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NEDBANK GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1966/010630/06
JSE share code: NED
NSX share code: NBK
ISIN: ZAE000004875
('Nedbank Group' or 'the Group')
PRELIMINARY AUDITED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER 2015
- Headline earnings increased 9,6% to R10 831m'
- Diluted headline earnings per share up 8,5% to 2 242 cents'
- Growth in tangible net asset value per share of 9,9%'
- Return on equity (excluding goodwill) at 17,0%
- Common-equity tier 1 ratio at 11,3%
- Full-year dividend per share up 7,7% to 1 107 cents
'Nedbank Group produced a resilient performance in an environment of difficult macroeconomic conditions, volatile markets and an escalating
regulatory agenda.
We delivered growth in diluted headline earnings per share of 8,5% ' ahead of the guidance we gave during the year. Earnings growth was driven by
ongoing momentum in NIR and disciplined cost management, combined with the benefit of equity-accounted earnings from our investment in ETI
based on our 20% share of their 12 months of publicly reported results to September 2015.
NIR growth was underpinned by an 8,5% growth in retail main banked clients and from our integrated CIB model that successfully unlocked additional
revenue growth and cross-sell opportunities. In response to increasing macroeconomic headwinds, we focused on reducing cost growth, maintaining
conservative provisioning levels and increasing liquidity buffers.
Nedbank is committed to long-term value creation for all our stakeholders and we were honoured to win 2015 Bank of the year in both Africa and SA
by The Financial Times and The Banker magazine.
Nedbank Group is in excellent shape to deal with the challenging macroeconomic environment that we expect in both SA and in the rest of Africa.
Forecast risk has increased and as a result our guidance for performance in the year ahead is harder than usual to formulate. Against this context we
currently forecast that growth in diluted headline earnings per share for 2016 will be lower than the growth we achieved in 2015 and below our
medium-to-long-term target of consumer price index + GDP growth + 5%. Given the increased forecast risk we will update this guidance with our
June 2016 results.'
Mike Brown
Chief Executive
BANKING AND ECONOMIC ENVIRONMENT
Globally the economic climate remained challenging, with improved growth in developed markets insufficient to offset the effects on emerging
markets of depressed oil and commodity prices and the broader impact of the slowdown in China. Additionally the tightening of US monetary policy
has placed further pressure on emerging markets as capital flows are diverted towards developed markets.
Economic conditions in SA have also deteriorated as reflected by our 2015 gross domestic product (GDP) growth forecast of 1,3%. This is considerably
less than the 2015 GDP growth of 2,5% we had forecast in February 2015. Various factors, including inadequate infrastructure, economic policy
uncertainty, concerns around government debt levels and the drought-related contraction in the agricultural sector, resulted in the USD/ZAR exchange
rate depreciating significantly in 2015, notwithstanding interest rate increases of 50 basis points (bps) and inflation remaining below 6,0%.
These and other factors led to Fitch Ratings downgrading the sovereign ratings to one notch above investment grade at BBB- (from BBB) with a stable
outlook. Moody's sovereign rating of Baa2/P-2 is currently two notches above investment grade and Standard & Poor's sovereign rating of BBB-/A-3 is
one notch above investment grade. Both Moody's and Standard & Poor's revised the outlook on their ratings from stable to negative, indicating a
likelihood of a possible downgrade in the next rating review, which could place Standard & Poor's sovereign rating of SA at subinvestment grade.
Against this challenging background wholesale credit demand has slowed, but remains ahead of retail demand, as consumers face increasing
pressures from the risk of job losses, high levels of indebtedness, increasing administrative costs and higher interest rates. Wholesale credit demand
continues to be supported by infrastructure-related projects.
Government, business and labour are working together to use the challenging economic environment as a catalyst for increased collaboration to
accelerate the rate of economic growth and job creation and to strengthen public finances. The group has been and will continue to be an active
participant in these discussions.
REVIEW OF RESULTS
Headline earnings grew 9,6%' to a record level of R10 831m' (2014: R9 880m)'. This was largely achieved through growth in non-interest revenue
(NIR), strong cost discipline and increased associate income from our investment in Ecobank Transnational Incorporated (ETI), partly offset by an
increase in impairments. Preprovisioning operating profit (PPOP) increased 7,3% (2014: 3,5%). Earnings growth was stronger in the first half of the
year, boosted by robust trading revenues and a weaker base in 2014. In the second half earnings growth slowed as NIR was impacted by, among
others, reduced levels of card-related interchange and increased impairments in Corporate and Investment Banking (CIB)'.
Other comprehensive income benefited from foreign currency translation gains and as a result total profit attributable to equity holders of the parent
increased 22,9% to R12,8bn'.
Diluted headline earnings per share (DHEPS) grew 8,5% to 2 242 cents' (2014: 2 066 cents)' and diluted basic earnings per share increased 8,3% to
2 219 cents' (2014: 2 049 cents)'. Excluding associate income from our shareholding in ETI and the related funding costs, the group's DHEPS
increased 4,8%.
Economic profit (EP) increased 19,6% to R2 525m (2014: R2 112m) relative to a cost of equity of 13,0% (2014: 13,5%). The cost of equity metric is set
annually in advance and therefore the 2015 cost of equity of 13,0% is not reflective of the movements in long bond rates in December 2015. The cost
of equity for 2016 is estimated at closer to 15,0% and, had this been used throughout 2015, EP would have decreased 41,0%. Return on average
ordinary shareholders' equity (ROE) (excluding goodwill) and ROE declined slightly to 17,0% (2014: 17,2%) and 15,7% (2014: 15,8%), as a result of the
lower return on assets (ROA) of 1,25% (2014: 1,27%), while gearing increased slightly to 12,5 times from 12,4 times.
The group's balance sheet remained strong. Our Basel III common-equity tier 1 (CET1) ratio of 11,3% (2014: 11,6%) continues to be well within our
Basel III 2019 internal target range of 10,5% to 12,5%. The liquidity coverage ratio (LCR) increased to 88,5%, above the 60% requirement in 2015 and
the 70% requirement in 2016. Our portfolio of LCR-compliant, high-quality liquid assets (HQLA) increased to a fourth-quarter average of R118,0bn
(2014: fourth-quarter average R91,4bn). The group's combined portfolio of LCR-compliant HQLA and other sources of quick liquidity amounted to
R160,7bn (2014: R126,1bn), representing 17,4% (2014: 15,6%) of total assets.
Net asset value per share continued to increase, growing 9,0%' to 15 685 cents' (2014: 14 395 cents)'.
Delivering sustainably to all our stakeholders
Nedbank Group is committed to long-term value creation for all our stakeholders. In line with our vision to be Africa's most admired bank by staff,
clients, shareholders, regulators and communities, we are pleased to report that Nedbank Group was named 2015 Bank of the Year in both Africa and
South Africa by The Financial Times and The Banker magazine.
During the period we delivered on a number of initiatives as part of our commitments to our stakeholders:
For staff ' creating 714 new permanent-employment opportunities, restructuring of CIB, integration of Retail and Business Banking (RBB) backoffices
and reorganisation of our insurance businesses; investing R371m in training, with more than 20 000 staff participating in learning programmes;
supporting 111 external bursars across 19 universities and 2 924 learners across our learnership programmes. Nedbank's achievement in staff
transformation was recognised at the 14th Annual Oliver Empowerment Awards where we received the Top Empowered Business of the Year award,
and were placed third overall for creating equal employment opportunities and limiting barriers to employment equity in Namibia by the Employment
Equity Commission.
For clients ' investing in client-centred innovation such as the Nedbank Instant Bond Indicator', Market Edge' and 'Easy to do credit' in Business
Banking. To improve client access through our distribution channels, we rolled out an additional 94 Intelligent Depositors, 8 195 new point-of-sale
devices and 110 net new ATMs, as well as a further 84 branches in the 'branch of the future' format. Digitally enabled clients increased 40%,
supporting 66% growth in the value of AppSuite' transactions to R16bn. Group client numbers increased 3,0% to 7,4m, including the closure of
359 000 dormant accounts and retail main banked clients were up 8,5%. We advanced R185bn (2014: R167bn) of new loans to clients. Assets under
management grew by 21,4% to R257bn (2014: R212bn) as Nedgroup Investments continued to produce excellent investment performance for our
clients, including winning the Raging Bull Award for both the South African and Offshore Management Company of the Year, in addition to being
ranked the top unit trust company in the October 2015 Plexcrown quarterly ratings.
