Nedbank Group Limited interim results 2011
Ref 74/11
1 August 2011
Old Mutual plc
Nedbank Group Limited interim results 2011
Old Mutual plc announces that its majority owned South African banking subsidiary Nedbank Group Limited ("Nedbank Group") released its interim results for the six months ended 30 June 2011 today, 1 August 2011. The full Nedbank Group interim results together with detailed financial information in HTML and PDF formats, financial results presentation to analysts and a link to a webcast of the presentation to analysts can be found on the company's website www.nedbankgroup.co.za.
The following is the full text of Nedbank Group's announcement:
"REVIEWED CONDENSED FINANCIAL RESULTS
for the six MONTHS ended 30 June 2011
Headline earnings R2 772m up 28,8%
Diluted headline earnings per share 600 cents up 26,3%
Strong NIR growth R7 139m up 15,9%
ROE (excluding goodwill) 13,7% and ROE 12,2%
Capital adequacy further strengthened (core Tier 1: 10,7%)
Interim dividend per share up 25,0%, to 265 cents
The growth trend of the second half of 2010 continued into the first half of 2011. During the past six months Nedbank Group has made good progress with its key strategic focus areas of repositioning Nedbank Retail, growing non-interest revenue and implementing a portfolio tilt strategy. This has resulted in the group delivering strong earnings growth while further strengthening portfolio impairments.
'Given our focus on growing the transaction franchise, it is pleasing to see that, since June 2010, we gained 94 000 net new retail primary clients. We increased the number of branches and other outlets by 116 and ATMs by 420, while transactional pricing is now at levels similar to 2005. We continue to see record transaction volume growth in electronic banking and increased net new primary client gains in the wholesale banking areas.
'The group remains focused on a client-centred strategy and is well positioned to deliver growth in earnings for 2011 in excess of our medium- to long-term financial target.'
Mike Brown
Chief Executive
Economic environment
Global demand has slowed in 2011 as industrial production and consumer spending in China and other large emerging markets moderated due to tighter monetary conditions. In many developed markets the fragile recovery faltered as surging oil prices and reduced fiscal and monetary stimulus negatively impacted consumer confidence and spending. In addition, concerns remain about the scale and increasing cost of sovereign debt in many parts of Europe.
Locally, real GDP grew at an annualised rate of 4,8% in the first quarter of 2011. Conditions softened in the second quarter, with the mining and manufacturing sectors in particular having been impacted by the loss of momentum in global markets and the strong rand. Capacity utilisation and confidence levels remain low, resulting in limited demand for corporate credit.
In the retail sector household loan growth was mostly from continued demand for unsecured loans and instalment sales. Mortgage advances growth remained depressed as buyers continue to be cautious in line with the flat outlook for house prices, high levels of consumer debt and increased living costs.
Given the weak global environment, domestic growth is largely dependent on further fixed-investment spending and an ongoing improvement in consumption levels.
Review of results¹
Nedbank Group produced strong earnings growth for the six months ended 30 June 2011 ('the period') in line with the guidance provided in the trading statements released in July this year.
Headline earnings increased by 28,8% to R2 772 million and profit from operations before taxation and non-trading and capital items was up 36,1%. Diluted headline earnings per share (HEPS) increased by 26,3% from 475 cents to 600 cents. Diluted basic earnings per share increased by 26,2% from 474 cents to 598 cents.
Earnings growth was driven by ongoing strong non-interest revenue (NIR) growth, improving margins and lower retail impairments. This growth was achieved while continuing to invest for the future and strengthening portfolio impairments.
Return on assets increased from 0,75% to 0,92% for the period. This increase, together with a decline in gearing to 13,3 times, resulted in the group's return on average ordinary shareholders' equity (ROE), excluding goodwill, increasing from 12,2% to 13,7%. ROE increased from 10,7% to 12,2% for the period.
The balance sheet remained well-capitalised, with the core Tier 1 capital adequacy ratio increasing to 10,7% (December 2010: 10,1%), while the group's Tier 2 capital position was reduced when the R1,5 billion Ned 5 bond was repaid in April 2011 and not replaced. The group's liquidity buffers were increased by R9,0 billion and the long-term funding profile continued to lengthen to 27,0%, all this in proactive preparation for Basel III.
Net asset value per share grew by 6,1% (annualised) from 9 831 cents in December 2010 to 10 128 cents in June 2011.
Cluster performance¹
Total operating cluster headline earnings increased strongly by 43,0% from R2 015 million to R2 881 million.
Nedbank Retail increased earnings from R133 million in 2010 to R826 million and, importantly, improved ROE from 1,7% to 9,9%. The repositioning of Nedbank Retail is being driven through a client-centred strategy of growing the primary-client base while leveraging the strong product lines. This has generated high levels of NIR growth and a significantly improving credit loss ratio, notwithstanding the continued strengthening of portfolio impairments.
Nedbank Capital's earnings reduced by 5,9% on the comparative period, with fee income down from lower market activity, and the credit loss ratio showed a slight deterioration from the prior period's elevated level. Nedbank Capital reported an increase of 4,3% in its NIR from trading. There has been some margin compression in foreign exchange flow businesses, and the market provided limited trading opportunities.
Nedbank Corporate achieved strong earnings growth of 24,0%, driven by improved margins, fair-value adjustments and improved income from its property private-equity portfolio.
Nedbank Business Banking's earnings were up 3,9%, reflecting the difficult conditions being experienced in the small to medium-sized business sector. In spite of this the cluster achieved an improvement in margins, above-inflation growth in fees and commission, primary-client acquisitions and deepened cross-sell.
Nedbank Wealth achieved good earnings growth of 16,6%, with strong contributions from insurance and asset management together with an improvement in the international wealth management businesses. Apart from strong growth in advice-based sales of financial planning, local Wealth Management had a disappointing performance in the first half of the year as a result of subdued activity and higher impairments.
Further segmental information is available on the group's website at www.nedbankgroup.co.za.
