nedbank group analyst presentation · ‘2010 saw our headline earnings grow for the first time...
TRANSCRIPT
nedbank groupanalyst presentation 2010
‘2010 saw our headline earnings grow for the first time since 2007, ending the year marginally above our expectations as set out in the third-quarter trading update. Earnings momentum built during the year, with earnings in the second half up strongly on the first half. These results were driven by improving economic conditions and the group’s strategic focus on growing non-interest revenue (NIR). Our wholesale businesses remained resilient and the performance of Nedbank Retail improved as impairments decreased and we began to realise the benefits of the Imperial Bank acquisition. Nedbank Wealth grew strongly following the integration of the former joint ventures and pleasing growth in new business.
While the global economic recovery remains fragile, we believe the worst of the cycle is behind us and expect continued earnings growth in 2011.’
Mike brownChief Executive Officer
For more information contact:raisibe Morathi • Chief Financial officerTel: +27 11 295 9693 Mobile: +27 083 327 0290 Fax: +27 11 294 9693 E-mail: [email protected]
don bowden • Tier 1 Investor relationsTel: +27 21 702 3102 Mobile: +27 82 555 8721 Fax: +27 21 702 3107 E-mail: [email protected]
01a
net asset value per share increased 8,0% to 9 831 cents
Capital adequacy further strengthened (core Tier 1: 10,1%)
ROE (excluding goodwill) 13,4% and ROE 11,8%
Full-year dividend per share of 480 cents, up 9,1%
Directors: Dr RJ Khoza (Chairman), MWT Brown* (Chief Executive Officer), CJW Ball**, TA Boardman, TCP Chikane, GW Dempster* (Chief Operating Officer), MA Enus-Brey, Prof B de L Figaji, DI Hope (New Zealand), A de VC Knott-Craig, WE Lucas-Bull, NP Mnxasana, RK Morathi* (Chief Financial Officer), JK Netshitenzhe, JVF Roberts (British), GT Serobe, MI Wyman (British).* Executive ** Senior independent non-executive director
heaDline earnings
R4,9bn14,6%14,6%
DiluteD heaDline earnings per share
1 069cents
8,7%8,7%
strong nir growth
R13,2bn11,0%11,0%
CONTENTSCommentary 2b
Integrated sustainability 8b
Financial highlights 10b
Consolidated statement of comprehensive income 11b
Consolidated statement of financial position 12b
Condensed consolidated statement of cashflows 13b
Consolidated statement of changes in equity 14b
Return on equity drivers 16b
Operational segmental reporting 18b
Geographical segmental reporting 20b
Segmental commentary 21b
Nedbank Corporate segmental report 24b
Nedbank Wealth segmental report 25b
Nedbank Wealth – New Business premium 24b
Nedbank Retail segmental report 26b
Nedbank Business Banking segmental report 26b
Nedbank Capital segmental report 27b
Nedbank Retail – advances and impairments 28b
Operational statistics 30b
Assets under management 31b
Earnings per share and weighted average shares 32b
Consolidated statement of financial position
banking/trading categorisation 33b
Nedbank Group categories of financial instruments 34b
Restatements 38b
Notes to the consolidated statement of comprehensive income
1 Average banking balance sheet and related interest 40b
2 Impairment of loans and advances 41b
3 Non-interest revenue 42b
4 Expenses 44b
5 Taxation charge 46b
6 Non-controlling interest – ordinary shareholders 46b
7 Preference shares 47b
Notes to the consolidated statement of financial position 48b
8 Loans and advances 48b
9 Investment securities 50b
10 Investments in associate companies and joint ventures 52b
11 Intangible assets 54b
12 Ordinary share capital and premium 56b
13 Amounts owed to depositors 56b
14 Long-term debt instruments 58b
15 BEE: Estimated future dilutive shares and IFRS 2 charge 60b
AN
NU
AL FIN
AN
CIA
L RESuLTS
Nedbank Group – Share-based payments 64b
BEE deal forecasts assumptions 68b
Nedbank Group Employee Incentive Schemes 69b
Shareholders’ analysis 71b
Nedbank Limited consolidated statement of comprehensive income 72b
Nedbank Limited consolidated statement of financial position 73b
Risk and balance sheet management review 74b
Highlights 74b
Introduction 77b
Basel III 77b
Credit risk 82b
Counterparty credit risk 97b
Credit concentration risk 98b
Securitisation risk 99b
Trading market risk 100b
Equity risk (investment risk) in the banking book 103b
Operational risk 103b
Asset and liability management 103b
Liquidity risk 103b
Interest rate risk in the banking book 107b
Foreign currency translation risk in the banking book 108b
Insurance risk 109b
Capital management 110b
Cost of equity 120b
External credit ratings 120b
Summarised dti Codes scorecard 122b
Market share 123b
Definitions 128b
Share information 136b
neDBanK group analyst presentation 20102b
2010 ANNUAL RESULTS pRESENTATiONCOMMENTARyeConoMIC envIronMenT Real gross domestic product (GDP) in South Africa grew by 2,8% in 2010 compared with a decline of 1,7% in 2009. The local economy had a strong start to the year, primarily driven by improved global demand for commodities and a rebound in manufacturing production off the depressed levels of 2009. Economic activity was also boosted by strong infrastructural spending ahead of the FIFA 2010 World Cup and by the event itself, with consumer spending rising steadily for most of the year. However, fixed investment by the private sector contracted for the second year off the elevated levels seen in 2008.
Growth in both the emerging and some parts of the developed world surprised on the upside, underpinned by China’s economic strength and continued demand for commodities and capital goods. Massive liquidity injections by major central banks and historically low interest rates helped to stimulate economic growth further, particularly in emerging economies. In contrast, the underlying economic and financial environment remained fragile in the developed world, with fiscal difficulties in parts of Europe and America, continued weakness in credit markets, limited employment growth and inflationary concerns returning in emerging economies.
Household finances improved in South Africa as debt started to decrease and interest rates eased to the lowest levels in 36 years. The recovery in the credit cycle has proved to be more modest compared with previous cycles. Household demand for credit was contained by the consumer debt burden remaining relatively high, increased regulatory requirements, policy uncertainty and employment growth only resuming late in the year. Against this background the ratio of household debt to disposable income declined marginally to 78,2% from just over 80% at the end of 2009. At the same time debt service costs decreased to 7,5%, the lowest level since June 2006, and are now at a level that is more conducive to improving economic growth in the consumer sector.
In the corporate sector excess capacity and uncertainty over the sustainability of the local and global recovery limited spending. Government fixed-investment spending, although continuing to contract, emerged as the main foundation for growth.
revIew oF resulTs¹Nedbank Group showed solid earnings growth in a challenging economic environment. After a strong fourth quarter the group finished the year with earnings marginally ahead of management’s expectations set out in the third-quarter trading update. Headline earnings increased by 14,6% from R4 277 million to R4 900 million. Diluted headline earnings per share increased by 8,7% from 983 cents to 1 069 cents, slightly above the forecast range of 0% to 8% provided in the third-quarter trading update. Diluted earnings per share (DEPS) decreased by 5,3% from 1 109 cents to 1 050 cents. As previously reported, 2009 DEPS included a once-off International Financial Reporting Standards (IFRS) revaluation gain of R547 million (after taxation) from the acquisition and consolidation of the Nedbank Wealth joint ventures.
The group recorded a return on average ordinary shareholders’ equity (ROE), excluding goodwill, of 13,4% and a ROE of 11,8%.
The group maintained its well-capitalised balance sheet with core Tier 1 capital at 10,1% (2009: 9,9%), while advances grew by 5,5%, with market share gains in most lending classes aside from home loans.
The net asset value per share grew by 8,0% from 9 100 cents in December 2009 to 9 831 cents in December 2010. This is a pleasing result given the increase in the average number of shares in issue following the acquisition of the joint ventures from Old Mutual and scrip dividend distributions last year.
ClusTer perForManCeThe business clusters delivered strong NIR growth, improved impairments and contained costs below original forecasts given to the market through continued cost discipline and optimisation, while expanding the group’s footprint.
The banking clusters’ results were impacted by increased allocation of central costs and negative endowment earnings from average interest rates that were 198 basis points lower when compared with 2009. The capital optimisation exercises in Nedbank Retail and Nedbank Business Banking continued and resulted in more efficient use of capital, while the lower levels of capital used resulted in lower endowment-related interest revenue in these clusters.
Nedbank Retail reported an encouraging improvement in impairments, particularly in home loans. Impairments improved in most other businesses, with Nedbank Corporate, Nedbank Wealth and Nedbank Business Banking again recording credit loss ratios within or below through-the-cycle target ranges. Nedbank Capital incurred a higher level of impairments in shareholders’ loans in its private equity portfolio.
The businesses generated strong growth in core fee and commission income, driven primarily by volume growth, new primary clients and a number of innovative products focused on growing NIR. Nedbank Capital recorded improved trading income, particularly in the equity businesses. Nedbank Wealth’s earnings benefited from the integration of the former joint ventures and strong growth in new business, particularly in the insurance and asset management businesses.
Nedbank Retail delivered a turnaround in performance, with headline earnings increasing from a R27 million loss to a R760 million profit and ROE growing to 4,6% (2009: -0,2%). Improved earnings were achieved following the acquisition of the Motor Finance Corporation business from Imperial Bank and through outperformance in the card and personal loans businesses, good quality growth in transactional clients, improved risk-based pricing and lower impairment levels following a step change improvement in collections, asset realisations and restructured loans. This stabilisation of Retail, combined with the repositioning of the cluster to an integrated and client-centred business, should contribute to a sustainable momentum in earnings growth.
The wholesale businesses and Nedbank Wealth recorded strong ROEs and Nedbank Retail much improved earnings.
Further segmental information is available on the group’s website www.nedbankgroup.co.za.
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FInanCIal perForManCe neT InTeresT InCoMe (nII)NII increased by 1,9% to R16 608 million (2009: R16 306 million) and the group’s net interest margin held up well at 3,35% (2009: 3,39%), despite the impact of lower interest rates.¹ Average interest-earning banking assets increased by 3,0% (2009 growth: 9,0%).¹
Margin compression was less than expected. Margin pressure primarily resulted from a smaller endowment from lower average interest rates and the cost of lengthening the funding profile. This was partially offset by:
• the widening of margins from asset pricing and a change in asset mix, including strong growth in the group’s retail motor finance and personal loans businesses;
• a relative prime/Johannesburg Interbank Agreed Rate (JIBAR) reset benefit as a result of less aggressive interest rate cuts during 2010 compared with 2009; and
• a decline in the market cost of term liquidity during the last quarter of the year.
IMpaIrMenTs Charge on loans and advanCesThe credit loss ratio on the banking book improved to 1,36% for the period [2009: 1,52% (restated)].¹
The reduction in the impairments charge was driven mostly by Nedbank Retail, particularly in the secured portfolios that had lagged the recovery in the unsecured portfolios. Lower interest rates and the stabilising of job losses contributed to the retail credit loss ratio improving significantly from 3,17% in 2009 to 2,67%. The group further strengthened its provisioning by reducing certain security assumptions in specific impairments, increasing levels of portfolio provisioning on debt restructures of R97 million and lengthening the bad debt emergence period assumptions within Nedbank Retail home loans at an additional cost of R114 million within portfolio impairments.
The credit portfolios in Nedbank Corporate, Nedbank Business Banking and Nedbank Wealth are of high quality and credit loss ratios remained within or below the respective clusters’ through-the-cycle levels. Nedbank Capital impairments increased in the higher-risk private equity portfolio.
Credit loss
ratio (%)
Year to
December
2010
H2
2010
H1
2010
Year to
December
2009*
Nedbank Capital 1,27 1,72 0,80 0,36Nedbank
Corporate 0,20 0,10 0,31 0,25Nedbank
Business Banking 0,40 0,48 0,32 0,52Nedbank Retail 2,67 2,42 2,93 3,17Nedbank Wealth 0,15 0,05 0,24 0,47
1,36 1,27 1,46 1,52
* Restated for average interest-earning banking advances and integration of Imperial Bank.
Defaulted advances declined by 1,04% to R26 765 million (2009: R27 045 million). Defaulted advances to total advances decreased from its peak of 6,01% in June 2010 to 5,63%. Total impairment provisions increased by 14,6% to R11 226 million (2009: R9 798 million) resulting in strengthened coverage ratios.
nIrThe group’s focus on NIR generated growth across all the clusters. NIR increased 11,0% to R13 215 million (2009: R11 906 million).¹ On a comparable basis NIR growth was 10,5% after adjusting for the acquisitions in 2009 of the Nedbank Wealth joint ventures and before fair-value adjustments. The ratio of NIR to expenses improved to 79,6% (2009: 78,8%).
Core fee and commission income grew strongly by 13,7% (like-for-like growth of 11,2%, adjusting for the Nedbank Wealth joint ventures) through volume growth, new products and new client acquisitions. The group reduced its retail transactional banking charges in 2006 and 2007. Since then price increases have been modest, with 2010 increases in line with inflation, resulting in current banking charges being similar to 2005 levels.
Insurance income grew 39,8% (18,4% on a like-for-like basis, adjusting for the Nedbank Wealth joint ventures) primarily as a result of the provision of insurance on a fast-growing personal loans book as well as the introduction of new products and improved levels of cross-selling.
Trading income increased by 13,9% to R2 096 million (2009: R1 841 million). In 2009 interest rates decreased at a rapid pace and created favourable trading conditions. Low volatility in the first half of 2010 resulted in difficult conditions for global markets and continued pressure on foreign exchange volumes and margins. This was offset by improved equity trading in the second half of the year.
Private equity markets remained constrained throughout the year. Listed-property private equity investments showed some modest gains. Overall NIR from the private equity portfolios decreased by 25,0%.
NIR from private equity (Rm)
December
2010
December
2009
Nedbank Capital 149 269Nedbank Corporate Property Finance 79 35
Total NIR from private equity 228 304
NIR was negatively impacted by R213 million (2009: R6 million profit) over the period as a result of the adverse fair-value adjustments of the group’s subordinated debt resulting from the narrowing of credit spreads. Nedbank Corporate also reflected a negative fair-value adjustment of R55 million (2009: R72 million profit) due to a downward movement in the yield curve and related convexity in the fixed-rate advances book and associated interest rate swaps.
expensesThe group has maintained a strong cost discipline over an extended period, resulting in the increase in expenses remaining below the market guidance given at the beginning of 2010.
neDBanK group analyst presentation 20104b
2010 ANNUAL RESULTS pRESENTATiONCOMMENTARy continuedExpenses grew by 9,9% to R16 598 million (2009: R15 100 million)1. The increase was partly due to the acquisition of the Nedbank Wealth joint ventures and the consolidation of Merchant Bank of Central Africa. Expenses increased by 8,5% on a comparable basis.
• Staff expenses increased by 11,3% (9,8% on a comparable basis), due to annual salary increases and an increase in staff numbers of 1,8%. Staff numbers increased mostly towards the end of 2010 in line with the group’s growth strategy, with most staff placements in the frontline sales force and credit areas. All staffmembers from Imperial Bank were transferred to Nedbank without any retrenchments. Short-term incentives increased by 17,8%, slightly ahead of headline earnings growth as a result of outperformance on non-financial measures included in the calculations. Long-term incentive costs include a reversal of prior periods’ costs where performance targets were not met.
• Fees and insurance increased by 13,1% (12,3% like-for-like) as NIR grew and following an increase in card, membership association and cash fees linked to the growth in cash handling and deployment of ATMs.
• Strategic marketing and public relations costs grew by 17,2% (16,4% like-for-like) mostly from the launch of products within Nedbank Wealth and Nedbank Retail, cross-selling initiatives and the increased visibility around the FIFA 2010 World Cup. These efforts are indicative of the group’s investing for growth.
Pressure on NII from endowment-related margin compression was again, as in 2009, the main contributor that led to the efficiency ratio deteriorating from 53,5% to 55,7%.
TaxaTIon¹The taxation charge (excluding taxation on non-trading and capital items) increased by 10,9% to R1 366 million (2009: R1 232 million) arising from profit growth adjusted for:
• dividend income as a proportion of total income being lower than in 2009;
• the lower provision for secondary tax on companies, owing to an increase of shareholders (81,5%) who elected to take scrip for the 2009 final dividend distribution (2008 final dividend distribution: 32,0%); and
• the reduced accounting effect from structured finance transactions that continued to unwind.
The effective tax rate increased marginally from 20,2% to 20,7%.
non-TradIng and CapITal ITeMs¹Income after taxation from non-trading and capital items decreased to a R89 million loss from a R549 million profit in 2009. The main component of this was an anticipated R34 million writedown on Imperial Bank computer software following the acquisition. The 2009 profit arose from the accounting-related revaluation of BoE (Pty) Limited and Nedgroup Life Assurance Company Limited on the acquisition of the remaining shares in the joint ventures.
sTaTeMenT oF FInanCIal posITIonCapITal The group’s capital adequacy ratios remain well above the group’s internal targets and marginally ahead of December 2009. This resulted from ongoing capital and risk-weighted asset optimisation,
a strategic focus on ‘managing for value’ and a 0,6% increase in capital from higher levels of scrip takeup and other share issues for staff incentives and black economic empowerment (BEE) structures. This growth was offset by the approximately 1,3% negative impact on the group’s capital adequacy ratios from the cash acquisition of 49,9% of Imperial Bank and the treatment of capitalised software as an intangible asset rather than as a fixed asset for capital adequacy purposes.
2010 2009
Internal
target
range
Regulatory
minimum
Core Tier 1 ratio 10,1% 9,9% 7,5% to 9,0% 5,25%Tier 1 ratio 11,7% 11,5% 8,5% to 10,0% 7,00%
Total capital
ratio 15,0% 14,9%
11,5% to
13,0% 9,75%
Ratios calculated including unappropriated profits.
Further detail will be available in the group’s Pillar 3 Report to be published in April 2011 on the group’s website www.nedbankgroup.co.za.
rIsk MeThodologIes and CapITal alloCaTIonNedbank Limited received approval from the South African Reserve Bank (SARB) to use, for regulatory capital purposes, the Advanced Measurement Approach for operational risk, effective from 2010, and to use the Internal Model Approach for market trading risk, effective from 2011. Nedbank Limited now has approval for all three of the major Pillar 1 risk approaches under Basel II, having received approval for using the Advanced Internal Ratings-based Approach for credit risk from the implementation date of Basel II in January 2008.
Enhancements relating to the internal capital allocation to business clusters were implemented in 2010. A major effect of these enhancements has been the allocation of most of the surplus capital held at a group level to the clusters, and the comparative results for the operational clusters have been restated accordingly. These enhancements have had no impact on the group’s overall capital levels and ROE, but have impacted the ROEs recorded by the clusters on a restated basis.
FundIng and lIquIdITy Nedbank Group’s liquidity position remains sound. The group continues to focus on diversifying its funding base, lengthening its funding profile and maintaining appropriate liquidity buffers.
Nedbank Group increased its long-term funding ratio from increased capital market issuances under the domestic medium-term note programme (R6,23 billion) and also increased the duration in the money market book.
The group’s liquidity position is further supported by a strong loan-to-deposit ratio of 97% and a low reliance on interbank and foreign currency funding. Nedbank Group is able to leverage off its favourable retail, commercial and wholesale deposit mix, which compares well with domestic industry averages.
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basel III developMenTs The majority of the Basel III proposals have recently been finalised, although some significant aspects remain to be completed in 2011. In South Africa the details of exactly how Basel III will be adopted will be determined by the SARB.
For Nedbank Group the impact of the new capital requirements is expected to be manageable. On a Basel III pro forma basis for 2010 the group is in a position to absorb the Basel III capital implications with all capital ratios still remaining above the top end of current internal target ranges. These should improve further by the end of 2013 from projected earnings, continuing capital and risk-weighted asset optimisation, and the impact of the group’s active portfolio management strategy.
Once Basel III has been finalised, Nedbank Group will review its target capital ratios.
In respect of the two proposed liquidity ratios, the liquidity coverage ratio for implementation in 2015 and the ‘net stable funding ratio’ (NSFR) for implementation in 2018, the impact of compliance by the SA banking industry would be punitive if implemented as they currently stand, particularly the NSFR in the light of structural constraints within the SA financial market. This is the case for many emerging-market jurisdictions around the world, and the negative effect on economic growth and employment would be significant. The group anticipates that a pragmatic approach on this issue will be applied prior to the finalisation in 2018.
loans and advanCesNedbank Group continued to make good progress in improving asset quality, and active management of the bank’s portfolios towards higher-economic-profit businesses resulted in slower asset growth in selected areas.
The group grew advances ahead of the industry at 5,5% to R475 billion (2009: R450 billion).¹ The advances by cluster are as follows:
Loans and advances (Rm)¹
December
2010
December
2009 % change
Nedbank Capital 62 328 55 315 12,7
− Banking activity 42 650 41 550 2,6− Trading activity 19 678 13 765 43,0
Nedbank Corporate 157 703 146 035 8,0Nedbank Business Banking 50 765 50 115 1,3Nedbank Retail 187 334 17 9 885 4,1Nedbank Wealth 16 869 19 089 (11,6)Other 274 (138) >100
475 273 450 301 5,5
Core banking advances in Nedbank Capital grew by 2,6% from December 2009, with R10,8 billion of new advances largely offset by repayments. Nedbank Corporate advances grew by 8,0%. Nedbank Business Banking advances ended marginally up, with R12 billion of new advances being offset to a large extent by repayments of other loans. The repositioning of Nedbank Retail and the focus on growing advances that potentially generate
higher economic profits resulted in home loans decreasing, as planned, by 0,3%, with stronger growth in personal loans, cards and motor finance of 39,1%, 7,9% and 9,8% respectively. Properties in possession decreased by 25,4%. The strength of the rand and the investment in uK Treasury bills, compared with previous placements with other banks, led to a decrease in advances in Nedbank Wealth.
deposITsDeposits increased by 4,5% to R490 billion (2009: R469 billion).¹
Optimising the mix of the deposit book remains a key focus in reducing the high cost of longer-term and professional funding. This is critical as banks compete more aggressively for lower-cost deposit pools with longer behavioural duration and as they start to take cognisance of the possible Basel III liquidity ratios. Low interest rates, coupled with low domestic savings levels and the deleveraging of consumers, led to modest growth in retail deposits during 2010. Relatively higher deposit growth in the wholesale sector indicated increasing working capital and available capacity among corporates. Throughout the year demand for higher-yielding negotiable certificates of deposit remained strong within the professional funds and corporate markets.
ouTlook Lower domestic interest rates and rising levels of income should boost consumer spending. Together with improving global demand, this is expected to increase confidence levels and lead to better consumer demand and capital formation in 2011 and further momentum in 2012.
Retail banking credit growth should fare better as household credit demand improves, house prices edge higher and impairments moderate. Corporate markets are expected to show modest improvement, while the small and medium enterprise (SME) market is likely to remain under pressure until fixed-investment activity improves.
Government spending should continue to underpin growth, although this is expected to be limited by the reduction in fiscal deficits over the medium term. Government’s stronger focus on job creation is also positive and much will depend on the ability to create a more enabling environment for business growth. Key to this will be improvements in the building of infrastructure and a more conducive and certain regulatory and policy environment to reduce the medium-term constraints on economic growth.
prospeCTsNedbank is well placed for earnings growth in 2011 and remains on track to meet its medium- to long-term financial targets in 2013. The group will continue to invest to generate sustainable revenue growth, underpinned by ongoing cost optimisation and efficiency improvements. Growing the bank’s overall franchise and maintaining momentum on the turnaround in the Retail Cluster, supported by a liquid and well-capitalised balance sheet, are key to delivering sustainable growth.
Margins should widen slightly, given that interest rates are expected to remain unchanged, and hence the negative effect of assets repricing quicker than liabilities out to three months will decrease. In addition, the cost of term liquidity is expected to decline as more expensive deposits mature and as below-trend
neDBanK group analyst presentation 20106b
2010 ANNUAL RESULTS pRESENTATiONCOMMENTARy continuedeconomic growth continues, albeit at higher levels than last year. Overall advances growth is expected to be in the mid to upper single digits.
Impairments are expected to continue reducing in line with the improved quality of assets supported by asset pricing on new advances that appropriately reflects risk and the related cost of funds. The credit loss ratio is currently expected to decrease but to remain above the group’s target range in 2011.
Transactional volumes are expected to increase as the economy improves and the group’s focus on growing primary clients is maintained.
The group’s medium-term targets remain unchanged and are included, with an outlook for performance against these targets for 2011, in the table below:
Metric2010
performance Medium-to-long-term targets 2011 outlook
ROE (excl goodwill) 13,4% 5% above monthly weighted average cost of ordinary shareholders' equity
Improving, remaining below target.
Growth in diluted headline earnings per share (EPS)
8,7% At least consumer price index + GDP growth + 5%
Improving, forecast to exceed target.
Impairments charge
(credit loss ratio)
1,36% Between 0,6% and 1,0% of average banking advances
Improving, remaining above target.
NIR:expenses ratio 79,6% > 85% Improving, remaining below target.
Efficiency ratio 55,2% < 50,0% Improving, remaining above target.
Basel II core Tier 1 capital adequacy ratio
10,1% 7,5% to 9,0% Improving, remaining above top end of target range.
Basel II Tier 1 capital adequacy ratio 11,7% 8,5% to 10,0% Improving, remaining above top end of target range.
Basel II total capital adequacy ratio 15,0% 11,5% to 13,0% Improving, remaining above top end of target range.
Economic capital Capitalised to 99,93% confidence interval on economic capital basis (target debt rating A including 10% buffer)
Dividend cover policy 2,30% 2,25 to 2,75 times 2,25 to 2,75 times.
Shareholders are advised that these forecasts have not been reviewed or reported on by the group’s auditors.
subsequenT evenTs – bee sCheMe share repurChase¹The lock-in period for participants in certain of Nedbank’s BEE schemes ended on 1 January 2011. In terms of these schemes Nedbank Group was entitled to repurchase 9,9 million Nedbank Group ordinary shares at a nominal value and on 6 January 2011 exercised such entitlement. The financial effects of this transaction are immaterial.
board Changes durIng The yearBob Head and Jabu Moleketi resigned from the board with effect from 19 February 2010 and 1 March 2010 respectively. Tom Boardman was appointed a non-executive director with effect from 1 March 2010. Joel Netshitenzhe was appointed an independent non-executive director with effect from 5 August 2010.
aCCounTIng polICIes¹ Nedbank Group Limited is a company domiciled in South Africa. The summarised consolidated financial results of the group at and
for the year ended 31 December 2010 comprise the company and its subsidiaries (the ‘group’) and the group’s interests in associates and jointly controlled entities.
Nedbank Group’s principal accounting policies have been prepared in terms of IFRS and have been applied consistently over the current and prior financial years.
Nedbank Group’s summarised consolidated financial results have been prepared in accordance with the recognition and measurement criteria of IFRS, interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and the presentation and disclosure requirements of International Accounting Standard (IAS) 34: Interim Financial Reporting, as well as the AC 500 standards as issued by the Accounting Practices Board.
In the preparation of these summarised consolidated financial results the group has applied key assumptions concerning the future and other inherent uncertainties in recording various
7b
assets and liabilities. These assumptions were applied consistently to the financial results for the year ended 31 December 2010. These assumptions are subject to ongoing review and possible amendments.
resTaTeMenTs¹The ratios for ROE and return on assets (ROA) have been restated with the denominator changing from simple average to daily average for equity and total asset values respectively. The calculation of the credit loss ratio has been changed from simple-average advances to daily-average banking advances (thereby excluding trading advances from the calculation). Comparatives for ROE and ROA changes do not affect the segmental ratios, but do affect the group ratios, while credit loss ratio changes affect both.
The comparative results for the operations segment reporting at 31 December 2009 have been restated in line with the group’s implementation of a revised economic capital allocation methodology as well as the integration of Imperial Bank Limited within various operating segments. These restatements have no effect on the group results and ratios, and only changes segment cluster results and ratios.
audITed resulTs – audITors’ reporT KPMG Inc and Deloitte & Touche, Nedbank Group’s independent auditors, have audited the consolidated annual financial results of Nedbank Group Limited from which the summarised consolidated financial results have been derived, and have expressed an unmodified audit opinion on the consolidated annual financial statements. The summarised consolidated financial results comprise the consolidated statement of financial position at 31 December 2010, consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cashflow for the 12 months then ended, and selected explanatory notes. The selected explanatory notes are marked with¹. The audit report is available for inspection at Nedbank Group’s registered office.
Forward-lookIng sTaTeMenTsThis announcement contains certain forward-looking statements with respect to the financial condition and results of operations of Nedbank Group and its group companies that, by their nature, involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, global, national and regional economic conditions; levels of securities markets; interest rates; credit or other risks of lending and investment activities; as well as competitive and regulatory factors. By consequence, all forward-looking statements have not been reviewed or reported on by the group’s auditors.
FInal dIvIdend deClaraTIonNotice is hereby given that a final dividend of 268 cents per ordinary share has been declared, payable to shareholders for the year ended 31 December 2010. In accordance with the provisions of STRATE, the electronic settlement and custody system used by JSE Limited, the relevant dates for the dividend are as follows:
Event DateLast day to trade (cum dividend) Friday, 1 April 2011Shares commence trading (ex dividend) Monday, 4 April 2011Record date (date shareholders
recorded in books) Friday, 8 April 2011Payment date Monday, 11 April 2011
Share certificates may not be dematerialised or rematerialised between Monday, 4 April 2011, and Friday, 8 April 2011, both days inclusive.
On Monday, 11 April 2011, the dividend will be electronically transferred to the bank accounts of all certificated shareholders where this facility is available. Where electronic funds transfer is either not available or not elected by the shareholder, cheques dated Monday, 11 April 2011, will be posted on that date.
Holders of dematerialised shares will have their accounts credited at their participant or broker on Monday, 11 April 2011.
The above dates and times are subject to change. Any changes will be published on the Securities Exchange News Service (SENS) and in the press.
For and on behalf of the board
Dr Reuel J Khoza Michael WT BrownChairman Chief Executive Officer
28 February 2011
8b neDBanK group analyst presentation 2010
INTEGRATED SuSTAINABILITyAS A STRATEgiC SUCCESS DRivERRather than managing sustainability as a separate business
requirement, Nedbank Group integrates sustainability matters
into strategic decision making and daily operations.
By integrating the four pillars of economic, social, cultural and
environmental sustainability, Nedbank Group is able to ensure
the continued growth and success of its business, optimise
returns for its shareholders over the long term, and remain
a relevant business for its staff, clients, suppliers and the
communities in which it operates.
In line with King III reporting guidelines the group's reporting
is also aligned with this integrated sustainability philosophy,
with all stakeholder communication structured to incorporate
the sustainability cornerstones of the organisation. This is a
significant departure from traditional financial reporting, which
focused exclusively on economic matters, and reflects the
group's commitment to embracing its role as a leading large
corporate in the private sector – to help create a sustainable
environment and future for all South Africans.
susTaInabIlITy hIghlIghTs For 2010As most of the information contained in this booklet deals with
the economic sustainability matters of Nedbank Group during
the 2010 reporting period, the highlights below relate to the
remaining three pillars of cultural, social and environmental
sustainability.
CulTural susTaInabIlITyNedbank Group continues to enjoy positive shifts in its corporate
culture and climate thanks to its ongoing focus on developing
its people, with a particular emphasis on the retention and
attraction of talented employees who support the organisation’s
goals and objectives.
In 2010 the group maintained its level 2 rating in respect of the
broad-based black economic empowerment (BBBEE) Codes of
the Department of Trade and Industry (dti) and ranked as South
Africa’s third most empowered corporate and number one bank
and financial services group by the Financial Mail Empowerdex
survey for the past two years.
Nedbank Group achieved its skills development target for the
period under review, with 71% of spend allocated to previously
disadvantaged groups.
In July 2010 the Nedbank Group Eyethu Broad-based Employee
Scheme vested, benefiting the 14 699 employees (including past
employees) who had received shares in 2005. These shares have
appreciated in value by approximately 65% since they were first
issued to qualifying employees at the inception of the scheme.
soCIal susTaInabIlITyAligned with the group’s key material objective to build societal
capital in South Africa, Nedbank Group’s social sustainability
efforts involve more than mere monetary support and see
the group actively seeking out opportunities to develop and
grow small businesses, foster job creation opportunities and
contribute to local communities in a sustainable manner.
The dti Codes stipulate that 1% of SA net profit after tax (based
on the 2009 financial year) should be allocated to socioeconomic
development. For Nedbank Group this equated to R54 million in
2010.
As the primary corporate social investment arm of Nedbank
Group, the Nedbank Foundation’s work is key to the group’s social
sustainability efforts. During 2010 the Nedbank Foundation provided
R35,08 million (2009: R30,5 million) in funding to 283 projects
and causes (2009: 291) in all nine provinces of South Africa. Over
the past five years the Nedbank Foundation has provided over
R132 million in funding to projects across South Africa.
envIronMenTal susTaInabIlITyAs the first financial services company in Africa to achieve
carbon neutrality, Nedbank Group remains committed to
reducing its carbon footprint, and that of its suppliers, clients
and staff proactively.
During 2010 the cost of maintaining the group's carbon-neutral
status comprised two elements:
• Direct costs related to the purchase of the carbon emission
reduction certificates required to offset those emissions that
could not be removed through carbon reduction activities.
These amounted to approximately R16 million.
• Indirect costs related to investments made to achieve
groupwide intensity reduction targets. These amounted to
approximately R7 million.
In addition to the environmental benefits of ongoing carbon
reduction by the group, the cost savings achieved for the period
2008 to 2010 as a result of reduction initiatives amounted to
more than R36 million. This figure does not factor in related
product and services revenue or reputational benefits.
envIronMenTal susTaInabIlITy IndICaTors – 2010Nedbank Group's delivery against key environmental
sustainability indicators for 2010 (compared with the previous
two years) is outlined below:
9b
indicator 2010 2009 2008 Comments
Total carbon emissions
(tonnes)*
213 428,09 213 081,32 135 468,69 The total reported greenhouse gas (GHG) emissions
in absolute terms increased by 0,16% year-on-year
from 2009 to 2010. However, this increase is as
a consequence of efforts to continue to expand
Nedbank Group's GHG report boundary and scope,
while simultaneously focusing efforts on reducing
its environmental impact.
Nedbank Group’s emissions per fulltime employee
(FTE) were reduced year-on-year by 6% to
8,25 tonnes per annum (tpa) and emissions per m2
of office space were also reduced by almost 4% to
0,39 tpa.
Electricity consumption
(kWh)#
83 341 027 95 546 670 98 710 927 Altogether 77% of the group's carbon footprint is
from electricity usage. The year 2010 saw intense
efforts and extensive investment aimed at reducing
this – resulting in an additional intensity reduction
of 13% per FTE.
Water consumption
(kilolitres)#
263 876 276 481 373 935 The group's initial water intensity reduction target
of 5% by 2010 (from 2005 levels) was met by the
end of 2009. A new target was set and a number
of initiatives are already resulting in a significant
reduction in water consumption.
Waste reduction: landfill
(tonnes)#
497 552 674 A 10% intensity reduction in waste generation
has been set for 2010 and 2011, based on 2009
figures. This translates into a 34,12 kg reduction per
employee by the end of 2011. Good progress has
been made against these targets.
Total recycled materials –
glass, plastic, tin, cardboard
and paper (tonnes)#
500 454,91 419,20
Paper consumption (tonnes) 1 917,29 1 932,22* 1 928,26 Paper constitutes about 2% of Nedbank's total
carbon footprint.
* 2009 restatement due to legacy system issues and overstated emission factors utilised
# Campus sites only
For more information refer to the 2010 Nedbank group
integrated Annual Report
The information provided on these pages represents a small
sample of the sustainability efforts and achievements of
Nedbank Group in 2010. For more detail, as well as insights
into the combined sustainability benefits delivered through the
group's initiatives during the past year, please refer to the 2010
Nedbank Group Integrated Annual Report, which can be accessed
at www.nedbankgroup.co.za from the end of March 2011.OTHER
OFFICE PAPER
PRODuCT DISTRIBuTION
COMMuTING
BuSINESS TRAVEL
ELECTRICITy
NEDBANKS 2010 CARBON FOOTpRiNT
77,46%
1,95%
3%
3,23%
16,46%
10b neDBanK group analyst presentation 2010
FiNANCiAL HigHLigHTSFOR THE yEAR ENDED 31 DECEMBER
% Change 2010 2009
sTaTIsTICsNumber of shares listed m 514,9 498,7 Number of shares in issue excluding shares held by group entities m 448,6 435,7 Weighted average number of shares m 443,9 423,4 Diluted weighted average number of shares m 458,2 435,1 Headline earnings Rm 14,6 4 900 4 277Profit attributable to equity holders of the parents Rm (0,3) 4 811 4 826Economic (loss)/profit* Rm (289) 57Headline earnings per share cents 9,3 1 104 1 010 Diluted headline earnings per share cents 8,7 1 069 983 Basic earnings per share cents (4,9) 1 084 1 140 Diluted basic earnings per share cents (5,3) 1 050 1 109 Ordinary dividends declared per share cents 9,1 480 440
– Interim 212 210 – Final 268 230
Dividend paid per share cents 442 520 Dividend cover times 2,30 2,30 Total assets administered by the group Rm 8,1 711 288 657 907
– Total assets Rm 6,7 608 718 570 703 – Assets under management** Rm 17,6 102 570 87 204
Life assurance embedded value Rm 29,7 1 031 795Life assurance value of new business Rm 57,8 295 187Net asset value per share cents 8,0 9 831 9 100 Tangible net asset value per share cents 10,3 8 160 7 398 Closing share price cents 5,1 13 035 12 405 Price/earnings ratio historical 11,8 12,3 Market capitalisation Rbn 8,4 67,1 61,9 Number of permanent employees 1,8 27 525 27 037
key raTIos (%)Return on ordinary shareholders’ equity (ROE) * 11,8 11,8 ROE excluding goodwill * 13,4 13,4 Return on total assets (ROA) * 0,82 0,76 Net interest income to average interest-earning banking assets 3,35 3,39 Non-interest revenue to total income 44,3 42,2 Non-interest revenue to total expenses 79,6 78,8 Credit loss ratio banking advances * 1,36 1,52 Efficiency ratio 55,7 53,5 Efficiency ratio (excluding BEE transaction expenses) 55,2 53,1 Effective taxation rate 20,7 20,2 Group capital adequacy ratios: Basel II (including unappropriated profits)
– Core Tier I 10,1 9,9 – Tier 1 11,7 11,5 – Total 15,0 14,9
* Certain of the group’s reporting ratio calculations have been adjusted. The 2009 ratios for return on equity (ROE), and return on assets (ROA) have been
restated with the denominator changing from simple average to daily average for equity and total assets values, respectively. The calculation of the
credit loss ratio has been changed from simple average advances to daily banking advances (thereby excluding trading advances from the calculation).
Comparatives have been restated accordingly.
** Restated (refer page 31b)
11b
Rm Note % Change 2010 2009
Interest and similar income (12,2) 44 377 50 537 Interest expense and similar charges (18,9) 27 769 34 231
Net interest income 1 1,9 16 608 16 306 Impairment charge on loans and advances 2 (6,7) 6 188 6 634
Income from lending activities 7,7 10 420 9 672 Non-interest revenue 3 11,0 13 215 11 906
Operating income 9,5 23 635 21 578 Total expenses 4 9,9 16 598 15 100
Operating expenses 9,9 16 450 14 974 BEE transaction expenses 17,5 148 126
Indirect taxation 2,1 447 438
Profit from operations before non-trading and capital items 9,1 6 590 6 040 Non-trading and capital items (91) 624
Profit on sale of subsidiaries, investments and property and
equipment (4) 635 Net impairment of investments, property and equipment
and capitalised development costs (87) (11)
Profit from operations (2,5) 6 499 6 664 Share of profits of associates and joint ventures 10 (98,2) 1 55
Profit before direct taxation (3,3) 6 500 6 719 Total direct taxation 5 4,4 1 364 1 307
Direct taxation 10,9 1 366 1 232 Taxation on non-trading and capital items (2) 75
profit for the year (5,1) 5 136 5 412
Other comprehensive income net of taxation (77) (228)
Exchange differences on translating foreign operations (246) (335)Fair value adjustments on available-for-sale assets (3) 21 Gains on property revaluations 172 86
Total comprehensive income for the year (2,4) 5 059 5 184
profit attributable to:Equity holders of the parent 4 811 4 826 Non-controlling interest – ordinary shareholders 6 59 242 Non-controlling interest – preference shareholders 7 266 344
profit for the year (5,1) 5 136 5 412
Total comprehensive income attributable to:Equity holders of the parent 4 734 4 603 Non-controlling interest – ordinary shareholders 59 237 Non-controlling interest – preference shareholders 266 344
Total comprehensive income for the year (2,4) 5 059 5 184
earnIngs reConCIlIaTIonProfit attributable to equity holders of the parent (0,3) 4 811 4 826 Less: Non-headline earnings items (89) 549
Non-trading and capital items (91) 624 Taxation on non-trading and capital items 2 (75)
Headline earnings 14,6 4 900 4 277
CONSOLIDATED STATEMENT OF COMpREHENSivE iNCOME
FOR THE yEAR ENDED 31 DECEMBER
12b neDBanK group analyst presentation 2010
CONSOLIDATED STATEMENT OF FiNANCiAL pOSiTiON AT 31 DECEMBER
Rm Note 2010 2009
asseTsCash and cash equivalents 8 650 7 867 Other short-term securities 27 044 18 550 Derivative financial instruments 13 882 12 710 Government and other securities 31 824 35 983 Loans and advances 8 475 273 450 301 Other assets 10 014 5 455 Clients’ indebtedness for acceptances 1 953 2 031 Current taxation receivable 483 602 Investment securities 9 11 918 11 025 Non-current assets held for sale 5 12 Investments in associate companies and joint ventures 10 936 924 Deferred taxation asset 284 282 Investment property 199 211 Property and equipment 5 612 4 967 Long-term employee benefit assets 2 052 1 860 Intangible assets 11 7 494 7 415 Mandatory reserve deposits with central banks 11 095 10 508
total assets 608 718 570 703
equITy and lIabIlITIesOrdinary share capital 12 449 436 Ordinary share premium 15 522 13 728 Reserves 28 130 25 485
total equity attributable to equity holders of the parent 44 101 39 649 Non-controlling interest attributable to
– ordinary shareholders 6 153 1 849 – preference shareholders 3 560 3 486
total equity 47 814 44 984 Derivative financial instruments 12 052 11 551 Amounts owed to depositors 13 490 440 469 355 Other liabilities 18 245 11 252 Liabilities under acceptances 1 953 2 031 Current taxation liabilities 191 315 Deferred taxation liabilities 1 804 1 945 Long-term employee benefit liabilities 1 414 1 304 Investment contract liabilities 7 309 6 749 Insurance contract liabilities 1 392 1 133 Long-term debt instruments 14 26 104 20 084
total liabilities 560 904 525 719
total equity and liabilities 608 718 570 703
Guarantees on behalf of clients 29 614 28 161
13b
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE yEAR ENDED 31 DECEMBER
Rm 2010 2009
Cash generated by operations 15 288 14 915 Change in funds for operating activities (12 891) (14 603)
Net cash from operating activities before taxation 2 397 312 Taxation paid (2 093) (2 318)
Cash flows from/(utilised by) operating activities 304 (2 006)Cash flows utilised by investing activities (4 438) (3 171)Cash flows from financing activities 5 504 4 878
Net increase/(decrease) in cash and cash equivalents 1 370 (299)Cash and cash equivalents at the beginning of the year 18 375 18 674
Cash and cash equivalents at the end of the year 19 745 18 375
Cash and cash equivalents 8 650 7 867Mandatory reserve deposits with central banks 11 095 10 508
14b neDBanK group analyst presentation 2010
CONSOLIDATED STATEMENT OF CHANgES iN EqUiTY FOR THE yEAR ENDED 31 DECEMBER
Rm
Number ofordinary
shares
Ordinaryshare
capital
Ordinaryshare
premium
Foreign currency
translationreserve
Propertyrevaluation
reserve
Share-basedpayment
reserve
Other non-distributable
reserves *
Available-for-
sale reserve
Otherdistributable
reserves **
Total equityattributable
to equityholders of
the parent
Non-controlling
interestattributableto ordinary
shareholders
Non-controlling
interestattributable
to preferenceshareholders
Total equity
Balance at 31 December 2008 409 707 740 410 11 370 545 951 949 175 64 20 449 34 913 1 881 3 279 40 073 Shares issued in terms of Employee Incentive Schemes 8 848 120 9 825 834 834 Shares issued in terms of capitalisation award 7 928 235 8 649 657 657 Shares issued in terms of BEE transaction 2 488 048 2 294 296 296 Shares issued 12 855 359 13 1 160 1 173 361 1 534 Share delisted in terms of BEE transaction (2 388 143) (2) (2) (2)Shares acquired/cancelled by group entities and BEE Trusts (3 706 182) (4) (570) (574) (574)Preference share dividend paid – (353) (353)Ordinary minority shareholders’ share of preference dividend paid – (9) 9 –Dividends paid to ordinary shareholders (2 253) (2 253) (5) (2 258)Total income and expenses for the year (321) 51 (74) (2) 12 4 939 4 605 (18) 190 4 777
Total comprehensive income for the year (321) 86 12 4 826 4 603 237 344 5 184 Net (expenses)/income recognised directly in equity (35) (74) (2) 113 2 (255) (154) (407)Transfer (to)/from reserves (35) (102) 2 135 – –Preference shares acquired by group entities – (154) (154)Share-based payments reserve movements 28 28 28 Acquisition of subsidiary – 26 26 Buy out of outside shareholders’ interests (17) (17) (281) (298)Regulatory risk reserve provision (4) (4) (4)Other movements (5) (5) (5)
balance at 31 december 2009 435 733 177 436 13 728 224 1 002 875 173 76 23 135 39 649 1 849 3 486 44 984 shares issued in terms of employee Incentive schemes 8 823 158 9 1 111 1 120 1 120 shares issued in terms of capitalisation award 7 397 653 7 937 944 944 shares issued in terms of bee transaction 1 225 560 2 217 219 219 share delisted in terms of bee transaction (1 225 560) (2) (2) (2)shares acquired/cancelled by group entities and bee Trusts (3 389 877) (3) (471) (474) (474)preference shares issued – 92 92 preference share dividend paid (5) (5) (281) (286)dilution of shareholding in subsidiary (13) (13) 13 –dividends paid to ordinary shareholders (2 042) (2 042) (8) (2 050)Total income and expenses for the year (244) 144 74 (49) 22 4 758 4 705 (1 701) 263 3 267
Total comprehensive income for the year (246) 172 (3) 4 811 4 734 59 266 5 059 net (expenses)/income recognised directly in equity 2 (28) 74 (49) 25 (53) (29) (1 760) (3) (1 792)
Transfer (to)/from reserves 2 (28) 4 (46) 25 43 – –liquidation of subsidiaries (4) (4) (4)share-based payments reserve movements 70 70 70 additional capitalisation of subsidiaries – 2 2 buy out of outside shareholders’ interests (91) (91) (1 762) (3) (1 856)regulatory risk reserve provision (3) (3) (3)other movements (1) (1) (1)
balance at 31 december 2010 448 564 111 449 15 522 (20) 1 146 949 124 98 25 833 44 101 153 3 560 47 814
* Represents other non-distributable revaluation surplus on capital items and non-distributable reserves transferred from other distributable reserves in
order to comply with the Bank’s Act, 1990.
