Wrap Text
Preliminary Audited Results for the year ended 31 December 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')
Preliminary audited results
for the year ended 31 December 2018
OVERVIEW
Nedbank Limited ('Nedbank') is a wholly owned subsidiary of Nedbank Group Limited ('Nedbank Group'), which is listed on JSE
Limited. These summary consolidated financial results are published on 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 5 March 2019. Further information is provided on the website at nedbankgroup.co.za.
BOARD AND LEADERSHIP CHANGES DURING THE PERIOD
Nomavuso Mnxasana retired as independent non-executive director with effect from 10 May 2018. Peter Moyo was appointed
as a non-executive director, while Bruce Hemphill stepped down from the Nedbank Limited board on 11 June 2018. Rob Leith and
Ian Gladman resigned from the board on 15 October 2018 following Old Mutual Limited´s unbundling of its controlling interest in
Nedbank Group, thereby concluding the managed separation process. Rob Leith was reappointed as a non-executive director with
effect from 1 January 2019.
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. Anna Isaac was appointed as Group Chief Compliance Officer with effect from 1 January 2019 following
the retirement of Thabani Jali. In addition, Jackie Katzin was appointed Group Company Secretary, effective from the same date.
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 2018 comprise those of 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 2018, summary consolidated statement of comprehensive income, summary consolidated statement of changes in
equity, summary consolidated statement of cashflows for the year ended 31 December 2018 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 entail 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 South African Institute
of Chartered Accountants (SAICA) Financial Reporting Guides, as issued by the Accounting Practices Committee and Financial
Pronouncements issued by the Financial Reporting Standards Council. It also requires, as a minimum, that reports 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 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 consolidated financial statements.
IFRS 16: LEASES*
IFRS 16 deals with the accounting for leases and replaces IAS 17 for reporting periods beginning on or after 1 January 2019.
The group has elected to apply IFRS 16 retrospectively using the modified approach. The group will therefore not restate
comparative periods, which will continue to be presented in terms of IAS 17, with a transitional adjustment made at 1 January 2019.
The implementation of IFRS 16 results in the recognition of lease liabilities of R3,9bn and right-of-use assets of R2,9bn, with equity
decreasing by approximately R700m on an after-tax basis. The IAS 17 straight-lining liability of R125m and the associated deferred
tax of R35m will be reversed against equity. Total equity decreases by approximately R610m on the adoption of IFRS 16.
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 2018 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.
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; sovereign credit ratings; 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 32
Notice is hereby given that gross preference dividend no 32 of 42,23172 cents per share has been declared for the period
from 1 July 2018 to 31 December 2018, payable on Monday, 25 March 2019, 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, 22 March 2019. 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
33,78538 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, 18 March 2019
Shares commence trading (ex dividend) Tuesday, 19 March 2019
Record date (date shareholders recorded in books) Friday, 22 March 2019
Payment date Monday, 25 March 2019
Share certificates may not be dematerialised or rematerialised between Tuesday, 19 March 2019, and Friday, 22 March 2019, 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, 25 March 2019.
For and on behalf of the board
Vassi Naidoo Mike Brown
Chairman Chief Executive
5 March 2019
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, EM Kruger, RAG Leith, L Makalima,
PM Makwana, 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
Group Company Secretary: J Katzin
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
AUDITED SUMMARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Nedbank Limited Reg No 1951/000009/06.
Prepared under the supervision of the Nedbank Group CFO, Raisibe Morathi CA(SA).
A copy of the Nedbank Limited audited consolidated annual financial statements can be obtained by contacting Nedbank Group
Investor Relations at nedbankgroupir@nedbank.co.za.
