Nedbank Group · JSE:NED
Nedbank — UBS 8th SA Financial Services Conference 2005
42 slides from Nedbank's conference presentation, Oct 20, 2005
Slide 1: Nedbank Group: The turning point
Nedbank Group “The turning point”
Slide 2: Agenda
Agenda • External environment • Internal factors • Summary
Slide 3: External environment
External environment <7 “Ge NEDBANK GROUP
Slide 4: External environment
External environment • Macro banking environment • Pressure on bank charges • Increased regulatory pressure • Increased competition • Growth of black / emerging market / BEE • Potential growth in infrastructure spend
Slide 5: Generally positive banking environment
Generally positive banking environment • Low interest rates, low inflation & more stable Rand • Consumer spending remains robust - Strong retail asset backed advances growth - Emerging black middle class • Significant estimated infrastructure spend • Strong growth in SME sector to continue • Buoyant
Slide 6: Low interest rate / inflationary environment
Low interest rate / inflationary environment CPIX, Prime (%) Real prime (%) 26 20 24 Downturns 18 22 real pod prime 16 20 CPI-X 18 14 16 12 14 10 12 10 8 8 6 6 4 4 2 2 0 0 95 96 97 98 99 00 01 02 03 04 05 06 07 08 Strong retail volume growth, off high base, likely in short term Momentum likely to fa
Slide 7: Positive banking environment driving growth
Positive banking environment driving growth Home loans Imperial Bank motor vehicle finance 40% 12,000 35% Total Book size 10,000 30% 8,000 25% 20% 6,000 Rm 15% 4,000 10% 5% 2,000 0% Jan- Mar- May- Jul- Sep- Nov- Jan- Mar- May- 0 04 04 04 04 04 04 05 05 05 Jan Mar May Jul Sep Nov Jan Mar May Jul '04
Slide 8: Credit environment
Credit environment • Driven by change in interest rates & inflation • Household debt / disposable income = 56,8% Jan ‘05 • Increased impairments volatility from IFRS • Strong retail credit demand continuing - Potential to reduce Nedbank Retail impairments charge - Impairments charge / lending assets
Slide 9: Quality of new business improving
Quality of new business improving Nedbank Home Loans - New Business 12.00 10.00 % 3+ Ever in Arrears 8.00 6.00 4.00 2.00 0.00 1 Mnts on Book 3 Mnts on Book 6 Mnts on Book 9 Mnts on Book 12 Mnts on Book Jun01-May02 Jun02-May03 Jun03-May04 Jun-04 Dec04 Quality of newer tranches better than previous bo
Slide 10: Pressure on bank charges
Pressure on bank charges • Competitions commission review of interchange fees driven by: - International trends - SA’s apparent high fees & Falkena report - Consumer pressure & increasing media pressure • Mzansi pricing • Continued competitive pressure in corporate sector - Particularly government &
Slide 11: Increased regulatory pressure
Increased regulatory pressure Regulation Cost Implications Comments (estimated) FICA In base: R 100 m • 2,1 m of 2,7 m clients re-verified 2005: R 50 m • Awareness training completed • Administrative challenge FAIS In base: R7m • 5 169 staff compliant 2005: R1m • Focus on training – better client se
Slide 12: Basel 2
Basel 2 WINNERS LOSERS • Banks that see Basel 2 as a means • Banks who see Basel 2 as a to change compliance exercise - Embrace ‘best practice’ management science - Fail to address portfolio - Address portfolio economics economics - Increase transparency - Fail to improve • Banks that bring a soluti
Slide 13: National credit bill
National credit bill • To govern credit agreements – estimated to be effective early 2006 • Will replace Credit Agreements Act, Usury Act & Micro-finance & Regulatory Act • To promote & advance social & economic welfare, promote fair transparent, competitive, sustainable, responsible, efficient & ac
Slide 14: Increased competition
Increased competition • Entry of foreign banks - Foreign banks have been in SA for a long time - ABSA/Barclays positions ABSA as stronger corporate & investment bank - Stronger ABSA African presence - Minimal impact on funding pool • Entry of non-traditional banks - Post Office, retailers, cell phon
Slide 15: Growth of black / emerging market
Growth of black / emerging market • Data anecdotal - mainly from surveys & not necessarily consistent • However, clear that black middle class, upper-end income growth significant over past few years • UNISA’s Bureau for Market Research - black households in high income group jumped 368% to 440 000
