Nedbank Group Limited (NED) Earnings Call Transcript & Summary

Good afternoon, and welcome to everyone on the webcast, those dialing in by the telephone lines and via LinkedIn. Today, we are sharing Nedbank Group's annual results to the 31st of December 2023. And after 20 years, as either the CFO or CEO of Nedbank Group, this is the 40th and final time I have the privilege of presenting either interim or final results for Nedbank. The agenda of today's presentation, as shown on the left, we'll start with myself providing an overview of the group's performance in 2023, a reflection on the operating environment and the outcomes we achieved on our strategic growth drivers. I'll then hand over to Mfundo Nkuhlu, our Chief Operating Officer, who will provide an update on our strategy, including the development of our world-class technology platform, a journey that we have called the managed evolution that is nearly complete and the positive impact that this is having on clients and operations. Mike Davis, our Chief Financial Officer, will follow Mfundo with a detailed analysis of the group's financial performance. And thereafter, as we usually do in year-end presentations, each of our frontline managing executives will cover the performance of their respective businesses. I will then return to close the presentation with the outlook for 2024, our targets, a reminder of the Chief Executive succession process and make some concluding remarks. You will notice that some slides are marked additional info in the top right-hand corner, and these are insights for investors, and we will not speak directly to these today. So starting with the overview. I am pleased to report that in a more volatile and difficult operating environment than we had forecast, we have met all the 2023 targets that we announced as our post-COVID recovery targets in March 2021. Being diluted headline earnings per share, or DHEPS, above ZAR 25.65 return on equity, or ROE, above 15%, a cost-to-income ratio below 54% as well as ranking #1 on Net Promoter Score or NPS. And our focus now shifts to our medium- and long-term targets and in particular, ongoing improvements in ROE. In 2023, the operating environment for us and our clients was volatile and difficult as evident in weak South African GDP growth, record level electricity shortages, high interest rates and elevated levels of inflation. While there is still forecast risk, it does seem that inflation is trending down, interest rates seem to have peaked and electricity shortages improved in the second half of the year. Although at the same time, geopolitical risks across the globe pose ongoing risk. And 2024 is an election year in many countries, including South Africa. Delivering on our strategy is showing results. And in our presentation today, we will demonstrate how our world-class technology platform has become the foundation for the delivery of strong digital growth metrics, improved client experiences, market share gains in key areas and ongoing productivity improvements. We've also maintained our leadership in renewable energy and ESG matters, which we know are important to all stakeholders. On the back of this strategic progress, we delivered a good operational performance, evidenced in pre-provisioning operating profit, or pre-prop growth of 15%, a positive jaws ratio of 4% and the cost-to-income ratio that improved to 53.9%. From a financial perspective, headline earnings increased by 11% as revenues increased by 12% and expenses were well managed. This was partially offset by a 30% increase in the impairment charge with a much better performance in the second half of the year, in particular in RBB collections. DHEPS increased by 14% and ROE increased to 15.1%. Both of these metrics benefiting from the ZAR 5 billion capital optimization initiative that we concluded in the first half of the year. We also maintained very strong balance sheet metrics in respect of capital, liquidity and expected credit loss coverage, which taken together with a 14% headline earnings per share growth enabled a very strong 15% growth in the full year dividend. Overall, after a more difficult H1, we delivered a better H2 outcome, particularly on RBB impairments and on closing deal flow in CIB. And as you will see in my closing slides, we have the foundations and momentum in place to enable delivery of our medium- and long-term targets, albeit in a difficult and highly competitive operating environment. Reflecting now on the external operating environment in a little more detail. The global macroeconomic environment has been volatile and difficult, impacted by the ongoing conflicts in many parts of the world and high global inflation and resultant monetary policy tightening, all of which impact on the South African economy. In addition to this, the operating environment in South Africa was impacted by several South Africa-specific issues, including record high levels of electricity shortages or load shedding, logistical constraints, inflation that remains sticky and as a result, higher-than-expected interest rate increases that continued into the first half of 2023. The slow progress made in addressing key issues of energy security, logistics and crime and corruption, coupled with fiscal pressures and increasing geopolitical risk have added to South Africa's country risk premium that manifests in the yield curve. As a result of all of these, economic outcomes in 2023 were weak, evident in the graphs on the slide, showing deteriorating levels of business confidence, a rise in bond yields, albeit with a slight improvement in the fourth quarter, a trend of continued bond and equity sales by foreigners and a depreciation of the rand. Eskom only managed to maintain an electricity availability factor of 54.7% in 2023, down from 57.6% the year before. Unfortunately, as a result, this means that South Africans continued to become poorer with real GDP growth below population growth in rand terms and even weaker in dollar terms. Higher levels of GDP growth are key to resolving many of the challenges I have just spoken about. The structural constraints preventing this from happening around energy supply, logistics and crime and corruption are being addressed through the government business partnership to accelerate progress on these vital issues. From an energy point of view, it is estimated that the impact of the current very high levels of load shedding is somewhere between 1% and 3% of GDP. Although slow, progress on resolving this energy constraint is evident, catalyzed by the legislative changes to enable increased levels of private sector energy generation. As a result, the private sector has made significant investments in renewable energy as evidenced in the 6 gigawatts of registered renewable energy projects with more still to come. Progress on the government renewable energy programs remains mixed with the finalization of some projects in late 2023 and the termination of others. If planned progress continues in the medium term, load shedding could possibly be curtailed to largely Stages 1 and 2, but delivering on this will be contingent on several factors, including improvement in Eskom's production levels, addressing grid constraints, further developing independent power producer capacity and ongoing momentum of private power generation. The financing opportunity for banks remains significant and is likely to provide a multiyear growth opportunity as shown in our booklet slide. Unreliable rail and port services further burdened the private sector, negatively affecting trade, disrupting supply chains and eroding the country's international competitiveness. Here, estimates from National Treasury put this impact on up to 5% of SA's GDP. The establishment of the National Logistics Crisis Committee, the publication of the Freight Logistics Roadmap and some progress on clearing port backlogs also represent slow-but-steady progress in this area. Regarding crime and corruption, there's still much to be done, and the FATF greylisting continues to be an effect, informed in large part by the limited success on state capture-related investigations and prosecutions. On the consumer front, the prevailing theme is increasing pressure that many consumers are under due to a combination of factors, including the weak economic growth, load shedding, high interest rates and sustained high levels of inflation, all of which erode consumers' disposable income. The 125 basis points year-on-year increase in interest rates in 2023 and, of course, 475 basis points since 2021 has been steeper than expected and it's similar to the extent of interest rate increases experienced during the global financial crisis. Pleasingly, interest rates now appear to have peaked and remained flat in the second half of 2023. Inflation receded from the 7.2% at the end of 2022 to 5.1% by the end of 2023, averaging 5.9% over the year. This downward trend came mainly from falling fuel prices, offsetting the impacts of a weaker rand. On the top right graph, you can see household savings have reduced as disposable income remains under pressure and consumers have had to absorb high levels of debt service costs. Debt service costs themselves continue to remain elevated, highlighting the strain on consumer financing has increased and as a result, we have seen a slowdown in household credit growth into the second half of 2023. Turning now from the environment to strategy. Our 3 strategic value drivers of growth, productivity and risk and capital management are shown in the top part of this slide, and I will discuss our ongoing progress on each of these shortly. Mfundo Nkuhlu will provide an update on the progress we have made on our strategic value unlocks. They are shown in the middle of the slide after I conclude. So starting with growth as our first strategic value driver. The graph on the left highlights how growth across net interest income, noninterest revenue and interest-earning banking assets has picked up over the past few reporting periods. Growth continued to be supported by client-driven activity. The CIB recording 20 primary client wins, RBB growing main bank clients by 9% and Nedbank Africa regions growing their client base by 4%. Pleasingly, all digital metrics continued to grow strongly with app volumes, that's the key retail channel, up 18% year-on-year and up by more than 300% since 2019, while the retail cross-sell ratio improved to 1.96x. External financial markets positively benefited assets under management, which increased by 14% to ZAR 448 billion and markets revenue in our CIB business increased by 7%. The endowment benefit from higher interest rates remains favorable and supportive of strong net interest income growth. Although from a bottom line point of view, this is -- this benefit was partially offset by increased impairments, as Mike Davis will outline later when he talks to our very deliberate strategy of managing the economic relationship between endowment and impairments through the cycle. From a productivity point of view, we continue to see the outcomes of our structural cost optimization efforts, together with some one-off benefits contributing to a lower cost-to-income ratio, showing a pleasing improvement from 55.8% to 53.9%. The cost-related productivity improvements have been largely driven by the benefits from our technology platform that is now 95% complete, enabling clients to use more cost-effective digital products and services, as well as ongoing process improvements alongside headcount reduction, mainly through natural attrition and real estate optimization amongst others. Our Managed Evolution IT build to date has been delivered on time, on scope and on budget. The group's intangible software assets on balance sheet peaked in 2020 at ZAR 9 billion and ended 2023 at ZAR 7.9 billion, while the related levels of IT cash flow spend, which peaked in 2017 at around ZAR 2.3 billion per annum have subsequently reduced as we near completion of the Managed Evolution technology build. Lastly for me, our key risk and capital management metrics continue to reflect a fortress balance sheet, even after the completion of the ZAR 5 billion capital optimization initiative during the first half of the year that reduced CET1 by 70 basis points. So starting on the top left of the slide. Under capital, our CET1 ratio at 13.5% remains well above the 12% top end of our Board target range. And after the capital optimization initiative, we have still retained a ZAR 12 billion average surplus capital in the center. On the bottom left, a final dividend of ZAR 10.22 per share was declared at a 57% payout ratio with the final dividend up 18% on the 2022 final dividend. Liquidity metrics in the middle of the slide, such as the LCR and NSFR, remained very strong. And under credit, our credit loss ratio increased to 109 basis points, which, as we guided at interims, is above the 100 basis points top end of our through-the-cycle target range. But pleasingly, the credit loss ratio improved from 121 basis points in the first half to 96 basis points in the second half of the year, in particular, in RBB, while in CIB, we made excellent progress in resolving and derisking Stage 3 loans that were in business rescue. Mike Davis and the cluster managing executives will discuss this in more detail later. The group's overall impairment coverage ratio increased to 3.62%, highlighting ongoing prudency in balance sheet provisioning in uncertain times. I will now hand over to Mfundo Nkuhlu to talk to the progress we have made on our strategic value unlocks in general and our IT strategy that is a vital foundation for ongoing competitiveness in particular.

