Wrap Text
Nedbank Group – Condensed Consolidated Interim Financial Results 2015
OLD MUTUAL PLC
ISIN CODE: GB00B77J0862
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Old Mutual plc
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4 August 2015
NEDBANK GROUP – CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS 2015
Nedbank Group Limited (“Nedbank Group”), the majority-owned South African banking subsidiary of Old Mutual
plc, released its interim results for the six months ended 30 June 2015 today, 4 August 2015.
The following is the commentary from Nedbank Group's announcement. The full announcement including
financial information is available from the Nedbank Group website
http://www.nedbankgroup.co.za/financialInterimResults.asp.
“NEDBANK GROUP LIMITED
Condensed consolidated interim financial results for the six months ended 30 June 2015
- Headline earnings increased 15,7% to R 5 323m
- Diluted headline earnings per share up 14,1% to 1 101 cents
- Growth in net asset value per share of 6,1%
- NIR-to-expenses ratio improved to 83,1%
- Return on equity (excluding goodwill) increased to 17,3%
- Common-equity tier 1 ratio at 11,4%
- Interim dividend per share up 16,7% to 537 cents
'Nedbank Group delivered a strong set of results for the first half of 2015, achieving an increase of 15,7% in
headline earnings and a return on equity (excluding goodwill) of 17,3%.
Headline earnings growth was supported by strong non-interest revenue generation and disciplined expense
management resulting in a higher NIR-to-expenses ratio of 83,1%. The credit loss ratio continued to improve
and, following our R6bn investment in October 2014 to acquire approximately 20% of Ecobank Transnational
Incorporated, earnings from our activities in the rest of Africa grew strongly.
The strategic choices we have made continue to support our ability to grow in an increasingly demanding macro
and regulatory environment. We have simplified our businesses and are generating synergies from integrating
our Retail and Business Banking clusters and from combining our wholesale businesses to form Nedbank
Corporate and Investment Banking. Our transactional banking franchise continues to strengthen with growth of
8% in main banked retail clients.
Our expectation of organic growth in diluted headline earnings per share for the year ending 31 December 2015
to be above nominal gross domestic product growth remains unchanged.'
Mike Brown
Chief Executive
Banking and economic environment
Global economic headwinds have increased as the Greek debt crisis intensified and heightened concerns
around the sustainability of growth in China led to weakness in commodity prices and volatility in the Chinese
stock market. While advanced economies recorded a gradual recovery, growth in emerging economies
remained below expectations. The International Monetary Fund downgraded its global gross domestic product
(GDP) growth forecast to 3,3% in 2015 from the 3,5% projected earlier this year.
In SA, growth in GDP expanded by only 1,3% in the first quarter of 2015, supported by marginally stronger
growth in household consumption expenditure and growth in gross fixed-capital formation.
Underlying credit demand was moderate, with retail credit demand remaining weak as household debt to
disposable income increased to 78,4%. In the wholesale sector conditions for production remained challenging.
Although export growth was supported by the weaker rand and lower crude oil price, these have been offset by
a combination of power shortages, higher input costs, an uncertain regulatory environment, lower international
commodity prices and weak demand in key export markets, which together have had a negative impact on
business confidence. Growth in the wholesale sector has largely been driven by government infrastructure
projects.
Pleasingly, international credit rating agencies Fitch and Standard & Poor's reaffirmed SA's sovereign risk
ratings at an investment grade of BBB with a negative outlook and BBB- with a stable outlook respectively.
While electricity constraints remain the greatest threat to domestic economic prospects, the credit rating
agencies acknowledge the progress made in the tightening of fiscal policy and reduction of the budget deficit, as
well as maintaining inflation within the target range of 3% to 6%.
Review of results
Headline earnings for the six months ended 30 June 2015 ('the period') grew 15,7% to R5 323m (June 2014: R4
599m), underpinned by strong non-interest revenue (NIR) growth, disciplined expenses growth, ongoing
improvement in impairments and faster growth from our activities in the rest of Africa, including associate
income from our shareholding in Ecobank Transnational Incorporated (ETI).