Financial performance
Net interest income (NII)
NII grew by 7,4% to R8 683 million (June 2010: R8 082 million). The net interest margin increased to 3,43% from 3,34% in the June 2010 period and 3,35% in the year to December 2010, while average interest-earning banking assets increased by 5,9% (annualised) (June 2010 growth: 2,8%).¹
The pleasing trend of widening margins can be ascribed to:
- the benefits from pricing assets to reflect risk (including both credit and liquidity risks) and funding costs more appropriately;
- ongoing improvement in the asset mix in line with the group's portfolio tilt strategy;
- a relative benefit this period from interest rates remaining stable, given that advances reprice quicker than deposits; and
- the cost of term liquidity continuing to decline.
This more than offset the effects of:
- the negative endowment from average rates being 123 basis points lower than in the 2010 period;
- the cost of lengthening the bank's funding profile; and
- the costs associated with carrying higher levels of lower-yielding liquid assets.
Impairments charge on loans and advances
Impairment levels improved as a result of a better credit environment and affordability levels together with enhanced collection capabilities and reduced levels of defaulted advances.
|
Credit loss ratio analysis (%) |
H1 |
Q1 |
H2 |
H1 |
|
|
2011 |
2011 |
2010 |
2010 |
|
Specific impairments |
1,10 |
1,12 |
1,19 |
1,46 |
|
Portfolio impairments |
0,11 |
0,03 |
0,08 |
0,00 |
|
Total credit loss ratio |
1,21 |
1,15 |
1,27 |
1,46 |
The credit loss ratio on the banking book improved to 1,21% for the period (June 2010: 1,46%). The credit loss ratio relating to specific impairments improved from 1,46% to 1,10%, reflecting the ongoing improvement in asset quality. Due to the current uncertain economic environment and as a result of increased emergence periods, the group has increased the level of portfolio impairments , as well as included R100 million in the centre to provide for unknown events that may have already occurred, but which will only be evident in the future.¹
The primary reduction in the impairments charge came from Nedbank Retail's secured-lending portfolios, due to the momentum gained from the improved credit environment and various risk management mitigation initiatives. This contributed to the credit loss ratio in Retail improving significantly from 2,93% in the period to June 2010 to 2,24%, which is now marginally outside the upper end of the cluster's through-the-cycle target range of 1,50% to 2,20%.¹
The advances portfolios in Nedbank Capital, Nedbank Corporate, Nedbank Business Banking and Nedbank Wealth remain of high quality. Credit loss ratios in these clusters, with the exception of Nedbank Capital, remain within the respective clusters' through-the-cycle levels.
|
Credit loss ratio (%) |
|
|
|
Year to |
|
|
H1 |
H2 |
H1 |
December |
|
|
2011 |
2010 |
2010 |
2010 |
|
Nedbank Capital |
0,86 |
1,72 |
0,80 |
1,27 |
|
Nedbank Corporate |
0,34 |
0,10 |
0,31 |
0,20 |
|
Nedbank Business Banking |
0,40 |
0,48 |
0,32 |
0,40 |
|
Nedbank Retail |
2,24 |
2,42 |
2,93 |
2,67 |
|
Nedbank Wealth |
0,41 |
0,05 |
0,24 |
0,15 |
|
Group |
1,21 |
1,27 |
1,46 |
1,36 |
Defaulted advances declined by 11,5% (annualised) to R25 241 million (2010: R26 765 million). This reflects writeoffs as well as the improved collections processes and credit environment, together with ongoing restructuring initiatives that have resulted in over 10 700 families (clients of Nedbank) being kept in their homes since July 2009.
NIR
NIR increased 15,9% to R7 139 million (June 2010: R6 158 million) and 12,5% before fair-value adjustments. Negative fair-value adjustments on own subordinated debt amounted to R46 million (June 2010: R110 million).¹
In line with the group's focus on growing the transactional franchise, core fee and commission income grew strongly by 14,1%. Ongoing primary-client acquisitions, product and systems innovation, record electronic-banking volume growth, cross-sell initiatives and the ability to leverage the group's strong wholesale client relationships to attract retail clients all contributed to this growth.
Insurance income grew 30,2% as a result of the growth in personal loans and motor finance, new-product revenues and cross-sell as well as an improved underwriting performance.
Trading income increased by 3,3% to R921 million (June 2010: R892 million).
NIR from the private-equity portfolios increased by 93,0%, primarily as a result of Nedbank Corporate's property private-equity earnings improving.
|
NIR from private equity (Rm) |
|
June |
June |
|
|
|
2011 |
2010 |
|
Nedbank Capital |
|
85 |
86 |
|
Nedbank Corporate Property Finance |
|
52 |
(15) |
|
Total NIR from private equity |
|
137 |
71 |
Expenses¹
Expenses grew by 12,3% to R8 838 million (June 2010: R7 872 million), including significant investment in growing the franchise. Increases in distribution, cash fees and an increase in variable compensation also contributed to the growth in expenses.
With the strong growth in NIR the group's NIR-to-expenses ratio improved from 78,2% to 80,8%. However, the muted growth in NII led to the efficiency ratio deteriorating from 55,3% to 55,9%.
Taxation¹
The taxation charge (excluding taxation on non-trading and capital items) increased from R577 million for the period to June 2010 to R1 013 million, with the effective tax rate at a more normalised level of 25,7%. This was mainly due to:
- the 36,1% growth in income before taxation;
- dividend income as a proportion of total income being lower than in the comparative period in 2010;
- the reversal of certain tax risk provisions in 2010; and
- secondary tax on companies savings in the first six months of 2010 due to the takeup of the scrip alternative offered in that period.
Statement of financial position
Capital
The group's capital adequacy ratios remain well above its internal target ranges in preparation for Basel III, and showed further strengthening since December 2010. This resulted mainly from a R451 million increase in equity from the vesting of shares under the staff incentive schemes and black economic empowerment (BEE) structures, organic earnings and further risk-weighted asset (RWA) optimisation, which included a R4 billion reduction in market risk RWA with the adoption of the Internal Model Approach approved by the South African Reserve Bank (SARB) with effect from 1 January 2011.
