Wrap Text
Condensed Consolidated Interim Financial Results for the six months ended 30 June 2017
NEDBANK LIMITED
Reg No 1951/000009/06
Incorporated in the Republic of South Africa
JSE share code: NBKP
ISIN: ZAE 000043667
('Nedbank Limited' or 'Nedbank')
Condensed consolidated interim financial results for the six months ended 30 June 2017
Overview
Nedbank Limited ('Nedbank') is a wholly owned subsidiary of Nedbank Group Limited ('Nedbank Group'), which is listed on
JSE Limited. These condensed consolidated interim financial results are published on SENS to provide information to
holders of Nedbank's listed non-redeemable non-cumulative non-participating preference shares.
Commentary relating to the Nedbank condensed consolidated interim financial results is included in the Nedbank Group
results, as presented to shareholders on 2 August 2017. Further information is provided on the website at
nedbankgroup.co.za.
Board and group executive changes
Tom Boardman and David Adomakoh departed from the board as independent non-executive directors with effect from the
close of Nedbank Group’s annual general meeting on Thursday, 18 May 2017.
Neo Dongwana and Linda Manzini were appointed as independent non-executive directors of the group with effect from 1
June 2017, and Hubert Brody with effect from 1 July 2017.
Transfer of subsidiaries*
Nedbank’s shareholding in Nedbank Lesotho and Nedbank Swaziland was distributed as a dividend in specie to Nedbank Group
on 1 June 2017. The value of the dividend in specie was equal to the carrying amount of the investments distributed of
R906m at 1 June 2017. This has been recognised in the statement of changes in equity in the distribution of subsidiaries
to shareholder line.
Basis of preparation*
Nedbank Limited is a company domiciled in SA. The reviewed condensed consolidated interim financial results of the group
at and for the six months ended 30 June 2017 comprise those of the company and its subsidiaries (the 'group') and the
group's interests in associates and joint arrangements.
The condensed consolidated interim financial statements comprise the condensed consolidated statement of financial
position at 30 June 2017, condensed consolidated statement of comprehensive income, condensed consolidated statement of
changes in equity and condensed consolidated statement of cashflows for the six months ended 30 June 2017 and selected
explanatory notes, which are indicated by the symbol*. The condensed consolidated interim financial statements have been
prepared under the supervision of Raisibe Morathi CA (SA), the Chief Financial Officer.
The condensed consolidated interim financial statements are prepared in accordance with International Financial
Reporting Standard IAS 34 Interim Financial Reporting, the South African Institute of Chartered Accountants Financial
Reporting Guides as issued by the Accounting Practices Committee, Financial Pronouncements as issued by Financial
Reporting Standards Council and the requirements of the Companies Act (Act No 71 of 2008) of South Africa. The
accounting policies applied in the preparation of these condensed consolidated interim financial statements, are in
terms of International Financial Reporting Standards and are consistent with those of the previous annual financial
statements.
IFRS 9 Financial Instruments
Nedbank is required to adopt IFRS 9 from 1 January 2018. IFRS 9 replaces IAS 39, addressing the classification and
measurement of financial assets and financial liabilities, the measurement of impairment provisions for amortised cost
and fair value through other comprehensive income financial assets and introduces a more risk-management focused
hedge-accounting model.
IFRS 9 is expected to impact the Nedbank’s balance sheet provisions and classification of certain of the Nedbank's
financial assets. Nedbank does not expect the classification and measurement requirements to have a significant impact
on Nedbank's financial position; however, this is subject to the business models in existence at 1 January 2018. From 1
January 2018 Nedbank will recognise fair-value gains or losses due to changes in the Nedbank's own credit risk for
financial liabilities it designates as at fair value through profit or loss to be presented in other comprehensive
income. However, Nedbank does not expect to change the manner in which it calculates these fair-value gains or losses
due to changes in Nedbank's own credit risk, which it has previously disclosed in its financial statements.
Nedbank's IFRS 9 parallel run is progressing well and we continue to expect that the transitional increase in balance
sheet provisions on 1 January 2018 will not have a significant impact on our capital adequacy levels, because the
increase in balance sheet provisions will be partially offset by a decrease in the excess of downturn expected loss over
IAS 39 provisions regulatory deduction from CET1 capital. Nedbank's excess of downturn expected loss over IAS 39
provisions regulatory deduction at 30 June 2017 was R1,9bn (December 2016: R1,5bn).