Diluted headline earnings per share (HEPS) increased 14,1% to 1 101 cents (June 2014: 965 cents) and
headline earnings per share grew by 13,7% to 1 128 cents (June 2014: 992 cents).
The increases in the return on average ordinary shareholders' equity (ROE), excluding goodwill to 17,3% (June
2014: 16,5%) and of the ROE to 16,0% (June 2014: 15,1%), were driven by a higher return on assets (ROA) of
1,28% (June 2014: 1,22%). Economic profit (EP) increased by 59,4% to R1 328m (June 2014: R833m) against
a cost of equity of 13,0% (June 2014: 13,5%).
The group remained well capitalised with our Basel III common-equity tier 1 (CET1) ratio at 11,4% (December
2014: 11,6%). The liquidity coverage ratio (LCR) at 76,3% in the second quarter of 2015 (Dec 2014: 66,4%) is
well above the 60% requirement in 2015 and is reflective of strong funding and liquidity levels. The group's
portfolio of high-quality liquid assets and other sources of quick liquidity amounted to R148,4bn (December
2014: R126,0bn).
Delivering sustainably to all our stakeholders
Nedbank Group is committed to operating on a sustainable basis and creating long-term value for all our
stakeholders as embodied in our vision to be Africa's most admired bank by our staff, clients, shareholders,
regulators and communities:
For staff – bedding down leadership and structural changes and embedding the core values of accountability,
integrity, respect, being people centred and pushing beyond boundaries; improving staff transformation; and
investing R230m in training, with more than 2 000 staff participating in learning academy programmes, more
than 400 unemployed youth participating in various specialised learnerships and 111 external bursars across 19
universities being supported.
For clients – investing in client-centred innovation such as the Nedbank Instant Bond Indicator to assist clients
with the home loan application process and create internal process efficiencies. 'Easy to do credit' was
implemented in Business Banking, improving turnaround times and removing paper from the credit approval
process. To improve client access through our distribution channels, we have rolled out 200 Intelligent
Depositors, 8 195 point-of-sale devices and 179 net new ATMs since June 2014, as well as a further
145 branches in the 'branch of the future' format. Digitally enabled clients increased 31% supporting 25%
growth in the value of AppSuite™ transactions to R35bn. Group client numbers increased 5,8% to 7,3m since
June 2014 and main banked clients were up 8,2%. We advanced R88,5bn (June 2014: R86,1bn) of new loans
to clients, and assets under management grew by 11,4% to R233,5bn (June 2014: R209,5bn). For the sixth
consecutive year Nedgroup Investments was placed third overall in the Domestic Management Company
category at the Raging Bull Awards and ranked as the top unit trust company in SA in the March 2015
Plexcrown quarterly ratings.
For shareholders – growing net asset value per share by 6,1% to 14 428 cents (June 2014: 13 596 cents),
improving the ROE to 17,3% (June 2014: 16,5%), delivering EP of R1 328m (up 59,4%) and increasing the
interim dividend by 16,7%, ahead of the 13,7% growth in headline earnings per share (HEPS). We remain
focused on our vision to be Africa's most admired bank by judiciously expanding into the rest of Africa, where
economic growth is faster than in SA. In West and Central Africa our R6bn investment in ETI provides our
shareholders with access to higher earnings growth potential in these markets.
For regulators – achieving full compliance with Basel III phase-in requirements, including maintaining strong
capital levels with a CET1 ratio of 11,4%, an average long-term funding ratio of 27,6% and a second-quarter
LCR ratio of 76,3% (above the 1 January 2015 minimum SARB requirement of 60,0%); maintaining strong,
transparent relationships with all regulators; contributing to industry working groups on new regulation; and
continuing to support responsible banking practices. We continue to work with Old Mutual plc and our regulators
in SA on the implications of the proposed Twin Peaks regulations which are planned to be implemented in 2016.
