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OML - Old Mutual Plc - Nedbank Group/Audited summarised financial results for
the year ended 31 December 2011
OLD MUTUAL PLC
ISIN: GB0007389926
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOML
Ref 13/12
29 February 2012
Old Mutual plc
NEDBANK GROUP - AUDITED SUMMARISED FINANCIAL RESULTS FOR THE YEAR ENDED 31
DECEMBER 2011
Old Mutual plc announces that its majority-owned South African banking
subsidiary Nedbank Group Limited ("Nedbank Group") released its audited
summarised financial results for the year ended 31 December 2011 today, 29
February 2012.
The following is the full text of Nedbank Group`s announcement:
"`Nedbank Group performed well in 2011, achieving a record level of headline
earnings, but more work lies ahead to meet all medium-to-long-term financial
targets.
These results were underpinned by continued delivery on our key strategic focus
areas of repositioning Nedbank Retail, growing non-interest revenue (NIR) and
implementing the portfolio tilt strategy. In the rest of Africa we deepened our
strategic alliance with Ecobank by providing a facility in support of Ecobank`s
corporate development programmes, including its transformational banking
acquisition in Nigeria, and in so doing secured rights to acquire up to 20% of
Ecobank Transnational Inc within two to three years.
Despite the challenging environment, Nedbank Group is well positioned to build
on the momentum from 2011 and meet its medium-to-long-term earnings growth
target once again in 2012.`
Mike Brown
Chief Executive
HIGHLIGHTS
Headline earnings R6 184m up 26,2%
Diluted headline earnings per share 1 340 cents up 25,4%
Strong NIR growth R15 412m up 16,6%
Headline profit before tax increased 31,9%
ROE (excluding goodwill) increased to 15,3% (2010: 13,4%)
Capital adequacy further strengthened (core Tier 1: 11,0%)
Full-year dividend per share of 605 cents, up 26,0%
BANKING AND ECONOMIC ENVIRONMENT
The global economic environment deteriorated in 2011 as the European sovereign-
debt crisis continued to unfold, leading to a loss of economic growth momentum
in both developed and emerging markets.
For SA gross domestic product (GDP) growth is expected to end at 3,2% for the
2011 year and interest rates remained unchanged at 37-year lows.
Household demand for credit remained stable and transactional demand continued
to strengthen, supported by real wage increases.
Business confidence remained at low levels for most of 2011, with corporate
credit demand gaining some traction towards the end of the year as both private
and public sector fixed-investment activity increased off a low base.
REVIEW OF RESULTS
Nedbank Group performed well for the year ended 31 December 2011, reflecting the
benefits of disciplined execution of its business plans and excellent progress
with key strategic initiatives.
The group recorded strong headline earnings growth of 26,2% to R6 184m for the
year (2010: R4 900m), driven primarily by 16,6% growth in NIR, net interest
margin (NIM) expansion and continued improvement in the Nedbank Retail credit
loss ratio.(1)
Diluted headline earnings per share increased 25,4% to 1 340 cents (2010: 1 069
cents) and diluted earnings per share 27,7% to 1 341 cents (2010: 1 050 cents)
in line with the group`s trading statement issued on 6 February 2012.(1)
Return on average ordinary shareholders` equity (ROE), excluding goodwill,
increased to 15,3% (2010: 13,4%) and ROE to 13,6% (2010: 11,8%), with the
benefit of return on assets (ROA) improving to 0,99% (2010: 0,82%), partially
offset by a reduction in gearing.(1) The group generated economic profit (EP) of
R924m (2010: economic loss of R289m).
The group is well capitalised, with the core Tier 1 capital ratio at 11,0%
(2010: 10,1%). Funding and liquidity levels remain sound. Liquidity buffers
increased R18,0bn to R24,0bn and the long-term funding ratio increased to the
group`s target level of 25,0%.(1)
Net asset value per share continued to increase, growing by 9,4% to 10 753 cents
at 31 December 2011 (2010: 9 831 cents).(1)
During 2011 the group continued to deliver on its vision of building Africa`s
most admired bank and its commitments to all stakeholders. Highlights for the
key stakeholders include:
- For staff: creating 969 additional job opportunities, investing R303m in
leadership development programmes and continuing the positive shift in corporate
culture.
- For clients: paying out R116bn in new loans; expanding the range of
distinctive client-centred offerings; launching various new-product innovations;
keeping fee increases at or below inflation, with average retail banking fees
remaining at levels similar to those in 2005; increasing footprint by 121 new
staffed outlets and 389 ATMs; further extending banking hours in 59 branches and
Sunday banking in 49 branches and, through restructures, having kept 13 900
families in their homes since 2009.
- For shareholders: generating a 15,3% total shareholder return, delivering
R924m EP, declaring a total dividend up 26,0% as well as winning numerous
reporting awards and the Financial Times and Banker magazine`s Bank of the Year
in SA for 2011.
- For regulators: increasing capital levels and remaining well positioned for
Basel III and the Solvency Assessment and Management regime; being one of the
first SA banks to receive South African Reserve Bank (SARB) approval for using
the advanced approaches for all three applicable risk types, and making cash
contributions of R5,1bn relating to direct, indirect and other taxation.
