Transcript Document

Financial Results
for the year ended 31 December 2002
Programme
• Year in review
– Richard Laubscher
• Financial review
– Stuart Morris
• Strategic review
– Derek Muller & Tom Boardman
• Prospects
– Richard Laubscher
Year in review
Richard Laubscher
The year in context
Macro issues
•
•
•
•
•
•
•
Microlending malaise
Small bank crisis
Industry consolidation
International bank departures
Rising inflation and interest rates
Strengthening Rand
Community Reinvestment Act and
Financial Charter mooted
• Mortgage originators and integrators
A challenging year
Strategic initiatives
•
•
•
•
•
•
•
•
Acquisition of BoE
Acquisition of NIB minorities
Integration of banking subsidiaries
New operating structures developed
Enhanced capital structure
Wealth Management rationalisation
Old Mutual Bank JV refined
Acquisition of Planet Finance
Created a stronger group
Strategic scorecard
Acquisitions
BoE
Imperial
Gerrard Private Bank
FBC Fidelity
ENF
Didata
Alliances
Old Mutual Bank/Bancassurance
Pick ’n Pay Go Banking
JD/Capital One microlending market
Amex/Capital One
Outsourcing











Year in review
• Core earnings up from R3,1bn to R3,4bn
• Core eps up 4% to 1 330c
• Organic growth in interest-earning assets
+17% boosted to +31% by BoE
• Topline revenue growth
– Organic:
– Acquired:
NII +12%
NII + 8%
• Expense growth
Organic:
+13%
NIR +15%
NIR +22%
Acquired:
+22%
• R266m net contribution from BoE
– Net profit of R520m offset by funding cost
of R254m
• Provisions – SME & Microlending
Segmental performances
(Rm)
% ch
2002
2001
+87
353
189
-56
256
579
-8
866
945
-30
112
161
Peoples Bank
+53
299
195
NIB
+22
760
625
Cape of Good Hope Bank
+26
120
95
T&O Strategic Investments
-171
(32)
45
Group Operations
+24
238
Nedbank Retail
Nedbank Commercial
Nedbank Corporate
Nedbank International
192
Acquisitions and alliances’
performance
(Rm)
% ch 2002
BoE (net of funding)
2001
265
Imperial Bank
+94
72
37
Gerrard Private Bank
+83
56
30
Bancassurance initiatives
+72
110
64
JD/Capital One
-213
(47)
(15)
-44
(39)
(27)
(25)
2
Pick ’n Pay Go Banking
Amex/Capital One
Merger and integration
• Group restructure triggered by:
– BoE purchase for R7,7bn
– NIB minorities buyout
• Synergy estimates of R905m per annum
by 2005
• Regulatory approvals for merger finalised
• R9,2bn new capital raised, enhancing capital
structure
– Ordinary capital R3,2bn
– Subordinated debt R4bn
– Preference shares R2bn
Merger and integration
Early successes
•
•
•
•
•
•
•
•
•
•
Legal Day One successful
Key decisions on product offering made
Future technology architecture agreed
Healthy funding flow back into BoE
– NBS deposits 103%; Probanker 100%;
Business Banking book 107%; BoE assets 115%;
no large depositor concentration issues
Client and staff retention good
Initial staff survey very positive
Nine sets of terms & conditions and nine payrolls
into one from 1 April 2003
Employee Development & Deployment Centre up
and running
Over 20 000 employee positions finalised
Operational merger going to plan
Major merger milestones
Activity
Q1
2003
Q2
Q3
Legal Day One
1 Jan 2003
V.1
Final
Migration planning
Wealth Management LDO
Product offering decision
Treasury integration
Capital markets integration
Systems architecture design
Payroll integration
CoGH integration into Nedbank retail
Credit Life integration
BoE Business Bank customer migration
PEP Bank integration into Peoples Bank
Cashbank integration into Peoples Bank
Consumer credit reorganisation
Peoples Bank branding developed
Private Wealth completion
CIS (unit trusts) integration
