| Thu 13 Feb 2003, 10:13 | | Nedcor - Financial results for the year ended 31 D |
|
Nedcor Limited
(Registration No: 1966/010630/06)
Share code: NED
ISIN code: ZAE000004875
Financial results for the year ended 31 December 2002
- Core earnings up 9% to R3 366 million
- Core earnings per share up 4% to 1 330cps
- Advances growth 34%
- Return on equity 21,9%
- Return on assets 1,57%
- Efficiency ratio 55,4%
* Nedcor reports 9% growth in core earnings, 32% decline in headline earnings
after translation losses
* The year 2002 has been another challenging and eventful one for Nedcor and for
the South African banking industry. The merger with BoE Limited (`BoE`) during
the year created the opportunity for a major restructuring and realignment of
the Nedcor Group, which culminated in the legal and practical merger of four
banks to form the new Nedbank Limited (`Nedbank`) on 1 January 2003 (`legal day
one`).
The industry experienced extreme volatility in rand exchange rates, four
successive interest rate hikes, troubles in the microlending industry, liquidity
stress in or failure of some smaller banks and referred difficulties from
unsettled global markets.
Within this industry environment Nedcor had an active year and reorganised the
group to establish new platforms for higher levels of client service,
competitiveness, efficiency and profitability. The merger with BoE fits ideally
into Nedcor`s growth strategy and most of BoE`s business units align well with
those of Nedcor. In addition, Nedcor`s scalable technology platforms will
benefit from the transaction volume increases introduced by BoE, and there is
potential for significant cost synergies from the merging of duplicated
services.
Key strategic developments during the year:
*Acquisition of BoE
The feature of the year was the acquisition of BoE with effect from 2 July 2002.
BoE was acquired at a cost of R7,7bn and was funded through a combination of
cash (R4bn from subordinated-loan notes and R1,5bn from own resources) and
equity R2,2bn. After fair-value acquisition adjustments and accounting policy
alignments totalling R1,1bn BoE`s at- acquisition asset value was R4,9bn,
resulting in goodwill of R2,8bn arising on acquisition.
*Integration of banking subsidiaries
The acquisition of BoE was the catalyst for an overall Nedcor Group
reorganisation, which entailed the integration of BoE, Nedcor Investment Bank
(`NIB`), Cape of Good Hope Bank (`CoGHB`) and parts of Peoples Bank Limited into
Nedbank with effect from 1 January 2003, and parts of BoE into Peoples Bank
later in 2003.
Integration - legal day one
The planning and preparation for legal day one paid off, with the consolidation
of the South African banking licences on 1 January 2003 being successful.
*Acquisition of NIB minorities
As part of the integration Nedcor acquired, with effect from 1 October 2002, the
outstanding minority shareholders` interests in NIB for R968m, which was settled
by the issue of new Nedcor shares.
*Enhanced capital structures
To fund the acquisitions of BoE and the NIB minorities and to optimise and
restructure its capital Nedcor undertook three major capital raisings totalling
R9,2bn during the year. These comprised the subordinated loan note raising of
R4bn in July 2002, the listings of R3,2bn Nedcor shares in July and October
2002, as well as a listed non-redeemable non-cumulative Nedbank preference share
issue of R2bn in December 2002.
*New operating structures
The group was reorganised into a new operating structure that will conduct
business under three distinctive primary bank brands, namely Nedbank, Nedbank
Corporate and Peoples Bank. All leadership positions were confirmed at an early
stage of the merger. Over 20 000 managers and staff have been formally appointed
to or confirmed in their new positions in terms of the merger requirements of
the new Labour Relations Act.
*Wealth management rationalisation
With a view to rationalising the wealth management activities of Nedbank, NIB
and BoE, NIB acquired the remaining 50% of FT NIBAM from Franklin Templeton for
a consideration of R180m with effect from 1 October 2002.