- For communities: making banking more accessible for the entry-level market and
remote rural communities with initiatives such as Vodacom m-Pesa; extending
R1,8bn in loans to black small to medium enterprises with a turnover of up to
R35m; assisting over 934 entrepreneurs under skills development programmes,
including the emerging agriculture sector; contributing R78m to social
development; remaining a Department of Trade and Industry (dti) level 2
contributor and increasing the dti score to 95,2 from 89,5; spending R6,6bn on
local procurement and playing a leadership role in environmental sustainability
through participation in the Conference of the Parties 17 (COP17), maintaining
our carbon neutrality, leading in water stewardship and being a signatory to the
CEO Water Mandate of the United Nations Global Compact.
CLUSTER PERFORMANCE
The business clusters collectively reported an increased ROE of 18,6% (2010:
14,4%) and earnings growth of 30,8%.1
Change Headline earnings ROE
% (Rm) (%)
2011 2010 2011 2010
Nedbank Capital 1,9 1 225 1 202 23,0 23,5
Nedbank Corporate 11,8 1 672 1 496 25,0 19,7
Nedbank Business Banking 3,3 852 825 23,1 26,4
Nedbank Retail 163,4 2 002 760 11,8 4,6
Nedbank Wealth 5,6 625 592 38,7 41,0
Operating units 30,8 6 376 4 875 18,6 14,4
Centre <(100) (192) 25
Total 26,2 6 184 4 900 13,6 11,8
Nedbank Retail`s headline earnings growth and ROE improvement were achieved
through excellent progress strategically and financially in repositioning the
cluster. Delivering distinctive client-centred value propositions enabled strong
new client growth and markedly increased sales. As a result, the cluster`s NIR
grew 17,3%, primarily driven by higher transactional and lending volumes. In
addition, improved risk-based pricing, effective collections and rehabilitations
resulted in reduced impairments, which contributed to the robust performance.
The good performance from the wholesale clusters was supported by excellent risk
management, an increase in primary clients and higher usage of innovative
transactional banking offerings. Nedbank Capital navigated well through
difficult and volatile markets and ended the year with a small increase in its
headline earnings. Nedbank Wealth performed well and its 2009 acquisitions
continued to bear fruit, supporting its growth in earnings and embedded value,
while the insurance and asset management businesses contributed strongly.
The centre moved to a loss of R192m primarily as a result of an additional
amount of R200m before tax that was raised as a group portfolio impairment and a
R111m after-tax share-based payments charge for the Eyethu community share
scheme.(1)
Detailed segmental information is available on the group`s website at
www.nedbankgroup.co.za under the `Financial information` section.
FINANCIAL PERFORMANCE
Net interest income
Net interest income (NII) grew 8,6% to R18 034m (2010: R16 608m), with NIM
growing to 3,46% (2010: 3,35%). Average interest-earning banking assets
increased 5,1% (2010 growth: 3,0%).(1)
The increase in NIM reflects:
- Asset margin expansion on new advances from risk-adjusted pricing and a change
in asset mix.
- The lower cost of term liquidity in 2011.
This was partially offset by:
- The impact of endowment, with average interest rates 90 basis points lower
than in 2010.
- The cost of enhancing the group`s funding profile.
- The cost of carrying higher levels of lower-yielding liquid assets as the
group proactively positions itself for the likely implications of Basel III.
Impairments
The credit loss ratio improved to 1,14% for the year (2010: 1,36%), while
further strengthening the portfolio impairment provision.(1)
The credit loss ratio relating to specific impairments improved substantially to
1,02% for the year (2010: 1,32%) as defaulted advances continued tracking
downwards to R23 073m (2010: R26 765m).
Credit loss ratio Dec H2 H1 Dec
analysis (%) 2011 2011 2011 2010
Specific impairments 1,02 0,93 1,10 1,32
Portfolio impairments 0,12 0,13 0,11 0,04
Total credit loss ratio 1,14 1,06 1,21 1,36
The group maintained a strong focus on credit risk management. The increased
level of portfolio impairments includes R159m relating to lengthened-emergence-
period assumptions and R200m in the centre for unknown events that may have
already occurred, but which will only be evident in the future.
Through-
the-
cycle target
Credit loss ratio (%) Dec H2 H1 Dec ranges
2011 2011 2011 2010
Nedbank Capital 1,23 1,57 0,86 1,27 0,10 - 0,35
Nedbank Corporate 0,29 0,24 0,34 0,20 0,20 - 0,35
Nedbank Business Banking 0,54 0,67 0,40 0,40 0,55 - 0,75
Nedbank Retail 1,98 1,73 2,24 2,67 1,50 - 2,20
Nedbank Wealth 0,25 0,09 0,41 0,15 0,20 - 0,40
Group 1,14 1,06 1,21 1,36 0,60 - 1,00
Nedbank Retail`s credit loss ratio of 1,98% (2010: 2,67%) is now within the
cluster`s through-the-cycle target range of 1,50% to 2,20%. Nedbank Capital`s
credit loss ratio remained elevated at levels similar to those of 2010 mainly
due to impairment charges on increased non-performing loans. Credit loss ratios
in Nedbank Corporate, Nedbank Business Banking and Nedbank Wealth remained
within or better than the respective clusters` through-the-cycle target ranges.
