Nedbank Group Limited interim results 2012
Ref 76/12
1 August 2012
Old Mutual plc
Nedbank Group Limited interim results 2012
Nedbank Group Limited ("Nedbank Group"), the majority-owned South African banking subsidiary of Old Mutual plc, released its interim results for the six months ended 30 June 2012 today, 1 August 2012. 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 2012
HIGHLIGHTS
ROE (excluding goodwill) increased to 15,7%
Core Tier 1 (Basel II.5) capital ratio strengthened to 10,6%
Interim dividend per share of 340 cents
Headline earnings R3 468m up 25,1%
Diluted headline earnings per share 741 cents up 23,5%
Strong NIR growth R8 265m up 15,8%
'Nedbank Group performed strongly in the first half of 2012, with the results underpinned by good revenue growth, prudent provisioning, responsible expense management and increased capital and liquidity ratios. We continue to build on the momentum created over the past few years and make good progress in delivering on our key strategic focus areas.
Nedbank is a vision-led and values-driven company and is firmly committed to supporting our staff, clients, shareholders, regulators and communities in achieving our vision of building Africa's most admired bank.
Highlights in respect of our key stakeholders include our corporate culture and values measures now being at worldclass levels; advances of new loans to clients amounting to R69bn; launching a number of innovative products, including the secure Nedbank App Suite; and increasing access to banking through 76 new outlets and 385 new ATMs. We also continue to lead in transformation as the JSE's most empowered large company as measured by the dti Codes, maintaining a level 2 rating.
Notwithstanding the increasingly challenging market conditions, Nedbank Group remains on track to achieve its earnings growth target in 2012.'
Mike Brown
Chief Executive
Banking and economic environment
After a positive start to the year the global market environment worsened in the second quarter, led by the deepening recession in the Eurozone. Activity in major emerging markets such as China has also weakened and conditions in the USA remain tough.
Given that Europe, the USA and China are SA's largest trading partners, the growth of SA's gross domestic product (gdp) slowed to 2,7% in the first quarter of 2012, from 3,1% in 2011, following lower levels of production and exports.
Although the rate of domestic spending has declined, low interest rates continue to support the modest household demand for credit, while transactional banking volumes remain favourable.
Corporate credit demand continued to improve in early 2012. However, since the second quarter, business confidence has weakened, which could lead to the private sector delaying capital expenditure and focusing on efficiency rather than expansion.
Review of results
Nedbank Group performed well for the six months ended 30 June 2012 ('the period') and made good progress in delivering on its key strategic focus areas.
The group achieved strong headline earnings growth of 25,1% to R3 468m for the period (June 2011: R2 772m). This was driven by 11,0% growth in net interest income (NII), 15,8% growth in non-interest revenue (NIR), continued improvement in impairments and responsible expense management combined with investment for growth.¹
Diluted headline earnings per share (DHEPS) increased 23,5% to 741 cents (June 2011: 600 cents) and diluted basic earnings per share increased 24,9% to 747 cents (June 2011: 598 cents).¹
The increase in return on assets (ROA) to 1,07% and a slight decrease in gearing supported an increase in the return on average ordinary shareholders' equity (ROE), excluding goodwill, to 15,7% (June 2011: 13,7%) and ROE to 14,1% (June 2011: 12,2%). The group generated an economic profit (EP) of R578m (June 2011: R146m).
The balance sheet remains well capitalised with the Basel II.5 core Tier 1 capital ratio at 10,6% (December 2011: pro forma 10,5%).
During the period the group lengthened its liquidity duration, resulting in the long-term funding profile increasing to 27,0% (December 2011: 25,0%), while liquidity buffers were increased to R26bn (December 2011: R24bn).
Tangible net asset value per share grew by 10,1% (annualised) from 9 044 cents in December 2011 to 9 500 cents in June 2012.
Delivering value to all our stakeholders
The significant impact of unsound banking practices on the economic condition of many countries around the world is a salutary reminder of the profound responsibilities that banks have as custodians of a nation's savings and as mobilisers of the efficient deployment of capital in laying the foundation for economic growth and job creation activity to flourish.
The SA banking industry has further enhanced its historically strong reputation as a consequence of the long-established sound and traditional banking practices adopted within a well-managed and regulated environment.
Nedbank Group continued to deliver on its vision of building Africa's most admired bank by all its stakeholders and making a positive contribution to SA and the other countries in which we operate through our positioning as a bank for all, providing relevant banking services to the broader population and offering great-value banking.
The highlights during this period with respect to each of our key stakeholders include:
· For staff: In striving to make Nedbank a great place to work we seek to have engaged employees who feel valued and able to contribute and communicate fully - our employee and corporate culture survey feedback is important and cultural entropy has improved to worldclass levels of 10%; we have been rated an employer of choice among graduates; and we have invested in skills development, with 1 100 managers undergoing the group's personal mastery programmes and more than 500 employees participating in our management development programmes and 134 graduates in our graduate development programme.
· For clients: We have paid out R69bn in new loans; launched various new innovative solutions and products such as Approve-it™, MyFinancialLife™, the Nedbank App Suite, the Nedbank 4 Me client value proposition, the Dezign Student Account, the Green Savings Bond, Nedbank Small Business Friday™ and the revamped Simply Biz website; kept fee increases at or below inflation; and increased footprint by 76 new staffed outlets and 385 ATMs year-on-year. Over the past 12 months Nedbank Retail increased its client base by 11,7% and Business Banking added 177 new transactional banking clients, while all the other clusters continued to deepen client relationships.
· For shareholders: We have generated a 22,3% total shareholders' return; declared a half-year dividend of 340 cents per share; delivered R578m EP; achieved a credit ratings upgrade from Fitch Ratings; and created significant value through our broad-based black economic empowerment scheme by creating R4,4bn in value since inception, R1,9bn of which has vested. Nedbank Group also received the Euromoney Best South African Bank 2012 award.
