Wrap Text
Nedbank Group Limited Audited Final Results 2014
OLD MUTUAL PLC
ISIN CODE: GB00B77J0862
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOML
Ref 96/15
23 February 2015
NEDBANK GROUP LIMITED AUDITED FINAL RESULTS 2014
Nedbank Group Limited (“Nedbank Group”), the majority-owned South African banking subsidiary of
Old Mutual plc, released its audited summarised financial results for the year ended 31 December
2014 today, 23 February 2015.
The following is the full text of Nedbank Group's announcement:
"Audited summary consolidated financial results for the 12 months ended 31 December 2014
- "Headline earnings increased 14,0% to R9 880m(1)
- Diluted headline earnings per share up 13,0% to 2 066 cents(1)
- Growth in tangible net asset value per share of 10,6%(1)
- Return on equity (excluding goodwill) at 17,2%(1)
- Common-equity tier 1 ratio: 11,6%
- Full-year dividend per share up 14,9% to 1 028 cents
'Nedbank Group produced a strong set of results in 2014. Headline earnings
growth of 14% was driven by good net interest income growth and a lower
credit loss ratio – despite strengthened central provisions and increased
coverage levels.
We made a number of important changes during 2014 to position the group
for continued growth into the future. Our strong internal talent pipelines
enabled us to implement a successful succession process in a number of
executive roles. We also announced the creation of an integrated corporate
and investment bank to enable better client service and unlock additional
revenue growth opportunities. Our pan-African banking network strategy was
strengthened through the investment of R5,9bn to secure a shareholding of
approximately 20% in our longstanding alliance partner, Ecobank.
The group is resilient, with diversified income streams and strong balance
sheet metrics, and is well positioned to continue to grow despite economic
headwinds. Although forecast risk remains high, for the year ahead we again
expect organic growth in diluted headline earnings per share to be above
nominal GDP growth'.
Mike Brown
Chief Executive
Banking and economic environment
The operating environment in 2014 remained challenging for consumers, with
global markets reflecting a mixed performance, and the local economy
remained under pressure from strike action and electricity supply constraints.
SA's gross domestic product (GDP) is forecast to grow at 1,4% for 2014, but
in the absence of strike action, economic growth would have been 1% higher
according to the South African Reserve Bank (SARB).
Weak economic conditions, the twin deficits and SA's resultant dependency
on foreign capital inflows translated into rand depreciation and heightened
inflationary pressures in the early part of the year, prompting an increase of
75 basis points in interest rates. These domestic factors contributed to
Standard Poor's reaffirming SA's sovereign risk rating at BBB negative with the
outlook remaining stable (placing SA one notch above investment grade),
Fitch Ratings revising its outlook on its BBB rating to negative and Moody's
downgrading SA's debt rating to Baa2 with a stable outlook.
The SA banking industry was also tested by the collapse of African Bank
Limited ('Abil'), the country's largest unsecured lender. The combined strength
of the system ensured that Abil's resolution was successfully managed and
that the bank was placed under curatorship with no significant consequences
for the rest of the SA financial system.
Overall the credit environment remained muted, with wholesale credit demand
continuing to outpace retail demand as poor employment prospects, high
levels of indebtedness, increased interest rates and weak confidence levels
weighed against consumers. Wholesale credit demand was supported by
renewable-energy projects, corporate action and increased dealflow from the
rest of Africa. Wholesale activity is expected to moderate as corporates
remain hesitant to make long-term investments and increase production
capacity given the weak economic outlook.
Review of results
Nedbank Group produced strong headline earnings growth of 14,0% to
R9 880m (2013: R8 670m) for the year ended 31 December 2014. Growth
was driven by an increase in net interest income (NII), improvements in
impairments and growth in non-interest revenue (NIR), particularly in the
second half. Headline earnings included associate income from our
shareholding in Ecobank Transnational Incorporated (ETI) effective for the last
quarter of the year.(1)
Diluted headline earnings per share (DHEPS) increased 13,0% to 2 066 cents
(2013: 1 829 cents) and diluted earnings per share increased 12,5% to 2 049
cents (2013: 1 822 cents). Excluding associate income from ETI and the
related funding costs, the group's organic DHEPS increased 12,3%.(1)
Economic profit (EP) of R2 112m (2013: R2 114m) was achieved against a
higher cost of equity of 13,5% (2013: 13,0%). Return on average ordinary
shareholders' equity (ROE) increased to 15,8%(1) (2013: 15,6%)(1) and ROE
excluding goodwill was 17,2%(1) (2013: 17,2%)(1), supported by a higher return
on assets (ROA) of 1,27%(1) (2013: 1,23%).(1)
The group's balance sheet is well positioned. Our Basel III common-equity tier
1 (CET1) ratio of 11,6% (2013: 12,5%) after acquiring approximately 20% of
ETI is above the mid-point of our Basel III 2019 internal target range. Funding
and liquidity levels remained sound, with statutory liquid assets and cash
reserves increasing 18,5% to R82,6bn (2013: R69,7bn). The group met the 60%
minimum liquidity coverage ratio (LCR) requirement on 1 January 2015. The
LCR will be increased 10% annually to reach 100% on 1 January 2019.
Net asset value per share continued to increase, growing 9,5% to 14 395
cents (2013: 13 143 cents).(1)
Delivering sustainably to all our stakeholders
Nedbank Group is committed to long-term value creation for all our
stakeholders. In line with our vision to be Africa's most admired bank by staff,
clients, shareholders, regulators and communities, we are pleased to report
as follows in 2014:
For staff – creating 380 new employment opportunities and converting
606 temporary positions to permanent positions; providing exciting career
growth opportunities as we grew the franchise into the rest of Africa; investing
R489m in training and 1 538 staff attending our Leading for Deep Green
programme; supporting 125 external bursars across 18 universities; improving
staff transformation and continuing the positive shift in corporate culture;
embedding our top three culture values of accountability, client satisfaction
and brand reputation.
For clients – investing in exciting client-centred innovations such as Send-
iMali(TM) (mobile money send/cardless cash withdrawal capability) and Market
Edge(TM) (an analytics tool for merchants). Value-adding enhancements were
made to our App Suite (including instant payments) and to ApproveIT(TM)
(including secure card-not-present transactions and SIM swap detection). Our
progress in innovation was acknowledged with Nedbank's receiving the 2014
African Banker Award for Innovation. As regards our physical distribution
channels, we made banking more accessible, increasing new outlets by 22
and owned ATMs by 304, as well as converting, to date, 171 outlets to the
'branch of the future' format. We advanced R167bn (2013: R159bn) of new
loans to clients and assets under management grew 11,4% to R212bn (2013:
R190bn). For the sixth consecutive year Nedgroup Investments was placed
third overall in the Domestic Management Company category at the annual
Raging Bull Awards. All of these have resulted in group client numbers
increasing 7% to 7,1m since December 2013.
