| Thu 4 Aug 2005, 16:55 | | Nedbank Limited - Reviewed Financial Results |
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Nedbank Limited - Reviewed Financial Results
Nedbank Limited
(Incorporated in the Republic of South Africa)
(Reg No 1951/000009/06)
Share code: NBKP ISIN code: ZAE000043667
REVIEWED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005
Overview
Nedbank Limited is a wholly owned subsidiary of Nedbank Group Limited, which is
listed on the JSE Limited. These consolidated annual financial results are
published to provide information to holders of Nedbank Limited`s listed non-
redeemable non-cumulative preference shares. Commentary relating to the
consolidated Nedbank Limited financial results is included in the Nedbank Group
Limited group results as presented to shareholders on 4 August 2005. Further
information is provided on the website www.nedbankgroup.co.za.
Changes to board of directors
During the period under review, the following changes were made to the board of
Nedbank:
* Bob Head was appointed as a non-executive director (1 January 2005);
* Hixonia Nyasulu resigned as an independent non-executive director and
Vice-chairman (26 January 2005);
* Phuthuma Nhleko resigned as a non-executive director (21 April 2005); and
* Lot Ndlovu changed status from an executive director to non-executive
director (1 May 2005).
Accounting policies
The Nedbank financial results have been prepared in accordance with
International Financial Reporting Standards (IFRS) as expected to be effective
for the year ending 31 December 2005. These standards are subject to ongoing
review and possible amendment in line of interpretive guidance from the
International Financial Reporting Interpretations Committee (IFRIC). The
results may therefore be subject to change at future reporting dates.
Restatement of comparatives
1. Nedbank`s results for the June and December 2004 reporting dates have been
restated to reflect the requirements of reporting under IFRS. These restated
results for 2004 were disclosed in an announcement on 3 May 2005. The
material adjustments for reporting under IFRS are noted in the
reconciliation of results, as reported below.
2. Income reclassification - during the period under review Nedbank changed its
disclosure in respect of income, and the 2004 results have been restated
accordingly. The components of net interest income (NII) and non-interest
revenue (NIR) were analysed and the nature and classification of interest
income and non-interest revenue was refined. In essence all income earned in
respect of banking activities (ie transactions entered into for the purpose
of earning a margin between interest earned and interest paid) is classified
as either interest income or interest expense and included in NII. By the
same token all transactions entered into for the purpose of trading
activities are classified as part of NIR. The effect of this change in
disclosure is to decrease NII by R22m for the period ended 30 June 2004 and
increase NII by R44m for the year ended 31 December 2004, with a
simultaneous increase/decrease in NIR in the relevant periods.
3. Balance sheet reclassifications - certain provisions for leave pay and
onerous leases totalling, R425m have been reclassified, for the reporting
period ended 30 June 2004, from the `Amounts owed to depositors` category to
`Other liabilities` category.
4. Segmental reporting comparative results for 2004 have been restated to take
into account the changes in improved profitability measurement and group
restructures implemented late in 2004. The restatements include the new
internal funds transfer pricing system, improved activity-justified transfer
pricing process and a risk-weighted capital allocation and charging method-
ology, while liquid assets and cash reserving costs are no longer held at
the centre but are charged to the operating segments.
5. Operating lease costs - the historical accounting and interpretation in
South Africa of AC105/IAS17 has not been in line with international
interpretation and application. Interpretive guidance by the Accounting
Practices Committee of the South African Institute of Chartered Accountants
- Circular 7/2005 issued on 2 August 2005, required minimum lease payments,
which are subject to a fixed rate escalation, to be spread over the life of
the lease, with the escalation not be accounted for in the year of
occurrence. Nedbank has assessed the materiality of any adjustment in terms
of this requirement, and does not expect this adjustment to materially
affect the current reported results. The impact on opening shareholders`
equity is presently being assessed and, should this be material, the group
will inform the market of any prior year adjustment required.
Reviewed interim results - auditors` opinion
The company`s auditors, KPMG Inc and Deloitte & Touche, have reviewed these
results and the review opinion is available for inspection at the company`s
registered office.