The wealth management activities were classified into two focus areas, namely
private clients and institutional asset management. The private client
activities, both domestically and internationally, will continue as a Nedcor/Old
Mutual joint venture operating under the BoE brand. BoE`s South African
institutional asset management, a business requiring scale, has been sold, with
effect from 1 January 2003, to empowerment partners spearheaded by AKA Capital
Limited and partnered by Old Mutual and Peoples Bank.
*Old Mutual Bank joint venture
The structure of the Old Mutual Bank joint venture, which entails the merger of
the Permanent Bank deposit-taking activities and infrastructure with Old Mutual
Bank, was revised during the year. It now operates under the Old Mutual Bank
brand as a division of Nedbank with effect from 1 January 2003. Its primary
focus will be to deliver banking products to Old Mutual clients.
*Merger and integration planning
Much time and attention has been devoted to planning for the integration and
realisation of the anticipated merger synergies. Management is acutely aware of
the integration risks arising from the merger and has reorganised management
responsibilities and resources to ensure that both the merger process and
ongoing operations are properly resourced. Integration milestones have been set
and are being closely monitored, with progress currently ahead of initial
targets.
The integration process continues to go well and legal day one proceeded
smoothly. Senior and key staff losses are minimal, asset growth is robust,
deposit return flows are strong and liquidity has been optimised.
Net recurring synergies, including funding and capital efficiencies and after
deducting integration costs, are expected to grow from R110m before tax in 2003
to R905m before tax from 2006 onwards. The synergies are planned from the
following areas:
At Target Reduction Current
inception 2005 % status
Bank licences 8 4 50 Done
Treasuries 10 3 70 Done
Brands 20 12 40 In progress
Office 49 19 61 In progress
premises
Branches 694 601 13 In progress
Products 388 223 43 In progress
IT systems 276 176 33 In progress
Staff 25 700 21 850 15 25 100
(permanent
and
temporary)
*Acquisition of Planet Finance
Planet Finance, the asset-based finance business of the former Saambou Bank, was
acquired by Nedcor`s subsidiary Imperial Bank Limited for approximately R850m
with effect from 1 September 2002. Imperial Bank also won a mandate to collect a
book of a further R1bn on behalf of the receiver of Saambou Bank.
Commentary on results
Core earnings (ie excluding translation gains and losses and merger and
reorganisation costs) grew by 9% to R3 366m (2001: R3 093m), comprising 7%
growth in South African operations and 16% growth in international operations.
Core earnings per share, due to the dilutory effect of new shares issued for the
acquisitions of BoE and NIB, grew at a lower rate of 4% to 1 330cps (2001: 1
284cps).
Headline earnings declined by 32% to R2 585m (2001: R3 789m), due mainly to the
effects of the volatility of the rand exchange rate that caused translation
losses in 2002, as opposed to translation gains in 2001.
Attributable earnings increased to R984m (2001: R13m), after providing for
exceptional capital losses totalling R1,6bn (2001: R3,8bn).
Return on equity increased to 21,9% (2001: 20,6%), while return on assets
decreased to 1,57% (2001: 1,83%).
A final dividend of 310cps (2001: 310cps) has been declared, giving total
dividends of 515cps (2001: 500cps) for the year, at a dividend cover of 2,6
times (2001: 2,6 times), based on core earnings and 2,0 times (2001: 3,1 times),
based on headline earnings.
The consolidation of BoE distorts the comparability of Nedcor`s organic
performance with 2001. However, BoE`s results are separately disclosed in the
segmental report. The commentary below seeks to give a perspective on Nedcor`s
overall performance, both including and excluding BoE.
Advances and net interest income
Advances grew by 34% (15%, excluding BoE), while net interest income grew by a
more muted 20% (12%, excluding BoE) to R6,3bn (2001: R5,3bn). This resulted from
pressure on margins by virtue of the liquidity squeeze that occurred during the
period of industry turbulence, and also from lower endowment income due to the
redeployment of cash invested in BoE, Imperial Bank, other joint ventures and
cash dividends paid. BoE was under liquidity stress when it was acquired and
this clearly impacted adversely on interest margins. However, we are pleased to
report strong returns of deposit flows and good progress in restoring margins.