For communities – advancing R26,8bn in new loans to retail clients, expanding our footprint and making
banking more accessible to all. Since 2010 we have contributed R560m to socioeconomic development,
including R52m in the first half of 2015. Following the maturity of our Broad Based Black Economic
Empowerment Schemes in February 2015, and in conjunction with our black business partners, Nedbank and
Old Mutual Emerging Markets have each committed R100m over 3 years to invest in initiatives aligned to the
National Development Plan. We have maintained our level 2 broad-based black economic empowerment
contributor status for the sixth consecutive year and once again ranked first among our peer group. Through our
Fair Share 2030 initiative we have developed solutions for the healthcare, agriculture and manufacturing sectors
that contribute to building a prosperous country.
Cluster financial performance
During the period under review we completed the integration of the support areas in Nedbank Retail and
Business Banking (RBB) and our wholesale clusters, Nedbank Corporate and Nedbank Capital, into Nedbank
Corporate and Investment Banking (CIB). In total and before central profits and losses the business clusters
reported headline earnings growth of 19,9% to R5 480m (June 2014: R4 571m) and an ROE of 19,7% (June
2014: 18,7%).
Headline
ROE
% change earnings
(%)
(Rm)
June June June June
2015 2014 2015 2014
CIB 12,3 2 485 2 212 22,9 26,3
Capital 17,9 1 242 1 053 32,3 31,6
Corporate 7,2 1 243 1 159 17,8 22,8
RBB 16,4 2 132 1 831 15,9 13,9
Business Banking 5,3 539 512 19,9 19,5
Retail 20,8 1 593 1 319 14,9 12,5
Wealth 11,9 519 464 38,9 33,9
Rest of Africa > 100,0 344 64 15,3 4,4
Business clusters 19,9 5 480 4 571 19,7 18,7
Centre > (100,0) (157) 28
Total 15,7 5 323 4 599 16,0 15,1
Nedbank CIB performed well, with strong growth in our Markets business and Commercial Property Finance,
and enhanced efficiencies as a result of integration synergies. The ROE was lower than in the prior period as a
result of higher economic capital allocations. Earnings growth was supported by CIB's strong franchise,
reflected in preprovisioning operating profit increasing 26,3% to R3 837m (June 2014: R3 037m). This was
underpinned by strong net interest income (NII) growth, enabled by good advances growth from commercial
property and investment banking, while NIR growth was driven by good performance in trading income and
property private-equity investments.
Nedbank RBB produced strong headline earnings growth and an improved ROE. This reflects a higher earnings
contribution from the Retail business, with its ROE in excess of the group's cost of equity and that of the prior
period. Overall, growth in earnings was underpinned by an increase in NIR despite selected price reductions
and interchange headwinds, lower impairment charges and well-controlled expense growth.
Nedbank Wealth continued to generate good earnings growth at an attractive ROE. These results were
attributed to continued growth momentum in Asset Management and Wealth Management, offset by a marginal
decline in Insurance earnings as a result of our selective origination strategies for personal loans.
The strong growth in earnings in the Rest of Africa Cluster was driven by associate income generated from our
approximately 20% investment in ETI, less funding costs, as well as a sound performance from our subsidiaries
in the South African Development Community (SADC). This was partially offset by ongoing central investment
costs.
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 increased 3,7% to R11 675m (June 2014: R11 263m) as the 9,6% growth in average interest-earning
banking assets was partially offset by the narrowing of the net interest margin (NIM) to 3,36% (June 2014:
3,55%). In December 2014 NIM was 3,52%.
Margin pressure resulted as the 7 basis points (bps) benefit from endowment income and improved asset
pricing was offset by a negative impact of:
- 11 bps due to changes in the advances mix as lower-margin wholesale advances grew faster than higher-
margin retail advances;
- 6 bps from holding higher levels of low-yielding, high-quality liquid assets in line with increasing regulatory
requirements; and
- 7 bps related to the cost of funding our investment in ETI.
