Wrap Text
Preliminary audited results for the year ended 31 December 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')
Preliminary audited results
for the year ended 31 December 2017
Overview
Nedbank Limited ('Nedbank') is a wholly owned subsidiary of Nedbank Group Limited ('Nedbank Group'), which is listed on
the JSE Limited. These summary consolidated financial results are published on the Securities Exchange News Service
(SENS) to provide information to holders of Nedbank's listed non-redeemable non-cumulative non-participating preference
shares.
Commentary relating to the Nedbank summary consolidated financial results is included in the Nedbank Group results, as
presented to shareholders on 2 March 2018. Further information is provided on the website at nedbankgroup.co.za.
Board and leadership changes during the period
Tom Boardman and David Adomakoh resigned from the board as independent non-executive directors with effect from the end
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.
Thulani Sibeko, Group Executive of Group Marketing, Communications and Corporate Affairs, resigned with effect from
27 June 2017. In October 2017 Abe Thebyane, Group Executive of Human Resources, announced his early retirement, to be
effective on the appointment of a suitable successor to ensure a seamless handover of responsibilities. These positions
are expected to be filled in the first half of 2018.
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 audited summary consolidated financial statements of the group at and
for the year ended 31 December 2017 comprise the company and its subsidiaries ('group') and the group's interests in
associates and joint arrangements.
The summary consolidated financial statements comprise the summary consolidated statement of financial position at
31 December 2017, summary consolidated statement of comprehensive income, summary consolidated statement of changes in
equity and summary consolidated statement of cashflows for the year ended 31 December 2017 and selected explanatory
notes, which are indicated by the symbol*. The summary consolidated financial statements and the full set of
consolidated financial statements have been prepared under the supervision of Raisibe Morathi CA(SA), the Chief
Financial Officer.
The summary consolidated financial statements are prepared in accordance with the requirements of the JSE Limited
Listings Requirements for preliminary reports, and the requirements of the Companies Act applicable to summary financial
statements. The 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) and the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued
by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 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 IFRS and are
consistent with the accounting policies applied in the preparation of the previous consolidated annual financial
statements.
IFRS 9 Financial instruments*
IFRS 9 is effective and will be implemented by the group from 1 January 2018. IFRS 9 replaces IAS 39 and sets out the
updated requirements for the recognition and measurement of financial instruments. These requirements specifically deal
with the classification and measurement of financial instruments, measurement of impairment losses based on an expected
credit loss model, and closer alignment between hedge accounting and risk management practices.
As permitted by the transitional provisions of IFRS 9, the group has elected not to restate comparative figures. Any
adjustments to the carrying amount of financial assets and financial liabilities at the date of transition will be
recognised in the opening retained earnings and other reserves at 1 January 2018. The group has elected to continue to
apply the hedge accounting requirements of IAS 39 on adoption of IFRS 9.
The estimates below are based on accounting policies, assumptions, judgements and estimation techniques, which will be
regularly reviewed and assessed during the year in preparation for the financial statements for the year ending
31 December 2018.
Classification and measurement*
The group has implemented the following on adoption of IFRS 9:
- Revocation of the fair value through profit or loss designation for certain loans and advances, amounts owed to
depositors and long-term debt instruments to facilitate the implementation of macro fair-value hedge accounting of
interest rate risk and hedge accounting of inflation risk. It is anticipated that the aforementioned changes will
reduce accounting volatility experienced with respect to fair value through profit or loss accounting.
- Reclassification of certain loans from amortised cost to fair value through other comprehensive income and fair
value through profit or loss to align with the business-model-driven classifications of IFRS 9.
- Review of the effective interest rate calculation for certain loans based on the additional guidance provided in
IFRS 9.
The implementation of the above IFRS 9 classification and measurement requirements decreased reserves at 1 January 2018
by approximately R200m.
Impairment*
The IFRS 9 impairment implementation progressed during 2017. The following were the main areas of focus for 2017:
- Finalisation of the IFRS 9 impairment model methodology.
