Investments and delayed deal flow in CIB. Commission and fee growth in PPB was robust at mid to upper single digits, reflecting ongoing strong growth in value-added services, solid client gains, and high levels of cross-sell following the successful implementation of our organizational restructure. Non-interest revenue growth for the full year is expected to be below mid-single digits. Expense growth was mid to upper single digits through to October when compared to the prior period, reflecting an improvement from the upper single-digit growth reported in the first half. This improvement was driven by slow growth in staff-related expenses and well-managed computer processing and accommodation costs. Expense growth is expected to be in line with our guidance of above mid-single digits for the full year 2025, again when excluding the one-off commercial settlement with Transnet.
Following the reclassification of Nedbank's financial investment in ETI as a non-current asset held for sale and the signing of a sale and purchase agreement with Pascale Investments on the 13th of August, no further associate income relating to ETI will be forthcoming in the second half, as previously communicated. Putting all this together, and when excluding the impact of the one-off commercial settlement with Transnet, the group is on track to deliver underlying DHEPS growth of flat to low single digits and an ROE of 15% or slightly higher for the full period. Reflecting on risk metrics and capital actions, the Nedbank Group's CET1 capital adequacy ratio remained above the upper end of the Board-approved target range of 11%-12%, and liquidity metrics similarly remained strong.
Year to date, the group repurchased and consequently cancelled around 10.5 million Nedbank shares to the value of ZAR 2.4 billion, at an average share price of just below ZAR 230 per share. On the strategic front, the strategic organizational restructure announced in March was completed and is effective from the 1st of July, as previously communicated. In the period, Andiswa Bata was appointed as the new ME for BCB. Following the receipt of approval from CompCom, the group's acquisition of iKhokha has now been completed, with effect from the 1st of December. And lastly, the disposal of the group's financial investment in ETI is awaiting the final requisite regulatory approvals in the relevant jurisdictions, and that largely is Nigeria. On that note, I'm very happy to move to Q&A. Anél, if you'll manage that through the hands or what pops up in the chat box.
Yes. Thank you, Mike. Let's quickly see. First question from Harry. Harry, good afternoon. Over to you.
Hi, good afternoon. Thanks very much. You noted that improving macro environments. Are there positive developments that are starting to come through in terms of the pipeline, or is it mostly the pipeline shifting into 2026, as you noted the delays? And then, are you able to comment on the front book growth that you're seeing in retail in terms of the unsecured portfolios as well, please?
Yeah. So Harry, I'll break that into three pieces. In terms of PPB, we are seeing the benefits of lower interest rates, lower inflation, higher real disposable income stocks translate into better front book growth. In terms of the split between secured and unsecured, secured, we continue to grow market share, so that's pleasing across NIR and effectively home loan and effectively home loans. We have seen effectively a slowing in market share losses across unsecured lending, and that largely talks to, in fact, a little bit of, call it, flat growth in personal loans, still negative growth in card. So pleasing that we've stopped losing market share from a personal loans perspective. I'm very pleased with certainly the secured portfolio, the fact that we've stopped losing share. I see that as the benefit of the macroeconomic environment improving, low rates, real disposable income being up, and low inflation.
In our BCB business, I referred to earlier the fact that if you go back to the half we were losing, effectively we saw negative growth year on year in our BCB business. That shifted in the last three months, so we're starting to see the benefit of, A, stripping that business out as a cluster, B, the appointment of Andiswa and we're starting to see growth momentum in that business, certainly over the last three months, which is very pleasing, and then in CIB, I mean, the pipeline is extremely strong, but as I say, given the fact that Nedbank is skewed towards infrastructure, renewable energy, mining, I mean, mining gear, that's fine, commercial property finance, certainly on the infrastructure and the energy side, we've seen more of those deals pushed into the later part of 2025, and specifically as it relates to renewable energy pushed into 2026.
So we believe the pipeline's still there, but when we last spoke at the half year, we thought we would grow that book at early double digits. And I referred to earlier the fact that the book is growing at above mid-single digits. And that slower growth than we had expected is largely as a result of the big renewable stuff pushing into 2026 and certain delays across infrastructure opportunities.
Great. Thank you.
Alf, can you pick up who's next?
Yeah. Next question from Ross, Ross Krige . Hello, Ross. Over to you.
Thanks, Alfred. I think Baron's the former.
Apologies, apologies. I think, yeah, Baron, you go first. Sorry, I thought you were second in line. You're second Baron . Baron, yeah. Thank you.
Thanks. Thanks. One of my two questions has been answered, but on the other one, can you maybe just remind us of your strategic priorities for BCB over the next six to 12 months and maybe how iKhokha might fit into this?