For shareholders – increasing the full year dividend 14,9% ahead of the 12,9%
growth in HEPS and generating a total shareholder's return (TSR) of 23,2%.
We acquired an initial 36,4% stake (with a pathway to control in 2016) of
Banco Único in Mozambique and a shareholding of approximately 20% in ETI.
Economic growth in the rest of Africa is faster than in SA and these
investments offer our shareholders access to earnings growth in these
markets while also providing the diversification benefits of having a presence
across 39 countries. For our SA broad-based black economic empowerment
(BBBEE) shareholders we have unlocked an estimated R8,2bn of value for
more than 500 000 beneficiaries since inception.
For regulators – full compliance with Basel III phase-in requirements,
including maintaining strong capital levels with a CET1 ratio of 11,6% and an
average long-term funding ratio of 25,4%; making cash taxation payments of
R8,0bn, relating to direct, indirect, pay as you earn (PAYE) and other taxation;
participating in the Abil resolution and underwriting; maintaining strong,
transparent relationships with all regulators; contributing to working groups on
new regulation and continuing to support responsible banking practices.
For communities – contributing R126m to socioeconomic development,
including R75m towards education. We also advanced R54bn in new loans to
retail clients, R1,2bn to affordable-housing developments across the country
and R113m to enterprise development. Our Fair Share 2030 pilot delivered
various successes, a highlight being a loan to a healthcare group that will
enable a projected cost-saving to our client from reduced energy consumption
of R1bn over 10 years. From an operational perspective we sourced 87% or
R8,5bn of our procurement locally. We continued our commitment to
managing our operational impact and maintained our carbon-neutral status,
and also attracted shareholder investment by remaining on the Dow Jones
Sustainability Index for the ninth consecutive year. We maintained our level-2
BBBEE contributor status for the sixth consecutive year. Together with Old
Mutual, we pledged a combined US$1m towards the African Union–Private
Sector Ebola Fund.
Delivering value to all our stakeholders assisted Nedbank in once again being
awarded SA Bank of the Year for 2014 by the Financial Times and the Banker
magazine, matching the achievements of 2011 and 2013.
Cluster financial performance
Our business clusters have developed competitive client value propositions
and strong market positioning as reflected in headline earnings growth of
19,3%¹ and an increased ROE of 19,7%(1) (2013: 18,7%)(1) against a higher
average total capital allocated at R51,4bn (2013: R45,5bn).
% Headline ROE
change earnings (%)(1)
(Rm)(1)
2014 2013 2014 2013
Nedbank Capital 23,3 2 128 1 726 30,9 29,4
Nedbank Corporate 15,8 2 599 2 245 24,5 26,4
Nedbank Business Banking 17,8 1 094 929 20,1 19,4
Nedbank Retail 15,7 2 937 2 539 13,3 11,6
Nedbank Wealth 15,8 1 042 900 36,8 36,2
Rest of Africa Division 106,4 357 173 10,1 8,7
Business clusters 19,3 10 157 8 512 19,7 18,7
Centre >(100) (277) 158
Total 14,0 9 880 8 670 15,8 15,6
Nedbank Capital grew headline earnings 23,3%, with this strong performance
driven by good NII growth and improvements in impairments. Lower NIR
growth reflects the high 2013 base in trading income related to renewable-
energy transactions. Preprovisioning operating profit growth was 12,0%.
Headline earnings growth of 15,8% in Nedbank Corporate was underpinned
by strong NII and NIR growth. The increase in NII was supported by
commercial mortgage and corporate lending activities and endowment
benefits. The growth in NIR was from core transactional income and private-
equity investments. Low levels of impairments continue to reflect good risk
management across the portfolio.
Nedbank Business Banking's strong increase of 17,8% in headline earnings
and improving ROE follow the normalisation of impairments from a large
single-client default in 2013 and solid NII growth from increased product
volumes and higher endowment earnings. Lower NIR reflects the impact of
maintaining transactional fees at 2013 levels as well as the proactive
reduction of transactional banking fees in alignment with market practices.
Preprovisioning operating profit was up 5,8%.
Headline earnings in Nedbank Retail grew 15,7% and benefited from an
improvement in impairments in personal loans and home loans. NIR was
influenced by the strategic decision to slow down personal loans and maintain
transactional fees at 2013 levels. Consequently, preprovisioning operating
profit decreased by 4,1%.
Nedbank Wealth's headline earnings growth of 15,8% was off a high 2013
base. This was largely due to record earnings growth in Wealth Management
and continued momentum in Asset Management, partially offset by relatively
slower growth from Insurance. The performance in Insurance resulted from
lower levels of sales of traditional insurance products, including homeowner's
cover and personal-loan-related insurance products.
The Rest of Africa Division, previously included in the Centre, reported
earnings of R357m (2013: R173m), showing strong growth, including
associate income from ETI as estimated by Nedbank on a prudent basis
effective from the fourth quarter, as ETI reports later than Nedbank. The
division also reported stronger performance from all five of our regional
subsidiaries.
Headline earnings at the Centre includes net endowment on surplus capital
and fair-value gains in the hedged portfolios, offset by additional portfolio
impairment provisions for ongoing economic uncertainties, with the central
portfolio provision increased by R150m to R350m.
Detailed segmental information is available in the results booklet and on the
group's website at nedbankgroup.co.za under the 'Financial information'
section.
Financial performance
Net interest income
NII grew 8,2%(1) to R22 961m(1) (2013: R21 220m)(1), benefiting from 9,7% growth
in average interest-earning banking assets.
The net interest margin (NIM) narrowed to 3,52% (2013: 3,57%). The
endowment income benefit from higher interest rates was offset by asset and
liability margin compression. Asset margins were impacted by the change in
asset mix as lower-yielding wholesale advances grew faster than higher-
yielding retail advances, including the reduction in our personal-loans book,
and by holding higher levels of lower-yielding high-quality liquid assets for
Basel III LCR requirements. Liability margin compression arose from higher
levels of competition for Basel III-friendly deposits.
Impairments charge on loans and advances
Impairments decreased 19,0% to R4 506m (2013: R5 565m) and the credit
loss ratio (CLR) declined to 0,79% (2013: 1,06%), despite increased coverage
levels and the strengthening of central provisions to R350m (2013: R200m) in
line with the group's view of a protracted weak economic environment.(1)
Credit loss ratio (%) Dec H2 H1 Dec
2014(1) 2014 2014 2013(1)
Specific impairments 0,72 0,67 0,78 0,97
Portfolio impairments 0,07 0,07 0,05 0,09
Total credit loss ratio 0,79 0,74 0,83 1,06
CLRs decreased across all clusters as a result of ongoing improvements in
asset quality, prudent credit granting and strong collections. Higher levels of
postwriteoff recoveries of R941m (2013: R888m) were recorded, including
personal-loan recoveries of R343m (2013: R276m).
