NEDBANK LIMITED
AnnuAl report
for the year ended 31 December 2014
annual report 2014 HIGHLIGHTS
HEADLINE
EARNINGS
▲12,4%
R8 077m
NIR/ExpENSES
RATIo
73,5%
2013: 76,6%
RETURN oN
EQUITY
12,5%
2013: 12,2%
CoMMoN-
EQUITY TIER 1 RATIo
11,0%
2013: 10,7%
CREDIT LoSS
RATIo
82 bps
2013: 110 bps
RETURN oN
ASSETS
1,11 %
2013: 1,06%
ContentS
Financial highlights
Ten-year review: Consolidated statement of comprehensive income
Ten-year review: Consolidated statement of financial position
Directors' responsibility
Company Secretary's Certification
Report from our Group Audit Committee
Report from our directors
Independent auditors' report to the shareholders of Nedbank Limited
Consolidated financial statements
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cashflows
Segmental reporting
Notes to the consolidated financial statements
Additional information not covered by the auditors' report
Compliance with IFRS – financial statement notes
Report from Group Remuneration Committee Chair
Reporting back on remuneration
Worldclass at managing risk
Board of directors
Information to our shareholders
Notice of our annual general meeting
Form of proxy
Notes to form of proxy
Terms used in our report
Abbreviations, acronyms and initialisms used in our report
Codes for our financial instruments
Notes
Contact details
2
4
6
8
9
10
12
15
16
17
18
20
21
24
119
120
122
152
166
170
173
174
175
179
182
183
184
1
2014
2013
7 998
(79)
(96)
17
7 152
(37)
(55)
18
8 077
7 189
3,37
0,82
42,7
58,1
52 236
12,5
644 737
753 444
1,11
368 823
11,0
12,1
14,7
27,2
358,3
27,2
29 650
75,62212
36,86072
38,76140
72,56847
975
1 056
925
59,5
3,40
1,10
43,3
56,6
47 973
12,2
595 249
699 155
1,06
336 858
10,7
12,1
14,5
27,2
358,3
27,2
26 390
70,83331
35,12556
35,70775
70,95205
1 037
1 090
1 040
72,3
Rm
Rm
Rm
Rm
Rm
%
%
%
%
Rm
%
Rm
Rm
%
Rm
%
%
%
m
m
m
cents
cents
cents
cents
cents
cents
cents
cents
m
FINANCIAL HIGHLIGHTS
for the year ended 31 December
Headline earnings reconciliation
profit attributable to equity holders of the parent
Non-headline earnings items
Non-headline earnings items
Taxation on non-headline earnings items
Headline earnings
Key ratios
Net interest income to average interest-earning banking assets
Credit loss ratio – banking advances
Non-interest revenue to total income
Efficiency ratio
Total equity attributable to equity holders of the parent
Return on ordinary shareholders’ equity
Average interest-earning banking assets
Total assets
Return on total assets
Total risk-weighted assets
Bank capital adequacy ratios (including unappropriated profits):
– Common-equity tier 1
– Tier 1
– Total
Share statistics
Number of shares in issue:
– ordinary shares
– preference shares
Weighted average number of ordinary shares
Headline earnings per ordinary share
Dividends per preference share:
– Declared per share
Interim
Final
– paid per share
– preference share traded price
Closing
High
Low
– Number of preference shares traded
2
HEADLINE EARNINGS
%
EXPENSES AND EFFICIENCY RATIO
2
3
4
3
1
1
7
3
6
5
6
5
9
6
4
5
3
2
8
3
8
3
8
3
1
3
5
5
8
8
4
6
9
8
1
7
7
7
0
8
4
9
4
0
1
5
2
7
1
1
8
6
7
2
1
1
7
6
2
1
2
9
7
3
1
3
8
9
4
1
5
5
9
6
1
5
6
5
8
1
9
9
1
0
2
1
3
0
2
2
,
0
6
5
5
,
1
6
,
8
4
5
,
4
0
5
,
3
3
5
,
3
6
5
,
8
6
5
,
3
6
5
,
6
6
5
1
,
8
5
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2007
2006
2005
2008
2011
■ Expenses (Rm) ■ Efficiency ratio (%)
2009
2010
2012
2013
2014
TOTAL EQUITY
Rbn
TOTAL ASSETS AND RETURN ON TOTAL ASSETS
,
4
4
2
1
,
8
2
1
,
3
3
,
4
6
3
,
0
8
3
,
4
8
3
,
0
3
4
7
,
1
5
,
0
6
5
,
0
6
5
7
2
3
2
0
4
1
6
4
7
4
5
5
4
5
6
7
5
4
1
6
5
4
6
9
9
6
3
5
7
1
,
1
0
,
1
3
,
1
1
,
1
,
7
0
,
7
0
,
9
0
0
,
1
1
,
1
1
,
1
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2007
2006
2005
■ Total assets (Rbn) ■ Return on total assets (%)
2008
2009
2010
2012
2011
2013
2014
NET INTEREST INCOME TO AVERAGE
INTEREST-EARNING BANKING ASSETS
%
NON-INTEREST REVENUE TO TOTAL INCOME
0
4
,
1
,
4
1
,
4
8
3
,
5
3
,
2
3
,
2
3
,
4
3
,
4
3
,
4
3
,
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
,
2
6
4
,
0
5
4
8
,
1
4
,
3
9
3
,
0
0
4
,
4
0
4
1
,
2
4
,
9
2
4
,
3
3
4
,
7
2
4
4
5
4
7
6
6
5
8
5
2
7
9
7
7
8
9
8
3
3
0
1
1
4
7
0
1
5
5
5
2
1
1
5
1
4
1
6
6
4
5
1
6
9
1
6
1
2007
2006
2005
■ Non-interest revenue (NIR) (Rm) ■ NIR to total income (%)
2008
2009
2014
2010
2012
2013
2011
3
NedbaNk LIMITed annual report
TEN-YEAR REVIEW
rm
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Consolidated statement of comprehensive income
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
Indirect taxation
profit from operations before non-headline earnings items
Non-headline earnings items
profit from operations
Share of (losses)/profits of associate companies and joint arrangements
profit before direct taxation
Direct taxation
profit for the year
profit attributable to:
– ordinary and preference equity holders
– Non-controlling interest – ordinary shareholders
– Non-controlling interest – preference shareholders
Headline earnings
50 075
28 322
21 753
4 478
17 275
16 196
33 471
22 031
522
10 918
(96)
10 822
12
10 834
2 786
8 048
7 998
50
8 048
8 077
44 107
23 873
20 234
5 529
14 705
15 466
30 171
20 199
480
9 492
(55)
9 437
28
9 465
2 297
7 168
7 152
16
7 168
7 189
42 900
24 102
18 798
5 239
13 559
14 151
27 710
18 601
460
8 649
(49)
8 600
8 600
2 159
6 441
6 410
31
6 441
6 460
41 417
24 119
17 298
5 321
11 977
12 555
24 532
16 955
413
7 164
(48)
7 116
7 116
1 610
5 506
5 483
23
5 506
5 531
43 421
27 556
15 865
6 360
9 505
10 741
20 246
14 983
387
4 876
(103)
4 773
4 773
983
3 790
3 737
53
3 790
3 838
49 332
33 795
15 537
6 659
8 878
10 338
19 216
13 792
402
5 022
(32)
4 990
(1)
4 989
960
4 029
3 790
224
15
4 029
3 823
55 154
39 874
15 280
4 755
10 525
9 877
20 402
12 671
356
7 375
745
8 120
9
8 129
1 791
6 338
6 106
217
15
6 338
5 469
40 185
26 631
13 554
2 115
11 439
9 725
21 164
12 768
298
8 098
25
8 123
54
8 177
2 185
5 992
5 681
298
13
5 992
5 656
27 089
16 600
10 489
1 465
9 024
8 566
17 590
11 725
334
5 531
183
5 714
68
5 782
1 669
4 113
3 870
243
4 113
3 711
22 574
13 878
8 696
987
7 709
7 454
15 163
10 494
213
4 456
833
5 289
67
5 356
935
4 421
4 228
193
4 421
3 432
4
rm
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Consolidated statement of comprehensive income
Interest and similar income
Interest expense and similar charges
net interest income
Impairments charge on loans and advances
Income from lending activities
profit from operations before non-headline earnings items
Share of (losses)/profits of associate companies and joint arrangements
Non-interest revenue
operating income
Total operating expenses
Indirect taxation
Non-headline earnings items
profit from operations
profit before direct taxation
Direct taxation
profit for the year
profit attributable to:
– ordinary and preference equity holders
– Non-controlling interest – ordinary shareholders
– Non-controlling interest – preference shareholders
Headline earnings
50 075
28 322
21 753
4 478
17 275
16 196
33 471
22 031
522
10 918
(96)
10 822
12
10 834
2 786
8 048
7 998
50
8 048
8 077
44 107
23 873
20 234
5 529
14 705
15 466
30 171
20 199
480
9 492
(55)
9 437
28
9 465
2 297
7 168
7 152
16
7 168
7 189
42 900
24 102
18 798
5 239
13 559
14 151
27 710
18 601
460
8 649
(49)
8 600
8 600
2 159
6 441
6 410
31
6 441
6 460
41 417
24 119
17 298
5 321
11 977
12 555
24 532
16 955
413
7 164
(48)
7 116
7 116
1 610
5 506
5 483
23
5 506
5 531
43 421
27 556
15 865
6 360
9 505
10 741
20 246
14 983
387
4 876
(103)
4 773
4 773
983
3 790
3 737
53
3 790
3 838
49 332
33 795
15 537
6 659
8 878
10 338
19 216
13 792
402
5 022
(32)
4 990
(1)
4 989
960
4 029
3 790
224
15
4 029
3 823
55 154
39 874
15 280
4 755
10 525
9 877
20 402
12 671
356
7 375
745
8 120
9
8 129
1 791
6 338
6 106
217
15
6 338
5 469
40 185
26 631
13 554
2 115
11 439
9 725
21 164
12 768
298
8 098
25
8 123
54
8 177
2 185
5 992
5 681
298
13
5 992
5 656
27 089
16 600
10 489
1 465
9 024
8 566
17 590
11 725
334
5 531
183
5 714
68
5 782
1 669
4 113
3 870
243
4 113
3 711
22 574
13 878
8 696
987
7 709
7 454
15 163
10 494
213
4 456
833
5 289
67
5 356
935
4 421
4 228
193
4 421
3 432
5
NedbaNk LIMITed annual report TEN-YEAR REVIEW (continued)
rm
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
10 757
56 322
15 644
26 828
17 467
35 004
13 811
31 279
603 329
566 047
5 393
236
2 369
16
1 158
165
7 459
4 409
14 843
4 516
4 204
340
2 932
12
1 098
69
87
6 571
2 847
13 199
4 188
12 587
37 575
14 660
26 194
520 116
4 528
241
2 832
508
1 029
362
84
6 171
1 992
12 641
3 830
11 514
31 715
14 314
29 991
493 107
3 989
629
3 549
8
565
66
488
6 082
2 027
11 862
3 634
753 444
699 155
645 350
613 540
576 490
544 990
547 132
460 627
401 888
326 980
27
17 422
34 787
52 236
3 561
27
17 422
30 524
47 973
3 561
27
17 422
26 140
43 589
3 561
27
14 422
24 856
39 305
3 561
183
141
136
121
55 980
15 479
634 623
8 404
35
287
3 002
35 634
697 464
753 444
51 675
16 588
585 497
10 016
13
297
1 804
33 265
647 480
699 155
47 286
13 475
542 671
9 273
67
36
367
1 880
30 295
598 064
645 350
42 987
13 791
516 540
8 286
27
997
1 473
29 439
570 553
613 540
471 447
446 428
436 420
321 724
250 410
7 469
21 955
14 077
31 667
3 613
440
2 999
5
933
48
82
5 394
1 965
11 068
3 328
27
14 422
20 281
34 730
3 560
110
38 400
11 930
491 038
6 179
76
1 358
1 408
26 101
538 090
576 490
6 823
14 408
12 871
35 754
3 917
580
3 012
12
922
36
102
4 754
1 783
10 437
3 151
27
14 422
18 174
32 623
3 483
1 796
91
37 993
10 799
467 924
5 218
162
1 514
1 298
20 082
506 997
544 990
7 638
10 411
23 114
41 834
4 731
314
2 743
10
913
71
104
4 124
1 667
10 061
2 977
27
14 422
16 927
31 376
3 122
1 644
300
36 442
23 077
464 082
6 145
117
1 982
1 227
14 060
510 690
547 132
9 545
11 775
9 924
29 271
375 421
4 920
29
2 739
735
65
75
3 757
1 305
8 351
2 715
27
14 422
13 954
28 403
3 122
1 307
300
33 132
10 336
391 526
10 419
275
1 470
1 145
12 324
427 495
460 627
11 165
13 855
10 314
22 031
5 120
138
2 385
41
690
48
66
3 323
1 357
7 026
2 605
27
14 422
9 583
24 032
2 770
955
300
28 057
11 549
341 708
9 098
338
1 410
1 210
8 518
373 831
401 888
10 586
9 496
12 534
22 505
5 088
119
2 419
66
397
626
87
3 039
1 225
5 732
2 651
27
14 422
6 263
20 712
2 770
872
24 354
15 463
272 492
5 224
333
774
1 067
7 273
302 626
326 980
Consolidated statement of financial position
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 securities
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
Reserves
total equity attributable to equity holders of the parent
preference share capital and premium
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
Long-term debt instruments
total liabilities
total equity and liabilities
6
Investments in private-equity associates, associate companies and joint
rm
Assets
Consolidated statement of financial position
Cash and cash equivalents
other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
other assets
Current taxation assets
Investment securities
Non-current assets held for sale
Long-term employee benefit assets
Mandatory reserve deposits with central banks
arrangements
Deferred taxation assets
Investment property
property and equipment
Intangible assets
total assets
equity and liabilities
ordinary share capital
ordinary share premium
Reserves
total equity attributable to equity holders of the parent
preference share capital and premium
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
Long-term debt instruments
total liabilities
total equity and liabilities
603 329
566 047
10 757
56 322
15 644
26 828
5 393
236
2 369
16
1 158
165
7 459
4 409
14 843
4 516
27
17 422
34 787
52 236
3 561
55 980
15 479
634 623
8 404
35
287
3 002
35 634
697 464
753 444
17 467
35 004
13 811
31 279
4 204
340
2 932
12
1 098
69
87
6 571
2 847
13 199
4 188
27
17 422
30 524
47 973
3 561
51 675
16 588
585 497
10 016
13
297
1 804
33 265
647 480
699 155
12 587
37 575
14 660
26 194
520 116
4 528
241
2 832
508
1 029
362
84
6 171
1 992
12 641
3 830
27
17 422
26 140
43 589
3 561
47 286
13 475
542 671
9 273
67
36
367
1 880
30 295
598 064
645 350
11 514
31 715
14 314
29 991
493 107
3 989
629
3 549
8
565
66
488
6 082
2 027
11 862
3 634
27
14 422
24 856
39 305
3 561
42 987
13 791
516 540
8 286
27
997
1 473
29 439
570 553
613 540
183
141
136
121
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
7 469
21 955
14 077
31 667
6 823
14 408
12 871
35 754
7 638
10 411
23 114
41 834
471 447
446 428
436 420
3 613
440
2 999
5
933
48
82
5 394
1 965
11 068
3 328
3 917
580
3 012
12
922
36
102
4 754
1 783
10 437
3 151
4 731
314
2 743
10
913
71
104
4 124
1 667
10 061
2 977
9 545
11 775
9 924
29 271
375 421
4 920
29
2 739
735
65
75
3 757
1 305
8 351
2 715
11 165
13 855
10 314
22 031
10 586
9 496
12 534
22 505
321 724
250 410
5 120
138
2 385
41
690
48
66
3 323
1 357
7 026
2 605
5 088
119
2 419
66
397
626
87
3 039
1 225
5 732
2 651
753 444
699 155
645 350
613 540
576 490
544 990
547 132
460 627
401 888
326 980
27
14 422
20 281
34 730
3 560
110
38 400
11 930
491 038
6 179
76
1 358
1 408
26 101
538 090
576 490
27
14 422
18 174
32 623
3 483
1 796
91
37 993
10 799
467 924
5 218
162
1 514
1 298
20 082
506 997
544 990
27
14 422
16 927
31 376
3 122
1 644
300
36 442
23 077
464 082
6 145
117
1 982
1 227
14 060
510 690
547 132
27
14 422
13 954
28 403
3 122
1 307
300
33 132
10 336
391 526
10 419
275
1 470
1 145
12 324
427 495
460 627
27
14 422
9 583
24 032
2 770
955
300
28 057
11 549
341 708
9 098
338
1 410
1 210
8 518
373 831
401 888
27
14 422
6 263
20 712
2 770
872
24 354
15 463
272 492
5 224
333
774
1 067
7 273
302 626
326 980
7
NedbaNk LIMITed annual report DIRECToRS’ RESpoNSIBILITY
The directors are responsible for the preparation and fair presentation of the consolidated financial statements of Nedbank Limited (comprising the
statement of financial position at 31 December 2014, the statement of comprehensive income, the statement of changes in equity and statement of
cashflows for the year then ended), the segmental reporting and the notes to the financial statements (including a summary of significant accounting
policies and other explanatory notes) in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IAS), 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. In addition, the directors are responsible for the preparation of the directors’ report.
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 ability of the company and its subsidiaries to continue as going concerns and there is no reason to
believe that the business will not be a going concern in the year ahead.
The auditors are responsible for reporting on whether the consolidated financial statements are fairly presented in accordance with the applicable
financial reporting framework.
APPROVAL OF CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
The consolidated annual financial statements of Nedbank Limited, as identified in the first paragraph, were approved by the Nedbank board of
directors on 20 February 2015 and are signed on its behalf by:
Dr rJ Khoza
Chairman
Sandown
20 February 2015
MWt Brown
Chief Executive
8
CoMpANY SECRETARY’S CERTIFICATIoN
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 Limited
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
20 February 2015
9
NedbaNk LIMITed annual report REpoRT FRoM oUR GRoUp AUDIT CoMMITTEE
Overview
The Nedbank Group Audit Committee (GAC) assists the board in
fulfilling its oversight responsibilities, in particular with regard to
evaluation of the adequacy and efficiency of accounting policies,
internal controls and financial reporting processes. In addition the
GAC assesses the effectiveness of the internal auditors and the,
independence and effectiveness of the external auditors.
Composition
The GAC consists of four members, all of whom are independent non-
executive directors, and is chaired by Malcolm Wyman. The GAC met
five times during the year at times which were aligned with the group's
financial reporting cycle. The Chief Executive (CE), the Chief Financial
officer (CFo), the Chief operating officer (Coo), the Chief Risk officer
(CRo), the Chief Internal Auditor (CIA), the Chief Governance and
Compliance officer and representatives of the external auditors are
invited to attend all GAC meetings.
GAC members
Malcolm Wyman
(Chairman)
Nomavuso Mnxasana
paul Makwana
Tom Boardman
(appointed 12 May 2014)
Scheduled meeting attendance
5/5
5/5
5/5
2/2
Committee governance and effectiveness
The legal responsibilities of the GAC are governed by the Companies
Act, 71 of 2008 ('Companies Act'), and the Banks Act, 94 of 1990
(as amended) ('Banks Act'). These responsibilities, and compliance
with appropriate governance and international best practice, are dealt
with in the committee's charter, which is reviewed annually and was
approved by the board.
The chairman of the committee reports to the board on the matters
discussed at each committee meeting and the minutes of each meeting
are circulated to all boardmembers.
The GAC Chairman has regular contact with the management team,
including the CEo, the Coo, the CRo, the CIA and the CFo, to address
relevant matters directly. The CIA and the external auditors have direct
access
including closed sessions without
management, on any matter that they regard as relevant to the fulfilment
of the committee's responsibilities.
the committee,
to
New members of the GAC undergo an induction programme, which
includes briefings on matters relevant to the responsibilities of the
committee, and meet with the finance executive. on going training is
provided to committee members on a range of financial, regulatory and
other compliance matters. During 2014 training was conducted on the
investor relations function and JSE reporting requirements; non-interest
income key drivers and areas of judgement; integrated reporting
framework and developments; and global mega trends within the
taxation environment.
The performance of the committee is reviewed annually through a self-
assessment questionnaire. The 2014 review concluded that the
committee continued to operate effectively and meet its objectives.
Internal control
The GAC monitored the effectiveness of the group's internal controls
and compliance with the Enterprisewide Risk Management Framework
(ERMF). The emphasis on risk governance is based on three lines of
defence and the GAC uses the regular reports received from the three
lines of defence to evaluate the effectiveness of the internal controls.
The ERMF places weight on accountability, responsibility, independence,
reporting, communication and transparency, both internally and with all
Nedbank's key external stakeholders.
The functions of the three lines of defence, as well as the principal
responsibilities that extend across the group, are set out in the Risk and
Balance Sheet Management Review available at nedbankgroup.co.za.
For the period under review the GAC monitored management's
effectiveness at:
■ creating and maintaining an effective internal control environment
throughout the group;
■ demonstrating the necessary respect for the control environment;
and
10
■ identifying and correcting weaknesses in systems and internal
controls.
The GAC received regular reports from the Group Information
Technology Committee regarding the monitoring of the adequacy and
efficiency of the group's information systems and from the Group Credit
Committee regarding its oversight of the adequacy and efficiency of the
credit monitoring processes and systems.
The GAC received regular reports on issues in the group's key issues
control log from the CRo and regular reports regarding governance and
compliance matters (including the Companies Act and Banks Act) from
the Chief Governance and Compliance officer.
As required by King III the GAC received confirmation from the CIA
regarding the effectiveness of internal financial controls, internal
controls and risk management.
Having considered, analysed, reviewed and debated
information
provided by management as well as Internal Audit and the external
auditors, the GAC considered that the internal controls of the group had
been effective in all material aspects throughout the year under review.
Financial reporting process
The GAC received regular reports from the CFo regarding the financial
performance of the group, the tracking and monitoring of key
performance indicators, details of budgets, forecasts, long-term plans
and capital expenditures, financial reporting controls and processes,
and the adequacy and reliability of management information used
during the financial reporting process.
The GAC reviewed and approved the accounting policies of the group as
reported in the annual financial statements, monitoring the consistency
of application and compliance with accounting standards. The GAC also
reviewed and approved the related group policies (Finance and
Accounting Risk policy, Taxation policy and Regulatory Reporting
policy). The GAC further assessed and confirmed the appropriateness
of the going-concern assumption used
in the annual financial
statements, taking into account management budgets and the capital
and the liquidity profiles.
The GAC also:
■ received a summary of the key technical accounting matters from
the CFo for consideration as well as a summary of critical
accounting judgements and estimates made during the financial
reporting process;
■ received input where there have been substantive discussions
between management and the external auditors; and
■ discussed all key areas of judgement with management and the
external auditors.
The GAC satisfied itself as to the expertise, resources and experience of
the finance function, as well as the appropriateness of the expertise and
experience of the CFo in terms of the JSE Listings Requirements.
over the past year and a half, there have been significant changes in
reporting by audit committees in the United Kingdom, driven by
regulatory and stakeholder requirements for greater transparency from
audit committees in reporting the matters that the audit committee
considered to be significant to the financial statements and how they
addressed these matters. The GAC considered the UK audit committee
reporting developments to be best practice and have chosen to adopt
them in the current year. Key areas of management judgement applied
in the preparation of the financial statements and assessed by the GAC
in the current year are:
■ Fair value of financial instruments – The GAC reviewed reports
from the CFo regarding the Investment Committee review of
investment valuations and details of critical valuation judgements
applied to the valuation of group treasury and trading instruments.
Financial instruments and investments are disclosed in notes 35
and 36 to the financial statements and in the accounting policy
discussed in note 1.5 to the financial statements.
■ taxation-related matters – The GAC reviewed reports from the
CFo regarding the tax computation and, where applicable, levels of
judgement in determining tax accrual and the deferred tax balance.
The taxation expense and related balances are disclosed in note 11.
■ Credit risk provisions – The GAC reviewed reports from the Group
Credit Committee regarding the level and appropriateness of
impairments, provisioning methodologies, and related key
judgements in determining the impairment balances.
■ Impairment considerations for goodwill, intangible assets and
associate investments – The GAC reviewed reports from the CFo
regarding the annual goodwill impairment assessment, the
consideration of impairment applied to certain intangible assets,
and related assumptions and judgements and the consideration
of the indicators of impairment for associate investments. The
methodology used by the group for goodwill impairment testing is
set out in note 1.7 to the financial statements.
■ employee benefits – The GAC reviewed reports from the CFo
regarding the valuation of postretirement medical aid and pension
fund obligations by independent actuaries and the level of
judgement applied in those actuarial valuations. Details of the key
assumptions used are set out in note 3.6 to the financial
statements.
In future, our external auditors will be required to report key audit
matters in their report, those matters that in the auditors’ judgement
were of most significance in their audit. Those key audit matters may
include the key areas of management judgement described above or
may extend to other matters. The GAC will continue to provide
information in their report to allow users of the financial statements to
understand how the GAC considered and evaluated the significant
matters described by the external auditors.
Regulatory reporting process
The GAC reviewed the adequacy of the regulatory reporting processes as
required by the Banks Act, which includes evaluation of the quality of
reporting and the adequacy of systems and processes, and consideration
of any findings regarding the regulatory reports by the external auditors.
The GAC also hosts an annual trilateral meeting with representatives of
the Bank Supervision Department of the South African Reserve Bank
(SARB) where, among other things, key external audit findings, internal
audit matters and reporting responsibilities in terms of the regulations are
discussed and the SARB provides feedback on industry-related issues.
Internal Audit
Internal Audit performs an independent assurance function and forms
part of the third line of defence as set out in the ERMF in the integrated
report. The CIA has a functional reporting line to the committee
chairman and an operational reporting line to the CEo.
The GAC, with respect to its evaluation of the adequacy and effectiveness
of internal controls, receives reports from the CIA, assesses the
effectiveness of the group internal audit function and reviews and
approves the Group Internal Audit plan. In particular the GAC:
■ ensured that the CIA has a direct reporting line to the chairman of
the GAC;
■ 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; and
■ monitored and challenged, where appropriate, action taken by
management with regard to adverse internal-audit findings.
External auditors
The group's external auditors are Deloitte & Touche and KpMG. The
GAC has a well-established policy on auditor independence and audit
effectiveness. During the period the GAC:
■ recommended to the board the selection of the external auditors
and the approval of their audit fees for the year under review;
■ approved the external auditors' annual plan and related scope of
work, confirming suitable reliance on Group Internal Audit and the
appropriateness of key audit risks identified and related audit effort;
and
■ monitored the effectiveness of the external auditors in terms of
their skills, independence, execution of the audit plan, reporting and
overall performance.
■ further annual review of the quality of the audit and the
performance of the joint external auditors was performed by
Internal Audit by analysing critical competencies expected of the
external auditors through interviews with and the responses to
questionnaires by key finance staff, Group Internal Audit members
central to the assessment process and members of the GAC.
However, the external auditors may provide non-audit services that do
not interfere with their independence and where their skills and
experience make them a logical supplier, subject to preapproval by the
committee. The GAC received regular reports as to the scope and
quantum of non-audit services proposed and delivered and confirmation
from the external auditors that their independence (in respect of audit
services and non-audit services) has not been impaired. Fees paid to the
auditors are disclosed in note 8 to the annual financial statements.
During the period under review Nedbank Group's ultimate holding
company, old Mutual plc, invited tenders for its external audit. Although
the Nedbank Group audit was not itself required to be the subject of a
tender, the GAC did support the old Mutual plc process by evaluating, in
respect of Nedbank Group, the tender participants determined by old
Mutual plc and reporting observations for consideration to old Mutual plc.
old Mutual plc subsequently confirmed that KpMG had been retained as
their external auditors and therefore, since KpMG is one of our joint
external auditors, there were no implications for Nedbank Group.
The GAC considered the independence of the joint external auditors on
an ongoing basis during the year. The GAC also examined the auditors'
proposed audit plan in July and assessed their skills, reporting and
overall performance based on a formal review following the year end
audit. It was confirmed that the joint external auditors were effective,
and they were recommended to the board for reappointment in 2015.
Key focus areas for 2015
■ Review and consideration of management plans in respect of future
changes to the International Financial Reporting Standards (IFRS),
most notably:
IFRS 9: Financial Instruments, which comprises three main
sections, namely classification and measurement of financial
assets and financial liabilities, impairment methodology and
hedge accounting. This standard will be effective from 1 January
2018 and is expected to have a significant impact on impairment
methodologies in banking across the globe.
IFRS 15: This standard relates to revenue from contracts with
clients and although significant and very relevant to the group, it
is not expected to bring material changes when it becomes
effective on 1 January 2017.
■ Monitoring of major technology implementations, the largest of
which was the SAp ERp program undertaken in 2014 and
implemented early in 2015, impacting the entire financial
accounting control environment.
■ Continued focus on ensuring that the group's financial systems,
processes and controls are operating effectively, are consistent with
the group's complexity and are responsive to changes in the
environment and industry.
Annual financial statements and integrated
reporting process
The GAC reviewed and discussed the audited annual financial
statements with the CFo, the CE, the CRo, Internal Audit and the
external auditors. The GAC assessed, and found to be effective and
appropriate, the financial reporting process and controls that led to the
compilation of the annual financial statements as well as the presentation
and disclosure in the annual financial statements with regard to the
approved accounting policies, IFRS and the requirements for fair
presentation of the Companies Act.
The GAC reviewed and discussed the integrated report reporting
process, governance and financial information included in the integrated
report after considering recommendations received from the Group
Transformation, Social and Ethics Committee, the Group Remuneration
Committee, the Group Risk and Capital Management Committee and
the Group Directors' Affairs Committee.
The GAC recommended to the board that the annual financial
statements and the financial information included in the integrated
report be approved. The board subsequently approved the annual
financial statements and the integrated report, which will be open for
discussion at the forthcoming annual general meeting.
The GAC also approved the Non-audit Services policy that specifies that
the external auditors are precluded from engaging in non-audit services
that would compromise their independence or violate any professional
requirements or regulations affecting their appointment as auditors.
Malcolm Wyman
Group Audit Committee Chairman
20 February 2015
11
NedbaNk LIMITed annual report REpoRT FRoM oUR DIRECToRS
for the year ended 31 December 2014
The board of directors have pleasure in presenting the annual financial
statements of Nedbank Limited for the year ended 31 December 2014.
During the period under review, and also subsequent to year-end, the
following changes occurred to the Nedbank Board:
Nature of business
Nedbank Limited ('Nedbank' or 'the company') is a registered bank
that, through its subsidiaries, provides a wide range of banking and
financial services. Nedbank maintains a primary listing of its non-
redeemable, non-cumulative, non-participating preference shares
under 'preference Shares' on JSE Ltd (the JSE).
Annual financial statements
Details of the financial results are set out on pages 16 to 118 of the
annual financial statements, which have been prepared under the
supervision of the Nedbank Chief Financial officer, Mrs RK Morathi,
and audited in compliance with the 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.
Year under review
The year under review is fully covered in the Chairman's Review, Chief
Executive's Review and the Chief Financial officer's Review in the 2014
Nedbank Group Integrated Report.
Share capital
Details of the authorised and issued share capital, together with details
of shares issued during the year, appear in note 29 to the annual
financial statements.
Ownership
The holding company of Nedbank is Nedbank Group Ltd (‘Nedbank
Group’), whose holding company is old Mutual Life Assurance Company
(SA) Limited and associates. Nedbank Group holds 100% 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 in note 52 to the annual financial statements.
Dividends
Details of the dividends appear in note 13 to the annual financial
statements.
Directors
Biographical details of the current directors appear in the Board of
directors section. Details of directors' and prescribed officers’
remuneration and Nedbank Group shares and Nedbank non-
redeemable, non-cumulative, non-participating preference shares
issued to directors and prescribed officers appear in the Reporting back
on remuneration section.
■ David Adomakoh was appointed as a non-executive director on
21 February 2014;
■ Mantsika Matooane was appointed as a non-executive director on
15 May 2014;
■ Brian Dames was appointed as a non-executive director on
30 June 2014;
■ paul Hanratty was appointed as a non-executive director on
8 August 2014;
■ Mfundo Nkuhlu was appointed as an executive director and Chief
operating officer on 1 January 2015;
■ Graham Dempster stood down as the Chief operating officer on
1 January 2015, but remained on the board as an executive director;
and
In terms of Nedbank’s memorandum of incorporation, not less than
one-third of the directors are required to retire at each Nedbank annual
general meeting and may offer themselves for election or reelection.
The directors so retiring are firstly those directors appointed by the
Nedbank board since the last annual general meeting, and thereafter
those longest in office since their last election.
Brian Dames, paul Hanratty, Mantsika Matooane, Mfundo Nkuhlu and
Vassi Naidoo were appointed by the board of directors since the
previous Nedbank annual general meeting and,
in terms of
the memorandum of incorporation, their appointments terminate at
the close of the meeting. They are available for election. Nomavuso
Mnxasana and Mpho Makwana 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 be held on
7 May 2015.
In terms of Nedbank Group policy, as applied by Nedbank, non-
executive directors and
independent non-executive directors of
Nedbank who have served on the board for a period longer than nine
years are required to retire. Reuel Khoza, Mustaq Enus-Brey and Gloria
Serobe were appointed to the Nedbank board on 16 August 2005 and
they will retire at the close of the Nedbank Group annual general
meeting on 11 May 2015. The board has resolved to elect Vassi Naidoo
as Chairman of Nedbank immediately after the close of the Nedbank
Group annual general meeting, subject to Nedbank shareholders
having elected him as a non-executive director.
Graham Dempster has reached the retirement age for executive
directors and he also retires from the Nedbank board at the close of the
Nedbank Group annual general meeting.
