Nedbank Group Ltd. Annual Report 2013

Plain-text annual report

1 0 1 6 2 A Tribute to Nelson Rolihlahla Mandela The Children’s Champion To a man who made our land his life And forgiveness his focus Who turned hatred into humility And made peace with the past Who made his captors his comrades And his prison cell his podium Who turned imprisonment into freedom And a divided people into a nation Who made children his cause And love his legacy. N E D B A N K G R O U P L I M T E D I I N T E G R A T E D R E P O R T f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 3 Nedbank is a proud partner of: nedbank.co.za Nedbank Limited Reg No 1951/000009/06. Authorised financial services and registered credit provider (NCRCP16). NEDBANK GROUP LIMITED INTEGRATED REPORT for the year ended 31 December 2013 NedbaNk Group | IntegrateD report 2013 nedbank group prides itself on supplying stakeholders with updated information on a regular basis. this information can be found at nedbankgroup.co.za or through the Nedbank app SuiteTM. reference gUiDe Crossreferencing reporting standard 2013 nedbank group pillar 3 Basel III public Disclosure report 2013 nedbank group transformation report Content available at nedbankgroup.co.za Supplementary information is available at nedbankgroup.co.za Scan with your smart device’s QR code reader to access additional information online. Accessing informAtion in this report this report has been produced with a view to simplifying the process of accessing the relevant information required by specific stakeholders. as was the case with the 2012 report, the 2013 report is extensively crossreferenced to ensure that related information is easy to find and that the global reporting Initiative and Financial Services Sector Supplement requirements are easily identifiable. Detailed supplementary information can be accessed at nedbankgroup.co.za mAKing things hAppen DeLiVering to oUr stAKehoLDers ensUring A sUstAinABLe BUsiness informAtion to oUr shArehoLDers OUR cONTAcT DETAILs NEDBANK GROUP LTD Incorporated in the republic of Sa reg no 1966/010630/06 BUsINEss ADDREss AND REGIsTERED OFFIcE nedbank 135 rivonia Campus 135 rivonia road Sandown, Sandton, 2196, Sa POsTAL ADDREss po Box 1144 Johannesburg, 2000, Sa tel: +27 (0)11 294 4444 Website: nedbankgroup.co.za TRANsFER sEcRETARIEs: Sa: CoMpuTerSHare INVeSTor SerVICeS (pTy) LTd BUsINEss ADDREss 70 Marshall Street Johannesburg, 2001, Sa POsTAL ADDREss po Box 61051 Marshalltown, 2107, Sa tel: +27 (0)11 370 5000 Fax: +27 (0)11 688 5238 NaMIbIa: TraNSFer SeCreTarIeS (pty) Ltd BUsINEss ADDREss robert Mugabe avenue no 4 Windhoek, namibia POsTAL ADDREss po Box 2401 Windhoek namibia tel: +264 (0)61 227 647 Fax: +264 (0)61 248 531 AUDITORs: DELOITTE & TOUcHE poSTaL addreSS private Bag X6 gallo Manor, 2052, Sa tel: +27 (0)11 806 5000 Fax: +27 (0)11 806 5003 KPMG INc poSTaL addreSS private Bag X9 parkview, 2122, Sa tel: +27 (0)11 647 7111 Fax: +27 (0)11 647 8000 NEDBANK GROUP INTEGRATED REPORT 2013 Should you wish to engage on the content of this report or if you require an additional copy of the nedbank group Ltd Integrated report 2013, 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. INVEsTOR RELATIONs alfred Visagie: Head of Investor relations tel: +27 (0)11 295 6249 email: nedbankgroupir@nedbank.co.za cOMPANY sEcRETARY tSB Jali: group Company Secretary tel: +27 (0)11 295 9696 Fax: +27 (0)11 294 9696 email: thabanij@nedbank.co.za 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 ‘forward-looking that may be defined as information statements’ within the meaning of US 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 International Financial reporting Standards 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, profits, or consequential loss or damage. 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 internationally certified obtained afforestation, using independently audited chains of custody. from sustainable and the carbon emissions generated through the production of this report have been included in the calculation of nedbank group’s total 2013 carbon footprint that will be offset during 2014. Committed to transparent reporting A profile of our business Increasing our footprint A strong performance in uncertain times Building enduring relationships Investing in our people Innovating for our clients Chairman’s Review: A sustainable future for all Committed to good governance: Report from Group Transformation, Social and Ethics Committee Chairman Chief Executive’s Review: Delivering sustainably to all our stakeholders Growing our franchises Nedbank Capital Nedbank Corporate Nedbank Retail and Nedbank Business Banking Nedbank Wealth Established leadership teams: Board of directors Group Executive Committee Cluster management Building a sustainable bank Validating our sustainability journey Invitation from our Chairman Our financial calendar for 2014 Question form for our annual general meeting Notice of our annual general meeting Form of proxy Notes to form of proxy 2 4 5 6 30 32 34 48 52 58 62 68 72 76 80 82 98 174 175 176 177 Inserted Inserted An attractive growth strategy Understanding material matters A sound investment Value-creating business model A summarised company structure Delivering value to our shareholders Partnering with our regulators Leading in the communities we serve Chief Financial Officer’s Review: Our financial performance in 2013 Our summarised five-year track record Responsibility of our directors Certification from our Company Secretary Report from our Audit Committee Report from our directors Report from independent auditors Summarised annual financial statements Worldclass at managing risk Reporting back on remuneration Incentive schemes for our people 10 14 24 28 38 42 44 100 108 109 109 110 114 118 119 130 138 173 Analysis of shareholders 187 Terms used in our report Abbreviations, acronyms and initialisms used in our report Codes for our financial instruments Our contact details Inside back cover 2 30 48 174 1 ENSURING A SUSTAINABLE BUSINESSINfoRmATIoN To oUR ShAREhoLdERSdELIVERING To oUR STAKEhoLdERSmAKING ThINGS hAPPEN MAKING THINGS HAPPEN Committed to transparent reporting A profile of our business Increasing our footprint A strong performance in uncertain times An attractive growth strategy Understanding material matters A sound investment Value-creating business model A summarised company structure 2 4 5 6 10 14 24 28 COMMITTED TO TRANSPARENT REPORTING This integrated report builds on progress, insights and stakeholder feedback received during the year and seeks to provide a detailed overview of the group’s financial and non-financial performance and how we created value for the period 1 January 2013 to 31 December 2013. The compilation of this report has been aligned with the requirements of the King Code of Governance Principles for SA (King III Code), the International Integrated Reporting Framework and complies with Global Reporting Initiative (GRI) Guidelines (3.1) A+ application level, which inform not only Nedbank Group’s annual reporting, but also our ongoing reporting initiatives throughout the year. For ease of reading and information accessibility, this report is written in the first person. The terms ‘Nedbank Group’, ‘Nedbank’, ‘the group’, ‘our’, ‘we’ and ‘us’ all refer to Nedbank Group Ltd and its associated operations, unless otherwise indicated. SCOPE OF REPORTING The Nedbank Group Ltd Integrated Report is published annually. This particular issue of the report provides information on our operations, financial and non-financial performance and integrated sustainability developments during the year ended 31 December 2013. The report covers all group clusters, operational areas and businesses of Nedbank Group in SA and internationally. Organisations in which we hold a minority stake are not included in the scope of this report. This report is addressed primarily to the long-term investor but also takes into account our primary stakeholders, namely our staff, clients, shareholders, regulators and communities. This report should be read in conjunction with other supporting reports and documents, all of which are available at nedbankgroup.co.za: ■ 2013 Nedbank Group Consolidated Annual Financial Statements ■ 2013 Results Booklet ■ 2013 Risk and Capital Management Pillar 3 Public Disclosure Report ■ 2013 Nedbank Group King III Principles ■ 2013 Nedbank Group Transformation Report ■ 2013 Supplementary Information: Governance and Ethics Review ■ 2013 Supplementary Information: Sustainable Development Review ■ 2013 Supplementary Information: Risk and Balance Sheet Management Review ■ 2013 Supplementary Information: Operational Overview ■ 2013 Global Reporting Initiative Financial Services Sector Supplement ■ 2013 Global Reporting Initiative G3.1 Index 2 The integrated report reflects our commitment to integrating sustainability across the organisation for the benefit of all stakeholders. This report builds on the 31 December 2012 Nedbank Group Ltd Integrated Report and was approved by the board on 11 March 2014. The six capitals (financial, manufactured, human, natural, social and intellectual) and how we build or deplete them are addressed in this integrated report, while not specifically referred to in this manner. NedbaNk Group | Integrated report 2013Assurance statement 98 GRI 3.1: 1.2, 3.1, 3.2, 3.3, 3.5, 3.6, 3.8, 3.9, 3.13 ASSURANCE AND INDEPENDENT ASSESSMENT Assurance of the 2013 Nedbank Group Ltd financial statements and Integrated Report is the responsibility of a combined financial and non-financial assurance team from Deloitte & Touche and KPMG Inc. The assurance statement by Deloitte & Touche and KPMG Inc on page 98 confirms: ■ The preparation of this report in accordance with the self-declared Global Reporting Initiative G3.1 Guidelines A+ application level using the principles of materiality, completeness and sustainability. ■ The use of the principles of inclusivity, materiality and responsiveness in accordance with AccountAbility’s AA1000APS (2008). ■ Limited assurance expressed over the following specified key performance indicators, which are marked with a P in the report: ■ Net promoter scores ■ Net primary-client gains ■ Banking Ombudsman cases ■ IT systems availability ■ Ethics acknowledgement ■ Anti-corruption interventions ■ Equator Principle deals ■ Carbon footprint ■ Water ■ Paper ■ Waste sent to landfill ■ Waste recycled ■ Entropy level ■ Employee surveys ■ Employee turnover ■ Value-added statement ■ All elements of the FSC scorecard The annual financial statements have being audited, and the report from independent auditors is on page 118. This integrated report also conforms to the requirements of the South African Companies Act, 71 of 2008, and JSE Ltd Listings Requirements. All FSC and black economic empowerment (BEE) information contained in this report has been verified and signed off by the audit firm, SizweNtsalubaGobodo Inc. An analysis of our compliance with the full Global Reporting Initiative (GRI) and the GRI Financial Services Sector Supplement indices (FSSS) is available at nedbankgroup.co.za in the supplementary sustainability review. MATERIAL MATTERS integrated Key to Nedbank Group’s goal of entrenching sustainability across every area of our business is our focus primarily on those matters and issues that are most material to our stakeholders. Determining material matters is an ongoing process, involving the study of all reports submitted for board or executive discussion, key business risk factors and identified opportunities, all formal and informal stakeholder feedback, our strategic objectives, and integrated sustainability imperatives. The resulting material matters inform content priority for this report and are discussed on pages 14 – 20 of this integrated report. They are also linked to and inform our strategy and actions. The Nedbank Group Executive Committee assumes responsibility for approval of the material matters prior to their endorsement by the Group Transformation, Social and Ethics Committee, a subcommittee of the board. Building enduring relationships 30–47 Understanding material matters 14–20 Report from independent auditors 118 STATEMENT OF THE BOARD OF DIRECTORS OF NEDBANK GROUP The board acknowledges its responsibility to ensure the integrity of this integrated report, which in the board’s opinion addresses all material integrated issues and presents fairly the group’s performance. This integrated report has been prepared in line with best practice as detailed on page 2 of this report. Dr Reuel Khoza Chairman 11 March 2014 Mike Brown Chief Executive 3 MAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSINfoRmATIoN To oUR ShAREhoLdERSdELIVERING To oUR STAKEhoLdERSNEDBANK GROUP | INTEGRATED REPORT 2013 A PROFILE OF OUR BUSINESS Nedbank Group is one of SA’s four largest banking groups by assets and deposits, with Nedbank Ltd our principal banking subsidiary. We are a JSE Top 40 company with our ordinary shares listed on the JSE since 1969 and on the Namibian Stock Exchange since 2007. Our market capitalisation was R107bn at 31 December 2013. Old Mutual plc is our majority shareholder, owning 52% of Nedbank Group. THE SERVICES AND PRODUCTS WE PROVIDE NEDBANK CAPITAL Investment banking and markets solutions for institutional and corporate clients. NEDBANK CORPORATE Lending, deposit- taking, transactional banking and commercial-property finance to large corporates, financial institutions, the public sector and government clients. NEDBANK RETAIL Holistic financial solutions for individuals, startups and small businesses; as well as corporate card and merchant solutions. NEDBANK WEALTH Wealth management, asset management and insurance solutions for clients of Nedbank Group. NEDBANK BUSINESS BANKING Holistic financial solutions for businesses and their owners. R750bn TOTAL ASSETS R8,7bn HEADLINE EARNINGS 6,7m CLIENTS 1 050 STAFFED OUTLETS 3 382 ATMs 29 513 EMPLOYEES A sound investment 24–27 Growing our franchises 68–71 GRI FSSS:FS6 GRI 3.1: 2.2, 2.4, 2.6 OUR FOCUS AND POSITIONING ■ A bank for all, based in Southern Africa, with selected WHERE WE ARE BASED ■ Headoffice in Sandown, Sandton, Johannesburg, SA. expansion into the rest of Africa. ■ Top two wholesale bank and strong market position in commercial-property finance, business banking, investment banking, vehicle finance, card-acquiring, deposit-taking and asset and wealth management. ■ Pan-African banking alliance with Ecobank Transnational Incorporated, giving our clients access to 37 countries across Africa. ■ Leadership in sustainability, transformation and community development. 4 ■ Regional branch network of more than 1 050 staffed outlets across SA. ■ Subsidiary banks in Lesotho, Malawi, Namibia, Swaziland, Zimbabwe, Isle of Man, Guernsey and Jersey. Representative offices in other Southern Africa countries, including Angola, Kenya, strategic acquisition of an initial stake of 36,4% in Banco Unico in Mozambique (regulatory approval received, with completion of the transaction targeted for end March 2014) and key global financial centres to provide international banking services for our SA-based multinational and high-net-worth clients, including in London, Toronto and Dubai (UAE). MAkING THINGS HAPPEN DELIVERING TO OUR STAKEHOLDERS ENSURING A SUSTAINABLE BUSINESS INFORMATION TO OUR SHAREHOLDERS INCREASING OUR FOOTPRINT Isle of Man UNITED KINGDOM London Guernsey Jersey CANADA USA Ecobank footprint Nedbank footprint Nedbank and Ecobank footprint Nedbank representative offices Ecobank representative offices Deals concluded in Africa Cape Verde Senegal Gambia Guinea Bissau Guinea Sierra Leone Liberia Morocco Mali Niger Burkina Faso Benin Ghana Nigeria Côte d’Ivoire São Tomé and Principe Togo Cameroon Equatorial Guineas Gabon Congo (Brazzaville) Luanda Dubai UAE Kenya Chad Central African Republic Uganda Ethiopia DRC Rwanda Burundi Angola Zambia Tanzania Seychelles Mauritius Malawi SOUTH AFRICA Limpopo Namibia Zimbabwe Mozambique Botswana Madagascar North West Gauteng Mpumalanga Lesotho Swaziland South Africa Northern Cape Western Cape Free State Eastern Cape KwaZulu- Natal New Nedbank branches 2013 Established Nedbank branches GRI FSSS: FS10 FS6 GRI G3.1: 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8 5 A STRONG PERFORMANCE IN UNCERTAIN TIMES GRI 3.1: EC1 FINANCIAL HIGHLIGHTS hEADLINE EARNINGS HEADLINE EARNINGS DILUTED hEADLINE EARNINGS DILUTED HEADLINE EARNINGS PER ShARE PER SHARE RETURN ON EqUITy RETURN ON EQUITY (ExCLUDING GOODWILL) (EXCLUDING GOODWILL) Rm RM cents CENTS % % 0 7 6 8 3 8 4 7 4 8 1 6 0 0 9 4 7 7 2 4 0 4 3 1 9 6 0 1 3 8 9 9 2 8 1 0 9 5 1 , 2 7 1 , 4 6 1 , 3 5 1 , 4 3 1 , 4 3 1 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 NON-INTEREST REvENUE RETURN ON ASSETS Rm % NON-INTEREST REVENUE RETURN ON ASSETS ORDINARy DIvIDEND PER ShARE cents ORDINARY DIVIDEND PER SHARE 1 6 3 9 1 4 2 3 7 1 2 1 4 5 1 5 1 2 3 1 6 0 9 1 1 % % 3 2 , 1 3 1 , 1 9 9 0 , 2 8 0 , 6 7 0 , 5 9 8 2 5 7 5 0 6 0 8 4 0 4 4 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 6 NedbaNk Group | Integrated report 2013 NON-FINANCIAL HIGHLIGHTS INvESTING IN OUR PEOPLE ■ Providing employment for an additional 588 permanent staff in SA. ■ Investing R396m in training our people. ■ Participation in our Leading for Deep Green programme by 1 521 of our staffmembers. ■ Consistently good staff and culture survey results. ■ High staff morale. ■ Good progress on staff transformation initiatives. INNOvATING FOR OUR CLIENTS ■ Increase of total group client numbers by 9,8% to 6,7m in 2013 (2012: 6,1m). ■ Significantly investing in our distribution footprint to be a bank for all, with five net new outlets and 334 ATMs in 2013. ■ Systems uptime at multiyear highs. ■ Accelerating delivery in innovation, including the reformatting of 28 Branch of the Future outlets, with more to follow. ■ Launching market- leading products such as PocketPOS™, MyFinancialLife™, My eBills™ invoice issuing and payment system. Added further functionality to the award- winning Nedbank App Suite™. ■ Offering clients a lower-priced credit life product with increased benefits. ■ Increasing loan payouts to R159bn (2012: R144bn) and assets under management by 26,5% to R190bn. DELIvERING vALUE TO OUR SHAREHOLDERS ■ Delivering economic profit of R2 114m and increasing the return on equity (excluding goodwill) to 17,2%. ■ Increasing the full-year dividend by 19,0%, ahead of 14,9% growth in headline earnings per share. ■ Delivering total shareholder return for 2013 of 16,0%. ■ Positioning the group for future shareholder value creation through our long-term, risk-mitigated and capital-efficient Pan-African banking strategy. ■ Voted the Financial Times and The Banker magazine’s 2013 SA Bank of the Year. ■ Our 2012 integrated report the overall winner of the 2013 Chartered Secretaries Southern Africa and JSE Annual Report awards. PARTNERING WITH OUR REGULATORS LEADING IN THE COMMUNITIES WE SERvE ■ Implementing Basel III successfully on 1 January 2013. ■ Strengthening the group’s common- equity tier 1 further to 12,5%. ■ One of SA’s largest tax contributors: with R8,0bn relating to direct, indirect, PAYE and other taxation. ■ Strong, open and transparent relationships with all regulators. ■ Commitment to responsible banking and insurance practices. ■ Strengthening balance sheet impairments and coverage ratios to the highest levels. ■ Aspiring to be worldclass at managing risk and having appropriate remediation where required. ■ Expanding our distribution footprint by 29% in urban areas and 71% in non-urban areas since 2009. ■ Contributing R413m to socioeconomic development since 2009 (2013: R111m). ■ Supporting 163 external bursars across 17 universities. ■ Maintaining our level 2 BBBEE FSC contributor status for the fifth consecutive year. ■ Sourcing 78,1% of our procurement locally, improving on an already high benchmark. ■ Being recognised as a leader in socially responsible banking at the 2013 African Banker awards and winning the Sunday Times Top 100 Companies CSI awards. Staff 32–33 Clients 34–37 Shareholders 38–41 Regulators 42–43 Communities 44–47 Cultural entropy (%) Number of clients (millions) Total shareholder return (%) Common-equity tier 1 ratio (Basel III) (%) Socioeconomic spend (Rm) 3 1 3 1 1 1 1 0 1 1 5 5 , 1 , 5 4 4 , 7 1 6 6 , , , 3 5 3 , 3 4 3 , 3 5 1 , 6 8 , 0 6 1 0 , 1 1 6 , 1 1 , 5 2 1 9 9 , 1 , 0 1 9 0 8 3 8 7 6 1 1 1 1 1 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 GREAT PLACE TO WORK GREAT PLACE TO BANK GREAT PLACE TO INvEST WORLDCLASS AT MANAGING RISK hIGhLy INvOLvED IN ThE COMMUNITy AND ENvIRONMENT 7 MAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSINfoRmATIoN To oUR ShAREhoLdERSdELIVERING To oUR STAKEhoLdERSA STRONG PERFORMANCE IN UNCERTAIN TIMES (CONTINUED) PERFORMANCE HIGHLIGHTS ECONOMIC Headline earnings Income attributable to equity holders of the parent Diluted earnings per share: ■ Headline ■ Basic Dividend declared per share Dividend cover Net asset value Tangible net asset value per share Net interest income to average interest-earning banking assets Credit loss ratio – banking advances Non-interest revenue (NIR) to total income NIR to total operating expenses Efficiency ratio Group capital adequacy ratios: ■ Common-equity tier 1 ■ Tier 1 ■ Total Total assets under administration Total assets Assets under management Return on total assets Return on ordinary shareholders’ equity (ROE), excluding goodwill ROE 1 Basel II. 2 Basel II.5. 3 Basel III. ENVIRONMENTAL Green Star-rated buildings Carbon footprint per fulltime employee Offset through carbon emission reduction projects Carbon status SOCIAL Socioeconomic development spend2 CULTURAL Broad-based black economic empowerment credentials Barrett entropy 1 tCO2e = tonnes of CO2 equivalent. 2 Includes Community Trust and Nedbank Private Wealth Foundation, spend impacted by FSC Code changes in 2013. 8 % change 2012–2013 2013 2012 2011 2010 2009 15,9 15,9 15,0 15,1 19,0 12,1 13,6 8 670 8 637 1 829 1 822 895 2,11 64 336 11 346 3,57 1,06 47,7 86,4 55,2 12,53 13,63 15,73 1,23 17,2 15,6 7 483 7 449 1 590 1 583 752 2,18 57 375 9 989 3,53 1,05 46,8 84,4 55,6 11,42 12,92 14,92 1,13 16,4 14,8 6 184 6 190 1 340 1 341 605 2,26 52 685 9 044 3,48 1,13 46,1 81,5 56,6 11,01 12,61 15,31 0,99 15,3 13,6 4 900 4 811 1 069 1 050 480 2,30 47 814 8 160 3,35 1,36 44,3 79,6 56,7 10,11 11,71 15,01 0,82 13,4 11,8 4 277 4 826 983 1 109 440 2,30 44 984 7 398 3,39 1,52 42,2 78,8 53,5 9,91 11,51 14,91 0,76 13,4 11,8 12,8 9,8 26,5 939 935 749 594 833 453 682 958 760 358 648 127 190 341 150 495 112 231 711 288 657 907 608 718 102 570 570 703 87 204 (3,5) (4,2) 3 7,61 230 000 Neutral 3 7,89 240 000 Neutral 2 7,74 240 000 Neutral 1 8,25 220 000 Neutral – 8,77 220 000 Neutral Rm Rm cents cents cents times Rm cents % % % % % % % % Rm Rm Rm % % % tCO2e4 tCO2e4 tCO2e4 Rm (4,3) 111 116 89 80 73 % Level 2 11 Level 2 10 Level 2 11 Level 2 13 Level 2 13 NEDBANK GROUP | INTEGRATED REPORT 2013 % change 2012–2013 2013 2012 2011 2010 2009 Our summarised five-year track record 108 Summarised annual financial statements 119–129 15,9 15,9 15,0 15,1 19,0 12,1 13,6 8 670 8 637 1 829 1 822 895 2,11 64 336 11 346 3,57 1,06 47,7 86,4 55,2 12,53 13,63 15,73 7 483 7 449 1 590 1 583 752 2,18 57 375 9 989 3,53 1,05 46,8 84,4 55,6 11,42 12,92 14,92 6 184 6 190 1 340 1 341 605 2,26 52 685 9 044 3,48 1,13 46,1 81,5 56,6 11,01 12,61 15,31 4 900 4 811 1 069 1 050 480 2,30 47 814 8 160 3,35 1,36 44,3 79,6 56,7 10,11 11,71 15,01 4 277 4 826 983 1 109 440 2,30 44 984 7 398 3,39 1,52 42,2 78,8 53,5 9,91 11,51 14,91 12,8 9,8 26,5 939 935 749 594 833 453 682 958 760 358 648 127 190 341 150 495 112 231 711 288 657 907 608 718 102 570 570 703 87 204 1,23 17,2 15,6 1,13 16,4 14,8 0,99 15,3 13,6 0,82 13,4 11,8 0,76 13,4 11,8 (3,5) (4,2) 3 7,61 230 000 Neutral 3 7,89 240 000 Neutral 2 7,74 240 000 Neutral 1 8,25 220 000 Neutral – 8,77 220 000 Neutral Rm Rm cents cents cents times Rm cents % % % % % % % % Rm Rm Rm % % % tCO2e4 tCO2e4 tCO2e4 Socioeconomic development spend2 Rm (4,3) 111 116 89 80 73 Broad-based black economic empowerment credentials 1 tCO2e = tonnes of CO2 equivalent. 2 Includes Community Trust and Nedbank Private Wealth Foundation, spend impacted by FSC Code changes in 2013. % Level 2 11 Transformation Report Level 2 10 Level 2 11 Level 2 13 Level 2 13 9 ECONOMIC Headline earnings Income attributable to equity holders of the parent Diluted earnings per share: ■ Headline ■ Basic Dividend cover Net asset value Dividend declared per share Tangible net asset value per share Net interest income to average interest-earning banking assets Credit loss ratio – banking advances Non-interest revenue (NIR) to total income NIR to total operating expenses Efficiency ratio Group capital adequacy ratios: ■ Common-equity tier 1 ■ Tier 1 ■ Total Total assets ROE Total assets under administration Assets under management Return on total assets Return on ordinary shareholders’ equity (ROE), excluding goodwill ENvIRONMENTAL Green Star-rated buildings Carbon footprint per fulltime employee Offset through carbon emission reduction projects Carbon status SOCIAL CULTURAL Barrett entropy MAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSINfoRmATIoN To oUR ShAREhoLdERSdELIVERING To oUR STAKEhoLdERSAN ATTRACTIvE GROWTh STRATEGy Our vision is to be Africa’s most admired bank by our staff, clients, shareholders, regulators and communities supported by our values of accountability, integrity, respect, pushing beyond boundaries and being people- centred. Our growth-oriented strategy is underpinned by strong franchises each with long-term growth opportunities, growing our share of transactional banking revenues, tilting our portfolio in favour of strategically attractive opportunities while protecting against the downside in higher risk portfolios and expanding into the rest of Africa. This is enabled by our people and our unique culture, which we regard as our primary strategic differentiator. 10 BUILDING STRONG FRANCHISES The historic strength of Nedbank Group has been in our wholesale franchises, which are built on strong client relationships, competitive deposit and lending market shares, quality portfolios with low levels of impairments over an extended period of time in corporate and business banking, expertise in key areas such as commercial property energy, resources, infrastructure and, more recently, oil and gas as well as markets businesses. We are well positioned to leverage off growth in the rest of Africa, support growth in small and medium enterprises and benefit the participation in the rollout of government’s infrastructure programmes. renewable finance, from Repositioning Nedbank Retail has been a large focus of the group for the past few years as we addressed weaknesses in the transactional banking franchise, owing to historic underinvestment and poor strategic choices in relation to clients, distribution and marketing, and a predominantly product-focused approach. This, coupled with inadequate risk management disciplines, led to Retail reporting a loss in 2009. Our actions over the past few years in building a sustainable and profitable retail bank, while recognising the importance of being a bank for all in SA, were to focus on the growth markets of youth and entry-level banking as well as restoring our historic strengths in the middle-market, seniors and small-business segments. As a result, we have made significant investments in footprint, new client value propositions and innovative products. At the same time we embedded worldclass risk practices, significantly strengthened balance sheet provisions and adopted more prudent provisioning methodologies. As a result, financial performance improved substantially and since the start of 2009 we have gained more than 2m clients. Future growth will be driven by SA’s banking population, which is forecast to grow by 10m people, and by our capturing an increasing share of these primary clients through innovative, client-centred value propositions. Nedbank Wealth, the youngest of the group’s client facing clusters, was established in 2009 following the buyout of the remaining shares in the former joint ventures with Old Mutual. The cluster has low capital is a significant economic profit requirements and in our wealth contributor. Growth opportunities insurance management, asset management and businesses remain very attractive. NedbaNk Group | Integrated report 2013MAkING THINGS HAPPEN DELIVERING TO OUR STAKEHOLDERS ENSURING A SUSTAINABLE BUSINESS INFORMATION TO OUR SHAREHOLDERS GROWING OUR TRANSACTIONAL BANKING FRANCHISE Historically, Nedbank has had a smaller transactional banking franchise than our peers and as a result our earnings have been strongly influenced by macroeconomic changes given the absence of a substantial, stable commission and fee income stream. Since 2009 we have focused on growing our transactional banking franchise through client gains, improved cross-sell and innovations, with the aim of increasing our non-interest-revenue- to-expense ratio and meeting our medium-to- long-term target of greater than 85%. In 2013 we achieved this target for the first time. GEOGRAPHIC EXPANSION Our largest opportunity is to capture a greater share of the banking profit pool in SA. In the longer term, economic growth in the rest of Africa is expected to be much higher and we will follow our clients who are also expanding beyond the borders of SA. We are building the Nedbank franchise in SADC and East Africa. In Central and West Africa we are following a partnership approach with Ecobank. MANAGING A BANK IN A TIME OF UNCERTAINTY AND REGULATORY CHANGE The introduction of new capital and liquidity requirements by Basel regulations in recent years has forced banks to rethink their business portfolios as capital and liquidity have become increasingly scarce and expensive resources impacting on overall profitability. In order to optimise returns for shareholders and position the bank in a tougher, uncertain and more volatile environment we have adopted a portfolio approach to managing our different businesses and products. Through our strategic portfolio tilt we choose to grow faster in certain businesses or products such as transactional banking, deposits, investment banking, insurance and asset management, while taking a selective origination approach with others. Home loans and personal loans are products where we have chosen to limit our downside risk and we recognise that we may lose market share during certain times in the economic cycle. OUR PEOPLE AND CULTURE ARE OUR PRIMARY DIFFERENTIATORS We believe that our people and our unique culture differentiate us. We are committed to developing and training our staff, and investing significantly in programmes such as Leading for Deep Green to improve our personal and team effectiveness across the group. In addition, we track and monitor our staff satisfaction levels and changes in our corporate culture by identifying areas of dissonance (entropy) and value matches in relation to our ideal corporate culture. Chairman’s Review 48–51 Chief Executive’s Review 62–67 GRI 3.1: 1.2 11 An AttrActive growth strAtegy (CONTINUED) A vISION-LED, vALUES-DRIvEN ORGANISATION vISION: TO BE AFRICA’S MOST ADMIRED BANk vALUES: INTEGRITy be honest, trustworthy, truthful, and consistent and open in all of our conduct and decisions. RESPECT recognise the inherent worth of every human being and treat all people accordingly. ACCOUNTABILITy prepared to make commitments and be judged against our commitments, to deliver on those commitments and to be responsible for our actions. PUShING BEyOND BOUNDARIES recognise our obligation to the entire organisation – to push beyond the limits of what is best for us individually, or as a group or unit and strive to break new ground – fuelled by our passion and commitment. PEOPLE-CENTRED we invest in our people and create empowering environments through development, support, mentoring, coaching, valuing diversity, recognition and reward. 12 DELIvERING ON OUR 2013 STRATEGIC FOCUS AREAS In 2013 we made progress towards achieving our vision through delivery on our strategic growth drivers of repositioning Nedbank Retail, growing NIR, portfolio tilt and rest of Africa. During our strategic planning processes for 2014-16 we refined our strategic focus areas in the context of our material matters – these are discussed in more detail on page 21. Over the past four years Nedbank’s franchise has experienced strong growth as reflected in the increase of our brand value by 38,0% to R10,9bn (2009: R7,9bn), measured by Brand Finance’s Brands Survey. We have also made significant progress in delivering on the four key strategic focus areas of repositioning Nedbank Retail, growing NIR, implementing the portfolio tilt strategy and expanding into the rest of Africa. Our 2014 strategic focus areas 21 NedbaNk Group | Integrated report 2013REPOSITION NEDBANK RETAIL GROW NIR Chairman’s Review 48–51 Chief Executive’s Review 62–67 We have made excellent progress in growing our NIR-to-expense ratio from 78,8% in 2009 to 86,4% in 2013, exceeding our medium-to-long-term target of more than 85%. Over this period, our client base has grown across all clusters and transactional banking From 2009 to 2013 our retail business’ headline earnings have increased from a loss of R27m to R2,5bn and ROE from (0,2%) to 11,6% in 2013. We invested R1,7bn in distribution footprint and a further R400m in people, integrated channels and innovations, while extracting R1,1bn in efficiencies and growing clients by 2,2m to 6,4m. With the repositioning complete, the focus now turns to leveraging our strong foundations to accelerate primary banked client gains and capturing a greater share of the market while continuing to be diligent in managing risk. REPOSITION NEDBANK RETAIL GROW NIR TO BE AFRICA’S MOST ADMIRED BANk PORTFOLIO TILT REST OF AFRICA CLIENT-CENTRED APPROACH SUSTAINABILITy EMBEDDED IN GROUP STRATEGy volumes have increased. As a result, commission and fee income grew at a compound annual growth rate of 13,1% to R14 023m (2009: R8 583m). REST OF AFRICA Our rest of Africa strategy incorporates our strategic alliance with Ecobank Transnational Incorporated (ETI) in West and Central Africa and strengthening our existing network and expanding our presence in the Southern African Development PORTFOLIO TILT Under the portfolio tilt strategy, economic profit (EP) increased significantly from R57m in 2009 to R2,1bn in 2013, supported by selective advances growth to mitigate against downside risk in personal loans and home loans while we focused strongly on EP-generative activities such as deposit growth, insurance, asset management and investment banking. Risk and balance sheet management review 134–136 Community (SADC) and East Africa. Nedbank has the right to take up a shareholding of up to 20% in ETI and a formal decision will be made during the rights exercise period in 2014. Regulatory approval has been received for us to acquire an initial stake of 36,4% of Banco Unico in Mozambique, with completion of the transaction targeted for end March 2014. The group has the right to acquire a majority shareholding over time and this will contribute to strengthening Nedbank’s franchise and client proposition in the SADC and East Africa, increasing our presence to six countries. 13 MAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSINfoRmATIoN To oUR ShAREhoLdERSdELIVERING To oUR STAKEhoLdERSAn AttrActive growth strAtegy (CONTINUED) UNDERSTANDING MATERIAL MATTERS Material matters impact on the sustainability and long-term performance of the group and our stakeholders. Determining material matters is an ongoing process that involves the study of all reports submitted for board or executive discussion, key business risk factors and identified opportunities, all formal and informal stakeholder feedback, our strategic objectives, and integrated sustainability imperatives. We identified six material matters in 2013 and broadly discuss why these are important to Nedbank Group, and what our strategic responses are. 1 MATERIAL MATTERS 2 TOUGH ECONOMIC CONDITIONS GRI 3.1: 1.2 3 BANKING RELEVANCE AMID CONSUMERISM AND INCREASED COMPETITION INCREASED DEMANDS ON GOVERNANCE AND RISK MANAGEMENT 4 GROWTH OPPORTUNITIES IN THE REST OF AFRICA 5 TRANSFORMATION OF SOCIETY WITHIN PLANETARY BOUNDARIES 6 SCARCE SKILLS Innovating for our clients 34–37 Leading in the communities we serve 44–47 Investing in our people 32–33 14 NedbaNk Group | Integrated report 2013 1 TOUGH ECONOMIC CONDITIONS Economic growth in advanced economies remains anaemic as these economies continue to deleverage, while China’s cooling economic growth and the normalisation of the monetary policies of advanced economies have muted prospects for many emerging economies. SA’s economic growth forecasts were systematically adjusted lower in 2013 and although growth for 2014 is currently anticipated at 2,6%, downside forecast risk remains. SA, with a current account deficit at 6,5% and a fiscal deficit of 4% of GDP in 2013, is seen as part of the ‘fragile five’ emerging economies, together with Brazil, India, Indonesia and Turkey. Infrastructural constraints continue to limit new investments and business confidence remains weak owing to policy uncertainty and labour disputes. In addition, rand weakness is likely to increase inflation putting pressure on interest rates. High levels of indebtedness and increasing pressure from rising administrative and transportation costs continue to weigh on consumers in SA. We proactively educate our clients about their pricing options and assist them in moving to lower-priced bundles based on their current banking needs and behaviour. WHY DO WE REGARD THIS AS A MATERIAL MATTER? The weak economic environment directly impacts a bank and its balance sheet through: ■ Reduced demand for credit (lower growth in loans and advances) coupled with high levels of consumer indebtedness and a muted corporate investment appetite. ■ Increased risk of defaults and bad debts. ■ An increase in expense growth from high levels of inflation. ■ 40-year-low interest rates that negatively affect endowment income. ■ The potential for a further downgrade of the SA sovereign credit rating coupled with a slowdown in capital inflows to fund the current account deficit, which could lead to greater currency volatility and depreciation, placing additional pressure on economic growth. ■ Delays in response to infrastructural constraints and service delivery issues, which could lead to increased social instability and postponement of much- needed capital investment. OUR STRATEGIC RESPONSE ■ Our capital levels remain strong, and we have sound liquidity, a well- diversified business portfolio and a risk framework that has been stress- tested for downside economic scenarios. ■ Over the past four years we have made significant progress in growing our transactional banking client base and NIR, and this focus will continue. As a result, we will be more resilient in the event of a slowdown in the growth of loans and advances and higher levels of impairments. ■ Early action was taken in higher-risk portfolios such as Home Loans and Personal Loans through selective origination and more stringent credit scorecards, while we further strengthened portfolio impairments and increased coverage ratios. ■ We have positioned our book for rising interest rates with net interest income benefiting by R936m for each 1% parallel upward shift in interest rates over 12 months. ■ We have a countercyclical strategy to invest for growth while containing costs and driving efficiencies through the implementation of ‘Optimise to invest’, a key strategic initiative to fund investment for the future through internal cost optimisation. Core to this is our strategy to rationalise, standardise and simplify IT systems through projects such as the SAP ERP implementation launched in 2013 to streamline Finance, HR and Procurement. ■ We proactively educate our clients about their pricing options and assist them in moving to lower-priced bundles based on their current banking needs and behaviour. In the process clients are saving on fees every year. We also assist our clients to avoid costly penalty fees and educate them to be ‘more savvy’ with their money. ■ We remain committed to the financial health of our clients and have introduced client-centred innovations such as MyFinancialLifeTM, My Money Map and education programmes for the youth and entrepreneurs to improve financial literacy, and a unique no-funds-alert function that notifies clients when there are insufficient funds in their account ahead of a pending debit order and delays the processing of the debit order. This gives clients time to top up their balance to prevent payments from being returned and avoid unnecessary penalty charges. This commitment was also demonstrated by the slowdown in the growth of our personal-loans book, ahead of the industry. 15 MAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSINfoRmATIoN To oUR ShAREhoLdERSdELIVERING To oUR STAKEhoLdERSAn AttrActive growth strAtegy (CONTINUED) 2 BANKING RELEVANCE AMID CONSUMERISM AND INCREASED COMPETITION Technology has enabled new competitors to emerge in the financial sector, and they are unencumbered by legacy systems. The most prominent examples are online banks, microloan providers and virtual payment systems. This has led to a proliferation of internet and mobile telephony providers placing an increasing array of products and services at consumer’s fingertips available 24/7. Consumer expectations of banks have increased resulting in a choice of integrated channels. Retail banking in SA has also seen a shift in banking behaviour, as clients become more aware of their options and understand the pricing consequences of their choices. OUR STRATEGIC RESPONSE ■ Nedbank has identified and adopted ‘client- centred innovation’ as a strategic growth driver. For example, we fully embraced digital and mobile banking, while embedding an integrated-channel strategy. This allows our clients to transact seamlessly across their channel of choice. Nedbank has differentiated its transactional services by being a leader in cybersecurity through its award-winning Nedbank App Suite™ technology. ■ In the past three years we have expanded our outlets by 41% and ATMs by 83% to provide clients with increased convenience and access. As part of our Branch of the Future rollout we are refurbishing all outlets to provide multichannel access, optimising floor size, improving efficiency and making the instore experience more client-friendly. ■ We are increasingly focusing on cross-selling, enabled by greater crosscluster collaboration and the integration of processes and systems. ■ To demonstrate our commitment to making banking more affordable and transparent, we have not only saved clients a great deal by moving them to more suitably bundled products but also Retail, Corporate and Business Banking transactional banking fees for 2014 will remain as they were in 2013. The cost is expected to be offset in the future by continued client gains, cross-sell and more transactional volumes. ■ In 2013 we launched a new credit life product, one of the lowest priced in the industry, with increased benefits. Competition for primary clients has increased, with pressure on banks to innovate more rapidly, price more competitively and market their offerings more aggressively. WHY DO WE REGARD THIS AS A MATERIAL MATTER? Transacting is a core service provided by banks. Clients that transact through a bank tend to also use other services such as deposits, thereby providing funding. Owing to reduced economic activity and non-traditional players into the market, competition for transacting clients has increased, with pressure on banks to innovate more rapidly, price more competitively and market their offering more aggressively. Innovating for our clients 34–37 16 NedbaNk Group | Integrated report 2013MAkING THINGS HAPPEN DELIVERING TO OUR STAKEHOLDERS ENSURING A SUSTAINABLE BUSINESS INFORMATION TO OUR SHAREHOLDERS Worldclass at managing risk 130–137 Partnering with our regulators 42–43 3 INCREASED DEMANDS ON GOVERNANCE AND RISK MANAGEMENT The global financial crisis and events such as the London Interbank Offered Rate (LIBOR) and misselling scandals in the UK have eroded trust in banks and the finance sector in many parts of the world. Regulators have responded with a multitude of measures to ensure the soundness of banks and protect consumers, the most prominent of which are the Basel III regulations on capital adequacy and liquidity. In the US the Volcker rule, restricting proprietary trading for banks, came into force during 2013. SA is moving towards a new Twin Peaks regulatory framework that seeks to coordinate prudential (South African Reserve Bank) and market conduct (FSB) regulations. Consumer protection is increasing, with a focus on improving transparency and protecting clients in terms of the Consumer Protection Act. WHY DO WE REGARD THIS AS A MATERIAL MATTER? Banks have to deal with greater complexity resulting from increased regulation and higher compliance costs, and this has impacted business activities. ■ Basel III reduces bank leverage, which reduced return on equity (ROE). This could increase the cost of credit at the higher end of the risk spectrum. ■ There is a trend towards greater emphasis on the core business of banking and reducing proprietary trading activities. ■ Consumer regulation is focused on protecting clients and ensuring sustainable banking practices. ■ Internationally, regulators have imposed significant fines on banks that have not complied with regulations. We fully support sustainable banking practices and continuously aim to stay at the forefront of anticipated regulatory interventions. OUR STRATEGIC RESPONSE ■ Managing risk is the cornerstone of a bank’s success. Our aspiration is to be worldclass at managing risk while being a great place to bank. Our regulators are one of our five key stakeholders and play a major role in our vision to build Africa’s most admired bank. ■ We have healthy relations with our regulators and continue to support governance and regulatory frameworks that have made it possible for SA’s banking sector to be rated third in the world for ‘soundness of banks’ by the World Economic Forum in 2013. ■ In January 2013 we implemented the Basel III capital and liquidity requirements. ■ We fully support sustainable banking practices and continuously aim to stay at the forefront of anticipated regulatory interventions. An example of this would be our new credit life product, priced at the lower end of the market while offering increased benefits. ■ We aspire to be worldclass at managing risk and having appropriate remediation where required. ■ We have an experienced board of directors, with currently six independent and five non-executive directors out of a total of 14. ■ Our strategic portfolio tilt strategy brings to the forefront effective risk management, focusing not only on returns but also on the risk and capital requirements for those returns. 17 An AttrActive growth strAtegy (CONTINUED) 4 GROWTH OPPORTUNITIES IN THE REST OF AFRICA Economic growth rates in the rest of Africa are attractive compared with those in many regions in the world, owing to improvements in the political environment, structural adjustments, the continent’s rich resource base and a young, growing, urbanising population. SA’s trade with the rest of Africa continues to grow rapidly. In 2012 the total value of trade was US$26bn, a compound annual growth rate of 12% since 1996. SA firms are also increasingly expanding into and investing in the rest of Africa. Trade liberation and the extension of trade corridors in several regions of Africa support further trade and economic integration. Notwithstanding these factors, many investors are still cautious about investing in Africa and perceived risks are still high. There is also less regulatory certainty in many African markets. The financial markets are typically much shallower and less sophisticated than in SA and large segments of the population are excluded from the financial sector. Incountry banking in most African countries is dominated by a few established banks. These banks are typically tightly controlled, particularly in the major economies – Nigeria, Angola, Ghana and Kenya – owing to strong historic domestic shareholder ties or subsidiary relationships to larger banking groups. OUR STRATEGIC RESPONSE ■ Our strategy is to develop a ‘Pan-African banking network’ by extending our Southern and East African country presence from five to approximately 10 countries over the medium term. Our clients are present in all of these countries. This network was most recently strengthened through the acquisition by Nedbank of a 36,4% stake in Banco Unico in Mozambique. ■ In addition, our clients have access to West and Central Africa through our strategic alliance with ETI, which is represented in 35 countries. We have the right to acquire 20% of ETI until November 2014. These linkages position us to provide our clients with a ‘one bank’ experience across the largest Pan-African network in sub-Saharan Africa in a risk-mitigated manner. ■ Our Africa approach fits into our growth strategy of a ‘step change in sustainably building the franchise’. The economic growth potential of the rest of Africa remains attractive for banks as well as their clients. WHY DO WE REGARD THIS AS A MATERIAL MATTER? The economic growth potential of the rest of Africa remains attractive for banks as well as their clients: ■ With faster economic growth in rest of Africa there is a pressing need for infrastructure and capital-intensive projects – banks play a key role in their funding and structuring. ■ SA clients entering the rest of Africa through their local banks seek to benefit from one-stop solutions. ■ International banks are increasingly focusing on expansion into Africa as investors seek exposure to the region through investment in well-managed SA banks. ■ New entrants to countries in the region could be forced to make comparatively subscale and expensive banking acquisitions. ■ Despite high revenue growth rates, many investments in the rest of Africa still have lower risk-adjusted returns. 18 NedbaNk Group | Integrated report 20135 TRANSFORMATION OF SOCIETY WITHIN PLANETARY BOUNDARIES Improvements in life expectancy have led to rapid population growth over the past two centuries. Economic growth has been faster, leading to higher living standards and an increase in average per capita incomes by a factor of more than 10. This growth has been underpinned by the conversion of natural resources into useful products and services, as well as improved social structures and technological innovation. However, high levels of poverty and inequality remain in many regions, including sub-Saharan Africa. Millions of citizens lack access to formal employment opportunities, sufficient food, clean water and sanitation, safe and affordable transportation, suitable housing, modern healthcare, education and financial services. Furthermore, progress has come at a price, as there is mounting evidence that human consumption is exceeding the supply limits of the planet. In addition, specific attention to the black economic empowerment (BEE) transformational environment is still required in SA. We will contribute through our core businesses to fulfil our social purpose of facilitating capital flows throughout the economy. We commit to doing our fair share. WHY DO WE REGARD THIS AS A MATERIAL MATTER? ■ The primary means through which modern societies have enjoyed developmental gains for the past two centuries – for instance the burning of fossil fuels and the extraction of finite mineral resources – appear unable to deliver the same benefits sustainably to a growing population. ■ It is predicted that the impact of climate change would manifest itself in the increasing frequency and intensity of natural disasters, freshwater, food and other supply constraints. The acceleration of species extinction and the degradation of ecosystems would erode nature’s capacity to supply essential life support services. ■ In this scenario, knockon economic effects of high and volatile commodity prices would be felt as resources are increasingly directed away from productive towards ‘repair’ activities. ■ Stricter regulatory responses may be expected – with the potential for social backlash against those perceived to have contributed to the emerging reality – as governments and businesses struggle to articulate and execute effective strategies. OUR STRATEGIC RESPONSE ■ Nedbank has developed a strategic response to address societal needs within critical environmental thresholds or ‘planetary boundaries’ called Fair Share 2030. This sets out how we will contribute through our core business, fulfilling our social purpose of facilitating capital flows throughout the economy. Fair Share 2030 is described in more detail on pages 22–23. ■ In addition we will contribute through our own operations and corporate social investment (CSI) through our foundation and trusts, and we will continue to play a role in shaping the future we want through thought leadership and advocacy. ■ Nedbank remains committed to building on its solid empowerment credentials in the interests of transformation and will continue to contribute to the nation’s socioeconomic growth through the support of the Financial Sector Code. Fair Share 2030 22–23 19 MAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSINfoRmATIoN To oUR ShAREhoLdERSdELIVERING To oUR STAKEhoLdERSAn AttrActive growth strAtegy (CONTINUED) 6 SCARCE SKILLS SA has high levels of unemployment. Recent statistics reflect that only 41% of the working-age population are employed, compared with a global average of 61%. While this appears to indicate labour surplus, there is a skills shortage attributable to the failings in the SA education system, where SA was rated 146th out of 148 countries according to the 2013–2014 World Economic Forum Competitiveness Report. WHY DO WE REGARD THIS AS A MATERIAL MATTER? Banking is a service industry managing significant levels of risk, and highly skilled employees are needed to service clients. Therefore, attracting and retaining skills are very important to us: ■ Competition for the pool of qualified people entering the labour market is increasing. Quantitative analysis skills are at a premium. ■ Companies are required to invest an increasing amount in training and development to address the skills gap. ■ The retention of skilled staff is critical to remain competitive and requires significant investment through incentives and career development. ■ Transformation is an imperative that we fully embrace to build a better country and to remain relevant. Competition for the pool of qualified people entering the labour market is increasing. Quantitative skills are at a premium. Investing in our people 32–33 Managing and optimising our own impact 92–97 20 OUR STRATEGIC RESPONSE ■ We place great value on being a great place to work. ■ In 2013 we spent R396m (2012: R352m) on training and development. ■ Our staff and corporate culture continue to be our key competitive advantage – in 2013 our values survey highlighted measures health levels, while we continue to optimise personal and team effectiveness through our Leading for Deep Green programme. ■ We continue to transform our business to reflect the profile of society as can be seen in our improving employment equity ratios. ■ Of the Nedbank Foundation’s expenditure, 50% is geared towards improving educational outcomes in the country. ■ Our bursary programme has assisted 16 learners across the entire SA, having spent R11m in 2013. ■ Recognising quantitative analysts as a scare resource we have launched a risk academy to develop quants. To date 15 staffmembers have graduated with a further 33 enrolled in the programme. NedbaNk Group | Integrated report 2013OUR 2014 STRATEGIC FOCUS AREAS Following the progress made with regard to our four previous strategic focus areas, the emphasis will now be on client-centred innovation, grow our transactional banking franchise, optimise to invest, our strategic portfolio tilt, and Pan-African banking network. Chief Executive’s Review 62–67 CLIENT-CENTRED INNOVATION is vital in accelerating and building on the innovations launched in the past two years to enhance Nedbank’s value propositions and drive client growth and product cross-sell. GROW OUR TRANSACTIONAL BANKING FRANCHISE focuses on capturing a greater share of the overall groupwide transactional banking opportunity, with growing NIR and client deposits a key outcome. OPTIMISE TO INVEST is aimed at driving internal efficiencies in an environment of slower revenue growth and enhancing our ability to invest in the franchise for the longer term. Significant information technology (IT) innovations are planned to enhance our systems and deliver business benefits through managed evolution. Our ‘rationalise, standardise and simplify’ IT TO BE AFRICA’S MOST ADMIRED BANK GROW TRANSACTIONAL BANKING FRANCHISE OPTIMISE TO INVEST CLIENT- CENTRED INNOVATION STRATEGIC PORTFOLIO TILT PAN-AFRICAN BANKING NETWORK STEP CHANGE IN SUSTAINABLY BUILDING THE FRANCHISE STRATEGIC PORTFOLIO TILT continues to emphasise the strategic nature of portfolio tilt and EP-generative activities while incorporating Nedbank’s Fair Share 2030 initiative, which encompasses a carefully calculated flow of money allocated each year to invest in future-proofing the environment, society and our business. We have also increased collaboration with our parent company, Old Mutual plc, and our sister companies in SA. New-business flows from our financial planners to Old Mutual SA increased 58% in 2013 and we entered the direct-insurance market in partnership with Mutual & Federal. strategy forms part of this intent as we move from 220 to 60 core systems over time and embark on initiatives such as a SAP ERP system replacement in Finance, Human Resources and Procurement. In 2013 alone, 30 IT systems were decommissioned. PAN-AFRICAN BANKING NETWORK reflects the importance of providing banking services for our clients as they expand across the continent, and creating shareholder value through appropriate investment opportunities that are aligned with the Nedbank strategy and culture and that can clear our financial hurdles. 21 MAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSINFORMATION TO OUR SHAREHOLDERSDELIVERING TO OUR STAKEHOLDERS AN ATTRACTIVE GROWTH STRATEGY (CONTINUED) MONEY WORKING FOR THE FUTURE WE WANT Nedbank’s vision is to be Africa’s most admired bank by all our stakeholders. We understand that our success in achieving this vision is greatly dependent on the success of the environment in which we operate – the people and our planet. Therefore, we are deeply committed to ensuring greater and lasting wellbeing for all. However, we are aware that the prevailing model for socioeconomic development is running into serious challenges as the economy bumps against environmental limits (eg climate change and fresh water), exacerbating inequality, increasing the potential for conflict and creating a real risk of stalled progress. While the private sector definitely plays a positive developmental role by supplying products and services, creating jobs, paying taxes and supporting social investment, the collective business response has not been sufficient to address these challenges. We cannot afford to be neutral with respect to outcomes for society; neither can we expect different outcomes if we do the same things as before. Our commitment is therefore to think and act differently, to go beyond usual business to help create the future we all want. We believe this ambition will increase our own chances of success, as well as those of our stakeholders, and help us to grow our franchise sustainably. SHAPING THE CONTEXT We need to get money working for the future we want by doing what we do best: being a successful bank. We are worldclass at managing risk, we facilitate trade, and we enable the deployment of capital into the economy. Through the proper application of these skills we can shape the context in which we operate. Taking a more deliberate and imaginative approach to creating a better future requires us to extend our aspiration to be the ‘green and caring’ bank into the range of products and services we offer. To this end we have applied a future- back, outside-in process to gain a better understanding of the conditions for long-term success and the needs and aspirations of society. Chief Executive’s Review 62–67 DRIVING TOWARDS THE FUTURE WE WANT THROUGH FAIR SHARE 2030 22 NEDBANK GROUP | INTEGRATED REPORT 2013MONEY WORKING FOR THE FUTURE WE WANT LONG-TERM GOALS AND RESPONSE Not everything that needs to be done can or should be done by a bank. We have therefore identified a number of long-term societal goals that are relevant for a thriving bank in a thriving society and that we believe we can contribute towards. These goals are: Atmospheric greenhouse gases are stabilised at a level that gives a more-than-50% probability of avoiding a 2°C temperature rise above the long-term preindustrial average. Water resources are not being extracted beyond sustainable levels. The labour force is employed at percentages comparable with those of other prosperous nations. All citizens have affordable access to energy services essential for development and prosperity. All citizens have affordable access to clean water and sanitation services. Levels of saving and investment are sufficient to support national economic development objectives. Good health outcomes are consistently being achieved for citizens at a cost that is comparable with that of other nations. Good educational outcomes are consistently being achieved for citizens at a cost that is comparable with that of other nations. These goals speak to environmental and social issues as well as the important interplay between these two domains. Achieving them collectively will also ensure other desirable outcomes such as improved food security, a more resource- efficient economy and less divided communities. We have calculated that, to achieve these goals between now and 2030, capital equal to 2% of the SA gross domestic product will have to be invested and lent differently into the economy annually. We have calculated that our fair share of this equates approximately to our market share of debt provision in the economy. This fair share is additional to all the things we already do in areas such as renewable energy, BEE financing and enterprise development – in most of which Nedbank is already an established leader. To get money working for the future we want needs imaginative solutions from our clients and our staff, coupled with rigorous risk assessment. Fair Share 2030 is our strategic response to these long- term goals. It is a calculated flow of money, allocated each year to be invested in future-proofing the environment, society and our business. Starting in 2015, Fair Share 2030 represents a constant flow of funding, estimated at R6bn, working for the future we want. Our response to the long- term goals also includes a risk screen to improve the management of our lending exposure to carbon and water risk, both for ourselves and our clients. Fair Share 2030 forms part of our strategic portfolio tilt, a mechanism through which to shift away from areas that contribute to societal risks, and towards areas that build resilience and wellbeing. An initial Fair Share 2030 target of R6bn has been set for 2015; 2014 is a pilot year. This represents a lending or investment target, subject to credit granting criteria, not an expense or donation, and we expect to make a decent return on this funding to be deployed into the economy. We will allocate our fair share every year to make sure money is flowing to activities that contribute to meeting the long-term goals. We will rigorously measure the performance of Fair Share 2030 funds and, in future years, report on indicators and progress towards reaching our targets. Fair Share 2030 is not designed to replace any aspect of our existing commitment to sustainability. Properly understood, it represents a step change in the way we approach our sustainability efforts through core business and a strategic response to our recognition of the need for all South Africans to work towards creating a better future for our country. By setting out how we will adapt to a changing environment, develop new competencies, sustainably grow our franchise, and invest our resources with a view to achieving a prosperous future, Fair Share 2030 forms another vital component in Nedbank’s realisation of its vision to be Africa’s most admired bank. 23 MAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSINFORMATION TO OUR SHAREHOLDERSDELIVERING TO OUR STAKEHOLDERSA SOUND INvESTMENT The Nedbank Group investment proposition remains compelling. Our competitive franchises are differentiated in the SA market and continue to create value. Also, we offer an attractive growth strategy and have a strong balance sheet. SOUND BANKING SYSTEM IN SA Through economic cycles SA banks have delivered sustainable returns on equity (ROEs), well above the much larger international banks in the US and the EU, with growth driven by continued increases in banking penetration in the retail market, business investment in SA infrastructure programmes and expansion into the rest of Africa. SA banks are well capitalised, operate in a predominantly closed funding system, and are very well regulated as evidenced by their being rated third globally in terms of soundness by the World Economic Forum and are currently delivering dividend yields above the JSE all-share index benchmarks. GRI 3.1: 1.2, EC2 Value- creating business model 28–29 24 NedbaNk Group | Integrated report 2013MAkING THINGS HAPPEN DELIVERING TO OUR STAKEHOLDERS ENSURING A SUSTAINABLE BUSINESS INFORMATION TO OUR SHAREHOLDERS Our objective of building an organisation that optimises returns for all stakeholders and creates a sustainable future is enabled by an integrated approach to the economics of the business, environmental preservation, involvement in society and organisational culture. Incorporating this approach, the investment case for Nedbank Group is built around: OPTIMISING RETURNS FOR ALL STAKEHOLDERS 1 2 3 4 5 COMPETITIvE FRANCHISES CREATING vALUE AND ENHANCING BRAND vALUE CONTINUED DELIvERY ON GROWTH-ORIENTED STRATEGY WELL POSITIONED FOR CURRENT ECONOMIC ENvIRONMENT A STRONG BALANCE SHEET AND DEFENSIvE INvESTMENT GIvEN THE STABLE BANKING SECTOR IN SA A STABLE AND EXPERIENCED MANAGEMENT TEAM AND DIFFERENTIATED vALUES-BASED CULTURE Refer to 26–27 25 A SOUND INVESTMENT (CONTINUED) 1 COMPETITIVE FRANCHISES CREATING VALUE AND ENHANCING BRAND VALUE Our historical strength in wholesale banking is evident in the fact that the underlying businesses consistently deliver ROEs – higher than our cost of capital, which is a key driver of value creation, while the high-ROE Nedbank Wealth cluster is growing faster than industry trends and Nedbank Retail is building a sustainable retail banking business. Leading position in corporate banking and commercial-property finance ■ Excellent client relationships and ratings. ■ Strong market shares, particularly in commercial-property finance and public sector loans. ■ Excellent risk practices over time. ■ Opportunity to increase transactional banking market share. Integrated, full-spectrum investment banking ■ Leadership and expertise in mining and resources, infrastructure, energy, telecommunications and oil and gas sectors, providing good growth opportunities in SA and the rest of Africa. ■ Full-service investment banking model, combined with an ability to leverage client relationships in collaboration with other wholesale clusters. ■ Focus on flow and deal facilitation in markets business. Strongly differentiated and decentralised business banking ■ Globally best-in-class client management practices. ■ Holistic relationship-banked offering through localised client service teams. ■ Excellent, client-centred risk management capabilities. ■ Strong deposit-generating franchise. ■ Client and people measurement at multiyear highs. ■ Excellent momentum in net new client gains and new business growth. Innovative and client-centred retail banking ■ Sustainable investment in the franchise, including integrated channels, people effectiveness and brand positioning. ■ Compelling, innovative client value propositions and positive shifts in brand perception, fuelling strong client growth momentum and cross-sell. ■ A growing client franchise to take advantage of the lower primary banked market share relative to our strong positioning in advances and deposits. ■ Judicious advances growth and strengthened balance sheet impairments to protect against downside risk. ■ Skilled people committed to collaboration and diligence in execution. Fast-growing wealth, insurance and asset management businesses ■ Significant opportunity in penetrating the Nedbank client base and benefiting from various new-product launches and recently introduced direct insurance offerings. ■ Unique Best of BreedTM asset manager with excellent track record, generating strong growth in assets under management. ■ Leveraging of the Nedbank Private Wealth brand as one of SA’s leading high-net-worth franchises. Longer-term, client-centred, risk-mitigated, capital-efficient strategy in rest of Africa, with unmatched Pan-African geographic footprint ■ Providing clients with access to 37 countries across Africa. ■ Rights to acquire up to 20% in Ecobank Transnational Incorporated. ■ Expansion into the Southern African Development Community and East Africa, where gross domestic product is expected to grow much faster than in SA, even though economic returns in financial services are still below cost of capital in the medium term. Approval to acquire an initial 36,4% in Banco Unico in Mozambique has been obtained and completion of transaction targeted for end March 2014. 26 Growing our franchises 68–71 Our 2014 strategic focus areas 21 Worldclass at managing risk 130–137 Established leadership teams 72–81 Building a sustainable bank 82–97 NEDBANK GROUP | INTEGRATED REPORT 20132 CONTINUED DELIVERY ON GROWTH-ORIENTED STRATEGY Our 2014–2016 strategic focus areas of client-centred innovation, optimising to invest, strategic portfolio tilt, building a Pan-African banking network, growing our transactional banking franchise, and a step change in sustainably building the franchise will continue to drive growth. 4 A STRONG BALANCE SHEET AND DEFENSIVE INVESTMENT GIVEN THE STABLE BANKING SECTOR IN SA ■ We have a strong, cost management culture, with the existing strategy favouring an investment-for-growth focus in our transactional businesses. ■ Risk and capital management is embedded in our culture and aimed at creating a stable and sustainable organisation. Our credit impairment coverage ratios are among the highest in the industry. The prudent and proactive actions taken in unsecured lending and home loans position the group defensively in the event of a further deterioration in the macroeconomic environment. ■ We have a common-equity tier 1 capital adequacy ratio at 12,5%, with sound funding and liquidity ratios that are in line with those of domestic peers. ■ Earnings streams are well diversified, with no cluster contributing more than 29% of headline earnings to the group. ■ A dividend cover range of 1,75 to 2,25 times, aiming to deliver dividend per share growth ahead of headline earnings per share growth. 3 WELL POSITIONED FOR CURRENT ECONOMIC ENVIRONMENT ■ Operational and financial gearing benefits should enable us to deliver improved profitability ratios over time. ■ Endowment income upside will be unlocked when interest rates increase (a 1% yield curve parallel shift in interest rates impacts pretax earnings by approximately R936m). ■ Through our strong wholesale banking franchise, we are well positioned to benefit from the rollout of government’s infrastructure programme, highlighted in the 2013 SA Budget and the National Development Plan. 5 A STABLE AND ExPERIENCED MANAGEMENT TEAM AND DIFFERENTIATED VALUES-BASED CULTURE ■ Our stable and skilled management team is among the most experienced and transformed in the SA banking sector. Group Executive Committee members have an average of 14 years with Nedbank Group and on average more than 23 years of industry and functional experience. The average tenure for cluster managing executives is over 12 years. Importantly, we have experienced limited change in the management team since 2010, and this has enabled strong and well-coordinated execution of the group’s strategy. ■ Our people and culture give us a sustainable long-term competitive advantage. Internal culture and staff surveys show that we are close to worldclass levels with high levels of consensus on common value. ■ Motivated and energised staff enable greater client satisfaction, which leads to higher revenue growth and improved shareholder value creation over the long term. 27 MAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSINfoRmATIoN To oUR ShAREhoLdERSdELIVERING To oUR STAKEhoLdERSVALUE-CREATING BUSINESS MODEL The business model of Nedbank Group is centred on the following: LENDING, DEPOSIT-TAKING AND FUNDING ACTIVITIES We manage shareholder funding, source deposits from clients, and raise funding from the markets to enable us to engage in lending and investment activities. This funding results in an obligation to pay interest to funders and generate a return for shareholders. We extend credit to clients, taking into account relevant factors such as a client’s risk grading and credit standing, and industry dynamics. The extension of credit results in an obligation on clients to pay interest to the bank. Where there is deterioration in clients’ risk grading or their ability to repay the funds to the bank, we make a provision of impairment on the extended credit. This is reported as a credit impairment. DEPOSITS (Rm) SHAREHOLDERS’ EQUITY (Rm) +9,5% +12,1% LOANS AND ADVANCES (Rm) +9,9% STATEMENT OF FINANCIAL POSITION IMPAIRMENT (Rm) +5,4% 8 7 8 0 5 5 2 5 9 2 0 6 5 7 3 7 5 6 3 3 4 6 6 6 1 7 2 5 2 7 3 9 7 5 2012 2013 2012 2013 2012 2013 NET INTEREST INCOME Net income generated from lending activities is net interest income (NII) less impairments charges, while NII is the net result of income received and interest paid on our lending and funding activities. ■ Interest is charged for loans granted to clients, with the interest rate based on clients’ risk profile and related funding and capital costs. These loan categories include home loans, motor finance, personal loans, credit cards, term loans and corporate property finance. ■ Interest is paid to funders for deposits placed with and debt granted to the bank, with the rate based on the bank’s credit rating, the term, size of deposit/facility and prevailing interest rates, among other things. ■ Included in NII is the endowment which is the income received on the bank’s own capital and low-yielding deposits, utilised in lending activities. ■ Loans and advances are impaired by the actual or expected change in bad debts from levels of loan repayments, property values and impact of interest rates, to name a few. NII (Rm) +7,8% 0 8 6 9 1 0 2 2 1 2 NET INCOME FROM LENDING ACTIVITIES (Rm) +8,1% 1 8 4 4 1 5 5 6 5 1 2012 2013 2012 2013 0 7 8 0 1 6 5 4 1 1 2012 2013 NON- INTEREST REVENUE Non-interest revenue includes income received from value- adding activities such as advisory and transactional banking services, insurance, asset management, trading and investment income and private-equity valuations. Value added is the wealth created from the rendering of quality services to clients: NET INTEREST INCOME R21 220m 61% IMPAIRMENT LOSSES ON LOANS AND ADVANCES (R5 565m) (16%) INCOME FROM LENDING ACTIVITIES R15 655m 45% R34 993mP 55% O D E W T A H W Y E N O M F O W O L F D E D D A E U L A V 28 1 Includes non-interest revenue, non-trading and capital items, and share of profits of private-equity associates, associate companies and joint arrangements. 2 Includes direct and indirect taxation. NEDBANK GROUP | INTEGRATED REPORT 2013 VALUE-CREATING BUSINESS MODEL LENDING, DEPOSIT-TAKING AND FUNDING ACTIVITIES TRANSACTIONAL, ADVISORY, TRADING, INVESTMENT, INSURANCE AND OTHER SERVICES We provide: ■ Transactional banking services. ■ Insurance solutions. ■ Asset management services. ■ Advisory services. ■ Trading services. ■ Investment services and related solutions, which generate non-interest revenue. CLIENTS (m) +10% 1 , 6 , 7 6 2012 2013 ■ Fees and commissions include transactional banking fees and commissions earned on investment products and advisory services. ■ Insurance income includes insurance premiums and underwriting profit less claims as well as profit-sharing arrangements. ■ Trading income is generated from fees for client flows, foreign-exchange, commodity, credit, interest rate and equity-trading investments. ■ Private-equity income is generated from the realisation or revaluation of property and private- equity investments, as well as dividends received. ■ Other income includes the fair-value adjustment of hedges held to mitigate fixed-interest-rates and basis risk of the bank’s balance sheet. NIR (Rm) +11,8% 4 2 3 7 1 1 6 3 9 1 2012 2013 OTHER BANKING INCOME1 R19 338m The following section of the report covers in more detail how we managed, created value and Made Things Happen for our stakeholders in 2013. OPERATIONS In return: We deliver these service activities by investing and maintaining our own operations, including our staff, distribution platforms, IT systems, marketing and communications, which generate our expense base. NUMBER OF STAFF NUMBER OF STAFFED OUTLETS 8 4 7 8 2 3 1 5 9 2 1 7 0 1 0 5 0 1 2012 2013 2012 2013 Chief Financial Officer’s Review 100–107 GRI 3.1: EC1 TAX AND OTHER Taxation is the regulatory requirement to pay direct and indirect taxes in the various jurisdictions in which we operate. EXPENSES TAX Expenses include staff and other operational costs incurred to maintain and invest in the group’s operations to service our clients. TAX PAID (DIRECT AND INDIRECT) Staff-related – 56%: Remuneration, short-term and long-term incentives, investing in training and developing our people. Other operational – 44%: Technology, systems and operational infrastructure, communication and marketing expenses, etc. EXPENSES (Rm) TAX (Rm) +9% +5,6% 3 6 5 0 2 9 1 4 2 2 6 2 4 3 7 1 6 3 2012 2013 2012 2013 RETENTIONS FOR GROWTH R6 334m R34 993mP 18% 36% D E T A C O L L A E U L A V OTHER EXPENDITURE4 R8 171m 24% SHAREHOLDERS3 R4 141m EMPLOYEES R12 629m SOCIOECONOMIC DEVELOPMENT SPEND R101m 12% 10% GOVERNMENT (TAXES)2 R3 617m 3 Value is allocated to shareholders in respect of cash dividends (but does not include the underlying value of capitalisation shares awarded) and income attributable to non-controlling shareholders. 4 Includes expenses relating to computer processing, communication and travel, occupation and accommodation, marketing and public relations and fees and insurances. 29 MAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSINFORMATION TO OUR SHAREHOLDERSDELIVERING TO OUR STAKEHOLDERS DELIVERING TO OUR STAKEHOLDERS Building enduring relationships Investing in our people Innovating for our clients Delivering value to our shareholders Partnering with our regulators Leading in the communities we serve 30 32 34 38 42 44 STAKEHOLDER OVERVIEW building enduring relationships Our stakeholders are those individuals, groups of individuals or organisations that affect and/or could be affected by our organisation’s activities, products or services and performance. Our primary stakeholders, as outlined in our vision, are our staff, clients, shareholders, regulators and communities and include ‘silent’ stakeholders such as future generations and the environment. The Nedbank Group Executive Committee has overall responsibility for the group’s stakeholder engagement. The process of engagement is largely decentralised, with the various clusters and business areas empowered to engage directly and transparently with their immediate stakeholders. We recognise that this presents the organisation with a measure of risk, particularly in terms of managing and maintaining a consistent message across all areas of stakeholder engagements. To mitigate such risk we have a comprehensive stakeholder engagement policy and framework in place, which aligns with the recommendations of King III and identifies material stakeholders for each business area and any potential areas of overlap that need to be monitored and managed. It is our belief that the benefits of immediate engagement between business areas and their stakeholders far outweigh the risks of such engagement. Direct engagement at a business level not only ensures that every area of Nedbank remains in touch with the needs, wants and expectations of all its stakeholders, but also empowers us to be more responsive and accurate in addressing and managing risks and leveraging potential opportunities because we have access to immediate feedback on these matters. We therefore encourage such decentralised Nedbank representation, but always within the parameters of our stakeholder engagement policy. The information that follows offers a high-level overview of our main stakeholder engagements and what was accomplished in 2013. Details of our engagement with other stakeholders are available in the online Sustainable Development Review. GRI FSSS: FS5 GRI 3.1: 1.2 4.14, 4.15, 4.16, 4.17 30 InvestIng In our people ‘Nedbank has come a long way in terms of transformation and I believe there are still great things to come. It’s a wonderful environment to work in and there are lots of opportunities and programmes through which to improve yourself and your career.’ – Nedbank staffmember ‘I believe in Nedbank; they take care of their staff. They encourage staff to get involved in community projects and care about the environment, and they make you feel that you are part of something truly exceptional.’ – Nedbank staffmember Refer to 32–33 Great place to work D E V I E C E R K C A B D E E F NedbaNk Group | Integrated report 2013 nedbank group views its stakeholders as partners in its business. our approach to stakeholder communication therefore extends beyond conversation to comprehensive engagement, through which ideas can be shared, input can be provided, and mutual benefit can be unlocked. InnovatIng for our clIents delIverIng value to our shareholders partnerIng wIth our regulators leadIng In the communItIes we serve ‘Knowledgeable staff and high levels of expertise make business a pleasure.’ – Nedbank Corporate client in an electronic Business Banking survey ‘Nedbank Private Wealth is the best bank that I have dealt with. You are very professional, fair and clear. I rate Nedbank Private Wealth as a model bank.’ – Nedbank Wealth client ‘Nedbank’s MyFinancialLifeTM is the best financial tool with which to keep track of your spending behaviour.’ – Nedbank Retail client ‘I would criticise the Nedbank Private Wealth logo. The marketing colours are dull.’ – Nedbank Wealth client ‘In an environment where pressure on the consumer is building, we prefer banks to focus on clients and deliver conservatively stated results … We think Nedbank ticked all the boxes in 1H13.’ – Rated financial analyst ‘Nedbank has a strong management team, I think one of the best in emerging market banks.’ – International investor ‘We particularly value our strategic partnership on Imbizo and believe that through this and other contributions we continue to add real value to Nedbank’. – CEO of Wipcapital Ltd Founder and Executive Director of WIPHOLD Ltd ‘Key issues are to understand how the credit loss ratio progresses from here and the health of the consumer.’ – Local investor Our relationships with regulators remain ongoing, proactive and transparent. Over the last year the demands from regulators to comply fully with all legislative and regulatory requirements have increased. Nedbank has approval from SARB to apply the Advanced Management Approach to calculate exposure to credit, operational and market risk. We view the professional relationship between Nedbank and our regulators as mutually beneficial. ‘SA is rated as a well-regulated financial market.’ – WEF Competitiveness Report 2013/14 ‘In the 30 years that I’ve been involved in invasive alien clearing, I never thought that I would get on top of this problem, but since receiving this Water Balance assistance, I now do.’ – Participating farmer, WWF Water Balance Programme ‘I have been part of Enactus since 2010, that has helped me to grow professionally and personally. It’s the generous sponsorships from corporates such as Nedbank that have helped Enactus SA to get to where it is today.’ – Zuko Xelelo, Nedbank Business Banking Academy Agriculture trainee Refer to 34–37 Refer to 38–41 Refer to 42–43 Refer to 44–47 Great place to bank Great place to invest worldclass at manaGinG risk HiGHly involved in tHe community and environment 31 ENSURING A SUSTAINABLE BUSINESSINfoRmATIoN To oUR ShAREhoLdERSmAKING ThINGS hAPPENDELIVERING TO OUR STAKEHOLDERSnedbank Group | INTEGRATED REPORT 2013 STAFF investing in our people In 2013 we improved our cultural sustainability performance as measured by non-financial key performance indicators. 29 513 NUMBER OF EMPLOYEES 63% FEMALE EMPLOYEES 37% MALE EMPLOYEES related materIal matters ■ Tough economic conditions ■ Scarce skills PERFORMANCE DURING 2013 Progress with its academies and the external acknowledgement of this innovative work, as we strive for continuous learning. Through the Nedbank academies approach, 1 311 leaders and professionals have been trained (868 in 2013). The alignment of management processes through the implementation of the integrated talent framework, which included training of the HR community and line managers on the framework. Good progress made on our journey to achieve a culture of collaboration, innovation and client-centredness through research and planned initiatives. Nedbank’s efforts in creating an inclusive environment where all employees are valued for their diversity. The People with Disabilities target was exceeded. At 31 December 3,73% of employees had declared disabilities. High level of staff satisfaction in Nedbank Staff Survey with a 76,7% rating. A total of 1 521 employees benefitted from the Leading for Deep Green Programme and over 100 employees were included in the Nedbank Leader/Manager Academy. Approximately 400 employees attended Planning for Retirement workshops. Good progress has been made with the implementation of the transformation strategy. Altogether 588 additional jobs were created in SA. On average 85% black representation on Nedbank learning programmes, with 30% of them black female. Retention of 95,9% of individuals identified in the talent pool for cluster executive roles during the 2012/13 talent review period. We continue to work on building our black talent pipeline and 78,9% of the long- term pipeline for cluster executive roles are black candidates. Positive review of overall competitiveness of our total remuneration and benefit offering relative to the markets in which we compete, while we remained appropriately commercial and agile in response to changes in market conditions. Ongoing monitoring of and adaptation to the evolving HR governance requirements applicable to organisations in financial services. Understanding material matters 14–20 32 Managing and optimising our own impact 92–97 Transformation Report Supplementary information: Sustainable Development Review GRI 3.1: 4.4, 4.17 deliverinG to our stakeHolders MAKING THINGS HAPPEN ENSURING A SUSTAINABLE BUSINESS INFORMATION TO OUR SHAREHOLDERS hot topIcs In 2013 Hot topics our response/resulting developments development and growth opportunities management capability ■ We offer our employees and managers numerous development opportunities (see page 94). In 2013, the Integrated Talent Framework was implemented. It includes talent conversations between managers and employees about performance, personal aspirations and holistic development. ■ Our Leading for Deep Green Programme and Leader/Manager Academy aim to better equip our managers and leaders. A total of 1 521 managers participated in the Leading for Deep Green Programme in 2013 and more than 100 managers went through the Nedbank Leader/ Manager Academy. work/Home life balance ■ Wellness Days were implemented to performance management process raise awareness of the importance of a healthy lifestyle. In 2014 a stress management programme will be piloted. ■ Ongoing engagement with employees led to an understanding of how they experience the performance management process. Feedback has been consolidated with a focus on continuous improvement. employment equity progress ■ We achieved five out of our nine employment equity targets. We are determined to understand the barriers and challenges involved so that we can address these proactively. ■ Countrywide transformation dialogues provided insights that were used to refine our employment equity plan and promoted a common understanding of diversity issues. Refer to 94 accolades In 2013 ■ Skills @ Work award in the Large Company category: BANKSETA ■ Highest Contributor award in the Financial Services Sector by the Thuthuka Bursary Fund ■ Nedbank Group monthly staff TV broadcast awarded a gold award for video excellence at the 2013 International Academy of the Visual Arts ■ Knowledge Resources Chief Learning Officer of the Year award challenges durIng 2013 ■ Achieving senior management employment equity targets has been particularly challenging since 2009. The statistics show that although we have achieved senior management black and black female targets, achievement regarding senior management Africans and Coloureds were below our plans and require further organisational effort. ■ Technology challenges have delayed the creation of a virtual online learning platform. More focus will be given in 2014. FOCUS AREAS FOR 2014 TARGETS FOR 2014 ■ Driving transformation in order to create a diverse workforce in an inclusive environment. ■ Enabling a unique, collaborative, innovative and client-centred culture. ■ Acquiring and optimising talent. ■ Repositioning rewards to create differentiation. ■ Creating a learning organisation that supports employee development and achievement of business objectives. ■ Senior management 37,6% black, with 15% being black females. ■ Middle management 57,2% black, with 30% of those being black females. ■ Junior management 83,1% black, with 55,1% being black females. ■ Maintaining a score of 9,2 for FSC skills. ■ Over 170 Leading for Deep Green workshops with the aim of reaching about 2 500 employees. Transformation Report Supplementary information: Sustainable Development Review 33 nedbank Group | INTEGRATED REPORT 2013 CLIENTS innovating For our Clients ‘Being great at listening, understanding our clients’ needs and delivering’ remains at the heart of nedbank’s strategy and we therefore remain committed to providing a choice of distinctive client-centred banking experiences as a bank for all through excellent service, innovative offerings and competitive pricing. 6,7m TOTAL CLIENTS 210 000 SMALL-AND-MEDIUM- ENTERPRISE (SME) CLIENTS 25 000 BUSINESS BANKING CLIENTS related materIal matters ■ Tough economic conditions ■ Banking relevance amid consumerism and increased competition ■ Increased demands on governance and risk management ■ Growth opportunities in the rest of Africa ■ Transformation of society within planetary boundaries Understanding material matters 14–20 34 GRI FSSS: FS13 FS14 PERFORMANCE DURING 2013 Grow clients and transactional income streams differentiated and relevant value offering delivering strong performance for clients wholesale banking proposition demonstrating relevance Nedbank Retail grew its client total by 529 000, with primary-client gain remaining stable and improved the quality of revenue per client. Nedbank Business Banking delivered strong net primary-banked- client gains of 965 clients. In addition Nedbank Corporate and Nedbank Wealth grew primary clients, continuing the momentum gained. A focus on product and process innovation yielded a number of market firsts and enhanced the client experience through simplified onboarding, more relevant offerings and automated fulfilment. Nedbank’s progress on conceptualising and operationalising the integrated-channels strategy and leveraging digital, was acknowledged when Nedbank received the Bank of the Year 2013 award from the Financial Times and The Banker magazine. Accelerated innovation resulted in the launch of a number of new solutions over the period, including enhancing the Approve-itTM internet security feature, the PocketPOSTM mobile chip and PIN card acceptance device and the MyFinancialLifeTM personal financial management tool, many of which are unique in the market and contribute to the distinctiveness of Nedbank’s overall value proposition. Nedbank Private Wealth clients experienced top quartile investment performance as measured over periods of 1, 3, 5, 7 and 9 year(s), and since fund inception. For the fifth consecutive year Nedgroup Investments was voted one of the Top 3 domestic asset management companies at the 2013 Raging Bull Awards. We enhanced our position in the global trade market through client enablement and new-product development. Transactional Banking continued to innovate while still focusing on compliance projects related to product enhancements. We continued to focus on maintaining a high-performance culture across the businesses with ongoing investment in people development and skills enhancement. Holding or reducing transactional prices in 2014 to ensure all elements of the value proposition remain compelling for our clients, and encourage product cross-sell while also supporting the accelerating drive in new-client acquisition. Two of Nedbank’s Savvy adverts ranked among the top five best-liked adverts in Q3 2013, only the third time this has happened in 29 years. Nedbank was also acknowledged as the bank of choice for small business and rated second Business Bank overall in the first business banking survey by Intellidex for Business Day Investors Monthly. deliverinG to our stakeHolders MAKING THINGS HAPPEN ENSURING A SUSTAINABLE BUSINESS INFORMATION TO OUR SHAREHOLDERS PERFORMANCE DURING 2013 (CONTINUED) accessibility to our financial services worldclass client service Making Nedbank more accessible through the R1,7bn investment in distribution since 2009. Branches have increased by 41% to 763, with 76% growth in the non-urban areas, and ATMs have increased by 83% to 3 382. An accelerated rollout plan has been chosen for the purpose of investing R2,1bn over the next five years, to enable 75% of our clients to experience the new Branch of the Future design within three years. In addition we are driving innovation across multiple distribution channels, including mobile and digital, allowing our clients to choose how they want to interact with us. The main service metric common to the majority of the bank is the Net Promoter Score (NPS) , which is used both as a lead measure of the overall health of client relationships and as a behavioural driver seeking to enhance client loyalty and organic growth. Business Banking, Property Finance and Retail experienced improvements in their NPS for 2013 (Business Banking reached a new historic high). Corporate Banking saw a slight year-on-year decline in NPS, but off a high base in 2012. Nedbank Private Wealth conducted their first NPS survey since 2009, with good scores following the rebranding of the old BoE Private Client business. Nedbank Retail’s recent CMATTM results have shown a substantial improvement in the overall score, with Retail’s client management intentions benchmarked as worldclass in 2012. On the recent very rigorous SCHEMATM measure, Retail was ranked in the top five of 92 companies surveyed globally. Business Banking’s client management capabilities are worldclass as confirmed by an independent assessment conducted globally, which ranked the business first in 92 global SCHEMATM assessments and second in some 900 global CMATTM assessments. The Treating Customers Fairly programme remained a prominent focus for Nedbank during 2013. The programme aims to improve client confidence through the supply of appropriate products and services and to enhance transparency and discipline in the industry. The programme also aligns with our current client-centred ethos and code of conduct. We anticipate that the additional focus this programme brings to client imperatives will further enhance client trust and service levels. In the spirit of ensuring accurate and relevant client advice, Nedbank rescreened more than 6 380 FAIS key individuals and representatives to ensure that they all comply with the prescribed ‘fit and proper’ requirements. Overall, 2013 was a pleasing year from a systems availability perspective. We measure the overall uptime of our major infrastructural platforms as well as our most critical application systems, and the blended uptime infrastructure and applications was 99,89% score (2012: 99,88%) against a target of 99,70%. It is important to note that this was achieved against a record number of complex changes deployed in the information technology (IT) environment. for both While we are fully committed to meeting our clients’ needs, they are able to approach the Ombudsman for Banking Services in cases where we are unable to resolve an issue to their satisfaction. The number of cases opened against us has remained relatively stable since 2012, with 688 (2012: 648) Nedbank Group-related cases being opened and 753 closed (2012: 659). Of the cases closed, 65% were resolved in favour of the bank. This result demonstrates that our internal processes are robust and address clients’ needs. accolades In 2013 ■ Nedbank voted SA 2013 Bank of the Year by the Financial Times and The Banker magazine. ■ Nedbank App Suite™ awarded the Best Android App in the consumer category at the MTN App of the Year awards 2013. ■ The bank recognised as Best Subcustodian in SA at the Global Finance World’s Best Subcustodian Banks awards 2013. ■ Nedbank voted Best Property Finance Bank in SA by the 2013 SA PwC banking survey. ■ Nedbank Private Wealth voted Best International Private Wealth Manager and received the prestigious Euromoney Best Private Bank for High-net-worth Clients award in the UK offshore category. ■ Nedbank awarded Power Deal of the Year by Euromoney Project Finance Africa. ■ Nedbank achieved first position by volume and third by value in 2013 Dealmakers M&A league tables. Growing our franchises 68–71 Supplementary information: Operational Overview 35 NEDBANK GROUP | INTEGRATED REPORT 2013 INNOVATING FOR OUR CLIENTS (CONTINUED) PERFORMANCE DURING 2013 (CONTINUED) Selectively expanding into Africa and leveraging the Ecobank–Nedbank Alliance The group continued to build on the foundations of the Ecobank–Nedbank Alliance. Various banking initiatives were implemented to align with the vision of providing clients with a one-bank experience across the African continent. Revenue is being generated as a result of an effective client engagement approach supported by streamlined operational processing. Client activity in sub-Saharan Africa increased signiﬁcantly during 2013 and this is reﬂected in the increased pipeline, transactional revenue and account openings that have been recorded across the business clusters. Nedbank Capital and Corporate made strides into Africa by leveraging the Ecobank alliance to provide Africa-destined clients with banking on the ground and participated in various lending opportunities. Improving the group’s positioning in the public sector Nedbank Group participated in the majority of public sector business tenders during 2013. The business retained its share of public sector liabilities. Feedback from various levels of government has indicated that we are well recognised as a reliable partner to the public sector. DATA PROTECTION AND PRIVACY Nedbank Group subscribes to the Code of Banking Practice of The Banking Association the Consumer SA and complies with Protection Act and the Protection of Information Act, all of which require that all personal client information be treated as private and conﬁdential. The group is further committed to complying with the Electronic Communications and Transactions Act regarding client privacy as well as the Financial Intelligence Centre Act (FICA) and Financial Advisory and Intermediary Services (FAIS) Act. in Formal policies and processes are place to manage client privacy and conﬁdentiality. For more details on cybercrime issues, such as online fraud, fraud prevention and anti-money-laundering measures, please see the Operational risk section online. RESPONSIBLE PRODUCT/ INFORMATION LABELLING Detailed product brochures that comply with all relevant legislation, such as the National Credit Act, are available to the group’s clients. Relationship managers are also responsible for explaining the characteristics, beneﬁts and implications of products to clients in accordance with the FAIS Act. Product policies review and procedures and committees are in place. product 36 RESPONSIBLE LENDING TO PROTECT CLIENTS, INVESTORS AND THE BANK FROM THE PRESSURES OF THE NEXT CREDIT CYCLE A number of concerning industry dynamics over the past three years have made it easier for consumers to access personal loans: ■ Many new entrants driving supply. ■ Inconsistency in the criteria and calculations applied, especially using 40-year-low interest rates and above-inﬂation wage increases (especially in the public sector) to determine affordability. ■ Ability to increase debt by extending tenor for similar or lower monthly instalments. This fuelled strong personal-loans industry growth before 2013 in an economy with weak fundamentals, while consumer indebtedness has materially increased over the past two years. At the same time distressed consumers have been able to keep current for longer, as they can access more credit to delay going into default. There is also a knockon effect to other asset classes as consumers are able to take out additional personal loans to sustain their lifestyles, including the ability to meet their home loans or vehicle ﬁnance obligations. As a result, actual loan origination vintages look more benign than the underlying factors suggest, and as macro factors change (higher inﬂation especially due to administered prices, below-inﬂation salary increases, higher risk of job losses and prime interest rate increases), the true quality of the assets and level of consumer stress emerge. Nedbank highlighted these concerns in 2011 and took early action to redesign the personal loans business fundamentally and reduce risk appetite, while increasing conservatism in impairment methodologies (away from the recency-based industry approach). This resulted in a slowing of advances growth well ahead of the market. In the 2013 ﬁnancial year we reduced our book by 9,4% (R2,1bn) while the rest of the industry continued to grow strongly at 8,3% (R12,3bn). By applying more stringent affordability criteria and selective advances origination policies across all asset classes, Nedbank sought to improve the underlying asset quality and, importantly, protect our clients against overindebtedness ahead of the next rising interest rate cycle. This is in line with Nedbank’s principles of acting as a responsible lender, ensuring sustainable growth and enabling our clients’ ﬁnancial ﬁtness. deliverinG to our stakeHolders MAKING THINGS HAPPEN ENSURING A SUSTAINABLE BUSINESS INFORMATION TO OUR SHAREHOLDERS hot topIcs In 2013 Hot topics our response/resulting developments pricing ■ We have moved towards more transparent and simplified pricing structures. ■ Credit life protection and pricing have become much debated topics in SA and are under increasing regulatory scrutiny. In 2013 we took a leadership position in proactively launching a differentiated credit life proposition that offers a sustainable insurance solution to the entry level market and provides top quartile and differentiated benefits at highly competitive rates. ■ We made a decision not to increase transactional prices in 2014 for the majority of our clients. ■ We invested R1,7bn in our distribution footprint, which resulted in 41% more branches and alternate outlets (a total of 763 excluding personal-loan kiosks) and 83% more ATMs. ■ The rollout of our Branch of the Future formats has been well received. ■ Video banking facilities in branches allow easy access to specialist advice. ■ Additional functionality was deployed for the Nedbank App Suite™. This included banking functionality for business and corporate clients. ■ Online channels were launched for business clients wishing to apply for products or provide feedback. ■ Our digital home loans Apply Online channel is the first on the market to offer approval within hours. The channel has already processed over 10 000 applications, granted loans worth R1,5bn and registered 1 548 properties. ■ Our listening centre is now fully established and facilitates engagements with clients and staff through social media and digital channels. ■ We funded a Green Star SA performance rating tool produced by the Green Building Council of South Africa. The tool helps existing building owners and/or portfolio managers to gain a better understanding of the environmental impact and related costs of their buildings, improving efficiencies and reducing costs. ■ We implemented and improved our cash management system, which maximises interest income and minimises the cost of borrowed funds for clients. ■ We have increased the functionality of our free, holistic personal financial management tool, MyFinancialLife™, through the addition of a simplified, fun budgeting tool called MyMoneyMap™. ■ We proactively educate our clients about their pricing options and help them to switch to the lowest-cost options for their needs. ■ A unique no-funds-alert function notifies clients when there are insufficient funds in their account ahead of a pending debit order and delays the processing of the debit order. ■ Our business clients now have a single point of entry through our wholesale banking client solution. This has resulted in a better understanding of our clients and improved communication and client service levels. ■ We proactively match the skills of our bankers to identified client needs. ■ We ensure that our clients have access to specialists when these are needed. Greater accessibility to banking services and increased channel choice responsiveness – social media the impact of spiralling energy costs on corporate building stock integrated cashflow management Financial literacy and overindebtedness Holistic understanding of clients’ businesses focus areas for 2014 With many of the client measurements steadily improving and accelerating, Nedbank remains well positioned to grow its client franchise and market share in all segments. Emphasis will be placed on: ■ Accelerated rollout of the Branch of the Future design and network of formats, reaching 75% of our clients by 2016. ■ Implementation of the integrated-channels roadmap towards a truly seamless client experience across the full range of channels emphasising mobile functionality and self-service. ■ Leveraging the strong foundations and compelling offering built for small businesses, professionals and seniors to regain market share in these important segments. ■ Continuing the journey of simplified, transparent pricing, with no price increases and with structural changes in 2014. ■ Emphasis on quality client growth, balanced with judicious granting of new loans to protect clients and the bank from the consequences of increasing consumer overindebtedness. GRI FSSS: FS15 GRI 3.1: 1.2, 4.17, PR3, PR5, PR6 37 nedbank Group | INTEGRATED REPORT 2013 SHAREHOLDERS delivering value to our shareholders a great place to invest. types of engagement ■ Jse sens announcements ■ Financial results and integrated report ■ roadshows and conferences ■ management meetings and calls ■ investor days ■ annual general meeting ■ media releases ■ Group website engagements held During the year, 344 individual meetings were held, including the following events: ■ Annual and interim results announcements, presentations and roadshows. ■ First- and third-quarter trading results. ■ Broker-hosted conferences, lunches and non-deal roadshows. ■ Nedbank Wealth and Nedbank Retail investor days. ■ Ad hoc meetings with shareholders, potential investors, analysts, credit rating agencies and financial media during non-closed periods. ■ Engagement with our holding company, Old Mutual Group, to ensure alignment of financial reporting and communication, to provide a holistic group view of which, the Old Mutual plc Africa Showcase held in the fourth quarter of 2013, is a good example. Feedback from the investment community ‘In an environment where pressure on the consumer is building, we prefer banks to focus on clients and deliver conservatively stated results … We think Nedbank ticked all the boxes in 1H13.’ – Rated financial analyst ‘Consistent strategy; gradual gains. There is an indication yet again of a clear, all-encompassing and consistent strategy for the retail business, focused on building a solid, loyal client base. We heard more of what we have heard before, which is comforting to us.’ – Rated analyst ‘Your rest of Africa strategy is sensible – I like the approach.’ – International investor ‘Strong management team, I think one of the best in emerging-market banks.’ – International investor ‘Easily one of the best discussions of banking culture I’ve had. Professional and realistic management. One we watch closely.’ – International investor ‘Key issues are to understand how the credit loss ratio progresses from here and the health of the consumer.’ – Local investor why do we engage wIth our shareholders and the Investment communIty? To provide relevant and timeous information on our strategy, prospects and financial performance so that shareholders and the investment community can fairly value Nedbank Group, and rating agencies can assign appropriate bank credit ratings to Nedbank, and so that we can manage the group’s reputational risk. related materIal matters ■ Tough economic conditions ■ Banking relevance amid consumerism and increased competition ■ Increased demands on governance and risk management ■ Growth opportunities in the rest of Africa ■ Transformation of society within planetary boundaries ■ Scarce skills Understanding material matters 14–20 38 deliverinG to our stakeHolders MAKING THINGS HAPPEN ENSURING A SUSTAINABLE BUSINESS INFORMATION TO OUR SHAREHOLDERS delIverIng value to our shareholders Who are our shareholders? Our stakeholders include the local and international investment community and comprise: ■ 19 832 shareholders ■ Investment funds and potential retail investors ■ 19 sellside analysts ■ Three credit rating agencies ■ Financial media nedBank shareholdIng top 40 InternatIonal 35% 100% 65% south afrIca nedBank treasury shares 10% other 5% 100% top 40 33% 52% old mutual delivering to shareholders in 2013 ■ Economic profit R2,1bn, up 39% driven by solid NIR growth, despite challenging economic environment and prudent provisioning. ■ Total shareholder return of 16%. ■ Total dividend of 895 cents, up 19,0%. ■ Price to net asset value 1,6 times. ■ Rights to 20% in Ecobank Transnational Incorporated. ■ Maintained leadership in transparent reporting. consistent strategy; gradual gains. there is an indication yet again of a clear, all-encompassing and consistent strategy for the retail business, focused on building a solid, loyal client base. we heard more of what we have heard before, which is comforting to us. – Rated financial analyst 39 nedbank Group | INTEGRATED REPORT 2013 dELIvERIng vaLUE to oUR ShaREhoLdERS (continued) 16,0% TOTAL SHAREHOLDER RETURN 19,0% FULL YEAR DIVIDEND INCREASE 17,2% ROE (ExCLUDING GOODWILL) PERFORMANCE DURING 2013 metric Return on equity (ROE) (excluding goodwill) Growth in diluted headline earnings per share (HEPS) Credit loss ratio (CLR) Non-interest-revenue (NIR)-to-expense ratio Efficiency ratio Common-equity tier 1 capital adequacy ratio (Basel III) Economic capital 2013 performance 17,2% 15,0% 1,06% 86,4% 55,2% 12,5% medium-to-long-term targets 5% above cost of ordinary shareholders’ equity 2014 outlook Below target ≥ consumer price index + growth domestic product (GDP) growth + 5% ≥ consumer price index + GDP growth Between 0,8% and 1,2% of average banking advances Meet target, improving slightly on 2013 > 85% At target 50,0% to 53,0% Above target 10,5% to 12,5% At or above the top end of target Internal Capital Adequacy Assessment Process (ICAAP): A debt rating (including 10% capital buffer) Dividend cover 2,11 times 1,75 to 2,25 times 1,75 to 2,25 times Shareholders are advised that this guidance is based on organic earnings and our latest macroeconomic outlook, and has not been reviewed or reported on by the group’s independent auditors. challenges durIng 2013 ■ Weak global and local economic environment leading to muted advances growth and higher defaults in certain product categories, most notably unsecured lending and small businesses. ■ Once-off impairment in business banking and unsecured lending environment impacting impairments in the first half of 2013. ■ Dealing with the complexity and challenges of increased regulation. ■ Strong competition from existing and non-traditional players. Chief Financial Officer’s Review 100–107 Committed to good governance 52–57 GRI 3.1: 4.4, 4.17 40 accolades In 2013 ■ Voted the Financial Times and The Banker magazine’s 2013 SA Bank of the Year ■ Our 2012 integrated report was awarded as follows: ¨ Overall winner: 2013 Chartered Secretaries Southern Africa and JSE Integrated Reporting awards ¨ Eighth place: 2013 EY Africa Excellence in Integrated Reporting ¨ Second in the Finance Sector and joint third overall: 2013 Nkonki Integrated Reporting Awards deliverinG to our stakeHolders MAKING THINGS HAPPEN ENSURING A SUSTAINABLE BUSINESS INFORMATION TO OUR SHAREHOLDERS hot topIcs In 2013 Hot topics our response/resulting developments impact of a tougher-than- anticipated economic environment ■ We strengthened our balance sheet (capital ratios, liquidity and provisioning). ■ Our focused collection processes generated solid post-writeoff recoveries. ■ We concentrated on selected advances growth to protect downside risk in line with our portfolio tilt strategy. ■ We are gaining new clients and improving cross-sell to grow NIR. ■ We are ensuring disciplined expense growth at 9% (2012: 8%), while continuing to invest for the future. ■ We proactively slowed our advances book growth in certain higher risk areas from H2 2012 and throughout 2013 through initiatives such as the tightening of affordability criteria. ■ We have kept our maximum loan size and tenor the same since 2009. ■ We released a new credit life product, priced competitively in the market, with increased benefits. ■ We have the rights to acquire a shareholding of up to 20% in Ecobank Transnational Incorporated. This alliance provides network coverage for Nedbank in Central and West Africa. ■ In addition to our existing presence in five Southern African Development Community (SADC) countries, the agreement to acquire an initial stake of 36,4% of Banco Unico in Mozambique – with the right to a majority shareholding over time – will strengthen our position in SADC and East Africa. ■ We gained 529 000 new clients, achieved higher cross-sell ratios, increased the number of our ATMs by 323 and our outlets by five, launched various innovative client value propositions and products, and continued proactive risk management while strengthening balance sheet provisioning (see the Supplementary Operational Overview information online for more details on Nedbank Retail). Health of the consumer and developments in the personal- loans industry reaching into the rest of africa in a value-creating, risk- mitigating manner progress in nedbank retail’s positioning focus areas for 2014 ■ Deliver on our strategic focus areas (see page 21) and make progress towards medium-to-long-term financial targets. Our 2014 strategic focus areas 21 ■ Ongoing improvement in quality of investor engagements and financial reporting disclosure. ■ Introduction of a corporate governance roadshow to deepen stakeholder engagement. 41 nedbank Group | INTEGRATED REPORT 2013 REguLATORS partnering With our regulators regular and open communication with regulators ensures that nedbank group is seen to be transparent in its dealings with them, thereby instilling trust in the nedbank brand and in risk management in the group. Basel III IMPLEMENTED 1 JANUARY 2013 12,5% COMMON-EQUITY TIER 1 ACHIEVED 31 DECEMBER 2013 related materIal matters ■ Tough economic conditions ■ Banking relevance amid consumerism and increased competition ■ Increased demands on governance and risk management ■ Growth opportunities in the rest of Africa ■ Transformation of society within planetary boundaries ■ Scarce skills PERFORMANCE DURING 2013 The Enterprisewide Risk Management Framework (ERMF), which is fully aligned with regulatory developments, was maintained. Following industry concerns of regulators about SA banks’ exposure to unsecured lending, our credit loss ratio of 1,06% was in line with that of 2012 and represented an improvement on the 1,31% reported in June 2013. Defaulted advances decreased by 9,4%. Regulatory compliance ensured strong capital adequacy levels supported by internal stress-testing results. Sound implementation and ongoing enhancement of the Advance Measurement Approach (AMA) for operational risk management were maintained and similarly the Internal Model Approach (IMA) for market risk continued to meet the regulators’ requirements. In line with international and local trends, Nedbank observed an increase in regulatory scrutiny and inspections, which highlighted areas where administrative regulatory controls can be strengthened. All regulatory reviews were attended to with significant attention to detail, professionalism and prompt reaction to matters raised. Compliance and regulatory risk has become increasingly significant given the more stringent regulatory environment in which Nedbank operates. The group sought to achieve compliance with applicable local and international laws, regulations and supervisory requirements, guided by an established comprehensive set of board- approved policies, procedures and governance structures. We engaged proactively with the South African Police Service and other crime prevention initiatives. The redesigning of our physical security systems at our branches and offices allowed us to save an amount of R36,5m in operational costs. Although we have experienced a decrease in the number of fraud cases (6 026 in 2013, down from 8 139 in 2012), the overall value of these cases has increased. The number of internal fraud cases has also decreased, evidence that preventing fraud rather than dealing with the consequences is a more effective strategy. As part of Nedbank’s recruitment process, integrity checks are conducted on all potential staffmembers. With regard to industry requirements by the regulators, we have commenced benchmarking our risk management performance against that of other banks and against feedback from the South African Reserve Bank (SARB). No issues were raised on our Internal Capital Adequacy Assessment Process (ICAAP) by SARB. Given the high levels of corruption currently experienced in SA we added our anti- corruption interventions as a key performance indicator that is externally assured. This was done to give an extra level of assurance to our stakeholders that our actions in this regard are robust and that we do not contribute to this negative cycle. In 2013 all (100% ) of our operations underwent corruption screening without any material concerns/issues being raised. Understanding material matters 14–20 42 GRI 3.1: 4.17 Worldclass at managing risk 130–137 deliverinG to our stakeHolders MAKING THINGS HAPPEN ENSURING A SUSTAINABLE BUSINESS INFORMATION TO OUR SHAREHOLDERS CHALLENGES DURING 2013 Industry concerns that resulted in our reducing our exposure to unsecured lending. Continued changes to regulations, which involve updating of our systems and processes to meet these requirements. The growing need for effective controls and procedures to enhance all aspects of regulatory compliance, especially as far as combating money laundering and the financing of terrorist activities is concerned. Increased oversight of all aspects of regulatory compliance. hot topIcs In 2013 Hot topics our response/resulting developments implementation and impact of basel iii regulations relating to banks increased focus on consumer protection, such as twin peaks regulation, the consumer protection act and the protection of personal information act solvency assessment and management (sam) regime for the sa insurance sector ■ We achieved compliance with Basel III on 1 January 2013. ■ We are well placed to comply with increased capital and liquidity requirements when these are required in future years. Net stable funding ratio compliance remains a challenge in SA. ■ We are well on track with our preparation for the new regulatory regime of Twin Peaks, the Consumer Protection Act and the Protection of Personal Information Act. ■ Nedgroup Insurance remains well capitalised and is on track to implement SAM. unsecured lending ■ We continued to implement our policy of responsible lending and rest of africa strategy money-laundering, terrorist- financing and sanctions risk management resolution and recovery planning focus areas for 2014 reduced our market share proactively. ■ We have adopted a risk-mitigated, client-centred, capital-efficient, longer-term strategic approach that has started to demonstrate benefits (see the information on our Africa operations on page 69). ■ We have invested significantly in IT and people resourcing to comply with the more stringent anti-money-laundering regulation and to combat terrorist-financing activities, with more to be done. ■ We maintain resilient business continuity management processes. International and local regulatory reform (in particular Basel III and Twin Peaks) has materially increased capital levels and liquidity costs, and is changing business models internationally. Regulatory risk remains high, but there is now less uncertainty because Basel III is substantially finalised by Bank for International Settlements and SARB, while Twin Peaks is expected to be finalised in 2014 with an ongoing emphasis on consumer protection. To meet the stringent requirements of all regulators in full, Nedbank Group will: ■ maintain good, regular and transparent relationships with all regulators; and ■ ensure compliance with all legal and regulatory requirements. A comprehensive risk strategy is in place and forms an integrated component of the group’s business plan. The salient features include continuing to evolve the strong risk culture, the ERMF, risk and balance sheet management and the building of worldclass risk management. Rest of Africa 69 43 nedbank Group | INTEGRATED REPORT 2013 COMMuNITIES leading in the Communities We serve level 2P BBBEE RATING 38% RENEWABLE-ENERGY FUNDING FOR REIPPPP 100% DISCLOSURE: SA CARBON PROJECT related materIal matters ■ Tough economic conditions ■ Transformation of society within planetary boundaries ■ Scarce skills Understanding material matters 14–20 Building a sustainable bank 82–97 GRI 3.1: 4.17 44 PERFORMANCE DURING 2013 2013 objective making things happen in 2013 leading as a ‘Caring bank’ be a truly sa bank: ■ socioeconomic development ■ Our 2013 socioeconomic development spend was R89m, in excess of the 0,7% of the SA NPAT FSC requirement (2012: R95m). This supported 585 development projects and initiatives, with more than 135 000 beneficiaries. ■ Altogether 82% of the total cost of external bursaries we awarded went to 132 black students (2012: 203), of which 68 (51%) were women. ■ access to finance ■ More than 54 000 clients and other stakeholders ■ lending to enable healthcare, housing and education, enterprise development (ed) and community upliftment ■ economic empowerment ■ preferential procurement delivering on transformation commitment were directly impacted by our consumer education programmes. ■ In 2013 Nedbank Business Banking granted R1,3bn in black small-and-medium-enterprise (SME) loans to 2 972 beneficiaries. ■ Nedbank extended more than R7,3bn in funding for transformational infrastructure, black SME financing, black agriculture financing and affordable housing in 2013. ■ 78% of our 2013 procurement spend was on locally sourced products and services (2012: 73%). ■ Black-owned supplier spend increased by 4% year on year. ■ Nedbank was recognised as the most transformed of the JSE Top 100 listed companies in the 2013 Mail & Guardian Most Empowered Companies survey done in partnership with Empowerdex. ■ Our progressive transformation initiatives have ensured that we maintained our level 2 broad- based black economic empowerment (BBBEE) rating for the fifth consecutive year. Our BBBEE rating for the past four years was calculated under the Codes of Good Practice (dti Codes) and for the first time this year was calculated in accordance with the Financial Sector Code (FSC). deliverinG to our stakeHolders MAKING THINGS HAPPEN ENSURING A SUSTAINABLE BUSINESS INFORMATION TO OUR SHAREHOLDERS PERFORMANCE DURING 2013 2013 objective making things happen in 2013 leading as a ‘green bank’ manage social and environmental impacts of our lending ■ We continued to refine and implement our Social and Environmental Management System (SEMS). Credit policies within our Business Banking, Wealth, Corporate and Capital clusters were enhanced to include a focused approach to high-impact industries to ensure that the related social and environment risks are mitigated. accelerate relevant product and service offering manage our carbon emissions contribute to resource conservation ■ Altogether 15 (2012:15) Nedbank Capital transactions that comply with the Equator Principles (per risk category) had additional drawdowns in 2013. ■ We developed Fair Share 2030, a business strategy that provides a longer-term perspective and a wider lens to identify client needs and develop appropriate business solutions. We developed a number of pilot products and projects that will form the foundation of this work and these will be further refined and evolved in 2014 for rollout in 2015. ■ We were involved in all three rounds of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), effectively funding and supporting projects that will deliver 1,486 MW or 38% of the total renewable- energy capacity allocated by REIPPPP since inception. ■ Since the inception of the Nedbank Green Savings Bond R3,6bn has been invested in it. Altogether R2,7bn of this ﬂowed in during 2013 (see page 84 of the Sustainability Development Performance Review). ■ Nedbank Affinity donations grew from R20,9m in 2012 to R27,8m in 2013, with support given to nearly 1 000 social and environmental projects across SA (excluding the projects supported by the Nelson Mandela Children’s Fund). Since the inception of the four Nedbank affinities, donations of more than R225m have been made to the respective trusts supported by them. ■ We maintained our carbon-neutral status for the fifth consecutive year. ■ We decreased our total greenhouse gas (GHG) emissions by 2,18% in 2013. ■ We again participated in the SA Carbon Disclosure Project Index and were one of only two participants to achieve a disclosure score of 100%. ■ Nedbank occupies three Green Star SA-rated buildings with another two planned for 2014. To date, Nedbank Corporate Property Finance has financed eight Green Star SA-rated buildings, making Nedbank the leader in green building finance. ■ Electricity usage declined by 2,63% per fulltime employee (FTE) and by 1,44% based on total ﬂoor space. ■ Overall water consumption on our campus sites increased marginally as a result of the consolidation of employees and organic growth. However, we continued our investment in water security through the WWF Water Balance programme. The year 2013 was the third in our five-year R9m pledge to support this vital water conservation programme (see page 90 of this report). ■ Our support of the WWF-SA Sustainable Agriculture programme encourages reduction of energy, water and other resource-intensive inputs in the SA agriculture sector. ■ We launched our Green Living Guide, which is aimed at encouraging all South Africans to adopt more sustainable lifestyles and enjoy the associated economic, social and environmental benefits. Fair Share 2030 22–23 Refer to 84 Transfor- mation Report Sustainable Develop- ment Review Refer to 90 45 nedbank Group | INTEGRATED REPORT 2013 LEadIng In thE CommUnItIES wE SERvE (continued) alIgnIng wIth fInancIal sector code-Based reportIng Our progressive transformation initiatives have ensured that we maintained our level 2 broad-based black economic empowerment (BBBEE) rating for the fifth consecutive year. For the past four years our broad-based black economic empowerment (BBBEE) rating was calculated under the Codes of Good Practice (dti Codes) and for the first time it was calculated in accordance with the Financial Sector Code (FSC). Because of the unique position that financial institutions hold in the development of SA, two new elements have been introduced into the FSC, which had been promulgated in November 2012. These include empowerment financing and access to financial services. The year 2013 brought with it the latest phase of the BBBEE framework in the form of the revised Codes of Good Practice, which prescribe goals of a transformational environment that is progressively more demanding. These changes symbolise a new beginning in the reorientation of the Transformation Policy to address the issue of fronting and focus more on productive BBBEE and the growth of black entrepreneurs through enterprise and supplier development elements. We seek to ensure that existing and new initiatives build on our current successes to advance our transformation journey. Financial sector code possible points december 2013 14 + 3 bonus 8 + 1 bonus 15 + 3 bonus 10 16 15 5 3 14 100 + 7 bonus 16,92 6,91 11,29 9,21 14,56 13,86 5,00 3,00 10,47 91,21 P 2 Transformation Report Supplementary information: Sustainable Development Review element ownership management control employment equity skills development procurement empowerment financing enterprise development socioeconomic development access to financial services total bbbee level 46 deliverinG to our stakeHolders MAKING THINGS HAPPEN ENSURING A SUSTAINABLE BUSINESS INFORMATION TO OUR SHAREHOLDERS hot topIcs In 2013 Hot topics scarce skills Funding of energy- related projects our response/resulting developments ■ We have implemented diverse training and development programmes to give our employees the skills necessary for them to meet client needs. ■ We further invested in graduate and bursary programmes as well as learnerships – all for the purpose of developing a talent pipeline for our own business as well as contributing to the overall SA skills pool. ■ Nedbank proactively responding to the regulatory and policy developments with regard to the SA energy mix. These developments will include the Integrated Energy Plan and the Integrated Resource Plan. We are committed to providing funding to ensure a secure energy future for SA, with cognisance given to the need for reducing carbon-intensive energy generation. trust in the financial sector During 2013 we paid special attention to: ■ Driving ethical behaviour through enhanced ethical awareness training for staff. ■ Ensuring correct financial advice for clients through well- qualified staff who comply with the Financial Advisory and Intermediary Services Act. ■ Protecting client information through stringent application of the Protection of Personal Information Act and worldclass online security. ■ We acknowledge that the number of applications we receive far outweigh the available funds. The Nedbank Foundation follows a stringent funding process to ensure the prudent allocation of our CSI investment. ■ Guided by our long-term goals and Fair Share 2030 response, we are committed to collaborating with businesses that innovate in the environmental and social spheres. The economic sustainability of these businesses is equally important and remains key to our investment and partnering decisions. access to corporate social investment (csi) funding Funding of green innovations/ companies accolades In 2013 In 2013 we received a number of awards that recognised our efforts in leading at sustainability in the communities we serve and impact. While we do not approach sustainability for the purpose of receiving accolades, recognition serves as external affirmation of the validity and effectiveness of the work we are doing. We are therefore proud of having been awarded the following: ■ Corporate Social Investment Leadership Award: Sunday Times Top 100 Companies ■ Socially Responsible Bank Award: African Banker Awards ■ 2013 Transformation Champion of the Year: Black Business Quarterly (BBQ) Awards ■ 100% disclosure score: SA Carbon Disclosure Project Index 2013 ■ Natural Capital Decoupling Leader on the Natural Capital Leaders Index 2013 focus areas for 2014 objective target integrate sustainability initiatives and considerations into all business activities. Continue the integration of sustainability into a long-term strategy and implementation of Fair Share 2030 (see page 22–23). Accelerate development of sustainable products and services. Enhance and expand responsible lending and investment practices. pursue carbon awareness, measurement and reduction and maintain our carbon- neutral status. Reduce carbon footprint through the pursuit of clearly defined electricity, paper, waste and business travel reduction targets and ongoing recycling initiatives in support of our journey to combat climate change. Maintain carbon neutrality despite tough economic conditions, with a simultaneous increase in the scope of our carbon measurements. continue to deliver on transformation as a vital component of realising one of our aspirations, which is to be a bank for all south africans. Maintain level 2 BBBEE rating as measured under the FSC, including the two additional sector-specific elements, which are empowerment financing and access to financial services. Participate in an industry realignment process through Banking Association of South Africa (BASA) and the FSC Council. Continue to focus on enhancing and extending access to financial services for all. Maintain growth in the representation of black women at Nedbank, especially at senior management level. Achieve a greater impact from our socioeconomic development spend and build stronger partnerships in this area. 47 ENSURING A SUSTAINABLE BUSINESS Chairman’s Review: A sustainable future for all 48 Committed to good governance: Report from Group Transformation, Social and Ethics Committee Chairman Chief Executive’s Review: Delivering sustainably to all our stakeholders Growing our franchises 52 58 62 68 Nedbank Capital Nedbank Corporate Nedbank Retail and Nedbank Business Banking Nedbank Wealth Established leadership teams: Board of directors Group Executive Committee Cluster management 72 76 80 Building a sustainable bank 82 Chief Financial Officer’s Review: Our financial performance in 2013 100 Our summarised five-year track record Responsibility of our directors Certification from our Company Secretary Report from our Audit Committee Report from our directors Report from independent auditors Summarised annual financial statements Worldclass at managing risk Reporting back on remuneration 108 109 109 110 114 118 119 130 138 173 Validating our sustainability journey Incentive schemes for our people 98 A SUSTAINABLE FUTURE FOR ALL CHAIRMAN’S REVIEW A strong and sustainable economy with higher levels of employment occurs when private enterprise is strong and works in harmony with government, creating the enabling conditions under which business can flourish. We are committed to playing an active role in facilitating the building of a thriving nation. Dr Reuel Khoza Non-executive Chairman 48 Committed to good governance 52–57 GRI 3.1: 1.1 Twenty years of democracy Reflecting on the first 20 years of democracy in SA provides an opportunity to review the country’s achievements and contemplate the next two decades. Change is often incremental, and on a year- by-year basis the cumulative effects are often overlooked. Looking back to 1994 we can see just how deeply our society and our economy have changed. In many areas our country is admired and respected. Even in its remotest areas the great majority of the population now has access to electricity, water and sanitation. Living standards have improved materially and the black middle class has become a significant component of our economy. Expansion of access to the monthly social grant has provided a degree of upliftment for the poor, with more than 16m people benefiting. Our public service and private sector have transformed and great progress has been made relative to the enormity of the challenges inherited in 1994. We score at or near the top of the rankings, including those of the World Economic Forum, for the quality of our corporate governance, the strength of our institutions, such as the stock exchange, and the soundness of our banks. Because SA has been embraced into the global economy and is able to participate in it fully, the private sector has been given many opportunities to grow and strengthen its abilities. This was enabled by government’s market-based approach, disciplined fiscal policies, protection of property rights, the gradual reduction of exchange controls and the lowering of trade barriers that helped attract an investment grade sovereign rating from Moody’s as early as 1994. These achievements have been remarkable given the massive challenges that needed to be addressed at the dawn of our democracy in 1994. Yet much remains to be done in areas where progress has been frustratingly slow. One key area is education, where many children never reach matric, and the majority of those who do, pass at a level that does not position them for growth and readiness for the world of work. Our youth are badly equipped for today’s labour market and this has contributed to our recording among the world’s highest levels of unemployment over a sustained period. In addition, a heavily regulated labour market keeps many unemployed. In recent years the business and investment environment has also become more uncertain and less supportive of expansion. Infrastructure shortfalls and policy uncertainty have contributed to these challenges. It is imperative that we imbue ourselves with moral leadership and wisdom for the public and private sectors. I strongly believe that leadership in these sectors should work together constructively to make a positive contribution to the creation of a better life for all. When we reflect on Nedbank Group’s journey since 1994, it is clear that we have had our own successes and challenges. We have grown organically as well as through various mergers and NEDBANK GROUP | INTEGRATED REPORT 2013R107,2bn MARKET CAPITALISATION (2012: R95,4bn) 16% TOTAL SHAREHOLdER RETURN LEVEL 2 BEE RATING FIFTH YEAR IN A ROW acquisitions. We had a difficult period, just after the start of the new millennium, that culminated in a rights issue in 2003 to strengthen the capital base of the group. Since then we have developed into one of the strongest financial services participants in the SA economy. We are making significant contributions to all our stakeholders, thereby helping to make SA a better place to live in. As an employer we created an additional 13 500 jobs, and we now have over 30 000 employees in total. At the same time, we embrace transformation and we have been one of the top three most transformed large companies on the JSE for the past three years. Since 2004 we have spent R1,5bn (approximately 70% of the group spend) on skills development for our black employees. Through our banking activities we granted over R570bn in loans to clients. We expanded our presence to service an additional 10 000 new areas and suburbs, particularly in peri-urban areas, and added more than 2 000 new ATMs to make banking more accessible and convenient. Nedbank is a bank for all, with more than 3m new retail and small-and-medium-enterprise (SME) clients having chosen to bank with us since 2004. Many of these clients are new to the formal banking system and we now service over 6,7m clients in total. In 2005 we embraced broad-based black economic empowerment (BBBEE) and developed a leadership position. Our innovative BEE transaction benefited more than 500 000 black South Africans directly and/or indirectly. The net value of our Eyethu scheme, with more than 47 000 participants, has grown by more than R6,7bn, with R2,3bn having already accrued free of any debt to these shareholders. In addition, over R747m has been paid out in dividends to date. As an active corporate citizen we have spent in excess of R644m on socioeconomic development projects since 2004. We assisted the communities in which we operate with sustainable and viable projects that focus on education, community development, health, economic development and volunteerism. Since 1994 the Nedbank Affinity Programme has contributed more than R200m to almost 1 000 projects in the areas of arts and culture, sports development, helping underprivileged children and environmental conservation. A total of 1,2m clients support these affinities and our primary beneficiaries have been the Nelson Mandela Children’s Fund and the World Wide Fund for Nature (WWF). We also marked, with great sadness, the passing of the founding father of our democracy, Mr Nelson Rolihlahla Mandela, in 2013. Tata Madiba represented universal virtues that unite us all as human beings the world over: moral authority and probity, resilience, conviction, moderation, compassion, grace, courage, humility and wisdom. At Nedbank we seek to support Madiba’s honourable legacy through a shared vision to champion the rights of children. We will continue our relationship with the Nelson Mandela Children’s Fund, spanning more than 15 years thus far, through the Nedbank Children’s Affinity. Since the launch of the Children’s Affinity, Nedbank has donated more than R50m to the Nelson Mandela Children’s Fund. Creating a desirable future The global economic environment over the past 20 years has been very beneficial for SA. It included rising commodity prices, a strong demand for exports and large capital inflows reducing the cost of capital, thereby assisting investment. This was the case especially in the period before the global financial crisis in 2008 and for a short period thereafter as the world began to recover from recession. Globally, financial institutions in particular have focused on addressing their financial strength and a return to traditional banking activities. The global financial system is in a better place today, but with much still to be done. SA banks are strong and the industry is rated the third most sound in the 2013–2014 World Economic Forum Global Competitiveness Report. Regulatory oversight is worldclass. Nedbank’s strategic focus areas of repositioning Nedbank Retail, non-interest revenue growth and portfolio tilt have ensured that we have substantially strengthened our franchise. We also lowered our exposure to the macroeconomic cycle through selected growth in higher-risk products such as unsecured lending, more prudent provisioning, levels of sustainable a stronger balance sheet and higher transactional income. It is very concerning that the global environment has been under stress for the past five years, which has culminated in significantly intensified pressure on emerging-market currencies as investors struggle to come to terms with changes in US monetary policy. The growth environment that attracted interest towards developing economies is still present and will reassert itself as the middle class grows. Africa in particular faces a bright future where better economic policies, greater regional integration, more open economies, reduced debt burdens, increased investor interest and massive resources will keep many economies on a strong growth trajectory. SA companies are already taking advantage of the many opportunities to the north, and our government is encouraging greater regional cooperation to unblock borders and boost infrastructure. investment Expansion into the rest of Africa is a great longer-term opportunity. Our vision, to be Africa’s most admired bank, reflects our intention to unlock this opportunity while managing the higher risk that typifies earlier-stage economies. Nedbank’s vision aligns with the ambition of our parent company, Old Mutual plc, to become Africa’s financial services champion. 49 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenCHAIRMAN’S REVIEW (CONTINUED) We are positioning ourselves to provide a Pan-African banking network supporting our clients’ activities on the continent. It is in this context that we established our alliance with Ecobank Transnational Incorporated (ETI) in 2008 for expansion into West and Central Africa, recognising the benefits that flow from deep local knowledge. The year 2014 is an important one for Nedbank as we are in the 12-month period during which we have the opportunity to exercise our rights to acquire 20% in ETI. Regulatory approval for our acquisition of a strategic stake in Banco Unico has been received and completion of the transaction is targeted for end March 2014. This acquisition enhances our plans for expansion into SADC and East Africa. A strong and sustainable economy with higher levels of employment occurs when private enterprise is strong and works in harmony with government, creating the enabling conditions under which business can flourish. We are committed to playing an active role in facilitating the building of a thriving nation. We appreciate the fact that our business success is linked to the upliftment of society at large, as well as the fact that we can do much to enable this upliftment through our core business activities. We are committed to playing an active role in building a thriving nation. In 2012 Nedbank developed its long-term vision for SA, describing a country that would be flourishing by 2030 and that would be a vibrant place to live and work, having overcome a series of pressing economic, social and environmental challenges. We worked with many experts, including those linked to the development of the National Planning Commission’s Diagnostic Report, to provide a clear understanding of our country’s potential. The 2030 goals are aligned with the National Development Plan (NDP): they were developed independently but in parallel and remain firmly aligned with it in spirit and objective, and they are more than just a statement of ambition. They provide a telescope that enhances our ability to identify future business opportunities and risks. We are responding through a strategic initiative called Fair Share 2030, challenging ourselves to capture new business opportunities by taking a non-conventional approach to lending on a scale that is appropriate to our market share. Leading by example This year I share with stakeholders more of the Nedbank board’s deliberations and challenges, both in the year gone by and looking forward. In addition I will lead our first board governance roadshow in 2014 to engage proactively with our shareholders and other stakeholders, to share our philosophies and thinking and to receive valuable input from them. Awareness around governance matters has increased since the global financial crisis, with unsound practices exposed and with regulatory intervention more strict. As a board we take governance, compliance and ethics very seriously – they underpin our deliberations and decisionmaking and align us with the spirit and guidelines of King III. We are continuously learning and challenging ourselves to strengthen our governance capabilities and recognise that, while much has been achieved, we must drive the organisation to raise its standards further in our aspiration to be worldclass at managing risk. Nedbank believes that the development of a unique corporate culture is an enduring competitive advantage. For more than a decade Nedbank has invested in personal-mastery and team-effectiveness programmes. 50 This is underpinned by the recognition that a values-based approach in leading the organisation is imperative if we are to safeguard the integrity of the organisation and position it appropriately in a rapidly transforming environment. Our board is well diversified and balanced, and we seek to continue building diversity in skills and thinking. We were pleased to welcome David Adomakoh in February 2014 as an independent non-executive director of Nedbank Group and Nedbank Ltd. We announced the departure of two of our directors, Don Hope and Thenjiwe Chikane, during 2013 and express our sincere appreciation to them for the many years of diligent service and insight they provided. A number of directors will be retiring in 2015 in line with our board continuity programme. In anticipation, the board has instituted a formal succession planning process and identified a broad spectrum of specific skills and experience it must have within its ranks. The process is robust and constructive in identifying the capabilities that potential new boardmembers should possess to complement those of the current members. In line with our strategy we will continue to bolster the skills of the board in areas such as banking, mining and technology (IT), innovation as well as the rest of Africa. information resources, in the integrated report contains detailed reporting on The governance transformation and risk, audit, remuneration sections. In addition to this, I summarise in the following paragraphs some deliberations of each of the board subcommittees. In 2013 the Group Transformation, Social and Ethics Committee focused on monitoring regulatory developments relating to the BBBEE Act and the Financial Sector Charter Codes. It also reviewed management’s effort to improve BBBEE performance and maintain our carbon neutrality despite increases in the scope of our carbon measurement. Lastly, the committee guided the strategic development of Fair Share 2030 in response to a set of long-term goals for a thriving SA. implementing the group’s The Group Information Technology Committee focused on reviewing and IT strategy, interrogating key technology trends that have a significant impact on banking. These trends will become increasingly prevalent over the next few years and include social media, mobile banking and cybersecurity. Production stability was monitored and it is pleasing that the group recorded the best system uptime levels in recent history. The committee approved Project 4321, which will consolidate the group’s finance, human resources and procurement systems and continue to be a focus over the next few years. The Group Audit Committee was satisfied with the adequacy and efficiency of the internal control systems, accounting practices, information systems and assurance processes applied within the group. We are particularly pleased with the ongoing recognition received for our financial and integrated reporting from independent observers such as the JSE, Chartered Secretaries Southern Africa, Nkonki and EY. We will continue to ensure that the committee is exercising its assurance oversight role effectively in relation to financial reporting, internal controls, internal audit, and our relationship with the external auditors, as well as to oversee the finance transformation project. More detailed reporting can be found on pages 110 to 113 of this integrated report. Report from Group Transfor- mation, Social and Ethics Committee Chairman 58–59 Report from our Audit Committee 110–113 NEDBANK GROUP | INTEGRATED REPORT 2013increased regulatory Given intervention, our focus on governance and the emergence of risks in a tougher macroeconomic environment, the Group Risk and Capital Management Committee provided oversight on various risks. These included capital and liquidity management, compliance with various frameworks and requirements, regulatory compliance with an increased focus on the prevention of money laundering and financing of terrorist activities, and actions to manage and reduce the onslaught of fraud. details are discussed on page 134 to 135 of this integrated report. These focus areas along with the group’s expansion into the rest of Africa will be closely monitored in the coming year. The primary focus for the Group Credit Committee was on reducing the group’s appetite for unsecured lending in the rapidly deteriorating consumer credit profile. In addition, it monitored stress in the middle-market business banking environment and engaged management on its level of comfort in our mining, automotive and agricultural credit exposures due to protracted strikes in these sectors during the year. Our construction industry exposures were also reviewed. The uncertainty in the global economy and difficult credit environment will be of considerable importance in 2014. remuneration. Given Remuneration, and specifically the remuneration of executives, continues to receive considerable attention from stakeholders. This had led globally to a significant increase in the amount of regulation. In some cases there has legislation regarding the delivery and disclosure been increasingly complex this of environment, the Group Remuneration Committee carries a key responsibility to ensure that remuneration policies and practices in the group enable the attraction and retention of key talent. It also aims to mitigate against imprudence and inappropriate risk-taking, and to enable sustainability. These remuneration policies and practices must be applied within the context of efforts ensuring that our core reward-for-performance principles are adhered to. implemented suite while These factors featured prominently in the scope of the Remuneration Committee’s work during 2013. The committee reviewed the competitiveness of the Nedbank remaining attuned and remuneration appropriately responsive to the changing governance environment. Where necessary, changes were made to our practices (these changes are set out in detail in the Remuneration Report on pages 138 to 140 of this integrated report). Our remuneration policies and practices foster an appropriately long-term focus, and growth in remuneration should be reflective of the overall performance of the business, resulting in an appropriate sharing of value between the various stakeholders in the group. This work will continue through 2014, with a broader focus on the critical issues of performance management, the competitiveness of our employee benefit suite, and further enhancements in our stakeholder engagement. Delivering value to shareholders In 2013 Nedbank Group again delivered value to our shareholders, with a total shareholder return of 16%. Our share price increased 11,7%, making us the second-best performer among the big four banks. We declared a total dividend of 895 cents, up 19% ahead of headline earnings- per-share growth of 14,9%. despite a volatile and uncertain environment, we continue to possess qualities that we believe are attractive to investors. These include: ■ competitive franchises that create value and enhance brand value because of: ¨ our leadership in corporate banking, and the fact that we hold the largest market share in commercial property finance and generate good returns underpinned by an excellent risk profile; ¨ integrated, lower-risk investment banking with strong growth prospects resulting from government’s infrastructure plans and growth on the continent; ¨ strong, differentiated and decentralised business banking; ¨ innovative, client-centred retail banking, with more clients choosing to bank with Nedbank; and ¨ fast-growing wealth, insurance and asset management business with high return on equity; ■ a client-centred, risk-mitigated, capital-efficient strategy in the rest of Africa over the long term, with the largest Pan-African geographical footprint; ■ continued delivery on a growth-oriented strategy; ■ a strong balance sheet and defensive investment given the stable banking sector in SA; and ■ a stable and experienced management team, a differentiated, values-based culture and high levels of staff morale. Looking forward The outlook for the environment remains volatile and uncertain. We, the board, believe that Nedbank is well positioned given its strong balance sheet and higher coverage in 2013. As proved over the past few years, we have a stable management team and a sustainable growth strategy, and this will continue to stand us in good stead as more clients choose to bank with Nedbank. We have refined our 2014 strategic focus areas (covered in more detail on page 21) to ensure that we build a sustainable franchise. This will help Nedbank remain on a growth path, focus on our clients through innovative solutions and grow in strategically attractive areas, particularly transactional banking, while optimising our spend to invest for the future. The year 2014 is also a key period in which to decide whether or not we will exercise our right to take up a 20% shareholding in ETI. Lastly, we will be finalising key board appointments in the near future and I look forward to engaging with our major shareholders during our first governance roadshow. Appreciation Thank you to my fellow directors for their contributions, insights and commitment to the affairs of the group. I am pleased that we again delivered strongly to all stakeholders in 2013. We are well prepared for both uncertain times and the unlocking of growth prospects, and I congratulate Mike Brown and the Group Executive Committee. We thank our staff for their contribution as they continually strive to exceed the expectations of our stakeholders. To our clients who have chosen Nedbank as their bank of choice, we thank you for your support on our journey towards making Nedbank a great place to bank. Dr reuel J Khoza Non-executive Chairman Refer to 134–135 Refer to 21 Refer to 138–140 51 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenGovernanCe in neDbanK Group Global banking scandals and high costs associated with them continue to emphasise the importance of sound governance in all organisations. They have also highlighted the fact that many organisations still do not understand that ethical leadership is crucial to ensure that sound governance prevails in organisations. despite the Sarbanes-Oxley Act, the Organisation for Economic Cooperation and development (OECd) principles, the UK Code of Corporation Governance and other good governance guidelines, corporates and their leaders do not all adhere to governance principles. SA has been fortunate to avoid the repercussions of the global crisis to some extent. Continuing meticulous management ensures that Nedbank’s governance is of the highest standard and these risks are managed. Fundamental to the Nedbank way of doing things is the aspiration to apply the King III principles. As required by our JSE Ltd (the JSE) Listings Requirements, we provide full disclosure in terms of Nedbank’s King III application. This is in the supplementary Governance and Ethics Review. Our aim is to implement the high governance standards in our SA operations and in all our affiliated entities across Africa. Currently, Nedbank Group has 283 affiliated entities. Included in these entities are the five African subsidiaries: Nedbank Lesotho, Nedbank Malawi, Nedbank Swaziland, Nedbank Zimbabwe (MBCA) and Nedbank Namibia. There has been increased focus in these areas to align governance processes to the best governance processes of Nedbank. In some instances, where the rule of law is stricter in the subsidiary, then that rule would be applicable in the subsidiary country. Some of these processes are: ■ Aligning the African subsidiaries to the King III requirements. Nedbank and the rest of Africa are using the Governance Assessment Instrument of the Institute of directors to track and implement King III best practices. Namibia and Zimbabwe adhere to King II as required by their regulator. However, in principle, they apply King III. ■ Reviewing and aligning the boards’ and the board committees’ composition in terms of composition, skill, diversity, independence and gender representation. ■ Conducting board and board committee evaluations. ■ Reviewing board charters, minutes and committee functions. ■ Compiling board continuity programmes and succession plans. Training is done at board level and 91% of the African boardmembers have done the GIBS Banking Board Leadership Programme. All African subsidiaries have done board evaluations in 2013. Following these evaluations, reports were compiled for all subsidiaries except Zimbabwe for regulatory reasons. The subsidiaries based their evaluation questionnaires on those used at group level, but adapted the questions to suit their entity’s environment. The questionnaires covered the following areas: ■ Role and responsibilities of directors. ■ Board committees and structures. CommitteD to GooD GovernanCe We are committed to good governance and compliance with recognised best-practice codes and legislation. We believe that our conduct should be underscored by sound governance practices that include transparency and accountability to all stakeholders, including staff, clients, regulators, shareholders and communities. 