· For regulators: We have continued to strengthen capital and liquidity levels to remain well positioned for Basel III and the Solvency Assessment and Management insurance regime; contributed to working groups on new regulation and made direct and indirect cash taxation contributions of R3,3bn for the period.
· For communities: We have achieved the No 1 ranking of JSE top 50 companies in the Financial Mail 2012 Top Empowered Companies index; contributed R41m to social development; spent R2,9bn on local procurement; launched the first Green Savings Bond in SA; opened our third building with the 4-Star Green Star rating at Menlyn Maine; and won the Financial Times African and Middle East Sustainable Bank of the Year 2012 award and the African Business Environmental Sustainability in Africa 2012 award.
Cluster performance
|
% change |
Headline earnings (Rm) |
ROE (%) |
|||
|
|
|
Jun 2012 |
Jun 2011* |
Jun 2012 |
Jun 2011* |
|
Nedbank Capital |
25,1 |
683 |
546 |
24,1 |
21,0 |
|
Nedbank Corporate** |
14,7 |
864 |
753 |
22,2 |
24,5 |
|
Nedbank Business Banking |
(6,1) |
433 |
461 |
20,5 |
22,8 |
|
Nedbank Retail |
38,4 |
1 194 |
863 |
11,8 |
9,3 |
|
Nedbank Wealth |
23,6 |
356 |
288 |
29,3 |
25,4 |
|
Line clusters |
21,3 |
3 530 |
2 911 |
17,5 |
16,1 |
|
Centre** |
55,4 |
(62) |
(139) |
|
|
|
Total |
25,1 |
3 468 |
2 772 |
14,1 |
12,2 |
* H1 2011 restated for enhancements to capital allocation methodologies in 2012.
** Restated for transfer of the Rest of Africa Division from Nedbank Corporate to the centre.
Nedbank Capital's headline earnings grew 25,1% to R683m (June 2011: R546m). The results were mainly driven by NIR growth of 42,4%, underpinned by strong growth in trading as well as fee and commission income, and partly offset by lower private equity income. EP of R311m and a ROE of 24,1% were achieved.
Nedbank Corporate grew headline earnings by 14,7% to R864m (June 2011: R753m) from strong growth in NIR, transactional activity and deposits, together with reduced impairments. ROE of 22,2% was achieved as a result of an improvement in the ROA to 1,03%, and the cluster grew EP to R353m.
While sustaining a high ROE of 20,5%, Nedbank Business Banking's 6,1% reduction in headline earnings and lower EP for the period of R156m are reflective of the challenging economic cycle adversely impacting the small- and medium-enterprise (SME) sector. Good progress was made in new client acquisitions and cross-sell, while maintaining outstanding risk management practices reflected in the credit loss ratio of 0,41%.
Nedbank Retail's accelerating momentum is reflected in 38,4% headline earnings growth and improving ROE to narrow the gap in relation to the cost of equity. This is testimony to the excellent progress strategically and financially in repositioning the cluster. Diligent execution of the distinctive client-centred growth strategy and effective risk management practices resulted in strong client gains, increased transactional and lending volumes, and lower impairments, while also further strengthening balance sheet impairments and expanding distribution.
Nedbank Wealth generated strong earnings growth of 23,6% to R356m (June 2011: R288m). NII increased 8,4% supported by international wealth management and BoE Private Clients increasing NII 19,7% and 13,4% respectively. Further support came from good insurance earnings growth of 39,1% and total assets under management increasing 18,3% to R125,5bn.
The Rest of Africa Division delivered a strong increase in headline earnings of 60,5%. This division was previously housed in Nedbank Corporate and is now managed at group level, with earnings included in headline earnings at the centre.
Further segmental information is available on the group's website at www.nedbankgroup.co.za.
Financial performance
NII
NII grew 11,0% to R9 642m (June 2011: R8 683m), underpinned by 7,7% (annualised) growth in average interest-earning banking assets (June 2011: 5,9%).¹
The net interest margin (NIM) increased to 3,53% from the comparative period (June 2011: 3,43%) and the full 2011 year (December 2011: 3,46%)¹, supported by sustained momentum in asset mix changes, offset by the cost of lengthening the liquidity profile and holding higher liquid asset buffers.
Impairments charge on loans and advances
The group's credit loss ratio continued to improve to 1,11%¹ (June 2011: 1,21%) from reduced levels of specific impairments, driven by better asset quality, reduced defaulted advances, higher levels of repayments and improved risk management. Portfolio impairments of 11 basis points included the strengthening of balance sheet impairments on the performing home loans and personal loans book.
|
Credit loss ratio analysis (%) |
Jun 2012 |
Jun 2011 |
Dec 2011 |
|
Specific impairments |
1,00 |
1,10 |
1,02 |
|
Portfolio impairments |
0,11 |
0,11 |
0,12 |
|
Total credit loss ratio |
1,11 |
1,21 |
1,14 |
Nedbank Retail and Nedbank Corporate were the main drivers of the group's improved credit loss ratio. In Nedbank Retail home loan impairments continued to improve, while bad debt recoveries increased from effective collection processes. Nedbank Capital's impairments charge reflects the increasing pressures in the operating environment.
|
Credit loss ratio (%) |
% banking advances |
Jun 2012 |
Jun 2011 |
Dec 2011 |
Through- the-cycle target ranges |
|
Nedbank Capital |
10,1 |
1,41 |
0,86 |
1,23 |
0,10 - 0,35 |
|
Nedbank Corporate* |
32,2 |
0,30 |
0,35 |
0,29 |
0,20 - 0,35 |
|
Nedbank Business Banking |
12,1 |
0,41 |
0,40 |
0,54 |
0,55 - 0,75 |
|
Nedbank Retail |
39,7 |
2,00 |
2,24 |
1,98 |
1,50 - 2,20 |
|
Nedbank Wealth |
4,0 |
0,46 |
0,41 |
0,25 |
0,20 - 0,40 |
|
Group |
|
1,11 |
1,21 |
1,14 |
0,60 - 1,00 |
* The Rest of Africa Division was previously reported in Nedbank Corporate and is now reported at the centre.
