Nedbank Group 2008 annual results presentation - v9 3.ppt · • Capital adequacy increased significantly – Core tier 1 7,2% to 8,2% – Tier 1 8,2% to 9,6% – Total 11,4% to 12,4%

1

NEDBANK GROUPANNUAL FINANCIAL RESULTS

YEAR ENDED 31 DECEMBER 2008

ANNUAL FINANCIAL RESULTS

AGENDA

HighlightsFinancial overviewOperational reviewOperational reviewSummary & prospects

2

Highlights

• SA banks & financial system remain structurally sound– SA relatively insulated but not immune

• Resilient performance in challenging environment – 15,7% growth in tangible NAV– R5,8 bn headline earnings - down 2,6%

• Capital adequacy increased significantly– Core tier 1 7,2% to 8,2% – Tier 1 8,2% to 9,6% – Total 11,4% to 12,4%

3

• Liquidity remains sound

• Risk management systems proving effective

… resilience in the face of extreme challenges

Manage through the economic cycle

Grow deposits & assets

selectively

• Deposit growth of 21,4%

• Advances growth of 16,1%

Price for risk

Proactively manage capital

• Improved asset margins on new business

• Capital adequacy ratios up significantly

• Liquidity sound

4

Leverage• Loan-to-deposit ratio 93,0%

• Leverage ratio 16,2 times

… conservative stance rather than maximise short term profitability

3

Continue to focus longer-term

People• Further improvements in staff morale survey

• Further successes in building a vision led & values

driven organisation

Systems

Brand & client service

• Electronic banking upgrades – done in Retail &

Business Banking – Corporate Banking in progress

• Retail single client view systems at advanced stage

• Sponsorship campaign to support brand image

• Retail widened service score gap over peers

• Business Banking model working well

5

Distribution• R1bn in Retail distribution complete

• Ecobank alliance into Africa finalised

… longer term strategy & focus remain unchanged

Transformation

• DTI - Level 3 BEE contributor (2007: Level 4)

• FSC score 99,1 points (2007: 97,5)

47% 44% 60%

2006 2007 2008

34%58% 60%

2006 2007 2008

58% 62% 65%

Black board members

Black management

6

16%36% 37%

2006 2007 2008

2006 2007 2008

Black female management

Total black staff

Note: graph classification per DTI scorecardFSC score still subject to FSC review

4

Continued investment in staff

2005200659 6

79.1

75.1

86.064.7

Nedbank Staff Survey overall

Ethics

Strategic directionDiversity

Rewards, recognition & performance management

2006

20082007

67.1

60.1

59.6

69.3

69.755.7

61.2

57.2

50.4

49.082.4

80.0

79.672.1

69.5

69.9

Strategic direction

Leadership

CommunicationRelationships & trust

Diversity

Policies & procedures

7

… improvement in all dimensions over last four years

63.3 58.3

78.5

75.3 75.4

74.5Management style

Training & development Change & transformation

Organisational culture & values

Nedbank’s credentials

• Dow Jones Sustainability Index membership

• Included for 5th year

• 1 of 25 banks worldwide

• 1 of 3 JSE listed companies (only SA Bank)

Continue to focus on all aspects of sustainability

1 of 3 JSE listed companies (only SA Bank)

• 2008:74% (2007: 71%)

• JSE SRI Index- Inclusion since 2004

• SA Carbon Disclosure Project Leadership Index

• Best placed bank

• 4th overall in the low emissions category

• Financial Times Emerging Markets Sustainable Bank of Year for Middle East & Africa

8

of Year for Middle East & Africa

• Equator Principles – 1st bank signatory in Africa

• WWF Conservation Partnership

• UNEP FI – Co Chair on UNEP FI African Task Force

• Ernst & Young Excellence in Sustainability Reporting -Award of Excellence received

5

Growth potential in SADC

• Financial services economic profit pool in Africa:

– Nedbank 12% - 14% of pool– SA 60% of pool

Nedbank footprint

– SADC 65% – 75% of pool

• Opportunity to gain economic profit market share in SA

• Selectively expand in Africa

SADC

Real GDP growth rates

7%

8%

9

0%

1%

2%

3%

4%

5%

6%

2002 2003 2004 2005 2006 2007 2008 2009

Sub-Saharan Africa South Africa

• Extend operations capital-efficiently

• Maintain focus in respective regions

• Effective cost & risk management

Nedbank / Ecobank strategic alliance

Ecobank footprintNedbank footprintExpanding opportunities

• Leverage existing relationships

• Utilise expertise on sector specific

advisory skills

• Explore joint investment opportunities

• Country specific tailored banking services

• Retain & attract skilled resources

10

Retain & attract skilled resources

• Knowledge transfer of different countries & systems

… goal of a ‘one bank’ client experience30 countries & over 1 000 branches & outlets

