Business profile

 

 

 

 

 

Contribution to group	2011	2010
Headline earnings (Rm)	1 225	1 202
Economic profit (Rm)	531	477
Total loans and advances (Rbn)	68,5	62,3
Total assets (Rbn)	202,6	215,2
Credit loss ratio (%)	1,23	1,27
Return on equity (%)	23,0	23,5
Employees	721	699

Business profile

• Provides comprehensive investment banking solutions to institutional and corporate clients.
• Product strengths include investment banking, leverage financing, trading, broking, structuring and hedging.
• Offices in SA and London and representative offices in Angola and Toronto.
• Primary units:
  • Investment Banking
  • Global Markets
  • Treasury
  • Client Coverage

Business strategy

• Follows an integrated investment banking business model – leveraging a unique combination of industry and product expertise with a single client interface.
• Long-term strategies include:
  • expanding into the rest of Africa and internationally in areas of sector specialisation;
  • leveraging the collaborative model within Nedbank Capital and other Nedbank Group clusters; and
  • being an integrated investment bank that offers bespoke, seamless client solutions built on product strengths and excellent execution.

Market position

• Reputable industry standings across key portfolios (eg resources, infrastructure and energy).
• Leading market position in carbon credits and renewable-energy financing.
• Placed second in Bloomberg’s overall corporate bond flow (excluding own issuances) for 2011.

Review of 2011

• Managed the business through difficult economic conditions in the light of the Northern Hemisphere crisis.
• Lending and investment criteria and cost management remained prudent.
• Portfolio effect from multiple businesses has maintained diversified earnings through the economic crisis.

Cluster Integrated Sustainability Highlights

• Increasing opportunity to fund, advise, invest and trade in the growing green economy.
• Product offering includes renewable energy financing, carbon products, ‘BGreen’ Exchange-traded Fund (ETF) and mining rehabilitation funds
• Embarked on a social literacy programme for school children, called ‘Spell It’, as a follow-up to the successful ChessKids initiative.

Key challenges in 2011

• Large pipeline of Investment Banking deals approved, with certain deals commenced and reaching financial close in the fourth quarter of 2011, and the remainder flowing into 2012.
• Global Markets revenue affected by difficult market conditions, risk aversion and international volatility.

Looking ahead to 2012

• Focus on clients and client relationship management.
• Expansion into the rest of Africa while focusing on key growth sectors and leveraging the alliance with Ecobank.
• Leverage green initiatives, eg Renewable Energy Independent Power Producer Programme (REIPPP).
• Cross-sell solutions into existing group client base.

 

 

 

 

 

Contribution to group	2011	2010
Headline earnings (Rm)	1 672	1 496
Economic profit (Rm)	801	421
Total loans and advances (Rbn)	164,8	157,7
Total assets (Rbn)	180,9	170,3
Credit loss ratio (%)	0,29	0,20
Return on equity (%)	25,0	19,7
Employees	3 546	3 611

Business profile

• Provides full-service corporate banking to large corporates with an annual turnover in excess of R400m, including commercial, industrial and property finance solutions.
• Comprises operations that service both retail and corporate market segments in Lesotho, Malawi, Namibia, Swaziland and Zimbabwe through Nedbank Africa, with a representative office in Kenya.
• The cluster comprises:
  • Corporate Banking
  • Property Finance
  • Nedbank Africa
  • Transactional Banking
  • Nedbank Investor Services
  • Corporate Shared Services

Business strategy

Aims to retain its top-two position in the SA corporate market through:

• increasing primary-banked clients;
• growing non-interest income (NIR) across all products;
• focusing on the public sector;
• delivering worldclass transactional banking solutions;
• managing client value;
• collaboration and cross-selling across Nedbank Group clusters to support service excellence;
• expanding selectively in Africa, including leveraging the Ecobank–Nedbank Alliance;
• Positioning itself to be a truly southern African bank, supporting its local client base as they expand into the rest of the continent; and
• continuing its focus on transformation in terms of both people and business strategies.

Market position

• Strong market share in other private sector loans (excluding foreign currency loans).
• Largest market share in property finance among banks in SA.

Review of 2011

• Grew NIR through gaining 27 new primary-banked corporate clients.
• Business showed resilience in current market by achieving good results with improvement in the core financial metrics.
• Managing for value and selective lending principles were adopted by client-facing businesses within the extremely challenging business environment.
• Impairments were well managed in a difficult environment.
• Continued with client migration to an enhanced electronic transactional banking platform.
• Enhanced traction on public sector business.
• Good progress in achieving business transformation objectives.

Cluster Integrated Sustainability Highlights

• Continued with direct financing of green buildings.
• Principal sponsor of the Green Building Council.
• Contributed to conserving and developing natural resources through the Go Green Fund in Namibia.

