Wrap Text
Preliminary audited results for the year ended 31 December 2016
Nedbank Limited
Reg No 1951/000009/06
Incorporated in the Republic of South Africa
JSE share code: NBKP
ISIN: ZAE 000043667
Preliminary audited results
for the year ended 31 December 2016
OVERVIEW
Nedbank Limited ('Nedbank') is a wholly owned subsidiary of Nedbank Group Limited ('Nedbank Group'), which is listed on JSE
Limited. These summary consolidated financial results are published on SENS to provide information to holders of Nedbank's
listed non-redeemable non-cumulative preference shares.
Commentary relating to the Nedbank summary consolidated financial results is included in the Nedbank Group results, as
presented to shareholders on 28 February 2017. Further information is provided on the website at nedbankgroup.co.za.
BOARD AND GROUP EXECUTIVE CHANGES
Following his retirement from Old Mutual plc, Paul Hanratty stepped down as a non-executive director of Nedbank Group and
Nedbank ('companies') on 12 March 2016. With effect from 1 August 2016 Errol Kruger was appointed as an independent non-
executive director of the companies and Rob Leith, the Director of Managed Separation at Old Mutual plc, was appointed as a
non-executive director of the companies with effect from 13 October 2016.
As a result of increasing time constraints from their respective overseas and local business commitments, Tom Boardman and
David Adomakoh have notified the boards of their intention to resign as independent non-executive directors with effect from
the close of Nedbank Group's Annual General Meeting on Thursday, 18 May 2017.
Ciko Thomas was appointed Managing Executive of Nedbank Retail and Business Banking (RBB) with effect from 1 April 2016
following the early retirement of Philip Wessels. Ciko has been a part of the RBB leadership team and a member of the Group
Executive Committee for the past six years. Sandile Shabalala resigned as Managing Executive of Business Banking and as a
member of our Group Executive Committee with effect from 2 September 2016.
ACCOUNTING POLICIES*
Nedbank is a company domiciled in SA. The summary consolidated financial results of the group at and for the period ended
31 December 2016 comprise the company and its subsidiaries ('group') and the group's interests in associates and joint
arrangements.
The summary consolidated financial statements contained in the Securities Exchange News Service (SENS) announcement have
been extracted from the audited consolidated financial statements. The summary consolidated financial statements have been
prepared in accordance with the provisions of the JSE Listings Requirements for preliminary reports and the Companies Act
applicable to summary financial statements.
The JSE 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), the South African Institute of
Chartered Accountants Financial Reporting Guides as issued by the Accounting Practices Committee, and Financial
Pronouncements as issued by the Financial Reporting Standards Council and also, as a minimum, to contain the disclosure
required by International Accounting Standard 34: Interim Financial Reporting. The accounting policies applied in the preparation
of the consolidated financial statements, from which the summary consolidated financial statements were derived, are in terms
of the IFRS and are consistent with the accounting policies that were applied in the preparation of the previous consolidated
financial statements.
The summary consolidated financial results have been prepared under the supervision of Raisibe Morathi CA(SA), the Chief
Financial Officer. The directors take full responsibility for the preparation of the summary consolidated financial results and for
correctly extracting the financial information from those underlying audited consolidated financial statements for inclusion in the
2016 year-end results booklet and SENS announcement.
EVENTS AFTER THE REPORTING PERIOD*
There are no material events after the reporting period to report on.
AUDITED SUMMARY CONSOLIDATED FINANCIAL STATEMENTS - INDEPENDENT AUDITORS' OPINION
The summary consolidated financial statements comprise the summary consolidated statement of financial position at
31 December 2016, 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, which are indicated by the symbol *.
These summary consolidated financial statements for the year ended 31 December 2016 have been audited by KPMG Inc and
Deloitte & Touche, who expressed an unmodified opinion thereon. The auditors also expressed an unmodified opinion on the
consolidated financial statements from which these summary consolidated financial statements were derived.
A copy of the auditors' report on the summary consolidated financial statements and of the auditors' report on the consolidated
financial statements are available for inspection at the company's registered office, together with the consolidated financial
statements identified in the respective auditors' reports.
