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Chief Operating Officer’s report

The central specialist functions in the Chief Operating Officer (COO) portfolio are a critical component in enabling the frontline clusters to deliver client-centred services and solutions, in a coordinated and collaborative way, to compete strongly in the client segments and markets in which they operate. The group has a distinctive strategy and is growing its franchise off the strong operating platform that has been built over the last few years. Significant initiatives, with an emphasis on enhancing the client experience through greater functionality and ease of use, have positioned the group well to grow its share of primary-banked clients in all market segments.

Graham Dempster
Chief Operating Officer

A number of key strategic and cross-cluster initiatives under the direction of the COO are in place to optimise our client service, systems and people practices:

Africa

Strategically, our activities in the rest of Africa are very important, as we continue to extend servicing our clients across the continent and benefit our stakeholders. The size and growth rates of gross domestic product in the rest of Africa continue to increase materially and our clients are extending their reach across this very exciting emerging market. Through our strategic business alliance with Ecobank, we continue to build innovatively on the one-bank client experience across our unrivalled banking network spanning 36 countries. In November 2011 Nedbank Group provided the holding company of the Ecobank Group, Ecobank Transnational Incorporated, with a $285m three-year facility in support of Ecobank’s corporate development programmes, including its recent acquisition of Oceanic Bank in Nigeria. This arrangement provides Nedbank Group with subscription rights that it can elect to exercise between months 24 and 36 to become up to a 20% shareholder in Ecobank. The arrangement further provides for the possibility of Ecobank establishing a reciprocal shareholding in Nedbank Group, subject to the required approvals; a review of the geographical alignment of businesses across the combined footprint; and reciprocal board representation of one director each. To provide for an aligned and integrated approach to our strategically important activities in the rest of Africa our existing operating banking subsidiaries in five southern African states namely, Namibia, Zimbabwe, Malawi, Lesotho and Swaziland (and the representative office in Kenya), have now been incorporated into the COO portfolio.

Optimise economic profit through Portfolio tilt

In light of changing banking regulation and pressure on banking return on equity, capital and liquidity have become increasingly scarce commodities and as a consequence the group introduced the concept of portfolio tilt in 2010 to concentrate on areas of strategic focus and/or higher economic-profit returns on a sustainable basis. This portfolio tilt approach is incorporated into the strategic planning process to review the performance of businesses and actively redirecting resources to optimise economic profit. Good progress was once again evident in the strengthening of capital ratios and tenor of funding.

Non-interest revenue uplift through primary-client growth and collaboration between clusters

The non-interest revenue (NIR) project has focused on cross-cluster opportunities. These opportunities are now embedded in the cluster plans in support of the group reaching its medium-term target NIR/expense ratio of 85%.

Optimise-to-Invest initiative

The Optimise-to-invest Project progressed well in identifying cross-cluster overlaps in services and cost duplication to optimise the group’s cost base and simplify our way of operating. The savings that were identified jointly by the clusters in addressing areas of cost duplication through this initiative have been overlaid into the three-year plans to deliver almost R500m in run-rate savings.

IT systems rationalisation and replacement

Group Technology (GT) has launched 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. Good progress was made during the year with, 19 systems being rationalised, and a further 30 are planned for 2012. The objective is to streamline the process for implementing new products more quickly, at a lower cost and with greater ease of use. A key philosophy is using service-oriented architecture, which enables a gradual approach to systems replacement and the reuse of processes. The IT roadmap has been developed with the frontline clusters based on their strategic priorities. This approach will lead to significant cost benefits over the longer term and will enable greater investment to take place in client systems, thereby enhancing the client experience. We commissioned an external benchmarking exercise by a global IT expert consultancy, with the assessment findings showing that GT is very well run and close to reaching worldclass standards for GT status in terms of its effectiveness and efficiency of operations. The benchmarking also identified opportunities in the application development area, where more effective processes aligning how GT and the line clusters work together, can bring additional benefits to the group as well as ideas further to enhance our innovation drive.

Nedbank brand and marketing repositioning

Nedbank Group continues to broaden its brand appeal across the board, with a particular emphasis on the youth and entry-level banking segments through positioning advertising, distribution and products such as Ke Yona, Nedbank Savvy and Vodacom m-pesa. The strengthening of the brand is tracked through a number of external benchmarks including brand dynamics, with Nedbank Group showing the strongest increase across the board in year-on-year performance over the past few years. A brand valuation exercise was also undertaken, which valued the brand at a significant value and provided key insights into where further gains can be realised.

Leadership development

Nedbank Group has consistently invested significant time and resources in unleashing the natural potential of our leadership across the group. There is a deep appreciation of what it takes to be effective leaders and teams, which has been engendered through participating in multiday development programmes that focus on developing personal mastery and team effectiveness, as well as building a ‘vision-led values-driven culture’ through the Leading for Deep Green programme. We believe that our unique corporate culture, developed through these processes and behaviours, is the ultimate enduring competitive advantage in our industry. The benefits of this programme have been seen in strong corporate culture and staff survey scores, higher staff morale, lower attrition rates and overall team effectiveness. During 2011 an additional 547 people participated in the programme, bringing the total number of participants to approximately 2 500 to date. We are well on our way into cascading this, over three years, to our 6 000 managers – an ambitious target that will have a profound impact on the leadership capability and effectiveness of the organisation as we continue to build a strong values-based leadership culture.