Wrap Text
Reviewed Financial Results for the six months ended 30 June 2013
NEDBANK GROUP LIMITED
Reg No: 1966/010630/06
ISIN: ZAE000004875
JSE share code: NED
NSX share code: NBK
NEDBANK GROUP REVIEWED CONDENSED CONSOLIDATED
INTERIM RESULTS 2013
COMMENTARY
NEDBANK GROUP LIMITED
Reviewed financial results for the six months ended 30 June 2013
- Headline earnings increased 13,3% to R3 914m(1)
- Diluted headline earnings per share up 12,6% to 831 cents(1)
- Strong NIR growth of 15,4% to R9 535m(1)
- ROE (excluding goodwill) increased to 16,1%
- Common-equity Tier 1 ratio increased to 11,8% (December 2012: 11,6%)
- Interim dividend per share up 14,7% to 390 cents
'In a tougher economic environment Nedbank Group delivered a solid
performance in the first six months of 2013. Strong NIR growth and disciplined
expense management resulted in the NIR-to-expense ratio target of over 85%
being exceeded for the first time and the return on equity increasing.
The group benefited from its portfolio of diverse businesses and strong
performances in the wholesale and wealth businesses resulted in overall
headline earnings growth of 13,3%.
Despite the more challenging economic environment and increasing
consumer credit stress that has led to higher retail banking impairments,
Nedbank Group is targeting, for the full year, growth in diluted headline
earnings per share to meet its medium-to-long-term target'.
Mike Brown
Chief Executive
Banking and economic environment
Globally economic conditions in most developed markets improved during the
first half of 2013, with the exception of the Eurozone. Emerging-market
economies continued to post moderate but slower growth, with currencies and
international commodity prices experiencing pressure following the US
Federal Reserve's announcement on likely future monetary policy changes.
At the same time SA's economic growth deteriorated as weakness in
production and exports persisted, leading to first-quarter GDP growth of 0,9%.
Domestic financial markets were characterised by volatility and rand
depreciation, reflecting lower levels of investor confidence primarily as a result
of the current account and fiscal deficits, slow growth and ongoing labour
tensions mainly in the mining sector.
Both household credit and corporate credit demand remained subdued.
Consumer stress has become increasingly evident with pressure from
increased living costs and weak job prospects.
In the corporate environment companies continued to postpone capacity
expansion, given fragile global economies and lower domestic growth
prospects. On the upside the recovery in government's capital expenditure
continued, with the bulk of the increase in expenditure devoted to housing and
other social infrastructure.
Review of results
Nedbank Group produced a solid set of results for the six months ended 30
June 2013 ('the period'). The results reflect the impact of a tougher-than-
anticipated economic environment, offset by continued internal momentum in
building the Nedbank franchise.
Headline earnings grew 13,3% to R3 914m (June 2012: R3 454m), driven by
good revenue growth and disciplined expense management, countering the
higher level of impairments.(1)
Diluted headline earnings per share increased 12,6% to 831 cents (June 2012:
738 cents) and diluted earnings per share increased 11,6% to 830 cents
(June 2012: 744 cents).(1)
The group generated economic profit (EP) of R749m, up 28,7% (June 2012:
R582m). The return on average ordinary shareholders' equity (ROE),
excluding goodwill, increased to 16,1% (June 2012: 15,8%) and the ROE
increased to 14,6% (June 2012: 14,2%), benefiting from an increased return-
on-assets (ROA) ratio of 1,15% (June 2012: 1,07%).
Nedbank Group is well capitalised, with the Basel III common-equity Tier 1
ratio at 11,8 % (December 2012: Basel III pro forma ratio 11,6%). Funding
and liquidity levels remained sound with the surplus liquidity buffer at R25,0bn
(December 2012: R24,4bn), while the average long-term funding ratio
increased to 28,0% (December 2012: 26,0%).
The net asset value per share continued to increase, growing 7,9%
(annualised) to 12 180 cents from 11 721 cents in December 2012.(1)
Delivering sustainably to all our stakeholders
Nedbank Group's foundations are strong, with diversified earning streams,
strong capital ratios, sound funding and liquidity positions, well-managed
liquid asset portfolios, mitigated risks in higher-risk asset classes through
ongoing selective origination and strengthened provisioning and coverage
ratios through early action. The investment in the Nedbank franchise over the
past few years is proving to be beneficial to all stakeholders and providing
good support for revenue growth during more difficult macroeconomic
circumstances.
We continue to deliver sustainably to all our stakeholders:
For staff creating 211 new employment opportunities; investing R148m in
training our people; 647 of our staff members participating in our Leading for
Deep Green programme; supporting 160 external bursars across 17
universities; and progressing well on staff transformation initiatives.
For clients significantly investing in our distribution footprint, with a 46%
increase in new outlets and 81% new ATMs since the first half of 2009;
accelerating delivery in innovation during the past 18 months, including
launching the 'branch of the future', PocketPOS, the eBill invoice issuing
and payment system as well as a new, lower-price credit life product;
increasing the value of loan payouts to R83bn (June 2012: R69bn) and client
inflows in assets under management by 33,2% to R167,2bn (June 2012:
R125,5bn).
Client satisfaction scores continue to reflect these investments, remaining at
multiyear highs. This has led to overall group client numbers increasing to
6,4m, up 10,0%, since June 2012 and growing numbers of clients transacting
through our channels.
For shareholders delivering EP of R749m and increasing the interim
dividend by 14,7% ahead of 12,4% growth in headline earnings per share
(HEPS); our lower share price to June (down 6,6%) performing in line with the
JSE Bank Index; creating shareholder value through our rights to acquire 20%
in Ecobank Transnational Incorporated (ETI); entering into an agreement to
acquire an initial stake of 36,4% of Banco Unico with a pathway to control,
subject to regulatory approval, and signing an alliance agreement with the
Bank of China to enable increased participation in ChinaAfrica flows.
For regulators implementing Basel III successfully on 1 January 2013, with
the group's common-equity Tier 1 strengthening further to 11,8%; making
cash taxation contributions of R3,4bn relating to direct, indirect, PAYE and
other taxation; continuing with our strong, open and transparent relationships
with all regulators and our commitment to responsible banking practices.
For communities expanding our branch footprint into peri-urban areas,
resulting in increased accessibility to Nedbank's relevant product offerings for
the community; since 2009 contributing R394m to socioeconomic
development and R47m in the first half of 2013; ranking first among the top
100 companies in the Mail & Guardian dti Code Survey; sourcing 74% or
R3,4bn of our procurement locally, improving on an already high benchmark;
making good progress with our Sustainable Agriculture and Water Balance
partnerships with WWF-SA; clients investing more than R1,6bn in our
Nedbank Retail Green Savings Bond; and being recognised as a leader in
socially responsible banking at the 2013 African Banker Awards.
