Wrap Text
Update On Nedbank Group’s Performance For The Three Months To 31 March 2018 and Pillar 3 Basel III Capital Adequacy
OLD MUTUAL PLC
ISIN CODE: GB00B77J0862
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOMOL
Old Mutual plc
Ref 205/18
10 May 2018
Update On Nedbank Group’s Performance For The Three Months To 31 March 2018 And Pillar 3 Basel Iii Capital Adequacy, Leverage And
Liquidity Ratios At 31 March 2018
Nedbank Group Limited (“Nedbank Group”), the majority-owned South African banking subsidiary of Old Mutual plc, released its first quarter
performance update today, 10 May 2018.
The following is the full text of Nedbank Group’s announcement:
“UPDATE ON THE GROUP’S PERFORMANCE FOR THE THREE MONTHS TO 31 MARCH 2018
Nedbank Group produced a strong performance for the first three months of the year, underpinned by the return to profitability of Ecobank
Transnational Incorporated (ETI) in their fourth-quarter of 2017 (equity-accounted one quarter in arrear in Nedbank Group’s first quarter of 2018).
Managed Operations performed in line with our expectations. While business and consumer confidence levels have improved, the beneficial
impact thereof in the group’s performance to date has largely been limited to improved trading and market-related activities. Credit demand and
transactional activity has remained subdued, but an improvement is expected from the second half of 2018.
Net interest income grew at low- to mid-single-digit levels. The net interest margin (NIM) for the period widened ahead of the full-year 2017 level
of 3,62% led by advances and funding mix benefits, as well as improved asset pricing.
The group’s credit loss ratio (CLR) now reported under IFRS 9, increased in line with expectations and was slightly below the lower end of our 60
to 100 bps through-the-cycle target range.
Non-interest revenue grew just above mid-single-digit levels. Commission and fee growth reflects subdued levels of client transactional activity as
well as accounting impacts from IFRS 15, offset by continued cross-sell and gains in clients across our retail and wholesale businesses. In line with
the improved business sentiment, trading and private equity income grew strongly, while insurance income increased off a low base in the first
quarter of 2017.
Disciplined expense management resulted in expenses growing in line with our expectations.
Associate income from the group’s share of ETI’s attributable income is equity-accounted one quarter in arrear, based on ETI’s publicly disclosed
results. In Q1 2018 the group’s share of ETI’s attributable profit of US $16,5m for their fourth quarter in 2017 (announced on 21 March 2018) was
R42m (Q1 2017: R1 203m loss) and in Q2 2018 the group’s share of ETI’s attributable profit of US $77m for their first quarter in 2018 (announced
on 23 April 2018) is estimated at R198m (subject to exchange rate movements) (Q2 2017: R142m). As a result, the group’s associate income
relating to ETI for the first six months of 2018 is estimated at R240m (H1 2017: R1 061m loss).
Our earnings guidance for 2018 remains the same as announced on 2 March 2018, where we noted: ‘Reflecting on the impact on the group of the
greater levels of business and consumer confidence evident in the early part of 2018, an improving economic outlook, ongoing delivery on our
strategy and ETI’s returning to sustained levels of profitability, our guidance for growth in diluted headline earnings per share for 2018 is to be in
line with our medium-to-long-term target of greater than or equal to GDP plus CPI plus 5%.’
Shareholders are advised that the guidance is based on organic earnings and our latest macroeconomic outlook, and have not been reviewed or
reported on by the group’s auditors.
PILLAR 3 BASEL III CAPITAL ADEQUACY, LEVERAGE AND LIQUIDITY RATIOS AT 31 MARCH 2018
This quarterly Pillar 3 disclosure covers the operations of Nedbank Group Limited (group) as well as Nedbank Limited (bank) and complies with the
Basel Committee on Banking Supervision’s (BCBS) revised Pillar 3 disclosure requirements and the South African Reserve Bank’s (SARB) Directive
1/2018.