Thank you, Mike, and good afternoon, everyone. I'm pleased to report that the implementation of the group's strategy is progressing well and yielding the anticipated financial benefits. In today's discussion, I will delve into how strategic execution is creating value and delivering results. Our strategy, which is enabled by a world-class technology platform and our employees is our most important asset is delivered through 5 strategic value unlocks, these being digital leadership and digital experiences, market-leading client experiences, focusing on areas that create value, known as Strategic Portfolio Tilt, driving efficient execution, including Target Operating Model or TOM enhancements and creating positive impacts, including delivery on the purpose of using our financial expertise to do good while maintaining our leadership on environmental, social and governance matters. The Managed Evolution transformation program has enabled us to build a modern, modular and digital information technology stack. As Mike mentioned, we reached 95% build completion at the end of December 2023, and the program is aiming for full completion by the end of 2024, on time, on scope and on budget. We are confident that we will not have an overrun in the investment spend on this program as the intangible asset peaked on the balance sheet in 2020 and the annual IT cash flow spend peaked in 2017 and has been sustained at materially lower levels. The refactoring and modernization of our core banking systems and the digitization of the 2 remaining client onboarding and servicing journeys in home loans and vehicle finance will be completed in the second half of the year. Our focus new shifts to leveraging our new technology stack to simplify our product range by migrating existing accounts to the new MiGoals product, converging for scale across all segments, all channels and all geographies, including harmonization of the Nedbank Africa Regions IT systems, modernizing payments, automating processes end-to-end, leveraging data and generative AI for commercial advantage and increasing our use of cloud computing and storage. Multiple benefits have been derived from our IT investments. For our clients, starting on the left, digital onboarding is now seamless and FICA-compliant for both individual and juristic clients. Digital services have been automated and today, more than 200 retail client services and more than 400 juristic services are available on apps and electron platforms, enabling our clients to self-service. Independent benchmarking by McKinsey, which were highlighted on the additional information slide shows that Nedbank ranks above local peers and above the average of global leaders on service features offered to clients on mobile. Digital sales penetration grew strongly from 2019, extending our advantage over local banks with more work to be done to get closer to global benchmarks. Benefits for Nedbank are shown on the right of the slide. From a revenue perspective, we continue to unlock higher levels of cross-sale and increase the contribution from value-added services and beyond banking solutions, such as Avo. From operational efficiency perspective, by adopting digital practices, we have managed since 2019 to reduce floor space and decrease headcount mainly through natural attrition, all contributing to the cumulative total of ZAR 4.2 billion of cost savings from both TOM 1.0 and TOM 2.0 to date. Lastly, Nedbank was ranked the eighth most valuable brand among South African companies, up from #9 position in the prior year. Benefits in operational efficiencies are tracked in our target operating model or TOM program. At the end of 2023, we realized cumulative TOM 2.0 cost benefits increased to ZAR 2.2 billion. Our target of achieving ZAR 2.5 billion of benefits remains in place and is now expected to be met in the first half of 2024, following decisions to reconsider the timing of the implementation of some initiatives that are linked to revenue uplift and the delay in some cost initiatives that we communicated at our interim results. The digitalization of services in RBB and changing client behavior have enabled us to reduce and optimize the shape of our branch infrastructure through Project Imagine as well as on our own campus sites as shown on the right of this slide. Ongoing focus on extracting value from our technology investments has resulted in the initiation of TOM 2.1, which will focus on extracting additional benefits from maturing our data and analytics capabilities, the modernization of key processes, the implementation of generative AI strategies and the modernization of payments. We will provide an update on the progress and benefits of TOM 2.1 at the presentation of our 2024 interim results. From a lending and deposit taking perspective, we have improved traction in gaining profitable market share in key areas while remaining selective in others in a difficult environment. Overall, total core loan market share remained steady year-on-year at 17.9% as measured through the Reserve Bank's latest December 2023 BA900 data. Wholesale term loan market share increased to 16.4%, and we remain focused on unlocking growth opportunities relating to infrastructure and renewable energy in particular. In home loans, we increased our market share to 14.4%. In commercial property and vehicle finance, where we have large market share positions, we more have been more selective in our credit granting. In unsecured lending, we have grown slower than market and deliberately given up market share given our assessment of the risk environment. From a retail deposit market share perspective, we are pleased with an increase in market share to 16.4%, while more work is required improving share in retail transactional and commercial deposits. Through our fifth strategic value unlock, we focus on creating positive impacts and supporting sustainable socioeconomic development as we deliver our purpose of using our financial expertise to do good. As shown on the graph, at the end of 2023, we have provided sustainable development goals related finance to the value of ZAR 145 billion on our balance sheet. This now represents 16% of the group's gross loans and advances, up from 13% in 2021. We aim to increase this to around 20% by 2025. This financing is supported by some of the initiatives we highlight on the right of the slide, including ZAR 15 billion of sustainable finance across multiple SDGs. ZAR 28 billion for farmers and agriculture, ZAR 22 billion in support of SMEs and ZAR 30 billion for renewable energy. Lastly, a few ESG highlights. Building on our leadership on environmental matters, as part of our results today, we disclosed our first financed emission glide paths for thermal-coal, oil and gas and power generation in support of a reduction in greenhouse gas emissions as per our commitments and journey to net zero. Anel Bosman will share more details on this later. In 2023, we maintained our Level 1 broad-based black economic empowerment status under the current financial sector [ code ]. And we made good progress on diversity, equity and inclusion. We recruited more than 2,800 youth employment service participants and almost 10,000 since inception, as we continue to make an impact on South African youth, their families and communities. Employees satisfaction levels remained high as evident in our 2023 Great Place to Work NPS score of 20, the second highest level since inception of our employee Pulse surveys 5 years ago. Finally, from an ESG ratings perspective, we continue to rank at the top end of our local and global peer group across multiple ratings, as shown on the left-hand side of this slide. We are specifically pleased that our AAA MSCI rating has just again been affirmed, placing us in the top 5% of global banks. On that highlight, I hand over to Mike Davis to take us through the review of the group's financial performance.

