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Quarterly Report on Pillar III Capital Adequacy and Liquidity Coverage Ratio at 31 March 2015
NEDBANK GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1966/010630/06
JSE share code: NED
NSX share code: NBK
ISIN: ZAE000004875
('Nedbank Group' or 'the group')
NEDBANK LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1951/000009/06
JSE share code: NBKP
ISIN: ZAE000043667
("Nedbank Limited" or "the bank")
QUARTERLY REPORT ON PILLAR III CAPITAL ADEQUACY AND LIQUIDITY
COVERAGE RATIO AT 31 MARCH 2015
The quarterly report on the group’s Pillar III Capital adequacy is in terms of
Regulation 43(1)(e)(ii) of the Banks Act 94 of 1990 (as amended) (“the Regulation”).
Certain of the information required to be disclosed is included in Nedbank Group's
trading update for the three month period to 31 March 2015.
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 of 12,4%
(2014: 12,5%) and 14,5% (2014: 14,6%), respectively reflect the effects of Basel III
regulatory requirements in respect of the grandfathering of old style instruments and
the redemption of Nedbank Limited’s hybrid debt instrument, as well as the deduction
of surplus capital attributable to minority interests.
Nedbank Limited’s common equity tier 1 ratio increased to 11,1% (2014: 11,0%) as a
result of organic capital generation. The bank’s Tier 1 ratio decreased to 12,0%
(2014: 12,1%) and Total CAR to 14,6% (2014: 14,7%) following the effects of Basel
III regulatory requirements as mentioned above.
The following table sets out the available capital as at 31 March 2015:
Nedbank Group Nedbank Limited
Including unappropriated profits Rm % Rm %
Tier 1 Capital 56 135 12,4% 45 457 12,0%
Common Equity Tier 1 Capital 52 813 11,7% 41 896 11,1%
Share capital and premium 17 900 18 571
Reserves 50 764 32 150
Minority interest:
Ordinary shareholders 257 0
Goodwill (5 140) (1 410)
Excess of expected loss over
eligible provisions (1 736) (1 763)
Defined benefit pension fund
assets (2 182) (2 182)
Capitalised software and
development costs (2 844) (2 874)
Investments in the common stock
of financial entities (amount
above 10% threshold) (3 785) 0
Other regulatory differences and
non- qualifying reserves ( 421) ( 596)
Additional Tier 1 Capital 3 322 0,7% 3 561 0,9%
Preference share capital and
premium 3 561 3 561
Hybrid debt capital 0 0
Grandfathering and other ( 239) 0
regulatory adjustments
Tier 2 Capital 9 396 2,1% 9 813 2,6%
Long-term liabilities 9 794 9 794
General allowance for credit
impairment 122 19
Grandfathering and other
adjustments ( 520) 0
Total Capital 65 531 14,5% 55 270 14,6%
Excluding unappropriated profits
Tier 1 Capital 52 816 11,7% 43 095 11,4%
Common Equity Tier 1 Capital 49 495 11,0% 39 534 10,4%
Total Capital 62 212 13,8% 52 908 14,0%
Nedbank Group Nedbank Limited
Minimum required capital and
reserve funds per risk type Pillar 1 Pillar 2a Total Pillar 1 Pillar 2a Total
Minimum ratios 8,0% 2,0% 10,0% 8,0% 2,0% 10,0%
Credit Risk 27 766 6 941 34 707 24 247 6 062 30 309
Equity Risk 1 018 255 1 273 764 191 955
Market Risk 555 139 694 404 101 505
Operational risk 4 415 1 104 5 519 3 773 943 4 716
Other 2 376 594 2 970 1 141 285 1 426
Total Minimum required
capital and reserve funds 36 130 9 033 45 163 30 329 7 582 37 911
Notes:
1. Minimum required capital and reserve funds have been reported at 10,0%, in
terms of Directive 05/2011 issued in terms of section 6(4) of the Banks Act, 1990.