Nedbank Group
Mar 2018 Dec 2017 Sep 2017 Jun 2017 Mar 2017
Available capital
1 Common equity tier 1 (CET1) (Rm) 59 438 60 313 60 772 56 274 56 592
1a Fully loaded ECL accounting model (Rm) 59 438
2 Tier 1 (Rm) 63 623 64 737 65 200 60 689 60 390
2a Fully loaded ECL accounting model Tier 1 (Rm) 63 623
3 Total capital (Rm) 77 046 75 920 76 384 73 994 73 153
3a Fully loaded ECL accounting model total capital (Rm) 77 046
Risk-weighted assets
4 Total risk-weighted assets (RWA) (Rm) 542 314 528 206 522 810 516 051 508 793
Risk-based capital ratios as a percentage of RWA
5 Common equity tier 1 ratio (%) 11,0 11,4 11,6 10,9 11,1
5a Fully loaded ECL accounting model common equity tier 1 (%) 11,0
6 Tier 1 ratio (%) 11,7 12,3 12,5 11,8 11,9
6a Fully loaded ECL accounting model tier 1 ratio (%) 11,7
7 Total capital ratio (%) 14,2 14,4 14,6 14,3 14,4
7a Fully loaded ECL accounting model total capital ratio (%) 14,2
Additional CET1 buffer requirements as a percentage of RWA
8 Capital conservation buffer requirement (%) 1,875 1,25 1,25 1,25 1,25
9 Countercyclical buffer requirement (%)
10 Bank G-SIB and/or D-SIB additional requirements (%)
11 Total of bank CET1 specific buffer requirements (row 8 + row 9 + row 10) (%) 1,875 1,25 1,25 1,25 1,25
12 CET1 available after meeting the bank’s minimum capital requirements (%) 3,6 4,2 4,4 3,7 3,9
Basel III leverage ratio
13 Total Basel III leverage ratio exposure measure (Rm) 1 019 589 1 009 172 1 013 565 1 000 130 999 644
14 Basel III leverage ratio (row 2/row 13) (%) 6,2 6,4 6,4 6,1 6,0
14a Fully loaded ECL accounting model Basel III leverage ratio (row 2a /row13) (%) 6,2
Liquidity Coverage Ratio
15 Total HQLA (Rm) 139 476 138 180 151 314 144 568 141 704
16 Total net cash outflow (Rm) 132 001 118 956 125 652 138 260 144 159
17 LCR ratio (%) 105,7 116,2 120,0 104,6 98,3
Basel III capital adequacy
Both the group and bank remain well capitalised at levels significantly above the minimum regulatory requirements. The common-equity
tier 1 ratios of 12,5% (December 2017: 12,6%) and 12,3% (December 2017: 12,6%), respectively are reflective of organic capital generation
and growth in risk weighted assets during the period and include the full impact of the implementation of IFRS 9 on 1 January 2018. The
group CET 1 capital ratio also decreased marginally following the strengthening of the ZAR against the USD during the period. The total tier
1 and total capital adequacy ratios were adversely impacted by a further grandfathering of old-style preference shares (R531m) in January
2018 in line with the Basel III transitional arrangements. The total CARs were positively impacted by the issuance of further new-style tier 2
capital of R2bn during March 2018.
