Nedbank Group · JSE:NED
Nedbank — UBS Annual Global Financial Services Conference 2012
24 slides from Nedbank's conference presentation, May 8, 2012
Slide 1: Balancing Growth and Risk
BALANCING GROWTH AND RISK NEDBANK GROUP Trevor Adams Managing Executive: BSM UBS conference, New York City 8 May 2012
Slide 2: 2011 financial highlights
2011 financial highlights Nedbank share performance (large bank): #1 : 1 year #1 : 3 years #2 : 5 years 1
Slide 3: Sound banking and governance environment in South Africa
Sound banking and governance environment in South Africa Rank (/142) Rank (/139) Indicators for South Africa 2011 - 2012 2010 - 2011 Strength of auditing & reporting standards 1 1 Regulation of securities exchange 1 1 Efficacy of corporate boards 2 2 Soundness of banks 2 6 Protection of minority sha
Slide 4: The business of banking is fundamentally about managing risk
The business of banking is fundamentally about managing risk BALANCE SHEET Volatility in asset value (= risk) o Buffer for unexpected losses (i.e. risk) Asset value a direct o Responsible to CAPITAL consequence of risk- shareholders to deliver taking activities e.g. acceptable returns ASSETS LIABILI
Slide 5: The business of banking is fundamentally about managing risk
The business of banking is fundamentally about managing risk Nedbank has 3 core objectives in managing risk o ‘Managing Risk as a THREAT’ o ‘Managing Risk as an UNCERTAINTY’ o ‘Managing Risk as an OPPORTUNITY’ Nedbank strictly applies 3 lines of defence in its risk governance o 1st line (Nedbank bus
Slide 6: Nedbank Retail vs Business Banking – importance of risk management
Nedbank Retail vs Business Banking – illustration of the importance of risk management Business Banking: very strong risk management The new risk management framework culture, which reflects in consistently low CLR brings these capabilities to Retail Business banking CLR Risk appetite Retail banking
Slide 7: How we look at banking
How we look at banking Bank = Macro-economic hedge fund + Fees & services business • Bank specific, idiosyncratic risk - Credit risk profile - ALM position - Trading activities - Risk appetite - Stress and scenario testing - Risk strategy - Etc. • Risk culture & risk management • Balance sheet manag
Slide 8: A macro-economic view of growth vs risk
A macro-economic view of growth vs risk Growth potential vs Risks • GDP growth: • Impact of fragile global economy on SA Developed world < SA < Rest of Africa • Geopolitical risk (international and SA) • SA infrastructure spending potential (R800bn pipeline) • Weak housing market recovery • Growing
Slide 9: Our key strategic focus areas – all about balancing risk and growth
Our key strategic focus areas – all about balancing risk and growth Client-centred focus Also reduces earnings underpinned by strong volatility risk risk management for sustainable profitability Investing for the future o “Risk Appetite in Africa” clearly Strategic portfolio management defined & qua
Slide 10: Our primary focus on Economic Profit (EP)
Our primary focus on Economic Profit (EP) EP primary metric: Aligns closest with shareholder value creation & incorporates risk (via economic capital allocation) EP a combination of familiar metrics Strong correlation of total shareholder return (TSR) with economic profit growth that enables trade
Slide 11: Portfolio Tilt – key objectives
Portfolio Tilt – key objectives Focus on maximising EP (and ROE) Target an optimal balance sheet and income statement shape and mix Optimise the strategic impact of Basel III o Optimal allocation of resources: capital, liquidity and expenses Reduce through-the-cycle earnings volatility Opt
Slide 12: Portfolio Tilt – key considerations
Portfolio Tilt – key considerations Delta EP growth, being the primary driver of shareholder value-add Overlay of current and forecasted economic cycle Growth of market share by economic value (or EP) more important than volume/asset size Strategic impact of Basel III Emphasising capital a