For shareholders ' growing net asset value per share by 9,0% to 15 685 cents' (2014: 14 395 cents)', delivering EP of R2 525m, increasing the total
dividend by 7,7%, ahead of the 7,4% growth in headline earnings per share (HEPS) and creating R8,2bn in value for over 500 000 of our broad-based
black economic empowerment (BBBEE) shareholders with the maturing of our BBBEE schemes in January 2015. Ensuring transparent, relevant and
timeous reporting and disclosure to shareholders, as acknowledged by Nedbank's ranking among the top quartile of JSE-listed companies.
For regulators ' maintaining full compliance with Basel III phase-in requirements, achieving an average long-term funding ratio of 28,7% and an
average LCR ratio of 88,5% in the fourth quarter; making cash taxation contributions of R8,2bn relating to direct, indirect, PAYE and other taxation;
ensuring we have a comprehensive recovery plan; maintaining transparent relationships and working closely with all regulators; establishing a
Regulatory Change Programme Office focused on ensuring efficient delivery against the various regulatory programmes, including the Anti-money-
laundering, Treating Clients Fairly, Protection of Personal Information, International Financial Reporting Standard 9, Risk Data Aggregation and Risk
Reporting, Twin Peaks and Market Conduct Programmes.
For communities ' advancing R57,6bn in new loans to retail clients; contributing R540m to socioeconomic development since 2011, including R125m
in 2015; supporting local businesses and purchasing 75% of our procurement spend locally. Investing R100m over three years in conjunction with our
black business partners in initiatives aligned with the Financial Sector Code and National Development Plan, including the first disbursement of R11m
to the Centane Agricultural Development project in the Eastern Cape focused on creating sustainable, self-funding commercial farms from primarily
communally owned land. We maintained our level 2 BBBEE contributor status for the seventh consecutive year. Our Fair Share 2030 initiative has
enabled R1,8bn of new lending to support green affordable housing, student accommodation and embedded energy, particularly in the farming sector,
and we introduced the Nedbank Insurance Green Property Plan, offering investment opportunities in green properties within a unit-linked fund.
Nedbank also contributed towards the country's water and energy security by investing in the Water Balance Programme to release water back into
the ecosystem and by committing R35,0bn towards renewable energy deals of which R11,0bn has been disbursed.
Cluster financial performance
Our business clusters delivered headline earnings growth of 13,2%' and an ROE of 19,3% (2014: 19,7%) on an increased average capital allocation of
R59,6bn (2014: R51,4bn).
Headline earnings
% change (Rm)' ROE (%)
2015 2014 2015 2014
CIB 10,2 5 208 4 727 22,6 27,0
RBB 10,6 4 460 4 031 16,6 14,6
Wealth 8,8 1 134 1 042 41,5 36,8
Rest of Africa 93,6 691 357 10,2 10,1
Business clusters 13,2 11 493 10 157 19,3 19,7
Centre > (100,0) (662) (277)
Total 9,6 10 831 9 880 15,7 15,8
Nedbank CIB's earnings growth of 10,2% was driven by good topline performance, demonstrating the strength of the underlying businesses and well-
managed expenses. This was partly offset by an increase in impairments largely relating to clients impacted by the downturn in the commodity cycle.
PPOP increased 21,9%. The ROE decreased to 22,6% (2014: 27,0%) following a 32,0% increase in capital allocated. This increase was mainly due to
ratings migration across certain portfolios, and the introduction of an industrywide regulatory capital charge for credit value adjustments (CVA) on over-
the-counter (OTC) ZAR derivatives and OTC derivatives with local counterparties not cleared through a central counterparty.
Nedbank RBB grew earnings 10,6% and benefited from an ongoing reduction in impairments following a number of years of selective origination strategies
across all asset classes, combined with proactive risk management and continued strengthening of balance sheet impairments. Topline growth improved,
notwithstanding the deliberate slowdown in personal-loan advances, lower interchange fees, and the run rate effect of selected fee reductions
implemented in the second half of 2014. We continued to invest in our distribution channels, marketing and client-centred innovation, while managing
costs diligently and extracting efficiencies. The improvement in ROE from 14,6% to 16,6% was particularly pleasing, given the focus we have had on
this metric.
Nedbank Wealth achieved headline earnings growth of 8,8% and ROE increased to 41,5%. The strong momentum experienced in the first half of 2015
continued both locally and internationally in our Wealth Management businesses. Nedbank Private Wealth benefited from strong advances and liabilities
growth, while stockbroking and financial planning delivered a solid set of results. Asset Management had an outstanding year, with excellent fund
performance and record net inflows. Insurance continues to be impacted by the historic slowdown in retail lending volumes.
Rest of Africa's performance was largely driven by associate income from our investment in ETI, while earnings from our African subsidiaries in the
Southern African Development Community (SADC) and East Africa were affected by a single once-off impairment charge. We account for our share of
ETI's earnings using its publicly disclosed results one quarter in arrears. This means that Nedbank's 2015 results contain our share of ETI's earnings for
their 12-month period ended 30 September 2015.
The centre reported a loss of R662m mainly as a result of the R108m after-tax impact of the R150m increase in the central provision to R500m', prime/
Johannesburg Interbank Agreed Rate (JIBAR) margin squeeze of R184m post tax as a result of short-term funding costs repricing faster than prime-linked
assets and accounting mismatch on certain hedged portfolios of R155m post tax that will reverse over time.
Detailed segmental information is available in the results booklet and under the 'Equity Investor Centre' section on the group's website at
nedbankgroup.co.za.
FINANCIAL PERFORMANCE
Net interest income
Net interest income (NII) grew 4,0%' to R23 885m' (2014: R22 961m)', with growth in average interest-earning banking assets of 11,0%, including
significantly higher levels of HQLA required for regulatory compliance with the LCR. Excluding HQLA, growth in average interest-earning banking assets
was 9,6%.
As expected, margins remained under pressure with the net interest margin (NIM) narrowing to 3,30% (2014: 3,52%) as the 10 bps combined benefit of
endowment income and asset and liability margin repricing was offset by:
- asset margin compression of 17 bps reflecting,
- 12 bps from the asset mix change, including the slowdown, albeit at a reduced pace, of our personal-loans book and
- 5 bps from holding higher levels of lower-yielding HQLA for Basel III LCR requirements; and
- liability margin compression of 15 bps including,
- 7 bps related to the increased cost of wholesale funding, including 4 bps of ETI funding costs,
- 6 bps from the relative prime JIBAR reset cost as prime rate changes lagged increases to JIBAR during 2015 and
- 2 bps linked to the cost of lengthening and diversifying the liquidity risk profile, through capital market and foreign funding sources in
preparation for the transition to the Basel III net stable funding ratio in 2018.
Impairments charge on loans and advances
Impairments increased 6,3% to R4 789m (2014: R4 506m) and the credit loss ratio (CLR) improved slightly to 0,77% (2014: 0,79%). Continued
improvements in retail impairments were offset by increased impairments in the wholesale clusters. Additional overlays were raised in RBB and at the
centre as deteriorating economic conditions prompted further strengthening of provisioning levels in the second half of 2015.
Dec H2 H1 Dec
Credit loss ratio (%) 2015 2015 2015 2014
Specific impairments 0,70 0,67 0,73 0,72
Portfolio impairments 0,07 0,10 0,04 0,07
Total credit loss ratio 0,77 0,77 0,77 0,79
The group's through-the-cycle target range for the CLR was changed to between 0,6% and 1,0%, from 0,8% and 1,2% of banking advances with effect
from 1 January 2016. The lower range reflects the change in advances mix towards a higher proportion of wholesale advances of the total book, as well as
the change in mix within Nedbank Retail towards a lower proportion of personal loans. At its peak, personal loans was 4,2% of total gross advances and
this has now reduced to 2,7%.
Improvements in retail impairments were driven by home loans, MFC and personal loans. Our strong collections focus led to further reductions in the
CLR in personal loans to 7,48% (2014: 10,04%) and in home loans to 0,06% (2014: 0,13%). Postwriteoff recoveries increased 20,8% to R1 137m (2014:
R941m), including recoveries in Retail of R1 015m (2014: R854m), largely comprising personal loans of R398m (2014: R343m) and MFC of R280m
(2014: R193m). This quantum of postwriteoff recovery is indicative of ongoing conservative provisioning levels.
Lower oil and commodity prices resulted in higher impairments in CIB and the Rest of Africa. In addition, RBB's total impairment overlay increased to
R699m (2014: R404m) and takes into consideration, inter alia, an estimate of the impairment impact that has been incurred in our agricultural book as a
result of the drought and in our personal loans book due to job losses in the mining sector, but are not yet evident. Portfolio provisions in the centre were
R350m at the start of 2015 and during the course of the year most of the items for which this provision was held were either satisfactorily resolved or
appropriate provisions were raised in the clusters. In the second half of the year the central portfolio provision was further strengthened to R500m to take
into account risks, particularly in commodities and in the Rest of Africa, that have been incurred but are only expected to emerge in 2016. Total balance
sheet impairments increased to R11 411m' (2014: R11 095m)'.
