• Nedbank expects operations outside South Africa to contribute about 14% of Group headline earnings
• The bank is repositioning itself as a Southern and East African lender, moving away from a business model dominated by South Africa’s
• The R13.9 billion acquisition is structured with approximately 80% new Nedbank shares and 20% cash

Harare - Nedbank has set a target for one fifth of its earnings to come from outside South Africa as it reshapes its business around Southern and East Africa through the acquisition of a controlling stake in Kenya’s NCBA Group.

Management says investors should begin viewing the bank as a regional banking group rather than a lender whose performance is overwhelmingly determined by South Africa’s economic cycle.

The strategy represents the clearest change in Nedbank’s geographic growth model in more than a decade and places regional diversification at the centre of future earnings expansion.

The new earnings target provides the first measurable benchmark for assessing the NCBA acquisition. Had the Kenyan lender been fully consolidated during the first half of 2026, it would have contributed approximately 11% of Nedbank’s headline earnings. Together with the Group’s existing Southern African operations, about 14% of earnings would have been generated outside South Africa. The group now intends to increase that contribution to 20% over time, establishing an 80 20 earnings structure between South Africa and the rest of the region.

This changes how the acquisition should be assessed. The transaction is not simply about entering Kenya or increasing customer numbers. It is about reducing concentration risk. Around 91% of Nedbank’s assets remain located in South Africa, exposing the Group to one economy, one fiscal environment and one domestic credit cycle. South Africa’s economy is expected to expand by only about 1.3% during 2026, limiting the pace at which banks can sustainably grow loans, deposits and transaction income. East Africa offers a different operating profile through stronger population growth, expanding financial inclusion, rising digital banking adoption and faster economic expansion.

NCBA provides the platform for that shift. The bank serves more than 60 million customers across Kenya, Uganda, Tanzania and Rwanda and has established positions in corporate banking, asset finance and digital lending. Rather than building an East African franchise organically over many years, Nedbank is acquiring an established banking network with scale, distribution, technology and customer relationships already in place.

The structure of the acquisition also reveals management’s capital allocation priorities. Nedbank has valued the transaction at approximately R13.9 billion and will settle about 80% of the consideration through newly issued Nedbank shares, with the remaining 20% paid in cash. That approach preserves regulatory capital and liquidity while avoiding the funding costs associated with a fully cash financed acquisition. Existing shareholders accept some dilution in exchange for exposure to a larger regional earnings base.

The transaction therefore shifts the value creation test from financing capacity towards execution. NCBA must generate sufficient earnings to offset the larger share count and produce returns above Nedbank’s cost of equity.

The strategy also marks a departure from Nedbank’s previous African expansion model. The Group exited its minority investment in Ecobank Transnational Incorporated during 2025. Ecobank provided continental exposure through associate earnings, though Nedbank exercised limited operational influence over strategy and capital allocation. NCBA gives the Group direct control over management, technology, lending strategy, risk systems and capital deployment. The bank is replacing passive African exposure with an operating platform that management can shape directly.

Nedbank is not pursuing the pan African strategy adopted by some competitors. Management has instead identified Southern and East Africa as the Group’s preferred operating geography. That narrower footprint reduces integration complexity while concentrating resources in markets that share stronger trade, investment and financial links with South Africa. The objective is depth within selected regional markets instead of broad geographic coverage across the continent.

The first half results show that regional expansion had already begun contributing before NCBA joins the Group. Advances across Nedbank Africa Regions increased 21%, while non interest revenue grew 12%. Digitally active customers increased from 69% to 72% of the regional customer base and mobile application usage rose 17%. These trends show that lending, transaction income and digital banking are expanding faster across the regional portfolio than in several mature domestic business lines.

Zimbabwe sits directly within that strategy through Nedbank’s subsidiary MBCA Bank. Although the Group does not disclose country level contributions within the regional business, the stronger emphasis on Southern Africa increases the strategic importance of Zimbabwe as part of the broader earnings diversification programme. Regional integration creates opportunities to expand cross border trade finance, treasury services, payments, corporate banking and multinational client relationships between Southern and East Africa. Zimbabwe’s position along those trade corridors gives MBCA greater relevance within a more regionally integrated banking model.

The acquisition nevertheless introduces new execution risks. Integrating a banking group operating across multiple jurisdictions requires alignment of technology platforms, governance frameworks, regulatory compliance, credit policies and risk management systems. Currency translation also becomes more important because profits generated in Kenya, Uganda, Tanzania and Rwanda will be reported in South African rand. Earnings diversification therefore comes with greater operational complexity and foreign exchange exposure.

The acquisition should be measured against four outcomes over the next three years. Earnings outside South Africa should move steadily towards the 20% target. NCBA should generate returns above Nedbank’s cost of equity after accounting for shareholder dilution. Regional lending growth should be accompanied by stable asset quality, while digital banking should continue expanding fee income alongside traditional interest revenue.

The market has already begun recognising the transition. What remained missing before the interim results was a quantified strategic destination. Management has now supplied that destination through the 20% earnings target. The NCBA acquisition should therefore be viewed less as an isolated corporate transaction and more as the foundation of a different Nedbank, one whose long term growth increasingly depends on Southern and East Africa instead of South Africa alone.

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