NON-INTEREST REVENUE
The momentum in continued in the second half of 2011, resulting in strong growth
of 16,6% to R15 412m (2010: R13 215m) and the ratio of NIR to expenses
increasing to 81,5% (2010: 79,6%).(1)
The continued trend of growth in commission and fee income, which was up 16,2%
to R11 335m (2010: R9 758m), arose from further primary-client gains, robust
transaction volumes and a good uptake of new products, particularly in Nedbank
Retail, as well as from increased volumes in electronic channels in the rest of
the group.
Insurance income grew strongly at 22,4%, achieved through insurance sales into
the MFC, personal loans and card businesses, as well as an improved underwriting
performance.
Trading income increased by 3,4% to R2 168m (2010: R2 096m) in difficult
markets. Private equity income increased by 41,7% to R323m (2010: R228m), mainly
from improved realisations and dividends received in the Nedbank Capital and
Nedbank Corporate private equity investment portfolios.
NIR was negatively impacted by R49m (2010: R213m loss) over the year due to fair
value adjustments of the group`s subordinated-debt and associated hedges
resulting from the strengthening of the group`s credit spreads.
EXPENSES
The group continued to manage core expenses while investing for growth,
resulting in an ongoing improvement in the NIR-to-expenses ratio. Expenses
increased 14,0% to R18 919m (2010: R16 598m)(1), comprising expense growth of
8,0% relating to `business-as-usual` activities, 3,0% relating to investing for
growth initiatives and 3,0% relating to variable compensation.
Overall the main drivers of expense growth were:
- Remuneration costs increasing 12,5%, driven by 3,4% headcount growth and
inflation-related annual increases of 6,5%.
- Short-term incentive costs increasing 35,8% on the back of strong headline
earnings and EP growth.
- Long-term incentive costs increasing R140m to R262m, as 2010 contained a
reversal of costs when associated corporate performance targets were not met.
- Volume-driven costs, such as fees and computer processing costs, continuing to
grow in support of revenue generating business activities.
- Investing for growth initiatives taking place across the clusters, which
included the repositioning of Nedbank Retail that entailed footprint rollout,
headcount growth in frontline and collections staff, and system enhancements.
The efficiency ratio increased to 56,6% (2010: 55,7%), reflecting the negative
endowment impact of lower interest rates on NII, compounded by slower growth in
interest-earning banking assets and the strategy of investing for growth.(1)
Nedbank Group`s compound NIR growth of 10,2% since 2007 continues to exceed its
related compound expense growth of 8,8%.
TAXATION
The tax charge increased 60,6% to R2 194m (2010: R1 366m), with the effective
tax rate increasing to a more normalised 25,2% (2010: 20,7%).(1) The increase
resulted from:
- The 31,9% growth in income before tax.
- A lower proportion of dividend income relative to total income than in 2010.
- Secondary tax on companies (STC) savings in the first six months of 2010 due
to the takeup of the scrip dividend (81,5%) offered in that period.
- The reversal of certain tax provisions in 2010.
STATEMENT OF FINANCIAL POSITION
Capital
The group`s capital adequacy ratios remain well above the group`s internal
targets in preparation for Basel III and continue to be strengthened as a result
of ongoing risk and capital optimisation, strong growth in organic earnings and
a strategic focus on managing for value and portfolio tilt.
Internal
target Regulatory
2011 2010 range minimum
Basel II
Core Tier 1 ratio 11,0% 10,1% 7,5% to 9,0% 5,25%
Tier 1 ratio 12,6% 11,7% 8,5% to 10,0% 7,00%
Total capital ratio 15,3% 15,0% 11,5% to 13,0% 9,75%
(Ratios calculated include unappropriated profits.)
Given the predominant focus on the core Tier 1 ratio under Basel III and
considering the group`s strong total capital adequacy ratio, the group elected
to call the Nedbank Limited Tier 2 bond (Ned 5) amounting to R1,5bn in April
2011 without replacing it.
Further detail on capital and risk management will be available in the group`s
Pillar 3 Report to be published in April 2012 on the group`s website at
www.nedbankgroup.co.za.
Risk methodologies and internal capital allocation
In 2011 Nedbank Limited received approval from the SARB to use, for regulatory
capital purposes, the Internal Model Approach for market trading risk. Nedbank
Limited now has approval for the advanced approaches in respect of all three of
the major Pillar 1 risk approaches under Basel II, having received approval for
using the Advanced Measurement Approach for operational risk, effective from
2010, and to use the Advanced Internal Ratings-based Approach for credit risk
from the implementation date of Basel II in 2008. This makes Nedbank Limited one
of the first SA banks to operate under all three advanced risk assessment
approaches.
Further enhancements to the internal capital allocation to business clusters
occurred in 2011 to support the closer alignment of group and cluster ROEs.
These enhancements have no impact on the group`s overall capital levels and ROE,
but have impacted the ROEs recorded by the business clusters. This is an ongoing
process born out of evolving regulatory developments such as Basel III.
Basel III developments
The majority of the international Basel III proposals were finalised in December
2010, although some significant aspects remain to be completed this year. The
details of how Basel III will be adopted in SA are expected to be determined by
the SARB during 2012.
The group expects the impact of the new capital requirements to be manageable.
On a Basel III pro forma basis for 2011 the group is in a position to absorb the
Basel III capital implications, with all capital adequacy ratios remaining well
above the upper end of current internal target ranges. These should improve
further into 2013 (the expected commencement date of Basel III implementation)
from projected earnings, continuing capital and risk optimisation, and the
impact of the group`s strategic portfolio management.
