| Thu 22 Feb 2007, 8:00 | | NED - Nedbank Group - Reviewed Preliminary Financi |
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NED
NED
NED - Nedbank Group - Reviewed Preliminary Financial Results For
The Year Ended 31 December 2006 and dividend declaration
Nedbank Group
Reg No: 1966/010630/06
ISIN code: ZAE000004875
JSE share code: NED
A member of the Old Mutual Group
REVIEWED PRELIMINARY FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006
- ROE increased
from 15,5% to 18,6%
- Growth strategy
reflected in performance
- Headline earnings up
40,0% to R4 435 million
- Fully diluted HEPS up
36,0% to 1 076 cents
- Efficiency ratio improved
from 64,8% to 58,2%
- Final dividend per share up
53,5% to 284 cents
- Strong performance
from all business clusters
- Realising synergies
from Old Mutual Group strategy
- Group capital
adequacy of 11,8%
`2006 has been a year of growth for Nedbank Group. This is reflected in
improved financial performance and in the growth of our distribution
network, client base and market share. We have created a strong platform
for sustainable growth.
The Old Mutual Group`s vision is to provide all South Africans with access
to high quality financial products and services. Nedbank Group is committed
to playing its part in the realisation of this vision.`
Tom Boardman Chief Executive
Overview
Nedbank Group maintained good momentum throughout the year, ending with a
strong performance in the final quarter. The financial results for the year
were again ahead of management`s initial expectations. All business
clusters recorded pleasing growth and an improved return on equity (ROE).
The group has started to show some early signs of market share gains. This
can be attributed to a number of factors, including:
* improved staff morale;
* faster turnaround times in a number of areas;
* reductions in several retail banking charges;
* improvements in service levels for both clients and external distribution
channels, particularly mortgage originators;
* increased brand awareness following the repositioning of Nedbank as a
bank for all southern Africans;
* the launch of a number of new retail products;
* a sound performance from Nedbank Capital as it continues to benefit from
its integrated investment banking strategy;
* pleasing growth from Nedbank Corporate, with key transactional banking
client gains, including new public sector clients; and
* enhanced credit risk management and pricing technologies across the
business clusters.
The relationship between the three Old Mutual Group companies in South
Africa - Old Mutual (SA), Nedbank Group and Mutual & Federal - has
strengthened over the past year, with revenue-generating and cost-saving
opportunities starting to be a growth driver for all three businesses.
Shareholders will again be offered a capitalisation award with a cash
dividend alternative. The award is 284 cents per share, up 53,5% from the
185 cents per share declared in February 2006.
Banking environment
The overall economic environment for banks remains positive despite the 200
basis points rise in interest rates during 2006. While the endowment effect
of this increase has improved the group`s interest margin, the resultant
increased level of credit stress in parts of the retail environment is
starting to affect impairments. Advances growth remains robust, although it
is anticipated that retail advances growth will slow as a result of the
higher interest rate environment.
The industry faces continued pressure on fees, both through increased
consumerism and the Competition Commission`s inquiry into bank fees.
Nedbank continues to be one of the most affordable of the big four banks
for entry-level banking products and supports the Competition Commission`s
inquiry. The bank reduced its retail transactional fees by an average of
over 13% in the past year.
Banks also face increased regulatory requirements with the associated costs
of compliance, including preparation for the introduction of the National
Credit Act (NCA); increased activity relating to the Financial Intelligence
Centre Act (FICA); the ongoing responsibilities under the Financial
Advisory and Intermediary Services Act (FAIS); and finalisation of systems
ahead of the implementation of Basel II in South Africa in January 2008.
Financial performance
Headline earnings increased by 40,0% to R4 435 million. Basic earnings grew
by 18,2% to R4 533 million.
Headline earnings per share increased by 39,3% to 1 110 cents (2005: 797
cents). Fully diluted headline earnings per share increased by 36,0% from
791 cents to 1 076 cents, the 2006 dilution being impacted by accounting
for the black economic empowerment (BEE) scheme under International
Financial Reporting Standards (IFRS). Basic earnings per share grew by
17,5% from 966 cents in 2005 to 1 135 cents in 2006.
These results are at the upper end of the earnings forecast ranges provided
in the group`s third-quarter results announcement on 14 November 2006.
The group`s return on average ordinary shareholders` equity (ROE) improved
from 15,5% to 18,6% for the year and is now comfortably ahead of the
group`s cost of capital. ROE excluding goodwill improved from 18,9% to
22,1%.
Net interest income (NII)
NII grew 28,5% to R10 963 million. The group`s margin for the year improved
to 3,92% from 3,55% in 2005. This margin is similar to that reported in the
third-quarter results.
This margin increase reflects:
* the benefit from the increased endowment together with the higher
interest rate environment;
* mix changes from the growth in higher-margin retail and business banking
advances, as well as a change in the advances mix within Nedbank Retail
resulting from higher growth in high-margin personal loans; and
* the interest on the proceeds from the sales of the remaining holdings in
Net1 UEPS Technologies Inc (NUEPS) and State Bank of Mauritius (SBM) during
the year.
NII benefited from this increase in the margin together with growth in
loans and advances of 24,2% (average interest-earning banking assets grew
by 16,5%).
The group anticipates some margin reduction during 2007 as a result of new
asset growth being funded largely by wholesale deposits. This will be
partially offset by the remaining endowment effect from the historic
interest rate increases.
Impairment losses on loans and advances
The impairments charge rose by 24,7% to R1 483 million for the year. The
impairments charge to average advances improved from 0,61% for the half
year to June 2006 to 0,52% for the full year. Impairments were negatively
impacted by the mix change in advances, referred to above, with higher-
margin retail advances and personal loans attracting appropriately higher
levels of impairments.
In Nedbank Retail an `incurred but not reported` (IBNR) impairments charge
of R70 million was raised for the impact of the NCA on collection periods.
In addition, refinements to assumptions were made for certain classes of
retail lending assets in Nedbank Retail resulting in an increase in the
IBNR impairment of R143 million. These included adjustments following the
observance of statistical default trends at 30 days and the refinement of
certain methodologies. The IBNR impairment in Nedbank Retail also increased
following the transfer of part of a data provision from specific
impairments amounting to R92 million. These three amounts were largely
offset by specific impairment releases of R226 million arising from
refinements to the methodologies for probability of default and loss given
default and the R92 million transfer from specific impairments relating to
the data provisions.
In response to the benign wholesale credit environment in Corporate Banking
and Property Finance, Nedbank Corporate lengthened the emergence periods
and refined the probability of default and loss given default metrics in
the impairment calculations, resulting in an additional IBNR impairments
charge of R53 million. Wholesale impairments benefited from continued
recoveries of corporate debts.