The auditors' report does not necessarily report on all of the information contained in the 2016 year-end results booklet and
SENS announcement. Shareholders are therefore advised that, 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 statements, from
Nedbank's registered office.
FORWARD-LOOKING STATEMENTS
This announcement contains certain forward-looking statements with respect to the financial condition and results of
operations of Nedbank 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; exchange 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.
NEDBANK NON-REDEEMABLE NON-CUMULATIVE PREFERENCE SHARES - DECLARATION OF DIVIDEND
NO 28
Notice is hereby given that gross preference dividend no 28 of 43,98905 cents per share has been declared for the period from
1 July 2016 to 31 December 2016, payable on Monday, 3 April 2017, to shareholders of the Nedbank non-redeemable non-
cumulative preference shares recognised in the accounting records of the company at the close of business on Friday,
31 March 2017. The dividend has been declared out of income reserves.
The dividend will be subject to a dividend withholding tax rate of 20% (applicable in SA), resulting in a net dividend of 35,19124
cents per share to those shareholders who are not exempt from paying dividend tax. In 2015 and 2016, the dividend withholding
tax rate was 15% and this increased to 20% on 22 February 2017. Nedbank's tax reference number is 9250/083/71/5 and the
number of preference shares in issue at the date of declaration is 358 277 491.
In accordance with the provisions of Strate, the electronic settlement and custody system used by JSE Limited, the relevant
dates for the payment of the dividend are as follows:
Last day to trade (cum dividend) Tuesday, 28 March 2017
Shares commence trading (ex dividend) Wednesday, 29 March 2017
Record date (date shareholders recorded in books) Friday, 31 March 2017
Payment date Monday, 3 April 2017
Share certificates may not be dematerialised or rematerialised between Wednesday, 29 March 2017, and Friday, 31 March 2017,
both days inclusive.
Where applicable, dividends in respect of certificated shares will be transferred electronically to shareholders' bank accounts on
the payment date. In the absence of specific mandates, dividend cheques will be posted to shareholders. Shareholders who have
dematerialised their share certificates will have their accounts at their participant or broker credited on Monday, 3 April 2017.
For and on behalf of the board
Vassi Naidoo Mike Brown
Chairman Chief Executive
28 February 2017
Registered office
Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, 2196;
PO Box 1144, Johannesburg, 2000.
Transfer secretaries
Computershare Investor Services (Pty) Limited, 15 Biermann Avenue, Rosebank, Johannesburg, 2196, SA.
PO Box 61051, Marshalltown, 2107.
Directors
V Naidoo (Chairman), MWT Brown* (Chief Executive), DKT Adomakoh (Ghanaian), TA Boardman, BA Dames, ID Gladman
(British), JB Hemphill, EM Kruger, RAG Leith, PM Makwana, Dr MA Matooane, NP Mnxasana, RK Morathi* (Chief Financial
Officer), JK Netshitenzhe, MC Nkuhlu* (Chief Operating Officer), S Subramoney, MI Wyman** (British).