Yeah. Very valid question. I mean, so a couple of things. I mean, when we announced the organizational restructure, we spoke to the fact that we felt that our commercial banking business was being deprioritized and a little bit lost within RBB, given the fact that obviously RBB housed Retail and Business Banking . So step one, we wanted to lift the profile of BCB. Secondly, we wanted to make it, as a result of that lift, we wanted to make it a cluster in that it competes for the same resources along with effectively PPB, NIR, and CIB, which it now does. The third issue is obviously we went through a recruitment process and very, very chuffed to have brought Andiswa across to the Nedbank family.
She's run an extremely large business in her previous employment in this particular space, and you're starting to see some of the momentum off the back of the reference to we're starting to see growth in that book over the last three months. And then when looking at the business, we had launched Mid-Corp in its old RBB stable, but in pulling it out, segmenting that business into SME, commercial banking, and Mid-Corp, it gives it segment focus along with, again, this idea of all jurisdictions being served out of effectively this particular business with the exception of CIB. So hopefully, Baron, I've given you some of the strategic intent and some of the benefits as early as growth over the last three months.
Yeah. Thank you.
Baron, let's go back to Ross. Ross.
Yeah. Thanks, Alfred. Thanks, Mike. Maybe just going back to your comment, Mike, on the delayed deal flow, just to clarify or to double-check, is that the key reason you mentioned two reasons behind the NIR guidance downgrade, and then I guess the second part of that question is, how confident are you that those deals will ultimately convert? It sounds like it's a timing issue, but just wanted to check that. I'll pause there and then follow with my other questions.
Yeah. So Ross, we do believe it is timing. When we look at the deals, when we go back to client, whether it's a grid connectivity issue as it relates to renewable energy, whether it's slight delays in terms of where we get to from an infrastructure perspective. So going back to client, the deals remain in place, so we believe the deal flow is intact. It's a timing issue as it relates to delay. And one of the big reasons for the miss from an NIR perspective, because remember, we were originally guiding sort of mid-single digits, now we're saying below mid-single digits. One of the reasons is certainly the fact that deals have been pushed into 2026.
Got it. Thanks, Mike. Two more questions, if you don't mind, just on the better-than-expected credit performance. Are there any specific operating or product segments? I mean, it sounds positive across the Board, but just wondering if you want to call out any product segments in particular that have been better than you expected in August, and then I'll just ask on buybacks while I have the mic. Clearly, that ramped up in H2. Just wondering about your thoughts into, I guess, the next three to six months.
Yeah, so from an impairment or cost of risk perspective, we've broadly seen an improvement across most portfolios. I made the reference to the fact that CIB and BCB are trading or tracking below the bottom end of their through-the-cycle target range. Some of that is as a result of slow growth. Obviously, you get the benefit in terms of an improved credit loss ratio, potentially, but the quality of the books are extremely clean. I mean, I can tell you now, two or three years ago, the number of clients on our watch lists were 2x what they are now. So the corporate book is extremely clean, and that talks to investment banking and commercial property finance.
Again, that's a function of corporate South Africa. A, continuing to be geared. B, being very selective where it's chosen to deploy balance sheet, and the benefit of lower rates, etc. You're getting very clean books in the commercial jurisdiction space, both across CIB and BCB. BCB to some extent due to slow growth, very selective growth, but it talks to slow growth. Across PPB, think of the big books in PPB. They are home loans, motor vehicle finance, unsecured lending. Think personal loans, card, overdraft. I mean, those would be your biggest portfolios. We're still seeing some sticky impairment behavior in the unsecured lending space. That's largely personal loans, not card. Cards, in fact, extremely low. Home loans have come off very clean.
And we are, as a result of some front book origination and the old taxi portfolio, again, I would suggest motor vehicle finance has been a little sticky, although we're starting to see the credit loss ratio in that book trend lower. But generally, you think jurisdiction very clean, that's BCB and CIB. If you think PPB, home loans, card, very clean, overdrafts clean, a little bit of stickiness in MFC and unsecured lending, but it's continuing to improve. And that's some of the reason why PPB's dropped inside the top end of its target range. And then NIR, NIR is slightly outside its target range, but it's a very small portfolio, and that's largely being driven by previous political issues in Mozambique.
Understood. Thanks, Mike. That's helpful. Just on the buybacks and your thinking going forward, if anything's changed, how much more capacity there is to do more?
Yeah, so as we said to all of you at the end of last year and at the half year, the way we think about buybacks and capital activity, etc., is first and foremost, we want it to be capitalized at the levels we spoke at half year, about 13%, because we saw an opportunity for particularly infrastructure and an opportunity to grow, as I said, sort of early double digits in our CIB business, and we wanted to have capital to support front book growth. Secondly, obviously, we'd like to keep paying shareholders a divvy at a 57% odd payout ratio. Thirdly, of course, we felt it appropriate to be above the top end of the buffer-proof target range given the levels of geopolitical risk. We didn't know at that stage where tariffs were going to land, etc., etc.
