| Mon 6 Aug 2007, 8:00 | | NED - Nedbank Group - Reviewed financial results: |
|
NED
NED
NED - Nedbank Group - Reviewed financial results: six months ended 30 June 2007
Nedbank Group Limited
Reg No: 1966/010630/06
JSE share code: NED
NSX share code: NBK
ISIN: ZAE000004875
Reviewed financial results
for the six months ended 30 June 2007
`The group`s ROE of 21,2% for the six months is ahead of our full-year target of
20% and, together with the 32,2% growth in diluted headline earnings per share,
highlights Nedbank`s continuing momentum
`Our challenge is to continue improving client service, enhancing our
distribution network, managing through the credit cycle and staying lean in
order to deliver superior growth.`
Tom Boardman Chief Executive
Headline earnings up 31,9% to R2 775 million
HEPS up 34,1% to 700 cents
Diluted HEPS up 32,2% to 673 cents
ROE increased from 18,3% to 21,2%
Efficiency ratio improved from 56,9% to 55,2%
Strong group capital adequacy ratio of 12,4%
Interim dividend per share up 48,3% to 310 cents
Banking environment
The overall economic environment remained favourable, extending the current
economic upswing to eight and a half years - the longest in South Africa`s
history. However, the economy grew at a slower pace, with subtle changes in the
composition of spending starting to emerge. The interest rate increases and some
signs of increased levels of credit stress in retail advances have slowed retail
asset growth, although demand for corporate credit continues to increase.
The introduction of the National Credit Act (NCA) resulted in a further slowdown
in loan application volumes and approval rates in June. It is, however, too
early to determine the longer-term impact of this legislation. (1)
Financial performance
Financial highlights (1)
at Reviewed Reviewed Reviewed
June June December
2007 2006 2006
Share statistics
Number of shares listed m 456,4 446,9 450,9
Number of shares in
issue, excluding
shares held by group m 399,6 399,7 394,7
entities
Weighted average number m 396,7 402,9 399,5
of shares
Diluted weighted average m 412,6 413,6 412,3
number of shares
Headline earnings per cents 700 522 1 110
share
Diluted headline cents 673 509 1 076
earnings per share
Ordinary dividends cents 310 209 493
declared per share
- Interim cents 310 209 209
- Final cents 284
Dividend paid per share cents 284 185 394
Dividend cover times 2,26 2,50 2,25
Net asset value per cents 6 903 5 982 6 363
share
Tangible net asset value cents 5 661 4 726 5 106
per share
Closing share price cents 13 200 11 300 13 350
Price-earnings ratio historical 10 12 12
Market capitalisation Rbn 60,2 50,5 60,2
Key ratios
Return on ordinary % 21,2 18,3 18,6
shareholders` equity
(ROE)
Return on total assets % 1,26 1,16 1,14
(ROA)*
Net interest income to % 3,90 3,91 3,94
interest-earning banking
assets**
Non-interest revenue to % 41,9 47,2 46,3
total income*
Impairments charge to % 0,63 0,61 0,52
average advances
Efficiency ratio* % 55,2 56,9 58,2
Effective taxation rate % 25,3 26,5 27,8
Group capital adequacy
ratios
- Tier 1 % 8,3 9,1 8,3
- Total % 12,4 13,3 11,8
Number of employees 25 992 22 403 24 034
Balance sheet statistics
(Rm)
Total equity 27 585 23 910 25 116
attributable to equity
holders of the parent
Total equity 32 474 28 038 29 388
Amounts owed to 356 640 280 633 324 685
depositors
Loans and advances 335 340 273 398 308 563
Gross 340 869 278 724 313 747
Impairment of loans (5 529) (5 326) (5 184)
and advances
Total assets* 460 832 380 549 424 912
* June 2006 restated
** June 2006 and December 2006 restated
Headline earnings per share (HEPS) increased by 34,1% to 700 cents (June 2006:
522 cents). Diluted HEPS increased by 32,2% from 509 cents to 673 cents. Basic
earnings per share grew by 22,2% from 577 cents in June 2006 to 705 cents. These
results are at the upper end of the ranges forecast in the group`s first-quarter
results announcement on 9 May 2007. (1)
The group`s return on average ordinary shareholders` equity (ROE) improved from
18,3% for June 2006 to 21,2%. ROE, excluding goodwill, increased from 21,8% to
24,7%. (1)
Headline earnings increased by 31,9% from R2 104 million for the period to June
2006 to R2 775 million. Basic earnings grew by 20,3% to R2 798 million (June
2006: R2 326 million). (1)
Net interest income (NII)
NII grew 30,3% to R6 568 million (June 2006: R5 039 million), mainly as a result
of the 30,9% growth in average interest-earning banking assets (H1 2007 compared
with H1 2006).
