nedbank retail division rob shuter december 2004

Nedbank Retail Division

Rob Shuter

December 2004

2

Agenda

Nedbank Retail in perspective

Key issues facing Nedbank Retail

Strategic focus for 2005

Nedbank Retail in perspective

4

Retail in the context of Nedcor

H1 2004 NII

Nedbank Corporate

49%

Nedbank Retail40%

Nedbank Capital

11%

H1 2004 Headline Earnings

Nedbank Corporate

62%

Nedbank Retail14%

Nedbank Capital

24%

H1 2004 NIR

Nedbank Corporate

28%

Nedbank Retail54%

Nedbank Capital

18%

Excluding central divisions, Imperial Bank & forex

FTP, AJTP & risk adjusted capital allocation not yet implemented

5

Selected market share information

Sep 04%

Dec 03%

Dec 02%

Home loans 23,7 26,3 27,5

Asset based finance 19,6 18,9 14,8

Credit card 17,4 18,9 20,9

Individual overdrafts 25,1 29,6 25,1

Individual deposits 29,9 29,9 19,9

Source: DI900

6

Retail footprint & customers

Category Total

Branches

- Nedbank

- Peoples Bank / NBS

- Old Mutual Bank

541

288

207

46

ATM’s 1 218

Self Service Terminals 328

Retail outlets - Pick ‘n Pay* 127

Point of sale devices 31 993

Footprint

*Cards can be collected at 72 Pick n Pay stores

Customers per brand

0.110.18

1.63

1.17

3.09

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Tota

l Ret

ail

Bank

ing

Nedb

ank

Reta

il

Peop

les

Bank OM

B

PnP

Go

Bank

ing

m

Two largest competitors: 5m-6m clients

7

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

10 000

Clients / branch Clients / ATM

0

1 000

2 000

3 000

4 000

5 000

6 000

Nedbank Bank B Bank A Bank C

Branches ATMs SSTs

Retail Footprint Competitor Comparison

Nedcor’s ATM footprint sub-scale

Size of Nedcor’s branch network comparable with competitors

Number of Clients per Point of Presence

Clients per branch far less than competitors

* Including Peoples, NBS & OMB branches, but excluding JV outlets.

*2 087

5 405

3 8053 605

Heavy Nedcor branch network

Light ATM footprint

Nedbank

Retail footprint & customers continued

9


Staff morale

Financial underperformance

Losing market share in home loans & card

Brand misconceptions

Complex & ineffective structure

Poor primary banker status

10

Source: M

cKinsey organisational perform

ance profile survey, June 2004

DistinctiveSuperiorCommonNot effective

Significant performance inhibitors, combined with recent retrenchments has contributed to low staff morale.

Cluster performance profiles

External orientation48%

Innovation43%

Retail (n = 232)

Environment & values32%

Direction45%

Account-ability55%

Co-ordination & control41%

Capability65%

Motivation41%

Leadership60%


Innovation31%

GBI(n = 271)


Direction29%

Account-ability37%


Capability59%

Motivation37%

Leadership48%


Innovation45%

Group Ops(n = 223)


Direction50%

Account-ability51%


Capability68%

Motivation41%

Leadership61%

Staff morale

Roadshows, divisional reorganisation, clearer strategy all helping to improve morale

Source: McKinsey survey (July 2004)

11Source: Retail Finance, Analysis of Financial Results

Compared to other large SA Retail banks, Nedbank is performing poorly.

