| Mon 1 Aug 2011, 8:01 | | NED - Nedbank Group - Reviewed condensed financial results for the six months |
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NED
NED
NED - Nedbank Group - Reviewed condensed financial results for the six months
ended 30 June 2011
Nedbank Group
Reg No: 1966/010630/06
ISIN: ZAE000004875
JSE share code: NED
NSX share code: NBK
REVIEWED CONDENSED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2011
Headline earnings R2 772m up 28,8%
Diluted headline earnings per share 600 cents up 26,3%
Strong NIR growth R7 139m up 15,9%
ROE (excluding goodwill) 13,7% and ROE 12,2%
Capital adequacy further strengthened (core Tier 1: 10,7%)
Interim dividend per share up 25,0%, to 265 cents
The growth trend of the second half of 2010 continued into the first half of
2011. During the past six months Nedbank Group has made good progress with its
key strategic focus areas of repositioning Nedbank Retail, growing non-interest
revenue and implementing a portfolio tilt strategy. This has resulted in the
group delivering strong earnings growth while further strengthening portfolio
impairments.
`Given our focus on growing the transaction franchise, it is pleasing to see
that, since June 2010, we gained 94 000 net new retail primary clients. We
increased the number of branches and other outlets by 116 and ATMs by 420, while
transactional pricing is now at levels similar to 2005. We continue to see
record transaction volume growth in electronic banking and increased net new
primary client gains in the wholesale banking areas.
`The group remains focused on a client-centred strategy and is well positioned
to deliver growth in earnings for 2011 in excess of our medium- to long-term
financial target.`
Mike Brown
Chief Executive
Economic environment
Global demand has slowed in 2011 as industrial production and consumer spending
in China and other large emerging markets moderated due to tighter monetary
conditions. In many developed markets the fragile recovery faltered as surging
oil prices and reduced fiscal and monetary stimulus negatively impacted consumer
confidence and spending. In addition, concerns remain about the scale and
increasing cost of sovereign debt in many parts of Europe.
Locally, real GDP grew at an annualised rate of 4,8% in the first quarter of
2011. Conditions softened in the second quarter, with the mining and
manufacturing sectors in particular having been impacted by the loss of momentum
in global markets and the strong rand. Capacity utilisation and confidence
levels remain low, resulting in limited demand for corporate credit.
In the retail sector household loan growth was mostly from continued demand for
unsecured loans and instalment sales. Mortgage advances growth remained
depressed as buyers continue to be cautious in line with the flat outlook for
house prices, high levels of consumer debt and increased living costs.
Given the weak global environment, domestic growth is largely dependent on
further fixed-investment spending and an ongoing improvement in consumption
levels.
Review of results
Nedbank Group produced strong earnings growth for the six months ended 30 June
2011 (`the period`) in line with the guidance provided in the trading statements
released in July this year.
Headline earnings increased by 28,8% to R2 772 million and profit from
operations before taxation and non-trading and capital items was up 36,1%.
Diluted headline earnings per share (HEPS) increased by 26,3% from 475 cents to
600 cents. Diluted basic earnings per share increased by 26,2% from 474 cents to
598 cents.
Earnings growth was driven by ongoing strong non-interest revenue (NIR) growth,
improving margins and lower retail impairments. This growth was achieved while
continuing to invest for the future and strengthening portfolio impairments.
Return on assets increased from 0,75% to 0,92% for the period. This increase,
together with a decline in gearing to 13,3 times, resulted in the group`s return
on average ordinary shareholders` equity (ROE), excluding goodwill, increasing
from 12,2% to 13,7%. ROE increased from 10,7% to 12,2% for the period.
The balance sheet remained well-capitalised, with the core Tier 1 capital
adequacy ratio increasing to 10,7% (December 2010: 10,1%), while the group`s
Tier 2 capital position was reduced when the R1,5 billion Ned 5 bond was repaid
in April 2011 and not replaced. The group`s liquidity buffers were increased by
R9,0 billion and the long-term funding profile continued to lengthen to 27,0%,
all this in proactive preparation for Basel III.
Net asset value per share grew by 6,1% (annualised) from 9 831 cents in December
2010 to 10 128 cents in June 2011.
Cluster performance
Total operating cluster headline earnings increased strongly by 43,0% from R2
015 million to R2 881 million.
Nedbank Retail increased earnings from R133 million in 2010 to R826 million and,
importantly, improved ROE from 1,7% to 9,9%. The repositioning of Nedbank Retail
is being driven through a client-centred strategy of growing the primary-client
base while leveraging the strong product lines. This has generated high levels
of NIR growth and a significantly improving credit loss ratio, notwithstanding
the continued strengthening of portfolio impairments.
Nedbank Capital`s earnings reduced by 5,9% on the comparative period, with fee
income down from lower market activity, and the credit loss ratio showed a
slight deterioration from the prior period`s elevated level. Nedbank Capital
reported an increase of 4,3% in its NIR from trading. There has been some margin
compression in foreign exchange flow businesses, and the market provided limited
trading opportunities.