Cluster performance
The business clusters generated an increased ROE of 17,6% (June 2012:
17,5%) and headline earnings growth of 4,6%, with strong performances
across the Capital, Corporate and Wealth businesses.
% Headline ROE
change earnings (%)
(Rm)
June June June June
2013 2012 2013 2012
Nedbank Capital 16,9 801 685 28,4 24,1
Nedbank Corporate 23,7 1 069 864 25,9 22,2
Nedbank Business Banking (19,4) 349 433 15,2 20,5
Nedbank Retail (11,7) 1 054 1 194 10,0 11,8
Nedbank Wealth 17,9 421 357 35,9 29,3
Business clusters 4,6 3 694 3 533 17,6 17,5
Centre including Rest of Africa- >100,0 220 (79)
Total 13,3 3 914 3 454 14,6 14,2
* June 2012 restated by R14m to reflect the adoption of IAS 19 Employee
Benefits (2011).
Nedbank Capital's growth in earnings and ROE was driven by good pipeline
conversion in investment banking, together with a solid performance from
global markets, while impairments improved.
Nedbank Corporate produced strong earnings growth and an improved ROE,
underpinned by increased cash and electronic banking volumes, a strong
delivery from the listed-property investment portfolio together with fair-value
gains and favourable deposit growth. This performance was achieved within a
well-managed impairment and expense environment across its businesses.
Nedbank Business Banking reported a decrease in headline earnings and
ROE following a R182m specific impairment charge in June on a R240m
exposure to a single client. The credit loss ratio (CLR) is expected to revert to
the upper end of its through-the-cycle target range for the full year, enabling
improved returns, reflective of the quality of client advances, proactive risk
management practices and underlying momentum in the business.
Notwithstanding the protracted challenges facing the small-and-medium-
enterprise (SME) sector in South Africa, Business Banking continued to
deliver strong growth in asset payouts, current account creditors and non-
interest revenue (NIR) on the back of new-client gains and deepening cross-
sell.
Nedbank Retail generated headline earnings of R1,1bn, down 11,7%, which
were impacted by the early and comprehensive risk-mitigating actions to
address the concerning personal-loan industry dynamics observed in 2012,
particularly in relation to the high industry growth rates that masked the true
underlying level of consumer financial distress. Balance sheet impairments
have been further strengthened to 4,2% of retail advances (June 2012: 4,0%),
notably in personal loans where an additional R498m has been raised since
June 2012 through methodology changes to increase prudency in
provisioning policies, including R60m for in duplum, with R306m of this
provision reflected against the performing portfolio. Consequently, the
Nedbank Retail CLR of 2,56% (June 2012: 2,00%) and ROE of 10,0% (June
2012: 11,8%) reflect these effects. The embedding of sound risk management
practices ensured that the CLR for the balance of advances remained within
expectations.
The excellent momentum in sustainably repositioning the Retail Cluster
strategically and financially was maintained in a very challenging
macroeconomic environment. Investment in distribution and distinctive client
value propositions is yielding significant client gains, with good increases in
related transactional, deposit and lending volumes, contributing to strong NIR
growth of 10,6%, which is well ahead of expense growth of 6,9%.
Nedbank Wealth's earnings growth and ROE increase were supported by
excellent performance in the asset management and life insurance
businesses, offset by a normalisation in the short-term insurance claims
environment. In addition, the CLR improved to within the cluster's through-the-
cycle target range.
Headline earnings at the centre represents, inter alia, the after-tax effects of a
release of R60m of the R200m central impairment provision to offset the
R60m in duplum model overlay incurred in Retail, a reversal of R88m of
insurance provisions following court rulings in our favour and an earnings
uplift in the Rest of Africa Division.(1)
Detailed segmental information is available in the results booklet and on the
group's website at www.nedbankgroup.co.za under the 'Financial information'
section.
Financial performance
Net interest income
Net interest income grew 6,9% to R10 309m (June 2012: R9 642m),
supported by growth in average interest-earning banking assets of 6,1%.(1)
The net interest margin (NIM) of 3,58% increased from the comparative
period (June 2012: 3,54%) and the prior year (December 2012: 3,53%).
Margin gains were underpinned by advances and deposit mix changes, risk-
adjusted pricing of new advances and backbook advances runoff.
Impairments charge on loans and advances
Impairments increased to R3 325m (June 2012: R2 702m) and the CLR to
1,31% (June 2012: 1,11%).
The CLR is comprised of a specific charge of 1,24% and a portfolio charge of
0,07% (June 2012: specific: 1,00% and portfolio: 0,11%).
CLR (%) Jun Jun Dec
2013 2012 2012
Specific impairments 1,24 1,00 0,91
Portfolio impairments 0,07 0,11 0,14
Total CLR 1,31 1,11 1,05
Total group defaulted advances decreased year-on-year to R20 176m (June
2012: R21 838m) from ongoing improvements in the residential and
commercial mortgage books. Defaulted advances were up 9,4% (annualised)
on the 2012 year-end (Dec 2012: R19 273m) from increases in personal loans
and in the wholesale businesses.
The coverage ratio for total and specific impairments increased to 58,8%
(June 2012: 52,9%) and 40,9% (June 2012: 39,0%) respectively. Portfolio
coverage on the performing book continued to strengthen to 0,7% (June 2012:
0,6%).
Our collections processes generated post-writeoff recoveries of R412m (June
2012: R428m), reflecting the prudent approach of cash accounting the
recoveries on the written-off book. This includes personal-loan recoveries of
R130m (June 2012: R114m).
CLR (%) % Jun Jun Dec Through-
banking 2013 2012 2012 the-cycle
advances target
ranges
Nedbank Capital 11,3 0,77 1,41 1,06 0,10 - 0,55
Nedbank Corporate 32,1 0,30 0,30 0,24 0,20 - 0,35
Nedbank Business Banking 11,9 1,02 0,41 0,34 0,55 - 0,75
Nedbank Retail 38,2 2,56 2,00 2,01 1,50 - 2,20
Nedbank Wealth 3,8 0,24 0,46 0,61 0,20 - 0,40
Group 1,31 1,11 1,05 0,60 - 1,00
Asset quality remains sound. In Nedbank Corporate the CLR was maintained
within its through-the-cycle target range, and both Nedbank Capital and
Nedbank Wealth reported lower impairments. The Business Banking CLR
was affected by the aforementioned impairment and is likely to revert to the
through-the-cycle target range by year-end. The deterioration in Nedbank
Retail's CLR reflects changes in advances mix, higher consumer credit stress
and the outcome of the more prudent impairment methodologies and early
risk mitigation actions taken in Personal Loans.
Non-interest revenue
NIR increased by 15,4% to R9 535m (June 2012: R8 265m)(1), due to the
following:
- Commission and fee income of R6 771m was up 14,2% (June 2012: R5
928m)(1), driven by strong client gains, improved cross-sell, good volumes
and higher levels of client activity.
