Wrap Text
Audited summarised consolidated annual financial results for the year ended 31 December 2013
NEDBANK LIMITED
Nedbank Limited Reg No 1951/000009/06
Incorporated in the Republic of South Africa
JSE share code: NBKP
ISIN: ZAE000043667
Audited summarised consolidated annual financial results for the year ended 31 December 2013
Overview
Nedbank Limited ('Nedbank') is a wholly owned subsidiary of Nedbank Group
Limited, which is listed on JSE Limited. These summarised consolidated annual
financial results are published to provide information to holders of Nedbank's listed
non-redeemable non-cumulative preference shares.
Commentary relating to the Nedbank summarised consolidated annual financial
results is included in the Nedbank Group Limited group results, as presented to
shareholders on 24 February 2014. Further information is provided on the website at
nedbankgroup.co.za.
Board and executive changes during the period
David Adomakoh was appointed as independent non-executive director of Nedbank Group
and Nedbank Limited with effect from 21 February 2014.
The following departures of non-executive directors of Nedbank Group and Nedbank
Limited occurred during 2013:
- Don Hope, with effect from 30 June 2013, following his retirement from Old
Mutual plc at the end of June 2013; and
- Thenjiwe Chikane, with effect from 13 August 2013.
Accounting policies
Nedbank is a company domiciled in SA. The summarised consolidated financial
results at and for the year ended 31 December 2013 comprise the company and its
subsidiaries (the 'group') and the group's interests in associates and joint
arrangements.
Nedbank's summarised consolidated financial results have been prepared in
accordance with the framework, measurement and recognition criteria of
International Financial Reporting Standards (IFRS) and are presented in accordance
with the disclosures prescribed by International Accounting Standards (IAS), the
South African Institute of Chartered Accountants (SAICA) Financial Reporting
Guides as issued by the Accounting Practices Committee, the Financial
Pronouncement as issued by Financial Reporting Standards Council and the
provisions of the SA Companies Act, 71 of 2008.
Nedbank Group's principal accounting policies have been applied in terms of IFRS
as issued by the International Accounting Standards Board (IASB) and have been
applied consistently during the current and prior financial years, with the exception of
changes noted below.
The following new standards and amendments have been mandatorily adopted 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.
IFRS 12 introduces additional disclosure requirements in respect of interest in
subsidiaries and associates, and also introduces new disclosure requirements for
unconsolidated structured entities.
These standards and amendments have been applied retrospectively and have
not required any significant 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
included in various standards. The prospective 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 revised). The
amendments include revised requirements for pensions and other
postemployment benefits, termination benefits and certain other changes. The
key amendments impacting the group 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 adoption of the amendments to IAS 19 has been applied retrospectively
and the resulting restatements, which are not considered material, are set
out in the note on restatements.
- 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 summarised consolidated financial results the group has
applied key assumptions concerning the future and other inherent uncertainties in
recording and measuring various assets and liabilities. The assumptions applied in
the financial results for the year ended 31 December 2013 were consistent with
those applied during the 2012 financial year. These assumptions are subject to
ongoing review and possible amendments. The summarised consolidated
condensed financial results have been prepared under the supervision of Raisibe
Morathi, the Chief Financial Officer.
Events after the reporting period
In line with the bank's scheduled capital plans, the full capital redemption of NED8,
the R1,7bn unsecured subordinated note that qualified as tier 2 capital under Basel
II, will take place on 8 February 2014.
Audited summarised consolidated results – independent auditors' opinion
KPMG Inc and Deloitte & Touche, Nedbank Group's independent auditors, have
audited the consolidated financial results of Nedbank Limited from which the
summarised consolidated financial results have been derived and have expressed
an unmodified audit opinion on the consolidated financial statements. The auditor's
report on the consolidated financial statements is available for inspection at Nedbank
Group's registered office. The summarised consolidated financial results comprise
the consolidated statement of financial position at 31 December 2013, consolidated
statement of comprehensive income, condensed consolidated statement of changes
in equity and condensed consolidated statement of cashflows for the year then
ended and selected explanatory notes. The directors take full responsibility for the
preparation of the summarised consolidated financial results and that the financial
information has been correctly extracted from the underlying audited annual financial
statements.