The margin for the six-month period was 3,90%, down from 3,94% reported for the
year to December 2006. This reflects strong competition for assets and pressure
on deposit pricing as the sector has had to source a higher proportion of
funding from the wholesale deposit market, offset by the endowment benefits of
interest rate increases.
Impairments charge on loans and advances
The impairments charge rose by 26,1% to R1 016 million (June 2006: R806
million). The credit loss ratio (impairments charge as a percentage of average
advances) increased from 0,61% in June 2006 to 0,63% for the period. Impairments
continued to benefit from recoveries in both Nedbank Corporate and Nedbank
Capital. As expected, impairments in the retail portfolios of Nedbank Retail and
Imperial Bank deteriorated as a result of rising interest rates and increased
levels of consumer indebtedness.
Credit loss ratio (%) June 2007 June 2006
Nedbank Corporate 0,11 0,07
Nedbank Capital (0,10) 0,90
Nedbank Retail 1,35 1,12
Imperial Bank 1,18 0,85
Total 0,63 0,61
Non-interest revenue (NIR)
NIR increased by 5,3% to R4 742 million for the period (June 2006: R4 502
million). Commission and fee income grew by 12,9% supported by good
transactional banking and bancassurance volumes. NIR growth has been adversely
affected by disappointing trading income in Nedbank Capital. Trading income for
the period amounted to R520 million, down from the high base of R885 million in
the first half of 2006 (Q1 2006 was a record trading quarter for Nedbank).
Nedbank Corporate recorded higher than expected property private equity gains of
R147 million for the half-year, compared with R110 million in the first half of
2006. Nedbank Capital`s private equity revenues increased from R162 million to
R346 million for the six months to June 2007. Fees in Bond Choice, within
Nedbank Corporate, grew by 43,3% from R245 million to R351 million.
The group`s retail bancassurance earnings grew strongly, with headline earnings
increasing by 23% from R104 million to R128 million.
Expenses
Expenses increased by 14,9% to R6 238 million (June 2006: R5 427 million),
reflecting the group`s continued expense management, balanced by the need to
invest for growth.
Staff expenses grew by 19,0% as a result of the budgeted increase in client-
facing and collections staff and an increase in performance-related
remuneration.
Marketing costs increased by 23,8% as Nedbank invested in repositioning and
increasing awareness of the Nedbank brand. Nedbank`s brand equity continues to
increase, with good gains in awareness and loyalty levels. Nedbank`s image
profile remains distinctive and well-differentiated. Spontaneous awareness of
the brand is currently at 82% of the banked market. The upward trajectory in
awareness of our Make Things Happen payoff line also continues to increase, with
awareness levels of 30% being recorded.
Bond Choice`s expenses grew by 32,6% from R221 million to R293 million.
The `jaws` ratio remained positive, with total revenue growth of 18,5% being
3,6% above expense growth of 14,9%, resulting in an improvement of the
efficiency ratio from 56,9% for the first half of 2006 to 55,2%.
Associate income
Associate income increased from R59 million in June 2006 to R179 million. This
was as a result of Nedbank`s R65 million share from the profit on the sale of
JSE Limited shares during the first quarter of 2007 by the BoE Private Clients
joint venture, as well as good performance in both the BoE and Nedgroup Life
Assurance Company joint venture with Old Mutual South Africa.
Non-trading and capital items
As the group has largely completed its non-core asset disposal programme, income
after taxation from non-trading and capital items declined from R222 million in
June 2006 to R23 million for the period.
Balance sheet
Capital
Nedbank Group continues to be well-capitalised, with a Tier 1 capital adequacy
ratio of 8,3% (December 2006: 8,3%) and a total capital adequacy ratio of 12,4%
(December 2006: 11,8%). (1)
Advances
Advances increased by 17,5% (annualised) to R335 billion. Details of advances
growth by division are as follows:
Rm June December Annualised
2007 2006 increase (%)
Nedbank Corporate 142 617 133 253 14,2
Nedbank Capital 38 331 40 560 (11,1)
Nedbank Retail 122 939 106 976 30,1
Imperial Bank 31 360 27 736 26,3
Other 93 38 291,9
Total 335 340 308 563 17,5
Deposits
Deposits increased by 19,8% (annualised) from R325 billion in December 2006 to
R357 billion in June 2007, with the group maintaining a strong liquidity
position throughout the period.
Cluster performance
Nedbank Corporate
Nedbank Corporate increased headline earnings by 28,6% to R1 541 million, with
the major businesses all performing well. ROE increased to 22,5% (H1 2006:
21,7%) as a result of strong revenue growth, the containment of expense
increases below revenue growth and a continuation of the low impairments charge.
Property private equity gains were stronger than anticipated.