In view of the predominate focus of Basel III on core Tier 1 capital and the group's high total capital ratio of 15,2% Nedbank Limited's Tier 2 bond (Ned 5) amounting to R1,5 billion was repaid in April 2011 and not replaced.
|
Basel II capital |
June |
December |
Internal |
Regulatory |
|
adequacy ratios |
2011 |
2010 |
target range |
minimum |
|
Core Tier 1 ratio |
10,7% |
10,1% |
7,5% to 9,0% |
5,25% |
|
Tier 1 ratio |
12,4% |
11,7% |
8,5% to 10,0% |
7,00% |
|
Total capital ratio |
15,2% |
15,0% |
11,5% to 13,0% |
9,75% |
Ratios calculated including unappropriated profits.
Further details will be available in the group's 30 June 2011 Pillar 3 Report to be published in September 2011 on the group's website at www.nedbankgroup.co.za.
Capital allocation to businesses
Enhancements relating to the internal capital allocation to business clusters were implemented for 2011. The major change related to home loans, with more use of loan-to-value (LTV) bands to measure estimated loss given default in order better to reflect the risk inherent in that portfolio, which resulted in the home loan capitalisation rate increasing from 3,2% to 5,1%. Clusters' individual capital allocation will naturally change due to any RWA optimisation and changes in the risk profile of their different portfolios. Other than the improvements from RWA optimisation, these enhancements had no impact on the group's overall capital levels and ROE.
Funding and liquidity
Nedbank Group's liquidity position remains sound. The group continues to focus on diversifying its funding base, maintaining its strong retail deposit market share, growing its commercial deposit base, lengthening its funding profile and growing appropriate liquidity buffers, which have been increased by R9 billion during this period.
Nedbank Group increased its long-term funding ratio from 22,6% in December 2010 to 27,0% in June 2011 from increased capital market issuances under its domestic medium-term note programme (R3,7 billion issued during this period), from the launch of a retail savings bond and also from the increased duration in the money market book.
The group's liquidity position is further supported by a strong loan-to-deposit ratio of 95,5% and a low reliance on interbank and foreign currency funding.
Basel III and Solvency II developments
The majority of the Basel III proposals were finalised in December 2010, although some significant aspects remain to be completed in 2011. In South Africa the details of exactly how Basel III will be adopted will be determined by SARB, and this is anticipated to be clarified in 2012.
For Nedbank Group the impact of the new capital requirements is expected to be manageable, given existing strong capital ratios and the high quality of core Tier 1 equity. On a Basel III pro forma basis at 30 June 2011 the group is in a position to absorb the expected Basel III capital implications, with all capital ratios remaining well above the top end of current internal target ranges and expected regulatory minima. These ratios should improve further by the end of 2013 from projected earnings, while continued capital and RWA optimisation and the group's portfolio tilt strategy should have a further favourable effect on the capital ratios.
Once Basel III has been finalised by SARB Nedbank Group will revise its internal target capital ratios.
The main challenge of Basel III is in respect of the two proposed liquidity ratios, the liquidity coverage ratio (LCR) for implementation in 2015 and the net stable funding ratio (NSFR) for implementation in 2018. The group, together with the industry, remains focused on how best to comply with the LCR ahead of 2015. The impact of NSFR compliance by South African and most banking industries worldwide would be punitive if implemented as is. The structural constraints within the SA financial markets add to the local challenge of NSFR compliance; however, this is being proactively addressed by National Treasury in conjunction with the financial services industry. The group anticipates that, following the observation period that will commence in 2012, the Basel Committee will amend the NSFR requirement, and a pragmatic approach on this issue will be applied prior to the finalisation in 2018.
Solvency Assessment and Management (SAM) is the Financial Services Board's new economic risk-based solvency regime for SA insurers that closely follows international regulatory trends, in particular Solvency II. SAM affects the Nedbank Wealth Cluster and is set for 2014 implementation.
Loans and advances
Group loans and advances decreased by 1,4% (annualised) to R472 billion (December 2010: R475billion).¹ Since June 2010 loans and advances increased by 2,3%.¹
Banking advances in Nedbank Capital declined 2,2% (annualised) and Nedbank Corporate's banking advances decreased by 3,9% (annualised). This reflects gross new advances being offset by the effect of slow utilisation of credit facilities, early unscheduled repayments and delays in both public and private sector investment programmes. The pipelines in the wholesale banking areas remain strong and growth is expected to increase in the second half.
Nedbank Business Banking advances increased by 35,7% (annualised) and Nedbank Retail advances decreased by 7,9% (annualised) due to migrations from Nedbank Retail of R8,2 billion of former Imperial Bank Supplier Asset Finance and Professional advances and R1,0 billion from Small Business Services under Retail Relationship Banking. Adjusting for these two movements, Business Banking advances decreased by 0,8% (annualised) and Retail advances grew by 2,1% (annualised). Strategic rebalancing of the asset portfolio in Nedbank Retail, on a like-for-like basis, resulted in a decrease in home loans of 2,7% (annualised) and an increase in motor finance of 7,5% (annualised). Unsecured lending continued to grow with personal loans and card receivables increasing by 26,5% (annualised) and 13,6% (annualised) respectively.
Deposits
Deposits increased by 1,5% (annualised) to R494 billion (2010: R490 billion). This resulted in the ratio of advances to deposits remaining strong at 95,5% (2010: 96,9%).¹
Lower-interest-bearing current and savings accounts have shown less growth than higher-interest-bearing term and fixed deposits. Although favourable for the group's funding strategy of lengthening the term deposit book, the group remains focused on optimising the mix of deposits.
In March this year Nedbank launched its retail savings bond to support a lengthening in the bank's funding profile. This offering was well received by clients and attracted in excess of R2 billion of competitively priced new term funds.