Key challenges in 2011

• Unpredictable and challenging business environment related to the global financial and Eurozone economic crisis.
• Slow growth environment in SA impacting adversely on client business activities.

Looking ahead to 2012

• Continued challenging economic environment with modest advances growth.
• Continued pressure on property-related returns.
• Expected increase in rollout of government infrastructure programme.
• Improved understanding of client requirements to be able to offer innovative and proactive solutions.
• Focus on strategic initiatives to enhance NIR for sustainable revenue growth.
• Increased focus to enhance execution capability to improve delivery.
• Explore new growth opportunities within SA and the rest of Africa.

 

 

 

 

Contribution to group	2011	2010
Headline earnings (Rm)	852	825
Economic profit (Rm)	372	382
Total loans and advances (Rbn)	58,3	50,8
Total assets (Rbn)	88,6	79,8
Credit loss ratio (%)	0,54	0,40
Return on equity (%)	23,1	26,4
Employees	2 345	2 390

Business profile

• Provides commercial banking solutions to small and medium-sized businesses with an annual turnover of between R7,5m and R400m.
• The cluster comprises:
  • four geographically decentralised client-facing business units;
  • a strategic business unit focusing on specialised finance, debtor management and client value propositions;
  • specialist services, including investment management, transactional banking sales, finance and business intelligence/client value management services; and
  • specialist functional areas providing human resources and finance, risk as well as business services, co-creating frameworks for execution by the decentralised businesses.

Business strategy

Aspirational vision of being the leader in business banking for SA consistently driven through:

• increasing primary-banker status through client acquisitions and cross-selling;
• sourcing new client growth through strong business relationships;
• relevant industry value propositions based on deep client insights;
• leveraging technology for greater effectiveness and to enhance the client experience;
• transforming staff, developing people and managing talent;
• participating in local corporate social investment to uplift the communities it serves; and
• delivering upper-quartile financial returns.

Market position

• Distinctive, holistic business model built on client-centred relationships and localised client service teams orchestrated by dedicated relationship banker.
• Strong client-centred risk culture; credit loss ratio better than target range for seventh successive year.
• Strong customer management capabilities as assessed by CMAT^TM – achieved fifth highest score out of 900 companies globally.
• Strong deposit-taking franchise and leader in Corporate Saver product (management of trust funds).
• Excellent electronic banking platform, NetBank Business.
• Leader in debtor management.
• Increased primary-banked market share from 15% to 20% over past five years.
• Client satisfaction and cultural alignment metrics at all-time highs.
• Consistent financial performance with > 23% return on equity throughout the challenging economic cycle, notwithstanding lower endownment earnings of R935m pretax following interest rate reductions of 650 basis points.

Cluster Integrated Sustainability Highlights

• R5m of enterprise development spent to assist emerging black small and medium enterprises through training, business mentorship, incubators and flexible lending structures; support benefited 934 entrepreneurs and supported the creation of 712 jobs.
• Participation in numerous social sponsorships and upliftment programmes in the local communities, ranging from financial donations and fund raisers to hands-on involvement by the cluster’s teams, eg Eco-School gardens.
• Ongoing efforts to reduce paper consumption and increase environmental awareness among clients and staff (eg charge for paper statements has been communicated to clients).
• R21m investment in the talent academy (an industry-first formally registered sales and credit learnership programme) to create a permanent source of skilled bankers (52 in 2011) while accelerating transformation.

Review of 2011

• Strong financial performance in a challenging economy – excellent risk management.
• New-client acquisition and cross-sell further improved.
• Introduced industry-first talent academy, with 50 graduates delivered for sales or credit positions.
• Imperial staff and client base for Specialist Asset Financing (SAF) and Professional Asset Financing (PAF) fully integrated and transactional cross-sell gaining momentum.
• Significant improvement in organisational culture – employee satisfaction remains high.
• Evolved decentralised business model to assess additional revenue paths – personal banker, card etc.

Key challenges in 2011

• Economic recovery remained fragile; number of liquidations indicates significant stress in the system.
• Majority of companies remained cautious with respect to expansions; business activities remained muted.
• Primary-banked market share did not shift despite significant growth in net new clients.
• Highly competitive market required a strong focus on retaining clients and staff.

Looking ahead to 2012

• Emphasis on growing share of smaller business segment through tailored offerings and simplified fulfilment processes.
• Execute on area-specific sales, marketing and expansion strategies in collaboration with Nedbank Retail.
• Continue to embed a lean mindset and culture of innovation to enhance the client experience and people effectiveness on a continuous basis.

