Wrap Text
Unaudited Condensed Consolidated Interim Financial Results for the six months ended 30 June 2018
NEDBANK LIMITED
Reg No 1951/000009/06
Incorporated in the Republic of South Africa
JSE share code: NBKP
ISIN: ZAE 000043667
JSE alpha code: BINBK
('Nedbank Limited' or 'Nedbank')
Unaudited condensed consolidated interim financial results for the six months ended 30 June 2018
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 preference shares.
Commentary relating to the Nedbank condensed consolidated interim financial results is included in the Nedbank Group
results, as presented to shareholders on 7 August 2018. Further information is provided on the website at
nedbankgroup.co.za.
Board and group executive changes
Having served on the Nedbank Group board for nine years, Nomavuso Mnxasana resigned as an independent non-executive
director with effect from the close of Nedbank Group's annual general meeting on 10 May 2018. With managed separation
progressing according to plan, Peter Moyo was appointed as a non-executive director and Bruce Hemphill resigned from the
Nedbank board on 11 June 2018.
Khensani Nobanda was appointed as Group Executive for Group Marketing and Corporate Affairs on 15 May 2018, and Deborah
Fuller was appointed as Group Executive for Human Resources on 25 June 2018 following the retirement of Abe Thebyane on
31 March 2018.
Basis of preparation*
Nedbank Limited is a company domiciled in SA. The unaudited condensed consolidated interim financial results of the
group at and for the six months ended 30 June 2018 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 2018, 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 2018 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 SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee, Financial Pronouncements as issued by the Financial Reporting Standards Council and the
requirements of the Companies Act (Act No 71 of 2008) of SA. The accounting policies applied in the preparation of these
condensed consolidated interim financial statements are in terms of IFRS and are consistent with those used for the
previous annual financial statements, except for changes arising from the adoption of IFRS 9 and IFRS 15, as set out in
the notes to the condensed consolidated interim financial statements.
The directors of the group take full responsibility for the preparation of this report. The condensed consolidated
interim financial results have not been audited or independently reviewed by the group's external auditors. The group's
2017 annual financial information has been correctly extracted from the underlying audited consolidated annual financial
statements.
Events after the reporting period*
There are no material events after the reporting period to report on.
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 31
Notice is hereby given that gross preference dividend no 31 of 41,82076 cents per share has been declared for the period
from 1 January 2018 to 30 June 2018, payable on Monday, 27 August 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, 24 August 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 33,45661 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 the JSE, the relevant
dates for the payment of the dividend are as follows:
Last day to trade (cum dividend) Tuesday, 21 August 2018
Shares commence trading (ex dividend) Wednesday, 22 August 2018
Record date (date shareholders recorded in books) Friday, 24 August 2018
Payment date Monday, 27 August 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 22 August 2018, and Friday, 24 August
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 credited at their participant or broker
on Monday, 27 August 2018.
For and on behalf of the board
Vassi Naidoo Mike Brown
Chairman Chief Executive
7 August 2018
Registered office
Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, 2196. PO Box 1144, Johannesburg, 2000, SA.
Transfer secretaries
Link Market Services South Africa Proprietary Limited, 19 Ameshoff Street, Braamfontein, Johannesburg, 2001 SA. PO Box
4844, Marshalltown, 2000, SA.
Directors
V Naidoo (Chairman), MWT Brown** (Chief Executive), HR Brody, BA Dames, NP Dongwana, ID Gladman (British), EM Kruger,
RAG Leith, PM Makwana, L Manzini, Dr MA Matooane, RK Morathi** (Chief Financial Officer), MP Moyo, 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
JSE alpha code: BINBK
Unaudited condensed consolidated financial statements for the period ended 30 June 2018
Prepared under the supervision of the Nedbank Group CFO, Raisibe Morathi CA(SA).
Nedbank Limited Reg No 1951/000009/06.
Condensed consolidated
statement of comprehensive income
for the period ended
30 June 30 June 31 December
2018 2017 2017
Change (Unaudited) (Reviewed) (Audited)
(%) Rm Rm Rm
Interest and similar income 0,4 35 554 35 405 71 311
Interest expense and similar charges (0,2) 22 876 22 933 46 111
Net interest income 1,7 12 678 12 472 25 200
Impairments charge on loans and advances 17,4 1 741 1 483 3 030
Income from lending activities (0,5) 10 937 10 989 22 170
Non-interest revenue 1,4 9 866 9 733 19 907
Operating income 0,4 20 803 20 722 42 077
Total operating expenses 1,2 12 774 12 622 26 192
Indirect taxation 1,2 409 404 858
Profit from operations before non-trading and capital items (1,0) 7 620 7 696 15 027
Non-trading and capital items >(100) (61) (16) (210)
Profit from operations (1,6) 7 559 7 680 14 817
Share of (losses)/income of associate companies >(100) (40) 7 (96)
Profit from operations before direct taxation (2,2) 7 519 7 687 14 721
Total direct taxation 3,7 1 975 1 905 3 563
Direct taxation 1 993 1 909 3 622
Taxation on non-trading and capital items (18) (4) (59)
Profit for the period (4,1) 5 544 5 782 11 158
Other comprehensive (losses)/income (OCI) net of taxation >(100) (617) 114 493
Items that may subsequently be reclassified to profit or loss
Exchange differences on translating foreign operations 139 2 (29)
Fair-value adjustments on available-for-sale assets (3) (14)
Debt investments at fair value through OCI (FVOCI) - net change (130)
in fair value
Items that may not subsequently be reclassified to
profit or loss
(Losses)/Gains on property revaluations (23) 161
Remeasurements on long-term employee benefit assets (626) 138 375