The group anticipates that the impairment charge will increase in the
medium to long term as a result of the recent interest rate increases,
combined with higher levels of household indebtedness. Nedbank Corporate`s
impairment levels are also currently at unsustainably low levels.
Non-interest revenue (NIR)
NIR for the period increased by 11,8% to R9 468 million (excluding
translation gains, NIR increased by 13%). This growth was driven by:
* volume growth in Nedbank Corporate and Nedbank Retail resulting in an
increase of 13,3% in commissions and fees;
* property private equity revaluations and realisations and dividends
received on private equity investments in Nedbank Corporate amounting to
R287 million (2005: R241 million);
* private equity revaluations and realisations and dividends received on
private equity investments in Nedbank Capital amounting to R291 million
(2005: R230 million);
* improved trading income in Nedbank Capital, particularly in the fourth
quarter;
* fees received from outside the group by Bond Choice growing by 47,6% from
R416 million to R614 million; and
* the group`s bancassurance operations growing new business premiums by 13%
from R5 090 million to R5 729 million.
The group has changed its disclosure of trading instrument transaction
costs for instruments held at fair value and these costs, in line with
industry practice, have now been disclosed within NIR. The effect is that
trading income for 2005 was reduced by R140 million from R1 431 million to
R1 291 million (2005 operating expenses being reduced by the same amount).
Trading income for the year showed an improvement over the third quarter,
with the fourth quarter up by 137,2% to R536 million (third quarter: R226
million). Trading results for the year were
R1 647 million (after reclassification of related transaction costs of R160
million) representing a 27,6% increase on 2005.
NIR growth was impacted by the more competitive pricing structure adopted
in Nedbank Retail, and in July 2006 retail transactional fees were reduced
by an average of 13%. Furthermore, fees were largely kept constant in 2005.
Service fees for Nedbank Retail`s Small Business Services clients remained
unchanged for the fourth successive year. Nedbank Mzansi Account fees were
also substantially reduced to make these products more accessible to new
entrants to the banking environment. The reductions in transactional fees
are estimated to have a further impact of approximately R50 million in
2007.
Expenses
Total expenses continue to be well managed, increasing by 7,9% to R11 886
million. Operating expenses increased by 12,1%. Staff expenses increased by
14,5%, reflecting the investment the group has made in client-facing staff
and an increase in variable pay as a result of the continued improvement in
operating performance. Marketing costs increased, as planned, by 36,2% off
the low base set in 2005 as the group invested in repositioning the Nedbank
brand.
Bond Choice`s total expenses grew by 42,3% from R378 million to R538
million.
BEE transaction expenses were R146 million (2005: R393 million), including
IFRS 2 costs of R23 million for the BEE transaction in Namibia. There were
no further merger and recovery expenses (2005: R155 million).
The `jaws` ratio continued to improve, with total revenue growth of 20,2%
being 12,3% above expense growth of 7,9%, resulting in the efficiency ratio
improving from 64,8% for 2005 to 58,2%. As expected, the efficiency ratio
is above the level reported in June 2006 of 57,3% as a result of a planned
increase in marketing expenditure in the last quarter, including marketing
costs for the SAA Voyager cobrand credit card and the initial costs for the
expansion of the distribution network.
Direct taxation
The effective taxation rate increased from 23,4% to a more normalised
27,8%, as the prior-year rate included the benefits of non-taxable foreign
exchange translation gains and credits arising from accounting for past
structured finance transactions, both of which had a more marginal impact
in the current year.
The group also increased taxation provisions for several historic matters
amounting to R174 million.
Non-trading and capital items
Income after taxation from non-trading and capital items amounted to R98
million for the year (2005: R669 million). The main component was a profit
of R221 million on the sale of the remaining shares in NUEPS in the first
half of the year. During the year the group also wrote down its goodwill in
Fairbairn Trust by R64 million. As a result of the decreasing appetite for
offshore trusts Fairbairn Trust`s earnings are projected to decrease,
requiring a partial impairment of the R92 million goodwill raised on the
acquisition of Fairbairn Trust in 2001 (adjusted for foreign currency
translation changes).
In 2005 the sale of the major portion of the investment in NUEPS (6,65
million shares) realised a R793 million profit when the company was listed
on NASDAQ.
Balance sheet
Capital
The group remains well capitalised, with a Tier 1 group capital adequacy of
8,3% and total group capital adequacy ratio of 11,8%, following the share
buybacks that took place in 2006 and strong advances growth.
Advances
Advances at R309 billion are ahead of original expectations and average
interest-earning banking assets grew by 16,5% to R280 billion. Details of
advances growth by major category are shown below:
Rm December December Annualised
2006 2005 Increase
(%)
Home loans 98 944 75 333 31,3
Commercial mortgages 46 213 37 993 21,6
Properties in possession 131 309 (57,6)
Term loans 33 948 25 314 34,1
Credit cards 5 283 4 074 29,7
Loans to banks 17 465 17 180 1,7
Overdrafts 13 761 11 604 18,6
Leases and instalment 43 358 34 935 24,1
debtors
Preference shares and 6 840 5 918 15,6
debentures
Trade and other bills 1 752 3 850 (54,5)
Reverse repurchase 6 703 3 066 118,6
agreements
Other loans to clients 39 349 34 046 15,6
Impairment of advances (5 184) (5 214) (0,6)
Total 308 563 248 408 24,2
This strong advances growth was the primary contributor to the increase in
total assets of 20,6% to R425 billion.
The group recorded some market share growth in certain categories of
advances in the second half of 2006:
* Home loan market share grew in each of the last four months of the year.
* Card advances growth exceeded the internal target of 25% with growth of
29,7%. Although this was less than the market growth for the year, there
were market share gains month-on-month in November and December after the
launch of balance transfer and budget/straight consolidations together with
the SAA cobranded cards.
* The group showed some gains in leases and instalment sales, although
Nedbank`s growth was slow in this area, with Imperial Bank gaining market
share.
* Generally wholesale advances growth was slightly ahead of the market
growth rate, driven by strong growth in advances to Corporate Banking
clients.
Deposits
Deposits increased by 24,3% from December 2005, although growth in
wholesale deposits has outpaced retail deposits. The group maintained a
strong liquidity position throughout the year.
Cluster performance
Nedbank Capital
Nedbank Capital increased headline earnings by 17,9% to R1 145 million and
improved its ROE to 31,3% (2005: 27,9%).
Despite the higher endowment on capital from higher interest rates, NII
declined by 3,3% to R675 million owing to the inclusion of a once-off
benefit on the unwinding of a preference share deal in the prior year.