Nedbank Corporate achieved strong earnings growth of 24,0%, driven by improved
margins, fair-value adjustments and improved income from its property private-
equity portfolio.
Nedbank Business Banking`s earnings were up 3,9%, reflecting the difficult
conditions being experienced in the small to medium-sized business sector. In
spite of this the cluster achieved an improvement in margins, above-inflation
growth in fees and commission, primary-client acquisitions and deepened cross-
sell.
Nedbank Wealth achieved good earnings growth of 16,6%, with strong contributions
from insurance and asset management together with an improvement in the
international wealth management businesses. Apart from strong growth in advice-
based sales of financial planning, local Wealth Management had a disappointing
performance in the first half of the year as a result of subdued activity and
higher impairments.
Further segmental information is available on the group`s website at
www.nedbankgroup.co.za.
Financial performance
Net interest income (NII)
NII grew by 7,4% to R8 683 million (June 2010: R8 082 million). The net interest
margin increased to 3,43% from 3,34% in the June 2010 period and 3,35% in the
year to December 2010, while average interest-earning banking assets increased
by 5,9% (annualised) (June 2010 growth: 2,8%).
The pleasing trend of widening margins can be ascribed to:
- the benefits from pricing assets to reflect risk (including both credit and
liquidity risks) and funding costs more appropriately;
- ongoing improvement in the asset mix in line with the group`s portfolio tilt
strategy;
- a relative benefit this period from interest rates remaining stable, given
that advances reprice quicker than deposits; and
- the cost of term liquidity continuing to decline.
This more than offset the effects of:
- the negative endowment from average rates being 123 basis points lower than in
the 2010 period;
- the cost of lengthening the bank`s funding profile; and
- the costs associated with carrying higher levels of lower-yielding liquid
assets.
Impairments charge on loans and advances
Impairment levels improved as a result of a better credit environment and
affordability levels together with enhanced collection capabilities and reduced
levels of defaulted advances.
Credit loss ratio analysis (%) H1 Q1 H2 H1
2011 2011 2010 2010
Specific impairments 1,10 1,12 1,19 1,46
Portfolio impairments 0,11 0,03 0,08 0,00
Total credit loss ratio 1,21 1,15 1,27 1,46
The credit loss ratio on the banking book improved to 1,21% for the period (June
2010: 1,46%). The credit loss ratio relating to specific impairments improved
from 1,46% to 1,10%, reflecting the ongoing improvement in asset quality. Due to
the current uncertain economic environment and as a result of increased
emergence periods, the group has increased the level of portfolio impairments ,
as well as included R100 million in the centre to provide for unknown events
that may have already occurred, but which will only be evident in the future.
The primary reduction in the impairments charge came from Nedbank Retail`s
secured-lending portfolios, due to the momentum gained from the improved credit
environment and various risk management mitigation initiatives. This contributed
to the credit loss ratio in Retail improving significantly from 2,93% in the
period to June 2010 to 2,24%, which is now marginally outside the upper end of
the cluster`s through-the-cycle target range of 1,50% to 2,20%.
The advances portfolios in Nedbank Capital, Nedbank Corporate, Nedbank Business
Banking and Nedbank Wealth remain of high quality. Credit loss ratios in these
clusters, with the exception of Nedbank Capital, remain within the respective
clusters` through-the-cycle levels.
Credit loss ratio (%) Year to
H1 H2 H1 December
2011 2010 2010 2010
Nedbank Capital 0,86 1,72 0,80 1,27
Nedbank Corporate 0,34 0,10 0,31 0,20
Nedbank Business Banking 0,40 0,48 0,32 0,40
Nedbank Retail 2,24 2,42 2,93 2,67
Nedbank Wealth 0,41 0,05 0,24 0,15
Group 1,21 1,27 1,46 1,36
Defaulted advances declined by 11,5% (annualised) to R25 241 million (2010: R26
765 million). This reflects writeoffs as well as the improved collections
processes and credit environment, together with ongoing restructuring
initiatives that have resulted in over 10 700 families (clients of Nedbank)
being kept in their homes since July 2009.
NIR
NIR increased 15,9% to R7 139 million (June 2010: R6 158 million) and 12,5%
before fair-value adjustments. Negative fair-value adjustments on own
subordinated debt amounted to R46 million (June 2010: R110 million).
In line with the group`s focus on growing the transactional franchise, core fee
and commission income grew strongly by 14,1%. Ongoing primary-client
acquisitions, product and systems innovation, record electronic-banking volume
growth, cross-sell initiatives and the ability to leverage the group`s strong
wholesale client relationships to attract retail clients all contributed to this
growth.
Insurance income grew 30,2% as a result of the growth in personal loans and
motor finance, new-product revenues and cross-sell as well as an improved
underwriting performance.