Total comprehensive income for the period (16,4) 4 927 5 896 11 651
Profit attributable to:
- Ordinary and preference shareholders (4,2) 5 540 5 780 11 160
- Non-controlling interest - ordinary shareholders >100 4 2 (2)
Profit for the period (4,1) 5 544 5 782 11 158
Total comprehensive income attributable to:
- Ordinary and preference shareholders (16,5) 4 924 5 894 11 653
- Non-controlling interest - ordinary shareholders 50,0 3 2 (2)
Total comprehensive income for the period (16,4) 4 927 5 896 11 651
Condensed consolidated
statement of financial position
at
30 June 30 June 31 December
2018 2017 2017
Change (Unaudited) (Reviewed) (Audited)
(%) Rm Rm Rm
Assets
Cash and cash equivalents (52,6) 6 145 12 970 8 823
Other short-term securities (0,1) 71 677 71 731 73 472
Derivative financial instruments 42,0 26 864 18 919 30 698
Government and other securities 56,4 76 330 48 814 48 749
Loans and advances(1) 1,8 702 919 690 279 695 744
Other assets >100 11 403 5 460 7 332
Current taxation assets >100 788 44 75
Investment securities(2) 40,2 6 541 4 664 5 303
Non-current assets held for sale (35,5) 382 592 388
Investments in associate companies(2) (1,7) 229 233 224
Deferred taxation assets 59,3 43 27 37
Property and equipment (1,3) 7 642 7 745 7 976
Long-term employee benefit assets (16,4) 4 510 5 393 5 761
Mandatory reserve deposits with central banks 5,5 19 013 18 022 18 145
Intangible assets 24,7 8 109 6 505 7 341
Total assets 5,7 942 595 891 398 910 068
Equity and liabilities
Ordinary share capital 28 28 28
Ordinary share premium 19 182 19 182 19 182
Reserves 4,9 46 949 44 761 48 215
Total equity attributable to equity holders of the parent 3,4 66 159 63 971 67 425
Preference share capital and premium 3 561 3 561 3 561
Holders of preference shares 561 561 561
Holders of additional tier 1 capital instruments 1,8 2 647 2 600 2 600
Non-controlling interest attributable to ordinary shareholders (9,1) 10 11 7
Total equity 3,2 72 938 70 704 74 154
Derivative financial instruments 83,7 24 286 13 222 23 561
Amounts owed to depositors(1) 5,0 774 011 737 038 742 859
Provisions and other liabilities 45,1 14 767 10 176 14 047
Current taxation liabilities (53,5) 40 86 191
Deferred taxation liabilities (47,5) 363 692 351
Long-term employee benefit liabilities (21,2) 2 704 3 432 3 423
Long-term debt instruments (4,6) 53 486 56 048 51 482
Total liabilities 6,0 869 657 820 694 835 914
Total equity and liabilities 5,7 942 595 891 398 910 068
(1) During 2018 a detailed review was performed on offsetting, which indicated that at 31 December 2017 an asset of R6 107m (June 2017: R3 473m) was incorrectly set
off against a liability with the same counterparty. To correct this at 31 December 2017 loans and advances and amounts owed to depositors were restated by
R6 107m (June 2017: R3 473m). This restatement had no impact on information on previously reported for Nedbank Group.
(2) During the period the group reviewed the classification of certain investments on the statement of financial position. As a result of this review the group's
private-equity investments have been reclassified from investments in private-equity associates, associate companies and joint arrangements to investment
securities better to reflect the measurement of these investments at fair value. To provide comparability the prior-period balances have been restated
accordingly (30 June 2017: R2 549m; 31 December 2017: R3 053m). The investments in private-equity associates, associate companies and joint arrangements were
renamed investments in associate companies.
Condensed consolidated
statement of changes in equity
Total Equity Non-
equity attributable controlling
attributable Preference Equity to interest
to equity share attributable additional attributable
holders capital to tier 1 capital to
of the and preference instrument ordinary Total
the parent premium shareholders holders shareholders equity
Rm Rm Rm Rm Rm Rm
Audited balance at 31 December 2016 61 908 3 561 2 000 253 67 722
Additional tier 1 capital instruments issued 600 600
Preference share dividend (191) (191)
Additional tier 1 capital instruments interest paid (101) (101)
Dividend to ordinary shareholders (2 315) (2 315)
Distribution of subsidiaries to shareholder (787) (244) (1 031)
Preference shares held by group entities 561 561
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 3 561 561 2 600 11 70 704
Preference share dividend (180) (180)
Additional tier 1 capital instruments interest paid (117) (117)
Dividend to ordinary shareholders (2 350) (2 350)
Total comprehensive income for the period 5 759 (4) 5 755
Share-based payment reserve movement 343 343
Other movements (1) (1)
Audited balance at 31 December 2017 67 425 3 561 561 2 600 7 74 154
Impact of adopting IFRS 9, net of taxation (2 086) (2 086)
Impact of adopting IFRS 15, net of taxation (254) (254)
Restated balance at 31 December 2017 65 085 3 561 561 2 600 7 71 814
Preference share dividend (174) (174)
Additional tier 1 capital instruments interest paid (161) 47 (114)
Dividend to ordinary shareholders (3 050) (3 050)
Total comprehensive income for the period 4 924 3 4 927
Share-based payment reserve movement (477) (477)
Other movements 12 12
Unaudited balance at 30 June 2018 66 159 3 561 561 2 647 10 72 938
Condensed consolidated
statement of cashflows
for the period ended
30 June 30 June 31 December
2018 2017 2017
(Unaudited) (Reviewed) (Audited)
Rm Rm Rm
Cash generated by operations 11 206 11 143 22 183
Change in funds for operating activities (6 668) (16 305) (19 139)
Net cash from/(utilised by) operating activities before taxation 4 538 (5 162) 3 044
Taxation paid (1 948) (1 485) (3 913)
Cashflows from/(utilised by) operating activities 2 590 (6 647) (869)
Cashflows utilised by investing activities (3 048) (3 627) (6 197)
Cashflows (utilised by)/from financing activities (1 352) 2 886 (4 346)
Effects of exchange rate changes on opening cash and cash equivalents (1) (1) (1)
Net decrease in cash and cash equivalents (1 810) (7 388) (11 412)
Cash and cash equivalents at the beginning of the year(2) 26 968 38 380 38 380
Cash and cash equivalents at the end of the year(2) 25 158 30 992 26 968
(1 Represents amounts less than R1m.