52 NedbaNk Group | Integrated report 2013 ■ Company Secretariat. ■ Compliance and risk management. ■ Financial and operational reporting. ■ Human Resources. ■ General observations. The results showed that all the boards were operating effectively and in accordance with their charters. All suggestions for improvement included in the evaluation in each of the results were based on the ratings abovementioned areas as well as directors’ comments. The results were submitted to the company secretary, who discussed them with the chairman for appropriate action by the board. following areas were The improvement in the rest of Africa: identified as requiring ■ Succession planning. ■ The boards’ interaction with management. ■ The IT expertise of the board. ■ Technical training for directors in risk management, especially IT risk. All African subsidiaries have submitted their regulation 39(18) reports and all have stated that sound governance processes are followed in support of their boards’ objectives. As part of the onsite visits conducted in the African countries, we review statements made in their respective reports for accuracy, validity in governance and ethics processes that need improvement. during 2013 Enterprise Governance and Compliance (EGC) reviewed the top 20 operational subsidiaries of the Nedbank Group. This included: ■ The major operating board subsidiaries (Rest of Africa, short-term insurance and stockbroker subsidiaries). ■ The composition of the subsidiary boards for skills, gender representation and tenure length. ■ The documented processes followed by these boards in approving changes to the subsidiary boards. ■ The attendance registers of the board meetings for the subsidiaries. ■ The state of the subsidiary Audit Committees was checked. There is a robust governance process to oversee all 283 affiliated companies in the group, and an annual report is submitted to the board of directors. King III is applied to all companies in the group. CompLianCe with KinG iii We endeavour at all times to apply the principles of King III to all aspects of our business. during the period under review the board again indicated that it was satisfied with the way in which the group applied the recommendations of King III or put alternative measures in place. In terms of the JSE Listings Requirements we are required to provide an explanation of how the King III principles were applied during the 2013 financial year and, should these not have been applied, to provide reasons for this and an indication of alternative measures taken. There are 75 such principles that apply to us and a comprehensive statement outlining our approach to each is included in the supplementary governance information available at nedbankgroup.co.za. Independence of Chairman The current Nedbank Group Chairman is not independent as defined by the governance codes, as he also serves on the board of the group’s parent company, Old Mutual plc. For this reason, the position of Lead Independent director was created in 2007, and it is currently held by Malcolm Wyman. and deliberated whether Non-executive directors’ remuneration The board of directors has considered the King III the recommendations remuneration of non-executive directors should comprise a base fee and an attendance fee per meeting. The board is of the view that this requirement is less pertinent to non- executive directors of Nedbank Group, because of the greater responsibilities associated with being a director of a bank and the requirement for boardmembers to provide input on an ongoing basis, over and above attendance of board meetings. The manner in which directors are selected, the internal discipline and regular independent evaluation continue to ensure high levels of commitment among boardmembers. Accordingly, the directors are paid an annual fee for their services. Independence of boardmembers The majority of the Nedbank Group boardmembers are non-executive directors, and at 31 december 2013 there were four independent and six non-independent non- executive directors on our board. The composition of the board is monitored and discussed by the directors on an ongoing basis to ensure that boardmembers have the correct skills and experience, and that the mix of non- independent non-executive executive directors and directors is enhanced. While the recruitment of additional independent non- executive directors is progressing, the board believes that the current composition is sufficiently robust to ensure that shareholder interests (including minority interests) are protected. At 1 January 2014 Tom Boardman was classified as an independent non-executive director as three financial years passed since he had been last employed by Nedbank Group in an executive capacity. At 21 February 2014 david Adomakoh joined the board as an independent the non-executive director. At 28 February 2014 board comprised of: ■ three executive directors; ■ six independent non-executive directors; and ■ five non-executive directors. King III recommends that board committees should comprise a majority of non-executive directors, the majority of whom should be independent. Committees should also be chaired by independent non-executive directors. At 31 december 2013 Nedbank Group board committees did not comply with King III in the following respects: Chairman’s Review 48–51 GRI 3.1: 4.1, 4.2, 4.3, 4.4, 4.6, 4.7, 4.8, 4.9, 4.10 Supplemen- tary information: Governance and Ethics Review 53 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenCommitted to good governanCe (CONTINUED) ■ The Group Information Technology Committee (GITCO) was chaired by a non-executive director who was not independent. On 1 January 2014 the chairman of the committee, Tom Boardman, was classified as an independent director. ■ Only non-executive directors are members of the Group Transformation, Social and Ethics Committee (GTSEC), but the majority of them were not independent. In addition, the GTSEC is chaired by a non-executive director who is not independent. With effect from 1 January 2014, GTSEC comprised a majority of independent non-executive directors. ■ The Group Credit Committee (GCC) was chaired by a non-executive director who was not independent. On 1 January 2014 the Chairman of the committee, Tom Boardman, was classified as an independent director. While the GCC has a majority of non-executive directors, the majority of these are not independent non-executive directors. ■ The Group Risk and Capital Management Committee (GRCMC) is chaired by a non-executive director who is not independent. ■ The Group directors’ Affairs Committee (dAC) is chaired by the Chairman of the group who is not independent. Independent directors are in the minority in terms of composition. While compliance with King III is not always achieved, the board is satisfied that the committees are appropriately constituted given the expertise and experience of the committee chairmen and members. This is evidenced in the results of the board and board committee evaluations that were conducted by an independent party in 2013. neDbanK Group boarD oF DireCtors In line with the recommendations of King III we have a unitary board structure. There is no overlap between the roles of the Chairman and the Chief Executive. The Chairman, Reuel Khoza, leads the board, while the executive management of the group is the responsibility of the Chief Executive, Mike Brown. This ensures that no 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. The board provides for independent and objective input into the decisionmaking process, thereby ensuring that no single director holds unfettered decisionmaking powers. during 2013 the board internally assessed the status of the Nedbank Group independent non-executive directors and was satisfied these boardmembers met the criteria of independent directors in terms of King III. Independence is debated by the dAC following detailed analysis of the circumstances of all the independent non-executive directors. that boarD appointments Board appointments take place according to a formal and transparent process in line with the board appointment policy. The entire board is involved in this process, with assistance provided by the dAC. Appointments to the board are made with due consideration of the need to ensure that the board comprises a diverse range of skills, knowledge and expertise and has the demographic representation, a relevant balance of skills and expertise and the professional and industry knowledge necessary to meet our strategic objectives. Non-executive directors are given no fixed term of appointment, although all directors are subject to retirement by rotation in terms of the company’s memorandum independence, appropriate requisite 54 of incorporation. Reappointment of non-executive directors is not automatic. Executive directors are subject to six-month notice periods, but the Chief Executive is subject to a 12-month notice period. 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. In terms of our policy, non-executive directors and independent non-executive directors who have served on the board for longer than nine years are required to retire from the board at the following annual general meeting. Executive directors are discouraged from holding directorships outside the group. boarD evaLuations In the last quarter of 2013, PwC conducted external evaluations of the full Nedbank Group Ltd Board, including all members, the Chairman and all board committees. A wide array of matters was assessed and the following comments were received: Overall, the questionnaire results and interviews conducted revealed that the boardmembers were satisfied that good governance was generally practised and that the board functions well in its oversight and support role. Based on our work performed, which included analysis of completed questionnaires and discussions with the selected boardmembers – covering the effectiveness of the board at a particular point in time rather than over a period of time – the Nedbank board appears to be supported by the relevant governance structures and processes, as required by governance best practice – allowing for the board to function effectively in discharging its responsibilities. The CE’s performance is evaluated according to his performance scorecard, which is approved annually by the Group Remuneration Committee (GRC). The feedback from this board evaluation process contributes to the production of the regulation 39(18) report addressing the state of our corporate governance. boarD Committees The board committee structure is designed to assist the board in the discharge of its duties and responsibilities. Each board committee has formal written terms of reference that are reviewed annually. Certain of the board’s responsibilities are delegated in accordance with the terms of reference. The board monitors these responsibilities to ensure effective coverage of, and control over, the operations of the group. during 2013 the following board committees operated within Nedbank Group: NedbaNk Group | Integrated report 2013 ■ The Group Audit Committee The Group Audit Committee (GAC) assists the board in its evaluation and review of the adequacy and efficiency of the internal control systems, accounting practices, information systems and auditing processes applied within Nedbank Group, and highlights measures to enhance the credibility and objectivity of financial statements and reports prepared. ■ The Group Risk and Capital Management Committee The Group Risk and Capital Management Committee (GRCMC) assists the board of directors in evaluating the adequacy and efficiency of risk policies, procedures, practices and controls. ■ The Group Remuneration Committee The Group Remuneration Committee (GRC) is authorised to approve aggregate adjustments to the remuneration of employees below Group Exco levels. The committee also recommends adjustments to the total remuneration of members of the Nedbank Group Executive Committee (Group Exco). The board, following recommendations made by the GRC, approves each Group Exco member’s total remuneration. This committee is also charged with the supervision of the Nedbank Group Employee Incentive Scheme. ■ The Group Credit Committee The Group Credit Committee (GCC) approves our credit philosophy and policies, sets credit limits and guidelines, confirms procedures to manage, control and price credit risk, approves the adequacy of interim and year-end impairments and monitors credit risk information, processes and disclosure. Apart from the GCC, the Large-exposure Approval Committee also approves large credit exposures as required by banking legislation. ■ The Group Directors’ Affairs Committee The Group directors’ Affairs Committee (dAC) considers, monitors and reports to the board on reputational and compliance risk, compliance with King III and the corporate governance provisions of the Banks Act. It also acts as the nominations committee for board appointments. ■ The Group Information Technology Committee The Group Information Technology Committee (GITCO) has broad responsibility for monitoring all issues pertaining to information technology (IT), both operational and strategic, and aims to ensure that IT development spend and investment are aligned with overall group strategy and direction and that the IT systems are efficient and effective. ■ The Group Finance and Oversight Committee The Group Finance and Oversight Committee (GFOC) has the primary functions of providing a board discussion forum for the consideration of risks within the bank, and ensuring that the board and the various board committees address those risks effectively. ■ The Group Transformation, Social and Ethics Committee The Group Transformation, Social and Ethics Committee (GTSEC) focuses on monitoring the imperative of integrated sustainability within the group, with specific focus on social and economic development, good corporate citizenship, environmental concerns, health and public safety, stakeholder engagement, labour and employment. our approaCh to ethiCs anD human riGhts A lack of ethical leadership in organisations globally has caused a number of governance and ethical lapses in recent years, which have resulted in corporate scandals and reinforced the need for ethical behaviour to be at the core of any business. Ethics failures can also impact financially on the sustainability of a business, as demonstrated by the recent London Interbank Offered Rate (LIBOR) scandal which resulted in sanctions and responsible business should, significant fines. Any therefore, have at its core a clear value system, a focus on sustainability, ethical leadership, and a strong governance framework that guides decisionmaking and action. At Nedbank Group we work tirelessly to ensure that we have all of these. Governance of ethics The board assumes ultimate responsibility for the is company’s ethics performance. This responsibility delegated to executive management who utilise various management this mandate. These include: frameworks fulfil to ethics and Corporate accountability Framework In line with Nedbank Group’s deep Green aspiration to be a great place to work, a key focus area is to develop a unique and innovative culture. We believe that ethical behaviour lies at the heart of such a culture and therefore have an Ethics and Corporate Accountability Framework in place. The updated framework was approved by the Group Exco and the dAC in 2013. the ethics panel This panel deals with all tipoffs regarding unethical conduct and now reports to the GTSEC on its continued efforts to ensure that independent, objective and fair courses of action are taken in all instances of unethical behaviour or actions. board ethics statement In line with the King Code of Governance Principle 1.1, which states that the board should provide effective leadership on an ethical foundation, Nedbank Group boardmembers and all subsidiary boardmembers are required to acknowledge and sign the Board Ethics Statement (BES) every year to demonstrate their continued commitment to the Nedbank values and to ethical conduct. This was done in July 2013. Code of ethics doing the right thing is at the heart of our approach to business. This commitment is encapsulated in the Nedbank Code of Ethics, to which all employees (including contractors and temporary employees) are required to adhere. In May 2013 the Code of Ethics, which is available on the Nedbank Group website to all stakeholders, was reviewed against the latest Old Mutual plc Code of Business Ethics. No material changes were made. We continue to maintain the highest ethical standards in carrying out our business activities, and our core values inform our Code of Ethics to guide and direct all decisions and actions. Established leadership teams 72–75 GRI FSSS: FSI, FS2, FS4, FS15 GRI 3.1: 4.11, HR1, HR2, HR3, HR10, HR11 Supplemen- tary information: Governance and Ethics Review 55 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenCommitted to good governanCe (CONTINUED) Code of Conduct The Nedbank Group Code of Conduct expands on the Code of Ethics. This operational document offers examples of ethical behaviour to help employees make ethical decisions. The Code of Conduct was reviewed and updated in 2012 and posted on the compliance tool in 2013 for all staff to acknowledge. A total of 93,3% of our employees had completed the Code of Conduct policy acknowledgement by 31 december 2013. It is important to note that the acknowledgement includes a set of questions to demonstrate an understanding of the policy principles after the staffmember has read and acknowledged the policy. Our group’s Supplier Code of Conduct is aligned with the Group Code of Conduct and supports the protection of human rights across our supply chain. The principles of the Supplier Code of Conduct apply to all our suppliers, consultants and contractors. african subsidiary implementation Because our strategy focuses on expansion into the rest of Africa, our Ethics Office implemented the full Nedbank Group ethics programme within our African subsidiaries from the latter part of 2012 through 2013. Representatives of the Ethics Office have visited all subsidiaries to review ethics practices and implement a common set of ethics policies and procedures. Measurement of ethics In line with our recognition of the fact that a business cannot manage what it doesn’t measure, we use a variety of indicators, surveys and tools to ensure that ethical conduct within Nedbank remains at the highest possible standard. nedbank ethics indicator The Nedbank Ethics Indicator (NEI) results help us to gauge the effectiveness of our ethics management interventions as well as the prevailing ethical culture in the organisation. This instrument also measures ethics risk. The top 20 risks identified in the NEI are included in business plans and monitored annually. sa business ethics survey To benchmark our progress in implementing ethical practices, we participated in the South African Business Ethics Survey (SABES), previously the South African Corporate Ethics Indicator or SACEI. This Ethics Institute of South Africa (Ethics SA) initiative included 15 large and mostly listed organisations in SA, and was based on the Organisational Ethics Indicator used in 2011. Our ranking of 11th in the survey indicates that we definitely can improve, particularly in identified areas of weakness such as ‘tendency to report misconduct’ and ‘experienced satisfaction with reporting’. To address this the Ethics Office has identified and taken steps to implement initiatives aimed at raising our performance in each area of the survey where we performed below par in 2013. Each business cluster has implemented improvement plans, and the Ethics Office is monitoring progress. Additionally, these points have been added to the Nedbank Staff Survey (NSS), and this will allow us to track the success of our initiatives annually. We performed above average in a number of survey measures, including ‘levels of awareness of ethics policies and processes’, ‘organisational culture’ and ‘observed misconduct’. ‘Overall Nedbank’s efforts to create an ethical culture among employees have paid off. From the findings it is evident that, although some gaps were identified, Nedbank has had success with embedding its ethical values in employees’ behaviour. We believe that Nedbank will successfully continue on this road.’ SABES commentary ethics risk assessment Starting in the fourth quarter of 2013, Ethics SA started conducting an ethics risk assessment with the aim of providing a benchmark against which organisations can compare their ethics risk profile and ensure compliance with King III. The risk assessment includes the identification of opportunities that we will build on, and risks that we will manage. nedbank staff survey during 2012 we made a significant change to the ethics questions in the NSS by incorporating our highest-rated risks as identified by the NEI. Whereas the ethics dimension was the strongest dimension in previous years, it dropped to third place in 2012 as a result of the robust change in questions in this dimension. These risks were also our focus areas for 2013 and the NSS results showed a promising increase during 2013 as a result of our continued efforts to improve ethical culture in the group. DrivinG ethiCaL awareness Through experience gained in the Ethics Office over the past eight years, we have realised that we need a variety of tools for effective awareness creation as our staffmembers respond differently to methods of learning based on their personalities. We therefore make use of a formal computer-based policy acknowledgement tool, face-to-face interaction with staff in awareness sessions, articles in our group publications, poster campaigns and film case studies and information pieces on topical issues that are screened in our branch networks. Promoting staff awareness awareness training In an ongoing effort to raise awareness of the importance of and the need for ethical behaviour, the Ethics Office performed more than 90 (2012: 38) training initiatives across our group. There has been a noticeable increase in queries and reports to the Ethics Office as a result of this awareness training. acknowledgement of policies Our electronic EGC Management System is integral to our ethics and conduct awareness and education efforts among staffmembers. The system is used to send out policies for staff to read and acknowledge and includes a survey to measure the extent of employees’ understanding of the policy principles. declarations of outside interests and gifts are also captured on the system, and these declarations and acknowledgements are monitored by governance and compliance officers. 56 NedbaNk Group | Integrated report 2013during 2013 the following data on policy acknowledgements and declarations was collected by the system: Policy acknowledgements and declarations Anti-corruption Pledge Code of Conduct Code of Ethics Employee Conduct Pledge declaration of Secrecy (launched in 2013) declaration of Outside Interests Nil Returns (referring to outside interests) 2013 95,3% 93,3% 94,7% 94,6% 95,2% 13,4% 83,4% 2012 91,4% 93,3% 80,1% 85,3% 13,6% 82,6% Promoting ethics among our suppliers The Ethics Office has developed an Ethics Responsibility Index (ERI) that has thus far been used in seven tender processes to assess ethics, governance and human rights aspects of the vendors/suppliers who want to partner with us. These aspects make up 15% of the tender application assessment, so where businesses do not show effective governance, ethics, human rights and environmental frameworks, their tender results may be significantly impacted. The Ethics Office also conducts independent assessments of a number of tender processes, and this has resulted in a saving of more than R850 000 in the year under review. The Ethics Office is in partnership with the Ethics Institute and deloitte for further development of this index into a fully fledged industry tool. Human rights Nedbank Group upholds the protection of human rights as enshrined in the SA Constitution and specifically the Bill of Rights. Using the United Nations Global Compact’s (UNGC) 10 principles and the findings of the John Ruggie Report, which was commissioned by the UNGC, we have developed our own Human Rights Statement. The statement was approved by the board in 2012 and we developed an implementation plan for our Human Rights in Business Project in 2013. Full implementation of the project will start in 2014. In terms of our Human Rights Statement, our corporate responsibility to protect human rights includes: ■ Adherence to global social norms and codes of good practice. ■ An understanding of how human rights impact our business, people management practices, environmental and social considerations, procurement, the value chain, product development and financial considerations. ■ The implementation of a human rights risk management system. ■ due diligence, which includes an analysis of practices in our own activities as well as those of our stakeholders. ■ The tracking of our performance against global social norms. ■ The provision of grievance mechanisms for both internal and external stakeholders to address issues of concern. We conduct a human rights compliance assessment every two years to ensure continued adherence to international standards. during 2013 we also completed a risk assessment according to the John Ruggie Guiding Principles to ensure that we focus on all improvement areas with the implementation of the project. The Ethics Office recruited an additional ethics officer, whose main focus will be the implementation of this project. Seven human-rights-related incidents of misconduct were raised by management in 2013 (2012: 15 incidents), but all were successfully resolved. In addition, 151 human-rights-related grievances were logged by staff (2012: 84). All of these were also resolved. The increased number of reports can be attributed to increased awareness on the issue of harassment as well as the available reporting mechanisms. Type of incident Assault discrimination Intimidation Sexual harassment Victimisation Total Disciplinary action Grievances 2012 n/a n/a 5 5 5 15 2013 n/a n/a 5 1 1 7 2012 2013 3 15 n/a 7 59 84 7 21 n/a 6 117 151 Managing and optimising our own impact 92–97 Supplemen- tary information: Governance and Ethics Review 57 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenCOMMITTED TO GOOD GOVERNANCE (CONTINUED) REPORT FROM GROUP TRANSFORMATION, SOCIAL AND ETHICS COMMITTEE CHAIRMAN The Group Transformation, Human Resources and Sustainability Committee, which was established as a subcommittee of the board during 2005, was reconstituted in 2012 to form the Group Transformation, Social and Ethics Committee in line with the requirements of the Companies Act 2008, as amended. Gloria Serobe Group Transformation, Social and Ethics Committee Chairman The Group Transformation, Social and Ethics Committee is an expression of our commitment to effective and good governance. In 2014 it will remain a key enabler in the achievement of our Deep Green aspirations as we continue on our journey to be Africa’s most admired bank. 58 NEDBANK GROUP | INTEGRATED REPORT 2013Since then we have complied with the requirements of the Companies Act 2008 and applied the recommendations of King III, as we endeavoured to fulfil our transformation, social and ethics mandates. The committee comprises three non-executive directors and other attendees, including experts on each of the disciplines or areas falling within the mandate of the committee specified in regulation 43(5) of the Companies Act. Meetings are held on a quarterly basis and a report is submitted to the board after each meeting. Our focus in 2013 ‘scarce skills’ and In support of the material matters of ‘transformation of society within planetary boundaries’, we have been mandated to advise, oversee and monitor Nedbank Group’s activities with regard to social and economic development, ethics, transformation, sustainability, corporate citizenship, environmental, health and public safety, consumer relationships, labour and employment. In doing so, we have focused on the following: Governance ■ We have reviewed our board charter and annual work plan to ensure the strategic and systematic fulfilment of our identified objectives. The changes incorporated gave more direction to the functions reporting into the committee, streamlined reporting into the committee and enhanced the oversight capabilities of the committee. ■ We have considered the composition, operations and functions of the committee in an annual committee evaluation process as part of our ongoing governance review. The committee was found to be functioning effectively with appropriate standards of corporate governance being applied. ■ We have ensured that meetings are attended by relevant members of management who are experts in the areas within the scope of the committee’s mandate. The regular attendance by these experts facilitated an effective flow of information between the committee and management. ■ We have incorporated relevant training on our agenda to ensure that members remain abreast of developments within the scope of the committee’s mandate. Noteworthy topics included proposed amendments to the Broad-based Black Economic Empowerment (BBBEE) Act, and carbon and the implications of a carbon tax/carbon pricing. monitoring ■ We have reviewed the transformation strategy and monitored achievement against identified targets in a bid to deliver on our transformation commitments. The committee is satisfied with the level of transformation within the group, its target- setting methodology and transformational achievements to date. ■ We have monitored regulatory developments relating to the BBBEE Act and the Financial Sector Codes (FSC). At 31 december 2013 the group achieved a level 2 score. Committed to good governance 52–57 Fair Share 2030 22–23 Transformation Report ■ We have monitored management’s effort to improve BBBEE scores and are satisfied with the interventions by management. ■ We have reviewed developments in the area of ethics management within the group, which includes a dedicated ethics officer and an anonymous hotline for tipoffs. ■ We have monitored progress against the sustainability strategy and the group’s efforts to maintain our carbon neutrality despite increases in the scope of our carbon measurement. ■ We have guided the strategic development of Fair Share 2030 in response to Nedbank’s long-term vision for a thriving SA (see pages 22 to 23 for more detail on Nedbank’s approach). ■ We have monitored activities relating to socioeconomic development (including external skills development), access to finance, lending to enable healthcare, housing and education, enterprise development and community upliftment, economic empowerment and preferential procurement. ■ We have monitored the impact of our corporate social investment spend and considered ways of strengthening partnerships. Gt serobe Group Transformation, Social and Ethics Committee Chairman 21 February 2014 WHAT WE WILL fOCuS ON IN 2014 In 2014 the committee will: ■ focus on the group’s transformation agenda with emphasis on the impact of regulatory requirements and targets; ■ focus on the impact of the industry realignment process of the Financial Sector Code with the Revised Codes of Good Practice (the codes) through The Banking Association South Africa (BASA); ■ monitor developments in the implementation of Fair Share 2030, Nedbank’s strategic response to its long-term goals for a thriving SA; and ■ continuously evolve its monitoring activities, where necessary, to enable effective fulfilment of its mandate. 59 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenCommitted to good governanCe (CONTINUED) reGister oF DireCtors‘ attenDanCe Nedbank Group Ltd Board Nedbank Ltd Board Nedbank Group Directors’ Affairs Committee 8 8/8 8/8 4/5 7/8 8/8 8/8 4/4 8/8 8/8 8/8 8/8 8/8 8/8 8/8 8/8 8 8/8 8/8 4/5 7/8 8/8 8/8 4/4 8/8 8/8 8/8 8/8 8/8 8/8 8/8 8/8 5 5/5 3/3 4/43 4/54 5/5 2/43 5/5 Number of meetings directors Tom Boardman Mike Brown Thenjiwe Chikane1 Graham dempster Mustaq Enus-Brey Ian Gladman don Hope2 Reuel Khoza Mpho Makwana Nomavuso Mnxasana Raisibe Morathi Joel Netshitenzhe Julian Roberts Gloria Serobe Malcolm Wyman Nedbank Group Remuneration Committee Nedbank Group Audit Committee 6 5 Nedbank Group IT Committee Nedbank Group Credit Large- exposure Approval Committee Committee Nedbank Group Risk and Capital Management Committee 5 Nedbank Group Transformation, Social and Ethics Committee Nedbank Group Finance and Oversight Committee 5/5 1/1 4/4 5/6 6/6 2/4 4/6 3/4 1/1 5/5 5/5 4 4/4 3/3 4/4 3/4 9 8/9 9/9 5/5 8/9 9/9 9/9 11 10/11 10/11 6/7 9/11 9/11 7/9 10/11 6/9 6/11 5/5 4/5 2/2 5/5 4/5 5/5 4 1/4 3/3 3/4 4/4 4 4/4 4/4 0/1 2/2 4/4 1 Resigned as director with effect from 13 August 2013. 2 Resigned as director with effect from 30 June 2013. 3 Recused from one short-notice meeting due to a conflict of interest. 4 Unable to attend one meeting that was called at short notice. details of appointments to and resignations from the board committees are provided on page 171 of the Remuneration Report. 60 NedbaNk Group | Integrated report 2013Nedbank Group Ltd Board 8 Nedbank Group Directors’ Nedbank Group Nedbank Group Audit Affairs Remuneration Committee Committee Committee Nedbank Ltd Board 6 5 8 8/8 8/8 4/5 7/8 8/8 8/8 4/4 8/8 8/8 8/8 8/8 8/8 8/8 8/8 8/8 5 5/5 3/3 4/43 4/54 5/5 2/43 5/5 8/8 8/8 4/5 7/8 8/8 8/8 4/4 8/8 8/8 8/8 8/8 8/8 8/8 8/8 8/8 5/5 1/1 4/4 5/6 6/6 2/4 4/6 3/4 1/1 5/5 5/5 Number of meetings directors Tom Boardman Mike Brown Thenjiwe Chikane1 Graham dempster Mustaq Enus-Brey Ian Gladman don Hope2 Reuel Khoza Mpho Makwana Nomavuso Mnxasana Raisibe Morathi Joel Netshitenzhe Julian Roberts Gloria Serobe Malcolm Wyman 1 Resigned as director with effect from 13 August 2013. 2 Resigned as director with effect from 30 June 2013. 3 Recused from one short-notice meeting due to a conflict of interest. 4 Unable to attend one meeting that was called at short notice. details of appointments to and resignations from the board committees are provided on page 171 of the Remuneration Report. Nedbank Group IT Committee Nedbank Group Credit Committee Large- exposure Approval Committee 4 4/4 3/3 4/4 3/4 9 8/9 9/9 5/5 8/9 9/9 9/9 11 10/11 10/11 6/7 9/11 9/11 7/9 10/11 6/9 6/11 Nedbank Group Risk and Capital Management Committee 5 5/5 4/5 2/2 5/5 4/5 5/5 Nedbank Group Transformation, Social and Ethics Committee Nedbank Group Finance and Oversight Committee 4 1/4 3/3 3/4 4/4 4 4/4 4/4 0/1 2/2 4/4 61 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenDeliVerinG sustAinAbly to All our stAKeHolDers ChieF exeCutive’s review 2013 has been a successful year for Nedbank Group – we repositioned Nedbank Retail, exceeded our NIR-to-expenses ratio of greater than 85%, tilted our portfolio away from high-risk, low-EP activities and built on our rest of Africa strategy. These actions position us well for the challenging economic environment we expect in the year ahead. I am pleased to report to all our stakeholders that 2013 was a successful year for Nedbank Group. It has been four years since I was appointed CEO, and we set out to deliver on four key strategic focus areas that I announced at that time. These were: 1 Repositioning Nedbank Retail Headline earnings have increased from a loss-making position to R2,5bn in 2013 and the return on capital has improved to 11,6%. In the second half of 2013 Nedbank Retail’s return on capital exceeded its cost of capital. Mike Brown Chief Executive 62 NedbaNk Group | Integrated report 20131 829 cents dILUTEd HEAdLINE EARNINGS PER SHARE 15% 895 cents dIVIdENd PER SHARE 19% 12,5% COMMON-EQUITY TIER 1 RATIO (BASEL III) (2012: 11,6%) An attractive growth strategy 10–23 2 Growing non-interest revenue (NIR) Our NIR growth has been ahead of the industry average and our NIR-to-expense ratio increased from 78,8% in 2009 to 86,4%, above our > 85% target for the first time. 3 Portfolio tilt We have followed a policy of selective origination in some advances categories and proactively reduced our exposure to higher-risk products in preparation for rising interest rates. Common-equity tier 1 capital increased from 9,9% (Basel II) to 12,5% (Basel III) and non-performing loan coverage levels from 29% to 42,8%. Economic profit (EP) increased from R57m to R2,1bn. 4 Rest of Africa We have secured the rights to subscribe for up to 20% in Ecobank Transnational Incorporated (ETI) and made our first foray into Mozambique with approval obtained for an initial stake of 36,4% of Banco Unico, targeting the end of the first quarter of 2014 for completion of the transaction. Chief Financial Officer’s Review 100–107 GRI 3.1: 1.1 63 during this time, we also acquired the minority interests that we did not own in various Old Mutual joint venture (JV) businesses to expand our economic interests in bancassurance and wealth management and we acquired full ownership of Imperial Bank, increasing our vehicle financing exposure to a market share of 25,2%. We have also increased our cooperation with our parent company, Old Mutual plc, and our sister companies in SA. New-business flows from our financial planners to Old Mutual SA increased 58% in 2013 and we entered the direct-insurance market in partnership with Mutual & Federal. Today, we are a far stronger bank than we were in 2009; we have added 2,2m retail clients and franchise while built strengthening our balance sheet for the rising interest rate cycle that lies ahead. the value of our Investors will be pleased to know that since 2009 our net asset value per share has increased by a compound growth rate of 9,6%, our return on equity (ROE) (excluding goodwill) has increased from 13,4% to 17,2%, and we have delivered compound dividend growth of 19,4% per annum. Headline earnings have grown from R4,3bn to R8,7bn. While our financial performance has been among the best in our peer group, I am particularly pleased that, with our focus on sustainability that is so closely linked to our brand, we delivered value to all our stakeholders. ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenCHIEF EXECUTIVE’S REVIEW (CONTINUED) Our journey to being Africa’s most admired bank, by all our stakeholders Our vision, to be Africa’s most admired bank, is underpinned by delivery to all our stakeholders – our staff, clients, shareholders, regulators and communities. In 2013 we continued to make good progress with our vision, as demonstrated by the following achievements: INVESTING IN OUR PEOPLE INNOVATING FOR OUR CLIENTS For our staff. At a time when jobs are being lost across the economy, we provided employment for more than 550 additional permanent employees in SA, invested significantly in training, progressed well with staff transformation initiatives as reflected in our employment equity statistics and continued the participation of our leaders in our Leading for Deep Green. This programme has not only made a significant difference to team effectiveness across the group, but also provided deep personal insights, for which our staffmembers are extremely grateful. As a result, our culture measurements are healthy – internally we have never been in a better position and our culture continues to attract high-calibre staff. ■ Tough economic conditions ■ Scarce skills I S R E T T A M L A R E T A M D E T A L E R For our clients. We continued investing in our distribution footprint with 334 additional ATMs and the rollout of 28 of our Branches of the Future. System uptime was at multiyear highs and we accelerated delivery in innovation with the launch of various market-leading products. Taking cognisance of the impact of a tough economic environment on our clients’ disposable income, we launched one of the lowest-priced credit life products with increased benefits and saved clients banking fees by proactively moving them to lower-priced bundled products and by keeping general fee increases at 0% for 2014. In 2013 we increased loan payouts by 10% and excelled at managing our clients’ money, once again being rated one of SA’s top three asset managers in the Raging Bull Awards, with assets under management increasing 26,5% to a record R190bn. As a result of all of this, more people chose to bank with Nedbank and our client numbers increased by 10% to 6,7m. ■ Tough economic conditions ■ Banking relevance amid consumerism and increased competition ■ Increased demands on governance and risk management ■ Growth opportunities in the rest of Africa ■ Transformation of society within planetary boundaries DELIVERING VALUE TO OUR SHAREHOLDERS For our shareholders. We delivered a strong set of results, achieving earnings growth in excess of our medium-to-long-term target, while investing in the franchise and strengthening our balance sheet provisioning levels. We delivered a total shareholder return of 16% and increased the full-year dividend by 19%. We also positioned the group for long-term shareholder value creation through our Pan-African banking strategy and we were once again voted the Financial Times and The Banker magazine 2013 SA Bank of the Year. ■ Tough economic conditions ■ Banking relevance amid consumerism and increased competition ■ Increased demands on governance and risk management ■ Growth opportunities in the rest of Africa ■ Transformation of society within planetary boundaries ■ Scarce skills PARTNERING WITH OUR REGULATORS For our regulators. To the satisfaction of these important institutions that oversee the health of our industry, we implemented Basel III successfully on 1 January 2013, with the group’s common-equity tier 1 capital strengthening further to 12,5%, being the top end of our internal target ranges. For our government, we made cash taxation contributions of R8bn relating to direct, indirect, PAYE and other taxation. We maintained our strong, open and transparent relationships with all regulators and continued our commitment to responsible banking practices. We are committed to being worldclass at managing risk and doing appropriate remediation where required. ■ Tough economic conditions ■ Banking relevance amid consumerism and increased competition ■ Increased demands on governance and risk management ■ Growth opportunities in the rest of Africa ■ Transformation of society within planetary boundaries ■ Scarce skills GREAT PLACE TO WORK GREAT PLACE TO BANK GREAT PLACE TO INVEST WORLDCLASS AT MANAGING RISK 64 NEDBANK GROUP | INTEGRATED REPORT 2013 LEADING IN THE COMMUNITIES WE SERVE For our communities. Since 2009 we have expanded our footprint to service 10 000 more areas and suburbs and contributed significantly to socioeconomic development. We maintained our level 2 broad-based black economic empowerment (BBBEE) contributor status for the fifth consecutive year and were ranked first among the top 100 companies in the Mail & Guardian dti Code survey, acknowledgement of the lead we are taking in building a more transformed SA. We were recognised as a leader in socially responsible banking at the 2013 African Banker awards and won the Sunday Times Top 100 Companies Corporate Social Investment (CSI) awards, illustrative of our green and caring approach, whether it’s for the benefit of our communities or our environment. ■ Tough economic conditions ■ Transformation of society within planetary boundaries ■ Scarce skills HIGHLY INVOLVED IN THE COMMUNITY AND ENVIRONMENT A sustainable business model The world has been a tough place for banks and bankers since the financial crisis began in 2008, with very few macroeconomic tailwinds. In SA our economy has grown slower than expected for the past few years, but given our sound banking system, growth in consumer spending and the commodity demand from China, it has been less affected than many developed economies. However, in 2013 the economy weakened more than expected. Initially forecast to grow at 2,6%, gross domestic product (GDP) growth ended the year at 1,9%, reflecting the continuing tough global environment and slowdowns in the economies of key trading partners together with our country’s own challenges, such as widespread labour strikes across export-led industries, high unemployment, infrastructure constraints and high levels of consumer indebtedness despite low levels of interest rates and real wage increases. Nevertheless, as discussed in greater detail in the Chief Financial Officer (CFO) section of this integrated report, our 2013 financial performance reflects the benefits of continuing to invest for growth and building our franchise, while our cost discipline and risk management capabilities ensured that we remained resilient despite the uncertain and volatile economic environment. I am convinced that the foundation we have built enables Nedbank to enter what is likely to be a challenging and volatile environment in 2014 in the best shape we have ever been. Our history also shapes the way we think about the future. It explains the value we place on our people and our unique culture, why we emphasise risk management and manage costs well, and why we invest with a long-term perspective and build diverse earnings streams. As we continue to grow, it will become more difficult to deliver the same rates of growth year after year, but this is the challenge every successful organisation faces and Nedbank is no different. This is where I believe our resilient business model, our people and our organisational culture will stand us in good stead. Embedding our values and culture Nedbank is a vision-led, values-driven organisation. We identified and introduced our values of accountability, integrity, pushing beyond boundaries, respect and being people-centred a decade ago. We have embedded them in our culture and continuously acknowledge our people – not just for what they achieve, but for how they achieve it. We fundamentally believe our culture, which encompasses our values, is our key source of competitive differentiation. Our culture survey, which measures the number of matches between an individual’s values and those of the organisation, shows that we have five matches – a worldclass level. It is particularly pleasing for me to see that our top three values – accountability, client satisfaction and being client-driven – are embedded in the organisation. Other values on our top 10, such as teamwork, environmental awareness and employee recognition, also align with our strategic focus areas, which gives me confidence in our future success as our plans and our hearts are aligned. We have found that there is no magic wand to reinforce culture, and no organisation can ensure that everyone does everything perfectly all the time. But we need to keep working at embedding our culture, because it is our key differentiator. Collaboration across our business is another area of distinctiveness. We have had good success from our Nedbank @ Work offering, which provides the employees of our wholesale clients with banking services, and which has given us more than 200 000 new clients since 2012. We also gained good traction in winning deals because we combined and co-located our Nedbank Capital and Nedbank Corporate structured- debt finance teams. Our shared services areas continue to be a good example of how to share resources and work together efficiently with a business partnering mindset. Building enduring relation- ships 30–47 Chief Financial Officer’s Review 100–107 65 ENSURING A SUSTAINABLE BUSINESSINFORMATION TO OUR SHAREHOLDERSDELIVERING TO OUR STAKEHOLDERSMAKING THINGS HAPPENChief exeCutive’s review (CONTINUED) Refining our strategy during our strategy development and planning processes in 2013 we identified six material matters that will continue to impact the bank in years to come as we seek to become Africa’s most admired bank. These are: ■ tough economic conditions. These seem to be the ‘new normal’ as developments in the external environment impact both our clients and the bank. ■ banking relevance amid consumerism and increased competition. We put our clients at the centre of everything we do in a more competitive environment. ■ increased demands on governance and risk management. Regulators seek to ensure a strong stable financial system and parity for all stakeholders. ■ Growth opportunities in the rest of africa. As our clients expand beyond the borders of SA we seek to unlock growth opportunities in regions of higher GdP growth. ■ the transformation of society within planetary boundaries. We strive to build a thriving bank in a thriving society. ■ scarce skills. We continually seek to keep and attract the best skills in a highly competitive environment. during 2013 we took stock of our four key strategic focus areas in relation to these six material matters and refined our statement of strategic intent, sharpened the language and changed the emphasis. The core principles of our successful strategy remain the same, but the context and challenges have evolved, and therefore we felt that our emphasis needed to shift as well. The first change is that our initiative to reposition Nedbank Retail is no longer highlighted as a separate focus area because the retail bank has been fundamentally repositioned, and it is resilient and ready to grow and improve its returns. Going forward we have five key strategic focus areas that are applicable right across Nedbank Group. All five, together with our stakeholder commitments, represent our strategic response to the material matters. 3 1 Client-centred innovation Firstly, we are accelerating innovation to make the group more accessible and easier to bank with through digital, integrated banking channels. Our client- centred business model, which was introduced in 2009, has enabled a far deeper understanding of what is important to our clients, and the clients I engage with across all our segments echo this. In the past two years we have brought more digital-banking offerings to our clients than ever before, with offerings such as Approve-it™, MyFinancialLife™, PocketPOS™ and an online home loan application site, to name a few. Since the Nedbank App Suite™ was launched over 340 000 downloads have been done and over R6bn (in over 10,5m transactions) has been transacted over the platform. Winning the MTN Android Consumer App of the Year award in 2013 demonstrates that we are indeed making progress, but we have to get even better and be more relevant and responsive to our clients in an increasingly competitive banking environment. An attractive growth strategy 10–23 investing Optimise to invest We want to leverage our strong cost culture and be more adept at extracting efficiencies while in our franchise for the longer term. Since 2009 we have achieved a cumulative R1,1bn in in Nedbank Retail while efficiencies investing R1,7bn in new distribution channels, client-value propositions such as Savvy and Ke Yona and system functionalities across the bank. In 2013 we initiated a SAP enterprise resource planning (ERP) system replacement in finance, and procurement functions. Since 2009 we have removed over R500m from the core cost base in technology, and as part of our ‘rationalise, standardise and simplify’ information technology (IT) strategy we have decommissioned 56 IT systems in our effort to reduce core systems from 220 to 60, while decommissioning a further 21 non-core IT systems. resources human 2 Strategic portfolio tilt Strategic portfolio tilt retains the same focus as portfolio tilt, which has helped us drive an increase in EP from R57m in 2009 to R2,1bn in 2013 as we focus on the optimal allocation of scarce resources such as capital and longer-dated funding. This has been supported by selective advances growth to mitigate against downside risk in products such as personal loans and home loans, while we focused strongly on EP-generative activities such as deposit growth, insurance, asset management, cards, vehicle finance and investment banking. Strategic portfolio tilt also incorporates Nedbank’s Fair Share 2030, which is born of the important role that Nedbank, as one of the 40 largest companies in SA, has to play in the economy and broader society. It involves a carefully calculated flow of money allocated each year for investment in future-proofing the environment, society and our business. In 2013 our Fair Share 2030 initiative made steady progress and early results have been encouraging, with innovative financing solutions emerging in agriculture, energy, housing and transportation. Lessons learned during our proof-of-concept phase will inform the way we scale up to the full Fair Share 2030 commitment – roughly equivalent to R6bn, or 4% to 6% of new lending each year. While it is too early to state precisely the earnings impact of Fair Share 2030, we are convinced it will create significant long-term value as we increase our participation in the green economy and underpin our vision of being Africa’s most admired bank. 66 NedbaNk Group | Integrated report 20134 Growing our transactional banking franchise Our strategic initiative to grow NIR has seen us increase our NIR-to-expenses ratio above 85% for the first time. Growing NIR is, however, an outcome of growing our transactional banking franchise and that is why we focus on high-quality, annuity NIR generated through transactional banking volume growth. To achieve this we will further strengthen our franchise by attracting even more transactional banking clients to build our current and savings account market share to levels closer to our asset market share, a challenge not dissimilar to the 85% NIR-to-expenses target we set in 2010. Achieving this will require innovative, client-centred products and value propositions, transparent and competitive pricing, efficient and sales-oriented channels, both physical (through our Branch of the Future) and electronic, as well as collaboration across all our businesses to deepen our share of wallet. 5 Pan-African banking network ‘rest of Africa’ strategic focus The has been renamed the ‘Pan-African banking network’ and will continue to incorporate our strategic alliance with Ecobank in West and Central Africa and our own network and expansion activities the Southern African Development Community (SADC) and East Africa. Nedbank has the right to take up a shareholding of up to 20% in ETI and a formal decision will be made during the rights exercise period in 2014. in Regulatory approval has been received to acquire an initial stake of 36,4% of Banco Unico in Mozambique and completion of the transaction targeted for end March 2014. The presence in Mozambique will contribute to the strengthening of Nedbank’s franchise and client proposition in the SADC and East Africa, increasing our presence to six countries. In 2013 we signed an alliance agreement with the Bank of China and this has already resulted in the conclusion of several transactions for clients. Outlook The economic outlook for 2014 remains volatile and uncertain, both globally and here in SA. There is a growing divergence between anticipated prospects for developed economies and emerging markets. Developed economies are expected to see accelerated momentum while emerging markets wrestle with the effects of the tapering off of quantitative easing as funds are disinvested, currencies depreciate and interest rates increase. This is particularly the case in countries such as SA, which have both current account and fiscal deficits to finance. A further concern is China’s economic slowdown, given its importance as a trade partner of SA. SA’s GDP is forecast to grow by 2,6% in 2014 – higher growth than in 2013, but still below potential – with the key drivers likely to be better export performance and an increase in gross fixed-capital formation. However, downside risk to growth has increased as interest rates have started on an upward trajectory with a 50 basis point increase in January 2014 and further potential increases later in the year. At the time of writing, forward rate markets were pricing in further interest rate increases of 150 basis points in 2014. This does not bode well for consumers who are already struggling with high levels of indebtedness. The economy is also dealing with infrastructural constraints and policy uncertainty, and corporate credit demand will likely remain subdued as corporates delay their commitment to new projects. In this context we believe Nedbank is well positioned and our strategies are appropriate for the environment. Our business is well diversified, with no cluster contributing more than 29% to headline earnings. NIR today contributes 48% of income, well ahead of the 42% in 2009. Our asset base is approximately 62% in wholesale and 38% in retail. We have positioned our book for a rising interest rate cycle, benefiting net interest income (NII) (including endowment income) by R936m before tax for every 1% increase in interest rates over a 12-month period. Defaulted advances continued to decrease to R17,5bn or 3% of our book (5,9% in 2009). While we cannot avoid the potential negative impact of higher rates on our clients’ ability to repay and hence our impairments, especially if rates increase too fast or too much, we have taken proactive steps by increasing our coverage on specific impairments to 42,8% (from 29% in 2009) and retail portfolio impairments to 1,4% of the performing book (from 0,5%). In addition, we have taken early action to reduce our exposure to higher-risk products such as personal loans and home loans, well ahead of the industry – home loans in particular have proved historically to be problematic for the industry if interest rates rise steeply. In summary, Nedbank enters 2014 with good momentum and a strong balance sheet. We are well positioned to make the most of growth opportunities as they present themselves, and we remain committed to consistent delivery for all our stakeholders. Given the uncertain economic environment, forecast risk has increased and, in this context in the year ahead, we are currently expecting organic growth in diluted headline earnings per share to be in excess of the growth in nominal GDP. Appreciation Nedbank’s journey over the past four years has been one of resilience, growth and consistent delivery. The next four years will undoubtedly be equally exciting. We have a solid foundation on which to continue building our growth, driven by our five key focus areas, and we are investing in our businesses and growing our franchise value. By delivering on our strategy, by staying true to our culture, and by being innovative and client-centred, I am confident that we can continue to go from strength to strength. I would like to thank our investors for their support throughout this journey. I would also like to express my gratitude to the exceptional and highly experienced group executive team that I am honoured to work with. Thank you for your invaluable contribution to the group, your knowledge, your leadership strength and your willingness to take on tough situations with a smile. To our board of directors and to our parent company, Old Mutual, thank you. To our Chairman, Reuel Khoza, thank you for your wisdom, guidance and support. Finally and most important of all, I would like to thank our people for their hard work, loyalty and commitment and our clients for trusting us with their banking needs. Together we make Nedbank a great place to work at, a great place to bank with and a great bank to invest in. Mike Brown Chief Executive 67 ENSURING A SUSTAINABLE BUSINESSINFORMATION TO OUR SHAREHOLDERSDELIVERING TO OUR STAKEHOLDERSMAKING THINGS HAPPENGrowinG our FranChises The following pages offer a broad overview of the various clusters making up Nedbank Group’s core business. for detailed information on business activities and strategies, as well as a review of 2013, please see the supplementary information on nedbankgroup.co.za or through the nedbank app suitetm. F F A T S GROuP Wholesale and retail banking services Insurance Asset management Wealth management NEDBANk CAPITAL Investment banking and markets solutions to institutional and corporate clients. Offices: SA and London. Representative offices: Angola and Toronto. NEDBANk CORPORATE Lending, deposit-taking, transactional banking to SA corporates with turnover > R700m pa and commercial- property finance. Headline earnings 29 513 683 2 186 ASSETS ASSETS ASSETS 100% 24% 25% I S C R T E M Assets L A C N A N I F I ROE1 15,6% ECap2 R64,3bn (100%3) ROE1 29,4% ECap2 R5,9bn (9,1%3) ROE1 26,4% ECap2 R8,5bn (13,2%3) HEADLINE EARNINGS HEADLINE EARNINGS HEADLINE EARNINGS 100% 20% 26% R8,67bn (+15,9%) R1,73bn (+20,6%) R2,25bn (+23,6%) GRI FSSS: FS6 GRI G3.1: 2.2, 2.7, EC2 Supplementary information: Operational Overview 68 1 Return on equity. 2 Economic capital. 3 % of group total. NedbaNk Group | Integrated report 2013 NEDBANk BuSINESS BANkING Commercial banking solutions for small-to- medium-sized businesses with a turnover of R10m to R700m pa. Holistic offering for businesses, business owners, households and employees. NEDBANk RETAIL A bank for all financial needs of individuals and small businesses with a turnover less than R10m pa. Transactional, card, lending, deposit-taking, risk management and investment products/ services, as well as card-acquiring services for business. NEDBANk WEALTH Insurance, asset management and wealth management solutions. Offices: SA, London, Isle of Man, Jersey, Guernsey and Middle East. CENTRE INCLuDING REST Of AfRICA In addition to nine shared- services clusters, Centre includes the Rest of Africa (RoA) division with operations in Lesotho, Malawi, Namibia, Swaziland and Zimbabwe as well as a recent investment in Mozambique (regulatory approval obtained, targeting completion by end March 2014). RoA is the custodian of the Ecobank Alliance. 2 346 17 153 2 056 5 089 ASSETS ASSETS ASSETS ASSETS 13% 27% 7% 4% ROE1 19,4% ECap2 R4,8bn (7,4%4) ROE1 11,6% ECap2 R21,9bn (34,0%4) ROE1 36,2% ECap2 R2,5bn (3,9%4) ECap2 R20,7bn3 (32,3%4) HEADLINE EARNINGS HEADLINE EARNINGS HEADLINE EARNINGS HEADLINE EARNINGS 11% 29% 10% 4% R0,93bn (-1,6%) R2,54bn (-0,5%) R0,90bn (+25,3%) R0,33bn (+>100%) 1 Return on equity. 2 Economic capital. 3 Rest of Africa, goodwill and excess capital. 4 % of group total. 69 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPengrowing our franChises (CONTINUED) GROuP Nedbank Group Ltd is a bank holding company and one of the four largest banking groups in SA measured by assets, with a strong deposit franchise. Its principal banking subsidiary is Nedbank Ltd. Nedbank operates under a federal operating model with five separate yet aligned client-facing clusters, supported and enabled by central services. NEDBANk CAPITAL Clients among top 200 SA corporates and parastatals. Top three mergers and acquisitions player. Industry expertise in: ■ Infrastructure. ■ Mining and resources. ■ Oil and gas. ■ Telecoms. ■ Energy. NEDBANk CORPORATE Top two SA corporate bank. > 600 large corporate clients. Strong market share in public sector loans. Continued market leadership in commercial property finance. W E I V R E V O L A N O T A R E P O I ■ Grow transactional banking franchise. ■ Client–centred innovation. ■ Optimise to invest. ■ Strategic portfolio tilt. ■ Pan-African banking network. ■ Strong client relationships. ■ Continued product and NIR growth through enhanced capabilities and primary-client growth. ■ Increased Pan-African focus. ■ Strong risk management. ■ Strong Investment Banking (IB) pipeline with more cross-sell across businesses. ■ Strategic growth in Africa and leverage Ecobank and Bank of China. ■ Leverage industry expertise. ■ Leverage trading systems. ■ Participating strongly in SA’s infrastructure build programme, including renewable energy. I I S R E V R d C G E T A R T S Y E K GRI FSSS: FS6 GRI G3.1: 2.2, 2.7, EC2 Supplementary information: Operational Overview 70 NedbaNk Group | Integrated report 2013 NEDBANk RETAIL 6,4m clients. 763 branches and alternate outlets, 287 Personal Loan kiosks and 3 382 ATMs. Strong positioning in household motor finance (28% share), and household deposits (20%). Compelling, innovative CVPs for all segments. NEDBANk BuSINESS BANkING About 25 000 client groups and strong primary-client gains. A leader in Corporate Saver deposits and debtor management. Excellent client-centred risk management and worldclass client management capabilities. distinctive client value propositions (CVP) and accountable empowered decentralised business service model. ■ A choice of distinctive client-centred banking experiences. ■ A rigorous approach to capturing virtuous circle and interdependencies between client segments. ■ Integrated-channels strategy leveraging mobile innovation, digital channels and social media; selected micro markets for growth/optimisation; area collaboration. ■ Robust risk management supporting strong product niches. ■ Liabilities innovation sustaining historical strength. ■ Collaborative, people-centred culture. NEDBANk WEALTH Life embedded value: R2,1bn Assets under management: R190,3bn > 10 000 high-net-worth (HNW) clients Nedgroup Investments: Raging Bull awards: Top 3 management company in SA for the fifth consecutive year; Morningstar awards: overall third place. Nedbank Private wealth: SA: ranked second in the ‘Up-and-coming professionals’ category in the 2013 SA’s Top Private Bank survey. International: ‘Best Private Bank for the Channel Islands’ and ‘Euromoney‘ Best Private Bank for HNW clients in the offshore category. ■ Explore broader complementary financial services growth opportunities. ■ Leverage momentum in Wealth and Asset Management. ■ Further CVP enhancements and focus on service excellence. ■ Product expansion and delivering client- centred solutions. ■ Continued investment in brand profiling. ■ Leverage advantage through group collaboration. CENTRE INCLuDING REST Of AfRICA Each cluster is charged using an activity-justified transfer pricing model based on a fully recoverable basis. ■ Creating a Pan-African banking network by utilising our tiered approach for RoA expansion, which includes leveraging our Ecobank alliance. ■ Optimise economic profit through strategic portfolio tilt. ■ Optimise-to-invest initiative. ■ IT systems rationalisation and replacement. ■ Risk-based economics (economic capital allocation, funds transfer pricing, liquidity premiums and risk- adjusted performance management) embedded groupwide in the business. 71 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenboArD of Directors estabLisheD LeaDership teams 1 Dr reuel Jethro Khoza 64 non-executive Chairman Appointed August 2005 as a non-executive director and May 2006 as Chairman Qualifications: BA(Hons) Psychology (University of Limpopo), MA Marketing Management (Lancaster, UK), Engd (Warwick, UK), IPBM-IMd (Lausanne, Switzerland), PMd (Harvard Business School, USA), LLd(hc) Rhodes, Cd (SA) Chairman’s Review 48–51 1 2 2 michael william thomas brown 47 Chief executive Appointed June 2004 as Chief Financial Officer and March 2010 as Chief Executive Qualifications: BCom, dip Acc, CA (SA), AMP (Harvard Business School, USA) Chief Executive’s Review 62–67 3 David Kwame tandoh adomakoh1 48 Appointed 21 February 2014 Qualifications: BSc(Hons) Economics (London School of Economics), diplome de Langue et de Civilisation (La Sorbonne, Université de Paris) 4 thomas andrew boardman1 64 Appointed November 2002 as an executive director, March 2010 as a non-executive director and January 2014 as an independent non-executive director Qualifications: BCom, CA (SA) 72 3 4 5 6 5 Graham wayne Dempster 58 Chief operating officer Appointed August 2009 Qualifications: BCom, CTA, CA (SA), AMP (Harvard Business School, USA) 6 mustaq ahmed enus-brey2 59 Appointed August 2005 Qualifications: BCompt(Hons), CA (SA) NedbaNk Group | Integrated report 2013 7 Ian David Gladman2 49 Appointed June 2012 Qualifications: BA(Hons) History (Christ’s College, Cambridge) 8 Paul Mpho Makwana1 43 Appointed 17 November 2011 Qualifications: BAdmin(Hons) Reporting back on remuneration 138–140 GRI 3.1: 4.3 9 Nomavuso Patience Mnxasana1 57 Appointed October 2008 Qualifications: BCompt(Hons), CA (SA) 7 8 9 10 Raisibe Kgomaraga Morathi 44 Chief Financial Officer Appointed September 2009 Qualifications: BCompt(Hons), CA (SA), HDip Tax, AMP (INSEAD) Chief Financial Officer’s Review 100–107 12 Julian Victor Frow Roberts2 56 Appointed December 2009 Qualifications: Fellow of Institute of Chartered Accountants, member of Association of Corporate Treasurers, Accountancy and Business Law (University of Stirling, Scotland) 13 Gloria Tomatoe Serobe2 54 Appointed August 2005 Qualifications: BCom (Unitra), MBA (Rutgers, USA) Report from Group Transformation, Social and Ethics Committee Chairman 58–59 14 Malcolm Ian Wyman3 67 Appointed August 2009 Qualifications: CA (SA), AMP (Harvard Business School, USA) Report from our Audit Committee 110–113 10 13 11 12 14 11 Joel Khathutshelo Netshitenzhe1 57 Appointed August 2010 Qualifications: MSc (University of London, UK) 1 2 3 Independent non-executive director Non-executive director Senior independent non-executive director 73 ENSURING A SUSTAINABLE BUSINESSINFORMATION TO OUR SHAREHOLDERSDELIVERING TO OUR STAKEHOLDERSMAKING THINGS HAPPENestablished leadership teams (CONTINUED) Dr Reuel Jethro Khoza 64 Non-executive Chairman (Appointed: August 2005 as a non-executive director and May 2006 as Chairman) Qualifications: BA(Hons) Psychology (University of Limpopo), MA Marketing Management (Lancaster, UK), EngD (Warwick, UK), IPBM-IMD (Lausanne, Switzerland), PMD (Harvard Business School, USA), LLD(hc) Rhodes, CD (SA) Nationality: SA Reuel was appointed the Non-executive Chairman of the group in May 2006. He is also Chairman of Aka Capital (Pty) Ltd, and a non-executive director of Nampak Ltd, Protea Group Ltd 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 Ltd. Reuel is also the Chancellor of the University of Limpopo. Committees: Group Directors’ Affairs Committee (Chairman) Shares: Nedbank Group Ltd ordinary shares: 7 800 beneﬁcial direct and 6 974 beneﬁcial indirect Nedbank Ltd preference shares: 0 Michael William Thomas Brown 47 Chief Executive (Appointed: June 2004 as Chief Financial Officer and March 2010 as Chief Executive) Qualifications: BCom, Dip Acc, CA (SA), AMP (Harvard Business School, USA) Nationality: SA Mike was an executive director of BoE Ltd and, after the merger between Nedbank Ltd, BoE Ltd, Nedbank Investment Bank Ltd and Cape of Good Hope Bank Ltd, was appointed Head of Property Finance at Nedbank Ltd. He was appointed as Chief Financial Officer of Nedbank Group in June 2004 and then as Chief Executive in 2010. Committees: Large-exposure Approval Committee, Group Credit Committee Shares: Nedbank Group Ltd ordinary shares: 55 049 beneﬁcial direct and 288 108 beneﬁcial indirect Nedbank Ltd preference shares: 0 David Kwame Tandoh Adomakoh 48 Independent Non-executive Director (Appointed 21 February 2014) Qualifications: BSc (Econs) Hons (London School of Economics), Diplome de Langue et de Civilisation (La Sorbonne, Université de Paris) Nationality: Ghanaian David is Chairman of Tiso Investment Holdings (Pty) Ltd and a co-founder of Tiso Group and served as its Group Managing Director. He is a former director of Chase Manhattan Ltd, London; Head of the Chase Manhattan Bank, Southern Africa; Executive Director of Robert Fleming SA; and Head of Africa Corporate Finance at JP Morgan. He currently serves as a non-executive director of Kagiso Tiso Holdings (Pty) Ltd, and Chairman of its Investment Committee. He also serves as a non-executive director of Idwala Industrial Holdings, African Explosives Ltd, Aveng (Africa) Ltd and Trident Steel. His experience spans 25 years in executive management and investment banking, and includes principal investing, corporate and project ﬁnance advisory work, debt capital raising, and ﬁnancial derivatives in a number of countries predominantly in Africa and Europe. He has also served on the boards of a number of SA, Nigerian and Ghanaian companies. He is a founding trustee of the Tiso Foundation, and a World Fellow of the Duke of Edinburgh’s International Award. Shares: Nedbank Group Ltd ordinary shares: 0 Nedbank Ltd preference shares: 0 74 Thomas Andrew Boardman 64 Independent Non-executive Director (Appointed: November 2002 as an executive director, March 2010 as a non-executive director, and January 2014 as an independent non-executive director) Qualifications: BCom, CA (SA) Nationality: SA Tom was Chief Executive of Nedbank Group Ltd from December 2003 to February 2010. He was previously Chief Executive and an executive director of BoE Ltd, one of SA’s leading private and investment banking companies that was acquired by Nedbank in 2002. He was the founding shareholder and Managing Director of retail housewares chain Boardmans, which he sold to Pick ‘n Pay Stores Ltd in 1986. Prior to this he was Managing Director of Sam Newman Ltd and worked for Anglo American Corporation Ltd for three years. He served his articles at Deloitte. He is a non-executive director of Nedbank Group Ltd, Woolworths Holdings Ltd, Royal Bafokeng Holdings (Pty) Ltd and African Rainbow Minerals Ltd. Tom has also been appointed as a non-executive director of Kinnevik, a listed Swedish investment company. He is a director of The Peace Parks Foundation and the Chairman of The David Rattray Foundation, and serves as a trustee on a number of other charitable foundations. Committees: Group Information Technology Committee (Chairman), Group Transformation, Social and Ethics Committee, Group Credit Committee (Chairman), Large-exposure Approval Committee, Group Finance and Oversight Committee, Group Directors’ Affairs Committee Shares: Nedbank Group Ltd ordinary shares: 4 012 beneﬁcial direct and 28 593 beneﬁcial indirect Nedbank Ltd preference shares: 243 000 beneﬁcial indirect Graham Wayne Dempster 58 Chief Operating Officer (Appointed: August 2009) Qualifications: BCom, CTA, CA (SA), AMP (Harvard Business School, USA) Nationality: SA Graham joined the group in 1980 in the Corporate Finance Division of UAL Merchant Bank Ltd. He was appointed General Manager in 1987 and Joint Head of the (UAL) Special Finance Division in 1989. In 1992 he was transferred to Nedbank Ltd, and in 1998 he was appointed Head of the International Division. He assumed responsibility for the Corporate Banking Division in 1999 and was appointed Managing Director of Nedbank Corporate in 2003. Graham was appointed Chief Operating Officer of Nedbank Group in August 2009. Committees: Group Credit Committee Shares: Nedbank Group Ltd ordinary shares: 17 822 beneﬁcial direct and 134 273 beneﬁcial indirect Nedbank Ltd preference shares: 0 Mustaq Ahmed Enus-Brey 59 Non-executive Director (Appointed: August 2005) Qualifications: BCompt(Hons), CA (SA) Nationality: SA Mustaq was appointed as a Nedbank Group director in August 2005. He is also a director of Brimstone Investment Corporation Ltd and Oceana Group Ltd, and Chairman of Life Healthcare Ltd. Committees: Group Risk and Capital Management Committee (Chairman), Group Directors’ Affairs Committee, Group Credit Committee, Group Finance and Oversight Committee, Large-exposure Approval Committee Shares: Nedbank Group Ltd ordinary shares: 2 113 beneﬁcial indirect Nedbank Ltd preference shares: 0 NedbaNk Group | Integrated report 2013Ian David Gladman 49 non-executive Director (Appointed: June 2012) Qualifications: BA(Hons) History (Christ’s College, Cambridge) nationality: British Ian is currently the Group Strategy director of Old Mutual plc. Previous positions held by him include Head of Corporate Finance (SA) and Joint Head: Financial Institutions Group, EMEA, at UBS Investment Bank. Committees: Group Credit Committee, Group Risk and Capital Management Committee, Group Finance and Oversight Committee, Large-exposure Approval Committee shares: nedbank Group Ltd ordinary shares: 0 nedbank Ltd preference shares: 0 Paul Mpho Makwana 43 independent non-executive Director (Appointed: 17 November 2011) Qualifications: BAdmin(Hons) nationality: SA Mpho is the immediate past Chairman of Eskom Holdings Ltd, Independent director of Adcock Ingram Ltd, and Chairman of ArcelorMittal SA Ltd. Committees: Group Remuneration Committee (Chairman), Group Transformation, Social and Ethics Committee, Group IT Committee, Group Audit Committee, Group directors’ Affairs Committee shares: nedbank Group Ltd ordinary shares: 0 nedbank Ltd preference shares: 0 Nomavuso Patience Mnxasana 57 independent non-executive Director (Appointed: October 2008) Qualifications: BCompt(Hons), CA (SA) nationality: SA Nomavuso is a director at Winhold Ltd, JSE Ltd, Transnet SOC and Land and Agricultural development Bank of SA Ltd (Land Bank). She was a senior partner and member of the executive committee of SizweNtsaluba before serving as Group Audit and Risk Executive at Imperial Holdings Ltd. Committees: Group Audit Committee, Group Remuneration Committee, Group Risk and Capital Management Committee. shares: nedbank Group Ltd ordinary shares: 11 620 beneficial indirect nedbank Ltd preference shares: 0 Raisibe Kgomaraga Morathi 44 Chief Financial officer (Appointed: September 2009) Qualifications: BCompt(Hons), CA (SA), Hdip Tax, AMP (INSEAd) nationality: SA Raisibe has held senior positions in banking and insurance over the past 19 years. Prior to joining Nedbank Group she was an executive director of one of the listed insurance companies. She previously held several executive positions at the Industrial development Corporation of SA Ltd, the last position being Chief Operating Officer. Committees: Large-exposure Approval Committee, Group Credit Committee shares: nedbank Group Ltd ordinary shares: 12 615 beneficial direct and 160 887 beneficial indirect nedbank Ltd preference shares: 0 Joel Khathutshelo Netshitenzhe 57 independent non-executive Director (Appointed: August 2010) Qualifications: MSc (University of London, UK) nationality: SA is an executive director of the Mapungubwe Institute Joel for Strategic Reflection (MISTRA) and a member of the National Planning Commission. He has been a member of the National Executive Committee of the African National Congress since 1991, and serves on the African National Congress’s Economic Transformation and Political Education subcommittees. He served as Head of Policy Coordination and Advisory Services in The Presidency from 2001 until december 2009. He was previously Chief Executive of the Government Communication and Information System and also served as Head of Communication in the President’s Office. He is a non-executive director on the board of Life Healthcare Group Holdings Ltd. Committees: Group Risk and Capital Management Committee, Group Information Technology Committee. shares: nedbank Group Ltd ordinary shares: 0 nedbank Ltd preference shares: 0 Julian victor Frow Roberts 56 non-executive Director (Appointed: december 2009) Qualifications: Fellow of Institute of Chartered Accountants, member of Association of Corporate Treasurers, Accountancy and Business Law (University of Stirling, Scotland) nationality: British Julian was appointed Group Chief Executive of Old Mutual plc in September 2008. Prior to this he was Chief Executive of the Old Mutual Group’s Skandia business. Julian originally joined Old Mutual plc as Group Finance director in August 2000. Before joining Old Mutual plc, he was Group Finance director of Sun Life & Provincial Holdings plc (now part of AXA) and, prior to that, Chief Financial Officer of Aon UK Holdings Ltd. Committees: Group directors’ Affairs Committee, Group Remuneration Committee shares: nedbank Group Ltd ordinary shares: 0 nedbank Ltd preference shares: 0 Gloria Tomatoe Serobe 54 non-executive Director (Appointed: August 2005) Qualifications: BCom (Unitra), MBA (Rutgers, USA) nationality: SA Gloria is the Chief Executive of Wipcapital Ltd and also founder and Executive director of WIPHOLd Ltd. She was previously the Executive director of Finance at Transnet SOC Ltd. Gloria serves on several boards, including that of Sasol Mining and Ixia Coal. She is the Chairman of the Board of the Independent Ports Regulator. She is also a non-executive director of Old Mutual Emerging Markets Ltd. Committees: Group Transformation, Social and Ethics Committee (Chairman), Group Credit Committee, Large- exposure Approval Committee, Group directors’ Affairs Committee shares: nedbank Group Ltd ordinary shares: 1 296 non-beneficial indirect nedbank Ltd preference shares: 0 Malcolm Ian wyman 67 senior independent non-executive Director (Appointed: August 2009) Qualifications: CA (SA), AMP (Harvard Business School, USA) nationality: British Malcolm is a non-executive director of Imperial Tobacco plc, senior independent non-executive director of Serco Group plc, and a non-executive director of Tsogo Sun Holdings Ltd. He was previously an executive director and Chief Financial Officer of SABMiller plc until August 2011. Committees: Group Audit Committee (Chairman), Group Risk and Capital Management Committee, Group directors’ Affairs Committee, Group Remuneration Committee, Group Finance and Oversight Committee (Chairman) shares: nedbank Group Ltd ordinary shares: 350 non-beneficial indirect nedbank Ltd preference shares: 0 75 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenGROUP EXECUTIVE COMMITTEE ESTABLISHED LEADERSHIP TEAMS Ciko Thomas 44 Managing Executive: Consumer Banking, Nedbank Retail (4 years‘ service) Qualifications: BSc, MBA Our leadership team remains among the most skilled and transformed in the SA banking sector. Sandile Shabalala 47 Managing Executive: Business Banking (18 years‘ service) Qualifications: BAdmin, National Higher Diploma: Management Practice, CAIB (SA), MBL, Strategic Management in Banking (INSEAD Business School, France), AMP (Harvard Business School, USA) CLIENT-FACING CLUSTERS Brian Kennedy 53 Managing Executive: Nedbank Capital (18 years‘ service) Dave Macready 55 Managing Executive: Nedbank Wealth (16 years‘ service) Qualifications: MSc (Eng)(Elec), MBA, AMP (Harvard Business School, USA) Qualifications: BCom (Hons), CA (SA), SEP (Harvard Business School, USA) Ingrid Johnson 47 Managing Executive: Retail and Business Banking (20 years‘ service) Qualifications: BCom, BAcc, CA (SA), AMP (Harvard Business School, USA) Mfundo Nkuhlu 47 Managing Executive: Nedbank Corporate (10 years‘ service) Qualifications: BA(Hons), Strategic Management in Banking (INSEAD), AMP (Harvard Business School, USA) 76 Mike Brown Chief Executive Board of directors 74 NEDBANK GROUP | INTEGRATED REPORT 2013Trevor Adams 51 Group Managing Executive: Balance Sheet Management (17 years‘ service) Qualifications: BCom(Hons), CA (SA), Risk Management in Banking (INSEAD) Abe Thebyane 53 Group Executive: Group Human Resources (3 years‘ service) Qualifications: BAdmin, Postgraduate Diploma in Management (Human Resources), MBA Thulani Sibeko 42 Group Executive: Group Marketing, Communication and Corporate Affairs (2 years’ service) Qualifications: BSc (Acc), Graduate Certificate Fred Swanepoel 50 Chief Information Ofﬁcer (17 years‘ service) Qualifications: BCom(Hons), MBA, SEPSA, AMP (Harvard Business School, USA) John Bestbier 58 Group Executive: Strategic Planning and Economics (18 years‘ service) Qualifications: BBusSci Actuarial, CA (SA) CENTRAL CLUSTERS Raisibe Morathi Chief Financial Officer Board of directors 75 Thabani Jali 55 Group Executive: Enterprise Governance and Compliance; Group Company Secretary (2 years‘ service) Qualifications: BA (Fort Hare), LLB (Natal University), LLM (Tulane University, USA) Graham Dempster Chief Operating Officer Board of directors 74 Philip Wessels 55 Chief Risk Ofﬁcer (18 years‘ service) Qualifications: BCom, CTA, CA (SA), Diploma in Advanced Banking Law, Institute of Stockbrokers 77 ENSURING A SUSTAINABLE BUSINESSINFORMATION TO OUR SHAREHOLDERSDELIVERING TO OUR STAKEHOLDERSMAKING THINGS HAPPENestablished leadership teams (CONTINUED) Trevor Adams 51 Group managing executive: balance sheet management Ingrid Johnson 47 managing executive: retail and business banking service: Qualifications: 20 years BCom, BAcc, CA (SA), AMP (Harvard Business School, USA) Ingrid joined Nedbank Group in 1993 to set up the foreign currency financing operations in several offshore jurisdictions. She also carried operational responsibility for the group’s banking businesses in London and Asia. Ingrid introduced balance sheet management in the Corporate Banking division, and thereafter moved into line management in Corporate Banking. In 2004 she was appointed Managing director of Corporate Banking and in 2005 she became Managing director of Nedbank Business Banking. She was appointed to the Nedbank Group Executive Committee in 2008. In August 2009 Ingrid assumed the additional responsibility for the turnaround of the Retail Banking Cluster and the integration of Imperial Bank in her new role as the Group Managing Executive of Retail and Business Banking. Brian Kennedy 53 managing executive: nedbank Capital 18 years service: Qualifications: MSc (Eng)(Elec), MBA, AMP (Harvard Business School, USA) Brian has over 24 years of investment banking experience, 18 of which have been at Nedbank. He led Capital Markets within Nedbank following the merger with BoE, and in November 2003 was appointed to the Group Executive Committee of Nedbank Group and mandated to develop the investment banking franchise, Nedbank Capital. Brian has extensive experience in the debt and equity capital markets and has been actively involved in the design and execution of innovative solutions for top SA corporates and parastatals. He has been instrumental in developing and driving the strategy, culture and new business initiatives within Nedbank Capital. Brian started his career in engineering before joining FirstCorp Merchant Bank Ltd in 1988. Prior to his appointment as Managing Executive of Nedbank Capital, Brian was an Executive director and Md of BoE Merchant Bank and Chairman of BoE Securities. Dave Macready 55 managing executive: nedbank wealth service: Qualifications: BCom(Hons), CA (SA), SEP (Harvard Business 16 years School, USA) dave joined Nedcor Investment Bank as a member of the Exco in 1997 after being a partner at deloitte & Touche for more than 10 years in both London and SA. He was responsible for Syfrets Private Bank and NIB International and was appointed Managing director of Asset Management three years later. In 2004 dave took on the role of Managing Executive for Bancassurance and Wealth. In 2009 the name was changed to Nedbank Wealth and dave was appointed to the Exco. service: 17 years Qualifications: BCom(Hons), CA (SA), Risk Management in Banking (INSEAd) Trevor was appointed to the Group Executive Committee in 2009 and leads the group’s Balance Sheet Management Cluster, which comprises the integrated central functions of risk management (eg credit portfolio management, asset and liability management, concentration risk, risk strategy, risk appetite and stress testing), funding and liquidity management, capital management, margin management), and strategic portfolio management (eg strategic portfolio tilt, funds transfer pricing, economic profit optimisation and risk-adjusted performance management) as well as the group’s regulatory reporting under the Banks Act. Trevor also led the group’s successful Basel II implementation, and recently Basel III as well, and the significant enhancement of risk, capital and balance sheet management across the group. Prior to joining the group in 1996 he was a partner at deloitte, where he also specialised in banking and risk management, and so collectively has over 21 years’ banking- related experience. John Bestbier 58 Group executive: strategic planning service: 18 years Qualifications: BBusSci Actuarial, CA (SA) John was appointed to the Group Executive on 1 January 2010 as Group Executive: Strategic Planning, having previously been with the group for 14 years. John is an investment banker with extensive experience in the financial services industry, having led a number of large corporate finance transactions for clients and for the group. In 1995 he served as a main board committee member of the JSE Securities Exchange and was closely involved in the reforms adopted by the exchange. He joined the group in 1995 as a director of its investment banking subsidiary UAL. during his tenure with the group he served on subsidiary boards and in various areas including short- and long-term insurance, asset management and stockbroking. Thabani Jali 55 Group executive: enterprise Governance and Compliance; Group Company secretary service: 2 years Qualifications: BA (Fort Hare), LLB (Natal University), LLM (Tulane University, USA) Thabani joined Nedbank Group in October 2011 as the Group Executive responsible for governance and compliance. He is also responsible for ethics, sustainability and Nedbank Group Editorial and Language Services. In addition to this role, he was also appointed Group Company Secretary on 1 July 2012. He is a member of the Specialist Committee on Company Law. Prior to joining the group, Thabani gained over 20 years’ experience in the legal profession as an attorney, a mediator, an arbitrator and later a judge. Thabani was formerly executive chairman of PricewaterhouseCoopers (Southern Africa), a deputy Judge President of the High Court of SA (Natal Provincial division) and a Judge of the Competition Appeal Court. He was also a partner in a commercial law firm and served as Chairman of the Competition Commission Enquiry into Bank Charges and the National Payment System from 2006 to 2008. 