** Represents the accumulated profits after distributions to shareholders and appropriations of retained earnings to other non-distributable reserves.
RESERVES
15b
Rm
Number ofordinary
shares
Ordinaryshare
capital
Ordinaryshare
premium
Foreign currency
translationreserve
Propertyrevaluation
reserve
Share-basedpayment
reserve
Other non-distributable
reserves *
Available-for-
sale reserve
Otherdistributable
reserves **
Total equityattributable
to equityholders of
the parent
Non-controlling
interestattributableto ordinary
shareholders
Non-controlling
interestattributable
to preferenceshareholders
Total equity
Balance at 31 December 2008 409 707 740 410 11 370 545 951 949 175 64 20 449 34 913 1 881 3 279 40 073 Shares issued in terms of Employee Incentive Schemes 8 848 120 9 825 834 834 Shares issued in terms of capitalisation award 7 928 235 8 649 657 657 Shares issued in terms of BEE transaction 2 488 048 2 294 296 296 Shares issued 12 855 359 13 1 160 1 173 361 1 534 Share delisted in terms of BEE transaction (2 388 143) (2) (2) (2)Shares acquired/cancelled by group entities and BEE Trusts (3 706 182) (4) (570) (574) (574)Preference share dividend paid – (353) (353)Ordinary minority shareholders’ share of preference dividend paid – (9) 9 –Dividends paid to ordinary shareholders (2 253) (2 253) (5) (2 258)Total income and expenses for the year (321) 51 (74) (2) 12 4 939 4 605 (18) 190 4 777
Total comprehensive income for the year (321) 86 12 4 826 4 603 237 344 5 184 Net (expenses)/income recognised directly in equity (35) (74) (2) 113 2 (255) (154) (407)Transfer (to)/from reserves (35) (102) 2 135 – –Preference shares acquired by group entities – (154) (154)Share-based payments reserve movements 28 28 28 Acquisition of subsidiary – 26 26 Buy out of outside shareholders’ interests (17) (17) (281) (298)Regulatory risk reserve provision (4) (4) (4)Other movements (5) (5) (5)
balance at 31 december 2009 435 733 177 436 13 728 224 1 002 875 173 76 23 135 39 649 1 849 3 486 44 984 shares issued in terms of employee Incentive schemes 8 823 158 9 1 111 1 120 1 120 shares issued in terms of capitalisation award 7 397 653 7 937 944 944 shares issued in terms of bee transaction 1 225 560 2 217 219 219 share delisted in terms of bee transaction (1 225 560) (2) (2) (2)shares acquired/cancelled by group entities and bee Trusts (3 389 877) (3) (471) (474) (474)preference shares issued – 92 92 preference share dividend paid (5) (5) (281) (286)dilution of shareholding in subsidiary (13) (13) 13 –dividends paid to ordinary shareholders (2 042) (2 042) (8) (2 050)Total income and expenses for the year (244) 144 74 (49) 22 4 758 4 705 (1 701) 263 3 267
Total comprehensive income for the year (246) 172 (3) 4 811 4 734 59 266 5 059 net (expenses)/income recognised directly in equity 2 (28) 74 (49) 25 (53) (29) (1 760) (3) (1 792)
Transfer (to)/from reserves 2 (28) 4 (46) 25 43 – –liquidation of subsidiaries (4) (4) (4)share-based payments reserve movements 70 70 70 additional capitalisation of subsidiaries – 2 2 buy out of outside shareholders’ interests (91) (91) (1 762) (3) (1 856)regulatory risk reserve provision (3) (3) (3)other movements (1) (1) (1)
balance at 31 december 2010 448 564 111 449 15 522 (20) 1 146 949 124 98 25 833 44 101 153 3 560 47 814
* Represents other non-distributable revaluation surplus on capital items and non-distributable reserves transferred from other distributable reserves in
order to comply with the Bank’s Act, 1990.
** Represents the accumulated profits after distributions to shareholders and appropriations of retained earnings to other non-distributable reserves.
RESERVES
16b neDBanK group analyst presentation 2010
RETURN ON EqUiTY DRivERS FOR THE yEAR ENDED 31 DECEMBER
2010 2009 2010 2009
Net interest income 16 608 16 306
Net interest income/average interest-earning banking
assets 3,35% 3,39%
less
impairments/
Nii less
Impairments/
NII
Impairment of loans and advances (6 188) (6 634) Impairments/average interest-earning banking assets 1,25% 4,76% 37,3% 1,38% 4,48% 40,7%
add add
Non-interest revenue 13 215 11 906
Non-interest revenue/average interest-earning banking
assets 2,66%
NiR/Expenses
79,6% 2,47%
NIR/Expenses
78,8%
income from normal operations 23 635 21 578
less
Efficiency
ratio less Efficiency ratio
Total operating expenses (16 598) (15 100) Total expenses/average interest-earning banking assets 3,35% 55,7% 3,14% 53,5%
add addShare of profits of associates and joint
ventures 1 55 Associate income/average interest-earning banking assets 0,00% 0,01%
net profit before taxation 7 038 6 533 1,41% 1,35%
Indirect taxation (447) (438) mu ltiply multiply
Direct taxation (1 366) (1 232) 1 - effective taxation rate 0,74 0,74
net profit after taxation 5 225 4 863 multiply multiply
Non-controlling interest (325) (586) Income attributable to minorities 0,94 0,88
headline earnings 4 900 4 277 Headline earnings 0,98% 0,88%
Daily average interest-earning banking
assets 495 930 481 378 multiply multiply
Daily average total assets 579 306 564 921 Interest-earning banking assets/daily average total assets 85,6% 85,2%
= =
return on total assets (roa) 0,82% 0,76%
multiply multiply
Daily average shareholders’ funds 41 551 36 388 gearing (roe/roa) 14,27 15,52
= =
return on ordinary shareholders’ equity (roe) 11,8% 11,8%
roe excluding goodwill 13,4% 13,4%
17b
2010 2009 2010 2009
Net interest income 16 608 16 306
Net interest income/average interest-earning banking
assets 3,35% 3,39%
less
impairments/
Nii less
Impairments/
NII
Impairment of loans and advances (6 188) (6 634) Impairments/average interest-earning banking assets 1,25% 4,76% 37,3% 1,38% 4,48% 40,7%
add add
Non-interest revenue 13 215 11 906
Non-interest revenue/average interest-earning banking
assets 2,66%
NiR/Expenses
79,6% 2,47%
NIR/Expenses
78,8%
income from normal operations 23 635 21 578
less
Efficiency
ratio less Efficiency ratio
Total operating expenses (16 598) (15 100) Total expenses/average interest-earning banking assets 3,35% 55,7% 3,14% 53,5%
add addShare of profits of associates and joint
ventures 1 55 Associate income/average interest-earning banking assets 0,00% 0,01%
net profit before taxation 7 038 6 533 1,41% 1,35%
Indirect taxation (447) (438) mu ltiply multiply
Direct taxation (1 366) (1 232) 1 - effective taxation rate 0,74 0,74
net profit after taxation 5 225 4 863 multiply multiply
Non-controlling interest (325) (586) Income attributable to minorities 0,94 0,88
headline earnings 4 900 4 277 Headline earnings 0,98% 0,88%
Daily average interest-earning banking
assets 495 930 481 378 multiply multiply
Daily average total assets 579 306 564 921 Interest-earning banking assets/daily average total assets 85,6% 85,2%
= =
return on total assets (roa) 0,82% 0,76%
multiply multiply
Daily average shareholders’ funds 41 551 36 388 gearing (roe/roa) 14,27 15,52
= =
return on ordinary shareholders’ equity (roe) 11,8% 11,8%
roe excluding goodwill 13,4% 13,4%
18b neDBanK group analyst presentation 2010
OpERATiONAL SEgMENTAL REpORTiNgFOR THE yEAR ENDED 31 DECEMBER
ConsolIdaTed sTaTeMenT oF FInanCIal posITIon (rm)
Nedbank group Nedbank Capital Nedbank CorporateNedbank Retail and
Business Banking Nedbank RetailNedbank Business
Banking Nedbank Wealth Shared Services Central Management Eliminations
2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
asseTsCash and cash equivalents 19 745 18 375 2 732 2 875 1 868 1 807 1 494 1 430 1 494 1 430 327 256 154 194 13 170 11 813 Other short-term securities 27 044 18 550 20 792 12 233 1 357 949 (1) (1) 4 200 3 021 696 2 347 Derivative financial instruments 13 882 12 710 13 790 12 471 (65) 79 13 157 147 Government and other securities 31 824 35 983 12 083 12 519 4 314 4 060 15 427 19 404 Advances and other accounts 475 273 450 301 62 328 55 315 157 703 146 035 238 099 230 000 187 334 179 885 50 765 50 115 16 869 19 089 (6) 121 280 (259) Other assets 40 950 34 784 7 578 3 393 5 097 4 811 5 263 5 465 4 567 4 656 696 809 12 524 11 530 6 643 7 371 3 845 2 214 Intergroup assets 95 886 99 454 28 364 29 321 28 364 29 321 3 747 116 (127 997) (128 891)
total assets 608 718 570 703 215 189 198 260 170 274 157 741 273 219 266 216 193 394 185 971 79 825 80 245 33 920 33 909 6 791 7 686 37 322 35 782 (127 997) (128 891)
equITy and lIabIlITIesAllocated capital 47 814 44 984 5 116 4 678 7 603 7 280 19 683 20 742 16 560 16 525 3 123 4 217 1 445 1 226 1 362 1 177 12 605 9 881 Derivative financial instruments 12 052 11 551 12 006 11 404 20 94 3 3 4 1 26 45 Amounts owed to depositors 490 440 469 355 184 201 175 041 131 194 119 831 162 973 161 662 87 204 86 641 75 769 75 021 11 356 13 100 370 340 346 (619) Other liabilities 32 308 24 729 13 200 6 398 3 570 2 434 3 357 3 244 2 424 2 237 933 1 007 9 794 8 944 1 718 3 889 669 (180) Intergroup liabilities 27 885 28 100 85 446 78 546 85 446 78 546 11 325 10 635 3 341 2 279 9 331 (127 997) (128 891)Long-term debt instruments 26 104 20 084 666 739 2 2 1 760 2 019 1 760 2 019 23 676 17 324
total equity and liabilities 608 718 570 703 215 189 198 260 170 274 157 741 273 219 266 216 193 394 185 971 79 825 80 245 33 920 33 909 6 791 7 686 37 322 35 782 (127 997) (128 891)
ConsoliDateD statement oF Comprehensive inCome (rm)
Net interest income 16 608 16 306 1 201 1 260 3 306 3 326 11 611 11 598 9 181 8 791 2 430 2 807 405 422 (156) (187) 241 (113) Impairment charge on loans and advances 6 188 6 634 535 141 307 369 5 320 6 042 5 110 5 758 210 284 25 82 1
Income from lending activities 10 420 9 672 666 1 119 2 999 2 957 6 291 5 556 4 071 3 033 2 220 2 523 380 340 (157) (187) 241 (113) Non-interest revenue 13 215 11 906 2 264 2 236 1 566 1 518 7 353 6 358 6 011 5 147 1 342 1 211 1 958 1 518 401 388 (246) (35) (81) (77)
Operating income 23 635 21 578 2 930 3 355 4 565 4 475 13 644 11 914 10 082 8 180 3 562 3 734 2 338 1 858 244 201 (5) (148) (81) (77)Total expenses 16 598 15 100 1 561 1 606 2 496 2 132 11 110 10 202 8 770 8 082 2 340 2 120 1 471 1 227 113 78 (72) (68) (81) (77)
Operating expenses 16 450 14 974 1 506 1 571 2 455 2 106 11 090 10 160 8 761 8 048 2 329 2 112 1 469 1 226 73 36 (62) (48) (81) (77)BEE transaction expenses 148 126 55 35 41 26 20 42 9 34 11 8 2 1 40 42 (10) (20)
Indirect taxation 447 438 23 23 41 28 232 229 210 207 22 22 53 25 94 129 4 4
Profit/(Loss) from operations 6 590 6 040 1 346 1 726 2 028 2 315 2 302 1 483 1 102 (109) 1 200 1 592 814 606 37 (6) 63 (84) Share of profits of associates and joint ventures 1 55 1 (1) 56
Profit/(Loss) before direct taxation 6 591 6 095 1 346 1 726 2 029 2 314 2 302 1 483 1 102 (109) 1 200 1 592 814 662 37 (6) 63 (84) Direct taxation 1 366 1 232 139 277 504 574 717 389 342 (82) 375 471 222 150 (218) (117) 2 (41)
Profit/(Loss) after taxation 5 225 4 863 1 207 1 449 1 525 1 740 1 585 1 094 760 (27) 825 1 121 592 512 255 111 61 (43) Profit attributable to:Non-controlling interest – ordinary shareholders 59 242 5 (3) 29 18 10 25 217 Non-controlling interest – preference shareholders 266 344 266 344
headline earnings 4 900 4 277 1 202 1 452 1 496 1 722 1 585 1 094 760 (27) 825 1 121 592 502 255 111 (230) (604)
selected ratiosAverage interest earning banking assets (Rm) 495 930 481 378 156 864 140 788 158 943 150 871 264 010 256 396 183 756 175 514 80 254 80 882 21 471 22 787 117 126 22 748 22 122 (128 223) (111 712)ROA (%) 0,82 0,76 0,6 0,8 0,9 1,1 0,6 0,4 0,4 1,0 1,4 1,7 1,6 ROE (%) 11,8 11,8 23,5 31,0 19,7 23,7 8,1 5,3 4,6 (0,2) 26,4 26,6 41,0 40,9 Interest margin (%) * 3,35 3,39 0,77 0,89 2,08 2,20 4,40 4,52 5,00 5,01 3,03 3,47 1,89 1,85 Non-interest revenue to total income (%) 44,3 42,2 65,3 64,0 32,1 31,3 38,8 35,4 39,6 36,9 35,6 30,1 82,9 78,3 Non-interest revenue to total expenses (%) 79,6 78,9 145,0 139,2 62,8 71,2 66,2 62,3 68,5 63,7 57,4 57,2 133,1 123,8 Credit loss ratio banking advances (%) 1,36 1,52 1,27 0,36 0,20 0,25 2,18 2,56 2,67 3,17 0,40 0,52 0,15 0,47 Efficiency ratio (%) 55,7 53,5 45,1 45,9 51,2 44,0 58,6 56,8 57,7 58,0 62,0 52,8 62,2 63,2 Efficiency ratio (Excluding BEE) (%) 55,2 53,2 43,5 44,9 50,4 43,5 58,5 56,6 57,7 57,7 61,7 52,6 62,2 63,2 Effective taxation rate (%) 20,7 20,2 10,4 16,0 24,8 24,8 31,2 26,2 31,0 75,2 31,3 29,6 27,3 22,6 Contribution to group economic (loss)/profit (Rm) (289) 57 477 832 421 758 (1 201) (1 654) (1 583) (2 217) 382 563 388 339 62 (45) (436) (173) Number of permanent employees 27 525 27 037 699 695 3 611 3 822 17 863 17 369 15 473 15 140 2 390 2 229 1 896 1 762 3 381 3 372 75 17
* Cluster margins include internal assetsThe comparative results for the segmental reporting for the year ended 31 December 2009 have been restated in line with the group’s implementation of a revised economic capital allocation methodology and as a result of the Imperial Bank Limited integration. The Imperial Bank Limited businesses have been combined with the following segments, Motor Finance Corporation, IBL Supplier Asset Finance with Nedbank Retail and IBL Property Finance with Nedbank Corporate. The restatement has no effect on the group results and ratios, and only changes segment results and ratios.
19b
ConsolIdaTed sTaTeMenT oF FInanCIal posITIon (rm)
Nedbank group Nedbank Capital Nedbank CorporateNedbank Retail and
Business Banking Nedbank RetailNedbank Business
Banking Nedbank Wealth Shared Services Central Management Eliminations
2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
asseTsCash and cash equivalents 19 745 18 375 2 732 2 875 1 868 1 807 1 494 1 430 1 494 1 430 327 256 154 194 13 170 11 813 Other short-term securities 27 044 18 550 20 792 12 233 1 357 949 (1) (1) 4 200 3 021 696 2 347 Derivative financial instruments 13 882 12 710 13 790 12 471 (65) 79 13 157 147 Government and other securities 31 824 35 983 12 083 12 519 4 314 4 060 15 427 19 404 Advances and other accounts 475 273 450 301 62 328 55 315 157 703 146 035 238 099 230 000 187 334 179 885 50 765 50 115 16 869 19 089 (6) 121 280 (259) Other assets 40 950 34 784 7 578 3 393 5 097 4 811 5 263 5 465 4 567 4 656 696 809 12 524 11 530 6 643 7 371 3 845 2 214 Intergroup assets 95 886 99 454 28 364 29 321 28 364 29 321 3 747 116 (127 997) (128 891)
total assets 608 718 570 703 215 189 198 260 170 274 157 741 273 219 266 216 193 394 185 971 79 825 80 245 33 920 33 909 6 791 7 686 37 322 35 782 (127 997) (128 891)
equITy and lIabIlITIesAllocated capital 47 814 44 984 5 116 4 678 7 603 7 280 19 683 20 742 16 560 16 525 3 123 4 217 1 445 1 226 1 362 1 177 12 605 9 881 Derivative financial instruments 12 052 11 551 12 006 11 404 20 94 3 3 4 1 26 45 Amounts owed to depositors 490 440 469 355 184 201 175 041 131 194 119 831 162 973 161 662 87 204 86 641 75 769 75 021 11 356 13 100 370 340 346 (619) Other liabilities 32 308 24 729 13 200 6 398 3 570 2 434 3 357 3 244 2 424 2 237 933 1 007 9 794 8 944 1 718 3 889 669 (180) Intergroup liabilities 27 885 28 100 85 446 78 546 85 446 78 546 11 325 10 635 3 341 2 279 9 331 (127 997) (128 891)Long-term debt instruments 26 104 20 084 666 739 2 2 1 760 2 019 1 760 2 019 23 676 17 324
total equity and liabilities 608 718 570 703 215 189 198 260 170 274 157 741 273 219 266 216 193 394 185 971 79 825 80 245 33 920 33 909 6 791 7 686 37 322 35 782 (127 997) (128 891)
ConsoliDateD statement oF Comprehensive inCome (rm)
Net interest income 16 608 16 306 1 201 1 260 3 306 3 326 11 611 11 598 9 181 8 791 2 430 2 807 405 422 (156) (187) 241 (113) Impairment charge on loans and advances 6 188 6 634 535 141 307 369 5 320 6 042 5 110 5 758 210 284 25 82 1
Income from lending activities 10 420 9 672 666 1 119 2 999 2 957 6 291 5 556 4 071 3 033 2 220 2 523 380 340 (157) (187) 241 (113) Non-interest revenue 13 215 11 906 2 264 2 236 1 566 1 518 7 353 6 358 6 011 5 147 1 342 1 211 1 958 1 518 401 388 (246) (35) (81) (77)
Operating income 23 635 21 578 2 930 3 355 4 565 4 475 13 644 11 914 10 082 8 180 3 562 3 734 2 338 1 858 244 201 (5) (148) (81) (77)Total expenses 16 598 15 100 1 561 1 606 2 496 2 132 11 110 10 202 8 770 8 082 2 340 2 120 1 471 1 227 113 78 (72) (68) (81) (77)
Operating expenses 16 450 14 974 1 506 1 571 2 455 2 106 11 090 10 160 8 761 8 048 2 329 2 112 1 469 1 226 73 36 (62) (48) (81) (77)BEE transaction expenses 148 126 55 35 41 26 20 42 9 34 11 8 2 1 40 42 (10) (20)
Indirect taxation 447 438 23 23 41 28 232 229 210 207 22 22 53 25 94 129 4 4
Profit/(Loss) from operations 6 590 6 040 1 346 1 726 2 028 2 315 2 302 1 483 1 102 (109) 1 200 1 592 814 606 37 (6) 63 (84) Share of profits of associates and joint ventures 1 55 1 (1) 56
Profit/(Loss) before direct taxation 6 591 6 095 1 346 1 726 2 029 2 314 2 302 1 483 1 102 (109) 1 200 1 592 814 662 37 (6) 63 (84) Direct taxation 1 366 1 232 139 277 504 574 717 389 342 (82) 375 471 222 150 (218) (117) 2 (41)
Profit/(Loss) after taxation 5 225 4 863 1 207 1 449 1 525 1 740 1 585 1 094 760 (27) 825 1 121 592 512 255 111 61 (43) Profit attributable to:Non-controlling interest – ordinary shareholders 59 242 5 (3) 29 18 10 25 217 Non-controlling interest – preference shareholders 266 344 266 344
headline earnings 4 900 4 277 1 202 1 452 1 496 1 722 1 585 1 094 760 (27) 825 1 121 592 502 255 111 (230) (604)
selected ratiosAverage interest earning banking assets (Rm) 495 930 481 378 156 864 140 788 158 943 150 871 264 010 256 396 183 756 175 514 80 254 80 882 21 471 22 787 117 126 22 748 22 122 (128 223) (111 712)ROA (%) 0,82 0,76 0,6 0,8 0,9 1,1 0,6 0,4 0,4 1,0 1,4 1,7 1,6 ROE (%) 11,8 11,8 23,5 31,0 19,7 23,7 8,1 5,3 4,6 (0,2) 26,4 26,6 41,0 40,9 Interest margin (%) * 3,35 3,39 0,77 0,89 2,08 2,20 4,40 4,52 5,00 5,01 3,03 3,47 1,89 1,85 Non-interest revenue to total income (%) 44,3 42,2 65,3 64,0 32,1 31,3 38,8 35,4 39,6 36,9 35,6 30,1 82,9 78,3 Non-interest revenue to total expenses (%) 79,6 78,9 145,0 139,2 62,8 71,2 66,2 62,3 68,5 63,7 57,4 57,2 133,1 123,8 Credit loss ratio banking advances (%) 1,36 1,52 1,27 0,36 0,20 0,25 2,18 2,56 2,67 3,17 0,40 0,52 0,15 0,47 Efficiency ratio (%) 55,7 53,5 45,1 45,9 51,2 44,0 58,6 56,8 57,7 58,0 62,0 52,8 62,2 63,2 Efficiency ratio (Excluding BEE) (%) 55,2 53,2 43,5 44,9 50,4 43,5 58,5 56,6 57,7 57,7 61,7 52,6 62,2 63,2 Effective taxation rate (%) 20,7 20,2 10,4 16,0 24,8 24,8 31,2 26,2 31,0 75,2 31,3 29,6 27,3 22,6 Contribution to group economic (loss)/profit (Rm) (289) 57 477 832 421 758 (1 201) (1 654) (1 583) (2 217) 382 563 388 339 62 (45) (436) (173) Number of permanent employees 27 525 27 037 699 695 3 611 3 822 17 863 17 369 15 473 15 140 2 390 2 229 1 896 1 762 3 381 3 372 75 17
* Cluster margins include internal assets
20b neDBanK group analyst presentation 2010
gEOgRApHiCAL SEgMENTAL REpORTiNgFOR THE yEAR ENDED 31 DECEMBER
ConsolIdaTed sTaTeMenT oF FInanCIal posITIon (rm)
Nedbank group South Africa * Rest of Africa Rest of world
2010 2009 2010 2009 2010 2009 2010 2009
asseTsCash and cash equivalents 19 745 18 375 16 488 14 536 1 285 1 224 1 972 2 615 Other short-term securities 27 044 18 550 20 488 13 847 1 357 949 5 199 3 754 Derivative financial instruments 13 882 12 710 13 349 12 402 28 79 505 229 Government and other securities 31 824 35 983 29 532 33 929 50 95 2 242 1 959 Loans and advances 475 273 450 301 453 187 425 133 8 843 7 820 13 243 17 348 Other assets 40 950 34 784 37 848 31 617 771 691 2 331 2 476 Intergroup assets (6 676) (9 950) 2 266 1 639 4 410 8 311
total assets 608 718 570 703 564 216 521 514 14 600 12 497 29 902 36 692
Total equity 47 814 44 984 42 350 40 115 1 665 1 446 3 799 3 423 Derivative financial instruments 12 052 11 551 11 506 11 226 20 76 526 249 Amounts owed to depositors 490 440 469 355 462 379 435 956 11 419 9 995 16 642 23 404 Provisions and other liabilities 32 308 24 729 31 469 23 676 521 378 318 675 Intergroup liabilities (9 590) (9 541) 973 600 8 617 8 941 Long-term debt instruments 26 104 20 084 26 102 20 082 2 2
total liabilities 608 718 570 703 564 216 521 514 14 600 12 497 29 902 36 692
ConsolIdaTed sTaTeMenT oF CoMprehensIve InCoMe (rm)
Net interest income 16 608 16 306 15 702 15 440 606 519 300 347 Impairment charge on loans and advances 6 188 6 634 6 372 6 360 33 34 (217) 240
Income from lending activities 10 420 9 672 9 330 9 080 573 485 517 107 Non-interest revenue 13 215 11 906 12 248 10 787 461 375 506 744
Operating income 23 635 21 578 21 578 19 867 1 034 860 1 023 851 Operating expenses 16 450 14 974 15 354 13 947 654 517 442 510 BEE transaction expenses 148 126 145 119 3 7 Indirect taxation 447 438 431 423 12 11 4 4
Profit from operations 6 590 6 040 5 648 5 378 365 325 577 337 Share of profits of associates and joint ventures 1 55 55 1
Profit before direct taxation 6 591 6 095 5 648 5 433 366 325 577 337 Direct taxation 1 366 1 232 1 191 1 080 104 94 71 58
Profit after taxation 5 225 4 863 4 457 4 353 262 231 506 279 Profit attributable to:Non-controlling
interest ordinary shareholders 59 242 29 209 30 18 15 Non-controlling
interest preference shareholders 266 344 266 344
headline earnings 4,900 4,277 4 162 3 800 232 213 506 264
* Includes all group elimination
21b
SEGMENTAL COMMENTARYnedbank group lIMITedSegmental financial results for the year ended 31 December
2010
Headline earnings ROE %
Rm – year ended %
change 20102009
Restated* 20102009
Restated*
Nedbank Capital (17,2) 1 202 1 452 23,5 31,0 Nedbank Corporate (13,1) 1 496 1 722 19,7 23,7 Nedbank Business Banking (26,4) 825 1 121 26,4 26,6 Nedbank Retail >100 760 (27) 4,6 (0,2) Nedbank Wealth 17,9 592 502 41,0 40,9
Operating units 2,2 4 875 4 770 14,4 14,1Centre >100 25 (493)
Group 14,6 4 900 4 277 11,8 11,8
nedbank CapITalNedbank Capital’s return on ordinary shareholders’ equity
(ROE) remained strong in the 2010 financial year at 23,5%.
Headline earnings decreased by 17,2% to R1 202 million (2009:
R1 452 million). The first decrease in six years. Economic profit
of R477 million declined 42,7% as a result of higher capital
allocation and increased cost of equity. Capital allocation
increased from R4 678 million to R5 116 million as the group
realigned economic and regulatory capital utilisation.
The operating environment continued to be challenging, with
corporate and project demand for credit remaining muted.
Average banking advances grew by 6,2% and average deposits
by 16,4%, boosted by negotiable certificates of deposits (NCDs)
and fixed-rate notes (FRNs) as institutional clients sought
higher-yield, longer-dated instruments.
The cluster remains a strong generator of non-interest-revenue
(NIR) as evidenced by the continued improvement in the NIR-to-
expenses ratio from an already high ratio of 139,2% to 145,0%.
Trading income showed strong growth of 14,8%, primarily due
to a significant improvement in the equity trading business. The
foreign exchange business experienced margin compression and
lack of volatility compared with 2009. Income from the advisory
business and private equity decreased as a result of subdued
levels of advisory activity and difficult markets respectively.
Nedbank Capital impairments increased to R535 million due
to a conservative approach to mark-to-market valuation
adjustments in the private equity portfolio. This largely
contributed to a 12,7% decrease in operating income to
R2 930 million for the year.
Total expenses declined by 2,8% to R1 561 million, which
is attributed to tight cost control. This is also reflected in the
efficiency ratio improving to 45,1%, compared with 45,9% in
2009 despite the cluster investing for growth in a number of
systems to improve trading.
nedbank CorporaTe Nedbank Corporate recorded headline earnings of R1 496 million
and an ROE of 19,7%. The negative impact of endowment
contributed to the 13,1% decrease in headline earning (5,7%
excluding the Imperial Bank commercial property book).
Core NIR (excluding the Imperial Bank commercial property
book) grew strongly by 11,9% in line with the cluster’s strategy
of focusing on increasing primary-banker market share,
deepening transactional banking offerings, and embarking on
a cross-sell value proposition. This was further boosted by 20
new transactional banking clients acquired during the year and
a strong increase in electronic banking revenues. Expenses grew
17%, partly as a result of investment spend on innovation to
support NIR growth. This resulted in the NIR-to-expenses ratio
declining to 62,8%.
High-quality credit portfolios, coupled with the strategy of
early identification and proactive client engagement, led to a
credit loss ratio of 0,09% (0,20% including the Imperial Bank
commercial property book), a continued improvement on the
0,25% recorded in 2009 and well within the cluster’s through-
the-cycle target range of 0,20% to 0,35%. The credit loss ratio
improved in all three operating businesses, with Corporate
Banking’s credit loss ratio declining to a negative ratio of 0,17%
to reflect net recoveries and a release from specific provisions,
Nedbank Africa improving from 0,51% to 0,42%, and Property
Finance standing at 0,34% (0,53% including the Imperial Bank
commercial property book).
Average advances for the year grew by 5,1% to R151,4 billion,
while average deposits declined by 6% to R124,1 billion as
a result of corporate clients switching from term deposits
to higher-yielding NCDs during the year, prompted by the
environment of lower interest rates.
The weaker economic environment resulted in limited advances
growth in Corporate Banking of 0,3%. Despite this, the business
generated headline earnings of R826 million and a ROE of 27,6%.
Property Finance achieved 7,9% growth in assets, headline
earnings of R550 million and a ROE of 18,3%.
Nedbank Africa performed well, with average advances up
20,2%. Headline earnings increased by 4,5% to R139 million at
a ROE of 14,6%.
22b neDBanK group analyst presentation 2010
Transactional Banking continued to drive innovation within the
cluster with the successful implementation of cash solutions
such as e-Mall and Currency-Converter, the delivery of the
enhanced electronic banking system and the reengineering of
deposit-taking, while the introduction of eStatements is an
initiative towards increased efficiency and supports Nedbank’s
green positioning.
nedbank reTaIl and busIness bankIngRetail and Business Banking continued to experience a
challenging economic environment, with continued high
consumer indebtedness and muted business demand, despite
interest rates being their lowest in 36 years.
The Imperial Bank integration has progressed well, with earnings,
assets and liabilities transferred to Nedbank’s clusters after the
section 54 approval in October 2010 and adjusted to reflect the
Nedbank economic capital and liquidity principles.
Business continuity was maintained which ensured that
460 people retained their jobs through redeployment within the
greater group. Motor Finance Corporation (MFC), Supplier Asset
Finance and Professional have been incorporated in the Retail
Cluster and Commercial Property in Nedbank Corporate. The
Imperial Bank MFC business was combined with the Nedbank
Vehicle Asset Finance business and has been run as a holistic
retail motor finance business for the whole of 2010. MFC, on a
combined basis, performed strongly in 2010, delivering headline
earnings of R606 million (2009: R309 million).
Shareholder value was enhanced as evidenced through the
correct allocation of capital and liquidity usage, against 100%
of the profits, integration costs of R117 million (of which 43%
has been incurred to date to unlock benefits of R200 million),
increased pricing for risk, and sustaining the combined retail
motor market share in excess of 30%.
nedbank busIness bankIngNedbank Business Banking continued to generate a high
ROE of 26,4% (2009: 26,6%) and strong economic profit of
R382 million (2009: R563 million), delivering consistently high
returns for the sixth successive year. This was achieved despite
the R247 million post-tax lower endowment earnings in 2010,
both from the lower-interest-rate environment and the balance
sheet efficiency exercise during 2009 and 2010 that reduced
capital utilisation by R1,1 billion in 2010 within the cluster.
Headline earnings, aligning the capital base and interest rates to
the 2009 capital ratio and rates respectively, declined by 4,4%,
evidencing sound fundamental performance in the current
economic climate.
The cluster’s focus on deepening its product cross-sell of
transactional products has yielded good results, with fees and
commission earnings up 10,8%, while costs grew at 10,3%
to unlock growth plans after two years of cost growth below
3%. Actual advances growth of 1,3% remained muted, despite
R12 billion in asset payouts, as clients deferred expansion plans
and moderated inventory levels.
The decentralised, accountable business model and localised
client service teams meaningfully contributed to net new
primary-client acquisition, which was up 35% on the previous
year, as well as to improving the credit loss ratio to 0,40%
(2009: 0,52%). The improvement in the credit loss ratio is once
again evidence of the continued effective risk management
practices within the cluster over the past six years. The
sustainability of Business Banking is evident from the R3 billion
in cumulative economic profit generated between 2005 and
2010 on R3,7 billion of average capital while continuing to
invest in staff, clients and communities.
nedbank reTaIlNedbank Retail has been stabilised through rebuilding and
strengthening the leadership team and addressing the
impairment challenges. The business is now positioned well for
a sustainable turnaround following a comprehensive strategic
review of all aspects of the business. The cluster delivered
headline earnings of R760 million (2009: R27 million loss) and
a R634 million reduction in economic losses to R1 583 million
loss (2009: R2 217 million loss). Aligning the capital and
interest rates to 2009 levels and excluding the Imperial Bank
acquisition, Nedbank Retail delivered a R1 billion turnaround in
earnings, with improved performance in most of the underlying
businesses. In particular, the Card and Personal Loans businesses
performed well in 2010 and through the cycle. The objective
is to restore Retail to economic profit neutrality in four years,
based on the current economic outlook.
Impairments have declined as a result of focused strategies on
the collections front, improving arrears status, judicious new
advances growth and focus on both post-writeoff recoveries and
client restructures. The Retail credit loss ratio improved to 2,67%
from 3,17% in 2009, with positive moves in all businesses other
than Retail Relationship Banking (incorporates Small Business
Services and Nedbank Private Bank).
Home Loans continued to feel the effects of business written in
2007/8, with the rehabilitation of the defaulted book remaining
challenging in a more subdued property market. Importantly,
the defaulted portfolio in Home Loans has improved to 10,5%,
down from 12,3% in December 2009. Factors contributing
to this reduction include higher levels of restructured loans
(cumulatively R3,9 billion), lower interest rates, differentiated
security realisation processes, improved collection processes
and tightening of its loan to value. Nedbank has kept over
SEGMENTAL COMMENTARYcontinued
23b
6 900 households in their homes through better management
of defaults.
Lower endowment income of R423 million has been offset to
an extent by continued asset repricing, reduced impairments
and an ongoing drive. in line with group strategy. NIR grew by
16,8% within Retail, boosted by growth of 96 000 in primary
clients, innovative products and volume growth. Reasonable cost
growth of 8,5% includes the impact of distribution expansion of
over 400 ATMs and over 160 outlets. Excluding this expansion,
the business reflects organic cost growth of 7,0%.
Nedbank Retail is being repositioned to be profitable on a
sustainable basis through a greater emphasis on delivering a
choice of distinctive client-centred banking experiences to all
in South Africa, underpinned by worldclass risk management
practices. This requires a significant shift to a more client-
centred, integrated business, and initial actions are yielding
positive results. Importantly, rebuilding scale in Nedbank Retail’s
client franchise will take many years to achieve.
nedbank wealTh Nedbank Wealth delivered strong financial performance in 2010,
with headline earnings up 17,9% to R592 million and ROE of
41,0% (2009: 40,9%).
On a like-for-like basis, adjusting for the acquisition of the
Old Mutual joint ventures in 2009, expense growth was well-
contained at 7,2% and headline earnings growth increased by
16,6%. The acquisition of the joint ventures delivered a return
on investment in excess of original expectations.
Overall NII declined by 3,9% (9,5% like-for-like) as a result of the
low-interest-rate environment, both locally and in the united
Kingdom. NIR grew strongly by 29,0% (12,4% like-for-like)
primarily on the back of the growth in the cluster’s insurance
and asset management businesses. Headline earnings growth
equated to an economic profit of R388 million – up 14,5% on
2009 notwithstanding additional capital allocation from the
centre. This growth is partially inflated by a client loan recovery
of £2,6 million in Fairbairn Private Bank, which impacted in a
favourable overall credit loss ratio for the cluster of 0,15%.
Significant domestic net inflows and strong fund performance
contributed to noteworthy performance from the Asset
Management Business. Total assets under management increased
by 17,6% to R102,6 billion. Internationally, the restructuring of
the business away from alternative hedge funds of funds into
the new best-of-breed range, resulted in a marginal increase in
assets under management, compared with net outflows in 2009.
The Wealth Management Business continued to be negatively
impacted by low uK interest rates and the strength of the rand.
These factors contributed to a decline in NII for Fairbairn Private
Bank of 23,7%.
BoE Private Clients maintained growth in line with CPIX despite
margin pressure, lower stockbroking volumes as well as subdued
investment appetite. This was offset by the more favourable
credit environment.
Advice based sales in the financial planning business rose by
13,9% on the back of increased planner productivity, a more
favourable economic climate and closer collaboration with
Nedbank Group.
The earnings increase in the Insurance Business was driven by a
notable performance in both the life and short-term insurance
businesses. Continued growth in the unsecured lending
businesses in Nedbank Retail contributed to the increased value
of new business of 57,8% and annual premium equivalent
growth of 37,0% for the period under review. The short-term
insurance business achieved gross written premium growth of
10,2%, while managing to keep claims well within acceptable
levels.