(2) Including mandatory reserve deposits with central banks.
Notes to the unaudited condensed consolidated financial statements for the period ended 30 June 2018*
Significant accounting policies
Change in accounting policies: Financial instruments
IFRS 9: Financial Instruments (IFRS 9) was issued in July 2014 and has replaced IAS 39: Financial Instruments:
Recognition and Measurement (IAS 39). The standard was effective and was implemented by the group from 1 January 2018.
This standard incorporates amendments to the classification and measurement of financial instruments [see part (ii)],
hedge accounting guidance and the accounting requirements for the impairment of financial assets measured at amortised
cost and fair value through OCI [see part (iii)]. The group has elected to continue to apply the hedge accounting
requirements of IAS 39 on adoption of IFRS 9.
For notes disclosures the consequential amendments to IFRS 7: Financial Instruments: Disclosures have also been applied
only to the current period. Notes disclosures for the comparative period repeat those disclosures made in the previous
year. Set out below are disclosures relating to the impact of the adoption of IFRS 9 on the group.
The group's approach to transition is discussed and the resultant net impact on opening reserves on 1 January 2018 is
provided in part (i).
(i) Transition
As permitted by the transitional provisions of IFRS 9, the group has elected not to restate comparative figures. Any
adjustments to the carrying amounts of financial assets and financial liabilities at the date of transition have been
recognised in the opening retained earnings and other reserves at 1 January 2018. The following table illustrates the
impact on opening reserves on transition to IFRS 9. Further information relating to this impact is provided in part (ii)
and part (iii).
Balance at IFRS 9 IFRS 15 Adjusted
31 December transitional transitional balance at
2017 adjustments adjustments 1 January 2018
Rm (Audited) (Unaudited) (Unaudited) (Unaudited)
Ordinary share capital and share premium 19 210 19 210
Retained earnings 47 164 (2 706) (254) 44 204
Other reserves 1 051 620 1 671
Total equity attributable to equity holders of the parent 67 425 (2 086) (254) 65 085
Preference share capital and premium 3 561 3 561
Holders of preference shares 561 561
Non-controlling interest attributable to holders of additional tier 1 2 600 2 600
capital instruments
Non-controlling interest attributable to ordinary shareholders 7 7
Total equity 74 154 (2 086) (254) 71 814
(ii) Classification and measurement
Financial assets are classified based on:
- the business model within which the financial assets are held and managed; and
- the contractual cashflow characteristics of the financial assets, ie whether the cashflows represent 'solely payments of
principal and interest'.
Financial assets are measured at amortised cost if they are held within a business model of which the objective is to
hold those assets for the purpose of collecting contractual cashflows and those cashflows comprise solely payments of
principal and interest (ie 'hold to collect' business model).
Financial assets are measured at FVOCI if they are held within a business model of which the objective is achieved by
both collecting contractual cashflows and selling financial assets, and those contractual cashflows comprise solely
payments of principal and interest (ie 'hold to collect and sell' business model). Movements in the carrying amount of
these financial assets are taken through OCI, except for impairment gains or losses, interest revenue and foreign
exchange gains or losses, which are recognised in profit or loss. Where the financial asset is derecognised, the
cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss.
The remaining financial assets are measured at fair value through profit or loss (FVTPL). All derivative instruments
that are either financial assets or financial liabilities will continue to be classified as held for trading and
measured at FVTPL.
For equity investments that are held neither for trading nor for contingent consideration the group may irrevocably
elect to present subsequent changes in fair value of these equity investments in OCI. Where the equity investment is
derecognised, the cumulative gain or loss previously recognised in OCI is not reclassified from equity to profit or
loss. However, it may be reclassified in equity. Alternatively, where the group does not make the abovementioned
election, fair-value changes are recognised in profit or loss. This election is made on an investment-by-investment
basis. On initial recognition the group may irrevocably designate a financial asset otherwise meeting the requirements
for measurement at amortised cost or FVOCI, as FVTPL, if doing so eliminates or significantly reduces an accounting
mismatch that would otherwise arise.
The accounting for financial liabilities is largely unchanged, except for financial liabilities designated at FVTPL.
Changes in the fair value of these financial liabilities that are attributable to the group's own credit risk are
recognised in OCI. Where the financial liability is derecognised, the cumulative gain or loss previously recognised in
OCI is not reclassified from equity to profit or loss. However, it may be reclassified in equity.
On the initial application of IFRS 9 an entity may revoke its previous designation of financial assets and financial
liabilities measured at FVTPL (fair-value option), with the loans being reclassified in amortised cost or FVOCI,
depending on the entity's business model for the asset.