The following table sets out the capital ratios including unappropriated profits at 31 March 2018:
% Nedbank Group Nedbank Limited
Including unappropriated profits
Common-equity tier 1 capital 12,5 12,3
Tier 1 capital 13,2 13,3
Total capital 15,7 16,5
OV1: OVERVIEW OF RISK-WEIGHTED ASSETS
Nedbank Group Nedbank Limited(1)
Mar 2018 Dec 2017 Mar 2018 Dec 2017
RWA MRC(2) RWA RWA MRC(2) RWA
1 Credit risk 365 177 40 626 356 893 305 159 33 949 295 646
2 Standardised Approach 38 064 4 235 37 410 415 46 426
3 AIRB Approach 327 113 36 391 319 483 304 744 33 903 295 220
4 Counterparty credit risk 27 269 3 034 23 921 26 583 2 957 23 169
5 Current Exposure Method 27 269 3 034 23 921 26 583 2 957 23 169
7 Equity positions in banking book under Market-based Approach 27 537 3 063 26 927 20 482 2 279 20 386
Securitisation exposures in banking book under Internal Ratings-based
12 Approach 546 61 621 546 61 621
16 Market risk 21 157 2 354 17 142 18 240 2 029 14 046
17 Standardised Approach 3 750 417 3 643 1 394 155 1 222
18 Internal Model Approach 17 407 1 937 13 499 16 846 1 874 12 824
19 Operational risk 66 333 7 379 66 333 57 664 6 415 57 664
21 Standardised Approach 6 030 671 6 030 16 1 16
22 Advanced Measurement Approach 52 596 5 851 52 596 50 380 5 605 50 380
24 Floor adjustment 7 707 857 7 707 7 268 809 7 268
Amounts below the thresholds for deduction (subject to 250% risk
12 956 1 441 15 016 2 373 264 2 058
23 weighting)
25 Other assets (100% risk weighting) 21 339 2 374 21 353 18 096 2 013 17 616
26 Total 542 314 60 332 528 206 449 143 49 967 431 206
(1) Nedbank Limited refers to the SA reporting entity in terms of regulation 38 (BA700) of the regulations relating to banks issued in terms of the Banks Act (Act No 94 of 1990).
(2) Total minimum required capital (MRC) is measured at 11,125% in line with the transitional requirements and excludes bank-specific Pillar 2b and D-SIB capital requirements.
Credit RWA
Nedbank Limited’s lending portfolios make up approximately 94% of the total credit extended by the group and utilise the AIRB
Approach. The lending portfolios of Nedbank Private Wealth International, the Rest of Africa subsidiaries and some of the legacy
Imperial Bank portfolio remain on TSA.
CR8: RWA FLOW STATEMENTS OF CREDIT RISK EXPOSURES UNDER AIRB
Rm RWA
1 RWA at 31 December 2017 319 483
2 Asset size 4 567
3 Asset quality 1 552
4 Model updates 1 500
5 Methodology and policy
6 Acquisitions and disposals
7 Foreign exchange movements
8 Other 11
9 RWA at 31 March 2018 327 113
Market RWA
Trading activity in Nedbank Corporate and Investment Banking (CIB) is primarily focused on client activities and flow trading. This includes market
making and the facilitation of client business in the foreign exchange, interest rate, equity, credit and commodity markets. There were no
incremental or comprehensive risk capital charges.
MR3: RWA FLOW STATEMENT OF MARKET RISK EXPOSURES UNDER IMA
Rm VaR Stressed VaR Total RWA
1 RWA at 31 December 2017 5 066 8 433 13 499
2 Movement in risk levels 1 319 700 2 018
3 Model updates/changes
4 Methodology and policy
5 Acquisitions and disposals
6 Foreign exchange movements 467 1 422 1 890
7 Other
8 RWA at 31 March 2018 6 852 10 555 17 407
Leverage ratio
The leverage ratio is a supplementary measure to risk-based capital requirements. The leverage ratios of both the group and
bank are well above minimum regulatory requirements.