24b neDBanK group analyst presentation 2010
NEDBANK CORPORATE SEgMENTAL REpORTFOR THE yEAR ENDED 31 DECEMBER
Total Corporate Banking property Finance
property Finance
excluding imperial imperial Africa** Other *
2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Headline earnings (Rm) 1 496 1 722 826 870 501 660 550 576 (49) 84 139 133 30 59 ROE (%) 19,7 23,7 27,6 29,3 14,1 19,2 18,3 19,6 (9,0) 16,8 14,6 16,8 28,3 73,8ROA (%) 0,9 1,1 0,6 0,6 0,6 0,8 0,7 0,8 (0,5) 1,0 1,1 1,2 Credit loss ratio banking advances (%) 0,2 0,3 (0,2) 0,1 0,5 0,4 0,3 0,4 1,9 0,5 0,4 0,5 Non-interest revenue to total expenses (%) 62,8 71,2 65,6 66,1 41,1 64,0 50,3 69,1 (23,5) 34,0 61,2 63,1Efficiency ratio (%) 51,2 44,0 52,5 42,9 35,6 33,2 34,7 32,8 43,1 35,8 72,2 69,0
Impairment charge on loans and advances (Rm) 307 369 (119) 80 393 255 222 213 171 42 33 34 –Total assets (Rm) 170 274 157 741 151 274 138 736 96 939 82 506 86 746 72 797 10 193 9 709 13 869 11 821 (91 808) (75 322) Average total assets (Rm) 163 860 154 855 141 969 147 951 85 663 78 110 75 947 69 270 9 716 8 840 13 024 10 838 (76 796) (82 044) Total advances (Rm) 157 703 146 035 69 486 66 440 77 481 71 501 68 742 62 639 8 739 8 862 8 777 7 755 1 959 339 Average total advances (Rm) 151 433 144 055 68 812 68 590 73 881 68 464 64 932 60 153 8 949 8 311 7 943 6 609 797 392 Total deposits (Rm) 131 194 119 831 117 604 107 835 325 87 304 67 21 20 11 419 9 995 1 846 1 914 Average total deposits (Rm) 124 077 131 945 110 467 120 250 319 124 294 85 25 39 11 152 9 342 2 139 2 229 Allocated capital (Rm) 7 603 7 280 2 998 2 965 3 549 3 441 3 004 2 941 545 500 950 794 106 80
* Includes Centralised Credit, Risk, HR, Finance, Shared Services, Transactional Banking and eliminations
** 2009 excludes MBCA
NEDBANK WEALTH SEgMENTAL REpORTFOR THE yEAR ENDED 31 DECEMBER
2010 2009
Headline earnings (Rm) 592 502 ROE (%) 41,0 40,9 ROA (%) 1,7 1,6 Credit loss ratio banking advances (%) 0,2 0,5Non-interest revenue to total expenses (%) 133,1 123,8 Efficiency ratio (%) 62,2 63,2 Impairment charge on loans and advances (Rm) 25 82 Assets under management (Rm) 102 570 87 204Life embedded value (EV) (Rm) 1 031 795Life value of new business (Rm) 295 187Total assets (Rm) 33 920 33 909 Average total assets (Rm) 34 063 32 343 Total advances (Rm) 16 869 19 089 Average total advances (Rm) 17 246 17 580 Total deposits (Rm) 11 356 13 100 Average total deposits (Rm) 12 094 14 765 Allocated capital (Rm) 1 445 1 226
25b
Total Corporate Banking property Finance
property Finance
excluding imperial imperial Africa** Other *
2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Headline earnings (Rm) 1 496 1 722 826 870 501 660 550 576 (49) 84 139 133 30 59 ROE (%) 19,7 23,7 27,6 29,3 14,1 19,2 18,3 19,6 (9,0) 16,8 14,6 16,8 28,3 73,8ROA (%) 0,9 1,1 0,6 0,6 0,6 0,8 0,7 0,8 (0,5) 1,0 1,1 1,2 Credit loss ratio banking advances (%) 0,2 0,3 (0,2) 0,1 0,5 0,4 0,3 0,4 1,9 0,5 0,4 0,5 Non-interest revenue to total expenses (%) 62,8 71,2 65,6 66,1 41,1 64,0 50,3 69,1 (23,5) 34,0 61,2 63,1Efficiency ratio (%) 51,2 44,0 52,5 42,9 35,6 33,2 34,7 32,8 43,1 35,8 72,2 69,0
Impairment charge on loans and advances (Rm) 307 369 (119) 80 393 255 222 213 171 42 33 34 –Total assets (Rm) 170 274 157 741 151 274 138 736 96 939 82 506 86 746 72 797 10 193 9 709 13 869 11 821 (91 808) (75 322) Average total assets (Rm) 163 860 154 855 141 969 147 951 85 663 78 110 75 947 69 270 9 716 8 840 13 024 10 838 (76 796) (82 044) Total advances (Rm) 157 703 146 035 69 486 66 440 77 481 71 501 68 742 62 639 8 739 8 862 8 777 7 755 1 959 339 Average total advances (Rm) 151 433 144 055 68 812 68 590 73 881 68 464 64 932 60 153 8 949 8 311 7 943 6 609 797 392 Total deposits (Rm) 131 194 119 831 117 604 107 835 325 87 304 67 21 20 11 419 9 995 1 846 1 914 Average total deposits (Rm) 124 077 131 945 110 467 120 250 319 124 294 85 25 39 11 152 9 342 2 139 2 229 Allocated capital (Rm) 7 603 7 280 2 998 2 965 3 549 3 441 3 004 2 941 545 500 950 794 106 80
* Includes Centralised Credit, Risk, HR, Finance, Shared Services, Transactional Banking and eliminations
** 2009 excludes MBCA
NEDBANK WEALTH – NEW BUSiNESS pREMiUM
FOR THE yEAR ENDED 31 DECEMBER
Rm % change 2010 2009
Credit, Single Life and Simple Investment Products 31,3 1 023.9 780.1 Short-term Insurance 14,8 903.4 786.6 Advice Based Products + 13,9 7 868.7 6 911.4
Life 13,5 1 795.8 1 582.5 Non-Life 22,7 5 867.2 4 780.5 Preference Shares (62,5) 205.7 548.4
total 15,5 9 796,0 8 478,1
+ This does not include business flows from our High Net Worth and Asset Management businesses
26b neDBanK group analyst presentation 2010
NEDBANK RETAIL SEgMENTAL REpORTFOR THE yEAR ENDED 31 DECEMBER
TotalRelationship
banking Small Business
Services private Bank Consumer Banking personal loans
Transactional and investment
products Secured Lending HomeloansMotor Finance Corporation Card Other *
2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Headline earnings (Rm) 760 (27) (88) 26 (87) 45 (1) (19) 597 361 495 285 102 76 (297) (769) (903) (1 078) 606 309 561 388 (13) (33)ROE (%) 4,6 (0,2) (6,3) 1,6 (9,2) 4,4 (0,2) (3,3) 17,5 14,0 20,6 16,4 10,0 9,1 (3,4) (8,4) (31,9) (25,4) 10,2 6,3 25,0 19,1 (1,9) (2,9)ROA (%) 0,4 – (0,3) 0,1 (0,5) 0,3 (0,2) 0,9 0,5 5,5 2,7 0,2 0,1 (0,2) (0,6) (1,0) (1,2) 1,3 0,7 6,0 4,4 – 0,1Credit loss ratio banking advances (%) 2,7 3,2 2,6 2,4 4,3 3,4 1,0 1,4 7,6 10,0 7,6 10,3 7,9 8,5 2,3 2,7 2,2 2,6 2,4 3,0 3,7 7,7 1,6 2,0Non-interest revenue to total expenses 68,5 63,7 53,4 49,7 59,2 56,0 39,5 35,5 64,6 58,2 74,0 58,7 62,0 58,1 30,6 23,5 19,6 16,0 41,8 32,1 119,0 121,1 (24,6) (149,0)Efficiency ratio (%) 57,7 58,0 72,6 68,7 71,2 66,4 76,0 74,3 68,9 71,7 35,8 39,6 92,4 92,3 36,1 36,7 51,4 47,0 27,8 29,3 61,3 58,8 (47,6) (6,2)Impairment charge on loans and advances (Rm) 5 110 5 758 674 584 540 413 134 171 929 910 831 801 98 109 3 077 3 526 2 035 2 414 1 042 1 112 287 558 143 180 Total assets (Rm) 193 394 185 971 25 319 24 314 11 732 11 794 13 587 12 520 12 969 9 383 12 004 8 589 965 794 135 597 132 628 89 653 92 278 45 944 40 350 7 840 7 401 11 669 12 245 Average total assets (Rm) 189 386 181 221 25 035 24 000 11 867 11 810 13 168 12 190 11 411 8 288 10 368 7 282 1 043 1 006 133 473 130 052 90 997 93 154 42 476 36 898 7 770 7 296 11 697 11 585 Total advances (Rm) 187 334 179 885 25 277 24 266 11 706 11 766 13 571 12 500 12 545 9 114 11 747 8 344 798 770 134 025 130 855 88 606 91 048 45 419 39 807 7 261 6 731 8 226 8 919Average total advances (Rm) 183 738 175 504 24 972 23 943 11 827 11 772 13 145 12 171 11 102 8 009 10 146 7 037 956 972 131 936 128 240 89 847 91 892 42 089 36 348 7 142 6 664 8 586 8 648Total deposits (Rm) 87 204 86 641 28 050 26 689 17 475 16 098 10 575 10 591 57 821 57 462 3 6 57 818 57 456 453 1 585 2 453 1 583 785 825 95 80 Average total deposits (Rm) 85 559 84 959 26 689 25 611 16 333 15 244 10 356 10 367 57 058 56 584 56 44 57 002 56 540 838 1 645 1 4 837 1 641 871 958 103 161 Allocated capital (Rm) 16 560 16 525 1 390 1 597 952 1 006 438 591 3 422 2 582 2 400 1 744 1 022 838 8 776 9 177 2 827 4 248 5 949 4 929 2 245 2 032 727 1 137
* Includes support divisions, IBL professional finance and IBL supplier asset finance
NEDBANK BuSINESS BANKING SEgMENTAL REpORT FOR THE yEAR ENDED 31 DECEMBER
2010 2009
Headline earnings (Rm) 825 1 121 ROE (%) 26,4 26,6 ROA (%) 1,0 1,4 Credit loss ratio banking advances (%) 0,4 0,5 Non-interest revenue to total expenses (%) 57,4 57,2Efficiency ratio (%) 62,0 52,8Impairment charge on loans and advances (Rm) 210 284 Total assets (Rm) 79 825 80 245 Average total assets (Rm) 80 375 80 821 Total advances (Rm) 50 765 50 115 Average total advances (Rm) 51 179 52 820 Total deposits (Rm) 75 769 75 021 Average total deposits (Rm) 76 218 75 478 Allocated capital (Rm) 3 123 4 217
27b
TotalRelationship
banking Small Business
Services private Bank Consumer Banking personal loans
Transactional and investment
products Secured Lending HomeloansMotor Finance Corporation Card Other *
2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Headline earnings (Rm) 760 (27) (88) 26 (87) 45 (1) (19) 597 361 495 285 102 76 (297) (769) (903) (1 078) 606 309 561 388 (13) (33)ROE (%) 4,6 (0,2) (6,3) 1,6 (9,2) 4,4 (0,2) (3,3) 17,5 14,0 20,6 16,4 10,0 9,1 (3,4) (8,4) (31,9) (25,4) 10,2 6,3 25,0 19,1 (1,9) (2,9)ROA (%) 0,4 – (0,3) 0,1 (0,5) 0,3 (0,2) 0,9 0,5 5,5 2,7 0,2 0,1 (0,2) (0,6) (1,0) (1,2) 1,3 0,7 6,0 4,4 – 0,1Credit loss ratio banking advances (%) 2,7 3,2 2,6 2,4 4,3 3,4 1,0 1,4 7,6 10,0 7,6 10,3 7,9 8,5 2,3 2,7 2,2 2,6 2,4 3,0 3,7 7,7 1,6 2,0Non-interest revenue to total expenses 68,5 63,7 53,4 49,7 59,2 56,0 39,5 35,5 64,6 58,2 74,0 58,7 62,0 58,1 30,6 23,5 19,6 16,0 41,8 32,1 119,0 121,1 (24,6) (149,0)Efficiency ratio (%) 57,7 58,0 72,6 68,7 71,2 66,4 76,0 74,3 68,9 71,7 35,8 39,6 92,4 92,3 36,1 36,7 51,4 47,0 27,8 29,3 61,3 58,8 (47,6) (6,2)Impairment charge on loans and advances (Rm) 5 110 5 758 674 584 540 413 134 171 929 910 831 801 98 109 3 077 3 526 2 035 2 414 1 042 1 112 287 558 143 180 Total assets (Rm) 193 394 185 971 25 319 24 314 11 732 11 794 13 587 12 520 12 969 9 383 12 004 8 589 965 794 135 597 132 628 89 653 92 278 45 944 40 350 7 840 7 401 11 669 12 245 Average total assets (Rm) 189 386 181 221 25 035 24 000 11 867 11 810 13 168 12 190 11 411 8 288 10 368 7 282 1 043 1 006 133 473 130 052 90 997 93 154 42 476 36 898 7 770 7 296 11 697 11 585 Total advances (Rm) 187 334 179 885 25 277 24 266 11 706 11 766 13 571 12 500 12 545 9 114 11 747 8 344 798 770 134 025 130 855 88 606 91 048 45 419 39 807 7 261 6 731 8 226 8 919Average total advances (Rm) 183 738 175 504 24 972 23 943 11 827 11 772 13 145 12 171 11 102 8 009 10 146 7 037 956 972 131 936 128 240 89 847 91 892 42 089 36 348 7 142 6 664 8 586 8 648Total deposits (Rm) 87 204 86 641 28 050 26 689 17 475 16 098 10 575 10 591 57 821 57 462 3 6 57 818 57 456 453 1 585 2 453 1 583 785 825 95 80 Average total deposits (Rm) 85 559 84 959 26 689 25 611 16 333 15 244 10 356 10 367 57 058 56 584 56 44 57 002 56 540 838 1 645 1 4 837 1 641 871 958 103 161 Allocated capital (Rm) 16 560 16 525 1 390 1 597 952 1 006 438 591 3 422 2 582 2 400 1 744 1 022 838 8 776 9 177 2 827 4 248 5 949 4 929 2 245 2 032 727 1 137
* Includes support divisions, IBL professional finance and IBL supplier asset finance
NEDBANK CAPITAL SEgMENTAL REpORT
FOR THE yEAR ENDED 31 DECEMBER
2010 2009
Headline earnings (Rm) 1,202 1 452ROE (%) 23,5 31,0ROA (%) 0,6 0,8Credit loss ratio banking advances (%) 1,3 0,4Non-interest revenue to total expenses (%) 145,0 139,2Efficiency ratio (%) 45,1 45,9Impairment charge on loans and advances (Rm) 535 141Total assets (Rm) 215 189 198 260Average total assets (Rm) 209 211 184 453Total advances (Rm) 62 328 55 315Average total advances (Rm) 63 519 53 076Total deposits (Rm) 184 201 175 041Average total deposits (Rm) 182 637 156 934Allocated capital (Rm) 5 116 4 678
28b neDBanK group analyst presentation 2010
Daily average advances Current impaired Default % ofRm % % % Total
Division 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Homeloans 118 753 117 754 87,2 84,1 2,3 3,6 10,5 12,3 60,8 63,4 Vehicle & Asset Finance 50 297 44 923 91,0 91,0 4,5 4,1 4,5 4,9 26,8 25,6 Personal Loans 11 628 8 581 85,6 82,9 4,7 5,0 9,6 12,1 6,8 5,3 Card 7 630 7 252 90,3 89,2 3,1 4,0 6,6 6,9 4,0 3,9 Overdrafts and other loans 2 924 2 993 79,1 73,9 1,6 6,0 19,3 20,2 1,6 1,8
Total 191 232 181 503 88,1 85,8 3,1 3,8 8,8 10,3 100,0 100,0
balanCe sheeTimpairment as a % of book Total impairments Current impaired Default % of
Rm % % % Total
Division 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Homeloans 3 375 3 263 0,3 0,1 7,2 5,4 23,0 18,8 2,8 2,6 Vehicle & Asset Finance 2 162 1 651 0,4 0,4 18,7 8,3 64,8 57,0 4,2 3,5 Personal Loans 916 762 0,1 0,2 18,7 16,6 61,6 55,9 6,9 7,7 Card 564 564 0,5 0,4 12,8 12,4 97,3 100,3 7,2 7,8 Overdrafts and other loans 555 600 0,8 0,7 36,2 13,3 88,4 84,5 18,3 18,3
Total 7 572 6 840 0,3 0,2 13,3 7,5 36,1 30,1 3,8 3,5
InCoMe sTaTeMenTincome statement
impairment charge portfolio impairment Specific impairment post write off Recoveries Credit Loss Ratio *Rm Rm Rm Rm %
Division 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Homeloans 2 511 2 865 160 32 2 403 2 883 (52) (50) 2,1 2,4 Vehicle & Asset Finance 1 245 1 253 231 (42) 1 090 1 352 (76) (57) 2,5 2,8 Personal Loans 842 810 32 (85) 981 1 015 (171) (120) 7,2 9,4 Card 287 558 (24) 425 702 (138) (120) 3,8 7,7 Overdrafts and other loans 225 272 (7) (8) 251 299 (19) (19) 7,7 9,1
Total 5 110 5 758 416 (127) 5 150 6 251 (456) (366) 2,7 3,2
* Calculated using daily average advances
NEDBANK RETAIL – ADvANCES AND iMpAiRMENTSFOR THE yEAR ENDED 31 DECEMBER
29b
Daily average advances Current impaired Default % ofRm % % % Total
Division 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Homeloans 118 753 117 754 87,2 84,1 2,3 3,6 10,5 12,3 60,8 63,4 Vehicle & Asset Finance 50 297 44 923 91,0 91,0 4,5 4,1 4,5 4,9 26,8 25,6 Personal Loans 11 628 8 581 85,6 82,9 4,7 5,0 9,6 12,1 6,8 5,3 Card 7 630 7 252 90,3 89,2 3,1 4,0 6,6 6,9 4,0 3,9 Overdrafts and other loans 2 924 2 993 79,1 73,9 1,6 6,0 19,3 20,2 1,6 1,8
Total 191 232 181 503 88,1 85,8 3,1 3,8 8,8 10,3 100,0 100,0
balanCe sheeTimpairment as a % of book Total impairments Current impaired Default % of
Rm % % % Total
Division 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Homeloans 3 375 3 263 0,3 0,1 7,2 5,4 23,0 18,8 2,8 2,6 Vehicle & Asset Finance 2 162 1 651 0,4 0,4 18,7 8,3 64,8 57,0 4,2 3,5 Personal Loans 916 762 0,1 0,2 18,7 16,6 61,6 55,9 6,9 7,7 Card 564 564 0,5 0,4 12,8 12,4 97,3 100,3 7,2 7,8 Overdrafts and other loans 555 600 0,8 0,7 36,2 13,3 88,4 84,5 18,3 18,3
Total 7 572 6 840 0,3 0,2 13,3 7,5 36,1 30,1 3,8 3,5
InCoMe sTaTeMenTincome statement
impairment charge portfolio impairment Specific impairment post write off Recoveries Credit Loss Ratio *Rm Rm Rm Rm %
Division 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Homeloans 2 511 2 865 160 32 2 403 2 883 (52) (50) 2,1 2,4 Vehicle & Asset Finance 1 245 1 253 231 (42) 1 090 1 352 (76) (57) 2,5 2,8 Personal Loans 842 810 32 (85) 981 1 015 (171) (120) 7,2 9,4 Card 287 558 (24) 425 702 (138) (120) 3,8 7,7 Overdrafts and other loans 225 272 (7) (8) 251 299 (19) (19) 7,7 9,1
Total 5 110 5 758 416 (127) 5 150 6 251 (456) (366) 2,7 3,2
* Calculated using daily average advances
30b neDBanK group analyst presentation 2010
OpERATiONAL STATiSTiCS FOR THE yEAR ENDED 31 DECEMBER
nedbank reTaIl
Classification of ClientsNumber of
clients
Number of internet
banking clients
Number of branches
Banking outlets
including kiosks
private bank suites Roving sales
2010 4 832 306 498 006 452 144 18 71
2009 4 166 104 439 609 438 75 18 72
Number of personal
loans kiosks
Number of personal
loans branches
pOS devicesenabled for
cash backNumber of
ATMsNumber of
SSTs
Number of permanentemployees
2010 320 43 6 419 2 283 384 15 473
2009 250 30 3 027 1 874 379 15 140
nedbank CorporaTe
Classification of clientsNumber of
clients
Number of electronic
banking clients/profiles
Number of ATM’sAfrica
Number oflocations/
branches
Number of permanentemployees
2010Corporate Banking (turnover > R400m) 546 2 224 5 278 Property Finance 5 212 7 450 Africa 219 942 18 880 83 46 1 404 Other 1 479
Total 225 700 21 104 83 58 3 611
2009Corporate Banking (turnover > R400m) 526 2 791 5 294 Property Finance 5 983 7 537Africa 192 097 16 500 74 47 1 443Other 1 548
Total 198 606 19 291 74 59 3 822
nedbank busIness bankIng
Classification of clientsNumber of
clients*
Number ofelectronic
banking clients/profiles
Number oflocations/
branches**
Number of permanentemployees
2010 21 842 18 950 63 2 390
2009 22 657 19 056 67 2 229
* 2010 based on number of client risk groups and not individual entities as per 2009
** 2010 locations were restated to reflect only locations with permanent presence. Clients in various other locations are serviced by roaming teams
31b
ASSETS UNDER MANAgEMENTAT 31 DECEMBER
Rm 2010 2009*
Fair value of funds under management – by typeunit trusts 59 764 48 334Third party 1 563 1 482Private clients 41 243 37 388
102 570 87 204
Fair value of funds under management – by geographySouth Africa 96 371 80 633Rest of world 6 199 6 571
102 570 87 204
2010
Rm Unit trusts Third party private clients Total
Reconciliation of movement in funds under management
– by typeOpening balance at 31 December 2009 as reported 48 334 3 143 42 148 93 625Opening balance adjustments* (1 661) (4 760) (6 421)
Adjusted opening balance at 31 December 2009 48 334 1 482 37 388 87 204Inflows 30 204 727 10 907 41 838Outflows (21 972) (92) (9 989) (32 053)Mark-to-market value adjustment 3 808 (227) 2 937 6 518 Foreign currency translation differences (610) (327) (937)
Closing balance – 31 December 2010 59 764 1 563 41 243 102 570
reconciliation of movement in funds 2010
Rm South AfricaRest of
world Total
reconciliation of movement in funds under management
– by geographyOpening balance at 31 December 2009 as reported 79 107 14 518 93 625Opening balance adjustments* 1 526 (7 947) (6 421)
Adjusted opening balance at 31 December 2009 80 633 6 571 87 204Inflows 40 142 1 696 41 838Outflows (31 053) (1 000) (32 053)Mark-to-market value adjustment 6 649 (131) 6 518 Foreign currency translation differences (937) (937)
Closing balance – 31 December 2010 96 371 6 199 102 570
* Management have identified that assets under administration (AUA) have been incorrectly disclosed as part of managed funds in prior years. As per the
definition of managed funds on behalf of third parties on a fully discretionary basis, these AUA balances should not be included in the group’s managed
funds disclosure. As a result the 2008 closing balance and the 2009 comparative movements have been restated.
32b neDBanK group analyst presentation 2010
EARNiNgS pER SHARE AND WEigHTED AvERAgE SHARESFOR THE yEAR ENDED 31 DECEMBER
Diluted DilutedEarnings per share Basic Basic Headline Headline
December 2010Earnings for the year (Rm) 4 811 4 811 4 900 4 900
Weighted average number of ordinary shares 443 900 061 458 229 105 443 900 061 458 229 105
Earnings per share (cents) 1 084 1 050 1 104 1 069
December 2009Earnings for the year (Rm) 4 826 4 826 4 277 4 277
Weighted average number of ordinary shares 423 428 547 435 070 582 423 428 547 435 070 582
Earnings per share (cents) 1 140 1 109 1 010 983
Basic earnings and headline earnings per share are calculated by dividing the relevant earnings amount by the weighted average
number of shares in issue. Fully diluted basic earnings and fully diluted headline earnings per share are calculated by dividing the
relevant earnings amount by the weighted average number of shares in issue after taking the dilutive impact of potential ordinary
shares to be issued into account (the estimated future dilutive shares arising from the BEE transaction as set out in note 15).
nuMber oF weIghTed average dIluTIve poTenTIal ordInary shares Generally, potential shares are dilutive if the strike price + SBP charge to come < average share price for the period of R131.60 (the
SBP charge to come represents the value of services to be received by Nedbank Group in exchange for these potential shares).
DecemberDecember 2010 2009
Shares (’000)potential
shares
Weighted averagedilutive
shares
Weightedaveragedilutiveshares
traditional schemes 17 933 9 124 7 220
Nedcor share incentive trust (1994) 628 156 545 Nedbank group options scheme (2005) 16 439 8 443 6 220 Matched share scheme 866 525 455
Bee schemes – south africa 27 235 5 139 4 381
Black Business Partners 7 891 775 1 024 Non-executive directors 622 142 171 Retail 1 Corporate 9 930 2 220 1 976 Black Executives 1 275 374 286 Black Management 7 517 1 628 923
Bee schemes – namibia 529 66 42
Black Business Partners 200 Affinity Groups 74 Education 99 LTIP: Black 20 13 10 LTIP: White 46 27 22 Black Management 90 26 10
total 45 697 14 329 11 643
33b
CONSOLIDATED STATEMENT OF FiNANCiAL pOSiTiON BANKiNg/TRADiNg
CATEgORiSATiON AT 31 DECEMBER
2010 2009Rm Banking Trading Elims Total Banking Trading Elims Total
asseTsCash and cash equivalents 8 621 29 8 650 7 860 7 7 867 Other short-term securities 18 067 12 306 (3 329) 27 044 9 151 14 411 (5 012) 18 550 Derivative financial instruments 258 15 673 (2 049) 13 882 250 13 796 (1 336) 12 710 Government and other securities 31 571 4 313 (4 060) 31 824 35 448 4 594 (4 059) 35 983 Loans and advances 455 595 19 678 475 273 436 536 13 765 450 301 Other assets 4 446 5 568 10 014 4 406 1 049 5 455 Customers’ indebtedness for acceptances 1 953 1 953 2 031 2 031 Current taxation receivable 483 483 602 602 Investment securities 11 604 314 11 918 10 748 277 11 025 Non-current assets held for sale 5 5 12 12 Investments in associate companies and joint ventures 936 936 924 924 Deferred taxation asset 15 269 284 82 200 282 Property and equipment 5 799 12 5 811 5 163 15 5 178 Long-term employee benefit assets 2 044 8 2 052 1 860 1 860 Mandatory reserve deposits
with central banks 11 095 11 095 10 508 10 508 Intangible assets 7 492 2 7 494 7 415 7 415 Inter divisional assets 12 022 (12 022) – 10 087 (10 087) –
total assets 559 984 70 194 (21 460) 608 718 532 996 58 201 (20 494) 570 703
ToTal equITy and lIabIlITIesAllocated capital 41 543 2 558 44 101 37 298 2 351 39 649 Non-controlling interest attributable to: ordinary shareholders 153 153 1 849 1 849 preference shareholders 3 560 3 560 3 486 3 486
Total equity 45 256 2 558 – 47 814 42 633 2 351 44 984 Derivative financial instruments 2 168 11 933 (2 049) 12 052 1 502 11 385 (1 336) 11 551 Amounts owed to depositors 454 648 39 129 (3 337) 490 440 439 536 34 839 (5 020) 469 355 Other liabilities 5 887 16 410 (4 052) 18 245 5 735 9 568 (4 051) 11 252 Liabilities under acceptances 1 953 1 953 2 031 2 031 Current taxation liabilities 191 191 315 315 Deferred taxation liabilities 1 640 164 1 804 1 887 58 1 945 Long-term employee benefit liabilities 1 414 1 414 1 304 1 304 Investment contract liabilities 7 309 7 309 6 749 6 749 Insurance contract liabilities 1 392 1 392 1 133 1 133 Long-term debt instruments 26 104 26 104 20 084 20 084 Inter divisional liabilities 12 022 (12 022) – 10 087 (10 087)
total liabilities 514 728 67 636 (21 460) 560 904 490 363 55 850 (20 494) 525 719
total equity and liabilities 559 984 70 194 (21 460) 608 718 532 996 58 201 (20 494) 570 703
34b neDBanK group analyst presentation 2010
NEDBANK GROuP: CATEgORiES OFFiNANCiAL iNSTRUMENTS FOR THE yEAR ENDED 31 DECEMBER 2010
At fair value through profit or loss
Rm TOTALHeld for trading Designated
Available-for-sale financial assets
Held-to-maturityinvestments Loans and receivables
Financial liabilities at amortised cost
Non-financial assets and liabilities
asseTsCash and cash equivalents 8 650 8 650 Other short-term securities 27 044 10 316 12 528 3 639 561 Derivative financial instruments 13 882 13 882 Government and other securities 31 824 288 17 305 827 10 113 3 291 Loans and advances 475 273 19 679 43 088 412 506 Other assets 10 014 5 203 902 3 909 Clients’ indebtedness for acceptances 1 953 1 953 Current taxation receivable 483 483 Investment securities 11 918 314 11 171 433 Non-current assets held for sale 5 5 Investment in associate companies and joint ventures 936 912 24Deferred taxation asset 284 284 Investment property 199 199 Property and equipment 5 612 5 612 Post-employment assets 2 052 2 052 Intangible assets 7 494 7 494 Mandatory reserve deposits with central bank 11 095 11 095
total assets 608 718 49 682 85 906 4 899 10 674 439 451 – 18 106
ToTal equITy and lIabIlITIesOrdinary share capital 449 449 Ordinary share premium 15 522 15 522 Reserves 28 130 28 130
total equity attributable to equity holders 44 101 – – – – – 44 101 Minority shareholders’ equity attributable to ordinary shareholders 153 153 Minority shareholders’ equity attributable to preference shareholders 3 560 3 560
Total equity 47 814 – – – – – 47 814 Derivative financial instruments 12 052 12 052 Amounts owed to depositors 490 440 35 815 90 144 364 481 Other liabilities 18 245 11 795 6 450 Liabilities under acceptances 1 953 1 953 Current taxation liabilities 191 191 Deferred taxation liabilities 1 804 1 804 Post-employment liability 1 414 1 414 Investment contract liabilities 7 309 7 309 Insurance contract liabilities 1 392 1 392 Long-term debt instruments 26 104 7 774 18 330
total liabilities 560 904 59 662 106 619 – – – 389 261 5 362
total equity and liabilities 608 718 59 662 106 619 – – – 389 261 53 176
ClassIFICaTIons In TerMs oF Ias 39A financial asset or financial liability at fair value through profit or loss is an asset or liability held that was either acquired
to sell or repurchase in the short term, or is managed on a portfolio basis for short-term gains, or is a derivative or is an
asset or liability that has been designated for classification and valuation as fair value through profit and loss.
Available-for-sale financial assets are those non-derivative financial assets that are designated as available for sale or are
not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss
and are held at fair value with fair value gains and losses recorded directly within equity and not through profit and loss.
35b
At fair value through profit or loss
Rm TOTALHeld for trading Designated
Available-for-sale financial assets
Held-to-maturityinvestments Loans and receivables
Financial liabilities at amortised cost
Non-financial assets and liabilities
asseTsCash and cash equivalents 8 650 8 650 Other short-term securities 27 044 10 316 12 528 3 639 561 Derivative financial instruments 13 882 13 882 Government and other securities 31 824 288 17 305 827 10 113 3 291 Loans and advances 475 273 19 679 43 088 412 506 Other assets 10 014 5 203 902 3 909 Clients’ indebtedness for acceptances 1 953 1 953 Current taxation receivable 483 483 Investment securities 11 918 314 11 171 433 Non-current assets held for sale 5 5 Investment in associate companies and joint ventures 936 912 24Deferred taxation asset 284 284 Investment property 199 199 Property and equipment 5 612 5 612 Post-employment assets 2 052 2 052 Intangible assets 7 494 7 494 Mandatory reserve deposits with central bank 11 095 11 095
total assets 608 718 49 682 85 906 4 899 10 674 439 451 – 18 106
ToTal equITy and lIabIlITIesOrdinary share capital 449 449 Ordinary share premium 15 522 15 522 Reserves 28 130 28 130
total equity attributable to equity holders 44 101 – – – – – 44 101 Minority shareholders’ equity attributable to ordinary shareholders 153 153 Minority shareholders’ equity attributable to preference shareholders 3 560 3 560
Total equity 47 814 – – – – – 47 814 Derivative financial instruments 12 052 12 052 Amounts owed to depositors 490 440 35 815 90 144 364 481 Other liabilities 18 245 11 795 6 450 Liabilities under acceptances 1 953 1 953 Current taxation liabilities 191 191 Deferred taxation liabilities 1 804 1 804 Post-employment liability 1 414 1 414 Investment contract liabilities 7 309 7 309 Insurance contract liabilities 1 392 1 392 Long-term debt instruments 26 104 7 774 18 330
total liabilities 560 904 59 662 106 619 – – – 389 261 5 362
total equity and liabilities 608 718 59 662 106 619 – – – 389 261 53 176
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity date that an
entity has the positive intention and ability to hold to maturity.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and
are carried at an accrued value and not fair valued.
Financial liabilities at amortised cost are non-derivative liabilities carried at amortised cost and not fair valued.
Non-financial assets and liabilities are all other assets and liabilities, which fall outside of the scope of IAS 39.
36b neDBanK group analyst presentation 2010
NEDBANK GROuP: CATEgORiES OFFiNANCiAL iNSTRUMENTS continued FOR THE yEAR ENDED 31 DECEMBER 2009
At fair value through profit or loss
Rm TOTAL Held for trading DesignatedAvailable-for-sale
financial assetsHeld-to-maturity
investments Loans and receivablesFinancial liabilities at amortised cost
Non-financial assets and liabilities
asseTsCash and cash equivalents 7 867 7 867 Other short-term securities 18 550 10 316 5 214 2 042 978 Derivative financial instruments 12 710 12 710 Government and other securities 35 983 568 16 029 804 13 444 5 138 Loans and advances 450 301 13 858 37 598 398 845 Other assets 5 455 832 667 3 956 Clients’ indebtedness for acceptances 2 031 2 031 Current taxation receivable 602 602 Investment securities 11 025 273 10 451 301 Non-current assets held for sale 12 12 Investment in associate companies and joint ventures 924 908 16 Deferred taxation asset 282 282 Investment property 211 211 Property and equipment 4 967 4 967 Post-employment assets 1 860 1 860 Intangible assets 7 415 7 415 Mandatory reserve deposits with central bank 10 508 10 508
total assets 570 703 38 557 70 867 3 147 14 422 426 314 – 17 396
ToTal equITy and lIabIlITIesOrdinary share capital 436 436 Ordinary share premium 13 728 13 728 Reserves 25 485 25 485
total equity attributable to equity holders 39 649 – – – – – 39 649 Minority shareholders’ equity attributable to ordinary shareholders 1 849 1 849 Minority shareholders’ equity attributable to preference shareholders 3 486 3 486
total equity 44 984 – – – – – 44 984 Derivative financial instruments 11 551 11 551 Amounts owed to depositors 469 355 30 037 74 993 364 325 Other liabilities 11 252 4 895 6 357 Liabilities under acceptances 2 031 2 031 Current taxation liabilities 315 315 Deferred taxation liabilities 1 945 1 945 Post-employment liability 1 304 1 304 Investment contract liabilities 6 749 6 749 Insurance contract liabilities 1 133 1 133 Long-term debt instruments 20 084 7 811 12 273
total liabilities 525 719 46 483 90 686 – – – 382 955 5 595
total equity and liabilities 570 703 46 483 90 686 – – – 382 955 50 579
37b
At fair value through profit or loss
Rm TOTAL Held for trading DesignatedAvailable-for-sale
financial assetsHeld-to-maturity
investments Loans and receivablesFinancial liabilities at amortised cost
Non-financial assets and liabilities
asseTsCash and cash equivalents 7 867 7 867 Other short-term securities 18 550 10 316 5 214 2 042 978 Derivative financial instruments 12 710 12 710 Government and other securities 35 983 568 16 029 804 13 444 5 138 Loans and advances 450 301 13 858 37 598 398 845 Other assets 5 455 832 667 3 956 Clients’ indebtedness for acceptances 2 031 2 031 Current taxation receivable 602 602 Investment securities 11 025 273 10 451 301 Non-current assets held for sale 12 12 Investment in associate companies and joint ventures 924 908 16 Deferred taxation asset 282 282 Investment property 211 211 Property and equipment 4 967 4 967 Post-employment assets 1 860 1 860 Intangible assets 7 415 7 415 Mandatory reserve deposits with central bank 10 508 10 508
total assets 570 703 38 557 70 867 3 147 14 422 426 314 – 17 396
ToTal equITy and lIabIlITIesOrdinary share capital 436 436 Ordinary share premium 13 728 13 728 Reserves 25 485 25 485
total equity attributable to equity holders 39 649 – – – – – 39 649 Minority shareholders’ equity attributable to ordinary shareholders 1 849 1 849 Minority shareholders’ equity attributable to preference shareholders 3 486 3 486
total equity 44 984 – – – – – 44 984 Derivative financial instruments 11 551 11 551 Amounts owed to depositors 469 355 30 037 74 993 364 325 Other liabilities 11 252 4 895 6 357 Liabilities under acceptances 2 031 2 031 Current taxation liabilities 315 315 Deferred taxation liabilities 1 945 1 945 Post-employment liability 1 304 1 304 Investment contract liabilities 6 749 6 749 Insurance contract liabilities 1 133 1 133 Long-term debt instruments 20 084 7 811 12 273
total liabilities 525 719 46 483 90 686 – – – 382 955 5 595
total equity and liabilities 570 703 46 483 90 686 – – – 382 955 50 579
38b neDBanK group analyst presentation 2010
Certain of the group’s reporting ratio calculations have been adjusted. The ratios for, Return on Equity (RoE) and Return on Assets
(RoA) have been restated with the denominator changing from simple average to daily average for equity and total assets values
respectively. The calculation of Credit Loss Ratio (CLR) has been changed from simple average advances to daily average banking
advances (thereby excluding trading advances from the calculation). Comparatives have been restated accordingly. Effects of these
ratio restatements:
Dec 2009 Dec 2009 Dec 2009(Dec 2010
SENS)(June 2010
SENS)(Dec 09
SENS)
Return on equity (ROE) 11,8% 11,8% 11,5%Return on assets (ROA) 0,76% 0,76% 0,75%Credit loss ratio 1,47% 1,47%Credit loss ratio – Banking 1,52% 1,52%
Credit loss ratio %(2) Movement. Dec 2009 Dec 2009 (1) Movement. Dec 2009
on June 2010SENS
(Dec 2010SENS)
(June 2010SENS)
on Dec 2009SENS
(Dec 2009SENS)
Nedbank Capital – 0,36 0,36 0,10 0,26Nedbank Corporate 0,01 0,25 0,24 0,24Nedbank Business Banking – 0,52 0,52 0,52Nedbank Retail (0,23) 3,17 3,40 0,32 3,08Nedbank Wealth – 0,47 0,47 0,47Imperial Bank 2,01 0,04 1,97
Total group – 1,52 1,52 1,47
(1) Effects of changes on December 2009 results as disclosed in the June 2010 SENS as a result of changing the calculation from simple average advances
to daily average banking advances (thereby excluding trading advances from the calculation).
(2) Effects of changes on December 2009 results as disclosed in the Dec 2010 SENS are as a result of the IBL integration The comparative results for the operations segment reporting for the year ended 31 December 2009 has been restated in line with
the group’s implementation of a revised economic capital allocation methodology and as a result of the Imperial Bank Limited
integration. The restatement has no effect of the group results and ratios, and only changes segment cluster results and ratios.
Effects of changes is as follows:
Headline Earnings (Rm)
(4) Movement. Dec 2009 Dec 2009 (3) Movement. Dec 2009on June 2010
SENS(Dec 2010
SENS)(June 2010
SENS)on Dec 2009
SENS(Dec 2009
SENS)
Nedbank Capital 5 1 452 1 447 98 1 349 Nedbank Corporate 96 1 722 1 626 92 1 534 Nedbank Business Banking 8 1 121 1 113 58 1 055 Nedbank Retail 463 (27) (490) 146 (636) Nedbank Wealth 4 502 498 18 480 Imperial Bank (201) 201 201 Shared Services (41) 111 152 19 133 Central Management (334) (604) (270) (431) 161
Total group – 4 277 4 277 – 4 277
RESTATEMENTSFOR THE yEAR ENDED 31 DECEMBER 2009
39b
Operating income (Rm)(4) Movement. Dec 2009 Dec 2009 (3) Movement. Dec 2009
on June 2010SENS
(Dec 2010SENS)
(June 2010SENS)
on Dec 2009SENS
(Dec 2009SENS)
Nedbank Capital 9 3 355 3 346 141 3 205 Nedbank Corporate 212 4 475 4 263 134 4 129 Nedbank Business Banking 12 3 734 3 722 85 3 637 Nedbank Retail 1 207 8 180 6 973 213 6 760 Nedbank Wealth 4 1 858 1 854 29 1 825 Imperial Bank (1 275) 1 275 1 275 Shared Services 6 201 195 195 Central Management (175) (148) 27 (602) 629 Eliminations (77) (77) (77)
Total group – 21 578 21 578 – 21 578
Total assets (Rm)(4) Movement. Dec 2009 Dec 2009 (3) Movement. Dec 2009
on June 2010SENS
(Dec 2010SENS)
(June 2010SENS)
on Dec 2009SENS
(Dec 2009SENS)
Nedbank Capital 198 260 198 260 1 700 196 560 Nedbank Corporate 9 135 157 741 148 606 148 606 Nedbank Business Banking 80 245 80 245 859 79 386 Nedbank Retail 42 023 185 971 143 948 143 948 Nedbank Wealth 33 909 33 909 33 909 Imperial Bank (55 660) 55 660 55 660 Shared Services 255 7 686 7 431 7 431 Central Management 3 914 35 782 31 868 (2 619) 34 487 Eliminations 333 (128 891) (129 224) 60 (129 284)
Total group – 570 703 570 703 – 570 703
(3) - Effects of changes on December 2009 results as disclosed in the June 2010 SENS as a result of revised economic capital allocation methodology
(4) - Effects of changes on December 2009 results as disclosed in the Dec 2010 SENS as a result of the allocated economic capital charges and IBL
integration
40b neDBanK group analyst presentation 2010
NOTES TO THE CONSOLiDATED STATEMENT OF COMpREHENSivE iNCOME FOR THE yEAR ENDED 31 DECEMBER
1 average bankIng balanCe sheeT and relaTed InTeresT2010 2009
Averagebalance
Margin statement interest
Averagebalance
Margin statement interestRm
Assets Received % Assets Received %
average prime rate 9,90 11,88 Advances and Clients’ indebtedness for acceptances
Homeloans (including PIPs) 146 426 11 962 8,2 144 197 14 456 10,0 Commercial mortgages 81 936 7 686 9,4 76 648 8 330 10,9 Lease and instalment debtors 65 400 7 303 11,2 61 539 7 655 12,4 Credit card balances 7 733 1 106 14,3 7 347 1 188 16,2 Bills and acceptances * 1 955 20 1,0 2 598 41 1,6 Overdrafts 13 230 1 331 10,1 13 366 1 577 11,8 Term loans and other ** 139 256 11 304 8,1 133 519 13 040 9,8 Impairment of loans and advances (10 628) (8 917)
Government and public sector securities 34 923 2 929 8,4 36 815 3 442 9,3 Short-term funds and trading securities 15 699 736 4,7 14 266 808 5,7
interest-earning banking assets 495 930 44 377 8,9 481 378 50 537 10,5 Net inter divisional assets – trading book (666) 762 Revaluation of FVTPL designated assets 1 442 606 Trading investments (12) (129)Derivative financial instruments 93 148 Insurance assets 8 435 6 796 Cash and bank notes 2 083 1 867 Other assets 7 123 5 649 Associates and Investments 2 984 2 842 Property and equipment 5 399 4 689 Intangible assets 7 387 6 571 Mandatory reserve deposit with central banks 11 766 11 055
total banking assets 541 964 44 377 8,2 522 234 50 537 9,7
Liabilities paid % Liabilities Paid %
Deposit and loan accounts 238 284 13 955 5,9 249 736 19 585 7,8 Current and savings accounts 56 878 788 1,4 55 623 1 188 2,1 Negotiable certificates of deposit 111 230 8 319 7,5 100 163 9 656 9,6 Other interest-bearing liabilities *** 42 264 2 420 5,7 40 623 2 161 5,3 Long-term debt instruments 25 696 2 287 8,9 16 478 1 641 10,0
interest-bearing banking liabilities 474 352 27 769 5,9 462 623 34 231 7,4 Other liabilities 11 317 10 340 Revaluation of FVTPL designated liabilties 1 442 606 Derivative financial instruments 1 445 1 052 Investment contract liabilities 8 257 6 702 Ordinary shareholders’ equity 41 305 35 697 Minority shareholders’ equity 3 846 5 214
total shareholders’ equity and banking liabilities 541 964 27 769 5,1 522 234 34 231 6,6
interest margin on average interest-earning banking assets 495 930 16 608 3,35 481 378 16 306 3,39
Where possible, averages are calculated on daily balances.
* Includes: clients’ indebtedness for acceptances
** Includes: term loans, preference shares, factoring debtors, other lending-related instruments and interest on derivatives
*** Includes: foreign currency liabilities and liabilities under acceptances
41b
2 IMpaIrMenT oF loans and advanCesRm 2010 2009
Opening balance 9 798 7 859
Specific impairment 7 830 5 542
Specific impairment excluding discounts 6 690 4 566 Specific impairment for discounted cash flow losses 1 140 976
Portfolio impairment 1 968 2 317
Income statement impairment charge (net of recoveries) 6 188 6 634
Specific impairment 5 802 6 798 Net increase in impairment for discounted cash flow losses 192 164 Portfolio impairment 194 (328)
Recoveries 763 457 Amounts written off/other transfers (5 523) (5 152)
Specific impairments (5 515) (5 131)Portfolio impairment (8) (21)
Total impairments 11 226 9 798
Specific impairment 9 072 7 830
Specific impairment excluding discounts 7 740 6 690 Specific impairment for discounted cash flow losses 1 332 1 140
Portfolio impairment 2 154 1 968
total advances 486 499 460 099
Details on segmental impairments and defaulted loans and advances are disclosed in the
credit risk section on pages 82b to 96b.
