EMERGING MARKETS,
NEDBANK, P&C
SHOWCASE
4 December 2013
Graham Dempster: Nedbank COO
Nedbank Group positioning & strategic focus areas
INSURANCE | INVESTMENT | SAVINGS | BANKING
AGENDA
Overview of the SA banking industry
Nedbank Group overview and strategic focus areas
2
TOTAL SA INDUSTRY
ASSETS/ADVANCES
Total assets (%)
2012
Loans & advances (%)
2012
6%
10%
22%
30%
22%
26%
R3.6 trillion
R2.8 trillion
23%
5%
19%
Absa
Nedbank
Other
9%
14%
Firstrand
Standard Bank
Source: SARB
Other loans: Loans granted/deposits placed under resale agreements,
Redeemable preference shares, Factoring accounts , Trade bills
Homeloans
Credit cards
Overdrafts
Other
11%
3%
Commercial mortgages
Lease & instalments
Term loans
Personal loans
3
SA INDUSTRY DEPOSITS DIVERSIFIED
AMONGST BANKS & VARIOUS
PROVIDERS
Composition of deposits (%)
2012
Total deposits (%)
2012
17%
9%
18%
R2.9 trillion
25%
7%
16%
21%
32%
R2.9 trillion
8%
28%
19%
Absa
Nedbank
Other
Firstrand
Standard Bank
Asset managers
Commercial
Capital markets
Foreign funding
Retail
Other
4
THE BIG 4 BANKS
Return on equity**(%)
Market capitalisation (Rbn)
250
205
200
30%
202
22.2%
130
150
110
100
20%
14.2%
13.5%
16.4%
10%
50
0
0%
Headline earnings*(Rbn)
Total assets (Rbn)
2000
20
1699
1500
1000
15
871
841
714
10
500
5
0
0
Standard Bank
BGA (Absa)
15.0
15.3
8.7
7.5
FirstRand
Nedbank Group
* As at 30 Dec 2012, FR at 30 June 2013, All other info based on latest public information
** Nedbank ROE excl goodwill
5
SA BANKS GENERATE SOUND
RETURNS THROUGH CYCLES
Return on equity (%)
40%
Pre-crisis average: 24.3%
30%
Post-crisis average: 15.5%
20%
Cost of equity
10%
0%
2005
2006
BGA
2007
2008
SBK Banking
2009
FirstRand
2010
2011
2012
H1 2013
Nedbank (excl goodwill)
6
SA BANKS HIGHLY RATED AND WELL
REGULATED
WEF Global
Competitiveness Report
‘13/14
rank
Strength of auditing &
reporting standards
1
Efficacy of corporate boards
1
Regulation of securities
exchanges
• Basel III implemented January 2013
• Well capitalised (Basel III minimum 9.5% plus pillar 2b)
1
Availability of financial
services
2
Soundness of banks
3
Source: World Economic Forum, The Global Competitiveness Report
2012-2013, 2013–2014
NCA – National Credit Act
Well regulated industry
• Sound funding & liquidity ratios
• NCA implemented June 2007 – legislated
responsible credit extension
• Exchange controls – “closed loop”
domestic funding market
• Regulator proactively engages with banks
7
SA BANKS’ STRONG CAPITAL POSITION
Average risk weight vs Basel III CET1 ratio (%, as at 31 Dec 2012)
80%
Median: 9.4%
Low capital ratios
& high risk weights
70%
Standard Bank
FirstRand
Investec
Ltd
60%
Average RW
Well capitalised &
high risk weights
Nedbank
ABSA
50%
Median: 44.5%
40%
SA banks have
conservative risk weighted
assets & strong capital
adequacy ratios
30%
20%
Low capital ratios
& low risk weights
Well
capitalised &
Well capitalised and
riskweights
weights
low low
risk
10%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
16%
17%
Basel III CET1 Ratio
Source: Goldman Sachs from company reports
Note: Average risk weight = Total risk weighted assets/total assets excluding derivatives & insurance assets
8
NEDBANK GROUP OVERVIEW
• Listed on the JSE – 52% held by OM Plc – R110bn market cap
• Strong capital levels, sound liquidity and balance sheet
provisioning levels
• Strong wholesale bank, with momentum in retail businesses
• Strengths in corporate banking, renewable energy, commercial
property finance, business banking, card acquiring & vehicle finance,
asset management, mobile banking
• Together with Ecobank our alliance partner, we offer our clients access
to the largest geographic footprint in Africa: 37 countries
• Leader in transformation, corporate social responsibility &
environmental affairs (the green bank)
9
OUR STRATEGIC FOCUS AREAS
10
REPOSITION NEDBANK RETAIL –
BUILDING A SUSTAINABLE BUSINESS
Headline earnings (Rm)
& ROE (%)
SustainablyContribution
delivering on(%)
the
2010 strategy commitments
11.8%
10.0%
9.3%
1 194
1 054
863
1.7%
133
(69)
-1.2%
H1
H1
H1
H1
H1
H12009
2009 H1
2010 H1
2011 H1
2012 H1
2013
2010
2011
2013
2012
2011 restated for enhancements to economic capital allocation methodologies in 2012
• Grow the client franchise - gaining
clients, with more cross-sell, less
attrition, across more micro-markets
• Optimise to invest – investing in
integrated channels strategy,
leveraging digital & area
collaboration plans
• Invest in people & organisational
effectiveness
• Accelerate client-centred innovation
and usage especially
in digital, deposits & payments
• Effective risk management - selective
origination, strong provisions &
collections
11
GROW NIR – CONTINUED PROGRESS
NIR-to-expense ratio (%)
88.7%
Key drivers
85.0%
83.2%
80.8%
78.2%
75.5%
 Focus on transactional
income growth across all
clusters
 Client growth >10% p.a.