* Executive ** Lead independent director
Company Secretary
TSB Jali
Sponsors
Investec Bank Limited, Nedbank CIB
Nedbank Limited Reg No 1951/000009/06
Incorporated in the Republic of South Africa
JSE share code: NBKP
ISIN: ZAE000043667
Audited summary consolidated financial statements
for the year ended 31 December 2016
Summary consolidated statement of comprehensive income
31 December 31 December
2016 2015
Change (Audited) (Audited)
for the year ended % Rm Rm
Interest and similar income 26,7 69 862 55 128
Interest expense and similar charges 38,6 45 344 32 724
Net interest income 9,4 24 518 22 404
Impairments charge on loans and advances (7,7) 4 254 4 608
Income from lending activities 13,9 20 264 17 796
Non-interest revenue 10,5 19 361 17 514
Operating income 12,2 39 625 35 310
Total operating expenses 7,8 25 283 23 459
Indirect taxation 21,3 810 668
Profit from operations before non-trading and capital items 21,0 13 532 11 183
Non-trading and capital items > 100 (289) (144)
Profit from operations 20,0 13 243 11 039
Share of losses of associate companies and joint arrangements > 100 (20) (1)
Profit from operations before direct taxation 19,8 13 223 11 038
Total direct taxation 16,2 3 286 2 828
Direct taxation 3 328 2 860
Taxation on non-trading and capital items (42) (32)
Profit for the year 21,0 9 937 8 210
Other comprehensive (losses)/income net of taxation < (100) (453) 578
Items that may subsequently be reclassified to profit or loss
Exchange differences on translating foreign operations (231) 190
Fair-value adjustments on available-for-sale assets (13) (9)
Items that may not subsequently be reclassified to profit or loss
Gains on property revaluations 24 118
Remeasurements on long-term employee benefit assets (233) 279
Total comprehensive income for the year 7,9 9 484 8 788
Profit attributable to:
- Ordinary and preference equity holders 21,2 9 896 8 163
- Non-controlling interest - ordinary shareholders (12,8) 41 47
Profit for the year 21,0 9 937 8 210
Total comprehensive income attributable to:
- Ordinary and preference equity holders 8,1 9 443 8 739
- Non-controlling interest - ordinary shareholders (16,3) 41 49
Total comprehensive income for the year 7,9 9 484 8 788
Headline earnings reconciliation
for the year ended
31 December 31 December
31 December 2016 31 December 2015
2016 (Audited) 2015 (Audited)
(Audited) Rm (Audited) Rm
Change Rm Net of Rm Net of
% Gross taxation Gross taxation
Profit attributable to ordinary and preference equity
holders 21,2 9 896 8 163
Non-trading and capital items > 100 289 247 144 112
IAS 16 - Loss on disposal of property and equipment 44 44 35 35
IAS 36 - Impairment of property and equipment 8 7
IAS 38 - Impairment of intangible assets 145 103 110 79
IAS 39 - Loss on sale of available-for-sale financial assets 94 94
IAS 39 - Profit on sale of available-for-sale financial
assets (9) (9)
IAS 40 - Loss on disposal of investment properties 6 6
Headline earnings 22,6 10 143 8 275
Summary consolidated statement of financial position
31 December 31 December
2016 2015
Change (Audited) (Audited)
at % Rm Rm
Assets
Cash and cash equivalents 11,5 20 241 18 151
Other short-term securities 13,5 68 218 60 078
Derivative financial instruments (41,7) 18 044 30 948
Government and other securities 18,6 50 687 42 733
Loans and advances 3,8 691 925 666 807
Other assets > 100 8 164 3 925
Current taxation assets (51,3) 440 904
Investment securities 15,8 1 908 1 648
Non-current assets held for sale > 100 287 2
Investments in private-equity associates, associate companies and joint
arrangements 83,9 2 575 1 400
Deferred taxation assets > 100 266 67
Property and equipment 1,0 8 197 8 114
Long-term employee benefit assets 3,2 5 042 4 885
Mandatory reserve deposits with central banks 12,0 18 139 16 190
Intangible assets 21,5 5 928 4 881
Total assets 4,6 900 061 860 733
Equity and liabilities
Ordinary share capital 28 28
Ordinary share premium 3,5 19 182 18 532
Reserves 13,5 42 698 37 610
Total equity attributable to equity holders of the parent 10,2 61 908 56 170
Preference share capital and premium 3 561 3 561
Additional tier 1 capital instruments 2 000
Non-controlling interest attributable to:
- Ordinary shareholders 13,5 253 223
Total equity 13,0 67 722 59 954
Derivative financial instruments (60,4) 13 469 33 996
Amounts owed to depositors 6,0 750 319 708 036
Provisions and other liabilities 28,3 12 717 9 911
Current taxation liabilities (39,1) 53 87
Deferred taxation liabilities (48,8) 391 763
Long-term employee benefit liabilities 10,6 3 328 3 009
Long-term debt instruments 15,8 52 062 44 977
Total liabilities 3,9 832 339 800 779
Total equity and liabilities 4,6 900 061 860 733
Summary consolidated statement of changes in equity
Non-
controlling
interest
Non- attributable
Total equity controlling to
attributable Preference interest additional
to equity share capital attributable tier 1
holders of and to ordinary capital
the parent premium shareholders instruments Total equity
Rm Rm Rm Rm Rm
Audited balance at 31 December 2014 52 236 3 561 183 55 980
Preference share dividend (371) (371)
Dividend to ordinary shareholders (5 200) (9) (5 209)
Issues of shares net of expenses 1 111 1 111
Total comprehensive income for the year 8 739 49 8 788
Share-based payment reserve movement (343) (343)
Other movements (2) (2)
Audited balance at 31 December 2015 56 170 3 561 223 - 59 954
Additional tier 1 capital instruments issued 2 000 2 000
Preference share dividend (377) (377)
Additional tier 1 capital instruments interest paid (78) (78)
Dividend to ordinary shareholders (4 250) (11) (4 261)
Issues of shares net of expenses 650 650
Total comprehensive income for the year 9 443 41 9 484
Share-based payment reserve movement 360 360
Regulatory risk reserve provision (10) (10)
Reviewed balance at 31 December 2016 61 908 3 561 253 2 000 67 722
Summary consolidated statement of cashflows
31 December 31 December
2016 2015
(Audited) (Audited)
for the year ended Rm Rm
Cash generated by operations 21 707 19 257
Change in funds for operating activities (14 185) (9 508)
Net cash from operating activities before taxation 7 522 9 749
Taxation paid (4 020) (3 771)
Cashflows from operating activities 3 502 5 978
Cashflows utilised by investing activities (5 265) (2 070)
Cashflows from financing activities 5 030 4 884
Effects of exchange rate changes on opening cash and cash equivalents
(excluding foreign borrowings) 772 (51)
Net increase in cash and cash equivalents 4 039 8 741
Cash and cash equivalents at the beginning of the year(1) 34 341 25 600
Cash and cash equivalents at the end of the year(1) 38 380 34 341
(1) Including mandatory reserve deposits with central banks.
Summary consolidated segmental reporting
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2016 2015 2016 2015 2016 2015 2016 2015
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm
for the year Total Total Operating Headline
ended assets liabilities income/(losses) earnings/(losses)
Nedbank
Corporate and
Investment
Banking 491 480 470 567 463 018 447 471 13 649 12 101 6 014 5 208
Nedbank Retail
and Business
Banking 304 842 292 560 278 588 265 636 25 810 23 715 4 960 4 460
Nedbank Wealth 62 042 61 322 58 655 58 588 4 362 4 320 1 192 1 134
Rest of Africa 36 189 32 941 28 247 26 142 1 713 1 358 (287) 691
Centre 71 469 68 336 55 803 49 138 (159) (650) (414) (662)
Total for
Nedbank Group 966 022 925 726 884 311 846 975 45 375 40 844 11 465 10 831
Fellow-
subsidiary
adjustments (65 961) (64 993) (51 972) (46 196) (5 750) (5 534) (1 322) (2 556)
Total 900 061 860 733 832 339 800 779 39 625 35 310 10 143 8 275
Contingent liabilities and commitments
CONTINGENT LIABILITIES AND UNDRAWN FACILITIES
31 December 31 December
2016 2015
(Audited) (Audited)
Rm Rm
Guarantees on behalf of clients 22 177 26 374
Letters of credit and discounting transactions 3 360 4 419
Irrevocable unutilised facilities and other 101 566 101 747
127 103 132 540
The group, in the ordinary course of business, enters into transactions that expose it 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 Ltd and its subsidiary companies, the outcome of which cannot
at present be foreseen.
COMMITMENTS
Capital expenditure approved by directors
31 December 31 December
2016 2015
(Audited) (Audited)
Rm Rm
Contracted 515 1 314
Not yet contracted 2 092 2 222
2 607 3 536
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.
