Wrap Text
Reviewed condensed financial results for the six months ended 30 June 2012
NEDBANK GROUP LIMITED
Reg No: 1966/010630/06
ISIN: ZAE000004875
JSE share code: NED
NSX share code: NBK
REVIEWED CONDENSED FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2012
HIGHLIGHTS
- ROE (excluding goodwill) increased to 15,7%
- Core Tier 1 (Basel II.5) capital ratio strengthened to 10,6%
- Interim dividend per share of 340 cents
Headline earnings R3 468m up 25,1%
Diluted headline earnings per share 741 cents up 23,5%
Strong NIR growth R8 265m up 15,8%
'Nedbank Group performed strongly in the first half of 2012, with the results underpinned by good revenue
growth, prudent provisioning, responsible expense management and increased capital and liquidity ratios. We
continue to build on the momentum created over the past few years and make good progress in delivering on
our key strategic focus areas.
Nedbank is a vision-led and values-driven company and is firmly committed to supporting our staff, clients,
shareholders, regulators and communities in achieving our vision of building Africa's most admired bank.
Highlights in respect of our key stakeholders include our corporate culture and values measures now being
at worldclass levels; advances of new loans to clients amounting to R69bn; launching a number of innovative
products, including the secure Nedbank App Suite; and increasing access to banking through 76 new outlets
and 385 new ATMs. We also continue to lead in transformation as the JSE's most empowered large company as
measured by the dti Codes, maintaining a level 2 rating.
Notwithstanding the increasingly challenging market conditions, Nedbank Group remains on track to achieve its
earnings growth target in 2012.'
Mike Brown
Chief Executive
BANKING AND ECONOMIC
ENVIRONMENT
After a positive start to the year the global market
environment worsened in the second quarter, led by the
deepening recession in the Eurozone. Activity in major
emerging markets such as China has also weakened and
conditions in the USA remain tough.
Given that Europe, the USA and China are SA's largest
trading partners, the growth of SA's gross domestic product
(GDP) slowed to 2,7% in the first quarter of 2012, from
3,1% in 2011, following lower levels of production and
exports.
Although the rate of domestic spending has declined, low
interest rates continue to support the modest household
demand for credit, while transactional banking volumes
remain favourable.
Corporate credit demand continued to improve in early
2012. However, since the second quarter, business
confidence has weakened, which could lead to the private
sector delaying capital expenditure and focusing on
efficiency rather than expansion.
REVIEW OF RESULTS
Nedbank Group performed well for the six months ended
30 June 2012 ('the period') and made good progress in
delivering on its key strategic focus areas.
The group achieved strong headline earnings growth of
25,1% to R3 468m for the period (June 2011: R2 772m). This
was driven by 11,0% growth in net interest income (NII),
15,8% growth in non-interest revenue (NIR), continued
improvement in impairments and responsible expense
management combined with investment for growth.¹
Diluted headline earnings per share (DHEPS) increased
23,5% to 741 cents (June 2011: 600 cents) and diluted
basic earnings per share increased 24,9% to 747 cents
(June 2011: 598 cents).¹
The increase in return on assets (ROA) to 1,07% and a slight
decrease in gearing supported an increase in the return on
average ordinary shareholders' equity (ROE), excluding
goodwill, to 15,7% (June 2011: 13,7%) and ROE to 14,1%
(June 2011: 12,2%). The group generated an economic
profit (EP) of R578m (June 2011: R146m).
The balance sheet remains well capitalised with the
Basel II.5 core Tier 1 capital ratio at 10,6% (December 2011:
pro forma 10,5%).
During the period the group lengthened its liquidity duration,
resulting in the long-term funding profile increasing to
27,0% (December 2011: 25,0%), while liquidity buffers were
increased to R26bn (December 2011: R24bn).
Tangible net asset value per share grew by 10,1%
(annualised) from 9 044 cents in December 2011 to 9 500
cents in June 2012.
DELIVERING VALUE TO ALL OUR
STAKEHOLDERS
The significant impact of unsound banking practices on the
economic condition of many countries around the world
is a salutary reminder of the profound responsibilities
that banks have as custodians of a nation's savings and as
mobilisers of the efficient deployment of capital in laying
the foundation for economic growth and job creation
activity to flourish.
The SA banking industry has further enhanced its historically
strong reputation as a consequence of the long-established
sound and traditional banking practices adopted within a
well-managed and regulated environment.
Nedbank Group continued to deliver on its vision of
building Africa's most admired bank by all its stakeholders
and making a positive contribution to SA and the other
countries in which we operate through our positioning as
a bank for all, providing relevant banking services to the
broader population and offering great-value banking.
The highlights during this period with respect to each of our
key stakeholders include:
- For staff: In striving to make Nedbank a great place to
work we seek to have engaged employees who feel
valued and able to contribute and communicate fully
our employee and corporate culture survey feedback
is important and cultural entropy has improved to
worldclass levels of 10%; we have been rated an
employer of choice among graduates; and we have
invested in skills development, with 1 100 managers
undergoing the group's personal mastery programmes
and more than 500 employees participating in
our management development programmes and
134 graduates in our graduate development programme.
