Wrap Text
Reviewed Condensed Consolidated Interim Financial Results for the six months ended 30 June 2014
Nedbank Limited Reg No 1951/000009/06
Incorporated in the Republic of South Africa
JSE share code: NBKP
ISIN: ZAE000043667
NEDBANK LIMITED
Reviewed condensed consolidated interim financial results for the six months
ended 30 June 2014
Overview
Nedbank Limited ('Nedbank') is a wholly owned subsidiary of Nedbank Group
Limited, which is listed on JSE Limited. These condensed consolidated interim
financial results are published to provide information to holders of Nedbank's listed
non-redeemable non-cumulative preference shares.
Commentary relating to the Nedbank condensed consolidated interim financial
results is included in the Nedbank Group Limited group results, as presented to
shareholders on 5 August 2014. Further information is provided on the website at
nedbankgroup.co.za.
Board changes during the period
During the period, David Adomakoh, Dr Mantsika Matooane and Brian Dames were
appointed as independent non-executive directors with effect from 21 February,
15 May and 30 June 2014 respectively.
Group Executive changes during the period
In anticipation of Graham Dempster's retirement in May 2015 and in line with the
group's succession plans, Mfundo Nkuhlu, currently Managing Executive, Nedbank
Corporate, will be appointed as Chief Operating Officer and become an executive
director (subject to regulatory approvals) from 1 January 2015.
Philip Wessels, currently the Chief Risk Officer (CRO), has been appointed as
Managing Executive, Retail and Business Banking, with effect from 1 August 2014,
following Ingrid Johnson's appointment as Group Finance Director of Old Mutual plc.
Trevor Adams, currently Group Managing Executive, Balance Sheet Management,
will take over as CRO with effect from 1 August 2014.
Accounting policies
Nedbank is a company domiciled in SA. The condensed consolidated interim
financial results at and for the six months ended 30 June 2014 comprises the
company and its subsidiaries (the 'group') and the group's interests in associates
and joint arrangements.
Nedbank'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, the Financial
Reporting Pronouncements as issued by Financial Reporting Standards Council and
the provisions of the SA Companies Act, 71 of 2008.
Nedbank'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.
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 2014 were consistent with
those applied during the 2013 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
There are no material events after the reporting period to report on.
Reviewed results - auditors' conclusion
KPMG Inc and Deloitte & Touche, Nedbank's independent auditors have reviewed
the condensed consolidated interim financial results of Nedbank Limited. The review
was conducted in accordance with International Standards on Review Engagements
2410: Review of Interim Financial Information performed by the Independent Auditor
of the Entity. They have expressed an unmodified review conclusion on the results.
The condensed consolidated interim financial results comprise the condensed
consolidated statement of financial position as at 30 June 2014, condensed
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 review report is
available for inspection at Nedbank's registered office.
Nedbank non-redeemable non-cumulative preference shares - declaration of
dividend no 23
Notice is hereby given that preference dividend no 23 of 36,86072 cents per share
has been declared for the period from 1 January 2014 to 30 June 2014, payable on
Monday, 1 September 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 Friday, 29 August 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 of 31,33161 cents per share to those
shareholders who are not exempt from paying dividend tax. 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 Friday, 22 August 2014
Shares trade ex dividend Monday, 25 August 2014
Record date Friday, 29 August 2014
Payment date Monday, 1 September 2014
Share certificates may not be dematerialised or rematerialised between Monday,
25 August 2014, and Friday, 29 August 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, 1 September 2014.
For and on behalf of the board
Dr RJ Khoza MWT Brown
Chairman Chief Executive
5 August 2014
Registered office: Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown,
Sandton 2196; PO Box 1144, Johannesburg, 2000.
Transfer secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall
Street, Johannesburg, 2001; PO Box 61051, Marshalltown, 2107.