Fair-value hierarchy
FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE
The fair value of a financial instrument is the price that would be received for the sale of an asset or paid for the transfer of a
liability in an orderly transaction between market participants at the measurement date. Underlying the definition of fair value is
an assumption that an entity is a going concern without any intention or need to liquidate, to curtail materially the scale of its
operations or to undertake a transaction on adverse terms. Fair value is not, therefore, the amount that an entity would receive
or pay in a forced transaction, involuntary liquidation or distressed sale.
The existence of published price quotations in an active market is the most reliable evidence of fair value and, where they exist,
they are used to measure the financial asset or financial liability. A market is considered to be active if transactions occur with
sufficient volumes and frequencies to provide pricing information on an ongoing basis. These quoted prices would generally be
classified as level 1 in terms of the fair-value hierarchy.
Where a quoted price does not represent fair value at the measurement date or where the market for a financial instrument is
not active, the group establishes fair value by using a valuation technique. These valuation techniques include, but are not limited
to, reference to the current fair value of another instrument that is substantially the same in nature, reference to the value of the
assets of underlying business, earnings multiples, discounted-cashflow analysis and various option pricing models. Valuation
techniques applied by the group would generally be classified as level 2 or level 3 in terms of the fair-value hierarchy. The
determination of whether an instrument is classified as level 2 or level 3 is dependent on the significance of observable inputs
versus unobservable inputs in relation to the fair value of the instrument. Inputs typically used in valuation techniques include
discount rates, appropriate swap rates, volatility, servicing costs, equity prices, commodity prices, counterparty credit risk, and
the group's own credit on financial liabilities.
The group has an established control framework for the measurement of fair value, which includes formalised review protocols
for the independent review and validation of fair values separate from the business unit entering into the transaction. The
valuation methodologies, techniques and inputs applied to the fair-value measurement of the financial instruments have been
applied in a manner consistent with that of the previous financial year.
FAIR-VALUE HIERARCHY
The financial instruments recognised at fair value have been categorised into the three input levels of the International Financial
Reporting Standards (IFRS) fair-value hierarchy as follows:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.
Level 2: Valuation techniques based on (directly or indirectly) market-observable inputs. Various factors influence the availability
of observable inputs. These factors may vary from product to product and change over time. Factors include the depth of
activity in the relevant market, the type of product, whether the product is new and not widely traded in the market, the
maturity of market modelling and the nature of the transaction (bespoke or generic).
Level 3: Valuation techniques based on significant inputs that are not observable. To the extent that a valuation is based on
inputs that are not market-observable the determination of the fair value can be more subjective, depending on the significance
of the unobservable inputs to the overall valuation. Unobservable inputs are determined on the basis of the best information
available and may include reference to similar instruments, similar maturities, appropriate proxies or other analytical techniques.
All fair values disclosed below are recurring in nature.
Total financial assets
recognised at amortised Total financial assets Total financial assets Total financial assets
Total financial assets cost classified as level 1 classified as level 2 classified as level 3
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Financial assets
Cash and cash equivalents 38 380 34 341 38 380 34 341
Other short-term securities 68 218 60 078 33 184 32 863 37 34 997 27 215
Derivative financial instruments 18 044 30 948 36 86 17 983 30 844 25 18
Government and other securities(1) 50 687 42 733 22 393 18 807 15 881 11 239 12 413 12 687
Loans and advances 691 925 666 807 602 139 571 603 89 709 95 171 77 33
Other assets 8 164 3 925 8 159 3 913 5 12
Investments in private-equity
associates, associate companies and
joint arrangements 2 350 1 154 2 350 1 154
Investment securities 1 908 1 648 19 432 798 526 1 091 690
879 676 841 634 704 255 661 527 15 978 11 769 155 900 166 443 3 543 1 895
Total financial liabilities
recognised at amortised Total financial liabilities Total financial liabilities Total financial liabilities
Total financial liabilities cost classified as level 1 classified as level 2 classified as level 3
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Financial liabilities
Derivative financial instruments 13 469 33 996 11 126 13 458 33 870
Amounts owed to depositors(1) 750 319 708 036 674 784 631 619 75 535 76 417
Provisions and other liabilities 11 739 8 980 9 127 6 020 2 235 2 744 377 216
Long-term debt instruments 52 062 44 977 51 761 44 576 156 301 245
827 589 795 989 735 672 682 215 2 246 3 026 89 671 110 748 - -
(1) Amounts owed to depositors of R93 079m were included in the prior year as held-for-trading liabilities, whereas these instruments were classified and measured as financial liabilities at amortised cost. Accordingly, the held-for-trading
and financial liabilities at amortised cost categories have been restated to reflect the correct classification.