Trading income increased by 3,3% to R921 million (June 2010: R892 million).
NIR from the private-equity portfolios increased by 93,0%, primarily as a result
of Nedbank Corporate`s property private-equity earnings improving.
NIR from private equity (Rm) June June
2011 2010
Nedbank Capital 85 86
Nedbank Corporate Property Finance 52 (15)
Total NIR from private equity 137 71
Expenses
Expenses grew by 12,3% to R8 838 million (June 2010: R7 872 million), including
significant investment in growing the franchise. Increases in distribution, cash
fees and an increase in variable compensation also contributed to the growth in
expenses.
With the strong growth in NIR the group`s NIR-to-expenses ratio improved from
78,2% to 80,8%. However, the muted growth in NII led to the efficiency ratio
deteriorating from 55,3% to 55,9%.
Taxation
The taxation charge (excluding taxation on non-trading and capital items)
increased from R577 million for the period to June 2010 to R1 013 million, with
the effective tax rate at a more normalised level of 25,7%. This was mainly due
to:
- the 36,1% growth in income before taxation;
- dividend income as a proportion of total income being lower than in the
comparative period in 2010;
- the reversal of certain tax risk provisions in 2010; and
- secondary tax on companies savings in the first six months of 2010 due to the
takeup of the scrip alternative offered in that period.
Statement of financial position
Capital
The group`s capital adequacy ratios remain well above its internal target ranges
in preparation for Basel III, and showed further strengthening since December
2010. This resulted mainly from a R451 million increase in equity from the
vesting of shares under the staff incentive schemes and black economic
empowerment (BEE) structures, organic earnings and further risk-weighted asset
(RWA) optimisation, which included a R4 billion reduction in market risk RWA
with the adoption of the Internal Model Approach approved by the South African
Reserve Bank (SARB) with effect from 1 January 2011.
In view of the predominate focus of Basel III on core Tier 1 capital and the
group`s high total capital ratio of 15,2% Nedbank Limited`s Tier 2 bond (Ned 5)
amounting to R1,5 billion was repaid in April 2011 and not replaced.
Basel II capital June December Internal Regulatory
adequacy ratios 2011 2010 target range minimum
Core Tier 1 ratio 10,7% 10,1% 7,5% to 9,0% 5,25%
Tier 1 ratio 12,4% 11,7% 8,5% to 10,0% 7,00%
Total capital ratio 15,2% 15,0% 11,5% to 13,0% 9,75%
Ratios calculated including unappropriated profits.
Further details will be available in the group`s 30 June 2011 Pillar 3 Report to
be published in September 2011 on the group`s website at www.nedbankgroup.co.za.
Capital allocation to businesses
Enhancements relating to the internal capital allocation to business clusters
were implemented for 2011. The major change related to home loans, with more use
of loan-to-value (LTV) bands to measure estimated loss given default in order
better to reflect the risk inherent in that portfolio, which resulted in the
home loan capitalisation rate increasing from 3,2% to 5,1%. Clusters` individual
capital allocation will naturally change due to any RWA optimisation and changes
in the risk profile of their different portfolios. Other than the improvements
from RWA optimisation, these enhancements had no impact on the group`s overall
capital levels and ROE.
Funding and liquidity
Nedbank Group`s liquidity position remains sound. The group continues to focus
on diversifying its funding base, maintaining its strong retail deposit market
share, growing its commercial deposit base, lengthening its funding profile and
growing appropriate liquidity buffers, which have been increased by R9 billion
during this period.
Nedbank Group increased its long-term funding ratio from 22,6% in December 2010
to 27,0% in June 2011 from increased capital market issuances under its domestic
medium-term note programme (R3,7 billion issued during this period), from the
launch of a retail savings bond and also from the increased duration in the
money market book.
The group`s liquidity position is further supported by a strong loan-to-deposit
ratio of 95,5% and a low reliance on interbank and foreign currency funding.
Basel III and Solvency II developments
The majority of the Basel III proposals were finalised in December 2010,
although some significant aspects remain to be completed in 2011. In South
Africa the details of exactly how Basel III will be adopted will be determined
by SARB, and this is anticipated to be clarified in 2012.
For Nedbank Group the impact of the new capital requirements is expected to be
manageable, given existing strong capital ratios and the high quality of core
Tier 1 equity. On a Basel III pro forma basis at 30 June 2011 the group is in a
position to absorb the expected Basel III capital implications, with all capital
ratios remaining well above the top end of current internal target ranges and
expected regulatory minima. These ratios should improve further by the end of
2013 from projected earnings, while continued capital and RWA optimisation and
the group`s portfolio tilt strategy should have a further favourable effect on
the capital ratios.
Once Basel III has been finalised by SARB Nedbank Group will revise its internal
target capital ratios.
