (852) (1 163)6 078 6 530 18 412 16 858 5 240 5 795 20 537 17 32511 257 4 665 534 (11 257) (5 199)

326 225 304 842 66 832 62 042 37 487 36 189 65 138 71 469

27 812 26 254 3 885 3 387 6 445 7 942 19 960 15 666

27 812 26 254 3 885 3 387 6 445 7 942 9 397 9 516

6 716 3 978

3 847 2 172

2 4 3 16 126 37

295 294 272 274 35 081 33 461 28 129 27 003 74 288 85 6511 798 3 796 23 016 20 931 1 034 1 214 10 710 6 3281 321 2 518 223 14 48 682 48 166

4 848 4 259 1 653 (88 628) (84 379)

326 225 304 842 66 832 62 042 37 487 36 189 65 138 71 469

17 790 17 347 1 003 974 1 474 1 013 141 (199)3 222 3 261 26 22 213 177 (350) (1)

14 568 14 086 977 952 1 261 836 491 (198)

12 312 11 724 3 390 3 410 997 877 200 39

26 880 25 810 4 367 4 362 2 258 1 713 691 (159)

19 136 18 433 2 880 2 704 2 200 1 887 (448) (409)302 359 117 108 40 32 459 332

7 442 7 018 1 370 1 550 18 (206) 680 (82)

(742) (85)

7 442 7 018 1 370 1 550 (724) (291) 680 (82)

2 082 1 978 302 358 (18) (93) 236 (27)

5 360 5 040 1 068 1 192 (706) (198) 444 (55)

104 89

58 80 280 281

252 78

5 302 4 960 1 068 1 192 (810) (287) (88) (414)

306 225 285 393 46 639 45 209 29 369 24 305 40 814 50 6601,68 1,68 1,62 1,93 (2,23) (0,86) 19,1 18,9 27,5 35,2 (12,6) (3,6)

5,81 6,08 2,15 2,15 5,02 4,17 40,9 40,3 77,2 77,8 40,3 46,4 64,3 63,6 117,7 126,1 45,3 46,5 1,06 1,12 0,09 0,08 1,02 0,98 63,6 63,4 65,6 61,7 127,2 104,5

28.0 28,2 22,0 23,1 2,5 32,0 1 394 1 230 522 711 (1 715) (1 413) (545) (933)

20 081 21 189 2 231 2 232 2 545 2 386 3 918 3 865


CIB headline earnings increased 5,0% to R6 315m, while EP

increased 3,5% to R2 039m. ROE remains healthy at 20,7%

despite being impacted by an increase in allocated capital of

6,9% to R30 437m, as a result of higher internal allocations.

Growth in headline earnings was affected by NII and NIR

pressures that are evident in this tough economic environment

characterised by declining business confidence levels.

NII decreased 1,0% to R7 216m and NIM increased to 2,12%,

with average deposits being maintained at R337bn and

average banking advances growing at 0,7% to R328bn. Early

repayments, coupled with reduced economic activity, led to

interest-earning banking assets decreasing 7,9% to R340bn.

Restating 2016 for the removal of the liquid-asset portfolio

out of interest-earning banking assets, the decrease would

have been 0,3%, while NIM would have shown a decrease of


2 bps. A stable pipeline is in place and several transactions are

anticipated to be closed over the first half of 2018.

Proactive risk management and working closely with our

clients to resolve distressed assets have contributed to the

CLR remaining below our TTC target range of 0,15% – 0,45%.

Recoveries and client resolutions across the CIB businesses

resulted in a decrease in impairments by 82,4% to R193m,

bringing the CLR to 0,06%. Credit volatility in the first half of

2017 continued into the second half, which was exacerbated by

the sovereign-credit-ratings downgrades. We continue to closely

monitor stressed sectors of the economy, such as portions of

the retail sector and certain state-owned enterprises, given the

ongoing uncertainty in terms of governance and oversight as

well as the impact of potential further sovereign downgrades

and impending liquidity challenges.

FINANCIAL HIGHLIGHTS

Corporate and Investment

Banking Property Finance

Corporate and Investment

Banking, excluding Property

Finance

2017 2016 2017 2016 2017 2016

NII (Rm) 7 216 7 291 2 022 1 923 5 194 5 368

Impairments charge on loans and advances (Rm) 193 1 095 (74) 46 267 1 049

NIR (Rm) 7 164 7 453 1 034 1 112 6 130 6 341

Gross operating income (Rm) 14 380 14 744 3 056 3 035 11 324 11 709

Operating expenses (Rm) 6 044 5 751 1 015 968 5 029 4 783

Headline earnings (Rm) 6 315 6 014 1 560 1 540 4 755 4 474

ROE (%) 20,7 21,1 20,6 21,6

ROA (%) 1,31 1,28 0,89 0,97

CLR (%) 0,06 0,34 (0,05) 0,04

NIR to total expenses (%) 118,5 129,6 101,8 114,9

Efficiency ratio (%) 42,3 39,0 33,2 31,9

Interest margin (%) 2,12 1,97 1,19 1,24

Total assets (Rm) 487 632 491 480 182 572 169 633 305 060 321 847

Average total assets (Rm) 481 146 468 348 174 856 159 226 306 290 309 122

Total advances (Rm) 356 029 370 199 143 267 136 348 212 762 233 851

Average total advances (Rm) 364 543 356 309 137 356 127 140 227 187 229 169

Total deposits (Rm) 338 792 343 153 363 1 118 338 429 342 035

Average total deposits (Rm) 337 052 336 878 668 1 293 336 384 335 585

Average allocated capital (Rm) 30 437 28 462 7 588 7 124 22 849 21 338

4 72

7

3 97

1

6 0

14

6 3

15

5 20

8

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Headline earnings(Rm)

Return on equity(%)

20172016

22,6

27,0

27,6

201520142013

21,1

20

,7


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FINANCIAL HIGHLIGHTS

Property Finance Investment Banking Markets

Short-term and

transactional services

2017 2016 2017 2016 2017 2016 2017 2016

Gross operating income (Rm) 3 056 3 035 3 551 4 012 4 703 4 584 3 070 3 110

Average total advances (Rm) 137 356 127 140 159 922 160 169 42 828 36 144 24 436 26 813

Looking forwardStrategically positioning the CIB franchise model to better

serve our clients remains our key priority as we continue

to execute on our integrated wholesale strategy. We are

hopeful that the renewed optimism in the country will result

in an increase in SA corporate investment. We have a strong

advances pipeline, which we expect to convert as business

confidence improves.

Leveraging off our strategic partners to expand our rest of

Africa presence in key selected sectors while growing our

transactional banking and deposits, remains essential to our

business strategy. As a response to the changing economic

environment we continue to invest in disruptive technologies

that deliver efficiencies in the long term.

We emphasise proactive risk management and focus on

resolutions in stressed sectors, while ensuring that we remain

compliant with regulatory requirements.

We will leverage our distinct culture and strategically

positioned brand to attract and retain top talent in our

businesses.

increase in cross-sell in some sectors, particularly in Property

Finance, thereby realising the benefits of an integrated

franchise. Markets has won the JSE Spire awards for the best

market-making team in Government bonds, the best sales team

for bonds and the best research team for technical analysis

(forex, interest rate derivatives and bonds).

Transactional ServicesThe business’s gross operating income decreased 1,4% primarily

due to the impact of the current economic conditions. Despite

the tough climate, the business successfully won and retained

top-tier client mandates that will contribute to growth in fees

in the future, with 26 total primary client wins. This includes

CIB being successfully appointed as the primary banker to the

Parliament of RSA for a second consecutive five-year term

and the Western Cape Government for a third consecutive

five-year term.

NIR declined 3,9% to R7 164m. The decline is primarily due to the

impact of slower economic activity on fees and commissions,

and private equity off a high base, which was partly offset by an

increase in trading income of R111m.

We continue to generate a competitive efficiency ratio of 42,3%.

Total expenses grew 5,1% to R6 044m, mainly due to investment

in disruptive technologies and regulatory compliance, which will

yield positive results in the future.

Property FinanceThe business grew average advances by 8,0% to R137,4bn as a

result of the drawdown of deals booked in 2016 coupled with new

growth. Gross operating income was impacted by a decrease

in NIR due to lower private equity income off a high base, while

NII growth was offset by increased Basel III-related funding

costs. The CLR decreased to a net release of 5 bps. The portfolio

contains good-quality collateralised assets with low LTVs,

underpinned by a large secure asset pool and strong client base.

The business has sustained its strong cost containment, which

resulted in an efficiency ratio of 33,2%. It is managed by a highly

experienced team who are leaders in SA property finance and

has maintained a leading market share over time.

Investment BankingAverage banking advances are flat yoy mainly as a result of early

repayments and subdued credit demand. The business has a

solid advances pipeline, which presents a growth opportunity as

business confidence improves. Gross operating income decreased

11,5% mainly owing to lower fee and commission revenue as

a result of lower corporate activity and lower NII. Investment

Banking has leading industry expertise in mining and resources,

infrastructure, oil and gas, telecoms and energy, having been

ranked number 2 for DCM bond issues in 2017. In Q4 2017, the

business entered into an alliance with Deutsche Bank to provide

primary equity and debt capital markets services to corporate,

public sector and institutional clients in SA and select markets in

sub-Saharan Africa. This will enhance our ability to provide our

clients with access to deeper sources of capital globally.

MarketsGross operating income in Markets showed good growth of

2,6% given the challenging economic conditions. The market

was characterised by low volatility and client activity,

interspersed with large event risk. The business has seen an

Favourable Unfavourable

Decreased impairments and reduced CLR.

Maintaining our leading position in

commercial-property finance.

Strong pipeline which is expected to convert as business

confidence improves.

Strategic partnerships to benefit clients on the continent

and globally.

Continued focus on people with a shift towards 'digital' talent.

Declining business confidence levels.

Subdued credit demand.

Increased competitive environment for high-quality assets.

Low levels of client activity.


Nedbank Retail andBusiness Banking

RBB increased headline earnings 6,9% to R5 302m, PPOP 4,0%

to R10 606m and ROE to 19,1%. NII growth was impacted by

lower NIM, but was underpinned by solid growth in advances

and strong growth in deposits. NIR growth was higher than

inflationary adjustments and grew despite weak economic

growth that impacted transactional volumes. The CLR

continues to benefit from our strategy of quality selective

origination across all asset classes. Expense growth of 3,8%

includes investment in digital and the reformatting of our

physical distribution footprint. We continue to focus on active

cost management.

Key drivers of the 2017 financial performanceNII increased 2,6% to R17 790m. Total NIM decreased a net

27 bps to 5,81%. This decrease was driven mainly by the margin

compression in the lending business as the prime–JIBAR gap

narrowed.

Average banking advances increased 4,2% to R294,9bn, with

new-loan payouts increasing to R86,0bn, largely driven by

payouts in Retail, which increased to R65,7bn. The Business

Banking advances pipeline remains strong; however, client

drawdown on facilities remains subdued, given the weak

economic outlook.

FINANCIAL HIGHLIGHTS for the year ended 31 December

Total Retail and

Business Banking Business Banking Retail Banking1

Relationship

Banking

2017 2016 2017 2016 2017 2016 2017 2016

NII (Rm) 17 790 17 347 4 013 4 011 13 777 13 336 2 102 1 953 Impairments charge on loans and advances (Rm) 3 222 3 261 80 173 3 142 3 088 16 29 NIR (Rm) 12 312 11 724 1 775 1 709 10 537 10 015 1 173 1 067 Operating expenses (Rm) 19 136 18 433 3 745 3 679 15 391 14 754 2 358 2 176 Headline earnings (Rm) 5 302 4 960 1 396 1 315 3 906 3 645 646 581 ROE (%) 19,1 18,9 24,3 23,8 17,7 17,6 25,0 23,6 ROA (%) 1,68 1,68 1,06 1,05 1,63 1,60 1,00 1,06 CLR (%) 1,06 1,12 0,12 0,26 1,32 1,37 0,05 0,09 NIR to total expenses (%) 64,3 63,6 47,4 46,5 68,5 67,9 49,8 49,1 Efficiency ratio (%) 63,6 63,4 64,7 64,3 63,3 63,2 72,0 72,0 Interest margin (%) 5,81 6,08 3,07 3,22 6,00 6,09 3,25 3,56 Total advances (Rm) 305 198 289 882 66 429 63 914 238 769 225 968 33 470 31 449 Average total advances (Rm) 294 930 282 992 65 057 64 538 229 873 218 454 32 428 30 836 Total deposits (Rm) 295 294 272 274 126 530 122 245 168 764 150 029 62 347 52 332 Average total deposits (Rm) 281 779 257 968 125 247 118 799 156 532 139 169 58 399 48 035 Average allocated capital (Rm) 27 812 26 254 5 747 5 520 22 065 20 734 2 588 2 461 1 Retail includes unallocated costs relating to Channel and Shared Services, which are not reflected separately.


4 0

31

3 4

68

4 4

60

20172016201520142013

4 9

60

5 3

02

Return on equity(%)

14,6

13,0

18,9

19,1

16,6

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Average deposits increased 9,2% to R281,8bn. Household

deposits, in which we have grown market share to 18,9%, remain

a key focus area, specifically as we transition towards full

liquidity requirements under Basel III. Market share of household

current-account deposits was 19,1% at December 2017.

Defaulted advances have increased to R15,1bn from

R14,2bn in 2016, which represents 4,8% of the advances

portfolio. We continue to engage with our clients on account

rehabilitations, including restructures and rearrangements,

specifically in the secured-lending businesses, where it is often

better for us to help clients keep their assets than to repossess.

Balance sheet impairments decreased slightly to 2,85% of total

advances due to lower coverage on performing advances of

0,61%, which is in line with continued improvement of asset

quality across all products.

The CLR of 1,06% remains well below our target range of

1,30% to 1,80%, driven by lower impairments across most

businesses. The charge includes the reground entries as well

as the reassessment of overlay provisions. These overlays

were raised ahead of model provisions to cater for events

that have occurred but are not yet reflected in the model

data, with overlays being released as the model data ‘catches

up’. Specifically, the unsecured-debt overlay and agriculture

overlays have been reassessed, with releases of these having

been processed. IFRS 9, which was implemented with effect

from 1 January 2018, will result in higher provisioning on the

performing book going forward.

NIR grew 5,0% to R12 312m, underpinned by growth in quality

transactional income and revenue from consumer card issuing

(together contributing R357m) as well as product price increases

of 4,6% from 1 January 2017, offset by lower mix and activity

volumes across all segments. This is a reflection of the tougher

macro environment, as clients are transacting more within

fixed-rate bundles.

Progress in quality-client acquisition and improved client

retention was reflected in 7,5 million clients, the small-and

medium-enterprise segment comprising 254 584 entities

and 22 426 business banking clients. Our main-banked client

numbers remained flat as slower transactional activity caused

some existing clients to fall outside our strict transactional

Client Engagement Unsecured Lending2 Home Loans MFC Card

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

2 357 2 376 3 269 3 176 1 674 1 647 3 355 3 232 1 294 1 212

38 50 1 063 1 179 (4) 55 1 276 1 019 753 756

3 617 3 545 648 666 287 261 744 713 4 044 3 743

6 426 6 174 1 408 1 394 1 023 955 1 191 1 163 3 250 3 067

(376) (236) 1 029 892 673 632 1 064 1 138 955 783

(21,3) (12,2) 29,7 29,4 19,6 18,4 15,7 18,3 27,5 24,0

(0,38) (0,25) 5,41 5,34 0,77 0,73 1,15 1,36 4,67 4,21

15,12 4,74 5,69 6,92 0,07 1,49 1,28 4,80 5,13

56,3 57,4 46,0 47,8 28,0 27,4 62,5 61,3 124,4 122,0

107,6 104,3 36,0 36,3 52,2 50,0 29,1 29,5 60,9 61,9

2,36 2.56 17,33 19,18 1,93 1,93 3,69 3,94 7,22 7,40

90 691 16 397 15 112 84 339 82 027 90 183 83 105 14 240 13 560

151 887 16 218 14 722 83 130 80 828 83 568 77 690 14 308 13 473

103 863 95 277 4 117 128 81 55 2 424 2 257

96 224 89 300 59 66 2 2 59 37 1 833 1 7521 764 1 939 3 470 3 032 3 428 3 444 6 769 6 203 3 469 3 262

activity-based main-banked definition, while our middle-market,

professional and small-business client segments continued to

increase. The impact of the slower economy has been evident

in this, where we have seen clients who have been active in the

past six months decreasing 3,2% since 2016. The newly launched

Consulta survey estimates our share of main-banked clients to

be 12,7%, up from the previous 10,1% recorded in the 2015 AMPS

survey (using the same methodology) as we aim to reach a

share of more than 15% by 2020.

Expense growth of 3,8% includes investment in distribution of

R98m and growth in revenue-related costs of R72m. This has

been paid for with R444m of additional cost savings delivered

through ongoing, focused and active cost management.

The growth of residual organic cost was also tightly managed at

2,9%, with headcount decreasing 1 062 to 20 243.

Growth of our physical distribution footprint is aligned with

our strategy to enhance access to self-service channels while

optimising our staffed points of presence. This strategy has

been implemented without significantly impacting distances

that clients need to travel to access our products and services.

We also continued to execute on our plan to reformat all

branches and deliver a range of integrated banking channels

for our clients. In this regard 42 branches were upgraded

to the new format in 2017, which brings the overall total to

336 branches, representing 55% of our total branch footprint.

We continued to optimise our branch network through the

closure of 95 outlets (including 52 instore points of presence in

Pick n Pay stores). These closures have not materially impacted

our branch distribution coverage of the bankable population and

were also in response to the implementation of our digital-sales

application process for personal loans, which was started in

the first quarter of 2017. We remain on track to reduce our

branch space by more than 30 000 m² (10% of total) by 2020,

while continuing to improve our market coverage. Since 2014 a

total reduction of 24 485 m² has been achieved. Our branch

reformatting strategy includes deployment, in branches, of

365 video-banking stations, which support five of the country’s

official languages. Financial planning, global trade and

other service-related transactions are delivered through our

video-banking network. In support of our digital and self-service

strategy, 350 internet banking stations and 394 internet banking

kiosks are available across our national branch footprint.

2 Numbers in 2017 include non-RRB student loans and overdrafts, which have an impact on headline earnings, the balance sheet and on all ratios.


A net total of 234 Intelligent Depositor devices were rolled out

during the year under review. Total cash dispensed through our

ATM network increased 6,4% and efficiencies were achieved

through the recycling of cash deposited through our footprint of

1 003 Intelligent Depositor devices.

During the year we implemented key initiatives to migrate

clients to our self-service/digital solutions, such as the

printing of bank statements on our Intelligent Depositor

devices. Client uptake has been encouraging, with more

than 200 000 statements printed per month. A total of

33 client-servicing functions, currently accessible only through

branches, are planned for deployment across our digital

channels by the end of March 2018. The first four services were

launched together with the new Nedbank Money app during the

fourth quarter of 2017. Card collection processes were improved

through the introduction of ‘instant issue’ embossed cheque

cards. Both voice biometrics and multimedia functionality in

the Nedbank Contact Centre were successfully deployed and

are now in full production. These solutions will create improved

authentication of clients and result in efficiencies through

real-time queuing, routing and resolution of client requests

across multiple mediums. New-concept distribution branches

were also landed.

We opened our first digital branch at the Sandton Gautrain

station in October 2017. This exciting new-format branch

focuses on showcasing our digital solutions to the public. We will

continue to innovate and roll out the digital branch formats as

part of our strategy to serve clients through convenient and

accessible channels that deliver cost-effective banking. We have

also deployed our first deep-rural solar branch in Mncwasa,

Eastern Cape, which was opened in August 2017. This branch

seeks to provide cashless banking in an area where access to

basic infrastructure is a challenge and where, historically, it has

also been prohibitive to create access to financial solutions.

Following the landing of the multimedia functionality in the

Nedbank Contact Centre, our video-banking offering and web

chat facilities will also be expanded in the future.

Good progress has already been made with the organisational

redesign strategies in RBB, specifically the integration of our

sales and service teams. These teams were integrated under

one management structure within our integrated-channels

business with effect from 1 June 2017. This initiative aims to

align and integrate client experience across the individual and

business banking segments so as to accelerate both growth and

service delivery to our clients. It will also drive reduction in layers

and duplication with a formalised collaboration model that

will leverage synergies and growth opportunities across RBB.

Further efficiencies will be harvested as we land key enablement

through our digital strategy.

Looking forwardRemaining true to our strategic choices, we will continue with

our commitment to delivering delightful client experiences,

with friendly, seamless and efficient service,

competitively priced products, and digital transformation.

This should lead to an increase in the size and quality

of our client base, the rapid acceleration of our active

cost management and a steady improvement of market

perception, resulting in higher returns and sustainable

growth for RBB in the current challenging economic and

regulatory environment. Our target for 2020 is to achieve

an ROE greater than 20% and a cost-to-income ratio of less

than 58%.

We will accelerate financial inclusivity of our banking

propositions, looking for ways to reduce transacting costs for

our clients and tapping into ecosystem-based propositions

to meet their constantly changing needs. We also aim to

launch a fresh new loyalty and rewards programme, which

we believe will provide our clients with a great incentive to

bank with Nedbank.

Our consistent policy on credit granting should ensure our

relative outperformance in the market on the risk cost line.

Growth will, however, continue to be supported by delivery

on various cost-efficiency strategies, such as the reduction of

the cost to acquire and serve clients.

Distribution investment over the next four years

(2017 to 2020) will result in 82% of our retail clients being

exposed to the enhanced branch format and self-service

offerings. Quality-client acquisition, improved attrition

and multiple-product usage are expected to result in

value-lift and further growth in the transactional-banking

franchise. Specific interventions are being put into place

to take our staff along this journey as we focus on digital

transformation.

NEDBANK RETAIL AND BUSINESS BANKING SEGMENTAL REVIEWBusiness BankingBusiness Banking delivered an excellent performance,

increasing headline earnings 6,2% to R1 396m at an ROE

of 24,3%. These results have been delivered despite the

slow economic growth, which has seen lower levels of

business confidence, with business owners delaying key

investment decisions as they manage their cashflows more

carefully. Notwithstanding new-loan payouts of R20bn,

average advances growth was modest at 0,8% yoy, while

average liabilities grew 5,4%, contributing to NII of R4 013m.