78 NedbaNk Group | Integrated report 2013Mfundo Nkuhlu 47 Managing Executive: Nedbank Corporate 10 years Service: BA(Hons), Strategic Management in Banking Qualifications: (INSEAD), AMP (Harvard Business School, USA) Mfundo joined Nedbank Group in 2004. He has led and managed Nedbank Africa and Corporate Banking, and since 2009 has been the Managing Executive of Nedbank Corporate. He joined the Group Exco in 2008. Previously he was the executive responsible for strategy, revenue and economic analysis at the SA Revenue Service. Prior to that he was with the Department of Trade and Industry as Chief Director for Africa and the New Partnership for Africa’s Development (NEPAD) programme. Sandile Shabalala 47 Managing Executive: Business Banking Service: Qualifications: 18 years BAdmin, National Higher Diploma: Management Practice, CAIB (SA), MBL, Strategic Management in Banking (INSEAD), AMP (Harvard Business School, USA) Sandile has over 25 years’ banking experience, including 18 years at Nedbank Group. Prior to joining Nedbank Group he worked for Barclays Bank, NBS Bank Ltd and Telkom SA. He has experience in retail, small business, corporate and business banking in both sales and credit banking functions. Prior to his appointment in October 2009 to the Group Exco as Managing Executive: Business Banking, Sandile had been leading and managing the Northern Business Unit in Business Banking as Divisional Executive. Thulani Sibeko 42 Group Executive: Group Marketing, Communication and Corporate Affairs 2 years Service: BSc (Acc), Graduate Certificate Qualifications: Thulani joined Nedbank Group in May 2011 and leads the group’s Marketing, Communication, Transformation, CSI and Public Affairs areas. Thulani started his marketing career at Gillette SA in 1993 and has held different marketing roles at Polaroid, Procter & Gamble, Vodacom Group Ltd and The Hollard Insurance Company Ltd. During his marketing career, he managed brands such as Gillette, Oral B, Braun, Polaroid, Olay, Pantene, Head & Shoulders, Vicks, Vodacom and Hollard. In addition to working in SA, Thulani has held regional assignments in the USA, the UK and Switzerland. Fred Swanepoel 50 Chief Information Officer 17 years Service: BCom(Hons), MBA, SEPSA, AMP (Harvard Qualifications: Business School, USA) Fred has more than 24 years’ experience in finance, banking and information technology. In 1996 Fred joined Nedbank to run regional operations, Western Cape. In 2000 he brought his operational experience into the group’s technology arena and was appointed Nedbank Group’s Chief Information Officer in November 2008. Prior to this he held several high-level positions in the technology environment, including Divisional Director for Finance, Risk and Compliance, Projects and Programme Management, and Head of Group Software Services. He has significantly repositioned Group Technology to deliver a simplified and agile technology landscape. Fred’s goal is to ‘leverage technology to make Nedbank Africa’s most admired bank’. Abe Thebyane 53 Group Executive: Group Human Resources Service: 3 years Qualifications: BAdmin, Postgraduate Diploma in Management (Human Resources), MBA Abe joined Nedbank Group and was appointed to the Group Exco in February 2011 as Head of Group Human Resources. Abe has 30 years’ experience in human resources, which he acquired through the various senior and executive positions he held in large corporations in SA. Prior to joining Nedbank Group, Abe was Executive Head: Human Resources at Anglo American Platinum Ltd for six years and before that he was Executive Director: Human Resources at Iscor Ltd. Ciko Thomas 44 Managing Executive: Consumer Banking, Nedbank Retail Service: 4 years Qualifications: BSc, MBA Ciko joined the group in January 2010 as Group Executive: Group Marketing, Communications and Corporate Affairs. Ciko has wide-ranging marketing and business experience in financial services and in the consumer goods and motor industries. He joined Nedbank from Barloworld where he was the Group Marketing Director of the Automotive Division. Ciko was previously General Manager of Retail Banking Marketing at Absa Group. He has also held various management positions at SA Breweries, Unilever and M-Net. In November 2010 Ciko was appointed as Managing Executive for Consumer Banking in the Retail Cluster. Philip Wessels 55 Chief Risk Officer Service: 18 years Qualifications: BCom, CTA , CA (SA), Diploma in Advanced Banking Law, Institute of Stockbrokers Philip has held the position of Chief Risk Officer on the Group Exco for Nedbank Group for the past 10 years. Under his leadership, and with the commitment and support of management and staff within the group, Nedbank Group’s risk management processes and governance principles have become highly regarded in the financial services industry. In 2011 Philip received the Risk Manager of the Year Award from the Institute of Risk Managers of SA. Prior to his appointment as Chief Risk Officer in 2004, Philip was a divisional director in Nedbank Business Banking and Nedbank Corporate. In addition, he was an executive director of BoE Ltd, Managing Director of BoE Securities, Chief Executive of BoE International (London) and Managing Director of BoE Bank, Business Banking and Boland Bank between 1995 and 2003. Philip was also a partner at Deloitte & Touche between 1989 and 1995. 79 ENSURING A SUSTAINABLE BUSINESSINFORMATION TO OUR SHAREHOLDERSDELIVERING TO OUR STAKEHOLDERSMAKING THINGS HAPPENcluster mAnAGement estabLisheD LeaDership teams CLIENT-fACING CLuSTERS NEDBANK CORPORATE Graeme Auret 44 Managing Executive: Corporate Banking 10 years’ service Frank Berkeley 57 Managing Executive: Property Finance 19 years’ service Francis Brand 50 Executive Head: Transactional Banking 27 years’ service Grant Kelly 41 Executive Head: Risk 9 years’ service Shamelle Maharaj 41 Executive Head: Human Resources 16 years’ service Priyabashni Naidoo 40 Executive Head: Finance and Strategy 13 years’ service Murray Stocks 47 Executive Head: Corporate Shared Services 22 years’ service NEDBANK BUSINESS BANKING Goolam Kader 47 divisional Executive: Cape 15 years’ service Douglas Lines 42 divisional Executive: Gauteng 13 years’ service Kandis Swanepoel 48 divisional Executive: Business Banking and Retail Relationship Banking Strategic Business Unit 17 years’ service Nomaxabiso Teyise 34 Executive Head: Human Resources 10 years’ service Jan Bosch 41 Executive Head: Business Banking and Retail Relationship Banking Specialist Services 16 years’ service Herman de Kock 40 divisional Executive: Northern 11 years’ service Bedresh Dhanjee 44 Executive Head: Risk 24 years’ service Brinsley du Plessis 43 Executive Head: Innovation, Process & Project Integration 23 years’ service Craig Evans 48 divisional Executive: Coastal and Inland 20 years’ service Annette Francke 39 Executive Head: Retail and Business Banking Strategy, Communication, Group Innovation; Business Banking Marketing 8 years’ service NEDBANK CAPITAL Anél Bosman 48 Chief Operating Officer 13 years’ service John Chemaly 49 Executive Head: Global Markets 14 years’ service Karel Janse van Rensburg 40 Executive Head: Finance 6 years’ service Peter Lane 57 Group Treasurer 24 years’ service Bradley Maxwell 39 Executive Head: Investment Banking 12 years’ service Neil McCarthy 42 Executive Head: Risk 18 years’ service Claire Meagher 45 Executive Head: Compliance & Governance 8 years’ service Terence G Sibiya 44 Executive Head: Coverage & Origination 2 years’ service Elsa Tshatedi 52 Executive Head: Human Resources 1 year’s service Johann van Zyl 46 UK Country Head 12 years’ service NEDBANK wEALTH Nicholas Andrew 42 Managing Executive: Asset Management 15 years’ service Gareth Baines 53 Managing Executive: Insurance 2 years’ service Lance Blumeris 42 Executive Head: Life Insurance 16 years’ service vince Boulle 49 Managing Executive: Wealth Management (Local) 9 years’ service Lloyd Buthelezi 35 Executive Head: Financial Planning 6 years’ service John Gibson 51 Executive Head: Trust and Fiduciary (Local) 2 years’ service Nancy Gwama 42 Executive Head: Marketing 1 year’s service Greg Horton 57 Managing Executive: Wealth Management (International) 19 years’ service Bertus Janse van Rensburg 39 Chief Risk Officer 8 years’ service Patiswa Jumba 41 Executive Head: Human Resources 5 years’ service Thulani Kunene 40 Executive Head: Compliance 1 year’s service walter Marte 37 Chief Financial Officer 8 years’ service Dion Nair 38 Executive Head: Insurance distribution 8 years’ service Don Rogan 44 Executive Head: Stockbroking 6 years’ service Iolanda Ruggiero 43 Chief Operating Officer 11 years’ service Anees vazeer 44 Executive Head: Short-term Insurance 7 years’ service 80 NEDBANK RETAIL David Crewe-Brown 45 Executive Head: Finance, Projects and Strategy 18 years’ service Anton de wet 47 Managing Executive: Client Engagement 16 years’ service Brian Duguid 52 Managing Executive: Nedbank Integrated Channels 32 years’ service Sydney Gericke 55 Managing Executive: Retail Card and Payments 25 years’ service Keith Hutchinson 55 Managing Executive: Retail Secured Lending 27 years’ service Millicent Lechaba 45 Executive Head: Human Resources 8 years’ service Sibongiseni Ngundze 44 Managing Executive: Retail Relationship Banking 9 years’ service Gavin Payne 51 Executive Head: Risk Retail and Business Banking 30 years’ service Sarel Rudd 58 Executive Head: Rest of Africa 11 years’ service Ashley Sutton-Pryce 60 Executive Head: Retail and Business Banking Human Resources, Communications and Projects 40 years’ services REST OF AFRICA Smit Crouse 37 Managing Executive: Investments, Alliances and Strategy 5 years’ service Adriaan du Plessis 54 Managing Executive: Banking Subsidiaries 22 years’ service wayne McAdam 53 CIO and COO 21 years’ service Chico Naidu 58 Executive Head: Innovation, Process & Project Integration Business Unit 36 years’ service NedbaNk Group | Integrated report 2013CENTRAL CLuSTERS GROUP TECHNOLOGy Thabang Legae 43 divisional Executive: Solutions delivery 6 years’ service Thando Lukhele 40 divisional Executive: Governance, Compliance, Legal, Procurement and Vendor Management 9 years’ service Patricia Maqetuka 55 divisional Executive: Wholesale Banking Technology 21 years’ service Ray Naicker 37 divisional Executive: Programme Management, design and Architecture 14 years’ service Andrew Sematimba 47 divisional Executive: Africa Technology and E-Commerce 12 years’ service Glenn Smith 56 divisional Executive: Mobile and digital 17 years’ service Hendrik Swanepoel 51 divisional Executive: Risk, Security and Shared Services 20 years’ service Barry van Huyssteen 49 divisional Executive: Information Technology Infrastructure and Operations 30 years’ service Hendus venter 42 divisional Executive: Retail Banking and Wealth 13 years’ service Andre young 45 divisional Executive: Human Resources, Marketing and Communications 3 years’ service BALANCE SHEET MANAGEMENT Michael Davis 42 Executive Head: Group Asset, Liability and Capital Management 17 years’ service Alan Faber 49 Executive Head: Strategic Projects, Reporting and Execution 16 years’ service Dhiren Haripersad 35 Executive Head: Group Value Based Management 3 years’ service Anthony Johnson 36 Executive Head: Group Credit Portfolio Management 9 years’ service GROUP RISK Glynis Hunziker 42 (direct reporting into Chair of Group Audit Committee) Chief Internal Auditor 18 years’ service Gerda Ferreira 50 Head Group Forensic Services 10 years’ service Nick Jacobs 48 General Manager: Group Legal and Risk Services 20 years’ service Sheralee Morland 49 General Manager: Enterprisewide Risk Management 8 years’ service Khosi Mpungose 35 Executive Head: Group Risk Human Resources 8 years’ service Anny Pachyannis- Alman 58 General Manager: Group Market Risk Monitoring 16 years’ service Johan Theron 44 Chief Credit Officer 15 years’ service Jan van Zyl 44 General Manager: Group Operational Risk Management 2 years’ service STRATEGIC PLANNING AND ECONOMICS Dennis Dykes 53 Group Chief Economist 30 years’ service Norman Edwards 48 divisional Executive: Group Strategy 17 years’ service Giles Needham-Clark 48 divisional Executive: Innovation Projects 14 years’ service ENTERPRISE GOvERNANCE AND COMPLIANCE Brigitte Burnett 46 Head: Sustainability 14 years’ service Brenda Chetty 39 Head: Client Facing Clusters, FAIS and Special Projects 16 years’ service Sicelwesihle Dlamini 45 Head: Governance and Compliance Shared Services 11 years’ service Maryna Mouton 43 Head: Governance and Ethics 18 years’ service Bittie Smook 57 Head: Nedbank Editorial and Language Services 32 years’ service GROUP HUMAN RESOURCES Ayn Brown 48 HR Executive: Organisational development 23 years’ service Gina Davidson 39 HR Executive: Talent Management 12 years’ service Sarel du Plessis 52 HR Executive: Operations 19 years’ service Florah Ehirim 36 divisional HR Manager: HR Business Partner 2 years’ service Thulane Ngele 41 HR Executive: IR, Transformation and Compliance 1 year’s service Dean Retief 39 HR Executive: People development 13 years’ service Clinton Rodgers 42 HR Executive: Rewards Management 1 year’s service GROUP FINANCE Luigi Bianco 45 General Manager: Planning, Measurement and Control 21 years’ service Steven Bird 35 General Manager: Group Financial Control Less than 1 year’s service Rian Cloete 40 General Manager: Group Tax 11 years’ service Anthony Costa 42 Business Performance Executive 12 years’ service GROUP MARKETING, COMMUNICA- TIONS AND CORPORATE AFFAIRS Thabang Chiloane 39 divisional Executive: Public Affairs 2 years’ service Gregory Garden 57 divisional Executive: Marketing Capability 15 years’ service Kershini Govender 40 divisional Executive: Transformation, Strategy and Alignment 11 years’ service Konehali Gugushe 38 divisional Executive: Corporate Social Responsibility 6 years’ service Sydney Mbhele 40 divisional Executive: Group Marketing 2 years’ service Mark Rock-Perring 46 divisional Executive: Market and Client Insights 15 years’ service Ian Fuller 58 General Manager: Business 16 years’ service Darryl McMullen 53 General Manager: Group Shared Services Centre 26 years’ service George Procommenos 41 General Manager: Group IT Projects, Business Planning and AJTP 15 years’ service Meshack Qacha 50 Human Resources Executive 20 years’ service vern Solomon 40 General Manager: Shared Accounting and Finance Services 8 years’ service Alfred visagie 41 Head of Investor Relations 13 years’ service veona watson 47 General Manager: Finance Strategy and Projects 13 years’ service 81 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenNedbaNk Group | Integrated report 2013 BUILDING A SUSTAINABLE BANK For nedbank group, sustainability has always been about far more than legislative compliance or public perception. it is the single word that represents our multifaceted approach to the responsibilities we have to our stakeholders. today these stakeholders are faced with numerous sustainability challenges relating to limited natural resources, the growing impact of climate change, ongoing global ﬁnancial crises and high levels of personal indebtedness. For this reason we consider it one of our primary responsibilities to demonstrate our commitment to and effectiveness in responding appropriately to the sustainability challenges of the world in which we operate – particularly since these challenges are material to our sustainable success, both as a business and as a green and caring bank. to this end, we endeavour to integrate sustainability into every aspect of how we work and who we are. this ranges from doing our share to create and nurture the world we desire for current and future generations, to ensuring deep and trusting relationships with, and acceptable results for, our staff, clients, shareholders, regulators and the communities within which we operate. 82 In previous years we reported separately on the group’s activities as they relate to environmental, social and cultural matters. Increasingly, however, a far more integrated approach to sustainability is being adopted across the business through a three-pronged approach of: 1 2 enabling sustainability through our products and services leading through collaboration and partnership 3 managing and optimising our own impact For this reason we have chosen to structure our sustainability reporting to reflect this reality, which is simply that environmental, cultural, social and economic sustainability are inextricably linked. SUSTAINABILITY GOVERNANCE to ensure that sustainability issues enjoy the prioritisation and focus they require, we have entrusted the responsibility for integrating sustainability into every aspect of our business to our group’s senior governance bodies. the group transformation, Social and ethics Committee (gtSeC) is the subcommittee of the nedbank group Ltd Board that takes primary responsibility for monitoring and reﬁning all sustainability policies and ensuring that these are fully integrated across all nedbank group businesses and activities. this topdown sustainability governance framework allows the business to respond quickly to sustainability risks and opportunities, while ensuring that management oversight of all such risks and opportunities is consistent and thorough. the group Sustainability Committee (gSC) reports to gtSeC and has executive and senior management representation across the organisation. a key focus of the gSC is to facilitate a greater understanding among our group’s bankers of the long-term sustainability implications – for both our bank and Sa – of their interactions. the gSC also decisions, actions and client communicates extensively with all nedbank staff. In recent years the sustainability evolution and maturity of our organisation have seen to implementation. In line with this, individual and team sustainability key performance indicators (KpIs) have evolved from being purely reduction-focused to assessing performance in terms of the employee’s ability to leverage sustainability for organisational growth and improved risk management. this communication from awareness transform maKIng thIngS happen deLIVerIng to oUr StaKehoLderS InFormatIon to oUr SharehoLderS eNsuriNG a sustaiNable busiNess SOCIAL AND ENVIRONMENTAL RISK MANAGEMENT at nedbank group we prioritise social and environmental risk management as a central component of how we manage our own business and how we work with our clients. to this end responsible business management is a non-negotiable part of our sustainable development. Like our overall sustainability philosophy, our approach to social and environmental risk management is highly integrated and recognises the interconnectedness of all signiﬁcant social and environmental risks, whether directly or indirectly, presented through our own activities or those of our clients. our risk management approach complies with relevant legislation, including the Code for responsible Investment for South africa (CrISa). We are signatories to the equator principles and the United nations global Compact, and through our parent company, old mutual, we adhere to the principles for responsible Investment (prI). risk management through cooperation In 2013 we made the content of our social and environmental risk policies and management processes accessible to all our stakeholders. We provided our lending clients, in particular, with environmental policy frameworks and the assistance of our environmental law specialists, with the aim of helping them to develop their own sustainability policies. In doing so we not only manage our own risk better, but also actively enhance our clients’ compliance and risk management processes, thereby protecting business value (theirs and ours) and maximising our client value proposition. social and environmental management system nedbank group’s social and environmental policies are linked to, and supported by, our Social and environmental management System (SemS) and have also been integrated into the group Credit policy. SemS is based on ISo 14001 and aligned with International Finance Corporation (IFC) best practice and equator principles’ guidelines. SemS details the policies, procedures, resources and workflow required to identify and assess the environmental or social impacts of lending activities that we undertake. Credit policies within our Business Banking, Wealth, Corporate and Capital clusters were enhanced to include a focused approach on high-impact industries to ensure that the related social and environment risks are mitigated. our social and environmental assessment tool also provides a screening mechanism to aid ﬁnance decisionmaking within high-risk sectors. this focused approach ensures that we responsibly manage our social and environmental risk exposure across our organisation. all of the assessment criteria are linked to the relevant equator principles and IFC performance Standards. this is to ensure that transactions are socially and environmentally sound when tested against international benchmarks. In 2013 SemS underwent a number of improvements aimed at closing identiﬁed assessment loopholes and delivering more comprehensive and thorough results to aid in lending decisionmaking. these enhancements enabled us to add value to our clients by recommending adjustments or improvements to proposed projects that served to raise their levels of sustainability compliance. RESpONSIBLE INVESTMENT In 2012 nedbank group adopted the old mutual group responsible investment standards to align with old mutual’s commitment to the prI and CrISa. the adoption of these standards aligns well with nedbank’s strategic positioning of being a green and caring bank and, more importantly, enables the bank to look at investment decisions through a new lens, thereby facilitating better risk management and the identiﬁcation of new opportunities. nedbank contributes 4% of old mutual group’s total funds under management. during 2013 we addressed many of the compliance requirements of being a signatory to the prI such as committing to the publication of our responsible Investment policy and Voting guidelines on the nedgroup Investments website. the focus was on upskilling staff to ensure a better understanding of the prI and CrISa as well as on what needed to be adapted to integrate the prI into the various assurance and investment businesses. this will continue in 2014. old mutual group will submit its ﬁrst report to the prI governing body in February 2014 using 2013 data. RESpONSIBLE LENDING as one of the leading providers of project ﬁnance in Sa, nedbank Capital reviews all potential project ﬁnance transactions for environmental and social compliance with the equator principles, IFC performance standards and legislation. the business has adopted an integrated and proactive approach to compliance. Key to this approach is compliance with the equator principles, an international, voluntary framework aimed at ensuring a consistent approach to managing environmental and social risks in project ﬁnancing. the application of the equator principles since 2005 has ensured greater consistency in our application of environmental and social risk management within our project ﬁnance business. other beneﬁts have arguably been improved client engagement on these issues as well as enhanced protection for project-impacted ecosystems and communities. With the adoption of equator principles III in the Corporate and property Finance business areas, we anticipate reaping similar beneﬁts. In 2012 a large number of deals were in compliance with the equator principles. this momentum was maintained as 15P transactions that comply with the equator principles had their ﬁrst drawdowns in 2013, thanks to the completion of a number of oil and gas and project ﬁnance transactions, particularly within the renewable-energy sector. equator principles deal activity total number of deals – ﬁrst drawdown Category a Category B Category C total value of deals (US$m) 2013 15P 14 1 965 2012 2011 2010 2009 15 6 9 2 1 1 1 1 5 1 3 1 938 172 25 174 Understand- ing material matters 14–20 report from group transfor- mation, Social and ethics Committee Chairman 58–59 grI FSSS: FS1, FS2, FS3, FS5 grI 3.1: 1.2, 4.1, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12 grI 3.1: en26, hr1, eC1 Supplemen- tary information: Sustainable develop- ment review 83 NedbaNk Group | Integrated report 2013 BUILDING A SUSTAINABLE BANK (CoNtiNued) 1 enabling sustainability through our products and services in addition to offering our clients the means and opportunities to achieve their personal or business financial goals, nedbank group’s banking, lending and investment solutions and services are built on the foundation of responsible financial services. From the incorporation of sustainability considerations into credit assessments to supporting clients through a balanced and carefully considered approach to their financial needs, we place a priority on ensuring that what we offer helps create a better future for all. ENABLING SA’S GREEN fUTURE Key to the sustainable future of Sa is our country’s ability to develop and nurture a green economy. We embrace the responsibility and opportunity to help nurture such a green future through innovative product development and sustainability-focused investment. investing in sa’s green economy through reipppp the renewable energy Independent power producer procurement programme (reIpppp) forms an integral part of the Sa government’s Integrated resource plan 2010 and seeks to achieve a signiﬁcant increase in the proportion of the country’s energy needs being met through independent, renewable-energy sources. this vital transition to a broader energy supply is crucial to securing the energy supply needed to encourage economic growth. Since the inception of reIpppp our investment bank has been highly involved in this forward- thinking programme and it has delivered numerous innovative ﬁnance solutions to organisations bidding to become independent power suppliers to Sa. the details of nedbank’s involvement in and support of reIpppp can be found in the case study in the nedbank Capital operational overview online. as a result of its extensive involvement nedbank effectively funded and supported projects that will deliver 1,478mW or 38% of the total renewable-energy capacity allocated by reIpppp since its inception – making us a key enabler of the country’s green future. the Nedbank Green savings bond this ﬁxed-term investment offers flexible investment terms ranging from 18 months to ﬁve years, a competitive rate and guaranteed returns. more importantly, it allows regular investors to make a tangible contribution to environmental sustainability because invested funds are earmarked for the support of renewable-energy projects in Sa. Since its inception r3,6bn has been in the nedbank green Savings Bond, of which r2,7bn flowed in during 2013. invested 84 maKIng thIngS happen deLIVerIng to oUr StaKehoLderS InFormatIon to oUr SharehoLderS eNsuriNG a sustaiNable busiNess the Nedbank Green index the nedbank green Index (ngI) is an innovative equity benchmark for investors who place a priority on incorporating environmental sustainability criteria into their investment decisions. In 2013 the ngI was signiﬁcantly outperformed by the JSe/FtSe all-share Index (aLSI) – 7,8% (2012: 26,1%) compared with 21,4% for the broad market index. this is in stark contrast to previous work on the relative performance of the ngI, which suggested that the stock selection process, which is primarily based on climate change credentials, had played a signiﬁcant role in the ngI’s outperformance of the aLSI. For the most part, the companies within the ngI with the strongest environmental credentials have continued to provide positive contributions to the relative total return. however, a number of companies that had a particularly strong share price performance in 2013 were excluded from the ngI entirely, although in most cases this was not because of poor environmental credentials, but rather because of non-public disclosure. For further details on the ngI please refer to nedbankcapital.co.za. Building enduring relationships 30–47 grI FSSS: FS8, FS14 grI 3.1: 2.2 grI FSSS: FS5 Supplementary information: Sustainable development review exchange-traded Fund (bGreen etF) We launched our nedbank Bgreen etF in december 2011. at the end of 2013 the Bgreen etF had a market capitalisation of r131m (2012: r119m). the Guaranteed exchange-traded Fund plan nedgroup Life offers this investment alternative as part of its Secure Investments portfolio. Based on the Bgreen etF, and provided through nedbank Financial planners, it offers our clients another way of participating in, and beneﬁting from, the work we are doing to deliver competitive, environmentally driven investments to all investors. In 2013 a total of r14,4m was invested through this platform. Carbon financing Carbon markets have been through a particularly turbulent time in recent years because of continued uncertainty surrounding long-term international carbon commitments. It is anticipated that greater clarity regarding international markets will emerge by the end of 2015. domestically, the proposed carbon tax could bolster the local carbon market for selected offsets. given our commitment to driving the green economy, our Carbon Finance Unit continues to monitor developments in this area. Nedbank Green affinity We make it possible for our clients to support environmental causes by choosing to use nedbank green affinity banking, investment or insurance products. as they do so, we donate money to the WWF nedbank green trust on their behalf at no cost to them. In 2013 nedbank green affinity donations to the WWF nedbank green trust increased by 14% to nearly r14,8m (2012: r12,9m). as a direct result of concerted efforts to raise awareness of the nedbank green affinity, we also added approximately 50 000 nedbank clients to the programme. Since its inception the nedbank green affinity programme has raised more than r150m in support of nearly 200 environmental projects across Sa. Greenbacks the nedbank greenbacks loyalty programme includes a ‘green stream’ that allows members to redeem loyalty points for goods that are environmentally friendly. In 2013 more than 750 of these ‘green’ products were redeemed by our environmentally aware clients, with a total value of r500 000. The WWf Nedbank Green Trust 1990 nedbank group created a In partnership with WWF-Sa through the WWF nedbank green trust as an innovative and sustainable way to raise funds in support of environmental causes. the WWF nedbank green trust’s mission is to bring together environmental and social sustainability. put another way, it seeks to enable people to live and work in harmony with nature, for the sustainable beneﬁt of both. the trust funds projects in climate change, freshwater conservation, marine conservation, the preservation of outstanding places, the conservation of species of special concern and conservation leadership. For more information on the WWF nedbank green trust go to nedbankgreen.co.za. 85 NedbaNk Group | Integrated report 2013 BUILDING A SUSTAINABLE BANK (CoNtiNued) ENABLING SOCIAL SUSTAINABILITY AND DEVELOpMENT ThROUGh INVESTMENT We recognise that leadership in social sustainability requires more than just a commitment to supporting communities; it also demands a willingness to put our money where our mouth is and invest in people, projects and businesses. our continued good performance in this regard illustrates the success of our efforts to meet the requirements of the Financial Sector Code (FSC). empowerment financing Comprising the two elements of targeted investments and BBBee transaction ﬁnance, empowerment ﬁnancing is an integral part of our overall transformation commitment. It involves investment in the economic development of empowered corporates, emerging black farmers, municipalities and emerging black small and medium enterprises. at the end of 2013 we had invested a total of r36bn in empowerment ﬁnancing since 2009. We are pleased with the progress we have made in lending in this area, but also recognise that there is still much to be done. BBBEE transaction financing BBBee transaction ﬁnancing is the extent to which we help promote the productive and sustainable participation of black companies and black people in each sector of the economy through various forms of credit extension. this includes all transactions for acquisition by black people, including women, of direct ownership in new or existing companies other than black Smes. these transactions also include joint ventures with debt ﬁnancing of or other forms of credit in BBBee companies. extension to and equity a transaction of r1,8bn was our most notable deal in 2013. investments enterprise development our approach to enterprise development (ed) is multifaceted and includes a mix of funding, transactional and support products and services that provide flexibility and adaptability across all industries. this allows us to design and tailor unique solutions, in line with the diverse needs of entrepreneurs and businesses, ultimately creating job opportunities and supporting socioeconomic development. regional teams with specialist and expert support, such as the national agriculture team, continue to drive the business imperative of transforming our client base and supporting emerging businesses, with a particular focus on supporting the vital small, medium and micro enterprises (Smme) sector. over the past two years more than 2 000 entrepreneurs have beneﬁted from our enterprise development investments. In accordance with the FSC requirements we invested an additional r59,5m in non-recoverable initiatives in 2013. Targeted investments targeted investment is an opportunity to extend the effectiveness of nedbank’s social sustainability efforts through debt ﬁnancing of, credit extension to, or equity investment in Sa projects that have the potential to help close any gaps that still exist in the country’s economic development and facilitate job creation for future growth. our targeted investment activities include: ■ transformational infrastructure ﬁnancing ■ Black agriculture ﬁnance ■ Black small-and-medium-enterprise (Sme) ﬁnancing ■ affordable housing at the end of 2013 we had invested a total of r18bn in targeted investments since 2009. during 2013 the affordable housing development ﬁnance unit concluded a number of new funding opportunities, including a facility for International housing Solutions, to bolster the affordable rental market and create quality accommodation for people in the lower-income range who cannot prove affordability to buy homes. also during 2013 the unit disbursed more than r1bn towards new affordable housing developments across Sa, with more than 12 000 new home opportunities created for 2013 and cumulatively over 25 000 homes during the past ﬁve years. 86 maKIng thIngS happen deLIVerIng to oUr StaKehoLderS InFormatIon to oUr SharehoLderS eNsuriNG a sustaiNable busiNess ENABLING ACCESS TO fINANCIAL SERVICES fOR ALL nedbank group remains committed to enabling social transformation and economic upliftment through access to ﬁnance for all. We are convinced that true access to ﬁnance involves a combination of physical accessibility to transaction points and ﬁnancial education for maximum empowerment. over the past four years we have opened 220 retail banking outlets (branches and alternative outlets, excluding personal Loans kiosks) and increased our atm footprint by 1 529 (or 83%) across the full spectrum of Sa communities. this means that nedbank’s retail banking footprint has grown by 41% to 763 outlets across the country since 2009. the Branch of the Future design choice and network of formats have further enhanced the relevance and appeal of nedbank to all in Sa by improving the instore experience through increased self-service capabilities, client-friendly queuing systems and emphasis on client education. altogether 28 outlets have been converted to the new formats, with the full rollout plan seeking to cover 77% of branches by 2016. Innovations in digital (notably mobile and telephone) banking, including the launch of the nedbank app Suitetm in 2012, have further increased access to nedbank’s banking services for all in Sa regardless of physical location. recently, this access strategy has seen us intensify our focus on rural areas, with initiatives undertaken in such far-flung communities as Kuruman in the rural northern Cape, Bela-Bela in Limpopo, elliotdale in the eastern Cape and nquthu in KwaZulu-natal, to mention just a few. Where there’s a lack of proper infrastructure, we partner with leading supermarket chain outlets such as pick ’n pay and Boxer Stores to offer inretailer facilities. a partnership with the passenger rail agency of South africa (praSa) will also see nedbank retail branches established in selected praSa stations across Sa. Making business more mobile with pocketpos™. In February 2013 nedbank cemented its position as a leading innovator in the business-banking space with the launch of pocketpoS™. this live emV- certiﬁed mobile point-of-sale (poS) solution, a ﬁrst in Sa, enables our clients to process debit and credit card transactions anywhere and any time using a smartphone connected to a secure card reader. For our clients the pocketpoS™ eliminates the risk of carrying cash, avoids cash deposit fees and, most importantly, increases payment success and thereby improves cashflow for small businesses and contractors. By the end of 2013 more than 1 200 nedbank pocketpoS™ units had been purchased by business clients across Sa. Growing access to entry-level banking as a direct result of our comprehensive mass market strategy, which was introduced in 2011, we have generated signiﬁcant year-on-year growth in entry-level banking and now serve more than 3m clients. a key solution that has contributed to our success in this market is nedbank Ke Yona. Launched in 2011, this eLB offering is designed to attract new entrants into the formal banking market. Ke Yona allows these previously unbanked individuals to transact, save, borrow and acquire insurance easily and affordably. imbizo: Helping to build economically viable and sustainable communities In 2005 the Imbizo programme was launched as a partnership between nedbank, mutual & Federal, old mutual and our black business partner, WIphoLd. Imbizo seeks to ignite economic activity in primarily rural markets, with an emphasis on building sustainable communities through commercial and corporate social investment activity to improve people’s livelihoods. the model focuses on identifying interventions that can contribute to building economically viable communities. these interventions include facilitating the creation of micro enterprises, migrating these up the value creation chain (from micro enterprise to small business), and encouraging job creation through medium-to- large-scale commercial investments. an additional component of the Imbizo programme is the Zakheleni collective lending product. If a self- help group or club of ﬁve to 12 members saves collectively for six months, it may apply for a loan of up to three times the amount it has saved, capped at r10 000 for the ﬁrst loan, and repayable over 22 months. When the ﬁrst loan has been repaid in full, the club can apply for a second loan. to date the Zakheleni product has registered more than 880 clubs and issued over 1 500 loans. more than 100 formal micro enterprises, and many more informal enterprises, have been formed as a result of this unique offering. In 2013 we introduced the Imbizo Business acumen pilot programme to provide small-business owners with valuable training in money management skills, establishing a market, separating personal and business accounts and understanding input costs to ensure the growth of their enterprises. its inception 135 participants have Since registered for the programme and 112 owners of microbusinesses have graduated. a total of r556 000 in funding has also been extended to graduates of the programme to help them grow their businesses. Building enduring relation- ships 30–47 grI 3.1: 2.2 grI FSSS: FS1, FS2, FS13, FS14 grI FSSS: FS7 grI 3.1: eC8 transfor- mation report Supplemen- tary information: Sustainable develop- ment review 87 NedbaNk Group | Integrated report 2013 BUILDING A SUSTAINABLE BANK (CoNtiNued) 2 leading through collaboration and partnership at nedbank group we acknowledge that the best way to maximise our positive sustainability impact is through partnerships with like-minded individuals, groups and organisations. we therefore proactively seek out such partnerships across all our stakeholder groups to contribute towards increased awareness and understanding of the sustainable development imperative. COMMITTED TO SOCIAL SUSTAINABILITY ThROUGh CARING We believe wholeheartedly in caring for the communities in which we operate, and in expressing that care through action. a thriving bank needs a thriving community, and so we direct our socioeconomic development (Sed) towards seven interlinked areas that also help to build our future client base. these areas are education (the knowledge economy), community and skills development (job creation), health (building healthy communities), the environment, sport and arts and culture development, and child welfare and protection. In terms of the Financial Sector Code, relevant Sa companies are required to spend at least 0,7% of their net proﬁt after tax (npat) on Sed initiatives. In 2013 we far exceeded this compliance requirement, placing r89m1 (r111m including community trust and the nedbank private Wealth Foundation) (2012: r95m) in socioeconomic development projects across our various focus areas. most of this investment was facilitated through: ■ the Nedbank Foundation. In 2013 a total of r36m was disbursed by our primary corporate social investment (CSI) arm, the nedbank Foundation, which focuses on long-term contributions to education, skills development and job creation, health and community development. the foundation supported 374 projects, reaching more than 8 000 beneﬁciaries. ■ the Nedbank external bursary Fund. We allocate a number of external bursaries, which amounted to a value of r11m in 2013. the bursaries are administered by the national Student Financial aid Scheme (nSFaS) through a public-private partnership. ■ staff volunteerism. this is intrinsic to nedbank, and many staffmembers take the time to apply their skills and talents to improving the lives of others. It also helps staff understand the communities we are trying to serve. % 19,96 1,42 9,92 4,02 5,21 NEDBANK SOCIOECONOMIC DEVELOPMENT SPEND 2013 42,83 ■ Education ■ Environment ■ Health ■ Sport ■ Welfare ■ Arts and culture ■ Community and skills development ■ Nedbank affinity programme. our clients have become 16,64 part of our CSI continuum through our successful nedbank affinity programme, through which we donate to causes and organisations on behalf of clients (and at no cost to them). In 2013 a total of r27,8m (2012: r20,9m) was distributed across the four affinities (green, Children’s, Sport and arts), with most of the growth coming from the recently launched investment-linked affinity accounts and electronic statements. In the past ﬁve years nedbank has spent over r400m on Sed projects. through our Sed we are striving to accelerate transformation in an effort not just to raise the bar in terms of compliance with the FSC, but also to entrench transformation within our organisational culture, enhance our commitment as a corporate citizen, and continue our drive to become a bank for all. 1 Reporting against FSC measurement principles. 88 maKIng thIngS happen deLIVerIng to oUr StaKehoLderS InFormatIon to oUr SharehoLderS eNsuriNG a sustaiNable busiNess ThE NEDBANK CONSUMER EDUCATION pROGRAMME Launched in 2004, this programme continues to deliver excellent results, providing clients and potential clients with information and insights to ensure they make informed decisions for ﬁnancial wellbeing. In 2013 we invested r8,1m in our consumer education programme, which beneﬁted almost 54 000 consumers across all nine provinces. Some of the education initiatives included under the Consumer education programme are: ■ Teach Children to Save South Africa™ (TCTS SA™). ■ Nedbank/Bona partnership. provides Bona magazine readers with accessible and relevant ﬁnancial education. ■ Nedbank how-to guide. Low-income earners are introduced to essential banking basics. ■ Consumer learning programme material. Learning modules available are Banking products and Services, Buying on Credit, personal Budgeting and Insurance and assurance. pARTNERING TO CREATE A fUTURE fOR SA’S YOUTh ■ The Nedbank Graduate programme. a total of 3 334 graduate applications were received for the 2013 graduate intake, and 134 were accepted. the intention behind the programme is to ensure that nedbank can recruit, develop and retain the best graduate talent in the market – people who can add value to our business and the industry as a whole. ■ SAGDA Graduate programmes. the programmes of the South african graduate development agency (Sagda) align with nedbank’s focus of enabling young people to enter and compete in the job market. We contributed r1m to Sagda’s prestigious internship programme in 2013, which saw young graduates enter the job market through placement with the department of public Works. ■ Enactus SA. Since 2009 nedbank has invested in enactus Sa (previously SIFe Sa), which helps university students gain a practical understanding of economics while developing a culture of ethical business conduct. through our partnership with enactus Sa, nedbank group human resources has also been able to recruit high-quality students into the graduate programme. ■ Nedbank External Bursary programme. We continue to help fund students who do not have the ﬁnancial means to study fulltime towards a ﬁrst degree through Sa public universities. In 2013 altogether 161 (2012: 249) bursaries were awarded. the total value of the support remains constant, even though increasing education costs and a more complete bursary offering per student have resulted in a reduced number of students being supported each year. the programme is a vital part of our talent pipeline development as it serves to equip and attract talent within our three-year skills plan. ■ Nedbank Learnership programmes. Learnerships are a vital means of contributing towards addressing the crisis of scarce skills in the Sa ﬁnancial services industry. all our learnership programmes are accredited by the South african Qualiﬁcations authority (SaQa), which requires attendance of classes as part of the learning process. In 2013 seven new learnerships were added to the nedbank portfolio, bringing the total number offered to 16. these were attended by a total of 1 307 learners, including unemployed graduates, matriculants and current nedbank employees. the nedbank-funded learnerships range from national Qualiﬁcations Framework (nQF) level 3 to nQF level 7. ■ Nedbank 4me – My future My Bank. targeted at Sa youth, this banking solution encourages and enables young people to save and to build their ﬁnancial ﬁtness from an early age. nedbank 4me is supported by four pillars – ‘4spending’, ‘4saving’, ‘4growing’ and ‘4good’ – and comprises a full transactional banking account with no monthly fees and a number of free initial transactions. thereafter pay-as-you-use pricing applies. Free enotes and self-service banking complete the offering. this banking product is supported by an entrepreneurial and business skills programme reaching approximately 135 000 learners at 300 schools in 2013. pARTNERShIpS fOR EffECTIVE SUSTAINABILITY EDUCATION the Nedbank Green Living Guide Launched at the green Building Council Conference in october 2013, this detailed sustainability guide is produced in collaboration with the Sustainability Institute and endorsed by the green Building Council South africa. the aim of the publication is to encourage all South africans to adopt a more sustainable lifestyle so that they can enjoy the economic, social and environmental beneﬁts that such an approach can deliver. It is available free to nedbank staff and clients, as well as to the general public. Since it was launched more than 2 000 copies have been distributed. It can be downloaded from nedbankgroup.co.za. Greening Your business established in 2010 in collaboration with Business Day, the greening Your Business programme continues to grow in popularity among Sa businesses of all types and sizes. In 2013 this innovative digital sustainability course was again updated and expanded with the addition of ﬁve new modules covering green company policies, facilities and supply chain management, sustainable event management and green living. a 10-part series called Green Living at Home was also added. during the year under review more than 1 350 businesses registered for the course. Nedbank Sustainability Outlook Nedbank Sustainability Outlook is researched on behalf of nedbank group by the University of Cambridge programme for Sustainability Leadership and distributed to more than 100 000 readers with the aim of encouraging debate around various sustainability issues. In 2013 topics ranged from impact investment, climate change, electromobility and the issues and challenges around nuclear energy and shale gas. grI FSSS: FS5, FS16 transfor- mation report Supplemen- tary information: Sustainable develop- ment review 89 NedbaNk Group | Integrated report 2013 BUILDING A SUSTAINABLE BANK (CoNtiNued) future generations grow up with a entrenching sustainable thinking in schools and communities We understand the importance of ensuring that our country’s full understanding of the value of sustainability as well as a knowledge of how to entrench it into the way they think and act. We are involved in a number of programmes aimed at instilling this sustainability mindset, thereby ensuring that we have a healthy world in which to operate in the future, including the following: Caring for Communities this programme has grown steadily and now sees hundreds of nedbank staffmembers actively involved in educating learners, teachers and communities on all aspects of sustainable living. Since inception the programme has involved 3 000 nedbank staff volunteers and touched the lives of over 6 000 learners and 1 600 adults at over 180 schools. In 2013 altogether 650 nedbank staffmembers volunteered to implement 56 projects (vegetable tunnels and rainwater harvesting tanks) at schools around the country. Forty sustainability workshops were held, and 2 100 learners were reached. twelve branch openings were also accompanied by community upliftment projects with a focus on environmental sustainability. Lean in Education Complementing the extensive work we undertake in education across Sa, nedbank Lean practitioners volunteered their time to facilitate personal mastery and Lean in education workshops with teaching bodies in 12 schools in 2013. WORLD WIDE fUND fOR NATURE SA nedbank group ﬁrst partnered with the World Wide Fund for nature Sa (WWF-Sa) in 1990, and this led to the establishment of the WWF nedbank green trust. the partnership has been further strengthened through our involvement in and support of various WWF-Sa programmes: The WWf Water Balance programme. access to clean drinking water is not only a basic human right, but it is also essential for economic growth. For this reason we have invested r9m in the WWF Water Balance programme, which is aimed at clearing alien vegetation at key water catchment areas around the country. our investment is over a ﬁve-year period and, since inception in 2011, has seen 193 ha (2013: 63 ha) of alien vegetation cleared. this has not only ensured the release of over 400 000 kℓ (2013: 131 000 kℓ) of water into the country’s ecosystem but, given the labour-intensive nature of the clearing work, has also created nearly 8 000 (2013: 3 368) workdays for members of communities in and around the targeted areas. as part of the programme in 2013 nedbank provided a local Wakkerstroom community in mpumalanga with ﬁnancial education and banking services. the team also handed over 50 hippo water rollers (a 90 ℓ device that assists with the transportation of water to households where it is not available on tap), a vegetable tunnel and solar chargers. this type of participation is key to achieving the deliverables of the Water Balance programme as it enhances our relationship with the community and demonstrates the mutual beneﬁts of the programme. WWf Nedbank Green Trust Graduate programme. the programme aims to support the development of a new cadre of young professionals who serve both the environment and the development agenda of Sa. to achieve this the programme funds part of the WWF postgraduate placement programme, which places young graduates with an honours or master’s degree in environmental sciences on 18-month internships that allow them to develop core conservation and professional skills under the guidance of an appointed mentor. 90 WWf-SA Sustainable Agriculture innovative this programme. programme seeks to promote and enable sustainable agriculture as a means of minimising the adverse impacts of farming on the environment. It also raises awareness of the need for good agricultural stewardship as a key part of addressing food security challenges In 2012 we committed r8,3m in support of this vital programme. in Sa. In 2013 it achieved a number of signiﬁcant successes across all the areas of agriculture it targets, including: ■ good advances in awareness and support among all stakeholders within the fruit and wine industries; ■ the provision of meaningful inputs into the establishment of a national framework to support sustainable agriculture; ■ the acquisition of funding in support of sustainable sugar farming initiatives; and ■ the completion of a draft code for better production of beef and dairy in partnership with Conservation South africa. maKIng thIngS happen deLIVerIng to oUr StaKehoLderS InFormatIon to oUr SharehoLderS eNsuriNG a sustaiNable busiNess ENSURING A SUSTAINABLE SUppLY ChAIN procurement offers a unique opportunity to express and extend our commitment to enterprise development and put into practice a values-driven business philosophy, particularly in terms of our transformation imperative. therefore go beyond our procurement practices compliance with preferential procurement legislation and guidelines, and our various procurement functions work closely with our suppliers to promote and enable greater sustainability across our supply chain. transformation as a direct result of this philosophy we are able to transform our procurement spend into an effective form of total investment. procurement spend amounted to just over r8,5bn. our preferential procurement investment amounted to just over r9,4bn as we managed to achieve 109% on the all supplier spend category (2012: r8,9bn). In 2013 our We also intensiﬁed our focus on the environmental and ethical performance and governance of new and existing suppliers introduction of enhanced declarations on our procurement systems. this information gives nedbank a better understanding of our suppliers and insight into the level of values alignment. through the local procurement We continue to monitor our progress in terms of the Local procurement accord with our first-tier suppliers. our Vendor management System has also been enhanced to provide detailed information on the origin of products and services supplied. We are pleased to have achieved a local content procurement level of almost 78%, which translates into approximately r7,5bn of local procurement. prompt payment Code nedbank group was the ﬁrst signatory to the prompt payment Code, which was implemented in 2013. the initiative, driven by the national Small Business Chamber (nSBC), seeks to address the cashflow challenges of small business in their dealings with large public and private sector organisations. We have committed to paying micro enterprises within seven days and all other small businesses within 30 days of the receipt of valid, compliant and accurate invoices from approved suppliers that have met our supplier onboarding requirements fully. Just over 3 200 Sme suppliers were used during 2013, with total payments of r2,3bn made to them. Greening our supply chain through proactive partnerships during the year under review we built more robust sustainability considerations into our overall procurement decisionmaking processes. We now that approved vendors not only demonstrate environmental awareness, but also be actively committed to entrenching environmental considerations and practices into all areas of their businesses. require In 2013 sustainability assessments of the top 300 nedbank group suppliers (representing approximately 85% of total group spend) showed that 23% (2012: 15%) now have formal environmental policies in place, while 41% (2012: 31%) are actively recycling. In 2014 we will be working with these suppliers to further their commitment to environmental sustainability. RECOGNISING SUSTAINABILITY LEADERShIp awarding leading sustainability efforts in various industries presents our group with an excellent opportunity to partner with other organisations in furthering the principles of sustainability. In addition to recognising best practices, awards serve to encourage others to adopt sustainable principles and practices, while highlighting the importance of sustainability as a business imperative, irrespective of the industry in which such businesses operate. In line with our integrated approach to sustainability, we support or sponsor a range of awards across various industries and economic sectors. these include the nedbank Capital Sustainable Business awards, the green Wine awards and, most recently, the eston Show Sustainable Farming awards, which promote and recognise sustainable farming practices among Sa’s sugarcane growers and producers. grI 3.1: eC6 91 NedbaNk Group | Integrated report 2013 BUILDING A SUSTAINABLE BANK (CoNtiNued) 3 managing and optimising our own impact at nedbank group we believe that the only way to lead is from the front, which is why we are committed to getting and keeping our own house in order. therefore, by effectively limiting our negative impacts, while maximising the positive, we not only do our share to create a sustainable future, but also position ourselves to influence others to do the same. in Sa and the We pride ourselves on having a stable employment environment at nedbank, but are conscious of the unstable impact unhappy labour environment employees can have on the productivity and sustainability levels of any organisation. For this reason we prioritise ongoing efforts to build and nurture strong and positive relationships with all our employees. By understanding their daily working experiences and challenges, engaging with them, and ensuring a positive and empowering nedbank culture, we strive continuously to build our organisation into an employer of choice in Sa, and a truly great place to work. the consistent and steadily improving results of our annual staff surveys reveal that our efforts in this regard are delivering good results and that we are moving our bank forward towards the realisation of this aspiration. TRANSfORMING OURSELVES, TRANSfORMING OUR INDUSTRY diversity has long been an essential part of our group’s people strategy. We want to remain at the forefront of transformation and sustainability, not just to meet targets and achieve FSC BBBee compliance but, even more importantly, to entrench diversity and transformation within our organisational culture. In so doing, we know that we will enhance our commitment to being a good corporate citizen, to meeting our clients’ needs even better, and to maintaining our momentum on our way to becoming a bank for all. our organisational transformation vision is to be a pan- african bank with an inclusive culture, relevant in the societies in which we operate and admired as a business that signiﬁcantly advances the development of historically disadvantaged people across all our stakeholder groups. to achieve this we have developed a transformation strategy that focuses on activities that will drive our transformation efforts to ensure that our workforce proﬁle is representative of the societies in which we operate and underpinned by all the essential factors that contribute to an inclusive environment. this also includes ensuring that differentiation in respect of pay and access to beneﬁts is defensible and not based on arbitrary or unfair considerations. as can be seen from our diverse employee proﬁle, we continue to move ever closer to being a business that is fully representative of Sa society. International staff represent 6% of our total staff complement. It should be noted, however, that data provided with regard to employment equity and the FSC relates only to Sa employees. as nedbank furthers its growth into the rest of africa, we are continually striving to align all people processes with the nedbank group policies, while ensuring adherence to the speciﬁc countries’ local legislation and market best practice. the subsidiaries are also impacted by the active trade unions and industry bodies, which require local practices to prevail. the focus in 2014 will be on auditing the alignment of all people-related policies and processes. Supplementary information: Sustainable development review transformation report grI 3.1: La14 Fair Share 2030 22–23 92 maKIng thIngS happen deLIVerIng to oUr StaKehoLderS InFormatIon to oUr SharehoLderS eNsuriNG a sustaiNable busiNess EMpLOYEE pROfILE In 2013 nedbank group had 29 513 permanent employees, including 1 759 employees in its international operations. employee gender proFile 62,7% EMPLOYEE AGE PROFILE employee age proFile (%) % attrition: gender proFile1 37,3% 4,3 9,2 14,9 ATTRITION – AGE PROFILE* attrition: age proFile (%) % 27,8 43,8 ■ < 26 years ■ 26–35 years ■ 36–45 years ■ 46–55 years ■ 55+ years 43,6% 40 56,4% 19 18 ■ < 26 years ■ 26–35 years ■ 36–45 years ■ 46–55 years ■ 55+ years 9 14 1 Total attrition rates: 2013: 8,7%P (2012: 8,2%) EMPLOYEE TENURE % employee tenure (%) 26,9 26,1 25 22 ■ < 3 years ■ 3–5 years ■ 6–10 years ■ 10+ years grI 3.1: 2.8, La1, La2, La13 transfor- mation report Female management (%) 61,5% female managers 23% of boardmembers are female 12,5% female executives a progressive and empowering employment equity plan during 2013 we adopted a slightly different and more inclusive approach to developing our groupwide employment equity (ee) plan. this rigorous process included the use of available internal data as well as consultation with employees in a number of the major centres. It was aimed at better understanding the barriers and challenges that have hindered the success of previous plans and targets. this allowed us to gather vital input in terms of what staffmembers believe will contribute to or limit the development of a more inclusive corporate culture and environment. the nedbank employment equity Forum (neeF) includes representation from all chairpersons of the group’s various cluster employment equity forums. the forum meets monthly and has been constituted in terms of the ee act to provide a platform for consultation on ee matters. achieving management transformation targets Senior management targets have been particularly challenging since 2009 and remained so in 2013. the statistics show that achievement against targets for african and Coloured groups is still below our ee plans, and we will continue to focus on addressing and overcoming these challenges. Gender advancement nedbank group is committed to the advancement of women in our bank and industry. With over 60% of our employees being female, we pay particular attention to this focus area. In the year under review 60% of all promotions were female, with 84,7% of those being black female appointments. advancement of people with disabilities We continue to focus on advancing people with disabilities (pWd) within our bank. to ensure that this is achieved in the most appropriate and accommodative manner employees are asked to declare any disabilities. the number of pWd declarations increased from 3,43% of all staff in 2012 to 3,73% in 2013. this was the result of ongoing pWd awareness campaigns and workshops, and the enhancement of the declaration portal. nedbank’s percentage of people with disabilities is above the average Sa corporate rate of 2%. embracing diversity nedbank continued its commitment to embracing diversity in 2013 through the further rollout of the Botho pele diversity programme. In 2013 altogether 5 027 employees attended the workshops, which brings the total number of employees impacted since 2008 to 20 226. 93 GRI 3.1: 4.5, LA10 Transfor- mation Report Supplemen- tary information: Sustainable Develop- ment Review NEDBANK GROUP | INTEGRATED REPORT 2013 BUILDING A SUSTAINABLE BANK (CONTINUED) At the forefront of leadership transformation The Leading for Deep Green programme provides managers with an opportunity to understand how they lead and how their leadership behaviours impact their teams. The programme gained further momentum in 2013 and by the end of the year had achieved its target, set in 2010, of positively impacting 3 489 leaders and employees in the organisation. Of these, 1 521 were reached in 2013. In 2013 we also piloted our Nedbank Leader/Manager Academy, in which training was offered to more than 100 employees. ENABLING A COLLABORATIVE, INNOVATIVE AND CLIENT-CENTRED CULTURE At Nedbank Group we prioritise the creation of a unique organisational culture and work environment as we believe this serves as a key competitive differentiator. Maintaining a culture that resonates with employees and inspires them is essential for our organisation’s sustainability. To this end a particular focus in 2013 was on building a collaborative and innovative culture that would, in turn, make us even more client-centred. Through the cultural measurements, we strive to understand how our employees experience the culture of the organisation and how closely this aligns with what they desire. As we consider our employees to be central to our success, we also take into consideration the suggestions for improvement that they provide through these survey platforms. The following measurements are viewed in a holistic manner so that we can plan effectively: ■ Values assessment – Barrett Survey. In 2013 we saw a slight shift in the entropy results (from 10% to 11% ). When seen in conjunction with the five current desired culture matches, it still indicates a healthy culture with good alignment between the current and desired employee values. ■ Organisational climate – Nedbank Staff Survey (NSS). The survey score improved from 75,5% in 2012 to 76,7% in 2013. This improvement is underpinned by the improvement of 12 of the 14 dimension scores year on year. Dimensions that showed statistically significant positive shifts included Change and Transformation, Ethics, Organisational Culture and Values, Rewards, Recognition and Performance Management, and Training and Development. ■ Staff Net Promoter Score. As part of our commitment to ensuring that we are Africa’s most admired bank – first and foremost by our staff – a Net Promoter Score was introduced into the NSS in 2012. The 2013 results show significant improvement, indicating that we have 15,5% more promoters than detractors in terms of Nedbank’s being a great place to bank. There were also 19,5% more promoters of Nedbank’s being a great place to work. ■ Hewitt Engagement Survey. The annual Hewitt Engagement Score measures how intellectually and emotionally involved Nedbank employees are in their 94 work. The year 2013 saw the Nedbank Engagement Score positively increasing by 1% to 72%. This score again puts us in the high-performance range and well above the average global financial services score of 59%. To build on this we have developed an engagement strategy, which will actively contribute to all employees’ experiences and further increase their engagement levels. This will be implemented in 2014. DEVELOPING, EMPOWERING AND EQUIPPING OUR PEOPLE We endeavour to create a culture of collaboration and innovation, where employees are given the opportunity to grow and thrive, so that they can work towards attaining their goals, prepare themselves for future roles and opportunities, and be instrumental in the organisation’s achievement of its objectives. Enabling employees to plan for the futures they want For us, continuous learning is the responsibility of both the employee and the organisation. We encourage all employees to plan their development thoroughly to ensure that they achieve the growth they need to realise their aspirations and benefit the organisation. Development discussions are held twice a year as part of the formal annual review process. Employees are able to plan and track their development on an online system. In 2013 a total of 21 238 (2012: 23 361) employees had development plans captured on the system. Outcomes-driven training and development Training and development are integral to this philosophy. In 2013 we recorded an average of 55 hours (2012: 44 hours) of training per employee, with an average of 56 hours for females. This aligns with our gender advancement focus. In 2013 we invested R396m (2012: R352m) in training. EFFECTIVE TALENT MANAGEMENT In 2013 we implemented our Integrated Talent Framework, which provides line managers with a view of how to enable effective talent management by demonstrating how the different HR practices interlink. A key component of the framework is the conversation that forms part of the annual talent review process. These include discussions between managers and their employees on career aspirations, retention drivers and the development objectives of individuals. Acquiring and optimising talent We believe that having the right people in the right jobs is of the utmost importance to the realisation of our vision to be Africa’s most admired bank. Occupational assessments form an integral part of selecting the right talent by ensuring that we employ those with the right skills and attitudes to match and complement our corporate culture. Occupational assessments are used to predict the likely future performance and potential that the individual may display in the workplace. These assessments improve the efficiency of the recruitment process by allowing us to make more informed recruitment decisions based on maKIng thIngS happen deLIVerIng to oUr StaKehoLderS InFormatIon to oUr SharehoLderS eNsuriNG a sustaiNable busiNess objective information. not only does this beneﬁt the it also enables us to evaluate an organisation, but individual’s potential to grow rather than just the skills he or she demonstrates. these assessments also provide signiﬁcant beneﬁts for employee development. REWARDING fOR pERfORMANCE performance planning at nedbank group ensures the alignment of our strategic business intent and the development and achievement of personal performance objectives. this is achieved through a scorecard approach from overall group and cluster cascaded down performance that each indicators, which ensures employee is able to contribute to the organisation’s success. In 2013 a total of 97% (2012: 96%) of employees participated in the ﬁnal performance review process, conﬁrming their ratings on our self-service hr portal. In addition to providing formalised input for development purposes, the outcome of the ﬁnal performance review is a primary input into the annual remuneration review process. this is in support of our reward-for-performance objectives. our approach to reward is based on a total reward philosophy. In addition to our core reward programmes, which are set out in detail in the 2013 remuneration report, we offer a number of banking and lifestyle products that provide access to a range of very competitively priced goods and services. SUSTAINABILITY ThROUGh EMpLOYEE WELLBEING given the rigours of working in the fast-paced ﬁnancial services environment, employee wellbeing is important. our wellness strategy therefore aims to help employees foster a long-term commitment to a healthy lifestyle and the proactive limitation of health risks. this strategy is complemented by a range of employee beneﬁts, including medical aid and retirement funds. the Nedbank employee Wellbeing programme our employee Wellbeing programme ensures that we are able to help employees respond adequately to the challenges they may encounter in their lives, which helps us build a more effective, more productive workforce. the employee Wellbeing programme provides assistance and support with issues such as emotional and personal difficulties, family and relationship concerns, alcohol or drug abuse, stress and change management, ﬁnancial legal concerns, hIV/aids, violence and matters, bereavement. the overall employee Wellbeing programme engagement rate in 2013 was 42%, while individualised usage of the core counselling and advisory services was 20,3% (2012: 19,6%). this is higher than the average uptake of such services for the ﬁnancial services sector in Sa, and we believe it is a result of our ongoing efforts to raise awareness of the service and encourage our employees to make full use of it. the most common themes for 2013 were relationship, stress and organisational issues. Managing lifestyle diseases in the workplace nedbank is committed to addressing lifestyle diseases proactively and in a positive, supportive and non- discriminatory manner. to this end we have developed a holistic and inclusive wellness strategy that includes ongoing education and health screening. We regularly offer our employees the opportunity to be tested for lifestyle diseases such as cardiovascular disease, diabetes and hIV/aids, while our ongoing education and health screening programme helps them to gain a better understanding of their personal health risk. It also gives nedbank’s management a good understanding of the health risks faced by employees, allowing for appropriate intervention planning. In 2013 a total of 3 703 employees underwent voluntary testing for various lifestyle diseases as part of nedbank Wellness days (2012: 1 211). planning for retirement In 2012 we launched our planning for retirement workshops. aimed at employees who are 55 and older, the workshops tackle the psychosocial as well as ﬁnancial aspects of preparing for and taking retirement. the feedback from the approximately 400 employees who attended was overwhelmingly positive, so the programme will be opened to employees of all ages in 2014, as we believe planning for retirement should start as early as possible. enabling staff volunteerism nedbank’s volunteerism programmes form an integral part of our CSI agenda and offer a tangible way for employees and clients to become personally involved in tackling the social, economic and environmental issues that pervade for nedbank group Sa. Volunteerism opportunities staffmembers International include team Challenge, mandela day, the Caring for Communities programme, nedbank payroll giving and the Local hero programme. ENSURING hARMONIOUS EMpLOYEE RELATIONShIpS as part of our commitment to promoting and fostering good employee relations, we recognise the right of our employees to representation, freedom of association and collective bargaining. Combined representation by the recognised unions, IBSa and SaSBo, accounts for 44,4% of employees in the bargaining unit. the bargaining unit comprises 18 091 employees and the non-bargaining unit makes up the balance. We engage in annual salary negotiations with all recognised trade unions representing our employees. In 2013 these salary negotiations took place over three days and an overall salary increase of 8% (distributed in accordance with an agreed matrix) was agreed for unionised employees. monthly consultation meetings with the unions ensure that sound employee relations practices are consistently applied. as a result of constructive consultations between grI 3.1: La4, La5, La8, La12 transfor- mation report Supplemen- tary information: Sustainable develop- ment review 95 NEDBANK GROUP | INTEGRATED REPORT 2013 BUILDING A SUSTAINABLE BANK (CONTINUED) all stakeholders, retrenchments were kept to a minimum in 2013, with only 11 forced retrenchments because of operational requirements. The minimum notice period for bargaining and non-bargaining units, as specified in agreements, is three months for any significant operational changes. Where necessary, we also consult regarding occupational health and safety matters. Documentation pertaining to injuries on duty is kept at a central portal within the Health and Safety Department. Our accident reporting and recording procedure further includes the recording of minor first-aid incidents, medical- related incidents and injuries sustained by contractors and visitors if our first aiders and medics attend to these incidents. The Nedbank Grievance Policy and Procedure gives our employees an accessible channel through which to raise any issues or dissatisfaction without fear of victimisation or discrimination. A total of 249 grievances were effectively managed in 2013. These ranged from disputes concerning victimisation and discrimination to specific complaints against managers. Consistent adherence to fair employee relations processes has ensured that referrals to the Commission for Conciliation, Mediation and Arbitration (CCMA) were kept to a minimum, with 106 matters referred to the CCMA for the year, compared with 133 in 2012. A total of 58 cases were settled (compared with 42 in 2012). Only one of the referred cases resulted in a decision against Nedbank (2012: 4). OCCUPATIONAL HEALTH AND SAFETY We place a priority on ensuring the occupational health and safety of our employees, clients and contractors, and make every effort to embed health and safety into our corporate culture. All our SA entities comply fully with the Occupational Health and Safety Act, 85 of 1993, including its regulations, as well as the Compensation for Occupational Injuries and Diseases Act, 130 of 1993. Our group subsidiaries are required to comply with relevant local occupational health and safety laws in their countries, as well as with the Occupational Health and Safety Policy of the group. Occupational health and safety committees All our group sites have occupational health and safety committees in place. Incident recording and reporting In compliance with the Compensation for Occupational Injuries and Diseases Act, 130 of 1993, our Health and Safety Department records, reports to the Compensation investigates (via the appointed Commissioner, and Accident Investigators) all workplace injuries. The table below reflects incidents and injuries recorded in 2013: Category First aid (minor incidents) Medical Workmen’s Compensation claims – Nedbank employees Workmen’s Compensation claims – Contractors Fatalities Near-miss incidents Days lost 2013 325 1361 40 1 22 7 2012 450 111 44 7 1 – 404 346 1 Medical incidents were related to medical conditions and were not caused by work-related injuries. 