Credit loss ratio (%) % Dec H2 H1 Dec Through-
banking 2014(1) 2014 2014 2013(1) the-cycle
advances target
ranges
Nedbank Capital 12,8 0,14 0,32 (0,04) 0,51 0,10 – 0,55
Nedbank Corporate 33,1 0,21 0,21 0,22 0,23 0,20 – 0,35
Nedbank Business Banking 11,4 0,42 0,39 0,44 0,65 0,55 – 0,75
Nedbank Retail 36,0 1,70 1,50 1,90 2,16 1,90 – 2,60
Nedbank Wealth 4,2 0,17 0,13 0,21 0,28 0,20 – 0,40
Rest of Africa Division 2,6 0,23 0,06 0,42 0,37
Group 0,79 0,74 0,83 1,06 0,80 – 1,20
Total group defaulted advances decreased by 11,2% to R15 846m
(2013: R17 848m), driven by continued improvements in the residential-
mortgage and personal-loans books. Total defaulted advances now
constitutes 2,5% of the book (2013: 3,0%).
Coverage ratios for total and specific impairments strengthened to 70,0%
(2013: 64,2%) and 43,1% (2013: 42,3%) respectively. Portfolio coverage
improved to 0,70% (2013: 0,68%).
Non-interest revenue
During the year a number of strategic actions were implemented to position
the group for growth into the future. These actions included the slowdown in
growth of personal loans, reducing the pricing of our credit life product (but
with increased benefits), maintaining transactional fees at 2013 levels, and
implementing selected fee reductions in Retail Relationship Banking and
Business Banking.
As a result NIR increased by 4,9%(1) to R20 312m(1) (2013: R19 361m)(1), with
strong growth of 10,2% in the second half of the year.
The underlying drivers of NIR growth included:
- Commission and fee income increasing 3,9%(1) to R14 570m(1)
(2013: R14 023m)(1), driven by good transactional-banking volume growth
and ongoing client acquisition, notwithstanding the effect of no fee
increases and fee reductions amounting to R355m.
- Insurance income growing 3,1%(1) to R1 986m(1) (2013: R1 927m)(1), which
was achieved mainly in the second half of the year, through a better claims
experience and continued momentum in non-traditional insurance, offset
by retail volumes.
- Trading income growing 3,3%(1) to R2 648m(1) (2013: R2 564m)(1) off a high
2013 base.
- Private-equity income increasing 88,0%(1) to R423m(1) (2013: R225m)(1)
following higher profits realised on listed investments of R434m (2013:
R192m).
- Fair-value gains of R35m(1) (2013: R40m)(1), which were recognised primarily
as a result of basis risk on centrally hedged banking book positions and
accounting mismatches in the hedged fixed-rate advances portfolios.
Expenses
Expenses growth of 9,4%(1) to R24 534m(1) (2013: R22 419m)(1) is reflective of
continued investment in the group's franchises.
The main contributors were:
- staff-related costs increasing 9,6%, comprising growth in remuneration of
8,8% and an increase in variable incentives;
- computer processing costs growing 13,9% to R3 097m, including
amortisation costs of R654m, up 12,0%.
- fees and insurance costs increasing 10,7% in line with higher volumes of
revenue-generating activities such as cash handling, card issuing and
acquiring, and client acquisition costs in Nedbank Wealth.
Associate income
Associate income increased to R161m (2013: R27m), largely driven by the
estimated income from our shareholding of approximately 20% in ETI,
effective from 1 October 2014.(1) The group's results includes Nedbank's own
conservative estimate of ETI's earnings, as the publication dates of ETI
results are not aligned to Nedbank Group.
Statement of financial position
Capital
The group remains well capitalised, with all capital adequacy ratios well above
the Basel III minimum regulatory capital requirements and within the group's
Basel III internal target ranges.
Basel III(1) Dec Jun Dec Internal target Regulatory
2014 2014 2013 range minimum*
CET1 ratio 11,6% 12,1% 12,5% 10,5% – 12,5% 5,5%
Tier 1 ratio 12,5% 13,1% 13,6% 11,5% – 13,0% 7,0%
Total 14,6% 15,0% 15,7% 14,0% – 15,0% 10,0%
capital
ratio
(Ratios calculated include unappropriated profits.)
(1) The Basel III regulatory requirements (excluding unappropriated profits) are being phased in
between 2013 and 2019 and exclude the Pillar 2b add-on.
Our CET1 ratio of 11,6% (2013: 12,5%) is above the mid-point of our Basel III
2019 internal target range. The decrease in the ratio since June 2014 is
largely as a result of the expected 0,9% capital impact from our investments in
ETI and Banco Único.
The tier 1 and total capital ratios reflect the progressive grandfathering of old-
style instruments in accordance with Basel III transitional arrangements.
Because of this only 80% of Nedbank's preference shares and hybrid debt
qualified as tier 1 capital in 2014. In addition, NED 8, a R1,7bn old-style tier 2
subordinated-debt instrument, was called in February 2014 and replaced with
R2,5bn of new-style Basel III-complaint tier 2 instruments.
Further details 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 nedbankgroup.co.za
in March 2015.
Funding and liquidity
The group's balance sheet remains well funded, with deposits increasing
8,4%(1) to R653,5bn(1) (2013: R603,0bn)(1) and the loan-to-deposit ratio
strengthening to 93,8%(1) (2013: 96,1%).(1)
Our strategy of growing retail and commercial deposits and maintaining a
conservative term funding profile continues to be reflected in the group's
average long-term funding ratio for the fourth quarter of 25,4% (average fourth
quarter 2013: 26,2%), which has tended to be above the industry average.
The group maintained a sound liquidity position, with contingent liquidity well
in excess of prudential liquidity requirements. The statutory liquid assets and
cash reserves, combined with the surplus liquid-asset portfolio of R37,0bn
(2013: R28,0bn), increased 18,5% to R82,6bn (2013: R69,7bn).
Liquidity coverage ratio
SARB adopted the Basel Committee's LCR phase-in arrangements where,
from 1 January 2015, SA banks must meet the minimum regulatory
requirement of 60%, which increases by 10% annually to reach 100% on
1 January 2019.
Nedbank has met the minimum LCR requirement of 60%, and implemented
an appropriately conservative buffer. The group is well positioned to meet the
ongoing LCR requirements throughout the transitional period.
Loans and advances
Loans and advances grew 5,8%(1) to R613,0bn(1) (2013: R579,4bn)(1). Excluding
low-yielding trading advances, banking advances growth was 8,1%,
underpinned by gross new payouts of R166,8bn (2013: R158,9bn).
Loans and advances by cluster are as follows:
Rm % change 2014(1) 2013(1)
Nedbank Capital (3,6) 105 601 109 549
Banking activities 9,1 78 596 72 066
Trading activities (28,0) 27 005 37 483
Nedbank Corporate 13,9 199 557 175 274
Nedbank Business Banking 4,8 65 819 62 785
Nedbank Retail 3,9 203 063 195 435
Nedbank Wealth 12,4 24 819 22 082
Rest of Africa Division (4,3) 14 073 14 700
Centre >100 89 (453)
5,8 613 021 579 372
Banking advances growth was primarily driven by strong growth from
Nedbank Capital and Nedbank Corporate, which together contribute 47,5% of
total banking advances and 49,7% of the year-on-year growth.
