CHIEF OPERATING OFFICER'S
REPORT

NEDBANK GROUP IS GROWING ITS FRANCHISE OFF THE STRONG OPERATING PLATFORM THAT HAS BEEN BUILT OVER THE PAST FEW YEARS. SIGNIFICANT DEVELOPMENT OF NEW SYSTEMS WITH AN EMPHASIS ON ENHANCING THE CLIENT EXPERIENCE THROUGH GREATER FUNCTIONALITY AND EASE OF USE HAS POSITIONED THE GROUP WELL TO GROW ITS SHARE OF PRIMARY-BANKED CLIENTS IN ALL MARKET SEGMENTS.

The central specialist functions in the Chief Operating Officer portfolio play a critical role in enabling the frontline clusters to execute their strategies and deliver client-centred services and solutions in a coordinated way, thereby competing strongly in the various segments and markets in which they operate. A number of key projects have been established to drive cross-cluster initiatives to optimise the group’s systems, services and people practices: LEADERSHIP DEVELOPMENT During the past few years Nedbank Group invested a great deal of time and resources in unleashing the natural potential of its leadership across the group. This has been achieved by developing a deep appreciation of what it takes to be effective leaders and through participation in multiday development programmes that focus on personal insights and team effectiveness, as well as building a ‘vision-led, values-driven culture’ through the Leading for Deep Green Programme.

These programmes have reached over 2 000 senior executives in the organisation and the benefits can be seen in the strong corporate culture and staff survey scores, higher staff morale, lower attrition rates and overall team effectiveness. The next phase of the Leading for Deep Green Programme is to cascade this, over three years, to the 6 800 employees in middle management positions. This is an ambitious target, but will have a profound impact on the leadership capability and effectiveness of the organisation as it continues to build a strong values-based leadership culture.

IT SYSTEMS RATIONALISATION AND REPLACEMENT

In 2010 Nedbank undertook a groupwide initiative to rationalise and simplify a large portion of its core information technology (IT) systems (from 220 to 60) over the medium term. The objective is to streamline the landing of new products, reduce costs and ensure greater ease of use. Underpinning this initiative is a service-oriented architecture, which enables a gradual approach to systems replacement and the reuse of processes where possible. The IT roadmap has been developed in collaboration with the frontline clusters and based on their strategic priorities. This approach will lead to significant cost benefits over the longer term and will enable greater investment in client systems, thereby enhancing the client experience.

NON-INTEREST REVENUE UPLIFT THROUGH PRIMARY-CLIENT GROWTH AND COLLABORATION BETWEEN CLUSTERS

The cross-cluster non-interest revenue (NIR) project initiated in 2010 was primarily established to seek additional sources of primary clients and fee-generating services through better collaboration between business clusters and the enabling of cross-sell. Cross-business opportunities have been identified and built into the group’s forward projections and there is a rigorous process of tracking progress to deliver over R750 million in NIR in the medium term, thereby supporting the group’s achievement of its medium term NIR/expense ratio target of 85%.

OPTIMISE-TO-INVEST INITIATIVE

Towards the end of 2010 the Group Executive Committee agreed to launch a new project to identify cross-cluster overlaps in services and cost duplication in order to optimise the group’s cost base and simplify its operations. The ultimate objectives of this project are to improve the client experience, reduce costs, and reinvest the majority of the savings into the group’s IT systems rationalisation and replacement initiative.

NEDBANK BRAND AND MARKETING REPOSITIONING

A significant brand revitalisation project was initiated and completed in 2010. Key outputs of the project included a sharpened, more focused and distinctive Nedbank brand position, and a framework and improved processes for building the Nedbank brand on an integrated, aligned basis across the group’s diverse target markets. The ultimate outcome of the brand-strengthening exercise has been the embedding of the brand promise around ‘Making things happen … because things don’t just happen on their own’. In future greater focus will be placed on building on the tangible banking benefits and value-add for clients.

OPTIMISE ECONOMIC PROFIT THROUGH PORTFOLIO TILT

In the light of changing banking regulations and pressure on banking returns on equity, capital and liquidity have become increasingly scarce commodities. Through the combined effort of the Balance Sheet Management, Group Strategy and Group Finance functions, together with the frontline business clusters, the group introduced the concept of portfolio tilt in 2010. In essence, this involves the allocation of scare resources to areas of strategic focus and/or higher economic profit returns on a sustainable basis. The group has identified businesses, products and geographies in which it would like to grow faster, others that should maintain their positioning and growth plans, and a few where the group should address the economic returns of the business. This portfolio tilt approach is incorporated into the strategic planning process to review the performance of businesses and actively redirect resources to optimise economic profits.

MANAGE THE ECOBANK NEDBANK ALLIANCE

The strategic business alliance between Nedbank and Ecobank is of fundamental importance in terms of affording clients of both institutions access to a banking network across 35 countries in Africa. The group continued to build on the initial foundations of the Ecobank Nedbank Alliance with a number of major achievements during 2010. The alliance won the award for the ‘most innovative bank’ at the African Banker Awards in Washington during the 2010 International Monetary Fund and World Bank meetings. During the year various banking initiatives were implemented that align with the vision of providing clients with a one-bank experience across the African continent. This included the enabling of Ecobank regional cards on Nedbank ATMs in South Africa. Nedbank Group will continue to build this partnership and assist clients who are pursuing strategies into Africa, while continuing to consider joint strategic investments into countries around the continent.



Graham Dempster
Chief Operating Officer