Post on 16-May-2020
1
NEDBANK GROUPANNUAL FINANCIAL RESULTS
YEAR ENDED 31 DECEMBER 2008
ANNUAL FINANCIAL RESULTS
AGENDA
HighlightsFinancial overviewOperational reviewOperational reviewSummary & prospects
2
Highlights
• SA banks & financial system remain structurally sound– SA relatively insulated but not immune
• Resilient performance in challenging environment – 15,7% growth in tangible NAV– R5,8 bn headline earnings - down 2,6%
• Capital adequacy increased significantly– Core tier 1 7,2% to 8,2% – Tier 1 8,2% to 9,6% – Total 11,4% to 12,4%
3
• Liquidity remains sound
• Risk management systems proving effective
… resilience in the face of extreme challenges
Manage through the economic cycle
Grow deposits & assets
selectively
• Deposit growth of 21,4%
• Advances growth of 16,1%
Price for risk
Proactively manage capital
• Improved asset margins on new business
• Capital adequacy ratios up significantly
• Liquidity sound
4
Leverage• Loan-to-deposit ratio 93,0%
• Leverage ratio 16,2 times
… conservative stance rather than maximise short term profitability
3
Continue to focus longer-term
People• Further improvements in staff morale survey
• Further successes in building a vision led & values
driven organisation
Systems
Brand & client service
• Electronic banking upgrades – done in Retail &
Business Banking – Corporate Banking in progress
• Retail single client view systems at advanced stage
• Sponsorship campaign to support brand image
• Retail widened service score gap over peers
• Business Banking model working well
5
Distribution• R1bn in Retail distribution complete
• Ecobank alliance into Africa finalised
… longer term strategy & focus remain unchanged
Transformation
• DTI - Level 3 BEE contributor (2007: Level 4)
• FSC score 99,1 points (2007: 97,5)
47% 44% 60%
2006 2007 2008
34%58% 60%
2006 2007 2008
58% 62% 65%
Black board members
Black management
6
16%36% 37%
2006 2007 2008
2006 2007 2008
Black female management
Total black staff
Note: graph classification per DTI scorecardFSC score still subject to FSC review
4
Continued investment in staff
2005200659 6
79.1
75.1
86.064.7
Nedbank Staff Survey overall
Ethics
Strategic directionDiversity
Rewards, recognition & performance management
2006
20082007
67.1
60.1
59.6
69.3
69.755.7
61.2
57.2
50.4
49.082.4
80.0
79.672.1
69.5
69.9
Strategic direction
Leadership
CommunicationRelationships & trust
Diversity
Policies & procedures
7
… improvement in all dimensions over last four years
63.3 58.3
78.5
75.3 75.4
74.5Management style
Training & development Change & transformation
Organisational culture & values
Nedbank’s credentials
• Dow Jones Sustainability Index membership
• Included for 5th year
• 1 of 25 banks worldwide
• 1 of 3 JSE listed companies (only SA Bank)
Continue to focus on all aspects of sustainability
1 of 3 JSE listed companies (only SA Bank)
• 2008:74% (2007: 71%)
• JSE SRI Index- Inclusion since 2004
• SA Carbon Disclosure Project Leadership Index
• Best placed bank
• 4th overall in the low emissions category
• Financial Times Emerging Markets Sustainable Bank of Year for Middle East & Africa
8
of Year for Middle East & Africa
• Equator Principles – 1st bank signatory in Africa
• WWF Conservation Partnership
• UNEP FI – Co Chair on UNEP FI African Task Force
• Ernst & Young Excellence in Sustainability Reporting -Award of Excellence received
5
Growth potential in SADC
• Financial services economic profit pool in Africa:
– Nedbank 12% - 14% of pool– SA 60% of pool
Nedbank footprint
– SADC 65% – 75% of pool
• Opportunity to gain economic profit market share in SA
• Selectively expand in Africa
SADC
Real GDP growth rates
7%
8%
9
0%
1%
2%
3%
4%
5%
6%
2002 2003 2004 2005 2006 2007 2008 2009
Sub-Saharan Africa South Africa
• Extend operations capital-efficiently
• Maintain focus in respective regions
• Effective cost & risk management
Nedbank / Ecobank strategic alliance
Ecobank footprintNedbank footprintExpanding opportunities
• Leverage existing relationships
• Utilise expertise on sector specific
advisory skills
• Explore joint investment opportunities
• Country specific tailored banking services
• Retain & attract skilled resources
10
Retain & attract skilled resources
• Knowledge transfer of different countries & systems
… goal of a ‘one bank’ client experience30 countries & over 1 000 branches & outlets
6
FINANCIAL OVERVIEWMIKE BROWN
Key financial indicators
For the year ended % change 2008 2007
Headline earnings (Rm) (2,6) 5 765 5 921
Diluted HEPS (cents) (2,0) 1 401 1 429
Diluted basic EPS (cents) 7,2 1 558 1 454
ROE (%) 17,7 21,4
ROE (excluding goodwill) (%) 20,1 24,8
ROA (%) 1,09 1,30
Margin (%) 3,66 3,94
Credit loss ratio (%) 1,17 0,62
12
Efficiency ratio (%) 51,1 54,9
Tangible NAV per share (cents) 15,7 7 179 6 207
Basel II capital adequacy* (%) 12,4 11,4