6

FINANCIAL OVERVIEWMIKE BROWN

Key financial indicators

For the year ended % change 2008 2007

Headline earnings (Rm) (2,6) 5 765 5 921

Diluted HEPS (cents) (2,0) 1 401 1 429

Diluted basic EPS (cents) 7,2 1 558 1 454

ROE (%) 17,7 21,4

ROE (excluding goodwill) (%) 20,1 24,8

ROA (%) 1,09 1,30

Margin (%) 3,66 3,94

Credit loss ratio (%) 1,17 0,62

12

Efficiency ratio (%) 51,1 54,9

Tangible NAV per share (cents) 15,7 7 179 6 207

Basel II capital adequacy* (%) 12,4 11,4

Dividend per share (cents) (6,1) 620 660* Including unappropriated profits

7

Income statement

Rm – year ended % ch 2008 2007

Net interest income 14,3 16 170 14 146

Impairments >100 (4 822) (2 164)

Income from lending activities (5,3) 11 348 11 982

Non-interest revenue 2,7 10 729 10 446

Total expenses 1,9 (13 741) (13 489)

Indirect taxation 22,6 (374) (305)

Associate income (35,6) 154 239

Headline profit before taxation (8,5) 8 116 8 873

13

p ( )

Direct taxation (24,8) (1 757) (2 336)

Minorities & preference shares (3,6) (594) (616)

Headline earnings (2,6) 5 765 5 921

Basic earnings 6,4 6 410 6 025

Segmental performance

Headline earnings

RORAC%

Rm – year ended % ch 2008 2007 2008 2007

Nedbank Capital 7,8 1 266 1 174 38,1 40,7

Nedbank Corporate 11,1 2 924 2 632 28,7 26,4

Nedbank Retail (46,6) 1 002 1 876 10,8 22,1

Imperial Bank (26,9) 166 227 13,2 23,9

Operating units (9 3) 5 358 5 909 22 2 26 5

14

Operating units (9,3) 5 358 5 909 22,2 26,5

Shared services (32) (15)

Central management 439 27

Total (2,6) 5 765 5 921 17,7 21,4

8

NII - margin analysis % of daily average interest-earning banking assets % RmDecember 2007 3,94 14 146Asset growth 3 268

Endowment movement: 0,06 278

Positive net endowment effect 0 13 587Positive net endowment effect 0,13 587

Increase cost of funding properties in possession (0,02) (79)

Cost of reducing interest rate sensitivity (benefits in 2009/10) (0,05) (230)

Liability price movement: 0,02 79

Current & savings accounts 0,20 894

Increased cost of funds (0,18) (815)

Asset price movement: (0,25) (1 104)

Personal loans (move to lower risk assets & NCA caps) (0,04) (165)

15

Secured products margin (0,10) (445)

Other Loans (0,07) (305)

Structured deals (0,04) (189)

Cost of carrying additional liquidity buffers in Government bonds (0,04) (165)

Other (0,07) (332)December 2008 3,66 16 170

Impairment charge

Rm – year ended % of averageadvances 2008 2007

I i t h 4 822 2 164Impairment charge 4 822 2 164

As % of NII (%) 29,8 15,3

Credit loss ratio (%) 1,17 0,62

Nedbank Capital 13,7 0,06 0,05

16

Nedbank Corporate 41,6 0,27 0,11

Nedbank Retail 35,0 2,47 1,26

Imperial Bank 9,7 1,71 1,28

9

0.96%

1.17%

14 000

16 000

1.00%

1.20%

Defaulted advancesR

m

9 90

9

11 7

95

078

6 90

2

7 85

9

17 3

010.62%

4 000

6 000

8 000

10 000

12 000

0 20%

0.40%

0.60%

0.80%Target credit loss ratio range

17

6 6 0

2 000

Dec-07 Jun-08 Dec-080.00%

0.20%

Defaulted advances (Basel II) Impairment provision

Credit loss ratio Long run expected loss (EAD)

Non-interest revenue

Rm – year ended %change 2008 2007

excl BCBond

Choice 2007

Commission & fees 13,8 7 911 6 950 578 7 528

Trading income 16,4 1 553 1 334 1 334

Private equity income (66,9) 303 915 915

FV adjustment on bonds/swap >100 291 (24) (24)

Credit spread 207 47 47

Basis 84 (71) (71)

Other FV adjustments >100 76 29 29

Other inv income (13,8) 69 80 80

R t l i 51 51 51

18

Rental income - 51 51 51

Sundry income (10,9) 475 533 533

Non-banking subsidiaries (16,6) 226 271 271Other (5,0) 249 262 262

Total NIR 8,7 10 729 9 868 578 10 446

10

Expenses

Rm – year ended % change Dec 08 Dec 07

excl BCBond

Choice Dec 07

Staff costs 0,1 7 040 7 034 45 7 079

Computer processing 10,5 1 841 1 666 7 1 673

Communication & travel 16,9 636 544 15 559

Accommodation 6,1 1 122 1 057 11 1 068

Marketing & PR 1,6 877 863 24 887

Fees & insurance 15,3 1 326 1 150 348 1 498

19

Other 23,9 705 569 8 577

Operating expenses 5,2 13 547 12 883 458 13 341

BEE 31,1 194 148 - 148

Total expenses 5,4 13 741 13 031 458 13 489

Taxation

Rm – year ended 2008 % 2007 %

T t l t 1 757 21 6 2 336 26 3Total tax 1 757 21,6 2 336 26,3

Tax – business operations 1 958 24,1 2 197 24,7

– risk provisions 15 0,2 97 1,1

– structured deals (147) (1,8) (79) (0,9)