Thank you, Mfundo, and good afternoon, everyone. I'm pleased to report that the group delivered a strong financial performance in 2023, with headline earnings up 11% driven by strong revenue growth, partially offset by higher impairments. Diluted headline earnings per share increased by 14% as the ZAR 5 billion capital optimization initiative resulted in the cancellation of just over 23 million shares. As highlighted by Mike, the operating environment has been challenging on the one hand, but as demonstrated by Mfundo, we've made good strides in implementing our strategy. These factors have had opposing impact on the group's financial performance as indicated on this slide. Reflecting on the key drivers of shareholder value creation, we are pleased to report that the group's ROE improved further to 15.1%, above our estimated cost of equity of 14.8% and above our 2023 target of 15%. A final dividend of ZAR 10.22 was declared, up 18%. Net asset value per share increased by 8%, notwithstanding the ZAR 5 billion share buy bank we executed largely during the first half of the year. At these levels, this implies a price-to-book ratio of just below 1x using the share price at the end of December. All of the group's profitability metrics improved, as seen in the solid headline earnings, DHEPS and earnings per share growth, while pre-provisioning operating profit growth was strong at 15% and total comprehensive income increased by 50%. Our NIM increased by 28 basis points to 4.21% whilst our credit loss ratio increased by 20 basis points to 109 basis points and total coverage remained prudent at 3.62%. Our balance sheet remained robust with strong liquidity and capital positions, well above Board and regulatory requirements. Unpacking the primary drivers of the 11% growth in headline earnings. We have seen NII increased strongly by 14%, NIR by 6% and associated income by 64%, supported by a very strong performance from ETI, all combining to reduce revenue growth of 12%. Impairments increased by 30%, partially offsetting strong revenue growth, while expenses were well managed, increasing by 8%. Reflecting on the balance sheet, average gross banking advances increased by 7%. In RBB, the growth was solid as average banking advances grew by 7%, primarily driven by solid performances in our relationship businesses and gradual home loans market share gains. We have been deliberately cautious in the unsecured lending categories, given elevated risk at this point in the cycle, and selective in credit origination and vehicle finance, as we leverage our position -- our strong position with MFC. CIB's advances growth increased by 8%. The increase was driven by growth in our leverage and diversified finance business, as well as in growth in infrastructure, water and telecoms and mining. The closure of various renewable energy transactions in Q4 will contribute to book growth this year. Growth in commercial property was moderate, supported by increased corporate activity. On the opposing side of the balance sheet, deposits increased by 5%, taking the loan to deposit ratio to 82%. Due to the expected reduction in interest rates, many clients termed out short-term cash into long-dated deposits. As a result, current and savings accounts, along with cash management deposits, decreased by 2% and 20%, respectively. In contrast, call and term deposits increased by 6% and fixed deposits by 5%. NCDs increased by 7% and other deposits increased by 21%, driven primarily by growth in structured deposits to meet client-specific demand. Turning to the income statement. NII increased strongly by 14%, driven by growth in average interest-earning banking assets of 7% and a 28-basis-point increase in the net interest margin. The increase in NIM was driven by a positive endowment impact of 38 basis points due to higher interest rates. This increase was partially offset by a negative asset mix impact due to slower growth and high-yielding assets such as unsecured loans, negative liability pricing due to a squeeze in deposit spreads and negative asset pricing in part due to higher levels of competition for good quality assets and improved risk profile in CIB and higher levels of Stage 3 loan interest reversals. As Mike touched on earlier, our active approach to interest rate risk management continues to see us managing the group's endowment position to offset the impact of changes in impairments through interest rate cycles. In 2023, the incremental endowment benefit from higher interest rates continue to offset incremental increases in impairments. This net benefit is expected to remain largely intact in 2024 and 2025 as average interest rates in 2024 are likely to remain at similar levels to 2023. And in 2025, lower NII endowment due to lower interest rates is expected to more than offset -- be offset through lower impairments. NII growth was 6% or 9% on a like-for-like basis, excluding restatements. Key drivers include commission and fee income increasing by 5%, supported by main-banked client growth, improved levels of cross-sell as well as growth in value-added services. This growth was partially offset by a slowdown in client activity on the back of a more difficult macroeconomic environment. Trading income grew by 3%, reflecting good performances in debt securities and commodities. Insurance income declined by 16%, impacted by the deliberate slowdown in unsecured retail lending volumes, IFRS 17 changes and new business strain relating to new insurance solutions. Excluding the IFRS reclassifications, insurance income would have been down 7%. Equity investment income declined by 6%, returning to more normalized levels when compared with a high 2022 base. And lastly, in other NIR, currency gains in ZIM on U.S. dollar capital as a result of currency devaluation, were partially offset by a higher net monetary loss. Turning to impairments. The group's impairment charge increased by 30% to ZAR 9.6 billion, which is an improvement from the 57% increase we reported in half 1 after a better second half performance in RBB collections in particular. The growth was driven by a 29% higher impairment charge in RBB due to the pressure experienced in the consumer segment of our business due to the more difficult macroeconomic environment. Focused management interventions in the second half delivered benefits, including better collections and loan origination with impairments down in the second half across all RBB products and segments, as shown in the booklet slide. CIB impairments increased by 17% year-on-year, higher in the second half than the first half, given the resolution of material Stage 3 loans. Good outcomes were reported in Wealth and Nedbank Africa Regions. The group's central provision reduced to ZAR 150 million and total overlays reduced to ZAR 1.1 billion as risks have been incorporated in our underlying cluster IFRS impairment models. As a result of the higher impairment charge, the group's credit loss ratio or cost of risk increased to 109 basis points, above our through-the-cycle target range of 60 to 100 basis points, but in line with the guidance we provided. Pleasingly, in the second half, the credit loss ratio of 96 basis points was back within our through-the-cycle target range. The CIB credit loss ratio at 24 basis points was within the cluster's through-the-cycle target range being slightly below the midpoint. The credit loss ratio in RBB increased to 194 basis points above the cluster's through-the-cycle target range, up from 161 basis points reported in the prior period. Pleasingly, the second half credit loss ratio for RBB was back within range. Wealth reported a credit loss ratio of 12 basis points below its through-the-cycle target range, benefiting from the release of client-specific overlays as a result of better-than-expected recoveries while the Nedbank Africa Regions' credit loss ratio of 100 basis points decreased slightly and remained within its through-the-cycle target range. The group's total expected credit loss coverage increased to an annual high of 3.62% as we remain adequately provided in a difficult macroeconomic environment. The group's Stage 1 coverage increased slightly to 0.66% and remained higher than pre-COVID levels. Stage 2 coverage decreased slightly to 6.8%, but also remained above pre-COVID levels. And Stage 3 coverage remained steady at 34.2% as RBB loans with higher coverage migrated from Stage 2 into Stage 3 and Stage 3 loans and CIB with lower coverage decreased as some counters cured all loans were written off. Shifting our focus to costs. Expenses increased by 8%, reflecting good expense management as we maintained our focus on efficiencies and the benefits of digitization. The increase in salaries, wages and other staff costs reflect the impacts of an average annual salary increase of 6.3% and higher costs to attract and retain key talent. This was partially offset by a 2% reduction in permanent employee numbers, largely through natural attrition. Computer processing costs increased by 8% and reflect the impact of the rand devaluation related to foreign currency IT contracts, continued investment in digital solutions and higher volumes. Discretionary spend has now reached normalized levels post-COVID, but cost of ZAR 107 million associated with increased levels of load shedding had to be absorbed. With respect to capital, our CET1 ratio decreased to 13.5%, having absorbed the ZAR 5 billion capital optimization and the ratio remains well above our Board-approved target range of 11% to 12%. The group remains capital generative, which offsets growth in RWA, primarily in credit growth and supports paying dividends at the 57% payout ratio. Lastly, before I hand over to our managing execs, a quick overview from me of our cluster performance. The group's headline earnings growth was driven by solid performances across all our business clusters as shown on this slide, with all of our clusters growing headline earnings and reporting ROEs above the group's cost of equity. With that, thank you. I will now hand over to Anel.

