Nedbank Group · JSE:NED
Nedbank — Investor Presentation (June 2005)
74 slides from Nedbank's investor presentation, Jun 20, 2005
Slide 1: Capital Management in the Nedbank Group
CAPITAL MANAGEMENT IN THE NEDBANK GROUP Presentation to the Merrill Lynch Investor Lunch (Booklet) Johannesburg 20 June 2005 1 Mike Brown (CFO) and Trevor Adams (Head: Group Capital Management and Basel 2) (LIB-GCD-INV-PPT-003) Presentation to Merrill Lynch Investor Lunch - 20 June 2005
Slide 2: Agenda
CAPITAL MANAGEMENT IN THE NEDBANK GROUP AGENDA No Topic Page 1 NEW RULES TO THE GAME OF BANKING 3-6 2 BASEL 2 IMPLEMENTATION ~ APPROACH 7-15 3 BASEL 2 IMPLEMENTATION ~ STATUS 16-34 4 KEY TIMELINES ~ SUMMARY 35-36 5 BASEL 2 IMPACTS AND ESTIMATED COSTS 37-40 6 IMPACT OF IFRS (IAS 39) ON CAPITAL 41-45
Slide 3: New Rules to the Game of Banking
NEW RULES TO THE GAME OF BANKING 3 (LIB-GCD-INV-PPT-003) Presentation to Merrill Lynch Investor Lunch - 20 June 2005
Slide 4: New Rules to the Game of Banking
NEW RULES TO THE GAME OF BANKING ARISING MAINLY FROM Basel 2 as the catalyst to risk based capital requirements: - comprehensive and sensitive risk measurement, which in turn drives capital requirements - capital requirements varied between banks with different risk profiles - convergence of economi
Slide 5: Balance Sheet Optimisation Induced by Basel 2
BALANCE SHEET OPTIMISATION ~ INDUCED BY BASEL 2 Illustrative Balance sheet profitability impact analysis (Basel 2 / Economic Capital vs. Basel 1) Capital% ROE% 16% 32% 14% 28% 12% 24% 10% 20% 8% 16% 6% 12% 4% 8% 2% 4% 0% 0% High grade unsecured Speculative grade Speculative grade partly corporate lo
Slide 6: Differences Between Risk-Adjusted and Unadjusted Measures
DIFFERENCES BETWEEN RISK-ADJUSTED AND UNADJUSTED MEASURES RISK ADJUSTED MEASURES MUCH BETTER HIGHLIGHT SHAREHOLDER VALUE CREATION OR DESTRUCTION ILLUSTRATIVE Return on a Non-Risk based Capital Measure (e.g. Basel 1), Risk-Adjusted-Performance-Measurement as is currently the case (Economic Capital /
Slide 7: Basel 2 Implementation ~ Approach
BASEL 2 IMPLEMENTATION ~ APPROACH 7 (LIB-GCD-INV-PPT-003) Presentation to Merrill Lynch Investor Lunch - 20 June 2005
Slide 8: Background
BACKGROUND Nedbank began preparations for Basel 2 from a zero base in Q1 2003. This included the establishment of a Basel 2 Programme Office, headed by Trevor Adams. Trevor reports directly to Philip Wessels (CRO) for Basel 2 and Mike Brown (CFO) for Group Capital Management, both of whom sit on the
Slide 9: Nedbank's Strategic Approach to Basel 2
NEDBANK’S STRATEGIC APPROACH TO BASEL 2 2003 - 2004 2003 - 2005 2004 - 2006 2005 - 2007 Enhancement and/or development of Enhancement to Resulting in best practice Comprehensive PLANNING RISK MEASUREMENT RISK AND CAPITAL MANAGEMENT VALUE BASED MANAGEMENT leading to methodologies, systems & tools pro
Slide 10: Nedbank's Basel 2 Programme Based on World Class Practices
WE HAVE STRUCTURED NEDBANK’S BASEL 2 PROGRAMME BASED ON WORLD CLASS PRACTICES Risk Measurement Efforts Credit risk VaR/market risk – Rating tools and scoring models ALM (ALCO) risks – PD calibration Operational Risk – LGD/EAD estimation Business Risk – Credit Portfolio Modelling Investment Risk Tact
Slide 11: A Systematic Process to Review and Manage Risk/Return of Balance Sheet