Non-interest revenue
Non-interest revenue, excluding translation gains/losses and exceptional items,
grew strongly by 37% (15%, excluding BoE) to R6,9bn (2001: R5,1bn). The
foundation for this increase was pleasing growth of 45% (20%, excluding BoE) in
commission and fee income, supplemented by good growth in bancassurance revenues
and trading income derived from exchange and securities dealing.
Translation effects
In 2001 the substantial decline in the rand exchange rate from R7,55 to R12,05
to the US$ as at 31 December 2001 resulted in translation gains totalling R1,1bn
from integrated operations accruing to headline earnings. In 2002 the
strengthening in the rand exchange rate from R12,05 to R8,60 to the US$ as at 31
December 2002 resulted in a reciprocal translation loss of R1bn.
This loss was partially relieved by the release as at 30 June 2002 of a general
risk provision of R400m created in 2001 to cover unidentified but inherent risks
that could arise from the exceptional rand depreciation of 2001.
In addition, translation losses of R411m (2001: translation gains of R263m)
resulting from conversion of non-integrated foreign entities have been taken
directly to reserves.
Specific and general risk provisions
The credit climate held steady and arrears trends generally improved during
2002, despite increased interest rates. Nedcor is cognisant, however, of the
need for adopting a conservative provisioning policy and this is reflected in
the income statement charge increase of 68%, including BoE and additional
provisions for the ringfenced Business Banking small and medium enterprises
(SME) book and the microloan sector. Non-performing loans, including BoE,
represent 3,9% (2001: 4,6%) of total advances and the net provision coverage,
after allowing for expected recoveries, is conservative at 157% (2001: 147%).
The ratio of balance sheet provisions to total advances is 3,1% (2001: 3,3%) as
at 31 December 2002.
In the trading statement of 21 November 2002 Nedcor reported on the need for
additional provisions in two areas, namely for a ringfenced, non-performing SME
book, and for microloans.
Additional provisions of R546m charged for these areas have had a material, but
largely non-recurring, negative effect on 2002 core earnings. Both of these
experiences occurred in initiatives aimed at expanding our activities in non-
traditional markets. Revised policies are in place to avoid repetition of these
losses.
Merger implementation
Operational and financial synergy targets have been identified and committed to.
Overall implementation plans, including systems migration plans, are in place.
Detailed business and functional unit implementation plans will be finalised by
31 March 2003. New terms and conditions for all employees will be implemented on
1 April 2003.
Firstly, Nedcor has an exposure to SMEs through an initiative in the late
nineties focused on developing this sector, which is key to development of the
economy. This sector has special characteristics with a potential to yield
higher returns, but at increased risk. High growth was experienced and, by the
start of 2002, the total book had grown to R3,2bn. However, this included non-
performing exposures totalling R700m, which were set aside in 1999 to be
separately managed as a ringfenced collections book.
During 2002 it became apparent that collections were falling well below those
previously anticipated and a full review of this book was conducted. As a
consequence we reported in the trading statement that provisions, the timing of
which had historically been created under a policy of legal certainty, would be
accelerated in 2002. This would result in an additional charge of R400m (R280m
after tax), over and above the R190m already budgeted, against 2002 earnings.
The ringfenced SME book has now been sold, and the sale price was determined at
the present value of estimated future collections, net of collection costs. The
adjustment of provisions to recognise the sale price necessitated a further
provision of R66m, bringing the total ringfenced SME book provisions for 2002 to
R656m (2001: R75m). This effectively accelerates provisions and collection costs
that would have been charged in future years. The ringfenced collection
operation has been closed and, in terms of the sale agreement, Nedcor may recoup
some losses if collections are achieved in excess of certain thresholds.
Secondly, Nedcor has adopted a cautious approach to microlending and does not
have a large exposure to this market. We nevertheless did not escape the
troubles of this industry and have recognised bad-debt provisions totalling
R225m (2001: R30m), some of which are shared with our partners, in respect of
total microloan exposures. Provisions in respect of unsecured microloan advances
stand at 34% (2001: 9%).