20

Opening rate change (29% to 28%) (39) (0,5) - -

Private equity portfolio (9C) (153) (1,9) - -

Secondary tax on companies (STC) 123 1,5 121 1,4

11

Balance sheet

Rm % change 2008 2007Cash & securities 7,1 79 401 74 138Advances 16,1 434 233 373 956Investments 9 622 9 296Property & equipment 4 327 3 929Computer software 1 607 1 349Goodwill 3 894 3 898Derivatives >100 22 321 9 047Other 11 618 13 243

Total assets 16,0 567 023 488 856

Ordinary shareholders’ equity 15,6 34 913 30 193

21

Minorities & preference shareholders 5 160 4 932Deposits 21,4 466 890 384 541Derivatives >100 23 737 11 432Long-term debt instruments 14,1 14 061 12 326Other (51,0) 22 262 45 432Total equity & liabilities 16,0 567 023 488 856

Group capital adequacy

ECONOMIC CAPITAL

35

40

Surplus Tier B( )

Total

10%

12%

BASEL II CAR 2008Targetranges

Including unappropriated profits

10

15

20

25

30

VS VS

SurplusR5 771m

10% bufferR2 452m

Minimumrequired

R24 521m

R9 610m

10% bufferR2 601m

Minimumrequired

R26 006m

Tier A(core)

R24 510m

Tier B(non-core)R8 234m

Tier A(core)

R28 336m

(non-core)R9 880m

Rbn

Tier 1

7.2% 8.

2%

8.2% 9.

6%11.4

%

12.4

%

2%

4%

6%

8%

10%

22

0

5

Requirement Availablefinancial

resources

Requirement Availablefinancial

resources20082007

0%

Core Tier1 Tier 1 TotalReg min Tier 1 Reg min Total

Surplus: Core R10,3bn Total R9,5bn

2007 2008

12

Leverage ratio & RWA / total assets

Nedbank Bank A Bank B Bank C

Leverage ratio Jun 2008 16,6 18,5 15,0 16,7

Leverage ratio Dec 2008 16 2 16 4Leverage ratio Dec 2008 16,2 16,4

RWA / total assets Jun 2008 63,9 47,8 56,8 52,6

RWA / total assets Dec 2008 62,8 49,2

23

… notwithstanding similar leverage to peers, Nedbank’s higher RWA / total assets ratios demonstrate prudence in applying AIRB models

Ned9Ned6IBL3Ned7

Ned10N d12

2 000

R 'm

Subordinated debt & hybrid maturity profile

Ned11

Ned8Ned12

Ned5

IBL2500

1 000

1 500

Ned H1

No

mat

uriti

es

24

0

500

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Subordinated Debt Hybrid Debt

m

13

Advances

Rm % change 2008 2007

Home loans 15,6 143 342 123 980Commercial mortgages 21,6 73 031 60 045P ti i i 100 791 308Properties in possession >100 791 308Term loans 61,0 64 144 39 835

Credit cards 2,0 7 248 7 109

Overnight loans (14,0) 15 760 18 336

Overdrafts (0,4) 12 461 12 514Other loans to clients (7,7) 44 581 48 280Leases & instalment sales 16,7 61 362 52 568

25

Preference shares & debentures 67,1 15 667 9 377

Trade & other bills (41,7) 1 075 1 843

Reverse repurchase agreements (55,0) 2 630 5 839Impairment of advances 29,3 (7 859) (6 078)

16,1 434 233 373 956

Deposits

Rm % change 2008 2007

Current accounts (1,6) 45 188 45 920

Savings accounts 2,7 14 303 13 925

Term deposits 16,4 292 768 251 424

Foreign currency liabilities (24,3) 6 226 8 230

NCDs 55,6 87 377 56 166

D it h t >100 21 028 8 876

26

Deposit repurchase agreements >100 21 028 8 876

21,4 466 890 384 541

14

o No exposure to US sub-primeo Small conduit businesso Limited use made of securitisation market

Funding & liquidity risk management

r o Limited use made of foreign marketso Strong retail & corporate deposit franchiseso Sound capital positiono Asset growth slowing due to market conditionso Stable money market shortageo Good client relationshipso Strong & efficient SA interbank marketui

dity

bar

omet

er

27

o Strong & efficient SA interbank market

o Global financial crisis & domestic slowdown

o Increased reliance on wholesale depositso Capital markets & foreign markets currently thin & expensive

Liqu

NAV & ROE

21 4%

24.8%22.1%

12 000 25%cents

4 year CAGR:

NAV 16,3%

NAV excluding goodwill 19,4%

54 597

6 36

3

7513 85

22

80 427

6 54

3

7 57

1

17.7%

21.4%

18.6%

15.5%

11.0%

20.1%

14.3%

18.9%

4 000

6 000

8 000

10 000

10%

15%

20%

28

4 65 5

5 6

3 72

1

4 68 5 4 6

0

2 000

2004 2005 2006 2007 20080%

5%

Net asset value per share NAV excluding goodwill

ROE ROE excluding goodwill

15

Financial drivers - 2009

• Advances growth upper single digits• Margin compression around 10 to 15 bps

• Wholesale up but within through the cycle

NII

• Retail worsen from 2008 (as economy worsens)• Overall to remain below 1,30%

• Mid single digit growth for year

• Growth to be held in upper single digits

Impairments

NIR

Expenses

29

• Targeting to improve CARs • Ongoing focus on funding & liquidity

Capital & liquidity

… current economic environment increases forecast risk

Group targets

Metric 2008 Medium to long term targetOld Revised 2009 outlook

ROE (excl goodwill) 20,1% ✗10% above monthly

weighted COE5% above monthly

weighted COE > 15%weighted COE weighted COE

Efficiency ratio 51,2% ✓ < 55% < 50% < 53%

Diluted HEPS growth (1,7%) ✗ ≥ CPIX + GDP growth + 5% ±10% down

Credit loss ratio 1,17% ✗ 0,55% - 0,85% < 1,30%

Core Tier 1 CAR:Tier 1 CAR: Total CAR:

8,2%9,6%12,4%

✓ 8,0% – 9,0%11,0% – 12,0%

7,5% - 9,0%8,5% - 10,0%11,5% - 13,0%

Towards top end

of ranges

30

, , , , , g

Economic capital ✓ ✓ 99,9% confidence - A- debt rating (including 10% buffer)

Dividend cover 2,29 ✓ 2,25 to 2,75 times

… outlook assumes a 227 basis point reduction in average prime rate

16

NEDBANK CAPITAL

BRIAN KENNEDY

Nedbank Capital - financial highlights

Year ended – Rm % change 2008 2007Headline earnings 7,8 1 266 1 174Efficiency ratio 52,2% 47,9%

A t 22%

Credit loss ratio 0,06% 0,05%

Average advances 23,3 57 079 46 302Average deposits 32,0 130 106 98 579

Allocated economic capital 15,1 3 324 2 887

RORAC 38,1% 40,7%

33%

32

Assets Headlineearnings

NedbankCapitalRest of bank

33%

17

Nedbank Capital – revenue split

Rm % change 2008 2007

Net interest income 72,1 938 545

I i t (44 0) 36 25Impairments (44,0) 36 25Income from lending activities 73,5 902 520Non-interest revenue (16,5) 1 782 2 135

Trading 13,7 1 333 1 172

Advisory & other (9,3) 322 355

Private equity (79,1) 127 608

3333

Realised (59,8) 133 331Unrealised (>100) (6) 277

Operating income 1,1 2 684 2 655

Risk perspective: trading activities

New Riskwatch system

CFDs launched

Increase in initial Margin

Key Milestones/Timeline of Trading Activities

30 000

35 000

70

80

90

Enhanced new product process

Independent risk function

Macquarie trading loss

SocGen trading incident

15 000

20 000

25 000

30 000

20

30

40

50

60

70

34

S&P

10 000

15 000

Jan 2005 Jul 2005 Jan 2006 Jul 2006 Jan 2007 Jul 2007 Jan 2008 Jul 2008 Jan 20090

10

20

JSE ALSI ViX (RHS)JSE ALSI (lhs) S&P ViX (rhs)

18

Single stock future & contracts for differences portfolios

SSF portfolio - exposure to clients SSF portfolio - exposure to safex

Tier 1 Tier 2 Tier 3 Tier 4

Jun-08 Sep-08 Dec-08 Current

CFD portfolio - exposure to clients


35

• Growth in CFD business during 2008

• Reduced developing concentration risk

through increasing initial margin & security


Global MarketsRisk Factor VaR

40

50

60

Average risk factor 3 –day 99% VAR 2007

2008

• Calculated Risk Appetite

• Broad based profit across

asset classes

• Greater revenue, more

‘winning’ days

0

10

20

30

Primary VaR Equity VaR FX VaR IR VaR Credit VaR

2007 2008Trading income analysis

70

80Trading days

2007

36

0

10

20

30

40

50

60

<=-20 -20 to< -15

-15 to< -10

-10 to< -5

-5 to <0

0 to <5

5 to <10

10 to< 15

15 to< 20

>= 20

2008

2007

2008

19

Gross exposure

20

25

30

35R'bn

Investment Banking Review

• Strong book growth– Improved margin

• Primary domestic lending focus• Diversification - geography & sector

CAGR = 26,3%

0

5

10

15

2004 2005 2006 2007 2008

Exposure by region

70%15%

• No new foreign deals in H2 2008 –pricing uncertainty

• Ecobank alliance enhances African opportunities

Exposure by sector

79%

37

15%

15%South AfricaRest of AfricaRest of world

12%9%Balance of book

BEE - share based dealsJunior mining

Market presence maintained across sectors

3838

20

Deepen client relationships • Acquired new clients while boosting current relationships

What we said Commentary

Performance against prospects & strategy

Create new revenue streams

Strong sector focus

Multiple product solutions

Human capital pipeline

• 7 new businesses gained traction in 2008

• Bolstered sector teams with increased deal flow

• Increased collaboration across deals

• Normal attrition levels & strong human capital pipeline

3939

Scalable trading platforms

Appropriate risk management

• Successfully rationalised systems• New trading platforms implementations are on track

