| Wed 6 Aug 2008, 8:00 | | NED - Nedbank Group - Reviewed Interim Financial Results For The Six Months |
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NED
NED
NED - Nedbank Group - Reviewed Interim Financial Results For The Six Months
Ended 30 June 2008
NEDBANK GROUP
Reg No: 1966/010630/06
ISIN: ZAE000004875
JSE share code: NED
NSX share code: NBK
Reviewed interim financial results for the six months ended 30 June 2008
A Member of the Old Mutual Group
- Diluted headline earnings per share up 6,8%
- Diluted earnings per share up 29,6%
- Efficiency ratio improved from 55,2% to 51,5%
- ROE (excluding goodwill) decreased from 24,7% to 21,3%
- Net asset value per share increased 18,1% to 8 155 cents
- Interim dividend per share maintained at 310 cents
`In the context of a tougher economic environment the group`s wholesale
businesses continued to perform well, but earnings in the retail businesses
decreased as a result of higher impairment charges.
In February this year we cautioned that the deteriorating macroeconomic outlook
was likely to make 2008 significantly more challenging for the South African
economy and the banking sector. Underlying growth in assets and net interest
income has remained solid, but impairment levels, arising mainly from the
retail portfolios, have now risen above the group`s through-the-cycle
expectations.
To manage the business through the current high interest rate cycle Nedbank
Group has, for some time, been strengthening collection and risk processes,
controlling cost growth and improving capital ratios. At the same time we
continue to focus on and invest in areas with medium- to long-term growth
potential and capitalise on the opportunities created by more volatile market
conditions.`
Tom Boardman Chief Executive
Banking environment
The South African economic environment continued to deteriorate during the
first half of 2008. Supply-side inflationary pressures led to further
interest rate increases in April and June, adding to the credit stress levels
of consumers. The resultant slowdown in economic growth is reflected in lower
retail sales, vehicle sales and house prices. Credit provisioning levels have
increased in Nedbank Retail and Imperial Bank.
The group`s wholesale banking bias has provided support within the current
environment. Corporate advances growth remained resilient, boosted by the
downstream activity from increasing fixed investment.
In June 2008 the Competition Commission released a summary of its findings on
the inquiry into bank charges in South Africa. Nedbank generally supports the
recommendations that have been made by the Banking Enquiry Panel.
Financial performance
Diluted headline earnings per share increased by 6,8% from 673 cents to 719
cents. Diluted basic earnings per share grew by 29,6% from 678 cents to 879
cents. (1)
The group`s return on average ordinary shareholders` equity (ROE), excluding
goodwill, decreased to below the group`s medium- to long-term target,
declining from 24,7% to 21,3% for the period. This decline resulted from a
reduction in gearing as the group increased its core Tier 1 capital adequacy to
position the bank in the current environment, and from a lower return on assets
caused mainly by higher retail impairment levels and lower private-equity-
related earnings. ROE declined from 21,2% to 18,7%. (1)
Headline earnings increased by 6,1% from R2 775 million to R2 943 million for
the period to June 2008. Basic earnings grew by 28,6% to R3 597 million (June
2007: R2 798 million). (1)
The group`s wholesale businesses increased headline earnings, benefiting from
favourable trading conditions and good client volumes. However, the group`s
financial performance was negatively impacted by retail impairment levels
rising above the group`s through-the-cycle expectations. In addition, market
movements in the equity and property markets have negatively impacted private
equity valuations. Basic earnings benefited from an after-tax profit of R637
million on the disposal of the group`s shares in Visa.
Following the introduction of black economic empowerment (BEE) and management
shareholders in Bond Choice, the group reduced its investment in the mortgage
originator from 62% to 25,5%. Consequently, Bond Choice is no longer classified
as a subsidiary of the group with effect from 1 January 2008.
Net interest income (NII)
NII grew 21,2% to R7 960 million (June 2007: R6 568 million). This increase was
driven mainly by the 22,9% growth in average interest-earning banking assets.
(1)
The net interest margin declined to 3,83% for the period from 3,90% for the
period to June 2007 and 3,94% for the year to December 2007. This reduction in
margin was in line with expectations as deposit margins were impacted by strong
competition for funding. Furthermore, the cost of the bank`s funding increased
as the proportion of assets funded through wholesale versus retail deposits
continued to increase and as the group lengthened the maturity profile of
liabilities. (1)
Margins on advances declined during the period. This was due to asset mix
changes with the growth of lower-risk, lower-margin assets, particularly
within the personal loans portfolio. The pressure on home loan margins has
begun to slow and wholesale margins on new assets are improving. This pressure
on deposit and asset spreads was partially offset by the endowment benefits of
higher interest rates.