And obviously, we had a number of wars taking place, so we felt it was appropriate to be overcapitalized. Then you drop into a conversation around buybacks, special divvies, etc. And we felt, given the slowing front book growth, where the stock was trading, I mean, I mentioned the fact that we did the 2.5 , the ZAR 2.4 billion or 10.5 million share buyback at an average price of ZAR 230. We felt at those levels that would be adding value to shareholders rather than to hold onto capital when we weren't seeing the front book origination. Having said that, sort of comments around future thoughts around buybacks, I'd rather start the year again with capital to support some of the pipeline I've referred to that we do see converting in the first quarter.
Very clear. Thanks a lot, Mike.
Great. Thanks, Ross. Charles, good afternoon. Over to you.
Good afternoon, Alfred. Afternoon, Mike. Thanks for the opportunity. Just want to check in. Early days, so you might not be able to say much, but the iKhokha acquisition, how are you thinking about that sort of profit trajectory over time? So that's the first one. Secondly, how does that impact your African acquisition strategy, particularly you'd spoken about East Africa earlier on in the year, whether this precludes that or if you're still considering rolling out in East Africa? And then third question, if I may, following on from Harry's question earlier, just what do you attribute to your better-than-market loan growth in PPB2 over the course of this year? It's sort of unusual for Nedbank to be leading on retail loan growth.
Yeah. Thanks, Charles. So first of all, from an iKhokha perspective, in terms of our thoughts around forward trajectory around profit, we have to get it to grow profits materially given the fact that we've effectively bought [iKhokha]. We bought a great business, which is entrenched in the mass market through the iKhokha device, and it is a business offering effectively basically financial product services, etc., solutions to merchants in that particular space. They've got over 55,000 devices embedded in effectively the small, medium enterprises space, and it's got a very prominent brand. So we've bought effectively a business that gives us access to where we think we are shy being small, medium enterprises, and particularly in the mass market segment.
We think we've bought not only access to 55,000 SME-type clients, which we can cross-sell the Nedbank value proposition into, but we think we've brought, again, exposure into a mass market space that we haven't been able to break into. So just to note that we have no intention of rolling iKhokha and dissolving the brand into, call it the mothership. We want to run it as a standalone subsidiary business, an entrepreneurial business with the same management team, but to cross-sell the Nedbank value proposition into. The business will consolidate into Andiswa 's business. So we had a dialogue and debate, does it roll up into PPB, does it roll up into BCB? That decision has been taken, so it rolls up into that particular business. So she's super excited about the acquisition of iKhokha.
I mean, just to give you numbers, at the moment, you know we spent ZAR 1.6 billion on the asset. It's got very little by way of balance sheet, and obviously, we've been in the process, given the fact that CompCom approval came through, of sizing the PPB and sizing the goodwill as opposed to intangible, because a large part of what we've acquired is in the form of goodwill and intangibles. So that's in progress, and to give you a feel, I mean, from a P&L perspective, it's very small in terms of the consolidation of that business into one month being effective 1 December. You could think sort of ZAR 5 million-ZAR 10 million. It's a nothing number. We bought the business because of its entrenchment into SME, merchant acquiring, mass market, and we will now model out.
Obviously, in making the decision to acquire the asset, we did a lot of front book modeling, and we believe it's a really great acquisition for Nedbank. In terms of East Africa, so we're actually running a pilot at the moment with a different fintech in the ability to distribute unsecured lending, in fact, into parts of Africa. With regards to East Africa, our narrative to date has been we will look to effectively move further into East Africa through areas of strength. And there, by way of example, we've used the example of CIB and effectively leveraging our CIB franchise into infrastructure, mining, commercial property finance, renewable energy into East Africa by effectively, call it suitcase banking. We have exposure on East Africa and Kenya at the moment through the CIB team.
We've said we wouldn't necessarily go out and effectively look to buy effectively a large commercial bank, call it a retail bank in Kenya, but to the extent that something presented itself, we would obviously look at it, so we're still in that particular position, and the acquisition of iKhokha in no way effectively has an impact on the East Africa strategy, and then in terms of PPB's better loan growth, as you know, we stepped off unsecured lending, personal loans, not card. Card was a function of effectively a value proposition we need to improve, so we didn't want to lose share from a card perspective, but we need to improve our card value proposition, whether it go all the way down to loyalties, rewards, etc., or just the experience of taking delivery of a card.
And then unsecured lending in the form of personal loans, we consciously pulled back, but it's nice to see we are back in market, and it's nice to see we're no longer losing share. But the market share gain has been as a result of we've chosen to grow in secured lending pockets where, in the case of VAF, we've got a very dominant position, as you know, from a market share perspective. And in the case of home loans, we spent a lot of time revisiting that particular business. And I think you're starting to see the benefits of a couple of clever initiatives in the home loan space, which we'll share with you at the year-end roadshow. But a lot of hard yards over many, many years has gone into turning our home loans value proposition, which we're starting to see the benefits of.
Remember, Charles, when you grow in market share in big secured books, it helps with market share when you look at the whole cluster versus growing in an unsecured space where, obviously, the size of loan is a lot smaller.