• Mitigated risks by vigilant monitoring & measurement

… strategies unchanged focus on risk management

Nedbank Capital – prospects

• Solid base built over 5 years

• Good quality advances book

– Generating significant NIIGenerating significant NII

– Opportunity to reprice new deals

• Available rand liquidity

• Term dollar funding expensive reduced international activity

• Continue to focus on generating client flows across product spectrum

• Environment conducive to building domestic market share

4040

• Environment conducive to building domestic market share

• Remain vigilant on credit & market risk

… difficult market conditions expected to continue throughout 2009

21

NEDBANK CORPORATEGRAHAM DEMPSTER

Nedbank Corporate - financial highlights

Year ended – Rm % change 2008 2007Headline earnings 11,1 2 924 2 632Margin 2,68% 2,82%Efficiency ratio 47 4% 53 5%

39%51%

Efficiency ratio 47,4% 53,5%Credit loss ratio 0,27% 0,11%Average advances 21,2 172 357 142 238Average deposits 21,1 208 426 172 046Allocated economic capital 2,1 10 190 9 977RORAC 28,7% 26,4%

42

Assets Headlineearnings

51%

NedbankCorporateRest of bank

22

2008 Highlights

• Strong core banking performance• Headline earnings up 20,1% to R2 764m • Efficient capital management (up only 0,6%) • RORAC 28 2%• RORAC 28,2%• Jaws 8,9%

Financial

• Good advances & deposits growth >20%

• Property investment returns exceeded market performance

43

• Growth in overall economic profit of 24%*

* Excluding Bond Choice & Lion Match sold down during 2007

2008 Highlights (continued)

Clients

• Excellent risk management

• Primary client gains

Risk

Clients

People

• Good progress on • Transformation • Corporate culture • Leadership development

Primary client gains

44

Strategies• Establishment of Business Banking as separate cluster

• Major strategic initiative through Ecobank pan-African alliance

23

Nedbank Corporate - segmental analysis

Headline earnings RORAC Average advances

Rm 2008 2007 %change

2008 % 2008 %

change

Business Banking 1 369 1 117 22,6 31,7 54 524 14,6

Corporate Banking 648 450 44,0 32,6 59 770 29,2

Property Finance 800 909 (12,0) 23,7 51 215 24,4

Africa 94 78 20,5 19,7 5 650 16,0

45

2 911 2 554 14,0 28,7 171 159 22,4

Other* 13 78 (83,3) 33,9 1 198 (49,3)

Nedbank Corporate 2 924 2 632 11,1 28,7 172 357 21,2

* Bond Choice & Lion Match sold down during 2007

Corporate Banking

• Growth in average advances 29% & deposits 28%

Earnings growth of 44,0% to R648m & RORAC of 32,6%

p

• Advances - emphasis on margin management

– grew annuity term advances

– term up >80%, short-term down

– margins increased

• Core banking NIR up 35%

46

• Major transformation initiative – Siyakhula

• Good progress in public sector deal flow

…continuing gains in Primary Banker market share

24

Property Finance

• Advances up 24% driven by high quality,

large deals

Earnings of R800m & RORAC of 23,7%

large deals

• Levels of impaired assets & arrears low

despite difficult economic conditions

• Property Investment returns exceeded market

performance – down on record 2007 level

• Successful affordable housing agreements

47

concluded with first tranche of funding disbursed

• Committed to being SA’s "greenest bank"

• High staff morale maintained

… continued selective growth

Africa


Earnings up 20,5% to R94m & RORAC of 19,7%

• Focussed on improving existing operations

• Risk well managed & impairments at acceptable

levels

• Greater focus on expanding to selected

SADC countries

48

• Exploring joint investments together

with Ecobank

…well positioned for future expansion opportunities

25

Transactional Banking

Banking solutions to address our clients’ needs

49

…driving transactional banking market share

Nedbank Corporate – future focus

• Sustaining economic profit

• Managing through these uncertain times

• Tight risk management focusTight risk management focus

• Gain primary bank clients

• Continue building on our transformation initiatives

• Visible leadership

• Progressing our alliance with Ecobank

50

• Developing a 'one bank' customer experience

across 30 countries & 1000 branches in Africa

26

NEDBANK BUSINESS BANKING

INGRID JOHNSON

Nedbank Business Banking - highlights


• Increased transactional ol me gro th

Earnings growth of 22,6% to R1 369m & RORAC of 31,7%

• Increased transactional volume growth,

complemented by net new client acquisition

• Client value management focus

• Active risk management

– increasing trend of defaults in market

– good recoveries 24%

5252

• Comprehensive offerings for

enterprise development,

agriculture, tourism & public sector

Headlineearnings

NedbankBusiness BankingRest of bank

27

Nedbank Business Banking – a new Cluster

• Effective decentralised business model based on accountability

High growth, high cross sell, high ROE in a major market segment

• Significantly transformed culture & employment equity profile• Continued improvement in staff satisfaction survey• Higher focus on new client acquisition