- For clients: We have paid out R69bn in new loans;
launched various new innovative solutions and
products such as Approve-it, MyFinancialLife, the
Nedbank App Suite, the Nedbank 4 Me client value
proposition, the Dezign Student Account, the Green
Savings Bond, Nedbank Small Business Friday and
the revamped Simply Biz website; kept fee increases at
or below inflation; and increased footprint by 76 new
staffed outlets and 385 ATMs year-on-year. Over the
past 12 months Nedbank Retail increased its client
base by 11,7% and Business Banking added 177 new
transactional banking clients, while all the other clusters
continued to deepen client relationships.
- For shareholders: We have generated a 22,3% total
shareholders' return; declared a half-year dividend of
340 cents per share; delivered R578m EP; achieved a
credit ratings upgrade from Fitch Ratings; and created
significant value through our broad-based black
economic empowerment scheme by creating R4,4bn
in value since inception, R1,9bn of which has vested.
Nedbank Group also received the Euromoney Best South
African Bank 2012 award.
- For regulators: We have continued to strengthen capital
and liquidity levels to remain well positioned for Basel
III and the Solvency Assessment and Management
insurance regime; contributed to working groups on new
regulation and made direct and indirect cash taxation
contributions of R3,3bn for the period.
- For communities: We have achieved the No 1 ranking
of JSE top 50 companies in the Financial Mail 2012 Top
Empowered Companies index; contributed R41m to
social development; spent R2,9bn on local procurement;
launched the first Green Savings Bond in SA; opened
our third building with the 4-Star Green Star rating at
Menlyn Maine; and won the Financial Times African and
Middle East Sustainable Bank of the Year 2012 award
and the African Business Environmental Sustainability in
Africa 2012 award.
CLUSTER PERFORMANCE
% Headline
change earnings ROE
(Rm) (%)
Jun Jun Jun Jun
2012 2011* 2012 2011*
Nedbank Capital 25,1 683 546 24,1 21,0
Nedbank 14,7 864 753 22,2 24,5
Corporate**
Nedbank
Business Banking (6,1) 433 461 20,5 22,8
Nedbank Retail 38,4 1 194 863 11,8 9,3
Nedbank Wealth 23,6 356 288 29,3 25,4
Line clusters 21,3 3 530 2 911 17,5 16,1
Centre** 55,4 (62) (139)
Total 25,1 3 468 2 772 14,1 12,2
* H1 2011 restated for enhancements to capital allocation
methodologies in 2012.
** Restated for transfer of the Rest of Africa Division from Nedbank
Corporate to the centre.
Nedbank Capital's headline earnings grew 25,1% to R683m
(June 2011: R546m). The results were mainly driven by NIR
growth of 42,4%, underpinned by strong growth in trading
as well as fee and commission income, and partly offset by
lower private equity income. EP of R311m and a ROE of
24,1% were achieved.
Nedbank Corporate grew headline earnings by 14,7% to
R864m (June 2011: R753m) from strong growth in NIR,
transactional activity and deposits, together with reduced
impairments. ROE of 22,2% was achieved as a result of an
improvement in the ROA to 1,03%, and the cluster grew
EP to R353m.
While sustaining a high ROE of 20,5%, Nedbank Business
Banking's 6,1% reduction in headline earnings and lower EP
for the period of R156m are reflective of the challenging
economic cycle adversely impacting the small- and
medium-enterprise (SME) sector. Good progress was made
in new client acquisitions and cross-sell, while maintaining
outstanding risk management practices reflected in the
credit loss ratio of 0,41%.
Nedbank Retail's accelerating momentum is reflected
in 38,4% headline earnings growth and improving ROE
to narrow the gap in relation to the cost of equity. This
is testimony to the excellent progress strategically and
financially in repositioning the cluster. Diligent execution of
the distinctive client-centred growth strategy and effective
risk management practices resulted in strong client gains,
increased transactional and lending volumes, and lower
impairments, while also further strengthening balance
sheet impairments and expanding distribution.
Nedbank Wealth generated strong earnings growth of
23,6% to R356m (June 2011: R288m). NII increased 8,4%
supported by international wealth management and BoE
Private Clients increasing NII 19,7% and 13,4% respectively.
Further support came from good insurance earnings growth
of 39,1% and total assets under management increasing
18,3% to R125,5bn.
The Rest of Africa Division delivered a strong increase in
headline earnings of 60,5%. This division was previously
housed in Nedbank Corporate and is now managed at
group level, with earnings included in headline earnings
at the centre.
Further segmental information is available on the group's
website at www.nedbankgroup.co.za.
FINANCIAL PERFORMANCE
NII
NII grew 11,0% to R9 642m (June 2011: R8 683m),
underpinned by 7,7% (annualised) growth in average
interest-earning banking assets (June 2011: 5,9%).¹
The net interest margin (NIM) increased to 3,53% from the
comparative period (June 2011: 3,43%) and the full 2011
year (December 2011: 3,46%)¹, supported by sustained
momentum in asset mix changes, offset by the cost of
lengthening the liquidity profile and holding higher liquid
asset buffers.
IMPAIRMENTS CHARGE ON LOANS AND
ADVANCES
The group's credit loss ratio continued to improve to
1,11%¹ (June 2011: 1,21%) from reduced levels of specific
impairments, driven by better asset quality, reduced
defaulted advances, higher levels of repayments and
improved risk management. Portfolio impairments of
11 basis points included the strengthening of balance sheet
impairments on the performing home loans and personal
loans book.