Nedbank Retail's slower advances growth reflects the 16,3% decrease in
personal loans, which largely offset stronger growth in Card and MFC (vehicle
finance) of 17,1% and 12,1% respectively.
Advances growth decreasing in the Rest of Africa Division resulted from
growth in the regional subsidiaries of 17,2% more than offset by the
repayment of the ETI loan of US$285m.
Total assets administered by the group has surpassed the R1,0tn level for the
first time, having increased 8,7% for the year (2013: R939,9m). Assets under
management increased 11,4% to R212m (2013: R190,3m) following good
market performance.(1)
Group strategic focus
We made good progress with our five key strategic focus areas, namely:
- Client-centred innovation: We continue to introduce innovative products
such as Send-iMali™, the MyFinancialLife™ retirement calculator, our
Greenbacks Rewards Programme SHOP Card and, for wholesale clients,
our worldclass Plug and Transact™ token and Market Edge, a merchant
analytics tool. Altogether 171 outlets in the 'branch of the future' format
have been converted to date and we currently plan to have converted
75% of all outlets by 2017. Digital channels remain important and digitally
enabled clients increased by 48% while the value of Nedbank App Suite
transactions increased 66% to R58bn. Our ability to launch additional
functionality without clients having to reinstall the Nedbank AppSuite™
once again contributed to Nedbank being a finalist for the MTN Best
Android Consumer App award in 2014. Our progress in innovative banking
solutions was further acknowledged by our receiving the 2014 African
Banker Award for Innovation. The implementation of our new transactional
switch in 2014 will enhance our electronic transactional capabilities into the
future.
- Growing our transactional banking franchise: The strategic decision
taken to build our franchise and client relationships through maintaining
our transactional fees at 2013 levels, and reducing selected fees in some
businesses, has seen early successes as client attrition metrics improved,
cross-sell increased and client gains continued in both total and main
banked categories. Our brand value increased 15% to R12,6bn in 2014 as
reported by Brand Finance SA's Top 50 Most Valuable Brands Survey and
Nedbank was rated the third-most-valuable bank brand in SA.
- Optimise and invest: Across Nedbank Group we have initiated various
cost and efficiency optimisation initiatives. Through our 'rationalise,
standardise and simplify' information technology strategy we are
decreasing our core systems from 250 to 60, 18 of which have been
decommissioned in 2014 and 74 to date. On 1 January 2015 we went live
successfully with our SAP enterprise resource planning (ERP)
replacement system for finance and procurement – on time, on budget and
within scope – with human resources to follow later in the year. In addition,
we are working on a range of alliances and synergies with the Old Mutual
Group in SA and have made substantial progress towards the 2017 Old
Mutual Group target of R1bn for collaborative initiatives. We currently
expect that less than 30% of this will accrue to Nedbank.
- Strategic portfolio tilt: The benefits from the early action taken in
reducing our home loan and personal-loan portfolios have been evident in
our 2014 results. Our focus on growing activities that generate economic
profit, such as transactional deposits, transactional banking and
investment in the rest of Africa, remains high on the agenda. The benefit of
our actions over the past four years has enabled the group to maintain a
sound balance sheet and reduce impairments, while delivering dividend
growth ahead of HEPS growth.
- Pan-African banking network: During the period we concluded the
acquisition of an initial 36,4% shareholding (with a pathway to control in
2016) of Banco Único in Mozambique. In our Rest of Africa subsidiaries
we have made good progress in implementing a standardised operating
model and our Flexcube information technology system is planned to be
implemented in Namibia in 2015. This has strengthened Nedbank's
franchise and client proposition in the Southern African Development
Community (SADC) and East Africa.
In West and Central Africa our alliance with ETI continues to deliver value
for the group. During October 2014 we exercised our rights to subscribe
for a 20% shareholding in ETI for a consideration of US$493,4m. Our
alliance with Bank of China has progressed and since inception we have
concluded a number of deals together. Additional disclosure of our
progress in the rest of Africa is contained in the segmental commentary of
the results booklet.
Value created through broad-based black economic empowerment
Nedbank Group's South African broad-based black economic empowerment
('BBBEE') transaction introduced in 2005 included over 500 000 direct and
indirect beneficiaries ('the BBBEE transaction'). The BBBEE transaction was aligned
and implemented in collaboration with Old Mutual Group's BBBEE transaction.
The BBBEE transaction facilitated broad-based black ownership equating to 11,5%
of the then value of Nedbank Group's SA businesses. The objective was to
create sustainable value for a broad base of diverse beneficiaries, including
strategic black business partners, employees, non-executive directors, clients
and community interest groups affiliated with the company.
The group's strong financial performance over the ensuing nine-year period
has benefitted its BBBEE stakeholders by an estimated R8,2bn, based on
current market prices. Valuing this benefit at the time that shares became
unrestricted, during the lifetime of the BBBEE schemes, the aggregate value
created for the BBBEE stakeholders would be R5,5bn.
Further information on the specific repurchase and issue relating to the
BBBEE transaction will be included in the JSE SENS announcement
published on 23 February 2015, which will also be available on the group's
website at nedbankgroup.co.za.
Economic outlook
The SA economy is forecast to improve modestly off a low base, although
growth will be constrained by disruptions to power supply and weaker growth
anticipated in key export markets, particularly in the Eurozone and China.
Growth in GDP is currently forecast at 2,5% for 2015 as the economy
recovers from the effects of strike action and exports are boosted by a weaker
rand. Risk to this appears to be on the downside. The sharp drop in global fuel
prices has improved the inflation outlook, and interest rates are expected to
remain unchanged at current levels until late in the year. The softer interest
rate outlook and lower borrowing costs should support consumer credit
demand and limit credit defaults in 2015, notwithstanding the weak job market
and still high consumer debt levels.
Retail banking conditions are therefore likely to improve modestly, but growth
in wholesale banking may moderate from current levels as fixed-investment
plans and credit demand will be limited by the severity and extent of
infrastructure constraints, rising production costs, soft global demand and low
international commodity prices.
Prospects
Our guidance on financial performance for the full 2015 year is as follows:
- Advances to grow at mid-single digits.
- NIM to be below the 2014 level of 3,52%.
- CLR to be at the lower end of the through-the-cycle target range of 80 to
120 basis points.
- NIR (excluding fair-value adjustments) to grow above mid-single digits.
- Expenses to increase above mid-single digits.
Although forecast risk remains high, for the year ahead we once again expect
organic growth in DHEPS to be above nominal GDP growth.