Nedbank is considering its accounting policy choice as to whether to continue IAS 39 hedge accounting or to move to the
new IFRS 9 hedge-accounting model. This accounting policy choice is not expected to have a significant impact on
Nedbank's existing fair-value hedges; however, Nedbank may replace its current accounting practice to designate financial
assets and financial liabilities as at fair value through profit or loss because of the accounting mismatch that arises
from its economic hedging activities with IAS 39 or IFRS 9 hedge accounting.
In line with the requirements of IFRS 9, Nedbank plans not to restate its comparative financial statements. Accordingly,
the transitional increase in balance sheet provisions and classification and measurement changes will be recognised, net
of related taxation, in equity at 1 January 2018.
Events after the reporting period*
There are no material events after the reporting period to report on.
Reviewed condensed consolidated interim financial statements - independent auditors’ review conclusion
The condensed consolidated interim financial statements for the six months ended 30 June 2017 have been reviewed by KPMG
Inc and Deloitte & Touche, who expressed an unmodified review conclusion thereon.
The auditors' review report does not necessarily report on all of the information contained in this interim results
announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the
auditors' engagement, they should obtain a copy of the auditors' report together with the accompanying financial
information, from Nedbank'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 companies, which, 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.
Nedbank non-redeemable non-cumulative non-participating preference shares - declaration of dividend no 29
Notice is hereby given that gross preference dividend no 29 of 43,39039 cents per share has been declared for the period
from 1 January 2017 to 30 June 2017, payable on Monday, 28 August 2017, to shareholders of the Nedbank non-redeemable
non-cumulative non-participating preference shares recognised in the accounting records of the company at the close of
business on Friday, 25 August 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 34,71231 cents per share to those shareholders who are not exempt from paying dividend tax. The dividend withholding tax
rate increased from 15% 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, 22 August 2017
Shares commence trading (ex dividend) Wednesday, 23 August 2017
Record date (date shareholders recorded in books) Friday, 25 August 2017
Payment date Monday, 28 August 2017
Share certificates may not be dematerialised or rematerialised between Wednesday, 23 August 2017, and Friday, 25 August
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, 28 August 2017.
For and on behalf of the board
Vassi Naidoo Mike Brown
Chairman Chief Executive
2 August 2017
Registered office
Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, 2196; PO Box 1144, Johannesburg, 2000.
Transfer secretaries
Computershare Investor Services Proprietary Limited, 15 Biermann Avenue, Rosebank, Johannesburg, 2196, SA. PO Box 61051,
Marshalltown, 2107.
Directors
V Naidoo (Chairman), MWT Brown** (Chief Executive), HR Brody, BA Dames, NP Dongwana, ID Gladman (British), JB Hemphill,
EM Kruger, RAG Leith, PM Makwana, L Manzini, 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
Reviewed condensed consolidated interim financial statements for the period ended 30 June 2017
Condensed consolidated
statement of comprehensive income
for the period ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
Change (Reviewed) (Reviewed) (Audited)
(%) Rm Rm Rm
Interest and similar income 11,4 35 405 31 774 69 862
Interest expense and similar charges 16,6 22 933 19 663 45 344
Net interest income 3,0 12 472 12 111 24 518
Impairments charge on loans and advances (24,6) 1 483 1 967 4 254
Income from lending activities 8,3 10 989 10 144 20 264
Non-interest revenue 5,1 9 733 9 257 19 361
Operating income 6,8 20 722 19 401 39 625
Total operating expenses 3,8 12 622 12 157 25 283
Indirect taxation 0,5 404 402 810
Profit from operations before non-trading and capital items 12,5 7 696 6 842 13 532
Non-trading and capital items (88,8) (16) (143) (289)
