Nedbank Group Ltd. Annual Report 2008

FY2008 Annual Report · Nedbank Group Ltd.
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NEDBANK GROUP
ANNUAL REPORT 2008

‘ISIVIVANE’ 
THE AFRICAN STONE CAIRN

Background to cover photograph:

Found within the Zulu and Sotho cultures, the ‘isivivane’ 
or stone cairn was used in the ancient world to mark places 

of spiritual, astronomical or historical signiﬁcance. 

Today they serve many purposes, but are commonly used as 
markers  on  hiking  trails  across  our  beloved  country  to  guide 
travellers navigating their way through unknown lands.

These formations consist of rocks of various sizes and colour, all 
carefully placed on top of one another to form a structure strong 
enough to withstand even the most tumultuous conditions.

The word ‘isivivane’ literally translates into ‘Throw your stone upon 
the pile’. It is customary for passers-by to add another stone to these 
formations for good luck. 

Every stone represents a different person and it is this collective spirit 
that maintains the isivivane’s structural integrity and growth.

At  Nedbank  Group  we  have  learnt  that,  with  a  strong  foundation 
and the right balance, even the smallest stone can contribute to the 
growth of a mountain.

With the ‘isivivane’ as a guide, we at Nedbank Group strive to achieve 
our  vision  of  becoming  southern  Africa’s  most  highly  rated  and 
respected bank, by our staff, clients, shareholders, regulators and 
communities.

CONTENTS

OVERVIEW 

2008 highlights 
Group proﬁle 
Financial highlights 
Investment case 
Group strategy  
Review of 2008 
Focus areas for 2009 
Segmental operational statistics 
Operational footprint 
Nedbank history 
Group structure  
Company structure 
Business proﬁle 
Seven-year review 
Economic review 

GROUP REPORTS

Chairman’s Statement 
Board of Directors 
Chief Executive’s Report 
Chief Financial Ofﬁcer’s Report 
Shareholders’ analysis  

OPERATIONAL REVIEWS

Nedbank Corporate 
Nedbank Capital 
Nedbank Retail 
Imperial Bank 
Group Technology 
The Nedbank brand 
Group Human Resources and  
employment equity 
Skills development 

GOVERNANCE

Enterprise Governance and Compliance 
Approach to sustainability and  
value-added statement 
Risk and Capital Management Report 

ANNUAL FINANCIAL STATEMENTS  

Annual ﬁnancial statements 

SHAREHOLDER MEETING MATTERS 

Letter from the Chairman 
Questions Form for the Annual General  
Meeting 
Shareholders’ Diary 
Notice of annual general meeting  
Proxy form 

OTHER INFORMATION

Deﬁnitions 
Abbreviations, acronyms and initialisms 
Instrument codes 
Contact details 

1
2
3
4
9
10
16
18
19
20
22
23
24
28
32

34
38
44
48
62

64
68
72
76
78
80

84
92

94

110
116

183

343

344
345
346
353

355
365
368
IBC

2008 HIGHLIGHTS

... resilience in the face of challenges

‘Nedbank Group has shown resilience in the face 

of the challenges posed by the crisis in global 

ﬁnancial markets and the rapid slowdown in 

the domestic economy. South African banks 

and the domestic ﬁnancial system remain 

structurally sound, but high interest rates 

and  the  global  economic  slowdown 

impacted  earnings.  In  this  operating 

environment  it  is  pleasing  that  the 

group  has  signiﬁcantly  strengthened  

capital ratios and maintained earnings 

at  a  level  similar  to  the  prior  year. 

We have continued to grow net asset 

value, our liquidity remains sound and 

the  group’s  risk  management  systems 

are  proving  effective  in  these  volatile 

markets.

2009 will undoubtedly be tough for the 

local  banking  sector,  but  we  currently 

anticipate improved prospects for growth 

in the medium term.’

Tom Boardman 
Chief Executive

SA BANKS AND FINANCIAL SYSTEM 
REMAIN STRUCTURALLY SOUND

RESILIENT PERFORMANCE   
IN CHALLENGING ENVIRONMENT
15,7% growth in tangible   
net asset value

R5,8 billion headline earnings

CAPITAL ADEQUACY   
INCREASED SIGNIFICANTLY
Core Tier 1  from 7,2% to 8,2%

Tier 1 

Total 

from 8,2% to 9,6%

from 11,4% to12,4%

LIQUIDITY   
REMAINS SOUND

RISK MANAGEMENT SYSTEMS   
PROVING EFFECTIVE

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1

 
 
 
 
 
 
 
 
 
 
GROUP
PROFILE

Nedbank Group Limited (‘Nedbank Group’) is a bank 
holding company that operates as one of the four 
largest banking groups in South Africa through its 
principal banking subsidiaries, Nedbank Limited and 
Imperial Bank Limited, in which Nedbank has a 50,1% 
interest. The company’s ordinary shares have been 
listed on the JSE Limited since 1969.

Nedbank Group offers a wide range of wholesale and retail 
banking services through three main business clusters, namely 
Nedbank Corporate, Nedbank Capital and Nedbank Retail. 
After signiﬁcant growth over the last few years Nedbank 
Business Banking was separated from the Nedbank Corporate 
business cluster to form a fourth business cluster from 
January 2009. Nedbank Group focuses on southern Africa, 
with the group positioned as a bank for all – from both a 
retail and a wholesale banking perspective.

The principal services offered by Nedbank Group comprise 
business, corporate and retail banking, property ﬁnance, 
investment banking, private banking, foreign exchange, 
and securities trading. Nedbank Group also generates 
income from private equity, credit card issuing and 
processing services, custodial services, unit trust 
administration, asset management services and 
bancassurance. 

Imperial Bank focuses mostly on motor vehicle 
ﬁnance, which is marketed through its Motor Finance 
Corporation brand. It also offers property, professional 
and supplier asset ﬁnance.

Nedbank Group’s headquarters are in Sandton, with large 

operational centres in Durban and Cape Town, which are 

complemented by a regional network throughout South 
Africa and facilities in other southern African countries. These 
facilities are operated through Nedbank Group’s 10 subsidiary 
and/or afﬁliated banks, as well as through branches and 
representative ofﬁces in certain key global ﬁnancial centres 
that serve to meet the international banking requirements of 
the group’s South African-based multinational clients.

2

NEDBANK GROUP ANNUAL REPORT 2008

% change 
2007 – 2008

 (2,6) 

 6,4 

 (4,2) 

 (2,0) 

 4,6 

 7,2 

 (6,1)

 15,7 

FINANCIAL
HIGHLIGHTS

2008

 5 765 

 6 410 

 1 422 

 1 401 

 1 581 

 1 558 

 620 

7 179 

 3,66 

 1,17 

 39,9   

51,1

 12,4  

2007

 5 921 

 6 025 

 1 485 

 1 429 

 1 511 

 1 454 

 660 

 6 207 

 3,94 

 0,62 

 42,5 

54,9

 11,4 

2006

 4 435 

 4 533 

 1 110 

 1 076 

 1 135 

 1 099 

 493 

 5 106 

 3,94 

 0,52 

 46,3 

58,2

 11,8 

 23,1 

 16,0 

 441 713 

 358 823 

 279 733 

 567 023 

 488 856 

 424 912 

 1,09 

 20,1 

17,7

2008

6 410 

 645 

 756 

 (111)

5 765 

 1,30 

 24,8 

21,4

2007

6 025 

104 

111 

(7)

 1,14 

 22,1 

18,6

2006

4 533

98

124

(26)

5 921 

4 435

Rm

Rm

cents

cents

cents

cents

cents

cents

%

%

%

%

%

Rm

Rm

%

%

%

Rm

Rm

Rm

Rm

Rm

Headline earnings

Income attributable to shareholders

Earnings per share

     Headline

     Diluted headline

     Basic

     Diluted basic

Dividend declared per share

Tangible net asset value per share

Net interest income (NII) to average interest-
earning banking assets

Credit loss ratio

Non-interest revenue (NIR) to total income

Efﬁciency ratio

Group capital adequacy ratio

Average interest-earning banking assets

Total assets

Return on total assets

ROE (excluding goodwill)

Return on shareholders’ equity (ROE)

HEADLINE EARNINGS RECONCILIATION

Proﬁt attributable to equity holders of the parent

Non-headline earnings items

Non-trading and capital items

Taxation on non-trading and capital items

Headline earnings

Refer to page 355 for deﬁnitions of terms used.

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3

 
 
 
 
 
 
 
 
 
 
INVESTMENT
CASE

Nedbank Group has identiﬁed a range of banking sector and 
company-speciﬁc criteria that an investor should consider when 
evaluating a potential investment.

Nedbank Group   
is focused on southern Africa

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:73)(cid:93)(cid:90)(cid:21)(cid:72)(cid:100)(cid:106)(cid:105)(cid:93)(cid:21)(cid:54)(cid:91)(cid:103)ican banking system has remained structurally 
sound.

(cid:73)(cid:93)(cid:90)(cid:21)(cid:92)(cid:103)(cid:100)(cid:106)(cid:101)(cid:21)(cid:94)(cid:104)(cid:21)(cid:101)(cid:100)(cid:104)(cid:94)(cid:105)(cid:94)(cid:100)(cid:99)(cid:90)(cid:89)(cid:21)(cid:86)(cid:104)(cid:21)(cid:86)(cid:21)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:91)(cid:100)(cid:103)(cid:21)(cid:86)(cid:97)(cid:97)(cid:21)(cid:72)(cid:100)(cid:106)(cid:105)(cid:93)(cid:21)(cid:54)(cid:91)(cid:103)(cid:94)(cid:88)(cid:86)(cid:99)(cid:104)(cid:35)

(cid:153)(cid:21) (cid:68)(cid:101)(cid:101)(cid:100)(cid:103)(cid:105)(cid:106)(cid:99)(cid:94)(cid:105)(cid:110)(cid:21)(cid:91)(cid:100)(cid:103)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:105)(cid:93)(cid:21)(cid:90)(cid:109)(cid:94)(cid:104)(cid:105)(cid:104)(cid:21)(cid:108)(cid:94)(cid:105)(cid:93)(cid:94)(cid:99)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:72)(cid:100)(cid:106)(cid:105)(cid:93)(cid:90)(cid:103)(cid:99)(cid:21)(cid:54)(cid:91)(cid:103)(cid:94)(cid:88)(cid:86)(cid:99)(cid:21)

Development Community (SADC) region, which currently 

generates approximately 65% to 75% of the ﬁnancial 

services’ economic proﬁt in Africa. Of the ﬁnancial services 

economic proﬁt pool in Africa, Nedbank only has an estimated 

12% to 14% share, showing the potential for growth. 

(cid:153)(cid:21)

(cid:54)(cid:97)(cid:97)(cid:94)(cid:86)(cid:99)(cid:88)(cid:90)(cid:21)(cid:108)(cid:94)(cid:105)(cid:93)(cid:21)(cid:58)(cid:88)(cid:100)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:90)(cid:99)(cid:86)(cid:87)(cid:97)(cid:90)(cid:104)(cid:21)(cid:67)(cid:90)(cid:89)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:105)(cid:100)(cid:21)(cid:100)(cid:91)(cid:91)(cid:90)(cid:103)(cid:21)(cid:88)(cid:97)(cid:94)(cid:90)(cid:99)(cid:105)(cid:104)(cid:21)(cid:86)(cid:88)(cid:88)(cid:90)(cid:104)(cid:104)(cid:21)

to 30 countries in Africa without having to embark on a risky 

o
or expensive acquisition strategy.

Strong retail and wholesale 
Str
deposit franchises
dep

(cid:153)
(cid:153)(cid:21)

D
Deposit franchises maintained amid adverse conditions.

4

NEDBANK GROUP ANNUAL REPORT 2008

Predominantly a wholesale bank

Advances

Headline earnings

20%

7%

(cid:153)(cid:21) (cid:67)(cid:90)(cid:89)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:93)(cid:86)(cid:104)(cid:21)(cid:86)(cid:21)(cid:97)(cid:86)(cid:103)(cid:92)(cid:90)(cid:21)(cid:86)(cid:89)(cid:107)(cid:86)(cid:99)(cid:88)(cid:90)(cid:104)(cid:21)(cid:87)(cid:86)(cid:104)(cid:90)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)

a strong deposit base with a smaller 

transactional banking market share. 

However, good client relationships and new 

systems should enable Nedbank to grow 

its transactional banking market share off 

a low base. The group has made pleasing 

gains in government transactional banking 

45%

55%

73%

in recent years and there is scope to grow 

Wholesale

Retail

Central

this business further.

Ability to   
manage costs

(cid:153)(cid:21)

(cid:57)(cid:90)(cid:98)(cid:100)(cid:99)(cid:104)(cid:105)(cid:103)(cid:86)(cid:105)(cid:90)(cid:89)(cid:21)(cid:86)(cid:87)(cid:94)(cid:97)(cid:94)(cid:105)(cid:110)(cid:21)(cid:105)(cid:100)(cid:21)(cid:98)(cid:86)(cid:99)(cid:86)(cid:92)(cid:90)(cid:21)(cid:88)(cid:100)(cid:104)(cid:105)(cid:104)(cid:21)

while investing for longer-term growth.

(cid:153)(cid:21)

(cid:62)(cid:98)(cid:101)(cid:103)(cid:100)(cid:107)(cid:90)(cid:89)(cid:21)(cid:90)(cid:91)(cid:196)(cid:88)(cid:94)(cid:90)(cid:99)(cid:88)(cid:110)(cid:21)(cid:103)(cid:86)(cid:105)(cid:94)(cid:100)(cid:21)(cid:91)(cid:103)(cid:100)(cid:98)(cid:21)(cid:44)(cid:38)(cid:33)(cid:45)(cid:26)(cid:21)(cid:94)(cid:99)(cid:21) 

2004 to 51,1% in 2008.

(cid:153)(cid:21)

(cid:73)(cid:93)(cid:90)(cid:21)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:94)(cid:104)(cid:21)(cid:86)(cid:21)(cid:97)(cid:90)(cid:86)(cid:89)(cid:90)(cid:103)(cid:21)(cid:94)(cid:99)(cid:21)(cid:88)(cid:100)(cid:98)(cid:98)(cid:90)(cid:103)(cid:88)(cid:94)(cid:86)(cid:97)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)

industrial property ﬁnancing, allowing it to 

be more selective in its asset acquisition 

strategy, thereby reducing the risk in its 

portfolio.

Income and expense growth, jaws ratio

%

20

10

0

2004

2005

2006

2007

2008

        Jaws ratio

       Income growth

      Expense growth

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5

 
 
 
 
 
 
 
 
 
 
INVESTMENT
CASE ... CONTINUED

Significant opportunities   
to grow non-interest revenue

(cid:153)(cid:21)

(cid:73)(cid:93)(cid:90)(cid:21)(cid:92)(cid:103)(cid:100)(cid:106)(cid:101)(cid:21)(cid:93)(cid:86)(cid:104)(cid:21)(cid:94)(cid:98)(cid:101)(cid:97)(cid:90)(cid:98)(cid:90)(cid:99)(cid:105)(cid:90)(cid:89)(cid:21)(cid:104)(cid:105)(cid:103)(cid:86)(cid:105)(cid:90)(cid:92)(cid:94)(cid:90)(cid:104)(cid:21)(cid:105)(cid:100)(cid:21)

–  upgrading wholesale transactional 

grow non-interest revenue off a relatively 

banking systems;

small market share position. This will also 

indirectly help other areas such as deposits 

and trading income on the back of increased 

client ﬂows. It has been assisted by:

–  rationalising brands and investing in 

retail distribution networks;

–  focusing on client service, which is 

currently being evidenced in client 

satisfaction surveys and through 

Nedbank’s leadership position;

–  focusing speciﬁcally on public sector 

business and seeing resultant growth off 

a zero base; and

–  positioning the group as being the most 

–  developing a unique culture, with client 

price-competitive, particularly for entry-

service and staff satisfaction as key 

level and mid-income clients;

outcomes.

A focused strategy   
to grow in the business banking market

10/08 4:09 PM Page 1 

C

M

Y

CM

MY

CY

CMY

K

(cid:153)(cid:21) (cid:67)(cid:90)(cid:89)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:94)(cid:104)(cid:21)(cid:108)(cid:90)(cid:97)(cid:97)(cid:34)(cid:101)(cid:100)(cid:104)(cid:94)(cid:105)(cid:94)(cid:100)(cid:99)(cid:90)(cid:89)(cid:21)(cid:105)(cid:100)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:21)(cid:94)(cid:99)(cid:21)(cid:105)(cid:93)(cid:94)(cid:104)(cid:21)

key sector.

(cid:153)(cid:21)

(cid:55)(cid:106)(cid:104)(cid:94)(cid:99)(cid:90)(cid:104)(cid:104)(cid:21)(cid:87)(cid:86)(cid:99)(cid:96)(cid:94)(cid:99)(cid:92)(cid:21)(cid:101)(cid:103)(cid:100)(cid:107)(cid:94)(cid:89)(cid:90)(cid:104)(cid:21)(cid:93)(cid:94)(cid:92)(cid:93)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:105)(cid:93)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)

high returns in a market where clients are 

mostly single-banked.

(cid:153)(cid:21)

(cid:73)(cid:93)(cid:90)(cid:21)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:88)(cid:86)(cid:99)(cid:21)(cid:100)(cid:106)(cid:105)(cid:101)(cid:90)(cid:103)(cid:91)(cid:100)(cid:103)(cid:98)(cid:21)(cid:94)(cid:99)(cid:21)(cid:87)(cid:106)(cid:104)(cid:94)(cid:99)(cid:90)(cid:104)(cid:104)(cid:21)

banking through a decentralised 

decisionmaking process.

omposite

6

NEDBANK GROUP ANNUAL REPORT 2008

Worldclass capital   
management and   
risk processes

(cid:153)(cid:21)

(cid:55)(cid:86)(cid:104)(cid:90)(cid:97)(cid:21)(cid:62)(cid:62)(cid:21)(cid:94)(cid:98)(cid:101)(cid:97)(cid:90)(cid:98)(cid:90)(cid:99)(cid:105)(cid:90)(cid:89)(cid:21)(cid:86)(cid:104)(cid:21)(cid:86)(cid:21)(cid:88)(cid:86)(cid:105)(cid:86)(cid:97)(cid:110)(cid:104)(cid:105)(cid:21)(cid:105)(cid:100)(cid:21)(cid:90)(cid:99)(cid:104)(cid:106)(cid:103)(cid:90)(cid:21)

worldclass capital management and risk 

processes.

(cid:153)(cid:21)

(cid:56)(cid:86)(cid:101)(cid:94)(cid:105)(cid:86)(cid:97)(cid:21)(cid:98)(cid:86)(cid:99)(cid:86)(cid:92)(cid:90)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:103)(cid:94)(cid:104)(cid:96)(cid:21)(cid:101)(cid:103)(cid:100)(cid:88)(cid:90)(cid:104)(cid:104)(cid:90)(cid:104)(cid:21)

integrated in all bank processes.

(cid:153)(cid:21)

(cid:56)(cid:86)(cid:101)(cid:94)(cid:105)(cid:86)(cid:97)(cid:21)(cid:86)(cid:89)(cid:90)(cid:102)(cid:106)(cid:86)(cid:88)(cid:110)(cid:21)(cid:103)(cid:86)(cid:105)(cid:94)(cid:100)(cid:104)(cid:21)(cid:98)(cid:86)(cid:94)(cid:99)(cid:105)(cid:86)(cid:94)(cid:99)(cid:90)(cid:89)(cid:21)(cid:86)(cid:87)(cid:100)(cid:107)(cid:90)(cid:21)

both regulatory requirements and historic 

internal targets.

Culture of   
governance 
and compliance

(cid:153)(cid:21)

(cid:60)(cid:100)(cid:107)(cid:90)(cid:103)(cid:99)(cid:86)(cid:99)(cid:88)(cid:90)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:88)(cid:100)(cid:98)(cid:101)(cid:97)(cid:94)(cid:86)(cid:99)(cid:88)(cid:90)(cid:21)(cid:101)(cid:103)(cid:100)(cid:88)(cid:90)(cid:104)(cid:104)(cid:90)(cid:104)(cid:21)(cid:86)(cid:103)(cid:90)(cid:21)

integrated in the business.

(cid:153)(cid:21) (cid:67)(cid:90)(cid:89)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:60)(cid:103)(cid:100)(cid:106)(cid:101)(cid:21)(cid:94)(cid:104)(cid:21)(cid:104)(cid:106)(cid:87)(cid:104)(cid:105)(cid:86)(cid:99)(cid:105)(cid:94)(cid:86)(cid:97)(cid:97)(cid:110)(cid:21)(cid:88)(cid:100)(cid:98)(cid:101)(cid:97)(cid:94)(cid:86)(cid:99)(cid:105)(cid:21)

with the King ll code.

Refer to pages 116 to 182.

Refer to pages 94 to 109.

Lead
Leaders   
in s
in sustainability

(cid:153)(cid:21)
(cid:153)(cid:21)

(cid:54)(cid:88)(cid:96)
(cid:54)(cid:88)(cid:96)(cid:99)(cid:100)(cid:108)(cid:97)(cid:90)(cid:89)(cid:92)(cid:90)(cid:89)(cid:21)(cid:86)(cid:104)(cid:21)(cid:86)(cid:21)(cid:97)(cid:90)(cid:86)(cid:89)(cid:90)(cid:103)(cid:21)(cid:94)(cid:99)(cid:21)(cid:104)(cid:106)(cid:104)(cid:105)(cid:86)(cid:94)(cid:99)(cid:86)(cid:87)(cid:94)(cid:97)(cid:94)(cid:105)(cid:110)(cid:33)(cid:21)

Ne
Nedbank Group has qualiﬁed for the JSE 

Soc
Socially Responsible Investment (SRI) Index 

for 
for ﬁve years and the Dow Jones World 

Sus
Sustainability Index for ﬁve years.

(cid:153)(cid:21)
(cid:153)(cid:21)

(cid:71)(cid:90)(cid:88)
(cid:71)(cid:90)(cid:88)(cid:100)(cid:92)(cid:99)(cid:94)(cid:104)(cid:90)(cid:89)(cid:21)(cid:86)(cid:104)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:58)(cid:98)(cid:90)(cid:103)(cid:92)(cid:94)(cid:99)(cid:92)(cid:21)(cid:66)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:104)(cid:21)

Sus
Sustainable Bank of the Year for Middle East 

and
and Africa for the second consecutive year.

Refe
Refer to pages 110 to 115.

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7

 
 
 
 
 
 
 
 
 
 
INVESTMENT
CASE ... CONTINUED

A track record   
of innovation

(cid:153)(cid:21)

(cid:62)(cid:99)(cid:99)(cid:100)(cid:107)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:93)(cid:86)(cid:104)(cid:21)(cid:87)(cid:90)(cid:90)(cid:99)(cid:21)(cid:89)(cid:90)(cid:98)(cid:100)(cid:99)(cid:104)(cid:105)(cid:103)(cid:86)(cid:105)(cid:90)(cid:89)(cid:21)(cid:105)(cid:93)(cid:103)(cid:100)(cid:106)(cid:92)(cid:93)(cid:47)

–  cost-effective solutions to increase the 

retail distribution network (eg banking 

outlets within retailers, mobile banking 

branches and cashback at point-of-sale 

terminals);

–  system solutions for clients (eg NetBank 

within Retail and Business Banking); and 

–  worldclass service initiatives such as 

AskOnce.  Where a client query is not 

answered on ﬁrst request it incurs a cash 

penalty in the form of a donation to a 

selected charity on behalf of the client.

Leaders in   
transformation

(cid:153)(cid:21)

(cid:73)(cid:103)(cid:86)(cid:99)(cid:104)(cid:91)(cid:100)(cid:103)(cid:98)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:86)(cid:97)(cid:97)(cid:100)(cid:108)(cid:104)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:92)(cid:103)(cid:100)(cid:106)(cid:101)(cid:21)(cid:105)(cid:100)(cid:21)(cid:87)(cid:90)(cid:21)

well-positioned for growing its business 

and attracting staff in the South African 

environment. This is demonstrated by 

having one of the best transformation 

scorecards among the larger banks in South 

Africa.

(cid:153)(cid:21)

(cid:65)(cid:90)(cid:107)(cid:90)(cid:97)(cid:34)(cid:105)(cid:93)(cid:103)(cid:90)(cid:90)(cid:21)(cid:87)(cid:97)(cid:86)(cid:88)(cid:96)(cid:21)(cid:90)(cid:88)(cid:100)(cid:99)(cid:100)(cid:98)(cid:94)(cid:88)(cid:21)(cid:90)(cid:98)(cid:101)(cid:100)(cid:108)(cid:90)(cid:103)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)

contributor in terms of the Department of 

Trade and Industry (dti) Codes.

Nedbank has created an organisational   
capability to succeed in a tough environment

(cid:153)(cid:21) (cid:68)(cid:103)(cid:92)(cid:86)(cid:99)(cid:94)(cid:104)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:86)(cid:97)(cid:21)(cid:97)(cid:90)(cid:86)(cid:103)(cid:99)(cid:94)(cid:99)(cid:92)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:90)(cid:109)(cid:101)(cid:90)(cid:103)(cid:94)(cid:90)(cid:99)(cid:88)(cid:90)(cid:21)

– 

There has been a signiﬁcant shift in 

gained from the Nedbank turnaround 

staff morale and culture towards a high-

in 2004 continues to stand the group 

performing organisation.

in good stead during challenging times. 

– 

Service has improved to number one 

Many examples of how this organisational 

among South African banks.

capability contributed to key cultural shifts 

– 

A cost-conscious culture has developed 

are evident. A few are listed alongside.

with accountability as the number one 

value being observed.

8

NEDBANK GROUP ANNUAL REPORT 2008

GROUP
STRATEGY

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The Nedbank vision is  
‘to become southern Africa’s most highly rated  
and respected bank ...  
by our staff, clients, shareholders, regulators and communities’.

The vision is supported by the group’s Deep Green aspirations 
(long-term objectives), namely to become a great place to 
work, a great place to bank and a great place to invest; to 
unleash synergies in Nedbank and Old Mutual groups; to 
be worldclass at managing risk; to create a community of 
leaders; to have the most respected and aspirational ﬁnancial 
services brand; to be recognised for being highly involved in 

the community and environment; to lead transformation; and 
to live our values.

Underpinning the vision and strategy is the group’s values 
that drive our decisions and behaviours, namely integrity, 
respect, accountability, pushing beyond boundaries and being 
people-centred.

Vision

‘To become southern Africa’s most highly rated and respected bank ...
... by our staff, clients, shareholders, regulators and communities.’

Deep Green  
aspirations

What makes us 
different and guides 
our long-term 
strategy?

Our brand expression

Great place to work

Great place to bank

Great place to invest

Unleashing synergies

Worldclass at managing risk

Community of leaders

Most respected and 
aspirational brand

Highly involved in the 
community and environment

Leading  
transformation

Living  
our values

Great at listening,  
understanding clients’ needs  
and delivering

‘MAKE THINGS HAPPEN’

Strategic focus

Grow our  
share of 
economic 
proﬁt

Become  
client- 
driven

Manage risk  
as an  
enabler

Enhance 
productivity  
and execution

Build a unique 
culture for 
competitive 
advantage

Accelerate 
transformation

Lead as 
a corporate 
citizen

Scope of the game

A member of the  
Old Mutual Group

Full-spectrum  
banking

Bank for all

Southern Africa focus with 
selected offshore expansion

Our values

Integrity

Respect

Accountability

Pushing beyond the 
boundaries

Being  
people-centred

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9

 
 
 
 
 
 
 
 
 
 
REVIEW
OF 2008

STAFF: ‘A great place to work’, ‘Create a community    

of leaders’ and ‘Living our values.’

Objective

Making it happen in 2008

Improve staff satisfaction

Employee satisfaction improved by a further 3,6% in the Nedbank Employee 
Survey. There have been positive shifts in all of the 12 dimensions measured.

Build a unique culture for 
competitive advantage

Limiting values have been eliminated from the top 10 values in the Nedbank 
Culture Survey and ﬁve matches of values from existing culture to ideal culture 
were recorded, indicating a closer alignment between reality and what staff are 
seeking. This trend has been consistent over the last four years.  

Retain our staff

Overall, staff attrition is lower than previous years.

Improve HR effectiveness 
and service delivery

The HR 2010 Programme, which is dedicated to improving effectiveness, 
efﬁciencies, capability and service delivery, has reached the midway stage. 2009 
sees the start of the second phase of implementation.

Build our leadership and 
management capabilities

The rollout of the Management Development Programme and the Leading 
for Deep Green leadership transformation initiative has been successful and is 
comfortably ahead of target.

Transform our workforce 
to start to align to the 
demographics of the South 
African economically active 
population

Transformation of our workforce is showing good progress across key indicators. 
Altogether 57% of all appointments are African and demographic proﬁles are 
generally meeting or exceeding targets.

2008 self-
assessment

Exceeded

Exceeded

Achieved

On track

Exceeded

On track

The table below shows the entropy score for Nedbank Group from 2005 to 2008 as well as the graphic representation of the staff 
survey results.

Culture survey entropy level 

Employee satisfaction survey

2005   
ENTROPY = 25%

2006   
ENTROPY = 19%

2007   
ENTROPY = 17%

2008   
ENTROPY = 14%

IDEAL   
ENTROPY < 10%

Nedbank staff survey overall

y

Rewards,  
,
recognition  
and performace  
e
management
t

64,7

Diversity
y

69,5

75,1

59,6

Ethics
EEEth

86,0

79,1

82,4

Strategic 
StrSS
direction
dddird

49,0

57,2

50,4

61,2

69,3

60,1

67,1

80,0

Leadership
Leadedd rsh

55,7

58,3

63,3

69,7

79,6

Communication
mmu iinicatio

69,9

Policies and  
anddand 
ies and 
procedures

72,1

Relationships  
onshipship  
and trust

74,5

Organisational 
i
Organniiisat
culture and values

io

75,3

75,4

78,5

Management style

gementtt sty

Training and  
ing anddandan  
development

Changes and 
Changhhanghanges a
transformation

2005

2006

2007

2008

Note: Entropy measures the level of decay in the organisation, which 
which
prevents it from becoming a high-performing culture. More simply, it 
ply, it
is the amount of energy that is wasted on unproductive activities.

10

NEDBANK GROUP ANNUAL REPORT 2008

 
CLIENTS: ‘A great place to bank.’

Objective

Making it happen in 2008

Grow Nedbank Retail and 
penetrate the mass market

Market share in credit cards and home loans has been maintained during 2008, 
while year-on-year market share in instalment credit increased by 2%. In the 
latter part of 2008 all business units shifted their focus to growing proﬁtable 
market share (focusing on economic-proﬁt generation rather than advances 
market share growth).

Retail primary clients increased by more than 119 000 to over 1,1 million.

Mzansi clients reached a milestone of 1 000 000 in August 2008.

Retain our leading positions 
in key wholesale market 
segments and grow our 
business banking franchise

Retained strong market positions in property ﬁnance and domestic corporate 
lending. Nedbank Investor Services awarded the Top-rated Domestic Custodian 
for 2008 by the Global Custodian. The Global Finance Survey voted Nedbank 
Investor Services the Best Subcustodian for South Africa and Africa for 2008 (for 
the third consecutive year).

Increased net new client acquisition by 60% in Business Banking, compared with 
prior year. Gained 16 new major corporates.

Nedbank Capital achieved top three placings in the Dealmakers corporate ﬁnance 
ranking by dealﬂow and led the Bond Exchange of South Africa (BESA) bond market 
share rankings in value and volume. Forex turnover continued to increase. Nedbank 
recorded a higher win ratio relative to the number of deals lost in tenders.

2008 self-
assessment

Partially 
achieved

Achieved

Exceeded

Achieved

Achieved

Partially 
achieved

Improve service levels 
ultimately to achieve 
worldclass service over time

Nedbank has been ranked number one among South African banks in the Ask Afrika 
Orange Index (Banking Sector Client Service) for the second consecutive year.

Exceeded

Client Management Assessment Tool (CMAT) scores improved to the top decile of 
global ﬁnancial services companies, while further commitments to our AskOnce 
service promise were launched.

Exceeded

Client satisfaction surveys indicate upward trends in client loyalty driven by 
Business Banking’s decentralised, empowered delivery model.

Capital Corporate Finance Ratings (Dealmakers) – top three in dealﬂow for 2007; 
Spire Awards (Bond Trading) – ﬁve top-three placings; improved the Nedgroup 
Securities Financial Mail ranking by one place. 

Expand our distribution 
footprint through investment 
and innovation

A total of 15 new branches, 278 new automated teller machines (ATMs) and  
23 instore branches were commissioned. Cashback at 2 193 additional point-of-
sale devices.

Provide value-for-money 
products

The reduction in retail bank fees over the past two years makes Nedbank the 
most affordable of the big four banks particularly in the lower-income and mass-
market segments.

Maintained competitive pricing in wholesale banking products. NetBank Business 
(electronic platform) ranked ﬁrst in South Africa in the BMI-T Survey for the 
value-for-money attribute.

Improve our positioning in 
the public sector

Appointed dedicated investment banking manager for the public sector and 
several pitches and mandates awarded from various public sector enterprises, eg 
ACSA, Eskom, Public Investment Corporation.

Achieved

Partially 
achieved

Achieved

Achieved

Achieved

Achieved

On the back of winning the Western Cape government account in 2007, Business 
Banking has won a number of municipalities as clients in 2008. 

Achieved

Grow our presence in Africa

Approvals were received to open representative branches in Angola and Kenya.

Achieved

Announced a strategic alliance with Ecobank to provide clients access to a 
combined Pan-African banking network covering 30 countries (including South 
Africa), with over 1 000 branches and banking outlets across the continent.

New

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11

 
 
 
 
 
 
 
 
 
 
REVIEW
OF 2008 ... CONTINUED

CLIENTS: CONTINUED

Ask Afrika Orange Index Client Service scores

Increased footprint through Ecobank alliance

70

65

60

55

50

2006

2007

2008

Nedbank

Bank A

Bank B

Bank C

Ecobank  
footprint

Nedbank  
footprint

Expansion   
opportunities

SHAREHOLDERS: ‘A great place to invest.’ 

FINANCIAL TARGETS

Measure

Making it happen in 2008

2008 self-
assessment

2009 
outlook

Medium- to long-term targets

Return on equity (ROE) 
(excl goodwill)

Efﬁciency ratio

Growth in diluted 
headline earnings per 
share

Credit loss ratio

Core Tier 1

  Tier 1

  Tier 2

20,1% Did not achieve

> 15%

5% (2008: 10%) above monthly 
weighted average cost of ordinary 
shareholders’ equity (COE).

51,1%

(2,0%)

Exceeded
Did not achieve +

- 10% down

< 53%

< 50% (2008: <55%)

1,17% Did not achieve

< 1,30%

8,2%

9,6%

12,4%

Exceeded

Towards the 
top end of 
the range

A- (including 
10% buffer)

2,25 – 2,75 
times

At least CPIX + gross domestic 
product (GDP) growth + 5%.

Between 0,55% and 0,85% of 
average advances.

7,5% – 9,0%

8,5% – 10,0%

11,5% – 13,0%

Capitalised to a 99,9% conﬁdence 
interval on economic-capital basis 
target A- debt rating (+ 10% buffer).

2,25 – 2,75 times.

Economic capital

R9,6 billion surplus

Exceeded

Dividend cover policy

2,29

Achieved

12

NEDBANK GROUP ANNUAL REPORT 2008

REGULATORS: ‘Worldclass at managing risk.’

Objective 

Making it happen in 2008

DELIVER WORLDCLASS RISK PRACTICES
Manage risk as an enabler

Basel II fully implemented for the group, including Advanced Internal Ratings- 
based (AIRB) approval from South African Reserve Bank (SARB) for credit risk in 
Nedbank and implementation for operational risk on track. 

Risk-based capital allocation (including a comprehensive economic-capital 
system and shareholder value-add basis) now driving strategic decisionmaking, 
business performance measurement and incentives.

Strong risk culture prevails, underpinned by sound risk governance endorsed by 
the Enterprisewide Risk Management Framework.

Across the bank we have reﬁned our credit parameters and loan-to-value (LTV) 
requirements on home loans, and bolstered collections capabilities.

Relationships and feedback from regulators and government stakeholders.

Prudent risk management in the wake of the global credit crisis limiting losses in 
respect of international exposures.

2008 self-
assessment

Achieved

Achieved

Achieved

On track

Achieved

Achieved

OPTIMISE CAPITAL AND LIQUIDITY

The group’s capital levels have improved signiﬁcantly during 2008 in an 
environment where capital adequacy is a key focus area. 

Exceeded

First South African bank to successfully execute non-core Tier 1 subordinated note 
of R1,8 billion in 2008.

Achieved

Liability growth was solid, speciﬁcally deposit growth at 21,4%, which exceeded 
asset growth at 16,1%.  

Exceeded

GROUP CAPITAL ADEQUACY

Basel II capital adequacy ratio  
– including unappropriated profits

Economic capital

12%

Total

10%

Tier 1

2008  
target 
tt
ra
ranges

8%

6%

4%

2%

0%

7,2% 8,2% 11,4%

8,2% 9,6% 12,4%

2007

2008

Core Tier 1

Tier 1

Total

Reg min Tier 1

Reg min total

40

35

30

25

20

n
b
R

15

10

5

0

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Requirement

l bl
l bl
Available  
ﬁnancial 
resources

Requirement

l bl
il bl
Available  
ﬁnancial 
resources

2007

2008

Surplus regulatory capital R9,5bn

Surplus R5,8bn

Surplus R9,6bn

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13

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REVIEW
OF 2008 ... CONTINUED

COMMUNITIES: ‘Highly involved in the community and 
environment’, ‘Becoming a bank for all 
South Africans’, ‘Leading   
transformation’, ‘Most respected   
and aspirational brand’ and   
‘Leading as a corporate citizen.’

Objective

Making it happen in 2008

Build the Nedbank brand and 
become a bank for all South 
Africans

Brand equity has improved with marked increases in awareness, relevance and 
loyalty, particularly in the mass consumer segment of the market. It is also very 
encouraging that Nedbank remains the only major South African banking brand 
to have made positive improvements in brand equity over the year.

2008 self-
assessment

Exceeded

Nedbank expanded its sponsorship proﬁle to cover the mass market by 
successfully hosting the ﬁrst Nedbank Cup (soccer mass-market sponsorship deal). 

Achieved

The launch of the Local Hero Programme for our clients was highly successful, 
with Nedbank contributing more than R1 million to our clients’ charities of choice.

Achieved

Become South Africa’s green 
and caring bank

Included in the JSE SRI Index and Dow Jones Sustainability Index for the ﬁfth 
consecutive year.

Achieved

Leading position among South Africa’s banks in the South African Carbon 
Leadership Index, and fourth place overall in the low-carbon industries category.  

Exceeded

Added 132 000 new clients to the Nedbank Afﬁnity Programme, which exceeded 
the targeted growth for 2008. Even during the tough economic times the total 
amount donated to various afﬁnity trusts in 2008 grew by 8% to R10,4 million. 

Exceeded

Funding of an equity stake in an affordable-housing development, Tanganani, with 
the capacity to yield 12 000 housing units (developers will be reducing its carbon 
footprint, both during development and during occupation).  

New

Awards received:
(cid:154)(cid:22)(cid:22)(cid:22)(cid:22)Financial Times Award for Emerging Markets Sustainable Bank of the Year for 

Middle East and Africa.

(cid:153)(cid:21)(cid:21)(cid:21)(cid:21)(cid:54)(cid:91)(cid:103)(cid:94)(cid:88)(cid:86)(cid:99)(cid:21)(cid:55)(cid:86)(cid:99)(cid:96)(cid:21)(cid:54)(cid:108)(cid:86)(cid:103)(cid:89)(cid:21)(cid:91)(cid:100)(cid:103)(cid:21)(cid:60)(cid:90)(cid:99)(cid:89)(cid:90)(cid:103)(cid:21)(cid:72)(cid:90)(cid:99)(cid:104)(cid:94)(cid:105)(cid:94)(cid:107)(cid:94)(cid:105)(cid:110)(cid:35)
(cid:153)(cid:21)(cid:21)(cid:21)(cid:21)(cid:54)(cid:104)(cid:104)(cid:100)(cid:88)(cid:94)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:91)(cid:100)(cid:103)(cid:21)(cid:54)(cid:89)(cid:107)(cid:86)(cid:99)(cid:88)(cid:90)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:100)(cid:91)(cid:21)(cid:55)(cid:97)(cid:86)(cid:88)(cid:96)(cid:21)(cid:54)(cid:88)(cid:88)(cid:100)(cid:106)(cid:99)(cid:105)(cid:86)(cid:99)(cid:105)(cid:104)(cid:21)(cid:94)(cid:99)(cid:21)(cid:72)(cid:100)(cid:106)(cid:105)(cid:93)(cid:90)(cid:103)(cid:99)(cid:21)(cid:54)(cid:91)(cid:103)(cid:94)(cid:88)(cid:86)(cid:21)(cid:54)(cid:108)(cid:86)(cid:103)(cid:89)(cid:35)
(cid:153)(cid:21)(cid:21)(cid:21)(cid:21)(cid:56)(cid:72)(cid:62)(cid:21)(cid:69)(cid:103)(cid:100)(cid:92)(cid:103)(cid:86)(cid:98)(cid:98)(cid:90)(cid:21)(cid:54)(cid:108)(cid:86)(cid:103)(cid:89)(cid:21)(cid:86)(cid:105)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:67)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:86)(cid:97)(cid:21)(cid:55)(cid:106)(cid:104)(cid:94)(cid:99)(cid:90)(cid:104)(cid:104)(cid:21)(cid:54)(cid:108)(cid:86)(cid:103)(cid:89)(cid:104)(cid:21)(cid:91)(cid:100)(cid:103)(cid:21)(cid:100)(cid:106)(cid:103)(cid:21)(cid:56)(cid:97)(cid:94)(cid:90)(cid:99)(cid:105)(cid:21)(cid:65)(cid:100)(cid:88)(cid:86)(cid:97)(cid:21)

Hero Programme.

Achieved a Financial Sector Charter (FSC) score of 99,1 and level-three black 
economic empowerment (BEE) contributor against the dti scorecard. Signiﬁcant 
progress across the board, with all areas exceeding FSC targets.

Reached 1 million Mzansi clients in August 2008. More than 60% of all new 
outlets are opened in historically unrepresented areas. 

During 2008 Nedbank launched various internal transformation initiatives aimed 
at enabling and embracing diversity conversations – these included the launch 
of the ‘Be the key’ transformation booklet and diversity workshops (evolving to 
greatness) to expose staff to the cultural diversity and history of South Africa.

Exceeded

Exceeded

On track

Accelerate transformation

14

NEDBANK GROUP ANNUAL REPORT 2008

 
SPONSORSHIP AWARENESS   

FSC SCORE AND DEPARTMENT OF 
TRADE AND INDUSTRY (dti) SCORES

Sponsorship awareness –  
four main banks

100 

80

84%

74%

60

57%

53%

40

F M A M J

J A S O N D J F M A M J

J A S O N D J F M A M J

J A S O N D J

2006

2007

2008

Based on TOTAL MARKET rolling eight-week data

89%

78%
77%
75%

100

80

60

40

0

Nedbank FSC and dti scores

89,0%

97,5%

99,1%

82,6%

67,5%

56,6%

67,5%

25,6%

2004

2005

2006

2007

2008

Nedbank

Bank A

Bank B

Bank C

FSC

dti

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

15

 
 
 
 
 
 
 
 
 
 
 
 
FOCUS AREAS
FOR 2009

During 2008 the strategy was further reﬁned by 
anticipating changing global and local events and 
conducting scenario planning exercises to identify the 
appropriate course of action. As a result the focus areas 

of the group for 2009 have been reﬁned:

MANAGING FOR VALUE (GROW OUR 
SHARE OF ECONOMIC PROFIT)

‘Managing for value’ implies a true understanding of risks 
vs returns. Economic proﬁt has become an important 
measure when deciding on where and how to grow our 
various business units. Our focus has shifted away from 
advances market share growth to growing our share of 
economic proﬁt. We will deliver on our strategies to grow 
economic proﬁt by focusing on liability and deposit growth, 
selected and proﬁtable advances growth, appropriate asset 
pricing, managing our risks appropriately, transactional 
banking and primary client growth, cross-sell and smart 
cost management. These initiatives will support our Grow 
Retail, Lead in Business Banking and Become Public Sector 
Bank of Choice thrusts. In addition we will optimise and 
grow operations in existing South African Development 
Community (SADC) countries (three-tiered African strategy), 
leverage our recently announced Ecobank alliance and 
provide boutique investment banking expansion in Africa.

In the deteriorating economic environment we will focus on 
managing the bank through this downward cycle. Managing 
our risks, especially through our credit policies, collections 
activities and risk management policies will be key. 

ENHANCE PRODUCTIVITY AND EXECUTION

The group will increase its focus on lean practices to improve 
the client experience, while saving money. Smart cost 
management in these uncertain times is increasingly important.

BUILD A UNIQUE CULTURE

A differentiated corporate culture can build a sustainable 
long-term competitive advantage and will help to attract and 
retain talented staff. The various management and leadership 
development programmes are key enablers. We need to 
become the employer of choice, recognising that market 
competition for talent is increasing. Continued focus on 
making Nedbank a great place to work will help us retain and 
attract the best people.

BECOME CLIENT-DRIVEN

ACCELERATE TRANSFORMATION

Great at listening, understanding clients’ needs and 
delivering are at the heart of our strategy and are 
summarised as being client-driven. We believe that 
there is no sustainable competitive advantage for 
Nedbank in product, price or distribution and as 
such our focus will continue to be on delivering 

worldclass service on a continual basis.

MANAGE RISK AS AN ENABLER

We will focus on proactive capital 

management and proactively managing 

the liquidity and funding of the 

bank. We will increase return on 

deployed capital by optimising 
regulatory and economic 

capital through granular 
and accurate risk 
assessment. 

Transformation is essential to our sustainability as a business 
and is a business imperative, and as a bank we have to remain 
socially relevant. Delivering key projects and initiatives to 
meet Financial Sector Charter (FSC), Department of Trade and 
Industry (dti) and Employment Equity (EE) targets will remain 
focus areas. Transforming our organisation into a truly South 
African bank as seen by all our stakeholders will set us apart 
from our peers, while we play an increasing role in uplifting 
our country and its people.

LEAD AS A CORPORATE CITIZEN

Social and environmental issues are important to clients 
and stakeholders. As environmental issues become more 
prominent and our country struggles with its socioeconomic 
issues, Nedbank as a leader in the sustainability space will 
continue to enhance its actions and increase its role in making 
a difference to our communities and environment. Our focus 
is to establish Nedbank as the caring bank – smart with heart.

16

NEDBANK GROUP ANNUAL REPORT 2008

OBJECTIVES FOR
2009 AND BEYOND

SHAREHOLDERS: ‘A GREAT PLACE TO 
INVEST.’

(cid:153)(cid:21) (cid:66)(cid:86)(cid:99)(cid:86)(cid:92)(cid:90)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:88)(cid:100)(cid:99)(cid:104)(cid:90)(cid:103)(cid:107)(cid:86)(cid:105)(cid:94)(cid:107)(cid:90)(cid:97)(cid:110)(cid:33)(cid:21)(cid:87)(cid:106)(cid:105)(cid:21)(cid:101)(cid:103)(cid:100)(cid:196)(cid:105)(cid:86)(cid:87)(cid:97)(cid:110)(cid:21)(cid:105)(cid:93)(cid:103)(cid:100)(cid:106)(cid:92)(cid:93)(cid:21)

the economic downturn.

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:56)(cid:100)(cid:99)(cid:105)(cid:94)(cid:99)(cid:106)(cid:90)(cid:21)(cid:91)(cid:100)(cid:88)(cid:106)(cid:104)(cid:21)(cid:100)(cid:99)(cid:21)(cid:97)(cid:94)(cid:86)(cid:87)(cid:94)(cid:97)(cid:94)(cid:105)(cid:110)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:105)(cid:93)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:100)(cid:106)(cid:103)(cid:21)(cid:104)(cid:105)(cid:103)(cid:100)(cid:99)(cid:92)(cid:21)
depositor franchise.

(cid:59)(cid:100)(cid:88)(cid:106)(cid:104)(cid:21)(cid:100)(cid:99)(cid:21)(cid:93)(cid:94)(cid:92)(cid:93)(cid:34)(cid:102)(cid:106)(cid:86)(cid:97)(cid:94)(cid:105)(cid:110)(cid:33)(cid:21)(cid:86)(cid:101)(cid:101)(cid:103)(cid:100)(cid:101)(cid:103)(cid:94)(cid:86)(cid:105)(cid:90)(cid:97)(cid:110)(cid:21)(cid:101)(cid:103)(cid:94)(cid:88)(cid:90)(cid:89)(cid:21)(cid:97)(cid:100)(cid:86)(cid:99)(cid:104)(cid:35)

(cid:60)(cid:103)(cid:100)(cid:108)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:92)(cid:103)(cid:100)(cid:106)(cid:101)(cid:188)(cid:104)(cid:21)(cid:105)(cid:103)(cid:86)(cid:99)(cid:104)(cid:86)(cid:88)(cid:105)(cid:94)(cid:100)(cid:99)(cid:86)(cid:97)(cid:21)(cid:87)(cid:86)(cid:99)(cid:96)(cid:94)(cid:99)(cid:92)(cid:21)(cid:91)(cid:103)(cid:86)(cid:99)(cid:88)(cid:93)(cid:94)(cid:104)(cid:90)(cid:33)(cid:21)(cid:87)(cid:100)(cid:105)(cid:93)(cid:21)
wholesale and retail.

(cid:56)(cid:103)(cid:100)(cid:104)(cid:104)(cid:34)(cid:104)(cid:90)(cid:97)(cid:97)(cid:21)(cid:94)(cid:99)(cid:105)(cid:100)(cid:21)(cid:100)(cid:106)(cid:103)(cid:21)(cid:90)(cid:109)(cid:94)(cid:104)(cid:105)(cid:94)(cid:99)(cid:92)(cid:21)(cid:88)(cid:97)(cid:94)(cid:90)(cid:99)(cid:105)(cid:21)(cid:87)(cid:86)(cid:104)(cid:90)(cid:35)

(cid:71)(cid:90)(cid:98)(cid:86)(cid:94)(cid:99)(cid:21)(cid:86)(cid:92)(cid:94)(cid:97)(cid:90)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:86)(cid:97)(cid:90)(cid:103)(cid:105)(cid:21)(cid:105)(cid:100)(cid:21)(cid:100)(cid:101)(cid:101)(cid:100)(cid:103)(cid:105)(cid:106)(cid:99)(cid:94)(cid:105)(cid:94)(cid:90)(cid:104)(cid:21)(cid:94)(cid:99)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:88)(cid:106)(cid:103)(cid:103)(cid:90)(cid:99)(cid:105)(cid:21)
environment. 

(cid:58)(cid:109)(cid:90)(cid:103)(cid:88)(cid:94)(cid:104)(cid:90)(cid:21)(cid:107)(cid:94)(cid:92)(cid:94)(cid:97)(cid:86)(cid:99)(cid:88)(cid:90)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:91)(cid:100)(cid:88)(cid:106)(cid:104)(cid:21)(cid:100)(cid:99)(cid:21)(cid:101)(cid:103)(cid:100)(cid:86)(cid:88)(cid:105)(cid:94)(cid:107)(cid:90)(cid:97)(cid:110)(cid:21)(cid:98)(cid:86)(cid:99)(cid:86)(cid:92)(cid:94)(cid:99)(cid:92)(cid:21)
capital and liquidity.

(cid:69)(cid:103)(cid:94)(cid:88)(cid:90)(cid:21)(cid:86)(cid:101)(cid:101)(cid:103)(cid:100)(cid:101)(cid:103)(cid:94)(cid:86)(cid:105)(cid:90)(cid:97)(cid:110)(cid:21)(cid:91)(cid:100)(cid:103)(cid:21)(cid:103)(cid:94)(cid:104)(cid:96)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:94)(cid:99)(cid:88)(cid:103)(cid:90)(cid:86)(cid:104)(cid:90)(cid:89)(cid:21)(cid:88)(cid:100)(cid:104)(cid:105)(cid:21)(cid:100)(cid:91)(cid:21)
funding.

(cid:58)(cid:99)(cid:93)(cid:86)(cid:99)(cid:88)(cid:90)(cid:21)(cid:101)(cid:103)(cid:100)(cid:89)(cid:106)(cid:88)(cid:105)(cid:94)(cid:107)(cid:94)(cid:105)(cid:110)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:90)(cid:91)(cid:196)(cid:88)(cid:94)(cid:90)(cid:99)(cid:88)(cid:110)(cid:33)(cid:21)(cid:90)(cid:109)(cid:90)(cid:88)(cid:106)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)
continue smart cost management. 

REGULATORS: ‘WORLDCLASS AT 
MANAGING RISK.’

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:58)(cid:109)(cid:90)(cid:103)(cid:88)(cid:94)(cid:104)(cid:90)(cid:21)(cid:107)(cid:94)(cid:92)(cid:94)(cid:97)(cid:86)(cid:99)(cid:88)(cid:90)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:91)(cid:100)(cid:88)(cid:106)(cid:104)(cid:21)(cid:100)(cid:99)(cid:21)(cid:101)(cid:103)(cid:100)(cid:86)(cid:88)(cid:105)(cid:94)(cid:107)(cid:90)(cid:97)(cid:110)(cid:21)(cid:98)(cid:86)(cid:99)(cid:86)(cid:92)(cid:94)(cid:99)(cid:92)(cid:21)
capital and liquidity.

(cid:69)(cid:103)(cid:94)(cid:88)(cid:90)(cid:21)(cid:86)(cid:101)(cid:101)(cid:103)(cid:100)(cid:101)(cid:103)(cid:94)(cid:86)(cid:105)(cid:90)(cid:97)(cid:110)(cid:21)(cid:91)(cid:100)(cid:103)(cid:21)(cid:103)(cid:94)(cid:104)(cid:96)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:94)(cid:99)(cid:88)(cid:103)(cid:90)(cid:86)(cid:104)(cid:90)(cid:89)(cid:21)(cid:88)(cid:100)(cid:104)(cid:105)(cid:21)(cid:100)(cid:91)(cid:21)
funding.

(cid:56)(cid:100)(cid:99)(cid:105)(cid:94)(cid:99)(cid:106)(cid:86)(cid:97)(cid:97)(cid:110)(cid:21)(cid:98)(cid:100)(cid:99)(cid:94)(cid:105)(cid:100)(cid:103)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:103)(cid:90)(cid:196)(cid:99)(cid:90)(cid:21)(cid:88)(cid:103)(cid:90)(cid:89)(cid:94)(cid:105)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:103)(cid:94)(cid:104)(cid:96)(cid:21)
parameters as appropriate.

(cid:59)(cid:106)(cid:103)(cid:105)(cid:93)(cid:90)(cid:103)(cid:21)(cid:90)(cid:98)(cid:87)(cid:90)(cid:89)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:97)(cid:90)(cid:107)(cid:90)(cid:103)(cid:86)(cid:92)(cid:90)(cid:21)(cid:108)(cid:100)(cid:103)(cid:97)(cid:89)(cid:88)(cid:97)(cid:86)(cid:104)(cid:104)(cid:21)(cid:103)(cid:94)(cid:104)(cid:96)(cid:21)(cid:101)(cid:103)(cid:86)(cid:88)(cid:105)(cid:94)(cid:88)(cid:90)(cid:104)(cid:35)

(cid:153)(cid:21) (cid:66)(cid:86)(cid:94)(cid:99)(cid:105)(cid:86)(cid:94)(cid:99)(cid:21)(cid:92)(cid:100)(cid:100)(cid:89)(cid:21)(cid:103)(cid:90)(cid:97)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:104)(cid:93)(cid:94)(cid:101)(cid:104)(cid:21)(cid:108)(cid:94)(cid:105)(cid:93)(cid:21)(cid:86)(cid:97)(cid:97)(cid:21)(cid:103)(cid:90)(cid:92)(cid:106)(cid:97)(cid:86)(cid:105)(cid:100)(cid:103)(cid:104)(cid:35)

STAFF: ‘A GREAT PLACE TO WORK’, ‘CREATE 
A COMMUNITY OF LEADERS’ AND ‘LIVING 
OUR VALUES.’

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:56)(cid:100)(cid:99)(cid:105)(cid:94)(cid:99)(cid:106)(cid:90)(cid:21)(cid:105)(cid:100)(cid:21)(cid:103)(cid:90)(cid:89)(cid:106)(cid:88)(cid:90)(cid:21)(cid:97)(cid:94)(cid:98)(cid:94)(cid:105)(cid:94)(cid:99)(cid:92)(cid:21)(cid:107)(cid:86)(cid:97)(cid:106)(cid:90)(cid:104)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:94)(cid:99)(cid:88)(cid:103)(cid:90)(cid:86)(cid:104)(cid:90)(cid:21)(cid:88)(cid:106)(cid:103)(cid:103)(cid:90)(cid:99)(cid:105)(cid:21)
to ideal culture matches.

(cid:59)(cid:106)(cid:103)(cid:105)(cid:93)(cid:90)(cid:103)(cid:21)(cid:94)(cid:98)(cid:101)(cid:103)(cid:100)(cid:107)(cid:90)(cid:21)(cid:104)(cid:105)(cid:86)(cid:91)(cid:91)(cid:21)(cid:104)(cid:86)(cid:105)(cid:94)(cid:104)(cid:91)(cid:86)(cid:88)(cid:105)(cid:94)(cid:100)(cid:99)(cid:35)

(cid:153)(cid:21) (cid:66)(cid:86)(cid:99)(cid:86)(cid:92)(cid:90)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:103)(cid:90)(cid:105)(cid:86)(cid:94)(cid:99)(cid:21)(cid:100)(cid:106)(cid:103)(cid:21)(cid:105)(cid:86)(cid:97)(cid:90)(cid:99)(cid:105)(cid:21)(cid:94)(cid:99)(cid:21)(cid:86)(cid:21)(cid:88)(cid:100)(cid:98)(cid:101)(cid:90)(cid:105)(cid:94)(cid:105)(cid:94)(cid:107)(cid:90)(cid:21)(cid:98)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:35)

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:57)(cid:90)(cid:107)(cid:90)(cid:97)(cid:100)(cid:101)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:21)(cid:100)(cid:106)(cid:103)(cid:21)(cid:101)(cid:90)(cid:100)(cid:101)(cid:97)(cid:90)(cid:35)

(cid:55)(cid:106)(cid:94)(cid:97)(cid:89)(cid:21)(cid:100)(cid:106)(cid:103)(cid:21)(cid:97)(cid:90)(cid:86)(cid:89)(cid:90)(cid:103)(cid:104)(cid:93)(cid:94)(cid:101)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:98)(cid:86)(cid:99)(cid:86)(cid:92)(cid:90)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:88)(cid:86)(cid:101)(cid:86)(cid:87)(cid:94)(cid:97)(cid:94)(cid:105)(cid:94)(cid:90)(cid:104)(cid:35)

(cid:59)(cid:106)(cid:103)(cid:105)(cid:93)(cid:90)(cid:103)(cid:21)(cid:94)(cid:98)(cid:101)(cid:103)(cid:100)(cid:107)(cid:90)(cid:21)(cid:93)(cid:106)(cid:98)(cid:86)(cid:99)(cid:21)(cid:103)(cid:90)(cid:104)(cid:100)(cid:106)(cid:103)(cid:88)(cid:90)(cid:104)(cid:21)(cid:29)(cid:61)(cid:71)(cid:30)(cid:21)(cid:90)(cid:91)(cid:91)(cid:90)(cid:88)(cid:105)(cid:94)(cid:107)(cid:90)(cid:99)(cid:90)(cid:104)(cid:104)(cid:21)
and service delivery.

(cid:73)(cid:103)(cid:86)(cid:99)(cid:104)(cid:91)(cid:100)(cid:103)(cid:98)(cid:21)(cid:100)(cid:106)(cid:103)(cid:21)(cid:108)(cid:100)(cid:103)(cid:96)(cid:91)(cid:100)(cid:103)(cid:88)(cid:90)(cid:21)(cid:105)(cid:100)(cid:21)(cid:104)(cid:105)(cid:86)(cid:103)(cid:105)(cid:21)(cid:105)(cid:100)(cid:21)(cid:86)(cid:97)(cid:94)(cid:92)(cid:99)(cid:21)(cid:105)(cid:100)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)
demographics of the South African economically active 
population.

CLIENTS: ‘A GREAT PLACE TO BANK.’

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:60)(cid:103)(cid:100)(cid:108)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:71)(cid:90)(cid:105)(cid:86)(cid:94)(cid:97)(cid:21)(cid:91)(cid:103)(cid:86)(cid:99)(cid:88)(cid:93)(cid:94)(cid:104)(cid:90)(cid:48)(cid:21)(cid:87)(cid:90)(cid:88)(cid:100)(cid:98)(cid:90)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:97)(cid:90)(cid:86)(cid:89)(cid:90)(cid:103)(cid:21)
in business banking and maintain our top-three 
positioning in wholesale banking.

(cid:60)(cid:103)(cid:100)(cid:108)(cid:21)(cid:101)(cid:103)(cid:94)(cid:98)(cid:86)(cid:103)(cid:110)(cid:21)(cid:88)(cid:97)(cid:94)(cid:90)(cid:99)(cid:105)(cid:21)(cid:104)(cid:105)(cid:86)(cid:105)(cid:106)(cid:104)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:105)(cid:103)(cid:86)(cid:99)(cid:104)(cid:86)(cid:88)(cid:105)(cid:94)(cid:100)(cid:99)(cid:86)(cid:97)(cid:21)(cid:94)(cid:99)(cid:88)(cid:100)(cid:98)(cid:90)(cid:21)
streams.

(cid:59)(cid:106)(cid:103)(cid:105)(cid:93)(cid:90)(cid:103)(cid:21)(cid:94)(cid:98)(cid:101)(cid:103)(cid:100)(cid:107)(cid:90)(cid:21)(cid:104)(cid:90)(cid:103)(cid:107)(cid:94)(cid:88)(cid:90)(cid:21)(cid:97)(cid:90)(cid:107)(cid:90)(cid:97)(cid:104)(cid:21)(cid:105)(cid:100)(cid:21)(cid:108)(cid:100)(cid:103)(cid:97)(cid:89)(cid:88)(cid:97)(cid:86)(cid:104)(cid:104)(cid:21)(cid:104)(cid:105)(cid:86)(cid:99)(cid:89)(cid:86)(cid:103)(cid:89)(cid:104)(cid:35)

(cid:153)(cid:21) (cid:66)(cid:86)(cid:99)(cid:86)(cid:92)(cid:90)(cid:21)(cid:91)(cid:100)(cid:103)(cid:21)(cid:107)(cid:86)(cid:97)(cid:106)(cid:90)(cid:21)(cid:29)(cid:104)(cid:90)(cid:97)(cid:90)(cid:88)(cid:105)(cid:94)(cid:107)(cid:90)(cid:21)(cid:101)(cid:103)(cid:100)(cid:196)(cid:105)(cid:86)(cid:87)(cid:97)(cid:90)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:105)(cid:93)(cid:30)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)

increase economic proﬁt in all businesses.

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:54)(cid:88)(cid:93)(cid:94)(cid:90)(cid:107)(cid:90)(cid:21)(cid:104)(cid:90)(cid:97)(cid:90)(cid:88)(cid:105)(cid:94)(cid:107)(cid:90)(cid:21)(cid:86)(cid:89)(cid:107)(cid:86)(cid:99)(cid:88)(cid:90)(cid:104)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:105)(cid:93)(cid:35)

(cid:72)(cid:90)(cid:97)(cid:90)(cid:88)(cid:105)(cid:94)(cid:107)(cid:90)(cid:97)(cid:110)(cid:21)(cid:90)(cid:109)(cid:101)(cid:86)(cid:99)(cid:89)(cid:21)(cid:94)(cid:99)(cid:105)(cid:100)(cid:21)(cid:54)(cid:91)(cid:103)(cid:94)(cid:88)(cid:86)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:97)(cid:90)(cid:107)(cid:90)(cid:103)(cid:86)(cid:92)(cid:90)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:58)(cid:88)(cid:100)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)
alliance.

(cid:56)(cid:100)(cid:99)(cid:105)(cid:94)(cid:99)(cid:106)(cid:90)(cid:21)(cid:87)(cid:106)(cid:94)(cid:97)(cid:89)(cid:94)(cid:99)(cid:92)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:67)(cid:90)(cid:89)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:87)(cid:103)(cid:86)(cid:99)(cid:89)(cid:21)(cid:86)(cid:104)(cid:21)(cid:86)(cid:21)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:91)(cid:100)(cid:103)(cid:21)(cid:86)(cid:97)(cid:97)(cid:21)
South Africans.

COMMUNITIES: ‘HIGHLY INVOLVED IN THE 
COMMUNITY AND ENVIRONMENT.’

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:56)(cid:100)(cid:99)(cid:105)(cid:94)(cid:99)(cid:106)(cid:90)(cid:21)(cid:105)(cid:100)(cid:21)(cid:97)(cid:90)(cid:86)(cid:89)(cid:21)(cid:86)(cid:104)(cid:21)(cid:86)(cid:21)(cid:88)(cid:100)(cid:103)(cid:101)(cid:100)(cid:103)(cid:86)(cid:105)(cid:90)(cid:21)(cid:88)(cid:94)(cid:105)(cid:94)(cid:111)(cid:90)(cid:99)(cid:21)(cid:94)(cid:99)(cid:21)(cid:100)(cid:106)(cid:103)(cid:21)(cid:90)(cid:91)(cid:91)(cid:100)(cid:103)(cid:105)(cid:104)(cid:21)(cid:105)(cid:100)(cid:21)
ensure we are a green and caring bank, thereby building 
a sustainable business that is relevant in South Africa. 

(cid:57)(cid:90)(cid:97)(cid:94)(cid:107)(cid:90)(cid:103)(cid:21)(cid:100)(cid:99)(cid:21)(cid:100)(cid:106)(cid:103)(cid:21)(cid:105)(cid:103)(cid:86)(cid:99)(cid:104)(cid:91)(cid:100)(cid:103)(cid:98)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:105)(cid:86)(cid:103)(cid:92)(cid:90)(cid:105)(cid:104)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:87)(cid:90)(cid:88)(cid:100)(cid:98)(cid:90)(cid:21)(cid:86)(cid:21)
truly South African bank.

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17

 
 
 
 
 
 
 
 
 
 
SEGMENTAL
OPERATIONAL STATISTICS

 NEDBANK RETAIL
2008

2007

 NEDBANK RETAIL
2008

2007

 NEDBANK CORPORATE
2008

Corporate Banking (Turnover > R400 million)

Business Banking (Turnover > R7,5 million)

Property Finance

Africa

Other

Total

2007

Corporate Banking (Turnover > R400 million)

Business Banking (Turnover > R5 million)

Property Finance

Africa

Other

Total

 IMPERIAL BANK
2008

2007

Number of 
internet 
banking  
clients

Number of 
clients

Number of 
branches

Banking 
outlets

Private bank 
suites

 4 368 552 

 388 387 

 3 776 869 

 339 149 

 444 

 468 

 42 

 50 

 19 

 16 

Mobile 
sales

 101 

 91 

Number of 
personal 
loan 
kiosks

Number of 
personal 
loan 
branches

230

200

26 

 26

POS 
devices 
enabled 
for 
cash back

3 075 

1 454 

Number of 
ATMs

Number of 
SSTs

Number of 
employees

1 747 

1 636 

 374 

375 

16 461  

15 356 

Number of 
electronic 
banking 
clients/ 
proﬁles

Number of 
clients

Number of  
ATMs 
Africa

Number of 
locations/ 
branches

Number of 
employees

 523 

 23 996 

 5 069 

 160 217 

20 693

 210 498 

 523 

 22 842 

 5 542 

 148 657

10 954

 188 518 

 2 831 

 17 576 

 10 561 

2 956

 33 924 

 1 625 

 16 825 

 8 461 

1 621

 28 532 

 5 

 73 

 7 

 41

5

302

2 281

457

1 218

1 934

 131 

 6 192 

 5 

 72 

 7 

 40 

5

 129 

 268 

 2 301 

 459 

 1 230 

 1 885 

 6 143 

 65 

6

 71 

 52 

6

 58 

Number of 
clients

 343 003 

 279 521 

Number of 
locations/
branches

 15 

 15 

Number of 
employees

 1 148 

 1 008

18

NEDBANK GROUP ANNUAL REPORT 2008

  
  
  
  
OPERATIONAL
FOOTPRINT

OPERATIONAL STATISTICS

Retail clients

Automated teller machines (ATMs)

Self-service terminals

Point-of-sale (POS) devices enabled for 
cashback transactions

2008

2007

1 747

1 636

374

375

3 075

1 454

ATMs in rest of Africa

71

58

Staffed outlets

Retail branches in South Africa

Banking outlets

Private banking and client suites

Mobile banking branches and outlets

Personal-loan branches

Personal-loan kiosks

Wholesale banking outlets in South Africa

Branches in rest of Africa

Pick n Pay stores

444

42

19

101

26

230

85

46

418

468

50

16

91

26

200

84

45

383

POINTS OF PRESENCE IN EUROPE

Egypt

Mali

Guinea

Burkina Faso

Togo

Nigeria

Cote d’Ivoire

Ghana

Cameroon

Uganda

Gabon

Kenya

Seychelles

Tanzania

Malawi

Angola

Zambia

Madagascar

Mozambique

Namibia

Zimbabwe

Swaziland

Mauritius

South Africa

Lesotho

POINTS OF PRESENCE IN AFRICA

Nedbank branches

Deals concluded in Africa

Nedbank footprint

Ecobank footprint

Representative offices opened

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19

 
 
 
 
 
 
 
 
 
 
NEDBANK
HISTORY

2008

Nedbank rated number one in  
Ask Afrika Orange Index client 
service survey for the second 
successive year.

Announced groundbreaking alliance 
with Ecobank to strengthen and 
expand Nedbank’s African presence.

Client-focused restructuring and 
new executive appointments to 
include Business Banking and 
Corporate Banking on the Group 
Executive Committee.

Integrated Go Banking into 
Nedbank.

Eyethu black economic 
empowerment (BEE) scheme paid 
out R63 million to clients to date.

Introduced the Basel II Advanced 
Internal Ratings-based (AIRB) 
approach for credit risk management 
in Nedbank.

2000s
2007 The group successfully delivered on the three-

year ﬁnancial targets set at the start of the 
strategic recovery programme in 2004 of a 
20% ROE and 55% efﬁciency ratio.

Secured the Western Cape Government 
transaction and ﬁve municipalities as the ﬁrst 
successes of the public sector bank-of-choice 
strategy.

Integrated Old Mutual Bank into Nedbank 
Retail.

Nedbank came ﬁrst in service delivery in the 
banking sector in the Ask Afrika Orange Index 
Survey.

Nedbank announced its ﬁrst mass-market 
sponsorship, namely the Nedbank Cup in the 
Premier Soccer League.

2006 Unveiled Nedbank’s BEE transaction in 

Namibia.

2005 Changed the name of the holding company 

from Nedcor Limited to Nedbank Group 
Limited.

Announced the group’s BEE deal: ‘Eyethu’ – 
the ﬁrst truly broad-based deal with tens of 
thousands of stakeholders. 

2004 Watershed year for the group as both structural 

and strategic changes were implemented to 
restore the performance of the group and lay 
a foundation for sustainable growth into the 
future. Raised R5 billon in a rights issue.

2003 The new Nedcor Group was formed, combining 

Nedcor, BoE, Nedcor Investment Bank (NIB) 
and Cape of Good Hope Bank. 

2002 Merger of Nedcor and BoE.

NIB minority shares acquired and NIB delisted.

2001 Merger of Permanent Bank and Old Mutual 

Bank.

2000 Acquired FBC Fidelity Bank. 

20

NEDBANK GROUP ANNUAL REPORT 2008

1990s
1999 Nedbank Private Bank and Syfrets Private Bank 

merged to create the largest private bank in 
South Africa.
BoE merged with Natal Building Society (NBS) 
and Boland.

1998 BoE merged with NBS Boland.
1997 Syfrets merged with UAL Merchant Bank and 

Nedbank Investment Bank division to form the 
listed Nedcor Investment Bank (NIB).
1995 Perm split its operations into Permanent Bank 

and Peoples Bank. 

1992 Nedﬁn, Perm and Nedbank became known as 

Nedcor Bank, a wholly owned subsidiary of 
Nedcor. 

1990 Nedbank in association with the World Wide 
Fund for Nature (WWF) launched The Green 
Trust.

1980s
1989 Nedbank Group changed its name to Nedcor. 
1988 Nedbank merged with Permanent Building 
Society to form NedPerm Bank.
1986 Old Mutual became the major shareholder 

(53%) of Nedbank.

1986 Nedbank Investment Bank was created as a 

result of the acquisition of Finansbank Limited.
1983 Nedbank became the ﬁrst bank in South Africa 
to pay interest on current accounts.

1970s
1973 Nedbank Group formed from the merger of 

Syfrets South Africa and Union Acceptances and 
Nedbank.

1971 The Netherlands Bank of South Africa (NBSA) 

changes its name to Nedbank. 

1970 The merchant bank Finansbank was established.

1960s
1969 The South African shareholding in NBSA 

increased to 100%. Syfrets SA was listed on 
The Johannesburg Stock Exchange (JSE). Boland 
Bank was listed on the JSE.

1967 Introduction, in Nedbank, of American Express 
Card Service through the issue of the American 
Express Gold Card.

1964 NBSA became the ﬁrst bank to introduce 
computerised banking services. 

1950s
1951 The Nederlandsche Bank voor Zuid-Afrika (NBZA) 

was established as a South African banking 
company and changed its name to the NBSA.

1940s
1946 The Credit Corporation of South Africa was 

established. In 1976 this became Nedﬁn Bank.

1920s
1925 NBZA merged with the Transvaalsche Bank 

en Handelsvereeniging, which was founded in 
1892. 

1900s
1903 The Nederlandsche Bank en Credietvereeniging 
voor Zuid-Afrika (NBCV) changed its name to 
NBZA.

1900 Boland Bank was established as a regional 

general bank.

1890s
1892 Transvaalsche Bank en Handelsvereeniging was 

formed.

1892 The Kimberley Permanent Mutual Building and 
Investment Society changed its name to South 
African Permanent Building and Investment 
Society, later known as Perm.

1880s
1888 NBCV was founded. 
1882 The NBS was established. 

1840s
1841 Kimberley Permanent Mutual Building and 
Investment Society inaugurated.

1830s
1838 The Board of Executors was established in Cape 

Town as a trust company. 
1831 Cape of Good Hope Bank established.

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21

 
 
 
 
 
 
 
 
 
 
GROUP
STRUCTURE

CLIENT INTERFACE

Nedbank  
Retail

Nedbank  
Corporate

Nedbank  
Capital

Business 
Banking

Imperial Bank 
(50,1%)

R b Sh t
Rob Shuter

D
Graham Dempster
G h

t

Mf
Mfundo Nkuhlu 

d Nk hl

d
Brian Kennedy
K
B i

id J h
Ingrid Johnson
I

R é W kW
René van Wyk

Deputy

T
T
Tom Boardman – Chief Executive

Chi f E

B

d

i

SUPPORT AREAS

Group  
Strategy and  
Corporate  
Affairs

Group  
Technology

Group  
Human  
Resources

Group 
Finance

Enterprise  
Governance 
and  
Compliance

Group  
Risk

l M h li
Nombulelo Moholi
N b l

l
Fred Swanepoel
F d S

Shi l
Shirley Zinn

Zi

Mik B
Mike Brown

S lb B
Selby Baqwa

Phili W l
Philip Wessels

22

NEDBANK GROUP ANNUAL REPORT 2008

COMPANY
STRUCTURE

AT 31 DECEMBER 2008 

NEDBANK GROUP LIMITED

Nedbank Limited  
100%

Foreign Nedgroup 
subsidiaries

BoE Limited  
100%

Nedgroup Investment 
Holdings 101 Limited 
100%

The Board of Executors 
100%

Nedgroup Securities  
(Pty) Limited 100%

Nedgroup Wealth 
Management Limited 100%

NBS Boland Group Limited 
100%

BoE Life Limited 100%

Local subsidiaries

Imperial Bank Limited 
50,1%

Nedcor Investment Limited 
100%

Nedgroup Investment 102 
Limited 100%

BoE Holdings Limited 100%

Nedgroup Collective 
Investments Limited 100%

NedEurope Limited 100%

Nedbank (Malawi) Limited 
97,1%

NedNamibia Holdings 
Limited 100%

Tando AG 100%

Alliance Investments 
Limited 100%

MN Holdings Limited 100%

Foreign Nedbank 
subsidiaries

Nedbank (Lesotho) Limited 
100%

Nedbank (Swaziland) 
Limited 67,2%

Nedcor Trade Services 
Limited 100%

OTHER COMPANIES/ENTITIES

Depﬁn Investments (Pty) 
Limited 100%

Nedgroup Insurance 
Company Limited 100%

Syfrets Securities Nominees 
(Pty) Limited 99%

BoE Management Limited 
100%

Nedcor Group Insurance 
Company Limited 100%

Syfrets Securities Limited 
100%

Dr Holsboer Beneﬁt Fund 
100%

Nedgroup Financial Services 
104 Limited 100%

Fairbairn Trust Company 
Limited 100%

Nedcor (SA) Insurance 
Company Limited 100%

Cape of Good Hope 
Financial Services Limited 
100%

FTNIB Management 
Company Limited 100%

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23

 
 
 
 
 
 
 
 
 
 
BUSINESS PROFILE

Contribution to group earnings

NEDBANK   
CORPORATE

NEDBANK   
BUSINESS BANKING

50,7%

Headline earnings (Rm) 
Total advances (Rbn) 
Total assets (Rbn)  
Credit loss ratio (%) 
Return on risk-adjusted capital (RORAC) (%) 
Employees 

Business proﬁle

2008

2 924 
191,5 
223,1 
0,27 
28,7 
6 192

2007

2 632 
153,7 
208,4 
0,11 
26,4 
6 143

Nedbank Business Banking has historically  
been a part of Nedbank Corporate, but from  
1 January 2009 Nedbank Business Banking 
commenced operating as a separate business 
cluster.

Nedbank Corporate provides full-service 
corporate banking to large corporates with 
an annual turnover in excess of R400 million, 
including commercial and industrial property 
ﬁnance solutions.

Nedbank Business Banking provides a full  
range of commercial banking solutions to 
medium-sized businesses with an annual 
turnover of R7,5 million to R400 million. 

Key brands

Business strategy

The cluster comprises: 

(cid:153)(cid:21) (cid:56)(cid:100)(cid:103)(cid:101)(cid:100)(cid:103)(cid:86)(cid:105)(cid:90)(cid:21)(cid:55)(cid:86)(cid:99)(cid:96)(cid:94)(cid:99)(cid:92)(cid:48)
(cid:153)(cid:21) (cid:73)(cid:103)(cid:86)(cid:99)(cid:104)(cid:86)(cid:88)(cid:105)(cid:94)(cid:100)(cid:99)(cid:86)(cid:97)(cid:21)(cid:55)(cid:86)(cid:99)(cid:96)(cid:94)(cid:99)(cid:92)(cid:48)
(cid:153)(cid:21) (cid:69)(cid:103)(cid:100)(cid:101)(cid:90)(cid:103)(cid:105)(cid:110)(cid:21)(cid:59)(cid:94)(cid:99)(cid:86)(cid:99)(cid:88)(cid:90)(cid:48)
(cid:153)(cid:21) (cid:67)(cid:90)(cid:89)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:54)(cid:91)(cid:103)(cid:94)(cid:88)(cid:86)(cid:48)(cid:21)(cid:86)(cid:99)(cid:89)
(cid:153)(cid:21) (cid:67)(cid:90)(cid:89)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:62)(cid:99)(cid:107)(cid:90)(cid:104)(cid:105)(cid:100)(cid:103)(cid:21)(cid:72)(cid:90)(cid:103)(cid:107)(cid:94)(cid:88)(cid:90)(cid:104)(cid:35)

Included in the cluster are the group’s 
African operations servicing both retail and 
corporate market segments in Lesotho, 
Malawi, Namibia, Swaziland and Zimbabwe.

CORPORATE

Nedbank Corporate aims to retain its 
top-two position in the corporate market 
through:

Business Banking has an aspirational 
vision of becoming the ‘leader in business 
banking for South Africa’ through:

(cid:153)(cid:21)
(cid:94)(cid:98)(cid:101)(cid:103)(cid:100)(cid:107)(cid:94)(cid:99)(cid:92)(cid:21)(cid:101)(cid:103)(cid:94)(cid:98)(cid:86)(cid:103)(cid:110)(cid:21)(cid:87)(cid:86)(cid:99)(cid:96)(cid:90)(cid:103)(cid:21)(cid:104)(cid:105)(cid:86)(cid:105)(cid:106)(cid:104)(cid:48)
(cid:153)(cid:21) (cid:92)(cid:103)(cid:100)(cid:108)(cid:94)(cid:99)(cid:92)(cid:21)(cid:67)(cid:62)(cid:71)(cid:21)(cid:86)(cid:88)(cid:103)(cid:100)(cid:104)(cid:104)(cid:21)(cid:86)(cid:97)(cid:97)(cid:21)(cid:101)(cid:103)(cid:100)(cid:89)(cid:106)(cid:88)(cid:105)(cid:104)(cid:48)
(cid:91)(cid:100)(cid:88)(cid:106)(cid:104)(cid:94)(cid:99)(cid:92)(cid:21)(cid:100)(cid:99)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:101)(cid:106)(cid:87)(cid:97)(cid:94)(cid:88)(cid:21)(cid:104)(cid:90)(cid:88)(cid:105)(cid:100)(cid:103)(cid:48)
(cid:153)(cid:21)
(cid:153)(cid:21) (cid:89)(cid:90)(cid:97)(cid:94)(cid:107)(cid:90)(cid:103)(cid:94)(cid:99)(cid:92)(cid:21)(cid:108)(cid:100)(cid:103)(cid:97)(cid:89)(cid:88)(cid:97)(cid:86)(cid:104)(cid:104)(cid:21)(cid:105)(cid:103)(cid:86)(cid:99)(cid:104)(cid:86)(cid:88)(cid:105)(cid:94)(cid:100)(cid:99)(cid:86)(cid:97)(cid:21)

banking solutions;
(cid:153)(cid:21) (cid:98)(cid:86)(cid:99)(cid:86)(cid:92)(cid:94)(cid:99)(cid:92)(cid:21)(cid:88)(cid:97)(cid:94)(cid:90)(cid:99)(cid:105)(cid:21)(cid:107)(cid:86)(cid:97)(cid:106)(cid:90)(cid:48)
(cid:153)(cid:21) (cid:89)(cid:103)(cid:94)(cid:107)(cid:94)(cid:99)(cid:92)(cid:21)(cid:88)(cid:100)(cid:97)(cid:97)(cid:86)(cid:87)(cid:100)(cid:103)(cid:86)(cid:105)(cid:94)(cid:107)(cid:90)(cid:21)(cid:98)(cid:100)(cid:89)(cid:90)(cid:97)(cid:21)(cid:86)(cid:88)(cid:103)(cid:100)(cid:104)(cid:104)(cid:21)

Nedbank clusters and with Old Mutual to 
support service excellence and cross-sell;
(cid:153)(cid:21) (cid:90)(cid:109)(cid:101)(cid:86)(cid:99)(cid:89)(cid:94)(cid:99)(cid:92)(cid:21)(cid:104)(cid:90)(cid:97)(cid:90)(cid:88)(cid:105)(cid:94)(cid:107)(cid:90)(cid:97)(cid:110)(cid:21)(cid:94)(cid:99)(cid:21)(cid:54)(cid:91)(cid:103)(cid:94)(cid:88)(cid:86)(cid:33)(cid:21)(cid:94)(cid:99)(cid:88)(cid:97)(cid:106)(cid:89)(cid:94)(cid:99)(cid:92)(cid:21)
leveraging its alliance with Ecobank;
(cid:153)(cid:21) (cid:90)(cid:104)(cid:105)(cid:86)(cid:87)(cid:97)(cid:94)(cid:104)(cid:93)(cid:94)(cid:99)(cid:92)(cid:21)(cid:86)(cid:21)(cid:105)(cid:103)(cid:106)(cid:97)(cid:110)(cid:21)(cid:72)(cid:100)(cid:106)(cid:105)(cid:93)(cid:21)(cid:54)(cid:91)(cid:103)(cid:94)(cid:88)(cid:86)(cid:99)(cid:21)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:94)(cid:99)(cid:21)

terms of clients and staff; and
(cid:88)(cid:100)(cid:99)(cid:105)(cid:94)(cid:99)(cid:106)(cid:94)(cid:99)(cid:92)(cid:21)(cid:94)(cid:105)(cid:104)(cid:21)(cid:91)(cid:100)(cid:88)(cid:106)(cid:104)(cid:21)(cid:100)(cid:99)(cid:21)(cid:105)(cid:103)(cid:86)(cid:99)(cid:104)(cid:91)(cid:100)(cid:103)(cid:98)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:35)

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:97)(cid:90)(cid:107)(cid:90)(cid:103)(cid:86)(cid:92)(cid:94)(cid:99)(cid:92)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:89)(cid:90)(cid:88)(cid:90)(cid:99)(cid:105)(cid:103)(cid:86)(cid:97)(cid:94)(cid:104)(cid:90)(cid:89)(cid:33)(cid:21)(cid:86)(cid:88)(cid:88)(cid:100)(cid:106)(cid:99)(cid:105)(cid:86)(cid:87)(cid:97)(cid:90)(cid:21)
business model to partner with clients to 
grow their business;

(cid:153)(cid:21) (cid:89)(cid:103)(cid:94)(cid:107)(cid:94)(cid:99)(cid:92)(cid:21)(cid:99)(cid:90)(cid:108)(cid:21)(cid:88)(cid:97)(cid:94)(cid:90)(cid:99)(cid:105)(cid:21)(cid:86)(cid:88)(cid:102)(cid:106)(cid:94)(cid:104)(cid:94)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:29)(cid:101)(cid:103)(cid:94)(cid:98)(cid:86)(cid:103)(cid:110)(cid:34)

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:153)(cid:21)

banker status);
(cid:91)(cid:100)(cid:88)(cid:106)(cid:104)(cid:94)(cid:99)(cid:92)(cid:21)(cid:100)(cid:99)(cid:21)(cid:105)(cid:103)(cid:86)(cid:99)(cid:104)(cid:91)(cid:100)(cid:103)(cid:98)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:100)(cid:91)(cid:21)(cid:104)(cid:105)(cid:86)(cid:91)(cid:91)(cid:21)(cid:86)(cid:104)(cid:21)
well as people development;
(cid:88)(cid:93)(cid:86)(cid:99)(cid:92)(cid:94)(cid:99)(cid:92)(cid:21)(cid:98)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:21)(cid:101)(cid:90)(cid:103)(cid:88)(cid:90)(cid:101)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:105)(cid:93)(cid:103)(cid:100)(cid:106)(cid:92)(cid:93)(cid:21)
active advertising;
(cid:97)(cid:90)(cid:107)(cid:90)(cid:103)(cid:86)(cid:92)(cid:94)(cid:99)(cid:92)(cid:21)(cid:90)(cid:99)(cid:105)(cid:90)(cid:103)(cid:101)(cid:103)(cid:94)(cid:104)(cid:90)(cid:21)(cid:89)(cid:90)(cid:107)(cid:90)(cid:97)(cid:100)(cid:101)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)
opportunities to support upcoming 
businesses; and
(cid:88)(cid:100)(cid:99)(cid:105)(cid:94)(cid:99)(cid:106)(cid:94)(cid:99)(cid:92)(cid:21)(cid:94)(cid:105)(cid:104)(cid:21)(cid:91)(cid:100)(cid:88)(cid:106)(cid:104)(cid:21)(cid:100)(cid:99)(cid:21)(cid:105)(cid:103)(cid:86)(cid:99)(cid:104)(cid:91)(cid:100)(cid:103)(cid:98)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:100)(cid:91)(cid:21)
its client base.

24

NEDBANK GROUP ANNUAL REPORT 2008

 
NEDBANK   
CAPITAL

NEDBANK   
RETAIL

IMPERIAL BANK

22,0%

17,4%

2,9%

2008

1 266 
47,7 
188,7 
0,06 
38,1 
693

2007

1 174 
51,2 
143,4 
0,05 
40,7 
625

2008

1 002 
150,1 
171,0 
2,47 
10,8 
16 461

2007

1 876 
133,5 
154,1 
1,26 
22,1 
15 356

2008

166 
44,7 
48,8 
1,71 
13,2 
1 148

2007

227 
35,3 
38,2 
1,28 
23,9 
1 008

Imperial Bank is a joint venture with Imperial 
Holdings Limited and provides predominantly 
asset-based ﬁnance in selected niche markets. 
Motor Finance Corporation (MFC) forms the 
largest part of the business.

The cluster comprises: 

(cid:153)(cid:21) (cid:66)(cid:59)(cid:56)(cid:48)
(cid:153)(cid:21) (cid:69)(cid:103)(cid:100)(cid:101)(cid:90)(cid:103)(cid:105)(cid:110)(cid:21)(cid:59)(cid:94)(cid:99)(cid:86)(cid:99)(cid:88)(cid:90)(cid:48)
(cid:153)(cid:21) (cid:72)(cid:106)(cid:101)(cid:101)(cid:97)(cid:94)(cid:90)(cid:103)(cid:21)(cid:54)(cid:104)(cid:104)(cid:90)(cid:105)(cid:21)(cid:59)(cid:94)(cid:99)(cid:86)(cid:99)(cid:88)(cid:90)(cid:48)(cid:21)(cid:86)(cid:99)(cid:89)
(cid:153)(cid:21) (cid:69)(cid:103)(cid:100)(cid:91)(cid:90)(cid:104)(cid:104)(cid:94)(cid:100)(cid:99)(cid:86)(cid:97)(cid:21)(cid:59)(cid:94)(cid:99)(cid:86)(cid:99)(cid:88)(cid:90)(cid:35)

Imperial Bank is focused on capitalising on the 
niche opportunities in the banking markets, 
with a focus on vehicle, property, professional 
and supplier and asset ﬁnance. 

Key elements of the strategy include:

(cid:153)(cid:21)

(cid:153)(cid:21)
(cid:153)(cid:21)

(cid:97)(cid:90)(cid:107)(cid:90)(cid:103)(cid:86)(cid:92)(cid:94)(cid:99)(cid:92)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:62)(cid:98)(cid:101)(cid:90)(cid:103)(cid:94)(cid:86)(cid:97)(cid:21)(cid:61)(cid:100)(cid:97)(cid:89)(cid:94)(cid:99)(cid:92)(cid:104)(cid:21)(cid:91)(cid:100)(cid:100)(cid:105)(cid:101)(cid:103)(cid:94)(cid:99)(cid:105)(cid:33)(cid:21)
dealership and network;
(cid:105)(cid:86)(cid:96)(cid:94)(cid:99)(cid:92)(cid:21)(cid:86)(cid:21)(cid:99)(cid:94)(cid:88)(cid:93)(cid:90)(cid:21)(cid:98)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:21)(cid:86)(cid:101)(cid:101)(cid:103)(cid:100)(cid:86)(cid:88)(cid:93)(cid:48)
(cid:91)(cid:100)(cid:88)(cid:106)(cid:104)(cid:94)(cid:99)(cid:92)(cid:21)(cid:100)(cid:99)(cid:21)(cid:90)(cid:109)(cid:88)(cid:90)(cid:97)(cid:97)(cid:90)(cid:99)(cid:88)(cid:90)(cid:21)(cid:94)(cid:99)(cid:21)(cid:88)(cid:97)(cid:94)(cid:90)(cid:99)(cid:105)(cid:21)(cid:104)(cid:90)(cid:103)(cid:107)(cid:94)(cid:88)(cid:90)(cid:48)(cid:21)
and 

(cid:153)(cid:21) (cid:87)(cid:90)(cid:94)(cid:99)(cid:92)(cid:21)(cid:99)(cid:94)(cid:98)(cid:87)(cid:97)(cid:90)(cid:35)(cid:21)

Nedbank Capital provides comprehensive 
investment banking solutions to institutional 
and corporate clients.

It has ofﬁces in South Africa and London and is 
setting up representative ofﬁces in Africa.

The cluster comprises: 

(cid:62)(cid:99)(cid:107)(cid:90)(cid:104)(cid:105)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:55)(cid:86)(cid:99)(cid:96)(cid:94)(cid:99)(cid:92)(cid:48)(cid:21)

(cid:153)(cid:21)
(cid:153)(cid:21) (cid:73)(cid:103)(cid:90)(cid:86)(cid:104)(cid:106)(cid:103)(cid:110)(cid:48)(cid:21)
(cid:153)(cid:21) (cid:58)(cid:102)(cid:106)(cid:94)(cid:105)(cid:94)(cid:90)(cid:104)(cid:48)(cid:21)
(cid:153)(cid:21) (cid:57)(cid:90)(cid:87)(cid:105)(cid:21)(cid:56)(cid:86)(cid:101)(cid:94)(cid:105)(cid:86)(cid:97)(cid:21)(cid:66)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:104)(cid:48)(cid:21)
(cid:153)(cid:21) (cid:60)(cid:97)(cid:100)(cid:87)(cid:86)(cid:97)(cid:21)(cid:66)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:104)(cid:48)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)
(cid:65)(cid:100)(cid:99)(cid:89)(cid:100)(cid:99)(cid:21)(cid:68)(cid:91)(cid:196)(cid:88)(cid:90)(cid:35)(cid:21)
(cid:153)(cid:21)

Nedbank Retail provides full-service retail 
banking and wealth management services to 
individuals and small businesses. It currently has 
4,37 million clients in South Africa and in the UK.

The cluster comprises: 

(cid:153)(cid:21) (cid:71)(cid:90)(cid:105)(cid:86)(cid:94)(cid:97)(cid:21)(cid:55)(cid:86)(cid:99)(cid:96)(cid:94)(cid:99)(cid:92)(cid:21)(cid:72)(cid:90)(cid:103)(cid:107)(cid:94)(cid:88)(cid:90)(cid:104)(cid:48)
(cid:153)(cid:21) (cid:67)(cid:90)(cid:89)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:69)(cid:103)(cid:94)(cid:107)(cid:86)(cid:105)(cid:90)(cid:21)(cid:55)(cid:86)(cid:99)(cid:96)(cid:48)
(cid:153)(cid:21) (cid:71)(cid:90)(cid:105)(cid:86)(cid:94)(cid:97)(cid:21)(cid:56)(cid:100)(cid:99)(cid:104)(cid:106)(cid:98)(cid:90)(cid:103)(cid:21)(cid:55)(cid:86)(cid:99)(cid:96)(cid:94)(cid:99)(cid:92)(cid:48)
(cid:153)(cid:21) (cid:71)(cid:90)(cid:105)(cid:86)(cid:94)(cid:97)(cid:21)(cid:72)(cid:98)(cid:86)(cid:97)(cid:97)(cid:21)(cid:55)(cid:106)(cid:104)(cid:94)(cid:99)(cid:90)(cid:104)(cid:104)(cid:21)(cid:72)(cid:90)(cid:103)(cid:107)(cid:94)(cid:88)(cid:90)(cid:104)(cid:48)
(cid:153)(cid:21) (cid:67)(cid:90)(cid:89)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:72)(cid:90)(cid:88)(cid:106)(cid:103)(cid:90)(cid:89)(cid:21)(cid:65)(cid:90)(cid:99)(cid:89)(cid:94)(cid:99)(cid:92)(cid:21)(cid:29)(cid:93)(cid:100)(cid:98)(cid:90)(cid:21)(cid:97)(cid:100)(cid:86)(cid:99)(cid:104)(cid:21)

and vehicle and asset ﬁnance);

(cid:153)(cid:21) (cid:67)(cid:90)(cid:89)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:69)(cid:90)(cid:103)(cid:104)(cid:100)(cid:99)(cid:86)(cid:97)(cid:21)(cid:65)(cid:100)(cid:86)(cid:99)(cid:104)(cid:48)
(cid:153)(cid:21) (cid:67)(cid:90)(cid:89)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:56)(cid:86)(cid:103)(cid:89)(cid:48)
(cid:153)(cid:21) (cid:71)(cid:90)(cid:105)(cid:86)(cid:94)(cid:97)(cid:21)(cid:55)(cid:86)(cid:99)(cid:88)(cid:86)(cid:104)(cid:104)(cid:106)(cid:103)(cid:86)(cid:99)(cid:88)(cid:90)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:76)(cid:90)(cid:86)(cid:97)(cid:105)(cid:93)(cid:48)(cid:21)(cid:86)(cid:99)(cid:89)
(cid:153)(cid:21) (cid:71)(cid:90)(cid:105)(cid:86)(cid:94)(cid:97)(cid:21)(cid:73)(cid:103)(cid:86)(cid:99)(cid:104)(cid:86)(cid:88)(cid:105)(cid:94)(cid:100)(cid:99)(cid:86)(cid:97)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:62)(cid:99)(cid:107)(cid:90)(cid:104)(cid:105)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)

Products (foreign exchange and payments). 

CAPITAL

Nedbank Capital follows an integrated 
investment banking business model – 
leveraging a unique combination of industry 
and product expertise with a single client 
interface. 

Retail will continue to manage the business 
carefully through the current tougher 
economic cycle. It will also continue to build 
on the cluster’s vision of becoming ‘South 
Africa’s fastest-growing retail bank’.

Long-term strategies include:

Overall strategic orientation includes: 

(cid:153)(cid:21)

(cid:153)(cid:21)

(cid:94)(cid:99)(cid:105)(cid:90)(cid:103)(cid:99)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:86)(cid:97)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:54)(cid:91)(cid:103)(cid:94)(cid:88)(cid:86)(cid:99)(cid:21)(cid:90)(cid:109)(cid:101)(cid:86)(cid:99)(cid:104)(cid:94)(cid:100)(cid:99)(cid:33)(cid:21)
including collaboration with Ecobank in the 
rest of Africa;
(cid:88)(cid:100)(cid:97)(cid:97)(cid:86)(cid:87)(cid:100)(cid:103)(cid:86)(cid:105)(cid:94)(cid:107)(cid:90)(cid:21)(cid:98)(cid:100)(cid:89)(cid:90)(cid:97)(cid:21)(cid:108)(cid:94)(cid:105)(cid:93)(cid:94)(cid:99)(cid:21)(cid:67)(cid:90)(cid:89)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)
Capital, Nedbank clusters and Old Mutual;

(cid:153)(cid:21) (cid:101)(cid:103)(cid:100)(cid:89)(cid:106)(cid:88)(cid:105)(cid:21)(cid:104)(cid:88)(cid:100)(cid:101)(cid:90)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:87)(cid:106)(cid:104)(cid:94)(cid:99)(cid:90)(cid:104)(cid:104)(cid:21)(cid:107)(cid:90)(cid:99)(cid:105)(cid:106)(cid:103)(cid:90)(cid:21)

expansion; and 
(cid:88)(cid:100)(cid:99)(cid:105)(cid:94)(cid:99)(cid:106)(cid:90)(cid:89)(cid:21)(cid:91)(cid:100)(cid:88)(cid:106)(cid:104)(cid:21)(cid:100)(cid:99)(cid:21)(cid:105)(cid:103)(cid:86)(cid:99)(cid:104)(cid:91)(cid:100)(cid:103)(cid:98)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:35)

(cid:153)(cid:21)

(cid:153)(cid:21) (cid:86)(cid:89)(cid:100)(cid:101)(cid:105)(cid:94)(cid:99)(cid:92)(cid:21)(cid:86)(cid:21)(cid:88)(cid:100)(cid:99)(cid:104)(cid:90)(cid:103)(cid:107)(cid:86)(cid:105)(cid:94)(cid:107)(cid:90)(cid:21)(cid:88)(cid:103)(cid:90)(cid:89)(cid:94)(cid:105)(cid:21)(cid:101)(cid:100)(cid:97)(cid:94)(cid:88)(cid:110)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)
focusing on collections and impairments;
(cid:153)(cid:21) (cid:90)(cid:109)(cid:90)(cid:88)(cid:106)(cid:105)(cid:94)(cid:99)(cid:92)(cid:21)(cid:187)(cid:98)(cid:86)(cid:99)(cid:86)(cid:92)(cid:90)(cid:21)(cid:91)(cid:100)(cid:103)(cid:21)(cid:107)(cid:86)(cid:97)(cid:106)(cid:90)(cid:188)(cid:21)(cid:104)(cid:105)(cid:103)(cid:86)(cid:105)(cid:90)(cid:92)(cid:94)(cid:90)(cid:104)(cid:21)(cid:94)(cid:99)(cid:21)
home loans and vehicle and asset-based 
ﬁnance;
investing in high economic proﬁt businesses; 
(cid:91)(cid:100)(cid:88)(cid:106)(cid:104)(cid:94)(cid:99)(cid:92)(cid:21)(cid:100)(cid:99)(cid:21)(cid:87)(cid:86)(cid:99)(cid:88)(cid:86)(cid:104)(cid:104)(cid:106)(cid:103)(cid:86)(cid:99)(cid:88)(cid:90)(cid:48)
(cid:88)(cid:100)(cid:99)(cid:105)(cid:94)(cid:99)(cid:106)(cid:94)(cid:99)(cid:92)(cid:21)(cid:94)(cid:105)(cid:104)(cid:21)(cid:91)(cid:100)(cid:88)(cid:106)(cid:104)(cid:21)(cid:100)(cid:99)(cid:21)(cid:105)(cid:103)(cid:86)(cid:99)(cid:104)(cid:91)(cid:100)(cid:103)(cid:98)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:48)
(cid:88)(cid:100)(cid:99)(cid:105)(cid:103)(cid:100)(cid:97)(cid:97)(cid:94)(cid:99)(cid:92)(cid:21)(cid:89)(cid:94)(cid:104)(cid:105)(cid:103)(cid:94)(cid:87)(cid:106)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:90)(cid:109)(cid:101)(cid:86)(cid:99)(cid:104)(cid:94)(cid:100)(cid:99)(cid:48)

(cid:153)(cid:21)
(cid:153)(cid:21)
(cid:153)(cid:21)
(cid:153)(cid:21)
(cid:153)(cid:21) (cid:90)(cid:99)(cid:105)(cid:103)(cid:90)(cid:99)(cid:88)(cid:93)(cid:94)(cid:99)(cid:92)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:97)(cid:90)(cid:86)(cid:89)(cid:94)(cid:99)(cid:92)(cid:21)(cid:104)(cid:90)(cid:103)(cid:107)(cid:94)(cid:88)(cid:90)(cid:21)(cid:101)(cid:100)(cid:104)(cid:94)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)

(cid:153)(cid:21)

(cid:153)(cid:21)

and service culture; 
(cid:105)(cid:86)(cid:103)(cid:92)(cid:90)(cid:105)(cid:94)(cid:99)(cid:92)(cid:21)(cid:98)(cid:86)(cid:95)(cid:100)(cid:103)(cid:21)(cid:88)(cid:93)(cid:86)(cid:99)(cid:99)(cid:90)(cid:97)(cid:104)(cid:21)(cid:91)(cid:100)(cid:103)(cid:21)(cid:101)(cid:103)(cid:94)(cid:98)(cid:86)(cid:103)(cid:110)(cid:21)(cid:88)(cid:97)(cid:94)(cid:90)(cid:99)(cid:105)(cid:21)
growth; and
increasing efforts in contributing towards the 
national agenda, particularly in the Imbizo 
process (government-initiated community 
meetings to discuss relevant issues), 
employment equity and supporting black 
small businesses and low-income housing.

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

25

 
 
 
 
 
 
 
 
 
 
BUSINESS PROFILE ... CONTINUED

Market position

NEDBANK   
CORPORATE

NEDBANK   
BUSINESS BANKING

(cid:153)(cid:21) (cid:72)(cid:105)(cid:103)(cid:100)(cid:99)(cid:92)(cid:21)(cid:98)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:21)(cid:104)(cid:93)(cid:86)(cid:103)(cid:90)(cid:21)(cid:94)(cid:99)(cid:21)(cid:100)(cid:105)(cid:93)(cid:90)(cid:103)(cid:21)(cid:101)(cid:103)(cid:94)(cid:107)(cid:86)(cid:105)(cid:90)(cid:21)(cid:104)(cid:90)(cid:88)(cid:105)(cid:100)(cid:103)(cid:21)

(cid:153)(cid:21)

loans (excl foreign currency loans). 
(cid:65)(cid:86)(cid:103)(cid:92)(cid:90)(cid:104)(cid:105)(cid:21)(cid:101)(cid:103)(cid:100)(cid:101)(cid:90)(cid:103)(cid:105)(cid:110)(cid:21)(cid:196)(cid:99)(cid:86)(cid:99)(cid:88)(cid:90)(cid:21)(cid:98)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:21)(cid:104)(cid:93)(cid:86)(cid:103)(cid:90)(cid:21)
among banks in South Africa. 

(cid:153)(cid:21) (cid:73)(cid:100)(cid:101)(cid:21)(cid:56)(cid:103)(cid:100)(cid:104)(cid:104)(cid:87)(cid:100)(cid:103)(cid:89)(cid:90)(cid:103)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:57)(cid:100)(cid:98)(cid:90)(cid:104)(cid:105)(cid:94)(cid:88)(cid:21)(cid:56)(cid:106)(cid:104)(cid:105)(cid:100)(cid:89)(cid:94)(cid:86)(cid:99)(cid:21)(cid:100)(cid:91)(cid:21)
the Year for southern Africa rating by Global 
Custodian. 

(cid:153)(cid:21) (cid:55)(cid:90)(cid:104)(cid:105)(cid:21)(cid:72)(cid:106)(cid:87)(cid:88)(cid:106)(cid:104)(cid:105)(cid:100)(cid:89)(cid:94)(cid:86)(cid:99)(cid:21)(cid:55)(cid:86)(cid:99)(cid:96)(cid:21)(cid:183)(cid:21)(cid:54)(cid:91)(cid:103)(cid:94)(cid:88)(cid:86)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:72)(cid:100)(cid:106)(cid:105)(cid:93)(cid:21)
Africa rating at the Global Finance Awards. 

(cid:153)(cid:21) (cid:54)(cid:101)(cid:101)(cid:103)(cid:100)(cid:109)(cid:94)(cid:98)(cid:86)(cid:105)(cid:90)(cid:97)(cid:110)(cid:21)(cid:39)(cid:38)(cid:26)(cid:21)(cid:101)(cid:103)(cid:94)(cid:98)(cid:86)(cid:103)(cid:110)(cid:34)(cid:87)(cid:86)(cid:99)(cid:96)(cid:90)(cid:103)(cid:21)(cid:98)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:21)
share (with slightly higher penetration in 
liabilities).
(cid:65)(cid:90)(cid:86)(cid:89)(cid:90)(cid:103)(cid:21)(cid:94)(cid:99)(cid:21)(cid:56)(cid:100)(cid:103)(cid:101)(cid:100)(cid:103)(cid:86)(cid:105)(cid:90)(cid:21)(cid:72)(cid:86)(cid:107)(cid:90)(cid:103)(cid:21)(cid:101)(cid:103)(cid:100)(cid:89)(cid:106)(cid:88)(cid:105)(cid:21)
(management of trust funds).

(cid:153)(cid:21)

(cid:153)(cid:21) (cid:60)(cid:100)(cid:100)(cid:89)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:105)(cid:93)(cid:21)(cid:94)(cid:99)(cid:21)(cid:104)(cid:101)(cid:90)(cid:88)(cid:94)(cid:86)(cid:97)(cid:94)(cid:104)(cid:105)(cid:21)(cid:91)(cid:100)(cid:88)(cid:106)(cid:104)(cid:21)(cid:86)(cid:103)(cid:90)(cid:86)(cid:104)(cid:21)

(franchising, public sector, tourism and 
enterprise development).

(cid:153)(cid:21) (cid:58)(cid:97)(cid:90)(cid:88)(cid:105)(cid:103)(cid:100)(cid:99)(cid:94)(cid:88)(cid:21)(cid:87)(cid:86)(cid:99)(cid:96)(cid:94)(cid:99)(cid:92)(cid:21)(cid:101)(cid:97)(cid:86)(cid:105)(cid:91)(cid:100)(cid:103)(cid:98)(cid:33)(cid:21)(cid:67)(cid:90)(cid:105)(cid:55)(cid:86)(cid:99)(cid:96)(cid:21)

Business, setting the standard in security 
and rated best value for money in South 
Africa (BMI-T Corp).

(cid:153)(cid:21)

What went well
(cid:153)(cid:21) (cid:60)(cid:100)(cid:100)(cid:89)(cid:21)(cid:89)(cid:90)(cid:101)(cid:100)(cid:104)(cid:94)(cid:105)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:105)(cid:93)(cid:33)(cid:21)(cid:87)(cid:90)(cid:99)(cid:90)(cid:196)(cid:105)(cid:94)(cid:99)(cid:92)(cid:21)(cid:91)(cid:103)(cid:100)(cid:98)(cid:21)(cid:100)(cid:106)(cid:103)(cid:21)
strong primary-banker-client relationships.
(cid:62)(cid:99)(cid:105)(cid:90)(cid:92)(cid:103)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:100)(cid:91)(cid:21)(cid:94)(cid:99)(cid:107)(cid:90)(cid:104)(cid:105)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:98)(cid:86)(cid:99)(cid:86)(cid:92)(cid:90)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)
functions in Business Banking with the 
Corporate Saver product sales teams.
(cid:62)(cid:99)(cid:107)(cid:90)(cid:104)(cid:105)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:94)(cid:99)(cid:21)(cid:97)(cid:90)(cid:86)(cid:89)(cid:90)(cid:103)(cid:104)(cid:93)(cid:94)(cid:101)(cid:21)(cid:89)(cid:90)(cid:107)(cid:90)(cid:97)(cid:100)(cid:101)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)
across three management levels.
(cid:153)(cid:21) (cid:72)(cid:94)(cid:92)(cid:99)(cid:94)(cid:196)(cid:88)(cid:86)(cid:99)(cid:105)(cid:97)(cid:110)(cid:21)(cid:94)(cid:98)(cid:101)(cid:103)(cid:100)(cid:107)(cid:90)(cid:89)(cid:21)(cid:104)(cid:105)(cid:86)(cid:91)(cid:91)(cid:21)(cid:98)(cid:100)(cid:103)(cid:86)(cid:97)(cid:90)(cid:35)
(cid:153)(cid:21) (cid:58)(cid:109)(cid:101)(cid:86)(cid:99)(cid:104)(cid:94)(cid:100)(cid:99)(cid:21)(cid:100)(cid:91)(cid:21)(cid:104)(cid:101)(cid:90)(cid:88)(cid:94)(cid:86)(cid:97)(cid:94)(cid:104)(cid:90)(cid:89)(cid:21)(cid:196)(cid:99)(cid:86)(cid:99)(cid:88)(cid:90)(cid:21)(cid:88)(cid:86)(cid:101)(cid:86)(cid:87)(cid:94)(cid:97)(cid:94)(cid:105)(cid:94)(cid:90)(cid:104)(cid:21)

(cid:153)(cid:21)

to cater for market opportunities. 
(cid:153)(cid:21) (cid:57)(cid:90)(cid:107)(cid:90)(cid:97)(cid:100)(cid:101)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:100)(cid:91)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:91)(cid:103)(cid:86)(cid:98)(cid:90)(cid:108)(cid:100)(cid:103)(cid:96)(cid:21)(cid:91)(cid:100)(cid:103)(cid:21)

implementing enterprise development in 
terms of the dti codes and through this 
supporting emerging entrepreneurs.

(cid:153)(cid:21) (cid:71)(cid:94)(cid:92)(cid:100)(cid:103)(cid:100)(cid:106)(cid:104)(cid:21)(cid:88)(cid:103)(cid:90)(cid:89)(cid:94)(cid:105)(cid:21)(cid:103)(cid:94)(cid:104)(cid:96)(cid:21)(cid:98)(cid:86)(cid:99)(cid:86)(cid:92)(cid:90)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:87)(cid:86)(cid:97)(cid:86)(cid:99)(cid:88)(cid:90)(cid:89)(cid:21)
with ongoing support of client’s business.
(cid:153)(cid:21)
(cid:62)(cid:99)(cid:88)(cid:103)(cid:90)(cid:86)(cid:104)(cid:90)(cid:21)(cid:94)(cid:99)(cid:21)(cid:99)(cid:90)(cid:105)(cid:21)(cid:101)(cid:103)(cid:94)(cid:98)(cid:86)(cid:103)(cid:110)(cid:34)(cid:88)(cid:97)(cid:94)(cid:90)(cid:99)(cid:105)(cid:21)(cid:86)(cid:88)(cid:102)(cid:106)(cid:94)(cid:104)(cid:94)(cid:105)(cid:94)(cid:100)(cid:99)(cid:35)
(cid:153)(cid:21) (cid:56)(cid:100)(cid:98)(cid:101)(cid:97)(cid:90)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:100)(cid:91)(cid:21)(cid:98)(cid:94)(cid:92)(cid:103)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:100)(cid:91)(cid:21)(cid:86)(cid:97)(cid:97)(cid:21)(cid:97)(cid:86)(cid:103)(cid:92)(cid:90)(cid:34)(cid:107)(cid:100)(cid:97)(cid:106)(cid:98)(cid:90)(cid:21)
and valued clients to the new NetBank 
Business electronic banking platform.

Challenges
(cid:153)(cid:21)
(cid:153)(cid:21)

(cid:62)(cid:99)(cid:88)(cid:103)(cid:90)(cid:86)(cid:104)(cid:94)(cid:99)(cid:92)(cid:21)(cid:94)(cid:98)(cid:101)(cid:86)(cid:94)(cid:103)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:88)(cid:93)(cid:86)(cid:103)(cid:92)(cid:90)(cid:104)(cid:35)(cid:21)
(cid:62)(cid:98)(cid:101)(cid:103)(cid:100)(cid:107)(cid:94)(cid:99)(cid:92)(cid:21)(cid:100)(cid:107)(cid:90)(cid:103)(cid:86)(cid:97)(cid:97)(cid:21)(cid:86)(cid:104)(cid:104)(cid:90)(cid:105)(cid:21)(cid:98)(cid:86)(cid:103)(cid:92)(cid:94)(cid:99)(cid:104)(cid:21)(cid:108)(cid:94)(cid:105)(cid:93)(cid:21)(cid:86)(cid:21)(cid:97)(cid:86)(cid:103)(cid:92)(cid:90)(cid:21)
balance of historic longer-term loans written 
at lower margins. 
(cid:62)(cid:98)(cid:101)(cid:103)(cid:100)(cid:107)(cid:94)(cid:99)(cid:92)(cid:21)(cid:100)(cid:107)(cid:90)(cid:103)(cid:86)(cid:97)(cid:97)(cid:21)(cid:86)(cid:104)(cid:104)(cid:90)(cid:105)(cid:21)(cid:98)(cid:86)(cid:103)(cid:92)(cid:94)(cid:99)(cid:104)(cid:21)(cid:108)(cid:94)(cid:105)(cid:93)(cid:21)(cid:86)(cid:21)(cid:97)(cid:86)(cid:103)(cid:92)(cid:90)(cid:21)
balance of historic longer-term loans written 
at lower margins. 

(cid:153)(cid:21)

(cid:153)(cid:21) (cid:57)(cid:90)(cid:86)(cid:97)(cid:94)(cid:99)(cid:92)(cid:21)(cid:108)(cid:94)(cid:105)(cid:93)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:88)(cid:100)(cid:98)(cid:101)(cid:97)(cid:90)(cid:109)(cid:94)(cid:105)(cid:94)(cid:90)(cid:104)(cid:21)(cid:100)(cid:91)(cid:21)(cid:106)(cid:101)(cid:92)(cid:103)(cid:86)(cid:89)(cid:94)(cid:99)(cid:92)(cid:21)

internal systems to improve work 
environment for staff and clients.

(cid:153)(cid:21) (cid:57)(cid:90)(cid:97)(cid:94)(cid:107)(cid:90)(cid:103)(cid:110)(cid:21)(cid:100)(cid:91)(cid:21)(cid:104)(cid:106)(cid:104)(cid:105)(cid:86)(cid:94)(cid:99)(cid:86)(cid:87)(cid:97)(cid:90)(cid:21)(cid:101)(cid:90)(cid:103)(cid:91)(cid:100)(cid:103)(cid:98)(cid:86)(cid:99)(cid:88)(cid:90)(cid:21)(cid:105)(cid:93)(cid:103)(cid:100)(cid:106)(cid:92)(cid:93)(cid:21)
the cycle, while continuing to build the 
franchise in the context of global market 
challenges, where liquidity and capital 
management take priority.

(cid:153)(cid:21) (cid:72)(cid:97)(cid:100)(cid:108)(cid:94)(cid:99)(cid:92)(cid:21)(cid:90)(cid:88)(cid:100)(cid:99)(cid:100)(cid:98)(cid:94)(cid:88)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:105)(cid:93)(cid:33)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:90)(cid:91)(cid:91)(cid:90)(cid:88)(cid:105)(cid:21)(cid:100)(cid:91)(cid:21)
declining interest rates on endowment 
income and continued rising impairments 
will impact on earnings in 2009.

Review of 2008

What went well
(cid:153)(cid:21) (cid:71)(cid:100)(cid:87)(cid:106)(cid:104)(cid:105)(cid:21)(cid:88)(cid:100)(cid:103)(cid:90)(cid:21)(cid:87)(cid:86)(cid:99)(cid:96)(cid:94)(cid:99)(cid:92)(cid:21)(cid:90)(cid:86)(cid:103)(cid:99)(cid:94)(cid:99)(cid:92)(cid:104)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:105)(cid:93)(cid:35)(cid:21)
(cid:153)(cid:21) Healthy earnings generated on property 

(cid:153)(cid:21)

investments, but down on 2007 record levels.
(cid:187)(cid:66)(cid:86)(cid:99)(cid:86)(cid:92)(cid:94)(cid:99)(cid:92)(cid:21)(cid:91)(cid:100)(cid:103)(cid:21)(cid:107)(cid:86)(cid:97)(cid:106)(cid:90)(cid:188)(cid:21)(cid:86)(cid:101)(cid:101)(cid:103)(cid:100)(cid:86)(cid:88)(cid:93)(cid:21)(cid:90)(cid:98)(cid:87)(cid:90)(cid:89)(cid:89)(cid:90)(cid:89)(cid:21)
in all businesses (including increasing credit 
spreads).
(cid:62)(cid:98)(cid:101)(cid:86)(cid:94)(cid:103)(cid:98)(cid:90)(cid:99)(cid:105)(cid:104)(cid:21)(cid:108)(cid:90)(cid:97)(cid:97)(cid:34)(cid:98)(cid:86)(cid:99)(cid:86)(cid:92)(cid:90)(cid:89)(cid:35)(cid:21)

(cid:153)(cid:21)
(cid:153)(cid:21) (cid:67)(cid:106)(cid:98)(cid:87)(cid:90)(cid:103)(cid:21)(cid:100)(cid:91)(cid:21)(cid:101)(cid:103)(cid:94)(cid:98)(cid:86)(cid:103)(cid:110)(cid:21)(cid:88)(cid:97)(cid:94)(cid:90)(cid:99)(cid:105)(cid:104)(cid:21)(cid:94)(cid:99)(cid:88)(cid:103)(cid:90)(cid:86)(cid:104)(cid:90)(cid:89)(cid:35)(cid:21)
(cid:153)(cid:21) (cid:58)(cid:97)(cid:90)(cid:88)(cid:105)(cid:103)(cid:100)(cid:99)(cid:94)(cid:88)(cid:21)(cid:87)(cid:86)(cid:99)(cid:96)(cid:94)(cid:99)(cid:92)(cid:21)(cid:101)(cid:97)(cid:86)(cid:105)(cid:91)(cid:100)(cid:103)(cid:98)(cid:21)(cid:90)(cid:99)(cid:93)(cid:86)(cid:99)(cid:88)(cid:90)(cid:89)(cid:35)(cid:21)
(cid:153)(cid:21) (cid:72)(cid:90)(cid:97)(cid:90)(cid:88)(cid:105)(cid:94)(cid:107)(cid:90)(cid:21)(cid:86)(cid:89)(cid:107)(cid:86)(cid:99)(cid:88)(cid:90)(cid:104)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:105)(cid:93)(cid:21)(cid:86)(cid:88)(cid:93)(cid:94)(cid:90)(cid:107)(cid:90)(cid:89)(cid:21)(cid:94)(cid:99)(cid:21)(cid:105)(cid:90)(cid:103)(cid:98)(cid:21)

(cid:153)(cid:21)

products.
(cid:62)(cid:98)(cid:101)(cid:103)(cid:100)(cid:107)(cid:90)(cid:98)(cid:90)(cid:99)(cid:105)(cid:104)(cid:21)(cid:94)(cid:99)(cid:21)(cid:104)(cid:105)(cid:86)(cid:91)(cid:91)(cid:21)(cid:88)(cid:106)(cid:97)(cid:105)(cid:106)(cid:103)(cid:90)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:98)(cid:100)(cid:103)(cid:86)(cid:97)(cid:90)(cid:21)
continued, with strong leadership attributes.

(cid:153)(cid:21) (cid:73)(cid:103)(cid:86)(cid:99)(cid:104)(cid:91)(cid:100)(cid:103)(cid:98)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:105)(cid:86)(cid:103)(cid:92)(cid:90)(cid:105)(cid:104)(cid:21)(cid:90)(cid:109)(cid:88)(cid:90)(cid:90)(cid:89)(cid:90)(cid:89)(cid:35)
(cid:153)(cid:21) (cid:60)(cid:100)(cid:100)(cid:89)(cid:21)(cid:101)(cid:103)(cid:100)(cid:92)(cid:103)(cid:90)(cid:104)(cid:104)(cid:21)(cid:100)(cid:99)(cid:21)(cid:86)(cid:91)(cid:91)(cid:100)(cid:103)(cid:89)(cid:86)(cid:87)(cid:97)(cid:90)(cid:34)(cid:93)(cid:100)(cid:106)(cid:104)(cid:94)(cid:99)(cid:92)(cid:21)

projects.

(cid:153)(cid:21) (cid:72)(cid:105)(cid:103)(cid:86)(cid:105)(cid:90)(cid:92)(cid:94)(cid:88)(cid:21)(cid:86)(cid:97)(cid:97)(cid:94)(cid:86)(cid:99)(cid:88)(cid:90)(cid:21)(cid:90)(cid:104)(cid:105)(cid:86)(cid:87)(cid:97)(cid:94)(cid:104)(cid:93)(cid:90)(cid:89)(cid:21)(cid:108)(cid:94)(cid:105)(cid:93)(cid:21)(cid:58)(cid:88)(cid:100)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)
to create the largest Pan-African network in 
Africa.

Challenges
(cid:153)(cid:21)

(cid:62)(cid:99)(cid:88)(cid:103)(cid:90)(cid:86)(cid:104)(cid:94)(cid:99)(cid:92)(cid:21)(cid:97)(cid:94)(cid:102)(cid:106)(cid:94)(cid:89)(cid:94)(cid:105)(cid:110)(cid:21)(cid:92)(cid:90)(cid:99)(cid:90)(cid:103)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:94)(cid:99)(cid:21)(cid:105)(cid:94)(cid:92)(cid:93)(cid:105)(cid:90)(cid:103)(cid:21)
markets.

(cid:153)(cid:21) (cid:69)(cid:103)(cid:90)(cid:101)(cid:86)(cid:103)(cid:94)(cid:99)(cid:92)(cid:21)(cid:88)(cid:97)(cid:94)(cid:90)(cid:99)(cid:105)(cid:104)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:104)(cid:105)(cid:86)(cid:91)(cid:91)(cid:21)(cid:91)(cid:100)(cid:103)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:99)(cid:90)(cid:92)(cid:86)(cid:105)(cid:94)(cid:107)(cid:90)(cid:21)
effect arising from the adverse global 
economic environment.

(cid:153)(cid:21) (cid:56)(cid:100)(cid:99)(cid:105)(cid:94)(cid:99)(cid:106)(cid:90)(cid:89)(cid:21)(cid:98)(cid:100)(cid:89)(cid:90)(cid:104)(cid:105)(cid:21)(cid:86)(cid:89)(cid:107)(cid:86)(cid:99)(cid:88)(cid:90)(cid:104)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:105)(cid:93)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)
margin increase in Corporate Banking. 
(cid:153)(cid:21) (cid:73)(cid:103)(cid:86)(cid:99)(cid:104)(cid:86)(cid:88)(cid:105)(cid:94)(cid:100)(cid:99)(cid:86)(cid:97)(cid:21)(cid:87)(cid:86)(cid:99)(cid:96)(cid:94)(cid:99)(cid:92)(cid:21)(cid:104)(cid:97)(cid:100)(cid:108)(cid:94)(cid:99)(cid:92)(cid:21)(cid:94)(cid:99)(cid:21)(cid:97)(cid:94)(cid:99)(cid:90)(cid:21)(cid:108)(cid:94)(cid:105)(cid:93)(cid:21)

(cid:153)(cid:21)

reduced economic activity.
(cid:62)(cid:98)(cid:101)(cid:86)(cid:94)(cid:103)(cid:98)(cid:90)(cid:99)(cid:105)(cid:104)(cid:33)(cid:21)(cid:103)(cid:90)(cid:197)(cid:90)(cid:88)(cid:105)(cid:94)(cid:99)(cid:92)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:94)(cid:98)(cid:101)(cid:86)(cid:88)(cid:105)(cid:21)(cid:100)(cid:91)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)
global and domestic slowdown and delayed 
effects of high interest rates, increasing to 
top end of through-the-cycle levels.

(cid:153)(cid:21) (cid:71)(cid:100)(cid:97)(cid:97)(cid:100)(cid:106)(cid:105)(cid:21)(cid:100)(cid:91)(cid:21)(cid:99)(cid:90)(cid:108)(cid:21)(cid:90)(cid:97)(cid:90)(cid:88)(cid:105)(cid:103)(cid:100)(cid:99)(cid:94)(cid:88)(cid:21)(cid:87)(cid:86)(cid:99)(cid:96)(cid:94)(cid:99)(cid:92)(cid:21)(cid:104)(cid:110)(cid:104)(cid:105)(cid:90)(cid:98)(cid:104)(cid:21)

to the corporate market.

(cid:153)(cid:21) (cid:56)(cid:100)(cid:99)(cid:105)(cid:94)(cid:99)(cid:106)(cid:90)(cid:89)(cid:21)(cid:86)(cid:88)(cid:105)(cid:94)(cid:107)(cid:94)(cid:105)(cid:110)(cid:21)(cid:94)(cid:99)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:101)(cid:106)(cid:87)(cid:97)(cid:94)(cid:88)(cid:21)(cid:104)(cid:90)(cid:88)(cid:105)(cid:100)(cid:103)(cid:35)
(cid:153)(cid:21) (cid:69)(cid:103)(cid:100)(cid:101)(cid:90)(cid:103)(cid:105)(cid:110)(cid:21)(cid:94)(cid:99)(cid:107)(cid:90)(cid:104)(cid:105)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:90)(cid:86)(cid:103)(cid:99)(cid:94)(cid:99)(cid:92)(cid:104)(cid:21)(cid:106)(cid:99)(cid:89)(cid:90)(cid:103)(cid:21)

pressure.