Once Basel III has been finalised in SA Nedbank Group will review its current
target capital ratios.
Two new liquidity ratios have been proposed under Basel III, being the liquidity
coverage ratio (LCR) for implementation in 2015 and the net stable funding ratio
(NSFR) for implementation in 2018. The impact of compliance by the SA banking
industry of, particularly, the NSFR would be punitive if implemented as it
currently stands in the light of structural constraints within the SA financial
market. This is the case for many jurisdictions around the world, and the
negative effect on economic growth and employment would be significant. The
group anticipates that a pragmatic approach on this issue will be applied prior
to implementation in 2018.
Loans and advances
Loans and advances grew 4,4% to R496bn (2010: R475bn), with growth increasing,
particularly in the wholesale portfolios, during the fourth quarter.(1)
Loans and advances by cluster are as follows:(1)
Rm(1) 2011 2010 % change
Nedbank Capital 68 510 62 328 9,9
Banking activity 48 558 42 650 13,9
Trading activity 19 952 19 678 1,4
Nedbank Corporate 164 754 157 703 4,5
Nedbank Business Banking 58 272 50 765 14,8
Nedbank Retail 183 663 187 334 (2,0)
Nedbank Wealth 19 625 16 869 16,3
Other 1 224 274 >100,0
496 048 475 273 4,4
Advances totalling R9bn were transferred from Nedbank Retail to Nedbank Business
Banking in 2011 to leverage its strong client and risk practices. On a like-for-
like basis the growth in Nedbank Retail was 2,7%, while Nedbank Business
Banking`s advances, excluding the full impact of the Imperial Bank transfer and
other client moves, remained flat.
Deposits
Deposits increased 6,3% to R521bn (2010: R490bn) and the group`s loan-to-deposit
ratio strengthened to 95,2% (2010: 96,9%).(1)
Optimising the mix of the deposit book remains a key focus in reducing the high
cost of longer-term and professional funding. This is critical as banks compete
more aggressively for lower-cost deposit pools with longer behavioural duration
as they position their balance sheets in preparation for the Basel III liquidity
ratios. Low interest rates, coupled with low domestic savings levels and the
deleveraging of consumers, led to modest growth in retail deposits during 2011.
Relatively higher deposit growth in commercial deposits indicated increasing
working capital and available capacity among corporate clients.
GROUP STRATEGIC FOCUS
The group`s key strategic initiatives of repositioning Nedbank Retail, growing
non-interest revenue, implementing the portfolio tilt strategy and expanding
into the rest of Africa will continue to drive earnings growth.
Excellent progress was made in repositioning Nedbank Retail as a more client-
centred and integrated business while maintaining the growth momentum of the
product lines. Strong underlying business performance, growing the number and
quality of primary clients, embedding effective risk management practices and
strengthening balance sheet impairments while improving credit loss ratios,
particularly in home loans, all contributed to Nedbank Retail`s headline
earnings increasing 163,4% and its ROE from 4,6% in 2010 to 11,8%.
The group`s NIR-to-expenses ratio target of 85% remains a key focus in the
medium term. The objective is to achieve this target by continuing to deliver
good-quality annuity income through commission and fee growth from primary-
client gains, volume growth, new innovative products and cross-sell across
clusters. Since 2009 the group has added 58 branches, 229 inretailer kiosks and
719 ATMs, and has refurbished 79 branches, representing an investment of R514m.
The Optimise to Invest programme involving simplifying information technology
systems and rationalising costs will also benefit the NIR-to-expenses ratio in
the medium term.
The group`s portfolio tilt strategy continues to focus on strategically
important EP-rich, lower-capital and liquidity-consuming activities and at the
same time drives the efficient allocation of the bank`s resources while
positioning the group strategically for Basel III. Insurance, asset management,
transactional banking products, selected asset categories and deposits are
important targeted areas for growth. In secured lending the group continues to
focus on profitable business that falls within the group`s board-approved risk
appetite.
In the short to medium term the group`s primary focus on SA and the five
southern African countries in which it has a presence provides strong upside for
Nedbank Group as it increases its EP share in the largest EP pool for financial
services in Africa.
The deepening of the alliance with Ecobank through the granting of a $285m loan
facility and the subscription rights to acquire up to a 20% shareholding in
Ecobank Transnational Inc in two to three years creates a path to provide a
significant benefit to clients in the rest of Africa in a prudent yet
substantive manner and ultimately could provide shareholders with access to
higher economic growth in the rest of Africa.
ECONOMIC OUTLOOK
SA`s GDP is currently forecast to grow by 2,7% in 2012, but remains dependent on
international developments, particularly in Europe.
Given that confidence is anticipated to remain fragile, private sector fixed-
investment activity is expected to remain modest. However, government and public
corporations are forecast to escalate their infrastructure spending, which
should contribute to improved wholesale advances growth.
Consumer spending is anticipated to moderate as concerns about inflation, house
prices and job security prevail. Transactional demand should remain robust,
while credit demand is likely to improve slowly off a low base as consumer
balance sheets strengthen and debt levels decline.
PROSPECTS
The group is well set for continued growth in 2012, building on the earnings
momentum created in 2011 and the focus and success of the delivery on the
group`s strategic initiatives.
In an uncertain global environment the group`s qualities are attractive and
should support continued earnings growth. These qualities include:
- Being one of the big four SA banks (SA banks were ranked second in the
Soundness of Banks category in the World Economic Forum Global Competitiveness
Survey).
