INVESTMENT CASE

Nedbank Group has identified a range of banking sector and company-specific criteria that an investor should consider when evaluating a potential investment.

Nedbank Group
is focused on southern Africa

The South African banking system has remained structurally sound. The group is positioned as a bank for all South Africans. Opportunity for growth exists within the Southern African Development Community (SADC) region, which currently generates approximately 65% to 75% of the financial services’ economic profit in Africa. Of the financial services economic profit pool in Africa, Nedbank only has an estimated 12% to 14% share, showing the potential for growth. Alliance with EcoBank enables Nedbank to offer clients access to 30 countries in Africa without having to embark on a risky or expensive acquisition strategy.

Strong retail and wholesale
deposits franchises

Deposit franchises maintained amid adverse conditions.

Predominantly a wholesale bank

Nedbank has a large advances base and a strong deposit base with a smaller transactional banking market share. However, good client relationships and new systems should enable Nedbank to grow its transactional banking market share off a low base. The group has made pleasing gains in government transactional banking in recent years and there is scope to grow this business further. The bank is a leader in commercial and industrial property financing, allowing it to be more selective in its asset acquisition strategy, thereby reducing the risk in its portfolio.

Ability to manage costs

Demonstrated ability to manage costs while investing for longer-term growth. Improved efficiency ratio from 71,8% in 2004 to 51,1% in 2008.

Significant opportunities to grow non-interest revenue

• The group has implemented strategies to grow non-interest revenue off a relatively small market share position. This will also indirectly help other areas such as deposits and trading income on the back of increased client flows. It has been assisted by:

• rationalising brands and investing in retail distribution networks;
• positioning the group as being the most price-competitive, particularly for entry-level and mid-income clients;
• upgrading wholesale transactional banking systems;
• focusing on client service, which is currently being evidenced in client satisfaction surveys and through Nedbank's leadership position;
• focusing specifically on public sector business and seeing resultant growth off a zero base; and
• developing a unique culture, with client service and staff satisfaction as key outcomes.

A focused strategy to grow in the business banking market

Nedbank is well-postioned to grow in this key sector. Business banking provides high growth and high returns in a market where clients are mostly single-banked. The bank can outperform in business banking through a decentralised decisionmaking process.

Worldclass capital management and risk processes

Basel II implemented as a catalyst to ensure worldclass capital management and risk processes. Capital management and risk process integrated in all bank processes. Capital adequacy ratios maintained above both regulatory requirements and historic internal targets.
Refer to here.

Culture of governance and compliance

Governance and compliance processes are integrated in the business Nedbank Group is substantially compliant  with the King ll code.
Refer to here.

Leaders in sustainability

 

	Acknowledged as a leader in sustainability, Nedbank Group has qualified for the JSE Socially Responsible Investment (SRI) Index for five years and the Dow Jones World Sustainability Index for five years. Recognised as the Emerging Markets Sustainable Bank of the Year for Middle East and Africa for the second consecutive year.
	Refer to here.

A track record of innovation

Innovation has been demonstrated through: cost-effective solutions to increase the retail distribution network (eg banking outlets within retailers, mobile banking branches and cashback at point-of-sale terminals); system solutions for clients (eg NetBank within Retail and Business Banking); and worldclass service initiatives such as AskOnce. Where a client query is not answered on first request it incurs a cash penalty in the form of a donation to a selected charity on behalf of the client.

leaders in transformation

Transformation allows the group to be well-positioned for growing its business and attracting staff in the South African environment. This is demonstrated by having one of the best transformation scorecards among the larger banks in South Africa. Level-three black economic empowerment contributor in terms of the department of trade and industry (dti) codes.

Nedbank has created an organisational capability to succeed in a tough environment

Organisational learning and experience gained from the Nedbank turnaround in 2004 continues to stand the group in good stead during challenging times. many examples of how this organisational capability contributed to key cultural shifts are evident. a few are listed alongside.

There has been a significant shift in staff morale and culture towards a high-performing organisation. Service has improved to number one among South African banks. A cost-conscious culture has developed with accountability as the number one value being observed.