Impairments charge on loans and advances
Impairments remained flat at R2 307m (June 2014: R2 333m), while the credit loss ratio (CLR) improved to
0,77% (June 2014: 0,83%) as a result of a lower specific impairments charge of 0,73% (June 2014: specific:
0,78%) and the decrease in the portfolio impairments charge to 0,04% (June 2014: portfolio: 0,05%)
CLR (%) Jun Jun Dec
2015 2014 2014
Specific impairments 0,73 0,78 0,72
Portfolio impairments 0,04 0,05 0,07
Total CLR 0,77 0,83 0,79
The improvement of the CLR was largely attributable to RBB's CLR remaining below target range,
demonstrating the outcome of selective asset origination and strong collections management. Post-write-off
recoveries increased to R520m (June 2014: R422m), of which R196m (June 2014: R153m) was attributable to
personal loans. CIB experienced an increase in its CLR as we exited a single-client exposure as well as
increased portfolio impairments as a result of ratings migration following market conditions worsening
particularly in the resources portfolio.
CLR (%) % Jun Jun Dec Through-
2014 the-cycle
banking 2015 2014
target
advances
ranges
CIB 47,2 0,38 0,15 0,19
Capital 13,7 0,41 (0,04) 0,14 0,10–0,55
Corporate 33,5 0,36 0,22 0,21 0,20–0,35
RBB 46,2 1,22 1,55 1,39
Business Banking 11,0 0,49 0,44 0,42 0,55–0,75
Retail 35,2 1,44 1,90 1,70 1,90–2,60
Wealth 4,2 0,18 0,42 0,17 0,20–0,40
Rest of Africa 2,4 0,86 0,21 0,23
Group 0,77 0,83 0,79 0,80–1,20
Total defaulted advances declined to R16 695m (June 2014: R17 409m) as the residential-mortgage and
personal-loans books continued to improve.
The coverage ratio for total impairments was maintained at 65,9% (June 2014: 65,9%), declining in specific
impairments to 39,6% (June 2014: 42,7%), while portfolio coverage on the performing book was maintained at
0,7% (June 2014: 0,7%).
Non-interest revenue
NIR increased 10,2% to R10 450m (June 2014: R9 480m). Growth was primarily driven by:
- Commission and fee income growth of 7,6% to R7 498m (June 2014: R6 970m) led inter alia by net client
gains, higher transactional volumes and inflation-related annual fee increases in RBB.
- Insurance income declining 11,0% to R816m (June 2014: R917m) owing to lower personal-loan volumes
and reduced credit life pricing with improved client product benefits.
- Trading income growth of 30,3% to R1 685m (June 2013: R1 293m) following strong performance from our
markets business on the back of increased client flows.
- Private-equity income decreasing to R115m (June 2014: R145m) as a result of lower valuations while the
increase in sundry income was mostly comprised of property partner increasing to R125m (June 2014:
R79m) as a result of realised gains on sale of property stock.
Expenses
Expenses grew 7,4% to R12 578m (June 2014: R11 712m), reflecting disciplined cost management and traction
gained from our 'optimise and invest' strategy to deliver efficiencies through simplifying processes and
rationalising systems.
The main underlying drivers include:
- Staff-related costs increasing 6,1%, consisting of –
- 7,1% growth in remuneration and other staff costs;
- 12,6% increase in short-term incentives; and
- a 33,1% reduction in long-term incentives.
- Computer processing costs up 10,3% to R1 671m, including amortisation costs increasing 10,1% to R360m.
- Fees and insurance costs 18,7% higher at R1 242m due to increased volumes of revenue-generating
activities such as cash handling and card issuing and acquiring.
- Occupation and accommodation costs growing 11,3% to R1 016m as we continued to invest in the
reformatting of retail branches to the 'branch of the future' format.
Overall, growth in gross operating income (excluding impairments and including associate income) of 8,7%
exceeded that of expenses, resulting in a positive jaws of 1,3% (June 2014: negative jaws of 4,4%), while the
efficiency ratio improved to 55,8% (June 2014: 56,4%).
Associate income
Associate income increased to R436m (June 2014: R11m) and is mainly comprised of the equity accounting of
our share of approximately 20% of ETI's fourth-quarter attributable income, as reported in its 2014 full-year
results, and first-quarter attributable income, as reported in its 2015 first-quarter trading update, in line with our
policy of accounting for ETI earnings a quarter in arrear. The related pretax funding costs of R246m are
accounted for in NII.