Nedbank non-redeemable non-cumulative preference shares – declaration of
dividend no 22
Notice is hereby given that preference dividend no 22 of 35,70775 cents per share
has been declared for the period from 1 July 2013 to 31 December 2013, payable on
Monday, 24 March 2014, to shareholders of the Nedbank non-redeemable non-
cumulative preference shares recognised in the accounting records of the company
at the close of business on Thursday, 20 March 2014. 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), which will result in a net dividend to those shareholders who are not exempt
from paying dividend tax of 30,35159 cents per share. Nedbank Limited's tax
reference number is 9250/083/71/5 and the number of preference shares in issue at
the date of declaration is 358 277 491.
In accordance with the provisions of Strate, the electronic settlement and custody
system used by JSE Limited, the relevant dates for the payment of the dividend are
as follows:
Last day to trade cum dividend Thursday, 13 March 2014
Shares trade ex dividend Friday, 14 March 2014
Record date Thursday, 20 March 2014
Payment date Monday, 24 March 2014
Share certificates may not be dematerialised or rematerialised between Friday, 14
March 2014, and Thursday, 20 March 2014, both days inclusive.
Where applicable, dividends in respect of certificated shares will be transferred
electronically to shareholders' bank accounts on payment date. In the absence of
specific mandates, dividend cheques will be posted to shareholders. Shareholders
who have dematerialised their share certificates will have their accounts, at their
participant or broker, credited on Monday, 24 March 2014.
For and on behalf of the board
Dr RJ Khoza MWT Brown
Chairman Chief Executive
24 February 2014
Registered office: Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown,
Sandton 2196; PO Box 1144, Johannesburg, 2000.
Transfer secretaries: Computershare Investor Services (Pty) Limited, 70 Marshall
Street, Johannesburg, 2001; PO Box 61051, Marshalltown, 2107.
Directors:
Dr RJ Khoza (Chairman), MWT Brown* (Chief Executive), DKT Adomakoh
(Ghanaian), TA Boardman, 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
Sponsors: Investec Bank Limited, Nedbank Capital
Nedbank Limited Reg No 1951/000009/06
Incorporated in the Republic of South Africa
JSE share code: NBKP
ISIN: ZAE000043667
Consolidated statement of comprehensive income
for the year ended 31 December 31 December
2013 2012
(Audited) (Audited)
Rm Rm
Restated
Interest and similar income 44,107 42,900
Interest expense and similar charges 23,873 24,102
Net interest income 20,234 18,798
Impairments charge on loans and advances 5,529 5,239
Income from lending activities 14,705 13,559
Non-interest revenue 15,466 14,151
Operating income 30,171 27,710
Total operating expenses 20,199 18,601
– Operating expenses** 20,143 18,539
– Black economic empowerment (BEE) transaction expenses 56 62
Indirect taxation 480 460
Profit from operations before non-trading and capital items 9,492 8,649
Non-trading and capital items (59) (48)
– Net profit on sale of subsidiaries, investments, and property and equipment 5 3
– Net impairment of investments, property and equipment, and capitalised development costs (64) (51)
Fair-value adjustments of investment properties 4 (1)
Profit from operations 9,437 8,600
Share of profits of associate companies and joint arrangements 28
Profit from operations before direct taxation 9,465 8,600
Total direct taxation 2,297 2,159
– Direct taxation** 2,315 2,158
– Taxation on non-trading and capital items (19) 1
– Taxation on revaluation of investment properties 1 *
Profit for the year 7,168 6,441
Other comprehensive income net of taxation 932 42
– Exchange differences on translating foreign operations*** 96 35
– Fair-value adjustments on available-for-sale assets*** (108) 39
– Remeasurements on long-term employee benefit assets** 726 (71)
– Gains on property revaluations*** 218 39
Total comprehensive income for the year 8,100 6,483
Profit attributable to:
- ordinary and preference equity holders** 7,152 6,410
- non-controlling interest – ordinary shareholders** 16 31
Profit for the year 7,168 6,441
Total comprehensive income attributable to:
- ordinary and preference equity holders** 8,084 6,456
- non-controlling interest – ordinary shareholders** 16 27
Total comprehensive income for the year 8,100 6,483
* Represents amounts less than R1m.