Profit from operations 14,6 7 680 6 699 13 243
Share of profits/(losses) of associate companies and joint arrangements <-100 7 (12) (20)
Profit from operations before direct taxation 15,0 7 687 6 687 13 223
Total direct taxation 16,6 1 905 1 634 3 286
Direct taxation 1 909 1 645 3 328
Taxation on non-trading and capital items (4) (11) (42)
Profit for the period 14,4 5 782 5 053 9 937
Other comprehensive income/(losses) net of taxation <-100 114 (44) (453)
Items that may subsequently be reclassified to profit or loss
Exchange differences on translating foreign operations 2 (97) (231)
Fair-value adjustments on available-for-sale assets (3) (5) (13)
Items that may not subsequently be reclassified to profit or loss
Gains on property revaluations (23) 24
Remeasurements on long-term employee benefit assets 138 58 (233)
Total comprehensive income for the period 17,7 5 896 5 009 9 484
Profit attributable to:
- Ordinary and preference equity holders 14,9 5 780 5 030 9 896
- Non-controlling interest - ordinary shareholders (91,3) 2 23 41
Profit for the period 14,4 5 782 5 053 9 937
Total comprehensive income attributable to:
- Ordinary and preference equity holders 18,2 5 894 4 986 9 443
- Non-controlling interest - ordinary shareholders (91,3) 2 23 41
Total comprehensive income for the period 17,7 5 896 5 009 9 484
Condensed consolidated
statement of financial position
at
30 Jun 30 Jun 31 Dec
2017 2016 2016
Change (Reviewed) (Reviewed) (Audited)
(%) Rm Rm Rm
Assets
Cash and cash equivalents (29,5) 12 970 18 407 20 241
Other short-term securities 9,0 71 731 65 813 68 218
Derivative financial instruments (5,0) 18 919 19 906 18 044
Government and other securities (5,6) 48 814 51 695 50 687
Loans and advances 1,3 686 806 677 672 691 925
Other assets 14,1 5 460 4 785 8 164
Current taxation assets (95,9) 44 1 083 440
Investment securities 21,3 2 115 1 744 1 908
Non-current assets held for sale >100 592 3 287
Investments in private-equity associates, associate companies and joint arrangements 66,9 2 782 1 667 2 575
Deferred taxation assets (53,4) 27 58 266
Property and equipment (6,3) 7 745 8 265 8 197
Long-term employee benefit assets 4,7 5 393 5 151 5 042
Mandatory reserve deposits with central banks 7,7 18 022 16 732 18 139
Intangible assets 20,8 6 505 5 387 5 928
Total assets 1,1 887 925 878 368 900 061
Equity and liabilities
Ordinary share capital 28 28 28
Ordinary share premium 19 182 19 182 19 182
Reserves 12,2 44 761 39 898 42 698
Total equity attributable to equity holders of the parent 8,2 63 971 59 108 61 908
Preference share capital and premium 3 561 3 561 3 561
Additional tier 1 capital instruments 70,6 2 600 1 524 2 000
Non-controlling interest attributable to:
- Ordinary shareholders (95,3) 11 235 253
- Preference shareholders 561
Total equity 9,7 70 704 64 428 67 722
Derivative financial instruments (32,6) 13 222 19 611 13 469
Amounts owed to depositors 0,5 733 565 729 920 750 319
Provisions and other liabilities 25,2 10 176 8 128 12 717
Current taxation liabilities (21,1) 86 109 53
Deferred taxation liabilities (44,7) 692 1 251 391
Long-term employee benefit liabilities 10,0 3 432 3 121 3 328
Long-term debt instruments 8,2 56 048 51 800 52 062
Total liabilities 0,4 817 221 813 940 832 339
Total equity and liabilities 1,1 887 925 878 368 900 061
Condensed consolidated
statement of changes in equity
Non- Non-controlling
Total equity controlling interest
attributable Preference interest attributable
to equity share Additional attributable to
holders capital tier 1 to ordinary preference
of the and capital share- share- Total
parent premium instruments holders holders equity
Rm Rm Rm Rm Rm Rm
Audited balance at 31 December 2015 56 170 3 561 223 59 954
Additional tier 1 capital instruments 1 524 1 524
issued
Preference share dividend (177) (177)
Dividend to ordinary shareholders (2 500) (11) (2 511)
Issues of shares net of expenses 650 650
Total comprehensive income for the period 4 986 23 5 009
Share-based payment reserve movement (20) (20)
Other movements (1) (1)
Reviewed balance at 30 June 2016 59 108 3 561 1 524 235 - 64 428
Additional tier 1 capital instruments 476 476
issued
Preference share dividend (200) (200)
Additional tier 1 capital instruments (78) (78)
interest paid
Dividend to ordinary shareholders (1 750) (1 750)