Thank you, Mike, and good afternoon. In a demanding operating environment, characterized by inflation, low economic growth and unstable geopolitics, it is pleasing to note that CIB achieved good results, growing headline earnings by 6%, underpinned by solid revenue growth and optimized capital utilization with return on equity improving to 18.9%. Net interest income increased by 7%, benefiting from average banking advances and deposits growing by 8% and 5%, respectively. Net interest margin was maintained as endowment benefits were offset by lower credit margins as risk improved, increased pricing competition on good quality assets and suspended interest on Stage 3 loans. Noninterest revenue is up 5%, driven by trading and commission and fees income. Markets revenue grew 7% as debt securities and commodity markets compensated for reduced foreign exchange client flows. Markets revenue includes fair value adjustments, where higher funding costs in the NII line were offset by fair value gains on several structures designated at fair value in the banking book. Commission and fees growth was supported by a strong performance in trade finance, benefiting from our investment in this business as a growth driver in Africa. Deal closure and lending towards the end of the year generated fee growth from a high 2022 base. Equity investment income and dividends received contracted 5% of a high base after growing 33% in 2022. The credit loss ratio rose marginally to 24 basis points but remain below the midpoint of the through-the-cycle target range of 15 to 45 basis points. And I will unpack this further in the presentation. Despite inflationary cost pressures and a firm commitment to attract and retain top talent, expense increases have been controlled at 7%. Average banking advances grew 8% as client activity increased, particularly in the second half of 2023 across various sectors. The renewable energy transactions that closed last year will contribute to book growth this year. As noted, average banking advances shows positive growth, while actual banking advances are flat, impacted by short-term transactional facility repayments and the optimization of our liquidity position. However, actual term lending advances grew by 4%. Our deliberate and disciplined approach to business selection and capital efficiency resulted in total allocated capital declining by 1%. Looking at the credit risk of the book. Prudent risk management contributed to a reasonable impairment outcome against a challenging backdrop despite the impact from a single name exposure in the property finance business. Impairments rose by 17% to ZAR 939 million, and the credit loss ratio of 24 basis points is below the midpoint of the through-the-cycle target. The credit loss ratio, excluding the single large exposure in property finance was mid-single digits and an excellent result on the rest of the lending book. Stage 3 loans have decreased to ZAR 16.9 million due to some write-offs and the resolution of several material Stage 3 loans. We expect this number to decline significantly in 2024, resulting in an NPL ratio in CIB below 2.5%. The total coverage ratio decreased from 1.29% to 1.14% due to the restructuring and partial write-offs of the single property finance name and some Stage 3 exposures in investment banking and transactional services migrating to the performing book. Our Stage 2 exposures continue to decrease with a slightly higher coverage ratio, whereas our Stage 1 cover ratio remains stable. With a significant increase in interest rates and the devaluation of currencies in Africa, it is important to highlight that CIB exposures are mostly to projects and commodities that generate foreign currency are well structured and secured with external insurance in place where required. Focusing on the commercial property sector, we saw some positive trends in the second half of the year, including stabilizing property values and increase in the trading of properties and corporate action. These indicate an improvement in sentiment and a level of confidence returning to the sector. Our Property Finance business continues to perform well despite the negative impact of additional impairments raised on the sizable single-name counter mentioned earlier, elevating the credit loss ratio to 47 basis points. Our exposure has largely been resolved with assets transferring to the purchases, post conclusion of a business rescue process. Our portfolio continues to be collateralized by a high-quality and well-diversified security pool and overall gearing remains low with a portfolio to loan value ratio of 52%. Arrears on the ZAR 167 billion performing book remain low at ZAR 8million. Nedbank, as a purpose-led organization, is focused on creating positive impacts. One example is our exceptional support for renewable energy projects. Last year, we made significant progress in closing several renewable energy deals, both in government procurement programs and private power generation with an anticipated future book growth of ZAR 18 billion. Our ability to be an innovative banking partner to collaborate with our clients to implement impactful solutions and support them on their energy transition journeys ensures that we maintain a strong pipeline of new mandates. Our commitment to supporting and enabling sustainable positive impacts is evidenced by our progress in our journey to net zero by 2050. In line with our energy policy published in 2021, we have finalized our initial sector glide paths, a good starting point for our road map to achieve our net zero commitment. As communicated last year, our emission reduction targets will initially focus on the emission related to our lending and investment activities in the upstream fossil fuel sector, particularly thermal coal, oil and gas as well as power generation. We have used the International Energy Agency net zero emissions 2030 targets in setting our glide paths, supported by our understanding of the just transition in an African context. We are targeting reductions of 47% for thermal coal and 26% for oil and gas by 2030 and will adopt a power generation cap of 188 grams of carbon oxide equivalent per kilowatt hour. These will be calculated against our glide path financed emissions using 2022 as the base year. From a digital perspective, we continue to deliver a digital and client service capabilities to be the go-to transactional bank for South African businesses. In support of this, we completed the business reorganization changes under TOM 2.0. Key highlights include the launch of voice of the client to capture client sentiment, migrating more than 95% of global clients onto the Nedbank Business Hub, or NBH, and survey results showing that multi-banked clients still the NBH experience surpasses competitors and critical measures, including channel convergence. We continue to drive innovation throughout our business with a specific focus on ensuring we deliver a warm digital experience and equip our employees and clients with the right digital and data capabilities to provide differentiated journeys, enhance cross-sell and enable efficiency. Turning to the 2024 outlook. We look to maintain our momentum from the second half of 2023 on banking advances and have a robust pipeline across multiple sectors. We drive NIR growth by building diverse revenue streams through our transactional banking, trading and advisory businesses. We will further diversify as we target opportunities in Africa with a focus on our areas of expertise. Commission and fees growth will benefit from the balance sheet activity I mentioned as well as our transactional services focus. We monitor our portfolio proactively and focus on stressed counters as we maintain the credit loss ratio within the target range. We remain confident in delivering growth through leadership in various sectors, delivering great digital customer experience and enhance our returns to increase our return on equity to above 19%, while reducing our cost-to-income ratio to lower than 44%. Thank you. And I will now hand over to you, Ciko.

Thank you, Anel, and good afternoon, everyone. It gives me pleasure to announce that Retail and Business Banking's headline earnings were up by 9% at an ROE of 16% for the full year 2023. The first 6 months of 2023 were marked by a difficult macroeconomic environment, marred by slow GDP growth, high inflation, continued high interest rates, load shedding and the worsened credit lending outlook. These challenges led to increased financial strain on our clients, resulting in elevated impairments in the first half of the year. However, during the second half, through dedicated focus and improved collections and recovery capabilities, we managed to claw back significantly in impairments, helping to support HE growth, as mentioned. The main drivers of the growth was an 11% increase in revenue and well-managed expense growth at 7%, which was partially offset by a 29% increase in impairments. Growth in revenue was driven largely by strong NII growth of 14%, benefiting from endowment as well as advances growth. NIR grew by 7% off the back of a 9% increase in new clients, improved cross-sell, higher value-added services sales and card interchange volumes. Impairment growth slowed down in the second half of 2023, increasing by only 3% compared to the increase of 60% reported in H1 2023. And in H2, the credit loss ratio moves back to within the through-the-cycle target range, whilst coverage was maintained. The expense increase of 7% was driven by judicious management of discretionary spend and ongoing optimization of operations through Project Phoenix, Project Imagine and other Target Operating Model 2.0 initiatives. Turning now to the segment franchises. In the increasingly competitive commercial and SME banking markets, our relationship businesses continue to perform well and strengthen their competitiveness. A few highlights of 2023 include commercial banking increasing its market share in the mid-corporate segment to 23%, continuing its positive momentum in its digital journey with Nedbank Business Hub now achieving critical scale and leveraging our industry CVPs, which have solidified competitive market share positions across all industries. Retail relationship banking maintained its market share across both the affluent and SME segments and continued to outperform with good growth in clients stemming from our highly competitive offering, whilst client satisfaction metrics and cross-sell improved to all-time highs. Our beyond banking offering, SimplyBiz, remains a key differentiator through which we have provided over 47,000 business owners free beyond-banking assistance in the form of advertising, coaching, access to relevant business support materials and other strategic initiatives. There is an opportunity to further grow the client base in franchising to focus on merchant acquisition as well as leveraging our expansion of relationship services into under-representative markets. The progress we're making in these businesses gives me confidence that we will not only be able to compete effectively against increasing levels of competition, but to continue to gain market share over the next few years. Turning to our consumer business. Our digital innovation journey continues to improve through enhanced onboarding capabilities as in the new MiGoals suite of transactional products that can be opened in under 5 minutes on our digital channels. The current Greenbacks program is undergoing further changes and enhancements to create additional value for clients and improve the competitiveness of the program. The enhanced program will be launched in quarter 1 of 2024. Digitally active clients increased by 11% to 2.9 million, of which 2.3 million clients are now using the Nedbank Money app increasing by 16% year-on-year. Digital platform sales increased to 55% of the overall sales activity mix, driven by a significant focus on digital marketing and sales funnel capabilities. Client satisfaction is seen as an increasingly strong differentiator for Nedbank, and we were, therefore, very pleased with the outcome of the Kantar NPS survey that ranked Nedbank #1 amongst SA banks on Net Promoter Score for the second year in a row. Over and above the great experience we create on our digital platforms, we also continue to focus on investing in our people and our service excellence program, which is the backbone of the client experience we offer. Clients satisfaction outcomes, along with digital capabilities we believe are a key driver for client growth and retention as well as improved level of cross-sell, which in turn led to the number of retail main-banked clients, increasing by 9% to 3.5 million. Cross-sell improving further to 1.96, also a reflection of the continued success of AI-enabled Next Best Action strategies. We are also starting to see a strong correlation between main-banked client growth and transactional NIR, which were both up by 9%, while from a deposit perspective, market share has stabilized, and focus is now firmly on growing in household deposits. From a productivity perspective, through Project Phoenix, we are shifting our RBB organizational structure so that it is more client centered. And through Project Imagine, we continue to optimize our branch infrastructure to deliver great client experiences, enhanced sales and improve productivity. It is pleasing to see that in the independent Finalta survey where it is highlighted that the transition of our franchise business to an agile operating model is strongly underway and the adoption of agile practices and values have positively impacted frontline sales force productivity. Our continued focus on sales productivity has resulted in branch sales and service productivity improving by 24%. In addition, since 2014, we have achieved floor space reduction of more than 111,000 square meters. The above cost efficiencies enabled a lower cost-to-income ratio in the consumer business. Turning now to impairments. Whilst the RBB credit loss ratio increased to 194 basis points, the trend improved from the 226 basis points in H1 of 223 to 164 basis points in H2 2023, and the decline was evident across all products and segments. The key drivers of this improvement include a more stable macroeconomic environment in H2 2023, further credit policy tightening, particularly in unsecured lending, assisting our clients via tailored rehabilitation and support, optimized payment strategies and debit check mandate increases, particularly on MFC and card, enhanced collection strategies and client-specific interventions supporting clients in commercial banking. These actions give me comfort that, all else being equal, we should see an improving trend into 2024 and 2025. Lastly, reflecting on the progress we are making on growth, we continue to gear ourselves for ongoing competitiveness through the commercialization of growth vectors. The ever super shop has been in market for 3.5 years and signed up over 2.5 million clients, up by 26% year-on-year and continues to grow exponentially. Value-added services increased by 29% across all products, including bill payments and digital vouchers, with over 1.5 million clients purchasing products across all of our channels. We have seen strong growth in Commercial Banking and MFC Solar Finance, with home loan solar CVP and Avo Solar launched in H2 of 2023. On the insurance side, we are focusing on life, funeral, as well as personal lines. Within the Township economy, we continue to innovate and leverage partnerships to co-create solutions of clients. We will soon be launching a CVP for [ Informa ] traders customized to their unique needs and behaviors. These growth vectors unlock alternative revenue generation opportunities and help pave the future for the bank. Turning now to prospects into 2024. We remain acutely aware of some of the macro challenges that clients will continue to face and we remain highly focused on our collections and recovery capabilities, while at the same time maintaining our strategies to originate quality business. We expect continued momentum in advances and deposits growth with NIM expected to decline as a result of ongoing product mix changes, as well as margin squeeze in client spreads. Our credit loss ratio is expected to move to within the top half of our through the cycle target range for the full year, but it will remain elevated in a difficult macroeconomic environment. Given the impact of seasonality, RBB's H1 CLR is likely to be higher than for H2. We aim to grow NIR by diversifying our revenue base and scale key growth vector strategies, whilst we continue to optimize expenses and deliver positive jaws. Our client-centered growth strategy, as well as our execution plans will also help us achieve these aspirations. Our long-term focus continues to be to reduce the RBB cost-to-income ratio and increase return on equity. Thank you. And I now hand over to my colleague, Iolanda.