** 2012 restated to reflect the adoption of IAS 19 Employee Benefits (revised 2011).
*** These items may be reclassified subsequently as profit or loss.
HEADLINE EARNINGS RECONCILIATION
for the year ended 31 December 31 December 31 December 31 December
2013 2013 2012 2012
(Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm
Restated Restated
Gross Net of taxation Gross Net of taxation
Profit attributable to ordinary and preference equity holders* 7,152 6410
Less: non-headline earnings items (55) (37) (49) (50)
– Net profit on sale of subsidiaries, investments, and property and equipment 5 6 3 2
– Net impairment of investments, property and equipment, and capitalised development costs (64) (46) (51) (51)
– Fair-value adjustments of investment properties 4 3 (1) (1)
Headline earnings attributable to ordinary and preference equity holders 7,189 6,460
* 2012 restated to reflect the adoption of IAS 19 Employee Benefits (revised 2011).
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 December 31 December 31 December
2013 2012 2011
(Audited) (Audited) (Audited)
Rm Rm Rm
Restated Restated
ASSETS
Cash and cash equivalents 17,467 12,587 11,514
Other short-term securities 35,004 37,575 31,715
Derivative financial instruments 13,811 14,660 14,314
Government and other securities 31,279 26,194 29,991
Loans and advances 566,047 520,116 493,107
Other assets 4,204 4,528 3,989
Current taxation assets 340 241 629
Investment securities ** 2,932 2,832 3,149
Non-current assets held for sale 12 508 8
Investments in private-equity associates, associate companies and joint arrangements ** 1,098 1,029 965
Deferred taxation assets* 69 362 152
Investment property 87 84 488
Property and equipment 6,571 6,171 6,082
Long-term employee benefit assets* 2,847 1,992 2,014
Mandatory reserve deposits with central banks 13,199 12,641 11,862
Intangible assets 4,188 3,830 3,634
Total assets 699,155 645,350 613,613
EQUITY AND LIABILITIES
Ordinary share capital 27 27 27
Ordinary share premium 17,422 17,422 14,422
Reserves 30,524 26,140 24,628
Total equity attributable to equity holders of the parent 47,973 43,589 39,077
Preference share capital and premium 3,561 3,561 3,561
Non-controlling interest attributable to ordinary shareholders 141 136 117
Total equity 51,675 47,286 42,755
Derivative financial instruments 16,588 13,475 13,791
Amounts owed to depositors 585,497 542,671 516,540
Provisions and other liabilities 10,016 9,273 8,286
Current taxation liabilities 13 67 27
Other liabilities held for sale 36
Deferred taxation liabilities* 297 367 993
Long-term employee benefit liabilities* 1,804 1,880 1,782
Long-term debt instruments 33,265 30,295 29,439
Total liabilities 647,480 598,064 570,858
Total equity and liabilities 699,155 645,350 613,613
* 2012 restated to reflect the adoption of IAS 19 Employee Benefits (revised 2011).