 Growth in clients with 2+
products >12% p.a.
H1
2009
H1
2010
H1
2011
H1
2012
H1
2013
M-L
term
target
 Significant increase in
innovation output
12
REST OF AFRICA: A CLIENT-CENTRED,
CAPITAL EFFICIENT & RISK MITIGATED
LONGER-TERM APPROACH
‘One bank’ experience for clients across 37 countries & >2000 staffed outlets
• Standardised operating model & IT
system approach
• Agreement for initial 36% interest in
Banco Unico, with rights to increase
to >50%
• Rights to acquire up to 20% equity
stake in ETI (Nov ‘13 – Nov ‘14)
• Ecobank building its franchise
13
PORTFOLIO TILT – ENHANCING
RETURNS IN A BASEL III WORLD
Nedbank Group economic profit (Rm)
& ROE (excl goodwill) (%)
15.7%
16.1%
28,7%
13.7%
13.1%
Key drivers
749
12.2%
582
• Judicious use of scarce resources
• Prepare strategically for Basel III
Grow faster:
• Transactional banking,
deposits, wealth, asset
management, insurance,
investment banking
146
Selective growth:
(24)
• Home loans, unsecured
lending
(352)
H1
2009
H1
2010
H1
2011
H1
2012
H1
2013
14
OUR STRATEGIC FOCUS AREAS
15
SHARE PRICE PERFORMANCE
REFLECTS THE PROGRESS MADE
 Strong relative share price performance (2nd best)
 From #4 to #2 in price to tangible book valuation
5 year relative share price performance
250
200
Nedbank
BGA (Absa)
FirstRand
Standard Bank
Price to tangible NAV
2.81
213
194
151
140
150
2.09
1.92
1.82
1.67
1.59
100
1.71
1.33
50
2008
2009
2010
2011
2012
2013
2008
2009
2010
2011
2012
2013
16
COLLABORATION WITH OLD MUTUAL
• Transactional banker to M&F and Old Mutual
Wholesale
• Custodian of OMLACSA assets
• Co-investor in Africa Investment fund (co-managed by OM)
• Joint funding of various transactions
• Collaborating across asset management, insurance & wealth
• Some of Nedbank’s AUM written via OM’s Fairbairn Capital platform
• Nedbank Best of Breed growth fund managed by OM
Wealth
• Writing & distribution of OM life & non-life products
• New business premiums by Nedbank NFP to OM up strongly
• Imbizo – community financial services initiative
• IT procurement benefits from scale
Other
• OM manages Nedbank Pension, Provident and Medical aid funds
• OM the insurer of Nedbank Group life scheme
• Collaboration on various CSI projects
17
FOCUS FOR THE NEXT 3 YEARS
• Client-centred innovation
• Grow transactional banking franchise
• Strategic portfolio tilt
• Optimise to invest
• Establish a Pan-African banking network
• Step change in sustainably building the franchise & the brand
18
EMERGING MARKETS,
NEDBANK, P&C
SHOWCASE
4 December 2013
Ingrid Johnson: Nedbank Group Managing Executive Retail & Business Banking
Repositioning Nedbank Retail
INSURANCE | INVESTMENT | SAVINGS | BANKING
RETAIL & BUSINESS BANKING CONTRIBUTIONS
TO NEDBANK GROUP
Retail and Business Banking as a share of Nedbank Group
H1 2013, %
Retail
Business Banking
Rest of Nedbank
Operating Income
Headline Earnings
Capital2
100% = R16,519m (Group)
100% = R3,914m (Group)
100% = R59,817m (Group)
44
27
44
9
64
35
57
8
12
Total Advances
Deposits
Employees
100% = R557,349m (Group)
100% = R578,807m (Group)
100% = 28,889 (Group)
18
35
54
11
35
15
67
1. Operating income – NII plus NIR less impairments
2. Cluster allocation as a percentage of ECAP to Total Group Equity
57
8
20
AGENDA
Repositioning Nedbank Retail
Context & strategic intent
Progress on three fundamental strategic imperatives
Future trends and prospects
21
CHALLENGES IN RETAIL NECESSITATED A
FUNDAMENTAL STRATEGIC REVIEW IN 2009
Retail Banking1 - headline earnings, Rm
RoE
%
17.6
23.1
22.1
10.8
Price : tangible book
4.0
-1.6
3.5
1 876
3.0
1 463
2.5
1 002
896
(156)
ECAP
%
2.0
1.5
5.8
2005
5.9
2006
5.9
2007
5.6
2008
5.6
2009
2
Rest of Nedbank - headline earnings, Rm
RoE
%
Nedbank Group
Firstrand
Barclays Africa Group (ABSA)
Standard Bank Group
14.8
17.0
21.1
20.4
1.0
Jan 05
Jan 06
Jan 07
Jan 08
Jan 09
Jan 10
Jan 08
Jan 09
Jan 10
Share price relative
20.0
200
150
4 045
2 271
2005
4 763
4 433
