Nedbank: H1 profit up 14%, but ex-ETI growth was upper single digits

On June 24, 2026, Nedbank released its pre-close update for H1 2026. Net profit rose 14.0% YoY to ZAR 10,283m on a trailing twelve-month basis, while net interest income grew 3.5%. The shares look attractive: P/E of 13.3 and dividend yield of 7.2% against expected earnings growth, though some of the growth was one-off.

Key takeaways

— H1 net profit grew 14.0% on strong fee and insurance income, but ex-ETI growth would have been upper single digits

— Net interest income rose only 3.5%: margin pressure from rate cuts partly offset by loan growth

— Expenses grew below mid-single digits, supporting pre-provision profit

— Impairment charges rose due to a one-off client default in BCB and deteriorating asset quality in PPB

— ROE of ~13% with P/E of 13.3 and dividend yield of 7.2% makes the share attractive

— The portal's model implies +12% upside from the current price

Attractiveness

Key figures, ZAR bn

H1 net profit grew 14.0% on strong fee and insurance income, but ex-ETI growth would have been upper single digits

In H1 2026, Nedbank's net profit grew 14.0% YoY. Drivers were strong fee and insurance income, particularly in Corporate and Investment Banking (CIB) and Personal and Private Banking (PPB).

However, in 2025 the bank sold its stake in Ecobank (ETI) and recognized ZAR 927m of associate income in H1 2025. Excluding this one-off, underlying growth would have been upper single digits – still decent, but less impressive.

Net interest income rose only 3.5%: margin pressure from rate cuts partly offset by loan growth

Net interest income rose 3.5% YoY in H1. Growth in average interest-earning assets at mid-to-upper single digits was partly offset by a decline in net interest margin due to the run-rate impact of 2025 rate cuts on endowment income.

Lending grew well: gross advances rose above mid-single digits in CIB and PPB, and around mid-single digits in BCB. NII growth is expected to improve over the year, slightly above the FY guidance of around mid-single digits.

Expenses grew below mid-single digits, supporting pre-provision profit

Operating expenses grew below mid-single digits in the first five months of 2026, helped by contained growth in salaries, IT, and travel costs. This supported solid pre-provision operating profit (PPOP) growth.

Management expects expense growth to remain below mid-single digits for H1 and FY 2026, supporting operational efficiency.

Impairment charges rose due to a one-off client default in BCB and deteriorating asset quality in PPB

The group's credit loss ratio (CLR) for 5M 2026 increased YoY and moved into the upper half of the 60–100 bps through-the-cycle target range. In BCB, higher impairments were due to a one-off single client default; in PPB, deteriorating macroeconomic assumptions and rising delinquencies across most asset classes drove the increase.

CIB's portfolio remains high quality, with CLR below its target range. Management expects FY CLR to be slightly above the midpoint of the target range, with H2 seasonally lower than H1.

ROE of ~13% with P/E of 13.3 and dividend yield of 7.2% makes the share attractive

Over the last twelve months, Nedbank earned ZAR 10,283m in net profit, corresponding to an ROE of 13.0%. With a market cap of ZAR 136,619m, the share trades at a P/E of 13.3 – a moderate valuation for a bank with this profitability.

The trailing twelve-month dividend yield is 7.2%, well above market averages, providing investors with a solid income stream while waiting for growth.

The portal's model implies +12% upside from the current price

According to the portal's model, based on ROE relative to P/B, the fair value of the share is 12% above the current market price. This suggests the market is not fully pricing the bank's earnings power.

The share is held in the 'ZA Banks (potential)' strategy on the portal, reflecting its fit with investment criteria, though this is not a buy recommendation.

Valuation on the latest reported figures

Bottom line

Nedbank reported H1 2026 with net profit up 14.0%, which looks strong, but part of the growth came from one-off income related to the ETI sale last year. Excluding that, growth would have been upper single digits – still decent, but less impressive. The main contributors were fee and insurance income, along with tight expense control, while net interest income grew slowly due to margin pressure. Asset quality is deteriorating in the retail segment, which will need attention in H2. At a P/E of 13.3, ROE of 13%, and dividend yield of 7.2%, the share looks attractive, especially with the portal's model implying +12% upside. The key question for holders is whether the bank can sustain earnings growth without one-offs and stabilize credit quality.