% Revised
banking H2 H1 Dec through-the-
CLR (%) advances Dec 2015 2015 2015 2014 cycle range
CIB 47,6 0,40 0,42 0,38 0,19 0,15'0,45
RBB 45,5 1,14 1,06 1,22 1,39 1,30'1,80
Wealth 4,3 0,15 0,12 0,18 0,17 0,20'0,40
Rest of Africa 2,6 1,25 1,58 0,86 0,23 0,75'1,00
Group 100 0,77 0,77 0,77 0,79 0,60'1,00
The group's total coverage ratio of 65,0% (2014: 70,0%) was driven by a lower specific coverage ratio of 38,0% (2014: 43,1%), largely due to the
implementation of the SARB directive 7/2015 on restructured accounts, which reduced specific coverage by 3,5%, improved impairments in retail
and the change in mix of retail and wholesale defaulted advances. Wholesale advances are assessed individually and are predominantly secured with
collateral resulting in relatively lower loss expectations in the event of default and, accordingly, lower specific impairments and coverage levels. The
portfolio coverage ratio for impairments remained stable at 0,70% (2014: 0,70%).
Total defaulted advances to total advances also remained stable at 2,53% (2014: 2,54%) as total defaulted advances increased 10,8% to R17 559m
(2014: R15 846m) in line with the growth in advances.
Non-interest revenue
NIR increased 7,1%' to R21 748m' (2014: R20 312m)', underpinned by:
- Commission and fee income growth of 7,3%' to R15 627m' (2014: R14 570m)', supported by continued client acquisitions, cross-sell and annual
inflation-related fee increases. Growth was, however, negatively impacted by lower card-related interchange rates amounting to R261m, the
slowdown in personal loans and the run rate effect of pricing reductions in the second half of 2014 in Small Business Services and Business Banking.
- Trading income growth of 19,6%' to R3 167m' (2014: R2 648m)' following improved cross-sell and a strong performance from our client-led Markets
business.
- Insurance income reduced 7,9%' to R1 830m' (2014: R1 986m)' owing to the historic slowdown in retail unsecured lending volumes, partially offset
by a good weather-related claims experience.
- Private-equity income, being of a less predictable nature, increasing 16,3%' to R886m' (2014: R762m)', mostly from realisations.
Expenses
Expenses were well managed and grew at 6,4%' to R26 110m' (2014: R24 534m)', including continued investment in our RBB and Rest of Africa Clusters
and the ongoing cost of compliance with increasing regulatory demands. Excluding the Rest of Africa Cluster, expenses grew at 5,6%. The main drivers
were:
- Staff-related costs rising 3,3%' (2014: 9,6%'), reflecting an increase in remuneration of 6,5% (2014: 8,8%), additional staff employed in regulatory
compliance support functions, and 2,4% lower variable performance-related incentives.
- Computer processing costs growing 14,4%' to R3 543m', including amortisation costs increasing 9,6% to R718m'.
- Fees and insurance costs increasing 23,9% to R2 801m' (2014: R2 260m)' due to increased costs associated with cash handling, compliance and
higher volumes of card issuing and acquiring.
Our strong cost discipline and focus on efficiency through our 'Optimise and invest' strategy led to cost efficiencies of R915m, supporting ongoing
investment for the future and contributing to a positive jaws ratio of 0,6% (2014: -2,5%).
Associate income
Associate income, largely from our share of approximately 20% of ETI's attributable income, increased to R871m' (2014: R161m).' Associate income is
equity-accounted one quarter in arrears using ETI's publicly disclosed results. The related funding costs of R370m (2014: R79m) are included in NII.
STATEMENT OF FINANCIAL POSITION
Capital
The group maintained a well-capitalised balance sheet. Our CET1 ratio of 11,3% (2014: 11,6%) remains around the mid-point of our Basel III 2019 internal
target range. The tier 1 and total capital ratios continue to be affected by the Basel III transitional requirements. Consequently, the tier 1 ratio decreased
following the redemption of R1,8bn of old-style hybrid debt, and the total capital ratio decreased with the redemption of NED11, representing R1bn of
old-style tier 2 subordinated debt, on its call date in September 2015. This was partially offset by the issuance of R2,3bn of new-style Basel III-compliant
tier 2 subordinated-debt instruments.
Dec Jun Dec Internal target Regulatory
Basel III(2) 2015 2015 2014 range minimum(2)
CET1 ratio 11,3% 11,4% 11,6% 10,5%'12,5% 6,5%
Tier 1 ratio 12,0% 12,1% 12,5% 11,5%'13,0% 8,0%
Total capital ratio 14,1% 14,5% 14,6% 14,0%'15,0% 10,0%
(Ratios calculated include unappropriated profits.)
(2)The Basel III regulatory requirements (excluding unappropriated profits) are being phased in between 2013 and 2019 and exclude the Pillar 2b addon.
The CET 1 ratio was impacted by risk-weighted assets (RWA) growing 13,7% to R501,2bn (2014: R440,7bn) largely as a result of an increase in credit
RWA due to:
- ratings migration across certain wholesale portfolios in line with the deteriorating economic environment;
- an industrywide CVA capital charge by the South African Reserve Bank for OTC ZAR derivatives and OTC derivatives with local counterparties not
cleared through a central counterparty, which increased RWA by R6,5bn; and
- growth in loans and advances.
Overall capital adequacy was further impacted by investments in Rest of Africa resulting in a higher capital impairment.
FUNDING AND LIQUIDITY
Our funding profile and liquidity position remains strong and well-diversified as reflected by the group's average long-term funding ratio for the fourth
quarter of 28,7% (2014: fourth-quarter average 25,4%).
The group's average LCR for the fourth quarter increased to 88,5% (2014: fourth-quarter average 66,4%), exceeding the minimum regulatory requirement,
which increased from 60% in 2015 to 70% from 1 January 2016. Our portfolio of LCR-compliant, HQLA increased to a fourth-quarter average of R118,0bn
(2014: fourth-quarter average R91,4bn). In addition to LCR-qualifying HQLA, Nedbank also holds other sources of quick liquidity, including corporate
bonds, listed equities and other marketable securities, that can be accessed in times of stress. Nedbank's combined portfolio of LCR-compliant HQLA
and other sources of quick liquidity amounted to a fourth-quarter average R160,7bn at December 2015, representing 17,4% of total assets.
Dec Jun Dec
Nedbank Group Limited liquidity coverage ratio 2015 2015 2014
HQLA (Rm) 117 997 109 060 91 423
Net cash outflows (Rm) 133 272 143 029 137 725
Liquidity coverage ratio (%)(3) 88,5 76,3 66,4
Regulatory minimum (%) 60,0 60,0 N/A
(3) Average for the quarter.
Further details on the LCR are available in the table section of the Securities Exchange News Service (SENS) announcement.
Further information on risk and capital management is available in the 'Risk and Balance Sheet Management Review' section of the group's results booklet
and will be available in the Pillar 3 Report to be published on the website at nedbankgroup.co.za in March 2016.
LOANS AND ADVANCES
Loans and advances grew 11,2%' to R681,6bn' (2014: R613,0bn)'. Excluding lower-yielding trading advances, banking advances growth was 10,5%
following gross new payouts of R184,7bn (2014: R166,8bn).
Loans and advances by cluster are as follows:
Rm % change 2015 2014
CIB 16,6 355 784(1) 305 158(1)
Banking activities 15,7 321 699 278 153
Trading activities 26,2 34 085 27 005
RBB 4,1 279 929(1) 268 882(1)
Wealth 13,6 28 206(1) 24 819(1)
Rest of Africa 17,4 16 515(1) 14 073(1)
Centre > 100 1 198(1) 89(1)
Group 11,2 681 632 613 021
Banking advances growth was primarily driven by CIB advances increasing 15,7%, mainly as a result of drawdowns in credit extended to clients in the
renewable-energy and commercial property sectors, as well as stronger growth in Rest of Africa and Wealth.
RBB grew advances by 4,1%, comprised of MFC (vehicle finance) increasing 7,6%, Home Loans by 1,2%, Card by 3,3% and Relationship Banking by 24,7%.
Excluding R4,9bn of advances transferred from Business Banking to Retail Relationship Banking in the first half of the year, Relationship Banking's advances
grew 4,5%, while Personal Loans decreased 4,5%.
Advances growth in the Rest of Africa Cluster was driven by growth in the African subsidiaries as a result of footprint expansion, new products and client
value propositions.