Nedcor`s exposure to microlending, and to retailers active in microlending, has
increased with the acquisition of BoE. However, unsecured exposures of R972m
(2001: R377m) to the microloan industry represent only 0,5% of total advances.
Our microloan exposure continues to be closely watched, as this sector has
clearly experienced stressful times, and stringent provisioning policies and
monitoring practices are in place.
In all other major businesses provisions have reduced in line with arrears
trends. We are naturally concerned about our bad experiences in the SME and
microlending sectors. Both are sectors we should engage, but they clearly
require a modified approach and methodology to ensure that our negative
experiences are not repeated.
Expenses
Expenses increased by 35% (13%, excluding BoE), with our efficiency ratio
declining to 55,4% (2001: 52,5%), but remaining constant at 52,5%, excluding
BoE.
Taxation
The charge for taxation, excluding exceptional items and the recognition of the
Peoples Bank deferred-tax asset of R185m, remained constant at R765m (2001:
R772m). On the same basis the effective rate of taxation was 18,6% (2001:
20,1%), assisted by lower levels of taxation on offshore income and increased
dividend income.
Core earnings benefited by R130m (R185m before allowing for minority interests)
from the non-recurring recognition of a deferred-tax asset in respect of
unutilised tax losses in Peoples Bank. This was required in terms of SA
Generally Accepted Accounting Practice (`GAAP`), because the positive profit
record of Peoples Bank for the past two years reinforced the probability of the
tax losses being utilised by future taxable income.
Integration - early successes
The Treasury consolidation, including the reduction of 10 frontoffices into
three and the centralisation of the backoffices in Johannesburg, was completed
on schedule on 1 February 2003. The Capital Markets integration is well-
advanced. The Cape of Good Hope Bank retail client migration process has started
and is well on track. An initial staff survey has showed an extremely positive
staff attitude.
Equity-accounted income and income attributable to minority shareholders
Equity-accounted income of R162m (2001: R181m) declined mainly due to the sale
of former associate NedTel Cellular in the second half of 2001. The
discontinuation of equity accounting of Zimbabwean associate Merchant Bank of
Central Africa, with effect from 1 July 2001, also contributed to the decline in
equity-accounted income. Minority interests at R333m (2001: R164m) doubled
following the consolidation of Gerrard Private Bank for a full year (2001: seven
months) and the first-time inclusion of the 30% Peoples Bank empowerment
minority with effect from 1 January 2002. These increases were partially offset
by the cessation of minority interests in NIB from 1 October 2002.
Merger and reorganisation costs
Once-off merger and reorganisation costs totalling R205m after tax (2001: R Nil)
have been charged to the income statement. These comprise R86m in respect of the
Nedcor Group reorganisation and integration and R119m for the closure and
reorganisation of the Permanent Bank operations in anticipation of Permanent
Bank`s joint venture with Old Mutual Bank. These costs are excluded in the
determination of core earnings.
Exceptional capital items
The market value of Nedcor`s investment of 103 million shares in Dimension Data
plc, listed on the London Stock Exchange, has declined further and has been
marked to market at its 31 December 2002 price of R4,02 per share (2001: R14,50
per share).
Other exceptional items comprise goodwill amortisation of R501m (2001: R273m),
including R214m for BoE, fair-value impairment writedowns of R119m (2001: R34m)
for fixed assets and other investments and R58m for losses on discontinued
operations and sales of investments.
Segmental reporting
Nedcor`s South African operations contributed R2 788m (2001: R2 595m) to core
earnings, while international operations, which were influenced by lower rand-
translated earnings, contributed R578m (2001: R498m). The net contribution from
BoE`s domestic and international operations, after deducting Nedcor`s funding
costs, was R265m for the six months to 31 December 2002.
Retail banking achieved excellent growth with a strong performance from Nedbank.
Peoples Bank was negatively impacted by the additional microloan provisions, but
otherwise produced a good performance. In commercial banking Cape of Good Hope
Bank had an outstanding year, while the otherwise good results of Nedbank`s
Commercial Division were adversely impacted by the ringfenced SME book
provisions. Corporate and investment banking grew modestly in tough markets.