Impairment charge on loans and advances
The impairment charge to the income statement increased by 86,4% to R1 894
million (June 2007: R1 016 million), resulting in the credit loss ratio
increasing from 0,62% in June 2007 to 0,96%. While the credit loss ratios in
both Nedbank Corporate and Nedbank Capital remained within through-the-
cycle levels, Nedbank Retail and Imperial Bank`s credit loss ratios
deteriorated further as a result of the rise in interest rates and the
increased levels of consumer indebtedness, and are now above expected through-
the-cycle ranges. (1)
Credit loss ratio (%) June 2008 June 2007
Nedbank Capital 0,12 (0,09)
Nedbank Corporate 0,15 0,11
Nedbank Retail 2,00 1,35
Imperial Bank 1,75 1,18
Nedbank Group 0,96 0,62
Non-interest revenue (NIR)
NIR increased by 4,5% to R4 954 million for the period (June 2007: R4 742
million). Excluding Bond Choice`s commission and sundry income in 2007, NIR
grew by 10,6% on a like-for-like basis. (1)
The sale of Bond Choice reduced commission and fee income by R261 million.
Commission and fee income (excluding Bond Choice) grew by 12,4%. In
transactional banking cheque processing fees continued to decline as clients
shifted to more secure electronic banking systems. Cash handling fees and
transactional-banking volumes grew strongly due to an increase in client
numbers as a result of the group`s investment in delivery channels from 2006
onwards.
The group`s retail Bancassurance and Wealth Division performed well, with
headline earnings increasing by 20,5% from R161 million to R194 million in
June 2008.
Trading income for the period increased 56,1% to R813 million, benefiting from
good client flows as a result of increased volatility in the currency and
interest rate markets, and improved equity trading.
Private equity income declined sharply, reflecting the reduced prices in
equity and property markets.
NIR from private equity (Rm) June 2008 June 2007
Nedbank Capital private equity 93 346
Nedbank Corporate property private equity (40) 147
Total NIR from private equity 53 493
Expenses
Despite high inflation and the increased distribution footprint, expenses
continued to be tightly controlled, increasing by 6,6% to R6 651 million (June
2007: R6 238 million). On a like-for-like basis, excluding Bond Choice,
expenses increased by 10,1%.
Staff expenses grew by 4,5%, benefiting from the sale of Bond Choice and an
adjustment of R129 million accounting for the growth in the existing pension
fund asset and a change in the pension fund rules in terms of International
Accounting Standard (IAS) 19.
Marketing costs increased by 8,4% following the group`s successful
investment in soccer through the sponsorship of the Nedbank Cup to increase
Nedbank brand awareness.
Information technology costs grew by 14,0%, largely attributable to
investment in systems development for business- , compliance- and risk-
related projects as well as higher ATM network costs.
The efficiency ratio improved from 55,2% for the first half of 2007 (excluding
Bond Choice 54,7%) to 51,5% for the same period in 2008.(1)
The `jaws` ratio improved to 7,6%, from 3,6% in June 2007, as a result of
revenue growth of 14,2% exceeding expense growth of 6,6%.(1)
Associate income
Associate income decreased from R179 million in June 2007 to R84 million. This
was primarily as a result of Nedbank Group`s R65 million share of the profit on
the sale of JSE Limited shares by the BoE Private Clients joint venture in the
prior period as well as the sale of the group`s interests in Whirlprops and
Kimberley Clark during 2007. (1)
Non-trading and capital items
Income after taxation from non-trading and capital items increased from R23
million in June 2007 to R654 million for the period. (1)
The main sources of this income accounted for as a non-headline item were as
follows:
The profit on the sale of Visa shares from the Visa initial public offering
in March 2008 and the subsequent disposal of the group`s remaining Visa shares
in June 2008 resulting in a profit of R637 million after tax.
In Bond Choice the sale of 26,5% to Kapela Investment Holdings and 10% to an
employee trust realising R60,9 million. The sale resulted in a capital profit
of R14,5 million after tax.
Balance sheet
Capital
Nedbank Group continues to be well-capitalised, with a Tier 1 capital adequacy
ratio of 8,7% (December 2007: 8,0% pro forma Basel II) and a total capital
adequacy ratio of 11,7% (December 2007: 11,2% pro forma Basel II). These ratios
are now in the upper half of the group`s target ranges. The core Tier 1 capital
adequacy ratio was 7,4% (December 2007: 6,9% pro forma Basel II).
Advances
Advances increased by 18,3% (annualised) to R408 billion, with strong asset
growth across all business units. Details of advances growth by division are as
follows:
June December Annualised
Rm 2008 2007 increase (%)
Nedbank Corporate 167 304 153 718 17,8
Nedbank Capital 55 943 51 233 18,5
Nedbank Retail 143 474 133 492 15,0
Imperial Bank 41 109 35 320 33,0
Other 241 193 50,0
Total 408 071 373 956 18,3
Deposits
Overall deposits increased by 26,1% (annualised) from R385 billion in December
2007 to R435 billion in June 2008, with higher interest rates increasing demand
for savings and investment products. (1)
Despite strong growth in retail funding, deposit growth was still largely
concentrated in the wholesale market. Management has remained focused on
optimising the funding mix and profile of the group through utilising alternate
funding sources, making a focused effort on the retail and business banking
deposit bases, and pricing competitively for term deposits. The group`s
liquidity position and funding franchise remain strong.