Financial performance over 4 years * 2008

Headline earnings 3 times higher than 2004 (CAGR ~32%) R1 369m

Return on capital Increased from 16% in 2004 31,7%

5353

… consistent strong financial performance

Efficiency ratio Improved from 64% in 2004 47,1%Average advances 1,7 times higher than 2004 R55bnAverage deposits 1,6 times higher than 2004 R71bn* Estimates to align for internal allocation & transfer pricing changes over the years

Nedbank Business Banking – future focus

• Lower endowment earnings & higher impairments will impact 2009

Delivering quality performance through the cyclewhile continuing to build our franchise

o e e do e t ea gs & g e pa e ts pact 009

earnings

• Managing risk in tough times while doing basics well

• Focus on client value to enhance returns & grow economic profit

• Visible leadership & continued development of people

• Emphasis on quality primary banker growth

5454

• Emphasis on quality primary banker growth

• Capitalising on decentralised business model based on accountability

… strategy “to be the leader in Business Banking for SA”

28

NEDBANK RETAILROB SHUTER

Nedbank Retail - financial summary

Year ended – Rm % change 2008 2007Headline earnings (46,6) 1 002 1 876Margin 4,93% 5,23%Efficiency ratio 61 1% 63 5%Efficiency ratio 61,1% 63,5%Credit loss ratio 2,47% 1,26%Average advances 17,6 143 334 121 851Average deposits 14,7 92 856 80 951Allocated economic capital 9,8 9 322 8 490RORAC 10,8% 22,1%

56

Assets Headlineearnings30%

17%

NedbankRetailRest of bank

29

Nedbank Retail – detailed income statement

Year ended - Rm % change 2008 2007

Net interest income 11,1 7 497 6 745

Impairments charge 130,9 (3 630) (1 572)

Income from lending activities (25,2) 3 867 5 173

Non-interest revenue 14,3 5 546 4 851

Total expenses 8,2 (7 973) (7 367)

Indirect taxation 28,1 (173) (135)

Associate income (20,7) 146 184

Headline profit before taxation (47 8) 1 413 2 706

5757

Headline profit before taxation (47,8) 1 413 2 706

Direct taxation (55,0) (357) (794)

Income attributable to minorities 50,0 (54) (36)

Headline earnings (46,6) 1 002 1 876

Nedbank Retail – segmental results

Headline Earnings (Rm)

RORAC(%)

Efficiency ratio (%)

Average Advances (Rb)

Credit loss ratio (%)

Division 2008 %ch 2008 2008 2008 %ch Dec 08 Jun 08

Bancassurance & Wealth 441 28,2 60,7 ▲ 61,0 ▼ 14,9 18,5 0,47 0,41

Small Business Services 389 17,9 47,9 ▼ 42,3 ▼ 10,0 38,2 3,29 1,96

Card 251 (10,4) 15,9 ▼ 59,4 ▼ 6,8 11,7 9,41 10,57

Personal Loans 245 1,2 18,8 ▲ 42,3 ▼ 5,9 9,1 10,32 9,06

Trans & Investment Products 100 42,9 10,4 ▲ 89,0 ▼ 1,1 (8,3) 12,86 16,64

Private Banking 88 7,3 24,1 ▲ 65,2 ▼ 10,6 9,4 0,63 0,50

Secured lending (617) (>100) (17,6) ▼ 56,1 ▲ 94,1 18,1 1,81 1,13

Vehicle & Asset Finance (175) (>100) (29,8) ▼ 72,3 ▼ 6,6 28,5 4,99 4,19

585858

( ) ( ) ( , ) , , , , ,

Home Loans (442) (>100) (15,1) ▼ 52,4 ▲ 87,5 17,3 1,56 0,90

Other 105 1,0

Total 1 002 (46,6) 10,8 ▼ 61,1 ▼ 143,3 17,6 2,47 2,00

30

Nedbank Retail – Bancassurance & Wealth


RORAC(%)





Bancassurance & Wealth 441 28,2 60,7 ▲ 61,0 ▼ 14,9 18,5 0,47 0,41

• Business performed well in turbulent markets• Strong growth in ST insurance business• Product expansion in 2009• Nedlife APE up 5%• AUM R84 bn, net inflows R6,5 bn

E ll t f d f

5959

• Excellent fund performance

Nedbank Retail – Small Business Services


RORAC(%)





Small Business Services 389 17,9 47,9 ▼ 42,3 ▼ 10,0 38,2 3,29 1,96

• Large industry economic profit pool• Growth platform laid over last few years• Investment in front line staff • Market share 14% (2007: 13%) • Increased signs of credit stress

F t i li t th

6060

• Focus on net primary client growth• Refocus on in-franchise lending

31

Nedbank Retail – Card


RORAC(%)





Card 251 (10,4) 15,9 ▼ 59,4 ▼ 6,8 11,7 9,41 10,57

• Credit metrics stable• Book shrinking – pressure on NII• Industry volumes slowing• Intense competition in acquiring• Amex strategy progressing well

Effi i & t ti k

6161

• Efficiency & revenue protection key

Nedbank Retail – Personal Loans


RORAC(%)





