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NEDBANK LIMITED - Preliminary Audited Results for the year ended 31 December 2018

Release Date: 05/03/2019 07:50
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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