Slide 13: Portfolio Tilt – grow faster vs selective growth
Portfolio Tilt – grow faster vs selective growth examples EP pool attractiveness o Acquired JVs & launching High Grow faster Nedbank various new products Wealth including life, insurance & asset management o Transactional banking / Strategic attractiveness clients / deposits o Card, Investment Banki
Slide 14: Championed at Nedbank by Balance Sheet Management
Championed at Nedbank by Balance Sheet Management (BSM) and embedded in the practices of all clusters In place bank-wide: Risk-based economic capital allocation Funds transfer pricing Liquidity premiums RAPM o Primary driver EP and HE growth Risk Appetite Risk Strategy o Integrated compo
Slide 15: Reposition Nedbank Retail
Reposition Nedbank Retail Enabling sustainable headline earnings & ROE increase Headline earnings (Rm) & annual ROE (%) o Skilled & stable leadership 11,8% o Excellent progress implementing client centred growth strategy 1 176 o Growth in 2011 o NIR increased 17,3% 826 627 o Clients +434k o Outlets
Slide 16: Reposition Nedbank Retail – The SA home loans market
Reposition Nedbank Retail – The SA home loans market A sobering example: Indicative* economics of South African home loans back to 2005 Impairments as % of advances Headline earnings as % of advances 2.2 -0.2 -0.3 1.4 -0.5 0.3 0.2 -1.0 -1.2 -1.3 -0.1 -0.3 -1.0 -1.9 2005 2006 2007 2008 2009 2010 2011
Slide 17: Grow NIR
Grow NIR Growing NIR to also reduce earnings volatility risk NIR : expenses ratio (%) o NIR growth momentum maintained - 22000 81.5% strongest growth in peer group (10.2% 82.0% 20000 CAGR) 79.6% o Consistent delivery across clusters 18000 80.0% 78.8% 78.1% 16.6% 77.4% 16000 o Growth underpinned by:
Slide 18: Rest of Africa - a medium to long-term opportunity
Rest of Africa - a medium to long-term opportunity Sub-Saharan Africa (excl SA) EP Building stronger position in Southern development 2010 - 2020 Africa: 20 o ~75% of financial services EP pool 15 accessible via SADC EP per year in Bn USD 10 o Nedbank, locally, has greater 5 opportunity to capture E
Slide 19: Rest of Africa – our risk mitigated approach
Rest of Africa – our risk mitigated approach ‘One bank’ experience for clients across 36 countries & over 2 000 staffed outlets o Alliance with Ecobank since 2008 o Provided Ecobank a $285m loan facility, with rights to acquire up to 20% equity stake (in 2 - 3 years) o Partnership approach with loca
Slide 20: Impact of Basel III
Impact of Basel III Well capitalised & positioned for Basel III, on back of successful Basel II implementation Core Tier 1 Basel II.5 capital (-0.5%) - 6% scaler for credit RWA IRB portfolios 0.5% - Stressed VAR for market trading risk 0.9% Basel III capital (neutral) - New capital deductions e.g. d
Slide 21: Proposed South African Basel III capital ratios – Draft 1
Proposed South African Basel III capital ratios – Draft 1 Draft 1 of the SA regulations were released by SARB on 30 March 2012 Proposal for SA Regulations Common Equity Tier 1 Tier 1 Capital Total Capital Effective date BCBS Basel 3 minimum 4.5% 6.0% 8.0% Pillar 2A for SA systemic risk * 2.0% 2.0% 2
Slide 22: Conclusion
Conclusion o SA & Africa provides good growth opportunities, balanced against some inherent risks o SA banking industry the 2nd most sound in the world o The business of banking is fundamentally about managing risk o The Nedbank Group strategy has a strong growth orientation, integrated with world c
Slide 23: Disclaimer
Disclaimer Nedbank Group has acted in good faith and has made every reasonable effort to ensure the accuracy and completeness of the information contained in this document, including all information that may be defined as 'forward-looking statements' within the meaning of United States securities le
Slide 24: Thank you
THANK YOU park Building Africa’s most admired
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