NIR was up 17,2% to R2 048 million, with strong growth in trading and
pleasing private equity revaluations and realisations. Total trading income
was up 28,6%, with debt securities trading up 57,0% and equity derivatives
trading up 28,7%. Trading activities benefited from increased flows and the
implementation of improved trading systems. During the last quarter the
impairments charge improved with recoveries from a number of outstanding
advances. The impairments charge for the year as a percentage of average
advances improved from 0,43% in 2005 to 0,28% for 2006.
All business units benefited from a greater outward focus, the strong deal
pipeline built up towards the end of 2005 and the coverage model that
facilitates client solutions through multidisciplinary teams consisting of
investment bankers, corporate bankers and product experts.
The outlook for 2007 remains positive, with favourable market conditions
and a strong deal pipeline having been built up during 2006.
Nedbank Corporate
Nedbank Corporate increased headline earnings by 34,8% to R2 553 million.
ROE increased to 21,9% (2005: 18,9%) mostly as a result of pleasing revenue
growth, a reduction in the impairments charge and well-controlled expenses.
NII and NIR showed double-digit growth, reflecting the momentum being
established in the underlying business units and the improved growth in
wholesale advances being experienced by the industry as a whole. Nedbank
Corporate has had success in gaining a number of new transactional
mandates, the full impact of which will be reflected only in 2007. Average
loans and advances increased by 17% and core transactional fee income grew
by over 8%, despite the continued impact of disintermediation on the cheque
business as clients switch to cheaper electronic platforms and credit
cards. Compared with the previous year, NIR from lending activities was
more than 12% higher. Electronic banking volumes grew by 62% owing to
successful client conversions to high-volume platforms and the continued
decline in cheque volumes.
Despite changes to the IBNR assumptions referred to earlier, the impairment
charge remained low due to reduced specific impairment charges and benefits
arising from bad debt recoveries through effective credit management.
Expenses remained well controlled.
The new channel convergence platform for the electronic banking needs of
Corporate and Business Banking clients was implemented. This product
consolidated the different business electronic banking platforms into a
state-of-the-art delivery platform that was installed at 2 429 clients by
year-end, with the rollout to remaining clients progressing well.
Nedbank Retail
Nedbank Retail increased headline earnings by 63,3% to R1 463 million and
ROE increased from 17,6% to 23,0%. Nedbank Retail`s ROE was slightly lower
than reported at the half-year as the division incurred compliance costs
ahead of the introduction of the NCA, increased marketing spend in the last
quarter and started with the expansion of its distribution network. In
spite of this additional expenditure, disciplined expense management and
tracking of the expenditure relating to Retail`s distribution rollout plan
saw the efficiency ratio improving from 71,7% for 2005 to 66,3% for 2007.
All the business units performed strongly, despite margin compression in
home loans due to the influence of mortgage originators and increased
impairments as a result of the mix change in advances with the growth in
personal loans ahead of other retail advances.
The cluster`s focus on client service as a key differentiator continues and
recent client service surveys show a significant improvement over last
year. Turnaround times for new applications have improved in most business
areas. This focus on client service and efficiency has resulted in a
significant improvement in asset growth and an increase in the number of
primary clients for the first time in three years.
A highlight of the year was the implementation of more competitive pricing
across key asset, liability and transactional products. Nedbank Retail`s
pricing had become uncompetitive in a number of areas in recent years and
the bank is now well positioned to compete as the consumer focuses on the
level of bank charges.
In August 2006 Nedbank Retail announced a plan to expand the bank`s retail
footprint. This is expected to address the underinvestment in distribution
over the last 10 years, as well as the lack of representation in certain
areas, and to position the bank for profitable and sustainable growth. From
2006 to 2008 Nedbank Retail will upgrade and expand its distribution
footprint, including opening an additional 400 new outlets (including 100
branches) and upgrading and increasing its ATM network by 50%. During the
second half of the year the group started implementing this programme by
installing 147 ATMs, half of which are in previously underserviced areas,
as well as opening 10 new branches, 19 outlets in retailers and Old Mutual
distribution centres, and 26 new personal loan kiosks at merchants and
introducing a further 18 portable bootkits for opening Mzansi Accounts.
The capital outlay for the second half of the year amounted to R53,7
million, with a negligible impact on current year expenses.
The implementation of the NCA remains an industry and bank-specific
challenge and priority.
Imperial Bank
Imperial Bank Limited increased headline earnings by 31,3% to R386 million,
and improved ROE from 23,2% to 24,7%. Nedbank Group`s share of these
earnings was R193 million
(2005: R147 million), also up 31,3%. NII grew by 34,2% and expenses by
14,7%, resulting in the efficiency ratio improving from 41,3% to 35,4%.
Loans and advances grew 40,8%. Advances growth was driven by a strong
performance from the Motor Vehicle Finance Division. The impairments charge
to average advances increased from 0,63% to 0,86%, largely as a result of a
slowdown in recoveries in Property Finance and increased impairments in the
Motor Vehicle Finance Division.
Imperial Bank restructured its capital base during the year to improve
returns to shareholders and to allow for future growth. The bank issued a
subordinated (Tier 2) bond (IBL2) of R500 million and preference share
capital amounting to R300 million. Imperial Bank also bought back R300
million of ordinary shares during the year, with Nedbank Group receiving
proceeds of R150 million.
Central Services
The headline loss in Central Services was R919 million and, excluding
foreign exchange translation gains, this increased by 6,3% from R868
million to R923 million.
The initial upgrades of the Financial Processing Architecture and the Basel
II programme are on track for delivery and implementation during 2007, in
anticipation of the introduction of Basel ll in 2008.
Capital management
The group has substantially completed preparations for the implementation
of Basel II in 2008 and has been using this programme as the catalyst to
elevate its risk and capital management to worldclass standards.
During the period the group:
* concluded a subordinated debt issue (NED5) of R1,5 billion in the first
half of the year;
* concluded a subordinated debt issue (NED6) of R1,5 billion in the third
quarter;
* redeemed the NED1 R2,0 billion bond on 20 September 2006; and
* executed share buybacks amounting to 5,5 million shares at a cost of R616
million in the first half of the year and a further 8,2 million shares at a
cost of R898 million during the third quarter. No further buybacks were
conducted during the last quarter as capital was required to fund asset
growth.
In February 2007 the group simultaneously concluded two further
subordinated debt issues, the NED7 of R650 million and NED8 of R1 billion,
both of which qualify as Tier 2 capital. In February Nedbank also announced
its intention to issue up to R1 billion in non-redeemable, non-cumulative,
non-participating preference share capital, qualifying as Tier 1 capital.