Thank you, Ciko and good afternoon, everyone. Starting with the Ned Wealth's overall performance. Nedbank Wealth delivered a resilient financial performance with headline earnings up 6% to ZAR 1.2 billion and maintained a high return on equity of 26.8%, well above the group's cost of equity. NII increased by 42% to ZAR 1.7 billion, largely due to higher SA U.S., U.K. and interest rates, which led to a widening of NIM from 2.09% to 2.85%. NIR decreased by 4% to ZAR 2.9 billion, driven by lower traditional bancassurance volumes, new business strain from new MyCover solutions and lower advice and investment fees in Wealth Management, South Africa. This was partially offset by increased shareholder returns in insurance and high AUM fees on the back of strong growth in AUM balances in asset management. Credit impairments increased due to lower client-specific overlay in releases and higher portfolio provisioning in the Wealth Management SA business, as clients exhibited strain from a higher interest rate environment. Expenses increased by 10% due to ongoing investment in people, brand awareness, data and digital initiatives, as well as the efficacy impact of the exchange rate and higher inflation internationally. Moving on to our divisional overviews and starting with Nedbank Insurance. Total insurance income includes the business that Nedbank Insurance rides on its own, as well as the business it collaborates with other clusters in the group, declined by 16% to ZAR 1.4 billion due to lower traditional bancassurance volumes, particularly in the credit life as RBB deliberately slowed personal loan growth in the current risk environment. The non-repeat of reserve releases in the prior year and new business strain. This was offset by an improved non-life claims experience due to the base effects of the KZN floods in 2022. The Life business generated value of new business of ZAR 372 million and the non-life business grew gross written premiums by 15%. The 2022 financials have been restated to account for IFRS 17 as expenses and associated indirect tax related to insurance products are now recognized in NIR. The opportunity to cross-sell insurance products across the group is significant, with steady progress achieved through the collaboration between Nedbank Insurance and retail and business banking. Nedbank Insurance remained focused on growing penetration of the Nedbank client base through various channels with MyCover suite of products. The MyCover suite has shown good growth, achieving 41% increase in gross premiums earned with MyCover Funeral up 16%, MyCover Life at 25% and MyCover Personal lines at 487%, albeit off of a little base. Improving Nedbank Insurance digital proposition has been a key enabler to this growth, as you will see on the next slide. In Insurance, 17 digital products are now live, up from 10 in 2022 and these can be found on 7 channels. The business launched the Insurance Widget and Offers for you, increasing traffic and sales on the Nedbank Money App and redesigned the insurance flow entry screen for enhanced client accessibility resulted in improved user experience. Looking forward, the use of data and digital remains a key growth in enabling client experiences. Nedbank Insurance remains committed to increasing penetration of its MyCover suite, which will be achieved through brand awareness and improved omnichannel offering, data-driven, targeted campaigns and collaboration across the group. Moving on to Asset Management. Nedbank Investments celebrated 20 years of its Best of Breed fund range. The business has grown its unitized assets from ZAR 10 billion to over ZAR 400 billion over the past 2 decades, remains the third largest offshore manager for the sixth year in a row and is the sixth largest South African manager according to the Q4 2023 Asisa Stats. Overall, the net group investments fund range performed well relative to peers, reporting a 14% increase in AUM on the back of improved market performance and strong net inflows, particularly in the cash and low cost core ranges. Net group investments remains committed to delivering long-term investment performance, acting in the best interest of clients and taking further steps in its journey of becoming a leader in responsible investing. And finally, looking at the Wealth Management Businesses. Wealth Management's headline earnings increased by 22% to ZAR 342 million, largely driven by an improvement in NII and partially offset by higher credit impairments and a decrease in NIR due to lower advance fees. Average deposit balances in Wealth Management South Africa increased by 20% as clients favored on balance sheet investments in the rising interest rate environment. Average deposit balances in Wealth Management international decreased and despite challenging investment market conditions, AUM has remained in line with expectations with higher AUA levels in comparison to the prior year. As part of the group-led Target Operating Model 2.0 initiative, there has been good collaboration with retail and business banking and wealth management in South Africa to increase the penetration of financial planning and advice into the Nedbank client base. The project to replace Wealth Management International's core wealth platform is still in early phases and is on track to be delivered in 2025. As we look ahead, our 2024 performance will be informed by a decrease in NII and a decline in the NIM as international interest rates are forecast to decline. An increase in NIR will be due to growth in the Nedbank Insurance market suite, higher, high net worth market share and higher AUM through attracting net inflows. The credit loss ratio is expected to remain within our target range and expenses are expected to grow marginally above inflation, as we continue to invest in key initiatives and key enablers. Looking at the medium and long-term targets, Nedbank Wealth will continue to maintain a strong return on equity above the group's cost of equity. Thank you and I will now hand over to Terence.