- A strong, well-capitalised balance sheet with a prudent funding structure and
sound liquidity.
- A strong wholesale banking franchise returning high ROEs.
- A strengthened and growing retail franchise.
- A growing wealth business returning high ROEs.
- A demonstrated ability to manage costs judiciously over time.
- A growing primary-client base.
- Sound risk management practices.
- A stable and experienced management team.
- Good staff morale and a values-based culture.
There is potential for further uplift from any acceleration of the economic
cycle, as the group NIM should benefit from the positive effect of increased
interest rates on endowment income, improved levels of advances growth and the
prospect of lower credit loss ratios.
These drivers, along with the group`s operational and financial gearing, are
likely to enable continued improvement in the group`s ROA and ROE.
In the context of the group`s 2012 forecast for GDP growth, inflation and
interest rates in SA the group`s guidance for 2012 is as follows:
- Advances to grow at mid single digits.
- NIM to remain at levels similar to those in 2011 and to benefit from interest
rate increases.
- The credit loss ratio to continue improving to the upper end of the group`s
through-the-cycle target range.
- NIR (excluding fair-value adjustments) to grow at low double digits,
maintaining the group`s ongoing improvement in the NIR?to-expenses ratio.
- Expenses, including investing for growth, to increase by mid to upper single
digits.
- The group to maintain strong capital ratios and continue to strengthen funding
and liquidity in preparation for Basel III.
The group`s medium-to-long-term targets remain unchanged and are included in the
table below, with an outlook for performance against these targets for 2012:
Metric 2011 Medium-to-long-term 2012 outlook
performance targets
ROE (excluding 15,3% 5% above average Improving,
goodwill) cost of ordinary remaining below
shareholders` target.
equity
Growth in diluted 25,4% = consumer price Above the target
headline earnings index + GDP growth level.
per share + 5%
Credit loss ratio 1,14% Between 0,6% and Improving into
1,0% of average upper end of
banking advances target.
NIR-to-expenses 81,5% > 85% Improving,
ratio remaining below
target.
Efficiency ratio 56,6% < 50,0% Improving,
remaining above
target.
Core Tier 1 capital 11,0% 7,5% to 9,0% Strengthening,
adequacy ratio remaining above
(Basel II) target.
Economic capital Capitalised to 99,93% confidence interval on
economic capital basis (target debt rating A,
including 10% buffer)
Dividend cover 2,26 times 2,25 to 2,75 times 2,25 to 2,75
policy times
Shareholders are advised that these forecasts have not been reviewed or reported
on by the group`s auditors.
BOARD AND EXECUTIVE CHANGES
The group advised earlier in the year that senior independent non-executive
director Chris Ball retired as a director with effect from 6 May 2011 after
reaching the mandatory retirement age for directors. Malcolm Wyman was appointed
to succeed Chris as senior independent non-executive director and as Chairman of
the Group Audit Committee. Mpho Makwana was appointed as independent non-
executive director with effect from 17 November 2011. Alan Knott-Craig has
resigned as an independent non-executive director with effect from 24 February
2012 following his recent appointment as chief executive of Cell C with effect
from 1 April 2012.
Three appointments to the Group Executive Committee were made during the year.
Abe Thebyane joined as Group Executive of Human Resources with effect from 1
February 2011. Thulani Sibeko was appointed as Group Executive of Marketing,
Communications and Corporate Affairs with effect from 1 May 2011. Thabani Jali
was appointed as Chief Governance and Compliance Officer with effect from 17
October 2011. Thabani succeeded Selby Baqwa, who retired on 31 July 2011 after
almost nine years` service with the group.
Raisibe Morathi, the Chief Financial Officer, now directly reports to Mike
Brown, Nedbank Group Chief Executive. This is in line with the group`s planning
at the time Raisibe joined the group in September 2009. In addition to his
current role as Chief Operating Officer, Graham Dempster also assumed full
responsibility for the group`s existing subsidiary bank activities in the rest
of Africa as well as the ongoing management of the Ecobank-Nedbank Alliance,
enabling an aligned approach to developing the group`s activities in the rest of
Africa.
ACCOUNTING POLICIES(1)
Nedbank Group Limited is a company domiciled in SA. The summarised consolidated
annual financial results of the group at and for the year ended 31 December 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
International Financial Reporting Standards (IFRS) of the International
Accounting Standards Board and have been applied consistently over the current
and prior financial years. Nedbank Group`s summarised consolidated annual
financial results have been prepared in accordance with the recognition and
measurement criteria of IFRS, interpretations issued by the IFRS Interpretations
Committee, presentation and disclosure requirements of International Accounting
Standard (IAS) 34: Interim Financial Reporting and AC 500 standards as issued by
the Accounting Practices Board and in terms of the requirements of the Companies
Act of SA.
In the preparation of these consolidated annual 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 year ended 31 December 2011 were consistent with those
applied during the 2010 financial year. These assumptions are subject to ongoing
review and possible amendments. The financial results have been prepared under
the supervision of Raisibe Morathi, the Group Chief Financial Officer.
EVENTS AFTER THE REPORTING PERIOD(1)
There are no material events after the reporting period to report on.
