OPERATIONAL OVERVIEW
NEDBANK CORPORATE

  NEDBANK CORPORATE PROVIDES LENDING, DEPOSIT-TAKING AND TRANSACTIONAL SERVICES TO NEDBANK GROUP'S WHOLESALE BANKING CLIENTS. IT DOES THIS THROUGH THREE CLIENT-FACING BUSINESS UNITS AND TWO SUPPORT AREAS.
 
  Corporate Banking is a relationship-driven business that focuses on the wholesale corporate market in southern Africa, with teams based in Johannesburg, Durban, Cape Town and London. Corporate Banking engages with clients who have turnovers exceeding R400 million per annum and lending requirements in excess of R50 million. It extends a full-service wholesale banking offering from lending to transactional banking through dedicated teams of corporate bankers, credit and transactional experts, as well as a specialised structured-debt team.

Property Finance specialises in providing tailormade financial property finance solutions to:

•commercial, industrial, retail and residential property developers, investors and owner occupiers;
•listed property funds; and
•partnerships – either through joint ventures or minority equity investments.

Nedbank Africa provides holistic banking in five southern African countries, and offers retail banking products, wholesale lending and deposit-taking. The focus is on economically profitable market segments and sectors where Nedbank Africa has a competitive advantage. The business leverages the Ecobank Nedbank Alliance footprint in providing a one-bank experience and accessibility to its clients.

Transactional Banking supports Nedbank Corporate, Nedbank Business Banking and Nedbank Retail through innovative transactional product development. It offers services across South Africa, in five African countries, and in regions serviced by the Ecobank Nedbank Alliance. Transactional Banking also manages Nedbank Corporate’s international financial relationships with its global banking partners.

Corporate Shared Services is the delivery and service centre for transactional processing and is primarily responsible for the processing and servicing of wholesale products in support of Nedbank Corporate and Business Banking clients. It also provides transactional processing and servicing for a large portion of Nedbank Retail clients.

THE YEAR UNDER REVIEW

Despite continued weak credit demand and contracted margins, 2010 was characterised by gains in primary-banked clients and a strong core banking performance by Nedbank Corporate.

Asset margins widened in key categories, but this was discounted by margin compression in the lower-rate environment, higher funding costs and the effect of liabilities.

The risk environment remained challenging, but Nedbank Corporate had another solid year in terms of containing impairments, reinforcing the value of the robust risk management disciplines that have been embedded in the business over the years.

The business performed well in a survey on the attributes most valued by clients, and there was a strong showing in the annual survey of staff on the organisational culture, underscoring the investment in people and the fact that the leadership team is well established.

Key to the performance of Nedbank Corporate is the focus on cultural sustainability with regard to the management of our human capital. The business continued to perform particularly well as evidenced by the decrease in the Barrett Survey entropy score to 9%, with seven value matches, as well as Nedbank Corporate achieving a positive overall Nedbank Staff Survey score of 78,9% and including Nedbank Africa 72,2%. These scores are reflective of a healthy functioning business.

During 2010 priority was given to:

LEADERSHIP EFFECTIVENESS

• Embedding a high-performance culture to address performance (productivity) barriers.
•Enhancing emotional intelligence (personal mastery and interpersonal effectiveness).
•Building further executive and staff coaching capabilities.

TRANSFORMATION
•Ongoing rollout and customisation of the Botho Pele diversity workshops.
•Continued focus on addressing the employment equity barrier.



The Nedbank Property Finance Academy amply demonstrated Nedbank Corporate’s commitment to providing employees with opportunities for growth and development, while equipping them with a clear understanding of the industry and the tools and knowledge they require to perform and contribute to the overall performance of the business. The academy is accredited through the University of the Witwatersrand and delegates receive a Certificate in Property Finance Practice from the university on completion of their studies. A total of 166 Nedbank staff members have graduated from the programme. The academy has been recognised as an industry leader, and was voted the winner of the Finance Sector award at the inaugural Skills Summit Achiever Awards early in 2010. It has also been widely acknowledged for displaying exceptional creativity and innovation, and for bringing about positive change in the property finance industry.