DEPOSITS
The group's strategy of building its deposit franchise through innovative products and competitive pricing led to deposit growth of 11,1% to R725,9bn'
(2014: R653,5bn)' resulting in a loan-to-deposit ratio of 93,9%' (2014: 93,8%)', which has remained consistently below 100%.
We continued to focus on growing Basel III-friendly deposits, emphasising retail and commercial deposits and reducing reliance on wholesale funding.
Retail deposit growth was 15,9% and commercial and wholesale deposits grew at 9,7%.
Current accounts increased 8,6%, in line with the 8,5% growth in main banked clients. Our savings accounts grew 20,3%, with good takeup of our tax-free
savings product, GoalSave, and foreign currency savings deposits in Nedbank Wealth reflecting higher values as a result of a weaker rand. Growth in fixed
deposits of 14,0% and in negotiable certificates of deposit of 16,7% was driven by demand for longer-term deposits on the back of increased interest rate
expectations. Call and term deposits increased 7,2%. Nedbank also successfully increased foreign currency funding by 50,8% to support foreign
denominated lending and to diversify the funding base.
Total funding-related liabilities grew 11,9% to R770,8bn (2014: R689,1bn), including R15,5bn of long-term debt capital market funding issued as part of our
strategy to lengthen the funding profile.
GROUP STRATEGIC FOCUS
We made good progress with our five key strategic focus areas, namely:
- Client-centred innovation: We continued to innovate with products such as Market Edge' ' winner of the big data and analytics category at the
Efma'Accenture Global Banking Innovation Awards. We deployed WebTickets in the Nedbank App Suite', implemented Tshwane Prepaid Electricity
on WAP, APP and USSD, launched our tax-free savings account - GoalSave - and our 32Day Notice Account and, for wholesale clients, our worldclass
Plug and Transact' token. To date we have converted 255 outlets in the 'branch of the future' format and we currently plan to have converted 77% of
all outlets by 2017. Digitally enabled clients increased 40% and the value of Nedbank App Suite' transactions by 66% to R16bn. As part of our
digital experience management programme, we launched the new Nedbank.co.za website, which leverages worldclass technology to enhance the
client experience, integrate product applications and render seamlessly across all mobile devices. Our progress in innovation was acknowledged with
Nedbank receiving The Banker Magazine's Technology Projects of the Year award and being recognised as The Asian Banker's Best Retail Bank in
South Africa and Best Mortgage and Home Loans Product in Africa for 2015. We also received recognition at the 2015 iCMG Enterprise & IT
Architecture Excellence Awards for our Managed Evolution architecture.
- Growing our transactional banking franchise: Our retail franchise continued to strengthen, with main banked clients increasing 8,5% to 2,7m and the
number of clients with two or more products up 5,5%. Significant progress was made in our brand value and client relationships as reflected in the
Nedbank Brand Tracker results, the Consulta annual retail reputational Net Promotor Score (NPS), which improved to 21% from 15%, and our SA
client satisfaction index score increasing to 74,3%. In addition, exceptionally high levels of full-service recovery was recorded, as evidenced by
Nedbank being ranked first among the banks in respect of the HelloPeter client feedback ratio. CIB successfully acquired the transactional accounts of
the eThekwini and Ekurhuleni metropolitan municipalities, demonstrating our strong client relationships, deep skills base and innovative transactional
banking solutions.
- Optimise and invest: Our expense optimisation programme unlocked R915m of cost savings in 2015 through initiatives such as the rationalisation of
RBB backoffice operations, the CIB integration and our strategy to decrease our core systems from 250 to 60, of which eight were decommissioned in
2015 and 84 to date. In response to the evolving regulatory landscape and increasing cost of compliance, we centralised our regulatory change office
to ensure economies of scale in terms of efficient delivery and cost management. Across the greater Old Mutual group in SA, Nedbank achieved
R112m of synergies across costs and revenues. Old Mutual Emerging Markets incorporating Mutual & Federal outsourced their IT support to Nedbank
on a commercial arm's length basis and this is projected to deliver a combined saving of more than R150m over a three-year period. We remain on
track for delivery of the full R1bn of pretax run rate synergies in 2017, of which just under 30% should accrue to Nedbank.
- Strategic portfolio tilt: Our focus on growing activities that generate EP, such as transactional deposits, transactional banking and investment in the
rest of Africa, generated EP growth of 19,6% to R2 525m, a loan-to-deposit ratio of 93,9%, and earnings growth of 93,6% in our Rest of Africa Cluster.
All this was achieved while maintaining strong balance sheet metrics, keeping impairments below our through-the-cycle range, and delivering
dividend growth ahead of HEPS growth.
- Pan-African banking network:
- In Central and West Africa our partnership approach through our strategic alliance and approximately 20% shareholding in ETI provides our
clients with a pan-African transactional banking network across 39 countries and our shareholders with the opportunity to participate in the
higher growth in the rest of Africa. Our close working relationship with Ecobank, supported by Ecobank's Johannesburg team co-locating into
Nedbank's offices, resulted in the partnership's conclusion of three joint financing deals in 2015, and 74 of our wholesale clients now banking
with Ecobank.
- In SADC and East Africa we continued to invest in our subsidiaries by implementing the Flexcube core banking system, launching new products
and rolling out new distribution channels, including the 'branch of the future' format. In terms of our existing contractual agreements we will
increase our stake in Banco Unico to 50% plus one share at an estimated cost of R178,4m in the first half of 2016.
ECONOMIC OUTLOOK
Economic conditions are unlikely to improve in 2016. The group's current forecast for 2016 GDP growth is 0,2%. Interest rates are expected to increase by
a cumulative 125 bps for 2016, having already increased by 50 bps in January in response to a higher inflation outlook caused by administered price
increases, higher food prices and the weaker rand.
Rising interest rates will increase borrowing costs and dampen consumer credit demand. Credit defaults are also expected to increase as a result of rising
rates as consumer debt levels remain high, with the job market unlikely to grow meaningfully in the short term. Transactional banking activity is
anticipated to grow modestly in line with consumer spending.
Growth in wholesale banking will continue to be limited by infrastructure constraints in SA, poor global demand and low international oil and commodity
prices. There remains pockets of growth in infrastructure as well as in renewable-energy projects. Sub-Saharan Africa will still represent an area of growth
for many SA corporates as indicated by the International Monetary Fund (IMF) in its 2016 GDP growth forecast of 4,0% for the region.
PROSPECTS
Our guidance on financial performance for the full 2016 year is as follows:
- Advances to grow at mid-to-upper single digits.
- NIM to be in line with the 2015 level of 3,30%.
- CLR to be within the revised through-the-cycle target range of 60 to 100 bps.
- NIR (excluding fair-value adjustments) to grow above mid-single digits, prior to the consolidation of Banco Unico.
- Expenses to increase by mid to upper-single digits, prior to the consolidation of Banco Unico.
In the current environment forecast risk remains elevated and as a result our guidance for performance in the year ahead is harder to formulate. In this
context we currently forecast that growth in DHEPS for 2016 will be lower than the growth we achieved in 2015 and below our medium-to-long-term
target of consumer price index + GDP growth + 5%. Given the increased forecast risk, we will update this guidance at the time of our June 2016 results.
Our medium-to-long-term targets remain unchanged, with the exception of the CLR through-the-cycle target range, which changed to between 0,6% and
1,0% from 0,8% and 1,2% of banking advances. The lower range reflects the change in advances mix towards a higher proportion of wholesale advances,
as well as the change in mix within Nedbank Retail towards a lower proportion of personal loans. At its peak, personal loans was 4,2% of total gross
advances and this has now reduced to 2,7%.The group's cost of equity for 2016 has been increased from 13,0% to 15,0% to capture the higher cost of
capital imputed by the increase in the SA long-bond yield during late 2015. We will take cognisance of this significant change in the cost of equity and
during 2016 we will review our medium-to-long -term target for ROE (excluding goodwill), being cost of equity + 5%.
Our medium-to-long-term targets and our current performance outlook for 2016 for these are as follows:
2016 full-year
Metric 2015 performance Medium-to-long-term targets outlook
ROE (excluding goodwill) 17,0% 5% above cost of ordinary shareholders' Below target
equity (to be reviewed during 2016)
Growth in DHEPS 8,5% >- consumer price index + GDP growth + Below 2015 growth and
5% below target
CLR 0,77% Revised to between 0,6% and 1,0% of Within target range
average banking advances
NIR-to-expense ratio 83,3% > 85% Below target
Efficiency ratio4 56,1% 50,0% to 53,0% Above target
CET1 capital adequacy ratio (Basel III) 11,3% 10,5% to 12,5% Within target range
Economic capital Internal Capital Adequacy Assessment Process (ICAAP):
A debt rating (including 10% capital buffer)
Dividend cover 2,06 times 1,75 to 2,25 times Within target range
4 Includes associate income in line with industry accounting practices.
Shareholders are advised that these forecasts are based on our latest macroeconomic outlook and have not been reviewed or reported on by the group's
auditors.