Statement of financial position
Capital
Nedbank Group remains well capitalised and operated well within our Basel III capital adequacy targets. The
CET1 ratio of 11,4% is lower than the 11,6% reported at the 2014 year-end due mainly to an increase in risk-
weighted assets (RWA) and foreign currency translation reserve (FCTR) losses relating to our share of ETI's
own Other Comprehensive Income (OCI) FCTR losses.
The increase in RWA resulted from a higher credit RWA, partly offset by a modest decrease in equity risk. The
higher credit RWA primarily relates to:
- an industrywide South African Reserve Bank (SARB) requirement for a credit valuation adjustment (CVA)
capital charge for over-the-counter ZAR and local derivatives not cleared through a central counterparty;
and
- increased conservatism applied in rating corporate banking and commercial property finance client
exposures given the weak macro environment.
Basel III (%) June December June Internal target Regulatory
2014 range minimum*
2015 2014
CET1 ratio 11,4 11,6 12,1 10,5 – 12,5 6,5
Tier 1 ratio 12,1 12,5 13,1 11,5 – 13,0 8,0
Total capital 14,5 14,6 15,0 14,0 – 15,0 10,0
ratio
(Ratios calculated include unappropriated profits.)
* The Basel III regulatory requirements are being phased in between 2013 and 2019, and exclude the Pillar 2b
add-on.
Our tier 1 and total capital ratios reflect the effects of redeeming R1,8bn of hybrid debt in January 2015 and the
issue of R2,3bn of Basel III-compliant tier 2 subordinated debt, in line with the group's capital plan and Basel III
transitional requirements.
Funding and liquidity
Nedbank Group maintained a strong funding profile and liquidity position, underpinned by a significant quantum
of long-term funding, a large surplus liquid-asset buffer, a strong loan-to-deposit ratio that is consistently below
100%, and a low reliance on interbank and foreign-currency funding.
At June 2015 the group's quarterly average LCR of 76,3% (Dec 2014: 66,4%) exceeded the minimum regulatory
requirement of 60%. The group is well positioned to exceed the minimum requirement throughout the phase-in
period as the LCR requirement increases by 10% per annum to 100% by 1 January 2019.
Nedbank Group Limited Liquidity June December June
Coverage Ratio 2015 2014 2014
High quality liquid assets (Rm) 109 060 91 423 78 358
Net cash outflows (Rm) 143 029 137 725 152 255
Liquidity Coverage ratio (%) 76,3 66,4 51,5
Regulatory Minimum (%) 60,0 N/A N/A
Further detail on the LCR is available in the table section of the Securities Exchange News Service (SENS)
announcement.
Nedbank's portfolio of LCR-compliant, high-quality liquid assets increased to R109,1bn (Dec 2014: quarterly
average R91,4bn). Together with our portfolio of quick-liquidity sources, the total available quick liquidity
amounted to R148,4bn (Dec 2014: R126,0bn), representing 17,1% of total assets.
We also maintained a strong, well-diversified funding profile. Our three-month average long-term funding ratio of
27,6% for the second quarter of 2015 (Dec 2014: quarterly average of 25,4%) represents a slightly more
conservative funding profile than the last reported industry average. The strong funding profile was supported by
growth in the Nedbank Retail Savings Bonds of R1,6bn to R13,4bn and Nedbank having successfully issued
R10,5bn in senior unsecured debt in the first half of 2015.
Further detail on risk and capital management will be available in the 'Risk and Balance Sheet Management
review' section of the group's results booklet and the Risk and Balance Sheet Management Report to be
published on the website at nedbankgroup.co.za in September 2015.
Loans and advances
Loans and advances grew 11,8% (annualised) to R648,8bn (December 2014: R613,0bn), with banking and
trading assets increasing 11,4% and 31,0% respectively.