12
Details of the members of the board who served during the year and at the reporting date are given below:
Name
Position as director
Date appointed as director
DKT Adomakoh
Non-executive director
21 February 2014
Date resigned/retired as director
(where applicable)
TA Boardman
MWT Brown
BA Dames
GW Dempster
MA Enus-Brey
ID Gladman
pB Hanratty
RJ Khoza
pM Makwana
MA Matooane
Np Mnxasana
RK Morathi
JK Netshitenzhe
MC Nkuhlu
Non-executive director
Chief Executive
Non-executive director
Executive director
Non-executive director
Non-executive director
Non-executive director
Chairman and non-executive
director
Non-executive director
Non-executive director
Non-executive director
Chief Financial officer and
executive director
1 November 2002 (1 March 2010 as
non-executive)
17 June 2004
30 June 2014
5 August 2009
16 August 2005
7 June 2012
8 August 2014
16 August 2005
17 November 2011
15 May 2014
1 october 2008
1 September 2009
Non-executive director
5 August 2010
Chief operating officer and
executive director
JVF Roberts (British)
Non-executive director
GT Serobe
Non-executive director
1 January 2015
1 December 2009
16 August 2005
MI Wyman (British)
Senior independent director
1 August 2009
Vassi Naidoo was appointed as a non-executive director and Chairman designate with effect from 1 May 2015.
Directors' interests
Nedbank Group holds the issued ordinary shares.
The directors' interests in ordinary shares in Nedbank Group and non-
redeemable, non-cumulative preference shares
in Nedbank at
31 December 2014 are set out in the Reporting back on remuneration
section. 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.
The Company Secretary’s addresses and the registered office are as
follows:
Business address
Registered address
Postal address
Nedbank Limited
135 Rivonia Road
Nedbank Limited
Nedbank 135 Rivonia
Campus
Sandown, Sandton
2196
po Box 1144
Johannesburg, 2000
135 Rivonia Road
SA
SA
Sandown, Sandton,
2196
SA
Audit Committee and Group Transformation, Social
and Ethics Committee Reports
Property and equipment
The report from our Group Audit Committee appears on pages 10 and
11 and the Report from Group Transformation, Social and Ethics
Committee Chair appears in the Nedbank Group Integrated Report.
There was no material change in the nature of the fixed assets of
Nedbank or its subsidiaries or in the policy regarding their use during
the year.
Company Secretary and registered office
The board of directors have 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 arms-length relationship between the
Company Secretary and the board is intact.
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.
Details of Mr Jali’s qualifications and experience appear in the
Established and admired leadership teams section of the 2014 Nedbank
Group Integrated Report.
In 2005 the WIpHoLD Consortium and the Brimstone Consortium
were chosen as active black business partners to assist in growing and
repositioning the Nedbank Group business and driving its internal
13
NedbaNk LIMITed annual report REpoRT FRoM oUR DIRECToRS (continued)
transformation. Consequently, performance agreements were entered
into between Nedbank Group and the aforementioned parties, which
govern, inter alia, the setting of the performance criteria, their
evaluation and the resultant performance fees in respect of the black
business partners. Mrs GT Serobe is founder, executive director and
9% shareholder of Women Investment portfolio Holdings Limited
(WIpHoLD) and Chief Executive of Wipcapital (proprietary) Limited, a
wholly owned subsidiary of WIpHoLD. Mr MA Enus-Brey is Chief
Executive officer and 8,83% shareholder of Brimstone Investment
Corporation Limited and a director of various Brimstone subsidiary
companies. The WIpHoLD Financial Services Number Two Trust and
the Brimstone-Mtha Financial Services Trust matured on 1 January 2015.
Also in 2005, Aka Capital (pty) Limited (‘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 2014 Mistra, received a
grant of R1m (2013: 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’s memorandum of
incorporation.
The key responsibilities relating to Reuel Khoza's position as Chairman
of Nedbank Group, and similarly for Vassi Naidoo who is the Chairman-
designate, are encapsulated in contracts.
Service contracts have been entered into for Messrs MWT Brown,
GW Dempster, MC Nkuhlu 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 Reporting back on remuneration section.
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 covers are placed with the
old Mutual Group.
Subsidiary companies
Details of principal subsidiary companies are reflected in note 52 to the
annual financial statements at nedbankgroup.co.za.
Special resolutions by subsidiaries:
■ 6 March 2014 by Depfin Investments (pty) Ltd for the creation and
allotment of 90 Class E and 287 Class F cumulative non-
convertible no par value preference shares.
■ 17 March 2014 by Fidelity Nominees (RF) (pty) Ltd for the
adoption of a new memorandum of incorporation, conversion to a
private company, and adding (RF) to the company’s name.
■ 24 March 2014 by Morened (pty) Ltd for the adoption of a new
memorandum of incorporation and conversion to a private
company.
■ 4 April 2014 by Bene Inventa (pty) Ltd for the adoption of a new
memorandum of incorporation.
■ 6 June 2014 by Nedcor Investments Ltd for the adoption of a new
memorandum of incorporation.
■ 6 June 2014 by Nedgroup Investment 102 Ltd for the adoption of a
new memorandum of incorporation.
■ 11 August 2014 by Depfin Investments (pty) Ltd for the subdivision
of 400 Class C cumulative non-convertible no par value preference
shares into 400 000 Class C cumulative non-convertible no par
value preference shares and for the subdivision of 400 Class
D cumulative non-convertible no par value preference shares into
400 000 Class D cumulative non-convertible no par value
preference shares.
■ 3 June 2014 by Nedcor Bank Nominees (RF) (pty) Ltd for the
adoption of a new memorandum of incorporation, conversion to a
private company and adding (RF) to the company’s name.
■ 18 June 2014 by BoE Holdings (pty) Ltd for the adoption of a new
memorandum of incorporation and conversion to a private
company.
■ 10 November 2014 by Eighty one Main Street Nominees (RF)
(pty) Ltd for the adoption of a new memorandum of incorporation,
conversion to a private company and adding (RF) to the company’s
name.
■ 8 December 2014 by The Board of Executors Mortgages (pty) Ltd
for the adoption of a new memorandum of incorporation.
■ 22 December 2014 by Depfin Investments (pty) Ltd for the creation
and allotment of 600 Class H cumulative non-convertible no par
value preference shares and for the creation and allotment of 100
Class I cumulative non-convertible no par value preference shares.
Acquisition of shares
No shares in Nedbank were acquired by Nedbank or by a Nedbank
subsidiary during the financial year under review.
Events after the reporting period
on 15 January 2015 Nedbank Limited's unsecured subordinated
NEDH1A and NEDH1B notes were redeemed and R225m of new-style
tier 2 debt instruments issued. A further R5,4bn of senior unsecured
debt was issued on 12 February 2015.
14
INDEpENDENT AUDIToRS’ REpoRT To THE SHAREHoLDERS oF NEDBANK LIMITED
We have audited the consolidated financial statements of Nedbank Limited set out on pages 16 to 118, which comprise the statement of financial
position as at 31 December 2014, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the
year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information.
DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The company’s directors are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors
determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to
fraud or error.
AUDITORS’ RESPONSIBILITY
our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International
Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures
selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due
to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of
the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OPINION
In our opinion, these consolidated financial statements present fairly, in all material respects, the consolidated financial position of Nedbank Limited
at 31 December 2014, and its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International
Financial Reporting Standards and the requirements of the Companies Act of South Africa.
OTHER REPORTS REQUIRED BY THE COMPANIES ACT
As part of our audit of the consolidated financial statements for the year ended 31 December 2014, we have read the Directors’ Report, the Audit
Committee’s Report and the Company Secretary’s Certificate for the purpose of identifying whether there are material inconsistencies between
these reports and the audited consolidated financial statements. These reports are the responsibility of the respective preparers. Based on reading
these reports we have not identified material inconsistencies between these reports and the audited consolidated financial statements. However, we
have not audited these reports and accordingly do not express an opinion on these reports.
KpMG Inc.
Registered Auditor
per Heather Berrange
Chartered Accountant (SA)
Director
KpMG Crescent
85 Empire Road
parktown, Johannesburg
2193
Deloitte & touche
Registered Auditor
per Mgcinisihlalo Jordan
Chartered Accountant (SA)
partner
Building 8, Deloitte place
The Woodlands, Woodlands Drive
Woodmead, Sandton
2128
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.
A full list of partners and directors is available on request.
Sandown
20 February 2015
15
NedbaNk LIMITed annual report CoNSoLIDATED 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
Indirect taxation
profit from operations before non-trading and capital items
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 net of taxation
Items that may be reclassified subsequently to profit or loss
– Exchange differences on translating foreign operations
– Fair-value adjustments on available-for-sale assets
Items that may not be reclassified subsequently to profit or loss
– Gains on property revaluations
– Remeasurements on long-term employee benefit assets
total comprehensive income for the year
profit attributable to:
– ordinary and preference equity holders
– Non-controlling interest – ordinary shareholders
total comprehensive income attributable to:
– ordinary and preference equity holders
– Non-controlling interest – ordinary shareholders
total comprehensive income for the year
Accounting
policy
1.23
1.23
1.5
1.21, 1.23
1.23
1.10
1.3
1.6
1.4
1.5
1.9
1.8
1.3
1.3
1.3
1.3
Notes
5
6
19.1
7
8
9
10
25.1
11.1
2014
rm
50 075
28 322
21 753
4 478
17 275
16 196
33 471
22 031
522
10 918
(96)
10 822
12
10 834
2 786
8 048
126
14
(113)
163
62
8 174
7 998
50
8 048
8 123
51
8 174
2013
Rm
44 107
23 873
20 234
5 529
14 705
15 466
30 171
20 199
480
9 492
(59)
4
9 437
28
9 465
2 297
7 168
932
96
(108)
218
726
8 100
7 152
16
7 168
8 084
16
8 100
16
CoNSoLIDATED STATEMENT oF FINANCIAL poSITIoN
at 31 December 2014
ASSetS
Cash and cash equivalents
other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances¹
other assets
Current taxation assets
Investment securities
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
Reserves
total equity attributable to equity holders of the parent
preference share capital and premium
Non-controlling interest attributable to ordinary shareholders
total equity
Derivative financial instruments
Amounts owed to depositors²
provisions and other liabilities
Current taxation liabilities
Deferred taxation liabilities
Long-term employee benefit liabilities
Long-term debt instruments
total liabilities
total equity and liabilities
¹ Included in loans and advances are loans to fellow subsidiaries amounting to R18.6bn (2013: R17.0 bn).
² Included in amounts owed to depositors are deposits from fellow subsidiaries amounting to R11.4bn (2013: R8.5bn).
Accounting
policy
1.5, 1.25
1.5
1.5
1.5
1.5
1.5
1.6
1.5
1.11
1.3, 1.5
1.6
1.10
1.9, 1.19
1.8
1.5, 1.25
1.3, 1.7, 1.12
1.15, 1.16
1.15
1.4, 1.14
1.15
1.3
1.5
1.5
1.5, 1.13
1.6
1.6
1.8
1.5
Notes
14
15
16
17
18
20
21
23
22
24
25
26
27
14
28
29.1
29.2
16
30
31
24
27
32
2014
rm
10 757
56 322
15 644
26 828
2013
Rm
17 467
35 004
13 811
31 279
603 329
566 047
5 393
236
2 369
16
1 158
165
7 459
4 409
14 843
4 516
4 204
340
2 932
12
1 098
69
87
6 571
2 847
13 199
4 188
753 444
699 155
27
17 422
34 787
52 236
3 561
183
55 980
15 479
634 623
8 404
35
287
3 002
35 634
697 464
753 444
27
17 422
30 524
47 973
3 561
141
51 675
16 588
585 497
10 016
13
297
1 804
33 265
647 480
699 155
17
NedbaNk LIMITed annual report CoNSoLIDATED STATEMENT oF CHANGES IN EQUITY
for the year ended 31 December
number of
ordinary shares
ordinary
share capital
rm
ordinary
share premium
rm
Foreign
currency
translation
reserve1
rm
property
revaluation
reserve2
rm
27 241 024
27
17 422
87
1 346
96
(35)
218
(27)
27 241 024
27
17 422
148
1 537
3 561
14
163
(36)
Balance at 31 December 2012
preference share dividend
Dividend to shareholders
Total comprehensive income for the year
Transfer (from)/to reserves
Share-based payments reserve movement
Disposal of subsidiary
Regulatory risk reserve provision
other movements
Balance at 31 December 2013
preference share dividend
Dividend to shareholders
Total comprehensive income for the year
Transfer (from)/to reserves
Share-based payments reserve movement
Regulatory risk reserve provision
other movements
Balance at 31 December 2014
27 241 024
27
17 422
162
1 664
16
33 380
52 236
3 561
183
55 980
¹ This represents the cumulative foreign exchange differences that arise on the translation of an entity with a different functional currency compared with the presentation currency of the parent company. The cumulative reserve
relating to a subsidiary that is disposed of is included in the determination of profit/loss on disposal of the subsidiary.
² This represents the cumulative amounts that have been recognised on the revaluation of group properties net of deferred taxation. When the property is disposed of, the cumulative revaluation surplus is transferred directly to
retained income.
³ All share-based payment expenses are recognised in the statement of comprehensive income, with the corresponding amount recognised in share-based payment reserves. Any excess tax benefit over the relative tax on the
share-based payments expense is recognised directly in this reserve. On the expiry or exercise of a share-based instrument the cumulative amount recognised in this respect is transferred directly to other distributable reserves.
The negative share-based payment reserve arises from the grants paid by Nedbank Limited to various share schemes to acquire Nedbank Group Limited shares, which is recognised directly in equity. The reconciliation shown
in this note is the cumulative share-based payment charge for all share schemes.
⁴ Represents other non-distributable revaluation surplus on capital items and non-distributable reserves transferred from other distributable reserves in order to comply with various banking regulations.
⁵ This comprises all fair-value adjustments, net of the related tax on all financial assets that have been classified as available for sale. On the disposal or impairment of available-for-sale financial assets the cumulative gains and
the associated tax recognised on these instruments are recognised in profit and loss for the period and are not included in the determination of headline earnings per share.
⁶ Represents the accumulated profits after distributions to shareholders and appropriation of retained earnings to other non-distributable earnings.
All movements are reflected net of taxation.
reserves
Share-based
payments
reserve3
rm
(401)
distributable
Available-for-
distributable
equity holders
reserves4
sale reserve5
reserves6
of the parent
total equity
other
attributable to
non-controlling
interest
attributable
to ordinary
shareholders
total equity
preference
share capital
and premium
rm
3 561
other
non-
rm
73
11
(4)
80
(7)
7
80
(11)
49
(363)
(7)
(145)
(515)
rm
237
(108)
129
(113)
rm
24 798
(292)
(3 450)
7 878
62
(3)
28 993
(323)
(3 400)
8 059
50
1
rm
43 589
(292)
(3 450)
8 084
49
(4)
(3)
47 973
(323)
(3 400)
8 123
(145)
7
1
rm
136
(8)
16
(3)
141
(9)
51
rm
47 286
(292)
(3 458)
8 100
49
(3)
(4)
(3)
51 675
(323)
(3 409)
8 174
(145)
7
1
18
number of
share capital
share premium
reserve1
ordinary
ordinary
translation
ordinary shares
27 241 024
rm
27
rm
17 422
27 241 024
27
17 422
148
1 537
Foreign
currency
rm
87
96
(35)
property
revaluation
reserve2
rm
1 346
218
(27)
14
163
(36)
reserves
Share-based
payments
reserve3
rm
(401)
(11)
49
(363)
(7)
(145)
(515)
other
non-
distributable
reserves4
rm
Available-for-
sale reserve5
rm
other
distributable
reserves6
rm
total equity
attributable to
equity holders
of the parent
rm
preference
share capital
and premium
rm
non-controlling
interest
attributable
to ordinary
shareholders
rm
total equity
rm
73
11
(4)
80
(7)
7
80
237
(108)
129
(113)
24 798
(292)
(3 450)
7 878
62
(3)
28 993
(323)
(3 400)
8 059
50
1
43 589
(292)
(3 450)
8 084
49
(4)
(3)
47 973
(323)
(3 400)
8 123
(145)
7
1
3 561
136
(8)
16
(3)
141
(9)
51
3 561
47 286
(292)
(3 458)
8 100
49
(3)
(4)
(3)
51 675
(323)
(3 409)
8 174
(145)
7
1
16
33 380
52 236
3 561
183
55 980
Balance at 31 December 2012
preference share dividend
Dividend to shareholders
Total comprehensive income for the year
Transfer (from)/to reserves
Share-based payments reserve movement
Disposal of subsidiary
Regulatory risk reserve provision
other movements
Balance at 31 December 2013
preference share dividend
Dividend to shareholders
Total comprehensive income for the year
Transfer (from)/to reserves
Share-based payments reserve movement
Regulatory risk reserve provision
other movements
Balance at 31 December 2014
27 241 024
27
17 422
162
1 664
¹ This represents the cumulative foreign exchange differences that arise on the translation of an entity with a different functional currency compared with the presentation currency of the parent company. The cumulative reserve
relating to a subsidiary that is disposed of is included in the determination of profit/loss on disposal of the subsidiary.
² This represents the cumulative amounts that have been recognised on the revaluation of group properties net of deferred taxation. When the property is disposed of, the cumulative revaluation surplus is transferred directly to
retained income.
³ All share-based payment expenses are recognised in the statement of comprehensive income, with the corresponding amount recognised in share-based payment reserves. Any excess tax benefit over the relative tax on the
share-based payments expense is recognised directly in this reserve. On the expiry or exercise of a share-based instrument the cumulative amount recognised in this respect is transferred directly to other distributable reserves.
The negative share-based payment reserve arises from the grants paid by Nedbank Limited to various share schemes to acquire Nedbank Group Limited shares, which is recognised directly in equity. The reconciliation shown
in this note is the cumulative share-based payment charge for all share schemes.
⁴ Represents other non-distributable revaluation surplus on capital items and non-distributable reserves transferred from other distributable reserves in order to comply with various banking regulations.
⁵ This comprises all fair-value adjustments, net of the related tax on all financial assets that have been classified as available for sale. On the disposal or impairment of available-for-sale financial assets the cumulative gains and
the associated tax recognised on these instruments are recognised in profit and loss for the period and are not included in the determination of headline earnings per share.
⁶ Represents the accumulated profits after distributions to shareholders and appropriation of retained earnings to other non-distributable earnings.
All movements are reflected net of taxation.
19
NedbaNk LIMITed annual report CoNSoLIDATED STATEMENT oF CASHFLoWS
for the year ended 31 December
Cash generated by operations
Cash received from clients
Cash paid to clients, employees and suppliers
Dividends received on investments
Recoveries on loans previously written off
Change in funds for operating activities
Increase in operating assets
Increase in operating liabilities
net cash from operating activities before taxation
Taxation paid
Cashflows (utilised by)/from operating activities
Cashflows utilised by investing activities
Acquisition of property and equipment, computer software and development costs and
investment property
Disposal of property and equipment, computer software and development costs and
investment property
Net movement on non-current assets held for sale
Disposal of investment banking assets
Acquisition of private-equity associates, associate companies and joint arrangements
Disposal of private-equity associates, associate companies and joint arrangements
Acquisition of other investments
Disposal of other investments
Cashflows utilised by financing activities
Issue of long-term debt instruments
Redemption of long-term debt instruments
Dividends paid to ordinary shareholders
preference share dividends paid
effects of exchange rate changes on opening cash and cash equivalents
(excluding foreign borrowings)
net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year²
Cash and cash equivalents at the end of the year²
¹ Represents amounts less than R1m.
² Including mandatory reserve deposits with central banks.
Notes
33.1
33.2
33.3
33.4
33.5
33.6
33.7
14
2014
rm
18 386
66 220
2013
Rm
17 772
59 522
(48 803)
(42 665)
40
929
(16 624)
(64 065)
47 441
1 762
(3 463)
(1 701)
(2 011)
37
878
(7 076)
(53 704)
46 628
10 696
(3 059)
7 637
(1 427)
(2 439)
(1 678)
45
(4)
11
(181)
133
(174)
598
(1 354)
7 004
(4 635)
(3 400)
(323)
6
496
14
(121)
80
(1 142)
918
(772)
8 785
(5 815)
(3 450)
(292)
1
1
(5 066)
30 666
25 600
5 438
25 228
30 666
20
SEGMENTAL REpoRTING
for the year ended 31 December
The group’s identification of its segments and the measurement of segment results are based on the group’s internal management reporting as used
for day-to-day decisionmaking and as reviewed by the chief operating decisionmaker, which in Nedbank Limited’s case is the Group Executive
Committee. The segments have been identified according to the nature of their respective products and services and their related target markets.
Nedbank Capital
Nedbank Capital comprises the group’s investment banking businesses that together manage the structuring, lending, underwriting and trading
businesses. Nedbank Capital seeks to provide seamless specialist advice, debt and equity raising and execution and trading capabilities in all the
major SA business sectors.
Nedbank Corporate
Nedbank Corporate comprises the client-focused businesses of Corporate Banking, property Finance as well as the specialist support areas of
Transactional Banking and Corporate Shared Services. These businesses focus mainly on providing lending, deposit-taking, commercial property
finance and transactional banking to large corporates, financial institutions, the public sector and government clients. Corporate Banking engages
with companies that have annual turnovers exceeding R700m (with strategic exceptions) and lending requirements greater than R50m. This target
market also includes the public sector and strategic BEE partnerships. property Finance specialises in providing specifically structured property
finance solutions to commercial, industrial, retail, residential and affordable housing developments as well as partnerships through joint ventures or
minority equity investments. Transactional Banking supports the wholesale clusters and segments of retail with business solutions, transactional
product solutions and innovation, and is also responsible for managing our correspondent banking relationships. Corporate Shared Services is the
delivery and service centre for transactional processing. It also houses Nedbank Investor Services (NIS) through which it provides custodial services
and secured lending to the collective investments industry.
Nedbank Retail
Nedbank Retail serves the financial needs of all individuals (excluding high-net-worth individuals) and small businesses with a turnover of up to
R10m, to whom it offers a full spectrum of banking and assurance products and services. The Nedbank Retail product portfolio includes transactional
accounts, home loans, vehicle and asset finance [including Motor Finance Corporation], card (both card-issuing and merchant-acquiring services),
personal loans and investments.
Nedbank Business Banking
Nedbank Business Banking offers the full spectrum of commercial banking products and related services to companies with an annual turnover of up
to R700m.
Nedbank Wealth
Nedbank Wealth provides a range of financial services through three divisions of Wealth Management, Asset Management and Insurance.
The cluster has operations in SA, London, on the Isle of Man, Jersey, Guernsey and the UAE. Nedbank Wealth creates, manages and protects the
wealth of a wide spectrum of clients ranging from high-net-worth individuals all the way through to the entry level market.
Rest of Africa Division
The Rest of Africa Division is responsible for the group’s banking operations and expansion activities in the rest of Africa. The Rest of Africa Division
has client-facing subsidiaries (retail and wholesale banking) in Lesotho, Malawi, Namibia, Swaziland and Zimbabwe and an investment, with
management control, in a bank in Mozambique. The division also holds the 20,7% investment in Ecobank Transnational Incorporated, manages the
Ecobank-Nedbank alliance and facilitates investments in other countries in Africa.
Centre
The centre is an aggregation of business operations that provide various support services to Nedbank Group Ltd, which includes the following
clusters: Group Finance, Group Technology, Group Strategic planning and Economics, Group Human Resources, Enterprise Governance and
Compliance, Group Risk and Group Marketing, Communications and Corporate Affairs. The centre also includes Group Balance Sheet Management
which is responsible for capital management, liquidity and funding management, the management of banking book interest rate risk, margin
management and strategic portfolio management.
21
NedbaNk LIMITed annual report SEGMENTAL REpoRTING (continued)
for the year ended 31 December
Statement of financial position (Rm)
Cash and cash equivalents
other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
other assets
Intergroup assets
total assets
equity and liabilities
Total equity
Derivative financial instruments
Amounts owed to depositors
provisions and other liabilities
Long-term debt instruments
Intergroup liabilities
total equity and liabilities
Statement of comprehensive income (Rm)
Net interest income
Impairments charge on loans and advances
Income from lending activities
Non-interest revenue
operating income
Total operating expenses
Indirect taxation
profit/(loss) from operations
Share of profits/(losses) of associate
companies and joint arrangements
profit/(loss) before direct taxation
Direct taxation
profit/(loss) after direct taxation
profit attributable to non-controlling interest:
- ordinary shareholders
- preference shareholders
Headline earnings/(loss)
Selected ratios
nedbank ltd
Fellow subsidiaries
nedbank Capital
nedbank Corporate
Banking
nedbank retail
Banking
nedbank Wealth
rest of Africa Division
Centre
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
total nedbank retail
and nedbank Business
nedbank Business
25 600
56 322
15 644
26 828
30 666
35 004
13 811
31 279
(2 650)
(10 912)
71
(349)
(3 407)
(7 447)
421
(812)
2 619
10 986
3 435
2 755
2 932
2 616
2 932
2 616
29 414
30 969
15 551
10 084
13 327
9 635
(52)
5 926
(52)
6 117
–
–
–
–
377
379
377
379
603 329
566 047
(9 692)
(13 325)
105 601
109 549
199 557
175 274
268 882
258 220
203 063
195 435
65 819
62 785
14 073
14 700
25 721
22 348
(32 337)
(25 869)
4 903
6 242
4 203
4 269
–
–
753 444
699 155
(55 869)
(50 439)
168 172
180 708
213 069
188 363
323 840
302 371
211 904
203 155
111 936
57 609
50 911
27 428
20 117
19 195
7 124
5 888
45 761
5 014
36 142
5 532
4 725
356
45 761
289
36 142
99 216
55 980
15 479
51 675
16 588
(14 931)
(12 661)
6 891
5 863
10 606
8 514
27 565
26 683
22 109
21 903
5 456
4 780
2 830
2 487
3 549
1 998
19 470
18 791
7
8
15 429
16 546
–
–
634 623
585 497
(18 827)
(17 455)
137 391
106 226
182 009
176 234
224 103
201 928
118 134
107 931
105 969
93 997
11 728
12 130
(22 114)
(20 328)
35 634
33 265
(4)
(3)
–
–
6 626
1 159
676
6 372
1 051
1 558
2 042
44 650
18 896
1 573
3 373
1 775
3 002
1 994
2 862
1 775
2 563
1 994
67 024
68 764
67 024
68 764
511
439
753 444
699 155
(55 869)
(50 439)
168 172
180 708
213 069
188 363
323 840
302 371
211 904
203 155
111 936
99 216
57 609
934
9 943
1
1 706
6 847
2
24 819
21 912
22 082
20 274
3 328
1 849
24
336
2 779
958
20
709
15 002
26 028
10 454
49
89
13 231
3 677
93
15 251
(453)
(45 761)
(36 142)
7 818
951
13 334
11 467
1
47
27
(8)
6
21 704
16 560
10 159
50 911
17 058
14 406
66 767
82 454
876
4
5 894
27 428
566
3 783
3 916
4
32 700
30 219
3 116
(103 517)
(128 262)
20 117
19 195
7 124
21 753
4 478
17 275
16 196
33 471
22 031
522
20 234
(1 208)
5 529
14 705
15 466
30 171
20 199
480
(28)
(1 180)
(4 116)
(5 296)
(2 503)
(113)
(986)
(36)
(950)
(3 895)
(4 845)
(2 220)
(121)
10 918
9 492
(2 680)
(2 504)
12
10 930
2 803
8 127
28
9 520
2 315
7 205
(149)
1
(2 829)
(2 503)
(684)
(2 145)
(718)
(1 785)
50
–
16
–
(19)
(323)
8 077
7 189
(1 803)
(12)
(292)
(1 481)
1 937
106
1 831
3 206
5 037
2 256
68
2 713
2 713
572
2 141
1 608
306
1 302
3 078
4 380
2 156
36
2 188
2 188
473
1 715
13
(11)
3 982
400
3 582
2 256
5 838
2 408
6
3 525
385
3 140
1 944
5 084
2 169
32
3 424
2 883
12
3 436
837
2 599
26
2 909
664
2 245
2 128
1 726
2 599
2 245
4 031
3 468
2 937
2 539
1 094
929
1 042
900
357
173
Average interest-earning banking assets (Rm)
644 737
595 249
(7 457)
534
117 151
97 506
193 751
173 642
306 401
289 113
198 343
193 027
108 058
96 086
32 351
27 455
18 920
17 207
(16 380)
(10 208)
Return on total assets (%)
Return on ordinary shareholders' equity (%)
Net interest income to average interest-
earning banking assets (%)
Non-interest revenue to total income (%)
Non-interest revenue to total operating
expenses (%)
Credit loss ratio - banking advances (%)
Efficiency ratio
Effective taxation rate (%)
Contribution to group economic profit
Number of employees
¹ Includes all group eliminations.
1,11
12,5
3,37
42,7
73,5
0,82
11,7
25,6
1 215
1,06
12,2
3,40
43,3
76,6
1,10
8,7
24,3
1 136
28 872
27 875
1,18
30,9
1,65
62,3
142,1
0,14
43,9
21,1
1 198
665
1,11
29,4
1,65
65,7
142,7
0,51
46,0
21,6
963
683
1,30
24,5
2,06
36,2
93,7
0,21
38,5
24,4
1 167
2 123
1,25
26,4
2,03
35,5
89,7
0,23
39,5
22,8
1 138
2 186
(897)
(1 627)
(978)
(1 638)
The 2013 comparative results for the segmental reporting have been restated. The Rest of Africa Division is now reported separately, and Central
Management and Shared Services are collectively reported as the Centre. The restatement has had no effect on the group results and ratios, and only
affects segment results and ratios.
Depreciation costs of R906m (2013: R841m) and amortisation costs of R644m (2013: R566m) for property, equipment, computer software and
capitalised development are charged on an activity-justified transfer pricing methodology by the segment owning the assets to the segment utilising
the benefits thereof.
22
15 216
3 771
11 445
10 530
21 975
16 076
243
5 656
–
5 656
1 562
4 094
14 314
4 765
9 549
10 380
19 929
14 824
242
4 863
–
4 863
1 357
3 506
11 720
3 500
8 220
8 820
17 040
12 689
215
4 136
11 206
4 355
6 851
8 651
15 502
11 705
217
3 580
4 136
1 136
3 000
3 580
1 003
2 577
–
63
–
38
63
38
1,24
14,6
4,97
40,9
65,5
1,39
62,4
27,6
310
1,16
13,0
4,95
42,0
70,0
1,80
60,0
27,9
–
1,42
13,3
5,91
42,9
69,5
1,70
61,8
27,5
(48)
1,27
11,6
5,81
43,6
73,9
2,16
58,9
28,0
(308)
17 153
3 496
271
3 225
1 710
4 935
3 387
28
1 520
1 520
426
1 094
1,01
20,1
3,24
32,9
50,5
0,42
65,1
28,0
358
3 108
410
2 698
1 729
4 427
3 119
25
1 283
1 283
354
929
0,96
19,4
3,24
35,7
55,4
0,65
64,5
27,6
308
300
153
147
153
300
54
186
60
60
73
(13)
4
260
(277)
441
441
203
644
(74)
160
558
2
560
149
411
(1)
254
158
4
26 122
17 626
11 027
628
41
587
3 399
3 986
2 484
102
1 400
1 400
358
1 042
1,91
36,8
1,94
84,4
0,17
61,7
25,6
660
2 119
52
40
531
59
472
3 081
3 553
2 218
108
1 227
(1)
1 226
326
900
1,95
36,2
1,93
85,3
0,28
61,4
26,6
577
2 056
898
35
863
768
1 631
1 256
30
345
149
494
85
409
1,58
10,1
4,75
46,1
61,2
0,23
69,2
17,2
(122)
1 605
801
50
751
675
1 426
1 126
23
277
277
64
213
0,90
8,7
4,66
45,7
59,9
0,37
76,3
23,1
(87)
1 501
136,9
138,9
20 373
19 499
18 026
2 347
2 346
(1 101)
3 614
(477)
3 588
nedbank ltd
Fellow subsidiaries
nedbank Capital
nedbank Corporate
total nedbank retail
and nedbank Business
Banking
nedbank retail
nedbank Business
Banking
nedbank Wealth
rest of Africa Division
Centre
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
25 600
56 322
15 644
26 828
30 666
35 004
13 811
31 279
(2 650)
(10 912)
71
(349)
(3 407)
(7 447)
421
(812)
29 414
30 969
15 551
10 084
13 327
9 635
(52)
5 926
(52)
6 117
25 721
22 348
(32 337)
(25 869)
4 903
6 242
4 203
4 269
2 619
10 986
3 435
2 755
2 932
2 616
2 932
2 616
–
–
–
–
377
379
377
379
603 329
566 047
(9 692)
(13 325)
105 601
109 549
199 557
175 274
268 882
258 220
203 063
195 435
65 819
62 785
753 444
699 155
(55 869)
(50 439)
168 172
180 708
213 069
188 363
323 840
302 371
211 904
203 155
111 936
5 888
45 761
5 014
36 142
5 532
4 725
356
45 761
289
36 142
99 216
934
9 943
1
1 706
6 847
2
24 819
21 912
22 082
20 274
3 328
1 849
24
336
2 779
958
20
709
14 073
14 700
15 002
26 028
49
10 454
89
13 231
3 677
93
15 251
(453)
7 818
951
13 334
11 467
(45 761)
(36 142)
57 609
50 911
27 428
20 117
19 195
7 124
(14 931)
(12 661)
6 891
5 863
10 606
8 514
27 565
26 683
22 109
21 903
5 456
4 780
2 830
2 487
3 549
1 998
19 470
18 791
7
8
15 429
16 546
–
–
634 623
585 497
(18 827)
(17 455)
137 391
106 226
182 009
176 234
224 103
201 928
118 134
107 931
105 969
93 997
11 728
12 130
(22 114)
(20 328)
35 634
33 265
(4)
(3)
1 558
2 042
–
–
44 650
18 896
1 573
3 373
1 775
3 002
1 994
2 862
1 775
2 563
1 994
67 024
68 764
67 024
68 764
511
439
4
26 122
17 626
11 027
753 444
699 155
(55 869)
(50 439)
168 172
180 708
213 069
188 363
323 840
302 371
211 904
203 155
111 936
99 216
57 609
1
47
27
(8)
6
21 704
16 560
10 159
50 911
17 058
14 406
66 767
82 454
876
4
5 894
27 428
566
3 783
3 916
4
32 700
30 219
3 116
(103 517)
(128 262)
20 117
19 195
7 124
–
–
55 980
15 479
51 675
16 588
15 216
3 771
11 445
10 530
21 975
16 076
243
5 656
–
5 656
1 562
4 094
14 314
4 765
9 549
10 380
19 929
14 824
242
4 863
–
4 863
1 357
3 506
11 720
3 500
8 220
8 820
17 040
12 689
215
4 136
11 206
4 355
6 851
8 651
15 502
11 705
217
3 580
4 136
1 136
3 000
3 580
1 003
2 577
–
63
–
38
63
38
3 496
271
3 225
1 710
4 935
3 387
28
1 520
1 520
426
1 094
3 108
410
2 698
1 729
4 427
3 119
25
1 283
1 283
354
929
628
41
587
3 399
3 986
2 484
102
1 400
1 400
358
1 042
531
59
472
3 081
3 553
2 218
108
1 227
(1)
1 226
326
900
898
35
863
768
1 631
1 256
30
345
149
494
85
409
801
50
751
675
1 426
1 126
23
277
277
64
213
52
40
8 077
7 189
(1 803)
2 128
1 726
2 599
2 245
4 031
3 468
2 937
2 539
1 094
929
1 042
900
357
173
300
153
147
153
300
54
186
60
60
73
(13)
4
260
(277)
441
441
203
644
(74)
160
558
2
560
149
411
(1)
254
158
Average interest-earning banking assets (Rm)
644 737
595 249
(7 457)
534
117 151
97 506
193 751
173 642
306 401
289 113
198 343
193 027
108 058
96 086
32 351
27 455
18 920
17 207
(16 380)
(10 208)
1,24
14,6
4,97
40,9
65,5
1,39
62,4
27,6
310
1,16
13,0
4,95
42,0
70,0
1,80
60,0
27,9
–
1,42
13,3
5,91
42,9
69,5
1,70
61,8
27,5
(48)
20 373
19 499
18 026
1,27
11,6
5,81
43,6
73,9
2,16
58,9
28,0
(308)
17 153
1,01
20,1
3,24
32,9
50,5
0,42
65,1
28,0
358
0,96
19,4
3,24
35,7
55,4
0,65
64,5
27,6
308
2 347
2 346
1,91
36,8
1,94
84,4
1,95
36,2
1,93
85,3
136,9
138,9
0,17
61,7
25,6
660
2 119
0,28
61,4
26,6
577
2 056
1,58
10,1
4,75
46,1
61,2
0,23
69,2
17,2
(122)
1 605
0,90
8,7
4,66
45,7
59,9
0,37
76,3
23,1
(87)
1 501
(1 101)
3 614
(477)
3 588
23
Statement of financial position (Rm)
Cash and cash equivalents
other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
other assets
Intergroup assets
total assets
equity and liabilities
Total equity
Derivative financial instruments
Amounts owed to depositors
provisions and other liabilities
Long-term debt instruments
Intergroup liabilities
total equity and liabilities
Impairments charge on loans and advances
Income from lending activities
Non-interest revenue
operating income
Total operating expenses
Indirect taxation
Share of profits/(losses) of associate
companies and joint arrangements
profit/(loss) before direct taxation
Direct taxation
profit/(loss) after direct taxation
profit attributable to non-controlling interest:
- ordinary shareholders
- preference shareholders
Headline earnings/(loss)
Selected ratios
Return on total assets (%)
Return on ordinary shareholders' equity (%)
Net interest income to average interest-
earning banking assets (%)
Non-interest revenue to total income (%)
Non-interest revenue to total operating
expenses (%)
Credit loss ratio - banking advances (%)
Efficiency ratio
Effective taxation rate (%)
Contribution to group economic profit
Number of employees
¹ Includes all group eliminations.
affects segment results and ratios.
the benefits thereof.