A SYSTEMATIC PROCESS TO REVIEW AND MANAGE THE RISK / RETURN OF NEDBANK’S BALANCE SHEET AT FOUR DISTINCT LEVELS B A LA N C E S H E E T LE V E L E X A M P LE S O F IN ITIA TIV E S P O R TFO LIO • G roup C redit P ortfolio M odel • R eview overall risks in portfolio • D eterm ine risk ‘hot spots’ takin
Slide 12: How This Links to Nedbank's Key Risk Management Objectives
HOW THIS LINKS TO NEDBANK’S KEY RISK MANAGEMENT OBJECTIVES Nedbank's Broad Risk Management Objectives (as laid out in our ERMF) Nedbank's Broad Risk Management Objectives (as laid out in our ERMF) Optimise business Protect against Ensure Earnings Optimise business opportunities Protect against unfor
Slide 13: Targeted Basel 2 Approaches
TARGETED BASEL 2 APPROACHES The targeted approaches for day one implementation of Basel 2 on 1 January 2008:- Advanced IRB Approach for Credit Risk Standardised Approach / Alternative Standardised Approach for Operational Risk (workstreams underway for Advanced Measurement Approach (AMA), but target
Slide 14: Risk Measurement Methodologies Must Be Tailored for Emerging Markets
RISK MEASUREMENT METHODOLOGIES OF THE DEVELOPED WORLD MUST BE TAILORED FOR EMERGING MARKETS Risk Characteristics of Emerging Markets: Comparison of Aggregate Provisions – Developed and Emerging Markets: Higher default rates Provisions/ Assets % Higher volatility in market variables 2.00% 1.60% Highe
Slide 15: Nedbank's 23 Projects Comprising Its Basel 2 Programme
NEDBANK’S 23 PROJECTS COMPRISING ITS BASEL 2 PROGRAMME Data Requirements Credit Risk projects Projects covering "Other Major Individual Risks" Project 1 Project 2 Project 3 Project 4 Project 5 Project 6 Project 7 Project 8 Project 9 Project 10 Project 11 Data & Data Credit Rating Tools Initial Re-ra
Slide 16: Basel 2 Implementation ~ Status
BASEL 2 IMPLEMENTATION ~ STATUS 16 (LIB-GCD-INV-PPT-003) Presentation to Merrill Lynch Investor Lunch - 20 June 2005
Slide 17: Nedbank's Basel 2 Implementation Philosophy
NEDBANK’S BASEL 2 IMPLEMENTATION PHILOSOPHY Our Basel 2 implementation philosophy has been to: Design, Prototype, Pilot, Roll-Out, Refine – then Automate. This has allowed for significant progress to be made, 80/20 output to be obtained, some benefits to be realised early and valuable lessons gained
Slide 18: Summary of Key Basel 2 Deliverables
SUMMARY OF KEY BASEL 2 DELIVERABLES DELIVERED AS AT 30 JUNE 2005 Project 1 Significant data collection effort Data & Data Data systems gap analysis (SAS/IBM used) Management (Business Requiremens) All data and data management business requirements defined (provided to IT) Project 2 8 of 9 new credit
Slide 19: Summary of Key Basel 2 Deliverables
SUMMARY OF KEY BASEL 2 DELIVERABLES DELIVERED AS AT 30 JUNE 2005 Project 4 LGD/EAD tools and framework for corporate exposures built and in use (needed for AIRB LGD / EAD approach) Framework and Tools Project 5 New Group Credit Methodology based on world class credit standards, aligned with AIRB Gro
Slide 20: Summary of Key Basel 2 Deliverables
SUMMARY OF KEY BASEL 2 DELIVERABLES DELIVERED AS AT 30 JUNE 2005 Project 7 Group Credit Portfolio Model (CPM) built (5 month project using KMV) and in use Credit Portfolio Established new Group CPM unit (part of new Group Capital Management Division) Model (CPM) & Financial Risk Aggregation (for con
Slide 21: Summary of Key Basel 2 Deliverables
