Big-four bank Nedbank is making steady progress to complete its multibillion-rand digital transformation project, dubbed “Managed Evolution”.
In its interim results for the six months to 30 June, published today, the financial institution says the build-out of its modern, modular and agile technology platform has reached 93% completion.
When Nedbank announced its financial results for the 12 months to 31 December in March, it said the project was 91% complete.
The project, which seeks to provide Nedbank with a complete refresh of its digital platforms, kicked off in 2016.
In August last year, the bank said the R9 billion digital transformation project was 89% complete.
The bank’s interim results show Managed Evolution has been pivotal in supporting the launch of three new transactional products off its new core banking system.
The project resulted in continued double-digit growth in all digital-related metrics, as well as higher levels of cross-sell, it says.
Nedbank Money app active clients reached 2.2 million in H1 2023, up by 23% year-on-year (YOY). Transaction volumes on the Money app increased by 22% YOY and transaction values increased by 23%.
Revenue from value-added services grew by 29% YOY across prepaid data, voucher and electricity purchases, as well as Lotto and the sending of money to cellphones.
“Our digital initiatives helped us to increase the number of digitally active retail clients in SA by 14% YOY to 2.8 million, representing 69% of retail main-banked clients, and to rank the number one bank in SA on net promoter score,” says Nedbank.
Since its launch in 2020, it notes, the Avo super app (now SuperShop) has signed up 2.3 million customers (up by 44% YOY), with over 23 000 businesses registered to offer their products and services on this e-commerce platform.
“Avo continues to grow exponentially, with a 70% YOY increase in gross merchandise value,” says the bank.
Power crisis opportunity
Meanwhile, Nedbank delivered a solid financial performance for the period under review, as headline earnings increased by 10% to R7.3 billion in a “challenging operating environment” and return on equity increased to 14.2% (H1 2022: 13.6%).
The operating environment in the first half was much more challenging than the bank had initially forecast, says Nedbank chief executive Mike Brown.
“In addition to a weak global economy and lower commodity prices, domestic economic activity continued to be negatively impacted by very high levels of load-shedding, logistical constraints, higher-than-expected levels of inflation, and as a result, higher-than-expected increases in interest rates.
“While progress is being made in improving outcomes on the key issues of energy security, transport and logistics, and crime and corruption, this progress is slow, and when coupled with the potentially severe economic consequences of the US reaction to SA’s allegedly compromising its non-aligned stance in relation to the Russia-Ukraine conflict, has added further to SA’s country risk premium, increasing bond yields and resulting in a deterioration in the value of the rand against foreign currencies.”
The bank notes that while record levels of electricity outages in H1 2023 had a limited impact on Nedbank’s operations, it had a negative impact on the operations of many of its clients, while at the same time leading many clients to invest in renewable energy and private power generation solutions, providing a large financing opportunity for Nedbank.
“While it should never have happened, load-shedding has increasingly become a catalyst for renewable and embedded energy investments to support both SA’s Just Energy Transition and for individuals and companies to reduce costs and reduce their dependency on electricity supply from Eskom. This is creating a strong runway for bank advances growth in this sector,” says Brown.
“However, electricity outages adversely impact business and consumer confidence, as well as increase inflation, and, as a result, limit GDP growth. From an SME perspective, load-shedding is making it increasingly difficult to start a business.”
It was announced at the group’s annual general meeting on 2 June that the Nedbank board, supported by a global search firm with strong domestic presence, had commenced a process to choose a successor to Brown.
Brown joined Nedbank Group 30 years ago and has been chief executive since 2010 and an executive director since 2004.
Nedbank says it has a strong track record of effective leadership succession, and this process will consider internal and external candidates.
“Brown, who is 57 years of age, continues to enjoy the total confidence of shareholders and the board. He will continue in his current chief executive role until a successor has been chosen and will retire after an appointment has been made and a suitable handover process has been completed.
“This process is now well under way and further updates will be provided alongside our 2023 year-end results in Q1 2024,” it concludes.