International rationalisation
Peoples Bank platform upgrades
NBS integration into Peoples Bank
Property & Asset Finance integration
Business Banking integration
Q4
Q1
2004
Q2
Q3
Q4
Q1
2005
Q2
Q3
Q4
Financial review
Stuart Morris
Disclosure
• BoE and NIB separately disclosed
• BoE pre-acquisition adjustments
• Pro forma segmental in Annual Report
• AC133 effective 1 January 2003
Income statement: core earnings
year ended 31 December
% ch
% ch*
2002
Rm
Net interest income
Non-interest revenue
+20
+37
+12
+15
6 300
6 929
5 874
5 833
5 268
5 054
Total income
Provisions
+28
+68
+13
+62
13 229
1 778
11 707
1 712
10 322
1 058
Net income
Expenses
+24
+36
+8
+13
11 451
7 334
9 995
6 140
9 264
5 416
Net operating income
Taxation
+7
-25
–
-26
4 117
580
3 855
569
3 848
772
Net income after taxation
Associate income
Minorities
15
-11
103
7
-18
103
3 537
162
(333)
3 286
148
(333)
3 076
181
(164)
+9
+4
–
-5
3 366
1 330
3 101
1 226
3 093
1 284
Core earnings
Core eps
*Excluding BoE
2002
Rm*
2001
Rm
Income statements
year ended 31 December
2002
Rm
Net interest income
Non-interest revenue
Total income
Provisions
Net income
Expenses
Net operating income
Taxation
Net income after taxation
Associate income
Minorities
Core earnings
* July – December 2002
Handout only
NIB
365
1 173
1 538
30
1 508
515
993
(150)
843
9
92
760
BoE*
contribution
1
1
1
1
426
096
522
66
456
194
262
10
252
14
266
BoE*
Funding
(363)
(363)
(363)
(363)
(109)
254
254
BoE*
1
1
1
1
789
096
885
66
819
194
625
119
506
14
520
Core earnings to headline
earnings
Core earnings
%
change
Dec
2002
Rm
Dec
2001
Rm
9
3 366
3 093
(1 011)
1 096
Translation gains/(losses)
General risk provision
Merger costs
400
(170)
(400 )
–
Headline earnings
-32
2 585
3 789
Headline eps
-35
1 022
1 574
Rand appreciation
Rand expectations: using end 2000 as base
13
12
11
10
actual and forecast
high
low
expected
9
8
7
6
99
00
00
01
01
02
02
03
Headline earnings to
attributable income
Headline earnings
Dec
2002
Rm
2 585
Dec
2001
Rm
3 789
Didata revaluation
(1 080)
Goodwill
(501)
(3 298)
(273)
Other impairments
(177)
(34)
Merger costs
(35)
–
Taxation
192
(171)
Attributable income
984
13
Attributable eps
389
5
Goodwill and capital writedowns
Goodwill
BoE
The Internet Solution
IQ Business Group
Other T&O investments
MBCA (Zimbabwe)
Other goodwill
Impairments
Investment sold
Total
Handout only
2002
Rm
501
214
–
58
59
36
134
119
58
678
2001
Rm
273
–
131
21
74
–
47
34
–
307
Net interest income
Rm
6,500
6,000
5,500
5,000
4,500
4,000
3,500
3,000
2,500
%
+19,6%
+10.4%
+11,1%
+8,6%
4.5
+11,3%
4.0
3.5
3.0
2.5
2.0
1998
1999
2000
NII (Rm)
Margin (%)
Margin after prov. (%)
2001
2002
Grossed-up margin (%)
BoE (Rm)
Non-interest revenue
Rm
+37,1%
7,000
%
55
6,000
+29,0%
50
5,000
4,000
+23,0%
+8,6%
+23,1%
45
3,000
2,000
40
1998
1999
NIR (Rm)
2000
2001
NIR: Total income (%)
2002
BoE (Rm)
Analysis of provisions by activity
Retail Banking
Peoples Bank
Commercial
Imperial Bank
Cape of Good Hope Bank
Corporate
NIB
Other
Microlending
SME Book
BoE
%
change
1
73
(21)
64
(19)
(18)
(25)
(10)
550
775
68
2002
Rm
417
59
160
105
29
50
30
11
861
195
656
66
1 778
2001
Rm
411
34
202
64
36
61
40
105
953
30
75
–
1 058
SME ringfenced collection book
Start
Rm
Carrying value
Estimated collections
700
(220)
Trading
statement
Rm
Now
Rm
480
700
(64)
636
698
(42)
656
Planned provisioning
480
636
656
2002 – normal
– additional
2003
2004
190
–
200
90
190
400
46
–
190
466
–
–
Non-performing loans
Dec 2002
%
Rm adv
Non-performing
loans
Expected
recoveries
Expected losses
Provisions
(coverage)
Adequacy of
provisions
– Gross
coverage (%)