AUDITED RESULTS - AUDITORS` REPORT
KPMG Inc and Deloitte & Touche, Nedbank Group`s independent auditors, have
audited the consolidated annual financial results of Nedbank Group Limited from
which the summarised consolidated financial results have been derived, and have
expressed an unmodified audit opinion on the consolidated annual financial
statements. The summarised consolidated annual financial results comprise the
consolidated statement of financial position at 31 December 2011, consolidated
statement of comprehensive income, condensed consolidated statement of changes
in equity, condensed consolidated statement of cashflows for the year then ended
and selected explanatory notes. The related notes are marked with(1). The audit
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.
PREFERENCE SHARE AMENDMENT
Amendment to the terms of the non-redeemable non-cumulative non-participating
preference shares in the issued share capital of Nedbank Limited (`Nedbank
perpetual preference shares`)
Holders of Nedbank perpetual preference shares are referred to the announcement,
released on the Securities Exchange News Service (SENS) of JSE Limited on 1
March 2007, setting out the potential effects on the Nedbank perpetual
preference shares of the then proposed amendments to the tax legislation
regarding the introduction of a dividend tax on all distributions, including
dividend distributions, by a company to its shareholders, as contemplated in
sections 64D to 64N of the Income Tax Act, 58 of 1962, as amended (`Income Tax
Act`) (`dividend tax`), in the place of STC. Those proposals have now been
incorporated into the necessary amending legislation, which has come into effect
and will apply from 1 April 2012.
As a result of the amendments to tax legislation, the board of directors of
Nedbank Limited has resolved, subject to the passing of the required resolutions
by holders of Nedbank perpetual preference shares and holders of Nedbank Group
Limited ordinary shares, to amend the rate used to calculate the preference
dividend payable on the Nedbank perpetual preference shares, from the current
rate of 75% of the prime rate to 83,33% of the prime rate.
The amendment will apply to dividend number 19, the dividend declared and paid
on Nedbank perpetual preference shares on or after 1 April 2012, the date on
which dividend tax becomes effective.
FINAL DIVIDEND DECLARATION
Notice is hereby given that a final dividend of 340 cents per ordinary share has
been declared, payable to shareholders for the year ended 31 December 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) Thursday, 29 March 2012
Shares commence trading (ex dividend) Friday, 30 March 2012
Record date (date shareholders recorded in Thursday, 5 April 2012
books)
Payment date Tuesday, 10 April 2012
The final dividend will not be affected by the introduction of dividend tax,
which only becomes effective for dividends declared on or after 1 April 2012.
Share certificates may not be dematerialised or rematerialised between Friday,
30 March 2012, and Thursday, 5 April 2012, both days inclusive.
On Tuesday, 10 April 2012, 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 Tuesday, 10 April 2012, will be posted
on that date.
Holders of dematerialised shares will have their accounts credited at their
participant or broker on Tuesday, 10 April 2012.
The above dates and times are subject to change. Any changes will be published
on SENS and in the press.
For and on behalf of the board
Dr Reuel J Khoza Michael WT Brown
Chairman Chief Executive
29 February 2012
FINANCIAL HIGHLIGHTS
at 31 December 31 December
2011 2010
Statistics
Number of shares listed m 507,4 514,9
Number of shares in issue,
excluding shares held by group
entities m 455,2 448,6
Weighted average number of shares m 452,9 443,9
Diluted weighted average number
of shares m 461,5 458,2
Preprovisioning operating profit Rm 13 709 12 454
Economic profit/(loss) Rm 924 (289)
Headline earnings per share cents 1 365 1 104
Diluted headline earnings per
share cents 1 340 1 069
Ordinary dividends declared per
share cents 605 480
- Interim cents 265 212
- Final cents 340 268
Ordinary dividends paid per share cents 533 442
Dividend cover times 2,26 2,30
Net asset value per share cents 10 753 9 831
Tangible net asset value per
share cents 9 044 8 160
Closing share price cents 14 500 13 035
Price/earnings ratio historical 11 12
Market capitalisation Rbn 73,6 67,1
Number of employees 28 494 27 525
Key ratios (%)
ROE 13,6 11,8
ROE, excluding goodwill 15,3 13,4
ROA 0,99 0,82
Net interest income to average
interest-earning banking assets 3,46 3,35
Non-interest revenue to total
income 46,1 44,3
Credit loss ratio - banking
advances 1,14 1,36
Non-interest revenue to total
operating expenses 81,5 79,6
Efficiency ratio 56,6 55,7
Efficiency ratio (excluding BEE
transaction expenses) 56,0 55,2
Effective taxation rate 25,2 20,7
Group capital adequacy ratios:
Basel II (including
unappropriated profits)
Core Tier I 11,0 10,1
Tier 1 12,6 11,7
Total 15,3 15,0
Statement of financial position
statistics (Rm)
Total equity attributable to
equity holders of the parent 48 946 44 101
Total equity 52 685 47 814