Defaulted advances declined 14,1% from R25 418m at June 2011 and 9,6% (annualised) from R22 928m at December 2011 to R21 838m. The group's total coverage ratio increased from 50,1% at December 2011 to 52,9%, and portfolio provisions of R200m raised at the centre in the prior year were not released.
NIR
NIR grew strongly, increasing by 15,8% to R8 265m (June 2011: R7 139m)¹, clearly demonstrating the inherent strength of the Nedbank franchise and the increasing number of South Africans choosing to bank with Nedbank. NIR growth was primarily driven by:
· good growth in commission and fee income of 14,6% from increases in transactional and lending volumes, net client acquisitions while keeping fee increases at or below the inflation rate and deepening cross-sell across the client base;
· excellent growth in insurance income of 29,2% from increased sales and a positive claims experience; and
· trading income growing 35,9% following strong performance in the fixed-income, credit and commodities (FICC) business in the Global Markets Division of Nedbank Capital.
Private equity income increased slightly to R139m (June 2011: R137m), following strong realisations in Nedbank Capital mostly offset by prudent valuations of unrealised investment portfolios as well as lower dividend income received in both Nedbank Capital private equity and Nedbank Corporate property private equity. Negative fair-value adjustments of R125m (June 2011: R61m profit) were recorded in the designated-asset-and-liability hedged portfolios.
The NIR-to-expenses ratio continued to increase to 83,2% (December 2011: 81,5%), boosted by the strong growth in NIR. The group is showing excellent progress towards the medium-to-long-term NIR-to-expenses target of 85,0%.
Expenses
The group maintained good cost discipline, resulting in an improved NIR-to-expenses growth delta of 3,3% and a slight improvement in the efficiency ratio to 55,5% (June 2011: 55,9%).¹
Expenses increased 12,5% to R9 939m (June 2011: R8 838m)¹, comprising 7,0% relating to business-as-usual activities, 2,1% relating to growth initiatives and 3,4% relating to variable compensation.
The main contributors to the increase in expenses were:
· remuneration costs increasing 11,1% mostly from headcount growth of 1,7% and inflation-related annual salary increases of 6,5%;
· short-term incentive (STI) costs increasing 46,6% due to the 25,1% increase in headline earnings and just under 300% increase in EP, as well as the heavier phasing of the 2011 STI accrual into the second half of 2011, and as such the growth rate should be more in line with earnings growth for the full year;
· long-term incentive costs increasing by R67m to R198m, as 2011 contained reversals of costs for the period from 2009 to 2011 when certain of the associated corporate performance targets were not met and the related incentive awards lapsed; and
· volume-driven costs, such as computer processing, card and marketing costs, growing in support of revenue-generating business activities.
Taxation1
The taxation charge and effective tax rate increased to R1 399m (June 2011: R1 013m)1 and 27,9% (June 2011: 25,7%) respectively. This was mainly the result of:
· an increase in capital gains tax (CGT) from 14,0% to 18,65%; and
· an increase in secondary tax on companies (STC) of R86m, compared with 2011, from a reduction in available STC credits due to the termination of the STC regime effective 1 April 2012 and the full H2 2011 dividend being subjected to STC.
Statement of financial position
Capital
The group implemented Basel II.5 capital criteria with effect from 1 January 2012. In line with the pro forma ratio disclosed to the market the 2011 year-end Basel II core Tier 1 capital ratio of 11,0% decreased to 10,5% under Basel II.5.
Strong organic earnings, partially offset by the distribution of the group's final 2011 dividend in April 2012 and growth in advances, resulted in the group's Basel II.5 core Tier 1 capital ratio in June 2012 increasing to 10,6%. Capital ratios are anticipated to increase further during the remainder of 2012 as a result of ongoing risk-weighted asset optimisation initiatives and earnings growth.
The draft SA regulations incorporating the impact of Basel III have been issued, although some key aspects still have to be finalised. Overall the group remains in a strong position to meet the draft capital requirements as currently anticipated. Revised internal targets incorporating Basel III will be communicated to the market once the regulations have been finalised.
|
Basel II |
Jun 2012 ratio (Basel II.5) |
Jun 2011 ratio (Basel II) |
Dec 2011 ratio (Basel II) |
Internal (Basel II) |
|
Core Tier 1 ratio |
10,6% |
10,7% |
11,0% |
7,5% to 9,0% |
|
Tier 1 ratio |
12,1% |
12,4% |
12,6% |
8,5% to 10,0% |
|
Total capital ratio |
14,4% |
15,2% |
15,3% |
11,5% to 13,0% |
(Ratios include unappropriated profits.)
Further details will be available in the group's 30 June 2012 Pillar 3 Report to be released on 17 September 2012 and published on the group's website at www.nedbankgroup.co.za.
Capital allocation to businesses
Enhancements relating to the internal economic capital allocation to line clusters included an upward revision to the amount of capital allocated to the clusters from 10,0% to 11,0%. Enhancements were also made to the allocation of capital impaired against intangible assets, previously held at the centre. These enhancements resulted in a dilution of the line clusters' ROE performance, given higher capital levels. Headline earnings and ROE numbers for the line clusters for the comparative period were restated on a like-for-like basis. These enhancements had no impact on the group's overall headline earnings, capital levels and ROE ratio.