Personal Loans 245 1,2 18,8 ▲ 42,3 ▼ 5,9 9,1 10,32 9,06

• Book growth moderated in volatile markets • Stable credit / collections metrics• SMS campaigns discontinued• Risk area strengthened• Post NCA shift from margin to NIR

S l i f t t ti i d

6262

• Sales infrastructure optimised• Monitoring market conditions closely

32

Nedbank Retail – TIP


RORAC(%)





Trans & Investment Products 100 42,9 10,4 ▲ 89,0 ▼ 1,1 (8,3) 12,86 16,64

• 119k net new primary clients (2007: 90k)• Liability targets exceeded – Park-It • Strong funding franchise• Overdraft book growth under pressure• Progress in tackling operational losses

D li i i t t t ill i t i

6363

• Declining interest rates will impact margins• New product launches in 2009

Nedbank Retail – Private Banking


RORAC(%)





Private Banking 88 7,3 24,1 ▲ 65,2 ▼ 10,6 9,4 0,63 0,50

• Personal / Private Bank integration• Client service focus intensified• Growth in primary clients is key• Some stress in credit portfolios• Particular focus on professional & mass

ffl t t

6464

affluent segments

33

Nedbank Retail – Vehicle & Asset Finance


RORAC(%)





Vehicle & Asset Finance (175) (>100) (29,8) ▼ 72,3 ▼ 6,6 28,5 4,99 4,19

• Very difficult year • Credit metrics & defaults high but stabilizing • Dealer and client re-pricing initiatives• Operational challenges in processing area• Dealer channel profitability challenges

6565

Nedbank Retail – Home Loans


RORAC(%)





Home Loans (442) (>100) (15,1) ▼ 52,4 ▲ 87,5 17,3 1,56 0,90

• Very disappointing year• Defaults intensified in H2• Pricing, risk & LTV adjusted• LGD deterioration provision now R280m• Increased fraud

O i i t k t i t t f fl

6666

• Originator market in state of flux• Lower interest rates will benefit over time• Book profile under pressure into 2010

34

0.7%

0.8%

0.9%

1.0%at

es

Nedbank Retail – default trends in 2008

Change in default rates across asset classesSBS

HomeLoans

0 1%

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

Mon

thly

Cha

nge

in D

efau

lt R

a

Private Bank

Card

Personal

VAF

67

Jan-

08

Feb-

08

Mar

-08

Apr

-08

May

-08

Jun-

08

Jul-0

8

Aug

-08

Sep-

08

Oct

-08

Nov

-08

Dec

-08

-0.3%

-0.2%

-0.1%

67

Loans

Current Accounts

… continued pressure in Home Loans & SBS

Nedbank Retail – home loans credit review

Current Arrear Defaulted

2007 93,3% 2,9% 3,8%

2008 86 2% 5 8% 8 0%

Book distribution BTV dis tributionDecember 200828%

2008 86,2% 5,8% 8,0%


2007 0,04% 4,2% 16,9%

2008 0,05% 4,4% 15,1%

Balance sheet provisioning

22%

20%

17%

20%

22%

19%

10%

20%

22%

6868

Coverage Credit loss

2007 0,93% 0,24%

2008 1,64% 1,38%

Ratios

<= 60 61 to 80 81 to 95 96 to 100 > 100

Original Value C urrent Value

35

Nedbank Retail – Banking Services

2008 Distribution• R1bn plan delivered successfully

• 75 new outlets (branches & retailer)

2008 Service• Launched phase II of explicit service

promise - Ask Once™

• CMAT t l b l t• 1 621 merchants enabled for cash advance

• 278 ATM’s

• 10 mobile sales teams

• 3 Private Banking suites

• Go Banking / OMB integration

• CMAT assessment - global top quartile

• Top bank - Ask Afrika Orange Index two years in a row

• Significantly widened service scores gap between competitors & ourselves

6969

Nedbank Retail – 2009 focus & outlook

• Conservative credit policy & focus on collections & impairments

• Execution of ‘manage for value’ strategies

• Invest in our high economic profit businesses

• Stringent expense control

• Build on bancassurance momentum

• Ongoing strategies to grow net primary clients

• Entrenching our service proposition

• 2009 earnings lower due to endowment pressure & high impairments

7070

… very difficult 2009 anticipated

36

PROSPECTS

TOM BOARDMAN

We continue to look at the bank holistically

• To understand our clients needs in difficult times

– Step change in client service

– Flexible collections arrangementsFlexible collections arrangements

– Continued focus on affordable banking

• To maintain strength of SA banking industry

– Conservative management of the bank

• To continue to focus on our people

Manage headcount through the cycle

72

– Manage headcount through the cycle

– Building our unique culture & value set

– Ensure we transform further

• To maintain our leadership position in sustainability

37

2009 key objectives

• Remain strongly profitable, but at marginally

lower levels than 2008

f &• Focus on economic profit & remain alert to opportunities

• Continue to strengthen capital adequacy

• Manage risk as an enabler

• Maintain focus on efficiency

• Continue to increase net asset value

73

• Continue to increase net asset value

… at the same time we will continue to build for the future

THANK YOU

38

BOOKLET SLIDES

15.0%

20.0%

25.0%

Nedbank Retail – book distribution & provisionsHome Loans Vehicle Asset Finance

ibut

ion

15.0%

20.0%

25.0%

0.0%

5.0%

10.0%

2007 94.2% 2.6% 3.2%

2008 88.5% 5.1% 6.4%

Current Arrear DefaultedBoo

k di

stri

s (B

S) /

book

go

ries)