NII and NIR grew by 26,1% and 14,5% respectively, reflecting the benefits of
increased growth in electronic banking and cash handling, primary client growth
within Business Banking and the public sector cross-sell momentum that has been
established. Advances increased by 28,8%, with a particularly good performance
from Business Banking, where advances increased by 27,3% on an annualised basis.
The credit loss ratio increased from 0,07% to 0,11%. This remains low due to the
quality of the overall wholesale portfolio and good recoveries during the period
across most of the underlying business units. Expenses increased by 18,6%,
largely driven by a 14,5% increase in headcount, particularly in client-facing
roles in Business Banking, and costs of meeting regulatory requirements of the
NCA and Basel II. Bond Choice costs increased by 32,6%.
This momentum in performance in Nedbank Corporate is expected to continue for
the balance of the year, although the impairments charge is likely to increase
and the strong property investment performance is unlikely to be repeated in the
second half.
Nedbank Capital
Nedbank Capital`s headline earnings were impacted by lower trading revenue and
declined by 5,4% to R545 million (June 2006: R576 million), but ROE increased
from 30,6% to 33,4% through more efficient capital utilisation.
Advances in Nedbank Capital fell by 11,1%. The advances in the Treasury Division
declined, while advances in the rest of Nedbank Capital`s divisions showed
strong growth.
The impairments charge decreased from R178 million for June 2006 to a net
recovery of R21 million for the period as a result of collections.
The business alliance with Macquarie continued to trade below expectations.
During the second quarter it was agreed with Macquarie that the alliance would
be terminated, well ahead of the scheduled end date of 24 March 2008, and in so
doing Nedbank`s risk profile would be reduced by over 50%. This process was
completed during the second quarter. The loss after taxation from the alliance
amounted to R213 million for the period. The total loss attributable to Nedbank
over the course of the alliance from March 2003 to June 2007 was R43 million
after tax. (1)
Specialised Finance and Investment Banking continued to enjoy good deal flow,
particularly in the mining and infrastructure project finance arenas. The deal
pipeline in these areas remains strong for the rest of 2007.
Gains on private equity investments and structured-finance transactions with
equity participation rights amounted to R346 million (H1 2006: R162 million).
Market conditions are forecast to remain favourable in the second half. The
group expects second-half earnings in Nedbank Capital to be higher than during
the first six months.
Nedbank Retail
Nedbank Retail increased headline earnings by 34,5% to R956 million and ROE from
24,2% to 24,7%. This performance was achieved through growth within the
Bancassurance and Wealth Division, higher card revenues driven by both acquiring
and issuing volumes, increased transactional banking volumes, continued growth
of the personal loan and home loan books, and an improved product mix. Headline
earnings for the half-year was enhanced by R65 million of associate income on
the sale of JSE Limited shares referred to above.
The performance was affected by margin compression in home loans and the impact
of more competitive risk-based pricing.
The impairments charge increased due to growth of the advances book and
increased credit stress in the portfolio. Over the past 18 months Nedbank Retail
has tightened criteria relating to its credit policy, which has resulted in a
reduction in loan applications approved. In addition, Nedbank Retail has
increased the number of collections staff and number of shifts, and introduced
new debt management systems.
In July 2006 Nedbank Retail reduced transactional banking fees by approximately
13% on average and by a further 6% in July 2007. Charges for Nedbank Retail`s
Small Business Services clients remain unchanged for the fourth successive year.
Nedbank Mzansi Account fees were also substantially reduced to make these
products more accessible to new entrants into the banking environment.
Nedbank Retail`s strategy to expand its retail footprint across South Africa
remains a key focus and the rollout is progressing according to plan. Nedbank
has invested R368 million since June 2006 to upgrade and increase its
distribution network. This includes opening an additional seven outlets and
upgrading and increasing its ATM network from 1 146 to approximately 1 361 ATMs.
Imperial Bank
Imperial Bank increased headline earnings by 26,0% to R224 million, although ROE
declined from 24,6% to 24,3%. Nedbank Group`s share of these earnings was R107
million (H1 2006: R89 million), up 20,2%. NII grew by 38,1% and expenses by
24,5%, resulting in the efficiency ratio improving from 34,7% to 32,0%. Loans
and advances grew 26,3%. Advances growth was driven by strong performance from
the Motor Vehicle Finance Division. The impairments charge increased by 73,5%,
reflecting the impact of higher interest rates.
Bill Lynch retired as a director and Chairman of Imperial Bank on 16 July 2007.
Bill has been Chairman since the inception of the bank in 1996 and played a
leading role in its development. The group would like to pay tribute to Bill for
his contribution and wishes him well in retirement.
Nedbank and Imperial Holdings Limited have reconfirmed their commitment to
Imperial Bank and are currently finalising a revised shareholders` agreement
that will formalise the terms of the relationship beyond 2010.
Central services
The costs for central services arise mainly from the excess cost of expensive
subordinated debt, perpetual preference share dividends, the funding cost of
goodwill and accounting mismatches on economic hedges.