Statement of comprehensive income (Rm)
Net interest income
20 234
(1 208)
profit/(loss) from operations
10 918
9 492
(2 680)
(2 504)
3 424
2 883
6 626
1 159
676
1 937
106
1 831
3 206
5 037
2 256
68
2 713
2 713
572
2 141
1,18
30,9
1,65
62,3
142,1
0,14
43,9
21,1
1 198
665
6 372
1 051
1 608
306
1 302
3 078
4 380
2 156
36
2 188
2 188
473
1 715
1,11
29,4
1,65
65,7
142,7
0,51
46,0
21,6
963
683
3 982
400
3 582
2 256
5 838
2 408
6
12
3 436
837
2 599
1,30
24,5
2,06
36,2
93,7
0,21
38,5
24,4
1 167
2 123
3 525
385
3 140
1 944
5 084
2 169
32
26
2 909
664
2 245
1,25
26,4
2,03
35,5
89,7
0,23
39,5
22,8
1 138
2 186
21 753
4 478
17 275
16 196
33 471
22 031
522
12
10 930
2 803
8 127
5 529
14 705
15 466
30 171
20 199
480
(28)
(1 180)
(4 116)
(5 296)
(2 503)
(113)
(986)
(36)
(950)
(3 895)
(4 845)
(2 220)
(121)
28
9 520
2 315
7 205
(149)
1
(2 829)
(2 503)
(684)
(2 145)
(718)
(1 785)
1,11
12,5
3,37
42,7
73,5
0,82
11,7
25,6
1 215
1,06
12,2
3,40
43,3
76,6
1,10
8,7
24,3
1 136
28 872
27 875
(897)
(1 627)
(978)
(1 638)
50
–
16
–
(19)
(323)
(12)
(292)
(1 481)
13
(11)
The 2013 comparative results for the segmental reporting have been restated. The Rest of Africa Division is now reported separately, and Central
Management and Shared Services are collectively reported as the Centre. The restatement has had no effect on the group results and ratios, and only
Depreciation costs of R906m (2013: R841m) and amortisation costs of R644m (2013: R566m) for property, equipment, computer software and
capitalised development are charged on an activity-justified transfer pricing methodology by the segment owning the assets to the segment utilising
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS
for the year ended 31 December
1
1.1
pRINCIpAL ACCoUNTING poLICIES
The group applies the following accounting policies in preparing the consolidated financial statements of Nedbank Limited.
Basis of preparation
The financial statements have been prepared on a going-concern basis and have been prepared on a consistent basis with the prior year,
except as detailed in note 2.2.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board, the South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides
as issued by the Accounting practices Committee, Financial pronouncements as issued by the Financial Reporting Standards Council, the
requirements of the Companies Act, 71 of 2008 (as amended) and the JSE Listings Requirements.
The financial information presented in the consolidated financial statements comprises that of the parent company, Nedbank Limited,
together with its subsidiaries, including consolidated structured entities, joint arrangements and associates, presented as a single entity
('the group'). Separate financial statements for the company are available at the company’s head office at Nedbank 135 Rivonia Road
Campus, 135 Rivonia Road, Sandown, 2196, Johannesburg.
The financial statements are presented in SA rand, the functional currency of Nedbank Limited, and are rounded to the nearest million rands.
The statements are prepared on the accrual and historical cost basis of accounting, except for:
■ non-current assets and disposal groups held for sale, which are all stated at the lower of the carrying amount and the fair value less
costs to sell;
■ employee benefit liabilities, valued using the projected-unit credit method, less the net total fair value of the plan assets; and
■ the following assets and liabilities, which are stated at their fair value:
financial assets and financial liabilities classified as at fair value through profit or loss;
financial assets classified as available for sale; and
investment properties and owner-occupied properties.
1.2 Accounting policy elections
The following accounting policy elections have been made by the group:
property and equipment
■ Land and buildings are stated at revalued amounts.
■ Revaluation surpluses are recognised directly in equity, through other comprehensive income.
Investment in venture capital divisions
■ In venture capital divisions the group has elected to carry associate and joint-venture entities
at fair value through profit and loss.
Financial instruments
■ The group has elected to designate certain fixed-rate financial assets and liabilities at fair
value through profit and loss to reduce the accounting mismatch.
■ Regular way purchases or sales of financial assets are recognised and derecognised using
trade date accounting.
Investment properties
■ The group has elected to recognise all investment properties at fair value, with changes in
Investments in subsidiaries, associate
companies and joint arrangements
fair value being recognised in profit and loss for the period.
■ The group has elected to recognise these investments at cost in the company financial
statements.
1.3 Group accounting
The group has adopted IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in
other Entities, as well as the consequential amendments to International Accounting Standard (IAS) 28 Investments in Associates and Joint
Ventures (2011), with effect from 1 January 2013.
Subsidiary undertakings and consolidated structured entities
Subsidiary undertakings are those entities, including unincorporated entities such as trusts and partnerships that are controlled by the
group. The group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity. The group is considered to have power over an entity when it has existing
rights that give it the current ability to direct the relevant activities of the entity. The group is exposed, or has rights, to variable returns from
its involvement with the entity when the investor’s returns from its involvement have the potential to vary as a result of the entity’s
performance. The group considers all facts and circumstances relevant to its involvement with an entity to evaluate whether control exists.
The group assesses any changes to the facts and circumstances relevant to the entity and reassesses the consolidation requirements on a
continuous basis.
The group financial statements include the assets, liabilities and results of the company plus subsidiaries, including consolidated structured
entities from the date control is established until the date that control ceases.
Where a subsidiary has a reporting period that is different from that of the group, the results of the subsidiary are adjusted to reflect a
reporting period consistent with the group’s reporting period. Where necessary, adjustments are made to the financial statements of
subsidiaries to align any difference in accounting policies with those of the group.
Subsidiaries include structured entities that are designed so that its activities are not governed by way of voting rights. In assessing whether
the group has power over such investees in which it has an interest, the group considers factors such as the purpose and design of the
investee; its practical ability to direct the relevant activities of the investee; the nature of its relationship with the investee; and the size of its
exposure to the variability of returns of the investee.
Intragroup balances, transactions, income and expenses, and profits and losses are eliminated in preparation of the group financial
statements. Unrealised losses are not eliminated to the extent that they provide objective evidence of impairment.
24
Associates
An associate is an entity, including an unincorporated entity, over which the group has the ability to exercise significant influence, but not
control or joint control, through participation in the financial and operating policy decisions of the investment (that is neither a subsidiary
nor an investment in a joint arrangement). This is generally demonstrated by the group holding in excess of 20%, but no more than 50%, of
the voting rights.
The profit or loss of the associate and assets and liabilities, including goodwill identified on acquisition, net of any accumulated impairment
losses, are included in the group financial statements using the equity method of accounting from the date significant influence commences
until the date significant influence ceases. Where an associate has a reporting period that is different from that of the group, the results of
the associate are adjusted to reflect a reporting period consistent with the group’s reporting period. The carrying amount of such investments
is reduced to recognise any impairment in the value of individual investments. When the group’s share of losses exceeds the carrying
amount of the associate, the carrying amount is reduced to nil, inclusive of any long-term debt outstanding. The recognition of further losses
is discontinued, except to the extent that the group has incurred or guaranteed obligations in respect of the associate.
Where an entity within the group transacts with an associate of the group, unrealised profits and losses are eliminated to the extent of the
group’s interest in the associate.
At each reporting date the group determines whether there is objective evidence that the investments in associates are impaired. The carrying
amounts of such investments are then reduced to recognise any impairment by applying the impairment methodology described in 1.12.
Investments in associates that are held with the intention of disposing thereof within 12 months are accounted for and classified as noncurrent
assets held for sale in accordance with the methodology described in 1.11.
Joint arrangements
Joint arrangements are those entities over which the group has joint control, established by contractual agreements requiring unanimous
consent for decisions about activities that significantly affect the arrangements’ returns. They are classified and accounted as follows:
■ Joint operation – when the group has rights to the assets, and obligations for the liabilities, relating to an arrangement, it accounts for
its assets, liabilities and transactions, including its share of those held or incurred jointly, in relation to the joint operation.
■ Joint venture – when the group has rights only to the net assets of the arrangement, it accounts for its interest using the equity method.
The carrying amount of such investments is reduced to recognise any impairment in the value of individual investments, by applying
the impairment methodology described in 1.12.
Where an entity within the group transacts with a joint arrangement of the group, unrealised profits and losses are eliminated to the extent
of the group’s interest in the joint arrangement. When the group’s share of losses exceeds the carrying amount of the joint arrangement,
the carrying amount is reduced to nil. The recognition of further losses is discontinued, except to the extent that the group has incurred
or guaranteed obligations in respect of the joint arrangement.
Investments in joint arrangements that are held with the intention of disposing thereof within 12 months are accounted for and classified as
non-current assets held for sale in accordance with the methodology described in 1.11.
Common control transactions
For transactions in which combining entities are controlled by the same party or parties before and after the transaction and where that
control is not transitory are referred to as common-control transactions. The group’s accounting policy for the acquiring entity would be to
account for the transaction at book values as reflected in the consolidated financial statements of the selling entity.
The excess of the cost of the transaction over the acquirer’s proportionate share of the net assets value acquired in common control
transactions, will be allocated to the common control reserve in equity.
Investments held by venture-capital divisions
Where the group has an investment in an associate or joint-venture company held by a venture-capital division, whose primary business is
to purchase and dispose of minority stakes in entities, the investment is classified as designated at fair value through profit or loss, as the
divisions are managed on a fair-value basis. Changes in the fair value of these investments are recognised in non-interest revenue in profit
or loss in the period in which they occur.
Acquisitions and disposals of stakes in group companies
Acquisitions of subsidiaries (entities acquired) and businesses (assets and liabilities acquired) are accounted for using the acquisition
method. The cost of a business combination is measured as the aggregate of the fair values (at the acquisition date) of assets given, liabilities
incurred or assumed, and equity instruments issued by the group in exchange for control of the acquiree. For all transactions subsequent to
31 December 2008 acquisition-related costs are recognised in profit or loss as incurred. prior to this date all acquisition-related costs were
capitalised to the cost of the acquisition.
Where the cost of acquisition includes any asset or liability resulting from a contingent consideration arrangement, that asset or liability is
measured at the acquisition date at fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they
qualify as measurement period adjustments (see below). All other subsequent changes in the fair value of a contingent consideration
classified as an asset or liability are accounted for in accordance with the relevant IFRSs. Changes in the fair value of a contingent consideration
that has been classified as equity are not recognised.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business
Combinations are recognised at their fair value at the date of acquisition, except:
■ deferred-taxation assets or liabilities, which are recognised and measured in accordance with IAS 12 Income Taxes, and liabilities or
assets related to employee benefit arrangements, which are recognised and measured in accordance with IAS 19 Employee Benefits;
■ liabilities or equity instruments that relate to the replacement, by the group, of an acquiree’s share-based payment awards, which are
measured in accordance with IFRS 2 Share-based payments; and
■ assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and
discontinued operations, which are measured in accordance with that standard.
25
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
pRINCIpAL ACCoUNTING poLICIES (continued)
1
1.3 Group accounting (continued)
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the
group reports provisional amounts for the items for which the accounting is incomplete. Where provisional amounts were reported, these
are adjusted during the measurement period (see below). Additional assets or liabilities are recognised to reflect any new information
obtained about the facts and circumstances that existed at the date of acquisition, which, if known, would have affected the amounts
recognised on that date.
The measurement period is the period from the date of acquisition to the date the group receives complete information about the facts and
circumstances that existed at the acquisition date. This measurement period is subject to a maximum of one year after the acquisition date.
Where a business combination is achieved in stages, the group’s previously held interests in the acquired entity are remeasured to fair value
at the acquisition date on the date the group attains control, and the resulting gain or loss, if any, is recognised in profit or loss. Amounts
arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income
(oCI) are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the group’s equity therein. The interest
of non-controlling shareholders is initially measured either at fair value or at the non-controlling interest’s proportionate share of the
acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to the
acquisition, non-controlling interests consist of the amount attributed to such interests at initial recognition and the non-controlling
interest’s share of changes in equity since the date of the combination.
The difference between the proceeds from the disposal of a subsidiary, the fair value of any retained investment and its carrying amount at
the date of disposal, including the cumulative amount of any exchange differences recognised in the statement of changes in equity that
relate to the subsidiary, is recognised as a gain or loss on the disposal of the subsidiary in the group profit or loss for the period.
All changes in the group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions (transactions
with owners). Any difference between the amount by which the non-controlling interests are increased or decreased and the fair value of
the consideration paid or received is recognised directly in equity and attributed to the group.
Goodwill
Goodwill arising on the acquisition of a subsidiary is recognised as an asset on the date that control is acquired, being the acquisition date.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree
and the fair value of the acquirer’s previously held equity interest (if any) in the entity over the net fair value of the identifiable net assets
recognised. If, after reassessment, the group’s interest in the net fair value of the acquiree’s identifiable net assets exceeds the sum of the
consideration transferred plus the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held
equity interest (if any), this excess is recognised immediately in profit or loss as a bargain purchase gain.
Goodwill is not amortised, but is tested for impairment at least once a year. Any impairment loss is recognised immediately in profit or loss
and is not subsequently reversed.
on disposal of a subsidiary the goodwill attributable to the subsidiary is included in the determination of the profit or loss on disposal.
1.4
Foreign currency translation
Foreign currency transactions
Individual entities within the group may use a different functional currency than that of the group, being the currency of the primary economic
environment in which the respective entities operate. Transactions in foreign currencies are translated into the functional currency of the
individual entities in the group at the date of the transaction by applying the spot exchange rate ruling at the transaction date to the foreign
currency amounts.
Monetary assets and liabilities in foreign currencies are translated into the functional currency of the respective entities of the group at the
spot exchange rate ruling at the reporting date.
Exchange differences that arise on the settlement or translation of monetary items at rates that are different from those at which they were
translated on initial recognition during the period or in previous financial statements are recognised in profit or loss in the period that
they arise.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated into the respective
functional currencies of the group entities using the foreign exchange rates ruling at the dates when the fair values were determined.
Non-monetary assets and liabilities denominated in foreign currencies that are measured in terms of historical cost are converted into the
functional currency of the respective group entities at the rate of exchange ruling at the date of the transaction and are not subsequently
retranslated.
Exchange differences on non-monetary items are recognised consistently with the gains and losses that arise on such items. For example,
exchange differences relating to an item for which gains and losses are recognised directly in equity are generally recognised in equity.
Conversely, exchange differences for non-monetary items for which gains and losses are recognised in profit or loss are recognised in profit
or loss in the period in which they arise.
Investments in foreign operations
Nedbank Limited’s presentation currency is SA rand.
The assets and liabilities, including goodwill, of those entities that have functional currencies other than that of the group (SA rand) are
translated at the closing exchange rate. Income and expenses are translated using the average exchange rate for the period. The differences
that arise on translation of these entities are recognised in other comprehensive income (oCI) in the statement of comprehensive income.
The cumulative exchange differences are recognised as a separate component of equity and are represented by the balance in the foreign
currency translation reserve.
26
on disposal of a foreign operation the cumulative amount in the foreign currency translation reserve related to that operation is transferred
to profit or loss for the period when the gain or loss on the disposal of the foreign operation is recognised.
The primary and major determinants for non-rand functional currencies are the economic factors that determine the sales price for goods
and services as well as costs. Additional supplementary factors to be considered are funding, autonomy and cashflows.
1.5
Financial instruments
Financial instruments, as recognised in the statement of financial position, include all financial assets and financial liabilities, including
derivative instruments, but exclude investments in subsidiaries, associate companies and joint arrangements (other than investments held
by venture capital divisions) and employee benefit plans. Financial instruments are accounted for under IAS 32 Financial Instruments:
presentation, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures and IFRS 13 Fair Value
Measurement.
The group commenced hedge accounting during the 2014 financial period. This is neither a change in accounting policy nor as a result of the
adoption of a new or amended standard, but merely the first-time application of an accounting treatment currently permitted under existing
and currently effective IFRS.
This accounting policy should be read in conjunction with the group’s categorised statement of financial position, the group’s risk
management policies and note 35.1.
Initial recognition
Financial instruments are recognised in the statement of financial position when the group becomes a party to the contractual provisions of
a financial instrument. All purchases of financial assets that require delivery within the timeframe established by regulation or market
convention (‘regular-way’ purchases) are recognised at the trade date, which is the date on which the group commits to purchase the
financial asset. The liability to pay for ‘regular-way’ purchases of financial assets is recognised on the trade date, which is when the group
becomes a party to the contractual provisions of the financial instrument.
Contracts that require or permit net settlement of the change in the value of the contract are not considered ‘regular-way’ contracts and are
treated as derivatives between the trade and settlement dates of the contract.
Initial measurement
Financial instruments that are categorised and designated at initial recognition as being at fair value through profit or loss are recognised at
fair value. Transaction costs, which are directly attributable to the acquisition or on issue of these financial instruments, are recognised
immediately in profit and loss.
Financial instruments that are not carried at fair value through profit or loss are initially measured at fair value plus transaction costs that are
directly attributable to the acquisition or issue of the financial instruments.
Where the transaction price in a non-active market is different to the fair value from other observable current market transactions in the
same instrument or based on a valuation technique, the variables of which include only data from observable markets, the group defers such
differences (day-one gains or losses). Day-one gains or losses are amortised on a straight-line basis over the life of the financial instrument.
To the extent that the inputs determining the fair value of the instrument become observable, or on derecognition of the instrument, day-one
gains or losses are recognised immediately in profit or loss.
Categories of financial instruments
Subsequent to initial recognition, financial instruments are measured at fair value or amortised cost, depending on their classification and
whether fair value can be measured reliably:
■ Financial instruments at fair value through profit or loss
Financial instruments at fair value through profit or loss consist of instruments that are held for trading and instruments that the group
has designated, at the initial recognition date, as at fair value through profit or loss.
The group classifies instruments as held for trading if they have been acquired or incurred principally for the purpose of sale or repurchase
in the near term, they are part of a portfolio of identified financial instruments for which there is evidence of a recent actual pattern of
short-term profittaking or they are derivatives. The group’s derivative transactions include foreign exchange contracts, interest rate
futures, forward rate agreements, currency and interest rate swaps, and currency and interest rate options (both written and purchased).
Financial instruments that the group has elected, at the initial recognition date, to designate as at fair value through profit or loss are
those that meet any one of the following conditions:
the fair value-through-profit-or-loss designation eliminates or significantly reduces a measurement or recognition inconsistency
that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on assets and liabilities on
different bases;
the instrument forms part of a group of financial instruments that is managed and its performance is evaluated on a fair value basis,
in accordance with a documented risk management or investment strategy, and information about the group is provided internally
on that basis to key management personnel, using a fair value basis; or
a contract contains one or more embedded derivatives that require separation from the host contract or a derivative that
significantly modifies the cashflows of the host contract.
Gains or losses on financial instruments at fair value through profit or loss (excluding interest income and interest expense calculated on the
amortised-cost basis relating to interest-bearing instruments that have been designated as at fair value through profit or loss) are reported
in non-interest revenue in the period in which they arise. Interest income and interest expense calculated in accordance with the effective-
interest method are reported in interest income and expense, except for interest income and interest expense on instruments held for
trading, which are recognised in non-interest revenue.
27
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
1
1.5
pRINCIpAL ACCoUNTING poLICIES (continued)
Financial instruments (continued)
■ Non-trading financial liabilities
All financial liabilities, other than those at fair value through profit or loss, are classified as non-trading financial liabilities and are
measured at amortised cost. The interest expense is recorded in interest expense and similar charges.
■ Held-to-maturity financial assets
Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and a fixed maturity that the
group has the positive intention and ability to hold to maturity, other than those that meet the definition of loans and receivables or those
that were designated as at fair value through profit or loss or available for sale. Held-to-maturity financial assets are measured at
amortised cost, with interest income recognised in interest and similar income. Gains or losses arising on disposal of held-to-maturity
financial assets are recognised in non-interest revenue.
■ Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market,
other than those financial assets classified by the group on initial recognition as at fair value through profit or loss, available for sale or
loans and receivables that are held for trading.
Financial assets that are classified as loans and receivables are carried at amortised cost, with interest income recognised in interest and
similar income. Gains or losses arising on disposal are recognised in non-interest revenue. The majority of the group’s advances are
included in the loans and receivables category.
■ Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that the group has designated as available for sale or are not
classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets as at fair value through profit or loss.
Available-for-sale financial assets are measured at fair value, with fair-value gains or losses recognised in other comprehensive income,
unless the asset has been designated as a hedged item in a fair-value hedging relationship subject to hedge accounting. In a fair-value
hedging relationship, the portion of the fair-value gain or loss of the asset attributable to the hedged risk is recorded in profit and loss to
offset changes in the fair value of the hedging instrument. Any other changes in the fair value of the asset attributable to aspects other
than the hedged risk, is recognised in other comprehensive income.
Foreign currency translation gains or losses on monetary items, impairment losses and interest income calculated using the effective-
interest-rate method, is reported in profit or loss.
Derivative financial instruments and hedge accounting
Derivatives are classified as assets when their fair value is positive or as liabilities when their fair value is negative, subject to the offsetting
principles as described under ‘offsetting financial instruments and related income’.
The method of recognising fair-value gains and losses depends on whether derivatives are held for trading or are designated as hedging
instruments, and if the latter, the nature of the risks being hedged.
■ Derivatives that qualify for hedge accounting
The group applies hedge accounting when transactions meet the criteria set out in IAS 39. When derivatives are designated as hedging
instruments, the group classifies them as either:
hedges of the change in fair value of recognised assets or liabilities or firm commitments (‘fair-value hedges’);
hedges of the variability in highly probable future cashflows attributable to a recognised asset or liability, or a forecast transaction
(‘cashflow hedges’); or
a hedge of a net investment in a foreign operation (‘net investment hedges’).
Cashflow hedges and hedges of net investments in foreign entities do not currently form part of the group’s hedging strategy.
At the inception of a hedging relationship, the group designates and documents the relationship between the hedging instrument and the
hedge item as well as its risk management objective and strategy for undertaking the hedging transactions, and the nature of the risk being
hedged. The group also documents its assessment of whether the hedging instrument is effective in offsetting changes in fair value or
cashflow of the hedged item attributable to the hedged risk.
Hedge effectiveness is assessed at inception and throughout the term of each hedging relationship. Each hedge must be expected to be
highly effective (prospective effectiveness), and demonstrates actual effectiveness (retrospective effectiveness) on an ongoing basis.
For prospective effectiveness, the hedging instrument must be expected to be highly effective in offsetting changes in fair value or cash
flows attributable to the hedges risk during the period for which the hedge is designated. For actual effectiveness to be achieved, the
changes in fair value or cashflows must offset each other in the range of 80% to 125%.
Interest on designated qualifying hedges is included in net interest income.
■ Fair-value hedges
Where a hedging relationship is designated as a fair-value hedge, the hedged item is adjusted for the change in fair value in respect of the
risk being hedged. Fair-value gains and losses arising on the remeasurement of both the hedging instrument and the hedged item are
recognised in ‘net interest income’, for so long as the hedging relationship is effective. Any hedge ineffectiveness is recognised in profit
and loss in non-interest revenue.
If the derivative expires, is sold, terminated, exercised, no longer meets the criteria for fair-value hedge accounting, or the designation
is revoked, then hedge accounting is discontinued.
28
■ Derivatives that do not qualify for hedge accounting
All gains and losses from changes in the fair value of derivatives that do not qualify for hedge accounting are recognised immediately
in non-interest revenue.
Embedded derivatives
Derivatives in a host contract that is a financial or non-financial instrument, such as an equity-conversion option in a convertible bond, are
separated from the host contract when all of the following conditions are met:
■ the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract; and
■ a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and
■ the combined contract is not measured at fair value, with changes in fair value recognised in profit or loss.
The host contract is accounted for:
■ under IAS 39 if it is a financial instrument; and
■ in accordance with other appropriate accounting standards if it is not a financial instrument.
If an embedded derivative is required to be separated from its host contract, but it is not possible to separately measure the fair value of the
embedded derivative, either at acquisition or at a subsequent financial reporting date, the entire hybrid instrument is categorised as at fair
value through profit or loss and measured at fair value.
Measurement basis of financial instruments
There are two bases of measurement, namely amortised cost and fair value:
■ Amortised cost
The amortised cost of a financial instrument is the amount at which the financial instrument is measured on initial recognition minus
principal repayments, plus or minus the cumulative amortisation using the effective-interest method of any difference between the initial
contractual amount and the maturity amount, less any cumulative impairment losses.
The effective-interest method is a method of calculating the amortised cost of a financial instrument and of allocating the interest
income and expense over the relevant period. The effective-interest rate is the rate that exactly discounts estimated future cash
payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period, to the net carrying
amount of the financial instrument. When calculating the effective interest rate, cashflows are estimated considering all contractual
terms of the financial instrument, but future credit losses are not considered. The calculation includes all fees and points paid or received
between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums
or discounts.
■ Fair value
The fair value of a financial instrument is the amount that would be received to sell the asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The fair value of instruments that are quoted in an active market is determined using quoted prices where they represent those at which
regularly and recently occurring transactions take place.
The group uses valuation techniques to establish the fair value of instruments where quoted prices in active markets are not available.
For a detailed discussion of the fair value of financial instruments refer to note 35.1.
Impairment of financial assets
The group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired.
A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of
impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event) and that loss event has
(or events have) an impact on the estimated future cashflows of the financial asset or group of financial assets that can be reliably estimated.
objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the group
about the following loss events:
■ significant financial difficulty of the issuer or obligor;
■ a breach of contract, such as a default or delinquency in respect of interest or principal payments;
■ the group granting to the borrower, for economic or legal reasons relating to the borrower’s financial difficulty, a concession that the
group would not otherwise consider;
■ it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
■ the disappearance of an active market for that financial asset because of financial difficulties; or
■ observable data indicating that there is a measurable decrease in the estimated future cashflows from a group of financial assets since
the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group,
including:
adverse changes in the payment status of borrowers in the group; or
national or local economic conditions that correlate with defaults on the assets in the group.
Loans that would otherwise be past due or impaired and whose terms have been renegotiated and display the characteristics of a performing
loan are reset to performing status. Loans whose terms have been renegotiated continue to be monitored to determine whether they are
considered to be impaired or past due.
29
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
1
1.5
pRINCIpAL ACCoUNTING poLICIES (continued)
Financial instruments (continued)
■ Assets carried at amortised cost
If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity financial assets carried at amortised
cost has been incurred, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the
present value of estimated future cashflows (excluding future credit losses that have not been incurred) discounted at the financial
asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the
amount of the loss is recognised in profit or loss.
The group first assesses whether there is objective evidence of impairment individually for financial assets that are individually significant,
and individually or collectively for financial assets that are not individually significant. If the group determines that there is no objective
evidence of impairment for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial
assets with similar credit-risk characteristics and collectively assesses them for impairment.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously recognised impairment loss
is reversed by adjusting the allowance account. The reversal may not result in a carrying amount of the financial asset that exceeds what
the amortised cost would have been had the impairment not been recognised at the date on which the impairment is reversed. The amount
of the reversal is recognised in profit or loss for the period.
■ Available-for-sale financial assets
When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity, in the statement of
comprehensive income, and there is objective evidence that the asset is impaired, the cumulative loss that has been recognised directly
in equity, in the statement of comprehensive income, is removed from equity and recognised in profit or loss. The amount of the
cumulative loss that is removed from equity and recognised in profit or loss is the difference between the acquisition cost (net of any
principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognised in
profit or loss. Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available for sale are
not reversed through profit or loss.
If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively
related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, with the amount
of the reversal recognised in profit or loss for the period.
■ Maximum credit risk
Credit risk arises principally from loans and advances to clients, investment securities, derivatives and irrevocable commitments to
provide facilities. The maximum credit risk is typically the gross carrying amount, net of any amounts offset and impairment losses.
The maximum credit exposure for loan commitments is the full amount of the commitment if the loan cannot be settled net in cash or
using another financial asset.
Derecognition
The group derecognises a financial asset (or group of financial assets) or a part of a financial asset (or part of a group of financial assets)
when, and only when:
■ the contractual rights to the cashflows arising from the financial asset have expired; or
■ it transfers the financial asset, including substantially all the risks and rewards of ownership of the asset; or
■ it transfers the financial asset, neither retaining nor transferring substantially all the risks and rewards of ownership of the asset, but no
longer retaining control of the asset.
A financial liability (or part of a financial liability) is derecognised when, and only when, the liability is extinguished, ie when the obligation
specified in the contract is discharged, cancelled or has expired.
The difference between the carrying amount of a financial asset or financial liability (or part thereof) that is derecognised and the consideration
paid or received, including any non-cash assets transferred or liabilities assumed, is recognised in non-interest revenue for the period.
Securitisations
The group securitises various consumer and commercial financial assets, generally resulting in the sale of these assets to structured entities,
which in turn issue securities to investors. Interests in the securitised financial assets may be retained in the form of senior or subordinated
tranches, interest-only strips or other residual interests (retained interests). Retained interests are primarily recorded in available-for-sale
investment securities and carried at fair value.
Gains or losses on securitisation, if the financial assets or liabilities are derecognised, depend in part on the carrying amount of the transferred
financial assets, allocated between the financial assets derecognised and the retained interests based on their relative fair values at the date
of transfer. Gains or losses on securitisation are recorded in non-interest revenue for the period.
Offsetting financial instruments and related income
Financial assets and liabilities are offset and the net amount reported in the statement of financial position only when the group has a legally
enforceable right to set off the financial asset and financial liability and the group has an intention of settling the asset and liability on a net
basis or realising the asset and settling the liability simultaneously. Income and expense items are offset only to the extent that their related
instruments have been offset in the statement of financial position.
Collateral
Financial and non-financial assets are held as collateral in respect of recognised financial assets. Such collateral, except cash collateral, is
not recognised by the group, as the group does not retain the risks and rewards of ownership, and is obliged to return such collateral to
counterparties on settlement of the related obligations. Should a counterparty be unable to settle its obligations, the group takes possession
30
of collateral or calls on other credit enhancements as full or part-settlement of such amounts. These assets are recognised when the
applicable recognition criteria under IFRS are met, and the group’s accounting policies are applied from the date of recognition.
Cash collateral is recognised when the group receives the cash and is reported as amounts received from depositors. Collateral is also given
to counterparties under certain financial arrangements, but such assets are not derecognised where the group retains the risks and rewards
of ownership. Such assets are at risk to the extent that the group is unable to fulfil its obligations to counterparties. For a detailed discussion
on collateral see note 47.
Sale and repurchase agreements and lending of securities
Securities sold subject to linked repurchase agreements are retained in the financial statements, as the group retains all risks and rewards
of ownership of the securities. The securities are recorded as trading or investment securities and the counterparty liability is included in
amounts owed to other depositors, deposits from other banks, or other money market deposits, as appropriate. Securities purchased under
agreements to resell are recorded as loans and advances to other banks or clients, as appropriate. The difference between the sale and
repurchase price is treated as interest and recognised over the duration of the agreements using the effective-interest method.
