Nedbank expects ROE to build in medium term to about 17%

Nedbank expects ROE to build in medium term to about 17%

Nedbank Group Targets 17% ROE in Medium Term Amid Strategic Reorganization

Nedbank Group has outlined a revised medium-term roadmap to elevate its return on equity (ROE) to approximately 17%, supported by strategic reorganization and operational improvements. For the six months ended 30 June 2025, the group reported an ROE of 15.2%, up slightly from 15.0% in the same period in 2024, while diluted headline earnings per share (DHEPS) grew 7% year-on-year.

The group's updated guidance reflects a challenging macroeconomic environment, including global trade uncertainties and subdued South African GDP growth. CEO Jason Quinn emphasized that the strategic divestment of Nedbank's investment in Ecobank Transnational Incorporated (ETI), now classified as an asset held for sale, aligns with a refocused strategy on the SADC and East Africa regions. This shift aims to enhance capital efficiency and operational clarity.

Key drivers of the ROE improvement include growth in non-interest revenue (NIR), improved impairment charges, and disciplined expense management. Nedbank also aims to strengthen net interest income (NII) through market share gains in retail deposits, home loans, and vehicle finance. The group's capital position remains robust, with a CET1 ratio of 13.1% and tier 1 capital at 14.7%, well above regulatory requirements.

Quinn noted that achieving the 17% ROE target will require sustained progress in credit risk management, digital transformation, and cross-selling initiatives. Retail and business banking segments have shown resilience, with digital transaction volumes rising 15–16% in South Africa and a 24% increase in brand value to R20bn.

While the group revised 2025 DHEPS growth expectations to low single digits, it remains confident in long-term value creation. Nedbank's dividend policy, with a 57% payout ratio for the interim period, underscores its commitment to balancing shareholder returns with capital preservation.

The path to 17% ROE hinges on navigating macroeconomic risks, including US tariff impacts and South Africa's uneven recovery, while leveraging strategic repositioning and operational efficiencies.