TALENT MANAGEMENT AND SKILLS DEVELOPMENT
• Ensuring the availability of succession plans across divisions.
• Integrating the recognition and reward processes with overall talent management in order to retain key people.
•Continuing investment into business and executive education to ensure succession management and to develop and mobilise talent.
•Managing the supply of scarce and key skills through continued investment in academies, bursaries, graduates and learnerships.
•Building and developing the management leadership pipeline through, among others, job rotation and coaching.

The highlight of Nedbank Corporate’s staff recognition process was the 2010 awards dinner held at Sun City. In keeping with the group’s green positioning the event was held by candlelight to observe Earth Hour. The dinner coincided perfectly with the timing of this global initiative and attendees were asked to light special candles as a symbolic gesture to mark the occasion and show their support.

FINANCIAL REVIEW


Year ended   % change 2010 2009
Headline earnings (Rm) (13,1) 1 496 1 722*
Efficiency ratio (%)   51,2 44,0
Credit loss ratio (%)   0,20 0,25*
Average advances (Rm) 5,1 151 433 144 055
Average deposits (Rm) (6,0) 124 077 131 945
Allocated economic capital (Rm) 4,4 7 603 7 280*
Return on equity (ROE) (%)   19,7 23,7*
 * Restated        

Nedbank Corporate recorded headline earnings of R1 496 million for the 2010 financial year and an ROE of 19,7%. The negative impact of endowment contributed to the 13,1% decrease in headline earnings (5,7% excluding the Imperial Bank property book).

Core non-interest revenue (NIR) (excluding Imperial Bank Limited) grew strongly by 11,9% in line with the cluster’s strategy of focusing on increasing primary-banker market share, deepening transactional banking offerings, and embarking on a cross-sell value proposition. This was further boosted by 20 new transactional banking clients acquired during the year and a strong increase in electronic banking revenues. Expenses grew 17,0%, partly as a result of investment spend on innovation to support NIR growth. This resulted in the NIR-to-expenses ratio declining to 62,8%.

High-quality credit portfolios, coupled with the strategy of early identification and proactive client engagement, led to a credit loss ratio of 0,09% (0,20% including the Imperial Bank property book), a continued improvement on the 0,25% recorded in 2009 and well within the cluster’s through-the-cycle target range of 0,20% to 0,35%. The credit loss ratio improved in all three operating businesses, with Corporate Banking’s credit loss ratio declining to a negative ratio of 0,17% to reflect net recoveries and a release from specific provisions, Nedbank Africa improving from 0,51% to 0,42%, and Property Finance standing at 0,34% (0,53% including the Imperial Bank property book).

Average advances for the period under review grew by 5,1% to R151,4 billion, while average deposits declined by 6,0% to R124,1 billion as a result of corporate clients switching from term deposits to higher-yielding negotiable certificates of deposit during the year, prompted by the environment of lower interest rates.

new nedbank building icon

 

The new Nedbank Phase 2 building in Sandton; the first building in South Africa to be awarded a 4-Star Green Star rating.


 

The new Nedbank Phase 2 building in Sandton represents an advance in the group’s sustainability journey. The first building in South Africa to be awarded a 4-Star Green Star rating, the new offices embody Nedbank’s commitment to minimising its impact on the environment, and Nedbank Corporate was intricately involved in making this happen for the group. From environmentally friendly construction materials and methods to interior design and the overall operation of the building, everything about Nedbank Phase II is green.

•Material usage – the building is predominantly framed in reinforced concrete, with 95% of the reinforcing steel from recycled resources.

•Fresh air – a full-economy-cycle air-conditioning system flushes fresh air through the building when conditions are favourable, while carbon dioxide sensors on each floor monitor levels and adjust the flow of fresh air.