Business Banking remains a strong generator of funding, with

R125,2bn in average total deposits giving rise to the generation

of R68,4bn in net surplus funds.

The overall margin decreased, resulting from lower asset

margins impacted by margin compression following changes

in the internal funding cost and a change in product mix on the

back of liabilities, which, at lower margins, grew faster than

assets.

NIR increased 3,9% in spite of muted economic activity.

The CLR, at 12 bps, remained below the TTC target range

of 50 bps to 70 bps and continued to reflect proactive and

effective risk management practices that benefit from our

decentralised model. The positive outcome of partnering with

our clients to rehabilitate their financial position was evidenced

by a higher level of specific-impairment reversals and recoveries

during 2017.

Business Banking remains robust, has quality returns on capital

and is well positioned to support the growth of our country

and our people. We are continuously evolving our CVPs and

delivery channels to ensure we remain relevant in a world of

fast-changing client needs, and we are investing heavily in all

areas of future digital experiences as we find solutions to real

client pain points and future unmet needs. Some of the exciting

new CVPs launched in 2017 include the school/education

CVP supported by our innovative Karri app. Our continued

investment in our Whole-view Business Banking™ core CVP

continues to deliver dividends with some excellent new-client

wins, including public sector players.

We are focusing heavily on all the key initiatives that add to

the future sustainability of our country and our people. This

includes our investment in enterprise development, supplier

development finance, access to finance for black SMEs in all

sectors and job creation opportunities. We work in collaboration


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with numerous external partners, including the public sector.

The Business Banking Public Sector team had the best year

ever, with the most main-banking tenders won in one year.

Some of the substantial wins were Stellenbosch, Mossel Bay,

Newcastle and Breede Valley Municipalities, and Namakwa

District Municipality.

Retail Relationship BankingRRB provides relationship-based banking services to affluent

individuals (salaried or self-employed) as well as small and

medium enterprises with a turnover of less than R10m and their

business owners. RRB’s value proposition is designed for clients

seeking a personalised, flexible and proactive approach and

caters for the more complex financial needs typically associated

with these segments. These businesses are well established in

both markets, with approximate primary-banked shares of 14%

and 20% respectively.

The business delivered a sterling set of results, with headline

earnings increasing 11% to R646m despite higher funding costs.

These results were evidenced by 12,9% growth in asset payouts

as well as double-digit growth in both NIR and average liability

balances. The CLR at 5 bps remains low and confirms RRB’s

entrenched risk management capabilities and the high quality of

the portfolio. With a strong ROE of 25%, this business remains a

key contributor to the overall performance of the cluster.

From a strategic perspective RRB continued to entrench the

Professional Banking proposition for the affluent segment

(including an offering to young professionals transitioning

from university to business and a niche offering to the medical

profession) through increased marketing and proactive banker

contact. Enhancements in the areas of mobile app banking,

vehicle finance, foreign travel and payment solutions, rewards

and card benefits are anticipated for the near future.

The introduction of a very competitive flat-fee bundle for

small businesses (providing up to 40% savings in monthly

fees), various investments into our Beyond Banking™ offering

(including continued collaboration with the Companies and

Intellectual Property Commission to enrich the company

registration process through Nedbank) and a good marketing

presence have seen Nedbank further strengthening its

positioning as the best bank for small businesses.

Given attractive economics in the affluent and small-and

medium-enterprise markets, we anticipate this to remain a

highly contested environment. Notwithstanding increased

competition from existing banks, new players and fintechs, we

believe RRB is well positioned for growth by leveraging existing

strength in the small-business segment and accelerating

innovation in digital and mobile offerings for the affluent

segment.

Client EngagementClient Engagement covers entry-level banking, youth and

middle-market segments and seeks to provide innovative

banking solutions to individual clients not included in the RRB

or BB segments. It includes the transactional, investment and

forex product areas, as well as business intelligence, digital and

marketing functions serving RBB. The area generated revenue

of R6,1bn, against operating costs of R6,5bn.

Our total clients have grown 1,6% to 7,5 million. Around

6 million (up 1,7%) of these have a transactional product

with Nedbank and around 3,7 million are active and transact

regularly. A stricter measure of this is what we call main-banked

clients, which have remained flat at 2,8 million. Our share of

main-banked clients is estimated to be at 12,7%, based on

the results from a field survey conducted independently by

Consulta, tracking the response of clients asked which bank

they consider to be their main bank. This compares with

the 2015 AMPS study that estimated Nedbank’s share at

10,1%. The evolution of the banking landscape and technology

has resulted in the crafting of a new digital strategy focusing

on client-centredness and digital innovation. The new Nedbank

Money™ app, with enhanced enrolment functionality and a

secure operating environment, was launched in November. It has

been downloaded close to 300 000 times to date, and regular

releases of new services and functionality are planned.

Digitally enabled clients have increased 8,2% and engaged users

on all Nedbank social media platforms have increased 20%, with

Nedbank ranking first on YouTube, second on Twitter, Instagram

and Google + and third on Facebook and LinkedIn. Nedbank

will ensure ongoing engaged client usage and interaction.

Additional innovation initiatives will pave the way for our new

client-centred digital experience.

The results of the annual South African Customer Service

Index (SAcsi) industry survey for 2017 were released in

December 2017. These showed a slight decline in our score for

our retail business from 21,0% in 2016 to 19,9% in 2017, while

our consumer business maintained a Net Promoter Score of

26%. For the 12 months to December 2017 we continued to

maintain a leading position on the hellopeter.com social media

platform. There are a number of large initiatives that will be

launched throughout 2018 to improve client experiences on

all touch points, including onboarding, servicing and everyday

interactions.

We plan to promote our price-competitive Nedbank

Pay-as-you-use Account, which is attractive across all client

segments. For just R5,50 a month clients get access to a bank

account with unlimited card swipes, a debit card, and free

cellphone and internet banking subscription. Qualifying clients

have access, at an additional fee, to an overdraft facility and a

Gold Cheque Card, which allows them to take advantage of the

Greenbacks loyalty programme.

The MyPocket savings pockets (up to 10 and at no cost)

can be linked to any of the transactional-account products

and enable clients to manage their spending and saving

activities more easily. They give immediate access to cash

and attract a favourable interest rate (currently up to 5,25%)

on balances. New and existing accountholders can open the

pockets online through Nedbank.co.za or at a branch.

The new Nedbank Travel Card was launched, ensuring that

travellers going abroad will no longer have to carry cash, making

them less likely to fall prey to criminals because they do not have

to carry large amounts of cash. The new Nedbank Travel Card

allows travellers to load up to eight international currencies on

their cards before their departure, using locked-in exchange

rates. Clients also receive a backup card at no additional

cost. Globally, these will be accepted at 32 million ATMs and

more than 30 million point-of-sale locations associated with

Mastercard. An added benefit is that there will be no cost for

point-of-sale purchases.

We recently launched UNLOCKED.ME – an innovative

e-commerce portal targeted at the youth. UNLOCKED.ME

allows clients to unlock their lifestyle, their potential and their

money. It is full of unique experiences, sure to thrill our target

audience. It is our first lifestyle marketplace and designed with

our clients in mind. This will take us one step closer to reaching

our digital aspirations of delivering delightful client experiences

through digital transformation.

Our investment products, particularly the Green Savings Bond

and 12-month fixed deposit, have shown impressive growth.

The focus on these products, in addition to our Tax-free Savings

Account, has been pivotal to our gains in retail deposit market

share. Retail has continued to grow household market share

with a 37 bps increase for 2017.


Over the past year we have completed the final phases of our

enterprisewide Treating Customers Fairly programme and this

has provided a solid platform for us to shape and implement

our market conduct strategy. Work has also been completed on

a detailed market conduct ‘blueprint’, which will be used as a

roadmap to implement market conduct requirements and these

initiatives are being tracked through a project plan.

Unsecured LendingIncluded in Unsecured Lending disclosure in 2017 is a portfolio

of R683m previously disclosed under Client Engagement,

which relates to non-RRB overdrafts and student loans.

The combined Unsecured Lending portfolio of R18,8bn

generated headline earnings of R1 029m at an ROE of 29,7%,

increasing to R1 206m when including related economics

reflected in the Wealth Cluster. While the migrated portfolio is,

at this stage, immaterial from a book size and headline earnings

contribution point of view, the creation of an unsecured lending

centre of excellence is expected to unlock cost-efficiencies as

well as improve CVPs in the medium to long term.

Personal-loan standalone products increased headline earnings

13,2% to R1 010m and generated an ROE of 32,1%. The growth

in headline earnings was achieved notwithstanding a negative

R142m impact of reduced maximum NCA interest rates

implemented in May 2016, versus R31m in 2016.

The personal-loan book NIM decreased 113 bps to 18,05%,

with 13 bps of the decrease relating to lower endowments and

the remainder due to the margin squeeze on new business

after May 2016. Average advances increased 4,6% while

period-end advances were up 3,7% to R18,1bn, reflecting

slower market growth, due to the weak macro environment

and increased consumer stress. Total book market share

is fairly stable at 9,8% (BA900, adjusted for non-retail

personal loans), while new-business market share in targeted

low-risk segments has grown to about 17% from 13% in 2015.

Our digital application solution was launched in February

2017, resulting in approximately 101 000 online applications

in the subsequent 10 months. In addition, phase one of our

personal-loan transactional bundling product was launched,

resulting in a 30% reduction in turnaround time and improved

client takeup. Further enhancements to these products as well

as the introduction of new offerings such as machine-learning

techniques, which are already used in our direct-marketing

acquisition channel and will be implemented in our credit-scoring

models, will continue in 2018 and beyond. This will enable

sustainable growth within the current risk appetite, while

improving client experience and assisting in growing our

main-banked transactional franchise.

Home LoansHome Loans headline earnings increased 6,4% to R673m

at an ROE of 19,6%. This improved result was driven by a

reduction in impairments and moderate book growth of 2,1%,

in line with the market. The CLR has remained at very low

levels, reflective of the strategy of selective growth and a

quality-collection capability.

The post-2008 frontbook generated an ROE of 26%, compared

with 8% from the pre-2009 backbook. The backbook of R28bn

has declined to 33% of the overall book, and R10bn of these

advances are loans that would meet the current credit policy

requirements using current pricing. This book is still mispriced by

110 bps and, as advances run off, the overall margin will improve.

The defaulted portfolio decreased to 5,5% of home loan

advances, while early arrears decreased to 2,8% of advances.

Impairment coverage on the defaulted portfolio decreased to

19,2%.

A number of new-client offerings were launched in 2017, aimed

at providing financial relief to clients when purchasing a new

home.

The home loan digital channel continued to be innovated by

rewarding clients for applying online. Clients are given 1%

cash back based on the value of the loan amount registered

(capped at R15 000), which is payable into a Nedbank

salary-funded transactional account. This has resulted in a

22% increase in new loans granted through this channel.

An affordable-housing campaign to waive the upfront

initiation fees of R6 250 for clients earning less than

R22 000 a month has resulted in a 9% increase in sales

volumes in this segment, despite a decrease in market

activity.

Smart Living Solutions was launched to promote and create

awareness about sustainable home-energy solutions.

This web-based solution enables clients to access a

reputable supplier to install quality energy-saving home

products. Existing clients can finance these alternative

renewable-energy technologies through their home loan

account.

We remain committed to helping clients who face financial

hardship and provide a website to educate clients about their

options should they fall behind on their home loan repayments.

The website, Home Loans Payment Solutions, has been

viewed over 148 000 times. In addition, over 31 000 families

have been able to retain their homes as a result of loan

restructures offering an effective rehabilitation process,

with the redefault rate on these loans being only 16,07%.

In addition, over 4 000 financially distressed clients were given

a fresh start through the Nedbank-assisted Sales programme.

The programme gives clients the option to sell their house in the

private market through an estate agent allocated by Nedbank,

thereby avoiding the repossession and distressed sale of the

house through a sheriff auction.

MFCMFC delivered headline earnings of R1 064m at an ROE of

15,7%. An upward trajectory of the JIBAR in anticipation of

a higher repo rate resulted in a margin squeeze of 10 bps.

Headline earnings, adjusted for margin squeeze, was R1 125m,

with an ROE of 16,6%. Average advances grew 7,6% to

R83,6bn as new-business volumes improved, despite the

contracting vehicle sales market. The business operating model,

strong dealer relationships and service excellence, all enabled by

a robust frontend system, have remained strong differentiators

that continue to set benchmark credit approval turnaround

times. The CLR increased to 1,49%. Although vehicle finance

CLR has proved to be fairly resilient over the past few years,

some pressure was experienced in 2016 when clients moved into

early arrears. A higher level of payment restructures and debt

review applications in 2017 indicated further pressure on the

consumer. The CLR is still within the risk appetite, aligning with

industry trends.

We continue to stay ahead of the everchanging market,

consistently strengthening alliances with selected car

brands and motor franchises to ensure sustainability in a

contracting market.

Card and PaymentsNedbank Card and Payments grew headline earnings 21,9%

to R955m at an ROE of 27,5%. The increase in headline

earnings was due primarily to NIR growth of 8,0% and

improved credit metrics with a CLR of 4,8%. The increase in

NIR was underpinned by growth of 10% in card-acquiring, 8%

in card-issuing as well as growth in new-client acquisition.

Growth of 6,6% in Nedbank card advances outpaced the

industry, which recorded growth of 3,3% (market share, per

November BA900, of 14,4% versus 13,8% in December 2016).

The Nedbank Greenbacks Rewards Programme continues to

grow in membership and relevance, with over one million clients

now registered, and we are well advanced in transitioning the

programme to a client-centred loyalty and rewards solution that

will recognise the client’s entire relationship with Nedbank.


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We continue to invest and deliver innovative solutions for growth and client relevance in a fast-evolving omnichannel payment

ecosystem, encompassing instore, online and mobile commerce. Our mobile payment solution continues to grow and is accepted at

more than 50 000 points of presence. Our GAP Access™ solution for small business, has continued to grow substantially in terms

of both clients served and the value of disbursements. This solution has played a substantial role in the growth of over 1 000 small

businesses since inception, providing low-risk access to capital in shorter timeframes with a smaller cashflow management impact on

the business.


Quality origination across all asset classes, at appropriate

risk-based pricing, driving asset-mix benefit and market-share

gains.

Market-share gains in Basel III-friendly household deposits.

CLR well below our target range, CLR benefiting from quality

book and collections and release of overlays no longer required.

Consistent investment in client-centred innovation.

Key digital innovations launched, including the Nedbank Money

app and digital branch, which offers interactive tellers and

video banking to enhance client experience.

Decrease in expenses due to organisational redesign,

reduced branch floor space and ongoing cost efficiencies.

Muted credit growth.

Slowdown in the unsecured-lending market in the formal sector

from the impact of the 2016 regulatory changes continues.

Main-banked client growth impacted by a decrease in

transactional activity.

Compressed spread between prime and the JIBAR-linked cost

of funding in the lending business impacted margins.

RETAIL AND BUSINESS BANKING: KEY BUSINESS STATISTICS 2017 2016

Business Banking

New client acquisitions – groups 1 490 1 346

Cross-sell product holding 93 998 93 946

Home Loans

Number of applications received thousands 123 149

Average loan-to-value of new business registered % 87 87

Average balance-to-original-value of portfolio % 76 77

Proportion of new business written through own channels % 70 61

Proportion of book written since 2009 % 67 61

Owned-properties book1 Rm 44 56

MFC

Number of applications received thousands 1 381 1 403

Percentage of used vehicles financed % 72,4 74,2

Personal Loans

Number of applications received thousands 1 286 1 271

Average loan size2 thousands 47,0 44,1

Average term months 38,7 40,0

Retail deposits

Total value of deposits taken in thousands 88 70

Total value of deposit withdrawals R000s 77 56

Number of clients at year-end

Retail main-banked clients thousands 2 783 2 784

Business Banking groups 22 426 22 292

Small Business Services segment thousands 255 247

Home Loans thousands 300 306

MFC thousands 573 560

Personal Loans thousands 448 478

Card issuing thousands 985 939

Investment products thousands 1 534 1 432

Transactional products thousands 6 026 5 925

Impact of small-balance account closures thousands (178)

Distribution

Number of Business Banking locations 68 70

Number of retail outlets 613 695

Number of new-image branches3 336 304

Number of ATMs4 3 948 3 865

Number of ATMs with cash-accepting capabilities5 1 003 769

Digitally enabled retail clients6 thousands 5 784 5 344

Digitally active retail clients6 thousands 891 852

POS devices thousands 88 84

1 Owned-properties book restated to reflect the net value of the properties owned taking impairment into account, previously stated as 127 for December 2016.2 Average loan size restated to include initiation fees. 3 Included in the number of retail outlets – shown separately for additional disclosure.4 Includes 15 corporate cash devices.5 Cash-accepting devices included in total number of ATMs.6 Digitally enabled and active clients have been restated to include number of unique 'open status' retail clients that have used (or at least logged in to) a digital

channel (online, Intelligent Depositors, app, USSD and SST) within the past three months.


BALANCE SHEET AVERAGE ADVANCES AND IMPAIRMENTS

Daily gross average

advances

Rm

Current

%

Impaired

%

Defaulted

%

% of

total advances

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

Home loans 113 958 110 418 93,0 92,6 2,3 2,4 4,7 4,9 37,0 37,6

VAF 88 015 81 782 92,5 93,5 3,9 3,6 3,7 3,0 30,1 29,2

Personal loans 17 832 17 054 81,4 80,8 5,2 5,4 13,3 13,9 5,8 5,8

Card 15 573 14 611 87,5 87,8 3,2 3,2 9,3 9,0 5,0 4,9

Other loans 2 139 2 005 83,8 86,3 1,3 1,3 14,8 12,4 0,5 0,6

Total Retail 237 517 225 870 91,5 91,7 3,2 3,1 5,3 5,2 78,4 78,1

Business Banking2 66 449 66 021 93,1 92,5 3,8 4,3 3,1 3,3 21,6 21,9

Total RBB 303 966 291 891 91,9 91,9 3,3 3,4 4,8 4,8 100,0 100,0

BALANCE SHEET IMPAIRMENT AS A % OF BOOK

% of total

Current

%

Impaired

%

Defaulted

Performing

defaulted1 %

Non-performing

defaulted %

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

Home loans 1,19 1,43 0,17 0,32 5,49 5,43 6,5 5,55 24,36 25,71

VAF 2,42 2,33 0,81 0,80 14,22 13,07 9,78 8,97 56,74 61,44

Personal loans 12,73 13,48 2,36 3,05 38,57 36,33 46,79 40,35 71,74 72,44

Card 8,81 8,77 0,51 0,53 14,2 12,54 6,13 5,29 92,08 95,61

Other loans 13,82 12,69 0,42 0,40 35,04 34,77 8,19 89,62 96,20

Total Retail 3,08 3,21 0,58 0,69 14,28 13,26 13,48 12,35 51,74 52,87

Business Banking2 2,01 2,15 0,72 0,73 4,46 5,83 37,98 37,57

Total RBB 2,85 2,98 0,61 0,70 11,85 11,20 13,48 12,35 49,12 49,87

1 Performing defaulted relate to loans that are reflected as defaulted in terms of SARB directive 7/2015, which resulted in distressed restructures being held in default for six months rather than the previous three months as well as the reclassification of performing loans from performing into defaulted due to the implementation of a new curing interpretation definition where we now hold an account in default for a total of six months from the date on which the account originally cures.

BALANCE SHEET ACTUAL ADVANCES

Total advances

Rm

Current

Rm

Impaired

Rm

Defaulted

Performing1

Rm

Non-performing

Rm

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

Home loans 116 102 112 210 107 982 103 948 2 648 2 718 1 547 1 494 3 925 4 050

VAF 94 881 87 377 87 728 81 660 3 682 3 128 1 938 1 172 1 533 1 417

Personal loans 18 122 17 474 14 756 14 110 948 941 567 534 1 851 1 889

Card 15 589 14 678 13 637 12 892 502 463 119 115 1 331 1 208

Other loans 1 663 1 729 1 394 1 492 22 23 6 241 214

Total Retail 246 357 233 468 225 497 214 102 7 802 7 273 4 177 3 315 8 881 8 778

Business Banking2 67 792 65 321 63 142 60 398 2 560 2 781 2 090 2 142

Total RBB 314 149 298 789 288 639 274 500 10 362 10 054 4 177 3 315 10 971 10 920

2 Business Banking classifies and manages its advances by Nedbank Group Ratings (NGR) (NGR 1–25 and NP), while Retail classifies its advances by arrears status. Business Banking advances have been mapped in the analysis as follows: NGR 1–20 as current; NGR 21–25 as impaired; and non-performing as default.


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BALANCE SHEET ACTUAL IMPAIRMENTS

Total impairments

Rm

Current

Rm

Impaired

Rm

Defaulted

Performing1

Rm

Non-performing

Rm

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

Home loans 1 386 1 603 184 331 145 148 101 83 956 1 041

VAF 2 292 2 035 709 651 524 409 189 104 870 871

Personal loans 2 307 2 355 348 430 366 342 265 215 1 328 1 368

Card 1 374 1 288 70 69 71 58 7 6 1 226 1 155

Other loans 230 219 6 6 8 8 216 205

Total Retail 7 589 7 500 1 317 1 487 1 114 965 562 408 4 596 4 640

Business Banking2 1 362 1 407 454 440 114 162 794 805

Total RBB 8 951 8 907 1 771 1 927 1 228 1 127 562 408 5 390 5 445

INCOME STATEMENT IMPAIRMENT CHARGE

Income statement

impairment charge

Rm

Portfolio

impairment

Rm

Specific impairment

Rm

Postwriteoff

recoveries

Rm

Credit loss ratio

%

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

Home loans (4) 86 (149) (123) 217 284 (72) (75) 0,00 0,08

VAF 1 267 996 173 71 1 477 1 295 (383) (370) 1,44 1,22

Personal loans 1 049 1 179 (58) 39 1 493 1 538 (386) (398) 5,88 6,92

Card 754 756 14 (6) 999 987 (259) (225) 4,84 5,17

Other loans 76 71 – (1) 111 107 (35) (35) 3,57 3,51

Total Retail 3 142 3 088 (20) (20) 4 297 4 211 (1 135) (1 103) 1,32 1,37

Business Banking2 80 173 (34) 2 143 203 (29) (32) 0,12 0,26

Total RBB 3 222 3 261 (54) (18) 4 440 4 414 (1 164) (1 135) 1,06 1,12

2 Business Banking classifies and manages its advances by Nedbank Group Ratings (NGR) (NGR 1–25 and NP), while Retail classifies its advances by arrears status. Business Banking advances have been mapped in the analysis as follows: NGR 1–20 as current; NGR 21–25 as impaired; and non-performing as default.