Reconciliation of specific impairment for discounted cash flow lossesRm
Opening balance 1 140 976 Net increase in impairment for discounted cash flow losses 192 164
Interest on specifically impaired loans and advances (1 704) (1 827)Net specific impairment charge for discounted cash flow losses 1 896 1 991
Closing balance 1 332 1 140
42b neDBanK group analyst presentation 2010
NOTES TO THE CONSOLiDATED STATEMENT OF COMpREHENSivE iNCOME continued FOR THE yEAR ENDED 31 DECEMBER
3 non-InTeresT revenue
Nedbank group Nedbank Capital Nedbank CorporateNedbank Retail and
Business Banking Nedbank RetailNedbank Business
Banking Nedbank Wealth Shared Services
Central Management and
Eliminations
Rm 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Commission and fees income 9 758 8 583 246 333 1 294 1 162 7 094 6 183 5 862 5 070 1 232 1 113 1 130 917 18 25 (24) (37)
Administration fees 336 217 30 24 259 197 253 182 6 15 52 7 6 (12) (10)Cash handling fees 630 530 172 150 458 380 164 121 294 259 Insurance commission 525 276 3 3 407 170 403 156 4 14 115 103 Exchange commission 300 302 99 104 160 147 57 57 103 90 38 46 3 5 Fees 1 254 1 136 218 252 270 282 52 30 52 30 728 582 (2) 2 (12) (12)Guarantees 122 118 2 79 73 43 43 10 8 33 35 Card income 2 097 1 937 5 1 2 008 1 881 1 954 1 830 54 51 84 55 Service charges 2 680 2 350 120 105 2 552 2 239 2 116 1 835 436 404 8 6 Other commission 1 814 1 717 28 79 516 420 1 155 1 096 905 881 250 215 105 125 10 12 (15)
Insurance income 860 615 860 615 Securities dealing and Fair value adjustments (300) 298 (65) 235 28 94 29 7 35 (6) 7 (15) (19) (1) (1) (276) (18)
Securities dealing (42) 254 (97) 259 84 22 (1) (3) (1) (3) (15) (19) (1) (1) (12) (4)Fair value adjustments (258) 44 32 (24) (56) 72 30 10 35 (5) 10 (264) (14)
Trading Income 2 096 1 841 1 879 1 637 76 94 141 122 50 46 91 76 (12)
Foreign exchange 1 040 1 167 823 951 76 94 141 122 50 46 91 76 Debt securities 774 764 774 764 Equities 276 (108) 276 (96) (12)Commodities 6 18 6 18
Rental income 51 52 17 18 (1) (3) (1) (3) 1 34 37 Investment income 265 64 194 18 51 29 12 11 1 2 11 9 5 5 1 3
Long-term assets sales 11 14 11 9 11 9 5 Dividends received 254 50 194 18 51 29 1 2 1 2 5 1 3
Sundry income 485 454 10 13 100 121 78 38 64 32 14 6 (18) 345 326 (30) (44)
Non-banking subsidiary 185 204 185 204 Other sundry income 300 250 10 13 100 121 78 38 64 32 14 6 (18) 160 122 (30) (44)
Foreign currency translation losses (1) (1)
total non-interest revenue 13 215 11 906 2 264 2 236 1 566 1 518 7 353 6 358 6 011 5 147 1 342 1 211 1 958 1 518 401 388 (327) (112)
3.1 private equity income included in nirNedbank group Nedbank Capital Nedbank Corporate
Rm 2010 2009 2010 2009 2010 2009
Securities dealing 3 268 (46) 251 49 17 Investment income – dividends received 225 36 194 18 31 18
total private equity nir 228 304 148 269 80 35
Realised 230 109 214 72 16 37 unrealised (2) 195 (66) 197 64 (2)
total private equity nir 228 304 148 269 80 35
43b
3 non-InTeresT revenue
Nedbank group Nedbank Capital Nedbank CorporateNedbank Retail and
Business Banking Nedbank RetailNedbank Business
Banking Nedbank Wealth Shared Services
Central Management and
Eliminations
Rm 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Commission and fees income 9 758 8 583 246 333 1 294 1 162 7 094 6 183 5 862 5 070 1 232 1 113 1 130 917 18 25 (24) (37)
Administration fees 336 217 30 24 259 197 253 182 6 15 52 7 6 (12) (10)Cash handling fees 630 530 172 150 458 380 164 121 294 259 Insurance commission 525 276 3 3 407 170 403 156 4 14 115 103 Exchange commission 300 302 99 104 160 147 57 57 103 90 38 46 3 5 Fees 1 254 1 136 218 252 270 282 52 30 52 30 728 582 (2) 2 (12) (12)Guarantees 122 118 2 79 73 43 43 10 8 33 35 Card income 2 097 1 937 5 1 2 008 1 881 1 954 1 830 54 51 84 55 Service charges 2 680 2 350 120 105 2 552 2 239 2 116 1 835 436 404 8 6 Other commission 1 814 1 717 28 79 516 420 1 155 1 096 905 881 250 215 105 125 10 12 (15)
Insurance income 860 615 860 615 Securities dealing and Fair value adjustments (300) 298 (65) 235 28 94 29 7 35 (6) 7 (15) (19) (1) (1) (276) (18)
Securities dealing (42) 254 (97) 259 84 22 (1) (3) (1) (3) (15) (19) (1) (1) (12) (4)Fair value adjustments (258) 44 32 (24) (56) 72 30 10 35 (5) 10 (264) (14)
Trading Income 2 096 1 841 1 879 1 637 76 94 141 122 50 46 91 76 (12)
Foreign exchange 1 040 1 167 823 951 76 94 141 122 50 46 91 76 Debt securities 774 764 774 764 Equities 276 (108) 276 (96) (12)Commodities 6 18 6 18
Rental income 51 52 17 18 (1) (3) (1) (3) 1 34 37 Investment income 265 64 194 18 51 29 12 11 1 2 11 9 5 5 1 3
Long-term assets sales 11 14 11 9 11 9 5 Dividends received 254 50 194 18 51 29 1 2 1 2 5 1 3
Sundry income 485 454 10 13 100 121 78 38 64 32 14 6 (18) 345 326 (30) (44)
Non-banking subsidiary 185 204 185 204 Other sundry income 300 250 10 13 100 121 78 38 64 32 14 6 (18) 160 122 (30) (44)
Foreign currency translation losses (1) (1)
total non-interest revenue 13 215 11 906 2 264 2 236 1 566 1 518 7 353 6 358 6 011 5 147 1 342 1 211 1 958 1 518 401 388 (327) (112)
3.1 private equity income included in nirNedbank group Nedbank Capital Nedbank Corporate
Rm 2010 2009 2010 2009 2010 2009
Securities dealing 3 268 (46) 251 49 17 Investment income – dividends received 225 36 194 18 31 18
total private equity nir 228 304 148 269 80 35
Realised 230 109 214 72 16 37 unrealised (2) 195 (66) 197 64 (2)
total private equity nir 228 304 148 269 80 35
44b neDBanK group analyst presentation 2010
NOTES TO THE CONSOLiDATED STATEMENT OF COMpREHENSivE iNCOME continued FOR THE yEAR ENDED 31 DECEMBER
4 expenses
Nedbank group Nedbank Capital Nedbank CorporateNedbank Retail and
Business Banking Nedbank RetailNedbank Business
Banking Nedbank Wealth Shared Services
Central Management and
Eliminations
Rm 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Staff costs 8 794 7 898 736 767 1 263 1 192 4 579 4 103 3 628 3 272 951 831 738 562 1 522 1 348 (44) (74)
Salaries and wages 8 716 7 900 Long-term employee benefits (44) (15)Share-based payment expenses – employees 122 13
Computer processing 2 135 1 993 98 111 192 138 438 418 381 355 57 63 71 75 1 333 1 251 3 –
Depreciation for computer equipment 337 340 Amortisation of computer software 496 456 Operating lease charges for computer equipment 167 137 Other computer processing expenses 1 135 1 060
Communication and travel 671 633 91 75 125 158 336 321 299 286 37 35 43 34 110 79 (34) (34)
Depreciation for vehicles 8 4 Other communication and travel 663 629
Occupation and accommodation 1 392 1 262 52 48 177 151 1 064 982 964 896 100 86 81 98 14 (18) 4 1
Depreciation for owner-occupied land and buildings 106 81 Operating lease charges for land and buildings 526 527 Other occupation and accommodation expenses 760 654
Marketing and public relations * 1 009 861 67 46 56 47 487 435 434 392 53 43 81 38 350 324 (32) (29)Fees and insurances 1 592 1 407 118 111 428 285 576 526 549 477 27 49 115 110 273 327 82 48 Office equipment and consumables 357 340 6 7 69 85 202 186 190 176 12 10 18 15 62 46 1
Depreciation for furniture and equipment 263 207 Operating lease charges for furniture and equipment 11 26 Other office equipment and consumables 83 107
Other sundries * 436 542 18 22 52 57 320 358 302 337 18 21 15 68 35 38 (4) (1)Amortisation of intangible assets** 64 38 64 38 Activity-justified transfer-pricing – – 320 384 93 (7) 3 088 2 831 2 014 1 857 1 074 974 243 188 (3 626) (3 359) (118) (37)
operating expenses 16 450 14 974 1 506 1 571 2 455 2 106 11 090 10 160 8 761 8 048 2 329 2 112 1 469 1 226 73 36 (143) (125)BEE transaction expenses 148 126 55 35 41 26 20 42 9 34 11 8 2 1 40 42 (10) (20)
BEE share-based payments expenses 143 114 Fees 5 12
total operating expenses 16 598 15 100 1 561 1 606 2 496 2 132 11 110 10 202 8 770 8 082 2 340 2 120 1 471 1 227 113 78 (153) (145)
* 2009 comparative information has been restated for Imperial Bank Limited joint ventures and alliance management fees of R28 million previously
disclosed in marketing and public relations line
** Amortisation charge for client relationships, contractual rights and other intangible assets
45b
4 expenses
Nedbank group Nedbank Capital Nedbank CorporateNedbank Retail and
Business Banking Nedbank RetailNedbank Business
Banking Nedbank Wealth Shared Services
Central Management and
Eliminations
Rm 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Staff costs 8 794 7 898 736 767 1 263 1 192 4 579 4 103 3 628 3 272 951 831 738 562 1 522 1 348 (44) (74)
Salaries and wages 8 716 7 900 Long-term employee benefits (44) (15)Share-based payment expenses – employees 122 13
Computer processing 2 135 1 993 98 111 192 138 438 418 381 355 57 63 71 75 1 333 1 251 3 –
Depreciation for computer equipment 337 340 Amortisation of computer software 496 456 Operating lease charges for computer equipment 167 137 Other computer processing expenses 1 135 1 060
Communication and travel 671 633 91 75 125 158 336 321 299 286 37 35 43 34 110 79 (34) (34)
Depreciation for vehicles 8 4 Other communication and travel 663 629
Occupation and accommodation 1 392 1 262 52 48 177 151 1 064 982 964 896 100 86 81 98 14 (18) 4 1
Depreciation for owner-occupied land and buildings 106 81 Operating lease charges for land and buildings 526 527 Other occupation and accommodation expenses 760 654
Marketing and public relations * 1 009 861 67 46 56 47 487 435 434 392 53 43 81 38 350 324 (32) (29)Fees and insurances 1 592 1 407 118 111 428 285 576 526 549 477 27 49 115 110 273 327 82 48 Office equipment and consumables 357 340 6 7 69 85 202 186 190 176 12 10 18 15 62 46 1
Depreciation for furniture and equipment 263 207 Operating lease charges for furniture and equipment 11 26 Other office equipment and consumables 83 107
Other sundries * 436 542 18 22 52 57 320 358 302 337 18 21 15 68 35 38 (4) (1)Amortisation of intangible assets** 64 38 64 38 Activity-justified transfer-pricing – – 320 384 93 (7) 3 088 2 831 2 014 1 857 1 074 974 243 188 (3 626) (3 359) (118) (37)
operating expenses 16 450 14 974 1 506 1 571 2 455 2 106 11 090 10 160 8 761 8 048 2 329 2 112 1 469 1 226 73 36 (143) (125)BEE transaction expenses 148 126 55 35 41 26 20 42 9 34 11 8 2 1 40 42 (10) (20)
BEE share-based payments expenses 143 114 Fees 5 12
total operating expenses 16 598 15 100 1 561 1 606 2 496 2 132 11 110 10 202 8 770 8 082 2 340 2 120 1 471 1 227 113 78 (153) (145)
* 2009 comparative information has been restated for Imperial Bank Limited joint ventures and alliance management fees of R28 million previously
disclosed in marketing and public relations line
** Amortisation charge for client relationships, contractual rights and other intangible assets
46b neDBanK group analyst presentation 2010
NOTES TO THE CONSOLiDATED STATEMENT OF COMpREHENSivE iNCOME continued FOR THE yEAR ENDED 31 DECEMBER
5 TaxaTIon ChargeRm 2010 2009
south african normal taxationCurrent 1 547 1 413 Deferred (248) (369)Secondary taxation on companies (STC) 33 66 Foreign taxation 57 149
Current and deferred taxation on income 1 389 1 259 Prior year overprovision – current (68) 112 Prior year underprovision – deferred 45 (139)
Total taxation on income 1 366 1 232 Tax on non-trading and capital items (2) 75
total 1 364 1 307
effective taxation rate excluding non-trading and capital items (%) 20,7 20,2
%
taxation rate reconciliation (excluding non-trading and capital items)standard rate of south african normal taxation 28,0 28,0 Non-taxable dividend income (4,9) (5,8)Capital items (1,0) (0,9)Structured deals (0,3) (2,0)STC 0,5 1,1Other (1,6) (0,2)
Total taxation on income as percentage of profit before taxation (excluding non-trading and capital items) 20,7 20,2
6 non-ConTrollIng InTeresT – ordInary shareholders
2010 2009Balance income Balance Income
Rm sheet statement sheet statement
Imperial Bank (100% acquired 5 February 2010) 25 1 738 215 Nedbank (Swaziland) 100 23 70 17 Nedbank (Namibia) various subsidiaries 6 2 6 1 Nedbank (Malawi) 3 * 3 * Fairbairn Private Bank (Jersey) (100% acquired
1 June 2009) 15 MBCA Bank (Zimbabwe) 34 4 27 * BoE Private Clients (100% acquired 1 June 2009) (5)Ideas Nedbank AIIF Investors Trust 10 5 5 (1)
Other 153 59 1 849 242
* Less than R1 million
47b
7 preFerenCe shares
Dividends declaredNumber of
sharesCents per
share Amount (Rm)2009Nedbank – Final declared for 2008 – paid March 2009 312 781 032 58,26844 182 Imperial – Final declared for 2008 – paid March 2009 3 000 000 545,32877 16 Nedbank – Interim declared for 2009 – paid Sept 2009 312 781 032 48,98630 153 Imperial – Interim declared for 2009 – paid Sept 2009 3 000 000 457,20548 14
365 2010Nedbank – Final declared for 2009 – paid March 2010 358 277 491 40,15068 144 Imperial – Final declared for 2009 – paid March 2010 3 000 000 374,73973 11 Nedbank – Interim declared for 2010 – payable Sept 2010 358 277 491 38,05479 136
2912010Nedbank – Final declared for 2010 – payable March 2011 358 277 491 36,20548 130
Dividends declared calculations Days Rate Amount (Rm)2009nedbank1 Jul 2010 – 31 Dec 2010 184 129,7 1 Jul 2010 – 9 Sept 2010 71 7,500% 52,3 10 Sept 2010 – 18 Nov 2010 70 7,125% 48,9 19 Nov 2010 – 31 Dec 2010 43 6,750% 28,5
total declared 129,7 Dividends paid calculations Days Rate Amount (Rm)2010 (paid march 2010)nedbank1 Jan 2009 – 30 Jun 2009 184 143,8 1 Jul 2009 – 13 Aug 2009 44 8,250% 35,6 14 Aug 2009 – 31 Dec 2009 140 7,875% 108,2 imperial1 Jan 2009 – 30 Jun 2009 184 11,2 1 Jul 2009 – 13 Aug 2009 44 7,700% 2,8 14 Aug 2009 – 31 Dec 2009 140 7,350% 8,4 2010 (Paid September 2010)nedbank1 Jan 2009 – 30 Jun 2009 181 136,3 1 Jan 2010 – 25 Mar 2010 84 7,875% 64,9 26 Mar 2010 – 30 Jun 2010 97 7,500% 71,4
total paid 291,3 less: Cumulative dividend paid 14,2 less: Dividend paid to group entities 11,2 profit attributable to preference shareholders 265,9 2009 (paid march 2009)nedbank1 Jul 2008 – 31 Dec 2008 184 182,1 1 Jul 2008 – 14 Dec 2008 167 11,625% 165,8 15 Dec 2008 – 31 Dec 2008 17 11,250% 16,3 imperial1 Jul 2008 – 31 Dec 2008 184 16,3 1 Jul 2008 – 14 Dec 2008 167 10,850% 14,8 15 Dec 2008 – 31 Dec 2008 17 10,500% 1,5 2009 (Paid September 2009)nedbank1 Jan 2009 – 30 Jun 2009 181 153,2 1 Jan 2009 – 8 Feb 2009 39 11,250% 37,6 9 Feb 2009 – 24 Mar 2009 44 10,500% 39,6 25 Mar 2009 – 3 May 2009 40 9,750% 33,4 4 May 2009 – 28 May 2009 25 9,000% 19,3 29 May 2009 – 30 Jun 2009 33 8,250% 23,3 imperial1 Jan 2009 – 30 Jun 2009 181 13,7 1 Jan 2009 – 8 Feb 2009 39 10,500% 3,4 9 Feb 2009 – 24 Mar 2009 44 9,800% 3,6 25 Mar 2009 – 3 May 2009 40 9,100% 3,0 4 May 2009 – 28 May 2009 25 8,400% 1,7 29 May 2009 – 30 Jun 2009 33 7,700% 2,0
total paid 365,3 less: Dividend paid to group entities 12,2 less: non-controlling – ordinary shareholders’ share of dividend paid 8,9 profit attrributable to preference shareholders 344,2
48b neDBanK group analyst presentation 2010
NOTES TO THE CONSOLiDATED STATEMENT OF FiNANCiAL pOSiTiON AT 31 DECEMBER
8 loans and advanCes
segmental breakdown Nedbank group Nedbank Capital Nedbank Corporate Nedbank Retail and
Business Banking Nedbank Retail Nedbank Business
Banking Nedbank Wealth Shared Services
Central Management and
Eliminations
Rm 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Homeloans** 145 895 144 921 2 654 2 239 129 714 130 032 115 578 115 801 14 136 14 231 13 733 12 846 (206) (196)Commercial mortgages** 86 100 80 672 72 461 67 368 13 504 13 130 2 217 2 090 11 287 11 040 312 339 (177) (165)Properties in possession 662 887 5 2 639 880 631 871 8 9 18 5 Credit cards 7 910 7 334 7 890 7 314 7 835 7 263 55 51 20 20 Overdrafts 13 307 11 093 12 4 868 2 819 8 334 8 177 2 076 2 155 6 258 6 022 93 97 Term loans 74 605 68 321 4 323 4 336 55 121 52 538 14 555 10 484 13 109 9 783 1 446 701 610 967 (4) (4)
Personal loans 13 001 9 508 478 413 12 522 9 093 12 518 9 091 4 2 1 2 Other term loans 61 604 58 813 4 323 4 336 54 643 52 125 2 033 1 391 591 692 1 442 699 609 965 (4) (4)
Overnight loans 12 552 12 420 1 1 11 887 11 661 664 758 1 664 757 Other loans to clients 42 897 43 203 33 019 31 743 3 239 1 933 4 200 4 730 375 421 3 825 4 309 1 874 4 667 (5) 121 570 9
Foreign client lending 6 715 6 761 5 133 5 562 1 619 887 155 312 1 1 154 311 (192) Remittances in transit 108 107 (1) 119 78 (5) 31 (9) 30 4 1 1 (5) (3) Other loans * 36 074 36 335 27 887 26 181 1 501 968 4 050 4 387 383 390 3 667 3 997 1 874 4 666 124 762 9
Leases and instalment debtors 67 881 64 128 47 147 3 957 3 616 63 642 60 150 53 085 48 340 10 557 11 810 258 239 (23) (24)Preference shares and debentures 20 499 16 633 14 863 11 168 4 880 5 059 583 226 583 226 55 61 118 119 Factoring accounts 3 202 2 179 3 202 2 179 3 202 2 179
Deposits placed under reverse repurchase agreements 10 849 8 026 10 849 8 026
Trade, other bills and bankers’ acceptances 140 282 137 278 3 4
Loans and advances before impairments 486 499 460 099 63 251 55 699 159 072 147 235 246 927 238 060 194 906 186 725 52 021 51 335 16 976 19 245 (5) 121 278 (261)Impairment of advances (11 226) (9 798) (923) (384) (1 369) (1 200) (8 828) (8 060) (7 572) (6 840) (1 256) (1 220) (107) (156) (1) 2 2
total loans and advances 475 273 450 301 62 328 55 315 157 703 146 035 238 099 230 000 187 334 179 885 50 765 50 115 16 869 19 089 (6) 121 280 (259)
Comprises: Loans and advances to clients 469 021 448 155 49 801 48 529 156 461 146 723 246 932 238 027 194 915 186 694 52 017 51 333 15 549 15 013 124 278 (261) Loans and advances to banks 17 478 11 944 13 450 7 170 2 611 512 (5) 33 (9) 31 4 2 1 427 4 232 (5) (3)
loans and advances before impairments 486 499 460 099 63 251 55 699 159 072 147 235 246 927 238 060 194 906 186 725 52 021 51 335 16 976 19 245 (5) 121 278 (261)
* Represents mainly loans relating to Specialised Finance and Debt Capital Markets in Nedbank Capital and other loans in Nedbank Corporate and
Nedbank Retail
** Comparative results have been restated for the prior year’s disclosure within Imperial Bank Limited. Mortgage loans as migrated to the property
asset finance book have been reclassified from homeloans to commercial mortgages, and mortgage loans as migrated to Nedbank Retail
have been reclassified from commercial to homeloans, in line with the group’s reporting. The net result of the reclassification is a R4,2 billion
adjustment from homeloans to commercial mortgages.
49b
8 loans and advanCes
segmental breakdown Nedbank group Nedbank Capital Nedbank Corporate Nedbank Retail and
Business Banking Nedbank Retail Nedbank Business
Banking Nedbank Wealth Shared Services
Central Management and
Eliminations
Rm 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Homeloans** 145 895 144 921 2 654 2 239 129 714 130 032 115 578 115 801 14 136 14 231 13 733 12 846 (206) (196)Commercial mortgages** 86 100 80 672 72 461 67 368 13 504 13 130 2 217 2 090 11 287 11 040 312 339 (177) (165)Properties in possession 662 887 5 2 639 880 631 871 8 9 18 5 Credit cards 7 910 7 334 7 890 7 314 7 835 7 263 55 51 20 20 Overdrafts 13 307 11 093 12 4 868 2 819 8 334 8 177 2 076 2 155 6 258 6 022 93 97 Term loans 74 605 68 321 4 323 4 336 55 121 52 538 14 555 10 484 13 109 9 783 1 446 701 610 967 (4) (4)
Personal loans 13 001 9 508 478 413 12 522 9 093 12 518 9 091 4 2 1 2 Other term loans 61 604 58 813 4 323 4 336 54 643 52 125 2 033 1 391 591 692 1 442 699 609 965 (4) (4)
Overnight loans 12 552 12 420 1 1 11 887 11 661 664 758 1 664 757 Other loans to clients 42 897 43 203 33 019 31 743 3 239 1 933 4 200 4 730 375 421 3 825 4 309 1 874 4 667 (5) 121 570 9
Foreign client lending 6 715 6 761 5 133 5 562 1 619 887 155 312 1 1 154 311 (192) Remittances in transit 108 107 (1) 119 78 (5) 31 (9) 30 4 1 1 (5) (3) Other loans * 36 074 36 335 27 887 26 181 1 501 968 4 050 4 387 383 390 3 667 3 997 1 874 4 666 124 762 9
Leases and instalment debtors 67 881 64 128 47 147 3 957 3 616 63 642 60 150 53 085 48 340 10 557 11 810 258 239 (23) (24)Preference shares and debentures 20 499 16 633 14 863 11 168 4 880 5 059 583 226 583 226 55 61 118 119 Factoring accounts 3 202 2 179 3 202 2 179 3 202 2 179
Deposits placed under reverse repurchase agreements 10 849 8 026 10 849 8 026
Trade, other bills and bankers’ acceptances 140 282 137 278 3 4
Loans and advances before impairments 486 499 460 099 63 251 55 699 159 072 147 235 246 927 238 060 194 906 186 725 52 021 51 335 16 976 19 245 (5) 121 278 (261)Impairment of advances (11 226) (9 798) (923) (384) (1 369) (1 200) (8 828) (8 060) (7 572) (6 840) (1 256) (1 220) (107) (156) (1) 2 2
total loans and advances 475 273 450 301 62 328 55 315 157 703 146 035 238 099 230 000 187 334 179 885 50 765 50 115 16 869 19 089 (6) 121 280 (259)
Comprises: Loans and advances to clients 469 021 448 155 49 801 48 529 156 461 146 723 246 932 238 027 194 915 186 694 52 017 51 333 15 549 15 013 124 278 (261) Loans and advances to banks 17 478 11 944 13 450 7 170 2 611 512 (5) 33 (9) 31 4 2 1 427 4 232 (5) (3)
loans and advances before impairments 486 499 460 099 63 251 55 699 159 072 147 235 246 927 238 060 194 906 186 725 52 021 51 335 16 976 19 245 (5) 121 278 (261)
* Represents mainly loans relating to Specialised Finance and Debt Capital Markets in Nedbank Capital and other loans in Nedbank Corporate and
Nedbank Retail
** Comparative results have been restated for the prior year’s disclosure within Imperial Bank Limited. Mortgage loans as migrated to the property
asset finance book have been reclassified from homeloans to commercial mortgages, and mortgage loans as migrated to Nedbank Retail
have been reclassified from commercial to homeloans, in line with the group’s reporting. The net result of the reclassification is a R4,2 billion
adjustment from homeloans to commercial mortgages.
50b neDBanK group analyst presentation 2010
NOTES TO THE CONSOLiDATED STATEMENT OF FiNANCiAL pOSiTiON continued AT 31 DECEMBER
9 InvesTMenT seCurITIesRm 2010 2009
listed investments 536 485
Private-equity portfolio 532 482 Other 4 3
unlisted investments 2 475 2 491
Endowment policies 18 18 N.E.S. Investment (Pty) Limited 354 185 Morning Tide Investments 168 (Pty) Limited 105 91 Strate Limited 36 31 Private-equity portfolio 1 127 1 274 Other 835 892
Total listed and unlisted investments 3 011 2 976
Listed policyholder investments at market value 7 068 6 417
Equities 275 350 Government, public and private sector stock 117 396 unit trusts 6 676 5 671
unlisted policyholder investments at directors’ valuation 1 871 1 666
Equities 1 1 Negotiable certificates of deposit, money market and other short-term funds 1 870 1 665
Net policyholder liabilities (32) (34)
Total policyholder investments 8 907 8 049
Total investment securities 11 918 11 025
summary of total private equity investments and loansinvestment securities 1 659 1 756
property investments 614 563
Listed investments 508 462 unlisted investments 106 101
other investments 1 045 1 193
Listed investments 24 20 unlisted investments 1 021 1 173
investment in associatesunlisted property investments 908 897
private equity shareholder loans and mezzanine debt facilities 1 945 2 312
total private equity investments and loans 4 512 4 965
51b
NOTES
52b neDBanK group analyst presentation 2010
NOTES TO THE CONSOLiDATED STATEMENT OF FiNANCiAL pOSiTiON continued AT 31 DECEMBER
10 InvesTMenTs In assoCIaTe CoMpanIes and joInT venTures
percentage holding Acquisition
Date towhichequity
incomeaccoun-
Equity-accounted earnings Carrying amount
Market value/ Directors’ valuation
Net indebtedness of loans to/(from) associates
Name of company and nature of business 2010 2009 date year-end ted for 2010 2009 2010 2009 2010 2009 2010 2009
unlistedJoint ventures 56
BoE (Pty) Limited + 50 Jan 03 Dec May 09 30 Nedgroup Life Assurance Company Limited + 50 Jan 03 Dec May 09 26
associates 1 (1) 936 924 936 924 675 608
African Spirit Trading 306 (Pty) Limited ** 33 Oct 06 Dec 40 40 38 Ballywood Properties 1 (Pty) Limited 49 49 Nov 05 Feb 14 11 14 11 1 Bond Choice (Pty) Limited ++ 29 29 Jun 02 Feb Dec 10 (2) 25 25 25 25 Capricorn Business and Technology Park (Pty) Limited 41 41 Nov 98 Sep 11 14 11 14 9 11 Century City JV 50 Dec 10 Dec 55 55 Clidet No 683 (Pty) Limited 49 49 Aug 06 Feb 303 274 303 274 166 166 Consep Developments (Pty) Limited 31 25 Dec 07 Feb 16 22 16 22 16 16 Emergent Investments (Pty) Limited 49 49 Jul 07 Feb 79 75 79 75 66 66 Erf 7 Sandown (Pty) Limited 35 35 Oct 06 Feb 25 20 25 20 5 5 Falcon Forest Trading 85 (Pty) Limited 30 30 Mar 05 Feb 23 15 23 15 * 2 Firefly Investments 74 (Pty) Limited 35 35 Oct 06 Feb 16 19 16 19 7 5 Friedshelf 113 (Pty) Limited 20 20 Aug 02 Feb 14 13 14 13 Hazeldean Retreat (Pty) Limited 20 20 Mar 07 Feb 12 11 12 11 9 12 Masingita Property Investment Holdings (Pty) Limited 35 35 Aug 05 Feb 40 30 40 30 12 12 Mooirivier Mall (Pty) Limited 30 30 Nov 06 Feb 13 6 13 6 83 38 Nedglen Property Developments (Pty) Limited 35 35 Nov 04 Jun 13 11 13 11 Newmarket Property Developments JV 40 40 Aug 06 Dec 10 23 10 23 14 24 Odyssey Developments (Pty) Limited 49 49 Nov 07 Jun 105 114 105 114 34 32 Oukraal Developments (Pty) Limited 30 30 Jan 08 Jun 27 29 27 29 15 15 SafDev Tanganani (Pty) Limited 25 25 Oct 08 Jun 13 13 13 13 TBA Genomineerdes (Pty) Limited 30 30 Jan 03 Jun 8 9 8 9 3 3 The Waterbuck Trust 40 40 Oct 07 Feb 15 15 15 15 18 18 Visigro Investments (Pty) Limited 30 30 Jun 06 Feb 83 108 83 108 (20) (19)Whirlprops 33 (Pty) Limited ++ 49 49 Sep 06 Feb Dec 10 * * * * XDV Investments (Pty) Limited 25 25 Nov 06 Jun * 20 * 20 (20)Other ++ Dec 10 1 1 16 7 16 7 237 184
1 55 936 924 936 924 675 608
These associate companies are all property related companies. There are regulatory constraints, apart from the provisions of the
Companies Act, 1973, that restricts the distribution of funds to the shareholders. Distribution of funds may however be restricted by
loan agreements that the entities have entered into.
* Represents amounts less than R1 million.
** Disposed of during 2010.
+ These joint ventures have been consolidated as subsidiaries from 5 June 2009.
++ These associates are equity accounted.
53b
10 InvesTMenTs In assoCIaTe CoMpanIes and joInT venTures
percentage holding Acquisition
Date towhichequity
incomeaccoun-
Equity-accounted earnings Carrying amount
Market value/ Directors’ valuation
Net indebtedness of loans to/(from) associates
Name of company and nature of business 2010 2009 date year-end ted for 2010 2009 2010 2009 2010 2009 2010 2009
unlistedJoint ventures 56
BoE (Pty) Limited + 50 Jan 03 Dec May 09 30 Nedgroup Life Assurance Company Limited + 50 Jan 03 Dec May 09 26
associates 1 (1) 936 924 936 924 675 608
African Spirit Trading 306 (Pty) Limited ** 33 Oct 06 Dec 40 40 38 Ballywood Properties 1 (Pty) Limited 49 49 Nov 05 Feb 14 11 14 11 1 Bond Choice (Pty) Limited ++ 29 29 Jun 02 Feb Dec 10 (2) 25 25 25 25 Capricorn Business and Technology Park (Pty) Limited 41 41 Nov 98 Sep 11 14 11 14 9 11 Century City JV 50 Dec 10 Dec 55 55 Clidet No 683 (Pty) Limited 49 49 Aug 06 Feb 303 274 303 274 166 166 Consep Developments (Pty) Limited 31 25 Dec 07 Feb 16 22 16 22 16 16 Emergent Investments (Pty) Limited 49 49 Jul 07 Feb 79 75 79 75 66 66 Erf 7 Sandown (Pty) Limited 35 35 Oct 06 Feb 25 20 25 20 5 5 Falcon Forest Trading 85 (Pty) Limited 30 30 Mar 05 Feb 23 15 23 15 * 2 Firefly Investments 74 (Pty) Limited 35 35 Oct 06 Feb 16 19 16 19 7 5 Friedshelf 113 (Pty) Limited 20 20 Aug 02 Feb 14 13 14 13 Hazeldean Retreat (Pty) Limited 20 20 Mar 07 Feb 12 11 12 11 9 12 Masingita Property Investment Holdings (Pty) Limited 35 35 Aug 05 Feb 40 30 40 30 12 12 Mooirivier Mall (Pty) Limited 30 30 Nov 06 Feb 13 6 13 6 83 38 Nedglen Property Developments (Pty) Limited 35 35 Nov 04 Jun 13 11 13 11 Newmarket Property Developments JV 40 40 Aug 06 Dec 10 23 10 23 14 24 Odyssey Developments (Pty) Limited 49 49 Nov 07 Jun 105 114 105 114 34 32 Oukraal Developments (Pty) Limited 30 30 Jan 08 Jun 27 29 27 29 15 15 SafDev Tanganani (Pty) Limited 25 25 Oct 08 Jun 13 13 13 13 TBA Genomineerdes (Pty) Limited 30 30 Jan 03 Jun 8 9 8 9 3 3 The Waterbuck Trust 40 40 Oct 07 Feb 15 15 15 15 18 18 Visigro Investments (Pty) Limited 30 30 Jun 06 Feb 83 108 83 108 (20) (19)Whirlprops 33 (Pty) Limited ++ 49 49 Sep 06 Feb Dec 10 * * * * XDV Investments (Pty) Limited 25 25 Nov 06 Jun * 20 * 20 (20)Other ++ Dec 10 1 1 16 7 16 7 237 184
1 55 936 924 936 924 675 608
These associate companies are all property related companies. There are regulatory constraints, apart from the provisions of the
Companies Act, 1973, that restricts the distribution of funds to the shareholders. Distribution of funds may however be restricted by
loan agreements that the entities have entered into.
* Represents amounts less than R1 million.
** Disposed of during 2010.
+ These joint ventures have been consolidated as subsidiaries from 5 June 2009.
++ These associates are equity accounted.
54b neDBanK group analyst presentation 2010
NOTES TO THE CONSOLiDATED STATEMENT OF FiNANCiAL pOSiTiON continued AT 31 DECEMBER
11 InTangIble asseTsRm Note 2010 2009
Computer software and capitalised development costs 11.1 1 998 1 819 goodwill 11.2 4 945 4 981 other intangible assets 11.3 551 615
7 494 7 415
11.1 Computer software and capitalised development costs – carrying amountAmortisation
Rm periods 2010 2009
Computer software 2 – 5 years 1 154 1 068
Customer product systems 645 579 Infrastructure and supporting systems 295 288 Risk management systems 189 201 Channel systems 25
Capitalised development costs none * 844 751
Customer product systems 318 297 Infrastructure and supporting systems 433 370 Risk management systems 85 84 Channel systems 8
1 998 1 819
Computer softwareOpening balance 1 068 933 Additions 154 153 Commissioned during year 423 439 Disposals and retirements 4Foreign exchange and other movements 5 (1)Amortisation charge for the year (496) (459)Impairments (1)
Closing balance 1 154 1 068
Capitalised development costsOpening balance 751 674 Additions 570 526 Commissioned during year (423) (439)Impairments (54) (10)
Closing balance 844 751
* Assets not yet commisioned and only begin amortisation once transferred to computer software. These assets are impaired if the value is adjusted.
11.2 goodwill – carrying amountRm 2010 2009
Carrying amount at beginning of year 4 981 3 894 Arising on business combinations 1 126Foreign currency translation (36) (39)
Carrying amount at end of year 4 945 4 981
55b
11 InTangIble asseTs (ConTInued)11.2 goodwill – carrying amount
2010 2009
RmPercentage
holding Cost
Accumu-lated
impair-ment
lossesCarryingamount Cost
Accumu-lated
impair-ment losses
Carryingamount
Fairbairn Private Bank (Jersey)
Limited/Fairbairn Trust
Company Limited (Guernsey)* 100 372 (138) 234 408 (138) 270 Peoples Mortgage Limited 100 198 (198) – 198 (198) –Imperial Bank Limited 100 285 (25) 260 285 (25) 260 Nedbank Limited 100 3 938 (1 114) 2 824 3 938 (1 114) 2 824 Old Mutual Bank 100 206 206 206 206 BoE (Pty) Limited 100 725 725 725 725 Nedgroup Life Assurance
Company Limited 100 401 401 401 401 Nedbank Namibia Limited 100 134 (2) 132 134 (2) 132 Capital One 82 82 82 82 American Express 81 81 81 81
6 422 (1 477) 4 945 6 458 (1 477) 4 981
* Movement in cost due to foreign currency translation
11.3 other intangible assets – carrying amount2010 2009
Rm
Amortis-ation
period Cost
Accumu-lated
amorti-sation and
impair-ments
Carryingamount Cost
Accumu-lated
amorti-sation and
impair-ments
Carryingamount
Major subsidiariesBoE (Pty) Limited 8 – 15 years 458 71 387 458 27 431 Nedgroup Life Assurance Company Limited 10 years 195 31 164 195 11 184
653 102 551 653 38 615
11.4 intangible assets – ratio’sRm 2010 2009
Total assets 608 718 570 703 Ordinary shareholders’ equity 44 101 39 649 Intangible assets 7 494 7 415
Capitalised software (Refer note 11.1) 1 998 1 819 Goodwill (Refer note 11.2) 4 945 4 981 Other intangible assets (Refer note 11.3) 551 615
Intangible assets/Total assets (%) 1,23 1,30 Intangible assets/Ordinary shareholders’ equity (%) 17,0 18,7
56b neDBanK group analyst presentation 2010
13 aMounTs owed To deposITorssegmental breakdown
Nedbank group Nedbank Capital Nedbank CorporateNedbank Retail and
Business Banking Nedbank Retail Business Banking Nedbank Wealth Shared Services
Central Management and
Eliminations
Rm 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Current accounts 47 672 44 539 161 380 6 383 4 309 40 395 39 086 25 223 24 657 15 172 14 429 674 665 1 16 58 83 Savings accounts 14 756 15 294 549 507 8 431 8 405 8 249 8 209 182 196 5 758 6 348 18 34 Other deposits and loan accounts 293 467 283 829 58 070 56 120 118 827 110 506 111 692 111 927 53 502 53 550 58 190 58 377 4 924 6 087 6 (1) (52) (810)
Call and term deposits 166 386 178 424 3 579 10 975 77 093 81 485 81 307 80 449 30 080 28 596 51 227 51 853 4 294 5 474 113 41 Fixed deposits 27 078 27 941 2 689 3 485 1 568 1 296 22 765 23 117 22 081 22 455 684 662 59 49 (3) (6)Cash management deposits 46 151 33 037 239 50 39 557 27 021 5 784 5 410 18 17 5 766 5 393 571 563 (7)Other deposits 53 852 44 427 51 563 41 610 609 704 1 836 2 951 1 323 2 482 513 469 1 6 6 (162) (845)
Foreign client liabilities 9 781 7 027 3 343 1 628 3 983 3 155 2 455 2 244 230 225 2 225 2 019 Negotiable certificates of deposit 110 584 103 731 108 810 102 339 1 452 1 354 322 38 Deposits received under repurchase agreements 14 180 14 935 13 817 14 574 363 325 36
total amounts owed to depositors 490 440 469 355 184 201 175 041 131 194 119 831 162 973 161 662 87 204 86 641 75 769 75 021 11 356 13 100 370 340 346 (619)
NOTES TO THE CONSOLiDATED STATEMENT OF FiNANCiAL pOSiTiON continued AT 31 DECEMBER
12 ordInary share CapITal and preMIuM2010 2009
PriceR
Number ofshares
m
Total
Rm
Ordinaryshare
capitalRm
Ordinaryshare
premiumRm
Number ofshares
m
Total
Rm
Ordinaryshare
capitalRm
Ordinaryshare
premiumRm
Total shares listed 514,9 19 638 515 19 123 498,8 17 419 499 16 920 Less: Treasury shares held 66,3 3 667 66 3 601 63,1 3 255 63 3 192
Executed H2 2005 97,2 1,0 100 1 99 1,0 100 1 99 Executed H1 2006 111,7 5,5 616 6 610 5,5 616 6 610 Executed H2 2006 109,2 8,2 897 8 889 8,2 897 8 889
Bought back – capital management 109,04 14,7 1 613 15 1 598 14,7 1 613 15 1 598
BEE transaction shares 40,3 938 40 898 40,5 938 40 898 Other shares held by group entities 11,3 1 116 11 1 105 7,9 704 8 696
Net shares reported 448,6 15 971 449 15 522 435,7 14 164 436 13 728
57b
13 aMounTs owed To deposITorssegmental breakdown
Nedbank group Nedbank Capital Nedbank CorporateNedbank Retail and
Business Banking Nedbank Retail Business Banking Nedbank Wealth Shared Services
Central Management and
Eliminations
Rm 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Current accounts 47 672 44 539 161 380 6 383 4 309 40 395 39 086 25 223 24 657 15 172 14 429 674 665 1 16 58 83 Savings accounts 14 756 15 294 549 507 8 431 8 405 8 249 8 209 182 196 5 758 6 348 18 34 Other deposits and loan accounts 293 467 283 829 58 070 56 120 118 827 110 506 111 692 111 927 53 502 53 550 58 190 58 377 4 924 6 087 6 (1) (52) (810)
Call and term deposits 166 386 178 424 3 579 10 975 77 093 81 485 81 307 80 449 30 080 28 596 51 227 51 853 4 294 5 474 113 41 Fixed deposits 27 078 27 941 2 689 3 485 1 568 1 296 22 765 23 117 22 081 22 455 684 662 59 49 (3) (6)Cash management deposits 46 151 33 037 239 50 39 557 27 021 5 784 5 410 18 17 5 766 5 393 571 563 (7)Other deposits 53 852 44 427 51 563 41 610 609 704 1 836 2 951 1 323 2 482 513 469 1 6 6 (162) (845)
Foreign client liabilities 9 781 7 027 3 343 1 628 3 983 3 155 2 455 2 244 230 225 2 225 2 019 Negotiable certificates of deposit 110 584 103 731 108 810 102 339 1 452 1 354 322 38 Deposits received under repurchase agreements 14 180 14 935 13 817 14 574 363 325 36
total amounts owed to depositors 490 440 469 355 184 201 175 041 131 194 119 831 162 973 161 662 87 204 86 641 75 769 75 021 11 356 13 100 370 340 346 (619)
NOTES
58b neDBanK group analyst presentation 2010
NOTES TO THE CONSOLiDATED STATEMENT OF FiNANCiAL pOSiTiON continued AT 31 DECEMBER
14 long-TerM debT InsTruMenTsNominal
value Instrument terms 2010 2009
Subordinated debt 10 937 11 126
Rand-denominated (Rm) 10 269 10 385
Callable bonds repayable on 30 December 2010 (IPB2) (a) + 500 8,38% per annum* 493 Callable bonds repayable on 4 December 2013 (IPB3) (b) 300 JIBAR + 2,5% per annum** 151 151 Callable notes repayable
1 500 7,85% per annum* 1 525 1 499 Callable notes repayable on 20 September 2018 (NED06) (d) 1 800 9,84% per annum* 1 915 1 781 Callable notes repayable on 8 February 2017 (NED07) (c) 650 9,03% per annum* 682 658 Callable notes repayable on 8 February 2019 (NED08) (d) 1 700 8,90% per annum* 1 759 1 643 Callable notes repayable on 6 July 2022 (NED09) (f) 2 000 JIBAR + 0,47% per annum** 2 031 2 036 Callable notes repayable on 15 August 2017 (NED10) (c) 500 JIBAR + 0,45% per annum** 504 505 Callable notes repayable on 17 September 2020 (NED11) (e) 1 000 10,54% per annum* 1 076 997 Callable notes repayable on 14 December 2017 (NED12A) (c) 500 JIBAR + 0,70% per annum** 502 502 Callable notes repayable on 14 December 2017 (NED12B) (c) 120 10,38% per annum* 124 120
Namibian dollar-denominated (NAM$m) 2 2
Long-term debenture repayable on 15 September 2030 40
17% per annum until 15 September 2000 – thereafter zero coupon 2 2
US dollar-denominated (US$m)Callable notes repayable on 3 March 2022 (EMTN01) (i) 100 3-month uS$ LIBOR** 666 739
Hybrid subordinated debt 1 808 1 766
Rand-denominated (Rm)Callable notes repayable on 20 November 2018 (NEDH1A) (g) 487 15,05% per annum* 529 484 Callable notes repayable on 20 November 2018 (NEDH1B) (g) 1 265 JIBAR + 4,75% per annum** 1 279 1 282
Securitised liabilities 1 154 1 412
Rand-denominated (Rm)Callable notes repayable on 18 November 2039 (GRN1A1) (h) 291 JIBAR + 0,25% per annum** 38 294 Callable notes repayable on 18 November 2039 (GR1A2A) (h) 1 407 JIBAR + 0,60% per annum** 991 993 Callable notes repayable on 18 November 2039 (GRN1B) (h) 98 JIBAR + 0,85% per annum** 74 75 Callable notes repayable on 18 November 2039 (GRN1C) (h) 76 JIBAR + 1,1% per annum** 51 50
59b
14 long-TerM debT InsTruMenTs (ConTInued)Nominal
value Instrument terms 2010 2009
Senior unsecured debtRand-denominated (ZARm) 12 197 5 773
Senior unsecured notes repayable on 9 September 2012 (NBK1B) 1 690 JIBAR + 1,50% per annum** 1 697 1 005Senior unsecured notes repayable on 15 September 2015 (NBK2A) 3 244 10,55% per annum* 3 347 2 065Senior unsecured notes repayable on 15 September 2015 (NBK2B) 1 044 JIBAR + 2,20% per annum** 1 054 251Senior unsecured notes repayable on 9 September 2019 (NBK3A) 762 11,39% per annum* 788 414Senior unsecured notes repayable on 31 March 2013 (NBKI1) 1 750 3,9% real yield base CPI ref 106.70667* 1 859 1 805Senior unsecured notes repayable on 28 October 2024 (NBK4) 130 Zero coupon 164 136Senior unsecured notes repayable on 31 March 2013 (NBKI1u) 98 3,8% real yield base CPI ref 108.68065* 102 97Senior unsecured notes repayable on 19 April 2013 (NBK5B) 1 552 JIBAR + 1,48% per annum** 1 575 Senior unsecured notes repayable on 19 April 2015 (NBK6A) 478 R157 + 1,75% per annum* 487 Senior unsecured notes repayable on 19 April 2015 (NBK6B) 1 027 JIBAR + 1,75% per annum** 1 043 Senior unsecured notes repayable on 19 April 2020 (NBK7B) 80 JIBAR + 2,15% per annum** 81
other 8 7
Rand-denominated (Rm) 8 7
unsecured debentures repayable on
30 November 2029 200 Zero coupon 8 7
total long-term debt instruments in
issue 26 104 20 084
During the year there were no defaults or breaches of principal, interest or any other terms and conditions of long-term debt instruments.Coupon holders are entitled, in the event of interest default, to put the coupon covering such interest payments to Nedbank Group Limited. The uS dollar subordinated-debt instruments are either matched by advances to clients or covered against exchange rate fluctuations. In accordance with the group’s articles of association, the borrowing powers of the company are unlimited.* Interest on these notes is payable biannually.** Interest on these notes is payable quarterly.+ The debt instrument was redeemed on its call date 30 December 2010.
(a) Callable by Nedbank Limited (previously by Imperial Bank Limited), after approximately five years from the date of issue, 30 March 2006 (i.e. 30 December 2010), at which time the interest converts to a floating 3-month JIBAR rate, plus a spread of 2,67%.
(b) Callable by Nedbank Limited (previously by Imperial Bank Limited), after five years from the date of issue, 4 December 2008 (i.e. 4 December 2013), at which time the interest converts to a floating 3-month JIBAR rate, plus a spread of 3,75%.
(c) Callable by the issuer, Nedbank Limited, after five years from the date of issue, 24 April 2006, 8 February 2007, 15 August 2007, 14 December 2007 and 14 December 2007 (i.e. 24 April 2011, 8 February 2012, 15 August 2012, 14 December 2012 and 14 December 2012), at which time the interest converts to a floating 3-month JIBAR rate, plus a spread of 1,70%, 1,95%, 1,45%, 1,70% and 1,70%, respectively.
(d) Callable by the issuer, Nedbank Limited, after seven years from the date of issue, being 20 September 2006 and 8 February 2007 (i.e. 20 September 2013 and 8 February 2014), at which time the interest converts to a floating 3-month JIBAR rate, plus a spread of 2,05% and 2,17%, respectively.
(e) Callable by the issuer, Nedbank Limited, after eight years from the date of issue, being 17 September 2007 (i.e. 17 September 2015), at which time the interest converts to a floating 3-month JIBAR rate, plus a spread of 2,85%.
(f) Callable by the issuer, Nedbank Limited, after ten years from the date of issue, being 6 July 2007 (i.e. 6 July 2017), at which time the interest will step up by 1,00% to a floating 3-month JIBAR rate, plus a spread of 1,47%.
(g) Callable by the issuer, Nedbank Limited, after ten and a half years from the date of issue, being 20 May 2008 (i.e. 20 Nov 2018), at which the interest converts to a floating 3-month JIBAR rate plus 712,5bps in perpetuity unless called.
(h) Callable by the issuer, Greenhouse Funding (Pty) Limited, after approximately five years from the date of issue, being 10 December 2007 (i.e. 18 November 2012), at which time the interest rate on the notes (GRN1A1,GR1A2A, GRN1B, GRN1C)will step up to three-month JIBAR rate, plus a spread of 0,40%, 0,80%, 1,10% and 1,35%, respectively.
(i) Callable by the issuer, Nedbank Limited, after eight years from the date of issue 3 March 2009 (i.e. 3 March 2017), at which time the interest rate coverts to a floating 3-month uS$ LIBOR rate, plus a spread of 3,00%.
60b neDBanK group analyst presentation 2010
NOTES TO THE CONSOLiDATED STATEMENT OF FiNANCiAL pOSiTiON continued AT 31 DECEMBER
15 bee: esTIMaTed FuTure dIluTIve shares and IFrs 2 ChargeThese are purely illustrative scenarios for the period 2011 – 2017 of the dilutive potential ordinary shares and the IFRS 2 charge
as at the end of each year. The first scenario is at an illustrative annual share price growth of 10% and dilutive sensitivity.
