Nedcor Limited - Credit Ratings Affirmed by CA-Rat
Nedcor Limited - Credit Ratings Affirmed by CA-Ratings
NEDCOR LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1966/010630/06
JSE share code: NED
ISIN code: ZAE000004875
(`Nedcor`)
Press Release: CA-Ratings affirms credit ratings of Nedcor
Nedcor`s 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 has affirmed the national long-term rating of zaAA- and short-term
rating of zaA1+ to the credit strength of Nedcor. The outlook remains stable.
Nedcor`s ratings reflect the banking group`s strong domestic market position,
good asset quality and satisfactory liquidity.
With total reported group assets of R300 billion at June 2004, Nedcor remains
one of the largest banking groups in South Africa. The bank has a strong
position in the corporate banking market. Nedcor`s major focus will be to
extract synergies from the merger with BoE and to grow organically in the
domestic market through improved client service and delivery infrastructure.
The asset quality of the bank is sound and the implementation of accounting
standard AC133 has brought the provisioning policies more in line with industry
practices. Non-performing loans are relatively stable and provision coverage has
improved. It is expected that the lower interest rates and better economic
conditions should improve asset quality further in future.
Liquidity is satisfactory with a strong funding base and good access to retail
funding through its retail branch network. The bank`s liquidity is slightly
above the industry average.
The ratings of Nedcor are constrained by moderate capital, weak profitability,
low internal efficiencies and an underperforming retail division.
The regulatory capital adequacy of the group is satisfactory at more than 12,3%,
following the rights issue that raised additional capital of R5,1 billion. The
medium-term strategy is to maintain capital at this level through internal
capital generation and the improvement of capital utilisation.
Declining net interest margins, high once-off merger and restructuring costs and
translation losses have adversely affected Nedcor`s performance. The
repatriation of offshore capital should reduce translation losses in future.
It is expected that the restructuring of the group should improve efficiencies
and reduce costs. The retrenchment of another 2 300 employees should be
completed by the end of 2004 and the full benefits realised in 2005.
The performance of the retail-banking division of Nedcor has been below national
standards. The future success and profitability of Nedcor will largely depend on
the turnaround of this division.
Nedcor has recently restructured and strengthened its management team
considerable, by adding some elements of youth and diversity. Although
management is judged to be of good quality, the new management team still have
to prove their resilience in an increasingly competitive environment to restore
and build the group.
These credit ratings refer to the group`s capacity to repay its liabilities in
South African Rand relative to other South African obligors.
11 February 2005
Issued by CA-Ratings
Contact: Leon Claassen +27 11 442 4233
Date: 11/02/2005 03:24:53 PM
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