2 972
2006
100
2007
2008
2009
2
50
Jan 05
related income is included in Retail
2009 subsequently restated for changes to allocated capital and exclusion of Wealth from Retail numbers
Note: Core Tier 1 equity 2007: 7.2%, 2009: 9.9% or Prime interest rate 2005: 10.6%, 2008: 15.1%
Source: Dec 2012 HSBC conference with small refinements
Jan 06
Jan 07
1 Wealth
2
22
NEDBANK RETAIL WAS LAGGING FAR BEHIND
PEERS IN CLIENT NUMBERS
Main banked client base by income segment
# million, as at Dec 2009
Total
Seniors
Middle
to Upper
6.0
0.4
0.9
4.2
0.2
0.6
4.1
0.2
0.6
2.7
2.6
Entry
Level
Banking
3.7
Youth
1.0
0.7
0.8
Bank 1
Bank 2
Bank 3
Total
clients1
11.7
9.0
6.7
4.2
% Main
banked
51
47
61
37
1 Cannot
add the client numbers to get the market as clients are multi-banked
Source: AMPS data and Retail analytics
1.5
0.1
0.3
0.9
0.2
Consequence of
strategic choices in 90s
• Low transactional
banking emphasis
• Positioned as elitist
23
RISING DEMOGRAPHICS HIGHLIGHTED NEED
TO BE A BANK FOR ALL IN SOUTH AFRICA
SA Population by banking segment
millions
57.9
Imperatives as a bank for all
Total
Middle
incl. seniors
49.3
3.5
10.9
 Invest in growing Youth &
Entry Level Banking
Entry level
banking
12.1
14.6
 Restore strength in Middle
to Upper, including seniors
4.4
 Grow entrepreneurs &
small businesses
Youth
Unbanked
3.3
30.5
28
2009
2020
 Develop low cost solution
for the unbanked
Note: Affluent: > R550,000; Middle: R100,000 to 550,000; Entry level: < R100,000; Youth: Youth aged 16-24
SOURCE: AMPS; Nedbank analysis
24
CHARTING A NEW PATH TO SUSTAINABLE
PROFITABLE GROWTH FOR NEDBANK RETAIL
Source: 2010 Retail Strategy Board presentation
25
3 FUNDAMENTAL IMPERATIVES TO
SUSTAINABLY TURN AROUND RETAIL
Rebuilding the client
franchise as a
bank for all
Developing client value
propositions better than any
alternative
Protecting against downside risk
and extreme impairment
volatility
500
Great
products
and offers
Competitive Client
Pricing
insights
Embedding effective
risk management
& culture
Evolving the organisation
to be more client
centred and integrated
Leading second order change
for accelerated organisational
alignment
Impairments
400
Marketing
that
connects
Relevant
distribution
300
200
100
2012
2011
2010
2009
2008
2007
Related economics
2006
0
26
DELIVERING SUSTAINABLE RETAIL RETURNS IN
A TOUGH CYCLE
Retail Banking1 - headline earnings, Rm
RoE
%
-0.2
4.6
10.8
2 091
12.1
Price : tangible book
10.0
2 552
3.0
Nedbank Group
Firstrand
Barclays Africa Group (ABSA)
Standard Bank Group
2.5
1 054
761
2.0
ECAP
%
(27)
2009
2010
2011
2012
9.1
8.7
10.3
10.9
H1
2013
10.7
Rest of Nedbank - headline earnings, Rm
RoE
%
23.4
16.6
15.7
4 304
4 139
4 093
16.7
2010
2011
17.6
4 931
2012
1.0
Jan 09
Jan 10
Jan 11
Jan 12
Jan 13
Jan 12
Jan 13
Share price relative
2 860
2009
1.5
H1
2013
230
210
190
170
150
130
110
90
70
50
Jan 09
Jan 10
Jan 11
1 Wealth
related income in rest of Nedbank
Common equity Tier 1 2009: 9.9%, 2012: 11.4%. Note: Prime interest rate 2009: 11.9%, 2012: 8.8%;. Source: Dec 2012 HSBC conference with refinements
27
3 FUNDAMENTAL IMPERATIVES TO
SUSTAINABLY TURN AROUND RETAIL
Rebuilding the client
franchise as a
bank for all
Developing client value
propositions better than any
alternative
Client
insights
Protecting against downside risk
and extreme impairment
volatility
500
Great
products
and offers
Competitive
Pricing
Embedding effective
risk management
& culture
Evolving the organisation
to be more client
centred and integrated
Leading second order change
for accelerated organisational
alignment
Impairments
400
Marketing
that
connects
Relevant
distribution
300
200
100
2012
2011
2010
2009
2008
2007
Related economics
2006
0
28
CLIENT GROWTH FROM ALL SEGMENTS
LEADING TO STRONG NIR CAGR OF 15.7%
Net New Client Growth 2009 to 2012
Cumulative NIR growth 2009 to 2012
#’000s
Rm
CAGR
Youth
17.3%
329
ELB
815
Middle &
Upper
SBS
Total
524
11.2%
1,710
18.4%
137
12.1%