The following table facilitates a measurement category comparison between IAS 39 and IFRS 9:
IFRS 9 measurement categories
Carrying FVOCI FVTPL Non-
amount IFRS 9: Carrying Mandatory Designated financial
31 IFRS 9: Classific- amount Debt Equity at at assets,
December ECL ation and IFRS 15: 1 January Amortised instrum- instrum- fair fair liabilities
2017 remeasurement measurement Revenue 2018 cost ents ent value value and equity
Rm (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Amortised 700 460 (2 567) 54 697 947 676 887 18 582 2 478
Cost
FVTPL 174 865 (258) 174 607 57 800 116 807
Available for sale 3 781 3 781 3 351 430
Non-financial 24 855 775 60 25 690 25 690
assets
Total assets 903 961 (1 792) (144) - 902 025 738 038 18 582 430 119 285 - 25 690
Financial 720 602 202 (112) 720 692 720 692
liabilities
at amortised
cost
FVTPL 104 240 104 240 59 791 44 449
Non-financial
liabilities 4 965 31 254 5 250 5 250
Equity 74 154 (1 994) (63) (254) 71 843 71 843
Total equity
and liabilities 903 961 (1 792) (144) - 902 025 780 483 - - 44 449 - 77 093
The following table illustrates the original assessment categories under IAS 39, the new measurement categories under
IFRS 9 for each class of the group's financial assets at 1 January 2018 and the reclassifications between the IAS 39
measurement categories and the IFRS 9 measurement categories:
Carrying IFRS 9: IFRS 9: IFRS 15: Carrying IFRS 9 reclassification to:
amount ECL Classificat Revenue amount Amortised FVOCI FVTPL
31 remeasurem- ion and 1 January cost(1) Debt Equity Mandatory Designated
December ent measurement 2018 instruments(2) instruments at fair at fair Non-financial
2017 value(3) value assets
Rm (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Financial assets
Cash and cash 8 823 8 823 8 823
equivalents
Other 73 472 (2) 73 470 26 659 46 811
short-term
securities
Derivative 30 698 30 698 30 698
financial
instruments
Government and 48 749 (3) 39 48 785 32 249 16 536
other securities
Loans and advances 689 637 (2 546) (504) 686 587 644 846 18 582 23 159
Other assets 7 332 (16) 7 316 7 316
Investment 2 250 261 2 511 430 2 081
securities
Investments in 3 053 3 053 3 053
associate
companies
Mandatory 18 145 18 145 18 145
reserve
deposits with
central banks
Current and 112 775 60 947 947
deferred
taxation assets
Other 21 690 21 690 21 690
non-financial
assets
Total assets 903 961 (1 792) (144) - 902 025 738 038 18 582 430 119 285 - 25 690
Financial
liabilities
Derivative 23 561 23 561 23 561
financial
instruments
Amounts owed to 736 752 (112) 736 640 718 188 18 452
depositors
Provisions and 14 047 202 347 14 596 10 813 2 436 1 347
other
liabilities
Long-term 51 482 51 482 51 482
debt
instruments
Current and 542 31 (93) 480 480
deferred
taxation
liabilities
Other 3 423 3 423 3 423
non-financial
liabilities
Equity 74 154 (1 590) (63) (254) 72 247 72 247
Total equity 903 961 (1 388) (144) - 902 429 780 483 - - 44 449 - 77 497
and liabilities
(1) Macro fair-value hedge accounting solution - Nedbank has adopted a macro fair-value hedge accounting solution that accounts for changes in the fair value of
interest rate risk.
(2) Held for distribution (FVOCI) - In light of the business model requirements certain instruments have been reclassified from amortised cost to FVOCI.
(3) Held for sale (FVTPL) - In light of the business model requirements certain instruments have been reclassified from amortised cost to FVTPL.
The following table illustrates the IFRS 9 classification and measurement transitional impact:
Hedge accounting(1) FVOCI business FVTPL business model and Review of effective Classification and
model(2) contractual cashflows(3) interest rate guidance measurement
Assets
Cash, government and other securities, and 39 39
derivative financial instruments
Loans and advances (297) 820 (369) (658) (504)
Current and deferred taxation assets 72 (227) 31 184 60
Investment securities 261 261
Total assets (186) 593 (77) (474) (144)
Total equity (105) 593 (77) (474) (63)
Amounts owed to depositors and other (112) (112)
liabilities
Current and deferred taxation liabilities 31 31
Total liabilities (81) - - - (81)
Total liabilities and equity (186) 593 (77) (474) (144)
(1) Macro fair-value hedge accounting solution - Nedbank has adopted a macro fair-value hedge accounting solution that accounts for changes in the fair value of
interest rate risk.
(2) Held for distribution (FVOCI) - In light of the business model requirements certain instruments have been reclassified from amortised cost to FVOCI.
(3) Held for sale (FVTPL) - In light of the business model requirements certain instruments have been reclassified from amortised cost to FVTPL.
On initial application of IFRS 9 on 1 January 2018 the group elected to revoke the existing designation of R58bn of
loans classified in FVTPL and R60bn of amounts due to depositors classified at FVTPL under the fair-value option of IAS
39, and reclassified the underlying assets and liabilities in amortised cost.
(iii) Impairments
Impairments in terms of IFRS 9 are determined based on an ECL model, as opposed to an incurred loss model in terms of
IAS 39. The ECL model applies to financial assets measured at amortised cost and debt instruments at FVOCI, lease
receivables and certain loan commitments as well as financial guarantee contracts.
Under IFRS 9 loss allowances are measured on either of the following bases:
- twelve-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting
date; and
- lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial
instrument.
The group is required to recognise an allowance for either 12-month or lifetime ECLs, depending on whether there has
been a significant increase in credit risk (SICR) since initial recognition. Indicators of a SICR in the retail
portfolio may include any of the following:
- Short-term forbearance.
- Direct debit cancellation.
- Extension to the terms granted.
- Previous arrears within the past months.
Indicators of a significant increase in credit risk in the wholesale portfolio may include any of the following:
- Significant increase in the credit spread.
- Significant adverse changes in business, financial and/or economic conditions in which the client operates.
- Actual or expected forbearance or restructuring.
- Significant change in collateral value.
- Early signs of liquidity and cashflow problems, such as a delay in the servicing of trade creditors/loans.