- Implementation of an IT framework facilitating efficient model execution and management.
- Development, build and testing of IFRS 9 impairment models with respect to a substantial portion of the group's
portfolios, leveraging off the aforementioned IT framework.
- Documentation and implementation of the relevant control environment and related governance processes.
The following areas will continue to receive the required attention as the implementation of IFRS 9 progresses during
the 2018 financial reporting period:
- Further refinement of certain models.
- Finalisation of the interim and year-end reporting and disclosure frameworks.
- Observing local and international industry trends with respect to IFRS 9 adoption.
The implementation of the IFRS 9 expected credit loss model requires increases in balance sheet impairments at
1 January 2018 of approximately R3,0bn, with reserves decreasing by approximately R2,2bn on an after-tax basis.
IFRS 15 Revenue from contracts with customers*
IFRS 15 replaces all existing revenue requirements in IFRS and applies to all revenue arising from contracts with
clients, unless the contracts are in the scope of the standards on leases, insurance contracts and financial
instruments. The standard is effective and will be implemented by the group from 1 January 2018.
The group has concluded that the loyalty points awarded to clients are accounted for as consideration payable to clients
in terms of new IFRS 15 guidance. The standard requires revenue to be decreased by the amount of consideration expected
to be paid to clients, with this amount recognised as a liability until payment is effected. The liability for the
amount expected to be paid to clients under the loyalty programme increased by approximately R300m on 1 January 2018 due
to the application of IFRS 15 requirements. Reserves at 1 January 2018 decreased by approximately R216m on an after-tax
basis.
Impact of IFRS 9 and 15 on common-equity tier 1 capital adequacy ratio
We continue to work closely with all of our regulators and have implemented IFRS 9 and IFRS 15 on 1 January 2018. The
estimated impact on our common-equity tier 1 capital adequacy ratio at 1 January 2018 is less than 20 basis points.
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 for the year ended 31 December 2017 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.
The copies 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 this results 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 consolidated financial statements, from
Nedbank Group'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 number 30
Notice is hereby given that gross preference dividend number 30 of 43,17350 cents per share has been declared for the
period from 1 July 2017 to 31 December 2017, payable on Monday, 26 March 2018, 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, 23 March 2018. 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 34,53880 cents per share to those shareholders who are not exempt from paying dividend tax. 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) Monday, 19 March 2018
Shares commence trading (ex dividend) Tuesday, 20 March 2018
Record date (date shareholders recorded in books) Friday, 23 March 2018
Payment date Monday, 26 March 2018
Share certificates may not be dematerialised or rematerialised between Tuesday, 20 March 2018, and Friday,
23 March 2018, 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, 26 March 2018.
For and on behalf of the board
Vassi Naidoo Mike Brown
Chairman Chief Executive
2 March 2018
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
AUDITED SUMMARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
Prepared under the supervision of the Nedbank Group CFO, Raisibe Morathi CA(SA).
Nedbank Limited Reg No 1951/000009/06.