– Net
coverage (%)
June 2002
%
Rm adv
Dec 2001
%
Rm adv
8 001
4,0
7 014
4,4
6 974
4,4
3 836
4 165
2,0
2,0
3 603
3 411
2,3
2,2
3 473
3 501
2,2
2,2
6 553
3,1
4 691
3,0
5 154
3,3
82
67
74
157
138
147
Capitalised development costs
2002
2001
Opening balance
881
480
Development expenditure
386
549
Commissioned
(772)
(148 )
Closing balance
495
881
Software amortisation
182
92
Capital adequacy
Tier 1
– Ordinary capital
& reserves
– Preference capital
Tier 2
– Callable notes
– Other
Total
*Percentage of risk-weighted assets
2002
Rbn
14,5
12,5
2,0
8,5
6,0
2,5
23,0
%*
7,0
2001
Rbn
14,1
%*
8,6
6,0
1,0
4,0
2,6
1,4
11,0
14,1
–
4,6
2,0
2,6
18,7
8,6
–
2,8
1,2
1,6
11,4
BoE acquisition
Rbn
Purchase consideration
7,7
Adjusted net asset value
4,9
Goodwill
2,8
BoE pre-acquisition adjustments
Post-tax
Net asset value – 31 March 2002
Headline earnings April – June 2002
Exceptional items
Net asset value – 30 June 2002
Fair value adjustments
Accounting policy alignments
Adjusted net asset value as at 30 June 2002
Handout only
Rm
6 058
97
(173 )
5 982
(899 )
(170 )
4 913
Embedded value
Rm
Shareholders’ net assets
Value of in-force business
Embedded value
Value of 15 months’ new business
Embedded value earnings as a %
of opening embedded value*
*Embedded value earnings negative due to change in assumptions
Handout only
2002
566
59
625
1
(4,7%)
Indicative new segmental
Nedbank Corporate
Corporate Banking
Commercial Banking
Property Finance
International
Imperial Bank
Treasury
Other
Retail
Wealth Management
Retail Banking
Peoples Bank
Capital & Group Services
Earnings
71%
Assets
70%
23%
19%
8%
6%
3%
3%
9%
15%
11%
14%
9%
4%
12%
5%
8%
20%
6%
2%
5%
15%
4%
17%
3%
7%
Strategic review
Derek Muller
Nedbank Corporate
We are an integrated corporate and
investment bank offering a full range
of services (advisory, debt, equity, and
transactional banking) to large and mid
size corporates, based on strong enduring
relationships, driven by innovative solutions
and leading edge technology
Nedbank Corporate
Corporate
Banking
No. of clients : 1 700
Market share : ± 22%
R250m turnover
Business
Banking
No. of clients : 25 000
Market share : ± 24%
R5m turnover
Nedbank Corporate
Derek Muller
Capital Markets
Brian
Kennedy
Business
Banking
Richard Buchholz
Corporate
Finance
ENF
Michael Katz
BEE/Public
Sector/Africa
Property &
Asset Finance
Sipho Pityana
Mike Brown
Rob Shuter
Coenraad
Jonker
Corporate Banking
W Cape Group Exec
Treasury
International
Graham
Dempster
Mike Thompson
Peter Lane
Rocco Rossouw
Support Services
Willie Ross
Ashley Sutton-Pryce
Kevin Hudson
Nedbank Corporate
Assets
(Rm)
No. of
people
Corporate Banking
36 600
310
Business Banking
22 300
3 720
Corporate Finance
–
30
ENF
–
200
Capital markets
10 700
350
Property & Asset Finance
25 000
1 200
International & Africa
23 200
670
Treasury
34 000
340
151 800
6 820
Total
Nedbank Corporate
• Quality asset growth of 12%
• RoE 21%
• Excellent credit management with low
levels of specific provisions for the year
• Strong growth in black empowerment
transactions
• Global trade achieved significant market
share gains
• Nedbank Investor Services ranked the
premier custody services provider
Handout only
Nedbank Treasury
• Successful integration of treasury rooms
• Integrated six back offices into central
processing area
• Foreign currency trading profit up 33% on
prior year
• Total trading profit up 16% on prior year
Handout only
Nedbank Commercial
• Asset growth of 11% to R16bn
Star performer was instalment
credit (+18%)
• Client deposits up 27% to R25bn
• NIR growth of 12% to R767m.