Dividend per share (cents) (6,1) 620 660* Including unappropriated profits
7
Income statement
Rm – year ended % ch 2008 2007
Net interest income 14,3 16 170 14 146
Impairments >100 (4 822) (2 164)
Income from lending activities (5,3) 11 348 11 982
Non-interest revenue 2,7 10 729 10 446
Total expenses 1,9 (13 741) (13 489)
Indirect taxation 22,6 (374) (305)
Associate income (35,6) 154 239
Headline profit before taxation (8,5) 8 116 8 873
13
p ( )
Direct taxation (24,8) (1 757) (2 336)
Minorities & preference shares (3,6) (594) (616)
Headline earnings (2,6) 5 765 5 921
Basic earnings 6,4 6 410 6 025
Segmental performance
Headline earnings
RORAC%
Rm – year ended % ch 2008 2007 2008 2007
Nedbank Capital 7,8 1 266 1 174 38,1 40,7
Nedbank Corporate 11,1 2 924 2 632 28,7 26,4
Nedbank Retail (46,6) 1 002 1 876 10,8 22,1
Imperial Bank (26,9) 166 227 13,2 23,9
Operating units (9 3) 5 358 5 909 22 2 26 5
14
Operating units (9,3) 5 358 5 909 22,2 26,5
Shared services (32) (15)
Central management 439 27
Total (2,6) 5 765 5 921 17,7 21,4
8
NII - margin analysis % of daily average interest-earning banking assets % RmDecember 2007 3,94 14 146Asset growth 3 268
Endowment movement: 0,06 278
Positive net endowment effect 0 13 587Positive net endowment effect 0,13 587
Increase cost of funding properties in possession (0,02) (79)
Cost of reducing interest rate sensitivity (benefits in 2009/10) (0,05) (230)
Liability price movement: 0,02 79
Current & savings accounts 0,20 894
Increased cost of funds (0,18) (815)
Asset price movement: (0,25) (1 104)
Personal loans (move to lower risk assets & NCA caps) (0,04) (165)
15
Secured products margin (0,10) (445)
Other Loans (0,07) (305)
Structured deals (0,04) (189)
Cost of carrying additional liquidity buffers in Government bonds (0,04) (165)
Other (0,07) (332)December 2008 3,66 16 170
Impairment charge
Rm – year ended % of averageadvances 2008 2007
I i t h 4 822 2 164Impairment charge 4 822 2 164
As % of NII (%) 29,8 15,3
Credit loss ratio (%) 1,17 0,62
Nedbank Capital 13,7 0,06 0,05
16
Nedbank Corporate 41,6 0,27 0,11
Nedbank Retail 35,0 2,47 1,26
Imperial Bank 9,7 1,71 1,28
9
0.96%
1.17%
14 000
16 000
1.00%
1.20%
Defaulted advancesR
m
9 90
9
11 7
95
078
6 90
2
7 85
9
17 3
010.62%
4 000
6 000
8 000
10 000
12 000
0 20%
0.40%
0.60%
0.80%Target credit loss ratio range
17
6 6 0
2 000
Dec-07 Jun-08 Dec-080.00%
0.20%
Defaulted advances (Basel II) Impairment provision
Credit loss ratio Long run expected loss (EAD)
Non-interest revenue
Rm – year ended %change 2008 2007
excl BCBond
Choice 2007
Commission & fees 13,8 7 911 6 950 578 7 528
Trading income 16,4 1 553 1 334 1 334
Private equity income (66,9) 303 915 915
FV adjustment on bonds/swap >100 291 (24) (24)
Credit spread 207 47 47
Basis 84 (71) (71)
Other FV adjustments >100 76 29 29
Other inv income (13,8) 69 80 80
R t l i 51 51 51
18
Rental income - 51 51 51
Sundry income (10,9) 475 533 533
Non-banking subsidiaries (16,6) 226 271 271Other (5,0) 249 262 262
Total NIR 8,7 10 729 9 868 578 10 446
10
Expenses
Rm – year ended % change Dec 08 Dec 07
excl BCBond
Choice Dec 07
Staff costs 0,1 7 040 7 034 45 7 079
Computer processing 10,5 1 841 1 666 7 1 673
Communication & travel 16,9 636 544 15 559
Accommodation 6,1 1 122 1 057 11 1 068
Marketing & PR 1,6 877 863 24 887
Fees & insurance 15,3 1 326 1 150 348 1 498
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Other 23,9 705 569 8 577
Operating expenses 5,2 13 547 12 883 458 13 341
BEE 31,1 194 148 - 148
Total expenses 5,4 13 741 13 031 458 13 489
Taxation
Rm – year ended 2008 % 2007 %
T t l t 1 757 21 6 2 336 26 3Total tax 1 757 21,6 2 336 26,3
Tax – business operations 1 958 24,1 2 197 24,7
– risk provisions 15 0,2 97 1,1
– structured deals (147) (1,8) (79) (0,9)
20
Opening rate change (29% to 28%) (39) (0,5) - -
Private equity portfolio (9C) (153) (1,9) - -
Secondary tax on companies (STC) 123 1,5 121 1,4
11
Balance sheet
Rm % change 2008 2007Cash & securities 7,1 79 401 74 138Advances 16,1 434 233 373 956Investments 9 622 9 296Property & equipment 4 327 3 929Computer software 1 607 1 349Goodwill 3 894 3 898Derivatives >100 22 321 9 047Other 11 618 13 243
Total assets 16,0 567 023 488 856
Ordinary shareholders’ equity 15,6 34 913 30 193
21
Minorities & preference shareholders 5 160 4 932Deposits 21,4 466 890 384 541Derivatives >100 23 737 11 432Long-term debt instruments 14,1 14 061 12 326Other (51,0) 22 262 45 432Total equity & liabilities 16,0 567 023 488 856
Group capital adequacy
ECONOMIC CAPITAL
35
40
Surplus Tier B( )
Total
10%
12%
BASEL II CAR 2008Targetranges
Including unappropriated profits
10
15
20
25
30
VS VS
SurplusR5 771m
10% bufferR2 452m
Minimumrequired
R24 521m
R9 610m
10% bufferR2 601m
Minimumrequired
R26 006m
Tier A(core)
R24 510m
Tier B(non-core)R8 234m
Tier A(core)
R28 336m
(non-core)R9 880m
Rbn
Tier 1
7.2% 8.