 

 

 

 

 

Contribution to group	2011	2010
Headline earnings (Rm)	2 002	760
Economic loss (Rm)	(203)	(1 583)
Total loans and advances (Rbn)	183,7	187,3
Total assets (Rbn)	190,4	193,4
Credit loss ratio (%)	1,98	2,67
Return on equity (%)	11,8	4,6
Employees	16 323	15 473

Business profile

• Serves the financial needs of individuals and small businesses with up to R7,5m in annual turnover.
• Provides transactional, card, lending and investment products and services.
• Services merchants and large corporates in respect of card-acquiring services.
• The cluster comprises:
  • secured lending, including home loans and vehicle finance;
  • retail relationship banking, which combines personal relationship banking and small business services;
  • consumer banking, which entails client engagement (client insight, value management, client value propositions, digital innovation, transactional banking and investments), integrated channels and personal loans; and
  • card issuing and acquiring.

Business strategy

Deliver a choice of distinctive client-centred banking experiences for all in SA that build deep, enduring relationships with Nedbank Group, underpinned by worldclass risk management. This will be achieved through:

• rebuilding the basics of a client-centred banking experience, and embracing the full ‘household’ including influencers, dependants and natural groupings;
• emphasising the virtuous circle of small businesses, individuals and entrepreneurs, and servicing the business, owner and employees on an integrated basis;
• developing specific value propositions for the youth, entry-level banking (ELB), middle-income market and seniors segments, tailored to their needs, behaviours and economics;
• repositioning home loans for selective origination and leveraging MFC;
• embedding worldclass risk management practices;
• harnessing the strength of wholesale client relationships to leverage card-acquiring capabilities and cross-selling opportunities such as employee banking; and
• an integrated channels strategy leveraging digital innovations, high-growth potential micromarkets, area collaboration and IT-enabled business process reengineering.

Market position

• Striving to be the most distinctive, relationship-oriented, client-centred bank.
• 2,6m ELB clients including youth.
• 1,4m clients in middle-income market and small business with good growth prospects.
• 855 000 seniors.
• Strong vehicle finance share, leveraging MFC’s distinctiveness (> 30%).
• Strong deposit franchise.
• Strong card-acquiring market share.
• Alternative channels benefiting personal-loans share (currently largest of SA’s four banks).

Cluster Integrated Sustainability Highlights

• Holistic, community-driven approach to area expansion, ensuring full stakeholder involvement, local recruitment and community engagement.
• Enhanced offerings for the ELB market to provide affordable solutions addressing client needs (Ke Yona, Personal Loans < R1 000).
• Effective rehabilitation of distressed clients, keeping over 13 900 families in their homes
  since 2009.
• Greater accessibility through investments in additional 389 ATMs, 31 branches and 90 alternate outlets. Altogether 59 branches now operate extended hours and 49 of these also trade on Sundays, with 261 alternate instore outlets available. Over 75% of Personal Loans outlets now sell transactional banking and over 90% have ATMs.
• Deep strategic alignment, having exposed over 14 000 Nedbank Retail employees to the Retail strategic intent in three-hour strategy conversations facilitated by their managers within a two-month period. The process has had a profound impact on people’s energy levels, motivation, understanding and commitment to delivering on the strategic imperatives for Retail and the broader bank and strongly positions Nedbank Retail for accelerating strategy execution in 2012.

Review of 2011

• Good progress made across the 12 step change initiatives underpinning the client-centred growth strategy.
• Strong executive leadership aligned to deliver on the strategy.
• Aspirational brand more accessible, with 65% new clients in ELB, including youth.
• Successfully launched Nedbank Savvy and Nedbank Ke Yona offerings, strengthening brand positioning in the broader market segments.
• Vodacom m-pesa offering attracting in excess of 693 000 subscribers, tenfold increase on last year.
• Retail Savings Bond raising of R3,9bn in competitively priced liabilities.
• Completed large-scale client migrations to ensure clients are serviced by the appropriate business unit.
• Continued strong performance from MFC, Personal Loans and Card, leveraged to benefit the holistic client experience.
• Rollout of new staff frontend banking platform to more than 6 500 users.

Key challenges in 2011

• Underpriced, poorer-quality home loans contained in the 2006-to-2008 book will be a drain on future earnings.
• Weak property market and high consumer indebtedness resulting in slow industry resolution of defaulted loans.
• High growth rates in unsecured lending – many new market entrants and varying interpretations of affordability criteria.
• Speed of innovation.

Looking ahead to 2012

• Continue with the cohesive execution of the 12 step change initiatives underpinning the Nedbank Retail strategy for a sustainable turnaround.
• Unlock benefits through collaboration across all Nedbank Group clusters with respect to distribution strategy, micromarket potential and digital innovation.
• Leverage existing wholesale relationships to unlock the virtuous circle of the business, the owner and the employees to include more Nedbank Retail clients in the Nedbank@Work offering.
• Continue embedding strong risk management practices in line with defined risk appetite.