Total comprehensive income for the period 4 457 18 4 475
Share-based payment reserve movement 380 380
Regulatory risk reserve provision (10) (10)
Other movements 1 1
Audited balance at 31 December 2016 61 908 3 561 2 000 253 - 67 722
Additional tier 1 capital instruments 600 600
issued
Preference share dividend (191) (191)
Additional tier 1 capital instruments (101) (101)
interest paid
Dividend to ordinary shareholders (2 315) (2 315)
Distribution of subsidiaries to shareholder (787) (244) (1 031)
Preference shares held by group 561 561
entities
Total comprehensive income for the period 5 894 2 5 896
Share-based payment reserve movement (437) (437)
Reviewed balance at 30 June 2017 63 971 3 561 2 600 11 561 70 704
Condensed consolidated
statement of cashflows
for the period ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
(Reviewed) (Reviewed) (Audited)
Rm Rm Rm
Cash generated by operations 11 143 10 706 21 707
Change in funds for operating activities (16 305) (12 479) (14 185)
Net cash (utilised by)/from operating activities before taxation (5 162) (1 773) 7 522
Taxation paid (1 485) (2 067) (4 020)
Cashflows (utilised by)/from operating activities (6 647) (3 840) 3 502
Cashflows utilised by investing activities (3 627) (2 117) (5 265)
Cashflows from financing activities 2 886 6 320 5 030
Effects of exchange rate changes on opening cash and cash equivalents (excluding foreign borrowings) 435 772
Net (decrease)/increase in cash and cash equivalents (7 388) 798 4 039
Cash and cash equivalents at the beginning of the period(1) 38 380 34 341 34 341
Cash and cash equivalents at the end of the period1 30 992 35 139 38 380
(1) Including mandatory reserve deposits with central banks.
Notes to the reviewed condensed consolidated interim financial statements for the period ended 30 June 2017*
Condensed consolidated
segmental reporting
for the period ended
30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec
2017 2016 2016 2017 2016 2016 2017 2016 2016 2017 2016 2016
(Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Total assets Total liabilities Revenue(1) Headline earnings/(losses)
Nedbank Corporate 479 359 476 225 491 480 448 288 447 896 463 018 6 997 7 190 14 744 3 211 3 004 6 014
and Investment
Banking
Nedbank Retail and 311 490 296 492 304 842 284 075 270 452 278 588 14 780 14 250 29 071 2 544 2 371 4 960
Business Banking
Nedbank Wealth 66 621 62 668 62 042 62 857 59 223 58 655 2 150 2 271 4 384 519 614 1 192
Rest of Africa 35 623 32 734 36 189 28 835 25 447 28 247 1 201 776 1 890 (1 092) (550) (287)
Centre 72 737 76 069 71 469 57 116 60 284 55 803 150 (102) (160) 89 (12) (414)
Total for Nedbank 965 830 944 188 966 022 881 171 863 302 884 311 25 278 24 385 49 929 5 271 5 427 11 465
Group
Fellow-subsidiary (77 905) (65 820) (65 961) (63 950) (49 362) (51 972) (3 073) (3 017) (6 050) 521 (265) (1 322)
adjustments
Total 887 925 878 368 900 061 817 221 813 940 832 339 22 205 21 368 43 879 5 792 5 162 10 143
(1) Revenue is calculated as net interest income plus non-interest revenue.
Headline earnings reconciliation
for the period ended
30 Jun 30 Jun 30 Jun 30 Jun 31 Dec 31 Dec
2017 2017 2016 2016 2016 2016
(Reviewed) (Reviewed) (Reviewed) (Reviewed) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm
Change Gross Net of taxation Gross Net of taxation Gross Net of taxation
(%)
Profit attributable to 14,9 5 780 5 030 9 896
ordinary and preference
equity holders
Non-trading and capital items (90,9) 16 12 143 132 289 247
IAS 16: Loss on disposal of 16 12 44 44
property and equipment
IAS 38: 39 28 145 103
Impairment of
intangible assets
IAS 39: Loss on sale of 94 94 94 94
available-for-sale financial
assets
IAS 40: Loss on disposal of 10 10 6 6
investment properties
Headline earnings 12,2 5 792 5 162 10 143
Contingent liabilities and commitments
CONTINGENT LIABILITIES AND UNDRAWN FACILITIES
at 30 Jun 30 Jun 31 Dec
2017 2016 2016
(Reviewed) (Reviewed) (Audited)
Rm Rm Rm
Guarantees on behalf of clients 21 475 37 771 22 177
Letters of credit and discounting transactions 3 342 2 879 3 360
Irrevocable unutilised facilities and other 93 179 94 398 101 566
117 996 135 048 127 103
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 Limited and its subsidiary companies, the outcome of
which cannot at present be foreseen.