- Insurance income of R950m increased 15,4% (June 2012: R823m),
benefiting from growth in personal loans offset by the base effect of the
benign short-term claims experienced in H1 2012.
- Trading income increased to a robust R1 272m (June 2012: R1 252m)
from a high 2012 base as a result of ongoing strong performance within
the fixed-income, commodities, credit and currencies and forex
environments.
- Private equity generated income of R63m (June 2012: R139m).
- Fair-value gains of R94m (June 2012: R125m loss) were recognised
mainly as a result of basis risk on centrally hedged banking book positions
and accounting mismatches in hedged fixed-rate advances portfolios as
market yields increased. This positive fair value gain follows a period of
cumulative fair-value losses of R583m since 2010. NIR, excluding fair-
value gains, was up 12,5%.
The strong uplift from NIR resulted in the NIR-to-expense ratio increasing to
88,7% (June 2012: 83,0%) and for the first time Nedbank achieved its
medium-to-long-term target of more than 85%.(1) The strength of the Nedbank
franchise is reflected in the sustained growth in NIR, increasing 15,4,%
(15,7%, excluding fair-value adjustments) on a compound basis since June
2009.
Expenses
Disciplined cost management resulted in expenses growing at 8,0% to
R10 750m [June 2012: R9 957m, restated by R18m to reflect the adoption of
IAS 19 Employee Benefits (2011)].(1)
Growth in expenses was primarily driven by:
- staff-related costs increasing 8,6%, comprising remuneration cost growth
of 8,0% following average inflation-related annual increases of 6,5% and
0,7% growth in predominantly frontline headcount; and
- marketing and computer processing cost growing 15,6% and 7,4%
respectively, consistent with the group's focus on revenue-generating
business activities and building the franchise.
Taxation(1)
The base effect of capital gains tax and secondary tax on companies in June
2012, combined with lower levels of dividend income, resulted in an effective
tax rate of 25,9% (June 2012: 27,9%)(1).
Statement of financial position
Capital
Strong balance sheet management resulted in all capital adequacy ratios
remaining well above the Basel III minimum regulatory capital requirements
and well within the group's new Basel III internal target ranges.
Nedbank June June December Internal Regulatory
Group 2013 2012 2012 target minimum*
(Basel III) (Basel II.5) (Pro forma range (Basel III)
Basel III) (Basel III)
Common-equity 11,8% 10,6% 11,6% 10,5% - 12,5% 9,00%
Tier 1 ratio
Tier 1 ratio 13,0% 12,1% 13,1% 11,5% - 13,0% 10,5%
Total capital 14,8% 14,4% 15,1% 14,0% - 15,0% 12,5%
ratio
(Ratios calculated include unappropriated profits.)
* The Basel III regulatory minima include minimum regulatory requirements for common-
equity Tier 1 in 2019 and Tier 1 and total ratios in 2015, including a conservative add-on
for Pillar 2A and domestic systemically important financial institutions (D-SIFIs). These
requirements exclude Pillar 2B add-ons and any countercyclical capital buffer
requirements.
The group's capital ratios are expected to be maintained at these strong
levels in 2013 through projected earnings growth and the portfolio tilt strategy,
offset by risk-weighted asset growth.
A total of R1,8bn of new-style, fully loss-absorbent, Basel III-compliant, Tier 2
subordinated-debt capital was successfully issued during July 2013 to replace
the R1,8bn Basel II Tier 2 capital that matures in September 2013.
Further detail on risk and capital management will be available in the Risk and
balance sheet management review section of the group's analyst booklet and
the Pillar 3 Report to be published on the website at
www.nedbankgroup.co.za in September 2013.
Funding and liquidity
Nedbank Group remains well funded, with a strong liquidity position that is
underpinned by a well-diversified and lengthened funding profile, a surplus
liquid asset buffer of R25,0bn in anticipation of the Basel III liquidity coverage
ratio (LCR), a strong loan-to-deposit ratio and low reliance on interbank and
foreign currency funding. The average long-term funding ratio for the second
quarter of 28,0% (December 2012: 26,0%) was supported by growth in the
Retail Savings Bond to R7,7bn.
The attractiveness of the Nedbank franchise as a capital market issuer was
again demonstrated in that a R2,0bn five-year commercial mortgage
securitisation was successfully concluded in March 2013 as well as R3,2bn of
three-year senior unsecured debt in July 2013.
Loans and advances
Loans and advances grew 11,5% (annualised) to R557,4bn (December 2012:
R527,2bn)(1), underpinned by gross new-advances payouts increasing 20,3%
to R83bn (June 2012: R69bn).
Loans and advances by cluster are as follows:
June December % change
Rm 2013 2012 (annualised)
Nedbank Capital 97 161 82 494 35,9
Banking activities 59 897 52 732 27,4
Trading activities 37 264 29 762 50,8
Nedbank Corporate 169 066 162 730 7,9
Nedbank Business Banking 62 627 60 115 8,4
Nedbank Retail 193 027 190 647 2,5
Nedbank Wealth 22 138 19 864 23,1
Centre, including Rest of 13 330 11 316 35,6
Africa
557 349 527 166 11,5
Nedbank Capital's banking advances growth was boosted by good
drawdowns of the deal pipeline, including the first tranche of the Renewable
Energy Independent Power Producer Procurement Programme (REIPPPP).
Growth in the trading advances book came largely from foreign-currency
placements and deposits placed under reverse repurchase agreements
related to the hedging of the group's liquid-asset portfolio.
In Nedbank Corporate, Corporate Banking recorded favourable growth in term
loans of 13,4% (annualised), whereas commercial mortgages decreased 1,8%
(annualised) as a result of higher levels of early settlements.
Good momentum in quality-client gains and support of existing relationship-
banked clients led to the increase in Nedbank Business Banking's advances
growth.
Retail banking advances grew by a modest 2,5% (annualised), reflecting the
difficult consumer environment, selective origination in higher-risk asset
categories in line with our portfolio tilt strategy, rolloff of the home loans
backbook and early repayments. Advances growth arose from Card and MFC
increasing advances 19,4% and 10,7% respectively, while personal loans and
home loan advances declined 5,8% and 1,9% respectively in line with the
planned slowdown in both advances categories. Personal loans represent
3,9%% of the overall group advances book.
Growth in advances at the Centre was led by increased business activity in
the Rest of Africa, consistent with the group's focus on deepening its Pan-
African banking relationships and expanding its presence in Africa.
Deposits
Deposits grew 10,2% (annualised) to R578,8bn (December 2012: R550,9bn)(1)
and the loan-to-deposit ratio increased slightly to 96,3% (June 2012: 95,7%).