Outlook
Domestic economic growth of 3,5% is currently anticipated for the full year. Increases in international food and fuel prices are expected to push inflation to the upper limit of the target band of 3% to 6% in the final quarter of 2011. The group expects interest rates to remain at current levels for the balance of 2011, with increases currently expected from the first quarter of 2012. Asset growth is expected to remain at conservative levels due to slow employment growth, relatively high levels of debt compared with historic levels, increases in electricity and fuel costs, and concerns about the possibility of interest rate hikes in 2012.
The growth in the SA economy will be dependent on global economic and financial developments, further fixed and infrastructure investment and ongoing improvement in consumption levels. Economic activity is expected to be subdued for the balance of 2011. However, corporate credit demand is expected to improve slightly as the recovery in capital expenditure builds momentum and demand for funding increases. The operating environment for small and medium-sized businesses remains challenging.
Government infrastructure spending will be relatively insensitive to the economic cycle, with substantial amounts set aside to accelerate social and economic infrastructure as announced in this year's National Budget. The flow of this investment should improve as the year progresses, but is only expected to accelerate in 2012.
The retail banking sector should continue to improve modestly as a result of transactional volume growth, with lending activity remaining much the same as in this reporting period.
Prospects
For the full year the group currently expects:
- interest margins to remain at similar levels to those of the first half;
- banking advances to grow in the lower to mid-single digits;
- impairments to continue improving, with the credit loss ratio reducing but remaining above the upper end of the group's target range of 0,60% to 1,00%;
- NIR (excluding fair-value adjustments) to grow at double digits; and
- expenses to grow in early double digits, but to remain less than NIR growth.
The balance sheet remains liquid, strongly capitalised and in a good position to take advantage of growth opportunities as they arise.
The group has had a positive start to the year and remains in a good position to deliver growth in 2011 earnings in excess of its medium- to long-term financial target.
Shareholders are advised that these forecasts have not been reviewed or reported on by the group's auditors.
Board and executive changes during the period
As previously advised, senior independent non-executive director Chris Ball retired as a director of Nedbank Group and Nedbank Limited with effect from 6 May 2011, after reaching the mandatory retirement age for directors. The group would like to thank Chris for his significant contribution to the board since his appointment in 2002.
Malcolm Wyman was appointed as senior independent non-executive director and also succeeded Chris as Chairman of the Group Audit Committee.
Two appointments to the Group Executive Committee were made during the period. Abe Thebyane joined as Group Executive of Human Resources with effect from 1 February 2011 and Thulani Sibeko was appointed as Group Executive of Marketing, Communications and Corporate Affairs with effect from 1 May 2011.
Selby Baqwa retired as Chief Governance and Compliance Officer at the end of July 2011 and was requested to take up a position as an acting judge in Pretoria. We thank him for his contribution to the Group Executive Committee and wish him well. We are making good progress with appointing a replacement and an announcement in this regard will be made in due course.
Accounting policies¹
Nedbank Group Limited is a company domiciled in South Africa. The condensed consolidated interim financial results of the group at and for the six months ended 30 June 2011 comprise the company and its subsidiaries (the 'group') and the group's interests in associates and jointly controlled entities.
Nedbank Group's principal accounting policies have been prepared in terms of the International Financial Reporting Standards (IFRS) and have been applied consistently over the current and prior financial years. Nedbank Group's condensed consolidated interim financial results have been prepared in accordance with International Accounting Standard (IAS) 34: Interim Financial Reporting and AC 500 standards as issued by the Accounting Practices Board.
In the preparation of these condensed consolidated interim financial results the group has applied key assumptions concerning the future and other inherent uncertainties in recording various assets and liabilities. The assumptions applied in the financial results for the six months ended 30 June 2011 were consistent with those applied during the 2010 financial year. These assumptions are subject to ongoing review and possible amendments. The results for the condensed segmental reporting for the period ended at 30 June 2010 have been restated for the integration of Imperial Bank Limited with various operating segments. These restatements have no effect on the group results and ratios, and only changes segment cluster results and ratios. The financial results have been prepared under the supervision of RK Morathi, the Group Chief Financial Officer.
Events after the reporting period¹
There are no material events after the reporting period to report on.
Reviewed results - auditors' review report
KPMG Inc and Deloitte & Touche, Nedbank Group's independent auditors, have reviewed the condensed consolidated interim financial results of Nedbank Group Limited and have expressed an unmodified review conclusion on the condensed consolidated interim financial results. The auditors' review was conducted in accordance with International Standards on Review Engagements (ISRE 2410): Review of Interim Financial Information Performed by the Independent Auditor of the Entity. The condensed consolidated financial results comprise the consolidated statement of financial position at 30 June 2011, consolidated statement of comprehensive income, condensed consolidated statement of changes in equity, condensed consolidated cashflow statement for the six months then ended and selected explanatory notes. The selected explanatory notes are marked with¹. The report is available for inspection at Nedbank Group'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 that, by their nature, involve risk and uncertainty because they relate to events and depend on circumstances that may or may not 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; as well as competitive and regulatory factors. By consequence, all forward-looking statements have not been reviewed or reported on by the group's auditors.
Interim dividend declaration
Notice is hereby given that an interim dividend of 265 cents per ordinary share has been declared, payable to shareholders for the six months ended 30 June 2011. In accordance with the provisions of STRATE, the electronic settlement and custody system used by JSE Limited, the relevant dates for the dividend are as follows:
|
Event |
Date |
|
Last day to trade (cum dividend) |
Friday, 2 September 2011 |
|
Shares commence trading (ex dividend) on |
Monday, 5 September 2011 |
|
Record date (date shareholders recorded in books) |
Friday, 9 September 2011 |
|
Payment date |
Monday, 12 September 2011 |
Share certificates may not be dematerialised or rematerialised between Monday, 5 September 2011, and Friday, 9 September 2011, both days inclusive.
On Monday, 12 September 2011, the dividend will be electronically transferred to the bank accounts of all certificated shareholders where this facility is available. Where electronic funds transfer is either not available or not elected by the shareholder, cheques dated Monday, 12 September 2011, will be posted on that date.
Holders of dematerialised shares will have their accounts credited at their participant or broker on Monday, 12 September 2011.