Note: NIR includes product and non-product NIR
11.5%
566
14.2%
5.2%
30
CAGR
1,944
34.3%
9.5%
223
2,815
• Avg. of ~150,000
clients migrated
annually from ELB
& Youth to Middle
• Avg NIR earned
from these clients
has increased by
~30%
• Actively
addressing
attrition
15.7%
29
DISTINCTIVE VALUE PROPOSITIONS FOR ALL
SEGMENTS – RESONATING WITH TARGET MARKETS
YOUTH
ENTRY LEVEL BANKING
MIDDLE
SENIORS
UPPER INCL PROFESSIONAL
SMALL BUSINESS
30
LEVERAGING STRONG BUSINESS RELATIONSHIPS
TO CAPTURE HOLISTIC BANKING OPPORTUNITY
Evolving Business Banking & RRB1
service model…
…to accelerate banking of company
employees and cross-sell
N@W account sales
YTD Sep
Client
growth
through
Nedbank
@Work
RRB1
BB
Banking &
financial
education
at your
work place
38 558
4 557
0
2011
34 001
2012
66 461
15 604
50 857
2013
Turnover through card acquiring
devices sold to BB clients since
2011, Rm
1 600
evolved to capture the virtuous circle
opportunity around the business owner &
employees
Cross-sell
of card
products
1 200
800
400
Jan-11
Jan-12
Jan-13
1 Retail Relationship Banking servicing businesses with turnover <R10m
31
MAKING NEDBANK MORE ACCESSIBLE
Over R1.3bn investment in distribution
STRATEGIC INTENT
since 2009
Branches & Outlets, #
Total
Alternate
outlets1
Branches
543
75
572
2009
H1
2013
3182
1853
Branches & Outlets, #
762
144
468
ATMs, #
Total
762
190
40%
increase
Footprint optimised in line with micro-market
STRATEGIC
INTENT
opportunity
- 128% growth
in non-urban
1 412
< 5yrs old
679
> 5yrs old
1 174
1 636
2009
H1
2013
Total
Rural
Semiurban
543
+188%
5050
53
+72%
+20%
72%
increase
Urban
91
440
2009
1 Excludes Personal Loans kiosks (2009:250, 2012: 313 & H1 2013: 279). Growth is from 2009 year end levels.
Source: 2012 results presentation with small refinements
527
H1
2013
32
Innovations
RATE OF CLIENT CENTRED INNOVATION IS
ACCELERATING
Focused on:
• Digital & payments
• Integrated channels
• Enhancing client value
propositions
• Simplifying internal processes
• Re-igniting the entrepreneurial
spirit
33
COMMERCIALISATION & MARKET PENETRATION
OF INNOVATIVE SOLUTIONS ACCELERATING
PocketPOS transaction volumes
App suite downloads
‘000
350
300
250
200
150
100
50
0
Feb
13
Mar
13
Apr
13
May
13
Jun
13
Jul
13
Aug
13
Sep
13
Oct
13
MyFinancialLife registrations
‘000
Secure Approve-it transactions
# mill
For FREE
35
AugSep OctNovDecJan Feb Mar AprMayJun Jul AugSep Oct
12 12 12 12 12 13 13 13 13 13 13 13 13 13 13
Nov
13
40
30
35
25
30
20
25
20
15
15
10
10
5
5
0
0
Sep
12
Nov
12
Jan
13
Mar
13
May
13
Jul
13
Sep
13
Aug
12
Oct
12
Dec
12
Feb
13
Apr
13
Jun
13
Aug
13
Oct
13
34
ENSURING PRICING IS SIMPLE, AFFORDABLE &
COMPETITIVE IN LINE WITH CLIENTS NEEDS
Comparable average monthly banking charges
R per month
260
Price reductions by
competitors bringing
them back in line
with the market
Nedbank
Competitor 1
Competitor 2
Competitor 3
240
220
2014 pricing
Announced
inflationary
increase
No increase
200
Next price
review in
July 2014
180
160
2014 pricing
not available
140
120
100
Jan-05
Jan-06
Jan-07
Nedbank changed
non-cash transactions
from ad-valorem to flat
in 2006, saving clients
R150m in fees annually
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Only in 2012 did
competitors change from
ad-valorem to flat,
contributing to large drop in
their average monthly fees
Pay-As-You-Use Current Account (including monthly maintenance fees and internet banking subscription)
35
BRAND INCREASINGLY RESONATING WITH
OUR CLIENTS
Brand value 2013
Rm
YoY
MTN
Telecomms
43,066
-1%
Vodacom
Telecomms
19,396
4%
SASOL
Chemicals
18,372
8%
Standard Bank
Banks
14,200
-21%
ABSA
Banks
12,411
-17%
Nedbank
Banks
10,920
20%
Woolworths
Retail
10,778
25%
First National Bank Banks
9,487
6%
Shoprite
Retail-Food / Supermarkets 9,286
4%
Mediclinic
Healthcare-Services
8,061
36%
Rank
Brand
2013
1
2
3
4
5
6
7
8
9
10
Industry Group
Q3 2013 – SA best Liked ads
1 Vodacom - Baby
2 Nedbank - Eugene Want or need it