With the recovery now firmly established and taking into account organic
growth together with current Basel I and future Basel II capital levels,
the group has decided to reduce its dividend cover policy from 2,5 to 3
times to 2,25 to 2,75 times.
These initiatives are part of the group`s ongoing long-term capital
management programme that seeks to achieve an optimal and prudent capital
structure. The group currently has a Basel I target minimum total capital
adequacy ratio of 12% and a target minimum Tier 1 ratio of 8%.
In addition to ongoing organic growth expectations the following issues,
which are expected to be finalised soon, will influence the scope of future
capital management actions:
* Amendments to section 38 of the Companies Act.
* Finalisation of the draft Basel II regulations by the South African
Reserve Bank (SARB).
* Asset securitisation.
The group expects to issue further Tier 2 capital and alternative forms of
Tier 1 capital in 2007, during which time the R4 billion NED2 bond is
currently expected to be redeemed on its call date in July 2007 (subject to
regulatory approval). Nedbank is committed to improving its profile as an
issuer in the debt capital markets and this should result in a more robust
subordinated-debt yield curve for the group.
Strategic objectives
The group achieved good momentum across the 12 short- and medium-term
strategic objectives set out in the 2005 annual report:
Achieve financial objectives to meet 2007 targets
Progress was made in returning the group closer to benchmark financial
performance and meeting the short-term 2007 financial targets of an ROE of
20% and an efficiency ratio of 55%. While the ROE of 18,6% and the
efficiency ratio of 58,2% were both ahead of the internal 2006 targets, the
increased investment in distribution and sales capacity makes the 55%
efficiency ratio target more challenging in 2007.
Build credible three-year plans to ensure a long-term focus
While the group has been unwavering in its commitment to achieve the 2007
targets, it has also been cognisant not to adopt an overly short-term
focus. We have developed medium- to long-term financial targets to be
achieved after 2007, which have been set out below. These are supported by
strategic business plans that build on the solid foundations laid during
the turnaround over the past three years.
Build a high-performance culture
A positive shift in staff morale was reported in the 2006 employee survey
results. These results showed improvements of up to 11,1 percentage points
in the categories measured by the group, with the highest improvements in
the leadership and transformation categories. All areas in Nedbank Group
worked hard on communicating with staff, ensuring strategies were clear,
addressing performance and remuneration issues, and motivating people. The
shift in morale was also significantly impacted by the successful
implementation of two programmes:
* Leading for Deep Green focused on building competencies around leadership
and strategy as well as personal transformation among the top leadership in
the group; and
* Project Catalyst saw the implementation of foundational people practices,
which were underpinned by the principles of fairness and equity.
Achieve profitable asset growth in line with the market
Market share improvements were below original targets in the early stages
of the year. However, as the year progressed improvements were achieved in
several key categories, particularly retail mortgages, card and other
private sector loans (mainly corporate lending). The impact of initially
growing at a slower rate than the market did not have a significant effect
on the group`s progress against its three-year plan as the market as a
whole, and particularly the retail banking sector, grew more than initially
expected.
Drive quality transactional banking growth
Net new primary clients increased for the first time in three years. The
group has created focused transactional banking teams and is implementing a
range of initiatives to improve cross-selling, upselling, client service,
client retention, pricing and bancassurance.
Nedbank Corporate launched the first phase of its integrated electronic
banking offering in the third quarter of 2006 and this is rapidly being
rolled out to commercial clients. This new offering has enabled Nedbank to
acquire a number of new clients, including clients in sectors where it has
not been competitive in the past such as the provincial governments, where
it recently won the tender for the Western Cape.
Nedbank Retail`s expanding branch and outlet footprint has improved
accessibility and reach, which together with a more outward focus,
positions the group to grow transactional revenue. The group`s
bancassurance revenue continued to grow, with new business premiums
increasing by 13% in 2006.
Deliver worldclass service
Foundations are being laid to deliver worldclass service. In addition to
existing service initiatives showing good progress, the Nedbank Retail
cluster completed a client management assessment, showing Nedbank Retail
marginally above the average global service benchmark. A project team is
currently analysing areas in need of improvement and compiling a holistic
strategy to ensure service becomes the group`s primary differentiator.
For wholesale clients the group continued to embed its coverage model,
drive strategic account planning and optimise various supporting processes.
During the year international distribution and servicing capability has
been enhanced with, among others, an alliance concluded with ABN AMRO
(Europe).
Corporate Banking, Nedbank Investor Services and Property Finance continued
to be the top-rated financial service providers in their respective
segments as measured by internal and independent external client surveys.
Mfundo Nkuhlu, Managing Director of the Corporate Banking Division of
Nedbank Corporate, was recognised as the `Top Corporate Banker in South
Africa for 2006` by the Association of Black Securities and Investment
Professionals. This is the second consecutive year that a Nedbank executive
has won the award.
Nedbank Capital has retained its `top two` position in corporate finance
and advisory business.
Nedbank received the award for the `Business Map BEE Top Commercial
Financier` in 2006.
Transform beyond Financial Sector Charter (FSC) targets
The group continues to make strides in all aspects of transformation. Good
progress was made in meeting employment equity targets across all
management levels. Black representation on the Nedbank Group Board has
increased to 47% and Reuel Khoza was appointed as the group`s first black
chairman. Of the Group Executive Committee 30% is black.
In 2005 the group concluded a broad-based BEE transaction, with a value of
more than R3 billion, which resulted in a broad range of black stakeholders
acquiring direct ownership worth 11,5% of the value of the group`s South
African businesses. The group`s strategic black business partners have
identified and assisted in leveraging several business opportunities.
BEE procurement spending showed a significant increase, from 34,9% in 2005
to 46,0% in 2006.
The 2008 industry target of opening eight FSC branches was achieved in
December 2006, while at the same time exceeding the 2008 target for black
small and medium enterprise (SME) financing during November 2006.
Nedbank substantially exceeded industry BEE transaction financing targets
for the second year in succession.
Nedbank`s Mzansi market share has increased from 11,4% in 2005 to above 15%
at December 2006.
During the year the group launched an affordable housing development
investment unit that has several projects in the pipeline. In addition,
Nedbank concluded a d40 million affordable housing development agreement
with Agence Fran?aise de D?veloppement.
The Nedbank Foundation shifted its focus to early-childhood development and
education projects. During 2006 the group contributed more than R42 million
to a broad range of community projects.
Nedbank received the international award for `Emerging Markets Corporate
Social Responsibility Bank of the Year` for the second consecutive year and
the award for `Bank of the Year in South Africa` at The Banker`s 2006
awards in London. During 2006 Nedbank was also rated first in its category
in the JSE Socially Responsible Investment Index and again included in the
Dow Jones World Sustainability Index.