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.
For and on behalf of the board
|
Dr RJ Khoza |
MWT Brown |
|
Chairman |
Chief Executive |
1 August 2011
Registered office
Nedbank Group Limited
Nedbank Sandton, 135 Rivonia Road, Sandown, Sandton, 2196.
PO Box 1144, Johannesburg, 2000.
Transfer secretaries in South Africa
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001, South Africa.
PO Box 61051, Marshalltown, 2107, South Africa.
Transfer secretaries in Namibia
Transfer Secretaries (Pty) Limited
Shop 8, Kaiserkrone Centre, Post Street Mall, Windhoek, Namibia.
PO Box 2401, Windhoek, Namibia.
Directors
Dr RJ Khoza (Chairman),
MWT Brown* (Chief Executive),
TA Boardman,
TCP Chikane,
GW Dempster* (Chief Operating Officer),
MA Enus-Brey,
Prof B de L Figaji,
DI Hope (New Zealand),
A de VC Knott-Craig,
WE Lucas-Bull,
NP Mnxasana,
RK Morathi* (Chief Financial Officer),
JK Netshitenzhe,
JVF Roberts (British),
GT Serobe,
MI Wyman** (British).
* Executive
** Senior independent non-executive
Company Secretary
GS Nienaber
Sponsors in South Africa
Merrill Lynch South Africa (Pty) Limited
Nedbank Capital
Sponsor in Namibia: Old Mutual Investment Services (Namibia) (Pty) Limited
This announcement is available on the group's website at www.nedbankgroup.co.za, together with the following additional information:
- Detailed financial information in HTML and PDF formats.
- Financial results presentation to analysts.
- Link to a webcast of the presentation to analysts.
For further information kindly contact Nedbank Group Investor Relations at nedbankgroupir@nedbank.co.za.
|
Financial highlights at |
|
Reviewed |
Reviewed |
Audited |
|
|
|
30 June |
30 June |
31 December |
|
|
|
2011 |
2010 |
2010 |
|
Statistics |
|
|
|
|
|
Number of shares listed |
m |
507,4 |
512,6 |
514,9 |
|
Number of shares in issue, excluding shares held by group entities |
m |
454,4 |
445,8 |
448,6 |
|
Weighted average number of shares |
m |
451,2 |
440,7 |
443,9 |
|
Diluted weighted average number of shares |
m |
462,2 |
453,7 |
458,2 |
|
Headline earnings per share |
cents |
614 |
489 |
1 104 |
|
Diluted headline earnings per share |
cents |
600 |
475 |
1 069 |
|
Ordinary dividends declared per share |
cents |
265 |
212 |
480 |
|
- Interim |
cents |
265 |
212 |
212 |
|
- Final |
cents |
|
|
268 |
|
Ordinary dividends paid per share |
cents |
268 |
230 |
442 |
|
Dividend cover |
times |
2,32 |
2,31 |
2,30 |
|
Net asset value per share |
cents |
10 128 |
9 397 |
9 831 |
|
Tangible net asset value per share |
cents |
8 477 |
7 732 |
8 160 |
|
Closing share price |
cents |
14 650 |
12 000 |
13 035 |
|
Price/earnings ratio |
historical |
12 |
12 |
12 |
|
Market capitalisation |
Rbn |
74,3 |
61,5 |
67,1 |
|
Number of employees |
|
28 210 |
26 924 |
27 525 |
|
Key ratios (%) |
|
|
|
|
|
Return on ordinary shareholders' equity (ROE) |
|
12,2 |
10,7 |
11,8 |
|
ROE, excluding goodwill |
|
13,7 |
12,2 |
13,4 |
|
Return on total assets (ROA) |
|
0,92 |
0,75 |
0,82 |
|
Net interest income to average interest-earning banking assets |
|
3,43 |
3,34 |
3,35 |
|
Non-interest revenue to total income |
|
45,1 |
43,2 |
44,3 |
|
Credit loss ratio - banking advances |
|
1,21 |
1,46 |
1,36 |
|
Non-interest revenue to total operating expenses |
|
80,8 |
78,2 |
79,6 |
|
Efficiency ratio |
|
55,9 |
55,3 |
55,7 |
|
Effective taxation rate |
|
25,7 |
19,9 |
20,7 |
|
Group capital adequacy ratios: Basel II (including unappropriated profits) |
|
|
|
|
|
- Core Tier I |
|
10,7 |
9,9 |
10,1 |
|
- Tier 1 |
|
12,4 |
11,5 |
11,7 |
|
- Total |
|
15,2 |
14,8 |
15,0 |
|
Statement of financial position statistics (Rm) |
|
|
|
|
|
Total equity attributable to equity holders of the parent |
|
46 022 |
41 893 |
44 101 |
|
Total equity |
|
49 728 |
45 572 |
47 814 |
|
Amounts owed to depositors |
|
493 974 |
480 418 |
490 440 |
|
Loans and advances |
|
471 918 |
461 303 |
475 273 |
|
- Gross |
|
483 385 |
471 392 |
486 499 |
|
- Impairment of loans and advances |
|
(11 467) |
(10 089) |
(11 226) |
|
Total assets administrated by the group |
|
715 570 |
680 285 |
711 288 |
|
- Total assets |
|
609 875 |
590 847 |
608 718 |
|
- Assets under management |
|
105 695 |
89 438 |
102 570 |
|
Life assurance embedded value |
|
1 122 |
977 |
1 031 |
|
Life assurance value of new business |
|
152 |
134 |
295 |
Consolidated statement of comprehensive income
|
for the period ended |
Reviewed |
Reviewed |
Audited |
|
|
30 June |
30 June |
31 December |
|
Rm |
2011 |
2010 |
2010 |
|
Interest and similar income |
21 030 |
22 173 |
44 377 |
|
Interest expense and similar charges |
12 347 |
14 091 |
27 769 |
|
Net interest income |
8 683 |
8 082 |
16 608 |
|
Impairments charge on loans and advances |
2 792 |
3 244 |
6 188 |
|
Income from lending activities |