Cluster performance
Nedbank Corporate
Headline earnings increased by 11,8% from R 1 344 million for June 2007 to R1
503 million for the period (excluding Bond Choice and Lion Match 15,2%).
The return on risk-adjusted capital (RORAC) increased to 29,5% from 27,7% for
June 2007.
The core banking activities of Nedbank Corporate generated headline earnings
growth of 30,6%, from R1 153 million to R1 506 million, with all the businesses
performing well and reflecting the inherent strength of Nedbank`s wholesale
banking franchise. Headline earnings grew by 32,7% to R731 million in Business
Banking, 44,4% to R286 million in Corporate Banking, 30,3% to R423 million in
Property Finance lending activities and 28,2% to R50 million in Nedbank Africa.
After four years of strong levels of profitability, the property private
equity investment portfolio felt the impact of the decline in property values.
The credit loss ratio increased from 0,11% to 0,15%. While Corporate Banking
and Property Finance remain at low levels of impairment, there has been a small
increase in gross levels of impairment in Business Banking.
NIR from core banking activities was up 24,0% and was positively impacted by
fair-value gains of R113 million (June 2007: R33 million) that arose largely
as a result of the profile of the book and the higher interest rate
environment. Within NIR commission and fee income increased by 9,0%, and growth
continues to be negatively affected by clients` transition from cheque
processing to electronic transactions.
Expenses decreased by 6,8%, with the division benefiting from not having the
expenses of Bond Choice and Lion Match in the June 2008 period. Core expenses
(excluding Bond Choice and Lion Match) increased by 10,8% due largely to an
increase in staff expenses as a result of headcount growth, mainly in client-
facing positions, during 2007. Headcount is actively managed to control costs
and, at the same time, to retain key staff.
With sound client relationships and a strong pipeline in place, the core
banking activities are well-positioned for the second half of 2008, although
the downturn in the economy is starting to impact clients, especially in
Business Banking, and impairments are consequently expected to increase from a
low base.
We anticipate that property investments will continue to feel the impact of
higher yields in the short term but, based on the quality of the investment
portfolio, we see upside in the medium to longer term.
Nedbank Capital
Headline earnings grew by 20,0% to R600 million, while RORAC decreased from
36,7% to 35,3%.
Trading income increased by 53,4% to R703 million off a low base in 2007. The
growth originated from robust client flows due to increased volatility in
interest rate and foreign exchange markets, offset to an extent by
disappointing performances in Debt Capital Markets and equity trading in the
securities business.
Investment Banking experienced good deal flow and the current environment has
provided positive asset-repricing opportunities.
NIR from private equity decreased 73,0% to R93 million as a result of the
effect on valuations of a sharply declining equity market. While this has not
been positive for the existing private equity book, the lower equity market has
provided good investment opportunities to build the private equity portfolio,
and R166 million was invested during the period.
As part of Nedbank Capital`s strategy to maintain and build its presence in
Africa, regional representative offices in West, East and North Africa are on
track to being opened, subject to regulatory approval. In addition, the group
is growing the London base. These growth initiatives have contributed to total
expenses increasing by 15,2% from R585 million to R675 million.
The attraction and retention of skilled people remain challenging as the pool
of skilled professional staff in South Africa continues to decrease.
Internationalising the business has assisted in retention of some key staff
via secondment to offshore offices.
Nedbank Capital remains committed to its integrated investment-banking
strategy and its collaborative culture, which acts as a hedge against tougher
conditions as there are multiple points of deal origination and a complete
range of banking services can be offered to clients.
The worsening economic environment is expected to have a negative impact on the
expansion of client businesses, notably on deal flow in the merger and
acquisition market. However, this is balanced by the diminishing influence of
offshore private equity houses and the shrinking of access to cheaper debt
markets. In addition, international competitors are expected to be less active
due to the subprime contagion effect on their balance sheet lending businesses,
which creates the opportunity for domestic banks with strong liquidity
franchises to reprice assets as well as to gain business in arguably a less
competitive environment.
Nedbank Retail
Nedbank Retail`s headline earnings declined by 18,6% to R728 million and RORAC
decreased from 21,9% to 15,9%.
Nedbank Retail achieved NII growth of 17,1%, which was primarily driven by good
advances growth in the Home Loan, Card and Vehicle and Asset Finance Divisions.
NIR increased 13,9% with solid performances in Bancassurance and Wealth and
card acquiring, and growth of 11,2% in primary clients.
Total revenue growth of 15,8% exceeded expense growth of 12,2%. The credit loss
ratio increased significantly by 65 basis points to 2,00%, which had a negative
impact on financial performance.
Excluding the profit on the sale of JSE Limited shares in 2007 by BoE Private
Clients, income from associates grew by 28,8%.