** Certain investments were reclassified from investment securities to investments in private-equity associates, associate companies
and joint ventures to align better with industry practice. No adjustments to the carrying value of the financial instruments arose
as a result of the reclassification. Furthermore, no changes were made to the categorisation of the financial instruments
and they remain classified as designated at fair value through profit or loss.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-controlling
Total equity interest
attributable to Preference attributable to
equity holders share capital ordinary
of the parent and premium shareholders Total equity
Rm Rm Rm Rm
Balance at 31 December 2011 39,305 3,561 121 42,987
Adoption of IAS 19 Employee Benefits (revised 2011) (228) (4) (232)
Restated balance at 31 December 2011 39,077 3,561 117 42,755
Shares issued 3,000 3,000
Preference share dividend (293) (293)
Dividend to ordinary shareholders (5,100) (8) (5,108)
Dividend in respect of BEE transaction (6) (6)
Total comprehensive income for the year* 6,456 27 6,483
Share-based payment reserve movement 451 451
Regulatory risk reserve provision 2 2
Other movements 2 2
Balance at 31 December 2012 43,589 3,561 136 47,286
Preference share dividend (292) (292)
Dividend to ordinary shareholders (3,450) (8) (3,458)
Total comprehensive income for the year 8,084 16 8,100
Share-based payment reserve movement 49 49
Disposal of subsidiary (3) (3)
Regulatory risk reserve provision (4) (4)
Other movements (3) (3)
Balance at 31 December 2013 47,973 3,561 141 51,675
* Restated to reflect the adoption of IAS 19 Employee Benefits (revised 2011).
CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE YEAR ENDED 31 December 31 December
2013 2012
(Audited) (Audited)
Rm
Rm Restated
Cash generated by operations *** 17,772 16,485
Change in funds for operating activities *** (7,076) (7,948)
Net cash from operating activities before taxation 10,696 8,537
Taxation paid (3,059) (3,108)
Cashflows from operating activities 7,637 5,429
Cashflows utilised by investing activities (1,427) (2,034)
Cashflows utilised by financing activities (772) (1,543)
Effects of exchange rate changes on opening cash and cash equivalents (excluding foreign borrowings) * *
Net increase in cash and cash equivalents 5,438 1,852
Cash and cash equivalents at the beginning of the year** 25,228 23,376
Cash and cash equivalents at the end of the year** 30,666 25,228
* Represents amounts less than R1m.
** Including mandatory reserve deposits with central banks.
*** 2012 restated to reflect the adoption of IAS 19 Employee Benefits (revised 2011).
Condensed segmental reporting
for the year ended 31 December 31 December 31 December 31 December 31 December 31 December
2013 2012 2013 2012 2013 2012
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm
Restated Restated Restated
Total assets Operating income Headline earnings
Nedbank Capital 180,708 142,290 4,380 4,044 1,726 1,431
Nedbank Corporate 188,363 175,073 5,084 4,410 2,245 1,817
Total Nedbank Retail and Nedbank Business Banking 302,371 290,198 19,929 18,989 3,468 3,496
Nedbank Retail 203,155 198,072 15,502 14,693 2,539 2,552
Nedbank Business Banking 99,216 92,126 4,427 4,296 929 944
Nedbank Wealth 50,911 42,270 3,553 2,993 900 718
Shared Services 7,346 6,048 78 4 159 40
Central Management, including Rest of Africa 19,895 27,079 1,992 1,365 172 (19)
Total for Nedbank Group 749,594 682,958 35,016 31,805 8,670 7,483
Fellow-subsidiary adjustments (50,439) (37,608) (4,845) (4,095) (1,481) (1,023)
Total 699,155 645,350 30,171 27,710 7,189 6,460
.
The segmental results for 2012 have been restated to reflect the adoption of IAS 19 Employee Benefits (revised 2011)
and the transfer of a subsidiary from Shared Services to Central Management,including Rest of Africa. The amendments
to IAS 19 include revised requirements for pensions and other postretirement benefits, termination benefits and certain other changes.