Capital management (1)
The group substantially has completed its implementation processes for Basel II,
which has been used as a catalyst to elevate risk and capital management to
worldclass standards. Nedbank Limited has received conditional approval from the
South African Reserve Bank for the implementation of the Advanced Internal
Ratings Based (AIRB) Approach for credit risk.
The group`s Basel II programme remains on track for implementation on 1 January
2008. No material changes are anticipated to the final draft of the Basel II
regulations to be completed later this year and the group confirms that its
planning reflects a continuing strong capital position under Basel II.
During 2007 the group:
* concluded Tier 2 subordinated-debt issues (NED7 and NED8) of R2,65 billion;
* issued Tier 1 perpetual preference shares of R364 million;
* completed a R2 billion Imperial Bank asset securitisation;
* redeemed the expensive NED2 R4 billion bond on its call date in July 2007; and
* completed a 10-year Tier 2 subordinated-debt issue (NED9) of R2 billion, which
was fully subscribed for by the International Finance Corporation and African
Development Bank in equal amounts. This transaction diversifies the bank`s
bondholder profile to include international investors and was competitively
priced on a floating-rate basis.
The amendments to section 38 of the Companies Act are expected to be promulgated
later this year. This will allow the group, subject to shareholder approval, to
resume paying cash-only dividends.
Transformation
Transformation continues to be high on the national agenda, with the Department
of Trade and Industry codes setting new benchmarks.
The group is pleased with the progress that it has made at all levels in respect
of both race and gender. However, the demographic statistics of the managerial
levels still translates into a pyramid shape and requires further
transformation.
Transformation, however, is not only about compliance and numbers. Nedbank
believes that transformation is a key strategic differentiator and it will use
both transformation and the development of a unique corporate culture as
cornerstones of its strategy.
Quarterly reporting (1)
Old Mutual plc, the group`s parent company, will be delisting from the Stockholm
Stock Exchange (SSE). The final day of trading Old Mutual plc shares on the SSE
will be 7 September 2007. Consequently, Nedbank Group will no longer be required
to publish full quarterly results. With effect from the period ending 30
September 2007 the group will revert to releasing quarterly trading updates in
terms of London Stock Exchange guidelines.
Accounting policies
The group`s principal accounting policies have been applied consistently with
those disclosed in the consolidated financial statements of Nedbank Group
Limited at and for the year ended 31 December 2006. The interim condensed
consolidated financial statements of Nedbank Group Limited have been prepared in
accordance with IAS 34: Interim Financial Reporting and consist of the
consolidated income statement, consolidated balance sheet, condensed
consolidated statement of changes in equity, condensed consolidated cash flow
statement and selected explanatory notes. The selected explanatory notes are
marked with (1).
Reviewed results - auditors` opinion
KPMG Inc and Deloitte & Touche, the company`s independent auditors, have
reviewed the interim condensed financial statements contained in this interim
report and have expressed an unmodified conclusion on the interim condensed
financial statements. The review report is available for inspection at the
company`s registered office.
Prospects
Performance in the second half of 2007 is likely to be influenced by:
* slower growth in retail advances;
* continued good growth in Business Banking and Corporate advances;
* an endowment benefit in the margin resulting from interest rate increases,
offset by margin compression in certain categories of advances and continued
reliance on wholesale funding;
* an increased impairments charge mainly due to lower wholesale recoveries and
the impact of higher interest rates on retail portfolios;
* fewer positive once-off items and revaluations in property private equity;
* the group continuing to extract synergies and grow revenue by working more
closely with fellow Old Mutual Group companies under an aligned strategy;
* investment in retail distribution and branding;
* no further material non-core asset sales; and
* ongoing capital management activities.
Earnings forecasts to December 2007
The directors expect headline earnings for the year to 31 December 2007 to be
between 23% and 33% higher than the R4 435 million reported for the year to 31
December 2006. Headline earnings per share is forecast to be between 24% and 34%
greater than the 1 110 cents per share reported for December 2006.
Based on the forecast range of headline earnings per share above, basic earnings
per share for the year to 31 December 2007 are estimated to be between 23% and
33% higher than the 1 135 cents per share reported for December 2006.
Shareholders are advised that these forecasts have not been reviewed or reported
on by the group`s auditors.
Financial targets
The group remains on track to meet its 2007 financial targets of an ROE of 20%
and an efficiency ratio of 55%, although meeting the efficiency ratio target
remains challenging due to the investment in retail distribution.
As communicated, the group`s medium- to long-term financial targets are as
follows:
Performance in Medium- to long-term financial
H1 2007 targets after 2007
Return on 21,2% (24,7% ROE greater than 20% and ROE
shareholders` excluding (excluding goodwill) 10% above
equity goodwill) the group`s monthly weighted
average cost of ordinary
shareholders` equity.