Thank you, Iolanda, and good afternoon, everyone. Our strategy on the continent is to own, manage and control banking operations in SADC and East Africa and to give our clients access to a banking network in West and Central Africa through our 21% strategic investment in the Pan African Banking Group ETI, which has subsidiaries in 33 countries. In this context, the NAR business produced a strong set of results for the full year 2023, with headline earnings up 94%, generating returns of 25.2% and above the group's cost of equity. On the same metrics, if we excluded the reversal of the ZAR 175 million provision that Nedbank raised in 2022 in respect of ETI's Ghana sovereign bond exposure, HE is up 76%, generating an ROE of 22.9%. Our performance comes as a result of strong performance from the SADC operations, albeit off a low base and the continued turnaround of ETI. On the right-hand side of the slide, we take a closer look at our segmental performance that contributed to the roughly ZAR 1.9 billion of AG for Africa regions. SADC operations HE is up 80% to ZAR 662 million, generating an ROE of 9.9%. While improving is still, however, well below the levels we would like it to be. Performance was largely driven by strong revenue growth, with NII up 25% and NIR up 17% respectively and revenue growth was driven by widening margins, higher Forex gains and an increase in digital channel revenues. Expenses were up 7%, owing to tight and proactive cost management. Our impairments increased by 15%. However, the credit loss ratio of 100 basis points remains within our through the target range of 85 to 120 basis points. On our ETI Associate Investment, the turnaround in ETI's performance continued in 2023 and our associate income was up 77% and this generated an HE of ZAR 1.2 billion. Excluding the reversal of the Ghana provision already referred to earlier, Associate Income was up 26% and resulted headline earnings of around ZAR 1.1 billion. The return on original cost of ETI investment was 22%. Looking more closely at our SADC operations, we're starting to see the benefits of a stronger foundation come through, as more of our business is increasingly aligned to the group and benefiting more from leveraging the enterprise capabilities. Some non-financial achievements included #1 in Net Promoter Scores in 2 markets, namely Mozambique and Eswatini. And in 2023, we launched Avo SuperShop in Namibia, a first of its kind of that market and has been received very well overall. Our digitally active clients now make up 64% of the base. In line with our strategy of strengthening our foundation, the journey to converge our technology infrastructure to the group's managed evolution platform that Mfundo spoke about, is now firmly underway and we should start to see a lot more activity across the markets we operate in, as we work to offer our clients the same net bank banking experience across all our SADC subsidiaries. This convergence will also contribute significantly to continuous improvements in our control environment. With the weakening of the local currency and significant dollarization of the Zimbabwean economy, a larger portion of our major clients now borrow in USD. Therefore, our U.S. dollar book has significantly increased with a CAGR of over 100% since 2022. Namibia continues to be the major contributor in our portfolio, holding 48% of total SADC assets. Turning to our ETI investment. On the graph on the bottom left-hand side of this slide, we can see that the ROI has increased towards our aspiration of consistently achieving ROI greater than 20%. On the graph on the right, our carrying value as of December 2023 was ZAR 1.3 billion against a market value of ZAR 2.2 billion at the same time. However, following the further recent Naira devaluation, the market value as of end of February 2024 declined to ZAR 1.5 billion, which is still ZAR 250 million higher than the carrying value as at end of December 2023. ETI continues to be a strong franchise in Western Central Africa and we've seen their share price increased by roughly 97% year-on-year. ETI return on tangible equity increased to 25.6% from 21% with their 3 core regions UEMOA, AWA and CESA achieving ROEs above 28%. And finally, turning to the outlook for Africa Regions. In 2024, we will continue to build on the improved performance in the SADC operations and as a shareholder, continue to drive value unlock relating to our ETI investment. In the SADC operations, our key focus areas will continue to be executing on our technology convergence and harmonization journey, transforming the business and operating model to leverage group centers of excellence and continue to grow our digital growth strategy, unlock further value in Mozambique. And in the medium to long term, we remain focused on achieving our ambition of consistently generating returns that are above cost of equity and a cost-to-income ratio of below 60%. Thank you, and back to you, Mike.

Thanks, Terence. In closing, as usual, I will provide our outlook for the period ahead, starting with our group economic unit's latest economic forecasts and then our 2024 targets or short-term guidance. I will also reflect on our medium and long-term targets, provide an update on the Chief Executive succession process and then conclude with some closing remarks on our focus on shareholder value creation through delivery of our strategy. So starting with the latest macroeconomic outlook from Nedbank's economic unit and this outlook informs our short and medium-term guidance to the market. We forecast South African GDP to increase in 2024 to 2026 by somewhere between 1% and 1.6% as you can see on the slide, an improvement from the 0.5% in 2023, but still disappointingly low given the slow progress on the structural constraints to high levels of economic growth that I outlined earlier in the presentation. Average inflation is forecast to ease further and average 5% in 2024. However, upside risks to inflation do remain, including the threat posed by the conflict in the Middle East to global oil prices, a vulnerable rand sensitive to changes in U.S. interest rate expectations and further aggressive hikes in electricity tariffs and other administered prices. We currently expect the prime lending rate to ease from July and for interest rates to reduce cumulatively by 75 basis points this year, taking the prime lending rate to 11% by the end of 2024 and then a further 50 basis points reductions thereafter. Credit extension is forecast to slow in the first half of the year before gradually picking up to about 5% by year-end, supported by the anticipated decline in domestic interest rates and, of course, strong growth in renewable energy investments. Turning now to our usual format of line-by-line income statement guidance for the short term to the end of 2024. Net interest income or NII growth is expected to be above mid-single digits, driven by moderate advances growth and a net interest margin that is expected to decline slightly, mainly due to asset mix changes, as lower-margin wholesale advances grow faster than higher margin retail advances. Given our interest rate forecast that I have just taken you through, average prime in 2024 is expected to be 11.5% compared to average prime of 11.4% in 2023. And as a result, interest rate-related endowment benefits are expected to remain intact period-on-period. The credit loss ratio is expected to decline from the 109 basis points, back to within the group's through the cycle target range by the end of 2024, due to ongoing reductions in RBB's credit loss ratio and the resolution of material risks relating to CIB's non-performing loans, having been completed in 2023. The credit loss ratio in the first half of 2024 is expected to be lower than it was in the first half of 2023, but is likely to still be just above the top end of the group's through the cycle target range, before reducing into this range in the second half of 2024 and over the full year. NIR or non-interest revenue growth is expected to be above mid-single digits as a result of main bank client gains, cross-sell benefits and deal closures, as well as an improvement in trading revenue and insurance income. All of this partially offset by higher base effects from fair value and net monetary loss and FX gains. Our focus on tight expense management remains in place and we expect growth of mid to upper single digits as we absorb new regulatory costs such as deposit insurance and an increase in the number of youth employment service opportunities that we provide. Underlying associate income from our share of ETI's earnings is expected to remain robust, but will be impacted by the non-recurrence of our ZAR 175 million Ghana bond provision that we released in the first half of 2023. Capital ratios are expected to remain well above board ranges and our dividend subject to Board approval declared at the top end of the payout ratio. While reaching our 2023 targets was an important milestone for Nedbank, we know that more needs to be done to continue to increase our ROE and as a result, our price-to-book ratio to create shareholder value. Our focus, therefore, now shifts to our medium-term or 2025 targets, where we aim to deliver ongoing DHEPS growth of 5% above nominal GDP, improve our ROE to 17%, enabled by a lower cost-to-income ratio and, of course, maintain our #1 ranking among South African banks on client satisfaction metrics. In our booklet slides, we unpack the key drivers that we are focusing on to shift our ROE from the current 15.1% to the 17% medium-term target in 2025. The process to choose my successor has been well managed by the Nedbank board. On this slide, we show the key time line since the appointment of Daniel Mminele as Chairperson of the Nedbank Group, succeeding in Paul Makwana to the start of the planned Chief Executive succession process in June. And then the announcement that we made in November last year regarding the appointment of Jason Quinn as CE-designate. After completing his so-called gardening leave, Jason will start his employment at Nedbank on the 22nd of May as CE-designate and will become Chief Executive when he joins the Board at our AGM, which is currently scheduled for the 31st of May and I will retire from the Board as planned. I will be available for a further 3 months as a senior adviser to facilitate a seamless handover. I wish Jason all the best and know that Nedbankers will welcome him and that Nedbank will be in good hands with Jason leading a very strong Exco team. So in closing, while the external environment remains difficult, we do expect some improvement in the macroeconomic environment for banks and our clients into 2024, with risk to the downside possible from unforeseen geopolitical events. We have strong foundations in place, with an experienced board and leadership team, a strategy that is demonstrating improvements in growth, productivity and returns, a track record of delivery, a world-class technology platform, a fortress balance sheet and great people and culture at Nedbank that help us deliver on our purpose and lead in ESG. I trust it is evident to all of you from our presentation today that there is good momentum in the Nedbank business, whether from attractive lending pipelines, digital client and market share growth, cost optimization efforts or the downward trending impairment profile. While we are pleased to have achieved all our 2023 targets in a difficult environment, our focus remains on ongoing improvements in our ROE from 15% towards our 17% target in 2025 to increase our price-to-book ratio and as a result, to continue to create shareholder value. Thank you and we will now proceed to Q&A.

Thank you. [Operator Instructions] The first question we have is from [indiscernible] of Citi.

So 3 questions from my side. Can you please expand further on which products or segments you're seeing asset pricing pressure on margin and how you see this progressing in 2024? And secondly, your medium-term targets require no material NIM contraction. How do you intend to achieve this in a lower rate environment, coupled with asset pricing pressure mentioned above? And lastly, what are you looking for in a potential bolt-on investment that you mentioned at the half year? And what countries or regions would be of particular interest to you.