2%
8.2% 9.
6%11.4
%
12.4
%
2%
4%
6%
8%
10%
22
0
5
Requirement Availablefinancial
resources
Requirement Availablefinancial
resources20082007
0%
Core Tier1 Tier 1 TotalReg min Tier 1 Reg min Total
Surplus: Core R10,3bn Total R9,5bn
2007 2008
12
Leverage ratio & RWA / total assets
Nedbank Bank A Bank B Bank C
Leverage ratio Jun 2008 16,6 18,5 15,0 16,7
Leverage ratio Dec 2008 16 2 16 4Leverage ratio Dec 2008 16,2 16,4
RWA / total assets Jun 2008 63,9 47,8 56,8 52,6
RWA / total assets Dec 2008 62,8 49,2
23
… notwithstanding similar leverage to peers, Nedbank’s higher RWA / total assets ratios demonstrate prudence in applying AIRB models
Ned9Ned6IBL3Ned7
Ned10N d12
2 000
R 'm
Subordinated debt & hybrid maturity profile
Ned11
Ned8Ned12
Ned5
IBL2500
1 000
1 500
Ned H1
No
mat
uriti
es
24
0
500
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Subordinated Debt Hybrid Debt
m
13
Advances
Rm % change 2008 2007
Home loans 15,6 143 342 123 980Commercial mortgages 21,6 73 031 60 045P ti i i 100 791 308Properties in possession >100 791 308Term loans 61,0 64 144 39 835
Credit cards 2,0 7 248 7 109
Overnight loans (14,0) 15 760 18 336
Overdrafts (0,4) 12 461 12 514Other loans to clients (7,7) 44 581 48 280Leases & instalment sales 16,7 61 362 52 568
25
Preference shares & debentures 67,1 15 667 9 377
Trade & other bills (41,7) 1 075 1 843
Reverse repurchase agreements (55,0) 2 630 5 839Impairment of advances 29,3 (7 859) (6 078)
16,1 434 233 373 956
Deposits
Rm % change 2008 2007
Current accounts (1,6) 45 188 45 920
Savings accounts 2,7 14 303 13 925
Term deposits 16,4 292 768 251 424
Foreign currency liabilities (24,3) 6 226 8 230
NCDs 55,6 87 377 56 166
D it h t >100 21 028 8 876
26
Deposit repurchase agreements >100 21 028 8 876
21,4 466 890 384 541
14
o No exposure to US sub-primeo Small conduit businesso Limited use made of securitisation market
Funding & liquidity risk management
r o Limited use made of foreign marketso Strong retail & corporate deposit franchiseso Sound capital positiono Asset growth slowing due to market conditionso Stable money market shortageo Good client relationshipso Strong & efficient SA interbank marketui
dity
bar
omet
er
27
o Strong & efficient SA interbank market
o Global financial crisis & domestic slowdown
o Increased reliance on wholesale depositso Capital markets & foreign markets currently thin & expensive
Liqu
NAV & ROE
21 4%
24.8%22.1%
12 000 25%cents
4 year CAGR:
NAV 16,3%
NAV excluding goodwill 19,4%
54 597
6 36
3
7513 85
22
80 427
6 54
3
7 57
1
17.7%
21.4%
18.6%
15.5%
11.0%
20.1%
14.3%
18.9%
4 000
6 000
8 000
10 000
10%
15%
20%
28
4 65 5
5 6
3 72
1
4 68 5 4 6
0
2 000
2004 2005 2006 2007 20080%
5%
Net asset value per share NAV excluding goodwill
ROE ROE excluding goodwill
15
Financial drivers - 2009
• Advances growth upper single digits• Margin compression around 10 to 15 bps
• Wholesale up but within through the cycle
NII
• Retail worsen from 2008 (as economy worsens)• Overall to remain below 1,30%
• Mid single digit growth for year
• Growth to be held in upper single digits
Impairments
NIR
Expenses
29
• Targeting to improve CARs • Ongoing focus on funding & liquidity
Capital & liquidity
… current economic environment increases forecast risk
Group targets
Metric 2008 Medium to long term targetOld Revised 2009 outlook
ROE (excl goodwill) 20,1% ✗10% above monthly
weighted COE5% above monthly
weighted COE > 15%weighted COE weighted COE
Efficiency ratio 51,2% ✓ < 55% < 50% < 53%
Diluted HEPS growth (1,7%) ✗ ≥ CPIX + GDP growth + 5% ±10% down
Credit loss ratio 1,17% ✗ 0,55% - 0,85% < 1,30%
Core Tier 1 CAR:Tier 1 CAR: Total CAR:
8,2%9,6%12,4%
✓ 8,0% – 9,0%11,0% – 12,0%
7,5% - 9,0%8,5% - 10,0%11,5% - 13,0%
Towards top end
of ranges
30
, , , , , g
Economic capital ✓ ✓ 99,9% confidence - A- debt rating (including 10% buffer)
Dividend cover 2,29 ✓ 2,25 to 2,75 times
… outlook assumes a 227 basis point reduction in average prime rate
16
NEDBANK CAPITAL
BRIAN KENNEDY
Nedbank Capital - financial highlights
Year ended – Rm % change 2008 2007Headline earnings 7,8 1 266 1 174Efficiency ratio 52,2% 47,9%
A t 22%
Credit loss ratio 0,06% 0,05%
Average advances 23,3 57 079 46 302Average deposits 32,0 130 106 98 579
Allocated economic capital 15,1 3 324 2 887
RORAC 38,1% 40,7%
33%
32
Assets Headlineearnings
NedbankCapitalRest of bank
33%
17
Nedbank Capital – revenue split