The acquisitions of Imperial Bank and Gerrard Private Bank performed
exceptionally well, contributing growth in core earnings of 95% and 81%
respectively. The alliance with Old Mutual (bancassurance initiatives)
progressed steadily, while the alliances with the JD Group/ Capital One
(microlending) and Pick `n Pay Go Banking continue to develop, but are still
making losses. The Pick `n Pay Go Banking initiative is progressing well and new
account openings are growing rapidly. We are confident of achieving satisfactory
returns from our alliances over the longer term.
Shareholders` funds and capital adequacy
Shareholders` funds grew to R18,1bn (2001: R15.7bn), notwithstanding the
writedowns of investments and translation losses. Together with the new
preference share capital of R2bn and subordinated-debt instruments of R7,6bn
(2001: R3,8bn), total statutory capital of R27,7bn (2001: R19,5bn) represents an
overall capital adequacy of 11,0% (2001: 11,4%), above the statutory requirement
of 10%. Primary capital stands at 7,0% (2001: 8,6%).
Accounting policies
The financial statements are prepared on the historical-cost basis, except for
certain investments that are carried at fair value, and comply in all material
respects with SA GAAP. The accounting policies of BoE have been realigned with
those of Nedcor. The accounting policies applied are consistent with those of
the previous year, except for the first-time application of Accounting Standard
AC 135 - `Investment property` - which requires depreciation of investment
properties. The impact of this change in the basis of accounting is not
material.
Work has been undertaken in preparation for the application of Accounting
Standard AC 133 - `Financial instruments: recognition and measurement` - which
applies to Nedcor with effect from 1 January 2003. This standard introduces
additional fair-value requirements in the valuation of assets and liabilities
and requires extensive revision of bad debt provisioning to a basis that
estimates the net present value of future collections. The application of this
standard will result in increased volatility in reported earnings. Nedcor will
first report to shareholders under AC 133 in respect of its interim results for
the six months to 30 June 2003.
Strategic initiatives
Nedcor has stated for some years that its primary focus is on banking in South
Africa - hence the cautious approach to banking activities internationally and
in Africa. In addition, we aim to leverage our substantial investment in
technology locally and abroad.
Our stated strategic objective in recent years has been to achieve low-cost,
quality client growth, both organically and through alliances with best-of-breed
partners. Our aim is to increase the number of delivery channels and products
available to clients, improve service quality and increase volume throughput
into our scalable technology platforms.
The merger with BoE and the consequent restructuring of the group has been the
most significant event for Nedcor in recent years and fully aligns with these
strategies. Another strategic objective is to leverage Nedcor`s core processing
competence in the international arena and so create a recurring, external income
stream. Good progress is being made with our international initiative.
We are pleased to have the prominent market position that we now enjoy. With BoE
Nedcor has achieved a scale that will allow us to improve our overall client
offering in a cost-effective way. We also retain the ability to extend our
footprint further through our alliances. This bodes well for our future market
presence and profitability.
Prospects
The Dimension Data writedowns and the SME and microlending provisions have been
disappointing setbacks in our drive to expand into new markets and build our
capital base. However, these are now largely behind us and were not inherent in
our ongoing traditional core businesses. Notwithstanding these setbacks, we
produced core profits of R3 366bn (2001: R3 093m) and, over five years, our
total assets have grown from R117bn to R274bn and total shareholders` equity
from R9,1bn to R20,1bn.
The solid performances of Nedcor`s core businesses and our strong balance sheet
position us well for the future. The BoE merger and group reorganisation have
been optimally planned to enhance these prospects,
Technology investment is a key enabling capability in banking and Nedcor has
made significant investments in technology projects over the past few years. The
bulk of these projects is now in use or in advanced stages of commissioning and
represents an investment for the future. The merger with BoE and the group
rationalisation now provide the enlarged Nedcor Group with further opportunities
to leverage economies of scale in order to increase efficiencies and reduce cost
to-income ratios. Furthermore, offshore processing is poised to build its
contribution on the back of this investment. We are confident about the future
potential of our technology platforms.