Funding and liquidity
Nedbank Group remains well funded, with a strong liquidity position, underpinned by a further lengthening of its funding profile, growth of the deposit base, a strong loan-to-deposit ratio of 95,6% and a low reliance on interbank and foreign currency funding.
The average long-term funding ratio increased to 27,0% (June 2011: 26,1%; December 2011: 25,0%), supported by the successful issuance in March 2012 of R1,7bn senior unsecured debt, strong growth in the Nedbank Retail Savings Bond to R5,9bn since its launch in March 2011, and the recent launch of the Green Savings Bond. Growth in the surplus liquid asset buffer to R26bn for June 2012 (June 2011: R16bn; December 2011: R24bn) also contributed to a stronger liquidity position.
The South African Reserve Bank (SARB) announcement during the period that SA banks would have access to committed liquidity facilities (CLFs) of up to 40% of the Basel III liquidity coverage ratio (LCR) net cash outflows to meet LCR requirements in 2015 has been positively received by the market and is in line with the approaches implemented in other similar markets. This provides clarity on how the LCR will be adopted by SA banks given the limited availability of level 2 assets in SA and is favourable for credit extension and economic growth in SA.
Loans and advances
Group loans and advances grew 7,1% (annualised) to R514bn (December 2011: R496bn).¹
|
Rm¹ |
Jun 2012 |
Dec 2011 |
% change (annualised) |
|
Nedbank Capital |
80 212 |
68 510 |
34,3 |
|
Banking activity |
49 538 |
48 558 |
4,1 |
|
Trading activity |
30 674 |
19 952 |
>100,0 |
|
Nedbank Corporate |
156 537 |
155 010 |
2,0 |
|
Nedbank Business Banking |
59 061 |
58 272 |
2,7 |
|
Nedbank Retail |
187 577 |
183 663 |
4,3 |
|
Nedbank Wealth |
19 053 |
19 624 |
(5,9) |
|
Centre |
11 086 |
10 969 |
2,1 |
|
|
513 526 |
496 048 |
7,1 |
During the period gross new advances payouts increased to R69bn (six months to June 2011: R52bn).
Overall advances growth continues to be shaped by the group's portfolio tilt strategy of focusing on business activities that generate higher EP. Nedbank Retail's advances growth was underpinned by strong growth in personal loans, credit card business and motor finance, partially offset by a slight decrease in home loans following the retail home loans strategy of positioning Nedbank Retail as the primary client interface with differentiated risk-based pricing. The environment for Nedbank Business Banking's SME clients remains challenging and has impacted demand for credit and the risk profile of this market segment. Nedbank Corporate's advances growth of 2,0% comprises advances growth of 6,4% in Corporate Banking and a decrease of 1,0% in Commercial Property Finance. The pipelines in the wholesale banking areas remain strong, although growth in the second half of the year is likely to be affected by weak global market conditions and lower levels of business confidence.
Deposits
Deposits increased 6,1% (annualised) to R537bn (December 2011: R521bn).¹
In line with the group's funding strategy of lengthening the term deposit book and optimising the mix of deposits, call and term deposits increased 8,1% and cash management deposits grew 23,0%. Negotiable certificates of deposit (NCDs) decreased 11,9%.
Given the challenging environment with interest rates at 38-year lows, current accounts decreased 5,1% and savings accounts showed moderate growth of 6,6%.
Economic outlook
The difficult global macro environment and recession in Europe have led to softer gdp growth in key emerging markets including SA.
SA's GDP is now forecast to grow by 2,5% in 2012 as a result of lower production and weaker exports in agriculture, manufacturing and mining. Interest rates are at 38-year lows and are expected to remain flat for the rest of the year, however, there is downside risk should there be a further slowdown in economic growth rates.
Lower levels of real wage growth and increased concerns around job security are anticipated to result in decreased consumer spending. Consumer credit demand should continue to grow, but is at risk of slowing down given decreasing levels of consumer confidence.
Business confidence remains weak, with the private sector remaining cautious and continuing to delay capital expenditure. Government and the public sector still have robust infrastructure plans, and, if implemented, are expected to support wholesale advances growth.
Prospects
In the light of the group's 2012 forecast for gdp growth and interest rates the group's financial guidance for the full year is currently as follows:
· Advances growth at mid single digits.
· NIM to increase slightly from the 3,46% level for the 2011 full year.
· The credit loss ratio to continue improving to within the upper end of the group's target range of 0,60% to 1,00%.
· NIR (excluding fair-value adjustments) to grow at low double digits, maintaining ongoing improvements in the group's NIR-to-expenses ratio.
· Expenses, including investing for growth, to increase by mid to upper single digits.
· The group to maintain strong capital ratios and continue to strengthen funding and liquidity in preparation for Basel III.
The group's financial guidance for 2012 as set out above remains largely unchanged from that given earlier in the year, with the exception of an upward revision of the margin, which was previously expected to remain at the December 2011 level of 3,46% and is now anticipated to be slightly above this level.
The SARB is expected to finalise Basel III capital levels for SA banks in the second half of 2012. Once the Basel III capital levels have been set, the group will be in a position to finalise its Basel III capital targets, review the current dividend policy of 2,25 to 2,75 times and communicate this to the market at the release of the 2012 annual results.
Building on the growth momentum from the first half of 2012, the group remains on track to achieve its earnings growth for the year in line with its medium-to-long-term financial target [gdp plus consumer price index (cpi) plus 5%].
Shareholders are advised that this guidance has not been reviewed or reported on by the group's auditors.
Board and executive changes during the period
Professor Brian Figaji retired as independent non-executive director of Nedbank Group and Nedbank Limited with effect from Friday, 4 May 2012.
Ian David Gladman was appointed as non-executive director of Nedbank Group and Nedbank Limited with effect from 7 June 2012.
