Operational review

After completing his articles with Deloitte & Touche, Rob joined BoE Merchant Bank. In 1994 he joined the Corporate Finance Division of Standard Corporate and Merchant Bank (SCMB), and was promoted to Joint Head of Corporate Finance in January 1997. In April 1998 he was appointed Head of Investment Banking at SCMB. After a brief stint at Computer Configurations Holdings Limited, a client of SCMB, he joined the Nedcor Group as Head of Corporate Finance in early 2000. Rob was appointed Director: Group Strategy and Corporate Affairs in November 2003. In September 2004 Rob was appointed Managing Director of Nedbank Retail. He is a member of the Nedcor Group Executive Committee.

Management team

Gavin Cookman (42)

Sydney Gericke (46)

Ingrid Hindle (40)

Dennis Jackson (43)

David Macready (46)

Sakhiwo (Saks) Ntombela (37)

June Tudhope (47)

Clive van Horen (38)

Target market and activities

Target markets are clearly identified and range from entry-level transactional banking to the high-income segment. These markets have been serviced through the brands within the Nedbank Retail stable, being Nedbank, Peoples Bank, Old Mutual Bank, Pick ’n Pay Go Banking, BoE Life, BoE Private Clients, Fairbairn Private Bank and Fairbairn Trust.

Review of the year

The move towards a rationalised brand portfolio, consolidated product offerings and a more cost-effective footprint resulted in the buyout of the minority 30% holding of the black economic empowerment (BEE) consortium in Peoples Bank. During 2004 approximately 700 000 NBS clients were successfully migrated to Peoples Bank.With the necessary regulatory approvals, Peoples Bank is now a division of Nedbank.

The joint ventures with Capital One and the JD Group were terminated and the holdings in the Stenham Group, BoE Life International, BoE International Fund Services, BoE International Fund Managers and Chiswell Associates sold.

There was good growth in earnings from two of our joint ventures with Old Mutual, namely BoE Private Clients and BoE Life. Nedcor Retail Investments grew assets under management by 63% from R8,2 billion to R13,4 billion and doubled profits for the second year in succession.

Despite the low levels of staff morale and unfortunate but unavoidable retrenchments, Nedbank Retail was still able to keep its client-centric focus and received three accolades from the Office of the Banking Adjudicator, being top honours for excellence in Customer Complaint Handling, the Code of Banking Practice Award for adherence to the code (second consecutive year) and an individual excellence award. At the International Investment Offshore Fund & Product Awards, in association with Standard & Poor’s, Fairbairn Private Bank was the winner of Best Offshore Bank Group for 2004.

The focus on developing leadership at all levels in Retail was demonstrated through the continuing Uhuru Programme and the enrolment of 200 ‘climbers’ during 2004. Summited Uhuru participants play a significant role in specific business initiatives and, as these numbers grow, the potential of institutionalising the Community of Leaders becomes more of a reality.

The Sisonke Programme was once again the recipient of both local and international recognition from various esteemed public relations forums. The Retail Sisonke Journey was a finalist in the PR NEWS Platinum PR Awards programme (international) in the Employee Relations category.

The Local Hero Programme was one of only two community development projects to receive an award at the Loerie Awards. The programme received a Bronze Award. The Team Challenge 2003, which ended in March 2004, was a finalist in the Mail & Guardian’s Investing in the Future Awards in the category for the Best Corporate Employee Involvement Programme.

During the second half of 2004 Branch Operations was integrated into the Retail Division to improve client service, create a common vision and remove duplications. This resulted in the Nedbank Retail staff complement increasing by approximately 5 000 people.

Following the appointment of Rob Shuter as Head of Nedbank Retail in September 2004 the cluster was reorganised to improve client service, reduce resource duplication and increase accountability. This resulted in the appointment of a new divisional executive team, the integration of the operational and support structures into Nedbank Retail and the formation of integrated standalone card, home loan and personal loans businesses.

Strategy

A first step in the path to success has been the reorganisation of the business and the establishment of three monolines to drive focus and accountability. The key management actions driving this strategy in 2005 are included under the acronym COURAGE:

• Reorganise the division and appoint new executive team
• Integrate Nedbank and Peoples Bank
• Reduce and simplify joint ventures

• Fix home loan business
• Fix card business
• Grow asset-based finance business

• Retain, cross-sell and acquire
• Increase current account creditors

• Optimise management of resources across the division
• Spend money wisely

A major focus for 2005 is the integration of Peoples Bank into Nedbank, which is expected to result in the closure of approximately 50 overlapping branches and the rebranding of approximately 150 Peoples Bank branches to Nedbank. The integration should entail limited systems issues and client disruption will be negligible. As a result of the integration as well as approximately 25 new branches, which will be opened in growth markets during 2005, clients will have access to a wider range of products and outlets. Advertising spend will be more focused and Nedbank is being made accessible to all as a bank that is proudly South African.

Prospects

Our turnaround strategy therefore requires significant improvements across a very broad front. A detailed plan has been laid out and the management team is resolute that the plan will be delivered upon and that the business will generate acceptable returns and improved client service in future.

Financial highlights and statistics

		2004	2003
Average assets
Rbn
Cash and short-term funds		1	1
Other short-term securities		3	3
Mortgage loans		49	43
Leases and instalment debtors		6	5
Loans and overdrafts		12	12
Other assets		5	9
Total assets		76	73
Total interest-earning assets		69	64
Current and savings accounts		26	24
Deposit and other accounts		45	44
Allocated capital		5	5
Total liabilities		76	73
Income statement
Rm
Net interest income		3 816	3 672
Non-interest revenue		3 846	3 473
Gross operating income		7 662	7 145
Impairment of advances		930	937
Income after impairment of advances		6 732	6 208
Operating expenses		5 742	5 562
Fees due to alliance partners		51	(32)
Merger expenses		17	91
Recovery programme expenses		79
Profit from operations		843	587
Attributable earnings of associates and joint ventures		10	18
Profit before taxation		853	605
Taxation		194	135
Profit after taxation		659	470
Minority interest income attributable to
ordinary shareholders		18	15
Headline earnings		641	455
Selected ratios
Return on average assets	%	0,84	0,62
Return on average equity	%	12,79	9,74
Interest margin	%	5,56	5,78
Impairments to net interest income	%	24,4	25,5
Non-interest revenue to gross income	%	50,2	48,6
Efficiency ratio	%	76,9	78,7
Effective tax rate	%	22,7	22,3
Number of employees		6 696	7 263
Operational statistics for 2004
Number of clients		3 336 728
Number of branches		501
Number of automated teller machines		1 210
Number of self-service terminals		327
Number of retail outlets		262