Rm % change 2008 2007
Net interest income 72,1 938 545
I i t (44 0) 36 25Impairments (44,0) 36 25Income from lending activities 73,5 902 520Non-interest revenue (16,5) 1 782 2 135
Trading 13,7 1 333 1 172
Advisory & other (9,3) 322 355
Private equity (79,1) 127 608
3333
Realised (59,8) 133 331Unrealised (>100) (6) 277
Operating income 1,1 2 684 2 655
Risk perspective: trading activities
New Riskwatch system
CFDs launched
Increase in initial Margin
Key Milestones/Timeline of Trading Activities
30 000
35 000
70
80
90
Enhanced new product process
Independent risk function
Macquarie trading loss
SocGen trading incident
15 000
20 000
25 000
30 000
20
30
40
50
60
70
34
S&P
10 000
15 000
Jan 2005 Jul 2005 Jan 2006 Jul 2006 Jan 2007 Jul 2007 Jan 2008 Jul 2008 Jan 20090
10
20
JSE ALSI ViX (RHS)JSE ALSI (lhs) S&P ViX (rhs)
18
Single stock future & contracts for differences portfolios
SSF portfolio - exposure to clients SSF portfolio - exposure to safex
Tier 1 Tier 2 Tier 3 Tier 4
Jun-08 Sep-08 Dec-08 Current
CFD portfolio - exposure to clients
Jun-08 Sep-08 Dec-08 Current
35
• Growth in CFD business during 2008
• Reduced developing concentration risk
through increasing initial margin & security
Jun-08 Sep-08 Dec-08 Current
Global MarketsRisk Factor VaR
40
50
60
Average risk factor 3 –day 99% VAR 2007
2008
• Calculated Risk Appetite
• Broad based profit across
asset classes
• Greater revenue, more
‘winning’ days
0
10
20
30
Primary VaR Equity VaR FX VaR IR VaR Credit VaR
2007 2008Trading income analysis
70
80Trading days
2007
36
0
10
20
30
40
50
60
<=-20 -20 to< -15
-15 to< -10
-10 to< -5
-5 to <0
0 to <5
5 to <10
10 to< 15
15 to< 20
>= 20
2008
2007
2008
19
Gross exposure
20
25
30
35R'bn
Investment Banking Review
• Strong book growth– Improved margin
• Primary domestic lending focus• Diversification - geography & sector
CAGR = 26,3%
0
5
10
15
2004 2005 2006 2007 2008
Exposure by region
70%15%
• No new foreign deals in H2 2008 –pricing uncertainty
• Ecobank alliance enhances African opportunities
Exposure by sector
79%
37
15%
15%South AfricaRest of AfricaRest of world
12%9%Balance of book
BEE - share based dealsJunior mining
Market presence maintained across sectors
3838
20
Deepen client relationships • Acquired new clients while boosting current relationships
What we said Commentary
Performance against prospects & strategy
Create new revenue streams
Strong sector focus
Multiple product solutions
Human capital pipeline
• 7 new businesses gained traction in 2008
• Bolstered sector teams with increased deal flow
• Increased collaboration across deals
• Normal attrition levels & strong human capital pipeline
3939
Scalable trading platforms
Appropriate risk management
• Successfully rationalised systems• New trading platforms implementations are on track
• Mitigated risks by vigilant monitoring & measurement
… strategies unchanged focus on risk management
Nedbank Capital – prospects
• Solid base built over 5 years
• Good quality advances book
– Generating significant NIIGenerating significant NII
– Opportunity to reprice new deals
• Available rand liquidity
• Term dollar funding expensive reduced international activity
• Continue to focus on generating client flows across product spectrum
• Environment conducive to building domestic market share
4040
• Environment conducive to building domestic market share
• Remain vigilant on credit & market risk
… difficult market conditions expected to continue throughout 2009
21
NEDBANK CORPORATEGRAHAM DEMPSTER
Nedbank Corporate - financial highlights
Year ended – Rm % change 2008 2007Headline earnings 11,1 2 924 2 632Margin 2,68% 2,82%Efficiency ratio 47 4% 53 5%
39%51%
Efficiency ratio 47,4% 53,5%Credit loss ratio 0,27% 0,11%Average advances 21,2 172 357 142 238Average deposits 21,1 208 426 172 046Allocated economic capital 2,1 10 190 9 977RORAC 28,7% 26,4%
42
Assets Headlineearnings
51%
NedbankCorporateRest of bank
22
2008 Highlights
• Strong core banking performance• Headline earnings up 20,1% to R2 764m • Efficient capital management (up only 0,6%) • RORAC 28 2%• RORAC 28,2%• Jaws 8,9%
Financial
• Good advances & deposits growth >20%
• Property investment returns exceeded market performance
43
• Growth in overall economic profit of 24%*
* Excluding Bond Choice & Lion Match sold down during 2007
2008 Highlights (continued)
Clients