Nedbank non-redeemable non-cumulative preference shares - declaration of
dividend no. 5
Notice is hereby given that preference dividend no 5 of 40,15068 cents per
share has been declared for the period from 1 January 2005 to 30 June 2005
payable on Monday, 29 August 2005, to shareholders of the non-redeemable
non-cumulative preference shares recorded in the books of the company at the
close of business on Friday, 26 August 2005.
In accordance with the provisions of STRATE, the electronic settlement and
custody system used by JSE Limited, the relevant dates for the payment of the
dividend are as follows:
Last day to trade `cum` dividend Friday, 19 August 2005
Shares trade `ex` dividend Monday, 22 August 2005
Record date Friday, 26 August 2005
Payment date Monday, 29 August 2005
Share certificates may not be dematerialised or rematerialised between Monday,
22 August 2005, and Friday, 26 August 2005, both days inclusive.
Where applicable, dividends in respect of certificated shares will be
transferred electronically to shareholders` bank accounts on payment date. In
the absence of specific mandates, dividend cheques will be posted to
shareholders. Shareholders who hold dematerialised shares will have accounts,
at their Central Securities Depository Participant (CSDP) or broker, credited
on Monday, 29 August 2005.
For and on behalf of the board
WAM Clewlow - Chairman TA Boardman - Chief Executive
4 August 2005
Registered office: Nedbank Sandton,
135 Rivonia Road,
Sandown, 2196,
PO Box 1144, Johannesburg, 2000.
Transfer secretaries: Computershare Investor Services 2004 (Pty) Ltd,
70 Marshall Street,
Johannesburg, 2001,
PO Box 61051, Marshalltown, 2107.
Directors: WAM Clewlow (Chairman), Prof MM Katz (Vice-chairman),
ML Ndlovu (Vice-chairman), TA Boardman* (Chief Executive), CJW Ball,
MWT Brown*, RG Cottrell, BE Davison, N Dennis (British),
Prof B Figaji, RM Head (British), JB Magwaza, ME Mkwanazi,
JVF Roberts (British), CML Savage, JH Sutcliffe (British)
* Executive
Company Secretary: GS Nienaber
Sponsors: Investec Bank Limited. Nedbank Capital
Statement of changes in shareholders` equity
Minority
Ordinary Preference attributable to
shareholders` shareholders` preference
Rm equity equity shareholders
Balance at 31 December
2003, as
previously reported 12 438 2 802 122
IAS transitional
adjustment (115)
Restated balance at
31 December 2003 12 323 2 802 122
Income attributable to
equity holders 604
Dividends to ordinary
shareholders (35)
Dividends to preference
shareholders (110) (32)
Issue of shares 2 593
Available for sale
reserve movement 416
Foreign currency
translation reserve
movements (122)
Balance at 30 June 2004 15 669 2 770 122
Income attributable to
equity holders 417
Dividends to ordinary
shareholders (100)
Dividends to preference
shareholders (119)
Issue of shares 1 298
Available for sale
reserve movement 30
Capital contribution to
holding company (437)
Foreign currency
translation reserve
movements (84)
Other movements (4) 123
Balance at 31 December 2004 16 670 2 770 245
Income attributable to
equity holders 1 533
Dividends to ordinary
shareholders (204)
Dividends to preference
shareholders (116)
Available for sale
reserve movement 234
Foreign currency
translation reserve
movements 60
Redemption of
preference shares (245)
Other movements (11)
Balance at 30 June 2005 18 166 2 770 -
Minority
attributable to
ordinary
Rm shareholders Total
Balance at 31 December 2003, as
previously reported 686 16 048
IAS transitional adjustment (29) (144)
Restated balance at 31 December 2003 657 15 904
Income attributable to equity holders 63 667
Dividends to ordinary shareholders (35)
Dividends to preference shareholders (142)
Issue of shares 2 593
Available for sale reserve movement 416
Foreign currency translation reserve movements (122)