Credit loss ratio analysis Jun Jun Dec
(%) 2012 2011 2011
Specific impairments 1,00 1,10 1,02
Portfolio impairments 0,11 0,11 0,12
Total credit loss ratio 1,11 1,21 1,14
Nedbank Retail and Nedbank Corporate were the main
drivers of the group's improved credit loss ratio. In Nedbank
Retail home loan impairments continued to improve, while
bad debt recoveries increased from effective collection
processes. Nedbank Capital's impairments charge reflects
the increasing pressures in the operating environment.
Through-
% the-cycle
Credit loss banking Jun Jun Dec target
ratio (%) advances 2012 2011 2011 ranges
Nedbank
Capital 10,1 1,41 0,86 1,23 0,10 0,35
Nedbank
Corporate* 32,2 0,30 0,35 0,29 0,20 0,35
Nedbank
Business
Banking 12,1 0,41 0,40 0,54 0,55 0,75
Nedbank
Retail 39,7 2,00 2,24 1,98 1,50 2,20
Nedbank
Wealth 4,0 0,46 0,41 0,25 0,20 0,40
Group 1,11 1,21 1,14 0,60 1,00
* The Rest of Africa Division was previously reported in Nedbank
Corporate and is now reported at the centre.
Defaulted advances declined 14,1% from R25 418m at
June 2011 and 9,6% (annualised) from R22 928m at
December 2011 to R21 838m. The group's total coverage
ratio increased from 50,1% at December 2011 to 52,9%,
and portfolio provisions of R200m raised at the centre in
the prior year were not released.
NIR
NIR grew strongly, increasing by 15,8% to R8 265m (June
2011: R7 139m)¹, clearly demonstrating the inherent
strength of the Nedbank franchise and the increasing
number of South Africans choosing to bank with Nedbank.
NIR growth was primarily driven by:
- good growth in commission and fee income of 14,6%
from increases in transactional and lending volumes,
net client acquisitions while keeping fee increases at or
below the inflation rate and deepening cross-sell across
the client base;
- excellent growth in insurance income of 29,2% from
increased sales and a positive claims experience; and
- trading income growing 35,9% following strong
performance in the fixed-income, credit and
commodities (FICC) business in the Global Markets
Division of Nedbank Capital.
Private equity income increased slightly to R139m
(June 2011: R137m), following strong realisations in
Nedbank Capital mostly offset by prudent valuations of
unrealised investment portfolios as well as lower dividend
income received in both Nedbank Capital private equity
and Nedbank Corporate property private equity. Negative
fair-value adjustments of R125m (June 2011: R61m profit)
were recorded in the designated-asset-and-liability hedged
portfolios.
The NIR-to-expenses ratio continued to increase to 83,2%
(December 2011: 81,5%), boosted by the strong growth in
NIR. The group is showing excellent progress towards the
medium-to-long-term NIR-to-expenses target of 85,0%.
EXPENSES
The group maintained good cost discipline, resulting in
an improved NIR-to-expenses growth delta of 3,3% and
a slight improvement in the efficiency ratio to 55,5%
(June 2011: 55,9%).¹
Expenses increased 12,5% to R9 939m (June 2011:
R8 838m)¹, comprising 7,0% relating to business-as-usual
activities, 2,1% relating to growth initiatives and 3,4%
relating to variable compensation.
The main contributors to the increase in expenses were:
- remuneration costs increasing 11,1% mostly from
headcount growth of 1,7% and inflation-related annual
salary increases of 6,5%;
- short-term incentive (STI) costs increasing 46,6% due to
the 25,1% increase in headline earnings and just under
300% increase in EP, as well as the heavier phasing of
the 2011 STI accrual into the second half of 2011, and
as such the growth rate should be more in line with
earnings growth for the full year;
- long-term incentive costs increasing by R67m to R198m,
as 2011 contained reversals of costs for the period from
2009 to 2011 when certain of the associated corporate
performance targets were not met and the related
incentive awards lapsed; and
- volume-driven costs, such as computer processing, card
and marketing costs, growing in support of revenue-
generating business activities.
TAXATION1
The taxation charge and effective tax rate increased to
R1 399m (June 2011: R1 013m)1 and 27,9% (June 2011:
25,7%) respectively. This was mainly the result of:
- an increase in capital gains tax (CGT) from 14,0% to
18,65%; and
- an increase in secondary tax on companies (STC)
of R86m, compared with 2011, from a reduction in
available STC credits due to the termination of the
STC regime effective 1 April 2012 and the full H2 2011
dividend being subjected to STC.
STATEMENT OF FINANCIAL POSITION
CAPITAL
The group implemented Basel II.5 capital criteria with
effect from 1 January 2012. In line with the pro forma ratio
disclosed to the market the 2011 year-end Basel II core
Tier 1 capital ratio of 11,0% decreased to 10,5% under
Basel II.5.
Strong organic earnings, partially offset by the distribution
of the group's final 2011 dividend in April 2012 and growth
in advances, resulted in the group's Basel II.5 core Tier 1
capital ratio in June 2012 increasing to 10,6%. Capital ratios
are anticipated to increase further during the remainder of
2012 as a result of ongoing risk-weighted asset optimisation
initiatives and earnings growth.
The draft SA regulations incorporating the impact of
Basel III have been issued, although some key aspects still
have to be finalised. Overall the group remains in a strong
position to meet the draft capital requirements as currently
anticipated. Revised internal targets incorporating Basel III
will be communicated to the market once the regulations
have been finalised.
