Nedbank Group · JSE:NED
Nedbank — UBS 13th SA Financial Services Conference 2010
26 slides from Nedbank's conference presentation, Oct 21, 2010
Slide 1: Optimising return on capital in a challenging new landscape
UBS Financial Services Conference, 21 October 2010 Optimising return on capital in a challenging new landscape Nedbank Group Mike Davis, Executive Head: Group Asset, Liability & Capital Management
Slide 2: Agenda
AGENDA o Nedbank’s current position o Key environmental trends o Optimising return on capital o Summary & conclusion 2
Slide 3: Nedbank's current position
Nedbank’s current position Refined EXCO team in Refined strategy – to Structural Vision place move from ‘good to changes & great’ investments Building Wealth Africa’s most Management Portfolio Tilt Acquisition of admired bank repositioned … by our staff, 100% of JVs NIR - key driver clients, Busines
Slide 4: Nedbank's current position (continued)
Nedbank’s current position (continued) Where we are today - We need to get to - Good Great oFinancial performance benchmarks oGrowth of NIR / transactional / well, except for NIR primary client market share – oAsset & liability market shares not greater share of wallet materially out of line & stron
Slide 5: Agenda
AGENDA o Nedbank’s current position o Key environmental trends o Optimising return on capital o Summary & conclusion 5
Slide 6: Macro-economic environment
Macro-economic environment 2010 2011 2012 2013 GDP 2,8% 3,0% 4,2% 4,0% CPIX Inflation 4,4% 4,9% 6,2% 6,0% Current account deficit 3,4% 3,9% 4,2% 4,9% Prime overdraft rate (year end) 9,50% 9,5% 12,0% 13,5% Exchange rate ($/R) 7,40 7,49 7,97 8,13 o Risk of double-dip recession in global markets • few
Slide 7: Key environmental trends
Key environmental trends o Bank RoEs are structurally declining o SA financial services EP pool large but Africa higher growth long term o SA prospects driven by infrastructural investment & wealthier consumer o High growth from bandwidth, electronic, internet, mobile & new technology o SA demograph
Slide 8: Basel 3 – implications for capital & liquidity
Basel 3 – implications for capital & liquidity Calibration of the Basel capital framework - o Core Tier 1 equity up from 2% to 4.5% (2013 - 2015) o Additional regulatory deductions to core Tier 1 (2014 - 2018) o Tier 1 up from 4% to 6% (2013 - 2015) o Capital conservation buffer of 2.5% (2016 - 2019
Slide 9: Basel 3 – implications for capital & liquidity (continued)
Basel 3 – implications for capital & liquidity (continued) Calibration of the Basel liquidity risk framework - Liquidity coverage ratio Net stable funding ratio High quality liquid assets Long stable funding > 100% > 100% Net cash outflows 30-day Required amount of time period stable funding Resulti
Slide 10: Agenda
AGENDA o Nedbank’s current position o Key environmental trends o Optimising return on capital o Summary & conclusion 10
Slide 11: Optimising return on capital - Nedbank's strategic drivers
Optimising return on capital - Nedbank’s strategic drivers Portfolio tilt approach Adopt active portfolio management NIR is the key driver approach to optimise scarce resources – more judicious allocation Provides high returns, low capital & of capital, liquidity & costs liquidity consumption & redu
Slide 12: Strategic attractiveness
Portfolio Tilt – actively manage toward high EP areas EP pool attractiveness (Market view) High A A Grow faster/ invest Strategic attractiveness B Maintain current B plan Home Loans C C Fix economics Low Low High Financial attractiveness Focus is on market share growth by value (EP) rather than pure
Slide 13: Portfolio Tilt – measuring risk vs. return (value)
Portfolio Tilt – measuring risk vs. return (value) Portfolios • Rewarded on portfolio performance vs. single business managed across • Allocate scarce resources to high EP areas business units • “Manage for value” at Group and business unit levels Risk allocation framework • Risk quantified by portf
Slide 14: Optimising return on capital - Nedbank's strategic drivers
Optimising return on capital - Nedbank’s strategic drivers Portfolio tilt approach Adopt active portfolio management NIR is the key driver approach to optimise scarce resources – more judicious allocation Provides high returns, low capital & of capital, liquidity & costs liquidity consumption & redu
Slide 15: NIR – grow transactional banking & primary clients
NIR – grow transactional banking & primary clients Targeting medium-to-long-term Rm NIR : expenses ratio of >85% 10 000 100% 83.0% 78.2% 7 000 75.4% 76.0% 74.5% 75.5% 80% 4 000 60% 1 000 40% 2005 2006 2007 2008 2009 2010 1: Commission & fees at June 2: Commission & fees at December 3: NIR-to expense
Slide 16: NIR – grow through innovative solutions & cross-sell
NIR – grow through innovative solutions & cross-sell Opportunities • Cross-sell across clusters across clusters • Medium- to long-term: Africa / Ecobank alliance • Wallstreet – rationalise 7 multi-interface applications Nedbank Capital • Innovative origination of carbon credits via project finance •
Slide 17: Optimising return on capital - Nedbank's strategic drivers
Optimising return on capital - Nedbank’s strategic drivers Portfolio tilt approach Adopt active portfolio management NIR is the key driver approach to optimise scarce resources – more judicious allocation Provides high returns, low capital & of capital, liquidity & costs liquidity consumption & redu
Slide 18: Reposition Retail
Reposition Retail ... particularly Home Loans o Imbalance of risk vs. return o Overly competitive – given economics o Margins squeezed due to: o Originator costs o Increasing funding costs o Higher concessions to Prime o Market slow to respond to increasing risk – some banks quicker than others o De
Slide 19: Reposition Retail (continued)
Reposition Retail (continued) “Delivering a choice of distinctive client-centred banking experiences that build many deep, enduring relationships with Nedbank” • Leverage small business, Business Banking & corporate client Harness relationships strengths • Product monolines – aligned with building d
Slide 20: Optimising return on capital - Nedbank's strategic drivers
Optimising return on capital - Nedbank’s strategic drivers Portfolio tilt approach Adopt active portfolio management NIR is the key driver approach to optimise scarce resources – more judicious allocation Provides high returns, low capital & of capital, liquidity & costs liquidity consumption & redu
Slide 21: Greater focus on Africa
Greater focus on Africa • Nedbank has significant market share in SA corporate & commercial sectors • Corporate & commercial clients increasing presence across Africa – future growth opportunities in African economic growth story • Nedbank needs capacity to service its clients as they extend into Af
Slide 22: Greater focus on Africa (continued)
Greater focus on Africa (continued) • Currently operate banks in 5 SADC countries Expand & grow • Existing niche competitive advantages in SADC • Continue to seek opportunities to grow scale in SADC Advisory • Angola & Kenya representative offices opened boutiques • Structured term trade & advisory
Slide 23: Agenda
AGENDA o Nedbank’s current position o Key environmental trends o Optimising return on capital o Summary & conclusion 23
Slide 24: In summary
In summary In order to optimise capital & close the price : book gap o Actively manage portfolio towards higher economic profit areas o Grow NIR & primary banking across the spectrum o Reposition Nedbank Retail onto a sustainable growth path o Greater focus on African expansion o Active balance shee
Slide 25: Thank you
THANK YOU 25
Slide 26: 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
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