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Nedbank Group - Rating Outlook Changed to Positive by CA-Ratings
NEDBANK GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1966/010630/06
JSE share code: NED
ISIN: ZAE000004875
PRESS RELEASE BY CA-RATINGS: NEDBANK GROUP"S RATING OUTLOOK CHANGED TO POSITIVE
Nedbank Group"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: Positive
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 affirmed Nedbank Group"s national long-term
rating at zaAA- and short-term rating at zaA1+ but has changed the rating
outlook from stable to positive. The positive outlook reflects CA-Ratings" view
that an upgrade of the long-term rating is possible within the next 12 months.
The short-term rating is already at the maximum level.
Nedbank, like most of the domestic banks, has benefited from the favourable
banking environment caused by relatively low and stable interest rates, low
inflation and consumer spending that have resulted in an improvement in asset
quality and strong loan growth.
As a universal bank with reported group assets of
R336 billion at June 2005, Nedbank Group remains one of the largest banking
groups in South Africa. The bank has a national franchise that is particularly
strong in the corporate banking market but lags in the retail segment of the
market. Strong emphasis has been placed on reducing the loss in market share of
the retail business, particularly in mortgage loans. The endeavours to increase
the profit contribution from the retail bank includes holding market share and
unlocking synergies and cross sell opportunities with Old Mutual, the group"s
major shareholder.
Liquidity is sound 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 but is showing increased reliance on wholesale funding.
However, the strong growth experienced in mortgage and motor loans have
increased the pressures on the bank to lengthen its funding book.
The regulatory capital adequacy of the bank at June 2005 is satisfactory at
12,8% with the primary portion at 8,9%. The medium-term strategy is to maintain
capital at roughly 12% through internal capital generation and further
improvement of capital utilisation.
The relatively low and stable interest rates coupled with the strong competition
between the banks for assets have increased the pressure on net interest
margins. The improvement in asset quality and concomitant lower impairment
charge has partially offset the effect of the finer interest margins.
Asset quality continues to display improvement. Provision coverage of non-
performing loans is considered adequate.
Overall performance and profitability has improved over the past 18 months and
it is set to continue with improved performance from the retail bank, continued
good performance from the investment and corporate banking activities and
enhancement in the risk management processes and capital utilisation.
These credit ratings refer to the group"s capacity to repay its liabilities in
South African Rand relative to other South African obligors.
19 December 2005
Issued by CA-Ratings
Contact: Leon Claassen +27 11 786 7000
Date: 19/12/2005 11:45:05 AM Produced by the JSE SENS Department
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