Measurement of ECLs
The measurement of ECLs reflects a probability-weighted outcome, the time value of money and the entity's best available
forward-looking information. The abovementioned probability-weighted outcome considers the possibility of a credit loss
occurring and the possibility of no credit loss occurring, even if the possibility of a credit loss occurring is low.
Credit losses are measured as the present value of all cash shortfalls (ie the difference between the cashflows due to
the entity in accordance with the contract and the cashflows that the group expects to receive). ECLs are discounted at
the effective interest rate of the financial asset.
The assessment of the ECL of a financial asset or portfolio of financial assets entails estimations of the likelihood of
defaults occurring and of default correlations between counterparties. The group measures ECL using probability of
default (PD), exposure at default (EAD) and loss given default (LGD). These three components are multiplied together and
adjusted for the likelihood of default. The calculated ECL is then discounted using the original effective interest rate
of the financial asset.
The assessment of SICR and the calculation of ECL both incorporate forward-looking information. The group has performed
historical analyses and identified the key economic variables impacting credit risk and ECL for each portfolio. These
economic variables and their associated impact on the PD, EAD and LGD vary by financial instrument. The group's
economics unit provides a forecast of economic variables and an overview of the economy quarterly or more often if
necessary. Significant judgement and estimates are applied in this process of incorporating forward-looking information
into the SICR assessment and ECL calculation.
Credit-impaired financial assets
At each reporting date the group assesses whether financial assets carried at amortised cost and debt securities at
FVOCI are credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact
on the estimated future cashflows of the financial asset have occurred. The group's definition of credit-impaired is
aligned to our internal definition of default.
Presentation of impairment
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the
assets, and the amortised cost is presented on the face of the statement of financial position.
For debt securities at FVOCI the loss allowance is recognised in OCI, instead of reducing the carrying amount of the
asset.
For off-balance-sheet exposures, such as financial guarantee contracts, the loss allowance is presented in 'Provisions
and other liabilities' on the face of the statement of financial position.
The following table illustrates the closing specific and portfolio impairment allowances in terms of IAS 39 and the
opening impairment allowances in terms of IFRS 9:
IAS 39 impairment provisions IFRS 9 ECL provision at 1 January 2018
at 31 December 2017
Portfolio Specific Total Reclassification Stage 1: Stage 2: Stage 3: Total ECL ECL impact
impairment impairment IAS 39 in FVTPL 12-month Lifetime ECL Lifetime ECL on
provision ECL allowance - allowance - 1 January
allowance not credit-impaired 2018
credit-impaired
Rm (Audited) (Audited) (Audited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Financial assets
Loans and advanc 4 750 6 605 11 355 (545) 2 495 3 696 7 165 13 356 (2 546)
es
Home loans 461 1 226 1 687 256 615 1 381 2 252 (565)
Commercial 494 314 808 308 208 318 834 (26)
mortgages
Properties in 24 24 2 1 25 28 (4)
possession
Credit cards 127 1 252 1 379 418 506 1 229 2 153 (774)
Overdrafts 123 526 649 91 136 459 686 (37)
Other loans to 2 100 2 047 4 147 (501) 734 1 336 2 252 4 322 (676)
clients
Net finance 1 246 1 203 2 449 660 841 1 501 3 002 (553)
lease and
instalment
debtors
Preference 199 13 212 (44) 26 53 79 89
shares and
debentures
Other - 2 2 (2)
short-term
securities
Government and - 3 3 (3)
other securities
Other assets - 15 1 16 (16)
Financial
liabilities
Provisions and - 80 64 58 202 (202)
other
liabilities
Total 4 750 6 605 11 355 (545) 2 595 3 761 7 223 13 579 (2 769)
Total ECL - 23 144 167
recognised on
FVOCI loans and
advances
Total ECL - 2 572 3 617 7 223 13 412
allowance per
statement of
financial
position
Total - - - - 2 595 3 761 7 223 13 579 -
A reconciliation between the opening balances of the IFRS 9 ECL allowance and the closing balances at 30 June 2018 is
provided below:
Not credit-impaired Credit-impaired
Subject to 12-month ECL Subject to lifetime ECL Subject to lifetime ECL - credit-impaired Total
Rm (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Beginning of the period - 1 January 2018 2 595 3 761 7 223 13 579
New financial assets originated or purchased 946 43 39 1 028
Financial assets derecognised/written-off (24) (43) (2 316) (2 383)
Repayments (214) 171 (216) (259)
Transfers to 12-month ECL (stage 1) 182 (550) (170) (538)
Transfers to lifetime ECL (not credit-impaired - stage 2) (276) 1 467 (351) 840
Transfers to lifetime ECL (credit-impaired - stage 3) (517) (1 182) 3 392 1 693
Foreign exchange and other movements (8) (115) (128) (251)
End of the period - 30 June 2018 2 684 3 552 7 473 13 709
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
2018 2017 2017 2018 2017 2017 2018 2017 2017 2018 2017 2017
(Unaudited) (Reviewed) (Audited) (Unaudited) (Reviewed) (Audited) (Unaudited) (Reviewed) (Audited) (Unaudited) (Reviewed) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Total assets Total liabilities Revenue(1) Headline earnings/(losses)
Nedbank Corporate and 497 796 479 359 487 632 464 671 448 288 457 195 7 407 6 997 14 380 3 296 3 211 6 315
Investment Banking
Nedbank Retail and 337 549 311 490 326 225 309 621 284 075 298 413 15 181 14 780 30 102 2 581 2 544 5 302
Business Banking
Nedbank Wealth 69 778 66 621 66 832 65 662 62 857 62 947 2 229 2 150 4 393 519 519 1 068
Centre 74 352 72 737 65 138 57 081 57 116 45 178 124 150 341 55 89 (88)
Total for Nedbank Group 979 475 930 207 945 827 897 035 852 336 863 733 24 941 24 077 49 216 6 451 6 363 12 597
Fellow-subsidiary (36 880) (38 809) (35 759) (27 378) (31 642) (27 819) (2 397) (1 872) (4 109) (868) (571) (1 286)
adjustments(2)
Total 942 595 891 398 910 068 869 657 820 694 835 914 22 544 22 205 45 107 5 583 5 792 11 311
(1) Revenue is calculated as net interest income plus non-interest revenue.