3 Capitec Bank - Paperless Banking
4 Nedbank - Eugene Online Banking
5 Wimpy - Puppet
Source: BrandFinance South Africa’s 50 Most Valuable Brands survey; Millward Brown Q3 Best Liked ads
• 1st time ever,
Nedbank has 2 ads
ranked top five
• Only 3rd time in
29 years to have
ad in top 5
36
3 FUNDAMENTAL IMPERATIVES TO
SUSTAINABLY TURN AROUND RETAIL
Rebuilding the client
franchise as a
bank for all
Developing client value
propositions better than any
alternative
Client
insights
Protecting against downside risk
and extreme impairment
volatility
500
Great
products
and offers
Competitive
Pricing
Embedding effective
risk management
& culture
Evolving the organisation
to be more client
centred and integrated
Leading second order change
for accelerated organisational
alignment
Impairments
400
Marketing
that
connects
Relevant
distribution
300
200
100
2012
2011
2010
2009
2008
2007
Related economics
2006
0
37
IMPAIRMENTS MOST VOLATILE DRIVER OF
INDUSTRY RETURNS, RETAIL LAGGING PEERS
SA banks (excl Nedbank) income statement
lines
Indexed to 2006 (pre-crisis)
Nedbank impairment lines
indexed to 2006 (pre-crisis)
600
600
500
500
400
400
20 higher Retail
impairment index
= 1% lower ROE
Retail
Nedbank
Total
355 Impairments
300
375
351
300
191 NII
175 Expenses
162 NIR
200
200
100
100
0
0
2006 2007 2008 2009 2010 2011 2012
Industry
Bank
26.7
ROE%
25.8
19.2
14.9
14.6
16.3
16.0
291
Wholesale
2006 2007 2008 2009 2010 2011 2012
Retail
ROE%
24.3
22.1
10.8
-0.2
4.6
10.8
12.1
38
SELECTIVE ORIGINATION TO IMPROVE RISK
QUALITY OF HOME LOAN PORTFOLIO
Home cyclical triggers informing growth appetite
%
Danger- reduce market share
Neutral- caution, consider tightening/loosening
Safe - lend
Nedbank HL Market Share (LHS)
Rbn
HL Market size (RHS)
Strategic decision
to shrink property
concentration risk
18.0
1000
900
17.5
800
17.0
700
16.5
600
• 80% of new
registrations sourced
through internal
channels vs 60% in 2009
• New online channel
contributing to 5% of
registrations in ‘13
16.0
15.5
15.0
500
400
300
200
100
14.5
04
05
06
07
08
09
10
11
12
Nedbank
HL advances
growth (CAGR) Rest of
market
19.1%
-0.8%
16.5%
3.8%
13
39
GIVEN INDUSTRY CONCERNS, PROACTIVELY
SLOWED GROWTH IN PERSONAL LOANS
Personal loans book monthly movement, Rm
0
Nedbank
-91
684
-167
870
593
ABIL
-114
-19
729
301
Capitec
520
375
-116
-159
-178
359
451
534
201
284
499
-246
Market growth 17.4% 1
vs
Nedbank growth -1.2% 1
719
Nedbank PL book Average GOI margin, %
113
25.0
20.0
1 129
272
FNB
160
278
-126
-144
Absa
132
85
43
41
138
1 600
-869
675
520
SBSA
452
15.0
130
150
10.0
H1 H1 H1 H1 H1
2009 2010 2011 2012 2013
-1 556
289
387
349
83
29
Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13
1 12-months growth to Aug 2013
40
3 FUNDAMENTAL IMPERATIVES TO
SUSTAINABLY TURN AROUND RETAIL
Rebuilding the client
franchise as a
bank for all
Developing client value
propositions better than any
alternative
Client
insights
Protecting against downside risk
and extreme impairment
volatility
500
Great
products
and offers
Competitive
Pricing
Embedding effective
risk management
& culture
Evolving the organisation
to be more client
centred and integrated
Leading second order change
for accelerated organisational
alignment
Impairments
400
Marketing
that
connects
Relevant
distribution
300
200
100
2012
2011
2010
2009
2008
2007
Related economics
2006
0
41
RETAIL CMAT RESULTS REFLECT SIGNIFICANT SHIFTS
IN CUSTOMER MGT CAPABILITIES FROM 2010
Overall CMAT scores
Intention, Reality and Effect scores
69
Best practice = 66*
54
44
47
58
49
Intention
57
53
55
48
30
50
43
Reality
Effect
19
2006
43
38
37
30
2006 2007 2008 2009 2010 2011 2012
61
57
60
42
38
71
33
34
34
2008
2009
2010
25
2007
2011
2012
“…this real ‘shifting up a gear’ shows the power of a clear, stable strategy, focussed execution &
effective socialisation, resulting in a genuine widespread ‘will to succeed’. Retail now has truly
world class intentions.”
