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NEDBANK GROUP ANNUAL REPORT 2009

Graham Dempster

CHIEF OPERATING OFFICER’S REPORT

‘The central functions housed within the portfolio of the Chief Operating Officer have a key role to play by operating in a coordinated way to enable the frontline business clusters to be well-positioned and supported in order to compete strongly in the markets in which they operate.’

Graham joined the group in 1980 in the Corporate Finance Division of UAL Merchant Bank. He was appointed General Manager of the division in 1987 and as Joint Head of the Special Finance Division in 1989. In 1992 he was transferred to Nedbank, initially in a general management role in respect of strategy, and was appointed as Head of the International Division in 1998. He assumed responsibility for the Corporate Banking Division in 1999 and Nedbank Corporate in late 2003. Graham was appointed Chief Operating Officer in August 2009.

Graham Dempster (54)
29 years’ service
Chief Operating Officer
BCom (CTA), CA (SA), AMP (Harvard Business School)

In August 2009 Nedbank Group announced a new structure for the Group Executive Committee. As part of the new structure Graham was appointed to the newly created position of Chief Operating Officer (COO) and as an executive director of both Nedbank Group Limited and Nedbank Limited.

In his role as COO Graham has overall accountability for several of the central functions in Nedbank Group, namely Nedbank Group Finance, Balance Sheet Management, Information Technology, Human Resources, Marketing, Communications and Corporate Affairs, and Strategic Planning, as well as responsibility for managing the alliance with our Pan-African banking partner Ecobank.

Business approach

Over the past six years Nedbank Group has focused on addressing the basics of banking and building the performance of the bank for the next phase of growth that it is now able to embark upon.

The central functions housed within the COO portfolio have a key role to play by operating in a coordinated way to enable the frontline business clusters to be well-positioned and supported in order to compete strongly in the markets in which they operate.

In this regard it is critical that, through the strategic planning processes undertaken each year, the group determines its key strategic change thrusts to achieve its growth objectives, and that we ensure that the scarce resources required in terms of appropriate allocation of economic capital, technology projects, specialist people skills and the marketing of the brand are aligned in an efficient and effective manner to support the frontline business in order to achieve the group’s key strategic change thrusts.

Transition from Nedbank Corporate

‘Over the past six years it was a great privilege to head Nedbank Corporate and be involved in the building of the businesses with a superb cluster executive team who are valued friends and colleagues. It has been wonderful to see many executives in the cluster achieve outstanding results both in their careers and personally. I will always treasure this as a very special time in my career and thank my colleagues on the Nedbank Corporate Executive Committee over those years for making it such a special journey. To each member of staff I thank you for making a very important contribution to the growth of the businesses and wish you all the best in the future.

I am delighted that Mfundo Nkuhlu was appointed to head Nedbank Corporate and I know he will be an excellent leader of the cluster.’

Financial targets

  Medium-to-long-term targets 2010 outlook

Return on equity (excl goodwill)

5% above monthly weighted-average cost of ordinary shareholders’ equity Improving, but below target.

Efficiency ratio

< 50,0% Worsening, remaining above target.

NIR-to-expenses ratio

> 85% Improving, but below target.
Growth in diluted headline earnings per share At least consumer price index + gross domestic product growth + 5% Improving, forecast to exceed target.
Impairments charge    
(credit loss ratio) Between 0,6% and 1,0% of average advances Improving, but above target.

Basel II core Tier 1 capital adequacy ratio

7,5% to 9,0% Improving, above top end of range.

Basel II Tier 1 capital adequacy ratio

8,5% to 10,0% Improving, above top end of range.

Basel II total capital adequacy ratio

11,5% to 13,0% Improving, above top end of range.
Economic capital Capitalised to 99,93% confidence interval on economic capital basis (target debt rating A including 10% buffer) A including 10% buffer.

Dividend cover policy

2,25 to 2,75 times 2,25 to 2,75 times.

Initial areas of focus include:

  • A three-year stategy and planning process for 2010 to 2012 that sought to align future economic capital allocation more closely to economic profit generation in order to enhance shareholder value creation.
  • An intensive project prioritisation process to agree which technology developments to undertake and to
    increase the level of project spend with an emphasis on high client impact and financial return criteria.
  • A refinement of our economic capital allocation methodologies more accurately to reflect the risk profile of the individual clusters to assess and drive the returns on capital – this will be implemented in the first half of 2010.
  • A formulation of overall bank and cluster risk loss ranges to provide the line businesses with a clear directive in terms of risk propensity in which to run their business.
  • The establishment of a non-interest revenue (NIR) project to drive the organisation to improve the NIR:expense ratio following the setting of the medium-to-long term target ratio at > 85%.
  • A cross-cluster process of talent development and succession planning to identify and support the development of our key executives.
  • The continued focus and commitment to achieving Nedbank Group’s aspiration of being a leader in transformation and the introduction of a dynamic target-setting process that aligns our employment equity targets in terms of both the Employment Equity Act and the Department of Trade and Industry Codes.
  • A review of the progress made in the building of the brand and the commencement of a more detailed assessment of the strength of the brand in the wholesale banking market in which Nedbank Group has a strong position and market presence.
  • Managing the alliance relationship with Ecobank to ensure the delivery of a seamless one-bank experience across 33 countries in Africa, providing clients with access to banking services across the largest geographic coverage banking network on the continent.