Nedbank received an `AAA` rating (the highest category) from Innovest
Strategic Value Advisors Inc, the global leader in providing `non-
traditional` research including drivers of risk and shareholder value in
the environmental, social, and strategic governance space, in its latest
Global Sector Report covering 263 banks and diversified financial companies
from around the world.
Unleash group synergies
A joint southern Africa strategy for the three Old Mutual Group companies
was initiated to identify revenue-generating and cost-saving opportunities
across the combined retail client base of over six million individuals.
Projects in which Nedbank is involved include the outsourcing of all data
and voice networks in conjunction with Old Mutual (South Africa), joint
procurement spending using the group`s greater bargaining power, and
bancassurance.
Optimise risk and capital
Nedbank has maintained a sound framework of enterprise-wide risk
management.
Credit, economic capital, earnings-at-risk, risk-based pricing and various
other models, largely all built by the end of 2005, have been implemented
across the group to enhance the management and optimisation of risk and
return. These credit models also form the basis of the group`s readiness to
adopt the Advanced Internal Ratings Based (AIRB) approach for credit risk
from the implementation date of Basel II (1 January 2008).
Both the FICA and Basel II implementations are on track.
Active capital management was executed in line with the Strategic Capital
Plan mandated and closely monitored by the board.
The market risk management functions were restructured and strengthened to
assign the Nedbank Capital cluster with first-line accountability for
market risk management, while the independent Group Market Risk Monitoring
function acts as a second line of defence.
The risk framework for Imperial Bank and the African subsidiaries was
updated and strengthened during the year.
Improve innovation
2006 was a year in which the group has become significantly externally
client-focused following the inward focus during the recovery programme.
The Nedbank Corporate Channel Conversion Project has progressed well during
the year with over 2 400 clients converted to the new worldclass system.
Nedbank Capital delivered various innovative product solutions across its
portfolio (including a new derivative product, Contracts for Difference).
Nedbank Retail launched various innovative products including the Nedbank
Transactor Account, Nedbank Everyday Account, Small Business Services
Startup Account, Balance Transfer, iMPi (cellphone-based payment solution),
the Nedbank Positive Return Fund and the SAA Voyager Card.
The Nedbank Affordable-housing Development Investment Unit referred to
above has been operationalised and the outlook appears promising.
Improve management information system
A general improvement in key business metrics and reporting is evident and
the Financial Planning Architecture Programme has progressed well. The
primary characteristics of the solution are the integration of financial
and risk architectures, a single-enterprise data warehouse ensuring
consistency of data used for reporting, standardisation across the group to
reduce manual-intensive reconciliation processes, groupwide integrated
planning, budgeting and forecasting solutions, a financial consolidation
process that facilitates greater accountability at business cluster level
and the ability to respond timeously and cost-effectively to evolving
statutory and regulatory reporting requirements such as Basel ll and IFRS.
The first two phases of the project will be completed during 2007.
The economic capital implementation, reported last year, has facilitated
both cluster and client profitability measurement on a risk-adjusted return
on capital basis.
Reposition the brand
With the introduction of a new brand expression Make Things Happen early in
the year the group intensified and increased its national advertising
campaigns to position the Nedbank brand in a more relevant and approachable
manner - as a bank that demonstrates a deeper understanding of financial
needs and cares about communities and the country. Brand measures have
shown significant improvements in Nedbank`s positioning in the market in
both awareness and acceptance, and steady progress has been made towards
the group`s stated aspiration of being the most respected and admired
banking brand.
Namibia
In September 2006 the three Old Mutual Group companies concluded a
simultaneous broad-based BEE transaction in Namibia. This included the
introduction of black equity ownership to the value of 11,13% of Nedbank`s
Namibian business. Nedbank Group will maintain a secondary listing on the
Namibian Stock Exchange with effect from Friday 23 February, which will see
all Old Mutual Group entities being dual-listed in Namibia.
Medium- to long-term financial targets
The group has set out the following medium- to long-term targets in
addition to the short-term targets of a 20% ROE and 55% efficiency ratio in
2007.
Performance in Medium- to long-term
2006 financial targets after
2007
Return on 18,6% ROE greater than 20%
shareholders` (22,1% and ROE (excluding
equity excluding goodwill) 10% above the
goodwill) group`s monthly
weighted average cost
of ordinary
shareholders` equity
Efficiency ratio 58,2% Maintain an efficiency
ratio of less than 55%
Fully diluted 36,0% A growth in fully
HEPS diluted HEPS of at
least average CPIX plus
GDP growth plus 5%
Impairments 0,52% An impairments charge
charge as a % of of between 0,55% and
average advances 0,85% of average
advances
Capital adequacy n/a Tier 1 8,0% - 9,0%
ratios (Basel II)
n/a Total 11,0% - 12,0%
Economic capital A- Adequately capitalised
adequacy to a 99,9% (A-)
confidence on an
economic capital basis
plus a 15% buffer
Dividend cover 2,25 times 2,25 to 2,75 times
cover
Prospects
Currently management believes performance in 2007 is likely to be
influenced by:
* growth in retail advances remaining robust but slowing, together with
ongoing growth in wholesale advances - this is forecast to result in
overall advances growth in the mid-teens;
* continued market pressure on retail funding volumes;
* an endowment benefit in the margin from historic interest rate increases;
* a slight worsening of the impairment charge following signs of increased
levels of credit stress in parts of the retail environment, together with
fewer impairment recoveries from Nedbank Capital and Nedbank Corporate;
* the ongoing effects of the Nedbank Retail price reductions and industry
fee pressure;
* pressure on revenues and costs associated with the introduction of the
NCA;
* the momentum from transactional banking mandates received by Nedbank
Corporate and a strong pipeline built up by Nedbank Capital;
* lower positive property private equity revaluations;
* additional operating efficiencies;
* investment in retail distribution and continued marketing spend on the
new brand position;
* finalisation of Basel II on 1 January 2008; and
* asset securitisation and ongoing capital management activities.
Board changes during the year
* Warren Clewlow retired as a non-executive director and Chairman after
reaching the mandatory retirement age (4 May 2006).
* Chairman designate, Dr Reuel Khoza, succeeded Warren Clewlow as Chairman
(4 May 2006).
* Julian Roberts resigned as a non-executive director (5 May 2006)
following his appointment as Chief Executive Officer and a director of Old
Mutual plc`s subsidiary, Skandia.
* Thenjiwe Chikane was appointed as an independent non-executive director
(1 November 2006).
* Rick Cottrell retired as an independent non-executive director after
reaching the mandatory retirement age (30 November 2006).