Are you comfortable with the pricing on your home loan book? There's been, I guess, some market rumors, chatter that your pricing is quite aggressive relative to peers.
So we're comfortable with our pricing in the home loan space. As I said earlier, some of the front book origination in VAF, we weren't necessarily comfortable with our scorecarding, and that's why that credit loss ratio effectively has been a bit sticky, but that has been addressed. But yeah, happy with the pricing across both secured lending portfolios.
Thank you very much.
Thanks, Charles. Next online is James. Hello, James.
Hi, Alfred. Thank you. Good evening, Mike. Thanks for the opportunity. Just staying with home loans for a second, I've got a few questions, but first with home loans. I know you've commented that you're comfortable with the pricing. Perhaps you can give us a sense on the margin on the front relative to your bank. We've seen strong growth on Nedbank in the space over the last year or so. If you can just comment on what kind of changes you've made in your origination strategy. Is it a risk appetite thing? Is it a pricing thing? What's given rise to the step change in the growth we've seen there? That's on home loans, and then just on CIB on loan growth, and perhaps you can just help us out here, and maybe there's some distortions in the way the BA 900 data comes through.
But if we look at corporate and commercial, clearly the BA 900s don't split CIB and business banking, but the system's growing at, call it 10% or 9.9% to September. Nedbank growing at around 2.5%. I mean, are there any distortions in the data that we should be aware of that may cause Nedbank to appear lagging relative to peers? And the second one is, how do we square that then with your commentary of sort of mid-single digit growth in CIB? Just trying to understand how we line up all those data points. Thank you.
So, James, we sort of missed the first question, but I think you were asking about front book pricing in the home loan space. So I think that's where you went. I think it would be.
Yeah, front book relative to back book. Yeah.
Yeah. So I think the overarching comment I'll make is that we are comfortable with our front book origination based on risk-adjusted pricing. I'll leave it there. On the second issue, which is what have we done different? We've actually entered a very smart JV with an originator, quite similar to what we've done in the MFC space in the past, that is proving to be beneficial from effectively a front book growth, and I'm very happy to spend time with you during unpacking that. And then with regards to CIB growth, I'm happy to sit down on the BA 900 data, but it doesn't detract from your comment. Your comment is the industry is growing at, call it upper single to lower double digits, and we're growing at, say, mid-single digits. So whichever way you cut the data, we're growing slower than market, which the comment's correct.
And that's largely as a result of our SKU and our CIB business to effectively commercial property finance, effectively renewable energy and infrastructure. And if you look at renewables and effectively infrastructure, a large part of that, which we thought would close, hasn't closed and moved into 2026. And in the commercial property finance perspective, given the fact we've got a high-quality portfolio, we've been selective as to what we either refinance or effectively finance. So it doesn't detract from your point. We're growing. Our CIB business is growing, and our BCB business, we're growing slower than the market. CIB deals migrating into 2026. BCB, I think you'll find there'll be a different story at the end of the year as a result of the three-month growth we've seen with the appointment of Andiswa and the organizational restructure.
Thank you. So, I mean, is it fair to say strategic portfolio tilt is a meaningful contributor to this? I mean, you haven't alluded to it yet at this point. I mean, you're growing retail a lot faster than commercial.
Yes. I would suggest it's more a function of the fact that commercial and CIB have disappointed from a growth perspective, but deal flow remains strong, and the reorganization with the appointment of Andiswa and the lifting of BCB and the segmentation of BCB into SME, commercial, and effectively Mid-Corp and acquisitions like iKhokha will result, I believe, in strong origination and front book growth over the next 18 months as a result of all of those, and CIB, I do think, will convert into 2026, so I think it's more a function of that.
And then we've been working on strategic portfolio tilt, and the reference to strategic portfolio tilt largely refers to PPB because most of our businesses, when you look at sort of a right-sized market share position of, call it 18%, and you're running sort of 15% in home loans, less than double digits in card, 11% in personal loans, 14% overdrafts. The only place you're punching above that is in motor vehicle finance and transactional at 13%. It is the PPB business that we've been looking to right-size over many, many years. And I think you are starting to see some of the benefits of that playing out in slightly stronger market share growth.
Excellent. Thank you.
Thank you, James. Let's go to Simon. Hello, Simon.
Hi. Yeah, thanks. Actually, most of my questions have been answered. Maybe just one last one from me on how are you preparing for benchmark reform? I just saw an announcement today that you'll have to be using a new benchmark. What kind of disruption does that have for your business? And do you see any financial impacts? Thanks.
Simon, I'm not sure if you're referring to overall Basel III reforms.
No, no, this is the benchmarks. I think they're getting rid of JIBAR, and you have to use a new benchmark starting next year.
Oh, yeah. Yeah, so in other words.
Yeah.