Condensed geographical segmental reporting
for the year ended 31 December 31 December 31 December 31 December
2013 2012 2013 2012
(Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm
Restated Restated
Operating income Headline earnings
SA 32,721 29,748 8,054 6,869
– Business operations* 32,721 29,748 8,409 7,230
– BEE transaction expenses (63) (68)
– Profit attributable to non-controlling interest – preference shareholders (292) (293)
Rest of Africa* 1,427 1,259 335 297
Rest of world – business operations* 868 798 281 317
Total per Nedbank Group 35,016 31,805 8,670 7,483
Fellow-subsidiary adjustments (4,845) (4,095) (1,481) (1,023)
Total 30,171 27,710 7,189 6,460
* 2012 restated to reflect the adoption of IAS 19 Employee Benefits (revised 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 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 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, but are not limited to, 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 (nedbankgroup.co.za).
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.
FINANCIAL ASSETS
Total financial Total financial assets Total financial assets Total financial assets Total financial assets
assets 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
2013 2012 2013 2012 2013 2012 2013 2012 2013 2012
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Restated Restated Restated Restated Restated
Cash and cash equivalents 30,666 25,228 30,666 25,228
Other short-term securities 35,004 37,575 13,335 16,425 358 479 21,311 20,671
Derivative financial instruments 13,811 14,660 - 58 6 13,753 14,654
Government and other securities 31,279 26,194 13,932 10,381 10,871 9,670 6,476 6,143
Loans and advances 566,047 520,116 474,932 438,255 - 1 91,082 81,743 33 117
Other assets* 4,204 4,528 3,849 4,227 355 301 - -
Investments in private-equity associates, associate companies and joint arrangement** 860 1,000 - - - 860 1,000
Investment securities** 2,932 2,832 - 947 884 1,154 967 831 981
684,803 632,133 536,714 494,516 12,589 11,341 133,776 124,178 1,724 2,098
FINANCIAL LIABILITIES
Total financial Total financial liabilities Total financial liabilities Total financial liabilities Total financial liabilities
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
2013 2012 2013 2012 2013 2012 2013 2012 2013 2012
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Restated Restated Restated Restated Restated
Derivative financial instruments 16,588 13,475 - 12 1 16,576 13,473 - 1
Amounts owed to depositors 585,497 542,671 438,253 408,490 - 147,244 134,181 -
Provisions and other liabilities 10,016 9,273 8,046 6,970 1,857 2,248 113 55 -
Long-term debt instruments*** 33,265 30,295 29,487 24,665 2,317 5,447 1,461 183 -
645,366 595,714 475,786 440,125 4,186 7,696 165,394 147,892 - 1
* An amount of R301m was reclassified from level 2 to level 1 due to more accurate information becoming available.
** An amount of R364m was reclassified from investment securities to investments in private-equity associates, associate
companies and joint arrangements to align better with industry practice. No adjustments to the carrying value of the finnacial
instruments arose as a result of the reclassification. Furthermore, no changes were made to the categorisation of the financial
instruments and they remain classified as designated at fair value through profit or loss.
*** During the year certain long-term debt instruments were determined to be trading in an inactive market. Previously the fair
value measurement of these instruments was determined with reference to published market values. Now the fair-value measurement
is determined by using an appropriate valuation technique, which incorporates observable inputs for similar instruments, with
similar maturities and coupons. This change in valuation methodology has resulted in a transfer of the affected instruments from level 1 to level 2.
