Nedbank Business Banking
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To be the leader in Business Banking for SA:

  • Attracting and retaining talented people.
  • Understanding needs of clients and delivering through the decentralised accountable business sample model.
  • Upper quartile returns and increasing primary-banked clients.

The primary strategic thrust for Nedbank Business Banking is to continue its journey of business transformation to be the leader in business banking for SA as measured across the key dimensions of employees, clients (including primary-banked market share) and financial performance. Emphasis is on the word 'for' SA, in recognition of the importance of Nedbank Business Banking's contribution towards enterprise development, job creation and community upliftment in the broader context of sustainable development. 

Over the seven years to 2012 Nedbank Business Banking has delivered consistently high returns to shareholders (21% in tough times and over 30% at the peak of the interest rate cycle) and cumulative economic profit (EP) of R3,4bn, while at the same time investing in the business in line with its strategic intent and guided by the ASCENT1 strategy roadmap. This has been achieved through consistent investment in people leadership and diversity, compelling, holistic client offerings with distinctive differentiators, organisational design aligned with strategic intent, disciplined risk management capabilities, pricing tools, tailored solutions for selected industries and overall market positioning.

1A: Accelerate quality client gains, cross-sell, retention and migration
S: Sustainably grow in each area with excellent risk management
C: Collaborate and innovate for growth
E: Easy to do business
N: New growth horizons
T: Team effectiveness harnessing diverse transformed people

REVIEW OF THE YEAR

The business continued on its ASCENT strategic journey to being the leader in business banking for SA and, thanks to the concerted efforts of our 2 200 staffmembers over many years, continues to perform well across all key metrics, including risk, clients and staff. The strong momentum has, however, been somewhat masked by the protracted economic difficulties being experienced by the entire SME sector.

Nedbank Business Banking is delivering an enhanced client experience as reflected in client satisfaction metrics reaching long-term highs. This is reinforced by our being awarded the second highest score ever out of 900 globally assessed companies for our customer management capabilities as measured in the 2012 Customer Management Assessment Tool (CMATTM) assessment. Proactive client calls and increased sales effectiveness, coupled with product, process and channel enhancements in line with Business Banking's Easy to do Business philosophy, increased the rate of gross new-client acquisition by approximately 60%. On the more stringent net client acquisition measure, based on transactional revenues, 775 net new primary-banked clients were acquired in 2012 (2011: 748). 

Specific emphasis was placed on growing the small-business segment as a driver of future growth, not only for Nedbank Group, but also for the country as a whole. In this context Business Banking and RRB jointly launched the Small Business Friday™ campaign, inspired by our partner American Express' successful initiative in the US, to raise awareness and rally support for small business. 

Business Banking also enhanced its overall offering to small businesses, ensuring the right mix of frontline skills, an appropriate risk appetite and greater speed of service enabled through preapproved facilities and simplified processes. A holistic approach was also taken to providing a seamless banking experience for business owners and their households, businesses and employees. Further innovative solutions, tailored to the needs of small businesses, are scheduled for release in 2013. This follows the successful recent launch of the mobile card point-of-sale device, PocketPOSTM, as an alternative mobile payment channel, as well as enhanced self-service capabilities in addition to clients' dedicated relationship bankers. A strong focus on enterprise development has benefited over
4 000 emerging entrepreneurs since 2009, including those in the agriculture sector. Nedbank Business Banking maintained its high-performance culture, as measured by the Barrett and Nedbank Staff Satisfaction Surveys, in a highly pressured environment through driving continuous change for greater effectiveness and an enhanced client experience. This resilience of our people is a result of continuous investments in skills development and visible leadership at all levels, with clear strategic direction complemented by ongoing, transparent communication.

FINANCIAL REVIEW

Year ended % change 2012 2011
Headline earnings (Rm) 9,0 944 866
Efficiency ratio (%)   65,3 63,0
Credit loss ratio – banking advances (%)   0,34 0,53
Average advances (Rm) (1,0) 58 958 59 563
Average deposits (Rm) 5,5 86 941 82 446
Allocated economic capital (Rm) 8,2 4 401 4 066
Return on equity (%)   21,5 21,3


Nedbank Business Banking grew its headline earnings by 9,0% to R944m (2011: R866m) and generated EP of R368m (2011: R338m) with a return on equity (ROE) of 21,5%.

Key drivers of the 2012 financial performance included:

  • An 18% increase in new loan disbursements to R19,1bn, muted by proactive risk management of concerning advances and clients deleveraging, deferring expansion plans and transacting less, resulting in net overall average advances being 1,0% lower year-on-year.
  • Effective containing of impairments to R206m on a R60,4bn average advances portfolio (gross of impairments). This resulted in a credit loss ratio (CLR) of 34 basis points (bps) (2011: 53bps), which is once again better than the through-the-cycle target range. The defaulted portfolio at 4,2% of actual advances improved from 5,1% in 2011. This was achieved by ensuring high-quality lending linked to primary-banked clients and proactive risk management through decentralised risk teams that acted vigorously on early warning signals. It is estimated that additional impairments of more than R200m were avoided through these early actions.
  • Good liability growth of 9,7% (excluding intercluster client moves) leveraging the market-leading products on offer and closer linkages between owners and their businesses. Business Banking continues to be a very strong generator of funding, placing net surplus funds of R33,6bn with the group. The 9bps narrowing in the overall margin to 3,20% is reflective of the higher quantum of surplus funding placed inter group in the mix of interest-earning assets, weighting the margin lower.
  • Achieving non-interest revenue (NIR) growth of 6,2% was achieved on the back of new-client acquisition and fee generation, muted by slower economic growth impacting client transaction volumes. Core fees and commissions increased by 8,2%.
  • Containing overall expense growth at 7,9% through increased high performance and operational effectiveness, which has resulted in a decrease in headcount of 94 permanent staff since January 2011. The reduction in the NIR-to-expenses ratio to 53,7% and the efficiency ratio to 65,3% reflects the timing challenge of investing for the future in and environment of a low growth an low interest rates.

LOOKING FORWARD

Although short-term earnings growth continues to be challenging in a low-growth economy, Nedbank Business Banking remains committed to the principles that have enabled consistently high returns on equity and an excellent CLR experience.  

The excellent collaboration with Nedbank Retail in focusing on the small-business sector, expanding in key growth nodes, and optimising costs and footprint through the integrated-channel strategy is proving very valuable in enhancing the client experience and unlocking growth opportunities. 

Emphasis is also on removing variability in the delivery of distinctive client-centred offerings and lowering cost to serve while remaining committed to the decentralised, accountable business service model and 'influencer' strategy to unlock the virtuous circle of the business owners, their business and employees, which are recognised by our clients as compelling differentiators. 

With our highly committed, values-driven team of people, Nedbank Business Banking remains outwardly focused to partner with its clients for growth for a greater SA.

   
   
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Nedbank Group Limited Reg No 1966/010630/06, 135 Rivonia Road, Sandown, Sandton, 2196, South Africa