Jun
2012 Jun Dec
ratio 2011 2011 Internal
(Basel ratio ratio target range
Basel II II.5) (Basel II) (Basel II) (Basel II)
Core Tier 1
ratio 10,6% 10,7% 11,0% 7,5% to 9,0%
Tier 1 ratio 12,1% 12,4% 12,6% 8,5% to 10,0%
Total capital 11,5% to
ratio 14,4% 15,2% 15,3% 13,0%
(Ratios include unappropriated profits.)
Further details will be available in the group's 30 June 2012
Pillar 3 Report to be released on 17 September 2012 and
published on the group's website at www.nedbankgroup.co.za.
CAPITAL ALLOCATION TO BUSINESSES
Enhancements relating to the internal economic capital
allocation to line clusters included an upward revision to the
amount of capital allocated to the clusters from 10,0% to
11,0%. Enhancements were also made to the allocation of
capital impaired against intangible assets, previously held at
the centre. These enhancements resulted in a dilution of the
line clusters' ROE performance, given higher capital levels.
Headline earnings and ROE numbers for the line clusters
for the comparative period were restated on a like-for-like
basis. These enhancements had no impact on the group's
overall headline earnings, capital levels and ROE ratio.
FUNDING AND LIQUIDITY
Nedbank Group remains well funded, with a strong liquidity
position, underpinned by a further lengthening of its
funding profile, growth of the deposit base, a strong loan-
to-deposit ratio of 95,6% and a low reliance on interbank
and foreign currency funding.
The average long-term funding ratio increased to 27,0%
(June 2011: 26,1%; December 2011: 25,0%), supported
by the successful issuance in March 2012 of R1,7bn
senior unsecured debt, strong growth in the Nedbank
Retail Savings Bond to R5,9bn since its launch in March
2011, and the recent launch of the Green Savings Bond.
Growth in the surplus liquid asset buffer to R26bn for
June 2012 (June 2011: R16bn; December 2011: R24bn) also
contributed to a stronger liquidity position.
The South African Reserve Bank (SARB) announcement
during the period that SA banks would have access to
committed liquidity facilities (CLFs) of up to 40% of the
Basel III liquidity coverage ratio (LCR) net cash outflows
to meet LCR requirements in 2015 has been positively
received by the market and is in line with the approaches
implemented in other similar markets. This provides clarity
on how the LCR will be adopted by SA banks given the
limited availability of level 2 assets in SA and is favourable
for credit extension and economic growth in SA.
LOANS AND ADVANCES
Group loans and advances grew 7,1% (annualised) to
R514bn (December 2011: R496bn).¹
Jun Dec % change
Rm¹ 2012 2011 (annualised)
Nedbank Capital 80 212 68 510 34,3
Banking activity 49 538 48 558 4,1
Trading activity 30 674 19 952 >100,0
Nedbank Corporate 156 537 155 010 2,0
Nedbank Business
Banking 59 061 58 272 2,7
Nedbank Retail 187 577 183 663 4,3
Nedbank Wealth 19 053 19 624 (5,9)
Centre 11 086 10 969 2,1
513 526 496 048 7,1
During the period gross new advances payouts increased to
R69bn (six months to June 2011: R52bn).
Overall advances growth continues to be shaped by the
group's portfolio tilt strategy of focusing on business
activities that generate higher EP. Nedbank Retail's advances
growth was underpinned by strong growth in personal loans,
credit card business and motor finance, partially offset by
a slight decrease in home loans following the retail home
loans strategy of positioning Nedbank Retail as the primary
client interface with differentiated risk-based pricing. The
environment for Nedbank Business Banking's SME clients
remains challenging and has impacted demand for credit
and the risk profile of this market segment. Nedbank
Corporate's advances growth of 2,0% comprises advances
growth of 6,4% in Corporate Banking and a decrease of
1,0% in Commercial Property Finance. The pipelines in the
wholesale banking areas remain strong, although growth
in the second half of the year is likely to be affected by
weak global market conditions and lower levels of business
confidence.
DEPOSITS
Deposits increased 6,1% (annualised) to R537bn (December
2011: R521bn).¹
In line with the group's funding strategy of lengthening the
term deposit book and optimising the mix of deposits, call
and term deposits increased 8,1% and cash management
deposits grew 23,0%. Negotiable certificates of deposit
(NCDs) decreased 11,9%.
Given the challenging environment with interest rates at
38-year lows, current accounts decreased 5,1% and savings
accounts showed moderate growth of 6,6%.
ECONOMIC OUTLOOK
The difficult global macro environment and recession in
Europe have led to softer GDP growth in key emerging
markets including SA.
SA's GDP is now forecast to grow by 2,5% in 2012 as a
result of lower production and weaker exports in agriculture,
manufacturing and mining. Interest rates are at 38-year
lows and are expected to remain flat for the rest of the year,
however, there is downside risk should there be a further
slowdown in economic growth rates.
Lower levels of real wage growth and increased concerns
around job security are anticipated to result in decreased
consumer spending. Consumer credit demand should
continue to grow, but is at risk of slowing down given
decreasing levels of consumer confidence.
Business confidence remains weak, with the private
sector remaining cautious and continuing to delay capital
expenditure. Government and the public sector still have
robust infrastructure plans, and, if implemented, are
expected to support wholesale advances growth.