Our medium-to-long-term targets and performance outlook for 2015 for these
are as follows:
2014 Medium-to-long-term 2015 full-year
Metric
performance targets outlook
ROE (excluding 5% above cost of
goodwill) 17,2% ordinary shareholders' Below target
equity
Growth in
13,0% = consumer price
DHEPS > consumer price
index + GDP growth +
Growth in index + GDP growth
12,3% 5%
organic DHEPS
Between 0,8% and
At lower end of target
CLR 0,79% 1,2% of average
range
banking advances
NIR-to-expense
82,8% >85% Below target
ratio
Efficiency ratio(1) 56,5% 50,0% to 53,0%(2) Above target
CET1 capital
adequacy ratio 11,6% 10,5% to 12,5% Within target range
(Basel III)
Internal Capital Adequacy Assessment Process (ICAAP):
Economic capital
A debt rating (including 10% capital buffer)
Dividend cover 2,07 times 1,75 to 2,25 times 1,75 to 2,25 times
(1) Includes associate income in line with industry accounting practices.
(2) Target will be reviewed for the impact of inclusion of associate income
Shareholders are advised that these forecasts are based on our latest
macroeconomic outlook, and have not been reviewed or reported on by the
group's auditors.
Board appointments
During the period David Adomakoh, Mantsika Matooane and Brian Dames
were appointed as independent non-executive directors with effect from
21 February, 15 May and 30 June 2014 respectively.
Paul Hanratty, Chief Operating Officer (COO) of Old Mutual plc was appointed
as non-independent non-executive director with effect from 8 August 2014.
Mfundo Nkuhlu, previously Managing Executive of Nedbank Corporate,
succeeded Graham Dempster as COO and joined the board as executive
director with effect from 1 January 2015. In his new role Mfundo has overall
responsibility for the Rest of Africa Division, Balance Sheet Management,
Information Technology, Human Resources, Marketing, Communications and
Corporate Affairs, and Strategic Planning. Graham will continue to focus on
strategic initiatives in the Rest of Africa until his retirement on 31 May 2015.
Dr Reuel Khoza, the current Chairman, reached his nine-year term in August
2014 and in line with Nedbank Group policy retires at the close of the annual
general meeting (AGM) on 11 May 2015. Vassi Naidoo will be appointed non-
executive director of the companies with effect from 1 May 2015. The boards
of Nedbank Group and Nedbank have resolved to elect Vassi as Chairman of
the companies immediately following the conclusion of the Nedbank Group
AGM scheduled to be held on 11 May 2015.
Group executive appointments
The group announced a number of executive appointments during the year.
All the appointments were internal and are evident of our well-thought-out
succession planning processes and the depth of our talent pipelines.
Philip Wessels was appointed Managing Executive of Retail and Business
Banking, following the appointment of Ingrid Johnson as Financial Director of
our parent, Old Mutual plc. Trevor Adams succeeded Philip as Chief Risk
Officer with effect from 1 August 2014 and Mike Davis joined the Group
Executive Committee as Group Executive of Balance Sheet Management with
effect from 1 January 2015 to fill Trevor's previous role.
Following the announcement in November 2014 that Nedbank Capital and
Nedbank Corporate will be integrated into a single client-facing, wholesale
business cluster, Brian Kennedy, Managing Executive of Nedbank Capital, will
be accountable for the combined corporate and investment bank, including
the implementation of the business structure and operating model with effect
from 1 January 2015. This newly formed cluster will offer the full spectrum of
wholesale products under one brand and one leadership team. Our objective
is to create a wholesale business that combines the strengths of Nedbank
Capital and Nedbank Corporate to build a market-leading franchise with an
even stronger client-centred focus.
Priya Naidoo joined the Group Executive Committee on 1 January 2015 and
will succeed John Bestbier, Group Executive for Strategic Planning and
Economics, on his scheduled retirement date of 30 June 2015.
Accounting policies(1)
Nedbank Group Limited is a company domiciled in SA. The summary
consolidated financial results of the group at and for the year ended
31 December 2014 comprise the company and its subsidiaries (the 'group')
and the group's interests in associates and joint arrangements.
The financial results contained in the SENS announcement has been
extracted from the consolidated financial statements, which have been
prepared in accordance with the requirements of the JSE Limited Listings
Requirements for preliminary reports, and the requirements of the Companies
Act applicable to summary financial statements. The Listings Requirements
require preliminary reports to be prepared in accordance with the framework
concepts and the measurement and recognition requirements of International
Financial Reporting Standards (IFRS), Financial Reporting Guides as issued
by the Accounting Practices Committee and Financial Pronouncement as
issued by the Financial Reporting Standards Council and also, as a minimum,
to contain the information required by IAS 34: Interim Financial Reporting. The
accounting policies applied in the preparation of the consolidated financial
statements, from which the summary consolidated financial results were
derived, are in terms of IFRS and are consistent with the accounting policies
applied in the preparation of the previous consolidated annual financial results.
The summary consolidated financial results have been prepared under the
supervision of Raisibe Morathi, the Chief Financial Officer.
Events after the reporting period(1)
The various BBBEE schemes that reached their maturity dates on
1 January 2015 will be rationalised through a specific repurchase of Nedbank
Group shares. The repurchased shares will not have a significant impact on
the consolidated financial position of the group and will be delisted, cancelled
and reinstated as authorised but unissued shares. Following this, the
Community Trust, which matures only in 2030, will subscribe for Nedbank
Group shares to maintain its shareholding in the group.
On 15 January 2015 Nedbank Limited's unsecured subordinated NEDH1A
and NEDH1B notes were redeemed and R225m of new-style tier 2 debt
instruments issued. A further R5,4bn of senior unsecured debt was issued on
12 February 2015.
At 31 December the carrying value of our long-term strategic investment in
ETI was R6,2bn. Based on the ETI share price at year-end the market value
was R5,5bn. We assessed the indicators of impairment as at 31 December
2014 in terms of International accounting Standard (IAS) 39 and, inter alia,
took into consideration ETI shares trade in low volume, the price is therefore
subject to volatility and does not reflect the underlying financial and strategic
value of the investment to the Nedbank Group. Therefore we did not impair
the carrying value of our investment at 31 December 2014. Subsequent to the
year-end on 19 February 2015 the market value of ETI based on the share
price, was R4,4bn. We will continue to assess the indicators of impairment in
future reporting periods
Audited summary consolidated financial results – independent auditors' report
KPMG Inc and Deloitte & Touche, Nedbank Group's independent auditors,
have audited the consolidated financial results of Nedbank Group Limited
from which the summary consolidated financial results have been derived,
and have expressed an unmodified audit opinion on the financial statements.
These summary consolidated financial results comprise the summary
consolidated statement of financial position at 31 December 2014, summary
consolidated statement of comprehensive income, summary consolidated
statement of changes in equity and summary consolidated statement of
cashflows for the year then ended and selected explanatory notes. The
related notes are marked with(1). Both audit reports are available for inspection
at Nedbank Group's registered office.
The auditors' report does not necessarily report on all of the information
contained in the financial results. Shareholders are therefore advised that in
order to obtain a full understanding of the nature of the auditors' engagement,
they should obtain a copy of the auditors' report together with the
accompanying financial information from Nedbank Group's registered office.