Summary consolidated statement of
comprehensive income
for the year ended
31 December 31 December
2018 2017
Change (Audited) (Audited)
(%) Rm Rm
Interest and similar income 2,0 72 739 71 311
Interest expense and similar charges 1,4 46 774 46 111
Net interest income 3,0 25 965 25 200
Impairments charge on financial instruments 17,1 3 547 3 030
Income from lending activities 1,1 22 418 22 170
Non-interest revenue 4,9 20 884 19 907
Operating income 2,9 43 302 42 077
Total operating expenses 5,4 27 616 26 192
Indirect taxation (6,3) 804 858
Profit from operations before non-trading and capital items (1,0) 14 882 15 027
Non-trading and capital items 21,9 (164) (210)
Profit from operations (0,7) 14 718 14 817
Share of losses of associate companies 13,5 (83) (96)
Profit from operations before direct taxation (0,6) 14 635 14 721
Total direct taxation 8,2 3 854 3 563
Direct taxation 3 899 3 622
Taxation on non-trading and capital items (45) (59)
Profit for the year (3,4) 10 781 11 158
Other comprehensive (losses)/income (OCI) net of taxation >(100) (368) 493
Items that may subsequently be reclassified to profit or loss
Exchange differences on translating foreign operations 70 (29)
Fair-value adjustments on available-for-sale assets (14)
Debt investments at fair value through OCI (FVOCI) – net change in fair value 7
Items that may not subsequently be reclassified to profit or loss
(Losses)/Gains on property revaluations (100) 161
Remeasurements on long-term employee benefit assets (345) 375
Total comprehensive income for the year (10,6) 10 413 11 651
Profit attributable to:
– Ordinary and preference shareholders (3,5) 10 765 11 160
– Non-controlling interest – ordinary shareholders >100 16 (2)
Profit for the year (3,4) 10 781 11 158
Total comprehensive income attributable to:
– Ordinary and preference shareholders (10,8) 10 397 11 653
– Non-controlling interest – ordinary shareholders >100 16 (2)
Total comprehensive income for the year (10,6) 10 413 11 651
Summary consolidated statement of
financial position
at
31 December 31 December 31 December
2018 2017 2016
Change (Audited) (Audited) (Audited)
(%) Rm Rm Rm
(Restated) (Restated)
Assets
Cash and cash equivalents (10,1) 7 931 8 823 20 241
Other short-term securities (21,3) 57 844 73 472 68 218
Derivative financial instruments (27,0) 22 412 30 698 18 044
Government and other securities 97,2 96 123 48 749 50 687
Loans and advances(1) 4,3 725 792 695 744 695 064
Other assets 64,2 12 040 7 332 8 164
Current taxation assets 40,0 105 75 440
Investment securities2 28,0 6 787 5 303 4 258
Non-current assets held for sale (21,4) 305 388 287
Investments in associate companies and joint arrangements(2) >100 786 224 225
Deferred taxation assets 8,1 40 37 266
Property and equipment 4,9 8 367 7 976 8 197
Long-term employee benefit assets (17,3) 4 764 5 761 5 042
Mandatory reserve deposits with central banks 9,1 19 789 18 145 18 139
Intangible assets 16,3 8 538 7 341 5 928
Total assets 6,8 971 623 910 068 903 200
Equity and liabilities
Ordinary share capital 28 28 28
Ordinary share premium 19 182 19 182 19 182
Reserves 2,9 49 636 48 215 42 698
Total equity attributable to equity holders of the parent 2,1 68 846 67 425 61 908
Preference share capital and premium 3 561 3 561 3 561
Holders of preference shares 561 561
Holders of additional tier 1 capital instruments 31,4 3 416 2 600 2 000
Non-controlling interest attributable to ordinary shareholders >100 23 7 253
Total equity 3,0 76 407 74 154 67 722
Derivative financial instruments (16,1) 19 761 23 561 13 469
Amounts owed to depositors1 8,6 806 487 742 859 753 458
Provisions and other liabilities (25,9) 10 414 14 047 12 717
Current taxation liabilities 42,4 272 191 53
Deferred taxation liabilities (36,2) 224 351 391
Long-term employee benefit liabilities (22,6) 2 648 3 423 3 328
Long-term debt instruments 7,6 55 410 51 482 52 062
Total liabilities 7,1 895 216 835 914 835 478
Total equity and liabilities 6,8 971 623 910 068 903 200
(1) During 2018 a detailed review was performed on offsetting, which indicated that at 31 December 2017 an asset 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 (2016: R3 139m).
The correction had no impact on the group's statement of comprehensive income, statement of changes in equity and statement of cashflows. This prior-period
error had no impact on information previously reported for Nedbank Group, because the asset and liability are eliminated as intragroup balances.
(2) During the year 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-year balances have been restated by R3 053m
(2016: R2 350m). The investments in private-equity associates, associate companies and joint arrangements were renamed investments in associate companies.
The reclassification had no impact on the group's statement of comprehensive income and statement of changes in equity.