Nedcor`s multibrand strategy and strategic alliances have assisted us to gain
market share in recent years. Now these have been augmented by the addition of
BoE products and brands. The key to further growth, however, is outstanding
client service, and our new operational structure should allow us to become a
group truly focused on and built around our clients.
That we have come through this demanding period so well is a tribute to our
staff. They have been dedicated to `making it happen` and remain the true
differentiators of our business. They are enthusiastic about the potential of
the new Nedcor Group and this should continue to manifest itself in benefits for
our clients and other stakeholders.
We believe that our strategy offers low-risk growth opportunities and focuses on
markets and initiatives that lie within our core competencies. We also believe
that we have set the foundations successfully to address the impending and
necessary transformation challenges in the industry and the country.
The challenge for 2003 and beyond is successfully to implement the merger and
integration plans to realise the anticipated synergies and to deliver an
enhanced client experience and real shareholder value. These are medium-term
processes and, while 2003 is likely to be a positive year, it will also be a
period of transition as the merger beds down. The full benefits of the merger
are likely to be more evident in 2004 and beyond.
Dividend
Notice is hereby given that a final dividend of 310 cents per ordinary share has
been declared in respect of the year ended 31 December 2002.
Trading in the STRATE environment requires settlement within five business days.
In accordance with the settlement procedures of STRATE Nedcor has determined the
last day for trading to participate in the final dividend to be Thursday, 20
March 2003. The shares will commence trading ex dividend on Monday, 24 March
2003, and the record date will be Friday, 28 March 2003. Payment will be made
on Monday, 31 March 2003.
Share certificates may not be dematerialised or rematerialised between Monday,
24 March 2003, and Friday, 28 March 2003, both days inclusive.
For and on behalf of the board
CF Liebenberg RCM Laubscher
Chairman Chief Executive
12 February 2003
Registered office
Nedcor Limited, Nedcor Sandton, 135 Rivonia Road, Sandown, 2196
PO Box 1144, Johannesburg, 2000
Transfer secretaries
Computershare Investor Services Limited, 70 Marshall Street, Johannesburg, 2001
PO Box 1053, Johannesburg, 2000
Directors
CF Liebenberg (Chairman), PG Joubert (Deputy Chairman), Prof MM Katz (Vice-
chairman), RCM Laubscher (Chief Executive), CJW Ball, TA Boardman, Dr IJ Botha,
WAM Clewlow, RG Cottrell, BE Davison, N Dennis (British),
Prof B Figaji, BJS Hore, MJ Levett, JB Magwaza, ME Mkwanazi, SG Morris, DGS
Muller, ML Ndlovu, PF Nhleko,
TH Nyasulu, JVF Roberts (British), AA Routledge, CML Savage, JH Sutcliffe
(British)
Company Secretary: GS Nienaber
Reg No: 1966/010630/06 Share code: NED ISIN code: ZAE000004875
% Dec 2002* Dec 2001**
Financial highlights change Rm Rm
Selected returns
Headline earnings (Rm) (32) 2 585 3 789
Headline earnings per (35) 1 022 1 574
share (cents)
Core earnings (Rm)+ 9 3 366 3 093
Core earnings per share 4 1 330 1 284
(cents)+
Return on average 21,9 20,6
shareholders` funds
(%)+
Return on total assets 1,57 1,83
(%)+
Non-interest revenue to 52,4 49,0
total income (%)+
Efficiency ratio (%)+ 55,4 52,5
Net interest income to 2,88 3,15
interest-earning assets
(%)
Doubtful-debt 3,1 3,3
provisions to total
advances (%)
Balance sheet
Total shareholders` 28 20 122 15 711
equity (Rm)