Amounts owed to depositors 521 155 490 440
Loans and advances 496 048 475 273
- Gross 507 545 486 499
- Impairment of loans and
advances (11 497) (11 226)
Total assets administrated by the
group 760 358 711 288
- Total assets 648 127 608 718
- Assets under management 112 231 102 570
Life assurance embedded value 1 522 1 031
Life assurance value of new
business 409 295
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-controlling
Total equity interest
attributable to attributable to
equity holders of ordinary
the parent shareholders
Rm
Balance at 31 December 2009 39 649 1 849
Dividend to shareholders (2 042) (8)
Preference share dividend (5) -
Issues of shares net of expenses 2 283 -
Shares acquired/cancelled by
group entities and BEE trusts (476) -
Dilution of shareholding in
subsidiary (13) 13
Total comprehensive income for
the year 4 734 59
Liquidation of subsidiaries (4) -
Additional capitalisation of
subsidiaries - 2
Share-based payment reserve
movement 70 -
Buyout of non-controlling
interests (91) (1 762)
Regulatory risk reserve provision (3) -
Other movements (1) -
Balance at 31 December 2010 44 101 153
Dividend to shareholders (2 608) (11)
Dividend in respect of BEE
transaction (310) -
Preference share dividend
Issues of shares net of expenses 323 -
Shares acquired/cancelled by
group entities and BEE trusts 95 -
Total comprehensive income for
the year 6 879 40
Share-based payment reserve
movement 446 -
Dilution of shareholding in
subsidiary 11 (11)
Acquisition of subsidiary - 7
Other movements 9 -
Balance at 31 December 2011 48 946 178
Non-controlling
interest
attributable to
preference
shareholders Total equity
Rm
Balance at 31 December 2009 3 486 44 984
Dividend to shareholders - (2 050)
Preference share dividend (281) (286)
Issues of shares net of expenses 92 2 375
Shares acquired/cancelled by
group entities and BEE trusts - (476)
Dilution of shareholding in
subsidiary - -
Total comprehensive income for
the year 266 5 059
Liquidation of subsidiaries - (4)
Additional capitalisation of
subsidiaries - 2
Share-based payment reserve
movement - 70
Buyout of non-controlling
interests (3) (1 856)
Regulatory risk reserve provision - (3)
Other movements - (1)
Balance at 31 December 2010 3 560 47 814
Dividend to shareholders - (2 619)
Dividend in respect of BEE
transaction - (310)
Preference share dividend (281) (281)
Issues of shares net of expenses - 323
Shares acquired/cancelled by
group entities and BEE trusts - 95
Total comprehensive income for
the year 281 7 200
Share-based payment reserve
movement - 446
Dilution of shareholding in
subsidiary - -
Acquisition of subsidiary 1 8
Other movements - 9
Balance at 31 December 2011 3 561 52 685
CONDENSED GEOGRAPHICAL SEGMENTAL REPORTING
Operating income Headline earnings
for the year ended 31 December 31 December 31 December 31 December
2011 2010 2011 2010
Rm
SA 26 228 21 578 5 695 4 162
- Business
operations 26 228 21 578 6 162 4 574
- BEE transaction
expenses - - (186) (146)
- Profit
attributable to
non-controlling
interest -
preference
shareholders - - (281) (266)
Rest of Africa 1 101 1 034 246 232
Rest of world -
business
operations 786 1 023 243 506
Total 28 115 23 635 6 184 4 900
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 31 December
2011 2010
Rm
Interest and similar income 42 880 44 377
Interest expense and similar charges 24 846 27 769
Net interest income 18 034 16 608
Impairments charge on loans and advances 5 331 6 188
Income from lending activities 12 703 10 420
Non-interest revenue 15 412 13 215
Operating income 28 115 23 635
Total operating expenses 18 919 16 598
- Operating expenses 18 725 16 450
- BEE transaction expenses 194 148
Indirect taxation 505 447
Profit from operations before non-trading
and capital items 8 691 6 590
Non-trading and capital items (14) (91)
- Net profit/(loss) on sale of
subsidiaries, investments, and property and
equipment 40 (4)
- Net impairment of investments, property
and equipment, and capitalised development
costs (54) (87)
Profit from operations 8 677 6 499
Share of profits of associates and joint
ventures * 1
Profit before direct taxation 8 677 6 500
Total direct taxation 2 174 1 364
- Direct taxation 2 194 1 366
- Taxation on non-trading and capital items (20) (2)
Profit for the year 6 503 5 136
Other comprehensive income/(loss) net of
taxation 697 (77)
- Exchange differences on translating
foreign operations 469 (246)
- Fair-value adjustments on available-for-
sale assets (21) (3)
- Gains on property revaluations 249 172
Total comprehensive income for the year 7 200 5 059
Profit attributable to:
Equity holders of the parent 6 190 4 811
Non-controlling interest - ordinary
shareholders 32 59
Non-controlling interest - preference
shareholders 281 266
Profit for the year 6 503 5 136
Total comprehensive income attributable to:
Equity holders of the parent 6 879 4 734
Non-controlling interest - ordinary
shareholders 40 59
Non-controlling interest - preference
shareholders 281 266
Total comprehensive income for the year 7 200 5 059
Basic earnings per share (cents) 1 367 1 084
Diluted earnings per share (cents) 1 341 1 050
* Represents amounts less than R1m.