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 consolidated financial results.
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 global, national and regional
economic conditions; levels of securities markets; interest rates; credit or
other risks of lending and investment activities; as well as competitive and
regulatory factors. By consequence, all forward-looking statements have not
been reviewed, audited or reported on by the group's auditors.
Final-dividend declaration
Notice is hereby given that a gross final dividend of 568 cents per ordinary
share has been declared, payable to shareholders for the year ended
31 December 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) or 85,20000 cents per ordinary share, resulting in a net
dividend of 482,80000 cents per ordinary share, unless the shareholder is
exempt from paying dividend tax or is entitled to a reduced rate in terms of an
applicable double-tax agreement.
Nedbank Group Limited's tax reference number is 9375/082/71/7 and the
number of ordinary shares in issue at the date of declaration is 499 257 807.
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) Thursday, 26 March 2015
Shares commence trading (ex dividend) Friday, 27 March 2015
Record date (date shareholders recorded in Thursday, 2 April 2015
books)
Payment date Tuesday, 7 April 2015
Share certificates may not be dematerialised or rematerialised between
Friday, 27 March 2015, and Thursday, 2 April 2015, both days inclusive.
On Tuesday, 7 April 2015, the dividend will be electronically transferred to the
bank accounts of shareholders. Holders of dematerialised shares will have
their accounts credited at their participant or broker on Tuesday, 7 April 2015.
For and on behalf of the board
Reuel Khoza Mike Brown
Chairman Chief Executive
23 February 2015
AUDITED SUMMARY CONSOLIDATED FINANCIAL RESULTS
for the year ended 31 December 2014
Financial highlights
at 31 December 31 December
Change 2014 2013
(Audited) (Audited) (Audited)
%
Statistics
Number of shares listed (2.2) m 499.3 510.3
Number of shares in issue, excluding shares held by group entities 1.0 m 465.6 461.2
Weighted-average number of shares 0.9 m 464.4 460.2
Diluted weighted-average number of shares 0.9 m 478.2 474.1
Preprovisioning operating profit 3.5 Rm 17 873 17 268
Economic profit(1) (0.1) Rm 2 112 2 114
Headline earnings per share 12.9 cents 2 127 1 884
Diluted headline earnings per share 13.0 cents 2 066 1 829
Ordinary dividends declared per share 14.9 cents 1 028 895
Interim 17.9 cents 460 390
Final 12.5 cents 568 505
Ordinary dividends paid per share 20.3 cents 965 802
Dividend cover times 2.07 2.11
Net asset value per share 9.5 cents 14 395 13 143
Tangible net asset value per share 10.6 cents 12 553 11 346
Closing share price 18.6 cents 24 900 21 000
Price/earnings ratio historical 11.7 11.1
Market capitalisation 16.0 Rbn 124.3 107.2
Number of employees 3.3 30 499 29 513
Key ratios (%)
Return on ordinary shareholders' equity (ROE) 15.8 15.6
ROE, excluding goodwill 17.2 17.2
Tangible ROE 18.2 18.3
Return on total assets (ROA) 1.27 1.23
Net interest income to average interest-earning banking assets 3.52 3.57
Credit loss ratio – banking advances 0.79 1.06
Gross operating income growth rate less expense growth rate (Jaws ratio) (2.5) 0.7
Non-interest revenue to total operating expenses 82.8 86.4
Non-interest revenue to total income 46.9 47.7
Efficiency ratio 56.5 55.2
Effective taxation rate 25.3 25.2
Return on risk-weighted assets(1) 2.24 2.21
Group capital adequacy ratios (including unappropriated profits):(1)
- Common-equity tier 1 11.6 12.5
- Tier 1 12.5 13.6
- Total 14.6 15.7
Statement of financial position statistics (Rm)
Total equity attributable to equity holders of the parent 10.6 67 024 60 617
Total equity 10.2 70 911 64 336
Amounts owed to depositors 8.4 653 450 602 952
Loans and advances 5.8 613 021 579 372
Gross 5.6 624 116 590 828
Impairment of loans and advances (3.2) (11 095) (11 456)
Total assets administered by the group 8.7 1 021 326 939 935
Total assets 8.0 809 313 749 594
Assets under management 11.4 212 013 190 341
Life assurance embedded value 12.0 2 393 2 137
Life assurance value of new business (27.0) 257 352
Foreign currency conversion rates
Pound sterling at the end of the year 3.9 R 18.04 17.36
Pound sterling average rate for the year 17.9 R 17.88 15.17
US dollar at the end of the year 10.3 R 11.58 10.50
US dollar average rate for the year 11.8 R 10.87 9.72
(1) These ratios have not been audited by the group's auditors.
Summarised consolidated statement of comprehensive income
for the year ended 31 December 31 December
Change 2014 2013
(Audited) (Audited) (Audited)
% Rm Rm
Interest and similar income 14.2 52 619 46 087
Interest expense and similar charges 19.3 29 658 24 867
Net interest income 8.2 22 961 21 220
Impairments charge on loans and advances (19.0) 4 506 5 565
Income from lending activities 17.9 18 455 15 655
Non-interest revenue 4.9 20 312 19 361
Operating income 10.7 38 767 35 016
Total operating expenses 9.4 24 534 22 419
Indirect taxation 5.7 635 601
Profit from operations before non-trading and capital items 13.4 13 598 11 996
Non-trading and capital items 94.6 (109) (56)
Net (loss)/profit on sale of subsidiaries, investments, and property and equipment <-100 (12) 11
Net impairment of investments, property and equipment, and capitalised development costs 44.8 (97) (67)
Fair-value adjustments of investment properties - 6 6
Profit from operations 13.0 13 495 11 946
Share of profits of associate companies and joint arrangements >100 161 27
Profit before direct taxation 14.1 13 656 11 973
Total direct taxation 15.0 3 468 3 016
Direct taxation 15.0 3 487 3 033
Taxation on non-trading and capital items 5.6 (19) (18)
Taxation on revaluation of investment properties (100.0) 1
Profit for the year 13.7 10 188 8 957
Other comprehensive income net of taxation (61.4) 647 1 675
Items that may be reclassified subsequently to profit or loss
– Exchange differences on translating foreign operations (43.5) 390 690
– Fair-value adjustments on available-for-sale assets (34.4) 21 32
Items that may not be reclassified subsequently to profit or loss
– Gains on property revaluations (9.0) 202 222
– Remeasurements on long-term employee benefit assets (95.3) 34 731
Total comprehensive income for the year 1.9 10 835 10 632
Profit attributable to:
- Equity holders of the parent 13.4 9 796 8 637
- Non-controlling interest – ordinary shareholders >100 69 28
- Non-controlling interest – preference shareholders 10.6 323 292