Directors:
Dr RJ Khoza (Chairman), MWT Brown* (Chief Executive), DKT Adomakoh
(Ghanaian), TA Boardman, BA Dames, GW Dempster* (Chief Operating Officer),
MA Enus-Brey, ID Gladman (British), PM Makwana, Dr MA Matooane, 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
NEDBANK LIMITED
CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
for the period ended 30 June 2014
Consolidated statement of comprehensive income
for the period ended 30 June 30 June 31 December
2014 2013 2013
(Reviewed) (Reviewed) (Audited)
Rm Rm Rm
Interest and similar income 24 069 21 358 44 107
Interest expense and similar charges 13 371 11 506 23 873
Net interest income 10 698 9 852 20 234
Impairments charge on loans and advances 2 314 3 299 5 529
Income from lending activities 8 384 6 553 14 705
Non-interest revenue 7 639 7 583 15 466
Operating income 16 023 14 136 30 171
Total operating expenses 10 546 9 703 20 199
- Operating expenses 10 530 9 683 20 143
- Black economic empowerment (BEE) transaction expenses 16 20 56
Indirect taxation 247 244 480
Profit from operations before non-trading and capital items 5 230 4 189 9 492
Non-trading and capital items (8) (8) (59)
- Net profit on sale of subsidiaries, investments, and property and equipment 5 5
- Net impairment of investments, property and equipment, and capitalised development costs (8) (13) (64)
Fair-value adjustments of investment properties 4 4
Profit from operations 5 222 4 185 9 437
Share of profits of associate companies and joint arrangements 11 28
Profit from operations before direct taxation 5 233 4 185 9 465
Total direct taxation 1 321 1 031 2 297
- Direct taxation 1 323 1 031 2 315
- Taxation on non-trading and capital items (2) (1) (19)
- Taxation on revaluation of investment properties 1 1
Profit for the period 3 912 3 154 7 168
Other comprehensive income net of taxation (111) (31) 932
- Exchange differences on translating foreign operations(1)
13 37 96
- Fair-value adjustments on available-for-sale assets(1)
(117) (57) (108)
- Remeasurements on long-term employee benefit assets 726
- Gains on property revaluations(1)
(7) (11) 218
Total comprehensive income for the period 3 801 3 123 8 100
Profit attributable to:
Ordinary and preference equity holders 3 893 3 155 7 152
Non-controlling interest - ordinary shareholders 19 (1) 16
Profit for the period 3 912 3 154 7 168
Total comprehensive income attributable to:
Ordinary and preference equity holders 3 777 3 124 8 084
Non-controlling interest - ordinary shareholders 24 (1) 16
Total comprehensive income for the period 3 801 3 123 8 100
(1) These items may be reclassified subsequently as profit or loss.
Headline earnings reconciliation
for the period ended 30 June 30 June 30 June 30 June 31 December 31 December
2014 2014 2013 2013 2013 2013
(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 ordinary and preference equity holders 3 893 3 155 7152
Less: Non-headline earnings items (8) (6) (4) (4) (55) (37)
- Net profit on sale of subsidiaries, investments, and property and equipment 5 6 5 6
- Net impairment of investments, property and equipment, and capitalised development costs (8) (6) (13) (13) (64) (46)
- Fair-value adjustments of investment properties 4 3 4 3
Headline earnings attributable to ordinary and preference equity holders 3 899 3 159 7 189
Consolidated statement of financial position
at 30 June 30 June 31 December
2014 2013 2013
(Reviewed) (Reviewed) (Audited)
Rm Rm Rm
ASSETS
Cash and cash equivalents 11 098 14 618 17 467
Other short-term securities 41 939 38 567 35 004
Derivative financial instruments 13 419 13 616 13 811
Government and other securities 30 004 24 508 31 279
Loans and advances 590 227 541 298 566 047
Other assets 6 429 5 290 4 204