5 891 |
4 838 |
10 420 |
|
Non-interest revenue |
7 139 |
6 158 |
13 215 |
|
Operating income |
13 030 |
10 996 |
23 635 |
|
Total operating expenses |
8 838 |
7 872 |
16 598 |
|
- Operating expenses |
8 788 |
7 812 |
16 450 |
|
- BEE transaction expenses |
50 |
60 |
148 |
|
Indirect taxation |
252 |
230 |
447 |
|
Profit from operations before non-trading and capital items |
3 940 |
2 894 |
6 590 |
|
Non-trading and capital items |
(16) |
(6) |
(91) |
|
- Net profit/(loss) on sale of subsidiaries, investments, and property and equipment |
16 |
(6) |
(4) |
|
- Net impairment of investments, property and equipment, and capitalised development costs |
(32) |
|
(87) |
|
Profit from operations |
3 924 |
2 888 |
6 499 |
|
Share of profits of associates and joint ventures |
|
|
1 |
|
Profit before direct taxation |
3 924 |
2 888 |
6 500 |
|
Total direct taxation |
1 005 |
574 |
1 364 |
|
- Direct taxation |
1 013 |
577 |
1 366 |
|
- Taxation on non-trading and capital items |
(8) |
(3) |
(2) |
|
Profit for the period |
2 919 |
2 314 |
5 136 |
|
Other comprehensive income/(loss) net of taxation |
79 |
(111) |
(77) |
|
- Exchange differences on translating foreign operations |
87 |
(99) |
(246) |
|
- Fair-value adjustments on available-for-sale assets |
(8) |
(14) |
(3) |
|
- Gains on property revaluations |
|
2 |
172 |
|
Total comprehensive income for the period |
2 998 |
2 203 |
5 059 |
|
Profit attributable to: |
|
|
|
|
Equity holders of the parent |
2 764 |
2 150 |
4 811 |
|
Non-controlling interest - ordinary shareholders |
12 |
33 |
59 |
|
Non-controlling interest - preference shareholders |
143 |
131 |
266 |
|
Profit for the period |
2 919 |
2 314 |
5 136 |
|
Total comprehensive income attributable to: |
|
|
|
|
Equity holders of the parent |
2 842 |
2 036 |
4 734 |
|
Non-controlling interest - ordinary shareholders |
13 |
36 |
59 |
|
Non-controlling interest - preference shareholders |
143 |
131 |
266 |
|
Total comprehensive income for the period |
2 998 |
2 203 |
5 059 |
|
Basic earnings per share (cents) |
613 |
488 |
1 084 |
|
Diluted earnings per share (cents) |
598 |
474 |
1 050 |
Headline earnings reconciliation
|
for the period ended |
Reviewed |
Reviewed |
Audited |
|||
|
|
30 June |
30 June |
31 December |
|||
|
|
2011 |
2010 |
2010 |
|||
|
|
|
Net of |
|
Net of |
|
Net of |
|
Rm |
Gross |
taxation |
Gross |
taxation |
Gross |
taxation |
|
Profit attributable to equity holders of the parent |
|
2 764 |
|
2 150 |
|
4 811 |
|
Less: Non-trading and capital items |
(16) |
(8) |
(6) |
(3) |
(91) |
(89) |
|
- Net profit/(loss) on sale of subsidiaries, investments, and property and equipment |
16 |
24 |
(6) |
(3) |
(4) |
(2) |
|
- Net impairment of investments, property and equipment, and capitalised development costs |
(32) |
(32) |
|
|
(87) |
(87) |
|
Headline earnings |
|
2 772 |
|
2 153 |
|
4 900 |
Consolidated statement of financial position
|
at |
Reviewed |
Reviewed |
Audited |
|
|
30 June |
30 June |
31 December |
|
Rm |
2011 |
2010 |
2010 |
|
ASSETS |
|
|
|
|
Cash and cash equivalents |
11 743 |
8 063 |
8 650 |
|
Other short-term securities |
29 125 |
21 080 |
27 044 |
|
Derivative financial instruments |
8 284 |
12 776 |
13 882 |
|
Government and other securities |
36 056 |
40 294 |
31 824 |
|
Loans and advances |
471 918 |
461 303 |
475 273 |
|
Other assets |
7 900 |
6 536 |
10 014 |
|
Clients' indebtedness for acceptances |
2 754 |
1 818 |
1 953 |
|
Current taxation receivable |
618 |
359 |
483 |
|
Investment securities |
12 808 |
11 249 |
11 918 |
|
Non-current assets held for sale |
8 |
|
5 |
|
Investments in associate companies and joint ventures |
1 128 |
902 |
936 |
|
Deferred taxation asset |
229 |
416 |
284 |
|
Investment property |
202 |
211 |
199 |
|
Property and equipment |
5 835 |
5 203 |
5 612 |
|
Long-term employee benefit assets |
2 111 |
1 937 |
2 052 |
|
Mandatory reserve deposits with central banks |
11 654 |
11 278 |
11 095 |
|
Intangible assets |
7 502 |
7 422 |
7 494 |
|
Total assets |
609 875 |
590 847 |
608 718 |
|
EQUITY AND LIABILITIES |
|
|
|
|
Ordinary share capital |
454 |
446 |
449 |
|
Ordinary share premium |
15 968 |
15 050 |
15 522 |
|
Reserves |
29 600 |
26 397 |
28 130 |
|
Total equity attributable to equity holders of the parent |
46 022 |
41 893 |
44 101 |
|
Non-controlling interest attributable to: |
|
|
|
|
- ordinary shareholders |
146 |
117 |
153 |
|
- preference shareholders |
3 560 |
3 562 |
3 560 |
|
Total equity |
49 728 |
45 572 |
47 814 |
|
Derivative financial instruments |
8 894 |
10 903 |
12 052 |
|
Amounts owed to depositors |
493 974 |
480 418 |
490 440 |
|
Provisions and other liabilities |
13 691 |
13 901 |
18 245 |
|
Liabilities under acceptances |
2 754 |
1 818 |
1 953 |