(cid:153)(cid:21) (cid:58)(cid:86)(cid:103)(cid:99)(cid:94)(cid:99)(cid:92)(cid:104)(cid:21)(cid:94)(cid:98)(cid:101)(cid:86)(cid:88)(cid:105)(cid:90)(cid:89)(cid:21)(cid:87)(cid:110)(cid:21)(cid:93)(cid:94)(cid:92)(cid:93)(cid:90)(cid:103)(cid:21)(cid:94)(cid:98)(cid:101)(cid:86)(cid:94)(cid:103)(cid:98)(cid:90)(cid:99)(cid:105)(cid:104)(cid:21)

and lower endowment on capital as interest 
rates decrease.

Prospects for 2009

26

NEDBANK GROUP ANNUAL REPORT 2008

 
IMPERIAL BANK

(cid:153)(cid:21) (cid:75)(cid:90)(cid:93)(cid:94)(cid:88)(cid:97)(cid:90)(cid:21)(cid:196)(cid:99)(cid:86)(cid:99)(cid:88)(cid:90)(cid:21)(cid:98)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:21)(cid:104)(cid:93)(cid:86)(cid:103)(cid:90)(cid:21)(cid:94)(cid:99)(cid:21)(cid:90)(cid:109)(cid:88)(cid:90)(cid:104)(cid:104)(cid:21) 

of 11% and growing. 

(cid:153)(cid:21) (cid:67)(cid:94)(cid:88)(cid:93)(cid:90)(cid:21)(cid:100)(cid:101)(cid:90)(cid:103)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:104)(cid:21)(cid:94)(cid:99)(cid:21)(cid:103)(cid:90)(cid:104)(cid:94)(cid:89)(cid:90)(cid:99)(cid:105)(cid:94)(cid:86)(cid:97)(cid:21)(cid:101)(cid:103)(cid:100)(cid:101)(cid:90)(cid:103)(cid:105)(cid:110)(cid:21)
development ﬁnance, commercial 
property ﬁnance, professional ﬁnance, 
supplier and asset ﬁnance, and ofﬁce 
equipment ﬁnance.

What went well    
(cid:153)(cid:21) (cid:72)(cid:105)(cid:103)(cid:100)(cid:99)(cid:92)(cid:21)(cid:87)(cid:86)(cid:97)(cid:86)(cid:99)(cid:88)(cid:90)(cid:21)(cid:104)(cid:93)(cid:90)(cid:90)(cid:105)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:105)(cid:93)(cid:33)(cid:21)(cid:101)(cid:86)(cid:103)(cid:105)(cid:94)(cid:88)(cid:106)(cid:97)(cid:86)(cid:103)(cid:97)(cid:110)(cid:21)

in MFC.

(cid:153)(cid:21) (cid:71)(cid:90)(cid:101)(cid:100)(cid:104)(cid:94)(cid:105)(cid:94)(cid:100)(cid:99)(cid:94)(cid:99)(cid:92)(cid:21)(cid:100)(cid:91)(cid:21)(cid:104)(cid:106)(cid:101)(cid:101)(cid:97)(cid:94)(cid:90)(cid:103)(cid:21)(cid:86)(cid:104)(cid:104)(cid:90)(cid:105)(cid:21)(cid:196)(cid:99)(cid:86)(cid:99)(cid:88)(cid:90)(cid:21)(cid:105)(cid:100)(cid:21)
take advantage of ﬁnancing infrastructure 
spend.
(cid:62)(cid:99)(cid:88)(cid:103)(cid:90)(cid:86)(cid:104)(cid:90)(cid:89)(cid:21)(cid:104)(cid:88)(cid:100)(cid:101)(cid:90)(cid:21)(cid:105)(cid:100)(cid:21)(cid:196)(cid:99)(cid:86)(cid:99)(cid:88)(cid:90)(cid:21)(cid:100)(cid:105)(cid:93)(cid:90)(cid:103)(cid:21)
professionals outside of the medical 
arena.

(cid:153)(cid:21)

Challenges 
(cid:153)(cid:21) (cid:72)(cid:94)(cid:92)(cid:99)(cid:94)(cid:196)(cid:88)(cid:86)(cid:99)(cid:105)(cid:21)(cid:94)(cid:99)(cid:88)(cid:103)(cid:90)(cid:86)(cid:104)(cid:90)(cid:21)(cid:94)(cid:99)(cid:21)(cid:88)(cid:103)(cid:90)(cid:89)(cid:94)(cid:105)(cid:21)(cid:94)(cid:98)(cid:101)(cid:86)(cid:94)(cid:103)(cid:98)(cid:90)(cid:99)(cid:105)(cid:104)(cid:21)
in MFC, Professional Finance and Supplier 
Asset Finance.
(cid:153)(cid:21)
(cid:62)(cid:99)(cid:88)(cid:103)(cid:90)(cid:86)(cid:104)(cid:90)(cid:89)(cid:21)(cid:88)(cid:100)(cid:104)(cid:105)(cid:21)(cid:100)(cid:91)(cid:21)(cid:91)(cid:106)(cid:99)(cid:89)(cid:94)(cid:99)(cid:92)(cid:35)
(cid:153)(cid:21) (cid:74)(cid:101)(cid:92)(cid:103)(cid:86)(cid:89)(cid:90)(cid:21)(cid:100)(cid:91)(cid:21)(cid:88)(cid:100)(cid:103)(cid:90)(cid:21)(cid:62)(cid:73)(cid:21)(cid:104)(cid:110)(cid:104)(cid:105)(cid:90)(cid:98)(cid:104)(cid:35)

NEDBANK   
CAPITAL

NEDBANK   
RETAIL

(cid:153)(cid:21) (cid:57)(cid:90)(cid:87)(cid:105)(cid:21)(cid:68)(cid:103)(cid:94)(cid:92)(cid:94)(cid:99)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:47)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:105)(cid:100)(cid:101)(cid:21)(cid:88)(cid:100)(cid:103)(cid:101)(cid:100)(cid:103)(cid:86)(cid:105)(cid:90)(cid:21)(cid:87)(cid:100)(cid:99)(cid:89)(cid:21)

issuer.

(cid:153)(cid:21) (cid:56)(cid:100)(cid:103)(cid:101)(cid:100)(cid:103)(cid:86)(cid:105)(cid:90)(cid:21)(cid:59)(cid:94)(cid:99)(cid:86)(cid:99)(cid:88)(cid:90)(cid:47)(cid:21)(cid:98)(cid:86)(cid:94)(cid:99)(cid:105)(cid:86)(cid:94)(cid:99)(cid:90)(cid:89)(cid:21)(cid:94)(cid:105)(cid:104)(cid:21)

top-three placing in the mergers and 
acquisitions (M&A) rankings. 
(cid:153)(cid:21) (cid:73)(cid:100)(cid:101)(cid:34)(cid:105)(cid:93)(cid:103)(cid:90)(cid:90)(cid:21)(cid:101)(cid:100)(cid:104)(cid:94)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:86)(cid:104)(cid:21)(cid:89)(cid:100)(cid:98)(cid:90)(cid:104)(cid:105)(cid:94)(cid:88)(cid:21)

institutional broker. 

(cid:153)(cid:21) (cid:54)(cid:91)(cid:103)(cid:94)(cid:88)(cid:86)(cid:99)(cid:21)(cid:62)(cid:99)(cid:107)(cid:90)(cid:104)(cid:105)(cid:100)(cid:103)(cid:21)(cid:62)(cid:56)(cid:73)(cid:21)(cid:57)(cid:90)(cid:86)(cid:97)(cid:21)(cid:100)(cid:91)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:78)(cid:90)(cid:86)(cid:103)(cid:21)(cid:91)(cid:100)(cid:103)(cid:21)

South Africa’s fourth largest retail bank:
(cid:153)(cid:21) (cid:38)(cid:43)(cid:33)(cid:46)(cid:44)(cid:26)(cid:21)(cid:93)(cid:100)(cid:98)(cid:90)(cid:21)(cid:97)(cid:100)(cid:86)(cid:99)(cid:104)(cid:21)(cid:98)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:21)(cid:104)(cid:93)(cid:86)(cid:103)(cid:90)(cid:35)(cid:21)
(cid:153)(cid:21) (cid:44)(cid:33)(cid:38)(cid:44)(cid:26)(cid:21)(cid:107)(cid:90)(cid:93)(cid:94)(cid:88)(cid:97)(cid:90)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:86)(cid:104)(cid:104)(cid:90)(cid:105)(cid:21)(cid:196)(cid:99)(cid:86)(cid:99)(cid:88)(cid:90)(cid:21)(cid:98)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:21)

share. 

(cid:153)(cid:21) (cid:38)(cid:39)(cid:33)(cid:44)(cid:26)(cid:21)(cid:88)(cid:86)(cid:103)(cid:89)(cid:21)(cid:98)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:21)(cid:104)(cid:93)(cid:86)(cid:103)(cid:90)(cid:35)
(cid:153)(cid:21) (cid:38)(cid:45)(cid:33)(cid:44)(cid:26)(cid:21)(cid:66)(cid:111)(cid:86)(cid:99)(cid:104)(cid:94)(cid:21)(cid:98)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:21)(cid:104)(cid:93)(cid:86)(cid:103)(cid:90)(cid:35)(cid:21)
(cid:153)(cid:21) (cid:39)(cid:41)(cid:33)(cid:41)(cid:26)(cid:21)(cid:94)(cid:99)(cid:89)(cid:94)(cid:107)(cid:94)(cid:89)(cid:106)(cid:86)(cid:97)(cid:21)(cid:89)(cid:90)(cid:101)(cid:100)(cid:104)(cid:94)(cid:105)(cid:21)(cid:98)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:21)(cid:104)(cid:93)(cid:86)(cid:103)(cid:90)(cid:35)
(cid:153)(cid:21) (cid:73)(cid:100)(cid:101)(cid:34)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:103)(cid:86)(cid:105)(cid:94)(cid:99)(cid:92)(cid:21)(cid:94)(cid:99)(cid:21)(cid:54)(cid:104)(cid:96)(cid:21)(cid:54)(cid:91)(cid:103)(cid:94)(cid:96)(cid:86)(cid:21)(cid:68)(cid:103)(cid:86)(cid:99)(cid:92)(cid:90)(cid:21)

2008 (Seacom deal). 

Index.

(cid:153)(cid:21) (cid:56)(cid:97)(cid:94)(cid:90)(cid:99)(cid:105)(cid:21)(cid:66)(cid:86)(cid:99)(cid:86)(cid:92)(cid:90)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:54)(cid:104)(cid:104)(cid:90)(cid:104)(cid:104)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:73)(cid:100)(cid:100)(cid:97)(cid:21)

(CMAT) score in the top decile of global 
banks.

What went well 
(cid:153)(cid:21) (cid:71)(cid:100)(cid:87)(cid:106)(cid:104)(cid:105)(cid:21)(cid:105)(cid:103)(cid:86)(cid:89)(cid:94)(cid:99)(cid:92)(cid:21)(cid:101)(cid:90)(cid:103)(cid:91)(cid:100)(cid:103)(cid:98)(cid:86)(cid:99)(cid:88)(cid:90)(cid:33)(cid:21)(cid:101)(cid:86)(cid:103)(cid:105)(cid:94)(cid:88)(cid:106)(cid:97)(cid:86)(cid:103)(cid:97)(cid:110)(cid:21)

in foreign exchange.

What went well  
(cid:153)(cid:21) (cid:76)(cid:90)(cid:97)(cid:97)(cid:34)(cid:88)(cid:100)(cid:99)(cid:105)(cid:103)(cid:100)(cid:97)(cid:97)(cid:90)(cid:89)(cid:21)(cid:90)(cid:109)(cid:101)(cid:90)(cid:99)(cid:104)(cid:90)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:105)(cid:93)(cid:35)
(cid:153)(cid:21) (cid:69)(cid:103)(cid:94)(cid:98)(cid:86)(cid:103)(cid:110)(cid:21)(cid:88)(cid:97)(cid:94)(cid:90)(cid:99)(cid:105)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:105)(cid:93)(cid:21)(cid:100)(cid:91)(cid:21)(cid:86)(cid:101)(cid:101)(cid:103)(cid:100)(cid:109)(cid:94)(cid:98)(cid:86)(cid:105)(cid:90)(cid:97)(cid:110)(cid:21)

(cid:153)(cid:21) (cid:69)(cid:103)(cid:100)(cid:92)(cid:103)(cid:90)(cid:104)(cid:104)(cid:21)(cid:100)(cid:99)(cid:21)(cid:54)(cid:91)(cid:103)(cid:94)(cid:88)(cid:86)(cid:99)(cid:21)(cid:90)(cid:109)(cid:101)(cid:86)(cid:99)(cid:104)(cid:94)(cid:100)(cid:99)(cid:33)(cid:21)(cid:108)(cid:94)(cid:105)(cid:93)(cid:21)

10% (+119 000 clients).

regional ofﬁces in Angola and Nigeria 
being set up.

(cid:153)(cid:21) (cid:67)(cid:90)(cid:105)(cid:21)(cid:99)(cid:90)(cid:108)(cid:21)(cid:88)(cid:97)(cid:94)(cid:90)(cid:99)(cid:105)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:105)(cid:93)(cid:21)(cid:100)(cid:91)(cid:21)(cid:42)(cid:46)(cid:37)(cid:21)(cid:37)(cid:37)(cid:37)(cid:35)(cid:21)
(cid:153)(cid:21) (cid:66)(cid:86)(cid:94)(cid:99)(cid:105)(cid:86)(cid:94)(cid:99)(cid:94)(cid:99)(cid:92)(cid:21)(cid:100)(cid:91)(cid:21)(cid:98)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:21)(cid:104)(cid:93)(cid:86)(cid:103)(cid:90)(cid:21)(cid:94)(cid:99)(cid:21)(cid:96)(cid:90)(cid:110)(cid:21)

(cid:153)(cid:21) (cid:66)(cid:86)(cid:94)(cid:99)(cid:105)(cid:86)(cid:94)(cid:99)(cid:94)(cid:99)(cid:92)(cid:21)(cid:94)(cid:99)(cid:89)(cid:106)(cid:104)(cid:105)(cid:103)(cid:110)(cid:21)(cid:103)(cid:86)(cid:99)(cid:96)(cid:94)(cid:99)(cid:92)(cid:104)(cid:35)(cid:21)
(cid:153)(cid:21) (cid:59)(cid:94)(cid:103)(cid:104)(cid:105)(cid:34)(cid:101)(cid:93)(cid:86)(cid:104)(cid:90)(cid:21)(cid:94)(cid:98)(cid:101)(cid:97)(cid:90)(cid:98)(cid:90)(cid:99)(cid:105)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:100)(cid:91)(cid:21)(cid:99)(cid:90)(cid:108)(cid:21)

trading systems.

(cid:153)(cid:21)

(cid:153)(cid:21) (cid:54)(cid:89)(cid:89)(cid:90)(cid:89)(cid:21)(cid:105)(cid:103)(cid:86)(cid:88)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:100)(cid:99)(cid:21)(cid:99)(cid:90)(cid:108)(cid:21)(cid:87)(cid:106)(cid:104)(cid:94)(cid:99)(cid:90)(cid:104)(cid:104)(cid:21)
opportunities and products.
(cid:62)(cid:99)(cid:107)(cid:90)(cid:104)(cid:105)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:94)(cid:99)(cid:21)(cid:104)(cid:96)(cid:94)(cid:97)(cid:97)(cid:90)(cid:89)(cid:21)(cid:101)(cid:90)(cid:100)(cid:101)(cid:97)(cid:90)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)
development of sound risk, information 
technology and ﬁnance platforms 
over the last few years, combined with 
a prudent risk appetite, contributed 
signiﬁcantly to the achievement of a 
more balanced earnings proﬁle in extreme 
market conditions. 

Challenges
(cid:153)(cid:21)

(cid:62)(cid:99)(cid:88)(cid:103)(cid:90)(cid:86)(cid:104)(cid:90)(cid:89)(cid:21)(cid:88)(cid:100)(cid:104)(cid:105)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:103)(cid:90)(cid:89)(cid:106)(cid:88)(cid:90)(cid:89)(cid:21)(cid:86)(cid:107)(cid:86)(cid:94)(cid:97)(cid:86)(cid:87)(cid:94)(cid:97)(cid:94)(cid:105)(cid:110)(cid:21)(cid:100)(cid:91)(cid:21)
funding.

(cid:153)(cid:21)

(cid:153)(cid:21) (cid:56)(cid:93)(cid:86)(cid:97)(cid:97)(cid:90)(cid:99)(cid:92)(cid:94)(cid:99)(cid:92)(cid:21)(cid:90)(cid:102)(cid:106)(cid:94)(cid:105)(cid:110)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:89)(cid:90)(cid:87)(cid:105)(cid:21)(cid:98)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:104)(cid:21)
impacting trading in these areas. 
(cid:65)(cid:100)(cid:108)(cid:90)(cid:103)(cid:21)(cid:90)(cid:102)(cid:106)(cid:94)(cid:105)(cid:110)(cid:21)(cid:98)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105)(cid:104)(cid:21)(cid:99)(cid:90)(cid:92)(cid:86)(cid:105)(cid:94)(cid:107)(cid:90)(cid:97)(cid:110)(cid:21)
impacting private equity valuations.
(cid:153)(cid:21) (cid:57)(cid:90)(cid:97)(cid:86)(cid:110)(cid:94)(cid:99)(cid:92)(cid:21)(cid:100)(cid:103)(cid:21)(cid:101)(cid:106)(cid:105)(cid:105)(cid:94)(cid:99)(cid:92)(cid:21)(cid:100)(cid:99)(cid:21)(cid:93)(cid:100)(cid:97)(cid:89)(cid:21)(cid:100)(cid:91)(cid:21)(cid:98)(cid:86)(cid:99)(cid:110)(cid:21)
client projects post October 2008.

categories.

(cid:153)(cid:21) (cid:67)(cid:106)(cid:98)(cid:87)(cid:90)(cid:103)(cid:21)(cid:100)(cid:99)(cid:90)(cid:21)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:103)(cid:86)(cid:105)(cid:94)(cid:99)(cid:92)(cid:21)(cid:94)(cid:99)(cid:21)(cid:54)(cid:104)(cid:96)(cid:21)(cid:54)(cid:91)(cid:103)(cid:94)(cid:96)(cid:86)(cid:21)

Orange Index service excellence survey  
(two years successively).
(cid:65)(cid:86)(cid:106)(cid:99)(cid:88)(cid:93)(cid:21)(cid:100)(cid:91)(cid:21)(cid:54)(cid:104)(cid:96)(cid:68)(cid:99)(cid:88)(cid:90)(cid:21)(cid:101)(cid:93)(cid:86)(cid:104)(cid:90)(cid:21)(cid:62)(cid:62)(cid:35)

(cid:153)(cid:21)
(cid:153)(cid:21) (cid:71)(cid:90)(cid:98)(cid:86)(cid:94)(cid:99)(cid:94)(cid:99)(cid:92)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:98)(cid:100)(cid:104)(cid:105)(cid:21)(cid:86)(cid:91)(cid:91)(cid:100)(cid:103)(cid:89)(cid:86)(cid:87)(cid:97)(cid:90)(cid:21)(cid:87)(cid:86)(cid:99)(cid:96)(cid:21)(cid:94)(cid:99)(cid:21)

the middle and mass market.

(cid:153)(cid:21) (cid:72)(cid:94)(cid:92)(cid:99)(cid:94)(cid:196)(cid:88)(cid:86)(cid:99)(cid:105)(cid:21)(cid:94)(cid:98)(cid:101)(cid:103)(cid:100)(cid:107)(cid:90)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:94)(cid:99)(cid:21)(cid:104)(cid:105)(cid:86)(cid:91)(cid:91)(cid:21)(cid:98)(cid:100)(cid:103)(cid:86)(cid:97)(cid:90)(cid:35)(cid:21)
(cid:153)(cid:21) (cid:58)(cid:109)(cid:101)(cid:86)(cid:99)(cid:104)(cid:94)(cid:100)(cid:99)(cid:21)(cid:100)(cid:91)(cid:21)(cid:89)(cid:94)(cid:104)(cid:105)(cid:103)(cid:94)(cid:87)(cid:106)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:105)(cid:93)(cid:103)(cid:100)(cid:106)(cid:92)(cid:93)(cid:21) 

15 new branches, 278 automated teller 
machines (ATMs) and cashback facilities 
at 2 193 new point-of-sale (POS) devices. 

(cid:153)(cid:21) (cid:72)(cid:94)(cid:92)(cid:99)(cid:94)(cid:196)(cid:88)(cid:86)(cid:99)(cid:105)(cid:21)(cid:94)(cid:99)(cid:107)(cid:90)(cid:104)(cid:105)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:94)(cid:99)(cid:21)(cid:88)(cid:100)(cid:97)(cid:97)(cid:90)(cid:88)(cid:105)(cid:94)(cid:100)(cid:99)(cid:104)(cid:21)

areas.

Challenges
(cid:153)(cid:21) (cid:72)(cid:94)(cid:92)(cid:99)(cid:94)(cid:196)(cid:88)(cid:86)(cid:99)(cid:105)(cid:21)(cid:94)(cid:99)(cid:88)(cid:103)(cid:90)(cid:86)(cid:104)(cid:90)(cid:21)(cid:94)(cid:99)(cid:21)(cid:87)(cid:86)(cid:89)(cid:21)(cid:89)(cid:90)(cid:87)(cid:105)(cid:104)(cid:33)(cid:21)

speciﬁcally in secured-debt products.

(cid:153)(cid:21) (cid:56)(cid:100)(cid:98)(cid:101)(cid:90)(cid:105)(cid:94)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:56)(cid:100)(cid:98)(cid:98)(cid:94)(cid:104)(cid:104)(cid:94)(cid:100)(cid:99)(cid:21)(cid:94)(cid:99)(cid:102)(cid:106)(cid:94)(cid:103)(cid:110)(cid:35)(cid:21)
(cid:153)(cid:21) (cid:56)(cid:93)(cid:86)(cid:97)(cid:97)(cid:90)(cid:99)(cid:92)(cid:94)(cid:99)(cid:92)(cid:21)(cid:93)(cid:100)(cid:98)(cid:90)(cid:21)(cid:97)(cid:100)(cid:86)(cid:99)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:107)(cid:90)(cid:93)(cid:94)(cid:88)(cid:97)(cid:90)(cid:21)

ﬁnance markets.

(cid:153)(cid:21) (cid:57)(cid:94)(cid:91)(cid:196)(cid:88)(cid:106)(cid:97)(cid:105)(cid:110)(cid:21)(cid:94)(cid:99)(cid:21)(cid:86)(cid:105)(cid:105)(cid:103)(cid:86)(cid:88)(cid:105)(cid:94)(cid:99)(cid:92)(cid:21)(cid:105)(cid:90)(cid:103)(cid:98)(cid:21)(cid:91)(cid:100)(cid:103)(cid:90)(cid:94)(cid:92)(cid:99)(cid:21)

(cid:153)(cid:21) (cid:58)(cid:99)(cid:107)(cid:94)(cid:103)(cid:100)(cid:99)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:100)(cid:91)(cid:21)(cid:89)(cid:90)(cid:88)(cid:97)(cid:94)(cid:99)(cid:94)(cid:99)(cid:92)(cid:21)(cid:94)(cid:99)(cid:105)(cid:90)(cid:103)(cid:90)(cid:104)(cid:105)(cid:21)(cid:103)(cid:86)(cid:105)(cid:90)(cid:104)(cid:21)

currency (dollar) funding.

(cid:153)(cid:21) (cid:72)(cid:97)(cid:100)(cid:108)(cid:89)(cid:100)(cid:108)(cid:99)(cid:21)(cid:94)(cid:99)(cid:21)(cid:92)(cid:97)(cid:100)(cid:87)(cid:86)(cid:97)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:72)(cid:100)(cid:106)(cid:105)(cid:93)(cid:21)(cid:54)(cid:91)(cid:103)(cid:94)(cid:88)(cid:86)(cid:99)(cid:21)

economy leading to decreased dealﬂow.

(cid:153)(cid:21) (cid:71)(cid:90)(cid:86)(cid:104)(cid:100)(cid:99)(cid:86)(cid:87)(cid:97)(cid:110)(cid:21)(cid:91)(cid:86)(cid:107)(cid:100)(cid:106)(cid:103)(cid:86)(cid:87)(cid:97)(cid:90)(cid:21)(cid:105)(cid:103)(cid:86)(cid:89)(cid:94)(cid:99)(cid:92)(cid:21)

environment, but volumes slowing. 
(cid:153)(cid:21) (cid:56)(cid:93)(cid:86)(cid:97)(cid:97)(cid:90)(cid:99)(cid:92)(cid:94)(cid:99)(cid:92)(cid:21)(cid:90)(cid:99)(cid:107)(cid:94)(cid:103)(cid:100)(cid:99)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:91)(cid:100)(cid:103)(cid:21)(cid:101)(cid:103)(cid:94)(cid:107)(cid:86)(cid:105)(cid:90)(cid:34)(cid:21)

(cid:153)(cid:21)

equity revaluations.
(cid:62)(cid:98)(cid:101)(cid:86)(cid:88)(cid:105)(cid:21)(cid:100)(cid:91)(cid:21)(cid:103)(cid:90)(cid:89)(cid:106)(cid:88)(cid:94)(cid:99)(cid:92)(cid:21)(cid:88)(cid:100)(cid:98)(cid:98)(cid:100)(cid:89)(cid:94)(cid:110)(cid:21)(cid:101)(cid:103)(cid:94)(cid:88)(cid:90)(cid:104)(cid:21)(cid:100)(cid:99)(cid:21)
mining business.

to impact endowment income negatively, 
but should provide some relief for 
distressed consumers.

(cid:153)(cid:21) (cid:56)(cid:100)(cid:99)(cid:105)(cid:94)(cid:99)(cid:106)(cid:90)(cid:89)(cid:21)(cid:88)(cid:100)(cid:99)(cid:104)(cid:106)(cid:98)(cid:90)(cid:103)(cid:21)(cid:101)(cid:103)(cid:90)(cid:104)(cid:104)(cid:106)(cid:103)(cid:90)(cid:21)(cid:91)(cid:103)(cid:100)(cid:98)(cid:21)(cid:93)(cid:94)(cid:92)(cid:93)(cid:21)
interest rates, high inﬂation, job losses 
and falling house prices.
(cid:62)(cid:98)(cid:101)(cid:86)(cid:94)(cid:103)(cid:98)(cid:90)(cid:99)(cid:105)(cid:104)(cid:21)(cid:103)(cid:90)(cid:98)(cid:86)(cid:94)(cid:99)(cid:94)(cid:99)(cid:92)(cid:21)(cid:93)(cid:94)(cid:92)(cid:93)(cid:35)

(cid:153)(cid:21)
(cid:153)(cid:21) (cid:72)(cid:100)(cid:98)(cid:90)(cid:21)(cid:103)(cid:90)(cid:88)(cid:100)(cid:107)(cid:90)(cid:103)(cid:110)(cid:21)(cid:94)(cid:99)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:106)(cid:99)(cid:104)(cid:90)(cid:88)(cid:106)(cid:103)(cid:90)(cid:89)(cid:34)(cid:97)(cid:90)(cid:99)(cid:89)(cid:94)(cid:99)(cid:92)(cid:21)

environment.

(cid:153)(cid:21) (cid:72)(cid:97)(cid:100)(cid:108)(cid:94)(cid:99)(cid:92)(cid:21)(cid:86)(cid:104)(cid:104)(cid:90)(cid:105)(cid:21)(cid:92)(cid:103)(cid:100)(cid:108)(cid:105)(cid:93)(cid:21)(cid:86)(cid:88)(cid:103)(cid:100)(cid:104)(cid:104)(cid:21)(cid:98)(cid:86)(cid:95)(cid:100)(cid:103)(cid:21)(cid:86)(cid:104)(cid:104)(cid:90)(cid:105)(cid:21)

categories.

(cid:153)(cid:21) (cid:56)(cid:100)(cid:99)(cid:105)(cid:94)(cid:99)(cid:106)(cid:90)(cid:89)(cid:21)(cid:91)(cid:100)(cid:88)(cid:106)(cid:104)(cid:21)(cid:100)(cid:99)(cid:21)(cid:88)(cid:100)(cid:104)(cid:105)(cid:21)(cid:90)(cid:91)(cid:196)(cid:88)(cid:94)(cid:90)(cid:99)(cid:88)(cid:94)(cid:90)(cid:104)(cid:35)
(cid:153)(cid:21) (cid:55)(cid:106)(cid:94)(cid:97)(cid:89)(cid:94)(cid:99)(cid:92)(cid:21)(cid:100)(cid:99)(cid:21)(cid:88)(cid:97)(cid:94)(cid:90)(cid:99)(cid:105)(cid:21)(cid:104)(cid:90)(cid:103)(cid:107)(cid:94)(cid:88)(cid:90)(cid:21)(cid:100)(cid:87)(cid:95)(cid:90)(cid:88)(cid:105)(cid:94)(cid:107)(cid:90)(cid:104)(cid:35)

Ongoing uncertainty, which makes it 
extremely difﬁcult to forecast, but we expect 
slowing advances growth and levels of 
impairments to remain high.

The focus for the year will be on:
(cid:153)(cid:21) (cid:98)(cid:86)(cid:99)(cid:86)(cid:92)(cid:94)(cid:99)(cid:92)(cid:21)(cid:86)(cid:103)(cid:103)(cid:90)(cid:86)(cid:103)(cid:104)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:88)(cid:100)(cid:97)(cid:97)(cid:90)(cid:88)(cid:105)(cid:94)(cid:100)(cid:99)(cid:104)(cid:48)
(cid:153)(cid:21)
(cid:153)(cid:21)

(cid:103)(cid:94)(cid:104)(cid:96)(cid:34)(cid:87)(cid:86)(cid:104)(cid:90)(cid:89)(cid:21)(cid:101)(cid:103)(cid:94)(cid:88)(cid:94)(cid:99)(cid:92)(cid:48)(cid:21)(cid:86)(cid:99)(cid:89)
(cid:91)(cid:106)(cid:99)(cid:89)(cid:94)(cid:99)(cid:92)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:88)(cid:86)(cid:101)(cid:94)(cid:105)(cid:86)(cid:97)(cid:35)

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

27

 
 
 
 
 
 
 
 
 
 
NEDBANK
SEVEN-YEAR REVIEW – STATISTICS AND RATIOS

Share statistics
Earnings per share
Headline
Diluted headline
Basic
Diluted basic
Dividends/Distributions
Declared per share
Paid/Capitalised per share
Dividend/Distribution cover
Net asset value per share
Tangible net asset value per share
Number of shares
Gross shares in issue
Treasury shares
Net shares in issue
Weighted average number
Fully diluted weighted average

Share price and related statistics

Nedbank Group traded share price
Closing
High
Low
JSE Banks Index – closing
JSE Allshare Index – closing
Market capitalisation
Number of shares traded
Number of shares traded to weighted 
average number of shares
Value of shares traded
Value traded to market capitalisation
Price/earnings ratio
Price to book
Dividend yield
Earnings yield
Closing price/Tangible net asset value

Performance ratios

Net interest income to interest-earning 
assets
Non-interest revenue to total income
Credit loss ratio
Efﬁciency ratio
Including BEE transaction expense
Excluding BEE transaction expense
Expenses to average assets
Effective taxation rate
Return on total assets
Return on risk-weighted assets
Return on ordinary shareholders’ equity

cents
cents
cents
cents

cents
cents
times
cents
cents

m
m
m
m
m

cents
cents
cents

Rbn
m

%
Rm
%
historical
times
%
%
times

%
%
%

%
%
%
%
%
%
%

4-year 
CAGR* 
%

31,0
30,6
39,0
38,6

50,8

16,3
20,9

2008

2007

2006

2005

2004

*** 
2003

*** 
2002

 1 422 
 1 401 
 1 581 
 1 558 

 620 
 660 
 2,29 
 8 522 
 7 179 

 469 
 (59)
 410 
 405 
 412 

 1 485 
 1 429 
 1 511 
 1 454 

 660 
 594 
 2,25 
 7 513 
 6 207 

 459 
 (57)
 402 
 399 
 414 

 1 110 
 1 076 
 1 135 
 1 099 

 493 
 394 
 2,25 
 6 363 
 5 106 

 451 
 (56)
 395 
 400 
 412 

 797 
 791 
 966 
 958 

 483 
 482 
 423 
 422 

 19 
 19 
 (546)
 (545)

 979 
 979 
 346 
 343 

 290 
 181 
 2,75 
 5 597 
 4 351 

 120 
 79 
 4,00 
 4 654 
 3 361 

 240 
 515 
 0,10 
 4 240 
 2 247 

 515 
 515 
 1,90 
 6 300 
 4 012 

 443 
 (41)
 402 
 397 
 400 

 394 
 ** 
 394 
 361 
 362 

275
**
275
293
293

271
**
271
253
254

 9 550 
 13 975 
 7 498 
 30 566 
 21 509 
 44,8 
 305,4 

 13 600 
 15 810 
 12 325 
 35 876 
 28 958 
 62,5 
 232,2 

 13 350 
 13 950 
 9 790 
 36 121 
 24 915 
 60,2 
 191,7 

 10 000 
 10 280 
 6 700 
 29 234 
 18 097 
 44,3 
 168,1 

 7 780 
 7 999 
 5 240 
 22 975 
 12 657 
 30,7 
 245,8 

 6 203 
 11 850 
 5 640 
 14 153 
 10 387 
 17,1 
 216,0 

 11 110 
 15 400 
 9 500 
 12 035 
 9 277 
 30,1 
 143,8 

 75,4 
 31 237 
 69,8 
 7 
 1,1 
 6,5 
 14,9 
 1,3 

 58,2 
 31 954 
 51,1 
 9 
 1,8 
 4,9 
 10,9 
 2,2 

 48,0 
 22 219 
 36,9 
 12 
 2,1 
 3,7 
 8,3 
 2,6 

 42,3 
 13 709 
 31,0 
 13 
 1,8 
 2,9 
 8,0 
 2,3 

 68,1 
 15 345 
 50,0 
 16 
 1,7 
 1,5 
 6,2 
 2,3 

 73,7 
 18 003 
 105,5 
 326 
 1,5 
 3,9 
 0,3 
 2,8 

56,8 
 17 228 
57,2 
 11 
 1,8 
 4,6 
 8,8 
 2,8 

 3,66 
 39,9 
 1,17 

 51,1 
 50,4 
 2,60 
 21,6 
 1,09 
 1,62 
 17,7 

 3,94 
 42,5 
 0,62 

 54,9 
 54,2 
 2,95 
 26,3 
 1,30 
 1,76 
 21,4 

 3,94 
 46,3 
 0,52 

 58,2 
 57,5 
 3,06 
 27,8 
 1,14 
 1,60 
 18,6 

 3,55 
 49,8 
 0,49 

 64,8 
 62,5 
 3,24 
 23,4 
 0,93 
 1,40 
 15,5 

 3,18 
 53,1 
 0,55 

 71,8 
 71,8 
 3,41 
 24,2 
 0,54 
 0,82 
 11,0 

 3,04 
 49,0 
 1,02 

 80,2 
 80,2 
 3,24 
 54,8 
 0,02 
 0,03 
0,4 

 2,95 
 48,5 
 0,63 

 65,4 
 65,4 
 2,46 
 5,1 
 0,84 
 1,19 
14,9 

28

NEDBANK GROUP ANNUAL REPORT 2008

Assets and related ratios
Advances
Performing advances
Defaulted/Impaired loans and advances
Gross advances 
Impairment of advances
Net advances
Non-performing advances (NPAs) to 
gross advances
Impairment of advances to gross 
advances
Assets
Total assets on balance sheet
Assets under management
Total assets administered by the group

Capital and related ratios

Total equity attributable to equity 
holders of the parent
Regulatory capital ****
Tier 1
Total qualifying capital
Risk-weighted assets ****
Group capital adequacy ratio ****
Core Tier 1
Tier 1
Total

Employee statistics and ratios

Number of employees
Revenue per employee
Expenses per employee
Headline earnings per employee

4-year 
CAGR* 
% 

2008

2007

2006

2005

2004

*** 
2003

***  
2002

Rm
Rm
Rm
Rm
Rm

%

%

Rm
Rm
Rm

 9 909 

 17 301 

17,9 424 791  370 125  306 004  249 318  220 202  208 960  193 414 
 8 001 
18,0 442 092  380 034  313 747  253 622  227 692  217 404  201 415 
 (7 859)
 (6 553)
 (5 214)
434 233  373 956  308 563  248 408  221 008  210 096  194 862 

 (5 184)

 (6 684)

 (7 308)

 (6 078)

 7 743 

 7 490 

 4 304 

 8 444 

 3,9 

 2,6 

 2,5 

1,7

3,3    

3,9    

4,0     

 1,8 

 1,6 

 1,7 

2,1         2,9

3,4

3,3

14,7 567 023  488 856  424 912  352 258  327 840  313 113  324 767 
 60 369  102 090  124 343 
13,8 651 404  574 294  511 124  416 183  388 209  415 203  449 110 

 84 381 

 63 925 

 85 438 

 86 212 

Rm

17,5  34 913 

 30 193 

 25 116 

 22 490 

 18 337 

 11 647 

 17 046 

Rm
Rm
Rm

%
%
%

R’000
R’000
R’000

 14 517 
 21 151 
 33 458 
 43 610 
 22 985 
 29 099 
355 235  334 876  276 914  225 756  212 459  212 850  208 656 

 17 274 
 25 663 

 26 611 
 37 421 

 22 932 
 32 683 

 10 593 
 21 589 

 8,2 
 9,6 
 12,4 

 7,2 
 8,2 
 11,4 

 8,3 
 11,8 

 9,4 
 12,9 

 8,1 
 12,1 

 5,0 
 10,1 

 7,0 
 11,0 

 27 570 
801 
498 
209 

 26 522 
846 
509 
223 

 24 034  22 188 
713 
497 
143 

788 
495 
185 

 21 103 
665 
518 
83 

 24 
466 
427 
 2 

 25 
416 
289 
111 

Refer to page 355 for deﬁnitions of terms used.

*    Compound annual growth rate. 

**  Represents amounts less than R1 million.
***   Before conversion to International Financial Reporting Standards (IFRS).
****  Ratios and balances for 2008 and 2007 were calculated according to Basel II principles,  

while ratios and balances for prior years were calculated according to Basel I principles.

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29

 
 
 
 
 
 
 
 
 
 
NEDBANK GROUP LIMITED
SEVEN-YEAR REVIEW – INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 

4-year 
CAGR* 

Rm

% 2008

2007

2006

2005

2004

** 
2003

** 
2002

Interest and similar income

26,3 

 57 986 

 42 001 

 28 521 

 23 234 

 22 789 

 28 141 

 23 607 

Interest expense and similar charges

27,9 

 41 816 

 27 855 

 17 558 

 14 705 

 15 644 

 21 333 

 17 652 

Net interest income

22,7 

 16 170 

 14 146 

 10 963 

 8 529 

 7 145 

 6 808 

 5 955 

Impairments charge on loans and advances

41,1 

 4 822 

 2 164 

 1 483 

 1 189 

 1 217 

 2 063 

 1 067 

Income from lending activities

17,6 

 11 348 

 11 982 

 9 480 

 7 340 

 5 928 

 4 745 

 4 888 

Non-interest revenue

Operating income

Total operating expenses

    Operating expenses

7,9 

 10 729 

 10 446 

 9 468 

 8 469 

 8 099 

 6 537 

 5 606 

12,0 

 22 077 

 22 428 

 18 948 

 15 809 

 14 027 

 11 282 

 10 494 

5,9 

 13 741 

 13 489 

 11 886 

 11 017 

 10 939 

 10 344 

 7 559 

7,1  13 547 

 13 341 

 11 740 

 10 469 

 10 314 

 9 950 

 7 366 

    Merger and recovery programme expenses

 155 

 625 

 394 

 193 

    Black economic empowerment  transaction     

 194 

 148 

 146 

 393 

expenses

Indirect taxation

Proﬁt from operations before non-trading and 
capital items

(5,6)

 374 

 305 

 345 

 223 

 470 

 359 

 275 

32,1

 7 962 

 8 634 

 6 717 

 4 569 

 2 618 

 579 

 2 660 

Non-trading and capital items

 756 

 111 

 124 

 701 

 (254)

 (1 655)

 (1 601)

Proﬁt from operations

38,6

 8 718 

 8 745 

 6 841 

 5 270 

 2 364 

 (1 076)

 1 059 

Share of proﬁts of associates and joint ventures

1,2

 154 

 239 

 153 

 167 

 147 

 132 

 162 

Proﬁt before direct taxation

37,1

 8 872 

 8 984 

 6 994 

 5 437 

 2 511 

 (944)

 1 221 

Direct taxation

Proﬁt for the year

Proﬁt attributable to:

31,3

 1 868 

 2 343 

 1 933 

 1 140 

 629 

 390 

 143 

38,9

 7 004 

 6 641 

 5 061 

 4 297 

 1 882 

 (1 334)

 1 078 

Equityholders of the parent

43,1

 6 410 

 6 025 

 4 533 

 3 836 

 1 528 

 (1 600)

 875 

Minority interest – ordinary shareholders

 257 

 344 

 309 

 233 

 125 

 133 

 203 

Minority interest – preference shareholders

38,4

 337 

 272 

 219 

 228 

 229 

 133 

Headline earnings

34,9

 5 765 

 5 921 

 4 435 

 3 167 

 1 743 

 55 

 2 476 

 7 004 

 6 641 

 5 061 

 4 297 

 1 882 

 (1 334)

 1 078 

*    Compound annual growth rate. 
**    Before conversion to IFRS.

30

NEDBANK GROUP ANNUAL REPORT 2008

 
 
 
 
 
 
 
 
NEDBANK GROUP LIMITED
SEVEN-YEAR REVIEW – BALANCE SHEET

AT 31 DECEMBER 

Rm
Assets
Cash and cash equivalents
Other short-term securities
Derivative ﬁnancial instruments
Government and other securities
Loans and advances
Other assets
Clients’ indebtedness for acceptances
Current taxation receivable
Investment securities
Non-current assets held for sale
Investments in associate companies and joint 
ventures
Deferred taxation asset
Investment property
Property and equipment
Long-term employee beneﬁt assets
Computer software and capitalised development 
costs
Mandatory reserve deposits with central banks
Goodwill
Total assets

Equity and liabilities
Ordinary share capital
Ordinary share premium
Reserves
Total equity attributable to equityholders of the 
parent
Minority shareholders’ equity attributable to:
 – ordinary shareholders
 – preference shareholders
Total equity 
Derivative ﬁnancial instruments
Amounts owed to depositors
Provisions and other liabilities
Liabilities under acceptances
Current taxation liabilities
Other liabilities held for sale
Deferred taxation liabilities
Long-term employee beneﬁt liabilities
Investment contract liabilities
Long-term debt instruments
Total liabilities
Total equity and liabilities
Guarantees on behalf of clients

*    Compound annual growth rate. 
**    Before conversion to IFRS.

4-year 
CAGR* 

% 2008

2007

2006

2005

2004

** 
2003

** 
2002

 8 609 
 18 589 
 22 321 
 42 138 

 4 630 
 16 310 
 27 276 
 26 224 

 11 142 
 17 014 
 16 176 
 22 658 

 12 267 
 25 756 
 15 273 
 22 196 

 12 227 
 10 610 
 28 496 
 21 333 

 10 344 
 25 793 
 9 047 
 29 637 

16,8
 16 607 
 14 987 
3,3
 50 786 
(4,9)
12,6
 14 647 
18,4  434 233   373 956   308 563   248 408   221 008   210 096   194 862 
 5 684 
(3,8)
19,0
 1 120 
 421 
15,3
 13 320 
6,5
(32,4)

 11 601 
 1 291 
 134 
 6 875 
 385 

 12 468 
 2 577 
 161 
 7 155 
 490 

 7 101 
 1 509 
 196 
 6 561 
 48 

 6 084 
 3 024 
 346 
 8 455 
 10 

 9 313 
 2 251 
 59 
 8 318 
 31 

 7 463 
 835 
 256 
 8 940 

3,4
(36,9)
5,2
11,2
10,1

 1 167 
 200 
 213 
 4 327 
 1 741 

 978 
 25 
 171 
 3 929 
 1 393 

 907 
 120 
 158 
 3 377 
 1 444 

 657 
 680 
 163 
 3 095 
 1 225 

 1 019 
 1 258 
 174 
 2 828 
 1 183 

 1 627 
 3 074 

 1 504 
 1 788 

 2 684 

 2 854 

 1 607 
 10 065 
 3 894 

3,2
16,7
 4 457 
1,5
14,7  567 023   488 856   424 912   352 258   327 840   313 113   324 767 

 1 320 
 5 747 
 3 687 

 1 266 
 7 039 
 3 695 

 1 419 
 5 420 
 3 676 

 1 349 
 8 364 
 3 898 

 3 762 

 1 710 

 1 730 

1,0
3,5
30,2

 410 
 11 370 
 23 133 

 402 
 10 721 
 19 070 

 395 
 9 727 
 14 994 

 402 
 10 465 
 11 623 

 394 
 9 892 
 8 051 

 275 
 4 801 
 6 571 

 271 
 4 536 
 12 239 

17,5

 34 913 

 30 193 

 25 116 

 22 490 

 18 337 

 11 647 

 17 046 

 1 881 
 3 279 
 40 073 
 23 737 

 1 049 
 2 770 
 26 309 
 17 055 

 1 511 
 3 421 
 35 125 
 11 432 

 1 202 
 3 070 
 29 388 
 12 904 

 503 
29,0
4,3
 1 987 
16,5
 19 536 
 50 233 
(3,9)
16,8  466 890   384 541   324 685   261 311   250 747   238 404   228 209 
(7,0)
 8 317 
 1 120 
19,0
 183 
5,0

 680 
 2 770 
 21 787 
 27 781 

 652 
 2 802 
 15 101 
 28 206 

 13 153 
 1 509 
 193 

 12 454 
 835 
 144 

 34 225 
 2 251 
 337 

 32 357 
 1 291 
 466 

 9 829 
 3 024 
 235 

 2 731 

 1 616 
 1 157 
 5 846 
 12 326 

 2 100 
 1 231 
 5 843 
 14 061 

16,4
2,6
17,1
 7 891 
17,8
 7 568 
14,5  526 950   453 731   395 524   325 949   306 053   298 012   305 231 
14,7  567 023   488 856   424 912   352 258   327 840   313 113   324 767 
23,7
 12 403 

 1 143 
 1 109 
 3 109 
 7 309 

 959 
 1 071 
 4 166 
 7 273 

 5 152 
 10 086 

 20 579 

 15 250 

 11 064 

 10 770 

 12 403 

 25 226 

 1 710 

 37 847 
 2 577 
 434 
 417 
 1 649 
 1 215 
 5 278 
 8 518 

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31

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC
REVIEW

Dennis Dykes (49)
Chief Economist: Nedbank Group

24 years’ service • MCom(Econ) 
(London School of Economics, UK)

Gross domestic product (GDP) growth: Quarter-on-quarter % annualised change

8

6

4

2

0

-2

00

01

02

03

04

05

06

07

08

09

Total

Excluding agriculture

32

NEDBANK GROUP ANNUAL REPORT 2008

OVERVIEW

Economic conditions deteriorated markedly during the
second half of 2008, bringing to an abrupt end the period of
strong economic growth that had started in 2004. The
slowdown had already been apparent in the household sector
from late 2007, following the sharp rise in interest rates.
However, falling export prices and volumes late in the year
led to a broader slowdown in the domestic economy.

The key change in 2008 was the large-scale deterioration in
the global financial and economic climate. Globally, massive
losses stemming originally from the subprime crisis mounted
as the year progressed and United States house prices
continued to fall. The crisis escalated in September when the
United States government was forced to take control of the
largest mortgage financiers, Freddie Mac and Fannie Mae and
later American Insurance Group. However, the collapse of
Lehman brothers and the authorities’ failure to back any
rescue package resulted in the total seizure of the interbank
lending market. By October non-financial companies started
cancelling fixed-investment plans and cutting back
employment as credit dried up and the full extent of the
crisis was realised. Consumer confidence deteriorated rapidly
and retail spending contracted, further reinforcing the
contraction. The resulting decline in global industrial
production reduced demand for minerals and metals and
forced commodity prices lower. A second problem for many
developing countries was that once-abundant financing also
dried up, forcing adjustments.

South Africa was not immune to these unfavourable
developments. The country was fortunate to escape the
direct impact of the subprime crisis, as domestic banks were
not holders of so-called toxic assets. Local companies, banks
and government are also not that reliant on foreign currency
funding, meaning that the adjustment to the new hostile
environment was not that abrupt and that the monetary
authorities were able to relax policy without worrying too
much about the consequences for the currency. However, the
effect on export-orientated sectors was immediate and
dramatic. In the final quarter of last year manufacturing
output fell by a seasonally adjusted annualised 21,8% as the
effect of major industrialised countries slipping deeper into
recession hurt industries such as motor vehicles and iron and
steel. The overall economy therefore contracted by 1,8% in
the quarter, bringing GDP growth for the year down to 3,1%.
The contraction in the fourth quarter was the first since the
third quarter of 1998 and the largest since the fourth quarter
of 1992.

The difficulties in export markets added to the problems
already being experienced in the household sector as a result
of relatively high inflation, interest rates and debt. Interest
service costs rose to around 12% by mid-year following two

further hikes in official interest rates in April and June, taking
prime lending rate to a peak of 15,5%. However, the ratio
eased to below 11,5% by year-end, helped by a cut in the
prime lending rate to 15% in December and slower growth in
debt as credit demand weakened.

Growth was, however, supported by another good agricultural
season and the expansion of infrastructure ahead of the 
FIFA 2010 World Cup as well as the drive to build up
electricity and transport capacity. Private sector fixed-capital
formation was also strong for much of the year, but faltered
as the year progressed and the extent of the crisis became
more apparent.

Balance of payments trends, unsurprisingly, were
unfavourable. Although export performance was good in the
first half of the year, when commodity prices were still
soaring, later weakness curbed much of the gains. In contrast,
import demand remained strong, initially bolstered by high
energy prices and later by capital goods needs. A further
widening of the services deficit meant that the current
account deficit probably increased to about 8% of GDP in
2008 from 7,3% in 2007. Increased global risk aversion
limited portfolio inflows and foreign direct investment,
placing a stronger burden on short-term capital flows to
finance the shortfall.

Inflation rose significantly into double figures as soaring
energy cost and food prices were magnified by a weaker rand
against the dollar. In August consumer inflation peaked at
13,6% and producer inflation at 19,1%. However, the strong
fall in the oil price helped the former end the year at 10,3%
and the latter at 11%.

Credit conditions tightened as the year progressed. Growth in
credit extension to the private sector fell to 13,6% in
December 2008 from 21,5% a year earlier, with asset-based
credit (instalment sales, leasing and mortgage finance)
growing by 12% over the period, compared with 22,2% a
year earlier. Higher interest rates and some deterioration in
household finances pushed insolvencies up by 58,3% and
liquidations rose by 4,7%. However, these were off low bases
and the overall levels are still well below historic highs.

OUTLOOK

The year ahead is likely to be exceptionally tough given the
scale of the global crisis. South Africa will be helped by a
relatively healthy financial sector, an infrastructure
programme that is already in place, significant interest rate
relief and lower inflation. However, household spending will
be constrained by expected large employment losses in
export-facing sectors and private sector fixed-investment
spending will adjust to the changing environment. Much will
depend on how quickly external conditions stabilise.

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33

 
 
 
 
 
 
 
CHAIRMAN’S
STATEMENT

‘The effects of 
this meltdown will
be felt for some
time to come.
However, it is hoped
that business the 
world over will learn
valuable lessons and
once again focus on
sustainable business
practices,
underpinned by
ethical behaviour.’

Dr Reuel J Khoza
Chairman

34

NEDBANK GROUP ANNUAL REPORT 2008

GLOBAL ECONOMY 

The past year was one of unprecedented economic turmoil
globally. We witnessed the start of a widespread recession,
the implosion of the financial sector and the demise and
even nationalisation of some of the most established and
reputable global institutions. Few could have predicted the
magnitude of this catastrophe.

At the core of the problem was the deteriorating credit
environment that resulted in the subprime mortgage crisis
which surfaced in the United States during 2007.
Simplistically stated, credit was extended to people who
could not afford it, based on the ill-founded assumption that
property values would continue to appreciate.

These substandard mortgage loans were packaged as
collateralised instruments using complex derivative structures.
These loans defaulted in mounting volumes and resulted in
massive writedowns for many leading financial institutions.

Nedbank had no direct exposure to the foreign subprime
market or any of these related derivative instruments.

The effects of this meltdown will be felt for some time to
come. However, it is hoped that business the world over will
learn valuable lessons and once again focus on sustainable
business practices, underpinned by ethical behaviour, which is
in the interests of all stakeholders, not just the self-serving
interests of a few.

DOMESTIC ENVIRONMENT

South Africa’s resilience in the face of this worldwide crisis
can be attributed largely to the regulatory framework and
prudent fiscal policies that define our business practices and
banking system and ensure companies and individuals
operate within conservative bounds.

Three specific regulations warrant mention. The National
Credit Act, introduced in 2006 to curb lending and shield
consumers from reckless credit granting, has also sheltered
the industry from the poor credit practices applied in many
first-world countries. The implementation of the Basel ll risk
management philosophy and discipline in January 2008 and
the conservative capital adequacy requirements imposed by
the Banking Regulator have ensured that local banks
continued to manage risk prudently and remained well-
capitalised. Finally, our foreign exchange controls, which limit
the flow of funds offshore, have added further protection and
provided a measure of insulation for our economy. Further

details on the impact of the global crisis on South Africa and
Nedbank, and the reasons why our country was largely
sheltered from the turmoil, are contained in the Risk and
Capital Management Report on page 116.

Domestically we have not only seen our economy slowing to
the brink of a recession, but we have also seen momentous
changes on the political front.

It should be reassuring to the international community that
South Africa has firmly established institutions and forums
such as our constitution and the rule of law that underpin
our democracy. This ensures that people in leadership roles
are constrained in their actions and that politicians remain
accountable to their constituencies.

Recent developments on the political landscape have
introduced a healthy diversity and bode well for the future of
our young democracy, as well as our economy.

BANKING SECTOR

The South African banking environment is experiencing the
effects of a slowing domestic economic cycle brought on by
high interest rates and high levels of inflation, and the
secondary effects of the global financial crisis. Across the
banking sector we have seen rising bad-debt levels and lower
levels of recoveries in the retail environment as household
finances remain strained.

On the positive side our banks have experienced less
volatility than many of their international peers, while also
not facing the same liquidity challenges and levels of
writedowns. Throughout the year rand liquidity remained
stable, with the interbank lending market continuing to
operate efficiently.

Our banking system is highly advanced with sophisticated,
worldclass risk management techniques that have been more
conservatively applied than has often been the case offshore.

On the regulatory front the Competition Commission’s
inquiry into bank charges resulted in the release of its report
late in the year and it has called for comment on the
recommendations. It is anticipated that the final outcome of
the banking inquiry process will be finalised during 2009. We
remain supportive of the objectives of the inquiry and are
committed to an outcome that provides real benefit to
consumers and ensures the ongoing competitiveness and
stability of the financial services industry.

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35

 
 
 
 
 
 
 
CHAIRMAN’S STATEMENT ... CONTINUED

AN INVESTMENT CASE

FINANCIAL PERFORMANCE

While the price of banking shares has been under severe
pressure over the past two years owing to the myriad of global
and domestic challenges, we believe that Nedbank Group has
many aspects an investor should consider when making an
investment decision. Management has identified a range of
sector- and company-specific criteria on page 4 that an
investor could consider when making a decision on a share
investment. This highlights how Nedbank Group’s strategy and
key strengths will favourably position the business as the
prospects for the banking sector improve beyond 2010.

A key point to highlight is that we offer a broad spectrum of
banking products within southern Africa. Owing to the size of
the group and the high percentage of Africa’s potential
banking economic profit being generated from this region, we
still have opportunities to grow without having to adopt a
higher-risk strategy of acquiring or building businesses
further afield.

Nedbank Group posted a robust performance when one
considers the adverse trading environment over the past
year. The board commends management for its unwavering
focus on capital, liquidity and risk management during this
tough time. The group’s financial and operational
performance is covered in further detail in both the Chief
Executive’s Report on page 44 and the Chief Financial
Officer’s Report on page 48.

BOARD OF DIRECTORS

During the year we took leave of three of our non-executive
directors who had collectively served on the board for 
18 years and made a profound contribution to boardroom
debate at Nedbank Group. Independent non-executive
director Barry Davison resigned owing to increased business
commitments and fellow independent director Cedric Savage
retired, while Jim Sutcliffe stood down from the board

36

NEDBANK GROUP ANNUAL REPORT 2008

following his resignation as Chief Executive of Old Mutual plc.
We are grateful for the role they have played and wish them
well into the future.

We welcomed two new independent non-executive directors.
Nomavuso Patience Mnxasana joined the board in October
2008 and adds a wealth of financial knowledge garnered in
the accounting profession and the corporate world. Alan
Knott-Craig was appointed to the board from the start of
2009. Alan was one of the pioneers of the mobile telephone
technology industry in Africa and under his leadership
Vodacom became one of the most admired companies in the
country. Banking is becoming increasingly dependent on
technology innovation and we look forward to benefiting
from Alan’s expertise and strategic insight.

Following the creation of the position of senior independent
non-executive director, the post held by Chris Ball, the board
decided to do away with the position of vice-chairman of the
board. The Joint Vice-chairmen of the board, Michael Katz and
Lot Ndlovu, will formally step down from their positions at
the forthcoming annual general meeting and continue to
serve as directors, while also retaining their current board
committee responsibilities.

Both these directors have been reclassified from non-
executive to independent non-executive directors in terms of
the definitions of King ll and the JSE Listings Requirements. It
has now been well over three years since these directors
were executives of the group and Lot Ndlovu’s consultancy
contract has also now expired. The board has considered the
independence in character and judgement of these directors
when changing their status to independent directors.

The United Kingdom’s Combined Code on Corporate
Governance states that independence can be compromised if
a non-executive director has served on a board for more than
nine years. Four of our directors have exceeded this period. To
ensure sound governance the board has introduced a practice
that any directors serving for more than nine years will now
be required to be reelected every year.

Our board now comprises 16 directors, with nine
independent non-executive directors, five non-executive

directors and two executive directors. We are committed to
retaining a majority of independent directors, also
recognising that three of our directors, including myself, are
not considered independent owing to our shareholdings in
the group’s black economic empowerment scheme and that
another two directors represent Old Mutual plc on our board.

We plan to appoint further directors to the board in the
months ahead, with a combination of seasoned directors and
those new to the boardroom, bringing further diversity across
ethnicity, gender and business experience.

APPRECIATION

Nedbank Group is served by a high-calibre board and I thank
my fellow directors for their dedication in executing their
governance and oversight responsibilities.

We thank the Registrar of Banks for his guidance of the
sector through one of its most challenging years.

The group has delivered a creditable performance in trying
conditions, and on behalf of the board I extend my thanks to
Tom Boardman and the Group Executive Committee for their
leadership and guidance over the past year.

It has been pleasing to see the commitment and teamwork
of our staff in their efforts towards realising our vision of
making Nedbank Group ‘southern Africa’s most highly rated
and respected bank’.

Dr Reuel J Khoza
Chairman

Sandton
25 February 2009

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37

 
 
 
 
 
 
 
BOARD OF DIRECTORS
AT 1 JANUARY 2009

Dr Reuel Jethro Khoza (59)

Reuel Khoza is Chairman of Aka Capital, Corobrik (Pty) Limited, Nepad

Non-executive Chairman

(appointed August 2005)

Qualifications:

BA(Hons) Psychology (UNIN),

MA Marketing Management

(Lancaster, UK), EngD (Warwick, UK),

IPBM – IMD (Lausanne,

Switzerland), PMD (Harvard

Business School, USA), LLD (hc).

Nationality:

South African.

Business Foundation and Murray & Roberts Cementation (Pty) Limited.

He is a non-executive director of Nampak Limited, Protea Group

Limited and Old Mutual plc. He is President of the Institute of Directors

and in this capacity served on the King II and King III Committees on

corporate governance. He is a founding director of the Black

Management Forum and the former Chairman of Eskom Holdings.

Nedbank Group Board committees:

Nedbank Group Directors’ Affairs Committee (Chairman).

Nedbank Group ordinary shares:

1 031 beneficial indirect and 1 031 non-beneficial indirect.

Nedbank Limited preference shares:

0.

Christopher John Watkins Ball
(69)

Senior Independent Non-executive

Director

Chris Ball was previously a non-executive director of BoE Limited and

five of its subsidiary companies, including Century City Limited. He is

currently a non-executive director of Mutual & Federal Insurance

Company Limited and Imperial Bank Limited.

(appointed November 2002)

Nedbank Group Board committees:

Qualifications:

Dip Iuris, MA

Nationality:

South African.

Group Finance and Oversight Committee (Chairman), Group Audit

Committee (Chairman), Group Remuneration Committee, Group Credit

Committee, Nedbank Group Directors’ Affairs Committee, Nedbank

Group Risk and Capital Management Committee, Group Transformation

and Sustainability Committee and Board Strategic and Innovation

Management Committee.

Nedbank Group ordinary shares:

10 000 beneficial direct.

Nedbank Limited preference shares:

144 300 beneficial direct.

Thomas Andrew Boardman
(59)

Chief Executive

(appointed November 2002 as

director and December 2003 as

Chief Executive).

Qualifications:

BCom, CA (SA).

Nationality:

South African.

Tom Boardman is Chief Executive of Nedbank Group and Nedbank

Limited. He was formerly the Chief Executive and an executive director
of BoE. Past directorships include Boardmans and Sam Newman Limited

as well as BoE International Holdings Limited and Northwind
Investments (Pty) Limited. He is a non-executive director of Mutual &

Federal Insurance Company Limited and the Banking Association.

Nedbank Group Board committees:

Group Credit Committee (member for purposes of the approval of large
exposures only).

Nedbank Group ordinary shares:

98 936 beneficial direct and 60 167 beneficial indirect.

Nedbank Limited preference shares:

85 000 non-beneficial indirect.

38

NEDBANK GROUP ANNUAL REPORT 2008

Michael William Thomas Brown
(42)

Chief Financial Officer

(appointed June 2004).

Qualifications:

BCom, Dip Acc, CA (SA).

Nationality:

South African.

Mike Brown is the Chief Financial Officer of Nedbank Group and
Nedbank Limited. He was an executive director of BoE, and after the
merger between Nedbank Group, BoE, Nedcor Investment Bank and
Cape of Good Hope Bank he was appointed as Head of Property
Finance at Nedbank Limited.

Nedbank Group Board committees:
Group Credit Committee (member for purposes of the approval of large
exposures only).

Nedbank Group ordinary shares:
39 522 beneficial indirect and 49 940 beneficial direct.

Nedbank Limited preference shares:
0.

Thenjiwe Claudia Pamela
Chikane (43)

Independent Non-executive Director

(appointed November 2006).

Qualifications:

CA (SA).

Nationality:

South African.

Thenjiwe Chikane is a chartered accountant by profession practising as
a consultant. She was previously the Chief Executive Officer of 
MGO Consulting and the Head of the Gauteng Department of 
Finance and Economic Affairs. She was also a non-executive director of
the Development Bank of Southern Africa, Telkom, Datacentrix, PetroSA
and Chairperson of the State Information Technology Agency.

Nedbank Group Board committees:
Group Audit Committee, Board Strategic Innovation Management
Committee and Group Transformation and Sustainability Committee.

Nedbank Group ordinary shares:
86 912 beneficial indirect.

Nedbank Limited preference shares:
0.

Mustaq Ahmed Enus-Brey (54)

Non-executive Director

(appointed August 2005).

Qualifications:

BCompt(Hons), CA (SA).

Nationality:

South African.

Mustaq Enus-Brey is a director of Brimstone Investment Corporation
Limited and Oceana Group Limited.

Nedbank Group Board committees:
Nedbank Group Risk and Capital Management Committee (Chairman),
Nedbank Group Directors’ Affairs Committee, Group Credit Committee
and Group Finance and Oversight Committee.

Nedbank Group ordinary shares:
1 650 beneficial indirect and 546 non-beneficial indirect.

Nedbank Limited preference shares:
0.

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BOARD OF DIRECTORS AT 1 JANUARY 2009 ... CONTINUED

Prof Brian De Lacy Figaji (64)

Independent Non-executive Director

(appointed November 2002).

Brian Figaji is Chairman of I&J Limited and MARIB Holdings. He is the
former Principal and Vice-chancellor of the Peninsula Technikon. He is
also a director of PetroSA, Cape Lime (Pty) Limited, ASSET (Educational
Trust) (Trustee) and the Development Bank of Southern Africa.

Qualifications:

BSc(Eng), Dip Tertiary Edu Med,

DEd (Coventry, UK), DLitt (hc)

(California State, USA).

Nationality:

South African.

Nedbank Group Board committees:
Group Credit Committee, Group Remuneration Committee, Group
Transformation and Sustainability Committee.

Nedbank Group ordinary shares:
114 579 beneficial indirect and 2 296 non-beneficial indirect.

Nedbank Limited preference shares:
0.

Rosemary Harris (50)

Rosemary Harris is a chartered accountant by profession and joined 

Non-executive Director

(appointed December 2007).

Qualifications:

BA(Hons), ACA.

Nationality:

British.

Old Mutual in April 2007 after a 21-year career at Prudential plc.

During this time she held several senior positions, including Customer

Service Director and Risk Management Director, and was most recently

Chief Operating Officer for Prudential UK and Europe.

Nedbank Group Board committees:

Nedbank Group Risk and Capital Management Committee.

Nedbank Group ordinary shares:

0.

Nedbank Limited preference shares:

0.

Robert Michael Head (50)

Bob Head is a former non-executive director of Mutual & Federal

Non-executive Director

(appointed January 2005).

Qualifications:

MA (Oxon), ACA, ACII, FCIB.

Nationality:

British.

Insurance Company Limited and Old Mutual Life Assurance Company (SA)

Limited. He is now in charge of the Skandia businesses in Europe and
Latin America. He joined Old Mutual plc in February 2003. Prior to that

he was Chief Executive of smile.co.uk, Finance Director of egg.com
(both UK internet banks) and held various directorships.

Nedbank Group Board committees:

Nedbank Group Remuneration Committee, Nedbank Group Risk 

and Capital Management Committee and Group Finance and 
Oversight Committee.

Nedbank Group ordinary shares:

0.

Nedbank Limited preference shares:

0.

40

NEDBANK GROUP ANNUAL REPORT 2008

Prof Michael Mervyn Katz (64)*

Independent Non-executive 

Vice-chairman

(appointed November 1997 as

Director and November 2002 as

Non-executive Vice-chairman).

Qualifications:

BCom, LLB, LLM (Harvard Law

School, USA), LLD (hc).

Nationality:

South African.

Alan De Villiers Charles 
Knott-Craig (56)

Independent Non-executive Director

(appointed January 2009).

Qualifications:

BSc(Eng)(Elec), Master of Business

Leadership, Doctor of Business

Leadership (hc).

Nationality:

South African.

Michael Katz is non-executive Vice-chairman of Nedbank Group,
Nedbank Limited and Chairman of Edward Nathan Sonnenbergs Inc.
He was Chairman of the Commission of Inquiry into the Tax System of
South Africa and Tax Advisory Committee. He is an honorary professor of
Company Law at the University of the Witwatersrand. He is also a non-
executive director of Nampak Limited and a member of the Securities
Regulatory Panel.

Nedbank Group Board committees:
Group Credit Committee (Chairman), Nedbank Group Directors’ Affairs
Committee, Board Strategic Innovation Management Committee, Group
Transformation and Sustainability Committee and Group Finance and
Oversight Committee.

Nedbank Group ordinary shares:
4 826 beneficial indirect.

Nedbank Limited preference shares:
165 000 beneficial direct and 105 000 non-beneficial indirect.
* Reclassified as an independent non-executive director with effect from 20 February 2009.

Alan Knott-Craig served as Managing Director of cellphone network

operator Vodacom Limited from 1993 and was Chief Executive 

of Vodacom Group from 1996 until his retirement at the end of

September 2008. He is currently an independent non-executive director

of Murray and Roberts Holdings Limited and a member of the Board of

the Council for Scientific and Industrial Research.

Nedbank Group Board committees:

Board Strategic Innovation Management Committee 

(effective 20 February 2009)

Nedbank Group ordinary shares:

0.

Nedbank Limited preference shares:

0.

Johannes Bhekumuzi Magwaza
(66)

Independent Non-executive Director

(appointed October 1996).

JB Magwaza is Chairman of Mutual & Federal Insurance Company

Limited and South Ocean Holdings Limited. He is also a non-executive

director of Dorbyl Limited, Rainbow Chicken Limited, Kap International
Limited, Hulamin Limited and Tongaat Hulett Limited.

Qualifications:

BA, MA (Warwick, UK).

Nationality:

South African.

Nedbank Group Board committees:

Group Remuneration Committee (Chairman), Group Audit Committee,

Nedbank Group Directors’ Affairs Committee, Group Transformation and
Sustainability Committee.

Nedbank Group ordinary shares:

160 beneficial direct, 114 529 beneficial indirect and 
549 non-beneficial indirect.

Nedbank Limited preference shares:

0.

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BOARD OF DIRECTORS AT 1 JANUARY 2009 ... CONTINUED

Mafika Edmund Mkwanazi (55)

Mafika Mkwanazi was previously Group Chief Executive of Transnet

Independent Non-executive Director

(appointed April 1999).

Qualifications:

BSc(Maths), BSc(Eng)(Elec).

Nationality:

South African.

Limited. He is currently Chairman of Hulamin Limited. He is also a

director of Stefanutti and Stocks Holdings Limited, MSC Logistics

Limited, MSC Depots Limited and Saatchi and Saatchi.

Nedbank Group Board committees:

Board Strategic Innovation Management Committee (Chairman),

Nedbank Group Directors’ Affairs Committee, Group Finance and

Oversight Committee, Nedbank Group Risk and Capital Management

Committee.

Nedbank Group ordinary shares:

1 768 beneficial direct, 114 579 beneficial indirect and 

1 148 non-beneficial indirect.

Nedbank Limited preference shares:

0.

Nomavuso Patience Mnxasana
(52)

Independent Non-executive Director

(appointed October 2008).

Qualifications:

BCompt(Hons), CA (SA).

Nationality:

South African.

Nomavuso Mnxasana is a director at Imperial Bank Limited and 

Land Bank Limited. A chartered accountant by profession, she was a

senior partner and member of the executive committee of

SizweNtsaluba. She then served as group audit and risk executive at

Imperial Holdings Limited.

Nedbank Group Board committees:

Nedbank Group Audit Committee.

Nedbank Group ordinary shares:

0.

Nedbank Limited preference shares:

0.

42

NEDBANK GROUP ANNUAL REPORT 2008

Maduke Lot Ndlovu (57)*

Independent Non-executive 

Vice-chairman

(appointed May 1993 as Non-

executive Director, November 1994

as Executive Director and 

May 2004 as Non-executive 

Vice-chairman).

Qualifications:

Dip LR, MAP, EDP (North Western,

USA), AMP (Harvard Business

School, USA). Holds honorary

doctorate from Pretoria Technikon

(now Tshwane Institute of

Technology).

Nationality:

South African.

Lot Ndlovu is non-executive Vice-chairman of the Nedbank Group and
Nedbank Limited. Previously he was CEO of Peoples Bank. He is Chairman
of NestLife Assurance Corporation Limited, The South African National
Roads Agency Limited, Nakatomi Corporation Limited, Community Growth
Management Company Limited, Crystal View Consulting Limited,
St Anthony’s Education Centre, Jomba Investments Limited, True Class
Consortium and November Ten Charities. He is a director of Mutual &
Federal Insurance Company Limited, Nampak Limited, Cross Continents
Investments Limited, Saxon Road Nominees Limited, Sani Pass
Management Company Limited, Sani Pass Development Company Limited
and Sec-Itech Limited. He is also a member of the Independent
Commission for the Remuneration of Public Office Bearers, the Business
Trust on Job Creation and Hope in Victory (a care-giving organisation for
HIV patients). Lot is a doyen of the black empowerment movement in
South Africa. He was President of both the Black Management Forum
(BMF) and the Black Business Council. The Black Economic Empowerment
Commission was initiated by the BMF under his presidency.

Nedbank Group Board committees:
Group Credit Committee, Nedbank Group Risk and Capital Management
Committee, Nedbank Group Directors’ Affairs Committee, Chairman of
the Group Transformation and Sustainability Committee.

Nedbank Group ordinary shares:
246 769 beneficial indirect.

Nedbank Limited preference shares:
0.
* Reclassified as an independent non-executive director with effect from 20 February 2009.

Gloria Tomatoe Serobe (49)

Gloria Serobe is the Chief Executive of Wipcapital Limited and also

Non-executive Director

(appointed August 2005).

Qualifications:

BCom (Unitra), MBA (Rutgers,

USA).

Nationality:

South African.

founder and executive director of Wiphold Limited. She was previously

the Executive Director: Finance at Transnet. Gloria serves on several

boards, including that of JSE Limited and sits on the Financial Sector

Charter Council. She is also a non-executive director of Old Mutual Life

Assurance Company (SA) Limited.

Nedbank Group Board committees:

Nil.

Nedbank Group ordinary shares:

972 beneficial indirect and 2 458 non-beneficial indirect.

Nedbank Limited preference shares:

0.

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43

 
 
 
 
 
 
 
CHIEF EXECUTIVE’S
REPORT

‘In the current
volatile financial
environment the
group has increased
its focus on capital,
liquidity and risk
management. We are
taking a more
conservative stance
and are focusing on
the longer-term
profit potential of
the group, rather
than seeking to
maximise short-
term profitability.’

Tom Boardman
Chief Executive

44

NEDBANK GROUP ANNUAL REPORT 2008

A RESILIENT PERFORMANCE

While the South African banking sector has largely avoided
the impact of the global banking crisis, our industry has been
severely affected by the environment of high interest rates in
South Africa and the downturn in the global economic cycle.

Nedbank Group has performed well in the face of these
extreme challenges. Our corporate businesses have shown
their resilience while our retail business has felt the impact of
the consumer slowdown. At R5,8 billion the group’s headline
earnings are down only marginally on last year.

Over the past year we have seen the value of many global
banks destroyed, so it is pleasing for Nedbank Group to
report a 16% growth in our tangible net asset value.

We have understandably adopted a more conservative
approach to managing the business. We have focused on
increasing our capital levels, with the total capital adequacy
ratio increasing from 11,4% to 12,4%, well above the
regulatory minimum level of 9,75%. Our risk management
systems are proving effective in volatile markets, aided by
the successful implementation of Basel ll at the start of the
year. Liquidity levels remain sound.

The significant investment we have made over the past four
years in our people, our systems, our brand and our
distribution network to service our clients has stood us in
good stead and allowed us to weather the storm. Even as the
economy slowed over the past year we continued to invest
for growth. The progress made during the recovery
programme and over the recent past to build a sustainable
business continues to benefit the group.

Harsh lessons have been learnt from the global banking crisis.
Early warning signals will no doubt be heeded in future and
taken more seriously. There is also a realisation of the need
to respond in a coordinated and coherent manner in a time
of crisis, rather than businesses or even countries acting
individually.

We also hope that these lessons will be applied to other
pressing issues facing us, most notably the challenge of
climate change that is rapidly accelerating to the point that
it will become irreversible, with devastating consequences on
a global scale. Hopefully the current financial and economic
crisis will not see climate change relegated further down
corporate and national agendas.

As with the financial crisis, early warnings have been ignored
and countries continued to put national interests ahead of
the greater good of humankind.

National solutions will not resolve a global crisis.

VISION-LED AND VALUES-DRIVEN

In last year’s annual report I outlined how we have focused
on building an organisation that is vision-led and values-
driven, and on our commitment to using corporate culture as
a competitive advantage.

Values are a key component of corporate culture as it is
ultimately values that drive behaviour. Transformation
specialist Richard Barrett in his groundbreaking book
Liberating the Corporate Soul makes three key points based
on research in over 500 companies in 35 countries. They are:

• The most successful organisations on the planet are vision-

guided and values-driven.

• Organisational transformation begins with the personal
transformation of the leadership group. Organisations
don’t transform, people do.

• Values alignment helps build sustainable, long-lasting

organisations that can withstand shocks and transform
under conditions of prolonged duress.

The global financial and economic crisis has shown, amid a
host of other lessons, the consequences of losing the moral
compass. Long-term success, for countries as much as for
companies, needs a compelling vision and a solid foundation
built on principles and values that act as a centre of gravity.

It is extremely encouraging that over the last five years we
have achieved a significant shift in both the awareness and
alignment of values across the majority of our staff at
Nedbank. We have started building a cultural resilience that
will equip us to withstand the type of shocks to which banks
are being subjected as well as to remain sustainable under
the prolonged conditions of duress that we are now facing.

The continued investment in our staff is also reflected in the
results of our annual staff survey. The survey covers 
12 dimensions and, as it is completed by a high proportion of
our staff, provides clear insight into staff morale and
highlights issues that need to be addressed. In 2008 the
overall score improved to 75,1% from 71,5% in 2007 and

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45

 
 
 
 
 
 
 
CHIEF EXECUTIVE’S REPORT ... CONTINUED

59,6% when we introduced the survey in 2005. The
dimensions for which our staff give Nedbank the highest
ratings are ‘ethics’, ‘strategic direction’, ‘leadership’ and
‘communication’. The dimensions that reflect the greatest
positive change over the last four years are ‘change and
transformation’ and ‘organisational culture and values’.

We have included in this annual report a section on our view
of the causes of the current financial crisis as well as our
view on why the South African banking system has avoided
the worst of the fallout.

As part of our response to the crisis, we have reviewed the
group’s risk appetite limits, exposures and processes. We have
also reviewed remuneration structures, which have certainly
played a role in the crisis. Most of all we strive to ensure that
ethics permeate the corporate culture and that the bank is in
alignment with public opinion.

TRANSFORMATION

Transformation remains a strategic differentiator for the
group and our ability to accelerate the pace of
transformation is key to achieving our goal of becoming a
truly southern African group.

All our transformation initiatives are driven within a
framework we established called the ‘ 10 transformation
truths’. Key to our approach is that transformation initiatives
should seek to unify rather than divide and should be
underpinned by our corporate values. We are committed to
seeking solutions that will use all the skills of all our people.

We are ever mindful of Oliver Tambo’s injunction, ‘It is our
responsibility to break down barriers of division and create a
country where there will be neither whites nor blacks, just
South Africans free and united in diversity’.

We have always said that transformation is more than
compliance and numbers, but our performance against the
Financial Sector Charter (FSC) scorecard and Department of
Trade and Industry (dti) Codes of Good Practice targets over
the past year highlight the good progress we have made.

The bank submitted an audited score of 99,07 (2007: 97,50)
out of a possible 100 points to the FSC Council, while our
rating under the dti Codes has been verified as a level-three
black economic empowerment (BEE) contributor (2007: level
four).

While employment equity is only one aspect of transformation,
it is pleasing to note that the number of black staff, as a
percentage of the total staff complement, has increased to
65%, up from 51% in 2004. Within the management ranks,
black executives account for 60% of all management. Black
directors now make up 60% of our board.

GROWTH IN BUSINESS BANKING

Our Business Banking Division within Nedbank Corporate has
experienced strong growth momentum in recent years under
the leadership of Ingrid Johnson. In recognising the strategic
importance of this business and the major market segment it
serves, Business Banking has become a standalone business
cluster from the start of 2009. Nedbank Group’s client-facing
structures now comprise Nedbank Corporate, Nedbank
Business Banking, Nedbank Capital, Nedbank Retail and
Imperial Bank.

Business Banking is differentiated in the market through its
decentralised, regional structure and client-centric business
model, serving over 23 000 clients with annual turnovers of
up to R400 million. Since 2004 headline earnings have
increased at a compound annual growth rate of 32% per
annum. With headline earnings of R1 369 billion, Business

46

NEDBANK GROUP ANNUAL REPORT 2008

Banking was the largest single contributor to group profits in
2008. The return on capital has grown from 16% to 31%,
while the efficiency ratio has improved from 64% to 47%
over the same period.

Business Banking is expected to remain an area of high
growth for the group.

STRENGTHENED LEADERSHIP

Over the past year we have not only strengthened the Group
Executive Committee (Group Exco), but also enhanced
transformation and succession planning. Following the
establishment of the Business Banking Division as a
standalone cluster, Ingrid Johnson was appointed to the
Group Exco. Mfundo Nkuhlu, the Managing Executive of
Corporate Banking, was appointed Deputy Managing
Executive of the Nedbank Corporate business cluster and also
joined the Group Exco. We also welcomed Fred Swanepoel to
the Group Exco as Chief Information Officer and Managing
Executive of Group Technology following the resignation of
Len de Villiers.

GROUP FOCUS

Our vision is to become southern Africa’s most highly rated
and respected bank. Sound progress has been made in our
strategy of providing a full-spectrum banking service by
driving our strong and highly competitive wholesale franchise
and continuing to build our retail presence as we aim to
become a bank for all southern Africans.

Late in the year the bank entered into a strategic alliance
with Ecobank, the Pan-African banking group that operates
mainly in West and Central Africa. The alliance will provide a
seamless experience to clients of Ecobank and Nedbank in 
30 countries through more than 1 000 branches across the
continent.

In the current volatile financial environment the group has
increased its focus on capital, liquidity and risk management.
We are taking a more conservative stance and focusing on
the longer-term profit potential of the group, rather than
seeking to maximise short-term profitability. Our areas of
focus in the year ahead will be:

• managing risk as an enabler by proactively managing

capital, liquidity, risk and credit;

•

•

enhancing productivity and efficiency, execution and
ongoing smart cost management; and

growing our share of economic profit and managing for
value.

The year 2009 will undoubtedly be very tough for the local
banking sector, but we currently anticipate improved
prospects for growth in the medium term. We are confident

that the bank is well-positioned for what lies ahead and our
people are committed to Make Things Happen. At the same
time we understand how difficult life is for many of our
clients. This includes the small-business sector, which is the
growth engine of our economy. By understanding our clients’
needs and maintaining close relationships we are trying
wherever possible to reach solutions together.

APPRECIATION

We are operating in an unprecedented time of global
financial crisis and economic downturn. It is at times like this
that our dependence on the integrity and ability of our
people become more apparent than ever. I would like to
thank all my colleagues on the Group Exco and all staff at
Nedbank for their loyalty, commitment and hard work. I am
privileged to work with one of the best teams with whom I
have been associated in my 35 years in South African
business.

I would like to thank all our clients for their ongoing support
of Nedbank and assure you of our commitment to
continually strive to improve our sevice levels.

Our Chairman, Reuel Khoza, leads the board with distinction,
and in closing I thank him for the supportive role he has
played in the group.

Tom Boardman
Chief Executive

Sandton 
25 February 2009

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47

 
 
 
 
 
 
 
CHIEF FINANCIAL OFFICER’S 
REPORT

‘2009 will be a very
tough year, with
margins coming
under pressure from
falling interest 
rates and
impairments
continuing to rise.
The environment 
remains volatile and
risks to assumptions
underpinning any
forecasts currently
appear increasingly
on the downside.
Our priority is to
maintain our solid
capital ratios and
strong liquidity
levels.’

Mike Brown
Chief Financial Officer

48

NEDBANK GROUP ANNUAL REPORT 2008

implementation of an enhanced financial-reporting
architecture, which has improved our target-setting processes,
capital management activities and external-reporting
capabilities. The focus on enhancing external reporting has
resulted in consistently improved reporting timelines and the
group reported audited preliminary results for the first time for
the 2008 financial year.

The Nedbank Group Annual Report was ranked fourth out of
the top 100 JSE-listed companies in Ernst & Young’s annual
Excellence in Corporate Reporting Awards in 2008. This
ranking is adjudicated by the accounting department at the
University of Cape Town in conjunction with Ernst & Young
and is an external endorsement of our ongoing commitment
to increasing disclosure and enhancing our levels of reporting
to the investment community.

The process of reducing the complexity of the group, following
the legacy mergers and business combinations, is nearing
completion. The significant reduction of legal entities has, in
itself, generated operating efficiencies and reduced risk.

INTRODUCTION

It is pleasing to report that in this challenging environment
for the banking sector Nedbank Group remained solidly
profitable, increased capital levels and achieved four of its
seven medium- to long-term financial targets, notably the
efficiency ratio, capital adequacy ratio, economic capital and
dividend cover levels.

The return on ordinary shareholders’ equity (ROE) target was
not achieved owing to the group reporting slightly lower
headline earnings – mainly as a result of increasing retail
impairment levels and lower private-equity earnings that
reduced the return on assets – together with higher capital
levels and lower leverage as capital adequacy ratios increased
during 2008. The credit loss ratio increased owing to the
credit stress being experienced in the domestic banking sector
and remained outside the target range of 55 to 85 basis
points. While this stress was primarily in the retail portfolios
as a result of affordability challenges from higher interest
rates, the rapid slowdown in the domestic economy is
increasingly affecting the wholesale portfolios off a low base.

After having invested significantly into a worldclass Basel II risk
and capital management environment, we embarked
on a programme to extract significant value for
the group from this investment, while ensuring
that we continue to improve the underlying data
that drives financial and non-financial information.
This initiative has further been supported by the

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49

 
 
 
 
 
 
 
CHIEF FINANCIAL OFFICER’S REPORT ... CONTINUED

RETURN ON EQUITY DRIVERS
for the year ended 31 December

Rm

2008

2007

Net interest income (NII)

16 170

14 146

NII/Average interest-earning banking assets

Impairment of loans and advances

(4 822)

(2 164)

Impairments/Average interest-earning banking assets

Non-interest revenue (NIR)

10 729

10 446

NIR/Average interest-earning banking assets

Income from normal operations

22 077

22 428 

Total operating expenses

(13 741)

(13 489)

Total expenses/Average interest-earning banking assets

Share of profits of associates and

joint ventures

154 

239

Associate income/Average interest-earning banking assets

Net profit before taxation

8 490 

9 178

Indirect taxation

(374)

(305)

Direct taxation

(1 757)

(2 336)

1 – effective taxation rate 

Net profit after taxation

6 359

6 537 

Minority interest

(594)

(616)

Income attributable to minorities

Headline earnings 

5 765 

5 921 

Headline earnings 

Daily average interest-earning

banking assets*

441 713 

358 824 

Interest-earning banking assets/Daily average total assets

Daily average total assets*

483 419 

399 049 

Interest-earning banking assets/Simple average total assets

Simple average total assets

527 940 

456 884 

Return on total assets

Simple average shareholders’ funds

32 553 

27 655 

Gearing

* Averages calculated on a 365/366-day basis.

Return on ordinary shareholders’ equity

50

NEDBANK GROUP ANNUAL REPORT 2008

2008

2007

3,66%

less

1,09%

5,00%

add

2,43%

less

3,11%

add

0,03%

3,94%

less

0,60%

add

2,91%

Impairments/NII

29,8%

Efficiency ratio

51,1%

6,25%

less

3,76%

add

0,07%

1,92%

multiply

0,75

multiply

0,91

1,31%

multiply

83,7%

=

1,09%

multiply

16,22

=

17,7%

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51

2,56%

multiply

0,71

multiply

0,91

Impairments/NII

15,2%

Efficiency ratio

54,9%

1,65%

multiply

78,5%

=

1,30%

multiply

16,52

=

21,4%

 
 
 
 
 
 
 
CHIEF FINANCIAL OFFICER’S REPORT ... CONTINUED

CHALLENGES FACING THE BANKING
SECTOR 

Before reviewing the group’s financial performance, it is useful
to outline the challenges faced by the local banking sector over
the past year (refer to the Economic review on page 32 for a
summary of the broader economic conditions prevailing in
South Africa in 2008 and the Risk and Capital Management
Report on pages 116 to 182 for an indepth analysis of the
causes of the international banking crisis as well as the reasons
we believe South African banks have to date been relatively
insulated, but not completely immune, from this).

•

•

•

•

•

Pressure on margins as the overall cost of longer-term
funding increased. Rand liquidity remained stable
throughout the year, with the interbank lending market
continuing to operate efficiently. Local banks have been
able to finance new assets in the normal course of
business.

Reduced capacity and increased cost of funding in the
domestic debt capital markets.

Rising non-performing loans and lower levels of
recoveries, especially in the retail environment as
household finances remained strained and asset prices
came under pressure. This trend intensified in the second
half of 2008 and has been increasingly affecting small
and medium-sized businesses, and will undoubtedly also
impact some larger corporates in the year ahead.

Sharply slower retail advances growth, partly offset by
reasonable wholesale-advances growth.

The implementation of the Basel II accord in January 2008.

RESPONSE TO ECONOMIC SLOWDOWN

In response to the turmoil in the global financial markets and
the slower domestic economy, Nedbank Group adopted a
more conservative approach and intensified its focus on the
following:

•

Increasing capital adequacy levels.

• Growing deposits and liquidity.

•

•

•

Proactive risk management.

Selectively growing assets in businesses that are well-
positioned to increase economic profit.

Continuing to manage for value in those businesses that
have lower economic profit profiles.

• Managing down positions in riskier lines of business.

FINANCIAL PERFORMANCE 

This review provides a detailed summary of the group’s
performance over the past year and should be read in
conjunction with the annual financial statements on 
pages 183 to 341.

Headline earnings decreased by 2,6% from R5 921 million to
R5 765 million. Basic earnings grew by 6,4% to R6 410 million
(2007: R6 025 million).

Diluted headline earnings per share (EPS) decreased by 2,0%
from 1 429 cents to 1 401 cents. Diluted EPS grew by 7,2%
from 1 454 cents to 1 558 cents, driven largely by the R622
million after-tax profit on the sale of Visa shares in the first
half of the year.

Cents
10 000

8 000

Net asset value and return on equity

18,9%

21,1%

18,6%

24,8%

21,4%

20,1%

17,7%

6 000

14,3%

15,5%

11,0%

4 000

2 000

0

4
5
6
4

1
2
7
3

7
9
5
5

0
8
6
4

3
6
3
6

7
2
4
5

3
1
5
7

3
4
5
6

2
2
5
8

1
7
5
7

004200
2004

20
2005
2005

20062
2006

2007
2007

2008
2008

4-year compound 
annual growth 
rate (CAGR)

NAV                                   16,3%

NAV per share

NAV excluding goodwill

NAV excluding goodwill     19.4%

ROE

ROE excluding goodwill

25%

20%

15%

10%

5%

0%

52

NEDBANK GROUP ANNUAL REPORT 2008

 
 
 
 
 
 
 
 
 
 
The group’s return on average ordinary shareholders’ equity,
excluding goodwill, decreased from 24,8% to 20,1%. ROE
dropped from 21,4% to 17,7% for the year.

(foreign deposits are 1,3% of total group deposits), the
group’s funding and liquidity levels have remained sound
with limited impact from the global financial crisis.

The tangible net asset value (NAV) per share grew strongly,
increasing 15,7% to 7 179 cents. The accompanying graph
highlights that, although ROE is declining owing to difficult
market conditions, the underlying net asset value of the
group has continued its steady upward trend, although at
slower growth rates.

Credit quality deteriorated throughout 2008, with Nedbank
Retail and Imperial Bank’s impairments worsening
significantly, while the wholesale-banking portfolios showed
a moderate deterioration in the second half of 2008. Overall
impairments have increased, although the impact on
earnings was partially offset by controlled cost growth. The
momentum built from disciplined cost management over the
past few years continued into 2008 and contributed towards
the efficiency ratio improving from 54,9% in 2007 (54,3%
excluding Bond Choice) to 51,1 % in 2008 and the ‘jaws’
ratio growing to 7,5% (2007: 6,9%).

The bank continued to see a steady inflow of client deposits,
resulting in retail deposits growing in line with retail
advances. Pressure on short-dated maturities has been
partially alleviated by market expectations of decreasing
interest rates and a strategy of increasing deposit duration,
particularly in the second half of the year. Given the group’s
domestic focus and small foreign-funding requirements

NII – margin analysis
% of daily average interest-earning banking assets

December 2007
Asset growth
Endowment movement

– Positive net endowment effect
– Increased cost of funding properties in possession
– Cost of reducing interest rate sensitivity (benefits in 2009/10)

Liability price movement

– Current and savings accounts
– Increased cost of funds

Asset price movement

– Personal loans (move to lower risk assets and National Credit Act caps)
– Secured products margin
– Other loans
– Structured deals

Cost of carrying additional liquidity buffers in government bonds
Other

December 2008

The segmental performance of the group’s operating units is
covered in the respective operational reviews from 
pages 64 to 93.

NII

NII grew 14,3% to R16 170 million (2007: R14 146 million)
on the back of growth in average interest-earning banking
assets of 23,2%.

The group’s net interest margin for the year under review
was 3,66%, down from 3,94% in 2007. The positive
endowment impact of interest rate increases on capital and
current and savings accounts was offset by the following:

•

•

•

•

Liability margin compression reflecting the higher cost of
term funding.

Asset margin compression from a changing asset mix. Asset
pricing continues to be a key focus for improving margins,
with higher margins being generated on new assets.

The cost of holding additional liquidity buffers deemed
prudent in the current environment.

Debits relating to the accounting for historic structured-
finance transactions, with related credits offset in
taxation.

%

3,94

0,06

0,13
(0,02)
(0,05)

0,02

0,20
(0,18)

(0,25)

(0,04)
(0,10)
(0,07)
(0,04)

(0,04)
(0,07)

3,66

Rm

14 146
3 268
278

587
(79)
(230)

79

894
(815)

(1 104)

(165)
(445)
(305)
(189)

(165)
(332)

16 170

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53

 
 
 
 
 
 
 
2008

2007

Average
balance

Margin
statement interest

Average
balance

Margin
statement interest

Assets

Received

CHIEF FINANCIAL OFFICER’S REPORT ... CONTINUED

Average banking balance sheet and related interest
at 31 December

Rm

AVERAGE PRIME RATE
Loans and advances and customers’
indebtedness for acceptances

– Home loans (including properties in 

possession)

– Commercial mortgages
– Lease and instalment debtors
– Credit cards
– Bills and acceptances*
– Overdrafts
– Term loans and other**
– Impairment of loans and advances

Government and other securities
Short-term funds and trading securities

Interest-earning banking assets
Net interdivisional assets – trading book
Revaluation of FVTPL-designated assets***
Derivative financial instruments
Insurance assets
Cash and banknotes
Other assets
Associates and investments
Property and equipment
Intangible assets
Mandatory reserve deposit with
central banks

%

15,1 

13,2 
13,6 
14,5 
17,9 
1,8 
14,3 
12,8 

10,3 
7,9 

13,1 

Assets

Received

17 798 
8 857 
8 301 
1 332 
67 
2 271 
14 592 

3 210 
1 558 

57 986 

134 703 
64 954 
57 122 
7 459 
3 666 
15 882 
113 769 
(6 881)
31 211 
19 828 

441 713 
5 436 
(588)
271 
6 118 
1 921 
6 288 
2 883 
4 122 
5 416 

9 839 

112 132 
51 900 
47 101 
6 502 
3 244 
13 416 
89 830 
(5 722)
20 455 
19 966 

358 824 
6 765 
(21)
282 
5 670 
1 662 
6 628 
3 063 
3 562 
4 861 

7 753 

%

13,1

11,4 
12,0 
13,0 
15,4 
3,1 
12,9 
11,8 

9,4 
7,4 

12 798 
6 230 
6 130 
1 003 
99 
1 727 
10 613 

1 926 
1 475 

42 001 

11,7 

Total assets

483 419 

57 986 

12,0 

399 049 

42 001 

10,5 

Deposit and loan accounts
Current and savings accounts
Negotiable certificates of deposit
Other interest-bearing liabilities****
Long-term debt instruments

Interest-bearing banking liabilities
Other liabilities
Revaluation of FVTPL-designated liabilities***
Derivative financial instruments
Investment contract liabilities
Ordinary shareholders’ equity
Minority shareholders’ equity

Liabilities

245 060 
57 981 
72 513 
41 784 
13 750 

431 088 
9 721 
(588)
815 
6 118 
31 165 
5 100 

Paid

25 941 
2 027 
8 413 
3 906 
1 529 

41 816 

%

10,6 
3,5 
11,6 
9,3 
11,1 

9,7 

Liabilities

197 326 
55 966 
54 729 
33 740 
10 244 

352 005 
9 313 
(21)
1 084 
5 669 
26 233 
4 766 

Paid

17 161 
1 708 
5 177 
2 746 
1 063 

27 855 

%

8,7 
3,1 
9,5 
8,1 
10,4 

7,9 

Total equity and liabilities

483 419 

41 816 

8,7 

399 049 

27 855 

7,0 

Interest margin on average 
interest-earning banking assets

441 713 

16 170 

3,66 

358 824 

14 146 

3,94 

Where possible, averages are calculated on daily balances.
* Includes clients’ indebtedness for acceptances.
** Includes term loans, preference shares, factoring debtors and other lending-related instruments and interest on derivatives.
*** FVTPL – fair value through profit or loss.
**** Includes foreign currency liabilities and liabilities under acceptances.

54

NEDBANK GROUP ANNUAL REPORT 2008

Impairments charge on loans and advances

The credit loss ratio increased from 0,62% in 2007 (1,02%

when reported for the nine months to September 2008) to

1,17% for the full year. The growth in advances and the

increase in the credit loss ratio are reflected in a 122,8%

increase in the impairments charge from R2 164 million to 

in the Nedbank Retail Home Loan and Vehicle and Asset

Finance Divisions. Wholesale-banking credit loss ratios remain

below expected through-the-cycle levels, although the credit

loss ratio in Business Banking increased as expected. The credit

quality in the Corporate and Investment Banking books remains

good, but is expected to be impacted by worsening credit

quality in the year ahead, resulting in increased credit loss ratios

R4 822 million. Retail credit loss ratios have deteriorated since

on these books. Notwithstanding seasonal effects, the

June 2008 and remain above expected through-the-cycle levels,

unsecured retail portfolio reflected encouraging signs of

largely as a result of continuing increases in defaulted advances

improvement in the latter part of 2008.

Impairment charge

Rm – year ended

Impairment charge
As % of NII (%)
Credit loss ratio (%)

– Nedbank Capital
– Nedbank Corporate
– Nedbank Retail
– Imperial Bank

% of average
advances

13,7
41,6
35,0
9,7

2008

4 822
29,8
1,17

0,06
0,27
2,47
1,71

2007

2 164
15,3
0,62

0,05
0,11
1,26
1,28

Defaulted advances increased by 74,6% from R9 909 million
to R17 301 million and total impairment provisions increased
by 29,3% from R6 078 million to R7 859 million.

NIR

NIR, excluding Bond Choice’s commission and sundry income
from the 2007 base, grew by 8,7% on a like-for-like basis.
Total NIR (including Bond Choice in the 2007 base) increased
by 2,7% to R10 729 million (2007: R10 446 million).

Commission and fee income grew by 13,8% on a like-for-like
basis (5,1% including Bond Choice), mainly from volume
growth and transactional price increases. Cheque processing
fees continue to decrease with the NetBank electronic
banking system now implemented for all Business Banking
clients and a process of migration initiated for Corporate
Banking clients. Cash handling fees and transactional banking
volumes grew strongly due to the growth in client numbers,
reflecting the success of Nedbank’s strategy to increase
delivery channels, improve client service and strengthen
brand positioning. The sale of Bond Choice reduced
commission and fee income by R578 million.

Trading income increased by 16,4% from R1 334 million in
2007 to R1 553 million in 2008, reflecting good trading
activity in the foreign exchange and global market

businesses, although equity and debt trading both had a
disappointing year. Adjusting for the loss in the first six
months of 2007 in respect of the Macquarie business
alliance, trading income would be at similar levels year-on-
year.

The sharp fall in equity markets resulted in historic unrealised
gains in mark-to-market private-equity positions reducing. In
spite of these challenging markets the group managed to
record a positive NIR of R303 million from its private-equity
portfolios on the back of revaluations, realisations and
dividend income.

Fair-value adjustments included an amount of R207 million
from the widening of credit spreads on the hedged portfolios
of our subordinated debt and related interest rate swaps. This
is not high-quality income and will reverse over the life of
the underlying hedges, and has not been attributed to
capital.

Nedbank Retail’s Bancassurance and Wealth Division
performed well, considering the dramatic fall in equity
markets, with headline earnings – mainly derived from NIR –
up 28,2% to R441 million for the year. In particular both BoE
Private Clients and the short-term insurance businesses of
Nedgroup Insurance Company and Nedgroup Insurance
Brokers recorded strong volume and earnings growth.

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55

 
 
 
 
 
 
 
CHIEF FINANCIAL OFFICER’S REPORT ... CONTINUED

2007
excl Bond
Choice

6 950
1 334
915

Bond
Choice

578

608
307

(24)

47
(71)

29
80
51
533

271
262

2008

7 911
1 553
303

127
176

291

207
84

76
69
51
475

226
249

2007

7 528
1 334
915

608
307

(24)

47
(71)

29
80
51
533

271
262

>100
(13,8)

(10,9)

(16,6)
(5,0)

8,7

10 729

9 868

578

10 446

• Marketing costs decreased by 1,1% and include the
group’s successful investment in soccer through the
sponsorship of the Nedbank Cup to increase Nedbank
brand awareness.

•

Information technology costs grew by 10,0%, largely
attributable to investment in systems development for
business-, compliance- and risk-related projects as well as
higher ATM network costs.

• Other expenses include the share-based payments charge
in respect of the group’s black economic empowerment
(BEE) transaction, which increased from R147 million to
R181 million.

•

Cooperation with other Old Mutual Group companies
continues to yield benefits.

Non-interest revenue

Rm – year ended

Commission and fees
Trading income
Private-equity income

% change

13,8
16,4
(66,9)

– Nedbank Capital private equity
– Nedbank Corporate property private equity

Fair-value adjustment on bonds/swap

>100

– Credit spread
– Basis

Other fair-value adjustments
Other investment income
Rental income
Sundry income

– Non-banking subsidiaries
– Other

Total NIR

Expenses

Nedbank Group continues to invest in its franchise while
maintaining a disciplined approach to expenses. Despite high
inflation and the increased distribution footprint, expenses
continued to be tightly controlled, increasing by 1,9% to 
R13 741 million (2007: R13 489 million). On a like-for-like
basis, excluding Bond Choice, expenses increased by 5,4%.

•

Staff expenses declined by 0,6%, notwithstanding a 4,0%
increase in staff numbers. Key reasons for this decline
were the sale of Bond Choice, lower bonus provisions and
an adjustment of R313 million to account for the growth
in the Nedgroup Pension Fund asset and a change in the
pension fund rules in 2007 in terms of surplus
apportionment.

56

NEDBANK GROUP ANNUAL REPORT 2008

Expenses

Rm – year ended

% change

Dec 2008

Dec 2007
excl Bond
Choice

7 034
1 666
544
1 057
863
1 150
569

12 883
148

13 031

Bond
Choice

Dec 2007

45
7
15
11
24
348
8

458
–

458

7 079
1 673
558
1 068
887
1 498
578

13 341
148

13 489

0,1
10,5
16,9
6,1
1,6
15,3
23,9

5,2
31,1

5,4

7 040
1 841
636
1 122
877
1 326
705

13 547
194

13 741

Staff costs
Computer processing
Communication and travel
Accommodation
Marketing and public relations
Fees and insurance
Other

Operating expenses
BEE

Total expenses

Associate income

Associate income decreased from R239 million in 2007 to
R154 million. This was primarily as a result of Nedbank
Group’s R65 million share of the profit on the sale of 
JSE Limited shares by BoE Private Clients in the prior year as
well as the sale of the group’s interests in Whirlprops and
Kimberley Clark during 2007.

Taxation

The taxation charge (excluding taxation on non-trading and
capital items) decreased by 24,8% from R2 336 million in
2007 to R1 757 million. The effective tax rate decreased from
26,3% in 2007 to 21,6% due largely to the following:

•

•

A reduction in the corporate taxation rate in South Africa
from 29% to 28%.

Accounting for a change in tax legislation impacting
investments held in the private-equity portfolios. The
proceeds from disposal of qualifying investments held for
longer than three years are now defined as capital in nature
and the group now accounts for taxation on revaluations of

such investments at 14%. In 2008 the taxation charge was
reduced by an amount of R153 million (1,9% of the
effective tax rate), reflecting the impact of this change in
legislation on cumulative revaluations of qualifying
investments held at 31 December 2007.

Accounting for historical structured-finance transactions,
which reduced the effective taxation rate by 1,8% (the
other side of this entry reduced margin with no overall
effect on earnings).

An increase in dividend income due largely to higher
yields from preference share investments linked to prime
and higher levels of investment in preference shares
issued by clients.

•

•

Non-trading and capital items

Income after taxation from non-trading and capital items
increased from R104 million in 2007 to R645 million for the
year. The main contributions were the R622 million after-tax
profit on the sale of Visa shares and the R15 million profit on
the sale of 33,5% in Bond Choice.

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57

 
 
 
 
 
 
 
CHIEF FINANCIAL OFFICER’S REPORT ... CONTINUED

BALANCE SHEET

Capital

Nedbank Group has strengthened capital ratios significantly,
with a Tier 1 capital adequacy ratio of 9,6% 
(December 2007: 8,2% pro forma Basel II) and a total capital
adequacy ratio of 12,4% (December 2007: 11,4% pro forma
Basel II). These ratios are now above the group’s historic
target ranges. The core Tier 1 capital adequacy ratio was
8,2% (December 2007: 7,2% pro forma Basel II). The group
currently holds a surplus of R9,6 billion against its calculated
economic capital requirements, calibrated to an A- debt
rating (including a 10% buffer), and a surplus of R9,5 billion
against its regulatory capital adequacy requirements.

Capital adequacy ratios include unappropriated profit at
year-end.

Capital adequacy ratios increased due to the issue of the first
hybrid Tier 1 capital instruments in South Africa amounting
to R1,75 billion, the profits made on the disposal of Visa
shares, the retention of earnings and a strong focus on the
optimisation of risk-weighted assets, enabled by enhancing
data quality and much more selective asset growth using the
group’s economic profit-based ‘managing for value’
philosophy. This resulted in risk-weighted asset growth of 6%
being below overall balance sheet growth of 16%.

The group’s leverage ratio (total assets to ordinary
shareholders’ equity) at 16,2 times is also conservative by
international standards and in line with the local peer group.

In response to the global financial crisis the group increased
its levels of surplus capital, extended its target regulatory
capital ranges and introduced a target capital adequacy range
for core Tier 1 capital. In the current environment the group’s
objective is to be at or at about the top end of these new
targets in the medium term.

Core Tier 1 ratio
Tier 1 ratio

Total capital ratio

2008 ratio

Revised range 

Previous range Regulatory minimum

8,2%
9,6%

7,5% to 9,0%
8,5% to 10,0%

N/a
8,0% to 9,0%

12,4%

11,5% to 13,0%

11,0% to 12,0%

5,25%
7,00%

9,75%

Further detail on the group’s capital management is included
in the Risk and Capital Management Report on pages 116 to
182.

Total assets

Total assets increased by 16,0% to R567 billion 
(2007: R489 billion). Growth in average interest-earning
banking assets slowed to 23,2% (2007 growth: 29,0%).

Advances

Advances increased by 16,1%, reflecting ongoing growth in
Nedbank Corporate but slower growth from Nedbank Retail
and a drop in advances in Nedbank Capital. Nedbank
Capital’s client loan book grew strongly, but this growth was
more than offset by a reduction in advances in the trading
portfolio. Imperial Bank showed strong growth through most
of the year, specifically in motor vehicle finance. Details of
advances growth by division are as follows:

Rm

Nedbank Corporate
Nedbank Capital
Nedbank Retail
Imperial Bank
Other

Total

2008

2007

Increase (%)

191 543
47 686
150 107
44 734
163

153 718
51 233
133 492
35 320
193

434 233

373 956

24,6
(6,9)
12,4
26,7
(15,5)

16,1

58

NEDBANK GROUP ANNUAL REPORT 2008

2007

Elim-
inations

(1 662)
(311)
(702)

BALANCE SHEET – BANKING/TRADING CATEGORISATION
at 31 December

Rm

Banking

Trading

2008

Elim-
inations

Total

Banking

Trading

ASSETS
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
Customers’ indebtedness for 
acceptances
Current taxation receivable
Investment securities
Non-current assets held for sale
Investments in associate companies 
and joint ventures
Deferred taxation asset
Property and equipment
Long-term employee benefit assets
Mandatory reserve deposits with 
central banks
Intangible assets
Interdivisional assets

8 598 
11 867 
363 
40 977 
423 822 
4 826 

11 
14 549 
23 650 
4 603 
10 411 
1 258 

(7 827)
(1 692)
(3 442)

8 609 
18 589 
22 321 
42 138 
434 233 
6 084 

10 712 
11 509 
166 
24 646 
347 979 
5 167 

(368)
15 946 
9 192 
5 693 
25 977 
4 146 

288 

153 
14 

3 024 
346 
8 167 
10 

1 167 
47 
4 526 
1 741 

10 065 
5 501 

5 596 

(5 596)

3 024 
346 
8 455 
10 

1 167 
200 
4 540 
1 741 

10 065 
5 501 
– 

2 251 
59 
7 926 
31 

978 
44 
4 085 
1 393 

8 364 
5 246 
1 044 

392 

(19)
15 

1 

(1 044)

Total

10 344 
25 793 
9 047 
29 637 
373 956 
9 313 

2 251 
59 
8 318 
31 

978 
25 
4 100 
1 393 

8 364 
5 247 
– 

Total assets

525 047 

60 533 

(18 557) 567 023 

431 600 

60 975 

(3 719) 488 856 

EQUITY AND LIABILITIES
Total equity attributable to equity- 
holders of the parent
Minority shareholders’ equity 
attributable to:
– ordinary shareholders
– preference shareholders

Total equity
Derivative financial instruments
Amounts owed to depositors
Provisional and other liabilities
Liabilities under acceptances
Current taxation liabilities
Deferred taxation liabilities
Long-term employee benefit liabilities
Investment contract liabilities
Long-term debt instruments
Interdivisional liabilities

33 015 

1 898 

34 913 

27 654 

2 539 

30 193 

1 898 
23 469 
27 430 
7 669 

9 
58 

1 881 
3 279 

38 175 
1 960 
447 287 
5 602 
3 024 
226 
2 042 
1 231 
5 843 
14 061 
5 596 

1 881 
3 279 

40 073 
– 
(1 692)
23 737 
(7 827) 466 890 
9 829 
(3 442)
3 024 
235 
2 100 
1 231 
5 843 
14 061 
– 

(5 596)

1 511 
3 421 

32 586 
804 
368 491 
6 175 
2 251 
345 
1 619 
1 157 
5 846 
12 326 

2 539 
10 939 
17 712 
28 752 

(8)
(3)

1 044 

1 511 
3 421 

(702)

– 
(311)

35 125 
11 432 
(1 662) 384 541 
34 225 
2 251 
337 
1 616 
1 157 
5 846 
12 326 
– 

(1 044)

Total liabilities

486 872 

58 635 

(18 557) 526 950 

399 014 

58 436 

(3 719) 453 731 

Total equity and liabilities

525 047 

60 533 

(18 557) 567 023 

431 600 

60 975 

(3 719) 488 856 

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59

 
 
 
 
 
 
 
CHIEF FINANCIAL OFFICER’S REPORT ... CONTINUED

Deposits

Overall deposits increased by 21,4% from R385 billion to
R467 billion at December 2008, with higher interest rates
increasing demand for savings and investment products.

Despite strong growth in retail funding, deposit growth was
still largely concentrated in the wholesale market.
Management has remained focused on optimising the
funding mix and profile of the group through utilising
alternate funding sources, concentrating especially on the
retail and business banking deposit bases, while pricing
competitively for term deposits.

Nedbank’s liquidity remains sound. The impact of the global
financial crisis on South African markets has, to date, been
largely limited to an increased cost of international funding
as a result of the reduction in international liquidity. This
decreased the bank’s ability to access such funding and has
led to an increase in the cost of – and decrease in appetite
for – capital market debt. Given Nedbank’s domestic focus,
international funding has traditionally not been a large
portion of the group’s funding base, while the increase in the
pricing of capital market debt has increased the cost of
rolling over conduit paper and new subordinated-debt issues,
with volumes issued in this market also being lower.

During 2008 Nedbank successfully issued hybrid debt, raising
R1,75 billion. In addition, the following programmes were
undertaken to diversify the funding base, raise further foreign
funding and lengthen the bank’s existing funding profile:

NIII

Impairments

Financial Drivers – 2009

• Advances growth upper 

single digits

• Margin compression around 

10 to 15 basis points

• Wholesale up but within 
through-the-cycle levels 

• Retail worsen from 2008 
•
(as economy worsens)

• Overall to remain below 1,30%

NIR

• Mid single digit growth for year

Expenses

• Growth to be held in upper 

single digits 

Capital and 
liquidity

• Targeting to improve capital 

adequacy ratios

• Ongoing focus on funding 
•

& liquidity

•

•

Issuing of foreign syndicated club loans of $165 million
and e165 million.

Registering of a $2 billion European medium-term note
(EMTN) programme.

• Obtaining a $100 million credit line from African

Development Bank.

•

Focusing on the retail deposit base through competitive
products and pricing.

DIVIDEND 

A final dividend of 310 cents per share was declared, in line
with the interim dividend, bringing the total dividend to 
620 cents per share (2007: 660 cents). This reduction of 6,1%
reflects the reduced headline earnings per share level over the
past year and the tougher conditions expected in 2009. The
dividend cover at 2,29 times remains within the target range of
2,25 to 2,75 times headline EPS. Shareholders have again been
offered a scrip dividend alternative to enable the group 
to further bolster capital levels.

OUTLOOK AND PROSPECTS

The domestic economy is expected to continue slowing in
2009, with gross domestic product (GDP) growth currently
forecast by the group at 0,4%. The global financial crisis and
resultant recessionary conditions will place more pressure on an
already slowing domestic economy. Weaker international trade,
lower commodity prices and continued volatility on major
financial markets are expected to restrict corporate activity.
Consumer finances are likely to remain strained as a result of
continued pressure on disposable income, falling asset prices,
increasing unemployment and the weaker rand. Lower
economic activity is also placing increasing strain on corporates.

Further interest rate cuts are anticipated during the course of
2009. The benefits of these would be expected to impact
positively on the South African banking environment only in
12 to 18 months’ time. In the short term decreases in
interest rates will have a negative endowment effect on
banking interest margins, while impairments are likely to
continue to deteriorate. The reversal of the higher
impairment trend typically takes longer to be reflected in
earnings following reduced interest rates.

Nedbank Group’s performance in 2009 is currently expected
to reflect the following:

•

Advances growth in the upper single digits. Retail
advances growth is expected to continue slowing, with
reasonable growth in wholesale advances, albeit at a
slower rate than in 2008.

• Margin compression, on the 2008 margin, of around 
10 to 15 basis points. Improvements as the margin

60

NEDBANK GROUP ANNUAL REPORT 2008

benefits from higher asset pricing will be offset by the
endowment turning negative as interest rates decrease
and by continued market pressure on retail funding
volumes.

•

The group credit loss ratio is likely to increase, although
it is currently targeted to remain below 1,30%.This will
be a tough target in the current environment.

• NIR growth for the year in mid single digits, with

– modest transactional banking fee increases,

– a slowing of transactional volumes, and

– continuing market pressures, which will not be

conducive to private-equity gains.

Expense growth for the year in upper single digits.

A continued strengthening of capital adequacy ratios and
an ongoing focus on funding and liquidity.

Further enhancements of the business in line with the
‘manage for value’ strategy.

•

•

•

FINANCIAL TARGETS

In the light of progress made by the group and taking into
account the current economic environment and the group’s
interest rate expectations, the group has revised its medium- to
long-term financial targets and set short-term objectives for
the 2009 financial year. The economic environment remains
uncertain and this, together with heightened market volatility,
ongoing global uncertainty and the potential for an extended
global recession, increases forecast risk. This short-term outlook

for 2009 is management’s current best estimates for the year
ahead and assumes a reduction of 227 basis points in the
average prime rate.

Based on the below, the current outlook for headline earnings
in 2009 is approximately 10% lower than the headline earnings
for the 2008 financial year. The outlook for basic earnings and
diluted earnings per share is approximately 20% lower, as the
group does not anticipate a capital profit similar to the profit
on the sale of Visa shares in 2008.

Shareholders are advised that the outlook and targets have
not been reviewed or reported on by the group’s auditors.

ACKNOWLEDGEMENTS

In closing, I thank the investment community both locally
and internationally for their interest in Nedbank Group and
for sharing their valuable insights in our ongoing interactions.
I also extend my thanks to the members of the finance
teams across Nedbank for their commitment to producing
quality financial information and for continually striving to
enhance disclosure.

Mike Brown
Chief Financial Officer

Sandton
25 February 2009

2009 outlook

Medium- to long-term targets

ROE (excl goodwill)

Efficiency ratio

> 15,0%

< 53,0%

5% above monthly weighted average cost of ordinary 
shareholders’ equity

< 50,0%

Growth in diluted headline EPS

Approximately 10% down

At least CPIX + GDP growth + 5%

Impairment charge

Basel II core Tier 1 
capital adequacy ratio

Basel II Tier 1 capital 
adequacy ratio

Basel II total capital adequacy ratio

< 1,30% 

Between 0,55% and 0,85% of average advances

Towards the top end 
of the range

Towards the top end 
of the range

Towards the top end 
of the range

7,5% to 9,0%

8,5% to 10,0%

11,5% to 13,0%

Economic capital

A- (including 10% buffer)

Capitalised to 99,9% confidence interval on economic capital 
basis (target debt rating A- including 10% buffer)

Dividend cover policy

2,25 to 2,75 times

2,25 to 2,75 times

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SHAREHOLDERS’ ANALYSIS
FOR THE YEAR ENDED 31 DECEMBER

No of shareholdings

%

No of shares

Register date:
Authorised share capital:
Issued share capital:

24 December 2008
600 000 000 shares
468 939 397 shares

Shareholder spread

1 – 1 000 shares
1 001 – 10 000 shares
10 001 – 100 000 shares
100 001 – 1 000 000 shares 
1 000 001 shares and over

Total

Distribution of shareholders

Banks
Close corporations
Empowerment
Endowment funds
Individuals
Insurance companies
Investment companies
Medical schemes
Mutual funds
Nominees and trusts
Old Mutual Life Assurance Company (SA) Limited and associates
Other corporations
Private companies
Public companies
Retirement funds
Share trusts*
Treasury shares

Total

Public/Non-public shareholders

Non-public shareholders

Directors and associates of the company**
Old Mutual Life Assurance Company (South Africa) Limited and associates
Treasury shares
Nedbank/Nedbank Group pension funds
Nedbank Group Limited and associates (share trusts)*
Nedbank Group Limited and associates (mutual funds)
Nedbank Group BEE trusts – South Africa*
Nedbank Group BEE trusts – Namibia

12 685
2 421
562
147
37

15 852

148
114
33
73
12 467
57
67
14
310
1 892
44
115
245
25
244
2
2

15 852

104

12
44
2
3
2
17
13
11

80,02 
15,27 
3,55 
0,93 
0,23 

2 738 106
6 871 348
18 855 821
40 394 136
400 079 986

%

0,58 
1,47 
4,02 
8,61 
85,32 

100,00

468 939 397

100,00

0,93
0,72
0,21
0,46
78,65
0.36
0,42
0,09
1,96
11,93
0,28
0,73
1,55
0,16
1,53
0,01
0,01

52 122 153
223 112
45 418 292
382 797
8 117 165
10 379 862
7 664 556
210 144
25 569 374
3 211 665
252 690 746
372 233
954 945
276 963
43 315 390
3 082 771
14 947 229

11,12
0,05
9,69
0,08
1,73
2,21
1,63
0,04
5,45
0,68
53,89
0,08
0,20
0,06
9,24
0,66
3,19

100,00

468 939 397

100,00

0,66 

0,08 
0,28 
0,01 
0,02 
0,01 
0,11 
0,08 
0,07 

316 664 622

954 368
252 690 746
14 947 229
121 612
3 082 771
583 468
43 618 748
665 680

152 274 775

67,52

0,20 
53,89
3,19 
0,03 
0,66 
0,12 
9,30
0,14

32,47 

468 939 397

100,00 

Public shareholders

Total

15 748

15 852

99,34 

100,00 

* Excludes shares held by directors in share trusts (executive directors only) and Eyethu schemes. Refer to pages 204 and 205.
** Includes shares held by directors in share trusts (executive directors only) and Eyethu schemes.

62

NEDBANK GROUP ANNUAL REPORT 2008

Major shareholders/managers

Old Mutual Group

Old Mutual Life Assurance Company (SA) Limited and 
associates (SA)
Old Mutual Investment Group (SA)

Nedbank Group treasury shares (SA)

BEE trusts:

– Eyethu Scheme – Nedbank South Africa
– Omufima Scheme – Nedbank Namibia

Nedbank Group (2005) Share Option, Matched Share and 
Restricted Share Scheme
Nedbank Group Limited and associates (Capital Management)
NES Investments (Pty) Limited

Public Investment Corporation (SA)
Lazard Asset Management (US)
Sanlam Investment Management (SA)
RMB Asset Management (SA)
Barclays Global Investors (US)
Boston Company Asset Management (US)

Beneficial shareholders holding 5% or more

Old Mutual Life Assurance Company (SA) Limited and associates (SA)
Public Investment Corporation (SA)

Total

Geographical distribution of shareholders

Domestic

– South Africa
– Botswana
– Namibia
– Unclassified

Foreign

– United States of America
– United Kingdom and Ireland
– Europe
– Other countries

No of shares

Dec 2008
% holding

Dec 2007
% holding

254 616 529

54,30

53,20

252 690 746
1 925 783

59 231 657

41 190 909
665 680

2 427 839
14 715 049
232 180

23 562 600
14 702 051
13 770 167
9 440 374
5 448 456
5 235 837

No of shares

411 730 572

405 190 165
65 241
3 104 919
3 370 247

57 208 825

41 833 966
4 125 969
1 980 813
9 268 077

53,89
0,41

12,63

8,78
0,14

0,52
3,14
0,05

5,02
3,14
2,94
2,01
1,16
1,12

52,95
0,25

12,48

9,09
0,14

3,20
0,05

5,31
1,29
2,74
0,47
1,04
1,36

No of shares

252 690 746
30 433 723

283 124 469

Dec 2008
% holding

Dec 2007
% holding

87,80

86,41
0,01
0,66
0,72

12,20

8,92
0,88
0,42
1,98

89,55

88,37

0,40
0,78

10,45

7,09
0,82
1,51
1,03

468 939 397

100,00

100,00

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63

 
 
 
 
 
 
 
OPERATIONAL REVIEW:
NEDBANK CORPORATE

Graham Dempster (53)
Group Executive: Nedbank Corporate

28 years’ service • BCom, CTA, CA (SA), AMP (Harvard, USA)

Graham joined the group in 1980 in the Corporate Finance
Division of UAL Merchant Bank. He was appointed 
General Manager of the division in 1987 and Joint Head of the
Special Finance Division in 1989. In 1992 he was transferred to
Nedbank, initially in a general management role in respect of
strategy, and in 1998 was appointed Head of the International
Division. He assumed responsibility for the Corporate Banking
Division in 1999 and Nedbank Corporate late in 2003.

MANAGEMENT TEAM

Frank Berkeley (52)
Managing Executive: Property Finance
14 years’ service • BCom, BAcc, CA (SA)

Denys Denya (44)
Managing Executive: Nedbank Africa
11 years’ service • BAcc, CA (Zim), ACIS,
MBA

Adriaan du Plessis (49)
Executive Head: Transactional Banking
18 years’ service • BCom(Hons), (CTA),
CA (SA), HDip (Co Law), CAIB (SA)

Keith Hutchinson (50)
Executive Head: Risk Management
19 years’ service • BCom, BCompt(Hons)

Ingrid Johnson (42)
Managing Executive: Business Banking
15 years’ service • BCom, BAcc,
CA (SA), AMP (Harvard, USA)

Anton Redelinghuis (59)
Executive Head: Strategy and
Marketing
21 years’ service • MCom, CA (SA)

Priya Naidoo (36)
Executive Head: Finance
8 years’ service • BCom, BCom(Hons),
CA (SA)

Murray Stocks (42)
Executive Head: Shared Services and
Nedbank Investor Services
17 years’ service • BCom

Mfundo Nkuhlu (42)
Deputy Managing Executive: Nedbank
Corporate; Managing Executive:
Corporate Banking
5 years’ service • BA(Hons), Strategic
Management in Banking (Insead),
AMP (Harvard, USA)

Ashley Sutton-Pryce (55)
Executive Head: Human Resources and
Communications
35 years’ service • BA, Business Strategy
for HR Leaders (Insead)

64

NEDBANK GROUP ANNUAL REPORT 2008

OVERVIEW

Nedbank Corporate comprises the client-focused businesses
of Business Banking, Corporate Banking, Property Finance,
Nedbank Africa and the specialist businesses of Transactional
Banking and Shared Services. These businesses focus mainly
on providing lending, deposit-taking and transactional
banking execution services to the wholesale-banking client
base of Nedbank. From 1 January 2009 Business Banking,
which has been a business unit within Nedbank Corporate,
will commence operating as a separate business cluster with
a direct reporting line to the Group Chief Executive (CE).

The year 2008 was generally challenging for banks globally.
Notwithstanding the difficult economic environment,
Nedbank Corporate has been able to produce good results,
with all the banking businesses performing well. The property
investment business generated positive earnings in a difficult
climate, albeit down from the record levels of 2007 when the
market was buoyant.

STRATEGY

Nedbank Corporate's core strength is to provide a
personalised relationship-based banking service by
thoroughly understanding our clients' needs and delivering
banking solutions to wholesale banking clients through our
teams of highly qualified, experienced professionals, who are
dedicated to providing the highest-quality service to their
clients.

We seek to achieve our strategy by ensuring that we attract
the best-quality people in the market, develop a full suite of
banking products and services, and support this through
outstanding service delivery. In executing this strategy we
seek to be a significant market share player in each of our
market segments.

FOCUS AREAS

Nedbank Corporate adopts a consistent set of principles in
terms of efficient deployment of capital, risk propensity and
decisionmaking, pricing, marketing and rewards to enhance
its returns on economic capital employed. This approach is
based on the similarities of the market segments it operates
in – specifically the specialist relationship management
philosophy, service standards and discretionary credit
decisionmaking, which rely on indepth personalised
knowledge of our clients.

We continue to be committed to focusing on client
acquisition and retention through best-practice client
satisfaction, the highest service standards and innovative
solutions, and by reducing problem incidence and improving
problem resolution.

Our focus is on transforming the businesses in line with the
objective of being a truly South African bank in terms of
culture and employment equity in all respects, and
aspirational targets have been set in this regard. We also seek
to leverage our black economic empowerment (BEE)
financing strengths, striving to become the custodian of
empowerment initiatives in terms of BEE financing and
enterprise development, underpinned by the Nedbank Group
Eyethu Corporate BEE Scheme, which was implemented 
in 2005.

REVIEW OF THE YEAR

Nedbank Corporate has produced robust core banking
earnings growth with all the business units showing growth
in headline earnings. The property investment business
generated positive earnings in difficult market conditions,
albeit down from the record levels of 2007, which were
generated in a buoyant market.

Key to the performance of Nedbank Corporate is outstanding
leadership and management and an emphasis on personal
growth and team effectiveness, which have been focus areas
for the last three years. Progress is evidenced by a further
improvement in the overall staff morale as reflected by a
further 4% increase in the positive mean in the Nedbank
Employee Survey. The material increase in the alignment of
our staff corporate culture for the fourth consecutive year
highlights the positive shift in attitudes and perceptions of
our people, who are crucial to client service and ultimately
market growth.