SUMMARY OF KEY BASEL 2 DELIVERABLES DELIVERED AS AT 30 JUNE 2005 Project 10 Significantly improved ALCO process ALM Risk Strong ALM management in place (Group ALM division reports to CFO) (incl. Funds Transfer Pricing (“FTP”) FTP implemented Project 11 Internal model (VaR) for Trading Risk (SARB app
Slide 22: Summary of Key Basel 2 Deliverables
SUMMARY OF KEY BASEL 2 DELIVERABLES DELIVERED AS AT 30 JUNE 2005 Project 14 Credit process automation (25% complete) Information Exposure Management System (RICOS) delivered Technology (Information Technology Requirements Data systems gap closure-plan for Basel 2 implementation) Data systems / data
Slide 23: Summary of Key Basel 2 Deliverables
SUMMARY OF KEY BASEL 2 DELIVERABLES DELIVERED AS AT 30 JUNE 2005 Project 17 RBP / CVM projects underway in all 3 business clusters Risk Based Pricing (RBP) & Customer Value Management (CVM) Project 18 Basel 2 / Economic Capital impact assesment done and ongoing Strategic & Quick wins identified, ini
Slide 24: Summary of Key Basel 2 Deliverables
SUMMARY OF KEY BASEL 2 DELIVERABLES DELIVERED AS AT 30 JUNE 2005 Project 20 Extension education / knowledge transfer programme underway (since 2004) at all Change levels (incl. Non-Executive directors) Management Communication and Documentation well advanced -Including Education, Documentation and C
Slide 25: Summary of Key Basel 2 Deliverables
SUMMARY OF KEY BASEL 2 DELIVERABLES DELIVERED AS AT 30 JUNE 2005 Project 22 SARB Basel 2 Gap Analysis SARB Basel 2 Quantitative Impact Study 4 Requirements Planning (comprehensive Scope of Work document, signed by all relevant senior and Liaison management and the Board of Directors). Project 23 Qua
Slide 26: Summary of Key Basel 2 Deliverables: Remaining
SUMMARY OF KEY BASEL 2 DELIVERABLES REMAINING KEY DELIVERABLES Project 1 Data Governance Framework (by 15/12/05) Data & Data Management (Business Requiremens) Project 6 Complete CPR for rest of Bank (by 30/09/05) Credit process Complete CPI (by 31/03/06) Redesign (CPR) & Credit Process Implementatio
Slide 27: Summary of Key Basel 2 Deliverables: Remaining
SUMMARY OF KEY BASEL 2 DELIVERABLES REMAINING KEY DELIVERABLES Project 8 Final Credit Model Validation Framework (by 31/03/06) Credit Model Fully effective (30/06/06) Validation and Back-testing (expert, independent model validation framework and process for all Basel 2 Credit model usage in Nedbank
Slide 28: Summary of Key Basel 2 Deliverables: Remaining
SUMMARY OF KEY BASEL 2 DELIVERABLES REMAINING KEY DELIVERABLES Project 14 Credit Process Automation (100%) (by 31/12/05) Information Collateral Management System (by 30/09/05) Technology Data Management System (interim by 30/09/05; final by 30/09/07) (Information Technology Requirements for Basel 2
Slide 29: Summary of Key Basel 2 Deliverables: Remaining
SUMMARY OF KEY BASEL 2 DELIVERABLES REMAINING KEY DELIVERABLES Project 17 Complete RBP / CVM projects in all 3 business clusters (by 31/03/06) Risk-based Pricing (RBP) and Customer Value Management (CVM) Project 18 Integrate Basel 2, Economic Capital and Capital Management into 2005 Strategic & Stra
Slide 30: Summary of Key Basel 2 Deliverables: Remaining
SUMMARY OF KEY BASEL 2 DELIVERABLES REMAINING KEY DELIVERABLES Project 20 Ongoing Change Management Change Ongoing upskilling and resourcing Management -Incl Education, Ongoing education and training Documentation Ongoing communications and Communications Project 21 Ongoing costs / benefits / capabi