Gawie Nienaber retired as Group Company Secretary with effect from 30 June 2012 after reaching the mandatory retirement age in terms of Nedbank Group's normal retirement policy.
Thabani Jali was appointed as Group Company Secretary and Jackie Katzin was appointed as Deputy Group Company Secretary of Nedbank Group and Nedbank with effect from 1 July 2012.
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 2012 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) of the International Accounting Standards Board 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 the measurement and recognition criteria of IFRS and presented in accordance with the disclosures, prescribed by International Accounting Standard (IAS) 34: Interim Financial Reporting, the South African Statements and Interpretations of Statements of Generally Accepted Accounting Practice (AC 500 series) issued by the Accounting Practices Board and the requirements of the Companies Act of SA.
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 2012 were consistent with those applied during the 2011 financial year. These assumptions are subject to ongoing review and possible amendments. The financial results have been prepared under the supervision of Raisibe Morathi, the Chief Financial Officer.
Events after the reporting period¹
There are no material events after the reporting period to report on.
Reviewed results - INDEPENDENT auditors' 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 of Review Engagements (ISRE 2410): Review of Interim Information Performed by the Independent Auditor of the Entity. The condensed consolidated interim financial results comprise the consolidated statement of financial position at 30 June 2012, consolidated statement of comprehensive income, condensed consolidated statement of changes in equity, condensed consolidated statement of cashflows for the six months then ended and selected explanatory notes. The related notes are marked with ¹. The review 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 a gross interim dividend of 340 cents per ordinary share has been declared, payable to shareholders for the six months ended 30 June 2012. The dividend has been declared out of income reserves.
The dividend will be subject to a local dividend tax rate of 15% or 51 cents per ordinary share, resulting in a net dividend of 289 cents per ordinary share, unless the shareholder is exempt from paying dividend tax or is entitled to a reduced rate in terms of the applicable double-tax agreement. No STC credits were available to be utilised as part of this declaration. Nedbank Group Limited's tax reference number is 9375/082/71/7 and the number of ordinary shares in issue at the date of declaration is 507 509 491.
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, 31 August 2012
Shares commence trading
(ex dividend) on Monday, 3 September 2012
Record date (date shareholders
recorded in books) Friday, 7 September 2012
Payment date Monday, 10 September 2012
Share certificates may not be dematerialised or rematerialised between Monday, 3 September 2012, and Friday, 7 September 2012, both days inclusive.
On Monday, 10 September 2012, 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, 10 September 2012, will be posted on that date.
Holders of dematerialised shares will have their accounts credited at their participant or broker on Monday, 10 September 2012.
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 2012
Financial highlights
|
at |
|
Reviewed 30 Jun 2012 |
Reviewed 30 Jun 2011 |
Audited 31 Dec 2011 |
|
Statistics |
|
|
|
|
|
Number of shares listed |
m |
507,5 |
507,4 |
507,4 |
|
Number of shares in issue, excluding shares held by group entities |
m |
456,0 |
454,4 |
455,2 |
|
Weighted average number of shares |
m |
455,7 |
451,2 |
452,9 |
|
Diluted weighted average number of shares |
m |
468,0 |
462,2 |
461,5 |
|
Preprovisioning operating profit |
Rm |
7 569 |
6 577 |
13 709 |
|
Economic profit |
Rm |
578 |
146 |
924 |
|
Headline earnings per share |
cents |
761 |
614 |
1 365 |
|
Diluted headline earnings per share |
cents |
741 |
600 |
1 340 |
|
Ordinary dividends declared per share |
cents |
340 |
265 |
605 |
|
- Interim |
cents |
340 |
265 |
265 |
|
- Final |
cents |
|
|
340 |
|
Ordinary dividends paid per share |
cents |
340 |
268 |
533 |
|
Dividend cover |
times |
2,24 |
2,32 |
2,26 |
|
Net asset value per share |
cents |
11 208 |
10 128 |
10 753 |
|
Tangible net asset value per share |
cents |
9 500 |
8 477 |
9 044 |
|
Closing share price |
cents |
17 389 |
14 650 |
14 500 |
|
Price/earnings ratio |
historical |
11 |
12 |
11 |
|
Market capitalisation |
Rbn |
88,2 |
74,3 |
73,6 |
|
Number of employees |
|
28 678 |
28 210 |
28 494 |
|
Key ratios (%) |
|
|
|
|
|
Return on ordinary shareholders' equity (ROE) |
|
14,1 |
12,2 |
13,6 |