Summary consolidated statement of changes
in equity
Non-
Total equity controlling
attributable Preference Holders of interest
to equity share Holders of additional attributable
holders of capital and preference tier 1 capital to ordinary
the parent premium shares instruments shareholders Total 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 (371) (371)
Additional tier 1 capital instruments
interest paid (218) (218)
Dividend to ordinary shareholders (4 665) (4 665)
Distribution of subsidiaries to shareholder (787) (244) (1 031)
Preference shares held by group entities 561 561
Total comprehensive income for the year 11 653 (2) 11 651
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
Impact of adopting IFRS 9, net of taxation (2 086) (2 086)
Impact of adopting IFRS 15, net of taxation (254) (254)
Audited balance at 1 January 2018 65 085 3 561 561 2 600 7 71 814
Additional tier 1 capital instruments issued 750 750
Preference share dividend (355) (355)
Additional tier 1 capital instruments
interest paid (301) (301)
Dividend to ordinary shareholders (6 050) (6 050)
Total comprehensive income for the year 10 397 16 10 413
Share-based payment reserve movement 170 170
Other movements (100) 66 (34)
Audited balance at 31 December 2018 68 846 3 561 561 3 416 23 76 407
Summary consolidated statement of cashflows
for the year ended
31 December 31 December
2018 2017
(Audited) (Audited)
Rm Rm
Cash generated by operations 22 789 22 183
Change in funds for operating activities (10 105) (19 139)
Net cash from operating activities before taxation 12 684 3 044
Taxation paid (3 653) (3 913)
Cashflows from/(utilised by) operating activities 9 031 (869)
Cashflows utilised by investing activities (6 232) (6 197)
Cashflows utilised by financing activities (2 047) (4 346)
Effects of exchange rate changes on opening cash and cash equivalents (1) (1)
Net increase/(decrease) in cash and cash equivalents 752 (11 412)
Cash and cash equivalents at the beginning of the year(2) 26 968 38 380
Cash and cash equivalents at the end of the year(2) 27 720 26 968
(1) Represents amounts less than R1m.
(2) Including mandatory reserve deposits with central banks.
NOTES TO THE AUDITED SUMMARY CONSOLIDATED FINANCIAL
STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018*
Summary consolidated segmental reporting
for the year ended
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2018 2017 2018 2017 2018 2017 2018 2017
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm
Headline earnings/
Total assets Total liabilities Revenue(1) (losses)
Nedbank Corporate and Investment Banking 507 807 487 632 474 252 457 195 15 767 14 380 6 714 6 315
Nedbank Retail and Business Banking 355 614 326 225 327 143 298 413 31 283 30 102 5 379 5 302
Nedbank Wealth 71 142 66 832 66 917 62 947 4 597 4 393 1 133 1 068
Centre 71 831 65 138 53 623 45 178 315 341 (433) (88)
Fellow subsidiaries(2) (34 771) (35 759) (26 719) (27 819) (5 113) (4 109) (1 909) (1 286)
Total 971 623 910 068 895 216 835 914 46 849 45 107 10 884 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 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 was restated by R6 107m.
Headline earnings reconciliation
for the year ended
31 December 31 December 31 December 31 December
2018 2018 2017 2017
(Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm
Change Net of Net of
(%) Gross taxation Gross taxation
Profit attributable to ordinary and preference equity
holders (3,5) 10 765 11 160
Non-trading and capital items (21,2) 164 119 210 151
IAS 16 loss on disposal of property and equipment 29 22 47 35
IAS 38/IAS 39 impairment of property, equipment,
intangible and available-for-sale assets 135 97 163 116
Headline earnings (3,8) 10 884 11 311
Contingent liabilities and commitments
CONTINGENT LIABILITIES AND UNDRAWN FACILITIES
at
31 December 31 December
2018 2017
(Audited) (Audited)
Rm Rm
Guarantees on behalf of clients 31 973 26 710
Letters of credit and discounting transactions 8 936 3 006
Irrevocable unutilised facilities and other 133 800 101 336
174 709 131 052
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
currently be foreseen. None of these matters are material in nature.
COMMITMENTS
Capital expenditure approved by directors
at
31 December 31 December
2018 2017
(Audited) (Audited)
Rm Rm
Contracted 435 415
Not yet contracted 2 320 2 320
2 755 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 year.