LEVEL 3 RECONCILIATION
Gains/
(Losses)
Gains/ in other
Opening (Losses) comprehensive
balance at in profit for income for Closing
1 January the year the year Purchases Sales and Transfers in/ balance at
31 December 2016 (Audited) Rm Rm Rm and issues settlements (out) 31 December
Financial assets
Derivative financial instruments 18 7 25
Loans and advances 33 4 40 77
Investment securities 690 (28) 53 (34) 410 1 091
Investments in private-equity associates, associate companies and joint
arrangements 1 154 274 1 130 (208) 2 350
1 895 257 - 1 183 (242) 450 3 543
Gains/
(Losses)
Gains/ in other
Opening (Losses) comprehensive
balance at in profit for income for Closing
1 January the year the year Purchases Sales and Transfers in/ balance at
31 December 2015 (Audited) Rm Rm Rm and issues settlements (out) 31 December
Financial assets
Derivative financial instruments 18 18
Loans and advances 33 33
Investment securities 800 (36) 1 (75) 690
Investments in private-equity associates, associate companies and joint
arrangements 898 89 304 (137) 1 154
1 731 71 - 305 (212) - 1 895
EFFECT OF CHANGES IN SIGNIFICANT UNOBSERVABLE ASSUMPTIONS TO REASONABLE POSSIBLE ALTERNATIVES — LEVEL 3 INSTRUMENTS
The fair-value measurement of financial instruments is, in certain circumstances, measured using valuation techniques that include assumptions that are not market-observable. Where
these scenarios apply, the group performs stress testing on the fair value of the relevant instruments. In performing the stress testing, appropriate levels for the unobservable-input
parameters are chosen so that they are consistent with prevailing market evidence and in line with the group's approach to valuation control. The following information is intended to
illustrate the potential impact of the relative uncertainty in the fair value of financial instruments for which valuation is dependent on unobservable-input parameters and which are
classified as level 3 in the fair-value hierarchy. However, the disclosure is neither predictive nor indicative of future movements in fair value.
FINANCIAL ASSETS
Value per
statement Favourable Unfavourable
Variance in of financial change in fair change in
Significant fair value position value fair value
31 December 2016 (Audited) Valuation technique unobservable input % Rm Rm Rm
Derivative financial instruments Discounted cashflows Discount rates, EBITDA Between (12) 25 2 (3)
and 9
Loans and advances Discounted cashflows Credit spreads and Between (12 77 7 (9)
discount rates and 9
Investment securities Discounted cashflows, Valuation multiples, Between (12) 1 091 103 (129)
adjusted net asset value, correlations, volatilities and 9
earnings multiples, third- and credit spreads
party valuations, dividend
yields
Investments in private-equity associates, associate companies and Discounted cashflows, Valuation multiples Between (12) 2 350 221 (278)
joint arrangements earnings multiples and 9
Total financial assets classified as level 3 3 543 333 (419)
FINANCIAL ASSETS
Value per
statement Favourable Unfavourable
Variance in of financial change in fair change in
Significant fair value position value fair value
31 December 2015 (Audited) Valuation technique unobservable input % Rm Rm Rm
Derivative financial instruments Discounted-cashflow Discount rates, risk-free Between (13) 18 2 (2)
model, Black-Scholes model rates, volatilities, credit and 10
and multiple valuation spreads and valuation
techniques multiples
Loans and advances Discounted cashflows Credit spreads and Between (13) 33 3 (4)
discount rates and 10
Investment securities Discounted cashflows, Valuation multiples, Between (13) 690 62 (77)
adjusted net asset value, correlations, volatilities and and 10
earnings multiples, third- credit spreads
party valuations, dividend
yields
Investments in private-equity associates, associate companies and Discounted cashflows, Valuation multiples Between (7) 1 154 96 (108)
joint arrangements earnings multiples and 8
Total financial assets classified as level 3 1 895 163 (191)
UNREALISED GAINS OR LOSSES
The unrealised gains or losses arising on instruments classified as level 3 include the following:
31 December December
2016 2015
(Audited) (Audited)
Rm Rm
Private-equity gains 257 71
257 71