• Excellent risk management
• Primary client gains
Risk
Clients
People
• Good progress on • Transformation • Corporate culture • Leadership development
Primary client gains
44
Strategies• Establishment of Business Banking as separate cluster
• Major strategic initiative through Ecobank pan-African alliance
23
Nedbank Corporate - segmental analysis
Headline earnings RORAC Average advances
Rm 2008 2007 %change
2008 % 2008 %
change
Business Banking 1 369 1 117 22,6 31,7 54 524 14,6
Corporate Banking 648 450 44,0 32,6 59 770 29,2
Property Finance 800 909 (12,0) 23,7 51 215 24,4
Africa 94 78 20,5 19,7 5 650 16,0
45
2 911 2 554 14,0 28,7 171 159 22,4
Other* 13 78 (83,3) 33,9 1 198 (49,3)
Nedbank Corporate 2 924 2 632 11,1 28,7 172 357 21,2
* Bond Choice & Lion Match sold down during 2007
Corporate Banking
• Growth in average advances 29% & deposits 28%
Earnings growth of 44,0% to R648m & RORAC of 32,6%
p
• Advances - emphasis on margin management
– grew annuity term advances
– term up >80%, short-term down
– margins increased
• Core banking NIR up 35%
46
• Major transformation initiative – Siyakhula
• Good progress in public sector deal flow
…continuing gains in Primary Banker market share
24
Property Finance
• Advances up 24% driven by high quality,
large deals
Earnings of R800m & RORAC of 23,7%
large deals
• Levels of impaired assets & arrears low
despite difficult economic conditions
• Property Investment returns exceeded market
performance – down on record 2007 level
• Successful affordable housing agreements
47
concluded with first tranche of funding disbursed
• Committed to being SA’s "greenest bank"
• High staff morale maintained
… continued selective growth
Africa
• Growth in average advances 16% & deposits 35%
Earnings up 20,5% to R94m & RORAC of 19,7%
• Focussed on improving existing operations
• Risk well managed & impairments at acceptable
levels
• Greater focus on expanding to selected
SADC countries
48
• Exploring joint investments together
with Ecobank
…well positioned for future expansion opportunities
25
Transactional Banking
Banking solutions to address our clients’ needs
49
…driving transactional banking market share
Nedbank Corporate – future focus
• Sustaining economic profit
• Managing through these uncertain times
• Tight risk management focusTight risk management focus
• Gain primary bank clients
• Continue building on our transformation initiatives
• Visible leadership
• Progressing our alliance with Ecobank
50
• Developing a 'one bank' customer experience
across 30 countries & 1000 branches in Africa
26
NEDBANK BUSINESS BANKING
INGRID JOHNSON
Nedbank Business Banking - highlights
• Growth in average advances 15% & deposits 12%
• Increased transactional ol me gro th
Earnings growth of 22,6% to R1 369m & RORAC of 31,7%
• Increased transactional volume growth,
complemented by net new client acquisition
• Client value management focus
• Active risk management
– increasing trend of defaults in market
– good recoveries 24%
5252
• Comprehensive offerings for
enterprise development,
agriculture, tourism & public sector
Headlineearnings
NedbankBusiness BankingRest of bank
27
Nedbank Business Banking – a new Cluster
• Effective decentralised business model based on accountability
High growth, high cross sell, high ROE in a major market segment
• Significantly transformed culture & employment equity profile• Continued improvement in staff satisfaction survey• Higher focus on new client acquisition
Financial performance over 4 years * 2008
Headline earnings 3 times higher than 2004 (CAGR ~32%) R1 369m
Return on capital Increased from 16% in 2004 31,7%
5353
… consistent strong financial performance
Efficiency ratio Improved from 64% in 2004 47,1%Average advances 1,7 times higher than 2004 R55bnAverage deposits 1,6 times higher than 2004 R71bn* Estimates to align for internal allocation & transfer pricing changes over the years
Nedbank Business Banking – future focus
• Lower endowment earnings & higher impairments will impact 2009
Delivering quality performance through the cyclewhile continuing to build our franchise
o e e do e t ea gs & g e pa e ts pact 009
earnings
• Managing risk in tough times while doing basics well
• Focus on client value to enhance returns & grow economic profit
• Visible leadership & continued development of people
• Emphasis on quality primary banker growth
