Nedbank Group · JSE:NED
Nedbank — UBS 13th Annual Global Financial Services Conference 2011
33 slides from Nedbank's conference presentation, May 2011
Slide 1: Balancing risk & growth as we build Africa's most admired bank
Risk & margin Funding management & liquidity management Balancing risk & growth as we build Africa’s most admired bank UBS Financial Services Value-based Capital Conference management management & portfolio tilt & leverage May 2011 1
Slide 2: Agenda
Agenda Overview of recent results Strategy for managing risk & growth Summary & prospects 2
Slide 3: Key financial highlights – 2010
Key financial highlights – 2010 For the year ended % change 2010 2009 Headline earnings (Rm) 14,6 4 900 4 277 Efficiency ratio (%) 55,2 53,1 NIR : expenses 79,6 78,8 Diluted HEPS (cents) 8,7 1 069 983 Diluted basic EPS (cents) (5,3) 1 050 1 109 ROE (excluding goodwill) (%) 13,4 13,4 ROE (%) 11,8 11,
Slide 4: Delivery of NIR & CLR targets – illustrative scenario
Delivery of NIR & CLR targets – illustrative scenario Based on 2010 results Assuming no change in leverage or equity Assuming efficiency ratio remains the same … further uplift from interest rate sensitivity of R660m pre-tax for every 1% increase in interest rates = approximately 1,3% addition to RO
Slide 5: Key financial highlights – 2011 Q1
Key financial highlights – 2011 Q1 % 2011 Q1 2010 year 2010 Q1 Margin 3,42 3,35 3,38 Credit loss ratio 1,15 1,36 1,46 NIR growth* 16,4 8,0 10,4 Commission & fee income growth* 13,9 11,2 18,4 Advances growth (annualised) 0,8 5,5 3,9 Core Tier 1 ratio (period end) 10,8 10,1 9,8 … earnings momentum of
Slide 6: Strategy for managing risk & growth
Strategy for managing risk & growth 6
Slide 7: Strategy for managing risk & growth
Strategy for managing risk & growth 1 Strategic portfolio discussion = “Where do we play” Input criteria Other Other Qualitative Shareholders EP pools Regulation strategic stakeholders criteria considerations Nedbank Group business portfolio In which client segments does Nedbank Group want to operat
Slide 8: Managing risk & growth
Managing risk & growth 2 Realisation of target portfolio A Tactics = “How do we play” Reposition Nedbank Retail Customer value management in Retail Grow primary clients & cross-sell Grow NIR But ensure value based cost management (NIR : expense target) Grow in areas which optimise EP & fix or slow g
Slide 9: Strategic drivers
Strategic drivers Reposition Nedbank Retail Grow NIR Client-centred focus underpinned by Provides high returns, low capital & strong risk management liquidity consumption & reduces Grow primary clients & cross-sell for earnings at risk profile sustainable ROE Sustainability Economic Cultural Environ
Slide 10: Reposition Nedbank Retail
Reposition Nedbank Retail “Delivering a choice of distinctive client-centred banking experiences” Leverage wholesale clusters’ client relationships Harness Product monolines – aligned with building deep client relationships strengths Leverage Personal Loans business Focus on people & unique Nedbank
Slide 11: SA banked population expected to grow by 4,9m to 24,2m by 2020
Understanding of external trends & context required SA banked population expected to grow by 4,9m to 24,2m by 2020 25% more than today Middle class 2m of this growth - fed by rising youth & entry-level Seniors will remain important - growing by 1,4m by 2020 Growing small business segment employing ~
Slide 12: Nedbank Retail – medium-term strategy
Nedbank Retail – medium-term strategy Key deliverables – medium term Unlocking R600m* cost efficiencies Re-investing R400m**: 340 new outlets & >1 000 new ATMs Extended shopping hours Win in mobile Unsecured lending enabling primary client growth Home Loans integral to total client relationship >30%
Slide 13: Nedbank Retail - 12 step change initiatives
Nedbank Retail - 12 step change initiatives Strengthen heart of the business 1. Build deep enduring banking relationships embracing full household 2. Capture SBS & individual synergies / entrepreneur opportunity 3. Tailor products for rising demographics 4. Reposition Home Loans 5. Align products to
Slide 14: Strategic drivers
Strategic drivers Reposition Nedbank Retail Grow NIR Client-centred focus underpinned by Provides high returns, low capital & strong risk management liquidity consumption & reduces Grow primary clients & cross-sell for earnings at risk profile sustainable ROE Sustainability Economic Cultural Environ
Slide 15: Grow NIR - innovative solutions & cross-sell
Grow NIR - innovative solutions & cross-sell Nedbank Improved equity trading Wall Street – rationalised 7 multi-interface applications Capital Innovative origination of carbon credits via project finance Nedbank Primary banked client gains NetBank Business & Cash Payments System electronic platforms
Slide 16: NIR : expenses trend
NIR : expenses trend Targeting NIR : expenses ratio of > 85% in medium-to-long-term Rm … NIR growth momentum continued into Q1 2011 16
Slide 17: Strategic drivers