Securities lent to counterparties are also retained in the financial statements and any interest earned is recognised in profit or loss using the
effective-interest-rate method. Securities borrowed are not recognised in the financial statements, unless these are sold to third parties,
in which case the purchase and sale are recorded with the gain or loss included in non-interest revenue. The obligation to return them is
recorded at fair value as a trading liability.
Acceptances
Acceptances comprise undertakings by the group to pay bills of exchange drawn on clients. The group expects most acceptances to be
settled simultaneously with the reimbursement from clients. Acceptances are recorded as liabilities within amounts owed to depositors,
with the corresponding asset recorded in the statement of financial position within loans and advances.
Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs
because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Issued financial guarantee contracts are recognised as insurance contracts and are measured at the best estimate of the expenditure
required to settle any financial obligation as of the reporting date. Liability adequacy testing is performed to ensure that the carrying amount
of the liability for issued financial-guarantee contracts is sufficient. Any increase in the liability relating to guarantees is recognised in profit
or loss.
1.6 Taxation
Taxation expense, recognised in the statement of comprehensive income, comprises current and deferred taxation. Current or deferred
taxation is recognised in profit or loss, except to the extent that it relates to items recognised directly in equity, in which case it too is
recognised in equity and to the extent that it relates to items recognised in oCI, in which case it too is recognised in oCI.
Current taxation
Current taxation is the expected tax payable on the taxable income for the year, using taxation rates enacted or substantively enacted at the
reporting date, and any adjustment to taxation payable in respect of previous years (prior-period tax paid).
Deferred taxation
Deferred-taxation is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Temporary differences are differences between the carrying amounts of
assets and liabilities for financial reporting purposes and their respective taxation bases. The amount of deferred taxation provided is based
on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, and is measured at the taxation rates
(enacted or substantively enacted at the reporting date) that are expected to be applied to the temporary differences when they reverse.
Deferred taxation is recognised in profit or loss for the period, except to the extent that it relates to a transaction that is recognised directly
in equity or in oCI, or a business combination that is accounted for as an acquisition. The effect on deferred taxation of any changes in
taxation rates is recognised in profit or loss for the period, except to the extent that it relates to items previously charged or credited directly
to equity.
Deferred taxation liabilities are generally recognised for all taxable temporary differences, and deferred-taxation assets are generally
recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those
deductible temporary differences can be utilised.
Deferred taxation is not recognised for the following temporary differences:
■ the initial recognition of goodwill;
■ the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor
taxable profit; and
■ differences relating to investments in subsidiaries and jointly controlled entities to the extent that they will not reverse in the
foreseeable future.
Deferred-taxation assets are recognised to the extent that it is probable that future taxable income will be available against which the
unutilised taxation losses and deductible temporary differences can be used. Deferred taxation assets are reviewed at each reporting date
and are reduced to the extent that it is no longer probable that the related taxation benefits will be realised.
Deferred-taxation assets and liabilities are offset if there is a legally enforceable right to offset current taxation liabilities against current
taxation assets, and they relate to income taxes levied by the same taxation authority on the same taxable entity, or on different taxation
entities, but they intend to settle current tax liabilities and assets on a net basis or their taxation assets and liabilities will be realised
simultaneously.
Deferred-taxation assets and liabilities are not discounted.
31
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
pRINCIpAL ACCoUNTING poLICIES (continued)
1
1.7 Goodwill and intangible assets
Goodwill and goodwill impairment
Goodwill arises on the acquisition of subsidiaries, associates and joint arrangements. Goodwill is measured at cost less accumulated
impairment losses. In respect of equity-accounted investments the carrying amount of goodwill is included in the carrying amount of
the investment.
Goodwill is allocated to one or more cash-generating units (CGUs), being the smallest identifiable group of assets that generates cash
inflows that are largely independent of the cash inflows from other assets or groups of assets. Goodwill is allocated to the CGUs in which the
synergies from the business combinations are expected. Each CGU containing goodwill is annually tested for impairment. An impairment
loss is recognised whenever the carrying amount of an asset or its CGU exceeds its recoverable amount. Impairment losses that are
recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to a CGU and then to reduce the
carrying amount of the other assets in the CGU on a pro rata basis. However, the carrying amount of these other assets may not be reduced
below the highest of its fair value less costs to sell, its value in use and zero.
Impairment testing procedures
The recoverable amount of a CGU is the higher of its fair value less cost to sell and its value in use. The fair value less cost to sell is
determined by ascertaining the current market value of an asset (or the CGU) and deducting any costs related to the realisation of the asset.
In assessing value in use the expected future cashflows from the CGU are discounted to their present value using a discount rate that reflects
current market assessments of the time value of money and the risks specific to the particular CGU.
Impairment losses relating to goodwill are not reversed and all impairment losses are recognised in capital and non-trading items for
the period.
Computer software and capitalised development costs
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding,
and expenditure on internally generated goodwill and brands are recognised as an expense in profit or loss for the period.
If costs can be reliably measured and future economic benefits are available, expenditure on computer software and other development
activities, whereby set procedures and processes are applied to a project for the production of new or substantially improved products and
processes, is capitalised if the computer software and other developed products or processes are technically and commercially feasible and
the group has intention and sufficient resources to complete development. The expenditure capitalised includes the cost of materials and
directly attributable employee and other direct costs. Computer development expenditure is amortised only once the relevant software is
available for use in the manner intended by management. Capitalised software is stated at cost less accumulated amortisation and
impairment losses. Expenditure for the development of computers that are not yet available for use is not amortised and is stated at cost less
impairment losses.
Amortisation of computer software and development costs is charged to profit or loss on a straight-line basis over the estimated useful lives
of these assets, which do not exceed five years and are reviewed annually. Subsequent expenditure relating to computer software is
capitalised only when it increases the future economic benefits embodied in the specific asset, in its current condition, to which it relates.
All other subsequent expenditure is recognised as an expense in the period in which it is incurred. The profit or loss on the disposal of
computer software is recognised in non-trading and capital items (in profit or loss). The profit or loss on disposal is the difference between
the net proceeds received and the carrying amount of the asset.
The amortisation methods and residual values of these intangible assets are reviewed on an annual basis.
Contractual client relationships
Contractual client relationships, including the present value of in-force business in insurance businesses, acquired in a business combination
are recognised at fair value at the date of acquisition. The contractual client relationships have a finite useful life and are carried at cost less
accumulated amortisation. The useful lives of these client relationships are reviewed on an annual basis. Amortisation is calculated using
the straight-line method over the expected life of the client relationship.
1.8
Employee benefits
The group operates a number of defined-benefit and defined-contribution plans for eligible employees. The assets of these plans are
generally held in separate trustee-administered funds. These benefits are accounted for in accordance with IAS 19.
Defined-benefit plans
The liability recognised in the statement of financial position in respect of defined-benefit pension plans is the present value of the defined-
benefit obligation at the reporting date less the fair value of plan assets.
The defined-benefit obligation is calculated annually by independent actuaries using the projected-unit credit method. The present value of
the defined-benefit obligation is determined by discounting the estimated future cash outflows using yields for government bonds that have
maturity dates approximating the terms of the group’s obligations.
Gains or losses resulting from remeasurements are recognised immediately in other comprehensive income. Remeasurements include
actuarial gains and losses, return on plan assets and the asset ceiling.
Current service costs and net interest on the defined-benefit liability are recognised immediately as an expense in profit or loss. past service
costs are recognised in profit or loss on the earlier of the date of the plan amendment or curtailment, and the date the group recognises
related restructuring costs.
plan assets are only offset against plan liabilities where they are assets held by long-term employee benefit funds or qualifying insurance
policies. Qualifying insurance policies exclude any policies held by the group’s holding or subsidiary companies.
32
Defined-contribution plans
Contributions to defined-contribution plans are recognised as an expense in profit or loss in the periods during which services are rendered
by employees.
Postemployment benefit plans
The group provides postretirement medical benefits and disability cover for eligible employees. The non-pension postemployment benefits
are accounted for, in accordance with their nature, as either a defined-contribution plan or a defined-benefit plan. Similarly, the expected
costs associated with such benefits are accounted for in a manner consistent with their classification.
Short-term employee benefits
Short-term employee benefits include salaries, accumulated leave payments, bonuses and non-monetary benefits such as medical aid
contributions.
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.
A liability is recognised for the amount to be paid under short-term cash-bonus plans or accumulated leave if the group has a present, legal
or constructive obligation to pay this amount as a result of past services provided by the employee and the obligation can be estimated reliably.
1.9
Property and equipment
Items of property and equipment are initially recognised at cost if it is probable that any future economic benefits associated with the items
will flow to the group and they have a cost that can be measured reliably. Certain items of property and equipment that had been revalued
to fair value on 1 January 2004, the date of transition to IFRS, are measured on the basis of deemed cost, being the revalued amount at the
date of that revaluation.
Subsequent expenditure is capitalised to the carrying amount of items of property and equipment if it is measurable and it is probable that
it increases the future economic benefits associated with the asset. All other expenses are recognised in profit or loss as an expense
when incurred.
Subsequent to initial recognition, computer equipment, vehicles and furniture and other equipment are measured at cost less accumulated
depreciation and accumulated impairment losses.
Land and buildings, the fair values of which can be reliably measured, are carried at revalued amounts, being the fair value at the date of
revaluation less any subsequent accumulated depreciation and impairment losses. Revaluation increases are credited directly to equity in
‘other comprehensive income’ under the heading ‘Revaluation reserve’. However, revaluation increases are recognised in profit or loss to the
extent that they reverse a revaluation decrease of the same asset previously recognised in profit or loss. Revaluation decreases are recognised
in profit or loss. However, decreases are debited directly to equity to the extent of any credit balance existing in the revaluation surplus in
respect of the same asset. Land and buildings are revalued on the same basis as investment properties.
This accounting policy should be read in conjunction with note 26.
Depreciation
Each part of an item of property and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.
Items of property and equipment that are classified as held for sale in terms of IFRS 5 are not depreciated. The depreciable amounts of
property and equipment are recognised in profit or loss on a straight-line basis over the estimated useful lives of the items of property and
equipment, unless they are included in the carrying amount of another asset. The useful lives, residual values and depreciation methods for
property and equipment are assessed and adjusted (where required) on an annual basis.
on revaluation any accumulated depreciation at the date of the revaluation is eliminated against the gross carrying amount of the item
concerned and the net amount restated to the revalued amount. Subsequent depreciation charges are adjusted based on the revalued
amount and residual values.
Any difference between the depreciation charge on the revalued amount and that which would have been charged under historic cost is
transferred net of any related deferred taxation between the revaluation reserve and retained earnings as the property is utilised. Land is not
depreciated.
The maximum initial estimated useful lives are as follows:
Computer equipment
Motor vehicles
Fixtures and furniture
Leasehold property
Significant leasehold property components
Freehold property
Significant freehold property components
5 years
6 years
10 years
20 years
10 years
50 years
5 years
Derecognition
Items of property and equipment are derecognised on disposal or when no future economic benefits are expected from their use or disposal.
The gain or loss on derecognition is recognised in profit or loss and is determined as the difference between the net disposal proceeds, if any,
and the carrying amount of the item. on derecognition any surplus in the revaluation reserve in respect of an individual item of property and
equipment is transferred directly to retained earnings in the statement of changes in equity.
Compensation from third parties for items of property and equipment that were impaired, lost or given up is included in profit or loss when
the compensation becomes receivable.
33
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
1
1.10
pRINCIpAL ACCoUNTING poLICIES (continued)
Investment properties
Investment properties comprise real estate held for earning rentals and/or for capital appreciation. This does not include real estate held
for use in the supply of services or for administrative purposes. Investment properties are initially measured at cost plus any directly
attributable expenses.
Investment properties are stated at fair value. Internal professional valuers perform valuations annually. For practical reasons valuations are
carried out over a cyclical basis over a 12-month period due to the large number of investment properties involved. External valuations are
obtained once every three years on a rotational basis. In the event of a material change in market conditions between the valuation date and
reporting date an internal valuation is performed and adjustments made to reflect any material changes in value.
The valuation methodology applied is dependent on the nature of the property. Income-generating assets are valued using discounted
cashflows. Vacant land, land holdings and residential flats are valued according to sales of comparable properties. Near-vacant properties
are valued at land value less the estimated cost of demolition.
Surpluses and deficits arising from changes in fair value are recognised in profit or loss for the period in the statement of comprehensive
income.
For properties reclassified during the year from property and equipment to investment properties any revaluation gain arising is initially
recognised in profit or loss to the extent of previously charged impairment losses. Any residual excess is taken to the revaluation reserve.
Revaluation deficits are recognised in the revaluation reserve to the extent of previously recognised gains and any residual deficit is
accounted for in profit or loss for the period.
Investment properties that are reclassified to owner-occupied properties are revalued at the date of transfer, with any difference being taken
to profit or loss.
This accounting policy should be read in conjunction with note 25.
1.11 Non-current assets held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale when their carrying amount will be recovered principally through sale
rather than use.
The asset or disposal group must be available for immediate sale in its present condition and the sale should be highly probable, with an
active programme to find a buyer and the appropriate level of management approving the sale.
Immediately before classification as held for sale, all assets and liabilities are remeasured in accordance with the group’s accounting policies.
Non-current assets (or disposal groups) held for sale are measured at the lower of the carrying amount and fair value less incremental
directly attributable cost to sell (excluding taxation and finance charges) and are not depreciated.
Gains or losses recognised on initial classification as held for sale and subsequent remeasurement are recognised in profit or loss, regardless
of whether the assets were previously measured at revalued amounts. The maximum gains that can be recognised are the cumulative
impairment losses previously recognised in profit or loss. A disposal group continues to be consolidated while classified as held for sale.
Income and expenses continue to be recognised in profit or loss.
Non-current assets (or disposal groups) are reclassified from held for sale to held for use if they no longer meet the held-for-sale criteria.
on reclassification the non-current asset (or disposal group) is remeasured at the lower of its recoverable amount and the carrying amount
that would have been recognised had the asset (or disposal group) never been classified as held for sale. Any gains or losses are recognised
in profit or loss, unless the asset was carried at a revalued amount prior to classification as held for sale.
A discontinued operation is a clearly distinguishable component of the group’s business that has been disposed of or is held for sale, which:
■ represents a separate major line of business or geographical area of operations;
■ is part of a single coordinated plan to dispose of a major line of business or geographical area of operations; or
■ is a subsidiary acquired exclusively with a view to resale.
This accounting policy should be read in conjunction with note 23.
1.12
Impairment (all assets other than financial assets, deferred taxation assets and investment property)
The group assesses all assets (other than financial assets, deferred taxation assets and investment property) for indications of impairment
or the reversal of a previously recognised impairment at each reporting date. These impairments (where the carrying amount of an asset
exceeds its recoverable amount) or the reversal of a previously recognised impairment is recognised in profit or loss for the period. Intangible
assets not yet available for use are tested, at least on an annual basis, for impairment.
An impairment loss is recognised in profit or loss whenever the carrying amount of an asset exceeds its recoverable amount.
The recoverable amount of an asset is the higher of its fair value less cost to sell and its value in use. The fair value less cost to sell is
determined by ascertaining the current market value of an asset and deducting any costs related to the realisation of the asset.
In assessing value in use the expected future pretax cashflows from the asset are discounted to their present value using a pretax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset the cashflows of
which are largely dependent on those of other assets the recoverable amount is determined for the CGU to which the asset belongs.
A previously recognised impairment loss will be reversed if the recoverable amount increases as a result of a change in the estimates used
previously to determine the recoverable amount, but not to an amount higher than the carrying amount that would have been determined,
net of depreciation or amortisation, had no impairment loss been recognised in prior periods.
34
1.13 Other provisions
provisions are recognised when the group has a present legal or constructive obligation as a result of a past event, in respect of which it is
probable that an outflow of economic benefits will occur and a reliable estimate can be made of the amount of the obligation. The amount
recognised as a provision is the reasonable estimate of the expenditure required to settle the obligation at the reporting date. Where the
effect of discounting is material, the provision is discounted. The discount rate reflects current market assessments of the time-value of
money and, where appropriate, the risks specific to the liability. Gains from the expected disposal of assets are not taken into account in
measuring provisions. provisions are reviewed at each reporting date and adjusted to reflect the current reasonable estimate. If it is no
longer probable that an outflow of resources will be required to settle the obligation, the provision is reversed.
Reimbursements
Where some or all of the expenditure required to settle a provision is expected to be reimbursed by a party outside the group, the
reimbursement is recognised when it is virtually certain that it will be received if the group settles the obligation. The reimbursement is
recorded as a separate asset at an amount not exceeding the related provision. The expense for the provision is presented net of the
reimbursement in profit or loss. Specific policies include:
■ onerous contracts
A provision for onerous contracts is recognised when the expected benefits to be derived by the group from a contract are lower than the
unavoidable cost of meeting the obligations under the contract.
■ Restructuring
A provision for restructuring is recognised when the group has a detailed formal plan for restructuring and has raised a valid expectation,
among those parties directly affected, that the plan will be carried out, either by having begun implementation or by publicly announcing
the plan’s main features. Restructuring provisions include only those costs that arise directly from restructuring that is not associated
with the ongoing activities of the group.
Future operating costs or losses are not provided for.
1.14 Share-based payments
Equity-settled share-based payment transactions with employees
The services received in an equity-settled share-based payment transaction with employees are measured at the fair value of the equity
instruments granted. The fair value of the equity instruments is measured at the grant date and is not subsequently remeasured.
If the equity instruments granted vest immediately and an employee is not required to complete a specified period of service before
becoming unconditionally entitled to the instruments, the services received are recognised in profit or loss for the period in full on the grant
date with a corresponding increase in equity.
Where the equity instruments do not vest until the employee has completed a specified period of service, it is assumed that the services
rendered by the employee, as consideration for the equity instruments, will be received in the future during the vesting period. The services
are accounted for in profit or loss in the statement of comprehensive income as they are rendered during the vesting period, with a
corresponding increase in equity. The amount recognised as an expense is adjusted to reflect the number of share awards for which the
related service and non-market performance vesting conditions are expected to be met such that the amount ultimately recognised as an
expense is based on the number of share awards that do meet the related-service and non-market performance conditions at the vesting
date. Where the equity instruments are no longer outstanding, the accumulated share-based payment reserve in respect of those equity
instruments is transferred to retained earnings.
Cash-settled share-based payment transactions with employees
The cost of cash-settled transactions is measured initially at fair value at the grant date. The fair value is expensed over the period until the
vesting date with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date up to and including
the settlement date with changes in fair value recognised in the statements of comprehensive income as staff costs.
Measurement of fair value of equity instruments granted
The equity instruments granted by the group are measured at fair value at the measurement date using standard-option pricing-valuation
models. The valuation technique is consistent with generally acceptable valuation methodologies for pricing financial instruments and
incorporates all factors and assumptions that knowledgeable, willing market participants would consider in setting the price of the equity
instruments. Vesting conditions, other than market conditions, are not taken into account in determining fair value. Vesting conditions are
taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount.
Share-based payment transactions with persons or entities other than employees
Transactions in which equity instruments are issued to historically disadvantaged individuals and organisations in SA for less than fair value
are accounted for as share-based payments. Where the group has issued such instruments and expects to receive services in return
for equity instruments, the share-based payments charge is spread over the related vesting (ie service) period. In instances where such
services could not be identified the cost has been expensed with immediate effect. The valuation techniques are consistent with those
mentioned above.
1.15 Share capital
ordinary share capital, preference share capital or any financial instrument issued by the group is classified as equity when:
■ payment of cash, in the form of a dividend or redemption, is at the discretion of the group;
■ the instrument does not provide for the exchange of financial instruments under conditions that are potentially unfavourable to
the group;
■ settlement in the group’s own equity instruments is for a fixed number of equity instruments at a fixed price; and
■ the instrument represents a residual interest in the assets of the group after deducting all its liabilities.
35
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
pRINCIpAL ACCoUNTING poLICIES (continued)
1
1.15 Share capital (continued)
Consideration paid or received for equity instruments is recognised directly in equity. Equity instruments are initially measured at the
proceeds received, less incremental directly attributable issue costs, net of any related income tax benefits. No gain or loss is recognised in
profit or loss on the purchase, sale, issue or cancellation of the group’s equity instruments.
When the group issues a compound instrument, ie an instrument that contains a liability and an equity component, the fair value of the
liability component is calculated first and the equity component is treated as a residual. Transaction costs that relate to the issue of a
compound financial instrument are allocated to the liability and equity components of the instrument in proportion to the allocation
of proceeds.
Distributions to holders of equity instruments are recognised as distributions in the statement of changes in equity in the period in which
they are payable. Dividends for the year that are declared after the reporting date are disclosed in the notes to the financial statements.
1.16 Treasury shares
When the group acquires its own share capital, the amount of the consideration paid, including directly attributable costs, net of any related
tax benefit, is recognised as a change in equity. Shares repurchased by the issuing entity are cancelled. Shares repurchased by group entities
are classified as treasury shares and are held at cost. These shares are treated as a deduction from the issued and weighted-average number
of shares and the cost price of the shares is presented as a deduction from total equity. The par value of the shares is presented as a
deduction from ordinary share capital and the remainder of the cost is presented as a deduction from ordinary share premium. Dividends
received on treasury shares are eliminated on consolidation.
1.17
Investment contracts
Investment-contract liabilities
Liabilities for unit-linked and market-linked contracts are reported at fair value. For unit-linked contracts the fair value is calculated as the
account value of the units, ie the number of units held multiplied by the bid-price value of the assets in the underlying fund (adjusted for
taxation). For market-linked contracts the fair value of the liability is determined with reference to the fair value of the underlying assets.
This fair value is calculated in accordance with the financial soundness valuation basis, except that negative rand reserves arising from the
capitalisation of future margins are not permitted. The fair value of the liability, at a minimum, reflects the initial deposit of the client, which
is repayable on demand.
Investment-contract liabilities (other than unit-linked and market-linked contracts) are measured at amortised cost.
Embedded derivatives included in investment contracts are separated out and measured at fair value. The host contract liability is measured
on an amortised-cost basis.
Revenue on investment management contracts
Fees charged for investment management services in conjunction with investment management contracts are recognised as revenue as the
services are provided. Initial fees that exceed the level of recurring fees and relate to the future provision of services are deferred and
amortised over the projected period over which services will be provided.
Contribution income relating to investment contracts
Contribution income includes lump sums received in respect of linked businesses with retirement funds and are accounted for when due.
The contribution income is set off directly against the liability under investment contracts.
Benefits relating to investment contracts
policyholder benefits are accounted for when claims are intimated directly against the liability under investment contracts.
1.18
Insurance contracts
Contracts under which the scheme accepts insurance risk from another party by agreeing to compensate such party or other beneficiaries
if a specified uncertain future event adversely affects the party or other beneficiaries are classified as insurance contracts.
Policy liabilities
The policy liabilities under unmatured policies, including unintimated claims, are computed at the reporting date by pC Falconer, the
statutory actuary, according to the financial-soundness valuation method as set out in the guidelines issued by the Actuarial Society of SA
in professional Guidance Note (pGN) 104. Claims intimated but not paid, are provided for. The actuarial statement of financial position is
included as a separate item in the group’s annual financial statements. The group performs a liability adequacy test on its liabilities in line
with IFRS 4 Insurance Contracts.
Linked products
Linked products are investment-related products where the risk and reward of the underlying investment portfolio accrues to the
policyholder. Linked products, which provide for returns based on the change in the value of the underlying instruments and market
indicators, are initially recorded at cost. These products are revalued at year-end using discounted-cashflow analysis, closing market values
and index values based on the observation dates stated in the underlying investment agreements. Valuations are adjusted for the effects of
changes in foreign exchange rates. Actuarial liabilities of these linked products are stated at the same value as the underlying investments.
36
1.19 Leases
The group as lessee
Leases in respect of which the group bears substantially all risks and rewards incidental to ownership are classified as finance leases.
Finance leases are capitalised at the inception of the lease at the lower of the fair value of the lease property and the present value of the
minimum lease payments. Directly attributable costs, such as commission paid, incurred by the group are added to the carrying amount of
the asset. Each lease payment is allocated between the liability and finance charges to achieve a constant periodic rate of interest on the
balance outstanding. Contingent rentals are expensed in the period they are incurred. The depreciation policy for leased assets is consistent
with that of depreciable assets owned. If the group does not have reasonable certainty that it will obtain ownership of the leased asset by the
end of the lease term, the asset is depreciated over the shorter of the lease term and its useful life.
Leases that are not classified as finance leases are classified as operating leases. payments made under operating leases, net of any
incentives received from the lessor, are recognised in profit or loss on a straight-line basis over the term of the lease. When another
systematic basis is more representative of the time pattern of the user’s benefit, then that method is used.
The group as lessor
Where assets are leased out under a finance lease arrangement, the present value of the lease payments is recognised as a receivable and
included under loans and advances in the statement of financial position. Initial direct costs are included in the initial measurement of the
receivable. The difference between the gross receivable and unearned finance income is recognised under loans and advances in
the statement of financial position. Finance lease income is allocated to accounting periods to reflect a constant periodic rate of return on
the group’s net investment outstanding in respect of the leases.
Assets leased out under operating leases are included under property and equipment in the statement of financial position. Initial direct
costs incurred in negotiating and arranging the lease are added to the carrying amount of the leased asset and recognised as an expense over
the lease term on the same basis as the rental income. Leased assets are depreciated over their expected useful lives on a basis consistent
with similar assets. Rental income, net of any incentives given to lessees, is recognised on a straight-line basis over the term of the lease.
When another systematic basis is more representative of the time pattern of the user’s benefit, then that method is used.
Recognition of lease of land
Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets.
However, when a single lease covers both land and a building, the minimum lease payments at the inception of the lease (including any
upfront payments) are allocated between the land and the building in proportion to the relative fair values of the respective leasehold
interests. Any upfront premium allocated to the land element that is normally classified as an operating lease represents prepaid lease
payments. These payments are amortised over the lease term in accordance with the time pattern of benefits provided. If the lease payments
cannot be allocated reliably between these two elements, the entire lease is classified as a finance lease, unless it is clear that both elements
are operating leases.
1.20 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction and production of qualifying assets are capitalised as part of the costs
of these assets. Qualifying assets are assets that necessarily take a substantial period of time to prepare for their intended use or sale.
Capitalisation of borrowing costs continues up to the date when the assets are substantially ready for their use or sale.
All other borrowing costs are expensed in the period in which they are incurred.
Borrowing costs capitalised are disclosed in the notes by asset category and are calculated at the group’s average funding cost, except to the
extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset. Where this occurs, actual borrowing costs
incurred less any investment income on the temporary investment of those borrowings are capitalised.
1.21 Government grants
Government grants are recognised when there is reasonable assurance that they will be received and that the group will comply with the
conditions attached to them. Grants that compensate the group for expenses or losses already incurred or for purposes of giving immediate
financial support to the entity with no future-related costs are recognised as income in the period it becomes receivable. Grants that
compensate the group for expenses to be incurred are recognised as revenue in profit or loss on a systematic basis in the same periods in
which the expenses will be incurred. Grants that compensate the group for the cost of an asset are recognised in profit or loss as revenue on
a systematic basis over the useful life of the asset.
1.22 Client loyalty
When a cardholder makes a purchase that is regarded as eligible spend, the person/company will be granted points that can be redeemed
at a later date for goods or services. points do not expire, unless a client is delinquent or dormant, in which case the points accrued are
forfeited as stated in the terms and conditions.
The fair value of the consideration received or receivable in respect of the initial sale is allocated between the award credits and the other
components of the sale. The award credits are recognised as deferred revenue until the entity fulfils its obligations to deliver awards
to customers.
The consideration allocated to the award credits will be measured by reference to the fair value thereof, ie the amount for which the award
credits could be sold separately and the expected manner by which the points will be utilised. Adjustments are made for the expected
utilisation and non-utilisation of the points awarded.
37
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
pRINCIpAL ACCoUNTING poLICIES (continued)
1
1.23 Revenue and expenditure
Interest income and expense
Interest income and expense are recognised in profit or loss using the effective-interest method taking into account the expected timing and
amount of cashflows. The effective-interest method is a method of calculating the amortised cost of a financial asset or financial liability
(or group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. Interest
income and expense include the amortisation of any discount or premium or other differences between the initial carrying amount of an
interest-bearing financial instrument and its amount at maturity calculated on an effective-interest-rate basis.
Non-interest revenue
■ Fees and commissions
The group earns fees and commissions from a range of services it provides to clients and these are accounted for as follows:
Income earned on the execution of a significant act is recognised when the significant act has been performed.
Income earned from the provision of services is recognised as the service is rendered by reference to the stage of completion of
the service.
Income that forms an integral part of the effective interest rate of a financial instrument is recognised as an adjustment to the
effective interest rate and recorded in interest income.
■ Dividend income
Dividend income is recognised when the right to receive payment is established on the ex dividend date for equity instruments and is
included in dividend income under non-interest revenue.
■ Net trading income
Net trading income comprises all gains and losses from changes in the fair value of financial assets and financial liabilities held for
trading, together with the related interest, expense, costs and dividends. Interest earned while holding trading securities and interest
incurred on trading liabilities are reported within non-interest revenue.
■ Income from investment contracts
Refer to 1.17 for non-interest revenue arising on investment management contracts.
■ other
Exchange and securities trading income, from investments and net gains on the sale of investment banking assets, is recognised in profit
or loss when the amount of revenue from the transaction or service can be measured reliably, it is probable that the economic benefits
of the transaction or service will flow to the group and the costs associated with the transaction or service can be measured reliably.
Fair-value gains or losses on financial instruments at fair value through profit or loss, including derivatives, are included in non-interest
revenue. These fair-value gains or losses are determined after deducting the interest component, which is recognised separately in interest
income and expense.
Gains or losses on derecognition of any financial assets or financial liabilities are included in non-interest revenue.
1.24 Segmental reporting
An operating segment is a component of an entity that engages in business activities from which it may earn revenues, the operating results
of which component are regularly reviewed by the group’s chief operating decisionmakers to make decisions about resources to be allocated
and to assess its performance, and for which financial information is available.
The group’s identification of its segments and the measurement of segment results are based on the group’s internal reporting to
management. The segments have been identified according to the nature of their respective products and services and their related target
markets, the detail of which can be found in the segmental reporting section.
The segments identified are complemented by the Centre, which provides support in the areas of finance, human resources, governance and
compliance, risk management and information technology. Additional information relating to major clients and other performance measures
is provided.
The group accounts for intersegment revenues and transfers as if the transactions were with third parties at current market prices.
1.25 Cash and cash equivalents
Cash and cash equivalents comprise balances with a maturity of less than 90 days from the date of acquisition, including cash and balances
with central banks that are not mandatory, other eligible bills and amounts due from other banks.
38
2
2.1
STANDARDS AND INTERpRETATIoNS
Standards and interpretations issued and not yet effective
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments was issued in its entirety in July 2014. The final version of the standard incorporates amendments to the
classification and measurement guidance as well as the accounting requirements for the impairment of financial assets measured at
amortised cost. These elements of the final standard are discussed in detail below:
■ Financial assets are to be classified and measured based on the business model for managing the financial asset and the cashflow
characteristics of the financial asset. There are two measurement approaches, namely fair value and amortised cost. The financial
asset is carried at amortised cost if it is the business model of the entity to hold that asset for the purpose of collecting contractual
cashflows and if those cashflows comprise principal repayments and interest.
■ For financial liabilities designated as at fair value through profit or loss a further requirement is that all changes in the fair value of
financial liabilities attributable to credit risk be transferred to other comprehensive income with no recycling through profit or loss
on disposal.
■ Impairments in terms of IFRS 9 will be determined based on an expected-loss model that considers the significant changes to the
asset’s credit risk and the expected loss that will arise in the event of default.
■ IFRS 9 allows financial liabilities not held for trading to be measured at either amortised cost or fair value. If fair value is elected, then
changes in the fair value as a result of changes in own credit risk should be recognised in other comprehensive income.
■ The hedge accounting requirements under IFRS 9 are closely aligned with how entities undertake risk management activities when
hedging financial and non-financial risk exposures. Hedge effectiveness will now be proved based on management’s risk management
objectives rather than the 80% to 125% band that was previously stipulated. IFRS 9 also allows for rebalancing of the hedge and the
deferral of hedging costs.
The group has initiated a process to determine the impact of the standard on the group’s statement of financial position and performance.
Until the process has been completed the group is unable to quantify the expected impact.
The standard is effective for financial years commencing on or after 1 January 2018.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a five-step model that will apply to revenue earned from a contract with a client (with limited exceptions), regardless
of the type of revenue transaction or the industry.
The standard’s requirements will also apply to the recognition and measurement of gains and losses on the sale of some non-financial assets
that are not outputs of the entity’s ordinary activities (eg the sale of property, plant and equipment or intangibles).
Extensive disclosures will be required, including disaggregation of total revenue, information about performance obligations, changes
in contract asset and liability account balances between periods, and key judgements and estimates.
The standard is effective for financial years commencing on or after 1 January 2017.
The group has initiated a process to determine the impact of the standard on the group’s statement of financial position and performance.
Until the process has been completed the group is unable to quantify the expected impact.
Amendment to IAS 19 Employee Benefits: Defined Benefit Plans – Employee Contributions
The amendment applies to contributions from employees or third parties and simplifies the accounting for contributions that are independent
of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage
of salary.
The amendment is effective for the group for the financial year commencing 1 January 2015. The group is evaluating the impact of this
standard on the group financial statements.
Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets
The amendments to IAS 16 and IAS 38 are to clarify the basis for the calculation of depreciation and amortisation as being the expected
pattern of consumption of the future economic benefits of an asset.
The amendments prohibit the use of revenue-based depreciation for property, plant and equipment and significantly limit the use of
revenue-based amortisation for intangible assets. As a result the ratio of revenue generated to total revenue expected to be generated
cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets.
The amendments are effective for the group for the financial year commencing 1 January 2016 and are not expected to have an effect on the
group’s financial statements.
Amendment to IFRS 11 Joint Arrangements on Acquisition of an Interest in a Joint Operation
This amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business.
The amendment specifies the appropriate accounting treatment for such acquisitions.
The amendment is effective for the group for the financial year commencing 1 January 2016 and is not expected to have an effect on the
group’s financial statements.
Amendments to IAS 16 Property, Plant and Equipment and IAS 41 Agriculture – Regarding Bearer Plants
These amendments change the financial reporting for bearer plants, such as grape vines, rubber trees and oil palms. The International
Accounting Standards Board (IASB) decided that bearer plants should be accounted for in the same way as property, plant and equipment
because their operation is similar to that of manufacturing. Consequently, the amendments include bearer plants in the scope of IAS 16,
instead of IAS 41. The produce growing on bearer plants will remain within the scope of IAS 41.