As referred to earlier Business Banking became a separate
cluster with effect from 1 January 2009 and the Managing
Executive, Ingrid Johnson, now reports directly to 
Tom Boardman, the Group CE, and has been appointed to
the Group Executive Committee (Group Exco). This is an
acknowledgement of the leadership strengths of Ingrid and
her impeccable track record in building a high-quality,
sustainable, large business in an area of strategic importance
for the bank. In addition to his current responsibilities as
Managing Executive of Corporate Banking, Mfundo Nkuhlu
was appointed as Deputy Managing Executive of Nedbank
Corporate and joined the Group Exco on 1 January 2009. The
Nedbank Corporate Executive team is very proud of these
appointees and wishes them great success in their new roles,
and will continue to support them fully through their
specialist functional roles.

Nedbank Corporate's commitment to transformation is
demonstrated by it having exceeded all its employment
equity and BEE lending targets.

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65

 
 
 
 
 
 
 
NEDBANK CORPORATE ... CONTINUED

Nedbank Corporate is benefiting from the image and
positioning of the Nedbank brand and continues to
contribute to the strengthening of the brand through various
media campaigns.

The risk management function in Nedbank Corporate had an
outstanding year, managing risk in an exceptionally difficult
environment. The proactive hands-on approach enabled
Nedbank Corporate to achieve a credit loss ratio of 0,27%,
which is below the low end of the forecast through-the-cycle
impairment range.

Notwithstanding the economic slowdown, the wholesale-
lending activity provided the opportunity to grow wholesale
lending, assisted by the demand for financing capital
projects. We have been able to increase the number of
primary-banked transactional banking clients in line with our
stated strategy.

We continue to focus on building our public sector client
base and have contributed to the financing needs of our
public sector clients. A number of municipalities were added
to the list of existing public sector clients.

The migration of our Business Banking clients onto NetBank
Business, the new electronic banking platform, continued
with the vast majority of new clients now being able to
benefit from the enhanced functionality. NetBank Business
plays an important part in new-client acquisition and
improved client retention. The focus for 2009 will be on
providing the remaining functionality required for Corporate
Banking clients and migrating the corporate clients onto the
new platform.

Electronic banking volumes in the wholesale market continue
to grow strongly, whereas a further decline in revenue and
volumes from cheque processing occurred, in line with the
market experience, as processing switches to electronic and
card platforms.

Business Banking managed the growth level of average
advances carefully, positioning the business to focus on the
quality of the book.

Average advances in Corporate Banking grew strongly at
29%, with the annuity nature of the book strengthening by a
substantial shift from short-term advances. The strong
growth in net interest income (NII) is driven by both volume
growth and improved credit margins.

Non-interest revenue (NIR) grew strongly in line with the
strategy of focusing on increasing our primary-banker market
share to deepen our transactional banking cross-selling and
enhance returns on capital in Corporate Banking and Business
Banking.

Transactional Banking provided the drive for investment in

transactional banking products in line with the strategy to

enhance Nedbank's wholesale-banking product offering to

clients with the implementation of the first phase of the

letters-of-guarantee system and further enhancements to

the electronic banking platform.

Shared Services had another good year in delivering accurate

and efficient processing during volatile and uncertain global

banking conditions. Nedbank Investor Services received the

top rating as Crossborder and Domestic Custodian by Global

Custodian for the third year running and was rated the Best

Subcustodian Bank – Africa and South Africa by Global

Finance for the second consecutive year.

Nedbank Africa had a solid performance, building on the

investment in prior years in governance and risk frameworks,

information technology, employee skills and the streamlining

of operations.

Towards the end of the year Nedbank entered into a

strategic business cooperation agreement with Ecobank, the

largest Pan-African banking group, creating a network of

more than 1 000 branches in 30 countries in Africa. Ecobank

has the largest geographic banking coverage in Africa in terms

of number of countries. It operates in 25 countries, mainly in

west, central and east Africa (including Ghana, Nigeria and

Kenya).

The alliance will enable the two banks to extend their

coverage across Africa on a cooperative basis while managing

costs and risk effectively. Ecobank will retain its focus on

expansion into less mature, growing markets and will also

enhance its service offering in southern Africa. Nedbank will

continue focusing on establishing banking operations in the

Southern Africa Development Community and, together with

Ecobank, provide its clients with comprehensive banking

services in west, central and east Africa and grow its banking

services in these markets.

The strategic alliance with Ecobank is a very exciting

development. It provides Nedbank with the opportunity to

expand its sphere of activity significantly in a low-risk, low-

capital-intensive manner, which is the preferred approach to

adopt during these challenging times in global financial

services.

This significant step forward for Nedbank will enable its

clients to access banking services in many countries across

the African continent through one integrated banking group

operating under the Ecobank brand.

66

NEDBANK GROUP ANNUAL REPORT 2008

FINANCIAL REVIEW

Nedbank Corporate increased headline earnings by 11,1% to
R2 924 million and achieved a return on risk-adjusted capital
(RORAC) of 28,7%. During 2007 the investments in Bond
Choice and Lion Match were sold down and, excluding this,
headline earnings grew by 13,4%.

The core banking activities generated strong headline
earnings growth of 20,1% in 2008 on top of the growth of
28% in 2007. It is pleasing to note that all the core banking
businesses performed well, with each business growing
headline earnings. Impairments were well-managed and
expense growth was controlled significantly below the level
of income growth.

Overall, Property Finance generated R800 million in earnings,
which was down 12% on 2007, with the core banking
operations showing an increase in earnings and the property
investment activities generating earnings of R154 million at
a good return on capital, but down from the record level of 
R272 million in 2007.

NII and NIR on core banking business grew 16% and 13,5%
respectively, mostly from the volume increase in
transactional banking products and gains in primary-banking
clients in both the public and private sectors in all the
businesses. Average advances increased by 21,2%.

The credit loss ratio of 0,27% is up from the unsustainably
low level of 0,11% in 2007, but below the through-the-cycle
benchmark, which is very pleasing in the current difficult
economic and business environment.

In line with the key strategy to be a leader in the attractive
business banking market, Business Banking increased

headline earnings strongly by 22,6% and 2008 is the fourth
consecutive year of consistent strong performance.

Corporate Banking had an excellent year with headline
earnings up 44%, resulting from strong asset growth, increased
credit margins and good NIR growth across all sectors.

Nedbank Africa increased headline earnings by 20,5% with
solid performances from all the underlying businesses.

PROSPECTS

The global economic crisis will have a negative effect on the
performance of Nedbank Corporate. This, coupled with the
expected decrease in interest rates, which will reduce income
on capital, and the likelihood of higher impairment levels,
will constrain growth. Further infrastructure development is
likely to benefit Nedbank Corporate.

Each business in Nedbank Corporate has clear strategies and
plans for the future, and the leadership teams are well
positioned to respond to the challenges ahead.

The business cooperation agreement with Ecobank has
opened up new avenues for business creation. Generating
value from this agreement will be an important focus area 
for 2009.

Nedbank Corporate's position in the market place will be
maintained through sound underlying business practices and
continued focus on developing the quality and capability of
all our people, products and services to provide the highest
level of service and delivery to our clients.

It is also well-placed to grow and optimise business
opportunities in the private and public sector markets by
leveraging off its strong and valued client base and by
providing innovative solutions through skilled, dynamic teams.

OUR BUSINESS

Business Banking services companies with an annual
turnover from R7,5 million to R400 million and is
differentiated by its decentralised, empowered, accountable
business model and client-centric approach.

Corporate Banking services companies with an annual
turnover in excess of R400 million and generates business
through lending, transactional banking, structuring and
advisory fee income opportunities, significant wholesale
funding, treasury execution, custodial services and global
trade activities.

Property Finance specialises in commercial and industrial
property finance in the middle to large corporate market.
The division also invests in property equities and in large
property developments in partnership with selected clients.

Nedbank Africa has banking operations in Lesotho, Malawi,
Namibia, Swaziland and Zimbabwe. Nedbank Africa operates
in the retail and wholesale-banking segments in each
country. The Ecobank alliance enables Nedbank to extend its
coverage across more than 1 000 branches in 
30 countries in Africa.

Transactional Banking provides product development and
support, and specialist transactional banking solutions 
and services to Business Banking and Corporate Banking 
clients, working closely with the relationship-banking teams.

Corporate Shared Services provides transaction execution
services for local and foreign payment and trade activities,
client service centres and client onboarding project
migration teams.

Nedbank Investor Services provides custodial services 
to entities trading on JSE and facilitates share-lending activities.

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67

 
 
 
 
 
 
 
OPERATIONAL REVIEW:
NEDBANK CAPITAL

Brian Kennedy (48)
Group Executive: Nedbank Capital

13 years’ service • MSc(Eng)(Elec), MBA, AMP (Harvard, USA)

Brian started his career in engineering before joining FirstCorp
Merchant Bank in 1988. He joined BoE Merchant Bank in 1996
and was appointed Managing Director in 1998. He was
appointed an executive director of BoE in 2001. Brian led Capital
Markets following the merger and in November 2003 was
appointed to the Group Executive Committee of Nedbank Group
and Managing Executive of Nedbank Capital. He has 21 years of
investment banking experience.

MANAGEMENT TEAM

Anél Bosman (42)
Executive Head: Risk
8 years’ service • BCom(Hons), MPhil
(Cantab)

Bedelia Theunissen (36)
Executive Head: Human Resources 
and Transformation
2 years’ service • BA(Social Sciences),
Hons(Psyc), MA(Ind Psyc) 

John Chemaly (44)
Managing Executive: Global Markets
9 years’ service • BCom

Peter Lane (52)
Managing Executive: Treasury
18 years’ service • BCom, FIFM, CAIB

Eureka Redelinghuys (49)
Executive Head: Finance and
Operations
4 years’ service • BCompt(Hons), CTA

Mark Sardi (39)
Managing Executive: Investment
Banking
3 years’ service • BBusSci(Hons), CA (SA)

Terence Singh (40)
Executive Head: Strategy and
Marketing
7 years’ service • MSc(Chem), MBA

Mark Weston (45)
Managing Executive: Investment Banking
and UK Country Head
19 years’ service • BCA, CA (New
Zealand), AMP (Harvard, USA)

Dan Zulu (45)
Executive Head: IT
10 years’ service • BSc

68

NEDBANK GROUP ANNUAL REPORT 2008

OVERVIEW

Nedbank Capital comprises the group’s investment banking
businesses that together manage the structuring, lending and
underwriting activities and all trading and broking activities
in the equity, capital, interest rate, and foreign exchange and
derivative markets.

With a full product spectrum that stretches from equity
research to the provision of long-term project financing,
Nedbank Capital is able to compete effectively in the
southern African market.

Market environment and overview

Notwithstanding very difficult market conditions, as well as
significantly lower income from private equity, earnings in
Nedbank Capital increased by 7,7%. Equity continues to be
well-deployed with return on equity (ROE) at 38,4% and
costs well-controlled with the cost-to-income ratio at 52,2%.
Increased client activity and market volatility enabled foreign
exchange and interest rate sales and trading to produce very
strong growth in earnings. The investment in skilled people
and the development of sound risk, IT and finance platforms
over the past few years, combined with a prudent risk
appetite, have contributed significantly to these results and
the achievement of a more balanced earnings profile in
extreme market conditions.

STRATEGY

•

•

•

The key differentiator embedded in the Nedbank Capital
vision is that of sector expertise used in developing
multidisciplinary solutions, which requires cooperation
between different product areas.

The vision of an integrated investment bank necessitates
creating a culture of collaboration, which itself enables
cross-pollination of ideas and aids origination.

Collaboration ensures optimal information flow, shared
deal opportunities and creating the maximum value for
our clients.

The overall strategic orientation set out below remains the
same for 2009 and beyond.

• Optimise scarce resources, including liquidity and capital,
away from traditional activity. Success will be driven by
the ability to sell solutions rather than products.

•

•

Link sector-focused teams [resources, power,
infrastructure, black economic empowerment (BEE),
diversifieds] with product expertise.

Link new business opportunities to regulatory/market
trends – in this case metals, hedging, trading,
credit/portfolio management, syndication and export
credit.

•

•

Implement a boutique international strategy where
Nedbank Capital has sector expertise – mostly in the
region, but in the case of resources internationally driven
off the London platform.

Establish an origination presence (representative office)
in Lagos, Luanda and Nairobi to selective new-product
opportunities in equity and debt markets. This will be
enhanced with the Ecobank alliance.

• Utilise the Wall Street Programme to complete the system
scalability initiative (in forex and money market products).

•

•

Continue to focus on skills development, attraction and
retention of highly specialised staff.

Focus on economic profit (EP) growth in Investment
Banking, including trading in the domestic market.

REVIEW OF THE YEAR

Within an integrated Investment Bank an effective portfolio
is of utmost importance to weather the external storms.
Within our trading business, both Treasury and Global
Markets experienced very strong growth of 405% and 129%
respectively, optimising increased volatility, widening spreads
and increased client activity.

Debt Capital Markets (DCM) were adversely affected by
widening credit spreads, which cost approximately R95
million. Equity profits were adversely affected by reduced
volumes, sharply lower market levels and a reduced portfolio
size as well as a reduction in book size and concentration risk
resulting from management decisions in October when
markets deteriorated.

The investment in and development of strong support
functions such as risk, finance, IT and human resources over
the past five years have contributed significantly to the
results and the achievement of a more balanced, less volatile
and robust earnings profile in extreme market conditions.

When Treasury, Equity Capital Markets (ECM) and DCM are
combined to create a trading view of Nedbank Capital's
business, trading represents 59% of Nedbank Capital’s earnings,
compared with only 20% in 2007.

FINANCIAL REVIEW

Interest income growth has been strong, growing at 71% and
originated in the following business units:

•

•

Investment Banking contributed R49 million through
strong asset growth and margin expansion.

Treasury added R96 million as it stepped into the role of
liquidity provider for the group and Nedbank Capital in
difficult times.

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NEDBANK CAPITAL ... CONTINUED

•

The preference share book added R100 million as its
business activities expanded.

Through all the financial turmoil experienced in the markets
over the 2008 financial year, diligent credit control and risk
processes helped limit the cost of credit-related impairments
in the financial statements.

Impairments grew by R10,4 million, resulting in a credit ratio
of 0,06%, which is slightly higher than the 0,05% at the end
of 2007.

Nedbank Capital’s ability to maintain or grow non-interest
income was hampered by the following four significant
contributing factors:

•

The private-equity portfolio, which contributed 22,9% of
total income in 2007, could not maintain its growth in
2008 as equity markets declined significantly.

•

•

•

The trading income line was adversely impacted by
mark-to-market reduction in equity upsides on some BEE
deals with hedges of R40 million.

Credit default swap exposure caused losses in the DCM
area of R95 million, which was as a result of the
unexpected widening of credit spreads. The underlying
exposure of this credit remains healthy and within
acceptable risk appetite.

Volatile equity markets in the second half resulted in
management taking a more conservative stance. Equity
arbitrage and single stock and contracts for different
books were significantly reduced. Difficult broking and
trading conditions as well as the reduced value of the JSE
share investment caused a R199 million decline.

Capital’s expense base grew by 10,4%, which includes 
R330 million of indirect transfer pricing growth of 17,1%.
Nedbank Capital's own cost base grew by 7,1% in an
inflationary environment where CPIX was at 12% at the end
of December 2008, indicating adequate action by
management to curtail significant spending in difficult
circumstances.

Nedbank Capital’s effective tax rate of -2,67% was driven by:

•

•

•

preference share dividends being a significant portion of
income generated in investment banking mainly through
BEE funding structures;

the cluster's ability to claim credits in respect of
secondary tax on companies; and

the change in section 9C of the Income Tax Act, allowing
certain private-equity investments to be taxed at capital
gains tax levels (once-off adjustment of R98,9 million).

The effective use of capital has been a continued focus for
Nedbank Capital. The economic profit contribution has
increased from R778 million in 2007 to R806 million in 2008
and now contributes 45% of the total economic profit
generated by the group, compared with 29% in 2007.

Nedbank Capital’s return on risk-adjusted capital (RORAC)
remains healthy at 38,1%.

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NEDBANK GROUP ANNUAL REPORT 2008

PROSPECTS

Nedbank Capital’s results are highly
dependent on levels of corporate activity and
new prospects, as well as volatility in foreign
exchange and interest rates and levels of
commodity prices and equity markets.

With available liquidity, a full-spectrum service
offering, and highly skilled staff, Nedbank Capital
remains well-positioned to participate in
Corporate and public sector activity in the region.

While the business employs a broad and diversified
set of risk monitoring and risk-mitigating
techniques, these systems and their application
cannot anticipate every financial outcome or the
timing thereof.

The global economic crisis could have a negative
impact on the performance of Nedbank Capital and the
likelihood of higher impairment levels will constrain
growth.

Each business in Nedbank Capital has clear strategies and
plans to take the business forward and contribute to the
development of the region. The leadership team remains
vigilant and ready to respond to the challenges ahead.

OUR BUSINESS

Nedbank Capital seeks to provide seamless specialist advice,
debt and equity raising and execution, and trading
capabilities in all the major South African business sectors.
Principal clients include the top 200 domestic corporates,
parastatals, leading financial institutions, non-South African
multinational corporates and clients undertaking major
infrastructure and mining projects in Africa, as well as
emerging BEE consortiums.

Debt Capital Markets deals with securitisation, credit
derivatives, the asset-backed conduit and bond origination
businesses and provides interest rate solutions.

Equity Capital Markets, the equity derivatives operation,
provides hedging and structuring services to corporate,
institutional and retail clients. This division exploits the
synergies between trading and structuring equities and
facilitates BEE transactions.

Global Markets focuses on providing the bank’s client base
with currency, interest rate derivative and bond-related
products as well as proprietary trading in the various markets.

Investment Banking includes the group’s corporate finance,
private-equity and coverage teams.

Specialised Finance provides debt-financing solutions with
a portfolio of services, including project finance, leveraged
debt, acquisition finance, structured trade and commodity
finance and structured financial solutions. The division also
has three sectoral specialist teams that serve as Nedbank
Capital’s knowledge hub in energy, infrastructure, and
mining and resources. In addition, the division covers retail,
healthcare and diversified industrials.

Treasury is the group’s funding interface with financial and
investment markets, locally and internationally. All the
group’s local and foreign currency funding requirements are
executed and managed through this unit.

Nedcor Securities (Pty) Limited is the institutional equities
business of the group. It provides research, sales and trading
services to major institutions.

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OPERATIONAL REVIEW:
NEDBANK RETAIL

Rob Shuter (41)
Group Executive: Nedbank Retail

9 years’ service • BCom, CA (SA)

After completing his articles at Deloitte & Touche, Rob joined
BoE Merchant Bank. In 1994 he joined the Corporate Finance
Division of Standard Corporate and Merchant Bank (SCMB), and
was appointed Head of Investment Banking in April 1998. Rob
joined the Nedbank Group as Head of Mergers and Acquisitions
early in 2000, and was appointed Managing Director of Nedbank
Retail in September 2004. He is a member of the Nedbank
Group Executive Committee and a director of the Operating
Board of The Banking Association South Africa.

MANAGEMENT TEAM

Sydney Gericke (50)
Managing Executive: Nedbank Card
20 years’ service • BCom(Acc),
BCom(Hons), MCom, CPA, SEP (Insead)

Ingrid Hindle (44)
Managing Executive: Retail Shared
Services
19 years’ service • BCompt(Hons),
CA (SA)

David Macready (50)
Managing Executive: Retail
Bancassurance and Wealth
11 years’ service • BCom(Hons),
CA (SA), SEP (Harvard, USA)

Manelisa Mavuso (38)
Managing Executive: Retail Marketing
4 years’ service • BEcon

Sibongiseni Ngundze (39)
Managing Executive: Small Business
Services
4 years’ service • BCom, SMDP, Credit
Diploma

Sakhiwo (Saks) Ntombela (41)
Managing Executive: Retail Banking
Services
5 years’ service • BSc(Eng), MBA

Alfred Ramosedi (39)
Managing Executive: Nedbank Private
Bank
14 years’ service • BCom, MBA, FCMA

Phumla Ramphele (46)
Managing Executive: Retail Risk
2 years’ service • CAIB (SA), BCom(Acc),
Postgraduate Certificate in Business
Administration

Sarel Rudd (53)
Managing Executive: Nedbank Personal
Loans
5 years’ service • BCom(Acc),
BCompt(Hons), CA (SA)

Mohamed Saloojee (41)
Managing Executive: Consumer
Banking
18 years’ service • MDP, LDP, EDP

Clive van Horen (42)
Managing Executive: Retail Secured
Lending
9 years’ service • BCom, CA (SA),
BSocSci(Hons), PhD(Econ)

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NEDBANK GROUP ANNUAL REPORT 2008

We have seen significant progress in our journey to be
worldclass at client service, both in our internal measure
using the Client Management Assessment Tool (CMAT)
framework, and also in external surveys. We again won the
banking section of Ask Afrika’s poll of service excellence, the
Orange Index, and have opened up a significant gap between
our competitors and ourselves. The key remaining service
issues continue to revolve around banking fees,
communication (callbacks and replies) and turnaround times.
AskOnce phase 2 was launched in July 2008 with a number
of enhanced service promises, directly addressing
communication and waiting times in branches.

In 2008 we embarked on a number of initiatives aimed at
simplifying our client-facing processes in order to improve
overall client experience and enhance productivity and
execution via our channels. These projects included the
redesign of our sales and service processes, ‘hassle-free
fulfilment’, card electronic channels and vehicle finance
operational process enhancements.

REVIEW OF 2008

Solid progress has been made over the past few years in
rebuilding and repositioning Nedbank Retail. We now have a
focused strategy, high-performing and motivated staff, a
competitive product set, much-improved distribution, very
competitive pricing structures and the most highly rated
service levels in South Africa for two consecutive years.

High interest rates, slowing volumes, declining house prices
and low consumer confidence made 2008 a very challenging
year in retail banking. Headline earnings have consequently
decreased by 46,6% from R1 875 million to R1 002 million
for the period to December 2008.

Net interest income (NII) grew by 11,0%, while non-interest
revenue (NIR) was up 14,1%. As anticipated in this
environment, Nedbank Retail’s credit loss ratio worsened to
2,47% (2007: 1,26%). This has been the main cause of the
decline in return on risk-adjusted capital (RORAC) of 11,29%
(2007: 22,09%). Expense growth has been controlled at
8,0%, which has led to an improved efficiency ratio of
61,09% (2007: 63,52%).

At Nedbank Retail our focus during 2008 has been firstly on
managing through these more difficult times and secondly
on making sure that we continue to improve the business
across all aspects, so that, as markets
normalise, we are in an even better
position to compete. Our 2008 strategic
initiatives were grouped under the
categories of risk, sales and growth,
service, enhanced productivity, distribution,
transformation and our people.

Our biggest challenge in 2008 has been the
credit risk environment. A number of
mitigating actions have been taken to lessen
the impact, including our ‘manage for value’
initiatives, scorecard and loan-to-value
tightening, investment in all of our collections
environments and application and collection
process redesign.

We have made steady progress this year on
growing our client base, particularly in the 
mass-market segment. During 2008 Nedbank
attracted 590 000 (2007: 470 000, 2006: 276 000)
new clients. We are growing our primary clients at
about 10% a year, which we believe is above
industry standards. We have maintained market share
across all key product categories and also remain very
well-positioned on product pricing.

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NEDBANK RETAIL ... CONTINUED

enjoy the same features and benefits to which
they are accustomed, Go Banking clients now also
enjoy access to the expanded Nedbank product
range offered through our branch and other
banking channels.

Transformation remains a key focus area for Nedbank

Retail. We acknowledge that building a great place to
work and a great place to bank requires a successful and

sustainable transformation programme. During 2008 we

rolled out a comprehensive transformation programme,
including recruitment target setting, diversity workshops,
transformation dialogue and entrenching our employment
equity forums. Nedbank Retail has exceeded its targets in all
categories and significant progress has been made in our
employment equity plans.

We continue to make progress with staff morale and with
building a differentiated culture. The Barrett framework is
used to measure culture and we are delighted to see an
increasing alignment between the Nedbank culture and our
people’s view of the ideal culture. The feedback from the
Nedbank staff survey also showed that Nedbank Retail had
improved across all dimensions.

PROSPECTS AND STRATEGY

For 2009 we anticipate ongoing consumer pressure from
relatively high interest rates, job losses and declining house
prices. Although some recovery is expected in the unsecured-
lending environment, impairments will remain high. Declining
interest rates will negatively impact endowment income, but
should provide some needed relief for distressed consumers. We
expect slower growth across all of our major asset categories.

We will continue to maintain our focus on managing through
the current challenging economic cycle, with particular
emphasis on:

•

conservative credit policy and focus on collections and
impairments;

The year 2008 was the final year of the Nedbank Retail Three-
year Distribution Plan announced in 2006. Over the past three
years Nedbank Retail has invested more than R1 billion in a
range of channels, most notably automated teller machines
(ATMs) and low-cost physical distribution points, which has led
to a significant increase in our branded outlets. During the past
year we installed 278 ATMs, 32 self-service terminals (SSTs) and
enhanced our branch footprint by 22 additional Nedbank
branches. We also further extended our reach into previously
underserviced communities by growing our mobile sales
operations to a total of 101 teams as well as opening 31 new
personal-loan outlets. Cashback at point-of-sale (POS)
functionality was introduced to an additional 1 621 POS
devices, while the number of Nedbank-in-retailer outlets was
grown to a total of 42. Continuous investment and expansion
will be needed as we grow our client base.

In the second half of 2008 the decision was taken to
integrate the Go Banking operation into Nedbank. While Go
Banking has always been competitively priced and offered
numerous benefits to its clients, it has been unable to grow
its active client base of about 90 000 clients to a sustainable
level. Go Banking was run as a separate business, in
association with Pick n Pay, from 2002. While continuing to

74

NEDBANK GROUP ANNUAL REPORT 2008

•

•

•

•

•

•

execution of ‘manage for value’ strategies in our secured-
lending products, with a strong focus on risk-based
pricing and economic profit;

investing in our businesses that contribute most to
economic profit;

focusing on bancassurance;

continued focus on transformation;

controlled distribution expansion;

stringent expense control, with headcount broadly kept
constant;

•

•

•

entrenching our leading service position and rollout of
the service culture;

building our primary-client base through focused
strategies in each segment and targeting our major
channels on primary-client growth; and 

increasing our efforts to contribute to the national
agenda, particularly in the Imbizo process and
employment equity, and supporting black small
businesses and low-income housing.

OUR BUSINESS

Nedbank Retail serves the financial needs of individuals and
small businesses by providing transactional, card, lending,
investment and insurance products and services. Nedbank
Retail clients have been grouped into five primary client
segments in order to tailor product and service solutions to
their specific needs. These segments are the high-net-worth,
affluent, middle, mass and small-business segments.

Target markets are clearly defined, ranging from entry-level
transactional banking to the high-net-worth segment. The
Nedbank Retail cluster also services merchants and large
corporates in respect of card-acquiring services. Our target
markets are serviced through the brands within the
Nedbank Retail stable, being Nedbank, Nedgroup
Investments, BoE Private Clients, Fairbairn Private Bank and
Fairbairn Trust Company.

loans, bancassurance, investments and specialised products
such as wills, stockbroking and portfolio advice. Nedbank
Retail continues to build on our competitive product and
price offerings while driving the delivery of a superior client
service experience across all our client segments and
channels.

The Nedbank Retail business operating model is organised
around our product and client segment areas, overlaid by
servicing and delivery channels. In addition three support
services divisions underpin our business operating model.

The Retail Shared Services Division provides support,
including human resources, finance, project office, strategic
planning, credit lab and business intelligence services.

Retail Risk is responsible for the monitoring of compliance
and risk as well as providing legal services to the cluster.

Our retail product portfolio includes transactional accounts,
home loans, vehicle and asset-based finance, card (both
card-issuing and merchant-acquiring services), personal

Retail Marketing provides marketing support to the business
divisions and assists in coordinating marketing activities
across the broader Nedbank Group.

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OPERATIONAL REVIEW:
IMPERIAL BANK

René van Wyk (52)
Chief Executive

15 years’ service • BCom, BCompt(Hons), CA (SA), AMP (Insead)

After being with KPMG for 17 years, of which the last five years
as a partner, René joined Nedbank on 1 January 1993 as General
Manager: Risk and chaired the executive credit committees in
the Corporate and Commercial Divisions. In 1997 he was
appointed General Manager: Corporate and International Credit
and in 1999 he was transferred to Nedcor Investment Bank
Limited as Managing Executive: Risk. In April 2002 René was
transferred to Nedbank Group as General Manager:
Enterprisewide Risk. In September 2004 he was seconded to
Imperial Bank and in May 2005 he was appointed Chief
Executive of Imperial Bank.

OVERVIEW

Imperial Bank Limited (Imperial Bank or the bank), was
incorporated into Nedbank Group in 1996 and is primarily
engaged in asset-based financing. Nedbank Limited (Nedbank)
and Imperial Holdings Limited (Imperial Holdings) respectively
hold 50,1% and 49,9% of the ordinary share capital. In terms of
a memorandum of understanding signed by the shareholders in
2001, Nedbank provides the funding for the bank, as well as risk
management support, and Imperial Holdings provides the bank
with access to its extensive South African footprint. A new
shareholders’ agreement has been concluded by Nedbank 
and Imperial Holdings, which will come into effect on 
1 January 2011 when the current agreement ends. The new
agreement is for an indefinite period.

The bank has four operating divisions. Motor Finance is the
largest division comprising 62,7% of group loans and
advances, followed by Property Finance with 17,9%,
Professional Finance (formerly Medical Finance) with 11,1%
and Supplier Asset Finance with 8,3%.

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NEDBANK GROUP ANNUAL REPORT 2008

REVIEW OF THE YEAR 

The year 2008 was extremely challenging and was
characterised by high interest rates and high food, electricity
and oil prices, as well as a rapidly deteriorating world
economy and slowing domestic economy in the final quarter.
Under these circumstances the bank produced a net profit
after tax of R361,2 million, down 24,6% from the 
R479,2 million in the previous year. Nedbank’s share of net
profit decreased from R227 million to R166 million. Return
on equity (ROE) declined from 23,9% to 13,2%. The
efficiency ratio, however, improved from 30,2% to 28,8%.
Loans and advances grew from R35,3 billion to R44,7 billion
as the bank continued to attract good-quality new business.

Motor Finance had a testing year. Although loans and
advances grew 29,0% from R21,7 billion to R28,0 billion,
impairment losses on loans and advances increased 63,7%
and represent 2,5% of average gross loans and advances
compared with 1,9% in the previous year. The board
confirmed through an indepth independent analysis that the
Motor Finance business model remains sound in a tough
market, evidenced by the efficiency ratio improving from
29,5% to 27,3% in the current year. Net profit after tax
declined 35,0% from R206,8 million to R134,5 million.
Motor Finance strengthened its position in its market.

Property Finance achieved good results, benefiting from a
pipeline of business approved in the latter half of 2007. In
line with the current strategy the commercial and industrial
mortgage book grew 50,0% from R3,8 billion to R5,7 billion.
Net profit after tax decreased 11,2% from R170,5 million to
R151,4 million.

Supplier Asset Finance disposed of the debt collection business
and repositioned itself to take advantage of financing
equipment. Loans and advances growth of 37,0% and net profit
after tax of R32,1 million were in line with forecasts.

Medical Finance, which changed its name to Professional
Finance, had a disappointing year. Impairment losses on loans
and advances increased from R3,8 million to R26,7 million
and margins remained under pressure. The efficiency ratio,
however, was well above target. During the past quarter the

division commenced a restructuring initiative, which should
improve the efficiency ratio and restore margins to levels
required to achieve an acceptable return. Net profit after tax
declined 33,2% from R19,6 million to R13,1 million.

The effective tax rate increased from 30,0% to 33,5% due to
a change in the estimated liability for deferred tax in a
subsidiary company.

No material events occurred after 31 December 2008 that
might have had an impact on the group's reported financial
position at this date.

PROSPECTS 

Recent months saw a dramatic change in the world
economy. The speed and severity of the decline is
unprecedented and has inevitably had a severe impact on 
the South African economy. Although interest rates are
anticipated to decline through the year, bringing welcome
relief to hard-pressed consumers, it is possible that the
effects of retrenchments will overshadow the benefits of
lower interest rates. Accordingly, trading conditions are likely
to remain difficult and unpredictable.

Motor Finance will focus on managing the growth of the
book within the constraints of the market, while ensuring
that risk-based pricing is further enhanced.

Property Finance will continue to focus on growing the book
of commercial and industrial loans and advances, while
selectively servicing the residential development market.
Demand for property finance has significantly reduced and is
unlikely to be restored during 2009.

Professional Finance will focus on improving margins and
efficiencies and on maintaining a good-quality book, while
expanding the market footprint to include other professions.

Supplier Asset Finance will focus on increasing its presence in
the financing of equipment and assets related to
infrastructural spend, while continuing to serve its traditional
office equipment, trucking and aviation markets.

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GROUP TECHNOLOGY

Fred Swanepoel (45)
Chief Information Officer: Nedbank Group and Group
Executive: Group Technology

12 years’ service • BCom(Hons), MBA, SEPSA (Harvard and Wits
Business School), AMP (Harvard, USA)

Fred has 20 years’ experience in finance, banking and IT. He
joined Nedbank in 1996 as Assistant General Manager of
Western Cape Operations. Since 2004 Fred has gained
experience at the highest level of Nedbank’s Operations and
Technology Cluster, holding the position of Divisional Director in
Finance, Risk and Compliance, Projects and Programme
Management, and Group Software Services. After a rigorous
recruitment process Fred was appointed to his current role in
November 2008.

Group Technology is Nedbank’s centralised technology unit
with responsibility for all components of the group’s
technology processing, development and systems support.
The group’s IT systems, databases, technology infrastructure,
software development and IT project/programme
management are centrally managed to provide economies of
scale and to facilitate a cohesive groupwide service-oriented
architecture (SOA) technology strategy.

REVIEW OF 2008 

In an economic environment in which household debt
increased client spending slowed and impairment levels rose.
Group Technology faced very different business requirements
(eg flexible and stable credit and collection processes and
systems) to maintain service excellence in the business
clusters. This increased the scale and complexity of the
group’s IT operations. Group Technology supported and
serviced the following areas in 2008:

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NEDBANK GROUP ANNUAL REPORT 2008

•

•

•

•

In terms of volumes Group Technology processed on
average 4,8 million financial transactions daily across 
384 systems in its mainframe and UNIX environments,
running more than 32 000 online and batch programs
daily. The number of Wintel servers grew to over 3 200.

A total of 27 300 PCs, 12 400 printers, 47 000 voice
devices and/or ports and 75 600 data connections were
supported.

The operational quality of service was improved. Serious
outages and service disruptions reduced by 17% in
number and by 30% in terms of time lost. These
improvements were achieved despite a 9,5% year-on-
year increase in changes to the environment.

Benchmarking conducted during the year continued to
reflect Group Technology as a cost-effective service
provider.

In 2008 the market experienced a continued increase in
internet fraud attempts, primarily through phishing. A well-
defined phishing response process ensured that Nedbank’s
losses were well-contained.

Group Technology remains convinced that the combination
of the adoption of best-of-breed solutions and the reuse of
existing legacy applications represents the right competitive
strategy for Nedbank. To this end the following progress was
made:

•

•

•

•

•

The SOA Centre of Excellence was established. Patterns,
processes and guidelines were defined, resulting in the
first phase of common and reusable services being
developed, deployed and reused. The Group Technology
IT vision is based on SOA, which promotes business
agility and flexibility.

Initial hard- and software were procured, configured and
implemented in the production environment.

The retail self-service internet channels were refreshed
comprehensively to enhance delivery.

An upgrade of the client information system (including
service enablement) was completed to provide an
enhanced view of client information.

The strategy and technology choice for the replacement
of staff-assisted channels was ratified, and phases 1 and
2 are progressing according to schedule and budget.

Project Merlot – the synergy project for the outsourcing of
all data and voice networks announced in conjunction with
Old Mutual (South Africa) in 2005 – continues on track to
deliver savings of R1 billion for both organisations over a
five-year period. An independent benchmark confirmed that

both parties are achieving targeted cost-efficiencies,
operating off a well-structured contract. The infrastructure
has been completely refreshed and is delivering in
accordance with service level agreements.

The first quarter of 2008 saw an increase in load-shedding
demands from Eskom and municipalities in South Africa.
Nedbank’s primary and secondary data centres were required
to run on diesel-generated backup power for over 160 hours
during a three-month period. This was achieved without any
service disruption. The power-generating facilities at both
data centres have been upgraded, including the addition of
another four diesel storage tanks at our primary site.

In 2008 more than 30 significant projects were implemented
on time, according to budget and well within the industry
benchmark of top-quartile performance. Productivity
benchmarks in the innovation business continue to reflect
improvements in cost and time delivery of function points.
The capacity buildup over the past three years, as well as
productivity improvements, has ensured that all the bank’s
innovation requirements were serviced during the year.

Nedbank successfully delivered on its Swisscard contractual
obligations in 2008. The execution of operational deliverables
against contracted service levels remained at the highest
standard with all critical service levels being consistently met.
The financial performance for the year was very good,
exceeding forecast profitability.

Group Technology has progressed satisfactorily against its
Department of Trade and Industry (dti) employment equity
targets, overachieving in the black middle and junior
management levels.

Finally, a client satisfaction survey conducted with the help
of over 5 000 employees in Nedbank showed a positive
increase in the overall satisfaction rating from 68% to 71%,
with an even greater increase in the number of delighted
clients from 66% to 74%.

PROSPECTS

Group Technology will continue on its path to become
Nedbank’s most highly rated and respected technology
partner by the business clusters. This will be done through
alignment with business clusters and divisions to ensure
greater end-to-end accountability by functions in Group
Technology. We will continue to build Nedbank’s future IT
landscape for the three-year technology and business-aligned
roadmaps. This will assist Group Technology in its continuous
quest to provide flexible, cost-effective information
technology solutions that evolve quickly and easily to suit
the requirements of Nedbank Group’s business clusters.

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79

 
 
 
 
 
 
 
THE NEDBANK BRAND

Nombulelo Moholi (48)
Group Executive: Group Strategy and 
Corporate Affairs

3 years’ service • BSc(Eng)(Elec)

Nombulelo Moholi was appointed Chief Strategy and Corporate
Affairs Officer for Nedbank Group in March 2006. She was
previously the Chief Sales and Marketing Officer of Telkom SA
Limited and a member of that group’s executive committee. She
joined Telkom in 1994 as General Manager of Payphones and
became Group Executive: Regulatory Affairs the following year.
Nombulelo was appointed Managing Executive of International
and Wholesale Services in 1999 and assumed responsibility for
the sales and marketing portfolio in 2002.

80

NEDBANK GROUP ANNUAL REPORT 2008

THE ROLE OF SPONSORSHIPS IN 
RAISING THE NEDBANK PROFILE

While there has been continued groupwide innovation
throughout 2008 in the areas of new-product development,
pricing, delivery and client service initiatives, Group
Marketing placed increased emphasis on the role of
sponsorships as a means to bolster our communications mix,
raise brand awareness and more closely engage with the
broader mass consumer market.

The announcement of a five-year sponsorship of the
Nedbank Cup, South Africa’s premier knockout cup
competition, marked the culmination of a long search by
Nedbank for an appropriate and significant opportunity to
access and support the soccer fraternity in South Africa.
Nedbank has very rapidly entered the soccer arena with a
highly successful, high-profile tournament executed with a
very high level of professionalism and precision.

The investment has already generated significant return on
marketing investment and is testimony to our passionate
commitment to national pride and community development
by supporting and enabling the sport with the greatest
number of participants and supporters in South Africa.

The Group Strategy and Corporate Affairs cluster is
responsible for managing the group’s image and reputation.
Key functions include marketing, communications and group
strategy. The cluster is also responsible for the Nedbank
Foundation and the Nedbank Economic Unit as well as for
the delivery of the group’s transformation objectives in terms
of the Financial Sector Charter and the Department of Trade
and Industry (dti) Codes of Good Practice.

REVIEW OF THE YEAR

•

•

2008 marked continued progress on building the
Nedbank brand. Brand equity has improved, with marked
increases in awareness, relevance and loyalty, particularly
in the mass consumer segment of the market. It is also
very encouraging that Nedbank remains the only major
banking brand to have made positive improvements in
brand equity over the period versus its peers, as
measured by the Brand Dynamics brand equity study
conducted by Millward Brown.

During the course of the year the bank’s monolithic brand
strategy was further refined through the integration of the
Old Mutual Bank and Go Banking brands into Nedbank
and the discontinuation of these brands.

• We refined the group strategy in an increasing uncertain

and volatile environment.

•

In the light of the deteriorating global and local landscape,
economic comment, insight and advice continued to be
sought by both internal and external stakeholders.

• We facilitated the process of setting targets for,

measuring compliance and progress with and the
implementation of the requirements of the dti
Codes of Good Practice and
establishing reporting on these, while
honouring the group’s commitment to
the Financial Sector Charter.

• Media relationships were strengthened

through proactive engagement and a host
of entertainment opportunities.

• Nedbank donated R43,5 million during
2008 to community development
programmes. The equitable spread of
foundation funds across multiple provinces
and focus areas (education, community
development, socioeconomic development
and staff volunteerism) progressed well.
Volunteerism programmes gained further
momentum with the introduction of the Client
Local Hero programme.

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81

 
 
 
 
 
 
 
THE NEDBANK BRAND ... CONTINUED

Our other sponsorship properties continued to go from
strength to strength and received heightened focus and
attention:

•

2008 marked the third year of a five-year sponsorship
deal between Nedbank and Athletics South Africa (ASA),
which includes the popular Nedbank City Marathon and
Matha Series. This sponsorship, together with our
cosponsorship of the Comrades Marathon, gives Nedbank
a sponsorship platform from which to reach clients and
prospective clients from every cultural, social and
economic background effectively.

• Nedbank’s involvement in supporting athletes with
disabilities has continued, with the highlight of this
sponsorship category being the success of the 
SA Paralympic Team, which achieved outstanding results
and international recognition at the 2008 Beijing
Paralympic Games. 2008 also marked Nedbank’s 
16th year as a sponsor of the Nedbank National
Championships for the Physically Disabled.

•

In its 28th year, the 2008 Nedbank Golf Challenge
attracted the strongest field in many years. The event
drew over 60 000 visitors, including numerous high-
profile dignitaries. The event provided Nedbank with
significant high-profile media and hospitality
opportunities and a unique way in which to engage with
clients and stakeholders. The Sports Trust Golf Challenge
(a joint initiative between Nedbank and 
Sun International) raised R1 million in aid of sport
development. The Nedbank Affinity Cup (golf) was a
resounding success, with Nedbank donating an amount
equal to the winner’s prize money to the Nelson
Mandela Children’s Fund.

‘The introduction of the
Nedbank Cup into the family
of PSL sponsors was a
milestone for professional
football in South Africa.
Ke Yona took its rightful place
at the top of the South
African sporting calendar as
one of the most unique
soccer tournaments ever seen
in South African football.
Congratulations Nedbank. You
have done football proud.’

– Dr Irvin Khoza: Chairman, Premier Soccer League

82

NEDBANK GROUP ANNUAL REPORT 2008

Group Strategy and Corporate Affairs sponsorship Living Standards Measure (LSM) profile

Soccer: 
*Nedbank Cup

Road running: 
*Nedbank Series/ 
Comrades

Golf:
*Nedbank Golf 
Challenge

Sport for the disabled: 
**incl Paralympics

Property

LSM

1

2

3

4

5

6

7

8

9

10

LSM breakdown of spectators

Legend

Dominant LSM participant and spectator

Strong secondary coverage

Limited coverage

*  Statistics as supplied by BMI Sporttrach – The Adult Sport and Sport Sponsorship Market in South Africa.
**  Accurate statistics relating to the composition of sport for the disabled are not available. 
This graph representation is based on the experience of the Nedbank Sponsorship Team.

•

•

•

deliver relevant strategic insights to inform strategic
decisions in the context of the changing external
environment;

continue to provide worldclass economic insight to
internal and external clients;

embed and drive Nedbank’s objective of accelerating
transformation and becoming a truly South African bank;
and

• make a difference in the communities in which we

operate through our foundation, staff and client social
responsibility programmes.

•

2008 also witnessed excellent exposure through a series
of smaller strategic sponsorships, including the Business
Woman’s Association, Cape Winemakers Guild and the
Old Mutual Budget Speech Competition.

Nedbank’s sponsorship portfolio is now well-balanced and a
key ingredient in our overall communications mix going
forward and provides a solid platform for building and
entrenching our brand in a broad range of consumer,
corporate and wholesale markets:

•

•

The new Nedbank Cup soccer sponsorship has dominant
coverage in LSM 1 to 6.

Road running has dominant coverage in LSM 1 to 4, and
strong coverage in LSM 5 to 10.

• Golf has dominant coverage in LSM 7 to 10.

PROSPECTS FOR 2009

We will:

•

•

•

•

continue to build a Nedbank brand that is not only
unique and very well differentiated, but also accessible,
caring, relevant and, most importantly, makes a
difference to the lives of our staff, clients, shareholders
and broader communities;

adopt an increased focus on establishing Nedbank as the
green (environmentally conscious) and caring brand;

execute and optimise the sponsorship portfolio;

optimise internal and external stakeholder engagement
and media relations;

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83

 
 
 
 
 
 
 
GROUP HUMAN RESOURCES 
AND EMPLOYMENT EQUITY

Professor Shirley Zinn (47)
Group Executive: Human Resources

3,5 years’ service • DEd

In July 2005 Shirley was appointed Group Executive: Human Resources
of the Nedbank Group, prior to which she was General Manager: HR,
at the South African Revenue Service (SARS). Before joining SARS, she
was Regional HR Director, responsible for Africa and the Middle East, for
Reckitt Benckiser. Her other positions included Group Executive: Equity,
for Computer Configurations Holdings and Director: Special
Programmes for the Department of Public Service and Administration.
Shirley is currently the Chairperson of the Institute of Bankers and
serves on the BANKSETA Board. Shirley’s most recent awards are
testimony to her career-long dedication and commitment to people
practices. These awards include the 2008 IPM Presidential Award, the
2008 Black Business Quarterly's Platinum Visionary Award and the
Business Woman Visionary Award, the 2008 Top Woman of the Year
Award and the Top Executive in Corporate South Africa Award.
She was also a finalist for the CEO Publication’s Most Influential
Woman in Business and Government Award.

REVIEW OF THE YEAR

In keeping with our belief that ‘great things begin with great
people’, 2008 was a year in which we continued the strong
focus on our people, their development and retention, the
culture and climate in which they operate, and alleviating the
challenges facing them as employees in a global economy.

Nedbank is faced with challenges in the war for talent and
the shortage of key skills in the financial sector, hence our
efforts in attracting and retaining great people are supported
by a creative employee value proposition (EVP), as well as
simple and effective tools to enable high performance. These
tools include having job profiles, outlining a clear purpose
and objectives, job matching to the market for market-
aligned remuneration and benefits, a career management
system that enables employees to make their own career
decisions, a learning and growth framework that caters for all
levels of development from entry-level matriculants and
graduates to senior managers and executives, as well as

84

NEDBANK GROUP ANNUAL REPORT 2008

Nedbank recognises that the single differentiating factor for
competitive advantage is the prevailing culture of our
organisation. In ensuring that we receive continuous feedback
for improvement, Nedbank measures the staff morale
through different diagnostic methods. The current
organisational culture as perceived by employees is measured
by the Barrett Survey, focusing on the level of entropy and
the gap between the current and desired culture. For 2008
the entropy levels improved to 14% from 17% in 2007. This
improvement comes off the original base of 25% in 2005
and shows a marked improvement over the past four years.
International research shows that an entropy score of
between 11% and 20% indicates a well-functioning
organisation and organisations operating at levels of 10%
and below are considered exceptional. The number of
matches between the current and desired cultures increased
from four to five, which is one below the best-practice range
of six to eight matches. The Nedbank Staff Survey measures
employees’ perceptions of organisational performance on 
12 dimensions, and there was a statistically significant
improvement in the score of 71,5% in 2007 to 75,1% in 2008,
comfortably above the best-practice range of 60% to 70%.

The impact of working in a highly competitive financial
services industry can be detrimental to the health and
wellbeing of employees. Nedbank is cognisant of this and
provides free wellbeing services to employees, in the form of
psychological counselling for personal problems, trauma
debriefing, executive health examinations, and financial
assistance to qualifying employees experiencing exorbitant
medical expenses. We also aim to provide an environment in
which a balanced work and home life is achieved through
flexible work practices.

flexible work practices to enable more productive working
hours that suit employees and the organisation.

We are committed to attracting the very best people to work
at Nedbank – our EVP and our recruitment processes support
our efforts in this regard. In 2008 altogether 20 campuses
were visited during the successful external graduate
recruitment campaign, with contact being made with
approximately 8 500 potential candidates. There were also
22 654 potential candidates registered on our e-recruitment
system in response to 628 advertised positions; and
approximately 6 500 referrals by staff were registered on our
e-referral system. Our staff are encouraged to refer potential
candidates to Nedbank and are rewarded for successful
placements after a successful referred candidate has been in
the specific position for six months.

We believe that the opportunity for development is key to
attracting and retaining the right people at Nedbank, and this
forms a significant part of our value proposition to current
and future employees. At the entry level the drive to develop
learners for the financial services industry resulted in 160
learners participating in the Kuyasa and Letsema Learnership
Programmes, 110 on other learnerships, 23 graduates on the
Training Outside of Public Practice (TOPP) Programme for
accountants, and 68 graduates on the Nedbank Graduate
Development Programme. All learners and graduates undergo
intensive on-the-job training and, following successful
completion of the programme, are ready to be placed. We
have been very successful in placing the majority of students
on completion of the programmes and have been pleased by
their progress.

The External Bursary Programme was launched in February
and 464 bursaries were awarded to undergraduate students
studying toward bank-related qualifications. Furthermore,
internal bursaries were awarded to 949 employees for further
academic study at graduate and post-graduate level and
study grant assistance was provided to 305 employees for
the education of their children.

The Management Development Programme (MDP) is aimed at
establishing a common values-based management approach
within our organisation and the Old Mutual Group. To this end 
9 897 (10 867 including Africa) of our staff have attended the
role orientation workshops this year and are now embarking on
practical application of skills learnt on these workshops.
Business and academic development for successive levels of our
management are catered for in the Applied Academic
Programmes. In 2008 altogether 27 senior managers attended
the executive education programmes, locally and
internationally, and 446 managers attended business education
programmes at the top business schools in South Africa.

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85

 
 
 
 
 
 
 
GROUP HUMAN RESOURCES 
AND EMPLOYMENT EQUITY ... CONTINUED

the cluster EE forums, EE managers, the People with
Disabilities (PWD) Forum chairpersons, Women’s Forum
representatives, trade union representatives and other
stakeholders, monitors EE and consults with staff across the
group.

Under the leadership of Nombulelo Moholi, Group Executive:
Strategy and Corporate Affairs, the NEEF continued to
champion EE in the bank.

The NEEF was also consulted on the Workplace Skills Plan
(WSP), which was submitted to the BANKSETA at the end of
June 2008. By being involved in these two major
submissions, the NEEF ensured that there was greater
alignment between the EE plan and the WSP, and that the
Skills Development Plan supported EE. The NEEF also serves
as a platform for clusters to showcase their innovative
initiatives to support EE, and through this medium also
monitors clusters’ progress against the implementation of
their respective EE plans.

Other governance structures to facilitate effective
implementation of transformation at Nedbank include the
Group Operations Committee (Opcom), the Transformation
and HR Committee (TRAHRCO), EE Managers Forum, PWD
Forum, Women’s Forum and EE Implementation and
Communications Steering Committee, all of which have
contributed to the successful implementation of our plans.

EMPLOYMENT EQUITY PROGRESS – BASED
ON THE EE ACT

The table below reflects the current demographic profile of
the group, based on the EE Act’s definition of occupational
levels, at 31 December 2008.

These figures are monitored on a monthly basis in order to
determine the group’s performance against set targets.

Nedbank’s response to the devastating impact of HIV/Aids
on employees is acknowledged through a two-pronged
strategy. Firstly, prevention is approached through the
voluntary testing of employees and, secondly, we attempt to
improve the quality of life of employees affected by the
disease. In 2008 a total of 5 959 employees underwent
voluntary testing to confirm their status, equivalent to
24,25% of employees, way beyond our expectations of 10%.

We are buoyed by the significant successes achieved in 2008,
and we strive to continue building on our capability to
deliver high performance, retain and develop our best people,
create a competitive advantage for the bank through our
unique culture and contribute to Making Things Happen.

EMPLOYMENT EQUITY

Nedbank aspires to be a leader in transformation and a 
great place to work. Transformation is gaining increasing
momentum in Nedbank and, in particular, employment
equity (EE) has been one of the key focus areas to accelerate
transformation.

While demographic representation is a requirement of the 
EE Act, the group firmly believes transformation is not only
about compliance with legislation and achieving targets – it is
also about creating an environment for staff that is conducive
for meaningful and sustainable transformation to take place,
which will enable the organisation to flourish.

If demographic representation is achieved in a supportive
environment, then the bank will be well-positioned to
maximise the benefits of a diverse workforce. This will ensure
that the bank not only performs, but also remains relevant in
the South African context.

EMPLOYMENT EQUITY PLAN 2008 TO 2010

An EE plan was submitted to the Department of Labour
(DoL) in April 2008, and the group was complimented on the
quality of the plan, which was compliant with all aspects of
the EE Act. All business clusters have also finalised EE plans,
which are aligned to the Group EE Plan. The balance of this
year has been dedicated to implementing quantitative and
qualitative aspects of these plans, which are monitored as
part of the performance agreements of cluster heads and all
the management levels below.

NEDBANK EMPLOYMENT EQUITY FORUMS

Nedbank has created governance processes and structures
such as the Nedbank Employment Equity Forum (NEEF) and
has established employment equity forums (EEFs) at cluster,
divisional and regional levels. The Nedbank Employment
Equity Forum (NEEF), which comprises the chairpersons of

86

NEDBANK GROUP ANNUAL REPORT 2008

Total workforce profile per Employment Equity Act

Numbers

Designated

Non-designated

Male

Female

Male Foreign nationals

Occupational levels

A

C

A

C

I

W

W

Male

Female

Total

Top management
Senior management
Professionally qualified
Skilled technical 
Semiskilled
Unskilled
Exceptions – permanent 
staff not matched

2
44
575
1 241
749
9

0
17
317
679
308
0

I

0
41
577
666
163
1

1
30
522
2 149
1 553
11

1
7
450
1 533
860
0

0
22
582
1 266
421
0

1
90
1 767
2 011
687 
1

9
310
1 779
655
125
0

12

2

3

6

2

3

6

4

Total permanent

2 632

1 323

1 451

4 272

2 853

2 294

4 563

2 882

Non-permanent employees

356

74

87

690

185

70

247

293

Grand total

2 988

1 397

1 538

4 962

3 038

2 364

4 810

3 175

0
25
104
51
7
0

2

189

140

329

0
11
99

14
597
6 772
103 10 354
4 916
23

43
1

0

40

257 22 716

112

2 254

369 24 970

(%)

Designated

Non-designated

Male

Female

Male Foreign nationals

Occupational levels

A

C

I

A

C

I

W

W

Male

Female

Total

Top management
Senior management
Professionally qualified
Skilled technical 
Semiskilled
Unskilled
Exceptions – permanent 
staff not matched

Total permanent

Non-permanent employees

Grand total

14
7
8
12
15
39

30

12

16

12

0 
3 
5 
7 
6 
0 

5 

6

3 

6 

0 
7 
9 
6 
3 
4 

8 

6

4 

6 

7 
5 
8 
21 
32 
48 

15 

19

31 

20 

7 
1 
7 
15 
17 
0 

5 

13

8 

12 

0 
4 
9 
12 
9 
0 

8 

10

3 

9 

7 
15 
26 
19 
14 
4 

15 

20

11 

19 

64 
52 
26 
6 
3 
0 

10 

13

13 

13 

0 
4 
2 
0 
0 
0 

5 

1

6 

1 

0 
2 
1 
1 
1 
4 

0 

1

5 

1 

100 
100 
100 
100 
100 
100 

100

100

100  

100 

RECONCILIATION OF HEADCOUNT

•

•

Reporting period:
The figures reported to the Department of Labour (DoL) on 1 October 2008 were for the period 1 July 2007 to 30 June 2008.
However, the figures reported in the annual report cover the financial year from 1 January 2008 to 31 December 2008.

Staff categories:
The DoL requires that the headcount includes permanent staff, payroll contractors, temporary staff, commission-based staff
and international secondees.

The headcount figures in the annual report reflect all staff categories reported in the DoL format, except temporary staff,
international secondees and staff of external entities.

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

87

 
 
 
 
 
 
 
GROUP HUMAN RESOURCES 
AND EMPLOYMENT EQUITY ... CONTINUED

During the course of the year Nedbank has focused on and made major inroads in becoming a disability-competent organisation.
One of the initiatives undertaken to ensure the achievement of this aim was actively to increase the number of PWDs in the
group’s employ. As a result, the number of PWDs has increased from 232 in December 2007 to 395 in December 2008. This
represents 1,6% of Nedbank’s total workforce.

The following table provides a breakdown of people with disabilities:

Numbers

Designated

Non-designated

Male

Female

Male

Foreign nationals

Occupational levels

A

C

I

A

C

I

W

W

Male

Female

Total

Top management
Senior management
Middle management
Junior management
Semiskilled
Unskilled
Exceptions – permanent 
staff not matched

Total permanent

Non-permanent employees

Grand total

0
1
6
19
25
0

0

51

1

52

0
0
6
4
4
0

0

14

0

14

0
1
8
7
6
0

0

22

0

22

0
9
46
15
10
0

0

80

6

86

0
0
3
19
22
0

0

44

4

48

0
0
6
16
10
0

0

32

1

33

0
0
5
10
8
0

0

23

0

23

0
1
30
42
27
0

0

100

4

104

0
1
3
1
0
0

0

5

1

6

0
0
4
3
0
0

0

7

0

7

0
13
117
136
112
0

0

378

17

395

(%)

Designated

Non-designated

Male

Female

Male

Foreign nationals

Occupational levels

A

C

I

A

C

I

W

W

Male

Female

Total

Top management
Senior management
Middle management
Junior management
Semiskilled
Unskilled
Exceptions – permanent 
staff not matched

Total permanent

Non-permanent employees

Grand total

8 
5 
14 
22 
0

0

13 

6 

13 

0 
5 
3 
4 
0

0

4 

0 

4 

8 
7 
5 
5 
0

0

6 

0 

6 

69 
39 
11 
9 
0

0

21 

35 

22 

0 
3 
14 
20 
0

0

12 

24 

12 

0 
5 
12 
9 
0

0

8 

6 

8 

0 
4 
7 
7 
0

0

6 

0 

6 

8 
26 
31 
24 
0

0

26 

24 

26 

8 
3 
1 
0 
0

0

1 

6 

2 

0 
3 
2 
0 
0

0

2 

0 

2 

100 
100 
100
100 
0

0

100 

100 

100 

88

NEDBANK GROUP ANNUAL REPORT 2008

EE – BASED ON dti CODES

Occupational levels

Top management
Senior management
Middle management
Junior management

Black
people
%

Black
female African

%

%

30,00
26,96
44,64
72,76

20,00
9,82
22,95
47,79

20,00
12,48
16,20
32,74

Total
staff

10
601
6 772
10 354

Nedbank remains committed to accelerating
transformation and redressing underrepresented
groups at management levels. We have set ourselves
challenging annual targets to rectify the situation by
2016. Appointment ratios for all groups are clearly
communicated and progress is celebrated on a
regular basis.

Total management

60,45

37,00

25,73

17 737

Semiskilled
Unskilled
Permanent staff 
not matched

82,47
91,30

57,65
47,83

46,83
86,96

4 916
23

70,00

27,50

45,00

40

Total permanent

65,26

41,46

30,39

22 716

Non-permanent employees

64,86

41,93

46,41

2 254

Total dti

65,23

41,51

31,84

24 970

Included for reconciliation purposes

Add:

International
International secondees
Imperial
Imperial secondees

Less:

Temp headcount

Total Nedbank Group

1 778
25
1 198
4

405

27 570

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O
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A
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C
N
A
N
R
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I

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A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
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S

I

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G
N
T
E
E
M
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D
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O
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89

 
 
 
 
 
 
 
GROUP HUMAN RESOURCES 
AND EMPLOYMENT EQUITY ... CONTINUED

EMPLOYMENT EQUITY PROGRESS – BASED ON THE FINANCIAL SECTOR CHARTER

Steady progress has been made since 2004, the start of the Financial Sector Charter (FSC), in all three management levels. 2008
targets have been met for both middle and junior management. Performance at senior management level was a challenge,
especially due to the prevailing economic conditions and the current war for talent in the private and the public sector, but this
was achieved during the course of 2008.

Employment equity progress – Based on the Financial Sector Charter

Staff category in terms of 
the definitions of the
FSC

Group Executive
Senior management
Middle management
Junior management
Non-managerial

African

Coloured

Indian

White

Female Male

Female Male

Female Male

Female Male

Total

1
49 
213
486
4 368

1
105
271
475
2 273

1
15
110
410
2 530

–
42
130
263
978

–
40
216
505
1 627

–
111
285
393
772

–
275
795
1 424
2 481

7
831
1 006
757
749

10
1 468
3 026
4 713
15 778

Total operations

5 117

3 125

3 066

1 413

2 388

1 561

4 975

3 350

24 995

FSC definition includes: Permanent, temporary, payroll contractors, international secondees and commission earners.

Included for reconciliation purposes.

Add:

International
Imperial
Imperial secondees

Less:

Temp headcount

Total Nedbank Group

1 778
1 198
4

405

27 570

Employment equity progress as a percentage – based on FSC

Staff category in terms of 
the definitions of the
FSC (%)

Group Executive
Senior management
Middle management
Junior management
Non-managerial

African

Coloured

Indian

White

Female Male

Female Male

Female Male

Female Male

Total

10,00
3,34
7,04
10,31
27,68

10,00
7,15
8,96
10,08
14,41

10,00
1,02
3,64
8,70
16,03

0,00
2,86
4,30
5,58
6,20

0,00
2,72
7,14
10,72
10,31

0,00
7,56
9,42
8,34
4,89

0,00
18,73
26,27
30,21
15,72

70,00
56,61
33,25
16,06
4,75

100
100
100
100
100

90

NEDBANK GROUP ANNUAL REPORT 2008

LEARNING AND GROWTH 
Nedbank Group as an organisation focuses learning on achieving an optimum value for the employee and the organisation.
Learning is ultimately about development for the employee resulting in portable skills and sustainability for the organisation. The
intersection of value is created when both the employee and the organisation experience a positive shift in performance.

Skills development is regarded as a key pillar to achieving our transformation strategy. In support of the transformation strategy
the WSP was completed as stipulated by the Skills Development Act. The primary source of information for this plan is the
personal development plans completed online by employees annually, following the annual performance discussions that are held
between employees and their managers. These discussions focus on increasing competence in their current roles and preparing
them for future opportunities linked to our broader talent management plans.

Nedbank has spent R263 840 903 on training in 2008, which is 4,44% of basic payroll. Of this, 2,87% of basic payroll was spent
on black staff.

At Nedbank learning and growth is sustained by a learning culture, which not only fulfils the various regulatory requirements that
govern skills development, but also provides the momentum for sustainable organisational performance.

1 TRAINING EXPENDITURE

1.1 Training expenditure in terms of Department of Trade and Industry (dti) Codes

Black skills development spend (Rm)

Total basic payroll
Total training spend
Training spend as % of basic payroll
Training spend for black staff using adjusted recognition for gender
Training spend for black people with disabilities (PWDs) using adjusted recognition for gender

Training spend on black staff as % of basic payroll
Training spend on black PWD as % of basic payroll

2008

R5 945,4
R263,8
4,44%
R170,8
R1,4

2,87%
0,02%

Nedbank qualifies for 9,14 points out of the 15 points allocated to skills development expenditure as per the dti generic
scorecard. Altogether 56,40% of the total training spend on black staff was spent on black female staff.

1.2 Training expenditure in terms of Financial Sector Charter (FSC)

Black skills development spend (Rm)

Total basic payroll
Total training spend (1)
Training spend as % of basic payroll
Training spend for black staff

Training spend on black staff as % of basic payroll

2008

R5 945
R240,5
4,05%
R127,2

2,14%

2007

R5 272,0
R174,5
3,31%
R106,5

2,02%

Total training spend improved by 37,85% in 2008, compared with 2007, while the training spend on black staff increased
by 19,41%. Nedbank has exceeded the FSC target of 1,5% on training spend on black staff by 0,64%.

Note 1: Difference in total training spend 
Total training spend in terms of dti Codes includes opportunity cost on salaries of employees participating in category B, C
and D programmes in terms of the learning programme matrix.

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A
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E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
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A
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S

I

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G
N
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E
M
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D
L
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A
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91

 
 
 
 
 
 
 
SKILLS DEVELOPMENT
REPORT

2 CATEGORY B, C AND D PROGRAMMES

Leadership Development Programme (LDP)
Management Advancement Programme (MAP)
Senior Leadership Development Programme (SLDP)
Letsema (matriculants)
Kuyasa (graduates)
Business analysis (cert level)
Business analysis (dipl level)
Credit learnership
Education, training and development practitioners
Forex
Information Technology Banking Learnership Programme
Risk
Systems support
Vehicle and Asset Finance (VAF)

Total

%

3 EXECUTIVE DEVELOPMENT

GIBS Executive Development Programme (EDP)
Harvard Advanced Management Programme (AMP)
Harvard Women's Programme
INSEAD AMP
INSEAD International Executive Programme
INSEAD Strategic Management in Banking

Total

%

4 OTHER PROGRAMMES

Graduate Programme
Eyethu programmes (Adult Basic Education and Training)
Training Outside Public Practice

Total

%

2008

2007

Total intake

Total black

Total intake

Total black

216
143
87
125
35
25
18
20
3
20
4
3
6
11

716

100

162
91
36
124
35
16
10
18
3
19
4
3
6
11

538

75

190
126
45
232
41
27
0
21
20
0
4
0
4
0

710

100

136
86
20
229
41
16
0
16
15
0
2
0
4
0

565

80

2008

2007

Total intake

Total black

Total intake

Total black

13
2
1
5
4
2

27

100

6
2
1
0
0
2

11

41

22
2
0
0
13
0

37

100

11
0
0
0
4
0

15

41

2008

2007

Total intake

Total black

Total intake

Total black

68
62
9

139

100

63
61
1

125

90

42
0
20

62

100

35
0
10

45

73

92

NEDBANK GROUP ANNUAL REPORT 2008

5 BURSARIES

Inhouse bursaries
External bursaries

Total

%

6 STUDY LOANS

Study loans

Total

%

2008

2007

Total intake

Total black

Total intake

Total black

949
464

1 413

100

710
409

1 119

79

1 574
0

1 574

100

1 081
0

1 081

67

2008

2007

Total intake

Total black

Total intake

Total black

39

39

100

30

30

77

43

43

100

29

29

67

7 STUDY GRANTS/EDUCATION ASSISTANCE FUND

Study grants

Education Assistance Fund

Total

%

2008

2007

Total intake

Total black

Total intake

Total black

305

227

532

100

147

211

358

67

297

395

692

100

147

352

499

72

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E
R

I

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A
N
O
T
A
R
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S
W
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V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
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D
L
O
H
E
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A
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I

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A
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F
N

I

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D
N
A

93

 
 
 
 
 
 
 
ENTERPRISE GOVERNANCE 
AND COMPLIANCE 

Selby Baqwa SC (57)
Group Executive: Enterprise Governance and Compliance

6 years’ service • BIuris, LLB, MBA 
(De Mont Fort University, Leicester,
UK, and Harvard, USA)

Selby Baqwa had over 20 years’ experience as both an attorney
and an advocate prior to being appointed to the position of
Public Protector of the Republic of South Africa in 1995. He
joined Nedbank Group in 2002 to head a new corporate
governance function, and at the beginning of 2005 also assumed
responsibility for compliance.

Enterprise Governance and Compliance (EGC) is responsible for
the monitoring of regulatory and reputational risk and the
setting of related policies. It also manages the Enterprise
Governance and Compliance Frameworks. Nedbank Group’s
governance strategy, objectives and structures have been
designed to ensure that the group complies with legislation and
a myriad of codes, while at the same time moving beyond
conformance to governance performance.

Nedbank Group has incorporated competitive governance
and compliance practices as core strategic imperatives for
the sustainable development of our organisation. Our
governance and compliance philosophy recognises the
importance of ensuring continual adherence to legislative,
regulatory and supervisory requirements as a critical part of
effective risk management and sound enterprise governance.

Enterprise governance is at the heart of the operations of
Nedbank Group and strategically links good governance to
effective performance management. EGC constitutes part of
the entire accountability framework of the organisation, and
requires a balance between accountability and assurance
(conformance) and value creation and resource utilisation
(performance).

The Group Executive: EGC, Adv Selby Baqwa, serves as a
member of the Group Executive Committee (Group Exco)
and reports directly to the Chief Executive and also has
direct access to the Chairman of the Nedbank Group Board.

94

NEDBANK GROUP ANNUAL REPORT 2008

He is supported by an extensive network of divisional

The division’s key objectives are to:

•

•

•

•

•

•

•

•

provide an independent assurance function with regard
to governance and compliance issues to the board, Group
Exco and the banking business;

implement and monitor good business governance
practices throughout the organisation;

internalise a culture of governance, ethics and
compliance across the group through ongoing training
and development;

set governance and compliance frameworks that will be
aligned with applicable regulations and local and
international best practice;

build and enhance relationships with key internal
partners (Risk, Internal Audit, Legal and Company
Secretariat – especially the business governance and
compliance champions) and external stakeholders;

achieve balanced economic, social and environmental
performance and implementation of a best-practice
corporate citizenship framework, including
comprehensive sustainability reporting and targeted
stakeholder engagement;

provide tools for and expert guidance on governance,
sustainability and compliance matters to the business;
and

inform the business of new and existing regulatory
requirements.

governance and compliance officers, all of whom work

closely with the central EGC Division in implementing

projects, fulfilling monitoring and training requirements and

creating a sustainable governance and compliance culture

throughout the group.

PHILOSOPHY, STRATEGY AND OBJECTIVES

The EGC functions are an essential part of Nedbank Group’s

control structure, having responsibility for the management

of regulatory and reputational risk. A comprehensive

Enterprisewide Risk Management Framework has been

developed in line with the requirements stipulated in section

60A of the Banks Act, read with the provisions of regulation

49 (previously 47). This framework ensures a consistent focus

on day-to-day governance requirements without losing sight

of the long-term growth and profitability of the group.

Nedbank Group’s governance and compliance strategies,

objectives and structures have been designed to ensure that

the group complies with legislation and numerous codes,

while at the same time moving beyond accountability and

assurance issues to value creation and resource utilisation

issues. Internally the function has expanded in five

complementary directions, namely:

•

•

•

•

•

enterprisewide corporate governance;

business governance;

corporate accountability and ethics;

sustainability management and reporting; and

compliance.

The enterprise governance and compliance functions operate,

among others, at the following levels within the organisation:

•

•

•

•

Board (including boards of subsidiaries and joint

ventures).

Executive management (dealing with business

governance and internal controls).

Employees (ensuring, for example, work ethics and

business governance).

Social and environmental integration (creating a

sustainable bank).

EGC works closely with the Company Secretary and Group

Risk in promoting a culture of good governance and

compliance within the group.

W
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C
N
A
N
R
E
V
O
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I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

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G
N
T
E
E
M
R
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D
L
O
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A
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I

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A
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I

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A

95

 
 
 
 
 
 
 
ENTERPRISE GOVERNANCE AND COMPLIANCE ... CONTINUED

COMPLIANCE

KING II CODE

As part of its compliance with the Code of Corporate
Practices and Conduct of the King Committee (‘King II’),
Nedbank Group has a comprehensive implementation and
monitoring plan to meet all of its requirements and
recommendations. This plan – the implementation of which
is monitored by the Directors’ Affairs Committee and EGC –
covers all the corporate governance requirements relating to
the Banks Act as well as the recommendations of the
Myburgh Report and has been approved by the board.

At 31 December 2008 the group complied substantially with
King II, with the only areas of non-compliance being the
following:

•

•

The group’s Chairman, Reuel Khoza, is a non-executive
director, but not independent. This is due to his position
at Aka Capital, a strategic business partner of Nedbank
Group through its BEE transaction. He is also a director
of the group’s holding company, Old Mutual plc, which
precludes him from being classified as independent.

The Chairman of the Credit Committee (Michael Katz) and
the Chairman of the Group Transformation and
Sustainability Committee (Lot Ndlovu) were not yet
classified as independent non-executive directors.

• Mustaq Enus-Brey is Chairman of the Group Risk and
Capital Management Committee and not classified as
independent as a result of to his relationship with one of
the group’s black business partners.

The Nedbank Board is satisfied that these areas of non-
compliance do not impair the governance integrity of the
group or perceptions of the group.

Compliance risk is the potential that the procedures
implemented by the entity to ensure compliance with
relevant statutory, regulatory and supervisory requirements
are not adhered to and/or are inefficient and ineffective.

The group manages compliance risk through the following
key activities:

•

Creating awareness through the training of employees
and other affected stakeholders on the impact and
responsibilities related to legislative requirements.

• Monitoring and reporting on the level of compliance with

legislative requirements.

•

•

Providing assurance that the risks relating to regulatory
requirements are identified, understood and effectively
managed.

Consulting with the business units and providing
compliance opinions with regard to new business
ventures and processes.

Nedbank Group is committed to the highest standards of
integrity, professionalism and ethical behaviour, and requires
all its employees to display these traits to comply with all
relevant laws, rules and standards when conducting the
business of the group.

Nedbank Group’s compliance function is an independent
function that identifies, evaluates, advises on, monitors and
reports on the group’s compliance risk. Without impairing
independence, qualified compliance officers are located in
the different business units to monitor and report on
compliance risk. The compliance function is further assisted
by centralised and decentralised legal and risk functions in
the group.

Compliance risk management tools provided to management
include compliance manuals, compliance risk profiles,
compliance control plans, compliance opinions and
compliance control adequacy and effectiveness reports. These
tools are increasingly integrated into the group’s operating
systems and are technology-enabled.

As a result of the geographical spread of its operations the
group is subject to wide-ranging supervisory and regulatory
regimes. Accordingly, the group’s relationships with regulators
are of paramount importance, specifically the relationship
with the bank supervision department of the South African
Reserve Bank. The group follows a policy of constructive
engagement with regulators.

96

NEDBANK GROUP ANNUAL REPORT 2008

Nedbank Group’s Enterprise Governance Framework
incorporates a full range of governance objectives, and
individual responsibilities are clearly delineated at board,
board committee, group executive and management levels.

In other respects, as far as compliance with King II is
concerned:

•

•

•

•

the Group Directors’ Affairs Committee consists
entirely of non-executive directors, of whom the
minority are independent (the Chief Executive attends
as an invitee);

the Group Audit Committee consists entirely of non-
executive directors, all of whom are independent;

the Group Remuneration Committee consists entirely
of non-executive directors, the majority of whom are
independent; and

the Group Risk and Capital Management Committee
consists entirely of non-executive directors, the minority
of whom are independent.

The Nedbank Group has provided input and commentary on
King III from both a sustainability and ethics content
perspective and eagerly awaits the release of the first draft of
King III.

COMBINED CODE

Old Mutual plc subscribes to the United Kingdom Combined
Code. Nedbank as a subsidiary takes cognisance of all
governance best practices, including the United Kingdom
Combined Code. Nedbank Group is not obliged to adhere to
the United Kingdom Combined Code, but if it were, areas of
non-compliance would be as follows:

•

•

The Chairman, Reuel Khoza, is a non-executive director
who is not independent, due to his position at Aka
Capital, where he is a strategic business partner in terms
of the group’s BEE transaction. He is also a director of
the group’s holding company, Old Mutual plc.

Recognising that the Chairman is not an independent
director and in line with the recommendations of the UK
Combined Code, Chris Ball was appointed to the position
of senior independent director in February 2007. Mr Ball
is, however, a member of more than one committee,
which is not in line with the code. The Group Exco is of
the opinion that it is both efficient and effective that the
same independent director be a member of various
committees, as this avoids any duplication of the
activities of the committees and also ensures that no
issues are overlooked.

•

•

•

The Combined Code recommends that a majority of
independent directors serve on the board to provide the
necessary checks and balances and to ensure that the
bank operates in a safe and sound manner. We continue
to aspire to adhere to the requirements of the Combined
Code, however, due to the limited number of experienced
independent directors in South Africa, it is not always
possible to adhere strictly to the code in this regard.

The Combined Code states that a director is not
independent if cross-directorships exist, or if there are
significant links with other directors. A significant number
of directors of the Nedbank Board hold cross-
directorships. Nedbank believes, however, that the
directors have the strength of character to meet the
independence criteria.

The Combined Code recommends that independence is
compromised if a director has served on the board for more
than nine years. Four directors, namely Michael Katz,
Lot Ndlovu, Johannes Magwaza and Mafika Mkwanazi,
have served longer than nine years on the Nedbank
Board. A process of reelection and rigorous performance
evaluation has, however, been instituted to comply with
the code. Any directors serving for more than nine years
are now required to be reelected each year.

GOVERNANCE/COMPLIANCE CULTURE

Enterprise governance requires commitment at every level of
the organisation and it is therefore essential to create an
effective governance and compliance culture. Creating this
culture also involves the alignment with the ethics and
values of the group.

During 2008 there was a continued focus on governance and
compliance training and awareness programmes to all
employees. Over 88% of the employees have completed the
training in corporate governance and 87% of the employees
have been trained in compliance. The e-learning training
initiatives included the following topics: Introduction of FAIS,
Money-laundering-control Awareness, Employment Equity,
National Credit Act, Occupational Health and Safety Act and
Sustainability.

EGC hosted regular governance and compliance forums to
enable employees to engage with thought leaders such as
Judge Mervyn King, Clem Sunter and Moeletsi Mbeki.

A communications and awareness plan was rigorously applied
in 2008 and included interventions such as email
communications, workshops, awareness through the Nedbank
TV channel, governance and compliance presentations and a
workshop with the main regulators of the bank.

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–

–

–

conducting director induction on governance and
compliance,

addressing employees and executive committees on
governance and compliance,

consulting with the company secretaries on their
policies, board structures, evaluations and practices,

– maintaining contact with the local regulator of each

entity,

–

–

consulting with managing directors on the challenges
they face and

reporting back to the Chief Executive and the Head
of the Nedbank Africa Division.

ENTERPRISE GOVERNANCE FRAMEWORK

Nedbank Group’s Enterprise Governance Framework
incorporates a full range of governance objectives, a
delineation of responsibilities at board, board committee,
Group Exco and management level, and the identification of
champions and key functions for corporate governance
integration into all operations.

Key features in achieving an effective governance process are
the cooperation between executive management and non-
executive directors and the significant emphasis, resources
and structure given to executive management functions to
champion corporate governance on a day-to-day basis and
assist the board, board committees and individual non-
executive directors with corporate governance and
compliance responsibilities.

CORPORATE GOVERNANCE STRATEGY

Formalised governance objectives

The board has formalised its governance objectives and
annually assesses and documents whether the process of
corporate governance implemented by the group successfully
achieves these objectives, measured as part of the Regulation
39(18) [previously 38(5)] Report on the state of corporate
governance in Nedbank Group.

Strategy

The board, together with recommendations from senior
management, is responsible to the shareholders and other
stakeholders for setting the strategic direction of the group
through defining objectives and key policies, which are then
cascaded throughout the organisation.

Stringent investment and performance criteria are
determined and refined by the board. These are monitored on
an ongoing basis through business plan reviews, key

Africa and offshore subsidiaries

The mandate of the EGC Division is enterprisewide and the
Nedbank Group Board is responsible for the state of
corporate governance and compliance in the entire
organisation.

In 2008 the division provided governance and compliance
assistance to the group’s operations in Africa, including:

• maintaining regular contact with managing directors,

company secretaries and compliance officers to ascertain
the state of governance and compliance within each
entity;

•

providing advice and support for those entities in respect
of governance, compliance and sustainability issues;

• monitoring and reporting on governance practices;

•

•

•

providing governance and compliance training to the
governance and compliance officers;

ensuring exposure of the board members to the Nedbank
Group Board committees and executives; and

arranging visits to each of these entities, which entailed

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NEDBANK GROUP ANNUAL REPORT 2008

operational and management performance indicators,
economic policies and trends, annual budgets and major
capital expenditure programmes, significant acquisitions,
disposals and other transactions, as well as criteria important
to Nedbank Group’s relations with its primary stakeholders
and its reputation and conduct as a good corporate citizen.

The above process is supported by a schedule of matters
reserved for the board, versus those that are delegated to board
committees, to ensure that the directors maintain full and
effective control over the group, specifically regarding significant
strategic, financial, organisational and compliance matters.

The board is accountable to Nedbank Group’s shareholders
for exercising leadership, enterprise, integrity and judgement
in directing the organisation to achieve continuing prosperity
in the interests of all the group’s stakeholders.

Dedicated strategy sessions of Group Exco and divisional
executive committees, as well as between the board and
Group Exco, are held to focus on strategy determination and
revision. Progress against strategic objectives is tracked
through the balanced-scorecard methodology.

THE BOARD OF DIRECTORS

Role and composition 

In line with the recommendations of King II Nedbank Group
has a unitary board structure comprising the following 
15 directors at 31 December 2008:

Independent non-executive directors (6)
Patience Mnxasana 
Chris Ball
Johannes Magwaza

Brian Figaji
Thenjiwe Chikane
Mafika Mkwanazi

Non-executive directors (7)
Reuel Khoza (Chairman)
Lot Ndlovu
Michael Katz
Rosie Harris 

Bob Head
Mustaq Enus-Brey
Gloria Serobe

Executive directors (2)
Tom Boardman (CE) 

Mike Brown (CFO)

Note:
Alan Knott-Craig was appointed independent non-executive
director with effect from 1 January 2009. Michael Katz and 
Lot Ndlovu were classified as independent non-executive
directors in February 2009.

Patience Mnxasana was appointed as an independent non-
executive director from 1 October 2008. Jim Sutcliffe,
Barry Davison and Cedric Savage resigned from the board
during 2008.

Three of the seven non-executive directors, including the
Chairman, are not considered independent, as they either serve
as directors or are senior executives of the group’s holding
company, Old Mutual plc. Mustaq Enus-Brey, Gloria Serobe and
Reuel Khoza, are also not considered independent because of
their relationship with Nedbank Group’s BEE partners.

The non-executive directors all have a high degree of
integrity and credibility, and the strong independent
composition of the board provides for independent and
objective input into the decisionmaking process, thereby
ensuring that no one director holds unfettered
decisionmaking powers.

The directors come from diverse backgrounds and bring to
the board a wide range of experience in commerce, industry
and banking. The directors have access to management,
whenever required.

Board appointments and evaluation

Board appointments are conducted in a formal and
transparent manner, in line with the board appointment
policy, by the board as a whole, assisted by the Group
Directors’ Affairs Committee. Any appointments to the
Nedbank Group Board are made taking into account the
need for ensuring that the board provides a diverse range of
skills, knowledge and expertise, the requisite independence,
the necessity of achieving a balance between skills and
expertise and the professional and industry knowledge
necessary to meet the group’s strategic objectives, as well as
the need for ensuring demographic representation.

In general directors are given no fixed term of appointment,
while executive directors are subject to short-term notice
periods. An executive director is required to retire from the
board at age 60, while a non-executive director is required to
retire at age 70, unless otherwise agreed. Reappointment of
non-executive directors is not automatic. Executive directors
are discouraged from holding a large number of directorships
outside the group.

A full assessment of the effectiveness of the board and board
committees, as well as an evaluation of the Chairman of the
board, took place during 2008. An assessment of the board’s
performance by management was included in the process.

The Chief Executive’s performance is also evaluated
according to his performance scorecard, which is approved
annually by the Group Remuneration Committee, with the
input of the Chairman and Old Mutual plc. The feedback
from this board evaluation process contributed to the
production of the Regulation 39(18) Report addressing the
state of corporate governance in the organisation.

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Board charter

The board has a formal written charter that is reviewed on
an annual basis.

The main functions of the board covered by the charter are:

in as much as these may impact the business, financial,
performance, risk profile and IT strategies of the group. This
committee aims to ensure alignment of the prioritisation and
magnitude of IT development spend and investment with
overall group strategy and direction.

determining the overall objectives for the group;

Group Audit Committee

•

•

•

•

•

•

•

developing strategies to meet those objectives in
conjunction with management;

formulating company policies;

rating the group’s own performance;

assuming overall responsibility for risk management;

appointing a chief executive for the group; and

evaluating the performance of the group’s directors.The
charter also formalises policies regarding board
membership and composition, board procedures, the
conduct of directors, risk management, remuneration,
board evaluation and induction.

Board committees

The board committee structure is designed to assist the
board in the discharge of its duties and responsibilities, and
was unchanged during 2008.

Current board committees:

•

Board Strategic Innovation Management Committee

• Group Audit Committee

• Group Credit Committee

• Group Directors’ Affairs Committee

• Group Finance and Oversight Committee

• Group Remuneration Committee

• Group Risk and Capital Management Committee

• Group Transformation and Sustainability Committee

Each board committee has formal written terms of reference
that are reviewed on an annual basis and effectively
delegated in respect of certain of the board’s responsibilities,
which are monitored by the board to ensure that the board
retains effective coverage of and control over the operations
of the group. The directors confirm that the committees
functioned in accordance with these terms of reference
during the financial year.

Board Strategic Innovation Management
Committee

The functions of the Group Audit Committee are primarily to
assist the board of directors in its evaluation and review of
the adequacy and efficiency of the internal control systems,
accounting practices, information systems and auditing
processes applied within the bank in the day-to-day
management of its business, and to introduce measures to
enhance the credibility and objectivity of financial
statements and reports prepared with reference to the affairs
of the group.

Group Credit Committee

The primary roles of the Group Credit Committee are to
approve credit policies and philosophy, set credit limits and
guidelines, confirm that procedures are in place to manage
and control credit risk, approve the adequacy of interim and
year-end provisions and ensure that the quality of the
group’s credit portfolio is in accordance with these
requirements by monitoring credit risk information, processes
and disclosure. This primary role comprises a monitoring
function. An important secondary role of this committee is
the approval of advances above sanctioned and regulatory
authority levels.

Group Directors’ Affairs Committee

The primary roles of the Group Directors’ Affairs Committee
are to consider, monitor and report to the board on strategic
risk, reputational and compliance risk, compliance with King II
and the corporate governance provisions of the Banks Act, as
well as the regulations issued thereunder, and to act as a
nominations committee for board appointments.

Group Finance and Oversight Committee

The chairmen of the Group Audit, Credit, Risk and Capital
Management and Strategic Innovation Management
Committees, as well as Bob Head, are members of this
committee, with the Chief Risk Officer attending by
invitation. Its primary functions are to be a board discussion
forum, to consider the full spectrum of risks in the bank and
to ensure that the board and the various board committees
address the risks effectively.

Group Remuneration Committee 

The Board Strategic Innovation Management Committee has
the broad responsibility to monitor all issues pertaining to
information technology (IT), both operational and strategic,

The Group Remuneration Committee consists of non-
executive directors only and is chaired by an independent
non-executive director.

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NEDBANK GROUP ANNUAL REPORT 2008

Reporting Initiative, an international multishareholder
process, as well as to give the needed attention at board
level to issues pertaining to the FSC, dti Codes on BEE,
training and development, and social and environmental
responsibility.

The board committee structure is also supported by group
executive management committees.

Chairman and Chief Executive 

In line with best practice the roles of chairman and chief
executive are separate. The board is led by the Chairman,
Reuel Khoza, and the executive management of the group is
the responsibility of the Chief Executive, Tom Boardman.This
accepted division of responsibilities at the helm of the group
ensures a balance of authority and power, so that no one
individual has unrestricted decisionmaking powers. At the
same time the board and executive management work
closely together in determining the strategic objectives of
the group.

Company Secretary and director development 

All directors have access to the advice and services of the
Company Secretary and EGC, who are responsible for
ensuring that board procedures and applicable rules and
regulations are fully observed. Further to this, the board has
an established procedure in the furtherance of its duties,
whereby directors may obtain independent professional
advice at the group’s cost.

New directors are informed of their duties and
responsibilities by way of an induction course that is run by
the Company Secretary and other experts on board
effectiveness, corporate governance and banking and

The Group Remuneration Committee is authorised to
approve the aggregate of adjustments to the remuneration
of employees below executive director and managing
executive level. The committee individually approves
adjustments to the total remuneration of members of the
Group Exco. The board, following recommendations made by
the Group Remuneration Committee, individually approves
adjustments to executive directors’ total remuneration. This
committee is also charged with the supervision of the
Nedbank Group Employee Incentive Scheme and is involved
in executive officer succession policy. The committee
considers remuneration in its totality in an integrated and
holistic manner, thereby assisting the board in discharging its
corporate governance duties related to remuneration
strategy, structure and costs.

The Remuneration Report, commencing on page 194, covers
all the corporate governance aspects and disclosure with
respect to remuneration of directors.

Group Risk and Capital Management Committee

In terms of the Banks Act a risk committee is required to
assist the board of directors in evaluating the adequacy and
efficiency of risk policies, procedures, practices and controls;
identify the buildup and concentration of risk; develop risk
mitigation techniques; ensure formal risk assessment; identify
and monitor key risks; facilitate and promote communication
through reporting structures; and ensure the establishment of
an independent risk management function and other related
functions. In addition, this committee also oversees the
group’s policies and procedures to ensure compliance with
Basel II, which has became fully effective in 2008.

The Group Risk and Capital Management Committee is
tasked with groupwide risk monitoring, focusing primarily on
the management and assessment of risk, including market
and trading risks; financial instrument (derivative) usage;
asset and liability management (ALM) risks; Group Asset and
Liability and Executive Risk Committee (Group ALCO)
processes and functions; investment exposures; and risks
related to the underwriting of share issues.

Group Transformation and Sustainability
Committee

The Group Transformation and Sustainability Committee has
the broad responsibility to monitor all issues pertaining to
the integrated economic, social, environmental, human
resources and transformation performance of the group.

This committee assists the board in discharging its
responsibility to ensure that the group proactively addresses
the requirements and/or recommendations for integrated
sustainability reporting as set out in King II and the Global

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the Group Exco, divisional executive committees, operational

risk committees, Group Exco subcommittees and all other

management committees.

Recognising the crucial link between board governance and

management implementation of group strategy, focus has

been placed on governance structures and processes at

management level under the business governance banner,

and a number of activities have been completed:

•

•

•

A business governance toolkit has been prepared to assist

the business clusters in monitoring their committees,

processes and training.

A review of the Group Exco subcommittee structures has

been completed by the Enterprise Governance and

Compliance Division.

A number of the business unit governance and

compliance officers have completed monitoring of their

cluster committees and business governance monitoring

has been integrated into monitoring plans.

We believe that business governance provides an essential

way of bringing corporate governance into the everyday

activities of all staffmembers.

A number of subcommittees ensure this alignment:

The Executive Strategic Innovation Management
Committee assists the Group Exco and the Board Strategic

Innovation Management Committee in discharging their

responsibilities to ensure that Nedbank Group has a well-

coordinated, efficient, effective and properly resourced IT

strategy, enabling the organisation to remain highly

competitive, and that this strategy is timeously

implemented.

technical information, familiarising the directors with the
bank’s senior management and strategies. A formal ongoing
director development programme was instituted during
2006, focusing on relevant briefings of all members of the
board and board committees to ensure that they are kept up
to date with local and international industry developments,
technology issues, risk management and corporate
governance best practice. All business cluster heads also
undertake regular presentations to update the board on
progress and key issues within particular clusters.

During 2008 the director development was continued. The
following topics have been included as part of the internal
training schedule for directors:

•

•

•

•

•

•

Risk-adjusted performance measurement, economic
profit and managing for value.

International trends on remuneration.

Ethics.

Socially responsible investment.

Subprime market collapse – lessons learnt.

Emerging International Financial Reporting Standards
(IFRS) issues, new BA returns and regulatory reporting.

During 2008 the South African Reserve Bank also encouraged
directors to attend external training workshops with the
Gordon Institute of Business Science (GIBS). The programme
put together by GIBS is the Banking Board Leadership
Programme, which was attended by seven boardmembers.
The GIBS director development will continue in 2009.

Succession planning 

Succession planning is an important focus area at board and
at both executive and senior management level. Detailed and
intensive planning is conducted through the Chairman’s
Office in consultation with the Group Directors’ Affairs and
Group Remuneration Committees.

The Chief Executive is required to report regularly to the
board on the group’s management development and
employment equity programmes.

Business governance

Business governance forms the link between the strategic
objectives set by the board and board committees, and the
actions and decisions taken by the management committees.
Primary attributes of this portfolio are the reviewing,
implementing and monitoring of structures, internal controls
and compliance according to the principles of good corporate
governance at management level, involving the functions of

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NEDBANK GROUP ANNUAL REPORT 2008

The Group Asset and Liability and Executive Risk
Committee is responsible for ensuring that the impact of the
following risks is effectively managed in Nedbank Group:

•

•

•

Liquidity risk.

Capital management risk.

Interest rate risk, both local and foreign.

• Market risk, including

–

–

–

currency translation risk,

trading market risk and

financial instruments used for purposes other than
trading (eg balance sheet hedges and investments).

The Mergers and Acquisitions (M&A) Steering Committee
ensures proper corporate governance, oversight and control
of corporate actions taken by the group as a whole. All
operational acquisitions, disposals, restructuring and major
corporate actions within the group are brought to the M&A
Steering Committee.

The primary role of the Executive Transformation and
Human Resources Committee is threefold, namely:

•

statutory compliance in respect of labour legislation;

• monitoring of transformation progress and the

implementation of FSC and dti requirements; and

• Nedbank Group employee recruitment, selection,

remuneration, performance management, maintenance,
training, development and, where necessary, termination.

The primary role of the Executive Taxation Committee is
monitoring tax compliance and tax policy and ensuring the
management of tax risk throughout the group in accordance
with Nedbank Group’s tax policy. Furthermore, the
committee assists the Group Audit and Group Risk and
Capital Management Committees in discharging their
responsibilities relative to the management and monitoring
of tax risk.

The Nedbank Capital Investment Committee’s primary role
is considering private-equity and mezzanine equity
investments and the underwriting of share issues, including
initial approval, periodic reviews and any material changes.

The primary role of the Nedbank Corporate Property
Investment Committee is considering private-equity
investments in client-driven property ventures and strategic
investments in the listed-property sector and allied-service
companies, including initial approval, periodic reviews and
any material changes.The Business Risk Management

Forum’s role is to provide leadership in assessing the impact
of any new regulatory requirements and legislation across
Nedbank Group and promoting, directing and overseeing the
successful implementation thereof.

The primary role of the Advanced Internal Ratings-based
(AIRB) Credit Executive Committee is to approve and
monitor all material aspects of the bank’s AIRB credit system,
and receive regular reporting thereon. In addition, the bank’s
AIRB Credit Framework and policies, including any changes
thereto, are reviewed and approved.

The Nedbank Brand Committee assists the Group Exco in
fulfilling inter alia the following responsibilities:

• Monitoring and reporting on brand health and the

repositioning of the Nedbank brand.

•

•

•

•

Revising and amending, where appropriate, the master
brand repositioning plan in the context of group strategy.

Approving strategies for key brand-building campaigns,
programmes or initiatives.

Regularly performing strategic reviews of competitor
positioning and marketing initiatives.

Ensuring alignment and coordination of groupwide
marketing activities in respect of business and brand
strategy.

• Optimising groupwide marketing spend, including

monitoring and reporting on investment and (where
applicable) making strategic recommendations on
optimal investment.

•

Ensuring consistency in the application of marketing
policies and processes, specifically in the areas of
advertising, corporate identity, sponsorships and market
research.

RISK MANAGEMENT 

Rather than attempting to avoid risk entirely, Nedbank Group
embraces effective risk management as a core competency –
one that allows for optimised risk-taking; is objective and
transparent; and ensures that the business prices for risk
appropriately, linking it to return.

One of the main catalysts to attaining our Deep Green
aspiration to be ‘worldclass at managing risk’ is our successful
implementation of Basel II. The Basel II Framework describes
a minimum international standard for capital adequacy that
national supervisory authorities implement through domestic
rule-making and adoption procedures. This was done in South
Africa in January 2008 when the South African Reserve Bank
introduced new Basel II banking regulations. As a result of the

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The risk management function is headed by the Chief Risk
Officer, Philip Wessels, who is a member of Group Exco and
reports directly to the Chief Executive. In addition, he attends
the board and certain board committee meetings by
invitation.

The board acknowledges its responsibility for the entire
process of risk management and for evaluating the
effectiveness of this process. Management is accountable to
the board for designing, implementing and monitoring the
process of risk management and integrating it with the day-
to-day activities of the group.

The Group Risk and Capital Management Committee is the
board committee responsible for assisting the board in
reviewing the risk management process and any significant
risks facing the group.

INTERNAL AUDIT AND OPERATIONAL RISK

Key role players within the Enterprise Governance Framework
of the group include Group Internal Audit and Operational
Risk.

Internal Audit 

Internal Audit is a centralised independent assurance
function, the purpose, authority and responsibility of which
are formally defined in a charter approved by the board in
line with stipulations of the Institute of Internal Auditors.
Group Internal Audit (GIA) reports on its assessment of the
adequacy and effectiveness of the group’s risk management,
control and governance processes at meetings of the Group
Audit Committee and other board subcommittees charged
with risk monitoring.

The Chief Internal Auditor reports to the Chairman of the
Audit Committee and has unrestricted access to the Chief
Risk Officer, chairmen of the board committees, the Chief
Executive and the Chairman of the board. Administratively,
GIA and the central group risk function are coordinated. GIA
also works closely with Enterprise Governance and
Compliance to ensure that audit issues of an ethical or
governance nature are made known and appropriately
resolved.

GIA has dedicated teams that perform internal audits in the
group’s various business operations, subsidiaries and joint
ventures. Audits are conducted according to a risk-based
approach, and the audit plan is approved by the Group Audit
Committee and updated quarterly to reflect any changes in
the risk profile of the group.

Operational risk

The sophisticated risk assessment methodology used for the
identification, assessment, management, monitoring and
reporting of risk is discussed in more detail under the
operational risk section on pages 165 to 166.

incorporation of Basel II into our business processes, Nedbank
has enhanced the level of sophistication of its risk and capital
measurement and management, and more closely aligns
both its regulatory and economic capital to the risks that the
bank faces.

The effective and appropriate management of such risks is
put into practice through the group’s best-practice
Enterprisewide Risk Management Framework, which considers
both the risks the group faces today and those it may face in
the future. The Enterprisewide Risk Management Framework
comprises three lines of defence as follows:

•

•

•

The first line of defence comprises focused and informed
involvement by the board and the Nedbank Group Exco,
and accountability and responsibility of business
management – all supported by appropriate internal
control, risk management and governance structures,
policies and processes.

The second line of defence consists of independent risk
monitoring and oversight at group level by Group Risk
and EGC functions.

The third line of defence provides independent objective
assurance on the management of risk across the group.
This is given by internal and external audit.

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NEDBANK GROUP ANNUAL REPORT 2008

Internal control 

An essential part of the board’s responsibility is reviewing the
effectiveness of internal control, making use of the
monitoring processes within the company.

This is primarily carried out through the Group Risk and
Capital Management Committee structure within Nedbank
Group. The detailed design, implementation and operation of
adequate internal controls are generally delegated to the
management team of Nedbank Group. These controls provide
reasonable assurance that significant risks are appropriately
managed, that management and financial information
emanating from Nedbank Group is reliable and that assets are
safeguarded. This, together with the associated responsibility
for reviewing periodically the effectiveness of such internal
control, is formally acknowledged by the head of each business
unit once a year. The Banks Act requires that a board of
directors annually reports to the Registrar of Banks on the
adequacy of internal controls, adherence to these,
maintenance of ethical standards, any material malfunctions
and whether a bank will continue as a going concern.

The board reports that:

•

•

no material malfunction in the group’s internal control
system occurred during the period under review;

it is satisfied with the effectiveness of the group’s
internal controls and risk management;

• whenever there is an indication of any significant

business risk or any weakness in controls that may result
in loss or reputational damage, these are recorded and
disclosed in a formal key issues control log, which is
lodged periodically with the board;

•

•

•

•

•

it has no reason to believe that the group will not
operate as a going concern for the year ahead;

it has no reason to believe that the group’s code of
ethics has been transgressed in any material respect;

it has no reason to believe that the group’s policies and
authority levels have not been enforced and adhered to
in all material respects;

there have been no material breaches of compliance with
any laws and regulations applicable to the group during
the period under review; and

there is a documented and tested process in place that
will allow the group to continue its critical business
processes in the event of a disastrous incident affecting
its activities.

In Nedbank Group a process and hierarchy for reporting on
internal control has been approved by the Group Audit
Committee on behalf of the board and is reviewed on an
ongoing basis by GIA and Group Risk.

PERSONAL-ACCOUNT AND 
INSIDER TRADING

Nedbank Group has a formal personal-account and insider
trading policy in place, which is based on current regulatory
requirements, sound risk management and governance
processes, as well as international best practice.

Accordingly, personal-account trades are centrally approved and
monitored by BoE Stockbrokers’ Compliance Department to
ensure that the risk exposures in this regard are appropriately
and effectively managed. The policy serves further to assist
directors and employees with their commitment to
maintaining a culture of integrity, adhering to legislative
requirements and enforcing zero tolerance of crime.

All dealings by directors and the Company Secretary in
Nedbank Group shares are communicated to the Listings
Division of JSE Limited, as dictated by the JSE Listings
Requirements. This information is published through the
Securities Exchange News Service (SENS).

FINANCIAL STATEMENTS AND 
EXTERNAL REVIEW

Going concern 

The directors of Nedbank Group confirm that they are
satisfied that the group has adequate resources to continue
in business for the foreseeable future.

The assumptions underlying the going-concern statement are
debated and recorded at the time of the approval of the
annual financial statements by the board.

This has also been done as part of the interim results process.
For this reason the Nedbank Group Board continues to adopt
the going-concern basis for preparing the financial statements.

Directors’ declaration 

The directors of Nedbank Group confirm and acknowledge that:

•

•

•

•

•

it is the directors’ responsibility to prepare financial
statements that fairly present the state of affairs of the
company at the end of the financial year and the profit
or loss and cashflows for that period;

the auditors are responsible for reporting on whether the
financial statements are fairly presented;

adequate accounting records and an effective system of
internal control and risk management have been
maintained;

appropriate accounting policies, supported by reasonable
and prudent judgements and estimates, have been
applied consistently, except as otherwise disclosed; and

applicable accounting standards have been adhered to or,
if there has been any departure in the interest of fair
presentation, this has been disclosed, explained and
quantified.

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ENTERPRISE GOVERNANCE AND COMPLIANCE ... CONTINUED

External auditors

The group’s joint external auditors are Deloitte & Touche and
KPMG Inc.

The report of the independent auditors on page 185 sets out
the responsibilities of the external auditors with regard to
reviewing the financial statements and the group’s compliance
with both statutory and accounting standard requirements.

The external audit is structured to provide sufficient evidence
to give reasonable assurance that the financial statements
are free from material misstatement. The audit review also
considers the external auditors’ support of the directors’
statements on the group as a going concern and adequacy of
the internal control environment.

The external auditors provide non-audit services to Nedbank
Group.

A policy, in line with that of Old Mutual plc, regarding the
provision of non-audit services by the group’s auditors is in
place. This process is structured between management and
the external auditors to ensure that the guidelines, requiring
approval by the Audit Committee depending on the quantum
of fees involved, are adhered to and monitored 
by cluster Enterprise Risk Committees and the Nedbank and
Old Mutual plc Audit Committees on a quarterly basis.

The total fee for non-audit and audit related services
provided by the external auditors for the year ended 
31 December 2008 was R20 million (2007: R25 million). This
amounts to 21,3% of the total audit and non-audit services
(2007: 27%).

Internet site 

Nedbank Group’s internet site (www.nedbankgroup.co.za) has
extensive information on the group, its annual, preliminary,
interim and sustainability reports and share price. It also
provides a regular update on business developments and
other matters of interest in relation to Nedbank Group.

Code of Ethics and organisational integrity

As a values-driven organisation, Nedbank Group sees its
values as an effective means of ensuring consistent actions
and behaviours across the group. To this end the group values
were developed in consultation with all staffmembers and
provide a clear framework on which the culture of the
organisation is built. The Nedbank Group values are:

Integrity
Be honest, trustworthy, truthful, consistent and open. Act
according to the highest ethical standards. We communicate
openly, directly and ethically.

Respect
Treat others as you would have them treat you. Use diversity
as strength. Listen to others and treat people with dignity.

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NEDBANK GROUP ANNUAL REPORT 2008

Provide individuals with fertile ground in which to grow. Treat
everyone in the organisation as important. We foster
individual strength to build the whole.

Accountability
Be prepared to make commitments and be judged against
your commitments. Deliver on commitments. We take
responsibility for our actions.

Pushing beyond boundaries
Play to the maximum of your abilities – as individuals, as
teams and as an organisation – across boundaries. We always
strive to break new ground, fuelled by our passion and
commitment.

Being people-centred
Invest in people. Create empowering environments through
development, support, mentoring, coaching, recognition and
reward. People are the source of our strength.

These values, which are closely aligned to the group’s holding
company, Old Mutual plc, have also been incorporated into
the groupwide Code of Ethics, which forms the foundation of
the Nedbank culture.

During 2008 this Code of Ethics, which is available on our
website at www.nedbankgroup.co.za, has been reviewed and
aligned with accepted international standards. Increasing
awareness of this code among employees remains a key
focus area and is viewed as playing a crucial part in making
governance a reality for Nedbank staffmembers. For this
reason awareness communications and various practical case
studies have been sent out during the year, reinforcing the
principles and importance of values and ethics within the

organisation. A total of 78 awareness sessions were also
conducted, including subsidiary board training, executive
training, and the training of managers and employees. The
focus of these sessions was on the Code of Ethics and the
Conflict of Interests and Gift Policies. The Tip-offs
Anonymous reporting line has also been marketed, resulting
in awareness among employees of their responsibility to
report incidents of unethical behaviour. To create further
awareness the ‘Ethics and Principles of Corporate Citizenship’
booklet was developed and distributed to all employees at
the end of 2007 and beginning 2008. The group television
channel has also been used to introduce briefings and ethics
tips to employees.

Business training was rolled out for various business units.
This year the focus was on subsidiary board training and
management and employee training. The Nedbank Board also
attended an awareness session as part of board training by
the Ethics Institute of South Africa. The Ethics Institute of
South Africa is assisting the group with the rollout of its
training programmes, and four accredited ethics officers form
part of the EGC Division.

The Compliance Tool was launched during 2008 as an
electronic mechanism for the declaration of all gifts given
and received. It also serves as a repository for declarations of
outside interests and allows employees to acknowledge
formally that they have read and understood policies. It even
offers a short survey to test their understanding of the
principles used in the policy. The rollout of the Conflict of
Interests Policy, the Code of Ethics and the Gift Policy via
this electronic tool will be finalised during 2008, while the
rollout of the other six EGC policies or acknowledgements
will commence at the end of January 2009.

A generic induction presentation has been developed,
covering the Code of Ethics, the Conflict of Interests Policy,
the Gift Policy and Sustainability, and this has been
distributed to the business to be included in all employee
induction programmes.

Nedbank Group also has an ethics framework, which includes
the addressing of issues such as conflict of interests, gifts and
personal-account trading, for which policies are in place and
reviewed annually to guide employee behaviour.

Group Risk Services, Human Resources, Internal Audit and the
HR Ombudsman assist in the reporting and resolution of
ethics issues that arise in the business.

The Nedbank Group Board Ethics Statement remains in place
and was included in the Code of Ethics during 2008.

The EGC Division has been consulting with various external
stakeholders to simplify the Code of Ethics and develop
innovative ways to create better awareness of, and buy into,
a highly ethical corporate culture. The Code of Ethics is also
currently being extended to external stakeholders.

The Nedbank Group Supplier Code of Conduct has been
developed and will be attached to all contracts managed by
Group Procurement along with the relevant
acknowledgements required by suppliers.

A staff survey on ethics that was conducted during 2008
yielded pleasing results, with the mean number of
respondents increasing from 3 358 in 2007 to 5 585.
The overall staff rating of the organisation increased from
83% to 86%, which represents a significant positive shift in
employee perception. The ethics indicator is the highest
indicator in the group for three years running, indicating that
employees are aware of the policies in this regard and
understand what is required of them.

It was accepted, in principle, by Group Exco that an ethics
measurement be incorporated into the balanced scorecards
of all employees. For 2009 ethics will be included in the
Group Exco scorecards as a modifier and measured by the
Nedbank ethics indicator (NEI). The NEI will be finalised by
end January 2009. A project approach will be followed to
address gaps when the results of the indicator are analysed.

Code of Banking Practice

Nedbank Group subscribes to the Code of Banking Practice of
The Banking Association South Africa, which governs all
relationships with authorities, clients, competitors,
employees, shareholders, local communities and other
primary stakeholders. Appropriate procedures and
mechanisms are in place to ensure full adherence to the code
and the group works with the Banking Ombudsman’s Office
to ensure that client complaints are resolved appropriately
and timeously.

POLITICAL CONTRIBUTIONS

While Nedbank Group fully supports the South African
democratic system, it does not contribute to individual
political parties. It may, however, periodically enter into
banking transactions with various parties in the ordinary
course of business. The group’s apolitical stance extends to
declining to fund projects that are specifically undertaken
under the auspices of political parties. That said, Nedbank
Group assists with worthy causes initiated by civic
organisations, and it is possible that these initiatives may
sometimes involve political figures. This in no way implies
any support of the political affiliations of such persons.

Anti-money-laundering and combating the
financing of terrorist activities 

Nedbank Group remains committed to combating money
laundering and terrorist financing through various policies
and procedures designed to ensure that statutory duties,
regulatory obligations, and agreed standards are met. The
Business Risk Management Forum (BRMF), a Group Exco
subcommittee, ensures consistent implementation of the

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107

 
 
 
 
 
 
 
ENTERPRISE GOVERNANCE AND COMPLIANCE ... CONTINUED

Money-laundering Control Programme (MLCP) throughout
the group. In 2008 the following deliverables were achieved:

assist business in its decisions regarding positive matches
against the sanctions lists.

• Ongoing restriction of clients whose records reflect ‘not
verified’ after a specified period following account
opening. At 31 December 2008 altogether 126 190 not-
verified records have been restricted and the remaining
31 329 not verified records are in the bank’s restriction
process.

•

•

•

•

•

Training for anti-money-laundering (AML) and the
combating of the financing of terrorist and related
activities (CFT) remains a high priority. At end December
our training statistics were as follows:

–

–

–

14 535 of the selected 27 511 employees completed
the awareness training for AML/CFT within the past
24 months;

14 903 of the 18 180 Retail employees completed
the Money-laundering Control Basic Training; and

3 285 of the 5 972 Corporate employees completed
Money-laundering Control Specialised Training for
Corporate and Merchant Banking.

The Awareness Training for AML/CFT (an e-learning
intervention) was updated to include legislative
amendments. The training intervention has been rolled
out to the group and forms part of Nedbank’s ongoing
training requirement.

Annual directors’ training for money-laundering and
terrorist-financing risk management has been developed
and implemented to meet the South African Reserve
Bank and Financial Intelligence Centre obligations and
international requirements.

The Financial Action Task Force/Eastern and Southern
Africa Anti-money-laundering Group mutual evaluation
of South Africa’s anti-money-laundering and counter-
terrorist financing regime onsite meeting was held at
Nedbank on 11 August 2008. Nedbank was an active
participant in the evaluation process.

The group-level Policy for Anti-money-laundering and
the Combating of the Financing of Terrorist and Related
Activities, and the Policy for Client Acceptance,
Maintenance and Monitoring were updated as part of the
annual review.

• Guidelines for Politically Exposed Persons, Non-
governmental Organisations, Non-profitable
Organisations and beneficial ownership were developed.

•

A sanctions programme was initiated whereby Nedbank
has implemented a governance forum and structures
relating to policies/guidelines on sanctions lists. A process
has been developed to govern key decisions relating to
the development and approval of sanctions lists. A
sanctions list guidelines document has been developed to

•

•

•

A client identification and profiling project was initiated
proactively to profile clients during the client takeon
process and to maintain and update the client risk profile
as each client’s risk profile changes.

A crossborder monitoring project has been initiated to
address regulatory compliance for all crossborder
transactions.

There have been positive interactions with the regulator
and the supervisors, contributing to sustainable and
trusting relationships that are beneficial to all parties.

Financial Advisory and Intermediary Services Act

The Financial Advisory and Intermediary Services Act (FAIS)
has been in effect since October 2004, protecting consumers
against improper financial advice and ensuring a prescribed
level of professionalism within the financial services industry.
Managed centrally by EGC, Nedbank Group has, through
ongoing compliance monitoring and reporting, strived to
adhere to all requirements of this legislation.

Extensive efforts have been made in bringing our advisory
and intermediary staff up to the required ‘fit and proper’
levels, as well as in driving accountability to management,
who assume the role of ‘key individual’ as required by the
legislation.

Ongoing process and system enhancements ensure that our
client-facing staffmembers who are impacted by FAIS are
able to deliver proper advice and provide all necessary
disclosures to our clients. Backend solutions have also been
enhanced to ensure adequate management of the Register of
Representatives, making this solution one of the most
sophisticated in the industry.

National Credit Act

The National Credit Act (NCA) was promulgated on 
15 March 2006 and came into effect on 1 June 2006.

Nedbank, as required by the legislation, has registered five
‘credit providers’.

Significant strides have been made in the implementation of
the requirements of the NCA thus far and there remains
continued focus on streamlining and improving the full
solution.

The Group Directors’ Affairs Committee, a subcommittee of
the board, is currently overseeing the implementation of the
NCA.

Sustainability reporting

Nedbank Group has issued a separate transformation and
sustainability report in accordance with the Global Reporting
Initiative (G3) and the Global Reporting Initiative Financial

108

NEDBANK GROUP ANNUAL REPORT 2008

Sector Supplement guidelines, taking into account the
recommendations of King II. An overview of the report is
available on pages 110 to 115 below. The full report is
available at www.nedbankgroup.co.za.

Board meetings 

In 2008 the Nedbank Group Board met eight times. The
record of attendance at board and board committee
meetings for Nedbank Group and Nedbank Limited for 2008
is shown below.

Number of meetings
Directors
CJW Ballxx
TA Boardman*
MWT Brown*
TCP Chikanex
BE Davisonx 2
MA Enus-Brey#
B de L Figajix
R Harris#
RM Head#
MM Katz#5
RJ Khoza#
JB Magwazax
ME Mkwanazix
NP Mnxasanax 4
ML Ndlovu#5
CML Savagex 1
GT Serobe#
JH Sutcliffe# 3

Number of meetings
Directors
CJW Ballxx
TA Boardman*
MWT Brown*
TCP Chikanex
BE Davisonx 2
MA Enus-Brey#
B de L Figajix
R Harris#
RM Head#
MM Katz#5
RJ Khoza#
JB Magwazax
ME Mkwanazix
NP Mnxasanax 4
ML Ndlovu#5
CML Savagex 1
GT Serobe#
JH Sutcliffe# 3

* Executive
# Non-executive

Nedbank
Group
Limited
Board

Nedbank
Limited
Board

8

8/8
8/8
8/8
6/8
5/6
7/8
8/8
6/8
8/8
8/8
8/8
7/8
8/8
2/2
7/8
3/4
6/8
5/6

8

8/8
8/8
8/8
6/8
5/6
7/8
8/8
6/8
8/8
8/8
8/8
7/8
8/8
2/2
7/8
3/4
6/8
5/6

Nedbank
Group
Directors’

Affairs Remuneration
Committee

Committee

Group Remuneration
Committee
prescheduled

Group
Group Remuneration
Committee
short notice/
ad hoc

4

4/4

3/3
1/1

3/4
4/4
3/4
4/4

4/4

3/3

6

6/6

6/6

1/1

6/6

3/3

3/4

5

5/5

5/5

0/0

5/5

3/3

3/4

1

1/1

1/1

1/1

1/1

0/0

0/0

Board
Strategic
Innovation
Group
Audit Management
Committee

Committee

Nedbank
Group Risk
and Capital
Group
Credit Management
Committee

Committee

Group Trans-
formation and
Sustainability
Committee

Group 
Finance and 
Oversight 
Committee

6

6/6

4/6
4/5
2/2

2/2

6/6

1/1

3/3
1/2

4

4/4

3/4

4/4

4/4

2/2

4

3/4

4/4
3/4

4/4

4/4

4

4/4

3/3
1/1

4/4
3/4

4/4

4/4

5

5/5

4/5

4/5

3/5

4/5

5/5

4

4/4

3/3
1/1

4/4
4/4

4/4

2 Resigned as director with effect from 2 August 2008
3 Resigned as director with effect from 9 September 2008
4 Appointed as director with effect from 1 October 2008
5 Changed to independent non-executive director with effect from 

20 February 2009

x

Independent non-executive

xx Senior Independent non-executive
1 Resigned as director with effect from 14 May 2008

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NEDBANK GROUP’S 
APPROACH TO SUSTAINABILITY

Nedbank Group aims to be a responsible corporate citizen at
all levels. It recognises that a primary focus of its business is
to maximise shareholder value, but while paying due regard
to the social and environmental impact associated with such
achievement.

Human rights are enshrined in the group’s strategies, policies,
procedures and processes, and transformation and black
economic empowerment (BEE) are actively pursued. The
group remains absolutely committed to the development of
an engaged, progressive, high-performance culture,
underpinned by integrity and a clear code of ethics.

Acknowledging that the challenges of climate change extend
beyond the environment, and also impact the economic and
social arenas, Nedbank Group holds itself accountable to
address climate change, and has approached this by issuing a
climate change position statement and by setting reduction
targets in respect of its energy, paper and water usage, as
well as its business travel.

The group is fully aware of its responsibility to Make Things
Happen for the communities that support it, and on which it
has an impact. As a major banking group in a country in
which sections of the community are beset by a lack of
education, extreme poverty and ill health, the group
considers it a privilege to be in a position to help address
these issues.

2008 IN SUMMARY: A SUSTAINABILITY
OVERVIEW

In 2008 Nedbank Group continued to instil a culture of
sustainability across its operations. The bank succeeded in
translating a number of strategic aspirations into positive
actions, integrating sustainability measures as components of
its various business processes, and incorporating specific
sustainability measures into performance assessments.

Based on the belief that engagement has the potential to
encourage change, the group continues its efforts to ensure
that its culture, values and policies influence the behaviour of
those with whom it partners and interacts.

The year saw Nedbank continuing its support of the 
UN Global Compact and its principles on human rights,
labour issues, the environment and anti-corruption as well as
its commitment to the Equator Principles. The group
continues in its role as Cochair of the United Nations
Environment Programme Finance Initiatives (UNEP FI) African
Task Force and is actively engaged in the development and
financing of sustainable solutions within the African context.

Access to finance was one of the bank’s major growth areas
and Nedbank reached 1 million Mzansi clients. The reduction

As South Africa’s ‘green bank’, Nedbank Group has an
enviable reputation for consistently demonstrating absolute
commitment to sustainability principles across its various
operations. Sustainability considerations have formed part of
the group’s core focus for some 18 years – long before their
importance became widely recognised within the broader
business community. Sustainability is integral to Nedbank’s
strategic objectives and is fully incorporated into the way the
group conducts its business, formulates its risk management
processes, implements policies to govern behaviour and
conduct, and assesses the performance of its employees,
managers and executives.

Nedbank Group has embraced sustainability in all its facets,
by placing environmental, social and ethical matters at the
heart of the business. The group’s values, risk management,
and business processes underpin its strategic approach to
sustainability and reflect the desire of the business to
preserve the future for all its stakeholders.

Ultimately, Nedbank Group embraces sustainability, not just
as an environmental or social issue or as one element of
governance or ethics, but rather as a means of bringing all of
these issues together into a business model designed to
ensure the long-term growth of a successful bank – for the
benefit of all.

110

NEDBANK GROUP ANNUAL REPORT 2008

in retail bank fees over the past two years has also served to
make Nedbank the most affordable of the big four banks –
particularly in the lower-income and mass markets.

The group remains firm in its belief that its employees are at
the heart of its success and has continued its efforts at
recruiting and retaining the best talent in South Africa. The
culture of the bank was further enhanced in 2008 by the
ongoing promotion of behavioural change through employee
participation. Staffmembers responded by consistently
looking beyond themselves to the needs of others,
undertaking extensive voluntary work, and making significant
financial contributions to those less fortunate.

Conservation remains a key sustainability focus area and the
bank’s partnership with the World Wide Fund for Nature –
South Africa (WWF-SA) entered its third year. In 2008 the
total contribution to The Green Trust by the Nedbank Group
reached more than R90 million since inception – money that
has been well-spent on over 150 major environmental
projects, with nearly R70 million of it going into
conservation.

The year under review also saw the group partnering and
supporting the African Chapter of the Prince’s Rainforest
Trust, a collaborative effort to stop deforestation in Africa.

As part of its commitment to environmental management
and, particularly, the minimisation of its carbon footprint, the
group issued a climate change position statement, supported
by intensity reduction targets and measures aimed at
managing and minimising its carbon footprint.

These and other material sustainability issues are discussed
in detail in the full 2008 Nedbank Group Sustainability and
Transformation Report and are outlined briefly on the
following pages.

ENTERPRISE GOVERNANCE: ‘MOST
RESPECTED BANK’

Refer to full Sustainability Report, section 2: Enterprise
Governance and Compliance

The sustainability of Nedbank Group’s operations is ensured
by means of strict adherence to competitive governance and
compliance practices, which include good governance, strong
ethics and a culture of compliance; effective management of
social, environmental and ethical risks; and a commitment to
responsible lending.

The group’s governance and compliance philosophy
recognises the importance of ensuring ongoing adherence to
legislative, regulatory and supervisory requirements as a
critical component of effective risk management and sound
enterprise governance.

Enterprise governance is at the heart of the group’s
operations and strategically links good governance to
effective performance management. The enterprise
governance and compliance framework ensures a consistent
focus on day-to-day governance requirements without losing
sight of the long-term growth and profitability of the group.
Add to this our commitment to proactive compliance with
regulatory statutes and standards, and well-governed,
regularly monitored internal policies and procedures, and the
group boasts a governance and compliance approach that is
not only industry-leading, but also highly enabling for the
whole Nedbank Group.

SHAREHOLDERS: ‘BEST PLACE TO INVEST’

Refer to full Sustainability Report, section 3: Shareholders

Nedbank Group recognises that sound investment decisions
can only be made when the investor has sufficient
information at his or her disposal. As the owners of the
group, Nedbank shareholders have a vested interest in its
sustainable success, and the group itself has a responsibility
to ensure that they have all the information they need to
make considered investment choices.

The group therefore places top priority on providing
shareholders with up-to-date, comprehensive information
regarding its activities and performance. In this way
shareholders are not only empowered to make informed
investment decisions, but also encouraged to provide
valuable feedback to enhance operations and profitability.

In 2008 Nedbank Group was again widely recognised and
applauded by the local and international financial services
industries for the quality of its investor relations.

CLIENT SERVICE: ‘BEST PLACE TO BANK’

Refer to full Sustainability Report, section 4: Our clients

As a bank for all South Africans, Nedbank Group recognises
that sustainable success begins and ends with satisfied
clients. Which is why, in 2008, the group once again devoted
considerable resources and energy to listening to its clients,
understanding their unique needs, and delivering appropriate
solutions to Make Things Happen for them.

Attracting, retaining and delighting clients remain
fundamental aspects of Nedbank Group’s sustainable
business success. Superior client service is a key strategic
focus area – as is expanding the group’s client base,
particularly into previously unbanked communities. In
addition to the ongoing enhancement of the products and
services offered by the group’s three main business clusters,
namely Nedbank Retail, Nedbank Corporate and Nedbank

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NEDBANK GROUP’S APPROACH TO SUSTAINABILITY ... CONTINUED

Capital, 2008 saw the group in its entirety sharpening its
focus on delivering excellence in client service. Client
satisfaction index results over the past three years have
continued their upward trend. A notable 2008 achievement
was Nedbank’s rating as the top service bank in South Africa
for the second year in a row by the independent Ask Afrika
Orange Index.

During 2008 there was a significant focus on the South
African small and medium-enterprise (SME) market, as it is
Nedbank Corporate’s view that small- and medium-sized
enterprises have a crucial role to play in job creation, income
generation, and the overall economic growth of the country.
Nedbank also continued to build its capacity to fund
affordable-housing developments.

In line with the strategy to expand into selected areas
throughout Africa, Nedbank Group and Ecobank Transnational
Incorporated (ETI), the parent company of Ecobank Group,
have entered into a strategic business cooperation
relationship to give clients access to a combined Pan-African
banking network covering 30 countries (including South
Africa) with over 1 000 branches and banking outlets across
the continent.

Nedbank Capital, as the first African bank to have subscribed
to the Equator Principles, continued to focus on responsible
lending. The third annual Nedbank Capital Green Mining
Awards, which acknowledge and celebrate the contribution
that responsible mining and mineral beneficiation makes to
the economic development of Africa, took place in 2008.

To position Nedbank and its clients appropriately for a
carbon-constrained future Nedbank Capital established a
dedicated carbon finance team to view carbon dioxide and
other emissions holistically.

EMPLOYER OF CHOICE: ‘BEST PLACE TO
WORK’

Refer to full Sustainability Report, section 5: Our staff

As a bank that has built its success on doing things
differently, Nedbank Group recognises that it is its employees
that differentiate the bank from its competitors. In 2008 the
group built on its commitment to staff to celebrate their
differences, continue transforming, and create a culture in
which all employees can realise their potential, achieve their
career and personal aspirations, give back to their
communities, and Make Things Happen, for themselves and
others. This was achieved via a particular focus on the four
human resources areas of building a unique culture for
competitive advantage, embedding talent management,
ongoing learning and development, and accelerating
transformation.

In 2008 the group developed and implemented a
comprehensive employment equity plan that includes both
qualitative and quantitative measures, as well as ongoing
review and enhancement of the group’s remuneration and
recognition programmes. Talent plans were also developed in
all business clusters and Group Human Resources finalised its
legislative and governance processes for people with
disabilities.

Surveys conducted among employees showed solid
improvements on the group’s culture alignment scores and
increasingly positive staff culture results, particularly in the
areas of leadership and communication.

The intention in 2009 and 2010 is to continue promoting
employment equity and implementing the diversity
management programme as a key driver of the
organisational culture.

SUPPLIER RELATIONS: ‘PARTNERING FOR
MUTUAL SUCCESS’

Refer to full Sustainability Report, section 6: Supplier relations

Nedbank Group’s relationship with its suppliers is built on
mutually beneficial partnerships that not only ensure a
reliable supply of required products and services, but also
assist those suppliers to grow and develop their organisations
for the benefit of the economy, the environment and society
as a whole.

A dedicated BEE procurement management unit is located
within the central group procurement area and this unit sets
the framework rules for BEE procurement based on the
agreed Nedbank Procurement Policy, while engaging with all
business clusters in achieving group BEE goals and targets.
The formalised Group Procurement Policy was amended and
updated during 2008 to include a Supplier Code of Conduct.
Regular supplier forums were also conducted to discuss
problems and find solutions.