Strategic drivers Reposition Nedbank Retail Grow NIR Client-centred focus underpinned by Provides high returns, low capital & strong risk management liquidity consumption & reduces Grow primary clients & cross-sell for earnings at risk profile sustainable ROE Sustainability Economic Cultural Environ
Slide 18: Economic profit (EP)
Economic profit (EP) EP primary metric because it aligns closest with shareholder value creation & incorporates risk (via economic capital allocation) EP a combination of familiar metrics that Strong correlation of total shareholder return enables trade-off between (TSR) with economic profit growth
Slide 19: Strategic attractiveness
Portfolio tilt EP pool attractiveness Focus is on market share A High growth by value (EP) rather than pure volume Strategic attractiveness B A Grow faster / invest B Maintain current plan C C Fix economics / grow slower Low Low Financial attractiveness High Rewards appropriately linked to performan
Slide 20: Economic profit (EP)
Economic profit (EP) Although primary metric, EP optimised within other constraints set by shareholder expectations/regulator & risk appetite Shareholder Optimising EP within constraints Risk appetite Illustrative expectations elements ROE (excl Goodwill) > CoE +5% 30% Revenue Revenue 0 <X < Capital
Slide 21: Risk vs reward – 2010
Risk vs reward – 2010 Shareholder expectations Risk appetite elements Medium- to long-term Board approved group level risk Metric 2010 target appetite metrics ROE (excl 5% above monthly Earnings at risk (EaR) 13,4% ✗ EaR less goodwill) weighted COE (potential earnings lost ✓ than 80% Diluted HEPS ov
Slide 22: Portfolio tilt
Portfolio tilt Key shifts for Nedbank Group • Home Loans - negative CAGR (reduce share from ±20% to ±15%) • Business Banking, Nedbank Capital & Personal Loans higher growth Advances • Property Finance lower growth - bearish outlook & 37% market share • Rest of portfolio – average / maintain growth •
Slide 23: Portfolio tilt
Portfolio tilt Key shifts for Nedbank Group • Significant growth improvement in all business clusters NIR • Positive shift overall in group's NII : NIR mix & NIR : expenses ratio • Risk (capital) vs return enhancement – shift to higher EP businesses • Shift towards lower capital / liquidity demandin
Slide 24: Strategic drivers
Strategic drivers Reposition Nedbank Retail Grow NIR Client-centred focus underpinned by Provides high returns, low capital & strong risk management liquidity consumption & reduces Grow primary clients & cross-sell for earnings at risk profile sustainable ROE Sustainability Economic Cultural Environ
Slide 25: Building Africa's most admired bank
Building Africa’s most admired bank South Africa Rest of Africa Regulation & ROEs remain First & foremost Support political issues low & Longer-term need to improve wholesale client remain challenging in growth competitive expansion into challenging in short to opportunity positioning Africa some me
Slide 26: Strategic drivers
Strategic drivers Reposition Nedbank Retail Grow NIR Client-centred focus underpinned by Provides high returns, low capital & strong risk management liquidity consumption & reduces Grow primary clients & cross-sell for earnings at risk profile sustainable ROE Sustainability Economic Cultural Environ
Slide 27: Sustainability
Sustainability Economic sustainability FM Top Empowerment Companies 2011 Balancing risk & growth for sustainable, quality returns to shareholders Cultural sustainability Created & maintaining a unique culture A basis for distinctiveness within a competitive market Environmental sustainability Mainta
Slide 28: Prospects
Prospects 4 som | cil aiaielaaal pesca >) i Vy: eon Te —~ tie thet a | —— ? AN AAORENNS “Ae \ Wasa, GROUP NEDBANK MAKE THI®)cs HAPPEN
Slide 29: Nedbank Group focus
Nedbank Group focus Growing the franchise & closing the price : book gap Reposition Nedbank Retail onto a sustainable growth path Grow NIR & primary banking across the spectrum Leverage the strong wholesale franchises Optimise costs & actively manage portfolio towards higher EP areas Greater focus o
Slide 30: Basel III – implications on SA banks
Basel III – implications on SA banks Basel II.v Basel III Core* - 7,0% Tier 1* - 8,5% Total* - 10,5% Effective 2012 * Including capital conservation buffer of 2,5% ✓ Effective 2013 – 2019 (phased) Liquidity coverage ratio (LCR) Net stable funding ratio (NSFR) Additional liquid assets High quality li
Slide 31: In conclusion – 2011 growth within risk metrics
In conclusion – 2011 growth within risk metrics Levers for growth Diluted HEPS growth Economy recovering Medium-term target: Strong management team in ≥ CPIX + GDP growth + 5% place NIR strategy starting to deliver 2011 forecast: to exceed target Good cost discipline Ongoing CLR improvements Risk me
Slide 32: Thank you
Thank you MAKE THI@®)GS HAPPEN NEDBANK
Slide 33: 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
Nedbank Group — UBS 13th Annual Global Financial Services Conference 2011 on 6ix