PROSPECTS
In the light of the group's 2012 forecast for GDP growth and
interest rates the group's financial guidance for the full year
is currently as follows:
- Advances growth at mid single digits.
NIM to increase slightly from the 3,46% level for the
2011 full year.
- The credit loss ratio to continue improving to within
the upper end of the group's target range of 0,60% to
1,00%.
- NIR (excluding fair-value adjustments) to grow at low
double digits, maintaining ongoing improvements in the
group's NIR-to-expenses ratio.
- Expenses, including investing for growth, to increase by
mid to upper single digits.
- The group to maintain strong capital ratios and continue
to strengthen funding and liquidity in preparation for
Basel III.
The group's financial guidance for 2012 as set out above
remains largely unchanged from that given earlier in the
year, with the exception of an upward revision of the
margin, which was previously expected to remain at the
December 2011 level of 3,46% and is now anticipated to
be slightly above this level.
The SARB is expected to finalise Basel III capital levels for
SA banks in the second half of 2012. Once the Basel III
capital levels have been set, the group will be in a position
to finalise its Basel III capital targets, review the current
dividend policy of 2,25 to 2,75 times and communicate
this to the market at the release of the 2012 annual results.
Building on the growth momentum from the first half of
2012, the group remains on track to achieve its earnings
growth for the year in line with its medium-to-long-term
financial target [GDP plus consumer price index (CPI)
plus 5%].
Shareholders are advised that this guidance has not been
reviewed or reported on by the group's auditors.
BOARD AND EXECUTIVE CHANGES
DURING THE PERIOD
Professor Brian Figaji retired as independent non-executive
director of Nedbank Group and Nedbank Limited with
effect from Friday, 4 May 2012.
Ian David Gladman was appointed as non-executive
director of Nedbank Group and Nedbank Limited with
effect from 7 June 2012.
Gawie Nienaber retired as Group Company Secretary with
effect from 30 June 2012 after reaching the mandatory
retirement age in terms of Nedbank Group's normal
retirement policy.
Thabani Jali was appointed as Group Company Secretary
and Jackie Katzin was appointed as Deputy Group Company
Secretary of Nedbank Group and Nedbank with effect from
1 July 2012.
ACCOUNTING POLICIES¹
Nedbank Group Limited is a company domiciled in South
Africa. The condensed consolidated interim financial results
of the group at and for the six months ended 30 June 2012
comprise the company and its subsidiaries (the 'group') and
the group's interests in associates and jointly controlled
entities.
Nedbank Group's principal accounting policies have been
prepared in terms of the International Financial Reporting
Standards (IFRS) of the International Accounting Standards
Board and have been applied consistently over the current
and prior financial years. Nedbank Group's condensed
consolidated interim financial results have been prepared in
accordance with the measurement and recognition criteria
of IFRS and presented in accordance with the disclosures,
prescribed by International Accounting Standard (IAS) 34:
Interim Financial Reporting, the South African Statements
and Interpretations of Statements of Generally Accepted
Accounting Practice (AC 500 series) issued by the
Accounting Practices Board and the requirements of the
Companies Act of SA.
In the preparation of these condensed consolidated interim
financial results the group has applied key assumptions
concerning the future and other inherent uncertainties in
recording various assets and liabilities. The assumptions
applied in the financial results for the six months ended
30 June 2012 were consistent with those applied during
the 2011 financial year. These assumptions are subject to
ongoing review and possible amendments. The financial
results have been prepared under the supervision of
Raisibe Morathi, the Chief Financial Officer.
EVENTS AFTER THE REPORTING PERIOD¹
There are no material events after the reporting period to
report on.
REVIEWED RESULTS INDEPENDENT
AUDITORS' REPORT
KPMG Inc and Deloitte & Touche, Nedbank Group's
independent auditors, have reviewed the condensed
consolidated interim financial results of Nedbank Group
Limited and have expressed an unmodified review
conclusion on the condensed consolidated interim
financial results. The auditors' review was conducted
in accordance with International Standards of Review
Engagements (ISRE 2410): Review of Interim Information
Performed by the Independent Auditor of the Entity. The
condensed consolidated interim financial results comprise
the consolidated statement of financial position at
30 June 2012, consolidated statement of comprehensive
income, condensed consolidated statement of changes in
equity, condensed consolidated statement of cashflows
for the six months then ended and selected explanatory
notes. The related notes are marked with ¹. The review
report is available for inspection at Nedbank Group's
registered office.
FORWARD-LOOKING STATEMENTS
This announcement contains certain forward-looking
statements with respect to the financial condition and
results of operations of Nedbank Group and its group
companies that, by their nature, involve risk and uncertainty
because they relate to events and depend on circumstances
that may or may not occur in the future. Factors that could
cause actual results to differ materially from those in the
forward-looking statements include, but are not limited to,
global, national and regional economic conditions; levels
of securities markets; interest rates; credit or other risks of
lending and investment activities; as well as competitive
and regulatory factors. By consequence, all forward-looking
statements have not been reviewed or reported on by the
group's auditors.
INTERIM DIVIDEND DECLARATION
Notice is hereby given that a gross interim dividend of
340 cents per ordinary share has been declared, payable to
shareholders for the six months ended 30 June 2012. The
dividend has been declared out of income reserves.