2. Regulation requires details of any risk exposure or other item that is subject to
rapid or material change. These are detailed in the trading update released on 11
May 2015.
LIQUIDITY COVERAGE RATIO (LCR)
In accordance with the provisions of section 6(6) of the Banks Act, 1990 (Act No. 94
of 1990), banks are directed, to comply with the relevant LCR disclosure
requirements, as set out in Directive 6/2014 and Directive 11/2014.
The following table sets out the LCR for the group and bank:
Nedbank Group(1) Nedbank Limited
R’m R’m
High Quality Liquid Assets2 103 827 101 178
Net Cashflows2 137 252
143 182
Liquidity Coverage Ratio %(2) 72,5% 73,7%
Minimum requirement 60% 60%
1. Only banking and/ or deposit?taking entities are included and the group data represents an aggregation of the relevant
individual net cash outflows and the individual HQLA portfolios, where surplus HQLA holdings in excess of the minimum
requirement of 60% have been excluded from the aggregated HQLA number in the case of all non?SA banking entities.
2. The above figures reflect the simple average of the month?end values at 31 January 2015, 28 February 2015 and 31
March 2015, based on the regulatory submissions to SARB.
The LCR is comprised of the value of the stock of High Quality Liquid Assets (HQLA)
and total net cash outflows. The aim of the LCR is to ensure that an adequate stock
of unencumbered High Quality Liquid Assets is held by banks to cover total net cash
outflows over a 30-day period under a prescribed stress scenario. The LCR was
phased in at 60% on 1 January 2015 and will increase by 10% each year to 100% on
1 January 2019.
HIGH QUALITY LIQUID ASSETS
Assets that can readily be converted into cash at little or no loss of value are
considered to be HQLA. There are two categories of assets that can be included in
the stock of HQLA. Level 1 assets, which can be included in the stock of HQLA
without limit at no haircut, comprising of coins and banknotes, cash reserves,
Treasury Bills, Government bonds and Debentures. Level 2 assets, which may in
aggregate account for no more than 40% of the total stock of HQLA, may comprise
certain government securities, public sector and corporate bonds. Given the limited
supply of level 2 assets in South Africa, the South African Reserve Bank has
undertaken to provide banks with Committed Liquidity Facilities of up to 40% of the
HQLA requirement.
NET CASH OUTFLOWS
Net cash outflows are defined as the total expected cash outflows minus total
expected cash inflows during a 30 day stress period.
NEDBANK’S LCR PROGRAMME
Based on internal risk modelling, Nedbank targets an LCR operational level above
the minimum regulatory requirement to absorb normal seasonal volatility inherent in
the domestic financial system and consequently in the LCR.
Nedbank met the minimum regulatory LCR requirement of 60% for 2015, and
implemented an appropriately conservative buffer. Additional HQLAs will be procured
to support balance sheet growth and the LCR minimum requirement of 70% in 2016,
while continuing to maintain appropriately sized surplus liquid-asset buffers to absorb
seasonal volatility in the LCR.
Stress testing and scenario analysis is conducted at both a bank and industry level
with the aim of appropriately sizing the liquidity buffer portfolio in the most optimal
manner for seasonal, cyclical and/or stress events. The stress testing and scenario
analysis focuses on estimating if-and-when the LCR liquidity buffer could be
significantly consumed beyond tolerable levels in order to pre-emptively facilitate the
formulation of mitigating actions designed to ensure that the size of the liquidity buffer
always remains appropriate for forecast future liquidity requirements.
Sandton
11 May 2015
Sponsors to Nedbank Group in South Africa:
Merrill Lynch South Africa (Pty) Limited
Nedbank Capital
Sponsor to Nedbank Group in Namibia:
Old Mutual Investment Services (Namibia) (Pty) Ltd
Sponsors to Nedbank Limited in South Africa:
Nedbank Capital
Investec Bank Limited
Date: 11/05/2015 11:49:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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