Nedbank Group remains committed to achieving its stated
procurement targets for SMEs as a means of contributing to
enterprise development (ED) in South Africa and helping to
empower BEE businesses. In 2008 the group achieved an
overall BEE spend ratio of 53,7% (2007: 53,1%).

SUPPORTING COMMUNITIES: ‘THE CARING
BANK’

Refer to full Sustainability Report, section 7: CSI and staff
volunteerism

In keeping with its aspiration to be ‘highly involved in the
community’, Nedbank Group actively continued seeking out
opportunities to contribute to local communities and non-
profit organisations as part of its sustainability commitments
in 2008.

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NEDBANK GROUP ANNUAL REPORT 2008

The group is committed to contributing to the upliftment of
people and communities across the country and does so via
an accessible, cooperative corporate social responsibility
programme that encourages staff involvement and strives to
deliver sustainable, life-changing benefits to those it touches,
rather than merely being a financial handout.

During the year under review Nedbank Group built further
on its reputation as a caring bank, and intends continuing in
this vein in 2009 by Making Things Happen and making a
positive contribution to the lives of those in need through
the proactive identification of developmental needs.

Ultimately the group aims to become a benchmark of
effective corporate social investment (CSI), and the total
donation of some R43,5 million to CSI projects in 2008, the
steady growth in takeup of Nedbank Affinity-linked products,
as well as the ongoing contribution by staffmembers through
the various volunteerism projects, constitute further steps
towards realising this vision.

MINIMISING OUR IMPACT ON THE
ENVIRONMENT: ‘THE GREEN BANK’

Refer to full Sustainability Report, section 8: The environment

Nedbank Group recognises that being a financial services
organisation doesn’t excuse it from taking responsibility for
looking after the environment. In fact, the group considers it
a strategic imperative to minimise any possible negative
environmental effects of its operations, and encourages its
business partners, suppliers and clients to do the same. The
bank’s commitment to the environment extends far beyond
legislative compliance, and is an integral part of its strategy
and a core focus area of its sustainability efforts.

In 2008 the group was once again included in the Dow Jones
World Sustainability Index (DJSI) – the fifth year in
succession that this has been the case. Nedbank Group is
one of only 25 banks worldwide and three companies with
primary listings in South Africa to be included on the index.

As the first South African bank to join the UNEP FI Unit in
2004, the group continued its support during 2008 by
cochairing the UNEP FI African Task Force, which has the
responsibility for ensuring close collaboration between more
than 280 banks, insurance and reinsurance companies, fund
managers and venture capitalists to promote links between
the environment and financial performance. Nedbank also
participated in the Climate Change Work Stream’s Project
Energy Efficiency Survey conducted during 2008.

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NEDBANK GROUP’S APPROACH TO SUSTAINABILITY ... CONTINUED

The bank’s unique conservation partnership with WWF-SA,
which spans some 18 years, was strengthened in 2008 with
WWF-SA providing direct input into Nedbank Group’s
sustainability and environmental policies, strategies, systems
and training, while the group provided finance to a number
of WWF-SA projects.

TRANSFORMATION: ‘A BANK FOR ALL’

Refer to full Sustainability Report, various sections

Nedbank continues to approach transformation from a
foundation of trust in which all staffmembers and
stakeholders are given the time and opportunity to make
their voice heard on the issue. Transformation is still viewed
as a strategic imperative and a business opportunity rather
than a matter of legislative compliance. In all its
transformation efforts balance remains key, and the business
case for transformation is driven at three levels by
stakeholders, clients and staff.

In 2008 the group enjoyed the following highlights in terms
of its ongoing transformation efforts:

•

•

•

•

•

•

•

Attained an A- rating under the Financial Sector Charter
targets.

Exceeded the 2008 targets in all categories of
employment equity, except black senior management,
where 88,7% of target was attained.

Improved skills development figures steadily and made
major strides in preferential procurement.

Exceeded black SME and agriculture financing targets.

First bank to reach 1 million Mzansi clients.

Exceeded cumulative investment targets by 187,5%.

BEE transaction financing remains very strong with the
cumulative target for 2008 significantly exceeded.

CONCLUSION

As a company that continually strives to be economically
viable, socially responsible and environmentally sound,
Nedbank Group continues to protect and grow its reputation
as the country’s truly ‘green bank’. In this way the group
continues to live out its commitment to Make Things
Happen by serving as a driver of sustainability both within its
business and on a far broader scale. A gratifying achievement
was receiving the Emerging Markets Sustainable Bank of the
Year Award for the Middle East and Africa at the Financial
Times Sustainable Banking Awards function in London for the
second year in a row.

Please refer to www.nedbankgroup.co.za for an electronic
copy of the complete 2008 Transformation and Sustainability
Report.

Closer to home, Nedbank Group cemented its Environmental
Policy, which sets out high-level principles for environmental
management across the group and forms part of its
operating philosophy, policies, standards and values. In 2008
the group also further embedded the principles contained in
its environmental and corporate responsibility policies by
including specific focus areas and deliverables in a corporate
responsibility framework. The bank also established a group
environmental forum with the aim of, among others,
ensuring the effective coordination of environmental
initiatives across the group.

Climate change remains a core focus area and Nedbank
Group believes in playing its part in increasing energy
efficiency and reducing carbon emissions. In line with its
commitment to the environment, the group drew up a
formal climate change position statement in 2008 to serve
as a public declaration and pledge to reduce its impact on
the environment by limiting energy, paper and water usage
and reducing carbon emissions.

To position Nedbank and its clients appropriately for a
carbon-constrained future Nedbank Capital established a
dedicated carbon finance team to view carbon dioxide and
other emissions holistically.

2008 saw Nedbank Group involving itself in efforts to stop
deforestation in Africa and preserve our world’s rainforests by
joining the Prince’s Rainforest Project (PRP), the African
chapter of which is aimed at helping to focus attention on
Africa and find solutions for the problem of deforestation on
the continent.

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NEDBANK GROUP ANNUAL REPORT 2008

VALUE-ADDED
statement

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Value added is the wealth created from providing 
quality services to clients
Net interest income
Impairment losses on loans and advances

Income from lending activities
Non-margin-related income*
Other expenditure

Value allocated
– Employees
– Government (taxes)**
– Shareholders***
– Retentions for growth

Depreciation and amortisation
Retained income

2008

2007

Rm

%

Rm

%

16 170 
(4 822)

11 348 
11 639 
(5 671)

17 316 

7 040 
2 242 
3 330 
4 704 

1 030 
3 674 

94 
(28)

66 
67 
(33)

100 

41 
13 
19 
27 

6 
21 

14 146 
(2 164)

11 982 
10 796 
(5 434)

17 344 

7 079 
2 648 
3 018 
4 599 

976 
3 623 

81 
(12)

69 
62 
(31)

100 

41 
15 
17 
27 

6 
21 

* Includes non-interest revenue, foreign currency translation gains/losses, non-trading and capital items, and share of profits of associates and joint ventures.
** Includes direct and indirect taxation.
*** Value is allocated to shareholders in respect of cash dividends (does not include the underlying value of capitalisation shares awarded) and income attributable to

minority shareholders.

17 316 

100 

17 344 

100 

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RISK AND CAPITAL MANAGEMENT REPORT

Philip Wessels (50)
Chief Risk Officer

14 years’ service • BCom, CTA, CA (SA), Diploma in Advanced
Banking Law, Institute of Stockbrokers

Under the leadership of Philip Wessels risk management has evolved
significantly within Nedbank over the past five years. Prior to his
appointment as Chief Risk Officer in 2004 Philip held a position as an
executive in Nedbank Business Banking and Nedbank Corporate. In
addition, he was previously an executive director of BoE Limited,
Managing Director of BoE Securities, Chief Executive of BoE International
(London) and Managing Director of BoE Bank Business Banking and of
Boland Bank between 1995 and 2003.
Prior to that Philip was also a partner at Deloitte & Touche.

As the Chief Risk Officer of the group, Philip heads Group Risk, ensuring
that risk is well-embedded and embraced throughout the organisation,
thus providing assurance that the bank is well-managed. Policy setting,
risk frameworks, governance structures and robust risk reporting all
contribute to achieving Nedbank Group’s deep-green aspiration of
worldclass risk management.

ACHIEVEMENTS AND REVIEW OF THE PAST
YEAR

The volatility faced by banks and other financial institutions
has emphasised that risk management is key to being at the
forefront of today’s financial landscape. As a process it is
critical that risk management is at all times embedded, but
evolving in nature so that it remains dynamic and relevant to
the business of the group.

Nedbank’s three-lines-of-defence strategy has played a
significant role in implementing strong risk governance,
which is applied pragmatically and consistently as the
foundation for successful risk management.

The three-lines-of-defence concept forms the backbone of
the Enterprisewide Risk Management Framework (ERMF),
which has been instrumental in assisting the group in
weathering the international financial storm. It incorporates a

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NEDBANK GROUP ANNUAL REPORT 2008

strong sense of accountability, responsibility, independence,
reporting, communications and transparency, both internally
and with all key external stakeholders.

In recognition of the success of Nedbank’s risk strategy the
Institute of Risk Management South Africa (IRMSA) for the
second consecutive year recognised Nedbank for having the
Most Effective Company Risk Management Programme.

OUTLOOK FOR THE YEAR AHEAD

Through the annual strategic business planning exercise
Group Risk identified seven main strategic focus areas for
2009, which are aligned with the strategic focus areas of
Nedbank Group. These focus areas include the following:

• Optimise economic profit through worldclass risk

management. This will be achieved through the correct
pricing of risks together with an increased focus and early
recognition of potential problems across all credit
portfolios.

•

Enable business to become client-driven. As an enabler
to business, one of the main objectives of the central risk
function is to continue to embrace new and existing
legislation and operationalise regulations in the course of
normal business operations.

• Manage risk as an enabler. This will ensure that

Nedbank is well-positioned to identify and manage risks
within the ongoing volatile environment. Embedding and
leveraging the principles of economic profit and Basel II
will further empower the business to increase levels of
growth, innovation and competitive advantage.

•

Enhance productivity and execution. Business
continuity management will receive additional impetus
to comply with Payments Association of South Africa
(PASA) requirements.

• Maintain strong risk management culture for

competitive advantage. Maintaining a strong oversight
of the group’s ERMF will continue to place a strong
emphasis on accountability for managing the group’s risk
universe.

•

•

Accelerate transformation. To align with the group’s
strategic aspiration of leading transformation,
transformation risk has now been formally recognised as
a main category of risk in the ERMF, rather than a
subcategory of HR risk.

Lead as a corporate citizen. All business undertakings
will be aligned with Nedbank’s position to remain a
leader in corporate social responsibility.

In an era that is unprecedented Group Risk is conscious of
the challenging global conditions facing the industry, and it
continues to commit itself to risk management as an integral
component of the business. Proactive, timeous and sound
response to the impact of changes within the scope of
operations is essential to sustaining and building on the solid
fundamentals of risk management already engrained
throughout the organisation.

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RISK AND CAPITAL MANAGEMENT REPORT
EXECUTIVE SUMMARY

In the wake of the global financial crisis in which shareholder
value around the world has been eroded in momentous
proportions and many large financial institutions have gone
insolvent, been taken over and/or received significant
government support, considerable blame has been directed at
poor risk management and corporate governance within the
financial services industry, and at inadequate regulation and
prudential supervision by related governments.

This has extended across the broad sphere of the entire
financial system where some financial activities and
institutions were either inadequately regulated or not at all.
Finally there is the fair-value, mark-to-market (MTM)
accounting rules that some blame for exaggerating the
writedowns and deepening the crisis.

In this Risk and Capital Management Report the following are
covered:

• Evaluation of the origins of the crisis, resultant lessons
learnt and a perspective on the role of the Basel II
principles.

• Perspective on the impact of the crisis on South Africa, and

Nedbank in particular.

• Nedbank Group’s strong risk and capital management culture
which, together with sound corporate governance, has helped
the group maintain a prudent, conservative risk appetite. This
will be illustrated through reference to a summary of
Nedbank’s current risk profile and capital adequacy.

It is highlighted that capital adequacy levels must be seen
in relation to a bank’s unique risk profile and risk appetite,
which should be transparent. This is a core objective of
Basel II, namely that banks should not all be measured on
a ‘one size fits all’ basis, but rather that banks with higher-
risk profiles should have commensurately higher capital
ratios. This was reinforced by the Basel Committee in
January 2009.

Regulation 43 of the revised regulations relating to banks in
South Africa requires disclosure to the public of reliable, relevant
and timely qualitative and quantitative information that
enables users of that information, among other things, to make
an accurate assessment of a bank’s financial condition,
including its capital adequacy, financial performance, business
activities, risk profile and risk management practices. Nedbank
Group Limited and Nedbank Limited (collectively ‘Nedbank’)
are fully committed to regulation 43.

The requirements of regulation 43 are aligned with
International Financial Reporting Standards (IFRS) but
significantly extend the public-disclosure requirements, in terms
of both content and frequency, relating to risk and capital
management. This extension of disclosure is embodied in what
is commonly known as Pillar 3 of the Basel II Accord.

Basel II and the revised regulations were effective in 
South Africa, and introduced successfully in Nedbank from 
1 January 2008.

This report contains a summary of the salient features 
of our risk and capital management for the year ended 
31 December 2008. Nedbank’s full Pillar 3 Report is available
on our website at www.nedbankgroup.co.za.

ORIGINS OF AND LESSONS LEARNT FROM
THE GLOBAL FINANCIAL CRISIS

History has shown that the key risks that cause a bank to fail
are the following:

• The quality of a bank’s board and/or executive

management, and/or their failure to endorse sound risk
management.

• Liquidity risk (banks borrow short, lend long).

• Concentration risk(s) – especially credit risk and associated

poor-quality lending.

• Poor governance, risk management and/or internal controls.

• Nedbank Group’s financial, risk and capital management

• Lack of transparency (and undue complexity).

profile for the year ended 31 December 2008.

• Nedbank Group’s current understanding of the key changes
and new requirements on the international regulatory
front in response to the crisis, and the group’s view on the
implications of these for the group together with its
actions to date and plans going forward.

In South Africa the Banking Regulator has consistently
been effective, and this has played a significant role in
preventing any local fallout from the crisis. South Africa
does, however, operate in a globally regulated market and
as a result of the significant response to the crisis by
international supervisors, this will have a knockon effect.

• Reputational risk (erosion of a bank’s franchise value).

In this crisis all these key risks and more have materialised
and are exacerbated by several additional key factors, all
acting in concert and resulting in what some refer to as the
‘perfect storm’. A summary of the crisis is set out below.

• Liquidity, asset quality, leverage and valuation

–

–

Excess liquidity and low interest rates leading to cheap
credit and poor-quality/subprime lending.

Excessive risk taking and ‘originate and sell’ strategies,
fuelled by aggressive remuneration practices, as well as
a strong push for growth.

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NEDBANK GROUP ANNUAL REPORT 2008

–

–

Excessive leverage facilitated by complex, unregulated
exotic credit derivatives, as well as a lack of
international supervision over reckless lending, gearing
and excessive consumer debt.

Resultant undue concentration risk in poor-
quality/subprime credit exposure leading to large
writedowns following the economic slowdown and
resulting in a global recession.

– Accounting fair-value MTM rules that require assets
and liabilities of firms to be measured at current
market prices rather than their accrued value, where
they are designated as such or held for trading. As
liquidity dried up in the financial markets and the crisis
deepened, such market prices dropped to fire-sale
levels, resulting in significant valuation difficulties and
further writedowns of significant magnitude that may
not ever represent fair value.

• Regulation and prudential supervision, and risk

management and governance in banks

– Aside from the credit derivatives market in the United
States, investment banks and other non-deposit-taking
institutions were insufficiently regulated.

Generally, international prudential supervision was
found wanting mainly due to the extent of
globalisation and regulators from different jurisdictions
and/or authorities not working together optimally. This
meant that the supervision of systemic risk, critical to
macroeconomic financial stability, fell short, especially
in a severely stressed environment.

–

Risk cultures, governance and risk management were
weak in some banks and, together with an
underestimation of certain risks, certain weaknesses in
Basel II existed.

The deficiencies in some banks are believed to be related to the
following:

–

–

–

–

Poor liquidity risk measurement and management.

Excessive concentration risks around 

certain credit portfolios,

•
• wholesale funding for liquidity, and
•

assets and liabilities subject to MTM fair-value
accounting.

Poor credit underwriting and an overreliance on, or
inappropriate use of, and/or incorrect assumptions and
valuation techniques used in quantitative risk models,
especially in the trading book, complex credit
derivatives and securitisations, with a failure to overlay
the quantitative science with qualitative information,
common sense and experience.

– An overreliance on external rating agencies, who

themselves were left unregulated.

– Counterparty credit risk management, including

securitisation and other off-balance-sheet activities.

– An overreliance on value-at-risk (VaR) models to
measure market-trading risk, which models
underestimated risk in a stressed environment.

–

–

–

–

Inadequate stress and scenario testing, and the
resultant inadequacy of capital buffers.

Poor data quality and risk information technology
infrastructure and systems.

Lack of clearly articulated risk appetite in financial terms
that are embedded in strategic plans and monitored.

Inadequate enterprisewide risk governance, including
ineffective challenge and debate, and insufficient
understanding of risk from board level to the front-
office, together with lack of a clear mandate of the
group risk function.

•

Integration of risk, capital, strategy and reward,
and the principles of Basel II

– While the crisis has revealed some shortcomings in

Basel II, this needs to be put in perspective. A line was
drawn in the sand in 2006 in order that Basel II could
be implemented, and it was clear on many aspects
that it could be enhanced and added to over time.
Additionally, it is unfortunate that Basel II was fully
effective in some jurisdictions only from 2008, while in
other jurisdictions, including the United States,
implementation was delayed even beyond that.

Those banks that truly embraced the spirit of Basel II,
and so have adequate risk and capital management,
generally will have weathered this ‘perfect storm’ better.

Basel II, and accompanying supervisory guidance,
specifically requires in its Pillar 2 that banks must have
a comprehensive Internal Capital Adequacy Assessment
Process (ICAAP) that is subject to an Supervisory
Review and Evaluation Process (SREP) by their banking
regulators.

The main ICAAP components require of banks:

•

•

•

effective board and management oversight;

comprehensive risk assessment and management
processes;

sound capital assessment and capital management;

• monitoring and reporting; and

•

Internal control review.

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RISK AND CAPITAL MANAGEMENT REPORT
EXECUTIVE SUMMARY ... CONTINUED

–

–

Properly implemented and consistently applied ICAAP
should provide the transparency and management
information to manage, control and optimise risk and
at the same time ensure financial sustainability. For a
large bank it should be aligned with best-practice
enterprisewide risk management and be forward-
looking, enforcing the essential integration of risk,
capital, strategy and reward.

This effectiveness, however, is pervasively influenced by
a bank’s risk culture and governance, active and
consistent executive management and board support,
and the operating business model.

• Government never allowed interest rates to fall so low as
in the United States as to encourage excessive borrowing
and untenable levels of household debt.

• The National Credit Act was successfully implemented in

South Africa to help minimise irresponsible lending
practices, overgearing and excessive consumer debt.

• Exchange controls prevented large flows of funds from

local institutions out of the country.

• Rand liquidity has remained stable, with the interbank

market operating normally.

• Good risk and capital management was implemented in

• Remuneration practices

South African banks.

–

–

–

–

–

These have been too short-term focused and not
aligned with long-term sustainability and shareholder
value creation principles. Here IFRS accounting rules
(‘point in time’) are at odds with Basel II principles
that are focused on long-term sustainability (‘through
the cycle’).

These have encouraged excessive risk-taking.

These often have no clawback provisions.

Risk department remuneration out of line with front-
office staff remuneration.

Limited application of risk-adjusted performance
measures in reward schemes.

• Transparency and disclosure

– Generally inadequate, exacerbated by undue

complexity and lack of regulation in certain financial
activities and transactions.

IMPACT OF THE GLOBAL FINANCIAL CRISIS
ON SOUTH AFRICA AND NEDBANK

South Africa’s banking industry has remained structurally
sound and stood up extremely well amid the crisis. Currently
Nedbank is experiencing cyclical financial stress and an
economic slowdown in a banking cycle and is indirectly
impacted by the crisis, but not on a scale comparable with
the unprecedented storms in the international financial
system.

South Africa has been sheltered to a large degree from the
crisis due to factors that include the following:

• There is sound regulation of all financial services, especially

the banking sector.

• South Africa did not experience to the same extent the
‘originate and sell’ mentality and use of complex credit
derivatives that resulted in excessive leverage in some
foreign banks.

• Basel II was successfully implemented in South Africa.

Nedbank specifically stands behind the message given in its
annual reports over the past few years with respect to its
strong risk and capital management culture and commitment.

• Since 2004 the Nedbank vision has been to become

southern Africa’s most highly rated and respected bank by its
staff, clients, shareholders, regulators and communities. The
vision is supported by the group’s 10 Deep Green aspirations,
which include becoming ‘worldclass at managing risk’.

• Aligned with the successful recovery and turnaround of the

Nedbank Group completed in 2007, a business-based
approach to its Basel II implementation was followed, not
only to comply with Basel II, but also to elevate the
group’s risk management, capital management and
performance measurement to worldclass standards.

• Nedbank successfully implemented Basel II in line with the
revisions to the Banks Act and the revised Basel II-based
banking regulations introduced in South Africa, from 
1 January 2008.

• Nedbank’s Capital Management Framework (CCMF)
embraces the integration of risk, capital, strategy,
performance measurement and incentive schemes across
the group.

Nedbank received favourable outcomes from the SREP of our
group’s ICAAP by the South African Reserve Bank (SARB), and
an external audit of our regulatory returns and associated
processes, both of which were concluded in the latter half of
2008. In addition, an independent audit firm was employed to
review the ICAAP submission.

While striving to ‘become worldclass at managing risk’ is a
journey and not a destination, and as there are always areas
to improve on, Nedbank fully embraced the spirit of Basel II,
which commenced back in 2004, and this has assisted sound
financial performance and sustainability amid the crisis and
South Africa’s economic downturn.

120

NEDBANK GROUP ANNUAL REPORT 2008

The protracted global financial crisis and its continuing
developments in early 2009, as well as increasing concerns in
the more traditional loan books of banks, are naturally of
major concern. Nevertheless, Nedbank’s continuing sound
profitability, albeit at marginally lower levels, and the
successful turnaround of the group have generated strong
capital levels and appropriately positioned it to weather the
challenges prevailing in the environment.

There is a proliferation of studies and responses to the
international crisis. Most pertinent to Nedbank is the
Switzerland-based Basel Committee on international banking
supervision who, following a G20 summit late last year,
announced a comprehensive strategy in the form of an 
eight-point plan to address the fundamental weaknesses
revealed by the crisis related to regulation, supervision, risk
and capital management. A summary of this and other
pertinent international responses to the crisis will be
provided in the full Pillar 3 disclosure update.

In 2009 Nedbank will, aside from continuing with its 2008
focus on strengthening capital ratios and liquidity, pursuing
selective asset growth and growing market share based on
economic profit, proactively respond to the international
recommendations, guidance and other requirements, and
address gaps that may remain as part of Nedbank’s ongoing
journey to be ‘worldclass at managing risk’.

In so far as Nedbank’s capital levels are concerned, and in line
with general global expectations and increased conservatism, it
has revised its target regulatory capital adequacy ranges
upward from 8% – 9% (Tier 1) and 11% – 12% (total) to 
8,5% – 10% (Tier 1) and 11,5% – 13% (total). The group’s
objective is to move towards the top end of these revised
ranges. Refer to page 169 onwards for more details of
Nedbank’s capital adequacy ratios.

NEDBANK’S CONSERVATIVE RISK APPETITE
AND STRONG CAPITAL ADEQUACY 

The crisis has highlighted that the appropriate level of capital
for a bank is a direct function of its risk appetite, strategy
and existing risk profile. This aligns directly with one of the
key objectives of Basel II, which is to differentiate capital
requirements and adequacy of capital buffers above the
regulatory minimum, to reflect the unique risk profile on a
bank-by-bank basis, rather following the ‘one size fits all’
approach among all banks that Basel I engendered. The Basel
Committee reconfirmed this in January 2009.

In Nedbank risk appetite is an articulation and allocation of
the risk capacity or quantum of risk it is willing to accept in
pursuit of its strategy, duly set and monitored by the board,
and integrated into its strategy, business and capital plans.

Nedbank has cultivated and embedded a prudent and
conservative risk appetite, focused on the basics and core
activities of banking. This is illustrated below:

• No direct exposure to United States subprime credit assets

nor associated credit derivative transactions.

• Conservative credit underwriting practices culminating in a
high-quality, well-collateralised wholesale book and further
tightening of the retail book since 2007 in anticipation of
the economic downturn and introduction of the National
Credit Act.

• Reasonable credit concentration risk levels.

–

Large individual exposure risk is low. Refer to page 148
for details.

– Geographic exposure risk is high (refer to page 149,
which highlights that 94% of the group’s loans and
advances originate in South Africa), but in reality this
concentration is positive for Nedbank, given the
current international crisis, and reflects focus on an
area of core competence.

–

Industry exposure risk is reasonably well-diversified.
Refer to page 149 for details.

– At first sight Nedbank’s property exposure appears
high, but this is in line with its domestic peer group
and most banks worldwide. As a result of this
perceived risk, it undertook a more detailed analysis of
its commercial property exposures.

With the assistance of leading consultants Nedbank
undertook this analysis to assess the level of economic
risk in its commercial property portfolio in the light of
concerns stemming from the devaluation of
commercial property in several overseas countries. This
was done with a view to improving not only Nedbank’s
risk management practices, but also its strategic
business options.

The conclusions and recommendations that resulted
from this detailed analysis were that:

•

•

•

potential credit losses in a stressed scenario would
remain within Nedbank’s risk appetite;

the portfolio is well-balanced, but there are
higher-risk loans that require closer monitoring;
and

the most appropriate business strategy is one of
selective origination, sacrificing business volumes
and market share growth for risk-based pricing,
economic profit and margin management. This is
broadly in line with Nedbank’s approach over the
last few years.

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RISK AND CAPITAL MANAGEMENT REPORT
EXECUTIVE SUMMARY ... CONTINUED

•

•

Stemming from this detailed analysis were several
useful benchmarks derived from what
international banks experienced, where we
compare favourably.

The analysis has also been useful not only from
the business perspective of shaping the
commercial property loan origination and deal-
pricing approach for the future, but also from the
credit risk management perspective of providing
Nedbank with additional relevant benchmarks
against which to monitor its commercial property
exposures and of highlighting risky exposures on
which to focus increased risk management.

• Counterparty credit risk is almost exclusively restricted to
non-complex banking transactions. There is continued
emphasis on the use of credit risk mitigation strategies,
such as netting and collateralisation of exposures.

Credit derivatives activities have been restricted to single-
name trades of South African exposures and are biased
towards providing risk mitigation. Refer to page 150 for
further details on the relatively low counterparty credit risk
exposure.

• A strong, well-diversified funding deposit base and a low
reliance on offshore funding. Additionally, Nedbank’s
reliance on its top 10 depositors is not concentrated.

Refer to page 155 onwards for an analysis in support of
this and Nedbank’s prudent liquidity risk management.

• Low level of securitisation exposure, which was reduced

during 2008. Refer to page 153 for summary details of this
exposure.

• Low leverage ratio (total assets to shareholders’ equity) of

16,2 times, which compares very favourably on an
international benchmarking basis.

• High ratio of risk-weighted assets to total assets of 62,7%,

indicative of Nedbank’s conservative Basel II
implementation and measurement of risk, which compares
favourably on a local and international benchmarking
basis.

• Low level of net assets exposed to the volatility of IFRS

fair-value MTM accounting.

–

Banking book

In terms of IAS 39 an entity has the option to
designate a financial instrument at fair value provided:

•

the designation ‘fair value through profit or loss’
eliminates or significantly reduces a measurement
or recognition inconsistency that would otherwise
arise from using different bases to measure and

•

•

recognise the gains and losses on financial assets
and financial liabilities; or

the instrument forms part of a group of financial
instruments that is managed, evaluated and
reported to the appropriate level of management
using a fair-value basis in accordance with a
documented risk management or investment
strategy; or

the financial instrument contains an embedded
derivative that significantly modifies the
cashflows of the host contract or the embedded
derivative clearly requires separation.

Nedbank meets the first two criteria when designating
financial instruments at fair value through profit and loss.

With regard to the first criterion Nedbank has entered
into a large number of fixed-rate deals for both assets
and liabilities. When a fixed-rate deal is entered into,
an interest rate risk arises and is hedged with an
interest rate swap derivative. This process is controlled
and monitored by the Group Asset and Liability and
Executive Risk Committee (Group ALCO).

In terms of IAS 39 all derivatives need to be carried at
fair value and it is the MTM of all these hedging
derivatives that causes an accounting mismatch as
discussed under the first criterion. To eliminate the
accounting mismatch the underlying financial
instrument is designated ‘fair value through profit and
loss’ and subsequently fair-valued. All fair-value
adjustments in this regard are unrecognised profits and
losses and are disclosed in non-interest revenue.

It is important to note that these profits and losses
will not be realised and will merely unwind over time
as the various financial instruments mature. The
financial instruments are effectively fully hedged on an
interest rate risk basis. The present volatility seen in
the income statement on the designated fair-value line
is a result of basis risk and because IAS 39 requires an
entity to fair-value its own credit for financial liabilities
designated ‘fair value through profit and loss’.

With regard to the second criterion Nedbank carries all
its investment securities, both listed and unlisted, at
fair value. There are no material hedges in place for
these investment securities and they are designated
‘fair value through profit and loss’, as management
report and manage these investment securities on this
basis. Please refer to the investment table on page 164
for details.

Refer to page 248 ‘Nedbank Group: categories of
financial instruments’ for details of the above.

122

NEDBANK GROUP ANNUAL REPORT 2008

–

Trading book

The trading book is fair-valued and the impact taken
through the income statement.

The crisis and the consequent impact on the South
African sovereign credit spreads had an effect on the
value of certain assets within the trading portfolio.
However, Nedbank’s holding of foreign assets in the
trading portfolio has been constrained by its low-risk
appetite for foreign credit risk. Consequently the
portfolio was and remains relatively small with mainly
shorter-dated assets with a bias to financial institutions
and large corporate exposures.

These MTM adjustments are included in the current year
trading revenue. Nedbank’s bond portfolio in London was
£273 million at 31 December 2008.

The trading portfolio has limited exposure to the credit
derivatives market and has been focused mainly on the
provision of protection on South African corporate
names. This, coupled with Nedbank’s conservative risk
appetite, has restricted losses incurred in the portfolio in
the current period.

In the Lehman Brothers collapse Nedbank held
incidental exposure (approximately US$1 million),
which had been MTM during the runup to its
15 September 2008 Chapter 11 filing. All other
exposures in Lehman Brothers were covered by
margining agreements and were successfully unwound
in terms of the supporting legal documents.

Refer to page 248 ‘Categories of financial instruments’
and page 59 ‘Balance sheet banking/trading
categorisation’ for further details.

• Small market trading risk in relation to total bank operations

(economic capital held is only 1,4% of total and is
conservatively based on limits rather than utilisation, plus a
10% capital buffer).

The risk appetite within the trading business has remained
largely unchanged over the past two years. Trading activities
have focused on the domestic market with a bias towards
local interest rate and equity products. Subsequent to exiting
from the Macquarie business alliance in 2007, the risk
appetite for complex equity derivatives was significantly
curtailed. Risk appetite is subject to periodic review, but there
was no material change in trading limits during the 2008
financial year.

• The overall performance of the trading business was sound for
2008, an indication that the impacts from the ‘credit crunch’
and difficult equity markets were successfully navigated, and
likewise that Nedbank’s risk systems were sound. Refer to
page 160 for more details.

• Low interest rate risk in the banking book as reflected by the

sensitivity analysis provided on page 158.

• Low equity (investment) risk exposure. The total equity risk
exposure, including Nedbank’s private-equity business, is 
R3,8 billion, comprising only 0,7% of total assets. Further,
within this a wide range of individual investments exist and
many are linked to a wider client relationship. Refer to 
page 164 for further details.

• Non-core asset disposal strategy successfully executed as

part of the group’s strategic turnaround completed in 2007.
Currently assets non-core to the business of banking are
immaterial.

• Low foreign currency translation risk to the rand’s volatility,
which is in line with Nedbank’s appropriate offshore capital
structure. Refer to page 159 for more details.

• Well-diversified earnings streams. Most of the group’s

earnings are generated by traditional, vanilla, annuity-based
income in wholesale and retail banking, and specialised
finance. Refer to page 218 of ‘Operational segmental
reporting’ for an analysis of this.

• Well-diversified subordinated-debt profile, with no maturity
of any existing Tier 2 regulatory capital until 2011 (Nedbank
Limited) and 2010 (Imperial Bank Limited). Refer to 
page 177 for details.

• Comprehensive stress and scenario testing to confirm the
adequacy of our capital ratios and accompanying capital
buffers.

Nedbank’s stress-testing strategy is performed across three
levels and is duly overseen by a strong governance process:

–

Specific risk-type testing such as credit, liquidity, trading
and equity risk.

– Macroeconomic factor modelling, involving stressing

capital levels in at least four scenarios

• mild stress,

•

•

•

high stress,

severe stress, and

positive scenario (better-than-expected base case).

–

Specific-event scenario analysis. The four events currently
chosen are

•

•

•

•

severe recession,

liquidity crisis,

property value crash, and 

default of two and three large exposures (credit

concentration risk).

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RISK AND CAPITAL MANAGEMENT REPORT
EXECUTIVE SUMMARY ... CONTINUED

• Since 2005 risk appetite is also expressed in terms of
quantitative risk metrics as well as qualitatively. The
quantitative metrics include earnings at risk (EaR) (based
on earnings volatility) and, related to this, the ‘chance of
regulatory insolvency’, ‘chance of experiencing a loss’ and
economic capital adequacy. These comprise group-level
risk appetite metrics and the current risk profile of the
group, which are all within the ranges approved by the
board and as previously reported.

Group metrics

Definition 

Measurement methodology

Current targets

Target achieved

Nedbank’s group level risk appetite metrics

EaR 

Chance of 
experiencing 
a loss

Chance of 
regulatory 
insolvency

Economic
capital
adequacy

Pretax earnings potentially
lost over a one-year period.

Measured as a 1-in-10-year
event (ie 90% confidence level).

EaR less than 100% of
pretax accounting earnings.

Event in which Nedbank Group
experiences an annual loss
(on an economic basis).

Utilises EaR by comparing
with expected profit over 
the next year.

Event in which losses would result
in Nedbank being undercapitalised
relative to minimum regulatory
capital ratios (both Tier 1 and 
total capital ratios).

Utilises EaR and compares with
capital buffer above regulatory
minimum – expressed as a
1-in-x-year chance of
regulatory insolvency.

Better than 1 in 10 years.

Better in 30 to 50 years.

Nedbank adequately
capitalised on an economic
basis to its current international
foreign currency target debt
rating.

Measured by comparing
available financial
resources with economic
capital requirement.

Equivalent rating
of A- or better
(including a 10%
capital buffer).

✓

✓

✓

✓

In addition, a large variety of risk limits, triggers, ratios,
mandates, targets and guidelines are in place for all the
financial risks [eg credit, market and asset and liability
management (ALM) risks]. One of these that Nedbank is
currently in excess of is the credit loss ratio range of 0,55%
to 0,85%, the ratio being 1,17% at 31 December 2008.
Prudent provisioning for this is reflected in Nedbank’s
credit impairments, details of which may be found from
page 139. We currently expect to remain outside the range
in 2009 as well.

Qualitatively, risk appetite is also expressed in terms of
policies, procedures, statements and controls to limit risks
that may or may not be quantifiable.

• Nedbank has had a strong focus since the beginning of
2008 on strengthening capital ratios and liquidity, and
selective asset growth as per its proactive response to the
deepening international crisis. Details on the significantly
strengthened capital and liquidity positions are provided
on pages 169 and 155 respectively.

In view of all of the above, it is believed that Nedbank’s capital
levels (both regulatory capital and internal capital assessment,

economic capital) and provisioning for credit impairments are
appropriate and conservative, and that Nedbank Group,
Nedbank Limited and other subsidiaries are strongly capitalised
relative to their business activities, strategy, risk appetite and
risk profile and the external environment in which they operate.
Additionally, no excess capital is currently held for acquisitions.

NEDBANK’S SOUND FINANCIAL, RISK AND
CAPITAL PROFILE

Further to Nedbank’s conservative risk appetite discussed
above and the group’s strategy focused on the basics of
banking, an overview of the salient features of the group’s
sound financial, risk and capital profile is set out below.

• Profitability and successful turnaround of

Nedbank 

– The profitability and successful turnaround of the group
have, inter alia, resulted in a strong capital position and
appropriately stationed it to weather the challenges
prevailing in the current external environment. Sound
financial performance continued in 2008, but with growth
rates declining in line with expectations amid more

124

NEDBANK GROUP ANNUAL REPORT 2008

difficult markets. Details on the group’s financial position
are provided in this 2008 Nedbank Group Annual Report.

• Significant strengthening of capital levels and

capital ratios through 2008

–

–

–

–

Basel I was in effect and relied on for the past 
20 years, and Nedbank actual capital levels today
remain well-above those that would have been
required under Basel I. The impact of moving to Basel II
in 2008 was a marginal decrease in Nedbank’s
minimum regulatory capital requirements. However,
qualifying capital and reserves decreased to a
significant extent due to certain reserves no longer
qualifying as regulatory capital in South Africa as
discussed from page 173. These currently amount to
approximately R1,6 billion at group level.

There is an excess of R9,5 billion (group) and R9,4 billion
(Nedbank Limited) of total Basel II regulatory capital
resources over the minimum capital requirements.

The group’s Basel II regulatory capital ratios are now
well above the top end of our 2008 board-approved
target ranges for Tier 1 and total capital adequacy. In
line with general global expectations Nedbank has
revised its target capital ratios range upward from 
8% to 9% (Tier 1) and 11% to 12% (total), to 8,5% to
10% (Tier 1) and 11,5% to 13% (total). A target range
has been introduced for core Tier 1 capital, namely
7,5% to 9%. In the current external environment the
group’s objective is to move towards the top end of
these new target ranges by the end of 2009. Refer to
page 171 onwards for details on Nedbank’s capital
ratios.

The group is satisfied with the composition of its Tier 1
capital as reflected on page 171 of the report, and its
intention is to operate within the regulatory limits for
non-core Tier 1 capital (ie perpetual preference shares
and hybrid debt capital). It is recognised that, following
the global financial crisis, much greater focus is now
being given to the core Tier 1 and leverage ratios and
Nedbank has responded to this. The actual core Tier 1
ratios are 8,2% (group) and 8,0% (Nedbank Limited)
at 31 December 2008, and its group leverage ratio
16,2 times.

The group’s dividend cover policy range remains at
2,25 to 2,75 times headline earnings per share.

What has been pleasing, and reinforces the sentiment
towards and reputation of Nedbank, has been the
inaugural hybrid debt capital (non-core Tier 1) issue in
South Africa by Nedbank. The total of R1,75 billion

issued in 2008 in challenging market conditions not
only represents another important milestone for
Nedbank, but also demonstrates continued investor
appetite for Nedbank paper.

– At 31 December 2008 Basel II minimum regulatory
capital requirements were higher by R6,0 billion
(group) and R3,9 billion (Nedbank Limited) than
internally determined economic capital requirements.

Nedbank’s internally determined capital requirements
(ie economic capital) are based on a sophisticated,
best-practice framework and are comprehensively used
across the group for capital allocation, performance
measurement and remuneration, as well as risk-based
pricing and client value management in the group’s
business.

– Nedbank’s internal capital assessment (ie economic
capital) reflects a surplus of available financial
resources over economic capital requirements of 
R9,6 billion (group) and R10,4 billion (Nedbank
Limited) based on its target solvency standard (A- or
99,9% confidence level; currently same as Basel II),
including a buffer of 10% applied to the economic
capital minimum requirement.

• Worldclass risk and capital management
frameworks are embedded groupwide

–

Strong risk and capital management is in place at
Nedbank Group based on a best-practice ERMF and
CMF, built on rigorous governance, challenge and
debate. These frameworks are supported by a strong
level of expert and experienced human resources, for
which succession plans are in place. These are regularly
monitored and updated.

The principles of prudence and conservatism prevail in
Nedbank’s frameworks and economic capital numbers.
Basel II has even higher levels of conservatism,
including for example downturn loss-given default
(dLGD) credit risk parameters and the Pillar 2a addon
(unique to South Africa), and does not recognise inter-
risk diversification in the Pillar 1 minimum regulatory
capital requirements.

– Nedbank’s economic capital outcome and process are
comprehensively in use across the group, including
within businesses on a day-to-day basis, and in
performance measurement and reward schemes that
are now primarily based on economic profit, using risk-
based economic capital allocation.

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RISK AND CAPITAL MANAGEMENT REPORT
EXECUTIVE SUMMARY ... CONTINUED

– Nedbank Limited was granted approval, effective 
1 January 2008, by SARB for use of the Advanced
Internal Ratings-based (AIRB) approach for credit risk
for the bank’s entire credit portfolio.

Nedbank’s AIRB credit system forms the basis of its
measurement and management of credit risk across
the bank. The Group Credit Portfolio Management Unit
in the Group Capital Management Division measures,
manages and strives to optimise the group’s credit
portfolios and credit concentration risk. For this
purpose the group uses a tailored Credit Portfolio
Model (CPM) run on KMV Portfolio Manager software.

Nedbank’s credit economic capital (which comprises
above 60% of total economic capital) is separately
derived by integrating the key Basel II AIRB credit risk
parameters with Nedbank’s sophisticated CPM. The
CPM also takes credit portfolio concentrations and
intrarisk diversifications into account.

Nedbank is a well-diversified banking group in the
context of South African markets, split across its four
major business clusters.

Nedbank’s top-20 individual exposure analysis, in
particular the ‘percentage of total Nedbank Group
credit economic capital by individual borrower’,
indicates that it does not have undue single-name
credit concentration risk. Nedbank’s CPM model
incorporates the asset size of obligors/borrowers into
its measurement and calculation of credit economic
capital. In the group’s stress and scenario testing, and
arriving at conclusions on the adequacy of capital
buffers, stress testing of single-name large exposures

and their potential impact on capital ratios are also
included.

Geographically, almost all credit exposures of the group
originate in South Africa (non-South African exposure is
approximately 6%). This geographical and industry
concentration risk is also built into Nedbank’s CPM.

–

The group’s internal risk and capital assessments are
complemented by a comprehensive and sophisticated
stress and scenario-testing process.

– Nedbank has made a significant investment (in excess
of R350 million in external costs alone over the past
four years) in its journey to worldclass risk
management to implement best-practice economic
capital modelling and the ICAAP, and scores highly in
the ‘use test’ across the group, which demonstrates
Nedbank’s significant commitment to Worldclass Risk
Management and a belief in its economic capital
numbers.

• Comprehensive business planning integrated with
active capital management driven off internal
capital generation across a well-diversified
banking group

–

The group’s financial performance is characterised by
diversified, sound and stable capital generation. Most of
the group’s headline earnings are generated by business
portfolios servicing traditional wholesale and retail
banking, and specialised finance.

– Current expected (base case) three-year projections to
31 December 2011 reflect further strengthening of
capital adequacy and are in line with the revised target
regulatory capital ranges at both group and bank level,
both internal economic capital adequacy and
regulatory capital.

–

The quality and diversification of Nedbank’s capital
base is sound, as reflected by its Tier 1 and Tier 2
composition. This includes the replacement over the
previous two years of the concentrated NED1 (R2 billion)
and NED2 (R4 billion) subordinated debt with a
smooth, well-diversified maturity profile with eight
subdebt issues totalling R7 billion and their maturity
relatively evenly spread over seven years from 2011 
to 2017.

– A sound capital management and capital planning

process is applied continuously, in which procyclicality
and stressed scenarios are comprehensively addressed,
confirming the adequacy of the group’s target (and
actual) regulatory capital ratios and economic capital
buffer levels.

126

NEDBANK GROUP ANNUAL REPORT 2008

–

The group is not currently holding any excess capital
for acquisitions. It is currently focused on growing
organically, mainly within southern Africa, and
concentrates on small but consistent market share
gains based on value (ie strong economic profit focus)
rather than volume.

• Comprehensive stress and scenario testing is

used to stress Nedbank’s base case projections,
and so assess and conclude upon the adequacy of
its capital buffers and target capital ratios

– Nedbank’s strategic planning process, rolling forecasts
and integrated capital planning include three-year
projections of expected (base case) financial
performance, Basel II and economic capital
requirements, which are compared with projected
available capital resources and risk appetite metrics.
The three-year projections and base case capital
planning are derived from the group’s three-year
business plans that are updated quarterly during the
year and revised on a full bottomup basis annually.

–

The main objective of the group’s stress testing is to
assess the effect of possible unexpected events on its
base case projections, including its capital
requirements, resources and adequacy of capital
buffers for both regulatory and economic capital. In
addition, stress testing is an important tool for
analysing Nedbank’s risk profile and risk appetite.

• Various contingency options exist should the

need arise

–

Further tightening of credit limits and/or active
management of asset growth, using Nedbank’s risk-
based economic capital allocation to its businesses and
‘manage for value’ (economic profit lens) approach to
achieve this optimally.

– Capacity to raise capital externally if required, despite

the current market turmoil, as evidenced by Nedbank’s 
R1,75 billion hybrid-capital issues to 31 December 2008.

– A strong, well-capitalised parent company, Old Mutual

Life Assurance Company (SA) Limited.

CONCLUDING COMMENTS

Nedbank recognises that to become ‘worldclass at
managing risk’ is a journey, not a destination. It is believed
that good progress has been made over the past five years
and that the group’s risk and capital management including
ICAAP generally align closely with best practice
internationally. This has accordingly positioned the group
well to be resilient through the current global financial
crisis. Nevertheless, Nedbank is continuously enhancing its
risk and capital management processes and systems and
remains firm in this endeavour.

In the group’s proactive response to the deepening global
crisis, although it has had a much reduced impact on South
Africa and Nedbank, there has been a strong focus since the
beginning of 2008 on strengthening its capital ratios and
liquidity position, and selective asset growth based on
economic profit (using its ‘manage for value’ philosophy).

In view of all of the above, and cognisant of the risks and
ongoing volatility inherent in global financial markets, the
board of directors and executive management believe that
capital levels, both regulatory capital and our internal capital
assessment (ie economic capital) and provisioning for credit
impairments are appropriate and conservative, and that
Nedbank Group, Nedbank Limited and the other subsidiaries
are strongly capitalised relative to their business activities,
strategy, risk appetite, risk profile and the external
environment in which they operate. Additionally, no excess
capital is held for acquisitions.

The board of directors is also satisfied with the overall
effectiveness of the processes relating to corporate
governance, internal controls, risk management, capital
management and capital adequacy.

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RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW

NEDBANK HAS A STRONG RISK AND CAPITAL CULTURE 

Nedbank has successfully implemented Basel II and with the
benefit of hindsight can look back over the past year and
reconfirm this. Nedbank received favourable outcomes from
the SREP of our group’s ICAAP by SARB, and an external
audit of our regulatory returns and associated processes,
both of which were concluded in the latter half of 2008.
Nedbank has invested significantly in advanced risk and
capital management capabilities, as well as human resources
and systems, and has transformed these using its
comprehensive Basel II programme as the main catalyst.

Nedbank’s Basel II implementation is in line with the
revisions to the Banks Act and the revised Basel II-based
banking regulations introduced by SARB that were effective
from 1 January 2008. The main objective of Basel II is to
promote significant enhancement and sophistication of risk
and capital measurement and management, thereby
elevating the safety and soundness of the banking industry.

Aligned with the successful recovery and turnaround of
Nedbank Group completed in 2007, the group followed a
strategic approach to its Basel II implementation, not only

to comply with Basel II, but also to elevate all material
aspects of the group’s risk management, capital
management and performance measurement to worldclass
standards. This has involved implementing, inter alia, best-
practice enterprisewide risk management (ERM) across the
group.

ERM is a structured and disciplined approach to risk
management, aligning strategy, processes, people, technology
and knowledge with the purpose of evaluating and managing
the opportunities, threats and uncertainties the group faces as
it strives to create shareholder value. It involves integrating risk
and capital management effectively across the group’s risk
universe, business units and operating divisions, geographical
locations and legal entities.

The Nedbank vision is ‘to become southern Africa’s most highly
rated and respected bank ... by its staff, clients, shareholders,
regulators and communities’. The vision is supported by the
group’s 10 Deep Green aspirations (long-term objectives),
which include becoming ‘worldclass at managing risk’,
incorporated within the group’s strategic framework.

To become southern Africa’s most highly rated and respected bank...
by our staff, clients, shareholders, regulators and communities.

Great place to work

Great place to bank

Great place to invest

Unleashing synergies

Worldclass at managing risk

Community of leaders

Most respected and
aspirational brand

Highly involved in the
community and environment

Leading
transformation

Living our
values

GREAT AT LISTENING, UNDERSTANDING CLIENTS’ NEEDS AND DELIVERING

Vision

Deep Green
aspirations

What makes
us different and
guides our long-
term strategy?

Our brand
expression

Strategic focus
areas

Grow our share
of economic
profit

Become client-
driven

Manage risk
as an
enabler

Enhance
productivity
and execution

Build a unique
culture for
competitive
advantage

Accelerate
transformation

Lead as a
corporate
citizen

Scope of the
game

A member of the Old
Mutual Group

Full-spectrum
banking

Bank
for all

Southern Africa focus with
selected offshore expansion

Our values

Integrity

Respect

Accountability

Pushing beyond
boundaries

Being people-
centred

In Nedbank to be ‘worldclass at managing risk’ means the following:
’Understanding, measuring and managing risk is central to everything we do. We have engrained risk management in our business.
We understand that banking at Nedbank is about managing risk, not avoiding it. Our risk management methodologies are worldclass.’

128

NEDBANK GROUP ANNUAL REPORT 2008

Nedbank’s Capital Management Framework (CMF)

STAKEHOLDERS
Depositors
Debtholders
Rating agencies
Regulators

Risk vs 
capital
 adequacy
(solvency)

RISK 
TAKING

CAPITAL MANAGEMENT

RISK 
MANAGEMENT
NT

Capital 
investment

Capital 
structuring

Capital 
allocation

Risk and
capital 
on
optimisation

Risk vs 
return

(profitability)

STAKEHOLDERS
Shareholders
Equity analysts
General public
Clients

RISK-ADJUSTED 
PERFORMANCE 
MEASUREMENT 
(RAPM)

STRATEGY

EE
Economic 
capital

Funds 
transfer 
pricing 
(FTP)

Activity-
justified 
transfer 
pricing
(AJTP)

BUSINESS 
CLUSTERS

Group 
ALM

GROUP CAPITAL MANAGEMENT

Group Strategy, Group Finance, 
Group ALM, Group Capital, 
management and business clusters

INDEPENDENT RISK MONITORING, VALIDATION, GOVERNANCE AND AUDIT ASSURANCE

Nedbank’s approach to risk embraces risk management as a
core competency that allows it to optimise risk-taking, is
objective and transparent and ensures that the business
prices for risk appropriately, linking risk to return.

Consistent with the group’s risk philosophy and strong risk
culture engrained in its ERMF, summarised on page 132, is
capital management.

Nedbank’s CMF reflects the integration of risk, capital,
strategy and performance measurement (and reward) across
the group. This contributes significantly to successful
enterprisewide risk management. The framework is based on
best-practice risk and capital management in all material
respects.

The comprehensive CMF is designed to meet Nedbank’s key
external stakeholders’ needs, both those focused more on the
adequacy of the group’s capital in relation to its risk profile
(or risk vs solvency) and those focused more on the return or
profitability of the group relative to the risk assumed (or risk
vs return). The challenge for management and the board is to
achieve an optimal balance between these two important
dimensions.

Nedbank’s risk and capital management positioning now
provides the group with sophisticated management science and
capabilities for active capital management and economic value-

based management to optimise the risk/return performance
and growth of the various businesses, aligned with the
established risk appetite of the group.

Nedbank recognises that to become ‘worldclass at managing
risk’ (and so capital management too) is a journey, not a
destination. It is believed that significant progress has been
made over the past five years and that the overall ICAAP is
generally closely aligned with best practice internationally. In
Nedbank emphasis is currently on the following:

• Very high ongoing focus on liquidity risk and capital
management in view of the current external market
turmoil and volatility.

• Ongoing data quality and data governance enhancements.

• Expansion and further embedding and cascading of the
group’s risk appetite metrics (eg EaR) down to business
unit level.

• Further embedding the group’s economic profit (based on
economic capital allocation) and ‘managing for value’
principles in updated business plans and day-to-day
management.

• Risk methodology and modelling enhancements, namely:

–

operational risk transition from Standardised Approach
to Advanced Measurement Approach;

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RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

– market trading risk to satisfy SARB regulatory

requirements for the Internal Model Approach approval
(but which has been used internally for several years
now); and

–

business risk.

•

Implementation of QRM software for our ALM process.

• Ongoing refinement and enhancement of Nedbank’s AIRB

credit system and related credit modelling.

• Proactively responding to developments on the

international regulatory front with respect to risk and
capital management, arising in response to the global
financial crisis.

AT THE HEART OF
NEDBANK’S BUSINESS AND
MANAGEMENT PROCESSES
ARE WORLDCLASS RISK AND
CAPITAL MANAGEMENT
FRAMEWORKS 

NEDBANK’S RISK UNIVERSE, GOVERNANCE AND ERMF 

Nedbank sees strong risk governance applied pragmatically
and consistently as the foundation for successful risk and
capital management.

responsibility, independence, reporting, communications and
transparency, both internally and with all Nedbank’s key
external stakeholders.

The high focus on risk governance is based on a three-lines-
of-defence concept, which is the backbone of the group’s
ERMF. The ERMF places a strong emphasis on accountability,

The three lines of defence, as well as the principal
responsibilities that extend across the group, function as
follows:

First line of defence

Second line of defence

Third line of defence

Focused and informed involvement by the board and Group Exco, as well
as accountability and responsibility of business management and Group
Finance, all supported by appropriate internal control, risk management
and governance structures and processes.

Independent risk-monitoring at group level
by the Group Risk and Group Enterprise
Governance and Compliance (EGC).

Independent assurance provided by
internal and external audit.

Strategy, performance and risk management

Policy, validation and monitoring

Independent assurance

Nedbank Group Board of Directors

Chief Risk Officer (CRO)

Board committees

Chief Executive (CE)

Group Executive Committee (Group Exco)

Group Exco subcommittees

Nedbank
Corporate
cluster

Nedbank
Capital
cluster

Nedbank
Retail
cluster

Imperial
Bank
Limited

Chief
Financial
Officer
(CFO)

Business
units

Business
units

Business
units

Business
units

Group Capital
Management

Business unit financial and risk officers

Business unit compliance officers

Group Technology (GT)

Group Human Resources (HR)

Group Strategy and Corporate Affairs

Group ALM

Group Tax

Group
Finance

Group Risk Monitoring Division

The CRO, who reports directly to the CE, provides:
• strategic risk management leadership;
• independent risk-monitoring;
• key support to the various risk committees;
• close interaction with the business units; and
• effective enterprisewide risk management 

and control.

Chief Governance and Compliance Officer

Group EGC

The Chief Governance and Compliance Officer,
who reports directly to the CE;
• provides continuous strategic compliance risk

management leadership;

• provides independent compliance risk

monitoring

• provides the Group Governance and Compliance

Framework; and

• works closely with the cluster governance and

compliance function in compliance and
governance matters.

Group
Internal
Audit
(GIA)

External
auditors

130

NEDBANK GROUP ANNUAL REPORT 2008

The 17 key risks that comprise Nedbank’s risk universe and
their materiality are reassessed, reviewed and challenged on
a regular basis (ie at least quarterly). The ERMF specifically
allocates the 17 key risks (which individually also include
various subrisks) at three levels, namely:

• board committees;

• executive management committees (at Group Exco level

and those within business clusters); and

•

individual functions, roles and responsibilities (at group
level and across all business clusters, as relevant).

The ERMF, fully embedded across Nedbank Group, is
supplemented by individual subframeworks such as those for

credit risk, market risk, liquidity risk, operational risk and
capital risk, as well as a comprehensive set of risk policies and
limits. These also include the role of the board, which
includes setting and monitoring the group’s risk appetite
(which includes risk limits) and oversight of the ERMF, duly
assisted by its board committees. At executive management
level the Group Exco is also assisted with its risk, strategic
and operational responsibilities by 10 subcommittees.

An overview of Nedbank Group’s ERMF, including the 17 key
risks that comprise the group’s risk universe and the risk
governance structures, is provided on the next page.

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RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

Overview of Nedbank Group’s Enterprisewide Risk Management Framework

RISK UNIVERSE

ACCOUNTING
AND TAXATION
RISKS

OPERATIONAL
RISK

INSURANCE
AND
 ASSURANCE RISKS

NEW-BUSINESS
RISK

LIQUIDITY
RISK

CAPITAL
RISK

MARKET
RISKS

Trading
book

Banking
book

FIRST LINE OF DEFENCE

BOARD
COMMITTEES

GROUP AUDIT
COMMITTEE

BOARD OF DIRECTORS

GROUP RISK AND CAPITAL MANAGEMENT COMMITTEE

GROUP EXCO
COMMITTEES

GROUP OPERATIONAL COMMITTEE

EXECUTIVE
TAXATION
COMMITTEE

BRAND
COMMITTEE

GROUP EXCO

BUSINESS RISK
MANAGEMENT
FORUM

GROUP ALCO
PROPERTY
STRATEGY
COMMITTEE

GROUP
PROCUREMENT
COMMITTEE

NEDBANK CORPORATE, NEDBANK BUSINESS BANKING, NEDBANK CAPITAL, NEDBANK RETAIL AND GROUP TECHNOLOGY CLUSTERS

BUSINESS CLUSTERS’
RISK GOVERNANCE

•  Cluster and business unit excos, divisional credit committees (DCCs), Trading Risk Committee, enterprisewide risk committees (ERCOs),
     investment committees and other appropriate specialist committees, with representation from the relevant independent group functions.

BASEL II
STEERING
COMMITTEE

GROUP FINANCE DIVISION (CFO Mike Brown)

CENTRAL FINANCIAL,
RISK AND CAPITAL
MANAGEMENT

GROUP CAPITAL
MANAGEMENT
AND BASEL II

GROUP ALM

GROUP TAX

FINANCIAL AND
MANAGEMENT
ACCOUNTING

GROUP SHARED
SERVICES
CENTRE

SECOND LINE OF DEFENCE

GROUP RISK DIVISION (CRO Philip Wessels)

INDEPENDENT
FUNCTIONS FOR GROUP
POLICY, RISK
MONITORING, MODEL
VALIDATION AND
CHALLENGE

GROUP RISK SERVICES

GROUP LEGAL

ERMF

GROUP OPERATIONAL
RISK MONITORING

THIRD LINE OF DEFENCE

INTERNAL AUDIT AND EXTERNAL AUDIT

INDEPENDENT
ASSURANCE

GIA

132

NEDBANK GROUP ANNUAL REPORT 2008

INVESTMENT
RISK

INFORMATION
TECHNOLOGY
RISKS

CREDIT
RISK

COMPLIANCE
RISK

STRATEGIC
RISK

REPUTATIONAL
RISK

TRANS-
FORMATION
RISK

SOCIAL  AND
ENVIRONMENTAL
RISKS

PEOPLE
RISK

BOARD STRATEGIC
INNOVATION
COMMITTEE

GROUP CREDIT
COMMITTEE

DIRECTORS’  AFFAIRS  COMMITTEE

TRANSFORMATION AND
SUSTAINABILITY COMMITTEE

REMUNERATION
COMMITTEE

EXECUTIVE
STRATEGIC
INNOVATION
MANAGEMENT
COMMITTEE

EXECUTIVE
CREDIT
COMMITTEE
GROUP
OPERATIONAL
COMMITTEE

BUSINESS RISK
MANAGEMENT
FORUM (BRMF)

GROUP
OPERATIONAL
COMMITTEE

BEE
FORUM

TRANSFORMATION AND HUMAN
RESOURCES EXECUTIVE
COMMITTEE

•  Heads of risk and risk functions, independent of business origination, report direct to business cluster heads.

EXECUTIVE
STRATEGIC
INNOVATION
MANAGEMENT
COMMITTEE

GROUP
OPERATIONAL
COMMITTEE

REGULATORY REPORTING
AND CENTRAL
ACCOUNTING

GROUP PLANNING
AND ALIGNMENT

INVESTOR RELATIONS

RISK, COMPLIANCE AND
SARB RELATIONS

PROJECT ACCOUNTING

HR

GROUP RISK DIVISION (CHIEF RISK OFFICER) Philip Wessels

GROUP CREDIT RISK
MONITORING (GCRM)

GROUP MARKET RISK
MONITORING (GMRM)

HR

CHIEF GROUP ENTERPRISE
GOVERNANCE AND COMPLIANCE
OFFICER

INTERNAL AUDIT AND EXTERNAL AUDIT

EXTERNAL AUDITORS
Deloitte & Touche and KPMG Inc

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RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

OVERVIEW OF THE ICAAP

In line with the four key principles contained in Pillar 2 of
Basel II, the revised South African regulations relating to
banks set out in regulation 39 the ICAAP requirements of
banks and related SREP requirements of the SARB. A
summary of this is depicted below.

Nedbank’s approach, assessment and management of risk
and capital from an internal perspective, as well as its
comprehensive integration and use in running the business,
over and above the minimum regulatory rules and capital
requirements of Basel II, are driven by its ICAAP.

Nedbank’s ICAAP has been embedded within its CMF
since it was first approved by the board of directors in
February 2006. This, in turn, is an integral and comprehensive
component of the group’s ERMF. The foundations of
Nedbank’s ICAAP, CMF and ERMF are a strong and rigorous
governance structure and process as discussed earlier. The
ERMF is actively maintained, updated and regularly reported

on up to board level, coordinated by the ERMF Division in
Group Risk.

The Group Capital Management Division reports direct to the
CFO and is mandated to champion the successful
implementation of the CMF and ICAAP across the group. Also
reporting to the CFO are the heads of Group ALM and
Regulatory Reporting, Budgeting and Central Accounting, who
are also central roleplayers in the group’s integrated risk and
capital management.

Further details of the group’s capital management is covered
on page 169.

The ultimate responsibility for the ICAAP rests with the board
of directors. The risk and capital management responsibilities of
the board and Group Exco are incorporated in their respective
terms of reference (charters) contained in the ERMF. They are
assisted by the various board and executive committees and
divisions set out in the ERMF on page 132.

Requirements of the bank
ICAAP

Requirements of the regulator
SREP

Principle 1

• Banks to have an ICAAP within which strategy

is to be linked with risk appetite and capital levels.

Principle 3

• Banks expected to hold capital in excess of the

regulatory minimum.

• Regulators with power to enforce.

Principle 2

• Regulators to review and evaluate banks’ ICAAP.
• Regulators able to take action if not satisfied with

a bank’s ICAAP.

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Principle 4
• Regulators to intervene early to prevent capital falling

below required minimum levels.

Main ICAAP components

Board and
management
oversight

Comprehensive risk
assessment and
management processes
(addressing ALL
material risks)

Sound capital
assessment
and management

Monitoring and
reporting

Internal control
review

134

NEDBANK GROUP ANNUAL REPORT 2008

ECONOMIC CAPITAL AND ECONOMIC PROFIT USE IN NEDBANK GROUP

Economic capital and economic profit use across Nedbank

• Economic capital adequacy
• Risk-based capital allocation across the group’s 

business

• Key component of risk appetite
• Active capital management and ICAAP
• Effective reporting of risk
• Strategic and capital planning

GROUP
LEVEL

PORTFOLIO
LEVEL

• Concentration risk management
• Risk diversification
• Risk portfolio management and optimisation
• Limit setting
• Value-based management

• Risk/return economic value appraisal of different 

business units and monolines
• Economic profit target setting
• Risk-based strategic planning
• Risk appetite optimisation
• ICAAP

BUSINESS
UNIT LEVEL

TRANSACTION
LEVEL

application and products
• Client value management
• Prioritisation of utilisation of client limits

• Risk-based pricing
• Consideration of economic return on individual loan

Nedbank’s risk and capital management, and so economic
capital, are embedded in the grain of the organisation and
the way the business is managed. This is summarised above.

Economic capital is a sophisticated, consistent measurement
and comparison of risk across business units, risk types and
individual products or transactions. This enables a focus on both
downside risk (risk protection) and upside potential (earnings
growth). Nedbank assesses the internal requirements for capital
using its proprietary economic capital methodology, which
models and assigns economic capital within nine quantifiable
risk categories, as summarised on page 167.

All of Nedbank’s quantifiable risks, as measured by its
economic capital, are then allocated back to the businesses
in the form of an economic capital allocation to where the
assets or risk positions reside/originate.

Economic capital not only facilitates an apples-with-apples
measurement and comparison of risk across businesses but,
by incorporating it into performance measurement, also
allows Nedbank to measure and compare the performance of
each business on an absolute basis (economic profit) and
relative percentage return basis [return on risk-adjusted
capital (RORAC)] by comparing these measures against the
group’s cost of capital.

To align the group’s current short-term incentive scheme 
(STI scheme) with the shareholder value drivers the STI scheme
has been designed to incentivise appropriately a combination
of profitable returns, risk and growth. It is driven from an
economic profit basis, using risk-based economic capital
allocation as discussed above. Risk is therefore an integral

component of capital allocation and performance
measurement (and reward) in Nedbank.

Economic capital, economic profit, RORAC and other
important metrics are included in performance scorecards
across the group. The key financial performance indicator is
economic profit, while measures such as ROE and RORAC are
used as important secondary measures.

NEDBANK’S RISK AND CAPITAL
MANAGEMENT FRAMEWORKS
ENABLE IT TO IDENTIFY,
MEASURE, MANAGE AND
CONTROL ITS MATERIAL RISKS
AND RISK APPETITE, AND THEN
RELATE THESE TO CAPITAL
REQUIREMENTS AND ENSURE
CAPITAL ADEQUACY.

Nedbank’s risk universe is defined, actively managed and
monitored in terms of our ERMF, in conjunction with the
CMF and its subframeworks, including economic capital, as
mentioned earlier.

A summary table of the key risk types impacting the group is
provided on the next page. An overview of the key risks
impacting Nedbank then follows.

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135

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

Major risk categories

ERMF key risk types

Capital risk

Credit risks

Liquidity risk

Market risks

Operational risks

Business risks

N/a = not applicable to economic capital.

Capital risk

Credit risk
• Underwriting (lending) risk
• Transfer (sovereign) risk
• Counterparty credit risk
• Securitisation risk
Liquidity risk

Market risk in the trading book
Market risk in the banking book
• Interest rate risk in the banking book
• Foreign currency translation risk in the banking book
Investment risk
• Equity risk in the banking book
• Property risk

Operational risk
Accounting and taxation risks
Compliance risk
Insurance and assurance risks
People risk
Information technology risk

Transformation risk
New-business risk
Reputational risk
Social and environmental risks
Strategic risk

Economic capital risk types

(see page 167)

✓

✓
✓ (combined as credit risk)
✓
✓(combined as credit risk)
✓(combined as credit risk)
N/a

✓
✓
✓
✓

✓
✓

✓

N/a (covered by provisions)
✓ (in operational risk)
✓ (in operational risk)
✓ (in operational risk)
✓ (in operational risk)

✓ (in business risk)
✓ (in business risk)
N/a
✓ (in business risk)
✓ (in business risk)

136

NEDBANK GROUP ANNUAL REPORT 2008

CREDIT RISK

Credit risk arises from lending and other financing activities
that constitute the group’s core business. It is by far the most
significant risk type and accounts for over 60% of the group’s
economic capital requirement and 80% of regulatory capital.

One of the major investments by Nedbank in risk in recent
years has been to elevate its credit risk management to best
practice. This, together with its strong client service focus,
positioned Nedbank not only to achieve appropriate growth
and returns, but also to obtain approval from SARB for the
AIRB approach for credit risk.

Governance structure of Nedbank’s AIRB credit system

Nedbank Board of Directors

Group Credit Committee

Group Audit Committee

Group Exco

Group Operating Committee (Group Opcom)

Executive Credit Committee (management body approved by the board)
Mandate includes to review, challenge and approve all material aspects of the bank’s AIRB credit system

Wholesale AIRB Technical Forum

Retail AIRB Technical Forum

Divisional credit committees

Business clusters (first line of defence)

• Appropriate use of models developed
• Credit units

• The origination of exposures and recommending

ratings in some cases

• Model and process validation (primary responsibility)
• New model development

• Model refinement, improvement and backtesting
• Approval of ratings (first line of defence)

Independent cluster Credit Risk Officers (CROs)

Business unit credit heads and risk functions

Cluster risk labs ( independent of business)

Group Risk units (second line of defence)

Group Credit Risk Monitoring (CRM)

• Model and process validation (ultimate responsibility)
• Approval of ratings (second line of defence)

• Ensuring consistency in the rating process

Credit Models Validation Unit (CMVU)

GIA (third line of defence)

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137

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

Credit risk is managed across the group in terms of its board-
approved Group Credit Risk Management Framework (GCRF),
which encompasses comprehensive credit policy, mandate
limits and governance structures. It is a key component of
the group’s ERMF, CMF and Risk Appetite Framework
discussed earlier.

The GCRF, which covers the macrostructures for credit risk
management, monitoring and approval mandates, includes
the Executive Credit Committee (ECC), its two AIRB technical
forums and a Group Credit Ad Hoc Ratings Committee.

The ECC is the designated committee appointed by the
board to monitor, challenge and ultimately approve all
material aspects of the bank’s AIRB credit rating and risk
estimation processes.

In this regard the board and its Group Credit Committee (GCC)
are required by the Basel II regulations to have a general
understanding of the AIRB credit system and the related reports
generated. They also need to ensure the independence of the

bank’s credit risk control unit, the CMVU and the effective
functioning of the ECC.

DCCs, with chairpersons independent of the business units,
operate for all major business units across the group. The
DCCs are responsible for approving and recommending credit
and credit policy, as well as reviewing divisional-level credit
portfolios, parameters, impairments, expected loss and credit
capital levels.

An independent Group Credit Risk Monitoring (GCRM) Unit is
part of Group Risk. It champions the ongoing enhancement of
credit risk management across the group, the GCRF and AIRB
credit system, monitors credit portfolios and reports to
executive management, DCCs, the ECC and ultimately the
board’s GCC on a regular basis. As part of GCRM the CMVU has
overall responsibility for the ongoing championing of the Basel
II AIRB methodology across the group and ensuring consistency
in the rating processes. It also has ultimate responsibility for
independent model validation.

Overview of Nedbank’s use of its AIRB credit system

Framework
and policy
(methodology,
process and
governance)

Credit
approval

Monitoring
and
reporting

Disclosure

Performance
measurement

Nedbank’s AIRB credit system

Risk-based
pricing and
client value
management

Expected
loss and
incurred loss
(impairments)

Strategy and
business
plans

Economic
capital and
capital
management

Group credit policy incorporates the relevant credit risk
principles stipulated in the revised regulations related to
banks as well as best practice. This policy is implemented
across the group with detailed and documented policies and
procedures, suitably adopted for retail, commercial or
corporate business units, and forms the cornerstone for
sound credit risk management as it provides a firm
framework for credit granting as well as the subsequent
monitoring of credit risk exposures.

Credit risk mitigation and the provision of collateral are
generally negotiated to protect the group against unforeseen
circumstances. It needs to be stressed, though, that the
primary consideration in the assessment of any lending
opportunity remains the borrower’s financial position and
ability to repay from its own resources and cashflow.
Collateral mitigates the overall risk of an exposure and it
affects pricing due to the fact that collateral provided will
decrease the loss-given default (LGD) of an exposure.

138

NEDBANK GROUP ANNUAL REPORT 2008

Other forms of credit risk mitigation that take place are on- and off-balance-sheet netting and setoff. Off-balance-sheet netting
usually occurs in the over-the-counter environment while setoff and on-balance-sheet netting take place in the banking book.

Other policies and principles are well-articulated in the group’s credit policy, as are the definitions of ‘past due’, ‘default’, ‘impaired
and non-performing loans/advances’, as well as ‘specific and portfolio impairments’ (refer to pages 141 and 142).

For credit risk measurement the following Basel II regulatory approaches have been fully adopted by Nedbank Group across its
various banking subsidiaries:

Subsidiary

Approach

Description of banking activity

% credit extended 
(size relative to total group)

Nedbank Limited

AIRB

Imperial Bank Limited
Nedbank Namibia Limited
Nedbank (Swaziland) Limited
Nedbank (Lesotho) Limited
Nedbank (Malawi) Limited
Fairbairn Private Bank (IOM) Limited
Fairbairn Private Bank Limited

Standardised
Standardised
Standardised
Standardised
Standardised
Standardised
Standardised

Full commercial banking 
(wholesale and retail)
Commercial and retail banking 
Commercial and retail banking 
Commercial and retail banking 
Commercial and retail banking 
Commercial and retail banking 
Private banking 
Private banking 

88

8
<1
<1
<1
<1
1
1

100

All credit exposure and asset classes in Nedbank Limited are
covered by the AIRB approach. All the other subsidiaries are
under the Standardised Approach and there is currently no
intention to migrate them to AIRB in the near future.

The above Basel II regulatory approaches all carry the formal
approval of SARB.

However, for credit economic capital across the entire group
Nedbank applies conservative AIRB credit parameter
benchmarks for subsidiaries other than Nedbank Limited
(where actual derived estimates are obviously used).
Nedbank Group’s credit economic capital is separately
derived by integrating the same key Basel II AIRB credit risk
parameters with Nedbank’s sophisticated CPM. The CPM
takes portfolio concentrations and diversifications into
account.

Credit risk profile at 31 December 2008 

The South African banking environment is experiencing the
effects of a rapidly slowing domestic economic cycle coupled
with political uncertainty and the secondary effects of the
global financial crisis and economic downturn. However, in spite
of this challenging economic environment, infrastructure
spending and moderate fiscal stimulus are still expected to
provide some opportunities for growth in the year ahead.

Credit quality deteriorated throughout 2008 with Nedbank
Retail’s impairments worsening significantly while the
wholesale-banking portfolio showed a moderate
deterioration in the second half of 2008. While impairments

have increased, the impact on earnings was partially offset by
prudent cost management.

The credit loss ratio increased from 0,62% in 2007 to 1,17%
for the year. The growth in loans and advances and the
increase in the credit loss ratio are reflected in a 122,8%
increase in the impairments charge from R2 164 million to
R4 822 million. Retail credit loss ratios have worsened since
June 2008 and remain above expected through-the-cycle
levels, largely as a result of continued increases in defaulted
loans and advances in the Home Loan and Vehicle and Asset
Finance Divisions. Wholesale-banking credit loss ratios remain
below expected through-the-cycle levels, although the credit
loss ratio in Business Banking has increased as expected. The
credit quality in the wholesale book remains good, but is
expected to be impacted by worsening credit quality in the
year ahead. Notwithstanding seasonal effects, the unsecured
retail portfolio reflected encouraging signs of improvement in
the latter part of 2008.

Defaulted loans and advances increased by 75% from 
R9 909 million to R17 301 million and the impairment
provisions increased by 29,3% from R6 078 million to 
R7 859 million. The group’s credit loss ratio is anticipated to
remain above the medium- to long-term target range of
between 0,55% and 0,85% for 2009. Nedbank Group’s long-
run average expected loss (EL) [on an exposure-at-
default(EAD)-weighted basis] for its credit portfolio is
estimated at 0,70%, consistent with the previous year.

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139

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

The majority of the group’s exposure to black economic
empowerment (BEE) and other loans and advances secured
by shares continue to be within their default cover ratios.
Loans and advances that are below these cover ratios
continue to service their debts and are considered to have
appropriate impairment provisions at year-end.

During 2008 the group changed the criteria for the
distinction between retail specific and portfolio impairments.
Initially, in view of the deteriorating economic climate and
rising retail impairments, to be more conservative the group

first changed the specific-impairment trigger for retail from 
60 days to 30 days past due. However, subsequent to this and
in order to adhere to the SARB’s new Basel II requirements
and align with the banking industry on the definition of non-
performing loans, retail impairments raised in the 30- to 90-
day past-due window were reclassified from ‘specific
impairment’ to ‘portfolio impairment’. The 2007
comparatives have been restated accordingly. These
reclassifications only pertain to retail as all other credit
portfolios in the group were already in line with the SARB’s
requirements.

A reconciliation of this two-step change during 2008 is provided below.

Retail cluster impairments

Rm

Opening balance (1 January 2008)
Move to 30-day impairment event
Move to align with SARB Basel II requirements

Revised opening balance
Adjusted gross income statement charge
Writeoffs and other moves

Closing balance at 31 December

Specific
impairment

Portfolio
impairment

2 383
125
(403)

2 105
3 835
(2 326)

3 614

550
(125)
403

828
47
(24)

851

Total

2 933
–
–

2 933
3 882
(2 350)

4 465

This reclassification of retail specific impairments held
against loans and advances did not have any effect on the
amounts reported in the group’s income statement, balance
sheet, statement of changes in total shareholders’ equity or
cashflow statement, but had an effect on restating the
related notes for 2007.

The following tables summarise Nedbank Group’s credit
portfolio quality and level of impairments at 31 December
2008. More granular information on balance sheet exposure
by Basel II asset class, business cluster, AIRB credit risk
metrics, and summaries of impairments and defaulted
advances is included in our full Pillar 3 Report on the
Nedbank website.

Summary of loans and advances

Rm – at 31 December

Home loans
Commercial mortgages
Properties in possession
Term loans
Credit cards
Overnight loans
Overdrafts
Other loans to clients
Leases and instalment sales
Preference shares and debentures
Trade and other bills
Reverse repurchase agreements

Gross loans and advances 
Impairment of loans and advances

Net loans and advances

140

NEDBANK GROUP ANNUAL REPORT 2008

Annualised 
% change

2008

2007

15,6
21,6
>100
61,0
2,0
(14,0)
(0,4)
(7,7)
16,7
67,1
(41,7)
(55,0)

16,3
29,3

16,1

143 342
73 031
791
64 144
7 248
15 760
12 461 
44 581
61 362 
15 667
1 075 
2 630 

123 980 
60 045 
308 
39 835 
7 109 
18 336 
12 514 
48 280 
52 568 
9 377 
1 843 
5 839 

442 092 
(7 859) 

380 034 
(6 078) 

434 233 

373 956 

Summary of impairment charges

Rm – at 31 December

Impairment charge

As % of net interest income (NII)

As % of average loans and advances 

Nedbank Capital

Nedbank Corporate

Nedbank Retail

Imperial Bank

% of average 

loans and 

advances

100,0

13,7

41,6

35,0

9,7

2008

4 822

29,8

1,17

0,06

0,27

2,47

1,71

2007

2 164

15,2

0,62

0,05

0,11

1,26

1,28

Summary of impairments vs defaulted loans 
and advances

1,17

Target credit 
loss ratio 
range

0,85

0,55

0,62

9 909

6 078

17 301

7 859

%
1,3
1,2
1,1
1,0
0,9
0,8
0,7
0,6
0,5
0,4
0,3
0,2
0,1
0

Rm

18 000

16 000

14 000

12000

10 000

8 000

6 000

4 000

2 000

0

2007

2008

I
Impairment provision

Defaulted loans and 
D
advances (Basel II)
a

Long-term EL%
L

Credit loss ratio (%)
C

The key definitions related to credit risk are set out below.

Defaulted loans and advances

This refers to any advance or group of loans and advances
that has triggered the Basel II definition of default criteria
and which is in line with the revised South African banking
regulations, effective 1 January 2008. For retail portfolios this
is product-centric and therefore a default would be specific
to a client or borrower account (a specific advance). For all
other portfolios it is client- or borrower-centric, meaning
that, should any transaction within a borrowing group
default, all transactions within the borrowing group would be
treated as defaulted.

At a minimum a default is deemed to have occurred where,
for example, a specific impairment is raised against a credit

exposure because the credit quality has declined significantly,
a material obligation is past due for more than 90 days or an
obligor exceeded an advised limit for more than 90 days.

Impaired loans and advances, and specific
impairments

Impaired loans and advances are defined as loans and
advances in respect of which the bank has raised a specific
impairment (accounting/IFRS 39 definition). A specific
impairment is raised in respect of an asset that has triggered
a loss event where the collateral held against the advance is
insufficient to cover the total expected losses. Such a loss
event may be, for example, significant financial difficulty of
the issuer or obligor, a breach of contract, such as a default,
or delinquency in interest or principal payments, with ageing
arrears as the primary driver.

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141

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

Portfolio impairment

Non-performing loans and advances

The standard portfolio represents all the loans and advances
that have not been impaired. These loans and advances have
not yet individually evidenced a loss event, but loans and
advances exist within the standard portfolio that may have an
impairment without the bank being aware of it. A period of
time will elapse between the occurrence of an occurred
impairment event and objective evidence of the impairment
becoming evident. This period is generally known as the
emergence period. For each standard portfolio an emergence
period is estimated as well as the probability of the loss-trigger
and the loss-given events occurring. These estimates are
applied to the total exposures of the standard portfolio to
calculate the portfolio impairment. Alternatively, the portfolio
impairment is known as the ‘impairment calculation based on
incurred-but-not-yet-reported methodology’.

Non-performing loans and advances are the same as
defaulted loans and advances (as defined above). To adhere
to the SARB’s Basel II requirements and align with the
banking industry, retail impairments raised in the window of
30 to 90 days past due were reclassified from ‘specific
impairment’ to ‘portfolio impairment’.

ROADMAP OF NEDBANK’S CREDIT-RATING
SYSTEMS

Nedbank Limited’s AIRB credit-rating system provides an
overview of the bank’s credit risk profile by business line and
major Basel II asset class. Imperial Bank and the non-South
African portfolios are under the Standardised Approach. Basel
II credit exposure is reported on the basis of EAD for the
businesses under the AIRB approach and IFRS credit exposure
for those under the Standardised Approach, as set out below.

Standardised rating system and non-regulated entities

Rm (IFRS exposure basis at 31 December 2008)

NON-
REGULATED
ENTITIES

30 481

STANDARDISED
APPROACH

67 692

Imperial Bank
45 697

*
Africa
6 740

**
Fairbairn
15 255

Corporate
468

SME
corporate
11 592

Banks
161

Securitisation
exposures
283

Corporate
1 160

SME
corporate
1 137

Public sector
entities
21

Banks
10 238

Retail
mortgages
1 286

Sovereign
2 093

Local
government
and
municipalities
4

Retail – other
27 874

SME retail
3 222

Local
government
and
municipalities
22

Sovereign
152

Banks
57

Retail – other
1 371

Other assets
2 360

Securities
firms
303

Retail
mortgages
2 000

Retail – other
1 433

SME retail
455

Business lines

Basel II asset class

* 

**

Includes Namibia, Swaziland, Lesotho and Malawi

Includes Isle of Man and Jersey

142

NEDBANK GROUP ANNUAL REPORT 2008

Retail Advanced Internal Ratings-based rating system

Rm (Basel II EAD basis at 31 December 2008)

NEDBANK
RETAIL CLUSTER

173 069

(2007: 145 416)

Transactional
and Investment
Products
4 055

Small Business
Services
14 459

Secured
Lending
105 254

Private
Bank
20 453

Personal
Loans
7 447

Card
10 541

Bankassurance
and Wealth
10 860

(2007: 4 803)

(2007: 9 165)

(2007: 95 710)

(2007: 8 113)

(2007: 6 776)

(2007: 10 836)

(2007: 10 012)

Retail –
other
3 857

Retail
mortgage
9 159

Retail
mortgage
98 473

Retail –
other
3 867

Retail –
other
7 447

Retail –
other
n/a

Retail –
other
1 298

(2007: 4 497)

(2007: 4 702)

(2007: 88 830)

(2007: 1 821)

(2007: 6 579)

(2007: 302)

(2007: 10 012)

SME retail
n/a

SME retail
5 300

Retail –
other
6 781

Retail
mortgage
16 586

SME retail
n/a

Retail
revolving credit
10 541

Retail
mortgage
9 562

(2007: 20)

(2007: 4 463)

(2007: 6 880)

(2007: 6 293)

(2007: 197)

(2007: 10 534)

(2007: n/a)

Corporate
198

(2007: n/a)

Retail
revolving
n/a

(2007: 286)

n/a no value at period end.

Business lines

Basel II asset class

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E
V
O

P
U
O
R
G

S
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P
E
R

I

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T
A
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P
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E
C
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I

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A

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D
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143

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

Wholesale Advanced Internal Ratings-based rating system

Rm (Basel II EAD basis at 31 December 2008)

NEDBANK
CORPORATE
CLUSTER

249 198

(2007: 222 383)

*
Other
1 411

Corporate
Banking
105 847

Property
Finance
66 434

Business
Banking
75 506

(2007: n/a)

(2007: 95 746)

(2007: 55 191)

(2007: 71 445)

Banks
1 334

Corporate
77

Banks
118

Corporate
88 553

Corporate
13 742

Corporate
SME
675

Banks
66

Corporate
8 668

(2007: n/a)

(2007: n/a)

(2007: 9 723)

(2007: 74 296)

(2007: 11 082)

(2007: 896)

(2007: n/a)

(2007: 4 141)

Local
government
and
municipalities
2 414

Public sector
entities
11 176

(2007: 1 656)

(2007: 7 620)

Retail – other
6

Retail
mortgages
1

(2007:  n/a)

(2007:  n/a)

Specialised
lending – high-
volatility
 commercial real
estate
10 483
(2007: 8 247)

Specialised
lending – project
finance
n/a

(2007: 176)

Specialised
lending – income-
 producing real
 estate
41 534
(2007: 34 790)

Securities firms
158

SME corporate
3 429

(2007: n/a)

(2007: 2 443)

SME retail
12

Sovereign
n/a

(2007:  n/a)

(2007: 5)

Specialised
lending – income-
producing real
estate
n/a
(2007: 3)

Local
government
and
municipalities
115

(2007: n/a)

Retail – other
6 309

Public sector
entities
24

(2007: n/a)

Retail
mortgages
6 628

(2007: 11 201)

(2007: 5 715)

SME retail
24 360

SME
corporate
27 402

(2007: 22 655)

(2007: 26 466)

Specialised
lending – income
 producing real
 estate
1 931
(2007: 1 267)

Sovereign
3

(2007: n/a)

n/a no value at period end.
*

Includes centralised credit risk and finance.

144

NEDBANK GROUP ANNUAL REPORT 2008

NEDBANK
CAPITAL
CLUSTER

57 959

LONDON
BRANCH

23 439

(2007: 91 933)

(2007:  n/a)**

NEDBANK
CENTRAL
MANAGEMENT

25 714

(2007:  n/a)**

Specialised
lending – income
 producing real
 estate
5
(2007: 7)

Specialised
lending –
object finance
467

(2007: 775)

Specialised
lending – project
finance
3 032

(2007: 6 443)

Corporate
14 450

Public sector
entities
121

Corporate
74

Banks
455

Sovereign
1048

Banks
7 735

Public sector
entities
1 299

Securities
firms
1

Securities
 firms
83

Retail
mortgages
1

Sovereign
23 885

Retail – other
1

Business line

Basel II asset class

Banks
22 531

Corporate
16 614

(2007: 31 993)

(2007: 19 283)

Local
government
and
municipalities
390

(2007: 877)

Retail – other
17

(2007: n/a)

Public sector
entities
2 817

(2007: 1 893)

Retail
mortgages
2

(2007: n/a)

Securities
firms
1 069

Securitisation
exposures
7 195

(2007:  n/a)

(2007: 9 428)

SME
corporate
227

SME retail
299

(2007: 657)

(2007: n/a)

Sovereign
3 229

(2007: 18 599)

Specialised
lending –
commodities
finance
65
(2007: 1 978)

**

Information for 2007 not available.

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145

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

The distribution of Nedbank Group’s credit exposure is set
out below. Comprehensive details on the distribution, trends
and migration of the group’s credit risk profile, across its

various credit portfolios, businesses and Basel II asset classes,
are provided in our full Pillar 3 Report available on the
Nedbank website.

Distribution of total Nedbank exposure at default*
Based on Nedbank’s master credit rating scale [ie probabilty of default (PD)] 
Nedbank Group rating (NGR)

20%

10%

0

0
0
R
G
N

1
0
R
G
N

2
0
R
G
N

3
0
R
G
N

4
0
R
G
N

5
0
R
G
N

6
0
R
G
N

7
0
R
G
N

8
0
R
G
N

9
0
R
G
N

0
1
R
G
N

1
1
R
G
N

2
1
R
G
N

3
1
R
G
N

4
1
R
G
N

5
1
R
G
N

6
1
R
G
N

7
1
R
G
N

8
1
R
G
N

9
1
R
G
N

0
2
R
G
N

1
2
R
G
N

2
2
R
G
N

3
2
R
G
N

4
2
R
G
N

5
2
R
G
N

1
P
N

2005

2006

2007

2008

Average performing book EAD-weighted PD 2,76%*

Average performing book EAD-weighted LGD 22,65%*

Average performing book EAD-weighted EL 0,78%*

Average total book EAD-weighted PD 5,40%*

Average total book EAD-weighted LGD 22,67%*

Average total book EAD-weighted EL 1,39%*

* For reporting group results, AIRB benchmarks based on expert judgement are applied to Imperial Bank and the small group subsidiaries under the Standardised Approach.  
   Nedbank Limited operates fully under the AIRB Approach and this accounts for 88% of total group credit exposure inclusive.  EAD is inclusive of debt securities and derivatives.

Based on Nedbank’s master transaction rating scale (ie expected loss) 
Nedbank transaction rating (NTR)

50%

40%

30%

20%

10%

0

1
0
R
T
N

2
0
R
T
N

3
0
R
T
N

4
0
R
T
N

5
0
R
T
N

6
0
R
T
N

7
0
R
T
N

8
0
R
T
N

9
0
R
T
N

0
1
R
T
N

2005

2006

2007

2008

146

NEDBANK GROUP ANNUAL REPORT 2008

CREDIT CONCENTRATION RISK

Nedbank’s AIRB credit system forms the basis of its

measurement and management of credit risk across the bank.

The bank requires that ratings be performed for all transactions,

not only to achieve Basel II regulatory compliance, but more

importantly to allow the bank to measure credit risk

consistently and accurately across its entire portfolio. The

Group Credit Portfolio Management Unit in the Group Capital

Management Division measures, manages and strives to

optimise the group’s credit portfolios and credit concentration
risk. For this purpose the group uses a tailored Credit Porfolio
Model (CPM) run on KMV Portfolio Manager software.

Nedbank’s credit economic capital is separately derived by
integrating the same key Basel II AIRB credit risk parameters
with Nedbank’s sophisticated CPM. The CPM takes credit
portfolio concentrations and intrarisk diversifications into
account.

Nedbank’s AIRB credit system integrated with its CPM and credit economic capital

PD MODELLING

EAD MODELLING

LGD MODELLING

• Quantifies the likelihood of the borrower being 

unable to repay.

• Rating models have been developed to estimate

PD for many segments across Nedbank.

• Depends on borrower credit quality.

• Quantifies the EaR in the case of default.
• Borrowers with some utilised limits are likely to
draw down part of that limit before they default.

• Calculation depends on product type.

• Quantifies the severity of loss.
• Estimates the amount of the EAD that will be

lost (ie not recovered).

• Also includes other economic costs, eg legal 

costs.

• Generally depends on the collateral and product

type.

Nedbank currently has 75 AIRB-compliant credit models

From
Nedbank’s
CPM

Portfolio correlations
(credit concentration risk)

EL

+

Maturity (M)
factor

Basel II
capital
formulae

=

Basel II credit
risk-weighted assets
(RWA) and regulatory
capital

Portfolio unexpected loss also
depends on the ‘diversification’
within Nedbank’s credit portfolio

Portfolio
unexpected loss

Confidence level
(multiplier effect)

Depends on desired level of confidence or target debt
rating  (Basel  II  is  calibrated  to  an A-  rating  or  99,9%
confidence level). Currently Nedbank is using the same
confidence level for its Economic-capital Model.

Credit value at risk (CVaR) or credit economic capital requirement  (at a given confidence level)

= Credit economic capital

Key factors affecting credit risk and capital requirements

PD

Credit
rating

EAD

Current
exposure

Unutilised
limits

Collateral value
[loan to value (LTV)]

LGD
Collateral
quality

Collections
(recovery rates)

Client
concentration

Sector
concentration

Concentration

Nedbank’s CPM thus measures and estimates concentration
risk in its credit portfolio, and intrarisk diversification, in
arriving at an integrated credit economic capital requirement.

• A large exposure approval committee, comprising three

non-executive directors, in addition to the CE, CFO, CRO
and Chief Credit Officer.

Nedbank GCRF includes the following salient features
relevant to the management and monitoring of credit
concentration risk:

• A separate board subcommittee, the GCC.

• An ECC and seven executive DCCs covering all the

businesses segments of the group.

• A comprehensive credit mandate structure/process.

• GCRM in Group Risk and the CPM Unit housed within

Group Capital Management in Group Finance.

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E
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C
N
A
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I

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A
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A
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F

L
A
U
N
N
A

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M
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A
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S

I

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A
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147

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

SINGLE-NAME CREDIT CONCENTRATION

Our top-20 exposure analysis, in particular the percentage of
total group credit economic capital by individual borrowers,
confirms that Nedbank does not have undue single-name
credit concentration risk. Nedbank’s credit concentration risk
measurement incorporates the asset size of obligors/borrowers

Top 20 Nedbank Group exposures

31 December 2008

No.

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Total of top 20 exposures

into its calculation of credit economic capital. Nedbank also
includes stress testing of single-name large exposures, and their
potential impact on capital ratios, in its stress and scenario
testing in assessing capital buffers.

Internal NGR
(PD) rating

EAD value 
Rm

% of total group
credit economic
capital

NGR03
NGR04
NGR09
NGR03
NGR04
NGR15
NGR05
NGR09
NGR03
NGR04
NGR05
NGR02
NGR08
NGR03
NGR13
NGR10
NGR05
NGR04
NGR10
NGR08

27 054 
3 770 
3 141 
3 282 
2 704 
2 674 
2 793 
2 564 
2 976 
2 750 
2 345 
2 073 
2 329 
2 050 
1 975 
1 943 
1 837 
1 842 
1 609 
1 603 

73 315 

0,13
0,09
0,20
0,02
0,02
0,29
0,04
0,04
0,01
0,05
0,02
0,01
0,15
0,01
0,28
0,12
0,02
0,04
0,12
0,06

1,72

The largest exposure (no 1 above) is to the South African government and is in respect of government bonds, treasury bills and other
similar paper arising in the ordinary course of business.

148

NEDBANK GROUP ANNUAL REPORT 2008

GEOGRAPHIC CONCENTRATION RISK
Geographically, almost all of Nedbank Group’s credit
exposure originates in South Africa (non-South African
exposure is approximately 6%). This geographical and
industry concentration risk is built into Nedbank’s
concentration risk measurement for economic capital
purposes. Refer to page 222 for a detailed analysis of our
geographical segmental analysis.

It is concluded that credit concentration risk is adequately
measured, managed, controlled and ultimately capitalised.
There is no undue single-name concentration. Nedbank is
also a well-diversified banking group in the South African
context, split across its three major business clusters.

Geographical split of loans and advances
2008

Geographical split of loans and advances
2007

1%

5%

2%

3%

94%

95%

South Africa

Rest of Africa

Rest of world

South Africa

Rest of Africa

Rest of world

INDUSTRY CONCENTRATION RISK

Industry split by exposure
2008

9%

9%

2%

8%

26%

10%

26%

3%

12%

14%

7%

Basic industries

Cyclical goods

Cyclical services

Finance and insurance

Non-cyclical

Other

Real estate

Resources

Retail mortgage

Retail – other

Industry split by exposure
2007

12%

6%

3%

8%

14%

10%

3%

4%

14%

Basic industries

Cyclical goods

Cyclical services

Finance and insurance

Non-cyclical

Other

Real estate

Resources

Retail mortgage

Retail – other

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E
C
N
A
N
R
E
V
O
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I

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A
C
N
A
N
I
F

L
A
U
N
N
A

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T
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E
M
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A
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S

I

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N
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E
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149

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

COUNTERPARTY CREDIT RISK (AND
SETTLEMENT RISK)

Credit derivative activities have been restricted to single-name
trades of South African exposures and biased towards providing
risk mitigation. Nedbank has no direct exposure to United
States subprime credit assets, nor involvement in any related
credit derivative transactions or structures.

There is continued emphasis on the use of credit risk
mitigation strategies, such as netting and collateralisation of
exposures. Nedbank and its large bank counterparties have
International Securities Lending Association (ISLA),
International Security Management Association (ISMA) and
International Swaps and Derivatives Association (ISDA)
master agreements as well as credit support (collateral)
agreements in place to support bilateral margining of
exposures. Limits and appropriate collateral are determined
on a risk-centred basis.

Counterparty credit limits are set at an individual
counterparty level and approved within the GCRF.
Counterparty credit exposures are reported and monitored at
a business unit level. To ensure that appropriate limits are
allocated to large transactions, scenario analysis is performed
within a specialised counterparty risk unit. Based on the
outcome of such analysis, proposals regarding potential risk
mitigating structures are made prior to final limit approval.

Where appropriate, Nedbank transacts over-the-counter
(OTC) derivatives under master netting agreements
published by the ISDA and the ISMA. Netting is applied only
to underlying exposures where supportive legal opinion is
obtained as to the enforceability of the relevant netting

agreement in the particular jurisdiction. Margining and
collateral arrangements are entered into in order to mitigate
counterparty credit risk. Haircuts, appropriate for the specific
collateral type, are applied to determine collateral value.
Margining agreements are pursued with interbank trading
counterparties on a proactive basis. Margining thresholds
constitute unsecured exposure to the counterparty and are
assessed as such. To deal with a potential deterioration of
counterparty credit risk over the life of transactions,
thresholds are typically linked to the counterparty external
credit rating.

Collateral arrangements make provision for adjustment of
the collateral posted in the event of a credit-rating
downgrade of either Nedbank or our counterparty bank.
Limits for our Corporate and Business Banking businesses
favour a nominal limit to facilitate monitoring. Prior to
execution material trading credit risk exposures within
Nedbank Group are modelled to determine an estimate of
total risk exposure. Monte Carlo simulations are used in this
process.

Nedbank applies the Basel II Current Exposure Method (CEM)
for counterparty credit risk.

Economic capital calculations also currently utilise the 
Basel II CEM results as input in the determination of credit
economic capital. In terms of active management of
counterparty credit risk there is continued emphasis on the
use of credit mitigation strategies, such as netting and
collateralisation of exposures. These strategies have been
particularly effective in situations where there has been a
higher risk of default.

Over-the-counter derivatives for Nedbank Limited solo and London branch

OTC derivative products

2008

Credit-default swap
Equities
Forex and gold
Interest rates
Other commodities
Precious metals except gold

Total

Notional value
Rm

Gross positive
fair value
Rm

2 104
4 497 
215 724 
324 480 
13 
4 

546 822 

2 
778 
14 807 
8 598 
599 
36 

24 820

Risk-
weighted
exposure
Rm

Netted
Current
current credit
netting exposure (pre-
mitigation)
benefits
Rm
Rm

Netted
current credit
exposure
(post-
mitigation)
Rm

Collateral
amount
Rm

EAD value
Rm

Gross positive
fair value
Rm

24 820 

13 272 

10 581 

1 796 

8 996 

12 861 

3 138 

OTC derivative
products
2008

Total

150

NEDBANK GROUP ANNUAL REPORT 2008

Notional
value
Rm

–
–
12 741 
187 234 
239 191 
33 544 
23 213 
2 846 
4 216 
10 093 
4 154 
1 878 
2 561 
2 955 
3 566 
5 861 
1 546 
797 
135 
9 506 
144 
72 
190 
319 
2 
58 

546 822 

Gross positive 
fair value
Rm

EAD value
Rm

–
–
241 
8 198 
10 601 
1 885 
896 
123 
163 
909 
162 
108 
145 
142 
123 
109 
58 
15 
6 
367 
3 
539 
15 
2 
0 
10 

24 820 

–
–
236 
2 187 
5 114 
990 
968 
142 
181 
994 
178 
121 
116 
168 
143 
201 
74 
19 
7 
444 
5 
539 
17 
6 
0 
11 

12 861 

Over-the-counter derivatives per NGR (PD) band

OTC derivatives per NGR (PD) band

2008

NGR01
NGR02
NGR03
NGR04
NGR05
NGR06
NGR07
NGR08
NGR09
NGR10
NGR11
NGR12
NGR13
NGR14
NGR15
NGR16
NGR17
NGR18
NGR19
NGR20
NGR21
NGR22
NGR23
NGR24
NGR25
NP1

Total

D
A
E

l
a
t
o
t

f
o
%
a
s
a
D
A
E

40%

35%

30%

25%

20%

15%

10%

5%

0%

0
0
R
G
N

1
0
R
G
N

2
0
R
G
N

3
0
R
G
N

4
0
R
G
N

5
0
R
G
N

6
0
R
G
N

7
0
R
G
N

8
0
R
G
N

9
0
R
G
N

0
1
R
G
N

1
1
R
G
N

2
1
R
G
N

3
1
R
G
N

4
1
R
G
N

5
1
R
G
N

6
1
R
G
N

7
1
R
G
N

8
1
R
G
N

9
1
R
G
N

0
2
R
G
N

1
2
R
G
N

2
2
R
G
N

3
2
R
G
N

4
2
R
G
N

5
2
R
G
N

1
P
N

NGR (PD) band

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

151

 
 
 
 
 
 
 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

Securities financing transactions (SFTs) for Nedbank Limited solo and London branch

SFTs

Rm

Gross positive
fair value

Collateral value 
after haircut

Netted current
credit exposure
(postmitigation)

EAD value

Risk-weighted 
exposure

Repurchase agreements (repos)
Securities lending 

Total

2 630 
4 686 

7 316 

2 529 
4 672 

7 201 

101 
14 

115 

101 
14 

115 

8
1 

9 

Gross
exposure 
Rm

725 
185 
5 155 
729 
430 
10 
82 

7 316 

EAD value
Rm

27 
6 
41 
21 
13 
– 
7 

115

Securities financing transactions per NGR (PD) band 

SFTs per NGR (PD) band

2008

NGR03
NGR04
NGR05
NGR06
NGR07
NGR08
NGR11

Total

D
A
E

l
a
t
o
t

f
o
%
a
s
a
D
A
E

40%

35%

30%

25%

20%

15%

10%

5%

0%

0
0
R
G
N

1
0
R
G
N

2
0
R
G
N

3
0
R
G
N

4
0
R
G
N

5
0
R
G
N

6
0
R
G
N

7
0
R
G
N

8
0
R
G
N

9
0
R
G
N

0
1
R
G
N

1
1
R
G
N

2
1
R
G
N

3
1
R
G
N

4
1
R
G
N

5
1
R
G
N

6
1
R
G
N

7
1
R
G
N

8
1
R
G
N

9
1
R
G
N

0
2
R
G
N

1
2
R
G
N

2
2
R
G
N

3
2
R
G
N

4
2
R
G
N

5
2
R
G
N

1
P
N

NGR (PD) band

152

NEDBANK GROUP ANNUAL REPORT 2008

 
 
 
 
 
 
Settlement risk is the risk where the group delivers an asset
to a buyer or pays an account to a seller without receiving
payment or the asset bought as expected. This risk is an
element of credit risk if counterparties default and of
operational risk if Nedbank is defrauded or transactions are
disrupted due to technical or system errors.

SECURITISATION RISK

Nedbank primarily uses securitisation as a funding
diversification tool and to assist with the management of
asset-liability mismatches.

During the year under review no new securitisation transactions
were concluded by the group. Nedbank concluded two
securitisation transactions in 2007, namely GreenHouse
Funding (Pty) Limited (‘GreenHouse’), a residential mortgage-
backed securitisation programme, and Octane ABS 1 (Pty)
Limited (‘Octane’), a securitisation programme of motor vehicle
loans advanced by subsidiary Imperial Bank Limited. Nedbank
also has an asset-backed commercial paper mortgage

On-balance-sheet securitisation exposure

programme, Synthesis Funding Limited (‘Synthesis’), which was
established in 2004. These vehicles are the full extent of the
group’s current securitisation exposure.

During the year, amid the adverse external environment,
although credit quality deteriorated, all securitisation vehicles
continued to perform within the specified parameters
detailed in the transaction documentation applicable to the
respective transactions and no securitisation assets were
subject to early amortisation. As a consequence the group
has not suffered any losses in respect of these securitisation
exposures.

The group’s securitisation initiatives are ultimately overseen
by the Group ALCO. All securitisation transactions are subject
to the stringent South African regulatory securitisation
framework.

From an IFRS accounting perspective the assets transferred
to GreenHouse and Octane vehicles continue to be
recognised and consolidated in the balance sheet of the
group. Synthesis is also consolidated into Nedbank Group.

2008

2007

Transaction

Year 
initiated

Rating
agency

Transaction 
type

Asset
type

Assets 
securitised
Rm

Carrying
amount 
of assets
Rm

Assets 

Carrying
amount
securitised of assets
Rm

Rm

GreenHouse

2007

Octane

2007

Total

Moody’s 
and Fitch
Fitch

Traditional
securitisation
Traditional 
securitisation

Retail 
mortgages
Auto
loans

2 000 

1 972 

2 000 

183

2 000 

4 000 

1 781

3 753

2 000 

1 806

4 000 

1 989 

The table below contains a summary of Synthesis, Nedbank’s asset-backed commercial paper (ABCP) mortgage programme.

Transaction

Year 
initiated

Rating 
agency

Transaction  Asset 
type

type

Programme 
size

Conduit size

2008
Rm

2007
Rm

Synthesis

2004

Moody’s 
and Fitch

ABCP
Conduit

Asset-backed
securities,
Corporate term 
loans and bonds

15 000 

7 801 

9 233 

W
E
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E
V
O

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U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

153

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

Off-balance-sheet securitisation exposure

Transaction

Own transactions
Synthesis

Transaction
type

Exposure
type

Exposure

2008
Rm

2007
Rm

ABCP Conduit

Liquidity facility

7 806 

9 390 

Third parties
Private Residential Mortgages (Pty) Limited
Private Mortgages 2 (Pty) Limited 
Private Mortgages 2 (Pty) Limited 

Securitisation
Securitisation
Securitisation

Liquidity facility
Liquidity facility
Redraw facility

Total

100
40 
436 

100 
40 
417 

8 382 

9 947

The various roles fulfilled by Nedbank in the securitisation transactions mentioned on the previous page are indicated in the table below.

Transaction

Originator

Investor

Servicer 

GreenHouse
Octane
Synthesis
Private Residential Mortgages (Pty) Limited
Private Mortgages 2 (Pty) Limited 

✓
✓

✓
✓
✓

✓
✓
✓

Liquidity
provider

Credit 
enhancement Swap 
provider

counterparty

✓
✓

✓
✓
✓

✓
✓
✓

The table below shows the Basel II internal ratings-based (IRB) consolidated group capital charges per risk band for securitised
exposures retained or purchased by Nedbank Group.

Capital charge

2008
Rm

3,9 
1,1
1,0 
–
5,7 
–
7,2
9,4
15,9 
–
–
– 
44,4 

88,6

2007
Rm

3,9 
1,1 
1,0 
– 
5,7 
– 
9,1
10,8 
15,9 
–
–
– 
55,6 

103,1* 

AAA or A1/P1
AA+ to AA-
A+
A or A2/P2
A-
BBB+
BBB or A3/P3
BBB-
BB+
BB
BB-
Unrated
Unrated liquidity facilities to ABCP programme

Total

* Restated.

154

NEDBANK GROUP ANNUAL REPORT 2008

ALM

ALM addresses two of Nedbank’s key risk types, namely
liquidity risk and market risk in the banking book, which in turn
includes interest rate risk in the banking book, and foreign
currency translation risk on foreign-based capital, investments,
loans and/or borrowings.

Group ALM is one of three support functions of the Group
Asset and Liability Committee (ALCO), specifically facilitating
this committee’s responsibility regarding these important risks.
Group ALM, which reports direct to the Group CFO, is
supported by an established ALM desk and maintains a close
interaction with the centralised funding desk. Both desks are
located in Nedbank’s Group Treasury dealing room. These desks
facilitate the implementation of on- and off-balance-sheet
strategies by providing access to products and tools available
within Group Treasury.

LIQUIDITY RISK 

There are two types of liquidity risk, namely market liquidity
risk and funding liquidity risk.

The international market turbulence that has affected and
continues to affect many financial markets around the world
has sharply focused attention on the crucial role liquidity plays
in assuring the effective functioning of the banking sector and
related markets. The significant reduction of liquidity in short-
term international money markets and the virtual drying-up of
liquidity in the securitisation and covered bonds market,
coupled with problems in accessing funding in the secured
financing markets, even for highly rated assets, have caused
severe liquidity difficulties for many international companies in
funding their on- and off-balance-sheet requirements. This has
prompted significant action by central banks and governments
around the world, including equity stakes, special liquidity
facilities and the acquisition of tainted assets.

The change in market liquidity since the start of this crisis has
highlighted how quickly liquidity can evaporate and how
illiquidity can last for prolonged periods of time, having
catastrophic consequences on what have been seen as strong,
mature organisations as well as economic growth rates. This
crisis has further highlighted that many banks around the world
failed to adopt basic principles of sound liquidity risk
management.

In February 2008 the Basel Committee on Banking Supervision
noted that financial innovation and global market
developments had transformed the nature of liquidity risk in
recent years, highlighting the following:

• Greater reliance on capital markets, a more volatile source of

funding.

• Growth in securitisation leading to:

–

an increase in ‘originate-to-distribute’ assets;

– more wholesale funding; and

–

an increase in trading vs banking book activity, which
meant more volatility in earnings.

• An increase in the complexity of financial instruments,

resulting in a lack of transparency.

• An increase in real-time payments and settlements,
heightening intraday liquidity risk management.

• An increase in crossborder business, resulting in events in one

market moving quickly to other markets.

As these events continue to develop and unfold, the result
continues to play out with devastating consequence. This led 
to financial institutions increasing capital bases (including
significant deleveraging), unprecedented government
intervention and support, a refocus on the money-in side of the
business and a shift back to vanilla banking books and products
(rather than complex financial products).

By contrast the South African banking system has remained
resilient to these adverse global market conditions and remains
structurally sound in a tough economic and financial
environment. To date global contagion has largely been
restricted to the domestic capital markets and has significantly
reduced domestic banks’ access to the foreign funding markets.
This has resulted in a repricing of securitised funding and a
decline in appetite for this asset class, and has caused Tier 1
and Tier 2 capital initiatives to become a lot more expensive
and has reduced their programme sizes.

Importantly, the domestic financial market continues to clear
efficiently and effectively as the South African banks have not
lost trust in one another.

The following is specific to Nedbank:

• Liquidity management is a vital risk management function in
all entities across all jurisdictions and currencies, and is a key
focus of Nedbank Group.

• A bank’s role in financial intermediation is the transformation
of short-term deposits into longer-term loans. This makes
Nedbank inherently susceptible to liquidity mismatches that
are managed through a combination of strategic initiatives.

• The impact of the global liquidity events on Nedbank has not

been material – primarily because these events have not
impacted the domestic funding market. Nedbank has an
immaterial foreign-funding requirement, a small international
footprint and a relatively small conduit business that has no
foreign balance sheet components. Nedbank has no direct
exposure to the United States subprime market.

W
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R
E
V
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U
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G

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R

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A
N
O
T
A
R
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P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

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O
T
A
M
R
O
F
N

I

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E
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T
O
D
N
A

155

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

4%

2%

0%

-2%

-4%

-6%

-8%

-10%

-12%

Nedbank Limited liquidity mismatch

2007

2008

Next day

2 to 7 days

8 days to 1 month

1 to 2 months

2 to 3 months

3 to 6 months

(Expressed on total assets and based on maturity assumptions, but before rollovers and risk management)

• Although the impact of these ongoing global liquidity

developments has not been significant for Nedbank Group,
the appropriate risk management resources and forums
continue to monitor these developments closely to identify
any early signs of contagion within the South African markets
in order to manage such risk appropriately.

• Ultimate responsibility for liquidity risk management rests

with the board of directors, which has approved an
appropriate liquidity risk management framework for the
management of the group’s funding requirements and
liquidity mismatches. This framework includes, inter alia,
appropriately constituted non-executive and executive risk
committees, a funding strategy forum, a centralised funding
desk and divisional pricing/interest rate committees. It also
includes appropriately defined charters for these forums as
well as supporting policies and limits defining risk appetite.

• The group’s daily liquidity requirements are managed by an
experienced centralised funding team in Group Treasury.

• Strategic liquidity initiatives are motivated to and approved

by Group ALCO before execution.

• Group ALCO monitors all liquidity strategies to ensure

compliance with the Liquidity Risk Management Framework
and their successful implementation.

• Nedbank has established a number of liquidity contingency
triggers, which are monitored regularly to facilitate early
warning. This process is supported by an appropriate liquidity
risk contingency plan and framework to ensure an immediate
response and process should the need arise.

• Group ALCO separately identifies deposits that are deemed
to be potential funds at risk. These funds are adequately
covered by sources of quick liquidity, including prudential

reserves and liquid assets. Sources of quick liquidity totalled
R76,6 billion at year-end, including prudential liquidity
holdings of R29,5 billion and an additional liquid asset buffer
of approximately R6 billion, which are actively used to create
liquidity in the carry market.

• Liquidity risk reporting, including appropriately designed

dashboards, provides the Group ALCO, as well as the board’s
Group Risk and Capital Management Committee, with
appropriate liquidity risk information. This includes measures
of compliance with approved policies and limits.

Nedbank’s sources of quick liquidity

38%

15%

4%

17%

8%

18%

Marketable assets

Forward-market placements

Short-dated placements

Unutilised interbank lines

Liquid asset buffer

Prudential liquid assets and reserves

156

NEDBANK GROUP ANNUAL REPORT 2008

• Behavioural modelling and stress analysis to identify business
as usual as well as potential stress cashflow requirements are
carried out regularly.

• Portfolios of marketable and highly liquid assets that can be

liquidated to meet unforeseen or unexpected funding
requirements are held in the group in terms of the Liquidity
Risk Management Framework (refer pie chart on previous
page).

• Net daily funding requirements are forecast by estimating
daily rollovers and withdrawals, managing pipeline dealflow
and actively managing daily settlements.

• The centralised funding desk maintains regular interaction

with the group’s larger depositors to understand and manage
their cashflow requirements.

• Close liaison is maintained with the retail banking, business
banking and corporate banking deposit-raising activities,
through separate direct dealing desks within the centralised
funding team, ensuring that stable sources of funds are
maximised and priced correctly, and client rollovers and flows
are understood. Nedbank has strong retail, business banking
and corporate deposit bases.

• Funding mismatches are managed by currency

denomination and a focus is placed on managing short-
term funding maturities, daily settlements and collateral
management processes. Nedbank Group has very little
funding mismatches in its foreign operations.

Nedbank Limited South African funding distribution

• Liabilities are appropriately diversified, including by

product, market and maturity.

• Funding is sourced from a large variety of depositors

representing a cross-section of South African public and
private economic sectors, industries, commercial
enterprises and individuals with a wide range of maturities
and using a large number of investment and transactional
banking products. Concentration risk within the deposit
base is appropriately diversified.

• The Group ALCO is always looking to identify diversified
sources of funding and will continue to look to make use
of the capital markets and foreign banks to diversify
funding sources during 2009.

• Scenario analysis is used in the management of the bank’s

liquidity risk, including plausible stress scenarios.

• The management of liquidity risk and particularly cash-

flows is strongly focused on the short to medium term to
ensure that risk management is quick to respond to
immediate cashflow requirements under different stress
scenarios.

Nedbank Limited South African sectoral distribution

of liabilities to the public
1%

20%

22%

2% 4%

9%

2%

10%

35%

22%

4%

3%

1%

8%

29%

28%

Professional funding

Corporates

Retail

Government and parastatals

Foreign

Other

Corporates

Financial institutions

Government and parastatals

Foreign sector rand deposits

Subordinated debt

SA banks

Other rand funding

Foreign currency funding

Household deposits

Unincorporated businesses 
and households 

W
E
I
V
R
E
V
O

P
U
O
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G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
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A
M
R
O
F
N

I

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E
H
T
O
D
N
A

157

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

INTEREST RATE RISK IN THE BANKING BOOK (IRRBB)

The table below highlights the group’s and bank’s exposure to interest rate risk measured for normal and stressed interest rate
changes over a 12-month period.

2008
Rm

Net interest income sensitivity
1% instantaneous decline in interest rates
2% instantaneous decline in interest rates

Linear path space
Lognormal interest rate sensitivity

Basis interest rate risk sensitivity
0,25% narrowing of prime/call differential

Economic value of equity sensitivity
1% instantaneous decline in interest rates
2% instantaneous decline in interest rates

Stress testing
Net interest income sensitivity
Instantaneous stress shock
Stress shock modelled as a ramp

Linear path space
Absolute-return interest rate sensitivity

N/a: not modelled.

Note

Nedbank
Limited

Other group
companies

Nedbank
Group

1

2

3

4

5
6

2

(338)
(674)

(143)
(286)

(481)
(960)

(445)

n/a

n/a

(138)

(44)

(182)

238
517

(1 428)
(1 706)

(2 284)

n/a
n/a

n/a
n/a

n/a

n/a
n/a

n/a
n/a

n/a

Notes

1 Interest rate risk, as currently modelled, exhibits very little
convexity. In certain cases the comparative figures have
been estimated assuming a linear risk relationship to the
interest rate moves.

2 Linear path space is a stochastic method used to generate
random interest rate paths. These paths are then modelled
and a probabilistic impact of interest rate changes on NII is
derived. The lognormal interest rate sensitivity uses two
years of interest rate movements to derive interest rate
volatility. The stress scenario absolute-return interest rate
sensitivity is based on the volatility of interest rates over
nine years.

3 Basis interest rate risk sensitivity is quantified using a
narrowing in the prime/call interest rate differential of
0,25% and is an indication of the sensitivity of the margin
to a squeeze in short-term interest rates.

4 Economic value of equity sensitivity is calculated as the
net present value (npv) of asset cashflows less the npv of
liability cashflows.

5 The instantaneous stress shock is derived from the
principles espoused in the Bank for International
Settlements paper ‘Principles for the Management and

Supervision of Interest Rate Risk’. For 2008 the shock
scenario uses an instantaneous interest rate shock of a 4%
(2007: 4%) downward shift in interest rates.

6 The stress shock modelled as a ramp uses the same
interest rate shock as the instantaneous stress shock
described above, but the rate shock is phased in over a
nine-month period.

Nedbank Group’s interest rate risk in the banking book arises
largely as a result of the non-sensitivity of its net
endowment position (comprising equity, ambiguous deposits
and working capital) and prime-linked (or equivalent) assets
funded with a degree of fixed-rate deposits and negotiable
certificates of deposit. This risk is largely concentrated within
Nedbank Limited.

The Group ALCO reduced the group’s sensitivity in 2008 to
align with its view on interest rates. These strategies were
largely completed during the first half of 2008 and better
positioned the group for a downward rate cycle. Interest rate
risk in the banking book is managed as a natural hedge
against impairment sensitivity as this risk demonstrates an
inverse relationship to credit risk, albeit with a lagging
consequence that needs to be modelled and closely
managed.

158

NEDBANK GROUP ANNUAL REPORT 2008

CURRENCY TRANSLATION RISK IN THE BANKING BOOK

Currency translation risk arises as a result of Nedbank’s investments in foreign companies that have issued foreign equity. This
foreign equity is translated into rand for domestic reporting purposes, recording a profit where the rand exchange rate has
deteriorated between periods and a loss where the rand exchange rate has strengthened between periods.

Offshore capital split by functional currency

Rm

US dollar
Pound sterling
Swiss franc
Malawi kwatcha
Other

Total

Offshore capital earnings at risk and capital at risk

Earnings at risk
Capital at risk

The increase in currency translation risk this year has been
caused by an increase in exchange rate volatilities and not
from an increase in the group’s foreign-exchange-sensitive
position. This position has in fact been further reduced in
2008 as noted above.

The effective average capitalisation rate of the foreign-
denominated business is 15%. The total foreign RWA as a
percentage of the Nedbank Group total is very low at 2,4%
(R8,5 billion out of total group RWA of R355 billion).
Therefore any foreign exchange rate movement will have a
minimal effect on Nedbank Group’s capital adequacy ratio.

High rand volatility has a minimal effect on capital adequacy,
as a 10% depreciation in the rand will decrease capital
adequacy by only 0,02%.

MARKET RISKS

Market risk in Nedbank Group arises in three main areas:

• Market risk (or position risk) in the trading book arises

exclusively in Nedbank Capital.

• Equity (investment) risk in the banking book arises in the
private equity and property portfolios within Nedbank
Capital and Nedbank Corporate clusters respectively and in
other strategic investments of the group. This risk also
includes market risk in respect of business premises,

USD equivalent ($ millions)

I/S

Equity

Forex
sensitivity

Non-forex 
sensitivity

3

3

88
91
6
5

88
94
6
5

190

193

391

391

Total

88
94
6
5
391

584

Rm

10
621

property required for future expansion and properties in
possession.

•

IRRBB that arises from repricing and/or maturity
mismatches between on- and off-balance-sheet
components originated across all the business clusters. This
is covered in the ALM section above.

A group market risk management framework including
governance structures is in place to achieve effective
independent monitoring and management of market risk as
follows:

• The board’s Group Risk and Capital Management

Committee.

• The Group ALCO, which is responsible for ensuring that the
impact of market risks is being effectively managed and
reported on throughout Nedbank Group, and that all policy,
risk limit and relevant market risk issues are reported to the
Group Risk and Capital Management Committee.

• The Trading Risk Committee, which is responsible for

ensuring independent oversight and monitoring of the
trading market risk activities of the trading areas. In
addition, the Trading Risk Committee also approves new
market risk activities and appropriate trading risk limits for
the individual business units within the trading area. The

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159

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

committee meeting is held monthly and is chaired by the
Head of Group Market Risk Monitoring. Attendees include
the CRO, the CFO, risk managers from the cluster,
managing executive and CRO of the cluster, and
representatives from Group Market Risk Monitoring
(GMRM).

• An independent function within the Group Risk Division,

namely GMRM, which monitors market risks across
Nedbank Group – this is a specialist risk area that provides
independent oversight of market risk, validation of risk
measurement, policy coordination and reporting.

• The federal model followed by Nedbank Group in terms of
which business clusters are responsible and accountable for
the management of the market risks that emanate from
their activities, with a separate risk function within each
cluster.

• Specialist investment risk committees within the business
areas. Meetings are convened monthly and as required to
approve acquisitions and disposals, and on a quarterly
basis to review investment valuations and monitor
investment risk activities. Membership includes the CRO,
CFO, managing executive and head of risk of the relevant
business cluster, and a representative from GMRM.

The board ultimately approves the market risk appetite and
related limits for both the banking book (asset and liability
management and investments) and the trading book. GMRM
reports on the market risk portfolio and is instrumental in
ensuring that market risk limits are compatible with a level
of risk acceptable to the board. No market risk is permitted
outside these board-approved limits. Hedging is an integral
part of managing trading book activities on a daily basis.
Banking book hedges are in line with Group ALCO strategies
and stress testing is performed monthly to monitor residual
risk.

Nedbank Capital may incur risk only in the trading market,
but is restricted to formally approved securities and
derivative products. Products and product strategies that are
new to business undergo a new product review and approval
process to ensure that their market risk characteristics are
understood and can be properly incorporated into the risk
management process. The process is designed to ensure that
all risks, including market, credit (counterparty), specific,
operational, legal, tax and regulatory (eg exchange control,
tax and accounting) risks are addressed and that adequate
operational procedures and risk control systems are in place.

In terms of market-trading activities Nedbank is adequately
capitalised. Nedbank does not have exposure to the credit

derivatives that contributed to the global financial crisis and
equity exposures were further reduced in 2008. In terms of
Nedbank’s economic capital the capital requirement is based
on VaR trading limits, which is a conservative approach as
limit utilisation is generally moderate. From a regulatory
capital perspective the standardised approach is used, which is
more conservative as it does not take any diversification into
account. In addition to VaR, stress testing is applied on a daily
basis to identify exposure to extreme market moves.

TRADING MARKET RISK

The potential for changes in the market value of trading
positions is referred to as market risk. Such positions result
from market-making and proprietary trading. All material
positions are MTM on a daily basis.

Categories of market risk include exposure to interest rates,
equity prices, currency rates and credit spreads. A description
of each market risk category is set out below:

•

Interest rate risk primarily results from exposure to changes
in the level, slope and curvature of the yield curve.

• Equity price risk results from exposure to changes in prices
and volatilities of individual equities and equity indices.

• Currency rate risk results from exposure to changes in spot,

forward prices and volatilities of currency rates.

• Credit spread risk results from exposure to changes in the
rate that reflects the spread investors receive for bearing
credit risk.

In addition to applying business judgement, senior
management use a number of quantitative measures to
manage the exposure to market risk. These measures include:

•

risk limits based on a portfolio measure of market risk
exposure referred to as VaR; and

• scenario analyses, stress tests and other analytical tools

that measure the potential effects on the trading revenue
of various market events.

identified  by  these  processes  are
The  material  risks 
summarised  in  the  Market  Risk  Department  reports  that  are
circulated to and discussed with senior management.

VaR is the potential loss in pretax profit due to adverse
market movements over a defined holding period with a
specified confidence level. The VaR methodology is a
statistically defined, probability-based approach that takes
into account market volatilities as well as risk diversification
by recognising offsetting positions and correlations between
products and markets.

160

NEDBANK GROUP ANNUAL REPORT 2008

VaR facilitates the consistent measurement of risk across all
markets and products, and risk measures can be aggregated
to arrive at a single risk number. The one-day, 99% VaR
number used by the group reflects a 99% confidence level
that the daily loss will not exceed the reported VaR. Daily
losses exceeding the VaR figure are likely to occur, on
average, once in every 100 business days.

The group uses historical data to estimate VaR. One year of
historical data is used in the calculation. The following should
be considered when reviewing the VaR numbers:

• The assumed one-day holding period will not fully capture
the market risk of positions that cannot be liquidated or
offset with hedges within one day.

Group trading book value at risk for 2008 (i) 

• The historical VaR assumes that the past is a good

representation of the future, which may not always be the
case.

• The 99% confidence level does not indicate the potential

loss beyond this interval.

While VaR captures the group’s exposure under normal
market conditions, sensitivity and stress-scenario analyses
(and in particular stress testing) are used to give insight into
the possible outcomes under abnormal market conditions.

The group’s trading market risk exposure, expressed as 
average daily VaR, decreased by 21% from R24,9 million to 
R19,7 million over the year. The reduction was due mainly to
a strategic decision to reduce the group’s exposure to equities
in 2008.

Rm

Risk categories

Foreign exchange
Interest rate
Equity
Credit
Diversification(iii)

Total VaR exposure

Historical VaR (99%, one-day) by risk type

Average

Minimum(ii) 

Maximum(ii)

Year-end

6,1
13,8
7,8
6,2
(14,2)

19,7

2,3
7,4
3,3
3,4

10,3

20,1
25,0
21,2
8,7

36,5

3,4
19,3
6,5
6,6
(11,8)

24,0

Group trading book value at risk for 2007 (i)

Rm

Risk categories

Foreign exchange
Interest rate
Equity
Diversification(iii)

Total VaR exposure

Historical VaR (99%, one-day) by risk type

Average

Minimum(ii)

Maximum(ii)

Year-end

2,5
14,5
12,6
(4,7)

24,9

0,7
10,4
5,7

14,9

6,4
22,0
28,7

37,4

4,4
13,8
7,5
(2,4)

23,3

(i) Certain positions are illiquid and VaR may not always be the most appropriate measure of risk. (We summarise the other market risk measures we apply to mitigate this later

on.)