Slide 16: Growth of the black / emerging market
Growth of the black / emerging market Mzansi Sales Volume 80 000 70 000 60 000 ABSA 50 000 FNB 40 000 Nedbank 30 000 Standard 20 000 SAPO 10 000 0 Oct Nov Dec Jan Feb Mar Apr May June July Aug Month Nedbank Mzansi sales volumes grew by 60% since April 2005 … the Nedbank brand can stretch
Slide 17: Growth in infrastructure spend
Growth in infrastructure spend INFRASTRUCTURE SPENDING SINCE 1993 Announced value of total capital projects Nedbank Group schedule: R bn (constant 2005 prices) Official gfcf: % Date Project Value - Rbn Status 15 Power 200 Public Enterprises: Eskom and Transnet Value of announced projects 1993 Eskom'
Slide 18: Internal factors
Internal factors <7 “Ge NEDBANK GROUP
Slide 19: Strategy remains the same
Strategy remains the same Vision “To become Southern Africa’s most highly rated & respected bank… …by our employees, clients, shareholders, regulators & communities.” What will dictate our business We need to be great at listening, model? understanding clients’ needs & delivering Making sure Nedbank
Slide 20: Key turning points
Key turning points Internal Focus More external Focus • Set the base • Staff morale • Reduced the risk • Client service • Increased accountability • Product improvements • Clarified vision • Systems enhancements • Set strategy • Channel improvements • Fixed the structure • Transformation & FSC • Del
Slide 21: Key opportunities
Key opportunities Progress trend Improvement in staff morale Turnaround Retail Performance of the corporate market Drive transactional revenue Unleash synergies with Old Mutual Group Transformation & leveraging BEE deal Brand positioning / promise / differentiation Integration of risk & capital mana
Slide 22: Improvement in staff morale
Improvement in staff morale • Increased job stability - Retrenchment programme completed end 2004 - No retrenchments from Peoples Bank integration • More positive publicity - Positive press coverage increased from 17% in Q4 2004 to 31% in Q2 2005 (Q2 2005 industry average 28%) (Delahaye Africa Media
Slide 23: Nedbank employee survey
Nedbank employee survey 2004 mean 38% (all statements) 2005 mean 50% (all statements) 0% 20% 40% 60% 80% 100% July 05 69% 19% 12% Direction July 04 43% 23% 34% July 05 68% 20% 12% Management style July 04 66% 19% 15% July 05 67% 22% 11% Leadership July 04 46% 32% 22% July 05 53% 22% 25% Performance
Slide 24: Turnaround Nedbank Retail
Turnaround Nedbank Retail • Comprehensive restructure - Integrated branch operations into Retail - Focussed business units • Improving staff morale • Enhanced relationships with mortgage originators Rm Jun 05 Jun 04 - Home loans a significant proportion of earnings Headline 439 214 - 67% (54% Jan ‘0
Slide 25: Nedbank Retail – C.O.U.R.A.G.E. strategy
Nedbank Retail – C.O.U.R.A.G.E. strategy Management actions (2005 – 2007) Client–driven C.O.U.R.A.G.E. Credit Organisational Unleash Retain Act Grow net Expense integration redesign bancassurance market Quickly transactional control share accounts People-driven C.O.U.R.A.G.E. Create high Obtain role
Slide 26: Retail focus areas … 2008
Retail focus areas … 2008 Tier 1 Tier 2 Tier 3 •Profitable asset growth •Pricing realignment •Expense control (market related) •Product enhancement •Get the numbers •Impairments reduction •Bancassurance profit •Brand repositioning •Acceptable risk environment growth •Channel •Net growth in enhanceme
Slide 27: Performance of the corporate market
Performance of the corporate market • Highly geared to corporate market performance - Nedbank Capital contributed 32% to June 2005 headline earnings - Nedbank Corporate contributed 66% to June 2005 headline earnings • Drivers of growth - Increased investment in capacity & infrastructure by corporate
Slide 28: Selected Nedbank BEE advisory experience
Selected Nedbank BEE advisory experience ERI Acquisition of 6,7% of Acquisition of 25% of Restructuring & Advisor to BEE consortium Telkom by Elephant Dimension Data SA by recapitalisation of IBE on the acquisition of 12.5% Consortium & 5% by PIC BEE consortium Consortium Worldwide of Uhambo Oil for