2 The fatalities were related to medical conditions and were not caused by work- related injuries. In 2013 a total of 2,2% (2012: 1,9%) man-days were lost because of sick leave. Occupational health and safety education and training Comprehensive occupational health and safety training is available on the Nedbank Group intranet site. It is compulsory for all our employees to read and acknowledge the Occupational Health and Safety Policy of the group annually. Risk control: compliance and emergency procedures Emergency procedures are in place for all our headoffices and retail outlets. All headoffice sites are also equipped with evacuation chairs, essential medical equipment, first- aid rooms and portable public address systems for emergency use. All occupational health and safety appointees are fully trained in the relevant emergency procedures. We hold two annual evacuation drills per year at all headoffice buildings and one drill in every retail outlet. It is compulsory for all staff, contractors and visitors to participate in these drills and disciplinary measures are taken for non-compliance with this requirement. GRI 3.1: LA7 Transfor- mation Report Supplemen- tary information: Sustainable Develop- ment Review 96 maKIng thIngS happen deLIVerIng to oUr StaKehoLderS InFormatIon to oUr SharehoLderS eNsuriNG a sustaiNable busiNess COMMITTED TO LEVERAGING OUR CARBON NEUTRALITY Carbon neutrality nedbank group achieved carbon-neutral status in 2010 and was the ﬁrst ﬁnancial services organisation in africa to do so. the carbon-neutral status propelled us into the next important phase of our environmental sustainability journey. the achievement also added momentum to the realisation of our becoming a leader and driver of sustainability in Sa. In the years since we achieved carbon neutrality we have been able to leverage this position to enhance our client value proposition, contribute to the development of Sa’s green economy, and unlock numerous synergies and partnerships through close collaborations with like-minded organisations. our approach to carbon neutrality is to reduce our own impact as much as possible ﬁrst and then to offset the remainder of the footprint. Footprint reductions are achieved through a variety of initiatives from internal behavioural change to working towards clear reduction targets in terms of paper, water, electricity, waste, travel and carbon emissions. We obtained the carbon credits required to offset our 2013 footprint from projects throughout africa that are delivering beneﬁts for the continent’s natural resources as well as its people and communities. these include the rukinga project, the Kibale national park natural high Forest rehabilitation project, reliance Compost, the ethekwini Landﬁll methane project, the Beatrix methane destruction and Utilisation project and Lifestraw Water Filtration project. From 2012 to the end of 2013 there were some positive signs in the growth of the amount of domestic Sa carbon offsetting projects that had veriﬁable carbon credits with the appropriate social upliftment beneﬁts. this said, there is still a limit on the available and eligible carbon offsetting projects we can invest in Sa. CARBON REDUCTION In 2013 our total carbon footprint was 221 379P tCo2e (2012: 226 310 tCo2e). therefore the total ghg emissions across the entire nedbank group decreased by 2,18% from 2012 to 2013. accordingly, the emission rate per fulltime employee (Fte) also decreased by 3,46% year on year and was calculated as 7,61 tCo2e per Fte (2012: 7,89 tCo2e per Fte). Based on floor space the ghg intensity rate decreased by 2,28% to 0,33 tCo2e/m2 (2012: 0,34 tCo2e/m2). A TARGETED AppROACh TO REDUCING OUR OWN ENVIRONMENTAL IMpACT reduction targets remain a key component of nedbank group’s overall commitment to limiting and constantly reducing its impact on the environment and its usage of diminishing natural resources. these reduction targets not only set the bar in terms of our groupwide carbon emissions and resource use, but are also cascaded through our organisation to provide individuals and teams with clearly deﬁned annual objectives. In many cases, the achievement of these reduction targets forms an integral part of performance reviews, thereby ensuring that nedbank staffmembers clearly understand the role and responsibility they have in meeting our group reduction targets. resources consumption not reflected in the carbon footprint pie chart below includes 299 694 kℓP (2012: 292 325 kℓ) of water, 355P (2012: 372) tonnes of waste sent to landﬁll and 565P (2012: 557) tonnes of waste recycled. target achievements in 2013 In 2013 we achieved the following in terms of our intensity reduction targets: resource Carbon emissions 7,61 tCo2e per Fte and achievement electricity Water paper Waste and recycling business travel 0,33 tCo2e/m2. electricity use was decreased by 2,63% per Fte and by 1,44% based on floor space, mostly because of campus site electricity reductions. Water consumption on campus sites increased by 0,73% per Fte from 2012 to 2013. total usage decreased by 13,4% from 2012 and the end-of-2016 target was reached. there was also a 13,2% reduction in emissions associated with paper usage. the waste sent to landﬁll decreased from the 2012 value of 21,01 kg per Fte to 19,70 kg per Fte. this means that the target for the end of 2016, based on 2011 values, was met by the end of 2013. recycling also increased by 1,44% to 565 tonnes. Business travel decreased from 15 899 tCo2e in 2012 to 14 514 tCo2e in 2013. this was mainly due to active cost containment. NEDBANK GROUp 2013 CARBON fOOTpRINT NEDBANK GROUP 2013 CARBON FOOTPRINT % 0,36 6,56 18,25 1,38 73,45 – 0,36% ■ Scope 1: Emissions ■ Scope 2: Electricity ■ Scope 3: Product – 73,45% distribution – 0% – 1,38% ■ Scope 3: Office paper ■ Scope 3: Commuting ■ Scope 3: Business – 18,25% travel – 6,56% grI FSSS: FS4, FS5 grI 3.1: en1, en3, en4, en8, en16, en22, en26 Supplemen- tary information: Sustainable develop- ment review 97 NedbaNk Group | Integrated report 2013 VALIDATING OUR SUSTAINABILITY jOURNEY ASSURANCE STATEMENT independent assurance report on selected sustainability information to the directors of Nedbank Group ltd We have undertaken a limited assurance engagement on selected sustainability information, as presented in the 2013 nedbank group Ltd Integrated report (‘this integrated report’) of nedbank group Ltd (‘nedbank’) for the year ended 31 december 2013. subject matter and related assurance the subject matter of our engagement, and related assurance we are required to provide, is as follows: 1 2 3 Limited assurance on nedbank’s assertions relating to their alignment with the aa1000apS (2008) principles (inclusivity, materiality and responsiveness) as described on page 3 of this integrated report. refer to 3 Limited assurance on the key performance indicators, identiﬁed by P on the relevant pages of this integrated report, as described in the table below. Limited assurance on nedbank’s self-declaration of the global reporting Initiative (grI) g3.1 a+ application level (available online). key performance indicators Net promoter score (Nps) Net primary-client gain systems availability description net promoter score trend based on externally conducted surveys (%). number of primary and/or net primary-client gain/loss for retail, corporate and business banking. Blended uptime score for infrastructure and applications, It capability quartile positioning (%). ombudsman for banking services cases number of external cases opened and closed. equator deals anti-corruption interventions Carbon footprint number of projects ﬁnanced. percentage and total number of business units analysed for risks related to corruption (%). total tonnes of Co2 equivalents. total kℓ consumed on campus sites. total tonnes consumed for nedbank group. Water paper Waste sent to landfill Waste recycled entropy employee surveys ethics acknowledgement employee turnover bbbee scorecard Value-added statement total tonnes sent to landﬁll from campus sites. total tonnes recycled from campus sites. entropy score as calculated by the Barrett Survey (%). overall employee satisfaction as determined by the nedbank Staff Survey (%). total number of employees acknowledging the nedbank Code of ethics and sundry ethics codes. Staff attrition rate (%). externally veriﬁed BBBee scorecard in terms of Financial Sector Code. Value allocated from income earned. directors’ responsibilities the directors of nedbank are responsible for the selection, preparation and presentation of the sustainability information in accordance with the criteria described in the subject matter above, the identiﬁcation of stakeholders and stakeholder reporting requirements, material issues, commitments with respect to sustainability performance, establishing and maintaining appropriate performance management and internal control systems from which the reported information is derived, and for such internal control as the directors determine necessary for the preparation of this integrated report that is free from material misstatement, whether due to fraud or error. independence and expertise We have complied with the International Federation of accountants (IFaC) Code of ethics for professional accountants, which includes comprehensive independence and other requirements founded on fundamental principles of integrity, objectivity, professional competence and due care, conﬁdentiality and professional behaviour. our engagement was carried out by a multidisciplinary team with extensive experience in sustainability reporting. 98 maKIng thIngS happen deLIVerIng to oUr StaKehoLderS InFormatIon to oUr SharehoLderS eNsuriNG a sustaiNable busiNess our responsibility limited assurance is to express our responsibility conclusions on the selected sustainability information based on our work performed. We have conducted our engagement in accordance with the International Standard on assurance engagements (ISae 3000), assurance engagements other than the audits or reviews of historical Financial Information, which standard requires that we plan and perform our engagement to obtain limited assurance that the selected sustainability information is free from material misstatement. our procedures selected and the extent of our procedures depend on our judgement, including the risks of material misstatement of the selected sustainability information in this integrated report, whether due to fraud or error. In making our risk assessments, we considered internal control relevant to nedbank’s preparation of this integrated report. In a limited assurance engagement, the evidence- gathering procedures are less than where reasonable assurance is expressed. We believe the evidence we have obtained is sufficient and appropriate to provide a basis for our limited-assurance-conclusion. summary of work performed our work included the following evidence-gathering procedures: ■ Interviewing management and senior executives at corporate level to evaluate the application of the grI g3.1 guidelines and aa1000apS (2008) principles and to obtain an understanding of the control environment related to integrated reporting. ■ testing the processes and systems at group level for generating, collating, aggregating, monitoring and reporting selected sustainability information and inspecting related documentation, more speciﬁcally: ¨ Interviews and discussions with relevant management, key personnel and/or stakeholders of nedbank to conﬁrm deﬁnitions and boundaries for selected performance information, and to gather information on the data collection and report preparation processes. ¨ evaluation of internal data management controls based on system walkthroughs. ¨ Inspection of selected internally and externally generated documents and records and comprehensive data analyses. ¨ recalculation of the key performance indicators. ■ evaluating whether the information presented in this integrated report is consistent with our overall knowledge and experience of sustainability management and performance at nedbank and not materially inconsistent with information contained in this integrated report. Conclusions 1 On the AA1000ApS (2008) principles of inclusiveness, materiality and responsiveness on which we are required to express limited assurance Based on our work performed, nothing has come to our attention that causes us to believe that nedbank’s the assertions relating aa1000apS (2008) principles of inclusivity, materiality and responsiveness, described on page 3, are not properly prepared. their alignment with to 2 3 On the selected key performance indicators on which we are required to express limited assurance Based on our work performed, nothing has come to our attention that causes us to believe that the selected key performance indicators set out in the table for the year ended 31 december 2013 are not fairly stated, in all material respects, in accordance with the grI g3.1 guidelines. On Nedbank’s self-declaration on the GRI G3.1 A+ application level on which we are required to express limited assurance Based on our work performed, nothing has come to our attention that causes us to believe that nedbank’s self- declaration of an a+ application level is not fairly stated in all material respects, in accordance with the grI g3.1 guidelines. limitation of liability our work has been undertaken to enable us to express the conclusions contained in this report solely to the addressee in accordance with the terms of our engagement, and for no other purpose. We do not accept or assume liability to any party other than the directors of nedbank, for our work, for this report, or for the conclusions we have reached. KpMG Services (pty) Ltd per neil morris Chartered accountant (Sa) registered auditor director KpMG Crescent 85 empire road parktown Johannesburg 2193 KpMG policy board: Chief executive: rm Kgosana executive directors: t Fubu, a hari, d van heerden, e magondo, JS mcIntosh, Cat Smit other directors: dC duffield, am mokgabudi, Lp Fourie, n Fubu, th hoole, a Jaffer, m Letsitsi, a masemola, Y Suleman (Chairman of the board), a thunström, t rossouw 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. Deloitte & Touche per nina le riche Chartered accountant (Sa) registered auditor partner Building 8, Deloitte place the Woodlands Woodlands drive Woodmead, Sandton 2128 national executive: LL Bam (Chief executive), ae Swiegers (Chief operating officer), gm pinnock (audit), dL Kennedy (risk advisory), nB Kader (tax), tp pillay (Consulting), K Black (Clients and Industries), JK mazzocco (talent and transformation), Cr Beukman (Finance), m Jordan (Strategy), S gwala (Special projects), tJ Brown (Chairman of the board), mJ Comber (deputy Chairman of the board) a full list of partners and directors is available on request. 11 march 2014 refer to 3 99 Our FiNaNciaL perFOrmaNce iN 2013 ChIEf fINANCIAL OffICER’S REVIEW good performance underpinned by strong nir growth and risk management. raisibe Morathi Chief Financial officer fINANCIAL OVERVIEW Of 2013 In a tougher-than-anticipated economic environment the group continued to build and grow the nedbank franchise, delivering headline earnings growth of 15,9% to r8 670m, a return on average ordinary shareholders’ equity (roe) excluding goodwill of 17,2% and economic proﬁt (ep) of r2 114m, up 39,0%. our progress over the past year is equally reflected in the return on assets (roa) increasing to 1,23% from 1,13% in 2012, driven by good revenue growth, impairments increasing at a slower rate than net interest income and disciplined expense management. We have continued to create value for our shareholders by increasing net asset value (naV) per share by 12,1% to 13 143 cents and dividends per share 19,0% to 895 cents per share, ahead of the 15,9% growth in headline earnings per share (hepS), while our diluted hepS increased 15% to 1 829 cents per share. nedbank group is well capitalised, with the Basel III common-equity tier 1 ratio at 12,5% – at the top end of our internal target range (2012: Basel III pro forma ratio 11,6%). Funding and liquidity levels remained sound with the surplus liquidity buffer at r28,0bn (2012: r24,4bn), and the ﬁnal-quarter average long-term funding ratio was maintained at 26,2%. strong financial position to build our franchise Year ended % change headline earnings (rm) economic proﬁt (rm) hepS (cents) diluted hepS (cents) preprovisioning operating proﬁt (rm) roa (%) roa (excluding goodwill) (%) roe (%) tangible naV per share (cents) assets under management (rbn) Common-equity tier 1 capital ratio (%) 15,9 39,0 14,9 15,0 2013 8 670 2 114 1 884 1 829 2012 7 4831 1 521 1 640 1 590 11,1 17 268 15 5431 1,23 17,2 15,6 1,13 16,4 14,8 13,6 26,5 11 346 9 989 190,3 150,5 12,5 895 11,62 752 100 1 December 2012 restated by R27m to reflect the adoption of IAS 19 Employee Benefits. 2 Pro forma Basel III. dividend per share (cents) 19,0 NedbaNk Group | Integrated report 2013maKIng thIngS happen deLIVerIng to oUr StaKehoLderS InFormatIon to oUr SharehoLderS eNsuriNG a sustaiNable busiNess r8,7bn headLIne earnIngS Up 15,9% 86,4% nIr/expenSeS ratIo (2012: 84,2%) 17,2% retUrn on eQUItY (exCLUdIng goodWILL) (2012: 16,4%) REVIEW Of 2013 RESULTS the group’s ﬁnancial performance was fundamentally driven by our diligence in executing on the key strategic focus areas, namely repositioning retail, portfolio tilt, rest of africa and growing nIr. the following review should thus be read in conjunction with the strategic focus areas and material matters covered on pages 21 and 14 respectively of this integrated report. Cluster review: defensive wholesale banking bias in tough consumer environment the group beneﬁted from diversiﬁed earnings streams from our clusters with the wholesale and wealth clusters producing strong earnings growth rates and high roes, while retail and business banking were impacted by higher impairments. Concerns around the worsening consumer environment led to further strengthening of our retail provisions and nedbank Business Banking was affected by the large single-client impairment. Further details on cluster performance are covered in the Segmental overview on page 122 of this integrated report. Year ended nedbank Capital nedbank Corporate nedbank Business Banking nedbank retail nedbank Wealth Line clusters Centre and rest of africa group group (excluding goodwill) headline earnings Rm ROE % % change 20,6 23,6 (1,6) (0,5) 25,3 11,8 >100,0 15,9 2013 1 726 2 245 929 2 539 900 8 339 331 8 670 20121 1 431 1 817 944 2 552 718 7 462 21 7 4831 2013 29,4 26,4 19,4 11,6 36,2 19,1 15,6 17,2 2012 25,4 22,5 21,5 12,1 29,7 17,9 14,8 16,4 1 December 2012 restated by R27m for the updated IFRS 19 accounting policy relating to employee benefits. headline earnings at the centre represent mainly an increase in earnings in the rest of africa division, a reversal of r88m of insurance provisions following court rulings in our favour in the ﬁrst half of the year and net interest income (nII) earned on higher levels of surplus equity held at the centre. the approximately 2% delta in roe between operating units and the group is as a result of capital held at the centre allocated to rest of africa, unallocated capital in excess of a threshold of 11% and capital held for goodwill and other corporate assets. our 2014 strategic focus areas 21 Understand- ing material matters 14–20 refer to 122 grI 3.1: 2.8, eC1 Consolidated annual ﬁnancial statements 101 NedbaNk Group | Integrated report 2013 ChIEf fINANCIAL OffICEr’S rEvIEw (CoNtiNued) hEADLINE EARNINGS DRIVEN BY GOOD MOMENTUM fROM GOOD NON-INTEREST- REVENUE GROWTh AND ExpENSES DISCIpLINE HEADLINE EARNINGS Rm 0 4 5 1 3 8 4 7 6 6 3 7 3 0 2 6 5 8 1 8 6 1 0 7 6 8 7,8% 7,0% 11,8% 9,0% 2012 NII Impairments NIR Expenses Direct tax and other 2013 Net interest income (Nii) nII grew 7,8% to r21 220m, underpinned by average interest-earning banking assets growth of 6,8%. the net interest margin (nIm) increased to 3,57% from 3,53%, led by liability margin gains from a lower cost of marginal wholesale funding, deposit mix and volume beneﬁts, and slightly lower levels of average long-term debt. notwithstanding improved risk-adjusted pricing of new advances, the asset margin was impacted by mix changes from the planned slowdown in growth of personal loans. overall margin beneﬁted from 3 basis points on the back of our interest rate strategies. NET INTEREST INCOME Bps ) 2 ( 1 2 3 Asset margin pricing and mix change Endowment on capital and deposit Liability margin pricing and mix Other 2013 7 5 3 3 5 3 2012 102 maKIng thIngS happen deLIVerIng to oUr StaKehoLderS InFormatIon to oUr SharehoLderS eNsuriNG a sustaiNable busiNess impairments charge on loans and advances Impairments increased 7,0% to r5 565m and the credit loss ratio (CLr) was similar to that of 2012 at 1,06%, largely due to higher impairments charges from methodology changes and increased defaulted advances in personal Loans, and a large single-client impairment in Business Banking at r167m. the CLr is comprised of 0,95% in speciﬁc and 0,11% in portfolio provisioning, resulting in overall increased coverage ratios. Sound asset quality and proactive risk management resulted in lower levels of inflows into defaulted advances, which declined 9,4% to r17 455m, 2,95% of gross advances. CREDIT LOSS RATIO % 1,59 1,52 1,36 1,32 1,13 1,05 Target range1 60 – 100bps 1,01 2009 2010 2011 0,91 2012 DEFAULTED ADVANCES (Rm) DEFAULTED ADVANCES AS % OF BOOK 10,6 5,9 2,6 1,06 0,95 5 4 0 7 2 5 6 7 6 2 0 1 2 3 2 6,3 3,6 2,0 3 7 2 9 1 5,4 3,0 1,6 (9,4) 5 5 4 7 1 2013 2009 2010 2011 2012 2013 Total impairments Speciﬁc impairments Retail Wholesale Nedbank Group 1 Revised through-the-cycle range: Nedbank Group 80–120 basis points (2014) the coverage ratio for total and speciﬁc impairments increased to 65,6% and 42,8% respectively. portfolio coverage on the performing book continued to strengthen to 0,70%. our collections processes are robust and generated post-writeoff recoveries of r888m (2012: r866m), reflecting the prudency of cash accounting recoveries on the written-off book. this includes recoveries in personal Loans of r276m (2012: r243m). Non-interest revenue nIr increased by 11,8% to r19 361m, with commission and fee income increasing by a strong 11,8% to r14 023m from good transactional volume increases across the group and improved cross-sell. NON-INTEREST REVENUE Rm 2 3 2 0 0 1 ) 5 8 ( 5 0 3 11,8% CONTRIBUTION (%) 4 13 10 5 8 4 1 4 2 3 7 1 73 45 4 16 1 6 3 9 1 11,8% 13,7% 4,1% (9,5%) >100% 16 2012 Comm and fees Insurance income Trading Private equity and other FY adj 2013 10 9 and fees ■ Comm ■ Insurance ■ Trading ■ Other Banking ■ Retail ■ Business ■ Corporate ■ Capital ■ Wealth ■ Other 103 NedbaNk Group | Integrated report 2013 ChIEf fINANCIAL OffICEr’S rEvIEw (CoNtiNued) Insurance income remained robust with growth of 13,7% to r1 927m on the back of good sales in motor vehicle insurance and an improvement in the claims environment, which was partly offset by the volume-related slowdown in credit life income. trading income increased 4,1% to r2 564m off the high 2012 base and private-equity income of r225m was recorded following higher unrealised losses in nedbank Capital and nedbank Corporate, exacerbated by higher realisations in 2012. Fair-value gains of r40m against a r265m loss in 2012 resulted from basis risk on centrally hedged banking book positions and accounting mismatches in the hedged ﬁxed-rate advances portfolios. our strategy to grow nIr has resulted in an nIr increase of 13,0% (excluding fair-value adjustments) on a compounded basis since 2009, with an increase in the nIr-to-expenses ratio from 78,8% in 2009 to 86,4% (2012: 84,4%) to meet our medium-to-long-term target of > 85% for the ﬁrst time since the introduction of this measurement in 2010. Banking fees are particularly relevant to consumers in this difficult economic climate and as part of our commitment to making banking more affordable we have kept our transactional fees in nedbank retail, nedbank Business Banking and nedbank Corporate for 2014 at 2013 levels. the cost is expected to be partly offset by continued client gains, cross-sell and more transactional volumes. expenses disciplined cost management, combined with ongoing investment in the franchise, resulted in operating expenses growing 9,0% to r22 362m. growth in expenses was primarily driven by a staff-related cost increase of 10,5%, comprising salary and union–negotiated wage cost growth of a combined average of 6,5% and 1,4% growth in average headcount, and a variable-compensation increase in line with the group’s ﬁnancial performance, with the short-term incentive up 15,9% and long-term incentive up 23,4%. marketing and computer processing costs grew at 13% and 10,5% respectively, consistent with increases in business volume growth. our efficiency ratio of 55,2% is steadily improving, in spite of the group investing more than r1,7bn in capex over the past ﬁve years in our franchise, distribution network, systems and new products. EFFICIENCY RATIO AND EXPENSE GROWTH % 9,9 9,9 , 5 3 5 , 7 5 5 2009 2010 Efficiency ratio Total expense growth (%) 14,0 , 6 6 5 2011 8,7 9,0 , 6 5 5 2012 , 2 5 5 2013 taxation the base effect of capital gains tax and secondary tax on companies in 2012, together with lower levels of dividend income, resulted in a lower effective tax rate of 25,2% in comparison with 26,8% for the prior period. this was computed from a total tax charge of r3 033m, 6% higher than that of 2012, and income tax payments were r3 239m for the year. a consolidated total cash payment of r8bn was made collectively by several group companies representing, inter alia, income tax, Vat, paYe and other indirect taxes. nedbank remains committed to responsible and ethical practices, and works closely with the tax authorities in various jurisdictions in which the group operates. 104 maKIng thIngS happen deLIVerIng to oUr StaKehoLderS InFormatIon to oUr SharehoLderS eNsuriNG a sustaiNable busiNess WELL-CApITALISED AND fUNDED BALANCE ShEET loans and advances Loans and advances increased 9,9% to r579,4bn from r527,2bn, with good wholesale banking advances growth of 16,1%. gross advances payouts stood at r158,9bn, up 10,1% from r144,3bn. Loans and advances by cluster are as follows: rm nedbank Capital Banking activities trading activities nedbank Corporate nedbank Business Banking nedbank retail nedbank Wealth Centre, including rest of africa % change 32,8 36,7 25,9 7,7 4,4 2,5 11,2 25,9 9,9 2013 109 549 72 066 37 483 175 274 62 785 195 435 22 082 14 247 579 372 2012 82 494 52 732 29 762 162 730 60 115 190 647 19 864 11 316 527 166 Banking advances growth in nedbank Capital remained robust, following steady drawdown of the deal pipeline, including the renewable energy Independent power producer procurement programme (reIpppp). growth in the trading advances book came largely from foreign currency placements, and deposits placed under reverse repurchase agreements related to surplus liquidity and the hedging of the group’s liquid-asset portfolio. the increase in nedbank Corporate’s advances is comprised of 5,3% growth in corporate banking and 11,0% growth in property ﬁnance. nedbank Business Banking recorded advances growth of 4,4% as the small-to-medium-sized enterprises sector continued to experience economic pressure throughout 2013. retail banking advances grew modestly at 2,5%. advances growth was led by an increase of 14,2% and 13,8% for card and vehicle ﬁnance respectively, while personal loan and home loan advances declined 9,4% and 2,1% respectively in line with the selective origination strategy. growth in advances at the centre was led by increased business activity in the rest of africa, consistent with the group’s focus on deepening its pan-african banking client relationships and expanding its presence in the rest of africa. deposits deposits grew 9,5% to r603,0bn – up from r550,9bn – and a sound loan-to-deposit ratio of 96,1% was maintained. STRONG DEPOSIT GROWTH AND A WELL-DIVERSIFIED DEPOSIT MIX DEPOSITS (Rbn) , 3 5 524,1 8 5 , 0 9 , 8 6 , , 6 5 1 6 9 , 9,6% CONTRIBUTION (%) 16,9 13,5 , 0 3 0 6 14,5 9,4 6,3 39,4 , 9 0 5 5 5,3% 9,7% 7,8% 9,1% 36,5% 11,0% 2012 Nedbank Capital Nedbank Corporate Nedbank Business Banking Nedbank Retail Nedbank Wealth Central Management, including Rest of Africa 2013 savings accounts ■ Current accounts and ■ Call and term deposits ■ Fixed deposits ■ Cash management deposits ■ Negotiable certiﬁcates of deposit ■ Other 105 NedbaNk Group | Integrated report 2013 ChIEf fINANCIAL OffICEr’S rEvIEw (CoNtiNued) our group’s portfolio tilt strategy to drive deposit growth is reflected in good contributions seen from all the clusters. Current accounts increased 5,1% and savings accounts grew by a strong 30,3%, as savings deposits held in nedbank Wealth were also boosted by rand depreciation. Call and term deposit balances were 9,7% higher due to increased funding from the commercial and asset management sectors. the strategy also focused on increasing ﬁxed deposits, which resulted in 16,3% growth in ﬁxed deposits, while negotiable certiﬁcates of deposit were up 13,7%. accounting policies nedbank group’s principal accounting policies have been consistently applied in current and prior ﬁnancial years in terms of International Financial reporting Standards (IFrS) as issued by the International accounting Standards Board (IaSB), with the exception of those items noted in the key changes to accounting policies section. engagement with audit Committee We remain accountable to the audit Committee concerning the adequacy of processes and controls, the quality of ﬁnancial results and signiﬁcant judgement and accounting issues. We are pleased to report that the audit Committee: ‘Considers the accounting practices and internal ﬁnancial controls that have led to the compilation of the annual ﬁnancial statements to be appropriate’. BASEL III IMpLEMENTATION Sa was one of the ﬁrst countries to implement Basel III as scheduled on 1 January 2013. the successful implementation of Basel III capital requirements at nedbank group was partly enabled by our portfolio tilt strategy, which brings to the forefront effective risk management, focusing not only on returns but also on the risk and capital requirements for those returns. In January 2014 the Basel Committee on Banking Supervision announced changes to the Basel III leverage ratio easing the international requirements, as well as the much anticipated proposed revisions to the net stable funding ratio, which is effective from 2018. While the Sa banking industry’s gap to compliance with the net stable funding ratio (nSFr) has substantially improved, full compliance remains a challenge due to structural constraints within Sa ﬁnancial markets. Capital nedbank group remains well capitalised and reported a Basel III common-equity tier 1 ratio of 12,5% (2012: 11,6% pro forma Basel III). during 2013 our strong balance sheet, together with organic earnings growth, resulted in the group’s capital adequacy ratios all remaining well above the Basel III regulatory capital minima and at or above the top of the group’s Basel III internal target ranges. Nedbank Group Common-equity tier 1 ratio tier 1 ratio total capital ratio 2013 (Basel III) % 2012 (pro forma basel iii) % 12,5 13,6 15,7 11,6 13,1 15,1 internal target range (basel iii) % 10,5 – 12,5 11,5 – 13,0 14,0 – 15,0 regulatory minimum1 (basel iii) % 4,5 6,0 9,5 (ratios include unappropriated proﬁts.) 1 The Basel III regulatory minima are being phased in between 2013 and 2019 and excluded Pillar 2B add-ons. during the year a total of r3,0bn of new-style, fully loss-absorbent, Basel III-compliant, tier 2 subordinated debt was successfully issued to replace the r2,1bn of Basel II tier 2 capital that matured in September 2013. Funding and liquidity nedbank group’s surplus-liquid-asset buffer increased to r28,0bn from r24,4bn, reflecting a strong liquidity position. the group has low levels of reliance on interbank and foreign currency funding, and continues successfully to diversify and lengthen its funding proﬁle. the last-quarter average long-term funding ratio was maintained at 26,2%, supported by the successful conclusion of a r2,0bn ﬁve-year commercial-mortgage securitisation in march 2013 as well as r5,8bn in senior unsecured debt issued during the year, replacing r3,4bn that matured in march and april 2013. the group has been compliant with the Basel III Liquidity Coverage ratio on a pro forma basis since 31 december 2012. 106 maKIng thIngS happen deLIVerIng to oUr StaKehoLderS InFormatIon to oUr SharehoLderS eNsuriNG a sustaiNable busiNess BUILDING EffICIENCY AND pRODUCTIVITY our Sap erp project referred to in the Chief executive’s review commenced in 2013 and is well under way with the planned replacement of the ﬁnance, human resources and procurement systems during the course of 2015 and 2016. the new systems are anticipated to generate savings in technology costs as 43 systems that are nearing the end of their current useful lives are expected to be replaced with this single integrated erp system, in line with the group’s strategy of ‘rationalise, simplify and standardise’. this will be part of the initiative to reduce 220 systems to 60 over time and will support ‘optimise to invest’, one of the ﬁve key focus areas introduced in 2014. From a business perspective, the new system will be implemented with a new target operating model that ensures a high level of standardisation of processes, and the beneﬁts are expected from operational efficiencies. the project has a strong governance process with oversight from the group executive Committee and the group Information technology Committee, a subcommittee of the board. pROSpECTS fOR 2014 In the light of the volatile economic conditions the group is currently expecting organic diluted hepS growth in 2014 to be greater than the growth in nominal gross domestic product. as usual, this will be updated at the presentation of our interim results. our CLr target range of 0,60% to 1,00% was amended to 0,80% to 1,20% to reflect nedbank retail’s more prudent provisioning methodologies and asset mix changes. the efficiency ratio target was amended from < 50,0% to a range of 50,0% to 53,0% to reflect the lower-interest-rate pattern and our strategy of investing for growth in the franchise. the group currently anticipates ﬁnancial performance for 2014 as follows: ■ advances to grow at mid-to-upper single digits. ■ nIm to remain at levels similar to those of 2013. ■ the CLr to be within the new CLr range of 80 to 120 basis points, improving slightly on 2013. ■ nIr (excluding fair-value adjustments) to grow at mid to upper single digits, incorporating the 0% transactional fee increase in 2014. ■ expenses to increase at upper single digits. AppRECIATION my gratitude goes to many people within and outside nedbank who contributed to our scoreboard as tabled from different perspectives in this integrated report. the ﬁnance teams within nedbank who consistently produced reports and analytics that track and measure our performance against our strategic focus areas, ensuring effective engagement and communication to all our stakeholders, including participating in no less than 300 investor meetings, have been a pillar of strength to me as CFo. I also acknowledge and fully appreciate the recognition received from the accounting and investment industry for the quality and standard of our ﬁnancial reporting and communication. I will continue to rely on your collective guidance and support during 2014. thank you. Raisibe Morathi Chief Financial officer 107 our summarised five-year tracK record consolidated statement of comprehensive income Rm Net interest income Impairments charge on loans and advances Income from lending activities Non-interest revenue Total operating expenses Indirect taxation Share of profits of associate companies and joint arrangements Headline profit before direct taxation Direct taxation Non-controlling interest Headline earnings 4-year CAGR1 % 6,8 (4,3) 12,8 12,9 10,4 8,2 (16,3) 18,5 25,3 (14,0) 19,3 2013 21 220 (5 565) 15 655 19 361 (22 419) (601) 27 12 023 (3 033) (320) 8 670 2012 19 680 (5 199) 14 481 17 324 (20 563) (561) 1 10 682 (2 861) (338) 7 483 2011 18 034 (5 331) 12 703 15 412 (18 919) (505) 8 691 (2 194) (313) 6 184 2010 16 608 (6 188) 10 420 13 215 (16 598) (447) 1 6 591 (1 366) (325) 4 900 2009 16 306 (6 634) 9 672 11 906 (15 100) (438) 55 6 095 (1 232) (586) 4 277 EP share statistics Earnings per share: – Headline – Diluted headline Dividends/Distributions: – Declared per share – Dividend cover 1 Compound annual growth rate. >100 Rm 2 114 1 521 924 (289) 57 16,9 16,8 19,3 cents cents cents times 1 884 1 829 1 640 1 590 1 365 1 340 1 104 1 069 895 2,11 752 2,18 605 2,26 480 2,30 1 010 983 440 2,30 consolidated statement of financial position 4-year CAGR1 % 9,7 6,4 9,2 7,1 11,2 (8,6) 6,3 9,4 13,4 7,1 21,5 9,3 9,6 11,3 Rm Cash and securities Loans and advances Other assets Total assets Total equity attributable to equity holders of the parent Non-controlling interest Amounts owed to depositors Provisions and other liabilities Long-term debt instruments Total equity and liabilities Assets: – Assets under management – Total assets administered by the group Net asset value per share Tangible net asset value per share Key ratios ROE ROE (excluding goodwill) Return on total assets Net interest income to interest-earning banking assets Credit loss ratio – banking advances Non-interest revenue to total operating expenses Efficiency ratio (including BEE transaction expense) Effective taxation rate 1 Compound annual growth rate. 108 2013 108 774 579 372 61 448 749 594 60 617 3 719 602 952 49 038 33 268 749 594 2012 98 467 527 166 57 325 682 958 53 601 3 774 550 878 44 407 30 298 682 958 Rm 190 341 Rm 939 935 13 143 11 346 cents cents 150 495 833 453 11 721 9 989 2011 92 459 499 023 56 645 648 127 48 946 3 739 524 130 41 870 29 442 648 127 112 231 760 358 10 753 9 044 2010 81 400 477 226 50 092 608 718 44 101 3 713 492 393 42 407 26 104 608 718 2009 75 110 452 332 43 261 570 703 39 649 5 335 471 386 34 249 20 084 570 703 102 570 711 288 9 831 8 160 87 204 657 907 9 100 7 398 % % % % % % % % 15,6 17,2 1,23 3,57 1,06 86,4 55,2 25,2 14,8 16,4 1,13 3,53 1,05 84,2 55,6 26,8 13,6 15,3 0,99 3,48 1,13 81,5 56,6 25,2 11,8 13,4 0,82 3,36 1,36 79,6 55,7 20,7 11,8 13,4 0,76 3,39 1,52 78,8 53,5 20,2 NedbaNk Group | Integrated report 2013responsibility of our directors The summarised annual financial statements on pages 119 to 129 are derived from the Nedbank Group Ltd consolidated annual financial statements for the year ended 31 December 2013. The directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements of Nedbank Group Ltd, comprising the statements of financial position at 31 December 2013; the statements of comprehensive income; the statements of changes in equity and statements of cashflows 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 as issued by the International Accounting Standards Board, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the requirements of the Companies Act, 71 of 2008 (as amended) and the JSE Listings Requirements. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records and an effective system of risk management as well as the preparation of 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 consolidated and separate financial statements are fairly presented in accordance with the applicable financial reporting framework. approval of consolidated and separate financial statements The consolidated and separate financial statements of Nedbank Group Ltd, as identified in the first paragraph, were approved by the Nedbank Group Ltd Board of Directors on 21 February 2014 and are signed on its behalf by: dr rJ Khoza Chairman Sandown 21 February 2014 mWt brown Chief Executive certification from our company secretary In terms of section 88(2)(e) of the Companies Act, 71 of 2008 (as amended), I certify that, to the best of my knowledge and belief, Nedbank Group Ltd has filed with the Commissioner all such returns and notices as are required by the Companies Act, 71 of 2008 (as amended), and that all such returns and notices are true, correct and up to date. tsb Jali Company Secretary Sandown 21 February 2014 109 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenNedbaNk Group | Integrated report 2013 report from our audit committee In a tough economic environment we continued to focus on the integrity of the group’s financial statements, and ensured that controls remained effective, assets were safeguarded and appropriate oversight was exercised over the external and internal audit processes. KeY areaS of focuS for 2013 ■ ensured that the group’s financial systems, processes and controls were operating effectively and were consistent with the group’s complexity and responding to the changes in requirements. ■ Continued to oversee the internal audit process to ensure satisfaction with the quality and coverage of the work performed by group Internal audit. ■ oversaw the relationship with our group statutory auditors and evaluated the effectiveness of the audit, ensuring that they have allocated sufficient and experienced resources to address heightened risks. ■ ensured adequate focus on control and compliance issues. ■ assessed the effective linkages between the nedbank group audit Committee, the board and other board committees. ■ enhanced oversight over subsidiaries’ board audit committees and internal audit functions. prioritY areaS for 2014 ■ ensuring that the committee is exercising its assurance oversight role effectively. ■ overseeing the delivery of the group’s finance transformation project. ■ Considering significant accounting issues and International Financial reporting Standards changes and ensuring appropriate disclosure. ■ Continuing to scrutinise key accounting judgements used for credit, goodwill-tax and valuation of financial instruments. MI Wyman Group audit Committee Chairman 110 maKIng thIngS happen delIVerIng to oUr StaKeholderS InFormatIon to oUr ShareholderS eNSurING a SuSTaINabLe buSINeSS ■ monitoring changes in the external regulatory environment and ensuring that we continue to have appropriate financial, compliance and internal controls in place. ■ Continuing to ensure that the group statutory auditors have allocated sufficient and experienced resources to match the changes in and the complexity of the group. ■ Continuing oversight over subsidiaries’ board audit committees and consideration of the activities of their internal audit functions. LegaL reSponSibiLitieS the legal responsibilities of the nedbank group audit Committee (’the committee‘) are governed by the Companies act, 71 of 2008, and the Banks act, 94 of 1990 (as amended). these responsibilities, 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 the independent non-executive directors, with all exception of the chairman of the board, are eligible to serve on the committee. the group 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 help members discharge their duties. committee memberS mI Wyman (Chairman) tCp Chikane (resigned 13 august 2013) np mnxasana pm makwana (appointed 2 September 2013) Scheduled meetings: 5 5/5 3/4 5/5 1/1 including details of Biographical details of the current members of the committee, academic qualifications, are set out on pages 72 to 75. members’ fees are included in the table of directors’ remuneration on page 171. their the Chief executive, Chief Financial officer, Chief operating officer, Chief risk officer, Chief Internal auditor, Chief governance and Compliance officer and representatives of the external auditors are invited to attend committee meetings. the external auditors attend all committee meetings and separate meetings are held to afford them the opportunity to meet with the committee without the presence of management or internal auditors. the internal auditors attend all committee meetings and are similarly afforded the opportunity to have separate meetings with the committee. committee effectiveneSS the performance of the committee is reviewed annually through a self-assessment questionnaire. this year an independent review was performed, which concluded that the committee continued to operate effectively and indicated improvements in various areas. 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). the Chief Internal auditor has a functional reporting line to the Chairperson of the committee and an operational reporting line to the Chief executive officer. externaL audit the group’s external auditors are deloitte & touche and Kpmg Inc. Fees paid to the auditors are disclosed in note 16 to the annual financial statements online. objectivity and independence of the external auditors the committee considers the external auditors to be independent of the group. our responsibility to monitor and review the objectivity and independence of the external auditors is supported by a policy that sets out the circumstances under which the external auditor may be permitted to render non-audit services. allowable services are preapproved, as set out in the non-audit Services policy, up to but not exceeding r15m. any non-audit service that exceeds this threshold requires approval from the committee and must be robustly justified and, if appropriate, tendered before it is approved. the committee closely reviews all requests for approval and receives quarterly reports on non-audit services undertaken by the external auditors so that the committee can monitor the types of service being provided and the fees incurred. details of the fees paid to the external auditors for non- audit work may be found in note 16 to the annual financial statements online. Significant categories of engagement undertaken in 2013 include the Banks act returns audit and the half-year results review. In each case approval was given only after a full and thorough assessment of the value case for using the auditors and of the skills and experience the auditors would bring to each assignment. We also satisfied ourselves that there were safeguards in place to protect the objectivity and independence of the auditors. KeY functionS and reSponSibiLitieS of the committee the the key to execute responsibilities outlined in its charter the committee, during the period under review: functions and discharge ■ assisted 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; ■ facilitated and promoted communication between the board, management, the external auditors and the Chief Internal auditor on matters that are the responsibility of the committee; established leadership teams 72–75 refer to 171–172 111 NEDBANK GROUP | INTEGRATED REPORT 2013 REPORT FROM OUR AUDIT COMMITTEE (CONTINUED) ■ introduced measures that, in the opinion of the committee, may enhance the credibility and objectivity of financial statements and reports prepared with reference to the affairs of the group; ■ nominated, for appointment as external auditors, the company registered auditors who, in the opinion of the committee, are independent of the group; ■ determined the fees to be paid to the external auditors and the auditors’ terms of engagement; ■ ensured that the appointment of the external auditors complied with the Companies Act and any other legislation relating to the appointment of auditors; ■ determined the nature and extent of any non-audit services to the group; ■ was available to receive and deal appropriately with any complaints (whether from inside 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 to any other matters related thereto; and ■ performed such further functions as were prescribed. The committee reports that it has adopted appropriate formal terms of reference to discharge its responsibilities, regulated its affairs in compliance with its charter and discharged all of 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-defense concept, which is the backbone of the group’s ERMF. The ERMF places weight on accountability, responsibility, independence, reporting, communication and transparency, both internally and with all our key external stakeholders. The functions of the three lines of defense, as well as the principal responsibilities that extend across the group, are set out in the worldclass at managing risk section on pages 130 to 137. Specific responsibilities of the committee for the period under review included the following: Internal control The committee: ■ monitored management’s effectiveness in creating and maintaining an effective internal control environment throughout the group and in demonstrating and stimulating the necessary respect for this control environment; and ■ monitored the identification and correction of weaknesses and breakdowns of systems and internal controls. 112 Financial control, accounting and reporting The committee: ■ monitored the adequacy and reliability of management information and the efficiency of management information systems; ■ delegated to the Group Information Technology Committee the monitoring of the adequacy and efficiency of the group’s information systems and received reports thereon; ■ satisfied itself as to the expertise, resources and experience of the finance function; ■ reviewed quarterly, interim and final financial results and statements and reporting for proper and complete disclosure of timely, reliable and consistent information; ■ evaluated 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; ■ discussed and resolved any significant or unusual accounting issues; ■ reviewed and monitored capital expenditure throughout the group for adequate control, monitoring and reporting; ■ reviewed 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; ■ reviewed and monitored the effectiveness, efficiency and reporting of the management of tax-related matters; ■ evaluated the appropriateness of the accounting for taxation risks (as set out in the group’s ERMF); ■ reviewed and monitored all key performance indicators to ensure that they are appropriate and that decisionmaking capabilities are maintained at high levels; and ■ reported to the board on the effectiveness of the group’s internal financial reporting controls. Internal audit The committee: ■ ensured direct reporting by the Chief Internal Auditor to the Chairman of the committee; ■ reviewed and approved the annual Internal Audit Plan; ■ reviewed and recommended the Internal Audit Charter for approval by the board of directors; ■ monitored the effectiveness of the internal audit function in terms of its scope, execution of its plan, coverage, independence, skills, staffing, overall performance and position within the organisation; ■ monitored and challenged, where appropriate, action taken by management with regard to adverse internal audit findings; Worldclass at managing risk 130–137 maKIng thIngS happen delIVerIng to oUr StaKeholderS InFormatIon to oUr ShareholderS eNSurING a SuSTaINabLe buSINeSS ■ formed a view on the adequacy and effectiveness of the control environment; and not having their own audit committees. In this regard the committee: ■ monitored the bank’s compliance with Basel III as detailed in the regulations to the Banks act, in line with existing phase in timelines and ongoing developments. external audit the committee: ■ recommended to the board the selection of the external auditors and the approval of their audit fees; ■ approved the external auditor’s annual plan and related scope of work; ■ monitored the effectiveness of the external auditors in terms of their skills, independence, execution of the audit plan, reporting and overall performance; ■ approved non-audit services to be rendered by the external auditors and monitored potential conflicts of interest; ■ considered whether the extent of reliance placed on internal audit by the external auditors was appropriate and whether there were any significant gaps between the internal and external audits; and ■ obtained assurance from the external auditors that their independence has not been impaired. regulatory reporting the committee: ■ reviewed 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; ■ considered the findings of any audited regulatory reports as they related to the key responsibility of the committee and the monitoring of management actions with a view to resolving any issues identified; and ■ performed such other functions as are prescribed in the regulations relating to the Banks act. concLuSion 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 had been effective in all material aspects throughout the year under review; ■ these controls had ensured that the group’s assets had been safeguarded; ■ proper accounting records had been maintained; ■ resources had been utilised efficiently; and ■ the skills, independence, audit plan, reporting and overall performance of the external auditors were acceptable, and the committee recommended their reappointment in 2014. ■ ratified the list of subsidiaries for which responsibility is assumed; and ■ reviewed the formalised process used for the group audit Committee to perform the necessary governance duties on behalf of subsidiaries. appropriateneSS of the expertiSe and experience of the chief financiaL officer In terms of the JSe listings requirements the audit Committee satisfied its meeting held on itself, at 16 January 2014, as to the appropriateness of the expertise and experience of the Chief Financial officer. integrated report the committee has overseen the integrated reporting process, reviewed the report and recommended the approval thereof to the board. the board subsequently approved the integrated report. annuaL financiaL StatementS during the period under review the committee: ■ reviewed and discussed the audited annual financial statements included in this integrated report with the external auditors, the Chief executive and the Chief Financial officer; ■ reviewed the external auditors’ report and management’s response thereto; ■ reviewed significant adjustments resulting from external audit queries and accepted unadjusted audit differences; and ■ received and considered reports from the internal auditors. approvaL the committee considers the accounting practices and internal financial controls that have led to the compilation of the annual financial statements to be appropriate. We further concurred with and accepted the external auditors’ report on the annual financial statements and have recommended the approval thereof to the board. the board subsequently approved the financial statements, which will be open for discussion at the forthcoming annual general meeting. companieS act requirementS In terms of the Companies act, 71 of 2008, the committee is responsible, as set out above, for all subsidiary companies mi Wyman group audit Committee Chairman 21 February 2014 113 NEDBANK GROUP | INTEGRATED REPORT 2013 REPORT FROM OUR DIRECTORS NATURE OF BUSINESS Nedbank Group Ltd (‘Nedbank Group’ or ‘the company’) is 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 Ltd (the JSE), with a secondary listing on the Namibian Stock Exchange. ANNUAL FINANCIAL STATEMENTS Details of the financial results are set out on pages 119 to 129 of the summarised annual financial statements, which have been prepared under the supervision of the Nedbank Group Chief Financial Officer, Mrs RK Morathi, and audited in compliance with the South African Institute of Charted Accountants (SAICA) Financial Reporting Guides as issued by the Accounting Practices Committee, and the requirements of the Companies Act, 71 of 2008 (as amended) and the JSE Listings Requirements. INTEGRATED REPORT The board of directors acknowledges its responsibility to ensure the integrity of this integrated report. The board has accordingly applied its mind to this integrated report and in the opinion of the board the integrated report addresses all material integrated performance of the organisation and its impacts. The integrated report has been prepared in line with best practice pursuant to the recommendations of the King III Code (principle 9.1). issues, and presents fairly the YEAR UNDER REVIEW The year under review is fully covered in the Chairman’s Review on pages 48 to 51, Chief Executive’s Review on pages 62 to 67, growing our franchises section on pages 68 to 71, and the Chief Financial Officer’s Review on pages 100 to 107. SHARE CAPITAL Details of the authorised and issued share capital, together with details of shares issued during the year, appear in note 38 to the annual financial statements available at nedbankgroup.co.za. AMERICAN DEPOSITARY SHARES At 31 December 2013, Nedbank Group had 3 159 022 (31 December 2012: 2 715 248) American depositary shares in issue through the Bank of New York Mellon as depositary, and trading on the OTC markets in the US. Each American depositary share is equal to one ordinary share. DIVIDENDS The following dividends were declared in respect of the year ended 31 December 2013: ■ Interim ordinary dividend of 390 cents per share (2012: 340 cents per share); and ■ Final ordinary dividend of 505 cents per share (2012: 412 cents per share). BORROWINGS Nedbank Group’s borrowing powers are unlimited pursuant to the company’s memorandum of incorporation. The details of borrowings appear in note 43 to the annual financial statements available at nedbankgroup.co.za. Summa- rised annual financial statements 119–129 DIRECTORS Biographical details of the current directors appear on pages 72 to 75. Details of directors’ and prescribed officers’ remuneration and Nedbank Group shares issued to directors and prescribed officers appear on pages 152 to 172. During the period under review, and also subsequent to year-end, the following changes occurred to the Nedbank Group Ltd Board: ■ Don Hope resigned as Non-executive Director on 30 June 2013; ■ Thenjiwe Chikane resigned as Independent Non-executive Director on 13 August 2013; and ■ David Adomakoh was appointed as Independent Non-executive Director on 21 February 2014. terms of Nedbank Group’s memorandum of In incorporation, one third of the directors are required to retire at each Nedbank Group annual general meeting and may offer themselves for election or reelection. David Adomakoh was appointed by the board of directors during 2014 and in terms of the memorandum of incorporation his appointment terminates at the close of the annual general meeting. He is available for election. Tom Boardman, Mustaq Enus-Brey, Mike Brown and Joel Netshitenzhe are also required to seek reelection at the annual general meeting. The aforementioned directors make themselves available for reelection and separate resolutions will be submitted for approval at the annual general meeting to beheld on 13 May 2014. Chairman’s Review 48–51 Chief Executive’s Review 62–67 Growing our franchises 68–71 Chief Financial Officer’s Review 100–107 OWNERSHIP The holding company of Nedbank Group is Old Mutual Life Assurance Company (SA) Ltd and associates, which holds 52,03% 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 187 and 188. In terms of Nedbank Group policy, non-executive directors and independent non-executive directors of Nedbank Group who have served on the board for a period longer than nine years are required to retire from the board. None of the current non-executive directors and independent non-executive directors of Nedbank Group have served on the board in that capacity for more than nine years. 114 maKIng thIngS happen delIVerIng to oUr StaKeholderS InFormatIon to oUr ShareholderS eNSurING a SuSTaINabLe buSINeSS details of the members of the board who served during the year and at the reporting date are given below: Name dKt adomakoh (ghanaian) ta Boardman position as director Independent non-executive director Independent non-executive director date resigned/retired as director (where applicable) date appointed as director 21 February 2014 1 november 2002 (1 march 2010 as non-executive, 1 January 2014 as independent non-executive) mWt Brown tCp Chikane gW dempster ma enus-Brey Id gladman Chief executive 17 June 2004 Independent non-executive director 1 november 2006 13 august 2013 Chief operating officer 5 august 2009 non-executive director 16 august 2005 non-executive director 7 June 2012 dI hope (new Zealand) non-executive director 1 december 2009 30 June 2013 rJ Khoza pm makwana np mnxasana rK morathi JK netshitenzhe non-executive Chairman 16 august 2005 Independent non-executive director Independent non-executive director 17 november 2011 1 october 2008 Chief Financial officer 1 September 2009 Independent non-executive director 5 august 2010 JVF roberts (British) non-executive director 1 december 2009 gt Serobe mI Wyman (British) non-executive director 16 august 2005 Senior Independent non- executive director 1 august 2009 directorS’ intereStS the directors’ interests in ordinary shares in nedbank group and non-redeemable non-cumulative preference shares in nedbank ltd at 31 december 2013 are set out in the remuneration report on page 172. the directors had no interest in any third party or company responsible for managing any of the business activities of the group. Banking transactions with directors are entered into in the normal course of business under terms that are no more favourable than those arranged with third parties. audit committee and group tranSformation, SociaL and ethicS committee reportS the audit Committee report appears on pages 110 to 113 the group transformation, Social and ethics and Committee report appears on pages 58 and 59. report from our audit Committee 110–113 refer to 172 report from group transfor- mation, Social and ethics Committee Chairman 58–59 115 NedbaNk Group | Integrated report 2013 report from our directors (CoNTINued) companY SecretarY and regiStered office the board of directors has conducted an assessment of the Company Secretary and is satisfied that mr Jali is suitably competent, qualified and experienced and has adequately and effectively performed the role and duties of a company secretary. mr Jali has direct access to, and ongoing communication with, the Chairman of the board. mr Jali is not a director of the company and the board is satisfied that, as far as is reasonably possible, an arm’s length relationship between the Company Secretary and the board is intact. details of mr Jali’s qualifications and experience appear on page 78. the Company Secretary’s addresses and the registered office are as follows: business address nedbank group ltd, nedbank 135 rivonia Campus, 135 rivonia road, Sandown, Sandton, 2196, Sa registered address 135 rivonia road, Sandown, Sandton, 2196, Sa postal address nedbank group ltd, po Box 1144, Johannesburg, 2000, Sa propertY and equipment there was no material change in the nature of the fixed assets of nedbank group or its subsidiaries or in the policy regarding their use during the year. poLiticaL donationS nedbank group has an established policy of not making donations to any political party. contractS and matterS in Which directorS and officerS of the companY have an intereSt no contracts in which directors and officers of the company had an interest and that significantly affected the affairs or business of the company or any of its subsidiaries were entered into during the year. internal 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 transformation. its 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 the black business partners. mrs gt Serobe is founder, executive director and 10% shareholder of Women Investment portfolio holdings limited (WIphold) and Chief executive of Wipcapital (pty) ltd, a wholly owned subsidiary of WIphold. mr ma enus-Brey is Chief executive and 8,76% shareholder of Brimstone Investment Corporation ltd and a director of various Brimstone subsidiary companies. respect of in 116 also in 2005, aka Capital (pty) ltd (aka Capital), in which dr rJ Khoza is a director and 27% shareholder, was appointed as business development partner of nedbank group and a performance agreement was similarly entered into between nedbank group and aka Capital. the aka-nedbank eyethu trust subsequently matured on 1 January 2011. mr JK netshitenzhe is an executive director of the mapungubwe Institute for Strategic reflection (mIStra). In 2013 mIStra received a grant of r2m from the nedbank eyethu Community trust (formed in 2005 as part of nedbank group’s Bee transaction). the nedbank eyethu Community trust provides funding to charitable or non–profit organisations that qualify. the grant to mIStra was evaluated against the normal criteria for funding by the trust. directorS’ and preScribed officerS’ Service contractS there are no service contracts with the directors of the company, other than for the Chairman and executive directors as set out below. the directors who entered into these service contracts remain subject to retirement by rotation in terms of nedbank group’s memorandum of incorporation. the key responsibilities relating to dr rJ Khoza’s position as Chairman of nedbank group are encapsulated in a contract. Service contracts have been entered into for messrs mWt Brown and gW dempster and ms rK morathi. these service contracts are effective until the executive directors reach the normal retirement age and stipulate a maximum notice period of six months (12 months for mr Brown) under most circumstances. details relating to the service contracts of prescribed officers are incorporated in the remuneration report on page 153. inSurance the group has placed cover in the london insurance market for up to r2,55bn for losses in excess of r50m. group captive insurers provide cover for total losses below the r50m level engagement point, retaining r100m, in any one year. Selected insurance cover is placed with the old mutual group. SubSidiarY companieS details of principal subsidiary companies are reflected in note 54 to the annual financial statements available at nedbankgroup.co.za. SpeciaL reSoLutionS bY SubSidiarieS ■ 14 February 2013 by Boe developments (pty) ltd for the adoption of a new memorandum of incorporation. ■ 22 February 2013 by Boness development phase 3 (pty) ltd for the adoption of a new memorandum of incorporation and change of objective. maKIng thIngS happen delIVerIng to oUr StaKeholderS InFormatIon to oUr ShareholderS eNSurING a SuSTaINabLe buSINeSS ■ 22 February 2013 by Capegate Crescent development (pty) ltd for the adoption of a new memorandum of incorporation and change of objective. ■ 22 February 2013 by lighthouse developments (pty) ltd for the adoption of a new memorandum of incorporation. ■ 22 February 2013 by onrus manor (pty) ltd for the adoption of a new memorandum of incorporation and change of objective. ■ 22 February 2013 by Visigro Investments (pty) ltd for the adoption of a new memorandum of incorporation and change of objective. ■ 8 march 2013 by linton projects (pty) ltd for the adoption of a new memorandum of incorporation and change of objective. ■ 8 march 2013 by nedport developments (pty) ltd for the adoption of a new memorandum of incorporation and change of objective. ■ 15 march 2013 by nedgroup Secretariat Services (pty) ltd for the adoption of a new memorandum of incorporation. ■ 15 march 2013 by nhS properties (pty) ltd for the adoption of a new memorandum of incorporation. ■ 16 april 2013 by toontjiesrivier landgoed ltd for the adoption of a new memorandum of incorporation and change of objective. ■ 16 april 2013 by Villager Investments no 1 (pty) ltd for the adoption of a new memorandum of incorporation and extending the objective of the company. ■ 19 april 2013 by mercury Securities (pty) ltd for the adoption of a new memorandum of incorporation. ■ 19 april 2013 by ned Settle Services (pty) ltd for the adoption of a new memorandum of incorporation. ■ 19 april 2013 by proclare (pty) ltd for the adoption of a the creation of 287 Class F cumulative redeemable non-par-value preference shares and the amendment of Schedule 1 attached to the memorandum of incorporation detailing the preferences, rights, limitations and other terms of the preference shares. ■ 21 october 2013 by nBg Capital management (pty) ltd for the adoption of a new memorandum of incorporation and conversion from a public company to a private company. ■ 24 october 2013 by Syfrets mortgage nominees (rF) (pty) ltd for the adoption of a new memorandum of incorporation, change of main business, change of name, and conversion from a public company to a private company. ■ 28 october 2013 by eighty one main Street nominees (rF) (pty) ltd for the adoption of a new memorandum of incorporation, change of main business, change of name and conversion from a public company to a private company. ■ 28 october 2013 by nedbank nominees (rF) (pty) ltd for the adoption of a new memorandum of incorporation, change of name and conversion from a public company to a private company. ■ 28 october 2013 by nedcor Bank nominees (rF) (pty) ltd for the adoption of a new memorandum of incorporation, cancelling the classes of preference shares, change of name, and conversion from a public company to a private company. ■ 5 november 2013 by nedgroup Wealth management (pty) ltd for the adoption of a new memorandum of incorporation and conversion from a public company to a private company. ■ 5 november 2013 by nedinvest (pty) ltd for the adoption of a new memorandum of incorporation and conversion from a public company to a private company. new memorandum of incorporation. ■ 15 november 2013 by Fidelity nominees (rF) (pty) ltd ■ 15 may 2013 by Kingsmead properties (pty) ltd for the adoption of a new memorandum of incorporation. ■ 17 may 2013 by depfin Investments (pty) ltd for the adoption of a new memorandum of incorporation. ■ 25 July 2013 by Syfrets participation Bond managers (pty) ltd for the adoption of a new memorandum of incorporation, change of main business, and conversion from a public company to a private company. ■ 1 august 2013 by depfin Investments (pty) ltd for the amendment of the memorandum of incorporation by the creation of 90 Class e cumulative redeemable non-par-value preference shares and the amendment of Schedule 1 attached to the memorandum of incorporation detailing the preferences, rights, limitations and other terms of the preference shares. ■ 14 august 2013 by depfin Investments (pty) ltd for the amendment of the memorandum of incorporation by for the adoption of a new memorandum of incorporation, change of main business, change of name, and conversion from a public company to a private company. 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 in terms of the general authority previously granted by shareholders. members will be requested to renew the general authority enabling the company or a subsidiary of the company to repurchase shares. eventS after the reporting period the directors are not aware of any other material events that have occurred between the reporting date and 21 February 2014. 117 auditorS’ report on conSoLidated financiaL StatementS deloitte & touche and Kpmg Inc, nedbank group limited’s independent auditors, have audited the consolidated financial statements and specified sections of the remuneration report of nedbank group limited from which management prepared the summarised consolidated financial results. the auditors have expressed an unqualified audit opinion on the consolidated financial statements in accordance with International Financial reporting Statements and the requirements of the Companies act of Sa. the consolidated financial statements and the auditors’ report thereon are available for inspection at the registered office of nedbank group limited. report from independent auditorS 118 NedbaNk Group | Integrated report 2013SummariSed annuaL financiaL StatementS the summarised annual financial statements on pages 119 to 129 are derived from the nedbank group ltd annual financial statements for the year ended 31 december 2013. the group has applied the provisions of the new Companies act, 71 of 2008 (as amended), of Sa, which allows for summarised financial statements report. in these summarised financial statements have been prepared under the supervision of raisibe morathi, the group Chief Financial officer. integrated disclosed this as In the preparation of the consolidated annual financial statements the group has applied key assumptions concerning future and other inherent uncertainties in recording various assets and liabilities. the assumptions applied in the financial statements for the year ended 31 december 2013 were consistent with those applied during the 2012 financial year. these assumptions are subject to ongoing review and possible amendments. nedbank group’s principal accounting policies have been prepared in terms of International Financial reporting Standards (IFrS) of the International accounting Standards Board and have been applied consistently over the current and prior financial year, with the exception of the following new standards and amendments, which have been mandatorily adopted on 1 January 2013: ■ the Consolidation Suite of Standards comprising IFrS 10 Consolidated Financial Statements, IFrS 11 Joint arrangements, IFrS 12 disclosures of Interests in other entities and the consequential amendments to IaS 27 Separate Financial Statements and IaS 28 Investments in associates and Joint Ventures; ■ IFrS 13 Fair Value measurement; ■ amendments to IFrS 7 Financial Instruments: disclosures – offsetting Financial assets and Financial liabilities; and ■ amendments to IaS 19 (IaS 19 revised). employee Benefits. the adoption of IaS 19 (revised 2011) required certain restatements to prior-year information, while the adoption of the remaining new standards and amendments did not have a material impact on the measurement of the group’s assets and liabilities. information contained the summarised annual financial statements are only a summary of the in the consolidated financial statements of nedbank group ltd and does not contain full or complete information. any investment decision should be based on the consolidated financial statements of nedbank group ltd. these a comprehensive list of the group’s accounting policies and further financial information included in the results Booklet, are available at nedbankgroup.co.za. consolidated statements, including financial 119 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenCONsOlIdaTed sTaTemeNT Of COmPReheNsIve INCOme 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 expenses2 Black economic empowerment (BEE) transaction expenses Indirect taxation Notes 1 2 3 4 5 2013 Rm 46 087 24 867 21 220 5 565 15 655 19 361 35 016 22 419 22 362 57 601 2012 Rm Restated 44 730 25 050 19 680 5 199 14 481 17 324 31 805 20 563 20 485 78 561 Profit from operations before non-trading and capital items 11 996 10 681 Non-trading and capital items Net profit on sale of subsidiaries, investments, and property and equipment Net impairment of investments, property and equipment, and capitalised development costs Fair-value adjustments of investment properties Profit from operations Share of profits of associate companies and joint arrangements Profit before direct taxation Total direct taxation Direct taxation2 Taxation on non-trading and capital items Taxation on revaluation of investment properties Profit for the year Other comprehensive income net of taxation Exchange differences on translating foreign operations3 Fair-value adjustments on available-for-sale assets3 Remeasurements on long-term employee benefit assets2 Gains on property revaluations3 Total comprehensive income for the year Profit attributable to: – equity holders of the parent2 – non-controlling interest – ordinary shareholders2 – non-controlling interest – preference shareholders Profit for the year Total comprehensive income attributable to: – equity holders of the parent2 – non-controlling interest – ordinary shareholders2 – non-controlling interest – preference shareholders Total comprehensive income for the year Basic earnings per share2 Diluted earnings per share2 1 Represents amounts less than R1m. 2 2012 restated to reflect the adoption of IAS 19 Employee Benefits (revised 2011). 3 These items may be subsequently reclassified as profit or loss. 120 (56) 11 (67) 6 11 946 27 11 973 3 016 3 033 (18) 1 8 957 1 675 690 32 731 222 (18) 33 (51) (12) 10 651 1 10 652 2 865 2 861 4 1 7 787 171 162 43 (76) 42 10 632 7 958 8 637 28 292 8 957 10 295 45 292 10 632 1 877 1 822 7 449 45 293 7 787 7 620 45 293 7 958 1 632 1 583 cents cents NedbaNk Group | Integrated report 2013CONsOlIdaTed sTaTemeNT Of fINaNCIal POsITION at 31 December Assets Cash and cash equivalents Other short-term securities Derivative financial instruments Government and other securities Loans and advances Other assets Current taxation assets Investment securities2, 3 Non-current assets held for sale Investments in private-equity associates, associate companies and joint arrangements2 Deferred taxation assets1 Investment property Property and equipment Long-term employee benefit assets1 Mandatory reserve deposits with central banks Intangible assets Total assets Equity and liabilities Ordinary share capital Ordinary share premium Reserves1 Total equity attributable to equity holders of the parent Non-controlling interest attributable to: – ordinary shareholders1 – preference shareholders Total equity Derivative financial instruments Amounts owed to depositors Provisions and other liabilities Current taxation liabilities Other liabilities held for sale Deferred taxation liabilities1 Long-term employee benefit liabilities1 Investment contract liabilities Insurance contract liabilities Long-term debt instruments Total liabilities Total equity and liabilities 1 2 012 restated to reflect the adoption of IAS 19 Employee Benefits (revised 2011). 