(ii) The maximum and minimum VaR values reported for each of the different risk factors did not necessarily occur on the same day. As a result of diversification, numbers for the

maximum and minimum values has been omitted from the table.

(iii) Diversification benefit is the difference between the aggregate VaR and the sum of VaRs for the four risk categories. This benefit arises because the simulated 99%/one-day loss

for each of the four primary market risk categories occurs on different days.

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161

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

The graph below illustrates the daily VaR for the period 
1 January to 31 December 2008. The daily VaR for the second
half of 2008 increased due to higher levels of exposure to
interest rates and credit spreads, as well as the increased levels
of volatility in the market.

Value-at-Risk (VaR) utilisation in 2008 (99%, one-day VaR)

Rm
40

30

20

10

R
a
V

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Date

One-day, 99% VaR

Average VaR 2008

Foreign exchange and interest rate activities produced
consistent revenue during 2008. VaR for all material risk
factors has been reported.

VaR is an important measurement tool and the performance
of the model is regularly assessed. The approach to assessing
whether the model is performing adequately is known as
backtesting. Backtesting is simply a historical test of the
accuracy of the VaR model. To conduct a backtest the bank
reviews its actual daily VaR over one year (about 250 trading

days) and compares the actual daily trading revenue (includes
net interest but excludes commissions and primary revenue)
outcomes with its VaR estimate and counts the number of
times the trading loss exceeds the VaR estimate.

The group uses a holding period of one day with a confidence
level of 99%, and had one backtesting exception for 2008.
This suggests that VaR, as currently implemented, has been a
conservative measure of the potential net revenue variability
on the daily trading activities.

Value-at-Risk (VaR) profit and loss (P & L)

R
a
V

Rm

40

30

20

10

0

-10

-20

-30

-40

Jan

Feb

Mar

Apr

May

Jun

Date

Jul

Aug

Sep

Oct

Nov

Dec

P&L

One-day, 99% VaR

162

NEDBANK GROUP ANNUAL REPORT 2008

The histogram below illustrates the distribution of daily
revenue during 2008 for Nedbank’s trading businesses
(including net interest, commissions and primary revenue
income of the trading businesses). The distribution is skewed
to the profit side and the graph shows that trading revenue
was realised on 185 days out of a total of 251 days in the
trading businesses. The average daily trading revenue
generated for 2008 was R6,8 million.

Nedbank Capital uses a number of stress scenarios to
measure the impact on portfolio values of extreme moves in
markets, based on historical experience as well as
hypothetical scenarios. The stress-testing methodology
assumes that all market factors move adversely at the same
time and that no actions are taken during the stress events
to mitigate risk, reflecting the decreased liquidity that
frequently accompanies market shocks. Stress tests results
are reported daily to senior management and monthly to the
Trading Risk Committee.

Analysis of trading revenue for the year ended 31 December 2008

s
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Trading revenue (Rm)

Risk factors

2008

Interest rate stress
Equity position stress
Foreign exchange stress
Overall

Average

117
131
21
269

High

265
310
90
496

Year-end

72
102
5
179

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163

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

Risk factors for the year ended 31 December 2008

Rm

500

400

300

200

100

-

Jan

Feb

Mar

Apr

May

Jun

Date

Jul

Aug

Sep

Oct

Nov

Dec

Foreign exchange stress

Interest rate stress

Equity stress

In addition, other risk measures are used to monitor the
individual trading desks and these include performance
triggers, approved trading products, concentration of
exposures, maximum tenor limits and market liquidity
constraints.

Market risk is governed by a number of policies that cover
management, identification, measurement and monitoring. In
addition, all market risk models are subject to periodic
independent validation in terms of the Group Market Risk
Management Framework.

Market risk reports are available at a variety of levels with
detail ranging from individual trader level right through to
group level.

Disclosure on the group’s risk position under the Standardised
Approach may be found in our full Pillar 3 Report on the
Nedbank website.

EQUITY RISK (INVESTMENT RISK) IN THE
BANKING BOOK

The total equity portfolio for investment risk is R3 779 million
(December 2007: R3 450 million), which comprises 

R2 612 billion as in note 30 of the financial statements plus
R1 167 billion (December 2007: R977 million) in investments
in associate companies and joint ventures as in note 31 of
the financial statements. Of that, R2 716 million (December
2007: R2 285 million) is held for capital gain, while the rest is
mainly strategic investments.

Equity investments held for capital gain are generally
classified as ‘fair value through profit and loss’, with fair-value
gains and losses reported in non-interest revenue. Strategic
investments are generally classified as ‘available for sale’ with
fair-value gains and losses recognised directly in equity. The
detailed accounting policies and valuation methodologies for
equity risk in the banking book are covered in the notes to
the 2008 annual financial statements.

Nedbank Group has adopted the market-based Simple Risk
Weight Approach for regulatory and economic capital
measurement purposes, with one exception. For economic
capital the PD/LGD Approach is used for exposures in respect of
investments in property holding and development companies in
our Property Finance Division. The approach for regulatory
capital was approved by SARB.

Investments 
Rm

Publicly listed 
2007

2008

Privately held

Total

2008

2007

2008

2007

Fair value disclosed in balance sheet 
[excluding associates and joint ventures (JVs)]
Fair value disclosed in balance sheet 
(including associates and JVs) 
Cumulative realised gains/(losses) arising from
sales and liquidations
Total unrealised gains to income statement 
(fair value through profit and loss)

525

525

647

(94)

598

2 087

1 875

2 612

2 473

598

3 254

2 852

3 779

3 450

88

47

28

95

211

184

675

1

299

231

164

NEDBANK GROUP ANNUAL REPORT 2008

OPERATIONAL RISK

Operational risk is the risk of loss resulting from inadequate
or failed internal processes, people and systems or from
external events. This definition includes legal risk, but
excludes strategic and reputational risk. Legal risk includes,
but is not limited to, exposure to fines, penalties or punitive
damages resulting from supervisory actions, as well as private
settlements.

To minimise the exposure to operational risk that arises as a
consequence of the group’s financial risk-taking (credit and
market) and operating activities, we have embedded a Group
Operational Risk Management Framework (GORF) that
facilitates a consistent and worldclass approach to
operational risk management.

Overview of Group Operational Risk Managment Framework

• Definition of operational
• Definition of operational
risk and subcategories
risk and subcategories

• Operational risk
• Operational risk

management strategy
management strategy
and objectives
and objectives

• Design
• Design
• Responsible
• Responsible
committees
committees
• Detail roles and
• Detail roles and
responsibilities
responsibilities

• Resource
• Resource

requirements
requirements

Operational risk
Operational risk
management
management
policies
policies

GOVERNANCE
GOVERNANCE
AND
AND
ORGANISATION
ORGANISATION

POLICIES
POLICIES

REPORTING
REPORTING

OPERATIONAL
RISK
ORM
MANAGEMENT
PROCESSES
(ORM)
PROCESSES

CONSOLIDATED
CONSOLIDATED
REPORTING
REPORTING
• Internal reporting
• Internal reporting

flows
flows

• External disclosures
• External disclosures

Risk assessment
Risk assessment
process
process

Loss data governance
Loss data governance
and collection process
and collection process

Key risk indicators (KRIs)
Key risk indicators (KRI)

STRATEGY
STRATEGY
AND
AND
OBJECTIVES
OBJECTIVES

NEDBANK
GROUP’S
Group
OPERATIONAL
Operational Risk
RISK
Management
MANAGEMENT
Framework
FRAMEWORK
(GORF)

ENABLING
ENABLING
SYSTEMS
SYSTEMS

Systems and
Systems and
data
data
architecture
architecture

Nedbank Group has approval from SARB to use the
Standardised Approach for operational risk for Basel II
regulatory capital from 1 January 2008. The group is well-
advanced on our operational risk measurement journey to the
Advanced Measurement Approach (AMA), having implemented
worldclass operational risk management in all other respects.

Business management is responsible for the identification,
management and monitoring of operational risk.
Operational risk is addressed at the divisional enterprisewide
risk committees. Significant operational risks are escalated to
the cluster operational risk committees and then, if
warranted, to the board’s Group Risk and Capital

Management Committee. Operational risk officers, who are
tasked with coordinating the implementation and
maintenance of the operational risk management processes
and GORF in the business, support management in the
execution of its duties.

The Group Operational-risk Monitoring (GORM) Division
functions in the second line of defence, its primary
responsibilities being to maintain and champion the GORF,
policies and enablers to support operational risk
management in the business. GORM also champions the
implementation of the Basel II requirements for operational
risk.

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165

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

MAJOR CONCENTRATION RISKS

Credit concentration has been addressed on page 147. Another
potential major concentration risk in Nedbank Group is liquidity
risk. The management of this, including diversification of the
funding base, contingency planning of sources of funding and
related governance is covered on page 155.

Property concentration risk was addressed on page 121.

Concentration risk is not considered to prevail in the group’s
trading, IRRBB, forex and equity risk portfolios, nor assets and
liabilities subject to MTM fair-value accounting.

Specialist functions in Group Risk, for example forensic
services, business continuity planning, group legal and
corporate insurance, also assist frontline businesses with
specialist advice, policies and standard setting. Pervasive
operational risk trends are monitored and reported on to the
Group Risk and Capital Management Committee.

GIA (the third line of defence) and EGC provide assurance to
the board that the GORF is sound and that the policies and
processes related to operational risk management are
adhered to.

There are several other important operational risk specialist
functions that assist the business in managing operational
risk. These functions include but are not limited to:

•

information security;

• safety and security services;

•

regulatory risk services (including money-laundering
control, financial advice and the new credit legislation
awareness);

•

forensic services;

• business continuity planning and disaster recovery;

•

legal-risk management; and

• the group insurance programme.

OTHER KEY RISKS IN OUR ERMF

Capital (and solvency) risk is covered on page 169.
Details on our other remaining key risks are contained
in our full Pillar 3 Report on the Nedbank website.
These include the following:

• new-business risk;

• accounting and taxation risks;

• technology risk;

•

reputational, strategic, social and
environmental, and compliance risks; and

• HR (people) and transformation risks.

Readers requiring more details on Nedbank Group’s
EGC should refer to pages 94 to 109 of this 2008
Nedbank Group Annual Report.

166

NEDBANK GROUP ANNUAL REPORT 2008

ECONOMIC CAPITAL

Economic capital is a sophisticated, consistent measurement
and comparison of risk across business units, risk types and
individual products or transactions. This enables a focus on both
downside risk (risk protection) and upside potential (earnings
growth).

Nedbank assesses the internal requirements for capital using its
proprietary economic capital methodology, which models and
assigns economic capital within nine quantifiable risk categories
as summarised below.

The total average economic capital required by the group, as
determined by the quantitative risk models and after
incorporating the group’s estimated portfolio effects, is
supplemented by a capital buffer of 10% to cater for any
residual procyclicality and stressed scenarios. The total
requirement is then compared with available financial
resources.

Details of Nedbank’s economic capital methodology may be
found in the full Pillar 3 Report on Nedbank’s website. Results
of the group’s and bank’s economic capital adequacy and
capital allocation to business clusters are covered on page 178.

Nedbank Group’s economic capital model and target capital adequacy (used for ICAAP)

Credit risks

Basel II AIRB credit methodology integrated with sophisticated CPM
(incorporating credit concentration risk and intrarisk diversification, counterparty credit risk and securitisation risk).

Transfer risk
(closely related to credit risk but arises due to sovereign default and so separately modelled and quantified).

Similar to AIRB credit methodology but dependent on probability and the extent of a transfer event (ie sovereign default).

+

+

Market risks

Trading (position) risk
VaR scaled to one year using
VaR limits (board-approved). 

IRRBB risk
Simulated modelling of NII; 
economic value of equity
also done.

Equity (investment) and property risks
300/400% risk weighting in line with
Basel II equity risk; PD/LGD Approach 
for Property Finance. 

Forex translation risks
Multiple on exposure, based on rand 
volatility measures.  

+

Operational risk

Basel II Standardised Approach used

+

Business risk

EaR methodology used

+
Other assets
(100% risk-weighted)
=
Minimum economic capital requirement
(after interrisk diversification benefits)
+
Capital buffer
(10% buffer for procyclically, stressed scenarios, etc)
=

Total economic capital requirement

Measurement period/time horizon: one year  (same as Basel II)
Confidence interval (solvency standard): 99,9% (A-) (Currently same as Basel II)

vs

Available financial resources 

Comprises regulatory Tier 1-type capital only

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A

167

 
 
 
 
 
 
 
 
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DETAILED REVIEW ... CONTINUED

RISK APPETITE

Risk appetite is an articulation and allocation of the risk
capacity or quantum of risk Nedbank Group is willing to
accept in pursuit of its strategy, duly set and monitored
quarterly by the board, and integrated into the group’s
strategy, business and capital plans.

Nedbank’s risk appetite culture is inherently conservative.
Details of this, and on the current risk profile, were summarised
in the ‘2008 highlights’ section earlier from page 121.

Nedbank measures and expresses risk appetite in terms of
quantitative risk metrics and qualitatively. The quantitative
metrics include EaR (or earnings volatility) and, related to
this, the chance of regulatory insolvency, the chance of
experiencing a loss and economic capital adequacy. These
comprise Nedbank’s ‘Group-level risk appetite metrics’. In
addition, a large variety of risk limits, triggers, ratios,
mandates, targets and guidelines are in place for all the
financial risks (eg credit, market and ALM risks).

Earnings volatility is the level of potential deviation from
expected financial performance that Nedbank is prepared to
sustain at relevant points on its risk profile. It is established
with reference to the strategic objectives and business plans
of the group, including the achievement of financial targets,
payment of dividends, funding of capital growth and
maintenance of target capital ratios.

Qualitatively risk appetite is also expressed in terms of
policies, procedures, statements and controls meant to limit
risks that may or may not be quantifiable.

Nedbank Group’s risk appetite is defined across five broad
categories as set out in our board-approved Risk Appetite
Framework:

• Group-level risk appetite metrics. These were expanded on

in the table on page 124.

• Specific risk-type limit setting (clarifying across our

businesses the mandate levels that are of an appropriate
scale relative to the risk and reward of the underlying
activities so as to minimise concentrations and other risks
that could lead to unexpected losses of a disproportionate
scale).

• Stakeholder targets (such as target debt rating for
economic capital adequacy and dividend policy).

• Policies, procedures and controls.

• Zero-tolerance statements.

Nedbank has a cascading system of risk limits at all levels of
the group and for all financial risks, which is a core
component of the implementation of the Risk Appetite
Framework. The size of the various limits is a direct reflection
of the board’s risk appetite, given the business cycle, market
environment, business plans and strategy, and capital
planning. All IRRBB and foreign currency translation risk are
transferred to Group ALM who, in conjunction with ALCO,
would have primary responsibility for managing/hedging
these risks.

Another key component of the ERMF is a comprehensive set
of board-approved risk policies and procedures, which is
updated annually. The coordination and maintenance of this
formal process rest with the head of ERMF, who reports
direct to the CRO.

In conclusion, Nedbank has a strong risk culture and a
conservative risk appetite, which is well-formalised, managed
and monitored on an ongoing basis, with the board’s
ultimate approval and oversight.

168

NEDBANK GROUP ANNUAL REPORT 2008

NEDBANK ASSESSES CAPITAL REQUIREMENTS 
USING ACTIVE CAPITAL MANAGEMENT INTEGRATED 
WITH ITS STRATEGY, FINANCIAL POSITION, RISK PROFILE 
AND RISK APPETITE.

CAPITAL RISK AND CAPITAL MANAGEMENT

Nedbank’s CMF reflects the integration of risk, capital,
strategy and performance measurement (and incentives)
across the group. This contributes significantly to successful
enterprisewide risk management.

The board-approved Solvency and Capital Management
Policy Document requires Nedbank to be capitalised at the
greater of Basel II regulatory capital and economic capital.

Importantly though, one should not see Nedbank’s economic
capital as divorced from Basel II regulatory capital. Quite the
contrary, its economic capital is an extension of the Basel II
Pillar 1 requirements to incorporate Pillar 2, together with 
a few other key refinements tailored to Nedbank and 
South Africa, and taking more of a rating agency perspective
(eg Tier 2 regulatory capital does not qualify for our
economic capital definition of available financial resources).

The Group Capital Management Division reports direct to the
CFO and is mandated to champion the successful
implementation of the CMF and ICAAP across the group. The
capital management and ICAAP responsibilities of the board
and Group Exco are incorporated in their respective terms of
reference (charters) contained in the ERMF. They are assisted
in this regard, and in overseeing the group’s capital risk, by
the board’s Group Risk and Capital Management Committee,
and Group ALCO, respectively.

Group ALCO is assisted by its Capital Management
Committee chaired by the head of Group Capital
Management.

Capital investment

Group ALM is responsible for managing the investment profile
raised through the issue of capital and the internal generation
of capital (ie retention of profits). This is integrated into the
overall ALCO process of Nedbank. The Group ALM and Group
Capital Management Divisions work closely together, both
being part of the Group Finance Division reporting to 
the CFO.

Nedbank’s Macroeconomic Factor Model provides further
science behind Group ALCO’s decisions on what extent to
hedge, if at all, the group’s capital against interest rate
changes and hence the impact on endowment income. This is
done by modelling the relationship between changes in
credit extension volumes, impairment levels and the group’s
endowment income when the economic cycle changes and
the extent to which a natural hedge exists between them.

Capital structuring, allocation and optimisation
(including risk optimisation and credit portfolio
management)

Group Capital Management is responsible for the group’s
Strategic Capital Plan (SCP). This is a dynamic plan and
process that is updated and reviewed regularly monthly to
Group ALCO and at least quarterly to the board’s Group Risk
and Capital Management Committee and the full board itself.
In addition, the plan is updated and accompanies all capital
actions for which board approval is ultimately required.

A key sophisticated planning tool enabling the SCP is our
Capital Adequacy Projection Model (CAPM). CAPM is fully
integrated with the group’s three-year business and strategic
plans, together with the economic capital, Basel II, IFRS and
other important parameters and financial data.

Basel II and economic capital requirements are projected by
CAPM for the current and the next three years. This also
covers, inter alia, capital requirements, available capital
resources, capital buffers, target capital ratios, dividend plan,
any constraints or limits, risk appetite metrics and details on
proposed capital actions and contingencies.

Each quarter the group updates its financial forecasts and
projected risk parameters, and so updates the projections in
the SCP. This would also take into account any actual change
in the business environment and/or the group’s risk profile, as
well as any capital actions (or proposed revisions to previous
capital plans, including any new constraints).

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169

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

This ensures that Nedbank’s capital management is forward-
looking and proactive (not reactive), and driven off
sophisticated and comprehensive long-run capital planning.

The above process provides base case (or expected) projections.
The base case is then stressed using various macroeconomic
scenarios (eg Pillar 2 stress testing), in addition to risk-specific
stress testing (eg Pillar 1 stress testing). The scenarios include
mild stress (negative and positive), high stress and severe stress.
Details of this is covered from page 181. The outcome of this
stress and scenario testing is the key factor in assessing and
deciding on Nedbank’s capital buffers – another key
component of the SCP.

Capital optimisation in Nedbank Group is about seeking an
optimal level of capital by optimising the risk profile of the
balance sheet through risk portfolio and economic value-based
management principles, risk-based strategic planning,

economic capital allocation and sound management of the
capital buffers. This is achieved by integrating risk-based capital
into the group’s strategy and aligning this with management’s
performance measurement, through established governance
and management structures, the formal strategic planning
process, performance scorecards and the group’s risk-adjusted
performance measurement (RAPM) framework.

Group  Capital  Management  is  therefore  also  responsible 
for  managing  the  efficient  employment  of  capital  across 
Nedbank Group’s businesses, using risk-based economic capital
allocation, credit  portfolio  management  and  RAPM  (primarily
driven by economic profit principles).

The group is capitalised at the higher of regulatory capital
and economic capital, being regulatory capital. The capital
allocation process to business clusters is then as follows:

SOURCING OF REGULATORY CAPITAL

CAPITAL ALLOCATION TO BUSINESS CLUSTERS FOR
PERFORMANCE MEASUREMENT

Tier 1 capital

•  Shareholders’ equity

(Core Tier 1)

Allocated as capital using bottomup economic capital
measurement. Any difference vs Core Tier 1 regulatory capital
is addressed via allocation of a buffer to the businesses.

•  Preference shares and hybrid debt capital

(Non-core Tier 1)

Allocated as part of funding costs; impacting businesses’
earnings.

Tier 2 capital

•  Subordinated debt

Allocated as part of funding costs; impacting businesses’
earnings.

An ongoing challenge for Nedbank is to extract as much
value as possible from the bank’s new position as a risk and
capital management front-runner from its significant Basel II
investment by continuing to build the emerging ‘managing
for value’ culture in Nedbank. In summary, this ‘managing for
value’ emphasis currently incorporates:

• comprehensively  embedding  risk-based  economic  profit in

the strategic planning and management processes;

• articulating a revised group financial target fit for the new
economic  profit  world, supplemented  with  business  unit
economic profit targets;

• conducting  quantitative  and  qualitative  strategic  position
analyses  at  business  unit  level  for  all  clusters, involving  a
heavy  emphasis  on  risk-based economic  profit  and  so 

also  driving  much  enhanced  business  portfolio  reviews  at

group  level, with  quantified  drivers  for  risk  and  growth

optimisation; and

• prioritising the business-oriented strategic thrusts quantitively

through high-level economic profit impact analysis applied to

single and appropriately grouped initiatives.

Aside from helping to optimise financial performance and

shareholder value creation, Nedbank’s enhanced ‘managing

for value’ capabilities will enable it to operate better in a

much more capital- and liquidity-constrained market

environment, including the taking of strategic decisions as to

where and to what extent it chooses to allocate the group’s

capital.

170

NEDBANK GROUP ANNUAL REPORT 2008

NEDBANK’S CAPITAL ADEQUACY IS STRONG 
RELATIVE TO ITS BUSINESS ACTIVITIES, STRATEGY,
RISK PROFILE AND THE EXTERNAL ENVIRONMENT 
IN WHICH IT OPERATES.

REGULATORY CAPITAL

Basel II regulatory capital adequacy **

Nedbank Group

Nedbank Limited

*9 484

Total ratio

*9 100

*10 285

Tier 1 ratio

2008 target
 ranges

*5 588

*3 988

*6 427

%
2
8

,

%
6
9

,

%
4
2
1

,

2008

%
2
7

,

%
2
8

,

%
4
1
1

,

2007
(Pro forma Basel II)

12,0%

10,0%

8,0%

6,0%

4,0%

2,0%

0,0%

*9 440

Total ratio

*7 699

*7 695

Tier 1 ratio

2008 target
 ranges

*4 586

*2 524

*4 210

%
0
8

,

%
8
9

,

%
1
3
1

,

2008

%
8
6

,

%
9
7

,

%
4
1
1

,

2007
(Pro forma Basel II)

12,0%

10,0%

8,0%

6,0%

4,0%

2,0%

0,0%

Target ranges
To 2008
From 2009

Tier 1 (%)
8 – 9
8,5 – 10

Total (%)
11 – 12
11,5 – 13

**Includes unappropriated profits.

Core Tier 1

Reg min core Tier 1 (5,25%)

Tier 1

Total

Reg min Tier 1 (7,0%)

Reg min total (9,75%)

*  Surplus in Rm

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171

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

Nedbank Group has strengthened its regulatory capital ratios
significantly, with a Tier 1 capital adequacy ratio of 9,6%
(December 2007: 8,2% pro forma Basel II) and a total capital
adequacy ratio of 12,4% (December 2007: 11,4% pro forma
Basel II). The core Tier 1 capital adequacy ratio was 8,2%
(December 2007: 7,2% pro forma Basel II).

The group’s leverage ratio (total assets to ordinary
shareholders’ equity) at 16,2 times is also conservative by
international standards and in line with the local peer group.

Nedbank Limited has also significantly strengthened
regulatory capital ratios, with a Tier 1 capital adequacy ratio
of 9,8% (December 2007: 7,9% pro forma Basel II) and a
total capital adequacy ratio of 13,1% (December 2007:
11,4% pro forma Basel II). The core Tier 1 capital adequacy
ratio was 8,0% (December 2007: 6,8% pro forma Basel II).

All capital ratios are now well above the group’s historic target
ranges. Capital adequacy ratios include unappropriated profits
at year-end to the extent that it is not expected to reverse and
is expected to be appropriated subsequent to year-end.

The group’s capital adequacy ratios increased significantly due
to a strong focus on the optimisation of risk-weighted assets,

Target capital adequacy ratios
Regulatory

Core Tier 1
Tier 1 
Total 

enabled by enhancing data quality and more selective asset
growth using the group’s economic profit-based ‘managing for 
value’ philosophy, the retention of earnings, the profits made 
on the disposal of Visa shares and the issue of the first 
hybrid Tier 1 capital instruments in South Africa (amounting to
R1,75 billion).

Basel II was successfully implemented by Nedbank. Within
that the group’s first comprehensive ICAAP required under
Pillar 2 of Basel II was successfully completed across the
group in the second half of the year, and this attained a
favourable outcome from the SREP completed by the
Banking Regulator.

However, on the back of the global financial crisis and the
more conservative stance taken to capital, the group has
increased its levels of surplus capital and extended its
target regulatory capital ranges, now also including a
target capital adequacy range for core Tier 1 capital. This
applies to both Nedbank Group and Nedbank Limited. In
the current external environment the group’s objective is
to move towards the top end of these new target ranges
by the end of 2009.

Revised range % Previous range %
to end 2008

from 2009

Regulatory 
minimum %

7,5 – 9,0
8,5 – 10,0
11,5 – 13,0

n/a
8,0 – 9,0
11,0 – 12,0

5,25
7,00
9,75

The global financial crisis also highlighted that the

appropriate level of capital for a bank is a function of its

strategy, individual risk appetite and existing risk profile. This

aligns with one of the key objectives of Basel II, which is to

differentiate capital requirements and adequacy of capital

buffers above the regulatory minimum, to reflect the unique

risk profile on a bank-by-bank basis, rather than following the

‘one size fits all’ approach that Basel I engendered. The Basel

Committee reinforced this objective in January 2009.

Against the background of the group’s conservative risk
appetite and sound risk management discussed later on, the
group believes that its capital levels (both regulatory capital
and its internal capital assessment, economic capital) and
provisioning for credit impairments are appropriate and
conservative, and that the group and its subsidiaries are
strongly capitalised relative to their business activities,
strategy, risk appetite, risk profile and the external
environment in which they operate. Additionally, the group is
currently not holding excess capital for acquisitions.

172

NEDBANK GROUP ANNUAL REPORT 2008

Actual capital adequacy ratios (including unappropriated profits)

Nedbank Group

Nedbank Limited

Basel I

Basel II

Basel I

Basel II

%

Core Tier 1
Tier 1
Total

(pro forma Basel II)
2007

7,2
8,2
11,4

2007

7,5
8,5
12,4

2008

8,2
9,6
12,4

(pro forma Basel II)
2007

6,8
7,9
11,4

2007

6,7
7,8
11,9

2008

8,0
9,8
13,1

Leverage ratio

16,2 times

16,2 times

There was a negative impact on the group’s capital ratios in the transition from Basel I to Basel II on 1 January 2008.

While minimum regulatory capital requirements decreased
marginally, qualifying capital and reserves decreased
materially, mainly due to the following:

• The foreign currency translation reserve of R256 million,

share-based payments reserve of R874 million and
available-for-sale reserve of R134 million were all no
longer allowed to qualify as capital in South Africa under
Basel II.

These reserves do continue to qualify as regulatory capital
in certain overseas jurisdictions. At 31 December 2008
these reserves collectively amounted to R1,6 billion.

• The excess of IFRS accounting impairments

over Basel II downturn expected loss
(dEL) of R1 708 million has to be
deducted per the AIRB Approach for credit
risk. At 31 December 2008 this amounted
to R1 176 million.

• Surplus capital within insurance

entities and certain non-qualifying
minority interests of R574 million is
no longer allowed. At 31 December
2008 this amounted to 
R774 million.

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173

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

Nedbank Group transition from Basel I to Basel II at 31 December 2007/1 January 2008

Minimum regulatory-capital requirements

Rm

35 000

33 669

a
(
(6 734)
)
(
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32 650

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((
(6 520)
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25 000

20 000

15 000

10 000

5 000

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Rm

40 000

35 000

30 000

25 000

20 000

15 000

10 000

5 000

Qualifying regulatory-capital resources
e
40 893

(1 130)

(1 708)

(574)

(60)

e
37 421

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Decrease

Increase

Decrease

a) The minimum capital ratio reduced from 10% Basel I to
9,75% Basel II. A Pillar 2, Principle 3 regulatory capital
buffer is also required to be set at the board’s discretion
and currently this is set at 10% above the minimum
regulatory ratio set by SARB. However, other
considerations such as rating agencies, peer benchmarking
and the external environment are also taken into account
in setting the target capital ratio ranges (as set out earlier),
which are well above these regulatory minimum levels.

b) Overall there was a benefit for Nedbank Limited obtaining
SARB approval for the AIRB Approach for credit risk under
Basel II. This was offset to an extent by the new 
requirement to hold capital for committed, unutilised
facilities (limits) under Basel II.

c) New capital requirement for operational risk under Basel II.

d) Much higher risk weightings (300%/400% vs 100%) for

equity (investment) risk under Basel II.

e) Excludes unappropriated profits at year-end.

In line with a specific provision of the Banks Act regulations,
profits do not qualify as qualifying regulatory capital unless
formally appropriated by the board. Accordingly, Nedbank’s
capital ratios, excluding unappropriated profits at year-end,
are shown below, which profits could be appropriated at any
time if needed.

Actual regulatory capital adequacy ratios (excluding unappropriated profits)

Nedbank Group

Nedbank Limited

Basel I

Basel II

Basel I

Basel II

%

Core Tier 1
Tier 1
Total

(pro forma Basel II)
2007

6,9
8,0
11,2

2007

7,2
8,3
12,2

2008

8,0
9,4
12,3

(pro forma Basel II)
2007

6,6
7,7
11,2

2007

6,5
7,6
11,7

2008

8,0
9,7
13,1

174

NEDBANK GROUP ANNUAL REPORT 2008

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summary of risk-weighted assets (by risk type)

Risk type

Nedbank Group

Nedbank Limited

Credit risk 
Credit portfolios subject to AIRB Approach (ie Nedbank Limited)

– Corporate, sovereign, bank (incl SME)
– Residential mortgage
– Qualifying revolving retail
– Other retail

Credit portfolios subject to Standardised Approach

– Corporate, sovereign, bank
– Retail exposures

Counterparty credit risk
Securitisation exposures (IRB Approach) 
Equity risk (Market-based Simple Risk Weight Approach)

– Listed (300% risk-weighting)
– Unlisted (400% risk-weighting)

Market risk (Standardised Approach)
Operational risk (Standardised Approach)
Other assets (100% risk-weighting)

2008
Rm

285 457 
238 480 

131 955 
70 401 
6 554 
29 570 

42 829 

16 849 
25 980 

3 169 
979 
13 035 

1 574 
11 461

7 049 
36 497 
13 197

2007
Rm

267 010 
220 396 

117 413 
58 712 
7 562 
36 709 

39 598 

19 007 
20 591 

6 184 
832 
17 141 

538 
16 603 

4 632 
28 462 
17 632 

2008
Rm

221 969 
218 142 

114 050 
67 968 
6 554 
29 570 

–

3 109 
718 
10 190

1 471 
8 719 

5 445 
30 559 
10 170 

2007
Rm

222 126 
215 170 

112 187 
58 712 
7 562 
36 709 

–

6 124 
832 
14 630 

459 
14 171 

3 470 
25 131 
9 416 

Total risk-weighted assets

355 235 

334 877 

278 333 

274 773 

Total minimum regulatory capital requirements (at 9,75%)
Total qualifying regulatory capital and reserves*

Total surplus capital over minimum requirements 

34 635 
44 119 

9 484 

32 651 
38 239 

5 588

27 137 
36 577

9 440

26 790 
31 376 

4 586 

* Includes unappropriated profits.

Analysis of total surplus capital

Core Tier 1
Tier 1
Total

9 100
10 285
9 484

3 988
6 427
5 588

7 699
7 695
9 440

2 524
4 210
4 586

Summary of risk-weighted assets (by risk type and business cluster)

Risk type and business cluster

Credit risk 

– Nedbank Corporate
– Nedbank Capital
– Nedbank Retail
– Imperial Bank
– Africa and UK

Equity risk
Market risk 
Operational risk
Other assets

2008
Rm

285 457 

112 568 
17 309 
87 721 
35 377 
32 482 

13 035 
7 049 
36 497 
13 197 

Mix
%

81

32
5
25
10
9

4
2
10
3

Total risk-weighted assets

355 235 

100

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175

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

Summary of qualifying capital and reserves

Tier 1 capital (primary)
Core Tier 1 capital

Ordinary share capital
Ordinary share premium
Reserves
Minority interest: ordinary shareholders
Deductions

Impairments
Goodwill
Excess of EL over eligible provisions (50%)
Unappropriated profits
Foreign currency translation reserves
Share-based payment reserves
Property revaluation reserves
Surplus capital held in insurance entities (50%)
Other regulatory differences

Non-core Tier 1 capital

Preference share capital and premium
Hybrid debt capital instruments 

Tier 2 capital (secondary)

Long-term debt instruments
Revaluation reserves (50%)
Deductions

Surplus capital held in insurance and financial entities (50%)
Excess of EL over eligible provisions (50%)
General allowance for credit impairment
Other regulatory differences

Tier 3 capital (tertiary)

Total capital

Capital including unappropriated profits*

Tier 1 capital (primary)
Core Tier 1 capital
Total capital

Nedbank Group 
2007
Rm

2008
Rm

Nedbank Limited
2007
Rm

2008
Rm

33 458 
28 427 

410 
11 370 
23 133 
1 881 
(8 367) 

(6) 
(3 894) 
(588) 
(658) 
(545) 
(949) 
(951) 
(387) 
(389) 

5 031 

3 279 
1 752

26 611 
23 190 

402 
10 721 
19 070 
1 511 
(8 514) 

(8) 
(3 898) 
(854) 
(852) 
(256) 
(874) 
(848) 
(287) 
(637) 

3 421 

3 421 

10 153

10 510 

10 464 
476 
(787) 

(387) 
(588) 
212 
(24) 

– 

10 873 
424 
(787) 

(287) 
(854) 
350 
4 

300 

27 031 
22 156 

27 
14 433 
14 298 

(6 602) 

(3 608) 
(1 126) 
(588) 
(300) 

(281) 
(668) 

21 188 
18 066 

27 
14 434 
10 488 

(6 883) 

(3 498) 
(1 126) 
(793) 
(604) 

(9) 
(592) 

(31) 

(261) 

4 874 

3 122 
1 752 

9 395 

9 812 
334 
(751) 

3 122 

3 122 

9 318 

9 815 
296 
(793) 

(588) 

(793) 

(163) 

– 

300 

43 611 

37 421 

36 426 

30 806 

Nedbank Group 
2007
Rm

2008
Rm

Nedbank Limited
2007
Rm

2008
Rm

33 966 
28 935 
44 119 

27 429 
24 008 
38 239 

27 182 
22 307 
36 577 

21 758 
18 636 
31 376 

* Includes unappropriated profits at year-end to the extent that they are not expected to reverse and are expected to be appropriated subsequent to year-end.

176

NEDBANK GROUP ANNUAL REPORT 2008

Growth in risk-weighted assets during 2008 was only 6%
while loans and advances grew by 16% due to data quality
enhancements and more selective asset growth. Further
upside still exists in reducing risk-weighted assets due to
further data enhancements and extra conservatism
previously introduced during Basel II implementation.

Details of capital instruments issued by Nedbank Group are
listed in note 43 to the 31 December 2008 annual financial
statements on pages 301 and 302.

The following is a summary of the group’s capital
management actions over the past two years:

• Saw South Africa’s inaugural hybrid debt capital issues in

2008, which came from Nedbank Limited, totalling 
R1,75 billion.

• Redeemed the NED2 R4 billion subordinated debt 

(July 2007).

• Concluded R6,77 billion in subordinated-debt issues.
Subordinated-debt issuance was significant due to

refinancing of the NED2 R4 billion bond and the NED1 
R2 billion bond.

Included in the above R6,77 billion issuance is a 10-year
landmark deal with the International Finance Corporation
and African Development Bank for R2 billion (NED 9).

Issued R364 million in perpetual preference shares in 
April 2007.

•

•

• Executed no share buybacks.

The group has maintained its dividend cover policy at 2,25 to
2,75 times.

Nedbank has achieved its objective of a smoothed,
well-diversified non-core Tier 1 and Tier 2 capital maturity
profile, removing the maturity concentration risk previously
associated with the NED1 (R2 billion) and NED2 (R4 billion),
in 2006 and 2007 respectively. Further capital issues will
continue to build on this. There are no maturities until 
2011 (Nedbank Limited) and 2010 (Imperial Bank Limited).

Rm

2 000

1 500

1 000

500

0

Nedbank Group’s non-core Tier 1 and Tier 2 maturity profile

NED7
NED10
NED12

NED 6
IBL3

NED 8

NED5

NED 9

NED H1

IBL2

NED 11

2009

2010
2010

2011
2011

2012
2012

2013
2013

20142014
2014

20152015
2015

2016

2017
2017

2018
2018

Subordinated debt

Hybrid debt

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177

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

Regulatory capital adequacy of all banking subsidiaries of Nedbank Group

A summary of the banking subsidiaries’ regulated capital adequacy positions at 31 December 2008 is provided below:

Banking subsidiary

(solo supervision)

Nedbank Limited
Imperial Bank Limited
Nedbank (Namibia) Limited
Fairbairn Private Bank (IOM) Limited
Fairbairn Private Bank Limited
Nedbank (Swaziland) Limited
Nedbank (Lesotho) Limited
Nedbank (Malawi) Limited

Country
capital
adequacy
ratio
%

9,75 
9,75 
10,00 
10,00 
10,00 
8,00 
8,00 
8,00 

2008 
Risk-
weighted
assets
Rm

278 333 
38 074 
3 264 
2 526 
1 722 
619 
320 
80 

2007
Risk- 
weighted 
assets 
Rm

274 773
33 909
3 147
2 919
1 504
582
453
97

Capital
ratio 
%

11,2
10,6
11,9
12,8
14,7
19,3
21,2
12,8

Capital
ratio 
%

13,1
11,1 
13,9
16,1
14,5 
17,4 
23,3 
23,0 

The above entities are all incorporated in Nedbank Group’s
economic capital and ICAAP process discussed earlier.

ECONOMIC CAPITAL ADEQUACY AND
ALLOCATION

Nedbank owns 50,1% of Imperial Bank Limited in a joint
venture with Imperial Holdings Group. Nedbank provides half
of the capital needs of Imperial Bank Limited, but also 100%
of its funding requirements. Nedbank expects Imperial Bank
Limited to operate at regulatory capital ratio targets
commensurate with those of Nedbank and its risk profile.

In conclusion, the capitalisation of all these banking entities
is adequate, all with conservative risk profiles and all well-
managed and monitored as part of the group’s ERMF and
ICAAP.

Nedbank Group’s Economic Capital Model has been discussed
on page 135. Set out below is Nedbank Group’s economic
capital adequacy and capital alloction to business clusters.

Nedbank Group’s ICAAP confirms that the group is
capitalised to its A- or 99,9% target debt rating (or solvency
standard) in terms of its proprietary economic capital
methodology set out earlier. This includes a 10% capital
buffer based on the group’s risk appetite metrics and results
of stress and scenario testing of the projected base case
capital requirements.

178

NEDBANK GROUP ANNUAL REPORT 2008

Summary of economic capital

Nedbank Group

Tier B
(non-core
capital)
9 880

Surplus
9 610

10% buffer
2 601

Surplus
5 771

10% buffer
2 452

Tier B
(non-core
capital)
8 234

Minimum 
requirement 
26 006

vs

Tier A 
(core capital) 
28 336

Minimum 
requirement 
24 521

vs

Tier A 
(core capital) 
24 510

Rbn

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0

Nedbank Limited

Surplus
10 360

10% buffer
2 110

Tier B
(non-core 
capital)
9 150

Surplus
661

10% buffer
2 237

Tier B
(non-core 
capital)
6 631

vs

Minimum 
requirement 
21 096

Tier A 
(core capital) 
24 415

vs

Minimum 
requirement 
22 368

Tier A 
(core capital) 
18 635

Rbn

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0

2008

2007

2008

2007

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Capitalised to a 99,9% conﬁ dence interval (target debt rating A-, currently same calibration as Basel II) plus a 10% capital buffer.

Target for economic capital adequacy

Actual economic capital requirements and available financial resources

By risk type

Credit risk*
Transfer (sovereign) risk
Market risk

Trading risk
IRRBB risk
Property risk
Investment risk 
Forex translation risk

Operational risk
Business risk
Other assets

Minimum economic capital requirement
+ Capital buffer (10%)

= Total economic capital requirement
vs Available financial resources

Tier A capital (shareholders’ equity)
Tier B capital (non-core Tier 1 capital)

= Surplus available

Nedbank Group

Nedbank Limited

2008

2007

2008

2007

%

60
0,6
12

1,4
0,1
3,9
6,3
0,1

6
18
3

100

Rm

15 605 
166 
3 066 

352 
33 
1 019 
1 635 
27 

1 682 
4 798 
689 

26 006 
2 601 

28 607 
38 216 

28 336 
9 880 

9 610 

%

65
1,3
10

1,4
0,1
3,7
4,6
0,1

4
16
3

100

Rm

16 018 
317 
2 472 

353 
31 
919 
1 139 
30 

1 099 
3 885 
730 

24 521 
2 452

26 973 
32 744 

24 510 
8 234 

5 771 

%

63
0,1
8

0,6
0,1
3,6
3,2
0,0

7
20
3

100

Rm

13 197 
25 
1 598 

137 
21 
765 
675 
0 

1 510 
4 168 
598 

21 096 
2 110 

23 206 
33 566 

24 415 
9 150 

10 360 

%

64
1,4
10

1,6
0,1
3,2
4,7
0,1

5
17
2

100

Rm

14 367 
321 
2 177 

353 
31 
722 
1 053 
18 

1 071 
3 875 
557 

22 368 
2 237 

24 605 
25 266 

18 635 
6 631 

661 

* Credit risk economic capital incorporates counterparty credit risk and securitisation risk.

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179

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

Overall credit risk economic capital has decreased marginally
from 2007 to 2008. Although the worsening credit cycle has
resulted in increases in PDs and non-performing loans in
Retail, this has been more than offset by an increase in
specific impairments and the optimisation of risk-weighted
assets, enabled by data quality enhancements and more
selective asset growth (as discussed under regulatory capital).

Property risk has increased mainly as a result of the increase
in properties-in-possession due to the worsening economic
conditions, while investment risk has increased due to
revaluations in the book value of investment exposures.
Operational risk increased due to the inclusion of the most
recent year of gross income data in the calculation. The
increase in business risk is also largely as a result of income
growth.

The cost of equity has been revised to 13,25% for 2009 as a
result of a lower 10-year risk-free rate expected for the year.
In line with international trends, long-term government rates
have been trending downwards in South Africa. This is due to
the higher-than-normal risk aversion and the expectation of
lower rates on the back of lower inflation expectations, both
of which can be ascribed to the current crisis.

EXTERNAL CREDIT RATINGS

In December 2008 Moody’s Investors Service affirmed
Nedbank’s national-scale short-term deposit rating of 
Prime- 1.za and long-term deposit of Aa 1.za.

Nedbank Limited received a rating upgrade from Fitch
Ratings in November 2007, which was reaffirmed in 
July 2008. In November 2008 Fitch maintained the ratings,
but changed the outlook for a number of the local banks on
the back of a rating outlook adjustment for South Africa,
including changing the outlook for Nedbank for its
international sovereign rating from stable to negative. No
adjustment was made to Nedbank’s local ratings or outlooks
and the Fitch Ratings national short-term rating remains 
F1+ (zaf).

Nedbank Limited also registered a European domestic
medium-term note programme (EMTN) during 
December 2008. This programme was separately rated by
both Moody’s and Fitch. Moody’s has assigned an A2 foreign
currency rating together with a positive outlook to both
senior and subordinated notes. Fitch has assigned BBB+ and
BBB foreign currency ratings to the long-term senior and
subordinated debt, respectively.

Details of Nedbank Group’s and Nedbank Limited’s credit
ratings by Fitch and Moody’s are included in the full Pillar 3
Report on the Nedbank website.

COMPREHENSIVE STRESS AND
SCENARIO TESTING IS USED
TO STRESS NEDBANK’S BASE
CASE PROJECTIONS AND SO
ASSESS THE ADEQUACY OF
ITS CAPITAL BUFFERS AND
TARGET RATIOS.

Nedbank’s stress and scenario testing recognises and
estimates the potential volatility of its capital requirements
and the base case (expected) projections covered earlier,
including the key assumptions and sensitivities contained
therein, which themselves are subject to fluctuation, and
ultimately the adequacy of its capital buffers and target
capital ratios.

Risk relating to procyclicality

Procyclicality is the extent to which the buffer between
available capital and required capital levels (regulatory and
economic) changes as a direct result of changes in the
economic cycle, and would decrease in a downturn economic
cycle.

Nedbank explicitly addresses the issue of procyclicality
through an effective capital management process, of which
an integral part includes the holistic stress testing of required
and available capital under various macroeconomic stress
scenarios. Details on this are provided in the full Pillar 3
Report on the Nedbank website.

Nedbank applies a downturn adjustment to all its LGDs used
for regulatory capital requirements, which mutes the effect
of procyclicality. Through-the-cycle LGDs are utilised for
economic capital requirements and are stressed for
worsening economic conditions but not adjusted for
improved conditions. The Macroeconomic Factor Model
explicitly models increases in through-the-cycle LGDs over
time for different macroeconomic stress scenarios
differentiated by subportfolio. Therefore, the effect of
increasing PDs together with increasing LGDs for economic
capital is addressed within the groupwide macroeconomic
factor stress testing.

The stress testing of impacts of procyclicality is performed both
for regulatory capital and for economic capital purposes in
setting and assessing the adequacy of the economic capital
buffer. Specific-risk (Pillar 1) stress tests are performed on
individual major risk types in addition to ongoing monitoring
and reporting to assess the maximum potential for unexpected
losses and so the impact on capital levels.

180

NEDBANK GROUP ANNUAL REPORT 2008

Nedbank’s strategy and approach to macroeconomic stress and scenario testing

Stress- and scenario-testing capabilities were significantly
enhanced in 2006 with Nedbank’s building of a proprietary
Macroeconomic Factor Model and completion of a
comprehensive Stress- and Scenario-testing Framework. This
framework goes beyond the minimum Pillar 1 and Pillar 2
requirements of Basel II and has been integrated with
Nedbank’s existing risk appetite and CAPM as discussed earlier.
A high-level depiction of the framework is provided below.

The groupwide Macroeconomic Factor Model is utilised to
stress-test Basel II regulatory capital, economic capital,
expected losses as well as available financial resources for
Nedbank Group and Nedbank for different macroeconomic
stress events.

The key factors influencing economic capital buffer size may
include:

• procyclicality (economic cycles) as discussed above;

• abnormal constraints arising in the market impacting

capital raising and/or liquidity (funding);

• earnings volatility levels;

• concentration risks;

• accounting impacts on available financial resources 

(eg IFRS);

•

foreign capital deployment; and

• strategic acquisitions (if applicable).

As highlighted above, Nedbank’s economic capital buffer
level is set mainly using Nedbank’s Macroeconomic Factor
Model and its comprehensive Stress and Scenario-testing
Framework.

Overview of Nedbank’s Stress- and Scenario-testing Framework

Nedbank’s empirically
derived macroeconomic
drivers or factors

Macroscenarios

In cooperation with
Group Economic Unit

Risk and capital analytics

PD, LGDs, EADs, regulatory capital,
economic capital, etc

Regression models

Regression parameters

ALM risk parameters

Supplied by Group ALM

Three-year strategic plan

Group Exco

Integrated Stress/Scenario Model

Output

Macro-
economic
Factor
Model

Capital
Adequacy
Projection
Model
(economic
and
regulatory
capital)

Business input

Pillars stress tests
Projected risk characteristics
  and parameters of credit portfolios
(eg PD profiles)

Three-year forecasts and
stress/scenario analysis of:
• Income statement
• Balance sheet
• Capital adequacy

Varied by:
• Three-year business plan 

base cases
• User-chosen

macroscenarios

Also used in setting capital
buffers for:
• Economic capital
•  Regulatory capital

STRESS-TESTING GOVERNANCE PROCESS (refer to our full Pillar 3 Report for details)

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181

 
 
 
 
 
 
 
RISK AND CAPITAL MANAGEMENT REPORT
DETAILED REVIEW ... CONTINUED

The overall stress test results and effects on regulatory capital,
economic capital, available capital resources and therefore
capital adequacy ratios are reported to the Group ALCO and
Group Risk and Capital Management Committee on a regular
basis (at least quarterly).

The result and impacts are provided on both a pre- and post-
management intervention basis. Management intervention
may include tightening of credit limits, limiting RWA growth in
the credit portfolio, especially to high-risk clients and so
reduce average PDs, and/or raise more capital than what was
originally planned. The results of the stress-testing scenarios
form part of the group’s ICAAP, which is submitted to the
board of directors and then SARB. The forward-looking
capability of the Stress-testing Model ensures that
management action can be taken in advance when necessary.

It is therefore ultimately concluded that Nedbank’s capital
planning and base case projected regulatory and economic
capital levels, ratios, targets and buffers, including the results
and impacts of the stress and scenario testing applied, are
sound and appropriate.

Using the Macroeconomic Factor Model an economic capital
buffer of 10% above the minimum economic capital
requirements has been set and approved by the board. The
target minimum available financial resources to cover the
economic capital requirements will therefore be at least the
minimum economic capital requirement plus 10%. This is
continuously monitored against the actual available financial
resources to assess the surplus/deficit as illustrated below.

The group’s strategy to cover stress and scenario testing
comprehensively, both for regulatory and economic capital
purposes, comprises the following three levels:

• Specific-risk (Pillar 1) and AIRB credit procyclicality testing

(using the Macroeconomic Factor Model to calculate
forward-looking, stressed PDs and LGDs, which then also
feeds the items below).

• Macroeconomic factor modelling (Pillar 2) covering four

scenarios, namely:

– mild stress;

–

–

–

high stress;

severe stress; and

positive scenario (ie better than the expected base
case).

• Specific-event scenario analysis. The four events the group

has chosen are:

–

–

–

–

severe recession;

liquidity crisis in Nedbank;

property value crash (akin to United States
subprime scenario and 1998 South African
interest rate crisis); and

default of two and three large exposures
(credit concentration risk).

182

NEDBANK GROUP ANNUAL REPORT 2008

ANNUAL FINANCIAL STATEMENTS
CONTENTS

Directors’ responsibility

Company Secretary Certification

Independent Auditors’ Report to the 

184

184

members of the Nedbank Group Limited  185

Audit Committee Report

Directors’ Report 2008

Remuneration Report

Nedbank Group employee 

incentive schemes

Group income statement

Group balance sheet

Group currency-adjusted 

income statement

Group currency-adjusted balance sheet

Group statement of changes in 

total shareholders’ equity

Group cashflow statement

Operational segmental reporting

Geographical segmental reporting

Notes to the financial statements

Analysis of investments in 

associates and joint ventures

Analysis of investments in subsidiaries

Nedbank major subsidiary companies

Company income statement

Company balance sheet

Company statement of changes 

in shareholders’ equity

Company cashflow statement

Notes to the company financial 

statements

186

190

194

206

208

209

210

212

214

216

218

222

224

328

330

332

333

333

334

334

335

183

DIRECTORS’ RESPONSIBILITY

The directors are responsible for the preparation and fair presentation of the group annual financial statements and annual financial
statements of Nedbank Group Limited, comprising the balance sheets at 31 December 2008; the income statements, the statements
of  changes  in  equity  and  cashflow  statements  for  the  year  then  ended; the  notes  to  the  financial  statements, which  include  a
summary of significant accounting policies and other explanatory notes; and the directors’ report in accordance with International
Financial Reporting Standards and in the manner required by the Companies Act of South Africa.

The directors’ responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair
presentation of these financial statements so as to be free from material misstatement, whether owing to fraud or error; selecting
and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

The directors’ responsibility also includes maintaining adequate accounting records and an effective system of risk management, as
well as preparing the supplementary schedules included in these financial statements.

The directors have made an assessment of the group’s and company’s ability to continue as going concerns and there is no reason
to believe that the group and company will not be going concerns in the year ahead.

The auditors are responsible for reporting on whether the group annual financial statements and annual financial statements are
fairly presented in accordance with the applicable financial reporting framework.

APPROVAL OF GROUP ANNUAL FINANCIAL STATEMENTS AND ANNUAL FINANCIAL
STATEMENTS

The group annual financial statements and annual financial statements of Nedbank Group Limited, as identified in the first paragraph,
were approved by the Nedbank Group Board of Directors on 25 February 2009 and are signed on its behalf by:

Dr RJ Khoza 
Chairman 

Sandown
25 February 2009

TA Boardman
Chief Executive

COMPANY SECRETARY’S CERTIFICATION

In terms of section 268G(d) of the Companies Act of South Africa I certify that, to the best of my knowledge and belief, Nedbank
Group Limited has lodged with the Registrar of Companies for the financial year ended 31 December 2008 all such returns as are
required of a public company in terms of the Companies Act and that all such returns are true, correct and up to date.

GS Nienaber
Company Secretary

Sandown
25 February 2009

184

NEDBANK GROUP ANNUAL REPORT 2008

INDEPENDENT AUDITORS’ REPORT 
TO THE MEMBERS OF NEDBANK GROUP LIMITED

REPORT ON THE FINANCIAL STATEMENTS

We have audited the group annual financial statements and annual financial statements of Nedbank Group Limited, which comprise
the  directors’ report, the  balance  sheets  as  at  31  December  2008, the  income  statements, statements  of  changes  in  equity  and
cashflow statements for the year then ended, a summary of significant accounting policies and other explanatory notes, and the
Remuneration Report as set out on pages 190 to 341.

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The  company’s  directors  are  responsible  for  the  preparation  and  fair  presentation  of  these  financial  statements  in  accordance  with
International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa.This responsibility includes:
designing, implementing and maintaining internal control relevant to the preparation and fair presentation of these financial statements
that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and
making accounting estimates that are reasonable in the circumstances.

AUDITORS’ RESPONSIBILITY

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with
International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit
to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s
preparation  and  fair  presentation  of  the  financial  statements  in  order  to  design  audit  procedures  that  are  appropriate  in  the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.An audit also includes
evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall financial statement presentation.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, these financial statements present fairly, in all material respects, the consolidated and separate financial position of
Nedbank Group Limited as at 31 December 2008, and of its consolidated and separate financial performance and cashflows for the
year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act
of South Africa.

KPMG Inc
Per TA Middlemiss
Chartered Accountant (SA)
Registered Auditor
Director

KPMG Crescent
85 Empire Road, Parktown
Johannesburg
2193

Policy board:
Chief Executive: RM Kgosana 
Executive Directors: TH Bashall*, DC Duffield, A Hari, TH Hoole,
FB Leith, JS McIntosh, AM Mokgabudi, D van Heerden 
Other directors: LP Fourie, T Fubu, A Jaffer, E Magondo, CM Read,
Y Suleman (Chairman of the Board), A Thunström, JM Vice
* British

The company’s principal place of business is at KPMG Crescent,
85 Empire Road, Parktown, where a list of the directors’ names
is available for inspection on request.

Sandown
25 February 2009

Deloitte & Touche
Per D Shipp
Partner

Building 8, Deloitte Place
The Woodlands, Woodlands Drive
Woodmead, Sandton
2128

National Executive:
GG Gelink (Chief Executive), AE Swiegers (Chief Operating Officer),
GM Pinnock (Audit), DL Kennedy (Tax and Legal and Financial Advisory),
L Geeringh (Consulting), L Bam (Corporate Finance), CR Beukman (Finance),
TJ Brown (Clients and Markets), NT Mtoba (Chairman of the Board),

A full list of partners and directors is available on request.

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185

 
 
 
 
 
 
 
AUDIT COMMITTEE REPORT

The legal responsibilities of the Nedbank Group Audit Committee (the committee) are set out in the Companies Act, 61 of 1973
(as amended), and the Banks Act, 94 of 1990 (as amended). These responsibilities, together with the requirements of parent
company Old Mutual plc’s audit committee and compliance with appropriate governance and international best practice, are
incorporated in the committee’s charter, which is reviewed annually and approved by the board.

COMPOSITION OF THE COMMITTEE

All independent non-executive directors, with the exception of the chairman of the board, are eligible to serve on the committee.
The Directors’ Affairs Committee recommends to the board any appointments to or removals from the board, which in turn is
responsible for the composition of the committee. The committee has three or more members, all of whom are financially literate,
with three members forming a quorum. Access to training is provided on an ongoing basis to assist members in discharging their
duties.

The committee comprised the following members during the year and to the date of this report, except where noted otherwise:

•

•

•

CJW Ball (Chairman)

TCP Chikane

JB Magwaza

• NP Mnxasana (appointed October 2008)

•

BE Davison (resigned August 2008)

• MA Enus-Brey (resigned March 2008)

•

RM Head (resigned March 2008)

• GT Serobe (resigned March 2008)

•

CML Savage (retired May 2008)

Biographical details of the current members of the committee are set out on pages 38 to 43. Members’ fees are included in the
table of directors’ remuneration on pages 198 and 199.

The Chief Executive, Chief Financial Officer, Chief Risk Officer, Chief Internal Auditor and representatives of the external auditors
are invited to attend the committee meetings. The external auditors attend all committee meetings and separate meetings are
held to afford them the opportunity of discussion without the presence of management or internal auditors. The internal auditors
attend all committee meetings and are similarly afforded separate meetings with the committee.

INTERNAL AUDIT

Internal audit is an independent assurance function, forming part of the third-line-of-defence as set out in the Enterprisewide Risk
Management Framework (ERMF) on pages 132 and 133 of the annual report. The Chief Internal Auditor has a direct reporting line
to the committee chairperson and also meets regularly with the Chief Executive Officer. Further details on the internal audit
function are contained in the Enterprise Governance and Compliance Report on pages 94 to 109.

EXTERNAL AUDIT

The group’s external auditors are Deloitte & Touche and KPMG Inc. Fees paid to the auditors are disclosed in note 14 to the annual
financial statements on page 257. Further details are contained in the Enterprise Governance and Compliance Report on page 106.

KEY FUNCTIONS AND RESPONSIBILITIES OF THE COMMITTEE

The key functions and responsibilities of the committee as outlined in the charter are to:

•

assist the board of directors in its evaluation of the adequacy and efficiency of the internal control systems, accounting
practices, information systems and auditing processes applied within the group in the day-to-day management of its business;

186

NEDBANK GROUP ANNUAL REPORT 2008

•

•

•

•

•

•

•

•

•

facilitate and promote communication between the board, management, the external auditors and the Chief Internal Auditor;

introduce such measures as in the committee’s opinion may serve to enhance the credibility and objectivity of financial
statements and reports prepared with reference to the affairs of the group;

nominate for appointment as auditors the company registered auditors who, in the opinion of the committee, are independent
of the group;

determine the fees to be paid to the auditors and the auditors' terms of engagement;

ensure that the appointment of the auditors complies with the Companies Act and any other legislation relating to the
appointment of auditors;

determine the nature and extent of any non-audit services that the auditors may provide to the group;

approve any contract with the auditors for the provision of non-audit services to the group;

receive and deal appropriately with any complaints (whether from within or outside the group) relating either to the
accounting practices and internal audit of the group or to the contents or auditing of its financial statements, or any other
related matter thereto; and

perform such further functions as may be prescribed.

The committee reports that it has adopted appropriate formal terms of reference to discharge its responsibilities, has regulated its
affairs in compliance with its charter and has discharged all its responsibilities as contained therein.

EFFECTIVENESS OF INTERNAL CONTROL

The committee monitors the group’s internal controls for effectiveness and adherence to the ERMF for pragmatic and consistent
application, as these form the foundation of successful risk management.

The emphasis on risk governance is based on a three-lines-of-defence concept, which is the backbone of the group’s ERMF. The
ERMF places weight on accountability, responsibility, independence, reporting, communications and transparency, both internally
and with all our key external stakeholders.

The functions of the three lines of defence, as well as the principal responsibilities that extend across the group, are set out in the
Risk and Capital Management Report on pages 116 to 182.

Specific responsibilities of the committee include the following:

Internal control

• Monitoring management's success at creating and maintaining an effective internal control environment throughout the group

and at demonstrating and stimulating the necessary respect for this control environment.

• Monitoring the identification and correction of weaknesses and breakdowns of systems and internal controls.

Financial control, accounting and reporting

• Monitoring the adequacy and reliability of management information and the efficiency of management information systems.

•

•

•

•

•

Delegating to the Board Strategic Information Technology Committee the monitoring of the adequacy and efficiency of the
group’s information systems and receiving from them reports thereon.

Reviewing quarterly, interim and final financial results and statements and reporting for proper and complete disclosure of
timely, reliable and consistent information and confirming the appropriateness of accounting policies used.

Evaluating on an ongoing basis the appropriateness, adequacy and efficiency of accounting policies and procedures, compliance
with generally accepted accounting practice and overall accounting standards as well as any changes thereto.

Discussing and resolving any significant or unusual accounting problems.

Reviewing and monitoring capital expenditure throughout the group for adequate control, monitoring and reporting.

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187

 
 
 
 
 
 
 
AUDIT COMMITTEE REPORT ... CONTINUED

•

Reviewing reports from the Group Credit Committee regarding the effectiveness and efficiency of the credit-monitoring
process, exposures and related impairments and adequacy of impairment provisions to discharge its board and Banks Act
obligations satisfactorily.

• Monitoring the management and reporting of tax-related matters.

• Monitoring the management and effectiveness of the accounting and taxation risks as set out in the group’s ERMF.

•

Reviewing and monitoring all key performance indicators to ensure that decisionmaking capabilities and the accuracy of the
related reporting and financial results they aid are maintained at industry levels.

Internal audit

•

Direct reporting by the Chief Internal Auditor to the chairman of the committee.

• Monitoring the effectiveness of the internal audit function in terms of its scope, plans, coverage, independence, skills, staffing,

overall performance and position within the organisation.

• Monitoring and challenging, where appropriate, action taken by management with regard to adverse internal audit findings.

•

Forming a view on the adequacy and effectiveness of the control environment.

• Monitoring compliance with the bank’s Advanced Internal Ratings-based (AIRB) credit approach.

External audit

•

Recommending to the board the selection of the external auditors and approving their audit fees.

• Monitoring the effectiveness of external auditors in terms of their skills, independence, audit plan, reporting and overall

performance.

•

•

Approving non-audit services to be rendered by the external auditors and monitoring conflicts of interest.

Considering whether the extent of reliance placed on internal audit by the external auditors is appropriate and whether there
are any significant gaps between internal and external audit.

Regulatory reporting

•

•

•

Reviewing the adequacy of the regulatory reporting processes, including the quality of the Banks Act reporting and the
adequacy of systems and people to perform these functions.

Considering the contents of any regulatory reports related to the key functions of the committee and monitoring
management actions to resolve any issues identified.

Performing such other functions as are prescribed in the regulations relating to the Banks Act.

Having considered, analysed, reviewed and debated information provided by management, internal audit and external audit, the
committee confirmed that:

•

•

•

•

•

the internal controls of the group have been effective in all material aspects throughout the year under review;

these controls have ensured that the group’s assets have been safeguarded;

proper accounting records have been maintained;

resources have been utilised efficiently; and

the skills, independence, audit plan, reporting and overall performance of the external auditors are acceptable and that it
recommends their reappointment in 2009.

188

NEDBANK GROUP ANNUAL REPORT 2008

APPROPRIATENESS OF THE EXPERTISE AND EXPERIENCE OF THE CHIEF FINANCIAL OFFICER
In terms of the JSE Listings Requirements the Audit Committee had, at its meeting held on 28 January 2009, satisfied itself as to
the appropriateness of the expertise and experience of the Chief Financial Officer.

ANNUAL FINANCIAL STATEMENTS

The committee has:

•

•

•

•

reviewed and discussed the audited annual financial statements included in the annual report with the external auditors, the
Chief Executive and the Chief Financial Officer;

reviewed the external auditors' management letter and management’s response thereto;

reviewed significant adjustments resulting from external audit queries and accepted any unadjusted audit differences; and

received and considered reports from the internal auditors.

The committee concurs with and accepts the external auditors' conclusions on the annual financial statements and has
recommended the approval thereof to the board. The board has subsequently approved the financial statements, which will be
open for discussion at the forthcoming annual general meeting.

CJW Ball
Audit Committee Chairman

25 February 2009

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189

 
 
 
 
 
 
 
DIRECTORS’ REPORT 2008
FOR THE YEAR ENDED 31 DECEMBER

NATURE OF BUSINESS

Nedbank Group Limited (‘Nedbank Group’ or ‘the company’) is a widely held company and a registered bank controlling company
that, through its subsidiaries, provides a wide range of banking and financial services. Nedbank Group maintains a primary listing
under ‘Banks’ on JSE Limited (‘JSE’), with a secondary listing on the Namibian Stock Exchange.

FINANCIAL RESULTS

Full details of the financial results are set out on pages 194 to 341 of these annual financial statements.

YEAR UNDER REVIEW

The  year  under  review  is  fully  covered  in  the  Chairman’s  Statement, Chief  Executive’s  Report, operational  reviews  and  the 
Chief Financial Officer’s Report.

SHARE CAPITAL

Details of the authorised and issued share capital, together with details of shares issued and options granted during the year, appear
in note 39 to the annual financial statements.

OWNERSHIP

The holding company of Nedbank Group is Old Mutual Life Assurance Company (SA) Limited and associates, which hold 53,89% of
the issued ordinary shares of the company. The ultimate holding company is Old Mutual plc, incorporated in England and Wales.
Further details of shareholders appear on pages 62 and 63.

DIVIDENDS

Details of the dividends appear in note 20 to the annual financial statements.

DIRECTORS

Biographical details of the current directors appear on pages 38 to 43. Details of directors’ remuneration and shareholdings appear
on pages 194 to 205.

During the period under review, and also subsequent to year-end, the following changes occurred in the Nedbank Group Board:

•

•

•

CML Savage resigned as an independent non-executive director (14 May 2008).

BE Davison resigned as an independent non-executive director (2 August 2008).

JH Sutcliffe resigned as a non-executive director (9 September 2008).

• NP Mnxasana was appointed as an independent non-executive director (1 October 2008).

•

A de VC Knott-Craig was appointed as an independent non-executive director (1 January 2009).

Also during the period under review the Nedbank Group Board decided to do away with the position of vice-chairman of the board.
The role of the vice-chairman is no longer considered to be necessary following the creation of the position of senior independent
non-executive  director, which  post  is  held  by  Mr  CJW  Ball. As  a  result  of  this  decision  the Joint Vice-chairmen  of  the  board,
Prof MM Katz and Mr ML Ndlovu, will formally step down from their positions as Vice-chairmen at the annual general meeting to be
held on 14 May 2009 and will continue to serve as directors of Nedbank Group.

The  directors  who, in  terms  of  the  articles  of  association, are  required  to  seek  reelection  at  the  annual  general  meeting  are 
Dr RJ Khoza, Mr MA Enus-Brey and Ms GT Serobe. Being eligible, they make themselves available for reelection.

Directors of Nedbank Group who have served on the board for a period longer than nine years are now required to seek reelection
annually. These directors are Prof MM Katz and Messrs JB Magwaza, ME Mkwanazi and ML Ndlovu and they, being eligible, make
themselves available for reelection.

190

NEDBANK GROUP ANNUAL REPORT 2008

Ms  NP  Mnxasana  and  Mr A  de VC  Knott-Craig  were  appointed  by  the  board  of  directors  with  effect  from  1  October  2008  and 
1  January  2009  respectively, and  in  terms  of  the  articles  of  association  their  appointments  terminate  at  the  close  of  the  annual
general meeting. They are available for election and separate resolutions to seek their election will be submitted for approval at the
annual general meeting to be held on 14 May 2009.

At a board meeting held on 20 February 2009 Prof MM Katz and Mr ML Ndlovu were reclassified as independent non-executive directors.

Details of the members of the board who served during the year are given below:

Name

Position as director

Date appointed
as director

Date resigned/retired
(where applicable)

CJW Ball
TA Boardman
MWT Brown
TCP Chikane
BE Davison
MA Enus-Brey
B de L Figaji
R Harris (British)
RM Head (British)
MM Katz
RJ Khoza
JB Magwaza
ME Mkwanazi
NP Mnxasana
ML Ndlovu
CML Savage
GT Serobe
JH Sutcliffe (British)

Senior independent director
Chief Executive – executive director
Chief Financial Officer – executive director
Independent non-executive director
Independent non-executive director
Non-executive director
Independent non-executive director
Non-executive director
Non-executive director
Vice-chairman – independent non-executive director*
Chairman – non-executive director
Independent non-executive director
Independent non-executive director
Independent non-executive director
Vice-chairman – independent non-executive director*
Independent non-executive director
Non-executive director
Non-executive director

1 November 2002
1 November 2002
17 June 2004
1 November 2006
25 November 2002
16 August 2005
25 November 2002
10 December 2007
1 January 2005
4 November 1997
16 August 2005
1 October 1996
20 April 1999
1 October 2008
5 May 1993
1 November 2002
16 August 2005
10 December 2001

2 August 2008

14 May 2008

9 September 2008

* With effect from 20 February 2009: independent non-executive director.

AUDIT COMMITTEE

The Audit Committee Report appears on pages 186 to 189.

COMPANY SECRETARY AND REGISTERED OFFICE

The Company Secretary is Mr GS Nienaber and his addresses and the registered office are as follows:

Business address
Nedbank Group Limited
Nedbank Sandton
135 Rivonia Road
Sandown, 2196
South Africa

PROPERTY AND EQUIPMENT

Registered address
135 Rivonia Road
Sandown
2196

Postal address
Nedbank Group Limited
PO Box 1144
Johannesburg, 2000
South Africa

There was no material change in the nature of the property and equipment of the group or in the policy regarding their use during
the year.

CONTRACTS

In  2004  Nedbank  Group  and  Old  Mutual  plc  entered  into  a  relationship  agreement, which  formally  records  the  terms  of  the
relationship between the two parties. This agreement is available on the Nedbank Group website, www.nedbankgroup.co.za.

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191

 
 
 
 
 
 
 
DIRECTORS’ REPORT 2008
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

In 2005 the Wiphold Consortium and the Brimstone Consortium were chosen as active black business partners to assist in growing
and  repositioning  the  Nedbank  Group  business  and  driving  its  internal  transformation. Aka  Capital  fulfils  the  role  of  business
development partner. Consequently, performance agreements were entered into between Nedbank Group and the aforementioned
parties, which govern, inter alia, the setting of the performance criteria, their evaluation and the resultant performance fees in respect
of the black business partners.

Nedbank Limited entered into a contract with Group Five Building (Pty) Limited in 2008 for the construction of the second phase of
the headoffice campus situated at 135 Rivonia Road. The building will comprise 43 258m2 of mainly office space and a portion of
retail space. The contract is due for completion on 13 March 2010.

Details of other contracts material to the affairs of Nedbank Group are discussed in the operational reviews included in the annual
report.

DIRECTORS’ SERVICE CONTRACTS

There are no service contracts with the directors of the company, other than those as set out below. The directors who entered into
these service contracts remain subject to retirement by rotation in terms of Nedbank Group’s articles of association.

The  key  responsibilities  relating  to  Dr  RJ  Khoza’s  position  as  Chairman  of  Nedbank  Group  are  encapsulated  in  a  contract, which
addresses, inter alia, his remuneration and term for occupying the position as Chairman.

Mr TA Boardman’s employment is governed by a service contract, which has a termination date of 28 February 2010. This service
contract stipulates a maximum notice period of six months under most circumstances.

A similar service contract was agreed at the time of the appointment of Mr MWT Brown on 17 June 2004. This service contract is
effective  until  Mr  Brown  reaches  the  normal  retirement  age  and  stipulates  a  maximum  notice  period  of  six  months  under  most
circumstances.

Mr ML Ndlovu’s employment was governed by a consultancy contract, agreed at the time of his appointment as a Non-executive
Vice-chairman of the company on 1 May 2005, and which expired on 31 December 2008.

INSURANCE

The group has placed cover in the London traditional insurance market of up to R1,85 billion for losses in excess of R50 million. Group
captive insurers provide cover for losses that may occur below the R50 million level, retaining R100 million. Certain layers of the group
insurance programme are shared with the Old Mutual Group. These arrangements are unchanged from those entered into in 2007.

SUBSIDIARY COMPANIES

Details of principal subsidiary companies are reflected on pages 330 to 332 of the annual financial statements.

SPECIAL RESOLUTIONS BY SUBSIDIARIES

Bellissima  Investments  Seventy Two  (Pty)  Limited  passed  a  special  resolution  at  its  shareholders’ meeting  on  31  October  2008,
changing its name to NedProperties (Proprietary) Limited with effect from 7 November 2008.

BoE  Developments  (Pty)  Limited  passed  a  special  resolution  at  its  shareholders’ meeting  on  16  October  2008, amending  certain
articles contained in its articles of association to conform to Nedbank Group practice, with effect from 14 November 2008.

BoE Unit Trust Management Company Limited passed a special resolution at its shareholders’ meeting on 28 May 2008, changing its
name to Nedinvest Limited with effect from 25 June 2008.

CKD Leasing (Pty) Limited passed a special resolution at its shareholders’ meeting on 9 December 2008, disposing of its major asset
in terms of section 228 of the Companies Act, 61 of 1973 (as amended), with effect from 6 January 2009.

Manco Management Company (Pty) Limited passed a special resolution at its shareholders’ meeting on 25 July 2008, changing its
name to Tunga Management Company (Pty) Limited with effect from 31 July 2008.

NedEurope Limited (Isle of Man) passed a special resolution on 3 November 2008, adopting a new memorandum and articles of
association and applying for reregistration as a company incorporated under the Isle of Man Companies Act 2006.

192

NEDBANK GROUP ANNUAL REPORT 2008

Nedcor  Securities  (Pty)  Limited  passed  a  special  resolution  at  its  shareholders’ meeting  on  23  July  2008, changing  its  name  to
Nedgroup Securities (Pty) Limited with effect from 11 August 2008.

Umlingo Trade and Invest 71 (Pty) Limited passed a special resolution at its shareholder’s meeting on 25 January 2008, changing its
name to Aard Mining Equipment (Pty) Limited with effect from 22 February 2008.

In addition, a number of dormant subsidiary companies adopted the prescribed special resolutions to enter into voluntary liquidation
as part of the Nedbank Group Rationalisation Project, a project with the aim of streamlining the number of subsidiary companies
and special-purpose vehicles during the course of the year under review.

A number of subsidiary companies, registered as dormant share block companies, amended their articles of association to incorporate
use agreements as part of the articles of association in compliance with the Share Block Control Act.

ACQUISITION OF SHARES

No shares in Nedbank Group were acquired by Nedbank Group or by a Nedbank Group subsidiary during the financial year under
review, other than those subject to the repurchase of shares from the Nedbank Eyethu Retail Scheme, the terms and conditions of
which scheme are detailed in the circular to ordinary shareholders dated 15 June 2005. Members will be requested to renew the
general authority enabling the company or a subsidiary of the company to repurchase shares.

POST-BALANCE-SHEET EVENTS

The  directors  are  not  aware  of  any  material  post-balance-sheet  events  that  have  occurred  between  the  balance  sheet  date  and 
25 February 2009.

DIRECTORS’ INTERESTS

The  directors’
Nedbank Limited at 31 December 2008 are set out in the Remuneration Report on pages 204 and 205.

interests  in  ordinary  shares  in  Nedbank  Group  and  non-redeemable non-cumulative  preference  shares  in 

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193

 
 
 
 
 
 
 
REMUNERATION REPORT

REMUNERATION PHILOSOPHY

The overall purpose of remuneration in Nedbank Group is to
attract, retain, motivate and reward high-performing and
talented staff. Furthermore, the remuneration philosophy is
aimed at encouraging sustainable long-term performance
and at all times to align performance with the strategic
direction and specific value drivers of the business, as well as
the interests of stakeholders.

Nedbank Group has adopted a total-reward philosophy as
part of an enterprisewide human resources (HR) strategy,
which in turn supports the group’s business strategy. Total
reward, comprising fixed and variable pay, reward and
recognition, work-home balance, talent management,
learning and development, and career development, also
plays a critical role in attracting, motivating and retaining
high-performing and talented individuals who are required to
achieve Nedbank Group’s objectives. The total-reward
approach within Nedbank Group is integrated into its people
management processes, such as transformation, performance
management, recognition, learning and development, and
talent management.

The group’s market position is to pay for performance, while
ensuring that there is a distribution of remuneration around
the market median when performance is on par with
predetermined financial and non-financial targets.
Performance in excess of these financial targets is rewarded
through additional incentives created through Nedbank
Group’s short-term incentive (STI) scheme, as well as
Nedbank Group’s recognition programme. Performance is
measured at a group and business unit level against agreed
targets after the finalisation of the year-end results. The
financial results drive the creation of STI pools in the group
and in each business unit. Distribution of these STI pools to
individuals is on the basis of relative individual performance
measured against agreed targets as stated in individual
performance scorecards.

Nedbank Group’s long-term incentive (LTI) schemes are
primarily aimed at the retention of key, high-impact
employees. They are intended to provide a motivation for
high performers to remain with Nedbank Group and also to
align the interests of individuals with shareholders.

Nedbank Group does not use a generic grading structure.
Instead, the bank benchmarks remuneration in terms of the
roles employees are required to perform by comparison with
the external market and in relation to individual
performance. Information on external remuneration is critical
to ensure that remuneration is market-related and
substantial effort is made to ensure that market information
is sourced from a number of different and credible
remuneration surveys.

REMUNERATION COMMITTEE MEMBERSHIP
AND CHARTER

The Group Remuneration Committee (the ‘committee’)
operates according to a charter approved by the Nedbank
Group Board. The board delegates responsibility to the
committee for the investigation and benchmarking of
remuneration practices and for considering and approving
proposals made on remuneration practices for the group.

During 2008 the committee initially comprised four
independent non-executive directors, namely JB Magwaza
(Chairman), Chris Ball, Brian Figaji and Cedric Savage, and 
one non-executive director, Jim Sutcliffe. Mr Savage retired 
in May 2008 and Mr Sutcliffe resigned in September 2008.
Bob Head, Regional Director, Old Mutual Europe, was appointed
to the committee in October 2008. Tom Boardman,
Chief Executive, Shirley Zinn, Group Executive:
Human Resources, and Mike Brown, Chief Financial Officer,
are permanent invitees to the committee meetings and
recuse themselves from discussions on their own
remuneration. The committee met six times during 2008.

The committee considers remuneration in an integrated and
holistic manner, thereby assisting the board in discharging its
corporate governance duties related to remuneration
strategy, structure and costs.

The committee’s responsibilities include:

•

•

•

•

investigating and benchmarking remuneration practices
and broad terms and conditions of employment for all
permanent employees to ensure that these are fair and
competitive, and approving the cost of annual
remuneration increases awarded to employees;

reviewing, monitoring and approving the design principles
supporting incentive arrangements and the quantification
of final STI pools for distribution to eligible employees;

reviewing, monitoring and approving the Nedbank Group
Employee Share Scheme rules, including the Eyethu
Employee Scheme rules;

approving the design principles supporting the LTI
arrangements and the granting of LTIs to employees, as
well as the financial targets linked to these incentives
where applicable;

• making recommendations to the board on guaranteed
remuneration adjustments, as well as short- and long-
term incentives for the executive directors and members
of the Group Executive Committee. The Chief Executive’s
remuneration is subject to final confirmation by the
Remuneration Committee of Old Mutual plc;

194

NEDBANK GROUP ANNUAL REPORT 2008

•

•

establishing a subcommittee to make recommendations
on the fees paid to the Chairman, senior independent
non-executive director and non-executive directors; and

approving performance scorecards for the Chief Executive
and members of the Nedbank Group Executive
Committee.

The committee applies the guiding principles of the
remuneration policy as far as is feasible, but both the board
and the committee retain the right to use their discretion to
deviate from this policy in exceptional circumstances.

The committee provides the board with feedback on
decisions taken after each meeting or more frequently, if
deemed necessary.

A self-assessment of the committee was conducted in 
July 2008 to evaluate the committee’s effectiveness against
the objectives of the committee’s charter and to highlight
and therefore focus on areas where its performance could 
be enhanced.

Overall, the results of the evaluation regarding the
effectiveness of the committee were positive and indicated
that the committee is functioning well. High-level feedback
confirmed that:

•

•

•

the committee performs its responsibilities according to
its charter;

there is good interaction between the board and the
committee; and

the committee meetings are productive and well-
facilitated, with appropriately robust discussions and
debate.

An area of improvement relates to the communication
between the committee and other shareholders and
stakeholders.

The Chairman of the board, Dr Reuel Khoza, also completed
an evaluation that confirmed his satisfaction with the
performance of the committee.

Advisers to the committee

The committee is informed of market-related information on
guaranteed packages (remuneration on a total cost-to-
company basis), as well as short- and long-term incentives,
based on a number of remuneration surveys in which the
group participates. These include Remchannel, the GRS Top
Executive Remuneration Survey, the LMO Executive
Remuneration Survey, the Hay Investment Banking Survey
and a number of smaller niche remuneration surveys.
Specialists within the Group Remuneration Services
Department collate and analyse the information sourced

from external service providers and prepare documentation
for consideration and approval by the committee. Where
appropriate, the committee has access to independent
executive remuneration consultants, and has utilised the
services of Vasdex Associates and PricewaterhouseCoopers
during the year. During 2008 Kevin Stacey, in his capacity as
the Old Mutual plc remuneration specialist, provided the
committee with input from the perspective of the 
Old Mutual plc Remuneration Committee.

Education of committee members

As part of the ongoing education of directors, a training
session on the latest remuneration practices in Europe and
the high-level principles on remuneration and incentive
schemes in the other Old Mutual plc businesses was
facilitated by Kevin Stacey.

Guaranteed-package increases 

Annual increases in the guaranteed package are
performance- and market-related, based on the projected
rate of inflation, increases awarded by other major banks and
the financial services industry, and the group’s remuneration
position against the banking and financial services markets.
To maintain appropriate remuneration competitiveness
relative to the labour market remuneration is reviewed at
least annually and annual increases take effect on 1 April.

Non-managerial employees form part of a bargaining unit,
and annual increases granted for this grouping depend on
negotiations with the recognised trade unions, SASBO and
IBSA. In April 2008 the non-managerial remuneration bill was
increased by 8,375% and the managerial and executive
remuneration bill increased by 7,25%. Individual increases are
granted on the basis of personal performance and market
comparisons within the overall adjustment percentage.

Chief Executive Tom Boardman’s guaranteed package was
reviewed in February 2008 and adjusted to R4 600 000 pa
with effect from 1 April 2008. This increase took into account
an annual increase in line with CPIX as well as a market
adjustment based on his performance and remuneration
levels relative to his peer group at the other major banks.
Chief Financial Officer Mike Brown’s guaranteed package was
reviewed and adjusted to R2 700 000 pa with effect from 
1 April 2008 using the same CPIX performance and market-
related criteria. These increases cover the period from 
1 April 2008 to 31 March 2009.

Remuneration 

All employees in the Nedbank Group are remunerated on a
total cost-to-company basis (referred to in this report as 
’the guaranteed package’), which includes a basic salary,
13th cheque (if selected), allowances and contributions to

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195

 
 
 
 
 
 
 
REMUNERATION REPORT ... CONTINUED

benefit funds. From the guaranteed package contributions are
made to the Nedgroup Medical Aid Scheme, a postretirement
medical aid fund (applicable only to qualifying employees), a
retirement fund, a disability fund and a death benefit
scheme. A car allowance/company car contribution may be
structured into the package where the employee is required
to travel on group business. The amounts stipulated under
basic salary and other benefits in table 1 on page 197
exclude the contributions to the retirement fund, but include
contributions to the disability fund, the car allowance/
company car, medical aid and postretirement medical aid
subsidy.

financial and non-financial targets as approved by the
committee.

To align with the group’s three-year business plan targets,
which are aligned with the group’s risk appetite as part of
the planning process, the short-term incentives were aligned
to EP in 2008. At a group level EP is calculated using
International Financial Reporting Standards (IFRS) headline
earnings and average shareholders’ funds together with an
appropriate hurdle above the group’s cost of equity. Similar
calculations are performed in the clusters using economic
capital allocations and cluster-specific cost of equity
estimates.

Retirement scheme 

Deferred short-term incentive scheme

The executive directors are members of Nedbank’s defined-
contribution retirement schemes. There are therefore no
defined-benefit liabilities in respect of the executive
directors. Contributions to the retirement funds form part of
the guaranteed package.

Short-term incentives 

Short-term incentives are intended to encourage particular
behaviours and obtain desired results. Nedbank Group
incentive schemes are structured to support collaborative
work across different clusters. The committee has agreed a
set of principles and all group and cluster incentive schemes
are designed according to those principles.

The level of Nedbank Group’s economic profit (EP) in excess
of the target for 2008 was the driver for the creation of the
incentive pools for all support clusters and the group pool
component for the income-generating clusters.

In the income-generating clusters incentive pools are
structured with a weighting linked to the group, cluster and,
where appropriate, divisional performance. The three income-
generating clusters within Nedbank (Retail, Corporate and
Capital) were measured against relevant EP targets, with these
pools being calculated independently of one another.
Independent calculations are done to ensure that the total
amount calculated on the group’s EP performance and the
amounts calculated taking into consideration each cluster’s
and division’s independent performance do not differ by more
than 5%. If the difference is more than 5%, the calculated
group pool will be used. Distribution of these pools is based on
individual performance relative to the agreed deliverables in
the performance management process (performance
scorecards for managers, senior managers and executives).

Executive remuneration is benchmarked to data provided in
national executive remuneration surveys and information
disclosed in annual financial statements. Executive bonuses
are based on actual performance measured against agreed

In 2006, in response to a buoyant labour market and a
higher-than-normal staff turnover, a deferred short-term
incentive (DSTI) scheme was approved and implemented for
337 employees, serving as a retention scheme. The Chief
Executive and members of the Group Executive Committee
were excluded from the 2006 scheme. An initial payment
took place in October 2006 with a two-year lock-in period
and the balance of the DSTI payment was paid in November
2008. The participants from Nedbank Capital were given a
three-year lock-in with the final payment scheduled for
November 2009. Employees who left the service of Nedbank
before the attainment of the lock-in date were required to
reimburse Nedbank the gross initial amount paid. The
scheme achieved its key aim of retaining critical skills.

In 2008 Nedbank was in a situation where the retention of
key staff again became increasingly challenging in a tougher
financial services sector where these skills were in demand. In
July 2008 the committee approved a further retention
scheme to be used for key staff and at 31 December 2008, the
scheme included 153 participants. The Chief Executive and
members of the Group Executive Committee were also
excluded from the 2008 scheme. An initial payment took
place in October 2008 and the balance of the cash award
will be paid in October 2011. Participants leaving the service
of the group before the termination date of the scheme are
required to reimburse Nedbank the gross initial amount paid.

EXECUTIVE DIRECTORS

Service contracts

In order to allow Tom Boardman to present the 2009
financial results his service contract was extended to 
28 February 2010. The extension of the contract was agreed
in January 2007. His service contract stipulates a maximum
notice period of six months under most circumstances.
A service contract was agreed with Mike Brown on 
17 June 2004, with a notice period of six months under most
circumstances and retirement age of 60 years.

196

NEDBANK GROUP ANNUAL REPORT 2008

Executive directors’ remuneration

The remuneration of executive directors for the years ended 31 December 2008 and 31 December 2007 was as follows:

Table 1: Executive directors’ remuneration – year to 31 December 2008

Name

TA Boardman
MWT Brown

Total

Basic salary 
and other 

Retirement
fund
benefits* contributions
(R000)

(R000)

Guaranteed
remuneration
(R000)

4 104
2 282

6 386

309
319

628

4 413
2 601

7 014

Performance

bonus**
(R000)

Total
(R000)

6 000***
3 250

10 413
5 851

9 250

16 264 

2008-
on-2007
change
(%)

(11,5)
(19,3)

(14,5)

* This salary includes contributions to the medical aid, postretirement medical aid subsidy, disability insurance and car allowance/company car benefits structured

into the package. No additional benefits are offered to executive directors.

** Bonus relates to performance in 2008, paid in March 2009.

*** The committee recommended a bonus of R6 624 million payable in cash to Mr TA Boardman. Following a request by Mr Boardman the committee amended the
proposal to a cash bonus of R6 million and an additional allocation of restricted shares to the value of R624 000. The board accepted the committee’s revised
proposal.

TA Boardman earned fees of R235 000 and R159 000 for board and committee membership of Mutual and Federal in 2008 and
2007, which fees were ceded to Nedbank Group.

Table 2: Executive directors’ remuneration – year to 31 December 2007

Name

TA Boardman
MWT Brown

Total

Basic salary 
and other 

Retirement
fund
benefits* contributions
(R000)

(R000)

Guaranteed
remuneration
(R000)

3 499
1 974

5 473

263
276

539

3 762
2 250

6 012

Performance

bonus**
(R000)

8 000
5 000

13 000

Total
(R000)

11 762
7 250

19 012

2007-
on-2006
change
(%)

18,4
15,8

17,4

* This salary includes contributions to the medical aid, postretirement medical aid subsidy, disability insurance and car allowance/company car benefits structured into the

package. No additional benefits are offered to executive directors.

** Bonus relates to performance in 2007, paid in March 2008.

A fully taxed refund of R128 686 relating to previous earnings was made to TA Boardman during 2007.

Performance bonus for executive directors

For both the Chief Executive and the Chief Financial Officer
the performance bonus for 2008 was based on a
combination of the level of group economic profit as well as
performance against their individual performance scorecards.

The individual performance of Tom Boardman and that of
Mike Brown is measured across five dimensions to determine
their respective share of the bonus pool, namely financial,
clients, internal processes, transformation and organisational
learning. The specific objectives for each of these dimensions
are as follows:

Financial – delivering sustainable financial
outperformance.

•

•

banking and implementing the three-tiered African
strategy; improving Nedbank’s client relations by
empowering our clients through delivery of affordable
banking and finally leading as a corporate citizen.

Internal processes – enhancing productivity and
execution, managing risk as an enabler, growing
regulatory and government relationships and growing
stakeholder relations.

Transformation – accelerating transformation in support of
achieving the group’s transformation targets and objectives.

•

•

• Organisational learning – building an innovative and
differentiated culture and becoming an employer of
choice by creating a great place to work.

Clients – investing for growth by expanding into the
mass and middle markets, the public sector and business

Performance across all five of these dimensions in 2008 was
solid in the light of market conditions. Targets across four of

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197

 
 
 
 
 
 
 
REMUNERATION REPORT ... CONTINUED

the major focus areas, ie clients, internal processes,
transformation and organisational learning, were exceeded.
Financial targets were largely met, but group economic profit
declined compared with that of 2007, resulting in reduced
bonus pools. This represents a resilient performance in the
light of global conditions and compares favourably with that
of our international and local peers.

Severance arrangements for executive directors

In the event of their services being terminated executive
directors will be entitled to a severance package equal to 
two weeks’ guaranteed remuneration per completed year of
defined operational service, with no maximum. In addition,
executive directors are entitled to a maximum notice period
of six months, during which they may or may not be required
to work.

Non-executive directors’ remuneration 

determined by the rotation requirements of the Nedbank
Group articles of association. A non-executive director is
required to retire at age 70. Any director serving for a period
in excess of nine years is subjected to annual reelection at
the annual general meeting.

The Chairman’s appointment was effective from 4 May 2006.
In terms of the articles of association the chairman and 
vice-chairman are reelected annually by the board.

In October 2008 the boards of Nedbank Group and 
Nedbank Limited decided to withdraw the position of 
vice-chairman of the board following the creation of the post
of senior independent non-executive director. As a result the
Joint Vice-chairmen of the boards, Michael Katz and 
Lot Ndlovu, will formally step down from their positions at the
annual general meeting on 14 May 2009 and will continue to
serve as independent non-executive directors of the group.
Chris Ball is the senior independent non-executive director.

The terms of engagement of the non-executive directors
(excluding the Chairman) cover a period of three years, as

Non-executive directors’ remuneration for the years ended
31 December 2008 and 31 December 2007 were as follows:

Name

CJW Ball
TCP Chikane
BE Davison
N Dennis
MA Enus-Brey
B de L Figaji
R Harris
RM Head
MM Katz 
RJ Khoza
JB Magwaza
NP Mnxasana
ME Mkwanazi
ML Ndlovu
CML Savage
GT Serobe
JH Sutcliffe

Total

Note

1, 2

b
f
1

4, e
2, 4

c
3
1, g

2, d

2, 5
4, a

Board 

Committee
meeting fees meeting fees
R000

R000

514
240
141

240
240
240
354
240

490
124
240
354
88
494
166

4 165

814
199
167

176
190
86
210
395
3 000
680
49
215
995
76
77
69

7 398

2008
R000

1 328
439
308

416
430
326
564
635
3 000
1 170
173
455
1 349
164
571
235

2007
R000

1 093
331
461
300
346
335
10
584
550
2 500
1 061

375
2 258
361
535
270

11 563

11 370

1
2
3
4
5
a

b
c
d

e
f
g

Includes fees for board, subsidiary board and committee memberships (including Imperial Bank) for the years 2007 and 2008.
Includes fees for board and committee memberships (including Mutual & Federal) for the years 2007 and 2008.
Includes fees for board and committee memberships (and additional services to Mutual & Federal) for the years 2007 and 2008.
Fees for RM Head and JH Sutcliffe and R Harris are paid to Old Mutual (SA) Limited for 2007 and 2008.
Includes fees for board and committee memberships (including Old Mutual Life Company South Africa) for the years 2007 and 2008.
JH Sutcliffe has resigned as a non-executive director from the boards of Nedbank Group and Nedbank Limited with effect from 9 September 2008 following his
resignation as Chief Executive of Old Mutual plc.
BE Davison resigned as non-executive director with effect from 2 August 2008.
From 1 January 2008 to 29 February 2008, RJ Khoza’s fees were paid directly to AKA Capital (Pty) Limited.
As part of the negotiations to conclude the termination of ML Ndlovu’s services as a consultant to the Nedbank Group, it was agreed that he would receive a payment
of R500 000 in 2008.
R Harris was appointed as a non-executive director with effect from 10 December 2007.
N Dennis resigned as an independent non-executive director effective 31 December 2007.
NP Mnxasana was appointed as an independent non-executive director with effect from 1 October 2008.

198

NEDBANK GROUP ANNUAL REPORT 2008

The remuneration for non-executive directors for committee membership is as follows:

Committee

Boards

Chairman of the board*
Vice-chairmen premium ****
Senior Independent Director*****
Nedbank Group Limited
Nedbank Limited**
Committees
Group Audit Committee**
Group Finance and Oversight Committee
Group Remuneration Committee**
Group Risk and Capital Management Committee**
Group Credit Committee
Group Directors’ Affairs Committee
Board Strategic Innovation Management Committee**
Group Transformation and Sustainability Committee**

Proposed
(with effect from 

1 January 2009)***

(R)

3 300 000
100 000
105 600
143 000
121 000

114 000
20 000
64 800
90 000
67 500
44 000
42 000
65 000

Annual fee** Annual fee
2007
(R)

2008
(R)

3 000 000
100 000
96 000
130 000
110 000

105 000
20 000
60 000
75 000
65 000
40 000
40 000
65 000

2 500 000

95 000
80 000

96 000
30 000
55 000
60 000
65 000
40 000
35 000
40 000

* The Nedbank Group Chairman’s fees include his fees for board, subsidiary board and committee memberships.
** At the annual general meeting held on 13 May 2008 approval was granted to increase non-executive directors’ fees in order to align the board fees with local market

practices.

*** Subject to shareholders’ approval at the 2009 annual general meeting.
**** This function terminates at the close of the May 2009 annual general meeting.
*****A fee of 40% on the Nedbank Group Limited and Nedbank Limited Board member fee is paid to the Senior Independent Director.

Chairmen of committees (other than the Chairman of the
Nedbank and Nedbank Group Directors’ Affairs Committee,
who receives a set annual remuneration package) receive
double the member fees. Fees payable to the non-executive
directors and the Nedbank Group Chairman are reviewed
annually and adjustments are considered by a subcommittee
of the Remuneration Committee. The subcommittee
recommended the above increases with effect from 
1 January 2009. These were approved by the board, but are
still subject to shareholder approval at the annual general
meeting to be held on 14 May 2009. Committee meeting
attendance is recorded in the Enterprise Governance and
Compliance Report on page 109.

SHARE INCENTIVES

Share option/Restricted-share grants

Long-term incentives are intended to achieve two strategic
objectives: to retain high-impact employees and provide
long-term reward that is aligned with the interests of the
shareholders. The value of the incentive issued is based on
the most recent performance review, individual career path
planning, scarcity of skills and the organisation’s need for
retaining the individual. The value of the instrument allocated
is benchmarked to the external market and overall

affordability. During 2008 the committee elected to issue

restricted shares as opposed to share options to eligible

participants. In line with market best practice, the restricted

shares were introduced with corporate performance targets.

On-appointment allocations (internal and external

appointments)

On-appointment restricted share allocations are offered at

the discretion of the committee to new senior management

employees in addition to employees who have been

appointed to more senior positions and have been

recommended by the Group Executive Committee. On-

appointment allocations take place three trading days after

the announcement of the interim and annual financial results

(in February and August), subject to the Nedbank Group

Personal Account and Insider Trading Policy. The committee

will determine annually whether performance-based vesting

conditions will apply. The vesting period for on-appointment

allocations is three years from the date of allocation, subject

to the achievement of corporate performance targets.

Annual allocations

Annual restricted share allocations apply to qualifying

employees in terms of criteria recommended by the Group

Executive Committee and approved by the committee.

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199

 
 
 
 
 
 
 
REMUNERATION REPORT ... CONTINUED

Annual allocations take place once a year (typically in
February), subject to the Nedbank Group Personal Account
and Insider Trading Policy. The committee will determine
annually whether performance-based vesting conditions will
apply in respect of the allocation to qualifying employees.

At 31 December 2008 share options and restricted shares in
issue under the Nedbank employee schemes (vested and
unvested), as a percentage of issued share capital, was 4,5%
This is well within the maximum of the 10% provided by the
scheme rules.

EMPLOYEE LONG-TERM INCENTIVE
SCHEMES

2005 Nedbank Employee Share Scheme

This scheme consists of three parts:

1

Share Option Scheme
Share options can be issued to qualifying employees with
or without performance conditions (as determined
annually by the committee). No new share options were
granted to employees in 2008.

2 Matched Share Scheme

The Matched Share Scheme allows employees an
opportunity to allocate up to 50% of their after-tax
bonus towards the acquisition of Nedbank Group shares
or to deposit Nedbank Group shares to the equivalent
value into the trust. The incentive to do so is a matching
of this investment to the equivalent value by the 2005
Nedbank Employee Share Trust on a one-for-one basis.
The trust’s obligation to deliver or procure the delivery of
the matched shares rests on two conditions, namely that:

•

•

employees are still in the service of the group on the
vesting date (three years after acquisition) for 50%
of the matched shares; and 

the group has met an agreed performance target
over a three-year period for the remaining 50% of
the matched shares.

In May 2008 enhancements to the Matched Share
Scheme were approved at the annual general meeting.
The Matched Investment Plan (MIP) was approved as an
enhanced scheme for participants, and the previous
Matched Share Scheme was renamed the Bonus Share
Scheme (the principles remain unchanged). The MIP was
not offered to employees during 2008 due to the current
economic climate. The committee retains the discretion
to implement the MIP based on business and market
conditions.

3 Restricted Share Plan

During 2008 Nedbank granted restricted shares with
time-based and performance–based vesting criteria.

The Restricted Share Plan offers awards to new
employees and internal appointments (on-appointment
allocations) and annually to existing employees (annual
allocations).

Annual allocations were made to 1 141 employees on 
3 March 2008. On-appointment allocations were made
to 112 employees in total on 3 March 2008 and 
11 August 2008.

Where applicable, restricted shares will vest only if the
predetermined financial targets are achieved. In the event
of no performance targets applying time-based vesting
criteria will apply. The committee agreed that a
combination of the following three performance targets is
to be used for the period 2008 – 2011 on a graduated
scale of vesting: return on equity (ROE) (excluding
goodwill), fully diluted headline earnings per share (HEPS)
growth and the cost-to-income ratio. Employees granted
restricted shares during 2008, which were initially subject
to only an ROE (excluding goodwill) target, were given the
option to elect the graduated vesting targets or retain on
the ROE (excluding goodwill) target. All restricted shares
allocated under this scheme will vest subject to the
achievement of targets after three years from the date of
allocation. As part of the Restricted Share Plan rules,
participants are entitled to receive dividends.

Restricted-share allocation price
For purposes of the Restricted Share Plan the allocation is
based on the weighted-average (by volume) market price
of an ordinary share in the company, as shown by the
official trading-price list published by JSE Limited (‘JSE’),
over the three most recent trading days on JSE
immediately preceding the allocation date.

Phantom Share Plan
During 2007 the committee approved the Phantom
Share Plan (cash-settled) for key staff of the business in
the United Kingdom. The scheme design principles mirror
the South African LTI schemes as far as possible. A total
of 14 United Kingdom employees participated in the
scheme in 2008.

Status of the share schemes
1994 Nedcor Group Employee Incentive Scheme
At 31 December 2008 there were 351 participants and 
1 870 387 Nedbank Group share options outstanding, of
which 47 911 were as a result of the rights issue grant
linked to the underlying options during 2004. Of these
share options outstanding 715 035 were issued with
performance-based vesting criteria and 1 155 352 were
time-based allocations.

200

NEDBANK GROUP ANNUAL REPORT 2008

Shares under the Eyethu Broad-based Scheme were allocated
as a once-off share grant to permanent Nedbank Group
employees who met the eligibility criteria at the inception
date of the scheme and no subsequent allocations were
made. A trading restriction of five years applies to shares
issued under this scheme.

The Evergreen Trust was created with the specific purpose of
uplifting the living standards and personal circumstances of
black permanent employees who meet certain eligibility
criteria. In April 2009 55 beneficiaries will be completing their
Grade 12 qualification equivalent to a NQF4.

NEDBANK EYETHU NON-EXECUTIVE
DIRECTORS TRUST

This trust holds 900 966 shares. At 31 December 2008 a
total of 654 068 shares were allocated to five participants.

On 3 March 2008 81 815 shares were allocated to 
TCP Chikane as a participant in the Nedbank Eyethu Non-
Executive Directors Scheme.

At 28 October 2008 a total of 19 376 shares were allocated
to TCP Chikane, B de L Figaji, JB Magwaza, ME Mkwanazi and
ML Ndlovu, utilising the 2008 interim cash dividend in terms
of the rules governing this scheme.

NEDBANK AFRICA SUBSIDIARY SCHEMES 

During 2006 the committee approved the Omufima
Employee Schemes for Nedbank Namibia. The committee
approved localisation and LTI schemes in principle for
Swaziland, Malawi, Zimbabwe and Lesotho during 2007.

All corporate performance targets for share options 
issued in 2005 were met and hence all these share
options vested.

2005 Nedbank Employee Share Trust 
At 31 December 2008 there were 1 172 participants and
14 083 839 Nedbank Group share options outstanding.
All share options under this scheme were issued with
time-based vesting criteria. The restricted-share
allocations made in 2008 were also linked to the
achievement of financial targets. A total of 2 516 999
restricted shares were issued in 2008.

Matched Share Scheme
The number of participants who have committed shares
to the scheme at 31 December 2008 is noted below:

2008

412

2007

414

2006

437

2005

461

The number of shares held in the trust totals 595 170
shares.

NEDBANK EYETHU EMPLOYEE SCHEMES 

Nedbank Group implemented its black economic
empowerment (BEE) staff schemes in August 2005. The
objective of the schemes is to support the achievement of
Nedbank’s broad transformation strategy. The group has
completed a project to ensure that the schemes also meet
the requirements of the Department of Trade and Industry
(dti) codes. A final audit to confirm that all the requirements
have been met will be concluded in July 2009.

The Eyethu employee schemes consist of the Black Executive
Trust, the Black Management Scheme, the Broad-based
Scheme and the Evergreen Trust. Share and share option
allocations have been made to new and internally appointed
employees since the inception of the schemes, in accordance
with the scheme rules and the respective trust deeds.

At 31 December 2008 a total of 42 black employees in
senior positions with group-wide impact, as identified by the
Group Executive Committee and approved by the committee
and trustees, are beneficiaries of the Black Executive Trust.

Black permanent employees earning in excess of R325 654
per annum received new or top-up options and shares under
the Black Management Scheme in the period under review.

At the 13 May 2008 AGM it was agreed that 2,4 million
shares be transferred to the Black Management Scheme from
the Nedbank Eyethu Retail Scheme in order to bolster the
scheme for future allocations.

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201

 
 
 
 
 
 
 
REMUNERATION REPORT ... CONTINUED

Executive directors’ share option holdings

Name

TA Boardman

MWT Brown

Opening balance at December 2007

Number of 
options

Date of 
issue

Issue 
price (R)

02/07/2002
11/05/2004
30/06/2005
28/02/2006
27/02/2007

02/07/2002
11/05/2004
10/08/2004
10/05/2004
30/06/2005
28/02/2006
27/02/2007

126 200
125 000*
100 000
120 000
72 765*

543 965

72 800
20 000*
80 000*
13 934*
20 000
70 000
40 000*

316 734

123,60
60,01
76,79
110,98
144,30

123,60
60,01
55,75
45,00
76,79
110,98
144,30

Expiry
date

02/07/2008
11/05/2010
30/06/2010
28/02/2011
27/02/2012

02/07/2008
11/05/2010
10/08/2010
10/08/2010
30/06/2010
28/02/2011
28/02/2012

Vested

126 200

126 200

72 800
10 000 

13 934

96 734

Share  options  issued  before  May  2005  were  issued  in  terms  of  the  1994  Nedcor  Group  Employee  Incentive  Scheme, with  50%
vesting after three years from the date of grant and the remaining 50% after four years from the date of grant.

Share options issued after May 2005 were issued in terms of the Nedbank Group (2005) Share Option, Matched Share and Restricted
Share Scheme, with 100% vesting after three years from the date of grant.

* Share options issued with performance-based vesting criteria. The rights issue options linked to these share options also have performance-based vesting criteria.
** No share options were issued in 2008 as a result of the introduction of the Restricted Share Plan.

Executive directors’ restricted shareholding (2008)*

Name

Number of
restricted
shares

Date of
issue

Issue price
(R)

Number of
restricted
shares

Date of
issue

Issue price
(R)

Vesting
date

Restricted shares issued during 2008

Closing balance at December 2008

TA Boardman

60 167

03/03/2008

120,62

60 167

03/03/2008

120,62

04/03/2011

60 167

60 167

MWT Brown

38 613

03/03/2008

120,62

38 613

03/03/2008

120,62

04/03/2011

38 613

38 613

* Restricted shares issued with time- and performance-based vesting criteria. No accelerated vesting would apply to TA Boardman notwithstanding the fact that he retires in

February 2010.

202

NEDBANK GROUP ANNUAL REPORT 2008

Exercised during 2008

Closing balance at December 2008**

Number of 
options

Date of
exercise/ 
cancellation

126 200
125 000*

02/07/2008
28/08/2008

Gain on options
exercised/
lapsed

lapsed
5 782 650 

Issue
price (R)

123,60
60,01

251 200

5 782 650 

72 800

02/07/2008

123,60

lapsed

13 934

25/03/2008

45,00

1 036 968

Number of 
options

Date of 
issue

Issue
price (R)

30/06/2005
28/02/2006
27/02/2007

100 000
120 000
72 765*

292 765

20 000*
80 000*

11/05/2004
10/08/2004

20 000
70 000
40 000*

30/06/2005
28/02/2006
27/02/2007

76,79
110,98
144,30

60,01
55,75

76,79
110,98
144,30

86 734

1 036 968

230 000

Expiry
date

30/06/2010
28/02/2011
27/02/2012

Vested

100 000

100 000

20 000*
80 000*

11/05/2010
10/08/2010

30/06/2010
28/02/2011
28/02/2012

20 000

120 000

Shares purchased/committed by executive directors under the Matched Share Scheme for the period 2005 – 2008:

Name

TA Boardman

MWT Brown

Number of shares

Date of inception

Strike price (R)

15 098
10 000
20 000

9 803
7 400
8 878
13 155

02/06/2005+
28/03/2006
31/03/2008

02/06/2005+
28/03/2006
27/03/2007
31/03/2008

76,50
130,18
117,83

76,50
130,18
141,92
117,83

+ 100% of the ordinary shares were matched on 3 June 2008 in terms of the rules of the Nedbank Group (2005) Matched Share Scheme.

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203

 
 
 
 
 
 
 
REMUNERATION REPORT ... CONTINUED

Directors’ interests

At 31 December 2008 the directors’ interests in ordinary shares in Nedbank Group were as follows:

Beneficial

Direct

Indirect

Non-beneficial
Indirect

2008

2007

2008

2007

Number of shares

CJW Ball
TA Boardman
MWT Brown
TCP Chikane
MA Enus-Brey*+
B de L Figaji*
R Harris
RM Head
MM Katz
RJ Khoza*++
JB Magwaza*
ME Mkwanazi*
NP Mnxasana
ML Ndlovu
GT Serobe*+++

Total

2008

10 000
98 936
49 940

2007

10 000
50 098
26 203

160
1 768

160
1 768

60 167
39 522
86 912
1 650
114 579

4 826
1 031
114 529
114 579

246 769
972

909

1 633**

107 928

546
2 296

546**
2 296

4 682
1 031
107 878
107 928

232 871
972

1 031
549
1 148

2 458

8 028

1 031
549
1 148

2 458

8 028

160 804

88 229

785 536

565 832

* Includes shares bought in terms of the Retail Eyethu Scheme by immediate family members.
** Shares awarded in 2007 (in terms of final dividend paid for 2006) are shown as being held beneficially indirect.
+ Excludes 4 353 200 and 4 662 678 shares held by The Brimstone-Mtha Financial Services Trust in 2007 and 2008 respectively.

++ Excludes 1 837 021 and 1 946 719 shares held by The Aka-Nedbank Eyethu Trust in 2007 and 2008 respectively.

+++ Excludes 4 366 046 and 4 676 324 shares held by The Wiphold Financial Services Number Two Trust in 2007 and 2008 respectively.

Refer to the circular to ordinary shareholders issued on 15 June 2005 for further information relating to the abovementioned trusts.

None of the directors had any direct non-beneficial interest in the shares of the company during the year under review.

204

NEDBANK GROUP ANNUAL REPORT 2008

At 31 December 2008 the directors’ interests in the non-redeemable non-cumulative preference shares of R0,001 each in Nedbank
Limited were as follows:

Number of shares

CJW Ball
TA Boardman
MWT Brown
TCP Chikane
B de L Figaji
MA Enus-Brey
R Harris
RM Head
MM Katz
RJ Khoza
JB Magwaza
ME Mkwanazi
NP Mnxasana
ML Ndlovu
GT Serobe

Total

Beneficial
Direct

Non-beneficial
Indirect

2008

2007

2008

2007

144 300

144 300

85 000

85 000

165 000

475 000

105 000

105 000

309 300

619 300

190 000

190 000

None of the above directors had any beneficial indirect or non-beneficial direct interest in Nedbank preference shares during the year
under review.

On 3 March 2009 altogether 99 340 restricted shares will be granted to TA Boardman with corporate performance targets in terms
of the Nedbank Group (2005) Share Option, Matched and Restricted Share Scheme. Furthermore, on 3 March 2009 MWT Brown will
be granted 118 827 restricted shares in terms of the Nedbank Group (2005) Share Option, Matched and Restricted Share Scheme.
52 812 restricted shares will be granted with corporate performance targets and 66 015 without corporate performance targets.

On 3 March 2009 NP Mnxasana will acquire 46 722 ordinary shares through the Nedbank Eyethu Non-executive Directors’ Scheme.
There are 100 000 (2007: 437 934) options outstanding that have been granted to executive directors in terms of the Nedcor Group
(1994) Employee Incentive Scheme and 422 765 (2007: 422 765) options outstanding that have been granted to executive directors
in terms of the Nedbank Group (2005) Share Option, Matched Share and Restricted Share Scheme. Refer to pages 202 and 203.

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NEDBANK GROUP EMPLOYEE 
INCENTIVE SCHEMES
FOR THE YEAR ENDED 31 DECEMBER

Movements
Options outstanding at the beginning of the year
Granted
Exercised
Expired
Surrendered

Options outstanding at the end of the year

Analysis
Performance-based options – 1994 Scheme
Non-performance-based options – 1994 Scheme
Performance-based options – 2005 Scheme
Non-performance-based options – 2005 Scheme
Performance-based options – Matched Shares Scheme 2005
Non-performance-based options – Matched Shares Scheme 2005

2008

2007

21 174 877
2 812 982
(2 351 454)
(1 313 279)
(1 404 848)

20 384 608
6 557 583
(3 503 475)
(173 313)
(2 090 526)

18 918 278 

21 174 877

715 035P
1 155 352
8 095 501P
8 357 220
297 585
297 585

1 311 740P
2 960 131
6 227 766P
10 078 478
298 381
298 381

18 918 278 

21 174 877

Summary by scheme
Nedcor Group Employee Incentive Scheme (1994)
Options granted in respect of the rights offer (1994 scheme)
Ex-NIB Share Incentive Scheme – now part of Nedcor Group Employee Incentive Scheme (1994)
Nedbank Group Share Option Scheme (2005)
Nedbank Group Matched Share Scheme (2005)

1 822 476
47 911

16 452 721
595 170

3 971 572
271 409
28 890
16 306 244
596 762

Options outstanding at the end of the year

18 918 278 

21 174 877

NEDCOR GROUP EMPLOYEE INCENTIVE SCHEME (1994)

The following options granted had not been exercised at 31 December 2008:

Option
expiry date

Number of
shares

25-Feb-09
30-Mar-09
30-Mar-09
21-May-09
21-May-09
12-Jun-09
29-Aug-09
1-Oct-09
1-Oct-09
1-Dec-09
1-Dec-09
1-Jan-10

54 750
650
650P
1 000
1 000P
3 750
12 000
11 840P
46 900
5 000
5 000P
1 250P

Issue
price
R

102,19
60,01
60,01
60,01
60,01
69,20
74,40
69,20
69,20
60,01
60,01
60,01

Option
expiry date

b/f
28-Jan-10
1-Mar-10
1-Mar-10
1-Apr-10
1-Apr-10
1-May-10
11-May-10
11-May-10
10-Aug-10
10-Aug-10
20-Apr-11

Number of
shares

143 790
2 875P
5 000
5 000P
5 000
5 000P
11 500P
609 988P
453 023
56 000P
198 950
326 350

Issue
price
R

60,01
60,01
60,01
60,01
60,01
60,01
60,01
60,01
55,75
55,75
74,40

Total

143 790

1 822 476 

206

NEDBANK GROUP ANNUAL REPORT 2008

OPTIONS GRANTED IN RESPECT OF THE RIGHTS OFFER (1994 SCHEME)

Option
expiry date

25-Feb-09
12-Jun-09
1-Oct-09
1-Oct-09

Total

Number of
shares

21 876
1 563
19 540
4 932P

47 911

Issue
price
R

45,00
45,00
45,00
45,00

NEDBANK GROUP (2005) SHARE OPTION, MATCHED SHARE AND RESTRICTED SHARE
SCHEME 
Share options:

The following options granted had not been exercised at 31 December 2008:

Option
expiry date

Number of
shares

31-Jan-09
31-Jan-09
31-Jan-09
1-Feb-09
23-Feb-09
28-Feb-09
28-Feb-09
28-Feb-09
28-Feb-09
6-Mar-09
31-Mar-09
18-Apr-09
22-Apr-09
30-Apr-09
30-Apr-09
1-May-09

Total

12 700
4 000P
18 000P
7 000
2 500
2 000
9 400
11 000
9 500P
500
1 000
1 000
1 000
5 000
2 000
10 000

96 600

Issue
price
R

110,98
134,30
144,30
76,79
76,79
76,79
84,68
110,98
144,30
76,79
76,79
76,79
76,79
76,79
110,98
76,79

Option
expiry date

Number of
shares

b/f
1-May-09
1-May-09
1-Jun-09
1-Jul-09
1-Jul-09
1-Jul-09
2-Jul-09
2-Jul-09
2-Jul-09
1-Sep-09
1-Oct-09
1-Oct-09
1-Oct-09
2-Oct-09
2-Oct-09

96 600
15 000
7 100
4 000
2 000
1 000
2 000P
5 000
2 000
2 000P
20 000
11 000
25 000
12 000P
4 500
3 000P

Issue
price
R

110,98
84,68
76,79
76,79
110,98
144,30
76,79
110,98
144,30
76,79
76,79
110,98
144,30
110,98
144,30

Option
expiry date

Number of
shares

b/f
7-Oct-09
1-Nov-09
1-Nov-09
1-Nov-09
1-Dec-09
1-Dec-09
1-Dec-09
30-Jun-10
8-Aug-10
28-Feb-11
3-Mar-11
10-Aug-11
11-Aug-11
27-Feb-12
10-Aug-12

212 200
1 000
10 000
17 500
15 000P
5 000
8 000
6 000P
3 026 040
356 900
4 394 980
2 173 651P
376 100
195 231P
4 963 119P
692 000P

Issue
price
R

76,79
76,79
110,98
144,30
76,79
110,98
144,30
76,79
84,68
110,98
*
107,03
*
144,30
134,30

212 200

16 452 721

* Restricted shares issued at a market price for no consideration to participants and held by the scheme until expiry date (subject to achievement of performance conditions).
Participants have full rights and receive dividends.

MATCHED SHARES

The obligation to deliver the following matched shares, 50% is subject to time and the other 50% to performance criteria, exists at
31 December 2008:
Option
expiry

Number of
shares

1-Apr-09
31-Mar-10
1-Apr-11

Total

P Performance-based options.

136 243
168 593
290 334 

595 170

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

207

 
 
 
 
 
 
 
GROUP INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER

Interest and similar income
Interest expense and similar charges

Net interest income
Impairments charge on loans and advances

Income from lending activities
Non-interest revenue

Operating income
Total operating expenses

– Operating expenses
– BEE transaction expenses

Indirect taxation

Profit from operations before non-trading and capital items
Non-trading and capital items

Profit from operations
Share of profits of associates and joint ventures

Profit before direct taxation
Direct taxation

Profit for the year

Profit attributable to:
Equityholders of the parent
Minority interest – ordinary shareholders
Minority interest – preference shareholders

Basic earnings per share (cents)
Diluted earnings per share (cents)
Dividend declared per share (cents)
Dividend paid per share (cents)

Notes

11
12

27.1

13

14
15

16

17

31.2

18.1

19.1
19.1
20.1
20.1

2008
Rm

57 986 
41 816 

16 170 
4 822 

11 348 
10 729 

22 077 
13 741 

13 547 
194 

374 

7 962 
756 

8 718 
154 

8 872 
1 868 

7 004 

6 410 
257 
337 

7 004 

1 581 
1 558 
620 
660 

2007
Rm

42 001 
27 855 

14 146 
2 164 

11 982 
10 446 

22 428 
13 489 

13 341 
148 

305 

8 634 
111 

8 745 
239 

8 984 
2 343 

6 641 

6 025 
344 
272 

6 641 

1 511 
1 454 
660 
594 

208

NEDBANK GROUP ANNUAL REPORT 2008

GROUP BALANCE SHEET
AT 31 DECEMBER

Assets
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
Clients’ indebtedness for acceptances
Current taxation receivable
Investment securities
Non-current assets held for sale
Investments in associate companies and joint ventures
Deferred taxation asset
Investment property
Property and equipment
Long-term employee benefit assets
Computer software and capitalised development costs
Mandatory reserve deposits with central bank
Goodwill

Total assets

Equity and liabilities
Ordinary share capital
Ordinary share premium
Reserves

Total equity attributable to equityholders of the parent
Minority shareholders’ equity attributable to:

– ordinary shareholders
– preference shareholders

Total equity 
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities
Liabilities under acceptances
Current taxation liabilities
Deferred taxation liabilities
Long-term employee benefit liabilities
Investment contract liabilities
Long-term debt instruments

Total liabilities

Total equity and liabilities

Guarantees on behalf of clients

Notes

21
22
23
25
26
28

29
30
32
31
33
34
35
36
37
21
38

39.1

39.2

23
40
41

29
33
36
42
43

44

2008
Rm

8 609 
18 589 
22 321 
42 138 
434 233 
6 084 
3 024 
346 
8 455 
10 
1 167 
200 
213 
4 327 
1 741 
1 607 
10 065 
3 894 

567 023 

410 
11 370 
23 133 

34 913 

1 881 
3 279 

40 073 
23 737 
466 890 
9 829 
3 024 
235 
2 100 
1 231 
5 843 
14 061 

526 950 

567 023 

25 226 

2007
Rm

10 344 
25 793 
9 047 
29 637 
373 956 
9 313 
2 251 
59 
8 318 
31 
978 
25 
171 
3 929 
1 393 
1 349 
8 364 
3 898 

488 856 

402 
10 721 
19 070 

30 193 

1 511 
3 421 

35 125 
11 432 
384 541 
34 225 
2 251 
337 
1 616 
1 157 
5 846 
12 326 

453 731 

488 856 

20 579 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

209

 
 
 
 
 
 
 
GROUP CURRENCY-ADJUSTED 
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER

Millions

Interest and similar income
Interest expense and similar charges

Net interest income
Impairments charge on loans and advances

Income from lending activities
Non-interest revenue

Operating income
Total operating expenses

– Operating expenses
– BEE transaction expenses

Indirect taxation

Profit from operations before non-trading and capital items
Non-trading and capital items

Profit from operations
Share of profits of associates and joint ventures

Profit before direct taxation
Direct taxation

Profit for the year
Minority interest attributable to ordinary shareholders
Minority interest attributable to preference shareholders

Profit attributable to equityholders of the parent
Less: non-trading and capital items

– Non-trading and capital items
– Tax on non-trading and capital items

Headline earnings

Average exchange rate at 31 December for R1

2008
R

57 986 
41 816 

16 170 
4 822 

11 348 
10 729 

22 077 
13 741 

13 547 
194 

374 

7 962 
756 

8 718 
154 

8 872 
1 868 

7 004 
257 
337 

6 410 
645 

756 
(111)

5 765 

1 

2007 
R

42 001 
27 855 

14 146 
2 164 

11 982 
10 446 

22 428 
13 489 

13 341 
148 

305 

8 634 
111 

8 745 
239 

8 984 
2 343 

6 641 
344 
272 

6 025 
104 

111 
(7)

5 921 

1 

The income statement reported in South African rand has been translated into other currencies at the average exchange rates for the
year. Refer to note 47.

210

NEDBANK GROUP ANNUAL REPORT 2008

2008 
US$

7 022 
5 064 

1 958 
584 

1 374 
1 299 

2 673 
1 664 

1 641 
23 

45 

964 
92 

1 056 
19 

1 075 
226 

849 
31 
41 

777 
79 

92 
(13)

698 

2007 
US$

5 981 
3 967 

2 014 
308 

1 706 
1 488 

3 194 
1 921 

1 900 
21 

43 

1 230 
16 

1 246 
34 

1 280 
334 

946 
49 
39 

858 
15 

16 
(1)

843 

2008 
UK£

3 856 
2 781 

1 075 
321 

754 
713 

1 467 
913 

900 
13 

25 

529 
50 

579 
10 

589 
124 

465 
17 
22 

426 
43 

50 
(7)

383 

0,1211 

0,1424 

0,0665

2007 
UK£

2 982 
1 978 

1 004 
154 

850 
742 

1 592 
958 

947 
11 

22 

612 
8 

620 
17 

637 
166 

471 
24 
19 

428 
8 

8 

420 

0,0710 

2008
e

4 807 
3 467 

1 340 
400 

940
889 

1 829 
1 138 

1 122 
16 

31 

660 
63 

723 
13 

736 
155 

581 
21 
28 

532 
54 

63 
(9)

478 

2007
e

4 339 
2 877 

1 462 
224 

1 238 
1 079 

2 317 
1 393 

1 378 
15 

32 

892 
11 

903 
25 

928 
242 

686 
36 
28 

622 
10 

11 
(1)

612 

0,0829 

0,1033 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

211

 
 
 
 
 
 
 
GROUP CURRENCY-ADJUSTED 
BALANCE SHEET
AT 31 DECEMBER

Millions

Assets
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
Clients’ indebtedness for acceptances
Current taxation receivable
Investment securities
Non-current assets held for sale
Investments in associate companies and joint ventures
Deferred taxation asset
Investment property
Property and equipment
Long-term employee benefit assets
Computer software and capitalised development costs
Mandatory reserve deposits with central banks
Goodwill

Total assets

Equity and liabilities
Ordinary share capital
Ordinary share premium
Reserves

Total equity attributable to equityholders of the parent
Minority shareholders’ equity attributable to:

– ordinary shareholders
– preference shareholders

Total equity 
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities
Liabilities under acceptances
Current taxation liabilities
Deferred taxation liabilities
Long-term employee benefit liabilities
Investment contract liabilities
Long-term debt instruments

Total liabilities

Total equity and liabilities

Guarantees on behalf of clients

Exchange rate at 31 December for R1

2008
R

8 609 
18 589 
22 321 
42 138 
434 233 
6 084 
3 024 
346 
8 455 
10 
1 167 
200 
213 
4 327 
1 741 
1 607 
10 065 
3 894 

567 023 

410 
11 370 
23 133 

34 913 

1 881 
3 279 

40 073 
23 737 
466 890 
9 829 
3 024 
235 
2 100 
1 231 
5 843 
14 061 

526 950 

567 023 

25 226 

1 

2007 
R

10 344 
25 793 
9 047 
29 637 
373 956 
9 313 
2 251 
59 
8 318 
31 
978 
25 
171 
3 929 
1 393 
1 349 
8 364 
3 898 

488 856 

402 
10 721 
19 070 

30 193 

1 511 
3 421 

35 125 
11 432 
384 541 
34 225 
2 251 
337 
1 616 
1 157 
5 846 
12 326 

453 731 

488 856 

20 579 

1 

The  balance  sheet  reported  in  South  African  rand  has  been  translated  into  other  currencies  at  the  closing  exchange  rate  at 
31 December. Refer to note 47.