The growth in call and term deposits of 13,8%, fixed deposits of 13,6% and
cash management deposits of 2,8% demonstrates the strong focus on
portfolio tilt and attracting retail and corporate funding through competitive and
innovative liability products.
Current and savings accounts increased by 2,3% and 27,5% respectively,
with good contributions from Retail, Business Banking and Wealth. Ongoing
improvements in the funding profile ensured that Nedbank continued to hold a
higher proportion of household deposits relative to the size of its current retail
transactional banking franchise.
Group strategic focus
The group maintained progress in growing its franchise and delivering on the
four key strategic initiatives of repositioning Nedbank Retail, growing NIR,
implementing the portfolio tilt strategy and expanding into the rest of Africa.
- Nedbank Retail's revenue and preprovisioning operating profit continued
to grow strongly. Momentum from investment in footprint, people, client
value propositions, including integrated channels and new innovations, as
well as collaboration with and leveraging wholesale relationships,
continues to support growth in the number and quality of clients and
related cross-sell. The deteriorating credit health of consumers in the last
quarter of 2012 as indicated in the 2012 annual results and the
implementation of a more prudent provisioning methodology for personal
loans will likely result in Retail achieving its goal of an ROE at or above the
cost of equity of 13,0% in line with the original target date of 2014.
Early risk-mitigating actions taken should enable the CLR to improve by
year-end, being closer to the upper end of the through-the-cycle target
range, and in that event Nedbank Retail's headline earnings for 2013
could be similar to the 2012 earnings level. There is downside risk if levels
of consumer financial distress deteriorate further.
- The NIR-to-expense ratio at a better-than-expected 88,7% exceeded our
target of more than 85% for the first time. Momentum came from good-
quality annuity income through growth in commission and fees from client
gains and ongoing cross-sell, insurance income, a solid performance in
trading as well as fair-value gains.
- The portfolio tilt strategy is evident in EP growth from R57m in 2009 to
R582m in June 2012 and R749m in June 2013. We will continue to focus
on growing EP-rich activities through Nedbank Wealth, deposits, and
transactional and investment banking. We will maintain a selective growth
approach in personal loans, home loans and commercial property finance
as we proactively seek to limit downside risk in this challenging operating
climate.
- Our Rest of Africa strategy represents a client-focused, risk-mitigated,
capital-efficient growth lever for the medium to long term. The strategic
alliance with Ecobank provides clients with access to the largest Pan-
African banking network focused on Central and West Africa and the rights
to acquire a shareholding of up to 20% in ETI, which can be exercised
between November 2013 and November 2014. The agreement to acquire
an initial stake of 36,4% of Banco Unico in Mozambique with the right to a
majority shareholding over time, subject to regulatory approval, will
contribute to strengthening our position in the Southern African
Development Community and East Africa as planned.
Economic outlook
Globally, economic growth is expected to be slightly firmer in the remainder of
2013. However, downside risk remains high, particularly in some key
emerging markets, including China, where concerns of a credit crisis and
economic slowdown have moderated growth momentum.
SA's GDP is forecast to grow by 2,0% in 2013 and 3,2% in 2014. The
weakening rand will provide limited benefit to export growth in light of the low
productivity, soft commodity prices and infrastructural constraints, but will add
to inflationary pressures. Overall, given the outlook of lower growth, interest
rates are anticipated to remain unchanged until possibly the second half of
2014.
Household credit demand, including residential mortgages, is likely to remain
muted, albeit with pockets of growth in areas such as instalment sales and
leasing finance. Growth in unsecured loans will continue to slowdown as
consumer stress increases and lending risk appetite diminishes.
Infrastructure spending by the public sector is anticipated to increase, but
corporate credit demand is expected to remain subdued, with increasing
competition for fewer deals.
Prospects
Financial performance for the full year as set out below is currently anticipated
to remain broadly in line with the guidance communicated in the 2012 annual
results, with the exception of the CLR that is now expected to be below the
1,31% in June 2013, but above 1,00%:
- Advances to grow at mid to upper single digits.
- NIM to remain at levels similar to 2012.
- The CLR to improve from the June 2013 level, but remain above the top
end of group's through-the-cycle target range of 60 to 100 basis points.
- NIR (excluding fair-value adjustments) to grow at low double digits and
allow the group to meet the medium-to-long-term NIR-to-expense target of
more than 85%.
- Expenses to increase by mid to upper single digits.
Nedbank Group is targeting full-year growth in diluted HEPS to meet our
medium-to-long-term target in the context of a tougher-than-expected
economic environment and ongoing market volatility. The group's medium-to-
long-term targets remain unchanged and the 2013 outlook for these is
highlighted below:
Metric 2012 Medium-to-long-term 2013
performance targets outlook
ROE (excluding 5% above cost of Improving,
goodwill) 16,4% ordinary shareholders' remaining below
equity target.
Growth in diluted >_ consumer price
19,0% index + GDP growth + Meet target.
HEPS 5%
Between 0,6% and Below June 2013,
CLR 1,05% 1,0% of average remaining above
banking advances target range.
NIR-to-expense
ratio 84,4% > 85% Meet target.
Improving,
Efficiency ratio 55,6% < 50,0% remaining above
target.
Common-equity
Tier 1 capital 11,8% 10,5% to 12,5% Strengthening.
adequacy ratio
(Basel III)
Economic capital Internal Capital Adequacy Assessment Process (ICAAP):
A debt rating (including 10% capital buffer)
Dividend cover 2,18 times 1,75 to 2,25 times 1,75 to 2,25 times
Shareholders are advised that these forecasts have not been reviewed or
reported on by the group's auditors.
Board changes
Mr Don Hope resigned as a non-executive director of Nedbank Group and
Nedbank Limited with effect from 30 June 2013 following his retirement from
Old Mutual plc at the end of June 2013.
Accounting policies(1)
Nedbank Group Limited is a company domiciled in SA. The condensed
consolidated interim financial results of the group at and for the six months
ended 30 June 2013 comprise the company and its subsidiaries (the 'group')
and the group's interests in associates and jointly controlled entities.
Nedbank Group's condensed consolidated interim financial results have been
prepared in accordance with the measurement and recognition criteria of
International Financial Reporting Standards (IFRS) and are presented in
accordance with the disclosures prescribed by International Accounting
Standards (IAS) 34: Interim Financial Reporting, the South African Institute of
Chartered Accountants (SAICA) Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Pronouncement as issued by
Financial Reporting Standards Council and the provisions of the Companies
Act of SA.
Nedbank Group's principal accounting policies have been prepared in terms
of IFRS of the International Accounting Standards Board (IASB) and have
been applied consistently over the current and prior financial years, with the
exception of changes mentioned below.
The following standards in particular have been newly adopted or amended
with effect from 1 January 2013:
- IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements
and IFRS 12 Disclosure of Interests in Other Entities, as well as the
consequential amendments to IAS 27 Separate Financial Statements
(2011) and IAS 28 Investments in Associates and Joint Ventures (2011).