Deposit, current and 34 237 083 177 152
other accounts (Rm)
Advances and other 34 202 650 151 329
accounts (Rm)
Total assets (Rm) 39 273 784 197 665
Assets under management 124 342 38 925
(off-balance-sheet)
(Rm)
Capital ratio (%) 11,0 11,4
Capital ratio - tier 1 7,0 8,6
(%)
Share statistics
Number of shares in 270,6 244,3
issue (m)
Weighted average number 253,0 240,8
of shares (m)
Earnings per share, 389 5
including exceptional
items (cents)
Fully diluted weighted 254,5 242,9
average number of
shares (m)
Diluted headline (35) 1 016 1 560
earnings per share
(cents)
Dividends per share 3 515 500
(cents)
Dividend cover (times)+ 2,6 2,6
Share price (cents) (11) 11 110 12 420
Price-earnings ratio 10,9 7,9
(historical)
Market capitalisation (1) 30,1 30,3
(Rbn)
% Dec 2002* Dec 2001**
Income statement change Rm Rm
Interest income 39 23 822 17 186
Interest expense 47 17 522 11 918
Net interest 20 6 300 5 268
income
Non-interest 37 6 929 5 054
revenue
Foreign exchange (1 011) 1 096
translation
(losses)/gains
Total income 7 12 218 11 418
Specific and 68 1 778 1 058
general
provisions
Exceptional (400) 400
general risk
provision
(reversed)/raised
Income after 9 10 840 9 960
specific and
general risk
provisions
Operating 35 7 334 5 416
expenses
Merger and 193
reorganisation
expenses
Profit from (27) 3 313 4 544
operations before
exceptional
capital items
Exceptional (1 793) (3 605)
capital items
Net capital (1 080) (3 298)
loss on
investment in
Dimension Data
Amortisation (501) (273)
and impairment of
goodwill
Loss on sale of (58)
investments and
operations
Merger and (35)
reorganisation
expenses
Impairment of (119) (34)
investments and
of property and
equipment
Profit from 1 520 939
operations
Attributable (11) 162 181
earnings of
associates
Profit before 1 682 1 120
taxation
Taxation (25) 580 772
Taxation: Merger (23)
and
reorganisation
expenses
Taxation: (192) 171
Exceptional
capital items
Profit after 1 317 177
taxation
Income 103 333 164
attributable to
minority
shareholders
Net profit for 984 13
year
% Dec 2002* Dec 2001**
Headline earnings change Rm Rm
Income 984 13
attributable to
shareholders
Add back:
Exceptional 1 793 3 605
capital items
Taxation: (192) 171
exceptional
capital items
Headline earnings (32) 2 585 3 789
% Dec 2002* Dec 2001**
Core earnings change Rm Rm
Headline earnings 2 585 3 789
Exclude:
Foreign exchange 1 011 (1 096)
translation
losses/(gains)
Exceptional (400) 400
general risk
provision
Merger and 193
reorganisation
expenses
Taxation on (23)
merger and
reorganisation
expenses
Core earnings 9 3 366 3 093
% Dec 2002* Dec 2001**
Balance sheet change Rm Rm
Assets
Cash and short- 51 16 607 10 978
term funds
Other short-term 32 14 987 11 372
securities
Government and 16 14 647 12 627
public sector
securities
Advances and 34 202 650 151 329
other assets
Insurance assets 100 7 891
Associate and 19 6 933 5 821
other investments
Property and 39 2 854 2 046
equipment
Intangible
assets:
Computer 31 1 638 1 247
software and
capitalised
development costs
Goodwill 250 4 457 1 272
Customers` 15 1 120 973
indebtedness for
acceptances
Total assets 39 273 784 197 665
Shareholders`
equity and
liabilities
Ordinary 15 17 046 14 830
shareholders`
equity
Preference share 1 987
capital and
premium
Minority 1 089 881
shareholders`
interest
Total 28 20 122 15 711
shareholders`
equity and
minority interest
Deposit and other 34 237 083 177 152
liabilities
Insurance funds 100 7 891
Subordinated-debt 98 7 568 3 829
instruments
Liabilities under 1 120 973
acceptances
Total 39 273 784 197 665
shareholders`
equity and
liabilities
Guarantees on 11 966 11 036
behalf of
customers