(2) During 2018 a detailed review was performed on offsetting, which indicated that at 31 December 2017 an asset of R6 107m (June 2017: R3 473m) was incorrectly set
off against a liability with the same counterparty. To correct this at 31 December 2017 loans and advances and amounts owed to depositors were restated by R6
107m (June 2017: R3 473m).
Headline earnings
reconciliation
for the period ended
30 Jun 30 Jun 30 Jun 30 Jun 31 Dec 31 Dec
2018 2018 2017 2017 2017 2017
(Unaudited) (Unaudited) (Reviewed) (Reviewed) (Audited) (Audited)
Change Rm Rm Rm Rm Rm Rm
(%) Gross Net of taxation Gross Net of taxation Gross Net of taxation
Profit attributable to ordinary and preference (4,2) 5 540 5 780 11 160
equity holders
Non-trading and capital items >100 61 43 16 12 210 151
IAS 16: Loss on disposal of property and equipment 5 3 16 12 47 35
IAS 38: Impairment of property, equipment and 56 40 163 116
intangible assets
Headline earnings (3,6) 5 583 5 792 11 311
Contingent liabilities and commitments
CONTINGENT LIABILITIES AND UNDRAWN FACILITIES
at 30 June 30 June 31 December
2018 2017 2017
(Unaudited) (Reviewed) (Audited)
Rm Rm Rm
Guarantees on behalf of clients 29 309 21 475 26 710
Letters of credit and discounting transactions 2 731 3 342 3 006
Irrevocable unutilised facilities and other 135 624 93 179 101 336
167 664 117 996 131 052
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 be foreseen at present.
COMMITMENTS
Capital expenditure approved by directors
at 30 June 30 June 31 December
2018 2017 2017
(Unaudited) (Reviewed) (Audited)
Rm Rm Rm
Contracted 324 395 415
Not yet contracted 2 320 2 320 2 320
2 644 2 715 2 735
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 period.
Cashflow information
for the period ended 30 June 30 June 31 December
2018 2017 2017
(Unaudited) (Reviewed) (Audited)
Rm Rm Rm
Acquisition of property and equipment, computer software and
development costs and investment property (1 610) (1 429) (3 755)
Issue of additional tier 1 capital instruments 600 600
Issue of long-term debt instruments 4 403 7 080 7 540
Redemption of long-term debt instruments (2 370) (3 094) (8 369)
Dividends to ordinary shareholders (3 050) (1 408) (4 665)
Preference share dividends paid (174) (191) (371)
Additional tier 1 capital instruments interest paid (161) (101) (218)
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, a 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 those of 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 Total financial Total financial Total financial assets
assets assets assets assets classified as level 3
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 30 Jun 30 Jun 31 Dec
2018 2017 2017 2018 2017 2017 2018 2017 2017 2018 2017 2017 2018 2017 2017
(Unaudited) (Reviewed) (Audited) (Unaudited) (Reviewed) (Audited) (Unaudited) (Reviewed) (Audited) (Unaudited) (Reviewed) (Audited) (Unaudited) (Reviewed) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Cash and 25 158 30 992 26 968 25 158 30 992 26 968
cash
equivalents
Other 71 677 71 731 73 472 26 770 27 810 25 193 3 44 907 43 918 48 279
short-term
securities
Derivative 26 864 18 919 30 698 24 103 26 840 18 816 30 698
financial
instruments
Government 76 330 48 814 48 749 49 328 29 033 28 862 22 818 8 918 5 173 4 184 10 863 14 714
and other
securities
Loans and ad 702 919 690 279 695 744 666 796 615 126 618 212 508 35 615 75 031 77 499 122 33
vances(1)
Other assets 11 403 5 460 7 332 11 403 5 460 7 332
Investment 6 541 4 664 5 303 49 14 15 764 936 825 5 728 3 714 4 643
securities(2)
920 892 870 859 888 266 779 455 708 421 706 567 23 399 9 038 5 188 112 310 149 564 172 015 5 728 3 836 4 496
(1) During 2018 a detailed review was performed on offsetting, which indicated that at 31 December 2017 an asset of R6 107m (June 2017: R3 473m) was incorrectly set
off against a liability with the same counterparty. To correct this at 31 December 2017 loans and advances and amounts owed to depositors were restated by R6
107m (June 2017: R3 473m).
(2) During the period the group reviewed the classification of certain investments on the statement of financial position. As a result of this review the group's
private-equity investments have been reclassified from investments in private-equity associates, associate companies and joint arrangements to investment
securities better to reflect the measurement of these investments at fair value. To provide comparability the prior-period balances have been restated
accordingly (30 June 2017: R2 549m; 31 December 2017: R3 053m).