COMMITMENTS
Capital expenditure approved by directors
at 30 Jun 30 Jun 31 Dec
2017 2016 2016
(Reviewed) (Reviewed) (Audited)
Rm Rm Rm
Contracted 395 818 515
Not yet contracted 2 320 1 850 2 092
2 715 2 668 2 607
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 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 (directly or indirectly) on 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.
FINANCIAL ASSETS
Total financial assets Total financial assets Total financial Total financial assets Total financial assets
recognised at assets classified as classified as level 2 classified as level 3
amortised cost level 1
30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec
2017 2016 2016 2017 2016 2016 2017 2016 2016 2017 2016 2016 2017 2016 2016
(Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Cash and 30 992 35 139 38 380 30 992 35 139 38 380
cash
equivalents
Other 71 731 65 813 68 218 27 810 35 753 33 184 3 37 43 918 30 060 34 997
short-term
securities
Derivative 18 919 19 906 18 044 103 132 36 18 816 19 755 17 983 19 25
financial
instruments
Government 48 814 51 695 50 687 29 033 20 369 22 393 8 918 21 193 15 881 10 863 10 133 12 413
and other
securities
Loans and 686 806 677 672 691 925 611 653 596 279 615 368 75 031 81 360 76 480 122 33 77
advances(1) (2)
Other assets 5 460 4 785 8 164 5 460 4 776 8 159 9 5
Investments in 2 549 1 433 2 350 2 549 1 433 2 350
private-equity
associates,
associate
companies
and joint
arrangements
Investment 2 115 1 744 1 908 14 35 19 936 1 049 798 1 165 660 1 091
securities
867 386 858 187 879 676 704 948 692 316 717 484 9 038 21 369 15 978 149 564 142 357 142 671 3 836 2 145 3 543
(1) Loans and advances of R10 128m (June 2016: R8 658m) were included in the previous year as held-for-trading assets, whereas these instruments were classified and
measured as financial assets at amortised cost. Accordingly, the held-for-trading and financial assets at amortised cost categories have been restated to
reflect the correct classification.
(2) Loans and advances of R3 103m (June 2016: R4 687m) were included in the previous year as designated at fair value through profit or loss, whereas these
instruments were classified and measured as financial assets at amortised cost. Accordingly, the designated at fair value through profit or loss and financial
assets at amortised cost categories have been restated to reflect the correct classification.
FINANCIAL LIABILITIES
Total financial liabilities Total financial liabilities Total financial liabilities Total financial liabilities
recognised at classified as level 1 classified as level 2
amortised cost
30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec
2017 2016 2016 2017 2016 2016 2017 2016 2016 2017 2016 2016
(Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Derivative 13 222 19 611 13 469 53 24 11 13 169 19 587 13 458
financial
instruments
Amounts owed 733 565 729 920 750 319 660 966 571 824 684 113 72 599 158 096 66 206
to depositors(3)
Provisions and 9 143 8 128 11 739 8 165 6 459 9 127 978 1 459 2 235 210 377
other
liabilities
Long-term debt 56 048 51 800 52 062 55 643 51 367 51 761 168 405 265 301
instruments
811 978 809 459 827 589 724 774 629 650 745 001 1 031 1 651 2 246 86 173 178 158 80 342
(3) Amounts owed to depositors of R9 329m (June 2016: R9 818m) were included in the previous year as designated at fair value through profit or loss, whereas these
instruments were classified and measured as financial liabilities at amortised cost. Accordingly, the designated at fair value through profit or loss and
financial liabilities at amortised cost categories have been restated to reflect the correct classification.