15.1 estimated future dilutive shares as at end of each year (‘000)
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Actual Actual Actual Actual Actual Actual Illustrative
forecast Illustrative
forecast Illustrative
forecast Illustrative
forecast Illustrative
forecast Illustrative
forecast Illustrative
forecast
Dilutive shares at 10% share price growth:sa Bee transaction 1 408 8 144 9 812 2 094 4 381 5 084 2 103 2 225 1 733 1 691 1 348 608 353
Black Business Partners (BBP) 764 2 992 2 631 1 024 775 509 674 Non-executive directors (NED) 21 116 225 81 171 142 Retail 12 685 2 051 1 065 1 Corporate 581 3 164 3 243 1 976 2 269 Black Executives 11 209 377 226 286 374 256 273 320 327 291 209 137 Black Management 19 978 1 285 722 923 1 524 1 339 1 278 1 413 1 364 1 057 400 216
namibia Bee transaction 10 6 19 42 56 45 48 44 46
Black Business Partners (BBP) 20 22 24 26 29 Affinity Groups (AG) 18 17 16 15 14 Education Discretionary LTIP 9 13 13 Black Management 10 6 10 29 5 7 8 3 4
1 408 8 144 9 822 2 100 4 400 5 126 2 159 2 271 1 781 1 735 1 394 608 353
Dilutive shares at share price growth of:sa Bee transaction5% 1 408 8 144 9 812 2 094 4 381 5 084 1 785 1 348 1 375 1 302 1 003 271 149 15% 1 408 8 144 9 812 2 094 4 381 5 084 2 648 3 020 2 194 1 824 1 321 421 171 20% 1 408 8 144 9 812 2 094 4 381 5 084 3 090 3 907 3 061 2 120 1 454 485 181 30% 1 408 8 144 9 812 2 094 4 381 5 084 3 933 5 399 4 521 3 513 1 679 593 198
namibia Bee transaction5% 10 6 19 42 104 111 40 41 42 15% 10 6 19 42 114 123 44 45 47 20% 10 6 19 42 115 124 45 46 48 30% 10 6 19 42 116 125 46 47 49
61b
15 bee: esTIMaTed FuTure dIluTIve shares and IFrs 2 ChargeThese are purely illustrative scenarios for the period 2011 – 2017 of the dilutive potential ordinary shares and the IFRS 2 charge
as at the end of each year. The first scenario is at an illustrative annual share price growth of 10% and dilutive sensitivity.
15.1 estimated future dilutive shares as at end of each year (‘000)
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Actual Actual Actual Actual Actual Actual Illustrative
forecast Illustrative
forecast Illustrative
forecast Illustrative
forecast Illustrative
forecast Illustrative
forecast Illustrative
forecast
Dilutive shares at 10% share price growth:sa Bee transaction 1 408 8 144 9 812 2 094 4 381 5 084 2 103 2 225 1 733 1 691 1 348 608 353
Black Business Partners (BBP) 764 2 992 2 631 1 024 775 509 674 Non-executive directors (NED) 21 116 225 81 171 142 Retail 12 685 2 051 1 065 1 Corporate 581 3 164 3 243 1 976 2 269 Black Executives 11 209 377 226 286 374 256 273 320 327 291 209 137 Black Management 19 978 1 285 722 923 1 524 1 339 1 278 1 413 1 364 1 057 400 216
namibia Bee transaction 10 6 19 42 56 45 48 44 46
Black Business Partners (BBP) 20 22 24 26 29 Affinity Groups (AG) 18 17 16 15 14 Education Discretionary LTIP 9 13 13 Black Management 10 6 10 29 5 7 8 3 4
1 408 8 144 9 822 2 100 4 400 5 126 2 159 2 271 1 781 1 735 1 394 608 353
Dilutive shares at share price growth of:sa Bee transaction5% 1 408 8 144 9 812 2 094 4 381 5 084 1 785 1 348 1 375 1 302 1 003 271 149 15% 1 408 8 144 9 812 2 094 4 381 5 084 2 648 3 020 2 194 1 824 1 321 421 171 20% 1 408 8 144 9 812 2 094 4 381 5 084 3 090 3 907 3 061 2 120 1 454 485 181 30% 1 408 8 144 9 812 2 094 4 381 5 084 3 933 5 399 4 521 3 513 1 679 593 198
namibia Bee transaction5% 10 6 19 42 104 111 40 41 42 15% 10 6 19 42 114 123 44 45 47 20% 10 6 19 42 115 124 45 46 48 30% 10 6 19 42 116 125 46 47 49
62b neDBanK group analyst presentation 2010
NOTES TO THE CONSOLiDATED STATEMENT OF FiNANCiAL pOSiTiON continued AT 31 DECEMBER
15 bee: esTIMaTed FuTure dIluTIve shares and IFrs 2 Charge (ConTInued)15.2 estimated share-based payment iFrs 2 Bee charge per year (rm)
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total
iFrs 2 Bee charge at 10% share price growth:sa Bee transaction 371,2 116,5 146,5 180,0 109,0 140,0 76,4 71,8 77,3 73,3 66,3 58,6 54,1 1 541,0
Black Business Partners (BBP) 214,6 19,0 9,0 10,0 10,0 23,0 24,0 26,4 29,0 31,9 35,1 38,7 470,8 Non-executive directors (NED) 0,6 2,0 12,0 5,0 2,0 21,6 Retail 1,1 38,0 30,2 73,0 6,0 148,3 Corporate 14,3 50,7 56,3 60,0 53,0 101,0 9,7 345,0 Black Executives 2,4 6,7 7,0 9,0 6,0 7,0 11,3 14,3 17,2 16,1 13,3 9,4 6,3 126,0 Black Management 10,6 19,1 22,0 24,0 32,0 22,0 32,4 33,5 33,7 28,2 21,0 14,0 9,1 301,7 Broad-based 127,6 127,6
namibia Bee transaction – 21,7 – 0,9 1,0 2,9 5,1 2,4 1,6 1,2 0,9 0,5 0,2 35,5
Black Business Partners (BBP) 9,0 9,0 Affinity Groups (AG) 3,3 3,3 Education 4,4 4,4 Discretionary 2,2 1,9 1,5 1,2 0,9 0,5 0,2 8,3 LTIP 0,1 0,4 2,7 0,4 3,2 Black Management 0,9 0,9 2,5 0,2 0,1 0,1 2,2 Broad-based 5,0 5,0
371,2 138,2 146,5 180,9 110,0 142,9 81,5 74,2 78,9 74,6 67,2 59,1 54,3 1 576,5
15.2 total estimated iFrs 2 Bee charge (rm)
at varying share price growth assumptions
December 2010 December 2009 5% 10% 15% 20% 30% 5% 10% 15% 20% 30%
sa Bee transaction 989,8 1 541,0 1 618,1 1 699,0 1 868,9 1 148,6 1 490,7 1 565,2 1 643,6 1 807,8
Pegged cost for instruments allocated to date 912,9 912,9 958,5 1 006,4 1 107,1 1 021,3 1 021,3 1 072,3 1 126,0 1 238,5 Future costs dependant on share price growth 76,9 628,1 659,6 692,5 761,8 127,3 469,4 492,9 517,6 569,3
namibia Bee transaction 35,6 35,5 35,3 35,1 34,8 34,5 34,8 35,1 35,5 36,1
Pegged cost for instruments allocated to date 38,8 38,8 38,8 38,8 38,8 28,8 28,8 28,8 28,8 28,8 Future costs dependant on share price growth (3,2) (3,3) (3,5) (3,7) (4,0) 5,7 6,0 6,3 6,7 7,3
1 025,4 1 576,5 1 653,4 1 734,1 1 903,6 1 183,1 1 525,5 1 600,3 1 679,1 1 843,9
63b
15 bee: esTIMaTed FuTure dIluTIve shares and IFrs 2 Charge (ConTInued)15.2 estimated share-based payment iFrs 2 Bee charge per year (rm)
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total
iFrs 2 Bee charge at 10% share price growth:sa Bee transaction 371,2 116,5 146,5 180,0 109,0 140,0 76,4 71,8 77,3 73,3 66,3 58,6 54,1 1 541,0
Black Business Partners (BBP) 214,6 19,0 9,0 10,0 10,0 23,0 24,0 26,4 29,0 31,9 35,1 38,7 470,8 Non-executive directors (NED) 0,6 2,0 12,0 5,0 2,0 21,6 Retail 1,1 38,0 30,2 73,0 6,0 148,3 Corporate 14,3 50,7 56,3 60,0 53,0 101,0 9,7 345,0 Black Executives 2,4 6,7 7,0 9,0 6,0 7,0 11,3 14,3 17,2 16,1 13,3 9,4 6,3 126,0 Black Management 10,6 19,1 22,0 24,0 32,0 22,0 32,4 33,5 33,7 28,2 21,0 14,0 9,1 301,7 Broad-based 127,6 127,6
namibia Bee transaction – 21,7 – 0,9 1,0 2,9 5,1 2,4 1,6 1,2 0,9 0,5 0,2 35,5
Black Business Partners (BBP) 9,0 9,0 Affinity Groups (AG) 3,3 3,3 Education 4,4 4,4 Discretionary 2,2 1,9 1,5 1,2 0,9 0,5 0,2 8,3 LTIP 0,1 0,4 2,7 0,4 3,2 Black Management 0,9 0,9 2,5 0,2 0,1 0,1 2,2 Broad-based 5,0 5,0
371,2 138,2 146,5 180,9 110,0 142,9 81,5 74,2 78,9 74,6 67,2 59,1 54,3 1 576,5
15.2 total estimated iFrs 2 Bee charge (rm)
at varying share price growth assumptions
December 2010 December 2009 5% 10% 15% 20% 30% 5% 10% 15% 20% 30%
sa Bee transaction 989,8 1 541,0 1 618,1 1 699,0 1 868,9 1 148,6 1 490,7 1 565,2 1 643,6 1 807,8
Pegged cost for instruments allocated to date 912,9 912,9 958,5 1 006,4 1 107,1 1 021,3 1 021,3 1 072,3 1 126,0 1 238,5 Future costs dependant on share price growth 76,9 628,1 659,6 692,5 761,8 127,3 469,4 492,9 517,6 569,3
namibia Bee transaction 35,6 35,5 35,3 35,1 34,8 34,5 34,8 35,1 35,5 36,1
Pegged cost for instruments allocated to date 38,8 38,8 38,8 38,8 38,8 28,8 28,8 28,8 28,8 28,8 Future costs dependant on share price growth (3,2) (3,3) (3,5) (3,7) (4,0) 5,7 6,0 6,3 6,7 7,3
1 025,4 1 576,5 1 653,4 1 734,1 1 903,6 1 183,1 1 525,5 1 600,3 1 679,1 1 843,9
64b neDBanK group analyst presentation 2010
NEDBANK GROuP SHARE-BASED pAYMENTS ANALySIS OF BEE SCHEMES – ILLuSTRATIVE ROLL OF SHARES – BASED ON A 10% INCREASE IN SHARE PRICE
15 bee: esTIMaTed FuTure dIluTIve shares and IFrs 2 Charge (ConTInued)
Inception Actual
2005 Actual
2006 Actual
2007 Actual
2008 Actual
2009
Actual
2010
Illustrativeforecast
2011
Illustrativeforecast
2012
Illustrativeforecast
2013
Illustrativeforecast
2014
Illustrativeforecast
2015
Illustrativeforecast
2016
Illustrativeforecast
2017
Illustrativeforecast
2018
Illustrativeforecast
2019 Total Illustrativecap shares
Illustrativecap shares
Illustrativecap shares
15.4 illustrative vesting outside of groupOpening balance 1 471 700 1 559 493 1 713 617 3 744 050 9 212 904 10 116 024 23 800 016 24 688 381 25 950 018 27 266 523 36 293 604 37 648 657 38 231 513 38 466 950 sa Bee transaction 47 977 154 124 2 030 433 5 468 854 883 310 13 666 809 852 675 1 190 929 1 303 995 9 019 296 974 562 582 856 235 437 930 278 38 813 237 9 070 662 (13 249 486) 34 634 414
BBP 7 891 300 7 891 300 5 378 003 (5 947 106) 7 322 197 NED 789 130 789 130 198 147 (424 666) 562 611 Retail – For sale 19 965 65 280 2 024 091 3 192 834 5 302 170 5 302 170 Retail – Free shares 1 767 390 1 767 390 1 767 390 Corporate Non-Aka 10 160 049 10 160 049 2 878 148 (5 714 284) 7 323 913 Corporate Aka 1 676 901 1 676 901 616 364 (1 163 429) 1 129 836 Community Black executives 105 480 247 138 150 068 111 091 110 738 145 362 199 956 311 949 237 248 101 101 373 394 2 093 521 2 093 521 Black management 28 012 88 844 6 342 403 150 636 172 890 662 741 585 1 080 192 1 158 634 928 041 662 614 345 609 134 337 556 885 7 661 076 7 661 076 Broad-based 1 471 700 1 471 700 Evergreen
namibia Bee transaction 39 816 19 810 17 182 35 690 70 708 12 510 7 784 380 491 81 452 665 443 327 452 (413 133) 579 762
BBP 199 929 199 929 119 714 (173 659) 145 984 AG 74 048 74 048 29 498 (44 259) 59 287 Education 98 730 98 730 39 331 (59 011) 79 049 Discretionary 81 452 81 452 138 909 (136 203) 84 157 LTIP 6 600 13 368 61 782 81 750 81 750 Black Management 13 210 17 182 22 322 8 926 12 510 7 784 7 784 89 718 89 718 Broad-based 39 816 39 816 39 816
1 559 493 1 713 617 3 744 050 9 212 904 10 116 024 23 800 016 24 688 381 25 950 018 27 266 523 36 293 604 37 648 657 38 231 513 38 466 950 39 478 680 39 478 680 9 398 114 (13 662 618) 35 214 176
treasury shares, i.e. in trusts considered to be inside group
opening balance 39 796 430 40 374 080 40 219 956 38 189 523 32 720 669 31 817 549 18 133 557 17 245 192 15 983 555 14 667 050 5 639 969 4 284 916 3 702 060 3 466 623 inception** 41 268 130 665 443
sa Bee transaction 41 268 130 (1 471 700) (47 977) (154 124) (2 030 433) (5 468 854) (883 310) (13 666 809) (852 675) (1 190 929) (1 303 995) (9 019 296) (974 562) (582 856) (235 437) (930 278) 2 454 893
BBP 7 891 300 (7 891 300) NED 789 130 (789 130) Retail For sale 5 302 170 (19 965) (65 280) (2 024 091) (3 192 834) Retail – Free shares 1 767 390 (1 767 390) Corporate Non-Aka 10 160 049 (10 160 049) Corporate Aka 1 676 901 (1 676 901) Community 1 531 551 1 531 551 Black executives 2 093 521 (105 480) (247 138) (150 068) (111 091) (110 738) (145 362) (199 956) (311 949) (237 248) (101 101) (373 394) Black management 7 661 076 (28 012) (88 844) (6 342) (403 150) (636 172) (890 662) (741 585) (1 080 192) (1 158 634) (928 041) (662 614) (345 609) (134 337) (556 885) Broad-based 1 471 700 (1 471 700) Evergreen 923 342 923 342
namibia Bee transaction 665 443 (39 816) (19 810) (17 182) (35 690) (70 708) (12 510) (7 784) (380 491) (81 452)
BBP 199 929 (199 929) AG 74 048 (74 048) Education 98 730 (98 730) Discretionary 81 452 (81 452) LTIP 81 750 (6 600) (13 368) (61 782) Black Management 89 718 (13 210) (17 182) (22 322) (8 926) (12 510) (7 784) (7 784) Broad-based 39 816 (39 816)
39 796 430 40 374 080 40 219 956 38 189 523 32 720 669 31 817 549 18 133 557 17 245 192 15 983 555 14 667 050 5 639 969 4 284 916 3 702 060 3 466 623 2 454 893 2 454 893
Illustrative cap/issued/purchased shares 815 960 2 150 413 3 666 988 5 304 469 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248
39 796 430 41 190 040 42 370 369 41 856 511 38 025 138 37 869 797 24 185 805 23 297 440 22 035 803 20 719 298 11 692 217 10 337 164 9 754 308 9 518 871 8 507 141 2 454 893
** Inception figures have changed due to re-allocation between the Ned scheme and Corporate Non-Aka
65b
15 bee: esTIMaTed FuTure dIluTIve shares and IFrs 2 Charge (ConTInued)
Inception Actual
2005 Actual
2006 Actual
2007 Actual
2008 Actual
2009
Actual
2010
Illustrativeforecast
2011
Illustrativeforecast
2012
Illustrativeforecast
2013
Illustrativeforecast
2014
Illustrativeforecast
2015
Illustrativeforecast
2016
Illustrativeforecast
2017
Illustrativeforecast
2018
Illustrativeforecast
2019 Total Illustrativecap shares
Illustrativecap shares
Illustrativecap shares
15.4 illustrative vesting outside of groupOpening balance 1 471 700 1 559 493 1 713 617 3 744 050 9 212 904 10 116 024 23 800 016 24 688 381 25 950 018 27 266 523 36 293 604 37 648 657 38 231 513 38 466 950 sa Bee transaction 47 977 154 124 2 030 433 5 468 854 883 310 13 666 809 852 675 1 190 929 1 303 995 9 019 296 974 562 582 856 235 437 930 278 38 813 237 9 070 662 (13 249 486) 34 634 414
BBP 7 891 300 7 891 300 5 378 003 (5 947 106) 7 322 197 NED 789 130 789 130 198 147 (424 666) 562 611 Retail – For sale 19 965 65 280 2 024 091 3 192 834 5 302 170 5 302 170 Retail – Free shares 1 767 390 1 767 390 1 767 390 Corporate Non-Aka 10 160 049 10 160 049 2 878 148 (5 714 284) 7 323 913 Corporate Aka 1 676 901 1 676 901 616 364 (1 163 429) 1 129 836 Community Black executives 105 480 247 138 150 068 111 091 110 738 145 362 199 956 311 949 237 248 101 101 373 394 2 093 521 2 093 521 Black management 28 012 88 844 6 342 403 150 636 172 890 662 741 585 1 080 192 1 158 634 928 041 662 614 345 609 134 337 556 885 7 661 076 7 661 076 Broad-based 1 471 700 1 471 700 Evergreen
namibia Bee transaction 39 816 19 810 17 182 35 690 70 708 12 510 7 784 380 491 81 452 665 443 327 452 (413 133) 579 762
BBP 199 929 199 929 119 714 (173 659) 145 984 AG 74 048 74 048 29 498 (44 259) 59 287 Education 98 730 98 730 39 331 (59 011) 79 049 Discretionary 81 452 81 452 138 909 (136 203) 84 157 LTIP 6 600 13 368 61 782 81 750 81 750 Black Management 13 210 17 182 22 322 8 926 12 510 7 784 7 784 89 718 89 718 Broad-based 39 816 39 816 39 816
1 559 493 1 713 617 3 744 050 9 212 904 10 116 024 23 800 016 24 688 381 25 950 018 27 266 523 36 293 604 37 648 657 38 231 513 38 466 950 39 478 680 39 478 680 9 398 114 (13 662 618) 35 214 176
treasury shares, i.e. in trusts considered to be inside group
opening balance 39 796 430 40 374 080 40 219 956 38 189 523 32 720 669 31 817 549 18 133 557 17 245 192 15 983 555 14 667 050 5 639 969 4 284 916 3 702 060 3 466 623 inception** 41 268 130 665 443
sa Bee transaction 41 268 130 (1 471 700) (47 977) (154 124) (2 030 433) (5 468 854) (883 310) (13 666 809) (852 675) (1 190 929) (1 303 995) (9 019 296) (974 562) (582 856) (235 437) (930 278) 2 454 893
BBP 7 891 300 (7 891 300) NED 789 130 (789 130) Retail For sale 5 302 170 (19 965) (65 280) (2 024 091) (3 192 834) Retail – Free shares 1 767 390 (1 767 390) Corporate Non-Aka 10 160 049 (10 160 049) Corporate Aka 1 676 901 (1 676 901) Community 1 531 551 1 531 551 Black executives 2 093 521 (105 480) (247 138) (150 068) (111 091) (110 738) (145 362) (199 956) (311 949) (237 248) (101 101) (373 394) Black management 7 661 076 (28 012) (88 844) (6 342) (403 150) (636 172) (890 662) (741 585) (1 080 192) (1 158 634) (928 041) (662 614) (345 609) (134 337) (556 885) Broad-based 1 471 700 (1 471 700) Evergreen 923 342 923 342
namibia Bee transaction 665 443 (39 816) (19 810) (17 182) (35 690) (70 708) (12 510) (7 784) (380 491) (81 452)
BBP 199 929 (199 929) AG 74 048 (74 048) Education 98 730 (98 730) Discretionary 81 452 (81 452) LTIP 81 750 (6 600) (13 368) (61 782) Black Management 89 718 (13 210) (17 182) (22 322) (8 926) (12 510) (7 784) (7 784) Broad-based 39 816 (39 816)
39 796 430 40 374 080 40 219 956 38 189 523 32 720 669 31 817 549 18 133 557 17 245 192 15 983 555 14 667 050 5 639 969 4 284 916 3 702 060 3 466 623 2 454 893 2 454 893
Illustrative cap/issued/purchased shares 815 960 2 150 413 3 666 988 5 304 469 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248
39 796 430 41 190 040 42 370 369 41 856 511 38 025 138 37 869 797 24 185 805 23 297 440 22 035 803 20 719 298 11 692 217 10 337 164 9 754 308 9 518 871 8 507 141 2 454 893
** Inception figures have changed due to re-allocation between the Ned scheme and Corporate Non-Aka
66b neDBanK group analyst presentation 2010
NEDBANK GROuP SHARE-BASED pAYMENTScontinued15 bee: esTIMaTed FuTure dIluTIve shares and IFrs 2 Charge (ConTInued)
Inception 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total
illustrative roll of shares
sa Bee transactionIssued outside group 1 471 700 1 519 677 1 673 801 3 704 234 9 173 088 10 056 398 23 723 208 24 575 883 25 766 812 27 070 807 36 090 104 37 064 666 37 647 522 37 882 959 38 813 237 38 813 237 Treasury shares 41 268 130 39 796 430 39 748 453 39 594 329 37 563 896 32 095 042 31 211 732 17 544 922 16 692 247 15 501 318 14 197 323 5 178 026 4 203 464 3 620 608 3 385 171 2 454 893 2 454 893
original Bee allocation 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 Cap shares 116 659 747 199 1 024 777 1 458 515 1 551 300 860 842 903 026 510 426 561 469 617 616 679 378 9 031 207
BBP 96 214 289 466 442 266 619 756 675 548 421 840 464 024 510 426 561 469 617 616 679 378 5 378 003 NED 28 021 35 439 48 777 51 586 17 162 17 162 198 147 Corporate 20 445 429 712 547 072 789 982 824 166 421 840 421 840 3 455 057
41 268 130 41 384 789 42 015 329 42 292 907 42 726 645 42 819 430 42 128 972 42 171 156 41 778 556 41 829 599 41 885 746 41 947 508 41 268 130 41 268 130 41 268 130 41 268 130 50 299 337 Call option shares (9 949 366) (5 947 106) (15 896 472)
BBP (5 947 106) (5 947 106) NED (621 898) (621 898) Corporate (9 327 468) (9 327 468)
shares expected at end 41 268 130 41 384 789 42 015 329 42 292 907 42 726 645 42 819 430 42 128 972 32 221 790 41 778 556 41 829 599 41 885 746 36 000 401 41 268 130 41 268 130 41 268 130 41 268 130 34 402 865
Weighted dilutive shares 1 406 976 8 143 756 9 811 687 2 093 953 4 381 086 5 084 264 2 103 406 2 225 370 1 733 235 1 691 435 1 348 111 608 499 352 918
illustrative roll of shares namibia Bee transactionIssued outside group 39 816 39 816 39 816 39 816 59 626 76 808 112 498 183 206 195 716 203 500 583 991 583 991 665 443 583 991 665 444 Treasury shares 665 442 625 626 625 626 625 626 625 626 605 816 588 634 552 944 482 236 469 726 461 942 81 451 81 451 1 81 453 30 059
original Bee allocation 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 444 665 444 695 503 Cap/issued/purchased shares 13 937 34 815 35 377 13 291 14 620 16 082 17 690 19 459 21 405 23 546 6 255 6 881 7 569 230 928
BBP 8 928 19 148 20 061 6 102 6 712 7 383 8 122 8 934 9 827 10 810 106 028 AG 2 724 6 296 7 431 3 280 3 608 3 969 4 366 4 802 5 282 5 811 47 569 Education 2 285 3 113 418 699 769 846 930 1 023 1 126 1 238 12 448 Discretionary 6 258 7 467 3 210 3 531 3 884 4 273 4 700 5 170 5 687 6 255 6 881 7 569 64 884
665 442 665 442 679 379 700 257 700 819 678 733 680 062 681 524 683 132 684 901 686 847 688 988 671 697 672 325 673 013 926 431 Call option shares (325 614) (87 519) (413 133)
BBP (173 659) (173 659) AG (44 259) (44 259) Education (59 011) (59 011) Discretionary (48 684) (87 519) (136 203)
Shares expected at end 665 442 665 442 679 379 700 257 700 819 678 733 680 062 681 524 683 132 684 901 686 847 363 374 671 697 584 806 673 013 513 299
67b
15 bee: esTIMaTed FuTure dIluTIve shares and IFrs 2 Charge (ConTInued) Inception 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total
illustrative roll of shares
sa Bee transactionIssued outside group 1 471 700 1 519 677 1 673 801 3 704 234 9 173 088 10 056 398 23 723 208 24 575 883 25 766 812 27 070 807 36 090 104 37 064 666 37 647 522 37 882 959 38 813 237 38 813 237 Treasury shares 41 268 130 39 796 430 39 748 453 39 594 329 37 563 896 32 095 042 31 211 732 17 544 922 16 692 247 15 501 318 14 197 323 5 178 026 4 203 464 3 620 608 3 385 171 2 454 893 2 454 893
original Bee allocation 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 Cap shares 116 659 747 199 1 024 777 1 458 515 1 551 300 860 842 903 026 510 426 561 469 617 616 679 378 9 031 207
BBP 96 214 289 466 442 266 619 756 675 548 421 840 464 024 510 426 561 469 617 616 679 378 5 378 003 NED 28 021 35 439 48 777 51 586 17 162 17 162 198 147 Corporate 20 445 429 712 547 072 789 982 824 166 421 840 421 840 3 455 057
41 268 130 41 384 789 42 015 329 42 292 907 42 726 645 42 819 430 42 128 972 42 171 156 41 778 556 41 829 599 41 885 746 41 947 508 41 268 130 41 268 130 41 268 130 41 268 130 50 299 337 Call option shares (9 949 366) (5 947 106) (15 896 472)
BBP (5 947 106) (5 947 106) NED (621 898) (621 898) Corporate (9 327 468) (9 327 468)
shares expected at end 41 268 130 41 384 789 42 015 329 42 292 907 42 726 645 42 819 430 42 128 972 32 221 790 41 778 556 41 829 599 41 885 746 36 000 401 41 268 130 41 268 130 41 268 130 41 268 130 34 402 865
Weighted dilutive shares 1 406 976 8 143 756 9 811 687 2 093 953 4 381 086 5 084 264 2 103 406 2 225 370 1 733 235 1 691 435 1 348 111 608 499 352 918
illustrative roll of shares namibia Bee transactionIssued outside group 39 816 39 816 39 816 39 816 59 626 76 808 112 498 183 206 195 716 203 500 583 991 583 991 665 443 583 991 665 444 Treasury shares 665 442 625 626 625 626 625 626 625 626 605 816 588 634 552 944 482 236 469 726 461 942 81 451 81 451 1 81 453 30 059
original Bee allocation 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 444 665 444 695 503 Cap/issued/purchased shares 13 937 34 815 35 377 13 291 14 620 16 082 17 690 19 459 21 405 23 546 6 255 6 881 7 569 230 928
BBP 8 928 19 148 20 061 6 102 6 712 7 383 8 122 8 934 9 827 10 810 106 028 AG 2 724 6 296 7 431 3 280 3 608 3 969 4 366 4 802 5 282 5 811 47 569 Education 2 285 3 113 418 699 769 846 930 1 023 1 126 1 238 12 448 Discretionary 6 258 7 467 3 210 3 531 3 884 4 273 4 700 5 170 5 687 6 255 6 881 7 569 64 884
665 442 665 442 679 379 700 257 700 819 678 733 680 062 681 524 683 132 684 901 686 847 688 988 671 697 672 325 673 013 926 431 Call option shares (325 614) (87 519) (413 133)
BBP (173 659) (173 659) AG (44 259) (44 259) Education (59 011) (59 011) Discretionary (48 684) (87 519) (136 203)
Shares expected at end 665 442 665 442 679 379 700 257 700 819 678 733 680 062 681 524 683 132 684 901 686 847 363 374 671 697 584 806 673 013 513 299
68b neDBanK group analyst presentation 2010
BEE DEAL – FORECAST ASSUMpTiONSThe following are the assumptions used for the South African BEE deal:
Changes in assumptions Forecast December 2010 December 2009
Timing of initial grant * August 2005 August 2005
Share price R87,90 for initial grantsR130.35 at December 2010 + 10% p.a. for future allocations
R87,90 for initial grantsR124.05 at December 2009 + 10% p.a. for future allocations
Timing of allocations Greater number allocated later (i.e. at higher share price) in line with latest fact pattern
Greater number allocated later (i.e. at higher share price) in line with latest fact pattern
Expected vesting criteria (Management Schemes)
Expected life to mirror experience in current employee schemes. Evenly spread between vesting and expiry dates at 50/50
Expected life to mirror experience in current employee schemes. Evenly spread between vesting and expiry dates at 50/50
Pricing of allocations Instrument values based on average share price on grant date Corporate and Non-executive Directors scheme issue prices based on R74,75 plus interest for all anticipated grants
Instrument values based on average share price on grant date Corporate and Non-executive Directors scheme issue prices based on R74,75 plus interest for all anticipated grants
Dividend yield Illustrative dividend yields Illustrative dividend yields
Participant drop-off rates Refined per scheme based on historical data increased for some
Refined per scheme based on historical data increased for some
* Grant date has impact on Black-Scholes valuation
69b
NEDBANK GROuP EMpLOYEE iNCENTivE SCHEMES
2010 2009
movementsInstruments outstanding at the beginning of the year 18 732 388 18 918 278Granted 4 581 240 5 274 418Exercised (5 200 338) (3 819 227)Expired (5 328 228) (333 979)Surrendered (1 114 433) (1 307 102)
Instruments outstanding at the end of the year 11 670 629 18 732 388
analysisNon-performance based options 1994 Scheme 43 500 628 280Performance based options and RSP’s 2005 Scheme 7 547 282p 11 180 686p
Non-performance based options and RSP’s 2005 Scheme 3 430 400 6 340 374Performance based matched shares 2005 Scheme 324 724 291 524Non-performance based matched shares 2005 Scheme 324 723 291 524
11 670 629 18 732 388
summary by schemeNedcor Group Employee Incentive Scheme (1994) 43 500 628 280Nedbank Group (2005) share option, matched and restricted share scheme 10 977 682 17 521 060Nedbank Group matched share scheme (2005) 649 447 583 048
Instruments outstanding at the end of the year 11 670 629 18 732 388
nedcor group employee incentive scheme (1994)The following options granted had not been exercised at 31 December 2010:
issueOption Number of priceexpiry date shares R
20-Apr-11 43 500 74.40
70b neDBanK group analyst presentation 2010
nedbank group (2005) share option, matched and restricted share scheme Share instruments:The following instruments granted had not been exercised at 31 December 2010:
Instrument Number of Priceexpiry date shares R
31-Dec-10 159 507p *31-Dec-10 92 208 *28-Feb-11 556 279 110.9804-Mar-11 1 735 427p *10-Aug-11 137 800 107.0312-Aug-11 156 125p *01-Jan-11 6 000 144.3001-Jan-11 8 900 134.3004-Mar-12 3 449 325p *12-Aug-12 582 315 *03-Mar-13 1 946 531p *04-Mar-13 1 946 531 *06-Aug-13 100 367p *07-Aug-13 100 367 *
Total 10 977 682
nedbank group matched shares scheme (2005):The obligation to deliver the following matched shares, 50% is subject to time and
the other 50% to performance criteria, exists at 31 December 2010:
Instrument Number ofexpiry date shares
01-Apr-11 252 14001-Apr-12 178 906 01-Apr-13 218 401
Total 649 447
P Performance-based instruments.
NEDBANK GROuP EMpLOYEE iNCENTivE SCHEMES continued
71b
SHAREHOLDERS’ ANALYSiSRegister date: 31 December 2010Authorised share capital: 600 000 000 sharesIssued share capital: 514 891 827 shares
Dec 2010 Dec 2009 major shareholders/managers Number of shares % holding % holding
Old Mutual Life Assurance Company (South Africa) Limited and associates 264 491 115 51,37 52,21 Nedbank Group treasury shares 66 327 716 12,89 12,63
BEE trusts:– Eyethu scheme – Nedbank South Africa 39 607 201 7,69 7,94 – Omufima scheme – Nedbank Namibia 722 240 0,14 0,15 Nedbank Group (2005) Share Option, Matched Share and
Restricted Share Scheme 11 003 534 2,14 1,53 Nedbank Group Limited and associates (Capital Management) 14 715 049 2,86 2,95 Nedbank Namibia Limited 47 512 0,01 0,01 NES Investments (Pty) Limited 232 180 0,05 0,05
Public Investment Corporation (SA) 33 212 027 6,45 5,78 Lazard Asset Management (uS) 15 228 510 2,96 6,00 Coronation Fund Managers (SA) 14 129 073 2,74 2,81 Sanlam Investment Management (SA) 11 235 331 2,18 2,20 STANLIB Asset Management (SA) 8 865 398 1,72 0,66BlackRock Inc (uS and uK) 7 088 356 1,38 1,20
Dec 2010 Dec 2009 major beneficial shareholders Number of shares % holding % holding
Old Mutual Life Assurance Company (South Africa) Limited and associates (SA) 264 491 115 51,37 52,21 Public Investment Corporation (SA) 39 286 687 7,63 7,42
Dec 2010 Dec 2009 geographical distribution of shareholders Number of shares % holding % holding
Domestic 448 155 287 87,04 86,42
– South Africa 437 206 579 84,91 85,17 – Namibia 8 294 868 1,61 0,67 – Swaziland 154 470 0,03– unclassified 2 499 370 0,49 0,58
Foreign 66 736 540 12,96 13,58
– united States of America 44 616 660 8,66 9,74 – united Kingdom and Ireland 7 705 099 1,50 1,10 – Europe 5 891 733 1,14 1,10 – Other countries 8 523 048 1,66 1,64
514 891 827 100,00 100,00
72b neDBanK group analyst presentation 2010
NEDBANK LIMITED CONSOLiDATED STATEMENT OF COMpREHENSivE iNCOMEFOR THE yEAR ENDED 31 DECEMBER
Rm 2010 2009
Interest and similar income 43 421 49 332 Interest expense and similar charges 27 556 33 795
Net interest income 15 865 15 537 Impairments charge on loans and advances 6 360 6 659
Income from lending activities 9 505 8 878 Non-interest revenue 10 741 10 338
Operating income 20 246 19 216 Total expenses 14 983 13 792
Operating expenses 14 838 13 674 BEE transaction expenses 145 118
Indirect taxation 387 402
Profit from operations before non-trading and capital items 4 876 5 022 Non-trading and capital items (103) (32)
Profit on sale of subsidiaries, investments, property and equipment (17) (22)Net impairment of investments, property, equipment and capitalised development costs (86) (10)
Profit from operations 4 773 4 990 Share of profits of associates and joint ventures (1)
Profit before direct taxation 4 773 4 989 Total direct taxation 983 960
Direct taxation 985 959 Taxation on non-trading and capital items (2) 1
profit for the year 3 790 4 029
Other comprehensive income net of taxation 118 264
Exchange differences on translating foreign operations (15) 32 Fair value adjustments on available-for-sale assets (31) 146 Gains on property revaluations 164 86
total comprehensive income for the year 3 908 4 293
Profit attributable to:Equity holders of the parent 3 737 3 790 Non-controlling interest ordinary shareholders 53 224 Non-controlling interest preference shareholders 15
profit for the year 3 790 4 029
Total comprehensive income attributable to:Equity holders of the parent 3 855 4 054 Non-controlling interest ordinary shareholders 53 224 Non-controlling interest preference shareholders 15
total comprehensive income for the year 3 908 4 293
earnIngs reConCIlIaTIonProfit attributable to equity holders of the parent 3 737 3 790 Less: Non-headline earnings items (101) (33)
Non-trading and capital items (103) (32)Taxation on non-trading and capital items 2 (1)
headline earnings 3 838 3 823
73b
NEDBANK LIMITED CONSOLiDATED STATEMENT OF FiNANCiAL pOSiTiON
AT 31 DECEMBER
Rm 2010 2009
asseTsCash and cash equivalents 7 469 6 823 Other short-term securities 21 955 14 408 Derivative financial instruments 14 077 12 871 Government and other securities 31 667 35 754 Loans and advances 469 527 444 403 Other assets 3 613 3 917 Clients’ indebtedness for acceptances 1 920 2 025 Current taxation receivable 440 580 Investment securities 2 999 3 012 Non-current assets held for sale 5 12 Investments in associate companies and joint ventures 933 922 Deferred taxation asset 48 36 Investment property 82 102 Property and equipment 5 394 4 754 Long-term employee benefit assets 1 965 1 783 Computer software and capitalised development costs 1 938 1 761 Goodwill 1 390 1 390 Mandatory reserve deposits with central bank 11 068 10 437
total assets 576 490 544 990
ToTal equITy and lIabIlITIesOrdinary share capital 27 27 Ordinary share premium 14 422 14 422 Reserves 20 281 18 174
total equity attributable to equity holders of the parent 34 730 32 623 Preference share capital and premium 3 560 3 483 Minority shareholders’ equity attributable to ordinary shareholders 110 1 796 Minority shareholders’ equity attributable to preference shareholders 91
total equity 38 400 37 993 Derivative financial instruments 11 930 10 799 Amounts owed to depositors 489 118 465 899 Other liabilities 6 179 5 218 Liabilities under acceptances 1 920 2 025 Current taxation liabilities 76 162 Deferred taxation liabilities 1 358 1 514 Long-term employee benefit liabilities 1 408 1 298 Long-term debt instruments 26 101 20 082
total liabilities 538 090 506 997
total equity and liabilities 576 490 544 990
Guarantees on behalf of clients 29 185 27 827
74b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEW
hIghlIghTsregulaTory and sTaTuTory developMenTs• Basel iii – Majority of the proposals are now finalised but some significant aspects are still outstanding. – Studies and opinions of the impact of Basel III on the banking industry and economic growth vary. – Implementation timelines extended considerably, commencing in 2013 with various phase-ins and transitional arrangements
through to 2019.
– On capital ■ Most heavily impacted are banks with relatively large capital market businesses, particularly trading activities,
securitisations, over-the-counter derivatives (counterparty credit risk) and securities lending. ■ Nedbank Group has a relatively small capital markets business and the overall impact is manageable.
– On liquidity ■ Internationally most banks generally fall short of the two new liquidity ratios, with shortfalls in high-quality liquid
assets and stable funding presenting significant business model implications. Both ratios remain under observation and banks have several years to meet them.
In particular, the net stable funding ratio (NSFR), in its current form, seems likely to significantly curtail longer-term lending. This is contrary to the primary role of banks to act as regulated financial intermediaries to convert short-term deposits into long-term lending, which enables economies to grow.
■ For Nedbank Group and generally the entire SA banking industry the impact of these two liquidity ratios would be pervasive if implemented as is, particularly the NSFR. However, a pragmatic approach is likely to be followed by the South African Reserve Bank (SARB).
• Solvency ii – Solvency Assessment and Management (SAM) is expected to be implemented in South Africa from 2014. SAM is South
Africa’s version of the international Solvency II requirements, which is similar to Basel II but for the insurance industry. – Impact on Nedbank Group (in the Nedbank Wealth Cluster only) is relatively small.
• Companies Act – The Companies Act 71 of 2008 required significant amendment. The Companies Amendment Bill, which is expected to come
into force on 1 April 2011, amends almost every section of the original act and the regulations are currently in draft form.
– For Nedbank Group and the SA banking industry the effect of the unintended consequences of S136(2) was addressed through the Banking Association of South Africa and the proposed revisions should resolve these concerns. Nedbank Group is assessing the full effect that this new act will have on its business.
• The Consumer protection Act – SA banks are required to be compliant by 31 March 2011. – Nedbank Group awaits the final regulations to complete its compliance programme.
• protection of personal information Act – It is expected that the Protection of Personal Information Bill will be passed into law during the Parliamentary first quarter
of 2011.
CapITal adequaCy • Regulatory capital – Nedbank Group’s capital ratios continued to strengthen year-on-year.
■ Core Tier 1: 10,1% (2009: 9,9%) ■ Tier 1: 11,7% (2009: 11,5%) ■ Total: 15,0% (2009: 14,9%)
– This strengthening occurred despite using internal capital resources to buy out the minorities in Imperial Bank, the negative impact on risk-weighted assets (RWA) of its integration into Nedbank Limited, and the impairment as intangible assets, rather than being treated as fixed assets, of capitalised software and development costs that was previously only expected from 2013 onwards under the new Basel III requirements. This is reflective of continuing, successful capital and RWA optimisation in Nedbank Group.
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75b
– Given the predominant focus on the core Tier 1 ratio by Basel III, and new requirements to ensure all classes of capital instruments fully absorb losses at the point of non-viability before taxpayers are exposed to loss, all of which will be phased-in over time (see page 79), Nedbank Group’s focus is firmly on its core Tier 1 ratio.
In consideration of Nedbank Group’s high total capital adequacy ratio of 15,0% the Imperial Bank Tier 2 bond (‘IPB2’), amounting to R500 million, was called (without being replaced) and the intention is to do the same with the Nedbank Limited bond (‘Ned 5’) that is callable in April 2011, subject to SARB approval.
• Economic capital – Available financial resources: Economic capital ratio 144% (2009: 142%). R12 784 million surplus capital above minimum
requirements plus the 10% buffer. – During 2010 the group implemented several refinements to the calculation and allocation of economic capital.
• internal Capital Adequacy Assessment process – The annual group Internal Capital Adequacy Assessment Process (ICAAP) was completed and signed off by the board
in July 2010. The SARB’s Supervisory Review and Evaluation Process (SREP) of Nedbank Group’s ICAAP was concluded favourably in H2 2010 with no material issues raised.
– Best-practice stress and scenario testing framework and process were followed to confirm the robustness of the group’s capital adequacy.
• Leverage ratio – This remains low at 13,8 times (2009: 14,4 times) when compared with international levels.
• External credit ratings – In July 2010 Moody’s Investor Services reaffirmed Nedbank Limited’s financial strength rating at C- and its global local
currency rating at A2. The outlook for all ratings was also maintained at stable. – In July 2010 Fitch Ratings reaffirmed Nedbank Group’s long-term foreign and local currency issuer default rating (IDR) at
BBB, and national long-term rating at AA-(zaf). The short-term foreign currency IDR was maintained at F2. The outlook for all three ratings was also maintained at stable.
FundIng and lIquIdITy• Well managed through another difficult and uncertain year in global banking.• Significantly lengthened the long-term funding ratio to 23% (2009: 18%), including successful issue of R6,2 billion in senior
unsecured debt during 2010.
▲
CApiTAL ADEqUACY
16,0
14,0
12,0
10,0
8,0
6,0
4,0
2,0
0,0
%
DECEMBER 2010
INTERNAL TARGET RANGES
* Surplus (Rbillion) above regulatory minima
DECEMBER 2009
11,7%11,5%
8,5 – 10,0
15,0%
11,5 – 13,0
14,9%
ESTIMATED BASEL III AT 2010
10,1%9,9%
7,5 – 9,0
*15,3 *15,6
*14,8 *15,3
*13,5 *13,9
Core tier 1 tier 1 total
Nedbank could already absorb the Basel III capital implications, with all capital ratios remaining above the top end of current target ranges.
76b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinued
• Matched maturity funds transfer pricing (MMFTP) and liquidity premiums (pricing for liquidity risk) well entrenched across the business.
• Sound loan-to-deposit ratio of 97%.• Further strengthened the liquidity buffer.• Well-diversified funding mix (ie retail versus wholesale deposit reliance) and strong retail household deposits positioning maintained.• Low reliance on interbank and foreign markets.• Internal Liquidity Adequacy Assessment Process introduced and embedded within the organisation, a similar concept to ICAAP.
MargIn ManageMenT• Net interest margin (NIM) reduced to 3,35% (2009: 3,39%) mainly due to the impact of endowment (on capital and non-
rate-sensitive liabilities) and costs of lengthening the funding profile and holding a higher liquidity buffer.• However, NIM has performed better than originally forecast due to a strong focus on asset pricing and mix (as per manage-
for-value strategy), application of MMFTP, allocation of risk-based capital and liquidity premiums among growth and market share gains across most categories of advances (with the exception of home loans in line with group strategy of focusing on areas with high economic profit potential).
Changes To and sarb approval For CerTaIn MeThodologIes• Advanced Measurement Approach and internal Model Approach
– Received approval from the SARB to use the Advanced Measurement Approach (AMA) for operational risk (from 2010) and Internal Model Approach (IMA) for market trading risk (from 2011) for regulatory capital purposes for Nedbank Limited.
– Nedbank Limited now has approval for all three major Pillar 1 risk types for Basel II, having received approval for the Advanced Internal Ratings-based (AIRB) Approach for credit risk on day 1 implementation of Basel II (January 2008).
– The regulatory capital approaches above now align with those already in use for economic capital (and ICAAP) purposes. This contributes to Nedbank Group’s RWA optimisation while representing a more sophisticated measurement of risk.
• Capital allocation to businesses (as discussed in the June 2010 results) – Increase in quantum of economic capital allocated to businesses for risk-adjusted performance measurement and segmental
analysis due to methodology enhancements and alignment with the higher group regulatory core Tier 1 capital level.
• Credit loss ratio (as discussed in the June 2010 results) – Change in calculation from simple average to daily averages and exclusion of trading assets to reflect the ratio more accurately.
rIsk ManageMenT• Strong credit risk management. – The credit loss ratio on the banking book improved to 1,36% [2009: 1,52% (restated)]. – Defaulted advances reduced by 1,04% to R26 765 million (2009: R27 045 million). – Maintained a conservative approach and total impairment provisions increased by 14,6% to R11 226 million (2009:
R9 798 million). – Sound credit growth achieved in current external economic environment under the bank’s manage-for-value strategic focus
on improving assets quality through active management of the bank’s portfolios towards high economic profit areas.
• Group’s Enterprisewide Risk Management Framework continued to be resilient.• Sound risk governance and compliance prevails, aligned with Basel requirements.• Effective operational and security risk management, containing impact of crime to reasonable levels.• Alternative operational risks to sustainability, such as environmental and transformation risks, well managed by the group.• Successful reputational risk management, such as the favourable Securities Regulation Panel ruling on the Pinnacle Point
litigation.• Successful Imperial Bank integration into Nedbank Limited.• Significant steps to enhance risk management in Nedbank Retail and to fix economics in secured lending.• Prudent risk appetite followed with group metrics cascaded into all business units.• Risk-based remuneration practices applied since 2008 align in all material respects with recent international requirements.• Robust capital and liquidity risk management.