Current taxation assets 156 404 340
Investment securities(1) 2 734 2 829 2 932
Non-current assets held for sale 12 13 12
Investments in private-equity associates, associate companies and joint arrangements(1) 1 182 838 1 098
Deferred taxation assets 80 176 69
Investment property 87 87
Property and equipment 6 787 6 175 6 571
Long-term employee benefit assets 4 074 2 022 2 847
Mandatory reserve deposits with central banks 13 886 11 439 13 199
Intangible assets 4 297 3 915 4 188
Total assets 726 324 665 795 699 155
EQUITY AND LIABILITIES
Ordinary share capital 27 27 27
Ordinary share premium 17 422 17 422 17 422
Reserves 31 100 26 801 30 524
Total equity attributable to equity holders of the parent 48 549 44 250 47 973
Preference share capital and premium 3 561 3 471 3 561
Non-controlling interest attributable to ordinary shareholders 156 124 141
Total equity 52 266 47 845 51 675
Derivative financial instruments 14 757 16 770 16 588
Amounts owed to depositors 612 487 563 175 585 497
Provisions and other liabilities 7 606 9 263 10 016
Current taxation liabilities 20 13
Deferred taxation liabilities 298 256 297
Long-term employee benefit liabilities 2 794 1 990 1 804
Long-term debt instruments 36 116 26 476 33 265
Total liabilities 674 058 617 950 647 480
Total equity and liabilities 726 324 665 795 699 155
(1) Investments to the amount of R315m were reclassified from investment securities to investments in private-equity associates, associate companies
and joint arrangements to align better with industry practice. June 2013 comparatives have been restated accordingly. 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
Audited balance at 31 December 2012 43 589 3 561 136 47 286
Preference share dividend (132) (132)
Dividend to ordinary shareholders (2 100) (8) (2 108)
Total comprehensive income for the period 3 124 (1) 3 123
Share-based payment reserve movement (229) (229)
Preference shares held by group entities (90) (90)
Disposal of subsidiary (3) (3)
Other movements (2) (2)
Reviewed balance at 30 June 2013 44 250 3 471 124 47 845
Preference share dividend (160) (160)
Dividend to ordinary shareholders (1 350) (1 350)
Total comprehensive income for the period 4 960 17 4 977
Share-based payment reserve movement 278 278
Preference shares held by group entities 90 90
Regulatory risk reserve provision (4) (4)
Other movements (1) (1)
Audited balance at 31 December 2013 47 973 3 561 141 51 675
Preference share dividend (158) (158)
Dividend to ordinary shareholders (2 600) (2 600)
Total comprehensive income for the period 3 777 24 3 801
Share-based payment reserve movement (450) (450)
Acquisition of shareholding in subsidiary (9) (9)
Regulatory risk reserve provision 5 5
Other movements 2 2
Reviewed balance at 30 June 2014 48 549 3 561 156 52 266
Condensed consolidated statement of cashflows
for the period ended 30 June 30 June 31 December
2014 2013 2013
(Reviewed) (Reviewed) (Audited)
Rm Rm Rm
Cash generated by operations 8 942 8 834 17 772
Change in funds for operating activities (12 207) (339) (7 076)
Net cash (utilised by)/from operating activities before taxation (3 265) 8 495 10 696
Taxation paid (1 504) (1 449) (3 059)
Cashflows (utilised by)/from operating activities (4 769) 7 046 7 637
Cashflows utilised by investing activities (1 006) (166) (1 427)
Cashflows from/(utilised by) financing activities 93 (6 051) (772)
Effects of exchange rate changes on opening cash and cash equivalents (excluding foreign borrowings) (1) (1) (1)
Net (decrease)/increase in cash and cash equivalents (5 682) 829 5 438
Cash and cash equivalents at the beginning of the period2 30 666 25 228 25 228
Cash and cash equivalents at the end of the period2 24 984 26 057 30 666
(1) Represents amounts less than R1m.