The amendments are effective for the group for the financial year commencing 1 January 2016 and are not expected to have an effect on the
group’s financial statements.
39
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
2
2.1
STANDARDS AND INTERpRETATIoNS (continued)
Standards and interpretations issued and not yet effective (continued)
IFRS 14 Regulatory Deferral Accounts
The standard IFRS 14 Regulatory Deferral Accounts permits first-time adopters to continue to recognise amounts related to rate regulation
in accordance with their previous Generally Accepted Accounting practices (GAAp) requirements when they adopt IFRS. However, to
enhance comparability with entities that already apply IFRS and do not recognise such amounts, the standard requires that the effect of rate
regulation must be presented separately from other items.
The standard is effective for the group for the financial year commencing 1 January 2016 and is not expected to have an effect on the group’s
financial statements.
Amendments to IAS 27 Separate Financial Statements on the equity method
These amendments allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their
separate financial statements.
The amendments are effective for the group for the financial year commencing 1 January 2016 and are not expected to have a significant
effect on the group’s financial statements.
Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures
These amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28 for dealing with the sale or
contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or
loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised
when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary.
The amendments are effective for the group for the financial year commencing 1 January 2016 and are not expected to have an effect on the
group’s financial statements.
IASB Annual Improvement Project
The IASB issued annual improvements to IFRS cycles 2010 to 2012 and 2011 to 2013, and for 2014.
The improvements focus on areas of inconsistency in IFRSs or where clarification of wording is required. As a consequence, the
improvements are either clarifying or correcting in nature, and do not propose new principles or changes to existing ones.
The amendments are effective for the group for the financial year commencing 1 January 2015 and are not expected to have a material
impact on the group’s financial statements.
2.2 Standards and interpretations adopted in the current year
The following standards and interpretations, or amendments thereto, effective for the financial year-end commencing 1 January 2014, have
been adopted by the group:
IFRIC 21 Levies
International Financial Reporting Interpreting Committee (IFRIC) 21 is an interpretation of IAS 37 provisions, Contingent Liabilities and
Contingent Assets and considers how an entity should account for liabilities to pay levies imposed by governments, other than income taxes,
in its financial statements.
IFRIC 21 clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that
triggers the payment of the levy.
The amendment did not have a material effect on the group’s financial statements.
Revised standards
Amendments to IFRS 10, IFRS 12 and IAS 27 – Investment Entities
The amendments define an investment entity and introduce an exception to consolidating particular subsidiaries for that investment entity.
These amendments require an investment entity to measure those subsidiaries at fair value through profit or loss in accordance with IFRS 9
Financial Instruments or IAS 39 Financial Instruments: Recognition and Measurement in its consolidated and separate financial statements.
The amendments also introduce new disclosure requirements for investment entities in IFRS 12 Disclosure of Interests in other Entities and
IAS 27 Separate Financial Statements.
The amendments did not have an effect on the group’s financial statements.
Amendment to IAS 32 Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities
The amendment to IAS 32 clarifies offsetting by explaining:
■ when an entity currently has a legally enforceable right of setoff; and
■ when gross settlement is equivalent to net settlement.
The adoption of the amendment did not have an impact on the group’s financial statements.
Amendment to IAS 36 Impairment of Assets Recoverable Amounts Disclosures for Non-financial Assets
The amendment removes certain disclosures required in respect of the recoverable amount of declined-value cash-generating units, which
had previously been included in IAS 36 by the issue of IFRS 13 Fair value Measurement.
The amendment did not have a material effect on the group’s financial statements.
40
Amendment to IAS 39 Financial Instruments: Recognition and Measurement
The IASB made a narrow-scope amendment to IAS 39 to permit the continuation of hedge accounting in certain circumstances in which the
counterparty to a hedging instrument changes in order to achieve clearing for that instrument. The amendment covers novations in the
following circumstances:
■ as a consequence of laws or regulations, or the introduction of laws or regulations;
■ where the parties to the hedging instrument agree that one or more clearing counterparties replace their original counterparty to
become the new counterparty to each of the parties; and
■ where it did not result in changes to the terms of the original derivative other than changes directly attributable to the change in
counterparty to achieve clearing.
All of the above criteria must be met to continue hedge accounting under this exception.
The amendment did not have an effect on the group’s financial statements.
3
KEY ASSUMpTIoNS CoNCERNING THE FUTURE AND KEY SoURCES oF
ESTIMATIoN
The group’s accounting policies are set out in note 1 of the annual financial statements. Certain of these policies, as well as estimates made
by management, are considered to be important to an understanding of the group’s financial condition since they require management to
make difficult, complex or subjective judgements and estimates, some of which may relate to matters that are inherently uncertain. The
following accounting policies include estimates that are particularly sensitive in terms of judgements and the extent to which estimates are
used. other accounting policies involve significant amounts of judgements and estimates, but the total amounts involved are not significant
to the financial statements. Management has agreed the accounting policies and critical accounting estimates with the board and Nedbank
Group Audit Committee.
3.1 Allowances for loan impairment and other credit risk provisions
Allowances for loan impairment represent management’s estimate of the losses incurred in the loan portfolios at the reporting date.
The group assesses its loan portfolios for impairment at each reporting date. In determining whether an impairment loss should be recorded
in the statement of comprehensive income, the group makes judgements as to whether there is observable data indicating a measurable
decrease in the estimated future cashflows from a portfolio of loans before the decrease can be allocated to an individual loan in that
portfolio. Estimates are made of the duration between the occurrence of a loss event and the identification of a loss on an individual basis.
The impairment for performing loans is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-
specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These include
early arrears and other indicators of potential default, such as changes in macroeconomic conditions and legislation affecting credit recovery.
These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period.
Within the Nedbank Retail, Nedbank Wealth and Nedbank Business Banking portfolios, which comprise large numbers of small homogeneous
assets with similar risk characteristics where credit-scoring techniques are generally used, statistical techniques are used to calculate
impairment allowances on the portfolio, based on historical recovery rates and assumed emergence periods. These statistical analyses use
as primary inputs the extent to which accounts in the portfolio are in arrears and historical information on the eventual losses encountered
from such delinquent portfolios. There are many such models in use, each tailored to a product, line of business or client category.
Judgement and knowledge are needed in selecting the statistical methods to be used when the models are developed or revised. The
impairment allowance reflected in the financial statements for these portfolios is therefore considered to be reasonable and supportable.
For larger exposures impairment allowances are calculated on an individual basis and all relevant considerations that have a bearing on the
expected future cashflows are taken into account, for example the business prospects for the client, the realisable value of collateral,
the group’s position relative to other claimants, the reliability of client information and the likely cost and duration of the workout process.
The level of the impairment allowance is the difference between the value of the discounted expected future cashflows (discounted at the
loan’s original effective interest rate) and its carrying amount. Subjective judgements are made in the calculation of future cashflows.
Furthermore, judgements change with time as new information becomes available or as workout strategies evolve, resulting in frequent
revisions to the impairment allowance as individual decisions are taken. Changes in these estimates would result in a change in the
allowances and have a direct impact on the impairments charge.
3.2
Fair value of financial instruments
Certain of the group’s financial instruments are carried at fair value through profit or loss, such as those held for trading, designated by
management under the fair value option and non-cashflow hedging derivatives.
other non-derivative financial assets may be designated as available for sale. Available-for-sale financial investments are initially recognised
at fair value and are subsequently held at fair value. Gains and losses arising from changes in fair value of such assets are included as a
separate component of other comprehensive income and presented in equity.
The fair value of a financial instrument is the amount that would be received to sell the asset or paid to transfer the liability in an orderly
transaction at the measurement date between knowledgeable, willing parties, other than in a forced or liquidation sale. Financial instruments
entered into as trading transactions, together with any associated hedging, are measured at fair value and the resultant profits and losses
are included in net trading income, along with interest and dividends arising from long and short positions and funding costs relating to
trading activities. Assets and liabilities resulting from gains and losses on financial instruments held for trading are reported gross in trading
portfolio assets and liabilities or derivative financial instruments, reduced by the effects of netting agreements where there is an intention
to settle net with counterparties.
41
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
3
3.2
KEY ASSUMpTIoNS CoNCERNING THE FUTURE AND KEY SoURCES oF
ESTIMATIoN (continued)
Fair value of financial instruments (continued)
Details of the processes, procedures and assumptions used in the determination of fair value are discussed in note 35.1 to the financial
statements. In particular, the areas that involve the greatest amount of judgement and complexity include the following:
■ assessing whether instruments are trading with sufficient frequency and volume, that they can be considered liquid;
■ the inclusion of a measure of the counterparties non-performance risk in the fair value measurement of loans and advances, which
involves the modelling of dynamic credit spreads;
■ the inclusion of credit valuation adjustment (CVA) and debit valuation adjustment (DVA) in the fair value measurement of derivative
instruments, with particular emphasis on DVA; and
■ the inclusion of own-credit risk in the calculation of the fair value of financial liabilities.
These concepts are continuously developing and evolving within the context of the SA market and therefore changes in these assumptions
will arise as the market develops.
3.3 Derecognition, securitisations and structured entities
The group enters into transactions that may result in the derecognition of certain financial instruments. Judgement is applied as to whether
these financial instruments are derecognised from the group’s statement of financial position.
The group sponsors the formation of structured entities primarily for the purpose of allowing clients to hold investments, for asset
securitisation transactions, for asset financing and for buying or selling credit protection. The group consolidates structured entities it
controls in terms of IFRS guidance. Where it is difficult to determine whether the group controls a structured entity, the group makes
judgements, in terms of IFRS guidance, about its exposure to the risks and rewards, as well as about its ability to make operational decisions
for the structured entity in question. In arriving at judgements, these factors are considered both jointly and separately. Further information
in respect of those securitisations, consolidated into the group financial statements, can be found in note 43 to the financial statements.
3.4 Goodwill
Management considers at least annually whether the current carrying value of goodwill is to be impaired. The first step of the impairment
review process requires the identification of independent CGUs by segmenting the group business into as many largely independent income
streams as is reasonably practicable. The goodwill is then allocated to these independent units. The first element of this allocation is based
on the areas of the business expected to benefit from the synergies derived from the acquisition. The second element reflects the allocation
of the net assets acquired and the difference between the consideration paid for those net assets and their fair value. This allocation is
reviewed following business reorganisation. The carrying value of the unit, including the allocated goodwill, is compared with its fair value
or value in use to determine whether any impairment exists. If the recoverable amount of a unit is less than its carrying value, goodwill will
be impaired.
Detailed calculations may need to be carried out, taking into consideration changes in the market in which a business operates (eg competitive
activity and regulatory change). In the absence of readily available market-price data this calculation is based on discounting expected
pretax cashflows at a risk-adjusted interest rate appropriate to the operating unit, the determination of both of which requires the exercise
of judgement. The estimation of pretax cashflows is sensitive to the periods for which detailed forecasts are available and to assumptions
regarding the long-term sustainable cashflows. While forecasts are compared with actual performance and external economic data,
expected cashflows naturally reflect management’s view of future performance.
The most significant amount of goodwill relates to Nedbank Limited. The goodwill impairment testing performed in 2014 indicated that
none of the goodwill was impaired in the year under review. Management believes that reasonable changes in key assumptions used to
determine the recoverable amount of Nedbank Limited’s goodwill would not result in impairment.
Further information in respect of goodwill recognised in the statement of financial position can be found in note 28 to the financial statements.
3.5
Intangible assets
An internally generated intangible asset, specifically internally developed software generated during the development phase, is recognised
as an asset if certain conditions are met. These conditions include technical feasibility, intention to complete the development, ability to use
the asset under development and demonstration of how the asset will generate probable future economic benefits.
The cost of a recognised internally generated intangible asset comprises all costs directly attributable to making the asset capable of being
used as intended by management. Conversely, all expenditures arising during the research phase are expensed as incurred.
The decision to recognise internally generated intangible assets requires significant judgement, particularly in the following areas:
■ evaluation of whether or not activities should be considered research activities or development activities;
■ assumptions about future market conditions, client demand and other developments;
■ assessment of whether completing an asset is technically feasible. The term ‘technical feasibility’ is not defined in the accounting
standards, and therefore requires a group-specific and necessarily judgemental approach;
■ evaluation of the future ability to use or sell the intangible asset arising from the development and the assessment of probability of
future benefits from sale or use; and
■ evaluation of whether or not a cost is directly or indirectly attributable to an intangible asset and whether or not a cost is necessary for
completing a development.
42
All intangible assets of the group have finite useful lives. Consequently, the depreciable amount of the intangible assets is allocated on
a systematic basis over their useful lives. Judgement is applied to the following:
■ determining the useful life of an intangible asset, based on estimates regarding the period over which the intangible asset is expected
to produce economic benefits to the group; and
■ determining the appropriate amortisation method. Accounting standards require that the straight-line method be used, unless
management can reliably determine the pattern in which the future economic benefits of the asset are expected to be consumed by
the group.
Both the amortisation period and the amortisation method have an impact on the amortisation expenses recorded in each period.
In making impairment assessments for the group’s intangible assets, management uses certain complex assumptions and estimates about
future cashflows, which require significant judgement and assumptions about future developments. These assumptions are affected by
various factors, including changes in the group’s business strategy, internal forecasts and estimation of the group’s weighted average cost
of capital. Due to these factors, actual cashflows and values could vary significantly from the forecast future cashflows and related values
derived using the discounted-cashflow method.
Further information in respect of intangible assets recognised in the statement of financial position can be found in note 28.
3.6
Employee benefits
The group provides pension plans for employees in most parts of the world. Arrangements for staff retirement benefits vary from country
to country and are made in accordance with local regulations and customs.
For defined-benefit schemes, including postretirement medical aid schemes, actuarial valuation of each of the scheme’s obligations using
the projected-unit credit method and the fair valuation of each of the scheme’s assets are performed annually in accordance with the
requirements of IAS 19.
The actuarial valuation is dependent on a series of assumptions, the key ones being interest rates, mortality, investment returns and inflation.
Mortality estimates are based on standard industry and national mortality tables, adjusted where appropriate to reflect the group’s own
experience. The returns on fixed-interest investments are set to market yields at the valuation date (less an allowance for risk) to ensure
consistency with the asset valuation. The returns on equities are based on the long-term outlook for global equities at the calculation date,
having regard to current market yields and dividend growth expectations.
The inflation assumption reflects long-term expectations of both earnings and retail price inflation. Further information on employee benefit
obligations, including assumptions, is set out in note 27 to the annual financial statements.
3.7
Income taxes
The group is subject to direct taxation in a number of jurisdictions in which it operates. There may be transactions and calculations for which
the ultimate tax determination has an element of uncertainty during the ordinary course of business. The group recognises liabilities based
on objective estimates of the quantum of taxes that may be due. Where the final tax determination is different from the amounts that were
initially recorded, such differences will impact the income tax and deferred taxation provisions in the period in which such determination is
made through profit and loss for that period.
3.8
Financial risk management
The group’s risk management policies and procedures are disclosed in the Worldclass at Managing Risk section. These risk management
procedures include, but are not limited to, credit risk, securitisation risk, liquidity risk, interest rate risk in the banking book and market risk.
4 CApITAL MANAGEMENT
Nedbank Group’s Capital Management Framework reflects the integration of risk, capital, strategy and performance measurement across
the group and contributes significantly to the Enterprisewide Risk Management Framework (ERMF).
A board-approved Solvency and Capital Management policy requires Nedbank Group to be capitalised at the greater of Basel III regulatory
capital and economic capital.
The Group Capital Management division is housed within the Balance Sheet Management cluster that reports to the Chief operating officer
and is mandated with the implementation of the Capital Management Framework and the Internal Capital Adequacy Assessment process
(ICAAp) across the group. The capital management (incorporating ICAAp) responsibilities of the board and management are incorporated
in their respective terms of reference as contained in the ERMF and are assisted by the board’s Group Risk and Capital Management
Committee, and Group ALCo and Executive Risk Committee (Group ALCo), respectively.
Capital, reserves and long-term debt instruments
The group’s capital management framework, policies and processes cover the group’s capital and reserves as per the consolidated statement
of changes in equity, as well as the long-term debt instruments per note 32.
Further details on the ERMF, capital management and regulatory requirements are disclosed in the Worldclass at Managing Risk section
which is unaudited, unless stated otherwise.
43
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
5
INTEREST AND SIMILAR INCoME
Home loans (including properties in possession)
Commercial mortgages
Finance lease and instalment debtors
Credit cards
overdrafts
Term loans and other
Government and other securities
Interest on government and other securities
Fair value adjustments on hedged items (refer to note 16.5)
Fair value adjustments on hedging instruments (refer to note 16.5)
Short-term funds and securities
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
6
INTEREST ExpENSE AND SIMILAR CHARGES
Deposit and loan accounts
Current and savings accounts
Negotiable certificates of deposit
other liabilities
Long-term debt instruments
Interest expense and similar charges may be analysed as follows:
– Interest expense and similar charges from financial instruments not at fair value through profit
and loss
– Interest expense and similar charges from financial instruments at fair value through profit or loss
2014
rm
10 333
9 798
8 807
1 710
1 204
12 393
3 521
3 521
(3)
3
2 309
50 075
41 747
8 328
50 075
18 203
628
4 919
1 729
2 843
28 322
26 183
2 139
28 322
2013
Rm
9 463
8 108
7 662
1 473
1 061
11 293
3 531
3 531
1 516
44 107
36 459
7 648
44 107
14 581
551
4 985
1 401
2 355
23 873
19 719
4 154
23 873
An unaudited margin analysis of the interest income and interest expense by asset and liability category is presented as additional financial
information in the Nedbank Group Limited integrated report.
44
7
NoN-INTEREST REVENUE
Commission and fee income
Administration fees
Cash-handling fees
Insurance commission
Exchange commission
other fees
Guarantee income
Card income
Service charges
other commission
Insurance income
Fair value adjustments (note 7.1)
Fair value adjustments
Fair value adjustments – own debt
Net trading income
Foreign exchange
Debt securities
Equities
Commodities
private-equity income
Securities dealing – realised
Securities dealing – unrealised
Dividends received from unlisted investments
Investment income
Dividends received from unlisted investments
Long-term-asset sales
Net sundry income
Rents received
Rental income from properties in possession
other sundry income
7.1
Analysis of fair value adjustments
Fair value adjustments can be analysed as follows:
– Held for trading
– Designated as at fair value through profit or loss
7.2 Government grants
2014
rm
12 591
121
819
613
379
921
168
2 969
3 467
3 134
284
35
73
(38)
2 394
1 148
1 194
27
25
411
350
(22)
83
51
40
11
430
61
2
367
2013
Rm
12 193
253
791
604
343
929
164
2 735
3 577
2 797
289
40
46
(6)
2 331
1 134
1 146
28
23
224
33
33
158
51
37
14
338
41
1
296
16 196
15 466
146
(111)
35
2 186
(2 146)
40
The group receives various government grants, from SA and foreign governments. The government grants take a variety of forms, including
interest rate subsidies on loans advanced to clients and payment in respect of previously writtenoff advances in respect of qualifying
deceased estates. The government grants that are received by the group are recognised when the conditions of the government grant have
been fulfilled and the grant is due to the group.
Certain government assistance is directed towards the group’s clients, including grants made to clients as first-time homeowners.
Although the group may assist the client in obtaining the grant, these grants do not qualify as government grants as envisaged by the
accounting standard.
The group receives certain SA government grants in the form of refunds for Skills Development Levies and they pertain to prior training that
has been facilitated by the group on behalf of its employees.
No assistance has been received by the group from any government or government organisation in respect of any troubled asset or financial-
crisis-related programme.
45
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
8 opERATING ExpENSES
Staff costs
Remuneration and other staff costs
Short-term incentives
Long-term employee benefits (note 27.2)²
Share-based payments expense – employees
BEE transaction expenses³
BEE share-based payments expenses
Fees
Computer processing
Depreciation for computer equipment
Amortisation of computer software
operating lease charges for computer equipment
Development costs
other computer-processing expenses
Communication and travel
Depreciation for vehicles
other communication and travel
occupation and accommodation
Depreciation for owner-occupied land and buildings
operating lease charges for land and buildings
other occupation and accommodation expenses
Marketing and public relations
Fees and assurances
Auditors’ remuneration
Statutory audit – current year
– prior year
Non-audit services – other services
other fees and assurance costs
Furniture, office equipment and consumables
Depreciation for furniture and other equipment
operating lease charge for furniture and other equipment
other office equipment and consumables
other operating expenses
Amortisation of intangible assets
other sundries
2014
rm
12 550
9 971
1 945
27
607
46
21
25
2 902
396
644
281
169
1 412
756
4
752
1 637
131
718
788
1 472
1 757
103
84
1
18
2013
Rm
11 513
9 193
1 656
114
550
56
33
23
2 553
345
566
238
184
1 220
745
3
742
1 502
126
646
730
1 391
1 627
90
83
1
6
1 654
1 537
631
375
7
249
280
280
595
367
6
222
217
1
217
22 031
20 199
Certain expenses incurred by the company on behalf of subsidiary companies are recovered from subsidiary companies. Refer to the
Remuneration Report for a detailed breakdown of directors’ and prescribed officers’ remuneration.
1 Represents amounts less than R1m.
2 Includes contributions to defined-benefit and pension funds and postretirement medical aid funding and any adjustments for defined benefit obligations together with any fair value adjustments of plan assets held.
See note 27.
3 See note 49 for a description of the BEE schemes.
46
9
INDIRECT TAxATIoN
Value-added taxation
other transaction taxes
Value-added taxation comprises the VAT incurred that is irrecoverable in respect of the making of
exempt supplies as defined in the Value-Added Tax Act, No 89 of 1991.
10 NoN-TRADING AND CApITAL ITEMS
profit on sale of subsidiaries and investments
Impairment of property and equipment, and capitalised development costs
11 DIRECT TAxATIoN
Charge for the year
11.1
SA normal taxation:
– Current charge
– Capital gains taxation – deferred
– Deferred taxation
Foreign taxation
Current and deferred taxation on income
prior-year overprovision/(underprovision) – current taxation
prior-year (underprovision)/overprovision – deferred taxation
Total taxation on income
Taxation on non-headline earnings items
11.2 Taxation rate reconciliation
Standard rate of SA normal taxation
Non-taxable dividend income
Capital items
other
Effective taxation rate
2014
rm
396
126
522
(96)
(96)
2 785
(29)
2
85
2 843
221
(261)
2 803
(17)
2 786
2014
%
28,0
(2,6)
0,1
0,1
25,6
2013
Rm
379
101
480
5
(64)
(59)
2 493
(33)
(178)
66
2 348
(135)
102
2 315
(18)
2 297
2013
%
28,0
(3,2)
(0,3)
(0,2)
24,3
11.3
Income tax recognised in other comprehensive income
2014
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
2013
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
Gross
Taxation
Net of taxation
14
(113)
86
195
96
(109)
1 010
316
(24)
(32)
1
(284)
(98)
14
(113)
62
163
96
(108)
726
218
11.4 Future taxation relief
The group has estimated taxation losses of R167,6m (2013: R217,6m) that can be set off against future taxable income, of which R30,9m
(2013: R76,8m) has been applied to the deferred taxation balance.
47
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
12
EARNINGS
Headline earnings reconciliations
2014
2013
rm
Gross
net of taxation
Gross
Net of taxation
profit attributable to ordinary and preference equity holders
Less: Non-trading and capital items
(96)
7 998
(79)
Loss 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 attributable to ordinary and preference
equity holders
(96)
(79)
8 077
(55)
5
(64)
4
13 DIVIDENDS
13.1 Ordinary shares
2014
Final declared for 2013 – paid 2014
Interim declared for 2014
ordinary dividends paid 2014
Final ordinary dividend declared for 2014
1 Total dividend declared for 2014 = 11 013 cents per share.
2013
Final declared for 2012 – paid 2013
Interim declared for 2013
ordinary dividends paid 2013
Final ordinary dividend declared for 2013
2 Total dividend declared for 2013 = 14 500 cents per share.
Millions of
shares
Cents per
share
27
27
27
27
9 544
2 9371
12 481
8 0761
7 709
4 9562
12 665
9 5442
7 152
(37)
6
(46)
3
7 189
rm
2 600
800
3 400
2 100
1 350
3 450
48
13.2 Preference shares
2014
number
of shares
Cents
per share
Amount
rm
Nedbank Limited – Final declared for 2013 – paid March 2014
Nedbank Limited – Interim declared for 2014 – paid September 2014
358 277 491
358 277 491
35,70775
36,86072
Nedbank Limited – Final declared for 2014 – payable March 2015
358 277 491
38,76140
128
132
260
139
Dividends declared calculations
2014
Nedbank Limited
1 July 2014 – 31 December 2014
1 July 2014 – 17 July 2014
18 July 2014 – 31 December 2014
Total declared
Days
184
17
167
rate
%
Amount
rm
7,500
7,708
138,9
12,5
126,4
138,9
Number
of shares
Cents
per share
Amount
Rm
2013
Nedbank Limited – Final declared for 2012 – paid March 2013
Nedbank Limited – Interim declared for 2013 – paid August 2013
358 277 491
358 277 491
35,82649
35,12556
Nedbank Limited – Final declared for 2013 – payable March 2014
358 277 491
35,70775
128
126
254
128
Dividends declared calculations
2013
Nedbank Limited
1 July 2013 – 31 December 2013
Total declared
Dividends paid calculations
2013 (paid March 2014)
Nedbank – 1 July 2013 – 31 December 2013
1 July 2013 – 31 December 2013
2014 (paid Sept 2014)
nedbank – 1 January 2014 – 30 June 2014
1 January 2014 – 29 January 2014
30 January 2014 – 30 June 2014
Nedbank (MFC) – participating preference shares
profit attributable to preference shareholders
2012 (paid March 2013)
nedbank – 1 July 2012 – 31 December 2012
1 July 2012 – 19 July 2012
20 July 2012 – 31 December 2012
2013 (paid September 2013)
Nedbank – 1 January 2013 – 30 June 2013
Nedbank (MFC) – participating preference shares
profit attributable to preference shareholders
Days
Rate
%
Amount
Rm
184
7,083
Days
184
184
181
29
152
184
19
165
181
rate
%
7,083
7,083
7,083
7,500
7,500
7,083
7,083
127,9
127,9
Amount
rm
127,9
127,9
132,1
20,2
111,9
63,2
323,2
128,4
14,0
114,4
125,8
37,7
291,9
49
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
14 CASH AND CASH EQUIVALENTS
Coins and bank notes
Money at call and short notice
Balances with central banks – other than mandatory reserve deposits
Cash and cash equivalents excluding mandatory reserve deposits with central banks
Mandatory reserve deposits with central banks
Money at call and short notice constitutes amounts withdrawable in 32 days or less. Mandatory
reserve deposits are not available for use in the group’s day-to-day operations. Cash on hand and
mandatory reserve deposits are non-interest bearing.
15 oTHER SHoRT-TERM SECURITIES
15.1 Analysis
Negotiable certificates of deposit
Treasury bills and other bonds
15.2 Sectoral analysis
Banks
Government and public sector
other services
2014
rm
6 437
3 890
430
10 757
14 843
25 600
7 277
49 045
56 322
8 410
47 491
421
56 322
2013
Rm
5 428
11 819
220
17 467
13 199
30 666
8 944
26 060
35 004
10 018
24 661
325
35 004
16 DERIVATIVE FINANCIAL INSTRUMENTS
These transactions have been entered into in the normal course of business and are carried at fair value. The principal types of derivative
contracts into which the group enters are described below.
■ Swaps
These are over the counter (oTC) agreements between two parties to exchange periodic payments of interest, or payments for the
change in value of a commodity, or related index, over a set period based on notional principal amounts. The group enters into swap
transactions in several markets. Interest rate swaps exchange fixed rates for floating rates of interest based on notional amounts. Basis
swaps exchange floating or fixed interest calculated using different bases. Cross-currency swaps are the exchange of interest based on
notional values of different currencies.
■ options
options confer the right, but not the obligation, on the buyer to receive or pay a specific quantity of an asset or financial instrument for a
specific price on or before a specified date. options may be exchange-traded or oTC agreements. The group principally buys and sells
currency, interest rate and equity options.
■ Futures and forwards
Short-term interest rate futures, bond futures, financial futures, equity and commodity futures and forward foreign exchange contracts
are all agreements to deliver, or take delivery of, a specified amount of an asset or financial instrument based on a specified rate, price or
index applied against the underlying asset or financial instrument, at a specified date. Futures are exchange-traded at standardised
amounts of the underlying asset or financial instrument. Forward contracts are oTC agreements and are principally dealt in by the group,
in interest rates as forward rate agreements and in currency as forward foreign exchange contracts.
Collateral
The group may require collateral in respect of the credit risk present in derivative transactions. The amount of credit risk is principally the
positive fair value of the contract. Collateral may be in the form of cash or in the form of a lien over a client’s assets, entitling the group to
make a claim for current and future liabilities.
16.1 Total carrying amount of derivative financial instruments
Gross carrying amount of assets
Gross carrying amount of liabilities
Net carrying amount
2014
rm
15 644
(15 479)
165
2013
Rm
13 811
(16 588)
(2 777)
A detailed breakdown of the carrying amount (fair value) and notional principal of the various types of derivative financial instruments held
by the group is presented in the following tables in notes 16.2 to 16.5.
50
16.2 Notional principal of derivative financial instruments
This represents the gross notional amounts of all outstanding contracts at year-end. This gross notional amount is the sum of the absolute
amount of all purchases and sales of derivative instruments. The notional amounts do not represent amounts exchanged by the parties and
therefore represent only the measure of involvement by the group in derivative contracts and not its exposure to market or credit risks
arising from such contracts. The amounts actually exchanged are calculated on the basis of the notional amounts and other terms of the
derivative, which relate to interest rates, exchange rates, securities or commodity prices or financial and other indices.
notional
principal
rm
2014
positive
value
rm
negative
value
rm
Notional
principal
Rm
2013
Positive
value
Rm
Negative
value
Rm
Hedging derivatives
Interest rate derivatives
Interest rate swaps
other derivatives
Equity derivatives
options written
options purchased
Futures¹
Commodity derivatives
Futures
Exchange rate derivatives
Forwards
Futures
Currency swaps
options purchased
options written
Interest rate derivatives
Interest rate swaps
Forward rate agreements
options purchased
Futures
Caps
Floors
Credit default swaps
275
275
8 266
2 541
2 541
3 184
1 957
1 957
303 944
242 209
1 214
49 331
5 244
5 946
682 767
515 712
121 404
–
6 160
2 169
650
36 672
3 317
2 541
776
1 173
1 173
142 695
115 300
108
22 043
5 244
344 379
256 677
65 300
1 696
900
650
19 156
4 949
2 541
2 408
784
784
161 249
126 909
1 106
27 288
5 946
338 388
259 035
56 104
4 464
1 269
9 250
2 856
2 860
3 534
1 285
1 285
181 986
156 023
379
21 075
2 329
2 180
757 808
469 770
242 827
723
7 705
307
150
4 141
2 860
1 281
92 979
81 678
336
8 593
2 329
43
379 037
238 133
120 100
723
1 884
17 516
36 326
18 197
5 109
2 856
2 253
1 285
1 285
89 007
74 345
43
12 482
2 137
378 771
231 637
122 727
5 821
307
150
18 129
total notional principal
997 209
491 839
505 370
950 329
476 157
474 172
1 Includes contracts for difference with positive notionals of R45m (2013: R342m) and negative notionals of R1 677m (2013: R2 014m).
51
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
16 DERIVATIVE FINANCIAL INSTRUMENTS (continued)
16.3 Carrying amount of derivative financial instruments
The amounts disclosed represent the fair value of all derivative instruments held at year-end. The fair value of a derivative financial
instrument is the amount at which it could be exchanged in a current transaction between willing parties, other than a forced liquidation
or sale. Fair values are obtained from quoted market prices, discounted cashflow models and market-accepted option-pricing models.
2014
Carrying
amount of
assets
rm
net carrying
amount
rm
Carrying
amount of
liabilities
rm
Net carrying
amount
Rm
2013
Carrying
amount of
assets
Rm
Carrying
amount of
liabilities
Rm
Hedging derivatives
Interest rate derivatives
Interest rate swaps
other derivatives
Equity derivatives
options written
options purchased
Futures¹
Commodity derivatives
Futures
Exchange rate derivatives
Forwards
Futures
Currency swaps
options purchased
options written
Interest rate derivatives
Interest rate swaps
Forward rate agreements
Futures
Caps
Floors
Credit default swaps
total carrying amount
2
8
(352)
360
9
9
1 129
1 320
(3)
(263)
234
(159)
(983)
(1 190)
19
(2)
(8)
4
194
165
2
372
360
12
10
10
6 645
3 089
3 322
234
8 615
7 534
56
4
4
1 017
15 644
364
352
12
1
1
5 516
1 769
3
3 585
159
9 598
8 724
37
2
12
823
15 479
390
(538)
928
(9)
(9)
(911)
5
1
(817)
200
(300)
(2 247)
(2 337)
14
(2)
(1)
2
77
(2 777)
945
928
17
4 076
2 432
1
1 443
200
8 790
7 505
101
2
1 182
13 811
555
538
17
9
9
4 987
2 427
2 260
300
11 037
9 842
87
2
1
1 105
16 588
1 Includes contracts for difference and an equity forward agreement. The fair value of the contracts for difference is zero as the variation margin is settled at the end of every day. The equity forward agreement is an
asset with a fair value of R2m (2013: R17m.).