Cost / Income Ratio

2003

ROE

2003

Nedbank Retail 73.4% 9.7%

Bank A Retail 60.2% 32.3%

Bank B Retail 63.9% 33.2%

Financial under-performance

12…losing market share in these primary retail product categories

Home Loan Market Share Month-on-month growth (%) Sept 2003 – Sept 2004

Card Balances Market ShareMonth-on-month growth (%) Sept 2003 – Sept 2004

Bank BBank CNedbankBank A

2.8% down

10%

15%

20%

25%

30%

35%

Sep-03 Oct-03 Dec-03 Jan-04 Mar-04 May-04 Jun-04 Aug-04

3% down

10%

15%

20%

25%

30%

35%

Sep-03 Oct-03 Dec-03 Jan-04 Mar-04 May-04 Jun-04 Aug-04

Source: DI900, September 2004

Market share performance

13

Nedbank clearly differentiated,but in areas that are seen to be unimportant to current & prospective clients

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

EmotionalAppeal

FunctionalAspects ofBanking

Brand Image IncreasinglyPopular

Conservative Exclusive SocialResponsibilty

Expensive-0.4

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

8 Top Drivers of Main Bank Usage Nedbank Main Bank Users

Bank B Main Bank Users Bank C Main Bank Users

Bank A Main Bank Users

Brand misconceptions – not promising what matters

Source: Nedbank Retail analytics

14Complex matrix of channels, client segments & products, overlaid with

the additional complexity of multiple brands, alliances & JV’s

HL ABF CardLoans/

overdraftsSavings Current Insurance Assurance Investment Offshore

ATM/ SST

Branch

Face-to-face

Telephony

Internet

In-store

Inter-mediary

Mobile

High-net-worth Private Personal Mass Market Underserved

All client segments

High-net-worth & Private Banking clients

Products

Segments

ChannelsBrands

Mass Market clients

Mass Market clients

Mass Market clients

All client segments

Personal banking clients

Illustrative four-dimensional matrix

All client segments

Amex

BoE Private Clients

Visa/ Master Card

Middle Market clients

Structure - complex & ineffective

15

1.17

0.94

0.11 0.080.03 0.02

0.0

0.2

0.4

0.6

0.8

1.0

1.2

To

tal

Ne

db

an

k

Re

tail

SM

E

Pe

rso

na

l

Sta

ff

Pri

va

te

Nedbank customers per segmentm

15% 13% 35% 24% 61% 42%

1.37 1.32 1.46 2.06 2.23 1.90

% Primary clientsCross-sell ratio

Poor primary banker status

Excludes Peoples Bank & Old Mutual Bank

17


Credit integration & improvement

Organise ourselves better:• Branch integration• Reorganise Nedbank Retail & appoint new executive team• Integrate Nedbank & Peoples Bank• Reduce & simplify JV’s

Unleash our Bancassurance potential

Retain & grow our market share – particularly home loans & card

Act quickly & decisively to deliver our plans

Grow net transactional accounts & improve funding mix

Expense control

CC

OO

UU

RR

AA

GG

EE

18

C = Credit integration & improvement

Integrate credit scoring – one view of the client

Improve customer experience – increase turnaround times

Introduce risk based pricing

Align credit analytics with the business

Apply credit analytics to collections environment

19

O = Organise ourselves better - 1. Branch integration

13 Jul: Decision to integrate Retail & Branch Operations(5 000 staff moved into Retail)

28 Jul: Integration project team & project principals established

3 Aug: Consultation with Unions

6 Aug: Placement of Divisional Directors

11 – 13 Aug: Assessment & placement process(22 Regional Managers)

16 – 18 Aug: Assessment of Branch Managers (13 venues with 32 panels conducting over 850 interviews)

20-21 Aug: Appointment of 454 branch managers

23 Sep: Placement of remaining unplaced staff in vacancies

… process completed in 72 days

20


Rob Shuter

• Visa / Mastercard

• Amex• Card

Operations• Card Fraud• Card

Authorisations• Card Product• Card Process• Card NCCC• Card Marketing

NRD Card

Sydney Gericke

• Home loan Areas transfer from within Retail

• Home loan Product

• Home loan Process

• Home loan NCCC

• Home loan Marketing

NRD Home Loans

June Tudhope

• P.L.A.• Credcor• JDNA• M.L .

Process• M.L.