(2) 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 30 June 30 June 31 December
2014 2013 2013 2014 2013 2013 2014 2013 2013 2014 2013 2013
(Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Total assets Total liabilities Operating income Headline earnings
Nedbank Capital 187 662 159 339 180 708 180 945 153 642 174 845 2 532 2 102 4 380 1 053 801 1 726
Nedbank Corporate 204 291 185 804 188 363 194 024 177 468 179 849 2 699 2 486 5 084 1 159 1 069 2 245
Total Nedbank Retail and Nedbank Business Banking 311 923 292 113 302 371 285 264 266 271 275 688 10 420 9 201 19 929 1 831 1 403 3 468
Nedbank Retail 206 701 200 339 203 155 185 327 179 136 181 252 8 074 7 196 15 502 1 319 1 054 2 539
Nedbank Business Banking 105 222 91 774 99 216 99 937 87 135 94 436 2 346 2 005 4 427 512 349 929
Nedbank Wealth 55 521 47 212 50 911 52 758 44 851 48 424 1 863 1 695 3 553 464 421 900
Shared Services 7 240 6 758 7 346 5 544 5 251 5 818 (55) 76 78 (1) 156 159
Central Management, including Rest of Africa 17 155 23 104 19 895 (1 821) 7 030 634 951 959 1 992 93 64 172
Total for Nedbank Group 783 792 714 330 749 594 716 714 654 513 685 258 18 410 16 519 35 016 4 599 3 914 8 670
Fellow-subsidiary adjustments (57 468) (48 535) (50 439) (42 656) (36 563) (37 778) (2 387) (2 383) (4 845) (700) (755) (1 481)
Total 726 324 665 795 699 155 674 058 617 950 647 480 16 023 14 136 30 171 3 899 3 159 7 189
Condensed geographical segmental reporting
for the period ended 30 June 30 June 31 December 30 June 30 June 31 December
2014 2013 2013 2014 2013 2013
(Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited)
Rm Rm Rm Rm Rm Rm
Operating income Headline earnings
SA 17 111 15 515 32 721 4 256 3 742 8 054
- Business operations 17 111 15 515 32 721 4 430 3 893 8 409
- BEE transaction expenses (16) (19) (63)
- Profit attributable to non-controlling interest - preference shareholders (158) (132) (292)
Rest of Africa 732 655 1 427 149 124 335
Rest of world - business operations 567 349 868 194 48 281
Total for Nedbank Group 18 410 16 519 35 016 4 599 3 914 8 670
Fellow-subsidiary adjustments (2 387) (2 383) (4 845) (700) (755) (1 481)
Total 16 023 14 136 30 171 3 899 3 159 7 189
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 (see
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.
All fair values disclosed below are recurring in nature.
FINANCIAL ASSETS
Total financial assets Total financial assets recognised at amortised cost Total financial assets classified as level 1 Total financial assets classified as level 2 Total financial assets classified as level 3
30 June 30 June 31 December 30 June 30 June 31 December 30 June 30 June 31 December 30 June 30 June 31 December 30 June 30 June 31 December
2014 2013 2013 2014 2013 2013 2014 2013 2013 2014 2013 2013 2014 2013 2012
(Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Cash and cash equivalents 24 984 26 057 30 666 24 984 26 057 30 666
Other short-term securities 41 939 38 567 35 004 9 539 15 102 13 335 211 500 358 32 189 22 965 21 311
Derivative financial instruments 13 419 13 616 13 811 1 58 13 419 13 615 13 753
Government and other securities 30 004 24 508 31 279 12 124 10 091 13 932 10 191 9 678 10 871 7 689 4 739 6 476
Loans and advances 590 227 541 298 566 047 494 247 453 666 474 932 1 95 947 87 576 91 082 33 55 33
Other assets 6 429 5 290 4 204 6 041 5 084 3 849 388 206 355
Investments in private-equity associates, associate companies and joint arrangements(1) 1 183 800 860 251 932 800 860
Investment securities(1) 2 734 2 829 2 932 668 795 947 1 123 972 1 154 943 1 062 831
710 919 652 965 684 803 547 186 510 000 536 714 11 458 11 181 12 589 150 367 129 867 133 776 1 908 1 917 1 724
(1) Investments to the amount of R315m were reclassified from investment securities to investments in private-equity associates,
associate companies and joint arrangements to align better with industry practice. June 2013 comparatives have been restated accordingly.
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.