HEADLINE EARNINGS RECONCILIATION
for the year ended 31 December 2011 31 December 2010
Rm Gross Net of Gross Net of
taxation taxation
Profit attributable to equity
holders of the parent 6 190 4 811
Less: Non-trading and capital
items (14) 6 (91) (89)
- Net profit/(loss) on sale of
subsidiaries, investments, and
property and equipment 40 60 (4) (2)
- Net impairment of
investments, property and
equipment, and capitalised
development costs (54) (54) (87) (87)
Headline earnings 6 184 4 900
CONDENSED SEGMENTAL REPORTING
Total assets
for the year ended 31 December 31 December
2011 2010
Rm
Nedbank Capital 202 624 215 189
Nedbank Corporate 180 949 170 274
Total Nedbank Retail and Nedbank Business 278 954 273 219
Banking
- Nedbank Retail 190 399 193 394
- Nedbank Business Banking 88 555 79 825
Nedbank Wealth 37 760 33 920
Shared Services 7 314 6 791
Central Management 45 482 37 322
Eliminations (104 956) (127 997)
Total 648 127 608 718
Operating income
for the year ended 31 December 31 December
2011 2010
Rm
Nedbank Capital 3 085 2 930
Nedbank Corporate 4 883 4 565
Total Nedbank Retail and Nedbank Business
Banking 16 952 13 644
- Nedbank Retail 12 978 10 082
- Nedbank Business Banking 3 974 3 562
Nedbank Wealth 2 648 2 338
Shared Services 250 244
Central Management 339 (5)
Eliminations (42) (81)
Total 28 115 23 635
Headline earnings
for the year ended 31 December 31 December
2011 2010
Rm
Nedbank Capital 1 225 1 202
Nedbank Corporate 1 672 1 496
Total Nedbank Retail and Nedbank Business 2 854 1 585
Banking
- Nedbank Retail 2 002 760
- Nedbank Business Banking 852 825
Nedbank Wealth 625 592
Shared Services (11) 255
Central Management (181) (230)
Eliminations
Total 6 184 4 900
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 December 31 December
2011 2010
Rm
ASSETS
Cash and cash equivalents 13 457 8 650
Other short-term securities 35 986 27 044
Derivative financial instruments 12 840 13 882
Government and other securities 30 176 31 824
Loans and advances 496 048 475 273
Other assets 12 051 10 014
Clients` indebtedness for acceptances 2 975 1 953
Current taxation receivable 698 483
Investment securities 14 281 11 918
Non-current assets held for sale 8 5
Investments in associate companies and joint
ventures 568 936
Deferred taxation asset 266 284
Investment property 614 199
Property and equipment 6 312 5 612
Long-term employee benefit assets 2 118 2 052
Mandatory reserve deposits with central
banks 11 952 11 095
Intangible assets 7 777 7 494
Total assets 648 127 608 718
Equity and liabilities
Ordinary share capital 455 449
Ordinary share premium 15 934 15 522
Reserves 32 557 28 130
Total equity attributable to equity holders
of the parent 48 946 44 101
Non-controlling interest attributable to:
- ordinary shareholders 178 153
- preference shareholders 3 561 3 560
Total equity 52 685 47 814
Derivative financial instruments 13 853 12 052
Amounts owed to depositors 521 155 490 440
Provisions and other liabilities 14 751 18 245
Liabilities under acceptances 2 975 1 953
Current taxation liabilities 200 191
Deferred taxation liabilities 1 345 1 804
Long-term employee benefit liabilities 1 479 1 414
Investment contract liabilities 8 237 7 309
Insurance contract liabilities 2 005 1 392
Long-term debt instruments 29 442 26 104
Total liabilities 595 442 560 904
Total equity and liabilities 648 127 608 718
Guarantees on behalf of clients 28 288 29 614
CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS
for the year ended 31 December 31 December
2011 2010
Rm
Cash generated by operations 16 552 15 251
Change in funds for operating activities (4 080) (12 891)
Net cash from operating activities before
taxation 12 472 2 360
Taxation paid (3 609) (2 093)
Cashflows from operating activities 8 863 267
Cashflows utilised by investing activities (3 702) (4 438)
Cashflows from financing activities 557 5 504
Effects of exchange rate changes on opening
cash and cash equivalents (excluding foreign
borrowings) (54) 37
Net increase in cash and cash equivalents 5 664 1 370
Cash and cash equivalents at the beginning
of the year* 19 745 18 375
Cash and cash equivalents at the end of the
year* 25 409 19 745
* Including mandatory reserve deposits with central banks.
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)
WE Lucas-Bull
PM Makwana
NP Mnxasana
RK Morathi* (Chief Financial Officer)
JK Netshitenzhe
JVF Roberts (British)
GT Serobe
MI Wyman** (British)
* Executive
** Senior independent non-executive director
Company Secretary:
GS Nienaber
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.
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 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."
Enquiries
External Communications / Investor Relations
Patrick Bowes +44 (0)20 7002 7440
Media
William Baldwin-Charles +44 (0)20 7002 7133
Investor Relations
Kelly de Kock +27 (0)21 509 8709
Notes to Editors
Old Mutual
Old Mutual is an international long-term savings, protection and investment
Group. Originating in South Africa in 1845, the Group provides life assurance,
asset management, banking and general insurance to more than 15 million
customers in Europe, the Americas, Africa and Asia. Old Mutual is listed on the
London Stock Exchange and the Johannesburg Stock Exchange, among others.
In the year ended 31 December 2010, the Group reported adjusted operating profit
before tax of GBP1.5 billion (on an IFRS basis) and had GBP309 billion of funds
under management from core operations, and shareholders` equity of GBP9.0
billion.
Old Mutual plc will announce its preliminary results for the year ended 31
December 2011 on 9 March 2012.
For further information on Old Mutual plc, please visit the corporate website at
www.oldmutual.com
Date: 29/02/2012 09:00:44 Produced by the JSE SENS Department.
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