5454
• Emphasis on quality primary banker growth
• Capitalising on decentralised business model based on accountability
… strategy “to be the leader in Business Banking for SA”
28
NEDBANK RETAILROB SHUTER
Nedbank Retail - financial summary
Year ended – Rm % change 2008 2007Headline earnings (46,6) 1 002 1 876Margin 4,93% 5,23%Efficiency ratio 61 1% 63 5%Efficiency ratio 61,1% 63,5%Credit loss ratio 2,47% 1,26%Average advances 17,6 143 334 121 851Average deposits 14,7 92 856 80 951Allocated economic capital 9,8 9 322 8 490RORAC 10,8% 22,1%
56
Assets Headlineearnings30%
17%
NedbankRetailRest of bank
29
Nedbank Retail – detailed income statement
Year ended - Rm % change 2008 2007
Net interest income 11,1 7 497 6 745
Impairments charge 130,9 (3 630) (1 572)
Income from lending activities (25,2) 3 867 5 173
Non-interest revenue 14,3 5 546 4 851
Total expenses 8,2 (7 973) (7 367)
Indirect taxation 28,1 (173) (135)
Associate income (20,7) 146 184
Headline profit before taxation (47 8) 1 413 2 706
5757
Headline profit before taxation (47,8) 1 413 2 706
Direct taxation (55,0) (357) (794)
Income attributable to minorities 50,0 (54) (36)
Headline earnings (46,6) 1 002 1 876
Nedbank Retail – segmental results
Headline Earnings (Rm)
RORAC(%)
Efficiency ratio (%)
Average Advances (Rb)
Credit loss ratio (%)
Division 2008 %ch 2008 2008 2008 %ch Dec 08 Jun 08
Bancassurance & Wealth 441 28,2 60,7 ▲ 61,0 ▼ 14,9 18,5 0,47 0,41
Small Business Services 389 17,9 47,9 ▼ 42,3 ▼ 10,0 38,2 3,29 1,96
Card 251 (10,4) 15,9 ▼ 59,4 ▼ 6,8 11,7 9,41 10,57
Personal Loans 245 1,2 18,8 ▲ 42,3 ▼ 5,9 9,1 10,32 9,06
Trans & Investment Products 100 42,9 10,4 ▲ 89,0 ▼ 1,1 (8,3) 12,86 16,64
Private Banking 88 7,3 24,1 ▲ 65,2 ▼ 10,6 9,4 0,63 0,50
Secured lending (617) (>100) (17,6) ▼ 56,1 ▲ 94,1 18,1 1,81 1,13
Vehicle & Asset Finance (175) (>100) (29,8) ▼ 72,3 ▼ 6,6 28,5 4,99 4,19
585858
( ) ( ) ( , ) , , , , ,
Home Loans (442) (>100) (15,1) ▼ 52,4 ▲ 87,5 17,3 1,56 0,90
Other 105 1,0
Total 1 002 (46,6) 10,8 ▼ 61,1 ▼ 143,3 17,6 2,47 2,00
30
Nedbank Retail – Bancassurance & Wealth
Headline Earnings (Rm)
RORAC(%)
Efficiency ratio (%)
Average Advances (Rb)
Credit loss ratio (%)
Division 2008 %ch 2008 2008 2008 %ch Dec 08 Jun 08
Bancassurance & Wealth 441 28,2 60,7 ▲ 61,0 ▼ 14,9 18,5 0,47 0,41
• Business performed well in turbulent markets• Strong growth in ST insurance business• Product expansion in 2009• Nedlife APE up 5%• AUM R84 bn, net inflows R6,5 bn
E ll t f d f
5959
• Excellent fund performance
Nedbank Retail – Small Business Services
Headline Earnings (Rm)
RORAC(%)
Efficiency ratio (%)
Average Advances (Rb)
Credit loss ratio (%)
Division 2008 %ch 2008 2008 2008 %ch Dec 08 Jun 08
Small Business Services 389 17,9 47,9 ▼ 42,3 ▼ 10,0 38,2 3,29 1,96
• Large industry economic profit pool• Growth platform laid over last few years• Investment in front line staff • Market share 14% (2007: 13%) • Increased signs of credit stress
F t i li t th
6060
• Focus on net primary client growth• Refocus on in-franchise lending
31
Nedbank Retail – Card
Headline Earnings (Rm)
RORAC(%)
Efficiency ratio (%)
Average Advances (Rb)
Credit loss ratio (%)
Division 2008 %ch 2008 2008 2008 %ch Dec 08 Jun 08
Card 251 (10,4) 15,9 ▼ 59,4 ▼ 6,8 11,7 9,41 10,57
• Credit metrics stable• Book shrinking – pressure on NII• Industry volumes slowing• Intense competition in acquiring• Amex strategy progressing well
Effi i & t ti k
6161
• Efficiency & revenue protection key
Nedbank Retail – Personal Loans
Headline Earnings (Rm)
RORAC(%)
Efficiency ratio (%)
Average Advances (Rb)
Credit loss ratio (%)
Division 2008 %ch 2008 2008 2008 %ch Dec 08 Jun 08
Personal Loans 245 1,2 18,8 ▲ 42,3 ▼ 5,9 9,1 10,32 9,06
• Book growth moderated in volatile markets • Stable credit / collections metrics• SMS campaigns discontinued• Risk area strengthened• Post NCA shift from margin to NIR
S l i f t t ti i d
6262
• Sales infrastructure optimised• Monitoring market conditions closely
32
Nedbank Retail – TIP
Headline Earnings (Rm)
RORAC(%)
Efficiency ratio (%)
Average Advances (Rb)
Credit loss ratio (%)
Division 2008 %ch 2008 2008 2008 %ch Dec 08 Jun 08
Trans & Investment Products 100 42,9 10,4 ▲ 89,0 ▼ 1,1 (8,3) 12,86 16,64
• 119k net new primary clients (2007: 90k)• Liability targets exceeded – Park-It • Strong funding franchise• Overdraft book growth under pressure• Progress in tackling operational losses