Nedbank Wealth

FINANCIAL HIGHLIGHTS for the year ended 31 December 2017 2016

NII (Rm) 1 003 974

Impairments charge on loans and advances (Rm) 26 22

NIR (Rm) 3 390 3 410

Operating expenses (Rm) 2 880 2 704

Headline earnings (Rm) 1 068 1 192

ROE (%) 27,5 35,2

ROA (%) 1,62 1,93

CLR (%) 0,09 0,08

NIR to total expenses (%) 117,7 126,1

Efficiency ratio (%) 65,6 61,7

Interest margin (%) 2,15 2,15

Assets under management (Rm) 312 313 273 327

Life assurance embedded value (Rm) 2 745 2 740

Life assurance value of new business (Rm) 349 399

Total assets (Rm) 66 832 62 042

Average total assets (Rm) 66 033 61 731

Total advances (Rm) 29 413 28 577

Average total advances (Rm) 28 716 29 204

Total deposits (Rm) 35 081 33 461

Average total deposits (Rm) 36 268 34 850

Average allocated capital (Rm) 3 885 3 387

Nedbank Wealth’s headline earnings declined 10,4% to

R1 068m, due to a continued tough and subdued economic

environment, negative investor sentiment, an increase in

weather-related claims as well as the strengthening of the rand.

In addition, prior-year results include the once-off income of

£2,5m as proceeds received from the sale of a share held by

Nedbank Private Wealth as a principal member of Visa Europe.

EP decreased 26,6% to R522m and ROE declined to 27,5%,

impacted by an increase in allocated capital. On a constant

currency basis and adjusting for the Visa income, headline

earnings would have declined 3,7% and ROE would have

been 28,6%.

Despite good balance sheet growth both locally and

internationally, NII increased marginally by 3,0% to R1 003m,

impacted by the stronger rand, and the NIM remained at 2,15%.

The CLR of 0,09% remains well below the TTC target range of

0,20% to 0,40%.

1 0

68

1 19

2

510

312

37

0

44

8

33

4

28

6

Cluster Insurance Asset Management

WealthManagement


Dec 2017

Dec 2016

Negative NIR growth of 0,6% to R3 390m was due to subdued

markets, negative investor sentiment and a substantial increase

in weather-related insurance claims, resulting in a decline of

the NIR-to-expenses ratio to 117,7%. Despite the ongoing focus

on containing expense growth, the efficiency ratio increased to

65,6% due to investment in digital initiatives in order to deliver

outstanding client experiences.

Wealth Management‘s headline earnings declined 22,7% to

R286m. Locally, the business was impacted by subdued market

conditions, but benefited from our integrated international

offering. Excluding the exchange rate impact and the

once-off Visa income recognised in the prior year, headline

earnings would have declined 4,7%. Growth in liabilities was

up marginally by 4,1% and advances declined 1,7%. On a

constant currency basis this growth would have been 14,9%

and 2,8% respectively. Balance sheet growth was offset by

lower-than-expected portfolio management and brokerage fee

income, as well as reduced financial planning productivity due to

subdued markets and negative investor sentiment.

Nedbank Private Wealth remains one of the top wealth

managers both locally and internationally. The numerous

awards won are a testament to the business’s commitment to

delivering exceptional client experience.

Locally, Nedbank Private Wealth ranked third overall in the

2017 Intellidex Top Private Banks & Wealth Managers survey

and achieved first place in both the Wealthy Executive and

Up-and-coming Professional categories. The business was also

ranked second in the Private Banking category of the People’s

Choice award, a significant improvement from last year’s

fourth place. In addition, Nedbank Private Wealth won first

place for philanthropic advice in SA for the fourth consecutive

year in the annual Euromoney Private Banking and Wealth

Management Survey.

Internationally, Nedbank Private Wealth won the award for Best

UK Private Bank for a third consecutive year at the prestigious

2017 City of London Wealth Management Awards as well as

for International Bank of the Year at the 2017 International

Adviser Product and Service Awards. In addition, the business

won Best International Private Banking Service (non-UK)

and Best International Wealth Management Provider (UK)

in the 2017 International Fund and Product Awards. Other

Return on equity(%)

36

,8

36

,2

35,2

27

,5

41,

5

20172016201520142013


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Assets under management(Rm)

20172016

180

88

4

166

27

9

201520142013

223

739

31

129

24

06

2

49 5

88

25

6 0

58

56

25

5

20

7 3

01

49

99

4

International

Local

awards include Private Bank of the Year – Channel Islands at

the 2017 Citywealth IFC Awards and the award for the Most

Innovative Client Solution at the 2017 WealthBriefing GCC

Region Awards. The business launched an enhanced, integrated

mobile app that has received accolades as one of the best in

market. Most recently, the app won third place in the Best

Enterprise Solution category in the MTN Business App of the

Year Awards.

Despite subdued markets, Asset Management increased

headline earnings by 7,1% to R334m, and on a constant

currency basis would have increased headline earnings by

11,4%. The business achieved excellent growth in AUM of

14,3% to R312,3bn and is ranked the fourth-largest unit trust

manager and third-largest offshore unit trust manager in

SA. Our international and cash offerings have continued to

grow and contributed to leading overall net inflows of R28,5bn.

Nedgroup Investments has also maintained its first position

in the offshore category for the third consecutive year at

the 2018 Raging Bull Awards. The business has made significant

strides towards digitising business processes and developing

innovative solutions such as a chatbot and a robo-advisor, both

of which will make it easier for our clients to do business with us.

Insurance earnings declined 12,2% to R448m impacted

by several catastrophic weather events resulting in

higher claims, together with lower volumes in traditional

bancassurance products and higher lapses in funeral policies.

As reported in June 2017, this was partially offset by a release

of reserves after a review of actuarial valuations. Non-life

insurance gross written premiums grew marginally by 2,3% to

R1 144m impacted by lower volumes in homeowner cover. Life

value of new business decreased 12,5% to R349m due to lower

single-premium investment policies, an increase in lapses and

funeral acquisition costs, as well as pressure on margin as a

result of a change in product mix. Life EV increased 23,9%,

which, after taking a dividend payment into account, resulted in

overall growth of 0,2% to R2 745m. In 2017 Nedbank Insurance

focused on developing digital solutions by piloting an innovative

connected home geyser telemetry offering and launching

a chatbot that will make it easier to service our clients.

The business also made good progress toward implementing

a single-policy administration system for both life and non-life

insurance, with the final phase due for completion in 2018.

Looking forwardWe anticipate an improved performance in 2018, with

economic growth forecasts expected to recover moderately

as the political environment stabilises, which should result in

improved investor confidence.

Nedbank Wealth remains well positioned to deliver value to

the group through focusing on developing its client-centred

strategy, which includes market-leading solutions,


Consistent long-term performance.

Integrated international offering attracting clients and net

client cashflows.

Noteworthy awards both locally and internationally.

Low CLR.

Good balance sheet growth.

Accelerated digital innovation.

Catastrophic weather events.

Subdued markets impacting investor sentiment.

Continued regulatory pressure and costs.

Currency impact on international earnings.

Low interest rate environment in the UK.

international integration and digital innovation. The cluster

will continue to pursue new opportunities for growth and

is committed to delivering on and deriving benefit from

collaboration initiatives within the group.

Wealth Management will focus on developing a deeper

understanding of our clients, which will result in enhanced

value propositions that are relevant, holistic, integrated

and superior, while continuing to accelerate digital

innovation to provide excellent client service through

omnichannel capabilities.

Our focus in Asset Management is first and foremost on

delivering long-term performance while remaining steadfast

in our promise of stewardship. The business will also continue

to drive market-share growth across all offerings and deliver

innovative digital solutions to enhance client experience.

Insurance will continue its drive to be client-centred by

focusing on enhancing client experiences through further

investment in digital, redefining CVPs and implementing

the final phase of the single-policy administration system.

Key enablers include investment in talent and skills, as well as

continued collaboration within the group.

We forecast growth in headline earnings in line with

nominal GDP, dependent on market and investor

sentiment. Our 2020 targets remain ambitious with ROE

of more than 30,0% and a cost-to-income ratio of less than

60,0%.


ASSETS UNDER MANAGEMENTRm 2017 2016

Fair value of funds under management – by type

Unit trusts 251 088 216 835

Third parties 449 476

Private clients 60 776 56 016

312 313 273 327

Fair value of funds under management – by geography

South Africa 256 058 223 739

Rest of the world 56 255 49 588

312 313 273 327

RmUnit

trustsThird

partiesPrivate clients Total

Reconciliation of movement in funds under management – by type Opening balance at 31 December 2016 216 835 476 56 016 273 327Inflows 393 904 25 15 123 409 052Outflows (367 374) (66) (13 124) (380 564)Mark-to-market value adjustment 13 156 5 2 894 16 055Foreign currency translation differences (5 433) 9 (133) (5 557)Closing balance – 31 December 2017 251 088 449 60 776 312 313

Rm South AfricaRest of

the world Total

Reconciliation of movement in funds under management – by geography Opening balance at 31 December 2016 223 739 49 588 273 327Inflows 397 830 11 222 409 052Outflows (373 451) (7 113) (380 564)Mark-to-market value adjustment 7 940 8 115 16 055Foreign currency translation differences (5 557) (5 557)Closing balance – 31 December 2017 256 058 56 255 312 313


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Nedbank Rest of Africa

Sub-Saharan Africa GDP growth has continued to recover in line

with expectations, from a low base of 1,3% in 2016. GDP growth

should reach 3,6% by 2020, higher than that of SA, and a

diversified Africa portfolio therefore remains an important part

of our growth strategy.

Our strategy remains to own, manage and control banking

operations in the SADC and East Africa, and to provide

our clients with access to a banking network in West and

Central Africa through our investment in and alliance with

the pan-African banking group Ecobank, which operates in

36 African countries. While the performance of our investment

in ETI has disappointed, impacted by weaker economic

conditions in West Africa and currency weakness, particularly

in Nigeria, it remains an important strategic investment for the

long term, given the growth prospects in sub-Saharan Africa.

ETI has made steady progress on its recovery path in 2017,

buoyed by an improving economic environment, notable

progress in the board-led strategic turnaround and the support

of Nedbank and other shareholders. Improving commodity

prices, especially the oil price, have served to underpin the

economic recovery in ETI’s major market in Nigeria. GDP growth

in Nigeria has recovered to 2,2% from negative growth in 2016,

inflation has stabilised at about 15% and the exchange rate to

the dollar has moved closer to market benchmarks. Other key

markets in West Africa, Ghana and Côte d’Ivoire continue to

register strong growth.

FINANCIAL HIGHLIGHTS Total Rest of Africa SADC and East Africa West and Central Africa

2017 2016 2017 2016 2017 2016

NII (Rm) 1 474 1 013 1 795 1 358 (321) (345)

Impairments charge on loans and advances (Rm) 213 177 213 177

NIR (Rm) 997 877 997 877

Operating expenses (Rm) 2 200 1 887 2 200 1 887

Headline earnings (Rm) (810) (287) 165 87 (975) (374)

ROE (%) (12,6) (3,6) 3,3 2,1 (66,6) (9,7)

ROA (%) (2,23) (0,86) 0,58 0,37 (12,85) (3,72)

CLR (%) 1,02 0,98 1,02 0,98

NIR to total expenses (%) 45,3 46,5 45,3 46,5

Efficiency ratio (%) 127,2 104,5 78,8 82,9

Interest margin (%) 5,02 4,17 7,14 6,69

Total assets (Rm)1 37 487 36 189 34 167 26 253 3 320 9 936

Average total assets (Rm) 36 251 33 411 32 910 23 369 3 341 10 042

Total advances (Rm) 20 541 19 582 20 541 19 582

Average total advances (Rm) 20 366 17 724 20 366 17 724

Total deposits (Rm) 28 129 27 003 28 129 27 003

Average total deposits (Rm) 28 061 23 492 28 061 23 492

Average allocated capital (Rm) 6 445 7 942 4 981 4 076 1 464 3 866

1 The methodology for eliminating actual intercompany assets was refined during 2017, which resulted in a lower actual and average balance for West and Central Africa.


35

7

173

176

(810

)

(28

7)

35

7

69

1

173

2017

2016

201520142013

Return on equity(%)

10,1

8,7

(12

,6)

10,2

(3,6

)

2017

2016

201520142013


ETI has made good progress with regard to its governance and

operational challenges. Material milestones include:

Changes to the composition of the ETI board, with increased

representation of the major institutional shareholders

enabling greater influence over the strategic direction of ETI.

Nedbank now has two boardmembers on the ETI board.

The conclusion of a US $400m convertible bond issue, which

provided capital to strengthen the ETI balance sheet.

Additions to the risk executive, including the appointment

of a new Chief Risk Officer, which has bolstered

risk management.

Improved profitability, as reflected by ETI’s audited

2017 interim results, a profitable nine months to

30 September 2017 and management guidance for a

profitable twelve months to 31 December 2017.

Nedbank remains a supportive and engaged shareholder and

continues to explore opportunities of mutual benefit.

In our SADC business we made good progress in the period

under review, investing for growth and driving client value.

Investments made include:

successfully implementing our core banking system Flexcube

in Malawi;

rolling out mobile banking in Lesotho, Swaziland and Malawi;

improving our mobile value-added services in Namibia,

Swaziland and Lesotho with a view to enhancing our CVP;

and

improving risk management across all subsidiaries in light of

current and anticipated regulation.

An important part of our growth is enhancing digital solutions

and channels on the back of the investment in our core

banking system. The postacquisition integration of Banco

Único (consolidated from 1 October 2016) is progressing well,

with a focus on enhancing financial and regulatory reporting,

optimising technology-related costs and extending compelling

value propositions to SA-banked corporates in Mozambique.

Financial highlightsRoA reported a headline loss of R810m, with headline earnings

of R165m from the SADC operations, including headoffice costs,

and a headline loss of R975m from our 21% shareholding in ETI.

Results for ETI are reported a quarter in arrear, and the losses

stem from the fourth quarter of 2016, which were driven largely

by impairments. Encouragingly, the following three quarters

of 2017 showed a return to profitability as a result of strong

performance in Treasury, fixed income and cash management.

Our SADC banking subsidiaries, excluding headoffice costs,

grew headline earnings 9,6% to R445m, with an ROE of 10,0%,

underpinned by strong performance from MBCA (Zimbabwe)

and Banco Único (Mozambique).

Average advances grew 14,9% and we increased NIM from

6,69% to 7,14%. Our investments in technology, CVPs and new

products assisted client growth of 14,0% to 336 707 clients and

an increase in NIR of 13,7% to R997m. Excluding Banco Único,

consolidation client growth was 14,7% (314 381 clients), with

a 0,7% increase of NIR to R847m.

The CLR increased slightly to 1,02% due to a 19,8% increase in

impairments to R213m resulting from economic pressures in

some subsidiaries. The CLR is marginally above our target range

of 0,65% to 1,00%.

Expenses increased by 16,6% to R2 200m, but remains below

operating income growth of 25,3%. Excluding Banco Único,

consolidation expenses increased 4,1% and operating income

12,6%. Excluding the associate loss from ETI, the efficiency ratio

improved to 78,76% from 82,95%.

Looking forward Looking ahead, sub-Saharan Africa GDP is expected to

grow 3,7% in 2018, the highest growth expected since 2011.

Nedbank is committed to long-term and profitable growth

in RoA.

We expect ongoing, strong earnings growth in the SADC,

with improving economic conditions in SA having a positive

impact on growth in the region. We will continue to create

shared value with our clients from investments made and the

repositioning of our business for the digital age through:

completing our rollout of the new core banking system;

investing in digital solutions and channels across all

the subsidiaries;

launching competitive CVPs in both wholesale and retail

on the back of investments made;

continuing to focus on cost management, especially

at headoffice;

continuing to leverage and improve collaboration with

Ecobank and the greater Nedbank Group; and

continuing to improve risk management to ensure a

sustainable, long-term, profitable business.


ETI returned to profitability in the three quarters of profit to

30 September 2017.

Opened 198 accounts in 25 countries for 85 of our wholesale

clients who bank with Ecobank.

Invested consistently in digital solutions and channels.

Developed new CVPs enabling strong growth in clients, assets

and deposits.

Grew revenues ahead of costs.

Reduced headoffice costs.

Difficult economic conditions in some SADC countries.

Associate loss from ETI Q4 2016 accounted for a quarter

in arrear.

Increased regulatory requirements driving higher cost

of compliance.

With regard to ETI, the recovery in commodity prices is expected

to have a positive impact on growth prospects in key markets.

We will continue to support the strategic turnaround focused

on improving governance, diversifying income streams away

from lending, and strengthening risk management. We will also

continue to explore ways across our businesses to generate

flows above our equity stake in ETI, particularly in CIB, by

focusing on increasing dealflow and launching an integrated

product in RBB.

We expect RoA to move to profitability and make an increasing

contribution to group earnings.


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Geographical segmental reportingfor the year ended 31 December

Nedbank Group South Africa1 Rest of Africa2 Rest of world

Rm 2017 2016 2017 2016 2017 2016 2017 2016

Consolidated statement of financial position

Assets

Cash and cash equivalents 36 122 45 084 27 228 36 991 6 791 7 166 2 103 927

Other short-term securities 92 775 84 679 74 128 68 559 4 383 2 580 14 264 13 540

Derivative financial instruments 29 904 17 633 29 721 17 248 39 44 144 341

Government and other securities 49 241 51 048 46 652 47 804 493 488 2 096 2 756

Loans and advances 710 329 707 077 660 071 653 630 20 541 19 582 29 717 33 865

Other assets 64 943 60 501 55 097 50 227 5 240 5 795 4 606 4 479

Intergroup assets – – (805) 534 271

Total assets 983 314 966 022 892 897 873 654 37 487 36 189 52 930 56 179


Total equity 88 539 81 711 73 692 73 106 6 445 7 942 8 402 663

Derivative financial instruments 23 367 13 296 23 286 13 095 3 16 78 185

Amounts owed to depositors 771 584 761 542 702 639 691 699 28 129 27 003 40 816 42 840

Provisions and other liabilities 48 248 57 397 46 539 55 567 1 034 1 214 675 616

Long-term debt instruments 51 576 52 076 51 353 52 062 223 14

Intergroup liabilities – – (4 612) (11 875) 1 653 2 959 11 875

Total liabilities 983 314 966 022 892 897 873 654 37 487 36 189 52 930 56 179

Consolidated statement of comprehensive income

NII 27 624 26 426 25 435 24 749 1 474 1 013 715 664

Impairments charge on loans and advances 3 304 4 554 3 028 4 059 213 177 63 318

Income from lending activities 24 320 21 872 22 407 20 690 1 261 836 652 346

NIR 24 063 23 503 22 212 21 631 997 877 854 995

Operating income 48 383 45 375 44 619 42 321 2 258 1 713 1 506 1 341

Operating expenses 29 812 28 366 26 964 25 739 2 200 1 887 648 740

Indirect taxation 1 001 927 948 884 40 32 13 11

Profit from operations 17 570 16 082 16 707 15 698 18 (206) 845 590

Share of losses of associate companies and joint arrangements (838) (105) (96) (20) (742) (85)

Profit before direct taxation 16 732 15 977 16 611 15 678 (724) (291) 845 590

Direct taxation 4 267 3 985 4 181 4 040 (18) (93) 104 38

Profit after taxation 12 465 11 992 12 430 11 638 (706) (198) 741 552

Profit attributable to non-controlling interest 678 527 574 438 104 89

Headline earnings 11 787 11 465 11 856 11 200 (810) (287) 741 552

1 Includes all group eliminations.2 The RoA geographical segmental income statement and balance sheet consist of the SADC banking subsidiaries and the investment in ETI. These statements do not

include transactions concluded with clients resident in the rest of Africa by other group entities within CIB nor transactional banking revenues. For example, CIB has a credit exposure to clients resident in the rest of Africa of R20,4bn (December 2016: R22,6bn).


91 Net margin analysis

95 Impairments


106 Expenses


108 Taxation charge

108 Preference shares

Income statement analysis

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1 Net margin analysis

2017 2016

Nedbank Group Bps Rm Bps Rm

Average interest-earning banking assets 763 112 747 0451

Opening NIM (rebased)/NII 354 26 426 330 23 885

Growth in banking assets 568 1 814

Endowment 5 359 18 1 390

Capital, net of working capital 2 151 11 831

Deposits 3 208 7 559

Asset margin pricing and mix 6 445 (3) (209)

Impact due to pricing (2) (182) 1 54

Impact due to mix change 8 627 (4) (263)

Liability margin pricing and mix (2) (129) (4) (257)

Deposits pricing and mix movements (9) 2 182

Impact due to deposit pricing (2) (122) 2 178

Impact due to deposit mix change 2 113 4

Enhancing funding profile (2) (120) (6) (439)

Prime–JIBAR basis (2) (151) 1 77

Cost associated with HQLA 32 (2) (154)

Removal of trading LAP 2

Other 1 74 (1) (120)

Previously reported closing NIM/NII for the year 362 27 624 341 26 426

Rebased for the year 131

Closing NIM/NII for the year (2016 rebased) 362 27 624 3541 26 426

1 To align with industry practices from November 2016, the CIB LAP (R34bn), which forms part of the overall Nedbank HQLA portfolio, was removed from average interest-earning banking assets. The average interest-earning banking assets were adjusted from R775 092m to R747 045m for 2016 to reflect the impact of removing CIB liquid assets from the beginning of 2016. This change has no effect on NII.

Net interest margin (yoy)(Bps)

Prime–JIBARbasis

Liabilitypricing and mix

Assetmix

2016rebased

Removal of trading

LAP

2016

341354

362

13

(2)

5

8 (2)(2) 1

2017Assetpricing

Endowmentimpact

Other


NET INTEREST INCOMEFavourable Unfavourable

Endowment benefit due to higher levels of capital and

transactional balances.

Positive mix changes due to improving growth in RBB

compared with slower growth in CIB low-margin assets.