|
Current taxation liabilities |
121 |
212 |
191 |
|
Deferred taxation liabilities |
1 858 |
1 936 |
1 804 |
|
Long-term employee benefit liabilities |
1 458 |
1 338 |
1 414 |
|
Investment contract liabilities |
7 666 |
6 920 |
7 309 |
|
Insurance contract liabilities |
1 541 |
1 235 |
1 392 |
|
Long-term debt instruments |
28 190 |
26 594 |
26 104 |
|
Total liabilities |
560 147 |
545 275 |
560 904 |
|
Total equity and liabilities |
609 875 |
590 847 |
608 718 |
|
Guarantees on behalf of clients |
29 934 |
28 432 |
29 614 |
Condensed consolidated statement of cashflows
|
for the period ended |
Reviewed |
Reviewed |
Audited |
|
|
30 June |
30 June |
31 December |
|
Rm |
2011 |
2010 |
2010 |
|
Cash generated by operations |
7 903 |
7 218 |
15 288 |
|
Change in funds for operating activities |
(2 082) |
(9 708) |
(12 891) |
|
Net cash from/(utilised by) operating activities before taxation |
5 821 |
(2 490) |
2 397 |
|
Taxation paid |
(855) |
(735) |
(2 093) |
|
Cashflows from/(utilised by) operating activities |
4 966 |
(3 225) |
304 |
|
Cashflows utilised by investing activities |
(2 147) |
(2 453) |
(4 438) |
|
Cashflows from financing activities |
833 |
6 644 |
5 504 |
|
Net increase in cash and cash equivalents |
3 652 |
966 |
1 370 |
|
Cash and cash equivalents at the beginning of the period* |
19 745 |
18 375 |
18 375 |
|
Cash and cash equivalents at the end of the period* |
23 397 |
19 341 |
19 745 |
* Including mandatory reserve deposits with central banks.
Condensed consolidated statement of changes in equity
|
|
|
Non- |
Non- |
|
|
|
Total equity |
controlling |
controlling |
|
|
|
attributable |
interest |
interest |
|
|
|
to |
attributable |
attributable |
|
|
|
equity holders |
to ordinary |
to preference |
Total |
|
Rm |
of the parent |
shareholders |
shareholders |
equity |
|
Balance at 31 December 2009 |
39 649 |
1 849 |
3 486 |
44 984 |
|
Dividend to shareholders |
(1 054) |
(8) |
|
(1 062) |
|
Preference share dividend |
|
|
(144) |
(144) |
|
Issues of shares net of expenses |
1 808 |
|
92 |
1 900 |
|
Shares acquired/cancelled by group entities and BEE trusts |
(476) |
|
|
(476) |
|
Total comprehensive income for the period |
2 036 |
36 |
131 |
2 203 |
|
Additional capitalisation of subsidiaries |
|
4 |
|
4 |
|
Share-based payment reserve movement |
22 |
|
|
22 |
|
Buyout of non-controlling interests |
(91) |
(1 764) |
(3) |
(1 858) |
|
Regulatory risk reserve provision |
(2) |
|
|
(2) |
|
Other movements |
1 |
|
|
1 |
|
Balance at 30 June 2010 |
41 893 |
117 |
3 562 |
45 572 |
|
Dividend to shareholders |
(988) |
|
|
(988) |
|
Preference share dividend |
(5) |
|
(137) |
(142) |
|
Issues of shares net of expenses |
475 |
|
|
475 |
|
Dilution of shareholding in subsidiary |
(13) |
13 |
|
- |
|
Total comprehensive income for the period |
2 698 |
23 |
135 |
2 856 |
|
Liquidation of subsidiaries |
(4) |
|
|
(4) |
|
Additional capitalisation of subsidiaries |
|
(2) |
|
(2) |
|
Share-based payment reserve movement |
48 |
|
|
48 |
|
Buyout of non-controlling interests |
|
2 |
|
2 |
|
Regulatory risk reserve provision |
(1) |
|
|
(1) |
|
Other movements |
(2) |
|
|
(2) |
|
Balance at 31 December 2010 |
44 101 |
153 |
3 560 |
47 814 |
|
Dividend to shareholders |
(1 251) |
(9) |
|
(1 260) |
|
Dividend distribution in terms of BEE transaction |
(310) |
|
|
(310) |
|
Preference share dividend |
|
|
(143) |
(143) |
|
Issues of shares net of expenses |
313 |
|
|
313 |
|
Shares delisted |
(10) |
|
|
(10) |
|
Shares acquired/cancelled by group entities and BEE trusts |
148 |
|
|
148 |
|
Acquisition of shareholding in subsidiary |
11 |
(11) |
|
- |
|
Total comprehensive income for the period |
2 842 |
13 |
143 |
2 998 |
|
Share-based payment reserve movement |
176 |
|
|
176 |
|
Regulatory risk reserve provision |
2 |
|
|
2 |
|
Balance at 30 June 2011 |
46 022 |
146 |
3 560 |
49 728 |
Condensed segmental reporting
|
|
Total assets |
||
|
for the period ended |
Reviewed |
Reviewed* |
Audited |
|
|
30 June |
30 June |
31 December |
|
Rm |
2011 |
2010 |
2010 |
|
Nedbank Capital |
196 752 |
204 944 |
215 189 |
|
Nedbank Corporate |
168 791 |
163 026 |
170 274 |
|
Total Nedbank Retail and Nedbank Business Banking |
271 494 |
266 450 |
273 219 |
|
- Nedbank Retail |
185 754 |
189 313 |
193 394 |
|
- Nedbank Business Banking |
85 740 |
77 137 |
79 825 |
|
Nedbank Wealth |
34 645 |
34 264 |
33 920 |
|
Shared Services |
7 252 |
6 599 |
6 791 |
|
Central Management |
40 981 |
40 740 |
37 322 |
|
Eliminations |
(110 040) |
(125 176) |
(127 997) |
|
Total |
609 875 |
590 847 |
608 718 |
|
|
Operating income |
||
|
for the period ended |
Reviewed |
Reviewed* |
Audited |
|
|
30 June |
30 June |
31 December |
|
Rm |
2011 |
2010 |
2010 |
|
Nedbank Capital |
1 368 |