Operational reviews for each of these central functions for 2009 follow this overview.

Description of functions

Group Finance

Group finance is responsible for the control and governance of the group’s accounting policies and disclosure requirements for both financial and management reporting, as well as the preparation and communication of the group financial results. This includes proactively managing the tax affairs of the group, together with budgeting, modelling and forecasting, target setting and ongoing tracking and maintenance of the group’s financial affairs. The Group Shared Services Centre within Group Finance provides, among others, centralised processing, procurement and property services.

Balance Sheet Management

Balance Sheet Management is responsible for managing the group’s regulatory, economic and statutory capital consistent with the current and planned levels of business activity, risk appetite and required/desired level of capital adequacy (including its target debt rating). Balance Sheet Management is mandated to ensure that capital is employed efficiently across the group based on an economic capital allocation and risk-adjusted performance measurement model to ensure that an optimal level of capital for the group and its subsidiaries is maintained. Balance Sheet Management optimises the risk profile of the balance sheet through risk portfolio and value-based management principles, risk-based  strategic planning, and management of capital buffers, integrated with stress and scenario testing and risk appetite. For more details refer to the Risk and Balance Sheet Management Report.

Group Technology

Group Technology is Nedbank’s centralised technology unit with responsibility for all components of the group’s technology processing, development and systems support. The group’s information technology (IT) systems, databases, technology infrastructure, software development and IT project/programme management are centrally managed to provide economies of scale and to facilitate a cohesive groupwide service-orientated architecture technology strategy.

Human Resources

Human Resources is esponsible for the overall integrity and operation of the human resources function for the group, which includes an integrated approach to building a unique culture for competitive advantage, accelerating transformation, learning and growth, talent management, rewards management and building human resources capability and excellence.

Group Marketing, Communications and Corporate Affairs

The Group Marketing, Communications and Corporate Affairs team has overall stewardship of the Nedbank brand, of external and internal communications to the full spectrum of the group’s stakeholders, and of the group’s overall corporate social responsibility programme, and is also responsible for monitoring the group’s transformation programme.

Strategic Planning

Strategic Planning coordinates the strategic planning activities across the group and assists in the implementation of its plans. The team also coordinates corporate actions such as acquisitions and disposals, and formulates the group’s views on macro- and microeconomic issues. These views are used internally by the group to inform its banking processes and are provided as a service to Nedbank Group clients in the form of research reports and presentations. Members of the team also serve on a number of industry advisory boards.

Ecobank alliance

The Ecobank Nedbank alliance is a group initiative through which Nedbank Group clients have access to the largest banking network in Africa across 33 countries in West, Central, East and southern Africa. The alliance’s central office is in Johannesburg and serves to provide support and facilitate various collaboration initiatives between the two organisations, cutting across all the clusters. LocalKnowledgeAfrica, the alliance centre of excellence, focuses on assisting clients in expanding and growing business across Africa, and through local in-country and sector intelligence overcomes some of the major complexities of doing business in Africa.

Management team


Trevor Adams (47)
Group Executive: Balance Sheet Management
14 years’ service • BCom(Hons), CA (SA)
John Bestbier (54)
Group Executive: Strategic Planning.
14 years’ service • BBusSc (Actuarial); CA (SA)
   
Smit Crouse (33)
Executive Head: Ecobank Alliance
2 years’ service • LLB, LLM
Raisibe Morathi (40)
Chief Financial Officer
3 years’ service • BCompt(Hons), CA (SA), H Dip Tax, AMP (Insead Business School)
   
Fred Swanepoel (46)
Chief Information Officer
13 years’ service • BCom(Hons), MBA, SEPSA (Harvard and Wits Business School), AMP (Harvard Business School, USA)
Ciko Thomas (40)
Group Executive: Group Marketing, Communications and Corporate Affairs
Joined 18 January 2010 • BSc, MBA
   
Shirley Zinn (48)
Group Executive: Human Resources
5 years’ service • DEd (Harvard)