The consolidation of Banco Único with effect from

October 2016, in which margins are wider.

Narrowed asset pricing due to competitive pricing as a result

of tough macroeconomic conditions slowing dealflow and

the implementation of NCA interest rate caps, despite the

improvement in the home loans portfolio yield due to the runoff

of lower-margin backbook vintages.

Increase in the cost of enhancing the funding profile of the

group to improve LCR and NSFR compliance.

Narrowing of the prime–JIBAR spread in 2017 versus 2016.

NII SENSITIVITY ANALYSIS At December 2017 the NII sensitivity of the group’s banking book for a 1% parallel reduction in interest rates, measured over

12 months, is 1,67% of total group ordinary shareholders’ equity, which is within the board’s approved risk limit of < 2,25%.

This exposes the group to a decrease in NII of approximately R1 363m before tax should interest rates decrease by 1%, measured

over a 12-month period.

The group’s NII sensitivity exhibits very little convexity and will therefore also result in an increase in pretax NII of approximately

similar amounts should interest rates increase by 1%.

The group’s NII sensitivity is actively managed through on- and off-balance-sheet interest rate risk management strategies for the

group’s expected interest rate view and impairment sensitivity.

Net interest income(Rm)

22

96

1

21

22

0

23

88

5

26

42

6

27

62

4

20172016201520142013

Interest margin trends versus prime rate of Nedbank Group(%)

3,5

2

3,5

7

3,3

0

Nedbank

Group

NIM

Average

prime

rate

8,5

9,1

10,4 10,4

9,4

3,5

4

3,6

2

2017201612015201420131 2016 rebased.


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Nedbank’s spread increased by 12 bps to 182 bps, mainly due to an improvement of 19 bps in the group CLR to 49 bps. This

was mainly attributable to lower impairments as a result of recoveries of various clients in CIB and overlay releases for certain

provisioned risk that had not emerged.

The group’s lending spread decreased by 7 bps to 231 bps, mainly due to the squeeze in the prime–JIBAR spread, competitive

pricing as dealflow slowed and the implementation of NCA interest rate caps.

Lending spread versus credit loss ratio (including target range) of Nedbank Group(Bps)

20172016

231

274

201520142013

Lending spread

(banking financial assets)

CLR

Current CLR target range

(60–100 bps)

= 182 = 177 = 195 = 177

4968

254238

= 170

7779

106

283


Average banking statement of financial position and related interest 2017 2016

Average balance Margin statement interest

Average

balance Margin statement interest

Rm Assets Received % Assets Received %

Average prime rate 10,39 10,41

Assets

Loans and advances

Home loans (including properties in possession) 147 751 14 073 9,52 143 794 13 552 9,42

Commercial mortgages 153 904 15 234 9,90 141 696 13 963 9,85

Finance lease and instalment debtors 105 381 12 211 11,59 99 812 11 448 11,47

Credit card balances 15 834 2 314 14,61 14 834 2 117 14,27

Overdrafts 18 618 2 087 11,21 17 475 1 837 10,51

Term loans and other1 216 571 18 135 8,37 227 849 17 665 7,75

Personal loans 20 039 4 716 23,53 18 673 4 512 24,16

Impairment of loans and advances (12 081) (11 546)

Government and public sector securities 37 447 3 009 8,04 44 692 3 635 8,13

Short-term funds and trading securities 59 648 3 520 5,90 77 813 4 666 6,00

Interest-earning banking assets2 763 112 75 299 9,87 775 092 73 395 9,47

Revaluation of FVTPL3-designated assets 1 331 839

Other non-interest-bearing assets4 84 096 74 939

Total assets 848 539 75 299 8,87 850 870 73 395 8,63

Liabilities Paid % Liabilities Paid %


Deposit and loan accounts 405 313 27 925 6,89 394 587 26 153 6,63

Current and savings accounts 103 358 1 004 0,97 97 947 976 1,00

Negotiable certificates of deposit 95 737 7 809 8,16 96 884 7 692 7,94

Other interest-bearing liabilities2 67 220 5 409 8,05 102 088 7 648 7,49

Long-term debt instruments 53 658 5 528 10,30 49 157 4 500 9,15

Interest-bearing banking liabilities 725 286 47 675 6,57 740 663 46 969 6,34

Revaluation of FVTPL3-designated liabilities 1 331 839

Other non-interest-bearing banking liabilities5 40 318 30 999

Ordinary and minority shareholders equity 81 604 78 369

Total shareholders' equity and liabilities 848 539 47 675 5,62 850 870 46 969 5,52

Interest margin on average interest-earning banking assets 763 112 27 624 3,62 775 092 26 426 3,41

1 Includes term loans, preference shares, factoring debtors, interest on derivatives and other lending-related instruments.2 Net interdivisional assets – trading book, previously disclosed as a negative in other interest-earning banking assets, now included in other interest-bearing liabilities,

which resulted in a fluctuation in the yield for interest-bearing banking liabilities.3 Fair value through profit and loss.4 Includes cash and banknotes, derivative financial instruments, insurance assets, associates and investments, property and equipment, mandatory reserve deposits

with central banks, intangible assets and other assets.5 Includes derivative financial instruments, investment contract liabilities and other liabilities.


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2 Impairments

2013 2014 2015 2016 2017

Total income statement impairments net of recoveries (Rm) 5 565 4 506 4 789 4 554 3 304Specific impairments 5 091 4 143 4 355 4 558 3 258Portfolio impairments 474 363 434 (4) 46

Total balance sheet impairments (Rm) 11 456 11 095 11 411 12 149 12 002Specific impairments 7 543 6 832 6 664 7 317 7 081Portfolio impairments 3 913 4 263 4 747 4 832 4 921

Total impairments to gross loans and advances (%) 1,94 1,78 1,65 1,69 1,66Corporate and Investment Banking 0,49 0,48 0,49 0,58 0,61Retail and Business Banking 3,56 3,22 3,00 2,98 2,85

Nedbank Group impairments charge(Rm)

5 0

91

4 1

43

4 3

55

4 5

58

Specific impairments

Portfolio impairments

5 5

65

474

363

3 3

04

4 7

89

4 5

54

3 2

58

20172015 201620142013

4 5

06

434

46

(4)20172015 2016

1,6

5

1,6

9

1,7

8

1,9

4

20142013

1,6

6

Total impairments to gross loans and advances(%)

Nedbank Group credit loss ratio trends(%)

0,49

0,79

Specific CLR

Portfolio CLR

Total CLR

Total CLR without the central overlay

0,01

0,70

0,69

0,67

0,77

1,06

0,48

0,54

0,72

0,07 0,07-0,01

0,09

Current CLR target

range (0,6–1,0)

20172015 201620142013

0,68

0,97


IMPAIRMENT OF LOANS AND ADVANCES

Rm

Corporate and

Investment Banking

Retail and Business

Banking WealthRest of

Africa Centre 2017 2016

Opening balance 2 165 8 907 154 423 500 12 149 11 411

Specific impairment 1 096 5 855 118 245 3 7 317 6 664

Specific impairment, excluding discounts 755 5 101 30 3 5 889 5 441

Specific impairment for discounted cashflow losses 341 754 118 215 1 428 1 223

Portfolio impairment 1 069 3 052 36 178 497 4 832 4 747

Impairments charge 210 4 386 26 256 (350) 4 528 5 711

Statement of comprehensive income charge net of recoveries 193 3 222 26 213 (350) 3 304 4 554

Specific impairment (230) 3 203 61 206 3 240 4 353

Net increase/(decrease) in impairment for discounted cashflow losses (93) 73 (37) 75 18 205

Portfolio impairment 516 (54) 2 (68) (350) 46 (4)

Recoveries 17 1 164 43 1 224 1 157

Amounts written off/Other transfers (175) (4 342) (60) (101) 3 (4 675) (4 973)

Specific impairment (172) (4 343) (59) (146) 2 (4 718) (5 062)

Portfolio impairment (3) 1 (1) 45 1 43 89

Total impairments 2 200 8 951 120 578 153 12 002 12 149

Specific impairment 618 5 952 83 423 5 7 081 7 317

Specific impairment, excluding discounts 370 5 125 2 133 5 5 635 5 889

Specific impairment for discounted cashflow losses 248 827 81 290 1 446 1 428

Portfolio impairment 1 582 2 999 37 155 148 4 921 4 832

Total gross loans and advances 358 229 314 149 29 533 21 119 (699) 722 331 719 226

Average banking advances 327 695 303 966 28 851 20 839 (1 046) 680 305 664 692

RECONCILIATION OF SPECIFIC IMPAIRMENT FOR DISCOUNTED CASHFLOW LOSSESRm

Opening balance 341 754 118 215 1 428 1 223

Net increase/(decrease) in impairment for discounted cashflow losses (93) 73 (37) 75 18 205

Interest on specifically impaired loans and advances (200) (1 061) (41) (63) (1 365) (1 370)

Net specific impairments charge for discounted cashflow losses 107 1 134 4 138 1 383 1 575

Closing balance 248 827 81 290 1 446 1 428


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Nedbank Group’s balance sheet impairments remained stable at R12,0bn due to the offsetting effects of lower specific

impairments in CIB, reflective of the resolutions of various clients from the defaulted portfolio and higher impairments in the

performing portfolio.

Total impairments as a percentage of gross loans and advances decreased to 1,66% as a result of a decrease to 2,85% in RBB,

which was offset by an increase in CIB to 0,61% off a lower base. Nedbank is comfortable with the level of impairment, as the

credit book contains quality assets that have performed well over the financial period.

The income statement impairments decreased to R3,3bn, enabled by an overall derisking of the portfolio by the implementation of

proactive risk management in the performing loans portfolio as well as improved collections and resolutions in the defaulted-loans

and advances portfolio.

CIB income statement impairments decreased by 82,4% to R193m, driven by successful restructuring of defaulted advances

that led to lower specific impairments, recoveries of previously written off exposures and an adequately collateralised

portfolio within Property Finance that represents 38,4% of the CIB defaulted portfolio at 31 December 2017 (32,6% at

31 December 2016).

RBB income statement impairments decreased by 1,2% to R3,2bn, mainly driven by a 53,8% decrease in Business Banking to

R80m. This is evident in the increased proportion of low-risk clients that, taken together with improvements in collections, has

resulted in a significant derisking of the overall portfolio over time. This was offset by a slight increase in arrears in 2017 on the

back of increased consumer distress levels in the current macroeconomic environment.

Group writeoffs decreased slightly to R4,7bn, reflective of the positive change in the collection and resolution strategies since

2012 in the RBB and CIB portfolios, resulting in postwriteoffs recoveries increasing to R1,2bn.


Credit loss ratioCREDIT LOSS RATIO PER BUSINESS CLUSTER

%

Corporate and

Investment Banking

Corporate and

Investment Banking,

excluding Property

FinanceProperty

Finance

Retail and Business Banking

Business Banking Retail Wealth

Rest of Africa

Nedbank Group

TTC target ranges 0,15–0,45 1,30–1,80 0,20–0,40 0,65–1,00 0,60–1,002017 Total CLR 0,06 0,10 (0,05) 1,06 0,12 1,32 0,09 1,02 0,49

Specific CLR (0,10) 0,04 (0,04) 1,08 0,17 1,33 0,08 1,34 0,48Portfolio CLR 0,16 0,06 (0,01) (0,02) (0,05) (0,01) 0,01 (0,32) 0,01

2016 Total CLR 0,34 0,53 0,04 1,12 0,26 1,37 0,08 0,98 0,68

Specific CLR 0,33 0,52 0,02 1,12 0,26 1,38 0,06 1,12 0,69

Portfolio CLR 0,01 0,01 0,02 (0,0) 0,00 (0,01) 0,02 (0,14) (0,01)

SUMMARY OF THE CREDIT LOSS RATIO BY BUSINESS UNIT

Mix of average banking

advances Impairment charges (net of recoveries) Credit loss ratio

2017 2016 2017 2016 2017 2016

% % Rm Mix (%) Rm % % %

Nedbank Group 100,0 100,0 3 304 100,0 4 554 100,0 0,49 0,68

Corporate and Investment Banking 48,2 48,9 193 5,8 1 095 24,0 0,06 0,34

CIB, excluding Property Finance 27,9 29,7 267 8,1 1 049 23,0 0,10 0,53

Property Finance 20,3 19,2 (74) (2,3) 46 1,0 (0,05) 0,04

Retail and Business Banking 44,7 43,9 3 222 97,5 3 261 71,6 1,06 1,12

Business Banking 9,8 9,9 80 2,4 173 3,8 0,12 0,26

Retail 34,9 34,0 3 142 95,1 3 088 67,8 1,32 1,37

Home Loans 12,4 12,4 (4) (0,1) 55 1,2 0,00 0,07

MFC 12,6 12,0 1 276 38,6 1 019 22,4 1,49 1,28

Unsecured Lending 2,7 2,6 1 063 32,2 1 179 25,9 5,69 6,92

Relationship Banking 4,8 4,7 16 0,5 29 0,6 0,05 0,09

Card 2,3 2,2 754 22,8 756 16,6 4,80 5,13

Wealth 4,2 4,4 26 0,8 22 0,5 0,09 0,08

Rest of Africa 3,1 2,8 213 6,4 177 3,9 1,02 0,98

* Client engagement excluded from Retail, Centre excluded from Group.

Despite subdued economic conditions, Nedbank has maintained a low CLR of 0,49%, which is below the TTC target range of 0,6%

to 1,0%. All business units were below or within their TTC target ranges, with the exception of RoA.

Overall improvement in CLR was as a result of lower growth and lower losses in the wholesale portfolio, which led to impairment

releases following improved collections, coupled with historical selective origination improving the quality of the book, which has

proactively limited downside risk.

CIB’s CLR improved to 0,06% and remained below the TTC target range of 0,15% to 0,45%, with specific impairment releases

as a result of proactive management of the defaulted portfolio, as well as prudent risk management in the overall portfolio.

Although the CIB portfolio contracted, the portfolio performed well across all business units as positive risk management

countered losses.

RBB’s CLR improved to 1,06% and remained below the TTC target range of 1,30% to 1,80%, with all business units within risk

appetite. Lower impairments were driven by the release of overlays and better quality of the portfolio.

The RoA CLR increased to 1,02%, above the TTC target range of 0,65% to 1,00%, in line with gross loans and advances growth.

Wealth’s CLR increased to 0,09%, remaining below the TTC target range of 0,20% to 0,40%.

The central provision decreased to R150m (Dec 2016: R500m) due to risk that has materialised or has been adequately resolved.

The remaining R150m is retained to ensure adequate coverage for emerging risks.


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Nedbank Group credit loss ratio per cluster(%)

20172015 201620142013

RBB

Rest of Africa

Wealth

CIB

1,061,14

1,39

1,80

1,02

1,25

1,12

0,98

0,15

0,34

0,190,28

0,090,17

0,230,37

0,06

0,40

0,08

0,30

Group defaulted loans and advances Nedbank Group’s defaulted advances remained stable at R19,6bn, despite the growth in the portfolio. This was due to the decrease

in CIB defaulted advances with the successful resolution, curing and rerating of counters into the performing portfolio, as well as

settlement by various clients. This was offset by RBB’s defaulted advances, which increased due to consumer strain on repayment

ability as well as the increase in performing defaults in the portfolio.

Nedbank Group’s defaulted advances as a percentage of gross loans remained stable at 2,71%, remaining within our credit

risk appetite.

RBB’s defaulted advances increased by 6,4% to R15,1bn, representing 4,82% as a percentage of gross loans, mainly driven by:

Retail’s defaulted advances increasing by 8,0% to R13,1bn as a result of higher defaults in MFC, which increased by 34,7% to

R3,4bn, driven by performing defaulted advances and Card increasing by 9,6% to R1,5bn, which is reflective of adverse economic

conditions and consumer distress impacting consumer repayment ability.

The increase in performing defaulted advances being a catalyst for the increase in DLAA, which resulted in an additional R4,2bn

exposure accounted for as defaulted.

The Home Loans defaulted advances decreasing by 2,6% to R4,8bn, which represents 5,55% as a percentage of gross loans and

advances, with Home Loans benefiting from lower-risk new business as well as the improved quality of the home loan book.

Business Banking’s defaulted advances decreasing by 2,4% to R2,1bn.

CIB’s defaulted advances decreased by 29,5% to R2,9bn, representing 0,82% as a percentage of gross loans, and caused by the

resolution, curing and rerating of counters into the performing portfolio, as well as settlement of various clients.

2017 2016

Group Actual

Non-performing

default Actual

Non-

performing

default

Defaulted advances 19 576 15 399 19 553 16 238

Defaulted advances as a percentage of gross loans and advances 2,71 2,13 2,72 2,25

Portfolio coverage 0,70 0,69

Specific coverage ratio 36,2 42,3 37,4 42,5

Total impairments as a percentage of gross loans and advances 1,66 1,69


NEDBANK GROUP DEFAULTED ADVANCES BY BUSINESS CLUSTER 2013 2014 2015 2016 2017

Rm

Mix

(%) Rm

Mix

(%) Rm

Mix

(%) Rm

Mix

(%) RmMix(%)

Corporate and Investment Banking 3 406 19,1 2 759 17,4 4 074 23,2 4 176 21,4 2 944 15,0CIB, excluding Property Finance 1 389 7,8 950 6,0 2 636 15,0 2 815 14,4 1 814 9,3 Property Finance 2 017 11,3 1 809 11,4 1 438 8,2 1 361 7,0 1 130 5,8Retail and Business Banking 13 736 77,0 12 266 77,4 12 263 69,8 14 235 72,8 15 148 77,4 Business Banking 2 334 13,1 2 087 13,2 2 059 11,7 2 142 11,0 2 090 10,7 Retail 11 402 63,9 10 179 64,2 10 204 58,1 12 093 61,8 13 058 66,7

Home Loans 4 746 26,6 4 053 25,6 3 869 22,0 4 880 25,0 4 753 24,3MFC 1 933 10,8 1 898 12,0 2 182 12,4 2 539 13,0 3 419 17,5Unsecured Lending 2 828 15,8 2 502 15,8 2 297 13,1 2 423 12,4 2 418 12,4Card 824 4,6 892 5,6 1 072 6,1 1 323 6,8 1 450 7,4Relationship Banking 914 5,1 674 4,3 625 3,6 765 3,9 827 4,2

Wealth 525 2,9 599 3,8 587 3,3 608 3,1 648 3,3Rest of Africa 181 1,0 222 1,4 635 3,6 534 2,7 836 4,3Nedbank Group 17 848 100,0 15 846 100,0 17 559 100,0 19 553 100,0 19 576 100,0

* Client engagement excluded from Retail.

Balance sheet coverage ratios Nedbank Group’s specific coverage decreased to 36,2% primarily due to lower specific coverage in RBB as well as increased

resolutions of various clients in CIB. This resulted in lower specific impairments, partially offset by the impact of a changing mix

in the defaulted portfolio as CIB’s defaulted advances contribution decreased while RBB increased. The lower coverage reflects

increased the performing defaulted advances in RBB and the recovery success in CIB.

RBB specific coverage decreased to 39,3% mainly due to a reduction in the Retail specific coverage which decreased to 39,5% due

to a higher proportion of the defaulted advances being considered performing defaults-which carry lower impairments-while

Business Banking’s specific coverage increased slightly to 38,0%.

CIB’s specific coverage decreased to 21,0%. This is due to lower specific impairments raised on wholesale advances, which are

considered on a client-by-client basis and secured with relatively lower loss expectations in the event of default. Property Finance’s

loans and advances are highly collateralised with low LTV ratios, relatively lower loss expectations in the event of default and

therefore a low specific coverage of 17,0%.

The Nedbank Group portfolio coverage ratio increased slightly by 0,70%, mainly due to portfolio coverage in CIB increasing to

0,44%, reflective of the deterioration in certain NGRs. RBB decreased to 1,00%, mainly as a result of overlay releases.