 

 

 

 

Contribution to group	2011	2010
Headline earnings (Rm)	625	592
Economic profit (Rm)	415	388
Total loans and advances (Rbn)	19,6	16,9
Total assets (Rbn)	37,8	33,9
Credit loss ratio (%)	0,25	0,15
Return on equity (%)	38,7	41,0
Employees	1 991	1 896

Business profile

• Nedbank Wealth has operations in SA, London, on the Isle of Man, Jersey and Guernsey, and in the Middle East.
• Its three business divisions are:
  • Wealth Management, which includes private banking and fiduciary services locally and internationally as well as stockbroking and financial planning.
  • Asset Management, which includes the Nedgroup Investments range of local and international best-of-breed unit trusts, cash solutions and multimanagement, as well as private client active management and research supporting the high-net-worth (HNW) clients and stockbroking businesses.
  • Insurance, which includes short-term insurance, life insurance and insurance broking.
  
  

  Business strategy

  Aspires to be the most admired wealth business, trusted and respected in creating, managing and protecting wealth.

  Nedbank Wealth’s key focus areas include:
  Wealth management
  • Benefits of a single-branded HNW proposition.
  • Growth in UK and Middle East operations.
  • Continued investment in advisory and stockbroking businesses.
  Asset management
  • Brand profile improving.
  • Leverage new investment offerings.
  • Best-of-breed provider of choice, locally and internationally.
  Insurance
  • Penetration of new products.
  • Technology and systems to deliver client-centricity.
  • Synergies across insurance.

  Market position

  • Wealth management. Strong position in traditional HNW markets. Focus on growth in entrepreneurial and emerging wealth markets.
  • Asset management. Nedgroup Investments rated among the top three finalists for Best Large Fund House at the 2011 Morningstar South Africa Fund Awards. Placed second overall in the Domestic Management Company of the Year category at the 2011 Raging Bull Awards.
  • Insurance. One of the fastest growing bancassurers in SA as evidenced by the increase in embedded value (EV) and value of new business (VNB).

  Review of 2011

  Delivered on the financial and strategic objectives set for 2011. Highlights include:

  Wealth management
  • Strong international performance.
  • Advice capacity strengthened
  • Significant awards and achievements.
  Asset management
  • Best-of-breed success internationally.
  • Stewardship and sustainable performance.
  • Investment offering expanded.
  Insurance
  • Strong growth in retail volumes.
  • Extensive new-product expansion.
  • Investment in systems and acquisition costs.

  Cluster Integrated Sustainability Highlights

  New products launched in 2011:
  • Hospital Cash – provides cash benefits for the number of days of hospital confinement.
  • 360Business – a set of insurance offerings that protect the viability of a business.
  • Guaranteed Income Plan – pays a guaranteed level of income over a five-year term and then repays the initial investment at the end of the five-year period.
  • Guaranteed Growth Plan – pays no income during the five years and repays the initial investment, plus guaranteed growth over the term at the end the five-year period.
  • UCITS IV – a Dublin-domiciled international investments offering.
  
  Operational overview
   

  Nedgroup Investments invested in capacity and skills to deliver cash and institutional solutions to the domestic market.

  Launched a solar geyser proposition that offers clients the option to replace a burst geyser with a solar water heater.

  Involved in various social and community initiatives including Young Enterprise Isle of Man’s ‘Learn to Earn’, Childline, Habitat for Humanity, National Institute for Crime Prevention and the Reintegration of Offenders (NICRO), Rape Crisis, Ntokozweni Primary School.

  Fairbairn Private Bank achieved ‘Best Service Initiative’ in the prestigious gold status awarded by Investors in People, which recognises commitment to continuous business improvement through staff.

  Key challenges in 2011

  Wealth management
  • Continued low-interest-rate environment, particularly in the UK.
  • Increasing European uncertainties and continued impact of UK austerity measures.
  • Decline in stockbroking capacity and activity.
  • Disappointing results from local fiduciary.
  Asset management
  • Local net flows lower than anticipated, impacting NIR.
  • Subdued investor confidence and risk appetite.
  Insurance
  • Higher expense growth as a result of new-business strain, increased marketing spend and investment in systems, intellectual property and capacity.
  • Drop-off in homeowner’s cover (HOC) policies, impacting short-term gross written premium.
  • Deterioration in personal-accident lapse rates.

  Looking ahead to 2012

  • Prospects remain positive despite the impact of the low-interest-rate environment, market volatility and concerns around financial stability, particularly in Europe.
  • The new, differentiated international HNW proposition is a major development, which will remove brand confusion and dramatically increase the group’s competitiveness in the market.
  • Recovery in stockbroking volumes and moderate JSE growth anticipated.
  • Further weakening of the SA rand may support earnings growth from HNW businesses.
  • Growth prospects in local and international asset management remain positive.
  • Strong retail volumes, particularly in Personal Loans and Card, will support the growth of simple risk products and will maintain insurance earnings growth despite investment in initiatives and systems and the impact of new-business strain.