Slide 31: Summary of Key Basel 2 Deliverables: Remaining
SUMMARY OF KEY BASEL 2 DELIVERABLES REMAINING KEY DELIVERABLES Project 22 SARB requirements SARB Basel 2 – Final plan review (2005) Requirements – Model approval (2005) and Liason – AIRB approach approval (2005) – Pilot test runs (2006) – Parallel runs (2007) Project 23 Complete QAR and report (by 3
Slide 32: Project 12: Capital Requirements (2004)
PROJECT 12: CAPITAL REQUIREMENTS – INCLUDING BASEL 2, ECONOMIC CAPITAL, RAPM, RISK APPETITE AND CAPITAL MANAGEMENT 2004 The Basel 2, Economic Capital, RAPM and Risk Appetite Project INVOLVING Mercer Oliver Wyman (MOW) delivered successfully in December 2004, as follows:- Economic Capital - Methodolo
Slide 33: Project 12: Capital Requirements (2005)
PROJECT 12: CAPITAL REQUIREMENTS – INCLUDING BASEL 2, ECONOMIC CAPITAL, RAPM, RISK APPETITE AND CAPITAL MANAGEMENT 2005 In 2005, following the new models / capabilities built in 2004, the key deliverables are:- Economic Capital and RAPM - Introduce ECap / RAPM SHADOW-BASED reporting into monthly Gro
Slide 34: Project 12: Capital Requirements (2006)
PROJECT 12: CAPITAL REQUIREMENTS – INCLUDING BASEL 2, ECONOMIC CAPITAL, RAPM, RISK APPETITE AND CAPITAL MANAGEMENT 2006 In 2006 the key deliverables are:- - Implementation of Economic Capital, RAPM and Risk Appetite Frameworks - Systems (IT) automation of related processes - Performance measurement
Slide 35: Key Timelines ~ Summary
KEY TIMELINES ~ SUMMARY 35 (LIB-GCD-INV-PPT-003) Presentation to Merrill Lynch Investor Lunch - 20 June 2005
Slide 36: Key Timelines Summary
KEY TIMELINES SUMMARY 2003 2004 2005 2006 2007 2008 Basel 2 Implemented (from 1 January) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Monthly KEY SARB DEADLINES SET FOR Parallel Runs Solo Run (all approaches) (all approaches) SOUTH AFRICAN BANKS QIS 4 (Phase 1) Pilot / Test Pillar 1 QIS 4 QIS 4 Economic Run
Slide 37: Basel 2 Impacts and Estimated Costs
BASEL 2 IMPACTS AND ESTIMATED COSTS 37 (LIB-GCD-INV-PPT-003) Presentation to Merrill Lynch Investor Lunch - 20 June 2005
Slide 38: Basel 2 Impacts
BASEL 2 IMPACTS Broadly speaking, Nedbank Group will be well positioned for Basel 2 and its resultant capital requirements (assuming AIRB accreditation for credit risk). We consider it inappropriate for any bank to, at this stage, make public its Basel 2 impact position(s) due to a number of outstan
Slide 39: Basel 2 Impacts
BASEL 2 IMPACTS 2. FIRB vs. AIRB approach accreditation? - LGD% under FIRB is based on first world experience (penal for South African corporate lending which is generally well collateralised) 3. Standardised approach risk weightings? - Residential mortgages at 35% (currently 50%) is based on first
Slide 40: Basel 2 Estimated Costs
BASEL 2 ESTIMATED COSTS TOTAL ESTIMATED COSTS Rm Non-IT 100 IT* 150 250 SPLIT AS FOLLOWS: 2003 39 (16%) 2004 84 (34%) 2005 90 (36%) 2006 37 (14%) 250 (100%) * Some integration with other major business process improvement initiatives, namely: - Financial Process Architecture Project - Enterprise-Wid
Slide 41: Impact of IFRS (IAS 39) on Capital
IMPACT OF IFRS (IAS 39) ON CAPITAL 41 (LIB-GCD-INV-PPT-003) Presentation to Merrill Lynch Investor Lunch - 20 June 2005
Slide 42: Does IAS 39 Impact on Capital?
