OPERATIONAL 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 decisionmaking. The segments have been identified according to the nature of their respective products and services and their related target markets.

Nedbank Corporate

Nedbank Corporate comprises the client-focused businesses of Business Banking, 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. Business Banking offers the full spectrum of commercial banking products and related services to companies with an annual turnover of up to R400 million. Corporate Banking services companies with an annual turnover in excess of R400 million as well as 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 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 South African business sectors.

Nedbank Retail

Nedbank Retail fulfils the financial services needs of individuals and small businesses through its offering of various transactional, card, lending, investment and insurance products. Nedbank Retail also services merchants and large corporates in respect of card-acquiring services. Services are provided through the brands within the Nedbank Retail stable, being Nedbank, Nedgroup Investments, BoE Private Clients, Fairbairn Private Bank and Fairbairn Trust Company. The retail product portfolio includes transactional accounts, home loans, vehicle and asset-based finance, cards, personal loans, bancassurance, investments and specialised products such as wills, stockbroking and portfolio advice.

Imperial Bank

Imperial Bank is a joint venture with Imperial Holdings Limited and provides predominantly asset-based finance, with most advances comprising vehicle finance and selected niche market financing. The bank has four divisions, namely Motor Finance, Property Finance, Professional Finance and Supplier Asset Finance. Supplier Asset Finance is focused on financing office equipment for the business community and providing asset-based finance to the aviation, transport and material-handling sectors, and provides a specialised debt collection service. Professional Finance provides a range of asset-based financial products to the medical and dental markets in South Africa, making finance available for residential properties, motor vehicles, equipment, practice needs and project finance for large medical facilities by way of mortgage loans, instalment sale facilities and loans.

Shared Services

Shared Services is an aggregation of business operations that provide various support services to the 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 income not recoverable from/allocated to business segments.

           Nedbank Group    Nedbank Corporate
  2008   2007   2008   2007
     
Balance sheet (Rm)              
Cash and cash equivalents 18 674   18 708   2 380   1 425
Other short-term securities 18 589   25 793   756   575
Derivative financial instruments 22 321   9 047   36   3
Government and other securities 42 138   29 637   4 207   942
Loans and advances 434 233   373 956   191 543   153 718
Other assets 31 068   31 715   5 785   4 559
Intergroup assets –   –   18 419   47 165
Total assets 567 023   488 856   223 126   208 387
Equity and liabilities              
Amounts owed to depositors 466 890   384 541   208 040   194 358
Other liabilities 22 262   45 432   4 689   3 925
Derivative financial instruments 23 737   11 432   35   3
Intergroup liabilities –   –        
Long-term debt instruments 14 061   12 326   172   124
Allocated capital 40 073   35 125   10 190   9 977
Total equity and liabilities 567 023   488 856   223 126   208 387
Income statement (Rm)              
Net interest income 16 170   14 146   5 898   5 175
Impairments charge on loans and advances 4 822   2 164   471   158
Income from lending activities 11 348   11 982   5 427   5 017
Non-interest revenue 10 729   10 446   2 578   3 198
Operating income 22 077   22 428   8 005   8 215
Total expenses 13 741   13 489   4 019   4 478
   – Operating expenses 13 547   13 341   3 987   4 446
   – BEE transaction expenses 194   148   32   32
Indirect taxation 374   305   43   29
Profit/(Loss) from operations 7 962   8 634   3 943   3 708
Share of profits of associates and joint ventures 154   239   9   54
Profit/(Loss) before direct taxation 8 116   8 873   3 952   3 762
Direct taxation 1 757   2 336   1 012   1 062
Profit/(Loss) after taxation 6 359   6 537   2 940   2 700
Profit attributable to minority interest              
   – ordinary shareholders 257   344   16   68
   – preference shareholders 337   272        
Headline earnings 5 765   5 921   2 924   2 632
Selected ratios*              
Average interest-earning banking assets (Rm) 441 713   358 824   220 210   183 484
Return on average assets (%) 1,1+   1,3+   1,3   1,4
Return on risk-adjusted capital (%) 17,7+   21,4+   28,7   26,4
Interest margin (%) 3,66   3,94   2,68   2,82
Non-interest revenue to gross income (%) 39,9   42,5   30,4   38,2
Credit loss ratio (%) 1,17   0,62   0,27   0,11
Efficiency ratio (%) 51,1   54,9   47,4   53,5
Efficiency ratio (excluding BEE transaction expenses) (%) 50,4   54,3   47,0   53,1
Effective taxation rate (%) 21,6   26,3   25,6   28,2
Contribution to group economic profit 1 792   2 658   1 511   1 267
Number of employees 27 570   26 522   6 192   6 143
+   These ratios were calculated on simple average assets and equity.
*  These ratios (unless otherwise stated) were calculated using amounts to Rm.

Depreciation of R616 million (2007: R545 million) and amortisation of R414 million (2007: R431 million) costs for property, equipment, computer software and capitalised development are charged on an activity-justified transfer pricing methodology by the segment owning the assets to the segment utilising the benefits thereof.

Segmental comparatives have been restated in line with the group’s implementation of economic-value-based management. From 2008 economic profit (EP) replaced return on equity (ROE) as the primary internal financial performance measure in the group. EP is a best-practice measure since it incentivises an appropriate balance between return and growth, and better aligns with shareholder value creation.



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