Loans and advances by cluster are as follows:
% change June December
2015 2014
Rm (annualised)
CIB 17,1 331 069 305 158
Capital 28,7 120 646 105 601
Banking activities 8,8 82 034 78 596
Trading activities 86,7 38 612 27 005
Corporate 11,0 210 423 199 557
RBB 4,6 275 079 268 882
Business Banking (4,7) 64 297 65 819
Retail 7,7 210 782 203 063
Wealth 14,9 26 652 24 819
Rest of Africa 25,4 15 849 14 073
Centre > 100 195 89
Group 11,8 648 844 613 021
Advances growth in CIB was mostly from higher term loan growth of 18,3% (annualised) and commercial-
mortgage growth (annualised) of 10,8%. Growth in trading advances was comprised mostly of surplus foreign-
currency placements and deposits placed under reverse repurchase agreements.
RBB's annualised advances growth of 4,6% was impacted by the 10,4% decrease in Personal Loans, although
offset by growth in new payouts, resulting in growth in Home Loans of 1,2% and Card of 8,6%. MFC's growth
slowed to 5,6% due to lower volumes in April and May 2015 as a result of the system changes relating to the
National Credit Amendment Act. The decrease in advances in Business Banking was mainly due to the
migration of Professional Banking's medical book to the Small Business Services Division in Retail. Excluding
this migration, Business Banking's and Retail's advances grew 10,4% and 2,8% respectively.
Deposits
Deposits grew 11,4% (annualised) to R690,5bn (Dec 2014: R653,5bn) resulting in a loan-to-deposit ratio of
94,0% (Dec 2014: 93,8%).
Total funding-related liabilities grew 13,6% (annualised) to R735,7bn (Dec 2014: R689,1bn) following R10,5bn
of long-term capital market funding issued in the first half of 2015.
The group's focus on growing household and commercial liabilities led to the introduction of a number of new,
innovative savings and deposit products during the period such as our tax-free savings offering and 32-day fixed
deposit. These initiatives, together with the increase in demand for longer-term deposit products, supported
strong growth of 50,2% in fixed deposits, 8,7% in savings accounts and 7,6% in call and term deposits.
Group strategic focus
We have made good progress with our five key strategic focus areas and this positions us well for continued
growth in a demanding macroeconomic environment with an escalating regulatory agenda:
- Client-centred innovation: We continue to introduce innovative products such as Market Edge™, Instant
Bond Indicator, standalone prepaids, Webtickets NedApp™ payment functionality, Nedbank Tax-free
Savings Account and the Nedbank 32Day Notice Account that does not incur any fees or commissions. Our
progress in innovation was acknowledged with Nedbank receiving the Best Mortgage and Home Loans
Product in Africa award for 2015 at The Asian Banker's 2nd Annual Middle East and Africa Awards
Ceremony. Altogether 197 outlets in the 'branch of the future' format have been converted to date to
improve client experiences and we plan to have converted 75% of all outlets by 2017.
- Growing our transactional banking franchise: The investments in our franchise over the past few years
and the strategic action taken in 2014 to keep fees at 2013 levels and selected reductions in Business
Banking and Small Business Services have proved to be beneficial as main banked client numbers grew
8,2% to 2,53m. In our wholesale business we recently won the eThekwini Metropolitan Municipality
transactional account. This acquisition joins the Western Cape provincial government and various municipal
accounts that have been acquired in the public sector since 2007, indicative of the highly innovative
transactional banking solutions in CIB. Nedbank's relatively lower share of primary clients in both retail and
wholesale continues to be an attractive opportunity for future growth.
- Optimise and invest: A focus on driving efficiencies is particularly relevant given the environment of slower
GDP and hence income growth. Our managed evolution approach in technology aims to enhance systems
over time, deliver business benefits and manage costs within a predetermined cashflow budget. Our
strategy to 'rationalise, standardise and simplify' our information technology environment from 250 to 60
systems has resulted in 81 systems being decommissioned since 2010 and a further 13 are planned for the
remainder of 2015. Our expense optimisation programme aims to unlock R900m of cost savings in 2015
through initiatives such as the rationalisation of RBB backoffice operations, the CIB integration, cost-
optimisation and efficiency initiatives. Within the greater Old Mutual group in SA (Nedbank, OMSA, and
Mutual & Federal) we are on track collectively to unlock cost and revenue synergies of R1bn before tax in