DOES IAS 39 IMPACT ON CAPITAL? Current regulations and statutory capital: YES - DI returns are based on GAAP unless specific guidance given - Changes due to IAS 39 affect reserves and asset carrying values - These affect regulatory capital adequacy Basel II: ? 42 (LIB-GCD-INV-PPT-003) Presentation t
Slide 43: Two Possible Approaches
TWO POSSIBLE APPROACHES No change - Nothing has changed economically, thus returns and capital levels should not be affected - Reverse accounting adjustments - Need a recon from new accounting rules to regulatory returns OR Accept the change - Accept new accounts and capital levels as basis for regu
Slide 44: Changes to Capital: What Could Go Wrong?
CHANGES TO CAPITAL Fair value adjustments Hedge accounting - Cash flow hedging - Fair value hedging Impairment WHAT COULD GO WRONG? Capital instability Comparability problems Asymmetric treatment of +ve and –ve adjustments Accounting decisions driven by regulatory treatment (eg. Hedge accounting) 44
Slide 45: Basel 2 vs. IFRS - Credit
BASEL 2 vs. IFRS - CREDIT Basel 2 IAS 39 Evaluations are basically “model driven” Evaluations are basically “market driven” Conservative estimates Realistic case estimate – “Central” Intention of regulation – Stability of the estimate banking sector Intention of regulation – Consider entire life of
Slide 46: New Capital Management Framework
NEW CAPITAL MANAGEMENT FRAMEWORK 46 (LIB-GCD-INV-PPT-003) Presentation to Merrill Lynch Investor Lunch - 20 June 2005
Slide 47: Capital Management Framework
CAPITAL MANAGEMENT FRAMEWORK CAPITAL MANAGEMENT FRAMEWORK BOARD OF DIRECTORS STAKEHOLDERS STAKEHOLDERS RISK RISK Clients vs. vs. Shareholders CAPITAL GROUP EXECUTIVE COMMITTEE RETURN Debt-holders ADEQUACY ("GROUP EXCO") Analysts Rating Agencies (Solvency) (Profitability) General public Regulators: -
Slide 48: Key Objectives of Capital Management Framework
KEY OBJECTIVES OF CAPITAL MANAGEMENT FRAMEWORK Integrate enterprise-wide risk management with capital management, and where risk is managed according to 3 broad objectives: - Risk as OPPORTUNITY (maximise earnings potential, exploit profitability skews) - Risk as UNCERTAINTY (minimise earnings volat
Slide 49: Key Capital Management Functions in Nedbank
KEY CAPITAL MANAGEMENT FUNCTIONS IN NEDBANK The key Capital Management functions established are: Capital Investment Managing the process whereby the cash raised through the issue of capital and / or the internal generation of capital (i.e. retention of profits) is physically invested, and integrate
Slide 50: Key Capital Management Functions in Nedbank (Continued)
KEY CAPITAL MANAGEMENT FUNCTIONS IN NEDBANK (CONTINUED) Capital Optimisation Seeking an optimal level of capital for the Group and its subsidiaries by facilitating the optimisation of the risk profile of thebalance sheet through portfolio and value-based management principles, risk based strategic p
Slide 51: Organisational Structures and Responsibilities: Group Finance Cluster
ORGANISATIONAL STRUCTURES AND RESPONSIBILITIES GROUP FINANCE CLUSTER Mike Brown Chief Financial Officer NEDBANK GROUP Luigi Darryl Ian David Mark Dave Trevor Don Brenda Mike Bianco McMullen Fuller Crewe-Brown Parker Hammond Adams Bowden Niehaus Burnell Project Financial & SARB Regulatory, ALM, FTP,
Slide 52: Organisational Structures and Responsibilities: Group Capital Management Division