LEVEL 3 RECONCILIATION
Gains/(Losses) in
Opening balance at 1 Gains/(Losses) in comprehensive income Closing balance at
January profit for the year for the year Purchases and issues Sales and settlements Transfers in/(out) 31 December
2013 (Audited) Rm Rm Rm Rm Rm Rm Rm
FINANCIAL ASSETS
Derivative financial instruments - -
Loans and advances 117 - - - (84) - 33
Investment securities 981 (21) - 200 (329) - 831
Investments in private-equity associates,
associate companies and joint arrangement 1,000 (22) - 59 (177) - 860
2,098 (43) - 259 (590) - 1,724
FINANCIAL LIABILITIES
Derivative financial instruments 1 - - (1) - - -
1 - - (1) - - -
Gains/(Losses) in
Opening balance at 1 Gains/(Losses) in profit comprehensive income Closing balance at
2012 (Audited) January for the year for the year Purchases and issues Sales and settlements Transfers in/(out) 31 December
Restated Rm Rm Rm Rm Rm Rm Rm
FINANCIAL ASSETS
Derivative financial instruments 29 (29) -
Loans and advances 91 29 (3) 117
Investment securities 952 110 1 49 (131) 981
Investments in private-equity associates,
associate companies and joint arrangement 945 (142) 275 (78) 1,000
2,017 (3) 1 324 (241) - 2,098
FINANCIAL LIABILITIES
Derivative financial instruments 5 (8) 4 1
5 (8) 4 - 1
EFFECT OF CHANGES IN SIGNIFICANT UNOBSERVABLE ASSUMPTIONS TO REASONABLE POSSIBLE ALTERNATIVES - LEVEL 3 INSTRUMENTS
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 sensitivity of the fair-value measurement is dependent on the unobservable inputs. Significant changes to the unobservable inputs in isolation will have either a positive or a negative impact on the fair value. 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 of in fair value due to change in fair value
Valuation technique Principal assumption stressed Stress parameters financial position stress test due to stress test
December 2013 (Audited) % Rm Rm Rm
FINANCIAL ASSETS
Loans and advances Discounted cashflow mode Credit spreads and discount rates Between (14) and 14 33 3 (4)
Investment securities Discounted cashflows, adjusted net asset value, earnings Valuation multiples, correlations, volatilities and Between (25) and 25 831 81 (96)
multiples, third-party valuations, dividend yields credit spreads
Investments in private-equity associates, associate companies and joint arrangements Discounted cashflows, earnings multiples Valuation multiples Between (11) and 11 860 83 (93)
Total financial assets classified as level 3 1,724 167 (193)
Favourable change in Unfavourable
Value per statement of fair value due to change in fair value
Valuation technique Principal assumption stressed Stress parameters financial position stress test due to stress test
December 2012 (Audited)
Restated % Rm Rm Rm
FINANCIAL ASSETS
Loans and advances Discounted cashflow model Credit spreads and discount rates Between (14) and 14 117 13 (16)
Investment securities Discounted cashflows, adjusted net asset value, earnings Valuation multiples, correlations, volatilities and Between (25) and 25 981 127 (156)
multiples, third-party valuations, dividend yields credit spreads
Investments in private-equity associates, associate companies and joint arrangements Discounted cashflows, earnings multiples Valuation multiples Between (11) and 11 1,000 70 (70)
Total financial assets classified as level 3 2,098 210 (242)
FINANCIAL LIABILITIES
Derivative financial instruments Discounted cashflow model, Black-Scholes model and Discount rates, risk-free rates, volatilities, credit Between (25) and 25 1 * *
multiple valuation techniques spreads and valuation multiples
* Represents amounts less than R1m.
UNREALISED GAINS AND LOSSES
The unrealised gains or losses arising on instruments classified as level 3 include the following:
31 December 31 December
2013 2012
(Audited) (Audited)
Rm Rm
Trading income/(losses) 11 (19)
Private-equity losses (12) (25)
Other fair-value adjustments 29
(1) (15)
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 models 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 liabilities Discounted cashflow model Discount rates
Investment and insurance contract liabilities Adjusted net asset value Underlying price of market traded instruments
Long-term debt instruments Discounted cashflows Discount rates
Offsetting financial assets and financial liabilities
In accordance with the requirements of IFRS 7 Financial Instruments: Disclosures, the table below sets out the impact of:
- recognised financial instruments that are set off in the statement of financial position in accordance with the requirements of International Accounting Standard (IAS) 32
Financial Instruments: Presentation; and
- financial instruments that are subject to an enforceable master netting arrangement or similar agreement that covers similar financial instruments and transactions that
did not qualify for presentation on a net basis.