As a result of adopting IFRS 10 the group has changed its accounting policy
with respect to determining whether it has control over and consequently
whether it is required to consolidate an investee. IFRS 10 introduces a new
set of criteria for assessing control by referring to the investor's exposure or
rights to variable returns from its involvement with the investee and the ability
to affect those returns through its power over the investee.
IFRS 11 requires that the group classifies its interests in joint arrangements
as either joint operations or joint ventures depending on the group's rights to
assets and obligations for the liabilities of the arrangements. There has been
no change to the method of accounting for joint arrangements.
These standards have been applied retrospectively and have not required any
material restatement in the groups' financial report.
- IFRS 13 Fair-value Measurement
IFRS 13 provides a revised definition of fair value and establishes a single
source of guidance for the measurement of fair value, which had
previously been contained in various standards. The adoption of this
standard did not have a material impact on the measurement of the
group's assets and liabilities. The group has an established control
framework with respect to the measurement of fair value, which includes
an ongoing review of the valuation methodologies applied.
- Disclosures Offsetting Financial Assets and Financial Liabilities
(amendments to IFRS 7)
The group has adopted the amendments to IFRS 7, which requires
extensive disclosures in respect of offsetting. The adoption had no impact
on the measurement of the group's assets and liabilities.
- IAS 19 Employee Benefits (2011)
The group has adopted IAS 19 Employee Benefits (2011). The
amendments include revised requirements for pensions and other
postemployment benefits, termination benefits and certain other changes.
The key amendments include:
- requiring the recognition of changes in net defined-benefit
liabilities/assets due to changes in determined expense/income in
'other comprehensive income' (eliminating the 'corridor approach'
previously permitted in IAS 19);
- modifying the accounting for termination benefits; and
- clarifying various miscellaneous issues.
The amendments have been applied retrospectively and required certain
restatements that are not material.
- IAS 1 Presentation of Financial Statements
Amendments to IAS 1 require identification of items that may be
reclassified from 'other comprehensive income' to 'profit or loss', and those
that may not be so reclassified. As a consequence of adopting the
amendments to IAS 1, items that may be reclassified from 'other
comprehensive income' to 'profit or loss' have been denoted as such in the
statement of comprehensive income.
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
2013 were consistent with those applied during the 2012 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 period(1)
A total of R1,8bn of new-style, fully loss-absorbent, Basel III-compliant, Tier 2
subordinated-debt capital was successfully issued during July 2013 to replace
the R1,8bn Basel II Tier 2 capital that matures in September 2013.
Furthermore, R3,2bn of three-year senior unsecured debt was also
successfully issued.
Reviewed results auditors' report
KPMG Inc and Deloitte & Touche, Nedbank Group's independent auditors,
have reviewed the condensed interim financial results of Nedbank Group
Limited. The review was conducted in accordance with International
Standards in Review Engagements 2410: Review of Interim Financial
Information by the Independent Auditor. They have expressed an unmodified
review conclusion on the results. The condensed consolidated interim
financial results comprise the consolidated statement of financial position at
30 June 2013, consolidated statement of comprehensive income, condensed
consolidated statement of changes in equity and 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 390 cents per ordinary
share has been declared, payable to shareholders for the six months ended
30 June 2013. The dividend has been declared out of income reserves.
The dividend will be subject to a dividend withholding tax rate of 15%
(applicable in South Africa) or 58,5 cents per ordinary share, resulting in a net
dividend of 331,5 cents per ordinary share, unless the shareholder is exempt
from paying dividend tax or is entitled to a reduced rate in terms of a
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 510 204 377.
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, 6 September 2013
Shares commence trading (ex dividend) Monday, 9 September 2013
Record date (date shareholders recorded in Friday, 13 September 2013
books)
Payment date Monday, 16 September 2013
Share certificates may not be dematerialised or rematerialised between
Monday, 9 September 2013, and Friday, 13 September 2013, both days
inclusive.
On Monday, 16 September 2013, 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, 16 September 2013,
will be posted on that date.
Holders of dematerialised shares will have their accounts credited at their
participant or broker on Monday, 16 September 2013.
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 Reuel J Khoza Michael WT Brown
Chairman Chief Executive
6 August 2013
Financial highlights
at 30 June 30 June 31 December
2013 2012 2012
(Reviewed) (Reviewed) (Audited)
Statistics
Number of shares listed m 510.2 507.5 507.5
Number of shares in issue, excluding shares held by group entities m 460.8 456.0 457.3
Weighted average number of shares m 459.2 455.7 456.3
Diluted weighted average number of shares m 471.2 468.0 470.7
Preprovisioning operating profit* Rm 8 652 7 550 15 543
Economic profit* Rm 749 582 1 521
Headline earnings per share* cents 852 758 1 640
Diluted headline earnings per share* cents 831 738 1 590
Ordinary dividends declared per share cents 390 340 752
Interim cents 390 340 340
Final cents 412
Ordinary dividends paid per share cents 412 340 680
Dividend cover* times 2.18 2.23 2.18
Net asset value per share* cents 12 180 11 143 11 721
Tangible net asset value per share* cents 10 444 9 435 9 989
Closing share price cents 17 553 17 389 18 800
Price/earnings ratio* historical 10.2 11.4 11.5
Market capitalisation Rbn 89.6 88.2 95.4
Number of employees 28 889 28 678 28 748
Key ratios (%)
Return on ordinary shareholders' equity (ROE)* 14.6 14.2 14.8
ROE, excluding goodwill* 16.1 15.8 16.4
Return on total assets (ROA) 1.15 1.07 1.13
Net interest income to average interest-earning banking assets** 3.58 3.54 3.53
Credit loss ratio banking advances 1.31 1.11 1.05
Non-interest revenue to total operating expenses* 88.7 83.0 84.4
Non-interest revenue to total income 48.0 46.2 46.8
Efficiency ratio* 54.2 55.6 55.6
Efficiency ratio (excluding BEE transaction expenses)* 54.1 55.3 55.4
Effective taxation rate 25.9 27.9 26.8
Group capital adequacy ratios (including unappropriated profits):***
Common equity tier 1 11.8 10.6 11.4
Tier 1 13.0 12.1 12.9
Total 14.8 14.4 14.9
Statement of financial position statistics (Rm)
Total equity attributable to equity holders of the parent* 56 126 50 810 53 601
Total equity* 59 817 54 551 57 375
Amounts owed to depositors 578 807 539 506 550 878
Loans and advances: 557 349 516 088 527 166
Gross 569 208 527 633 538 037
Impairment of loans and advances (11 859) (11 545) (10 871)
Total assets administered by the group 881 493 795 568 833 453
Total assets* 714 330 670 052 682 958
Assets under management 167 163 125 516 150 495
Life assurance embedded value 2 063 1 827 2 030
Life assurance value of new business 201 279 563
* 2012 restated to reflect the adoption of IAS 19 Employee Benefits (2011).