D li i i t t t ill i t i
6363
• Declining interest rates will impact margins• New product launches in 2009
Nedbank Retail – Private Banking
Headline Earnings (Rm)
RORAC(%)
Efficiency ratio (%)
Average Advances (Rb)
Credit loss ratio (%)
Division 2008 %ch 2008 2008 2008 %ch Dec 08 Jun 08
Private Banking 88 7,3 24,1 ▲ 65,2 ▼ 10,6 9,4 0,63 0,50
• Personal / Private Bank integration• Client service focus intensified• Growth in primary clients is key• Some stress in credit portfolios• Particular focus on professional & mass
ffl t t
6464
affluent segments
33
Nedbank Retail – Vehicle & Asset Finance
Headline Earnings (Rm)
RORAC(%)
Efficiency ratio (%)
Average Advances (Rb)
Credit loss ratio (%)
Division 2008 %ch 2008 2008 2008 %ch Dec 08 Jun 08
Vehicle & Asset Finance (175) (>100) (29,8) ▼ 72,3 ▼ 6,6 28,5 4,99 4,19
• Very difficult year • Credit metrics & defaults high but stabilizing • Dealer and client re-pricing initiatives• Operational challenges in processing area• Dealer channel profitability challenges
6565
Nedbank Retail – Home Loans
Headline Earnings (Rm)
RORAC(%)
Efficiency ratio (%)
Average Advances (Rb)
Credit loss ratio (%)
Division 2008 %ch 2008 2008 2008 %ch Dec 08 Jun 08
Home Loans (442) (>100) (15,1) ▼ 52,4 ▲ 87,5 17,3 1,56 0,90
• Very disappointing year• Defaults intensified in H2• Pricing, risk & LTV adjusted• LGD deterioration provision now R280m• Increased fraud
O i i t k t i t t f fl
6666
• Originator market in state of flux• Lower interest rates will benefit over time• Book profile under pressure into 2010
34
0.7%
0.8%
0.9%
1.0%at
es
Nedbank Retail – default trends in 2008
Change in default rates across asset classesSBS
HomeLoans
0 1%
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
Mon
thly
Cha
nge
in D
efau
lt R
a
Private Bank
Card
Personal
VAF
67
Jan-
08
Feb-
08
Mar
-08
Apr
-08
May
-08
Jun-
08
Jul-0
8
Aug
-08
Sep-
08
Oct
-08
Nov
-08
Dec
-08
-0.3%
-0.2%
-0.1%
67
Loans
Current Accounts
… continued pressure in Home Loans & SBS
Nedbank Retail – home loans credit review
Current Arrear Defaulted
2007 93,3% 2,9% 3,8%
2008 86 2% 5 8% 8 0%
Book distribution BTV dis tributionDecember 200828%
2008 86,2% 5,8% 8,0%
Current Arrear Defaulted
2007 0,04% 4,2% 16,9%
2008 0,05% 4,4% 15,1%
Balance sheet provisioning
22%
20%
17%
20%
22%
19%
10%
20%
22%
6868
Coverage Credit loss
2007 0,93% 0,24%
2008 1,64% 1,38%
Ratios
<= 60 61 to 80 81 to 95 96 to 100 > 100
Original Value C urrent Value
35
Nedbank Retail – Banking Services
2008 Distribution• R1bn plan delivered successfully
• 75 new outlets (branches & retailer)
2008 Service• Launched phase II of explicit service
promise - Ask Once™
• CMAT t l b l t• 1 621 merchants enabled for cash advance
• 278 ATM’s
• 10 mobile sales teams
• 3 Private Banking suites
• Go Banking / OMB integration
• CMAT assessment - global top quartile
• Top bank - Ask Afrika Orange Index two years in a row
• Significantly widened service scores gap between competitors & ourselves
6969
Nedbank Retail – 2009 focus & outlook
• Conservative credit policy & focus on collections & impairments
• Execution of ‘manage for value’ strategies
• Invest in our high economic profit businesses
• Stringent expense control
• Build on bancassurance momentum
• Ongoing strategies to grow net primary clients
• Entrenching our service proposition
• 2009 earnings lower due to endowment pressure & high impairments
7070
… very difficult 2009 anticipated
36
PROSPECTS
TOM BOARDMAN
We continue to look at the bank holistically
• To understand our clients needs in difficult times
– Step change in client service
– Flexible collections arrangementsFlexible collections arrangements
– Continued focus on affordable banking
• To maintain strength of SA banking industry
– Conservative management of the bank
• To continue to focus on our people
Manage headcount through the cycle
72
– Manage headcount through the cycle
– Building our unique culture & value set
– Ensure we transform further
• To maintain our leadership position in sustainability
37
2009 key objectives
• Remain strongly profitable, but at marginally
lower levels than 2008
f &• Focus on economic profit & remain alert to opportunities
• Continue to strengthen capital adequacy
• Manage risk as an enabler
• Maintain focus on efficiency
• Continue to increase net asset value
73