Exceptional performance in electronic
banking and global trade
Handout only
Nedbank International
• African subsidiaries NPAT up 54%
• African associates down 29%
(MBCA; HSBC Equator; SBM)
• Hong Kong NPAT down 26%
• London NPAT down 17%
• Focus on trade finance & private banking
Handout only
Nedbank Corporate
Strategic objectives 2003
• Create a common culture
• Build on our intellectual capital/
advisory capacity
• Build on our very strong corporate relationships
• Maximise our regional strengths
• Deeper penetration of the mid-market
• Greater focus on public sector
• Commitment to growth in Africa and offshore
• Total commitment to black economic
empowerment
Nedbank Corporate
Integration update
• Treasury consolidation completed 1 February
2003
• Systems selected
• No funding difficulties
• No clients lost
• Lost very few senior people
• Change management: roadshows/workshops
Some recent deals
•
•
•
•
•
•
•
•
•
Southern Sun/Tsogo Sun – funding
Cell C – funding & swaps
African Legend/Caltex – advisor
Resilient Properties – listing
Harmony/African Vanguard – advisor
Sandton Towers – property structure
Sasol Service Stations – funding
Telkom IPO – legal advisor
ICC/World Cup – legal advisor
Synergy estimates
Capital Markets
Business Banking
Corporate
Banking
Property & Asset Finance
Finance & International
Treasury
Total
Handout only
18
43
12
62
135
Strategic review
(continued)
Tom Boardman
Nedbank Retail & Wealth
Management
Tom Boardman
Retail
Pete
Backwell
Wealth
Management
Paul Leaf-Wright
Old Mutual Bank
Jack de Blanche
Pete Southworth
View of the market
BoE
Top 300 listed corporates,
government, institutions
High net worth
Medium size listed,
unlisted, professionals
Nedbank Retail
Nedbank Corporate
Middle income
Old Mutual Bank
Owner managed
Pick ‘n Pay Go Banking
Peoples Bank
Informal sector
Mass market
Businesses
Individuals
SA Retail market
Nedbank Private Banking
13 000 clients
BoE
17 000 clients
Income > R500 000 p.a.
Assets > R3 million
Nedbank Personal Banking
85 000 clients
Income > R200 000p.a.
Nedbank Retail
719 000 clients
Income > R36 000p.a.