FINANCIAL LIABILITIES
Total financial liabilities Total financial liabilities recognised at amortised cost Total financial liabilities classified as level 1 Total financial liabilities classified as level 2 Total financial liabilities classified as level 3
30 June 30 June 31 December 30 June 30 June 31 December 30 June 30 June 31 December 30 June 30 June 31 December 30 June 30 June 31 December
2014 2013 2013 2014 2013 2013 2014 2013 2013 2014 2013 2013 2014 2013 2013
(Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Derivative financial instruments 14 757 16 770 16 588 12 14 757 16 769 16 576 1
Amounts owed to depositors 612 487 563 175 585 497 481 401 432 650 438 253 131 086 130 525 147 244
Provisions and other liabilities 7 606 9 263 10 016 6 281 6 592 8 046 1 173 2 547 1 857 152 124 113
Long-term debt instruments 36 116 26 476 33 265 34 090 20 964 29 487 573 5 289 2 317 1 453 223 1 461
670 966 615 684 645 366 521 772 460 206 475 786 1 746 7 836 4 186 147 448 147 641 165 394 - 1 -
LEVEL 3 RECONCILIATION
Gains/(Losses) in
comprehensive
Opening balance at 1 Gains/(Losses) in profit income for the Sales and Closing balance at
January for the period period Purchases and issues settlements Transfers in/(out) 30 June
30 June 2014 (Reviewed) Rm Rm Rm Rm Rm Rm Rm
FINANCIAL ASSETS
Loans and advances 33 33
Investment securities 831 69 49 (6) 943
Investments in private-equity associates, associate companies and joint arrangements 860 60 89 (77) 932
1 724 129 - 138 (83) - 1 908
Gains/(Losses) in
Opening balance at 1 Gains/(Losses) in profit comprehensive Sales and Closing balance at
January for the period income for the period Purchases and issues settlements Transfers in/(out) 30 June
30 June 2013 (Reviewed) Rm Rm Rm Rm Rm Rm Rm
FINANCIAL ASSETS
Loans and advances 117 (66) 4 55
Investment securities(1) 981 19 4 (8) 66 1 062
Investments in private-equity associates, associate companies and joint arrangements(1) 1 000 (289) 269 (131) (49) 800
2 098 (336) 8 269 (139) 17 1 917
(1) Investments to the amount of R315m were reclassified from investment securities to investments in private-equity associates, associate companies
and joint arrangements to align better with industry practice. June 2013 comparatives have been restated accordingly. 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.
Gains/(Losses) in
Opening balance at 1 Gains/(Losses) in profit comprehensive Sales and Closing balance at
January for the period income for the period Purchases and issues settlements Transfers in/(out) 31 December
31 December 2013 (Audited) Rm Rm Rm Rm Rm Rm Rm
FINANCIAL ASSETS
Loans and advances 117 (84) 33
Investment securities 981 (21) 200 (329) 831
Investments in private-equity associates, associate companies and joint arrangements 1 000 (22) 59 (177) 860
2 098 (43) - 259 (590) - 1 724
FINANCIAL LIABILITIES
Derivative financial instruments (1) (1) -
(1) - - (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 in fair value due to change in fair value
Valuation technique Principal assumption stressed Stress parameters of financial position stress test due to stress test
30 June 2014 (Reviewed) % Rm Rm Rm
FINANCIAL ASSETS
Loans and advances Discounted cashflow model Credit spreads and discount rates Between (14) and 14 33 3 (4)
Investment securities Discounted cashflows, adjusted net asset value, earnings multiples, third- Valuation multiples, correlations, volatilities and credit spreads Between (25) and 25 943 88 (107)
party valuations, dividend yields
Investments in private-equity associates, associate companies and joint arrangements Discounted cashflows, earnings multiples Valuation multiples Between (11) and 11 932 79 (90)
Total financial assets classified as level 3 1 908 170 (201)
Favourable change in Unfavourable
Value per statement fair value due to change in fair value
Valuation technique Principal assumption stressed Stress parameters of financial position stress test due to stress test
30 June 2013 (Reviewed) % Rm Rm Rm
FINANCIAL ASSETS
Loans and advances Discounted cashflow model Credit spreads between (14) and 14 55 5 (6)
Investment securities(2) Discounted cashflows, adjusted net asset value, earnings multiples, third- Valuation multiples, correlations, volatilities and credit spreads between (25) and 25
party valuations, dividend yields 1 062 130 (141)
Investments in associate companies and joint ventures(2) Discounted cashflows, earnings multiples Valuation multiples between (12) and 12 800 57 (57)
Total financial assets classified at level 3 1 917 192 (204)
FINANCIAL LIABILITIES
Derivative financial instruments Correlations, volatilities and credit spreads between (25) and 25
1 1
1
(1) Represents amounts less than R1m.
(2) Investments to the amount of R315m were reclassified from investment securities to investments in private-equity associates, associate companies
and joint arrangements to align better with industry practice. June 2013 comparatives have been restated accordingly. 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.