|
ROE, excluding goodwill |
|
15,7 |
13,7 |
15,3 |
|
Return on total assets |
|
1,07 |
0,92 |
0,99 |
|
Net interest income to average interest-earning banking assets |
|
3,53 |
3,43 |
3,46 |
|
Credit loss ratio - banking advances |
|
1,11 |
1,21 |
1,14 |
|
Non-interest revenue to total operating expenses |
|
83,2 |
80,8 |
81,5 |
|
Non-interest revenue to total income |
|
46,2 |
45,1 |
46,1 |
|
Efficiency ratio |
|
55,5 |
55,9 |
56,6 |
|
Efficiency ratio (excluding BEE transaction expense) |
|
55,3 |
55,5 |
56,0 |
|
Effective taxation rate |
|
27,9 |
25,7 |
25,2 |
|
Group capital adequacy ratios (including unappropriated profits): |
|
|
|
|
|
Core Tier I |
|
10,6* |
10,7 |
11,0 |
|
Tier 1 |
|
12,1* |
12,4 |
12,6 |
|
Total |
|
14,4* |
15,2 |
15,3 |
|
Statement of financial position statistics (Rm) |
|
|
|
|
|
Total equity attributable to equity holders of the parent |
|
51 110 |
46 022 |
48 946 |
|
Total equity |
|
54 856 |
49 728 |
52 685 |
|
Amounts owed to depositors |
|
536 944 |
493 974 |
521 155 |
|
Loans and advances |
|
513 526 |
471 918 |
496 048 |
|
- Gross |
|
525 071 |
483 385 |
507 545 |
|
- Impairment of loans and advances |
|
(11 545) |
(11 467) |
(11 497) |
|
Total assets administrated by the group |
|
795 537 |
715 981** |
760 358 |
|
- Total assets |
|
670 021 |
609 875 |
648 127 |
|
- Assets under management |
|
125 516 |
106 106** |
112 231 |
|
Life assurance embedded value |
|
1 827 |
1 122 |
1 522 |
|
Life assurance value of new business |
|
279 |
152 |
409 |
Condensed consolidated statement of changes in equity
|
Rm |
Total equity attributable to equity holders of the parent |
Non-controlling interest attributable to ordinary shareholders |
Non-controlling interest attributable to preference shareholders |
Total equity |
|
Balance at 31 December 2010 |
44 101 |
153 |
3 560 |
47 814 |
|
Dividend to shareholders |
(1 251) |
(9) |
|
(1 260) |
|
Dividend in respect 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 |
|
Dilution 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 |
|
Dividend to shareholders |
(1 357) |
(2) |
|
(1 359) |
|
Preference share dividend |
|
|
(138) |
(138) |
|
Issues of shares net of expenses |
20 |
|
|
20 |
|
Shares acquired/cancelled by group entities and BEE trusts |
(53) |
|
|
(53) |
|
Total comprehensive income for the period |
4 037 |
27 |
138 |
4 202 |
|
Share-based payment reserve movement |
270 |
|
|
270 |
|
Regulatory risk reserve provision |
(2) |
|
|
(2) |
|
Acquisition of subsidiary |
|
7 |
1 |
8 |
|
Other movements |
9 |
|
|
9 |
|
Balance at 31 December 2011 |
48 946 |
178 |
3 561 |
52 685 |
|
Dividend to shareholders |
(1 628) |
(7) |
|
(1 635) |
|
Dividend in respect of BEE transaction |
19 |
|
|
19 |
|
Preference share dividend |
|
|
(142) |
(142) |
|
Issues of shares net of expenses |
13 |
|
|
13 |
|
Shares acquired/cancelled by group entities and BEE trusts |
9 |
|
|
9 |
|
Total comprehensive income for the period |
3 503 |
14 |
142 |
3 659 |
|
Share-based payment reserve movement |
245 |
|
|
245 |
|
Regulatory risk reserve provision |
1 |
|
|
1 |
|
Other movements |
2 |
|
|
2 |
|
Balance at 30 June 2012 |
51 110 |
185 |
3 561 |
54 856 |
Consolidated statement of comprehensive income
|
for the period ended Rm |
|
Reviewed 30 Jun 2012 |
Reviewed 30 Jun 2011 |
Audited 31 Dec 2011 |
|
Interest and similar income |
|
22 362 |
21 030 |
42 880 |
|
Interest expense and similar charges |
|
12 720 |
12 347 |
24 846 |
|
Net interest income |
|
9 642 |
8 683 |
18 034 |
|
Impairments charge on loans and advances |
|
2 702 |
2 792 |
5 331 |
|
Income from lending activities |
|
6 940 |
5 891 |
12 703 |
|
Non-interest revenue |
|
8 265 |
7 139 |
15 412 |
|
Operating income |
|
15 205 |
13 030 |
28 115 |
|
Total operating expenses |
|
9 939 |
8 838 |
18 919 |
|
- Operating expenses |
|
9 893 |
8 788 |
18 725 |
|
- BEE transaction expenses |
|
46 |
50 |
194 |
|
Indirect taxation |
|
243 |
252 |
505 |
|
Profit from operations before non-trading and capital items |
|
5 023 |
3 940 |
8 691 |
|
Non-trading and capital items |
|
34 |
(16) |
(14) |
|
- Net profit on sale of subsidiaries, investments, and property and equipment |
|
29 |
16 |
40 |
|
- Net impairment of investments, property and equipment, and capitalised development costs |
|
5 |
(32) |
(54) |
|
|
|
|
|
|
|
Profit from operations before direct taxation |
|
5 057 |
3 924 |
8 677 |
|
Total direct taxation |
|
1 404 |
1 005 |
2 174 |
|
- Direct taxation |
|
1 399 |
1 013 |
2 194 |
|
- Taxation on non-trading and capital items |
|
5 |
(8) |
(20) |
|
|
|
|
|
|
|
Profit for the period |
|
3 653 |
2 919 |
6 503 |
|
Other comprehensive income net of taxation |
|
6 |
79 |
697 |
|
- Exchange differences on translating foreign operations |
|
17 |
87 |
469 |
|
- Fair-value adjustments on available-for-sale assets |
|
(1) |
(8) |
(21) |
|