Operations Branch 326

• M.L. Marketing

NRD Personal

LoansHassim Akoob

• Gerrard Private Bank

• Fairbain Trust

• London Retail

• Group Country Head

NRDInternational

Gavin Cookman

• Call Centre Product

• Trans. & Invest. Product

• ABF & Vehicle Finance Product

• ATM/SST• eRetail

Channel• Internet/

Intra-net• Telephone• Cellular• Branch

Systems

NRD Product Solutions

Saks Ntombela

• Markets (Branches, Nedbank & Peoples)

• Mass Market• SME• Personal• Private• Boe Private

Clients• CSAU & cross-

border• Schemes• Staff Banking• Client Analytics &

research• OM Bank• PnP Go Banking• Retail client

service marketing• Other NCCC• Relevant

Operations areas

NRDBanking Services

Clive van Horen

• HR• Retail Projects• Strategy• Internal Retail

communi-cations

• Retail Organisational Change

NRD People Strategy & ProjectsDennis

Jackson

• Finance• Risk• Compliance• Credit• Client &

Products Analytics & profitability

NRDShared

ServicesIngrid Hindle

• NFP• NRI• Insurance• Assurance

NRDBancass &

WealthDave

Macready

New areas to be created

Transfer ex Product

Transfer ex Operations/ Risk

Transfer ex Process

O = Organise ourselves better - 2. Reorganise Nedbank Retail

21

Pieces of the card business are scattered throughout Nedbank, leading to blurred accountability, complex governance & contributing poor performance

Visa, Mastercard

Visa, Mastercard

Visa, Mastercard

Retail

Front-line businessesRiskCentral Operations Group Business

Innovation

Visa, Amex, Mastercard

Risk

AmexRisk operations (credit)

AmexCustomer Servicing

AmexDistribution

Fraud

AmexVisa,

MastercardCard helpdesk

Amex, Visa, Mastercard

Card operations

AmexVisa,

MastercardCard processes

AmexVisa,

MastercardCard acquiring

AmexVisa,

MastercardCard issuing

Amex JVNCCCCPOProcessProduct

Ca

rd F

un

cti

on

s &

c

om

pe

ten

cy

ce

ntr

es

Nedbank divisions

Card businesses

Previous structure of the card business

O = Organise ourselves better - 2. Reorganise Nedbank Retail

22

Rationale for integration – create a great bank for all South Africans

• move Peoples Bank to Nedbank brand, after section 54 approval

• reposition Nedbank as a bank for all South Africans

• limited IT issues

• number align & optimise infrastructure geographically

Rebranding of Peoples Bank does not mean “closure of Peoples Bank”

• some overlapping branches will be merged

• aim to minimise impact on staff & clients

• expand into new areas

Dedicated integration team under Brian Duguid

All branches under common regional management

• 13 regions across SA - business design unchanged

O = Organise ourselves better - 3. Integrate Nedbank & Peoples Bank

23

Integrate Nedbank & Peoples Bank - Nedbank footprint

24

Integrate Nedbank & Peoples Bank - Adding Peoples Bank footprint

25

Percentage Peoples/NBS Branches:

within 1Km of Nedbank: 68%



Integrate Nedbank & Peoples Bank - Overlap removed & potential new sites

26

Integrate Peoples Bank & Nedbank Regions Nov ’04

Staff communication Nov ‘04

Client & product systems high level design Jan ‘05

Finalise branch footprint plan (consult with regional managers) Mar ’05

Communicate to staff re branch rebranding & closures Mar ‘05

Align product & client systems & processes Q4 ’05

Rebrand products, clients & branches once systems aligned by Dec ’05

Create & implement cultural transformation programme throughout 2005

Functional staff training (product, process) throughout 2005

Ongoing brand s-t-r-e-t-c-h throughout 2005

Open new Nedbank branches in areas not adequately served Q3, Q4 & ongoing

2005

Peoples Bank integration next steps

…need to rebrand all products & branches by December 2005

27

Termination of Capital One alliances announced (Amex & PLA)