FINANCIAL LIABILITIES
Total financial Total financial liabilities Total financial liabilities Total financial liabilities
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
2018 2017 2017 2018 2017 2017 2018 2017 2017 2018 2017 2017
(Unaudited) (Reviewed) (Audited) (Unaudited) (Reviewed) (Audited) (Unaudited) (Reviewed) (Audited) (Unaudited) (Reviewed) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Derivative 24 286 13 222 23 561 17 53 24 269 13 169 23 561
financial
instruments
Amounts owed to 774 011 737 038 742 859 739 030 664 439 664 964 34 981 72 599 77 895
depositors(1)
Provisions and 13 378 9 143 13 047 11 167 8 165 10 611 2 066 978 2 405 145 31
other
liabilities
Long-term debt 53 486 56 048 51 482 53 486 55 643 51 134 405 348
instruments
865 161 815 451 830 949 803 683 728 247 726 709 2 083 1 031 2 405 59 395 86 173 101 835
(1) During 2018 a detailed review was performed on offsetting, which indicated that at 31 December 2017 an asset of R6 107m (June 2017: R3 473m) was incorrectly set
off against a liability with the same counterparty. To correct this at 31 December 2017 loans and advances and amounts owed to depositors were restated by R6
107m (June 2017: R3 473m).
LEVEL 3 RECONCILIATION
30 June 2018 Opening Losses in Transfers out Purchases Sales and Closing
(Unaudited) balance non-interest Rm and settlements balance at
at revenue in issues Rm 30 Jun
1 Jan profit for the Rm Rm
Rm period
Rm
FINANCIAL ASSETS
Investment 5 021 (174) (6) 1 022 (135) 5 728
securities 5 021 (174) (6) 1 022 (135) 5 728
30 June 2017 Opening Gains/(Losses) in Purchases Sales and Closing
(Reviewed) balance 'non-interest revenue' in and issues settlements balance at
at profit for the period Rm Rm 30 Jun
1 Jan Rm Rm
Rm
FINANCIAL ASSETS
Derivative financial 25 (7) (18) -
instruments
Loans and advances 77 45 122
Investment securities(1) 3 441 (52) 430 (105) 3 714
3 543 (14) 430 (123) 3 836
(1) During the period the group reviewed the classification of certain investments on the statement of financial position. As a result of this review the group's
private-equity investments have been reclassified from investments in private-equity associates, associate companies and joint arrangements to investment
securities better to reflect the measurement of these investments at fair value. To provide comparability the prior-period balances have been restated
accordingly (30 June 2017: R2 549m; 31 December 2017: R3 053m).
31 December 2017 Opening Gains in 'non-interest Purchases and Sales and Closing
(Audited) balance revenue' in profit for the issues settlements balance at
at year Rm Rm 31 Dec
1 Jan Rm Rm
Rm
FINANCIAL ASSETS
Derivative financial 25 (25) -
instruments
Loans and advances 77 45 (89) 33
Investment securities(1) 3 441 85 1 625 (688) 4 463
3 543 130 1 625 (802) 4 496
(1) During the period the group reviewed the classification of certain investments on the statement of financial position. As a result of this review the group's
private-equity investments have been reclassified from investments in private-equity associates, associate companies and joint arrangements to investment
securities better to reflect the measurement of these investments at fair value. To provide comparability the prior-period balances have been restated
accordingly (30 June 2017: R2 549m; 31 December 2017: R3 053m).
EFFECT OF CHANGES IN SIGNIFICANT UNOBSERVABLE ASSUMPTIONS TO REASONABLE POSSIBLE ALTERNATIVES — LEVEL 3 INSTRUMENTS
The fair value of financial instruments is, in certain circumstances, measured using valuation techniques that include
assumptions that are not market-observable. Where these scenarios apply, the group performs stress testing on the fair
value of the relevant instruments. When 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 technique Significant Variance Value per Favourable Unfavourable change
unobservable input in fair statement of change in in fair value
value financial fair value
position
30 June 2018 % Rm Rm Rm
(Unaudited)
FINANCIAL ASSETS
Investment securities Discounted cashflows, adjusted net Valuation multiples, Between 5 728 725 (585)
asset value, earnings multiples, correlations, (10) and 13
third-party valuations, dividend volatilities and
yields credit spreads
Total financial assets
calassifed as level 3 5 728 725 (585)
Valuation technique Significant Variance Value per Favourable Unfavourable change
unobservable input in fair statement of change in in fair value
value financial fair value
position
30 June 2017 % Rm Rm Rm
(Reviewed)
FINANCIAL ASSETS
Loans and advances Discounted cashflows Credit spreads and Between 122 11 (14)
discount rates (11,5) and
9,0
Investment securities(1) Discounted cashflows, adjusted net Valuation multiples, Between 3 714 338 (427)
asset value, earnings multiples, correlations, (11,5) and
third-party valuations, dividend volatilities and 9,0
yields credit spreads
Total financial assets 3 836 349 (441)
classified as level 3
(1) During the period the group reviewed the classification of certain investments on the statement of financial position. As a result of this review the group's
private-equity investments have been reclassified from investments in private-equity associates, associate companies and joint arrangements to investment
securities better to reflect the measurement of these investments at fair value. To provide comparability the prior-period balances have been restated
accordingly (30 June 2017: R2 549m; 31 December 2017: R3 053m).
Valuation technique Significant Variance in fair Value Favourable Unfavourable change
unobservable value per change in fair value
input statement in fair
of value
financial
position
31 December 2017 % Rm Rm
(Audited)
FINANCIAL ASSETS
Loans and advances Discounted Credit Between (12) and 9 33 3 (4)
cashflows spreads and
discount
rates
Investment Discounted Valuation Between (12) and 9 4 463 417 (525)
securities(1) cashflows, multiples,
adjusted net asset correlations,
value, earnings volatilities
multiples, and credit
third-party spreads
valuations,
dividend yields
Total financial assets
classifies as level 3 4 496 420 (529)
(1) During the period the group reviewed the classification of certain investments on the statement of financial position. As a result of this review the group's
private-equity investments have been reclassified from investments in private-equity associates, associate companies and joint arrangements to investment
securities better to reflect the measurement of these investments at fair value. To provide comparability the prior-period balances have been restated
accordingly (30 June 2017: R2 549m; 31 December 2017: R3 053m).