Yes, yes, yes. No, I mean, we've been running that program as an industry for the better part of the last, I don't know, 18 months, probably longer, probably longer. In fact, it has been longer, and that talks to effectively ZARONIA coming in, JIBAR obviously going out, and some form of phased approach to effectively resetting all of the JIBAR-linked contracts to ZARONIA. That is well in hand, and that's been actually managed as an industry, and I believe the industry is well- positioned to effectively move away towards ZARONIA from JIBAR. I don't think that's in any way a risk at all.
Super. Okay. Thank you. All from me.
Thank you, Simon. We are going back to Harry. Oh, Harry. Hello, Harry.
Yes. Hi. Thanks very much. Could you possibly quantify the benefit from the Basel changes in the third quarter and how you see it playing out from a fully loaded perspective once the output floors are in? And then can you also possibly comment on the expenses at the center in the first half? I think you said it related to the restructuring. Has that continued in the second half? And what's the outlook for 2026? Thank you.
So to cover the last one first, yeah, we're expecting similar levels as at the half, so again, the important thing is not to run rate effectively that growth in expenses. Having said that, there are certain like if I take the sale of ETI, that was a program that was managed by the center in terms of small group Exco team together with Board members. Those sorts of expenses will be housed in the center. Another example would be obviously the restructuring we've spoken about. Obviously, we involve certain individual firms that have done this before to support in the restructuring of PPB, integration of wealth, and of course, BCB, and the consequential impact of lift and shift in terms of people. So those will come across, and we've made a decision that those will not be TP to our frontline businesses.
We see them as one source of cost. So Harry, we've got a very, very close eye on what expenses we build in the center. I think at year-end, you might see it bump up slightly, but it's the same programs. It's the same issues we're talking to, and then they'll be gone. So they won't be run- rated into 2026. We won't continue to build expenses in the center. And then your first question around Basel, there was actually a slight improvement when we implemented the Basel III reforms on the 1st of July 2025, largely as a result of dropping the scaler, 6% scaler. And then our best estimate at the moment is that when modeling the floors through to 2028, we actually thought they would have an adverse impact.
At the moment, on a best efforts basis, we think we might be able to absorb the transition to the floors through to 2028 with very little impact on the capital adequacy position of the bank.
Okay. Great. Thank you. So from here, you'd say very little impact with the benefits you've already received?
No, I believe all the way through to 2028, we'll have no further adverse implication or benefit as a result of implementing the floors.
Great. Thank you.
Thanks, Harry. Simon, I just want to see if you're back for another question, or should we go to [Rodeby]? Simon?
I didn't put it down. Sorry.
Okay. Great. Rodeby, good afternoon.
Yeah. Afternoon, Alfred. Afternoon, Mike. I just want to take you back to Charles's question on iKhokha. If you read some of the commentary from some of your competitors, they've defined payments as just an enabler for banking and not like a key differentiator, and then it seems the way that you're punting the iKhokha acquisition, that it's going to solve a lot of the problems that you have within the broader retail banking space. Could you just explain what the strategy will be there over and above iKhokha, for actually, because you mentioned that you're going to use the existing relationships there to actually tap into areas where you don't have a presence, but the one concern I have is that a lot of those merchants will not just only use an iKhokha device. They'll use multiple devices.
Isn't there a big risk that with intensifying competition in that space, that those relationships can be easily displaced and that the strategy, yeah, goes to zero? On VAF, could I just ask in terms of what you're seeing, given that you're seeing a lot of, because MFC is quite strong in the used car segment, and then you're seeing quite strong growth on the Chinese vehicles within the new vehicle space. How is MFC faring there? Yeah, that's it from my side.
Perfect. Alrighty. I mean, [Rodeby], two good questions. From a payments perspective and the reference to iKhokha, there is lots happening in the payment space, as you can imagine, so I would suggest that's a lot bigger than a payments iKhokha conversation as it relates to either P2B, B2B, and the implications on merchants versus individuals, etc., etc., and whether you're using EFTs, PayShap, or effectively real-time settlement rails, so there's a lot happening in there. In fact, Alfred put together a great payments Investor Day down at the Cape not too long ago, which if you haven't seen it, we should share that material with you, but so there's lots happening in payments, and payments is going to shape the way it's going to shape. We think there is upside as a result of what's playing out in the payment space.
But we could spend a separate conversation on that, whether it be bringing more into the payments system as a result of the cost thereof, bringing cash into the system, taking cash out of the system, in which case you get the benefit of lazy deposits. As a result of further and higher levels of transactional volume, you get the benefits of higher fees. So there's lots happening in the payment space. With regards to iKhokha, the device is a device that facilitates a means of transferring value. But more important to us is it's a brand that resonates in the mass market that Nedbank has failed to penetrate that we're really excited about.