20 0%

40.0%

60.0%

80.0%

100.0%

0.0%

5.0%

10.0%

2007 93.3% 2.9% 3.8%

2008 86.2% 5.8% 8.0%


20 00%

40.00%

60.00%

80.00%

100.00%

7676 Note: total Retail excluding Bancassurance & Wealth & PiP’s

Coverage Credit loss ratio2007 0.93% 0.24%2008 1.64% 1.38%

Coverage Credit loss ratio 2007 2.89% 1.58%2008 5.89% 4.53%

Prov

isio

ns(c

ate

0.0%

20.0%

2007 0.2% 21.0% 65.5%

2008 0.7% 21.5% 64.8%

Current Arrear Defaulted0.00%

20.00%

2007 0.04% 4.2% 16.9%

2008 0.05% 4.4% 15.1%


39

Nedbank Retail – book distribution & provisionsPersonal Loans Card

ibut

ion

15.0%

20.0%

25.0%

15.0%

20.0%

25.0%

Boo

k di

stri

s (B

S) /

book

go

ries)

0.0%

5.0%

10.0%

2007 73.9% 10.3% 15.8%

2008 77.0% 8.4% 14.7%


20 0%

40.0%

60.0%

80.0%

100.0%

0.0%

5.0%

10.0%

2007 89.2% 5.1% 5.6%

2008 87.1% 4.9% 8.0%


20 0%

40.0%

60.0%

80.0%

100.0%


Prov

isio

ns(c

ate


0.0%

20.0%

2007 0.5% 23.6% 56.9%

2008 0.3% 27.3% 55.9%



0.0%

20.0%

2007 0.6% 11.3% 89.7%

2008 0.5% 13.0% 94.1%


Nedbank Retail – book distribution & provisionsTrans & Inv products Total

ibut

ion

15.0%

20.0%

25.0%

15.0%

20.0%

25.0%

20 0%

40.0%

60.0%

80.0%

100.0%

Boo

k di

stri

s (B

S) /

book

go

ries)

20 0%

40.0%

60.0%

80.0%

100.0%

0.0%

5.0%

10.0%

2007 73.2% 9.0% 17.7%

2008 70.2% 8.9% 20.8%

Current Arrear Defaulted0.0%

5.0%

10.0%

2007 91.7% 3.5% 4.8%

2008 85.6% 5.9% 8.5%


78

0.0%

20.0%

2007 0.1% 9.2% 35.6%

2008 0.1% 7.8% 28.4%



Prov

isio

ns(c

ate

Coverage Credit loss ratio2007 20.10% 7.28%2008 21.73% 10.93%

Coverage C/L ratio 2007 2.36% 1.26%2008 3.18% 2.47%

0.0%

20.0%

2007 0.5% 12.8% 75.6%

2008 0.5% 13.4% 81.4%


40

Nedbank Retail – Home Loans: age distribution & BTV

Age Distribution

42%Jun-08 Dec-08

33% 34% 33%

28%31%

42%

7979

0-12 mths 13-24 mths > 24 mths

Disclaimer

Nedbank Group has acted in good faith & has made every reasonable effort to ensure the accuracy & completeness of the information contained in this document, including all information that may be defined as 'forward-looking statements' within the meaning of United States securities legislation.Forward-looking statements may be identified by words such as 'believe', 'anticipate', 'expect' 'plan' 'estimate' 'intend' 'project' 'target' 'predict' & 'hope''expect', 'plan', 'estimate', 'intend', 'project', 'target', 'predict' & 'hope'.Forward-looking statements are not statements of fact, but statements by the management of Nedbank Group based on its current estimates, projections, expectations, beliefs & assumptions regarding the group's future performance. No assurance can be given that forward-looking statements will prove to be correct & undue reliance should not be placed on such statements.The risks & uncertainties inherent in the forward-looking statements contained in this document include, but are not limited to: changes to IFRS & the interpretations, applications & practices subject thereto as they apply to past, present & future periods; domestic & international business and market conditions such as exchange rate and interest rate

80

movements; changes in the domestic & international regulatory & legislative environments; changes to domestic & international operational, social, economic & political risks; & the effects of both current & future litigation.Nedbank Group does not undertake to update any forward-looking statements contained in this document & does not assume responsibility for any loss or damage whatsoever & howsoever arising as a result of the reliance by any party thereon, including, but not limited to, loss of earnings, profits, or consequential loss or damage.

Documents

Nedbank Group 2008 annual results presentation - v9 3.ppt · • Capital adequacy increased significantly – Core tier 1 7,2% to 8,2% – Tier 1 8,2% to 9,6% – Total 11,4% to 12,4%