ORGANISATIONAL STRUCTURES AND RESPONSIBILITIES GROUP CAPITAL MANAGEMENT DIVISION Mike Brown Chief Financial Officer Trevor Adams Head: Group Capital Management (and Basel 2 Programme) Markus Borner Strategic Capital Management Economic Capital Strategic: Capital Optimisation Stakeholder Allocation -
Slide 53: Group Capital Management Division (continued)
ORGANISATIONAL STRUCTURES AND RESPONSIBILITIES GROUP CAPITAL MANAGEMENT DIVISION (“GCMD”) (continued) The mandate of the GCMD, which reports directly to the Chief Financial Officer, is as follows: Capital Structuring (including Capital Adequacy) - ensuring that the amount of regulatory, economic* an
Slide 54: Organisational Structures and Responsibilities: Business Clusters
ORGANISATIONAL STRUCTURES AND RESPONSIBILITIES BUSINESS CLUSTERS (Nedbank Corporate, Nedbank Capital and Nedbank Retail) The business clusters are responsible for:- efficiently employing economic capital across their businesses; actively pursuing an optimal risk profile across each of their business
Slide 55: Economic Capital and Risk Appetite Concepts
ECONOMIC CAPITAL AND RISK APPETITE CONCEPTS 55 (LIB-GCD-INV-PPT-003) Presentation to Merrill Lynch Investor Lunch - 20 June 2005
Slide 56: Economic Capital
ECONOMIC CAPITAL A COMPREHENSIVE MEASURE OF RISK CONSISTENT ACROSS RISK TYPES AND BUSINESSES THROUGH REFERENCE TO A TARGET SOLVENCY RATING Total Risk Quantitatively measured in the (is the volatility or fluctuations form of Economic Capital in a bank’s value) Credit Operating Market Risk Risk Risk C
Slide 57: Basel 2 vs. Economic Capital Methodology
BASEL 2 vs. ECONOMIC CAPITAL METHODOLOGY NEDBANK GROUP FRAMEWORK BASEL 2 (based on AIRB) ECONOMIC CAPITAL Pillar 1 Pillar 2 Comprehensive risk and capital assessment Rules based Subjective Bottom-up modeling Minimum capital requirements for: Add buffer for all other material risks: Internal capital
Slide 58: Economic Capital Is the Capital Required to Protect Against Insolvency
ECONOMIC CAPITAL IS THE CAPITAL REQUIRED TO PROTECT AN INSTITUTION FROM ECONOMIC INSOLVENCY AT A DESIRED LEVEL OF CONFIDENCE Statistical Approach to Risk Economic Capital The quantification of risks requires statistics and the concept of probability Probability The future value (of a bank’s assets)
Slide 59: Risk Appetite
RISK APPETITE A TOOL TO EXPRESS THE GROUP’S RISK TOLERANCE IN A QUANTITATIVE WAY Illustrative earnings distribution Probability Different stakeholders have different viewpoints of risk – Maximum acceptable ‘Earnings at Risk’ where EaR is the shareholder measure of earnings volatility – Appropriate C
Slide 60: Nedbank Group's Risk Appetite Metrics
NEDBANK GROUP’S RISK APPETITE METRICS BASED ON EARNINGS VOLATILITY MODELLING (aligned with our economic capital model) 4 Key metrics are used: Earnings at Risk Chance of regulatory insolvency Chance of experiencing a loss Economic Capital Adequacy / Implied Debt Rating 60 (LIB-GCD-INV-PPT-003) Prese
Slide 61: Economic Capital and Risk Appetite Concepts
ECONOMIC CAPITAL AND RISK APPETITE CONCEPTS Nedbank Group’s risk appetite is defined in terms of earnings volatility, with risk targets subsequently allocated using economic capital. Target setting hierarchy Group Constraints / Targets Economic Capital Group Risk Appetite RoE (20%) Corporate Capital
Slide 62: Background on RAPM and Cost of Capital
BACKGROUND ON RAPM AND COST OF CAPITAL 62 (LIB-GCD-INV-PPT-003) Presentation to Merrill Lynch Investor Lunch - 20 June 2005
Slide 63: Background on RAPM