High inflation, record levels of personal indebtedness and increases in
interest rates have put the South African consumer under severe pressure. The
erosion of consumers` ability to repay debt has led to the continued
deterioration of the retail lending environment. This has placed significant
pressure on retail banking, which is expected to continue for the remainder of
2008 and into 2009, and has impacted negatively on advances and deposit growth
as well as impairments.
During the past 18 months Nedbank Retail has executed specific strategies
appropriate to the current economic environment. These include focusing on
pricing, risk control and collections as well as on the quality of new
business. Headcount in the collections areas has increased significantly and
ongoing system improvements have been undertaken. Appropriate risk management
will remain a top priority for management.
During the period Nedbank Retail`s incurred but not reported (IBNR) impairment
charge changed by the following items, in addition to normal impairments
calculated using historical data:
Impairment provisions raised historically for general data issues amounting
to R60 million have been released as they are no longer required following
improvements in the quality of data.
A R30 million release of impairment provisions raised in 2007 for the
potential impact of the introduction of the National Credit Act (NCA) on the
personal loans book, which has in fact improved over the last 12 months.
Nedbank Retail continues to hold R140 million of impairment provisions, over
and above the system-calculated IBNR, to reflect the effects of the
deteriorating economic environment, which, although incurred, are not yet
evident.
The provision raised in 2007 for the move of the default definition from 60
days to 30 days has been increased by R27 million to R139 million.
The integration of Old Mutual Bank into Nedbank has been completed on schedule
and the project has delivered all its major objectives and synergy targets.
Nedbank Retail`s strategic focus in the second half of the year continues to be
as follows:
Entrenching the strategy of focusing on areas that yield a high economic
profit.
Managing risk and impairments through the economic cycle.
Expense control, with headcount remaining constant.
Growing its client base with a specific emphasis on primary clients.
Transformation.
Driving the delivery of worldclass service.
Imperial Bank
Headline earnings decreased by 15,6% to R189 million, mainly due to an increase
in both impairments and the effective taxation rate. ROE declined from 24,3% to
15,5%. Nedbank Group`s share of these earnings was R88 million (June 2007: R107
million), down 17,8%.
Imperial Bank grew loans and advances 33,0% from R35,3 billion to R41,1
billion, following the successful implementation of the National Credit Act
requirements. NII increased 18,8% from R682 million to R810 million, reflecting
a margin squeeze mainly due to the increased cost of funding.
Expenses remained well-controlled, increasing by only 3,5% and resulting in
the efficiency ratio improving from 32,0% to 26,8%.
Despite the tougher trading environment and tightening of credit criteria, new-
business volumes remained at similar levels to the prior year.
Motor Finance benefited from increased financing in the used-car market, while
Property Finance had a satisfactory six months although demand for residential
development finance is declining as anticipated. Supplier Asset Finance
performed in line with expectations, while growth in Medical Finance has been
adversely affected by higher interest rates and the level of uncertainty within
the economy.
The impairment charge increased from R177 million to R341 million and the
credit loss ratio deteriorated from 1,18% to 1,75%. The main contributor to the
impairment charge was the Motor Finance Division, which was adversely impacted
by increased interest rates and lower values being realised in the used-car
market that resulted in the credit loss ratio increasing from 1,93% to 2,65%.
The Property, Medical and Supplier Asset Finance Divisions continued to
experience acceptable impairment charge levels in line with expectations.
The increase in the effective tax rate from 25,0% to 33,5% is mainly due to the
group having fully utilised the benefits of an historic loss. As disclosed, a
deferred taxation asset had not been raised historically for this loss.
Imperial Bank anticipates that conditions will remain challenging in the second
half of the year, as performance will continue to be impacted by the high
interest rate environment.
Nedbank Group 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.
Capital management
The group remains well-capitalised under Basel II. The group Tier 1 capital
adequacy ratio and total capital adequacy ratio strengthened to 8,7% and 11,7%
respectively. The group`s core Tier 1 capital adequacy ratio was 7,4%.
The group`s objective is to maintain an efficient capital structure and to
ensure that economic capital is held in excess of the requirement for target
debt ratings. Capital is not held to support acquisitions.
Surplus capital is held to ensure that an appropriate buffer is maintained
after extensive systemic and stress scenario testing is performed to determine
the group`s optimal capital requirements, which includes the following
considerations:
Organic business growth requirements.
Needs of stakeholders.
Target capital adequacy ratios.
Projected business plans.
During the first six months of 2008 management focused on increasing the
group`s capital adequacy ratios to ensure that the group`s strong capital
position is maintained in the tougher economic environment.
In May 2008 Nedbank Limited privately placed an inaugural hybrid Tier 1 issue
of R900 million in the domestic market. This was followed with a further R287
million issue, bringing the total issue to R1 187 million by 30 June 2008.
Depending on market conditions, the group plans to issue further hybrid Tier 1
capital instruments and Tier 2 capital. There are no maturities of existing
Tier 2 capital in 2008, 2009 or 2010.