Summary consolidated statement of comprehensive income
for the year ended
31 December 31 December
2017 2016
Change (Audited) (Audited)
(%) Rm Rm
Interest and similar income 2,1 71 311 69 862
Interest expense and similar charges 1,7 46 111 45 344
Net interest income 2,8 25 200 24 518
Impairments charge on loans and advances (28,8) 3 030 4 254
Income from lending activities 9,4 22 170 20 264
Non-interest revenue 2,8 19 907 19 361
Operating income 6,2 42 077 39 625
Total operating expenses 3,6 26 192 25 283
Indirect taxation 5,9 858 810
Profit from operations before non-trading and capital items 11,0 15 027 13 532
Non-trading and capital items 27,3 (210) (289)
Profit from operations 11,9 14 817 13 243
Share of losses of associate companies and joint arrangements <(100) (96) (20)
Profit from operations before direct taxation 11,3 14 721 13 223
Total direct taxation 8,4 3 563 3 286
Direct taxation 3 622 3 328
Taxation on non-trading and capital items (59) (42)
Profit for the year 12,3 11 158 9 937
Other comprehensive income/(losses) net of taxation > 100 493 (453)
Items that may subsequently be reclassified to profit or loss
Exchange differences on translating foreign operations (29) (231)
Fair-value adjustments on available-for-sale assets (14) (13)
Items that may not subsequently be reclassified to profit or loss
Gains on property revaluations 161 24
Remeasurements on long-term employee benefit assets 375 (233)
Total comprehensive income for the year 22,8 11 651 9 484
Profit attributable to:
- Ordinary and preference shareholders 12,8 11 160 9 896
- Non-controlling interest - ordinary shareholders <(100) (2) 41
Profit for the year 12,3 11 158 9 937
Total comprehensive income attributable to:
- Ordinary and preference shareholders 23,4 11 653 9 443
- Non-controlling interest - ordinary shareholders <(100) (2) 41
Total comprehensive income for the year 22,8 11 651 9 484
Summary consolidated statement of financial position
at
31 December 31 December
2017 2016
Change (Audited) (Audited)
(%) Rm Rm
Assets
Cash and cash equivalents (56,4) 8 823 20 241
Other short-term securities 7,7 73 472 68 218
Derivative financial instruments 70,1 30 698 18 044
Government and other securities (3,8) 48 749 50 687
Loans and advances (0,3) 689 637 691 925
Other assets (10,2) 7 332 8 164
Current taxation assets (83,0) 75 440
Investment securities 17,9 2 250 1 908
Non-current assets held for sale 35,2 388 287
Investments in private-equity associates, associate companies and joint arrangements 27,3 3 277 2 575
Deferred taxation assets (86,1) 37 266
Property and equipment (2,7) 7 976 8 197
Long-term employee benefit assets 14,3 5 761 5 042
Mandatory reserve deposits with central banks 18 145 18 139
Intangible assets 23,8 7 341 5 928
Total assets 0,4 903 961 900 061
Equity and liabilities
Ordinary share capital 28 28
Ordinary share premium 19 182 19 182
Reserves 12,9 48 215 42 698
Total equity attributable to equity holders of the parent 8,9 67 425 61 908
Preference share capital and premium 3 561 3 561
Holders of preference shares 561
Holders of additional tier 1 capital instruments 30,0 2 600 2 000
Non-controlling interest attributable to ordinary shareholders (97,2) 7 253
Total equity 9,5 74 154 67 722
Derivative financial instruments 74,9 23 561 13 469
Amounts owed to depositors (1,8) 736 752 750 319
Provisions and other liabilities 10,5 14 047 12 717
Current taxation liabilities > 100 191 53
Deferred taxation liabilities (10,2) 351 391
Long-term employee benefit liabilities 2,9 3 423 3 328
Long-term debt instruments (1,1) 51 482 52 062
Total liabilities (0,3) 829 807 832 339
Total equity and liabilities 0,4 903 961 900 061
Summary consolidated statement of changes in equity
Equity
Total equity attributable to Non-controlling
attributable Preference Equity additional interest
to equity share attributable tier 1 capital attributable
holders of capital and to preference instrument to ordinary Total
the parent premium shareholders holders shareholders 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 2 000 2 000
issued
Preference share dividend (377) (377)
Additional tier 1 capital instruments (78) (78)
interest paid
Dividend to ordinary shareholders (4 250) (11) (4 261)
Issues of shares net of expenses 650 650
Total comprehensive income for the 9 443 41 9 484
year
Share-based payment reserve movement 360 360
Regulatory risk reserve provision (10) (10)
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 (371) (371)
Additional tier 1 capital instruments (218) (218)
interest paid
Dividend to ordinary shareholders (4 665) (4 665)
Distribution of subsidiaries to (787) (244) (1 031)
shareholder
Preference shares held by 561 561
group entities
Total comprehensive income for the 11 653 (2) 11 651
year
Share-based payment reserve movement (94) (94)
Other movements (1) (1)
Audited balance at 31 December 2017 67 425 3 561 561 2 600 7 74 154
Summary consolidated statement of cashflows
for the year ended
31 December 31 December
2017 2016
(Audited) (Audited)
Rm Rm
Cash generated by operations 22 183 21 707
Change in funds for operating activities (19 139) (14 185)
Net cash from operating activities before taxation 3 044 7 522
Taxation paid (3 913) (4 020)
Cashflows (utilised by)/from operating activities (869) 3 502
Cashflows utilised by investing activities (6 197) (5 265)
Cashflows (utilised by)/from financing activities (4 346) 5 030
Effects of exchange rate changes on opening cash and cash equivalents ^ 772
Net (decrease)/increase in cash and cash equivalents (11 412) 4 039
Cash and cash equivalents at the beginning of the year(1) 38 380 34 341
Cash and cash equivalents at the end of the year(1) 26 968 38 380
^ Represents amounts less than R1m.