Peter Lavers, REAP Consulting
*Retail Banking Best practice benchmark (a composite of best scores in sections = realistically achievable stretch target)
Source: CMAT Assessments, REAP Consulting
42
DISTINCTIVE POSITIONING TO ‘WIN THE GAME’,
LEVERAGING KEY TRENDS
Trends
Sources of distinctiveness
Consumer preference for choice,
simplicity, increased transparency and
lower cost banking
A choice of distinctive client
centred banking experiences,
delighting in moments of truth
Rising demographics and 6% p.a. small
business growth represent tomorrow’s
valued, aspirational clients
A rigorous approach to
capturing virtuous circle of
household & business
Technological innovation (e.g. digital
channels) offering opportunity for lower
cost distribution and process simplicity
Integrated channels strategy
leveraging digital, high
potential micro-markets &
optimising cost
Higher cost of capital and liquidity from
Basel regulations put risk management
and liabilities at a premium
Robust risk management for
quality asset portfolios &
Deposit innovation sustaining
historical strength
Collaborative cultures increasingly
recognised as central to organizations
effectiveness and innovation
Collaborative people culture
with a client-centred,
relationship-oriented DNA
Source: 2012 Investor Day Presentation; United Nations; IFC; Financial Inclusion Expert Group;
World bank – doing business; team analysis
43
COMMITTED TO BUILDING QUALITY BUSINESSES
Distinctive
strategies
Uniquely positioned for
macro economy & trends
Diligence in execution
of imperatives
A skilled leadership
team with a track
record of delivery
Grow
the client
franchise as
a bank for all
Insight led strategic
choices for
competitive
distinctiveness
Collaborate
and innovate
for growth
Commitment to
building high quality
businesses for
sustainable
performance
Manage
risk effectively
44
AGENDA
Profile of banking in Africa
Nedbank Group strategy for Rest of Africa
45
Building the African Banking Champion
46
PROFILE OF BANKING IN SUB
SAHARAN AFRICA
South African Banks
Total Assets (US$bn)
Pre-Tax Profits (US$m)
3 500
200
3 260
180
3 000
160
2 477
2 500
182
140
120
2 000
1 425
1 500
1 323
100
100
95
80
80
60
1 000
40
500
20
-
Standard
Bank
FirstRand
Source: The Banker Top 1000 World
Banks, 2012
BGA
(ABSA)
Nedbank
Standard
Bank
FirstRand
BGA
(ABSA)
Nedbank
47
PROFILE OF BANKING IN SUB
SAHARAN AFRICA
Top 10 Sub Saharan Africa Banks (Excl SA)
Pre-Tax Profits (US$m)
1 000
658
500
-
664
536
348
Zenith
First Bank
ETI
289
Guaranty
Access
360
139
UBA
Fidelity
174
MCB
110
BPC
106
FCMB
Total Assets (US$bn)
50
40
30
20
18
17
20
11
10
-
Zenith
First Bank
Source: The Banker Top 1000 World
Banks, 2012
ETI
Guaranty
11
Access
15
6
UBA
Fidelity
7
MCB
10
BPC
6
FCMB
48
PROFILE OF BANKING IN SUB
SAHARAN AFRICA
South African Banks
Top 10 Sub Saharan Africa Banks (Excl SA)
Pre-Tax Profits (US$m)
4 000
Pre-Tax Profits (US$m)
4 000
3 260
3 000
3 000
2 477
2 000
1 425
1 323
1 000
2 000
1 000
Standard FirstRand
Bank
BGA
(ABSA)
Nedbank
658
536
348
360
139
174
110
106
Zenith First Bank
ETI
Guaranty Access
Trust
Fidelity
MCB
BPC
FCMB
6
7
10
6
Fidelity
MCB
BPC
FCMB
5
1
UBA
Total Assets (US$bn)
182
200
150
150
100
100
95
80
50
100
50
Standard FirstRand
Bank
Footprint
(No.
Countries)
289
-
Total Assets (US$bn)
200
664
18
8
Source: The Banker Top 1000 World
Banks, 2012
BGA
(ABSA)
Nedbank
12
6/37
17
18
20
11
11
15
Zenith First Bank
Footprint
(No.
Countries)
5
1
ETI
35
Guaranty Access
Trust
6
9
UBA
20
1
1
49
PROFILE OF BANKING IN AFRICA
South African Banks’ Footprint
International Banks’ Footprint
Pan-African and Regional Banks’ Footprint
Ecobank (ETI)
West Africa ‐ UBA
West Africa – Access Bank
East Africa ‐ KCB
Source: Press clippings, annual reports, team analysis
Existing footprints
Foothold markets1
Planned
Ecobank
50
SUB-SAHARAN AFRICA BANKING
REVENUE GROWTH
At current growth rates, SSA revenues are forecast to grow from $36bn in 2011
to $87bn in 2020
Total SSA Banking Revenue Pools (SSA excl. SA)
(US$bn)
Projected Revenues
100
80
60
60
40
20
Growth Scenarios: Total SSA Banking
Revenue Pools (US$bn)
87
CAGR
2020
2030
32
8%
73
158
10%
87
223
15%
128
520
21
36
12
55
39
24
0
2011
2016
Wholesale
2020
Retail
McKinsey Global
Banking Pools implied
compound annual
growth rate
Source: McKinsey Global Banking Pools
51
NEDBANK GROUP STRATEGY FOR
REST OF AFRICA
A client-centred, capital efficient and risk mitigated longer-term approach
B
