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OLD MUTUAL PLC - First Quarter 2015 Trading Update

Release Date: 11/05/2015 08:01
Code(s): OML     PDF:  
Wrap Text
First Quarter 2015 Trading Update

       OLD MUTUAL PLC
       ISIN: GB0007389926
       JSE SHARE CODE: OML
       NSX SHARE CODE: OLM
       ISSUER CODE: OLOML
       Old Mutual plc
       Ref 360/15
       11 May 2015


       NEDBANK GROUP – FIRST QUARTER 2015 TRADING UPDATE
       Nedbank Group Limited (“Nedbank Group”), the majority-owned South African banking subsidiary of
       Old Mutual plc, released its first quarter trading update today, 11 May 2015.

       The following is the full text of Nedbank Group's announcement:

       “NEDBANK GROUP – FIRST QUARTER 2015 TRADING UPDATE

       “Economic conditions in South Africa remained weak in the first quarter as the benefits of lower oil
       prices and benign interest rates were largely offset by electricity supply constraints, negatively
       impacting business confidence.

       In the context of this challenging environment, Nedbank Group has had a strong first quarter. We
       continue to make good progress in the delivery of our strategic focus areas. Non-interest revenue
       grew 18,1% with good growth in trading revenues and commissions and fees. The mix and quality of
       our advances book resulted in the credit loss ratio improving on the first quarter of last year.

       Our expectation of organic growth in diluted headline earnings per share in 2015 to be above nominal
       GDP growth remains unchanged”.


       Mike Brown

       Chief Executive

       OPERATIONAL PERFORMANCE


       Net interest income for the three months ended 31 March 2015 (“the period”) increased 4,4% to R5
       811m (Q1 2014: R5 566m) with average interest-earning banking asset growth, including increased
       prudential liquid asset requirements, of 9,2% (Q1 2014: growth of 10,4%).


       The net interest margin narrowed to 3,41% (Q1 2014: 3,57%), mainly as a result of the change in
       advances mix, holding higher levels of low-yielding high-quality liquid assets in line with regulatory
       requirements and the effects from funding our shareholding of approximately 20% in Ecobank
       Transnational Incorporated (ETI). The overall margin impact from funding our investment in ETI was
       negative 8 basis points (bps). The income from our share of the profits of ETI is disclosed outside of
       the net interest margin as part of associate income, accounted for one quarter in arrears at the
       average US dollar to SA rand exchange rate for the period.



       The credit loss ratio of 80bps (Q1 2014: 89bps) is at the low end of our through-the- cycle target
       range. This is reflective of the mix changes in our advances book, good collections and continued
       improvements in retail impairments, and consistent performance in wholesale impairments.


       Non-Interest Revenue (NIR) increased 18,1% to R5 318m (Q1 2014: R4 505m). The main underlying
       drivers of growth in NIR were:

       - Commission and fee income up 9,4%, led by ongoing client acquisitions, cross sell, inflation-
          related fee increases in retail and income from renewable energy transactions;
       - Trading income growth of 50,8% was primarily driven by strong performance from our global
          markets business on the back of increased client flows. The growth in trading income is expected
          to moderate over the full year;
       - Insurance income decreased 8,2% due to the run-rate effect in our credit life business of lower
          personal loans volumes since deliberately slowing down growth of this portfolio since 2013;
       - Private equity income increased to R65m (Q1 2014: loss of R4m) following realisations in our
          listed property investments; and
       - Fair value gains of R104m (Q1 2014: loss of R52m) comprised of movements in basis risk in the
          banking book and accounting mismatches in the hedged fixed rate portfolios.



       Total advances growth of 16,0% (annualised) to R637,2bn was mostly attributable to banking
       advances increasing 10,8% (annualised). Deposits grew 15,9% (annualised) to R679bn. Assets under
       management increased 27,4% (annualised) to R226,3bn.



