Half Year 2026 Nedbank Group Ltd Earnings Call Transcript
Key Points
- Nedbank Group Ltd (NDBKF) delivered DHEPS growth of 2%, ahead of market expectations of a decline, with a strong 15% growth when excluding ETI base effects.
- The company reported strong underlying operational performance with pre-provision operating profit increasing by 8% (15% ex-ETI), supported by growth momentum across all business clusters.
- Nedbank Group Ltd (NDBKF) achieved its target of a 66% shareholding in NCBA Group, with the transaction on track for completion in Q3 or early Q4 2026, supporting earnings diversification.
- The company's cost discipline was excellent, with expense growth of only 3%, contributing to an improved cost-to-income ratio of 56.2% and a 1% improvement in PPB's ratio to below 60%.
- Nedbank Group Ltd (NDBKF) maintained a strong capital position with a CET1 ratio of 12.6%, above the top end of its target range, allowing for an interim dividend of ZAR10.52 per share.
- The company is seeing tangible benefits from its technology and AI investments, including a 95% reduction in time to create fraud cases and AI-driven sales increasing from 5% to 13% of total sales.
- Nedbank Group Ltd (NDBKF) reported strong growth in non-interest revenue (up 10%), driven by an 11% increase in commission and fees and a 20% increase in insurance income.
- The company is well-positioned for future growth, with a significant pipeline for infrastructure investment (ZAR1.1 trillion) and a 7% growth in gross banking advances.
- Nedbank Group Ltd (NDBKF) gained market share in key retail lending products, including home loans and cards, while retaining its leading position in vehicle finance.
- The company's strategic focus on productivity and efficiency is yielding results, with NAR and SATIC cluster ROE increasing by 3% to 10% and headcount reduced by 9%.
- Nedbank Group Ltd (NDBKF) experienced a higher-than-expected credit loss ratio of 95 basis points, driven by a 26% increase in impairment charges, particularly in PPB.
- The company's PPB credit loss ratio increased to 205 basis points, above its through-the-cycle target range, due to higher credit losses in home loans and cards.
- Nedbank Group Ltd (NDBKF) faces continued pressure from higher inflation and fuel prices, which negatively impacted consumer health and led to a downward revision of GDP forecasts.
- The company's net interest margin compressed by 12 basis points to 375 basis points, primarily due to a 21 basis points endowment impact from lower average interest rates.
- Nedbank Group Ltd (NDBKF) saw a 66% decline in associate income following the sale of ETI, which negatively impacted headline earnings growth.
- The company's outlook is cautious, with expectations of a further 25 basis points interest rate hike in September 2026, which could continue to pressure consumers and credit quality.
- Nedbank Group Ltd (NDBKF) reported a slowdown in Q2 with slower momentum, and the company noted that the fixed investment cycle has not yet fully materialized.
- The company's personal loans portfolio remains challenging, with a cautious stance and market share losses, although actions are being taken to arrest this trend.
- Nedbank Group Ltd (NDBKF) faces uncertainty from global volatility and Middle East conflicts, which could impact the operating environment and financial markets.
- The company's BCB cluster expenses grew by 6.5% (ex-iKhokha) due to continued investment in digital capabilities and costs associated with establishing a standalone cluster.
Good afternoon and welcome to Nedbank's 2026 interim results presentation. The presentation today will cover an overview of our results. Before turning to some thoughts on the operating environment and the outcomes we're starting to see on the back of strategic decisions we've made over the last 18 months.
After that, Mfundo, our Chief Operating Officer, will cover the progress we've made on some of our strategic focus areas, and Mike, our CFO, will then unpack our financial results, and I'll return at the end to discuss our outlook and our guidance.
Well, let me start with a few overarching thoughts on the operating environment, the strategic progress we've made and my comments on our financial performance in the first half of the year. The overarching theme of Nedbank's results was one of focused execution and growth. If 2025 was a transformational year for Nedbank's strategy, 2026 is a year of transition and focus on execution and growth. On the operating environment, we've got three key messages.
Firstly,
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