Nedbank’s earnings growth in line with expectations

The Nedbank Group’s financial performance reflects headline earnings growth in line with management expectations, it said on Wednesday.

For the 10 months ended October, headline earnings growth was driven by higher levels of net interest income (NII) and non-interest revenue (NIR), a lower impairment charge and an expense base that was well managed, the group said in a voluntary trading update.

Guidance provided in the update excludes the impact of the commercial settlement with Transnet — a one-off R600m expense in Corporate and Investment Banking (CIB), it said.

In November, Nedbank said it would pay Transnet R600m to avoid a protracted legal fight over allegations that the bank acted improperly in interest-rate swap deals concluded more than a decade ago.

The settlement was entered into by Nedbank without admitting liability.

Transnet had long insisted that the bank was responsible for losses suffered in the transactions that ultimately enriched Gupta-linked Regiments Capital.

The SIU and Transnet last year launched a R2.8bn lawsuit against Nedbank. The lawsuit came after the mediation talks between the two collapsed, largely due to the insistence by Transnet that Nedbank accept it acted in a corrupt manner regarding interest rate swap transactions in 2015 and 2016.

Nedbank responded to the lawsuit by saying it was unwilling to take responsibility for the governance failures that led to Gupta-linked regiments’ looting of the state-owned entity’s coffers.

The interest rate swap transactions featured in the report of the judicial commission of inquiry into allegations of state capture, corruption and fraud in the public sector, and formed part of a greater scheme to misappropriate and divert public funds from Transnet to Gupta-linked entities.

Former chief justice Raymond Zondo recommended in the state capture report that certain transactions involving Nedbank in which Regiments acted as an adviser to Transnet be subject to further investigation.

On Wednesday, Nedbank reported NII growth of low-to-mid single digits for the period, which is slightly higher than the 2% growth achieved in the first half.

Gross banking advances growth in CIB was above mid-single digits as the division continued to have strong pipelines in place, with drawdowns increasingly being pushed into 2026.

Actual banking advances in Business and Commercial Banking had picked up over the past three months, it said.

Growth momentum in Personal and Private Banking advances continued at mid-to-upper single digits, supported by strong front-book growth across the secured lending portfolios.

“In line with our strategy, deposit growth remained ahead of loan growth, supported by ongoing retail deposit market share gains,” it said.

“We expect NII growth for FY2025 to be in line with the guidance provided as part of the group’s 2025 interim results of low-to-mid single digits,” it added.

The group’s impairment charge continued to improve, ahead of management expectations, and the annualised credit loss ratio (CLR) improved to below the middle of the group’s through-the-cycle (TTC) target range of 60-100 bps.

Its guidance is for the group’s CLR to be below the midpoint of the group’s TTC target range for the full year.

NIR growth was below mid-single digits, driven by solid trading and good underlying insurance growth. This was partially offset by the negative effects from fair value adjustments and delayed deal flow in CIB.

NIR growth for FY2025 was expected to be below mid-single digits, it said.

Expense growth is expected to be in line with its guidance of above mid-single digits for the full year, excluding the Transnet settlement.

“Excluding the impact of the one-off commercial settlement with Transnet, the group is on track to deliver underlying DHEPS [diluted headline earnings per share] growth of flat to low single digits and an ROE of 15% or higher for FY2025,” it said.

For the year to date, the group repurchased and consequently cancelled 10.54-million Nedbank shares to the value of R2.4bn.

During the period, the acquisition of fintech innovator iKhokha was completed, and the disposal of the group’s financial investment in Ecobank Transnational Incorporated to Bosquet is awaiting the final regulatory approvals in the relevant jurisdictions.

The group said that while the South African operating environment remained difficult into the second half, prospects had improved lately. It said subdued inflation and lower interest rates were expected to support a more convincing recovery in household credit demand.

South Africa’s investment environment had improved through progress on structural reforms, its removal from the Financial Action Task Force greylist, its hosting of the G20 Leaders’ Summit, continued fiscal discipline and S&P’s upgrading of SA’s long-term foreign currency credit rating, it noted.

Nedbank will release its annual results on March 3 2026.