** As communicated in the group's 2012 integrated report, clients' indebtedness for acceptances has been reclassified from interest-earning banking assets to other assets for the
purposes of calculating the interest margin on interest-earning banking assets, which resulted in an increase in the ratio for June 2012 from 3,53% to 3,54%.
*** 2012 and 2013 ratios were calculated according to Basel II.5 and Basel III principles respectively. These ratios are not reviewed by or reported on by the group's auditors.
Consolidated statement of comprehensive income
for the period ended 30 June 30 June 31 December
2013 2012 2012
(Reviewed) (Reviewed) (Audited)
Rm Rm Rm
Interest and similar income 22 400 22 362 44 730
Interest expense and similar charges 12 091 12 720 25 050
Net interest income 10 309 9 642 19 680
Impairments charge on loans and advances 3 325 2 702 5 199
Income from lending activities 6 984 6 940 14 481
Non-interest revenue 9 535 8 265 17 324
Operating income 16 519 15 205 31 805
Total operating expenses 10 750 9 957 20 563
Operating expenses** 10 729 9 911 20 485
BEE transaction expenses 21 46 78
Indirect taxation 305 243 561
Profit from operations before non-trading and capital items 5 464 5 005 10 681
Non-trading and capital items (8) 34 (18)
Net profit on sale of subsidiaries, investments, and property and equipment 5 29 33
Net impairment of investments, property and equipment, and capitalised development costs (13) 5 (51)
Fair-value adjustments of investment properties 4 (12)
Profit from operations 5 460 5 039 10 651
Share of profits of associates and joint ventures 1
Profit before direct taxation 5 460 5 039 10 652
Total direct taxation 1 413 1 399 2 865
Direct taxation** 1 413 1 394 2 861
Taxation on non-trading and capital items (1) 5 4
Taxation on revaluation of investment properties 1 *
Profit for the period 4 047 3 640 7 787
Other comprehensive income/(losses) net of taxation 358 (32) 171
Exchange differences on translating foreign operations*** 371 17 162
Fair-value adjustments on available-for-sale assets*** (2) (1) 43
Remeasurements on long-term employee benefit assets** (38) (76)
(Losses)/Gains on property revaluations*** (11) (10) 42
Total comprehensive income for the period 4 405 3 608 7 958
Profit attributable to:
Equity holders of the parent** 3 910 3 483 7 449
Non-controlling interest ordinary shareholders** 5 15 45
Non-controlling interest preference shareholders 132 142 293
Profit for the period 4 047 3 640 7 787
Total comprehensive income attributable to:
Equity holders of the parent** 4 254 3 453 7 620
Non-controlling interest ordinary shareholders** 19 13 45
Non-controlling interest preference shareholders 132 142 293
Total comprehensive income for the period 4 405 3 608 7 958
Basic earnings per share** cents 851 764 1 632
Diluted earnings per share** cents 830 744 1 583
* Represents amounts less than R1m.
** 2012 restated to reflect the adoption of IAS 19 Employee Benefits (2011).
*** These items are or may be reclassified to profit or loss.
Headline earnings reconciliation
for the period ended
30 June 30 June 30 June 30 June 31 December 31 December
2013 2013 2012 2012 2012 2012
(Reviewed) (Reviewed) (Reviewed) (Reviewed) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm
Gross Net of taxation Gross Net of taxation Gross Net of taxation
Profit attributable to equity holders of the parent* 3 910 3 483 7 449
Less: Non-headline earnings items (4) (4) 34 29 (30) (34)
Net profit on sale of subsidiaries, investments, and property and equipment 5 6 29 24 33 29
Net impairment of investments, property and equipment, and capitalised development costs (13) (13) 5 5 (51) (51)
Fair-value adjustments of investment properties 4 3 (12) (12)
Headline earnings 3 914 3 454 7 483
* 2012 restated to reflect the adoption of IAS 19 Employee Benefits (2011).
Consolidated statement of financial position
at 30 June 30 June 31 December
2013 2012 2012
(Reviewed) (Reviewed) (Audited)
Rm Rm R
Assets
Cash and cash equivalents 16 784 11 840 14 445
Other short-term securities 44 906 42 090 43 457
Derivative financial instruments 13 004 14 608 13 812
Government and other securities 25 022 26 693 26 753
Loans and advances** 557 349 516 088 527 166
Other assets 9 585 11 775 9 488
Current taxation receivable 455 976 246
Investment securities 18 145 15 825 16 577
Non-current assets held for sale 13 22 508
Investments in associate companies and joint ventures 527 602 668
Deferred taxation assets* 324 386 541
Investment property 210 617 205
Property and equipment 6 407 6 259 6 398
Long-term employee benefit assets* 2 132 2 099 2 095
Mandatory reserve deposits with central banks 11 468 12 384 12 677
Intangible assets 7 999 7 788 7 922
Total assets 714 330 670 052 682 958
Equity and liabilities
Ordinary share capital 461 456 457
Ordinary share premium 16 343 15 955 16 033
Reserves* 39 322 34 399 37 111
Total equity attributable to equity holders of the parent 56 126 50 810 53 601
Non-controlling interest attributable to
ordinary shareholders* 220 180 213
preference shareholders 3 471 3 561 3 561
Total equity 59 817 54 551 57 375
Derivative financial instruments 16 777 15 272 13 454
Amounts owed to depositors** 578 807 539 506 550 878
Provisions and other liabilities 16 046 16 246 15 526
Current taxation liabilities 114 116 193
Other liabilities held for sale 36
Deferred taxation liabilities* 596 1 039 793
Long-term employee benefit liabilities* 2 029 1 874 1 913
Investment contract liabilities 10 519 8 709 9 513
Insurance contract liabilities 3 146 2 683 2 979
Long-term debt instruments 26 479 30 056 30 298
Total liabilities 654 513 615 501 625 583
Total equity and liabilities 714 330 670 052 682 958
* 2012 restated to reflect the adoption of IAS 19 Employee Benefits (2011).
** As communicated in the group's 2012 integrated report, clients' indebtedness for acceptances and liabilities for acceptances have been reclassified to loans and advances and amounts owed to
depositors respectively for the purpose of achieving improved comparability with the majority of the group's SA banking peers. These items were previously separately disclosed in the
group's statement of financial position. June 2012 comparatives have been reclassified accordingly.