SUMMARY OF PRINCIPAL VALUATION TECHNIQUES — LEVEL 2 INSTRUMENTS
The following table sets out the group's principal valuation techniques used in determining the fair value of financial assets and
financial liabilities classified as level 2 in the fair-value hierarchy:
Assets Valuation technique Key inputs
Other short-term securities Discounted-cashflow model Discount rates
Derivative financial instruments Discounted-cashflow model Discount rates
Black-Scholes model Risk-free rate and volatilities
Multiple valuation techniques Valuation multiples
Government and other securities Discounted-cashflow model Discount rates
Loans and advances Discounted-cashflow model Interest rate curves
Investment securities Discounted-cashflow model Money market rates and interest rates
Underlying price of market-traded
Adjusted net asset value instruments
Dividend yield method Dividend growth rates
Liabilities
Derivative financial instruments Discounted-cashflow model Discount rates
Black-Scholes model Risk-free rate and volatilities
Multiple valuation techniques Valuation multiples
Amounts owed to depositors Discounted-cashflow model Discount rates
Provisions and other liabilities Discounted-cashflow model Discount rates
Long-term debt instruments Discounted-cashflow model Discount rates
Assets and liabilities not measured at fair value for which fair value is disclosed
Certain financial instruments of the group are not carried at fair value, including those categorised as held to maturity, loans and
receivables, and financial liabilities at amortised cost. The calculation of the fair value of these financial instruments incorporates
the group's best estimate of the value at which these financial assets could be exchanged, or financial liabilities could be
transferred, between market participants at the measurement date. The group's estimate of what fair value is does not
necessarily represent the amount for which the group would be able to sell the asset or transfer the respective financial liability in
an involuntary liquidation or distressed sale.
The fair values of these respective financial instruments at the reporting date detailed below are estimated only for the purpose
of IFRS disclosure, as follows:
Carrying
Rm value Fair value Level 1 Level 2 Level 3
31 December 2016 (Audited)
Financial assets 657 716 648 545 21 828 33 128 593 589
Other short-term securities 33 184 33 128 33 128
Government and other securities 22 393 21 828 21 828
Loans and advances 602 139 593 589 593 589
Financial liabilities 51 761 48 880 20 432 28 448 -
Long-term debt instruments 51 761 48 880 20 432 28 448
Carrying
Rm value Fair value Level 1 Level 2 Level 3
31 December 2015 (Audited)
Financial assets 623 273 618 012 17 415 32 709 567 888
Other short-term securities 32 863 32 709 32 709
Government and other securities 18 807 17 415 17 415
Loans and advances 571 603 567 888 567 888
Financial liabilities 44 576 42 933 24 269 18 664 -
Long-term debt instruments 44 576 42 933 24 269 18 664
There has been no significant changes in the methodology used to estimate the fair value of the above instruments during the year.
LOANS AND ADVANCES
Loans and advances that are not recognised at fair value principally comprise variable-rate financial assets. The interest rates on
these variable rate-financial assets are adjusted when the applicable benchmark interest rate changes.
Loans and advances are not actively traded in most markets and it is therefore not possible to determine the fair value of these
loans and advances using observable market prices and market inputs. Due to the unique characteristics of the loans and
advances portfolio and the fact that there have been no recent transactions involving the disposals of such loans and advances,
there is no basis to determine a price that could be negotiated between market participants in an orderly transaction. The group
is not currently in the position of a forced sale of such underlying loans and advances and it would therefore be inappropriate to
value the loans and advances on a forced-sale basis.
For specifically impaired loans and advances the carrying value as determined after consideration of the group's IAS 39 credit
impairments, is considered the best estimate of fair value.