BOARD CHANGES
During the period the boards of Nedbank Group Limited and Nedbank Limited ('the companies') announced the appointment of:
- Vassi Naidoo as Non-executive Director with effect from 1 May 2015, and Non-executive Chairman from 11 May 2015;
- Stanley Subramoney as independent Non-executive Director with effect from 23 September 2015; and
- Bruce Hemphill as Non-executive Director with effect from 25 November 2015 following his appointment as CEO of Old Mutual plc.
The following board directors retired at the annual general meeting on 11 May 2015, either having served on the board as a non-executive for nine years or
having retired from executive service:
- Dr Reuel Khoza, Non-executive Chairman;
- Mustaq Enus-Brey, Non-executive Director;
- Gloria Serobe, Non-executive Director; and
- Graham Dempster, Executive Director.
On 31 October 2015, subsequent to his retirement from Old Mutual plc, Julian Roberts retired as Non-executive Director from the boards of the
companies.
Following the announcement by Old Mutual plc regarding the stepping down of Mr Paul Hanratty as Chief Operating Officer, the boards of the companies
advise that Mr Paul Hanratty will end his term as a Non-executive Director of the companies on 12 March 2016.
GROUP EXECUTIVE CHANGES
The group's executive leadership team is key to the delivery of our strategic focus areas, and during the period we announced the following appointments:
- With effect from 1 January 2015
- Mfundo Nkuhlu succeeded Graham Dempster (who retired) as Chief Operating Officer and was appointed to the board as an Executive Director,
- Brian Kennedy was appointed as Managing Executive of Nedbank Corporate and Investment Banking, which was formed through the integration
of our Nedbank Capital and Nedbank Corporate Clusters and
- Mike Davis was appointed as Group Executive of Balance Sheet Management.
- Iolanda Ruggiero was appointed as Managing Executive of Nedbank Wealth with effect from 1 May 2015, having replaced Dave Macready;
- Priya Naidoo was appointed as Group Executive for Strategic Planning and Economics with effect from 1 June 2015; and
- Mike Davis, Iolanda Ruggiero and Priya Naidoo were appointed to our Group Executive Committee.
Philip Wessels, Group Managing Executive Nedbank Retail and Business Banking, has requested to take early retirement from Nedbank for personal
reasons, which request has been supported by the Board. This will be effective from 31 March 2016, some 2 years ahead of his normal retirement age of
60. Philip has had a long and successful career at Nedbank spanning more than 20 years across various businesses in the group. We thank Philip for his
contribution to the group and wish him well in his retirement.
In line with our succession planning, Nedbank is pleased to announce the appointment of Ciko Thomas, to succeed Philip with effect from 1 April 2016,
subject to regulatory approval. Ciko is currently Managing Executive of Consumer Banking and has been a part of the RBB leadership team and the Group
Executive Committee for six years. He has wide-ranging banking and leadership experience across the group. Ciko's appointment ensures continuity in
RBB's leadership and strategy, and he inherits a strong RBB cluster with an experienced management team. Ciko completed the Harvard AMP in 2015, and
holds BSc and MBA degrees.
ACCOUNTING POLICIES'
Nedbank Group Limited is a company domiciled in South Africa. The audited summary consolidated financial statements of the group at and for the year
ended 31 December 2015 comprises the company and its subsidiaries (the 'group') and the group's interests in associates and joint arrangements.
The summary consolidated financial statements contained in the SENS announcement has been extracted from the audited summary consolidated
financial statements, which have been prepared in accordance with the provisions of the JSE Limited Listings Requirements for preliminary reports and the
Companies Act applicable to summary financial statements. The JSE Limited Listings Requirements require preliminary reports to be prepared in
accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the
South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides as issued by the Accounting Practices Committee, and Financial
Pronouncements as issued by the Financial Reporting Standards Council and also, as a minimum, to contain the disclosure required by International
Accounting Standard 34: Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated financial statements, from
which the summary consolidated financial statements results were derived, are in terms of the IFRS and are consistent with the accounting policies that
were applied in the preparation of the previous consolidated annual financial results.
The summary consolidated financial results have been prepared under the supervision of Raisibe Morathi CA(SA), the Chief Financial Officer.
EVENTS AFTER THE REPORTING PERIOD'
There are no material events after the reporting period to report on.
AUDITED SUMMARY CONSOLIDATED FINANCIAL STATEMENTS ' INDEPENDENT
AUDITORS' OPINION
The summary consolidated financial statements comprise the summary consolidated statement of financial position at 31 December 2015, summary
consolidated statement of comprehensive income, summary consolidated statement of changes in equity and summary consolidated statement of
cashflows for the year then ended and selected explanatory notes, which are indicated by the following symbol '.
These summary consolidated financial statements for the year ended 31 December 2015 have been audited by KPMG Inc and Deloitte & Touche, who
expressed an unmodified opinion thereon. The auditors also expressed an unmodified opinion on the consolidated financial statements from which these
summary consolidated financial statements were derived.
A copy of the auditors' report on the summary consolidated financial statements and of the auditors' report on the consolidated financial statements
are available for inspection at the company's registered office, together with the consolidated financial statements identified in the respective
auditors' reports.
The auditors' report does not necessarily report on all of the information contained in the financial results. Shareholders are therefore advised that, in order
to obtain a full understanding of the nature of the auditors' engagement, they should obtain a copy of the auditors' report together with the accompanying
financial information from 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, which 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 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, audited or reported on by the group's auditors.
FINAL-DIVIDEND DECLARATION
Notice is hereby given that a gross final dividend of 570 cents per ordinary share has been declared, payable to shareholders for the year ended
31 December 2015. The dividend has been declared out of income reserves.
The dividend will be subject to a dividend withholding tax rate of 15% (applicable in SA) or 85,50000 cents per ordinary share, resulting in a net dividend
of 484,50000 cents per ordinary share, unless the shareholder is exempt from paying dividend tax or is entitled to a reduced rate in terms of an applicable
double-tax agreement.
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 494 411 956.
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, 8 April 2016
Shares commence trading (ex dividend) Monday, 11 April 2016
Record date (date shareholders recorded in books) Friday, 15 April 2016
Payment date Monday, 18 April 2016
Share certificates may not be dematerialised or rematerialised between Monday, 11 April 2016, and Friday, 15 April 2016, both days inclusive.
On Monday, 18 April 2016, the dividend will be electronically transferred to the bank accounts of shareholders. Holders of dematerialised shares will have
their accounts credited at their participant or broker on Monday, 18 April 2016.
For and on behalf of the board
Vassi Naidoo Mike Brown
Chairman Chief Executive
2 March 2016
FINANCIAL HIGHLIGHTS
at
31 December 31 December
Change 2015 2014
% (Audited) (Audited)
Statistics
Number of shares listed (1,0) m 494,4 499,3
Number of shares in issue, excluding shares held by group entities 2,4 m 476,6 465,6
Weighted-average number of shares 2,1 m 474,2 464,4
Diluted weighted-average number of shares 1,0 m 483,1 478,2
Preprovisioning operating profit 7,3 Rm 19 170 17 873
Economic profit(5) 19,6 Rm 2 525 2 112
Headline earnings per share 7,4 cents 2 284 2 127
Diluted headline earnings per share 8,5 cents 2 242 2 066
Ordinary dividends declared per share 7,7 cents 1 107 1 028
Interim cents 537 460
Final cents 570 568
Ordinary dividends paid per share 14,5 cents 1 105 965
Dividend cover times 2,06 2,07
Net asset value per share 9,0 cents 15 685 14 395
Tangible net asset value per share 9,9 cents 13 794 12 553
Closing share price (24,3) cents 18 861 24 900
Price/earnings ratio historical 8,3 11,7
Market capitalisation (25,0) Rbn 93,2 124,3
Number of employees (permanent staff)(5) 2,7 31 312 30 499
Number of employees (permanent and temporary staff)(5) 0,8 31 689 31 422
Key ratios (%)
Return on ordinary shareholders' equity (ROE)(5) 15,7 15,8
ROE, excluding goodwill(5) 17,0 17,2
Tangible ROE(5) 18,1 18,2
Return on total assets (ROA)(5) 1,25 1,27
Return on average risk-weighted assets(5) 2,30 2,34
Net interest income to average interest-earning banking assets(5) 3,30 3,52
Credit loss ratio ' banking advances(5) 0,77 0,79
Gross operating income growth rate less expense growth rate (jaws ratio) 0,6 (2,5)
Non-interest revenue to total operating expenses 83,3 82,8
Non-interest revenue to total income 47,7 46,9
Efficiency ratio (including share of profits of associate companies and joint
arrangements) 56,1 56,5
Effective taxation rate 24,0 25,3
Group capital adequacy ratios (including unappropriated profits):(5)
' Common-equity tier 1 11,3 11,6
' Tier 1 12,0 12,5
' Total 14,1 14,6
Statement of financial position statistics (Rm)
Total equity attributable to equity holders of the parent 11,5 74 754 67 024
Total equity 11,1 78 751 70 911
Amounts owed to depositors 11,1 725 851 653 450
Loans and advances 11,2 681 632 613 021
Gross 11,0 693 043 624 116
Impairment of loans and advances 2,8 (11 411) (11 095)
Total assets administered by the group 15,8 1 183 021 1 021 326
Total assets 14,4 925 726 809 313
Assets under management 21,4 257 295 212 013
Life insurance embedded value(5) 11,0 2 657 2 393
Life insurance value of new business(5) (3,9) 247 257
Foreign currency conversion rates
Pound sterling at the end of the year 28,4 R 23,16 18,04
Pound sterling average rate for the year 10,4 R 19,74 17,88
US dollar at the end of the year 34,9 R 15,62 11,58
US dollar average rate for the year 19,0 R 12,94 10,87
(5) These metrics have not been audited by the group's auditors.