Efficiency ratio 55,2% Maintain an efficiency ratio of
less than 55%.
Diluted HEPS 32,2% A growth in diluted HEPS of at
least average CPIX plus GDP
growth plus 5%.
Impairments 0,63% An impairment charge of between
charge as a % of 0,55% and 0,85% of average
average advances advances.
Capital adequacy 8,3% Tier 1 8,0% - 9,0%.
ratios (Basel II)
12,4% Total 11,0% - 12,0%.
Economic capital A- Adequately capitalised to a
adequacy 99,9% (A-) confidence on an
economic capital basis plus a
15% buffer.
Dividend cover 2,26 times 2,25 to 2,75 times cover.
Forward-looking statements
This announcement contains certain forward-looking statements with respect to
the financial condition and results of operations of Nedbank Group and its group
companies, which by their nature involve risk and uncertainty because they
relate to events and depend on circumstances that may occur in the future.
Factors that could cause actual results to differ materially from those in the
forward-looking statements include, but are not limited to: global, national and
regional economic conditions; levels of securities markets; interest rates;
credit or other risks of lending and investment activities; and competitive and
regulatory factors.
Capitalisation award with a cash dividend alternative
Notice is hereby given that the directors of the company have resolved to issue
fully paid ordinary shares in the company as a capitalisation award to ordinary
shareholders. Ordinary shareholders will be entitled, in respect of all or part
of their shareholding, to elect to receive new fully paid ordinary shares, which
shares will be issued only to those ordinary shareholders who, in respect of all
or part of their shareholding, elect at or before 12:00 on Friday, 14 September
2007, to receive the capitalisation award shares. Shareholders not electing to
receive new fully paid ordinary shares in respect of all or part of their
shareholding will be entitled to receive a cash dividend alternative of 310
cents per ordinary share (the cash dividend alternative).
In accordance with the provisions of STRATE, the electronic settlement and
custody system used by JSE Limited, the relevant dates for the capitalisation
award election and the cash dividend alternative are as follows:
2007
Last day to trade to participate in the Friday, 7 September
capitalisation award or the cash
dividend alternative
Shares trade ex the capitalisation award Monday, 10 September
election and the cash dividend
alternative on
Listing of the maximum number of new Monday, 10 September
ordinary shares that could be taken up
in terms of the capitalisation award on
Last day to elect to receive Friday, 14 September
capitalisation award shares, failing
which shareholders will receive the cash
dividend alternative, by 12:00
Record date to participate in the Friday, 14 September
capitalisation award or receive the cash
dividend alternative
Payment of the cash dividend alternative Monday, 17 September
to shareholders who have not elected to
participate in the capitalisation award
or have participated in the
capitalisation award in respect of only
part of their shareholding on
New shares issued and posted or Monday, 17 September
participant or broker accounts credited
regarding the shares to be issued to
shareholders participating in the
capitalisation award in respect of all
or part of their shareholding on
The maximum number of new shares listed Wednesday, 19 September
in terms of the capitalisation award
adjusted to reflect the actual number of
shares issued in terms of the
capitalisation award on or about
Shares may not be dematerialised or
rematerialised between Monday, 10
September 2007, and Friday, 14 September
2007, both days inclusive.
The above dates and times are subject to change. Any changes will be published
on the Securities Exchange News Service (SENS) and in the press.
The number of capitalisation shares to which shareholders are entitled will be
determined in the ratio that 310 cents per ordinary share bears to the 30-day
volume-weighted average price for the company`s share, to be determined by no
later than Thursday, 30 August 2007. Details of the ratio will be published on
SENS not later than Friday, 31 August 2007, at 11:00 and in the financial press
the following business day. Trading in the STRATE environment does not permit
fractions and fractional entitlements. Accordingly, where a shareholder`s
entitlement to new ordinary shares, calculated in accordance with the above
formula, gives rise to a fraction of a new ordinary share, such fraction will be
rounded up to the nearest whole number where the fraction is greater than or
equal to 0,5 and rounded down to the nearest whole number where the fraction is
less than 0,5.
A circular relating to the capitalisation award and the cash dividend
alternative will be posted to shareholders on or about Wednesday, 22 August
2007.
Note:
Dematerialised shareholders are required to notify their duly appointed
participant (previously referred to as central securities depository
participant) or broker of their election in terms of the capitalisation award in
the manner and at the time stipulated in the agreement governing the
relationship between shareholders and their participant or broker.