Income-based
classification
Asset-based
classification
Nedbank (Retail) – highlights
• Strategy development started in 2000, focusing on
3 main issues:
– Create appropriate working environment
– Build sustainable competitive advantage
– Fix poor performance
• Detailed 5-year plan, ahead of plan at end 2002
Nedbank (Retail)
Financial highlights
• Retail Division has delivered outstanding
results for 2002:
–
–
–
–
–
Client assets
NII
NIR
Expenses
NIAT
+11%
+18%
+13%
+12%
+87%
Nedbank Retail
Integration update
• Moved product teams to a new “shared
service” Product Division
• Moved Unit Trust Company to Wealth
Management
• Move of Wealth Management from
Nedbank Private Bank to Wealth
Management – in progress
• Move of Cape of Good Hope Bank
branches, staff and retail clients into Retail
Division – well on track
• Integration of Manager Direct into
Nedbank Retail
Handout only
Pick ’n Pay Go Banking
• Phase 3 commenced July 2002
– 236 Go Bankers in 14 Hypermarkets and
113 Supermarkets
– In-store card delivery
– Exclusive discounts
– 85 000 accounts / 3 000 new applications per week
Old Mutual Bank
•
•
•
•
Division of Nedbank Ltd – 50/50 JV
Leverage dominant Old Mutual brand
Banking products, systems and processes
supplied by Nedcor
Sales, marketing and channel management
supplied by Old Mutual
OMB Business Opportunities
•
•
•
•
•
•
2 million OMPF customers
300 000 ex-Permanent Bank customers
No need to create a brand
Huge intermediary network
Established branch distribution network
No need to use expensive originators for
mortgages
Nedcor Wealth Management
Jointly-owned Businesses with Old
Mutual
Private Clients
Credit Protection
(South Africa)
(South Africa)
Wholly-owned Businesses
Retail Investment
Products & Services
International
Companies
(On and Offshore)
Nedcor Wealth Management
Jointly-owned Businesses with Old
Mutual
Private Clients
Credit Protection
(South Africa)
(South Africa)
Wholly-owned Businesses
Retail Investment
Products & Services
International
Companies
(On and Offshore)
• Scope of offering to High Net Worth Individuals:
– Discretionary Portfolio Management
Complete offering
– Private Banking
both onshore
– Other Investment Products
& offshore
– Fiduciary Services:Trusts, Wills,
Estates
No. of staff 554/Clients 17500/AUM R23bn
Private Clients business structure
Nedbank Syfrets
Private Banking
Wealth Mngmnt
Old Mutual Trust
Handout only
BoE Private Bank
Syfrets Trust
BoE Personal
Stockbrokers
FTNIB Private
Client Asset Mgt
Private Clients
One client-centric model
Relationship Manager
• Private Client Asset Mgmnt
• Structured Lending
Product
provision
NEDBANK
In-sourcing
products
Distribution
• Stockbroking
• Fiduciary
Product
provision
FAIRBAIRN
CAPITAL
Handout only
Products
Private Clients
Impact of merger
• Six different business models to be
combined into one business - presently
working with McKinsey & Co to determine
optimal business model
• Extended product range for clients
– Off-shore opportunities with Gerrard Private Bank
– Increase share of wallet of existing customers
(currently single product clients only)
• Economies of scale lead to decrease in
relative costs
– increasing profitability
– eliminate duplication of operations
Handout only
Private Clients
International joint venture
• Old Mutual and Nedbank have a joint
initiative in Gerrard Private Bank
– Comprehensive offering to high net worth individuals
– Will be BoE’s offshore offering
– Full product range now available on a ‘seamless’
basis
• Banking
• Trust and Fiduciary Services
• Investment Management
– With the representative office recently opened perfectly positioned to service clients
Handout only
Nedcor Wealth Management
Jointly-owned Businesses with Old
Mutual
Private Clients
Credit Protection
(South Africa)
(South Africa)
Wholly-owned Businesses
Retail Investment
Products & Services
International
Companies
(On and Offshore)
• Scope of providing banking
customers with credit protection
– Nedbank customers
– JV and Alliances
– Other banks customers
No. of staff 105 / Premium income R491m / EV R44m
Credit Protection
Impact of merger
• Single focus on credit protection
• Repositioning of business as a ‘Bank
Life Company’
• Utilise the strengths of both
shareholders
– distribution from Nedbank
– expertise from Old Mutual
Handout only
Nedcor Wealth Management
Jointly-owned Businesses with Old
Mutual
Private Clients