Accounting policies
Nedbank Group Limited (the `company`) is a company domiciled in South
Africa. The reviewed financial results of the company at and for the year
ended 31 December 2006 comprise the company and its subsidiaries (together
referred to as the `group`), and the group`s interests in associates and
jointly controlled entities.
The group`s principal accounting policies have been applied consistently
with those of the prior year, except where otherwise stated. These Nedbank
Group reviewed financial results have been prepared in accordance with the
recognition and measurement principles of International Financial Reporting
Standards (IFRS). In the preparation of these financial results the group
has assumed certain key sources of estimation in recording various assets
and liabilities. These sources of estimation were the same as those applied
to the consolidated financial statements at 31 December 2005. These
standards are subject to ongoing review and possible amendments and the
results may therefore be subject to change at future reporting dates.
Restatement of 2005 results
1 Reclassification of transaction costs in NIR
Expenses amounting to R160 million (2005: R140 million), directly related
to NIR, have been reclassified from operating expenses, consistent with
industry practice, and have been included in NIR.
These expenses represent transaction costs directly attributable to the
acquisition of trading instruments recorded at fair values, which do not
include transaction costs. The carrying amount of trading instruments,
other than those at fair value through profit or loss, generally includes
transaction costs. Consequently, transaction costs that would be included
in the determination of the effective interest rate of the instruments and
the interest attributable to the instrument have been disclosed within NIR.
Comparative results have been restated accordingly.
2 Segmental reporting comparative results
Segmental reporting comparative results were restated for 2005 to take
account of the ongoing changes for improved profitability measurements. The
restatements relate to the introduction, during 2006, of the group`s STC
costs in respect of dividends payable to each cluster, based on
profitability, and the alignment of Imperial Bank`s contribution, net of
minorities, to exclude all group profitability measurement adjustments.
Subsequent events
As of the date of this announcement there are no post-balance-sheet events
to report.
Reviewed results - auditors` opinion
The group`s auditors KPMG Inc. and Deloitte & Touche, have reviewed the
condensed consolidated preliminary financial statements which comprise the
balance sheet of Nedbank Group and its subsidiaries at 31 December 2006,
and the related consolidated income statement, condensed statement of
changes in equity and condensed cash flow statement for the year then ended
and their unmodified review opinion is available for inspection at the
company`s registered office.
Forward-looking statements
This announcement contains certain forward-looking statements with respect
to the financial condition and results of operations of Nedbank Group and
its group companies, which by their nature involve risk and uncertainty
because they relate to events and depend on circumstances that may occur in
the future. Factors that could cause actual results to differ materially
from those in the forward-looking statements include, but are not limited
to, global, national and regional economic conditions; levels of securities
markets; interest rates, credit or other risks of lending and investment
activities, and competitive and regulatory factors.
Capitalisation award with a cash dividend alternative
Notice is hereby given that the directors of the company have resolved to
issue fully paid ordinary shares in the company as a capitalisation award
to ordinary shareholders. Ordinary shareholders will be entitled, in
respect of all or part of their shareholding, to elect to receive new fully
paid ordinary shares, which will be issued only to those ordinary
shareholders who, in respect of all or part of their shareholding, elect on
or before 12:00 on Thursday, 5 April 2007, to receive the capitalisation
award shares. Shareholders not electing to receive new fully paid ordinary
shares in respect of all or part of their shareholding will be entitled to
receive a cash dividend alternative of 284 cents per ordinary share (the
cash dividend alternative).
In accordance with the provisions of STRATE, the electronic statement and
custody system used by JSE Limited, the relevant dates for the
capitalisation award election and the cash dividend alternative are as
follows:
2007
Last day to trade to participate in the Thursday, 29 March
capitalisation award or the cash
dividend alternative
Shares trade ex the capitalisation award Friday, 30 March
election and the cash dividend
alternative on
Listing of the maximum number of new Friday, 30 March
ordinary shares that may be taken up in
terms of the capitalisation award on
Last day to elect to receive Thursday, 5 April
capitalisation award shares, failing
which the cash dividend alternative will
be received by 12:00
Record date to participate in the Thursday, 5 April
capitalisation award or receive the cash
dividend alternative on
Payment of the cash dividend alternative
to shareholders who have not elected to
participate in the capitalisation award
or
have participated in the capitalisation Tuesday, 10 April
award in respect of only part of their
shareholding on
New shares issued and posted or central Tuesday, 10 April
securities depository participant
(`CSDP`) or broker accounts credited
regarding the shares to be issued to
shareholders participating in the
capitalisation award in respect of all
or part of their shareholding on
The maximum number of new shares listed Friday, 13 April
in terms of the capitalisation award,
adjusted to reflect the actual number of
shares issued in terms of the
capitalisation award on or about
Share certificates may not be dematerialised or rematerialised between
Friday, 30 March 2007, and Thursday, 5 April 2007, both days inclusive.
The above dates and times are subject to change. Any changes will be
published on the Securities Exchange News Service (SENS) and in the press.
The number of capitalisation shares to which shareholders are entitled will
be determined in the ratio that 284 cents per ordinary share bears to the
30-day volume-weighted average price for the company`s share, to be
determined by no later than Tuesday, 20 March 2007. Details of the ratio
will be published on SENS no later than Thursday, 22 March 2007, at 12:00
and in the financial press the following business day. Trading in the
STRATE environment does not permit fractions and fractional entitlements.
Accordingly, where a shareholder`s entitlement to new ordinary shares
calculated in accordance with the above formula gives rise to a fraction of
a new ordinary share, such fraction will be rounded up to the nearest whole
number, where the fraction is greater than or equal to 0,5, and rounded
down to the nearest whole number, where the fraction is smaller than 0,5.
A circular relating to the capitalisation award and the cash dividend
alternative will be posted to shareholders on or about Wednesday, 14 March
2007.
Note: Dematerialised shareholders are required to notify their duly
appointed CSDP or broker of their election in terms of the capitalisation
award in the manner and at the time stipulated in the agreement governing
the relationship between shareholders and their CSDP or broker.