Termination of the JDNA alliance announced

Increased weight & effort behind Pick ‘n Pay Go Banking

Discussions being held with Old Mutual re joint ventures

O = Organise ourselves better - 4. Reduce & simplify JV’s

External JV’s Internal JV’s

Capital One – Amex

Capital One – PLA

JDNA

Pick ‘n Pay Go Banking

Old Mutual Bank

Bancassurance alliance

BoE Life

BoE Private Clients

28

Review insurance product set & launch new products

Enhance ‘embedded’ nature of sales processes & non advice products

Incentivise distribution channels

Focus on education, training & sales support

Adoption of a simple integrated financial planning system

Ensure maximum penetration of ‘own’ Group product

Increase number & productivity of planners

Conduct product profitability reviews

U = Unleash Bancassurance potential

29

100%100% 29%29% 19%19% 52%52%

Intake Declined Approved Reworked

Actions Status

1. Provide infrastructure to link credit scorecard to front-end

2. Provide straight through processing for selected branch bonds

3. Originator capture strategy4. Increase product offering to cover 80% of bonds

through both channels

Complete

Complete

On track for delivery – 30/11On track for delivery – 31/12

Market share from pilot originator up from 16% in July to 25% in September

Market share from pilot originator up from 16% in July to 25% in September

Process inflow problem

R = Retain & grow market share - 1. Fix the home loan business

30

100%100% 50%50% 36%36% 12%12%

Opening pipeline from previous month

Inflow & rework from current month

Registration Not taken up

Actions Status

1. Develop MI capability to measure and monitor real-time application progress

2. Agree acceptable queue length and escalations3. Analyse MI and re-engineer processes as appropriate4. Manage commitment report to reduce time taken to

convert bonds to book and to proactively assist clients in the registration process

5. Install queuing system at call centre to increase take-up ratio and reduce time delays due to amendments

6. Integrate home loan infrastructure with other bank infrastructure to reduce duplicate capture and errors resulting in amendments and delays

Complete

On track for delivery – 31/12On track for delivery – 31/12Pilot due to begin – 01/12

Complete

Part of proposal due for 31/12

102%102%

Closing pipeline

Pipeline problem

R = Retain & grow market share - 1. Fix the home loan business continued

31

Market positioning & reputation

• Re-visiting our mass market & low income housing strategy• Improving our service levels

Staff Morale • Build enthusiasm & passion for home loans business by establishing identity & highlighting early victories

• Formulation of the monoline structure

Systems • Streamline development process • Tackle unresolved system constraints and issues with vigour• Reduce time-to-market

Risk • Testing credit policy• Improving pricing policies & methodology

Channel management

• Improve service levels to originators• Lever branch sales capability - investment in training & product

knowledge & through appropriate target-setting & staff incentivisation

MI • Resolve disparate information sources & produce meaningful, timely MI for decision-making

• Develop better client & business understanding - analysis

R = Retain & grow market share - 1. Fix the home loan business continued

Other issues

32

Reorganise into single integrated business unit

Integrate Amex, Mastercard & Visa

Map, understand & improve client service processes

Re-activate the branch network for card sales

Activate client retention programs

Leverage Corporate cluster business opportunities

Improve credit policies & collections

Review & enhance card loyalty programmes

Launch cash back at point of sale

R = Retain & grow market share - 2. Fix the card business

33

E = Expense control

NBS / Peoples Bank / Nedbank integration

• savings from branch integration

• address mismatch of clients & distribution

• head office savings achieved in 2004

Retail Reorganisation – reduces resource duplication

Concentrated focus on headcount

Accelerated sales of PIPs – maintenance & guarding benefits

Optimisation of marketing – reduced number of brands

“There is no miracle moment. Small

incremental wins in one common

direction will restore Nedcor to a

highly rated & respected financial

institution.”

Thank you

Booklet only slides

37Source: Retail Finance, September 2004; Competition in SA banking, JP Morgan, Infochoice

SA Retail banking highly profitable (ROE’s of 20% - 40%)

Foreign competition historically concentrated on the stock brokerage

& private banking businesses

SA banks could have continued strong performance (ROE) in retail

banking in the next three years

Expect increased competition, but barriers to entry high.

The proposed take-over of ABSA by Barclays indicative of the

opportunities that exist in the retail market.

