SEGMENTAL REPORTING

FOR THE YEAR ENDED 31 DECEMBER

The group’s identification of its segments and the measurement of segment results are based on the group’s internal management reporting as used for day-to-day decision making and as reviewed by the chief operating decision maker, which in Nedbank Group Limited’s case is the Group Executive Committee. The segments have been identified according to the nature of their respective products and services and their related target markets.

NEDBANK CAPITAL

Nedbank Capital comprises the group’s investment banking businesses that together manage the structuring, lending, underwriting and trading businesses. Nedbank Capital seeks to provide seamless specialist advice, debt and equity raising and execution and trading capabilities in all the major SA business sectors.

NEDBANK CORPORATE

Nedbank Corporate comprises the client-focused businesses of Corporate Banking, Property Finance, Nedbank Africa and the specialist businesses of Transactional Banking and Shared Services. These businesses focus mainly on providing lending, deposit-taking and transactional banking solutions and execution services to the wholesale banking client base of Nedbank. Corporate Banking services companies with an annual turnover in excess of R400 million as well as black economic empowerment (BEE) and public sector clients. Property Finance specialises in commercial and industrial property finance in the middle to large corporate market and also invests in property equities and in large property developments in partnership with selected clients. Nedbank Africa has banking operations in Lesotho, Malawi, Namibia, Swaziland and Zimbabwe. Nedbank Africa operates in the retail and wholesale banking segments in each country.

NEDBANK RETAIL

Nedbank Retail serves the financial needs of all individuals (excluding high-net-worth individuals) and small businesses with a turnover of up to R7,5 million to whom it offers a full spectrum of banking and assurance products and services. The Nedbank Retail product portfolio includes transactional accounts, home loans, vehicle and asset finance [including Motor Finance Corporation (MFC)], card (both card-issuing and merchant-acquiring services), personal loans and investments.

NEDBANK BUSINESS BANKING

Nedbank Business Banking offers the full spectrum of commercial banking products and related services to companies with an annual turnover of up to R400 million.

NEDBANK WEALTH

Nedbank Wealth provides services across retail banking, business and corporate banking as well as the high-net-worth segment and independent financial adviser market. The businesses within Nedbank Wealth encompass life assurance, short-term insurance, financial planning, stockbroking, insurance brokerage, private banking, fiduciary services and asset management.

SHARED SERVICES

Shared Services is an aggregation of business operations that provide various support services to Nedbank Group , which includes the following clusters: Group Technology, Group Strategy and Corporate Affairs, Human Resources, Enterprise Governance and Compliance, Group Risk and Group Finance – Shared Services.

CENTRAL MANAGEMENT

Includes group capital instruments together with certain group overheads not recoverable from business segments, mainly within the Balance Sheet Management Division.

	Nedbank Group		Nedbank Capital
	2010	2009	2010	2009
STATEMENT OF FINANCIAL POSITION (Rm)
Cash and cash equivalents	19 745	18 375	2 732	2 875
Other short-term securities	27 044	18 550	20 792	12 233
Derivative financial instruments	13 882	12 710	13 790	12 471
Government and other securities	31 824	35 983	12 083	12 519
Loans and advances	475 273	450 301	62 328	55 315
Other assets	40 950	34 784	7 578	3 393
Intergroup assets	–	–	95 886	99 454
Total assets	608 718	570 703	215 189	198 260
Equity and liabilities
Allocated capital	47 814	44 984	5 116	4 678
Derivative financial instruments	12 052	11 551	12 006	11 404
Amounts owed to depositors	490 440	469 355	184 201	175 041
Other liabilities	32 308	24 729	13 200	6 398
Long-term debt instruments	26 104	20 084	666	739
Intergroup liabilities	–	–
Total equity and liabilities	608 718	570 703	215 189	198 260
STATEMENT OF COMPREHENSIVE INCOME (Rm)
Net interest income	16 608	16 306	1 201	1 260
Impairments charge on loans and advances	6 188	6 634	535	141
Income from lending activities	10 420	9 672	666	1 119
Non-interest revenue	13 215	11 906	2 264	2 236
Operating income	23 635	21 578	2 930	3 355
Total operating expenses	16 598	15 100	1 561	1 606
Operating expenses	16 450	14 974	1 506	1 571
BEE transaction expenses	148	126	55	35
Indirect taxation	447	438	23	23
Profit/(Loss) from operations	6 590	6 040	1 346	1 726
Share of profits of associates and joint ventures	1	55
Profit/(Loss) before direct taxation	6 591	6 095	1 346	1 726
Direct taxation	1 366	1 232	139	277
Profit/(Loss) after direct taxation	5 225	4 863	1 207	1 449
Profit attributable to non-controlling interest:
– ordinary shareholders	59	242	5	(3)
– preference shareholders	266	344
Headline earnings	4 900	4 277	1 202	1 452
SELECTED RATIOS*
Average interest-earning banking assets (Rm)	495 930	481 378	156 864	140 788
Return on assets(%)**	0,8	0,8	0,6	0,8
Return on equity (%)**	11,8	11,8	23,5	31,0
Net interest income to average interest-earning banking assets (%)	3,35	3,39	0,77	0,89
Non-interest revenue to total income (%)	44,3	42,2	65,3	64,0
Non-interest revenue to total operating expenses (%)	79,6	78,9	145,0	139,2
Credit loss ratio – banking advances (%)**	1,36	1,52	1,27	0,36
Efficiency ratio (%)	55,7	53,5	45,1	45,9
Efficiency ratio (excluding BEE transaction expense) (%)	55,2	53,2	43,5	44,9
Effective taxation rate (%)	20,7	20,2	10,4	16,0
Contribution to group economic profit	(289)	57	477	832
Number of employees	27 525	27 037	699	695

*

These ratios (unless otherwise stated) were calculated using amounts to Rm.

**

Certain of the group’s reporting ratio calculations have been adjusted. The ratios for return on risk- adjusted capital and return on assets 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 ratios has been changed from simple-average advances to daily-average banking advances (thereby excluding trading advances from the calculation). Comparatives have been restated accordingly.

The 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 Limited Bank businesses have been combined with the following segments: MFC, Supplier Asset Finance with Nedbank Retail and Property Finance with Nedbank Corporate. The restatement has no effect on the group results and ratios, and only changes segment results and ratios.

Depreciation costs of R583 million (2009: R632 million) and amortisation costs of R560 million (2009: R497 million) for property, equipment, computer software, capitalised development and other intangible assets are charged on an activity-justified transfer pricing methodology by the segment owning the assets to the segment utilising the benefits thereof.

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