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NEDCOR LIMITED - CREDIT RATINGS FROM CA-RATINGS
NEDCOR LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1966/010630/06
JSE share code: NED
ISIN code: ZAE000004875
Press Release: CA-Ratings assigns credit ratings to Nedcor
Current credit ratings:
Long-term: zaAA- (Indicates very strong capacity of the
issuer to pay interest and repay
capital relative to other South African
obligors.)
Outlook: Stable
Short-term: zaA1+ (Indicates that the degree of safety
regarding timely payment is either
overwhelming or very strong, relative
to other South African obligors. Issues
determined to possess overwhelming
safety characteristics are denoted with
a plus (+) sign designation.)
CA-Ratings announces that it has assigned the following credit ratings to
Nedcor: long-term zaAA- and short-term zaA1+. The outlook for the rating is
stable.
This is the first time that CA-Ratings assigns credit ratings to the Nedcor
group.
The ratings of Nedcor reflect the banking group"s strong domestic market
position as one of the largest banks in South Africa with a full range of
banking products. Total assets at its half-year amounted to R315 billion.
The bank has a strong position in the corporate banking market and although its
retail banking operations are lagging that of its domestic competitors, a strong
focus has been placed on improving its market share as well as service delivery
to this market segment.
Nedcor remains predominantly a domestic bank with as yet, little representation
in Europe, the USA, Asia and other African countries. The bank"s strategy
includes a strong focus on the southern African market with selective expansion
into Africa and possibly Asia.
The regulatory capital adequacy of the bank is satisfactory at more than 10% but
the medium-term strategy of the bank is to strengthen it to 12%. Internal
capital generation and the potential issuance of primary capital will be
combined with improvement in the capital utilisation to bolster the capital
position of the bank.
The asset quality of the bank is satisfactory and the implementation of
accounting standard AC133 brought the provisioning policies more in line with
industry practices. Non-performing loans are relatively stable and provision
coverage has improved over the last year. Further improvement is possible
following the decline in interest rates during the latter part of 2003 as well
as the lower level of inflation.
Nedcor"s recent performance has been adversely affected by the once-off costs of
the merger with BoE. Thinning net interest margins were caused by the rapidly
declining interest rates and long-term debt finance that was raised to fund this
acquisition. The newfound strength of the Rand continues to impact the
profitability through translation losses on its foreign assets. Normal banking
revenue is of good quality with a 45% to 55% split between interest and non-
interest income, but the implementation of AC133 is expected to increase the
volatility of reported earnings in the future.
The funding base of Nedcor remains diverse and the bank benefits from a large
retail deposit base of some 30% of total deposits compared to the industry
average of 22%. The bank"s liquidity is above the industry average.
Old Mutual demonstrated its support for Nedcor through a R2bn loan at the end of
2003.
The Financial Sector Charter released in October 2003 is expected to have short-
term cost implications for the South African banks but should not undermine the
stability of the banking sector.
14 January 2004
Issued by CA-Ratings
Contact: Leon Claassen +27 11 442 4233
Date: 14/01/2004 04:30:03 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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