LR1: SUMMARY COMPARISON OF ACCOUNTING ASSETS VS LEVERAGE RATIO EXPOSURE MEASURE
Item Mar 2018
1 Total consolidated assets as per published financial statements 993 447
Adjustment for investments in banking, financial, insurance or commercial entities that are consolidated for accounting
2 purposes but outside the scope of regulatory consolidation
Adjustment for fiduciary assets recognised on the balance sheet pursuant to the operative accounting framework but
3 excluded from the leverage ratio exposure measure
4 Adjustments for derivative financial instruments (5 315)
5 Adjustment for securities financing transactions (ie repos and similar secured lending) (16 243)
6 Adjustment for off-balance sheet items (ie conversion to credit equivalent amounts of off-balance sheet exposures) 51 142
7 Other adjustments (3 442)
8 Leverage ratio exposure 1 019 589
LR2: LEVERAGE RATIO COMMON DISCLOSURE TEMPLATE
Item Mar 2018 Dec 2017
On-balance sheet exposures
1 On-balance sheet items (excluding derivatives and SFTs, but including collateral) 956 768 941 050
2 Asset amounts deducted in determining Basel III Tier 1 capital (13 718) (15 445)
3 Total on-balance sheet exposures (excluding derivatives and SFTs) (sum of lines 1 and 2) 943 050 925 605
Derivative exposures
4 Replacement cost associated with all derivatives transactions (ie net of eligible cash variation
margin) 19 559 25 358
5 Add-on amounts for PFE associated with all derivatives transactions 13 818 13 372
6 Gross-up for derivatives collateral provided where deducted from the balance sheet assets
pursuant to the operative accounting framework 1 363 1 452
7 Deductions of receivables assets for cash variation margin provided in derivatives transactions (142)
8 Exempted CCP leg of client-cleared trade exposures (10 826) (8 791)
9 Adjusted effective notional amount of written credit derivatives 395 1 845
10 Credit derivatives (protection bought) (same reference name with equal to or greater remaining
maturity) (680) (1 998)
11 Total derivative exposures (sum of lines 4 to 10) 23 629 31 096
Securities financing transaction exposures
12 Gross SFT assets (with no recognition of netting), after adjusting for sale accounting transactions 18 109 17 366
13 Netted amounts of cash payables and cash receivables of gross SFT assets (17 333) (16 758)
14 CCR exposure for SFT assets 776 609
15 Agent transaction exposures 216 112
16 Total securities financing transaction exposures (sum of lines 12 to 15) 1 768 1 329
Other off-balance sheet exposures
17 Off-balance sheet exposure at gross notional amount 197 398 197 398
18 Adjustments for conversion to credit equivalent amounts (146 256) (146 256)
19 Off-balance sheet items (sum of lines 17 and 18) 51 142 51 142
Capital and total exposures
20 Tier 1 capital 63 623 64 737
21 Total exposures (sum of lines 3, 11, 16 and 19) 1 019 589 1 009 172
Leverage ratio(1)
22 Basel III leverage ratio (%) 6,2 6,4
(1) Basis of preparation for the leverage ratio is quarterly averaging.
Liquidity coverage ratio (LCR)
In accordance with the provisions of section 6(6) of the Banks Act, 1990 (Act No 94 of 1990), banks are directed to comply with
the relevant LCR disclosure requirements, as set out in Directive 6/2014, Directive 11/2014 and Directive 1/2018.
The LCR aims to ensure that a bank holds an adequate stock of unencumbered high quality liquid assets (HQLA) to cover total
net cash outflows over a 30-day period under a prescribed stress scenario. Based on the final revisions announced by the Basel
Committee the LCR is being phased-in by 10% each year and will reach a minimum requirement of 100% from 1 January 2019.
The figures below reflect the simple average of daily observations over the quarter ending 31 March 2018 for Nedbank Limited
and the simple average of the month-end values at 31 January 2018, 28 February 2018 and 31 March 2018 for all non-SA
banking entities. The figures are based on the regulatory submissions to SARB.
Nedbank Group Limited(1) Nedbank Limited
Total Total Total Total
unweighted weighted unweighted weighted
value(2) value(3) value(2) value(3)
Rm (average) (average) (average) (average)
1 Total HQLA 139 476 134 784
Cash outflows
2 Retail deposits and deposits from small-business clients, of which 175 866 17 428 160 521 16 052
3 stable deposits 3 162 158
4 less stable deposits 172 704 17 270 160 521 16 052
5 Unsecured wholesale funding, of which 246 276 121 572 214 762 107 157
6 operational deposits (all counterparties) and deposits in institutional networks
of cooperative banks 123 490 30 883 105 495 26 374
7 non-operational deposits (all counterparties) 122 313 90 216 109 083 80 599
8 unsecured debt 473 473 184 184
9 Secured wholesale funding 24 109 23 882
10 Additional requirements, of which 101 903 17 602 91 974 14 759
11 outflows related to derivative exposures and other collateral requirements 758 758 723 723
12 outflows related to loss of funding on debt products
13 credit and liquidity facilities 101 145 16 844 91 251 14 036
14 Other contractual funding obligations
15 Other contingent funding obligations 164 688 8 531 155 642 8 068
16 Total cash outflows 712 842 165 133 646 781 146 036
Cash inflows
17 Secured lending 15 296 38 15 296 38
18 Inflows from fully performing exposures 50 036 32 332 37 196 21 817
19 Other cash inflows 4 263 4 143 522 522
20 Total cash inflows 69 595 36 513 53 014 22 377
21 Total HQLA 139 476 134 784
22 Total net cash outflows(4) 132 001 123 659
23 LCR (%) 105,7 109,0
(1) Only banking and/or deposit-taking entities are included and the group data represents an aggregation of the relevant individual net cash outflows and the individual HQLA
portfolios, where surplus HQLA holdings in excess of the minimum requirement of 90% for 2018 have been excluded from the aggregated HQLA number in the case of all non-SA
banking entities.