212

NEDBANK GROUP ANNUAL REPORT 2008

2008 
US$

918 
1 983 
2 382 
4 496 
46 333 
649 
323 
37 
902 
1 
125 
21 
23 
462 
186 
171 
1 074 
415 

60 501 

44 
1 213 
2 468 

3 725 

201 
350 

4 276 
2 533 
49 817 
1 049 
323 
25 
224 
131 
623 
1 500 

56 225 

60 501 

2 692 

0,1067

2007 
US$

1 516 
3 781 
1 326 
4 345 
54 822 
1 365 
330 
9 
1 219 
5 
143 
4 
25 
576 
204 
198 
1 226 
572 

71 666 

59 
1 572 
2 795 

4 426 

222 
502 

5 150 
1 676 
56 374 
5 017 
330 
49 
236 
170 
857 
1 807 

66 516 

71 666 

3 017 

0,1466

2008 
UK£

633 
1 366 
1 641 
3 097 
31 916 
447 
222 
25 
621 
1 
86 
15 
16 
318 
128 
118 
740 
286 

41 676 

30 
836 
1 700 

2 566 

138 
241 

2 945 
1 745 
34 316 
722 
222 
17 
154 
91 
430 
1 034 

38 731 

41 676 

1 854 

0,0735

2007 
UK£

757 
1 888 
662 
2 169 
27 373 
682 
165 
4 
609 
2 
72 
2 
13 
288 
102 
99 
612 
285 

35 784 

29 
785 
1 396 

2 210 

111 
250 

2 571 
837 
28 148 
2 505 
165 
25 
118 
85 
428 
902 

33 213 

35 784 

1 506 

0,0732

2008
e

652 
1 407 
1 690 
3 190 
32 871 
461 
229 
26 
640 
1 
88 
15 
16 
327 
132 
122 
762 
295 

42 924 

31 
861 
1 751 

2 643 

143 
248 

3 034 
1 797 
35 344 
744 
229 
18 
159 
93 
442 
1 064 

39 890 

42 924 

1 910 

0,0757

2007
e

1 031 
2 572 
902 
2 955 
37 283 
929 
224 
6 
829 
3 
98 
2 
17 
392 
139 
134 
834 
389 

48 739 

40 
1 069 
1 901 

3 010 

151 
341 

3 502 
1 140 
38 339 
3 412 
224 
34 
161 
115 
583 
1 229 

45 237 

48 739 

2 052 

0,0997

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

213

 
 
 
 
 
 
 
GROUP STATEMENT OF CHANGES
IN TOTAL SHAREHOLDERS’ EQUITY
FOR THE YEAR ENDED 31 DECEMBER

Number of
ordinary shares

394 685 482 
3 493 321 
4 830 026 
70 172 

(5 171)
(1 132 431)

Balance at 31 December 2006
Shares issued for options exercised under employee incentive schemes
Shares issued in terms of capitalisation award
Shares issued in terms of BEE transaction
Preference shares issued by Nedbank Limited
Share issue expenses
Shares acquired by group entities
Shares acquired by BEE trusts
Shares issued by subsidiary
Preference share dividends paid
Preissuance dividend paid
Ordinary minority shareholders’ share of preference dividends paid
Dividends to shareholders
Total income and expense for the year

Profit for the year
Net income/(expense) recognised directly in equity

– Transfer from/(to) reserves
– Release of reserve previously not available***
– Foreign currency translation reserve movement
– Property revaluation reserve movement
– Share-based payments reserve movement
– Available-for-sale reserve movement
– Acquisition of subsidiaries
– Disposal of subsidiaries
– Buyout of minorities
– Other movements

Balance at 31 December 2007
Shares issued in terms of employee incentive schemes
Shares issued in terms of capitalisation award
Shares issued in terms of BEE transaction
Shares delisted in terms of BEE transaction
Shares sold by group entities
Shares acquired/cancelled by BEE trusts
Shares issued by subsidiary
Preference share dividends paid
Ordinary minority shareholders’ share of preference dividends paid
Dividends to shareholders
Total income and expense for the year

401 941 399 
4 809 873 
4 039 422 
3 345 585 
(2 533 558)
19 000 
(1 913 981)

Profit for the year
Net income/(expense) recognised directly in equity

– Transfer from/(to) reserves
– Release of reserve previously not available***
– Foreign currency translation reserve movement
– Property revaluation reserve movement
– Share-based payments reserve movement
– Regulatory risk reserve provision
– Available-for-sale reserve movement
– Preference shares held by group entities
– Disposal of subsidiaries
– Other movements

Ordinary
share
capital
Rm

395 
3 
5 

(1)

– 

– 

402 
5 
4 
3 
(2)

(2)

– 

– 

Ordinary
share
premium
Rm

Reserves not
available for
distribution
Rm

9 727 
499 
646 
16 

(1)
(1)
(165)

– 

– 

10 721 
535 
455 
315 

(656)

– 

– 

93 

20 

20 

239 
(219)

113 

(113)

(113)

(52)
(61)

Balance at 31 December 2008

409 707 740 

410 

11 370 

– 

* Represents other non-distributable revaluation surplus on capital items and non-distributable reserves transferred from other distributable reserves in order to comply

with the Banks Act 1990.

** Represents the accumulated profits after distributions to shareholders and appropriations of retained earnings to other non-distributable reserves.
*** Relates to differences between the market price and the exercise price of the options granted to employees that were exercised during the current year.

214

NEDBANK GROUP ANNUAL REPORT 2008

Property Share-based

Foreign
currency
translation
reserve
Rm

revaluation
reserve
Rm

Other
non-
payments distributable
reserves*
Rm

reserve
Rm

Available-

Other
for-sale distributable
reserve
Rm

reserves**
Rm

281 

485 

636 

358 

175 

12 966 

(25)

(25)

(22)

(3)

363 

363 

(14)

374 

3 

107 

107 

103 

238 

238 

(91)

329 

(2 402)
5 816 

6 025 
(209)

(212)

(41)

(41)

(3)

(38)

256 

848 

874 

4 

465 

3 

134 

16 380 

289 

289 

41 

248 

103 

103 

19 

84 

75 

75 

(113)

188 

545 

951 

949 

(290)

(290)

(290)

7 

(7)

175 

(70)

(70)

7 

(77)

(2 736)
6 805 

6 410 
395 

388 

7 

Total
equity
attributable
to equity-
holders of
the parent
Rm

Minority
shareholders’
equity
attributable
to ordinary
shareholders
Rm

Minority
shareholders’
equity
attributable
to preference
shareholders
Rm

25 116 
502 
651 
16 
– 
(1)
(1)
(166)

– 
– 
– 
(2 402)
6 478 

6 025 
453 

– 
(219)
(3)
374 
329 
(38)
3 
– 
– 
7 

30 193 
540 
459 
318 
(2)
– 
(658)
– 
– 
– 
(2 736)
6 799 

6 410 
389 

– 
(61)
248 
84 
188 
7 
(77)
– 
– 
– 

1 202 

3 070 

364 
(3)

(285)
(10)
13 

272 

272 
– 

150 

(13)
(41)
213 

344 
(131)

(41)

(81)
(21)
12 

1 511 

3 421 

225 

(4)
(81)
230 

257 
(27)

(6)

6 

(29)
2 

(341)
4 

195 

337 
(142)

(142)

Total
equity
Rm

29 388 
502 
651 
16 
364 
(4)
(1)
(166)
150 
(285)
(10)
– 
(2 443)
6 963 

6 641 
322 

– 
(219)
(44)
374 
329 
(38)
3 
(81)
(21)
19 

35 125 
540 
459 
318 
(2)
– 
(658)
225 
(341)
– 
(2 817)
7 224 

7 004 
220 

– 
(61)
242
84 
188 
7 
(71)
(142)
(29)
2 

64 

20 449 

34 913 

1 881 

3 279 

40 073 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

215

 
 
 
 
 
 
 
GROUP CASHFLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER

Cash generated by operations

Cash received from clients
Cash paid to clients, employees and suppliers
Dividends received on investments
Recoveries on loans previously written off
Effects of exchange rate changes on opening cash and cash equivalents 
(excluding foreign borrowings)

Change in funds for operating activities

Increase in operating assets
Increase in operating liabilities

Net cash from operating activities before taxation
Taxation paid

Cashflows from/(utilised by) operating activities
Cashflows utilised by investing activities

Acquisition of property and equipment, computer software and 
development costs and investment property
Disposal of property and equipment, computer software and 
development costs and investment property
Net disposal of investment banking assets
Acquisition of associate companies
Disposal of associate companies
Acquisition of other investments
Disposal of other investments
Disposal of investments in subsidiary companies net of cash
Acquisition of investments in subsidiary companies net of cash

Cashflows (utilised by)/from financing activities

Net proceeds from issue of ordinary shares
Issue of long-term debt instruments
Redemption of long-term debt instruments
Dividends paid to ordinary shareholders
Preference share dividends paid

Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year*

Cash and cash equivalents at the end of the year*

* Including mandatory reserve deposits with central banks.

Notes

48.1

48.2
48.3

48.4
48.5

48.6

48.7
48.8

48.9

21

2008
Rm

14 557 

68 473 
(54 485)
234 
379 

(44)

(10 674)

(81 992)
71 318 

3 883 
(2 233)

1 650 
(999)

(1 547)

18 
8 
(321)
282 
(810)
1 331 
40 

(685)

657 
2 263 
(528)
(2 736)
(341)

(34)
18 708 

18 674 

2007
Rm

12 453 

52 288 
(40 388)
131 
417 

5 

(10 691)

(66 697)
56 006 

1 762 
(2 419)

(657)
(2 063)

(1 039)

46 
28 
(529)
458 
(1 808)
662 
366 
(247)

2 122 

1 001 
8 062 
(4 254)
(2 402)
(285)

(598)
19 306 

18 708 

216

NEDBANK GROUP ANNUAL REPORT 2008

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

217

 
 
 
 
 
 
 
OPERATIONAL SEGMENTAL REPORTING
FOR THE YEAR ENDED 31 DECEMBER

The group’s identification of its segments and the measurement of segment results are based on the group’s internal management
reporting  as  used  for  day-to-day  decisionmaking. The  segments  have  been  identified  according  to  the  nature  of  their  respective
products and services and their related target markets.

Nedbank Corporate
Nedbank  Corporate  comprises  the  client-focused  businesses  of  Business  Banking, Corporate  Banking, Property  Finance, Nedbank
Africa and the specialist businesses of Transactional Banking and Shared Services. These businesses focus mainly on providing lending,
deposit-taking and transactional banking solutions and execution services to the wholesale banking client base of Nedbank. Business
Banking offers the full spectrum of commercial banking products and related services to companies with an annual turnover of up
to R400 million. Corporate Banking services companies with an annual turnover in excess of R400 million as well as BEE and public
sector clients. Property Finance specialises in commercial and industrial property finance in the middle to large corporate market and
also invests in property equities and in large property developments in partnership with selected clients. Nedbank Africa has banking
operations  in  Lesotho, Malawi, Namibia, Swaziland  and  Zimbabwe. Nedbank Africa  operates  in  the  retail  and  wholesale  banking
segments in each country.

Nedbank Capital
Nedbank Capital comprises the group’s investment banking businesses that together manage the structuring, lending, underwriting
and  trading  businesses. Nedbank  Capital  seeks  to  provide  seamless  specialist  advice, debt  and  equity  raising  and  execution  and
trading capabilities in all the major South African business sectors.

Nedbank Retail
Nedbank Retail fulfils the financial services needs of individuals and small businesses through its offering of various transactional,
card, lending, investment and insurance products. Nedbank Retail also services merchants and large corporates in respect of card-
acquiring services. Services are provided through the brands within the Nedbank Retail stable, being Nedbank, Nedgroup Investments,
BoE Private Clients, Fairbairn Private Bank and Fairbairn Trust Company. The retail product portfolio includes transactional accounts,
home loans, vehicle and asset-based finance, cards, personal loans, bancassurance, investments and specialised products such as wills,
stockbroking and portfolio advice.

Imperial Bank
Imperial Bank is a joint venture with Imperial Holdings Limited and provides predominantly asset-based finance, with most advances
comprising vehicle finance and selected niche market financing. The bank has four divisions, namely Motor Finance, Property Finance,
Professional Finance and Supplier Asset Finance. Supplier Asset Finance is focused on financing office equipment for the business
community and providing asset-based finance to the aviation, transport and material-handling sectors, and provides a specialised
debt collection service. Professional Finance provides a range of asset-based financial products to the medical and dental markets in 
South Africa, making finance available for residential properties, motor vehicles, equipment, practice needs and project finance for
large medical facilities by way of mortgage loans, instalment sale facilities and loans.

Shared Services
Shared Services is an aggregation of business operations that provide various support services to the Nedbank Group, which includes
the  following  clusters: Group  Technology, Group  Strategy  and  Corporate  Affairs, Human  Resources, Enterprise  Governance  and
Compliance, Group Risk and Group Finance – Shared Services.

Central Management
Includes group capital instruments together with certain group overheads income not recoverable from/allocated to business segments.

218

NEDBANK GROUP ANNUAL REPORT 2008

Balance sheet (Rm)
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets 
Intergroup assets

Total assets

Equity and liabilities
Amounts owed to depositors
Other liabilities
Derivative financial instruments
Intergroup liabilities
Long-term debt instruments
Allocated capital

Total equity and liabilities

Income statement (Rm)
Net interest income
Impairments charge on loans and advances

Income from lending activities
Non-interest revenue

Operating income
Total expenses

– Operating expenses
– BEE transaction expenses

Indirect taxation

Profit/(Loss) from operations
Share of profits of associates and joint ventures

Profit/(Loss) before direct taxation
Direct taxation

Profit/(Loss) after taxation
Profit attributable to minority interest

– ordinary shareholders
– preference shareholders

Headline earnings

Selected ratios*
Average interest-earning banking assets (Rm)
Return on average assets (%)
Return on risk-adjusted capital (%)
Interest margin (%)
Non-interest revenue to gross income (%) 
Credit loss ratio (%)
Efficiency ratio (%)
Efficiency ratio (excluding BEE transaction expenses) (%)
Effective taxation rate (%)
Contribution to group economic profit
Number of employees

+ These ratios were calculated on simple average assets and equity.
* These ratios (unless otherwise stated) were calculated using amounts to Rm.

Nedbank Group

2008 

2007

Nedbank Corporate

2008 

2007

18 674 
18 589 
22 321 
42 138 
434 233 
31 068 
– 

567 023 

466 890 
22 262 
23 737 
– 
14 061 
40 073 

567 023 

16 170 
4 822 

11 348 
10 729 

22 077 
13 741 

13 547 
194 

374 

7 962 
154 

8 116 
1 757 

6 359 

257 
337 

5 765 

441 713 
1,1+ 
17,7+ 
3,66 
39,9 
1,17 
51,1 
50,4 
21,6 
1 792 
27 570 

18 708 
25 793 
9 047 
29 637 
373 956 
31 715 
– 

488 856 

384 541 
45 432 
11 432 
– 
12 326 
35 125 

488 856 

14 146 
2 164 

11 982 
10 446 

22 428 
13 489 

13 341 
148 

305 

8 634 
239 

8 873 
2 336 

6 537 

344 
272 

5 921 

358 824 
1,3+
21,4+
3,94 
42,5 
0,62 
54,9 
54,3 
26,3 
2 658 
26 522 

2 380 
756 
36 
4 207 
191 543 
5 785 
18 419 

223 126 

208 040 
4 689 
35 

172 
10 190 

223 126 

5 898 
471 

5 427 
2 578 

8 005 
4 019 

3 987 
32 

43 

3 943 
9 

3 952 
1 012 

2 940 

16 

1 425 
575 
3 
942 
153 718 
4 559 
47 165 

208 387 

194 358 
3 925 
3 

124 
9 977 

208 387 

5 175 
158 

5 017 
3 198 

8 215 
4 478 

4 446 
32 

29 

3 708 
54 

3 762 
1 062 

2 700 

68 

2 924 

2 632 

220 210 
1,3
28,7 
2,68 
30,4 
0,27 
47,4 
47,0 
25,6 
1 511 
6 192 

183 484 
1,4 
26,4 
2,82 
38,2 
0,11 
53,5 
53,1 
28,2 
1 267 
6 143 

Depreciation  of  R616  million  (2007: R545  million)  and  amortisation  of  R414  million  (2007: R431  million)  costs  for  property,
equipment, computer software and capitalised development are charged on an activity-justified transfer pricing methodology by the
segment owning the assets to the segment utilising the benefits thereof.
Segmental comparatives have been restated in line with the group’s implementation of economic-value-based management. From 2008
economic profit (EP) replaced return on equity (ROE) as the primary internal financial performance measure in the group. EP is a best-
practice measure since it incentivises an appropriate balance between return and growth, and better aligns with shareholder value creation.

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

219

 
 
 
 
 
 
 
OPERATIONAL SEGMENTAL REPORTING
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

Nedbank Capital 
2007

2008 

Nedbank Retail 

2008 

2007

2 488 
8 880 
21 972 
11 466 
47 686 
3 473 
92 741 

4 738 
17 135 
8 982 
22 139 
51 233 
5 589 
33 603 

1 780 
6 935 
280 

1 787 
6 976 
26 

150 107 
11 861 

133 492 
11 863 

188 706 

143 419 

170 963 

154 144 

157 017 
4 844 
23 521 

3 324 

100 785 
28 483 
11 262 

2 
2 887 

98 861 
8 330 
84 
52 335 
2 031 
9 322 

87 457 
8 233 
134 
47 816 
2 014 
8 490 

188 706 

143 419 

170 963 

154 144 

545 
25 

520 
2 135 

2 655 
1 284 

1 253 
31 

21 

1 350 
1 

1 351 
177 

1 174 

938 
36 

902 
1 782 

2 684 
1 419 

1 387 
32 

24 

1 241 

1 241 
(32)

1 273 

7 

7 497 
3 630 

3 867 
5 546 

9 413 
7 973 

7 881 
92 

173 

1 267 
146 

1 413 
357 

1 056 

6 745 
1 572 

5 173 
4 851 

10 024 
7 367 

7 325 
42 

135 

2 522 
184 

2 706 
794 

1 912 

54 

36 

1 266 

1 174 

1 002 

1 876 

106 770 
0,8 
38,1 
0,88 
65,5 
0,06 
52,2 
51,0 
(2,6)
805 
693 

80 578 
0,9 
40,7 
0,68 
79,6 
0,05 
47,9 
46,7 
13,2 
779 
625 

151 974 
0,6 
10,8 
4,93 
42,5 
2,47 
61,1 
60,4 
25,3 
(291)
16 461 

129 026 
1,3 
22,1 
5,23 
41,8 
1,26 
63,5 
63,2 
29,4 
715 
15 356 

Balance sheet (Rm)
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets 
Intergroup assets

Total assets

Equity and liabilities
Amounts owed to depositors
Other liabilities
Derivative financial instruments
Intergroup liabilities
Long-term debt instruments
Allocated capital

Total equity and liabilities

Income statement (Rm)
Net interest income
Impairments charge on loans and advances

Income from lending activities
Non-interest revenue

Operating income
Total expenses

– Operating expenses
– BEE transaction expenses

Indirect taxation

Profit/(Loss) from operations
Share of profits of associates and joint ventures

Profit/(Loss) before direct taxation
Direct taxation

Profit/(Loss) after taxation
Profit attributable to minority interest

– ordinary shareholders
– preference shareholders

Headline earnings

Selected ratios*
Average interest-earning banking assets (Rm)
Return on average assets (%)
Return on risk-adjusted capital (%)
Interest margin (%)
Non-interest revenue to gross income (%) 
Credit loss ratio (%)
Efficiency ratio (%)
Efficiency ratio (excluding BEE transaction expenses) (%)
Effective taxation rate (%)
Contribution to group economic profit
Number of employees

220

NEDBANK GROUP ANNUAL REPORT 2008

Imperial Bank 

2008 

2007

Shared Services 
2007

2008 

Central Management 
2007

2008 

Eliminations 

2008 

2007

1 102 
1 563 
19 
534 
44 734 
784 
32 

48 768 

1 361 
321 
78 
42 856 
792 
3 360 

48 768 

1 733 
701 

1 032 
88 

1 120 
525 

525 

51 

544 

544 
182 

362 

181 
15 

166 

41 554 
0,8 
13,2 
4,17 
4,8 
1,71 
28,8 
28,8 
33,5 
166 
1 148 

778 
1 106 
39 
337 
35 320 
578 
37 

38 195 

1 547 
358 
33 
32 562 
1 000 
2 695 

38 195 

1 491 
412 

1 079 
128 

1 207 
489 

489 

34 

684 

684 
205 

479 

239 
13 

227 

32 509 
1,4 
23,9 
4,59 
7,9 
1,28 
30,2 
30,2 
30,0 
227 
1 008 

108 

920 

94 
6 171 

144 
5 619 

6 373 

6 683 

301 
3 428 

1 585 

1 059 

6 373 

(361)
(1)

(360)
362 

2 
132 

90 
42 

80 

(210)

(210)
(178)

(32)

288 
3 109 

2 174 

1 112 

6 683 

(250)
(4)

(246)
408 

162 
115 

67 
48 

87 

(40)

(40)
(25)

(15)

(32)

(15)

10 816 
455 
14 
25 931 
69 
2 994 
1 386 

41 665 

1 310 
650 
19 
15 802 
11 066 
12 818 

41 665 

465 
(15)

480 
449 

929 
(251)

(247)
(4)

3 

1 177 
(1)

1 176 
416 

760 

(1)
322 

439 

9 060 
1 
(3)
6 219 
49 
3 507 
1 747 

(112 578)

(82 552)

20 580 

(112 578)

(82 552)

106 
1 324 

9 186 
9 964 

(112 578)

(82 552)

20 580 

(112 578)

(82 552)

440 
1 

439 
(27)

412 
3 

8 
(5)

(1)

410 

410 
123 

287 

1 
259 

27 

– 
(76)

(76)
(76)

(76)

– 

– 

– 

– 

– 
(247)

(247)
(247)

(247)

– 

– 

– 

– 

104 

171 

20 225 

7 009 

(99 124)

(73 953)

(179)
3 060 

(167)
3 369 

(220)
16 

(163)
21 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

221

 
 
 
 
 
 
 
GEOGRAPHICAL SEGMENTAL REPORTING
FOR THE YEAR ENDED 31 DECEMBER

Nedbank Group

2008 

2007 

18 674 
18 589 
22 321 
42 138 
434 233 
31 068 
–

567 023 

40 073 
23 737 
466 890 
22 262 
–
14 061 

567 023 

16 170 
4 822 

11 348 
10 729 

22 077 
13 741 

13 547 
194 

374 

7 962 
154 

8 116 
1 757 

6 359 

257 
337 

5 765 

18 708 
25 793 
9 047 
29 637 
373 956 
31 715 
–

488 856 

35 125 
11 432 
384 541 
45 432 
–
12 326 

488 856 

14 146 
2 164 

11 982 
10 446 

22 428 
13 489 

13 341 
148 

305 

8 634 
239 

8 873 
2 336 

6 537 

344 
272 

5 921 

Balance sheet (Rm)
Assets
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances 
Other assets
Intergroup assets

Total assets

Equity and liabilities
Total equity
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities
Intergroup liabilities
Long-term debt instruments

Total equity and liabilities

Income statement (Rm)
Net interest income
Impairments charge on loans and advances

Income from lending activities
Non-interest revenue

Operating income
Total operating expenses

– Operating expenses 
– BEE transaction expenses

Indirect taxation

Profit from operations
Share of profits of associates and joint ventures

Profit before direct taxation
Direct taxation

Profit after taxation
Profit attributable to minority interest

– ordinary shareholders
– preference shareholders

Headline earnings

222

NEDBANK GROUP ANNUAL REPORT 2008

South Africa

2008 

2007 

Rest of Africa 

2008 

2007 

Rest of world

2008

2007

15 376 
9 596 
21 353 
39 789 
409 369 
27 547 
(9 468)

513 562 

34 648 
22 607 
431 906 
21 378 
(10 866)
13 889 

513 562 

15 182 
4 696 

10 486 
10 018 

20 504 
12 688 

12 497 
191 

358 

7 458 
154 

7 612 
1 665 

5 947 

202 
337 

5 408 

16 856 
17 547 
8 793 
28 232 
354 227 
28 784 
(1 600)

452 839 

30 515 
11 248 
362 745 
44 733 
(8 602)
12 200 

452 839 

13 336 
2 087 

11 249 
9 775 

21 024 
12 538 

12 393 
145 

298 

8 188 
238 

8 426 
2 247 

6 179 

284 
272 

5 623 

1 670 
764 
72 
116 
5 897 
542 
1 502 

1 274 
576 
2 
104 
7 128 
505 
415 

10 563 

10 004 

1 123 
68 
8 298 
403 
669 
2

944 
2 
7 091 
358 
1 608 
1 

10 563 

10 004 

516 
33 

483 
281 

764 
472 

469 
3 

10 

282 

282 
84 

198 

16 

182 

441 
17 

424 
245 

669 
461 

458 
3 

3 

205 
1 

206 
57 

149 

33 

116 

1 628 
8 229 
896 
2 233 
18 967 
2 979 
7 966 

42 898 

4 302 
1 062 
26 686 
481 
10 197 
170 

42 898 

472 
93 

379 
430 

809 
581 

581 

6 

222 

222 
8 

214 

39 

175 

578 
7 670 
252 
1 301 
12 601 
2 426 
1 185 

26 013 

3 666 
182 
14 705 
341 
6 994 
125 

26 013 

369 
60 

309 
426 

735 
490 

490 

4 

241 

241 
32 

209 

27 

182 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

223

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER

1 PRINCIPAL ACCOUNTING POLICIES

The following principal accounting policies have been applied consistently in dealing with items that are considered material in
relation  to  the  Nedbank  Group  Limited  consolidated  financial  statements  as  well  as  the  Nedbank  Group  Limited  financial
statements.

1.1 Basis of preparation

The financial statements have been prepared on a going-concern basis.

The  group  and  company  financial  statements  have  been  prepared  in  accordance  with  International  Financial  Reporting
Standards (IFRS) and the requirements of the South African Companies Act, 1973, as amended.

The financial statements are presented in South African rands (ZAR), the functional currency of Nedbank Group Limited,
and  are  rounded  to  the  nearest  million  rands. The  statements  are  prepared  on  the  accrual  and  historical-cost  basis  of
accounting, except for:

•

•

non-current assets and disposal groups held for sale, which are all stated at the lower of carrying amount and fair value
less costs to sell; and

the following assets and liabilities, which are stated at their fair value

–

–

–

financial assets and financial liabilities at fair value through profit or loss,

financial assets classified as available for sale, and

investment property and owner-occupied properties.

1.2 Foreign currency translation

(i)

Foreign currency transactions
Transactions in foreign currencies are translated into the functional currency of the respective individual entities in the
group at the date of such transactions by applying the spot exchange rate ruling at the transaction date to the foreign
currency amounts.

The functional currency of the respective entities in the group is the currency of the primary economic environment
in which these entities operate. The results and financial position of each individual entity in the group are translated
into the functional currency of the entity.

Monetary assets and liabilities in foreign currencies are translated into the functional currency of the respective group
entities at the spot exchange rate ruling at the balance sheet date.

Exchange differences that arise on the settlement or translation of monetary items at rates different from those at
which they were translated on initial recognition during the period or in previous financial statements are recognised
in profit or loss in the period they arise.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated
into the respective functional currencies of the group entities using the foreign exchange rates ruling at the dates when
the fair values were determined.

Non-monetary assets and liabilities denominated in foreign currencies that are measured in terms of historical cost
are converted into the functional currency of the respective group entities at the rate of exchange ruling at the date
of the transaction and are not subsequently retranslated.

Exchange  differences  for  non-monetary  items  are  recognised  consistently  with  gains  and  losses  on  such  items. For
example, exchange  differences  relating  to  an  item  for  which  gains  and  losses  are  recognised  directly  in  equity  are
recognised  in  equity. Conversely, exchange  differences  for  non-monetary  items  for  which  gains  and  losses  are
recognised in profit or loss are recognised in profit or loss.

(ii)

Investments in foreign operations
Nedbank Group Limited’s presentation currency is South African rand (ZAR).

The  assets  and  liabilities, including  goodwill, of  those  entities  that  have  functional  currencies  other  than  ZAR  are
translated at the closing rate. Income and expenses are translated using the average exchange rate for the period. The
differences that arise on translation are recognised directly in equity. All these exchange differences are recognised as
a separate component of equity in the Foreign Currency Translation Reserve.

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NEDBANK GROUP ANNUAL REPORT 2008

On disposal of a foreign operation, the cumulative exchange differences deferred in the Foreign Currency Translation
Reserve relating to the foreign operation being disposed of are recognised in profit or loss when the gain or loss on
disposal is recognised. The primary major determinants of non-rand functional currencies are the economic factors that
determine  the  sales  price  for  goods  and  services  and  costs. Additional  supplementary  factors  to  be  considered  are
funding, autonomy and cashflows.

1.3 Group accounting

(i) Subsidiary undertakings and special-purpose entities

Group
Subsidiary undertakings are those entities, including unincorporated entities such as trusts and partnerships, that are
controlled by the group. The group financial statements include the assets, liabilities and results of the company plus
subsidiaries, including special-purpose entities (SPEs) controlled by the group from the date of acquisition until the
date the group ceases to control the subsidiary. Subsidiary undertakings are consolidated when they are considered to
be material to the financial statements of the group.

Control is defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from
its activities. Control is presumed to exist when the group owns, directly or indirectly through subsidiaries, more than
half of the voting power of an entity, unless, in exceptional circumstances, it can clearly be demonstrated that such
ownership does not constitute control. The existence and effect of potential voting rights that are currently exercisable
or  convertible, including  potential  voting  rights  held  by  other  entities, are  considered  when  assessing  whether  the
group has control.

Subsidiaries include SPEs that are created to accomplish a narrow and well-defined objective, which may take the form
of a company, corporation, trust, partnership or unincorporated entity. The assessment of whether control exists for
SPEs is based on the substance of the relationship between the group and the SPE. SPEs in which the group holds half
or less of the voting rights, but which are controlled by the group by retaining the majority of risks or benefits, are
consolidated in the group financial statements.

Acquisitions of subsidiaries (entities acquired) and businesses (assets and liabilities acquired) are accounted for using
the purchase method. The cost of a business combination is measured as the aggregate of the fair values (at the date
of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the group in exchange
for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable
assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations
are recognised at their fair value at the date of acquisition, except for non-current assets (or disposal groups) that are
classified as ‘held for sale’ in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations,
which are measured at fair value less cost to sell.

The interest of minority shareholders in the acquiree is initially recognised in equity and is measured at the minority’s
proportion of the net fair value of the assets, liabilities and contingent liabilities recognised. The minority shareholders
do not include any portion of goodwill.

Intragroup  balances, transactions, income  and  expenses  and  profits  and  losses  are  eliminated  in  preparation  of  the
group financial statements. Unrealised losses are not eliminated to the extent that they provide objective evidence of
impairment.

The  difference  between  the  proceeds  from  the  disposal  of  a  subsidiary  and  its  carrying  amount  as  of  the  date  of
disposal, including  the  cumulative  amount  of  any  exchange  differences  that  relate  to  the  subsidiary  in  equity, is
recognised in the group income statement as the gain or loss on the disposal of the subsidiary.

Company
Subsidiary undertakings are accounted for on the cost basis.

(ii) Associates

An associate is an entity, including an unincorporated entity, over which the group has the ability to exercise significant
influence, but not control or joint control, through participation in the financial and operating policy decisions of the
investment (that is neither a subsidiary nor an investment in a joint venture).

The results and assets and liabilities of associates including goodwill identified on acquisition, net of any accumulated
impairment losses, are incorporated in the group financial statements using the equity method of accounting from the
date  significant  influence  commences  until  the  date  significant  influence  ceases. The  carrying  amount  of  such

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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

1 PRINCIPAL ACCOUNTING POLICIES ... continued

1.3 Group accounting ... continued

(ii) Associates ... continued

investments is reduced to recognise any impairment in the value of individual investments. When the group’s share of
losses  exceeds  the  carrying  amount  of  the  associate, the  carrying  amount  is  reduced  to  nil, inclusive  of  any  debt
outstanding, and  recognition  of  further  losses  is  discontinued, except  to  the  extent  that  the  group  has  incurred  or
guaranteed obligations in respect of the associate.

Where an entity within the group transacts with an associate of the group, unrealised profits and losses are eliminated
to the extent of the group’s interest in the relevant associate.

Investments in associates held with the intention of disposing thereof within 12 months are accounted for as non-
current assets held for sale.

(iii) Joint ventures

Joint ventures are those entities over which the group has joint control in terms of a contractual agreement. Jointly
controlled  entities  are  incorporated  in  the  group  financial  statements  using  the  equity  method  of  accounting. The
carrying amount of such investments is reduced to recognise any impairment in the value of individual investments,
by applying the impairment methodology described in 1.7.

Where  an  entity  within  the  group  transacts  with  a  joint  venture  of  the  group, unrealised  profits  and  losses  are
eliminated to the extent of the group’s interest in the joint venture. When the group’s share of losses exceeds the
carrying  amount  of  the  joint  venture, the  carrying  amount  is  reduced  to  nil  and  recognition  of  further  losses  is
discontinued, except to the extent that the group has incurred or guaranteed obligations in respect of the joint venture.

Investments in joint ventures held with the intention of disposal within 12 months are accounted for as non-current
assets held for sale.

(iv) Investments held by venture capital divisions

Where the group has an investment in an associate company or joint-venture company held by its venture capital
divisions, whose  primary  businesses  is  to  purchase  and  dispose  of  minority  stakes  in  entities, the  investment  is
classified as designated fair value through profit and loss as the divisions are managed on a fair-value basis. Changes
in fair value are recognised in the non-interest revenue line in profit or loss in the period in which they occur.

(v) Goodwill

Goodwill, being the excess of the cost of the business combination over the group’s interest in the fair value of the
acquiree’s identifiable assets, liabilities and contingent liabilities recognised, arising on acquisition is recognised as an
asset  and  initially  measured  at  cost. If, after  reassessment, the  group’s  interest  in  the  fair  value  of  the  acquiree’s
identifiable  assets, liabilities  and  contingent  liabilities  exceeds  the  costs  of  the  business  combination, the  excess  is
immediately recognised in profit or loss. There is currently no negative goodwill recognised in the group’s financial
statements.

1.4 Investment contracts

(i)

Investment contract liabilities
Liabilities for unit-linked and market-linked contracts are reported at fair value. For unit-linked contracts the fair value
is calculated as the account value of the units, ie the number of units held multiplied by the bid price value of the
assets  in  the  underlying  fund  (adjusted  for  taxation). For  market-linked  contracts  the  fair  value  of  the  liability  is
determined with reference to the fair value of the underlying assets. This fair value is calculated in accordance with the
financial soundness valuation basis, except that negative rand reserves arising from the capitalisation of future margins
are  not  permitted. The  fair  value  of  the  liability, at  a  minimum, reflects  the  initial  deposit  of  the  client, which  is
repayable on demand.

Investment contract liabilities (other than unit-linked and market-linked contracts) are measured at amortised cost.

Embedded derivatives included within investment contracts are separated and measured at fair value, and the host
contract liability is measured on an amortised-cost basis.

(ii) Revenue on investment management contracts

Fees  charged  for  investment  management  services  in  conjunction  with  investment  management  contracts  are
recognised as revenue as the services are provided. Initial fees that exceed the level of recurring fees and relate to the
future provision of services are deferred and amortised over the projected period over which services will be provided.

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NEDBANK GROUP ANNUAL REPORT 2008

1.5 Financial instruments

Financial  instruments, as  reflected  on  the  balance  sheet, include  all  financial  assets  and  financial  liabilities, including
derivative instruments, but exclude investments in subsidiaries, associated companies and joint ventures (other than private
equity), and  employee  benefit  plans. Financial  instruments  are  accounted  for  under  IAS  32  Financial  Instruments:
Presentation and IAS 39 Financial Instruments: Recognition and Measurement.

The  group  does  not  apply  hedge  accounting. This  accounting  policy  should  be  read  in  conjunction  with  the  group’s
categorised balance sheet.

(i)

Initial recognition
Financial  instruments  are  recognised  on  the  balance  sheet  when  the  group  becomes  a  party  to  the  contractual
provisions  of  the  financial  instrument. All  purchases  of  financial  assets  that  require  delivery  within  the  timeframe
established by regulation or market convention (‘regular way’ purchases) are recognised at trade date, which is the date
on which the group commits to purchase the asset. The liability to pay for ‘regular way’ purchases of financial assets
is recognised on trade date, which is when the group becomes a party to the contractual provisions of the financial
instrument.

Contracts that require or permit net settlement of the change in the value of the contract are not considered ‘regular
way’ contracts and are treated as derivatives between the trade and settlement of the contract.

(ii)

Initial measurement
Financial  instruments  are  initially  measured  at  fair  value  plus, in  the  case  of  financial  instruments  not  at  fair  value
through  profit  or  loss, transaction  costs  that  are  directly  attributable  to  the  acquisition  or  issue  of  the  financial
instruments.

Where the transaction price in a non-active market is different to the fair value from other observable current market
transactions  in  the  same  instrument  or  based  on  a  valuation  technique  whose  variables  include  only  data  from
observable markets, the group defers such differences (day-one gains or losses). Day-one gains or losses are amortised
on a straight-line basis over the life of the instrument. To the extent that the inputs determining the fair value of the
instrument  become  observable, or  when  the  instrument  is  derecognised, day-one  gains  or  losses  are  recognised
immediately in profit or loss.

(iii) Categories of financial instruments

Subsequent  to  initial  recognition, financial  instruments  are  measured  either  at  fair  value, amortised  cost or  cost,
depending on their classification and whether fair value can be measured reliably:

•

Financial instruments at fair value through profit or loss
Financial  instruments  at  fair  value  through  profit  or  loss  consist  of  instruments  that  are  held  for  trading  and
instruments that the group has designated, on initial recognition date, as at fair value through profit or loss.

The group classifies instruments as held for trading if it has been acquired or incurred principally for the purpose
of sale or repurchase in the near term, it is part of a portfolio of identified financial instruments for which there is
evidence  of  a  recent  actual  pattern  of  short-term  profit-taking  or  the  instrument  is  a  derivative. The  group’s
derivative transactions include foreign exchange contracts, interest rate futures, forward rate agreements, currency
and interest rate swaps, currency and interest rate options (both written and purchased).

Financial instruments that the group has elected, on initial recognition date, to designate as at fair value through
profit or loss are those that meet any one of the following conditions:

– the  fair  value  through  profit  or  loss  designation  eliminates  or  significantly  reduces  a  measurement  or
recognition  inconsistency  that  would  otherwise  arise  from  measuring  assets  or  liabilities  or  recognising  the
gains and losses on assets and liabilities on different bases;

– the instrument forms part of a group of financial instruments that is managed and its performance is evaluated
on  a  fair-value  basis,
in  accordance  with  a  documented  risk  management  or  investment  strategy, and
information about the group is provided internally on that basis to key management personnel, using a fair-
value basis; or

– a contract that contains one or more embedded derivatives that require separation from the host contract or

the derivative significantly modifies the cashflows of the host contract.

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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

1 PRINCIPAL ACCOUNTING POLICIES ... continued

1.5 Financial instruments ... continued

(iii) Categories of financial instruments ... continued

•

Financial instruments at fair value through profit or loss ... continued
Gains or losses on financial instruments at fair value through profit or loss (excluding interest income and interest
expense calculated on the amortised-cost basis relating to interest-bearing instruments that have been designated
as  at  fair  value  through  profit  or  loss)  are  reported  in  non-interest  revenue  as  they  arise. Interest  income  and
interest expense calculated on the effective-interest-rate method are reported in interest income and expense,
except for interest income and interest expense on instruments held for trading, which are reported in non-interest
revenue.

• Non-trading financial liabilities

All financial liabilities, other than those at fair value through profit or loss, are classified as non-trading financial
liabilities and are measured at amortised cost. Gains or losses on the derecognition of trading financial liabilities
are reported in non-interest revenue. Interest expense is recorded in net interest income.

•

•

•

Held-to-maturity financial assets
Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and a
fixed maturity that the group has the positive intention and ability to hold to maturity, other than those that meet
the  definition  of  loans  and  receivables  on  those  that  were  designated  as  at  fair  value  through  profit  or  loss  or
available  for  sale. Held-to-maturity  financial  assets  are  measured  at  amortised  cost, with  interest  income
recognised in interest and similar income. Gains or losses arising on disposal of held-to-maturity financial assets
are recognised in non-interest revenue.

Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market, other than those financial assets classified by the group on initial recognition as at fair value
through profit or loss, available for sale or loans and receivables that are held for trading.

Financial assets classified as loans and receivables are carried at amortised cost, with interest income recognised
in  interest  and  similar  income. Gains  or  losses  arising  on  disposal  are  recognised  in  non-interest  revenue. The
majority of the group’s advances are included in the loans and receivables category.

Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that the group has designated as available for
sale or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair
value through profit or loss.

Available-for-sale financial assets are measured at fair value, with fair-value gains or losses recognised directly in
equity. Foreign  currency  translation  gains  or  losses  or  interest  income, calculated  on  the  effective  interest  rate
method, is reported in profit or loss.

(iv) Embedded derivatives

Derivatives in a host contract, that is a financial or non-financial instrument, such as an equity conversion option in a
convertible bond, are separated from the host contract, when all of the following conditions are met:

•

•

•

the  economic  characteristics  and  risks  of  the  embedded  derivative  are  not  closely  related  to  those  of  the  host
contract;

a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative;
and

the combined contract is not measured at fair value, with changes in fair value recognised in profit or loss.

The host contract is accounted for:

•

•

under IAS 39 if it is, itself, a financial instrument; and

in accordance with other appropriate standards if it is not a financial instrument.

If an embedded derivative is required to be separated from its host contract but it is not possible to measure the fair
value of the embedded derivative separately, either at acquisition or at a subsequent financial reporting date, the entire
hybrid instrument is categorised as at fair value through profit or loss and measured at fair value.

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NEDBANK GROUP ANNUAL REPORT 2008

(v) Measurement basis of financial instruments

•

•

Amortised cost
The amortised cost of a financial instrument is the amount at which the financial instrument is measured at initial
recognition minus principal repayments, plus or minus the cumulative amortisation using the effective-interest-
rate  method  of  any  difference  between  the  initial  amount  and  the  maturity  amount,
less  any  cumulative
impairment losses.

The  effective-interest-rate  method  is  a  method  of  calculating  the  amortised  cost  of  a  financial  asset  and  of
allocating  the  interest  income  and  expense  over  the  relevant  period. The  effective  interest  rate  is  the  rate  that
exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument
or, when appropriate, a shorter period, to the net carrying amount of the financial instrument. When calculating
the  effective  interest  rate, an  entity  shall  estimate  cashflows  considering  all  contractual  terms  of  the  financial
instrument, but shall not consider future credit losses. The calculation includes all fees and points paid or received
between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all
other premiums or discounts.

Fair value
The fair value of a financial instrument on initial recognition is normally the transaction price, that is the fair value
of the consideration given or received. However, if part of the consideration is given or received for something else,
the fair value is estimated using a valuation technique.

Published price quotations, in an active market, are the best evidence of fair value, and when they exist, they are
used  to  measure  the  financial  instrument. A  financial  instrument  is  regarded  as  quoted  in  an  active  market  if
quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or
regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length
basis. The appropriate quoted market price for an asset held or liability to be issued is usually the current bid price
and, for an asset to be acquired or a liability held, the asking price.

When the group has assets and liabilities with offsetting market risks, it may use mid-market prices as a basis for
establishing fair values for the offsetting risk positions and apply the bid or asking price to the net open position,
as appropriate.

If  the  market  for  a  financial  instrument  is  not  active, fair  value  is  established  by  using  a  valuation  technique.
Valuation techniques include using recent arm’s length market transactions between knowledgeable and willing
parties, if  available; reference  to  the  current  fair  value  of  another  instrument  that  is  substantially  the  same;
discounted-cashflow  analysis; and  option  pricing  models. If  there  is  a  valuation  technique  commonly  used  by
market  participants  to  price  the  instrument  and  that  technique  has  been  demonstrated  to  provide  reliable
estimates of prices obtained in actual market transactions, the entity may use that technique.

The objective of using a valuation technique is to establish what the transaction price would have been on the
measurement  date  in  an  arm’s  length  exchange  motivated  by  normal  business  considerations. Fair  value  is
estimated on the basis of the results of a valuation technique that makes maximum use of market inputs, and
relies as little as possible on entity-specific inputs. A valuation technique would be expected to arrive at a realistic
estimate of the fair value if (a) it reasonably reflects how the market could be expected to price the instrument
and (b) the inputs to the valuation technique reasonably represent market expectations and measures of the risk-
return factors inherent in the financial instrument.

Therefore, a valuation technique (a) incorporates all factors that market participants would consider in setting a
price and (b) is consistent with accepted economic methodologies for pricing financial instruments. Periodically,
the  group  calibrates  the  valuation  technique  and  tests  it  for  validity  using  prices  from  any  observable  current
market transactions in the same instrument (ie without modification or repackaging) or based on any available
observable market data. The group obtains market data consistently in the same market where the instrument was
originated or purchased.

The  use  of  a  valuation  technique  may  result  in  no  gain  or  loss  being  recognised  on  the  initial  recognition  of  a
financial asset or financial liability. In such a case, IAS 39 requires that a gain or loss be recognised after initial
recognition only to the extent that it arises from a change in a factor (including time) that market participants
would consider in setting a price.

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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

1 PRINCIPAL ACCOUNTING POLICIES ... continued

1.5 Financial instruments ... continued

(v) Measurement basis of financial instruments ... continued

•

Fair value ... continued
Where  discounted-cashflow  techniques  are  used, estimated  future  cashflows  are  based  on  management’s  best
estimates and the discount rate used is a market-related rate at the balance sheet date for an instrument with
similar terms and conditions. Where pricing models are used, inputs are based on market-related measures (prices
from  observable  current  market  transactions  in  the  same  instrument  without  modification  or  other  observable
market data) at the balance sheet date. When market-related measures are not available, observable market data
is modified to incorporate relevant factors that a market participant in an arm’s length exchange motivated by
normal  business  considerations  would  consider  in  determining  the  fair  value  of  the  financial  instrument  (non-
observable market inputs). The International Private Equity and Venture Capital Valuation Guidelines and industry
practice, which have demonstrated the capability to provide reliable estimates of prices obtained in actual market
transactions, are  used  to  determine  the  adjustments  to  observable  market  data. Consideration  is  given  to  the
nature and circumstances of the financial instrument in determining the appropriate non-observable market input.

Non-observable market inputs are used to determine the fair values of, among others, private-equity investments,
management buyouts and development capital. Valuation techniques applied by the group and that incorporate
non-observable market inputs include, among others, earnings multiples, the price of recent investments, the value
of the net assets of the underlying business and discounted cashflows.

The  fair  value  of  a  financial  liability  with  a  demand  feature  is  not  less  than  the  amount  payable  on  demand,
discounted from the first date on which the amount could be required to be paid. When the fair value of financial
liabilities cannot be reliably determined, the liabilities are recorded at the amount due.

Fair value is considered reliably measurable if:

– the variability in the range of reasonable fair-value estimates is not significant for that instrument; or

– the probabilities of the various estimates within the range can be reasonably assessed and used in estimating

fair value.

– Investments in equity instruments that do not have a quoted market price in an active market and whose fair
value cannot be reliably measured, and derivatives that are linked to and have to be settled by delivery of such
unquoted equity instruments, are measured at cost.

(vi) Derecognition

The group derecognises a financial asset (or group of financial assets) or a part of a financial asset (or part of a group
of financial assets) when and only when:

•

•

•

the contractual rights to the cashflows arising from the financial asset have expired; or

it transfers the financial asset, including substantially all the risks and rewards of ownership of the asset; or

it transfers the financial asset, neither retaining nor transferring substantially all the risks and rewards of ownership
of the asset, but no longer retains control of the asset.

A financial liability (or part of a financial liability) is derecognised when and only when the liability is extinguished, ie
when the obligation specified in the contract is discharged, cancelled or has expired.

The  difference  between  the  carrying  amount  of  a  financial  asset  or  financial  liability  (or  part  thereof)  that  is
derecognised and the consideration paid or received, including any non-cash assets transferred or liabilities assumed,
is recognised in profit or loss for the period.

The group securitises various consumer and commercial financial assets, which generally results in the sale of these
assets to SPEs, which in turn issue securities to investors. Interests in the securitised financial assets may be retained
in  the  form  of  senior  or  subordinated  tranches, interest-only  strips  or  other  residual  interests  (retained  interests).
Retained interests are primarily recorded in available-for-sale investment securities and carried at fair value. Gains or
losses on securitisation depend in part on the carrying amount of the transferred financial assets, allocated between
the financial assets derecognised and the retained interests based on their relative fair values at the date of transfer.
Gains or losses on securitisation are recorded in other operating income.

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NEDBANK GROUP ANNUAL REPORT 2008

(vii) Impairment of financial assets

The group assesses at each balance sheet date whether there is objective evidence that a financial asset or group of
financial  assets  is  impaired. A  financial  asset  or  a  group  of  financial  assets  is  impaired  and  impairment  losses  are
incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after
the initial recognition of the asset (a loss event) and that loss event has (or events have) an impact on the estimated
future cashflows of the financial asset or group of financial assets that can be reliably estimated. Objective evidence
that a financial asset or group of assets is impaired includes observable data that come to the attention of the group
about the following loss events:

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significant financial difficulty of the issuer or obligor;

a breach of contract, such as a default or delinquency in interest or principal payments;

the group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a
concession that the group would not otherwise consider;

it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;

the disappearance of an active market for that financial asset because of financial difficulties; or

observable data indicating that there is a measurable decrease in the estimated future cashflows from a group of
financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with
the individual financial assets in the group, including

– adverse changes in the payment status of borrowers in the group or

– national or local economic conditions that correlate with defaults on the assets in the group.

Assets carried at amortised cost
If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments
carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the
asset’s carrying amount and the present value of estimated future cashflows (excluding future credit losses that
have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of
the asset is reduced through the use of an allowance account and the amount of the loss is recognised in profit or
loss.

The group first assesses whether there is objective evidence of impairment individually for financial assets that are
individually significant, and individually or collectively for financial assets that are not individually significant. If the
group determines that there is no objective evidence of impairment for an individually assessed financial asset,
whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics
and collectively assesses them for impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating),
the previously recognised impairment loss is reversed by adjusting the allowance account. The reversal may not
result in a carrying amount of the financial asset that exceeds what the amortised cost would have been had the
impairment not been recognised at the date on which the impairment is reversed. The amount of the reversal is
recognised in profit or loss for the period.

Financial assets carried at cost
If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is
not carried at fair value, because its fair value cannot be reliably measured, or on a derivative asset that is linked
to and has to be settled by delivery of such an unquoted equity instrument, or a financial asset that is carried at
cost  because  its  fair  value  could  not  be  determined, the  amount  of  the  impairment  loss  is  measured  as  the
difference between the carrying amount of the financial asset and the present value of estimated future cashflows
discounted  at  the  current  market  rate  of  return  for  a  similar  financial  asset. Such  impairment  losses  are  not
reversed.

Available-for-sale financial assets
When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there
is  objective  evidence  that  the  asset  is  impaired, the  cumulative  loss  that  has  been  recognised  directly  in  equity  is
removed  from  equity  and  recognised  in  profit  or  loss  even  though  the  financial  asset  has  not  been  derecognised.

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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

1 PRINCIPAL ACCOUNTING POLICIES ... continued

1.5 Financial instruments ... continued

(vii) Impairment of financial assets ... continued

•

Available-for-sale financial assets ... continued
The amount of the cumulative loss that is removed from equity and recognised in profit or loss is the difference
between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any
impairment  loss  on  that  financial  asset  previously  recognised  in  profit  or  loss. Impairment  losses  recognised  in
profit or loss for an investment in an equity instrument classified as available for sale are not reversed through
profit or loss.

If, in  a  subsequent  period, the  fair  value  of  a  debt  instrument  classified  as  available  for  sale  increases  and  the
increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss,
the impairment loss is reversed, with the amount of the reversal recognised in profit or loss for the period.

• Maximum credit risk

Credit risk arises principally from loans and advances to clients, investment securities derivatives and irrevocable
commitments  to  provide  facilities. The  maximum  credit  risk  is  typically  the  gross  carrying  amount, net  of  any
amounts offset and impairment losses. The maximum credit exposure for loan commitments is the full amount of
the commitment if the loan cannot be settled net in cash or using another financial asset.

(viii)Offsetting financial instruments and related income

Financial assets and liabilities are offset and the net amount reported in the balance sheet only when the group has a
legally enforceable right to set off the financial asset and financial liability and the group has an intention of settling
the asset and liability on a net basis or realising the asset and settling the liability simultaneously. Income and expense
items are offset only to the extent that their related instruments have been offset in the balance sheet.

(ix) Collateral 

Financial and non-financial assets are held as collateral in respect of recognised financial assets. Such collateral, except
cash collateral, is not recognised by the group, as the group does not retain the risks and rewards of ownership, and is
obliged to return such collateral to counterparties upon settlement of the related obligations. Should a counterparty
be unable to settle its obligations, the group takes possession of collateral or calls on other credit enhancements as
full or part settlement of such amounts. These assets are recognised when the applicable recognition criteria under
IFRS are met, and the group’s accounting policies are applied from the date of recognition. Cash collateral is recognised
when the group receives the cash and is reported as amounts received from depositors.

Collateral is also given to counterparties under certain financial arrangements, but such assets are not derecognised
where the group retains the risks and rewards of ownership. Such assets are at risk to the extent that the group is
unable to fulfil its obligations to counterparties.

(x)

Interest income and expense
Interest  income  and  expense  are  recognised  in  profit  or  loss  using  the  effective-interest-rate  method  taking  into
account the expected timing and amount of cashflows. The effective-interest-rate method is a method of calculating
the amortised cost of a financial asset or financial liability (or group of financial assets or financial liabilities) and of
allocating the interest income or interest expense over the relevant period. Interest income and expense include the
amortisation  of  any  discount  or  premium  or  other  differences  between  the  initial  carrying  amount  of  an  interest-
bearing instrument and its amount at maturity calculated on an effective-interest-rate basis.

(xi) Non-interest revenue

•

Fees and commission
The group earns fees and commissions from a range of services it provides to clients and these are accounted for
as follows:

– Income earned on the execution of a significant act is recognised when the significant act has been performed.

– Income earned from the provision of services is recognised as the service is rendered by reference to the stage

of completion of the service.

– Income that forms an integral part of the effective interest rate of a financial instrument is recognised as an

adjustment to the effective interest rate and recorded in interest income.

232

NEDBANK GROUP ANNUAL REPORT 2008

•

Dividend income
Dividend income is recognised when the right to receive payment is established on the ex dividend date for equity
instruments and is included in dividend income.

• Net trading income 

Net trading income comprises all gains and losses from changes in the fair value of financial assets and financial
liabilities held for trading, together with the related interest, expense, costs and dividends. Interest earned while
holding trading securities and interest incurred on trading liabilities are reported within non-interest revenue.

•

Income from investment contracts
Refer to 1.4 (ii) for non-interest revenue arising on investment management contracts.

• Other

Exchange and securities trading income, from investments and net gains on the sale of investment banking assets,
is recognised in profit or loss when the amount of revenue from the transaction or service can be measured reliably,
it  is  probable  that  the  economic  benefits  of  the  transaction  or  service  will  flow  to  the  group  and  the  costs
associated with the transaction or service can be measured reliably.

Fair-value  gains  or  losses  on  financial  instruments  at  fair  value  through  profit  or  loss, including  derivatives, are
included  in  non-interest  revenue. These  fair-value  gains  or  losses  are  determined  after  deducting  the  interest
component, which is recognised separately in interest income and expense.

Gains or losses on derecognition of any financial assets or financial liabilities are included in non-interest revenue.

(xii) Sale and repurchase agreements and lending of securities

Securities sold subject to linked repurchase agreements are retained in the financial statements as the group retains
all risks and rewards of ownership of the securities. The securities are recorded as trading or investment securities and
the counterparty liability is included in amounts owed to other depositors, deposits from other banks, or other money
market deposits, as appropriate. Securities purchased under agreements to resell are recorded as loans and advances
to other banks or clients, as appropriate. The difference between the sale and repurchase price is treated as interest
and  recognised  over  the  duration  of  the  agreements  using  the  effective-interest-rate  method. Securities  lent  to
counterparties are also retained in the financial statements and any interest earned is recognised in profit or loss using
the effective-interest-rate method.

Securities borrowed are not recognised in the financial statements, unless these are sold to third parties, in which case
the purchase and sale are recorded with the gain or loss included in non-interest revenue. The obligation to return them
is recorded at fair value as a trading liability.

(xiii)Acceptances

Acceptances comprise undertakings by the group to pay bills of exchange drawn on clients. The group expects most
acceptances to be settled simultaneously with the reimbursement from clients. Acceptances are disclosed as liabilities
with the corresponding asset recorded in the balance sheet.

(xiv)Financial guarantee contracts

Issued financial guarantee contracts are recognised as insurance contracts. Liability adequacy testing is performed to
ensure that the carrying amount of the liability for issued financial guarantee contracts is sufficient.

1.6 Taxation

Taxation  expense  comprises  both  current  and  deferred  taxation. Income  (direct)  taxation  is  recognised  in  profit  or  loss,
except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity.

(i) Current taxation

Current taxation is the expected taxation payable on the taxable income for the year, using taxation rates enacted or
substantively enacted at the balance sheet date, and any adjustment to taxation payable (prior-period tax paid) in
respect of previous years.

Secondary tax on companies (STC) that arises from the distribution of dividends is recognised at the same time as the
liability to pay the related dividend.

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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

1 PRINCIPAL ACCOUNTING POLICIES ... continued

1.6 Taxation ... continued

(ii) Deferred taxation

Deferred  taxation  is  provided  using  the  balance  sheet  liability  method, based  on  temporary  differences. Temporary
differences are differences between the carrying amounts of assets and liabilities for financial reporting purposes and
their  taxation  bases. The  amount  of  deferred  taxation  provided  is  based  on  the  expected  manner  of  realisation  or
settlement  of  the  carrying  amount  of  assets  and  liabilities, and  is  measured  at  the  taxation  rates  (enacted  or
substantively enacted at the reporting date) that are expected to be applied to the temporary differences when they
reverse.

Deferred taxation is recognised in profit or loss for the period, except to the extent that it relates to a transaction that
is recognised directly in equity, or a business combination that is an acquisition. The effect on deferred taxation of any
changes in taxation rates is recognised in profit or loss for the period, except to the extent that it relates to items
previously charged or credited directly to equity.

Deferred  tax  liabilities  are  generally  recognised  for  all  taxable  temporary  differences, and  deferred  tax  assets  are
generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will
be available, against which those deductible temporary differences can be utilised.

Deferred  taxation  is  not  recognised  for  the  following  temporary  differences: the  initial  recognition  of  goodwill; the
initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither
accounting nor taxable profit; and differences relating to investments in subsidiaries and jointly controlled entities to
the extent that they will not reverse in the foreseeable future.

Deferred tax assets are recognised to the extent that it is probable that future taxable income will be available, against
which the unutilised taxation losses and deductible temporary differences can be used. Deferred taxation assets are
reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related taxation
benefits will be realised.

Deferred tax assets are recognised for STC credits received based on the expected utilisation of these credits by group
companies in the declaration of future dividends.

1.7 Goodwill and intangible assets

(i) Goodwill and goodwill impairment

Goodwill  arises  on  the  acquisition  of  subsidiaries, associates  and  joint  ventures. Goodwill  is  measured  at  cost  less
accumulated  impairment  losses. In  respect  of  equity-accounted  investments, the  carrying  amount  of  goodwill  is
included in the carrying amount of the investment.

All business combinations are accounted for by applying the purchase method of accounting. At the date of acquisition
the group recognises the acquiree’s identifiable assets, liabilities and contingent liabilities that satisfy the recognition
criteria at their respective fair values. The cost of a business combination is the aggregate of the fair values, at the date
of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued, in exchange for control, plus
any costs directly attributable to the business combination. Any contingent purchase consideration is recognised to the
extent that the adjustment is probable and can be measured reliably at the acquisition date. If a contingency that was
not initially included in the purchase consideration subsequently becomes probable and measurable, the additional
consideration is treated as an adjustment to the cost of the business combination. Any excess between the cost of the
business combination and the group’s interest in the net fair value of the identifiable assets, liabilities and contingent
liabilities  acquired  is  recognised  as  goodwill  in  the  balance  sheet. Goodwill  is  adjusted  for  any  subsequent
remeasurement of contingent purchase consideration.

Goodwill is allocated to one or more cash-generating units (CGUs), being the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. Goodwill
is allocated to the CGUs in which the synergies from the business combinations are expected. Each CGU containing
goodwill is annually tested for impairment. An impairment loss is recognised whenever the carrying amount of an asset
or  its  CGU  exceeds  its  recoverable  amount. Impairment  losses  recognised  in  respect  of  CGUs  are  allocated  first  to
reduce the carrying amount of any goodwill allocated to a CGU and then to reduce the carrying amount of the other
assets in the CGU on a pro rata basis.

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NEDBANK GROUP ANNUAL REPORT 2008

•

Impairment-testing procedures
The recoverable amount of a CGU is the higher of its fair value less cost to sell and its value in use. The fair value
less cost to sell is determined by ascertaining the current market value of an asset (or the CGU) and deducting any
costs related to the realisation of the asset.

In assessing value in use, the expected future pretax cashflows from the CGU are discounted to their present value
using a pretax discount rate that reflects current market assessments of the time value of money and the risks
specific to the CGU.

Impairment losses relating to goodwill are not reversed and all impairment losses are recognised in profit and loss.

(ii) Computer software and capitalised development costs

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, and expenditure on internally generated goodwill and brands are recognised as an expense in profit or
loss for the period.

If costs can be reliably measured and future economic benefits are available, expenditure on computer software and
other development activities, whereby set procedures and processes are applied to a project for the production of new
or substantially improved products and processes, is capitalised if the computer software and other developed products
or  processes  are  technically  and  commercially  feasible  and  the  group  has  sufficient  resources  to  complete
development. The expenditure capitalised includes the cost of materials and directly attributable employee and other
costs. Computer development expenditure is amortised only once the relevant software is available for use. Capitalised
software is stated at cost less accumulated amortisation and impairment losses. Computer development expenditure,
which is not yet available for use, is not amortised and is stated at cost less impairment losses.

Amortisation of computer software and development costs is charged to profit or loss on a straight-line basis over the
estimated  useful  lives  of  these  assets, which  does  not  exceed  five  years  and  is  reviewed  at  appropriate  intervals.
Subsequent  expenditure  relating  to  computer  software  is  capitalised  only  when  it  increases  the  future  economic
benefits embodied in the specific asset, in its current condition, to which it relates. All other subsequent expenditure
is recognised as an expense in the period in which it is incurred. On the disposal of computer software the profit or
loss  on  disposal  is  recognised  in  non-trading  and  capital  items  (in  the  income  statement). The  profit  and  loss  on
disposal is the difference between the net proceeds received and the carrying amount of the asset.

1.8 Property and equipment

Items  of  property  and  equipment  are  initially  recognised  at  cost  if  it  is  probable  that  any  future  economic  benefits
associated with the items will flow to the group and that the cost can be measured reliably. Certain items of property and
equipment that had been revalued to fair value on 1 January 2004, the date of transition to IFRS, are measured on the basis
of deemed cost, being the revalued amount at the date of that revaluation.

Subsequent expenditure is capitalised to the carrying amount of items of property and equipment if it is measurable and
it is probable that it increases the future economic benefits associated with the asset. All other expenses are recognised in
profit or loss as an expense when incurred.

Subsequent to initial recognition, computer equipment, vehicles and furniture and other equipment are measured at cost
less accumulated depreciation and accumulated impairment losses.

Land and buildings, whose fair values can be reliably measured, are carried at revalued amounts, being the fair value at the
date  of  revaluation  less  any  subsequent  accumulated  depreciation  and  impairment  losses. Revaluation  increases  are
credited directly to equity under the heading ‘Revaluation reserve’. However, revaluation increases are recognised in profit
or  loss  to  the  extent  that  they  reverse  a  revaluation  decrease  of  the  same  asset  previously  recognised  in  profit  or  loss.
Revaluation decreases are recognised in profit or loss. However, decreases are debited directly to equity to the extent of
any credit balance existing in the revaluation surplus in respect of the same asset. Land and buildings are revalued on the
same basis as investment properties.

(i) Depreciation

Each part of an item of property and equipment with a cost that is significant in relation to the total cost of the item
is depreciated separately. Items of property and equipment that are classified as ‘held for sale’ in terms of IFRS 5 are
not depreciated. The depreciable amounts of property and equipment are recognised in profit or loss on a straight-line
basis over the estimated useful lives of the items of property and equipment, unless they are included in the carrying
amount of another asset. Useful lives, residual values and depreciation methods are assessed on an annual basis.

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235

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

1 PRINCIPAL ACCOUNTING POLICIES ... continued

1.8 Property and equipment ... continued

(i) Depreciation ... continued

On revaluation any accumulated depreciation at the date of the revaluation is eliminated against the gross carrying
amount of the item concerned and the net amount restated to the revalued amount. Subsequent depreciation charges
are adjusted based on the revalued amount and residual values.

Any difference between the depreciation charge on the revalued amount and that which would have been charged
under historic cost is transferred net of any related deferred taxation between the revaluation reserve and retained
earnings as the property is utilised.

Land is not depreciated.

The maximum estimated useful lives are as follows:

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Computer equipment 5 years

• Motor vehicles 6 years

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Fixtures and furniture 10 years

Leasehold property 20 years

Significant leasehold property components 10 years

Freehold property 50 years

Significant freehold property components 5 years

(ii) Derecognition

Items of property and equipment are derecognised on disposal or when no future economic benefits are expected from
their use or disposal. The gain or loss on derecognition is recognised in profit or loss and is determined as the difference
between the net disposal proceeds, if any, and the carrying amount of the item. On derecognition any surplus in the
revaluation  reserve  in  respect  of  an  individual  item  of  property  and  equipment  is  transferred  directly  to  retained
earnings in the statement of changes in equity.

Compensation from third parties for items of property and equipment that were impaired, lost or given up is included
in profit or loss when the compensation becomes receivable.

1.9 Impairment (all assets other than goodwill and financial assets)

The  group  assesses  all  assets  (other  than  goodwill  and  intangible  assets  not  yet  available  for  use)  for  indications  of
impairment or the reversal of a previously recognised impairment at each balance sheet date. These impairments (where
the carrying amount of an asset exceeds its recoverable amount) or the reversal of a previously recognised impairment are
recognised in profit or loss for the period. Intangible assets not yet available for use are tested on a minimum of an annual
basis for impairment.

An impairment loss is recognised in profit or loss whenever the carrying amount of an asset exceeds its recoverable amount.

The recoverable amount of an asset is the higher of its fair value less cost to sell and its value in use. The fair value less cost
to sell is determined by ascertaining the current market value of an asset and deducting any costs related to the realisation
of the asset.

In assessing value in use, the expected future pretax cashflows from the asset are discounted to their present value using a
pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
For an asset whose cashflows are largely dependent on those of other assets the recoverable amount is determined for the
CGU to which the asset belongs.

A previously recognised impairment loss will be reversed if the recoverable amount increases as a result of a change in the
estimates used previously to determine the recoverable amount, but not to an amount higher than the carrying amount
that would have been determined, net of depreciation or amortisation, had no impairment loss been recognised in prior
periods.

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NEDBANK GROUP ANNUAL REPORT 2008

1.10 Investment properties

Investment properties comprise real estate held to earn rentals and/or for capital appreciation. This does not include real
estate held for use in the supply of services or for administrative purposes. Investment properties are initially measured at
cost plus any directly attributable expenses.

Investment  properties  are  stated  at  fair  value. Internal  professional  valuers  perform  valuations  annually. For  practical
reasons, valuations  are  carried  out  on  a  cyclical  basis  over  a  12-month  period  due  to  the  large  number  of  properties
involved. External valuations are obtained once every three years on a rotational basis. In the event of a material change in
market conditions between the valuation date and balance sheet date an internal valuation is performed and adjustments
made to reflect any material changes in value.

The valuation methodology adopted is dependent on the nature of the property. Income-generating assets are valued using
discounted cashflows.Vacant land, land holdings and residential flats are valued according to sales of comparable properties.
Near-vacant properties are valued at land value less the estimated cost of demolition.

Surpluses and deficits arising from changes in fair value are recognised in profit or loss for the period.

For  properties  reclassified  during  the  year  from  property  and  equipment  to  investment  properties, any  revaluation  gain
arising is initially recognised in profit or loss to the extent of previously charged impairment losses. Any residual excess is
taken to the revaluation reserve. Revaluation deficits are recognised in the revaluation reserve to the extent of previously
recognised gains and any residual deficit is accounted for in profit or loss for the period.

Investment  properties  that  are  reclassified  to  owner-occupied  property  are  revalued  at  the  date  of  transfer, with  any
difference being taken to profit or loss.

1.11 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction and production of qualifying assets are capitalised as
part of the costs of these assets. Qualifying assets are assets that necessarily take a substantial period of time to prepare
for their intended use or sale. Capitalisation of borrowing costs continues up to the date when the assets are substantially
ready for their use or sale.

All other borrowing costs are expensed in the period in which they are incurred.

Details of borrowing costs capitalised are disclosed in the notes by asset category and are calculated at the group’s average
funding cost, except to the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset.Where
this occurs, actual borrowing costs incurred less any investment income on the temporary investment of those borrowings
are capitalised.

1.12 Employee benefits

Defined-benefit and defined-contribution plans have been established for eligible employees of the group, with assets held
in separate trustee-administered funds.

(i) Defined-benefit pension plans

Pension obligations are accounted for in accordance with IAS 19 Employee Benefits. The projected-unit credit method
is used to determine the defined-benefit obligations based on actuarial assumptions, which incorporate not only the
pension  obligations  known  on  the  balance  sheet  date, but  also  information  relevant  to  their  expected  future
development. The discount rates used are determined based on the yields for government bonds that have maturity
dates approximating the terms of the group’s obligations.

Actuarial gains and losses are accounted for using the ‘corridor method’ and are not recognised in the statement of
changes in equity. The portion of actuarial gains and losses that are recognised for each defined-benefit plan is the
excess of the net cumulative unrecognised actuarial gains and losses at the end of the previous reporting period over
the greater of 10% of the present value of the defined-benefit obligation at that date, before deducting plan assets,
and  10%  of  the  fair  value  of  any  plan  assets  at  that  date. This  is  then  divided  by  the  expected  average  remaining
working lives of the employees participating in that plan.

Where  the  calculation  results  in  a  benefit  to  the  group, the  recognised  asset  is  limited  to  the  net  total  of  any
unrecognised  actuarial  losses  and  past  service  costs  and  the  present  value  of  any  future  refunds  from  the  plan  or
reductions in future contributions to the plan.

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237

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

1 PRINCIPAL ACCOUNTING POLICIES ... continued

1.12 Employee benefits ... continued

(i) Defined-benefit pension plans ... continued

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees
is recognised as an expense in profit or loss on a straight-line basis over the average period until the benefits become
vested. To the extent that the benefits vest immediately the expense is recognised immediately in profit or loss.

Plan assets are only offset against plan liabilities where they are assets held by long-term employee benefit funds or
qualifying insurance policies. Qualifying insurance policies exclude any insurance policies held by the group’s holding
or subsidiary companies.

(ii) Defined-contribution plans

Contributions in respect of defined-contribution benefits are recognised as an expense in profit or loss as incurred.

(iii) Postemployment benefit plans

Certain entities within the group provide post-retirement medical benefits and disability cover to eligible employees.
Non-pension postemployment benefits are accounted for according to their nature, either as defined-contribution or
defined-benefit  plans. The  expected  costs  of  post-retirement  benefits  that  are  defined-benefit  plans  in  nature  are
accounted for in the same manner as in the case of defined-benefit pension plans.

(iv) Short-term employee benefits

Short-term  employee  benefit  obligations  are  measured  on  the  balance  sheet  on  an  undiscounted  basis  and  are
expensed as the related service is provided.

1.13 Share-based payments

(i)

Equity-settled share-based payment transactions with employees
The services received in an equity-settled share-based payment transaction with employees are measured at the fair
value of the equity instruments granted. The fair value of the equity instruments is measured at grant date and is not
subsequently remeasured.

If the equity instruments granted vest immediately and an employee is not required to complete a specified period of
service before becoming unconditionally entitled to the instruments, the services received are recognised in profit or
loss for the period in full on grant date with a corresponding increase in equity.

Where the equity instruments do not vest until the employee has completed a specified period of service, it is assumed
that the services rendered by the employee, as consideration for the equity instruments, will be received in the future
during the vesting period. The services are accounted for in profit or loss as they are rendered during the vesting period,
with  a  corresponding  increase  in  equity. The  share-based  payment  expense  is  adjusted  for  non-market-related
performance conditions, such as service period required to be completed. Where the equity instruments are no longer
outstanding, the accumulated share-based payment reserve in respect of those equity instruments is transferred to
retained earnings.

(ii) Measurement of fair value of equity instruments granted

The equity instruments granted by the group are measured at fair value at measurement date using standard option
pricing valuation models. The valuation technique is consistent with generally acceptable valuation methodologies for
pricing  financial  instruments  and  incorporates  all  factors  and  assumptions  that  knowledgeable, willing  market
participants  would  consider  in  setting  the  price  of  the  equity  instruments. Vesting  conditions, other  than  market
conditions, are not taken into account in determining fair value. Vesting conditions are taken into account by adjusting
the number of equity instruments included in the measurement of the transaction amount.

(iii) Share-based payment transactions with persons or entities other than employees

Transactions  in  which  equity  instruments  are  issued  to  historically  disadvantaged  individuals  and  organisations  in
South Africa  for  less  than  fair  value  are  accounted  for  as  share-based  payments. Where  the  group  has  issued  such
instruments  and  expects  to  receive  services  in  return  for  equity  instruments, the  share-based  payments  charge  is
spread over the related vesting (ie service) period. In instances where such goods and services could not be identified,
the  cost  has  been  expensed  with  immediate  effect. The  valuation  techniques  are  consistent  with  those  mentioned
above.

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NEDBANK GROUP ANNUAL REPORT 2008

1.14 Leases

(i) The group as lessee

Leases in respect of which the group bears substantially all risks and rewards incidental to ownership are classified as
finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the lease
property or the present value of the minimum lease payments. Directly attributable costs, such as commission paid,
incurred by the group are added to the carrying amount of the asset. Each lease payment is allocated between the
liability and finance charges to achieve a constant periodic rate of interest on the balance outstanding. Contingent
rentals are expensed in the period they are incurred. The depreciation policy for leased assets is consistent with that
of depreciable assets owned. If the group does not have reasonable certainty that it will obtain ownership of the leased
asset by the end of the lease term, the asset is depreciated over the shorter of the lease term and its useful life.

Leases  that  are  not  classified  as  finance  leases  are  classified  as  operating  leases. Payments  made  under  operating
leases, net of any incentives received from the lessor, are recognised in profit and loss on a straight-line basis over the
term of the lease. When another systematic basis is more representative of the time pattern of the user’s benefit, then
that method is used.

(ii) The group as lessor

Where assets are leased out under a finance lease arrangement, the present value of the lease payments is recognised
as a receivable. Initial direct costs are included in the initial measurement of the receivable. The difference between the
gross receivable and unearned finance income is recognised in the balance sheet, in loans and advances. Finance lease
income is allocated to accounting periods to reflect a constant periodic rate of return on the group’s net investment
outstanding in respect of the leases.

Assets leased out under operating leases are included under property and equipment in the balance sheet. Initial direct
costs  incurred  in  negotiating  and  arranging  the  lease  are  added  to  the  carrying  amount  of  the  leased  asset  and
recognised as an expense over the lease term on the same basis as the rental income. Leased assets are depreciated
over their expected useful lives on a basis consistent with similar assets. Rental income, net of any incentives given to
lessees, is  recognised  on  a  straight-line  basis  over  the  term  of  the  lease. When  another  systematic  basis  is  more
representative of the time pattern of the user’s benefit, then that method is used.

(iii) Recognition of lease of land

Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets.

However, when a single lease covers both land and a building, the minimum lease payments at the inception of the
lease (including any upfront payments) are allocated between the land and the building in proportion to the relative
fair values of the respective leasehold interests. Any upfront premium allocated to the land element that is normally
classified as an operating lease represents prepaid lease payments. These payments are amortised over the lease term
in accordance with the time pattern of benefits provided. If the lease payments cannot be allocated reliably between
these two elements, the entire lease is classified as a finance lease, unless it is clear that both elements are operating
leases.

1.15 Cash and cash equivalents

Cash and cash equivalents comprise balances with less than 90 days’ maturity from the date of acquisition, including cash
and balances with central banks that are mandatory, other eligible bills and amounts due from other banks.

1.16 Other provisions

Provisions are recognised when the group has a present legal or constructive obligation as a result of a past event, in respect
of which it is probable that an outflow of economic benefits will occur and a reliable estimate can be made of the amount
of the obligation. The amount recognised as a provision is the reasonable estimate of the expenditure required to settle the
obligation at the balance sheet date. Where the effect of discounting is material, the provision is discounted. The discount
rate reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
Gains from the expected disposal of assets are not taken into account in measuring provisions. Provisions are reviewed at
each balance sheet date and adjusted to reflect the current reasonable estimate. If it is no longer probable that an outflow
of resources will be required to settle the obligation, the provision is reversed.

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239

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

1 PRINCIPAL ACCOUNTING POLICIES ... continued

1.16 Other provisions ... continued

(i) Reimbursements

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by a party outside
the group, the reimbursement is recognised when it is virtually certain that it will be received if the group settles the
obligation. The reimbursement is recorded as a separate asset at an amount not exceeding the related provision. The
expense for the provision is presented net of the reimbursement in profit or loss. Specific policies described in (ii) and
(iii) below apply.

(ii) Onerous contracts

A provision for onerous contracts is recognised when the expected benefits to be derived by the group from a contract
are lower than the unavoidable cost of meeting the obligations under the contract.

(iii) Restructuring

A provision for restructuring is recognised when the group has a detailed formal plan for restructuring and has raised
a valid expectation, among those parties directly affected, that the plan will be carried out, either by having begun
implementation or by publicly announcing the plan’s main features. Restructuring provisions include only those costs
that arise directly from restructuring that is not associated with the ongoing activities of the group.

Future operating costs or losses are not provided for.

1.17 Segment reporting

An operating segment is a component of an entity that engages in business activities from which it may earn revenues,
whose operating results are regularly reviewed by management to make decisions about resources to be allocated and to
assess its performance, and for which financial information is available.

The  group’s  identification  of  its  segments  and  the  measurement  of  segment  results are  based  on  the  group’s  internal
reporting  to  management. The  segments  have  been  identified  according  to  the  nature  of  their  respective  products  and
services and their related target markets, the detail of which can be found in the Operating Segment Report on pages 218
to 221 of the annual report.

The segments identified are complemented by ‘Shared Services’ and ‘Central Management’, which provide support in the
areas of finance, human resources, governance and compliance, risk management and information technology.

Additional information relating to geographic areas, major clients and other performance measures is provided.

The group accounts for intersegment revenues and transfers as if the transactions were with third parties at current market
prices.

1.18 Government grants

Government grants are recognised when there is reasonable assurance that they will be received and the group will comply
with the conditions attached to them. Grants that compensate the group for expenses or losses already incurred or for
purposes of giving immediate financial support to the entity with no future-related costs are recognised as income in the
period it becomes receivable. Grants that compensate the group for expenses to be incurred are recognised as revenue in
profit or loss on a systematic basis in the same periods in which the expenses will be incurred. Grants that compensate the
group for the cost of an asset are recognised in profit or loss as revenue on a systematic basis over the useful life of the
asset.

1.19 Non-current assets held for sale and discontinued operations

Non-current  assets  (or  disposal  groups)  are  classified  as ‘held  for  sale’ when  their  carrying  amount  will  be  recovered
principally through sale rather than use.

The asset or disposal group must be available for immediate sale in its present condition and the sale should be highly
probable, with an active programme to find a buyer and the appropriate level of management approving the sale.

Immediately before classification as ‘held for sale’, all assets are remeasured in accordance with the group’s accounting
policies. Non-current assets (or disposal groups) held for sale are measured at the lower of carrying amount and fair value
less incremental directly attributable cost to sell (excluding taxation and finance charges) and are not depreciated.

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NEDBANK GROUP ANNUAL REPORT 2008

Gains or losses recognised on initial classification as ‘held for sale’ and subsequent remeasurement is recognised in profit
or loss, regardless of whether the assets were previously measured at revalued amounts. The maximum gains that can be
recognised are the cumulative impairment losses previously recognised in profit or loss. A disposal group continues to be
consolidated while classified as ‘held for sale’. Income and expenses continue to be recognised in profit and loss.

Non-current assets (or disposal groups) are reclassified from ‘held for sale’ to ‘held for use’ if they no longer meet the held-
for-sale criteria. On reclassification the non-current asset (or disposal group) is remeasured at the lower of its recoverable
amount and the carrying amount that would have been recognised had the asset (or disposal group) never been classified
as held for sale. Any gains or losses are recognised in profit or loss, unless the asset was carried at a revalued amount prior
to classification as ‘held for sale’.

A discontinued operation is a clearly distinguishable component of the group’s business that has been disposed of or is held
for sale, which:

•

•

•

represents a separate major line of business or geographical area of operations;

is part of a single coordinated plan to dispose of a major line of business or geographical area of operations; or

is a subsidiary acquired exclusively with a view to resale.

1.20 Share capital

Ordinary share capital, preference share capital or any financial instrument issued by the group is classified as equity when:

•

•

•

•

payment of cash, in the form of a dividend or redemption, is at the discretion of the group;

the  instrument  does  not  provide  for  the  exchange  of  financial  instruments  under  conditions  that  are  potentially
unfavourable to the group;

settlement in the group’s own equity instruments is for a fixed number of equity instruments at a fixed price; and

the instrument represents a residual interest in the assets of the group after deducting all of its liabilities.

The group’s ordinary and preference share capital is classified as equity.

Consideration  paid  or  received  for  equity  instruments  is  recognised  directly  in  equity. Equity  instruments  are  initially
measured at the proceeds received, less incremental directly attributable issue costs, net of any related income tax benefit.
No gain is recognised in profit or loss on the purchase, sale, issue or cancellation of the group’s equity instruments.

When the group issues a compound instrument, ie an instrument that contains both a liability and equity component, the
equity  component  is  initially  measured  at  the  residual  amount  after  deducting  from  the  fair  value  of  the  compound
instrument the amount separately determined for the liability component. Transaction costs that relate to the issue of a
compound financial instrument are allocated to the liability and equity components of the instrument in proportion to the
allocation of proceeds.

Distributions to holders of equity instruments are recognised as distributions in the statement of changes in equity in the
period in which they are payable. Dividends for the year that are declared after the balance sheet date are disclosed in the
notes to the financial statements.

1.21 Treasury shares

When the group acquires its own share capital, the amount of the consideration paid, including directly attributable costs,
net of any related tax benefit, is recognised as a change in equity. Shares repurchased by the issuing entity are cancelled.
Shares repurchased by group entities are classified as treasury shares and are held at cost. These shares are treated as a
deduction  from  the  issued  and  weighted  average  number  of  shares, and  the  cost  price  of  the  shares  is  presented  as  a
deduction from total equity. The par value of the shares is presented as a deduction from ordinary share capital and the
remainder of the cost is presented as a deduction from ordinary share premium. Dividends received on treasury shares are
eliminated on consolidation.

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241

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

2 STANDARDS AND INTERPRETATIONS

2.1

Standards and interpretations issued but not yet effective

2.1.1 Revised standards

The following revisions to International Accounting Standards have not been early-adopted by the group:

(i)

IFRS  3  Business  Combinations: Comprehensive  revision  on  applying  the  acquisition  method  and
consequential  amendments  to  IAS  27  Consolidated  and  Separate  Financial  Statements,
IAS  28
Investments in Associates and IAS 31 Interest in Joint Ventures
The revised IFRS 3 retains the basic requirements of IFRS 3 (2004) to apply acquisition accounting for all business
combinations within the scope of IFRS 3, to identify the acquirer and to determine the acquisition date for every
business combination. The most significant change is a move from a purchase price allocation approach to a fair-
value measurement principle. The revision applies to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after 1 July 2009.

The amended IAS 27 requires accounting for changes in ownership interests in a subsidiary that occur without loss
of control to be recognised as an equity transaction. When the group loses control of a subsidiary, any interest
retained in the former subsidiary will be measured at fair value, with the gain or loss recognised in profit and loss.
This amendment is effective for the group for the financial reporting period commencing on 1 January 2010.

The revision and amendment is applicable prospectively and will not affect past transactions.

(ii)

IAS 1 Presentation of Financial Statements: Comprehensive revision including requiring a statement of
comprehensive income
The changes made to IAS 1 require information in financial statements to be aggregated on the basis of shared
characteristics and introduce a statement of comprehensive income. The revision includes changes in titles of
financial statements to reflect their functions more clearly.

The main change in the revised IAS 1 is the requirement to present all non-owner transactions in the statement of
comprehensive income. The amendment also requires two sets of comparative numbers to be provided for the
financial position in any year where there has been a restatement or reclassification of balances.

The revised standard will affect the disclosures in the annual report. The revision is effective for annual periods
commencing on or after 1 January 2009. The group will adopt the revised standard on its effective date.

(iii) Amendments  to  IAS  32, Financial  Instruments: Presentation, and  IAS  1, Presentation  of  Financial

Statements — Puttable Financial Instruments Arising on Liquidation and Obligations
The amendment requires additional information to be presented on puttable instruments that are presented
as equity.

The amendment will not affect the group as the group does not have puttable instruments that are presented
within equity.

The amendment is effective for annual periods beginning on or after 1 January 2009. The group will apply the
amendment from its effective date.

(iv)

IAS 39 Financial Instruments: Recognition and Measurement: Amendment: Eligible Hedged Items
The  amendment  clarifies  that  inflation  may  only  be  hedged  in  instances  where  changes  in  inflation  are
contractually specified portions of cashflows of recognised financial instruments. It also clarifies that an entity
is permitted to designate purchased or net purchased options as a hedging instrument in a hedge of a financial
or non-financial item, and to improve effectiveness an entity is allowed to exclude the time value of money
from the hedging instrument.

This amendment is effective for the group for the annual periods commencing on 1 January 2009 and is not
expected to have a significant impact on the group.

(v) Annual improvements projects

As part of its first annual improvements projects, the IASB has issued its edition of annual improvements. The
annual improvement projects aim to clarify and improve the accounting standards.

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NEDBANK GROUP ANNUAL REPORT 2008

The improvements include those involving terminology or editorial changes with minimal effect on recognition
and measurement.

There  are  no  significant  changes  in  the  current  year’s  improvement  that  will  affect  the  group  and  the
improvement is effective for the group with effect from 1 January 2009.

2.1.2 Interpretations

The following interpretations of existing standards are not yet effective and have not been early-adopted by the group:

(i)

IFRIC 13 Customer Loyalty Programmes
The  interpretation  clarifies  the  application  of  IAS  18  to  customer  loyalty  programmes. The  interpretation
requires an entity that grants loyalty award credits to allocate some of the initial proceeds from the initial
revenue-generating  transaction  to  the  award  credit  as  a  liability  (entity’s  obligation  to  provide  award). The
award is accounted for as a separate revenue-generating transaction. The interpretation is effective for annual
periods commencing on or after 1 July 2008.

The application of IFRIC 13 will result in the group deferring a portion of income as a liability. The group will
adopt the interpretation for its annual period commencing 1 January 2009.

(ii)

IFRIC 17 Distributions of Non-cash Assets to Owners
IFRIC 17 clarifies that:

•

•

•

•

a dividend payable should be recognised when the dividend is appropriately authorised and is no longer at
the discretion of the entity;

an entity should measure the dividend payable at the fair value of the net assets to be distributed;

an entity should recognise the difference between the dividend paid and the carrying amount of the net
assets distributed in profit or loss; and

an entity should provide additional disclosures if the net assets being held for distribution to owners meet
the definition of a discontinued operation.

IFRIC 17 is effective for annual periods beginning on or after 1 January 2010 and is not anticipated to have a
major effect on the group’s accounts.

2.2

Standards and interpretations adopted in the current year

2.2.1 New standards

The following standards and amendments to standards have been adopted by the group in the current year:

(i)

IFRS 8 Operating Segments
IFRS 8 Operating Segments, which is effective for annual periods commencing on or after 1 January 2009, has
been early-adopted in these financial statements and replaces IAS 14 Segment Reporting.

IFRS  8  requires  an  entity  to  adopt  a  management  approach  to  reporting  the  financial  performance  of  its
operating segments. Generally, the information to be reported would be what management is currently using
internally for evaluating segment performance and deciding how to allocate resources to operating segments.

The application of IFRS 8 has not changed the group’s policy on identification, recognition or measurement of
its reportable segments, as the group’s existing internal structures are in line with both IAS 14 and IFRS 8.
Other than minor changes to the format of disclosure and presentation, there were no changes to comparative
information.

2.2.2 Revised standards

The following revisions to International Financial Reporting Standards have been adopted by the group:

(i)

IAS 23 Borrowing Costs
The  group  early-adopted  the  revision  that  removed  the  option  of  immediately  recognising  as  an  expense
borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale.

The  revision did  not  affect  the  group, as  it  is  the  group’s  policy  to  capitalise  borrowing  costs  on  qualifying
assets.

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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

2 STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE ... continued

2.2.2 Revised standards ... continued

(ii)

(iii)

IAS 39 Financial Instruments: Recognition and Measurements: Amendments allowing reclassification of
instruments
This amendment allowed an entity to change the classification of certain ‘held for trading’ financial assets into
financial  assets  carried  at  amortised  cost, subject  to  certain  criteria  being  met. There  was  no  effect  on  the
group of adopting this amendment, as the group did not reclassify any financial assets.

IFRS 2 Share-based Payment: Amendment relating to vesting conditions and cancellation
Under IFRS 2 failure to meet a condition, other than a vesting condition, is treated as a cancellation. IFRS 2
specifies the accounting treatment of cancellations by the entity, but does not give guidance on the treatment
of cancellations by parties other than the entity. The amendment requires cancellations by parties other than
the entity to be accounted for in the same way as cancellations by the entity.

The group early-adopted the amendment, which did not affect the group’s results.

2.2.3 Interpretations

The following interpretations of existing standards have been adopted by the group:

(i)

IFRIC 11, IFRS 2 Group and Treasury Share Transactions
This interpretation clarifies that, where a parent grants rights to its equity instruments to the employees of a
subsidiary, the  subsidiary will  measure  the  services  received  from  its  employees  in  accordance  with  the
requirements  applicable  to  equity-settled  share-based  payment  transactions, with  a  corresponding  increase 
in equity.

Nedbank  Group  Limited, the  parent  company, grants  share  options  over  its  shares  to  employees  of 
Nedbank Limited.

Nedbank  Limited  measures  the  services  received  from  its  employees  in  accordance  with  the  requirements
applicable to cash-settled share-based payment transactions, with a corresponding increase in liabilities. This
is due to the fact that, when share options are exercised by employees, Nedbank Limited is required to pay to
Nedbank Group Limited the difference between the listing value and the exercise price of the share options.

The adoption of the interpretation did not have any effect on the group.

(ii)

IFRIC 12 Service Concession Arrangements
The  interpretation  clarifies  the  application  of  existing  IFRSs  by  concession  operators  for  obligations  under
concession arrangements and rights received in service concession arrangements.

The group is not party to concession arrangements, and the adoption of the interpretation therefore did not
have any impact on the group.

(iii)

IFRIC  14, IAS  19  The  Limit  on  a  Defined-benefit  Asset, Minimum  Funding  Requirements  and  their
Interaction
The  interpretation  addresses  the  implication  of  minimum  funding  requirements  on  the  recognition  of  a
defined-benefit obligation.

The effect on the group of the adoption of this interpretation did not have any effect on the group’s financial
position or performance.

(iv)

IFRIC 15 Real Estate Sales
The interpretation clarifies when real estate sales should be accounted for in terms of IAS 11 Construction
Contracts or IAS 18 Revenue.

The group early-adopted this interpretation and it did not have any effect on the financial results or position
of the group.

(v)

IFRIC 16 Hedges of a Net Investment of a Foreign Operation
The  interpretation  clarifies  which  risks  can  be  hedged  under  a  hedge  of  the  net  investment  in  a  foreign
operation and by which entities within the group the hedging instruments can be held in order to qualify as a
hedge of a net investment in a foreign operation.

The group does not currently apply hedge accounting to net investments in foreign operations and therefore
the early adoption of this standard has had no effect on the financial results or position of the group.

244

NEDBANK GROUP ANNUAL REPORT 2008

3 KEY ASSUMPTIONS CONCERNING THE FUTURE AND KEY SOURCES OF ESTIMATION

The group’s accounting policies are set out on pages 224 to 241. Certain of these policies, as well as estimates made by management,
are  considered  to  be  important  to  an  understanding  of  the  group’s  financial  condition  since  they  require  management  to  make
difficult, complex or subjective judgements and estimates, some of which may relate to matters that are inherently uncertain. The
following  accounting  policies  include  estimates  that  are  particularly  sensitive  in  terms  of  judgements  and  the  extent  to  which
estimates  are  used. Other  accounting  policies  involve  significant  amounts  of  judgements  and  estimates, but  the  total  amounts
involved are not significant to the financial statements. Management has discussed the accounting policies and critical accounting
estimates with the Board Audit Committee.

3.1 Allowances for loan impairment and other credit risk provisions

Allowances for loan impairment represent management’s estimate of the losses incurred in the loan portfolios at the balance
sheet date.

Performing loans
The group assesses its loan portfolios for impairment at each balance sheet date. In determining whether an impairment loss
should be recorded in the income statement, the group makes judgements as to whether there is observable data indicating a
measurable decrease in the estimated future cashflows from a portfolio of loans before the decrease can be allocated to an
individual  loan  in  that  portfolio. Estimates  are  made  of  the  duration  between  the  occurrence  of  a  loss  event  and  the
identification of a loss on an individual basis. The impairment for performing loans is calculated on a portfolio basis, based on
historical  loss  ratios, adjusted  for  national  and  industry-specific  economic  conditions  and  other  indicators  present  at  the
reporting date that correlate with defaults on the portfolio. These include early arrears and other indicators of potential default,
such as changes in macroeconomic conditions and legislation affecting credit recovery. These annual loss ratios are applied to
loan balances in the portfolio and scaled to the estimated loss emergence period.

Within the retail and the business bank portfolios, which comprise large numbers of small homogeneous assets with similar risk
characteristics  where  credit-scoring  techniques  are  generally  used, statistical  techniques  are  used  to  calculate  impairment
allowances on the portfolio, based on historical recovery rates and assumed emergence periods. These statistical analyses use as
primary inputs the extent to which accounts in the portfolio are in arrear and historical information on the eventual losses
encountered from such delinquent portfolios. There are many such models in use, each tailored to a product, line of business or
client category.

Judgement and knowledge is needed in selecting the statistical methods to use when the models are developed or revised. The
impairment allowance reflected in the financial statements for these portfolios is therefore considered to be reasonable and
supportable.

For larger exposures impairment allowances are calculated on an individual basis and all relevant considerations that have a
bearing on the expected future cashflows are taken into account, for example the business prospects for the client, the realisable
value of collateral, the group’s position relative to other claimants, the reliability of client information and the likely cost and
duration of the workout process. The level of the impairment allowance is the difference between the value of the discounted
expected  future  cashflows  (discounted  at  the  loan’s  original  effective  interest  rate) and  its  carrying  amount. Subjective
judgements are made in the calculation of future cashflows. Furthermore, judgements change with time as new information
becomes available or as workout strategies evolve, resulting in frequent revisions to the impairment allowance as individual
decisions are taken. Changes in these estimates would result in a change in the allowances and have a direct impact on the
impairments charge.

3.2 Fair value of financial instruments

Some of the group’s financial instruments are carried at fair value through profit or loss, such as those held for trading, designated
by management under the fair-value option and non-cashflow hedging derivatives.

Other non-derivative financial assets may be designated as available for sale. Available-for-sale financial investments are initially
recognised at fair value and are subsequently held at fair value. Gains and losses arising from changes in fair value of such assets
are included as a separate component of equity. The fair value of a financial instrument is the amount at which the instrument
could  be  exchanged  in  a  current  transaction  between  willing  parties, other  than  in  a  forced  or  liquidation  sale. Financial
instruments  entered  into  as  trading  transactions, together  with  any  associated  hedging, are  measured  at  fair  value  and  the
resultant profits and losses are included in net trading income, along with interest and dividends arising from long and short
positions  and  funding  costs  relating  to  trading  activities. Assets  and  liabilities  resulting  from  gains  and  losses  on  financial
instruments  held  for  trading  are  reported  gross  in  trading  portfolio  assets  and  liabilities  or  derivative  financial  instruments,
reduced by the effects of netting agreements where there is an intention to settle net with counterparties.

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245

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

3 KEY  ASSUMPTIONS  CONCERNING  THE  FUTURE  AND  KEY  SOURCES  OF  ESTIMATION  ...

continued

3.2 Fair value of financial instruments ... continued

Valuation methodology
The method of determining the fair value of financial instruments can be analysed into the following categories:

(a)-1Unadjusted quoted prices in active markets where the quoted price is readily available and the price represents actual and

regularly occurring market transactions on an arm’s length basis.

(b) Valuation techniques using market observable inputs. Such techniques may include

–

–

using recent arm’s-length market transactions,

referring to the current fair value of similar instruments and

– making  use  of  discounted  cashflow  analysis, pricing  models  or  other  techniques  commonly  used  by  market 

participants.

(c)-1Valuation  techniques  used  above, but  that  include  significant  inputs  that  are  not  observable. On  initial  recognition  of
financial instruments measured using such techniques the transaction price is deemed to provide the best evidence of fair
value for accounting purposes.

The valuation techniques in (b) and (c) above use inputs such as interest rate yield curves, equity prices, commodity and currency
prices/yields, volatilities  of  underlyings  and  correlations  between  inputs. The  models  used  in  these  valuation  techniques  are
calibrated against industry standards, economic and observed transaction prices, where available.

Various factors influence the availability of observable inputs and these may vary from product to product and change over time.
Factors include, for example, the depth of activity in the relevant market, the type of product, whether the product is new and
not widely traded in the market place, the maturity of market modelling and the nature of the transaction (bespoke or generic).

To the extent that valuation is based on models or inputs that are not observable in the market, the determination of fair value
can be more subjective, dependent on the significance of the unobservable input to the overall valuation. Unobservable inputs
are determined based on the best information available, for example by reference to similar assets, similar maturities, appropriate
proxies or other analytical techniques.

Further information on the fair value of financial instruments is provided in note 5 to the accounts.

Corporate bonds
Corporate bonds are valued using observable active quoted prices or recently executed transactions, except where observable
price quotations are not available. In that scenario the fair value is determined based on cashflow models where significant inputs
may include yield curves, bond or single-name credit default swap spreads.

Private-equity investments
The fair value of private equity is determined using appropriate valuation methodologies that, dependent on the nature of the
investment, may  include  discounted  cashflow  analysis, enterprise  value  comparisons  with  similar  companies, price/earnings
comparisons and turnover multiples. For each investment the relevant methodology is applied consistently over time and may
be adjusted for changes in market conditions relative to the instrument.

Own credit on financial liabilities
The carrying amount of financial liabilities held at fair value is adjusted to reflect the effect of changes in own credit spreads. As
a result, the carrying value of issued bonds and subordinated-debt instruments that have been designated at fair value through
profit and loss is adjusted by reference to the movement in the appropriate spreads. The resulting gain or loss is recognised in
the income statement.

Derivatives
Derivative contracts can be exchange-traded or over-the-counter (OTC) agreements.

The fair value of financial instruments that are not quoted in active markets is determined by using valuation techniques.

Where  valuation  techniques  or  models  are  used  to  determine  fair  values, they  are  validated  and  periodically  independently
reviewed  by  qualified  senior staff. Models  are  calibrated  and  back-tested  to  ensure  that  outputs  reflect  actual  data  and
comparative market prices. To the extent that it is practical, models use only observable data.

3.3 Securitisations and special-purpose entities

The  group  sponsors  the  formation  of SPEs primarily  for  the  purpose  of  allowing  clients  to  hold  investments, for  asset
securitisation transactions, for asset financing and for buying or selling credit protection. The group consolidates the SPEs it
controls in terms of IFRS guidance. Where it is difficult to determine whether the group controls an SPE, it makes judgements,

246

NEDBANK GROUP ANNUAL REPORT 2008

in terms of IFRS guidance, about its exposure to the risks and rewards, as well as about its ability to make operational decisions
for the SPE in question. In arriving at judgements, these factors are considered both jointly and separately.

3.4 Goodwill

Management has to consider at least annually whether the current carrying value of goodwill is impaired. The first step of the
impairment review process requires the identification of independent CGUs, by dividing the group business into as many largely
independent income streams as is reasonably practicable. The goodwill is then allocated to these independent units. The first
element  of  this  allocation  is  based  on  the  areas  of  the  business  expected  to  benefit  from  the  synergies  derived  from  the
acquisition. The second element reflects the allocation of the net assets acquired and the difference between the consideration
paid for those net assets and their fair value. This allocation is reviewed following business reorganisation. The carrying value of
the unit, including the allocated goodwill, is compared with its fair value to determine whether any impairment exists. If the fair
value of a unit is less than its carrying value, goodwill will be impaired. Detailed calculations may need to be carried out, taking
into consideration changes in the market in which a business operates (eg competitive activity and regulatory change). In the
absence  of  readily  available  market  price  data  this  calculation  is  based  on  discounting  expected  pretax  cashflows  at  a  risk-
adjusted interest rate appropriate to the operating unit, the determination of both of which requires the exercise of judgement.
The estimation of pretax cashflows is sensitive to the periods for which detailed forecasts are available and to assumptions
regarding the long-term sustainable cashflows. While forecasts are compared with actual performance and external economic
data, expected cashflows naturally reflect management’s view of future performance.

3.5 Retirement benefit obligations

The group provides pension plans for employees in most parts of the world.Arrangements for staff retirement benefits vary from
country to country and are made in accordance with local regulations and customs.

For defined-benefit schemes actuarial valuation of each of the scheme’s obligations using the projected-unit credit method and
the fair valuation of each of the scheme’s assets are performed annually in accordance with the requirements of IAS 19.

The actuarial valuation is dependent on a series of assumptions, the key ones being interest rates, mortality, investment returns
and inflation. Mortality estimates are based on standard industry and national mortality tables, adjusted where appropriate to
reflect the group’s own experience.

The returns on fixed-interest investments are set to market yields at the valuation date (less an allowance for risk) to ensure
consistency  with  the  asset  valuation. The  returns  on  equities  are  based  on  the  long-term  outlook  for  global  equities  at  the
calculation date having regard to current market yields and dividend growth expectations.The inflation assumption reflects long-
term expectations of both earnings and retail price inflation.

Further information on retirement benefit obligations, including assumptions, is set out in note 36 to the accounts.

3.6 Income taxes

The  group  is  subject  to  direct  taxation  in  a  number  of  jurisdictions  in  which  it  operates. There  may  be  transactions  and
calculations for which the ultimate tax determination has an element of uncertainty during the ordinary course of business. The
group  recognises  liabilities  based  on  objective  estimates  of  the  quantum  of  taxes  that  may  be  due. Where  the  final  tax
determination  is  different  from  the  amounts  that  were  initially  recorded, such  differences  will  impact  the  income  tax  and
deferred tax provisions in the period in which such determination is made, through profit and loss for the period.

4 CAPITAL MANAGEMENT

Nedbank Group’s Capital Management Framework reflects the integration of risk, capital, strategy and performance measurement
across the group and contributes significantly to the successful Enterprisewide Risk Management Framework (ERMF).

A  board-approved Solvency  and  Capital  Management Policy  requires  Nedbank  Group  to  be  capitalised  at  the  greater  of  Basel  II
regulatory capital and economic capital.

The Group Capital Management Division reports to the Chief Financial Officer and is mandated with the implementation of the
Capital Management Framework and the internal capital adequacy assessment process (ICAAP) across the group. Capital management
(incorporating ICAAP) responsibilities of the board and management are incorporated in their respective terms of reference contained
in the ERMF and are assisted by the board’s Group Risk and Capital Management Committee, and Group ALCO, respectively.

Capital, reserves and long-term debt instruments
The group’s Capital Management Framework, policies and processes include all group capital and reserves as per the group’s statement
of changes in total shareholders’ equity on pages 214 and 215 as well as the long-term debt instruments per note 43 on page 301.

Further details on the ERMF, capital management and regulatory requirements are disclosed in the Risk and Capital Management
Report on pages 116 to 182.

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247

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

5 GROUP BALANCE SHEET – CATEGORIES OF FINANCIAL INSTRUMENTS

At fair value through
profit or loss

Held for
trading
Rm 

*
Designated
Rm 

Total
Rm 

Notes

Available-
for-sale
financial
assets
Rm 

Held-to-
maturity
investments
Rm 

**
Loans and
receivables
Rm 

**
Financial
liabilities at
amortised
cost
Rm 

Non-
financial
assets and
liabilities
Rm

2008
Assets
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
Clients’ indebtedness for acceptances
Current taxation receivable
Investment securities
Non-current assets held for sale
Investments in associate companies 
and joint ventures
Deferred taxation asset
Investment property
Property and equipment
Long-term employee benefit assets
Computer software and capitalised 
development costs
Mandatory reserve deposits with 
central bank
Goodwill

21
22
23
25
26
28

29
30
32

31
33
34
35
36

37

21
38

8 609 
18 589 
22 321 
42 138 
434 233 
6 084 
3 024 
346 
8 455 
10 

1 167 
200 
213 
4 327 
1 741 

1 607 

10 065 
3 894 

7 102 
22 321 
1 247 
10 427 
1 004 

4 552 

5 165 

1 770 

310 

18 726 

16 053 
34 280 
167 

8 609 

5 802 
389 526  
4 913  

257 

7 952 

246 

10 065  

3 024 
346 

10 

1 167 
200 
213 
4 327 
1 741 

1 607 

3 894 

Total assets

567 023 

42 358 

63 004 

5 721 

20 496 

418 915 

– 

16 529 

Equity and liabilities
Ordinary share capital
Ordinary share premium
Reserves

39.1

410 
11 370 
23 133 

410 
11 370 
23 133 

Total equity attributable to equity- 
holders of the parent
Minority shareholders’ equity 
attributable to:

– ordinary shareholders
– preference shareholders

39.2

23
40
41

Total equity 
Derivative financial instruments
Amounts owed to depositors
Other liabilities
Liabilities under acceptances
29
Current taxation liabilities
33
Deferred taxation liabilities
Long-term employee benefit liabilities 36
42
Investment contract liabilities
43
Long-term debt instruments

34 913 

– 

– 

– 

– 

– 

– 

34 913 

– 
23 737 
19 611 
3 712 

1 881 
3 279 

40 073 
23 737 
466 890 
9 829 
3 024 
235 
2 100 
1 231 
5 843 
14 061 

– 

– 

– 

– 

– 

40 073 

1 881 
3 279 

98 976 
50 

5 843 
7 951 

348 303 
6 067 

6 110 

3 024
235
2 100
1 231

Total liabilities

526 950 

47 060 

112 820 

Total equity and liabilities

567 023 

47 060 

112 820 

– 

– 

– 

– 

– 

– 

360 480 

6 590

360 480 

46 663

248

NEDBANK GROUP ANNUAL REPORT 2008

At fair value through
profit or loss

Total
Rm 

Held for
trading
Rm 

*
Designated
Rm 

Notes

Available-
for-sale
financial
assets
Rm 

Held-to-
maturity
investments
Rm 

**
Loans and
receivables
Rm 

**
Financial
liabilities at
amortised
cost
Rm 

Non-
financial
assets and
liabilities
Rm

2007
Assets
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
Clients’ indebtedness for acceptances
Current taxation receivable
Investment securities
Non-current assets held for sale
Investments in associate companies 
and joint ventures
Deferred taxation asset
Investment property
Property and equipment
Long-term employee benefit assets
Computer software and capitalised 
development costs
Mandatory reserve deposits with 
central bank
Goodwill

21
22
23
25
26
28

29
30
32

31
33
34
35
36

37

21
38

10 344 
25 793 
9 047 
29 637 
373 956 
9 313 
2 251 
59 
8 318 
31 

978 
25 
171 
3 929 
1 393 

1 349 

8 364 
3 898 

14 574 
9 047 
5 087 
26 005 
3 715 

4 243 

5 984 

992 

241 

6 219 

12 245 
22 930 
243 

10 344 

5 845 
325 021  
5 355  

8 004 

314 

8 364 

2 251 
59 

31 

978 
25 
171 
3 929 
1 393 

1 349 

3 898 

488 856 

58 428 

47 665 

6 539 

7 211 

354 929 

– 

14 084 

Total assets

Equity and liabilities
Ordinary share capital
Ordinary share premium
Reserves

39.1

402 
10 721 
19 070 

Total equity attributable to equity- 
holders of the parent
Minority shareholders’ equity 
attributable to:

– ordinary shareholders
– preference shareholders

39.2

23
40
41

Total equity 
Derivative financial instruments
Amounts owed to depositors
Other liabilities
Liabilities under acceptances
29
Current taxation liabilities
Deferred taxation liabilities
33
Long-term employee benefit liabilities 36
42
Investment contract liabilities
43
Long-term debt instruments

30 193 

– 

– 
11 432 
16 147 
26 610 

1 511 
3 421 

35 125 
11 432 
384 541 
34 225 
2 251 
337 
1 616 
1 157 
5 846 
12 326 

– 

– 

54 447 

5 846 
7 725 

Total liabilities

453 731 

54 189 

68 018 

Total equity and liabilities

488 856 

54 189 

68 018 

– 

– 

– 

– 

– 

– 

– 

– 

402 
10 721 
19 070 

– 

30 193 

1 511 
3 421 

– 

35 125 

– 

– 

313 947 
7 615 

2 251 
337 
1 616 
1 157 

4 601 

– 

– 

326 163 

5 361 

326 163 

40 486 

* Refer to note 24 in respect of financial instruments designated as at fair value through profit or loss.

** The group measures all significant fixed-rate instruments at fair value, and any change in fair value is recognised in the income statement.

Loans and advances and other financial assets and liabilities that are not carried at fair value principally comprise of variable-rate financial assets and liabilities. The
interest rates on these financial assets and liabilities are adjusted when the relevant benchmark interest rate changes.
The  group  has  developed  and  applied  a  fair-value  methodology  in  respect  of  gross  exposures  for  loans  and  advances  and  financial  liabilities  that  are  measured  at
amortised cost at 31 December 2008. The methodology incorporates the average interest rates per product type and the projected monthly cashflows per product type.
Future forecasts for the overall group’s probability of default (PD) and loss-given default (LGD) for periods 2009 through to 2011, based on the latest internal data
available, are applied to the first three years’ projected cashflows. Average PDs and LGDs are applied to the projected cashflows for the period 2012 onwards. There are
no significant variances in the fair-value methodology results compared with values as reported in the financial statements.
For impaired advances the carrying value as determined after consideration of the group’s IAS39 credit impairments is considered the best estimate of fair value.
The group is therefore satisfied that, after considering the internal credit models together with other assumptions and the variable-interest-rate exposure, the carrying
value of loans and receivables and financial liabilities measured at amortised cost approximates fair value.

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M
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A
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E
M
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A
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249

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

6 LIQUIDITY GAP (CONTRACTUAL)

Rm

2008
Cash and cash equivalents (including 
mandatory reserve deposits with 
central bank)
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets

<3 months <6 months 

>3 months  >6 months 
<1 year 

>1 year 
<5 years 

Non- 
>5 years  determined 

Total 

4 238 
7 979 
758 
5 593 
93 980 
4 720 

200 
3 223 
148 
1 895 
14 482 

16 
4 081 
11 600 
416 
24 337 

3 306 
6 230 
22 107 
136 902 

3 585 
12 127 
164 532 

14 220 

26 348 

18 674
18 589
22 321
42 138
434 233
31 068 

117 268 

19 948 

40 450 

168 545 

180 244 

40 568 

567 023

Total equity and liabilities
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities
Long-term debt instruments

850 
347 615 
6 475 

230 
33 434 

11 508 
61 699 

6 529 
22 558 

4 620 
1 584 

479 

7 214 

6 368 

40 073 

15 787 

40 073 
23 737 
466 890 
22 262
14 061 

354 940 

33 664 

73 686 

36 301 

12 572 

55 860 

567 023 

Net liquidity gap

(237 672)

(13 716)

(33 236)

132 244 

167 672 

(15 292)

– 

2007
Cash and cash equivalents (including 
mandatory reserve deposits with 
central bank)
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets

6 223 
17 833 
1 736 
7 796 
90 683 
5 957 

320 
2 621 
819 
1 312 
11 977 

12 
2 736 
653 
668 
21 951 

115 
2 603 
3 857 
16 268 
103 212 

1 982 
3 593 
146 133 

12 038 

25 758 

18 708 
25 793 
9 047 
29 637 
373 956 
31 715 

130 228 

17 049 

26 020 

126 055 

151 708 

37 796 

488 856 

Total equity and liabilities
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities
Long-term debt instruments

1 777 
303 382 
8 097 

869 
23 207 

890 
40 417 

5 111 
16 497 

2 785 
1 038 

616 

3 748 

7 962 

35 125 

37 335 

35 125 
11 432 
384 541 
45 432 
12 326 

313 256 

24 076 

41 923 

25 356 

11 785 

72 460 

488 856 

Net liquidity gap

(183 028)

(7 027)

(15 903)

100 699 

139 923 

(34 664)

– 

2007 government and other securities has been restated to reflect the maturity profile of the associated premium or discount.

250

NEDBANK GROUP ANNUAL REPORT 2008

7 CONTRACTUAL MATURITY ANALYSIS FOR FINANCIAL LIABILITIES

Balance
sheet
amount

Trading
book* <3 months <6 months

>3 months >6 months
<1 year

>1 year
<5 years

>5 years

Equity/Non-
determinable
maturity 

Total

Rm

2008
Long-term debt instruments
Investment contract liabilities
Amounts owed to depositors

14 061 
5 843 

141 
5 843 
466 890  27 430  333 995 

219 

1 063 

10 621 

9 140 

36 438 

65 228 

20 949 

1 142 

45 194 
14 307 
8 814  234 171 
4 584 
1 642 
44  31 374 

15 981 

25 430 

15 835 

1 142 

20 457 

39 798 

5 114 

45 188 
– Current accounts
14 303 
– Savings deposits
– Other deposits and loan accounts 292 768 
6 226 
– Foreign currency liabilities
87 377 
– Negotiable certificates of deposit
– Deposits received under 
repurchase agreements

21 028  16 930 

4 365 

Derivative financial instruments 
– liabilities
Provisions and other liabilities

23 737  23 737 
7 736 
16 419 

632 

25 226 

25 226 

3 129 
46 378 

74 733 

3 129 
46 378 

Guarantees on behalf of clients
Confirmed letters of credit and 
discounting transactions
Unutilised facilities and other

2007
Long-term debt instruments
Investment contract liabilities
Amounts owed to depositors

12 326 
5 846 

183 
5 846 
384 541  17 712  296 000 

296 

1 490 

8 900 

10 885 

24 995 

42 262 

16 135 

716 

45 920 
– Current accounts
– Savings deposits
13 925 
– Other deposits and loan accounts 251 424 
8 230 
– Foreign currency liabilities
– Negotiable certificates of deposit
56 166 
– Deposits received under 
repurchase agreements

8 876 

45 931 
13 928 
8 748  205 571 
5 231 
2 999 
22 373 
53 

5 912 

2 966 

Derivative financial instruments 
– liabilities
Provisions and other liabilities

11 432  11 432 
39 586  28 338 

2 251 

11 406 

21 097 

11 715 

716 

13 589 

21 165 

4 420 

526 950  58 903  340 611 

36 657 

66 291 

31 570 

10 282 

8 051  552 365 

–  74 733 

– 

– 

– 

– 

– 

74 733 

21 184 
5 843 
–  485 182

45 194 
14 307 
301 373 
6 226 
96 787 

21 295 

23 737 
16 419 

8 051 

25 226 

3 129 
46 378 

21 754 
5 846 
–  397 820 

45 931 
13 928 
259 253 
8 230 
61 600 

8 878 

11 432 
39 586 

8 997 

20 579 

2 427 
48 632 

453 731  57 482  304 280 

25 291 

43 752 

25 035 

11 601 

8 997  476 438 

Guarantees on behalf of clients
Confirmed letters of credit and 
discounting transactions
Unutilised facilities and other

20 579 

20 579 

2 427 
48 632 

71 638 

2 427 
48 632 

– 

71 638 

– 

– 

– 

– 

– 

71 638 

This table is based on a contractual, undiscounted basis. 2007 has been restated to exclude total equity.

* Trading areas of the group are not managed on a contractual-maturity basis. The markets in which the group trades are generally liquid and positions will often be closed out before
contractual maturity. An internal centralised funding desk is in place and ensures the funding of all trading positions each day. Strict limits exist in terms of what funds can be borrowed
for the centralised funding desk. These limits were put in place by the Group Asset and Liability Committee and are constantly monitored.

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N
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I

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A

251

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

8 HISTORICAL VALUE AT RISK (99%, ONE DAY) BY RISK TYPE

Rm

Foreign exchange
Interest rate
Equity products
Other
Diversification

2008 
Average Minimum Maximum Year-end

2007
Average Minimum Maximum Year-end

6,12
13,78 
7,78 
6,22 
(14,17) 

2,25
7,42 
3,30 
3,35 

20,08
24,98 
21,21 
8,67 

3,39
19,32
6,53 
6,59
(11,80) 

2,50
14,50 
12,60 

(4,70) 

0,70
10,40 
5,70 

6,40
22,00 
28,70 

4,40 
13,80 
7,50 

(2,40) 

Total value-at-risk exposure

19,73 

10,26 

36,52 

24,03

24,90 

14,90 

37,40 

23,30 

9 INTEREST RATE REPRICING GAP

Rm

2008
Total assets
Total equity and liabilities
Interest rate hedging activities
Repricing profile
Cumulative repricing profile
Expressed as a percentage of total assets

2007
Total assets
Total equity and liabilities
Interest rate hedging activities
Repricing profile
Cumulative repricing profile
Expressed as a percentage of total assets

<3 months <6 months 

>3 months  >6 months 
<1 year 

>1 year 
<5 years 

Trading,
non-rate
>5 years  and foreign 

Total 

423 926 
348 042 
(46 246)
29 638 
29 638 
5,2 

380 535 
281 382 
(42 477)
56 676 
56 676 
11,6 

8 716 
37 236 
24 254 
(4 266)
25 372 
4,5 

4 673 
23 780 
17 371 
(1 736)
54 940 
11,2 

1 881 
46 023 
42 430 
(1 712)
23 660 
4,2 

3 920 
43 347 
34 780 
(4 647)
50 293 
10,3 

37 856 
14 007 
(3 766)
20 083 
43 743 
7,7 

23 115 
15 865 
(6 774)
476 
50 769 
10,4 

21 919 
6 033 
(16 672)
(786)
42 957 
7,6 

12 397 
5 538 
(2 900)
3 959 
54 728 
11,2 

72 725 
115 682 

567 023 
567 023 

(42 957)

64 216 
118 944 

(54 728)

488 856 
488 856 
–
–

10 CREDIT ANALYSIS OF OTHER SHORT-TERM SECURITIES, AND GOVERNMENT AND OTHER

SECURITIES

Credit rating

Investment grade 
2008
Rm

2007
Rm

Subinvestment grade 

Not rated 

Total 

2008
Rm

2007
Rm

2008
Rm

2007
Rm

2008
Rm

2007
Rm

Other short-term securities

18 054 

25 516 

530 

273 

– Negotiable certificates of deposit
– Treasury bills and other

14 002 
4 052 

21 320 
4 196 

Government and other securities

42 057 

29 548 

– Government and government-

guaranteed

– Other dated securities

30 933 
11 124

19 231 
10 317 

60 111 

55 064 

530 

81 

81 

611 

273 

65 

65 

338 

5 

5 

–

5 

4 

18 589 

25 793 

14 002 
4 587 

21 320 
4 473 

42 138 

29 637 

30 933 
11 205 

19 240 
10 397 

60 727 

55 430 

4 

24 

9 
15 

28 

All debt securities that are purchased by the group are rated using an internal rating system, being the Nedbank Group rating
(NGR)  scale. The  group  requires  that  all  investments  be  rated  using  the  NGR  scale  to  ensure  that  credit  risk  is  measured
consistently  and  accurately  across  the  group. This  ensures  compliance  with  the  group’s  policy  surrounding  the  rating  of
investments. The NGR scale has been mapped to the Standard and Poor’s credit rating system. According to the NGR scale,
investment  grade  can  be  equated  to  a  Standard  and  Poor’s  rating  of BB and  above. All  government  and  other  short-term
securities are current and not impaired. Investment grade includes credit ratings from NGR01 to NGR11 and subinvestment
grade includes credit ratings from NGR12 to NGR25.

252

NEDBANK GROUP ANNUAL REPORT 2008

11 INTEREST AND SIMILAR INCOME

Home loans (including properties in possession)
Commercial mortgages
Finance lease and instalment debtors
Credit cards
Bills and acceptances
Overdrafts
Term loans

– Personal loans
– Other term loans

Government and other securities
Short-term funds and securities
Other loans

Interest and similar income may be analysed as follows:

– Interest and similar income from financial instruments not at fair value through 

profit and loss

– Interest and similar income from financial instruments at fair value through profit or loss

12 INTEREST EXPENSE AND SIMILAR CHARGES

Deposit and loan accounts
Current and savings accounts
Negotiable certificates of deposit
Other liabilities
Long-term debt instruments

Interest expense and similar charges may be analysed as follows:

– Interest expense and similar charges from financial instruments not at fair value 

through profit and loss

– Interest expense and similar charges from financial instruments at fair value through 

profit or loss

2008 
Rm

17 798 
8 857 
8 301 
1 332 
67 
2 271 
7 119 

2 172 
4 947 

3 210 
1 558 
7 473 

2007
Rm

12 798 
6 230 
6 130 
1 003 
99 
1 727 
5 181 

2 036 
3 145 

1 926 
1 475 
5 432 

57 986 

42 001 

53 357 
4 629 

57 986 

25 941 
2 027 
8 413 
3 906 
1 529 

41 816 

37 669 
4 332 

42 001 

17 161 
1 708 
5 177 
2 746 
1 063 

27 855 

31 930 

24 960 

9 886 

41 816 

2 895 

27 855 

An unaudited margin analysis of the interest income and interest expense by asset and liability category is presented on page 54.

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A

253

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

13 NON-INTEREST REVENUE

Commission and fee income****

– Administration fees
– Cash-handling fees
– Insurance commission
– Exchange commission
– Fees
– Guarantees
– Card income
– Service charges
– Bond originator income
– Other commission

Securities dealing and fair-value adjustments

– Securities dealing**
– Fair-value adjustments (note 13.1)

Net trading income**

– Foreign exchange 
– Debt securities 
– Equities 
– Commodities

Rental income
Investment income

– Long-term asset sales
– Dividends received

Sundry income***

– Income from non-banking subsidiaries
– Other sundry income

Foreign currency translation gains

2008 
Rm

7 910 

267 
464 
548 
358 
990 
108 
1 846 
1 972 

1 357 

498 

130 
368 

1 553 

1 156 
557 
(194)
34 

51 
242 

8 
234 

475 

226 
249 

* 

2007
Rm

7 528 

195 
378 
523 
294 
1 056 
83 
1 695 
1 709 
578 
1 017 

841 

836 
5 

1 334 

733 
342 
233 
26 

51 
159 

28 
131 

533 

271 
262 

* 

* Represents amounts less than R1 million.
** These amounts relate to gains and losses on financial assets and liabilities held for trading.
*** Sundry  income  for  2007  includes  R48  million  (2008: R0  million)  gross  profit, comprising  turnover  of  R143  million  (2008: R0  million)  and  cost  of  sales  of 

R95 million (2008: R0 million) from non-banking subsidiaries.

**** Commission and fee income includes an amount of R695 million (2007: R625 million) received for trust and fiduciary fees.

10 729

10 446

13.1 Analysis of fair-value adjustments

Fair-value adjustments can be analysed as follows:

– Held for trading 
– Designated at fair value through profit or loss

13.2 Government grants

(928)
1 296 

368 

281 
(276)

5 

The group advances home loans from its Retail cluster for affordable housing. The group receives various government grants
from  the  South African  and  foreign  governments. The  government  grants  take  a  variety  of  forms, including  interest  rate
subsidies on loans advanced to the group and payment in respect of previously writtenoff advances in respect of qualifying
deceased estates. The government grants that are received by the group in respect of affordable housing are recognised when
the conditions of the government grant have been fulfilled and the grant is due to the group.

Certain  government  assistance  is  directed  directly  towards  the  client, including  grants  made  to  clients  as  first-time
homeowners. Although the group may assist the client in obtaining the grant, it does not qualify as a government grant
as envisaged by the accounting standard.

The group receives certain South African government grants in the form of refunds for Skills Development Levies and they
pertain to prior training that has been facilitated by the group on behalf of its employees.

