Nedcor Limited (NED SJ )
Old Mutual PLC
15 September 2003
Old Mutual plc
Nedcor Limited (NED SJ)
Nedcor Ltd. ('Nedcor'), the South African banking group, in which Old Mutual plc
('Old Mutual') has a 53% holding, has today issued a statement (below).
It is expected that Richard Laubscher will stand down as an Executive Director
of Old Mutual plc in due course as a consequence of his ceasing to hold the
office of Chief Executive, Nedcor.
Richard Laubscher Announces Plans to Step Down by Year End
15 September 2003
Chief Executive
After 32 years at Nedcor, the last ten as Chief Executive, Richard Laubscher has
given notice of his intention to stand down by 31 December 2003 as Chief
Executive and as a director. Richard will remain with the Group until a suitable
candidate has been appointed and will ensure that a smooth handover occurs.
For some time Richard has indicated to the Chairman, Chris Liebenberg, and also
publicly, that he felt it was time to stand down as Chief Executive. Following
the BoE acquisition, he was asked to commit to remain as Chief Executive to
oversee the merger and reorganisation (M & R) process with BoE, NIB and Cape of
Good Hope Bank before handing over the reins to a successor. The M & R process
is continuing to progress smoothly and the board expects that operational
synergies will exceed R660 million. These synergies will be realised over time
with the full benefit from 2006 onwards. The M & R process is now at a point
where Richard and the Board feel comfortable for a successor to take over. This
has been expedited to ensure that Richard and Chris Liebenberg who retires in
October 2004 do not leave at the same time.
The Board takes this opportunity to publicly thank Richard for his considerable
contribution to the group over many years. Widely regarded as a charismatic
leader, Richard has led Nedcor's strategic drive to participate in banking
consolidation and grow from being the smallest of the big four banks to a bank
of significant scale matching its major competitors. This culminated last year
in the acquisition of BoE. Under Richard's leadership, since 1994 Nedcor has
grown from total assets of R54 billion to R316 billion at June 2003, from core
profits of R603 million to R3,3 billion in 2002 and from a market capitalisation
of R5,9 billion to a current value of R20 billion.
The Board has an ongoing succession planning process and the Nominations
Committee has identified a number of excellent potential internal successors. At
the same time, the board is reviewing external candidates to ensure the best
person possible is selected for the position.
Results expectations
The Board wishes to take this opportunity to align market and analysts'
expectations for 2003. Following Nedcor's disappointing interim results for the
six months ended 30 June 2003, which were below market expectations, analysts
have updated their estimates of results for the full year to 31 December 2003.
Due to the volatility of interest and exchange rates, the uncertain nature of
various revenue streams and the accounting complexities of the mergers,
analysts' expectations of Nedcor's core earnings cover a wide range.
Nedcor's statutory results for the year will be published on a post-AC 133
basis. However, due to the inherent volatility and unpredictability of the AC
133 results, analysts have prepared their estimates of core earnings largely on
a pre-AC 133 basis. The current analysts' consensus estimate of core earnings
per share (based on Nedcor's internal view of consensus) is 1204 cents (2002 -
1330 cents).
Nedcor's pre-AC 133 core earnings for the first half of 2003 were 445 cents per
share, meaning that analysts' consensus estimates anticipate substantially
improved earnings of 759 cents per share for the second half of 2003. While the
Group remains solidly profitable, indications at this early stage are that
earnings for the second half are unlikely to be lower than the first half, but
will not meet the levels of the analysts' consensus estimates.
As communicated during the interim results process, the bank has taken a
conservative stance on its funding, particularly over the merger period, by
having a higher proportion of longer dated fixed interest deposits. This
conservative funding profile at a time of falling interest rates, together with
the endowment effect of lower rates on capital and reduced asset growth in a
competitive environment, is a contributing factor to the lower anticipated
earnings.
All the banks within the Group (Nedbank, Peoples Bank, Imperial Bank and Gerrard
Private Bank) operate with statutory capital ratios comfortably in excess of the
regulatory minimums. Nedcor Limited, the bank holding company, has a lower
capital ratio at close to the regulatory requirement of 10%, and the Group is
looking to raise additional capital in due course to act as a buffer against
undue volatility. The capital raised is likely to include a blend of preference
shares, secondary and tertiary capital.
Management's action plan to improve the group's profitability is being
vigorously pursued. The actions include changing the funding mix, improving
returns on low yielding assets, increasing transactional income, focussing on
annuity income, continually improving credit quality, containing expense growth
and the sale of non-core investments and assets.
Chris Liebenberg
Chairman Nedcor Limited
ENQUIRIES:
Old Mutual, London Tel: +44 20 7569 0100
James Poole
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