       The group remains well capitalised with our common equity tier 1 ratio at 11,7% (December 2014:
       11,6%). Our Tier 1 and Total capital adequacy ratios reflect the effects of Basel III regulatory
       requirements in respect of the grandfathering of old-style tier 1 and tier 2 instruments and hybrid debt
       instruments. During the period the group redeemed R1,8bn of hybrid debt instruments and issued
       R225m of Basel III compliant tier 2 debt instruments.


       The capital ratios are as follows:

           Nedbank Group                 Q1 2015        December 2014      Internal target         Regulatory
                                                                                     range           minimum*


           Common-equity tier              11,7%            11,6%            10,5% – 12,5%               5,5%
           1 ratio

           Tier 1 ratio                    12,4%            12,5%            11,5% – 13,0%               7,0%

           Total capital ratio             14,5%            14,6%            14,0% – 15,0%              10,0%

       (Ratios include unappropriated profits.)

        * The Basel III regulatory minima are being phased in between 2013 and 2019, and exclude Pillar
          2B add-ons.


       EXECUTIVE MANAGEMENT CHANGES

       The group’s executive leadership team is key to the delivery of our strategic focus areas and during
       the period we progressed towards the full integration of our Corporate and Investment Bank and
       finalised the appointment of the cluster executive team under the leadership of Brian Kennedy.


       Following Dave Macready’s appointment as Chief Executive of Old Mutual South Africa, Iolanda
       Ruggiero was appointed as Managing Executive of Nedbank Wealth and as a member of our Group
       Executive Committee (Exco) with effect from 1 May 2015.


       We bid farewell to Graham Dempster and John Bestbier as Group Exco members as they reach their
       scheduled retirement dates on 31 May and 30 June 2015, respectively. We announced at the time of
       our annual results that Mfundo Nkuhlu had succeeded Graham Dempster as Chief Operating Officer
       and was appointed to the board as an executive director with effect from 1 January 2015, and that
       Priya Naidoo had joined the Group Exco and would succeed John Bestbier as Group Executive for
       Strategic Planning and Economics upon his retirement.


       BOARD CHANGES

       The following board directors are scheduled to retire with effect from 11 May 2015:

       -      Dr Reuel Khoza, Non-executive Chairman.
       -      Mustaq Enus-Brey as Non-executive Director.
       -      Gloria Serobe as Non-executive Director.
       -      Graham Dempster as Executive Director.


       We welcome Vassi Naidoo who was appointed Non-executive Director of Nedbank Group and
       Nedbank and Chairman designate with effect from 1 May 2015. The boards of these companies 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.


       PROSPECTS

       The group currently anticipates that the SA gross domestic product (GDP) will grow by 2,2% in 2015,
       with risk remaining on the downside. Interest rates are currently expected to increase by 25 basis
       points in the last quarter of the year.


       Our financial guidance for 2015, as communicated at the 2014 Annual Results presentation, for
       organic growth in diluted headline earnings per share to be greater than the growth in nominal GDP,
       remains unchanged.


       Shareholders are advised that these forecasts and the figures stated in this trading update have not
       been reviewed or reported on by the group’s auditors.


       FORWARD-LOOKING STATEMENT

       This announcement contains certain forward-looking statements with respect to the financial condition
       and results of operations of Nedbank Group and its group companies, which by their nature involve
       risk and uncertainty because they relate to events and depend on circumstances that may occur in
       the future. Factors that could cause actual results to differ materially from those in the forward-looking
       statements include, but are not limited to, global, national and regional economic conditions, levels of
       securities markets, interest rates, credit or other risks of lending and investment activities, together
       with competitive and regulatory factors.

       Sandton

       11 May 2015”


       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
       Lead Sponsor:
       Merrill Lunch South Africa (Pty) Limited
       
       Joint Sponsor:
       Nedbank Capital


       Notes to Editors

       Old Mutual provides investment, savings, insurance and banking services to more than 17 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 2014, the Group reported adjusted operating profit before tax of £1.6 billion (on
       an IFRS basis) and had £319 billion of funds under management from core operations.

       For further information on Old Mutual plc, please visit the corporate website at www.oldmutual.com



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