For the group’s comprehensive disclosure on risk and balance sheet management in line with Regulation 43 of the regulations relating to banks in South Africa, please refer to the group’s updated Pillar 3 Report that will be released on the group’s website at www.nedbankgroup.co.za by 8 April 2011. This summary review primarily focuses on the key financial risks and balance sheet management components.
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77b
InTroduCTIonThe SA economy had a strong start to the year primarily driven by
global demand for commodities and manufacturing production.
However, the fragility of the global recovery as a result of high
government debt in developed economies was highlighted by
fiscal consolidation in European economies during the course of
the year. This impacted global demand for SA exports, resulting
in the domestic recovery losing momentum despite the boost
from the FIFA 2010 World Cup. Against this backdrop the
domestic banking environment improved modestly, supported
by 30-year-low interest rates that translated to an improved
credit environment.
The landscape of banking continues to change following the
global financial crisis, although the Euro region remains a major
concern, and the significant international regulatory response in
particular to what is commonly referred to as Basel III.
basel IIIMost of the Basel III proposals have recently been finalised, with
some significant aspects remaining outstanding, but envisaged
to be completed in 2011.
Considerable debate continues on the impact of Basel III on the
banking industry and, consequently, economic growth. Particular
focus has fallen on the new liquidity ratios and the cumulative
impact of the vast array of new Basel III requirements, especially
when considering forward growth projections. In South Africa
the details of exactly how Basel III will be adopted are still to be
advised by the SARB.
suMMary oF basel III• New Basel ii.v requirements (finalised in July 2009)
– Enhancements to pillar 1
■ Securitisation
■ Trading market risk
– Enhancements to pillar 2 [and hence the ICAAP]
■ Bankwide governance and risk management
■ Principles for sound liquidity risk management
■ Principles for risk concentrations
■ Sound remuneration practices (risk-based)
■ Valuation and liquidity risks of financial instrument
fair-value practices
■ Principles for sound stress testing practices
■ Off-balance-sheet exposures and securitisation activities
■ Reputational risk and implicit support
– Enhancements to pillar 3 (public disclosure)
■ Securitisation exposures
The above are incorporated into the draft changes to the
SA banking regulations, effective 1 January 2012.
In addition, the SARB are proposing to entirely phase out
hybrid debt capital (non-core Tier 1), which is contrary to
Basel III that allows for existing hybrid debt to remain, and
introduce a 1,06 multiplier to credit RWA of AIRB banks (to
align with the original Basel II Accord).
• Basel iii requirements (finalised in December 2010)
– Raise quality, consistency and transparency of capital
base
– Enhance risk coverage
– Introduce new leverage ratio
– Reduce procyclicality and introduce new countercyclical
buffers
– Address systemic risk and interconnectedness
– Introduce new global liquidity framework [notably the
new liquidity coverage ratio (LCR) and NSFR]
– Basel III timelines
■ Commence 2013 with long phase-ins through to 2019
(see page 79)
There is no formal indication yet from the SARB on South
Africa’s adoption, other than ‘South African banks will not
need to raise additional capital in response to Basel III’ and
that ‘a pragmatic approach will be followed in respect of the
new Basel III liquidity ratios’.
• Basel iii requirements (work in progress; to be finalised
during 2011)
– Capital surcharge for systemically important financial
institutions (SIFIs)
– Loss absorbency requirements for all capital instruments
(finalised in January 2011)
– Counterparty credit risk
– Trading book review
– Convergence with International Financial Reporting
Standards
• Observation periods commence in 2011/2012 for:
– New liquidity ratios (LCR and NSFR)
– New leverage ratio
In summary, greater clarity and finalisation have been achieved
to date, but significant uncertainty remains.
poTenTIal IMpaCT on nedbank group oF key basel III CoMponenTs• Capital
– Overall, considered to be ‘manageable’ but await
finalisation of the outstanding Basel III requirements and
details from the SARB for adoption in South Africa.
78b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinued – SA banks’ regulatory capital rules were already considerably
more conservative than the Basel II international rules.
The Tier 1 minimum ratio is 7% in South Africa, while
the core Tier 1 minimum is 5,25%. In addition, a unique
to South Africa, 1,5% Pillar 2a capital buffer is already in
force. All the major SA banks are currently operating at
capital ratios significantly above the minimum regulatory
ratios required.
– Core Tier 1 capital is the main focus. In view of the new
Basel III capital buffers, it is likely that Nedbank Group’s
target may increase from the current 7,5% – 9,0%. The
group expects to meet this via earnings, continuing
capital and RWA optimisation, the strategic positioning of
products, business mix and our new portfolio tilt strategic
focus, integrated with the efforts of enhancing return
on ordinary shareholders’ funds (RoE) and optimising
economic profit.
– Nedbank Group has a strong track record over the past
three years of significant capital and RWA optimisation.
This is expected to continue.
– The new Basel III regulatory deductions against core Tier 1
qualifying capital resources only commence in January
2014. These deductions are not significant for Nedbank
Group.
– Hybrid debt capital (non-core Tier 1) will be phased out
by the SARB. The group’s Tier 2 debt capital also needs to
be addressed (replace and reduce the extent in view of the
new Basel III loss absorbency requirements) over the long
transitional period.
– All the major SA banks have also completed three
comprehensive, annual ICAAPs since 2008. These are
required to be signed off by the board of directors of each
bank and are then subjected to a detailed SREP by the
SARB.
• Leverage
– No challenges are envisaged in terms of compliance with
Basel III’s new leverage ratio, which includes off-balance-
sheet exposure.
• Risk coverage
– The Basel III requirements will impact most significantly
on banks with large capital markets businesses. Higher
RWA requirements will primarily come from trading
books, securitisations, securities lending and over-the-
counter derivatives.
– Nedbank Group’s trading book is small in relation to
its total bank operations, securitisation exposure and
activities are very low, and counterparty credit risk,
including repurchase transactions and securities financing,
is mostly restricted to low-risk, non-complex transactions.
Credit derivative activities are also restricted to single-
name trades of SA exposures and biased towards providing
risk mitigation.
The group does not envisage a significant overall increase
in minimum capital or RWA requirements, subject to the
outcome of the Basel III proposals still to be finalised in
2011.
In particular, the outstanding Basel III proposals on SIFIs
and counterparty credit risk do need to be finalised before
a conclusion can be reached on this aspect. In South Africa
a unique Pillar 2 add-on of 1,5% already exists, additional
to the minimum Basel II total ratio requirement of 8%.
• Remuneration
– As regards the emphasis on ‘risk-based’ remuneration
together with additional sound governance practices,
Nedbank Group is very well positioned and has only a few
minor gaps to close (see the Remuneration Report in the
Nedbank Group 2010 Annual Report).
79b
basel III suMMary oF deCeMber 2010 announCeMenTs
SARB* BASEL II BASEL III**
( = shading indicates transition periods)
As is %
As is %
2011%
2012%
2013%
2014%
2015%
2016%
2017%
2018%
2019%
CApiTAL Core Tier 1 ratio (minimum) 5,25 2,0 3,5 4,0 4,5 4,5 4,5 4,5 4,5
Capital conservation buffer (CCB1) N/A N/A 0,625 1,25 1,875 2,50
Countercyclical Capital Buffer (CCB2) N/A N/A 0 – 2,5 0 – 2,5 0 – 2,5 0 – 2,5 0 – 2,5 0 – 2,5 0 – 2,5
(is an extension of CCB1 when there is excessive credit growth – from time to time at discretion of local regulator)
Core Tier 1 ratio plus CCB 1 (minimum) 5,25 2,0 3,5 4,0 4,5 5,125 5,75 6,375 7,0
Total Tier 1 ratio capital (minimum) 7,0 4,0 4,5 5,5 6,0 6,0 6,0 6,0 6,0
Total capital ratio (minimum) 9,5 8,0 8,0 8,0 8,0 8,0 8,0 8,0 8,0
Total capital ratio plus CCB1 (minimum) 9,5 8,0 8,0 8,0 8,0 8,625 9,25 9,875 10,5
phase-in of new regulatory deductions to qualifying capital 20 40 60 80 100 100
Capital instruments that no longer qualify as non-core Tier 1 capital or Tier 2 capital
Earlier of phaseout over 10-year horizon beginning 2013 or call/stepup date (only instruments issued pre 12 September 2010 qualify for transition period).
SiFis and new issues of capital instruments
Work continues on an integrated approach to SIFIs that could include additional capital surcharges, contingent capital and bail-in debt. In addition, strengthening the loss absorbency of non-core Tier 1 and Tier 2 capital instruments, and a proposal to ensure the loss absorbency at the point of non-viability.
LiqUiDiTY LCR
The LCR identifies the amount of unencumbered, high quality liquid assets an institution is required to hold in order to offset the cumulative net cash outflows it would encounter under an acute short-term (30 day) stress scenario.
N/A N/A
Obs
erva
tion
perio
dbe
gins
Intr
oduc
e m
inim
umst
anda
rd
NSFR
The NSFR measures the amount of longer-term, stable funding sources required by an institution given the liquidity profile of its assets and the contingent liquidity risk arising from off-balance-sheet exposures. N/A N/A
Obs
erva
tion
perio
d b
egin
s
Intr
oduc
e m
inim
um s
tand
ard
The standard requires a minimum amount of funding that is expected to be stable over a one year horizon based on liquidity risk factors assigned to assets and off-balance sheet exposures.
LEvERAgE
Leverage ratio
N/A N/A Supervisory monitoring
Parallel run Migra-tion to
Pillar 1
Includes on and off-balance sheet exposure
1 January 2013 – 1 January 2017Disclosure starts 1 January 2015
* Uncertain as to what changes, if any, the SARB will now make to the minimum regulatory capital and buffer levels in South Africa.
** All dates are as of 1 January.
Stock of high quality liquid assets
Net cash outflows over a 30-day time period≥ 100%
Available amount of stable funding
Required amount of stable funding≥ 100%
80b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinued• Liquidity
– Although the implementation timelines have been
extended considerably, compliance with the two proposed
liquidity ratios (especially the NSFR) remains the major
concern for SA banks, unless benefits arise from National
Treasury’s Structural Funding and Liquidity Task Team,
which is addressing this issue and the structural issues in
the country’s financial industry.
– SA’s banking industry has remained structurally sound and
weathered the global financial crisis and local recession
well due to a number of factors, including:
■ Sound and proactive regulation of financial services,
especially in the banking sector.
■ Strong risk and capital management in the SA banking
industry.
■ Basel II being successfully implemented and embraced
in South Africa.
■ The National Credit Act (NCA) being successfully
implemented in South Africa to help minimise
irresponsible lending practices, overgearing and
excessive consumer debt.
■ Fiscal authorities in South Africa never allowing
interest rates to fall as low, and for as long, as those
in the united States, where this resulted in excessive
borrowing and untenable levels of household debt.
South Africa has not had negative real interest rates.
■ Exchange controls preventing large flows of funds
from local institutions out of the country.
■ Low reliance on foreign funding/capital markets.
■ Rand liquidity remaining stable, with the interbank
market operating normally.
■ The originate-and-sell business model and complex
credit derivatives and/or securitisation vehicles, which
resulted in excessive leverage in some foreign banks,
not being implemented and used in South Africa to the
same extent.
■ Charging of liquidity premiums in client borrowings
and improved asset pricing.
■ Lessons learned from the 2002/3 SA banking crisis.
Government support was not required by the SA banking
industry at any time during this global financial crisis.
While always striving to maintain close alignment with
Basel III standards, for the factors set out above South Africa
would be justified in appropriately modifying the specific
requirements of the proposed liquidity ratios in Basel III.
– Nedbank Group fully subscribes to the principles set out
in the Basel III liquidity risk framework and has already
embedded these principles into its existing liquidity risk
management framework. By way of example, Nedbank
Group is compliant with the ‘Principles for Sound Liquidity
Risk Management and Supervision’ that were issued in
September 2008.
– In terms of revising the regulations it is broadly
anticipated that the SARB will subscribe to the principles
encapsulated in the proposed Basel III liquidity standards.
However, it is also anticipated that, given the structural
factors impacting the ability of SA banks to comply with
the ‘as is’ proposed liquidity ratios, the SARB will follow
a pragmatic approach in terms of what can be achieved,
without creating unintended consequences (eg slower
economic growth and higher unemployment).
‘Once finalised in the course of 2010 by the Basel
Committee, these requirements related to a stressed
liquidity coverage ratio, and a structural liquidity ratio will be
considered for incorporation into the regulatory framework.
However, ultimately, liquidity in the SA financial sector is
mainly a structural matter that is likely to require extensive
dialogue between various key roleplayers such as the
National Treasury, the central bank, the Financial Services
Board and the Department’ (2009 Annual Report, Bank
Supervision Department, South African Reserve Bank).
– Compliance with the LCR and the NSFR are not related
to issues of principle but rather to specific factors and, in
particular, the structural issues, benefits and characteristics
of the SA financial system.
We have graphically depicted below the manner in
which SA banks are currently funded, based on the latest
industry data.
We draw the following conclusions of total SA bank
funding from this data:
■ Only 16% emanates from household deposits.
■ Capital markets only contribute 6%, with foreign
capital markets contributing only 2%.
■ Other funding, which includes deposits from local
corporates denominated in foreign currency, only
represents 4%.
■ Wholesale and commercial deposits, which attract
the most adverse treatment in terms of the proposed
Basel III ratios, represent 72%.
81b
On the liability side of the balance sheet, in order to improve both the LCR and NSFR, SA banks would potentially need to do the following:
■ Increase the proportion of deposits from households significantly in order to proportionally reduce deposits from wholesale and corporate depositors.
■ Lengthen the funding profile through increased capital market issuance, both domestically and internationally.
– However, the structural challenges likely to constrain SA banks, in terms of executing the strategies outlined above, include:
■ Low levels of retail savings. ■ The small SA capital market. ■ Expensive offshore markets being constrained by
overall appetite for emerging-market paper. ■ Regulations that limit the structural duration of the
domestic money market. ■ An insufficient pool of liquid assets.
– While the SARB has given no formal indication regarding its approach to adopting and/or modifying the proposed Basel III liquidity ratios, the following possibilities exist:
■ Adopt a pragmatic approach on the basis that the Basel III proposed liquidity ratios do not take the following into account:
❍ The ‘closed’ nature of SA’s money markets, resulting from exchange controls and the mechanics of the domestic settlement and clearing system, ie rands are more ‘sticky’ for SA banks (in the rand system)
than for euro- or dollar-denominated banks (in their respective systems) whose systems are more ‘open’.
❍ The fact that the large SA asset managers (of which there are approximately 16) have only five major banks with which to deposit funds. In Europe and the uS there are many more banks, implying that their wholesale funding is less ‘sticky’ compared with South Africa.
❍ Given that liquidity risk is a consequential risk, legislation such as the NCA reduces systemic risk and the need for oversized liquidity buffers. Many developed economies do not yet have the safety net of NCA-type legislation. In South Africa the NCA prohibits the originate-to-distribute model that was at the heart of the uS sub-prime crisis. This additional SA safety net should be considered when setting minimum levels of compliance for the ratios.
❍ SA banks have proportionally higher core Tier 1 capital levels compared with many of the international banks. The conservative capital structure of SA banks, with more loss-absorbing permanent capital, should also be considered when setting the minimum SA liquidity standards.
❍ A strong capital base can help to mitigate liquidity risk both by providing a capital buffer to allow an entity to raise funds and deploy them in liquid positions and by serving to reduce the credit risk taken by providers of funds to the group.
❍ unlike the uS, which has not yet embedded Basel II, South Africa has fully embraced the principles of Basel II with robust risk management approaches having been adopted by the domestic banks.
TOTAL DOMESTiC BANK FUNDiNg R2,6 TRiLLiON (AS AT 30 NOvEMBER 2010)
wholesaledeposits
R1 094 billion42%
Commercialdeposits
R768 billion30%
householddeposits
R402 billion16%
Capital markets
R148 billion6%
other funding
R120 billion4%
Foreign funding
R59 billion2%
Funding mix (r billion)
% of total funding base
DomestiC marKet oFFshore marKet
82b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinued ❍ The Basel III document requires banks to assume
that 100% of wholesale deposits (maturing over the
next 30 days) flow out of the bank. Applying a look-
through principle to money market funds it could
be argued that the underlying depositor is retail in
nature. To assume that 100% of these funds would
therefore leave the bank over a 30-day time horizon
(as per the LCR) may be a material overstatement in
the SA market.
❍ Basel III distinguishes between small business and ‘all
other business’, which typically includes medium-
sized businesses, large businesses and corporate
businesses with professional treasuries. All other
businesses are treated equally in that 75% of their
deposits are assumed to leave the bank within a 30-
day interval (assuming they have a low operational
relationship with the bank). We believe that there is
considerable scope to differentiate between medium,
large and corporate-type commercial clients in the
SA environment.
■ Broaden the definition of high-quality assets
considered to be eligible in terms of the LCR.
❍ While addressing the structural issues through
National Treasury’s Structural Funding and
Liquidity Task Team is a longer-term initiative,
the SARB could in the short-term consider
broadening the definition of high-quality
assets. That is, in addition to the Basel III level 1
and 2 liquid assets, the SARB could introduce
level 3 and 4 assets (eg other bank debt such as
negotiable certificates of deposit, promissory notes
and floating rate notes).
■ Allow the creation of ‘collateral pools’ for inclusion in
the stock of high-quality liquid assets.
❍ In view of the structural constraints to lengthening
the funding profile or replacing wholesale funding
with retail deposits, that is limitations in terms of
addressing the liability side of the balance sheet,
a key consideration is addressing the asset side of
the balance sheet by bolstering the stock of liquid
assets via converting typically long-dated illiquid
assets into high-quality liquid assets.
❍ An option for consideration is to allow banks to
create ‘collateral pools’ that meet preagreed SARB
requirements (eg maximum loan-to-value, minimum
seasoning or payment to income ratios) and which
may be pledged as security against stress funding.
These ‘collateral pools’ could then be included in the
stock of liquid assets making up the LCR.
■ Introduction of a national deposit insurance scheme.
❍ South Africa is not aligned with many other
jurisdictions in terms of deposit insurance schemes.
The impact of this needs to be considered as
SA banks’ liquidity ratios will reflect negatively
compared with international jurisdictions with
deposit insurance schemes as, in terms of the Basel
III ratios and definitions, such a scheme is required
in order to classify deposits as ‘stable’ and thus
receive a more favourable treatment.
– Nedbank Group’s additional possible courses of action
could include:
■ Purchasing further level 1 assets (including government
bonds, treasury bills, debentures) assuming this
quantum of level 1 assets would be available. This
would not have a pervasive impact on projected ROEs.
■ Structuring certain new corporate lending in the
form of A- or better corporate bonds rather than as
advances (client dependent) in order to increase the
market capacity of level two assets.
■ Through Nedbank Group’s new portfolio tilt strategic
approach, reducing certain long-dated lending.
■ utilising Nedbank Group’s well-diversified funding mix
supported by a strong retail and commercial deposit
franchise (and a strong market share of household
deposits).
■ utilising the domestic and international capital
markets, for example securitisation vehicles, as this
market is opening up again and is starting to show
signs of improved liquidity.
CredIT rIskThe recovery in the credit cycle has proven to be more modest
compared with previous cycles. Household demand for credit
was contained by the consumer debt burden remaining relatively
high, increased regulatory requirements, policy uncertainty and
employment growth only resuming late in the year, resulting
in a less broad-based recovery. In the corporate sector excess
capacity and uncertainty over the sustainability of the local and
global recovery limited spending. Government fixed-investment
spending, although continuing to contract, emerged as the main
foundation for growth.
Household finances improved in South Africa as debt was
slowly reduced and interest rates eased to the lowest levels in
36 years. Against this background, the ratio of household debt to
disposable income decreased to 78,2% from just over 80% at
the end of 2009. At the same time debt service costs decreased
to 7,5%, the lowest level since June 2006, and are now at a level
that is more conducive to improving economic growth in the
consumer sector.
83b
Nedbank Group gross loans and advances grew ahead of the industry at 5,7% to R486 billion (2009: R460 billion):
* 2009 restated to include Imperial Bank loans and advances.
^ 2009 restated to exclude Nedbank Wealth loans and advances.
** These relate to eliminations passed through Central Management.
Nedbank Corporate advances grew by 8,0%. Nedbank Business Banking advances ended marginally up with R12 billion of new
advances being offset to a large extent by repayments of other loans. The repositioning of Nedbank Retail resulted in home loans
decreasing, as planned, by 0,2% while there was stronger growth in personal loans, cards and vehicle and asset finance of 37,7%, 7,9%
and 13,3%, respectively. Core banking advances in Nedbank Capital grew by 2,6% with R10,8 billion of new advances largely offset by
repayments. The strength of the rand and the investment in uK treasury bills, compared with previous placements with other banks,
led to a decrease in advances in Nedbank Wealth.
The change in loans and advances by business cluster and by product are given in the tables that follow.
neT loans and advanCes by busIness ClusTer
Rm % change 2010
2009
(Restated)*
Nedbank Capital 12,7 62 328 55 315Nedbank Corporate 8,0 157 703 146 035Total Nedbank Retail and Business Banking 3,5 238 099 230 000
Nedbank Retail 4,1 187 334 179 885Nedbank Business Banking 1,3 50 765 50 115
Nedbank Wealth (11,6) 16 869 19 089Other >(100,0) 274 (138)
Net loans and advances 5,5 475 273 450 301
* 2009 restated to include Imperial Bank loans and advances and disclose Nedbank Wealth separately.
1,3%
(11,8%)
>(100%)
4,4%
8,0%
13,6%
gROSS LOANS AND ADvANCES BY BUSiNESS CLUSTER
500 000
450 000
400 000
350 000
300 000
250 000
200 000
150 000
100 000
50 000
0
rm
2009 2010
NEDBANK CAPITAL
NEDBANK CORPORATE*
NEDBANK RETAIL*^
NEDBANK BuSINESS BANKING
NEDBANK WEALTH
19 245 16 976(140)** 273**
186 725 194 906
147 235 159 072
55 69963 251
51 335 52 021
460 099
486 499
84b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedsuMMary oF loans and advanCes by produCT
Rm % change 2010
2009
(Restated)*
Home loans 0,7 145 895 144 921Commercial mortgages 6,7 86 100 80 672Properties in possession (25,4) 662 887Credit cards 7,9 7 910 7 334Overdrafts 20,0 13 307 11 093Term loans 9,2 74 605 68 321Overnight loans 1,1 12 552 12 420Other loans to clients (0,7) 42 897 43 203Leases and instalment sales 5,9 67 881 64 128Preference shares and debentures 23,2 20 499 16 633Factoring accounts 46,9 3 202 2 179Deposits placed under reverse repurchase agreements 35,2 10 849 8 026Trade, other bills and bankers’ acceptances (50,4) 140 282
Gross loans and advances 5,7 486 499 460 099Impairment of loans and advances 14,6 (11 226) (9 798)
Net loans and advances 5,5 475 273 450 301
* Comparative results have been restated for the integration of Imperial Bank. Mortgage loans as migrated to the Property Finance
division have been reclassified from home loans to commercial mortgages and those to Nedbank Retail have been reclassified from
commercial mortgages to home loans in line with the group’s reporting. The net result of this reclassification is a R4,2 billion adjustment
from home loans to commercial mortgages.
suMMary oF loans and advanCes by seCTor
Rm % change 2010 2009
Individuals 4,5 190 283 182 102Financial services, insurance and real estate 33,0 119 298 89 685Banks 46,3 17 478 11 944Manufacturing 10,9 30 875 27 839Building and property development 16,1 11 735 10 109Transport, storage and communication 5,2 30 767 29 253Retailers, catering and accommodation (24,2) 7 632 10 064Wholesale and trade (9,1) 7 408 8 146Mining and quarrying (22,9) 16 839 21 830Agriculture, forestry and fishing 5,6 5 613 5 317Government and public sector (47,0) 7 958 15 003Other services (16,8) 40 613 48 807
gross loans and advances 5,7 486 499 460 099
85b
The Basel II on-balance-sheet exposure at year-end is R569 billion (2009: R542 billion). The reconciliation of the Basel II exposure to
the gross loans and advances of R486 billion is shown below.
balanCe sheeT CredIT exposure** per basel II asseT Class and busIness ClusTer
Regulated
RmNedbankCapital*
NedbankCorporate*
TotalNedbank
Retail andBusinessBanking
NedbankRetail
NedbankBusinessBanking
NedbankWealth
CentralManage-
ment 20102009
(Restated)
Advanced internal Ratings-based (AiRB) Approach 85 103 141 570 194 785 142 536 52 249 12 237 18 071 451 766 431 493
Corporate 24 125 71 123 6 403 6 403 1 101 652 92 400Specialised lending – high-volatility commercial real estate 6 740 6 740 7 442Specialised lending – income-producing real estate 41 567 2 369 2 369 43 936 42 209Specialised lending – object finance 439Specialised lending – commodities finance 67 67 55Specialised lending – project finance 2 097 2 097 4 811Small and medium enterprises (SME) – corporate 631 4 066 22 879 22 879 27 576 23 672Public sector entities 6 643 10 512 3 3 17 158 15 997Local governments and municipalities 245 6 038 1 060 1 060 7 343 5 623Sovereign 13 730 54 18 070 31 854 26 567Banks 36 060 1 455 37 515 36 913Securities firms 104 10 114 906Retail mortgages 4 113 432 108 958 4 474 11 447 124 883 123 621Retail revolving credit 8 802 8 802 64 8 866 7 028Retail – other 749 23 328 21 552 1 776 726 24 803 23 241SME – retail 91 5 16 280 2 995 13 285 16 376 20 340Securitisation exposure 557 229 229 786 229
RECONCiLiATiON OF ON-BALANCE SHEET ExpOSURE TO gROSS LO ANS AND ADvANCES
600 000
500 000
400 000
300 000
200 000
100 000
0
rm
HOME LOANS (R145 895m)
COMMERCIAL MORTGAGES (R86 100m)
PROPERTIES IN POSSESSION (R662m)
CREDIT CARDS (R7 910m)
OVERDRAFTS (R13 307m)
TERM LOANS (R74 605m)
OVERNIGHT LOANS (R12 552m)
OTHER LOANS TO CLIENTS (R42 897m)
LEASE AND INSTALMENT SALES (R67 881m)
PREFERENCE SHARES AND DEBENTuRES (R20 499m)
FACTORING ACCOuNTS (R3 202m)
DEPOSITS PLACED uNDER REVERSE PuRCHASE AGREEMENTS (R10 849m)
TRADE, OTHER BILLS AND BANKERS’ ACCEPTANCES (R140m)
Basel ii on-balance-sheet
exposureDerivatives
government stock and
other dated securities
short-term securities other Fair-value
adjustments
other assets net
of fair-value adjustments
setoff accounts
within iFrs gross loans and
advances
gross loans and advances
568 786 (14 526)(28 818)
(25 764)(2 705) (2 305) (4 915) (3 254) 486 499
86b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedbalanCe sheeT CredIT exposure** per basel II asseT Class and busIness ClusTer (continued)
Regulated
RmNedbank
Capital*NedbankCorporate*
TotalNedbank
Retail andBusinessBanking
NedbankRetail
NedbankBusinessBanking
NedbankWealth
CentralManage-
ment 20102009
(Restated)
The Standardised Approach (TSA) – 20 493 48 051 48 051 – 10 912 167 79 623 75 224
Corporate 2 932 159 159 129 3 220 4 368SME – corporate 10 007 3 047 3 047 13 054 13 634Public sector entities 32 32 30Local governments and municipalities 17 4 4 21 2 578Sovereign 1 450 1 239 2 689 1 198Banks 1 236 60 60 6 798 38 8 132 8 613Securities firms 313 313 307Retail mortgages 2 804 3 483 3 483 2 137 8 424 7 274Retail – other 1 523 37 710 37 710 738 39 971 33 409SME – retail 179 3 267 3 267 3 446 3 514Securitisation exposure 321 321 321 299
properties in possession – 5 639 631 8 18 – 662 887Non-regulated entities 21 096 11 393 4 938 4 530 408 470 (1 162) 36 735 34 473
Balance sheet exposure (Basel ii) 106 199 173 461 248 413 195 748 52 665 23 637 17 076 568 786 542 077
Less assets included in Basel II
asset classes (42 948) (11 515) (1 106) (843) (263) (6 661) (16 803) (79 033) (78 216)
Derivatives (14 419) (34) (60) (60) (1) (12) (14 526) (13 582)Government stock and other
dated securities (6 849) (3 899) (18 070) (28 818) (33 903)Short-term securities (20 204) (1 357) (4 203) (25 764) (18 213)Call money (1 057) (74) (132) (1 263) (929)Deposits with monetary
institutions (909) (656) 9 (1 556) (2 424)Remittances in transit 119 (5) (9) 4 114 108Fair-value adjustments (364) (1 844) (97) (12) (85) (2 305) (1 000) Other assets net of fair-value adjustments on assets 854 (3 770) (944) (762) (182) (2 325) 1 270 (4 915) (8 273)
Setoff of accounts within International Financial Reporting Standards (IFRS) total gross loans and advances – (2 873) (381) – (381) – – (3 254) (3 762)
Gross loans and advances 63 251 159 073 246 926 194 905 52 021 16 976 273 486 499 460 099
* Nedbank Corporate and Nedbank Capital include London Branch (AIRB Approach).
** Balance sheet exposure includes on-balance-sheet, repurchase and resale and derivative exposures.
87b
advanCed InTernal raTIngs-based approaCh For nedbank group Through Nedbank Limited and London Branch 87% of the total credit extended in Nedbank Group is covered by the Basel II AIRB
Approach, with the Imperial Bank, Fairbairn and Nedbank African subsidiaries’ credit portfolios on TSA. Nedbank intends to apply to
the SARB in 2011 for approval to use the AIRB approach for the legacy Imperial Bank book.
The results shown below include both the Nedbank Limited and London Branch exposure:
suMMary oF advanCed InTernal raTIngs-based approaChbasel II CredIT exposures by ClusTer and asseT Class
2010
rm
aIrb on-balance-
sheetexposure
aIrb off-balance-
sheetexposure
repurchase and resaleexposure
derivative exposure
Total credit
extended*
exposureat default
(ead)
downturnexpected
loss(perfor-
ming)
best estimate
of expected
loss (non-
performing)
Nedbank Capital 60 348 6 843 10 829 13 926 91 946 78 604 216 744
Corporate 18 312 522 1 163 4 650 24 647 24 699 189 744Specialised lending – commodities finance 67 67 69 Specialised lending – project finance 2 097 2 097 2 161 5 SME – corporate 241 390 631 710 4 Public sector entities 4 997 506 1 140 6 643 6 721 Local governments and municipalities 147 98 245 193 Sovereign 13 730 12 13 742 13 773 Banks 19 449 82 9 066 7 545 36 142 23 470 13 Securities firms 7 614 94 3 718 631 2 Retail mortgages 4 4 4Retail – other 740 9 749 749 2 SME – retail 91 91 111 1 Securitisation 557 5 613 6 170 5 313
Nedbank Corporate 141 570 58 186 – – 199 756 184 138 444 491
Corporate 71 123 49 485 120 608 106 034 263 25Specialised lending – high volatility commercial real estate 6 740 341 7 081 7 082 42 319Specialised lending – income producing real estate 41 567 1 805 43 372 44 634 113 67SME – corporate 4 066 782 4 848 4 776 24 80Public sector entities 10 512 3 314 13 826 12 999 1 Local governments and municipalities 6 038 480 6 518 6 545 1 Sovereign 54 54 55Banks 1 455 1 946 3 401 1 970 Securities firms 10 10 10 Retail mortgages 3 3 Retail – other SME – retail 5 30 35 33
88b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinued
2010
rm
aIrb on-balance-
sheetexposure
aIrb off-balance-
sheetexposure
repurchase and resaleexposure
derivative exposure
Total credit
extended*
exposureat default
(ead)
downturnexpected
loss(perfor-
ming)
best estimate
of expected
loss (non-
performing)
Total Nedbank Retail and Business Banking 194 785 57 023 – – 251 808 244 405 2 614 6 150
Corporate 6 403 3 162 9 565 8 316 40 60Specialised lending – income producing real estate 2 369 219 2 588 2 630 8 6SME – corporate 22 879 8 845 31 724 31 044 152 362Public sector entities 3 16 19 13 Local governments and municipalities 1 060 12 1 072 1 113 Retail mortgages 113 432 19 402 132 834 136 481 814 2 889Retail revolving credit 8 802 16 001 24 803 16 907 516 718 Retail – other 23 328 2 020 25 348 23 884 853 1 434SME – retail 16 280 7 346 23 626 23 788 231 681Securitisation 229 229 229
Nedbank Retail 142 536 37 368 – – 179 904 174 837 2 223 5 146
Corporate 222 222 222 6 Retail mortgages 108 958 18 050 127 008 130 860 780 2 778Retail revolving credit 8 802 16 001 24 803 16 907 516 718Retail – other 21 552 1 885 23 437 22 005 837 1 243SME – retail 2 995 1 210 4 205 4 614 84 407Securitisation 229 229 229
Nedbank Business Banking 52 249 19 655 – – 71 904 69 568 391 1 004
Corporate 6 403 2 940 9 343 8 094 34 60Specialised lending – income producing real estate 2 369 219 2 588 2 630 8 6SME – corporate 22 879 8 845 31 724 31 044 152 362Public sector entities 3 16 19 13 Local governments and municipalities 1 060 12 1 072 1 113 Retail mortgages 4 474 1 352 5 826 5 621 34 111Retail – other 1 776 135 1 911 1 879 16 191SME – retail 13 285 6 136 19 421 19 174 147 274
Nedbank Wealth 12 237 3 094 – – 15 331 16 988 39 76
Retail mortgages 11 447 2 789 14 236 15 549 31 74Retail revolving credit 64 221 285 563 3 1Retail – other 726 84 810 876 5 1
Central Management 18 071 – – – 18 071 18 071 – 20
Corporate 1 1 1 20Sovereign 18 070 18 070 18 070
Total 427 011 125 146 10 829 13 926 576 912 542 206 3 313 7 481
Downturn expected loss (AIRB Approach) 10 794IFRS impairment on loans and advances 9 062
Excess of downturn expected loss over eligible provisions 1 732
* Total credit extended is AIRB on-balance-sheet, repurchase and resale, derivatives and off-balance-sheet exposures (includes unutilised facilities).
89b
suMMary oF The sTandardIsed approaCh
basel II CredIT exposures by ClusTer and asseT Class
2010
rm
aIrb on-
balance-
sheet
exposure
aIrb off-
balance-
sheet
exposure
repurchase
and resale
exposure
derivative
exposure
Total credit
extended*
Nedbank Corporate 20 435 210 – 58 20 703
Corporate 2 904 28 2 932SME – corporate 10 007 210 10 217Public sector entities 32 32Local governments and municipalities 17 17Sovereign 1 450 1 450Banks 1 206 30 1 236Securities firms 313 313Retail mortgages 2 804 2 804Retail revolving creditRetail – other 1 523 1 523SME – retail 179 179
Nedbank Retail 47 991 835 – 60 48 886
Corporate 159 1 160SME – corporate 3 047 167 3 214Local governments and municipalities 4 4Banks 60 60Retail mortgages 3 483 436 3 919Retail – other 37 710 166 37 876SME – retail 3 267 65 3 332Securitisation exposure 321 321
Nedbank Wea lth 10 911 – – 1 10 912
CorporateSovereign 1 239 1 239Banks 6 797 1 6 798Securities firmsRetail mortgages 2 137 2 137Retail revolving creditRetail – other 738 738
Central Management 155 – – 12 167
Corporate 121 8 129Banks 34 4 38
Total 79 492 1 045 – 131 80 668
* Total credit extended is AIRB on-balance-sheet, repurchase and resale, derivatives and off-balance-sheet exposures (includes unutilised facilities).
The sTandardIsed approaChThe exposure under TSA, which consists of the legacy Imperial Bank book, Nedbank Group’s African subsidiaries and Fairbairn, is 13%
of Nedbank Group total exposure. A breakdown of exposures by asset class is shown in the table below:
90b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedIMpaIrMenTs and deFaulTed loans and advanCesThe credit loss ratio on the banking book improved to 1,36% for the period [2009: 1,52% (restated)]. The reduction in the impairment
charge was driven mostly by Nedbank Retail, particularly in the secured portfolios that had lagged the recovery in the unsecured
portfolios. Lower interest rates and the stabilising of job losses contributed to the retail credit loss ratio improving significantly
from 3,17% in 2009 to 2,67%. The group further strengthened its provisioning by reducing certain security assumptions in specific
impairments and lengthening the emergence periods.
The credit portfolios in Nedbank Corporate, Nedbank Business Banking and Nedbank Wealth are of high quality and credit loss ratios
remained within or below the respective clusters’ through-the-cycle target levels. Nedbank Capital impairments increased in the
higher risk private equity portfolio.
The tables on the following pages summarise Nedbank Group’s defaulted portfolio and the level of impairments. The policies, principles
and definitions relating to the defaulted portfolio and impairments are well articulated in the group’s credit policy and Pillar 3 Report.
suMMary oF IMpaIrMenTs, deFaulTed loans and advanCes and CredIT loss raTIos
2010
%nedbank
Capital nedbank
Corporate
nedbank retail and
business banking
nedbank retail
nedbank business banking
nedbank wealth Total
Impairments to gross loans and advances 1,45 0,86 3,58 3,88 2,42 0,63 2,30
Specific impairments 1,27 0,59 2,94 3,20 1,95 0,48 1,86Portfolio impairments 0,18 0,27 0,64 0,68 0,47 0,15 0,44
Impairment charge as a % of net interest income (NII) 44,55 9,29 45,82 55,66 8,64 6,17 37,26Credit loss ratio 1,27 0,20 2,18 2,67 0,40 0,15 1,36
Credit loss ratio – specific 1,17 0,27 2,08 2,46 0,71 0,16 1,32Credit loss ratio – portfolio 0,10 (0,07) 0,10 0,21 (0,31) (0,01) 0,04
Defaulted loans and advances to gross loans and advances 2,03 2,58 8,51 9,09 6,31 2,16 5,50Properties in possession to gross loans and advances – – 0,26 0,32 0,02 0,11 0,14
suMMary oF IMpaIrMenTs, deFaulTed loans and advanCes and CredIT loss raTIos
2009(Restated)*
%Nedbank
Capital Nedbank
Corporate
Total Nedbank
Retail and Business Banking
Nedbank Retail
Nedbank Business Banking
Nedbank Wealth Total
Impairments to gross loans and advances 0,69 0,82 3,39 3,66 2,38 0,81 2,13
Specific impairments 0,56 0,45 2,83 3,17 1,59 0,67 1,70Portfolio impairments 0,13 0,37 0,56 0,49 0,79 0,14 0,43
Impairment charge as a % of NII 11,19 11,09 52,10 65,50 10,12 19,43 40,68Credit loss ratio 0,36 0,25 2,56 3,17 0,52 0,47 1,52**
Credit loss ratio – specific 0,31 0,27 2,69 3,24 0,82 0,40 1,59Credit loss ratio – portfolio 0,05 (0,02) (0,13) (0,07) (0,30) 0,07 (0,07)
Defaulted loans and advances to gross loans and advances 1,41 2,37 9,39 10,47 5,45 2,15 5,88Properties in possession to gross loans and advances – – 0,37 0,47 0,02 0,03 0,19
* 2009 restated to include Imperial Bank and disclose Nedbank Wealth separately.
91b
Nedbank Group updated its methodology for calculating the credit loss ratio in 2010, removing trading assets from loans and advances. Impairments are not raised against trading assets as these are designated at fair value through profit or loss, and therefore any losses are realised through a decrease in non-interest revenue.
Additionally, Nedbank Group’s credit loss ratio is now based on a year-to-date daily average of loans and advances as opposed to a simple average. These changes had a minimal impact on Nedbank Group’s credit loss ratio (ie 0,03% – 0,06% over the past two years). The credit loss ratio at December 2009 increased from 1,47% to 1,52% after incorporating these changes**.
In 2009 (with the Retail Cluster following in 2010) Nedbank Group enhanced the consolidation, focus and reporting of key financial risk appetite metrics. Business cluster-specific credit loss ratio targets were formalised for the first time, after taking into account historic, through-the-cycle, sustainable performance as well as desired risk appetite. In addition to this, the group’s credit loss ratio target was reviewed separately, but in conjunction with the consolidated business cluster targets. Nedbank Group’s targeted credit
loss ratio is 0,60% – 1,00%.
The business clusters’ credit loss ratios over time are also shown below.
Note: Nedbank Corporate and Nedbank Retail credit loss ratios restated due to Imperial Bank integration.
BUSiNESS CLUSTERS’ CREDiT LOSS RATiO TRENDS
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
%
NEDBANK RETAIL
TOTAL RETAIL AND BuSINESS BANKING
NEDBANK CAPITAL
NEDBANK BuSINESS BANKING
NEDBANK WEALTH
NEDBANK CORPORATE
mar 2009 Jun 2009 sep 2009 Dec 2009 mar 2010 Jun 2010 sep 2010 Dec 2010
3,40
2,82
3,22
2,64
1,01
0,80 0,83
1,27
0,79
0,47
0,91
0,59
0,260,27 0,25 0,25 0,29 0,24
0,25 0,20
0,62
0,47 0,320,31
0,23 0,15
0,62
0,600,31 0,36
1,14
0,520,43
0,32 0,270,40
2,57 2,562,42 2,37
2,23 2,18
3,21 3,17
2,96 2,93
2,762,67
TREND OF CREDiT LOSS RATiO vERSUS TARgET RANgE
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
%
mar 2009 Jun 2009 sep 2009 Dec 2009 mar 2010 Jun 2010 sep 2010 Dec 2010
GROuP (CREDIT LOSS RATIO)
uPPER BOuND (GROuP CREDIT LOSS RATIO TARGET)
LOWER BOuND (GROuP CREDIT LOSS RATIO TARGET)
BASEL II EL % THROuGH-THE-CyCLE TARGET RANGE (0,6% - 0,7%)
old upper bound (group credit loss ratio target) 0,85
Basel ii expected loss (el)% through-the-cycle-range (0,6-0,7)
old lower bound (group credit loss ratio target) 0,55new lower bound (group credit loss ratio target) 0,60
new upper bound (group credit loss ratio target) 1,00
1,72
1,601,52 1,52 1,51
1,46
1,36 1,36
92b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedA summary of the impairments movements over the past year is shown below.
suMMary oF IMpaIrMenTs
RmNedbank
Capital NedbankCorporate
TotalNedbankRetail andBusinessBanking
NedbankRetail
NedbankBusinessBanking
NedbankWealth
CentralManage-
ment 2010 2009
Opening balance 384 1 200 8 060 6 840 1 220 156 (2) 9 798 7 859
Specific impairment 310 656 6 735 5 921 814 129 7 830 5 542
Specific impairment, excluding discounts 306 416 5 839 5 269 570 129 6 690 4 566Specific impairment for discounted cashflow losses 4 240 896 652 244 1 140 976
Portfolio impairment 74 544 1 325 919 406 27 (2) 1 968 2 317
Income statement impairment charge (net of recoveries) 535 307 5 320 5 110 210 25 1 6 188 6 634
Specific impairment 471 270 5 098 4 697 401 (38) 1 5 802 6 798Net increase/decrease in impairment for discounted cashflow losses 20 137 (30) (3) (27) 65 192 164Portfolio impairment 44 (100) 252 416 (164) (2) 194 (328)
Recoveries 167 71 490 458 32 35 – 763 457Amounts written off/other transfers (163) (209) (5 042) (4 836) (206) (109) – (5 523) (5 152)
Specific impairment (162) (202) (5 042) (4 836) (206) (109) (5 515) (5 131)Portfolio impairment (1) (7) (8) (21)
Closing balance 923 1 369 8 828 7 572 1 256 107 (1) 11 226 9 798
Specific impairment 806 932 7 251 6 237 1 014 82 1 9 072 7 830
Specific impairment, excluding discounts 782 555 6 385 5 588 797 17 1 7 740 6 690Specific impairment for discounted cashflow losses 24 377 866 649 217 65 1 332 1 140
Portfolio impairment 117 437 1 577 1 335 242 25 (2) 2 154 1 968
Total loans and advances 63 251 159 072 246 927 194 906 52 021 16 976 273 486 499 460 099
Total average banking book loans and advances 42 113 152 775 243 651 191 212 52 439 17 406 (1 840) 454 105 436 884
Total average loans and advances 64 025 152 775 243 651 191 212 52 439 17 406 (90) 477 767 451 853
93b
The coverage ratio is the amount of specific impairments that have been raised for the total defaulted loans and advances. This is
effectively the inverse of the expected recoveries ratio. The expected recoveries are equal to the defaulted loans and advances less the
specific impairments, as specific impairments are raised for any shortfall that would arise after all recoveries are taken into account.
The expected recoveries of defaulted loans and advances include recoveries as a result of liquidation of security or collateral, as well
as recoveries as a result of a client curing or partial client repayments.
The absolute value of expected recoveries of defaulted accounts (which includes security values) will increase as the number of
defaults increase. The expected recovery amount will, in most instances, be less than the total defaulted exposure, as it is seldom the
case that 100% of the defaulted loan would be written off.
A decrease in the coverage ratio (or increase in the expected recoveries ratio) may arise as a result of the following:
• Expected recoveries improving due to higher recoveries being realised in the loss given default (LGD) calculation.
• A change in the defaulted product mix, with a greater percentage of products that have a higher security value and therefore a
lower specific impairment, such as secured products (home loans and commercial real estate).
• An increase in the collateral value, which is an input into the LGD calculation and would result in a decrease in the LGD and
decrease in specific impairments.
• A change in the mix of new versus older defaults as, in most products, the recoveries expected from defaulted clients decrease over
time.
• A change in the writeoff policy, such as extending the period prior to writing off a deal, that will result in a longer period in which
recoveries can be realised.