UNREALISED GAINS
The unrealised gains arising on instruments classified as level 3 include the following:
30 June 30 June 31 December
2018 2017 2017
(Unaudited) (Reviewed) (Audited)
Rm Rm Rm
Private-equity (losses)/gains (174) (14) 130
SUMMARY OF PRINCIPAL VALUATION TECHNIQUES — LEVEL 2 INSTRUMENTS (UNAUDITED)
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 (UNAUDITED)
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 and are measured 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 (Unaudited)
Financial assets 742 895 738 516 24 679 50 975 662 862
Other short-term securities 26 770 26 730 26 730
Government and other securities 49 329 48 924 24 679 24 245
Loans and advances 666 796 662 862 662 862
Financial liabilities 53 486 54 650 32 052 22 598 -
Long-term debt instruments 53 486 54 650 32 052 22 598
30 June 2017 (Reviewed)
Financial assets 671 969 664 274 23 914 32 635 607 725
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(1) 615 126 607 725 607 725
Financial liabilities 55 643 56 101 23 240 32 861 -
Long-term debt instruments 55 643 56 101 23 240 32 861
31 December 2017 (Audited)
Financial assets 672 267 667 515 23 993 29 962 613 560
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(1) 618 212 613 560 613 560
Financial liabilities 51 134 52 028 23 975 28 053 -
Long-term debt instruments 51 134 52 028 23 975 28 053
(1) During 2018 a detailed review was performed on offsetting, which indicated that at 31 December 2017 an asset of R6 107m (June 2017: R3 473m) was incorrectly set
off against a liability with the same counterparty. To correct this at 31 December 2017 loans and advances and amounts owed to depositors were restated by R6
107m (June 2017: R3 473m).
There have been no significant changes in the methodology used to estimate the fair value of the above instruments
during the period.
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 IFRS 9
expected credit losses, 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 (PD) and loss given defaults (LGDs) for the periods 2019 to 2021 (2017: for periods 2018 to 2020) are based on
the latest available internal data and is applied to the projected cashflows of the first three years. 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 value(1) Total weighted
value(2)
Rm (average) (average)
Total high-quality liquid assets 143 061
Cash outflows
Retail deposits and deposits from small-business clients 160 143 16 014
Less stable deposits 160 143 16 014
Unsecured wholesale funding 217 616 112 983
Operational deposits (all counterparties) and deposits in institutional networks of cooperative 102 131 25 533
banks
Non-operational deposits (all counterparties) 115 008 86 973
Unsecured debt 477 477
Secured wholesale funding 24 614
Additional requirements 97 390 16 937
Outflows related to derivative exposures and other collateral requirements 1 508 1 508
Credit and liquidity 95 882 15 429
facilities
Other contingent funding obligations 165 317 8 457
Total cash outflows 665 080 154 391
Cash inflows
Secured lending (eg reverse repurchase agreements) 9 318 20
Inflows from fully performing exposures 39 444 22 894
Other cash inflows 969 969
Total cash inflows 49 731 23 883
Total adjusted value
Total HQLA 143 061
Total net cash outflows 130 508
Liquidity coverage ratio (%) 109,6%
(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 2018, based on regulatory submissions to SARB.
This section on the liquidity coverage ratio has not been audited or reviewed by the group's auditors.
Net stable funding ratio
Unweighted value by Weighted
residual maturity value
Rm No maturity <= 6 months > 6 > 1 year
months
to 1
year
Available stable funding
Capital 80 346 - - - 80 346
Regulatory capital 76 533 76 533
Other capital instruments 3 813 3 813
Retail deposits and deposits - 195 262 12 840 23 036 210 327
from small-business clients
Less stable 195 262 12 840 23 036 210 327
deposits
Wholesale funding - 392 421 63 016 119 063 301 606
Operational deposits 117 876 58 938
Other wholesale funding 274 545 63 016 119 063 242 668
Other liabilities 11 122 5 306 - 10 252 7 067
Net stable funding ratio 9 162
(NSFR) derivative
liabilities
All other liabilities and 11 122 5 306 1 090 7 067
equity not included in the
above categories
Total ASF 599 346
Required stable funding
Total NSFR high-quality 11 822
liquid assets (HQLA)
Performing - 143 027 66 013 473 341 476 672
loans and
securities
Performing loans to 11 834 1 183
financial institutions
secured by level 1 HQLA
Performing loans to 24 086 5 847 41 168 47 704
financial institutions
secured by non-level 1 HQLA
and unsecured performing
loans to financial
institutions
Performing loans to 100 242 55 083 302 895 332 793
non-financial corporate
clients, loans to retail and
small-business clients and
loans to sovereigns, central
banks and public sector
enterprises, of which
with a risk weight of less 11 651 7 573
than or equal to 35% under
the Basel II Standardised
Approach for credit risk
Performing residential 3 105 2 295 115 969 80 405
mortgages, of which
with a risk weight of less 3 105 2 295 104 344 70 523
than or equal to 35% under
the Basel II Standardised
Approach for credit risk
Securities that are not in 3 760 2 788 13 309 14 587
default and do not qualify
as HQLA, including
exchange-traded equities
Other assets 8 642 89 - 50 900 42 125
Physical traded commodities, 49 41
including gold
NSFR derivative assets 9 233 71
NSFR derivative liabilities 9 163 916
before deduction of
variation margin posted
All other assets not 8 593 89 32 504 41 097
included in the above
categories
Off-balance-sheet items 273 991 9 325
Total required stable 539 944
funding
NSFR (%) 111,0%
The figures above reflect the quarter ending June 2018 , based on regulatory submissions to SARB. This section on the
net stable funding ratio has not been audited or reviewed by the group's auditors.
Date: 07/08/2018 07:07:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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