The main challenge of Basel III is in respect of the two proposed liquidity
ratios, the liquidity coverage ratio (LCR) for implementation in 2015 and the
net stable funding ratio (NSFR) for implementation in 2018. The group, together
with the industry, remains focused on how best to comply with the LCR ahead of
2015. The impact of NSFR compliance by South African and most banking industries
worldwide would be punitive if implemented as is. The structural constraints
within the SA financial markets add to the local challenge of NSFR compliance;
however, this is being proactively addressed by National Treasury in conjunction
with the financial services industry. The group anticipates that, following the
observation period that will commence in 2012, the Basel Committee will amend
the NSFR requirement, and a pragmatic approach on this issue will be applied
prior to the finalisation in 2018.
Solvency Assessment and Management (SAM) is the Financial Services Board`s new
economic risk-based solvency regime for SA insurers that closely follows
international regulatory trends, in particular Solvency II. SAM affects the
Nedbank Wealth Cluster and is set for 2014 implementation.
Loans and advances
Group loans and advances decreased by 1,4% (annualised) to R472 billion
(December 2010: R475billion). Since June 2010 loans and advances increased by
2,3%.
Banking advances in Nedbank Capital declined 2,2% (annualised) and Nedbank
Corporate`s banking advances decreased by 3,9% (annualised). This reflects gross
new advances being offset by the effect of slow utilisation of credit
facilities, early unscheduled repayments and delays in both public and private
sector investment programmes. The pipelines in the wholesale banking areas
remain strong and growth is expected to increase in the second half.
Nedbank Business Banking advances increased by 35,7% (annualised) and Nedbank
Retail advances decreased by 7,9% (annualised) due to migrations from Nedbank
Retail of R8,2 billion of former Imperial Bank Supplier Asset Finance and
Professional advances and R1,0 billion from Small Business Services under Retail
Relationship Banking. Adjusting for these two movements, Business Banking
advances decreased by 0,8% (annualised) and Retail advances grew by 2,1%
(annualised). Strategic rebalancing of the asset portfolio in Nedbank Retail, on
a like-for-like basis, resulted in a decrease in home loans of 2,7% (annualised)
and an increase in motor finance of 7,5% (annualised). Unsecured lending
continued to grow with personal loans and card receivables increasing by 26,5%
(annualised) and 13,6% (annualised) respectively.
Deposits
Deposits increased by 1,5% (annualised) to R494 billion (2010: R490 billion).
This resulted in the ratio of advances to deposits remaining strong at 95,5%
(2010: 96,9%).
Lower-interest-bearing current and savings accounts have shown less growth than
higher-interest-bearing term and fixed deposits. Although favourable for the
group`s funding strategy of lengthening the term deposit book, the group remains
focused on optimising the mix of deposits.
In March this year Nedbank launched its retail savings bond to support a
lengthening in the bank`s funding profile. This offering was well received by
clients and attracted in excess of R2 billion of competitively priced new term
funds.
Outlook
Domestic economic growth of 3,5% is currently anticipated for the full year.
Increases in international food and fuel prices are expected to push inflation
to the upper limit of the target band of 3% to 6% in the final quarter of 2011.
The group expects interest rates to remain at current levels for the balance of
2011, with increases currently expected from the first quarter of 2012. Asset
growth is expected to remain at conservative levels due to slow employment
growth, relatively high levels of debt compared with historic levels, increases
in electricity and fuel costs, and concerns about the possibility of interest
rate hikes in 2012.
The growth in the SA economy will be dependent on global economic and financial
developments, further fixed and infrastructure investment and ongoing
improvement in consumption levels. Economic activity is expected to be subdued
for the balance of 2011. However, corporate credit demand is expected to improve
slightly as the recovery in capital expenditure builds momentum and demand for
funding increases. The operating environment for small and medium-sized
businesses remains challenging.
Government infrastructure spending will be relatively insensitive to the
economic cycle, with substantial amounts set aside to accelerate social and
economic infrastructure as announced in this year`s National Budget. The flow of
this investment should improve as the year progresses, but is only expected to
accelerate in 2012.
The retail banking sector should continue to improve modestly as a result of
transactional volume growth, with lending activity remaining much the same as in
this reporting period.
Prospects
For the full year the group currently expects:
- interest margins to remain at similar levels to those of the first half;
- banking advances to grow in the lower to mid-single digits;
- impairments to continue improving, with the credit loss ratio reducing but
remaining above the upper end of the group`s target range of 0,60% to 1,00%;
- NIR (excluding fair-value adjustments) to grow at double digits; and
- expenses to grow in early double digits, but to remain less than NIR growth.
The balance sheet remains liquid, strongly capitalised and in a good position to
take advantage of growth opportunities as they arise.
The group has had a positive start to the year and remains in a good position to
deliver growth in 2011 earnings in excess of its medium- to long-term financial
target.
Shareholders are advised that these forecasts have not been reviewed or reported
on by the group`s auditors.