2 2013 Rm 2012 Rm Restated 2011 Rm Restated Notes 20 842 42 451 13 390 32 091 14 445 43 457 13 812 26 753 13 457 35 986 12 840 30 176 6 579 372 527 166 499 023 8 673 565 19 348 12 1 101 216 214 6 818 2 980 13 231 8 290 9 488 246 16 213 508 1 032 541 205 6 398 2 095 12 677 7 922 12 051 698 13 881 8 968 354 614 6 312 2 102 11 952 7 777 749 594 682 958 648 199 461 16 343 43 813 60 617 246 3 473 64 336 16 580 602 952 14 682 301 789 1 842 11 523 3 321 33 268 685 258 749 594 457 16 033 37 111 53 601 213 3 561 57 375 13 454 455 15 934 32 307 48 696 174 3 561 52 431 13 853 550 878 524 130 15 526 193 36 793 1 913 9 513 2 979 30 298 625 583 682 958 14 751 200 1 341 1 809 8 237 2 005 29 442 595 768 648 199 7 Certain investments were reclassified from investment securities to investments in private-equity associates, associate companies and joint arrangements to align better with industry practice. No adjustments to the carrying value of the financial instruments arose as a result of the reclassification. Furthermore, no changes were made to the categorisation of the financial instruments and they remain classified as designated at fair value through profit or loss. 3 Includes Nedbank Group Ltd’s right to subscribe for 2 478 341 936 ordinary shares in Ecobank Transnational Incorporated (ETI), exercisable between November 2013 and November 2014, at an aggregate price of USD 285m and to acquire further shares at market-related prices to become a 20% shareholder in ETI. 121 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenLoans and advances Other assets Intergroup assets Total assets Equity and liabilities Total equity segmeNTal RePORTINg for the year ended 31 December Rm Statement of financial position Cash and cash equivalents Nedbank Group Nedbank Capital Nedbank Corporate Nedbank Retail and Business Banking Nedbank Retail Nedbank Business Banking Nedbank Wealth Shared Services Central Management, including Rest of Africa1 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 Restated Restated Restated Restated Restated Restated Restated Restated Restated 34 073 27 122 10 986 4 399 2 755 2 623 2 616 2 088 2 616 2 088 58 Other short-term securities 42 451 43 457 30 969 26 972 Derivative financial instruments 13 390 13 812 13 327 13 672 (52) (99) – – Government and other securities 32 091 26 753 9 635 7 820 6 117 – – – 379 250 762 195 435 190 647 62 785 60 115 5 989 379 162 730 258 220 579 372 527 166 109 549 82 494 175 274 48 217 44 648 6 242 6 933 4 269 3 830 5 014 5 463 4 725 5 337 – – 36 142 31 885 749 594 682 958 180 708 142 290 188 363 175 073 302 371 290 198 203 155 198 072 50 911 42 270 7 346 6 048 19 895 27 079 64 336 57 375 5 863 5 632 8 514 8 089 26 683 25 478 21 903 21 077 4 780 4 401 2 487 2 420 1 528 1 532 19 261 14 224 1 706 6 847 2 433 5 042 22 082 20 274 19 864 16 931 7 346 5 990 289 36 142 99 216 126 31 885 92 126 439 535 1 21 704 16 560 15 897 14 276 755 1 215 486 51 4 355 6 851 8 651 15 502 11 705 11 697 8 217 3 928 6 731 7 962 14 693 10 849 10 839 10 171 3 108 410 2 698 1 729 4 427 3 119 3 116 3 25 2 924 206 2 718 1 578 4 296 2 939 2 936 3 25 3 580 1 003 2 577 3 673 1 084 2 589 1 283 354 929 1 332 388 944 531 59 472 3 081 3 553 2 218 2 216 2 108 1 227 (1) 1 226 326 900 494 118 376 2 617 2 993 1 912 1 909 3 90 991 (2) 989 271 718 (211) 289 78 (140) (177) 37 155 63 63 (96) 159 (213) 217 4 (51) (90) 39 195 (140) (140) (180) 40 38 2 539 37 2 552 929 944 900 718 159 40 16 010 4 635 113 15 960 14 247 5 072 17 521 11 443 239 12 944 11 316 5 501 (36 142) (31 885) 33 35 96 105 86 844 3 267 2 137 30 223 27 233 1 453 50 1 403 589 1 992 1 192 1 193 (1) 28 772 2 774 309 465 39 254 172 969 36 933 432 1 365 972 958 14 20 373 5 378 101 277 40 256 (19) Derivative financial instruments 16 580 13 454 16 546 13 419 – – Amounts owed to depositors Provisions and other liabilities Long-term debt instruments Intergroup liabilities Total equity and liabilities 602 952 550 878 30 953 32 458 106 226 100 908 8 480 6 372 33 268 30 298 1 051 849 176 234 160 618 201 928 186 125 107 931 98 935 93 997 87 190 2 042 2 266 3 002 1 994 3 743 2 216 – – 44 650 13 002 1 573 4 100 68 764 72 636 749 594 682 958 180 708 142 290 188 363 175 073 302 371 290 198 203 155 198 072 99 216 92 126 10 159 50 911 9 677 42 270 3 848 7 346 3 979 (128 994) (103 394) 6 048 19 895 27 079 2 563 1 994 3 208 2 216 68 764 72 636 Consolidated statement of comprehensive income Net interest income 21 220 19 680 1 608 1 521 3 525 3 326 14 314 13 583 11 206 10 659 (211) (213) Impairments charge on loans and advances 5 565 5 199 306 Income from lending activities 15 655 14 481 1 302 526 995 Non-interest revenue Operating income Total expenses Operating expenses BEE transaction expenses Indirect taxation 385 3 140 1 944 385 4 765 4 134 2 941 9 549 9 449 1 469 10 380 9 540 19 361 17 324 3 078 3 049 35 016 31 805 4 380 4 044 5 084 4 410 19 929 18 989 22 419 20 563 22 362 20 485 57 601 78 561 2 156 2 152 4 36 1 974 1 969 5 31 2 169 2 165 4 32 1 968 14 824 13 788 1 964 14 813 13 775 4 29 11 242 13 196 Profit/(Loss) from operations 11 996 10 681 2 188 2 039 2 883 2 413 4 863 5 005 3 580 3 673 1 283 1 332 Share of profits of associate companies and joint arrangements 27 1 26 (2) – – Profit/(Loss) before direct taxation 12 023 10 682 2 188 2 039 2 909 2 411 4 863 5 005 Direct taxation Profit/(Loss) after direct taxation 3 033 8 990 2 861 7 821 473 1 715 603 664 594 1 357 1 436 2 245 1 817 3 506 1 472 3 533 Profit attributable to non-controlling interest: – ordinary shareholders – preference shareholders headline earnings 1 Includes all group eliminations. 28 292 45 293 (11) 5 – 38 – 37 8 670 7 483 1 726 1 431 2 245 1 817 3 468 3 496 The segmental results for 2012 have been restated to reflect the adoption of IAS 19 Employee Benefits (2011) and the transfer of a subsidiary from Shared Services to Central Management, including Rest of Africa. The amendments to IAS 19 include revised requirements for pensions and other postretirement benefits, termination benefits and certain other changes. 122 NedbaNk Group | Integrated report 2013Loans and advances Other assets Intergroup assets Total assets Equity and liabilities Total equity Amounts owed to depositors Provisions and other liabilities Long-term debt instruments Intergroup liabilities Total equity and liabilities Non-interest revenue Operating income Total expenses Operating expenses BEE transaction expenses Indirect taxation Nedbank Group Nedbank Capital Nedbank Corporate Nedbank Retail and Business Banking Nedbank Retail Nedbank Business Banking Nedbank Wealth Shared Services Central Management, including Rest of Africa1 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 Rm Restated Restated Restated Restated Restated Restated Restated Restated Restated Statement of financial position Cash and cash equivalents Other short-term securities Derivative financial instruments 13 390 13 812 13 327 13 672 (52) (99) 42 451 43 457 30 969 26 972 – – – – – 34 073 27 122 10 986 4 399 2 755 2 623 2 616 2 088 2 616 2 088 Government and other securities 32 091 26 753 9 635 7 820 6 117 5 989 379 379 579 372 527 166 109 549 82 494 175 274 162 730 258 220 250 762 195 435 190 647 62 785 60 115 48 217 44 648 6 242 6 933 4 269 3 830 5 014 5 463 4 725 5 337 – – 36 142 31 885 749 594 682 958 180 708 142 290 188 363 175 073 302 371 290 198 203 155 198 072 289 36 142 99 216 126 31 885 92 126 1 706 6 847 2 433 5 042 58 22 082 20 274 19 864 16 931 7 346 5 990 16 010 4 635 113 15 960 14 247 5 072 17 521 11 443 239 12 944 11 316 5 501 (36 142) (31 885) 50 911 42 270 7 346 6 048 19 895 27 079 Derivative financial instruments 16 580 13 454 16 546 13 419 – – 64 336 57 375 5 863 5 632 8 514 8 089 26 683 25 478 21 903 21 077 4 780 4 401 2 487 2 420 1 528 1 532 19 261 14 224 602 952 550 878 106 226 100 908 176 234 160 618 201 928 186 125 107 931 98 935 93 997 87 190 32 458 30 953 6 372 8 480 2 042 2 266 3 002 33 268 30 298 1 051 849 3 743 2 216 1 994 – – 44 650 13 002 1 573 4 100 68 764 72 636 2 563 1 994 3 208 2 216 68 764 72 636 439 535 749 594 682 958 180 708 142 290 188 363 175 073 302 371 290 198 203 155 198 072 99 216 92 126 1 21 704 16 560 15 897 14 276 755 1 215 486 51 33 35 96 105 86 844 3 267 2 137 30 223 27 233 10 159 50 911 9 677 42 270 3 848 7 346 3 979 (128 994) (103 394) 6 048 19 895 27 079 Consolidated statement of comprehensive income Impairments charge on loans and advances 5 565 5 199 306 Income from lending activities 15 655 14 481 1 302 526 995 Net interest income 21 220 19 680 1 608 1 521 3 525 3 326 14 314 13 583 11 206 10 659 35 016 31 805 4 380 4 044 5 084 4 410 19 929 18 989 19 361 17 324 3 078 3 049 22 419 20 563 22 362 20 485 57 601 78 561 2 156 2 152 4 36 1 974 1 969 5 31 385 3 140 1 944 2 169 2 165 4 32 385 4 765 4 134 2 941 9 549 9 449 1 469 10 380 9 540 1 968 14 824 13 788 1 964 14 813 13 775 4 29 11 242 13 196 4 355 6 851 8 651 15 502 11 705 11 697 8 217 3 928 6 731 7 962 14 693 10 849 10 839 10 171 3 108 410 2 698 1 729 4 427 3 119 3 116 3 25 2 924 206 2 718 1 578 4 296 2 939 2 936 3 25 Profit/(Loss) from operations 11 996 10 681 2 188 2 039 2 883 2 413 4 863 5 005 3 580 3 673 1 283 1 332 3 580 1 003 2 577 3 673 1 084 2 589 1 283 354 929 1 332 388 944 531 59 472 3 081 3 553 2 218 2 216 2 108 1 227 (1) 1 226 326 900 494 118 376 2 617 2 993 1 912 1 909 3 90 991 (2) 989 271 718 (211) (213) (211) 289 78 (140) (177) 37 155 63 63 (96) 159 (213) 217 4 (51) (90) 39 195 (140) (140) (180) 40 38 2 539 37 2 552 929 944 900 718 159 40 Share of profits of associate companies and joint arrangements 27 1 26 (2) – – Profit/(Loss) before direct taxation 12 023 10 682 2 188 2 039 2 909 2 411 4 863 5 005 Direct taxation Profit/(Loss) after direct taxation 3 033 8 990 2 861 7 821 473 1 715 603 664 594 1 357 1 436 2 245 1 817 3 506 1 472 3 533 Profit attributable to non-controlling interest: – ordinary shareholders – preference shareholders headline earnings 1 Includes all group eliminations. 28 292 45 293 (11) 5 – 38 – 37 8 670 7 483 1 726 1 431 2 245 1 817 3 468 3 496 The segmental results for 2012 have been restated to reflect the adoption of IAS 19 Employee Benefits (2011) and the transfer of a subsidiary from Shared Services to Central Management, including Rest of Africa. The amendments to IAS 19 include revised requirements for pensions and other postretirement benefits, termination benefits and certain other changes. 1 453 50 1 403 589 1 992 1 192 1 193 (1) 28 772 2 774 309 465 39 254 172 969 36 933 432 1 365 972 958 14 20 373 5 378 101 277 40 256 (19) 123 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPensummaRIsed CONsOlIdaTed sTaTemeNT Of ChaNges IN equITy Total equity attributable to equity holders of the parent Rm 48 946 (250) 48 696 (3 248) Non- controlling interest attributable to ordinary shareholders Rm Non- controlling interest attributable to preference shareholders Rm 178 (4) 174 (8) 3 561 3 561 (293) 14 119 7 620 396 2 2 53 601 (3 821) 475 (132) 10 295 206 (4) (3) 60 617 45 293 2 213 (9) 3 561 (292) 45 292 (3) 246 (88) 3 473 Total equity Rm 52 685 (254) 52 431 (3 256) (293) 14 119 7 958 396 2 2 2 57 375 (3 830) (292) 475 (132) 10 632 206 (4) (88) (3) (3) 64 336 Balance at 2011 Adoption of IAS 19 Employee Benefits (revised 2011) Restated balance at 2011 Dividend to shareholders Preference share dividend Issues of shares net of expenses Shares (acquired)/no longer held by group entities and BEE trusts Total comprehensive income for the year1 Share-based payment reserve movement Regulatory risk reserve provision Acquisition of subsidiary Other movements Balance at 2012 dividend to shareholders Preference share dividend Issues of shares net of expenses shares (acquired)/no longer held by group entities and Bee trusts Total comprehensive income for the year share-based payment reserve movement Regulatory-risk reserve provision Preference shares held by group entities disposal of subsidiary Other movements Balance at 2013 1 Restated to reflect the adoption of IAS 19 Employee Benefits (revised 2011). geOgRaPhICal segmeNTal RePORTINg for the year ended 31 December SA Business operations1 BEE transaction expenses Profit attributable to non-controlling interest – preference shareholders Rest of Africa1 Rest of world – business operations1 Total 1 2012 restated to reflect the adoption of IAS 19 Employee Benefits (revised 2011). 124 Operating income Headline earnings 2013 Rm 32 721 32 721 2012 Restated Rm 29 748 29 748 1 427 868 35 016 1 259 798 31 805 2013 Rm 8 054 8 409 (63) (292) 335 281 8 670 2012 Restated Rm 6 869 7 230 (68) (293) 297 317 7 483 NedbaNk Group | Integrated report 2013 summaRIsed CONsOlIdaTed sTaTemeNT Of CashflOws for the year ended 31 December Cash generated by operations2 Change in funds for operating activities 2 Net cash from operating activities before taxation Taxation paid Cashflows from operating activities Cashflows utilised by investing activities Cashflows utilised by financing activities Effects of exchange rate changes on opening cash and cash equivalents (excluding foreign borrowings) Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year1 Cash and cash equivalents at the end of the year1 1 Including mandatory reserve deposits with central banks. 2 2012 restated to reflect the adoption of IAS 19 Employee Benefits (revised 2011). headlINe eaRNINgs ReCONCIlIaTION for the year ended 31 December 2013 Rm 20 553 (4 507) 16 046 (3 890) 12 156 (4 341) (800) (64) 6 951 27 122 34 073 2012 Rm Restated 18 769 (5 912) 12 857 (3 914) 8 943 (4 696) (2 552) 18 1 713 25 409 27 122 Profit attributable to equity holders of the parent1 Less: non-headline earnings items Net profit on sale of subsidiaries, investments, and property and equipment Net impairment of investments, property and equipment, and capitalised development costs Fair-value adjustments of investment properties Headline earnings 1 2012 restated to reflect the adoption of IAS 19 Employee Benefits (revised 2011). 2013 Rm gross (50) 11 (67) 6 2013 Rm Net of taxation 8 637 (33) 11 (49) 5 8 670 2012 Rm Restated Gross (30) 33 (51) (12) 2012 Rm Restated Net of taxation 7 449 (34) 29 (51) (12) 7 483 125 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPen NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 1 INTEREST AND SIMILAR INCOME Home loans (including properties in possession) Commercial mortgages Finance lease and instalment debtors Credit cards 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 2 INTEREST EXPENSE AND SIMILAR CHARGES Deposit and loan accounts Current and savings accounts Negotiable certificates of deposit Other interest-bearing 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 2013 Rm 9 818 8 117 7 753 1 473 1 263 9 412 4 662 4 750 3 571 1 673 3 007 46 087 38 288 7 799 46 087 14 751 584 5 134 2 042 2 356 24 867 20 705 4 162 24 867 2012 Rm 10 222 7 883 7 293 1 311 1 284 8 867 4 325 4 542 3 360 1 719 2 791 44 730 38 358 6 372 44 730 14 078 590 5 867 1 998 2 517 25 050 20 297 4 753 25 050 An unaudited margin analysis of the interest income and interest expense by asset and liability category is presented in the additional information to the annual financial statements available at nedbankgroup.co.za. 3 IMPAIRMENT OF LOANS AND ADVANCES Impairment of loans and advances Balance at the beginning of the year Impairments charge Statement of comprehensive income charge net of recoveries: Loans and advances Advances designated as at fair value through profit or loss Recoveries Amounts written off against the impairment/other transfers Impairment of loans and advances 4 NON-INTEREST REVENUE Commission and fee income1 Insurance income Fair-value adjustments Net trading income2 Private-equity income2 Investment income Net sundry income Total impairment Specific impairment 2013 Rm 10 870 6 453 5 565 5 591 (26) 888 2012 Rm 11 497 6 065 5 199 5 169 30 866 2013 Rm 7 443 5 906 5 018 5 044 (26) 888 2012 Rm 8 749 5 384 4 518 4 488 30 866 Portfolio impairment 2012 Rm 2013 Rm 3 427 547 547 547 2 748 681 681 681 (5 867) 11 456 (6 692) 10 870 (5 879) 7 470 (6 690) 7 443 12 3 986 (2) 3 427 14 023 1 927 40 2 564 225 56 526 19 361 12 538 1 695 (265) 2 464 391 107 394 17 324 1 Commission and fee income includes R1 947m (2012: R1 563m) related to trust and fiduciary fees. 2 An amount of R180m was reclassified from net trading income (equities) to private-equity income (securities dealing – unrealised) to reflect the effect on non-interest revenue resulting from the corresponding reclassification of a financial instrument from held-for-trading to designated at fair value through profit or loss. 126 NEDBANK GROUP | INTEGRATED REPORT 2013 5 TOTal OPeRaTINg eXPeNses Staff costs Computer processing Communication and travel Occupation and accommodation Marketing and public relations Fees and insurances Furniture, office equipment and consumables Other operating expenses Operating expenses BEE transaction expenses Total operating expenses 6 lOaNs aNd advaNCes Mortgage loans Home loans Commercial mortgages Net finance lease and instalment debtors 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 3) Comprises: – loans and advances to customers – loans and advances to banks 7 amOuNTs Owed TO dePOsITORs Current accounts Savings deposits Other deposits and loan accounts Call and term deposits Fixed deposits Cash management deposits Other deposits and loan accounts Foreign currency liabilities Negotiable certificates of deposit Deposits received under repurchase agreements Comprises: – amounts owed to depositors1 – amounts owed to banks1 Portfolio impairment 2013 Rm 12 629 2 720 820 1 838 1 451 2 042 454 408 22 362 57 22 419 2013 Rm 242 481 136 156 106 325 85 038 106 234 (21 196) 11 441 251 868 772 15 048 97 528 21 145 76 383 17 927 70 976 12 658 237 58 081 18 984 4 796 25 796 41 590 828 (11 456) 579 372 557 956 32 872 590 828 58 704 22 631 407 593 237 393 38 289 56 571 75 340 14 309 87 457 12 258 602 952 557 645 45 307 602 952 2012 Rm 11 425 2 461 793 1 730 1 281 1 801 449 545 20 485 78 20 563 2012 Rm 234 033 136 301 97 732 75 764 79 322 (3 558) 10 019 218 220 574 13 694 88 354 22 969 65 385 18 341 51 482 5 760 193 45 529 16 948 4 461 24 338 28 538 036 (10 870) 527 166 508 134 29 902 538 036 55 843 17 373 374 052 216 333 32 911 56 609 68 199 10 161 76 888 16 561 550 878 511 756 39 122 550 878 1 2012 deposits received under repurchase agreements of R9 076m have been reclassified from business sector to banks in line with the group’s 2013 sectoral disclosure. 127 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPen Notes to the fiNaNcial statemeNts (CONTINUED) 8 ResTaTemeNTs aNd ReClassIfICaTIONs During the year the group restated certain prior-year information due to the mandatory adoption of IAS 19 Employee Benefits and other reclassifications identified. The impact of the relevant restatements and reclassifications are detailed below: CONsOlIdaTed sTaTemeNT Of fINaNCIal POsITION december 2012 January 2012 Other re- classifi- cations2 as pre- viously Other re- classifi- cations2 as pre- viously reported Ias 191 Ias 191 88 (16) 142 364 400 (163) (364) 2 102 (400) 2 258 2 095 Restated reported Restated 968 354 614 6 312 568 266 614 6 312 668 399 205 6 398 1 032 541 205 6 398 12 677 7 922 682 958 14 445 43 457 13 812 26 753 527 166 9 488 246 16 577 508 14 445 43 457 13 812 26 753 527 166 9 488 246 16 213 508 13 457 35 986 12 840 30 176 499 023 12 051 698 14 281 8 13 457 35 986 12 840 30 176 499 023 12 051 698 13 881 8 Rm Assets Cash and cash equivalents Other short-term securities Derivative financial instruments Government and other securities Loans and advances Other assets Current taxation assets Investment securities3 Non-current assets held for sale Investments in private-equity associates, associate companies and joint arrangements Deferred taxation assets Investment property Property and equipment Long-term employee benefit assets Mandatory reserve deposits with central banks Intangible assets Total assets Equity and liabilities Ordinary share capital Ordinary share premium Reserves1 Total equity attributable to equity holders of the parent Non-controlling interest attributable to: – ordinary shareholders – preference shareholders Total equity Derivative financial instruments Amounts owed to depositors Provisions and other liabilities Current taxation liabilities Other liabilities held for sale Deferred taxation liabilities Long-term employee benefit liabilities Investment contract liabilities Insurance contract liabilities Long-term debt instruments Total liabilities Total equity and liabilities 1 On 1 January 2013 the group adopted IAS 19 Employee Benefits (revised 2011) (IAS 19R). The adoption of IAS 19R resulted in the group restating its previously reported 213 3 561 57 375 13 454 550 878 15 526 193 36 793 219 3 561 57 730 13 454 550 878 15 526 193 36 781 174 3 561 52 431 13 853 524 130 14 751 200 – 1 341 178 3 561 52 685 13 853 524 130 14 751 200 1 479 8 237 2 005 29 442 595 442 648 127 1 913 9 513 2 979 30 298 625 583 682 958 1 591 9 513 2 979 30 298 625 249 682 979 1 809 8 237 2 005 29 442 595 768 648 199 12 677 7 922 682 979 11 952 7 777 648 199 11 952 7 777 648 127 457 16 033 37 460 455 15 934 32 307 455 15 934 32 557 457 16 033 37 111 334 (21) 326 72 48 946 48 696 53 950 53 601 (250) (250) 1 345 (349) (349) (254) (355) 2 118 – – – – 330 322 (21) (6) (4) (4) 72 12 – – – – – – financial results in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. 2 Certain investments were reclassified from investment securities to investments in private-equity associates, associate companies and joint arrangements to align better with industry practice. No adjustments to the carrying value of the financial instruments arose as a result of the reclassification. Furthermore, no changes were made to the categorisation of the financial instruments and they remain classified as designated at fair value through profit or loss. 3 An amount of R846m was reclassified from held for trading to designated at fair value to reflect management’s original intention. 128 NedbaNk Group | Integrated report 2013CONsOlIdaTed sTaTemeNT Of COmPReheNsIve INCOme Rm 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 december 2012 Restated Ias 19 44 730 25 050 19 680 5 199 14 481 17 324 31 805 20 563 20 485 78 561 – – – 35 35 as previously reported 44 730 25 050 19 680 5 199 14 481 17 324 31 805 20 528 20 450 78 561 Profit from operations before non-trading and capital items 10 681 (35) 10 716 Non-trading and capital items Fair-value adjustments of investment properties Profit from operations Share of profits of associate companies and joint arrangements Profit before direct taxation Direct taxation Profit for the year Other comprehensive income/(loss) net of taxation Exchange differences on translating foreign operations Fair-value adjustments on available-for-sale assets Remeasurements on long-term employee benefit assets Gains on property revaluations Total comprehensive income for the year Profit attributable to: Equity holders of the parent Non-controlling interest – ordinary shareholders Non-controlling interest – preference shareholders Total comprehensive income attributable to: Equity holders of the parent Non-controlling interest – ordinary shareholders Non-controlling interest – preference shareholders Total comprehensive income for the year Basic earnings per share (cents) Diluted earnings per share (cents) (18) (12) 10 651 1 10 652 2 865 7 787 171 162 43 (76) 42 (18) (12) (35) 10 686 (35) (10) (25) (76) (76) 1 10 687 2 875 7 812 247 162 43 42 7 958 (101) 8 059 7 449 45 293 7 787 7 620 45 293 7 958 1 632 1 583 (27) 2 (25) (99) (2) (101) (6) (5) 7 476 43 293 7 812 7 719 47 293 8 059 1 638 1 588 129 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenwoRldclass at Managing Risk Risk and Balance sheet ManageMent Nedbank Group has a strong risk culture and follows worldclass enterprisewide risk management (ERM), which aligns strategy, policies, people, processes, technology and business intelligence in order to optimise the opportunities and uncertainties the group may face in its ongoing efforts to maximise sustainable shareholder value. Background to risk and balance sheet management in Nedbank Group It is the group’s view that a strong risk governance process is the foundation for successful risk management and balance sheet management, which is why this model represents the core of the business’s Enterprisewide Risk Management Framework (ERMF). The ERMF places emphasis on accountability, responsibility, independence, reporting, communications and transparency, and comprises 17 key risk categories that are managed, monitored, measured and reported on by the first, second and third line-of-defence functions across the group. The 17 key risks that comprise Nedbank Group’s risk universe are reassessed, reviewed and challenged on a regular basis in terms of their materiality. The ERMF, in turn, specifically allocates the 17 key risks at each of three levels of responsibility, namely: ■ board (non-executive directors) committees; ■ executive management committees [at Group Executive Committee (Exco) level and those within business clusters]; and ■ individual functions, roles and responsibilities (at group level and across business clusters). GRI FSSS: FS1 FS2 GRI: 3.1: 1.2, EC1, EC2 Supplementary information: Risk and Balance Sheet Management Review Supplementary information: Risk and Capital Management Pillar 3 Public Disclosure Report 130 NedbaNk Group | Integrated report 2013 EntErprisEwidE risk ’ i E s r E v n u k s i r s p u o r G k n a b d E n ACCOuNTING AND TAxATION RISkS CAPITAl RISk COMPlIANCE RISk CREDIT RISk INFORMATION TEChNOlOGy RISk MARkET RISk INSuRANCE AND ASSuRANCE RISk uNDER- WRITING INSuRANCE RISk INSuRANCE RISk TRADING BOOk BANkING BOOk NEW BuSINESS RISk INvESTMENT RISk lIquIDITy RISk OPERATIONAl RISk PEOPlE RISk REPuTATIONAl RISk SOCIAl AND ENvIRONMENTAl RISk STRATEGIC RISk TRANSFORMATION RISk ResponsiBilities of the thRee lines of defence fiRst line The board and management of Nedbank Group are responsible for the implementation and management of risk. second line Group Risk and Enterprise Governance and Compliance perform a policy-setting and monitoring role to ensure implementation of risk management principles and adherence to regulation and legislation. thiRd line Group Internal Audit (GIA), external auditors and independent actuaries provide additional assurance on the effectiveness of risk management in the organisation. In these various committees the 17 key risks are contained in formal terms of reference (or charters) and linked to the agendas of meetings. Comprehensive reporting on the risk universe thus occurs regularly, where their status, materiality and the effectiveness of management are assessed, reviewed and challenged. the iterative reassessment of the 17 key risks. Escalation criteria have been formalised and significant risk issues and/or limit breaches are raised and included in the key issues control log, which is a key feature of the ERMF and risk reporting across Nedbank Group. This process originates in the business clusters; then, based on materiality, risks are escalated up to the group executive level and then to the non-executive board level. The process is overlaid by the group’s three lines of defence governance model as set out above, so that the assessment, review and challenge are not only the responsibility of management and the board, but also of Group Risk, Group Compliance, and Group Internal Audit and the external auditors in the second and third lines of defence. Within this recurring ERM process, and additionally via the strategic and business planning process, new and/or emerging risks are identified, captured and addressed within the ERMF and its associated process. A residual heat map is used and supports The ERMF, fully embedded in business and central functions across Nedbank Group, is supplemented by individual frameworks such as those for risk appetite in respect of credit risk, market risk, liquidity risk, operational risk and capital risk, as well as a comprehensive set of risk policies and limits. These also comprise the role of the board, which includes setting and monitoring the group’s risk appetite 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, operational and asset, responsibilities by six liability and capital management subcommittees and the Group Operations Committee (Opcom), Taxation, Property and Procurement Committees, and the Group Transformation Forum. 131 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPen Worldclass aT MaNaGING rIsK (CONTINUED) Nedbank Group has also developed individual risk frameworks for the effective management of social, environmental and transformation risks. These frameworks serve as best-practice guidelines for the management of risks associated with these pillars of sustainability within the organisation, offering clear governance structures (eg committees, charters and policies) to deal with risks associated with the group’s sustainability objectives. The ERMF thus facilitates effective challenge and debate at executive management and board levels, and strong interaction across the group between the businesses and the functions. Our stress-testing independent central group scenarios examine nine of the macroeconomic factors in the proprietary model, which provides important input into a three- year plan and risk strategy. Risk strategy During the annual strategy and business planning process a comprehensive risk strategy is formulated. The salient features include evolving our strong risk foundation, with a particular focus on the following initiatives: ■ As regulatory requirements increase rapidly, Nedbank continues to invest heavily in resources, programme implementation and monitoring. Combating money laundering, combating terrorist financing, the Foreign Account Tax Compliance Act, Treating Customers Fairly, the protection of personal information, the Banks Amendment Act, the Financial Sector Regulation Bill (Twin Peaks and market conduct), the Financial Services laws General Amendment Act, the National Credit Amendment Bill and a Basel III consultative paper for the fundamental review of the trading book feature as high-focus areas. Arising from these is the increased oversight required by regulators of financial institutions, and in this regard Nedbank prides itself on the strong, regular and transparent relationships with its regulators and stakeholders. ■ Nedbank continues to rely heavily on the strong foundation provided by the ERMF with the intention to employ worldclass risk management practices. It is therefore important further to maximise the benefits that can be derived from the advanced approaches for operational, credit and market risks. We will also continue to manage the risk complexity through appropriate models, validation and skills. ■ In support of the overall Nedbank strategy relating to the rest of Africa, a second-line-of-defence focus will be assisting the business to enhance the control environment in existing operations, while the Pan-African strategy will remain a top priority. ■ In terms of innovation we will continue to leverage technology to support risk processes, improve our client experience, minimise the onslaught of fraud and, where necessary, increase the focus on data access and data risk management. ■ We will continue the sound management of the Corporate Insurance programme. ■ There will be an ongoing focus on credit risk management in the current economic environment, especially with adverse interest rate and currency moves, job losses, fuel prices, etc. ■ While enabling business innovation and the business to deliver on its strategy, Nedbank will maintain sound risk principles during a period of focus on non-interest revenue growth. 132 ■ In line with our Deep Green aspiration to become ‘highly involved in the community and environment’, Nedbank embraces the analysis that informed SA’s National Development Plan (NDP) in its Fair Share 2030 initiative and will ensure that credit and investment decisionmakers are cognisant of these. ■ Although 2013 demonstrated good overall balance sheet growth in line with portfolio tilt objectives, deposit mix trends will be the focus for 2014 and beyond. ■ unlike Basel II that was implemented in 2008, Basel III will be phased in over several years until 2019 and there are therefore several items that are still regarded as work in progress, with a detailed plan to meet timelines. Work-in- progress issues remaining are, among others, fundamental reviews of the trading book, fundamental revision of the operational-risk and securitisation frameworks, peer reviews of Basel III implementation and recovery and resolution plans. oveRview of 2013 Successes and concerns During the year Nedbank maintained its focus on actively managing and maintaining a strong risk culture within an embedded ERMF, supplemented by individual frameworks and comprehensive risk policies and risk governance, which includes best-practice reporting and disclosure. including The Group Risk and Capital Management Committee (GRCMC) manages the bank’s risk, liquidity and capital optimisation, proactively. This committee acts as the board’s expert monitors of liquidity, operational, legal, investment, insurance and assurance, strategic and all market risks. Committee members meet quarterly and consider any buildup or concentration in the various risks and also emerging risks to which the group is exposed. The ERMF risk policies and limits are continuously reviewed by this committee. In its commitment to improving existing risk and governance practices continually, the GRCMC completed an initiative to streamline and rationalise the policies covering the risks included in its mandate. GRCMC focused on embedding the group operational-risk profile compiled from different data elements and monitoring the identified risks by aligning the components of operational- risk measurement and the management approach. Active involvement, participation and proactive response to new regulations ensured that Nedbank’s operational-risk practices remained sound and aligned with new international operational- risk standards. There was a greater focus on coordination to enhance understanding of interrelationship between the operational risk and other risk types across the organisation, supported by directors’ operational-risk management training. A further major responsibility of the committee is its focus on is liquidity and capital management, ensuring the bank adequately funded with prudent levels of capital adequacy in compliance with the Basel III requirements. In line with international and local trends Nedbank observed an increase in regulatory scrutiny and inspections, which highlighted areas where administrative regulatory controls can be strengthened. The period saw an increased awareness and responsiveness to the top five global emerging operational risks in the financial services sector. Cybercrime issues, the regulatory environment, outsourcing, fraud and conduct risk were rated the top five risks in 2013. Primary matters attended to comprised major litigation NedbaNk Group | Integrated report 2013and claims against the bank, security risk (physical, information and staff), business continuity, recovery and resolution plans, monitoring of regulatory risks, the implementation of the group regulatory programmes, oversight of capital and liquidity management in compliance with Basel III, combating of money laundering and terrorist financing, sanctions control, privacy (protection of personal information), occupational health and safety, the Companies Act and the Foreign Account Tax Administration Act. in the deployment of nedbank’s risk strategy during the financial year of 2013 we managed to achieve the following successes: ■ The ERMF was maintained and continued to be resilient in 2013, encompassing strong and effective risk and balance sheet management, governance and compliance, fully aligned with the latest international Basel and local requirements. ■ Basel III was implemented on 1 January 2013 without any interruption to our operations. This was largely a result of our proactive approach to Basel III, preplanning and strong capital positioning leading up to 2013. ■ While Basel II was implemented together with external consultants, Basel III was implemented by our internal resources. ■ We improved on our credit loss ratios (ClRs). Although our ClR target is set at 60 basis points to 100 basis points, we are continuously working towards decreasing it further from its current position of 1,06%. ClR target ranges have been revised from 2014 for Nedbank Group at 80 basis points to 120 basis points. ■ Expertise and good decisionmaking skills allowed commercial property to exceed expected growth in 2013, while remaining within the target range set for its ClR. ■ Strong capital adequacy levels were supported by internal stress-testing results. ■ We continued with the sound implementation and ongoing enhancement of the advanced approaches for operational, credit and market risks. ■ Nedbank experienced a stable operational-risk environment against a backdrop of high-profile external operational-risk events locally and internationally. The group remained focused on anticipating, recognising and proactively responding to the challenges and emerging risks in the operating environment. The group’s top and emerging operational risks mainly related to financial crime; execution, delivery and process management; and information security. Fraud and transaction processing were also the main reasons for internal losses by frequency and severity. These were, however, contained within approved risk appetite limits and significant material loss events were limited. As the business evolves, the associated growth and level of operational complexity expose the group to additional operational risks. In response, the group continued to focus on improving the internal control environment to minimise the potential for losses, with emphasis on making it easy to do business with Nedbank. ■ Compliance and regulatory risk has become increasingly compliance with applicable local and international laws, regulations and supervisory requirements, guided by an established and comprehensive set of board-approved policies, procedures and governance structures. ■ The redesigning of our physical security systems at our branches and offices allowed us to save an amount of R36,5m. ■ Although we have experienced a decrease in the number of fraud cases (6 026 in 2013 from 8 139 in 2012), the overall value of these cases has increased. In addition, the number of internal fraud cases has decreased – evidence that preventing fraud rather than dealing with the consequences is a more effective strategy. As part of Nedbank’s recruitment process, staff integrity checks are conducted on all prospective staffmembers, including non-permanent staffmembers such as contractors. ■ As part of industry requirements by the Regulator we started to benchmark our risk management performance against that of other banks and against feedback from the South African Reserve Bank (SARB). We are proud to report that no issues were raised on our Internal Capital Adequacy Assessment Process (ICAAP) by SARB. however, the following concerns were also noted: ■ Increased valuations of listed shares in 2013 have given rise to concerns about a possible future reduction in share prices, and therefore we are monitoring our exposure to listed shares daily and improving the liquidity of our exposure. ■ Industry concerns resulted in our decreasing our exposure to unsecured lending. ■ Continuous changes to regulations create the need to update our systems and processes in order to meet new requirements. ■ A sovereign downgrade, rand weakness and volatility, weak growth, higher inflation, rising interest rates and the uncertainty associated with the national elections will impact the business. ■ There is a growing need for effective controls and procedures to enhance all aspects of regulatory compliance, especially as far as combating money laundering and the financing of terrorist activities is concerned. theMes Innovation and client centricity Banking requires continuous innovation, the enabling of the risk-mitigating processes and business with efficient the improvement of the client experience. Recent examples of these in the quest to combat fraud include: ■ Approve-it™, a solution to increase electronic online banking security, which has resulted in a significant decrease in the number of phishing scams in 2013 compared with those recorded in 2012. ■ Risk Net, a transactional card fraud prevention tool that is used to detect suspicious account activity. significant, given the heightened regulatory environment in which Nedbank operates. The group sought to achieve As a result of these measures to improve our risk management systems we experienced no major security breaches in 2013. 133 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenWorldclass aT MaNaGING rIsK (CONTINUED) Top of mind at Nedbank is the smart implementation of the Protection of Personal Information Act, which will ensure that client data is protected to minimise compromise and abuse. We have proactively embraced this legislation, while also focusing on implementing Treating Customers Fairly (TCF) requirements in all our business activities. The board and management benefited from interacting with the Financial Services Board (FSB), who provided insight into the fair treatment of clients. Initiatives to date include awareness campaigns, focused and directed programme management, board and executive oversight and assessments to identify gaps in the fair treatment of clients at all levels of the organisation. foRwaRd looking Regulatory landscape The volume and speed of regulatory change remain challenging both globally and locally, requiring agility from a bank aspiring to be worldclass at managing risk. Furthermore, market conduct and behaviour will be the cornerstones of maintaining confidence. An innate focus on these risk exposures will have far-reaching implications for reputational risk, and the Twin Peaks legislation governing conduct is expected to improve risk mitigation in this regard. Also on the horizon is the Basel Committee’s Fundamental Review of the Trading Book, which represents a significant change in the way regulatory capital will be calculated for trading market risk. Macroeconomic factors The unpredictable macro environment will also create volatility and uncertainty. The greatest risk for us is a sovereign downgrade of SA’s credit rating, which will impact: ■ our pricing and our ability to issue new forms of funding and capital, particularly outside SA; ■ our margins; and ■ our growth. Because we are capped at the sovereign ceiling, all SA banks will be downgraded in such an event. Innovation imperative While Nedbank invests in appropriate prevention and detection mechanisms for cybercrime, information security breaches and fraud, these risks remain key in shaping the operational-risk landscape. Technology and innovation are strong forces driving change in the business environment. Nedbank continues to invest in the capability and capacity required to meet and exceed demands from an information technology systems perspective. Risk and Balance sheet ManageMent Review Highlights The 2013 financial performance, delivered amid continuing difficult macroeconomic conditions, is underpinned by a strong, robust balance sheet across all the core dimensions of capital adequacy, liquidity, provisioning and sound asset quality, aided by the group’s strategic portfolio tilt focus, an enabling but prudent risk appetite, excellence in risk management and a seamless transition to Basel III. 134 capital adeQUacY and leveRage ■ The common-equity tier 1 (CET1) capital ratio strengthened to 12,5% (2012: 11,6% pro forma Basel III) to the top end of the group’s new Basel III target range, well positioned to support growth and pursue strategic opportunities. ■ The successful issuance of R3bn of new-style Basel III subordinated debt tier 2 capital at competitive pricing, culminating in a total capital ratio of 15,7% (2012: 15,1% pro forma Basel III). ■ The risk-weighted assets (RWA) density of 52,4% (2012: 52,7%), which compares conservatively with international levels. ■ Sound Internal Capital Adequacy Assessment Process (ICAAP) and, in line with Basel III, a comprehensive new Recovery Plan. ■ Dividend growth of 19% above headline earnings per share (hEPS) growth of 14,9% is at a 2,11 times dividend cover as the group continues to migrate to the midpoint of its dividend cover range (1,75 times to 2,25 times). ■ Migration to Basel III is seamless. ■ In January 2014 the Basel Committee on Banking Supervision (Basel Committee) announced changes to the Basel III leverage ratio, easing the international requirements. Nedbank also compares favourably with international peers on leverage, with a pro forma Basel III ratio of 6,4% (Basel III minimum 3%; SARB minimum 4%) or 15,6 times, while the current financial International Financial Reporting Standards (IFRS) accounting-based ratio is 7,9% (or 12,7 times). liQUiditY and fUnding ■ Nedbank is pro forma-compliant with the new Basel III liquidity coverage ratio (lCR), which becomes effective on 1 January 2015. This includes R28bn (2012: R24bn) of surplus liquid assets held at year-end. ¨ Total sources of quick liquidity are a significant R107,3bn or 14,3% of total assets (2012: R105,4bn or 15,4%). ■ A strong funding profile has been maintained throughout 2013, with Nedbank recording a three-month average long-term funding ratio of 26,2% in the last quarter of 2013, up slightly from 26,0% in 2012. ¨ Nedbank issued its first-ever commercial-mortgage-backed securities (CMBS) during March 2013, successfully raising R2,0bn, while also diversifying its long-term funding sources. − Nedbank issued R3,2bn in senior unsecured debt in July 2013, followed by a further issue of R2,6bn in November 2013 at competitive pricing. ¨ In January 2014 the Basel Committee announced the much anticipated proposed revisions to the Basel III net stable funding ratio (NSFR), which is effective from 2018. While the SA banking industry’s gap to compliance with the NSFR will have substantially improved, full compliance remains a structural challenge. ■ Deposits grew 9,5% to R603,0bn. The growth in deposits across Corporate, Retail, Business Banking and Wealth supports Nedbank Group’s key objective of enhancing an already strong retail and commercial banking franchise through continued emphasis on meeting client needs through product, pricing and innovation, and the group’s strategic portfolio tilt focus. NedbaNk Group | Integrated report 2013 ¨ The loan-to-deposit ratio remains favourably positioned, ■ Total gross new-advances payouts increased by 10,1% to consistently below 100% at 96,1% (2012: 95,7%). R158,9bn (2012: R144,3bn). pRovisioning and defaUlted advances ■ Nedbank has established prudent and conservative provisioning across all its credit portfolios. ■ With significant action already taken in home loans and, in recent years, in Personal loans, the bank is placed in a sound position ahead of the rising interest rate cycle. ■ Sound asset quality and proactive risk management have enabled lower levels of inflows into defaulted advances, which declined by 9,4% to R17 455m (2012: R19 273m) and amounted to 2,95% of gross advances (2012: 3,58%). ¨ Defaulted advances in Nedbank Retail declined to 5,4% of the advances portfolio (2012: 6,3%) as the result of sustained excellence in collection efforts, effective client rehabilitations (including restructures and rearrangements) and higher-quality new business. ¨ The six-month writeoff period for personal loans and steps taken from h2 2012 to reduce risk resulted in personal-loans defaulted advances peaking mid-year and the ClR improving since June 2013. ¨ Investment Banking, Nedbank Property Finance, Corporate Banking and MFC contributed 64,8% of gross payouts. ¨ Personal loans gross payouts decreased by 56,2% during 2013 due to intentionally low, risk-mitigated growth strategies in the business. ■ Also in line with our portfolio tilt strategy, Nedbank’s credit concentration risk (expressed on a percentage of total gross loans and advances) has been actively managed over time, including: ¨ Residential mortgages were managed down from 32,3% (2009) to 23,0% (2013). ¨ Commercial mortgages were maintained around 18,0% during the last three years, but increased from 16,5% in 2009. Nedbank has a market-leading commercial property franchise, which aligns with our preference to be more weighted in this economically attractive portfolio and less in residential mortgages, relative to the peer group. ¨ lease and instalment sales increased from 13,9% (2009) to 14,4% (2013). ¨ Personal loans comprises only 3,6% (2009: 2,1%) and the ¨ The coverage ratio for total and specific impairments intention is to maintain this below 4%. increased to 65,6% (2012: 56,4%) and 42,8% (2012: 38,6%) respectively. Portfolio coverage on the performing book continued to strengthen to 0,70% (2012: 0,66%). ¨ Within Nedbank Retail balance sheet impairments strengthened further, which was reflected in both specific coverage increasing to 51,0% (2012: 45,2%) and portfolio coverage increasing to 1,37% (2012: 1,21%), aided by R323m pretax additional impairments as downside risk protection in anticipation of the effects of the systemic risk of high industry unsecured lending growth rates in preceding years and increasing consumer indebtedness. asset QUalitY ■ Strategic portfolio tilt has been a key focus area of Nedbank since 2009, including selective origination of lower or higher growth in varying credit portfolios together with a strong emphasis on risk-based pricing and client value management. ¨ This has considerably strengthened the balance sheet as summarised above and quality of the asset mix, resulting in good net interest margin (NIM) growth, despite the tough economic environment, the 40-year low interest rates negatively impacting endowment and the significant new costs associated with Basel III, while placing Nedbank favourably going into the rising interest rate cycle in 2014. ■ In 2013 solid advances growth was delivered across several key businesses, including MFC (14,8%), Card (13,5%), Property Finance (11,0%), Investment Banking (36,5%) and Rest of Africa (17,5%), supporting the growth in total loans and advances of 9,9% to R579,4bn. ¨ There was selective advances growth to mitigate against downside risk in personal loans and home loan products, which decreased by 7,9% and 0,1% respectively. ■ Significant levels of cash and securities were maintained in 2013, including high-quality liquid assets (hqlAs) (R56,7bn) and cash reserves (R13,0bn) in line with Basel III. ¨ As part of the group’s 2013 interest rate risk strategy, higher levels of unhedged fixed-rate short-dated securities were accumulated within cash and securities compared with government bonds. ■ Intangible assets of R8bn represent only 1% of total assets. ■ Nedbank Wealth assets under management grew 26,4% to R190,3bn (2012: R150,5bn), reflective of the significant growth of this business, providing further favourable diversification and portfolio tilt for the group. ¨ The insurance businesses are on track with Solvency Assessment and Management (SAM) implementation through a proactive approach that has been imbedded in risk management frameworks, strategic initiatives and system enhancements. MaRgin ManageMent ■ NIM has continued to improve in a challenging macroeconomic environment, on the back of the group’s strategic portfolio tilt and strong balance sheet management. ■ NIM improved by four basis points to 3,57% from 3,53% in 2012. ¨ Margin gains were underpinned by sound risk-adjusted pricing of advances, deposit growth and mix benefits, a reduction in the marginal cost of wholesale funds, slightly lower levels of long-term debt, and the benefit of an interest rate risk strategy offset by asset-mix changes, a squeeze on funding spreads due to Basel III and the impact of lower interest rates. ¨ During 2013 industry pricing became increasingly aggressive in the MFC, Business Banking and Corporate Banking portfolios. ■ Nedbank Group’s lending spread increased from 2,22% in 2010 to 2,83% in 2013 as a result of asset mix enhancements driven by strategic portfolio tilt, improved pricing and backbook runoff. ¨ under the portfolio tilt strategy, economic profit (EP) ¨ This reinforces the increased ClR target range that has increased significantly from R57m in 2009 to R2,1bn in 2013. been in effect from 2014, discussed on the following page. 135 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenWorldclass aT MaNaGING rIsK (CONTINUED) Risk ManageMent ■ Nedbank’s ERMF has remained resilient through 2013, together with a prudent but enabling Risk Appetite Framework, comprehensive stress and scenario testing and the comprehensive new Recovery Plan under Basel III. Credit risk ■ The ClR of 1,06% remained at a similar level to that of 2012, having improved from 1,31% at June 2013, mainly due to timeous positioning in Personal loans and a large client- specific impairments charge included in June 2013 that had normalised at year-end. ¨ All business clusters and within that all business units’ ClRs were within their through-the-cycle target ranges, with the one exception being Personal loans as a consequence of R323m additional impairments as downside risk protection for deteriorating levels of consumer credit health, fuelled by the high industrywide unsecured-lending growth rates in preceding years and resultant industry tightening of credit availability, particularly as interest rates rise from 40-year lows. The embedding of sound risk management practices and early comprehensive risk-mitigating actions ensured the ClR of 2,16% for the full year remained within the Retail ClR target range. − Overall defaulted loans continued to decline, while further strengthening the coverage ratios. ¨ From 2014 onwards the group has revised the following ClR target ranges: % Nedbank Group Nedbank Retail new clR target range Old CLR target range 0,80 – 1,20 0,60 – 1,00 1,90 – 2,60 1,50 – 2,20 − The drivers of the above changes are the significant asset-mix change in Retail since 2009, on the back of strategic portfolio tilt and more prudent retail provisioning methodologies implemented in recent years, and with a commensurate increase in credit spreads and NIM, and the group’s Pan-African strategy. ■ The Group Credit Risk Framework and mandate/limit structure was maintained substantially unchanged. ■ Close scrutiny was in particular maintained over: ¨ Pending changes to the National Credit Act and related strategic implications ¨ Consumer indebtedness ¨ Personal loans and execution of our strategy ¨ home loans backbook ¨ Collections ¨ Nedbank Capital’s renewable-energy programme of expansion ¨ Expansion into the rest of Africa ¨ Credit concentration risk ¨ Implications of the pending finalisation of a new accounting standard, IFRS 9, on impairments ¨ Continually improving the management of the Advanced Internal-ratings Based (AIRB) credit risk system Market risks ■ Interest rate risk in the banking book (IRRBB) reflects net interest income (NII) sensitivity to a 1% change in interest rates at R936m (2012: R813m) over one year or 1,54% (2012: 1,51%) of capital, positioned for an upward interest rate cycle. ■ Market risk associated with group’s hqlA portfolio continues to be well managed, eliminating any material market risks on these portfolios for significant market volatility. ■ Trading market risk and equity risk in the banking book remain low at just 1,2% and 3,7% of total group economic capital respectively, as the primary focus is flow trade, client facilitation and marketmaking. ¨ The bulk of the derivative book relates to vanilla interest rate and foreign currency derivatives. ■ Foreign currency translation risk (FCTR) is also a low risk, with sensitivity of a 10% change in the value of the rand only having a 0,1% impact on the group’s total regulatory capital adequacy ratio (CAR). Operational risk ■ Nedbank’s management of operational risk remained sound and the AMA Framework effective. ■ Continuous sound management of operational risk, including the investment in Information Technology systems and experienced operational risk management staff, benefited the group’s risk-weighted asset and capital adequacy ratios. ■ Nedbank operated within approved operational risk appetite limits for all categories, namely operational risk capital to gross operating income (GOI), internal losses to GOI and earnings at risk at a 90th percentile. Regulatory reform ■ Strong, engaged and transparent relationships were maintained with all the group’s regulators throughout 2013. ■ The group continued to proactively manage the pervasive, ongoing regulatory reforms and its impact on the business in particular: ¨ Anti-money-laundering regulations on combating terrorist finance activity ¨ Basel III (given the phasing-in from 2013 through 2019) ¨ NCA ¨ Twin Peaks legislation ¨ Consumer Protection Act ¨ Solvency II/SAM (insurance) ¨ IFRS 9 (provisioning) ¨ Companies Act 136 NedbaNk Group | Integrated report 2013diffeRent RepoRts foR diffeRent aUdiences and diffeRent pURposes This report focuses on the integrated narrative and thinking within Group Risk and Balance Sheet Management. Other reports, such as Pillar 3 and ICAAP, are more focused on compliance with regulation 43 and Basel III. Report Results booklet Topics The analyst booklet is a document presented to financial analysts, biannually along with the announcement of the group’s results. Audience Investors and analysts Issuance February/ August 2014 Web content Stakeholders March 2014 Pillar 3 General Public, Regulators Full disclosure: March/ September 2014 Minimum capital adequacy disclosure: May/ October 2014 ICAAP Internal, Regulators July 2014 ILAAP Internal, Regulators July 2014 The report consists of three sections: the analyst presentation, financial results and risk and balance sheet management review, and provides an overview of the group’s financial performance, risk and capital position. Provides information on operations, financial and non-financial performance and integrated sustainability developments during the year. The report covers all group clusters, operational areas and businesses of Nedbank Group. Pillar 3 of Basel III focuses on market discipline and aims to complement the minimum capital requirements (Pillar 1) and the supervisory review process (Pillar 2). The Pillar 3 Public Disclosure Report is based on regulation 43 of the SARB regulations. Requirements specified include: ■ qualitative and quantitative information relating to capital position and allocation and risk management; ■ information pertaining to the financial performance and financial position of the bank (including capital adequacy, capital structure, and liquidity); ■ risk management objectives and policies; and ■ the nature and extent of risk exposures as well as how these are managed. The Pillar 3 report is an extension of the information disclosed in the risk and balance sheet management section of the analyst booklet. This report is also published biannually on the group’s website. The full regulation 43 disclosure is published for year-end and interim results, while the minimum capital adequacy requirements disclosure, as specified in regulation 43(1)(e)(iii), is published for the first and third quarter results along with the group’s trading update. These documents are published on the group’s website. As part of Pillar 2 (Supervisory Review Process) of the Basel III Framework, banks are required to develop an ICAAP and set capital targets that are commensurate with the bank’s risk profile and control environment, including under stress conditions. ICAAP is primarily concerned with Nedbank’s comprehensive approach, measurement and management of risk and capital from an internal perspective, that is, over and above the minimum regulatory rules and requirements of Basel III. In view of the significance of liquidity risk in banking, Nedbank also produces an Internal liquidity Adequacy Assessment Process (IlAAP) (along with the ICAAP). The report is a confidential document that is compiled annually and is reviewed and signed off by the board (through the GRCMC), Group Asset and liability Committee, Group Exco and GIA before being sent to the SARB. The IlAAP involves an ongoing and rigorous assessment of Nedbank’s liquidity self- sufficiency under a continuum of stress liquidity scenarios, taking cognisance of the board-approved risk appetite. The IlAAP also involves an ongoing review and assessment of all components which collectively make up and/or support the liquidity Risk Management Framework. The objective of this review and assessment process is to ensure that the framework remains sound in terms of measuring, monitoring, managing and mitigating liquidity risk, taking cognisance of best practise and regulatory developments. The report is a confidential document that is compiled annually and is reviewed and signed-off by the board (through the GRCMC), Group AlCO, Group Exco and GIA before being sent to the SARB. Recovery Plan Internal, Regulators August 2014 The recovery plan sets out Nedbank’s detailed approach to dealing with a capital, liquidity and/or business continuity crisis. Within the plan early warning signals and trigger levels are identified as part of the ongoing monitoring process relating to a potential or occurring crisis situation. The recovery plan provides Nedbank Group with a clear framework of actions that can be taken during a crisis with the aim of ensuring that the group’s management is able to act quickly and decisively to minimise or mitigate a crisis event. The report is a confidential document that is compiled annually and is reviewed and signed-off by the board (through the GRCMC), Group AlCO, Group Exco and GIA before being sent to the SARB. 137 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenRepoRting back on RemuneRation Statement FRom tHe cHaiRman oF tHe gRoup RemuneRation committee I am pleased to present to you, our stakeholders, our annual Remuneration Report. The report sets out our remuneration policy and details of Nedbank Group’s remuneration practices during the 2013 financial year. Remuneration, and particularly executive remuneration, continues to receive a great deal of attention globally by firms and their shareholders, governments, regulators for Sound and the media. While the Principles Compensation Practice of the International Financial Stability Board (IFSB), issued under the auspices of the G20 in 2009, still globally underpin remuneration regulation in financial services firms, many developed markets have gone considerably beyond these. Legislation has been promulgated in the UK regarding the introduction of binding shareholder votes on remuneration. The EU continues to press ahead with the implementation of bonus caps, a measure Switzerland has also adopted. The US is increasing disclosure requirements on pay differentials. While these measures have been from many quarters, some commentators (and at least one national government) postulate that elements of these either may have significant unintended consequences such as a material reduction of national competitiveness in the financial services sector, or may not add any material value to how stakeholders engage with companies on matters related to executive remuneration. lauded In SA good governance regarding remuneration is primarily informed by the King III Code of Corporate Governance. Banks also align with the IFSB principles and are required to include specific disclosures in their annual reports in terms of regulation 43 of the Banks Act. Through these, a comprehensive governance framework applies to financial services remuneration in SA. I am pleased that Nedbank has responded appropriately to all of these requirements. to report GRI 3.1: 4.5, EC3 Paul Mpho Makwana Independent Non-executive Director 138 NedbaNk Group | Integrated report 2013A key consideration for firms operating within a principles-based governance framework is that there is a degree of expert judgement inherent in determining compliance with these principles. A further consideration is how a firm achieves appropriate compliance with the governance principles and standards, while ensuring the its remuneration-related competitive position, protection of thereby retaining and attracting the talent to achieve its strategic objectives, including the protection of its franchise. This has been a critical issue for the Group Remuneration Committee (Group Remco) during 2013. We have, over the past several years, kept our core remuneration policy and principles largely consistent. In 2009 amendments were introduced that provided for deferral of short-term incentive (STI) awards, and included forfeiture provisions, which have been refined subsequently. While no material changes were made to the remuneration in 2013, we will, from policy and associated practices 1 January 2014, introduce the requirement that all future long- term incentive (LTI) awards made to executive directors be subject to corporate performance targets on 100% of the award, up from 50% in previous award cycles. This is dealt with in more detail on page 166 of this Remuneration Report. The implementation of the policy and principles in practice has seen a reduction in the STI pool in circumstances where business performance has declined, and has seen the lapsing of performance share awards in instances where the corporate performance targets were not met. These arrangements continue to apply, having been found fit for purpose. The bank produced another set of very good results this year, and continues to deliver strong progress against all of our major strategic objectives. This is dealt with in detail in other parts of this integrated report. A summary of some of the key relevant financial and non-financial metrics that influence our remuneration outcomes is provided below: Key relevant financial and non-financial metrics Headline earnings (Rm) Economic profit (Rm) Return on equity (excluding goodwill) (%) Year-end share price (cents) Fini 15 Index Nedbank Staff Survey (%)2 Barrett Staff Survey entropy level (%)3 2013 8 6701 2 114 17,21 21 000 12 745 76,7 P 11 P 2012 7 483 1 521 16,4 18 800 10 644 75,5 10 Yoy change % 15,9 39 11,7 19,7 1,59 -10 1 Audited. 2 Re-baselined to account for 14 dimensions on the survey, up from 13 applied in 2012. 3 The decline in the Barrett score manifests in a higher score. This is therefore reflected as a negative. The bank’s performance continues to improve year on year and, as a consequence, STI pools earned and approved over the past two years have increased. Following the lapsing of all LTI awards allocated between 2005 and 2009, we are now seeing vesting levels commensurate with the overall performance of the group, and the returns delivered to all stakeholders. The high levels of engagement between members of Group Remco remain an important contribution to the effective implementation of the core principles of the Remuneration Policy and its alignment with both strategy and performance. Readers of our Remuneration Report will observe that we have refined our Remuneration Policy. While there have been no material changes to the substance of the policy, we have sought to achieve the following core objectives: ■ Improve the readability and clarity of the policy. ■ Enhance the Remuneration Policy objectives to ensure greater clarity about the group’s remuneration philosophy. ■ Remove duplication between the Remuneration Policy and the Remuneration Report by enhancing, in particular, the descriptions of our remuneration elements. ■ Include details of performance management and recognition in the Remuneration Policy, as these are key aspects of the overall remuneration environment. The Remuneration Policy is, in accordance with King III, put to a non-binding advisory vote annually at our annual general meeting. I recommend, on behalf of Group Remco, that shareholders vote positively in this regard. 139 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenreporting back on remuneration (CONTINUED) In the Group Remco Chairman’s Statement in the 2012 Remuneration Report several key matters to be considered in 2013 were highlighted. These, together with the actions initiated to address them, are set out below: Issues raised in the 2012 Remuneration Report action taken in 2013 Reviewing of the overall competitiveness and fitness for purpose of our total remuneration and benefits offering relative to the markets in which we compete, while remaining appropriately commercial and agile to respond to changes in market conditions. Detailed review of our approach to performance management. Ongoing monitoring of and adaptation to the evolving remuneration governance requirements applicable to financial services firms. We, as Group Remco, have a comprehensive agenda that ensures broad coverage of all major remuneration and benefit elements. This has enabled the committee to review all the remuneration arrangements in place in the group. Group Remco remains of the view that the remuneration and benefits in place in the group continue to meet the necessary commercial, regulatory and risk requirements. Accordingly, there have been no material changes to the remuneration and benefit practices during the year. We have also, for 2014, introduced the requirement that all future LTI awards made to executive directors will be subject to corporate performance targets on 100% of the award, up from 50% in previous award cycles. A comprehensive review process was launched by the group in the second half of 2013. This first phase of the project, a discovery phase, was concluded. During this phase international best practice regarding performance management was researched and examined, a range of internal Nedbank staff survey-related information was consolidated and we drew on outcomes from employee focus groups regarding the implementation of performance management. The outcomes of the review are that the process of more comprehensively reviewing the group’s approach to performance management will continue in 2014. Remuneration governance is high on our agenda. In addition to a comprehensive training session conducted by PwC on latest global trends, a remuneration governance update has been added as a standard agenda item for the committee. In addition, Group Remco commissioned specific research on remuneration governance in Canada and Australia, complementing the focus on Europe, the UK and the US. The committee is pleased with the level of Nedbank’s compliance with the relevant regulatory and statutory codes pertaining to remuneration. Our remuneration strategy is reviewed regularly to ensure that it continues to adapt to changing market conditions and that it remains competitive and appropriately aligned with our overall business strategy. Some of the key themes that Group Remco will consider in 2014 will be: ■ Conclusion of the performance management review project. ■ Improved shareholder engagement through our governance roadshows conducted annually by the Chairman of the board. ■ Review of the structure, composition and effectiveness of our employee benefits suite. ■ Consideration of the possible implementation of a focused LTI programme for a limited number of senior executives in the group. This will be funded by Old Mutual plc and is proposed to apply across all of its operations in SA, including Nedbank. Further information in this regard is available on page 164 of the Remuneration Report. I took over as Chairman of Group Remco following the resignation of Ms TCP Chikane from the board on 13 August 2013. I would like to express my appreciation to Ms Chikane for her contribution to the committee during her tenure. I would also like to commend my fellow Group Remco members on the way in which they have engaged in the important issues related to remuneration in the group. I am grateful for the levels of rigour they have applied to the debates on our Remuneration Policy and remuneration practices in these dynamic times. pm makwana 21 February 2014 140 NedbaNk Group | Integrated report 2013RemuneRation poLicY tHe poLicY The group defines total reward as a combination of various types of rewards, including financial and non-financial, indirect and direct, and intrinsic and extrinsic rewards. The Remuneration Policy provides a framework for the management of total reward in the group, and supports the Nedbank employee value proposition (EVP). Scope of the Remuneration Policy The Nedbank Group Remuneration Policy (’the policy‘) is board- approved and forms part of the group’s operating philosophy, policies and standards. It sets out how total remuneration is to be managed in the group, and is supported by detailed operating policies, procedures and practices at business unit level. The policy applies to all entities in Nedbank Group, including wholly owned subsidiaries and subsidiaries or joint ventures in which Nedbank has a majority interest, and excludes companies in which the group has only a private-equity investment. The policy applies uniformly in all such jurisdictions, except where it is in conflict with either local statutes or regulations, in which case such statutes or regulations will apply. Where a particular operating jurisdiction has a more onerous regulatory or statutory framework, the local standards of governance in that jurisdiction will apply. Aims of the policy The group’s reward arrangements should: ■ enable it to attract, motivate and retain people of high calibre, with the right mix of experience, skills and knowledge to deliver on the strategy; ■ support and reinforce its desired culture and encourage behaviour consistent with its values, thereby stimulating employee engagement; ■ create appropriate balance and alignment between the needs, expectations and risk exposures of its stakeholders, including our staffmembers, clients, shareholders, regulators and communities, to ensure the creation of sustainable long-term value for each of these; ■ incentivise employees to deliver sustained high levels of performance and excellent execution of its strategic priorities, while being cognisant of the impact this delivery has on the risk profile and exposure of the organisation; ■ enable appropriate transparency in the development of remuneration programmes and the allocation of individual remuneration to ensure equity and fairness based on valid and appropriate external and internal benchmarks; and ■ align with the principles of good corporate and compensation governance, ensuring an appropriate share of value for the relevant stakeholders in its business. In the above regard Nedbank’s fixed and variable remuneration is aimed at enabling it to remain competitive. In this context ‘competitive’ encompasses market relativity, sustainability and commercial sensibility in the allocation and delivery of remuneration. Remuneration governance The group complies with the relevant remuneration governance codes that apply in its various operating jurisdictions. These include groupwide compliance with the International Financial Stability Board’s (IFSB’s) Principles for Sound Compensation Practice. In SA the group complies with the provisions of King III and the requirements of regulation 43 of the Banks Act. For group operations domiciled in the UK, the provisions of the Prudential Regulatory Authority (previously the Financial Services Authority Remuneration Code) apply. The Nedbank Group Remuneration Committee (Group Remco) is mandated by the group’s board to oversee and govern all aspects of remuneration and operates according to an approved charter. Outcomes of Group Remco meetings are reported to the board. Group Remco also conducts an annual self-assessment of its effectiveness. Group Remco has independent advisers, both in SA and input, advice on internationally, who provide strategic international and local best practice and benchmarking. Group Remco is further supported by the Group Reward and Performance function. Group Remco works closely with the Group Risk and Capital Management Committee (GRCMC) to ensure a comprehensive approach to risk and reward. The group publishes a comprehensive annual Remuneration Report as part of its overall governance requirements. 141 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenreporting back on remuneration (CONTINUED) Components of Nedbank’s Total Remuneration Framework Nedbank’s Total Remuneration Framework is made up as follows: Recognition Short-to- medium-term focus, performance orientation SPECIAl-PURPOSE ShORT-TERM ARRANGEMENTS ShORT-TERM INCENTIvES (INClUDING DEFERRAl AND FORFEITURE) lONG-TERM INCENTIvES Long-term focus, ownership orientation EMPlOYEE OwNERShIP PlAN PERFORMANCE MANAGEMENT GUARANTEED PACKAGE Short-term focus, day-to-day orientation Performance management The group’s performance management process ensures appropriate alignment of individual, team, business unit and cluster performance objectives with those of the group. This enables translation of the group’s strategic focus areas into individual action plans. The core principles of the group’s performance management process are as follows: ■ Performance management is consistently applied across the group to ensure effective alignment of strategic objectives and individual outputs. ■ Performance objectives are based on a scorecard of metrics featuring both financial and non-financial indicators, which align with the group’s strategic imperatives. ■ Performance management is an ongoing process rather than an event. ■ Performance outcomes are appropriately differentiated to reflect the different levels of contribution made by employees to the success of the group. Where performance deficits are identified, these are dealt with actively, with the primary objective of returning the employee to full performance. ■ Performance management is a primary input into the group’s remuneration programmes, with the aim, among others, of ensuring appropriate differentiation in remuneration based on contribution. Guaranteed remuneration Guaranteed remuneration comprises salary and employee benefits and is delivered to employees in a form determined by local market conditions. Guaranteed remuneration usually reflects the prevailing ‘rate for the role’ within a remuneration range, with actual remuneration being distributed about the median of the range. In SA, and in some non-SA operations, this will take the form of a guaranteed package (GP). This represents the fixed cost of employment and, depending on local market practice, comprises a combination of the following: ■ Cash salary ■ Retirement benefits ■ Medical benefits ■ Death and disability benefits ■ Contributions towards postretirement medical funding, where applicable ■ Motor vehicle benefits A core principle under a GP model is that changes to benefit contribution levels are typically cost neutral to the group: changes to benefit pricing result in a corresponding increase or decrease in the monthly cash salary for the individual. Where appropriate, local market conditions may necessitate a basic-salary-plus-add-on benefit approach. In these instances the salary is typically fixed, with benefit costs being a function of utilisation (that is, if the benefit is not used, there is no cash compensation in lieu of the benefit). The group carries the upside risk of increases in the cost of benefits. 