52
16.4 Analysis of derivative financial instruments
Rm
Derivative assets
2014
Maturity analysis
Under one year
one to five years
over five years
2013
Maturity analysis
Under one year
one to five years
over five years
Derivative liabilities
2014
Maturity analysis
Under one year
one to five years
over five years
2013
Maturity analysis
Under one year
one to five years
over five years
notional principal of derivatives
2014
Maturity analysis
Under one year
one to five years
over five years
2013
Maturity analysis
Under one year
one to five years
over five years
Hedging
derivatives
other derivatives
Interest rate
derivatives
equity
derivatives
Commodity
derivatives
exchange rate
derivatives
Interest rate
derivatives
total
1
1
2
260
112
372
736
209
945
252
112
364
346
209
555
10
10
1
1
9
9
3 425
1 932
1 288
6 645
2 328
1 173
575
4 076
2 385
1 653
1 478
5 516
2 757
1 013
1 217
4 987
75
200
275
6 513
1 753
1 957
257 249
28 404
18 291
8 266
1 957
303 944
4 111
2 083
3 056
9 250
1 285
1 285
153 865
19 067
9 054
181 986
787
3 154
4 674
8 615
417
4 026
4 347
8 790
632
3 097
5 869
9 598
533
4 331
6 173
11 037
224 932
255 640
202 195
682 767
290 206
304 406
163 196
757 808
4 482
5 199
5 963
15 644
3 481
5 408
4 922
13 811
3 270
4 862
7 347
15 479
3 645
5 553
7 390
16 588
490 651
285 872
220 686
997 209
449 467
325 556
175 306
950 329
16.5 Derivatives designated as fair-value hedges
As part of the group’s hedging activities, it enters into transactions which are designated as fair-value hedge transactions. Cashflow hedges
and hedges of net investments in foreign entities do not currently form part of the Group’s hedging strategy.
Fair-value hedges are used by the group to mitigate the risk of changes in fair value of financial instruments due to movements in market
interest rates. Derivatives that are designated by the group to form part of these fair-value hedge transactions principally consist of interest
rate swaps. The corresponding hedged items forming part of these fair-value hedge transactions primarily consist of fixed rate government
bonds (refer to note 25).
For qualifying fair-value hedges, all changes in the fair value of the derivative and in the fair value of the hedged item in relation to the risk
being hedged are recognised in profit and loss. If the hedge relationship is terminated, the fair-value adjustment to the hedged item continues
to be reported as part to the basis of the item and is amortised to profit and loss as a yield adjustment over the remainder of the hedging period.
53
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
16 DERIVATIVE FINANCIAL INSTRUMENTS (continued)
16.5 Derivatives designated as fair-value hedges (continued)
The group recognised the following gains and losses on hedging instruments and hedged items:
Rm
Losses on hedged items (assets) (note 5)
Gains on hedging instruments (assets) (note 5)
17 GoVERNMENT AND oTHER SECURITIES
17.1 Analysis
Government and government-guaranteed securities
other dated securities¹
17.2 Sectoral analysis
Financial services, insurance and real estate
Banks
Manufacturing
Transport, storage and communication
Government and public sector
other sectors
1 Includes securitised assets. See note 43.
18 LoANS AND ADVANCES
2014
2013
(3)
3
–
13 839
12 989
26 828
2 516
2 897
1 882
694
17 571
1 268
26 828
17 324
13 955
31 279
2 628
3 026
2 171
1 082
20 487
1 885
31 279
The group extends advances to individuals and to the corporate, commercial and public sectors. Advances made to individuals are mostly
in the form of mortgages, instalment credit, overdrafts, personal loans and credit card borrowings. The group’s main activity is in the
corporate and commercial sectors where advances are made to a large cross-section of businesses, predominantly in the finance and
service area, manufacturing and building and property finance sectors.
This note should be read in conjunction with note 19 ‘Impairment of loans and advances’, as this represents the gross exposure before any
impairment provision. Specific impairments have been raised against those loans identified as impaired, and the analysis per product type
can be found in note 19.2. portfolio impairments are recognised against loans and advances classified as ‘neither past due nor impaired’
or ‘past due but not impaired’.
54
18.1 Categories of loans and advances
Mortgage loans
Home loans
Commercial mortgages
Net finance lease and instalment debtors (note 18.4)
Gross investment
Unearned finance charges
Credit cards
other loans and advances
properties in possession
overdrafts
Term loans
personal loans
other term loans
overnight loans
other loans to clients
Foreign client lending
Remittances in transit
other loans¹
preference shares and debentures
Factoring accounts
Deposits placed under reverse repurchase agreements
Trade, other bills and bankers’ acceptances
Impairment of loans and advances (note 19)
Comprises:
Loans and advances to customers
Loans and advances to banks
1 Represents clients’ indebtedness for acceptances and other loans.
18.2 Sectoral analysis
Individuals
Financial services, insurance and real estate
Banks
Manufacturing
Building and property development
Transport, storage and communication
Retailers, catering and accommodation
Wholesale and trade
Mining and quarrying
Agriculture, forestry and fishing
Government and public sector
other services
18.3 Geographical analysis
SA
Rest of Africa
Europe
Asia
United States
other
2014
rm
252 098
128 889
123 209
92 487
115 877
(23 390)
13 376
256 316
596
13 214
103 820
17 457
86 363
21 638
75 488
12 314
156
63 018
17 995
4 986
18 291
288
614 277
(10 948)
603 329
594 771
19 506
614 277
219 820
152 858
19 506
40 397
8 878
23 696
23 444
17 456
25 009
4 283
21 551
57 379
614 277
579 634
10 735
12 473
3 754
2 961
4 720
2013
Rm
234 424
128 505
105 919
83 810
104 806
(20 996)
11 428
247 717
773
12 622
95 602
20 419
75 183
17 926
71 306
12 255
100
58 951
18 855
4 796
25 796
41
577 379
(11 332)
566 047
552 122
25 257
577 379
211 433
132 394
25 257
44 353
7 626
23 845
16 686
12 833
27 958
4 346
21 621
49 027
577 379
543 273
12 908
13 114
1 781
1 226
5 077
614 277
577 379
55
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
18 LoANS AND ADVANCES (continued)
18.4 Net finance lease and instalment debtors
rm
No later than one year
Later than one year and no later than five years
Later than five years
18.5 Classification of loans and advances
2014
unearned
finance
charges
(5 977)
(16 350)
(1 063)
Gross
29 912
80 762
5 203
115 877
(23 390)
2013
Unearned
finance
charges
(5 520)
(14 533)
(943)
Gross
27 712
72 451
4 643
104 806
(20 996)
net
23 935
64 412
4 140
92 487
Net
22 192
57 918
3 700
83 810
total
neither past due nor
impaired
past due but not
impaired
rm
2014
2013
2014
2013
Mortgage loans¹
252 098
234 424
235 721
216 945
Net finance lease and instalment
debtors¹
Credit cards
properties in possession
overdrafts
Term loans
overnight loans
other loans to clients¹
preference shares and debentures
Factoring accounts
Deposits placed under reverse
repurchase agreements
Trade, other bills and bankers’
acceptances
92 487
13 376
596
13 214
103 820
21 638
75 488
17 995
4 986
83 810
11 428
773
12 622
95 602
17 926
71 306
18 855
4 796
84 624
11 394
76 567
9 744
12 058
98 679
21 638
74 878
17 995
4 574
11 084
89 611
17 920
70 501
18 855
4 492
18 291
25 796
18 291
25 796
288
41
288
41
2014
8 870
5 530
1 080
505
1 962
219
2013
8 911
4 829
856
675
2 504
6
161
298
204
Defaulted
2014
7 507
2013
8 568
2 333
2 414
902
596
651
828
773
863
3 179
3 487
391
114
644
100
614 277
577 379
580 140
541 556
18 464
18 146
15 673
17 677
Loans and advances defaulted – not impaired
Loans and advances defaulted – impaired¹
1 2013 comparatives have been restated due to reclassifications of restructures in MFC as defaulted advances.
345
15 328
15 673
436
17 241
17 677
56
18.6 Age analysis of loans and advances
total
<1 month
>1 month
<3 months
>3 months
<6 months
>6 months
<12 months
>12 months
rm
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
Neither past due nor
impaired
580 140 541 556 580 140 541 556
Mortgage loans
235 721 216 945 235 721 216 945
Net finance lease and
instalment debtors
Credit cards
overdrafts
Term loans
84 624
76 567
84 624
76 567
11 394
9 744
11 394
9 744
12 058
11 084
12 058
11 084
98 679
89 611
98 679
89 611
overnight loans
21 638
17 920
21 638
17 920
other loans to clients
74 878
70 501
74 878
70 501
preference shares and
debentures
17 995
18 855
17 995
18 855
Factoring accounts
4 574
4 492
4 574
4 492
Deposits placed under
reverse repurchase
agreements
Trade, other bills and
bankers’ acceptances
past due but not
impaired
18 291
25 796
18 291
25 796
288
41
288
41
18 464
18 146
10 558
10 366
Mortgage loans
8 870
8 911
5 670
5 740
7 866
3 178
7 665
3 160
Net finance lease and
instalment debtors
Credit cards
overdrafts
Term loans
5 530
1 080
505
856
675
1 962
2 504
overnight loans
other loans to clients¹
Factoring accounts
–
219
298
6
161
204
4 829
2 311
2 532
3 214
2 291
739
434
890
216
298
81
630
341
58
679
43
1 040
1 072
1 464
6
133
204
3
28
40
22
5
13
115
11
6
96
2
Subtotal
Defaulted
598 604 559 702 590 698 551 922
7 866
7 665
40
115
–
–
–
–
15 673
17 677
Mortgage loans¹
7 507
8 568
Net finance lease and
instalment debtors¹
Credit cards
properties in
possession
overdrafts
Term loans
other loans to clients¹
Factoring accounts
2 333
2 414
902
828
596
651
773
863
3 179
3 487
391
114
644
100
total loans and
advances
614 277 577 379
1 2013 comparatives have been restated due to reclassifications of restructures in MFC as defaulted advances.
57
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
18 LoANS AND ADVANCES (continued)
18.7 Credit quality of loans and advances
rm
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
total
nGr 1-12
nGr 13-20
nGr 21-25
np 1-3
unrated
Neither past due nor
impaired
Mortgage loans
Net finance lease and
instalment debtors
Credit cards
overdrafts
Term loans
overnight loans
other loans to clients
preference shares and
debentures
Factoring accounts
Deposits placed under
reverse repurchase
agreements
Trade, other bills and
bankers’ acceptances
past due but not
impaired
Mortgage loans¹
Net finance lease and
instalment debtors¹
Credit cards
overdrafts
Term loans
overnight loans
other loans to clients¹
Factoring accounts
Defaulted
Mortgage loans¹
Net finance lease and
instalment debtors¹
Credit cards
properties in
possession
overdrafts
Term loans
other loans to clients¹
Factoring accounts
Total loans and
advances
580 140 541 556 220 377 203 057 309 817
235 721 216 945
57 518
291 713
49 959 165 436 152 722
22 614
8 839
19 667
6 887
–
–
27 332
3 928
27 119
7 377
84 624
11 394
12 058
98 679
21 638
74 878
76 567
9 744
11 084
89 611
17 920
70 501
4 344
1 099
3 314
73 127
16 834
35 243
4 958
1 328
3 278
59 199
13 815
32 921
72 674
8 714
8 256
20 427
4 800
19 896
65 945
6 824
7 327
24 469
3 918
19 049
6 929
1 581
247
4 787
4
227
4 902
1 592
249
5 679
187
171
17 995
4 574
18 855
4 492
11 401
143
15 828
281
3 958
4 431
2 901
4 211
18 291
25 796
17 354
21 452
937
4 344
288
41
38
288
3
18 464
8 870
18 146
8 911
2
2
1
1
2 672
1 467
3 192
1 244
15 647
7 363
14 638
7 530
5 530
1 080
505
1 962
–
219
298
15 673
7 507
2 333
902
596
651
3 179
391
114
4 829
856
675
2 504
6
161
204
17 677
8 568
2 414
828
773
863
3 487
644
100
726
230
26
222
1 110
168
195
474
1
1
4 760
835
479
1 720
192
298
34
3 678
676
471
1 946
6
127
204
34
677
762
241
338
230
264
19 512
18 360
2 636
126
26
2
9
15
100
11
1
12
9
67
117
36
35
20
26
215
125
40
17
33
13 937
7 103
16 283
8 028
1 702
404
1 394
540
2 295
902
2 353
828
38
61
644
2 546
333
114
856
3 483
635
100
596
7
633
24
773
7
4
9
614 277 577 379 220 379 203 058 312 489 294 905
38 295
34 305
13 963
16 383
29 151
28 728
1 2013 comparatives have been restated due to reclassifications of restructures in MFC as defaulted advances.
The group uses a master rating scale for measuring credit risk, which measures borrower risk excluding the effect of collateral and any credit
mitigation (ie probability of default only). The comprehensive probability of default rating scale, which is mapped to default probabilities and
external rating agency scales, enables the group to measure credit risk consistently and accurately across its entire portfolio. A brief
explanation of the scale follows:
NGR 1-12: Represents borrowers who demonstrate a strong capacity to meet financial obligations, and who have a negligible or low
probability of default. This category comprises, but is not limited to, the group’s large corporate clients, including financial institutions,
parastatals and other government-related institutions.
NGR 13-20: Represents borrowers who demonstrate a satisfactory ability to make payments and who have a low or moderate probability of
default. This category comprises, but is not limited to, small and medium businesses, medium-sized corporate clients and individuals.
NGR 21-25: Represents borrowers who are of higher risk. This category comprises higher-risk individuals or small businesses, as well as
borrowers that were rated higher on inception but have since migrated down the rating scale as a result of poor financial performance.
However, the borrower has not defaulted and is continuing to make repayments.
Np 1-3: Represents clients who have defaulted. Where this rating appears in the ‘past due but not impaired’ category, the borrowers are
continuing to make repayments against their obligation and are being closely monitored.
58
19 IMpAIRMENT oF LoANS AND ADVANCES
19.1
Impairment of loans and advances
Balance at the beginning of the year
Impairments charge
Statement of comprehensive income charge
net of recoveries:
– Loans and advances¹
– Advances designated as at fair value
through profit or loss (see note 36.1)
Recoveries
Amounts written off against the impairment/
other transfers
Impairment of loans and advances
total impairments
Specific impairments
portfolio impairments
2014
rm
11 332
5 407
4 478
4 476
2
929
2013
Rm
10 778
6 407
5 529
5 503
26
878
2014
rm
7 476
5 059
4 130
4 128
2
929
2013
Rm
7 397
5 940
5 062
5 036
26
878
2014
rm
3 856
348
348
348
2013
Rm
3 381
467
467
467
(5 791)
10 948
(5 853)
11 332
(5 777)
6 758
(5 861)
7 476
(14)
4 190
8
3 856
1 2013 comparatives have been restated due to reclassifications of restructures in MFC as defaulted advances.
19.2
Impairments of loans and advances by classification
total impairments – 2014
Home loans
Commercial mortgages
properties in possession
Credit cards
overdrafts
other loans to clients
Net finance lease and instalment debtors
preference shares and debentures
Trade, other bills and bankers’ acceptances
Balance at
the beginning
of the year
rm
Impairments
charge/(release)
rm
Amounts written
off against the
impairments/
other transfers
rm
2 861
785
18
888
492
3 739
2 549
(1)
1
253
304
19
800
180
2 786
1 065
(674)
(181)
15
(702)
(236)
(2 743)
(1 271)
1
Impairment of loans and advances
11 332
5 407
(5 791)
Total impairments – 2013
Home loans
Commercial mortgages
properties in possession
Credit cards
overdrafts
other loans to clients
Net finance lease and instalment debtors
preference shares and debentures
Trade, other bills and bankers’ acceptances
Impairment of loans and advances
3 278
854
23
702
522
3 231
2 167
1
10 778
total
rm
2 440
908
52
986
436
3 782
2 343
1
10 948
2 861
785
18
888
492
3 739
2 549
(1)
1
529
337
(7)
713
189
3 592
1 054
(946)
(406)
2
(527)
(219)
(3 084)
(672)
(1)
6 407
(5 853)
11 332
59
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
19
19.2
IMpAIRMENT oF LoANS AND ADVANCES (continued)
Impairments of loans and advances by classification (continued)
Balance at
the beginning
of the year
rm
Impairments
charge/(release)
rm
Amounts written
off against the
impairments/
other transfers
rm
Specific impairments – 2014
Home loans
Commercial mortgages
properties in possession
Credit cards
overdrafts
other loans to clients
Net finance lease and instalment debtors
preference shares and debentures
Specific impairment of loans and advances
Specific impairments – 2013
Home loans
Commercial mortgages
properties in possession
Credit cards
overdrafts
other loans to clients
Net finance lease and instalment debtors¹
preference shares and debentures
Specific impairment of loans and advances
portfolio impairments – 2014
Home loans
Commercial mortgages
Credit cards
overdrafts
other loans to clients
Net finance lease and instalment debtors
Trade, other bills and bankers’ acceptances
portfolio impairment of loans and advances
portfolio impairments – 2013
Home loans
Commercial mortgages
Credit cards
overdrafts
other loans to clients
Net finance lease and instalment debtors¹
Trade, other bills and bankers’ acceptances
portfolio impairment of loans and advances
1 912
476
18
775
369
2 315
1 612
(1)
7 476
2 492
569
23
605
396
2 028
1 284
7 397
949
309
113
123
1 424
937
1
3 856
786
285
97
126
1 203
883
1
3 381
314
248
19
791
166
2 615
906
5 059
354
281
(7)
697
192
3 375
1 048
5 940
(61)
56
9
14
171
159
348
175
56
16
(3)
217
6
467
(674)
(184)
15
(702)
(236)
(2 725)
(1 272)
1
(5 777)
(934)
(374)
2
(527)
(219)
(3 088)
(720)
(1)
(5 861)
3
(18)
1
(14)
(12)
(32)
4
48
8
1 2013 comparatives have been restated due to reclassifications of restructures in MFC as defaulted advances.
60
total
rm
1 552
540
52
864
299
2 205
1 246
6 758
1 912
476
18
775
369
2 315
1 612
(1)
7 476
888
368
122
137
1 577
1 097
1
4 190
949
309
113
123
1 424
937
1
3 856
19.3 Sectoral analysis
total impairments
Specific impairments
portfolio impairments
Individuals¹
Financial services, insurance and
real estate
Manufacturing
Building and property development
Transport, storage and
communication
Retailers, catering and
accommodation
Wholesale and trade
Mining and quarrying
Agriculture, forestry and fishing
Government and public sector
other services
2014
rm
7 588
1 314
501
101
175
29
131
157
40
58
854
10 948
2013
Rm
8 184
975
276
112
185
49
244
189
159
60
899
11 332
19.4 Geographical analysis
SA¹
other African countries
Europe
Asia
United States
other
10 554
10 934
75
282
–
37
–
101
155
2
130
10
2014
rm
4 979
488
339
41
69
4
78
47
18
47
648
6 758
6 444
45
232
37
2013
Rm
5 600
426
90
63
94
6
213
132
140
47
665
7 476
7 180
32
136
128
2014
rm
2 609
826
162
60
106
25
53
110
22
11
206
4 190
4 110
30
50
2013
Rm
2 584
549
186
49
91
43
31
57
19
13
234
3 856
3 754
69
19
2
2
10
1 2013 comparatives have been restated due to reclassifications of restructures in MFC as defaulted advances.
10 948
11 332
6 758
7 476
4 190
3 856
19.5 Interest on specifically impaired loans and advances
876
965
Interest on specifically impaired loans and advances is determined for the period for which the loan and advance was classified as
specifically impaired.
The amount is calculated by multiplying the discounted expected recovery by the effective interest rate for the specifically impaired loan and
advance. The interest on specifically impaired loans and advances reflects the unwinding of the time value of money for the expected
discounted recovery.
Interest on specifically impaired loans and advances does not represent the contractual interest that has been earned on the outstanding
balance of a loan and advance.
20 oTHER ASSETS
Sundry debtors and other accounts
21
INVESTMENT SECURITIES
Listed investments at market value
private-equity portfolio
other
Unlisted investments at directors’ valuation
Strate Ltd
private-equity portfolio
other
Total listed and unlisted investments
2014
rm
5 393
5 393
624
624
1 745
51
1 195
499
2 369
2013
Rm
4 204
4 204
941
818
123
1 991
43
1 506
442
2 932
61
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
22 SUMMARISED FINANCIAL INFoRMATIoN oF INVESTMENTS IN pRIVATE
EQUITY ASSoCIATES, ASSoCIATE CoMpANIES AND JoINT ARRANGEMENTS
profit/(loss) from
continuing operations
posttax profit/
(loss) from discontinued
operations
other comprehensive
income/(loss)
total comprehensive
income
2014
rm
2013
Rm
2014
rm
2013
Rm
2014
rm
2013
Rm
2014
rm
2013
Rm
Comprehensive income
Associates
private-equity associates
(manufacturing, industrial,
leisure and other)
private-equity associates
(property investment
associates)
other
Joint arrangements
248
130
141
75
(4)
460
116
116
(16)
346
5
(4)
1
1
1
162
6
176
104
(52)
(7)
135
67
116
116
103
6
378
336
22.1 Movement in carrying amount
Carrying amount at the beginning of the year
Share of associate companies’ and joint arrangements’ profit after taxation for the current year
Net movement of associate companies and joint arrangements at cost¹
Fair value movements
Carrying amount at end of year
22.2 Analysis of carrying amount
Associate investments – on acquisition: Net asset value
Share of retained earnings since acquisition
Fair value movements
22.3 Valuation
Directors’ valuation
1 These amounts include movements due to acquisitions and disposals.
2014
rm
1 098
12
10
38
1 158
730
39
389
1 158
1 158
1 158
2013
Rm
1 029
28
61
(20)
1 098
705
28
365
1 098
1 098
1 098
Refer to note 51 for further information in respect of investments in private-equity associates, associate companies and joint arrangements.
23 NoN-CURRENT ASSETS HELD FoR SALE
non-current assets held for sale
properties sold not yet transferred¹
previously included in:
property and equipment
2014
rm
16
16
2013
Rm
12
12
Non-current assets and liabilities held for sale are measured at the lower of the carrying amount and fair value less incremental directly
attributable costs of disposal and are not depreciated. In accordance with IFRS 13 Fair value Measurement, the measurement of the group’s
non-current assets and liabilities are considered to be non-recurring. Non-recurring fair value measurements are those that IFRS requires or
permits to be recognised in the statement of financial position in particular circumstances. Furthermore, the group classifies these assets
and liabilities into level 3 of the fair value hierarchy. Level 3 fair value measurements are those that include the use of significant
unobservable inputs.
1 Commitments for the sale of properties had been entered into at year-end by the group. Transfer of which had not been effected at year-end. Transfer of the properties is expected to take place during the
following year.
62
24 DEFERRED TAxATIoN
24.1 Reconciliation of deferred taxation balance
Deferred taxation assets
Balance at the beginning of the year
Current year temporary differences recognised in the statement of comprehensive income
Capital gains taxation
Client credit agreements
Deferred acquisition costs
Deferred fee income
Depreciation
Fair value adjustments of financial instruments
Impairment of loans and advances
other income and expense items
Share-based payments
Taxation losses recognised
Recognised directly in equity
other movements
Balance at the end of the year
Deferred taxation liabilities
Balance at the beginning of the year
Current year temporary differences recognised in the statement of comprehensive income
Capital gains taxation
Client credit agreements
Deferred acquisition costs
Deferred fee income
Depreciation
Fair value adjustments of financial instruments
Impairment of loans and advances
other income and expense items
property revaluations
Share-based payments
Taxation losses recognised
Recognised directly in equity
other movements
Balance at the end of the year
2014
rm
69
307
20
(5)
(37)
15
(17)
(32)
114
241
21
(13)
(25)
(186)
165
297
19
9
4
12
(6)
(29)
287
2013
Rm
362
(25)
1
(28)
2
(268)
69
367
(153)
(26)
(3)
64
(39)
85
(31)
(4)
(174)
(10)
(63)
48
376
(293)
297
63
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
24 DEFERRED TAxATIoN (continued)
24.2 Analysis of deferred taxation
Deferred taxation assets
Capital gains taxation
Client credit agreements
Deferred acquisition costs
Deferred fee income
Depreciation
Fair-value adjustments of financial instruments
Impairment of loans and advances
other income and expense items
property revaluations
Share-based payments
Taxation losses
Deferred taxation liabilities
Capital gains taxation
Client credit agreements
Deferred acquisition costs
Deferred fee income
Depreciation
Fair value adjustments of financial instruments
Impairment of loans and advances
other income and expense items
property revaluations
Share-based payments
25 INVESTMENT pRopERTY
25.1 Fair value
Fair value at the beginning of the year
Transfers to non-current assets held for sale (note 23)
Net profit/(loss) from fair value adjustments
other movements
Fair value at the end of the year
25.2 Fair value of investment property
2014
rm
(184)
(16)
(396)
272
(408)
78
1 249
31
(443)
(27)
9
165
52
28
88
119
287
87
(87)
–
2013
Rm
11
36
22
69
231
11
358
(257)
391
(94)
(1 116)
188
531
54
297
84
4
(1)
87
Investment properties are freehold and are either held to earn rentals or for capital appreciation. Internal professional valuers perform
valuations on an annual basis. External valuers are obtained once every three years on a rotational basis in accordance with the group’s
policies for the valuation of properties. The internal and external valuers are members or associates of the Institute of Valuers (SA) or a local
equivalent in the case of foreign subsidiaries. The carrying amount of these properties is the fair value of the property as determined by
registered independent valuers who have recent experience in the location and category of the property being valued. In determining the fair
value of these investment properties, the following factors were considered:
Type of property
Valuation method
Significant inputs
Parameters
Commercial property
Discounted cashflow
Income capitalisation rates
10,0%
Total investment properties
measured at fair value
2014
rm
–
2013
Rm
87
87
In accordance with IFRS 13 Fair value Measurement, the measurement of the group’s investment properties are considered to be recurring.
Recurring fair value measurements are those that IFRS requires or permits to be recognised in the statement of financial position at the end
of each reporting period. Furthermore, the group classifies its investment properties into level 3 of the fair-value hierarchy. Level 3 fair-value
measurements are those that include the use of significant unobservable inputs.
64
25.3 Rental income and operating expenses from investment property
Rental income from investment property
Direct operating expense arising from investment property that generated rental income
25.4 Minimum contractual lease rental income from investment property
2014
2014
rm
4
6
–
2013
Rm
13
20
12
12
26 pRopERTY AND EQUIpMENT
land
Buildings
Computer
equipment
Furniture and other
equipment
Vehicles
total
2014
rm
2013
Rm
2014
rm
2013
Rm
2014
rm
2013
Rm
2014
rm
2013
Rm
2014
rm
2013
Rm
2014
rm
2013
Rm
Gross carrying
amount
Balance at
1 January
Acquisitions
Increases arising
from revaluations¹
Transfers to
non-current
assets held
for sale
Disposals
Writeoff of
accumulated
depreciation on
revaluations
Transfers to
software (note 28)
Effect of
movements in
foreign exchange
rates and other
movements
Balance at
31 December
Accumulated
depreciation and
impairment
losses
Balance at
1 January
Depreciation
charge for the
year
Writeoff of
accumulated
depreciation on
revaluations
Disposals
Transfers to
software (note 28)
Effect of
movements in
foreign exchange
rates and other
movements
Balance at
31 December
Carrying amount
At 1 January
At 31 December
220
347
(4)
(759)
(8)
(297)
(85)
(132)
(60)
787
4 005
180
3 725
92
2 897
728
2 591
432
3 294
745
3 065
437
24
3
23
4
11 009
1 658
10 191
965
789
2
83
7
137
340
(1)
(3)
(3)
(3)
(15)
(5)
(1)
(542)
(128)
(198)
(162)
(4)
(3)
(85)
(132)
(13)
(47)
1
2
(1)
2
(1)
1
873
789
4 221
4 005
3 083
2 897
3 840
3 294
371
388
2 154
1 931
1 898
1 686
131
126
396
345
375
367
1
24
15
4
2
3
24
12 041
11 009
15
4 438
4 020
3
906
841
(85)
(15)
(132)
(10)
(511)
(123)
(147)
(149)
(4)
(3)
(6)
(85)
(677)
(132)
(275)
(16)
(1)
1
402
371
2 039
2 154
2 126
1 898
789
873
787
789
3 634
3 819
3 337
3 634
743
1 044
660
743
1 396
1 714
1 379
1 396
15
9
9
15
4 582
4 438
8
9
6 571
7 459
6 171
6 571
1 Gains on property revaluations are recognised in profit or loss to the extent that they reverse a revaluation decrease of the same asset previously recognised in profit or loss.
65
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
26 pRopERTY AND EQUIpMENT (continued)
Equipment (principally computer equipment, motor vehicles, fixtures and furniture) is stated at cost less accumulated depreciation and
impairment losses. Land is recognised at the revalued amount, which is based on external valuations obtained every three years on a
rotation basis for all properties in accordance with the group’s accounting policy. The valuers are members or associates of the Institute of
Valuers (SA) or a local equivalent in the case of foreign subsidiaries. An annual internal review is also done on those properties not subject
to external valuation. The carrying amount of properties is the fair value as determined by the valuers less subsequent accumulated
depreciation and impairment losses. Adjustments in the valuation of the properties are recorded in the revaluation reserve, which is
amortised over the remaining useful life of the property. In determining the fair value of properties, the following factors are considered:
Type of property
Valuation method
Significant inputs
Parameters
Commercial property Market comparable
approach and
discounted cashflow
Income capitalisation
rates
11,0% – 13,5%
(2013: 10,0%
– 13,0%)
Residential property Market comparable
approach and
replacement value
price per square
metre
total land and
buildings
land
Buildings
2014
rm
2013
Rm
2014
rm
2013
Rm
868
783
3 809
3 629
5
5
10
8
873
788
3 819
3 637
In accordance with IFRS 13 Fair value Measurement,the measurement of the group’s properties are considered to be recurring. Recurring
fair-value measurements are those that IFRS requires or permits to be recognised in the statement of financial position at the end of each
reporting period. Furthermore, the group classifies its properties measured at fair value into level 3 of the fair-value hierarchy. Level 3
fair-value measurements are those that include the use of significant unobservable inputs.
In respect of certain properties there are restrictions of title in terms of regulatory restrictions such as servitudes. This does not have
a material effect on the ability of the group to transfer these properties. No material plant and equipment have been pledged as security
for liabilities.
If land and buildings were carried under the cost and not the revaluation model, the carrying amount would have been R2 444m
(2013: R2 349m).
27 LoNG-TERM EMpLoYEE BENEFITS
The group has a number of defined-benefit and defined-contribution plans in terms of which it provides pension, postretirement medical aid
and long-term disability benefits to employees and their dependants on retirement, death or disability. All eligible employees and former
employees are members of trustee-administered or underwritten schemes within the group, financed by company and employee
contributions. All SA retirement plans are governed by the pension Funds Act of 1956. The defined-benefit funds are actuarially valued using
the projected-unit credit method. Any deficits are funded to ensure the ongoing financial soundness of the funds.
The benefits provided by the defined-benefit schemes are based on years of membership and/or salary levels. These benefits are provided
from contributions by employees, the group, and income from the assets of these schemes. The benefits provided by the defined-contribution
schemes are determined by the accumulated contributions and investment earnings.
At the dates of the latest valuations, the defined-benefit plans were in a sound financial position in terms of section 16 of the pensions Funds
Act. During 1998 active members in the Nedgroup pension Fund (defined-benefit) were granted a further option to transfer to one of the
defined-contribution funds and approximately three quarters of the then valuation surplus was allocated to members and pensioners.
The funds that constitute the assets and liabilities that the group has recognised in the statement of financial position in respect of its
defined-benefit plans are listed below. The latest actuarial valuations were performed at 31 December 2014.
Postemployment benefits
Defined-benefit pension funds
Nedgroup pension Fund (including the optiplus policy).
BoE Funds, which consist of BoE Ltd pension Fund (1969), pension Fund of BoE Bank: Business Division.
Nedbank UK pension Fund.
other funds consisting of Nedbank Swaziland Ltd pension Fund and Nedbank Lesotho pension Fund.
Defined-benefit medical aid schemes
Nedgroup Medical Aid Scheme for Nedbank employees and pensioners.
Nedgroup Medical Aid Scheme for past BoE employees and pensioners.
Other long-term employee benefits
Disability fund
Nedbank Group Disability Fund [including the old Mutual Alternative Risk Transfer Fund (oMART) policy].
Insurance policies held with related parties
optiplus (Nedgroup pension Fund) and oMART (Nedbank Group Disability Fund) are insurance policies, the proceeds of which can only be
used to pay or fund the employee benefits under the specific funds. However, these policies are not qualifying insurance policies in terms of
IAS 19 Employee Benefits since they are held with related parties. These rights to reimbursement are therefore recognised as separate
assets and in all other respects are treated in the same way as other plan assets.
66
27.1 Analysis of long-term employee benefits assets and liabilities
rm
2014
postemployment benefits
other long-term employee benefits – disability fund
2013
postemployment benefits
other long-term employee benefits – disability fund
Assets
liabilities
net asset
4 035
374
4 409
2 527
320
2 847
(2 628)
(374)
(3 002)
(1 484)
(320)
(1 804)
1 407
1 407
1 043
1 043
The group’s defined-benefit obligation in terms of the Nedbank Group Disability Fund is recognised together with the fair value of the assets
held in oMART. oMART is a structured entity controlled by the group and was established to fund this defined-benefit obligation. The value
of the oMART asset held by the group is R374m (2013: R320m).