Board and executive changes during the period
As previously advised, senior independent non-executive director Chris Ball
retired as a director of Nedbank Group and Nedbank Limited with effect from 6
May 2011, after reaching the mandatory retirement age for directors. The group
would like to thank Chris for his significant contribution to the board since
his appointment in 2002.
Malcolm Wyman was appointed as senior independent non-executive director and
also succeeded Chris as Chairman of the Group Audit Committee.
Two appointments to the Group Executive Committee were made during the period.
Abe Thebyane joined as Group Executive of Human Resources with effect from 1
February 2011 and Thulani Sibeko was appointed as Group Executive of Marketing,
Communications and Corporate Affairs with effect from 1 May 2011.
Selby Baqwa retired as Chief Governance and Compliance Officer at the end of
July 2011 and was requested to take up a position as an acting judge in
Pretoria. We thank him for his contribution to the Group Executive Committee and
wish him well. We are making good progress with appointing a replacement and an
announcement in this regard will be made in due course.
Accounting policies
Nedbank Group Limited is a company domiciled in South Africa. The condensed
consolidated interim financial results of the group at and for the six months
ended 30 June 2011 comprise the company and its subsidiaries (the `group`) and
the group`s interests in associates and jointly controlled entities.
Nedbank Group`s principal accounting policies have been prepared in terms of the
International Financial Reporting Standards (IFRS) and have been applied
consistently over the current and prior financial years. Nedbank Group`s
condensed consolidated interim financial results have been prepared in
accordance with International Accounting Standard (IAS) 34: Interim Financial
Reporting and AC 500 standards as issued by the Accounting Practices Board.
In the preparation of these condensed consolidated interim financial results the
group has applied key assumptions concerning the future and other inherent
uncertainties in recording various assets and liabilities. The assumptions
applied in the financial results for the six months ended 30 June 2011 were
consistent with those applied during the 2010 financial year. These assumptions
are subject to ongoing review and possible amendments. The results for the
condensed segmental reporting for the period ended at 30 June 2010 have been
restated for the integration of Imperial Bank Limited with various operating
segments. These restatements have no effect on the group results and ratios, and
only changes segment cluster results and ratios. The financial results have been
prepared under the supervision of RK Morathi, the Group Chief Financial Officer.
Events after the reporting period
There are no material events after the reporting period to report on.
Reviewed results - auditors` review report
KPMG Inc and Deloitte & Touche, Nedbank Group`s independent auditors, have
reviewed the condensed consolidated interim financial results of Nedbank Group
Limited and have expressed an unmodified review conclusion on the condensed
consolidated interim financial results. The auditors` review was conducted in
accordance with International Standards on Review Engagements (ISRE 2410):
Review of Interim Financial Information Performed by the Independent Auditor of
the Entity. The condensed consolidated financial results comprise the
consolidated statement of financial position at 30 June 2011, consolidated
statement of comprehensive income, condensed consolidated statement of changes
in equity, condensed consolidated cashflow statement for the six months then
ended and selected explanatory notes. The selected explanatory notes are marked
with. The 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 that, 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, 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; 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.
Interim dividend declaration
Notice is hereby given that an interim dividend of 265 cents per ordinary share
has been declared, payable to shareholders for the six months ended 30 June
2011. 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, 2 September 2011
Shares commence trading (ex dividend) on Monday, 5 September 2011
Record date (date shareholders recorded in Friday, 9 September 2011
books)
Payment date Monday, 12 September 2011
Share certificates may not be dematerialised or rematerialised between Monday, 5
September 2011, and Friday, 9 September 2011, both days inclusive.
On Monday, 12 September 2011, 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, 12 September 2011, will be
posted on that date.
Holders of dematerialised shares will have their accounts credited at their
participant or broker on Monday, 12 September 2011.
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 MWT Brown
Chairman Chief Executive
1 August 2011
Registered office
Nedbank Group Limited
Nedbank Sandton, 135 Rivonia Road, Sandown, Sandton, 2196.
PO Box 1144, Johannesburg, 2000.
Transfer secretaries in South Africa
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.
Directors
Dr RJ Khoza (Chairman),
MWT Brown* (Chief Executive),
TA Boardman,
TCP Chikane,
GW Dempster* (Chief Operating Officer),
MA Enus-Brey,
Prof B de L Figaji,
DI Hope (New Zealand),
A de VC Knott-Craig,
WE Lucas-Bull,
NP Mnxasana,
RK Morathi* (Chief Financial Officer),
JK Netshitenzhe,
JVF Roberts (British),
GT Serobe,
MI Wyman** (British).
* Executive
** Senior independent non-executive
Company Secretary
GS Nienaber
Sponsors in South Africa
Merrill Lynch South Africa (Pty) Limited
Nedbank Capital
Sponsor in Namibia: Old Mutual Investment Services (Namibia) (Pty) Limited
This announcement is available on the group`s website at 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 at
nedbankgroupir@nedbank.co.za.