Balance at 30 June 2004 720 19 281
Income attributable to equity holders 54 471
Dividends to ordinary shareholders (10) (110)
Dividends to preference shareholders (119)
Issue of shares 1 298
Available for sale reserve movement 30
Capital contribution to holding company (437)
Foreign currency translation reserve movements (84)
Other movements (205) (86)
Balance at 31 December 2004 559 20 244
Income attributable to equity holders 76 1 609
Dividends to ordinary shareholders (204)
Dividends to preference shareholders (116)
Available for sale reserve movement 234
Foreign currency translation reserve movements 60
Redemption of preference shares (245)
Other movements 72 61
Balance at 30 June 2005 707 21 643
Income Statement
for the period ended Reviewed Restated Restated
30 June 30 June 31 December
Rm 2005 2004 2004
Interest income and similar income 12 208 12 586 22 252
Interest expense and similar charges 7 853 9 418 15 498
Net interest income 4 355 3 168 6 754
Impairment charge on loans and
advances 597 405 1 358
Income from lending activities 3 758 2 762 5 396
Non-interest revenue 3 159 3 303 7 374
Foreign currency translation
gains/(losses) 129 (96) (434)
Operating income 7 046 5 970 12 336
Total expenses 5 082 5 215 10 898
Operating expenses 4 839 4 639 9 744
Transaction taxes 161 165 459
Fees due to alliance partners 30 83 70
Recovery programme expenses 234 379
Merger expenses 52 94 246
Profit from operations before
non-trading
and capital items 1 964 755 1 438
Non-trading and capital items 2 (38) (86)
Impairment of goodwill 2 (4)
(Loss)/Profit on sale of subsidiaries,
investments and property and equipment (14) 15 31
Net gain/(impairment) of investments,
property and equipment and capitalised
development costs 16 (55) (113)
Profit from operations 1 966 717 1 352
Share of profits of associates and
joint ventures 30 58 121
Profit before taxation 1 996 775 1 473
Taxation 387 125 374
Taxation on non-trading and capital
items (17) (39)
Profit for the period 1 609 667 1 138
Minority interest income attributable
to
ordinary shareholders (76) (63) (117)
Income attributable to equity holders 1 533 604 1 021
Balance sheet
as at Reviewed Restated Restated
30 June 30 June 31 December
Rm 2005 2004 2004
Assets
Cash and balances with central banks 13 666 11 314 9 582
Other short-term securities 14 054 7 457 13 426
Government and other securities 24 122 22 210 26 035
Derivative financial instruments 12 624 18 719 24 170
Loans and advances 245 991 216 245 230 876
Other assets 5 442 7 496 5 227
Current taxation prepaid 173 163 177
Investments in associate companies and
joint ventures 569 1 286 507
Investment securities 2 501 3 765 2 618
Post-employment assets 974 506 992
Deferred taxation asset 1 235 1 245 1 154
Investment property 119 130 119
Property and equipment 2 682 2 635 2 767
Non-current assets available for sale 48 12 48
Computer software and capitalised
development costs 1 281 1 510 1 375
Goodwill 540 460 549
Customers` indebtedness for
acceptances 1 396 1 009 1 509
Total assets 327 417 296 162 321 131
Shareholders` equity and liabilities
Ordinary share capital 27 27 27
Ordinary share premium 13 945 12 647 13 945
Reserves 4 194 2 995 2 698
Total equity attributable to equity
holders 18 166 15 669 16 670
Preference share capital and premium 2 770 2 770 2 770
Minority shareholders` equity
- ordinary shareholders 707 720 559
- preference shareholders 122 245
Total shareholders` equity 21 643 19 281 20 244
Derivative financial instruments 14 827 18 172 26 253
Amounts owed to depositors 274 674 242 642 258 798
Other liabilities 5 267 5 794 4 735
Deferred revenue 246 225 257
Current taxation liabilities 209 115 119
Deferred taxation liabilities 870 792 936
Post-employment liabilities 954 635 972
Long-term debt instruments 7 331 7 497 7 308