AUDITED SUMMARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE 12 MONTHS ENDED 31 DECEMBER 2015
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended
31 December 31 December
2015 2014
Change (Audited) (Audited)
% Rm Rm
Interest and similar income 14,6 60 289 52 619
Interest expense and similar charges 22,7 36 404 29 658
Net interest income 4,0 23 885 22 961
Impairments charge on loans and advances 6,3 4 789 4 506
Income from lending activities 3,5 19 096 18 455
Non-interest revenue 7,1 21 748 20 312
Operating income 5,4 40 844 38 767
Total operating expenses 6,4 26 110 24 534
Indirect taxation 23,3 783 635
Profit from operations before non-trading and capital items 2,6 13 951 13 598
Non-trading and capital items 29,4 (141) (109)
Net loss on sale of investments and property and equipment (23) (12)
Net impairment of property and equipment, and intangible assets (118) (97)
Fair-value adjustments of investment properties 6
Profit from operations 2,3 13 810 13 495
Share of profits of associate companies and joint arrangements > 100 871 161
Profit before direct taxation 7,5 14 681 13 656
Total direct taxation 1,5 3 519 3 468
Direct taxation 3 550 3 487
Taxation on non-headline earnings items (31) (19)
Profit for the year 9,6 11 162 10 188
Other comprehensive income net of taxation > 100 2 149 647
Items that may subsequently be reclassified to profit or loss
' Exchange differences on translating foreign operations 3 203 390
' Share of other comprehensive income of investments accounted
for using the equity method (1 572)
' Fair-value adjustments on available-for-sale assets (4) 21
Items that may not subsequently be reclassified to profit or loss
' Gains on property revaluations 167 202
' Remeasurements on long-term employee benefit assets 298 34
' Share of other comprehensive income of investments accounted
for using the equity method 57
Total comprehensive income for the year 22,9 13 311 10 835
Profit attributable to:
' Equity holders of the parent 9,4 10 721 9 796
' Non-controlling interest ' ordinary shareholders 1,4 70 69
' Non-controlling interest ' preference shareholders 14,9 371 323
Profit for the year 9,6 11 162 10 188
Total comprehensive income attributable to:
' Equity holders of the parent 22,9 12 820 10 431
' Non-controlling interest ' ordinary shareholders 48,1 120 81
' Non-controlling interest ' preference shareholders 14,9 371 323
Total comprehensive income for the year 22,9 13 311 10 835
Basic earnings per share (cents) 7,2 2 261 2 109
Diluted earnings per share (cents) 8,3 2 219 2 049
HEADLINE EARNINGS RECONCILIATION
for the year ended
31 December 31 December 31 December 31 December
2015 2015 2014 2014
(Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm
Change
% Gross Net of taxation Gross Net of taxation
Profit attributable to equity holders of the parent 9,4 10 721 9 796
Less: Non-headline earnings items (141) (110) (103) (84)
Net (loss)/profit on sale of investments and property
and equipment (23) (24) (12) 7
Net impairment of property and equipment, and intangible assets (118) (86) (97) (97)
Fair-value adjustments of investment properties 6 6
Headline earnings 9,6 10 831 9 880
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at
31 December 31 December
2015 2014
Change (Audited) (Audited)
% Rm Rm
Assets
Cash and cash equivalents 71,2 22 840 13 339
Other short-term securities 12,5 75 614 67 234
Derivative financial instruments 95,8 30 488 15 573
Government and other securities 58,4 43 060 27 177
Loans and advances 11,2 681 632 613 021
Other assets 3,1 8 984 8 715
Current taxation assets > 100 1 032 291
Investment securities (34,3) 13 155 20 029
Non-current assets held for sale (87,5) 2 16
Investments in private-equity associates, associate companies and joint arrangements 24,9 9 579 7 670
Deferred taxation assets (26,5) 227 309
Investment property (75,4) 32 130
Property and equipment 13,0 8 784 7 773
Long-term employee benefit assets 11,2 5 055 4 546
Mandatory reserve deposits with central banks 8,9 16 232 14 911
Intangible assets 5,0 9 010 8 579
Total assets 14,4 925 726 809 313
Equity and liabilities
Ordinary share capital 2,4 477 466
Ordinary share premium 4,7 17 569 16 781
Reserves 13,9 56 708 49 777
Total equity attributable to equity holders of the parent 11,5 74 754 67 024
Non-controlling interest attributable to:
' Ordinary shareholders 33,7 436 326
' Preference shareholders 3 561 3 561
Total equity 11,1 78 751 70 911
Derivative financial instruments > 100 33 628 15 472
Amounts owed to depositors 11,1 725 851 653 450
Provisions and other liabilities 68,6 23 240 13 788
Current taxation liabilities > 100 412 134
Deferred taxation liabilities 27,0 1 182 931
Long-term employee benefit liabilities 0,1 3 074 3 071
Investment contract liabilities (6,5) 10 988 11 747
Insurance contract liabilities (13,3) 3 618 4 171
Long-term debt instruments 26,2 44 982 35 638
Total liabilities 14,7 846 975 738 402
Total equity and liabilities 14,4 925 726 809 313
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-controlling Non-controlling
Total equity interest interest
attributable to attributable to attributable to
equity holders ordinary preference
of the parent shareholders shareholders Total equity
Rm Rm Rm Rm
Audited balance at 31 December 2013 60 617 246 3 473 64 336
Dividend to shareholders (4 643) (9) (4 652)
Preference share dividend (323) (323)
Issues of shares net of expenses 771 771
Shares delisted in terms of BEE transaction (1 613) (1 613)
Shares (acquired)/no longer held by group entities and BEE trusts 1 306 1 306
Acquisition of additional shareholding in subsidiary 8 8
Total comprehensive income for the year 10 431 81 323 10 835
Share-based payment reserve movement 151 151
Regulatory risk reserve provision 7 7
Preference shares no longer held by group entities 88 88
Other movements (3) (3)
Audited balance at 31 December 2014 67 024 326 3 561 70 911
Dividend to shareholders (5 395) (10) (5 405)
Preference share dividend (371) (371)
Issues of shares net of expenses 1 023 1 023
Shares delisted in terms of BEE transaction (336) (336)
Shares (acquired)/no longer held by group entities and BEE trusts (463) (463)
Total comprehensive income for the year 12 820 120 371 13 311
Share-based payment reserve movement 82 82
Other movements (1) (1)
Audited balance at 31 December 2015 74 754 436 3 561 78 751
SUMMARY CONSOLIDATED STATEMENT OF CASHFLOWS
for the year ended
31 December 31 December
2015 2014
(Audited) (Audited)
Rm Rm
Cash generated by operations 22 455 21 332
Change in funds for operating activities (13 602) (11 231)
Net cash from operating activities before taxation 8 853 10 101
Taxation paid (4 400) (4 283)
Cashflows from operating activities 4 453 5 818
Cashflows from/(utilised by) investing activities 2 867 (9 455)
Cashflows from/(utilised by) financing activities 3 802 (2 132)
Effects of exchange rate changes on opening cash and cash equivalents (excluding foreign borrowings) (300) (54)
Net increase/(decrease) in cash and cash equivalents 10 822 (5 823)
Cash and cash equivalents at the beginning of the year(1) 28 250 34 073
Cash and cash equivalents at the end of the year(1) 39 072 28 250
(1) Including mandatory reserve deposits with central banks.