Amendments to section 38 of the Companies Act were promulgated at the beginning
of this year and the group received shareholder approval at the Nedbank Group
annual general meeting in May no longer to be legally required to offer the
scrip dividend alternative. Accordingly, the group has decided to offer a cash-
only dividend and to increase the dividend cover slightly, within the guidance
range of 2,25 to 2,75 times, to maintain the 2007 dividend level.
Prospects
Performance in the second half of 2008 is likely to be influenced by the
following:
Continued slowing of economic growth in South Africa.
Slowing growth in retail advances.
Corporate Banking advances growth remaining more resilient.
Business Banking starting to show signs of slowing advances growth.
An endowment benefit in the margin resulting from the rise in interest
rates, offset by margin compression in certain categories of advances and
continued reliance on wholesale funding.
Retail credit loss ratios stabilising, unless market conditions deteriorate
further, and worsening credit loss ratios in the Business Banking area.
Wholesale credit loss ratios remaining below through-the-cycle levels and
retail credit loss ratios remaining above through-the-cycle levels.
Continued focus on cost control.
Ongoing capital management activities.
The group anticipates this to impact on the group`s financial performance in
2008 as follows:
Advances growth for 2008 to be in the mid-teens.
Margin compression for the full year on the 2007 margin of between 10 to 15
basis points.
Credit loss ratios in the wholesale areas to increase from current levels,
but to remain below through-the-cycle expectations.
Retail credit loss ratios to stabilise, unless market conditions deteriorate
further.
NIR growth for the year to be in upper single digits (early double digits,
excluding Bond Choice).
Expense growth for the year to be in upper single digits (early double
digits, excluding Bond Choice) and to remain below revenue growth.
Capital adequacy ratios to improve further.
The group currently expects to show positive earnings growth for the full year.
However, in 2008 it is unlikely that the group will meet all its medium-to
long-term financial targets. The group forecasts for the year currently
indicate the following:
Growth in diluted headline earnings per share (HEPS) lower than the target of
at least average CPIX plus GDP growth plus 5%.
ROE (excluding goodwill) of less than 10% above the group`s monthly weighted
average cost of ordinary shareholders` equity.
The group`s credit loss ratio will exceed the upper limit of the target range
of 0,85%.
Solid revenue growth and ongoing disciplined cost management with an
efficiency ratio being maintained well below the 55% target.
The group`s capital adequacy ratio will improve further and remain in the top
half of our target ranges.
The group will remain capitalised to a 99,9% confidence interval on an
economic-capital basis to a target debt rating of A- with a 10% buffer.
The group`s dividend cover will remain within its range of between 2,25 and
2,75 times.
The group still expects to achieve its medium- to long-term financial targets
over time.
Shareholders are advised that these forecasts have not been reviewed or
reported on by the group`s auditors.
Board changes
As previously reported Cedric Savage retired as an independent non-executive
director (14 May 2008) and Barry Davison resigned as an independent non-
executive director (2 August 2008).
Accounting policies
Nedbank Group Limited is a company domiciled in South Africa. The consolidated
interim financial results of the company at and for the half year ended 30 June
2008 comprised the company and its subsidiaries (together referred to as the
`group`) and the group`s interests in associates and jointly controlled
entities.
Nedbank Group`s principal accounting policies have been applied consistently
over the current and prior financial years.
Nedbank Group`s consolidated interim financial results have been prepared in
accordance with the recognition and measurement criteria of International
Financial Reporting Standards (IFRS), interpretations issued by the
International Financial Reporting Interpretations Committee (IFRIC), and the
presentation and disclosure requirements of IAS 34: Interim Financial
Reporting.
In the preparation of these financial results the group has applied key
assumptions concerning the future and other indeterminate sources in recording
various assets and liabilities. These assumptions were applied consistently to
both the company and group financial statements for the six months ended 30
June 2008. These assumptions are subject to ongoing review and possible
amendments.
The selected explanatory notes, provided in accordance with IAS 34, are marked
with (1).
Reviewed results - auditors` opinion
KPMG Inc and Deloitte & Touche, Nedbank Group`s independent auditors, have
reviewed the consolidated interim financial results contained in this interim
report and have expressed an unmodified conclusion on the consolidated interim
financial results. The review report is available for inspection at 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 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.
Interim dividend declaration
Notice is hereby given that an interim dividend of 310 cents per ordinary share
has been declared, payable to shareholders for the six months ended 30 June
2008. In accordance with the provisions of Strate, the electronic settlement
and custody system used by JSE Limited, the relevant dates for the dividend are
as follows:
Event Date
Last day to trade (cum dividend) Friday, 5 September 2008
Shares commence trading (ex dividend) Monday, 8 September 2008
Record date (date shareholders recorded in books) Friday, 12 September 2008
Payment date Monday, 15 September 2008
Shares may not be dematerialised or rematerialised between Monday, 8 September
2008, and Friday, 12 September 2008, both days inclusive.
On Monday, 15 September 2008, the dividend will be electronically transferred
to the bank accounts of all certificated shareholders where this facility is
available. Where electronic funds transfer is either not available or not
elected by the shareholder, cheques dated Monday, 15 September 2008, will be
posted on that date.