For and on behalf of the board
Dr RJ Khoza TA Boardman
Chairman Chief Executive
21 February 2007
Financial highlights
at 31 December
Reviewed Audited
2006 2005
Share statistics
Number of shares listed m 450,9 442,8
Number of shares in issue m 394,7 401,8
excluding shares held by
group entities
Weighted average number of m 399,5 397,2
shares
Fully diluted weighted m 412,3 400,4
average number of shares
Headline earnings per cents 1 110 797
share
Fully diluted headline cents 1 076 791
earnings per share
Dividends declared per cents 493 290
share
- Interim cents 209 105
- Final cents 284 185
Dividend paid per share cents 394 181
Dividend cover times 2,25 2,75
Net asset value per share cents 6 363 5 597
Tangible net asset value cents 5 106 4 351
per share
Closing share price cents 13 350 10 000
Price earnings ratio historica 12 13
l
Market capitalisation Rbn 60,2 44,3
Key ratios
Return on ordinary % 18,6 15,5
shareholders` equity (ROE)
Return on total assets % 1,14 0,93
(ROA)
Net interest income to % 3,92 3,55
interest-earning banking
assets
Non-interest revenue to % 46,3 49,8
total income*
Impairments charge to % 0,52 0,49
average advances
Efficiency ratio* % 58,2 64,8
Effective taxation rate % 27,8 23,4
Group capital adequacy
ratio
- Tier 1 % 8,3 9,4
- Total % 11,8 12,9
Number of employees 24 034 22 188
Balance sheet statistics
(Rm)
Total equity attributable 25 116 22 490
to equity holders of the
parent
Total equity 29 388 26 309
Amounts owed to depositors 324 685 261 311
Loans and advances 308 563 248 408
Gross 313 747 253 622
Impairment of loans and (5 184) (5 214)
advances
Total assets 424 912 352 258
Earnings reconciliation
(Rm)
Profit attributable to 4 533 3 836
equity holders of the
parent
Less: Non-trading and 98 669
capital items
Impairment of goodwill (70) (1)
Profit on sale of
subsidiaries, investments
and
property and equipment 248 904
Net impairment of
investments, property and
equipment
and capitalised (54) (202)
development costs
Taxation on above items (26) (32)
Headline earnings 4 435 3 167
* 2005 Restated
Condensed consolidated statement of changes in equity
Minority
shareholders`
Total equity equity
attributable attributable
to to
equity preference
holders
Rm of the parent shareholders
Balance at 31 December 2004 18 337 2 770
Net income recognised directly 463 -
in equity
Release of reserves previously (70)
not available
Foreign currency translation 95
reserve movement
Available-for-sale reserve (204)
movement
Revaluation of owner-occupied 153
property
Share-based payments reserve 466
movement
Net acquisition of
subsidiaries
Capitalisation of minorities
Other 23
Profit for the year 3 836 228
Dividends to shareholders (727) (228)
Issues of shares net of 1 336
expenses
Shares acquired by group (755)
entities
Balance at 31 December 2005 22 490 2 770
Net income recognised directly 400 -
in equity
Release of reserves previously (105)
not available
Foreign currency translation 334
reserve movement
Available-for-sale reserve (110)
movement
Revaluation of owner-occupied 77
property
Share-based payments reserve 225
movement
Other (21)
Profit for the year 4 533 219
Dividends to shareholders (1 562) (219)
Issues of shares net of 875
expenses
Shares acquired by group (1 620)
entities
Shares issued/(repurchased) by 300
subsidiary
Balance at 31 December 2006 25 116 3 070
Minority
shareholders`
equity
attributable
to ordinary Total
Rm shareholders equity
Balance at 31 December 2004 680 21 787
Net income recognised directly 136 599
in equity
Release of reserves previously (70)
not available
Foreign currency translation 10 105
reserve movement
Available-for-sale reserve (204)
movement
Revaluation of owner-occupied 153
property
Share-based payments reserve 466
movement
Net acquisition of 17 17
subsidiaries
Capitalisation of minorities 107 107
Other 2 25
Profit for the year 233 4 297
Dividends to shareholders (955)
Issues of shares net of 1 336
expenses
Shares acquired by group (755)
entities
Balance at 31 December 2005 1 049 26 309
Net income recognised directly 17 417
in equity
Release of reserves previously (105)
not available
Foreign currency translation 21 355
reserve movement
Available-for-sale reserve (110)
movement
Revaluation of owner-occupied 77
property
Share-based payments reserve 225
movement
Other (4) (25)
Profit for the year 309 5 061
Dividends to shareholders (23) (1 804)
Issues of shares net of 875
expenses
Shares acquired by group (1 620)
entities
Shares issued/(repurchased) by (150) 150
subsidiary
Balance at 31 December 2006 1 202 29 388
Consolidated income statement
for the year ended 31 December
Reviewed Audited
Rm 2006 2005
Interest and similar income 28 521 23 234
Interest expense and similar 17 558 14 705
charges
Net interest income 10 963 8 529
Impairment charge on loans and 1 483 1 189
advances
Income from lending activities 9 480 7 340
Non-interest revenue*^ 9 468 8 469
Operating income 18 948 15 809
Total expenses 11 886 11 017
Operating expenses* 11 740 10 469
Merger and recovery programme 155
expenses
BEE transaction expenses 146 393
Indirect taxation 345 223
Profit from operations before non- 6 717 4 569
trading and capital items
Non-trading and capital items 124 701
Impairment of goodwill (70) (1)
Net profit on sale of 248 904
subsidiaries, investments and
property and equipment
Net impairment of investments, (54) (202)
property and equipment and
capitalised development costs
Profit from operations 6 841 5 270
Share of profits of associates 153 167
and joint ventures
Profit before direct taxation 6 994 5 437
Total direct taxation 1 933 1 140
Direct taxation 1 907 1 108
Taxation on non-trading and 26 32
capital items
Profit for the year 5 061 4 297
Attributable to:
Profit attributable to equity 4 533 3 836
holders of the parent
Profit attributable to minority 309 233
interest - ordinary shareholders
- preference shareholders 219 228
Profit for the year 5 061 4 297
Basic earnings per share cents 1 135 966
Diluted earnings per share cents 1 099 958
Dividend declared per share cents 493 290
Dividend paid per share cents 394 181
* Reclassification of transaction costs in NIR
Expenses amounting to R160 million (2005: R140 million), directly related
to NIR, have been reclassified from operating expenses, consistent with
industry practice, and have been included in NIR.
These expenses represent transaction costs directly attributable to the
acquisition of trading instruments recorded at fair values, which do not
include transaction costs. The carrying amount of trading instruments,
other than those at fair value through profit or loss, generally includes
transaction costs. Consequently, transaction costs that would be included
in the determination of the effective interest rate of the instruments and
the interest attributable to the instrument have been disclosed within NIR.
Comparative results have been restated accordingly.
^ Foreign currency gains and losses are no longer separately disclosed, but
included in non-interest revenue.