Defaulted advances as a percentage of gross loans and advances(%)

15 84617 848

2,71

Total Nedbank Group

Nedbank CIB

Nedbank RBB

3,02 2,54 2,53 2,72

0,821,19 0,9 1,14 1,12

4,825,13 4,424,25

4,76

17 559 15 399

19 57619 553

4 1773 315

16 238

Defaulted advances

Performing defaulted

advances

20172016201520142013


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BALANCE SHEET COVERAGE RATIO BY PRODUCT AND BUSINESS CLUSTER Gross loans Defaulted loans and advances

Performing gross loans

(Rm)

Portfolio impairment

(Rm)

Portfolio coverage

ratio (%)

Default loans and advances

(Rm)

Specific impairment

(Rm)

Specific coverage

ratio (%)

Net total exposure

(Rm)

2017 Corporate and Investment Banking 355 286 1 582 0,45 2 944 618 21,0 356 029

CIB, excluding Property Finance 212 616 1 240 0,58 1 814 426 23,5 212 762Property Finance 142 670 342 0,24 1 130 192 17,0 143 267

Retail and Business Banking 299 000 2 999 1,00 15 148 5 952 39,3 305 198Business Banking 65 701 569 0,87 2 090 794 38,0 66 429Retail1 233 299 2 430 1,04 13 058 5 158 39,5 238 769

Residential mortgages 5 382 1 049 19,5 Commercial mortgages 21 7 34,1 Lease and instalment debtors 3 472 1 060 30,5 Credit card balances 1 450 1 233 85,0 Personal loans 2 418 1 593 65,9 Properties in possession 68 0,0 Other loans and advances 247 216 87,6

Wealth 28 885 37 0,13 648 83 12,8 29 413Rest of Africa 20 282 155 0,77 836 423 50,5 20 541Nedbank Group 702 755 4 921 0,70 19 576 7 081 36,2 710 329

Residential mortgages 6 703 1 284 19,2 Commercial mortgages 1 778 325 18,3 Lease and instalment debtors 3 815 1 265 33,2 Credit card balances 1 467 1 246 85,0 Personal loans 2 500 1 636 65,4 Properties in possession 156 0,0 Other loans and advances 3 157 1 324 41,9

2016

Corporate and Investment Banking 368 189 1 069 0,29 4 176 1 096 26,3 370 199

CIB, excluding Property Finance 232 561 713 0,31 2 815 811 28,8 233 851

Property Finance 135 628 356 0,26 1 361 285 21,0 136 348

Retail and Business Banking 284 555 3 052 1,07 14 235 5 853 41,1 289 882

Business Banking 63 179 602 0,95 2 142 805 37,6 63 914

Retail1 221 376 2 450 1,11 12 093 5 048 41,8 225 968

Residential mortgages 5 418 1 111 20,5

Commercial mortgages 36 13 36,1

Lease and instalment debtors 2 589 975 37,7

Credit card balances 1 323 1 161 87,8

Personal loans 2 423 1 583 65,4

Properties in possession 89

Other loans and advances 215 205 95,8

Wealth 28 123 36 0,13 608 118 19,4 28 577

Rest of Africa 19 471 178 0,91 534 245 46,1 19 582

Nedbank Group 696 673 4 832 0,69 19 553 7 317 37,4 707 077

Residential mortgages 6 755 1 430 21,2

Commercial mortgages 1 962 440 22,4

Lease and instalment debtors 2 929 1 178 40,2

Credit card balances 1 337 1 174 87,8

Personal loans 2 477 1 618 65,3

Properties in possession 250

Other loans and advances 3 843 1 471 38,3

1 The numbers are based on individual products within Retail and not the various business units.


NEDBANK GROUP COVERAGE RATIOS BY BUSINESS CLUSTER% 2013 2014 2015 2016 2017

Specific coverage ratio 42,3 43,1 38,0 37,4 36,2Corporate and Investment Banking 23,6 27,7 17,1 26,3 21,0

CIB, excluding Property Finance 33,7 36,4 13,4 28,8 23,5Property Finance 16,7 23,1 23,8 21,0 17,0

Retail and Business Banking 47,5 47,6 45,6 41,1 39,3Business Banking 35,8 38,5 40,5 37,6 38,0Retail 49,9 49,4 46,7 41,8 39,5

Wealth 26,9 23,9 20,8 19,4 12,8Rest of Africa 47,0 47,3 41,6 46,1 50,5

Portfolio coverage ratio 0,68 0,70 0,70 0,69 0,70Corporate and Investment Banking 0,21 0,24 0,29 0,29 0,45

CIB, excluding Property Finance 0,21 0,24 0,30 0,31 0,58Property Finance 0,22 0,22 0,28 0,26 0,24

Retail and Business Banking 1,18 1,17 1,11 1,07 1,00Business Banking 0,72 0,82 0,94 0,95 0,87Retail 1,33 1,28 1,16 1,11 1,04

Wealth 0,12 0,10 0,12 0,13 0,13Rest of Africa 0,70 0,53 0,64 0,91 0,77


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Nedbank Group defaulted advances and specific coverage (%)

15 84617 848

36,2

Nedbank Group specific coverage42,3

43,1

38,0 37,4

17 559 19 57619 553

Defaulted advances

20172016201520142013

Nedbank Retail portfolio coverage ratio(%)

0,36

1,00

0,56

1,04

1,33 1,281,16 1,11

Personal Loans

Home Loans

MFC

Card

Nedbank Retail

0,92 0,86

1,381,061,28 0,97

1,35

0,941,26

0,71

1,031,26

20172016201520142013

4,58 4,41

4,99 5,135,23

Nedbank Retail specific coverage ratio(%)

93,794,493,7

39,5

46,741,8

49,449,9

38,5

25,0

Personal Loans

Home Loans

MFC

Card

62,1

28,2

53,6

27,2

66,7

87,7

37,2

20,0

65,4

85,0

30,2

19,9

69,467,0 65,9

Nedbank Retail

20172016201520142013



Nedbank Group

Corporate and

Investment Banking

Rm 2017 2016 2017 2016

Commission and fee income 17 355 16 686 2 708 2 829

Insurance commission 693 582

Exchange commission 501 532 130 152

Guarantee income 253 189 183 132

Other commission 3 578 3 372 942 1 000

Administration fees 1 139 1 085 10 8

Cash-handling fees 968 936 220 200

Service charges 4 145 4 043 48 46

Card income 3 701 3 485

Other fees 2 377 2 462 1 175 1 291

Insurance income 1 566 1 727

Fair-value adjustments 106 – (144) (61)

Fair-value adjustments (29) (73) (144) (61)

Fair-value adjustments – own long-term debt 135 73

Trading income 3 900 3 761 3 689 3 578

Foreign exchange 1 378 1 449 1 167 1 266

Debt securities 2 158 1 933 2 158 1 933

Equities 325 332 325 332

Commodities 39 47 39 47

Private-equity income 708 929 705 929

Security dealing – realised1 119 (41) 119 (41)

Security dealing – unrealised1 (405) 451 (408) 451

Dividends received 700 179 700 179

Other income 141 138 141 138

Interest and distribution 153 202 153 202

Investment income 54 26 29 8

Dividends received 18 15 8 8

Long-term assets sales 36 11 21

Sundry income2 374 374 177 170

Total non-interest revenue 24 063 23 503 7 164 7 453

1 Security dealings-unrealised relates to equity investments in associates and joint ventures, which are estimated and converted to realised once earned.2 Sundry income mainly comprises rental income and unclaimed balances.

Non-interest revenue to total operating expenses(%)

82

,8

86

,4

83

,3

82

,9

80

,7

20172016201520142013

Non-interest revenue(Rm)

20

312

19 3

61

21

74

8

23 5

03

24

06

3

20172016201520142013


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Retail and


2017 2016 2017 2016 2017 2016 2017 2016

11 919 11 325 2 059 1 913 721 661 (52) (42)

445 427 213 120 35 35

242 219 76 95 67 63 (14) 3

39 47 1 30 10

2 442 2 175 10 27 163 156 21 14

522 523 540 478 52 60 15 16

718 698 1 1 29 37

3 791 3 709 35 31 271 257

3 643 3 447 57 38 1

77 80 1 183 1 161 17 5 (75) (75)

255 262 1 311 1 459 43 58 (43) (52)

(32) 5 – – 5 (2) 277 58

(32) 5 5 (2) 142 (15)

135 73

90 78 – – 121 105 – –

90 78 121 105

– – 3 – – – – –

3

16 12 3 1 1 3 5 2

1 1 3 1 1 3 5 2

15 11

64 42 14 37 106 52 13 73

12 312 11 724 3 390 3 410 997 877 200 39


Achieved transactional client wins and increased levels of

cross-sell across the group.

Avoided potential negative impacts in trading income

around event risks ie macro economics and political and

policy uncertainty.

Weak business and consumer confidence levels negatively

affecting transactional activity.

High private-equity and commission and fee bases in the

previous year in CIB.

Slower main-banked client conversion due to lower levels

of transactional activity causing clients to fall out of our

main-banked definition.

Increased weather-related claims, lower volumes and an

increase in lapses in insurance.

Muted activity levels in trading income.


4 Expenses

Nedbank Group

Corporate and

Investment Banking

Rm 2017 2016 2017 2016

Staff costs 16 530 15 524 2 761 2 701

Salaries and wages 13 376 12 573

Total incentives 2 990 2 939

Short-term incentives 2 389 2 391

Long-term incentives 601 548

Other staff costs 164 12

Computer processing 4 201 4 047 534 512

Depreciation of computer equipment 727 617

Amortisation of intangible assets 793 799

Operating lease charges for computer processing 400 394

Other computer processing expenses 2 281 2 237

Fees and insurances 3 277 3 040 903 760

Occupation and accommodation1 2 330 2 291 252 257

Marketing and public relations 1 694 1 685 81 91

Communication and travel 843 830 276 243

Other operating expenses2 937 949 156 172

Activity-justified transfer pricing – – 1 081 1 015

Total operating expenses 29 812 28 366 6 044 5 751

Analysis of total information technology-related function spend included in total expenses 2017 2016

IT staff-related costs within group technology 1 570 1 368

Depreciation and amortisation of computer equipment, software and intangibles 1 521 1 415

Other IT costs (including licensing, development, maintenance and processing charges)3 2 525 2 552

Total IT-related functional spend 5 616 5 335

1 Includes building depreciation charges of R399m (R392m). 2 Includes furniture depreciation charges of R266m (R230m), consumables and sundry expenses. 3 Includes consulting, professional, communication and travel, and other IT-related spend, and excludes interbank clearing costs.

Efficiency ratio(%)

56

,1

56

,5

55

,2

56,9

58

,6

20172016201520142013

Total operating expenses(Rm)

24

53

4

22

419

26

110

28

36

6

29

812

20172016201520142013


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Retail and


2017 2016 2017 2016 2017 2016 2017 2016

7 812 7 472 1 486 1 428 1 017 889 3 454 3 034

924 919 160 145 56 83 2 527 2 388

1 365 1 268 186 140 272 207 551 665

1 887 1 835 138 125 195 168 (142) (94)

919 924 105 106 66 48 523 516

341 377 65 69 56 51 105 90

387 404 96 108 140 71 158 194

5 501 5 234 644 583 398 370 (7 624) (7 202)

19 136 18 433 2 880 2 704 2 200 1 887 (448) (409)


Synergies and cost savings across the group including R238m

run-rate from implementation of our new target-operating

model (target R1,0bn by 2019 and R1,2bn by 2020).

A reduction of 122 core systems to date.

Headcount reduction of 859.

Short-term incentive flat on 2016, given muted

earnings growth.

Continued cost of regulatory compliance.

Impact of Banco Único consolidation.

Infrastructure spend on digital channels and restructure of

physical branches with cost savings in future periods.

Total employees (permanent staff)

30

49

9

29

513

31

312

32 4

01

31

53

1

20172016201520142013



2017 2016

Rm GrossNet of

taxation Gross

Net of

taxation

Profit attributable to equity holders of the parent 11 621 10 132

Non-trading and capital items 224 166 1 363 1 333

IFRS 3: Fair-value loss on remeasurement of previously held interest 15 15

IAS 16: (Profit)/Loss on disposal of property and equipment 47 35 44 44

IAS 21: Recycled foreign currency translation loss – Banco Único, SA 203 203

IAS 28: Loss on dilution of shareholding in ETI 17 17

IAS 28: Impairment provision for ETI 1 000 1 000

IAS 38/IAS 39: Impairment of intangible and available-for-sale assets 163 117 141 99

IAS 39: Profit on sale of available-for-sale financial assets 14 14 (63) (51)

IAS 40: Loss on disposal of investment properties 6 6

Headline earnings 11 787 11 465

6 Taxation charge 2017 2016

Total tax charge for the year 4 209 3 955

Taxation rate reconciliation (excluding non-trading and capital items) (%)

Standard rate of SA normal taxation 28,0 28,0

Reduction of taxation rate:

– Dividend income (2,4) (2,1)

– Capital items 0,2

– Foreign income and in terms of 9D (0,8) (0,8)

– Associate loss 1,2 0,2

– Other (0,7) (0,4)

Total taxation on income as percentage of profit before taxation 25,5 24,9

Effective tax rate excluding ETI 24,5 24,8

7 Preference shares

Dividends declaredNumber of

sharesCents per

shareAmount

Rm

2017 Nedbank – Final (dividend number 30) declared for 2017 – payable April 2018 358 277 491 43,17350 154,7 2016

Nedbank – Final (dividend number 26) declared for 2015 – paid April 2016 358 277 491 40,01711 143,4

Nedbank – Interim (dividend number 27) declared for 2016 – paid September 2016 358 277 491 42,75385 153,1

Total of dividends declared 296,5

Nedbank (MFC) – participating preference shares1 80,0

Less: Dividends declared in respect of shares held by group entities (15,9)

360,6

2017 Nedbank – Final (dividend number 28) declared for 2016 – paid April 2017 358 277 491 43,98905 157,6Nedbank – Interim (dividend number 29) declared for 2017 – paid September 2017 358 277 491 43,39039 155,5Total of dividends declared 313,1Nedbank (MFC) – participating preference shares1 58,0Less: Dividends declared in respect of shares held by group entities (32,6) 338,51 Profit share calculated semi-annually.


110 Loans and advances


115 Investments in private-equity

associates, associate companies

and joint arrangements


118 Amounts owed to depositors

121 Liquidity risk and funding

123 Equity analysis

125 Capital management

Statement of financial position analysis

8 Loans and advancesSUMMARY OF LOANS AND ADVANCES BY BUSINESS CLUSTER AND BUSINESS LINE

Gross loans Balance sheet impairments Net

Rm Change (%) Rm Mix (%) Rm Mix (%) Change (%)

2017 Corporate and Investment Banking 358 229 (3,8) (2 200) 18,3 356 029 50,1 (3,8)

Trading book 31 356 (10,6) 31 356 4,4 (10,6)Banking book 326 873 (3,1) (2 200) 18,3 324 673 45,7 (3,1)CIB, excluding Property Finance 214 429 (22,2) (1 666) 13,9 212 762 25,5 (22,4)Property Finance 143 800 5,0 (534) 4,4 143 267 20,2 5,1

Retail and Business Banking 314 149 5,1 (8 951) 74,6 305 198 43,0 5,3

Business Banking 67 792 3,8 (1 362) 11,3 66 429 9,4 3,9Retail 246 357 5,5 (7 589) 63,2 238 769 33,6 5,7

Home Loans 85 580 2,6 (1 241) 10,3 84 339 11,9 2,8MFC 92 439 8,6 (2 256) 18,8 90 183 12,7 8,5Unsecured Lending 18 797 7,6 (2 400) 20,0 16 397 2,31 8,5Relationship Banking 33 705 6,2 (235) 2,0 33 470 4,7 6,4Card 15 614 5,2 (1 374) 11,4 14 240 2,0 5,0Other 222 92,0 (83) 0,7 140 0,0 > 100,0

Wealth 29 533 2,8 (120) 1,0 29 413 4,1 2,9Rest of Africa 21 119 5,6 (578) 4,8 20 541 2,9 4,9Centre (699) 5,4 (153) 1,3 (852) (0,1) 26,7Nedbank Group 722 331 0,4 (12 002) 100,0 710 329 100,0 0,5

Trading book 31 356 (10,6) 31 356 4,4 (10,6)Banking book 690 975 1,0 (12 002) 100,0 678 973 95,6 1,0


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Gross loans Balance sheet impairments Net

Rm Change (%) Rm Mix (%) Rm Mix (%) Change (%)

2016 Corporate and Investment Banking 372 364 4,2 (2 165) 17,8 370 199 52,3 4,1

Trading book 35 086 2,9 35 086 5,0 2,9

Banking book 337 278 4,3 (2 165) 17,8 335 113 47,4 4,2

CIB, excluding Property Finance 235 375 0,3 1 524 12,5 233 851 26,6 0,0

Property Finance 136 989 11,6 (641) 5,3 136 348 19,3 11,7

Retail and Business Banking 298 789 3,5 (8 907) 73,3 289 882 41,0 3,6

Business Banking 65 321 (1,3) (1 407) 11,6 63 914 9,0 (1,3)

Retail 233 468 5,0 (7 500) 61,7 225 968 32,0 5,0

Home Loans 83 441 2,2 (1 415) 11,6 82 027 11,6 2,4

MFC 85 090 7,7 (1 985) 16,3 83 105 11,8 7,7

Unsecured Lending 17 468 7,2 (2 355) 19,4 15 112 2,1 7,7

Relationship Banking 31 738 3,6 (289) 2,4 31 449 4,4 3,8

Card 14 848 6,3 (1 288) 10,6 13 560 1,9 5,9

Other 883 25,0 (168) < 0,1 715 < 0,1 25,0

Wealth 28 731 1,3 (154) 1,3 28 577 4,0 1,3

Rest of Africa 20 005 18,5 (423) 3,5 19 582 2,8 18,6

Centre (663) > (100,0) (500) 4,1 (1 163) < 0,1 > (100,0)

Nedbank Group 719 226 3,8 (12 149) 100,0 707 077 100,0 3,7

Trading book 35 086 2,9 35 086 5,0 2,9

Banking book 684 140 3,8 (12 149) 100,0 671 991 95,0 3,8


SEGMENTAL BREAKDOWN

Nedbank Group

Corporate and

Investment Banking Rm 2017 2016 2017 2016

Home loans 149 891 145 276 5 8 Commercial mortgages 161 576 151 740 133 169 125 909 Properties in possession 155 250 94 Credit cards 15 801 14 870 Overdrafts 19 039 18 871 3 248 3 478 Term loans 118 560 122 085 93 606 98 225 Personal loans 20 041 19 252 Other term loans 98 519 102 833 93 606 98 225 Overnight loans 21 165 21 913 19 458 20 626 Other loans to clients 82 591 97 984 70 330 85 194 Foreign client lending 20 948 26 871 20 451 26 092 Remittances in transit 161 371 4 1 Other loans1 61 482 70 742 49 875 59 101 Leases and instalment debtors 112 141 105 481 2 694 3 127 Preference shares and debentures 18 654 20 078 18 438 20 049 Factoring accounts 5 461 5 010 Deposits placed under reverse repurchase agreements 17 279 15 654 17 279 15 654 Trade, other bills and bankers’ acceptances 18 14 2 Loans and advances before impairments 722 331 719 226 358 229 372 364 Impairment of advances (12 002) (12 149) (2 200) (2 165) Total loans and advances 710 329 707 077 356 029 370 199 Comprises: – Loans and advances to clients 701 836 689 648 339 968 344 621 – Loans and advances to banks 20 495 29 578 18 261 27 743 Loans and advances before impairments 722 331 719 226 358 229 372 364 1 Represents mainly loans relating to Specialised Finance and Debt Capital Markets in Nedbank Capital.

Market share as per BA900Home loans (2014–2017)(%)

34

,3

14,5

20

,2

23

,7

7,3

OtherStandard BankNedbank FirstRand Absa

Commercial mortgage loans (2014–2017) (%)

18,7

40,5

6,1 12,6

22

,1



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Retail and


2017 2016 2017 2016 2017 2016 2017 2016

128 161 124 771 15 793 14 939 6 170 5 784 (238) (226)

18 321 17 220 8 709 8 172 1 784 1 045 (407) (606)

74 92 25 38 56 26

15 719 14 812 82 58

12 443 11 218 133 144 3 215 4 031

19 715 19 247 1 390 1 283 3 852 3 333 (3) (3)

18 125 17 475 2 27 1 914 1 750

1 590 1 772 1 388 1 256 1 938 1 583 (3) (3)

968 1 035 739 252

7 080 6 414 3 273 4 104 1 984 2 127 (76) 145

145 206 352 573

45 182 (1) (1) 113 189

6 890 6 026 3 274 4 105 1 519 1 365 (76) 145

106 152 98 970 74 50 3 221 3 335 (1)

55 136 1 25 28

5 461 5 010

16 14

314 149 298 789 29 533 28 731 21 119 20 005 (699) (663)

(8 951) (8 907) (120) (154) (578) (423) (153) (500)

305 198 289 882 29 413 28 577 20 541 19 582 (852) (1 163)

314 104 298 607 27 647 27 788 20 827 19 295 (710) (663)

45 182 1 886 943 292 710 11

314 149 298 789 29 533 28 731 21 119 20 005 (699) (663)

Credit cards (2014–2017)(%)

27

,3

14,0

23

,8

27

,1

7,8


Core corporate loans (2014–2017)(%)


20

,7

21,0

21,

4

19,6

17,3

Personal loans (2014–2017)(%)

17,7

10,3

21,

7

10,7

39

,6


Instalment credit (2014–2017)(%)

18,5

28,1

31,

7

19,1 2,6



Gross loans and advances Nedbank’s gross loans and advances grew 0,4% to R722,3bn, driven by solid performance in RBB, offset by a decline in CIB, with

the exception of Property Finance.

The increase in gross loans and advances resulted in a change in the gross loans and advances mix, with RBB increasing its

contribution to 43,5%, while CIB’s contribution decreased to 49,6%.

RBB’s gross loans and advances grew 5,1% to R314,1bn across all asset classes, with solid growth in Retail. This growth was

attained while maintaining market share yet improving the mix of low-risk clients in line with the current risk appetite and prudent

origination strategies.

Retail’s gross loans and advances grew 5,5% to R246,4bn due to the following:

— MFC’s gross loans and advances increasing by 8,6% to R92,4bn, with consecutive growth yoy since 2012 as a result of

enhancements in the operating model and strong dealer relationships due to a robust frontend system. Despite the

contraction in the vehicle market, MFC has maintained its dominant local market share position.

— Unsecured Lending grew by 7,6% to R18,8bn mainly due to an additional R683m previously disclosed under client

engagement, which relates to non-retail relationship banking overdrafts and student loans. Unsecured lending as a

standalone increased by 3,7% to R18,1bn, reflecting slower market growth, driven by the weak macro environment and

increased consumer stress.

— Card’s gross loans and advances grew by 5,2% to R15,6bn, primarily due to increases in existing balances. The Card portfolio

has experienced consistent healthy growth since 2012.

— Home Loans gross loans and advances showed moderate growth of 2,6% to R85,6bn in line with the industry. Growth has

been consistent since 2011, but still below the volumes of 2007 to 2010.

Business Banking advances pipeline remained good; however, client drawdowns remained subdued given the negative economic

outlook.

RoA’s gross loans and advances grew 5,1% to R21,1bn due to growth across the various countries.

Wealth gross loans and advances grew 2,8% to R29,5bn as a result of increased growth in home loans and commercial mortgages.

CIB’s gross loans and advances decreased 3,8% to R358,2bn due to a combination of unexpected early repayments, which

resulted in portfolio impairment releases, sell-downs, which allowed for the diversification of risk, and a decrease in the trading

book. CIB’s other loans and advances decreased as a result of muted capital expenditure in the subdued economic climate with a

competitive market.

Gross trading advances decreased by 10,6% to R31,4bn, being subject to volatility based on liquidity needs and overnight

placement demands.

Property Finance advances experienced growth of 5,0% to R143,8bn, which was in line with industry growth. The portfolio

contains collateralised good-quality assets with low LTVs and is managed by a highly experienced team, the leaders in SA

property finance, and has maintained the leading market share.