Then to the extent that you have the relationship with the merchant, you then get the ability to offer balance sheets, to effectively do pre-approved or ghost offers, to potentially move the transactional banking relationship across to Nedbank. It's the access to the merchant that really excites us. It's not a payments conversation. Then with regards to your question on VAF, very relevant. In fact, MFC was late to the party as it relates to Chinese vehicles. You've seen a pivot in that, and you'll see it when we report our year-end numbers and our booklet. You'll actually see a shift. It's shifting from used towards new as a result of what's playing out with regards to Chinese vehicles. In fact, they were late to the party, but they are firmly in the party as it relates to new and/or used Chinese vehicles.
We are seeing strong growth in that particular space. I mean, if any of us drive on the road now, I promise you you'll see more than two, three, four, five Volks or BYDs or JACs or, I mean, the Chinese vehicles are flooding the market as a result of they're great on price, they're great on effectively post-acquisition service, they give great motor plans. In fact, we're seeing it in the form of resale value as it relates to a secondhand Chinese vehicle holding value. If you're not playing in the Chinese vehicle space as a motor vehicle finance franchise, you're going to be losing out.
Yeah. And then if I could just ask another question before I go to the end of the line. Just on what you mentioned within the CIB business, that there's been delay in terms of the deals closing. But then if you listen to some of the commentary from your peers, they've been reporting quite strong global markets performance and overall CIB performance. What do you think is happening at Nedbank or what nuances are there that we should be mindful of?
Yeah. So I wouldn't say they're nuances. I would say you need to look carefully at where the growth is coming from. I think you need to look carefully with the deals that are booked on the South African balance sheet or the Africa balance sheet. I think you need to look very carefully at renewable energy versus infrastructure. Renewable energy, most of us are battling with grid connection. So you'll find that a lot of their deals similarly are being delayed into 2026. And then in terms of infrastructure, it depends on what deal you're currently working on. But as Nedbank, our big books are renewable energy, infrastructure, mining, commercial property finance. And those areas have either been delayed or effectively deals have closed on a sort of ad hoc basis. The big chunk around renewable energy has moved firmly into 2026.
And then we've been selective on commercial property finance, which means you don't grow as quickly as potentially if you're not selective.
And then just on global markets, what is management doing to try to improve scale there in terms of Nedbank's market share in the broader global market space?
So if you compare our global markets business on a South Africa- to- South Africa basis, we compete well from a global markets business. When you look at some of the other peers who have large global markets Africa businesses, that's where you're seeing obviously growth that we won't compete with because we're 96% domiciled to South Africa. But as a South African global markets business, we've got a very strong business.
Okay. Thanks, Mike.
Thanks, Rodeby. I think we've got one more on the line. And we're back to Ross before we'll take the questions on the chat. Ross.
Thanks, guys. Yeah, sorry. I hope I'm not asking you to repeat yourself too much on Rodeby's second to last question. It's a similar question, but I'm going to ask it anyway in case you have any more insight, Mike. Just on that CIB loan growth versus system growth, it's very clear why Nedbank would be, I guess, underperforming system growth. I was just curious, I mean, are you seeing what is actually driving that system growth to be as strong as it is? What industries, sectors, however you want to frame it? And then in terms of why Nedbank isn't maybe winning as much there, is that a function of pricing or lack of, I guess, specialty in those areas or something else? Thanks.
I think it's a relative play if you look at the relative size of the portfolios that I've spoken to. And then a little bit to your and Rodeby's question, we have seen some very aggressive pricing in the renewable energy space, so deals that have closed and/or infrastructure that I think if you don't have the client relationship, it's hard to make work from an economic profit perspective. In other words, you can't necessarily get the client or the deal across the line at EP positive, in other words, at an ROE above cost of equity. So we've definitely seen some of that.
And I think it does talk to the importance of having a transactional banking franchise because you can be, if you're the primary banker to, effectively, a client and you're pressed on price, you still potentially will take the deal because you don't want to lose the client transactional relationship. And if you don't have a strong transactional banking franchise, you can't do the deal on its own. So you get squeezed and you don't partake.
Understood. Thanks, Mike.
I think we've got one more from Baron.
Thanks, Alfred. Just a quick question on the main drivers behind the strong growth in fee and commission in PBB, particularly in relation to value-added services and whether you think you can defend this growth into 2026 or even improve it? Thanks.
Yeah. So we're really pleased about the growth in our value-added services business. We're also pleased about client gains, and we're starting to leverage the benefit of high levels of cross-sell, again, as a result of integrating largely Nedbank Private Wealth and specifically the insurance value proposition into PPB, and we've had this conversation before where we were missing out in the ability to cross-sell our insurance value proposition into our individual client base as a result of having the insurance value proposition stuck in Nedbank Wealth as a standalone cluster, so we're starting to see the benefits of leveraging the organizational restructure in higher or better levels of cross-sell, and then with regards to value-added services, I think that talks to our investment in managed evolution, so in other words, technology spend. It talks to effectively the organizational restructure.