(2) Unweighted values are calculated as outstanding balances maturing or callable within 30 days (for inflows and outflows).
(3) Weighted values are calculated after the application of respective haircuts (for HQLA) or inflow and outflow rates (for inflows and outflows).
(4) Note that total cash outflows less total cash inflows may not be equal to total net cash outflows to the extent that regulatory caps have been applied to cash inflows as specified by the regulations.
The group's quarterly average LCR exceeded the minimum regulatory requirement of 90% applicable in 2018, where the group
maintains appropriate operational buffers designed to absorb seasonal and cyclical volatility in the LCR. Nedbank's portfolio of
LCR-compliant HQLA (comprising mainly of government bonds and treasury bills) increased to a quarterly average of R139,5bn,
up marginally from December 2017 where the portfolio amounted to R138,2bn. Nedbank will continue to procure additional
HQLA to support balance sheet growth and the LCR phase-in, while maintaining appropriately sized surplus liquid-asset buffers.
The lower LCR observed in the current quarter (105,7%), compared with the previous quarter (116,2%), relates to a business-
as-usual seasonal trends observed every year after the December holiday period.
Shareholders are advised that this report has not been reviewed or reported on by the group’s auditors.
Sandton
10 May 2018”
Enquiries
External communications
Patrick Bowes +44 20 7002 7440
Investor relations
Dominic Lagan (Old Mutual plc) +44 20 7002 7190
John-Paul Crutchley (Quilter) +44 20 7002 7016
Nwabisa Piki (Old Mutual Emerging Markets) +27 11 217 1951
Media
William Baldwin-Charles +44 20 7002 7133
+44 78 3452 4833
Notes to Editors
About Old Mutual plc
Old Mutual plc is a holding company for several financial services companies. In March 2016, it announced a new strategy of managed
separation entailing the separation of its underlying businesses into independently-listed, standalone entities.
BrightSphere Investment Group, a US based institutional asset manager, which rebranded from OM Asset Management in March 2018, is
now independent from Old Mutual. The remaining underlying businesses are:
OML (which includes Old Mutual Emerging Markets): OML has an ambition to become a premium financial services group in sub-Saharan
Africa and offers a broad spectrum of financial solutions to retail and corporate customers across key market segments in 17 countries.
Nedbank: Nedbank ranks as a top-5 bank by capital on the African continent and Ecobank, in which Nedbank maintains a 21.2% shareholding,
ranks within the top-10 banks by assets on the African continent.
Quilter: Quilter (formerly Old Mutual Wealth) is a leader in the UK and in selected offshore markets in wealth management, providing advice-
led investment solutions and investment platforms to over 900,000 customers, principally in the affluent market segment.
For the year ended 31 December 2017, Old Mutual reported an adjusted operating profit before tax of £2.0 billion. For further information
on Old Mutual plc and the underlying businesses, please visit the corporate website at www.oldmutualplc.com.
Sponsor:
Merrill Lynch South Africa (Pty) Ltd
Joint Sponsor:
Nedbank Corporate and Investment Banking
Date: 10/05/2018 08:01:00 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.
Sharenet Sites 