Financial highlights
at Reviewed Reviewed Audited
30 June 30 June 31
December
2011 2010 2010
Statistics
Number of shares listed m 507,4 512,6 514,9
Number of shares in issue, m 454,4 445,8 448,6
excluding shares held by
group entities
Weighted average number of m 451,2 440,7 443,9
shares
Diluted weighted average m 462,2 453,7 458,2
number of shares
Headline earnings per share cents 614 489 1 104
Diluted headline earnings cents 600 475 1 069
per share
Ordinary dividends declared cents 265 212 480
per share
- Interim cents 265 212 212
- Final cents 268
Ordinary dividends paid per cents 268 230 442
share
Dividend cover times 2,32 2,31 2,30
Net asset value per share cents 10 128 9 397 9 831
Tangible net asset value cents 8 477 7 732 8 160
per share
Closing share price cents 14 650 12 000 13 035
Price/earnings ratio historical 12 12 12
Market capitalisation Rbn 74,3 61,5 67,1
Number of employees 28 210 26 924 27 525
Key ratios (%)
Return on ordinary 12,2 10,7 11,8
shareholders` equity (ROE)
ROE, excluding goodwill 13,7 12,2 13,4
Return on total assets 0,92 0,75 0,82
(ROA)
Net interest income to 3,43 3,34 3,35
average interest-earning
banking assets
Non-interest revenue to 45,1 43,2 44,3
total income
Credit loss ratio - banking 1,21 1,46 1,36
advances
Non-interest revenue to 80,8 78,2 79,6
total operating expenses
Efficiency ratio 55,9 55,3 55,7
Effective taxation rate 25,7 19,9 20,7
Group capital adequacy
ratios: Basel II (including
unappropriated profits)
- Core Tier I 10,7 9,9 10,1
- Tier 1 12,4 11,5 11,7
- Total 15,2 14,8 15,0
Statement of financial
position statistics (Rm)
Total equity attributable 46 022 41 893 44 101
to equity holders of the
parent
Total equity 49 728 45 572 47 814
Amounts owed to depositors 493 974 480 418 490 440
Loans and advances 471 918 461 303 475 273
- Gross 483 385 471 392 486 499
- Impairment of loans and (11 467) (10 089) (11 226)
advances
Total assets administrated 715 570 680 285 711 288
by the group
- Total assets 609 875 590 847 608 718
- Assets under management 105 695 89 438 102 570
Life assurance embedded 1 122 977 1 031
value
Life assurance value of new 152 134 295
business
Consolidated statement of comprehensive income
for the period ended Reviewed Reviewed Audited
30 June 30 June 31 December
Rm 2011 2010 2010
Interest and similar income 21 030 22 173 44 377
Interest expense and similar charges 12 347 14 091 27 769
Net interest income 8 683 8 082 16 608
Impairments charge on loans and 2 792 3 244 6 188
advances
Income from lending activities 5 891 4 838 10 420
Non-interest revenue 7 139 6 158 13 215
Operating income 13 030 10 996 23 635
Total operating expenses 8 838 7 872 16 598
- Operating expenses 8 788 7 812 16 450
- BEE transaction expenses 50 60 148
Indirect taxation 252 230 447
Profit from operations before non- 3 940 2 894 6 590
trading and capital items
Non-trading and capital items (16) (6) (91)
- Net profit/(loss) on sale of 16 (6) (4)
subsidiaries, investments, and
property and equipment
- Net impairment of investments, (32) (87)
property and equipment, and
capitalised development costs
Profit from operations 3 924 2 888 6 499
Share of profits of associates and 1
joint ventures
Profit before direct taxation 3 924 2 888 6 500
Total direct taxation 1 005 574 1 364
- Direct taxation 1 013 577 1 366
- Taxation on non-trading and capital (8) (3) (2)
items
Profit for the period 2 919 2 314 5 136
Other comprehensive income/(loss) net 79 (111) (77)
of taxation
- Exchange differences on translating 87 (99) (246)
foreign operations
- Fair-value adjustments on available- (8) (14) (3)
for-sale assets
- Gains on property revaluations 2 172
Total comprehensive income for the 2 998 2 203 5 059
period
Profit attributable to:
Equity holders of the parent 2 764 2 150 4 811
Non-controlling interest - ordinary 12 33 59
shareholders