1 441 |
2 930 |
|
Nedbank Corporate |
2 355 |
2 044 |
4 565 |
|
Total Nedbank Retail and Nedbank Business Banking |
7 969 |
6 231 |
13 644 |
|
- Nedbank Retail |
6 010 |
4 477 |
10 082 |
|
- Nedbank Business Banking |
1 959 |
1 754 |
3 562 |
|
Nedbank Wealth |
1 236 |
1 076 |
2 338 |
|
Shared Services |
74 |
151 |
244 |
|
Central Management |
48 |
92 |
(5) |
|
Eliminations |
(20) |
(39) |
(81) |
|
Total |
13 030 |
10 996 |
23 635 |
|
|
Headline earnings |
||
|
for the period ended |
Reviewed |
Reviewed* |
Audited |
|
|
30 June |
30 June |
31 December |
|
Rm |
2011 |
2010 |
2010 |
|
Nedbank Capital |
546 |
580 |
1 202 |
|
Nedbank Corporate |
779 |
628 |
1 496 |
|
Total Nedbank Retail and Nedbank Business Banking |
1 282 |
572 |
1 585 |
|
- Nedbank Retail |
826 |
133 |
760 |
|
- Nedbank Business Banking |
456 |
439 |
825 |
|
Nedbank Wealth |
274 |
235 |
592 |
|
Shared Services |
(20) |
195 |
255 |
|
Central Management |
(89) |
(57) |
(230) |
|
Eliminations |
|
|
|
|
Total |
2 772 |
2 153 |
4 900 |
* The comparative results for the condensed segmental reporting for the period ended 30 June 2010 have been restated as a result of the integration of Imperial Bank Limited with various operating segments. The restatement has no effect on the group results and ratios, and only changes segment results and ratios.
Condensed geographical segmental reporting
|
|
Operating income |
||
|
for the period ended |
Reviewed |
Reviewed |
Audited |
|
|
30 June |
30 June |
31 December |
|
Rm |
2011 |
2010 |
2010 |
|
South Africa |
12 095 |
10 117 |
21 578 |
|
- Business operations |
12 095 |
10 117 |
21 578 |
|
- BEE transaction expenses |
|
|
|
|
- Profit attributable to non-controlling interest - preference shareholders |
|
|
|
|
Rest of Africa |
503 |
481 |
1 034 |
|
Rest of world - business operations |
432 |
398 |
1 023 |
|
Total |
13 030 |
10 996 |
23 635 |
|
|
Headline earnings |
||
|
for the period ended |
Reviewed |
Reviewed |
Audited |
|
|
30 June |
30 June |
31 December |
|
Rm |
2011 |
2010 |
2010 |
|
South Africa |
2 519 |
1 917 |
4 162 |
|
- Business operations |
2 706 |
2 103 |
4 574 |
|
- BEE transaction expenses |
(44) |
(55) |
(146) |
|
- Profit attributable to non-controlling interest - preference shareholders |
(143) |
(131) |
(266) |
|
Rest of Africa |
95 |
98 |
232 |
|
Rest of world - business operations |
158 |
138 |
506 |
|
Total |
2 772 |
2 153 |
4 900 |
Directors
Dr RJ Khoza (Chairman),
MWT Brown* (Chief Executive),
TA Boardman,
TCP Chikane,
GW Dempster* (Chief Operating Officer),
MA Enus-Brey,
Prof B de L Figaji,
DI Hope (New Zealand),
A de VC Knott-Craig,
WE Lucas-Bull,
NP Mnxasana,
RK Morathi* (Chief Financial Officer),
JK Netshitenzhe,
JVF Roberts (British),
GT Serobe,
MI Wyman** (British).
* Executive
** Senior independent non-executive
This announcement is available on the group's website at www.nedbankgroup.co.za, together with the following additional information:
- Detailed financial information in HTML and PDF formats.
- Financial results presentation to analysts.
- Link to a webcast of the presentation to analysts.
For further information kindly contact Nedbank Group Investor Relations at nedbankgroupir@nedbank.co.za.
Registered office
Nedbank Group Limited,
Nedbank Sandton,
135 Rivonia Road, Sandown, Sandton, 2196.
PO Box 1144, Johannesburg, 2000.
Transfer secretaries in South Africa
Computershare Investor Services (Pty) Limited,
70 Marshall Street, Johannesburg, 2001, South Africa.
PO Box 61051, Marshalltown, 2107, South Africa.
Transfer secretaries in Namibia
Transfer Secretaries (Pty) Limited,
Shop 8, Kaiserkrone Centre, Post Street Mall, Windhoek, Namibia.
PO Box 2401, Windhoek, Namibia.
Company Secretary
GS Nienaber"
Enquiries
|
External Communications |
|
|
|
Patrick Bowes |
|
+44 (0)20 7002 7440 |
|
|
|
|
|
Investor Relations |
|
|
|
Aleida White |
|
+44 (0)20 7002 7287 |
|
|
|
|
|
Media |
|
|
|
William Baldwin-Charles |
|
+44 (0)20 7002 7133 |
Notes to Editors
Old Mutual
Old Mutual plc is an international long-term savings, protection and investment Group. Originating in South Africa in 1845, the Group provides life assurance, asset management, banking and general insurance to more than 15 million customers in Europe, the Americas, Africa and Asia. Old Mutual plc is listed on the London Stock Exchange and the Johannesburg Stock Exchange, among others.
In the year ended 31 December 2010, the Group reported adjusted operating profit before tax of £1.5 billion (on an IFRS basis) and had £309 billion of funds under management, from core operations.
For further information on Old Mutual plc, please visit the corporate website at www.oldmutual.com
This information is provided by RNS
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