excluded from
assets
Dec 2002* Dec 2001**
Cash flow statement Rm Rm
Cash flows from operating 3 746 5 420
activities
Cash received from 29 326 23 270
clients
Cash paid to clients, (24 471) (16 929)
employees and suppliers
Dividends received 173 114
Dividends paid (1 282) (1 035)
Net decrease/(increase) in 802 (6 492)
operating funds
Taxation paid (765) (396)
Net cash utilised in (6 456) (3 065)
investing activities
Net cash provided by 8 302 2 651
financing activities
Net increase in 3 075 2 248
subordinated debt
Net proceeds of ordinary 3 240 403
shares issued
Net proceeds of preference 1 987
shares issued
Net increase/(decrease) in 5 629 (1 882)
cash and short-term funds
Cash and short-term funds 10 978 12 860
at beginning of year
Cash and short-term funds 16 607 10 978
at end of year
Statement of changes in Dec 2002* Dec 2001**
shareholders` equity Rm Rm
Ordinary share capital 271 242
Balance at beginning of year 242 240
Shares issued during year 27 2
Sale of treasury shares by 3
subsidiary
Shares acquired by subsidiary (1)
Ordinary share premium 4 536 1 326
Balance at beginning of year 1 326 934
Shares issued during year 2 924 448
Share issue expenses (9) (9)
Sale of treasury shares by 453
subsidiary
Shares acquired by subsidiary (158) (47)
Preference share capital and 1 987 -
premium
Shares issued during year 2 000
Share issue expenses (13)
Non-distributable reserves 216 703
Balance at beginning of year 703 516
Transfer from distributable 246 114
reserves
Foreign currency translation (411) 263
Release of reserves previously (332) (172)
not available
Other movements 10 (18)
Distributable reserves 12 023 12 559
Balance at beginning of year 12 559 13 724
Change in accounting policy - (13)
prior-year adjustment
Net profit for year 984 13
Transfer to non-distributable (246) (114)
reserves
Dividends to shareholders (1 282) (1 035)
Other movements 8 (16)
Total shareholders` equity 19 033 14 830
Segmental analysis
% Dec 2002* Dec 2001**
- core change Rm % Rm %
earnings
BY OPERATION
Retail 70 653 20 384 12
banking
Nedbank 354 11 189 6
Peoples 299 9 195 6
Bank
Commercial (37) 448 14 711 24
banking
Nedbank 256 8 579 20
Imperial 72 2 37 1
Bank#
Cape of 120 4 95 3
Good Hope
Bank
Corporate and 5 1 329 39 1 263 41
investment
banking
Nedbank 866 26 945 31
Nedcor 463 13 318 10
Investment
Bank#
T & O (32) (1) 45 1
investments
Internal 238 7 192 6
funding and
group
operations
International (7) 465 14 498 16
(including
Africa)
Nedbank 112 3 161 5
Gerrard 56 2 31 1
Private Bank#
Nedcor 297 9 306 10
Investment
Bank#
BoE 265 7 -
South Africa 406 12
International 113 3
Funding (254) (8)
Core earnings 9 3 366 100 3 093 100
BY GEOGRAPHY
South Africa 7 2 788 83 2 595 84
Nedcor, 2 636 79 2 595 84
excluding BoE
BoE 406 12
BoE funding (254) (8)
Rest of 132 272 8 117 4
Africa
Rest of the (20) 306 9 381 12
world
Nedcor, 193 6 381 12
excluding BoE
BoE 113 3
Core earnings 9 3 366 100 3 093 100
*Reviewed
**Audited
+ Based on core earnings calculation, excluding all exceptional items
# Net of minorities
The segmental analysis is primarily based on management operating reports and
ignores boundaries of the legal entities. Comparative figures are restated,
where necessary, to afford a proper comparison. Capital is allocated to segments
based on the related risk-weighted assets in terms of the Banks Act
classifications and weightings. The aspects of capital allocation and transfer
pricing of support costs between segments are under regular review.
This and additional information is available on our website: www.nedcor.com
Date: 13/02/2003 10:00:00 AM Produced by the JSE SENS Department