Non-controlling interest - preference 143 131 266
shareholders
Profit for the period 2 919 2 314 5 136
Total comprehensive income
attributable to:
Equity holders of the parent 2 842 2 036 4 734
Non-controlling interest - ordinary 13 36 59
shareholders
Non-controlling interest - preference 143 131 266
shareholders
Total comprehensive income for the 2 998 2 203 5 059
period
Basic earnings per share (cents) 613 488 1 084
Diluted earnings per share (cents) 598 474 1 050
Headline earnings reconciliation
for the period ended Reviewed Reviewed Audited
30 June 30 June 31 December
2011 2010 2010
Net of Net of Net of
Rm Gross taxation Gross taxation Gross taxation
Profit attributable 2 764 2 150 4 811
to equity holders of
the parent
Less: Non-trading (16) (8) (6) (3) (91) (89)
and capital items
- Net profit/(loss) 16 24 (6) (3) (4) (2)
on sale of
subsidiaries,
investments, and
property and
equipment
- Net impairment of (32) (32) (87) (87)
investments,
property and
equipment, and
capitalised
development costs
Headline earnings 2 772 2 153 4 900
Consolidated statement of financial position
at Reviewed Reviewed Audited
30 June 30 June 31 December
Rm 2011 2010 2010
ASSETS
Cash and cash equivalents 11 743 8 063 8 650
Other short-term securities 29 125 21 080 27 044
Derivative financial instruments 8 284 12 776 13 882
Government and other securities 36 056 40 294 31 824
Loans and advances 471 918 461 303 475 273
Other assets 7 900 6 536 10 014
Clients` indebtedness for 2 754 1 818 1 953
acceptances
Current taxation receivable 618 359 483
Investment securities 12 808 11 249 11 918
Non-current assets held for sale 8 5
Investments in associate companies 1 128 902 936
and joint ventures
Deferred taxation asset 229 416 284
Investment property 202 211 199
Property and equipment 5 835 5 203 5 612
Long-term employee benefit assets 2 111 1 937 2 052
Mandatory reserve deposits with 11 654 11 278 11 095
central banks
Intangible assets 7 502 7 422 7 494
Total assets 609 875 590 847 608 718
EQUITY AND LIABILITIES
Ordinary share capital 454 446 449
Ordinary share premium 15 968 15 050 15 522
Reserves 29 600 26 397 28 130
Total equity attributable to equity 46 022 41 893 44 101
holders of the parent
Non-controlling interest
attributable to:
- ordinary shareholders 146 117 153
- preference shareholders 3 560 3 562 3 560
Total equity 49 728 45 572 47 814
Derivative financial instruments 8 894 10 903 12 052
Amounts owed to depositors 493 974 480 418 490 440
Provisions and other liabilities 13 691 13 901 18 245
Liabilities under acceptances 2 754 1 818 1 953
Current taxation liabilities 121 212 191
Deferred taxation liabilities 1 858 1 936 1 804
Long-term employee benefit 1 458 1 338 1 414
liabilities
Investment contract liabilities 7 666 6 920 7 309
Insurance contract liabilities 1 541 1 235 1 392
Long-term debt instruments 28 190 26 594 26 104
Total liabilities 560 147 545 275 560 904
Total equity and liabilities 609 875 590 847 608 718
Guarantees on behalf of clients 29 934 28 432 29 614
Condensed consolidated statement of cashflows
for the period ended Reviewed Reviewed Audited
30 June 30 June 31 December
Rm 2011 2010 2010
Cash generated by operations 7 903 7 218 15 288
Change in funds for operating (2 082) (9 708) (12 891)
activities
Net cash from/(utilised by) 5 821 (2 490) 2 397
operating activities before taxation
Taxation paid (855) (735) (2 093)
Cashflows from/(utilised by) 4 966 (3 225) 304
operating activities
Cashflows utilised by investing (2 147) (2 453) (4 438)
activities
Cashflows from financing activities 833 6 644 5 504
Net increase in cash and cash 3 652 966 1 370
equivalents
Cash and cash equivalents at the 19 745 18 375 18 375
beginning of the period*
Cash and cash equivalents at the end 23 397 19 341 19 745
of the period*
* Including mandatory reserve deposits with central banks.