Holders of dematerialised shares will have their accounts credited at their
participant or broker on Monday, 15 September 2008.
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.
For and on behalf of the board
Dr RJ Khoza TA Boardman
Chairman Chief Executive
6 August 2008
Financial highlights
at Reviewed Reviewed Audited
June June December
2008 2007 2007
Statistics
Number of shares listed m 466,6 456,4 459,3
Number of shares in issue, excluding
shares held by group entities m 406,2 399,6 401,9
Weighted average number of shares m 403,6 396,7 398,7
Diluted weighted average number of
shares m 409,1 412,6 414,4
Headline earnings per share cents 729 700 1 485
Diluted headline earnings per share
cents 719 673 1 429
Ordinary dividends declared per share
cents 310 310 660
- Interim (cents) 310 310 310
- Final (cents) 350
Dividend paid per share cents 350 284 594
Dividend cover times 2,35 2,26 2,25
Net asset value per share cents 8 155 6 903 7 513
Tangible net asset value per share cents 6 817 5 661 6 207
Closing share price cents 9 211 13 200 13 600
Price/earnings ratio historical 6 10 9
Market capitalization Rbn 43,0 60,2 62,5
Number of employees 26 982 25 992 26 522
Key ratios (%)
Return on ordinary shareholders`
equity (ROE) 18,7 21,2 21,4
Return on total assets (ROA) 1,14 1,26 1,30
Net interest income to average
interest-earning banking assets 3,83 3,90 3,94
Non-interest revenue to total income 38,4 41,9 42,5
Credit loss ratio* 0,96 0,62 0,62
Efficiency ratio 51,5 55,2 54,9
Effective taxation rate 23,8 25,3 26,3
Group capital adequacy ratios: Basel I
- Tier 1 8,3 8,3
- Total 12,4 12,2
Group capital adequacy ratios: Basel II
- Tier 1 8,7 8,0
- Total 11,7 11,2
Balance sheet statistics (Rm)
Total equity attributable to equity
holders of the parent 33 127 27 585 30 193
Total equity 38 098 32 474 35 125
Amounts owed to depositors 435 209 356 640 384 541
Loans and advances* 408 071 338 907 373 956
Gross* 414 973 344 436 380 034
Impairment of loans and advances (6 902) (5 529) (6 078)
Total assets 549 007 460 832 488 856
* June 2007 reclassified.
Condensed consolidated cashflow statement
for the period ended Reviewed Reviewed Audited
June June December
Rm 2008 2007 2007
Cash generated by operations 6 570 5 630 12 453
Change in funds for operating activities (1 951) (1 592) (10 691)
Net cash generated from operating
activities before taxation 4 619 4 038 1 762
Taxation paid (1 198) (1 390) (2 419)
Cashflows from/(utilised in) operating
activities 3 421 2 648 (657)
Cashflows utilised in investing
activities (592) (1 572) (2 063)
Cashflows (utilised in)/from financing
activities (498) 1 917 2 122
Net increase/(decrease) in cash and cash
equivalents 2 331 2 993 (598)
Cash and cash equivalents at the
beginning of the period* 18 708 19 306 19 306
Cash and cash equivalents at the end of
the period* 21 039 22 299 18 708
* Including mandatory reserve deposits with central bank.
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 2006 25 116 3 070
Ordinary minority shareholders` share of
preference dividends paid 6
Dividends to shareholders (1 142) (135)
Issues of shares net of expenses 766 361
Shares acquired by group entities (82)
Shares issued by subsidiary
Total income and expense for the period 2 927 129
Profit for the period 2 798 129
Net income recognised directly in equity 129 -
Release of reserves previously not available (132)
Foreign currency translation reserve movement 50
Available-for-sale reserve movement 49
Share-based payment reserve movement 166
Other movements (4)
Balance at 30 June 2007 27 585 3 431
Ordinary minority shareholders` share of
preference dividends paid 7
Dividends to shareholders (1 260) (160)
Issues of shares net of expenses 402
Shares acquired by group entities (85)
Total income and expense for the period 3 551 143
Profit for the period 3 227 143
Net income recognised directly in equity 324 -
Release of reserves previously not available (87)
Foreign currency translation reserve movement (53)
Available-for-sale reserve movement (87)
Property revaluation reserve movement 374
Share-based payment reserve movement 163
Acquisition of subsidiaries 3
Disposal of subsidiaries
Buyout of minorities
Other movements 11
Balance at 31 December 2007 30 193 3 421
Ordinary minority shareholders` share of
preference dividends paid 7
Dividends to shareholders (1 440) (176)
Issues of shares net of expenses 1 000
Shares acquired by group entities (513)
Total income and expense for the period 3 887 169
Profit for the period 3 597 169
Net income recognised directly in equity 290 -
Release of reserves previously not available (54)
Foreign currency translation reserve movement 272
Available-for-sale reserve movement (24)
Property revaluation reserve movement 4
Share-based payment reserve movement 82
Disposal of subsidiaries