- (Losses)/Gains on property revaluations |
|
(10) |
|
249 |
|
|
|
|
|
|
|
Total comprehensive income for the period |
|
3 659 |
2 998 |
7 200 |
|
Profit attributable to: |
|
|
|
|
|
Equity holders of the parent |
|
3 497 |
2 764 |
6 190 |
|
Non-controlling interest - ordinary shareholders |
|
14 |
12 |
32 |
|
Non-controlling interest - preference shareholders |
|
142 |
143 |
281 |
|
Profit for the period |
|
3 653 |
2 919 |
6 503 |
|
Total comprehensive income attributable to: |
|
|
|
|
|
Equity holders of the parent |
|
3 503 |
2 842 |
6 879 |
|
Non-controlling interest - ordinary shareholders |
|
14 |
13 |
40 |
|
Non-controlling interest - preference shareholders |
|
142 |
143 |
281 |
|
Total comprehensive income for the period |
|
3 659 |
2 998 |
7 200 |
|
Basic earnings per share |
cents |
767 |
613 |
1 367 |
|
Diluted earnings per share |
cents |
747 |
598 |
1 341 |
Headline earnings reconciliation
|
for the period ended |
|
Reviewed 30 Jun 2012 |
|
Reviewed 30 Jun 2011 |
|
Audited 31 Dec 2011 |
|
Rm |
Gross |
Net of taxation |
Gross |
Net of taxation |
Gross |
Net of taxation |
|
Profit attributable to equity holders of the parent |
|
3 497 |
|
2 764 |
|
6 190 |
|
Less: Non-trading and capital items |
34 |
29 |
(16) |
(8) |
(14) |
6 |
|
- Net profit on sale of subsidiaries, investments, and property and equipment |
29 |
24 |
16 |
24 |
40 |
60 |
|
- Net impairment of investments, property and equipment, and capitalised development costs |
5 |
5 |
(32) |
(32) |
(54) |
(54) |
|
|
|
|
|
|
|
|
|
Headline earnings |
|
3 468 |
|
2 772 |
|
6 184 |
Condensed segmental reporting
|
|
Total assets |
Operating income |
Headline earnings |
||||||
|
for the period ended Rm |
Reviewed 30 Jun 2012 |
Reviewed 30 Jun 2011 |
Audited 31 Dec 2011 |
Reviewed 30 Jun 2012 |
Reviewed 30 Jun 2011 |
Audited 31 Dec 2011 |
Reviewed 30 Jun 2012 |
Reviewed 30 Jun 2011 |
Audited 31 Dec 2011 |
|
Nedbank Capital |
157 065 |
120 673 |
149 789 |
1 844 |
1 368 |
3 091 |
683 |
546 |
1 228 |
|
Nedbank Corporate |
168 733 |
156 272 |
167 074 |
2 143 |
1 887 |
3 865 |
864 |
753 |
1 571 |
|
Total Nedbank Retail and Nedbank Business Banking |
283 495 |
271 768 |
279 323 |
9 129 |
8 029 |
17 102 |
1 627 |
1 324 |
2 957 |
|
- Nedbank Retail |
193 889 |
185 755 |
190 398 |
7 062 |
6 063 |
13 107 |
1 194 |
863 |
2 091 |
|
- |
89 606 |
86 013 |
88 925 |
2 067 |
1 966 |
3 995 |
433 |
461 |
866 |
|
Nedbank Wealth |
40 953 |
34 645 |
37 759 |
1 468 |
1 257 |
2 690 |
356 |
288 |
654 |
|
Shared Services |
7 083 |
7 252 |
7 315 |
(4) |
77 |
259 |
10 |
(14) |
3 |
|
Central Management |
146 953 |
160 633 |
153 282 |
650 |
432 |
1 150 |
(72) |
(125) |
(229) |
|
Eliminations |
(134 261) |
(141 368) |
(146 415) |
(25) |
(20) |
(42) |
|
|
|
|
Total |
670 021 |
609 875 |
648 127 |
15 205 |
13 030 |
28 115 |
3 468 |
2 772 |
6 184 |
The segmental results for the periods ended 30 June 2011 and 31 December 2011 have been restated for the following adjustments: (a) enhancements to the allocation of economic capital; (b) the reallocation of negotiable certificates of deposit from Nedbank Capital to the centre; and (c) transferring the Rest of Africa Cluster from Nedbank Corporate to Central Management. These restatements have no effect on the group results and ratios, and only affect the segment results and related ratios.
Consolidated statement of financial position
|
at Rm |
Reviewed 30 Jun 2012 |
Reviewed 30 Jun 2011 |
Audited 31 Dec 2011 |
|
Assets |
|
|
|
|
Cash and cash equivalents |
11 840 |
11 743 |
13 457 |
|
Other short-term securities |
42 090 |
29 125 |
35 986 |
|
Derivative financial instruments |
14 608 |
8 284 |
12 840 |
|
Government and other securities |
26 693 |
36 056 |
30 176 |
|
Loans and advances |
513 526 |
471 918 |
496 048 |
|
Other assets |
11 775 |
7 900 |
12 051 |
|
Clients' indebtedness for acceptances |
2 562 |
2 754 |
2 975 |
|
Current taxation receivable |
976 |
618 |
698 |
|
Investment securities |
15 825 |
12 808 |
14 281 |
|
Non-current assets held for sale |
22 |
8 |
8 |
|
Investments in associate companies and joint ventures |
602 |
1 128 |
568 |
|
Deferred taxation asset |
269 |
229 |
266 |
|
Investment property |
617 |
202 |
614 |
|
Property and equipment |
6 259 |
5 835 |
6 312 |
|
Long-term employee benefit assets |
2 185 |
2 111 |
2 118 |
|
Mandatory reserve deposits with central banks |
12 384 |
11 654 |
11 952 |
|
Intangible assets |
7 788 |
7 502 |
7 777 |
|
Total assets |
670 021 |
609 875 |
648 127 |
|
Equity and liabilities |
|
|
|
|
Ordinary share capital |
456 |
454 |
455 |
|
Ordinary share premium |
15 955 |
15 968 |
15 934 |
|
Reserves |
34 699 |
29 600 |
32 557 |
|
Total equity attributable to equity holders of the parent |
51 110 |
46 022 |
48 946 |
|
Non-controlling interest attributable to: |
|
|
|
|
- ordinary shareholders |
185 |
146 |
178 |
|