For and on behalf of the board
Dr RJ Khoza TA Boardman
Chairman Chief Executive
6 August 2007
Consolidated income statement
for the period ended Reviewed Reviewed Audited
June June December
Rm 2007 2006 2006
Interest and similar income 19 075 12 827 28 521
Interest expense and similar charges 12 507 7 788 17 558
Net interest income 6 568 5 039 10 963
Impairments charge on loans and 1 016 806 1 483
advances
Income from lending activities 5 552 4 233 9 480
Non-interest revenue* 4 742 4 502 9 468
Operating income 10 294 8 735 18 948
Total expenses 6 238 5 427 11 886
Operating expenses* 6 157 5 361 11 740
BEE transaction expenses 81 66 146
Indirect taxation 133 155 345
Profit from operations before non- 3 923 3 153 6 717
trading and capital items
Non-trading and capital items 21 255 124
Impairment of goodwill (70)
Profit on sale of subsidiaries, 23 262 248
investments and property and
equipment
Net impairment of investments, (2) (7) (54)
property and equipment, and
capitalised development costs
Profit from operations 3 944 3 408 6 841
Share of profits of associates and 179 59 153
joint ventures
Profit before direct taxation 4 123 3 467 6 994
Total direct taxation 1 036 885 1 933
Direct taxation 1 038 852 1 907
Taxation on non-trading and capital (2) 33 26
items
Profit for the period 3 087 2 582 5 061
Attributable to:
Profit attributable to equity 2 798 2 326 4 533
holders of the parent
Profit attributable to minority 160 146 309
interest - ordinary shareholders
- preference shareholders 129 110 219
Profit for the period 3 087 2 582 5 061
Basic earnings per share 705 577 1 135
Diluted earnings per share 678 562 1 099
Dividend declared per share 310 209 493
Dividend paid per share 284 185 394
*June 2006: Reclassification of transaction costs in non-interest revenue (NIR)
Expenses amounting to R89 million for the period, directly related to NIR, have
been reclassified from operating expenses, consistent with industry practice,
and have been included in NIR.
These expenses represent transaction costs directly attributable to the
acquisition of trading investments recorded at fair value, which do not include
transaction costs. The carrying amount of financial instruments, other than
those at fair value through profit or loss, generally includes transaction
costs. Consequently, transaction costs that would be included in the
determination of the effective interest rate of the instruments and the interest
attributable to these instruments have been disclosed within NIR.
Earnings reconciliation (1)
for the period ended Reviewed Reviewed Audited
June June December
Rm 2007 2006 2006
Profit attributable to equity 2 798 2 326 4 533
holders of the parent
Less: Non-trading and capital items 23 222 98
Impairment of goodwill (70)
Profit on sale of subsidiaries, 23 262 248
investments and property and
equipment
Net impairment of investments, (2) (7) (54)
property and equipment, and
capitalised development costs
Taxation on above items 2 (33) (26)
Headline earnings 2 775 2 104 4 435
Consolidated balance sheet
at Reviewed Reviewed Audited
June June December
Rm 2007 2006 2006
Assets
Cash and cash equivalents 14 563 9 092 12 267
Other short-term securities 24 226 27 707 25 756
Derivative financial instruments 9 446 14 364 15 273
Government and other securities* 25 310 16 614 22 196
Loans and advances 335 340 273 398 308 563
Other assets 20 581 14 277 12 468
Clients` indebtedness for 2 666 1 646 2 577
acceptances
Current taxation receivable 851 138 161
Investment securities 8 308 6 700 7 155
Non-current assets held for sale 559 150 490
Investments in associate companies 1 106 573 907
and joint ventures
Deferred taxation asset 56 214 120
Investment property 167 146 158
Property and equipment 3 460 3 183 3 377
Long-term employee benefit assets 1 494 1 279 1 444
Computer software and capitalised 1 260 1 269 1 266
development costs
Mandatory reserve deposits with 7 736 6 049 7 039
central bank
Goodwill 3 703 3 750 3 695
Total assets 460 832 380 549 424 912
Total equity and liabilities
Ordinary share capital 400 400 395
Ordinary share premium 10 406 10 231 9 727
Reserves 16 779 13 279 14 994
Total equity attributable to equity 27 585 23 910 25 116
holders of the parent
Minority shareholders` equity
attributable to
- ordinary shareholders 1 458 1 058 1 202
- preference shareholders 3 431 3 070 3 070
Total equity 32 474 28 038 29 388
Derivative financial instruments 11 636 15 051 12 904
Amounts owed to depositors 356 640 280 633 324 685
Other liabilities* 36 606 38 843 37 847
Liabilities under acceptances 2 666 1 646 2 577
Current taxation liabilities 303 567 434
Other liabilities held for sale 467 417
Deferred taxation liabilities 1 998 879 1 649
Long-term employee benefit 1 231 1 129 1 215
liabilities
Investment contract liabilities 5 783 4 547 5 278
Long-term debt instruments 11 028 9 216 8 518
Total liabilities 428 358 352 511 395 524
Total equity and liabilities 460 832 380 549 424 912
Guarantees on behalf of clients 18 533 12 798 15 250
* Certain bond positions were not set off in the June 2006 reporting period and
have been restated for comparability purposes.