Cashflow information
for the year ended
31 December 31 December
2018 2017
(Audited) (Audited)
Rm Rm
Acquisition of property and equipment, computer software and development costs and investment
property (4 133) (3 571)
Issue of additional tier 1 capital instruments 750 600
Issue of long-term debt instruments 9 404 7 340
Redemption of long-term debt instruments (5 495) (7 939)
Dividends to ordinary shareholders (6 050) (3 758)
Preference share dividends paid (355) (371)
Additional tier 1 capital instruments interest paid (301) (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 assets Total financial assets Total financial assets Total financial assets
Total financial assets recognised at amortised cost classified as level 1 classified as level 2 classified as level 3
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Cash and cash equivalents 27 720 26 968 27 720 26 968
Other short-term securities 57 844 73 472 21 500 25 193 36 344 48 279
Derivative financial instruments 22 412 30 698 38 22 374 30 698
Government and other securities 96 123 48 749 67 628 28 862 25 505 5 173 2 990 14 714
Loans and advances(1) 725 792 695 744 683 770 618 212 42 022 77 499 33
Other assets 10 776 7 332 10 776 7 332
Investment securities(2) 6 787 5 303 16 15 793 825 5 978 4 463
947 454 888 266 811 394 706 567 25 559 5 188 104 523 172 015 5 978 4 496
(1) During 2018 a detailed review was performed on offsetting, which indicated that at 31 December 2017 an asset of R6 107m 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.
(2) During the year 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-year balances have been restated accordingly (R3 053m).
FINANCIAL LIABILITIES
Total financial liabilities Total financial liabilities Total financial liabilities
Total financial liabilities recognised at amortised cost classified as level 1 classified as level 2
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
2018 2017 2018 2017 2018 2017 2018 2017
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm
Derivative financial instruments 19 761 23 561 8 19 753 23 561
Amounts owed to depositors(1) 806 487 742 859 784 908 664 964 21 579 77 895
Provisions and other liabilities 5 261 13 047 4 795 10 611 466 2 405 31
Long-term debt instruments 55 410 51 482 55 410 51 134 348
886 919 830 949 845 113 726 709 474 2 405 41 332 101 835
(1) During 2018 a detailed review was performed on offsetting, which indicated that at 31 December 2017 an asset of R6 107m 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.
LEVEL 3 RECONCILIATION
Gains relating
to investments
in equity
instruments at
Gains in non- FVOCI and debt
Opening interest revenue instruments at Closing
balance at in profit for the FVOCI in OCI Purchases Sales and Transfers balance at
1 January year for the year and issues settlements from level 2 31 December
31 December 2018 (Audited) Rm Rm Rm Rm Rm Rm Rm
FINANCIAL ASSETS
Investment securities 4 712 211 3 2 201 (1 169) 20 5 978
4 712 211 3 2 201 (1 169) 20 5 978
Gains in non-
Opening interest revenue Closing
balance at in profit for the Purchases Sales and balance at
1 Jan year and issues settlements 31 Dec
31 December 2017 (Audited) Rm Rm Rm Rm Rm
FINANCIAL ASSETS
Derivative financial instruments 25 (25) –
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 year 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-year balances have been restated accordingly (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.
Value per
statement Favourable Unfavourable
Significant Variance in of financial change in fair change in fair
Valuation technique unobservable input fair value position value value
31 December 2018 (Audited) % Rm Rm Rm
FINANCIAL ASSETS
Investment securities Discounted cashflows, Valuation multiples, Between (10) 5 978 788 (620)
adjusted net asset value, correlations, volatilities and 13
earnings multiples, and credit spreads
third-party valuations and
dividend yields
Total financial assets classified as level 3 5 978 788 (620)
Value per
statement Favourable Unfavourable
Significant Variance in of financial change in fair change in fair
Valuation technique unobservable input fair value position value value
31 December 2017 (Audited) % Rm Rm Rm
FINANCIAL ASSETS
Loans and advances Discounted cashflows Credit spreads and Between 33 3 (4)
discount rates (12) and 9
Investment securities(1) Discounted cashflows, Valuation multiples, Between 4 463 417 (525)
adjusted net asset value, correlations, volatilities (12) and 9
earnings multiples, and credit spreads
third-party valuations and
dividend yields
Total financial assets classified as level 3 4 496 420 (529)
(1) During the year 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-year balances have been restated accordingly (R3 053m).