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Rm 2017 2016

Listed investments 36 35

Unlisted investments 3 889 3 564

Taquanta Asset Managers portfolio 453 430

Strate Limited 143 130

Private-equity portfolio 965 713

Other 2 328 2 291

Total listed and unlisted investments 3 925 3 599

Listed policyholder investments at market value 9 540 8 673

Unlisted policyholder investments at directors’ valuation 3 188 2 055

Net policyholder liabilities (19) (102)

Total policyholder investments 12 709 10 626

Total investment securities 16 634 14 225

Rm 2017 2016

Summary of total private-equity investments

Investment securities 980 732

Investment in associates 3 170 2 357

Unlisted property investments 2 411 1 749

Unlisted other investments 759 608

Private-equity shareholder loans and mezzanine debt facilities 450 2 622

Total private-equity investments 4 600 5 711

10 Investments in private-equity associates, associate companies and joint arrangements

Equity-accounted earnings

Rm

Carrying amount

Rm

Net indebtedness of loans

to/(from) associates

Rm

Name of company and nature of business 2017 2016 2017 2016 2017 2016

Private-equity associates and associate companies

Listed

ETI1 (744) (125) 3 320 3 978 (271) 500

Unlisted

Campuskey Proprietary Limited 140 108 13

Masingita Property Investment Holdings Proprietary Limited 289 279 64 98

Quintado 126 Proprietary Limited 109 93 136 117

Other individually immaterial associates2

Private-equity associates (manufacturing, industrial, leisure and other)3 759 608 381 191

Private-equity associates (property investment associates)4 1 593 1 147 1 211 910

Other (94) (18) 232 232

Joint arrangements

Unlisted

Banco Único, SA (Mozambique)5 38

Individually immaterial joint arrangements 280 122 288 127

(838) (105) 6 722 6 567 1 809 1 956

1 Ecobank Transnational Incorporated is a pan-African bank and its shares are listed on the stock exchanges of Nigeria, Ghana and Ivory Coast. The percentage holding in ETI at December 2017 was 21,2% (December 2016: 21,2%).

2 Represents various investments that are not individually material. 3 Represents private-equity associates in manufacturing, industrial, leisure and other.4 Represents private-equity property investment associates.5 Banco Único has been consolidated into the group with effect from October 2016.


Equity risk in the banking book 2017 2016

Total equity portfolio (Rm) 10 647 10 166

Disclosed at fair value (Rm) 7 095 5 956

Equity-accounted (Rm) 3 552 4 210

Percentage of total assets (%) 1,1 1,1

Percentage of group minimum economic-capital requirement (%) 3,6 4,6

Equity investments in the banking book are primarily undertaken by Nedbank CIB. Any additional investments are undertaken as a

result of operational or strategic requirements.

The Nedbank board sets the overall risk appetite and strategy of the group for equity risk, and business compiles portfolio

objectives and investment strategies for its investment activities. These address the types of investment, expected business

returns, desired holding periods, diversification parameters and other elements of sound investment management oversight.

The ETI strategic investment is accounted for under the equity method of accounting and is therefore not carried at fair value.

Equity investments that are accounted for under the equity method of accounting total R3 552m.

ACCOUNTING RECOGNITION OF ETIRm 2017 2016

Opening carrying value (pre-impairment provision) 4 978 7 808

Share of associate (loss)/earnings1, 2 (744) (125)

Share of other comprehensive income and foreign currency translation 86 (2 529)

Share of other comprehensive income1, 2 474 (1 700)

Foreign currency translation3 (388) (829)

Dividends and other4 (176)

Closing carrying value (pre-impairment provision) 4 320 4 978

Impairment provision (1 000) (1 000)

Closing carrying value 3 320 3 978

Regulatory capital summary

Closing carrying value 3 320 3 978

Amount above 10% threshold deduction 324

Amount within 10% threshold deduction, risk-weighted at 250% 3 320 3 654

Amount included within RWA 8 301 9 135

1 ETI results reported a quarter in arrear, ie 1 October 2016 to 30 September 2017.2 Applicable average exchange rate: 1 January 2017 to 31 December 2017.3 Applicable period: 1 January 2017 to 31 December 2017, ie the cumulative difference at each quarter of the earnings and other comprehensive income converted at an

average USD/ZAR rate compared with the related US dollar balances converted at the quarter-end spot rate.4 Applicable average exchange rate: Spot rate and date accrued.

The carrying value of Nedbank Group’s strategic investment in ETI decreased from R4,0bn to R3,3bn during the year, due to a

combination of the rand strengthening against the US dollar and the group's share of losses incurred by ETI during the 12 months to

30 September 2017.

The market value of the group’s investment in ETI, based on its quoted share price, was R3,6bn on 31 December 2017 and R4,1bn on

28 February 2018. Based on the group's 2016 value-in-use (VIU) calculation, management determined that an impairment provision

of R1,0bn was appropriate. This reduced the carrying value of the group’s investment in ETI to R4,0bn at 31 December 2016. This

calculation is required to be revisited at each reporting period when the indicators of impairment are reconsidered and the VIU

calculation reassessed taking into account any future changes in estimates and assumptions.

Based on management's 2017 assessment, there are no observable indicators of further impairment at 31 December 2017 and

insufficient observable indicators that the impairment loss recognised in 2016 has decreased. The R1,0bn impairment recognised in

2016 has therefore not been reversed in the current reporting period. ETI has been an important long-term investment for Nedbank,

providing our clients with a pan-African transactional banking network across 39 countries and access to dealflow in Central and

West Africa since its acquisition in 2014. We remain supportive of ETI’s endeavours of delivering an ROE in excess of its COE in due

course. Conditions in the key markets in which ETI operates have improved in 2017 and management expects further improvements in

2018 and beyond.


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Rm 2017 2016

Computer software and capitalised development costs 6 003 4 581

Goodwill 5 131 5 199

Client relationships, contractual rights and other 250 303

11 384 10 083

COMPUTER SOFTWARE AND CAPITALISED DEVELOPMENT COSTS – CARRYING AMOUNT

Rm

Amorti-

sation

periods 2017 2016

Computer software1 2–15 years 3 592 2 992

Core product and client systems 1 193 1 255

Support systems 1 217 976

Digital systems 476 450

Payment systems 706 311

Development costs not yet commissioned1 none2 2 411 1 589

Core product and client systems 691 416

Support systems 1 039 698

Digital systems 613 191

Payment systems 68 284

6 003 4 581

Computer software

Opening balance 2 992 2 343

Additions 248 485

Commissioned during the year 1 257 1 093

Disposals and retirements (3) (36)

Foreign exchange and other moves (5)

Amortisation charge for the year (793) (799)

Impairments (109) (89)

Closing balance 3 592 2 992

Development costs not yet commissioned

Opening balance 1 589 1 180

Additions 2 137 1 559

Commissioned during the year (1 257) (1 093)

Foreign exchange and other moves (1)

Impairments (58) (56)

Closing balance 2 411 1 589

1 2016 balances have been restated based on reclassification criteria adopted for intangible assets. However, there has been no change to the total.2 Assets not yet commissioned and begin amortisation only once transferred to computer software. Amortisation period determined when transferred out of

development costs not yet commissioned to computer software.

GOODWILL – CARRYING AMOUNTRm 2017 2016

Carrying amount at the beginning of the year 5 199 5 257

Acquisitions 19

Foreign currency translation (68) (77)

Carrying amount at the end of the year 5 131 5 199


12 Amounts owed to depositors SEGMENTAL BREAKDOWN

Nedbank GroupCorporate and

Investment Banking

Rm 2017 2016 2017 2016

Current accounts 80 841 77 330 6 550 6 528

Savings accounts 30 657 29 937 2 8

Other deposits and loan accounts 536 113 510 614 291 785 288 768

Call and term deposits 291 033 292 813 113 473 126 078

Fixed deposits 56 821 52 215 6 857 11 458

Cash management deposits 67 865 67 889 58 294 59 906

Other deposits 120 394 97 697 113 161 91 326

Foreign currency liabilities 21 643 34 407 15 840 28 722

Negotiable certificates of deposit 77 525 89 852

Deposits received under repurchase agreements 24 805 19 402 24 615 19 127

Total amounts owed to depositors 771 584 761 542 338 792 343 153

Comprises:

– Amounts owed to clients 723 054 718 045 296 849 306 527

– Amounts owed to banks 48 530 43 497 41 943 36 626

Total amounts owed to depositors 771 584 761 542 338 792 343 153

Deposits grew 1,3% to R771,6bn, with total funding-related liabilities increasing 1,2% to R823,2bn.

With 93,7% of all funding-related liabilities emanating from deposits, Nedbank’s continued focus on growing the retail and

corporate banking franchise resulting in an improved loan-to-deposit ratio of 92,1%.

Through the active management of the RBB franchise, deposits grew by 8,5% to R295,3bn, resulting in household deposits

market share gains, which increased yoy to 18,9% from 18,7%, supported by Nedbank’s strong market share in household

current-account deposits of 19,1%.

Through the growth in current accounts, savings accounts, fixed deposits and other structured deposits, Nedbank has

successfully reduced funding from negotiable certificates of deposit as well as more expensive foreign currency funding

used in the general rand funding pool.

The positive tilt towards more Basel III-friendly deposits, achieved through RBB, Wealth, RoA and through market share

gains in commercial deposits, has resulted in lower HQLA and long-term funding requirements as well as a stronger LCR in

terms of ensuring regulatory compliance and a strong balance sheet position.

Growth in Retail Green Savings Bonds (included in fixed deposits) contributed positively to managing the long-term

funding profile and diversifying the funding mix.

Nedbank closely matches its liabilities to its foreign currency assets, resulting in a negligible mismatch in terms of its total

balance sheet. Nedbank, however, remains focused on growing foreign currency deposits linked to its transactional retail

and commercial deposit franchise as part of diversifying its overall funding base.

Nedbank Group enhanced its funding mix through growth in Basel III-friendly deposit sourcesDeposits by cluster (Rbn)

Nedbank CIB

771,6

(11,3)1,6

Nedbank RoA

Nedbank RBB

2016

761,5

(4,3)1,123,0

2017Central Management

Nedbank Wealth

1,3%

(13,3%)(1,3%)4,2%4,8%8,5%

Basel III -Basel III +


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Retail and Business Banking Wealth Rest of Africa Centre

2017 2016 2017 2016 2017 2016 2017 2016

64 391 61 714 1 676 1 582 8 277 7 450 (53) 56

9 629 9 581 19 713 19 277 1 313 1 071

215 820 195 598 13 692 12 602 14 924 14 531 (108) (885)

159 681 150 157 9 456 10 845 8 505 6 712 (82) (979)

47 501 37 209 598 308 1 865 3 240

5 964 5 530 2 309 1 440 1 240 945 58 68

2 674 2 702 1 329 9 3 314 3 634 (84) 26

5 454 5 381 349 304

3 076 3 372 74 449 86 480

190 275

295 294 272 274 35 081 33 461 28 129 27 003 74 288 85 651

293 814 270 819 35 081 33 461 26 439 24 234 70 871 83 004

1 480 1 455 1 690 2 769 3 417 2 647

295 294 272 274 35 081 33 461 28 129 27 003 74 288 85 651

Deposits by product Contribution (Rbn) (%)

Negotiable certificates

of deposit

Call and term

deposits

771,6

(1,8)

0,7

Fixed deposits

Current and cash

management deposits

2016

2017

761,5

(12,8)

28,2

4,63,5

(12,3)

2017Other deposits

Basel III -Basel III +

Foreign currency liabilities

Savings accounts

Current and cash management

deposits

Call and term deposits

Fixed deposits

Savings accounts

Negotiable certificates of deposit

Other

19,3

37,77,4

4,0

21,6

10,0

1,3%

(13,7%)(0,6%)24,0%8,8%2,4%2,4% (37,1%)


1 Includes 'households' as per the SARB BA900 return.2 Includes 'private non-financial corporate sector deposits', 'unincorporated businesses' and 'non-profit and charities' as per the SARB BA900 return.3 Includes 'insurers', 'pension funds', 'private financial corporate sector deposits', 'collateralised borrowings' and 'repurchase deposits' as per the SARB BA900 return.4 Includes 'foreign currency deposits' and 'foreign currency funding' as per the SARB BA900 return.

Non-financial corporate deposits2 (2014–2017)(%)

29

,1

16,5

23

,6

16,7

14,1


Household deposits1 (2014–2017)(%)

19,5

18,9

21,

2

21,

3

19,1


MARKET SHARE AS PER BA900

Wholesale deposits3 (2014–2017)(%)

20

,2

21,

2

19,7

22

,0

16,9


Foreign currency liabilities4 (2014–2017)(%)

27

,9

12,8

18,9

9,8

30

,6


In 2017 Nedbank successfully reduced wholesale funding, which decreased from 39,0% to 37,6%. This was achieved through

proportionally higher growth in retail and commercial deposits, with the funding mix improving from 19,3% and 27,4%, to 21,5% and

28,0% respectively.

The reduced reliance on wholesale funding was achieved within the context of reducing Nedbank’s reliance on the more marginal

funding sources, namely the capital market and foreign funding.

In 2018 emphasis on tilting Nedbank’s deposit mix towards Basel III-friendly deposits will continue, with a focus on providing

competitive and innovative transactional and investment products, with an ongoing emphasis on meeting client needs through

product, pricing and innovation.

Wholesale

Commercial

Household

Capital markets

Foreign funding39,0

27,4

7,2

19,3

7,1

Nedbank Group’s positively tilting deposit mix(%)

R761,5bn

2016

37,6

28,0

6,1

21,5

6,8

R771,6bn

2017


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Liquidity risk and fundingSUMMARY OF NEDBANK GROUP LIQUIDITY RISK AND FUNDING PROFILE 2017 2016

Total sources of quick liquidity (Rm) 195 414 180 413

Total HQLA (Rm) 138 180 137 350

Other sources of quick liquidity (Rm) 57 234 43 063

Total sources of quick liquidity (as a percentage of total assets) (%) 19,9 18,7

Long-term funding ratio (three-month average) (%) 27,0 29,6

Retail Savings Bond (Rm) 24 874 19 213

Senior unsecured debt (Rm) 36 255 35 705

Total capital market issuance (including senior unsecured debt, tier 2 capital and additional tier 1 capital) (Rm) 54 098 54 076

Reliance on negotiable certificates of deposit (as a percentage of total deposits) (%) 10,0 11,8

Reliance on foreign funding (as a percentage of total deposits) (%) 2,8 4,5

Loan-to-deposit ratio (%) 92,1 92,8

Basel III liquidity ratios

LCR1 (%) 116,2 109,3

Minimum regulatory LCR requirement (%) 80 70

NSFR (%) > 100 > 100

1 Only banking and/or deposit-taking entities are included in the group LCR and the group ratio represents an aggregation of the relevant individual NCOF and the individual HQLA portfolios across all banking and/or deposit-taking entities. Surplus HQLA holdings in excess of the minimum requirement of 80% have been excluded from the aggregated HQLA number in the case of all non-SA banking entities. The above figures reflect the simple average of daily observations over the quarter ending December 2017 for Nedbank Limited and the simple average of the month-end values at 31 October 2017, 30 November 2017 and 31 December 2017 for all non-SA banking entities.

Nedbank Group remains well funded with a strong liquidity position, underpinned by a significant quantum of long-term funding,

an appropriately sized surplus liquid-asset buffer, a strong loan-to-deposit ratio consistently below 100% and a low reliance on

interbank and foreign currency funding.

Nedbank has maintained the NSFR at above 100% on a pro forma basis and is already compliant with the minimum regulatory

requirements that will be effective from 1 January 2018. The focus going forward will be on achieving NSFR compliance within the

context of balance sheet optimisation.

The group's quarterly average LCR exceeded the minimum regulatory requirement of 80% in 2017 and 90% effective from

1 January 2018, with the group maintaining appropriate operational buffers designed to absorb seasonal and cyclical volatility in

the LCR.

The LCR, calculated using the simple average of daily observations over the quarter ending December 2017 for Nedbank Limited

and the simple average of the month-end values at 31 October 2017, 30 November 2017 and 31 December 2017 for all non-SA

banking entities, was 116,2%.

— Nedbank's portfolio of LCR-compliant HQLA increased to a quarterly average of R138,2bn, up marginally from

December 2016 when the portfolio amounted to R137,4bn.

— Notwithstanding the low growth in HQLA, the LCR has still increased yoy as a result of a decrease in LCR net cash outflows

attributable to a positive tilt in Nedbank’s deposit mix towards proportionally more Basel III-friendly deposits in the form of

RBB and Wealth deposits as well as through market share gains in commercial deposits.

— Nedbank will continue to procure additional HQLA to support balance sheet growth and the LCR phase-in, while maintaining

appropriately sized surplus liquid-asset buffers.

20172016

Nedbank Group LCR exceeds minimum requlatory requirements

125,7

137,4 138,2

119,0

HQLA (Rbn)

Net cash outflows (Rbn)

LCR (%)

109,3116,2


Nedbank Group significant sources of quick liquidityTotal sources of quick liquidity (Rbn)

Corporate bonds and

listed equities

Unencumbered trading securities

Price-sensitive overnight loans

Other banks’ paper and

unutilised bank credit lines

Other assets

52

11

1

26

10

Other sources of quick liquidity contribution (%)

R57,2bn

2016 2017

137,4 138,2

43,0 57,2

180,4

195,4

0,6%

33,0%

8,3%

Total HQLA

Other sources of quick liquidity

2017

Nedbank Group funding and liquidity profile, underpinned by strong liquidity risk metrics

20172015 2016

27,029,6

2013 2014

Annual growth

in deposits (Rbn)

Annual growth

in capital market

issuance (Rbn)

Three-month-average

long-term funding

ratio (%)

Loan-to-deposit

ratio (%)

3,0

52,1

9,1

35,6

93,9

28,7

96,1

26,2

93,8

25,4

2,39,4

50,5

72,4

10,0

92,192,8

A strong funding profile has been maintained in 2017, with Nedbank recording a three-month average long-term funding ratio

of 27,0% in the fourth quarter of 2017. The proportional tilt towards more Basel III-friendly RBB and Wealth deposits as well as

market share gains in commercial deposits, has afforded Nedbank the opportunity to marginally reduce its long-term funding

profile, even though Nedbank continues to run a more prudent long-term funding profile when compared with the industry

average of approximately 24%.

— Nedbank Retail Savings Bonds growth of R5,7bn contributed positively to the longer-term funding profile, as well as the

strategy of diversifying Nedbank’s funding base, bringing the total amount issued to R24,9bn.

— In addition, Nedbank successfully issued R3,5bn in senior unsecured debt during 2017, while R3,3bn matured during the year.

— Nedbank issued new-style additional tier 1 capital instruments of R0,6bn and R2,5bn in new-style tier 2 capital instruments

during the year, while redeeming R3,0bn of old-style tier 2 capital instruments on call dates in line with the group’s

capital plan.

Nedbank’s reliance on foreign currency funding as a percentage of total deposits remained small at 2,8%. However, increasing

retail and commercial foreign currency deposits remains a key component of Nedbank’s strategy to diversify its funding sources

and to fund foreign advances growth at attractive interest rates.

The group’s annual board-approved ICAAP, ILAAP and updated Recovery Plans include appropriate consideration of the managed

separation with Old Mutual, with no material impact expected.

In addition to the HQLA portfolio maintained for LCR purposes, Nedbank also identifies other sources of stress liquidity, which

can be accessed in times of stress. Nedbank’s combined portfolio of HQLA and other sources of quick liquidity, collectively

amounted to R195,4bn at December 2017, and represented 19,9% of total assets.


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Equity analysis

ANALYSIS OF CHANGES IN NET ASSET VALUE

Change

(%) 2017 2016

Balance at the beginning of the year 81 711 78 751

Additional shareholder value 88,0 11 625 6 183

Profit attributable to equity holders of the parent 11 621 10 132

Currency translation movements (1 323) (3 575)

Exchange differences on translating foreign operations – other1 (684) (1 083)

Exchange differences on translating foreign operations – ETI1 (389) (828)

Share of other comprehensive income of investments accounted for using the equity method2 (250) (1 664)

Net available-for-sale movements 441 (97)

Fair-value adjustments on available-for-sale assets 22 (73)

Share of other comprehensive income of investments accounted for using the equity method2 419 (24)

Defined-benefit fund adjustment 387 (296)

Share of other comprehensive income of investments accounted for using the equity method (included in other distributable reserves)2 309 (13)

Other direct reserve movements 190 32

Transactions with ordinary shareholders (6,3) (5 529) (5 199)

Dividends paid (6 080) (5 587)

Equity-settled share-based payments (65) 136

Gross put liability – Banco Único (223)

Net repurchase of share capital and premium and capitalisation of reserves 616 475

Transaction with non-controlling shareholders > 100 138 (19)

Exchange differences on translating foreign operations1 27 9

Other transaction with non-controlling shareholders 111 (28)

Additional tier 1 capital instruments 600 2 000

Other movements (6) (5)

Balance at the end of the year 8,4 88 539 81 711

MOVEMENTS IN GROUP FOREIGN CURRENCY TRANSLATION RESERVE

Change

(%) 2017 2016

Balance at the beginning of the year (257) 3 318

Foreign currency translation reserve (FCTR) 63,0 (1 323) (3 575)

ETI3 (639) (2 492)

Banco Único 55 (44)

Other subsidiaries (739) (1 039)

Transfer of FCTR to other reserves –

Balance at the end of the year > (100) (1 580) (257)

1 Exchange differences on translating foreign operations as shown in the statement of comprehensive income (R1 046m) (December 2016: (R1 902m).2 Share of other comprehensive income of investments accounted for using the equity method as shown in the statement of comprehensive income R478m

(December 2016: R1 701m loss).3 Exchange differences on translating foreign operations of R389m (December 2016: R828m) and share of other comprehensive income of investments accounted for

using the equity method of R250m (December 2016: R1 664).


Foreign currency translation risk in the banking book Foreign currency translation risk is the risk of the group’s capital losing value as a result of movements in exchange rates that

adversely impact the rand value of foreign-denominated equity in subsidiaries and associates.

NEDBANK GROUP OFFSHORE CAPITAL SPLIT BY FUNCTIONAL CURRENCY 2017 2016

$m (US dollar equivalent)Forex-

sensitiveNon-forex-

sensitive TotalForex-

sensitive

Non-forex-

sensitive Total

US dollar 505 505 497 497

Pound sterling 185 185 138 138

Malawi kwacha 4 4 5 5

Mozambican metical 45 45 37 37

Other 524 524 563 563

Total 739 524 1 263 677 563 1 240

Limit 1 100 1 100

Foreign-denominated equity in subsidiaries and associates has increased by 9,2% to US $739m in 2017, primarily due to an increase

in the value of the Nedbank Private Wealth and Nedbank London investments.