Profit for the year 13.7 10 188 8 957
Total comprehensive income attributable to:
- Equity holders of the parent 1.3 10 431 10 295
- Non-controlling interest – ordinary shareholders 80.0 81 45
- Non-controlling interest – preference shareholders 10.6 323 292
Total comprehensive income for the year 1.9 10 835 10 632
Basic earnings per share (cents) 12.4 2 109 1 877
Diluted earnings per share (cents) 12.5 2 049 1 822
Headline earnings reconciliation
for the year ended
31 December 31 December 31 December 31 December
Change 2014 2014 2013 2013
(Audited) (Audited) (Audited) (Audited) (Audited)
% Rm Rm Rm Rm
Gross Net of taxation Gross Net of taxation
Profit attributable to equity holders of the parent 13.4 9 796 8 637
Less: Non-headline earnings items (103) (84) (50) (33)
Net (loss)/profit on sale of subsidiaries, investments, and property and equipment (12) 7 11 11
Net impairment of investments, property and equipment, and capitalised development costs (97) (97) (67) (49)
Fair-value adjustments of investment properties 6 6 6 5
Headline earnings 14.0 9 880 8 670
Summarised consolidated statement of financial position
at 31 December 31 December
Change 2014 2013
(Audited) (Audited) (Audited)
% Rm Rm
Assets
Cash and cash equivalents (36.0) 13 339 20 842
Other short-term securities 58.4 67 234 42 451
Derivative financial instruments 16.3 15 573 13 390
Government and other securities (15.3) 27 177 32 091
Loans and advances 5.8 613 021 579 372
Other assets 0.5 8 715 8 673
Current taxation assets (48.5) 291 565
Investment securities 3.5 20 029 19 348
Non-current assets held for sale 33.3 16 12
Investments in private-equity associates, associate companies and joint arrangements >100 7 670 1 101
Deferred taxation assets 43.1 309 216
Investment property (39.3) 130 214
Property and equipment 14.0 7 773 6 818
Long-term employee benefit assets 52.6 4 546 2 980
Mandatory reserve deposits with central banks 12.7 14 911 13 231
Intangible assets 3.5 8 579 8 290
Total assets 8.0 809 313 749 594
Equity and liabilities
Ordinary share capital 1.1 466 461
Ordinary share premium 2.7 16 781 16 343
Reserves 13.6 49 777 43 813
Total equity attributable to equity holders of the parent 10.6 67 024 60 617
Non-controlling interest attributable to:
– Ordinary shareholders 32.5 326 246
– Preference shareholders 2.5 3 561 3 473
Total equity 10.2 70 911 64 336
Derivative financial instruments (6.7) 15 472 16 580
Amounts owed to depositors 8.4 653 450 602 952
Provisions and other liabilities (6.1) 13 788 14 682
Current taxation liabilities (55.5) 134 301
Deferred taxation liabilities 18.0 931 789
Long-term employee benefit liabilities 66.7 3 071 1 842
Investment contract liabilities 1.9 11 747 11 523
Insurance contract liabilities 25.6 4 171 3 321
Long-term debt instruments 7.1 35 638 33 268
Total liabilities 7.8 738 402 685 258
Total equity and liabilities 8.0 809 313 749 594
Summarised consolidated statement of changes in equity
Non-controlling Non-controlling
Total equity interest interest
attributable to attributable to attributable to
equity holders ordinary preference
of the parent shareholders shareholders Total equity
Rm Rm Rm Rm
Audited balance at 31 December 2012 53 601 213 3 561 57 375
Dividend to shareholders (3 821) (9) (3 830)
Preference share dividend (292) (292)
Issues of shares net of expenses 475 475
Shares (acquired)/no longer held by group entities and BEE trusts (132) (132)
Total comprehensive income for the year 10 295 45 292 10 632
Share-based payment reserve movement 206 206
Preference shares held by group entities (88) (88)
Disposal of subsidiary (3) (3)
Regulatory risk reserve provision (4) (4)
Other movements (3) (3)
Audited balance at 31 December 2013 60 617 246 3 473 64 336
Dividend to shareholders (4 643) (9) (4 652)
Preference share dividend (323) (323)
Issues of shares net of expenses 771 771
Shares delisted in terms of BEE transaction (1 613) (1 613)
Shares (acquired)/no longer held by group entities and BEE trusts 1 306 1 306
Acquisition of additional shareholding in subsidiary 8 8
Total comprehensive income for the year 10 431 81 323 10 835
Share-based payment reserve movement 151 151
Regulatory risk reserve provision 7 7
Preference shares no longer held by group entities 88 88
Other movements (3) (3)
Audited balance at 31 December 2014 67 024 326 3 561 70 911
Summarised consolidated statement of cashflows
for the year ended 31 December 31 December
2014 2013
(Audited) (Audited)
Rm Rm
Cash generated by operations 21 332 20 553
Change in funds for operating activities (11 231) (4 507)
Net cash from operating activities before taxation 10 101 16 046
Taxation paid (4 283) (3 890)
Cashflows from operating activities 5 818 12 156
Cashflows utilised by investing activities (9 455) (4 341)
Cashflows utilised by financing activities (2 132) (800)
Effects of exchange rate changes on opening cash and cash equivalents (excluding foreign borrowings) (54) (64)
Net (decrease)/increase in cash and cash equivalents (5 823) 6 951
Cash and cash equivalents at the beginning of the year(1) 34 073 27 122
Cash and cash equivalents at the end of the year(1) 28 250 34 073
(1) Including mandatory reserve deposits with central banks.
Summarised segmental reporting
for the year ended 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2014 2013 2014 2013 2014 2013 2014 2013
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm
Total assets Total liabilities Operating income Headline earnings
Nedbank Capital 168 172 180 708 161 281 174 845 5 037 4 380 2 128 1 726
Nedbank Corporate 213 069 188 363 202 463 179 849 5 838 5 084 2 599 2 245
Total Nedbank Retail and Nedbank Business Banking 323 840 302 371 296 275 275 688 21 975 19 929 4 031 3 468
Nedbank Retail 211 904 203 155 189 795 181 252 17 040 15 502 2 937 2 539
Nedbank Business Banking 111 936 99 216 106 480 94 436 4 935 4 427 1 094 929
Nedbank Wealth 57 609 50 911 54 779 48 424 3 986 3 553 1 042 900
Rest of Africa Division 27 428 20 117 23 879 18 119 1 631 1 426 357 173
Centre 19 195 7 124 (275) (11 667) 300 644 (277) 158
Total 809 313 749 594 738 402 685 258 38 767 35 016 9 880 8 670
The 2013 comparative results for the segmental reporting have been restated. The Rest of Africa Division is now reported separately, and Central Management
and Shared Services are collectively reported as the Centre. The restatement has had no effect on the group results and ratios, and only affects segment
results and ratios.
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.