BACKGROUND ON RAPM Nedbank Group will move to Risk-Adjusted-Performance-Measurement (RAPM) as a key basis for internal performance measurement with effect 1 January 2006 (with shadow roll having commenced in Q1 2005). Lead by other areas "New" risk-adjusted P&L Funds Transfer Pricing (FTP) (Group AL
Slide 64: Cost of Capital
COST OF CAPITAL As at 1 January 2005 Cost of Capital is the weighted average of the cost of the two equity components: ordinary and preference shares (“WACC”) Weighting Cost WACC Cost of ordinary shares (after tax) 83% 14.2%* Capital Asset Pricing Model (CAPM)* Cost of preference shares 17% 8.25% 75
Slide 65: Capital Levels and Targets
CAPITAL LEVELS AND TARGETS 65 (LIB-GCD-INV-PPT-003) Presentation to Merrill Lynch Investor Lunch - 20 June 2005
Slide 66: Capital Levels and Targets
CAPITAL LEVELS AND TARGETS Capital levels and planning is assessed across five dimensions, as follows: Regulatory (Basel 1) Regulatory Economic Statutory Buffer (Basel 2) Capital Capital Capital (Rating (basis for Local (South Africa) Agencies RoE to 2007) capital) International (small) Current regu
Slide 67: Capital Levels and Targets (Continued)
CAPITAL LEVELS AND TARGETS (CONTINUED) Foreign Capital Requirements - Reduced to $US 342 million equivalent - 2005 Strategic Planning Process will finalise offshore requirements Current Divident Policy is 3 – 3,5x cover on headline earnings Capital optimisation opportunities will receive strong focu
Slide 68: Process for the Integration of Capital Management into Strategy
PROCESS FOR THE INTEGRATION OF CAPITAL MANAGEMENT INTO STRATEGY 68 (LIB-GCD-INV-PPT-003) Presentation to Merrill Lynch Investor Lunch - 20 June 2005
Slide 69: Process for the Integration of Capital Management into Strategy
PROCESS FOR THE INTEGRATION OF CAPITAL MANAGEMENT INTO STRATEGY BOARD OF DIRECTORS Provides direction and approves overall strategy proposed by management, and with a clear regard to the integration, and an understanding of, capital and risk (also a Basel 2, Pillar II requirement). GROUP RISK COMMIT
Slide 70: Summary of Nedbank Group's Key Capital and Strategic Actions
SUMMARY OF NEDBANK GROUP’S KEY CAPITAL AND STRATEGIC ACTIONS 70 (LIB-GCD-INV-PPT-003) Presentation to Merrill Lynch Investor Lunch - 20 June 2005
Slide 71: Summary of Nedbank Group's Key Capital and Strategic Actions
SUMMARY OF NEDBANK GROUP’S KEY CAPITAL AND STRATEGIC ACTIONS Economic Capital allocation and RAPM Client value management Reduce / optimise risk profile of balance sheet Risk based strategic planning Integration of risk, capital and strategy, linked to Client selection improvement performance Collat
Slide 72: Summary and Conclusion
SUMMARY AND CONCLUSION 72 (LIB-GCD-INV-PPT-003) Presentation to Merrill Lynch Investor Lunch - 20 June 2005
Slide 73: Summary
SUMMARY Nedbank is proactively responding to “The new Rules to the Game of Banking” Significant progress made, and on track for, Basel 2 Basel 2 impacts - pending SARB decisions before concluding Significant enhancements around Capital Management: - New dedicated Group Capital Management Function wi
Slide 74: Conclusion
CONCLUSION WE SEE THE WINNERS OR LOSERS UNDER THESE “NEW RULES” AS FOLLOWS: Winners Losers Banks that see Basel 2 as a means to Banks who see Basel 2 as a compliance change exercise − Embrace ‘best practice’ management − Risk not being compliant with ‘Use Test’ science into way of doing business − F