The total RWA for the group’s foreign entities is R44,4bn, which is low at approximately 8,4% of total RWA.

EXCHANGE RATES Average Closing

Change (%) 2017 2016 Change (%) 2017 2016

UK pound to rand (10,5) 17,59 19,65 (2,1) 16,60 16,95

US dollar to rand (10,0) 13,12 14,57 (10,7) 12,29 13,77

US dollar to naira 19,8 312,77 261,15 (2,7) 306,60 315,00

Rand to naira 29,7 23,59 18,19 12,7 24,94 22,13


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Regulatory capital adequacy and leverageNEDBANK GROUP’S CAPITAL ADEQUACY, A FOUR-YEAR REVIEW

Nedbank manages its capital levels in line with a number of factors, including the internal assessment of the level of risk being taken,

the expectations of the rating agencies, the requirements of the regulators and the returns expected by shareholders. Nedbank also

seeks to ensure that its capital structure takes full advantage of the range of capital instruments and capital management activities

available in optimising the financial efficiency and loss absorption capacity of its capital base.

Nedbank Group has performed extensive and comprehensive stress testing during this period, with a strong focus on the

sovereign-ratings downgrades, and concludes that the group remains strongly capitalised relative to its business activities, the

board’s strategic plans, risk appetite, risk profile and the external environment in which the group operates.

Nedbank Group significantly strengthened its capital adequacy position over the past three years, with the CET1 capital ratio

improving by 100 bps over this period. The strengthening of the CET1 capital ratio has been supported by strong earnings generation

and an appropriate dividend policy. The group’s sound capital structure is supported by: A focus on fully loss-absorbent capital, with Basel III-fully compliant capital now making up 99% of the group’s total capital

structure, having issued R2,6bn of new-style additional tier 1 and R12,2bn of new-style tier 2 capital since the implementation of

Basel III in 2013.

A conservative RWA density of 54% (RWA/total assets), which compares favourably with local and international peers.

A substantial tier 1 capital surplus of R24,6bn, which includes management buffers earmarked to absorb the impact of regulatory

changes in the short term (IFRS 9), other regulatory reforms (prudential requirements, tax and IFRS) over the medium to long term

and management’s strategic plans.

YEAR UNDER REVIEW

SARB

minimum1

Internal

targets2 2017 2016

Nedbank Group

Including unappropriated profits

Total CAR (%) > 14 15,5 15,3

Total tier 1 (%) > 12 13,4 13,0

CET1 (%) 10,5–12,5 12,6 12,1

Surplus tier 1 capital (Rm) 24 625 23 320

Leverage (times) < 25 < 20 14,2 15,3

Dividend cover (times) 1,75–2,25 1,91 2,00

Cost of equity (%) 14,0 14,2

Excluding unappropriated profits

Total CAR (%) 10,75 14,4 14,4

Total tier 1 (%) 8,75 12,3 12,1

CET1 (%) 7,25 11,4 11,3

Nedbank Limited


Total CAR (%) > 14 16,7 15,9

Total tier 1 (%) > 12 13,9 12,9

CET1 (%) 10,5–12,5 12,6 11,7

Surplus tier 1 capital (Rm) 22 055 19 355

Excluding unappropriated profits

Total (%) 10,75 15,9 15,6

Total tier 1 (%) 8,75 13,1 12,5

CET1 (%) 7,25 11,9 11,3

1 SARB minimum requirement for 2017 reflects the phase-in of the conservation buffer at 1,25% and is disclosed excluding bank-specific Pillar 2b and D-SIB capital requirements.

2 Nedbank’s internal TTC targets are based on the 2019 end state minimum regulatory requirement.

Capital management

27,4%

19,9%

12,6%

R66 419m

54%

R82 026m

R11 183m

R47m

R528 206m

R12 243m

100 bps

R15,3bn

0 bps

R17,6bn

R1,9bn

R87,5bn

R4,0bn

R6,5bn

2017CET1 CAR

CET1 capital

RWA density

Total capital

Qualifying tier 2 capital

RWA

11,6%

R51 112m

54%

R64 385m

R9 255m

R440 696m

R4 082m

R5 712m

2014

Old-style tier 2 notes (before deductions)New-style tier 2 notes (before deductions)


Nedbank Group’s CET1 ratio improved to 12,6% due to an increase in qualifying capital and reserves as a result of organic earnings,

offset by the payment of R6,1bn in ordinary dividends during the year.

This was offset to a degree by movements in RWA, as follows:

— Credit risk RWA decreasing by R3,8bn, primarily due to Basel III model refinements within the Nedbank Retail portfolio, which

had been initiated in 2016 and continued into 2017. This decrease was offset by an R8,2bn increase in counterparty credit risk

RWA, which was driven by the impact of the rand strengthening in the fourth quarter on client hedges.

— Equity RWA growth of R8,8bn as a result of new acquisitions and revaluations as well as other RWA growth of R2,2bn due to

balance sheet movements during the year.

— Operational RWA growth of R5,0bn due to an increase in Advanced Measurement Approach capital and an update in the

three-year average GOI parameters.

The issuance of new-style additional tier 1 of R600m and tier 2 of R2,5bn capital instruments during 2017 further strengthened the

group’s tier 1 and total CAR respectively.

Nedbank Group’s gearing (including unappropriated profits) under the Leverage Ratio Framework and disclosure requirements

improved to 14,2 times (or 7,0%) due to relatively low balance sheet growth, organic capital generation and the issuance of

new-style additional tier 1 capital instruments of R600m during 2017.

OVERVIEW OF RISK-WEIGHTED ASSETS Nedbank Group Nedbank Limited1

2017 2016 2017 2016

Rm RWA MRC2 RWA RWA MRC2 RWA

Credit risk 356 893 38 366 360 731 295 646 31 782 304 491

Standardised Approach 37 410 4 022 37 176 426 46 1 464

Advanced Internal Ratings-based Approach 319 483 34 344 323 555 295 220 31 736 303 027

Counterparty credit risk 23 921 2 571 15 745 23 169 2 491 14 899

Current Exposure Method 23 921 2 571 15 745 23 169 2 491 14 899

Equity positions in banking book under Market-based Approach 26 927 2 895 18 156 20 386 2 191 14 637

Securitisation exposures in banking book under Internal Ratings-based Approach 621 67 1 097 621 67 1 097

Market risk 17 142 1 843 17 542 14 046 1 510 16 140

Standardised Approach 3 643 392 2 125 1 222 131 1 706

Internal Model Approach 13 499 1 451 15 417 12 824 1 379 14 434

Operational risk 66 333 7 131 61 345 57 664 6 199 54 278

Standardised Approach 6 030 648 5 044 16 2 49

Advanced Measurement Approach 52 596 5 654 43 741 50 380 5 416 42 040

Floor adjustment 7 707 829 12 560 7 268 781 12 189

Amounts below the thresholds for deduction (subject to 250% risk weighting) 15 016 1 614 15 404 2 058 221 3 308

Other assets (100% risk weighting) 21 353 2 295 19 201 17 616 1 894 16 556

Total 528 206 56 782 509 221 431 206 46 355 425 406

1 Nedbank Limited refers to the SA reporting entity in terms of regulation 38 (BA700) of the regulations relating to banks issued in terms of the Banks Act (Act No 94 of 1990).

2 Total MRC is measured at 10,75% in line with the transitional requirements and excludes bank-specific Pillar 2b and D-SIB capital requirements.


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SUMMARY OF REGULATORY QUALIFYING CAPITAL AND RESERVES1

Nedbank Group Nedbank Limited

Rm 2017 2016 2017 2016


Total tier 1 capital 70 843 65 967 59 786 54 983

CET1 66 419 61 588 54 530 49 795

Share capital and premium 19 170 18 521 19 221 19 221 Reserves 62 055 56 687 47 427 40 951

Minority interest: Ordinary shareholders 812 675 Deductions (15 618) (14 295) (12 118) (10 377)

Goodwill (5 131) (5 199) (1 410) (1 410) Excess of expected loss over eligible provisions (2 008) (1 502) (1 952) (1 537) Defined-benefit pension fund assets (1 957) (1 805) (1 957) (1 805) Capitalised software and development costs (5 994) (4 558) (5 930) (4 519) Other regulatory differences and non-qualifying reserves (528) (1 231) (869) (1 106)

Additional tier 1 capital 4 424 4 379 5 256 5 188

Preference share capital and premium 2 656 3 188 2 656 3 188 Perpetual subordinated debt instruments 2 600 2 000 2 600 2 000 Regulatory adjustments (832) (809)

Tier 2 capital 11 183 11 733 12 294 12 829

Subordinated debt instruments 12 290 12 825 12 290 12 825 General allowance for credit impairment 157 180 4 4 Regulatory adjustments (1 264) (1 272)

Total capital 82 026 77 700 72 080 67 812

Excluding unappropriated profits Tier 1 capital 64 737 61 771 56 403 53 352 CET1 capital 60 313 57 392 51 147 48 164 Total capital 75 920 73 504 68 697 66 181

1 For comprehensive 'composition of capital' and 'capital instruments main features' disclosure please refer to nedbank.co.za/content/nedbank/desktop/gt/en/aboutus/information-hub/capital-and-risk-management-reports.html.

REGULATED BANKING SUBSIDIARIES Nedbank Group banking subsidiaries are well capitalised for the environments in which they operate, with CARs well in excess of

respective host regulators’ minimum requirements, with the exception of Nedbank (Malawi) Limited due to a significant writeoff this

year. The host country regulator has given condonation for this breach, as the group recapitalises this entity.

2017 2016

Total capital requirement

(host country) RWATotal capital

ratio RWA

Total capital

ratio

% Rm % Rm %

Rest of Africa

Banco Único 8,0 2 861 17,7 2 772 12,4

Nedbank Namibia Limited 10,0 12 096 15,2 11 573 14,0

Nedbank (Swaziland) Limited 8,0 3 219 23,8 3 262 21,0

Nedbank (Lesotho) Limited 8,0 1 711 25,8 1 611 25,0

Nedbank (Malawi) Limited 15,0 301 11,4 408 15,8

MBCA Bank Limited (Zimbabwe) 12,0 2 252 30,7 2 491 26,0

United Kingdom

Nedbank Private Wealth (IOM) Limited 10,0 6 624 16,3 6 781 15,1


IFRS 9 is effective and will be implemented by the group from 1 January 2018. IFRS 9 replaces IAS 39 and sets out the updated

requirements for the recognition and measurement of financial instruments. These requirements specifically deal with the

classification and measurement of financial instruments, measurement of impairment losses based on an expected credit loss

model, and closer alignment between hedge accounting and risk management practices.

IFRS 15 replaces all existing revenue requirements in IFRS and applies to all revenue arising from contracts with clients, unless the

contracts are in the scope of the standards on leases, insurance contracts and financial instruments. The standard is effective and

will be implemented by the group from 1 January 2018.

IFRS 9 and IFRS 15 – Transition impact on CET1 at transition date, 1 January 2018

The implementation of IFRS 9 expected credit loss requirements increases balance sheet impairments at 1 January 2018 by

approximately R3,2bn, (approximately 27% increase in on-balance-sheet impairments), which results in a net reduction in total

equity of approximately R2,3bn after adjusting for an approximate R0,9bn tax impact. The impact on CET1 is reduced by a R2,0bn

excess of downturn expected loss over provisions already taken into account in the calculation of regulatory capital under IAS 39.

The key drivers of the increase in impairment provisions is the mix of the lending book where Nedbank has a greater wholesale

versus retail mix when compared with the industry.

— The impact of lengthening the emergence periods under IFRS 9 has a greater impact on retail portfolio provisions versus

wholesale portfolio provisions.

— Nedbank has a relatively large commercial property finance book that includes appreciating assets that mitigate lifetime

expected credit loss impacts.

For 94% of Nedbank’s book, the AIRB Approach is followed, which is higher than the peer average, resulting in Nedbank having a

relatively larger excess of downturn expected loss over provisions under IAS 39.

The impact of approximately R0,2bn for IFRS 9 classification and measurement arose due to the revocation of the fair value

through profit or loss designation for certain loans and advances, amounts owed to depositors and long-term debt instruments

to facilitate the implementation of macro fair-value hedge accounting of interest rate risk and hedge accounting of inflation risk;

the reclassification of certain loans from amortised cost to fair value through other comprehensive income, and fair value through

profit or loss to align with the business-model-driven classifications of IFRS 9; and a review of the effective interest rate calculation

for certain loans based on the additional guidance provided in IFRS 9.

The impact of approximately R0,2bn for IFRS 15 arose in respect of the group’s loyalty points awarded to clients where the

expected consideration payable to clients has been updated to take into account the requirements specifically where loyalty points

awarded to clients are determined to be consideration payable to our clients.

The estimated impact of IFRS 9 and IFRS 15 is less than 20 bps on our CET1 ratio.

Summary impact of transition on CET1 (Rbn)

IFRS 9classification and

measurement

65,7~ (0,2)2,0

Taxeffect

IFRS 9impairments

31 Dec2017

66,4 ~ (0,2)

< 0,1%CET1 < 0,1% > 12,4%12,6%

~ 0,9~ (3,2)

1 Jan 2018pro forma

IFRS 15revenue

Excess of downturn

expected lossover provisions


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Economic capital adequacyNEDBANK GROUP ECONOMIC CAPITAL REQUIREMENT 2017 2016

Rm Mix % Rm Mix %

Credit risk 37 027 65 35 211 65

Transfer risk1 83 < 1

Market risk 7 789 14 8 356 15

Business risk 6 654 12 6 375 12

Operational risk 3 420 5 2 907 5

Insurance risk 535 1 370 1

Other assets risk 1 904 3 1 053 2

Minimum economic capital requirement 57 329 100 54 355 100

1 The group no longer capitalises for transfer risk separately as this risk type is captured under the Country Risk Framework in credit risk.

Nedbank Group’s minimum economic capital requirement increased by R3,0bn during the year primarily due to:

A R1,8bn increase in credit risk economic capital, which was largely driven by a rise in counterparty credit risk economic capital,

as a result of the impact of the rand strengthening in the fourth quarter on client hedges and good advances growth in the

MFC portfolio.

A R513m increase in operational risk economic capital, predominantly as a result of updated parameters in the operational

risk model.

A R279m increase in business risk economic capital, which was primarily driven by parameter updates of the internal business

risk model.

These higher economic capital requirements were offset by a R567m decrease in market risk economic capital, which was primarily

driven by:

The strengthening of the rand in the fourth quarter, decreasing the rand value of the ETI investment.

Marginally lower levels of interest rate risk in the banking book.

External credit ratings Standard & Poor’s Moody’s Investors Service

Nedbank Limited

Sovereign rating SA

Nedbank Limited

Sovereign rating SA

Nov 2017 Nov 2017 Nov 2017 Nov 2017

Outlook Stable StableRating

under reviewRating

under reviewForeign currency deposit ratings

Long-term BB BB Baa3 Baa3Short-term B B P-3 P-3

Local currency deposit ratings Long-term BB BB+ Baa3 Baa3Short-term B B P-3 P-3

National scale rating Long-term deposits zaAA- zaAA+ Short-term deposits zaA-1+ zaA-1+


132 Earnings per share and weighted-average shares

133 Nedbank Group employee incentive schemes

134 Long-term debt instruments

134 Additional tier 1 capital instruments

135 Shareholders’ analysis

136 Basel III balance sheet credit exposure by business cluster and asset class

138 Nedbank Limited consolidated statement of comprehensive income

139 Nedbank Limited consolidated statement of financial position

139 Nedbank Limited consolidated financial highlights

140 Definitions

142 Abbreviations and acronyms

IBC Company details

Supplementary information

Earnings per share and weighted-average shares

Earnings per share BasicDiluted

basic HeadlineDiluted

headline

Dec 2017 Earnings for the year 11 621 11 621 11 787 11 787Weighted-average number of ordinary shares 480 755 231 489 986 366 480 755 231 489 986 366Earnings per share (cents) 2 417 2 372 2 452 2 406Dec 2016

Earnings for the year 10 132 10 132 11 465 11 465

Weighted-average number of ordinary shares 477 755 134 487 894 673 477 755 134 487 894 673

Earnings per share (cents) 2 121 2 077 2 400 2 350

Basic earnings and headline earnings per share are calculated by dividing the relevant earnings amount by the weighted-average

number of shares in issue.

Fully diluted basic earnings and fully diluted headline earnings per share are calculated by dividing the relevant earnings amount by the

weighted-average number of shares in issue after taking the dilutive impact of potential ordinary shares to be issued into account.

Number of weighted-average dilutive potential ordinary shares (000)

Potential shares are the total number of shares arising from historic grants, schemes or awards, available for distribution.

The number of potential shares, the strike price at issuance date, potential funding charges and imputed costs, the future

share-based payments charge, allocated compared with unallocated, and the date of issuance are taken into account to determine

the weighted-average dilutive shares.

2017 2016

Potential

shares

Weighted-average dilutive shares

Weighted-

average

dilutive

shares

Traditional schemes 14 356 7 314 7 855

Nedbank Group Restricted-share Scheme (2005) 11 332 5 597 6 283

Nedbank Group Matched-share Scheme 3 024 1 717 1 572

Total BEE schemes 2 519 1 917 2 285

BEE schemes – South Africa 2 486 1 905 2 103

Community 1 690 1 690 1 690

Black executives 518 157 243

Black management 278 58 170

BEE schemes – Namibia 33 12 182

Total 16 875 9 231 10 140


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Nedbank Group employee incentive schemesfor the year ended 31 December

Nedbank Group employee incentive schemes 2017 2016

Summary by scheme

Nedbank Group Restricted-share Scheme (2005) 9 401 279 9 630 296

Nedbank Group Matched-share Scheme (2005) 2 245 223 2 213 243

Instruments outstanding at the end of the year 11 646 502 11 843 539

Analysis

Performance-based – restricted shares 5 203 138 P 5 236 979 P

Non-performance-based – restricted shares 4 198 141 4 393 317

Performance-based – matched shares (CBSS1) 1 504 584 P 1 459 090 P

Non-performance-based – matched shares (VBSS2) 740 639 754 153


Movements

Instruments outstanding at the beginning of the year 11 843 539 11 151 535

Granted 4 063 638 4 982 033

Exercised (3 589 475) (3 616 210)

Surrendered (671 200) (673 819)


1 Compulsory Bonus Share Scheme.2 Voluntary Bonus Share Scheme.

Nedbank Group (2005) Restricted- and Matched-share Schemes

Restricted shares3

Details of instruments granted and not exercised at 31 December 2017 and the resulting dilutive effect:

Instrument expiry dateNumber of

shares

13 Mar 18 1 411 770 P

14 Mar 18 1 111 188

13 Aug 18 59 837 P

14 Aug 18 46 571

18 Mar 19 1 960 358 P

19 Mar 19 1 587 840

12 Aug 19 39 907 P

13 Aug 19 35 185

16 Mar 20 1 687 838 P

17 Mar 20 1 378 661

11 Aug 20 43 428 P

12 Aug 20 38 696

Restricted shares not exercised at 31 December 2017 9 401 279

Unallocated shares 624 149

Treasury shares 10 025 428

Average shares exercised or forfeited during the year 1 306 109

Total potential shares 11 331 537

Weighted-average dilutive shares applicable for the year 5 597 144

3 Restricted shares are issued at a market price for no consideration to participants, and are held by the scheme until the expiry date (subject to achievement of performance conditions). Participants have full rights and receive dividends.

P Performance-based instruments.


Matched shares

Instrument expiry dateNumber of

shares

1 Apr 18 629 7941 Apr 19 847 9891 Apr 20 767 440Matched shares outstanding not exercised at 31 December 2017 2 245 223Movements due to shares exercised/forfeited during the year 779 054Total potential shares 3 024 277Weighted-average dilutive shares applicable for the year 1 717 060

The obligation to deliver the matched shares issued under the voluntary and compulsory share scheme is subject to time and other

performance criteria.

This obligation exists over 31 December 2017 and therefore has a dilutive effect.

Matched shares are not issued and are therefore not recognised as treasury shares. However, until they are issued, there remains a

potential dilutive effect.

Long-term debt instrumentsInstrument code 2017 2016

Subordinated debt 12 624 13 349

Callable notes (rand-denominated) 12 401 11 965

Long-term debenture (Namibian dollar-denominated) 213 6

Callable notes (US dollar-denominated) 1 378

Callable notes (MZN-denominated) 10

Securitised liabilities – callable notes (rand-denominated) 2 672 3 003

Senior unsecured debt – senior unsecured notes (rand-denominated) 36 255 35 702

Unsecured debentures (rand-denominated) 25 22

Total long-term debt instruments in issue 51 576 52 076

Further information can be accessed on our group website:

nedbank.co.za/content/nedbank/desktop/gt/en/aboutus/information-hub/capital-and-risk-management-reports.html

nedbank.co.za/content/nedbank/desktop/gt/en/aboutus/debt-investor/debt-investors-programme.html

Additional tier 1 capital instrumentsThe group issued new-style (Basel III-compliant) additional tier 1 capital instrument as follows:

Instrument code Instrument terms 2017 2016

Subordinated

Callable notes (rand-denominated)

NEDT1A 3-month JIBAR + 7,00% per annum 1 517 1 500

NEDT1B 3-month JIBAR + 6,25% per annum 505 500

NGLT1A 3-month JIBAR + 5,65% per annum 613

Total non-controlling interest attributable to additional tier 1 capital instruments 2 635 2 000

The additional tier 1 notes represent perpetual, subordinated instruments, with no redemption date. The instruments are redeemable,

subject to regulatory approval, at the sole discretion of the issuer from the applicable call date and following a regulatory or tax event.

The payment of interest is at the discretion of the issuer and interest payments are non-cumulative. In addition, in certain conditions

the regulator may prohibit Nedbank from making interest payments. Accordingly the instruments are classified as equity instruments

and disclosed as part of the non-controlling interest.