Industry profitability

38

Low interest & inflationary environment = banks experiencing buoyant growth

• boom conditions residential mortgage market - demand likely to be sustained

• retail sales booming - augmented by emerging Black middle class

• interest rates - remain stable in 2004 - long term rates to trend gently upwards

While this stimulates borrowing, banks experiencing downward pressure on fees

Anticipated year on year credit growth

ABF Mortgages Overdrafts Credit Cards

2004 NEU 21.8 21.8 -5.4 19.0

BER 17.6 17.7 1.5 19.2

2005 NEU 23.6 20.0 6.5 12.6

BER 18.2 14.2 5.7 16.9

2006 NEU 17.9 17.7 6.6 10.9

BER 17.6 15.1 12.5 16.6

2007 NEU 26.7 20.8 -1.2 17.3

BER 11.1 9.1 13.2 12.0

Source: Nedbank Economic Unit, Bureau of Economic Research ,Nedbank Retail Data annualised using simple averages

Economic outlook

39

Market environment

Our Competitors

Highly competitive market

New entrants - Standard Chartered (20twenty) & Barclays (bid for ABSA)

Positive economic environment - Nedbank has been losing market share

Increasing disintermediation & consolidation (e.g. retail stores)

Our Clients

Clients becoming increasingly sophisticated - pressure on delivery & margins

Transition from product push to holistic financial planning

Financial education to clients, especially in the low-income market vital

Market changing - mature white market to growing black middle & affluent market

Source: Nedbank Economic Unit, Nedbank Retail

40

Legislation

FAIS, POCA, FICA & Basel II - impacts on Retail

The Consumer Credit Bill - significant impact on consumer credit lending in the

micro lending, banking & retail sectors if promulgated

Consumer bodies & regulators - challenge the basis of fees charged by banks.

The Falkena Report indicate that the NIR earned by banks (especially on retail

transactional banking) cannot be sustained

Financial Sector Charter targets

Source: Nedbank Economic Unit, Nedbank Retail

Increased legislation & compliance increases the cost,risk & complexity of doing business

41

DI900

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

Dec

-01

Jan

-02

Feb

-02

Mar

-02

Apr

-02

May

-02

Jun

-02

Jul-

02

Aug

-02

Sep

-02

Oct

-02

Nov

-02

Dec

-02

Jan

-03

Feb

-03

Mar

-03

Apr

-03

May

-03

Jun

-03

Jul-

03

Aug

-03

Sep

-03

Oct

-03

Nov

-03

Dec

-03

Jan

-04

Feb

-04

Mar

-04

Apr

-04

May

-04

Jun

-04

Month

De

bto

rs b

oo

k v

alu

e

AMEX CARD Total Retail Card TOTAL CARD TOTAL BUSINESS BANKING

240m Write-off192.5m Net LossSale of the

Edgars Book

Card debtors

Source: DI900

42

Receivables as per DI900

3,100,000,000

3,150,000,000

3,200,000,000

3,250,000,000

3,300,000,000

3,350,000,000

3,400,000,000

3,450,000,000

3,500,000,000

2004/01 2004/02 2004/03 2004/04 2004/05 2004/06 2004/07 2004/08 2004/09

Period

Outstanding Balances

2004 Receivables 2003 Receivables

Card Receivables

Source: DI900

43

Number and Value of Transactions where Nedbank is the Acquirer

0500

10001500200025003000350040004500

Millions

Period

Val

ue

of T

ran

sact

ion

s

0123456789

Millions

Nu

mb

er o

f Tra

nsa

ctio

ns

2003 Toatal Value of Acquiring Transactions 2004 Total Value of Acquiring Transactions

2003 Total Number of Acquiring Transaction 2004 Total Number of Transactions

Card transactions - acquiring

44

Card transactions - issuing

Total Number and Value of Transactions for All Cards

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2004

/01

2004

/02

2004

/03

2004

/04

2004

/05

2004

/06

2004

/07

2004

/08

2004

/09

2004

/10

Millions

Period

Valu

e of

Tra

nsac

tions

0

1

2

3

4

5

6

7

8

Millions

Num

ber

of T

rans

actio

ns

2004 Total Value of Transactions 2003 Total Value of Transactions 2004 Total Number of Transactions 2003 Total Number of Transactions