Alliance approach
(principally West & Central Africa)
B
A
A
Nedbank
Universal
Banks
(selected SADC
& East African
markets)
52
THE AFRICAN CHAMPION BANKING
NETWORK
‘One Bank’ client experience
• Ecobank Nedbank alliance
• Established in 2008
• Significant operational traction through the
Alliance Committee
B
• Growth in the number of Nedbank wholesale
clients transacting with Ecobank
• Deepened the alliance in 2011 through
US$285m term loan
• Rights to acquire up to 20% equity stake in ETI
(Nov ‘13 – Nov ‘14)
• Ecobank building its franchise
• Top ten bank in Africa per The Banker magazine
based on capital
• Earnings up 74% to US$217m for 9 month to 30
Sept 2013, ROE >15%
The largest Pan African Banking network: 37 countries & > 2 000 staffed outlets
53
GROW THE NEDBANK FRANCHISE IN
SADC & EAST AFRICA
• Standardised business
operating model
• Entry into Mozambique
• Fast growing GDP (11% p.a. over last 5
years)
• SA Corporates & SMEs very active
• Ideal country to create a model
universal bank
A
*
• Agreement for initial 36% interest in
Banco Unico & pathway to control*
• Amorim a strong partner &
experienced management team
* Subject to regulatory approval
54
DIFFERENTIATED POSITIONING IN
REST OF AFRICA
Partnership based
Local knowledge
‘One bank’ client
experience
Capital efficient to
create shareholder
value
55
EMERGING MARKETS,
NEDBANK, P&C
SHOWCASE
5 December 2013
RAISIBE MORATHI, NEDBANK CFO
Nedbank Group Financial overview
INSURANCE | INVESTMENT | SAVINGS | BANKING
AGENDA
Historical trends
Growth drivers
Segmental performance
Balance sheet positioning
Looking forward
57
SOLID PERFORMANCE DESPITE
EXTERNAL HEADWINDS
A Capital levels increased
more than 30% on the back
of retained earnings & Basel
capital requirements
ROE excl goodwill (%)
16,4
13,4
B Additional liquidity costs from
3.5
lengthening funding profile
& building surplus liquid
asset buffers
5.8
0.9
4.7
C Interest rates at 40-year lows
3.1
A
B
C
(lost endowment)
D
E
D Lower levels of impairments
(adjusted for mix)
2009
Higher levels
of capital
Basel
liquidity
costs
Lower
interest
rates
Lower
Profitability
impairments
uplift
2012
E ROE uplift from Nedbank
strategic initiatives such as
NIR growth
58
SOLID PERFORMANCE THROUGH THE
GLOBAL CREDIT CRISIS
ROA (%), ROE (%) and Leverage (times)
16.4%
15.3%
1.40%
16.1%
• Strong ROA recovery,
despite lower interest
rates (endowment) &
retail impairment pressure
1.20%
13.4%
13.4%
1.13%
1.15%
1.00%
0.99%
• Enabled higher ROEs
0.80%
0.76%
0.82%
0.60%
17.6
16.3
15.5
14.5
14.0
despite
0.40%
• Higher capital requirements
under Basel III
0.20%
0.00%
2009
2010
ROE (excl goodwill)
2011
2012
ROA
H1
2013
Leverage
59
POSITIVE TRENDS CONTINUED
Advances (Rbn): 4,8% CAGR
Deposits (Rbn): 4,7% CAGR
NIM (%): +19 bps
579
527
477
557
499
471
452
2009
2010
551
2011
2012
H1
2013
CLR (%): -21 bps
2009
492
2010
3,48*
524
3,39
2011
2012
H1
2013
NIR : expenses (%): +990bps
2009
3,53
3,58
3,35
2010
2011
2012
H1
2013
Efficiency ratio (%): +70bps
88,7
1,52
84,4
1,36
1,13
2009
2010
2011
1,31
1,05
2012
* Restated to include Acceptances
H1
2013
78,8
79,6
2009
2010
55,7
81,5
2011
56,6
55,5
53,5
2012
H1
2013
2009
2010
2011
2012
54,2
H1
2013
60
HEADLINE EARNINGS GROWTH
DRIVERS
Headline earnings (Rm)
4 158
3 629
110
837
96,9%
2 124
3 914
1 988
H1
2009
25,9%
NII
3,2%
Impairments
77,3%
NIR
51,0%
Expenses
Direct tax
& Other
H1
2013
61
NET INTEREST MARGIN –
SOLID RECOVERY
NII (Rm) and NIM(%)
25 000
3.7
3.48
3.5
3.39
3.58
3.53
3.35
20 000
• Regulatory pressures eg
Basel III liquidity
requirements
19 680
3.3
16 306
16 608
18 034
15 000
6 mths
3.1
10 000
10 309
2.9
5 000
2.7
2.5
-
2009
2010
2011
NII
2012
H1
• Endowment income
(interest rate changes)
• Change in asset mix
• Loan & deposit pricing
dynamics
• Level of competition
2013
NIM
62
CREDIT LOSS RATIO –
HIGHLY CYCLICAL
CLR (%)
1,72
1,60
• Change in asset mix
1,46
1,46
1,31
1,21
1,11
1,24
• Provisioning methodology
assumptions & changes
• Level of balance sheet
provisioning
1,10
1,00
Target range
60 - 100bps
H1
2009
H1
2010
Total impairments
H1
2011
H1
2012
• Client indebtedness &
collateral values
H1
2013
• Post write off recoveries
Specific impairments
63
PRUDENT PROVISIONING &
EARLY ACTION
Total & specific coverage (%)
Defaulted advances (Rm, annualised)
Defaulted advances as % of book (%)
13,1%
5,8%
6,2%
2,1%
H1
2009
38,6
28,0%
31,6%
35,8%
Write-offs (Rm)
3,5%
2,5%
25 437
35,9
45,4
28 367
H1
2010
Retail
25 418
H1
2011
Wholesale