So if we just deal with all of those, in terms of products where we're seeing any particular pricing pressure, before I hand over to firstly, Mfundo, firstly, Ciko and then to Anel, I think broadly what you've got to see is that we are in an environment where all the large banks operating in South Africa are well capitalized and highly liquid. At the same time, as we have an environment of very low levels of economic growth and low levels of advances growth more broadly in demand. So that inevitably will lead to pricing pressure on -- across the board on all higher-quality deals. But maybe Ciko, if you just start with any particular pricing pressure in RBB and then Anel with any particular pricing pressure in CIB.

[Technical Difficulty] pricing pressure first of all. The first obvious is on the deposit product suite as the mentions have kind of come in aggressively to attract deposits, we're seeing it across the spectrum from laying all the way up with client offering, we're seeing pressure. We've seen pressure on [Technical Difficulty] in the high end related products, [Technical Difficulty] declines that does tend to be pressured [Technical Difficulty] in terms of price offered because we're all chasing the right profile of clients and relative suite and yes, probably doesn't have the biggest areas and also in the SME there some price and as you know is for market share gains.

And then, Anel, could you speak to the CIB business?

Overall, we saw demand for most assets, specifically in renewables and each transactions. We also saw margins coming down [Technical Difficulty] of counterparts as Mike mentioned earlier.

And then if I come to your second question around the slide that builds to our medium-term targets and it says we're not expecting any material margin pressure. And in particular, you're focusing on endowment in a lower rate environment, I'm going to ask Mike Davis to deal with that.

Yes. So a couple of things. I mean, Mike referred to it in the presentation is that, we're expecting 75 basis point rate cuts in the second half of this year. We got rate hikes of 125 basis points in the first half of last year. If you look at the average rate of prime, in fact, it's going to be higher this year than last year. So there's no negative endowment effect in 2024 expected versus 2023, where we do expect some dilution would be ongoing advances mix dilution. We spoke earlier about the fact that we've pulled back in unsecured lending, which obviously delivers a higher margin and we've grown market share in, for example, secured lending. As we continue to do that, we obviously will continue to see slight contraction in NIMs as a result of asset mix, but nothing really indolent.

And then to come back to your third point around potential bolt-on acquisitions. I guess at the interim, you would have seen, we've subsequently, reasonably far down the track on the purchase of the full maintenance leasing book from Eqstra as a bolt-on into our RBB business and their product suite. And I think we've said for a while that we would want to expand our activities in the SADC and East African environment, either through some form of acquisition if we find one that is both strategically sensible, sensibly priced, et cetera or given our increasing digital capabilities, we have the ability to enter those markets digitally alongside our investment banking franchises that are already transacting there.

The next question we have is from James Starke of RMB Morgan Stanley.

Three questions from me. The first one is regarding your medium-term guidance for the ROE. If we think about it, you have flagged that you're unlikely to meet your 52% cost-to-income target. At the same time, insurance is one of the key elements of your pathway to getting there and that's looking like it's slowing, particularly given the subdued growth in personal lending. So the question really is, what else have you become more optimistic about that's underpinning your confidence of getting to your 17% ROE by 2025? The second question is around your credit loss guidance. You have flagged that you're expecting 75 basis points in rate cuts. What happens if those don't come through? I mean, is that -- is your guidance contingent on those coming through if it doesn't come through to the same extent? Do you still achieve your CLR at the top end of the range? And then lastly, your effective tax rate has come off quite a bit. How sustainable is the current level? And where do we go to from here more so into 2025 and beyond?

So I guess, because I won't be here in 2025, I'll ask Mike Davis to talk to those.

Yes. So James, I mean, we've always said that we set stretch targets. We've always said that 17% is a stretch ROE target as -- is getting down to a 50% cost-to-income ratio. We have changed the guidance that we're likely to hit the 52% just outside of 2025. So we've pushed that into 2026, but it's not a big miss in terms of our original medium-term target of 52%. But yes, I mean, 17% has got stretching as did 15% in terms of delivering 15.1% in 2023. To get there, we probably need to see slightly stronger revenue growth, slightly stronger balance sheet growth and we've got to be diligent across the expenses line, particularly as we move through 2024 and into 2025. So we wouldn't get there if we were growing expenses by mid to upper single digits in 2025. So that's how we would get there. We've had couple of questions around, does it necessarily involve anything in the denominator? And we've been quite clear around the capital equity position of the organization in terms of first and foremost, deployed into balance sheet growth. Second, we obviously support higher [ WEs ] over the next medium term, support any bolt-ons to the extent that they present themselves and possibly any further capital action. So -- but yes, 17% is a stretch, but we put it out there and we committed to try and get there. That was your first question. Second question, yes, guidance is premised off our macroeconomic outlook. To the extent that we didn't get 75 basis points, it would result in a higher credit loss ratio. So we do think that the consumer needs relief into the back end of this year, I mean rate expectations have already been pushed out into July. We previously thought those would come earlier. So yes, if we don't get the 75, it would result in higher NII through higher endowment, but it would put pressure on that cost of risk line. And then your last point around the effective tax rate at the pre-close the back end of November last year. I did put into the room that we've resolved a particular matter with SASSA. It's a long outstanding matter that has been settled, that recoupment has been made and any associated provisions released and as a result, that does drive down the tax rate slightly. I mean, if you want a number to model, I would probably add a 1% to that in terms of modeling the effective tax rate going forward.

The next question we have is from Harry Botha of Anchor Stockbrokers.

Just a question quickly on capital optimization, Mike. I know you've probably just answered it, but I think to an extent, obviously, it does seem as if capital is sufficient to fund dividends and growth at the moment, particularly with the share price close to NAV, isn't it, yes, a good time to return capital to shareholders through share buybacks. And then secondly, in terms of insurance growth potential in new products, what is the insurance penetration in RBB main bank customer base at the moment in some of those new products?

We'll ask Mike to pick up the first one, and then Iolanda to pick up the second one.

Yes, I mean the answer in simple terms is yes and that's what the motivation was regarding the original ZAR 5 billion buyback we executed largely in the first half of 2023. To the extent that the share price trades below 1x price to book, I do think it adds value to shareholders to return capital. But at the same time, you need to ensure that you've got adequate capital for growth. Hopefully, this set of numbers puts a bit more back into the share price and drives us further towards above a 1x price to book. But yes, South Africa certainly has the history of creating opportunities. So to the extent that it presents, it might make sense to do further buybacks.

Now with regards to the insurance opportunity and the penetration into the Nedbank client base and we have some really stretched targets in the 3-year planning. We believe that there is still room for penetration into the Nedbank client base, moving away from the traditional bancassurance reliance with specific reference to credit life in the personal loan space. And then you'll see that in my presentation with reference to the personal lines, there's still massive opportunity there and good growth and but also a low base and the penetration of a funeral and the life in the MyCover. So that's where we really see the opportunity for growth and with growth opportunity within the retail and business banking client base.

And just to build on that a little bit, you spoke about the reduction in insurance revenue, James. And you will see in the detail that a large portion of that is due to reserve releases in the prior year and reserve building in the current year, so perhaps less underlying sales rather actuarial assumptions, as well as the impact of lower bancassurance volumes, primarily in personal loans and that's really the deliberate strategy that RBB has been following to give up a little bit of share in personal loans at this point in the cycle. And clearly, that strategy is not one that will be a permanent strategy that we are a point in the cycle where we feel that the risk is sensible again to try and grow a bit of share in personal lines and that will reverse the insurance trajectory in credit life.

There are no further questions on the phone lines.

Okay. If I can then just come to the questions on the web and I need to read those. So first question is from Matthew Pouncett at Laurium Capital. The loan and deposit book saw limited growth from the half year. Can you comment on recent origination run rates? The NII guidance of above mid-single digits suggest that management expects a decent pick-up in loan origination in 2024. So I'm going to hand that back to Mike Davis.

Yes. So we certainly saw when reflecting on loan, particularly loan growth is slowing into quarter 3 and more so into quarter 4. So certainly and it slowed a lot further than we had expected. Some of the growth in Nedbank specifically was effectively on purpose in that we continue to lose share in unsecured lending just at this point in the cycle, given heightened risk. And when you take point in time, if you go back to 2022, we had cash placed in, for example, the interbank space that CIB has done a lot around optimizing its consumption of capital. So to the extent that it's low EP advances growth, we've effectively allowed that to run off. So some of it is intentional. But certainly, we saw a slowing largely across our RBB business more than we had expected. And I think when you reflect on the BI returns and potentially when the other banks release, I think you just find similar trends in certainly 2 of the other majors. So we certainly saw that slowing. In terms of the expectations through 2024, we've had a reasonably good start to the year, particularly in our wholesale business and we do guide across half 1 and half 2. We do expect half 2 to be a stronger performance than half 1 as it relates to loan growth.

And there's a second question also from Matthew at Laurium. In RBB, did you put through any transactional fee cuts during the year. So I'm going to hand that across to Ciko?