27.2
Postemployment benefits
rm
Analysis of postemployment benefit assets
and liabilities
2014
pension funds
Nedgroup Fund
Nedbank UK Fund
other funds
Medical aid funds
Nedgroup scheme for Nedbank employees
Nedgroup scheme for BoE employees
Total
2013
pension funds
Nedgroup Fund
Nedbank UK Fund
other funds
Medical aid funds
Nedgroup scheme for Nedbank employees
Nedgroup scheme for BoE employees
Total
present value
of obligation
Fair value
of plan asset
Surplus/
(Deficit)
unrecognised
due to
paragraph 64
limit
net asset/
(liability)
5 024
4 460
395
169
1 772
1 644
128
6 796
4 781
4 267
352
162
1 571
1 481
90
6 352
7 053
6 488
384
181
1 170
1 170
8 223
6 520
6 017
332
171
893
893
7 413
2 029
2 028
(11)
12
(602)
(474)
(128)
1 427
1 739
1 750
(20)
9
(678)
(588)
(90)
1 061
(20)
(20)
(20)
(18)
(18)
(18)
2 009
2 028
(11)
(8)
(602)
(474)
(128)
1 407
1 721
1 750
(20)
(9)
(678)
(588)
(90)
1 043
67
NedbaNk LIMITed annual report pension and
provident funds
Medical aid
funds
4 781
34
382
10
138
(335)
14
5 024
4 784
32
312
10
(155)
74
(276)
4 781
6 520
528
290
38
10
(335)
(11)
13
7 053
5 635
368
690
32
10
(275)
(8)
68
6 520
1 571
68
151
42
(60)
1 772
1 584
65
132
(148)
(62)
1 571
893
92
(24)
265
(56)
1 170
854
68
28
(57)
893
total
6 352
102
533
10
180
(395)
14
6 796
6 368
97
444
10
(303)
74
(338)
6 352
7 413
620
266
303
10
(391)
(11)
13
8 223
6 489
436
718
32
10
(332)
(8)
68
7 413
NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
27 LoNG-TERM EMpLoYEE BENEFITS (continued)
27.2 Postemployment benefits (continued)
rm
present value of defined-benefit obligation
2014
Balance at the beginning of the year
Current service cost
Interest cost
Contributions by plan participants
Actuarial losses
Benefits paid
Impact of foreign currency exchange rate changes
Balance at the end of the year
2013
Balance at the beginning of the year
Current service cost
Interest cost
Contributions by plan participants
Actuarial gains
Impact of foreign currency exchange rate changes
Benefits paid
Balance at the end of the year
Fair value of plan assets
2014
Balance at the beginning of the year
Expected return on plan assets
Actuarial gains
Contributions by the employer
Contributions by plan participants
Benefits paid
Scheme-settled administration costs
Impact of foreign currency exchange rate changes
Balance at the end of the year
2013
Balance at the beginning of the year
Expected return on plan assets
Actuarial gains
Contributions by the employer
Contributions by plan participants
Benefits paid
Scheme-settled administration costs
Impact of foreign currency exchange rate changes
Balance at the end of the year
68
rm
net asset/(liability) recognised
2014
present value of defined-benefit obligation
Fair value of plan assets
Funded status
Unrecognised due to paragraph 64 limit
Asset
Liability
2013
present value of defined-benefit obligation
Fair value of plan assets
Funded status
Unrecognised due to paragraph 64 limit
Asset
Liability
net (income)/expense recognised
2014
Current service cost
Interest cost
Scheme-settled plan administration costs
2013
Current service cost
Interest cost
Scheme-settled plan administration costs
Movements in net asset/(liability) recognised
2014
Balance at the beginning of the year
Net income/(expense) recognised in the statement of comprehensive income
Net remeasurements – credit for the year
Contributions paid by the employer
Impact of foreign currency exchange rate changes
Balance at the end of the year
2013
Balance at the beginning of the year
Net income/(expense) recognised in the statement of comprehensive income
Net remeasurements – credit/(debit) for the year
Contributions paid by the employer
Impact of foreign currency exchange rate changes
Balance at the end of the year
pension and
provident funds
Medical aid
funds
total
(6 796)
8 223
1 427
(20)
1 407
4 035
(2 628)
(6 352)
7 413
1 061
(18)
1 043
2 527
(1 772)
1 170
(602)
(602)
(602)
(1 571)
893
(678)
(678)
(678)
(1 484)
68
59
127
65
65
130
(678)
(127)
(66)
269
102
(86)
11
27
97
9
8
114
1 043
(27)
85
307
(1)
(5 024)
7 053
2 029
(20)
2 009
4 035
(2 026)
(4 781)
6 520
1 739
(18)
1 721
2 527
(806)
34
(145)
11
(100)
32
(56)
8
(16)
1 721
100
151
38
(1)
2 009
(602)
1 407
842
16
836
32
(5)
1 721
(730)
(130)
175
7
112
(114)
1 011
39
(5)
(678)
1 043
69
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
27 LoNG-TERM EMpLoYEE BENEFITS (continued)
27.2 Postemployment benefits (continued)
Distribution of plan assets (%)
2014
Equity instruments
Debt instruments
property
Cash
International
2013
Equity instruments
Debt instruments
property
Cash
International
Actual return on plan assets (rm)
2014
2013
pension and
provident funds
Medical aid
funds
total
34,18
28,74
4,89
6,32
25,87
100,00
31,81
28,03
4,39
5,87
29,90
100,00
818
1 058
25,00
17,00
43,00
15,00
100,00
25,00
17,00
43,00
15,00
100,00
68
96
32,88
27,07
4,19
11,54
24,32
100,00
31,00
26,70
3,86
10,34
28,10
100,00
886
1 154
Principal actuarial assumptions (%)
range
used in valuation
2014
Discount rates
Expected rates of return on plan assets
Inflation rate
Expected rates of salary increases
pension increase allowance
Annual increase to medical aid subsidy
Average expected retirement age (years)
2013
Discount rates
Expected rates of return on plan assets
Inflation rate
Expected rates of salary increases
pension increase allowance
Annual increase to medical aid subsidy
Average expected retirement age (years)
3,60 – 8,10
3,60 – 8,10
2,25 – 5,90
6,90 – 7,10
0,53 – 5,90
55 to 65
4,40 – 8,50
4,40 – 8,50
2,50 – 6,10
7,00 – 7,10
0,57 – 6,10
55 to 65
9,1
9,1
6,5
6,5
7,5
60
9,4
9,4
6,8
6,8
7,8
60
Pension funds
The expected long-term return is a function of the expected long-term returns on equities, cash and bonds. In setting these assumptions the
asset splits at the latest available date were used and adjustments were made to reflect the effect of expenses.
Weighted average assumptions:
Discount rate
Expected return on plan assets
Future salary increases
Future pension increases
70
2014
%
7,86
7,86
6,34
5,53
2013
%
8,30
8,30
6,55
5,74
Medical aid funds
The overall expected long-term rate of return on plan assets is 9,4%. The expected rate of return is based on market expectations, at the
beginning of the period, for returns over the entire life of the related obligation. The expected rate of return is based on the expected
performance of the entire portfolio.
experience adjustments on present value of defined-benefit obligation for past
five years
2014
2013
2012
2011
2010
2009
experience adjustments on fair value of plan assets for past five years
2014
2013
2012
2011
2010
2009
estimate of future contributions
Contributions expected for ensuing year
Fund surplus/(deficit) for past five years
55
229
10
(106)
30
192
(30)
95
185
36
(42)
148
18
153
48
(98)
(24)
28
18
(2)
(10)
27
13
377
28
47
78
94
(24)
28
18
(32)
85
212
36
present value
of obligation
Fair value
of plan asset
Surplus/
(Deficit)
pension funds
2014
2013
2012
2011
2010
2009
Medical aid funds
2014
2013
2012
2011
2010
2009
effect of 1% change in assumed medical cost trend rates (rm)
1% increase – effect on current service cost and interest cost
1% increase – effect on accumulated benefit obligation
1% decrease – effect on current service cost and interest cost
1% decrease – effect on accumulated benefit obligation
5 024
4 781
4 784
4 191
3 917
3 432
1 772
1 571
1 584
1 482
1 222
1 085
7 053
6 520
5 635
5 115
4 908
4 633
1 170
893
854
830
810
790
2014
50
274
(20)
(222)
2 029
1 739
851
924
991
1 201
(602)
(678)
(730)
(652)
(412)
(295)
2013
36
228
(29)
(186)
71
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
28 INTANGIBLE ASSETS
Goodwill
Software
Software
development
costs
1 633
6 859
241
761
(33)
(198)
(1)
1 633
7 629
224
224
1 409
1 409
1 633
4 897
644
(198)
1
5 344
1 962
2 285
5 884
263
669
(5)
(15)
60
3
1 633
6 859
224
4 330
566
(17)
16
2
224
4 897
1 409
1 409
1 554
1 962
952
804
(761)
(38)
957
135
135
817
822
1 001
678
(669)
(59)
1
952
134
¹
1
135
867
817
total
9 444
1 045
–
(71)
(198)
(1)
10 219
5 256
644
(198)
1
5 703
4 188
4 516
8 518
941
–
(64)
(15)
60
4
9 444
4 688
566
(17)
16
3
5 256
3 830
4 188
rm
2014
Cost
Balance at the beginning of the year
Acquisitions
Development costs commissioned to software
Impairment losses
Disposals and retirements
Foreign currency translation and other movements
Balance at the end of the year
Accumulated amortisation
Balance at the beginning of the year
Amortisation charge
Disposals and retirements
Foreign currency translation and other movements
Balance at the end of the year
Carrying amount
At the beginning of the year
At the end of the year
2013
Cost
Balance at the beginning of the year
Acquisitions
Development costs commissioned to software
Impairment losses
Disposals and retirements
Transfers from property and equipment (note 26)
Foreign currency translation and other movements
Balance at the end of the year
Accumulated amortisation
Balance at the beginning of the year
Amortisation charge
Disposals and retirements
Transfers from property and equipment (note 26)
Foreign currency translation and other movements
Balance at the end of the year
Carrying amount
At the beginning of the year
At the end of the year
1 Represents amounts less than R1m.
72
28.1 Analysis of goodwill
rm
original subsidiary companies
peoples Mortgage Ltd
IBL Asset Finance and Services Ltd
old Mutual Bank
Capital one
American Express
Nedbank Limited – BoE Ltd
Visigro Investments (pty) Ltd
other
Cost
198
285
206
82
81
757
19
5
1 633
2014
Accumulated
impairment
losses
Carrying
amount
(198)
(25)
(1)
(224)
–
260
206
82
81
757
19
4
2013
Accumulated
impairment
losses
(198)
(25)
(1)
(224)
Carrying
amount
–
260
206
82
81
757
19
4
1 409
Cost
198
285
206
82
81
757
19
5
1 409
1 633
Goodwill is allocated to individual CGUs based on business activity. Impairment testing is done on a regular basis by comparing the net
carrying value of the CGUs to the estimated value in use. The value in use is determined by discounting estimated future cashflows of
each CGU. The discounted cashflow calculations have been performed using Nedbank’s cost of equity, which is calculated using the Capital
Asset pricing Model. No impairments resulting from impairment testing have been effected for the reporting periods presented. Management
regards the useful lives of all CGUs to be indefinite. See note 3 for key assumptions used when assessing goodwill impairment.
The value in use of the various CGUs was based on the following assumptions:
Risk-free rate (%)
Beta range
Equity risk premium (%)
Terminal growth rate range (%)
Cashflow projection (years)
Discount rate range (%)
Goodwill on a geographical basis relates to SA in total and is as follows:
Carrying amount
Estimated value in use
Net estimated recoverable amounts
29 SHARE CApITAL
29.1 Ordinary share capital
Authorised
30 000 000 (2013: 30 000 000) ordinary shares of R1 each
Issued
27 241 024 (2013: 27 241 024) fully paid ordinary shares of R1 each
2014
7,98
2013
8,23
0,21 – 0,89
0,15 – 0,81
6,00
6,00
0,00 – 5,80
0,00 – 5,00
3
3
9,08 – 12,81
9,06 – 13,06
1 409
100 801
99 392
1 409
109 509
108 100
2014
rm
30
27
2013
Rm
30
27
Subject to the restrictions imposed by the Companies Act, 2008 (as amended), the unissued shares are under the control of the directors
until the forthcoming annual general meeting.
73
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
29 SHARE CApITAL (continued)
29.2 Preference share capital and premium
Nedbank Limited preference share capital and premium
Authorised
1 000 000 000 (2013: 1 000 000 000) non-redeemable non-cumulative preference shares
of R0,001 each
5 000 Class A redeemable cumulative preference shares of R0,0001 each
5 000 Class B redeemable cumulative preference shares of R0,0001 each
Issued
358 277 491 (2013: 358 277 491) non-redeemable non-cumulative preference shares of R0,001 each
100 Class A redeemable cumulative preference shares of R0,0001 each
100 Class B redeemable cumulative preference shares of R0,0001 each
preference share premium
1 Represents amounts less than R1m.
2014
rm
2013
Rm
1
1
1
1
1
1
1
1
1
1
3 561
3 561
3 561
3 561
preference shares are classified as equity instruments by Nedbank Limited (the company).
Each preference share confers on the holder the right to capital of the company in the form of a cash dividend prior to payment of dividends
to any other class of shareholder. The rate is limited to 83,33% of the prevailing prime rate on a deemed value of R10 and is never compounded.
The dividends, if declared, accrue half-yearly on 30 June and 31 December and are payable within 120 days of these dates respectively.
If a preference dividend is not declared, the dividend will not accumulate and will never become payable by the company, whether in
preference to payments to any other class of share or otherwise.
Each preference share confers on the holder the right to a return of capital on the winding up of the company prior to any payment to any
other class of share, but holders are not entitled to any further participation in the profits, assets or any surplus assets of the company in
such circumstances.
The holders of this class of share are not entitled to be present or vote (even by proxy) at any meeting of the company except when a declared
dividend or part thereof remains in arrears and unpaid after six months from the due date or a resolution is proposed that directly affects the
rights attached to the preference share or the interests of the holder, including resolutions to wind up the company or in the reduction of its
share capital.
At every general meeting where the preference shareholder is entitled to vote, the voting rights are restricted to the holder’s nominal value
in proportion to the total nominal value of all shares issued by the company.
No shares in the capital of the company, in priority to the preference shares, can be created or issued without prior sanction of the holders
of preference shares by way of a resolution passed at a separate class meeting properly constituted in terms of the provisions set out in the
articles of association of the holders of preference shares.
74
30 AMoUNTS oWED To DEpoSIToRS
30.1 Classifications
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 agreements¹
Comprises:
– Amounts owed to depositors
– Amounts owed to banks
2014
rm
62 385
9 649
453 350
252 157
41 264
60 025
99 904
29 807
66 849
12 583
2013
Rm
56 139
9 408
409 320
232 382
36 879
55 943
84 116
13 799
84 573
12 258
634 623
585 497
586 058
48 565
634 623
540 238
45 259
585 497
Deposit products include current accounts, savings accounts, call and notice deposits, fixed deposits and negotiable certificates of deposit.
Term deposits vary from six months to five years in both the wholesale and retail markets.
Foreign currency liabilities are either matched by advances to clients or hedged against exchange rate fluctuations.
1 Government and other securities (note 17) and negotiable certificates of deposit (note 15) amounting to R11 525m (2013: R12 258m) have been pledged as collateral for deposits received under repurchase
agreements. These amounts represent assets that have been transferred but that do not qualify for derecognition under IAS 39.
30.2 Sectoral analysis
Banks
Government and public sector
Individuals
Business sector
30.3 Geographical analysis
SA
Rest of Africa
Europe
Asia
United States
31
pRoVISIoNS AND oTHER LIABILITIES
Creditors and other accounts
Deferred revenue: customer loyalty programmes
Short-trading securities and spot positions
Leave pay accrual (note 31.1)
31.1
Leave pay accrual
Balance at the beginning of the year
Recognised in profit or loss
Utilised during the year
Balance at the end of the year
2014
rm
48 565
46 652
154 520
384 886
634 623
2013
Rm
45 259
47 029
141 811
351 398
585 497
613 638
569 220
6 956
13 865
164
5 704
8 360
165
2 048
634 623
585 497
6 668
258
767
711
8 404
676
386
(351)
711
7 206
277
1 857
676
10 016
635
367
(326)
676
75
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
31 pRoVISIoNS AND oTHER LIABILITIES (continued)
31.2 Day-one gains and losses
The group enters into transactions where the fair value of the financial instruments are determined using valuation models for which certain
inputs are not based on market-observable prices or rates. Such financial instruments are initially recognised at the transaction price, which
is the best indicator of fair value. The transaction price may differ from the valuation amount obtained, giving rise to a day-one profit or loss.
The difference between the transaction price and the valuation amount, commonly referred to as ‘day-one profit or loss’, is deferred and
either amortised over the life of the transaction, deferred until the instrument’s fair value can be determined using market-observable
inputs, or realised when the financial instrument is derecognised.
The group’s day-one profits are attributable to commodity financial instruments.
Balance at the beginning of the year
Loss recognised in the statement of comprehensive income
Balance at the end of the year
32 LoNG-TERM DEBT INSTRUMENTS
Nominal value
Instrument terms
rm
1 700
8,90% per annum¹
2 000
JIBAR + 0,47% per annum²
1 000
10,54% per annum¹
1 800
JIBAR + 2,75% per annum²
1 200
JIBAR + 2,55% per annum²
450
10,49% per annum¹
1 737
JIBAR + 2,55% per annum²
300
uS$m
JIBAR + 2,75% per annum²
100
Three month USD LIBoR²
rm
487
15,05% per annum¹
1 265
JIBAR + 4,75% per annum²
rm
480
JIBAR + 1,1% per annum²
336
JIBAR + 1,25% per annum²
900
JIBAR + 1,54% per annum²
110
JIBAR + 1,90% per annum²
Subordinated debt
rand-denominated
Callable notes repayable on
8 February 2019 (NED8) (a)
Callable notes repayable on
6 July 2022 (NED9) (c)
Callable notes repayable on
17 September 2020 (NED11) (b)
Callable notes repayable on
25 July 2023 (NED13) (g)
Callable notes repayable on
29 November 2023 (NED14) (g)
Callable notes repayable on
8 April 2024 (NED15) (h)
Callable notes repayable on
8 April 2024 (NED16) (g)
Callable notes repayable on
14 october 2024 (NED17) (g)
uS dollar-denominated
Callable notes repayable on
3 March 2022 (EMTN01) (e)
Hybrid subordinated debt –
Rand-denominated
Callable notes repayable on
20 November 2018 (NEDH1A) (d)
Callable notes repayable on
20 November 2018 (NEDH1B) (d)
Securitised liabilities –
Rand-denominated
Callable notes repayable on
25 october 2039 (GRH1A1) (f)
Callable notes repayable on
25 october 2039 (GRH1A2) (f)
Callable notes repayable on
25 october 2039 (GRH1A3) (f)
Callable notes repayable on
25 october 2039 (GRH1B) (f)
¹ Interest on these notes is payable biannually.
² Interest on these notes is payable quarterly.
76
2014
rm
–
2014
rm
9 813
8 654
2 031
1 048
1 828
1 209
461
1 771
306
1 159
1 159
1 900
575
1 325
1 395
32
340
912
111
2013
Rm
33
(33)
–
2013
Rm
8 946
7 895
1 765
2 026
1 070
1 826
1 208
1 051
1 051
1 831
552
1 279
1 593
232
340
910
111
Senior unsecured debt – Rand-denominated
Senior unsecured notes repayable on
15 September 2015 (NBK2A)
Senior unsecured notes repayable on
15 September 2015 (NBK2B)
Senior unsecured notes repayable on
9 September 2019 (NBK3A)
Senior unsecured notes repayable on
28 october 2024 (NBK4)
Senior unsecured notes repayable on
19 April 2015 (NBK6A)
Senior unsecured notes repayable on
19 April 2015 (NBK6B)
Senior unsecured notes repayable on
19 April 2020 (NBK7B)
Senior unsecured notes repayable on
24 March 2014 (NBK8A)
Senior unsecured notes repayable on
24 March 2014 (NBK8B)
Senior unsecured notes repayable on
23 March 2016 (NBK9A)
Senior unsecured notes repayable on
23 March 2016 (NBK9B)
Senior unsecured notes repayable on
25 July 2016 (NBK10A)
Senior unsecured notes repayable on
21 April 2014 (NBK10B)
Senior unsecured notes repayable on
28 November 2020 (NBK11A)
Senior unsecured notes repayable on
27 october 2014 (NBK11B)
Senior unsecured notes repayable on
19 March 2021 (NBK12A)
Senior unsecured notes repayable on
20 February 2015 (NBK12B)
Senior unsecured notes repayable on
19 March 2024 (NBK13A)
Senior unsecured notes repayable on
21 February 2017 (NBK13B)
Senior unsecured notes repayable on
28 November 2016 (NBK14A)
Senior unsecured notes repayable on
27 August 2015 (NBK14B)
Senior unsecured notes repayable on
27 August 2017 (NBK15B)
Senior unsecured notes repayable on
25 July 2016 (NBK16B)
Senior unsecured notes repayable on
28 November 2016 (NBK17B)
Senior unsecured notes repayable on
20 March 2017 (NBK18B)
Senior unsecured notes repayable on
26 June 2017 (NBK19B)
Senior unsecured notes repayable on
25 June 2021 (NBK20B)
Senior unsecured notes repayable on
10 November 2017 (NBK21B)
Other – Rand-denominated
Unsecured debentures repayable on
30 November 2029
total long-term debt instruments in issue
¹ Interest on these notes is payable biannually.
² Interest on these notes is payable quarterly.
Nominal value
Instrument terms
rm
3 244
10,55% per annum¹
1 044
JIBAR + 2,20% per annum²
1 273
11,39% per annum¹
660
Zero coupon¹
478
9,68% per annum¹
2014
rm
2013
Rm
22 511
20 882
3 347
1 054
1 385
263
487
3 347
1 053
1 397
236
487
1 027
JIBAR + 1,75% per annum²
1 043
1 041
80
JIBAR + 2,15% per annum²
81
450
8,39% per annum¹
988
JIBAR + 1,05% per annum²
81
460
869
1 137
9,36% per annum¹
1 166
1 166
677
JIBAR + 1,25% per annum²
151
6,91% per annum¹
678
154
500
JIBAR + 1,00% per annum²
1 888
8,92% per annum¹
1 903
1 075
JIBAR + 0,94% per annum²
855
9,38% per annum¹
1 297
JIBAR + 1,00% per annum²
391
9,73% per annum¹
405
JIBAR + 1,30% per annum²
500
9,29% per annum¹
250
JIBAR + 1,00% per annum²
786
JIBAR + 1,31% per annum²
878
1 307
402
408
501
252
700
678
155
455
1 903
1 086
1 306
408
251
730
3 056
JIBAR + 0,8% per annum²
3 068
3 074
694
JIBAR + 0,75% per annum²
1 035
JIBAR + 0,85% per annum²
806
JIBAR + 0,9% per annum²
650
JIBAR + 1,3% per annum²
JIBAR + 1,12% per annum²
241
rm
200
Zero coupon
698
1 037
806
650
243
15
15
699
13
13
35 634
33 265
77
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
32 LoNG-TERM DEBT INSTRUMENTS (continued)
During the year there were no defaults or breaches of principal, interest or any other terms and conditions of long-term debt instruments.
Coupon holders are entitled, in the event of interest default, to put the coupon covering such interest payments to Nedbank Limited. The US
dollar subordinated-debt instruments are either matched by advances to clients or covered against exchange rate fluctuations. In accordance
with the group’s memorandum of incorporation the borrowing powers of the group are unlimited.
(a) Callable by the issuer, Nedbank Limited, after seven years from the date of issue, being 20 September 2006 and 8 February 2007
(ie 20 September 2013 and 8 February 2014), at which time the interest converts to a floating three-month JIBAR rate, plus a spread of
2,05% and 2,17% respectively.
(b) Callable by the issuer, Nedbank Limited, after eight years from the date of issue, being 17 September 2007 (ie 17 September 2015), at
which time the interest converts to a floating three-month JIBAR rate, plus a spread of 2,85%.
(c) Callable by the issuer, Nedbank Limited, after 10 years from the date of issue, being 6 July 2007 (ie 6 July 2017), at which time the
interest converts to a floating three-month JIBAR rate, plus a spread of 2,20%.
(d) Callable by the issuer, Nedbank Limited, after ten and a half years from the date of issue, being 20 May 2008 (ie 20 November 2018),
at which time the interest converts to a floating three-month JIBAR rate plus 712,5 bps in perpetuity unless called.
(e) Callable by the issuer, Nedbank Limited, after eight years from the date of issue 3 March 2009 (ie 3 March 2017), at which time the
interest rate converts to a floating three-month USD LIBoR rate, plus a spread of 3,00%.
(f) Callable by the issuer, Greenhouse Funding (RF) Ltd, after approximately five years from the date of issue, being 19 November 2012
(ie 25 october 2017), at which time the interest rate on the notes (GRH1A1, GRH1A2, GRH1A3, GRH1B) will step up to three-month
JIBAR rate, plus a spread of 1,49%, 1,69%, 2,08% and 2,57% respectively.
(g) Callable by the issuer, Nedbank Limited, after five years from the date of issue, 24 July 2013, 28 November 2013, 7 April 2014 and
13 october 2014 (ie 25 July 2018, 29 November 2018, 8 April 2019 and 14 october 2019), at which time the interest remains at a floating
three-month JIBAR rate, plus a spread of 2,75%, 2,55%, 2,55% and 2,75% respectively.
(h) Callable by the issuer, Nedbank Limited, after five years from the date of issue, 7 April 2014 (ie 8 April 2019), at which time the interest
remains at a fixed rate of 10,49%.
33 CASHFLoW INFoRMATIoN
33.1 Reconciliation of profit from operations to cash generated by operations
profit from operations
Adjusted for:
– Depreciation (note 8)
– Amortisation: computer software and intangible assets (note 8)
– Movement in impairment of loans and advances
– Net income on investment banking assets
– Impairment losses on investments, property and equipment, and capitalised development
costs (note 10)
– Loss on sale of subsidiaries, investments and property and equipment (note 10)
– Fair value adjustments of investment properties (note 25)
– Indirect taxation (note 9)
Cash generated by operations
33.2 Cash received from clients
Interest and similar income (note 5)
Commission and fees (note 7)
Net trading income (note 7)
other income
33.3 Cash paid to clients, employees and suppliers
Interest expense and similar charges (note 6)
Staff costs (note 8)
other operating expenses
78
2014
rm
10 822
906
644
5 407
(11)
96
522
18 386
50 075
12 591
2 394
1 160
66 220
2013
Rm
9 437
841
566
6 407
(14)
64
(5)
(4)
480
17 772
44 107
12 193
2 331
891
59 522
(28 322)
(12 550)
(7 931)
(48 803)
(23 873)
(11 513)
(7 279)
(42 665)
33.4 Increase in operating assets
other short-term securities
Government and other securities
Loans and advances and other operating assets
33.5 Increase in operating liabilities
Current and savings accounts
other deposits, loan accounts and foreign currency liabilities
Negotiable certificates of deposit
Deposits received under repurchase agreements
Creditors and other liabilities
33.6 Taxation paid
Amounts receivable at the beginning of the year
Statement of comprehensive income charge (excluding deferred taxation)
other taxation received/(paid)
Amounts receivable at the end of the year
Total indirect taxation (note 9)
Taxation paid
33.7 Dividends paid
2014
rm
(21 318)
4 451
(47 198)
(64 065)
6 487
60 038
(17 724)
325
(1 685)
47 441
327
(3 074)
7
(201)
(2 941)
(522)
(3 463)
2013
Rm
2 571
(5 085)
(51 190)
(53 704)
2 791
34 479
9 859
(4 303)
3 802
46 628
174
(2 424)
(2)
(327)
(2 579)
(480)
(3 059)
Recognised in the consolidated statement of changes in shareholders’ equity
(3 400)
(3 450)
79
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
34 CoNSoLIDATED STATEMENT oF FINANCIAL poSITIoN – CATEGoRIES
oF FINANCIAL INSTRUMENTS
At fair value through profit or loss
notes
total
rm
Held for trading
rm
Designated1
rm
Available-for-sale
Held-to-maturity
loans and
Financial liabilities
assets, liabilities
financial assets
investments
receivables
at amortised cost
and equity
rm
rm
rm
rm
rm
non-financial
8 447
15 644
5 229
26 306
18
15 282
8 603
58 431
383
2 352
898
10 757
56 322
15 644
26 828
603 329
5 393
236
2 369
16
1 158
165
7 459
4 409
14 843
4 516
32 593
2 653
9 245
17
10 757
1 098
518 592
4 992
14 843
753 444
55 644
85 949
2 670
41 838
550 282
27
17 422
34 787
52 236
3 561
183
55 980
15 479
634 623
8 404
35
287
3 002
35 634
697 464
753 444
15 479
77 201
902
93 582
93 582
39 437
2 040
41 477
41 477
236
16
260
165
7 459
4 409
4 516
17 061
27
17 422
34 787
52 236
3 561
183
55 980
35
287
3 002
3 324
59 304
517 985
7 502
33 594
559 081
559 081
2014
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 securities
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 bank
Intangible assets
total assets
equity and liabilities
ordinary share capital
ordinary share premium
Reserves
total equity attributable to equity holders of the parent
preference share capital and premium
Non-controlling interest attributable to:
– ordinary shareholders
total equity
Derivative financial instruments¹
Amounts owed to depositors
provisions and other liabilities
Current taxation liabilities
Deferred taxation liabilities
Long-term employee benefit liabilities
Long-term debt instruments
total liabilities
total equity and liabilities
1 Refer to note 36 in respect of financial instruments designated as at fair value through profit or loss.
14
15
16
17
18
20
21
23
22
24
25
26
27
14
28
29.1
29.2
16
30
31
24
27
32
80
34 CoNSoLIDATED STATEMENT oF FINANCIAL poSITIoN – CATEGoRIES
oF FINANCIAL INSTRUMENTS
At fair value through profit or loss
notes
rm
rm
rm
total
Held for trading
Designated1
Available-for-sale
financial assets
rm
Held-to-maturity
investments
rm
loans and
receivables
rm
Financial liabilities
at amortised cost
rm
non-financial
assets, liabilities
and equity
rm
32 593
2 653
9 245
17
10 757
1 098
518 592
4 992
14 843
753 444
55 644
85 949
2 670
41 838
550 282
Non-current assets held for sale
Investments in private-equity associates, associate companies
Long-term employee benefit assets
Mandatory reserve deposits with central bank
2014
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 securities
and joint arrangements
Deferred taxation assets
Investment property
property and equipment
Intangible assets
total assets
equity and liabilities
ordinary share capital
ordinary share premium
Reserves
preference share capital and premium
Non-controlling interest attributable to:
– ordinary shareholders
total equity
Derivative financial instruments¹
Amounts owed to depositors
provisions and other liabilities
Current taxation liabilities
Deferred taxation liabilities
Long-term employee benefit liabilities
Long-term debt instruments
total liabilities
total equity and liabilities
total equity attributable to equity holders of the parent
1 Refer to note 36 in respect of financial instruments designated as at fair value through profit or loss.
14
15
16
17
18
20
21
23
22
24
25
26
27
14
28
29.1
29.2
16
30
31
24
27
32
10 757
56 322
15 644
26 828
603 329
5 393
236
2 369
16
1 158
165
7 459
4 409
14 843
4 516
27
17 422
34 787
52 236
3 561
183
55 980
15 479
634 623
8 404
35
287
3 002
35 634
697 464
753 444
8 447
15 644
5 229
26 306
18
15 282
8 603
58 431
383
2 352
898
15 479
77 201
902
93 582
93 582
39 437
2 040
41 477
41 477
236
16
260
165
7 459
4 409
4 516
17 061
27
17 422
34 787
52 236
3 561
183
55 980
35
287
3 002
3 324
59 304
517 985
7 502
33 594
559 081
559 081
81
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
34 CoNSoLIDATED STATEMENT oF FINANCIAL poSITIoN – CATEGoRIES
oF FINANCIAL INSTRUMENTS (continued)
At fair value through profit or loss
Notes
Total
Rm
Held for trading
Rm
Designated1
Rm
Available-for-sale
Held-to-maturity
Loans and
Financial liabilities
assets, liabilities
financial assets
investments
receivables
at amortised cost
and equity
Rm
Rm
Rm
Rm
Rm
Non-financial
10 376
13 811
5 423
31 783
20
5
11 293
9 897
59 332
335
2 781
860
17 467
35 004
13 811
31 279
566 047
4 204
340
2 932
12
1 098
69
87
6 571
2 847
13 199
4 188
13 335
2 027
12 033
146
17 467
1 899
474 932
3 849
13 199
699 155
61 418
84 498
2 173
25 368
511 346
27
17 422
30 524
47 973
3 561
141
51 675
16 588
585 497
10 016
13
297
1 804
33 265
647 480
699 155
16 588
57 482
1 970
89 762
76 040
76 040
3 778
93 540
93 540
340
12
238
69
87
6 571
2 847
4 188
14 352
27
17 422
30 524
47 973
3 561
141
51 675
13
297
1 804
2 114
53 789
438 253
8 046
29 487
475 786
475 786
2013
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 securities
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 bank
Intangible assets
total assets
Equity and liabilities
ordinary share capital
ordinary share premium
Reserves
total equity attributable to equity holders of the parent
preference share capital and premium
Non-controlling interest attributable to:
– ordinary 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
Long-term debt instruments
total liabilities
total equity and liabilities
1 Refer to note 36 in respect of financial instruments designated as at fair value through profit or loss.
14
15
16
17
18
20
21
23
22
24
25
26
27
14
28
29.1
29.2
16
30
31
23
24
27
32
82
34 CoNSoLIDATED STATEMENT oF FINANCIAL poSITIoN – CATEGoRIES
oF FINANCIAL INSTRUMENTS (continued)
At fair value through profit or loss
Notes
Rm
Rm
Rm
Total
Held for trading
Designated1
Available-for-sale
financial assets
Rm
Held-to-maturity
investments
Rm
Loans and
receivables
Rm
Financial liabilities
at amortised cost
Rm
Non-financial
assets, liabilities
and equity
Rm
13 335
2 027
12 033
146
17 467
1 899
474 932
3 849
13 199
699 155
61 418
84 498
2 173
25 368
511 346
Non-current assets held for sale
Investments in private-equity associates, associate companies
2013
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 securities
and joint arrangements
Deferred taxation assets
Investment property
property and equipment
Intangible assets
total assets
Equity and liabilities
ordinary share capital
ordinary share premium
Reserves
Long-term employee benefit assets
Mandatory reserve deposits with central bank
total equity attributable to equity holders of the parent
preference share capital and premium
Non-controlling interest attributable to:
– ordinary 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
Long-term debt instruments
total liabilities
total equity and liabilities
1 Refer to note 36 in respect of financial instruments designated as at fair value through profit or loss.
14
15
16
17
18
20
21
23
22
24
25
26
27
14
28
29.1
29.2
16
30
31
23
24
27
32
17 467
35 004
13 811
31 279
566 047
4 204
340
2 932
12
1 098
69
87
6 571
2 847
13 199
4 188
27
17 422
30 524
47 973
3 561
141
51 675
16 588
585 497
10 016
13
297
1 804
33 265
647 480
699 155
10 376
13 811
5 423
31 783
20
5
11 293
9 897
59 332
335
2 781
860
16 588
57 482
1 970
89 762
76 040
76 040
3 778
93 540
93 540
340
12
238
69
87
6 571
2 847
4 188
14 352
27
17 422
30 524
47 973
3 561
141
51 675
13
297
1 804
2 114
53 789
438 253
8 046
29 487
475 786
475 786
83
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
35 FAIR VALUE MEASUREMENT – FINANCIAL INSTRUMENTS
35.1 Valuation of financial instruments
Background
Information obtained from the valuation of financial instruments is used by the group to assess the performance of the business and, in
particular, provide assurance that the risk and return measures that the business has taken are accurate and complete. It is important that
the valuation of financial instruments accurately represents the financial position of the group while complying with the requirements of the
applicable accounting standards.