Contingency note
Historically a number of group companies entered into structured-finance
transactions with third parties, using their tax bases. In the majority of these
transactions the underlying third parties contractually agreed to accept the
risk of any tax imposed by the South African Revenue Service (SARS), although
the obligation to pay rested in the first instance with the group companies. It
would only be in limited cases, for example where the credit quality of a client
became doubtful or where the client specifically contracted out of the repricing
of additional taxes, that the recovery from a client could be less than the
liability arising on assessment, in which case provisions would be made.
SARS has recently assessed structures in a manner contrary to the way initially
envisaged by the contracting parties and continues to examine other structures.
As a result group companies are, or could be, obliged to pay additional amounts
to SARS and recover these from clients under various applicable contractual
arrangements.
Condensed consolidated statement of changes in equity
Minority
Total equity shareholders`
attributable equity
to equity attributable
holders of to preference
Rm the parent shareholders
Balance at 31 December 2005 22 490 2 770
Net income recognised directly in 72 -
equity
Foreign currency translation reserve 226
movement
Available-for-sale reserve movement (201)
Share-based payments reserve movement 46
Other movements 1
Profit for the period 2 326 110
Dividends to shareholders (742) (110)
Issues of shares net of expenses 427
Shares acquired by group entities (663)
Shares issued/(repurchased) by 300
subsidiary
Balance at 30 June 2006 23 910 3 070
Net income recognised directly in 328 -
equity
Release of reserves previously not (105)
available
Foreign currency translation reserve 108
movement
Available-for-sale reserve movement 91
Revaluation of owner-occupied 77
property
Share-based payments reserve movement 179
Other movements (22)
Profit for the period 2 207 109
Dividends to shareholders (820) (109)
Issues of shares net of expenses 448
Shares acquired by group entities (957)
Balance at 31 December 2006 25 116 3 070
Net income recognised directly in 129 -
equity
Release of reserves previously not (132)
available
Foreign currency translation reserve 50
movement
Available-for-sale reserve movement 49
Share-based payments reserve movement 166
Other movements (4)
Profit for the period 2 798 129
Ordinary minority shareholders` share 6
of preference dividends paid
Dividends to shareholders (1 142) (135)
Issues of shares net of expenses 766 361
Shares acquired by group entities (82)
Shares issued by subsidiary
Balance at 30 June 2007 27 585 3 431
Condensed consolidated statement of changes in equity
Minority
shareholders`
equity
attributable
to ordinary Total
Rm shareholders equity
Balance at 31 December 2005 1 049 26 309
Net income recognised directly in 20 92
equity
Foreign currency translation reserve 19 245
movement
Available-for-sale reserve movement (201)
Share-based payments reserve movement 46
Other movements 1 2
Profit for the period 146 2 582
Dividends to shareholders (7) (859)
Issues of shares net of expenses 427
Shares acquired by group entities (663)
Shares issued/(repurchased) by (150) 150
subsidiary
Balance at 30 June 2006 1 058 28 038
Net income recognised directly in (3) 325
equity
Release of reserves previously not (105)
available
Foreign currency translation reserve 2 110
movement
Available-for-sale reserve movement 91
Revaluation of owner-occupied 77
property
Share-based payments reserve movement 179
Other movements (5) (27)
Profit for the period 163 2 479
Dividends to shareholders (16) (945)
Issues of shares net of expenses 448
Shares acquired by group entities (957)
Balance at 31 December 2006 1 202 29 388
Net income recognised directly in (20) 109
equity
Release of reserves previously not (132)
available
Foreign currency translation reserve (23) 27
movement
Available-for-sale reserve movement 49
Share-based payments reserve movement 166
Other movements 3 (1)
Profit for the period 160 3 087
Ordinary minority shareholders` share (6) -
of preference dividends paid
Dividends to shareholders (28) (1 305)
Issues of shares net of expenses 1 127
Shares acquired by group entities (82)
Shares issued by subsidiary 150 150
Balance at 30 June 2007 1 458 32 474
Condensed consolidated cash flow statement
for the period ended Reviewed Reviewed Audited
June June December
Rm 2007 2006 2006
Cash generated by operations 5 630 4 464 9 297
Change in funds for operating (1 592) (7 176) (3 739)
activities
Net cash generated from operating 4 038 (2 712) 5 558
activities before taxation
Taxation paid (1 390) (213) (953)
Cash flows from/(utilised by) 2 648 (2 925) 4 605
operating activities
Cash flows (utilised by)/from (1 572) 172 (1 057)
investing activities
Cash flows from/(utilised by) 1 917 1 005 (1 131)
financing activities
Net increase/(decrease) in cash and 2 993 (1 748) 2 417
cash equivalents
Cash and cash equivalents at the 19 306 16 889 16 889
beginning of the period*
Cash and cash equivalents at the end 22 299 15 141 19 306
of the period*
* Including mandatory reserve deposits with central bank.