2017. We currently expect that just less than 30% of this will accrue to Nedbank.
- Strategic portfolio tilt: We continue to benefit from the early actions taken in reducing the backbook of our
home loan and personal-loan portfolios. Derisking these portfolios has positioned Nedbank well for market-
related growth going forward, while retaining our selective origination credit criteria. We continue to
strengthen our focus on growing EP-generative aspects such as transactional deposits, transactional
banking and the rest of Africa. The actions taken over the past four years have strengthened our balance
sheet, impairments have reduced to the lower end of our target range, and we have delivered dividend
growth ahead of HEPS growth.
- Pan-African banking network: In Central and West Africa we are following a partnership approach through
our strategic alliance with ETI. In 2014 we invested approximately R6bn to obtain approximately 20% of ETI,
thereby enabling our clients to grow with us and our partners on the continent and our shareholders to
participate in the higher growth opportunity in the rest of Africa. More than 70 of our wholesale clients now
conduct their transactional banking with Ecobank and we have concluded two joint deals in 2015 and are
working closely together on building a strong deal pipeline. In the SADC and East Africa we continued to
invest in our existing subsidiaries, by implementing the Flexcube core banking system in Namibia, investing
in skills and distribution, while bedding down the acquisition of approximately 37% of Banco Único in
Mozambique, with a pathway to control in 2016. We continue to explore acquisition opportunities in the
SADC and East Africa as we plan to increase from 6 to 10 countries over time.
Economic outlook
The local economy is expected to improve slightly in 2015 off the low 2014 base, supported by household
spending and a modest improvement in global demand. Growth in GDP for SA is currently forecast at 2,0% for
2015, with risk remaining to the downside, given ongoing electricity constraints and commodity price weakness.
In view of inflationary factors due to the weaker rand and the anticipated normalisation of US interest rates, we
currently expect the Reserve Bank to increase interest rates by a further 25 bps in September 2015.
Growth in loans to households will remain constrained due to the weak job market and high debt levels,
increasing only moderately off last year's low base. Corporate credit demand will continue to be affected by the
soft economic environment and many uncertainties relating to power supply, labour relations, commodity prices
and economic policies, which negatively impact business confidence. Growth in the corporate sector will largely
be driven by downstream government infrastructure projects and global demand.
Prospects
Our guidance on financial performance for the full year is as follows:
- Advances to grow above mid-single digits.
- NIM to be slightly below the level reported in the 2015 interim results of 3,36%.
- CLR to be at the lower end of the through-the-cycle target range of 80 bps to 120 bps.
- NIR (excluding fair-value adjustments) to grow above mid-single digits.
- Expenses to increase above mid-single digits.
Our financial guidance for organic growth in diluted HEPS in 2015 to be greater than nominal GDP growth and
our medium-to-long-term targets remain unchanged. The outlook for these in 2015 is as follows:
June 2015 2015 full year Medium-to-long-term
Metric performance
outlook targets
ROE (excluding 5% above cost of ordinary
goodwill) 17,3% shareholders' equity
Below target
Growth in diluted ? consumer price index + ? consumer price index +
14,1%
HEPS GDP growth GDP growth + 5%
Between 0,8% and 1,2%
At lower end of target
CLR 0,77% of average banking
range
advances
NIR-to-expense ratio 83,1% Below target > 85%
Efficiency ratio 55,8% Above target 50,0% to 53,0%
(including associate
income)
CET1 capital
adequacy ratio 11,4% Within target range 10,5% to 12,5%
(Basel III)
Internal Capital Adequacy Assessment Process (ICAAP):
Economic capital
A debt rating (including 10% capital buffer)
Dividend cover 2,10 times 1,75 to 2,25 times 1,75 to 2,25 times
Shareholders are advised that these forecasts are based on organic earnings and our latest macroeconomic
outlook, and have not been reviewed or reported on by the group's auditors.