- preference shareholders |
3 561 |
3 560 |
3 561 |
|
Total equity |
54 856 |
49 728 |
52 685 |
|
Derivative financial instruments |
15 272 |
8 894 |
13 853 |
|
Amounts owed to depositors |
536 944 |
493 974 |
521 155 |
|
Provisions and other liabilities |
16 246 |
13 691 |
14 751 |
|
Liabilities under acceptances |
2 562 |
2 754 |
2 975 |
|
Current taxation liabilities |
116 |
121 |
200 |
|
Deferred taxation liabilities |
1 033 |
1 858 |
1 345 |
|
Long-term employee benefit liabilities |
1 544 |
1 458 |
1 479 |
|
Investment contract liabilities |
8 709 |
7 666 |
8 237 |
|
Insurance contract liabilities |
2 683 |
1 541 |
2 005 |
|
Long-term debt instruments |
30 056 |
28 190 |
29 442 |
|
Total liabilities |
615 165 |
560 147 |
595 442 |
|
Total equity and liabilities |
670 021 |
609 875 |
648 127 |
Condensed consolidated statement of cashflows
|
for the period ended Rm |
Reviewed 30 Jun 2012 |
Reviewed 30 Jun 2011 |
Audited 31 Dec 2011 |
|
Cash generated by operations |
9 121 |
7 914 |
16 552 |
|
Change in funds for operating activities |
(4 641) |
(2 082) |
(4 080) |
|
Net cash from operating activities before taxation |
4 480 |
5 832 |
12 472 |
|
Taxation paid |
(2 431) |
(855) |
(3 609) |
|
Cashflows from operating activities |
2 049 |
4 977 |
8 863 |
|
Cashflows utilised by investing activities |
(2 155) |
(2 147) |
(3 702) |
|
Cashflows (utilised by)/from financing activities |
(1 115) |
833 |
557 |
|
Effects of exchange rate changes on opening cash and cash equivalents (excluding foreign borrowings) |
36 |
(11) |
(54) |
|
Net (decrease)/increase in cash and cash equivalents |
(1 185) |
3 652 |
5 664 |
|
Cash and cash equivalents at the beginning of the period* |
25 409 |
19 745 |
19 745 |
|
Cash and cash equivalents at the end of the period* |
24 224 |
23 397 |
25 409 |
|
* Including mandatory reserve deposits with central banks. |
|
|
|
Condensed geographical segmental reporting
|
|
Operating income |
Headline earnings |
||||
|
for the period ended Rm |
Reviewed 30 Jun 2012 |
Reviewed 30 Jun 2011 |
Audited 31 Dec 2011 |
Reviewed 30 Jun 2012 |
Reviewed 30 Jun 2011 |
Audited 31 Dec 2011 |
|
SA |
14 217 |
12 095 |
26 228 |
3 171 |
2 519 |
5 695 |
|
- Business operations |
14 217 |
12 095 |
26 228 |
3 354 |
2 706 |
6 162 |
|
- BEE transaction expenses |
|
|
|
(41) |
(44) |
(186) |
|
- |
|
|
|
(142) |
(143) |
(281) |
|
Rest of Africa |
584 |
503 |
1 101 |
124 |
95 |
246 |
|
Rest of world - business operations |
404 |
432 |
786 |
173 |
158 |
243 |
|
Total |
15 205 |
13 030 |
28 115 |
3 468 |
2 772 |
6 184 |
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.
Transfer secretaries in SA: Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg, 2001, SA. PO Box 61051, Marshalltown, 2107, SA.
Transfer secretaries in Namibia: Transfer Secretaries (Pty) Limited, Shop 8, Kaiserkrone Centre, Post Street Mall, Windhoek, Namibia. PO Box 2401, Windhoek, Namibia.
Sponsors in SA: Merrill Lynch South Africa (Pty) Limited, Nedbank Capital.
Sponsor in Namibia: Old Mutual Investment Services (Namibia) (Pty) Limited.
Directors: RJ Khoza (Chairman), MWT Brown* (Chief Executive), TA Boardman, TCP Chikane,
GW Dempster* (Chief Operating Officer), MA Enus-Brey, ID Gladman (British), DI Hope (New Zealand),
WE Lucas-Bull, PM Makwana, NP Mnxasana, RK Morathi* (Chief Financial Officer), JK Netshitenzhe,
JVF Roberts (British), GT Serobe, MI Wyman** (British).
* Executive ** Senior independent non-executive director
Company Secretary: TSB Jali
Registered office: Nedbank Group Limited, Nedbank Sandton, 135 Rivonia Road, Sandown, Sandton, 2196.
PO Box 1144, Johannesburg, 2000.
Reg No: 1966/010630/06 ISIN: ZAE000004875
JSE share code: NED NSX share code: NBK"
Enquiries
|
External communications |
|
|
|
Patrick Bowes |
UK |
+44 (0)20 7002 7440 |
|
|
|
|
|
Investor relations |
|
|
|
Kelly de Kock |
SA |
+27 (0)21 509 8709 |
|
|
|
|
|
|
|
|
|
Media |
|
|
|
William Baldwin-Charles |
|
+44 (0)20 7002 7133 +44 (0)7834 524 833 |
Notes to Editors
Old Mutual
Old Mutual 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 12 million customers in Africa, the Americas, Asia and Europe. Old Mutual has been listed on the London and Johannesburg Stock Exchanges, among others, since 1999.
In the year ended 31 December 2011, the Group reported adjusted operating profit before tax of £1.5 billion (on an IFRS basis) and had £267 billion of funds under management from core operations.
Old Mutual plc's interim results for the six months ended 30 June 2012 will be released on 8 August 2012.
For further information on Old Mutual plc, please visit the corporate website at www.oldmutual.com
This information is provided by RNS
Latest directors dealings
- 52 minutes ago ASOS
- 1 hour ago MJ Gleeson
- 1 hour ago Rolls-Royce Holdings
- 1 hour ago Crest Nicholson Holdings
- 2 hours ago Naked Wines