The dividend will be subject to a local dividend tax rate of
15% or 51 cents per ordinary share, resulting in a net dividend
of 289 cents per ordinary share, unless the shareholder is
exempt from paying dividend tax or is entitled to a reduced
rate in terms of the applicable double-tax agreement. No
STC credits were available to be utilised as part of this
declaration. Nedbank Group Limited's tax reference number
is 9375/082/71/7 and the number of ordinary shares in issue
at the date of declaration is 507 509 491.
In accordance with the provisions of Strate, the electronic
settlement and custody system used by JSE Limited, the
relevant dates for the dividend are as follows:
Event Date
Last day to trade (cum dividend) Friday, 31 August 2012
Shares commence trading
(ex dividend) on Monday, 3 September 2012
Record date (date shareholders
recorded in books) Friday, 7 September 2012
Payment date Monday, 10 September 2012
Share certificates may not be dematerialised or
rematerialised between Monday, 3 September 2012, and
Friday, 7 September 2012, both days inclusive.
On Monday, 10 September 2012, the dividend will be
electronically transferred to the bank accounts of all
certificated shareholders where this facility is available.
Where electronic funds transfer is either not available or
not elected by the shareholder, cheques dated Monday,
10 September 2012, will be posted on that date.
Holders of dematerialised shares will have their accounts
credited at their participant or broker on Monday,
10 September 2012.
The above dates and times are subject to change. Any
changes will be published on the Securities Exchange News
Service (SENS) and in the press.
For and on behalf of the board
Dr RJ Khoza MWT Brown
Chairman Chief Executive
1 August 2012
FINANCIAL HIGHLIGHTS
at Reviewed 30 Jun 2012 Reviewed 30 Jun 2011 Audited 31 Dec 2011
Statistics
Number of shares listed m 507,5 507,4 507,4
Number of shares in issue, excluding shares held by group entities m 456,0 454,4 455,2
Weighted average number of shares m 455,7 451,2 452,9
Diluted weighted average number of shares m 468,0 462,2 461,5
Preprovisioning operating profit Rm 7 569 6 577 13 709
Economic profit Rm 578 146 924
Headline earnings per share cents 761 614 1 365
Diluted headline earnings per share cents 741 600 1 340
Ordinary dividends declared per share cents 340 265 605
Interim cents 340 265 265
Final cents 340
Ordinary dividends paid per share cents 340 268 533
Dividend cover times 2,24 2,32 2,26
Net asset value per share cents 11 208 10 128 10 753
Tangible net asset value per share cents 9 500 8 477 9 044
Closing share price cents 17 389 14 650 14 500
Price/earnings ratio historical 11 12 11
Market capitalisation Rbn 88,2 74,3 73,6
Number of employees 28 678 28 210 28 494
Key ratios (%)
Return on ordinary shareholders' equity (ROE) 14,1 12,2 13,6
ROE, excluding goodwill 15,7 13,7 15,3
Return on total assets 1,07 0,92 0,99
Net interest income to average interest-earning banking assets 3,53 3,43 3,46
Credit loss ratio banking advances 1,11 1,21 1,14
Non-interest revenue to total operating expenses 83,2 80,8 81,5
Non-interest revenue to total income 46,2 45,1 46,1
Efficiency ratio 55,5 55,9 56,6
Efficiency ratio (excluding BEE transaction expense) 55,3 55,5 56,0
Effective taxation rate 27,9 25,7 25,2
Group capital adequacy ratios (including unappropriated profits):
Core Tier I 10,6* 10,7 11,0
Tier 1 12,1* 12,4 12,6
Total 14,4* 15,2 15,3
Statement of financial position statistics (Rm)
Total equity attributable to equity holders of the parent 51 110 46 022 48 946
Total equity 54 856 49 728 52 685
Amounts owed to depositors 536 944 493 974 521 155
Loans and advances 513 526 471 918 496 048
Gross 525 071 483 385 507 545
Impairment of loans and advances (11 545) (11 467) (11 497)
Total assets administrated by the group 795 537 715 981** 760 358
Total assets 670 021 609 875 648 127
Assets under management 125 516 106 106** 112 231
Life assurance embedded value 1 827 1 122 1 522
Life assurance value of new business 279 152 409
* Basel II.5 and not reviewed by or reported on by the group's auditors.