254

NEDBANK GROUP ANNUAL REPORT 2008

13.3 Segmental analysis

Rm

Commission and fee income****

– Administration fees
– Cash-handling fees
– Insurance commission
– Exchange commission
– Fees
– Guarantees
– Other card income
– Service charges
– Bond originator income
– Other commission

Securities dealing and fair-value 
adjustments

– Securities dealing 
– Fair-value adjustments 

Net trading income 

– Foreign exchange 
– Debt securities 
– Equities 
– Commodities

Rental income
Investment Income

– Long-term asset sales
– Dividends received

Sundry income

– Income from non-banking 

subsidiaries

– Other sundry income

Foreign currency translation gains

Nedbank Group
2008

2007

Nedbank Corporate
2008
2007

Nedbank Capital
2008
2007

7 910 

267 
464 
548 
358 
990 
108 
1 846 
1 972 
–
1 357 

498 

130 
368 

1 553 

1 156 
557 
(194)
34 

51 
242 

8 
234 

475 

226 
249 

–

7 528 

195 
378 
523 
294 
1 056 
83 
1 695 
1 709 
578 
1 017 

841 

836 
5 

1 334 

733 
342 
233 
26 

51 
159 

28 
131 

533 

271 
262 

–

2 035 

2 543 

298 

338 

52 
361 
17 
205 
284 
102 
44 
437 

533 

39 

56 
(17)

185 

185 

16 
142 

8 
134 

161 

161 

56 
281 
22 
186 
295 
77 
36 
410 
750 
430 

327 

303 
24 

121 

121 

15 
22 

8 
14 

170 

46 
124 

296 
2 

35 

72 
(37)

334 
2 

2 

500 

518 
(18)

1 333 

1 172 

914 
557 
(172)
34 

89 

89 

27 

571 
342 
233 
26 

108 

2 
106 

17 

27 

17 

Total non-interest revenue

10 729 

10 446 

2 578 

3 198 

1 782 

2 135 

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255

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

13 NON-INTEREST REVENUE ... continued
13.3 Segmental analysis ... continued

Rm

Nedbank Retail
2008
2007

Imperial Bank 
2008
2007

Shared Services
2008
2007

763 

545 

28 

25 

38 

98 

70 

39 

14 

59 

8 

5 
8 

(29)

(29)

–

–

–

–

–

(5)

2 
(7)

–

37 
–

Commission and fee income**** 5 454 

4 772 

– Administration fees
– Cash-handling fees
– Insurance commission
– Exchange commission
– Fees
– Guarantees
– Other card income
– Service charges
– Bond originator income
– Other commission

Securities dealing and fair-value 
adjustments

– Securities dealing 
– Fair-value adjustments 

Net trading income 

– Foreign exchange 
– Debt securities 
– Equities 
– Commodities

Rental income
Investment Income

– Long-term asset sales
– Dividends received

Sundry income

– Income from non-banking 

subsidiaries

150 
103 
531 
148 
418 
4 
1 802 
1 535 

146 
97 
501 
104 
417 
4 
1 659 
1 299 

1 

1 

57 

57 

(3)
5 

5 

32

3 

3 

41 

41 

1 
2 

2 

32 

Central Management
and eliminations 
2007

2008

(34)

(13)

(197)

(14)

(16)

(14)

(5)

457 

(1)
458 

(22)

(22)

1 
6 

6 

(172)
3 

(34)

12 
(46)

–

1 
23 

18 
5 

33 

7 

4 
10 

12 

45 

45 

–

34 
4 

4 

– Other sundry income

32 

32 

19 

89 

Foreign currency translation gains

19 

89 

271 

292 

(35)

(67)

226 
45 

225 
67 

(35)

(67)

Total non-interest revenue

5 546 

4 851 

88 

128 

362 

408 

373 

(274)

256

NEDBANK GROUP ANNUAL REPORT 2008

14 OPERATING EXPENSES

Staff costs

– Salaries and wages 
– Long-term employee benefits*
– Share-based payments expense – employees**

Computer processing

– Depreciation for computer equipment
– Amortisation of computer software
– Operating lease charges for computer equipment
– Other computer processing expenses

Communication and travel

– Depreciation for vehicles
– Other communication and travel

Occupation and accommodation

– Depreciation for owner-occupied land and buildings
– Operating lease charges for land and buildings
– Other occupation and accommodation expenses

Marketing and public relations
Fees and insurances

– Auditors’ remuneration

– Statutory audit – current year
– Statutory audit – prior year
– Non-audit services – interim reviews
– Non-audit services – other services

– Bond Choice fees
– Other fees and insurance costs 

Furniture, office equipment and consumables

– Depreciation for furniture and other equipment
– Operating-lease charge for furniture and other equipment
– Other office equipment and consumables

Other sundries 

Included in staff costs are the following:
Executive directors’ remuneration***
Non-executive directors’ remuneration***

2008 
Rm

7 040 

7 193 
(239)
86 

1 841 

331 
414 
146 
950 

636 

3 
633 

2007
Rm

7 079 

6 923 
20 
136 

1 673 

288 
431 
126 
828 

558 

3 
555 

1 122 

1 068 

71 
469 
582 

877 
1 326 

94 

70 
4 
5 
15 

1 232 

326 

211 
31 
84 

379 

67 
457 
544 

887 
1 498 

93 

64 
4 
7 
18 

517 
888 

297 

187 
20 
90 

281 

13 547 

13 341 

16 
10 

26 

19 
10 

29 

Certain expenses incurred by the company on behalf of subsidiary companies are recovered from subsidiary companies.

* Includes  contributions  to  defined-benefit  and  defined-contribution  pension  funds  and  post-retirement  medical  aid  funding  and  any  adjustments  for  defined-

benefit obligations together with any fair-value adjustments of plan assets held. Refer to note 36.

** Excluding amounts related to the group’s BEE schemes.
*** Refer to pages 197 and 198 of the Remuneration Report for a detailed breakdown of directors’ remuneration.

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257

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

14 OPERATING EXPENSES ... continued

14.1 Segmental analysis

Rm

Nedbank Group
2008

2007

Nedbank Corporate
2008
2007

Nedbank Capital
2008

2007

Staff costs
Computer processing
Communication and travel
Occupation and accommodation
Marketing and public relations
Fees and insurances
Office equipment and consumables
Other sundries
Indirect transfer pricing

7 040 
1 841 
636 
1 122 
877 
1 326 
326 
379 
–

7 079 
1 673 
558 
1 068 
887 
1 498 
297 
281 
–

Operating expenses
BEE transaction expenses

13 547 
194 

13 341 
148 

Total operating expenses

13 741 

13 489 

Efficiency ratio (%)

51,1 

54,9 

1 939 
167 
193 
217 
105 
345 
96 
55 
870 

3 987 
32 

4 019 

47,4 

1 731 
170 
94 
182 
116 
734 
44 
55 
1 320 

4 446 
32 

4 478 

53,5 

671 
96 
79 
44 
37 
92 
5 
33 
330 

1 387 
32 

1 419 

52,2 

15 BEE TRANSACTION EXPENSES

BEE share-based payments expenses
Fees

Refer to note 50 for a description of the BEE schemes.

16 INDIRECT TAXATION
Value-added taxation
Revenue stamps
Other transaction taxes

Value-added taxation comprises that portion which is irrecoverable as a result of
the interest earned in the banking sector.

17 NON-TRADING AND CAPITAL ITEMS
Profit on sale of subsidiaries and investments 
(Loss)/Profit on sale of property and equipment
Impairment of investments
Impairment of property and equipment, and capitalised development costs

* Represents amounts less than R1 million.

2008 
Rm

181 
13 

194 

317 
3 
54 

374 

769 
(2)
* 
(11)

756

641 
75 
66 
32 
28 
96 
8 
25 
282 

1 253 
31 

1 284 

47,9 

2007
Rm

147 
1 

148 

258 
4 
43 

305 

110 
8 
(6)
(1)

111

258

NEDBANK GROUP ANNUAL REPORT 2008

Nedbank Retail

2008

3 283 
401 
286 
846 
454 
489 
171 
201 
1 750 

7 881 
92 

7 973 

61,1 

2007

3 136 
346 
237 
790 
499 
397 
165 
152 
1 603 

7 325 
42 

7 367 

63,5 

Imperial Bank 

2008

2007

306 
40 
33 
26 
16
26 
13 
65 

525 

525 

28,8

294 
30 
33 
24 
49 
18 
11 
30 

489 

489 

30,2 

Shared Services

2008

1 145 
1 137 
79 
(13)
294 
310 
42 
28 
(2 932)

90 
42 

132 

2007

1 289 
1 064 
164 
22 
219 
391 
72 
37 
(3 191)

67 
48 

115 

Central Management
and eliminations 
2007

2008

(304)

(34)
2 
(29)
64 
(1)
(3)
(18)

(323)
(4)

(327)

(12)
(12)
(36)
18 
(24)
(138)
(3)
(18)
(14)

(239)
(5)

(244)

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A
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E
C
N
A
N
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V
O
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I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

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T
N
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M
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A
T
S

I

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T
E
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D
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A
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A
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A

259

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

18 DIRECT TAXATION

18.1 Charge for the year

South African normal taxation

– Current charge 
– Capital gains taxation – current
– Capital gains taxation – deferred
– Deferred taxation

Foreign taxation

Current and deferred taxation on income
Prior-year overprovision – current taxation
Prior-year underprovision – deferred taxation

Total taxation on income
Secondary tax on companies
Taxation on non-trading and capital items – deferred taxation on sale of 
subsidiaries, investments and property and equipment

18.2 Taxation rate reconciliation 

Standard rate of South African normal taxation
Reduction in taxation rate (note 18.4)
Non-taxable dividend income
Capital items
Differences between foreign taxation rates and South African taxation rate
Risk provision
Structured deals
Secondary tax on companies
Other

Effective taxation rate

18.3 Future taxation relief

2008 
Rm

1 554 
(3)
(25)
(7)
77 

1 596 
(315)
353 

1 634 
123 

111 

1 868 

% 

28 
(2)
(5)
(1)
(1)

(1)
1 
3 

22 

2007
Rm

1 882 

6 
224 
106 

2 218 
(24)
21 

2 215 
121 

7 

2 343 

% 

29 

(4)
(1)
(1)
1 
(1)
1 
2 

26 

The  group  has  estimated  taxation  losses  of  R1  285  million  (2007: R314  million)  that  can  be  set  off  against  future 
taxable  income, of  which  R1  267  million  (2007: R221  million)  has  been  applied  to  the  deferred  taxation  balance.
Furthermore, the group has accumulated STC credits amounting to R617 million at the year-end (2007: R511 million),
which have arisen as a result of dividends received exceeding dividends paid. A deferred taxation asset of R62 million
(2007: R51 million) has been raised on these STC credits.

18.4 Change in company taxation rate

The South African corporate taxation rate has been reduced from 29% to 28% during the current year. The effect of this
change in rate on the group’s deferred taxation liability is a credit to the current-year deferred taxation charge in the
income  statement  of  R39  million. A  further  deferred  taxation  credit  to  the  income  statement  for  the  2008  year  of 
R153 million flows from the introduction of the provisions of section 9C of the Income Tax Act. This has allowed the group
to reduce the rate of tax applicable to unrealised surpluses of certain equity instruments to 14%.

260

NEDBANK GROUP ANNUAL REPORT 2008

19 EARNINGS

19.1 Earnings per share

Basic earnings and headline earnings per share are calculated by dividing the relevant earnings amount by the weighted
average number of shares in issue. Diluted earnings and diluted headline earnings per share are calculated by dividing the
relevant earnings by the weighted average number of shares in issue after taking the dilutive impact of potential ordinary
shares to be issued into account.

Rm

2008
Profit attributable to equityholders of the parent
Adjusted for:

– Non-trading and capital items (note 17)
– Taxation on non-trading and capital items (note 18)

Adjusted profit attributable to equityholders of 
the parent

Weighted average number of ordinary shares
Adjusted for:

– Share schemes that have a dilutive effect

Basic 

Headline

Basic

Diluted

Basic

Diluted

6 410 

6 410 

6 410 

6 410 

(756)
111 

(756)
111 

6 410 

6 410 

5 765 

5 765 

405 412 483  405 412 483  405 412 483  405 412 483 

6 122 316 

6 122 316 

Adjusted weighted average number of ordinary shares 405 412 483  411 534 799  405 412 483  411 534 799 

Earnings per share (cents)

1 581 

1 558 

1 422 

1 401 

2007
Profit attributable to equityholders of the parent
Adjusted for:

– Non-trading and capital items (note 17)
– Taxation on non-trading and capital items (note 18)

Adjusted profit attributable to equityholders of 
the parent

Weighted average number of ordinary shares
Adjusted for:

– Share schemes that have a dilutive effect

6 025 

6 025 

6 025 

6 025 

(111)
7 

(111)
7 

6 025 

6 025 

5 921 

5 921 

398 746 512  398 746 512  398 746 512  398 746 512 

15 658 900 

15 658 900 

Adjusted weighted average number of ordinary shares 398 746 512  414 405 412  398 746 512  414 405 412 

Earnings per share (cents)

1 511 

1 454 

1 485 

1 429 

The  diluted  earnings  per  share  calculations  are  based  on  the  group’s  daily  average  share  price  of  10  276  cents 
(2007: 13 833 cents) and exclude the effect of certain share options granted under certain share option schemes as they
would be antidilutive. The number of share options not included in the weighted average number of shares (as they would
have been antidilutive) is 33 million (2007: 17 million).

19.2 Headline earnings reconciliation

2008 

Gross

Net of
taxation

Profit attributable to equityholders of the parent
Less: non-trading and capital items

Profit on sale of subsidiaries, investments and property 
and equipment
Net impairment of investments, property and equipment 
and capitalised development costs

756 

767 

(11)

Headline earnings

6 410 
645 

656 

(11)

5 765 

Gross

111 

118 

(7)

2007

Net of
taxation

6 025 
104 

111 

(7)

5 921 

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N
A
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I

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A
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N
A

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261

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

20 DIVIDENDS

20.1 Ordinary shares

2008
Final declared for 2007 – paid 2008
Interim declared for 2008

Ordinary dividends paid 2008

Final ordinary dividend declared for 2008

2007
Final declared for 2006 – paid 2007
Interim declared for 2007

Ordinary dividends paid 2007

Final ordinary dividend declared for 2007

Last date 
to register 

Millions of
shares

Cents per 
share 

4 Apr 08
5 Sep 08

29 Mar 07 
14 Sep 07 

411 
418 

402 
406 

350 
310* 

660 

310* 

284 
310** 

594 

350** 

Rm

1 440  
1 296 

2 736 

1 142 
1 260  

2 402 

STC  on  dividends  equals  10%  of  the  amount  declared, which  will  be  partially  offset  by  the  deferred  taxation  asset
previously raised for STC credits.

* Total dividend declared for 2008 = 620 cents per share.
** Total dividend declared for 2007 = 660 cents per share.

262

NEDBANK GROUP ANNUAL REPORT 2008

20.2 Minority interest – preference shareholders

Days 

Rate % 

Rm 

2008
Dividends paid:
Nedbank Limited
1 July 2007 – 31 December 2007

1 July 2007 – 19 August 2007
20 August 2007 – 14 October 2007
15 October 2007 – 9 December 2007
10 December 2007 – 31 December 2007

1 January 2008 – 30 June 2008

1 January 2008 – 13 April 2008
14 April 2008 – 16 June 2008
17 June 2008 – 30 June 2008

Imperial Bank Limited
1 July 2007 – 31 December 2007

1 July 2007 – 19 August 2007
20 August 2007 – 14 October 2007
15 October 2007 – 9 December 2007
10 December 2007 – 31 December 2007

1 January 2008 – 30 June 2008

1 January 2008 – 14 April 2008
15 April 2008 – 13 June 2008
14 June 2008 – 30 June 2008

366 
184 

50 
56 
56 
22 

182 

104 
64 
14 

366 
184 

50 
56 
56 
22 

182 

104 
60 
18 

9,750 
10,125 
10,500 
10,875 

10,875 
11,250 
11,625 

9,100 
9,450 
9,800 
10,150 

10,150 
10,500 
10,850 

Dividends declared:
Nedbank Limited
Final declared for 2007 – paid March 2008
Interim declared for 2008 – paid September 2008

Imperial Bank Limited
Final declared for 2007 – paid March 2008
Interim declared for 2008 – paid September 2008

Number 
of shares 

Cents
per share 

312 781 032 
312 781 032 

51,55479 
55,02049 

3 000 000 
3 000 000 

481,17808 
515,31507 

Final declared for 2008 – payable March 2009 (Nedbank Limited)

312 781 032 

58,26844 

Final declared for 2008 – payable March 2009 (Imperial Bank Limited)

3 000 000 

545,32877 

333,4 
161,3 

41,8 
48,6 
50,4
20,5 

172,1 

96,7 
61,5 
13,9 

29,9 
14,4

3,8 
4,3 
4,5 
1,8 

15,5 

8,7 
5,2 
1,6 

363,3 

Rm

161 
172 

14 
16 

363 

182 

16

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E
C
N
A
N
R
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V
O
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I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
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M
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A
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S

I

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N
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E
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R
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D
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F
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N
A

263

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

20 DIVIDENDS ... continued

20.2 Minority interest – preference shareholders ... continued

Days 

Rate % 

Rm 

2007
Dividends paid:
Nedbank Limited
1 July 2006 – 31 December 2006

1 July 2006 – 3 August 2006
4 August 2006 – 15 October 2006
16 October 2006 – 10 December 2006
11 December 2006 – 31 December 2006

1 January 2007 – 30 June 2007

1 January 2007 – 10 June 2007
11 June 2007 – 30 June 2007

Imperial Bank Limited
22 June 2006 – 31 December 2006

22 June 2006 – 3 August 2006
4 August 2006 – 15 October 2006
16 October 2006 – 10 December 2006
11 December 2006 – 31 December 2006

1 January 2007 – 30 June 2007

1 January 2007 – 10 June 2007
11 June 2007 – 30 June 2007

Dividends declared:
Nedbank Limited
Final declared for 2006 – paid March 2007
Interim declared for 2007 – paid September 2007

Imperial Bank Limited
Final declared for 2006 – paid March 2007
Interim declared for 2007 – paid September 2007

365 
184 

34 
73 
56 
21 

181 

161 
20 

374 
193 

43 
73 
56 
21 

181 

161 
20 

8,250 
8,630 
9,000 
9,375 

9,375 
9,750 

7,700 
8,050 
8,400 
8,750 

8,750 
9,100 

Number 
of shares 

Cents
per share 

277 298 896 
312 781 032 

44,13699 
46,72603 

3 000 000 
3 000 000 

430,93151 
435,82192 

Final declared for 2007 – payable March 2008 (Nedbank Limited)

312 781 032 

51,55479 

Final declared for 2007 – payable March 2008 (Imperial Bank Limited)

3 000 000 

481,17808 

268,3 
122,4 

21,3 
47,8 
38,3 
15,0 

145,9 

126,9 
19,0 

26,0 
12,9 

2,7 
4,8 
3,9 
1,5 

13,1 

11,6 
1,5 

294,3 

Rm 

122  
146  

13 
13 

294 

161 

14 

264

NEDBANK GROUP ANNUAL REPORT 2008

21 CASH AND CASH EQUIVALENTS

Coins and bank notes
Money at call and short notice
Balances with central banks – other than mandatory reserve deposits

Cash and cash equivalents excluding mandatory reserve deposits with central banks 
Mandatory reserve deposits with central banks 

Money  at  call  and  short  notice  constitutes  amounts  withdrawable  in  32  days  or
less. Mandatory reserve deposits are not available for use in the group’s day-to-day
operations. Cash on hand and mandatory reserve deposits are non-interest bearing.
Other money market placements are floating-interest-rate assets.

22 OTHER SHORT-TERM SECURITIES

22.1 Analysis

Negotiable certificates of deposit
Treasury bills and other bonds

22.2 Sectoral analysis

Banks
Government and public sector

23 DERIVATIVE FINANCIAL INSTRUMENTS

2008 
Rm

2 443 
3 583 
2 583 

8 609 
10 065

18 674 

14 002 
4 587 

18 589 

14 002 
4 587 

18 589 

2007
Rm

2 439 
6 318 
1 587 

10 344 
8 364 

18 708 

21 320 
4 473 

25 793 

21 320 
4 473 

25 793 

These  transactions  have  been  entered  into  in  the  normal  course  of  business  and  are  carried  at  fair  value. There  are  no
commitments or contingent commitments under derivative instruments that are settled otherwise than with cash. The principal
types of derivative contracts into which the group enters are described below.

Swaps
These are OTC agreements between two parties to exchange periodic payments of interest, or payments for the change in value
of a commodity, or related index, over a set period based on notional principal amounts. The group enters into swap transactions
in several markets. Interest rate swaps exchange fixed rates for floating rates of interest based on notional amounts. Basis swaps
exchange floating or fixed interest calculated by using different bases. Cross currency swaps are the exchange of interest based
on notional values of different currencies.

Options
Options  confer  the  right, but  not  the  obligation, on  the  buyer  to  receive  or  pay  a  specific  quantity  of  an  asset  or  financial
instrument for a specific price at or before a specified date. Options may be exchange-traded or OTC agreements. The group
principally buys and sells currency, interest rate and equity options.

Futures and forwards
Short-term interest rate futures, bond futures, financial and commodity futures and forward foreign exchange contracts are all
agreements to deliver, or take delivery of, a specified amount of an asset or financial instrument based on a specified rate, price
or  index  applied  against  the  underlying  asset  or  financial  instrument at  a  specified  date. Futures  are  exchange-traded  at
standardised amounts of the underlying asset or financial instrument. Forward contracts are OTC agreements and are principally
dealt in by the group in interest rates as forward rate agreements and in currency as forward foreign exchange contracts.

Collateral
The  group  may  require  collateral  in  respect  of  the  credit  risk  present  in  derivative  transactions. The  amount  of  credit  risk  is
principally the positive fair value of the contract. Collateral may be in the form of cash or in the form of a lien over a client’s
assets entitling the group to make a claim for current and future liabilities.

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I

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N
A
N
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F

L
A
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N
N
A

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265

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

23 DERIVATIVE FINANCIAL INSTRUMENTS ... continued

23.1 Total carrying amount of derivative financial instruments

Gross carrying amount of assets
Gross carrying amount of liabilities

Net carrying amount

2008 
Rm

22 321 
(23 737)

(1 416)

2007
Rm

9 047 
(11 432)

(2 385)

A detailed breakdown of the carrying amount (fair value) and notional principal of the various types of derivative financial
instruments held by the group is presented in the following tables.

23.2 Notional principal of derivative financial instruments

This represents the gross notional amounts of all outstanding contracts at year-end. This gross notional amount is the
sum of the absolute amount of all purchases and sales of derivative instruments. The notional amounts do not represent
amounts exchanged by the parties and therefore represent only the measure of involvement by the group in derivative
contracts and not its exposure to market or credit risks arising from such contracts. The amounts actually exchanged are
calculated on the basis of the notional amounts and other terms of the derivative, which relate to interest rates, exchange
rates, securities prices or financial and other indices.

2008

Notional
principal
Rm 

Positive  Negative 
value
Rm

value
Rm

Notional
principal
Rm

2007
Positive 
value
Rm

Negative 
value
Rm

Equity derivatives

29 066 

14 282 

14 784 

128 711 

57 970 

70 741 

Options written
Options purchased
Futures*

11 837 
10 849 
6 380 

10 849 
3 433 

Commodity derivatives

16 549 

7 877 

Options written
Options purchased
Caps and floors
Swaps
Futures

8 
635 
15 521 
385 

8 
278 
7 591 

11 837 

2 947 

8 672 

357 
7 930 
385 

45 831 
46 778 
36 102 

14 196 

11 
10 

14 174 
1 

46 778 
11 192 

45 831 

24 910 

6 888 

7 308 

11 

7 297 

10 

6 877 
1 

Exchange rate derivatives

277 055 

138 282 

138 773 

160 962 

81 037 

79 925 

Forwards
Currency swaps
Options purchased
Options written

250 625 
16 626 
4 893 
4 911 

124 639 
8 750 
4 893 

125 986 
7 876 

4 911 

147 949 
10 336 
1 388 
1 289 

76 520 
3 129 
1 388 

71 429 
7 207 

1 289 

Interest rate derivatives

471 675 

227 757 

243 918 

375 147 

164 343 

210 804 

Interest rate swaps
Forward rate agreements
Options purchased
Options written
Futures
Caps
Floors
Credit default swaps

269 703 
122 815 
23 498 
24 988 
20 948 
4 074 
2 865 
2 784 

131 014 
60 504 
23 498 

8 412 
750 
2 715 
864 

138 689 
62 311 

24 988 
12 536
3 324 
150 
1 920 

247 861 
84 324 
4 145 
4 600 
24 819 
4 731 
3 656 
1 011 

103 774 
37 328 
4 145 

12 177 
2 752 
3 156 
1 011 

144 087 
46 996 

4 600 
12 642 
1 979 
500 

Total notional principal

794 345 

388 198 

406 147 

679 016 

310 238 

368 778 

* Includes contracts for difference with positive notionals of R34 million (2007: R8 million) and negative notionals of R318 million (2007: R376 million).

266

NEDBANK GROUP ANNUAL REPORT 2008

23.3 Carrying amount of derivative financial instruments

The amounts disclosed represent the fair value of all derivative instruments held at year-end. The fair value of a derivative
financial instrument is the amount at which it could be exchanged in a current transaction between willing parties, other
than a forced liquidation or sale. Fair values are obtained from quoted market prices, discounted cashflow models and
market-accepted option-pricing models.

Net
carrying
amount
Rm 

(1 110)

(1 567)
404 
53 

2008
Carrying
amount of
assets
Rm

Carrying
amount of
liabilities
Rm

510 

404 
106 

1 620 

1 567 

53 

Equity derivatives

Options written
Options purchased
Futures**

Commodity derivatives

157 

1 383 

1 226 

Options written
Options purchased
Caps and floors
Swaps
Futures

(13)
170 

104 
1 279 

117 
1 109 

Exchange rate derivatives

458 

14 380 

13 922 

Forwards
Currency swaps
Options purchased
Options written

Interest rate derivatives

Interest rate swaps
Forward rate agreements
Options purchased
Options written
Futures
Caps
Floors
Credit default swaps

314 
177 
639 
(672)

(921)

(804)
10 
86 
(141)
(7)
(5)
41 
(101)

12 397 
1 344 
639 

6 048 

5 658 
227 
86 

2 
3 
41 
31 

12 083 
1 167 

672 

6 969 

6 462 
217 

141 
9 
8 

132 

Net
carrying
amount
Rm

(1 677)

(2 155)
912 
(434)

356 

(36)
27 

365 

32 

351 
(309)
20 
(30)

(1 096)

(1 138)
14 
11 
(11)
(5)
3 
4 
26 

2007

Carrying
amount of
assets
Rm

1 290 

Carrying
amount of
liabilities
Rm

2 967 

2 155 

912 
378 

725 

27 

698 

3 208 

2 747 
441 
20 

3 824 

3 653 
106 
11 

1 
23 
4 
26 

812 

369 

36 

333 

3 176 

2 396 
750 

30 

4 920 

4 791 
92 

11 
6 
20 

Total carrying amount

(1 416)

22 321 

23 737 

(2 385)

9 047 

11 432 

** Includes contracts for difference. The fair value is zero as the variation margin is settled at the end of every day.

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N
A
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I

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N
A
N
I
F

L
A
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N
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A

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I

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G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

267

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

23 DERIVATIVE FINANCIAL INSTRUMENTS ... continued

23.4 Analysis of derivative financial instruments

Equity
derivatives
Rm

Commodity Exchange rate
derivatives
derivatives
Rm 
Rm 

Interest rate
derivatives
Rm 

Total
Rm

Derivative assets 
2008
Maturity analysis 
Under one year
One to five years
Over five years

2007 
Maturity analysis 
Under one year
One to five years
Over five years

Derivative liabilities
2008
Maturity analysis
Under one year
One to five years
Over five years

2007 
Maturity analysis 
Under one year
One to five years
Over five years

Notional principal of derivatives 
2008
Maturity analysis 
Under one year
One to five years
Over five years

2007 
Maturity analysis 
Under one year
One to five years
Over five years

248 
262 

133 
712 
538 

510 

1 383 

556 
733 
1 

1 290 

507 
1 106 
7 

1 620 

753 
2 193 
21 

2 967 

65 
576 
84 

725 

116 
639 
471 

1 226 

25 
307 
37 

369 

11 157 
2 876 
347 

14 380 

2 219 
966 
23 

3 208 

11 316 
2 491 
115 

13 922 

2 262 
885 
29 

3 176 

966 
2 381 
2 701 

6 048 

368 
1 582 
1 874 

3 824 

649 
2 293 
4 027 

6 969 

496 
1 725 
2 699 

4 920 

12 504 
6 231 
3 586 

22 321 

3 208 
3 857 
1 982 

9 047 

12 588 
6 529 
4 620 

23 737 

3 536 
5 110 
2 786 

11 432 

17 102 
11 957 
7 

29 066 

3 404 
7 221 
5 924 

229 253 
45 313 
2 489 

256 386 
148 265 
67 024 

506 145 
212 756 
75 444 

16 549 

277 055 

471 675 

794 345 

87 461 
41 168 
82 

341 
11 373 
2 482 

139 480 
19 329 
2 153 

194 190 
116 267 
64 690 

421 472 
188 137 
69 407 

128 711 

14 196 

160 962 

375 147 

679 016 

268

NEDBANK GROUP ANNUAL REPORT 2008

24 FINANCIAL INSTRUMENTS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS

The group has satisfied the criteria for designation of financial instruments as at fair value through profit or loss in terms of the
accounting policies.

Various fixed-rate advances and liabilities are entered into by the group. The overall interest rate risk of the group is economically
hedged by the Asset and Liability Management Division of the group by way of interest rate swaps. The interest rate risk is then
traded to the market through the trading desk.

The swaps and frontdesk trading instruments meet the definition of ‘derivatives’, and are therefore measured at fair value in
terms of IAS 39. Fixed-rate advances and liabilities, however, do not meet this definition. Therefore, to avoid any accounting
mismatch of holding the advances at amortised cost and the hedging instruments at fair value, the advances and liabilities are
designated as at fair value through profit or loss and are held at fair value.

Various instruments are designated as at fair value through profit or loss, which is consistent with the group’s documented risk
management or investment strategy. The fair value is the attribute of the instrument that is managed and reviewed on a regular
basis by the risk/investment strategies of the group. The risk of the portfolio is measured and monitored on a fair-value basis.

24.1 Financial assets designated as at fair value through profit or loss

2008
Negotiable certificates of deposit purchased
Treasury bills
Government-guaranteed
Other dated securities
Commercial mortgage loans
Instalment credit
Leases and debentures
Preference shares
Loans and advances (secured and unsecured)
Overdrafts
Foreign correspondents
Other loans
Loans to other banks
Trade and other bills and acceptances
Debtors and accruals
Listed investments
Unlisted investments
Endowment policy
Insurance policyholder investments
Policyholder assets

Change in fair value due to
change in credit risk

Maximum
exposure to
credit risk
Rm

Current

period** Cumulative
Rm 

Rm 

1 091 
3 461 
13 126 
2 927 
16 824 
2 794 
632 
2 349 
6 074 
* 
2 850 
2 143 
277 
337 
167 
541 
1 560 
8 
5 879 
(36)

63 004 

11
1 

(1)

(2)

(3)

12

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

269

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

24 FINANCIAL INSTRUMENTS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS ...

continued

24.1 Financial assets designated as at fair value through profit or loss ... continued

Change in fair value due to
change in credit risk

Maximum
exposure to
credit risk
Rm

Current

period** Cumulative
Rm 

Rm 

341 
3 901 
11 255 
991 
9 756 
31 
123 
1 726 
5 878 
28 
2 084 
2 316 
497 
492 
243 
595 
1 317 
245 
5 881 
(35)

47 665 

3 
(3)

(10)

(93)

12 
1 

2 

(103)

15 

2007
Negotiable certificates of deposit purchased
Treasury bills
Government-guaranteed
Other dated securities
Commercial mortgage loans
Instalment credit
Leases and debentures
Preference shares
Loans and advances (secured and unsecured)
Overdrafts
Foreign correspondents
Other loans
Loans to other banks
Trade and other bills and acceptances
Debtors and accruals
Listed investments
Unlisted investments
Endowment policy
Insurance policyholder investments
Policyholder assets

* Represents amounts less than R1 million.
** Refer to note 27.1.

Nedbank Group has estimated the change in credit risk in accordance with IAS 39: Financial Instruments: Recognition and
Measurement as being the amount arising from the change in fair value of the financial instrument that is not attributable
to changes in market conditions that give rise to market risk. Individual credit spreads for loans or receivables that have
been  designated  as  at  fair  value  through  profit  or  loss  are  determined  at  inception  of  the  deal. The  credit  spread  is
calculated as the difference between the benchmark interest rate and the interest rate charged to the client. Subsequent
changes in the benchmark interest rate and the credit spread give rise to changes in fair value in the financial instrument.
Loans and advances are reviewed for observable changes in credit risk and the credit spread is adjusted at subsequent dates
if there has been an observable change in credit risk relating to a particular loan or advance. No credit derivatives are used
to hedge the credit risk on any of the financial assets designated as at fair value through profit or loss.

270

NEDBANK GROUP ANNUAL REPORT 2008

24.2 Financial liabilities designated as at fair value through profit or loss

2008
Long-term subordinated debt instruments
Call and term deposits
Fixed deposits 
Promissory notes and other liabilities
Foreign currency liabilities
Investment contract liabilities
Negotiable certificates of deposit 
Sundry creditors

2007
Long-term subordinated debt instruments
Call and term deposits
Fixed deposits 
Promissory notes and other liabilities
Foreign currency liabilities
Investment contract liabilities
Negotiable certificates of deposit

Change in fair value due to
change in credit risk

Current
period
Rm 

Cumulative
Rm

207 
50 

262 
55 

88 

97 

Contractually
payable at
maturity
Rm

Fair
value
Rm

7 951 
31 324 
98 
6 
4 659 
5 843 
62 889 
50 

7 955 
31 193 
97 
6 
4 656 
5 843 
62 405 

112 820 

112 155 

345 

414 

7 725 
18 294 
80 
74 
5 283 
5 846 
30 716 

68 018 

7 971 
18 397 
83 
75 
5 279 
5 846 
30 884 

68 535 

47 
2 
1 
(5)

9 

54 

55 
5 

9 

69 

The change in fair value due to credit risk has been determined as the difference between fair values determined using a
credit-adjusted liability curve and a risk-free liability curve.

The  curves  are  constructed  using  a  standard ‘bootstrapping’ process  to  derive  a  zero  coupon  yield  curve. The  credit-
adjusted curve was based on offer rates of negotiable certificates of deposit and promissory notes with maturity periods
of up to five years, and thereafter the offer rates of issued Nedbank bonds are applied.

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

271

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

25 GOVERNMENT AND OTHER SECURITIES

25.1 Analysis

Government and government-guaranteed securities
Other dated securities

25.2 Sectoral analysis

Financial services, insurance and real estate
Banks
Manufacturing
Transport, storage and communication
Retailers, catering and accommodation 
Government and public sector
Other sectors

25.3 Valuation

Listed securities

– Carrying amount
– Market value

Unlisted securities

– Carrying amount
– Directors’ valuation

2008 
Rm

30 933 
11 205 

42 138 

4 640 
3 092 
523 
246 

32 283 
1 354 

42 138 

42 099 
42 013 

39 
39 

2007
Rm

19 240 
10 397 

29 637 

5 670 
2 266 

161 
200 
21 053 
287 

29 637 

29 335 
29 316 

302 
302 

Total market/directors’ valuation

42 052 

29 618 

272

NEDBANK GROUP ANNUAL REPORT 2008

26 LOANS AND ADVANCES

The group extends advances to individuals and to the corporate, commercial and public sectors. Advances made to individuals
are mostly in the form of mortgages, instalment credit, overdrafts, personal loans and credit card borrowings. The group’s main
activity  is  in  the  corporate  and  commercial  sector, where  advances  are  made  to  a  large  cross section  of  businesses,
predominantly in the finance and service area, manufacturing and building and property finance sectors.

26.1 Classification of loans and advances

Mortgage loans

– Home loans*
– Commercial mortgages

Net finance lease and instalment debtors* (note 26.4) 

– Gross investment
– Unearned finance charges

Credit cards
Other loans and advances

Properties in possession
Overdrafts
Term loans

– Personal loans
– Other term loans

Overnight loans
Other loans to clients

– Foreign client lending
– Remittances in transit
– Other loans**

Preference shares and debentures
Factoring accounts
Deposits placed under reverse repurchase agreements
Trade, other bills and bankers’ acceptances

Impairment of loans and advances (note 27)

Comprises:

– Loans and advances to clients
– Loans and advances to banks

2008 
Rm

216 373 

143 342 
73 031 

61 362 

67 881 
(6 519)

7 248 
157 109 

791 
12 461 
64 144 

7 187 
56 957 

15 760 
44 187 

8 433 
229 
35 525 

15 667 
394 
2 630 
1 075 

442 092 
(7 859)

434 233 

428 189 
13 903 

442 092 

2007
Rm

184 025 

123 980 
60 045 

52 568 

58 025 
(5 457)

7 109 
136 332 

308 
12 514 
39 835 

6 912 
32 923 

18 336 
47 786 

13 734 
196 
33 856 

9 377 
494 
5 839 
1 843 

380 034 
(6 078)

373 956 

361 668 
18 366 

380 034 

* During the 2007 financial year Nedbank Limited completed a R2 billion securitisation of the Nedbank Retail home loan portfolio. Imperial Bank Limited also
successfully securitised R2 billion of its motor vehicle instalment sale agreement portfolio. The notes relating to the abovementioned securitisation deals are
listed on the Bond Exchange of South Africa (BESA). In terms of IAS 39 the home loan portfolio and the motor vehicle instalment sale agreement portfolio
remain on the group’s balance sheet as the group is exposed to substantially all the risks and rewards of ownership of these loans and advances.

** Represents mainly loans relating to Specialised Finance and Debt Capital Markets within the Nedbank Capital segment and other loans within the Nedbank

Corporate and Nedbank Retail segments.

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

273

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

26 LOANS AND ADVANCES ... continued

26.2 Sectoral analysis
Individuals
Financial services, insurance and real estate
Banks
Manufacturing
Building and property development
Transport, storage and communication
Retailers, catering and accommodation
Wholesale and trade
Mining and quarrying
Agriculture, forestry and fishing
Government and public sector
Other services

26.3 Geographical analysis

South Africa
Other African countries
Europe
Asia
USA
Other

26.4 Net finance lease and instalment debtors
Gross finance lease and instalment debtors:
No later than one year
Later than one year and no later than five years
Later than five years

Unearned future income on finance lease and instalment debtors

Net finance lease and instalment debtors

The net finance lease and instalment debtors may be analysed as follows:
No later than one year
Later than one year and no later than five years
Later than five years

2008 
Rm

232 006 
102 215 
13 903 
18 542 
5 728 
10 237 
7 302 
8 558 
17 903 
3 673 
3 225 
18 800 

442 092 

418 923 
11 185 
7 962 
2 122 
731 
1 169 

442 092 

12 092 
45 048 
10 741 

67 881 
(6 519)

61 362 

10 161 
40 523 
10 678 

61 362 

2007
Rm

164 315 
100 220 
18 366 
13 942 
8 323 
9 769 
5 249 
8 734 
9 352 
2 763 
6 666 
32 335 

380 034 

362 182 
8 522 
7 074 
1 266 
493 
497 

380 034 

11 236 
43 055 
3 734 

58 025 
(5 457)

52 568 

10 180 
39 006 
3 382 

52 568 

274

NEDBANK GROUP ANNUAL REPORT 2008

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

275

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

26 LOANS AND ADVANCES ... continued

26.5 Segmental analysis

Rm

Nedbank Group
2008

Nedbank Corporate

2007

2008

2007

Nedbank Capital
2008

2007

Mortgage loans

216 373 

184 025 

82 920 

68 021 

– 

– 

– Home loans 
– Commercial mortgages 

143 342 
73 031 

123 980 
60 045 

16 817 
66 103 

14 796 
53 225 

Net finance lease and instalment 
debtors 
Credit cards 
Other loans and advances 

61 362 
7 248 
157 109 

52 568 
7 109 
136 332 

Properties in possession 
Overdrafts 
Term loans 

– Personal Loans 
– Other term loans 

Overnight loans 
Other loans to clients 

– Foreign client lending 
– Remittances in transit 
– Other loans 

Preference shares and debentures 
Factoring accounts 
Deposits placed under reverse 
repurchase agreements 
Trade, other bills and bankers' 
acceptances 

Loans and advances before 
impairments 
Impairment of advances 

17 620
53 
93 101 

21 
10 112 
50 541 

299 
50 242 

15 723 
10 543 

2 850 
171 
7 522 

5 767 
394 

16 869 
53 
70 612 

30 
10 252 
29 022 

343 
28 679 

18 331 
8 073 

2 084 
140 
5 849 

4 346 
494 

217 

230 

47 902 

51 387 

3 
4 518 

44 
2 059 

4 518 

2 059 

36 
29 956 

4 
36 837 

5 582 

11 649 

24 374 

25 188 

9 689 

4 828 

791 
12 461 
64 144 

7 187 
56 957 

15 760 
44 187 

8 433 
229 
35 525 

15 667 
394 

308 
12 514 
39 835 

6 912 
32 923 

18 336 
47 786 

13 734 
196 
33 856 

9 377 
494 

2 630 

5 839 

2 630 

5 839 

1 075 

1 843 

64 

1 070 

1 776 

442 092 
(7 859)

380 034 
(6 078)

193 694 
(2 151)

155 555 
(1 837)

48 119 
(433)

51 617 
(384)

Total loans and advances 

434 233 

373 956 

191 543 

153 718 

47 686 

51 233 

Comprises:
Loans and advances to clients 
Loans and advances to banks 

Loans and advances before 
impairments 

428 189 
13 903 

361 668 
18 366 

193 235 
459 

155 226 
329 

37 316 
10 803 

35 621 
15 996 

442 092 

380 034 

193 694 

155 555 

48 119 

51 617 

276

NEDBANK GROUP ANNUAL REPORT 2008

Nedbank Retail

Imperial Bank 

Shared Services

2008

2007

2008

121 944 

106 645 

11 793 

120 992 
952 

105 788 
857 

5 668 
6 125 

2007

9 638 

3 549 
6 089 

2008

– 

2007

– 

10 797 
7 195 
14 636 

770 
2 340 
8 283 

6 888 
1 395 

1 
3 148 

1 
58 
3 089 

89 

9 453 
7 056 
13 271 

278 
2 204 
8 369 

6 569 
1 800 

1 
2 338 

1 
28 
2 309 

78 

32 778 

26 064 

975 

521 

801 

801 

52 

52 

122 

385 

385 

11 

11 

125 

5 

3 

154 572 
(4 465)

136 425 
(2 933)

45 546 
(812)

150 107 

133 492 

44 734 

36 223 
(903)

35 320 

151 931 
2 641 

134 412 
2 013 

45 546 

36 223 

154 572 

136 425 

45 546 

36 223 

94 

6 
– 

88 

88 

94 

94 

94 

94 

146 

3 
– 

143 

28 
115 

146 
(2)

144 

118 
28 

146 

Central Management
and eliminations 
2007

2008

(279)

(153)
(126)

(48)

395 

11 
– 

(284)

(135)
(149)

(50)

401 

1 

1 

400 

384 

400 

384 

67 
2 

69 

67 

67 

68 
(19)

49 

68 

68 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

277

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

27 IMPAIRMENT OF LOANS AND ADVANCES

27.1 Impairment of loans and advances

Balance at the beginning of the year* 
(note 52)
Impairments charge 

Income statement charge net of recoveries

– loans and advances
– advances designated as at fair value 
through profit or loss (note 24.1)

Recoveries 

Amounts written off against
impairment/Other transfers

Total impairments
2007
Rm

2008 
Rm

Specific impairments
2007*
Rm

2008
Rm

Portfolio impairments
2007*
Rm

2008 
Rm

6 078 
5 201 

4 822 

4 825 

(3)

379 

5 184 
2 581 

2 164 

2 267 

(103)

417 

4 063 
4 885 

4 506 

4 509 

(3)

379 

3 564 
2 205 

1 788 

1 891 

(103)

417 

2 015 
316 

316 

316 

1 620 
376 

376 

376 

(3 420)

(1 687)

(3 406)

(1 706)

(14)

19 

Impairment of loans and advances

7 859 

6 078 

5 542 

4 063 

2 317 

2 015 

27.2 Impairments of loans and advances by classification

Balance at the
beginning
of the year
Rm

Impairments
charge
Rm

Amounts
written off
against
impairment
/Other
transfers
Rm 

1 104 
502 
36 
456 
696 
2 176 
1 038 
70 

1 680 
219 
127 
762 
421 
823 
1 171 

(2)

6 078 

5 201 

303 
82 
(4)
515 
283 
907 
515 
(20)

998 
465 
66 
282 
685 
1 652 
944 
90 
2 

5 184 

(522)
21 
(35)
(585)
(286)
(1 371)
(608)
(41)
7 

(3 420)

(197)
(45)
(26)
(341)
(272)
(383)
(421)

(2)

2 581 

(1 687)

Total
Rm

2 262 
742 
128 
633 
831 
1 628 
1 601 
29 
5 

7 859 

1 104 
502 
36 
456 
696 
2 176 
1 038 
70 
– 

6 078 

Total impairment – 2008

Home loans
Commercial mortgages
Properties in possession
Credit cards
Overdrafts
Other loans to clients
Net finance lease and instalment debtors
Preference shares and debentures
Trade, other bills and bankers’ acceptances

Impairment of advances

Total impairment – 2007

Home loans
Commercial mortgages
Properties in possession
Credit cards
Overdrafts
Other loans to clients
Net finance lease and instalment debtors 
Preference shares and debentures
Trade, other bills and bankers’ acceptances

Impairment of advances

278

NEDBANK GROUP ANNUAL REPORT 2008

Balance at the
beginning
of the year
Rm

Impairments
charge
Rm

Amounts
written off
against
impairment
/Other
transfers
Rm 

648 
154 
36 
367 
533 
1 494 
779 
52 

1 648 
163 
127 
762 
377 
863 
952 

(7)

4 063 

4 885 

Total
Rm

1 749 
333 
128 
545 
613 
1 077 
1 069 
28 
– 

5 542 

648 
154 
36 
367 
533 
1 494 
779 
52 

(547)
16 
(35)
(584)
(297)
(1 280)
(662)
(24)
7 

(3 406)

(240)
(43)
(26)
(341)
(189)
(512)
(354)

(1)

25 
5 
(1)
11 
(91)
54 
(17)

513 
409 
88 
218 
551 
532 
1 
5 

(14)

2 317 

43 
(2)

(83)
129 
(67)

(1)

19 

456 
348 
89 
163 
682 
259 
18 
– 

2 015 

2 205 

(1 706)

4 063 

660 
207 
66 
239 
476 
1 172 
676 
67 
1 

3 564 

456 
348 
89 
163 
682 
259 
18 

2 015 

338 
258 
43 
209 
480 
268 
23 
1 

228 
(10)
(4)
469 
246 
834 
457 
(15)

32 
56 

44 
(40)
219 

5 

316 

75 
92 
46 
37 
73 
58 
(5)

Specific impairment – 2008

Home loans
Commercial mortgages
Properties in possession
Credit cards
Overdrafts
Other loans to clients
Net finance lease and instalment debtors
Preference shares and debentures
Trade, other bills and bankers’ acceptances

Impairment of advances

Specific impairment – 2007

Home loans
Commercial mortgages
Properties in possession
Credit cards
Overdrafts
Other loans to clients
Net finance lease and instalment debtors
Preference shares and debentures
Trade, other bills and bankers’ acceptances

Impairment of advances

Portfolio impairment – 2008

Home loans
Commercial mortgages
Credit cards
Overdrafts
Other loans to clients
Net finance lease and instalment debtors
Preference shares and debentures
Trade, other bills and bankers’ acceptances

Impairment of advances

Portfolio impairment – 2007

Home loans
Commercial mortgages
Credit cards
Overdrafts
Other loans to clients
Net finance lease and instalment debtors
Preference shares and debentures
Trade, other bills and bankers’ acceptances

Impairment of advances

1 620 

376 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

279

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

27 IMPAIRMENT OF LOANS AND ADVANCES ... continued

27.3 Sectoral analysis
Individuals
Financial services, insurance and real estate
Manufacturing
Building and property development
Transport, storage and communication
Retailers, catering and accommodation
Wholesale and trade
Mining and quarrying
Agriculture, forestry and fishing
Government and public sector
Other services

27.4 Geographical analysis

South Africa
Other African countries
Europe
Asia
Other

27.5 Ratio of impairments 

Total impairments
2007
Rm

2008 
Rm

Specific impairments
2007*
Rm

2008
Rm

Portfolio impairments
2007*
Rm

2008 
Rm

4 870 
1 012 
256 
238 
250 
345 
46 
105 
65 
11 
661 

7 859 

7 604 
89 
112 
6 
48 

7 859 

3 601 
767 
194 
183 
132 
176 
295 
45 
96 
29 
560 

6 078 

5 910 
90 
67 
4 
7 

6 078 

3 850 
447 
127 
150 
105 
292 
8 
70 
33 
7 
453 

5 542 

5 364 
47 
85 

2 608 
401 
127 
126 
67 
59 
277 
16 
42 
11 
329 

4 063 

3 960 
59 
42 

46 

2 

1 020 
565 
129 
88 
145 
53 
38 
35 
32 
4 
208 

2 317 

2 240 
42 
27 
6 
2 

5 542 

4 063 

2 317 

993 
366 
67 
57 
65 
117 
18 
29 
54 
18 
231 

2 015 

1 950 
31 
25 
4 
5 

2 015 

Impairment of advances at the end of the year
Total advances
Ratio (%)

7 859 
442 092 
1.78 

6 078 
380 034 
1.60 

* The group has changed its criteria for the distinction between specific and portfolio impairments during 2008 so as to align criteria with industry standard
practice. The  reclassification  of  impairments  held  against  loans  and  advances  did  not  have  any  effect  on  the  amounts  reported  in  the  group’s  income
statement, balance  sheet, statement  of  changes  in  total  shareholders’ equity  or  cashflow  statement, but  had  an  effect  on  the  notes  above  for  2007  in
respect of specific and portfolio impairment provision balances. Refer to note 52 for reclassification.

27.6 Interest on specifically impaired loans and advances

708 
Interest on specifically impaired loans and advances is determined for the period for which the loan and advance was
classified as specifically impaired.

1 174 

The  amount  is  calculated  by  multiplying  the  discounted  expected  recovery  by  the  effective  interest  rate  for  the
specifically impaired loan and advance. The interest on specifically impaired loans and advances reflects the unwinding
of the time value of money for the expected discounted recovery.

Interest on specifically impaired loans and advances does not represent the contractual interest that has been earned on
the outstanding balance of a loan and advance.

280

NEDBANK GROUP ANNUAL REPORT 2008

Nedbank
Group

Nedbank
Corporate

Nedbank
Capital

Nedbank
Retail

Imperial

Shared services 
and Central 
Bank Management

27.7 Segmental analysis

Rm

2008
Opening balance

– Specific impairment
– Portfolio impairment

Impairment charge

– Income statement impairment 

charge net of recoveries

– Specific impairment
– Portfolio impairment

– Recoveries

6 078 

4 063 
2 015 

5 201 

4 822 

4 506 
316 

379 

Amounts written off/Other transfers

(3 420)

– Specific impairment
– Portfolio impairment

Total impairments

– Specific impairment
– Portfolio impairment

2007 
Opening balance

– Specific impairment
– Portfolio impairment

Impairment charge

– Income statement impairment 

charge net of recoveries

– Specific impairment
– Portfolio impairment

– Recoveries

(3 406)
(14)

7 859 

5 542 
2 317 

5 184 

3 564 
1 620 

2 581 

2 164 

1 788 
376 

417 

Amounts written off/Other transfers

(1 687)

– Specific impairment
– Portfolio impairment

Total impairments

– Specific impairment
– Portfolio impairment

(1 706)
19 

6 078 

4 063 
2 015 

1 837 

820 
1 017 

561 

471 

328 
143 

90 

(247)

(256)
9 

2 151 

982 
1 169 

1 773 

861 
912 

312 

158 

40 
118 

154 

(248)

(235)
(13)

1 837 

820 
1 017 

384 

362 
22 

54 

36 

6 
30 

18 

(5)

(5)

433 

381 
52 

370 

358 
12 

25 

25 

15 
10 

(11)

(11)

384 

362 
22 

2 933 

2 105 
828 

3 882 

3 630 

3 583 
47 

252 

(2 350)

(2 326)
(24)

4 465 

3 614 
851 

2 386 

1 771 
615 

1 828 

1 572 

1 386 
186 

256 

(1 281)

(1 308)
27 

2 933 

2 105 
828 

903 

752 
151 

719 

701 

605 
96 

18 

(810)

(810)

812 

565 
247 

622 

541 
81 

419 

412 

343 
69 

7 

(138)

(139)
1 

903 

752 
151 

21 

24 
(3)

(15)

(16)

(16)

1 

(8)

(9)
1 

(2)

(2)

33 

33 

(3)

(3)

4 
(7)

(9)

(13)
4 

21 

24 
(3)

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

281

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

28 OTHER ASSETS

Sundry debtors and other accounts 
Trading securities and spot positions

29 CURRENT TAXATION 

Normal taxation

– Current taxation receivable
– Current taxation liabilities

30 INVESTMENT SECURITIES

30.1 Carrying amount

Listed investments

Private-equity portfolio
Other

Unlisted investments

Endowment Policies
Dr Holsboer/NES Investment Portfolio
Morning Tide Investments 168 (Pty) Limited
Strate Limited
Private-equity portfolio
Other

Total listed and unlisted investments

Listed policyholder investments at market value

Equities 
Government, public and private sector stock
Unit trusts

Unlisted policyholder investments at directors’ valuation

Equities 
Negotiable certificates of deposit, money market and other short-term funds

Net policyholder liabilities

Total policyholder investments

Total investment securities

30.2 Fair value of listed and unlisted investments

Listed at market value
Unlisted at directors’ valuation

2008 
Rm

5 227 
857 

6 084 

346 
(235)

111 

525 

489 
36 

2 087 

27 
177 
86 
28 
1 085 
684 

2 612 

4 987 

274 
187 
4 526 

892 

2 
890 

(36)

5 843 

8 455 

525 
2 087 

2 612 

2007
Rm

5 598 
3 715 

9 313 

59 
(337)

(278)

598 

482 
116 

1 874 

245 
240 
94 
16 
916 
363 

2 472 

5 178 

419 
196 
4 563 

703 

7 
696 

(35)

5 846 

8 318 

598 
1 874 

2 472 

A register of private-equity and other investments is available for inspection at the company’s registered offices.

282

NEDBANK GROUP ANNUAL REPORT 2008

31 INVESTMENTS IN ASSOCIATE COMPANIES AND JOINT VENTURES

31.1 Carrying amount

Unlisted investments 

31.2 Movement in carrying amount

Carrying amount at the beginning of the year 
Share of associate companies’ and joint ventures’ profit after taxation for 
the current year
Dividends received
Net acquisitions/(disposals) of associate companies and joint ventures at 
carrying value
Foreign currency translation differences

Carrying amount at the end of the year

31.3 Analysis of carrying amount

Associate investments – on acquisition: Net asset value
Share of retained earnings since acquisition 
Cumulative dividends received
Foreign currency translation differences

Information relating to investments in associate companies appears on 
pages 328 to 329.

31.4 Valuation

Unlisted at directors’ valuation

31.5 Goodwill included in associate investments

The carrying amount of investments includes the following amount in 
respect of goodwill:

– Carrying amount at the beginning of the year

– Cost

– Realised through disposals

Carrying amount at the end of the year

2008 
Rm

1 167 

1 167 

978 

154 
(128)

161 
2 

1 167 

986 
602 
(424)
3 

1 167 

1 167 

1 167 

– 

– 

31.6 Summarised financial information of investments in associate companies and joint ventures

2008
Total assets
Total liabilities
Operating results 
Total revenues

2007
Total assets
Total liabilities
Operating results
Total revenues

Joint ventures
Rm

Associates
Rm 

2 738 
2 610 
291 
1 831 

3 448 
3 349 
368 
1 339 

5 117 
4 440 
196 
1 052 

3 182 
2 254 
650 
1 032 

2007
Rm

978 

978 

907 

239 
(163)

(5)

978 

827 
447 
(296)

978 

978 

978 

197 

197 

(197)

– 

Total
Rm 

7 855
7 050 
487
2 883 

6 630 
5 603 
1 018 
2 371 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

283

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

32 NON-CURRENT ASSETS HELD FOR SALE

2008
Properties sold not yet transferred 

2007
Properties sold not yet transferred 

Previously 
included in

Property and
equipment 

Property and
equipment 

Net carrying
amount
Rm

10 

10 

31 

31 

Commitments for the sale of several properties had been entered into at year-end. Transfer, however, had not been effected at
these dates. Transfer of the properties is expected to take place during the following year.

33 DEFERRED TAXATION

33.1 Reconciliation of deferred taxation balance

Deferred taxation asset
Balance at the beginning of the year
Current-year temporary differences recognised in the income statement

– Impairment of loans and advances
– Other income and capital items
– Taxation losses recognised

Other movements

Balance at the end of the year

Deferred taxation liability
Balance at the beginning of the year
Current-year temporary differences recognised in the income statement

– Client credit agreements
– Deferred acquisition costs
– Impairment of loans and advances
– Other income and capital items
– Taxation losses (utilised)/recognised

Other movements

Balance at the end of the year

2008 
Rm

25 
128 

13 
(100)
215 

47 

200 

1 616 
560 

(132)
23 
(154)
897 
(74)

(76)

2 100 

2007
Rm

120 
(95)

(95)

25 

1 649 
155 

(794)
254 

(1 498)
2 193 

(188)

1 616 

284

NEDBANK GROUP ANNUAL REPORT 2008

33.2 Analysis of deferred taxation

Deferred taxation asset
Impairment of loans and advances
Other income and capital items
Taxation losses

Deferred taxation liability
Client credit agreements
Deferred acquisition costs
Impairment of loans and advances
Other income and capital items
Taxation losses

34 INVESTMENT PROPERTY

34.1 Fair value

Fair value at the beginning of the year
Acquisitions
Disposals
Net gain from fair-value adjustments

Fair value at the end of the year

34.2 Fair value of investment property

Investment properties are freehold and are either held to earn rentals or for
capital  appreciation. External  valuations  have  been  obtained  for  all
investment  properties  and  have  been  determined  in  accordance  with  the
group’s accounting policies. The valuers are all members or associates of the
Institute of Valuers (SA).

The  carrying  amount  of  these  properties  is  the  fair  value  of  property  as
determined by registered independent valuers who have recent experience
in  the  location  and  category  of  the  property  being  valued. The  assumed
discount rate applied was between 9,5% and 15,0%, and takes into account
the type of property and the property location.

Valuations determined by reference to existing market conditions
Valuations based on discounted future income streams

34.3 Rental income and operating expenses from investment property

Rental income from investment property
Direct operating expense arising from investment property that generated 
rental income

34.4 Minimum contractual lease rental income from investment property

2008
2009
2010

2008 
Rm

63 
(142)
279 

200 

752 
277 
(468)
1 613 
(74)

2 100 

171 
26 
(1)
17 

213 

207 
6 

213 

16

23

14
4

18 

2007
Rm

3 
22 

25 

1 089 
254 
(314)
651 
(64)

1 616 

158 
10 
(15)
18 

171 

162 
9 

171 

17 

20 

13 
13 
11 

37 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

285

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

35 PROPERTY AND EQUIPMENT

Gross carrying amount
Balance at 1 January
Acquisitions
Increases arising from revaluations
Transfers (to)/from non-current assets held for sale
Disposals
Reclassification
Writeoff of accumulated depreciation on revaluations
Effect of movements in foreign exchange rates

Land

Buildings

2008

2007

2008

2007

396 
5 
213 

614 
8 
15 
(6)

(3)

1 957 
230 
123 
24 

(8)
(41)

1 808 
52 
327 

(216)
32 
(46)

Balance at 31 December

628 

614 

2 285 

1 957 

Accumulated depreciation and impairment losses
Balance at 1 January
Depreciation charge for the year
Acquisitions
Writeoff of accumulated depreciation on revaluations
Transfers to non-current assets held for sale
Impairments
Disposals
Reclassification
Effect of movements in foreign exchange rates

Balance at 31 December 

Carrying amount
At 1 January 

At 31 December 

153 
71 

(41)
(1)

156 
67 

(46)

(59)
35 

– 

614 

628 

– 

182 

153 

396 

614 

1 804 

2 103 

1 652 

1 804 

Registers  providing  the  information  regarding  land  and  buildings, as  required  in  terms  of schedule  4  of  the  Companies Act,
61 of 1973, are available for inspection at the registered office of the company.

Equipment  (principally  computer  equipment, motor  vehicles, fixtures  and  furniture)  is  stated  at  cost  less  accumulated
depreciation  and  impairment  losses. Property  is  recognised  at  the  revalued  amount, which  is  based  on  external  valuations
obtained every three years on a rotation basis for all properties in accordance with the group’s accounting policy. The valuers
are all members or associates of the Institute of Valuers (SA). An annual internal review is also done on those properties not
subject to external valuation. The carrying amount of properties is the fair value as determined by the valuers less subsequent
accumulated depreciation and impairment losses. Adjustments in the valuation of the properties are recorded in the revaluation
reserve which is amortised over the remaining useful life of the property.

In respect of certain property there are restrictions of title in terms of regulatory restrictions such as servitudes. This does not
have a material effect on the ability of the group to transfer these properties. No material plant and equipment has been pledged
as security for liabilities.

In  determining  the  fair  value  of  properties  the  assumed  discount  rates  applied  for  future  income  streams  range  between 
8,5% and 14% and take into account the type of property and the property’s location.

If  land  and  buildings  were  carried  under  the  cost  and  not  the  revaluation  model, the  carrying  amount  would  have  been 
R1 434 million (2007: R1 381 million).

286

NEDBANK GROUP ANNUAL REPORT 2008

Computer equipment
2008

2007

Furniture and
other equipment
2007

2008

Vehicles

Total

2008

2007

2008

2007

2 383 
353 

2 153 
332 

1 687 
339 

1 499 
350 

(152)

(99)

(162)

1 

(3)

(8)

(121)
(44)

3 

2 585 

2 383 

1 856 

1 687 

1 687 
331 

1 508 
288 

(10)
(99)

(136)

2 

1 884 

1 687 

696 

701 

645 

696 

887 
211 
(3)

(124)

2 

973 

800 

883 

835 
187 

(121)
(14)

887 

664 

800 

30 
5 

(9)

2 

28 

15 
3 

(3)

1 

16 

15 

12 

45 
4 

(19)

30 

25 
3 

(13)

15 

20 

15 

6 671 
935 
138 
18 
(323)
(11)
(41)
(5)

7 382 

2 742 
616 
(3)
(41)
(1)
– 
(263)
– 
5 

3 055 

3 929 

4 327 

5 901 
743 
540 
– 
(455)
(12)
(46)
– 

6 671 

2 524 
545 
– 
(46)
– 
(69)
(198)
(14)
– 

2 742 

3 377 

3 929 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

287

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

36 LONG-TERM EMPLOYEE BENEFITS

The  group  has  a  number  of  defined-benefit  and  defined-contribution  plans  in  terms  of  which  it  provides  pension, post-
retirement medical aid and long-term disability benefits to employees and their dependants on retirement, death or disability.
All eligible employees and former employees are members of trustee-administered or underwritten schemes within the group,
financed by company and employee contributions. All South African retirement plans are governed by the Pension Funds Act of
1956. The defined-benefit funds are actuarially valued using the projected unit credit method. Any deficits are funded to ensure
the ongoing financial soundness of the funds.

The benefits provided by the defined-benefit schemes are based on years of membership and/or salary levels. These benefits are
provided from contributions by employees, the group, and income from the assets of these schemes. The benefits provided by
the defined-contribution schemes are determined by the accumulated contributions and investment earnings.

At the dates of the latest valuations, the defined-benefit plans were in a sound financial position in terms of section 16 of the
Pensions Funds Act. During 1998 active members in the Nedgroup Pension Fund (defined benefit) were granted a further option
to  transfer  to  one  of  the  defined-contribution  funds  and  approximately  three  quarters  of  the  then  valuation  surplus  was
allocated to members and pensioners.

The funds that constitute the assets and liabilities that the group has recognised in the balance sheet in respect of its defined-
benefit plans are listed below. The latest actuarial valuations were performed at 31 December 2008.

Refer note 14 for the expense relating to the defined-contribution plans.

Postemployment benefits
Defined-benefit pension and provident funds
• Nedgroup Pension Fund (including the Optiplus policy).

• BoE  Funds, which  consist  of  NBS  Group  Pension  Fund, BoE  Limited  Pension  Fund  (1969) and  Pension  Fund  of  BoE  Bank:

Business Division.

•

Fairbairn Funds, which consist of Fairbairn Private Bank Pension and Provident Funds.

• Nedbank UK Pension Fund.

• Other funds, which consist of Nedbank Swaziland Limited Pension Fund and Nedbank Lesotho Pension Fund (2007 includes

the Lion Match Group Pension Fund and Lion Match Closed Pension Fund. Lion Match was disposed of during 2007).

Defined-benefit medical aid schemes
• Nedgroup Medical Aid Scheme for Nedbank employees and pensioners.

• Nedgroup Medical Aid Scheme for past BoE employees and pensioners.

• Nedbank Namibia Medical Aid Fund.

Other long-term employee benefits

Disability fund
• Nedbank Group Disability Fund [including the Old Mutual Alternative Risk Transfer Fund (OMART) policy].

Insurance policies held with related parties
• Optiplus  (Nedgroup  Pension  Fund)  and  OMART  (Nedbank  Group  Disability  Fund)  are  insurance  policies, the  proceeds  of
which  can  only  be  used  to  pay  or  fund  the  employee  benefits  under  the  specific  funds. However, these  policies  are  not
qualifying insurance policies in terms of IAS 19 Employee Benefits since they are held with related parties. These rights to
reimbursement are therefore recognised as separate assets and in all other respects are treated in the same way as other plan
assets.

288

NEDBANK GROUP ANNUAL REPORT 2008

36.1 Analysis of long-term employee benefit assets and liabilities

Rm

2008
Postemployment benefits
Other long-term employee benefits – Disability fund

2007
Postemployment benefits
Other long-term employee benefits – Disability fund

Assets

Liabilities

Net asset/
(liability)

1 465 
276 

1 741 

1 126 
267 

1 393 

(1 021)
(210)

(1 231)

(976)
(181)

(1 157)

444 
66 

510 

150 
86 

236 

The group’s defined-benefit obligation in terms of the Nedbank Group Disability Fund is recognised together with the fair
value of the assets held in OMART. OMART is a SPE controlled by the group and was established to fund this defined-benefit
obligation. The value of the OMART asset held by the group is R276 million (2007: R267 million).

36.2 Postemployment benefits

Present value
of obligation

Fair value of
plan asset

Surplus/
(Deficit)

Unrecognised
actuarial
(gains)/losses
and assets

Net asset/
(liability)

Analysis of postemployment benefit
assets and liabilities (Rm)
2008
Pension funds

– Nedgroup Fund
– BoE Funds
– Nedbank UK Fund
– Fairbairn Funds
– Other funds

Medical aid funds

– Nedgroup scheme for Nedbank 

employees

– Nedgroup scheme for BoE employees
– Nedbank Namibia scheme (unfunded)

3 315 

2 608 
326 
205 
67 
109 

916 

808 
103 
5 

4 455 

3 613 
468 
201 
66 
107 

743 

743 

Total

2007
Pension funds

– Nedgroup Fund 
– BoE Funds
– Nedbank UK Fund
– Fairbairn Funds
– Other funds

Medical aid funds

– Nedgroup scheme for Nedbank 

employees

– Nedgroup scheme for BoE employees
– Nedbank Namibia scheme (unfunded)

4 231 

5 198 

4 723 

3 855 
431 
250 
75 
112 

749 

749 

2 963 

2 260 
285 
224 
93 
101 

811 

712 
95 
4 

1 140 

1 005 
142 
(4)
(1)
(2)

(173)

(65)
(103)
(5)

967 

1 760 

1 595 
146 
26 
(18)
11 

(62)

37 
(95)
(4)

(500)

(389)
(142)
20 
9 
2 

(23)

(24)
1 

(523)

(1 450)

(1 292)
(146)
(9)
9 
(12)

(98)

(97)
(1)

Total

3 774 

5 472 

1 698 

(1 548)

640 

616
– 
16
8 
– 

(196)

(89)
(102)
(5)

444

310 

303 
– 
17 
(9)
(1)

(160)

(60)
(96)
(4)

150 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
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E
M
R
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D
L
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R
A
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S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

289

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

36 LONG-TERM EMPLOYEE BENEFITS ... continued

36.2 Postemployment benefit ... continued

Pension and
provident
funds

Medical aid
funds

Present value of defined-benefit obligation (Rm)
2008
Balance at the beginning of the year
Current service cost
Interest cost
Contributions by plan participants
Actuarial (gains)/losses
Transfers and curtailments
Recognition of pension fund asset
Benefits paid
Other movements

Balance at the end of the year

2007
Balance at the beginning of the year 
Current service cost
Interest cost
Contributions by plan participants
Actuarial gains
Disposals
Benefits paid
Other movements

Balance at the end of the year 

Fair value of plan assets (Rm)
2008
Balance at the beginning of the year
Expected return on plan assets
Actuarial losses
Contributions by the employer
Contributions by plan participants
Benefits paid
Transfers
Other movements

Balance at the end of the year

2007
Balance at the beginning of the year 
Expected return on plan assets
Actuarial gains
Contributions by the employer
Contributions by plan participants
Benefits paid
Disposals
Other movements

Balance at the end of the year 

2 963 
31 
271 
9 
(96)
(28)
394 
(233)
4 

3 315 

3 000 
33 
227 
9 
(35)
(11)
(258)
(2)

2 963 

4 723 
424 
(484)
30 
8 
(233)
(17)
4 

4 455 

4 265 
361 
433 
22 
9 
(258)
(107)
(2)

4 723 

811 
35 
70 

34 

(34)

916 

810 
31 
70 

(65)

(35)

811 

749 
62 
(38)

(30)

743 

700 
58 
22 

(31)

749 

Total

3 774 
66 
341 
9 
(62)
(28)
394 
(267)
4 

4 231 

3 810 
64 
297 
9 
(100)
(11)
(293)
(2)

3 774 

5 472 
486 
(522)
30 
8 
(263)
(17)
4 

5 198 

4 965 
419 
455 
22 
9 
(289)
(107)
(2)

5 472 

290

NEDBANK GROUP ANNUAL REPORT 2008

Net asset/(liability) recognised (Rm)
2008
Present value of defined-benefit obligation
Fair value of plan assets

Funded status
Unrecognised net actuarial gains
Unrecognised asset due to asset ceiling

Asset
Liability

2007
Present value of defined-benefit obligation 
Fair value of plan assets 

Funded status
Unrecognised net actuarial gains
Unrecognised asset due to asset ceiling

Asset
Liability

Net (income)/expense recognised (Rm)
2008
Current service cost
Interest cost
Expected return on plan assets
Amortisation of unrecognised actuarial gains
Past service cost – benefit of rule change allocated to members
Asset recognition – benefit of rule change allocated to the fund
Gain on curtailments and settlements
Effect of application of asset ceiling

2007
Current service cost
Interest cost
Expected return on plan assets
Amortisation of unrecognised actuarial losses/(gains)
Effect of application of asset ceiling

Movements in net asset/(liability) recognised (Rm)
2008
Balance at the beginning of the year
Net income/(expense) recognised in the income statement
Contributions paid by the employer

Balance at the end of the year

2007
Balance at the beginning of the year
Net income/(expense) recognised in the income statement
Contributions paid by the employer

Balance at the end of the year

Pension and
provident
funds

Medical aid
funds

(3 315)
4 455 

1 140 
(359)
(141)

640 

1 465 
(825)

(2 963)
4 723 

1 760 
(310)
(1 140)

310 

1 126 
(816)

31 
271 
(424)
(35)
394 
(526)
(9)
(2)

(300)

33 
227 
(361)
16 
63 

(22)

310 
300 
30 

640 

266 
22 
22 

310 

(916)
743 

(173)

(23)

(196)

(196)

(811)
749 

(62)
(98)

(160)

(160)

35 
70 
(62)
(1)

(1)

41 

31 
70 
(58)
(1)

42 

(160)
(41)
5 

(196)

(122)
(42)
4 

(160)

Total

(4 231)
5 198 

967 
(359)
(164)

444 

1 465 
(1 021)

(3 774)
5 472 

1 698 
(408)
(1 140)

150 

1 126 
(976)

66 
341 
(486)
(36)
394 
(526)
(9)
(3)

(259)

64 
297 
(419)
15 
63 

20 

150 
259 
35 

444 

144 
(20)
26 

150 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
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D
L
O
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R
A
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S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

291

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

36 LONG-TERM EMPLOYEE BENEFITS ... continued

36.2 Postemployment benefits ... continued

Distribution of plan assets (%)
2008
Equity instruments
Debt instruments
Property
Cash
International
Other

2007
Equity instruments
Debt instruments
Property
Cash
International
Other

Actual return on plan assets (Rm)
2008

2007

Principal actuarial assumptions (%)
2008
Discount rates
Expected rates of return on plan assets
Inflation rate
Expected rates of salary increases
Pension increase allowance
Annual increase to medical aid subsidy
Average expected retirement age (years)

2007
Discount rates
Expected rates of return on plan assets
Inflation rate
Expected rates of salary increases
Pension increase allowance
Annual increase to medical aid subsidy
Average expected retirement age (years)

Pension and
provident
funds

Medical aid
funds

34,17 
32,73 
4,73 
2,71 
16,72 
8,94 

28,00 
13,00 

45,00 
14,00 

Total

33,30 
29,91 
4,05 
8,75 
16,33 
7,66 

100,00 

100,00 

100,00 

52,10 
24,12 
0,28 
5,76 
9,61 
8,13 

27,00 
2,00 

63,00 
8,00 

48,66 
21,09 
0,24 
13,60 
9,39 
7,02 

100,00 

100,00 

100,00 

(60)

794 

24 

80 

(36)

874 

5,8 to 8,5 
5,5 to 10,0 
2,8 to 5,3 
4,9 to 6,3 
0,5 to 3,8 

63 

5 to 8 
4,5 to 9,25 
2,6 to 5 
5 and 6 
0 to 4,5 

7,3 and 8,0 
7,3 
5,3 
5,3 

5,3 and 6,3 
60 and 63 

8 and 8,5 
8,5 
6,5 
6,5 

63 

6,25 and 6,5 
60 and 63 

Pension and provident funds
The expected long-term return is a function of the expected long-term returns on equities, cash and bonds. In setting
these assumptions, the asset splits as at the latest available date were used and adjustments were made to reflect the
effect of expenses.

Weighted average assumptions:
Discount rate
Expected return on plan assets
Future salary increases
Future pension increases

292

NEDBANK GROUP ANNUAL REPORT 2008

2008 
%

7,99
8,74
5,21
3,54

2007
%

8,21
9,14
5,32
3,65

Medical aid funds 
The overall expected long-term rate of return on plan assets is 7,3%. The expected rate of return is based on market
expectations, at the beginning of the period, for returns over the entire life of the related obligation. The expected rate
of return is based on the expected performance of the entire portfolio.

Experience adjustments on present value of defined-benefit 
obligation for past five years 
2008

2007
2006
2005
2004

Experience adjustments on fair value of plan assets for past 
five years
2008

2007
2006
2005
2004

Estimate of future contributions
Contributions expected for ensuing year

Fund surplus/(deficit) for past five years
Pension funds
2008

2007
2006
2005
2004

Medical aid funds
2008

2007
2006
2005
2004

Effect of 1% change in assumed medical cost trend rates (Rm)
1% increase – effect on current service cost and interest cost
1% increase – effect on accumulated benefit obligation
1% decrease – effect on current service cost and interest cost
1% decrease – effect on accumulated benefit obligation

Pension and
provident
funds

Medical aid
funds

Total

(82)

(17)
105 
(22)
(95)

33 

(64)
43 
47 
16 

(49)

(81)
148 
25 
(79)

(483)

(39)

(522)

433 
448 
374 
144 

21 

22 
47 
42 
28 

5 

455 
495 
416 
172 

26 

Present value
of obligation

Fair value of
plan asset

Surplus/
(Deficit)

3 315 

2 963 
3 000 
2 951 
2 708 

916 

811 
810 
714 
628 

4 455 

4 723 
4 265 
3 660 
3 167 

743 

749 
700 
614 
538 

1 140 

1 760 
1 265 
709 
459 

(173)

(62)
(110)
(100)
(90)

2008 

2007 

18 
136 
(15)
(112)

18 
120 
(15)
(98)

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

293

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

37 COMPUTER SOFTWARE AND CAPITALISED DEVELOPMENT COSTS

Software
development
costs
Rm

Software
Rm

2008
Cost
Balance at the beginning of the year
Acquisitions
Development costs commissioned to software
Impairment losses
Disposals and retirements
Foreign exchange and other movements

Balance at the end of the year

Accumulated amortisation and impairment losses
Balance at the beginning of the year
Amortisation charge
Impairment losses
Disposals and retirements
Foreign exchange and other movements

Balance at the end of the year

Carrying amount
At the beginning of the year

At the end of the year

2007
Cost
Balance at the beginning of the year
Acquisitions
Development costs commissioned to software
Disposals or retirements
Foreign exchange and other movements

Balance at the end of the year

Accumulated amortisation and impairment losses
Balance at the beginning of the year
Amortisation charge
Impairment losses
Foreign exchange and other movements
Disposals or retirements

Balance at the end of the year

Carrying amount
At the beginning of the year

At the end of the year

3 249 
92 
328 
(7)
(15)
36 

3 683 

2 326 
414 
(3)
(14)
27 

2 750 

923 

933 

2 886 
110 
308 
(40)
(15)

3 249 

1 941 
431 

(35)
(11)

2 326 

945 

923 

648 
583 
(328)
(7)

896 

222 

222 

426 

674 

499 
414 
(308)
43 

648 

178 

2 
42 

222 

321 

426 

Total
Rm

3 897 
675 
– 
(14)
(15)
36 

4 579 

2 548 
414 
(3)
(14)
27 

2 972 

1 349 

1 607

3 385 
524 
– 
3 
(15)

3 897 

2 119 
431 
2 
7 
(11)

2 548 

1 266 

1 349 

294

NEDBANK GROUP ANNUAL REPORT 2008

38 GOODWILL

38.1 Reconciliation of carrying amount

Carrying amount at the beginning of the year
Arising on business combinations
Realised through disposals
Foreign currency translation and other

Carrying amount at the end of the year

38.2 Analysis

Fairbairn Private Bank (Jersey) 
Limited/ Fairbairn Trust 
Company Limited (Guernsey)
Peoples Mortgage Limited
Imperial Bank Limited
Nedbank Limited
Nedcor Investment Bank
Old Mutual Bank
Nedbank Namibia Limited
Capital One
American Express

2008
Accumulated 
impairment 
Rm

Cost
Rm 

Carrying 
amount
Rm

447 
198 
285 
3 563 
375 
206 
134 
82 
81 

5 371 

(138)
(198)
(25)
(739)
(375)

(2)

(1 477)

309 
–
260 
2 824 
–
206 
132 
82 
81 

3 894 

2008 
Rm

3 898 

(2)
(2)

3 894 

2007
Rm

3 695 
225 
(21)
(1)

3 898 

2007 

Accumulated
impairment 
Rm

Carrying 
amount
Rm

(138)
(198)
(25)
(739)
(375)

(2)

(1 477)

311 
–
260 
2 826 
–
206 
132 
82 
81 

3 898 

Cost
Rm

449 
198 
285 
3 565 
375 
206 
134 
82 
81 

5 375 

Goodwill  is  allocated  to  individual  cash-generating  units  based  on  business  activity. Impairment  testing  is  done  on  a
regular basis by comparing the net carrying value of the cash-generating units to the estimated value in use. The value
in use is determined by discounting estimated future cashflows of each cash-generating unit. The discounted cashflow
calculations  have  been  performed  using  Nedbank’s  cost  of  equity, which  is  calculated  using  the  Capital Asset  Pricing
Model. No impairments resulting from impairment testing have been effected for this reporting period. Management
regards the useful lives of all cash-generating units to be indefinite.

Geographical split is based on the area in which the cash-generating unit operates:
Africa
Europe

The value in use is estimated as follows:
Africa
Europe

Net estimated recoverable amounts:
Africa
Europe

Refer to note 3 for key assumptions used when assessing goodwill impairment.

2008 
Rm

3 585 
309 

3 894 

172 069 
1 647 

173 716 

168 484 
1 338 

169 822 

2007
Rm

3 587 
311 

3 898 

237 427 
1 943 

239 370 

233 840 
1 632 

235 472 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

295

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

39 SHARE CAPITAL

39.1 Ordinary share capital

Authorised
600 000 000 (2007: 600 000 000) ordinary shares of R1 each

Issued
468 939 397 (2007: 459 278 075) fully paid ordinary shares of R1 each
Treasury shares arising from share repurchases by subsidiaries of 59 231 657
(2007: 57 336 676) fully paidup ordinary shares of R1 each

Subject to the restrictions imposed by the Companies Act, 61 of 1973, as
amended, the unissued shares are under the control of the directors until
the  forthcoming  annual  general  meeting. In  terms  of  special  resolutions
passed  at  the  May  2008  general  meeting, the  directors  were  granted  the
general authority to buy back up to 10% of the issued share capital of the
company until the forthcoming annual general meeting.

The  treasury  shares  held  are  used  mainly  for  the  purpose  of  fulfilling  the
options and share awards outstanding in terms of the share schemes (both
employees and third parties).

39.2 Preference share capital and premium

Nedbank Limited preference share capital and premium
Authorised
1 000 000 000 (2007: 1 000 000 000) non-redeemable non-cumulative 
preference shares of R0,001 each

Issued
312 781 032 (2007: 312 781 032) non-redeemable non-cumulative 
preference shares of R0,001 each
Preference share premium

Imperial Bank Limited preference share capital and premium
Authorised
8 000 000 (2007: 8 000 000) non-redeemable non-cumulative
non-participating preference shares of R0,0005 each

Issued
3 000 000 (2007: 3 000 000) non-redeemable non-cumulative
non-participating preference shares of R0,0005 each
Preference share premium
Shares held by group entities

Total preference share capital and premium

* Represents amounts less than R1 million.

2008 
Rm

2007
Rm

600 

469 

(59)

410 

600 

459 

(57)

402 

1 

1 

* 
3,121 

3,121 

* 
3,121 

3,121 

* 

* 

* 
300 
(142)

158 

3,279 

* 
300 

300 

3,421 

296

NEDBANK GROUP ANNUAL REPORT 2008

The preference shares are classified as equity instruments by Nedbank Limited and Imperial Bank Limited (the entities)
and have therefore been classified as minority interest in the consolidated financial statements.

Each preference share confers on the holder the right to capital of the company in the form of a cash dividend prior to
payment  of  dividends  to  any  other  class  of  shareholder. The  rate  is  limited  to  75%  of  the  prevailing  prime  rate  on  a
deemed value of R10 for Nedbank Limited and R100 for Imperial Bank preference shares, and is never compounded. The
dividends, if declared, accrue half-yearly on 30 June and 31 December and are payable within 120 days of these dates
respectively.

If a preference dividend is not declared, the dividend shall not accumulate and will never become payable by the entities,
whether in preference to payments to any other class of share or otherwise.

If, due  to  any  amendment  of  the  Income  Tax  Act, 58  of  1962, the  dividends  become  taxable  in  the  hands  of  the
shareholders and the payment of the preference share dividends becomes a deductible expense for the entities, then the
75% of prevailing prime rate will be increased to the extent that the entities incur a savings on servicing the preference
shares. If such an amendment does not result in a saving for the entities, but a decrease in the returns on the preference
share investment, no amendment to the rate is envisaged.

Each preference share confers on the holder the right to a return of capital on the winding-up of the entities prior to any
payment to any other class of share, but holders are not entitled to any further participation in the profits, assets or any
surplus assets of the entities in such circumstances.

The holders of this class of share are not entitled to be present or vote (even by proxy) at any meeting of the entities
except when a declared dividend or part thereof remains in arrears and unpaid after six months from the due date or a
resolution is proposed which directly affects the rights attached to the preference share or the interests of the holder,
including resolutions to wind up the entities or in the reduction of their share capital.

At  every  general  meeting  where  the  preference  shareholder  is  entitled  to  vote, the  voting  rights  are  restricted  to  the
holder’s nominal value in proportion to the total nominal value of all shares issued by the entities.

No shares in the capital of the entities, in priority to the preference shares, can be created or issued without prior sanction
of the holders of preference shares by way of a resolution passed at a separate class meeting properly constituted in
terms of the provisions set out in the articles of association.

39.3 Share options – staff schemes

Share options granted under the Nedcor Group (1994) Employee Incentive Scheme and Nedbank Group (2005) Share
Option, Matched Share and Restricted Share Scheme have an exercise price fixed at the market price of the share on the
day prior to the date on which the option is granted. Options may be exercised at rates determined by the schemes’
trustees and expire at the earlier of termination or varying periods of up to 10 years from the granting of the option. On
exercise of the option the schemes will subscribe for shares in Nedbank Group Limited at the full market price then ruling.
The difference between such market price and the exercise price is recoverable from the subsidiary that employs the
relevant employee. In respect to these options granted before 7 November 2002, any amounts accrued by subsidiaries prior
to exercise are transferred to non-distributable reserves net of the amount paid in respect of options exercised. As all
options issued before 7 November 2002 have expired, this reserve is no longer required in the current year.

Refer to pages 206 and 207 for further detail on share option schemes.

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297

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

40 AMOUNTS OWED TO DEPOSITORS

40.1 Classifications
Current accounts
Savings deposits
Other deposits and loan accounts

– Call and term deposits
– Fixed deposits
– Cash management deposits
– Securitisation notes
– Other deposits and loan accounts

Foreign currency liabilities
Negotiable certificates of deposit
Deposits received under repurchase agreements*

Comprises:

– Amounts owed to depositors
– Amounts owed to banks

Deposit products include current accounts, savings accounts, call and notice
deposits, fixed deposits and negotiable certificates of deposit. Term deposits
vary from six months to five years in both the wholesale and retail markets.

Foreign  currency  liabilities  are  either  matched  by  advances  to  clients  or
hedged against exchange rate fluctuations.

* Government and other securities (note 25) amounting to R21 028 million (2007: R8 633 million) have
been  pledged  as  collateral  for  deposits  received  under  repurchase  agreements. These  amounts
represent assets that have been transferred but that do not qualify for derecognition under IAS 39.

40.2 Sectoral analysis 

Banks
Government and public sector
Individuals
Business sector

40.3 Geographical analysis

South Africa
Other African countries
Europe
Asia
USA
Other

2008 
Rm

45 188 
14 303 
292 768 

192 557 
25 983 
36 149 
1 239 
36 840 

6 226 
87 377 
21 028 

2007
Rm

45 920 
13 925 
251 424 

153 684 
24 378 
41 910 
1 236 
30 216 

8 230 
56 166 
8 876 

466 890 

384 541 

429 426 
37 464 

466 890 

339 562 
44 979 

384 541 

37 464 
33 220 
146 527 
249 679

466 890 

430 472 
9 935 
23 750 
767 
279 
1 687 

466 890 

44 979 
28 921 
134 028 
176 613 

384 541 

354 459 
8 541 
18 009 
838 
294 
2 400 

384 541 

298

NEDBANK GROUP ANNUAL REPORT 2008

40.4 Segmental analysis

Rm

Nedbank Group
2008

2007

Nedbank Corporate
2008
2007

Nedbank Capital
2008
2007

Current accounts
Savings deposits
Other deposits and loan accounts

45 188 
14 303 
292 768 

192 557 
– Call and term deposits
25 983 
– Fixed deposits
36 149 
– Cash management deposits
– Other deposits and loan accounts 38 079 

Foreign currency liabilities
Negotiable certificates of deposit
Deposits received under repurchase 
agreements

6 226 
87 377 

45 920 
13 925 
251 424 

153 684 
24 378 
41 910 
31 452 

8 230 
56 166 

19 588 
643 
182 582 

144 009 
1 802 
35 565 
1 206 

4 241 
986 

20 983 
567 
167 411 

122 338 
2 356 
41 876 
841 

4 976 
421 

100 

74 

49 633 

33 128 

13 478 
1 195 
2 
34 958 

1 703 
85 900 

3 875 
909 

28 344 

3 053 
55 914 

21 028 

8 876 

19 681 

8 616 

Amounts owed to depositors

466 890 

384 541 

208 040 

194 358 

157 017 

100 785 

Rm

Nedbank Retail
2008
2007

Imperial Bank 
2008
2007

Shared Services
2008
2007

25 405 
Current accounts
13 625 
Savings deposits
Other deposits and loan accounts 59 549 

– Call and term deposits
– Fixed deposits
– Cash management deposits
– Other deposits and loan 

34 810 
22 972 
590 

24 794 
13 300 
49 162 

27 293 
20 794 
31 

1 361 

1 547 

110 
12 

239 
21 

1 

9 

9 

3 

25 

8 

Central Management
and eliminations 
2007

2008

94 
35 
(366)

141 
2 
(8)

66 
58 
151 

(69)
298 
3 

accounts

1 177 

1 044 

1 239 

1 287 

17 

(501)

(81)

Foreign currency liabilities
Negotiable certificates of deposit
Deposits received under 
repurchase agreements

282 

201 

Amounts owed to depositors

98 861 

87 457 

1 361 

1 547 

491 

(169)

291 

301 

260 

288 

1 056 

1 310 

106 

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299

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

41 PROVISIONS AND OTHER LIABILITIES

Creditors and other accounts
Insurance contracts
Short trading securities and spot positions
Provision for onerous contracts (refer note 41.1)
Leave pay accrual (note 41.2)

41.1 Provision for onerous contracts
Balance at the beginning of the year
Recognised in profit or loss

Balance at the end of the year

41.2 Leave-pay accrual

Balance at the beginning of the year
Movements from business combinations

– Additions
– Disposals

Recognised in profit or loss
Utilised during the year
Unused amounts reversed

Balance at the end of the year

Provisions  have  been  raised  in  accordance  with  IAS  37: Provisions,
Contingent Liabilities and Contingent Assets, as set out in note 44.

41.3 Day-one gains and losses

The  group  enters  into  transactions  where  the  fair  value  of  the  financial
instruments  are  determined  using  valuation  models  for  which  certain 
inputs  are  not  based  on  market  observable  prices  or  rates. Such  financial
instruments  are  initially  recognised  at  the  transaction  price, which  is  the
best  indicator  of  fair  value. The  transaction  price  may  differ  from  the
valuation amount obtained, giving rise to a day-one profit or loss.

The  difference  between  the  transaction  price  and  the  valuation  amount,
commonly  referred  to  as  ‘day-one  profit  or  loss’, is  deferred  and  either
amortised over the life of the transaction, deferred until the instrument’s fair
value can be determined using market observable inputs, or realised when
the financial instrument is derecognised.

The  group’s  day-one  profits  are  attributable  to  commodity  financial
instruments.

Opening balance
Deferral of profit on new transactions
Recognised in the income statement – amortisation

Closing balance

42 INVESTMENT CONTRACT LIABILITIES 

Market value at the beginning of the year
Movements in policyholder liabilities during the year

Market value at the end of the year

Policies held within investment contracts are recorded at market-related values.

2008 
Rm

5 162 
506 
3 657 
15 
489 

9 829 

18 
(3)

15 

453 
(3)

1 
(4)

42 
(3)

489 

57

(2)

55 

5 846 
(3)

5 843 

2007
Rm

6 758 
451 
26 545 
18 
453 

34 225 

20 
(2)

18 

401 
5 

5 

50 
(1)
(2)

453 

37
29
(9)

57

5 278 
568 

5 846 

300

NEDBANK GROUP ANNUAL REPORT 2008

43 LONG-TERM DEBT INSTRUMENTS

Subordinated debt
Rand-denominated
Callable bonds repayable on
4 December 2008 (IPB1) +
Callable bonds repayable on 
30 December 2010 (IPB2) (a)
Callable bonds repayable on 
4 December 2013 (IPB3) (b)
Callable notes repayable on 
24 April 2016 (NED 05) (c)
Callable notes repayable on 
20 September 2018 (NED06) (d)
Callable notes repayable on 
8 February 2017 (NED07) (c)
Callable notes repayable on 
8 February 2019 (NED08) (d)
Callable notes repayable on 
6 July 2022 (NED 09) (f)
Callable notes repayable on 
15 August 2017 (NED10) (c)
Callable notes repayable on 
17 September 2020 (NED11) (e)
Callable notes repayable on 
14 December 2017 (NED12A) (c)
Callable notes repayable on 
14 December 2017 (NED12B) (c)

Namibian dollar-denominated
Long-term debenture repayable on 
15 September 2030

Hybrid subordinated debt
Rand-denominated
Callable notes repayable on 
20 November 2018 (NEDH1A) (g)
Callable notes repayable on 
20 November 2018 (NEDH1B) (g)

Securitised liabilities
Rand-denominated
Callable notes repayable on 
18 November 2039 (GRN1A1) (h)
Callable notes repayable on 
18 November 2039 (GR1A2A) (h)
Callable notes repayable on 
18 November 2039 (GRN1B) (h)
Callable notes repayable on 
18 November 2039 (GRN1C) (h)

Other
Rand-denominated
Unsecured debentures repayable on 
30 November 2029

US dollar-denominated
Guaranteed loan repayable on 
31 August 2009

Total long-term debt instruments in issue

Nominal
value

Instrument terms

(Rm)

515

500

300

13,5% per annum*

8,38% per annum*

JIBAR + 2,5% per annum**

1 500

7,85% per annum*

1 800

9,84% per annum*

650

9,03% per annum*

1 700

8,90% per annum*

2 000

JIBAR +0,47% per annum**

500

JIBAR + 0,45% per annum**

1 000

10,54% per annum*

500

120

(NAM$m)

40

(Rm)

487

JIBAR + 0,70% per annum**

10,38% per annum*

17% per annum until 
15 September 2000 
– thereafter zero coupon

15,05% per annum*

1 265

JIBAR + 4,75% per annum**

(Rm)

291

JIBAR + 0,25% per annum**

1 407

JIBAR + 0,60% per annum**

98

76

(Rm)

200

(US$m)

18

JIBAR + 0,85% per annum**

JIBAR + 1,1% per annum**

Zero coupon

1,5 basis points below 6-month 
LIBOR on nominal value

2008 
Rm

10 627 
10 625 

488 

152 

1 480 

1 869 

671 

1 718 

2 060 

508 

1 051 

503 

125 

2 

2 

1 839 
1 839 

550 

1 289 

1 420 
1 420 

295 

999 

75 

51 

175 
5 

5 

170 

2007
Rm

10 787 
10 785 

528 

472 

1 406 

1 844 

641 

1 667 

2 050 

507 

1 048 

503 

119 

2 

2 

–
–

1 409 
1 409 

293 

991 

75 

50 

130 
5 

5 

125 

170 

14 061 

125 

12 326 

During  the  year  there  were  no  defaults  or  breaches  of  principal, interest  or  any  other  terms  and  conditions  of  long-term  debt
instruments.

Coupon holders are entitled, in the event of interest default, to put the coupon covering such interest payments to Nedbank Group
Limited. The  US  dollar  subordinated-debt  instruments  are  either  matched  by  advances  to  clients  or  covered  against  exchange  rate
fluctuations. In accordance with the group’s articles of association the borrowing powers of the company are unlimited.

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301

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

43 LONG-TERM DEBT INSTRUMENTS ... continued

*  Interest on these notes is payable biannually.

** Interest on these notes is payable quarterly.

+ The debt instrument was redeemed on its call date of 4 December 2008.

(a) Callable by the issuer, Imperial Bank Limited, after approximately five years from the date of issue, being 30 March 2006 (ie 30 December 2010), at which time

the interest converts to a floating three-month JIBAR rate, plus a spread of 2,67%.

(b) Callable by the issuer, Imperial Bank Limited, after five years from the date of issue, being 4 December 2008 (ie 4 December 2013), at which time the interest

converts to a floating three-month JIBAR rate, plus a spread of 3,75%.

(c) Callable by the issuer, Nedbank Limited, after five years from the date of issue, being 24 April 2006, 8 February 2007, 15 August 2007, 14 December 2007 and 
14 December 2007 (ie 24 April 2011, 8 February 2012, 15 August 2012, 14 December 2012 and 14 December 2012), at which time the interest converts to a
floating three-month JIBAR rate, plus a spread of 1,70%, 1,95%, 1,45%, 1,70% and 1,70% respectively.

(d) Callable by the issuer, Nedbank Limited, after seven years from the date of issue, being 20 September 2006 and 8 February 2007 (ie 20 September 2013 and 

8 February 2014), at which time the interest converts to a floating three-month JIBAR rate, plus a spread of 2,05% and 2,17% respectively.

(e) Callable by the issuer, Nedbank Limited, after eight years from the date of issue, being 17 September 2007 (ie 17 September 2015), at which time the interest

converts to a floating three-month JIBAR rate, plus a spread of 2,85%.

(f) Callable by the issuer, Nedbank Limited, after ten years from the date of issue, being 6 July 2007 (ie 6 July 2017), at which time the interest will step up by

1,00% to a floating three-month JIBAR rate, plus a spread of 1,47%.

(g) Callable by the issuer, Nedbank Limited, after ten and a half years from the date of issue, being 20 May 2008 (ie 20 November 2018), at which time the interest

converts to a floating three-month JIBAR rate, plus 712,5 basis points in perpetuity unless called.

(h) Callable by the issuer, Greenhouse Funding (Pty) Limited, after approximately five years from the date of issue, being 10 December 2007 (ie 18 November 2012),
at which time the interest rate on the notes (GRN1A1, GR1A2A, GRN1B, GRN1C) will step up to a three-month JIBAR rate, plus a spread of 0,40%, 0,80%, 1,10%
and 1,35% respectively.

Tier 3 capital
At 31 December 2007 R300 million was included in deposits that qualified as Tier 3 capital. The debt instrument was redeemed on 
22 September 2008.

44 CONTINGENT LIABILITIES

Guarantees on behalf of clients
Confirmed letters of credit and discounting transactions
Unutilised facilities and other

2008 
Rm

25 226 
3 129 
46 378 

74 733 

2007
Rm

20 579 
2 427 
48 632 

71 638 

The  group  in  the  ordinary  course  of  business  enters  into  transactions that  expose  the  group  to  tax, legal  and  business  risks.
Provisions are made for known liabilities that are expected to materialise. Possible obligations and known liabilities where no
reliable estimate can be made or it is considered improbable that an outflow would result are reported as contingent liabilities.
This is in accordance with IAS 37: Provisions, Contingent Liabilities and Contingent Assets.

There are a number of legal or potential claims against Nedbank Limited and its subsidiary companies, the outcome of which
cannot at present be foreseen.

Historically a number of group companies entered into structured-finance transactions with third parties using their tax bases.
In the majority of these transactions the underlying third party has contractually agreed to accept the risk of any tax being
imposed by the South African Revenue Service (SARS), although the obligation to pay rested in the first instance with the group
companies. It would only be in limited cases, for example, where the credit quality of a client became doubtful, or where the
client  specifically  contracted  out  of  the  repricing  of  additional  taxes, that  the  recovery  from  a  client  could  be  less  than  the
liability arising on assessment, in which case provisions would be made.

SARS has assessed one of these structures in a manner contrary to the way initially envisaged by the contracting parties. An
appeal has been lodged against the assessment and SARS continues to examine other structures. As a result group companies
are, or could be, obliged to pay additional amounts to SARS and recover these from clients under the applicable contractual
arrangements.

302

NEDBANK GROUP ANNUAL REPORT 2008

45 COMMITMENTS

45.1 Capital expenditure approved by directors

Contracted
Not yet contracted

2008 
Rm

498 
284 

782 

2007
Rm

687 
432 

1 119 

Funds to meet capital expenditure commitments will be provided from group resources. In addition, capital expenditure
is incurred in the normal course of business throughout the year.

45.2 Operating lease commitments

Companies in the group have entered into leases over fixed property, furniture and other equipment for varying periods.
The group is a major lessor of properties, which are subject to individual contracts that specify the group’s option to
renew leases, escalation clauses and purchase options, if applicable. Due to the large number of lease agreements entered
into by the group, this information has not been provided in the annual financial statements, but is available from the
group on request. The following are the minimum lease payments under non-cancellable leases:

2008
Land and buildings
Furniture and equipment

2007
Land and buildings
Furniture and equipment

2009
Rm 

2010 – 2013
Rm 

Beyond 2013
Rm

507
164

671 

1 074 
347 

1 421 

2 334 

2 334 

2008
Rm 

2009 – 2012 
Rm 

Beyond 2012
Rm 

529 
221 

750 

2 202 
714 

2 916 

3 910 
518 

4 428 

45.3 Commitments under derivative instruments

The group enters into option contracts, financial futures contracts, forward rate and interest rate swap agreements and
other financial agreements in the normal course of business (note 23).

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303

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

46 SECURITISATIONS

The group was party to securitisation transactions involving residential mortgage loans and motor vehicle financing. In addition,
the group acts as a conduit for commercial paper, whereby it acquires long-term rated bonds and offers capital market funding
to South African corporates at attractive rates. These assets are funded through the issuance of short-dated investment-grade
commercial paper to institutional investors. All the commercial paper issued by Synthesis Funding Limited is assigned the highest
short-term RSA local-currency credit rating by both Fitch and Moody’s, and is listed on the Bond Exchange of South Africa.

In these transactions, the assets, or interests in the assets, or beneficial interests in the cashflows arising from the assets, are
transferred to a SPE, or to a trust, which then transfers its beneficial interests to a SPE, which then issues floating-rate debt
securities to third-party investors.

Securitisations, depending on the individual arrangement, may result in continued recognition of the securitised assets and the
recognition of the debt securities issued in the transaction or may lead to partial recognition of the assets to the extent of the
group’s continuing involvement in those assets or to derecognition of the assets and to the separate recognition, as assets or
liabilities, of any rights and obligations created or retained in the transfer. Full derecognition only occurs when the group transfers
both its contractual right to receive cashflows from the financial assets, or retains the contractual rights to receive the cashflows,
but assumes a contractual obligation to pay the cashflows to another party without material delay or reinvestment, and also
transfers substantially all the risks and rewards of ownership, including credit risk, prepayment risk and interest rate risk.

The following table shows the carrying amount of securitised assets, stated at the amount of the group’s continuing involvement
where appropriate, together with the associated liabilities, for each category of asset in the balance sheet:*

Rm

Loans and advances to clients 
Residential mortgage loans**
Motor vehicle financing

Other financial assets
Corporate and bank paper
Other securities
Commercial paper

Total

2008

2007

Carrying
amount 
of assets

Associated 
liabilities

Carrying
amount
of assets

Associated 
liabilities

2 031 
1 751 

1 972 
1 781 

2 067 
5 673 

183 
1 806 

2 416 
6 744 

2 014 
1 747 

7 727 

9 162 

11 493 

11 509 

11 149 

12 923 

This table presents the gross balances within the securitisation schemes and does not reflect any elimination of intercompany
balances.

* The value of any derivative instruments taken out to hedge any financial asset or liability is adjusted against such instrument in this disclosure.

** The  residential  mortgage  loan  securitisation  programme  was  commenced  in  November  2007, and at  31  December  2007  cash  of  R1  817  million  within 
the  securitisation  scheme  was  held  on  deposit  with  Nedbank  Limited. There  are  minimal  portions  in  this  programme that  remain  undrawn at  the  end  of 
December 2008. All remaining cash received from the securitisation remains with Nedbank Limited on deposit.

47 FOREIGN CURRENCY CONVERSION GUIDE

Monetary figures in these financial statements are expressed in South African rand to the nearest million. The approximate value
of the South African rand at 31 December against the following currencies was:

United States dollar
Pound sterling
Euro

Actual
2008

0,1067
0,0735
0,0757

Actual
2007

0,1466
0,0732
0,0997

Average
2008

0,1211
0,0665
0,0829

Average
2007

0,1424
0,0710
0,1033

304

NEDBANK GROUP ANNUAL REPORT 2008

48 CASHFLOW INFORMATION

48.1 Reconciliation of profit from operations to cash generated by 

operations
Profit from operations
Adjusted for:

– Depreciation (note 14)
– Amortisation: computer software (note 14)
– Movement in impairment of loans and advances
– Loss/(Profit) on disposal of property and equipment
– Net income on investment banking assets
– Effects of exchange rate changes on cash and cash equivalents (excluding 

foreign borrowings)

– Impairment losses on investments, property and equipment, and capitalised 

development costs (note 17)

– Profit on sale of subsidiaries, investments and property and equipment 

(note 17)

– Transaction taxes

Cash generated by operations

48.2 Cash received from clients

Interest and similar income (note 11)
Commission and fees (note 13)
Net trading income (note 13)
Other income

48.3 Cash paid to clients, employees and suppliers

Interest expense (note 12)
Staff costs (note 14)
Other operating expenses 

48.4 Increase in operating assets
Other short-term securities
Government and other securities
Advances and other accounts

48.5 Increase in operating liabilities
Current and savings accounts
Other deposits, loan accounts and foreign currency liabilities
Negotiable certificates of deposit
Deposits received under repurchase agreements
Creditors and other liabilities

2008 
Rm

8 718 

616 
414 
5 201 
42 
(8)

(44)

11 

(767)
374 

2007
Rm

8 745 

545 
431 
2 581 
(20)
(28)

5 

7 

(118)
305 

14 557 

12 453 

57 986 
7 910 
1 553 
1 024 

68 473 

(41 816)
(7 040)
(5 629)

(54 485)

7 204 
(12 501)
(76 695)

(81 992)

(354)
39 340 
31 211 
12 152 
(11 031)

71 318 

42 001 
7 528 
1 334 
1 425 

52 288 

(27 855)
(7 079)
(5 454)

(40 388)

(37)
(7 441)
(59 219)

(66 697)

5 122 
46 445 
10 648 
(2 359)
(3 850)

56 006 

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305

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

48 CASHFLOW INFORMATION ... continued

48.6 Taxation paid

Amounts payable at the beginning of the year
Income statement charge (excluding deferred taxation)
Total indirect taxation (note 16)
Portion of transaction taxation on property and equipment acquired to be 
depreciated in future years
Amounts (receivable)/payable at the end of the year (note 29)

48.7 Disposal of investments in subsidiary companies net of cash

Cash and cash equivalents
Loans and advances
Other assets
Investment securities
Non-current assets held for sale
Investments in associate companies and joint ventures
Deferred taxation asset
Property and equipment
Amounts owed to depositors
Provisions and other liabilities
Current taxation liabilities
Other liabilities held for sale
Deferred taxation liabilities

Net assets disposed
Profit/(Loss) on disposal
Minority interest
Goodwill

Consideration received
Cash and cash equivalents disposed

Net consideration

48.8 Acquisition of investments in subsidiary companies net of cash

Minority interest 
Goodwill

Consideration paid
Less: Cash and cash equivalents acquired

Net cash outflow

48.9 Dividends paid

2008 
Rm

(278)
(1 443)
(374)

(27)
(111)

(2 233)

20 

82 

4 
1 
25 

(66)
2 

68 
21 
(29)

60 
(20)

40 

–

–

2007
Rm

(273)
(2 086)
(305)

(33)
278 

(2 419)

40 
68 
131 
261 
532 

170 
(191)
(105)

(467)
(14)

425 
19 
(57)
19 

406 
(40)

366 

(23)
(224)

(247)
–

(247)

Recognised in the group statement of changes in total shareholders’ equity

(2 736)

(2 402)

306

NEDBANK GROUP ANNUAL REPORT 2008

49 MANAGED FUNDS

49.1 Fair value of funds under management – by type

Unit trusts
Third party
Private clients 

49.2 Fair value of funds under management – by geography

South Africa
Rest of world

49.3 Reconciliation of movement in funds under 

management – by type

2008 
Rm

39 242 
3 192 
41 947 

84 381 

68 403 
15 978 

84 381 

Balance at 31 December 2006
Group transfers
Disposals
Inflows
Outflows
Mark-to-market value adjustment
Foreign currency translation differences

Balance at 31 December 2007
Inflows
Outflows
Mark-to-market value adjustment
Foreign currency translation differences

Balance at 31 December 2008

49.4 Reconciliation of movement in funds under 

management – by geography

Balance at 31 December 2006
Disposals
Inflows
Outflows
Mark-to-market value adjustment
Foreign currency translation differences

Balance at 31 December 2007
Inflows
Outflows
Mark-to-market value adjustment
Foreign currency translation differences

Balance at 31 December 2008

Unit trusts
Rm 

Third party Private clients
Rm 

Rm 

32 780 
2 347 

13 942 
(12 402)
3 573 
(170)

40 070 
18 810 
(15 415)
(6 291)
2 068 

39 242 

23 320 
(6 716)
(14 659)
1 052 
(368)
79 
124 

2 832 
1 166 
(760)
(66)
20 

3 192 

South Africa
Rm

72 827 
(14 349)
23 921 
(18 584)
6 860 

70 675 
26 876 
(21 656)
(7 492)

68 403 

30 112 
4 369 

13 686 
(9 782)
3 898 
253 

42 536 
12 473 
(9 754)
(3 348)
40 

41 947 

Rest 
of world
Rm 

13 385 
(310)
4 759 
(3 968)
690 
207 

14 763 
5 573 
(4 273)
(2 213)
2 128 

15 978 

2007
Rm

40 070 
2 832 
42 536 

85 438 

70 675 
14 763 

85 438 

Total
Rm 

86 212 
– 
(14 659)
28 680 
(22 552)
7 550 
207 

85 438
32 449 
(25 929)
(9 705)
2 128 

84 381 

Total
Rm

86 212 
(14 659)
28 680 
(22 552)
7 550 
207 

85 438 
32 449 
(25 929)
(9 705)
2 128 

84 381 

The group, through a number of subsidiaries and joint ventures, operates unit trusts, holds and invests funds on behalf of
clients and acts as a trustee in a number of fiduciary capacities. In addition, companies in the group operate securities
and custodial services on behalf of clients. Commissions and fees earned in respect of trust and management activities
performed are included in the group income statement as non-interest revenue.

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307

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

50 SHARE-BASED PAYMENTS

Nedbank Group Limited shares, share options over Nedbank Group Limited shares and equity instruments in respect of Nedbank
Group Limited shares are granted to employees as part of their remuneration package as services are rendered, as well as to
clients, business  partners  and  affinity  groups  as  an  incentive  to  retain  business  and  develop  growth  within  the  group. The
following are the share and share option schemes that have been in place during the year. All schemes are equity-settled at
group level except the UK long-term incentive scheme, which is cash-settled.

As the group cannot estimate reliably the fair value of services received nor the value of additional business received, the group
rebuts the presumption that such services and business can be measured reliably. The group therefore measures their fair value
by reference to the fair value of the shares, share options or equity instruments granted, in line with the group’s accounting
policy. The fair value of such shares, share options and equity instruments is measured at the grant date utilising the Black-
Scholes valuation model.

50.1 Description of arrangements

Scheme

Traditional employee schemes

Trust/Special-purpose
vehicle (SPV)

Description

Nedbank Group (1994) 
Share Option Scheme

Nedbank Employee
Share Trust

Nedbank Group (2005) 
Share Option and Restricted
Share Scheme

Nedbank Group (2005)
Share Scheme Trust

Nedbank Group (2005) 
Matched Share Scheme

Nedbank Group (2005)
Share Scheme Trust

Old Mutual UK 
Sharesave Scheme

n/a

Nedbank UK long-term 
incentive plan

Nedbank Group (2005)
Share Scheme Trust
amended to
accommodate the
United Kingdom
participants

Share options are granted to key personnel to motivate
senior employees to remain with the group. The granting 
of share options is based on job level, merit and
performance, and is entirely at the discretion of the
trustees acting on recommendations of executive
management. Grants are made twice a year for new
appointments and annually for existing staff, on a date
determined by the trustees.

Share options and restricted shares are granted to key
personnel to motivate senior employees to remain with the
group. The granting of share options and restricted shares is
based on job level, merit and performance, and is entirely at
the discretion of the trustees acting on recommendations
of executive management. Grants are made twice a year
for new appointments and annually for existing staff, on a
date determined by the trustees.

All employees of the group are eligible to participate in the
scheme. An amount of not more than 50% of their after
tax bonus can be invested, which will be matched by the
group with shares.

All eligible employees of Fairbairn Private Bank (Jersey)
Limited, Fairbairn Private Bank (Isle of Man) Limited and
Fairbairn Trust Company Limited (Guernsey) are entitled to
participate in the Old Mutual UK Sharesave Scheme, which
allows them to elect to save between £5 and £250 per
month over a three- or five-year period, and receive an
option to purchase Old Mutual plc shares in the future at
an exercise price that is set at the start of the scheme.
Invitations to participate in the scheme are issued annually.

Employees who perform services in the United Kingdom on
behalf of the Group will be considered for participation in the
UK LTIP. Selected employees will be granted share
appreciation rights (‘SARs’). SARs are similar to options in that
SARs are granted at a predetermined exercise price and
vesting and expiry date. When the participant elects to
exercise the SARs, the employer settles the difference between
the current market price and the exercise price in cash.

308

NEDBANK GROUP ANNUAL REPORT 2008

Vesting requirements

Share options granted on appointment are time-based, of which 50% vest
after three years and the remaining 50% after four years.

Annual allocations to existing staff are linked to the achievement of
predetermined targets for growth in headline earnings over the performance
period of three and four years.

Completion of three years’ service plus, where applicable, predetermined
targets for average return on income, average fully dilutive headline earnings
per share growth and average cost-to-income ratio.

Three years’ service and achievement of Nedbank Group performance targets.
Where these performance targets are not met, 50% will vest, provided that
the three years’ service has been achieved.

Completion of three or five years’ service.

Maximum term

6 years

5 years

3 years

5,5 years

Completion of three or five years’ service from grant date, subject to corporate
performance targets being met.

5 years

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309

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

50 SHARE-BASED PAYMENTS ... continued

50.1 Description of arrangements... continued

Scheme

Trust/SPV

Description

Nedbank Eyethu BEE schemes
– Employees

Non-executive 
Directors’ Scheme

Nedbank Eyethu Non-
Executive Directors’
Trust

Certain non-executive directors acquired restricted shares
at par value, with notional funding over a period of six
years. The beneficial ownership of the shares resides with
the participants, including the voting and dividend rights.

Black Executive Scheme

Nedbank Eyethu Black
Executive Trust

Black Management Scheme

Nedbank Eyethu Black
Management Trust

Broad-based Employee
Scheme

Nedbank Eyethu Broad-
based Employee Trust

Restricted shares and share options were granted to certain
black employees on a senior management level. The
beneficial ownership of the shares resides with the
participants, including the voting and dividend rights.

Restricted shares and share options were granted to certain
black employees on middle and senior management level.
The beneficial ownership of the shares resides with the
participants, including the voting and dividend rights.

Restricted shares granted to all qualifying employees who
do not participate in any other share incentive scheme
operating in the group. The beneficial ownership of the
shares resides with the participants, including the voting
and dividend rights. However, the participants are not
entitled to deal in the shares for a period of five years.

Nedbank Eyethu BEE schemes
– Clients and business partners

Black Business Partner Scheme

Wiphold Financial
Services Number Two
Trust and Brimstone-
Mtha Financial Services
Trust

Each trust was issued an equal number of restricted shares
at R1,87 per share, with notional funding over a period of
10 years. The beneficial ownership of the shares resides
with the participants, including the voting and dividend
rights.

Retail Scheme

Nedbank Eyethu 
Retail Trust

Corporate Scheme

Nedbank Eyethu
Corporate Scheme Trust
and Aka-Nedbank
Eyethu Trust

For every three shares acquired, participants qualify for an
additional bonus share after a three-year period. The
participants can elect to settle the payment for the shares
in a once-off lump sum payment or by a monthly debit
order over 36 months. Should there be any contractual
breach by the participants, they will cease to qualify for the
bonus shares.

Restricted shares were allocated to existing black corporate
clients and to Aka Capital (Pty) Limited, a key corporate
client that has the role of the black development partner in
the scheme, at par value, with notional funding over a
period of six years. The beneficial ownership of the shares
resides with the participants, including the voting and
dividend rights. Should there be any contractual breach by
the participants, they will cease to qualify for these shares.

310

NEDBANK GROUP ANNUAL REPORT 2008

Vesting requirements

Maximum term

Six years’ service and no dealing in the shares during this notional funding
period. So as not to compromise the non-executive directors’ independence,
no specific performance conditions will apply to the directors’ participation.

Participants must remain in service for four, five and six years, after each of
which 1/3 of the shares become unrestricted and 1/3 of the options vest.

Participants must remain in service for four, five and six years, after each of
which 1/3 of the shares become unrestricted and 1/3 of the options vest.

n/a

6 years

7 years

7 years

5 years

No dealing in the shares during the 10-year notional funding period.

10 years

Participants must operate and maintain a primary transaction account with
Nedbank for three years.

3 years

Participants must use Nedbank as their primary banker for six years.

6 years

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311

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

50 SHARE-BASED PAYMENTS ... continued

50.1 Description of arrangements ... continued

Scheme

Trust/SPV

Description

Nedbank Namibia Omufima 
BEE schemes – Employees

Namibia Black 
Management Scheme

Nedbank Ofifiya Black
Management Trust

Namibia Broad-based
Employee Scheme

Nedbank Ofifiya Broad-
based Employee Trust

Nedbank Namibia Omufima 
BEE schemes – Business 
partners and affinity groups

Namibia Black Business
Partner Scheme

Namibia Affinity 
Group Scheme

Namibia Education Scheme

Central Consortium SPV
Three Investments (Pty)
Limited, Coastal
Consortium SPV Three
Investments (Pty)
Limited and Northern
Empowerment SPV
Three Investments (Pty)
Limited

Southern Consortium
SPV Three Investments
(Pty) Limited and
Eastern Consortium 
SPV Three Investments
(Pty) Limited

Nedbank Namibia
Education Trust

Restricted shares and share options were granted to certain
black employees on middle and senior management level.
The beneficial ownership of the shares resides with the
participants, including the voting and dividend rights.

Restricted shares granted to all qualifying employees who
do not participate in any other share incentive scheme
operating in the group. The beneficial ownership of the
shares resides with the participants, including the voting
and dividend rights.

Each SPV was issued an equal number of restricted shares
at R2,53 per share, with notional funding over a period of
10 years. The beneficial ownership of the shares resides
with the participants, including the voting and dividend
rights.

Each SPV was issued an equal number of restricted shares
at R1 per share, with notional funding over a period of 
10 years. The beneficial ownership of the shares resides
with the participants, including the voting and dividend
rights.

The SPV was issued an equal number of restricted shares at 
R1 per share, with notional funding over a period of 
10 years. The beneficial ownership of the shares resides
with the participants, including the voting and dividend
rights.

312

NEDBANK GROUP ANNUAL REPORT 2008

Vesting requirements

Maximum term

Participants must remain in service for four, five and six years, after each of
which 1/3 of the shares become unrestricted and 1/3 of the options vest.

7 years

No dealing in these shares during the restricted period of five years.

5 years

No dealing in these shares during the 10-year notional funding period.

10 years

No dealing in these shares during the 10-year notional funding period.

10 years

No dealing in these shares during the 10-year notional funding period.

10 years

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313

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

50 SHARE-BASED PAYMENTS

50.2 Effect on profit and financial position

Traditional employee schemes

Nedbank Group (1994) Share Option Scheme
Nedbank Group (2005) Share Option and 
Restricted Share Scheme
Nedbank Group (2005) Matched Share Scheme
Old Mutual UK Sharesave Scheme 
Nedbank UK long-term incentive plan**

Nedbank Eyethu BEE schemes

Black Business Partner Scheme***
Non-executive Directors’ Scheme
Retail Scheme
Corporate Scheme
Black Executive Scheme
Black Management Scheme

Nedbank Namibia Omufima BEE schemes

Namibia Black Business Partner Scheme
Namibia Affinity Group Scheme
Namibia Education Scheme
Namibia Black Management Scheme
Namibia Broad-based Employee Scheme

Share-based payments
expense

2008
Rm

2007
Rm

Share-based payments
reserve/liability
2008
Rm

2007
Rm

86 

7 

57 
20 
2 
* 

180 

9 
5 
73 
60 
9 
24 

1 

136 

17 

103 
15 
1 
* 

146 

19 
12 
30 
56 
7 
22 

1 

1 

1 

290 

42 

212 
31 
5 
* 

640 

243 
20 
103 
181 
25 
68 

18 

9 
3 
4 
2 

356 

96 

223 
33 
4 
* 

501 

234 
15 
69 
121 
16 
46 

17 

9 
3 
4 
1 

* Represents amounts less than R1 million.

** This scheme is cash-settled and therefore creates a liability.

*** The share-based payments expense relating to the Nedbank Eyethu BEE black business partners relates to the annual performance fee paid to them

calculated in terms of the trust deed.

267 

283 

948 

874 

314

NEDBANK GROUP ANNUAL REPORT 2008

2008

2007

Weighted
average
Number of exercise price
R
instruments

Weighted
average
Number of exercise price
R
instruments

50.3 Movements in number of instruments

Nedbank Group (1994) Share Option Scheme
Outstanding at the beginning of the year
Forfeited
Exercised
Expired

4 271 871 
(37 896)
(1 080 909)
(1 282 679)

78,00 
51,33 
59,78 
115,76 

9 123 748 
(1 444 777)
(3 254 387)
(152 713)

Outstanding at the end of the year

1 870 387 

63,19 

4 271 871 

Exercisable at the end of the year
Weighted average share price for options exercised (R)

1 675 787 

61,89 
106,42 

2 146 189 

Nedbank Group (2005) Share Option and Restricted
Share Scheme
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Expired

16 306 244 
2 516 999 
(1 336 047)
(1 003 875)
(30 600)

113,68 

105,83 
77,83 
110,98 

10 811 210 
6 377 666 
(612 944)
(249 088)
(20 600)

Outstanding at the end of the year

16 452 721 

99,02 

16 306 244 

Exercisable at the end of the year
Weighted average share price for options exercised (R)

3 564 940 

78,63 
102,41 

51 600 

Nedbank Group (2005) Matched Share Scheme
Outstanding at the beginning of the year
Granted
Forfeited
Exercised

Outstanding at the end of the year

Exercisable at the end of the year
Weighted average share price for options exercised (R)

Old Mutual UK Sharesave Scheme (options over 
Old Mutual plc shares – GBP)
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Expired

Outstanding at the end of the year

Exercisable at the end of the year
Weighted average share price for options exercised (GBP)

596 762 
295 983 
(30 905)
(266 670)

595 170 

– 

914 547 
1 009 743 
(426 244)
(424 858)
(1 466)

1 071 722 

81 184 

449 650 
179 917 
(32 805)

– 

596 762 

– 
97,00 

– 

0,93 
0,90 
1,18 
0,60 
1,53 

0,93 

0,95 
1,11 

821 847 
252 283 
(6 107)
(52 473)
(101 003)

914 547 

– 

79,33 
80,89 
80,14 
105,97 

78,00 

93,20 
143,80 

95,19 
143,16 
107,13 
91,67 
84,04 

113,68 

107,00 
138,80 

– 

– 
– 

0,86 
1,31 
0,97 
0,76 
1,46 

0,93 

– 
– 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

315

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

50 SHARE–BASED PAYMENTS ... continued

2008

2007

Weighted
average
Number of exercise price
R
instruments

Weighted
average
Number of exercise price
R
instruments

50.3 Movements in number of instruments ...

continued
Nedbank UK long-term incentive plan
Outstanding at the beginning of the year
Granted
Forfeited

Outstanding at the end of the year

35 000 
34 132 
(12 500)

134,27 
120,62 
134,30 

56 632 

126,06 

Exercisable at the end of the the year
Weighted average share price for options exercised (R)

– 

– 
– 

37 500 
(2 500)

35 000 

– 

Black Business Partner Scheme
Outstanding at the beginning of the year

7 891 300 

171,82 

7 891 300 

Outstanding at the end of the year

7 891 300 

171,82 

7 891 300 

Exercisable at the end of the year
Weighted average share price for options exercised (R)

– 

– 
– 

– 

134,27 
134,27 

134,27 

– 
– 

171,82 

171,82 

– 
– 

Non-executive Directors’ Scheme
Outstanding at the beginning of the year
Granted
Other movements

493 206 
81 815 

108,04 
78,81 

344 351 

108,04 

148 855 

Outstanding at the end of the year

575 021 

103,88 

493 206 

108,04 

Exercisable at the end of the year
Weighted average share price for options exercised (R)

– 

– 
– 

– 

Retail Scheme
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Adjusted for anticipated number of shares to be granted

1 200 296 

(17 159)
(509 205)
432 948 

1 438 451 
2 137 
(240 292)

Outstanding at the end of the year

1 106 880 

– 

1 200 296 

Exercisable at the end of the year
Weighted average share price for options exercised (R)

– 

– 
91,07 

– 

Corporate Scheme
Outstanding at the beginning of the year
Granted
Forfeited

10 230 707 

108,06 

9 939 141 
300 282 
(8 716)

Outstanding at the end of the year

10 230 707 

108,06 

10 230 707 

Exercisable at the end of the year
Weighted average share price for options exercised (R)

– 

– 
– 

– 

– 
– 

– 

– 
– 

108,06 
108,06 
108,06 

108,06 

– 
– 

316

NEDBANK GROUP ANNUAL REPORT 2008

2008

2007

Weighted
average
Number of exercise price
R
instruments

Weighted
average
Number of exercise price
R 
instruments

Black Executives Scheme
Outstanding at the beginning of the year
Granted
Forfeited
Expired

946 705 
281 588 
(48 902)

69,29 
74,85 
66,70 

852 050 
233 170 
(114 515)
(24 000)

Outstanding at the end of the year

1 179 391 

70,73 

946 705 

Exercisable at the end of the year
Weighted average share price for options exercised (R)

– 

Black Management Scheme
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Expired

4 554 109 
2 015 248 
(849 774)
(6 342)
(72 342)

– 
– 

90,03 
102,68 
101,33 
54,50 
78,16 

– 

3 801 976 
1 335 806 
(482 176)
(88 290)
(13 207)

Outstanding at the end of the year

5 640 899 

93,04 

4 554 109 

Exercisable at the end of the year
Weighted average share price for options exercised (R)

41 300 

77,33 
106,65 

– 

Namibia Black Business Partner Scheme
Outstanding at the beginning of the year

199 929 

278,98 

199 929 

Outstanding at the end of the year

199 929 

278,98 

199 929 

Exercisable at the end of the year
Weighted average share price for options exercised (R)

– 

– 
– 

Namibia Affinity Group Scheme
Outstanding at the beginning of the year

Outstanding at the end of the year

74 048 

282,47 

74 048 

282,47 

Exercisable at the end of the year
Weighted average share price for options exercised (R)

– 

– 
– 

Namibia Education Scheme
Outstanding at the beginning of the year

Outstanding at the end of the year

Exercisable at the end of the year
Weighted average share price for options exercised (R)

Namibia Black Management Scheme
Outstanding at the beginning of the year

Outstanding at the end of the year

Exercisable at the end of the year
Weighted average share price for options exercised (R)

98 730 

282,47 

98 730 

282,47 

– 

75 400 

75 400 

– 

– 
– 

77,92 

77,92 

– 
– 

– 

74 048 

74 048 

– 

98 730 

98 730 

– 

75 400 

75 400 

– 

60,60 
96,22 
58,29 
74,75 

69,29 

– 
– 

75,10 
127,62 
79,52 
75,01 
74,75 

90,03 

– 
143,00 

278,98 

278,98 

– 
– 

282,47 

282,47 

– 
– 

282,47 

282,47 

– 
– 

77,92 

77,92 

– 
– 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

317

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

50 SHARE–BASED PAYMENTS ... continued

2008

2007

Weighted
average
remaining
contractual
life (years)

Weighted
average
remaining
contractual
life (years)

Number of
instruments

Number of
instruments

50.4 Instruments outstanding at the end of the 

year by exercise price
Nedbank Group (1994) Share Option Scheme
45,00
55,75
60,01
61,40
69,20
74,40
81,00
88,00
90,90
102,19
102,65
111,00
123,60
125,00

Nedbank Group (2005) Share Option and
Restricted Share Scheme
0,00
76,79
84,68
107,03
110,98
134,30
144,30

Nedbank Group (2005) Matched Share Scheme
0,00

Old Mutual UK Sharesave Scheme (options over 
Old Mutual plc shares – GBP)
0,60
0,90
0,78
1,03
1,53
1,31

Nedbank UK long-term incentive plan
120,62
134,30

Black Business Partner Scheme
171,82

47 911 
254 950 
1 111 936 

62 490 
338 350 

0,5 
1,6 
1,3 

0,7 
2,2 

54 750 

0,2 

271 409 
271 700 
1 978 132 
14 500 
67 915 
440 700 
2 222 
2 500 
6 667 
54 750 
62 650 
20 001 
945 175 
133 550 

1 870 387 

1,5 

4 271 871 

2 368 882 
3 114 040 
373 400 
376 100 
4 493 680 
696 000 
5 030 619 

16 452 721 

595 170 

595 170 

14 235 
882 390 
37 729 
79 140 
27 650 
30 578 

1 071 722 

34 132 
22 500 

56 632 

7 891 300 

7 891 300 

2,2 
1,5 
1,5 
2,6 
2,1 
3,6 
3,1 

2,4 

1,5 

1,5 

(0,5)
2,3 
0,4 
(0,2)
0,5 
1,5 

1,9 

4,2 
4,6 

4,4 

6,6 

6,6 

4 199 047 
488 850 
384 500 
5 006 081 
725 300 
5 502 466 

16 306 244 

596 762 

596 762 

450 590 

40 244 
106 152 
87 876 
229 685 

914 547 

35 000 

35 000 

7 891 300 

7 891 300 

0,7 
2,6 
2,3 
2,4 
1,8 
3,3 
0,3 
0,3 
0,1 
1,2 
0,8 
0,5 
0,5 
0,2 

1,8 

2,5 
2,6 
3,6 
3,1 
4,6 
4,2 

3,4 

1,2 

1,2 

0,5 

1,5 
1,1 
1,4 
3,3 

1,4 

5,6 

5,6 

7,6 

7,6 

318

NEDBANK GROUP ANNUAL REPORT 2008

Non-executive Directors’ Scheme
78,81
108,04

Retail Scheme
0,00

Corporate Scheme
108,06

Black Executives Scheme
0,00
74,75
104,51
107,03
110,98
120,62
134,30
144,30

Black Management Scheme
0,00
74,75
104,51
107,03
110,98
120,62
134,30
144,30

Namibia Black Business Partner Scheme
278,98

Namibia Affinity Group Scheme
282,47

Namibia Education Scheme
282,47

Namibia Black Management Scheme
0,00
101,29

2008

2007

Weighted
average
remaining
contractual
life (years)

2,6 
2,6 

2,6 

0,2 

0,2 

2,6 

2,6 

2,8 
3,6 
6,6 
4,6
4,2 
6,2 
5,6 
5,2 

4,1 

2,9 
3,6 
6,6 
4,6 
4,2 
6,2 
5,6 
5,2 

4,8 

8,0 

8,0 

8,0 

8,0 

8,0 

8,0 

3,0 
5,0 

4,5 

Number of
instruments

81 815 
493 206 

575 021 

1 106 880 

1 106 880 

10 230 707 

10 230 707 

348 048 
360 000 
106 265 
51 239 
80 888 
82 657 
72 000 
78 294 

1 179 391 

486 767 
2 026 167 
926 279 
258 369 
242 300 
770 645 
516 559 
413 813 

5 640 899 

199 929 

199 929 

74 048 

74 048 

98 730 

98 730 

17 396 
58 004 

75 400 

Weighted
average
remaining
contractual
life (years)

3,6 

3,6 

1,1 

1,1 

3,6 

3,6 

3,2 
4,6 

5,6 
5,6 

6,6 
6,2 

4,7 

3,2 
4,6 

5,6 
5,2 

6,6 
6,2 

5,1 

9,0 

9,0 

9,0 

9,0 

9,0 

9,0 

4,0 
6,0 

5,5 

Number of
instruments

493 206 

493 206 

1 200 296 

1 200 296 

10 230 707 

10 230 707 

270 113 
384 000 

51 239 
80 888 

72 000 
88 465 

946 705 

391 759 
2 315 567 

360 672 
302 604 

606 437 
577 070 

4 554 109 

199 929 

199 929 

74 048 

74 048 

98 730 

98 730 

17 396 
58 004 

75 400 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

319

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

50 SHARE–BASED PAYMENTS ... continued

50.5 Instruments granted during the year

The  weighted  average  fair  value  of  instruments  granted  during  the  year  has  been  calculated  using  the  Black-Scholes
option pricing model, using the following inputs and assumptions.