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
of the parent shareholders shareholders Total equity
Rm Rm Rm Rm
Balance at 31 December 2011 48 946 178 3 561 52 685
Adoption of IAS 19 amendments (250) (4) (254)
Restated balance at 31 December 2011 48 696 174 3 561 52 431
Dividend to shareholders (1 609) (7) (1 616)
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* 3 453 13 142 3 608
Share-based payment reserve movement 245 245
Regulatory risk reserve provision 1 1
Other movements 2 2
Balance at 30 June 2012 50 810 180 3 561 54 551
Dividend to shareholders (1 639) (1) (1 640)
Preference share dividend (151) (151)
Issues of shares net of expenses 1 1
Shares acquired/cancelled by group entities and BEE trusts 110 110
Total comprehensive income for the period* 4 167 32 151 4 350
Share-based payment reserve movement 151 151
Regulatory risk reserve provision 1 1
Acquisition of subsidiary 2 2
Balance at 31 December 2012 53 601 213 3 561 57 375
Dividend to shareholders (1 967) (9) (1 976)
Preference share dividend (132) (132)
Issues of shares net of expenses 458 458
Shares acquired/cancelled by group entities and BEE trusts (144) (144)
Total comprehensive income for the period 4 254 19 132 4 405
Share-based payment reserve movement (75) (75)
Preference shares held by group entities (90) (90)
Disposal of subsidiary (3) (3)
Other movements (1) (1)
Balance at 30 June 2013 56 126 220 3 471 59 817
* Restated to reflect the adoption of IAS 19 Employee Benefits (2011).
Condensed consolidated statement of cashflows
for the period ended 30 June 30 June 31 December
2013 2012 2012
(Reviewed) (Reviewed) (Audited)
Rm Rm Rm
Cash generated by operations 10 259 9 121 18 804
Change in funds for operating activities 158 (4 641) (5 947)
Net cash from operating activities before taxation 10 417 4 480 12 857
Taxation paid (1 896) (2 431) (3 914)
Cashflows from operating activities 8 521 2 049 8 943
Cashflows utilised by investing activities (1 742) (2 155) (4 696)
Cashflows utilised by financing activities (5 604) (1 115) (2 552)
Effects of exchange rate changes on opening cash and cash equivalents (excluding foreign borrowings) (45) 36 18
Net increase/(decrease) in cash and cash equivalents 1 130 (1 185) 1 713
Cash and cash equivalents at the beginning of the period*
Cash and cash equivalents at the end of the period* 27 122 25 409 25 409
28 252 24 224 27 122
* Including mandatory reserve deposits with central banks.
Condensed segmental reporting
for the period ended 30 June 30 June 31 December 30 June 30 June 31 December 30 June 30 June 31 December
2013 2012 2012 2013 2012 2012 2013 2012 2012
(Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm
Total assets Operating income Headline earnings
Nedbank Capital 159 339 157 069 142 290 2 102 1 844 4 044 801 685 1 431
Nedbank Corporate 185 804 168 732 175 073 2 486 2 143 4 410 1 069 864 1 817
Total Nedbank Retail and Nedbank Business Banking 292 113 283 495 290 198 9 201 9 129 18 989 1 403 1 627 3 496
Nedbank Retail 200 339 193 889 198 072 7 196 7 062 14 693 1 054 1 194 2 552
Nedbank Business Banking 91 774 89 606 92 126 2 005 2 067 4 296 349 433 944
Nedbank Wealth 47 212 40 953 42 270 1 695 1 468 2 993 421 357 718
Shared Services 6 758 6 564 6 048 76 (11) 4 156 10 40
Central Management, including Rest of Africa 23 104 13 239 27 079 959 632 1 365 64 (89) (19)
Total 714 330 670 052 682 958 16 519 15 205 31 805 3 914 3 454 7 483
The segmental results for 2012 have been restated to reflect the adoption of IAS 19 Employee Benefits (2011). The amendments to the standard include revised requirements for pensions and
other postretirement benefits, termination benefits and certain other changes.
Restated group ratios are disclosed in the financial highlights section.
Condensed geographical segmental reporting
for the period ended 30 June 30 June 31 December 30 June 30 June 31 December
2013 2012 2012 2013 2012 2012
(Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited)
Rm Rm Rm Rm Rm Rm
Operating income Headline earnings
SA 15 515 14 217 29 748 3 742 3 164 6 869
Business operations* 15 515 14 217 29 748 3 893 3 347 7 230
BEE transaction expenses (19) (41) (68)
Profit attributable to non-controlling interest preference shareholders (132) (142) (293)
Rest of Africa* 655 584 1 259 124 126 297
Rest of world business operations* 349 404 798 48 164 317
Total 16 519 15 205 31 805 3 914 3 454 7 483
* 2012 restated to reflect the adoption of IAS 19 Employee Benefits (2011).
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 a presumption 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 best 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 volume and frequency 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 (eg other short-term securities and government and other securities), reference to the value of the assets of underlying business
(eg investment contract liabilities), earnings multiples (eg unlisted investments), discounted cashflow analysis (eg unlisted investments, loans and advances, other short-term securities, government and other securities and amounts owed
to depositors) and various option pricing models (eg other short-term securities and government and other securities and derivatives).
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 (www.nedbankgroup.co.za).
FAIR-VALUE HIERARCHY
The financial instruments recognised at fair value have been categorised into the three input levels of the 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.
There were no significant transfers between level 1 and 2 during the period under review.