Favourable change in Unfavourable
Value per statement fair value due to change in fair value
Valuation technique Principal assumption stressed Stress parameters of financial position stress test due to stress test
31 December 2013 (Audited)
% Rm Rm Rm
FINANCIAL ASSETS
Loans and advances Discounted cashflow model Credit spreads and discount rates Between (14) and 14 33 3 (4)
Investment securities Discounted cashflows, adjusted net asset value, earnings multiples, third- Valuation multiples, correlations, volatilities and credit spreads Between (25) and 25 831 81 (96)
party valuations, dividend yields
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)
UNREALISED GAINS AND LOSSES
The unrealised gains or losses arising on instruments classified as level 3 include the following:
30 June 30 June 30 June
2014 2014 2014
(Reviewed) (Reviewed) (Reviewed)
Rm Rm Rm
Trading income/(losses) (47) 2
Private-equity losses 129 (289) (45)
129 (336) (43)
SUMMARY OF PRINCIPAL VALUATION TECHNIQUES - LEVEL 2 INSTRUMENTS
The following table sets out the group's principal valuation techniques used in determining the
fair value of financial assets and financial liabilities classified as level 2 in the fair-value hierarchy:
Assets Valuation technique Key inputs
Other short-term securities Discounted cashflow model Discount rates
Derivative financial instruments Discounted cashflow model Discount rates
Black-Scholes model Risk-free rate and volatilities
Multiple valuation techniques Valuation multiples
Government and other securities Discounted cashflow model Discount rates
Loans and advances Discounted cashflow model Interest rate curves
Investment securities Discounted cashflow model Money market rates and interest rates
Adjusted net asset value Underlying price of market-traded
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
Long-term debt instruments Discounted cashflow model 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 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.
Similar financial instruments include derivatives, sales and repurchase agreements, reverse sale and repurchase agreements, and securities borrowing and lending agreements. Financial instruments
such as loans and deposits are not disclosed in the table below unless they are offset in the statement of financial position.
30 June 2014 (Reviewed) Effects of netting on the statement of financial position Related amounts not set off in the
statement of financial position
Amounts set off
in the statement Net amounts Amounts that Net amounts Total amounts
of financial included in the may be netted reflecting the Amounts not recognised in
position in statement of off on the effect of master subject to IFRS 7 the statement of
accordance with financial occurrence of a Financial netting offsetting financial
Rm Gross amounts IAS 32 position(1) future event collateral arrangements disclosure(2) position
Derivative financial instruments (2 373) 1 560 (813) 813 (525) (1 338)
- Assets 9 831 3 588 13 419
- Liabilities (10 644) (4 113) (14 757)
Assets excluding derivative financial instruments 4 190 (2 019) 2 171 - - 2 171 588 056 590 227
- Loans and advances 4 190 (2 019) 2 171 2 171 588 056 590 227
Liabilities excluding derivative financial instruments (94 793) 39 438 (55 355) - - (55 355) (557 132) (612 487)
- Amounts owed to depositors (94 793) 39 438 (55 355) (55 355) (557 132) (612 487)
30 June 2013 (Reviewed) Effects of netting on the statement of financial position Related amounts not set off in the
statement of financial position
Amounts set off
in the statement Net amounts Amounts that Net amounts Total amounts
of financial included in the may be netted reflecting the Amounts not recognised in
position in statement of off on the effect of master subject to IFRS 7 the statement of
accordance with financial occurrence of a Financial netting offsetting financial
Rm Gross amounts IAS 32 position(1) future event collateral arrangements disclosure(2) position
Derivative financial instruments (4 219) 688 (3 531) 3 219 (312) 377 (3 154)
- Assets 11 486 2 130 13 616
- Liabilities (15 017) (1 753) (16 770)
Assets excluding derivative financial instruments 3 302 (1 131) 2 171 - - 2 171 539 127 541 298
- Loans and advances 3 302 (1 131) 2 171 2 171 539 127 541 298
Liabilities excluding derivative financial instruments (70 348) 14 080 (56 268) - - (56 268) (506 907) (563 175)
- Amounts owed to depositors (70 348) 14 080 (56 268) (56 268) (506 907) (563 175)
(1) Includes the net amount of financial assets and financial liabilities where offsetting has been applied in terms of IAS 32 and financial instruments that are subject to master
netting agreements but no offsetting has been applied. Excludes financial instruments that are subject
neither to setoff nor to master netting agreements.
(2) Includes financial instruments that are subject to neither setoff nor to master netting agreements.
Sponsors: Investec Bank Limited, Nedbank Capital
Date: 05/08/2014 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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