It talks to, effectively, what we're looking to do in [Digito]. It talks to, effectively, the investment we've made in something called MarTech, the ability to effectively better pre-approve next best offer to clients, which supports take-up. I think all of that is starting to have a benefit as a result of being able to, A, give a better client experience, and B, put in front of clients a better value-added service as next best offer.
Baron, are you happy with that?
Yeah. Yes. Thank you.
Okay. Thank you. Mike, before we go to the comments, just for Rodeby's information, the two presentations that we refer to, the one on payments and more recently we did one on secured lending, which covers a lot of what Nedbank's been doing in the vehicle finance space and the strong growth we've been seeing there is on our website under Investor Relations section under presentations. But Rodeby, we will send you the links to that as well. Mike, we've got quite a few comments in the chat, which I think a lot of them we have covered, but I don't know if you want me to read it or you want to go through it and we'll just answer it.
No, no. I'm happy to read it. So it's the first one aside from the CIB deal conversion. What were the other contributing factors towards the slight miss in NIR growth versus guidance? Is that the first one?
The first one is from Baron. Mike, thanks for the call. Is it still logic grid transmission connections that are stalling in the CIB pipeline realization? What other parts of frictions are there? Are they implicitly taking up balance sheet capacity and restraining your ability to lend elsewhere?
So I think I answered that. It is largely grid capacity and the ability to get and I think what Eskom's worked out is they themselves need the grid capacity for their own renewable energy transition as the plant gets older and older and as they decommission plants. But we do think that we'll resolve that into 2026.
Next question from Chris. You've quoted buybacks of ZAR 2.4 billion in 2025 to date, but to partially offset the negative impacts of EPS and ROE on the EDR disposal, given attractive share price levels, how much capacity do you have for additional buybacks? I think, Mike, you've also covered that, that we won't necessarily do any further buybacks this year, and we will reassess our position next year.
Correct.
Yeah. Next question. We have a lot of pent-up growth in CIB advances being pushed into 2026, and with improvements in retail and business originations, how do you see prospects for advances growth in 2026?
Yeah. So we would see, I mean, so let's say we grow, I don't know, somewhere around about mid-single digits across the entire portfolio, maybe slightly stronger than that. We would certainly see stronger growth into next year. I would suggest that we would see certainly mid to upper single digits, if not with a bit of shape to it, depending on what closes from a CIB perspective. We might see early double-digit growth in the first half of next year. I think that just with the benefits of lower interest rates run-rate through next year, lower inflation, slightly stronger growth expectations from a GDP perspective, corporate South Africa being positioned to grow, structural reforms, the opportunities across infrastructure. I mean, you just got to go and look at what Transnet's going to spend over the next five years.
They're going to spend ZAR 127 billion on infrastructure, and that includes road, rail, ports, pipeline infrastructure, etc. So they're expecting to spend about ZAR 25-odd billion a year in infrastructure. So I think with all of that, you should see that translate into better growth from an individual perspective, from a corporate perspective, and downstream from that, from a commercial banking, SME, mid-core perspective. So I would suggest you're going to see upper single-digit growth next year from a loans and advances portfolio growth perspective.
Thanks, Mike. Two more. Aside from slower CIB deal conversion, what were the other contributing factors toward the slight miss in NIR growth versus guidance? I think we also mentioned in our trading update the fair value, which part of it also sits in global markets. I don't know if you want to add anything else there, Mike.
Yeah. So it's largely the lack of conversion of deal flow. And then, as Alfred's indicated, we do have base effects. We had fair value gains in CIB, and we actually had a slight macro fair value hedge accounting fair value gain in the base, which we would expect not to recur. And we know as a result of the deals not converting, we're not booking stronger levels of CIB commission and fee income. And that's largely the reason for the miss.
Thanks, Mike. Last question, more towards the NIM. Can you give us updated endowment sensitivity if this has changed post the first half? What are the prospects for margins in 2026 given likely negative endowment impacts and any thoughts on asset mix or liability margins?
Yeah. So Chris, as you know, we identified the CIB portfolio as well as the surplus capital in the [audio distortion] area that has no correlation to impairments. So there we sort of voiced to the market that we would look to over time build an appropriate strategic hedge against those pockets of capital. I mean, to give you an indication, based on an inverted yield curve, based on where we see value, we only built out. It's about ZAR 12 billion of a position, a lot higher than that. So we've done some endowment hedging, largely where we don't and haven't identified a natural hedge against impairments. But the endowment sensitivity for the group is still about ZAR 1.3-odd billion for a 1% move in rates.
And then the second part of that question, the prospects for margins. I indicated that margins as at October were slightly below the 387 we reported at the half year. And we did indicate at the half year that we would expect the full run rate of negative endowment to be into the base by sort of quarter one 2026. So I hope that answers the question. I mean, thoughts on asset mix impacts to the extent that we can grow some unsecured lending market share, which is our objective. We would expect to possibly benefit from mix benefits, unsecured, secured. And to the extent that we did see good growth in PPB, some of the conversations we had earlier around secured lending, those margins come with thicker margin than CIB.