LEVEL 3 RECONCILIATION
30 June 2017 (Reviewed) Opening Gains/(Losses) in profit Purchases and Sales and Closing balance
balance at for the period issues settlements at 30 Jun
1 Jan Rm Rm Rm Rm
Rm
FINANCIAL ASSETS
Derivative financial instruments 25 (7) (18) -
Loans and advances 77 45 122
Investment securities 1 091 (6) 83 (3) 1 165
Investments in private-equity associates, associate 2 350 (46) 347 (102) 2 549
companies and joint arrangements
3 543 (14) 430 (123) 3 836
30 June 2016 (Reviewed) Opening Gains/(Losses) in profit Purchases and Sales and Closing balance
balance at for the period issues settlements at 30 Jun
1 Jan Rm Rm Rm Rm
Rm
FINANCIAL ASSETS
Derivative financial instruments 18 1 19
Loans and advances 33 33
Investment securities 690 (36) 26 (20) 660
Investments in private-equity associates, associate 1 154 188 145 (54) 1 433
companies and joint arrangements
1 895 153 171 (74) 2 145
31 December 2016 (Audited) Opening Gains/(Losses) in profit Purchases and Sales and Transfers Closing
balance at for the year issues settlements in/(out) balance at
1 Jan Rm Rm Rm Rm 31 Dec
Rm Rm
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, 1 154 274 1 130 (208) 2 350
associate companies and joint arrangements
1 895 257 1 183 (242) 450 3 543
EFFECT OF CHANGES IN SIGNIFICANT UNOBSERVABLE ASSUMPTIONS TO REASONABLE POSSIBLE ALTERNATIVES — LEVEL 3 INSTRUMENTS
The fair-value measurement of financial instruments are, 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.
Valuation Significant unobservable Variance in fair Value per Favourable Unfavourable
technique input value statement of change in change in fair
financial fair value value
position
30 June 2017 (Reviewed) % Rm Rm Rm
FINANCIAL ASSETS
Loans and advances Discounted Credit spread and Between (11,5) and 9,0 122 11 (14)
cashflows discount rates
Investment Discounted Valuation Between (11,5) and 9,0 1 165 106 (134)
securities cashflows, multiples,
adjusted net correlations,
asset value, volatilities and
earnings credit spreads
multiples,
third-party
valuations,
dividend yields
Investments Discounted Valuation multiples Between (11,5) and 9,0 2 549 232 (293)
in cashflows,
private-equity earnings
associates, multiples
associate
companies and
joint arrangements
Total 3 836 349 (441)
financial assets
classified as level 3
Valuation technique Significant unobservable Variance in fair Value per Favourable Unfavourable
input value statement of change in change in fair
financial fair value value
position
30 June 2016 (Reviewed) % Rm Rm Rm
FINANCIAL ASSETS
Derivative financial Discounted-cashflow model, Discount rates, risk-free Between (12) and 10 19 2 (2)
instruments Black-Scholes model and rates, volatilities,
multiple valuation credit spreads and
techniques valuation multiples
Loans and advances Discounted-cashflow model Credit spreads and Between (12) and 10 33 3 (4)
discount rates
Investment securities Discounted cashflows, Valuation multiples, Between (12) and 10 660 64 (81)
adjusted net asset value, correlations, volatilities
earnings multiples, and credit spreads
third-party valuations,
dividend yields
Investments in Discounted cashflows, Valuation multiples Between (7) and 7 1 433 117 (132)
private-equity earnings multiples
associates, associate
companies and joint
arrangements
Total financial assets 2 145 186 (219)
classified as level 3
Valuation technique Significant unobservable Variance in fair Value per Favourable Unfavourable
input value statement of change in change in fair
financial fair value value
position
31 December 2016 % Rm Rm Rm
(Audited)
FINANCIAL ASSETS
Derivative financial Discounted cashflows Discount rates, earnings Between (12) and 9 25 2 (3)
instruments before interest, tax and
depreciation and
amortisation
Loans and advances Discounted cashflows Credit spreads and Between (12) and 9 77 7 (9)
discount rates
Investment securities Discounted cashflows, Valuation multiples, Between (12) and 9 1 091 103 (129)
adjusted net asset value, correlations,
earnings multiples, volatilities and credit
third-party valuations, spreads
dividend yields
Investments in Discounted cashflows, Valuation multiples Between (12) and 9 2 350 221 (278)
private-equity earnings multiples
associates, associate
companies and joint
arrangements
Total financial assets 3 543 333 (419)
classified as level 3
UNREALISED GAINS OR LOSSES