The group reports financial assets and financial liabilities on a net basis in the statement of financial position only if there is a legally enforceable right to set off the
recognised amounts and there is intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Certain master netting arrangements may not meet the criteria for offsetting in the statement of financial position because:
- these agreements create a right of setoff that is enforceable only following an event of default, insolvency or bankruptcy; and
- the group and its counterparties do not intend to settle on a net basis or to realise the assets and settle the liabilities simultaneously.
Master netting arrangements and similar agreements include derivative clearing agreements, global master repurchase agreements and global master securities lending
agreements.
2013 (Audited)
Total amounts
subject to IFRS 7
offsetting
Amounts disclosure
recognised in recognised in
the statement of the statement of
financial Amounts that Net amounts financial Total amounts
position and may be netted reflecting the position, Amounts not recognised in
subject to off on the effect of master excluding the subject to the statement of
netting occurrence of a Financial netting effect of offsetting financial
Rm arrangements future event collateral arrangements collateral disclosure position
Assets
Derivative financial instruments 12,835 (6,700) 6,135 12,835 976 13,811
Loans and advances 27,838 27,838 27,838 538,209 566,047
40,673 (6,700) - 33,973 40,673 539,185 579,858
Liabilities
Derivative financial instruments 15,846 (7,320) 8,526 15,846 742 16,588
Amounts owed to depositors 61,660 61,660 61,660 523,837 585,497
77,506 (7,320) - 70,186 77,506 524,579 602,085
2012 (Audited)
Total amounts
subject to IFRS 7
offsetting
Amounts disclosure
recognised in recognised in
the statement of the statement of
financial Amounts that Net amounts financial Total amounts
position and may be netted reflecting the position, Amounts not recognised in
subject to off on the effect of master excluding the subject to the statement of
netting occurrence of a Financial netting effect of offsetting financial
Rm arrangements future event collateral arrangements collateral disclosure position
Assets
Derivative financial instruments 13,231 (7,021) 6,210 13,231 1,429 14,660
Loans and advances 24,338 24,338 24,338 495,778 520,116
37,569 (7,021) - 30,548 37,569 497,207 534,776
Liabilities
Derivative financial instruments 13,386 (6,183) 7,203 13,386 89 13,475
Amounts owed to depositors 17,142 (7,319) 9,823 17,142 525,529 542,671
30,528 (13,925) (7,549) 9,054 30,528 525,618 556,146
Restatements and reclassifications
During the year the group restated certain prior-year information due to the mandatory adoption of IAS 19 Employee Benefits and other reclassifications identified.