Credit Protection
(South Africa)
(South Africa)
Wholly-owned Businesses
Retail Investment
Products & Services
International
Companies
(On and Offshore)
• Develops, distributes and
supports both international and
SA investment product solutions
to chosen target markets
No. of staff 80/Unit holders 133 000/AUM R7bn
Retail Investment
Products & services
Outsourced
Support
Services
Retail
Products
& Services
Target
Market
SA
International
Both SA & International
• BoE Private Clients • Gerrard Private Bank • Product research &
development
• BoE Trust Services • Offshore Trust
Companies
• HNW Intermediaries
• All collective investment
• HNW Intermediaries
schemes
• LISPs/FOFs
• Gerrard UK
• Nedbank Retail
• Marketing, sales,
• Offshore Life
distribution support
• Nedbank Corporate
Companies
• Group Alliances
Handout only
Outsourced
Asset
Management
SA
• BoE
• Aka
• Nedbank
Treasury
International
• Stenham
Gestinor
• NIBi
• Chiswell
Associates
• SYmmETRY
• OMUS
• OMAM
Retail Investment
Impact of merger
• Amalgamation of four unit trust management
companies (BoE, FT-NIB, Nedbank, NIBi)
• Definition of a new value proposition and
product set covering active, passive, multimanaged and absolute ranges
• Rationalisation of more than 50 unit
trust funds
• Release R30m of under-utilised capital
• Distribution, marketing and operational
consolidation, yielding economies of scale
• Consolidated negotiation with suppliers on
performance-related SLAs
Handout only
Nedcor Wealth Management
Jointly-owned Businesses with Old
Mutual
Private Clients
Credit Protection
(South Africa)
(South Africa)
Wholly-owned Businesses
Retail Investment
Products & Services
International
Companies
(On and Offshore)
• 3 main focus areas
– Private Clients
– Specialised Asset Mgmt
– Private Banking
No. of staff 430/Clients 26 000/AUM £4,25bn
International Businesses
BoE International
Gerrard Private
Bank
Stenham Gestinor
NIBi International
Handout only
Chiswell
Associates
Fairbairn Trust
International Businesses
Nature of business
• Private client asset gathering and management
– Fiduciary services
– Hedge Funds
– Syndicated Property Investments
– Linked Investment platform
– Retail pooled investments
• Asset Management - manage investments of
– families
– charities and small institutional funds
• Gerrard Private Bank - offers clients integrated
– banking
– asset management
– fiduciary services
– treasury products
Handout only
International Businesses
Impact of merger
• Creation of one multi-management
business
– Stenham Gestinor Asset Management
– NIBi
• Rationalise the trust businesses
– BoE Trust Co
– SG Trustee Services (Channel Islands.
Switzerland, Luxembourg)
– Fairbairn Trust/Gerrard Trust
– NIBi Trust Company
• Integration of the management and
operations of the international businesses
Handout only
Wealth Management
Long-term opportunities
• We have all the products that are
needed
• We have a huge client base providing
growth potential
• Our businesses are already profitable
Leads to rapid growth!
Synergy estimates
R’m
Shared Services
127
Nedbank
Corporate
135
Nedbank
Retail
36
Integration costs
being estimated
Wealth
Management
103
Peoples Bank
14
Synergies will
benefit the Group
fully in 2005
T&O
245
Total
660
Handout only
Strategic review
(continued)
Richard Laubscher
Peoples Bank
Highlights
• Total assets increased 6% despite 19%
decline in FBC assets
• 37% increase in NIR
• Net effect of “excess” provisions only
R30m
• R130m benefit from assessed losses
• Restructuring proceeding well
– Risk and compliance centralised
– More than 1 million transactional clients
– Total assets R12bn (R10bn in advances)
Technology & Operations
Highlights
•
•
•
•
Financial performance
Process culture
M&R Integration
Digitisation
– CAMSII
– Alpha cost savings
– NetBank
• International – Swisscard on track
Prospects
Richard Laubscher
Strategy
Wealth
Management
Peoples Bank
Bancassurance
International
SA Banking
Corporates
Individuals
Businesses
Alliances
T&O platform
Outsourcing
The year ahead
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•
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Strategic platform in place
Retain and grow client base
Integrate operations
Extract synergies
Address non-performing assets
2002 low base: 2003 therefore
statistically better
• 2004: the power in the model should
evidence itself
Implementation & execution