21 838
20 176
H1
2012
H1
2013
2 350
2 842
52,9%
58,8%
39,0%
40,9%
3 082
2 749
2 302
Post write-off recoveries (Rm)
198
249
290
H1
2009
H1
2010
H1
2011
428
412
H1
2012
H1
2013
Group
64
NIR GROWTH & EXPENSE
MANAGEMENT KEY DIFFERENTIATORS
NIR-to-expense ratio (%)
Contribution
(%)
Contribution
6%
88,7
13%
> 85,0
83,0
10%
71%
80,8
78,2
75,5
Comm & Fees
Trading
Insurance
Other
5%
15%
44%
H1
2009
NIR
growth: 8,5%
H1
2010
H1
2011
H1
2012
H1
2013
M-L term
target
16%
11%
14,5%
15,9%
15,8%
15,4%
Retail
Capital
BB 9%
Wealth
Corporate
Other
65
NIR GROWTH & EXPENSE
MANAGEMENT KEY DIFFERENTIATORS
Nedbank NIR & expenses growth (%)
20%
CAGR
(2009 to H1 2013*)
16%
12,5%
12,3%
12%
• NIR growth has increased at
a faster rate than expense
growth
despite
8%
9,2%
4%
enabling
0%
Jaws:
• Investing for growth
2009
2010
2011
2012
0,8%
1,1%
1,1%
2,6%
NIR
* H1 2013 annualised on 2009 FYE
H1
2013
7,4%
• Positive jaws to widen, over
a sustained period – a key
differentiator for Nedbank
NIR excl FV
66
STRONG WHOLESALE & HIGH ROE
HIGH GROWTH WEALTH BUSINESSES,
WHILE REPOSITIONING RETAIL
45%
For the period H1 2013
ROE (excl goodwill)
40%
Wealth
35%
30%
Capital
Corporate
25%
20%
15%
BB
Cost of capital
10%
Retail
5%
0%
0
5
Relative size of headline earnings
10
15
Allocated economic capital (Rbn)
20
25
67
SOLID ADVANCES GROWTH –
PORTFOLIO TILT
Advances growth
Rbn
450,3
475,3
499,0
527,2
557,3
MIX
2,0%
14,3%
4,0%
12,8%
17,6%
24,4%
2009
2010
2011
Home loans
Term loans
Vehicle Asset Finance
Other
2012
CPF
Personal loans
Card
H1
2013
• Good opportunities in
card, vehicle Finance
• Strong positioning in
commercial property
finance & wholesale
lending (term loans)
• Slowed down personal
loan growth given market
risk
• Poor home loan
economics & downside
risk drives focus on own
originated loans
68
DEPOSITS A KEY FOCUS AREA
Deposit growth
Rbn
469,4
490,4
524,1
550,9
578,8
MIX
14,4%
9,9%
• Strong positioning in call
& term
39,9%
• Focus on growing CASA
balances off primary
banking client gains
9,8%
2010
2011
Other
Cash Man
Call & Term deposits
Current Accounts
*NCDs: Negotiable Certificate of Deposits
2012
H1
2013
• Success from cash
management solutions
6,1%
3,4%
2009
• Less reliance on
expensive NCDs
• Low reliance of foreign
funding
NCDs*
Fixed deposits
Savings accounts
69
STRONG BASEL III POSITION
Capital:

• LCR:
Only 2015
Phased
in from 2015
• Pro-forma ratio: compliant
Common equity tier 1 ratio (%)
NSFR:
Basel III target range:
10,5 – 12,5%
11,6

11,8
Only 2018
• Anticipate pragmatic approach
Funding:

• Ave. LT funding ratio: 28,0%
• Surplus liquidity buffer R25bn
• Successful placement of LT funding
Leverage:
30 Dec 2012
(Pro-forma Basel III)
30 June
2013
(Basel III)

• Pro-forma leverage ratio 16,3x (incl
commitments) vs. SARB max (25,0) &
BIII max (33,3x)
70
HEALTHY CAPITAL POSITION AND
LOWER DIVIDEND COVER
Nedbank NAV per share & growth
(Rbn, %)
Dividend cover ratio
(x)
2,25 – 2,75x
9,3%
2012
H1 2013
2.30
2.30
2.26
10753
2011
2009
2010
2011
2.18
2010
1,75 – 2,25x
2.18
2009
9831
9100
8,0%
12180
9,4%
11721
9,7%
2012
H1 2013
71
KEY PERFORMANCE INDICATORS
Jun
2013
Dec
2012
ROE (excl goodwill)
16,1%
16,4%
Diluted HEPS growth
12,6%
19,0%
Dividend per share growth
14,7%
24,3%
Credit loss ratio
1,31%
1,05%
NIR : expense ratio
88,7%
84,4%
Efficiency ratio
54,2%
55,6%
Common equity tier 1 CAR
11,8%
11,6%1
1. CAR for Dec 2012 on proforma Basel III basis, June 2013 on Basel III basis
72
LOOKING FORWARD:
2013 GUIDANCE
2013 SA GDP growth:
2,0%
NII
Interest rates:
Increase in late 2014
Inflation:
Upper-end of
SARB range
Advances growth at mid-to-upper single digits
Margin to remain at levels similar to 2012
CLR
Improve from the June 2013 level, but remain above the top end
of the through-the-cycle target range (60 – 100bps)
NIR
Low double digit growth (excluding fair-value adjustments)
Expenses
Mid-to-upper single digit growth
73
NEDBANK GROUP’S INVESTMENT
CASE
Price to tangible NAV
• Competitive franchises & diversified
2.81
portfolio
• Attractive growth strategy (incl NIR
growth, Retail positioning, Wealth
potential)
2.09
1.92
1.71
• Longer-term risk mitigated strategy
in Rest of Africa, with unmatched
Pan-African geographic footprint
• Strong balance sheet – well
positioned for the future, and lower
dividend cover
2009
2010
2011
2012
2013
Standard Bank (SBK)
Barclays Africa (BGA)
FirstRand (FSR)
Nedbank (NED)
• Stable, experienced management
team & differentiated values based
culture
74