Other movements 10
Balance at 30 June 2008 33 127 3 421
Minority
shareholders`
equity
attributable
to ordinary Total
Rm shareholders equity
Balance at 31 December 2006 1 202 29 388
Ordinary minority shareholders` share of
preference dividends paid (6) -
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
Total income and expense for the period 140 3 196
Profit for the period 160 3 087
Net income recognised directly in equity (20) 109
Release of reserves previously not available (132)
Foreign currency translation reserve movement (23) 27
Available-for-sale reserve movement 49
Share-based payment reserve movement 166
Other movements 3 (1)
Balance at 30 June 2007 1 458 32 474
Ordinary minority shareholders` share of
preference dividends paid (7) -
Dividends to shareholders (13) (1 433)
Issues of shares net of expenses 402
Shares acquired by group entities (85)
Total income and expense for the period 73 3 767
Profit for the period 184 3 554
Net income recognised directly in equity (111) 213
Release of reserves previously not available (87)
Foreign currency translation reserve movement (18) (71)
Available-for-sale reserve movement (87)
Property revaluation reserve movement 374
Share-based payment reserve movement 163
Acquisition of subsidiaries 3
Disposal of subsidiaries (81) (81)
Buyout of minorities (21) (21)
Other movements 9 20
Balance at 31 December 2007 1 511 35 125
Ordinary minority shareholders` share of
preference dividends paid (7) -
Dividends to shareholders (73) (1 689)
Issues of shares net of expenses 1 000
Shares acquired by group entities (513)
Total income and expense for the period 119 4 175
Profit for the period 136 3 902
Net income recognised directly in equity (17) 273
Release of reserves previously not available (54)
Foreign currency translation reserve movement 13 285
Available-for-sale reserve movement (24)
Property revaluation reserve movement 4
Share-based payment reserve movement 82
Disposal of subsidiaries (29) (29)
Other movements (1) 9
Balance at 30 June 2008 1 550 38 098
Consolidated income statement
for the period ended Reviewed Reviewed Audited
June June December
Rm 2008 2007 2007
Interest and similar income 26 633 19 075 42 001
Interest expense and similar charges 18 673 12 507 27 855
Net interest income 7 960 6 568 14 146
Impairments charge on loans and advances 1 894 1 016 2 164
Income from lending activities 6 066 5 552 11 982
Non-interest revenue 4 954 4 742 10 446
Operating income 11 020 10 294 22 428
Total expenses 6 651 6 238 13 489
Operating expenses 6 543 6 157 13 341
BEE transaction expenses 108 81 148
Indirect taxation 191 133 305
Profit from operations before
non-trading and capital items 4 178 3 923 8 634
Non-trading and capital items 764 21 111
Profit on sale of subsidiaries,
investments and property and equipment 764 23 118
Net impairment of investments, property
and equipment, and capitalised development
costs (2) (7)
Profit from operations 4 942 3 944 8 745
Share of profits of associates and joint
ventures 84 179 239
Profit before direct taxation 5 026 4 123 8 984
Total direct taxation 1 124 1 036 2 343
Direct taxation 1 014 1 038 2 336
Taxation on non-trading and capital items 110 (2) 7
Profit for the period 3 902 3 087 6 641
Attributable to:
Profit attributable to equity holders of
the parent 3 597 2 798 6 025
Profit attributable to minority interest
- ordinary shareholders 136 160 344
Profit attributable to minority interest
- preference shareholders 169 129 272
Profit for the period 3 902 3 087 6 641
Basic earnings per share cents 891 705 1 511
Diluted earnings per share cents 879 678 1 454
Dividend declared per share cents 310 310 660
Dividend paid per share cents 350 284 594
Earnings reconciliation
for the period ended Reviewed Reviewed Audited
June 2008 June 2007 December 2007
Rm Gross Net Gross Net Gross Net
Profit
attributable to
equity holders of
the parent 3 597 2 798 6 025
Less: non-trading
and capital items 764 654 21 23 111 104
Net profit on sale
of subsidiaries,
investments and
property and
equipment 764 654 23 25 118 111
Net impairment of
investments,
property and
equipment, and
capitalised
development costs (2) (2) (7) (7)
Headline earnings 2 943 2 775 5 921
Consolidated balance sheet
at Reviewed Reviewed Audited
June June December
Rm 2008 2007 2007
Assets
Cash and cash equivalents 11 550 14 563 10 344
Other short-term securities* 29 335 26 229 25 793
Derivative financial instruments 16 759 9 446 9 047
Government and other securities 36 524 25 310 29 637
Loans and advances* 408 071 338 907 373 956
Other assets* 12 848 15 011 9 313
Clients` indebtedness for acceptances 3 130 2 666 2 251
Current taxation receivable 28 851 59
Investment securities 8 994 8 308 8 318
Non-current assets held for sale 32 559 31
Investments in associate companies and