UNREALISED GAINS
The unrealised gains arising on instruments classified as level 3 include the following:
31 December 31 December
2018 2017
(Audited) (Audited)
Rm Rm
Private-equity gains 211 130
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 year.
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 the financial instruments incorporates the group's best estimate of the value at which the 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:
Carrying
Rm value Fair value Level 1 Level 2 Level 3
31 December 2018 (Audited)
Financial assets 772 898 760 518 44 554 21 460 694 504
Other short-term securities 21 500 21 460 21 460
Government and other securities 67 628 66 844 44 554 22 290
Loans and advances 683 770 672 214 672 214
Financial liabilities 55 410 56 226 27 944 28 282 –
Long-term debt instruments 55 410 56 226 27 944 28 282
Carrying
Rm 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(1) 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
(1) During 2018 a detailed review was performed on offsetting, which indicated that at 31 December 2017 an asset of R6 107m 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 was restated by R6 107m.
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 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 are 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 3), 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 variable-rate liabilities and hedge-accounted fixed-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 (UNAUDITED)
Liquidity coverage ratio
Total Total
unweighted weighted
value(1) value(2)
Rm (average) (average)
Total high-quality liquid assets 156 941
Cash outflows
Retail deposits and deposits from small-business clients 165 119 16 512
Less stable deposits 165 119 16 512
Unsecured wholesale funding 216 942 106 092
Operational deposits (all counterparties) and deposits in institutional networks of cooperative
banks 107 934 26 983
Non-operational deposits (all counterparties) 109 008 79 109
Secured wholesale funding 24 113
Additional requirements 123 126 23 918
Outflows related to derivative exposures and other collateral requirements 3 220 3 220
Credit and liquidity facilities 119 906 20 698
Other contingent funding obligations 157 280 8 093
Total cash outflows 686 580 154 615
Cash inflows
Secured lending (eg reverse repurchase agreements) 7 809 19
Inflows from fully performing exposures 30 386 17 401
Other cash inflows 475 475
Total cash inflows 38 670 17 895
Total
adjusted
value
Total HQLA 156 941
Total net cash outflows 136 720
Liquidity coverage ratio (%) 114,8%
(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 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 residual maturity
Between six
Six months months and More than Weighted
Rm No maturity or less one year one year value
Available stable funding (ASF)
Capital 84 993 – – – 84 993
Regulatory capital 81 156 81 156
Other capital instruments 3 837 3 837
Retail deposits and deposits from small-business
clients – 207 218 15 376 22 268 222 602
Less stable deposits 207 218 15 376 22 268 222 602
Wholesale funding – 433 033 45 991 110 835 301 616
Operational deposits 125 779 62 890
Other wholesale funding 307 254 45 991 110 835 238 726
Other liabilities 10 041 395 293 7 601 757
Net stable funding ratio (NSFR) derivative liabilities 6 990
All other liabilities and equity not included in the
above categories 10 041 395 293 611 757
Total ASF 609 968
Required stable funding
Total NSFR high-quality liquid assets (HQLA) 13 501
Performing loans and securities – 130 073 63 097 506 957 496 911
Performing loans to financial institutions secured by
level 1 HQLA 8 661 866
Performing loans to financial institutions secured by
non-level 1 HQLA and unsecured performing loans
to financial institutions 27 588 5 884 42 627 49 708
Performing loans to non-financial corporate clients,
loans to retail and small-business clients and loans
to sovereigns, central banks and public sector
enterprises, of which 81 812 53 493 338 513 353 114
with a risk weight of less than or equal to 35%
under the Basel II Standardised Approach for
credit risk 11 372 7 392
Performing residential mortgages, of which 3 071 2 314 120 159 83 240
with a risk weight of less than or equal to 35%
under the Basel II Standardised Approach for
credit risk 3 071 2 314 107 937 72 852
Securities that are not in default and do not qualify
as HQLA, including exchange-traded equities 8 941 1 406 5 658 9 983
Other assets 8 340 248 – 46 711 41 733
Assets posted as initial margin for derivative
contracts and contributions to default funds of
CCPs 248 210
NSFR derivative assets 7 357 367
NSFR derivative liabilities before deduction of
variation margin posted 6 990 699
All other assets not included in the above categories 8 340 32 364 40 457
Off-balance-sheet items 276 783 9 717
Total required stable funding 561 862
NSFR (%) 108,6%
The figures above reflect the quarter ending December 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: 05/03/2019 07:50:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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