Condensed operational segmental reporting (1)
for the period ended Reviewed Reviewed Audited
June June December
2007 2006 2006
Rbn Rbn Rbn
Total Total Total
assets assets assets
Nedbank Corporate 187 149 175
Nedbank Capital 149 128 138
Nedbank Retail 142 108 125
Imperial Bank 34 26 30
Shared Services 6 7 8
Central Management 18 13 13
Eliminations (75) (50) (64)
Total 461 381 425
Segmental reporting comparative results have been restated for improved
profitability measurement.
Condensed operational segmental reporting (1)
for the period ended Reviewed Reviewed Audited
June June December
2007 2006 2006
Rm Rm Rm
Operating Operating Operating
income income income
Nedbank Corporate 4 233 3 505 7 596
Nedbank Capital 1 245 1 298 2 605
Nedbank Retail 4 782 3 975 8 591
Imperial Bank 541 427 932
Shared Services 44 47 286
Central Management (421) (437) (859)
Eliminations (130) (80) (203)
Total 10 294 8 735 18 948
Segmental reporting comparative results have been restated for improved
profitability measurement.
Condensed operational segmental reporting (1)
for the period ended Reviewed Reviewed Audited
June June December
2007 2006 2006
Rm Rm Rm
Headline Headline Headline
earnings earnings earnings
Nedbank Corporate 1 541 1 198 2 515
Nedbank Capital 545 576 1 145
Nedbank Retail 956 711 1 463
Imperial Bank 107 89 193
Shared Services 20 (82) (138)
Central Management (394) (388) (743)
Eliminations
Total 2 775 2 104 4 435
Segmental reporting comparative results have been restated for improved
profitability measurement.
Condensed geographical segmental reporting (1)
for the period ended Reviewed Reviewed Audited
June June December
2007 2006 2006
Restated
Operating Operating Operating
Rm income income income
South Africa 9 627 8 151 17 616
Business operations 9 627 8 151 17 616
BEE transaction costs
Income attributable to
preference shareholders
Rest of Africa 288 281 657
Business operations 288 281 657
BEE transaction costs
Rest of world - business 379 303 675
operations
Total 10 294 8 735 18 948
Condensed geographical segmental reporting (1)
for the period ended Reviewed Reviewed Audited
June June December
2007 2006 2006
Headline Headline Headline
Rm earnings earnings earnings
South Africa 2 631 1 984 4 176
Business operations 2 839 2 157 4 516
BEE transaction costs (79) (63) (121)
Income attributable to (129) (110) (219)
preference shareholders
Rest of Africa 50 41 76
Business operations 51 41 99
BEE transaction costs (1) (23)
Rest of world - business 94 79 183
operations
Total 2 775 2 104 4 435
Registered office: Nedbank Group Limited, Nedbank Sandton
135 Rivonia Road, Sandown, 2196; PO Box 1144, Johannesburg, 2000
Transfer secretaries:
Computershare Investor Services 2004 (Pty) Limited, 70 Marshall Street,
Johannesburg, 2001, South Africa
PO Box 61051, Marshalltown, 2107, South Africa
Transfer secretaries in Namibia:
Transfer Secretaries (Pty) Limited
Shop 8, Kaiserkrone Centre, Post Street Mall, Windhoek, Namibia; PO Box 2401,
Windhoek, Namibia
Company Secretary: GS Nienaber ISIN: ZAE000004875
Directors:
Dr RJ Khoza (Chairman), Prof MM Katz (Vice-chairman), ML Ndlovu (Vice-chairman),
TA Boardman* (Chief Executive), CJW Ball**, MWT Brown* (Chief Financial
Officer), TCP Chikane, BE Davison, N Dennis (British), MA Enus-Brey, Prof B de L
Figaji, RM Head (British), JB Magwaza, ME Mkwanazi, CML Savage, GT Serobe, JH
Sutcliffe (British)
* Executive ** Senior independent director
This announcement is available on the group`s website - www.nedbankgroup.co.za -
together with the following additional information:
* Detailed financial information in HTML and PDF formats.
* Financial results presentation to analysts.
* Link to a webcast of the presentation to analysts.
For further information kindly contact Nedbank Group Investor Relations by email
at nedbankgroupir@nedbank.co.za.
Sponsor in Namibia: Old Mutual Investment Services (Namibia) (Pty) Limited
Sponsors: Merrill Lynch South Africa (Pty) Limited, Nedbank Capital
These results and additional information are available on www.nedbankgroup.co.za
Date: 06/08/2007 08:00:23 Produced by the JSE SENS Department.