2008
Number of instruments granted
Weighted average fair value per instrument granted (R)
Weighted average share price (R)
Weighted average exercise price (R)
Weighted average expected volatility (%)*
Weighted average life (years)
Weighted average expected dividends (%)**
Weighted average risk-free interest rate (%)
Number of participants
Weighted average vesting period (years)
Possibility of not vesting (%)
Expectation of meeting performance criteria (%)

2007
Number of instruments granted
Weighted average fair value per instrument granted (R)
Weighted average share price (R)
Weighted average exercise price (R)
Weighted average expected volatility (%)*
Weighted average life (years)
Weighted average expected dividends (%)**
Weighted average risk-free interest rate (%)
Number of participants
Weighted average vesting period (years)
Possibility of not vesting (%)
Expectation of meeting performance criteria (%)

Nedbank Group
(2005) Share

Option and Nedbank Group
Restricted (2005) Matched
Share Scheme

Share Scheme

Old Mutual UK
Sharesave
Scheme
(GBP)

Nedbank UK
long-term
incentive
plan

2 516 999 
111,53 
111,53 

295 983 
95,26 
117,50 

27,0 
3,0 

10,5 
1 220 
3,0 
70 
30 

6 377 666 
27,19 
134,78 
143,16 
27,0 
4,0 
4,9 
8,6 
1 262 
3,0 
10 
100 

27,0 
3,0 
7,3 
10,5 
412 
3,0 
7 
93 

179 917 
125,10 
141,00 

27,0 
3,0 
4,1 
8,7 
414 
3,0 
7 
100 

1 009 743 
0,26 
1,18 
0,90 
27,6 
3,8 
5,9 
4,0 

3,4 

100 

252 283 
0,46 
1,67 
1,31 
28,0 
4,0 
4,4 
4,7 

3,4 

100 

34 132 
19,01 
111,03 
120,62 
27,0 
4,0 
8,1 
11,9 
18 
3,0 

100 

37 500 
33,45 
135,00 
134,27 
28,0 
5,0 
5,3 
9,3 
8 
4,0 
10 
100 

Expected volatility is determined based on the historical average volatility for shares over their vesting periods.

* Volatility is determined using expected volatility for all shares listed on JSE Limited.
** The dividend yield used for grants made has been based on forecast dividends.

320

NEDBANK GROUP ANNUAL REPORT 2008

Non-
executive
Director’s
Scheme

81 815 
48,52 
112,00 
78,81 
27,0 
1,9 

10,9 
1 
0,5 

100 

Retail
Scheme

Corporate
Scheme

Black
Executives
Scheme

Black
Management
Scheme

281 588 
49,51 
108,66 
74,85 
27,9 
5,7 
5,3 
9,8 
13 
5,0 
5 
95 

233 170 
64,71 
134,85 
96,22 
27,9 
5,5 
3,5 
8,7 
10 
5,0 
5 

2 015 248 
27,87 
108,79 
102,68 
28,0 
5,9 
7,2 
9,8 
685 
5,0 
12 
88 

1 335 806 
41,80 
134,88 
127,62 
28,0 
5,9 
4,7 
8,8 
628 
5,0 
12 

2 137 
118,41 
136,37 

27,0 
3,0 
4,8 
9,0 
1 
3,0 
1 
99 

300 282 
63,59 
134,76 
108,06 
27,0 
3,9 

9,8 
2 
3,9 
5 

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

321

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

51 RELATED PARTIES

51.1 Relationship with parent, ultimate controlling party and investees

The group’s parent company is Old Mutual (South Africa) Limited (OMSA), which, through its subsidiaries, holds 54,30%
(2007: 53,20%)  of  Nedbank  Group  Limited’s  ordinary  shares. The  ultimate  controlling  party  is  Old  Mutual  plc,
incorporated in the United Kingdom.

Material subsidiaries of the group are identified on pages 330 to 332 and associates and joint ventures of the group are
identified on pages 328 and 329.

51.2 Key management personnel compensation 

Key  management  personnel  are  those  persons  who  have  authority  and  responsibility  for  planning, directing  and
controlling the activities of the group, directly or indirectly, including all directors of the company and its parent, as well
as members of the Executive Committee who are not directors, as well as close members of the family of any of these
individuals.

Details of the compensation paid to the board of directors are disclosed in the Remuneration Report on pages 194 to 205
and details of their shareholdings in the company are disclosed on pages 204 to 205. Compensation paid to the board
of directors and compensation paid to other key management personnel, as well as the number of share options and
instruments held, are shown below:

Compensation (Rm)
2008
Directors’ fees
Remuneration – paid by subsidiaries

– Short-term employee benefits
– Gain on exercise of options

2007
Directors’ fees *
Remuneration – paid by subsidiaries

– Short-term employee benefits
– Gain on exercise of options

Number of share options and instruments
2008 
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Expired
Transferred

Key 
management
personnel 

Directors 

12 
25 

16 
9 

37 

11 
33 

19 
14 

44 

80 

68 
12 

80 

68 

43 
25 

68 

Total

12 
105 

84 
21 

117 

11 
101 

62 
39 

112 

1 412 503 
209 250 

(166 744)
(199 000)

1 380 971 
315 507 
(107 645)
(276 521)

177 500 

2 793 474 
524 757 
(107 645)
(443 265)
(199 000)
177 500 

Outstanding at the end of the year

1 256 009 

1 489 812 

2 745 821 

2007 
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Transferred

Outstanding at the end of the year

1 333 738 
121 643 
(26 926)
(160 292)
144 340 

1 716 265 
300 430 
(68 708)
(393 693)
(173 323)

3 050 003 
422 073 
(95 634)
(553 985)
(28 983)

1 412 503 

1 380 971 

2 793 474 

322

NEDBANK GROUP ANNUAL REPORT 2008

51.3 Related-party transactions

The following significant transactions were entered into between Nedbank Group and the following related parties. All
of these transactions were entered into in the normal course of business.

Outstanding balances (Rm)

Parent/Ultimate controlling party
Loans and advances to Old Mutual plc
Forward exchange rate contracts with Old Mutual plc
Interest rate contracts with Old Mutual plc
Equity derivatives with Old Mutual plc

Fellow subsidiaries
Loans and advances from Old Mutual Life Assurance Company (SA) (Pty) Limited
Deposits from Old Mutual Life Assurance Company (SA) (Pty) Limited
Deposits from Old Mutual Asset Managers (SA) (Pty) Limited
Deposits from other fellow subsidiaries
Bank accounts held by Old Mutual Life Assurance Company (SA) (Pty) Limited
Bank accounts held by Old Mutual Asset Managers (SA) (Pty) Limited*
Bank accounts held by other fellow subsidiaries
Insurance-related receivables from Mutual & Federal Insurance Company Limited

Joint venture
Loans to BoE (Pty) Limited
Loans from BoE (Pty) Limited
Deposits and bank accounts held by BoE (Pty) Limited

Associates
Loans to associates
Deposits from associates
Bank accounts held by associates*

Key management personnel
Mortgage bonds to key management personnel
Deposits from key management personnel
Deposits from entities under the influence of key management personnel
Bank accounts owing from key management personnel
Bank accounts owing to key management personnel
Bank accounts owing from entities under the influence of key management 
personnel
Bank accounts owing to entities under the influence of key management 
personnel

Due from/(Owing to) 
2008 
Rm

2007
Rm

(1)
(1)
(307)

(79)
(1 467)
(123)
(3 156)
(1 637)
(1)
(588)
9

78 
(1)
(553)

577 
(93)
(319)

12 
(9)
(422)
17 
(8)

37

(41)

(545)
(1)
(5)

(79)
(1 444)
(1 351)
(1 204)
(1 054)
(255)
(257)
20

1 
(118)
(139)

505 
(289)
(177)

11 
(15)
(229)
2 
(11)

6

(19)

W
E
I
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R
E
V
O

P
U
O
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G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

323

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

51 RELATED PARTIES ... continued

51.3 Related-party transactions ... continued

Outstanding balances (Rm)

The Wiphold  and  Brimstone  consortia  and  Aka  Capital  (Pty)  Limited  are
related  parties  since  certain  key  management  personnel  of  the  company
have significant influence over these entities. These entities are participants
in the Nedbank Eyethu BEE schemes and the share-based payments reserve
recognised  in  respect  of  these  entities  and  key  management  personnel  is
detailed below.

Wiphold consortium
Brimstone consortium
Aka Capital (Pty) Limited
Key management personnel – directors
Key management personnel – other

Share-based payments reserve

Performance fees are also paid to the Wiphold and Brimstone consortia in
terms of the Nedbank Eyethu BEE schemes:
Wiphold consortium
Brimstone consortium

Performance fee liability at year-end

Long-term employee benefit plans
Deposits from Nedbank Namibia Medical Aid Fund
Bank accounts held by other funds

Transactions (Rm)

Parent/Ultimate controlling party
Dividend declared to OMSA via its subsidiaries

Fellow subsidiaries
Interest income from other fellow subsidiaries
Interest expense to other fellow subsidiaries
Interest expense to Old Mutual Life Assurance Company (SA) (Pty) Limited*
Interest expense to Old Mutual Asset Managers (SA) (Pty) Limited*
Interest expense to Old Mutual Group Achievements (Pty) Limited*
Facilities management fee to Old Mutual Properties (Pty) Limited
Insurance premiums to Mutual & Federal Insurance Company Limited
Claims recovered from Mutual & Federal Insurance Company Limited
Commission income from Mutual & Federal Insurance Company Limited
Handling fees to Mutual & Federal Insurance Company Limited
Asset management fee to Old Mutual Asset Managers (SA) (Pty) Limited

Joint venture
Interest expense to BoE (Pty) Limited
Lease income from BoE (Pty) Limited*
Administration fee income from BoE (Pty) Limited
Advisory fee expense to BoE (Pty) Limited
Commission expense to BoE (Pty) Limited

Due from/(Owing to) 
2008 
Rm

2007
Rm

(108)
(107)
(28)
(33)
(27)

(303)

(5)
(4)

(9)

(28)
(149)

(108)
(107)
(20)
(30)
(34)

(299)

–

(42)
(49)

Income/(Expense)

2008 
Rm

2007
Rm

(1 577)

(1 382)

2 
(317)
(384)
(26)

(268)
315 
63 
(17)
(5)

(54)
11 
26 
2 

(125)
(287)
(148)
(120)
(5)
(342)
338 
84 
(20)
(7)

(12)
10 
14 
3 

324

NEDBANK GROUP ANNUAL REPORT 2008

Transactions (Rm)

Associates
Interest income from associates
Interest expense to associates*

Key management personnel
Interest income from key management personnel
Interest income from entities under the influence of key management personnel
Interest expense to key management personnel
Interest expense to entities under the influence of key management personnel

The  share-based  payments  charge  in  respect  of  the  entities  that  are
participants in  the  Nedbank  Eyethu  BEE  schemes  and  key  management
personnel is detailed below:

Aka Capital (Pty) Limited
Key management personnel – other

Share-based payments expense (included in BEE transaction expenses)*

Key management personnel – directors
Key management personnel – other

Share-based payments expense (included in staff costs)*

Performance fees are also paid to the Wiphold and Brimstone consortia in
terms of the Nedbank Eyethu BEE schemes.

Wiphold consortium
Brimstone consortium

Performance fee expense

Long-term employee benefit plans
Interest expense to Nedgroup Pension Fund
Interest expense to other funds

The group has an insurance policy (Optiplus policy) with a fellow subsidiary,
Old  Mutual  Life Assurance  Company  (SA)  (Pty)  Limited, in  respect  of  its
pension plan obligations. It also has an interest in the OMART cell captive
within  a  fellow  subsidiary  in  respect  of  its  disability  plan  obligations. The
value  of  this  policy  and  this  interest  are  shown  as  reimbursement  rights,
with a corresponding liability. In the case of the interest in the cell captive,
the group recognises the surplus in the cell captive. The amounts included in
the  financial  statements  in  respect  of  this  policy  and  this  interest  are  as
follows:

Optiplus policy reimbursement right
OMART policy reimbursement right

Included in long-term employee benefit assets

Optiplus policy obligation
Disability obligation

Included in long-term employee benefit liabilities

* Where necessary, comparative information has been enhanced to provide a more detailed analysis.

Income/(Expense)

2008 
Rm

2007
Rm

20 
(25)

2 
3 
(2)
(41)

(8)
(3)

(11)

(10)
(14)

(24)

(9)
(8)

(17)

(8)
(14)

29 
(51)

1 
5 
(1)
(31)

(8)
(4)

(12)

(17)
(8)

(25)

(10)
(9)

(19)

(6)
(4)

842 
276 

1 118 

(842)
(210)

(1 052)

823 
267 

1 090 

(823)
(181)

(1 004)

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325

 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

52 RECLASSIFICATIONS

52.1 Impairment of loans and advances

52.1.1 Impairment of loans and advances
Balance at the beginning of the year
Income statement charge

– loans and advances
– advances designated as at fair value 
through profit or loss (note 24.1)

Total 
impairment**

Specific
impairments 

Portfolio 
impairments 

Reclassified* 
2007
Rm 

2007
Rm 

As previously
stated
2007
Rm 

Reclassified* 
2007
Rm 

As previously
stated
2007
Rm 

5 184 
2 164 

2 267 

3 564 
1 788 

1 891 

3 787 
1 843 

1 946 

1 620 
376 

376 

1 397 
321 

321 

(103)

(103)

(103)

Recoveries
Amounts written off against the impairment

417 
(1 687)

417 
(1 706)

417 
(1 706)

19 

19 

Impairment of loans and advances

6 078 

4 063 

4 341 

2 015 

1 737 

52.1.2 Impairment of loans and advances 

by classification
Home loans
Commercial mortgages
Properties in possession
Credit cards
Overdrafts
Other loans to clients
Net finance lease and instalment debtors 
Preference shares and debentures
Trade, other bills and bankers’ acceptances

1 104 
502 
36 
456 
696 
2 176 
1 038 
70 

648 
154 
36 
367 
533 
1 494 
779 
52 

693 
154 
36 
408 
544 
1 675 
779 
52 

456 
348 

89 
163 
682 
259 
18 

411 
348 

48 
152 
501 
259 
18 

Impairment of loans and advances

6 078 

4 063 

4 341 

2 015 

1 737 

52.1.3 Sectoral analysis
Individuals
Financial services, insurance and real estate
Manufacturing
Building and property development
Transport, storage and communication
Retailers, catering and accommodation
Wholesale and trade
Mining and quarrying
Agriculture, forestry and fishing
Government and public sector
Other services

52.1.4 Geographical analysis

South Africa
Other African countries
Europe
Asia
Other

3 601 
767 
194 
183 
132 
176 
295 
45 
96 
29 
560 

6 078 

5 910 
90 
67 
4 
7 

6 078 

2 608 
401 
127 
126 
67 
59 
277 
16 
42 
11 
329 

4 063 

3 960 
59 
42 

2 886 
401 
127 
126 
67 
59 
277 
16 
42 
11 
329 

4 341 

4 238 
59 
42 

2 

2 

4 063 

4 341 

993 
366 
67 
57 
65 
117 
18 
29 
54 
18 
231 

715 
366 
67 
57 
65 
117 
18 
29 
54 
18 
231 

2 015 

1 737 

1 950 
31 
25 
4 
5 

2 015 

1 672 
31 
25 
4 
5 

1 737 

* The group has changed its criteria for the distinction between specific and portfolio impairments during 2008 so as to align criteria with
industry  standard  practice. The  reclassification  of  impairments  held  against  loans  and  advances  did  not  have  any  effect  on  the  amounts
reported in the group’s income statement, balance sheet, statement of changes in total shareholders’ equity or cashflow statement, but had
an effect on the notes above for 2007 in respect of specific and portfolio impairment provision balances.

** Total impairment of loans and advances and related data is not affected by the reclassifications.

326

NEDBANK GROUP ANNUAL REPORT 2008

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327

 
 
 
 
 
 
 
ANALYSIS OF INVESTMENTS IN ASSOCIATES
AND JOINT VENTURES
FOR THE YEAR ENDED 31 DECEMBER

Name of company and nature of business

Unlisted
Joint ventures

BoE (Pty) Limited
Nedgroup Life Assurance Company Limited

Associates

Access Africa Property Group (Pty) Limited***
Acturis Limited*** +
African Spirit Trading 306 (Pty) Limited
Ballywood Properties 1 (Pty) Limited
Bond Choice (Pty) Limited++
Capricorn Business and Technology Park (Pty) Limited
Clidet No 683 (Pty) Limited
Consep Developments (Pty) Limited
Eagle Creek Investments 265 (Pty) Limited***
Emergent Investments (Pty) Limited
Erf 7 Sandown (Pty) Limited
Falcon Forest Trading 85 (Pty) Limited
Firefly Investments 74 (Pty) Limited
Friedshelf 113 (Pty) Limited
G & C Shelf 31 (Pty) Limited
Golden Pond Trading 350 (Pty) Limited
Hazeldean Retreat (Pty) Limited
Kimberly Clark SA Holdings (Pty) Limited**
Lyric Rose (Pty) Limited
Masingita Property Investment Holdings (Pty) Limited
Mooirivier Mall (Pty) Limited
Nedglen Property Development (Pty) Limited
Newmarket Property Developments JV
Odyssey Developments (Pty) Limited
Off The Shelf Investment Forty One (Pty) Limited
Oukraal Developments (Pty) Limited
SafDev Tanganani (Pty) Limited
Sandton Square Portion 8 (Pty) Limited***
TBA Genomineerdes (Pty) Limited
The Waterbuck Trust
The Woodlands Property Trust
Visigro Investments (Pty) Limited
Whirlprops 33 (Pty) Limited
XDV (Pty) Limited
Other

Percentage holding
2008
2007
%
%

Acquisition
date

Year-end

50 
50 

33 
49 
29 
41 
49 
25 

43 
35 
30 
35 
20 
30 
20 
20 

49 
35 
30 
35 
40 
49 
33 
30 
25 

30 
40 
20 
30 
49 
25 

50 
50 

40 
53 
33 

42 
49 

25 
43 

30 
35 
20 
40 
20 
20 

49 
35 
30 
35 
40 
49 
33 

25 
30 
40 
20 
30 
49 
25 

Jan 03
Jan 03

Jan 06
Mar 01
Oct 06
Nov 05
Jun 02
Nov 98
Aug 06
Dec 07
Aug 07
Jul 07
Oct 06
Mar 05
Oct 06
Aug 02
May 04
Jul 06
Mar 07
Aug 04
Oct 00
Aug 05
Nov 06
Nov 04
Aug 06
Nov 07
Dec 00
Jan 08
Oct 08
Nov 02
Jan 03
Oct 07
Jan 05
Jun 06
Sep 06
Nov 06

Dec
Dec

Feb
Sep
Dec
Feb
Feb
Sep 
Feb
Feb
Feb
Feb
Feb
Feb
Feb
Feb
Feb
Feb
Feb
Dec
Feb
Feb
Feb
Jun
Dec
Jun
Feb
Jun
Jun
Apr
Jun
Feb
Feb
Feb
Feb
Jun

* Represents amounts less than R1 million.
** Disposed of during 2007.
*** Disposed of during 2008.

+ Investment in preference shares that do not carry voting rights; therefore accounted for as an associate.

++ No longer a subsidiary; shareholding changed from 62,0% to 28,5% in January 2008.

328

NEDBANK GROUP ANNUAL REPORT 2008

Date to which
equity income
accounted for

Equity-accounted
earnings

Carrying
amount

2008
Rm

2007
Rm

2008
Rm

2007
Rm

Market value/
Directors’ valuation
2008
2007
Rm
Rm

Net indebtedness of
loans to/(from) associates

2008
Rm

2007
Rm

Dec 08
Dec 08

145 

76 
69 

9 

184 

133 
51 

55 

Dec 08

5 

Jun 07

14 

Dec 08

Dec 08

3 

1 

40 

1 

247 

183 
64 

920 

22 
11 
27 
14 
254 
21 

85 
17 
10 
18 
10 
* 
9 
12 

* 
30 
11 
8 
22 
110 
9 
16 
15 

12 
11 
11 
110 
* 
19 
26 

230 

182 
48 

748 

9 
9 
20 

17 
211 

20 
72 

8 
13 
10 
46 
4 
* 

12 
27 
29 
6 
* 
110 
8 

20 
7 
8 
4 
48 
* 
10 
20 

247 

183 
64 

920 

22 
11 
27 
14 
254 
21 

85 
17 
10 
18 
10 
* 
9 
12 

* 
30 
11 
8 
22 
110 
9 
16 
15 

12 
11 
11 
110 
* 
19 
26 

230 

182 
48 

748 

9 
9 
20 

17 
211 

20 
72 

8 
13 
10 
46 
4 
* 

12 
27 
29 
6 
* 
110 
8 

20 
7 
8 
4 
48 
* 
10 
20 

154 

239 

1 167 

978 

1 167 

978 

–

–

577 

20 

10 
166 
14 

66 
4 
2 
2 

* 
12 

33 
34 

22 
26 
7 
15 

3 
14 

2 

(20)
145 

577 

505 

6 

20 

13 
166 

11 
66 

2 
2 

(99)
* 

2 
28 
29 

* 
110 
7 

8 
3 
8 

2 

10 
111 

505 

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A
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N
A
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N
N
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329

 
 
 
 
 
 
 
ANALYSIS OF INVESTMENTS IN SUBSIDIARIES
FOR THE YEAR ENDED 31 DECEMBER

Group 
Issued capital 

2008
Rm 

2007
Rm

Banking
Nedbank Namibia Limited (Namibia)
Nedbank Malawi Limited (Malawi)
Fairbairn Private Bank (Jersey) Limited 
Imperial Bank Limited
Nedbank (Lesotho) Limited
Nedbank Limited
Nedbank (Swaziland) Limited
Peoples Mortgage Limited 
MBCA Bank Limited (Zimbabwe)
Trust and participation bond administration
NedInvest Limited (formerly BoE Unit Trust Management Company Limited)
Fairbairn Trust Company Limited (Guernsey)
Nedgroup Collective Investments Limited
Syfrets Participation Bond Managers Limited 
Syfrets Securities Limited
Syfrets Securities Nominees (Pty) Limited
FTNIB Management Company Limited**
Other companies
BoE Holdings Limited
NedNamibia Holdings Limited (Namibia)
Nedgroup International Holdings Limited (Isle of Man)
BoE Life Limited
BoE Limited
BoE Management Limited
Cape of Good Hope Financial Services Limited**
Dr Holsboer Benefit Fund
NedEurope Limited (Isle of Man)
Alliance Investments Limited (Mauritius)***
MN Holdings Limited (Mauritius)
NBG Capital Management Limited
NIB Blue Capital Investments (Pty) Limited
Nedcor (SA) Insurance Company Limited
Nedcor Group Insurance Company Limited
Nedgroup Financial Services 104 Limited**
Nedgroup Investment Holdings 101 Limited
Nedgroup Investment 102 Limited
Nedcor Investments Limited 
Nedgroup Securities (Pty) Limited
Nedcor Trade Services Limited (Mauritius)
Nedgroup Insurance Company Limited 
Nedgroup Wealth Management Limited
NBS Boland Group Limited
Depfin Investments (Pty) Ltd
Tando AG (Switzerland) 
The Board of Executors 
Other companies

* Represents amounts less than R1 million.
** In the process of liquidation.
*** Acquired during 2008.

Unless otherwise stated, all entities are domiciled in South Africa.

Headline earnings from subsidiaries (after eliminating intercompany transactions):

Aggregate earnings
Aggregate losses

17 
13 
5 
4 
20 
27 
12 
45 
* 

5 
1 
6 
* 
1 
* 
2 

2 
18 
* 
1 
11 
* 
6 

3 057 
* 
* 
* 
* 
* 
* 
* 
17 
6 
28 
10 
2 
5 
* 
75 
* 
42 
* 
* 

2008
Rm 

5 992 
227 

17 
10 
5 
3 
20 
27 
12 
45 
* 

5 
1 
6 
* 
1 
* 
2 

2 
18 
* 
1 
11 
* 
6 

3 057 
* 
* 
* 
* 
* 
* 
* 
17 
6 
28 
10 
2 
5 
* 
75 
* 
28 
* 
* 

2007
Rm 

6 313 
392 

330

NEDBANK GROUP ANNUAL REPORT 2008

Group
Effective holding 

2008
% 

100 
97 
70 
50,1 
100 
100 
67 
100 
15 

100 
100 
100 
100 
100 
99 
100 

100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 

2007
%

100 
97 
70 
50,1 
100 
100 
67 
100 
15 

100 
100 
100 
100 
100 
99 
100 

100 
100 
100 
100 
100 
100 
100 
100 
100 

100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 

Company 
Book value of investments 
2007
Rm

2008
Rm 

Company 
Net indebtedness 
2008
Rm 

2007
Rm

17 949 

17 949 

(289)

(1 397)

10 

(1 070)
(3 687)
(6)

(1 123)
(3 687)
(6)

5 

3 

2 

3 

2 

429 

429 

4 321 

4 321 

1 158 

1 205 

5 

5 
194 

5 

5 
194 

49 

49 

24 120 

24 162 

71 
(45)
(5)

(5 031)

(45)
(5)

(6 253)

General information required in terms of the 4th schedule of the Companies Act, 61 of 1973, is detailed in respect of only those
subsidiaries where the financial position or results are material to the group. It is considered that the disclosure in these statements
of such information in respect of the remaining subsidiaries would entail expenses out of proportion to the value to members. Other
subsidiaries consist of nominees, property-owning and financial holding companies acquired in the course of lending activities. A
register detailing information in respect of all subsidiaries is available for inspection at the registered office.

Nedbank Group Limited will ensure that, except in the case of political risk and unless specifically excluded by public notice in a
country where a subsidiary is domiciled, its banking subsidiaries, and its principal non-banking subsidiaries are able to meet their
contractual liabilities.

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A
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I

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N
A
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F

L
A
U
N
N
A

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A
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I

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331

 
 
 
 
 
 
 
NEDBANK MAJOR SUBSIDIARY COMPANIES 
AT 31 DECEMBER 2008

Nedbank Limited 
100%

Foreign Nedgroup 
subsidiaries

BoE Limited 
100%

Nedgroup Investment 
Holdings 101 Limited 
100%

The Board of Executors 
100%

Nedgroup Securities 
(Pty) Limited 100%

Nedgroup Wealth 
Management Limited 100%

NBS Boland Group Limited 
100%

BoE Life Limited 100%

Local subsidiaries

Imperial Bank Limited 
50,1%

Nedcor Investment Limited 
100%

Nedgroup Investment 102 
Limited 100%

BoE Holdings Limited 100%

Nedgroup Collective 
Investments Limited 100%

NedEurope Limited 100%

Nedbank (Malawi) Limited 
97,1%

NedNamibia Holdings 
Limited 100%

Tando AG 100%

Alliance Investments 
Limited 100%

MN Holdings Limited 100%

Foreign Nedbank 
subsidiaries

Nedbank (Lesotho) Limited 
100%

Nedbank (Swaziland) 
Limited 67,2%

Nedcor Trade Services 
Limited 100%

OTHER COMPANIES/ENTITIES

Depﬁ n Investments (Pty) 
Limited 100%

Nedgroup Insurance 
Company Limited 100%

Syfrets Securities Nominees 
(Pty) Limited 99%

BoE Management Limited 
100%

Nedcor Group Insurance 
Company Limited 100%

Syfrets Securities Limited 
100%

Dr Holsboer Beneﬁ t Fund 
100%

Nedgroup Financial Services 
104 Limited 100%

Fairbairn Trust Company 
Limited 100%

Nedcor (SA) Insurance 
Company Limited 100%

Cape of Good Hope 
Financial Services Limited 
100%

FTNIB Management 
Company Limited 100%

332

NEDBANK GROUP ANNUAL REPORT 2008

COMPANY INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER

Interest and similar income

Net interest income
Dividends from subsidiaries
Foreign currency translation loss

Total income after foreign currency translation loss
Operating expenses

Profit from operations before non-trading capital items
Capital profit on sale of investment
Impairment of investments in subsidiaries
Impairment of intergroup loans and advances
Loss on waiver of subsidiary loans

Profit before taxation
Direct taxation

Profit after taxation

COMPANY BALANCE SHEET
AT 31 DECEMBER

Assets
Sundry debtors and accrued interest
Deferred taxation asset
Current taxation receivable
Investment in subsidiary companies

– Shares at cost – unlisted
– Owing by subsidiaries

Total assets

Shareholders’ equity and liabilities
Ordinary share capital
Ordinary share premium
Share-based payments reserve
Non-distributable reserves
Distributable reserves

Equity attributable to equityholders of the parent
Sundry creditors
Deferred taxation liabilities
Impairment of intergroup loans and advances
Amounts owing to subsidiaries

Total liabilities

Total shareholders’ equity and liabilities

Notes

1

6

2

Notes

3

4

9

5

6

2008
Rm

–
3 047 

3 047 
20 

3 027 

(44)
(2)

2 981 
16 

2 965 

2008
Rm

28 
7 
8 
24 207 

24 120 
87 

24 250 

469 
15 476
235 
41 
2 705 

18 926 
14 
7 
185 
5 118 

5 324 

24 250 

2007
Rm

3 

3 
2 536 
(1)

2 538 
25 

2 513 
56 
(83)
24 
(48)

2 462 
144 

2 318 

2007
Rm

1 

5 
24 497 

24 162 
335 

24 503 

459 
14 174 
230 
41 
2 802 

17 706 
19 
7 
183 
6 588 

6 797 

24 503 

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R

I

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A
N
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A
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C
N
A
N
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V
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I

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A
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N
A
N
I
F

L
A
U
N
N
A

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T
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M
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A
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S

I

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G
N
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E
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D
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A
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A

333

 
 
 
 
 
 
 
COMPANY STATEMENT OF CHANGES 
IN SHAREHOLDERS’ EQUITY
FOR THE YEAR ENDED 31 DECEMBER

Number of
ordinary
shares

Ordinary Ordinary
share
premium
Rm

share
capital
Rm

Share-based

Other non-

Total
ordinary
payments distributable Distributable shareholders’
equity
Rm

reserves
Rm

reserves
Rm

reserve
Rm

Balance at 31 December 2006
Shares issued in terms of employee 
incentive schemes
Capitalisation award
Shares acquired/cancelled by BEE trusts
Shares listed under BEE schemes
Share-based payments reserve movements
Profit for the year
Ordinary dividends

Balance at 31 December 2007
Shares issued in terms of employee 
incentive schemes
Capitalisation award
Shares acquired/cancelled by BEE trusts
Shares listed under BEE schemes
Share-based payments reserve movements
Profit for the year
Ordinary dividends
Other movements

450 884 556 

451 

13 013 

218 

41 

3 182 

16 905 

3 493 321 
4 830 026 

3 
5 

70 172 

499 
646 
8 
8 

502 
651 
8 
8 
12 
2 318 
(2 698)

12 

2 318 
(2 698)

459 278 075 

459 

14 174 

230 

41 

2 802 

17 706 

4 809 873 
4 039 422 

812 027 

5 
4 

1 

535 
453 
15 
299 

5 

540 
457 
15 
300 
5 
2 965 
(3 066)
4 

2 965 
(3 066)
4 

Balance at 31 December 2008

468 939 397 

469 

15 476 

235 

41 

2 705 

18 926 

COMPANY CASHFLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER

Notes

7

Cash generated by operations

Cash received from clients – interest income
BEE transaction share-based payments expense
Cash paid to clients, employees and suppliers
Dividends received on investments

Change in funds for operating activities

Decrease in operating assets
Decrease in operating liabilities

Net cash generated from operating activities before taxation
Taxation paid

8

Cashflows from operating activities
Cashflows utilised by investing activities

Acquisition of investments in subsidiary companies 

Cashflows utilised by financing activities

Proceeds from issue of ordinary shares
Dividends paid to ordinary shareholders

Net increase/(decrease) in cash and cash equivalents for the year

2008
Rm

3 032 

5 
(20)
3 047 

(1 257)

213 
(1 470)

1 775 
19 

1 756 
(2)

(2)

(1 754)

1 312 
(3 066)

–

2007
Rm

2 526 

3 
12 
(25)
2 536 

(576)

588 
(1 164)

1 950 
147 

1 803 
(274)

(274)

(1 529)

1 169 
(2 698)

–

334

NEDBANK GROUP ANNUAL REPORT 2008

NOTES TO THE COMPANY 
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER

1 OPERATING EXPENSES

Audit fees – current year
BEE transaction share-based payments expenses 
Directors’ fees
Other

2 DIRECT TAXATION

2.1

2.2

Charge for the year
South African normal taxation – current taxation
Capital gains taxation
Secondary taxation on companies

Taxation rate reconciliation 
Standard rate of South African normal taxation
Non-taxable income
Non-deductable expenses
Secondary taxation on companies

Effective taxation rate

3 SUNDRY DEBTORS 

Sundry debtors and accrued interest

These assets are repayable on demand or at short notice and are all within South Africa.

4 SHARE CAPITAL

Ordinary share capital
Authorised
600 000 000 (2007: 600 000 000) ordinary shares of R1 each

Issued ordinary share capital
468 939 397 (2007: 459 278 075) fully paid ordinary shares of R1 each

5 SUNDRY CREDITORS

Creditors and other accounts

2008 
Rm

5 
5 
7 
3 

20 

1 

15 

16 

% 
28 
(28)

1 

1 

2007
Rm

1 
12 
10 
2 

25 

2 
7 
135 

144 

% 
29 
(29)
1 
5 

6 

28 

1 

600 

469 

600 

459 

14 

19 

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V
O

P
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S
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R

I

L
A
N
O
T
A
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S
W
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V
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R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
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M
E
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A
T
S

I

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G
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E
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R
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D
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335

 
 
 
 
 
 
 
NOTES TO THE COMPANY 
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

6 IMPAIRMENT OF INTERGROUP LOANS AND ADVANCES

Specific impairment has been raised on intergroup loans and advances made by Nedbank Limited to fellow subsidiary companies.
Nedbank Group Limited has guaranteed these intergroup advances, for which a provision against these guarantees has been
recognised.

Balance at the beginning of the year
Income statement charge

Balance at the end of the year

7 CASH GENERATED BY OPERATIONS

Reconciliation of profit before taxation to cash generated by operations
Profit before taxation
Adjusted for:

– BEE transaction share-based payments expenses
– Foreign currency translation profit
– Impairment of advances
– Impairment of investments
– Loss on waiver of loan to subsidiary
– Capital profit on sale of investment

2008 
Rm

183 
2 

185 

2007
Rm

207 
(24)

183 

2 981 

2 462 

5 

2 
44 

12 
1 
(24)
83 
48 
(56)

Cash generated by operations

3 032 

2 526 

8 TAXATION PAID

Amounts prepaid at the beginning of the year
Income statement charge – current taxation
Realised deferred taxation
Income statement charge – secondary taxation on companies
Amounts prepaid at the end of the year

(5)
1 

15 
8 

19 

(3)
2 
8 
135 
5 

147 

336

NEDBANK GROUP ANNUAL REPORT 2008

9 SHARE-BASED PAYMENTS

Equity instruments are granted to business partners and non-executive directors as an incentive to retain business and develop
growth  within  the  group. The  share-based  payment  expenses  and  reserve  balances  in  respect  of  the  Black  Business  Partner
Scheme and the Non-executive Directors’ Scheme, implemented in 2005, were accounted for in the Nedbank Group Limited
consolidated financial statements and in the Nedbank Group Limited standalone financial statements. Both of these schemes
will be equity-settled.

As the company cannot estimate reliably the fair value of services received nor the value of additional business received, the
company rebuts the presumption that such services and business can be measured reliably. The company therefore measures
their fair value by reference to the fair value of the equity instruments granted, in line with the group’s accounting policy. The
fair value of such equity instruments is measured at the grant date utilising the Black-Scholes valuation model.

9.1 Description of arrangements

Scheme

Trust/SPV

Description

Vesting requirements

Maximum term

Nedbank Eyethu BEE schemes

Black Business
Partner Scheme

Wiphold Financial
Services Number
Two Trust and
Brimstone-Mtha
Financial Services
Trust

Non-executive
Directors’ Scheme

Nedbank Eyethu
Non-executive
Directors’ Trust

No dealing in the shares
during the 10-year notional
funding period.

10 years

Each trust was issued an
equal number of restricted
shares at R1,87 per share,
with notional funding over
a period of 10 years. The
beneficial ownership of the
shares resides with the
participants, including the
voting and dividend rights.

6 years

Certain non-executive
directors acquired restricted
shares at par value, with
notional funding over a
period of six years. The
beneficial ownership of the
shares resides with the
participants, including the
voting and dividend rights.

Six years’ service and no
dealing in the shares during
this notional funding period.
So as not to compromise the
non-executive directors’
independence, no specific
performance conditions will
apply to the directors’
participation.

9.2 Effect on profit and financial position

Black Business Partner Scheme
Non-executive Directors’ Scheme

Share-based
payments expense

Share-based
payments reserve

2008
Rm

5 

5 

2007
Rm

12 

12 

2008
Rm

215 
20 

235 

2007
Rm

215 
15 

230 

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A
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I

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337

 
 
 
 
 
 
 
NOTES TO THE COMPANY 
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

9 SHARE-BASED PAYMENTS... continued

9.3 Movements in number of instruments

2008

Weighted
average
exercise price
Rm

171,82 

171,82 

–

78,81 

103,88 

–

Number of
instruments

7 891 300 

7 891 300 

–

493 206 

81 815 

575 021 

–

Black Business Partner Scheme 
Outstanding at the beginning of the year

Outstanding at the end of the year

Exercisable at the end of the year

Non-executive Directors’ Scheme
Outstanding at the beginning of the year
Other movements
Granted

Outstanding at the end of the year

Exercisable at the end of the year

9.4

Instruments outstanding at the end of the year by exercise price

2008

Weighted
average
remaining
contractual
life (years)

6,6 

6,6 

2,6 
2,6 

2,6 

Number of
instruments

7 891 300 

7 891 300 

81 815 
493 206 

575 021 

Black Business Partners Scheme
171,82

Non-executive Directors’ Scheme
78,81
108,04

2007

Weighted
average
exercise price
Rm

171,82 

171,82 

–

108,04 

Number of
instruments

7 891 300 

7 891 300 

–

344 351 
148 855 

493 206 

108,04 

–

–

2007

Weighted
average
remaining
contractual
life (years)

7,6 

7,6 

3,6 

3,6 

Number of
instruments

7 891 300 

7 891 300 

493 206 

493 206 

9.5

Instruments granted during the year
The  weighted  average  fair  value  of  instruments  granted  during  the  year  has  been  calculated  using  the  Black-Scholes
option pricing model, using the following inputs and assumptions.

Number of instruments granted
Weighted average fair value per instrument granted (R)
Weighted average share price (R)
Weighted average exercise price (R)
Weighted average expected volatility (%)
Weighted average life (years)
Weighted average expected dividends (%) 
Weighted average risk-free interest rate (%)
Number of participants
Weighted average vesting period (years)
Possibility of not vesting (%)
Expectation of meeting performance criteria (%)

Non-executive
Director’s
Scheme
2008 

Non-executive
Director’s
Scheme
2007

81 815 
48,52 
112,00 
78,81 
27,0 
1,9 
0,0
10,9 
1 
0,5 
0,0
100 

338

NEDBANK GROUP ANNUAL REPORT 2008

10 RELATED PARTIES

10.1 Relationship with parent, ultimate controlling party and investees

The  company's  parent  company  is  Old  Mutual  (South Africa)  Limited  (OMSA), which, through  its  subsidiaries, holds
54,30% (2007: 53,20%) of Nedbank Group Limited's ordinary shares. The ultimate controlling party is Old Mutual plc,
incorporated in the United Kingdom.

Material  subsidiaries  of  the  company  are  identified  on  pages 330  to 332  and  associates  and  joint  ventures  of  the
company are identified on pages 328 and 329.

10.2 Key management personnel compensation 

Key  management  personnel  are  those  persons  who  have  authority  and  responsibility  for  planning, directing  and
controlling the activities of the company, directly or indirectly, including all directors of the company and its parent, as
well as members of the Executive Committee who are not directors, as well as close members of the family of any of
these individuals.

Details of the compensation paid to the board of directors are disclosed in the Remuneration Report on pages194 to 205
and details of their shareholdings in the company are disclosed on pages 204 and 205. Compensation paid to the board
of directors is aggregated below, together with the aggregate compensation paid to the executive directors, as well as
the number of share options and instruments held.

Compensation (Rm)
2008
Directors’ fees – Paid by subsidiaries
Remuneration – Paid by subsidiaries

– Short-term employee benefits
– Gain on exercise of options

2007
Directors’ fees* – Paid by subsidiaries
Remuneration – Paid by subsidiaries

– Short-term employee benefits
– Gain on exercise of options

Number of share options and instruments
2008
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Expired
Transferred

Key 
management
personnel 

Directors 

12 
25 

16 
9 

37 

11 
33 

19 
14 

44 

80 

68 
12 

80 

68 

43 
25 

68 

Total

12 
105 

84 
21 

117 

11 
101 

62 
39 

112 

1 412 503 
209 250 

(166 744)
(199 000)

1 380 971 
315 507 
(107 645)
(276 521)

177 500 

2 793 474 
524 757 
(107 645)
(443 265)
(199 000)
177 500 

Outstanding at the end of the year

1 256 009 

1 489 812 

2 745 821 

2007
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Transferred

Outstanding at the end of the year

1 333 738 
121 643 
(26 926)
(160 292)
144 340 

1 716 265 
300 430 
(68 708)
(393 693)
(173 323)

3 050 003 
422 073 
(95 634)
(553 985)
(28 983)

1 412 503 

1 380 971 

2 793 474 

* Where necessary, comparative information has been enhanced to provide a more detailed analysis.

W
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N
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N
A
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L
A
U
N
N
A

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A
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I

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339

 
 
 
 
 
 
 
NOTES TO THE COMPANY 
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER ... CONTINUED

10 RELATED PARTIES ... continued

10.3 Related-party transactions

The  following  significant  transactions  were  entered  into  between  Nedbank  Group  Limited  and  the  following  related
parties. All of these transactions were entered into in the normal course of business.

Outstanding balances (Rm)

Subsidiaries
Loan from BoE Management Limited – interest-free
Loan from BoE Limited – interest-free
Loan from Cape of Good Hope Financial Services Limited – interest-free*
Loan from Nedbank Nominees (Pty) Ltd*
Loan from The Board of Executors 1838
Bank accounts with Nedbank Limited – interest-free
Advance to NEST
Loan to FTNIB Manco
Tando AG – dividend 
Due from Nedbank Limited on exercise of share options during the year 
– interest-free
Impairment provision in respect of amounts due to Nedbank Limited by its 
subsidiaries
Impairment provision in respect of amounts due to Nedgroup Investments 
Limited by its subsidiaries
Impairment provision in respect of amounts due by BoE Limited

Key management personnel
The Wiphold and Brimstone consortia are related parties since certain key
management  personnel  of  the  company  have  significant  influence  over
these entities. These consortia are participants in the Nedbank Eyethu BEE
schemes  and  the  share-based  payments  reserve  recognised  in  respect  of
these consortia and key management personnel is detailed below:

Wiphold consortium
Brimstone consortium
Non-executive directors

Share-based payments reserve

Due from/(Owing to) 
2008 
Rm

2007
Rm

(3 687)
(1 070)
(6)
(5)
(45)
(305)
16 

71 

(163)

(2)
(18)

(3 687)
(1 171)
(5)
(5)
(45)
(1 723)
325 
10 

325 

(161)

(2)
(19)

(108)
(107)
(20)

(235)

(108)
(107)
(15)

(230)

340

NEDBANK GROUP ANNUAL REPORT 2008

Transactions (Rm)

Parent
Dividend declared to OMSA via its subsidiaries*

Subsidiaries
MN Holdings Limited

Interest income

MN Holdings Limited

Foreign currency translation gains/(losses) on loans to or from subsidiaries

Nedbank Limited
Nedgroup Investment Holdings 101 Limited
Syfrets Securities Limited
Nedgroup Insurance Company Limited
NedEurope Limited
Tando AG
FTNIB Management Company Limited*
Nedbank International Limited*
Alliance Investments Limited
BoE Limited

Dividends declared by subsidiaries

Income/(Expense)

2008 
Rm

2007
Rm

1 577 

1 382 

–

–

2 294 
286 
32 
60 
163 
143 

16 
53 

3 

3 

(1)

(1)

1 947 
498 
10 

10 
22 

49 

3 047 

2 536 

Key management personnel
The  share-based  payments  charge  in  respect  of  the  entities  that  are
participants  in  the  Nedbank  Eyethu  BEE  schemes  and  key  management
personnel is detailed below:

Non-executive directors

Share-based payments expense

(5)

(5)

(12)

(12)

* Where necessary, comparative information has been enhanced to provide a more detailed analysis.

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E
C
N
A
N
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I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
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M
E
T
A
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S

I

S
G
N
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E
E
M
R
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A
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I

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A
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341

 
 
 
 
 
 
 
342

NEDBANK GROUP ANNUAL REPORT 2008

LETTER FROM THE CHAIRMAN

Dear Member

I extend a warm invitation to you to attend the 42nd annual general meeting of Nedbank Group Limited to be held in the Auditorium,
Retail Place West, Nedbank Sandton, 135 Rivonia Road, Sandown, on Thursday, 14 May 2009, at 09:00.

Included in this document are:

•

•

•

the notice of annual general meeting setting out the resolutions to be proposed at the meeting;

annexure 1 to the notice of annual general meeting setting out explanatory notes regarding proxies and resolutions for the annual
general meeting, as well as important notes about the annual general meeting; and

a form of proxy.

If  you  are  unable  to  attend, you  will  be  able  to  exercise  your  right  as  a  member  to  take  part  in  the  annual  general  meeting  by
following the accompanying explanatory notes.

I should like to remind members of their right to raise questions, at the appropriate time, at the annual general meeting. As it is not
always possible to answer every question raised at the annual general meeting, and to ensure that matters of particular interest to
members are covered, members may use the attached question form to raise, in advance, any questions of particular interest to them.
From the question forms returned we can assess the most popular topics, which I shall endeavour to address at the annual general
meeting. This advance notice of relevant questions will, of course, not prevent any member from raising questions, at the appropriate
time, during the annual general meeting.

The question form can be:

•

•

forwarded to the Company Secretary, Gawie Nienaber, Ground Floor, Block A, Nedbank Sandton, 135 Rivonia Road, Sandown, 2196
(PO Box 1144, Johannesburg, 2000), to be received no later than 09:00 on Wednesday, 13 May 2009; or

handed in at the time of registering attendance at the annual general meeting, should the above option not have been chosen.

Should  you  require  an  interpreter  (for  sign  language  or  translation  from  English  into  any  of  the  other  official  languages  of 
South Africa) to be in attendance at the annual general meeting, please do not hesitate to advise the Company Secretary’s office on
+27 (0)11 294 9105/6/7 or at gawien@nedbank.co.za by no later than Thursday, 7 May 2009, for this facility to be arranged.

Yours faithfully

Dr RJ Khoza
Chairman

Sandown
25 February 2009

HEADOFFICE

135 Rivonia Road, Sandown, 2196
PO Box 1144, Johannesburg, 2000, South Africa
Tel +27 (0)11 294 4444 Fax +27 (0)11 295 1111 www.nedbankgroup.co.za

Nedbank Group Limited 
Reg No 1966/010630/06

Directors: Dr  RJ  Khoza  (Chairman)
CJW  Ball MWT  Brown TCP  Chikane MA  Enus-Brey
JB Magwaza ME Mkwanazi NP Mnxasana GT Serobe

Prof  MM  Katz  (Vice-chairman) ML  Ndlovu  (Vice-chairman) TA  Boardman  (Chief  Executive)
Prof  B  de  L  Figaji R  Harris† RM  Head† A  de  VC  Knott-Craig
(†British)

Company Secretary: GS Nienaber

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343

 
 
 
 
 
 
 
QUESTION FORM FOR 
ANNUAL GENERAL MEETING

Name of member

Address

Contact details

Telephone number

Fax number

Email

Questions

344

NEDBANK GROUP ANNUAL REPORT 2008

SHAREHOLDERS’ DIARY

2008 FINANCIAL YEAR

Financial year-end
Annual results and announcement of final dividend
Final dividend payment (Nedbank Limited preference shares)
Final dividend payment (Nedbank Group Limited ordinary shares)
Annual general meeting

2009 FINANCIAL YEAR

First-quarter trading update
Interim report and announcement of interim dividend
Interim dividend payment
Third-quarter trading update
Financial year-end
Annual results and announcement of final dividend
Publication and posting of annual report
Final dividend payment
Annual general meeting

(Dates correct at time of going to print)

31 December 2008
26 February 2009
on or about 30 March 2009
on or about 14 April 2009
14 May 2009

on or about 7 May 2009
on or about 5 August 2009
during September 2009
on or about 5 November 2009
31 December 2009
during February 2010
during March 2010
during April 2010
during May 2010

MAP GIVING LOCATION OF NEDBANK SANDTON

The map below indicates the location of Nedbank Sandton, where the annual general meeting will be held.

MORNINGSIDE

WENDYWOOD

SANDOWN

NEDBANK
GROUP
SANDTON

WYNBERG

JHB

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345

 
 
 
 
 
 
 
NOTICE OF ANNUAL GENERAL MEETING

Nedbank Group Limited
(Incorporated in the Republic of South Africa)
Reg No 1966/010630/06
JSE share code: NED; NSX share code: NBK
ISIN: ZAE000004875
(Nedbank Group or the company)

Notice is hereby given that the 42nd annual general meeting of the members of Nedbank Group will be held in the Auditorium,
Retail Place West, Nedbank Sandton, 135 Rivonia Road, Sandown, Sandton, on Thursday, 14 May 2009, at 09:00.

AGENDA

1

2

To receive and adopt the annual financial statements of the company for the year ended 31 December 2008.

To note and confirm the interim dividend of 310 cents per ordinary share declared by the board of directors on 5 August 2008 and
the final dividend of a number of Nedbank Group shares, to be determined in terms of the capitalisation award ratio, for every
100 Nedbank Group shares held to those members who elected (or were deemed to have elected) the capitalisation award and
310 cents per ordinary share to those members who did not elect to receive capitalisation shares, as declared by the board of
directors on 25 February 2009.

3

To reelect as directors of the company

3.1 Dr RJ Khoza,

3.2 Mr MA Enus-Brey,

3.3 Prof MM Katz,

3.4 Mr JB Magwaza,

3.5 Mr ME Mkwanazi,

3.6 Mr ML Ndlovu and

3.7 Ms GT Serobe,

who  retire  by  rotation  in  terms  of  the  company’s  articles  of  association  and, being  eligible, make  themselves  available  for
reelection. Biographical details of the directors to be reelected are set out on pages 38 to 43 of the annual report.

Prof MM Katz and Messrs JB Magwaza, ME Mkwanazi and ML Ndlovu are required, in terms of board policy, to seek reelection
annually as they have served on the board for more than nine years.

The performance and contribution of each of the above directors have been reviewed by the board and the board recommends
that each of these directors be reelected. In addition, while length of tenure must be considered when determining a director’s
independence, the  board  believes  that  Prof  Katz  and  Messrs  Magwaza, Mkwanazi  and  Ndlovu  continue  to  demonstrate  the
characteristics of independence as required by the board.

4

To elect

4.1 Mr A de VC Knott-Craig and

4.2 Ms NP Mnxasana

as directors of the company.

During the year the board of directors appointed Mr Knott-Craig and Ms Mnxasana as directors of the company. They retire in
terms of the company’s articles of association and, being eligible, make themselves available for election. Biographical details of
Mr Knott-Craig and Ms Mnxasana are set out on pages 41 and 42 of the annual report.

5

6

7

To approve the non-executive directors’ fees.

To approve the remuneration paid to executive directors.

To reappoint Deloitte & Touche (with the designated auditor currently being Mr D Shipp) and KPMG Inc (with the designated
auditor  currently  being  Ms TA  Middlemiss), as  joint  auditors, to  hold  office  from  the  conclusion  of  the  42nd  annual  general
meeting until the conclusion of the next annual general meeting of Nedbank Group.

346

NEDBANK GROUP ANNUAL REPORT 2008

8

To authorise the Nedbank Group Audit Committee to determine the remuneration of the company’s auditors and the auditors’
terms of engagement.

9

To consider and, if deemed fit, pass with or without modification the following resolution:

ORDINARY RESOLUTION 1

Control of authorised, but unissued, shares
’Resolved that authority be and is hereby granted to the directors to place the authorised, but unissued, ordinary shares in the
share capital of Nedbank Group under the control of the directors to allot these shares on such terms and conditions and at such
times as they deem fit, subject to the provisions of the Companies Act, 61 of 1973, as amended, the Banks Act, 94 of 1990, as
amended, and  the  JSE  Limited  Listings  Requirements. The  issuing  of  shares  granted  under  this  authority  will  be  limited  to
Nedbank  Group’s  existing  contractual  obligations  to  issue  shares, including  for  purposes  of  Nedbank  Group’s  BEE  transaction
approved in 2005 and the NedNamibia BEE transaction approved in 2006, any scrip dividend and/or capitalisation share award,
shares required to be issued for the purpose of carrying out the terms of the Nedbank Group share incentive schemes as well as
any alternative coupon settlement mechanism relating to issues, from time to time, of the Nedbank Limited Tier 1 hybrid debt
capital instruments.’

10 As special business, to consider and, if deemed fit, pass with or without modification the following resolutions:

ORDINARY RESOLUTION 2

Amendment to the Nedbank Group (2005) Share Option, Matched Share and Restricted Share Scheme
’Resolved to amend paragraph 12.1.2 of The Nedbank Group (2005) Share Scheme rules, by deleting the underlined words in the
aforesaid paragraph:

Termination before the Vesting Date
12.1

If  a  Participant  is  granted  an  Option  in  terms  of  the  Scheme  and, before  the  Vesting  Date, the  employment  of  such
participant by an Employer terminates -

12.1.2 by reason of a Fault Termination, such Option shall lapse automatically on the day which is 30 days immediately following
the  Termination  Date  and  shall  cease  to  have  any  further  force  or  effect; provided  that  the  RemCom  may, in its  sole
discretion, and prior to the end of the 30-day period referred to above, require that the Participant transfer his/her Options,
prior to their lapsing, to the Trustees for a consideration no greater than any consideration paid by the Participant for such
Options.’

Ordinary resolution 2 is required, under the JSE Listings Requirements, to be passed by achieving a 75% majority of the votes cast in
favour of such resolution by all members present or represented by proxy and entitled to vote at the annual general meeting.

SPECIAL RESOLUTION 1

General authority to repurchase shares
’Resolved, as a special resolution of the company, that the company and/or its subsidiaries be and are hereby authorised, in terms
of a general authority contemplated in sections 85(2) and 85(3) of the Companies Act, 61 of 1973, as amended (the act), to
acquire the company’s issued shares from time to time on such terms and conditions and in such amounts as the directors of
the company may from time to time decide, but always subject to the approval, to the extent required, of the Registrar of Banks,
the provisions of the act, the Banks Act, 94 of 1990, as amended, and the JSE Limited (JSE) Listings Requirements, subject to the
following limitations:

(a)

the repurchase of securities shall be effected through the main order book operated by the JSE trading system and done
without any prior understanding or arrangement between the company and the counterparty;

(b)

authorisation thereto shall be given by the company’s articles of association;

(c)

(d)

this general authority shall be valid only until the company’s next annual general meeting, provided that it shall not extend
beyond 15 months from the date of the passing of this special resolution;

in determining the price at which the company’s ordinary shares are acquired by the company in terms of this general
authority the maximum premium at which such ordinary shares may be acquired shall be 10% of the weighted average of
the market price at which such ordinary shares are traded on JSE, as determined over the five trading days immediately
preceding the date of the repurchase of such ordinary shares by the company;

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347

 
 
 
 
 
 
 
NOTICE OF ANNUAL GENERAL MEETING ...

CONTINUED

(e)

(f)

(g)

(h)

(i)

(j)

(k)

the acquisitions of ordinary shares in the aggregate in any one financial year shall not exceed 10% of the company’s issued
ordinary share capital of that class in any one financial year;

the company and Nedbank Group shall be in a position to repay their debts in the ordinary course of business for a period
of 12 months after the decision by the directors of the company to repurchase shares in the open market;

the assets of the company and Nedbank Group shall be in excess of the liabilities of the company and Nedbank Group for
a period of 12 months after the decision by the directors of the company to repurchase shares in the open market – for
this purpose the assets and liabilities shall be recognised and measured in accordance with the accounting policies used in
the latest audited consolidated annual financial statements;

the ordinary capital and reserves of the company and Nedbank Group shall be adequate for ordinary business purposes for
the 12 months after the decision by the directors of the company to repurchase shares in the open market;

the available working capital shall be adequate to continue the operations of the company and Nedbank Group for a period
of 12 months after the decision by the directors to repurchase shares in the open market;

after such repurchase the company shall continue to comply with paragraphs 3.37 to 3.41 of the JSE Listings Requirements
concerning shareholder spread requirements;

neither the company nor its subsidiaries shall repurchase securities during a prohibited period, as defined in paragraph 3.67
of  the  JSE  Listings  Requirements, unless  they  have  in  place  a  repurchase  programme  where  the  dates  and  quantities  of
securities to be traded during the relevant period are fixed (not subject to any variation) and full details of the programme
have been disclosed in an announcement on SENS prior to the commencement of the prohibited period;

(l) when the company has cumulatively repurchased 3% of the initial number of the relevant class of securities, and for each

3% in aggregate of the initial number of that class acquired thereafter, an announcement shall be made; and

(m) at any point in time the company shall appoint only one agent to effect any repurchase(s) on its behalf.’

In terms of the proposed special resolution the maximum number of Nedbank Group shares that may be repurchased during the
term of this authority, subject to (b) above, is 46 893 940 shares (10% of 468 939 397 shares in issue at 3 March 2009).

The reason for and effect of special resolution 1 is to authorise the company and/or its subsidiaries by way of a general authority
to acquire its/their own issued shares on such terms and conditions and in such numbers as determined from time to time by
the directors of the company, subject to the limitations set out above. Should the general authority for the acquisition of shares
be granted at Nedbank Group’s annual general meeting, it will provide the board with the flexibility to repurchase such shares
as and when the best interests of the company require it to do so.

Statement by the directors of Nedbank Group in terms of section 85(4) of the Companies Act
The  directors  of  Nedbank  Group, after  considering  the  effect  of  the  repurchase  of  shares  from  the  BEE  partners, which  was
approved by the company as special resolution 2 on 22 July 2005, and the repurchase of the maximum number of the company’s
shares in terms of the general authority, are satisfied that, for the period until the date of the next annual general meeting:

•

•

•

the company and the group will be able to pay their debts in the ordinary course of business;

the assets of the company and the group will be in excess of the liabilities, measured in accordance with the accounting
policies used in the audited financial statements for the year ended 31 December 2008; and

the working capital and reserves of the company and the group will be adequate.

Disclosure in terms of section 11.26 of the JSE Listings Requirements
The JSE Listings Requirements require the following disclosures, which are disclosed in the Nedbank Group 2008 Annual Report,
as set out below:

Management and directors

pages 22 and 38 to 43

Major shareholders of Nedbank Group

pages 62 and 63

Directors’ interests in securities

pages 204 and 205

Share capital of Nedbank Group

pages 296 and 297

348

NEDBANK GROUP ANNUAL REPORT 2008

Material change
Other than the facts and developments, as reported on in the annual report, there have been no material changes in the affairs
or financial position of Nedbank Group and its subsidiaries from 31 December 2008 to the date of the audit report forming part
of the annual financial statements.

Directors’ responsibility statement
The  directors, whose  names  are  given  on  pages 38  to 43  of  the  annual  report, collectively  and  individually  accept  full
responsibility  for  the  accuracy  of  the  information  pertaining  to  special  resolution  1  and  certify  that, to  the  best  of  their
knowledge and belief, no facts have been omitted that would make any statement false or misleading, and that all reasonable
enquiries to ascertain such facts have been made and that this resolution and additional disclosure in terms of section 11.26 of
the JSE Listings Requirements pertaining thereto contain all such information required by law and the JSE Listings Requirements.

Litigation statement
In terms of section 11.26 of the JSE Listings Requirements the directors, whose names are given on pages 38 to 43 of the annual
report, are not aware of any legal or arbitration proceedings, including proceedings pending or threatened, that may have or may
have had in the recent past, being at least the previous 12 months, a material effect on Nedbank Group’s financial position.

VOTING BY PROXY

A member entitled to attend and vote at the meeting may appoint a proxy or proxies to attend, speak and vote in his/her stead. A
proxy need not be a member of the company. Completed proxy forms should be received at the office of the transfer secretaries no
later than 24 hours before the time appointed for the holding of the annual general meeting.

By order of the board

GS Nienaber
Company Secretary

Sandown
25 February 2009

REGISTERED OFFICE
Nedbank Group Limited
Reg No 1966/010630/06
Nedbank Sandton
135 Rivonia Road 
Sandown, 2196

PO Box 1144
Johannesburg, 2000
Tel: +27 (0)11 294 4444
Fax: +27 (0)11 295 1111

TRANSFER SECRETARIES IN SOUTH AFRICA
Computershare Investor Services (Pty) Limited
70 Marshall Street
Johannesburg, 2001

TRANSFER SECRETARIES IN NAMIBIA
Transfer Secretaries (Pty) Limited
Shop 8, Kaiserkrone Centre
Post Street Mall,
Windhoek, Namibia

PO Box 61051
Marshalltown, 2107
Tel: +27 (0)11 370 5000
Fax: +27 (0)11 688 5238

PO Box 2401
Windhoek, Namibia
Tel: +264 (0)61 227 647
Fax: +264 (0)61 248 531

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349

 
 
 
 
 
 
 
ANNEXURE 1

EXPLANATORY NOTES TO RESOLUTIONS FOR THE ANNUAL GENERAL MEETING

1 Receipt and adoption of annual financial statements and reports

In terms of the Companies Act, 61 of 1973, as amended (‘the act’), the directors are required to present to members at the annual
general meeting the annual financial statements, incorporating the report of the directors, for the year ended 31 December 2008,
together with the report of the auditors contained in the annual financial statements.

2 Payment of dividends

An  interim  dividend  of  310  cents  per  ordinary  share  was  declared  by  the  board  of  directors  on  5 August  2008  and  paid  on 
15 September 2008. A final dividend of a number of Nedbank Group shares, to be determined in terms of the capitalisation award
ratio, for every 100 Nedbank Group shares held was declared by the board of directors on 25 February 2009 to those members
who elected (or were deemed to have elected) the capitalisation award and 310 cents per ordinary share to those members who
did not elect to receive capitalisation shares. Members are asked to note and confirm the dividends paid/payable.

3 Election of directors who retire by rotation or retire as a result of filling a casual vacancy

In terms of the company’s articles of association (‘articles’) one-third of the directors are required to retire at each annual general
meeting and may make themselves available for reelection. In addition, any person appointed to fill a casual vacancy on the board
of  directors, or  as  an  addition  thereto, since  the  last  annual  general  meeting  is  similarly  required  to  retire  and  is  eligible  for
election  at  the  annual  general  meeting. During  2008  the  board  of  directors  took  a  decision  that, in  line  with  one  of  the
requirements of the Combined Code of Corporate Governance, any director in office for a period of more than nine years should
retire annually at the annual general meeting but could make himself/herself available for reelection. Biographical details of the
directors of the company retiring by rotation, or as a result of an appointment during the year, are set out on pages 38 to 43 of
the Nedbank Group 2008 Annual Report. Voting will be conducted in respect of each director individually.

4 Non-executive directors’ fees

In terms of article 17.7 of the company’s articles, remuneration shall be payable to the directors as determined by the company
at a general meeting. Full particulars of all fees and remuneration are contained on pages 194 to 207 of the Nedbank Group 2008
Annual Report. The Nedbank Group Board has recommended the following increases in the non-executive directors’ fees for the
2009 financial year:

•

Chairman’s fee to be increased from R3 000 000 to R3 300 000 per annum.

• Nedbank Limited Board member fee to be increased from R110 000 to R121 000 per annum.

• Nedbank Group Limited Board member fee to be increased from R130 000 to R143 000 per annum.

• Group Audit Committee member fee to be increased from R105 000 to R114 000 per annum.

• Group Remuneration Committee member fee to be increased from R60 000 to R64 800 per annum.

• Group Risk and Capital Management Committee member fee to be increased from R75 000 to R90 000 per annum.

• Group Credit Committee member fee to be increased from R65 000 to R67 500 per annum.

• Group Directors’ Affairs Committee member fee to be increased from R40 000 to R44 000 per annum.

•

Board Strategic Innovation Management Committee member fee to be increased from R40 000 to R42 000 per annum.

The Nedbank Group Chairman’s fees include his fees for board and board committee memberships.

No changes in fees are proposed for the annual premium of R100 000 paid to the vice-chairmen (payable until these positions
are  discontinued) and  members  of  the  Group  Finance  and  Oversight  Committee  (currently  R20  000)  and  the  Group
Transformation and Sustainability Committee (currently R65 000). As indicated in the Directors’ Report, the Joint Vice-chairmen
of  the  board, Prof  MM  Katz  and  Mr  ML  Ndlovu, will  formally  step  down  from  their  positions  as  vice-chairmen  at  the  annual
general meeting to be held on 14 May 2009 and will continue to serve as directors of Nedbank Group.

The chairmen of the various committees (apart from Dr RJ Khoza) receive double the member fee.

The Nedbank Group Board also recommends that a premium of 40% on the Nedbank Limited and Nedbank Group Limited Board
member fee (as revised from time to time) be paid to the senior independent director with effect from 1 January 2008.

5 Reappointment of auditors

This resolution proposes the reappointment of the company’s existing joint auditors, Deloitte & Touche (the designated auditor
currently  being  Mr  D  Shipp)  and  KPMG  Inc  (the  designated  auditor  currently  being  Ms  TA  Middlemiss), until  the  next 
annual  general  meeting. The  appointments  are  recommended  by  the  directors  of  the  company  following  the  review  and
recommendation thereof by the Group Audit Committee.

350

NEDBANK GROUP ANNUAL REPORT 2008

ANNEXURE 1 ... CONTINUED

6 Remuneration of auditors

This resolution gives authority to the Nedbank Group Audit Committee to fix the remuneration and the terms of engagement of
the auditors (proposed to be reappointed in terms of the above resolution).The aggregate auditors’ remuneration for audit and other
services  paid  to  the  auditors  for  the  financial  year  ended  31  December  2008  amounted  to R94  million  (2007: R93  million).
Particulars of the auditors’ remuneration can be found in note 14 on page 257 of the Nedbank Group 2008 Annual Report.

7 Ordinary resolution 1 – placing of unissued ordinary shares under the control of the directors

In terms of sections 221 and 222 of the act the members of the company have to approve the placement of unissued shares
under  the  control  of  the  directors. The  authority  is  limited  to  shares  being  issued  for  purposes  of  Nedbank  Group’s  existing
contractual  obligations, including  Nedbank  Group’s  BEE  transaction  approved  in  2005  and  the  NedNamibia  BEE  transaction
approved in 2006, for the issue of shares for capitalisation share awards and scrip dividends and for the various Nedbank Group
share incentive schemes as well as any alternative coupon settlement mechanism relating to issues, from time to time, of the 
Nedbank Limited Tier 1 hybrid debt capital instruments.

8 Ordinary  resolution  2  –  amendment  to the  Nedbank  Group  (2005)  Share  Option, Matched  Share  and  Restricted  Share

Scheme
The current termination of employment clause in the Nedbank Group (2005) Share Option, Matched Share and Restricted Share
Scheme  rules  allows  employees  who  terminate  their  employment  relationship  with  Nedbank  Group  an  additional 30  days
immediately following their termination date in which share options can vest and be exercised. It is proposed that the rules be
amended automatically to lapse all unvested share options on date of termination of service in the event of a fault termination.

9 Special resolution 1 – repurchase of shares

The company’s articles contain a provision allowing the company or any of its subsidiaries to repurchase (acquire) the company’s
issued shares. This is subject to the approval of members in terms of the company’s articles, the Companies Act, 61 of 1973, as
amended, the Banks Act, 94 of 1990, as amended, and the JSE Limited (JSE) Listings Requirements. The existing general authority,
granted by members at the last annual general meeting on 13 May 2008, is due to expire unless renewed.

The  directors  are  of  the  opinion  that  it  would  be  in  the  best  interests  of  the  company  to  extend  such  general  authority 
and  thereby  allow  the  company  to  be  in  a  position  to  purchase  its  own  shares  on  the  open  market, should  market 
conditions and price justify such action. The proposed authority would enable the company to purchase up to a maximum of 
46  893  940  ordinary  shares  in  the  capital  of  the  company, with  a  stated  upper  limit  on  the  price  payable, in  terms  of  the 
JSE Listings Requirements. The board manages the company’s equity on a proactive and dynamic basis, and purchases would 
be  made, only  after  the  most  careful  consideration, in  cases  where  the  directors  believed  that  such  purchases  were  in  the 
best interests of the company and its members.

No shares in Nedbank Group were acquired by Nedbank Group or by a Nedbank Group subsidiary during the financial year ended
31 December 2008, other than in respect of the repurchase of shares from the Nedbank Eyethu Retail Scheme, the terms and
conditions of which scheme are detailed in the circular to ordinary shareholders dated 15 June 2005.

IMPORTANT NOTES ABOUT THE ANNUAL GENERAL MEETING

Venue: The Auditorium, Retail Place West, Nedbank Sandton, 135 Rivonia Road, Sandown.

Date: Thursday, 14 May 2009, at 09:00.

Time: The annual general meeting will start promptly at 09:00. Shareholders wishing to attend are advised to be in the auditorium
no later than 08:45. The reception area will be open from 08:30, from which time refreshments will be served.

Travel information: The map on page 345 indicates the location of Nedbank Sandton.

Admission: Shareholders  and  others  attending  the  annual  general  meeting  are  asked  to  register  at  the  registration  desk  in  the
auditorium reception area at the venue. Shareholders, shareholder representatives and proxies may be required to provide proof of
identity. Cellphones should be switched off for the duration of the proceedings.

Parking: Secure parking is provided at the venue, Entrance 4, off Fredman Drive.

Questions: Shareholders  who  wish  to  ask  questions  relating  to  the  business  of  the  annual  general  meeting  or  on  other  related
matters but have not lodged their question forms with or faxed them to the Company Secretary are asked to register their names
and addresses and hand in their question forms at the registration desk. A question form is enclosed on page 344 for this purpose.
Staff will be on hand to provide any advice and assistance required.

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NOTICE OF ANNUAL GENERAL MEETING
... CONTINUED

Electronic voting: We will once again be taking advantage of the benefits that electronic meeting management can offer. On arrival
you will be registered, be linked to your profile on the share register and be given an electronic keypad with which to cast your vote.
As your vote is received, a message will be displayed on the keypad screen, confirming that your vote has been registered. Results of
votes cast on each resolution will be displayed on an overhead screen within minutes of voting.

Interpreter: Should you require an interpreter (for sign language or translation from English into any of the other official languages
of South Africa) to be in attendance at the annual general meeting, please do not hesitate to advise the Company Secretary’s office
on +27 (0)11 294 9105/6/7 or at gawien@nedbank.co.za by no later than Thursday, 7 May 2009, for this facility to be arranged.

Certificated shareholders and own-name dematerialised registration
Holders of certificated Nedbank Group ordinary shares wishing to attend the annual general meeting should verify beforehand with
the transfer secretaries of the company that their shares are in fact registered in their name and check the number of shares so
registered. Should their shares not be registered in their own name, but in any other name or form, shareholders wishing to attend
and/or vote at the annual general meeting should follow the instructions and explanatory notes that accompany the notice of the
annual general meeting. Similarly, shareholders who are holding dematerialised Nedbank Group ordinary shares and believe these to
be  held  in  their  own  name  should  check  with  the  transfer  secretaries  and  take  the  appropriate  action  in  accordance  with  the
instructions and guidance contained herein or obtain assistance from the transfer secretaries, if necessary.

Participant (previously known as Central Securities Depository Participant) or nominee holdings
Holders of Nedbank Group ordinary shares (whether certificated or dematerialised) through a nominee should timeously make the
necessary arrangements with that nominee or, if applicable, participant or broker to furnish such nominee, participant or broker with
the necessary authority to attend and vote at the annual general meeting or they should instruct their nominee, participant or broker
(as the case may be) on how they wish their votes to be cast on their behalf at the annual general meeting. As far as holdings in a
participant  are  concerned, these  will  be  guided  by  the  terms  of  the  agreement  entered  into  between  shareholders  and  their
participant or broker.

Proxies
Shareholders completing a proxy form (see note 1 on page 354) should ensure that their proxy form reaches the address indicated
in note 9 on page 354 no later than 09:00 on Wednesday, 13 May 2009.

Enquiries
Any shareholders experiencing difficulties or having questions pertaining to the annual general meeting or the above are invited to
contact the Company Secretary’s office on +27 (0)11 294 9105/6/7.

Results of the annual general meeting
The results of the annual general meeting will be posted on SENS as soon as is practicable after the meeting.

352

NEDBANK GROUP ANNUAL REPORT 2008

ANNUAL REPORT 2008

FORM OF PROXY

Nedbank Group Limited 
(Incorporated in the Republic of South Africa)
Reg No 1966/010630/06
JSE share code: NED; NSX share code: NBK 
ISIN: ZAE000004875
(Nedbank Group or the company)

For use by members and registered holders of certificated Nedbank Group ordinary shares and holders of dematerialised Nedbank Group
ordinary shares registered in their own name at the annual general meeting to be held in the Auditorium, Retail Place West, Nedbank
Sandton, 135 Rivonia Road, Sandown, on Thursday, 14 May 2009, at 09:00 and at any adjournment thereof.

Holders of Nedbank Group ordinary shares (whether certificated or dematerialised) through a nominee should not complete this form
of proxy but should timeously make the necessary arrangements with that nominee or, if applicable, participant (previously referred to
as  central  securities  depository  participant)  or  broker  (as  the  case  may  be)  to  furnish  such  nominee, participant  or  broker  with  the
necessary authority to attend and vote at the annual general meeting or they should instruct their nominee, participant or broker (as
the case may be) on how they wish their votes to be cast on their behalf at the annual general meeting.

I/We                                                                                              

of (address)                                                                                         

being the holder(s) of                                       ordinary shares in the company, appoint (see note 1)

1                                                                                      or failing him/her

2                                                                                     or failing him/her

3

the chairman of the annual general meeting

as my/our proxy to act for me/us and on my/our behalf at the annual general meeting that will be held for the purpose of considering
and, if  deemed  fit, passing  with  or  without  modification  the  ordinary  and  special  resolutions  to  be  proposed  thereat  and  at  any
adjournment thereof, and to vote for and/or against such resolutions and/or to abstain from voting in respect of the ordinary shares
registered in my/our name(s), in accordance with the following instructions (see note 3):

Number of votes
(one vote per ordinary share)
Against
For

Abstain

Receipt and adoption of annual financial statements

Resolutions
1
2 Noting and confirmation of payment of dividends
3.1 Reelection as a director of Dr RJ Khoza, who is retiring by rotation
3.2 Reelection as a director of Mr MA Enus-Brey, who is retiring by rotation
3.3 Reelection as a director of Prof MM Katz, who is retiring by rotation
3.4 Reelection as a director of Mr JB Magwaza, who is retiring by rotation
3.5 Reelection as a director of Mr ME Mkwanazi, who is retiring by rotation
3.6 Reelection as a director of Mr ML Ndlovu, who is retiring by rotation
3.7 Reelection as a director of Ms GT Serobe, who is retiring by rotation
4.1 Election of Mr A de VC Knott-Craig, who was appointed as a director during the year
4.2 Election of Ms NP Mnxasana, who was appointed as a director during the year
5 Approval of the non-executive directors’ fees
6 Approval of the remuneration paid to executive directors
7
8 Determination of the remuneration of the joint auditors
9 Ordinary resolution 1 – placing of unissued ordinary shares under the control of the directors
10 Ordinary resolution 2 – amendment of the Nedbank Group (2005) Share Option,

Reappointment of the joint auditors

Matched Share and Restricted Share Scheme rules

11 Special resolution 1 – general authority to repurchase shares

Signed at (place)                                                   on (date)                         2009

Signature

Assisted by me
(where applicable)

Please read the notes on the reverse side hereof.

Contact details
Tel:
Fax:
Email:

NOTES TO PROXY FORM

1

Each member is entitled to appoint one or more proxies (who need not be a member of the company) to attend, speak and vote
in place of that member at the annual general meeting.

2 A member may insert the name of a proxy or the names of two alternative proxies of the member’s choice in the space provided,
with or without deleting ‘the chairman of the annual general meeting’. The person whose name stands first on the form of proxy
and who is present at the annual general meeting shall be entitled to act as proxy to the exclusion of the persons whose names
follow.

3 A member’s instructions to the proxy have to be indicated by the insertion of the relevant number of votes exercisable by that
member in the appropriate box provided. Failure to comply with this shall be deemed to authorise the chairman of the annual
general meeting, if the chairman is the authorised proxy, to vote in favour of the ordinary and special resolutions at the annual
general meeting or the appointed proxy to vote or to abstain from voting at the annual general meeting, as he/she deems fit, in
respect of all the member’s votes exercisable thereat.

4 A member or his/her proxy is not obliged to vote in respect of all the ordinary shares held by such member or represented by
such  proxy, but  the  total  number  of  votes  for  or  against  the  ordinary  and  special  resolutions  and  in  respect  of  which  any
abstention is recorded may not exceed the total number of votes to which the member or his/her proxy is entitled.

5 Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity has to be
attached to this form of proxy, unless previously recorded by the company’s transfer secretaries or waived by the chairman of
the annual general meeting.

6

The chairman of the annual general meeting may reject or accept any form of proxy that is completed and/or received in any
manner other than in accordance with these instructions and notes.

7 Any alterations or corrections to this form of proxy shall be initialled by the signatory/signatories.

8

9

The completion and lodging of this form of proxy shall not preclude the relevant member from attending the annual general
meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such member
wish to do so.

Forms  of  proxy  have  to  be  lodged  with  or  posted  to  the  transfer  secretaries  in  South Africa, namely  Computershare  Investor
Services  (Pty)  Limited  (Computershare), 70  Marshall  Street, Johannesburg, 2001  (PO  Box  61051, Marshalltown, 2107), or  in
Namibia, namely  Transfer  Secretaries  (Pty)  Limited, Shop  8, Kaiserkrone  Centre, Post  Street  Mall, Windhoek, Namibia 
(PO  Box  2401, Windhoek, Namibia). The  forms  of  proxy  must  be  received  no  later  than  09:00  on Wednesday, 13  May  2009.
Proxy forms can also be submitted by fax to Computershare [fax number +27 (0)11 688 5238], subject to the proxy instructions
meeting all other criteria.

10 This proxy form is to be completed only by those members who are:

• holding shares in a certificated form; or

•

recorded in the subregister as holding shares in dematerialised electronic form in their own name.

11 Holders of Nedbank Group ordinary shares (whether certificated or dematerialised) through a nominee should timeously make
the necessary arrangements with that nominee or, if applicable, participant (previously referred to as central securities depository
participant) or broker (as the case may be) on how they wish their votes to be cast on their behalf at the annual general meeting.
As  far  as  holdings  in  a  participant  are  concerned, these  will  be  guided  by  the  terms  of  the  agreement  entered  into  between
members and their participant or broker.

12 Members  attending  the  annual  general  meeting  will  be  afforded  the  opportunity  of  putting  questions  to  the  directors  and

management. A perforated form has been included for this purpose.

354

NEDBANK GROUP ANNUAL REPORT 2008

ACCOUNTING AND TAXATION RISK
The risk that the integrity of the financial statements and
related information cannot be upheld.

BANKS
This asset class covers all exposures to counterparties treated
as banks.

DEFINITIONS

ACCOUNTING RISK
•

•

•

•

The risk that inappropriate accounting information
causes suboptimal decisions to be made, due to
inappropriate policy, faulty interpretation of policy, or
plain error.
The extent to which the financial statements can be
affected by exchange rate fluctuations. Also called
accounting exposure or translation risk.
The risk that financial statements and other statutory
and regulatory reporting do not accord with international
financial reporting standards (IFRS) and/or other relevant
statutory requirements are not based on appropriate
accounting policies and do not incorporate required
disclosures.
The risk that the internal financial and operational
controls of accounting and administration do not provide
reasonable assurance that transactions are executed and
recorded in accordance with generally accepted business
practice and the group’s policies and procedures, and that
assets are safeguarded.

ADVANCED INTERNAL RATINGS-BASED
APPROACH (AIRB)
Subject to supervisory approval, a bank may use its internally
developed credit risk measurement systems to calculate the
capital requirements for credit risk.

ASSETS UNDER MANAGEMENT
Assets managed by Nedbank Group, which are beneficially
owned by clients and are therefore not reported on the
consolidated balance sheet. The service provided in respect of
these assets is discretionary portfolio management on behalf
of clients.

ASSURANCE RISK
The failure to reinsure with other acceptable quality insurers,
beyond the level of risk appetite (excessive risk) mandated by
the board of directors, risks underwritten by the short-term
insurance and/or life assurance activities of the group,
including catastrophe insurance (ie more than one insurance
claim on the group arising from the same event), leading to
disproportionate losses to the group.

AUTOMATED TELLER MACHINE (ATM)
A cash machine or free-standing device dispensing cash,
which may also provide other information or services to
clients who have a card and a personal identification number,
password or other personal identification.

BASEL CAPITAL ACCORD (BASEL II)
The new Basel Capital Accord (Basel II) of the Bank for
International Settlements is an improved capital adequacy
framework accomplished by closely aligning banks’ capital
requirements with improved modern risk management
practices and sophisticated risk assessment capabilities. It
further ensures the risk sensitivity of the minimum capital
requirements by including supervisory reviews and market
discipline through enhanced disclosure.

BASEL ASSET CLASSES (AS CATEGORISED IN
THE BA 200 RETURN)

CORPORATE EXPOSURES

Corporate
Corporate exposures are defined as debt obligations of a
corporation, partnership or proprietorship. Banks are
permitted to distinguish between exposures to small-
and medium-sized entities.

Specialised lending – high-volatility commercial real
estate (property development)
High-volatility commercial real estate (HVCRE) lending
is the financing of commercial real estate that exhibits
higher loss rate volatility compared with other types of
specialised lending.

Specialised lending – income-producing real estate
Income-producing real estate (IPRE) refers to a method
of providing funding to real estate (such as office
buildings to let, retail space, multifamily residential
buildings, industrial or warehouse space, and hotels)
where the prospects for repayment and recovery on the
exposure depend primarily on the cashflows generated
by the asset. The primary source of these cashflows
would generally be lease or rental payments or the sale
of the asset.

Specialised lending – object finance
Object finance (OF) refers to a method of funding the
acquisition of physical assets (eg ships, aircraft, satellites,
railcars and fleets) where the repayment of the exposure
is dependent on the cashflows generated by the specific
assets that have been financed and pledged.

Specialised lending – commodities finance
Commodities finance (CF) refers to structured short-
term lending to finance reserves, inventories or
receivables of exchange-traded commodities (eg crude
oil, metals or crops) where the exposure will be repaid
from the proceeds of the sale of the commodity.

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DEFINITIONS ... CONTINUED

Specialised lending – project finance
Project finance (PF) is a method of funding in which the
lender looks primarily to the revenues generated by a
single project, both as the source of repayment and as
security for the exposure. This type of financing is
usually for large, complex and expensive installations (eg
power plants, chemical processing plants and mines).

SME corporate
This asset class covers all exposures to small and
medium enterprises that are classified as corporate,
based on criteria prescribed by the Banking Regulator.

Purchased receivables – corporate
This asset class covers all receivables classified as
corporate exposures, which are purchased for inclusion
in asset-backed securitisation structures. However, banks
may also use this approach, with the approval of
national supervisors, for appropriate on-balance-sheet
exposures that share the same features.

PUBLIC SECTOR ENTITIES
This asset class covers all exposures to enterprises that are
wholly or majority-owned by the central government, (eg
Eskom and Transnet).

LOCAL GOVERNMENTS AND
MUNICIPALITIES
This asset class covers all exposures to enterprises that are
wholly or majority-owned by the central government (eg
Eskom and Transnet).

SOVEREIGN (INCL CENTRAL
GOVERNMENT AND CENTRAL BANK)
This asset class covers all exposures to counterparties
treated as central government.

SECURITIES FIRMS
This asset class covers all exposures to enterprises
regulated by a recognised authority and trading in
securities.

RETAIL EXPOSURES

Retail mortgages (incl home equity line of credit)
This asset class covers all mortgage advances or credit
lines to individuals that are fully secured by a mortgage
over residential property.

Retail revolving credit
Exposures to individuals that are revolving, unsecured,
and uncommitted (both contractually and in practice).
In this context revolving exposures are defined as those
where clients’ outstanding balances are permitted to
fluctuate based on their decisions to borrow and repay,
up to a limit established by the bank.

Retail – other
This asset class covers all non-revolving exposures
(excluding mortgage advances) to individuals.

SME retail
This asset class covers all exposures to small and
medium enterprises that are classified as corporate,
based on criteria prescribed by the Banking Regulator.

Purchased receivables – Retail
This asset class covers all receivables classified as retail
exposures, which are purchased for inclusion in asset-
backed securitisation structures. However, banks may
also use this approach, with the approval of national
supervisors, for appropriate on-balance-sheet exposures
that share the same features.

BLACK ECONOMIC EMPOWERMENT (BEE)
BEE is defined in the Financial Sector Charter and means the
economic empowerment of all black people (Africans,
coloureds and Indians who are South African citizens),
including women, workers, youth, people with disabilities and
people living in rural areas, through diverse but integrated
socioeconomic strategies.

BEE TRANSACTION
Nedbank Group’s BEE transaction, which focused primarily on
the issuing of shares to BEE partners for the purposes of BEE,
equating to approximately 9,3% (43 618 748 shares) of total
share capital and equating to black ownership of 11,5% of
the value of Nedbank Group’s South African businesses in
2005. Nedbank Namibia’s BEE transaction, which focused
primarily on the issuing of shares to BEE partners and affinity
groups for the purposes of BEE in Namibia, equating to
approximately 0,14% (665 680 shares) of total share capital
of Nedbank Group Limited and equating to black ownership
of 11,13% of the value of NedNamibia Holdings Limited,
Nedbank Group’s Namibian business in 2006.

BORROWING GROUP
A group of clients and their underlying loans and advances
according to the ‘per person’ definition of the ‘Regulations
Related to Banks’.

BRANCH-IN-A-BOX
This is a cost-effective, quick-deployment, relocatable,
prefabricated bank branch. It uses modern, broadband
satellite technology for communication, which makes it
effective for speedy access and hence client convenience. It is
also used to test new markets, especially in areas with
limited infrastructure such as urban townships and deep rural
areas where banking services are not readily available. A
branch-in-a-box provides full transaction facilities to clients,
including cash withdrawals and deposits, sales and service.

356

NEDBANK GROUP ANNUAL REPORT 2008

CAPITAL ADEQUACY RATIO (CAR)
The capital adequacy of South African banks is measured in
terms of the South African Banks Act requirements. The ratio
is calculated by dividing the primary (Tier 1), secondary 
(Tier 2) and tertiary (Tier 3) capital by the risk-weighted
assets.

Group capital adequacy ratio
Group capital adequacy is the ratio of group net qualifying
capital and reserve funds to total group risk-weighted
assets as calculated in accordance with the South African
Banks Act requirements.

Primary (Tier 1) capital
Primary capital consists of issued ordinary share capital
and perpetual preference share capital, qualifying perpetual
callable hybrid capital, retained earnings and reserves, less
regulatory deductions.

Core Tier 1 capital
Core Tier 1 capital is primary capital less any amount on
non-core Tier 1 capital, being perpetual preference share
capital and qualifying perpetual callable hybrid capital.

Secondary (Tier 2) capital
Secondary capital is made up of subordinated dated debt
and certain types of perpetual callable debt, the excess
amount in respect of eligible provisions and 50% of any
revaluation surplus, less regulatory deductions.

Tertiary (Tier 3) capital
Tertiary capital consists of capital obtained by way of
unsecured subordinated loans, subject to such conditions
as may be prescribed.

CAPITAL RISK
The risk that the group will become unable to absorb losses,
maintain public confidence and support the competitive
growth of the business. This entails ensuring that
opportunities can be acted on timeously, while solvency is
never threatened.

CASHFLOW

Financing activities
Activities that result in changes to the capital structure of
the group.

Investment activities
Activities relating to the acquisition, holding and disposal
of property and equipment and long-term investments.

Operating activities
Activities that are not financing or investing activities and
arise from the operations conducted by the group.

CLOSING PRICE/TANGIBLE NET ASSET
VALUE PER SHARE
The closing share price on JSE at year-end divided by the
tangible net asset value per share.

COMPETITION COMMISSION INQUIRY
INTO BANKING
A formal inquiry that was conducted by the Competition
Commission of South Africa into competition in the banking
sector. A detailed report outlining the recommendations of
the banking inquiry panel to the Competition Commission
was published in December 2008. Industry stakeholders have
been given an opportunity by National Treasury to comment
on the recommendations contained in the report. This input
will be discussed by National Treasury with the Department
of Trade and Industry, the South African Reserve Bank and the
Competition Commission, and it is anticipated that the final
outcome of the banking inquiry process and the impact on
the banking industry will be finalised during 2009.

COMPLIANCE RISK
The risk to earnings and capital arising from violations of or
non-compliance with laws, rules and regulations, as well as
internal group policies and authority levels, prescribed
practices and ethical standards.

COMPOUND ANNUAL GROWTH RATE
(CAGR)
The year-on-year growth rate of an amount over a specified
period of time.

CREDIT LOSS RATIO 
Credit loss ratio is the impairments charge as a percentage of
average advances.

CREDIT RISK
The risk to earnings and capital arising from the probability
of borrowers and counterparties failing to meet their
repayment commitments (including accrued interest). Credit
concentration risk arises on a portfolio basis where the bank
has significant aggregated exposures to particular credit
segments, sectors of industry or other portfolios.

CURRENCY TRANSLATION RISK
The risk to earnings or capital arising from the conversion of
the group’s offshore banking book assets or liabilities or
commitments or earnings from foreign currency to local or
functional currency.

DEFAULTED ADVANCE
Any advance or group of advances that has triggered relevant
‘definition of default’ criteria for that portfolio, which is in
line with the amended regulations relating to banks. For
retail portfolios it is transaction-centric and therefore a

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DEFINITIONS ... CONTINUED

default would be specific to an account (specific advance).
For wholesale portfolios it is client- or borrower-centric,
meaning that, should any transaction within a borrowing
group default, then all transactions within the borrowing
group would be defaulted.

DEFINITION OF DEFAULT
At a minimum, a default is deemed to have occurred where a
material obligation is overdue for more than 90 days or an
obligor exceeds an advised limit for more than 90 days.

DEFERRED TAXATION ASSETS
Deferred taxation assets are the amounts of income taxation
recoverable in future periods in respect of:
•

deductible temporary differences arising due to
differences between the taxation and accounting
treatment of transactions; and
the carry-forward of unused taxation losses.

•

DEFERRED TAXATION LIABILITIES
Deferred taxation liabilities are the amounts of income
taxation payable in future periods due to differences between
the taxation and accounting treatment of transactions.

DIRECT TAXATION
Direct taxation includes normal taxation on income, capital
gains tax (CGT) and secondary tax on companies (STC).

DIVIDEND/DISTRIBUTION COVER
Headline earnings per share divided by the
dividend/distribution declared per share.

DIVIDEND/DISTRIBUTION DECLARED PER
SHARE
Dividend/Distribution declared per share is the actual interim
dividend paid/capitalisation award issued and the final
dividend declared/capitalisation award declared for the
period under consideration, expressed in cents.

DIVIDEND/DISTRIBUTION
PAID/CAPITALISED PER SHARE
Dividend/Distribution paid/capitalised per share is the actual
final dividend paid/capitalisation award issued for the prior
year and the interim dividend paid/capitalisation award
issued for the year under consideration, expressed in cents.

DIVIDEND YIELD
Dividend/Capitalisation award declared per ordinary share as
a percentage of the closing share price of ordinary shares.

DOWNTURN EXPECTED LOSS
A stress-tested value for expected loss under downturn
economic conditions that could have unfavourable effects on
a bank’s credit exposures.

358

NEDBANK GROUP ANNUAL REPORT 2008

DTI CODES
The Codes of Good Practice, as promulgated on 
9 February 2007 under section 9(1) of the Broad-based Black
Economic Empowerment Act, 2003 (53 of 2003), establish
the rules, targets and stipulations for the measurement of
broad-based black economic empowerment within South
Africa based on three scorecard classifications for
organisations: emerging microenterprise (EME), qualifying
small enterprise (QSE) and generic enterprise. Nedbank is
scored as a generic enterprise.

EARNINGS PER SHARE (EPS)

Basic earnings basis
Income attributable to equityholders for the period divided
by the weighted average number of ordinary shares in issue
(net of shares held by group entities) during the period.

Headline earnings basis
Headline earnings divided by the weighted average
number of shares in issue (net of shares held by group
entities) during the period.

Fully diluted basis
The relevant earnings figure is adjusted for the assumed
adjustments to income that would have been earned on
the issue of shares issued from dilutive instruments. The
resultant earnings are divided by the weighted average
number of ordinary shares and other dilutive instruments
(ie potential ordinary shares) outstanding at the period-
end, assuming they had been in issue for the period.

EARNINGS YIELD
Headline earnings per share as a percentage of the closing
price of ordinary shares.

ECONOMIC CAPITAL (ECAP)
Economic capital is the quantification of risk and an internal
assessment of the amount of capital required to protect the
group against economic losses with a desired level of
confidence (solvency standard or default probability) over a
one-year time horizon. In other words, it is the magnitude of
economic losses the group could withstand while remaining
solvent.

EFFECTIVE TAXATION RATE
The taxation charge in the income statement, excluding
taxation relating to non-trading and capital items, as a
percentage of profit before taxation.

EFFICIENCY RATIO (COST-TO-INCOME
RATIO)
Total operating expenses (excluding indirect taxation) as a
percentage of income from normal operations (net interest
income plus non-interest revenue).

ENTERPRISEWIDE RISK
All risk types and categories across all business lines,
functions, geographical locations and legal entities of the
group, collectively known as its ‘risk universe’.

ENTERPRISEWIDE RISK MANAGEMENT
FRAMEWORK (ERMF)
The risk framework developed by Nedbank Group and
applied to all of its divisions to monitor and manage risk.
Further details are included in the risk management section
of this annual report.

EXPECTED LOSS (EL)
EL is the expected value of portfolio losses due to default
over a specified time horizon.

EXPENSES PER EMPLOYEE
Operating expenses for the year divided by the number of
employees at year-end.

EXPENSES TO AVERAGE ASSETS
Operating expenses for the year divided by average total
assets.

EXPOSURE AT DEFAULT (EAD)
EAD is an estimation of the extent to which a bank may be
exposed to a counterparty in the event and at the time of
that counterparty’s default.

EYETHU
Eyethu means ‘ours’ in the Nguni languages and epitomises
the inclusive and uniquely South African identity of the BEE
transaction.

THE FINANCIAL ADVISORY AND
INTERMEDIARY SERVICES ACT, 37 OF 2008
(FAIS)
FAIS aims to regulate a wide range of financial advisory and
intermediary services to clients. All financial advisers who are
authorised to operate under a FAIS licence have to adhere to
certain standards and processes.

THE FINANCIAL INTELLIGENCE CENTRE
ACT, 38 OF 2001 (FICA)
FICA is aimed at combating money laundering in South
Africa. The group’s compliance function has developed
processes and procedures across the business to ensure that
clients are properly identified, suspicious transactions are
reported, adequate records are maintained and employees
are trained in respect of FICA.

FINANCIAL SECTOR CHARTER (FSC)
A transformation charter, as contemplated in the broad-
based BEE legislation, that was voluntarily developed by the
financial sector and constitutes a framework and establishes

the principles on which BEE will be implemented in the
financial sector.

FOREIGN EXCHANGE TRANSLATION
GAINS/LOSSES
The results and assets/liabilities of all foreign entities
controlled by the group that have a rand-functional currency
are translated at the closing exchange rate and the
differences arising are recognised in the income statement as
foreign exchange translation gains/losses.

FTSE/JSE AFRICA ALL-SHARE INDEX
This comprises the top 99% of eligible listed companies on
JSE ranked by full market capitalisation.

FTSE/JSE AFRICA BANKS INDEX
This comprises all companies that are constituents of both
the FTSE/JSE Africa All-share Index and the banking sector.

GROSS DOMESTIC PRODUCT (GDP)
The total market value of the goods and services produced
by a country’s economy during a specific period of time.

HEADLINE EARNINGS
Headline earnings is not a measure of maintainable earnings.
For purposes of the definition and calculation the guidance
given on headline earnings, as issued by the South African
Institute of Chartered Accountants in circular 07/02 of
December 2002, has been used. Headline earnings consist of
the earnings attributable to ordinary shareholders, excluding
non-trading and capital items.

HEADLINE EARNINGS PER EMPLOYEE
Headline earnings divided by the number of employees in
service at year-end.

HEDGE
A risk management technique used to insulate financial
results from market, interest rate or foreign currency
exchange risk (exposure) arising from normal banking
operations. The elimination or reduction of such exposure is
accomplished by establishing offsetting positions. For
example, assets denominated in foreign currencies can be
offset against liabilities in the same currencies or through the
use of foreign exchange hedging instruments such as futures,
options or foreign exchange contracts.

INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IFRS)
The standards, as adopted by the International Accounting
Standards Board (IASB), and interpretations issued by the
International Financial Reporting Interpretations Committee
(IFRIC) of the IASB. Nedbank Group’s consolidated financial
results are prepared in accordance with IFRS.

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DEFINITIONS ... CONTINUED

IMPAIRMENTS CHARGE TO AVERAGE
ADVANCES
Impairments charge on loans and advances for the year
divided by average advances. Also known as the credit loss
ratio or impairment ratio.

IMPAIRMENT OF LOANS AND ADVANCES
Impairment of loans and advances arises where there is
objective evidence that the group will not be able to collect
an amount due. The impairment is the difference between
the carrying amount and the estimated recoverable amount.

INDIRECT TAXATION
Value-added tax (VAT) and other taxes, levies and duties paid
to government, excluding direct taxation.

INFORMATION TECHNOLOGY RISK
The risk resulting from system malfunction and unavailability,
security breaches and inadequate systems investment,
development, implementation, support and capacity (refer to
the definition of ‘Operational risk’).

INSURANCE RISK
The risk of no insurance cover or inadequate/failed insurance
cover for insurable business risks.

INTEREST RATE RISK
Interest rate risk in the banking book is the risk that a bank’s
earnings or economic value will decline as a result of changes
in interest rates. The sources of interest rate risk in the
banking book are:

•

•

•

•

repricing risk (mismatch risk) – timing differences in the
maturity (for fixed-rate) and repricing (for floating-rate)
of bank assets, liabilities and off-balance-sheet positions;
basis risk-imperfect correlation in the adjustment of the
rates earned and paid on different instruments with
otherwise similar repricing characteristics;
yield curve risk changes in the shape and slope of the
yield curve; and
embedded-options risk – the risk pertaining to interest-
related options embedded in bank products.

INVESTMENT RISK
The risk of a decline in the net realisable value of investment
assets arising from adverse movements in market prices or
factors specific to an investment itself (eg reputation and
quality of management). Market prices are independent
variables, which include interest rates, property values,
exchange rates, equity and commodity prices.

‘JAWS’ RATIO
The difference between the rate of growth in total income
from normal operations and the rate of total expense
growth.

JOHANNESBURG INTERBANK AGREEMENT
RATE (JIBAR)
The rate that South African banks charge each other for
wholesale money.

JSE LIMITED (JSE)
Previously JSE Securities Exchange South Africa.

KING II (THE CODE)
The King Report on Corporate Governance 2002, which sets
out principles of good corporate governance for South African
companies and organisations.

LIQUIDITY RISK
There are two types of liquidity risk: market liquidity risk and
funding liquidity risk. Market liquidity risk is the risk that the
bank cannot easily offset or eliminate a position without
significantly affecting the market price because of inadequate
market depth or market disruption. It differs from funding
liquidity risk, which is the risk that the bank will not be able
efficiently to meet both expected and unexpected current
and future cashflow and collateral needs without affecting
either daily operations or the financial condition of the bank.
However, in many cases, the same factors may trigger both
types of liquidity risk.

LONDON INTERBANK OFFERED RATE
(LIBOR)
The rate that banks participating in the London money
market offer each other for short-term deposits.

LOSS-GIVEN DEFAULT (LGD)
Estimate of the amount of the exposure at default that will
be lost (ie not recovered). Also includes other economic
costs, eg legal costs.

MARKET CAPITALISATION
The group’s closing share price multiplied by the number of
shares in issue, including shares held by group entities.

MARKET RISK
Market risk is the potential impact on earnings of
unfavourable changes in foreign exchange rates, interest
rates, prices, market volatilities and liquidity. Market risk
includes trading risk and, in terms of the banking book,
derivative instruments used for hedging risk in non-trading
portfolios, investment risk, translation risk and interest rate
risk. Investment risk arises from changes in the fair value of
investments and includes private equity and property as well
as strategic investments.

MARK-TO-MARKET
Valuation of financial instruments using prevailing market
prices or fair value as of the balance sheet date.

360

NEDBANK GROUP ANNUAL REPORT 2008

MOBILE BOOTKITS
These are mobile sales and service kits that are easily
transportable and can be quickly deployed in areas without
traditional branch infrastructure.

MZANSI ACCOUNTS
The Mzansi Account is a card-based, entry-level
savings/transmission product with a basic set of features and
simplified pricing structure. The major banks worked
collectively to provide a standard for new bank accounts that
offer affordable and accessible products to previously
unbanked individuals. Each bank sets its own pricing, but
collaboration between the banks allows holders of Mzansi
Accounts to make use of any of the participating banks’
ATMs at no additional cost.

NATIONAL CREDIT ACT (NCA)
The National Credit Act, 34 of 2005, that became effective in
stages commencing on 1 June 2006, 1 September 2006 and 
1 June 2007. The NCA sets a framework for every type of
credit transaction and replaces the Usury Act of 1968
(governing moneylending transactions) and the Credit
Agreements Act of 1980 (governing instalment sale or hire
purchase agreements).

NET ASSET VALUE PER SHARE
Total equity attributable to equityholders of the parent
divided by the number of shares in issue, excluding shares
held by group entities.

NET INTEREST INCOME TO AVERAGE
INTEREST-EARNING ASSETS (NET INTEREST
MARGIN)
Net interest income expressed as a percentage of average
net interest-earning banking assets. Net interest-earning
banking assets are used, as these closely resemble the
quantum of assets earning income that is included in net
margin.

NEW-BUSINESS RISK
Development of new products and business that reach the
client distribution channel without the appropriate signoff for
compliance with the requirements for managing regulatory,
legal, tax, accounting, pricing, strategic and any other
relevant risks. Also the risk that new products and business
do not generate anticipated revenue or cost savings to the
group.

NON-INTEREST REVENUE TO TOTAL
INCOME
Income from normal operations, excluding net interest, as a
percentage of total income from normal operations.

NON-TRADING AND CAPITAL ITEMS
These comprise:

•

•

•

•

•

•

surpluses and losses on disposal of long-term
investments, subsidiaries, joint ventures and associates;

impairment of goodwill arising on acquisition of
subsidiaries, joint ventures and associates;

surpluses and losses on the sale or termination of an
operation;

capital cost of fundamental reorganisation or
restructuring that has a material effect on the nature and
focus of the operations of the reporting entities;

impairment of investments, property and equipment,
computer software and capitalised development costs;
and

other items of a capital nature.

NUMBER OF SHARES TRADED
Total number of ordinary shares traded on JSE during the
year.

NUMBER OF SHARES TRADED TO
WEIGHTED AVERAGE NUMBER OF SHARES
Number of shares traded for the year as a percentage of the
weighted average number of shares in issue during the year.

OFF-BALANCE-SHEET ASSETS
Assets managed on behalf of third parties on a fully
discretionary basis.

ON-BALANCE-SHEET EXPOSURE
Advances that have either been fully or partially utilised by a
borrower.

OPERATIONAL RISK
The risk of loss resulting from inadequate or failed internal
processes and systems, incompetent people or external
events. This definition includes legal risk.

ORDINARY SHAREHOLDERS’ FUNDS
Total equity attributable to equityholders of the parent.

PEOPLE RISK
People risk is defined as possible inadequacies in human
capital and inadequate management of human resource
practices, policies and processes resulting in the inability to
attract, manage, develop and retain competent resources.
This may stem from inadequate skills or knowledge, no clear
consequences of not meeting performance standards, lack of
alignment with strategy or a reward system that fails to
motivate properly.

PRICE/EARNINGS RATIO
The closing price of ordinary shares divided by headline
earnings (for the previous 12 months) per share.

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DEFINITIONS ... CONTINUED

PRICE TO BOOK
The group’s closing share price relative to the net asset value.

PRIMARY CLIENT
In the case of an individual, a client is classified as a primary
client where a form of salary, wage, annuity or pension is
paid into either a current account or a savings account.

PROBABILITY OF DEFAULT (PD)
Quantification of the likelihood of a borrower being unable
to repay.

PROPERTIES IN POSSESSION (PIPs)
Properties acquired through payment defaults on loans
secured by properties.

REPUTATIONAL RISK
The risk of impairment of the group’s image in the community
or the long-term trust placed in the group by its stakeholders as
a result of a variety of factors, such as the group’s performance,
strategy execution, ability to create shareholder value, or an
activity, action or stance taken by the group. This may result in
loss of business and/or legal action.

RETURN ON ORDINARY SHAREHOLDERS’
EQUITY (ROE)
Headline earnings expressed as a percentage of average
equity attributable to equityholders of the parent.

RETURN ON ORDINARY SHAREHOLDERS’
EQUITY (ROE) EXCLUDING GOODWILL
Headline earnings expressed as a percentage of average
equity attributable to equityholders of the parent less
goodwill.

RETURN ON RISK-ADJUSTED CAPITAL
(RORAC)
Headline earnings expressed as a percentage of economic
capital.

RETURN ON RISK-WEIGHTED ASSETS
Headline earnings for the year divided by the average risk-
weighted assets.

RETURN ON ASSETS (ROA)
Headline earnings expressed as a percentage of average total
assets.

RISK APPETITE
Risk appetite is a tool to express the group’s risk tolerance
quantitatively and an articulation of the level of risk Nedbank
Group is willing to take in pursuit of its strategic goals.

RISK-WEIGHTED ASSETS
Risk-weighted assets are determined by applying risk weights
to balance sheet assets and off-balance-sheet financial

instruments according to the relative credit risk of the

counterparty. The risk weighting for each balance sheet asset

and off-balance-sheet financial instrument is regulated by

the South African Banks Act or by regulations in the

respective countries of the other banking licences.

SARB REGULATIONS RELATED TO BANKS
AND THE BA RETURNS
The regulations relating to banks were amended with effect

from 1 January 2008, based on the revised Basel Capital

Accord (Basel II). The new Basel Capital Accord of the Bank of

International Settlements is an improved capital adequacy

framework accomplished by closely aligning banks’ capital

requirements with improved modern risk management

practices and sophisticated risk assessment capabilities. It

further ensures the risk sensitivity of the minimum capital

requirements by including supervisory reviews and market

discipline through enhanced disclosure.

SECONDARY TAX ON COMPANIES (STC)
STC is a tax paid at company level on the net difference

between dividends paid and dividends received. The current

rate of STC is 10%. The government has announced that STC

will be replaced by a withholding tax on shareholders, which

is expected to take place towards the end of 2010.

SECURITISATION EXPOSURES
This asset class covers all exposures to tradeable, interest-

bearing commercial paper, which is secured by an underlying

asset, eg mortgage loans.

SEGMENTAL REPORTING

Geographical segment

A distinguishable component of the group that is engaged

in providing services within a particular economic

environment and is subject to risks and returns that are

different from those of components operating in other

economic environments.

Operational segment

A distinguishable component of the group, based on the

market on which each business area focuses, which is

subject to risks and returns that are different from those of

other operating segments.

SHARE-BASED PAYMENTS
Transfers of a company’s equity instruments by its

shareholders to parties that have supplied goods or services

to the company (including employees).

362

NEDBANK GROUP ANNUAL REPORT 2008

SHARES HELD BY GROUP ENTITIES
(TREASURY SHARES)
Ordinary shares in Nedbank Group Limited acquired/held by
group companies, including ordinary shares held in share
trusts as part of the BEE transaction.

SOCIAL AND ENVIRONMENTAL RISKS
The risks related to non-achievement of a balanced and
integrated financial, social and environmental performance
(referred to as the ‘triple bottomline’), resulting in
reputational impairment to the group and ultimately loss of
business and profitability.

SELF-SERVICE TERMINAL (SST)
Similar to an ATM, but designed for non-cash transactions.

STANDARD(ISED) APPROACH
A standard approach (foundation approach) to calculate
capital requirements for banks, prescribed by the supervisor,
used in lieu of the AIRB Approach.

STRATEGIC RISK
Strategic risk relates to the consequences that arise when the
environment in which decisions that are hard to implement
quickly and to reverse has an unattractive or adverse impact.
Strategic risk ultimately has two elements: doing the right
thing at the right time; and doing it well.

TANGIBLE NET ASSET VALUE PER SHARE
Total equity attributable to equityholders of the parent, less
goodwill, computer software and capitalised development
costs, divided by the number of shares in issue, excluding
shares held by group entities.

TAXATION RISK
Taxation risk is the risk of loss (financial or otherwise) as a
result of:
•
•

inappropriate tax planning and strategy;
non-compliance with or incorrect interpretation and
application of taxation legislation; or
the effect of new tax legislation on existing financial
structures or products.

•

TOTAL COLLATERAL
Total monetary value of all collateral held by a bank as
security for an advance(s), limited to exposure.

TOTAL CREDIT EXTENDED
Total of all advances extended by a bank, including unutilised
facilities.

TOTAL EQUITY ATTRIBUTABLE TO
EQUITYHOLDERS OF THE PARENT
Ordinary share capital, share premium and reserves.

TOTAL INCOME FROM NORMAL
OPERATIONS
Net interest income plus non-interest revenue plus foreign
currency translation gains/losses.

TRADED PRICE
The last traded price on JSE on the last business day of the
year, also referred to as ‘closing price’.

TRADING MARKET RISK
Trading market risk exists within the group’s proprietary
trading activities (trading on the group’s own account). It is
defined as the risk of loss occurring as a result of
unfavourable changes in market prices such as foreign
exchange rates, interest rates, equity prices and commodity
prices.

VALUE AT RISK (VaR)
A generally accepted risk measurement concept that uses
statistical models to estimate the distribution of possible
returns on a portfolio at a given level of confidence.

VALUE OF SHARES TRADED
Total value of ordinary shares traded on JSE during the year.

VALUE TRADED TO MARKET
CAPITALISATION
Value of shares traded as a percentage of market
capitalisation at year-end.

WEIGHTED AVERAGE NUMBER OF SHARES
The number of shares in issue increased by shares issued
during the period, weighted on a time basis for the period
during which they participated in the income of the group,
less shares held by group entities, weighted on a time basis
for the period during which the entities held these shares.

These definitions should be read in conjunction with the
group’s accounting policies, which also clarify certain
terms used.

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363

 
 
 
 
 
 
 
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 legislation.

Forward-looking statements may be identified by words such as ‘believe’, ‘anticipate’, ‘expect’, ‘plan’, ‘estimate’, ‘intend’, ‘project’, ‘target’,
‘predict’ and ‘hope’.

Forward-looking statements are not statements of fact, but statements by the management of Nedbank Group based on its current
estimates, projections, expectations, beliefs and assumptions regarding the group’s future performance.

No assurance can be given that forward-looking statements will prove to be correct and undue reliance should not be placed on such
statements.

The risks and uncertainties inherent in the forward-looking statements contained in this document include, but are not limited to: changes to
IFRS and the interpretations, applications and practices subject thereto as they apply to past, present and future periods; domestic and
international business and market conditions such as exchange rate and interest rate movements; changes in the domestic and international
regulatory and legislative environments; changes to domestic and international operational, social, economic and political risks; and the
effects of both current and future litigation.

Nedbank Group does not undertake to update any forward-looking statements contained in this document and does not assume
responsibility for any loss or damage whatsoever and howsoever arising as a result of the reliance by any party thereon, including, but not
limited to, loss of earnings or profits, or consequential loss or damage.

364

NEDBANK GROUP ANNUAL REPORT 2008

ABBREVIATIONS, ACRONYMS 
AND INITIALISMS

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ABCP
ABET
ACSA
AGM
AIRB
AJTP
ALCO
ALM
ALSI
AMA
AMP
ASA
ATM

BA
BEE
BESA
BMF
BRMF

CAPM
CAGR
CAR
CE
CEM
CF
CFO
CFT

CGU
CMAT
CMF
CMVU
COE
CPIX

CPM
CRO
CSI
CVaR

DBSA
DCC
DCM 
dEL
DJSI
dLGD
DoL

asset-backed commercial paper

Adult Basic Education and Training

Airports Company of South Africa

annual general meeting

Advanced Internal Ratings-based

activity-justified transfer pricing

Asset and Liability Committee

asset and liability management

all-share index

Advanced Measurement Approach

Advanced Management Programme

Athletics South Africa

automated teller machine

Banks Act

black economic empowerment

Bond Exchange of South Africa

Black Management Forum

Business Risk Management Forum

Capital Adequacy Projection Model

compound annual growth rate

capital adequacy ratio

chief executive

current exposure method

commodities finance

Chief Financial Officer

combating of the financing of terrorist and
related activities

cash-generating unit

Client Management Assessment Tool

Capital Management Framework

Credit Models Validation Unit

cost of equity

consumer price index excluding mortgage bond
interest cost

Credit Portfolio Model

Chief Risk Officer

corporate social investment

credit value at risk

Development Bank of South Africa

divisional credit committee

Debt Capital Markets

downturn expected loss

Dow Jones World Sustainability Index

downturn loss-given default

Department of Labour

DSTI
dti

deferred short-term incentive

Department of Trade and Industry

earnings at risk

economic capital

exposure at default

employment equity

Equity Capital Markets

enterprise development

Employment Equity Forum 

Executive Credit Committee

Executive Development Programme

EAD
EaR
Ecap
ECC
ECM
ED
EDP
EE
EEF
EFO
EGC
EL
EME
EMTN
EP
EPS
ERCO
ERM
ERMF
ESAAMLG Eastern and Southern Africa Anti-money-

enterprise governance and compliance

enterprisewide risk management

Enterprisewide Risk Committee

European medium-term note programme

Executive Financial Officer

emerging microenterprise

earnings per share

economic profit

expected loss

Enterprisewide Risk Management Framework

ETDP
ETI
EVE
EVP
Exco

FAIS
FCL
FCTR
FIC
FICA
forex
FSC
FTE
FTP
FVTPL
FX

GAC
GCC
GCRF
GCRM
GDP
GIA

laundering Group

Education and Training Development Practices

Ecobank Transnational Incorporated

economic value of equity

employee value proposition

executive committee

Financial Advisory and Intermediary Services Act

foreign currency loans

foreign currency translation reserve

Financial Intelligence Centre

Financial Intelligence Centre Act

foreign exchange

Financial Sector Charter 

fulltime equivalent

funds transfer pricing

fair value through profit or loss

foreign exchange

Group Audit Committee

Group Credit Committee

Group Credit Risk Management Framework 

Group Credit Risk Monitoring

gross domestic product

Group Internal Audit

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ABBREVIATIONS, ACRONYMS 
AND INITIALISMS ... CONTINUED

GIBS
GMRM
GORF

GORM
GRI
GT

HC
HCD
HEPS
HR
HVCRE

IAS
IASB
ICAAP
IEP
IFRIC

IFRS
INSEAD
IPRE
IRB
IRMSA
IRRBB
ISDA
ISLA
ISMA
IT
ITBLP

JIBAR
JV

KRI

LDP
LGD
LSM
LTI
LTV

M
M&A
MAP
MDP
MFC

Gordon Institute of Business

Group Market Risk Monitoring

Group Operational Risk Management
Framework

Group Operational-risk Monitoring

Global Reporting Initiative

Group Technology

headcount 

human capital development

headline earnings per share

Human Resources

high-volatility commercial real estate

International Accounting Standards

International Accounting Standards Board

internal capital adequacy assessment process

International Executive Programme

International Financial Reporting Interpretations
Committee

International Financial Reporting Standards

Institute of Risk Management South Africa

income-producing real estate

internal ratings-based

Institute of Risk Management South Africa

interest rate risk in the banking book

International Swaps and Derivatives Association

International Securities Lending Association

International Security Management Association

information technology

Information Technology Banking Learnership
Programme

Johannesburg Interbank Agreement Rate

joint venture

key risk indicator

Leadership Development Programme

loss-given default

Living Standards Measure

long-term incentive

loan to value

maturity

mergers and acquisitions

Management Advancement Programme

Management Development Plan

Motor Finance Corporation

MIP
MIS
MLCP
MTM

NAV
NBCV

NBS
NBSA
NBZA
NCA
NCD
NEEF
NEI
NGO
NGR
NIB
NII
NIR
NPA
NPO
npv
NTR

OF
OMART
OMSA
Opcom
OTC

PASA
P & L
PD
PIC
PIP
PF
POS
PRP
PSL
PWD

QSE

RAPM
ROA
ROE
RORAC
RWA

Matched Investment Plan

management information system

Money-laundering Control Programme

mark-to-market

net asset value

Nederlandsche Bank en Credietvereeniging voor
Zuid-Afrika

Natal Building Society

Netherlands Bank of South Africa

Nederlandsche Bank voor Zuid-Afrika

National Credit Act

negotiable certificate of deposit

Nedbank Employment Equity Forum

Nedbank ethics indicator

Non-governmental organisation

Nedbank Group rating

Nedcor Investment Bank

net interest income 

non-interest revenue

non-performing advance

non-profitable organisation

net present value

Nedbank transaction rating

object finance

Old Mutual Alternative Risk Transfer Fund

Old Mutual South Africa

Group Operations Committee

over the counter

Payment Association of South Africa

profit and loss

probability of default

Public Investment Corporation

property in possession

project finance

point of sale

Prince's Rainforest Project

Premier Soccer League

People With Disabilities

qualifying small enterprise

risk-adjusted performance measurement

return on assets

return on equity

return on risk-adjusted capital

risk-weighted asset

366

NEDBANK GROUP ANNUAL REPORT 2008

SA
SADC
SAFEX
SAR
SARB
SARS
SBPR
SCP
SENS
SFT
SLDP
SMB
SME
SOA
SPE
SPV
SREP
SRI
SST
STC
STI

Standardised Approach

South African Development Community

South African Futures Exchange

share appreciation right

South African Reserve Bank

South African Revenue Service

share-based payments reserve

Strategic Capital Plan

Securities Exchange News Service

securities financing transaction

Senior Leadership Development Programme

Strategic Management in Banking

small and medium enterprise

service-oriented architecture

special-purpose entity

special-purpose vehicle

supervisory review and evaluation process

Socially Responsible Investment

self-service terminal

secondary tax on companies

short-term incentive

transactional and investment products

TIP
TOPP
TRAHRCO Transformation and HR Committee
TTC

Training Outside Public Practice

through the cycle

UK LTIP
UN
UNEP FI

USD

VAF
VaR
VAT

United Kingdom long-term incentive plan

United Nations

United Nations Environment Programme
Finance Initiatives

United States dollar

vehicle and asset finance

value at risk

value-added tax

Wits Business School

WBS
WSP
WWF
World Wide Fund for Nature
WWFSA World Wide Fund for Nature – South Africa

Workplace Skills Plan

YOY

year-on-year

W
E
I
V
R
E
V
O

P
U
O
R
G

S
T
R
O
P
E
R

I

L
A
N
O
T
A
R
E
P
O

S
W
E
I
V
E
R

E
C
N
A
N
R
E
V
O
G

I

L
A
C
N
A
N
I
F

L
A
U
N
N
A

S
T
N
E
M
E
T
A
T
S

I

S
G
N
T
E
E
M
R
E
D
L
O
H
E
R
A
H
S

I

N
O
T
A
M
R
O
F
N

I

R
E
H
T
O
D
N
A

367

 
 
 
 
 
 
 
INSTRUMENT CODES

NEDBANK GROUP ORDINARY SHARES

JSE share code: NED
NSX share code: NBK
ISIN:
ADR code:
ADR CUSIP:

ZAE000004875
NDBKY
63975K104

NEDBANK LIMITED NON-REDEEMABLE,
NON-CUMULATIVE PREFERENCE SHARES

JSE share code: NBKP
ISIN:

ZAE000043667

IMPERIAL BANK LIMITED NON-REDEEMABLE,
NON-CUMULATIVE PREFERENCE SHARES

JSE share code:
ISIN:

IBLP
ZAE000081675

NEDBANK LIMITED SUBORDINATED DEBT

Listed on the Bond Exchange of South Africa

NED5
NED6
NED7
NED8
NED9
NED10
NED11
NED12A
NED12B
NEDH1A
NEDH1B

ISIN
ZAG000029810
ZAG000033358
ZAG000036831
ZAG000036849
ZAG000041120
ZAG000043191
ZAG000044272
ZAG000047937
ZAG000047945
ZAG000053703
ZAG000053711

IMPERIAL BANK LIMITED SUBORDINATED DEBT

Listed on the Bond Exchange of South Africa

IBP2
IBP3

ISIN
ZAG000029422
ZAG000062605

368

NEDBANK GROUP ANNUAL REPORT 2008

NEDBANK GROUP LIMITED

TRANSFER SECRETARIES

CONTACT DETAILS

South Africa:
Computershare Investor Services (Pty) Limited
Business address
70 Marshall Street, Johannesburg, 2001
South Africa

Postal address

PO Box 61051, Marshalltown, 2107
South Africa
Tel: +27 (0)11 370 5000
Fax: +27 (0)11 688 5228

Namibia
Transfer Secretaries (Pty) Limited
Business address

Shop 8, Kaiserkrone Centre, Post Street Mall
Windhoek, Namibia

Postal address

PO Box 2401, Windhoek
Namibia
Tel: +264 (0)61 227 647
Fax: +264 (0)61 248 531

AUDITORS

Deloitte & Touche

Private Bag X6, Gallo Manor, 2052
South Africa
Tel: +27 (0)11 806 5000
Fax: +27 (0)11 806 5003

KPMG Inc

Private Bag X9, Parkview, 2122
South Africa
Tel: +27 (0)11 647 7111
Fax: +27 (0)11 647 8000

Incorporated in the Republic of South Africa 
Reg No 1966/010630/06

Business address and registered ofﬁce

Nedbank Sandton
135 Rivonia Road, Sandown, 2196
South Africa

Postal address

PO Box 1144, Johannesburg, 2000
South Africa
Tel: 27 (0)11 294 4444
Fax: +27 (0)11 294 6540
Nedbank Group website: www.nedbankgroup.co.za
Nedbank Limited website: www.nedbank.co.za

NEDBANK GROUP 2008 ANNUAL REPORT

Should you require a copy of the Nedbank Group 2008 Annual 
Report, please email your address details to Nedbank Group 
Investor Relations at nedbankgroupir@nedbank.co.za or send a 
fax to +27 (0)11 294 6549. It is also available on the enclosed 
CD or online at www.nedbankgroup.co.za.

INVESTOR RELATIONS

The investor relations and ﬁnancial media functions at 
Nedbank Group are outsourced. For investor-related 
information please contact:

Tier 1 Investor Relations

Grapevine House
Silverwood Close
Steenberg Ofﬁce Park, Tokai
Cape Town, 7945
South Africa
Tel: +27 (0)21 702 3102
Fax: +27 (0)21 702 3107
Email: nedbankgroupir@nedbank.co.za

COMPANY SECRETARY

GS Nienaber: Group Company Secretary
Tel: +27 (0)11 294 9106
Fax: +27 (0)11 295 9106
Email: Gawien@nedbank.co.za

ABOUT THIS REPORT

This report is printed on Sappi Triple Green – a paper grade manufactured according to three environmental pillars: a minimum of 
60% of the pulp used in the production of this paper is sugar cane ﬁbre, which is the material remaining after raw sugar has been 
extracted from sugar cane; the bleaching process is elemental chlorine-free; and the remaining pulp used in the production process 
comprises wood ﬁbre which is obtained from sustainable and internationally certiﬁed afforestation, using independently audited 
chains of custody.

w w w. n e d b a n k g r o u p . c o . z a