The impact of the relevant restatements and reclassifications are detailed below:
Consolidated statement of financial position
December 2012 January 2012
As
As previously Other previously
Rm Restated IAS 19* Other reclassifcations** reported Restated IAS 19* reclassifcations** reported
Assets
Cash and cash equivalents 12,587 12,587 11,514 11,514
Other short-term securities 37,575 37,575 31,715 31,715
Derivative financial instruments 14,660 14,660 14,314 14,314
Government and other securities 26,194 26,194 29,991 29,991
Loans and advances 520,116 520,116 493,107 493,107
Other assets 4,528 4,528 3,989 3,989
Current taxation assets 241 241 629 629
Investment securities*** 2,832 (364) 3,196 3,149 (400) 3,549
Non-current assets held for sale 508 508 8 8
Investments in private-equity associates, associate companies and joint arrangements 1,029 364 665 965 400 565
Deferred taxation assets 362 140 222 152 86 66
Investment property 84 84 488 488
Property and equipment 6,171 6,171 6,082 6,082
Long-term employee benefit assets 1,992 (161) 2,153 2,014 (13) 2,027
Mandatory reserve deposits with central bank 12,641 12,641 11,862 11,862
Intangible assets 3,830 3,830 3,634 3,634
Total assets 645,350 (21) - 645,371 613,613 73 - 613,540
Equity and liabilities
Ordinary share capital 27 27 27 27
Ordinary share premium 17,422 17,422 14,422 14,422
Reserves * 26,140 (323) 26,463 24,628 (228) 24,856
Total equity attributable to equity holders of the parent 43,589 (323) - 43,912 39,077 (228) - 39,305
Preference share capital and premium 3,561 3,561 3,561 3,561
Non-controlling interest attributable to ordinary shareholders 136 (6) 142 117 (4) 121
Total equity 47,286 (329) - 47,615 42,755 (232) - 42,987
Derivative financial instruments 13,475 13,475 13,791 13,791
Amounts owed to depositors 542,671 542,671 516,540 516,540
Provisions and other liabilities 9,273 9,273 8,286 8,286
Current taxation liabilities 67 67 27 27
Other liabilities held for sale 36 36 - -
Deferred taxation liabilities 367 12 355 993 (4) 997
Long-term employee benefit liabilities 1,880 296 1,584 1,782 309 1,473
Long-term debt instruments 30,295 30,295 29,439 29,439
Total liabilities 598,064 308 - 597,756 570,858 305 - 570,553
Total equity and liabilities 645,350 (21) - 645,371 613,613 73 - 613,540
* On 1 January 2013 the group adopted IAS 19 Employee Benefits (revised 2011) (IAS 19R).The adoption of IAS 19R resulted in the group restating its previously reported financial results, in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
** Certain investments were reclassified from investment securities to investments in private-equity associates, associate companies and joint arrangements to align better with industry practice. No adjustments to the carrying value of the financial instruments arose as a result of the reclassification. Furthermore, no changes were made to the categorisation of the financial instruments and they remain classified as designated at fair value through profit or loss.
*** An amount of R846m was reclassified from held for trading to designated at fair value to reflect management's original intention. No adjustments to the carrying value of the financial instruments arose as a result of the reclassification.
Consolidated statement of comprehensive income
December 2012
As
previously
Rm Restated IAS 19 reported
Interest and similar income 42,900 42,900
Interest expense and similar charges 24,102 24,102
Net interest income 18,798 - 18,798
Impairments charge on loans and advances 5,239 5,239
Income from lending activities 13,559 - 13,559
Non-interest revenue 14,151 14,151
Operating income 27,710 - 27,710
Total operating expenses 18,601 36 18,565
- Operating expenses 18,539 36 18,503
- BEE transaction expenses 62 62
Indirect taxation 460 460
Profit from operations before non-trading and capital items 8,649 (36) 8,685
Non-trading and capital items (48) (48)
Fair-value adjustments of investment properties (1) (1)
Profit from operations 8,600 (36) 8,636
Share of profits of associate companies and joint arrangements - -
Profit before direct taxation 8,600 (36) 8,636
Direct taxation ** 2,159 (10) 2,169
Profit for the year 6,441 (26) 6,467
Other comprehensive income/(loss) net of taxation 42 (71) 113
- Exchange differences on translating foreign operations 35 35
- Fair-value adjustments on available-for-sale assets 39 39
- Remeasurements on long-term employee benefit assets (71) (71)
- Gains on property revaluations 39 39
Total comprehensive income for the year 6,483 (97) 6,580
Profit attributable to:
- ordinary and preference shareholders 6,410 (28) 6,438
- non-controlling interest - ordinary shareholders 31 2 29
6,441 (26) 6,467
Total comprehensive income attributable to:
- ordinary and preference shareholders 6,456 (95) 6,551
- non-controlling interest - ordinary shareholders 27 (2) 29
Total comprehensive income for the year 6,483 (97) 6,580
Date: 24/02/2014 08:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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