142 NedbaNk Group | Integrated report 2013The primary determinant of guaranteed remuneration is market- relatedness. The group conducts annual benchmarking against comparable firms in the relevant jurisdictions to assess market competitiveness. The combination of distribution of guaranteed remuneration within the earnings ranges and the market relativity of the group’s guaranteed remuneration is a primary input into the annual salary review process, but in all instances this is subject to affordability and appropriate consideration of the sustainability of the group’s remuneration practices. In support of remuneration benchmarking there is a robust process of job profiling and evaluation. This ensures consistency in the evaluation and sizing of roles, and the associated benchmarking of guaranteed-remuneration levels. At an individual decisionmaking level performance is used as a determinant of the extent of an individual’s progression within an earnings range. Thus, performance and individual market position are used concurrently when remuneration increases are determined. Adjustments to guaranteed remuneration outside of the annual review process are typically exceptional, linked to changes in responsibility or the intention to retain specific talent. These are subject to appropriate approval based on the relevant delegations of authority. All employee benefits, whether offered on a cost-to-company or a basic-salary-plus-add-on basis, are subject to appropriate oversight and governance to ensure that the financial and reputational risks associated with the provision of employee benefits are effectively and prudently managed. Short-term incentives, including deferrals Short-term incentives (STIs) are delivered primarily through the group’s discretionary STI arrangements. Where appropriate, and subject to the appropriate governance and approval, bespoke plans may be implemented, subject to Group Remco oversight. As a general rule, all STI plans are funded from the group’s overall STI pool. Thus, bespoke plans will result in a ‘drawdown’ on the pool. Where there is a specific dispensation to exclude a bespoke plan from the overall STI pool (usually in cases of low- guaranteed/high-variable remuneration models), Group Remco approval for such exclusion is required. The group does not operate any individual ‘line of sight’ schemes that could be deemed to encourage inappropriate risk-taking or increase the risk of moral hazard. Where commission-type arrangements operate (usually in respect of low-risk income- generating sales roles), appropriate safeguards are included to mitigate any potential moral hazard. STI participation is discretionary, and therefore there is no right to a performance incentive award in any given year. STIs are, at an individual level, determined primarily on the basis of performance, with the overall objective of exceptional reward for exceptional performance. Differentiation of awards based on the range of performance outcomes in the group is therefore a core principle. Furthermore, employees performing below a minimum acceptable level are not typically eligible for consideration for an STI award. the group has STIs are typically in the form of cash and the employee must be in service on the date of payment. However, in accordance with global financial services governance and prudent risk management principles, introduced an arrangement of compulsory deferral into shares of STI awards paid in excess of a threshold approved by Group Remco from time to time, which has been effective from 2010 onwards. Where deferral applies under this arrangement, any awards made are subject to specific release from forfeiture criteria and may, at the discretion of Group Remco, be subject to forfeiture. Where forfeiture applies, the group will not retest conditions or extend the period over which shares must be held. Group Remco approval is required for all individual awards that exceed 200% of guaranteed remuneration. The group may, as a component of its approved long-term incentive (LTI) programme, offer a share-matching arrangement on compulsory STI deferrals, subject to the participant’s retention of the award in the plan for a minimum period of 36 months (which is longer than the standard deferral timeframe), and subject to the release of the awards from potential forfeiture. Additional matching is further subject to the fulfilment of a specific group performance condition. Special-purpose short-term variable remuneration arrangements The group uses, on an exceptional basis, special-purpose short- term variable remuneration arrangements to assist in the attraction and retention of key talented employees and holders of scarce skills. These include signon awards and deferred short- term incentive (DSTI) arrangements, both of which are subject to individual performance and time-based conditions to ensure an appropriate return on the remuneration investment. The group is cognisant of the regulatory concerns raised regarding so-called ‘guaranteed variable remuneration’, and the potential downside of such payments. A high level of governance is therefore applied to both the operation of the respective programmes and the actual inclusion of individuals. In this regard a specified pool is approved by Group Remco for each financial year for each of the programmes. This pool is placed under the direct control of the Chief Executive (CE) and is subject to review by Group Remco at each meeting. As a core principle, guaranteed variable remuneration awards are highly exceptional and are utilised primarily in the context of the appointment or retention of key, critical talent. Furthermore, participants are typically only able to receive an award under the respective plans once during their tenure with the group. The group does not award guaranteed bonuses. Employee ownership plans The group offers two broad types of employee ownership plans: broad-based participation based on local statutory or regulatory requirements (these include broad-based black economic empowerment arrangements and ‘indigenisation’ or ‘localisation’ programmes) and employee subscription arrangements, where employees may invest a portion of their after-tax STI in Nedbank shares, with the possibility of matched shares. 143 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenreporting back on remuneration (CONTINUED) Broad-based schemes operate in jurisdictions where local regulations or statutes require specific economic participation by employees, usually by means of ownership of a stake in the business. In most (but not necessarily all) instances these plans are put in place to redress past imbalances in participation in the in such plans respective country’s economy. Participation therefore may be limited to certain employees, based on demographic specifications. Further, failure to adhere to the requirements may have material legal or regulatory implications for the relevant business. Broad-based schemes are typically implemented at zero cost to employees. directors being subject to performance conditions on 100% of the award). ■ Awards subject to performance conditions may be lapsed in full or in part in the event that the conditions are not met. There is also appropriate upward leverage to a maximum of 130% in the event that conditions are exceeded. Where awards are lapsed because of non-fulfilment of the performance conditions, the conditions will not be retested. ■ Awards are subject to vesting over a period of no less than three years from the date of the grant. Employee subscription arrangements are typically voluntary and give employees the opportunity to invest in Nedbank, currently on a posttax basis, over a stipulated period. This allows the employee to participate in both potential share price appreciation and the application of matching arrangements if the shares are retained in the plan for a prespecified period of 36 months. In this regard the group operates a voluntary STI deferral scheme, which allows eligible participants to receive matching shares, provided such shares remain in the programme for a stipulated period. All employee ownership plans are subject to board or Group Remco approval (and may, subject to the nature of the transaction, require regulatory, stock exchange or shareholder approval). Accordingly, strict governance and approval processes apply in every instance. long-term incentive plans The group’s shareholders have approved the implementation of a restricted-share-plan (RSP) arrangement, through which LTI awards are made. Where deemed necessary to address local taxation and exchange control issues, cash-settled phantom RSP arrangements have been implemented to ensure that operations outside SA may also participate in LTI arrangements linked to the group’s share price performance, and therefore ensure appropriate alignment of the interests of executives based abroad with those of the group’s shareholders. LTI awards are based on the following considerations: ■ Strategy and individuals key to driving the business strategy. ■ Talent management strategy and succession planning. ■ Retention of key talent and scarce skills. ■ Transformation objectives. ■ Potential and performance. ■ Leadership. The following are the core principles applicable to the group RSP arrangements (including phantom RSPs): ■ Awards under the relevant RSPs may typically be made at only two intervals per year – the annual pay review (typically March) and one off-cycle award (typically August). All awards are subject to the necessary governance and approval processes. ■ All plans are subject to corporate performance targets (CPTs) on at least 50% of the total award (with awards for executive ■ Where awards are lapsed, there is no replacement compensation issued. ■ Employees may not take steps to hedge or otherwise insure themselves against potential losses in respect of their LTI participation prior to vesting. ■ The pool available for allocation under the group’s LTI arrangements is approved in advance by Group Remco. ■ Group Remco assesses and confirms the CPT outcomes, ensuring that the interests of all stakeholders are appropriately considered. Changes to remuneration arrangements The group reserves the right, subject to compliance with the relevant legislation or collective agreements, to change or withdraw any aspect of its total remuneration framework. All programmes are subject to the applicable rules from time to time. Recognition In addition to the core remuneration elements set out above, the group also prides itself on the recognition of excellence among employees. To this end the group operates a comprehensive recognition programme comprising both formal and informal recognition. The core principles of the recognition process are as follows: ■ Recognition should be timely and spontaneous. ■ Recognition should be specific in that employees must know what behaviours were found desirable and what actions should be repeated. ■ Business units determine how recognition will be conducted in their area within specified guidelines. ■ The recognition programme incorporates both informal and formal processes. These processes run concurrently throughout the year and support the achievement of the group’s business objectives. ■ Any awards made under the recognition programme are compliant with the relevant tax legislation. Non-executive directors’ remuneration The fees of non-executive directors are reviewed annually. In accordance with the relevant corporate governance requirements, these are subject to approval in advance by shareholders at the annual general meeting. Changes to fees, where approved, become applicable on 1 July of each year. 144 NedbaNk Group | Integrated report 2013Roles and accountabilities Oversight and approval of Remuneration Policy and reward programmes; approval of senior executive remuneration. Proposal of reward programmes and structures to Group Remco; oversight and implementation of approved remuneration programmes. BOARD Accountable for organisational governance. Provides mandate to Group Remco. Oversight and input regarding risk and remuneration. Works with Group Remco to ensure GROUP REMUNERATION COMMITTEE GROUP ExCO GROUP RISK AND CAPITAl MANAGEMENT COMMITTEE appropriate risk adjustment in remuneration structures. INDEPENDENT ADvISERS Independent advice on best practice, benchmarking and remuneration governance issues. Implementation of reward programmes, with employees adhering to reward policies and processes. GROUP REwARD AND PERFORMANCE Reward strategy and supporting policies and programmes; execution of reward initiatives. lINE MANAGEMENT hUMAN RESOURCES Implementation of reward policy and strategy; line management support and advice. EMPlOYEES Adherence to reward policies and processes. 145 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenreporting back on remuneration (CONTINUED) RemuneRation RepoRt is enabled and The Nedbank Group Remuneration Policy supported by decisions made by Group Remco, which is informed by internal rules, procedures and processes. These ensure that the group’s predominant approach remains one of consistency and stability, while being cognisant of evolving legislation and remuneration practice. Any changes made are considered carefully to mitigate any unintended consequences or negative effects on the group’s stakeholders. In this regard the only material change made to remuneration practice in the group was the implementation of the requirement that future LTI awards made to executive directors will now be subject to performance conditions on 100% of the award, up from 50% in previous award cycles. This is set out in more detail on page 166 of this Remuneration Report. This Remuneration Report sets out the consistent implementation of the Nedbank Group Remuneration Policy within the group during 2013, as well as subsequent events in 2014, where applicable. RemuneRation goVeRnance Remuneration regulation Group Remco recognises that, globally, the remuneration environment is becoming increasingly regulated. This requires that Group Remco members keep abreast of the changing regulatory landscape, as well as prevailing stakeholder sentiment regarding remuneration matters, and take proactive steps to ensure that the group continues to meet its regulatory obligations in this regard. Group Remco receives regular updates from either its external advisers or the Group Reward and Performance team on the evolving regulatory environment to ensure that it is able to respond to changes in this regard appropriately and timeously. There have also, for the past two years, been dedicated training sessions, to which all boardmembers are invited, dealing in depth with the issues of remuneration governance. Interaction with regulators During 2013 the group confirmed to the South African Reserve Bank (SARB) that it continues to comply with the IFSB Principles and the associated implementation standards. All matters previously raised with the group by the SARB as part of its ongoing engagement with SA banks were confirmed as having been closed during 2012. These items specifically related to increased disclosures in the Remuneration Report in terms of regulation 43 of the Banks Act. The relevant issues were evidenced in the disclosures outlined in our 2012 Remuneration Report, and again in this report. Composition of Group Remco Group Remco currently consists of four members, the majority of whom are independent non-executive directors. The committee has an independent chairman. Group Remco membership in 2013 was as follows: Name Directorship status Current membership Ms TCP Chikane (past Chairman) Mr MA Enus-Brey Independent non-executive director Non-executive director Mr DI Hope Mr PM Makwana (Chairman) Non-executive director Independent non-executive director Ms NP Mnxasana Mr JVF Roberts Mr MI Wyman Independent non-executive director Non-executive director Senior independent non-executive director Resigned as a director 13 August 2013. Resigned from Group Remco 18 January 2013. Resigned as a director 30 June 2013. Current member. Appointed Chairman 2 September 2013. Current member. Appointed to Group Remco 21 February 2013. Current member. Group Remco met six times during 2013. Details of attendance at the meetings are set out in the supplementary Governance and Ethics section available online. The CE, Chief Operating Officer and Group Executive: Human Resources, are permanent invitees to Group Remco meetings. However, none of these attendees are present for discussions on their own remuneration. The meetings are also attended by the executive responsible for the Reward and Performance function in the group, as well as any external advisers whom Group Remco may deem necessary from time to time. All members of Group Remco act as trustees of the Nedbank Group (2005) Employee Share Trust. The trustee meeting for this scheme was held on 22 November 2013. Functioning of Group Remco Group Remco is delegated by the board to discharge its corporate governance duties related to remuneration strategy, policy and practices. The board ensures that Group Remco is: ■ constituted in a way that enables it to exercise competent and independent judgement on remuneration policy and practices, while also considering the management of related risk; ■ independently engaged by the GRCMC for specific risk- related decisions; ■ functioning in compliance with statutory requirements, codes of relevant best remuneration practice as well as applicable regulatory requirements and its board-approved charter; and ■ remaining responsive in terms of risk-adjusted remuneration practices. 146 NedbaNk Group | Integrated report 2013Group Remco’s responsibilities, which are groupwide in their application and are set out in the Group Remco Charter, are to: Approve Recommend Review Report ■ in an annual remuneration report for the board for publication in the integrated report; and ■ to the board after each meeting and more frequently if required. ■ to the board for approval all elements of remuneration on an individual basis for the CE, executive directors and other members of Group Exco; and ■ to the board, based on the research and recommendations of an independent subcommittee (comprised of individuals not impacted by the proposals in this regard), the remuneration of the Chairman of the board, and the non-executive directors for onward recommendation to the shareholders. ■ the annual performance scorecards of the CE, executive directors and prescribed officers, and other members of the Group Executive Committee (Group Exco), and the resultant outcomes in respect of each performance year; ■ the CPTs related to the vesting of LTI allocations and matched shares; ■ the annual STI pool, and the rules of any bespoke incentive schemes; ■ the overall guaranteed remuneration increase budget or mandate for all staff; ■ the proposed STI awards to individuals in excess of a defined limit; ■ on an individual basis, all share-based LTI allocations in excess of a defined limit; and ■ all elements of remuneration for the Company Secretary. ■ remuneration proposals and practices for the group to ensure alignment with best practice and the latest governance principles; ■ the overall financial liability related to all elements of remuneration for the entire group; ■ the material terms and conditions of service of all group staff (where appropriate) to ensure that they are fair and competitive; ■ the proposals for non- executive directors’ fees, which is the responsibility of the independent committee; ■ the appropriate peer group against which group remuneration will be evaluated; ■ any issues raised by the GRCMC that are related to remuneration; ■ the allocation of guaranteed variable remuneration awards; and ■ the use of independent external advice where necessary. Group Remco applies the guiding principles of the Remuneration Policy as far as is feasible, but retains the right to apply discretion to deviate from this policy in exceptional circumstances. There were no requirements for such deviation in 2013. Group Remco’s self-assessment to evaluate its effectiveness against the objectives of its charter revealed no material issues. Advice to Group Remco Group Remco has full access to independent executive remuneration consultants, and has utilised the services of Vasdex Associates (Pty) Ltd and PwC during 2013. Group Remco is provided, through the Group Reward and remuneration function, with market-related Performance information based on a number of independent remuneration surveys in which we participate. These include PwC Remchannel surveys, the Global Remuneration Solutions Top Executive Remuneration Survey, the LMO Executive Remuneration Survey and a number of smaller niche remuneration surveys. RemuneRation eLementS: mateRiaL pRogRammeS The group’s remuneration elements are set out in detail in the Remuneration Policy on pages 141 to 145 of this Remuneration Report. In this section material remuneration programmes or practices are highlighted. 147 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenGRI 3.1: EC3 REPORTING BACK ON REMUNERATION (CONTINUED) Total remuneration mix The Nedbank total remuneration mix is depicted as follows: GUARANTEED REMUNERATION VARIABLE REMUNERATION Guaranteed package OR Salary Benefits Short-term incentives Cash award Deferral (subject to forfeiture) Long-term incentives Matched shares LTI awards Details of the items in the diagram set out above are included in the Remuneration Policy on pages 141 to 145 of this Remuneration Report. However, in some instances, further details which are set out on the pages that follow, are provided to ensure greater understanding of Nedbank’s approach in this regard. Retirement schemes Our principal position on retirement schemes remains that these should be of a defined-contribution nature, with appropriate employee involvement in the governance of these schemes through representation on boards of trustees. We are, however, cognisant of the fact that the scheme design and governance will be largely influenced by local statutory and regulatory conditions. Detailed financial disclosures are set out in the consolidated annual financial statements available online. SA employees (part of guaranteed package) The majority of SA employees (and specifically all appointees since 1 January 1994) are members of the Nedgroup Defined-contribution Pension or Provident Fund. Both include flexible contribution levels and member investment choice. At 31 December 2013 a total of 8 446 employees were members of the Defined-contribution Pension Fund and 17 829 employees were members of the Defined-contribution Provident Fund. We also have the closed Nedgroup Defined-benefit (DB) Pension Fund, with 283 active members and 2 666 pensioners at 31 December 2013. The Nedgroup DB Pension Fund is fully funded, with an actuarial surplus. Employees outside SA (either provided as part of the guaranteed package or as a standalone employee benefit) Our non-SA operations run a variety of defined-contribution and legacy defined-benefit schemes for the benefit of employees. These are all governed in accordance with the local regulatory environment. Where defined-benefit plans are in deficit, appropriate steps are in place to manage the financial impact of such deficits. Existing defined-benefit- plan deficits are not regarded as posing any material risk to the financial sustainability of the group. Postretirement medical aid fund subsidisation A postretirement medical aid fund exists, which provides qualifying employees in SA with a postretirement medical aid subsidy promise. Approximately 72% of active employees participate in the benefit. This promise is contingent on the employee actually retiring from the bank, and is not transferable. The fund is currently fully funded. 148 Short-term incentive schemes STIs aim to drive the achievement of sustainable results within an agreed risk appetite framework and to encourage behaviours that are consistent with our values and are aligned with the best interests of our stakeholders. Our STI schemes are structured to support collaborative work across different clusters. Group Remco has agreed a set of principles and all group and cluster incentive schemes are designed according to those principles. Performance is measured at a group, cluster and business unit level against preagreed financial and non-financial targets after the finalisation of the audited year-end results. income-generating clusters incentive pools are In the structured with a weighting linked to the group, cluster and, where appropriate, divisional performance. The five income- generating clusters within the group (Capital, Corporate, Business Banking, Retail and Wealth) are measured against a combination of performance targets, namely economic profit (EP), headline earnings and a set of non-financial targets. The incentive pools for all central clusters are based on a combination of group performance relative to the targets in respect of EP, headline earnings and cluster-specific non- financial performance scorecards. Group Remco continues to institute a control limit whereby there may be no more than a 10% variance between the group topdown performance calculation and the independent bottomup cluster performance calculations for determining the Group STI pool. The detailed process for setting the STI pools is outlined on page 165 of this Remuneration Report. Distribution of the STI pools at an individual level is on a discretionary basis, is aligned with market practice and utilises individual performance relative to the agreed deliverables in the performance management process. In view of the importance of long-term sustainability of performance, a portion of the STI earned above a predetermined threshold is deferred, and remains at risk over a future settlement period. The total STI pool approved for distribution by Group Remco in respect of the 2013 financial year was R1 825m (2012: R1 579m). Furthermore, in accordance with the provisions of its charter, Group Remco approved 31 individual STI payments (2012: 13) in excess of 200% of GP in respect of the 2013 financial year. NEDBANK GROUP | INTEGRATED REPORT 2013Deferral of short-term incentives STIs above R1m are subject to deferral into the Compulsory Bonus Share Scheme, which operates under the terms of the Nedbank Group (2005) Matched Share Scheme. This arrangement has been in place since 2010. Deferral takes place in respect of 50% of any amount over R1m, and applies on a posttax basis. Amounts are deferred over a period of 30 months, with releases from forfeiture taking place in equal proportions at six months, 18 months and 30 months from the date of award. However, to be eligible for a match on these shares the individual must retain the shares in the scheme for a full period of 36 months. This is addressed in further detail below. Awards in each tranche are subject to a formal release-from- forfeiture decision, which is subject to board approval and dependent on there having been no material events that would, at the absolute discretion of Group Remco, warrant forfeiture of the particular tranche of the individual awards. If a forfeiture event is declared, the awards for the applicable tranche lapse in part or full, without any option for retesting. Awards are subject to forfeiture in the event of resignation or dismissal for cause (a so-called ‘fault’ termination). held in the scheme for 36 months to qualify for the match, as set out below. matching of deferred short-term performance incentive awards In terms of the Matched Share Scheme rules, should there be no forfeiture of awards as outlined above and the employee retains the shares in the scheme for a period of 36 months, he or she may receive matched shares of either 50% or 100% of the number of shares held by him or her in the scheme for the relevant allocation year. The former is based on the employee remaining in the scheme for the stipulated period, whereas the latter is based on both time and the achievement of a predefined CPT. In practice, this means that where the employee is at the highest marginal tax rate and the full after-tax amount of the STI is committed to the Matched Share Scheme for 36 months and the performance condition is met, the STI can increase by 30% on its original value, before taking account of any movement in the share price. A cash-settled compulsory STI deferral is used for all employees employed in the UK who earned an STI in excess of £150 000. A total of 2 (2012: 2) UK-based employees earned STIs in excess of the threshold for financial year 2013 (payable in 2014). Employees may also elect to defer a portion of their posttax STI voluntarily into the Matched Share Scheme, subject to the total deferral (including compulsory deferral) not exceeding 50% of the total posttax STI award. Any voluntary deferral must similarly be Special-purpose short-term variable remuneration In exceptional circumstances, typically in the context of hiring senior and key employees, we use preapproved special-purpose short-term variable remuneration arrangements. Scheme type Signon bonuses DSTI awards Number of awards Ten awards (2012: 20) totalling R2,86m (2012: R12,7m). Six awards (2012: 21) totalling R6,1m (2012: R13,3m). Scheme description Scheme governance Cash awards made to prospective employees on joining the group, typically awarded to compensate for loss of certain accrued benefits, or to make them whole in terms of existing contractual obligations. DSTI awards are cash-based awards, comprising an upfront payment (typically 40% of the award), with a deferred component (the remaining 60%) payable subject to a minimum time-based condition. Group Remco approves an annual pool from which the CE may allocate awards. Recommendations are received from Group Exco members. Awards are subject to clawback provisions in respect of termination of services before a prestipulated timeframe. Group Remco approves an annual pool for DSTIs. Motivations for awards are made by Group Exco members and approved by the CE. Awards may not be considered for the current CE or for existing members of Group Exco, but may be considered on a highly exceptional basis as part of the total remuneration package in the event of appointment of new Group Exco members from outside the group. Awards are subject to contract, to clawback (for the component already paid) and to forfeiture of the remaining portion in the event that the recipient leaves the employ of the group during the tenure of the award. Awards are also subject to an ongoing minimum individual performance requirement, which, if not met, may result in the lapse of the deferred tranche in full. The group does not, as a matter of course, award guaranteed bonuses. 149 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenreporting back on remuneration (CONTINUED) long-term incentives LTIs are awarded with the joint aims of aligning performance with the interests of stakeholders and of retaining key employees. Criteria and the quantum of allocations are benchmarked to the market annually. The allocation of LTIs is discretionary and is based on the following key eligibility criteria: ■ Strategy and individuals key to driving the business strategy. ■ Talent management strategy and succession planning. ■ Retention of key talent and scarce skills. ■ Transformation objectives. ■ Potential and performance. ■ Leadership. All LTI allocations are motivated by Group Exco and approved by Group Remco members in their capacity as trustees of the Nedbank (2005) Employee Share Scheme Trust. Specific approval is also required for all LTI awards greater than 100% of GP. The various LTI schemes are indicated below. The operation of the international Long-term Incentive Plan (LTIP) has been brought in line with the Nedbank SA LTIP, but on a phantom basis. Overview of the group’s long-term incentive arrangements under the Nedbank (2005) Employee Share Scheme the option Scheme No awards have been made in terms of this section of the scheme since 2007 and there are no unvested awards in this scheme. Restricted Share Scheme: annual allocations Group Remco issued restricted shares with a three-year vesting period to eligible participants on the following basis: ■ 50% performance shares: restricted shares with CPTs. ■ 50% retention shares: restricted shares without CPTs. With effect from 2014 all future awards made to executive directors will be subject to CPTs on 100% of the award. Restricted Share Scheme: on-appointment allocations On-appointment, restricted-share allocations with a three-year vesting period are offered at the discretion of Group Remco to new senior managers and also to employees who have been appointed to more senior positions and have been recommended for an allocation by Group Exco. On-appointment allocations take place biannually (and by exception on the date of appointment, with specific approval), three trading days after the announcement of the annual or interim financial results. Allocations are made on the following basis: ■ 50% performance shares: restricted shares with CPTs. ■ 50% retention shares: restricted shares without CPTs. With effect from 2014 all future on-appointment awards made to executive directors (including on appointment to an executive director role) will be subject to CPTs on 100% of the award. matched Share Scheme The Matched Share Scheme provides a vehicle for the compulsory deferral of STI awards in excess of R1m. There is also an opportunity for employees to participate in the scheme by way of a voluntary investment. The details applicable to deferral and potential matching of deferred awards are set out on page 149 of this Remuneration Report. In this regard employees also have a voluntary opportunity to allocate a portion of their STI to a maximum of 50% of their total after-tax STI (inclusive of any compulsory deferral) towards the acquisition of Nedbank Group shares. Employees may also deposit personally held Nedbank Group shares to the equivalent value into the trust that administers this scheme. The incentive to do so is a matching of this investment to a maximum equivalent value on a one-for-one basis. The scheme’s obligation to deliver or procure the delivery of the matched shares in both the compulsory and voluntary arrangements rests on two conditions, namely that: ■ for 50% of the matched shares, employees are still in the service of the group on the vesting date three years after allocation under the Matched Share Scheme; and ■ for the remaining 50% of the matched shares, the group has met an agreed performance target over a three-year period. Other long-term incentive schemes in operation phantom cash-settled Restricted Share plan During 2007 Group Remco approved the Phantom Cash-settled Restricted Share Plan (the Nedbank UK LTIP) for key employees in the UK. The design principles and rules mirror the Nedbank (2005) Employee Share Scheme. nedbank africa subsidiary schemes There are approved schemes in Nedbank Namibia and Nedbank Swaziland. Full details of the number and value of awards granted during the year in terms of our share-based plans are included in the Consolidated Annual Financial Statements, which are available online. 150 NedbaNk Group | Integrated report 2013Corporate performance targets Group Remco approved the use of a combination of equally weighted internal absolute and external relative CPTs for the performance shares awarded in 2013, which have remained unchanged since these targets were originally set in 2010. The details of these targets are set out on page 167 of this Remuneration Report. CPTs may not be altered once they have been set. This is in accordance with global best practice and the provisions of the relevant remuneration regulations. vesting profile of long-term incentives The vesting profiles of the various employee share plans are as follows: 2010 2011 2012 2013 2014 2015 2016 Issue date Nedbank (2005) Employee Share Scheme: – Restricted Share Scheme 02/03/2010 03/03/2010 05/08/2010 06/08/2010 07/03/2011 08/03/2011 04/08/2011 05/08/2011 07/03/2012 08/03/2012 06/08/2012 07/08/2012 07/03/2013 08/03/2013 14/08/2013 15/08/2013 Performance shares issued with CPTs ROE + Fini 15. Status: Proportionally vested 03/2013 ROE + Fini 15. Status: Proportionally vested 08/2013 ROE + Fini 15. Status: Proportionally vesting 03/2014 ROE + Fini 15. Status: Proportionally vesting 08/2014 ROE + Fini 15. Status: Proportionally vesting 08/2015 ROE + Fini 15. Status: Too soon to assess ROE + Fini 15. Status: Too soon to assess ROE + Fini 15. Status: Too soon to assess Retention shares issued without CPTs No CPTs. Status: Fully vested 03/2013 No CPTs. Status: Fully vested 08/2013 No CPTs. Status: Fully vesting 03/2014 No CPTs. Status: Fully vesting 08/2014 No CPTs. Status: Fully vesting 03/2015 No CPTs. Status: Fully vesting 08/2015 No CPTs. Status: Fully vesting 08/2016 No CPTs. Status: Fully vesting 08/2016 Issue date 2010 2011 2012 2013 2014 2015 2016 Performance and match conditions Outcome Nedbank (2005) Employee Share Scheme: – Compulsory Bonus Share Scheme 01/04/2010 01/04/2011 01/04/2012 01/04/2013 Release from forfeiture decision on 6-, 12- and 18-month anniversary of date of grant. For matching: ROE of Nedbank Group of greater than or equal to the COE (to be determined annually) +2% over three financial years. Match only applies to shares held in the plan for 36 months. No forfeiture: All tranches released in full. 0,5:1 match confirmed No forfeiture: All tranches released in full. 1:1 match confirmed Tranche 1 and 2 released. Tranche 3 and match still to be tested. Tranche 1 released. Tranche 2 and 3 and match still to be tested. Issue date 2010 2011 2012 2013 2014 2015 2016 Performance and match conditions Nedbank (2005) Employee Share Scheme: – Voluntary Bonus Share Scheme 01/04/2010 01/04/2011 01/04/2012 01/04/2013 ROE – Return on equity (excluding goodwill). COE – Cost of equity. For matching: ROE of Nedbank Group of greater than or equal to the COE (to be determined annually) +2% over three financial years. Match only applies to shares held in the plan for 36 months. Outcome 0,5:1 match 1:1 match Too soon to assess Too soon to assess 151 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenreporting back on remuneration (CONTINUED) vesting of share awards in 2014 Nedbank Group issued restricted shares in March 2011, with vesting thereof linked in equal proportions to a combination of time and the group’s meeting certain performance conditions. In respect of the time-based awards vesting took place at 100% and in respect of the performance-condition-based awards vesting took place at 85,9% of the award. The same vesting arrangements applied in respect of the awards issued to all employees who participate in the scheme. Where necessary, in the case of executive directors and the Company Secretary, the necessary Securities Exchange News Service (SENS) announcements were in this regard. issued at the prescribed times Nedbank Eyethu employee schemes We implemented our black economic empowerment staff schemes in August 2005. The following employee schemes were approved at that time: Scheme name Black Executive Trust Black Management Scheme Evergreen Trust1 Broad-based Scheme new awards during 2013 7 0 1 123 qualifying employees received vouchers to assist with school uniform purchases (2012: 6) Fully vested on 27 July 2010 total beneficiaries at 31 December 2013 53 (2012:60) 1 038 (2012: 1 366) Once-off awards are made 1 The Evergreen Trust was created with the specific purpose of improving the living standards and personal circumstances of black permanent employees at the lower-income levels by providing grants and/or benefits to qualifying employees. Share and share option allocations are made to new and internally appointed employees, in accordance with the scheme rules and the respective trust deeds. Rest of Africa empowerment schemes No allocations were made under the Nedbank Swaziland Sinakekelwe Employee Share Scheme and the Nedbank Namibia Ofifiya Black Management Scheme in 2013. Empowerment or ‘indiginisation’ schemes were approved during 2013 for the group’s subsidiaries in Lesotho, Malawi and Zimbabwe. These are currently in the process of being implemented. Collective bargaining regarding remuneration increases Certain categories of employees in SA are covered under collective bargaining agreements with Sasbo: The Finance Union and the Insurance and Banking Staff Association (IBSA). At 31 December 2013 a total of 69% of our employees constituted the bargaining unit. In April 2013 the bargaining unit guaranteed- remuneration bill was increased by 8% and non-bargaining unit and executive guaranteed remuneration bill by approximately 5,5% and 5% respectively. The minimum GP for all SA entities was increased by 14,6% to R110 000 per annum. Collective-bargaining arrangements also exist in our Rest of Africa subsidiaries in Lesotho, Namibia, Swaziland and Zimbabwe. Care is taken in respect of these that salary increase settlements are appropriate within the context of local market and economic conditions. eXecutiVe DiRectoRS anD pReScRibeD oFFiceRS Prescribed officers income- The managing executives of the four frontline, generating clusters are included in the disclosures set out below. The board has approved the executives to be regarded as prescribed officers. Increase in guaranteed package The remuneration for the CE, executive directors and prescribed officers were adjusted with effect from 1 April 2013. Increases for executive directors and prescribed officers took into account market benchmarks, performance and remuneration levels relative to those of peers. There was also appropriate consideration of calls for restraint in regard to remuneration. The GPs of the CE and other executive directors were considered and recommended to the board by Group Remco, with a further approval by Old Mutual plc for the CE. 152 NedbaNk Group | Integrated report 2013The following adjustments to GP were approved by Group Remco for implementation on 1 April 2014: Guaranteed package1 Yoy movement New GP effective April 2014 (R000) 7 200 5 000 3 900 4 650 4 000 3 750 3 750 gp at april 2013 (R000) GP at April 2012 (R000) 2013–2014 % change 2012–2013 % change 6 600 4 435 3 570 4 200 3 780 3 300 3 500 6 330 4 225 3 400 4 000 3 600 3 000 3 325 9,1 12,7 9,2 10,7 5,8 13,6 7,1 4,3 5,0 5,0 5,0 5,0 10,0 5,3 MWT Brown GW Dempster RK Morathi IG Johnson B Kennedy D Macready MC Nkhulu 1 Audited. The above proposals were informed by an extensive role evaluation and remuneration benchmarking exercise conducted with GRS/Mercer SA in respect of each individual executive director and prescribed officer. Retirement schemes All executive directors and prescribed officers are members of the Nedgroup Defined-contribution Pension or Provident Fund. There are no defined-benefit liabilities in respect of the executive directors and prescribed officers. Contributions to the retirement funds form part of the GP. Service contracts Service contracts of executive directors and prescribed officers are aligned with the general conditions of service applicable to all group employees based in SA, except for specific provisions relating to notice periods. Service contracts are subject to the following notice and retirement conditions: Notice period Retirement age Chief Executive Executive directors Prescribed officers 12 months Six months One to three months 60 60 60 Termination arrangements Executive directors and prescribed officers are entitled to severance pay equal to two weeks’ GP per completed year of service if their services are terminated by the company on a no- fault basis. Contractual notice (where applicable) and accrued leave will also be paid out in the normal course. Treatment of any unpaid bonus, unvested deferrals or unvested LTI awards will be dealt with in accordance with the rules of the various schemes, and will in all instances be subject to Group Remco and board oversight and approval. There are no special termination arrangements or golden- parachute agreements in place. Short-term incentive scheme targets STI amounts awarded for 2013 to all executive directors and prescribed officers were based on a combination of performance against preagreed targets in respect of the level of group and respective cluster EP, headline earnings and performance against their individual performance scorecards, incorporating financial and non-financial measures. 153 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPen reporting back on remuneration (CONTINUED) The dimensions used to measure individual performance were: Theme Financial and business Client and relationships Management and internal processes Organisational learning, leadership and transformation Broad objectives linkage to strategic focus areas Delivering sustainable financial outperformance. Investing for growth by expanding into the entry-level and middle markets, the public sector and business banking, and implementing the rest of Africa strategy; improving our client relations by empowering our clients through delivery of affordable banking; and leading as a corporate citizen. Enhancing productivity and execution; managing risk as an enabler; growing regulatory and government relationships; and growing stakeholder relations. Accelerating transformation in support of achieving our transformation targets, objectives and behaviours; and building an innovative and differentiated culture and becoming an employer of choice by creating a great place to work. Manage for value Client-centred Green and caring bank Risk as an enabler Productivity and execution Leading transformation Unique and innovative culture These are broadly consistent with the dimensions applied in 2012, except that certain metrics will have been updated to include the evolving group strategy. The following table presents the way in which the STI awards have been determined, based on the assessment of the group and respective cluster headline earnings and EP performance as well as the performance of each executive director and prescribed officer against his or her agreed individual performance scorecard: % of GP achieved for group and cluster financial measures % of GP achieved for individual perfor- mance and discretion B 183 183 183 169 319 199 194 C 14 18 10 10 25 13 20 Final STI as % of on target STI E=D/A 131 134 129 119 138 141 143 Final STI as % of GP D=B+C 197 201 193 179 344 212 214 Ontarget STI % of GP Maximum target STI % of GP A 150 150 150 150 250 150 150 250 250 250 250 400 250 250 executive directors MWT Brown GW Dempster RK Morathi prescribed officers IG Johnson B Kennedy D Macready MC Nkuhlu (Rounded) Minimum shareholding requirements In November 2012 Group Remco approved a minimum shareholding policy, which will apply to all current and future members of Group Exco, including executive directors and prescribed officers. In terms of these arrangements the following minimum shareholding levels must be reached within five years from the date of the March 2013 LTI awards or five years from the date of appointment to Group Exco, if later: 154 NedbaNk Group | Integrated report 2013 Chief Executive Executive directors and prescribed officers Other members of Group Exco 2 times guaranteed package 1,5 times guaranteed package 1 times guaranteed package As previously reported, the CE has already reached the required two times GP holding level in 2012, and has maintained compliance with the requirements. totaL RemuneRation oF eXecutiVe DiRectoRS anD pReScRibeD oFFiceRS (auDiteD*) MwT Brown Gw Dempster RK Morathi Executive directors R000 Cash portion of package Other benefits Defined contribution retirement fund guaranteed remuneration 2013* 5 614 118 800 6 532 Cash performance incentive 7 000 Deferred performance incentive (delivered in shares) 6 000 total Sti1 total remuneration2 13 000 19 532 2012 5 376 106 765 6 247 6 250 5 250 11 500 17 747 Value of share-based awards (face value at award)5 total direct remuneration3 13 000 32 532 11 000 28 747 other payments4 % 2013* 3 521 129 732 4 382 4 950 3 950 8 900 13 282 8 250 21 532 4,6 13,0 10,1 18,2 13,2 2012 3 420 121 627 4 168 4 400 3 400 7 800 11 968 7 000 18 968 21 % 2013* 2012 2 647 282 409 3 338 3 500 2 500 6 000 9 338 2 953 142 432 3 527 3 950 2 950 6 900 10 427 7 000 17 427 6 000 15 338 5,1 14,1 11,0 17,9 13,5 % 5,7 15,0 11,7 16,7 13,6 % % % % B Kennedy 2012 IG Johnson 2012 MC Nkuhlu 2012 D Macready 2012 6,4 261 625 587 248 485 444 3 735 2013* 2013* 2013* 2013* 3 381 93 2 931 102 2 573 166 3 255 58 2 358 148 2 789 90 3 462 63 2 790 512 4 150 3 900 Prescribed officers R000 Cash portion of package Other benefits Defined contribution retirement fund guaranteed remuneration Cash performance incentive Deferred performance incentive (delivered in shares) total Sti1 total remuneration2 Value of share-based awards (face value at award)5 total direct remuneration3 other payments4 1 In terms of the rules of the Matched Share Scheme, this amount may increase by up to 30% (before share price movement), subject to fulfilment of the CPT, and subject to continued 6 000 4 900 0,0 13 000 10 800 2,2 16 735 14 350 3 250 3 250 7 500 7 500 11 650 11 400 2 500 3 250 7 500 6 000 9 281 16,6 16 974 14 450 1 3 000 20,4 7 000 16,6 10 224 27,3 21,0 10 956 2 250 5 500 8 450 25,0 7 000 6 000 11,6 23 735 20 350 10 000 8 000 21 650 19 400 7 000 5 900 6 750 6 000 17,5 19 456 25,0 18,0 4 000 16 781 8 500 7 500 3 500 4 250 4 250 4 250 2 950 3 250 3 550 3 456 3 224 3 281 402 423 15,9 16,7 12,5 13,3 5,2 9,3 5,3 investment of the amount in the scheme for 36 months. 2 Total remuneration is the sum of guaranteed remuneration and total STI. 3 Total direct remuneration is the sum of total remuneration and the value of share-based awards made. 4 Other payments are typically non-recurring payments and include leave pay and special payments, but exclude gains from vesting share awards, which are set out in the table on pages 156 to 163 of this Remuneration Report. 5 Awards listed under 2013 were granted in March 2014, and apply in respect of the 2014–2016 financial years. Awards listed under 2012 were granted in March 2013, and apply in respect of the 2013 – 2015 financial years. 155 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenreporting back on reMuneration (CONTINUED) SHARE-BASED PAYMENTS TO EXECUTIVE DIRECTORS AND PRESCRIBED OFFICERS (AUDITED) Payments from prior years’ deferred bonus, LTIs and outstanding share plan awards, including participation in the group’s empowerment arrangements: Opening balance at 1 January 2013 Awards made during 2013 Awards vesting/lapsing during 2013 Number of Number of restricted restricted shares/ options released shares/ options lapsed Market price at vesting (R) Vesting/ Exercise date Value gained on vesting (R) Notional value of loss on lapsing(5) (R) 30 655 43 360 12 705 194,55 2013/03/03 5 963 930 (2 471 758) 194,55 2013/03/04 8 435 688 Number of restricted shares/ options Date of issue/ inception Issue price (R) Vesting date Number of restricted shares/ options Date of issue/ inception Issue price (R) Final vesting/ exercise date 43 360 2010/03/02 43 3602 2010/03/03 23 357 2011/03/07 23 3572 2011/03/08 32 431 2012/03/07 32 4312 2012/03/08 121,08 2013/03/03 121,08 2013/03/04 128,44 2014/03/08 128,44 2014/03/09 161,88 2015/03/08 161,88 2015/03/09 4 895 2010/03/31 10 584 2011/03/31 15 192 2012/03/31 137,88 2013/04/01 141,72 2014/04/01 171,79 2015/04/01 Own shares 2010/03/31 2011/03/31 Own shares Own shares 2012/03/31 137,88 2013/04/01 141,72 2014/04/01 171,79 2015/04/01 20 647 2010/03/02 20 6472 2010/03/03 15 571 2011/03/07 15 5712 2011/03/08 27 798 2012/03/07 27 7982 2012/03/08 121,08 2013/03/03 121,08 2013/03/04 128,44 2014/03/08 128,44 2014/03/09 161,88 2015/03/08 161,88 2015/03/09 4 351 2010/03/31 5 292 2011/03/31 10 477 2012/03/31 2013/04/01 137,88 141,72 2014/04/01 171,79 2015/04/01 Own shares 2010/03/31 Own shares 2011/03/31 Own shares 2012/03/31 137,88 2013/04/01 141,72 2014/04/01 171,79 2015/04/01 28 962 2013/03/07 189,90 2016/03/08 28 9622 2013/03/08 189,90 2016/03/09 2 4483 2013/04/01 193,49 2013/04/01 7 343 193,49 2013/04/01 1 420 797 16 099 2013/03/31 195,66 2016/04/01 2 1763 2013/04/01 193,49 2013/04/01 2 176 193,49 2013/04/01 421 034 Own shares 2013/03/31 195,66 2016/04/01 16 241 449 (2 471 758) 1 715 395 1 715 395 14 597 20 647 6 050 194,55 2013/03/03 2 839 846 (1 177 028) 194,55 2013/03/04 4 016 874 18 430 2013/03/07 18 4302 2013/03/08 189,90 2016/03/08 189,90 2016/03/09 2 1763 2013/04/01 193,49 2013/04/01 6 527 193,49 2013/04/01 1 262 909 10 426 2013/03/31 195,66 2016/04/01 1 3613 2013/04/01 193,49 2013/04/01 1 361 193,49 2013/04/01 263 340 Own shares 2013/03/31 195,66 2016/04/01 8 382 969 (1 177 028) 1 219 266 1 219 266 Executive directors MWT Brown Nedbank restricted shares Compulsory Bonus Share Scheme1 Voluntary Bonus Share Scheme4 Total value of dividends Total GW Dempster Nedbank restricted shares Compulsory Bonus Share Scheme1 Voluntary Bonus Share Scheme4 Total value of dividends Total 156 Dividends Total value dividends respect of all plans(7) (R) of Number paid in restrict- of ed shares/ options Closing balance at 31 December 2013 End of perfor- mance period Final vesting/ exercise date 23 357 23 357 32 431 32 431 2013/12/31 2014/03/08 2013/12/31 2014/03/09 2014/12/31 2015/03/08 2014/12/31 2015/03/09 28 962 2015/12/31 2016/03/08 28 962 2015/12/31 2016/03/09 10 584 2013/12/31 2014/04/01 15 192 2014/12/31 2015/04/01 16 099 2015/12/31 2016/04/01 15 571 15 571 27 798 27 798 18 430 18 430 2013/12/31 2014/03/08 2013/12/31 2014/03/09 2014/12/31 2015/03/08 2014/12/31 2015/03/09 2015/12/31 2016/03/08 2015/12/31 2016/03/09 5 292 2013/12/31 2014/04/01 10 477 10 426 2014/12/31 2015/04/01 2015/12/31 2016/04/01 NedbaNk Group | Integrated report 2013SHARE-BASED PAYMENTS TO EXECUTIVE DIRECTORS AND PRESCRIBED OFFICERS (AUDITED) Payments from prior years’ deferred bonus, LTIs and outstanding share plan awards, including participation in the group’s empowerment arrangements: Opening balance at 1 January 2013 Awards made during 2013 Awards vesting/lapsing during 2013 Number of restricted shares/ options released Number of restricted shares/ options lapsed Market price at vesting (R) Vesting/ Exercise date Value gained on vesting (R) Notional value of loss on lapsing(5) (R) 30 655 43 360 12 705 194,55 2013/03/03 194,55 2013/03/04 5 963 930 8 435 688 (2 471 758) 4 895 2010/03/31 137,88 2013/04/01 2 4483 2013/04/01 193,49 2013/04/01 7 343 193,49 2013/04/01 1 420 797 Own shares 2010/03/31 137,88 2013/04/01 2 1763 2013/04/01 193,49 2013/04/01 2 176 193,49 2013/04/01 421 034 Dividends Total value of dividends paid in respect of all plans(7) (R) Number of restrict- ed shares/ options Closing balance at 31 December 2013 End of perfor- mance period Final vesting/ exercise date 23 357 23 357 32 431 32 431 28 962 2013/12/31 2014/03/08 2013/12/31 2014/03/09 2014/12/31 2015/03/08 2014/12/31 2015/03/09 2015/12/31 2016/03/08 28 962 2015/12/31 2016/03/09 10 584 15 192 16 099 2013/12/31 2014/04/01 2015/04/01 2014/12/31 2016/04/01 2015/12/31 16 241 449 (2 471 758) 1 715 395 1 715 395 14 597 20 647 6 050 194,55 2013/03/03 194,55 2013/03/04 2 839 846 4 016 874 (1 177 028) 4 351 2010/03/31 137,88 2013/04/01 2 1763 2013/04/01 193,49 2013/04/01 6 527 193,49 2013/04/01 1 262 909 18 430 2013/03/07 189,90 2016/03/08 18 4302 2013/03/08 189,90 2016/03/09 5 292 2011/03/31 141,72 2014/04/01 10 477 2012/03/31 171,79 2015/04/01 10 426 2013/03/31 195,66 2016/04/01 Own shares 2010/03/31 137,88 2013/04/01 1 3613 2013/04/01 193,49 2013/04/01 1 361 193,49 2013/04/01 263 340 Own shares 2011/03/31 141,72 2014/04/01 Own shares 2012/03/31 171,79 2015/04/01 Own shares 2013/03/31 195,66 2016/04/01 15 571 15 571 27 798 27 798 18 430 18 430 2013/12/31 2014/03/08 2013/12/31 2014/03/09 2014/12/31 2015/03/08 2014/12/31 2015/03/09 2015/12/31 2016/03/08 2015/12/31 2016/03/09 5 292 10 477 10 426 2013/12/31 2014/04/01 2015/04/01 2014/12/31 2016/04/01 2015/12/31 8 382 969 (1 177 028) 1 219 266 1 219 266 157 Number of restricted shares/ options Date of issue/ inception Issue price (R) Vesting date Number of restricted shares/ options Date of issue/ inception Issue price (R) Final vesting/ exercise date Executive directors MWT Brown Nedbank restricted shares 43 360 2010/03/02 121,08 2013/03/03 43 3602 2010/03/03 121,08 2013/03/04 23 357 2011/03/07 128,44 2014/03/08 23 3572 2011/03/08 128,44 2014/03/09 32 431 2012/03/07 161,88 2015/03/08 32 4312 2012/03/08 161,88 2015/03/09 28 962 2013/03/07 189,90 2016/03/08 28 9622 2013/03/08 189,90 2016/03/09 10 584 2011/03/31 141,72 2014/04/01 15 192 2012/03/31 171,79 2015/04/01 16 099 2013/03/31 195,66 2016/04/01 Own shares 2011/03/31 141,72 2014/04/01 Own shares 2012/03/31 171,79 2015/04/01 Own shares 2013/03/31 195,66 2016/04/01 Nedbank restricted shares 20 647 2010/03/02 121,08 2013/03/03 20 6472 2010/03/03 121,08 2013/03/04 15 571 2011/03/07 128,44 2014/03/08 15 5712 2011/03/08 128,44 2014/03/09 27 798 2012/03/07 161,88 2015/03/08 27 7982 2012/03/08 161,88 2015/03/09 Compulsory Bonus Share Scheme1 Voluntary Bonus Share Scheme4 Total value of dividends Total GW Dempster Compulsory Bonus Share Scheme1 Voluntary Bonus Share Scheme4 Total value of dividends Total ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPen Number of Number of restricted restricted shares/ options released shares/ options lapsed Market price at vesting (R) Vesting/ Exercise date Value gained on vesting (R) Notional value of loss on lapsing(5) (R) 25 265 35 736 10 471 194,55 2013/03/03 4 915 306 (2 037 133) 194,55 2013/03/04 6 952 439 Dividends Total value dividends respect of all plans(7) (R) of Number paid in restrict- of ed shares/ options Closing balance at 31 December 2013 End of perfor- mance period Final vesting/ exercise date 15 571 15 571 13 899 13 899 15 797 15 797 2013/12/31 2014/03/08 2013/12/31 2014/03/09 2014/12/31 2015/03/08 2014/12/31 2015/03/09 2015/12/31 2016/03/08 2015/12/31 2016/03/09 3 175 6 636 7 666 2013/12/31 2014/04/01 2014/12/31 2015/04/01 2015/12/31 2016/04/01 6 600 6 600 6 800 19 800 19 800 20 400 2014/03/04 2015/03/04 2016/03/04 2014/03/04 2015/03/04 2016/03/04 12 078 262 (2 037 133) 1 026 648 1 026 648 reporting back on reMuneration (CONTINUED) Opening balance at 1 January 2013 Awards made during 2013 Awards vesting/lapsing during 2013 Number of restricted shares/ options Date of issue/ inception Issue price (R) Vesting date Number of restricted shares/ options Date of issue/ inception Issue price (R) Final vesting/ exercise date 35 736 2010/03/02 35 7362 2010/03/03 15 571 2011/03/07 15 5712 2011/03/08 13 899 2012/03/07 13 8992 2012/03/08 121,08 2013/03/03 121,08 2013/03/04 128,44 2014/03/08 128,44 2014/03/09 161,88 2015/03/08 161,88 2015/03/09 3 175 2011/03/31 6 636 2012/03/31 141,72 2014/04/01 171,79 2015/04/01 Own shares 2010/03/31 2011/03/31 Own shares Own shares 2012/03/31 137,88 2013/04/01 141,72 2014/04/01 171,79 2015/04/01 6 600 2010/03/03 6 600 2010/03/03 6 800 2010/03/03 19 800 2010/03/03 19 800 2010/03/03 20 400 2010/03/03 121,08 2014/03/04 121,08 2015/03/04 121,08 2016/03/04 121,08 2014/03/04 121,08 2015/03/04 121,08 2016/03/04 2013/03/07 15 797 15 7972 2013/03/08 189,90 2016/03/08 189,90 2016/03/09 7 666 2013/03/31 195,66 2016/04/01 1 0883 2013/04/01 193,49 2013/04/01 1 088 193,49 2013/04/01 210 517 Own shares 2013/03/31 195,66 2016/04/01 Executive directors RK Morathi Nedbank restricted shares Compulsory Bonus Share Scheme1 Voluntary Bonus Share Scheme4 Eyethu restricted shares Eyethu restricted options6 Total value of dividends Total 158 NedbaNk Group | Integrated report 2013 35 7362 2010/03/03 121,08 2013/03/04 15 571 2011/03/07 128,44 2014/03/08 15 5712 2011/03/08 128,44 2014/03/09 13 899 2012/03/07 161,88 2015/03/08 13 8992 2012/03/08 161,88 2015/03/09 3 175 2011/03/31 141,72 2014/04/01 6 636 2012/03/31 171,79 2015/04/01 Compulsory Bonus Share Scheme1 Voluntary Bonus Share Scheme4 Own shares 2011/03/31 141,72 2014/04/01 Own shares 2012/03/31 171,79 2015/04/01 Eyethu restricted shares 6 600 2010/03/03 121,08 2014/03/04 Eyethu restricted options6 19 800 2010/03/03 121,08 2014/03/04 6 600 2010/03/03 121,08 2015/03/04 6 800 2010/03/03 121,08 2016/03/04 19 800 2010/03/03 121,08 2015/03/04 20 400 2010/03/03 121,08 2016/03/04 Total value of dividends Total 15 797 2013/03/07 189,90 2016/03/08 15 7972 2013/03/08 189,90 2016/03/09 7 666 2013/03/31 195,66 2016/04/01 Own shares 2013/03/31 195,66 2016/04/01 Opening balance at 1 January 2013 Awards made during 2013 Awards vesting/lapsing during 2013 Number of restricted shares/ options Date of issue/ inception Issue price (R) Vesting date Number of restricted shares/ options Date of issue/ inception Issue price (R) Final vesting/ exercise date Executive directors RK Morathi Nedbank restricted shares 35 736 2010/03/02 121,08 2013/03/03 Number of restricted shares/ options released Number of restricted shares/ options lapsed Market price at vesting (R) Vesting/ Exercise date Value gained on vesting (R) Notional value of loss on lapsing(5) (R) 25 265 35 736 10 471 194,55 2013/03/03 194,55 2013/03/04 4 915 306 6 952 439 (2 037 133) Own shares 2010/03/31 137,88 2013/04/01 1 0883 2013/04/01 193,49 2013/04/01 1 088 193,49 2013/04/01 210 517 Dividends Total value of dividends paid in respect of all plans(7) (R) Number of restrict- ed shares/ options Closing balance at 31 December 2013 End of perfor- mance period Final vesting/ exercise date 15 571 15 571 13 899 13 899 15 797 15 797 2013/12/31 2014/03/08 2013/12/31 2014/03/09 2014/12/31 2015/03/08 2014/12/31 2015/03/09 2015/12/31 2016/03/08 2015/12/31 2016/03/09 3 175 6 636 7 666 2013/12/31 2014/04/01 2015/04/01 2014/12/31 2016/04/01 2015/12/31 6 600 6 600 6 800 19 800 19 800 20 400 2014/03/04 2015/03/04 2016/03/04 2014/03/04 2015/03/04 2016/03/04 12 078 262 (2 037 133) 1 026 648 1 026 648 159 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPen Number of Number of restricted restricted shares/ options released shares/ options lapsed Market price at vesting (R) Vesting/ Exercise date Value gained on vesting (R) Notional value of loss on lapsing(5) (R) 17 517 24 777 7 260 194,55 2013/03/03 3 407 932 (1 412 433) 194,55 2013/03/04 4 820 365 Dividends Total value dividends respect of all plans(7) (R) of Number paid in restrict- of ed shares/ options Closing balance at 31 December 2013 End of perfor- mance period Final vesting/ exercise date reporting back on reMuneration (CONTINUED) Opening balance at 1 January 2013 Awards made during 2013 Awards vesting/lapsing during 2013 Prescribed officers IG Johnson Nedbank restricted shares Compulsory Bonus Share Scheme1 Voluntary Bonus Share Scheme4 Total value of dividends Total B Kennedy Nedbank restricted shares Number of restricted shares/ options Date of issue/ inception Issue price (R) Vesting date Number of restricted shares/ options Date of issue/ inception Issue price (R) Final vesting/ exercise date 24 777 2010/03/02 24 7772 2010/03/03 2011/03/07 19 464 19 4642 2011/03/08 24 709 2012/03/07 24 7092 2012/03/08 121,08 2013/03/03 121,08 2013/03/04 128,44 2014/03/08 128,44 2014/03/09 161,88 2015/03/08 161,88 2015/03/09 3 807 2010/03/31 2011/03/31 5 292 10 477 2012/03/31 137,88 2013/04/01 141,72 2014/04/01 171,79 2015/04/01 2013/03/07 21 063 21 0632 2013/03/08 189,90 2016/03/08 189,90 2016/03/09 1 9043 2013/04/01 193,49 2013/04/01 5 711 193,49 2013/04/01 1 105 021 Own shares 2011/03/31 141,72 2014/04/01 Own shares 2013/03/31 195,66 2016/04/01 9 966 2013/03/31 195,66 2016/04/01 24 777 2010/03/02 24 7772 2010/03/03 15 571 2011/03/07 15 5712 2011/03/08 18 532 2012/03/07 18 5322 2012/03/08 121,08 2013/03/03 121,08 2013/03/04 128,44 2014/03/08 128,44 2014/03/09 161,88 2015/03/08 161,88 2015/03/09 Compulsory Bonus Share Scheme1 4 786 2010/03/31 4 022 2011/03/31 6 548 2012/03/31 137,88 2013/04/01 141,72 2014/04/01 171,79 2015/04/01 Voluntary Bonus Share Scheme4 Own shares 2011/03/31 Own shares 2012/03/31 141,72 2014/04/01 171,79 2015/04/01 Total value of dividends Total 15 797 2013/03/07 15 7972 2013/03/08 2 3933 2013/04/01 189,90 2016/03/08 189,90 2016/03/09 2013/04/01 193,49 15 026 2013/03/31 195,66 2016/04/01 Own shares 2013/03/31 195,66 2016/04/01 160 19 464 19 464 24 709 24 709 21 063 21 063 2013/12/31 2014/03/08 2013/12/31 2014/03/09 2014/12/31 2015/03/08 2014/12/31 2015/03/09 2015/12/31 2016/03/08 2015/12/31 2016/03/09 5 292 2013/12/31 2014/04/01 10 477 2014/12/31 2015/04/01 9 966 2015/12/31 2016/04/01 15 571 15 571 18 532 18 532 15 797 15 797 2013/12/31 2014/03/08 2013/12/31 2014/03/09 2014/12/31 2015/03/08 2014/12/31 2015/03/09 2015/12/31 2016/03/08 2015/12/31 2016/03/09 4 022 6 548 2013/12/31 2014/04/01 2014/12/31 2015/04/01 15 026 2015/12/31 2016/04/01 9 333 318 (1 412 433) 1 268 465 1 268 465 17 517 24 777 7 260 194,55 2013/03/03 3 407 932 (1 412 433) 194,55 2013/03/04 4 820 365 7 179 193,49 2013/04/01 1 389 065 9 617 362 (1 412 433) 1 025 364 1 025 364 NedbaNk Group | Integrated report 2013Number of restricted shares/ options Date of issue/ inception Issue price (R) Vesting date Number of restricted shares/ options Date of issue/ inception Issue price (R) Final vesting/ exercise date Prescribed officers IG Johnson Nedbank restricted shares 24 777 2010/03/02 121,08 2013/03/03 24 7772 2010/03/03 121,08 2013/03/04 19 464 2011/03/07 128,44 2014/03/08 19 4642 2011/03/08 128,44 2014/03/09 24 709 2012/03/07 161,88 2015/03/08 24 7092 2012/03/08 161,88 2015/03/09 21 063 2013/03/07 189,90 2016/03/08 21 0632 2013/03/08 189,90 2016/03/09 5 292 2011/03/31 141,72 2014/04/01 10 477 2012/03/31 171,79 2015/04/01 Own shares 2011/03/31 141,72 2014/04/01 Own shares 2013/03/31 195,66 2016/04/01 9 966 2013/03/31 195,66 2016/04/01 Compulsory Bonus Share Scheme1 Voluntary Bonus Share Scheme4 Total value of dividends Total B Kennedy Nedbank restricted shares 24 777 2010/03/02 121,08 2013/03/03 24 7772 2010/03/03 121,08 2013/03/04 15 571 2011/03/07 128,44 2014/03/08 15 5712 2011/03/08 128,44 2014/03/09 18 532 2012/03/07 161,88 2015/03/08 18 5322 2012/03/08 161,88 2015/03/09 Scheme1 4 022 2011/03/31 141,72 2014/04/01 6 548 2012/03/31 171,79 2015/04/01 Voluntary Bonus Share Own shares 2011/03/31 141,72 2014/04/01 Scheme4 Own shares 2012/03/31 171,79 2015/04/01 Total value of dividends Total 15 797 2013/03/07 189,90 2016/03/08 15 7972 2013/03/08 189,90 2016/03/09 15 026 2013/03/31 195,66 2016/04/01 Own shares 2013/03/31 195,66 2016/04/01 Opening balance at 1 January 2013 Awards made during 2013 Awards vesting/lapsing during 2013 Number of restricted shares/ options released Number of restricted shares/ options lapsed Market price at vesting (R) Vesting/ Exercise date Value gained on vesting (R) 17 517 24 777 7 260 194,55 2013/03/03 194,55 2013/03/04 3 407 932 4 820 365 Notional value of loss on lapsing(5) (R) (1 412 433) Dividends Total value of dividends paid in respect of all plans(7) (R) Number of restrict- ed shares/ options Closing balance at 31 December 2013 End of perfor- mance period Final vesting/ exercise date 3 807 2010/03/31 137,88 2013/04/01 1 9043 2013/04/01 193,49 2013/04/01 5 711 193,49 2013/04/01 1 105 021 9 333 318 (1 412 433) 1 268 465 1 268 465 17 517 24 777 7 260 194,55 2013/03/03 194,55 2013/03/04 3 407 932 4 820 365 (1 412 433) Compulsory Bonus Share 4 786 2010/03/31 137,88 2013/04/01 2 3933 2013/04/01 193,49 2013/04/01 7 179 193,49 2013/04/01 1 389 065 9 617 362 (1 412 433) 1 025 364 1 025 364 19 464 19 464 24 709 24 709 21 063 21 063 2013/12/31 2014/03/08 2013/12/31 2014/03/09 2014/12/31 2015/03/08 2014/12/31 2015/03/09 2015/12/31 2016/03/08 2015/12/31 2016/03/09 5 292 10 477 9 966 2013/12/31 2014/04/01 2015/04/01 2014/12/31 2016/04/01 2015/12/31 15 571 15 571 18 532 18 532 15 797 15 797 2013/12/31 2014/03/08 2013/12/31 2014/03/09 2014/12/31 2015/03/08 2014/12/31 2015/03/09 2015/12/31 2016/03/08 2015/12/31 2016/03/09 4 022 6 548 15 026 2013/12/31 2014/04/01 2015/04/01 2014/12/31 2016/04/01 2015/12/31 161 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenreporting back on reMuneration (CONTINUED) Opening balance at 1 January 2013 Awards made during 2013 Awards vesting/lapsing during 2013 Prescribed officers D Macready Nedbank restricted shares Compulsory Bonus Share Scheme1 Voluntary Bonus Share Scheme4 Total value of dividends Total MC Nkuhlu Nedbank restricted shares Compulsory Bonus Share Scheme1 Voluntary Bonus Share Scheme4 Eyethu restricted shares Eyethu restricted options6 Number of restricted shares/ options Date of issue/ inception Issue price (R) Vesting date Number of restricted shares/ options Date of issue/ inception Issue price (R) Final vesting/ exercise date 16 518 2010/03/02 16 5182 2010/03/03 15 571 2011/03/07 15 5712 2011/03/08 15 443 2012/03/07 15 4432 2012/03/08 121,08 2013/03/03 121,08 2013/03/04 128,44 2014/03/08 128,44 2014/03/09 161,88 2015/03/08 161,88 2015/03/09 1 218 2010/03/31 3 704 2011/03/31 6 548 2012/03/31 137,88 2013/04/01 141,72 2014/04/01 171,79 2015/04/01 24 777 2010/03/02 24 7772 2010/03/03 19 464 2011/03/07 19 4642 2011/03/08 15 443 2012/03/07 15 4432 2012/03/08 121,08 2013/03/03 121,08 2013/03/04 128,44 2014/03/08 128,44 2014/03/09 161,88 2015/03/08 161,88 2015/03/09 1 269 2010/03/31 6 985 2012/03/31 2013/04/01 137,88 171,79 2015/04/01 3 960 2009/03/03 3 960 2009/03/03 4 080 2009/03/03 11 880 2009/03/03 11 880 2009/03/03 12 240 2009/03/03 75,74 2013/03/04 75,74 2014/03/04 75,74 2015/03/04 75,74 2013/03/04 75,74 2014/03/04 75,74 2015/03/04 15 797 2013/03/07 15 7972 2013/03/08 189,90 2016/03/08 189,90 2016/03/09 6093 2013/04/01 193,49 2013/04/01 1 827 193,49 2013/04/01 353 506 6 899 2013/03/31 195,66 2016/04/01 Own shares 2013/03/31 195,66 2016/04/01 19 747 2013/03/07 19 7472 2013/03/08 189,90 2016/03/08 189,90 2016/03/09 6353 2013/04/01 193,49 2013/04/01 7 666 2013/03/31 195,66 2016/04/01 Own shares 2013/03/31 195,66 2016/04/01 Number of Number of restricted restricted shares/ options released shares/ options lapsed Market price at vesting (R) Vesting/ Exercise date Value gained on vesting (R) 11 678 16 518 4 840 194,55 2013/03/03 194,55 2013/03/04 2 271 955 3 213 577 Notional value of loss on lapsing(5) (R) (941 622) Dividends Total value dividends respect of all plans(7) (R) of Number paid in restrict- of ed shares/ options Closing balance at 31 December 2013 End of perfor- mance period Final vesting/ exercise date 15 571 15 571 15 443 15 443 15 797 15 797 2013/12/31 2014/03/08 2013/12/31 2014/03/09 2014/12/31 2015/03/08 2014/12/31 2015/03/09 2015/12/31 2016/03/08 2015/12/31 2016/03/09 3 704 6 548 6 899 2013/12/31 2014/04/01 2014/12/31 2015/04/01 2015/12/31 2016/04/01 19 464 19 464 15 443 15 443 19 747 19 747 2013/12/31 2014/03/08 2013/12/31 2014/03/09 2014/12/31 2015/03/08 2014/12/31 2015/03/09 2015/12/31 2016/03/08 2015/12/31 2016/03/09 2 328 7 666 2014/12/31 2015/04/01 2015/12/31 2016/04/01 3 960 4 080 11 880 12 240 2014/03/04 2015/03/04 2014/03/04 2015/03/04 5 839 038 (941 622) 893 417 893 417 17 517 24 777 7 260 194,55 2013/03/03 194,55 2013/03/04 3 407 932 4 820 365 (1 412 433) 1 904 2 3288 2 3288 193,49 2013/04/01 184,00 2013/08/08 217,00 2013/10/31 368 405 428 352 505 176 3 960 194,55 2013/03/04 770 418 11 880 192,43 2013/03/04 1 386 2449 11 686 892 (1 412 433) 1 054 781 1 054 781 Matching on the Compulsory Bonus Share Scheme occurs only on shares in the scheme at the vesting date. If the CPT is met, 100% matching occurs, otherwise a 50% matching occurs. Restricted share awards with time-based vesting only. Total value of dividends Total 1 2 3 Match occurred at 0,5 shares for each share in the Compulsory Bonus Share Scheme and Voluntary Bonus Share Scheme, at the vesting date. 4 For the Voluntary Bonus Share Scheme employees invest their own Nedbank shares into the scheme. After three years, if the CPTs are met, a 100% matching occurs, otherwise a 50% matching occurs. 5 Value determined based on number of shares lapsing multiplied by the market share price on scheduled vesting date. 6 Eyethu restricted options have a life span of seven years from the date of issue. 7 Value of dividends excludes dividends paid in respect of the Voluntary Bonus Share Scheme, as these are the participants’ own shares. 8 Mr Nkuhlu elected to withdraw from the Matched Share Scheme following the release from forfeiture of the relevant award tranches. 9 The value gained in respect of the Eyethu restricted options is determined based on the difference between the exercise price (R192,43) and the issue price (R75,74). The former figure is rounded in the table above. 162 NedbaNk Group | Integrated report 2013Opening balance at 1 January 2013 Awards made during 2013 Awards vesting/lapsing during 2013 Number of restricted shares/ options released Number of restricted shares/ options lapsed Market price at vesting (R) Vesting/ Exercise date Value gained on vesting (R) 11 678 16 518 4 840 194,55 2013/03/03 194,55 2013/03/04 2 271 955 3 213 577 Notional value of loss on lapsing(5) (R) (941 622) Dividends Total value of dividends paid in respect of all plans(7) (R) Number of restrict- ed shares/ options Closing balance at 31 December 2013 End of perfor- mance period Final vesting/ exercise date 1 218 2010/03/31 137,88 2013/04/01 6093 2013/04/01 193,49 2013/04/01 1 827 193,49 2013/04/01 353 506 5 839 038 (941 622) 893 417 893 417 17 517 24 777 7 260 194,55 2013/03/03 194,55 2013/03/04 3 407 932 4 820 365 (1 412 433) 1 904 2 3288 2 3288 2013/04/01 193,49 184,00 2013/08/08 2013/10/31 217,00 368 405 428 352 505 176 Eyethu restricted shares 3 960 2009/03/03 75,74 2013/03/04 3 960 194,55 2013/03/04 770 418 Eyethu restricted options6 11 880 2009/03/03 75,74 2013/03/04 11 880 192,43 2013/03/04 1 386 2449 11 686 892 (1 412 433) 1 054 781 1 054 781 15 571 15 571 15 443 15 443 15 797 15 797 2013/12/31 2014/03/08 2013/12/31 2014/03/09 2014/12/31 2015/03/08 2014/12/31 2015/03/09 2015/12/31 2016/03/08 2015/12/31 2016/03/09 3 704 6 548 6 899 2013/12/31 2014/04/01 2015/04/01 2014/12/31 2016/04/01 2015/12/31 19 464 19 464 15 443 15 443 19 747 19 747 2013/12/31 2014/03/08 2013/12/31 2014/03/09 2014/12/31 2015/03/08 2014/12/31 2015/03/09 2015/12/31 2016/03/08 2015/12/31 2016/03/09 2 328 7 666 2014/12/31 2015/12/31 2015/04/01 2016/04/01 3 960 4 080 11 880 12 240 2014/03/04 2015/03/04 2014/03/04 2015/03/04 163 Number of restricted shares/ options Date of issue/ inception Issue price (R) Vesting date Number of restricted shares/ options Date of issue/ inception Issue price (R) Final vesting/ exercise date Prescribed officers D Macready Nedbank restricted shares 16 518 2010/03/02 121,08 2013/03/03 16 5182 2010/03/03 121,08 2013/03/04 15 571 2011/03/07 128,44 2014/03/08 15 5712 2011/03/08 128,44 2014/03/09 15 443 2012/03/07 161,88 2015/03/08 15 4432 2012/03/08 161,88 2015/03/09 3 704 2011/03/31 141,72 2014/04/01 6 548 2012/03/31 171,79 2015/04/01 15 797 2013/03/07 189,90 2016/03/08 15 7972 2013/03/08 189,90 2016/03/09 6 899 2013/03/31 195,66 2016/04/01 Own shares 2013/03/31 195,66 2016/04/01 Nedbank restricted shares 24 777 2010/03/02 121,08 2013/03/03 24 7772 2010/03/03 121,08 2013/03/04 19 464 2011/03/07 128,44 2014/03/08 19 4642 2011/03/08 128,44 2014/03/09 15 443 2012/03/07 161,88 2015/03/08 15 4432 2012/03/08 161,88 2015/03/09 19 747 2013/03/07 189,90 2016/03/08 19 7472 2013/03/08 189,90 2016/03/09 1 269 2010/03/31 137,88 2013/04/01 6353 2013/04/01 193,49 2013/04/01 6 985 2012/03/31 171,79 2015/04/01 7 666 2013/03/31 195,66 2016/04/01 Own shares 2013/03/31 195,66 2016/04/01 3 960 2009/03/03 75,74 2014/03/04 4 080 2009/03/03 75,74 2015/03/04 11 880 2009/03/03 75,74 2014/03/04 12 240 2009/03/03 75,74 2015/03/04 Compulsory Bonus Share Scheme1 Voluntary Bonus Share Scheme4 Total value of dividends Total MC Nkuhlu Compulsory Bonus Share Scheme1 Voluntary Bonus Share Scheme4 Total value of dividends Total 1 2 4 5 6 7 9 table above. Matching on the Compulsory Bonus Share Scheme occurs only on shares in the scheme at the vesting date. If the CPT is met, 100% matching occurs, otherwise a 50% matching occurs. Restricted share awards with time-based vesting only. 3 Match occurred at 0,5 shares for each share in the Compulsory Bonus Share Scheme and Voluntary Bonus Share Scheme, at the vesting date. For the Voluntary Bonus Share Scheme employees invest their own Nedbank shares into the scheme. After three years, if the CPTs are met, a 100% matching occurs, otherwise a 50% matching occurs. Value determined based on number of shares lapsing multiplied by the market share price on scheduled vesting date. Eyethu restricted options have a life span of seven years from the date of issue. Value of dividends excludes dividends paid in respect of the Voluntary Bonus Share Scheme, as these are the participants’ own shares. 8 Mr Nkuhlu elected to withdraw from the Matched Share Scheme following the release from forfeiture of the relevant award tranches. The value gained in respect of the Eyethu restricted options is determined based on the difference between the exercise price (R192,43) and the issue price (R75,74). The former figure is rounded in the ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenreporting back on reMuneration (CONTINUED) Deferred short-term incentive awards There are no outstanding DSTI awards in respect of current executive directors and prescribed officers, who are not eligible for these awards. Old Mutual long-term incentive proposal A core component of the strategy of Old Mutual plc is to enhance the effectiveness of its three businesses in Africa by increasing collaboration. Nedbank, Old Mutual Emerging Markets (OMEM) and Mutual & Federal (M&F) have made good strides in working together; however, the potential for further revenue enhancement, cost savings and capital efficiency remains. The Old Mutual plc board believes that further collaboration on revenue, cost and capital synergies should be supported and rewarded as it brings benefit to all three businesses. Therefore, Old Mutual plc has proposed to the Nedbank board to implement an LTI plan in Old Mutual plc shares (funded by Old Mutual plc) for senior executives in Nedbank, OMEM and M&F. The Old Mutual plc board believes a cohesively structured plan with appropriate measures and targets will ensure that performance in this area is rewarded. Nedbank’s board will evaluate the details of this proposal and its impact on existing and future Nedbank remuneration practices, and prior to any implementation, will consult with major shareholders. the GRCMC RISK AND REMUNERATION We have an integrated process of managing the relationship between risk and remuneration. There is cooperation between Group Remco and to ensure appropriate consideration of the overall risk environment when making remuneration decisions. Key matters related to risk aspects of remuneration are discussed with the GRCMC. This reflects our commitment to achieving a balance between the prudent management of remuneration within the context of both our risk appetite and risk profile, and the need to attract, retain and motivate key talent to enable the delivery of our strategic objectives. Taking account of future and current risks in the remuneration process The STI scheme has been designed to incentivise a combination of profitable returns, appropriate risk-taking and growth. It is driven from an EP and headline earnings basis, using risk-based economic capital allocation as set out in the Risk and Balance Sheet Review available online. We operate a comprehensive internal capital adequacy assessment process blueprint that addresses the nature and type of risk incorporated into the overall framework. The framework integrates with our STI pool arrangements and individual performance scorecard assessments, which in turn inform the distribution of STIs from the derived business STI pools. As in previous years, the STI pools incorporate ex ante or ‘before the fact’ risk adjustments. This is built into the pool allocation process, which is set out on the opposite page: ■ Group Remco approves an ontarget STI pool at the beginning of the year. At year-end the overall group pool is 50% based on performance versus headline earnings targets and 50% based on performance against EP targets, together with a non-financial modifier, as set out below. ■ Prior to distribution, the cluster pools may be adjusted (either up or down) by a maximum of 15% by using the relevant Group Exco member’s individual non-financial scorecard assessment, which itself incorporates further risk assessment metrics. ■ Altogether 50% of each cluster STI pool is determined by using performance versus headline earnings targets and 50% is based on performance versus EP targets (for line clusters there is a 30/70 split between group and cluster performance, except for Nedbank Capital, where the split is 15/85). ■ EP per cluster is determined by using economic capital allocated to each cluster, incorporating the various risk elements described in the Group Enterprisewide Risk Management Framework (ERMF). ■ These mechanical calculations and adjustments (which include the application, where appropriate, of a group-level non-financial modifier) are presented to Group Remco, which then ratifies a final set of cluster pools (the group bottomup cluster pools), which may not differ more than 10% from the total STI pool determined based on group EP and headline earnings alone (the group topdown pool). ■ The total allocated STIs (for all employees across all jurisdictions and including the pools for stockbrokers and analysts mentioned below) must stay within the totals approved by Group Remco. ■ Any individual STI payment in excess of 200% of GP must be individually motivated and approved by Group Remco. The following categories of employees are excluded from the distribution process outlined above: ■ Stockbrokers, since they are paid on a six-monthly basis from a bespoke STI arrangement based on predetermined contractual arrangements (certain business risk elements are included in the formulaic determination for the stockbrokers’ pool). The pool allocated is included in the overall Nedbank Wealth pool. ■ Analysts in Nedbank Capital, since their STIs are predominantly determined using Financial Mail-published ratings. ■ Private-equity ‘locked box’ remuneration, which is the market norm for private-equity collective investment performance- based remuneration, based on a sharing of ‘carried interest’ on realised investments. We utilise a three-year budgeting, forecasting and planning process, which is fully cognisant of projected risk parameters, capital buffers and impairment provisions, and the likely impact thereof on future remuneration practices. There have been no material changes in the measures used over the past year. 164 NedbaNk Group | Integrated report 2013linking performance and reward The annual STI process is indicated in the diagram below, which describes the process of STI pools creation and distribution based on individual performance and discretion, using both quantitative and qualitative steps in the process. Total group pool The overall group pool is approved by Group Remco relative to benchmarks. The allocation of the Group Remco- approved group pool to each cluster for ontarget performance is done by the CE, with input from Group Exco. 1 headline earnings and Ep performance A total of 50% of the year-end cluster pools is determined based on year-end EP performance relative to target. A total of 50% of the year-end cluster pools is determined based on year-end headline earnings performance relative to target. There is a 10% limit set for the bottomup cluster pools relative to the overall group pool. 2 Balanced scorecard Bonus pool adjustments Individual bonus proposals The financially determined pools (topdown and bottomup) are adjusted by a maximum of ±15% based on the non- financial elements of relevant Group Exco members’ scorecards. Risk metrics are included in the relevant scorecards and aligned with the group three-year plan and risk frameworks. 