SUMMARY SEGMENTAL REPORTING
for the year ended
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2015 2014 2015 2014 2015 2014 2015 2014
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm
Total assets Total liabilities Operating income/(losses) Headline earnings/(losses)
Nedbank Corporate and
Investment Banking 470 567 381 241 447 471 363 744 12 101 10 875 5 208 4 727
Nedbank Retail and Business
Banking 292 560 278 079 265 636 250 514 23 715 21 975 4 460 4 031
Nedbank Wealth 61 322 57 609 58 588 54 779 4 320 3 986 1 134 1 042
Rest of Africa 32 941 27 428 26 142 23 879 1 358 1 631 691 357
Centre 68 336 64 956 49 138 45 486 (650) 300 (662) (277)
Total 925 726 809 313 846 975 738 402 40 844 38 767 10 831 9 880
During the period the Nedbank Corporate and Nedbank Capital Clusters were merged to form the Nedbank Corporate and Investment Banking Cluster.
Similarly, the Nedbank Retail and Nedbank Business Banking Clusters were merged to form the Nedbank Retail and Business Banking Cluster. The
comparative segment information previously presented for Nedbank Corporate, Nedbank Capital, Nedbank Retail and Nedbank Business Banking has been
represented based on the new merged clusters, ie Nedbank Corporate and Investment Banking and Nedbank Retail and Business Banking. This had the
consequential effect that certain intergroup assets and liabilities and the related eliminations between Nedbank Retail and Business Banking and the
Centre have been restated.
CONTINGENT LIABILITIES AND COMMITMENTS
for the year ended
Contingent liabilities and undrawn facilities
31 December 31 December
2015 2014
(Audited) (Audited)
Rm Rm
Guarantees on behalf of clients 27 300 23 778
Letters of credit and discounting transactions 4 463 3 262
Irrevocable unutilised facilities and other 103 519 104 429
135 282 131 469
The group, in the ordinary course of business, enters into transactions that expose it to tax, legal and business risks. Provisions are made for known liabilities that
are expected to materialise. Possible obligations and known liabilities where no reliable estimate can be made or it is considered improbable that an outflow would
result are reported as contingent liabilities. This is in accordance with IAS 37: Provisions, Contingent Liabilities and Contingent Assets.
There are a number of legal or potential claims against Nedbank Group Limited and its subsidiary companies, the outcome of which cannot be foreseen at present.
COMMITMENTS
Capital expenditure approved by directors
31 December 31 December
2015 2014
(Audited) (Audited)
Rm Rm
Contracted 1 317 1 294
Not yet contracted 2 222 1 286
3 539 2 580
Funds to meet capital expenditure commitments will be provided from group resources. In addition, capital expenditure is incurred in the normal course of
business throughout the year.
FAIR-VALUE HIERARCHY
FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE
The fair value of a financial instrument is the price that would be received for the sale of an asset or paid for the transfer of a liability in an orderly
transaction between market participants at the measurement date. Underlying the definition of fair value is an assumption that an entity is a going concern
without any intention or need to liquidate, to curtail materially the scale of its operations or to undertake a transaction on adverse terms. Fair value is not,
therefore, the amount that an entity would receive or pay in a forced transaction, involuntary liquidation or distressed sale.
The existence of published price quotations in an active market is the most reliable evidence of fair value and, where they exist, they are used to measure
the financial asset or financial liability. A market is considered to be active if transactions occur with sufficient volumes and frequencies to provide pricing
information on an ongoing basis. These quoted prices would generally be classified as level 1 in terms of the fair-value hierarchy.
Where a quoted price does not represent fair value at the measurement date or where the market for a financial instrument is not active, the group
establishes fair value by using a valuation technique. These valuation techniques include reference to the current fair value of another instrument that is
substantially the same in nature, reference to the value of the assets of underlying business, earnings multiples, discounted-cashflow analysis and various
option pricing models. Valuation techniques applied by the group would generally be classified as level 2 or level 3 in terms of the fair-value hierarchy. The
determination of whether an instrument is classified as level 2 or level 3 is dependent on the significance of observable inputs versus unobservable inputs
in relation to the fair value of the instrument. Inputs typically used in valuation techniques include discount rates, appropriate swap rates, volatility,
servicing costs, equity prices, commodity prices, counterparty credit risk, and the group's own credit on financial liabilities.
The group has an established control framework for the measurement of fair value, which includes formalised review protocols for the independent review
and validation of fair values separate from the business unit entering into the transaction. The valuation methodologies, techniques and inputs applied to
the fair-value measurement of the financial instruments have been applied in a manner consistent with that of the previous financial year.
FAIR-VALUE HIERARCHY
The financial instruments recognised at fair value have been categorised into the three input levels of the International Financial Reporting Standards
(IFRS) fair-value hierarchy as follows:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.
Level 2: Valuation techniques based on (directly or indirectly) market-observable inputs. Various factors influence the availability of observable inputs.
These factors may vary from product to product and change over time. Factors include the depth of activity in the relevant market, the type of product,
whether the product is new and not widely traded in the market, the maturity of market modelling and the nature of the transaction (bespoke or generic).
Level 3: Valuation techniques based on significant inputs that are not observable. To the extent that a valuation is based on inputs that are not market-
observable the determination of the fair value can be more subjective, depending on the significance of the unobservable inputs to the overall valuation.
Unobservable inputs are determined on the basis of the best information available and may include reference to similar instruments, similar maturities,
appropriate proxies or other analytical techniques.
All fair values disclosed below are recurring in nature.
Financial assets
Total financial assets recognised Total financial assets classified Total financial assets classified Total financial assets classified
Total financial assets at amortised cost as level 1 as level 2 as level 3
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Cash and cash equivalents 39 072 28 250 39 072 28 250
Other short-term securities 75 614 67 234 32 862 32 593 667 668 42 085 33 973
Derivative financial instruments 30 488 15 573 99 27 30 371 15 546 18
Government and other securities(2) 43 060 27 177 18 807 9 245 11 438 10 080 12 815 7 852
Loans and advances 681 632 613 021 582 454 525 793 60 63 99 085 87 132 33 33
Other assets 8 984 8 715 4 832 6 219 4 152 2 496
Investments in private'equity associates,
associate companies and joint arrangements 1 162 898 1 162 898
Investment securities 13 155 20 029 448 635 12 016 18 594 691 800
893 167 780 897 678 027 602 100 16 864 13 969 196 372 163 097 1 904 1 731
(2) Floating rate notes of R1 097m were included in the prior year as loans and receivables whereas these instruments are classified as available-for-sale. Accordingly, the loans and receivables and available-for-sale categories have been restated.
Total financial liabilities Total financial liabilities Total financial liabilities Total financial liabilities
Total financial liabilities recognised at amortised cost classified as level 1 classified as level 2 classified as level 3
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Derivative financial instruments 33 628 15 472 126 7 33 416 15 445 86 20
Amounts owed to depositors 725 851 653 450 555 508 536 673 170 343 116 777
Provisions and other liabilities(3) 21 942 12 433 7 988 7 924 13 724 4 369 230 140
Investment contract liabilities(4)
10 988 11 747 10 988 11 747
Long-term debt instruments 44 982 35 638 44 581 33 598 156 575 245 1 465
837 391 728 740 608 077 578 195 14 006 4 951 215 222 145 574 86 20
(3) R1 355m of provisions and other liabilities were previously included in the financial liabilities at amortised cost category within the categories of financial instruments. However, these balances are not within the scope of the IAS 39 categories of financial instruments. Therefore, this amount has been presented under non-financial assets,
liabilities and equity and the comparative information has been restated to align with current year presentation.
(4) R4 171m of insurance contract liabilities were previously included in the designated at fair value through profit or loss category within the categories of financial instruments. However, these balances are accounted for in terms of IFRS 4 Insurance Contracts and thus are not within the scope of the IAS 39 categories of financial
instruments. Therefore, insurance contract liabilities have been presented under non-financial assets, liabilities and equity and the comparative information has been restated to align with current year presentation.