Defaulted advances declined by 1,04% to R26 765 million (2009: R27 045 million). Total impairment provisions increased by 14,6% to
R11 226 million (2009: R9 798 million) resulting in strengthened coverage ratios. The group’s coverage ratio increased to 33,9% (2009:
29,0%) predominantly due to the decrease in residential mortgage defaulted advances. In addition, improved client affordability
combined with stabilising house prices has contributed towards the ongoing improvement of early arrears in home loan advances.
However, commercial mortgages, lease and instalment debtors, and other loans and advances increased, as illustrated in the following
table.
DEFAULTED LOANS AND ADvANCES, SpECiFiC iMpAiRMENTS AND COvERAgE RATiO
30 000
25 000
20 000
15 000
10 000
5 000
0
34,0
32,0
30,0
28,0
26,0
24,0
22,0
20,0
rm %
2009 2010
DEFAuLTED LOANS AND ADVANCES
SPECIFIC IMPAIRMENTS
COVERAGE RATIO (%)
27 045
29,0
33,926 765
7 8309 072
94b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinued
deFaulTed loans and advanCes and relaTed seCurITy and IMpaIrMenTs by busIness ClusTer and asseT Class
RmNedbank
Capital NedbankCorporate
Total
Nedbank
Retail and
Business
BankingNedbank
Retail
NedbankBusinessBanking
NedbankWealth 2010 2009
AiRB Approach 1 242 2 340 18 639 15 364 3 275 336 22 557 23 746
Corporate 1 216 52 263 263 1 531 468Specialised lending – high-volatility commercial real estate 1 664 1 664 1 647Specialised lending – income-producing real estate 531 43 43 574 962SME – corporate 93 1 273 1 273 1 366 940Sovereign 26 26 44Retail mortgages 12 760 12 205 555 333 13 093 15 137Retail revolving credit 747 747 2 749 483Retail – other 2 392 1 942 450 1 2 393 2 638SME – retail 1 161 470 691 1 161 1 427
TSA – 1 245 1 725 1 725 13 2 983 1 623
Corporate 7 7 7 42SME – corporate 1 245 205 205 1 450 595Retail mortgages 85 85 12 97 65Retail other 1 277 1 277 1 1 278 789SME – retail 151 151 151 132
Other regulated entities – 254 – – 254 152properties in possession – 5 639 631 8 18 662 887Non-regulated entities 45 264 – – 309 637
Total defaulted loans and advances 1 287 4 108 21 003 17 720 3 283 367 26 765 27 045
DEFAULTED LOANS AND ADvANCES BY pRODUCT
rm
OTHER LOANS AND ADVANCES
PROPERTIES IN POSSESSION
PERSONAL LOANS
CREDIT CARDS
LEASE AND INSTALMENT DEBTORS
COMMERCIAL MORTGAGES
RESIDENTIAL MORTGAGES
(12,6%)
13,4%
24,3%
2,8%6,1%
(25,4%)
31,9%
30 000
25 000
20 000
15 000
10 000
2009 2010
15 956 13 947
3 513 3 983
2 469
3 068
504
518
1 222
1 297
887
662
2 4943 290
27 04526 765
95b
The coverage ratio and expected recovery ratio by business cluster and by product is shown in detail in the table below.
suMMary oF IMpaIrMenTs and deFaulTed loans and advanCes – nedbank group
2010
rm
defaulted loans and advances
defaulted loans and advances
as % of total
expected
recoveries
net uncovered
position after
discoun-ting
Total specific impair-ments
specific impair-
ments on defaulted loans and advances
specific impair-
ments for discounted
cashflow losses
Coverage ratio (%)
expected recovery ratio (%)
Nedbank Capital 1 287 4,8 481 806 806 782 24 62,6 37,4
Other loans and advances 1 287 4,8 481 806 806 782 24 62,6 37,4
Nedbank Corporate 4 108 15,3 3 176 932 932 555 377 22,7 77,3
Residential mortgages 45 0,2 32 13 13 9 4 28,9 71,1Commercial mortgages 3 439 12,8 2 700 739 739 413 326 21,5 78,5Lease and instalment debtors 29 0,1 15 14 14 10 4 48,3 51,7Personal loans 19 0,1 8 11 11 10 1 57,9 42,1Properties in possession 5 5 100,0Other loans and advances 571 2,1 416 155 155 113 42 27,1 72,9
Total Nedbank Retail and Business Banking 21 003 78,5 13 752 7 251 7 251 6 385 866 34,5 65,5
Residential mortgages 13 557 50,7 10 531 3 026 3 026 2 666 360 22,3 77,7Commercial mortgages 544 2,1 420 124 124 54 70 22,8 77,2Lease and instalment debtors 3 038 11,4 1 193 1 845 1 845 1 748 97 60,7 39,3Credit cards 518 1,9 16 502 502 500 2 96,9 3,1Personal loans 1 278 4,8 490 788 788 495 293 61,7 38,3Properties in possession 639 2,3 580 59 59 59 9,2 90,8Other loans and advances 1 429 5,3 522 907 907 863 44 63,5 36,5
Nedbank Retail 17 720 66,3 11 483 6 237 6 237 5 588 649 35,2 64,8
Residential mortgages 12 224 45,7 9 441 2 783 2 783 2 502 281 22,8 77,2Commercial mortgages 124 0,5 67 57 57 50 7 46,0 54,0Lease and instalment debtors 2 364 8,9 832 1 532 1 532 1 471 61 64,8 35,2Credit cards 514 1,9 14 500 500 498 2 97,3 2,7Personal loans 1 278 4,8 490 788 788 495 293 61,7 38,3Properties in possession 631 2,3 572 59 59 59 9,4 90,6Other loans and advances 585 2,2 67 518 518 513 5 88,5 11,5
Nedbank Business Banking 3 283 12,2 2 269 1 014 1 014 797 217 30,9 69,1
Residential mortgages 1 333 5,0 1 090 243 243 164 79 18,2 81,8Commercial mortgages 420 1,6 353 67 67 4 63 16,0 84,0Lease and instalment debtors 674 2,5 361 313 313 277 36 46,4 53,6Credit cards 4 2 2 2 2 50,0 50,0Properties in possession 8 8 100,0Other loans and advances 844 3,1 455 389 389 350 39 46,1 53,9
Nedbank Wealth 367 1,4 285 82 82 17 65 22,3 77,7
Residential mortgages 345 1,3 271 74 74 9 65 21,4 78,6Lease and instalment debtors 1 1 100,0Properties in possession 18 0,1 13 5 5 5 27,8 72,2Other loans and advances 3 3 3 3 100,0
Central Management – – (1) 1 1 1 – – 100,0
Other loans and advances (1) 1 1 1 100,0
96b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedsuMMary oF IMpaIrMenTs and deFaulTed loans and advanCes – nedbank group (continued)
2010
rm
defaulted loans and advances
defaulted loans and advances
as % of total
expected recoveries
net uncovered
position after
discoun-ting
Total specific impair-ments
specific impair-
ments on defaulted loans and advances
specific impair-
ments for discounted
cashflow losses
Coverage ratio (%)
expected recovery ratio (%)
group 26 765 100,0 17 693 9 072 9 072 7 740 1 332 33,9 66,1
Residential mortgages 13 947 52,1 10 834 3 113 3 113 2 684 429 22,3 77,7Commercial mortgages 3 983 14,9 3 120 863 863 467 396 21,7 78,3Lease and instalment debtors 3 068 11,5 1 209 1 859 1 859 1 758 101 60,6 39,4Credit cards 518 1,9 16 502 502 500 2 96,9 3,1Personal loans 1 297 4,8 498 799 799 505 294 61,6 38,4Properties in possession 662 2,5 598 64 64 64 9,7 90,3Other loans and advances 3 290 12,3 1 418 1 872 1 872 1 762 110 56,9 43,1
suMMary oF IMpaIrMenTs and deFaulTed loans and advanCes – nedbank group
2009
Rm
Defaulted loans and advances
Defaulted loans and advances
as % of total
Expected recoveries
Net uncovered
position after
discoun-ting
Total specific impair-ments
Specific impair-
ments on defaulted loans and advances
Specific impair-
ments for discounted
cashflow losses
Coverage ratio (%)
Expected recovery ratio (%)
group 27 045 100,0 19 215 7 830 7 830 6 690 1 140 29,0 71,0
Residential mortgages 15 956 59,0 12 951 3 005 3 005 2 627 378 18,8 81,2Commercial mortgages 3 513 13,0 2 964 549 549 334 215 15,6 84,4Lease and instalment debtors 2 469 9,1 915 1 554 1 554 1 423 131 62,9 37,1Credit cards 504 1,9 1 503 503 499 4 99,8 0,2Personal loans 1 222 4,5 543 679 679 383 296 55,6 44,4Properties in possession 887 3,3 719 168 168 168 18,9 81,1Other loans and advances 2 494 9,2 1 122 1 372 1 372 1 256 116 55,0 45,0
properTIes In possessIon
RmNedbank
Capital NedbankCorporate
Total Nedbank Retail and Business Banking
NedbankRetail
NedbankBusinessBanking
NedbankWealth
Central Manage-
ment 2010 2009
Opening balance – 2 880 871 9 5 – 887 791Disposal/Writedowns/
Revaluations – (6) (607) (593) (14) (14) – (627) (580)Properties in possession
acquired during the period – 9 366 353 13 27 – 402 676
Closing balance – 5 639 631 8 18 – 662 887
unsold 5 468 462 6 17 490 565Sold awaiting transfer 171 169 2 1 172 322
97b
CounTerparTy CredIT rIskNedbank Group applies the Current Exposure Method (CEM) for Basel II counterparty credit risk. Economic capital calculations also
currently utilise the CEM results as input in the determination of credit economic capital.
over-The-CounTer (oTC) derIvaTIves For nedbank lIMITed and london branCh
OTC derivative products Notional value
gross positive fair value Notional value
Gross positive fair value
Rm 2010 2010 2009 2009
Credit default swaps 8 338 56 2 272 8
Embedded derivatives 3 720* 2Proprietary trading 4 618** 54 2 272 8
Equities 11 740 569 11 005 1 155Forex and gold 346 824 6 212 189 601 6 437Interest rates 419 210 7 234 358 738 5 470Other commodities 4 172 147 45 302Precious metals except gold 6 487 105 2 56
Total 796 771 14 323 561 663 13 428
* Credit default swaps embedded in credit linked notes issued by Nedbank Group whereby credit protection is purchased of R1 078 million or credit linked
notes purchased whereby credit protection is sold of R2 642 million.
** Proprietary trading positions through the purchase (R1 877 million) and sale (R2 741 million) of credit protection.
OTC derivative products
Rm
Gross positive fair
value
Current netting
benefits
Netted current credit
exposure (before
mitigation)Collateral
amount
Netted current credit
exposure (after
mitigation)Exposure at default value
Risk-weighted exposure
2010 14 323 6 983 9 052 368 8 766 11 718 4 428
2009 13 428 7 028 6 963 779 6 443 9 566 3 018
seCurITIes FInanCIng TransaCTIons (sFTs) For nedbank lIMITed and london branCh
SFTs
RmGross positive
fair value
Collateral value after
haircut
Netted current credit exposure
(after mitigation)Exposure at
default valueRisk-weighted
exposure
2010 Repurchase agreements 10 849 10 343 506 506 26Securities lending 8 738 9 715 1 237 1 237 89
Total 19 587 20 058 1 743 1 743 115
2009Repurchase agreements 8 026 7 557 469 469 40Securities lending 8 567 9 208 415 415 27
Total 16 593 16 765 884 884 67
98b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedCredIT ConCenTraTIon rIsksIngle-naMe CredIT ConCenTraTIon rIskOf total group credit economic capital only 3,1% is attributable to the top 20 exposures, excluding banks and government exposure, and 1,4% to the top 20 banks’ exposure, highlighting that Nedbank Group does not have undue single-name credit concentration risk.
The group’s credit concentration risk measurement incorporates the asset size of obligors/borrowers into its calculation of credit economic capital. Single-name concentration is monitored at all credit committees, which includes the applicable regulatory and economic capital per exposure.
geographIC ConCenTraTIon rIskGiven that 95% of the group’s loans and advances originate in South Africa, geographic exposure risk is high. Practically, however, this concentration has proven positive for Nedbank
Group, given the global financial crisis, and reflects its focus on its area of core competence.
The direct exposure of Nedbank Group to the banking sectors of Portugal, Italy, Ireland, Greece and Spain (PIIGS) is monitored on an ongoing basis and is not material. The group holds no sovereign bonds issued by these countries. Direct lines to banks in Italy and Spain are restricted to systemically important banks.
A summary of Nedbank Group’s exposure to the PIIGS is provided below:
• Portugal – total exposure amounts to R20,65 million.• Italy – total exposure amounts to R2,44 billion.• Ireland – total exposure amounts to R21,22 million.• Greece – Nedbank Group has no exposure, nor lines to Greek
banks.• Spain – total exposure amounts to R8,28 million.
Note 1: 2009 restated due to the introduction of the sovereign industry segment in 2010.Note 2: The figures above represents the industry (%) split of Nedbank Group’s total exposure, including on-balance sheet, off-balance sheet and
derivatives based on the proprietary credit portfolio model used for credit economic capital measurement.
gEOgRApHiC CONCENTRATiON RiSK
SOuTH AFRICA
REST OF AFRICA
REST OF WORLD
2010
95%
2009
94%
3%2% 4%2%
iNDUSTRY CONCENTRATiON RiSK
RETAIL –MORTGAGES
RETAIL – OTHER
SOVEREIGN
BASIC INDuSTRIES
CyCLICAL GOODS
CyCLICAL SERVICES
FINANCE AND INSuRANCE
NON-CyCLICAL
OTHER
REAL ESTATE
RESOuRCES
2010 2009
10%
23%
15%3%
3%
7%
9%
7%
14%
7%2%11%
22%
15%4%
3%
6%
9%
6%
16%
6%2%
99b
Previously sovereign exposures, including local government
exposure, were considered part of the non-cyclical segment. In
2010 this was allocated into a standalone segment and restated
for 2009.
We conclude that credit concentration risk is adequately
measured, managed, controlled and ultimately capitalised. There
is no undue single-name concentration or sector concentrations.
While there is a concentration of Nedbank Group’s loans and
advances in South Africa, this has been positive for Nedbank
Group during the global financial crisis.
seCurITIsaTIon rIsk
Nedbank Group uses securitisation exclusively as a funding
diversification tool and to add flexibility in mitigating structural
liquidity risk. The group currently has three traditional
securitisation transactions:
• Synthesis Funding Limited (Synthesis), an asset-backed
commercial paper (ABCP) programme launched during 2004.
• Octane ABS 1 (Pty) Limited (Octane), a securitisation of
motor vehicle loans launched in July 2007.
• GreenHouse Funding (Pty) Limited, Series 1 (GreenHouse),
a residential mortgage-backed securitisation programme
launched in December 2007.
Nedbank Group also fulfils a number of secondary roles as
liquidity facility provider, swap provider and investor in third-
party securitisation transactions. All securitisation transactions
entered into thus far have involved the sale of the underlying
assets to the special-purpose vehicles. Nedbank Group has not
originated or participated in synthetic securitisations.
Nedbank Group complies with International Financial Reporting
Standards in recognising and accounting for securitisation
transactions. In particular, the assets transferred to the
GreenHouse and Octane securitisation vehicles continue to be
recognised and consolidated in the balance sheet of the group
and the respective securitisation vehicles are consolidated under
Nedbank Group for financial reporting purposes. Synthesis is
also consolidated into the group for financial reporting purposes.
Securitisations are treated as sales transactions (rather than
financing). The assets are sold to the special-purpose vehicles at
carrying value and no gains or losses are recognised.
Nedbank Group has not engaged in any new securitisation
transactions of its own assets in the period under review.
There have been no downgrades of any of the commercial paper
issued in Nedbank Group’s securitisation transactions and the
performance of the underlying portfolios of assets remains
acceptable.
asseTs seCurITIsed and reTaIned seCurITIsaTIon exposure
Transactionyear
initiatedRating agency
Transactiontype Asset type
Assets secur-itised
Assets out-
standing
Amountretained/
pur-chased*
Assets securi-
tised
Assets out-
standing
Amountretained/
pur-chased*
Rm 2010 2010 2010 2009 2009 2009
GreenHouse 2007Moody’s
and FitchTraditional
securitisation Retail mortgages 2 000 1 699 226 2 000 1 973 226
Octane 2007 FitchTraditional
securitisation Auto loans 2 000 607 312 2 000 1 454 312
Total 4 000 2 306 538 4 000 3 427 538
* This is the nominal amount of exposure and excludes accrued interest.
lIquIdITy FaCIlITIes provIded To nedbank’s abCp prograMMe
Trans-action
year initiated
Ratingagency
Transaction
type Asset typeProgramme
size
Commercialpaper
outstandingLiquidityfacilities
Commercialpaper
outstandingLiquidityfacilities
Rm 2010 2010 2009 2009
Synthesis 2004 Fitch
ABCP
programme
Asset-backed
securities,
corporate term
loans and bonds 15 000 5 006 5 009 5 820 5 824
Total 15 000 5 006 5 009 5 820 5 824
100b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedTradIng MarkeT rIsk
Most of Nedbank Group’s trading activity is executed in Nedbank
Capital. This includes market-making and the facilitation of
client business and proprietary trading in the commodity, equity,
credit, interest rate, and currency markets. Nedbank Capital
primarily focuses on client activities in these markets.
In addition to applying business judgement, management uses
a number of quantitative measures to manage the exposure to
trading market risk. These measures include:
• risk limits based on a portfolio measure of market risk
exposures referred to as value at risk (VaR), including expected
tail loss; and
• scenario analysis, stress tests and other analytical tools that
measure the potential effects on the trading revenue arising
in the event of various unexpected market events.
While VaR captures Nedbank Group’s exposure under normal
market conditions, sensitivity and stress-and-scenario analysis
(and in particular stress testing) are used to add insight into the
possible outcomes under abnormal market conditions.
TradIng MarkeT rIsk proFIleThe tables below reflect the VaR statistics for the Nedbank
Group trading book activities. The first table is for the period
January to December 2010 and the second table is for the period
January to December 2009.
group TradIng book value aT rIsk
Rm Historical VaR (99%, one-day VaR) by risk type
Risk categories Average Minimum* Maximum* year-end
2010Foreign exchange 2,2 0,6 6,7 3,9interest rate 9,0 3,9 14,9 6,2Equity 3,6 1,4 9,3 2,8Credit 2,8 0,8 4,0 4,0Commodity 0,7 0,0 1,5 0,2Diversification** (7,3) (6,2)
Total vaR exposure 11,0 6,1 18,3 11,0
2009Foreign exchange 4,1 1,0 10,3 3,7Interest rate 16,9 7,2 28,7 7,4Equity 6,3 2,5 13,3 3,8Credit 6,0 2,5 10,9 3,2Commodity 0,5 0,0 2,4 1,2Diversification** (12,5) (6,0)
Total VaR exposure 21,3 9,9 33,1 13,3
* The maximum and minimum VaR values reported for each of the different risk factors do not necessarily occur on the same day. As a result a diversification
number for the maximum and minimum values have been omitted from the table.
** Diversification benefit is the difference between the aggregate VaR and the sum of VaRs for the five risk categories. This benefit arises because the
simulated 99%/one-day loss for each of the five primary market risk categories occurs on different days.
Nedbank Group’s trading market risk exposure expressed as average daily VaR decreased by 48% from R21,3 million in 2009 to
R11 million in 2010. The economic and financial outlook in 2010 has remained uncertain against the backdrop of a fragile global
economic recovery and the near sovereign default in the Eurozone. This has negatively impacted the risk appetite in all the market
risk categories.
The following graph illustrates the daily VaR for the period January to December 2010. Nedbank Group remained within the approved
risk appetite and the VaR limits allocated by the board.
101b
value-aT- rIsk uTIlIsaTIon For 2010(99%, one-day vaR)
VaR is an important measurement tool and the performance of the model is regularly assessed. The approach to assessing whether the
model is performing adequately is known as backtesting, which is simply a historical test of the accuracy of the VaR model. To conduct
a backtest the bank reviews the actual daily VaR over a one-year period (on average 250 trading days) and compares the actual
daily trading revenue (including net interest but excluding commissions and primary revenue) with the VaR estimate and counts the
number of times the trading loss exceeds the VaR estimate.
Nedbank Group used a holding period of one day with a confidence level of 99%, and had no backtesting exceptions for 2010.
vAR UTiLiSATiON FOR 2010 (99%, ONE-DAY vAR)
20
15
10
5
0
var rm
Jan FeB mar apr may Jun Jul aug sep oCt nov DeC
ONE DAy VAR
AVERAGE VAR
vAR pROFiT AND LOSS FOR 2010rm
mar apr mayJan FeB Jun augJul sep oCt nov DeC
25
20
30
15
10
5
–
-5
-10
-15
-20
-30
-25
PROFIT AND LOSS
VAR
102b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedThe following histogram illustrates the distribution of daily revenue during 2010 for Nedbank Group’s trading businesses (including
net interest, commissions and primary revenue credited to Nedbank Group’s trading businesses). The distribution is skewed to the
profit side and the graph shows that trading revenue was realised on 215 days out of a total of 251 days in the period. The average
daily trading revenue generated was R6,03 million (2009: R6,7 million).
analysIs oF TradIng revenue For 2010
revIsIons To The basel II FraMeworkIn the Revisions to the Basel II Framework published by the Basel Committee in July 2009 a guideline for calculating stressed VaR
was provided. Stressed VaR is calculated using market data taken over a period through which the relevant market factors were
experiencing stress. Nedbank Group uses historical data from the period 26 March 2008 to 12 March 2009. This period captures
significant volatility in the SA market.
The information in the following table is the comparison of the VaR using three different calculations at 31 December 2010. The three
different calculations are historical VaR, extreme tail loss and stressed VaR. The extreme tail loss measures the expected losses in the
tail of the distribution and stressed VaR uses a volatile historical data period. A 99% confidence level and one-day holding period is
used for all the calculations.
CoMparIson oF TradIng value aT rIsk
rm historical var stressed var extreme tail loss2010 99% (one-day var) 99% (one-day var) 99% (one-day var)
Foreign exchange 3,9 19,5 5,3Interest rates 6,2 15,7 8,2Equities 2,8 3,5 3,7Credit 4,0 4,0 7,0Commodities 0,2 3,6 1,2Diversification (6,2) (23,9) (13,3)
Total vaR exposure 10,9 22,4 12,1
ANALYSiS OF TRADiNg REvENUE FOR 2010
num
ber
of t
radi
ng D
ays
trading income (rm)
<-3
5
-35
to -
30
-30
to -
25
-25
to -
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 to
25
25 to
30
30 to
35
>35
40
50
60
70
80
90
30
20
0
10
103b
equITy rIsk (InvesTMenT rIsk) In The bankIng bookThe total equity portfolio for investment risk is R3 919 million (2009: R3 873 million). R2 897 million (2009: R2 947 million) is held
for capital gain, while the rest is mainly strategic investments.
Investments Publicly listed Privately held Total
Rm 2010 2009 2010 2009 2010 2009
Fair value disclosed in balance sheet
(excluding associates and joint ventures) 536 485 2 475 2 491 3 011 2 976Fair value disclosed in balance sheet
(including associates and joint ventures) 536 485 3 383 3 388 3 919 3 873
Equity investments held for capital gain are generally classified as fair value through profit and loss, with fair-value gains and losses
reported in non-interest revenue. Strategic investments are generally classified as ‘available for sale’, with fair-value gains and losses
recognised directly in equity.
equITy InvesTMenTs held For CapITal gaIn (prIvaTe equITy) reporTed In non-InTeresT revenue
Nedbank Group Nedbank Capital Nedbank Corporate
Rm 2010 2009 2010 2009 2010 2009
Securities dealing 3 268 (46) 251 49 17 Investment income – dividends received 225 36 194 18 31 18
Total private equity 228 304 148 269 80 35
Realised 230 109 214 72 16 37unrealised (2) 195 (66) 197 64 (2)
Total private equity 228 304 148 269 80 35
operaTIonal rIskNedbank Group was granted approval in December 2010 from
the South African Reserve Bank for the use of the AMA, and now
calculates its operational risk regulatory capital requirements
using partial and hybrid AMA.
The AMA Operational Risk Management Framework was
approved by the board’s Group Risk and Capital Management
Committee. The AMA methodologies contained therein have
already been rolled out and embedded in the businesses,
including for the purposes of economic capital and the
International Capital Adequacy Assessment Process.
asseT and lIabIlITy ManageMenTlIquIdITy rIsk A portfolio of marketable and highly liquid assets, which could
be liquidated to meet unforeseen or unexpected funding
requirements, is maintained. The market liquidity by asset type
(and for a continuum of plausible stress scenarios) is considered
as part of the internal stress testing and scenario analysis
process.
The quantum of unencumbered assets available as collateral for
stress funding is measured and monitored on an ongoing basis.
Nedbank Group’s sources of quick liquidity available for stress
funding requirements amounted to R78,6 billion at year-end.
The following table reflects the composition of this portfolio.
104b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuednedbank group’s sourCes oF quICk lIquIdITy
The tables below show the expected profile of cashflows under a contractual and business-as-usual (Bau) scenario:
nedbank group ConTraCTual lIquIdITy gap aT year-end
rm >3 months >6 months >1 year non-2010 <3 months <6 months <1 year <5 years >5 years determined Total
Cash and cash equivalents (including mandatory reserve deposits with central bank) 19 272 473 19 745 Other short-term securities 19 377 2 763 3 128 1 776 27 044 Derivative financial instruments 3 682 1 117 1 361 4 877 2 845 13 882 Government and other securities 352 1 260 5 655 18 335 6 222 31 824 Loans and advances 87 925 18 266 30 134 177 962 160 986 475 273 Other assets 5 911 35 039 40 950
Assets 136 519 23 406 40 278 202 950 170 053 35 512 608 718
Total equity 47 814 47 814 Derivative financial instruments 1 288 582 1 032 4 886 4 264 12 052 Amounts owed to depositors 342 941 49 403 56 765 39 102 2 229 490 440 Other liabilities 9 262 23 046 32 308 Long-term debt instruments 289 1 674 18 102 6 039 26 104
Liabilities and equity 353 780 51 659 57 797 62 090 12 532 70 860 608 718
Net liquidity gap (217 261) (28 253) (17 519) 140 860 157 521 (35 348) –
The contractual liquidity gap is adjusted with behavioural assumptions in order to determine the group’s Bau or anticipated liquidity
risk profile. These adjustments result largely in a lengthening of deposit cashflows, due to behavioural assumptions through which
contractually maturing short-term deposits have longer profiles under normal market conditions.
NEDBANK gROUp’S SOURCES OF qUiCK LiqUiDiTY
5%5%
11%
31%
14%
19%
12%
3%
CORPORATE AND LISTED EQuITIES
MARKETABLE SECuRITIES SuRPLuS LIQuID ASSETS, NOTES AND COINS
PRuDENTIAL LIQuID ASSETS
CASH RESERVES
OTHER BANK PAPER AND uNuTILISED BANK CREDIT LINES
PRICE SENSITIVE OVERNIGHT LOANS
OTHER
105b
nedbank group busIness-as-usual lIquIdITy gap aT year-end
rm >3 months >6 months >1 year non-2010 <3 months <6 months <1 year <5 years >5 years determined Total
Cash and cash equivalents
(including mandatory reserve
deposits with central bank) 19 745 19 745 Other short-term securities 19 377 2 763 3 128 1 776 27 044 Derivative financial instruments 3 682 1 117 1 361 4 877 2 845 13 882 Government and other
securities 31 824 31 824 Loans and advances 40 178 26 135 47 971 316 853 44 136 475 273 Other assets 40 950 40 950
Assets 63 237 30 015 52 460 323 506 98 550 40 950 608 718
Total equity 47 814 47 814 Derivative financial instruments 1 288 582 1 032 4 886 4 264 12 052 Amounts owed to depositors 84 383 58 945 76 375 269 565 1 172 490 440 Other liabilities 32 308 32 308 Long-term debt instruments 289 1 674 18 003 6 138 26 104
Liabilities and equity 85 960 61 201 77 407 292 454 11 574 80 122 608 718
Net liquidity gap (22 723) (31 186) (24 947) 31 052 86 976 (39 172) –
Note: BaU assumptions include rollover assumptions on term maturities. No management actions are assumed in terms of realising cash through the sale
of liquid assets or other marketable securities.
The additional disclosure below depicts the contractual and Bau liquidity mismatches in respect of Nedbank Limited, and highlights
the split of total deposits into stable and more volatile. Based on the behaviour of the bank’s clients, it is estimated that 82% of the
total deposit base is stable.
nedbank lIMITed ConTraCTual balanCe sheeT MIsMaTCh aT year-end
rm
2010 Total next day 2 to 7 days8 days to 1
month
More than 1month to 2
months
Contractual maturity of assets 549 968 52 542 6 485 34 856 15 858Loans and advances 423 576 33 601 1 256 17 609 7 657Trading, hedging and other investment instruments 72 145 2 991 5 144 13 098 5 275Other assets 54 247 15 950 85 4 149 2 926Contractual maturity of liabilities 549 968 203 926 17 540 44 889 27 072Stable deposits 372 076 175 277 8 306 30 060 21 020Volatile deposits 83 365 21 921 1 663 6 375 5 229
Trading and hedging instruments 54 035 6 728 7 571 8 454 823Other liabilities 40 492
On-balance-sheet contractual mismatch – (151 384) (11 055) (10 033) (11 214)Cumulative on-balance-sheet contractual mismatch – (151 384) (162 439) (172 472) (183 686)
106b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedThe Bau table below shows the expected liquidity mismatch under normal market conditions after taking into account the behavioural
attributes of Nedbank Limited’s stable deposits, savings and investment products:
nedbank lIMITed busIness-as-usual balanCe sheeT MIsMaTCh aT year end
2010
rm Total next day 2 to 7 days8 days to 1
month
More than 1month to 2
months
BaU maturity of assets 549 968 28 093 4 223 14 413 11 286Loans and advances 423 576 8 400 2 302 11 985 8 533Trading, hedging and other investment instruments 72 145 19 693 1 921 2 428 2 753Other assets 54 247BaU maturity of liabilities 549 968 18 258 10 906 28 946 14 981Stable deposits 372 076 1 042 1 627 5 577 10 832Volatile deposits 83 365 1 881 5 133 18 629 3 326Trading and hedging instruments 54 035 15 335 4 146 4 740 823Other liabilities 40 492
On-balance-sheet BaU mismatch – 9 835 (6 683) (14 533) (3 695)Cumulative on-balance-sheet BaU mismatch – 9 835 3 152 (11 381) (15 076)
As per the table above Nedbank Limited’s Bau inflows exceed outflows in the overnight-to-one-week time bucket, taking into
account behavioural assumptions, including rollover assumptions associated with term deals, but excluding Bau management actions.
As illustrated on the following page the Bau maturity mismatch has improved during 2010. In other words, under Bau conditions
Nedbank Group’s liquidity position is stronger in 2010 than in 2009. This has been achieved through a strategy of lengthening the
funding profile and managing the asset/liability composition from a behavioural perspective.
In terms of lengthening the funding profile the long-term funding ratio increased to 23% in 2010, compared with 18% in 2009.
Nedbank Group’s capital market issues of R6,2 billion, with 3, 5 and 10 year instruments having been issued, contributed to the
increase in the long-term funding ratio.
NEDBANK LiMiTED BEHAviOURAL LiqUiDiTY MiSMATCH AT YEAR-END*
next Day 2 to 7 Days 8 Days to 1 month 1 to 2 months 2 to 3 months 3 to 6 months
4
2
0
(2)
(4)
(6)
(8)
2010
2009%
* Expressed on total assets and based on maturity assumptions before rollovers and risk management.
107b
InTeresT raTe rIsk In The bankIng bookNedbank Group is exposed to interest rate risk in the banking
book (IRRBB) primarily because of the following:
• The bank writes a large quantum of prime-linked advances.
• Funding is prudently raised across the curve at fixed-term
deposit rates that reprice only on maturity.
• Three-month Johannesburg Interbank Agreed Rate (JIBAR)-
linked swaps and forward-rate agreements are typically used
in the risk management of term deposits and fixed-rate
advances.
• Short-term demand funding products reprice to different
short-end base rates.
• Certain non-repricing transactional deposit accounts are
non-rate-sensitive.
• The bank has a mismatch in net non-rate-sensitive balances,
including shareholders’ funds that do not reprice for interest
rate changes.
IRRBB comprises:
• Repricing risk (mismatch risk) – timing difference in the
maturity (for fixed rate) and repricing (for floating rate) of
bank assets, liabilities and off-balance-sheet positions.
• Reset or basis risk – imperfect correlation in the adjustment
of the rates earned and paid on different instruments with
otherwise similar repricing characteristics.
• yield curve risk – changes in the shape and slope of the yield
curve.
• Embedded optionality – the risk pertaining to interest-
related options embedded in bank products.
nedbank group – InTeresT raTe reprICIng gap aT year-end
2010
rm < 3 months >3 months<6 months
> 6 months <12 months > 1 year
non-rate-sensitive
Net repricing profile before hedging 67 201 (26 844) (19 982) 29 879 (50 254)Net repricing profile after hedging 39 376 746 1 952 8 180 (50 254)Cumulative repricing profile after hedging 39 376 40 122 42 074 50 254 –
At year-end the earnings-at-risk sensitivity of the group’s banking book for a 1% parallel reduction in interest rates was 1,38% of total
group equity (2009: 1,30%), well within the approved risk limit of 2,5%. This exposes the group to a decrease in net interest income
(NII) of approximately R660 million should interest rates fall by 1%, measured over a 12-month period.
NEDBANK gROUp iNTEREST RATE REpRiCiNg pROFiLE AT YEAR END
rm
< 3 months >3 months<6 months
>6 months<12 months
>1 year non-rate- sensitive
40 000
60 000
20 000
0
(20 000)
(40 000)
(60 000)
NET REPRICING PROFILE BEFORE HEDGING
NET REPRICING PROFILE AFTER HEDGING
108b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedThe level of interest rate sensitivity is managed in conjunction with credit impairment sensitivity and the group’s interest rate view,
and is benchmarked regularly against the peer group.
Nedbank Limited’s economic value of equity, measured for a 1% parallel decrease in interest rates, is a loss of R441 million at year-
end (2009: loss of R225 million).
The table below highlights the group’s and bank’s exposure to interest rate risk measured for normal and stressed interest rate changes:
exposure To InTeresT raTe rIsk
2010
rm notenedbank
limitedother group
companiesnedbank
group
Nii sensitivity 1 1% instantaneous decline in interest rates (562) (98) (660)2% instantaneous decline in interest rates (1 119) (200) (1 319)
Linear path space 2 Lognormal interest rate sensitivity (259) n/a* n/a*Absolute-return interest rate sensitivity** (1 315) n/a* n/a*
Basis interest rate risk sensitivity 3 0,25% narrowing of prime/call differential (215) (2) (217)
Economic value of equity sensitivity 4 1% instantaneous decline in interest rates (441) n/a* n/a*2% instantaneous decline in interest rates (909) n/a* n/a*
Nii sensitivity Instantaneous stress shock** 5 (3 447) n/a* n/a*Instantaneous stress shock modelled as a ramp** 6 (3 166) n/a* n/a*
* n/a: not modelled.
** Stressed interest rate changes.
Notes
1 Net interest income sensitivity, as currently modelled, exhibits very little convexity.
2 Linear path space is a stochastic method used to generate random interest rate paths. These paths are then modelled and a probabilistic impact
of interest rate changes on NII is derived. The ‘Lognormal interest rate sensitivity’ uses two years of interest rate movements to derive interest rate
volatility. The stress scenario ‘Absolute-return interest rate sensitivity’ is based on the volatility of interest rates over nine years.
3 Basis interest rate risk sensitivity is quantified using a narrowing in the prime/call interest rate differential of 0,25% and is an indication of the
sensitivity of the margin to a squeeze in short-term interest rates.
4 Economic value of equity sensitivity is calculated as the net present value of asset cashflows less the net present value of liability cashflows.
5 The instantaneous stress shock is derived from the principles espoused in the Basel Committee paper ‘Principles for the Management and Supervision
of Interest Rate Risk’. 1st and 99th percentile observed interest rate changes over a five-year period with a one-year holding period have been used.
6 The instantaneous stress shock modelled as a ramp uses the same interest rate shock as the instantaneous stress shock described above, but the rate
shock is phased in over a nine-month period.
ForeIgn CurrenCy TranslaTIon rIsk In The bankIng bookForeign currency translation risk arises as a result of Nedbank Group’s investments in foreign companies that have issued foreign
equity. This foreign equity is translated into rands for domestic reporting purposes, recording a profit where the rand exchange rate
has deteriorated and a loss where the rand exchange rate has strengthened between periods.
Foreign currency translation risk remains relatively low and is currently aligned with an appropriate offshore capital structure. Risk
limits are based on the expected level of currency-sensitive foreign capital. The exposure was approximately uSD267 million at year-
end (2009: uSD241 million).
109b
oFFshore CapITal splIT by FunCTIonal CurrenCy
$m uS dollar equivalent ($m) 2010 2009Equity Forex sensitive Non-forex-sensitive Total Total
uS dollar 121 121 121 108Pound sterling 122 122 122 113Swiss franc 16 16 16 13Malawi kwatcha 8 8 8 7Other 543 543 436
Total 267 267 543 810 677
Forex-sensITIve porTIon oF oFFshore CapITal
$m 2010 2009
Forex-sensitive portion of offshore capital 267 241
Limit 325 250
The total risk-weighted assets (RWA) for foreign entities
(R7,6 billion) relative to that for Nedbank Group (R323 billion)
is 2,3% at year-end. The effective average capitalisation rate
of the foreign-denominated business is 27% (2009: 26%). Any
foreign exchange rate movement will therefore have a limited
effect on Nedbank Group’s capital adequacy ratio (eg a 10%
appreciation in the rand will decrease the capital adequacy ratio
only by 0,02%).
InsuranCe rIskWithin Nedbank Group insurance risk encompasses underwriting
and product design risk.
Actuarial and statistical methodologies are used to price
insurance risk (eg morbidity, mortality, theft). underwriters align
clients with this pricing basis and respond to any anti-selection
by placing clients in substandard-risk pools, pricing this risk with
an additional risk premium, excluding certain claim events or
causes, or excluding clients from entering pools at all.
The failure to reinsure with acceptable-quality reinsurers (beyond
the level of risk appetite mandated by the board of directors)
for risks underwritten by the short-term insurance and/or life
assurance activities of the group, and also including catastrophe
insurance (ie more than one insurance claim on the group arising
from the same event), could lead to disproportionate losses
(reinsurance risk).
Insurance underwriting activities are predominantly undertaken
by Nedgroup Life Assurance Company Limited (Nedgroup
Life) and Nedgroup Insurance Company Limited (Nedgroup
Insurance) within the Nedbank Wealth Cluster.
Nedgroup Insurance is a short-term insurer that focuses
predominantly on homeowner’s insurance and limited vehicle-
related value-add products for the retail market.
Nedgroup Life offers credit life, simple-risk and savings solutions,
as well as a set of differentiated underwritten individual risk life
products supported by a wellness programme. A large part of
the book is derived from the provision of life cover linked to
Nedbank Group’s lending activities.
The group’s risk appetite for insurance risk is currently low,
reflected by its consumption of only 0,7% of total minimum
required group economic capital (refer page 117). The solvency
ratios are set out on page 115.
110b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedCapITal ManageMenTregulaTory CapITal adequaCynedbank group regulaTory CapITal adequaCy
Ongoing strong balance sheet management has further strengthened the group’s capital ratios, well above the group’s internal targets
in preparation for Basel III, to 10,1% (core Tier 1), 11,7% (Tier 1) and 15,0% (total) from 9,9%, 11,5% and 14,9% in 2009.
In the first quarter of 2010 the acquisition of the minority shareholding in Imperial Bank was settled in cash and, together with the
negative impact of its integration into Nedbank Limited in Q4 2010 on risk-weighted assets (RWA), and the impairment as intangible
assets, rather than being treated as fixed assets, of capitalised software development costs (previously only expected from 2013
onwards under the new Basel III requirements), resulted in an approximate 1,3% decrease in the group’s capital adequacy ratios.
However, this was offset by continuing capital and RWA optimisation, Nedbank Group’s manage-for-value strategic focus, retained
earnings and a 0,3% increase in capital from higher levels of take-up under the scrip dividend alternative in the second quarter.
Strong track record of RWA and capital optimisation
RiSK AND CApiTAL OpTiMiSATiON
10,5
10,0
9,5
9,0
8,5
8,0
450
400
350
300
250
200
150
100
50
Core Tier 1 (Dec 09)
Core Tier 1 (Dec 10)
Imperial Bank
acquisition
Intangibles Gross credit RWA
growth
Profits less deductions
Capital optimisation
9,9 (0,5)
(0,8)
(0,8)
(0,9) (10,1)
(0,2)
% Core tier 1 ratio (2010) rwa (2007 - 2010)rbn
Dec 2007 Dec 2010Gross RWA optimisation
Gross RWA growth
57
335324
(68)
(17)*
(29)-
(22)42
15
2008
2009
2010
NEDBANK gROUp REgULATORY CApiTAL ADEqUACY
16,0
14,0
12,0
10,0
8,0
6,0
4,0
2,0
0,0
%
DeC 2009
DeC 2010
11,7%11,5%
8,5 – 10,0
15,0%14,9%
11,5 – 13,0
10,1%9,9%
7,5 – 9,0
*15,3 *15,6
*14,8 *15,3
*13,5 *13,9
INTERNAL TARGET RANGES
* Surplus (Rbillion) above regulatory minima
PRO FORMA BASEL III AT 2010
Core tier 1 tier 1 total
Strong track record of RWA and capital optimisation
*R7,7 billion due to AMA
111b
In the light of the predominant focus on the core Tier 1 ratio by
Basel III and its future new requirements to ensure all classes of
capital instruments fully absorb losses at the point of non-viability
before taxpayers are exposed to loss, all to be phased-in over time,
Nedbank Group’s focus is firmly on its core Tier 1 ratio.
Due to the high total ratio of 15,0% the group called the Imperial
Bank Tier 2 bond (‘IPB2’) amounting to R500 million (without
replacing it) in December 2010 and the intention is likewise with
the R1,5 billion Nedbank Limited bond (‘Ned 5’) that is callable
in April 2011, subject to SARB approval.
The annual group ICAAP was completed and signed off by the
board in July 2010. SARB’s SREP of Nedbank Group’s ICAAP
concluded favourably in H2 2010, with no material issues raised.
Nedbank Limited’s regulatory capital ratios decreased year-
on-year, but still remain well above the internal target ranges,
due to the Imperial Bank acquisition and impact on RWA of its
integration, and impairment of capitalised software development
costs, which in aggregate had an impact of decreasing the bank’s
capital ratios by 2,4%, offset to a large degree by retained
earnings, and capital and RWA optimisation. Nedbank Limited’s
capital ratios are core Tier 1: 9,3% (2009: 9,6%), Tier 1: 11,1%
(2009: 11,7%) and total: 14,9% (2009: 15,6%).
All capital adequacy ratios remain well above the group’s target
ranges. This is deemed prudent in light of the uncertainty that
still remains with regard to Basel III. They include unappropriated
profits for the year to the extent that these are not expected to
be reversed and are expected to be appropriated subsequent to
the year-end.
The group’s leverage ratio is low at 13,8 times (2009: 14,4 times),
compared with international levels. Consolidation of entities
for regulatory purposes is performed in accordance with the
requirements of Basel II, the Banks Act and accompanying
regulations. Some differences exist in the basis of consolidation
for accounting and regulatory purposes. These include the
exclusion of certain accounting reserves [eg the foreign currency
translation (FCT) reserve, share-based payments (SBP) reserve
and available-for-sale (AFS) reserve], the deduction of insurance
entities and the exclusion of trusts that are consolidated in
terms of International Financial Reporting Standards (IFRS) but
are not subject to regulatory consolidation.
The FCT, SBP and AFS reserves that arise in the consolidation of
entities in terms of IFRS amounted to approximately R1 billion
at year end, and are excluded from qualifying regulatory capital.
Restrictions on the transfer of funds and regulatory capital within
the group are not material factors. These restrictions mainly relate
to those entities that operate in countries other than South Africa
where there are exchange control restrictions in place.
suMMary oF rwa (by rIsk Type and busIness ClusTer)
2010 Mix 2009 Mix(Restated)**
Rm % Rm %
Credit risk 246 793 76,3 246 099 75,4
Nedbank Capital 28 632 8,9 25 389 7,7Nedbank Corporate 76 794 23,7 76 569 23,5Nedbank Business Banking 37 005 11,4 33 616 10,3Nedbank Retail 97 483 30,1 102 468 31,4Nedbank Wealth 6 031 1,9 7 051 2,2Central Management 848 0,3 1 006 0,3
Equity risk 13 273 4,1 13 396 4,1Market risk 7 339 2,3 5 718 1,8Operational risk * 43 415 13,4 47 222 14,4Other assets 12 861 3,9 14 031 4,3
Total RWA 323 681 100,0 326 466 100,0
* 2009 based on The Standardised Approach (TSA), 2010 based on AMA.
** Restated to reflect full integration of Imperial Bank into Nedbank Limited.
Nedbank Group’s total RWA are marginally lower year-on-year. This is mainly due to credit RWA remaining flat on the back of low
levels of growth and capital related optimisation, and the decrease in operational risk RWA following the adoption of the AMA given
SARB approval in 2010.
112b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedRisk methodologies and capital allocation
Nedbank Group received approval from SARB to use the AMA for operational risk (from 2010) and IMA for market trading risk (from
2011) for regulatory capital purposes, and now has approval for all the three major Pillar 1 risk types for Basel II, having received
approval for the AIRB Approach for credit risk on day-one implementation of Basel II in January 2008.