So you're getting the benefit of mix there, particularly as CIB has slowed into the back end of the year.
Thank you, Mike. I think we've exhausted all the chats. I think we've got one more from [Rodeby], and then we'll close up. So Rodeby, last word from you.
Yeah. Thanks, Alfred. Mike, I just want to ask, I think in the past you've mentioned that part of the reason that you've opted not to fully hedge your balance sheet is that you want to benefit on, yeah, when rates come down that you benefit on impairments improving. So now that 1.25 that you mentioned, how much of it then that negative impact on NIR, how much of that can be offset by improving impairments? Or you think that it will take, yeah, it's going to take the cutting cycles being relatively shallow, so then you won't see the full impact or as fast an impact or, yeah?
Yeah.
Yeah. I don't know if you could say anything here.
Yeah. So I think what's important is that when you look at a credit loss ratio over sort of a loans and advances portfolio of ZAR 900-odd billion, and you effectively model the sensitivity, which is roughly off the same sort of denominator from a NIM perspective, basically you find that if NIM dilutes by 10 basis points, you need the cost of risk to improve by 10 basis points to have no impact on bottom line. So that's how we typically run the group, is that you think about what happened to the NIM of the organization due to endowment, where it went to effectively when rates were cut aggressively through to COVID down to 7% prime. Think about what happened, that was a bad example, but think about what happened when you moved through to prime moving off the 7% up to effectively 11.25% is where we peaked.
What happened in that cycle? We saw a blowout in impairments. Remember, impairments went to effectively 121 basis points. They then improved to 109, then down to just inside 100, 103 maybe, then just inside all the way down to 81. That shape, you have the opposite effect or opposite shape happening in endowment. As rates effectively went up and as the impairment number went up, the group's NIM went up. As rates have come down, the cost of risk has come from 121 to 81. And I'm saying to you it's below 80 at this point in the cycle. So the cost of risk has come down from 121 to 81. That's 40 basis points. The NIM effectively gave up endowment. It obviously gained endowment when rates moved up, and we lost endowment when rates came down.
So it's that relationship that if we're squeezing endowment wise from a rate perspective by 10 basis points, we need to get 10 basis points back from a cost of risk perspective. Now, what we've done to refine that is we've said in portfolios it's not quite 10 equals 10, but in portfolios like CIB we're saying there's no correlation between impairments and effectively endowment. When rates go up or down, it doesn't necessarily translate into a higher or lower credit loss ratio in CIB because CIB is lumpy. It's really about a corporate default for whatever reason, a bad strategic call, or it's undercapitalized, or it makes whatever. Corporate defaults, we're effectively a balance sheet that's lent a lot into the corporate. It's potentially collateralized to X, and we take a big impairment number, but it's not correlated to rates.
So in that portfolio, we have started to build a strategic hedge where we want more certainty around NIM. We don't want NIM to effectively float as interest rates move. We want a more consistent NIM, but we want to take out the hedge where we see value. So the best time to do that hedge would have been when rates were at the all-time highs. We should have gone and bought a whole lot of receive fixed risk, but we didn't. So since then, rates have been inverted, coming down, and we haven't necessarily seen value at particular levels, but where we have, as I mentioned earlier, we've put ZAR 12 billion of a hedge in place. But the amount of capital we allocate into CIB is ZAR 33 billion, plus it's got a transactional deposit base.
So we are building out hedges where it makes sense, and we're leaving the endowment to float where it makes sense, for example, in our PPB business and to an extent a large part of our BCB business, but not all of our BCB business. So in our BCB business, there's also an element of capital we want to hedge as and when appropriate. And that might take us a number of years to do that because very difficult to go and buy receive fixed rate at 6.5% at the moment. We don't see that as value creative or value additive to shareholders for the next five years.
Okay. Thanks.
Right. Thank you, Rodeby. Mike, I think that concludes all the questions for today. Maybe some last thoughts before we all head off to a well-deserved holiday, and just to say from our team, thank you very much for all your engagements this year. Mike, I'll leave the last words with you.
No, thanks, Alf, and thanks to my Investor Relations team. As you all know, they do a great job. Just a big thank you to all of you dialing in and the interest in Nedbank. I think we're trading at a level that effectively talks to the profitability of the organization. I think we've put in place a lot of exciting initiatives that will start to deliver value into 2026, 2027, and 2028. And what we need to do through Alfred and his team, we need to make sure we can put in front of you as investors or effectively analysts, we need to be able to put in front of you tangible data points that demonstrate that what I've spoken to is starting to add value to the organization in order for you to follow the equity narrative over the next year to three years.
But yeah, thanks for dialing in, and look forward to seeing all of you in, I think it's the 3rd of March. And again, hopefully you're all taking a good break. Have a great recharge, and we'll catch up on the other side of Christmas and New Year. Thanks, guys, ladies.