3 The CE makes discretionary adjustments to quantitatively determined cluster pools based on judgement and non-quantifiable metrics. Group Remco makes discretionary adjustments to the group pool to effect any required corrections based on non-quantifiable metrics, including risk assessment. 4 Individual bonus proposals are discretionary and no fixed formulaic approach is used by the bank. All cluster executive bonus proposals are analysed by Group Exco and the necessary adjustments made to ensure appropriate consistency across the bank. All Group Exco bonus proposals are individually motivated and recommended by Group Remco to the board. The CE bonus requires Nedbank board approval and approval by the Old Mutual plc Remco. All senior functional bonuses (including risk and finance) are reviewed and ratified by the relevant Group Exco member. All proposed bonuses in excess of 200% of GP require motivation and Group Remco approval. 5 QUaNTITaTIvE apprOaCh sTEps QUalITaTIvE apprOaCh sTEps 165 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenreporting back on reMuneration (CONTINUED) Mitigating the effect of inappropriate performance metrics Inappropriate performance metrics would typically manifest when the year-on-year change in remuneration is seen to be abnormal (either too high or too low relative to performance and market benchmarks) or is unduly volatile. We witnessed this in the 2008 financial year when, after changing to a purely EP measure for STI pooling, the flaws inherent in this change became evident. The current STI scheme was implemented in 2009 and ensures a more balanced approach to the determination of the STI pool. A similar situation emerged as a consequence of the previous application of 100% performance-based shares and options. This resulted in a material misalignment of the vesting profile of the LTI scheme relative to the overall performance of the group over the performance period, with awards lapsing in full. In this regard none of the allocations made between 2005 and 2009 that were subject to performance conditions vested, due to the performance metrics that were set at the time. As a result of the performance measures set out above and their disproportionately negative effect on employee compensation relative to peers and the market, we issued a number of deferred cash- and share-based retention awards in 2009 and 2010 to prevent attrition of key skills and enable effective succession management in the business. While appropriate in the context in which these awards were made, our aim would be to avoid a similar situation from arising in the future. Accordingly, awards made from 2010 onwards are subject 50% to performance conditions and 50% to time-based vesting. The historical and possible future vesting profile of our restricted-share plans is shown on page 151 of this Remuneration Report, and illustrates how this approach has enabled a more graduated vesting profile, as opposed to the ‘all or nothing’ arrangements in place for awards made up to 2009. It is also noted that, with effect from 2014, all future LTI awards made to executive directors will be subject to performance conditions on 100% of the award. Managing the franchise risk inherent in reward programmes The impact of inappropriate performance metrics on reward programmes has a material franchise risk implication. This is exacerbated when, in spite of highly competitive business results, shareholder returns or share price performance, deferred or LTI remuneration lapses. This risk manifests in increased turnover of skilled employees, the erosion of perceptions of the competitiveness of the firm’s remuneration offering (and in ‘discounting’ of the value of LTI awards by participants), a reduction in external perceptions of the firm’s being a preferred employer and an increase in hiring cost (and the associated opportunity cost of getting employees to full performance in a new role). It is a key principle of our Remuneration Policy that there should be appropriate sharing of value among stakeholders. Thus, while material disadvantage or prejudice should not result for employees due to remuneration design issues, we are cognisant of the fact that remuneration programmes should equally not be 166 designed to favour or benefit employees at the expense of other stakeholders. It is within this context that we conducted a review of certain aspects of our employee share plans. Specifically, we focused on the application of performance conditions in our LTI scheme, and the ongoing operation of the Matched Share Scheme. The conclusion reached in our review is that the schemes remain fit for purpose and should not be changed at this stage, except in respect of the application of performance conditions for awards made to executive directors. In this regard all awards made to executive directors from 1 March 2014 will be subject to performance conditions on 100% of the award, as opposed to the current arrangement of 50%, which will remain in place for all other employees. Executive directors will therefore have 50% of their LTI award subject to the ROE (excluding goodwill) versus the COE condition, and 50% of the award will be subject to the relative Fini 15 condition. Further details of the conditions and the vesting arrangements related to these are set out on pages 167 and 168 of this Remuneration Report. We set out some of the details of our review to place the decision in context: ■ Exposure of remuneration programmes to the group’s share price is inherently risk-adjusted. The experience of participants in the share plans (for whom awards are part of annual remuneration, which is deferred over a prespecified period) therefore mirrors that of shareholders in terms of share price movements. ■ The component of our LTI programme that is subject to performance conditions is not highly leveraged. Significant outperformance against the measures results in a maximum upside of 130% for performance shares. Downside risk, on the other hand, could see performance share awards reduced to zero in instances of material underperformance. This provides protection against inappropriate windfall. ■ Our ‘value at award’ for LTIs is not adjusted or grossed up for projected vesting probability. This means that awards are made with a reasonable assumption that full vesting may be likely. This risk is, for us, an inherent consequence of participation in the scheme. ■ The component of awards made under the retention share element of the plan is a powerful retention mechanism for key talent and scarce skills. We have one of the lowest levels of employee turnover in the financial services sector and have received positive commentary on the stability and combined experience in the group of our leadership team. Awards are also typically only made to individuals who are meeting the requisite minimum performance standards. ■ Our Matched Share Scheme introduces a strong incentive for our leadership team to co-invest in the group. The requirement to remain in the Matched Share Scheme for a minimum of 36 months (against the backdrop of releases from forfeiture – and therefore entitlement to encash the deferrals – at six, 18 and 30 months) assists in creating a longer-term focus for our senior leadership. The performance condition attached to one half of the match also ensures that there is a minimum return before any such benefit accrues to NedbaNk Group | Integrated report 2013participants. In practice this means that, where the employee is at the highest marginal tax rate and the full after-tax amount of the STI is committed to the Matched Share Scheme for 36 months and the performance condition is met, the STI can increase by 30% on its original value, before taking account of any movement in the share price. ■ Clawback provisions are in place to enable mitigation of inappropriate risk-taking and enable an appropriate penalty in instances of malus or misconduct. ■ We acknowledge that there are many different aspects that could be considered in terms of what metrics are used in setting performance conditions. Having considered various alternatives, we are comfortable that the absolute internal measure of ROE (excluding goodwill) versus COE and the relative external measure of the performance of the Nedbank Group share relative to the Fini 15 Index remain fit for purpose, and enable the necessary focus on delivering competitive and sustainable returns to shareholders and associated benefits to other stakeholders. We have also been unequivocal about our adherence to other aspects of good corporate governance in relation to share plans. In this regard share awards in either the Restricted Share Plan or Matched Share Scheme are not, under any circumstances, backdated. Further, no retrospective adjustments are made to performance conditions to mitigate the impact of weak performance. Therefore, we are of the view that our remuneration practices, and the levels at which these occur, are appropriately competitive relative to those of our peer group. adjustments to remuneration based on long-term performance We are involved in retail banking, wholesale banking and investment banking operations, as well as wealth management and other financial services. The forward-looking business model is based on a rolling three-year plan approach. The mandatory deferral of STIs for up to 30 months and three-year vesting of LTI share allocations (with not less than half of the award subject to CPTs) align with this forward-looking business cycle. The deferral period provides for risk-based outcomes to be monitored over the three-year period subsequent to the deferral and enables clawback to be applied where appropriate. The compulsory deferral of STIs continues for awards made in respect of financial year 2013 performance on a basis consistent with that previously applied. The structure and vesting profile applicable to the deferral of STI awards are set out on page 151 of this Remuneration Report. Conditional vesting of long-term incentives The performance share element of the LTI allocation is aligned with both the group three-year medium-to-long-term published ROE (excluding goodwill) target of COE plus 5% (absolute internal target) and the relative performance of the share price (relative external target). The current targets used and previously described in the 2012 Remuneration Report (these targets having remained unchanged since the 2010 financial year) are as follows: ■ A total of 50% of all share-based awards are granted as retention shares, whereby the vesting criterion applied is continuous employment for a three-year period. ■ The remaining 50% carry the following additional vesting criteria: ¨ For 25% of the total award vesting will be based on the simple-average published ROE (excluding goodwill) over a three-year period, compared with the simple-average COE over the same timeframe, according to the following sliding scale (that is, there is a straight-line vesting arrangement based on the actual performance relative to the target): Vesting ratios (for 50% of the allocation) based on ROE (excluding goodwill): COE + 0% or worse 0% COE + 1,25% 25% COE + 2,5% 50% COE + 3,75% 75% COE +5% 100% COE +6% 110% COE COE +7% +8% or better 120% 130% ¨ For 25% of the total award vesting will be based on the relative performance of the Nedbank share price versus the Fini 15 Index over the same three-year period, where the Nedbank share price starting and end values are calculated based on a 30-day volume-weighted average price (VWAP) and the Fini 15 Index is based on a 30-day simple average. Vesting ratios (for 50% of the allocation) based on share price relative to the Fini 15 Index: Fini 15 -20% or worse 0% Fini 15 -15% 25% Fini 15 -10% 50% Fini 15 -5% 75% Fini 15 100% Fini 15 +10% 110% Fini 15 Fini 15 +20% +30% or better 120% 130% 167 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenreporting back on reMuneration (CONTINUED) As with the COE target, there is a straight-line vesting (on a basis of actual achievement along the continuum as set out in the tables above, rather than on a ‘hurdle’ basis) arrangement based on the actual performance relative to the target. release from forfeiture of short-term incentive deferral The deferral and release from forfeiture process is described on page 149 of this Remuneration Report. The board has absolute discretion as to the quantum and nature of any forfeiture or malus triggers related to the compulsory deferral of STI awards. In this regard the deferred amount will be forfeited should the employee resign or be dismissed for cause before the end of the release of the outstanding forfeiture obligations, as well as in cases where, at the sole discretion of the board, material irregularities or misrepresentation of financial results come to light during the deferral period. The board has absolute discretion as to the nature of any action to be taken against the individual, or group of individuals, who may have transgressed. The deferral policy is reviewed annually. This category of deferred compensation allows any adverse business deals or intentional misrepresentation to come to light in the three years subsequent to the allocation and appropriate action to be taken if deemed appropriate by the board. ADDITIONAL REGULATION 43/PILLAR 3 DISCLOSURES The disclosure requirements of regulation 43 of the Banks Act set out extensive quantitative and qualitative disclosures that are required to help stakeholders understand the approaches adopted by financial services organisations in respect of risk and remuneration. The majority of these disclosures are addressed elsewhere in this Remuneration Report. Specific disclosures relating to senior managers and material risk-takers, the quantum of remuneration paid in the year, signon awards, guaranteed bonuses, severance payments and the amount of remuneration subject to adjustment are set out below. aggregate remuneration of senior managers and material risk-takers The tables below set out the aggregate 2013 (and comparative 2012) remuneration of those employees regarded as senior managers and material risk-takers. Senior managers include executive directors and prescribed officers, members of Group Exco, as well as other members of the group’s senior management with executive responsibility for a material part of the group’s business. Material risk-takers include employees whose individual actions have a material impact on the risk exposure of the group, as well as those responsible for setting and monitoring trader mandates and risk and stop-loss limits. Included in this category are the heads of risk and finance, heads of major trading functions and those responsible for material investment decisions within the group. These criteria have not changed from those applied in 2012. For 2013 a total of 41 (2012: 41) individuals were classified as senior managers and a further 35 (2012: 35) were classified as material risk-takers. There was, however, some movement within the categories and thus there may be different individuals for whom amounts reported relative to the prior year. Senior managers Material risk-takers 2013 Total value of remuneration in the 2013 financial year1 Unrestricted Deferred Unrestricted Deferred Fixed remuneration (Rm) Variable remuneration – cash award (Rm) Variable remuneration – deferred performance incentive (Rm) Variable remuneration – long-term incentive awards (Rm) Total 2013 remuneration (unrestricted and deferred remuneration) (Rm) Total number of employees 108,3 105,4 213,7 41 64,4 136,9 201,3 71,5 51,8 123,3 35 Value of outstanding deferred remuneration at 31 December 2013 Compulsory Bonus Share Scheme (Rm) Restricted Share Scheme (Rm) Total deferred remuneration outstanding (Rm) Value of deferred remuneration paid out during 2013 (Rm) Value of deferred remuneration forfeited during 20132 (Rm) Senior managers Material risk-takers 86,7 468,1 554,8 180,2 27,0 21,6 37,6 59,2 25,6 143,7 169,3 60,3 8,0 168 NedbaNk Group | Integrated report 2013Total value of remuneration in the 2012 financial year1 Fixed remuneration (Rm) Variable remuneration – cash award (Rm) Variable remuneration – deferred performance incentive (Rm) Variable remuneration – long-term incentive awards (Rm) Total 2012 remuneration (unrestricted and deferred remuneration) (Rm) Total number of employees value of outstanding deferred remuneration at 31 December 2012 Compulsory Bonus Share Scheme (Rm) Restricted Share Scheme (Rm) Total deferred remuneration outstanding (Rm) Value of deferred remuneration paid out during 2012 (Rm) Value of deferred remuneration forfeited during 20122 (Rm) 2012 senior managers Material risk-takers Unrestricted Deferred Unrestricted Deferred 101,5 84,4 185,9 41 46,7 126,6 173,3 64,6 45,9 110,3 35 13,5 34,9 48,4 senior managers Material risk-takers 45,9 458,4 504,3 84,4 101,8 11,7 157,0 168,7 11,6 35,9 1 The amounts reflected in the tables above relate to actual awards made or remuneration received in the period from 1 January to 31 December. 2 Forfeiture of deferred remuneration due to non- or partial fulfilment of performance conditions on share awards. remuneration subject to adjustment in 2013 The total amount of outstanding deferred remuneration exposed to ex post explicit and/or implicit adjustments is indicated in the following table: Year FY2013 FY2012 amount R2 347m1 R2 053m1 1 Based on the 30-day VWAP to 31 December. This is a combination, at 31 December of each year, of the following: ■ All unvested RSP awards ■ All unvested CBSS awards The total amount of reductions during the financial year due to ex post explicit adjustments (adjustments as a consequence of non- fulfilment of specified performance conditions) is indicated in the following table: Year FY2013 FY2012 amount R97,1m1 R507,2m1 1 Based on the share price at the scheduled vesting date. Value of RSP awards lapsed due to new or partial fulfilment of CPT conditions. The total amount of reductions during the financial year due to ex post implicit adjustments (adjustments as a consequence of specific clawback decisions, either based on individual or group considerations) is indicated in the following table: Year FY2013 FY2012 amount R0m R0m No forfeitures or clawback arrangements were applied in the normal course. 169 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPen reporting back on reMuneration (CONTINUED) remuneration of risk and compliance specialists Consistent with good corporate governance and the requirements of the various local and international regulations dealing with remuneration in financial services firms, special attention is paid to the process of remunerating risk and compliance specialists within the group. This serves to ensure that individuals in these functions remain sufficiently independent from the functions or businesses they service. The remuneration of senior risk and compliance specialists is not determined within the relevant business unit alone. Initial proposals are initiated by the business unit management; however, Group Exco members with overall accountability for the specific control function (the Chief Risk Officer and the Chief Compliance Officer) have codecision rights in respect of performance management and direct remuneration decisions for employees within the respective control functions. This ensures appropriate independence in setting remuneration for the applicable control function employees. Other remuneration disclosures Further disclosures specifically required in terms of regulation 43 of the Banks Act are set out below: Other remuneration disclosures Number of employees who received variable remuneration during the year Total guaranteed bonuses Total signon awards Total severance awards1 2013 Rm – 2,86 3,73 N 23 706 – 10 7 2012 rm – 12,7 5,4 N 23 945 – 20 6 1 For the purpose of this disclosure severance payments mean payments that exceed the bank’s contractual redundancy payment. Our policy is not to award guaranteed bonuses. Where specific compensation is indicated for new employees for the loss of an accrued benefit, the forfeiture of a performance bonus or in respect of a specific outstanding contractual obligation, a signon or DSTI award may be made. This is subject to time and, in the case of DSTI awards, ongoing individual performance conditions. NON-EXECUTIVE DIRECTORS The terms of engagement of the non-executive directors (excluding the Group Chairman) cover a period of three years, as determined by the rotation requirements of our memorandum of incorporation. A non-executive director is required to retire at age 70, unless the board determines otherwise. Any non- executive director serving for a period in excess of nine years is required to retire from the board at the next annual general meeting. In terms of the memorandum of incorporation the Group Chairman is reelected annually by the board. remuneration The fees of the Group Chairman and the non-executive directors reflect the specific responsibilities relating to their membership of the board and, where applicable, board committees. The Group Chairman receives a single fee for his role. Non-executive directors are paid a fixed fee for board membership and receive additional fees for their participation in board committees. Premiums are paid to the chairmen of all board committees, with the exception of the Directors’ Affairs Committee, which is chaired by the Group Chairman. A premium is applicable for the Senior Independent Non-executive Director. Neither the Group Chairman nor boardmembers receive any performance-related pay or any benefits. Board and board committee meeting attendance is recorded on pages 60 and 61 of this integrated report. 170 NedbaNk Group | Integrated report 2013Non-executive directors’ remuneration for the years ended 31 December 2013 and 31 December 2012 was as follows: NON-EXECUTIVE DIRECTORS’ REMUNERATION (*AUDITED) Termination date Note Board fees* (r000) Committee fees* (r000) 2013* (R000) 2012 (r000) TA Boardman TCP Chikane A de VC Knott-Craig MA Enus-Brey B de L Figaji ID Gladman DI Hope RJ Khoza WE Lucas-Bull PM Makwana NP Mnxasana JK Netshitenzhe JVF Roberts GT Serobe MI Wyman Total August 2013 February 2012 May 2012 June 2013 November 2012 f d b j h 1, i 1, g c a 1, e 323 196 323 323 158 4 100 323 323 323 323 323 323 610 421 497 288 115 338 380 125 137 363 776 3 261 8 150 933 617 – 820 – 611 273 668 900 87 837 279 292 527 4 100 3 888 – 661 703 448 460 686 1 099 11 411 771 483 640 422 360 593 997 11 744 Fees for JVF Roberts, DI Hope and ID Gladman were paid to Old Mutual (SA) Ltd for 2012 and 2013. 1 a PM Makwana was appointed as the Chairman of Group Remco on 2 September 2013 and to the Group Audit Committee on 2 September 2013. b A de VC Knott-Craig resigned from the board and all committees on 24 February 2012. c WE Lucas-Bull resigned from the board and all committees on 5 November 2012. d TCP Chikane resigned from the board and all committees on 13 August 2013. e f g DI Hope resigned from the board and all committees on 30 June 2013. h B de L Figaji retired from the board, and as Chairman of Group Remco and member of all other committees on 4 May 2012. i j On 18 January 2013 MA Enus-Brey resigned as a member of Group Remco and resigned as Chairman of the Group Credit Committee and Large-exposure Approval Committee. JVF Roberts was appointed as a member of Group Remco on 21 February 2013. TA Boardman was appointed as Chairman of the Group Credit Committee and to the Large-exposure Approval Committee on 18 January 2013. ID Gladman was appointed a member of the Group Finance Oversight Committee on 2 August 2013. However, he remains a member of the Group Credit Committee and Large-exposure Approval Committee. Non-executive directors are accountable for decisions made regardless of attendance at meetings. Non-executive directors are also required, as a matter of course, to represent stakeholders and to make the necessary preparations for meetings and other engagements. Group Remco is satisfied that the fee structure applied in respect of non-executive directors remains appropriate. Non-executive directors’ fees An independent subcommittee, consisting of Messrs MWT Brown and JVF Roberts, evaluated the respective committee fees from a number of perspectives, including peer group comparisons, effective rates per committee and year-on-year increases. This year a thorough review of the competitiveness of the group’s non-executive director remuneration was conducted, as Group Remco had become concerned that the group’s competitive position in this regard had weakened. As a consequence, the board is recommending to shareholders that the necessary adjustments are made in several key areas. These include: ■ Increasing the level of fees paid to all boardmembers by 14,9%. ■ Increasing the premium paid to the Chairman of the Audit Committee, the GRCMC, Group Remco and of the Credit Committee to 2,5 times the fee paid to a member. ■ Increasing the fees payable to members of the Audit Committee, the GRCMC and Group Remco by 11,1%, 9,3% and 10% respectively. 171 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenreporting back on reMuneration (CONTINUED) The board and committee fees proposed for non-executive directors and for committee membership are as follows: NON-EXECUTIVE DIRECTORS’ REMUNERATION (*AUDITED) Boards Chairman of the board1 Senior independent director premium Nedbank Group Ltd Nedbank Ltd Committees Group Audit Committee Chairman Member Group Finance and Oversight Committee Chairman Member Group Remuneration Committee Chairman Member Group Risk and Capital Management Committee Chairman Member Group Credit Committee Chairman Member Group Directors’ Affairs Committee Chairman Member Group IT Committee Chairman Member Group Transformation, Social and Ethics Committee Chairman Member 1 The Group Chairman’s fee includes fees for board, subsidiary board and committee memberships. 2 On a like-for-like basis this represents a year-on-year increase of 12,8%. 2014 (R)* Proposed 2013 (r) 4 500 000 40% of board fee 206 900 173 100 4 200 000 40% of board fee 180 075 150 675 500 000 200 000 52 000 26 000 275 000 110 000 350 000 140 000 437 500 175 000 360 000 180 000 49 350 24 675 200 000 100 000 256 200 128 100 320 000 160 000 part of Group Chairman’s fee 61 000 Part of Group Chairman’s fee 57 750 170 000 85 000 170 000 85 000 157 000 78 750 157 500 78 750 %2 7,1 14,9 14,9 14,9 38,9 11,1 5,4 5,4 37,5 10,0 36,6 9,3 36,7 9,4 5,6 7,9 7,9 7,9 7,9 The above increases are effective from 1 July 2014, subject to shareholders’ approval at the 13 May 2014 annual general meeting. DIRECTORS’ INTERESTS (*AUDITED) At 31 December 2013 the directors’ interests in ordinary shares in Nedbank Group Ltd and preference shares in Nedbank Ltd were as follows: Number of shares* TA Boardman TA Boardman (preference shares) MWT Brown GW Dempster MA Enus-Brey ID Gladman RJ Khoza PM Makwana NP Mnxasana RK Morathi JK Netshitenzhe JVF Roberts GT Serobe MI Wyman Total ordinary shares Total preference shares 172 Beneficial* direct 2013 Beneficial direct 2012 Beneficial* indirect 2013 Beneficial indirect 2012 4 012 24 012 55 049 17 822 55 049 17 822 28 593 243 000 288 108 134 273 2 113 62 758 85 000 294 648 123 211 2 113 7 800 7 800 6 974 6 974 12 615 12 615 11 620 160 887 11 620 155 762 97 298 117 298 632 568 243 000 657 086 85 000 NedbaNk Group | Integrated report 2013 INCENTIVE SCHEMES FOR OUR PEOPLE Nedbank Group employee incentive schemes Movements Instruments outstanding at the beginning of the year Granted Exercised Surrendered Instruments outstanding at the end of the year Analysis Performance-based restricted shares Non-performance-based restricted shares Performance-based matched shares Non-performance-based matched shares Instruments outstanding at the end of the year Summary by scheme Nedbank Group Share Option and Restricted Share Scheme (2005) Nedbank Group Matched Share Scheme (2005) Instruments outstanding at the end of the year 2013 2012 12 239 342 4 127 553 (3 801 643) (580 334) 11 984 918 p p 5 355 178 5 355 178 637 281 637 281 11 984 918 10 710 356 1 274 562 11 984 918 12 732 254 4 204 482 (949 007) (3 748 387) 12 239 342 5 660 881 5 660 880 458 791 458 790 12 239 342 11 321 761 917 581 12 239 342 p p NEDBANK GROUP (2005) SHARE OPTION, MATCHED AND RESTRICTED SHARE SCHEME restricted shares Restricted shares are issued at a market price for no consideration to participants and are held by the scheme until the expiry date (subject to achievement of performance and time-based conditions). Participants have full rights and receive dividends. The following instruments granted had not been exercised at 31 December 2013: Instrument expiry date 8 March 2014 9 March 2014 5 August 2014 6 August 2014 18 October 2014 18 October 2014 8 March 2015 9 March 2015 7 August 2015 8 August 2015 7 March 2015 8 March 2016 15 August 2016 16 August 2016 Total Number of shares 1 780 552 1 780 552 145 398 145 398 12 539 12 539 1 667 303 1 667 303 55 185 55 185 1 648 095 1 648 095 46 106 46 106 10 710 356 P P P P P P P MATCHED SHARES The obligation to deliver the following matched shares, 50% of which is subject to time-based conditions and the other 50% to performance conditions, exists at 31 December 2013: Instrument expiry date 1 April 2014 1 April 2015 1 April 2016 Total P Performance-based instruments. Number of shares 252 822 424 195 597 545 1 274 562 173 ENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSdelIVerInG to oUr StaKeholderSmaKInG thInGS haPPenINFORMATION TO OUR SHAREHOLDERS Invitation from our Chairman Our financial calendar for 2014 Question form for our annual general meeting Notice of our annual general meeting Form of proxy Notes to form of proxy Analysis of shareholders Terms used in our report Abbreviations, acronyms and initialisms used in our report Codes for our financial instruments 174 175 176 177 Inserted Inserted 187 Our contact details Inside back cover INVITATION FROM OUR CHAIRMAN I extend a warm invitation to you to attend the 47th annual general meeting of Nedbank Group Ltd to be held in the Auditorium, Retail Place West, Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, on Tuesday, 13 May 2014, at 08:30. Included in this document are the following: ■ The notice of the annual general meeting setting out the resolutions to be proposed. ■ Annexure 1 to the notice of the annual general meeting setting out explanatory notes regarding the resolutions as well as important notes about the annual general meeting. ■ A form of proxy and explanatory notes regarding proxies. The resolutions as set out in the notice will be put to shareholders to vote by way of a poll. This is to ensure an exact reﬂection of the views of the shareholders. An interactive electronic voting system will be used, which will reﬂect both proxy votes submitted prior to the meeting and the votes by shareholders present at the meeting. I would like to remind shareholders 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 all matters of particular interest to shareholders are covered, shareholders may use the attached question form to raise any questions in advance. From these question forms the most popular topics will be assessed and I will endeavour to address these at the annual general meeting. This advance notice of relevant questions will, of course, not prevent any shareholder from raising questions, at the appropriate time, during the meeting. The question form can be forwarded to the Company Secretary, Ground Floor, Block A, 135 Rivonia Road, Sandown, Sandton, 2196 (PO Box 1144, Johannesburg, 2000), to be received no later than 08:30 on Monday, 12 May 2014, or handed in at the time of registering attendance at the annual general meeting, should the ﬁrst option not have been chosen. Should you require an interpreter (sign language or a translator from English to any of the other ofﬁcial languages of SA) to be in attendance at the annual general meeting, please advise the Company Secretary’s ofﬁce of this requirement on +27 (0)11 294 9107, or send an email to JackieK@nedbank.co.za by no later than Friday, 2 May 2014. Shareholders wishing to participate in the meeting through electronic facilities are also requested to contact the Company Secretary’s office by Friday, 2 May 2014, for access to be arranged. Yours faithfully Dr RJ Khoza Chairman Sandown 11 March 2014 HEADOFFICE Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, 2196 PO Box 1144, Johannesburg, 2000 Tel: +27 (0)11 294 4444 nedbankgroup.co.za Nedbank Group Ltd Reg No 1966/010630/06 Directors: Dr RJ Khoza (Chairman) MWT Brown (Chief Executive) DKT Adamakoh** TA Boardman GW Dempster (Chief Operating Ofﬁcer) MA Enus-Brey ID Gladman* PM Makwana NP Mnxasana RK Morathi (Chief Financial Ofﬁcer) JK Netshitenzhe JVF Roberts* GT Serobe MI Wyman* (*British) (**Ghanaian) Company Secretary: TSB Jali 174 NedbaNk Group | Integrated report 2013OUR FINANCIAl CAlENDAR FOR 2014 2013 December Financial year-end – 31 December 2014 January February March March April May June July Annual results and announcement of ﬁnal dividend – 24 February Final dividend payment – 24 March, for Nedbank Ltd preference shares Publication and posting of integrated report – 31 March Final dividend payment – 7 April, for Nedbank Group Ltd ordinary shares Annual general meeting – 13 May First-quarter trading update – 13 May August Interim results and announcement of interim dividend – 5 August September Interim dividend payment October November Third-quarter trading update – 3 November December Financial year-end – 31 December 2015 January February March April May Annual results and announcement of ﬁnal dividend Publication and posting of integrated report Final dividend payment Annual general meeting 175 DELIVERING TO OUR STAKEHOLDERSMAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderS QUEsTION FORM FOR OUR ANNUAl GENERAl MEETING Name of member Address Contact details Telephone number Fax number Email Questions 176 NedbaNk Group | Integrated report 2013NOTICE OF OUR ANNUAl GENERAl MEETING Nedbank Group Ltd (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’) GRI 3.1: 4.4 Notice is hereby given to shareholders recorded in the securities register of Nedbank Group on Thursday, 20 March 2014, that the 47th annual general meeting of shareholders will be held in the Auditorium, Retail Place West, Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, on Tuesday, 13 May 2014, at 08:30 to deal with such business as may lawfully be dealt with at the meeting and to consider and, if deemed ﬁt, pass, with or without modiﬁcation, the ordinary and special resolutions set out hereunder in the manner required by the Companies Act, 71 of 2008 (as amended) (’the Companies Act‘), as read with the Listings Requirements of JSE Ltd (’JSE Listings Requirements‘), which meeting is to be participated in and voted at by shareholders recorded in the company’s securities register on the record date of Friday, 2 May 2014. The quorum requirement for the ordinary and special resolutions set out below is sufﬁcient persons being present to exercise, in aggregate, at least 25% of all voting rights that are entitled to be exercised on the resolutions, provided that at least three shareholders of the company are present at the annual general meeting. The percentage of voting rights required to pass the ordinary resolutions is more than 50% of the voting rights exercised, and the percentage of voting rights required to pass the special resolutions is at least 75% of the voting rights exercised thereon. Kindly note that meeting participants (including proxies) will be required to provide reasonably satisfactory identiﬁcation before being entitled to attend or participate in the meeting. Forms of identiﬁcation include valid identity documents, driving licences and passports. When reading the resolutions below, please refer to the explanatory notes for the resolutions on pages 183 to 186. AGENDA 1 PRESENTATION OF ANNUAL FINANCIAL STATEMENTS AND REPORTS The annual ﬁnancial statements of the company, incorporating among others the Directors’ Report, Auditors’ Report and Report of the Audit Committee, for the ﬁnancial year ended 31 December 2013, and the report of the Group Transformation, Social and Ethics Committee in terms of regulation 43(5)(c) of the Companies Act, 71 of 2008 (as amended), have been distributed as required and will be presented to the shareholders. The summarised audited annual ﬁnancial statements, together with the reports, are contained in this integrated report. 2 ORDINARY DIVIDENDS To note the interim dividend of 390 cents per ordinary share declared by the board of directors on 6 August 2013, and the ﬁnal dividend of 505 cents per ordinary share declared by the board of directors on 24 February 2014. REsOlUTIONs 3 ORDINARY RESOLUTION 1 REElECTION OF DIRECTORs OF THE COMPANY The following directors retire by rotation in terms of the company’s memorandum of incorporation and, being eligible, make themselves available for reelection, each by way of a separate vote. Biographical details of the directors to be reelected are set out on pages 74 and 75 of this integrated report. 3.1 ‘Resolved that Mr TA Boardman be and is hereby reelected as a director of the company.’ Independent non-executive director; Date of appointment: 1 November 2002 as an executive director, 1 March 2010 as a non-executive director, and 1 January 2014 classified as an independent non-executive director; Educational qualifications: BCom, CA (SA); Board committees: Nedbank Group Information Technology Committee (Chairman), Nedbank Group Transformation, Social and Ethics Committee, Nedbank Group Credit Committee (Chairman), Large-exposure Approval Committee, Nedbank Group Finance and Oversight Committee, Nedbank Group Directors’ Affairs Committee. 177 DELIVERING TO OUR STAKEHOLDERSMAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderS NotiCe of our ANNuAl GeNerAl MeetiNG (CONTINUED) 3.2 3.3 ‘Resolved that Mr MWT Brown be and is hereby reelected as a director of the company.’ Chief Executive; Date of appointment: 17 June 2004 as Chief Financial Officer and 1 March 2010 as Chief Executive; Educational qualifications: BCom, Dip Acc, CA (SA), AMP (Harvard Business School, USA); Board committees: Large-exposure Approval Committee, Nedbank Group Credit Committee. ‘Resolved that Mr MA Enus-Brey be and is hereby reelected as a director of the company.’ Non-executive director; Date of appointment: 16 August 2005; Educational qualifications: BCompt (Hons), CA (SA); Board committees: Nedbank Group Risk and Capital Management Committee (Chairman), Nedbank Group Directors’ Affairs Committee, Nedbank Group Credit Committee, Nedbank Group Finance and Oversight Committee, Large-exposure Approval Committee. 3.4 ‘Resolved that Mr JK Netshitenzhe be and is hereby reelected as a director of the company.’ Independent non-executive director; Date of appointment: 5 August 2010; Educational qualifications: MSc (University of London, UK); Board committees: Nedbank Group Risk and Capital Management Committee, Nedbank Group Information Technology Committee. 4 ORDINARY RESOLUTION 2 ElECTION OF DIRECTORs OF THE COMPANY During the year the board appointed Mr Adomakoh as a director of the company. Mr Adomakoh retires in terms of the company’s memorandum of incorporation and, being eligible, makes himself available for election. His biographical details are set out on page 74 of this integrated report. 4.1 ‘Resolved that Mr DKT Adomakoh be and is hereby elected as a director of the company.’ Independent non-executive director; Date of appointment: 21 February 2014; Educational qualifications: BSc (Econs) Hons (London School of Economics), Diplome de Langue et de Civilisation (La Sorbonne, Universite de Paris). 5 ORDINARY RESOLUTION 3 REAPPOINTMENT OF EXTERNAl AUDITORs ‘Resolved, on recommendation of the Nedbank Group Audit Committee, that Deloitte & Touche (with Mr S Jordan as designated auditor) and KPMG Inc (with Ms H Berrange as designated auditor) be and are hereby reappointed as joint auditors to hold ofﬁce from the conclusion of the 47th annual general meeting until the conclusion of the next annual general meeting of Nedbank Group.’ 6 ORDINARY RESOLUTION 4 EXTERNAl AUDITORs’ REMUNERATION ‘Resolved that the Nedbank Group Audit Committee be and is hereby authorised to determine the remuneration of the company’s auditors and the auditors’ terms of engagement.’ 7 ORDINARY RESOLUTION 5 CONTROl OF AUTHORIsED, BUT UNIssUED, ORDINARY sHAREs ‘Resolved that the board be and is hereby authorised, as it in its discretion thinks ﬁt, to issue ordinary shares of R1,00 each in the share capital of the company, subject to the provisions of the Companies Act, 71 of 2008 (as amended), the Banks Act, 94 of 1990 (as amended), and the JSE Ltd 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 Ltd tier 1 hybrid debt capital instruments, and to support the conversion and/or writeoff of all additional tier 1 and tier 2 instruments into common equity on the occurrence of a trigger event, as determined by the relevant authority, which means the SA Reserve Bank or the equivalent governmental authority. Such authority will endure until the forthcoming annual general meeting of the company (whereupon this authority will lapse, unless it is renewed at the aforementioned annual general meeting), provided that it will not extend beyond 15 months from the date of this meeting.’ 178 NedbaNk Group | Integrated report 2013 8 ADVISORY ENDORSEMENT OF REMUNERATION POLICY ‘To endorse through a non-binding advisory vote the company’s Remuneration Policy (excluding the remuneration of the non- executive directors for their services as directors and members of the board committees), as set out in the Remuneration Report contained in the annual ﬁnancial statements.’ 9 SPECIAL RESOLUTION 1 REMUNERATION OF NON-EXECUTIVE DIRECTORs ‘Resolved that the non-executive directors’ fees for their services as directors be and are hereby approved as follows: Committee Chairman1 Senior independent director premium (40%) Nedbank Group boardmember Nedbank Ltd boardmember Committees Nedbank Group Audit2 Nedbank Group Risk and Capital Management2 Nedbank Group Credit2 Nedbank Group Remuneration2 Nedbank Group Transformation, Social and Ethics3 Nedbank Group Directors’ Affairs Nedbank Group Information Technology3 Nedbank Group Finance and Oversight3 Current annual fee (1/7/2013 to 30/6/2014) R 4 200 000 132 300 180 075 150 675 180 000 128 100 160 000 100 000 78 750 57 750 78 750 24 675 Proposed annual fee4 (1/7/2014 to 30/6/2015) R 4 500 000 152 000 206 900 173 100 200 000 140 000 175 000 110 000 85 000 61 000 85 000 26 000 1 The chairman will be paid a single fee, inclusive of committee chairmanship and membership fees. 2 The committee Chairman will be paid 2,5 times the member fees. 3 The committee Chairman will be paid double the member fees. 4 Subject to shareholders’ approval at the May 2014 annual general meeting. On a like-for-like basis the proposed increase represents a 12,8% increase overall. 10 SPECIAL RESOLUTION 2 GENERAl AUTHORITY TO REPURCHAsE sHAREs PREAMBLE The board of directors of the company has considered the impact of a repurchase or purchase, as the case may be, of up to 10% of the company’s shares, which falls within the amount permissible under a general authority in terms of the JSE Listings Requirements and, in respect of acquisitions by a subsidiary of the company, the Companies Act, 71 of 2008 (as amended). Should the opportunity arise and should the directors deem it to be advantageous to the company, or any of its subsidiaries, to repurchase or purchase, as the case may be, such shares, it is considered appropriate that the directors (and relevant subsidiaries) be authorised to repurchase or purchase, as the case may be, the company’s shares. ‘Resolved that the company and/or its subsidiaries be and are hereby authorised by way of a general authority to repurchase or purchase, as the case may be, shares issued by the company, from any person, on such terms and conditions and in such numbers as the directors of the company or the subsidiary may from time to time determine, subject to the applicable requirements of the company’s memorandum of incorporation, to the approval, to the extent required, of the Registrar of Banks, the provisions of the Companies Act, 71 of 2008 (as amended), the Banks Act, 94 of 1990 (as amended), and the JSE Ltd (the JSE) Listings Requirements, and subject further to the restriction that the repurchase or purchase, as the case may be, by the company and/or any of its subsidiaries of shares in the company under this authority will not, in aggregate in any one ﬁnancial year, exceed 10% of the shares in issue at the commencement of such ﬁnancial year. It is recorded that the JSE Listings Requirements provide, among others, that the company or any subsidiary of the company may only make a general repurchase of the shares of the company subject to the following limitations: 179 DELIVERING TO OUR STAKEHOLDERSMAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderS NotiCe of our ANNuAl GeNerAl MeetiNG (CONTINUED) (a) the repurchase of securities must be effected through the 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 must be given by the company’s and its subsidiaries’ memorandum of incorporation; (c) this general authority will be valid only until the company’s next annual general meeting, provided that it does not extend beyond 15 months from the date of the passing of this special resolution; (d) in determining the price at which the company’s ordinary shares are repurchased by the company in terms of this general authority, the maximum premium at which such ordinary shares may be repurchased will be 10% of the weighted average of the market price at which such ordinary shares are traded on the JSE, as determined over the ﬁve trading days immediately preceding the date of the repurchase of such ordinary shares by the company; (e) the board will have acknowledged by resolution that the company will satisfy the solvency and liquidity test immediately after the repurchase and that since the test was done there have been no material changes to the ﬁnancial position of the company and the group; (f) neither the company nor its subsidiaries will repurchase securities during a prohibited period, as deﬁned in paragraph 3.67 of the JSE Listings Requirements, unless a repurchase programme is in place in terms of which the dates and quantities of securities to be traded during the relevant period are ﬁxed (not subject to any variation), full details of which programme have been disclosed in an announcement on the Securities Exchange News Service (SENS) prior to the commencement of the prohibited period; (g) 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 will be published on SENS and in the ﬁnancial press; and (h) at any time the company will appoint only one agent to effect any repurchase(s) on its behalf.’ In terms of the proposed special resolution 2 the maximum number of Nedbank Group shares that may be repurchased during the term of this authority, subject to (b) above, is 51 030 239 shares (10% of 510 302 393 shares in issue at 1 January 2014). This resolution is required to be passed on a show of hands by not less than 75% of the number of shareholders of the company who are entitled to vote on a show of hands and who are present at the meeting in person or by proxy or, where a poll has been demanded, by not less than 75% of the total votes to which the shareholders present in person or by proxy are entitled. The directors of the company undertake that they will not effect a general repurchase of shares as contemplated above, unless the following conditions are met: 1) 2) the company and the group are in a position to repay their debt in the ordinary course of business for a period of 12 months after the date of the notice of the annual general meeting; the company’s and the group’s assets at fair value will be in excess of the liabilities of the company and the group for a period of 12 months after the date of the notice of the annual general meeting. For this purpose the assets and liabilities will be recognised and measured in accordance with the accounting policies used in the latest audited consolidated annual ﬁnancial statements, which comply with the Companies Act, 71 of 2008 (as amended); 3) the share capital and reserves of the company and the group are adequate for a period of 12 months following the date of the notice of the annual general meeting; and 4) the available working capital of the company and the group will be adequate for ordinary business purposes for a period of 12 months after the date of the notice of the annual general meeting. 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 Ltd Integrated Report 2013, as set out below: Management and directors (pages 76 to 81 and 72 to 75). Major shareholders of Nedbank Group (pages 187 and 188). Directors’ interests in securities (page 172). Share capital of Nedbank Group (page 121). 180 NedbaNk Group | Integrated report 2013 MATERIAl CHANGE Other than the facts and developments reported on in this integrated report, there have been no material changes in the affairs or ﬁnancial position of Nedbank Group and its subsidiaries from 31 December 2013 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 72 to 73 of this integrated report, collectively and individually accept full responsibility for the accuracy of the information pertaining to special resolution 2 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 and other than as set out in note 44 (contingent liabilities and undrawn facilities) of the annual ﬁnancial statements online, the directors, whose names are given on pages 72 and 73 of this integrated 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. 11 SPECIAL RESOLUTION 3 GENERAl AUTHORITY TO PROVIDE FINANCIAl AssIsTANCE TO RElATED AND INTERRElATED COMPANIEs ‘Resolved that, subject to the provisions of the Companies Act, 71 of 2008 (as amended) (’the Companies Act‘), the shareholders of the company hereby approve, as a general approval, the company providing direct or indirect ﬁnancial assistance (’ﬁnancial assistance‘) as contemplated in sections 44 and 45 of the Companies Act, whether in the form of advances for expenses, assisting with administration of transactions, loans, loan facilities, extending credit, discharging debts, performing obligations, contractual undertakings, sureties, guarantees, guarantee facilities, mortgages, pledges, cessions, bonds, charges or otherwise, on such terms as may be authorised by the board of directors of the company having regard to the funding and commercial requirements of the Nedbank group of companies (’the Group‘) as contemplated in the Companies Act from time to time and in accordance with the following: 1 2 3 4 5 6 the ﬁnancial assistance can be provided to any company that is currently, or in the future, ‘related’ to or ‘interrelated’ with the company (and any person ‘related’ to any of such companies) as contemplated by the Companies Act or any other person (a ‘recipient’) (which, for the avoidance of doubt, excludes ﬁnancial assistance provided to any directors or prescribed ofﬁcers of the company or of any such recipients); the ﬁnancial assistance may be provided for the purpose of, or in connection with, the subscription to any option, or any securities, issued or to be issued by the company or a company related to or interrelated with the company or for the purchase of any securities of the company or a company or corporation that is related to or interrelated with the company, as contemplated in section 44 of the Companies Act or any other purpose regulated by section 45 of the Companies Act; authorisation by the board of any ﬁnancial assistance pursuant to this resolution must be provided within a period of two years following the date of the adoption of this special resolution; any related corporate action must be duly authorised in compliance with the JSE Listings Requirements, the Companies Act, and the Banks Act where applicable; this approval is subject to the board complying with sections 44 and 45 of the Companies Act; and nothing in this approval will limit the provision by the company of ﬁnancial assistance that does not require approval by way of a special resolution of the shareholders in terms of sections 44 and 45 of the Companies Act or falls within any exemption provided in these sections.’ 181 DELIVERING TO OUR STAKEHOLDERSMAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderS NotiCe of our ANNuAl GeNerAl MeetiNG (CONTINUED) VOTING BY PROXY A shareholder entitled to attend and vote at the annual general meeting may appoint a proxy or proxies to attend, speak and vote or abstain from voting in his/her/its/their stead. A proxy need not be a shareholder of the company. Completed proxy forms are requested to 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 TsB Jali Company Secretary Sandown 21 February 2014 Registered office Nedbank Group Ltd Reg No 1966/010630/06 Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, 2196 PO Box 1144 Johannesburg, 2000 Tel: +27 (0)11 294 4444 Transfer secretaries in sA Transfer secretaries in Namibia Computershare Investor Services (Pty) Ltd Transfer Secretaries (Pty) Ltd Ground Floor 70 Marshall Street Johannesburg, 2001 PO Box 61051 Marshalltown, 2107 Tel: +27 (0)11 370 5000 Fax: +27 (0)11 688 5238 Robert Mugabe Avenue No 4 Windhoek, Namibia PO Box 2401 Windhoek, Namibia Tel: +264 (0)61 227 647 Fax: +264 (0)61 248 531 182 NedbaNk Group | Integrated report 2013 ANNEXURE 1 EXPlANATORY NOTEs TO REsOlUTIONs FOR THE ANNUAl GENERAl MEETING 1 Presentation of annual financial statements and reports In terms of the Companies Act, 71 of 2008, as amended (‘the Companies Act’), the directors are required to present to shareholders at the annual general meeting the annual ﬁnancial statements, incorporating among others the Directors’ Report, Auditors’ Report and the Report of the Audit Committee, for the ﬁnancial year ended 31 December 2013. 2 Payment of dividends An interim dividend of 390 cents per share was declared by the board of directors on 6 August 2013 and paid on 2 September 2013. A ﬁnal dividend of 505 cents per ordinary share was declared by the board of directors on 24 February 2014. Shareholders are asked to note the dividends paid/payable. 3 Reelection and election of directors who retire by rotation or retire as a result of filling a casual vacancy In terms of the company’s memorandum of incorporation not less than one-third of the directors are required to retire at each annual general meeting and may make themselves available for reelection. Any person appointed to ﬁll a casual vacancy on the board, or as an addition thereto, since the last annual general meeting is required to retire and is eligible for election at the annual general meeting. 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 74 and 75 of the Nedbank Group Ltd Integrated Report 2013. An assessment of each of the retiring directors was performed by the Nedbank Group Directors’ Affairs Committee and reported to the Nedbank Group Ltd Board, who recommends that shareholders approve the election and/or reelection of the retiring directors. 4 Reappointment of external auditors This resolution proposes the reappointment of the company’s existing joint auditors, Deloitte & Touche (the designated auditor being Mr M Jordan) and KPMG Inc (the designated auditor being Ms H Berrange), 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. 5 Remuneration of external 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 2013 amounted to R129m (2012: R114m). Particulars of the auditors’ remuneration can be found in note 16 on page 76 of the Nedbank Group Annual Financial Statements 2013 online. 6 Placing of authorised but unissued ordinary shares under the control of the directors The shareholders of the company are requested to approve the placement of authorised but 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 black economic empowerment (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 Ltd tier 1 hybrid debt capital instruments. 7 Remuneration Policy In accordance with the principles of King III an advisory vote is being put to shareholders for the endorsement of Nedbank Group’s Remuneration Policy. As the votes on this resolution are non-binding, the results would not be binding on the board. However, the board will take cognisance of the outcome of the vote when considering its Remuneration Policy in future. 183 DELIVERING TO OUR STAKEHOLDERSMAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderS ANNexure 1 (CONTINUED) 8 Non-executive directors’ remuneration In terms of article 27 of the company’s memorandum of incorporation remuneration will be payable to the directors as may be approved from time to time by special resolution. Full particulars of all fees and remuneration are contained on pages 171 and 172 of this integrated report. The Nedbank Group Ltd Board has recommended the non-executive directors’ fees as set out in special resolution 1 in the notice of the annual general meeting. The board deliberated on the requirement of King III that non-executive directors fees should comprise a base fee and an attendance fee per meeting. The board is of the view that this requirement is less pertinent to directors of Nedbank Group due to the practicalities and responsibilities of being a director of a bank, and the need for the board to provide inputs on an ongoing basis, even when they are not able to attend a board meeting in person. 9 Repurchase of shares The company’s memorandum of incorporation contains a provision allowing the company or any of its subsidiaries to repurchase (acquire) the company’s issued shares. This is subject to the Companies Act, the Banks Act, 94 of 1990 (as amended) and the JSE Listings Requirements. In terms of sections 46 and 48 of the Companies Act the company or its subsidiaries are allowed to repurchase the company’s shares. The existing general authority, granted by shareholders at the last annual general meeting on 3 May 2013, is due to expire, unless renewed. The reason for and effect of special resolution 2 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 in special resolution 2. 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. 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 repurchase its own shares on the open market, should market conditions and price justify such action. The proposed authority would enable the company to repurchase up to 51 030 239 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 repurchases would be made, only after the most careful consideration, in cases where the directors believe that such purchases would be in the best interests of the company and its shareholders. 10 General authority to provide financial assistance Section 44 of the Companies Act essentially requires, subject to limited exceptions, approval by way of special resolution for the provision of ﬁnancial assistance for the purpose of, or in connection with, the subscription of any option, or any securities, issued or to be issued by the company or a related or interrelated company, or for the purchase of any securities of the company or a related or interrelated company. Section 45 of the Companies Act essentially requires, subject to limited exceptions, approval by way of special resolution for the provision of ﬁnancial assistance, among others, to companies ‘related’ to and ‘interrelated’ with the company. Both sections 44 and 45 provide, among others, that the regulated ﬁnancial assistance may only be provided pursuant to a special resolution passed by shareholders within the previous two years. The provision of any direct or indirect ﬁnancial assistance by the company will always be subject to the board being satisﬁed that, immediately after providing such ﬁnancial assistance, the company will satisfy the solvency and liquidity test referred to in section 45(3)(b)(i) of the Companies Act, and that the terms under which such ﬁnancial assistance is to be given are fair and reasonable to the company, as referred to in section 45(3)(b)(ii) of the Companies Act. The directors would like the authority to be able to provide ﬁnancial assistance to companies ‘related’ and ‘interrelated’ to the company and persons related to such companies, including for the acquisition of securities issued by the company and related companies, where they regard it as desirable. For example, such authorisation is generally required for providing loans and guarantees and other ﬁnancial assistance to subsidiaries and group companies, which is often necessary or desirable for the conduct of Nedbank Group’s business. 184 NedbaNk Group | Integrated report 2013 Important notes about the annual general meeting Venue: Date: Time: Proof of identity and admission: The Auditorium, Retail Place West, Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton. Tuesday, 13 May 2014, at 08:30. The annual general meeting will start promptly at 08:30. Shareholders wishing to attend are advised to be in the auditorium no later than 08:15. The reception area will be open from 08:00, from which time refreshments will be served. Shareholders and others attending the annual general meeting are asked to register at the registration desk in the auditorium reception area. For purposes of section 63(1) of the Companies Act, 71 of 2008 (as amended) any person attending or participating at the annual general meeting is required to present reasonably satisfactory identiﬁcation to the satisfaction of the presiding chairman. Forms of identiﬁcation include valid identity documents, driving licences and passports. Housekeeping: Cellphones should be switched off for the duration of the proceedings. Parking: Questions: Electronic voting: Interpreter: Secure parking is provided at Nedbank 135 Rivonia Campus, Entrance 4, off Fredman Drive. 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 requested to register their names and addresses and hand in their question forms at the registration desk. A question form is enclosed on page 176 for this purpose. Staff will be on hand to provide any advice and assistance required. Nedbank Group 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. Shareholders wishing to participate in the meeting through electronic facilities are also requested to contact the Company Secretary’s office no later than Friday, 2 May 2014, in order for reasonable access to be arranged. Should you require an interpreter (for sign language or translation from English into any of the other official languages of SA) 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 9107 or at JackieK@nedbank.co.za no later than Friday, 2 May 2014, for this facility to be arranged. 185 DELIVERING TO OUR STAKEHOLDERSMAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSANNexure 1 (CONTINUED) 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 own 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. A person who holds a beneﬁcial interest in any certiﬁcated Nedbank Group shares may vote on a matter at the annual general meeting, only to the extent that: 1 2 3 the beneﬁcial interest includes the right to vote on the matter; and the person’s name is on the company’s register of disclosures as the holder of a beneﬁcial interest; or the person holds a proxy appointment in respect of that matter from the registered holder of the relevant Nedbank Group shares. 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 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 form of proxy are requested to ensure that their form of proxy reaches the address indicated in note 10 on page 184 no later than 08:30 on Monday, 12 May 2014. 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 9107. 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 annual general meeting. 186 NedbaNk Group | Integrated report 2013FORM OF PROXY GRI 3.1: 4.4 NEDBANK GROUP lTD (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 registered holders of certiﬁcated Nedbank Group securities and holders of dematerialised Nedbank Group securities registered in their own name (‘shareholders’) and any persons who are not shareholders, but who at the record date of Friday, 2 May 2014, are entitled to exercise any voting rights (irrespective of the form, title or nature of the securities to which those voting rights are attached) (collectively ‘holders’) in relation to the resolutions to be proposed at the annual general meeting to be held in the Auditorium, Retail Place West, Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, on Tuesday, 13 May 2014, at 08:30 and at any adjournment thereof. Holders of dematerialised securities who wish to attend the annual general meeting must inform their nominee, participant (previously referred to as central securities depository participant) or broker of their intention and the nominee, participant or broker will furnish such holder with the necessary authority to attend and vote at the annual general meeting. Alternately, should a holder not wish to attend the annual general meeting in person, such holder may provide his/her nominee, participant or broker with his/her voting instruction and such nominee, participant or broker will complete all necessary documentation and action same in order for the holders’ vote(s) to be taken account of at the annual general meeting. I/We of (address) being the holder(s) of ordinary shares in the company, appoint (see notes 1 and 4): 1 2 or failing him/her or failing him/her 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 5): Number of votes (one vote per ordinary share) Against For Abstain Resolutions Reappointment of the external auditors 1.1 Reelection as a director of TA Boardman, who is retiring by rotation 1.2 Reelection as a director of MWT Brown, who is retiring by rotation 1.3 Reelection as a director of MA Enus-Brey, who is retiring by rotation 1.4 Reelection as a director of JK Netshitenzhe, who is retiring by rotation 2.1 Election of DKT Adomakoh, who was appointed as a director during the year 3 4 Determination of the remuneration of the external auditors 5 6 Advisory endorsement on a non-binding basis of company’s Remuneration Policy 7 Approval of the non-executive directors’ fees 8 General authority to repurchase shares 9 General authority to provide ﬁnancial assistance to related and interrelated companies Placing of unissued ordinary shares under the control of the directors On a show of hands a person entitled to vote is only entitled to one vote irrespective of the number of the relevant Nedbank Group shares he/she holds or represents. On a poll, a person entitled to vote at the annual general meeting present in person or by proxy/proxies is entitled to that proportion of the total votes in the company that the aggregate amount of the nominal value of the Nedbank Group shares held or represented by him/her bears to the aggregate amount of the nominal value of all the Nedbank Group shares issued by the company and carrying the right to vote. A proxy/proxies may delegate his/her/their authority in terms of this proxy to another person. This proxy form will lapse and cease to be of force and effect immediately after the annual general meeting of the company to be held in the Auditorium, Retail Place West, Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, on Tuesday, 13 May 2014, at 08:30 or at any adjournment thereof, unless it is revoked earlier. Signed at (place) Signature Assisted by me (where applicable) Please read the notes on the reverse side hereof. on (date) 2014 DELIVERING TO OUR STAKEHOLDERSMAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSNOTEs TO FORM OF PROXY sUMMARY OF RIGHTs OF A HOlDER TO BE REPREsENTED BY PROXY As CONTAINED IN sECTION 58 OF THE COMPANIEs ACT AND NOTEs TO FORM OF PROXY 1 Each holder entitled to attend and vote at the annual general meeting is entitled to appoint one or more individuals as proxy/ proxies who need not be a person(s) entitled to vote at the annual general meetings to attend, participate in, speak and vote or abstain from voting in place of that holder at the annual general meeting. The proxy/proxies may delegate the authority received from the holder to a further person, subject to any restriction set out in this form of proxy. 2 3 A proxy appointment must be in writing, dated and signed by the holder appointing the proxy/proxies. 4 A holder may insert the name of a proxy or the names of two alternative proxies of the holder’s choice in the space provided, with or without deleting ‘the chairman of the annual general meeting’. The person whose name stands ﬁrst on this form of proxy and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of the persons whose names follow. Further, a holder may appoint more than one proxy to exercise voting rights attached to different securities held by that holder. 5 A holder’s instructions to the proxy/proxies have to be indicated by the insertion of the relevant number of votes exercisable by that holder in the appropriate box provided. Failure to comply with this will 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/proxies to vote or to abstain from voting at the annual general meeting, without direction as he/she/they deem(s) ﬁt, in respect of all the holder’s votes exercisable thereat. 6 A holder or his/her proxy/proxies is/are not obliged to vote in respect of all the ordinary shares held by such holder or represented by such proxy/proxies, 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 holder or his/her proxy/proxies is/are entitled. 7 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. Examples of satisfactory identiﬁcation include a valid identity document, a valid driving licence or a valid passport. 8 Any alterations or corrections to this form of proxy must be initialled by the signatory/signatories. 9 The completion and lodging of this form of proxy will not preclude the relevant holder 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 holder wish to do so, in which case this proxy will be suspended accordingly. 10 Forms of proxy have to be lodged with or posted to the Company Secretary’s office (for the attention of Ms Jackie Katzin, Block A, Ground Floor, Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, 2196, or PO Box 1144, Johannesburg, 2000) or the company’s transfer secretaries in SA, namely Computershare Investor Services (Pty) Ltd (‘Computershare’), 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), or in Namibia, namely Transfer Secretaries (Pty) Ltd, Robert Mugabe Avenue No 4, Windhoek, Namibia (PO Box 2401, Windhoek, Namibia), before a proxy/proxies may exercise any voting rights of a holder at the annual general meeting. The forms of proxy are requested to be received no later than 08:30 on Monday, 12 May 2014. Forms of proxy can also be submitted by fax to Computershare (fax number +27 (0)11 688 5238), subject to the proxy instructions meeting all other criteria. Any form of proxy not received by the company or the company’s transfer secretaries in accordance with the above, must be handed to the Company Secretary at the annual general meeting before a proxy/proxies may exercise any voting rights of a holder at the annual general meeting. This form of proxy may be completed by: 11 11.1 those holders who are holding Nedbank Group shares in a certiﬁcated form; or 11.2 those holders who are recorded in the subregister as holding Nedbank Group shares in dematerialised electronic form in their own name; or 11.3 persons who are not shareholders but who are entitled to exercise any voting rights (irrespective of the form, title or nature of the securities to which those voting rights are attached) at the record date at the annual general meeting. 12 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 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. 13 Holders attending the annual general meeting will be afforded the opportunity of putting questions to the directors and management. A perforated question form has been included for this purpose. 14 If this form of proxy has been delivered to the company in accordance with paragraph 10, as long as that appointment remains in effect, any notice that is required by the Companies Act or the company’s memorandum of incorporation to be delivered by the company to a holder must be delivered by the company to the holder or, alternatively, if a holder has directed the company to do so in writing and has paid any reasonable fees charged by the company for doing so, to such holder’s proxy/proxies. 15 Save if a holder provides in this proxy form that a proxy appointment is irrevocable, a holder may revoke the proxy appointment by: (i) cancelling it in writing, or making a later inconsistent appointment of a proxy/proxies; and (ii) delivering a copy of the revocation instrument to the proxy/proxies and to the Company Secretary’s office at Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, 2196, for attention Ms Jackie Katzin, to be received before the replacement proxy/proxies exercise(s) any rights of the holder at the annual general meeting of the company or any adjournment thereof. 16 The revocation of a proxy appointment constitutes a complete and ﬁnal cancellation of the proxy’s/proxies’ authority to act on behalf of the holder as of the later of: (i) the date stated in the revocation instrument, if any; or (ii) the date on which the revocation instrument was delivered as required in paragraph 15 above. NedbaNk Group | Integrated report 2013ANAlYsIs OF sHAREHOlDERs for the year ended 31 December Register date: Authorised share capital: Issued share capital: 27 December 2013 600 000 000 shares 510 302 393 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 aid schemes Mutual funds Nominees and trusts Old Mutual Life Assurance Company (SA) Ltd and associates Other corporations Treasury shares Private companies Public companies Retirement funds Share trusts1 Total Public/Non-public shareholders Non-public shareholders Directors and associates of the company2 Old Mutual Life Assurance Company (SA) Ltd and associates Treasury shares Nedbank/Nedbank Group pension funds Nedbank Group Ltd and associates (share trusts)1 Nedbank Group Ltd and associates (mutual funds) Nedbank Group BEE trusts – SA1 Nedbank Group BEE trusts – Namibia Public shareholders Total 1 Excludes shares held by directors in share trusts (executive directors only) and Eyethu schemes. 2 Includes shares held by directors in share trusts (executive directors only) and Eyethu schemes. Number of shareholdings 15 643 3 118 831 202 38 Number of shares % 78,88 3 727 788 15,72 8 526 855 4,19 1,02 26 996 245 57 386 757 0,19 413 664 748 % 0,73 1,67 5,29 11,25 81,07 19 832 100,00 510 302 393 100,00 206 110 22 146 1,03 56 306 868 0,55 120 050 0,11 23 886 583 0,73 1 143 703 15 196 76,62 10 473 301 132 49 34 400 2 603 35 72 1 298 19 495 14 0,67 0,25 0,17 2,02 13,13 5 141 236 3 232 747 484 566 48 919 077 4 372 401 0,18 265 490 771 0,36 0,01 1,50 0,10 2,49 0,07 206 345 14 715 049 1 464 532 166 300 63 116 822 11 062 042 11,03 0,03 4,68 0,23 2,05 1,01 0,63 0,09 9,59 0,86 52,03 0,04 2,88 0,29 0,03 12,37 2,17 19 832 100,00 510 302 393 100,00 91 9 35 1 5 14 6 10 11 19 741 19 832 0,46 317 374 638 0,04 731 512 0,17 265 490 771 0,01 0,03 0,07 0,03 0,05 0,06 14 715 049 228 923 11 062 042 1 814 498 22 531 022 800 821 99,54 192 927 755 62,19 0,13 52,03 2,88 0,04 2,17 0,36 4,42 0,16 37,81 100,00 510 302 393 100,00 187 DELIVERING TO OUR STAKEHOLDERSMAKING THINGS HAPPENENSURING A SUSTAINABLE BUSINESSInformatIon to oUr ShareholderSANAlySiS of ShAreholDerS (CONTINUED) Major shareholders/managers Old Mutual Life Assurance Company (SA) Ltd and associates Nedbank Group treasury shares BEE trusts: Eyethu schemes – Nedbank SA Omuﬁma schemes – Nedbank Namibia Nedbank Group (2005) Share Option, Matched Share and Restricted Share Schemes Nedbank Group Ltd and associates (Capital Management) Nedbank Namibia Ltd Public Investment Corporation (SA) Coronation Fund Managers (SA) Lazard Asset Management (US and UK) Sanlam Investment Management (SA) BlackRock Inc Dimensional Fund Advisors Beneficial shareholders holding 5% or more Old Mutual Life Assurance Company (SA) Ltd and associates (SA) Government Employees Pension Fund (SA) Geographical distribution of shareholders Domestic South Africa Namibia Unclassiﬁed Foreign United States of America United Kingdom and Ireland Europe Other countries Number of shares 2013 % holding 2012 % holding 265 490 771 49 108 934 52,03 9,63 22 531 022 753 309 11 062 042 14 715 049 47 512 32 502 268 30 565 164 16 067 397 9 937 801 8 485 499 7 455 278 265 490 771 38 339 338 443 191 472 435 580 625 5 101 359 2 509 488 67 110 921 40 554 064 6 538 436 7 527 330 12 491 091 4,42 0,15 2,17 2,88 0,01 6,37 5,99 3,15 1,95 1,66 1,46 52,03 7,51 86,85 85,36 1,00 0,49 13,15 7,95 1,28 1,48 2,44 52,13 9,90 4,55 0,15 2,29 2,90 0,01 7,27 2,68 2,93 1,96 1,45 1,40 52,13 8,22 86,37 83,64 1,90 0,83 13,63 8,17 1,58 1,60 2,28 510 302 393 100,00 100,00 188 NedbaNk Group | Integrated report 2013NedbaNk Group | IntegrateD report 2013 nedbank group prides itself on supplying stakeholders with updated information on a regular basis. this information can be found at nedbankgroup.co.za or through the Nedbank app SuiteTM. reference gUiDe Crossreferencing reporting standard 2013 nedbank group pillar 3 Basel III public Disclosure report 2013 nedbank group transformation report Content available at nedbankgroup.co.za Supplementary information is available at nedbankgroup.co.za Scan with your smart device’s QR code reader to access additional information online. Accessing informAtion in this report this report has been produced with a view to simplifying the process of accessing the relevant information required by specific stakeholders. as was the case with the 2012 report, the 2013 report is extensively crossreferenced to ensure that related information is easy to find and that the global reporting Initiative and Financial Services Sector Supplement requirements are easily identifiable. Detailed supplementary information can be accessed at nedbankgroup.co.za mAKing things hAppen DeLiVering to oUr stAKehoLDers ensUring A sUstAinABLe BUsiness informAtion to oUr shArehoLDers OUR cONTAcT DETAILs NEDBANK GROUP LTD Incorporated in the republic of Sa reg no 1966/010630/06 BUsINEss ADDREss AND REGIsTERED OFFIcE nedbank 135 rivonia Campus 135 rivonia road Sandown, Sandton, 2196, Sa POsTAL ADDREss po Box 1144 Johannesburg, 2000, Sa tel: +27 (0)11 294 4444 Website: nedbankgroup.co.za TRANsFER sEcRETARIEs: Sa: CoMpuTerSHare INVeSTor SerVICeS (pTy) LTd BUsINEss ADDREss 70 Marshall Street Johannesburg, 2001, Sa POsTAL ADDREss po Box 61051 Marshalltown, 2107, Sa tel: +27 (0)11 370 5000 Fax: +27 (0)11 688 5238 NaMIbIa: TraNSFer SeCreTarIeS (pty) Ltd BUsINEss ADDREss robert Mugabe avenue no 4 Windhoek, namibia POsTAL ADDREss po Box 2401 Windhoek namibia tel: +264 (0)61 227 647 Fax: +264 (0)61 248 531 AUDITORs: DELOITTE & TOUcHE poSTaL addreSS private Bag X6 gallo Manor, 2052, Sa tel: +27 (0)11 806 5000 Fax: +27 (0)11 806 5003 KPMG INc poSTaL addreSS private Bag X9 parkview, 2122, Sa tel: +27 (0)11 647 7111 Fax: +27 (0)11 647 8000 NEDBANK GROUP INTEGRATED REPORT 2013 Should you wish to engage on the content of this report or if you require an additional copy of the nedbank group Ltd Integrated report 2013, 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. INVEsTOR RELATIONs alfred Visagie: Head of Investor relations tel: +27 (0)11 295 6249 email: nedbankgroupir@nedbank.co.za cOMPANY sEcRETARY tSB Jali: group Company Secretary tel: +27 (0)11 295 9696 Fax: +27 (0)11 294 9696 email: thabanij@nedbank.co.za 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 ‘forward-looking that may be defined as information statements’ within the meaning of US 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 International Financial reporting Standards 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, profits, or consequential loss or damage. 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 internationally certified obtained afforestation, using independently audited chains of custody. from sustainable and the carbon emissions generated through the production of this report have been included in the calculation of nedbank group’s total 2013 carbon footprint that will be offset during 2014. 1 0 1 6 2 A Tribute to Nelson Rolihlahla Mandela The Children’s Champion To a man who made our land his life And forgiveness his focus Who turned hatred into humility And made peace with the past Who made his captors his comrades And his prison cell his podium Who turned imprisonment into freedom And a divided people into a nation Who made children his cause And love his legacy. N E D B A N K G R O U P L I M T E D I I N T E G R A T E D R E P O R T f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 3 Nedbank is a proud partner of: nedbank.co.za Nedbank Limited Reg No 1951/000009/06. Authorised financial services and registered credit provider (NCRCP16). NEDBANK GROUP LIMITED INTEGRATED REPORT for the year ended 31 December 2013

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