(1) Including mandatory reserve deposits with central banks.
NOTES TO THE AUDITED SUMMARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017*
Summary consolidated segmental reporting
for the year ended
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2017 2016 2017 2016 2017 2016 2017 2016
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm
Total assets Total liabilities Revenue(1) Headline earnings/(losses)
Nedbank Corporate and Investment 487 632 491 480 457 195 463 018 14 380 14 744 6 315 6 014
Banking
Nedbank Retail and Business Banking 326 225 304 842 298 413 278 588 30 102 29 071 5 302 4 960
Nedbank Wealth 66 832 62 042 62 947 58 655 4 393 4 384 1 068 1 192
Centre 65 138 71 469 45 178 55 803 341 (160) (88) (414)
Total for Nedbank Group 945 827 929 833 863 733 856 064 49 216 48 039 12 597 11 752
Fellow-subsidiary adjustments (41 866) (29 772) (33 926) (23 725) (4 109) (4 160) (1 286) (1 609)
Total 903 961 900 061 829 807 832 339 45 107 43 879 11 311 10 143
(1) Revenue is calculated as net interest income plus non-interest revenue.
During 2017 the Rest of Africa Cluster subsidiaries that had been owned by Nedbank Limited at 31 December 2016 were
transferred to Nedbank Group Limited. Comparative information has been restated accordingly.
Headline earnings reconciliation
for the year ended
31 December 31 December 31 December 31 December
2017 2017 2016 2016
(Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm
Change Gross Net of taxation Gross Net of taxation
(%)
Profit attributable to ordinary and 12,8 11 160 9 896
preference equity holders
Non-trading and capital items (38,9) 210 151 289 247
IAS 16: Loss on disposal of property and 47 35 44 44
equipment
IAS 38: Impairment of intangible assets 163 116 145 103
IAS 39: Loss on disposal of available-for-sale 94 94
financial assets
IAS 40: Loss on disposal of investment 6 6
properties
Headline earnings 11,5 11 311 10 143
Contingent liabilities and commitments
CONTINGENT LIABILITIES AND UNDRAWN FACILITIES
at
31 December 31 December
2017 2016
(Audited) (Audited)
Rm Rm
Guarantees on behalf of clients 26 710 22 177
Letters of credit and discounting transactions 2 837 3 360
Irrevocable unutilised facilities and other 101 336 101 566
130 883 127 103
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
31 December 31 December
2017 2016
(Audited) (Audited)
Rm Rm
Contracted 415 515
Not yet contracted 2 320 2 092
2 735 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.