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Shareholders’ analysis

Register date: 29 December 2017

Authorised share capital: 600 000 000 shares

Issued share capital: 498 108 914 shares

Number of

shares

2017% holding

2016

% holding

Major shareholders/managers

Old Mutual Life Assurance Company (SA) Limited and associates (includes funds managed on behalf of other beneficial owners) 266 156 545 53,43 54,61

Nedbank Group treasury shares 16 540 026 3,32 3,52

BEE trusts 6 467 086 1,30 1,44

Eyethu scheme – Nedbank SA 6 314 784 1,27 1,27

Omufima scheme – Nedbank Namibia 152 302 0,03 0,17

Nedbank Group (2005) Restricted- and Matched-share Schemes 10 025 428 2,01 2,07

Nedbank Namibia Limited 47 512 0,01 0,01

Public Investment Corporation (SA) 30 644 866 6,15 6,19

Coronation Fund Managers (SA) 28 519 315 5,73 5,94

Lazard Asset Management (International) 16 152 780 3,24 3,25

Allan Gray Investment Council 11 753 787 2,36 1,80

BlackRock Inc (International) 9 171 648 1,84 2,22

GIC Asset Management Proprietary Limited 8 382 090 1,68 1,35

The Vanguard Group Inc 7 980 744 1,60 1,41

Dimensional Fund Advisors (US, UK and AU) 7 422 012 1,49 1,51

Major beneficial shareholders

Old Mutual Life Assurance Company (SA) Limited and associates (SA) 265 824 962 53,37 54,19

Government Employees Pension Fund (SA) 31 815 881 6,39 6,04

Geographical distribution of shareholders

Domestic 408 240 203 81,95 82,20

South Africa 400 140 369 80,33 80,25

Namibia 3 937 080 0,79 1,41

Swaziland 121 200 0,02 0,02

Unclassified 4 041 554 0,81 0,52

Foreign 89 868 711 18,05 17,80

United States of America 52 188 688 10,48 10,56

United Kingdom and Ireland 8 149 219 1,64 1,66

Europe 10 074 643 2,02 2,17

Other countries 19 456 161 3,91 3,41

Total shares listed 498 108 914 100,00 100,00

Less: Treasury shares held 16 540 026

Net shares reported 481 568 888


Basel III balance sheet credit exposure by business cluster and asset class

Corporate and

Investment Banking

Property Finance

Retail and

Business Banking

Nedbank Wealth

Rest of Africa Centre

Advanced Internal Ratings-based Approach 431 124 146 995 309 203 19 646 49 897 Corporate 162 910 43 796 14 745 1 Specialised lending – HVCRE4 7 241 7 241 46 Specialised lending – IPRE5 91 864 91 864 1 732 4 828 Specialised lending – project finance 34 807 SME – corporate 4 660 3 498 19 601 2 405 Public sector entities 24 465 238 Local governments and municipalities 8 057 943 Sovereign 49 550 1 49 897 Banks 46 916 45 12 Securities firms Retail mortgage 115 923 9 935 Retail revolving credit 15 523 78 Retail – other 107 471 158 SME – retail 103 32 714 2 195 Securitisation exposure 551 551 300

The Standardised Approach6 556 16 298 31 894 Corporate 6 554 SME – corporate 271 1 181 Public sector entities 419 Local government and municipalities 34 Sovereign 5 200 8 026 Banks 4 002 2 648 Retail mortgage 277 5 160 6 328 Retail revolving credit 2 063 Retail – other 4 755 3 075 SME – retail 4 2 747

Properties in possession 74 25 56 Non-regulated entities 37 827 Total Basel III balance sheet exposure7 468 951 146 995 309 833 35 969 31 950 49 897 Downturn expected loss (AIRB Approach)

Expected loss performing book BEEL on defaulted advances

IFRS impairment on AIRB loans and advances Excess of downturn expected loss over eligible provisions 1 Risk weighting is shown as a percentage of exposure at default (EAD) for the AIRB Approach and as a percentage of total credit extended for The Standardised

Approach (TSA).2 dEL is in relation to performing loans and advances.3 Best estimate of expected loss (BEEL) is in relation to defaulted loans and advances. 4 High-volatility commercial real estate.5 Income-producing real estate.6 A portion of the legacy Imperial Bank book in Nedbank RBB, Nedbank Private Wealth (UK) and the non-SA banking entities in Africa are covered by TSA.7 Balance sheet credit exposure includes on-balance-sheet, repurchase and resale agreements and derivative exposure.


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Nedbank Group

Dec 2017

Nedbank Group

Dec 2016

(Rm)Mix(%)

Change(%)

RiskWeighting1

(%)

Downturn expected

loss (dEL)2

(Rm)BEEL3

(Rm) (Rm)

Mix

(%)

Downturn

expected

loss (dEL)2

BEEL3

(Rm)

809 870 90,4 2,2 36,9 6 757 6 629 792 166 93,6 6 132 7 032

177 656 19,8 (7,3) 42,6 1 125 486 191 708 22,6 820 795

7 287 0,8 11,1 109,1 89 87 6 561 0,8 94 114

98 424 11,0 11,3 32,4 273 105 88 451 10,5 330 173

34 807 3,9 47,7 57,4 172 23 571 2,8 38 75

26 666 3,0 (1,1) 41,1 150 159 26 955 3,2 150 92

24 703 2,8 9,5 65,5 55 22 561 2,7 50

9 000 1,0 (5,7) 20,8 2 7 9 548 1,1 1 8

99 448 11,1 (0,4) 7,2 16 99 864 11,8 5

46 928 5,2 (11,8) 30,1 88 53 226 6,3 135

23,6 < 0,1

125 858 14,0 5,2 24,0 656 1 141 119 691 14,2 796 1 254

15 601 1,8 4,0 60,7 766 1 335 15 007 1,7 672 1 299

107 629 12,0 8,0 51,8 2 910 2 636 99 702 11,8 2 582 2 513

35 012 3,9 2,5 34,2 455 673 34 168 4 459 709

851 0,1 (26,2) 72,5 1 153 0,1

48 748 5,4 (9,2) 65,9 53 704 6,4

6 554 0,7 5,8 95,5 6 194 0,7

1 452 0,2 (16,6) 17,7 1 742 0,2

419 0,0 (35,0) 67,1 645 0,1

34 0,0 (8,1) 76,2 37 < 0,1

13 226 1,5 33,0 73,7 9 944 1,1

6 650 0,7 (55,0) 66,1 14 767 1,7

11 765 1,4 (6,2) 40,2 12 545 1,4

2 063 0,2 35,6 69,6 1 521 0,2

3 834 0,4 (8,2) 61,9 4 175 0,5

2 751 0,3 28,9 69,0 2 134 0,2

155 0,0 (38,0) 250 < 0,1

37 827 4,2 (6,2) 40 337 4,6

896 600 100 1,1 6 757 6 629 886 457 100 6 132 7 032

13 386 13 164

6 757 6 132

6 629 7 032

(11 379) (11 662)

2 008 1 502


Nedbank LimitedConsolidated statement of comprehensive incomefor the year ended 31 December

Rm 2017 2016

Interest and similar income 71 311 69 862

Interest expense and similar charges 46 111 45 344

Net interest income 25 200 24 518

Impairments charge on loans and advances 3 030 4 254

Income from lending activities 22 170 20 264

Non-interest revenue 19 907 19 361

Operating income 42 077 39 625

Total operating expenses 26 192 25 283

Indirect taxation 858 810

Profit from operations before non-trading and capital items 15 027 13 532

Non-trading and capital items (210) (289)

Profit from operations 14 817 13 243

Share of losses of associate companies and joint arrangements (96) (20)

Profit before direct taxation 14 721 13 223

Total direct taxation 3 563 3 286

Direct taxation 3 622 3 328

Taxation on non-trading and capital items (59) (42)

Profit for the year 11 158 9 937

Other comprehensive income net of taxation 493 (453)

Items that may subsequently be reclassified to profit or loss

Exchange differences on translating foreign operations (29) (231)

Fair-value adjustments on available-for-sale assets (14) (13)

Items that may not subsequently be reclassified to profit or loss

Actuarial losses on long-term employee benefit assets 375 (233)

Gains on property revaluations 161 24

Total comprehensive income for the year 11 651 9 484

Profit attributable to:

– Ordinary and preference equity holders 11 160 9 896

– Non-controlling interest – ordinary shareholders (2) 41

Profit for the year 11 158 9 937

Total comprehensive income attributable to:

– Ordinary and preference equity holders 11 653 9 443

– Non-controlling interest – ordinary shareholders (2) 41

Total comprehensive income for the year 11 651 9 484

Headline earnings reconciliation

Profit attributable to ordinary and preference equity holders 11 160 9 896

Less: Non-headline earnings items net of taxation (151) (247)

Non-trading and capital items (210) (289)

Taxation on non-trading and capital items 59 42

Headline earnings attributable to ordinary and preference equity holders 11 311 10 143


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Nedbank Limited Consolidated statement of financial positionat 31 December

Rm 2017 2016

Assets

Cash and cash equivalents 8 823 20 241

Other short-term securities 73 472 68 218


Government and other securities 48 749 50 687

Loans and advances 689 637 691 925

Other assets 7 332 8 164

Current taxation assets 75 440

Investment securities 2 250 1 908

Non-current assets held for sale 388 287

Investments in private-equity associates, associate companies and joint arrangements 3 277 2 575

Deferred taxation assets 37 266

Property and equipment 7 976 8 197

Long-term employee benefit assets 5 761 5 042

Mandatory reserve deposits with central banks 18 145 18 139

Intangible assets 7 341 5 928

Total assets 903 961 900 061

Total equity and liabilities

Ordinary share capital 28 28

Ordinary share premium 19 182 19 182

Reserves 48 215 42 698

Total equity attributable to equity holders of the parent 67 425 61 908

Preference share capital and premium 3 561 3 561

Holders of additional tier 1 capital instruments 2 600 2 000

Non-controlling interest attributable to ordinary shareholders 7 253

Holders of preference shares 561

Total equity 74 154 67 722


Amounts owed to depositors 736 752 750 319

Provisions and other liabilities 14 047 12 717

Current taxation liabilities 191 53

Deferred taxation liabilities 351 391

Long-term employee benefit liabilities 3 423 3 328

Long-term debt instruments 51 482 52 062

Total liabilities 829 807 832 339

Total equity and liabilities 903 961 900 061

Nedbank LimitedConsolidated financial highlightsfor the year ended 31 December

2017 2016

ROE (%) 17,8 17,3

ROA (%) 1,29 1,20

NIM (%) 3,57 3,40

CLR – banking advances (%) 0,47 0,67

Efficiency ratio 58,2 57,7


Assets under administration (AUA) (Rm) Market value of assets held in custody on behalf of clients.

Assets under management (AUM) (Rm) Market value of assets managed on behalf of clients.

Common equity tier 1 (CET1) capital adequacy ratio (%) CET1 regulatory capital, including unappropriated profit, as a percentage

of total risk-weighted assets.

Credit loss ratio (CLR) – banking advances (%) Impairments charge on loans and advances in the consolidated statement of

comprehensive income as a percentage of daily average gross loans and advances.

Default Default occurs in respect of a particular client in the following instances:

When the bank considers that the client is unlikely to pay its credit obligations to the bank in full without the bank having

recourse to actions such as realising security (if held).

When the client is past due for more than 90 days on any material credit obligation to the bank. Overdrafts will be

considered as being past due if the client has breached an advised limit or has been advised of a limit smaller than the

current outstanding amount.

In terms of Nedbank‘s Group Credit Policy, when the client is placed under business rescue in terms of the Companies Act,

71 of 2008, and when the client requests a restructure of his facilities as a result of financial distress.

Defaulted loans and advances (non-performing defaulted advances) Any advance or group of loans and advances that has

triggered the Basel III definition of default criteria and is in line with the revised SA banking regulations. For retail portfolios this

is product-centred and a default would therefore be specific to a client or borrower account (a specific advance). For all other

portfolios, except specialised lending, it is client- or borrower-centred, meaning that should any transaction within a borrowing

group default, all transactions within the borrowing group would be treated as having defaulted.

At a minimum a default is deemed to have occurred where a material obligation is past due for more than 90 days or a client

has exceeded an advised limit for more than 90 days. A specific impairment is raised against such a credit exposure due to a

significant perceived decline in the credit quality.

Diluted headline earnings per share (DHEPS) (cents) Headline earnings divided by the weighted-average number of ordinary

shares, adjusted for potential dilutive ordinary shares.

Dividend cover (times) Headline earnings per share divided by dividend per share.

Economic profit (EP) (Rm) Headline earnings less the cost of equity (total equity attributable to equity holders of the parent, less

goodwill, multiplied by the group's cost-of-equity percentage).

Effective taxation rate (%) Direct taxation as a percentage of profit before direct taxation, excluding non-trading and

capital items.

Efficiency ratio (%) Total operating expenses as a percentage of total income, being net interest income, non-interest revenue and

share of profits or losses from associates and joint arrangements.

Earnings per share (EPS) (cents) Earnings attributable to ordinary shareholders, divided by the weighted-average number of

ordinary shares in issue.

Gross operating income growth rate less expenses growth rate (JAWS ratio) (%) Measure of the extent to which the total income

growth rate exceeds the total operating expenses growth rate.

Headline earnings (Rm) The profit attributable to equity holders of the parent, excluding specific separately identifiable

remeasurements, net of related tax and non-controlling interests.

Headline earnings per share (HEPS) (cents) Headline earnings divided by the weighted-average number of ordinary shares in issue.

Life insurance embedded value (Rm) The embedded value (EV) of the covered business is the discounted value of the projected

future after-tax shareholder earnings arising from covered business in force at the valuation date, plus the adjusted net worth.

Life insurance value of new business (Rm) A measure of the value added to a company as a result of writing new business. Value of

new business (VNB) is calculated as the discounted value, at the valuation date, of projected after-tax shareholder profit from

covered new business that commenced during the reporting period, net of frictional costs and the cost of non-hedgeable risk

associated with writing new business, using economic assumptions at the start of the reporting period.

Net asset value (NAV) (Rm) Total equity attributable to equity holders of the parent.

Net asset value (NAV) per share (cents) NAV divided by the number of shares in issue, excluding shares held by group entities at the

end of the period.

Net interest income (NII) to average interest-earning banking assets (AIEBA) (%) NII as a percentage of daily average total assets,

excluding trading assets. Also called net interest margin (NIM).

Definitions


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Non-interest revenue (NIR) to total income (%) NIR as a percentage of operating income, excluding the impairments charge on

loans and advances.

Number of shares listed (number) Number of ordinary shares in issue, as listed on the JSE.

Ordinary dividends declared per share (cents) Total dividends to ordinary shareholders declared in respect of the current period.

Performing defaulted loans and advances (Rm) Loans that would otherwise not be in default, but are classified as defaulted due to

regulatory requirements, ie directive 7 and the new curing definition.

Portfolio coverage (%) Portfolio impairments in the statement of financial position as a percentage of gross loans and advances,

excluding defaulted advances.

Portfolio impairments (Rm) Impairment for latent losses inherent in groups of loans and advances that have not yet been

specifically impaired.

The standard portfolio represents all the loans and advances that have not been impaired. These loans and advances have

not yet individually evidenced a loss event, but there are loans and advances in the standard portfolio that may have an

impairment without the bank being aware of it yet.

A period of time will elapse between the occurrence of an impairment event and objective evidence of the impairment

becoming evident. This period is generally known as the emergence period. For each standard portfolio an emergence period is

estimated as well as the probability of the loss trigger and the loss given events occurring. These estimates are applied to the

total exposures of the standard portfolio to calculate the portfolio impairment.

Preprovisioning operating profit (PPOP) (Rm) Headline earnings plus direct taxation plus an impairments charge on loans and

advances.

Profit attributable to equity holders of the parent (Rm) Profit for the period less non-controlling interests pertaining to ordinary

shareholders, preference shareholders and additional tier 1 capital instrument noteholders.

Profit for the period (Rm) Income statement profit attributable to ordinary shareholders of the parent, before non-controlling

interests.

Return on equity (ROE) (%) Headline earnings as a percentage of daily average ordinary shareholders' equity.

Return on equity (ROE) (excluding goodwill) (%) Headline earnings as a percentage of daily average ordinary shareholders' equity

less goodwill.

Return on tangible equity (%) Headline earnings as a percentage of daily average ordinary shareholders' equity less

intangible assets.

Risk-weighted assets (RWA) (Rm) On-balance-sheet and off-balance-sheet exposures after applying prescribed risk weightings

according to the relative risk of the counterparty.

Specific impairments (Rm) Impairment for loans and advances that have been classified as total defaults and specifically impaired,

net of the present value of estimated recoveries.

Specific coverage (%) Specific impairments in the statement of financial position as a percentage of total defaulted advances.

Tangible net asset value (Rm) Equity attributable to equity holders of the parent, excluding intangible assets.

Tangible net asset value per share (cents) Tangible net asset value (NAV) divided by the number of shares in issue, excluding shares

held by group entities at the end of the period.

Tier 1 capital adequacy ratio (CAR) (%) Tier 1 regulatory capital, including unappropriated profit, as a percentage of

total risk-weighted assets.

Total capital adequacy ratio (CAR) (%) Total regulatory capital, including unappropriated profit, as a percentage of

total risk-weighted assets.

Value in use (VIU) (Rm) The present value of the future cashflows expected to be derived from an asset or cash-generating unit.

Weighted-average number of shares (number) The weighted-average number of ordinary shares in issue during the period listed on

the JSE.


AFR available financial resources

AIEBA average interest-earning banking assets

AIRB Advanced Internal Ratings-based

AUA assets under administration

AUM assets under management

BBBEE broad-based black economic empowerment

BEE black economic empowerment

bn billion

bps basis point(s)

CAGR compound annual growth rate

CAR capital adequacy ratio

CET1 common equity tier 1

CIB Corporate and Investment Banking

CLR credit loss ratio

COE cost of equity

CPI consumer price index

CPF commercial-property finance

CVP client value proposition

DHEPS diluted headline earnings per share

D-SIB domestic systematically important bank

ECL expected credit loss

EP economic profit

EPS earnings per share

EV embedded value

ETI Ecobank Transnational Incorporated

GDP gross domestic product

GOI gross operating income

group Nedbank Group Limited

HE headline earnings

HEPS headline earnings per share

HQLA high-quality liquid asset(s)

IAS International Accounting Standard(s)

ICAAP Internal Capital Adequacy Assessment Process

IFRS International Financial Reporting Standard(s)

ILAAP Internal Liquidity Adequacy Assessment Process

JIBAR Johannesburg Interbank Agreed Rate

JSE JSE Limited

LAP liquid-asset portfolio

LCR liquidity coverage ratio

LIBOR London Interbank Offered Rate

m million

MFC Motor Finance Corporation (vehicle finance lending division of Nedbank)

MRC minimum required capital

NCA National Credit Act, 34 of 2005

NCOF net cash outflows

NGN Nigerian naira

NII net interest income

NIM net interest margin

NIR non-interest revenue

NPL non-performing loan(s)

NSFR net stable funding ratio

OM Old Mutual

plc public listed company

PPOP preprovisioning operating profit

R rand

RBB Retail and Business Banking

Rbn South African rands expressed in billions

Rm South African rands expressed in millions

RoA Rest of Africa (cluster name)

ROA return on total assets

ROE return on equity

RORWA return on risk-weighted assets

RRB Retail Relationship Banking

RWA risk-weighted assets

SA South Africa

SADC Southern African Development Community

SAICA South African Institute of Chartered Accountants

SARB South African Reserve Bank

SDGs Sustainability Development Goals

TTC through the cycle

UK United Kingdom

US United States

VAF vehicle and asset finance

VaR value at risk

VIU value in use

VNB value of new business

yoy year on year

ytd year to date

ZAR South African rand (currency code)

Abbreviations and acronyms


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DISCLAIMERNedbank Group has acted in good faith and has made every reasonable effort

to ensure the accuracy and completeness of the information contained in this

document, including all information that may be defined as ‘forward-looking

statements’ within the meaning of United States securities legislation.

Forward-looking statements may be identified by words such as ‘believe’,

‘anticipate’, ‘expect’, ‘plan’, ‘estimate’, ‘intend’, ‘project’, ‘target’, ‘predict’ and ‘hope’.

Forward-looking statements are not statements of fact, but statements by the

management of Nedbank Group based on its current estimates, projections,

expectations, beliefs and assumptions regarding the group’s future performance.

No assurance can be given that forward-looking statements will be correct and

undue reliance should not be placed on such statements.

The risks and uncertainties inherent in the forward-looking statements contained

in this document include, but are not limited to: changes to IFRS and the

interpretations, applications and practices subject thereto as they apply to past,

present and future periods; domestic and international business and market

conditions such as exchange rate and interest rate movements; changes in the

domestic and international regulatory and legislative environments; changes to

domestic and international operational, social, economic and political risks; and the

effects of both current and future litigation.

Nedbank Group does not undertake to update any forward-looking statements

contained in this document and does not assume responsibility for any loss or

damage arising as a result of the reliance by any party thereon, including, but not

limited to, loss of earnings, profits, or consequential loss or damage.

NEDBANK GROUP LIMITEDIncorporated in the Republic of SA

Registration number 1966/010630/06

Registered officeNedbank Group Limited, Nedbank 135 Rivonia Campus,

135 Rivonia Road, Sandown, Sandton, 2196

PO Box 1144, Johannesburg, 2000

Transfer secretaries in SAComputershare Investor Services Proprietary Limited

15 Biermann Avenue, Rosebank, Johannesburg, 2196

PO Box 61051, Marshalltown, 2107

NamibiaTransfer Secretaries (Proprietary) Limited

Robert Mugabe Avenue No 4, Windhoek, Namibia

PO Box 2401, Windhoek, Namibia

INSTRUMENT CODESNedbank Group ordinary sharesJSE share code: NED

NSX share code: NBK

ISIN: ZAE000004875

ADR code: NDBKY

ADR CUSIP: 63975K104

Nedbank Limited non-redeemable non-cumulative preference sharesJSE share code: NBKP

ISIN: ZAE000043667

FOR MORE INFORMATION CONTACT

INVESTOR RELATIONSEmail: [email protected]

RAISIBE MORATHIChief Financial Officer

Tel: +27 (0)11 295 9693

ALFRED VISAGIEExecutive Head, Investor Relations

Tel: +27 (0)11 295 6249

Email: [email protected]

This announcement is available on the group’s website

at nedbankgroup.co.za, together with the following

additional information:

Financial results presentation to analysts.

Link to a webcast of the presentation to analysts.

For further information please contact Nedbank Group

Investor Relations at [email protected].

Company details

Terms and conditions apply. Nedbank Ltd Reg No 1951/000009/06.

Authorised financial services and registered credit provider (NCRCP16).

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