Liabilities under acceptances 1 396 1 009 1 509
Total liabilities 305 774 276 881 300 887
Total shareholders` equity and
liabilities 327 417 296 162 321 131
Guarantees on behalf of customers
excluded
from assets 9 352 10 320 10 770
IAS39: Balance sheet classification of financial instruments
as at 30 June 2005
Rm Assets Liabilities
Fair value 45 037 25 554
Financial assets and liabilities at fair value
through profit and loss 44 125 25 554
Available for sale 912
Amortised cost 276 302 279 141
Loans and receivables 269 495
Held to maturity 6 807
Non-trading liabilities 279 141
Other assets and liabilities 6 078 1 079
Total shareholders` equity 21 643
327 417 327 417
as at 30 June 2004
Rm Assets Liabilities
Fair value 51 754 27 137
Financial assets and liabilities at fair value
through profit and loss 51 146 27 137
Available for sale 608
Amortised cost 238 253 246 475
Loans and receivables 236 903
Held to maturity 1 350
Non-trading liabilities 246 475
Other assets and liabilities 6 155 907
Total shareholders` equity 21 643
296 162 296 162
as at 31 December 2004
Rm Assets Liabilities
Fair value 58 272 33 840
Financial assets and liabilities at fair value
through profit and loss 57 644 33 840
Available for sale 628
Amortised cost 256 670 265 992
Loans and receivables 249 597
Held to maturity 7 073
Non-trading liabilities 265 992
Other assets and liabilities 6 189 1 055
Total shareholders` equity 20 244
321 131 321 131
Segmental analysis
June 2005 June 2004 December 2004
Reviewed Restated Restated
Actual Average Actual
Total assets Total assets Total assets
Rbn Rbn Rbn
Nedbank Corporate 129 124 123
Imperial Bank 18 14 18
Nedbank Capital 85 54 70
Nedbank Retail 86 79 81
Shared Services 9 9 8
Capital Management and
Central Funding 49 36 60
Eliminations (40) (26) (32)
Total per Nedbank Group 336 290 328
Fellow-subsidiary adjustment (9) (4) (7)
Total Nedbank 327 286 321
June 2005 June 2004 December 2004
Reviewed Restated Restated
Operating Operating Operating
income income income
Rm Rm Rm
Nedbank Corporate 2 872 2 797 5 944
Imperial Bank 322 267 482
Nedbank Capital 1 135 1 065 2 530
Nedbank Retail 3 346 3 263 6 687
Shared Services 162 61 506
Capital Management and Central
Funding (528) (726) (1 859)
Eliminations (24) (144) (269)
Total per Nedbank Group 7 285 6 583 14 021
Fellow-subsidiary adjustment (239) (613) (1 685)
Total Nedbank 7 046 5 970 12 336
June 2005 June 2004 December 2004
Reviewed Restated Restated
Headline Headline Headline
earnings earnings earnings
Rm Rm Rm
Nedbank Corporate 927 812 1 844
Imperial Bank 56 47 71
Nedbank Capital 447 355 906
Nedbank Retail 439 214 575
Shared Services (94) (128) (149)
Capital Management and Central
Funding (377) (498) (1 505)
Eliminations
Total per Nedbank Group 1 398 802 1 742
Fellow-subsidiary adjustment 133 (177) (674)
Total Nedbank 1 531 625 1 068
Geographical segmental reporting
for the period ended 30 June 2005 30 June 2004 31 December 2004
Reviewed Restated Restated
Operating Operating Operating
Rm income income income
South Africa 6 704 5 646 12 686
Business operations 6 704 5 646 12 686
Merger and Recovery
Programme expenses
Foreign currency
translation
gains/(losses)
Minority interest income
attributable to
preference shareholders
Rest of Africa 237 206 304
Rest of world 344 731 1 031
Business operations 344 731 1 031
Merger and Recovery
Programme expenses
Total per Nedbank Group 7 285 6 583 14 021
Fellow-subsidiary
adjustment (239) (613) (1 685)
Total Nedbank 7 046 5 970 12 336
for the period ended 30 June 2005 30 June 2004 31 December 2004
Reviewed Restated Restated
Headline Headline Headline
Rm earnings earnings earnings
South Africa 1 210 526 1 513
Business operations 1 214 1 062 2 647
Merger and Recovery
Programme expenses ( 53) (328) (625)
Foreign currency
translation