The regulatory capital approaches above now align with those already in use for economic capital and ICAAP.
suMMary oF rwa and CapITal adequaCy posITIon
Nedbank Group Nedbank Limited ***Risk Type
Rm 2010 2009 2010 2009
Credit risk 246 793 246 099 225 719 184 472
Credit portfolios subject to AIRB Approach 188 610 192 842 176 680 180 968
Corporate, sovereign, bank, SME 106 312 105 669 95 545 95 274 Residential mortgages 46 305 51 023 45 141 49 543 Qualifying revolving retail 8 489 7 385 8 490 7 386 Other retail 27 504 28 765 27 504 28 765
Credit portfolios subject to TSA 52 771 49 344 43 694
Corporate, sovereign, bank 17 645 19 534 12 111 Retail exposures 35 126 29 810 31 583
Counterparty credit risk (Current Exposure Method) 4 543 3 057 4 476 2 908Securitisation risk [Internal Ratings-based (IRB) Approach] 869 856 869 596
Equity risk (Market-based Simple Risk Weight Approach) 13 273 13 396 10 829 10 781
– Listed (300% risk weighting) 1 605 1 447 1 596 1 447 – unlisted (400% risk weighting) 11 668 11 949 9 233 9 334
Market risk (TSA****) 7 339 5 718 6 373 4 455Operational risk (2010: AMA; 2009: TSA) 43 415 47 222 35 693 39 025Other assets (100% risk weighting) 12 861 14 031 9 721 10 429
Total risk-weighted assets 323 681 326 466 288 335 249 162
Total minimum regulatory capital requirements* 34 481 35 097 31 034 27 560Total qualifying capital and reserves** 48 419 48 584 42 860 38 939
Total surplus capital over minimum requirements 13 938 13 487 11 826 11 379
Analysis of total surplus capital** Core Tier 1 15 603 15 296 11 571 10 816Tier 1 15 250 14 820 11 838 11 691Total 13 938 13 487 11 826 11 379
* Includes Basel II capital floor requirements.
** Includes unappropriated profits.
*** Nedbank Limited refers to the SA reporting entity in terms of Regulation 38 (BA700) of the SA banking regulations.
**** SARB approval received to change to IMA from 2011.
The integration of Imperial Bank increased Nedbank Limited’s RWA by R49 billion year-on-year, mainly in credit RWA. The introduction
of AMA resulted in lower operational risk RWA.
113b
suMMary oF qualIFyIng CapITal and reserves
Excluding unappropriated profits Nedbank Group Nedbank LimitedRm 2010 2009 2010 2009
Tier 1 capital (primary) 36 861 36 627 31 249 28 600
Core Tier 1 capital 31 549 31 389 25 937 23 365
Ordinary share capital 449 436 27 27 Ordinary share premium 15 522 13 728 14 434 14 434 Reserves 28 130 25 485 17 605 15 610 Minority interest: ordinary shareholders 153 1 849 Deductions (12 705) (10 109) (6 129) (6 706)
Impairments (10) (8) (720) (3 430)Goodwill (4 945) (4 981) (1 410) (1 126)Capitalised software development costs* (1 998) (1 936)Other intangibles* (544)Excess of expected loss over eligible provisions (50%) (866) (780) (869) (861)Unappropriated profits (1 217) (1 312) (942) (798)FCT reserves 20 (223) (9) (9)SBP reserves (949) (875) 557 206 Property revaluation reserves (1 146) (1 002) (747) (666)AFS reserves (98) (76) (9) (9)Capital held in insurance and financial entities (50%) (562) (489)Other regulatory differences (390) (363) (44) (13)
Non-core Tier 1 capital 5 312 5 238 5 312 5 235
Preference share capital and premium 3 560 3 486 3 560 3 483 Hybrid debt capital instruments 1 752 1 752 1 752 1 752
Tier 2 capital (secondary) 10 511 10 911 10 839 9 807
Long-term debt instruments 11 000 11 500 10 998 10 848 Revaluation reserves (50%) 573 501 374 333 Deductions (1 062) (1 090) (533) (1 374)
Capital held in insurance and financial entities (50%) (562) (489)Excess of expected loss over eligible provisions (50%) (866) (780) (869) (861)General allowance for credit impairment 410 212 380Other regulatory differences (44) (33) (44) (513)
Total 47 372 47 538 42 088 38 407
* Treated as an impairment rather than as fixed assets.
Including unappropriated profits Nedbank Group Nedbank LimitedRm 2010 2009 2010 2009
Core Tier 1 capital 32 596 32 435 26 709 23 897Tier 1 capital (primary) 37 908 37 673 32 021 29 132Total capital 48 419 48 584 42 860 38 939
114b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuednedbank group’s subordInaTed debT and non-Core TIer 1
Note: The subordinated debt is based on call dates not maturity.
dIvIdend CoverThe group has a dividend cover policy range of 2,25 to 2,75 covered by headline earnings per share, dividends per share for 2010
at 2,3 times. Historically the effective cover has been higher as a result of take-up under the scrip dividend alternative and the
reinvestment of dividend proceeds by black economic empowerment (BEE) shareholder trusts.
suMMary oF regulaTory CapITal adequaCy oF all bankIng subsIdIarIesA summary of all the group’s banking subsidiaries’ Basel II regulatory capital positions is provided below:
2010 2009
RWATotal capital
ratio RWATotal capital
ratio Bank Rm % Rm %
Nedbank Limited (including unappropriated profits) 288 335 14,9 249 162 15,6Nedbank Limited (excluding unappropriated profits) 288 335 14,6 249 162 15,4 Imperial Bank Limited 43 887 11,2Nedbank (Namibia) Limited 5 067 13,5 3 864 14,6Fairbairn Private Bank (IOM) Limited 1 729 18,2 2 327 15,9Fairbairn Private Bank Limited 1 400 14,7 1 697 14,2Nedbank (Swaziland) Limited 1 290 20,2 1 374 15,7Nedbank (Lesotho) Limited 984 20,6 905 18,8MBCA Bank Limited 761 15,3 571 15,2Nedbank (Malawi) Limited 232 22,8 98 50,1
In October 2010 Imperial Bank ceased to be a registered banking entity. It was integrated into Nedbank Limited by year-end. This
largely explains the significant increase in Nedbank Limited in RWA year-on-year.
The capitalisation of all these banking entities is deemed adequate, all have conservative risk profiles, and are managed and monitored
within the group’s Enterprisewide Risk Management Framework and ICAAP.
NEDBANK’S SUBORDiNATED DEBT AND NON-CORE TiER 1
3000
3500
2500
2000
1500
1000
500
0
IMPERIAL BANK – SuBORDINATED DEBT
SuBORDINATED DEBT
HyBRID DEBT
2011 2012 2013 2014 2015 2017 2018
115b
suMMary oF solvenCy oF InsuranCe subsIdIarIesIn South Africa the regulators currently require the insurers to hold capital at a minimum of one times cover. The new SAM requirements
(South Africa’s version of Solvency II) are expected to be implemented in 2014 with revised measurements, similar to Basel II.
solvenCy raTIos Minimum 2010 2009
Long-term insurance (Nedgroup Life) 1,00 x 4,00 x 3,60 x Short-term insurance (Nedgroup Insurance Company) 1,25 x 1,38 x* 1,56 x*
* The decrease in the solvency ratio is the result of the timing of a dividend payment made of R140 million during October 2010 (2009: R30 million).
eConoMIC CapITal adequaCy and ICaapNedbank Group’s economic capital methodology is contained in the group’s Pillar 3 report. Set out below is a summary of the group’s
economic capital adequacy and ICAAP position.
group eConoMIC CapITal adequaCy
All risk and balance sheet methodologies and models are reviewed regularly to ensure they remain in line with best industry practice
and regulatory developments.
As previously advised, enhancements relating to capital allocation to business clusters were implemented in 2010. One major effect
of these adjustments has been to allocate most of the surplus capital held at group to the business clusters. This has been done and
the comparative results for the business clusters restated.
The key capital allocation enhancements implemented in 2010 were:
• Increase of the group’s internal target solvency standard from 99,9% (or A-) to 99,93% (or A) (implemented in 2009).
• update of the credit portfolio modelling correlations and revision of the credit economic capital allocation methodology, taking
into account recent global developments and experience, current best practice and Basel III.
• Change in internal measurement of operational risk for economic capital purposes using AMA.
• Incorporation of 100% of Imperial Bank.
• Implementing refined parameters used in the business risk methodology based on more recent data.
• Adding a new risk type for insurance risk.
gROUp ECONOMiC CApiTAL ADEqUACY
2010 2009
25 000
30 000
35 000
40 000
45 000
20 000
15 000
5000
10 000
rm
surplus 12 784
10% buffer 2 670
minimum requirement
26 703
Required economic capital
Required economic capital
Available financial resources
Available financial resources
minimum requirement
25 738
tier a (core capital)
36 845
tier B (non-core capital)
5 312tier B
(non-core capital) 5 238
tier a (core capital)
34 909
surplus 11 835
10% buffer 2 574
116b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinued• Increasing the aggregate amount allocated to business clusters using bottomup calculated economic capital via the allocation of
a capital buffer and thus aligning the clusters’ aggregated allocated capital closely with group regulatory capital levels (limited to
an effective 10% core Tier 1 regulatory ratio level for the group), on which its ROE is based.
The above had no impact on the group’s overall capital level, but significantly increased the quantum of capital allocated to each
business cluster and impacted the ROE recorded by the clusters on a steady-state basis.
Nedbank Group’s ICAAP confirms that the group is capitalised above its current A or 99,93% target debt rating (solvency standard)
in terms of its proprietary economic capital methodology. This includes a 10% capital buffer, the incorporation of the group’s risk
appetite as approved by the board and the application of comprehensive stress and scenario testing.
eConoMIC CapITal requIreMenTs (by rIsk Type) and avaIlable FInanCIal resourCes
Rm 2010 2009*
Credit risk 15 488 15 414Securitisation risk 18 26Transfer risk 89 146Market risk 3 340 3 255
Trading risk 424 442 Interest rate risk in the banking book (IRRBB) 27 39 Property risk 1 436 1 161 Investment risk 1 421 1 580 Forex translation risk 32 33
Business risk 4 715 4 157Operational risk 1 997 1 968Other assets risk 864 622insurance risk 192 150
Minimum economic capital requirement 26 703 25 738+ Capital buffer (10%) 2 670 2 574
= TOTAL economic capital requirement 29 373 28 312vs Available financial resources 42 157 40 147
Tier A capital (shareholders’ equity) 36 845 34 909 Tier B capital (non-core Tier 1-type capital) 5 312 5 238
= Surplus available after capital buffer 12 784 11 835
* Imperial Bank is included at 100% ownership for economic capital purposes retrospectively to 2009. Results shown incorporate the enhancements made
to the economic capital model for 2010.
117b
avaIlable FInanCIal resourCes
Rm 2010 2009
Tier A capital 36 845 34 909 Ordinary share capital and premium 15 971 14 164 Minority interest: ordinary shareholders 153 1 849 Reserves 28 130 25 485
Retained income 16 924 14 130 Unappropriated profits 1 217 1 309 Distributable reserves 7 692 7 697 Non-distributable reserves 124 173 FCT reserves (20) 223 SBP reserves 949 875 AFS reserves 98 76 Property revaluation reserves 1 146 1 002
Deductions (9 225) (7 827)
Impairments (10) (8)Capitalised software development costs (1 998) Other intangibles (544) Goodwill (4 945) (4 981)Subordinated-debt portion of unappropriated profits (170) (266)First loss credit enhancement in respect of securitisation scheme (100%)* (88) (33)Capital held in insurance and financial entities (100%)* (1 124) (489)Other adjustments (346) (2 050)
Excess of IFRS provisions over expected loss (100%) 1 816 1 238 Tier B capital 5 312 5 238
Preference shares 3 560 3 486 Hybrid debt capital instruments 1 752 1 752
Total AFR 42 157 40 147
* 100% deduction in 2010 to align with Basel III changes
ECONOMiC CApiTAL REqUiREMENTS (BY RiSK TYpE)
2010 2009CREDIT RISK
SECuRITISATION RISK
TRANSFER RISK
TRADING RISK
IRRBB RISK
PROPERTy RISK
INVESTMENT RISK
FOREX TRANSLATION RISK
BuSINESS RISK
OPERATIONAL RISK
OTHER ASSETS RISK
INSuRANCE RISK
17.7%
7.5%
5.3%
5.4%0.1%
1.6%
0.1%
3.2% 0.7%
58,0%
16.2%
7.6%
6.1%
4.5%
1.7%0.6% 0.1%
0.2%
0.1%
2.4% 0.6%
59,9%
0.3% 0.1%
118b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedThe total economic capital (including a 10% buffer) increased by R1,1 billion from R28,3 billion in 2009 (restated) to R29,4 billion
in 2010, largely due to an increase in business risk economic capital. The introduction of an economic risk type for insurance risk had
a small impact on total economic capital of R192 million (2009: R150 million), which is reflective of the low risk appetite in this
business sector.
The decrease in other adjustments for AFR is largely due to the purchase of Imperial Bank (minority interest).
In conclusion, Nedbank Group’s economic capital adequacy is strong at its A (99,93%) target debt rating (solvency standard), with a
surplus at group level of R12,8 billion. This is after the implementation of the enhancements previously mentioned and providing for
a 10% economic capital buffer, the adequacy of which is confirmed by sophisticated stress testing.
rIsk-based CapITal alloCaTIon To busIness ClusTersRisk-based economic capital allocation to the business clusters has been in place since 2008 for risk-adjusted performance
measurement and remuneration purposes. It is a fundamental component in the measurement of the businesses’ contribution to
economic profit, return on risk-adjusted capital and risk-adjusted return on capital.
As discussed on page 75, further enhancements have been made in 2010 to the group’s methodology for allocating capital to
its businesses. Overall this resulted in additional capital being allocated to each cluster, the main component of which was the
introduction of a capital buffer, aligning total allocated capital more closely with total equity upon which the group is measured.
Further refinements to the 2011 allocation methodology have been finalised as part of the 2011 to 2013 business planning process,
and will be communicated with the 2011 half-year results.
A summary of the economic capital allocation at 2010 by business cluster is presented below. The key movements in 2010 were the
allocation of higher economic capital buffers and an increase in business risk economic capital requirements.
suMMary oF MInIMuM eConoMIC CapITal requIreMenT aT 2010 (by busIness ClusTer)
2010
rmnedbank
groupnedbank
Capitalnedbank
Corporate
nedbank business banking
and retailnedbank
retail
nedbank business banking
nedbank wealth
Central Manage-
ment
Credit risk 15 488 1 239 3 194 10 552 8 961 1 591 492 11 Securitisation risk 18 18 Transfer risk 89 66 23 Market risk 3 340 1 161 532 235 229 6 83 1 329
Trading risk 424 424 IRRBB risk 27 2 6 18 15 3 1 Property risk 1 436 38 212 209 3 10 1 176 Investment risk 1 421 721 483 5 5 61 151 FX translation risk 32 14 5 11 2
Business risk 4 715 711 835 2 910 2 412 498 259 Operational risk 1 997 546 504 799 596 203 85 63 Other assets risk 864 32 93 191 184 7 57 491 Insurance risk 192 192
Minimum economic
capital requirement 26 703 3 773 5 181 14 687 12 382 2 305 1 168 1 894
Capital buffer * 17 398 1 342 2 109 6 683 5 715 968 314 6 950
Total capital
allocated 44 101 5 115 7 290 21 370 18 097 3 273 1 482 8 844
* Unallocated buffer included in Central Management buffer.
119b
suMMary oF MInIMuM eConoMIC CapITal requIreMenT aT 2009 (by busIness ClusTer)
2009
RmNedbank
GroupNedbank
CapitalNedbank
Corporate
Nedbank Business Banking
and RetailNedbank
Retail
Nedbank Business Banking
Nedbank Wealth
Central Manage–
ment
Credit risk 15 414 1 051 3 544 10 240 8 556 1 684 549 30 Securitisation risk 26 21 – 5 5 – – – Transfer risk 146 103 43 – – – – – Market risk 3 255 1 299 613 298 290 8 90 955
Trading risk 442 442 IRRBB risk 39 3 11 23 18 5 2 Property risk 1 161 37 270 267 3 1 853 Investment risk 1 580 842 561 5 5 72 100 FX translation risk 33 12 4 15 2
Business risk 4 157 663 793 2 502 1 821 681 181 18 Operational risk 1 968 535 506 801 603 198 56 70 Other assets risk 622 19 52 193 190 3 26 332 Insurance risk 150 – – – – – 150 –
Minimum economic
capital requirement 25 738 3 691 5 551 14 039 11 465 2 574 1 052 1 405
Capital buffer * 13 911 1 065 1 814 5 361 4 602 759 315 5 356
Total capital allocated 39 649 4 756 7 365 19 400 16 067 3 333 1 367 6 761
* Unallocated buffer included in Central Management buffer.
120b neDBanK group analyst presentation 2010
RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedCosT oF equITyFollowing a shift in the constituents of the cost of equity calculated using the Capital Asset Pricing Model, Nedbank Group revised its
cost of equity to 13,00% at the beginning of 2011 (2010: 14,15%). The risk-free rate applied was the primary driver of this change
with the 10-year point of the SA sovereign yield curve declining to 8,16% (2009: 9,17%) at 31 December 2010. The cost of equity is
revised and updated on an annual basis but also reviewed quarterly.
exTernal CredIT raTIngsMoody’s investors Service
Moody’s Investors Service (Moody’s) has reaffirmed the ratings of Nedbank Limited, the 100%-owned subsidiary of Nedbank Group
Limited (Nedbank Group) in July 2010:
Moody’s InvesTors servICe nedbank lIMITed July 2010
Bank financial-strength rating C-
Outlook – financial-strength rating Stable
Global local currency – long-term deposits A2
Global local currency – short-term deposits Prime-1
Foreign currency – long-term bank deposits A3
Foreign currency – short-term bank deposits Prime-2
Outlook – foreign currency deposit rating Stable
National scale rating – long-term deposits Aa2.za
National scale rating – short-term deposits Prime-1.za
Outlook – national scale rating Stable
121b
FITCh raTIngsFitch Ratings (Fitch) affirmed its ratings for Nedbank Group and Nedbank Limited, below is a full list of the ratings the related outlook
at July 2010.
Latest Fitch ratings for Nedbank Group companies:
FiTCH RATiNgS NEDBANK gROUp NEDBANK LiMiTEDJuly 2010 July 2010
Individual C CSupport 2 2Foreign currencyShort-term F2 F2Long-term BBB BBBLong-term rating outlook Stable StableLocal currencyLong-term senior BBB BBBLong-term rating outlook Stable StableNationalShort-term F1+ (zaf) F1+ (zaf)Long-term AA- (zaf) AA- (zaf)Long-term rating outlook Stable Stable
122b neDBanK group analyst presentation 2010
SUMMARiSED dti CODES SCORECARDAT 31 DECEMBER 2010
Ownership
Voting rights Economic interest Employee
schemes/
broad-based
schemes, etc
Net equity
value Total score Weighting
Black
People
Black
Women
Black
People
Black
Women
Designated
Groups
30,71% 3,25% 28,05% 3,84% 11,33% 11,33% 30,71% 20,11% 20%
non-scoring performance Weighting
Product/Area
Mzanzi
(accounts)
FSC
(branches)
Black
SMMES
(R million)
Black
agriculture
(R million)
Affordable
housing
(R million)
Trans-
formational
Infrastructure
(R million)
BEE
transaction
financing
(R million)
Consumer
education
(% of Retail
NPAT)
Achieved 315 024 8 R1 772 R70 R2 099 R5 681 R6 570 0,27%
Growth vs 2009 1,00% 0,00% 52,54% 71,43% 63,84% 59,18% 79,27% 18,52%
Total BEE Score dti level 2 89,50% 100%
Management Board
Black Executive
Directors
Senior top
management
Top other
management
Bonus:
independent
directors Total score Weighting
47,06% 41,67% 25,00% n/a 50,00% 8,62% 10%
Employment Equity Senior management Middle management
Junior
management Disabled as % of total Total score Weighting
26,15% 50,85% 72,40% 1,15% 11,42% 15%
Skills Development Skills spend Disabled skills spend Category B, C, D black learners Total score Weighting
2,78% 0,04% 3,02% 9,60% 15%
preferential procurement % spend
% spend on QSE’s and
EME’s % spend black owned
% black women-
owned Total score Weighting
85,12% 27,13% 12,56% 5,24% 19,75% 20%
Enterprise Development Contributions Total score Weighting
6,98% 15,00% 15%
Social Economic Development Contributions Total score Weighting
1,46% 5,00% 5%
123b
MARKET SHARE
40%
30%
20%
10%
0%
-10%
-20%
-30%
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
-2.0%
-3.0%
COMMERCIAL MORTGAGES
Change in market share Nedbank
Growth (%) Nedbank Ltd
Growth (%) Industry
Market share (%) Nedbank Ltd
Jan 2009 Mar 2009 May 2009 Jul 2009 Sep 2009 Nov 2009 Jan 2010 Mar 2010 May 2010 Jul 2010 Sep 2010 Nov 2010
Jan 2009 Mar 2009 May 2009 Jul 2009 Sep 2009 Nov 2009 Jan 2010 Mar 2010 May 2010 Jul 2010 Sep 2010 Nov 2010
RESIDENTIAL MORTGAGES
20%
10%
0%
-10%
-20%
1.0%
0.0%
-1.0%
Change in market share Nedbank
Growth (%) Nedbank Ltd
Growth (%) Total Banking Institutions
Market share (%) Nedbank Ltd
124b neDBanK group analyst presentation 2010
MARKET SHAREcontinued
25%
20%
15%
10%
5%
0%
-5%
-10%
1.4%
0.9%
0.4%
-0.1%
-0.6%
INSTALMENT CREDIT
Change in market share Nedbank
Growth (%) Nedbank Ltd
Growth (%) Industry
Market share (%) Nedbank Ltd
Jan 2009 Mar 2009 May 2009 Jul 2009 Sep 2009 Nov 2009 Jan 2010 Mar 2010 May 2010 Jul 2010 Sep 2010 Nov 2010
CREDIT CARDS
30%
20%
10%
0%
-10%
0.0%
-0.5%
-1.0%
Change in market share Nedbank
Growth (%) Nedbank Ltd
Growth (%) Industry
Market share (%) Nedbank Ltd
Jan 2009 Mar 2009 May 2009 Jul 2009 Sep 2009 Nov 2009 Jan 2010 Mar 2010 May 2010 Jul 2010 Sep 2010 Nov 2010
125b
OTHER LOANS AND ADVANCES
30%
20%
10%
0%
-10%
1.0%
0.0%
-1.0%
-2.0%
-3.0%
Change in market share Nedbank
Growth (%) Nedbank Ltd
Growth (%) Industry
Market share (%) Nedbank Ltd
Jan 2009 Mar 2009 May 2009 Jul 2009 Sep 2009 Nov 2009 Jan 2010 Mar 2010 May 2010 Jul 2010 Sep 2010 Nov 2010
TOTAL ADVANCES
30%
20%
10%
0%
-10%
2.0%
1.0%
0.0%
-1.0%
-2.0%
Change in market share Nedbank
Growth (%) Nedbank Ltd
Growth (%) Industry
Market share (%) Nedbank Ltd
Jan 2009 Mar 2009 May 2009 Jul 2009 Sep 2009 Nov 2009 Jan 2010 Mar 2010 May 2010 Jul 2010 Sep 2010 Nov 2010
126b neDBanK group analyst presentation 2010
MARKET SHAREcontinued
TOTAL ASSETS
20%
10%
0%
-10%
-20%
1.0%
0.0%
-1.0%
-2.0%
Change in market share Nedbank
Growth (%) Nedbank Ltd
Growth (%) Industry
Market share (%) Nedbank Ltd
Jan 2009 Mar 2009 May 2009 Jul 2009 Sep 2009 Nov 2009 Jan 2010 Mar 2010 May 2010 Jul 2010 Sep 2010 Nov 2010
TOTAL MORTGAGE ADVANCES
30%
20%
10%
0%
-10%
3%
2%
1%
0%
-1%
Change in market share Nedbank
Growth (%) Nedbank Ltd
Growth (%) Industry
Market share (%) Nedbank Ltd
Jan 2009 Mar 2009 May 2009 Jul 2009 Sep 2009 Nov 2009 Jan 2010 Mar 2010 May 2010 Jul 2010 Sep 2010 Nov 2010
127b
TOTAL ASSETS
20%
10%
0%
-10%
-20%
1.0%
0.0%
-1.0%
-2.0%
Change in market share Nedbank
Growth (%) Nedbank Ltd
Growth (%) Industry
Market share (%) Nedbank Ltd
Jan 2009 Mar 2009 May 2009 Jul 2009 Sep 2009 Nov 2009 Jan 2010 Mar 2010 May 2010 Jul 2010 Sep 2010 Nov 2010
TOTAL MORTGAGE ADVANCES
30%
20%
10%
0%
-10%
3%
2%
1%
0%
-1%
Change in market share Nedbank
Growth (%) Nedbank Ltd
Growth (%) Industry
Market share (%) Nedbank Ltd
Jan 2009 Mar 2009 May 2009 Jul 2009 Sep 2009 Nov 2009 Jan 2010 Mar 2010 May 2010 Jul 2010 Sep 2010 Nov 2010
DEPOSITS
40%
20%
0%
-20%
-40%
1.0%
0.0%
-1.0%
-2.0%
Change in market share Nedbank
Growth (%) Nedbank Ltd
Growth (%) Industry
Market share (%) Nedbank Ltd
Jan 2009 Mar 2009 May 2009 Jul 2009 Sep 2009 Nov 2009 Jan 2010 Mar 2010 May 2010 Jul 2010 Sep 2010 Nov 2010
Jan 2009 Mar 2009 May 2009 Jul 2009 Sep 2009 Nov 2009 Jan 2010 Mar 2010 May 2010 Jul 2010 Sep 2010 Nov 2010
MARKET SHARE PERCENTAGES
45%
40%
35%
30%
25%
20%
15%
10%
5%
Commercial Mortgages
Other Loans & Advances
Instalment Credit
Residential Mortgages
Credit Cards
Total Advances
128b neDBanK group analyst presentation 2010
DEFiNiTiONSadvanCed InTernal raTIng-based approaCh (aIrb)Advanced Internal Rating Based Approach, which is subject to Supervisory approval where a bank may use its internal developed credit
risk measurement systems to calculate the capital requirements for credit risk.
advanCed MeasureMenT approaCh (aMa)AMA allows a bank to calculate its regulatory capital charge (using internal models) based on internal risk variables and profiles. This
is the only risk sensitive approach for operational risk allowed in Basel II.
asseTs under ManageMenTAssets managed by Nedbank Group, which are beneficially owned by clients and are therefore not reported on the consolidated
balance sheet. Advances that have either been fully or partially utilised by a borrower.
aTMAutomated teller machine. A cash machine or free-standing device dispensing cash, which may also provide other information or
services to clients who have a card and a personal identification number, password or other personal identification.
banksThis asset class covers all exposures to counterparties treated as Banks
basel CapITal aCCord (basel II)The new Basel Capital Accord (Basel II) of the Bank for International Settlements is an improved capital adequacy framework
accomplished by closely aligning banks’ capital requirements with improved modern risk management practices and sophisticated risk
assessment capabilities. It further ensures the risk sensitivity of the minimum capital requirements by including supervisory reviews
and market discipline through enhanced disclosure.
basel asseT Classes (as CaTegorIsed In The ba 200 reTurn)CorporaTe exposuresCorporaTeCorporate exposures are defined as a debt obligation of a corporation, partnership, or proprietorship. Banks are permitted to distinguish
separately exposures to Small and Medium-sized enterprises.
speCIalIsed lendIng hIgh volaTIlITy CoMMerCIal real esTaTeHigh volatility commercial real estate (HVCRE) lending is the financing of commercial real estate that exhibits higher loss rate
volatility compared to other types of Specialised Lending.
speCIalIsed lendIng InCoMe-produCIng real esTaTeIncome-producing real estate (IPRE) refers to a method of providing funding to real estate (such as, office buildings to let, retail space,
multifamily residential buildings, industrial or warehouse space, and hotels) where the prospects for repayment and recovery on the
exposure depend primarily on the cash flows generated by the asset. The primary source of these cash flows would generally be lease
or rental payments or the sale of the asset.
speCIalIsed lendIng objeCT FInanCeObject finance (OF) refers to a method of funding the acquisition of physical assets (e.g. ships, aircraft, satellites, railcars, and fleets)
where the repayment of the exposure is dependent on the cash flows generated by the specific assets that have been financed and
pledged.
speCIalIsed lendIng CoMModITIes FInanCeCommodities finance (CF) refers to structured short-term lending to finance reserves, inventories, or receivables of exchange-traded
commodities (e.g. crude oil, metals, or crops), where the exposure will be repaid from the proceeds of the sale of the commodity.
speCIalIsed lendIng projeCT FInanCeProject finance (PF) is a method of funding in which the lender looks primarily to the revenues generated by a single project, both
as the source of repayment and as security for the exposure. This type of financing is usually for large, complex and expensive
installations, for example power plants, chemical processing plants, mines, etc.
129b
sMe CorporaTeThis asset class covers all exposures to Small and Medium Enterprises that are classified as Corporate, based on criteria prescribed by
the Regulator.
purChased reCeIvables CorporaTeThis asset class covers all receivables classified as corporate exposures, which are purchased for inclusion in asset-backed securitisation
structures, but banks may also use this approach, with the approval of national supervisors, for appropriate on-balance sheet exposures
that share the same features.
publIC seCTor enTITIesThis asset class covers all exposures to Enterprises that are wholly or majority owned by the Central Government, e.g. Eskom,
Transnet, etc.
loCal governMenTs and MunICIpalITIesThis asset class covers all exposures to metropolitan councils, district councils and municipalities.
sovereIgn (InCludIng CenTral governMenT and CenTral bank)This asset class covers all exposures to counterparties treated as Central Government.
seCurITIes FIrMsThis asset class covers all exposures to enterprises regulated by a recognised authority, and which trades in securities.
reTaIl exposuresreTaIl MorTgages (InCludIng hoMe equITy lIne oF CredIT) This asset class covers all mortgage advances or credit lines to individuals, which are fully secured by a mortgage over residential
property.
reTaIl revolvIng CredITExposures to individuals, that is revolving, unsecured, and committed (both contractually and in practice). In this context, revolving
exposures are defined as those where customers’ outstanding balances are permitted to fluctuate based on their decisions to borrow
and repay, up to a limit established by the bank.
reTaIl oTherThis asset class covers all non-revolving exposures (excluding mortgage advances) to individuals.
sMe reTaIlThis asset class covers all exposures to Small and Medium Enterprises that are classified as Retail, based on criteria prescribed by the
Regulator.
purChased reCeIvables – reTaIlThis asset class covers all receivables classified as retail exposures, which are purchased for inclusion in asset-backed securitisation
structures, but banks may also use this approach, with the approval of national supervisors, for appropriate on-balance sheet exposures
that share the same features.
bee TransaCTIonNedbank Group’s BEE transaction, which focused primarily on the issuing of shares to BEE partners for the purposes of BBBEE,
equating to approximately 9,3% (43 618 748 shares) of total share capital and equating to black ownership of 11,5% of the value
of Nedbank Group’s South African businesses in 2005. Nedbank Namibia’s BEE transaction, which focused primarily on the issuing
of shares to BEE partners and affinity groups for the purposes of BEE in Namibia, equating to approximately 0,14% (665 680 shares)
of total share capital of Nedbank Group Limited and equating to black ownership of 11,13% of the value of NedNamibia Holdings
Limited, Nedbank Group’s Namibian business in 2006.
borrowIng groupA group of clients and their underlying loans and advances according to the per person definition of the ‘Regulations Related to Banks’.
130b neDBanK group analyst presentation 2010
DEFiNiTiONScontinuedCapITal adequaCy raTIoThe capital adequacy of South African banks is measured in terms of the South African Banks Act requirements. The ratio is calculated
by dividing the Tier 1, secondary (Tier 2) and tertiary (Tier 3) capital by the risk-weighted assets.
group CapITal adequaCy raTIoGroup capital adequacy is the ratio of group net qualifying capital and reserve funds to total group risk-weighted assets as calculated
per the South African Banks Act requirements.
prIMary (TIer 1) CapITalPrimary capital consists of issued ordinary share capital and perpetual preference share capital, qualifying perpetual callable hybrid
capital, retained earnings and reserves, less regulatory deductions.
Core TIer 1 CapITalCore Tier 1 capital is Primary Capital less any amount on non-core Tier 1 capital, being perpetual preference share capital and
qualifying perpetual callable hybrid capital
seCondary (TIer 2) CapITalSecondary capital is made up of subordinated dated debt and certain types of perpetual callable debt, excess amount in respect of
eligible provisions, 50% of any revaluation surplus less regulatory deductions.
TerTIary (TIer 3) CapITalTertiary capital consists of capital obtained by way of unsecured subordinated loans, subject to such conditions as may be prescribed.
Cash FlowFInanCIng aCTIvITIesActivities that result in changes to the capital structure of the group.
InvesTMenT aCTIvITIesActivities relating to the acquisition, holding and disposal of property and equipment and long-term investments.
operaTIng aCTIvITIesActivities that are not financing or investing activities and arise from the operations conducted by the group.
CredIT loss raTIoCredit loss ratio is the impairments charge as a percentage of average advances.
deFaulTed advanCeAny advance or group of advances that has triggered relevant definition of default criteria for that portfolio which is in line with the
amended BA regulations relating to banks. For retail portfolios it is transaction centric and therefore a default would be specific to
an account (specific advance). For wholesale portfolios it is client or borrower centric meaning that in the event of any transaction
within a borrowing group default, then all transactions within the borrowing group would be defaulted.
deFInITIon oF deFaulTAt a minimum, a default is deemed to have occurred where a material obligation is overdue for more than 90 days or an obligor
exceed an advised limit for more than 90 days.
deFerred TaxaTIon asseTsDeferred taxation assets are the amounts of income taxation recoverable in future periods in respect of:
• deductible temporary differences arising due to differences between the taxation and accounting treatment of transactions; and
• the carry forward of unused taxation losses.
deFerred TaxaTIon lIabIlITIesDeferred taxation liabilities are the amounts of income taxation payable in future periods due to differences between the taxation
and accounting treatment of transactions.
131b
dIreCT TaxaTIonDirect taxation includes normal taxation on income, capital gains taxation (CGT) and secondary taxation on companies (STC).
dIvIdend/dIsTrIbuTIon CoverHeadline earnings per share divided by the dividend/distribution declared per share.
dIvIdend/dIsTrIbuTIon deClared per shareDividend/distribution declared per share is the actual interim dividend paid/capitalisation award issued and the final dividend declared/
capitalisation award declared for the period under consideration, expressed in cents.
dIvIdend/dIsTrIbuTIon paId/CapITalIsed per shareDividend/distribution paid/capitalised per share is the actual final dividend paid/capitalisation award issued for the prior year and the
interim dividend paid/capitalisation award issued for the year under consideration, expressed in cents.
dIvIdend yIeldDividend/capitalisation award declared per ordinary share as a percentage of the closing share price of ordinary shares.
down Turn expeCTed lossA stress-tested value for expected loss under down turn economic conditions that could have unfavourable effects on a bank’s credit
ecxposures.
dTI CodesThe Codes of Good Practice as promulgated on 9 February 2007 under section 9(1) of the Broad-Based Black Economic Empowerment
Act, 2003 (Act No. 53 of 2003), establishes the rules, targets and stipulations for the measurement of Broad-Based Black Economic
Empowerment within South Africa based on three scorecard classifications for organisations: Emerging Micro Enterprise (EME),
Qualifying Small Enterprise (QSE), or Generic Enterprise. Nedbank is scored as a Generic Enterprise under the published codes.
earnIngs per share (eps)basIC earnIngs basIsIncome attributable to equity holders for the period divided by the weighted average number of ordinary shares in issue (net of shares
held by group entities) during the period.
headlIne earnIngs basIsHeadline earnings divided by the weighted average number of shares in issue (net of shares held by group entities) during the period.
Fully dIluTed basIsThe relevant earnings figure is adjusted for the assumed adjustments to income that would have been earned on the issue of shares
issued from dilutive instruments. The resultant earnings are divided by the weighted average number of ordinary shares and other
dilutive instruments (i.e. potential ordinary shares) outstanding at the period-end, assuming they had been in issue for the period.
earnIngs yIeldHeadline earnings per share as a percentage of the closing price of ordinary shares.
eConoMIC CapITal (eCap)Economic capital is the quantification of risk and an internal assessment of the amount of capital required to protect the group
against economic losses with a desired level of confidence (solvency standard or default probability) over a one-year time horizon. In
other words, it is the magnitude of economic losses the group could withstand while still remaining solvent.
eConoMIC proFIT or lossHeadline earnings after adjusting for cost of capital.
eFFeCTIve TaxaTIon raTeThe taxation charge in the income statement, excluding taxation relating to non-trading and capital items, as a percentage of profit
before taxation.
132b neDBanK group analyst presentation 2010
DEFiNiTiONScontinuedeFFICIenCy raTIo (CosT-To-InCoMe raTIo)Total expenses as a percentage of income from normal operations (net interest income plus non-interest revenue).
exposure aT deFaulTEAD is an estimation of the extent to which a bank may be exposed to a counterparty in the event of, and at the time of, that
counterparty’s default.
expeCTed loss (el)EL is the expected value of portfolio losses due to default over a specified time horizon.
ForeIgn exChange TranslaTIon gaIns/lossesThe results and assets/liabilities of all foreign entities controlled by the group that have a rand-functional currency are translated at
the closing exchange rate and the differences arising are recognised in the income statement as foreign exchange translation gains/
losses.
headlIne earnIngsHeadline earnings is not a measure of maintainable earnings. For purposes of the definition and calculation, the guidance given on
headline earnings, as issued by The South African Institute of Chartered Accountants in circular 07/02 of December 2002, has been
used. Headline earnings consist of the earnings attributable to ordinary shareholders excluding non-trading and capital items.
IFrsInternational Financial Reporting Standards, as adopted by the International Accounting Standards Board (IASB), and interpretations
issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB. Nedbank Group’s consolidated financial
results are prepared in accordance with IFRS.
IMpaIrMenT Charge To average advanCesImpairment charge on loans and advances for the year divided by average advances. Also known as the credit loss ratio or impairment
ratio.
IMpaIrMenT oF loans and advanCesImpairment of loans and advances arises where there is objective evidence that the group will not be able to collect an amount due.
The impairment is the difference between the carrying amount and the estimated recoverable amount.
IndIreCT TaxaTIonValue Added Taxation (VAT) and other taxes, levies and duties paid to government, excluding direct taxation.
‘jaws’ raTIoThe difference between the rate of growth in total income from normal operations and the rate of total expense growth.
jIbarJohannesburg Interbank Agreement Rate, which is the rate that South African banks charge each other for wholesale money.
kIng II (The Code)The King Report on Corporate Governance 2002, which sets out principles of good corporate governance for South African companies
and organisations.
kIng IIIThe revised King Code and report on Governance for South Africa 2009, which sets out revised principles of good corporate governance
for South African Companies.
lIborLondon Interbank Offered Rate, which is the rate that banks participating in the London money market offer each other for short-
term deposits.
133b
MarkeT CapITalIsaTIonThe group’s closing share price multiplied by the number of shares in issue including shares held by group entities.
neT asseT value per shareTotal equity attributable to equity holders of the parent divided by the number of shares in issue, excluding shares held by group
entities.
neT InTeresT InCoMe To average InTeresT-earnIng asseTs (neT InTeresT MargIn)Net interest income expressed as a percentage of average net interest-earning banking assets. Net interest-earning banking assets are
used, as these closely resemble the quantum of assets earning income that is included in net margin.
non-InTeresT revenue To ToTal expensesNon-interest revenue as a percentage of total expenses from normal operations.
non-InTeresT revenue To ToTal InCoMeNon-interest revenue as a percentage of total income from normal operations.
non-TradIng and CapITal ITeMsThese comprise the following:
• surpluses and losses on disposal of long-term investments, subsidiaries, joint ventures and associates;
• impairment of goodwill arising on acquisition of subsidiaries, joint ventures and associates;
• surpluses and losses on the sale or termination of an operation;
• capital cost of fundamental reorganisation or restructuring having a material effect on the nature and focus of the operations of the
reporting entities;
• impairment of investments, property and equipment, computer software and capitalised development costs; and
• other items of a capital nature.
oFF-balanCe-sheeT asseTsAssets managed on behalf of third parties on a fully discretionary basis.
prICe/earnIngs raTIoThe closing price of ordinary shares divided by headline earnings (for the previous 12 months) per share.
properTIes In possessIon (pIps)Properties acquired through payment defaults on loans secured by properties.
reTurn on ordInary shareholders’ equITy (roe)Headline earnings expressed as a percentage of average equity attributable to equity holders of the parent.
reTurn on ordInary shareholders’ equITy (roe) exCludIng goodwIllHeadline earnings expressed as a percentage of average equity attributable to equity holders of the parent less goodwill.
reTurn on ToTal asseTs (roa)Headline earnings expressed as a percentage of average total assets.
rIsk-weIghTed asseTs (rwa)Risk-weighted assets are determined by applying risk weights to balance sheet assets and off-balance sheet financial instruments
according to the relative credit risk of the counterparty. The risk weighting for each balance sheet asset and off-balance sheet financial
instrument is regulated by the South African Banks Act or by regulations in the respective countries of the other banking licences.
134b neDBanK group analyst presentation 2010
DEFiNiTiONScontinuedsarb regulaTIons relaTed To banks and The ba reTurnsThe regulations relating to banks were amended with affect 01/01/2008, based on the revised Basel Capital Accord (Basel II). The new
Basel Capital Accord of the Bank of International Settlements is an improved capital adequacy framework accomplished by closely
aligning banks’ capital requirements with improved modern risk management practices and sophisticated risk assessment capabilities.
It further ensures the risk sensitivity of the minimum capital requirements by including supervisory reviews and market discipline
through enhanced disclosure. The new Banks Act regulatory returns (BA).
segMenTal reporTIngoperaTIonal segMenTA distinguishable component of the group, based on the market on which each business area focuses, which is subject to risks and
returns that are different from those of other operating segments.
geographICal segMenTA distinguishable component of the group that is engaged in providing services within a particular economic environment and is
subject to risks and returns that are different from those of components operating in other economic environments.
seCurITIsaTIon exposuresThis asset class covers all exposures to tradable, interest-bearing commercial paper, which is secured by an underlying asset, e.g.
mortgage loans
share-based payMenTsTransfers of a company’s equity instruments by its shareholders to parties that have supplied goods or services to the company
(including employees).
shares held by group enTITIes (Treasury shares)Ordinary shares in Nedbank Group Limited acquired/held by group companies, including ordinary shares held in share trusts as part
of the BEE transaction.
ssTSelf-service terminal, similar to an ATM, but designed for non-cash transactions.
The sTandardIsed approaCh (Tsa)An approach to calculate regulatory credit risk requirements which sets out specific risk weights specified by the regulator in lieu of
the AIRB Approach.
TangIble neT asseT value per shareTotal equity attributable to equity holders of the parent less goodwill, computer software and capitalised development costs, divided
by the number of shares in issue, excluding shares held by group entities.
ToTal CollaTeralTotal monetary value of all collateral held by a bank as security for an advance(s), limited to exposure.
ToTal CredIT exTendedTotal of all advances extended by a bank, including unutilised facilities and other off balance sheet exposures.
ToTal equITy aTTrIbuTable To equITy holders oF The parenTOrdinary share capital, share premium and reserves.
weIghTed average nuMber oF sharesThe number of shares in issue increased by shares issued during the period, weighted on a time basis for the period during which they
participated in the income of the group, less shares held by group entities, weighted on a time basis for the period during which the entities
held these shares.
These definitions should be read in conjunction with the group’s accounting policies, which also clarify certain terms used.
135b
DiSCLAiMER Nedbank Group has acted in good faith and has made every reasonable effort to ensure the accuracy and 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’ and ‘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 and assumptions regarding the group’s future performance.
No assurance can be given that forward-looking statements will prove to be correct and undue reliance should not be placed on such
statements.
The risks and uncertainties inherent in the forward-looking statements contained in this document include, but are not limited
to: changes to IFRS and the interpretations, applications and practices subject thereto as they apply to past, present and future
periods; domestic and international business and market conditions such as exchange rate and interest rate movements; changes in
the domestic and international regulatory and legislative environments; changes to domestic and international operational, social,
economic and political risks; and the effects of both current and future litigation.
Nedbank Group does not undertake to update any forward-looking statements contained in this document and does not assume
responsibility for any loss or damage whatsoever and 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.
136b neDBanK group analyst presentation 2010
SHARE iNFORMATiONCoMpany deTaIlsnedbank group lIMITedIncorporated in the Republic of South Africa
Registration number: 1966/010630/06
Registered address:
Nedbank Sandton, 135 Rivonia Road, Sandown, 2196, Johannesburg
PO Box 1144, Johannesburg, 2000
Transfer secretaries:
South Africa:
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Nambia:
Transfer Secretaries (Pty) Limited
Shop 8, Kaiserkrone Centre, Post Street Mall, Windhoek, Namibia
PO Box 2401, Windhoek, Namibia
InsTruMenT Codesnedbank group ordInary sharesJSE share code: NED
NSX share code: NBK
ISIN: ZAE000004875
ADR code: NDBKy
ADR CuSIP: 63975K104
nedbank lIMITed non-redeeMable, non-CuMulaTIve preFerenCe sharesJSE share code: NBKP
ISIN: ZAE000043667
137b
abouT ThIs reporTThis report is printed on Sappi Triple Green – a paper grade manufactured according to three environmental pillars: a minimum of
60% of the pulp used in the production of this paper is sugar cane fibre, which is the material remaining after raw sugar has been
extracted from sugar cane; the bleaching process is elemental chlorine-free; and the remaining pulp used in the production process
comprises wood fibre which is obtained from sustainable and internationally certified afforestation, using independently audited
chains of custody.
nedbank group head office
nedbank sandton 135 rivonia road sandown 2196
po Box 1144 Johannesburg 2000
tel +27 (0)11 294 4444
Fax +27 (0)11 294 6540
transfer secretaries
Computershare investor services (pty) limited
70 marshall street Johannesburg 2001 south africa
po Box 61051 marshalltown 2107 south africa
tel +27 (0)11 370 5000
Fax +27 (0)11 688 5217/8
these results and additional information are available on
www.nedbankgroup.co.za