joint ventures 1 012 1 106 978
Deferred taxation asset 96 56 25
Investment property 180 167 171
Property and equipment 3 925 3 460 3 929
Long-term employee benefit as sets 1 597 1 494 1 393
Computer software and capitalised
development costs 1 497 1 260 1 349
Mandatory reserve deposits with central
bank 9 489 7 736 8 364
Goodwill 3 940 3 703 3 898
Total assets 549 007 460 832 488 856
Equity and liabilities
Ordinary share capital 406 400 402
Ordinary share premium 11 204 10 406 10 721
Reserves 21 517 16 779 19 070
Total equity attributable to equity
holders of the parent 33 127 27 585 30 193
Minority shareholders` equity
attributable to
- ordinary shareholders 1 550 1 458 1 511
- preference shareholders 3 421 3 431 3 421
Total equity 38 098 32 474 35 125
Derivative financial instruments 17 211 11 636 11 432
Amounts owed to depositors 435 209 356 640 384 541
Other liabilities 32 604 36 606 34 225
Liabilities under acceptances 3 130 2 666 2 251
Current taxation liabilities 295 303 337
Other liabilities held for sale 467
Deferred taxation liabilities 1 820 1 998 1 616
Long-term employee benefit liabilities 1 265 1 231 1 157
Investment contract liabilities 6 425 5 783 5 846
Long-term debt instruments 12 950 11 028 12 326
Total liabilities 510 909 428 358 453 731
Total equity and liabilities 549 007 460 832 488 856
Guarantees on behalf of clients 20 475 18 533 20 579
* Collateral balances of R5 570 million previously included in other assets
have been reclassified to other short-term securities (R2 003 million) and
loans and advances (R3 567 million) in June 2007.
Condensed operational segmental reporting
for the period ended
Reviewed Reviewed Audited Reviewed Reviewed
June June December June June
2008 2007 2007 2008 2007
Rm Rm Rm Rm Rm
Total Total Total Operating Operating
assets assets assets income income
Nedbank
Corporate 228 331 183 220 208 387 3 954 3 939
Nedbank
Capital 173 075 149 412 143 419 1 349 1 178
Nedbank
Retail 166 839 142 448 154 144 4 926 4 690
Imperial
Bank 43 560 34 004 38 195 543 541
Shared
Services 6 217 6 452 6 683 59 65
Central
Management 38 104 18 935 20 580 225 11
Eliminations(107 119) (73 639) (82 552) (36) (130)
Total 549 007 460 832 488 856 11 020 10 294
Audited Reviewed Reviewed Audited
December June June December
2007 2008 2007 2007
Rm Rm Rm Rm
Operating Headline Headline Headline
income earnings earnings earnings
Nedbank Corporate 8 215 1 503 1 344 2 632
Nedbank Capital 2 655 600 500 1 174
Nedbank Retail 10 024 728 894 1 876
Imperial Bank 1 207 88 107 227
Shared Services 162 27 41 (15)
Central Management 412 (3) (111) 27
Eliminations (247)
Total 22 428 2 943 2 775 5 921
Segmental comparatives have been restated in line with the group`s
implementation of economic-value-based management. From 2008 economic profit
(EP) replaces ROE as the primary internal financial performance measure in the
group. EP is a best-practice measure since it incentivises an appropriate
balance between return and growth, and better aligns with shareholder value
creation.
Condensed geographical segmental reporting
for the period ended
Reviewed Reviewed Audited
June June December
2008 2007 2007
Operating Operating Operating
Rm income income income
South Africa 10 224 9 627 21 024
Business operations 10 224 9 627 21 024
BEE transaction expenses
Profit attributable to minority
interest - preference shareholders
Rest of Africa 379 288 669
Business operations 379 288 669
BEE transaction expenses
Rest of world - business operations 417 379 735
Total 11 020 10 294 22 428
Reviewed Reviewed Audited
June June December
2008 2007 2007
Headline Headline Headline
Rm earnings earnings earnings
South Africa 2 769 2 631 5 623
Business operations 3 042 2 839 6 039
BEE transaction expenses (105) (79) (144)
Profit attributable to minority
interest - preference shareholders (168) (129) (272)
Rest of Africa 70 50 116
Business operations 71 51 119
BEE transaction expenses (1) (1) (3)
Rest of world - business operations 104 94 182
Total 2 943 2 775 5 921
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, MA Enus-Brey, Prof B de L Figaji,
R Harris (British), RM Head (British), JB Magwaza, ME Mkwanazi, CML Savage, GT
Serobe, JH Sutcliffe (British) * Executive ** Senior independent non
-executive director
Sponsor in Namibia: Old Mutual Investment Services (Namibia) (Pty) Limited
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.
Registered office: Nedbank Group Limited, Nedbank Sandton 135 Rivonia Road,
Sandown, 2196 PO Box 1144, Johannesburg, 2000
Transfer secretaries: Computershare Investor Services (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
Reg No: 1966/010630/06
ISIN: ZAE000004875
JSE share code: NED
NSX share code: NBK
Date: 06/08/2008 08:00:11 Produced by the JSE SENS Department.
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