Cashflow information
for the year ended
31 December 31 December
2017 2016
(Audited) (Audited)
Rm Rm
Acquisition of property and equipment, computer software and development costs and investment property (3 755) (3 776)
Issue of additional tier 1 capital instruments 600 2 000
Issue of long-term debt instruments 7 540 13 587
Redemption of long-term debt instruments (8 369) (6 502)
Dividends to ordinary shareholders (4 665) (4 250)
Preference share dividends paid (371) (377)
Additional tier 1 capital instruments interest paid (218) (78)
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 valuation techniques. 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 Total financial assets Total financial assets Total financial assets Total financial assets
assets recognised at amortised classified as level 1 classified as level 2 classified as level 3
cost
31 31 31 31 31 31 31 31 31 31
December December December December December December December December December December
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Cash and cash equivalents 26 968 38 380 26 968 38 380
Other short-term securities 73 472 68 218 25 193 33 184 37 48 279 34 997
Derivative financial 30 698 18 044 36 30 698 17 983 25
instruments
Government and other 48 749 50 687 28 862 22 393 5 173 15 881 14 714 12 413
securities
Loans and advances(1,2) 689 637 691 925 612 105 615 592 77 499 76 256 33 77
Other assets 7 332 8 164 7 332 8 159 5
Investments in private equity 3 053 2 350 3 053 2 350
associates, associate
companies and joint
arrangements
Investment securities 2 250 1 908 15 19 825 798 1 410 1 091
882 159 879 676 700 460 717 708 5 188 15 978 172 015 142 447 4 496 3 543
(1) Loans and advances of R10 128m 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 326m 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
Total financial liabilities recognised Total financial liabilities Total financial liabilities
liabilities at amortised cost classified as level 1 classified as level 2
31 31 31 31 31 31 31 31
December December December December December December December December
2017 2016 2017 2016 2017 2016 2017 2016
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm
Derivative financial 23 561 13 469 11 23 561 13 458
instruments
Amounts owed to 736 752 750 319 658 857 684 116 77 895 66 203
depositors
Provisions and other 13 047 11 739 10 611 9 127 2 405 2 235 31 377
liabilities (3)
Long-term debt 51 482 52 062 51 134 51 761 348 301
instruments
824 842 827 589 720 602 745 004 2 405 2 246 101 835 80 339
(3) Amounts owed to depositors of R9 332m 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
31 December 2017 (Audited) Opening Gains/(Losses) in non-interest Purchases and Sales and Closing
balance at revenue in profit for the year issues settlements balance at
1 Jan Rm Rm Rm 31 Dec
Rm Rm
FINANCIAL ASSETS
Derivative financial instruments 25 (25) -
Loans and advances 77 45 (89) 33
Investment securities 1 091 79 267 (27) 1 410
Investments in private-equity associates, 2 350 6 1 358 (661) 3 053
associate companies and joint arrangements
3 543 130 1 625 (802) 4 496
31 December 2016 (Audited) Opening Gains/(Losses) in Gains/(Losses) in fair-value adjustments Purchases Sales and Closing
balance at non-interest revenue in on available-for-sale assets in other and issues settlements balance at
1 Jan profit for the year comprehensive income for the year Rm Rm 31 Dec
Rm Rm 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 1 154 274 1 130 (208) 2 350
associates, 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.