FINANCIAL ASSETS
Total financial assets Total financial assets recognised at Total financial assets classified at level 1 Total financial assets classified at level 2 Total financial assets classified at level 3
amortised cost
30 June 31 December 30 June 31 December 30 June 31 December 30 June 31 December 30 June 31 December
2013 2012 2013 2012 2013 2012 2013 2012 2013 2012
(Reviewed) (Audited) (Reviewed) (Audited) (Reviewed) (Audited) (Reviewed) (Audited) (Reviewed) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Cash and cash equivalents 28 252 27 122 28 252 27 122
Other short-term securities 44 906 43 457 15 171 16 599 740 818 28 995 26 040
Derivative financial instruments 13 004 13 812 53 10 12 951 13 800 2
Government and other securities 25 022 26 753 10 091 10 381 10 171 10 230 4 760 6 142
Loans and advances 557 349 527 166 463 129 441 407 62 67 94 103 85 575 55 117
Other assets 9 585 9 488 6 637 5 376 2 948 3 783 329
Investments in associate companies and joint ventu 485 636 485 636
Investment securities 18 145 16 577 566 534 16 038 14 606 1 541 1 437
696 748 665 011 523 280 500 885 14 540 15 442 156 847 146 492 2 081 2 192
FINANCIAL LIABILITIES
Total financial liabilities Total financial liabilities recognised at Total financial liabilities classified at level 1 Total financial liabilities classified at level 2 Total financial liabilities classified at level 3
amortised cost
30 June 31 December 30 June 31 December 30 June 31 December 30 June 31 December 30 June 31 December
2013 2012 2013 2012 2013 2012 2013 2012 2013 2012
(Reviewed) (Audited) (Reviewed) (Audited) (Reviewed) (Audited) (Reviewed) (Audited) (Reviewed) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Derivative financial instruments 16 777 13 454 19 6 16 757 13 447 1 1
Amounts owed to depositors 578 807 550 878 447 692 416 097 131 115 134 781
Provisions and other liabilities 16 046 15 526 9 764 9 148 6 151 6 318 131 60
Investment and insurance contract liabilties 13 665 12 492 13 665 12 492
Long-term debt instruments 26 479 30 298 20 967 24 668 5 289 5 447 223 183
651 774 622 648 478 423 449 913 11 459 11 771 161 891 160 963 1 1
LEVEL 3 RECONCILIATION
Gains/(Losses) in
Opening balance at Gains/(Losses) in comprehensive Purchases and Sales and Closing balance at
1 January profit for the year income for the year issues settlements Transfers in/(out) 30 June
2013 (Reviewed) Rm Rm Rm Rm Rm Rm Rm
FINANCIAL ASSETS
Derivative financial instruments 2 3 (5) -
Loans and advances 117 (66) 4 55
Investment securities 1 437 81 14 (8) 17 1 541
Investments in associate companies and joint ventures 636 (289) 269 (131) 485
2 192 (271) 18 269 (144) 17 2 081
FINANCIAL LIABILITIES
Derivative financial instruments 1 1
1 - - - - - 1
Gains/(Losses) in
Opening balance at Gains/(Losses) in comprehensive Sales and Closing balance at
1 January profit for the year income for the year Purchases and issues settlements Transfers in/(out) 31 December
2012 (Audited) Rm Rm Rm Rm Rm Rm Rm
FINANCIAL ASSETS
Derivative financial instruments 29 2 (29) 2
Loans and advances 91 29 (3) 117
Investment securities 1 453 68 4 49 (137) 1 437
Investments in associate companies and joint ventures 545 (106) 275 (78) 636
2 118 (7) 4 324 (247) - 2 192
FINANCIAL LIABILITIES
Derivative financial instruments 5 (8) 4 1
5 (8) - - 4 - 1
Gains and losses include fair value gains or losses, translation gains or losses and, where applicable, dividends and interest income or expense.
EFFECT OF CHANGES IN SIGNIFICANT UNOBSERVABLE ASSUMPTIONS TO REASONABLE POSSIBLE ALTERNATIVES
As discussed above, the fair value of financial instruments is, under certain circumstances, measured by means of valuation techniques based on assumptions that are not market-observable. Where these scenarios apply, the group
performs stress testing on the fair value of the relevant instruments. In stress testing, appropriate levels are chosen for the unobservable input parameters 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, the valuation of which depends on unobservable input parameters. However, it is
unlikely in practice that all unobservable parameters would simultaneously be at the extremes of their ranges of reasonably possible alternatives. Furthermore, the disclosure is neither predictive nor indicative of future
movements in fair value.
Favourable change Unfavourable
Value per statement in fair value due to change in fair value
Stress parameters of financial position stress test due to stress test
June 2013 (Reviewed) Principal assumption stressed % Rm Rm Rm
FINANCIAL ASSETS
Loans and advances Credit spreads between (14) and 14
55 6 (8)
Investment securities Valuation multiples, correlations, volatilities and credit spreads between (25) and 25
1 541 155 (164)
Investments in associate companies and joint ventures Valuation multiples between (11) and 11
485 57 (57)
Total financial assets classified at level 3 2 081 218 (229)
FINANCIAL LIABILITIES
Derivative financial instruments Correlations, volatilities and credit spreads between (25) and 25
1 * *
* Represents amounts less than R1m.
Favourable change Unfavourable
Value per statement in fair value due to change in fair value
Stress parameters of financial position stress test due to stress test
December 2012 (Audited) Principal assumption stressed % Rm Rm Rm
FINANCIAL ASSETS
Derivative financial instruments Correlations, volatilities and credit spreads between (14) and 14
2 * *
Loans and advances Credit spreads between (14) and 14
117 13 (16)
Investment securities Valuation multiples, correlations, volatilities and credit spreads between (25) and 25
1 437 151 (178)
Investments in associate companies and joint ventures Valuation multiples between (11) and 11
636 70 (70)
Total financial assets classified at level 3 2 192 234 (264)
FINANCIAL LIABILITIES
Derivative financial instruments Correlations, volatilities and credit spreads between (25) and 25
1 * *
* Represents amounts less than R1m.
The group has adopted IAS 19 Employee Benefits (2011). The amendments include revised requirements for pensions and other postemployment benefits, termination benefits and certain other
changes. The amendments have been applied retrospectively and required the following restatements in the consolidated statement of comprehensive income, headline earnings reconciliation
and consolidated statement of financial position:
Reviewed Reviewed Audited Reviewed
30 June 30 June 30 December 30 December
2012 IAS 19 2012 2012 IAS 19 2012
(As reported) restatement (Restated) (As reported) restatement (Restated)
Consolidated statement of comprehensive income
Total operating expenses 9 939 18 9 957 20 528 35 20 563
Direct taxation 1 399 (5) 1 394 2 871 (10) 2 861
Other comprehensive income net of taxation:
Remeasurements on long-term employee benefit assets (38) (38) (76) (76)
Profit attributable to:
Equity holders of the parent 3 497 (14) 3 483 7 476 (27) 7 449
Non-controlling interest -ordinary shareholders 14 1 15 336 2 338
Total comprehensive income attributable to:
Equity holders of the parent 3 503 (50) 3 453 7 719 (99) 7 620
Non-controlling interest ordinary shareholders 14 (1) 13 47 (2) 45
Basic earnings per share 767 (3) 764 1 638 (6) 1 632
Diluted earnings per share 747 (3) 744 1 588 (5) 1 583
Headline earnings reconciliation
Headline earnings 3 468 (14) 3 454 7 510 (27) 7 483
Consolidated statement of financial position
Deferred taxation assets 269 117 386 399 142 541
Long-term employee benefit assets 2 185 (86) 2 099 2 258 (163) 2 095
Total equity attributable to equity holders of the parent 34 699 (300) 34 399 37 460 (349) 37 111
Non-controlling interest attributable to ordinary shareholders 185 (5) 180 219 (6) 213
Deferred taxation liabilities 1 033 6 1 039 781 12 793
Long-term employee benefit liabilities 1 544 330 1 874 1 591 322 1 913
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) 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.
Directors
Dr RJ Khoza (Chairman), MWT Brown* (Chief Executive), TA Boardman,
TCP Chikane, GW Dempster* (Chief Operating Officer), MA Enus-Brey,
ID Gladman (British), 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
Reg No: 1966/010630/06
JSE share code: NED
NSX share code: NBK
ISIN: ZAE000004875
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: 06/08/2013 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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