Big-four bank Nedbank has completed its “Managed Evolution” IT modernisation, after nine years.
So said Mfundo Nkuhlu, Nedbank chief operations officer, yesterday in an interview with ITWeb after the financial services firm announced its financial results for the year ended 31 December.
According to Nkuhlu, since the Managed Evolution project kicked off in 2016, the bank has spent R11.7 billion on the IT refresh initiative.
The long-term technology transformation strategy aimed to modernise Nedbank’s IT infrastructure and systems.
Nedbank’s goal was to replace legacy systems with more modular, cloud-based and application programming interface (API)-driven architecture to improve efficiency, scalability and innovation.
The bank has been investing heavily in this transformation to remain competitive in the rapidly-evolving fintech space.
In a statement yesterday, Nedbank CEO Jason Quinn highlighted that despite a challenging economic environment, the bank achieved significant successes from a strategic perspective.
“A key highlight of 2024 was the fundamental completion of our Managed Evolution IT transformation, which has delivered a refreshed and modern technology platform,” said Quinn.
“This platform, along with our enhanced digital capabilities, supported ongoing strong digital growth, market-leading client satisfaction metrics, solid main-banked client gains and higher levels of cross-sell.”
Renewed focus
“We concluded that project with the delivery of the core banking platform, which was the last element that we were modernising. That was delivered at the end of last year,” noted Nkuhlu.
The digital client onboarding for home loans and vehicle financing was concluded in March.
Nkuhlu pointed out that while Nedbank has sealed the Managed Evolution chapter, it will continue investing in emerging technologies, such as artificial intelligence (AI) and generative AI (GenAI), among others.
“It does not mean that because the Managed Evolution programme is now complete, we will stop investing in technologies. Technology doesn’t stop – we will continue to refresh and inject new technology solutions to keep pace with innovations and developments in the market.”
He added that the bank’s projection in the medium-term is to have annual cash flow spend of R2 billion to invest in new technologies.
Nkuhlu pointed out that the bank’s target operating model, which was implemented in an effort to reduce technology-related costs, is also now complete. Cumulatively, Nedbank derived benefits of R5 billion by implementing this model.
“The focus now is on the use of digital channels. In the retail business, this largely relates to the Nedbank app, and in the juristic business, it’s the Nedbank business app.
“We now have 65% of all total retail sales coming through digital channels and our ambition is to take that to 75% by the end of the year. We have also seen strong growth, particularly in the main banked clients coming through digital channels.”
He pointed out that one of the benefits of the project is that the bank is now able to use data to derive commercial outcomes.
“Our focus is now using data and analytics to help us develop comprehensive products for our clients.”
He revealed that Nedbank recently established a dedicated data and insights team to spearhead the monetisation of data.
“The team is required to interface with the front end of the business, our technology teams, as well as the risk team, particularly in the area of mitigating data risks in our environment.
“We are now in the process of harnessing our AI capabilities − such as GenAI, machine learning and robotic process automation − so that we can drive the speed of innovation and optimise costs, as well as streamline our processes.”
According to Nkuhlu, one of the key challenges the bank faced was securing qualified tech skills to complete the project. “However, we are very happy that the project was completed in time.”
Digital gains
In its results, the firm says it is “winning digitally”. Retail digital transaction volumes and values in SA grew by 12%. Digitally-active retail clients increased by 7% to 3.1 million, representing 70% of retail main-banked clients, while digitally-active clients across the Nedbank Africa regions business increased from 64% to 72% of its total active client base.
Active Nedbank Money app clients increased by 14% to 2.7 million in 2024, while transaction volumes increased by 16% and transaction values increased by 21%.
Nedbank’s headline earnings increased by 8% to R16.9 billion, diluted headline earnings per share increased by 11%, and the group’s return on equity (ROE) strengthened to 15.8%, from 15.1% in the prior period, reflecting steady progress towards its ROE targets.
The bank explains that headline earnings growth was underpinned by good non-interest revenue growth, a lower impairment charge and targeted expense management, offsetting muted net interest income growth given slower loan growth and margin pressure.
Balance sheet metrics all remained strong, enabling the declaration of a final dividend of 1 104 cents per share, up by 8% at a payout ratio of 57%.
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