gains/(losses) 165 (98) (280)
Minority interest income
attributable to
preference shareholders (116) (110) (229)
Rest of Africa 79 83 45
Rest of world 109 193 184
Business operations 109 193 220
Merger and Recovery
Programme expenses (36)
Total per Nedbank Group 1 398 802 1 742
Fellow-subsidiary
adjustment 133 (177) (674)
Total Nedbank 1 531 625 1 068
Cash flow statement
for the period ended Reviewed Restated Audited
30 June 30 June 31 December
Rm 2005 2004 2004
Cash and balances with central banks
at beginning of period 9 582 11 716 11 716
Cash flow from operating activities 3 063 2 354 4 814
Net increase/(decrease) in operating
funds 1 702 (2 111) (8 209)
Taxation paid (306) (188) (603)
Cash flows from investment activities 97 (285) 1 148
Cash flows from financing activities (472) (172) 716
Cash and balances with central banks
at end of period 13 666 11 314 9 582
Earnings reconciliation
at Reviewed Restated Restated
30 June 30 June 31 December
Rm 2005 2004 2004
Income attributable to equity holders 1 533 604 1 021
Less: non-trading and capital items 2 (21) (47)
Impairment of goodwill 2 (4)
(Loss)/Profit on sale of
subsidiaries, investments
and property and equipment (14) 15 31
Net gain/(impairment) of investments,
property and equipment and capitalised
development costs 16 (55) (113)
Taxation on above items 17 39
Headline earnings 1 531 625 1 068
Headline earnings excluding foreign
currency
translation gains/(losses) 1 402 721 1 502
Reconciliation of restated income attributable to equity holders as reported
under IFRS
Reviewed for the period ended
Rm Note 31 December 2004 30 June 2004
As previously reported 628 280
Adjustments for;
Credit impairment 1 140 215
Revenue recognition and deferred
acquisition costs 2 (31) (14)
Goodwill 3 101 40
Foreign exchange 4 138 81
Share-based payments 5 (42) 11
Post-employment benefits 6 130
Property, plant and equipment 7 (43) (9)
As reported under IFRS 1 021 604
Reconciliation of restated changes in shareholders` equity as reported
under IFRS
Reviewed for the
period ended 31 December 30 June 1 January
Rm Note 2004 2004 2004
As previously
reported 20 127 19 185 16 048
Income statement
movements:
Credit impairments 1 106 186 (33)
Revenue recognition
and deferred
acquisition costs 2 (176) (156) (135)
Goodwill 3 101 40
Foreign exchange 4
Share-based payments 5 (51) 2 (9)
Post-employment
benefits 6 (86) (215) (215)
Property, plant and
equipment 7 223 239 248
As reported under
IFRS 20 244 19 281 15 904
Material adjustments
The basis of the material adjustments, net of the associated tax impact, as
shown in the tables for `Reconciliation of restated profit attributable to
ordinary shareholders` and `Reconciliation of restated statement of changes in
shareholders` equity` are noted below:
Note 1: Credit impairment
Previously the group calculated its impairment losses on loans and advances on
an `expected loss` basis. Credit impairments were calculated using historical
data and trends. The discount rate used to calculate the recoverable amount
included an allowance for a credit spread.
Under IFRS the group has moved to an `incurred loss` basis. Impairment losses
are incurred only if there is objective evidence of impairment as a result of
one or more past events that have occurred since initial recognition. IFRS also
allows for the creation of a credit impairment for incurred but not reported
(`IBNR`) losses to provide for latent losses in a portfolio of loans that have
not yet been individually evidenced. The discount rate used to calculate the
recoverable amount now excludes any allowance for a credit spread.
Note 2: Revenue recognition and deferred acquisition costs
Previously fees charged and certain related acquisition costs for originating
loans were recognised immediately in the income statement.