Variance Value per Favourable Unfavourable
in fair statement change in change in
value of fair value fair value
financial
Significant position
31 December 2017 Valuation technique unobservable input % Rm Rm Rm
(Audited)
FINANCIAL ASSETS
Loans and advances Discounted Credit spreads Between 33 3 (4)
cashflows and discount (12,0) and 9,0
rates
Investment securities Discounted cashflows, Valuation multiples, Between 1 410 132 (166)
adjusted net asset correlations, (12,0) and 9,0
value, earnings volatilities and
multiples, third-party credit spreads
valuations, dividend
yields
Investments in Discounted cashflows, Valuation multiples Between 3 053 285 (359)
private-equity earnings multiples (12,0) and 9,0
associates, associate
companies and joint
arrangements
Total financial 4 496 420 (529)
assets classified as
level 3
Valuation technique Significant unobservable Variance Value per Favourable Unfavourable
input in fair statement of change in change in
value financial fair value fair value
position
31 December 2016 (Audited) % Rm Rm Rm
FINANCIAL ASSETS
Derivative financial Discounted cashflows Discount rates, earnings Between 25 2 (3)
instruments before interest, tax and (12) and 9
depreciation and
amortisation
Loans and advances Discounted cashflows Credit spreads and discount Between 77 7 (9)
rates (12) and 9
Investment securities Discounted cashflows, adjusted Valuation multiples, Between 1 091 103 (129)
net asset value, earnings correlations, volatilities (12) and 9
multiples, third-party and credit spreads
valuations, dividend yields
Investments in Discounted cashflows, earnings Valuation multiples Between 2 350 221 (278)
private-equity associates, multiples (12) and 9
associate companies and
joint arrangements
Total financial assets 3 543 333 (419)
classified as level 3
UNREALISED GAINS
The unrealised gains arising on instruments classified as level 3 include the following:
31 December 31 December
2017 2016
(Audited) (Audited)
Rm Rm
Private-equity gains 130 257
SUMMARY OF PRINCIPAL VALUATION TECHNIQUES — LEVEL 2 INSTRUMENTS (AUDITED)
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 rates 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
Adjusted net asset value Underlying price of market-traded instruments
Dividend yield method Dividend growth rates
Liabilities
Derivative financial instruments Discounted-cashflow model Discount rates
Black-Scholes model Risk-free rates 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
TRANSFERS BETWEEN LEVELS OF THE FAIR-VALUE HIERARCHY (AUDITED)
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 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 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
31 December 2017 (Audited)
Financial assets 666 160 661 408 23 993 29 962 607 453
Other short-term securities 25 193 25 130 25 130
Government and other securities 28 862 28 825 23 993 4 832
Loans and advances 612 105 607 453 607 453
Financial liabilities 51 134 52 028 23 975 28 053 -
Long-term debt instruments 51 134 52 028 23 975 28 053
Rm Carrying value Fair value Level 1 Level 2 Level 3
31 December 2016 (Audited)
Financial assets 671 169 661 807 21 828 33 128 606 851
Other short-term securities 33 184 33 128 33 128
Government and other securities 22 393 21 828 21 828
Loans and advances (1) 615 592 606 851 606 851
Financial liabilities 51 761 48 880 20 432 28 448 -
Long-term debt instruments 51 761 48 880 20 432 28 448
(1) Loans and advances of R10 128m were included in the previous year as held-for-trading assets, whereas these instruments were classified and measured as financial
assets at amortised cost. Loans and advances of R3 326m 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 held-for-trading, designated at fair value through profit or
loss and financial assets at amortised cost categories have been restated to reflect the correct classification.
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 disposal 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 133 146
assets
Cash outflows
Retail deposits and deposits from small-business clients 157 325 15 732
Less stable deposits 157 325 15 732
Unsecured wholesale funding 201 025 96 025
Operational deposits (all counterparties) and deposits in institutional networks of 102 176 25 544
cooperative banks
Non-operational deposits (all counterparties) 98 616 70 248
Unsecured debt 233 233
Secured wholesale funding 21 899 21
Additional requirements 88 957 12 988
Outflows related to derivative exposures and other collateral requirements 895 895
Outflows related to loss of funding on debt products 127 127
Credit and liquidity facilities 87 935 11 966
Other contractual funding obligations 4 4
Other contingent funding obligations 161 673 8 194
Total cash outflows 630 883 132 964
Cash inflows
Secured lending (eg reverse repurchase agreements) 9 137 22
Inflows from fully performing exposures 36 421 22 018
Other cash inflows 410 410
Total cash inflows 45 968 22 450
Total
adjusted
value
Total HQLA 133 146
Total net cash outflows 110 514
Liquidity coverage ratio (%) 120,5
(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 daily average over the quarter ended December 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: 02/03/2018 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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