The group has developed a methodology and model to determine the fair value of the gross exposures for the performing loans
and advances measured at amortised cost. This model incorporates the use of average interest rates and projected monthly
cashflows per product type. Future cashflows are discounted using interest rates at which similar loans would be granted to
borrowers with similar credit ratings and maturities. Methodologies and models are updated on a continuous basis for changes
in assumptions, forecasts and modelling techniques. Future forecasts of the group's probability of default (PDs) and loss given
defaults (LGDs) for periods 2017 to 2019 (2015: for periods 2016 to 2018) are based on the latest available internal data and is
applied to the first three years' projected cashflows. Thereafter, PDs and LGDs are gradually reverted to their long-run averages
and are applied to the remaining projected cashflows. Inputs into the model include various assumptions utilised in the pricing of
loans and advances. The determination of such inputs is highly subjective and therefore any change to one or more of the
assumptions may result in a significant change in the determination of the fair value of loans and advances.
GOVERNMENT AND OTHER SECURITIES
The fair value of government and other securities is determined based on available market prices (level 1) or discounted cashflow
analysis (level 2), where an instrument is not quoted or the market is considered to be inactive.
OTHER SHORT-TERM SECURITIES
The fair value of other short-term securities is determined using a discounted cashflow analysis (level 2).
LONG-TERM DEBT INSTRUMENTS
The fair value of long-term debt instruments is determined based on available market prices (level 1) or discounted cashflow
analysis (level 2) where an instrument is not quoted or the market is considered to be inactive.
AMOUNTS OWED TO DEPOSITORS
The amounts owed to depositors principally comprise of variable-rate liabilities. The carrying value of the amounts owed to
depositors approximates fair value because the instruments reprice to current market rates at frequent intervals. In addition, a
significant portion of the balance is callable or is short term in nature.
CASH AND CASH EQUIVALENTS, OTHER ASSETS, MANDATORY DEPOSITS WITH CENTRAL BANKS, AND
PROVISIONS AND OTHER LIABILITIES
The carrying values of cash and cash equivalents, other assets, mandatory deposits with central banks and provisions and other
liabilities are considered a reasonable approximation of their respective fair values, as they are either short term in nature or are
repriced to current market rates at frequent intervals.
Liquidity coverage ratio
Total Total
unweighted weighted
value(1) value(2)
Rm (average) (average)
High-quality liquid assets (HQLA)
Total HQLA 132 856
Cash outflows
Retail deposits and deposits from small-business clients 168 571 16 857
Stable deposits - -
Less: stable deposits 168 571 16 857
Unsecured wholesale funding 212 079 102 448
Operational deposits (all counterparties) and deposits in institutional networks of cooperative
banks 113 688 32 685
Non-operational deposits (all counterparties) 98 391 69 763
Unsecured debt - -
Secured wholesale funding 21 328 42
Additional requirements 80 000 11 958
Outflows related to derivative exposures and other collateral requirements 1 126 1 126
Outflows related to loss of funding on debt products 699 699
Credit and liquidity facilities 78 175 10 133
Other contractual funding obligations - -
Other contingent funding obligations 187 080 8 299
Total cash outflows 669 058 139 604
Cash inflows
Secured lending (eg reverse repurchase agreements) 14 370 716
Inflows from fully performing exposures 31 675 16 906
Other cash inflows 4 879 4 879
Total cash inflows 50 924 22 501
Total HQLA 132 856
Total net cash outflows 117 103
Liquidity coverage ratio (%) 113,5%
(1) Unweighted values are calculated as outstanding balances maturing or callable within 30 days (for inflows and outflows).
(2) Weighted values are calculated after the application of respective haircuts (for HQLA) or inflow and outflow rates (for inflows and outflows).
The figures above reflect the simple average of the month-end values at 31 October 2016, 30 November 2016 and 31 December
2016 based on regulatory submissions to the South African Reserve Bank. This section on the liquidity coverage ratio has not
been audited by the group's auditors.
Sponsors
Investec Bank Limited, Nedbank CIB
Date: 28/02/2017 08:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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