•Air-conditioning – high-efficiency, water-cooled centrifugal chillers were combined with an ingenious heat recovery system to minimise the cost of heating and cooling the building. Zero-ozone-depleting refrigerants make it an even more environmentally friendly system.

•Water recycling – an innovative black-water treatment system sees water used in the building partially recycled and reused for all non-potable water requirements such as for toilets and the irrigation of indigenous gardens.

•Lighting – energy-efficient lighting is used throughout the building and an intelligent lighting system monitors, dims and switches off lights in all unoccupied office sectors. Some 60% of offices have a direct line of sight to the outdoors or to a natural-light atrium.

•Waste management – a dedicated system provides for the collection and separation of paper, glass, plastics, metals and organic materials.

The weaker economic environment resulted in limited average advances growth in Corporate Banking of 0,3%. Despite this, the business generated headline earnings of R826 million and an ROE of 27,6%.

Property Finance achieved 7,9% growth in average advances, headline earnings of R550 million and an ROE of 18,3%.

Nedbank Africa performed well, with average advances up 20,2%. Headline earnings increased by 4,5% to R139 million at an ROE or 14,6%, greater than the cost of capital.

Transactional Banking continued to drive innovation within the cluster with the successful implementation of cash solutions such as eMall and Currency Converter, the delivery of the enhanced electronic banking system, and the reengineering of deposit-taking, while the introduction of eStatements is an initiative towards increased efficiency and supports Nedbank Group’s green positioning.

Shared Services enjoyed another good year with operational losses well below threshold levels and once again gained accolades as a leading custodial services business.

STRATEGY

Nedbank Corporate’s core strength is in providing personalised relationship-based banking services and solutions to the wholesale market. This is achieved by ensuring a thorough understanding of the banking needs of clients and the markets in which they operate, and delivering appropriate banking solutions.

Key strategic focus areas include:
• Growing sustainable economic profit through value-driven strategies.
• Increasing client acquisition and share of wallet through intragroup cross-selling.
•Selective asset and liability growth.
•Continuing to contribute to business sustainability and transformation through the funding of black economic empowerment and green initiatives.
• Achieving a step change in NIR by aligning the cluster’s sales force and profitable products to the appropriate clients and business sectors.
•Embedding risk and capital management imperatives in planning, performance management and pricing.
•Continuing to focus on driving efficiencies while maintaining investment for future business growth.
•Developing leaders and managing talent.





Underpinning this strategic focus is a continued commitment to cultural sustainability, with a particular focus on transforming Nedbank Corporate’s workforce profile and creating an appropriate pool of skills required for growth and diversity. Through appropriate remuneration and reward structures the cluster will also continue to attract and retain the talent it requires to secure future business growth. Nedbank Corporate remains committed to helping develop South Africa’s talent pools, particularly in areas of skills shortages.

LOOKING FORWARD

The business environment and economic prospects are expected to improve slightly in 2011, based on momentum gained in the last quarter of 2010. Credit extension is likely to improve with good funding opportunities in the value chains of growing sectors of the economy as well as the public sector infrastructure programme.

Nedbank Corporate will continue to focus on sustained economic profit growth while applying rigorous risk management disciplines. The business will seek to increase the number of primary-banked clients and improve the NIR-to-expenses ratio.

Continued client service improvement and the ongoing rollout of innovative electronic banking products and solutions will remain key focus areas for Transactional Banking.

All the businesses comprising Nedbank Corporate will continue to align closely with the image and strong positioning of the Nedbank brand and strive to contribute to the strengthening of its corporate and commercial equity through closely aligned media campaigns and consistent financial performance.

Nedbank Africa is on a solid growth trajectory and will pursue opportunities for expansion in line with the group’s vision of being Africa’s most admired bank.

Nedbank Corporate will continue to invest in people development with a strong focus on providing visible leadership and a culture of collaboration and unity.


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