Thanks, Mike. Hopefully, the echo is better. As you know, not directly one-on-one, what we did in 2023 was, we substituted the old Nedbank service suite, transactional service suite in consumer banking with a brand new suite called MiGoals, Iolanda spoke to it earlier and touched on it as well, much easier to operate, much simpler to price, much more transparent pricing and much easier from a process, from an account opening point of view and onboarding. What that has done is that where we would have given up NIR migrations, it's been made up by the upshot in the take-up of volumes of the new transactional offering in MiGoals, especially in the upper middle segment of our consumer base. So there's been an offsetting effect and any potential impact that might have had on revenue, especially NIR was minimal on the consumer banking side. So no, we haven't seen any of that. There might -- there was some freeze on the small business side for the first 6 months of 2023 with 0 rated our PSUs offering, but the impact on revenue is minimal. When I say minimal, literally less than ZAR 20 million, ZAR 25 million for the full year on that side. And but, yes, where there would have been a big impact. As I said, would have been in the customer breaking space. But as I said, it's been made up by more than -- in some instances, triple-digit growth on sales on the MiGoals transaction suite.

And perhaps one last data point on all of that is that while it's lost in the consolidated non-interest revenue numbers, if you look at non-interest revenue in the consumer segment of RBB, which is where the vast majority of our transactional activity sits. During 2023, you would have seen we said we grew main-bank customers 9% and non-interest revenue in that segment also grew 9%. There's a question now from Charles Russell at SBG Securities. And more than one question. So the first one is, why do you continue to carry a ZAR 10 billion non-performing loan and property finance after the business rescue process on the single name counter is complete. So I'm going to hand that across to Anel.

I think just to note, the business rescue process is still underway and it has not been completed. And secondly, the transfer of properties are in process. And then lastly, just as a guidance, we expect our non-performing loan ratio to drop to below the 2.5% once these processes are completed.

So the -- all the underlying sale agreements and transaction agreements are signed. What is not yet complete is the final transfer of the properties, you all know that requires rates clearances and all sorts of things. In fact, we had a very material transfer take place in January. And if you looked at my final slide, down the bottom, you'll see that we say we expect a ZAR 10 billion reduction or a ZAR 11 billion reduction in NPLs in CIB during the course of 2024, as these underlying properties transfer. The second question is, your guidance on associate income is slightly lower than 2023. I assume you're talking about the rand value and not the growth levels. What does this assume on currency conversion across major African countries, currencies? And I'm going to ask Mfundo to deal with that one.

Yes, indeed, the strong contribution from ETI in 2023 reflects among other things, also the reversal of the provisions of ZAR 175 million against the Ghanaian bond. That component is not run ratable. As a consequence of that, it gets taken out in the projections for 2024. In its own financial budgets, I also project strong growth in the medium term. And so beyond just 2024, you will find that the earnings contribution of ETI remain strong over the medium term. In respect of currency movement, certainly, we've seen a depreciation of NIR in the recent period that points to a correction in that market and perhaps resulting in some level of dislocation as the currency weakened beyond the level at which the parallel rate is trading. That is something that certainly will put pressure on the capital position of the subsidiary in Nigeria itself, but do take into account that Nigeria as a share of total earnings of ETI has reduced significantly over an extended period of time now.

The last question from Charles Russell is actually very, very similar to the first question from Matthew Pouncett, but I'll ask it anyway. Can you reconcile the 3% banking loan growth with the 7% average loan growth? And how will this impact average growth into FY 2024? So Mike Davis, if I go back to you on that?

Yes. So again, very similar to the first one. We saw strong growth in second half of 2022, that run rate into the averages into 2023 and we've seen slowing growth in the second half of 2023, that obviously adversely affects the point-in-time loan growth '23 on '22. How does it affect 2024, a little bit to the guidance I referred to earlier, we're expecting a softer half 1 on half 2. And that, again, is taken into the guidance we give as it relates to growth in NII as being above mid-single digits.

Then at the moment, the final question on the web is from Ross Krige at Investec. Hello, and thank you. First, it's a number of questions again. Firstly, with regard to group non-interest revenue, full year 2023 growth was ahead of the 10 months to October, what drove the very strong November and December levels. And I guess I better ask 1 question at least myself rather than pass them all out. But I think in essence, 2 main things drove the stronger November and December. Firstly, always non-interest revenue growth in November and December is higher in RBB. Remember, November, Black Friday, all of those sorts of things and clearly, December also over Christmas, materially higher volumes through all of our systems. So there's always a very strong seasonal uptick in NIR in the last 2 months in retail. And then CIB in the last 2 to 3 months of the year had a better performance in trading revenue on average than they had earlier in the year. But in particular, had a number of large deals that closed in the last 2 to 3 months of the year. A number of the renewable energy deals that we feel like we've been waiting several years to close, finally got over the line. And therefore, as a consequence, having done all the work over a number of years, we were finally able to book some of those fees. The second question from Ross and I'm going to ask Mike Davis to pick this up. Expense growth is expected to remain above CPI in inflation rates in 2024 for clearly explained reasons. But should we expect this to shift lower over the medium term as one-off items such as deposit insurance move into the base and efficiencies are extracted from previous investments?

Yes, Ross, in simple terms, yes. I mean we are and will absorb DIS for the first time in 2024. We've got slightly higher levels of 20p costs and we've got slightly higher levels as they relate to our [ YES ] program. So those are all coming into the base for the first time. And you should expect expense growth to drop when we move into 2025.

Hopefully, we won't get any new regulatory costs in 2025, Ross. The final question is NII growth expectations for 2024 are flagged as second half weighted based on loan growth. What drives your expectation of an acceleration into H2? Again, I'm going to pass this back to Mike, it's all around that same theme of loan growth into H2.

Yes, it really is that run rate, the adverse run rate impact of slowing growth in the back end of 2023 into the first half of 2024. So that works its way into lower averages and then stronger growth expectations in the second half, really driven by slightly stronger GDP growth, inflation continues to come off. Interest rates are cut 75 basis points and ongoing opportunities in our CIB business through the likes of renewable energy.

And we have another question that's come on to the web from [ Tinashe Kambadza ]. Good day. Thank you for the presentation. You note opportunities in renewable energy. Please can you provide more specific insights on this in terms of the projects that are being targeted, wind solar, et cetera? Also, are you experiencing further delays in government's renewable energy or the REI PPP program. So again, I'm going to pass that to Anel.

We've also seen, sorry, Mike and the -- we see that the programs are closed towards the second half of last year 2023, will draw down towards the end of H1 going into H2 this year, which is a further explanation of the average banking advances that will grow during 2024.

And Tinashe, just finally, if you look at the bottom of Slide 54 that Anel spoken to, you can see in respect of government programs, what had been awarded, what closed in 2023, what we think is going to close in 2024 and which ones have been terminated. So thank you. I hope we have been able to cover all of your questions adequately. Can we go back to the telephone lines to see if there are any final questions on the telephone lines? And if there are any more on the web, please type them in.

We have a follow-up question from James Starke of RMB Morgan Stanley.

Two from me quickly, loan growth. Do you see your level of loan growth diverging from system level loan growth? And then one maybe for Ciko on the home loan book, pleasing recovery from a credit loss perspective in the second half, perhaps some more color on the state of that book and if that improvement can continue into 2024?

And again, we'll start with Mike Davis on the loans and then over to Ciko.

Yes, James. So if you pick up the BA900 data, you'll see that in terms of if you just look at our peer group, you'll find that 2 of the peers will be growing behind us and one of the peers will be growing ahead of us. And if you bring in the likes of some of the smaller players, you'll see that we're roughly growing in line with industry growth from an advances perspective.

Anel, would you -- sorry, Ciko, would you pick up the question on the home loan book?

Yes, it was nice to see the improvement in the second half. And I think that kind of benefited from us retilting the book in terms of how we originate. We came back and pulled the brakes quite aggressively on in sub-sectors like affordable housing, first-time home loans to -- in the context of a book that we started seeing was filling the heat and so we got the benefit of that. And of course, of the break of some aggressive collection strategies, especially in those sub-segments. I do worry, though about home loans going forward. It's nice to see us moving share upwards on the BAs, certainly a positive trend, but risk and outlook on home loans is still elevated. We've seen what's happened to the market. It slowed down quite drastically and where there is any activity, it seems to be at the high end of the market, low risk, high end. So all of us as banks are going to fish in that same pond, which makes it quite aggressive from a NIM point of view, in terms of margins, but also in terms of reduced opportunities for us to continue to grow.

Thanks. We check if there are any more questions on the telephone lines?

There are no further questions.

Okay. So all that remains is for me to say thank you very much. I hope you enjoyed our presentation today and we look forward to engaging with many of you over the next couple of weeks on the road. Thank you.