Related amounts not set off in the statement of
31 December 2014 (Audited) Effects of netting on the statement of financial position 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
accordance with financial occurrence of a Financial netting offsetting of financial
Rm Gross amounts IAS 32 position(1) future event collateral arrangements disclosure(2) position
Derivative financial instruments (2 677) 2 788 111 (111) (10) 101
- Assets 15 540 33 15 573
- Liabilities (15 429) (43) (15 472)
Assets excluding derivative financial instruments 5 387 (2 874) 2 513 - - 2 513 610 508 613 021
- Loans and advances 5 387 (2 874) 2 513 2 513 610 508 613 021
Liabilities excluding derivative financial instruments (88 695) 29 516 (59 179) - - (59 179) (594 271) (653 450)
- Amounts owed to depositors (88 695) 29 516 (59 179) (59 179) (594 271) (653 450)
Related amounts not set off in the statement of
31 December 2013 (Audited) Effects of netting on the statement of financial position 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
accordance with financial occurrence of a Financial netting offsetting of financial
Rm Gross amounts IAS 32 position(1) future event collateral arrangements disclosure(2) position
Derivative financial instruments(3) (2 956) (2 956) 506 (2 450) (234) (3 190)
- Assets 13 004 386 13 390
- Liabilities (15 960) (620) (16 580)
Assets excluding derivative financial instruments(3) 2 885 (831) 2 054 - - 2 054 577 318 579 372
- Loans and advances 2 885 (831) 2 054 2 054 577 318 579 372
Liabilities excluding derivative financial instruments(3) (71 322) 16 187 (55 135) - - (55 135) (547 817) (602 952)
- Amounts owed to depositors (71 322) 16 187 (55 135) (55 135) (547 817) (602 952)
(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 where no offsetting has been applied. Excludes financial instruments that
are neither subject to setoff nor master netting agreements.
(2) Includes financial instruments that are neither subject to setoff nor master netting agreements.
(3) During 2014 the group enhanced its accounting processes and management information and expanded the disclosure relating to the offsetting of financial assets and liabilities in its consolidated financial statements. This expanded disclosure resulted in a restatement to
2013 comparative information.
Contingent liabilities and commitments
CONTINGENT LIABILITIES AND UNDRAWN FACILITIES
31 December 31 December
2014 2013
(Audited) (Audited)
Rm Rm
Guarantees on behalf of clients 23 778 35 806
Letters of credit and discounting transactions 3 262 3 205
Irrevocable unutilised facilities and other 104 429 95 255
131 469 134 266
The group, in the ordinary course of business, enters into transactions that expose the group to tax, legal and business risks. Provisions are made for known liabilities that are expected to
materialise. Possible obligations and known liabilities where no reliable estimate can be made or it is considered improbable that an outflow would result are reported as contingent
liabilities. This is in accordance with IAS 37: Provisions, Contingent Liabilities and Contingent Assets.
There are a number of legal or potential claims against Nedbank Group Ltd and its subsidiary companies, the outcome of which cannot at present be foreseen.
COMMITMENTS
Capital expenditure approved by directors
31 December 31 December
2014 2013
(Audited) (Audited)
Rm Rm
Contracted 1 294 247
Not yet contracted 1 286 889
2 580 1 136
Funds to meet capital expenditure commitments will be provided from group resources. In addition, capital expenditure is incurred in the normal course of business throughout the year.
Operating lease commitments
Companies in the group have entered into leases over fixed property, furniture and other equipment for varying periods. The group is a major lessor of properties, which are subject to
individual contracts that specify the group's option to renew leases, escalation clauses and purchase options, if applicable. Due to the large number of lease agreements entered into by the
group, this information has not been provided in the annual financial statements, but is available from the group on request. The following are the minimum lease payments under non-
cancellable leases:
31 December 2014 (Audited) 2015 2016-2019 Beyond 2019
Rm Rm Rm
Land and buildings(1) 726 2 033 2 598
Furniture and equipment 286 173
1 012 2 206 2 598
31 December 2013 (Audited) 2014 2015-2018 Beyond 2018
Rm Rm Rm
Land and buildings(1) 756 2 002 2 682
Furniture and equipment 246 410 2
1 002 2 412 2 684
(1) The group may from time to time enter into subleases of properties where it is the lessee. These subleases are considered to be immaterial in the context of the group's overall leasing arrangements.
Commitments under derivative instruments
The group enters into option contracts, financial futures contracts, forward rate and interest rate swap agreements and other financial agreements in the normal course of business.
Registered office
Nedbank Group Limited, Nedbank 135 Rivonia Campus, 135 Rivonia Road,
Sandown, Sandton, 2196.
PO Box 1144, Johannesburg, 2000.
Transfer secretaries in SA
Computershare Investor Services (Pty) Ltd, 70 Marshall Street,
Johannesburg, 2001, SA.
PO Box 61051, Marshalltown, 2107, SA.
Transfer secretaries in Namibia
Transfer Secretaries (Pty) Ltd, Robert Mugabe Avenue No 4,
Windhoek, Namibia.
PO Box 2401, Windhoek, Namibia.
Directors
Dr RJ Khoza (Chairman), MWT Brown* (Chief Executive), DKT Adomakoh
(Ghanaian), TA Boardman, BA Dames, GW Dempster*, MA Enus-Brey,
ID Gladman (British), PB Hanratty (Irish), PM Makwana, Dr MA Matooane, NP
Mnxasana, RK Morathi* (Chief Financial Officer), JK Netshitenzhe,
MC Nkuhlu* (Chief Operating Officer), 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) Ltd
Nedbank Capital
Sponsor in Namibia: Old Mutual Investment Services (Namibia) (Pty)
Ltd
This announcement is available on the group's website at
nedbankgroup.co.za, together with the following additional information:
- Detailed financial information in HTML and PDF formats.
- Financial results presentation to analysts.
- Link to a webcast of the presentation to analysts.
For further information please contact Nedbank Group Investor Relations at
nedbankgroupir@nedbank.co.za.
Enquiries
External communications
Patrick Bowes UK +44 20 7002 7440
Investor relations
Dominic Lagan UK +44 20 7002 7190
Sizwe Ndlovu SA +27 11 217 1163
Media
William Baldwin-Charles +44 20 7002 7133
+44 7834 524833
Notes to Editors
Old Mutual provides investment, savings, insurance and banking services to more than 16 million customers in
Africa, the Americas, Asia and Europe. Originating in South Africa in 1845, Old Mutual has been listed on the
London and Johannesburg Stock Exchanges, among others, since 1999.
In the year ended 31 December 2013, the Group reported adjusted operating profit before tax of £1.6 billion (on
an IFRS basis) and had £294 billion of funds under management from core operations.
For further information on Old Mutual plc, please visit the corporate website at www.oldmutual.com
In the year ended 31 December 2013, the Group reported adjusted operating profit before tax of £1.6
billion (on an IFRS basis) and had £294 billion of funds under management from core operations.
For further information on Old Mutual plc, please visit the corporate website at www.oldmutual.com
Lead Sponsor to Old Mutual:
Merrill Lynch South Africa (Pty) Limited
Joint Sponsor to Old Mutual:
Nedbank Capital
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