In accordance with IFRS fees charged for loans are recognised as revenue as the
services are provided. Initial fees, which relate to the future provision of
services, are deferred and amortised over the anticipated period in which the
services will be provided.
Similarly, costs that are directly attributable to securing a loan are deferred
as an asset and amortised as the related revenue is recognised.
Note 3: Goodwill
Previously the group recognised acquired goodwill at cost and amortised it on a
straight-line basis over its expected useful life. Goodwill was subject to
review for indications of impairment and any impairment losses were recognised
in the income statement.
IFRS requires that goodwill is not amortised, but is subject to impairment
reviews, both annually and when there are indications that the carrying value
may not be recoverable. Negative good- will is no longer recognised on the
balance sheet, but in the income statement as it arises.
The 2004 goodwill amortisation previously recognised in the income statement
has been reversed, resulting in a corresponding increase in equity. All
goodwill has been tested for impairment at 1 January 2004, 30 June 2004, and 31
December 2004 in accordance with IFRS, with no further impairment being
recognised on transition. Negative goodwill that was previously held on the
balance sheet at the transition date was released to reserves.
Note 4: Foreign exchange
Previously the group classified the assets and liabilities of all foreign
subsidiaries and branches as either foreign entities or integrated operations.
The foreign currency adjustments arising from the translation of foreign
entities were recognised directly in equity in the Foreign Currency Translation
Reserve (`FCTR`), while those of the integrated operations were recognised in
the income statement.
IFRS requires the group to determine the `functional currency` for all entities
and the distinction between foreign entities and integrated operations has been
removed. An entity, which has a non-rand functional currency, is translated at
the closing exchange rate and the differences arising are reported directly to
equity, while all other entities classified as having a rand functional
currency report foreign currency translation differences in the income
statement.
The group has elected to apply the exemption afforded to it by IFRS 1 and reset
the balance of the FCTR to zero at the date of transition to IFRS.
Note 5: Share-based payments
The group grants share options to employees under employee share incentive
schemes. Other than costs incurred in administering the schemes, which were
expensed as incurred, the schemes did not result in any expense to the group,
except for a dilution in earnings per share when the shares were issued.
In accordance with the requirements of IFRS the group has recognised an expense
in the income statement, with a corresponding credit to equity, representing
the fair value of outstanding employee share options with regard to its equity,
settled schemes. The fair value at the date of granting the options is charged
to income over the relevant option vesting periods, adjusted to reflect actual
and expected levels of vesting.
Note 6: Post-employment benefits
Previously the group elected to use the corridor method for the recognition of
actuarial gains and losses. Only cumulative actuarial gains or losses in excess
of 10% of the surplus or deficit in the fund were amortised in the income
statement. Cumulative gains or losses inside this corridor were carried on the
balance sheet and recognised over the expected remaining working lives of the
employees.
Under IFRS 1 the group has applied the option to eliminate its pension fund
corridor against opening retained income at the date of transition. The asset
has been eliminated, and the adjustment taken to retained earnings as at 1
January 2004. Future actuarial gains or losses will continue to be recognised
using the corridor method.
Note 7: Property, plant and equipment
Previously property, plant and equipment were measured at cost less accumulated
depreciation and impairment losses.
Under IFRS, equipment (principally computer equipment, motor vehicles, fixtures
and furniture) is still stated at cost less accumulated depreciation and
impairment losses.
Owner-occupied property has been recognised at revalued amounts, being the fair
value at the date of revaluation less subsequent accumulated depreciation and
accumulated impairment losses. Increases in valuation of the properties are
taken to a revaluation reserve. This revaluation reserve is amortised over
the remaining useful life of the property. Land is not depreciated.
Investment properties are stated at revalued amounts, being fair value at the
date of revaluation less accumulated impairment losses. Increases or decreases
in valuation are recognised in the income statement and investment properties
are not depreciated.
These results and additional information are available on our website:
www.nedcor.com
Date: 04/08/2005 04:49:17 PM
Produced by the JSE SENS Department