** Restated.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-controlling Non-controlling
Total equity interest interest
attributable to attributable to attributable to
equity holders ordinary preference
Rm of the parent shareholders shareholders Total equity
Balance at 31 December 2010 44 101 153 3 560 47 814
Dividend to shareholders (1 251) (9) (1 260)
Dividend in respect of BEE transaction (310) (310)
Preference share dividend (143) (143)
Issues of shares net of expenses 313 313
Shares delisted (10) (10)
Shares acquired/cancelled by group entities and BEE trusts 148 148
Dilution of shareholding in subsidiary 11 (11)
Total comprehensive income for the period 2 842 13 143 2 998
Share-based payment reserve movement 176 176
Regulatory risk reserve provision 2 2
Balance at 30 June 2011 46 022 146 3 560 49 728
Dividend to shareholders (1 357) (2) (1 359)
Preference share dividend (138) (138)
Issues of shares net of expenses 20 20
Shares acquired/cancelled by group entities and BEE trusts (53) (53)
Total comprehensive income for the period 4 037 27 138 4 202
Share-based payment reserve movement 270 270
Regulatory risk reserve provision (2) (2)
Acquisition of subsidiary 7 1 8
Other movements 9 9
Balance at 31 December 2011 48 946 178 3 561 52 685
Dividend to shareholders (1 628) (7) (1 635)
Dividend in respect of BEE transaction 19 19
Preference share dividend (142) (142)
Issues of shares net of expenses 13 13
Shares acquired/cancelled by group entities and
BEE trusts 9 9
Total comprehensive income for the period 3 503 14 142 3 659
Share-based payment reserve movement 245 245
Regulatory risk reserve provision 1 1
Other movements 2 2
Balance at 30 June 2012 51 110 185 3 561 54 856
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the period ended
Rm Reviewed 30 Jun 2012 Reviewed 30 Jun 2011 Audited 31 Dec 2011
Interest and similar income 22 362 21 030 42 880
Interest expense and similar charges 12 720 12 347 24 846
Net interest income 9 642 8 683 18 034
Impairments charge on loans and advances 2 702 2 792 5 331
Income from lending activities 6 940 5 891 12 703
Non-interest revenue 8 265 7 139 15 412
Operating income 15 205 13 030 28 115
Total operating expenses 9 939 8 838 18 919
Operating expenses 9 893 8 788 18 725
BEE transaction expenses 46 50 194
Indirect taxation 243 252 505
Profit from operations before non-trading and capital items 5 023 3 940 8 691
Non-trading and capital items 34 (16) (14)
Net profit on sale of subsidiaries, investments, and
property and equipment 29 16 40
Net impairment of investments, property and equipment,
and capitalised development costs 5 (32) (54)
Profit from operations before direct taxation 5 057 3 924 8 677
Total direct taxation 1 404 1 005 2 174
Direct taxation 1 399 1 013 2 194
Taxation on non-trading and capital items 5 (8) (20)
Profit for the period 3 653 2 919 6 503
Other comprehensive income net of taxation 6 79 697
Exchange differences on translating foreign operations 17 87 469
Fair-value adjustments on available-for-sale assets (1) (8) (21)
(Losses)/Gains on property revaluations (10) 249
Total comprehensive income for the period 3 659 2 998 7 200
Profit attributable to:
Equity holders of the parent 3 497 2 764 6 190
Non-controlling interest ordinary shareholders 14 12 32
Non-controlling interest preference shareholders 142 143 281
Profit for the period 3 653 2 919 6 503
Total comprehensive income attributable to:
Equity holders of the parent 3 503 2 842 6 879
Non-controlling interest ordinary shareholders 14 13 40
Non-controlling interest preference shareholders 142 143 281
Total comprehensive income for the period 3 659 2 998 7 200
Basic earnings per share cents 767 613 1 367
Diluted earnings per share cents 747 598 1 341
HEADLINE EARNINGS RECONCILIATION
Reviewed Reviewed Audited
for the period ended 30 Jun 2012 30 Jun 2011 31 Dec 2011
Rm Gross Net of taxation Gross Net of taxation Gross Net of taxation
Profit attributable to equity holders of the parent 3 497 2 764 6 190
Less: Non-trading and capital items 34 29 (16) (8) (14) 6
Net profit on sale of subsidiaries, investments,
and property and equipment 29 24 16 24 40 60
Net impairment of investments, property and
equipment, and capitalised development costs 5 5 (32) (32) (54) (54)
Headline earnings 3 468 2 772 6 184
CONDENSED SEGMENTAL REPORTING
Total assets Operating income Headline earnings
Reviewed Reviewed Audited Reviewed Reviewed Audited Reviewed Reviewed Audited
for the period ended 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec
Rm 2012 2011 2011 2012 2011 2011 2012 2011 2011
Nedbank Capital 157 065 120 673 149 789 1 844 1 368 3 091 683 546 1 228
Nedbank Corporate 168 733 156 272 167 074 2 143 1 887 3 865 864 753 1 571
Total Nedbank Retail and
Nedbank Business Banking 283 495 271 768 279 323 9 129 8 029 17 102 1 627 1 324 2 957
Nedbank Retail 193 889 185 755 190 398 7 062 6 063 13 107 1 194 863 2 091
Nedbank Business
Banking 89 606 86 013 88 925 2 067 1 966 3 995 433 461 866
Nedbank Wealth 40 953 34 645 37 759 1 468 1 257 2 690 356 288 654
Shared Services 7 083 7 252 7 315 (4) 77 259 10 (14) 3
Central Management 146 953 160 633 153 282 650 432 1 150 (72) (125) (229)
Eliminations (134 261) (141 368) (146 415) (25) (20) (42)
Total 670 021 609 875 648 127 15 205 13 030 28 115 3 468 2 772 6 184
The segmental results for the periods ended 30 June 2011 and 31 December 2011 have been restated for the following adjustments:
(a) enhancements to the allocation of economic capital; (b) the reallocation of negotiable certificates of deposit from Nedbank Capital
to the centre; and (c) transferring the Rest of Africa Cluster from Nedbank Corporate to Central Management. These restatements have no
effect on the group results and ratios, and only affect the segment results and related ratios.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at
Rm Reviewed 30 Jun 2012 Reviewed 30 Jun 2011 Audited 31 Dec 2011
Assets
Cash and cash equivalents 11 840 11 743 13 457
Other short-term securities 42 090 29 125 35 986
Derivative financial instruments 14 608 8 284 12 840
Government and other securities 26 693 36 056 30 176
Loans and advances 513 526 471 918 496 048
Other assets 11 775 7 900 12 051
Clients' indebtedness for acceptances 2 562 2 754 2 975
Current taxation receivable 976 618 698
Investment securities 15 825 12 808 14 281
Non-current assets held for sale 22 8 8
Investments in associate companies and joint ventures 602 1 128 568
Deferred taxation asset 269 229 266
Investment property 617 202 614
Property and equipment 6 259 5 835 6 312
Long-term employee benefit assets 2 185 2 111 2 118
Mandatory reserve deposits with central banks 12 384 11 654 11 952
Intangible assets 7 788 7 502 7 777
Total assets 670 021 609 875 648 127
Equity and liabilities
Ordinary share capital 456 454 455
Ordinary share premium 15 955 15 968 15 934
Reserves 34 699 29 600 32 557
Total equity attributable to equity holders of the parent 51 110 46 022 48 946
Non-controlling interest attributable to:
ordinary shareholders 185 146 178
preference shareholders 3 561 3 560 3 561
Total equity 54 856 49 728 52 685
Derivative financial instruments 15 272 8 894 13 853
Amounts owed to depositors 536 944 493 974 521 155
Provisions and other liabilities 16 246 13 691 14 751
Liabilities under acceptances 2 562 2 754 2 975
Current taxation liabilities 116 121 200
Deferred taxation liabilities 1 033 1 858 1 345
Long-term employee benefit liabilities 1 544 1 458 1 479
Investment contract liabilities 8 709 7 666 8 237
Insurance contract liabilities 2 683 1 541 2 005
Long-term debt instruments 30 056 28 190 29 442
Total liabilities 615 165 560 147 595 442
Total equity and liabilities 670 021 609 875 648 127
CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS
for the period ended Reviewed Reviewed Audited
Rm 30 Jun 2012 30 Jun 2011 31 Dec 2011
Cash generated by operations 9 121 7 914 16 552
Change in funds for operating activities (4 641) (2 082) (4 080)
Net cash from operating activities before taxation 4 480 5 832 12 472
Taxation paid (2 431) (855) (3 609)
Cashflows from operating activities 2 049 4 977 8 863
Cashflows utilised by investing activities (2 155) (2 147) (3 702)
Cashflows (utilised by)/from financing activities (1 115) 833 557
Effects of exchange rate changes on opening cash and cash equivalents
(excluding foreign borrowings) 36 (11) (54)
Net (decrease)/increase in cash and cash equivalents (1 185) 3 652 5 664
Cash and cash equivalents at the beginning of the period* 25 409 19 745 19 745
Cash and cash equivalents at the end of the period* 24 224 23 397 25 409
* Including mandatory reserve deposits with central banks.
CONDENSED GEOGRAPHICAL SEGMENTAL REPORTING
Operating income Headline earnings
Reviewed Reviewed Audited Reviewed Reviewed Audited
for the period ended 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec
Rm 2012 2011 2011 2012 2011 2011
SA 14 217 12 095 26 228 3 171 2 519 5 695
Business operations 14 217 12 095 26 228 3 354 2 706 6 162
BEE transaction expenses (41) (44) (186)
Profit attributable to non-
controlling interest preference
shareholders (142) (143) (281)
Rest of Africa 584 503 1 101 124 95 246
Rest of world business operations 404 432 786 173 158 243
Total 15 205 13 030 28 115 3 468 2 772 6 184
Directors: RJ Khoza (Chairman), MWT Brown* (Chief Executive), TA Boardman, TCP Chikane,
GW Dempster* (Chief Operating Officer), MA Enus-Brey, ID Gladman (British), DI Hope (New Zealand),
WE Lucas-Bull, PM Makwana, NP Mnxasana, RK Morathi* (Chief Financial Officer), JK Netshitenzhe,
JVF Roberts (British), GT Serobe, MI Wyman** (British).
* Executive ** Senior independent non-executive director
Company Secretary: TSB Jali
Registered office: Nedbank Group Limited, Nedbank Sandton, 135 Rivonia Road, Sandown, Sandton, 2196.
PO Box 1144, Johannesburg, 2000.
Reg No: 1966/010630/06 ISIN: ZAE000004875
JSE share code: NED NSX share code: NBK
Transfer secretaries in SA: Computershare Investor
Services (Pty) Limited, 70 Marshall Street, Johannesburg,
2001, SA. PO Box 61051, Marshalltown, 2107, SA.
Transfer secretaries in Namibia: Transfer Secretaries
(Pty) Limited, Shop 8, Kaiserkrone Centre, Post Street Mall,
Windhoek, Namibia. PO Box 2401, Windhoek, Namibia.
Sponsors in SA:
Merrill Lynch South Africa (Pty) Limited, Nedbank Capital.
Sponsor in Namibia:
Old Mutual Investment Services (Namibia) (Pty) Limited.
This announcement is available on the group's website at
www.nedbankgroup.co.za, together with the following
additional information:
- Detailed financial information in HTML and PDF formats.
- Financial results presentation to analysts.
- Link to a webcast of the presentation to analysts.
For further information kindly contact Nedbank Group
Investor Relations at nedbankgroupir@nedbank.co.za.
Date: 01/08/2012 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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