Condensed consolidated statement of changes in equity
Non- Non-
Total equity controlling controlling
attributable interest interest
to attributable attributable
equity holders to ordinary to preference Total
Rm of the parent shareholders shareholders equity
Balance at 31 39 649 1 849 3 486 44 984
December 2009
Dividend to (1 054) (8) (1 062)
shareholders
Preference share (144) (144)
dividend
Issues of shares 1 808 92 1 900
net of expenses
Shares (476) (476)
acquired/cancelled
by group entities
and BEE trusts
Total 2 036 36 131 2 203
comprehensive
income for the
period
Additional 4 4
capitalisation of
subsidiaries
Share-based 22 22
payment reserve
movement
Buyout of non- (91) (1 764) (3) (1 858)
controlling
interests
Regulatory risk (2) (2)
reserve provision
Other movements 1 1
Balance at 30 June 41 893 117 3 562 45 572
2010
Dividend to (988) (988)
shareholders
Preference share (5) (137) (142)
dividend
Issues of shares 475 475
net of expenses
Dilution of (13) 13 -
shareholding in
subsidiary
Total 2 698 23 135 2 856
comprehensive
income for the
period
Liquidation of (4) (4)
subsidiaries
Additional (2) (2)
capitalisation of
subsidiaries
Share-based 48 48
payment reserve
movement
Buyout of non- 2 2
controlling
interests
Regulatory risk (1) (1)
reserve provision
Other movements (2) (2)
Balance at 31 44 101 153 3 560 47 814
December 2010
Dividend to (1 251) (9) (1 260)
shareholders
Dividend (310) (310)
distribution in
terms of BEE
transaction
Preference share (143) (143)
dividend
Issues of shares 313 313
net of expenses
Shares delisted (10) (10)
Shares 148 148
acquired/cancelled
by group entities
and BEE trusts
Acquisition of 11 (11) -
shareholding in
subsidiary
Total 2 842 13 143 2 998
comprehensive
income for the
period
Share-based 176 176
payment reserve
movement
Regulatory risk 2 2
reserve provision
Balance at 30 June 46 022 146 3 560 49 728
2011
Condensed segmental reporting
Total assets
for the period ended Reviewed Reviewed* Audited
30 June 30 June 31 December
Rm 2011 2010 2010
Nedbank Capital 196 752 204 944 215 189
Nedbank Corporate 168 791 163 026 170 274
Total Nedbank Retail and 271 494 266 450 273 219
Nedbank Business Banking
- Nedbank Retail 185 754 189 313 193 394
- Nedbank Business Banking 85 740 77 137 79 825
Nedbank Wealth 34 645 34 264 33 920
Shared Services 7 252 6 599 6 791
Central Management 40 981 40 740 37 322
Eliminations (110 040) (125 176) (127 997)
Total 609 875 590 847 608 718
Operating income
for the period ended Reviewed Reviewed* Audited
30 June 30 June 31 December
Rm 2011 2010 2010
Nedbank Capital 1 368 1 441 2 930
Nedbank Corporate 2 355 2 044 4 565
Total Nedbank Retail and 7 969 6 231 13 644
Nedbank Business Banking
- Nedbank Retail 6 010 4 477 10 082
- Nedbank Business Banking 1 959 1 754 3 562
Nedbank Wealth 1 236 1 076 2 338
Shared Services 74 151 244
Central Management 48 92 (5)
Eliminations (20) (39) (81)
Total 13 030 10 996 23 635
Headline earnings
for the period ended Reviewed Reviewed* Audited
30 June 30 June 31 December
Rm 2011 2010 2010
Nedbank Capital 546 580 1 202
Nedbank Corporate 779 628 1 496
Total Nedbank Retail and 1 282 572 1 585
Nedbank Business Banking
- Nedbank Retail 826 133 760
- Nedbank Business Banking 456 439 825
Nedbank Wealth 274 235 592
Shared Services (20) 195 255
Central Management (89) (57) (230)
Eliminations
Total 2 772 2 153 4 900
* The comparative results for the condensed segmental reporting for the period
ended 30 June 2010 have been restated as a result of the integration of Imperial
Bank Limited with various operating segments. The restatement has no effect on
the group results and ratios, and only changes segment results and ratios.
Condensed geographical segmental reporting
Operating income
for the period ended Reviewed Reviewed Audited
30 June 30 June 31 December
Rm 2011 2010 2010
South Africa 12 095 10 117 21 578
- Business operations 12 095 10 117 21 578
- BEE transaction expenses
- Profit attributable to non-
controlling interest -
preference shareholders
Rest of Africa 503 481 1 034
Rest of world - business 432 398 1 023
operations
Total 13 030 10 996 23 635
Headline earnings
for the period ended Reviewed Reviewed Audited
30 June 30 June 31 December
Rm 2011 2010 2010
South Africa 2 519 1 917 4 162
- Business operations 2 706 2 103 4 574
- BEE transaction expenses (44) (55) (146)
- Profit attributable to non- (143) (131) (266)
controlling interest -
preference shareholders
Rest of Africa 95 98 232
Rest of world - business 158 138 506
operations
Total 2 772 2 153 4 900
Directors
Dr RJ Khoza (Chairman),
MWT Brown* (Chief Executive),
TA Boardman,
TCP Chikane,
GW Dempster* (Chief Operating Officer),
MA Enus-Brey,
Prof B de L Figaji,
DI Hope (New Zealand),
A de VC Knott-Craig,
WE Lucas-Bull,
NP Mnxasana,
RK Morathi* (Chief Financial Officer),
JK Netshitenzhe,
JVF Roberts (British),
GT Serobe,
MI Wyman** (British).
* Executive
** Senior independent non-executive
This announcement is available on the group`s website at 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 at
nedbankgroupir@nedbank.co.za.
Registered office
Nedbank Group Limited,
Nedbank Sandton,
135 Rivonia Road, Sandown, Sandton, 2196.
PO Box 1144, Johannesburg, 2000.
Transfer secretaries in South Africa
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
Sponsors in South Africa
Merrill Lynch South Africa (Pty) Limited and Nedbank Capital.
Date: 01/08/2011 08:01:00 Produced by the JSE SENS Department.
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