The unrealised gains or losses arising on instruments classified as level 3 include the following:
30 Jun 30 Jun 31 Dec
2017 2016 2016
(Reviewed) (Reviewed) (Audited)
Rm Rm Rm
Private-equity gains (14) 153 257
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 Discounted-cashflow Discount rates
securities model
Derivative financial Discounted-cashflow Discount rates
instruments model
Black-Scholes model Risk-free rate and volatilities
Multiple valuation Valuation multiples
techniques
Government and other Discounted-cashflow Discount rates
securities model
Loans and advances Discounted-cashflow Interest rate
model curves
Investment securities Discounted-cashflow Money market rates and interest rates
model
Adjusted net asset value Underlying price of market-traded instruments
Dividend yield method Dividend growth
rates
Liabilities
Derivative financial Discounted-cashflow Discount rates
instruments model
Black-Scholes model Risk-free rate and volatilities
Multiple valuation Valuation multiples
techniques
Amounts owed to Discounted-cashflow Discount rates
depositors model
Provisions and other Discounted-cashflow Discount rates
liabilities model
Long-term debt Discounted-cashflow Discount rates
instruments model
TRANSFERS BETWEEN LEVELS OF THE FAIR-VALUE HIERARCHY
In terms of the group's policy, transfers of financial instruments between levels of the fair-value hierarchy are deemed
to have occurred at the end of the reporting period.
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, 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 transferred, between market participants at the measurement date. The group’s
estimate of what fair value is does not necessarily represent what it would be able to sell the asset for or transfer
the respective financial liability for 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:
Rm Carrying value Fair value Level 1 Level 2 Level 3
30 June 2017 (Reviewed)
Financial assets 668 496 660 801 23 914 32 635 604 252
Other short-term securities 27 810 27 812 27 812
Government and other securities 29 033 28 737 23 914 4 823
Loans and advances 611 653 604 252 604 252
Financial liabilities 55 643 56 101 23 240 32 861 -
Long-term debt instruments 55 643 56 101 23 240 32 861
Rm Carrying value Fair value Level 1 Level 2 Level 3
30 June 2016 (Reviewed)
Financial assets 639 056 627 066 19 850 35 707 571 509
Other short-term securities 35 753 35 707 35 707
Government and other securities 20 369 19 850 19 850
Loans and advances 582 934 571 509 571 509
Financial liabilities 51 367 51 072 25 774 25 298 -
Long-term debt instruments 51 367 51 072 25 774 25 298
Rm Carrying 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
There have 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 2018 to 2020 (2016: for periods 2017 to 2019) 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.
Additional information
Liquidity coverage ratio
Total unweighted Total weighted
value(1) value(2)
Rm (average) (average)
Total high-quality liquid assets 140 076
Cash outflows
Retail deposits and deposits from small-business clients 164 224 16 424
Less stable deposits 164 224 16 424
Unsecured wholesale funding 213 814 112 739
Operational deposits (all counterparties) and deposits in institutional 99 917 28 726
networks of cooperative banks
Non-operational deposits (all counterparties) 113 593 83 709
Unsecured debt 304 304
Secured wholesale funding 25 529 32
Additional requirements 77 103 10 480
Outflows related to derivative exposures and other collateral requirements 760 760
Outflows related to loss of funding on debt products 64 64
Credit and liquidity facilities 76 279 9 656
Other contingent funding 177 853 8 954
obligations
Total cash outflows 658 523 148 629
Cash inflows
Secured lending (eg reverse repurchase agreements) 9 731 125
Inflows from fully performing exposures 25 641 13 751
Other cash inflows 3 103 3 103
Total cash inflows 38 475 16 979
Total
adjusted
value
Total HQLA 140 076
Total net cash outflows 131 650
Liquidity coverage ratio (%) 106,4%
(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 daily average over the quarter ended June 2017, based on regulatory submissions to SARB.
This section on the liquidity coverage ratio has not been audited or reviewed by the group's auditors.
Date: 02/08/2017 07:06:00 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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