Board appointments
With effect from 1 May 2015 Vassi Naidoo was appointed Non-executive Director of Nedbank Group and
Nedbank, and Chairman from 11 May 2015. The following board directors retired at the annual general meeting
on 11 May 2015, either having served on the board as a non-executive for nine years or having retired from
executive service:
- Dr Reuel Khoza, Non-executive Chairman.
- Mustaq Enus-Brey, Non-executive Director.
- Gloria Serobe, Non-executive Director.
- Graham Dempster, Executive Director.
Group Executive appointments
Iolanda Ruggiero was appointed Managing Executive of Nedbank Wealth and joined our Group Executive
Committee with effect from 1 May 2015.
Accounting policies
Nedbank Group Limited is a company domiciled in SA. The condensed consolidated interim financial results of
the group at and for the six months ended 30 June 2015 comprise the company and its subsidiaries (the 'group')
and the group's interests in associate companies and joint arrangements.
The financial results contained in the SENS announcement have been prepared in accordance with
International Financial Reporting Standard (IAS) 34: Interim Financial Reporting, excluding paragraph 16A(j) as
permitted by the JSE listings requirements; the South African Institute of Chartered Accountants (SAICA)
Financial Reporting Guides as issued by the Accounting Practices Committee and the Financial
Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the
Companies Act of South Africa. A full analysis of the results for the six months, which includes full IAS 34
disclosure, is available from the company’s registered office upon request. The financial results contained in the
SENS announcement have been extracted from the condensed consolidated interim financial statements.
The accounting policies applied in the preparation of the condensed consolidated interim financial statements
are in terms of International Financial Reporting Standards and are consistent with the accounting policies
applied in the preparation of the previous annual financial statements.
The condensed consolidated interim 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
While these condensed consolidated interim financial results are neither audited nor reviewed, KPMG Inc and
Deloitte & Touche, Nedbank Group's independent auditors, have reviewed and expressed an unmodified review
conclusion on the condensed consolidated interim financial statements of Nedbank Group Limited, from which
the financial results contained in the SENS announcement have been extracted.
The auditor’s review report does not necessarily report on all the information contained in this announcement as
it excludes information pursuant to paragraph 16A(j) as permitted by the JSE listings requirements and includes
additional commentary. Shareholders are therefore advised that in order to obtain a full understanding of the
nature of the auditor’s engagement they should obtain a copy of the auditor’s report together with the
accompanying financial information from Nedbank Group’s registered office.
The directors take full responsibility for the preparation of the condensed consolidated interim financial results
and for correctly extracting the financial information from those underlying reviewed condensed consolidated
interim financial results for inclusion in this SENS announcement.
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 or reported on by the group's auditors.
Interim dividend declaration
Notice is hereby given that a gross interim dividend of 537 cents per ordinary share has been declared, payable
to shareholders for the six months ended 30 June 2015. 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 80,55 cents per
ordinary share, resulting in a net dividend of 456,45 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 494 411 956.
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) Friday, 4 September 2015
Shares commence trading (ex dividend) Monday, 7 September 2015
Record date (date shareholders recorded in books) Friday, 11 September 2015
Payment date Monday, 14 September 2015
Share certificates may not be dematerialised or rematerialised between Monday, 7 September 2015, and
Friday, 11 September 2015, both days inclusive.
On Monday, 14 September 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
Monday, 14 September 2015.
The above dates and times are subject to change. Any changes will be published on SENS and in the press.
For and on behalf of the board
Vassi Naidoo Michael WT Brown
Chairman Chief Executive
4 August 2015
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
V Naidoo (Chairman), MWT Brown* (Chief Executive), DKT Adomakoh (Ghanaian), TA Boardman, BA Dames,
ID Gladman (British), PB Hanratty (Irish), PM Makwana, Dr MA Matooane, NP Mnxasana, RK Morathi* (Chief
Financial Officer), JK Netshitenzhe, MN Nkuhlu* (Chief Operating Officer), JVF Roberts (British), 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 kindly 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 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
Lead Sponsor to Old Mutual:
Merrill Lynch South Africa (Pty) Limited
Joint Sponsor to Old Mutual:
Nedbank Capital
Date: 04/08/2015 08:02:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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