Consolidated balance sheet
at 31 December
Reviewed Audited
Rm 2006 2005
Assets
Cash and cash equivalents 12 267 11 142
Other short-term securities 25 756 17 014
Derivative financial instruments 15 273 16 176
Government and other securities 22 196 22 658
Loans and advances 308 563 248 408
Other assets 12 468 11 601
Client`s indebtedness for acceptances 2 577 1 291
Current taxation receivable 161 134
Investment securities 7 155 6 875
Non-current assets held for sale 490 385
Investments in associate companies 907 657
and joint ventures
Deferred taxation asset 120 680
Investment property 158 163
Property and equipment 3 377 3 095
Long-term employee benefit assets 1 444 1 225
Computer software and capitalised 1 266 1 320
development costs
Mandatory reserve deposits with 7 039 5 747
central bank
Goodwill 3 695 3 687
Total assets 424 912 352 258
Total equity and liabilities
Ordinary share capital 395 402
Ordinary share premium 9 727 10 465
Reserves 14 994 11 623
Total equity attributable to equity 25 116 22 490
holders of the parent
Minority shareholders` equity
attributable to
- ordinary shareholders 1 202 1 049
- preference shareholders 3 070 2 770
Total equity 29 388 26 309
Derivative financial instruments 12 904 17 055
Amounts owed to depositors 324 685 261 311
Other liabilities 37 847 32 357
Liabilities under acceptances 2 577 1 291
Current taxation liabilities 434 466
Other liabilities held for sale 417
Deferred taxation liabilities 1 649 959
Long-term employee benefit 1 215 1 071
liabilities
Investment contract liabilities 5 278 4 166
Long-term debt instruments 8 518 7 273
Total liabilities 395 524 325 949
Total equity and liabilities 424 912 352 258
Guarantees on behalf of clients 15 250 11 064
Contingency note
Historically a number of group companies entered into structured finance
transactions with third parties using the tax base of these companies.
Pursuant to the terms of the majority of these transactions, the underlying
third party has contractually agreed to accept the risk of any tax being
imposed by the South African Revenue Service (`SARS`), although the
obligation to pay in the first instance rests with the group companies. It
is only in limited cases where, for example, the credit quality of a client
becomes doubtful, or where the client has specifically contracted out of
the re-pricing of additional taxes, that the recovery from a client could
be less than the liability that could arise on assessment, in which case
provisions are made. SARS has examined the tax aspects of some of these
types of structures and SARS could assess these structures in a manner
contrary to that initially envisaged by the contracting parties. As a
result group companies could be obliged to pay additional amounts to SARS
and recover these from clients under the applicable contractual
arrangements.
Condensed consolidated cash flow statement
for the year ended 31 December
Reviewed Audited
Rm 2006 2005
Cash generated by operations 9 297 6 898
Change in funds for operating (3 739) 2 023
activities
Net cash generated from operating 5 558 8 921
activities before taxation
Taxation paid (953) (852)
Cash flows from operating activities 4 605 8 069
Cash flows utilised by investing (1 057) (927)
activities
Cash flows utilised by financing (1 131) (303)
activities
Net increase in cash and cash 2 417 6 839
equivalents
Cash and cash equivalents at the 16 889 10 050
beginning of the year*
Cash and cash equivalents at the end 19 306 16 889
of the year*
* Including mandatory reserve deposits with central bank.
Condensed operational segmental reporting
for the year ended 31 December
Reviewed Audited Reviewed Audited
December December December December
2006 2005 2006 2005
Restated Restated
Rbn Rbn Rm Rm
Total Total Operating Operating
assets assets income income
Nedbank Capital 138 117 2 605 2 302
Nedbank Corporate 175 138 7 654 6 223
Nedbank Retail 125 96 8 591 7 208
Imperial Bank 30 22 932 740
Shared Services 9 9 228 306
Central management 12 15 (859) (823)
Eliminations (64) (45) (203) (147)
Total 425 352 18 948 15 809
Reviewed Audited
December December
2006 2005
Restated
Rm Rm
Headline Headline
earnings earnings
Nedbank Capital 1 145 971
Nedbank Corporate 2 553 1 894
Nedbank Retail 1 463 896
Imperial Bank 193 147
Shared Services (176) 104
Central management (743) (845)
Eliminations
Total 4 435 3 167
Segmental reporting comparative results
Segmental reporting comparative results were restated for 2005 to take
account of the ongoing changes for improved profitability measurements. The
restatements relate to the introduction, during 2006, of the group`s STC
costs in respect of dividends payable to each cluster, based on
profitability, and the alignment of Imperial Bank`s contribution, net of
minorities, to exclude all group profitability measurement adjustments.
Condensed geographical segmental reporting
for the year ended 31 December
Reviewed Audited
December December
2006 2005
Operating Operating
Rm income income*
South Africa 17 616 14 694
Business operations 17 612 14 568
BEE transaction costs
Merger and recovery programme
expenses
Foreign currency translation gains 4 126
Profit attributable to minority
interest - preference shareholders
Rest of Africa 657 512
Business operations 657 512
BEE transaction costs
Rest of world 675 603
Business operations 675 603
Merger and recovery programme
expenses
Total 18 948 15 809
* Restated
Reviewed Audited
December December
2006 2005
Headline Headline
Rm earnings
earnings
South Africa 4 176 2 884
Business operations 4 512 3 406
BEE transaction costs (121) (334)
Merger and recovery programme (86)
expenses
Foreign currency translation gains 4 126
Profit attributable to minority (219) (228)
interest - preference shareholders
Rest of Africa 76 135
Business operations 99 135
BEE transaction costs (23)
Rest of world 183 148
Business operations 183 182
Merger and recovery programme (34)
expenses
Total 4 435 3 167
* Restated
Registered office: Nedbank Group Limited, Nedbank Sandton
135 Rivonia Road, Sandown, 2196, PO Box 1144, Johannesburg, 2000
Transfer secretaries:
Computershare Investor Services 2004 (Pty) Limited, 70 Marshall Street,
Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Company Secretary: GS Nienaber
Directors:
Dr RJ Khoza (Chairman), Prof MM Katz (Vice-chairman), ML Ndlovu (Vice-
chairman), TA Boardman* (Chief Executive), CJW Ball, MWT Brown* (Chief
Financial Officer), TCP Chikane, BE Davison, N Dennis (British), MA Enus-
Brey, Prof B de L Figaji, RM Head (British), JB Magwaza, ME Mkwanazi, CML
Savage, GT Serobe, JH Sutcliffe (British) * Executive
This announcement is available on the group`s website -
www.nedbankgroup.co.za - together with the following additional
information:
* detailed financial information in HTML and PDF formats;
* financial results presentation to analysts; and
* link to a webcast of the presentation to analysts.
For further information kindly contact Nedbank Group Investor Relations by
email at nedbankgroupir@nedbank.co.za.
Sponsors: Merrill Lynch South Africa (Pty) Limited, Nedbank Capital
Date: 22/02/2007 08:00:01 Produced by the JSE SENS Department.