• Continue to increase net asset value
… at the same time we will continue to build for the future
THANK YOU
38
BOOKLET SLIDES
15.0%
20.0%
25.0%
Nedbank Retail – book distribution & provisionsHome Loans Vehicle Asset Finance
ibut
ion
15.0%
20.0%
25.0%
0.0%
5.0%
10.0%
2007 94.2% 2.6% 3.2%
2008 88.5% 5.1% 6.4%
Current Arrear DefaultedBoo
k di
stri
s (B
S) /
book
go
ries)
20 0%
40.0%
60.0%
80.0%
100.0%
0.0%
5.0%
10.0%
2007 93.3% 2.9% 3.8%
2008 86.2% 5.8% 8.0%
Current Arrear Defaulted
20 00%
40.00%
60.00%
80.00%
100.00%
7676 Note: total Retail excluding Bancassurance & Wealth & PiP’s
Coverage Credit loss ratio2007 0.93% 0.24%2008 1.64% 1.38%
Coverage Credit loss ratio 2007 2.89% 1.58%2008 5.89% 4.53%
Prov
isio
ns(c
ate
0.0%
20.0%
2007 0.2% 21.0% 65.5%
2008 0.7% 21.5% 64.8%
Current Arrear Defaulted0.00%
20.00%
2007 0.04% 4.2% 16.9%
2008 0.05% 4.4% 15.1%
Current Arrear Defaulted
39
Nedbank Retail – book distribution & provisionsPersonal Loans Card
ibut
ion
15.0%
20.0%
25.0%
15.0%
20.0%
25.0%
Boo
k di
stri
s (B
S) /
book
go
ries)
0.0%
5.0%
10.0%
2007 73.9% 10.3% 15.8%
2008 77.0% 8.4% 14.7%
Current Arrear Defaulted
20 0%
40.0%
60.0%
80.0%
100.0%
0.0%
5.0%
10.0%
2007 89.2% 5.1% 5.6%
2008 87.1% 4.9% 8.0%
Current Arrear Defaulted
20 0%
40.0%
60.0%
80.0%
100.0%
7777 Note: total Retail excluding Bancassurance & Wealth & PiP’s
Prov
isio
ns(c
ate
Coverage Credit loss ratio 2007 11.78% 9.94%2008 10.74% 10.32%
0.0%
20.0%
2007 0.5% 23.6% 56.9%
2008 0.3% 27.3% 55.9%
Current Arrear Defaulted
Coverage Credit loss ratio 2007 6.38% 7.29%2008 8.80% 9.41%
0.0%
20.0%
2007 0.6% 11.3% 89.7%
2008 0.5% 13.0% 94.1%
Current Arrear Defaulted
Nedbank Retail – book distribution & provisionsTrans & Inv products Total
ibut
ion
15.0%
20.0%
25.0%
15.0%
20.0%
25.0%
20 0%
40.0%
60.0%
80.0%
100.0%
Boo
k di
stri
s (B
S) /
book
go
ries)
20 0%
40.0%
60.0%
80.0%
100.0%
0.0%
5.0%
10.0%
2007 73.2% 9.0% 17.7%
2008 70.2% 8.9% 20.8%
Current Arrear Defaulted0.0%
5.0%
10.0%
2007 91.7% 3.5% 4.8%
2008 85.6% 5.9% 8.5%
Current Arrear Defaulted
78
0.0%
20.0%
2007 0.1% 9.2% 35.6%
2008 0.1% 7.8% 28.4%
Current Arrear Defaulted
78 Note: total Retail excluding Bancassurance & Wealth & PiP’s
Prov
isio
ns(c
ate
Coverage Credit loss ratio2007 20.10% 7.28%2008 21.73% 10.93%
Coverage C/L ratio 2007 2.36% 1.26%2008 3.18% 2.47%
0.0%
20.0%
2007 0.5% 12.8% 75.6%
2008 0.5% 13.4% 81.4%
Current Arrear Defaulted
40
Nedbank Retail – Home Loans: age distribution & BTV
Age Distribution
42%Jun-08 Dec-08
33% 34% 33%
28%31%
42%
7979
0-12 mths 13-24 mths > 24 mths
Disclaimer
Nedbank Group has acted in good faith & has made every reasonable effort to ensure the accuracy & completeness of the information contained in this document, including all information that may be defined as 'forward-looking statements' within the meaning of United States securities legislation.Forward-looking statements may be identified by words such as 'believe', 'anticipate', 'expect' 'plan' 'estimate' 'intend' 'project' 'target' 'predict' & 'hope''expect', 'plan', 'estimate', 'intend', 'project', 'target', 'predict' & 'hope'.Forward-looking statements are not statements of fact, but statements by the management of Nedbank Group based on its current estimates, projections, expectations, beliefs & assumptions regarding the group's future performance. No assurance can be given that forward-looking statements will prove to be correct & undue reliance should not be placed on such statements.The risks & uncertainties inherent in the forward-looking statements contained in this document include, but are not limited to: changes to IFRS & the interpretations, applications & practices subject thereto as they apply to past, present & future periods; domestic & international business and market conditions such as exchange rate and interest rate
80
movements; changes in the domestic & international regulatory & legislative environments; changes to domestic & international operational, social, economic & political risks; & the effects of both current & future litigation.Nedbank Group does not undertake to update any forward-looking statements contained in this document & does not assume responsibility for any loss or damage whatsoever & howsoever arising as a result of the reliance by any party thereon, including, but not limited to, loss of earnings, profits, or consequential loss or damage.