Note: These figures exclude Private Label & Visa Electron

45

Reorganisation - resolve complexity

3 focused integrated businesses under the Nedbank brand

• Card

• Home Loans

• Personal Loans

Flexible channel strategy

Integrated high-net-worth offering

Product & process functions aligned to client-driven strategy in each

business cluster

Process should remove significant uncertainty

Resolve complexity, duplicated resources & enhance focus

46


Banking Services

Clive van Horen

• Nedbank Network

• Peoples Network

Branches

Sharon Kersten

Personal Banking

Cross Border

Martin Schultheiss

BoE PrivateClientsPrivate

Banking

Vince Boulle

Operations SupportPnP Go BankingOM Bank

Staff Banking

Andrew Lumsden

• Bank for All Strategy

• Strategic Planning

• Projects• Knowledge

management

Strategy

Mohamed Saloojee

SMECorporate Schemes

Alfred Ramosedi

• NCCC• NCC• Service

Recovery Desk

• Retention Unit

• CSAU• Service

Transformat-ion

• Client Satisfaction Research

Client Services

Doug Hardie

• Marketing & Research

Marketing

Acting Head: Arthur Werren

• HR• Learning &

Development

• Communica-tion

HR & Comms

TBA

Finance (in-sourced)

Acting Head: Craig Nelson

• Risk and Compliance

David Power is head of Nedbank Private David Power is head of Nedbank Private Banking, reporting to Vince BoulleBanking, reporting to Vince Boulle

Banking Services structure

47


Home Loans

June Tudhope

• Channel Management

• Non-Channel Acquisition

Home Loans Client & Dbn Management

Geoff Els

• End to end process execution

• IT Operations SLA management

• NCCC – SLA management

• PML

Home LoansOperations

Eugene Drotskie

• Process Efficiency & Improvement

• IT development relationship management

• Training• PML

Home LoansProcess

Mark Danckwerts

• Market segments

• Banking council & stakeholder relationships

• Business development

• Marketing

Home Loans Innovation & Development

Lindiwe Kubeka

• FSC• Internal/

External communica-tion

• HR• Projects• Training –

facilitators• Strategy

support

Home LoansStrategy, People

& ProjectsDiana

Musara

• Finance• Operational

risk• Compliance• MIS

Home Loans Shared

ServicesGreg Salter

Home LoansCredit Risk

Pieter van Heerden

Home loan structure

48


Card

Sydney Gericke

• Card Issuing Credit

• Card Issuing Debit

Consumer Card

Services

Nick Moore

• Corp. Acquiring Solutions

• Corp. Purchasing & Procurement Solutions

• Merchant Acquiring

Corporate Card

Services

TBA

Card Operations

Barry van Huyssteen

• Voyager• Membership

Rewards• Marketing /

Advertising• Ensure /

Manage Brand Integrity (A/M/V)

• Promotions

Card Marketing

TBA

• Client Satisfaction Measure-ment

• Resolve Escalated Queries

• Process Improvement end-to-end

• Project Management

• Strategy Planning

Card Service

Solutions

Susan Fourie

• Credit Risk Management

• Fraud Risk Services

• Card Authorisa-tions

Card Risk Services

Rene de Villiers

• Rapid Deployment Initiatives

• CAMS Platform

• Emerging Card Technology

• Determine rqmts & Create Release Plans

• Implement Card Solutions

Card Innovation Services

Joy Rees

• Human Resources

• M.I.

Card People

Practices

TBA

• HR• Risk• Learning &

Development• Finance (in

sourced)• Communica-

tion• Knowledge

management

Card Compliance

& Operational

RiskTBA

• Finance• Reporting• AJTP

Card Finance

(In-sourced)

TBA

Card structure

nedbank retail division rob shuter december 2004

Documents