There were significant transfers between level 1 and level 2 of the fair-value hierarchy within government and other securities and other sort-term securities due to changes in the level of market activity. The impacted categories are:
- Held for trading ' R1 308m
- Designated ' R2 802m
- Available for sale ' R2 074m
Level 3 reconciliation
31 December 2015 (Audited) Gains/
(Losses)
Gains/ in other
Opening (Losses) comprehensive
balance at in profit for income for Closing
1 January the year the year Purchases Sales and Transfers in/ balance at
Rm Rm Rm and issues settlements (out) 31 December
Financial assets
Derivative financial instruments 18 18
Loans and advances 33 33
Investment securities 800 (36) 2 (75) 691
Investments in private-equity associates, associate companies and joint arrangements 898 89 312 (137) 1 162
1 731 71 ' 314 (212) ' 1 904
Financial liabilities
Derivative financial instruments 20 66 86
20 66 ' ' ' ' 86
Gains/
(Losses)
Gains/ in other
Opening (Losses) comprehensive
balance at in profit for income for Closing
1 January the year the year Purchases Sales and Transfers in/ balance at
31 December 2014 (Audited) Rm Rm Rm and issues settlements (out) 31 December
Financial assets
Loans and advances 33 33
Investment securities 955 208 27 (390) 800
Investments in private-equity associates, associate companies and joint arrangements 860 42 142 (146) 898
1 848 250 ' 169 (536) ' 1 731
Financial liabilities
Derivative financial instruments 20 20
' ' ' 20 ' ' 20
Effect of changes in significant unobservable assumptions to reasonable possible alternatives
The fair-value measurement of financial instruments are, in certain circumstances, measured using valuation techniques that include assumptions that are not market observable. Where these scenarios apply, the group
performs stress testing on the fair value of the relevant instruments. In performing the stress testing, appropriate levels for the unobservable input parameters are chosen so that they are consistent with prevailing
market evidence and in line with the group's approach to valuation control. The following information is intended to illustrate the potential impact of the relative uncertainty in the fair value of financial instruments for
which valuation is dependent on unobservable input parameters and which are classified as level 3 in the fair value hierarchy. However, the disclosure is neither predictive nor indicative of future movements in fair value.
Financial assets
Value per
statement of Favourable Unfavourable
Variance in financial change in fair change in fair
Significant fair value position value valu
31 December 2015 (Audited) Valuation technique unobservable input % Rm Rm Rm
Derivative financial instruments Discounted-cashflow model, Discount rates, risk-free rates,
Black-Scholes model and volatilities, credit spreads and Between (13)
multiple valuation techniques valuation multiples and 10 18 2 (2)
Loans and advances Credit spreads and discount Between (13)
Discounted cashflows rates and 10 33 3 (4)
Investment securities Discounted cashflows,
adjusted net asset value, Valuation multiples,
earnings multiples, third-party correlations, volatilities and Between (13)
valuations, dividend yields credit spreads and 10 691 62 (77)
Investments in private-equity associates, associate companies and joint Discounted cashflows, Between (7)
arrangements earnings multiples Valuation multiples and 8 1 162 97 (109)
Total financial assets classified as level 3 1 904 164 (192)
Financial liabilities
Derivative financial instruments Discounted cashflows, Growth rates, cost of equity Between (10)
earnings multiples and price-to-book and 10 (86) 37 (33)
Financial assets
Value per
statement of Favourable Unfavourable
Variance in financial change in fair change in fair
Significant fair value position value valu
31 December 2014 (Audited) Valuation technique unobservable input % Rm Rm Rm
Loans and advances Credit spreads and discount Between (13)
Discounted cashflow model rates and 13 33 3 (4)
Investment securities Discounted cashflows, adjusted
net asset value, earnings Valuation multiples,
multiples, third-party valuations, correlations, volatilities and Between (13)
dividend yields credit spreads and 13 800 76 (95)
Investments in private-equity associates, associate companies and joint Discounted cashflows, earnings Between (16)
arrangements multiples Valuation multiples and 16 898 124 (134)
Total financial assets classified as level 3 1 731 203 (233)
Financial liabilities
Derivative financial instruments Discounted cashflows, earnings Growth rates, cost of equity and Between (13)
multiples price to book and 13 (20) 15 (21)
Unrealised gains or losses
The unrealised gains or losses arising on instruments classified as level 3 include the following:
31 December 31 December
2015 2014
(Audited) (Audited)
Rm Rm
Private-equity gains 71 193
71 193
Summary of principal valuation techniques - level 2 instruments
The following table sets out the group's principal valuation techniques used in determining the fair value of financial assets and financial liabilities
classified as level 2 in the fair-value hierarchy:
Assets Valuation technique Key inputs
Other short-term securities Discounted'cashflow model Discount rates
Derivative financial instruments Discounted'cashflow model Discount rates
Black-Scholes model Risk-free rate and volatilities
Multiple valuation techniques Valuation multiples
Government and other securities Discounted'cashflow model Discount rates
Loans and advances Discounted'cashflow model Interest rate curves
Investment securities Discounted'cashflow model Money market rates and interest rates
Adjusted net asset value Underlying price of market'traded instruments
Dividend yield method Dividend growth rates
Liabilities
Derivative financial instruments Discounted'cashflow model Discount rates
Black-Scholes model Risk-free rate and volatilities
Multiple valuation techniques Valuation multiples
Amounts owed to depositors Discounted'cashflow model Discount rates
Provisions and other liabilities Discounted'cashflow model Discount rates
Investment contract liabilities Adjusted net asset value Underlying price of market'traded instruments
Long-term debt instruments Discounted'cashflow model Discount rates
LIQUIDITY COVERAGE RATIO
Total Total
unweighted weighted
value(1) value(2)
Rm (average) (average)
High-quality liquid assets
Total high-quality liquid assets (HQLA) 117 997
Cash outflows
Retail deposits and deposits from small-business clients, of which 164 534 16 280
Stable deposits 3 478 174
Less stable deposits 161 056 16 106
Unsecured wholesale funding, of which 238 322 126 010
Operational deposits (all counterparties) and deposits in institutional networks of cooperative banks 117 905 33 898
Non-operational deposits (all counterparties) 120 417 92 112
Unsecured debt ' '
Secured wholesale funding 15 115 63
Additional requirements, of which 150 650 20 245
Outflows related to derivative exposures and other collateral requirements 1 816 1 816
Outflows related to loss of funding on debt products 1 161 1 161
Credit and liquidity facilities 147 673 17 268
Other contractual funding obligations 49 280 3 868
Other contingent funding obligations 5 538 306
Total cash outflows 623 439 166 772
Cash inflows
Secured lending (eg reverse repos) 6 928 812
Inflows from fully performing exposures 46 642 29 551
Other cash inflows 6 189 6 167
Total cash inflows 59 759 36 530
Total
adjusted
value(3)
Total HQLA 117 997
Total net cash outflows 133 272
Liquidity coverage ratio (%) 88,5%
(1) Unweighted values are calculated as outstanding balances maturing or callable within 30 days (for inflows and outflows).
(2) Weighted values are calculated after the application of respective haircuts (for HQLA) or inflow and outflow rates (for inflows and outflows).
(3) Note that total cash outflows less total cash inflows may not be equal to total net cash outflows to the extent that regulatory caps have been applied to
cash inflows as specified by the regulations.
The figures above reflect the simple average of the month-end values at 31 October 2015, 30 November 2015 and 31 December 2015 based on regulatory
submissions to SARB. This section on the liquidity coverage ratio has not been audited by the group's auditors.
REGISTERED OFFICE
Nedbank Group Limited, Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, 2196.
PO Box 1144, Johannesburg, 2000.
TRANSFER SECRETARIES IN SA
Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg, 2001, SA.
PO Box 61051, Marshalltown, 2107, SA.
Transfer secretaries in Namibia
Transfer Secretaries (Pty) Ltd, Robert Mugabe Avenue No 4, Windhoek, Namibia.
PO Box 2401, Windhoek, Namibia.
DIRECTORS
V Naidoo (Chairman), MWT Brown* (Chief Executive), DKT Adomakoh (Ghanaian), TA Boardman, BA Dames, ID Gladman (British), PB Hanratty (Irish),
JB Hemphill, PM Makwana, Dr MA Matooane, NP Mnxasana, RK Morathi* (Chief Financial Officer), JK Netshitenzhe, MC Nkuhlu* (Chief Operating
Officer), S Subramoney, MI Wyman** (British).
* Executive ** Senior independent non-executive director
Company Secretary: TSB Jali
Reg no: 1966/010630/06
JSE share code: NED
NSX share code: NBK
ISIN: ZAE000004875
Sponsors in SA: Merrill Lynch SA (Pty) Ltd
Nedbank CIB
Sponsor in Namibia: Old Mutual Investment Services (Namibia) (Pty) Ltd
This announcement is available on the group's website at 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 please contact Nedbank Group Investor Relations at nedbankgroupir@nedbank.co.za.
Date: 02/03/2016 08:00:00 Supplied by www.sharenet.co.za
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