Slide 29: Selected Nedbank BEE funding experience
Selected Nedbank BEE funding experience Senior debt participant and Funder of 25% acquisition Funding of joint venture bond underwriter in Total SA by Calulo-led for JD Group BEE Consortium Preference share funding into Funding of BEE acquisition by Funding of empowerment the established BEE vehicle
Slide 30: Focus on transactional revenue
Focus on transactional revenue • Nedbank Corporate - Focussed transactional banking unit - Improving corporate banking systems - Channel convergence project in progress, roll-out scheduled for H1 ‘06 - Joint initiatives with Nedbank Capital • Nedbank Retail - New structure, staff training, improving
Slide 31: Unleash Synergies with Old Mutual group
Unleash Synergies with Old Mutual group • Much closer working relationship - Recently appointed Old Mutual Group Director for Southern Africa - Working on projects together – i.e., outsourced voice & data networks - Nedbank Retail Bancassurance - new group business premiums up 74% - Increased share
Slide 32: Transformation beyond FSC targets
Transformation beyond FSC targets Core component of FSC 2004 2005 status Human Resources • Employment equity § § • Skills development § § Procurement § § Access to financial services • Savings & transactional § § • Loan origination § § Empowerment financing • BEE transaction § § • Infrastructure Inv
Slide 33: Leveraging BEE deal – Status 14 Oct 2005
Leveraging BEE deal – Status 14 Oct 2005 Scheme Achieved subscription Target subscription Closing date Status Broadbase Allocated 1 451 400 shares to As per allocation 10th Aug 2005 14 514 employees ☺ Black Exec Allocated 168 000 shares and Approx 1,3m shares are 10th Aug 2005 504 000 options to 18
Slide 34: Leveraging BEE deal (continued)
Leveraging BEE deal (continued) • Black business partners (Wiphold & Brimstone consortia) – Strategic planning sessions held with Nedbank Corporate, Nedbank Capital & Group Human Resources – Pursuing in excess of 10 different transactions introduced by partners – Various meetings with Nedbank Retail
Slide 35: Brand positioning / differentiation
Brand positioning / differentiation • Clarified strategy & structure ahead of finalising brand campaign Listening Understanding Delivering Brand expression Desired practice A rallying call Strategic intent that Brand essence inspires, motivates Make Smart & challenges Deeper a with people understand
Slide 36: Phased approach to brand
Phased approach to brand Nedbank Listening Campaign Value proposition Deeper understanding of you & your banking needs Personality Smart with Heart BEE Integration Affinities CSI Delivering Peoples Bank Nedbank Eyethu Nelson Mandela People Raise profile Ownership Plan Children’s Fund into Nedbank Th
Slide 37: Brand alignment with strategy
Brand alignment with strategy By 2007, Nedbank aims to: • Be seen as a bank accessible to all • Be one of best companies to work for • Have significantly broadened its demographic • Be seen as the benchmark for client care business, marketing & distribution footprint • Be seen as having a true commu
Slide 38: Integration of risk & capital mgt into strategy
Integration of risk & capital mgt into strategy Basel 2 a catalyst to banks to ensure proper risk based capital management The “rules of banking” in SA changing in line with international best practice • Economic capital allocation & • Reduce / optimise risk profile of RAPM balance sheet • Collatera
Slide 39: Summary
<7 “Ge NEDBANK GROUP
Slide 40: Conclusion
Conclusion External environment Internal factors • Macro banking environment • Improving staff morale • Pressure on bank charges • Focus on client service • Increased regulatory pressure • Product improvements • Increased competition • System enhancements • Growth of black/emerging market • Transfor
Slide 41: There is no miracle moment
“There is no miracle moment. Small incremental wins in one common direction will restore Nedbank Group to a highly rated & respected financial institution.”
Slide 42: Thank you
<7 “Ge NEDBANK GROUP
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