The fair value of a financial instrument is the amount that would be received to sell the asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Underlying the definition of fair value is a presumption that an entity is
a going concern without any intention or need to liquidate, to curtail materially the scale of its operations or to undertake a transaction on
adverse terms. Fair value is not, therefore, the amount that an entity would receive or pay in a forced transaction, involuntary liquidation or
distressed sale.
Control environment
Validation and approval
The business unit entering into the transaction is responsible for the initial determination and recording of the fair value of the transaction.
There are normalised review protocols for the independent review and validation of fair values separate from the business unit entering into
the transaction. These include, but are not limited to:
■ daily controls over the profit or loss recorded by trading and treasury frontoffice traders;
■ specific controls to ensure consistent pricing policies and procedures are adhered to;
■ independent valuation of structures, products and trades; and
■ periodic review of all elements of the modelling process.
The validation of pricing and valuation methodologies is verified by a specialist team that is part of the group’s risk management function
and that is independent of all the business units. A specific area of focus is the marking-to-model of illiquid and/or complex financial
instruments.
The review of the modelling process includes approval of model revisions, vetting of model inputs, review of model results and more
specifically the verification of risk calculations. All valuation techniques are validated and reviewed by qualified senior staff and are calibrated
and back-tested for validity by using prices from any observable current market transaction in the same instrument (ie without modification
or repackaging) or based on any observable market data. The group obtains market data consistently in the same market where the
instrument was originated or purchased.
If the fair value calculation deviates from the quoted market value due to inaccurate observed market data, these deviations in the valuation
are documented and presented at a review committee, which is independent of both the business unit and the specialist team, for approval.
The committee will need to consider both the regulatory and accounting requirements in arriving at an opinion on whether the deviation
is acceptable.
The group refines and modifies its valuation techniques as markets and products develop and as the pricing for individual products becomes
more or less readily available. While the group believes its valuation techniques are appropriate and consistent with those of other market
participants, the use of different methodologies or assumptions may result in different estimates of fair value at the different reporting dates.
Stress testing and sensitivity measures
Comprehensive stress testing is conducted by the group, in which the following, at a minimum, are considered:
■ anticipated future projected trading positions;
■ historical events;
■ scenario testing to evaluate plausible future events; and
■ specific testing to supplement the value at risk (VaR) methodology (ie one-day holding period and 99% confidence interval).
For further discussion in respect of stress testing and sensitivity measures refer to note 35.7.
Valuation methodologies
The objective of a fair value measurement is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability
would take place between market participants at the measurement date under current market conditions. A fair value measurement
includes, but is not limited to, consideration of the following:
■ the particular asset or liability that is being measured (consistently with its unit of account);
■ the principal (or most advantageous) market for the asset or liability; and
■ the valuation technique(s) appropriate for the measurement, considering the availability of data with which to develop inputs that
represent the assumptions that market participants would use when pricing the asset or liability and the level of the fair-value hierarchy
within which the inputs are categorised.
quoted price
A financial instrument is regarded as quoted in an active market if quoted prices are readily available from an exchange, industry group,
pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.
The appropriate quoted market price for an asset held or a liability to be issued is usually the current bid price and, for an asset to be acquired
or a liability held, the asking price.
The objective of determining fair value is to arrive at the transaction price of an instrument on the measurement date (ie without modifying
or repackaging the instrument) in the principal (or most advantageous) active market to which the business has immediate access.
84
The existence of published price quotations in an active market is the most reliable evidence of fair value and, when they exist, they are used
without adjustment to measure the financial asset or financial liability. A market is considered to be active if transactions occur with
sufficient volume and frequency to provide pricing information on an ongoing basis.
These quoted prices would generally be classified as level 1 in terms of the fair value hierarchy prescribed by IFRS 13 Fair value Measurement.
Valuation techniques
If the market for a financial instrument is not active, the group establishes fair value by using various valuation techniques. These valuation
techniques may include:
■ using recent arm’s length market transactions between knowledgeable, willing parties;
■ reference to the current fair value of another instrument that is substantially of the same in nature;
■ reference to the value of the net asset of the underlying business;
■ earnings multiples;
■ discounted-cashflow analysis; and
■ various option pricing models.
If there is a valuation technique that is commonly used by market participants to price the financial instrument and that technique has been
demonstrated to provide reasonable estimates of prices obtained in actual market transactions, the group will use that technique. In applying
valuation techniques, and to the extent possible, the group maximises the use of relevant observable inputs and minimises the use of
unobservable inputs.
The objective of using a valuation technique is to establish what the transaction price would have been on the measurement date in an arm’s
length exchange and motivated by normal business considerations. In applying valuation techniques, the group uses estimates and
assumptions that are consistent with available information about the estimates and assumptions that market participants would use in
setting a price for the financial instrument.
Fair value is therefore estimated on the basis of the results of a valuation technique that makes maximum use of market inputs and relies as
little as possible on entity-specific inputs. A valuation technique would be expected to arrive at a realistic estimate of the fair value if:
■ it reasonably reflects how the market could be expected to price the instrument; and
■ the inputs to the valuation technique reasonably represent market expectations and measures of the risk-return factors inherent in the
financial instrument.
Therefore, a valuation technique:
■ will incorporate all relevant factors that market participants would consider in determining a price; and
■ is consistent with accepted economic methodologies for pricing financial instruments.
If a published price quotation in an active market does not exist for a financial instrument in its entirety, but active markets exist for its
component parts, fair value is determined on the basis of the relevant market prices for the various component parts.
If a rate (rather than a price) is quoted in an active market, the group uses that market-quoted rate as an input into a valuation technique to
determine fair value. If the market-quoted rate does not include credit risk or other factors that market participants would include in valuing
the instrument, the group adjusts for these factors.
Valuation techniques applied by the group would generally be classified as level 2 or level 3 in terms of the fair value hierarchy prescribed by
IFRS 13 Fair value Measurement. The determination of whether an instrument is classified as level 2 or level 3 is dependent on the significance
of observable inputs versus unobservable inputs in relation to the fair value of the instrument.
Observable markets
Quoted market prices in active markets are the best evidence of fair value and are used as the basis of measurement, if available.
A determination of what constitutes ‘observable market data’ will necessitate significant judgement. It is the group’s belief that ‘observable
market data’ comprises, in the following hierarchical order:
■ prices or quotes from an exchange or listed markets in which there are sufficient liquidity and activity;
■ proxy observable market data that is proven to be highly correlated and has a logical, economic relationship with the instrument that is
being valued; and
■ other direct and indirect market inputs that are observable in the marketplace.
Data is considered by the group to be ‘observable’ if the data is:
■ verifiable;
■ readily available;
■ regularly distributed;
■ from multiple independent sources;
■ transparent; and
■ not proprietary.
Data is considered by the group to be ‘market-based’ if the data is:
■ reliable;
■ based on consensus within reasonable narrow, observable ranges;
■ provided by sources that are actively involved in the relevant market; and
■ supported by actual market transactions.
It is not intended to imply that all of the above characteristics must be present to conclude that the evidence qualifies as observable market
data. Judgement is applied based on the strength and quality of the available evidence.
85
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
35 FAIR VALUE MEASUREMENT – FINANCIAL INSTRUMENTS (continued)
35.1 Valuation of financial instruments (continued)
Inputs to valuation techniques
An appropriate valuation technique for estimating the fair value of a particular financial instrument would incorporate observable market
data about the market conditions and other factors that are likely to affect the instrument’s fair value. Inputs are selected on a basis that is
consistent with the characteristics of the instrument that market participants would take into account in a transaction for that instrument.
principal inputs to valuation techniques applied by the group include, but are not limited to, the following:
■ Discount rate: Where discounted-cashflow techniques are used, estimated future cashflows are based on management’s best
estimates and the discount rate used is a market rate at the reporting date for an instrument with similar terms and conditions.
■ The time value of money: The business may use well-accepted and readily observable general interest rates, such as the Johannesburg
Interbank Agreed Rate (SA), London Interbank offered Rate (UK) or an appropriate swap rate, as the benchmark rate to derive the
present value of a future cashflow.
■ Credit risk: Credit risk is the risk of loss associated with a counterparty’s failure or inability to fulfil its contractual obligations.
The valuation of the relevant financial instrument takes into account the effect of credit risk on fair value by including an appropriate
adjustment for the risk taken.
■ Foreign currency exchange prices: Active currency exchange markets exist for most major currencies, and prices are quoted daily on
various trading platforms and in financial publications.
■ Commodity prices: observable market prices are available for those commodities that are actively traded on exchanges in SA, London,
New York, Chicago and other commercial exchanges.
■ Equity prices: prices (and indices of prices) of traded equity instruments are readily observable on the JSE Ltd or any other recognised
international exchange. present value techniques may be used to estimate the current market price of equity instruments for which
there are no observable prices.
■ Volatility: Measures of the volatility of actively traded items can be reasonably estimated by the implied volatility in current market
prices. The shape and skew of the volatility curve is derived from a combination of observed trades and doubles in the market. In the
absence of an active market, a methodology to derive these volatilities from observable market data will be developed and utilised.
■ Recovery rates/Loss given default: These are used as an input to valuation models as an indicator of the severity of losses on default.
Recovery rates are primarily sourced from market data providers or inferred from observable credit spreads.
■ prepayment risk and surrender risk: Expected repayment patterns for financial assets and expected surrender patterns for financial
liabilities can be estimated on the basis of historical data.
■ Servicing costs: If the cost of servicing a financial asset or financial liability is significant and other market participants would face
comparable costs, the issuer would consider them in determining the fair value of that financial asset or financial liability.
■ Dividends: Consistent consensus dividend forecasts adjusted for internal investment analysts’ projections can be applied to each
share. Forecasts are usually available for the current year plus one additional year. Thereafter, a constant growth rate would be applied
to the specific dates into the future for each individual share.
■ Inception profit (day-one gain or loss): The best evidence of the fair value of a financial instrument at initial recognition is the
transaction price (ie the fair value of the consideration given or received), unless the fair value of that instrument is evidenced by
comparison with other observable current market transactions in the same instrument (ie without modification or repackaging) or
based on a valuation technique, the variables of which include data from observable markets only.
Valuation adjustments
To estimate a reliable fair value, where appropriate, the group applies certain valuation adjustments to the pricing information derived from
the above sources. In making appropriate adjustments, the group considers certain adjustments to the modelled price that market
participants would make when pricing that instrument. Factors that would be considered include, but are not limited to, the following:
■ own credit on financial liabilities: The carrying amount of financial liabilities held at fair value is adjusted to reflect the effect of
changes in the group’s own credit spreads. As a result, the carrying value of issued bonds and subordinated-debt instruments that have
been designated at fair value through profit or loss is adjusted by reference to the movement in the appropriate spreads. The resulting
gain or loss is recognised in profit and loss in the statement of other comprehensive income.
■ Counterparty credit spreads: Adjustments are made to market prices when the creditworthiness of the counterparty differs from that
of the assumed counterparty in the market price (or parameter).
Valuation techniques by instrument
other short-term securities and government and other securities
The fair value of these instruments is based on quoted market prices from an exchange dealer, broker, industry group or pricing service,
when available. When they are unavailable, the fair value is determined by reference to quoted market prices for similar instruments,
adjusted as appropriate for the specific circumstances of the instruments.
Where these instruments include corporate bonds, the bonds are valued using observable active quoted prices or recently executed
transactions, except where observable price quotations are not available. Where price quotations are not available, the fair value is
determined based on cashflow models, where significant inputs may include yield curves and bond or single-name credit default
swap spreads.
Derivative financial instruments
Derivative contracts can either be traded via an exchange or over the counter (oTC) and are valued using market standard models and
quoted parameter inputs. parameter inputs are obtained from pricing services, consensus pricing services and recently occurring
transactions in active markets, whenever possible. Certain inputs may not be observable in the market directly, but can be determined from
observable prices via model calibration procedures. other inputs are not observable, but can generally be estimated from historical data or
other sources.
86
loans and advances
Loans and advances include mortgage loans (home loans and commercial mortgages), other asset-based loans, including collateralised
debt obligations, and other secured and unsecured loans.
In the absence of an observable market for these instruments, the fair value is determined by using internally developed models that are
specific to the instrument and that incorporate all available observable inputs. These models involve discounting the contractual cashflows
by using an at-inception credit-adjusted zero-coupon curve. Loans and advances are reviewed for observed and verified changes in credit
risk and the credit spread is adjusted at subsequent dates if there has been an observable change in credit risk relating to a particular loan
or advance.
Investment securities
Investment securities include private-equity investments, listed investments and unlisted investments.
The fair value of listed investments is determined with reference to quoted bid prices at the close of business on the relevant securities
exchange.
Where private-equity investments are involved, the exercise of judgement is required due to uncertainties inherent in estimating the fair
value. The fair value of private-equity is determined using appropriate valuation methodologies that, dependent on the nature of the
investment, may include an analysis of the investee’s financial position and results, risk profiles and prospects, discounted-cashflow analysis,
enterprise value comparisons with similar companies, price/earnings comparisons and earnings multiples. For each investment the relevant
methodology is applied consistently over time and may be adjusted for changes in market conditions relative to that instrument.
The fair value of unlisted investments is determined using appropriate valuation techniques that may include, but are not limited to,
discounted-cashflow analysis, net asset value calculations and directors’ valuations.
other assets
Short positions or long positions in equities arise in trading activities where equity shares, not owned by the group, are sold in the market to
third parties. The fair value of these instruments is determined by reference to the gross short/long position valued at the offer rate.
Investments in instruments that do not have a quoted market price in an active market and the fair value of which cannot be reliably
measured, as well as derivatives that are linked to and have to be settled by delivery of such unquoted equity instruments, are measured at
fair value, using models considered to be appropriate by management.
Amounts owed to depositors
Amounts owed to depositors include deposits under repurchase agreements, negotiable certificates of deposit and other deposits. These
instruments incorporate all market risk factors, including a measure of the group’s credit risk relevant for that financial liability when
designated at fair value through profit or loss.
The fair value of these financial liabilities is determined by discounting the contractual cashflows using a Nedbank Limited-specific credit-
adjusted yield curve that reflects the level at which the group would issue similar instruments at the reporting date. The market risk
parameters are valued consistently to similar instruments held as assets.
The fair value of a financial liability with a demand feature is not less than the amount payable on demand, discounted from the first date on
which the amount could be required to be paid. When the fair value of a financial liability cannot be reliably determined, the liability is
recorded at the amount due. Fair value is considered reliably measurable if:
■ the variability in the range of reasonable fair value estimates is not significant for that instrument; or
■ the probabilities of the various estimates within the range can be reasonably assessed and used in estimating fair value.
Investment contract liabilities
The fair value of investment contract liabilities is determined by reference to the fair value of the underlying assets.
long-term debt instruments
The fair value of long-term debt instruments is determined by reference to published market values on the relevant exchange, when they are:
■ available; and
■ considered to be trading with sufficient volume and frequency.
When the above conditions are not met, the fair value is determined using models considered to be appropriate by management. As far as
possible, inputs to these models will leverage observable inputs for similar instruments with similar coupons and maturities.
Complex instruments
These instruments are valued by using internally developed models that are specific to the instrument and that have been calibrated to
market prices. In less active markets, data is obtained from less frequent market transactions, broker quotes and through extrapolation and
interpolation techniques. Where observable prices or inputs are not available, other relevant sources of information such as historical data,
fundamental analysis of the economics of the transaction and proxy information from similar transactions are used. These models are
continually reviewed and assessed to ensure that the best available data is being utilised in the determination of fair value.
other liabilities
Short positions or long positions in equities arise in trading activities where equity shares, not owned by the group, are sold in the market to
third parties. The fair value of these instruments is determined by reference to the gross short/long position valued at the offer rate.
Where the group has assets and liabilities with offsetting market risks, it may use mid-market prices as a basis for establishing fair values
for the offsetting risk positions and apply the bid or asking price to the net open position, as appropriate.
87
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
35 FAIR VALUE MEASUREMENT – FINANCIAL INSTRUMENTS (continued)
35.1 Valuation of financial instruments (continued)
Summary of principal valuation techniques – level 2 instruments
The following table sets out the group’s principal valuation techniques used in determining the fair value of financial assets and financial
liabilities classified as level 2 in the fair-value hierarchy:
Valuation technique
Key inputs
Assets
other short-term securities
Discounted cashflow model
Derivative financial instruments
Discounted cashflow model
Discount rates
Discount rates
Black-Scholes model
Risk-free rate and volatilities
Government and other securities
Discounted cashflow model
Multiple valuation techniques
Discounted cashflow model
Valuation multiples
Discount rates
Interest rate curves
Discounted cashflow models
Money market rates and interest rates
Adjusted net asset value
Dividend yield method
Underlying price of market-traded
instruments
Dividend growth rates
Loans and advances
Investment securities
liabilities
Derivative financial instruments
Discounted cashflow model
Discount rates
Black-Scholes model
Risk-free rate and volatilities
Multiple valuation techniques
Valuation multiples
Amounts owed to depositors
provisions and liabilities
Discounted cashflow model
Discounted cashflow model
Long-term debt instruments
Discounted cashflow model
Discount rates
Discount rates
Discount rates
Summary of principal valuation techniques – level 3 instruments
The summary of the valuation techniques applicable to those financial assets and financial liabilities classified as level 3 in the fair value
hierarchy is set out in note 35.7.
35.1.1
Financial assets
Total
financial
assets
recognised
at amortised
cost
Total
financial
assets
recognised
at fair value
Total
financial
assets
Note
Held for trading
Designated at fair value
through profit or loss
Available for sale
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
736 383
592 120
144 263
4 618 51 026
4 550 79 668
1 731
2 381
289
25 600
32 593
25 600
56 322
15 644
23 729
8 447
459 14 823
15 644
10 15 634
26 828
10 343
16 485 4 590
639
3 084
5 519
2 381
272
603 329
518 592
84 737
26 306
58 398
33
5 393
4 992
401
18
383
898
2 369
684 803
30 666
35 004
13 811
536 714
30 666
13 335
898
2 369
148 089
4 710 56 703
5
624
928
5 852 76 927
898
800
1 719
2 027
17
146
21 669
10 376
358 10 935
13 811
58 13 753
31 279
13 932
17 347 4 632
791
4 341
5 556
1 898
129
566 047
474 932
4 204
3 849
91 115
355
20
31 783
59 299
33
335
860
2 932
860
2 932
5
818
1 137
860
826
129
17
14
15
16
17
18
20
22
21
14
15
16
17
18
20
22
21
rm
2014
Cash and cash equivalents
other short-term securities
Derivative financial
instruments
Government and other
securities
Loans and advances
other assets
Investments in private-equity
associates, associate
companies and joint
arrangements
Investment securities
2013
Cash and cash equivalents
other short-term securities
Derivative financial
instruments
Government and other
securities
Loans and advances
other assets
Investments in private-equity
associates, associate
companies and joint
arrangements
Investment securities
88
Summary of fair value
hierarchies
total financial assets
recognised at fair value
total financial assets
classified as level 1
total financial assets
classified as level 2
total financial assets
classified as level 3
rm
2014
2013
other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
other assets
Investments in private-equity
associates, associate companies and
joint arrangements
Investment securities
23 729
15 644
16 485
84 737
401
21 669
13 811
17 347
91 115
355
898
2 369
860
2 932
2014
459
10
2013
358
58
10 055
10 871
401
355
2014
2013
2014
2013
23 270
15 634
6 430
21 311
13 753
6 476
84 704
91 082
33
33
624
947
945
1 154
144 263
148 089
11 549
12 589
130 983
133 776
reconciliation to categorised
statement of financial position
rm
Level 1
Level 2
Level 3
Held for trading
Designated at fair value
through profit or loss
2014
4 618
51 026
2013
4 710
2014
4 550
56 703
79 668
5
1 731
2013
5 852
76 927
1 719
898
800
1 731
860
831
1 724
Available for sale
2014
2 381
289
2013
2 027
146
reconciliation to statement of financial position
rm
Total financial assets
Total non-financial assets
Total assets
35.1.2 Financial liabilities
55 644
61 418
85 949
84 498
2 670
2 173
Note
2014
2013
34
34
736 383
684 803
17 061
14 352
753 444
699 155
Total
financial
liabilities
recognised
at amortised
cost
Total
financial
liabilities
recognised
at fair value
Total
financial
liabilities
Note
Held for trading
Designated at fair value
through profit or loss
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Rm
2014
Derivative financial instruments
Amounts owed to depositors
provisions and other liabilities
Long-term debt instruments
2013
Derivative financial instruments
Amounts owed to depositors
provisions and other liabilities
Long-term debt instruments
16
30
31
32
16
30
31
32
694 140
559 081
135 059
772
92 810
–
575
40 902
15 479
634 623
517 985
8 404
35 634
7 502
33 594
15 479
116 638
5
15 474
77 201
902
767
135
39 437
2 040
575
1 465
645 366
475 786
169 580
1 869
74 171
–
2 317
91 223
16 588
16 588
12
16 576
585 497
438 253
147 244
57 482
89 762
10 016
33 265
8 046
29 487
1 970
3 778
1 857
113
2 317
1 461
–
–
89
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
35 FAIR VALUE MEASUREMENT – FINANCIAL INSTRUMENTS (continued)
35.1 Valuation of financial instruments (continued)
35.1.2 Financial liabilities (continued)
Summary of fair-value
hierarchies
total financial liabilities
recognised at fair value
total financial liabilities
classified as level 1
total financial liabilities
classified as level 2
total financial liabilities
classified as level 3
rm
2014
2013
2014
2013
2014
2013
2014
2013
Derivative financial instruments
15 479
16 588
Amounts owed to depositors
116 638
147 244
provisions and other liabilities
Long-term debt instruments
902
2 040
1 970
3 778
5
–
767
575
135 059
169 580
1 347
12
15 474
16 576
116 638
147 244
135
1 465
113
1 461
133 712
165 394
–
–
1 857
2 317
4 186
reconciliation to categorised statement of financial position
Held for trading
Designated at fair value
through profit or loss
rm
Level 1
Level 2
reconciliation to statement of financial position
rm
Total financial liabilities
Total equity and non-financial liabilities
Total equity and liabilities
2014
772
92 810
2013
1 869
74 171
2014
575
2013
2 317
40 902
91 223
93 582
76 040
41 477
93 540
Note
2014
2013
34
34
694 140
645 366
59 304
53 789
753 444
699 155
The tables presented above analyse the financial assets and financial liabilities that are measured at fair value by level of fair-value hierarchy
as required by IFRS 13 Fair value Measurement. The levels of the hierarchy are defined as follows:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.
Level 2: Valuation techniques using market data, that is either directly or indirectly observable. Various factors influence the availability of
observable data and these may vary from product to product and change over time. Factors include, for example, the depth of activity in the
relevant market, the type of product, whether the product is new and not widely traded in the market, the maturity of market modelling and
the nature of the transaction (bespoke or generic).
Level 3: Valuation techniques that include significant inputs that are unobservable. To the extent that a valuation is based on inputs that are
not market-observable, the determination of the fair value can be more subjective, dependent on the significance of the unobservable inputs
to the overall valuation. Unobservable inputs are determined based on the best information available and may include reference to similar
instruments, similar maturities, appropriate proxies or other analytical techniques.
35.2 Details of changes in valuation techniques
There have been no changes to valuation techniques during the current year.
35.3 Significant transfers between level 1 and level 2
There were no significant transfers between level 1 and level 2 during the current year.
90
35.4 Level 3 reconciliation
Assets
rm
2014
opening
balance at
1 January
Gains in
profit for
the year
Gains in other
comprehensive
income for
the year
purchases
and issues
Sales and
settlements
transfers
from level 2
transfers
to level 2
Closing
balance at
31 December
Held for trading
Investment securities
5
5
(5)
(5)
Designated as at fair value
1 719
250
169
(407)
860
33
826
42
208
142
(146)
27
(261)
1 724
250
169
(412)
Opening
balance at
1 January
Gains/
(losses) in1
profit for
the year
Gains in other
comprehensive
income for
the year
Purchases
and issues
Sales and
settlements
Transfers
from level 2
Transfers
to level 2
Closing
balance at
31 December
Investments in private-equity
associates, associate
companies and joint
arrangements
Loans and advances
Investment securities
total financial assets
classified as level 3
Rm
2013
Investments in private-equity
associates, associate
companies and joint
arrangements
Loans and advances
Investment securities
total financial assets
classified as level 3
Held for trading
Investment securities
21
21
2
2
Designated as at fair value
2 077
(45)
1 000
117
960
(22)
(23)
(18)
(18)
(572)
(177)
(84)
(311)
259
59
200
1 731
898
33
800
1 731
5
5
1 719
860
33
826
1 724
2 098
(43)
259
(590)
Gains and losses include, but are not limited to, fair value gains or losses, translation gains or losses and trading gains or losses.
liabilities
Rm
2013
Opening
balance at
1 January
(Gains)/1
losses in
profit for
the year
Losses in other
comprehensive
income for
the year
Purchases
and issues
Sales and
settlements
Transfers
from
level 2
Transfers
to level 2
Closing
balance at
31 December
Held for trading
Derivative financial
instruments
total financial liabilities
classified as level 3
1
1
1
(1)
(1)
(1)
Gains and losses include, but are not limited to, fair value gains or losses, translation gains or losses and trading gains or losses.
91
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
35 FAIR VALUE MEASUREMENT – FINANCIAL INSTRUMENTS (continued)
35.5 Unrealised gains and losses
The unrealised gains or losses arising on instruments classified as level 3 include the following:
Trading income
private-equity gains/(losses)
2014
rm
193
193
2013
Rm
2
(45)
(43)
35.6 Effect of changes in significant unobservable assumptions to reasonable possible alternatives
The fair value measurement of financial instruments are, in certain circumstances, measured using valuation techniques that include
assumptions that are not market observable. Where these scenarios apply, the group performs stress testing on the fair value of the relevant
instruments. In performing the stress testing, appropriate levels for the unobservable input parameters are chosen so that they are consistent
with prevailing market evidence and in line with the group’s approach to valuation control.
The sensitivity of the fair value measurement is determined on the unobservable market inputs. Significant changes to the unobservable
inputs in isolation will have either a positive or negative impact on the fair value. The following information is intended to illustrate the
potential impact of the relative uncertainty in the fair value of financial instruments for which valuation is dependent on unobservable input
parameters and which are classified as level 3 in the fair-value hierarchy. However, it is unlikely in practice that all unobservable parameters
would simultaneously be at the extremes of their ranges of reasonably possible alternatives. Furthermore, the disclosure is neither predictive
nor indicative of future movements in fair value.
The following table shows the effect on fair value of changes in unobservable input parameters to reasonably possible alternative
assumptions:
Valuation technique
principle
assumption
stressed
Amount
recognised in
the statement
of financial
position
Favourable
change in
value due to
stress test
unfavourable
change in
value due to
stress test
rm
rm
rm
Stress
parameters
%
2014
Assets
Loans and advances
Discounted cashflows
Credit spreads and
discount rates
between
(13) and 13
33
3
(4)
Investment securities
Discounted cashflows,
adjusted net asset value,
earnings multiples,
third-party valuations,
dividend yields
Valuation multiples,
correlations,
volatilities and
credit spreads
between
(13) and 13
Investments in private-
equity associates,
associate companies and
joint arrangements
total financial assets
classified as level 3
2013
Assets
Discounted cashflows,
earnings multiples
Valuation multiples
between
(16) and 16
800
76
(95)
898
1 731
124
203
(134)
(233)
Loans and advances
Discounted cashflows
Credit spreads and
discount rates
between
(14) and 14
33
3
(4)
Investment securities
Discounted cashflows,
adjusted net asset value,
earnings multiples,
third-party valuations,
dividend yields
Valuation multiples,
correlations,
volatilities and
credit spreads
between
(25) and 25
Investments in private-
equity associates,
associate companies and
joint arrangements
total financial assets
classified as level 3
Discounted cashflows,
earnings multiples
Valuation multiples
between
(11) and 11
831
81
(96)
860
1 724
83
167
(93)
(193)
92
35.7 Fair value approximates carrying value
Certain financial instruments of the group are not carried at fair value, including those categorised as held to maturity, loans and receivables,
and other financial assets and financial liabilities at amortised cost. The calculation of the fair value of these financial instruments
incorporates the group’s best estimate of the value at which these financial assets could be exchanged, or financial liabilities transferred,
between market participants at the measurement date. The group’s estimate of what fair value is does not necessarily represent what it
would be able to sell the asset for transfer the respective financial liability for in an involuntary liquidation or distressed sale.
The fair values of these respective financial instruments at the reporting date detailed below are estimated only for the purpose of IFRS
disclosure, as follows:
loans and advances
Loans and advances, recognised in note, that are not recognised at fair value, principally comprise variable-rate financial assets. The interest
rates on these variable rate-financial assets are adjusted when the applicable benchmark interest rate changes.
Loans and advances are not actively traded in most markets and it is therefore not possible to determine the fair value of these loans and
advances using observable market prices and market inputs. Due to the unique characteristics of the loans and advances portfolio and the
fact that there have been no recent transactions involving the disposals of such loans and advances, there is no basis to determine a price
that could be negotiated between market participants in an orderly transaction. The group is not currently in the position of a forced sale of
such underlying loans and advances and it would therefore be inappropriate to value the loans and advances on a forced-sale basis.
For specifically impaired loans and advances, the carrying value as determined after consideration of the group’s IAS 39 credit impairments,
is considered the best estimate of fair value.
The group has developed a methodology and model to determine the fair value of the gross exposures for the performing loans and advances
measured at amortised cost. This model incorporates the use of average interest rates and projected monthly cashflows per product type.
Future cashflows are discounted using interest rates at which similar loans would be granted to borrowers with similar credit ratings and
maturities. Methodologies and models are updated on a continuous basis for changes in assumptions, forecasts and modelling techniques.
Future forecasts of the group’s probability of default (pDs) and loss-given defaults (LGDs) for periods 2014 to 2016 (2012: for periods 2013
to 2015) are based on the latest available internal data and applied to the first three years’ projected cashflows. Thereafter, pDs and LGDs
are gradually reverted to their long-run averages and are applied to the remaining projected cashflows. Inputs into the model include various
assumptions utilised in the pricing of loans and advances. The determination of such inputs is highly subjective and therefore any change to
one or more of the assumptions may result in a significant change in the determination of the fair value of loans and advances.
The results of these fair value calculations are summarised below:
positive scenario (%)
Base scenario (%)
Mild-risk scenario (%)
2014
0,28
(0,09)
(0,62)
2013
(0,88)
(1,27)
(1,83)
The table above indicates the differential between the fair value of performing loans and advances and the carrying value thereof. The
scenarios are based on the group’s assessment of future economic developments. positive percentages (without brackets) indicate that the
fair value of the performing loans and advances is greater than the carrying value. Similarly, negative percentages (included in brackets)
indicate that the fair value of the performing loans and advances is less than its carrying value.
In the current year under review, the current carrying value of the loans and advances is greater than the calculated fair value. Loans and
advances granted in prior periods, which are still performing, were priced at lower contractual interest rates compared to the higher pricing
that loans and advances are currently contracted at within current circumstances. The estimated cashflows on the prior period underlying
loans and advances are thus discounted at a higher rate to determine the fair value, compared to the lower contractual rate at inception date,
resulting in a lower fair value than the current carrying value.
The group is of the opinion that the carrying value of loans and advances approximates fair value. Loans and advances would be classified
into level 3 of the fair-value hierarchy.
Government and other securities
The fair value of government and other securities are determined based on available market prices and directors’ valuations where
appropriate. See note 17 for further detail. Government and other securities would be classified into level 1 (available market prices) and
level 2 (directors’ valuation) of the fair-value hierarchy.
other financial assets (excluding government and other securities and loans and advances) and financial liabilities (excluding amounts
owed to depositors and long-term debt instruments)
The carrying values of cash and cash equivalents, other assets, mandatory deposits with central banks and provisions and other liabilities
are considered a reasonable approximation of their respective fair values, as they are either short term in nature or are repriced to current
market rates at frequent intervals. other financial assets and other financial liabilities would be classified into level 1 of the fair value hierarchy.
Cash and cash equivalents and mandatory deposits with central banks would be classified into level 1 of the fair-value hierarchy. other
assets and provisions and other liabilities would be classified into level 3 of the fair-value hierarchy.
Amounts owed to depositors
The group is of the opinion that the carrying value of variable-rate amounts owed to depositors approximates fair value. Amounts owed to
depositors would be classified into level 3 of the fair-value hierarchy.
long-term debt instruments
The group is of the opinion that the carrying value of variable-rate long-term debt instruments approximates fair value. Long-term debt
instruments would generally be classified into level 1 or level 2 of the fair-value hierarchy.
93
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
36 FINANCIAL INSTRUMENTS DESIGNATED AS AT FAIR VALUE THRoUGH
pRoFIT oR LoSS
The group has satisfied the criteria for designation of financial instruments as at fair value through profit or loss in terms of the accounting
policies.
Various fixed-rate advances and liabilities are entered into by the group. The overall interest rate risk of the group is economically hedged by
way of interest rate swaps and managed by the Group ALCo. The interest rate risk is then traded to the market through the central
trading desk.
The swaps and frontdesk trading instruments meet the definition of ‘derivatives’, and are measured at fair value in terms of IAS 39. Fixed-
rate advances and liabilities, however, do not meet this definition. Therefore, to avoid any accounting mismatch of holding the advances at
amortised cost and the hedging instruments at fair value, the advances and liabilities are designated as at fair value through profit or loss
and are held at fair value.
Various instruments are designated as at fair value through profit or loss, which is consistent with the group’s documented risk management
or investment strategy. The fair value of the instruments is managed and reviewed on a regular basis by the risk/investment functions of the
group. The risk of the portfolio is measured and monitored on a fair value basis.
36.1 Financial assets designated as at fair value through profit or loss
Maximum exposure
to credit risk
Change in fair value due to change in credit risk¹
Current period
Cumulative
rm
2014
2013
2014
2013
2014
2013
Negotiable certificates of deposit
purchased
Treasury bills
Government guaranteed
other dated securities
Mortgage loans
Instalment credit
Leases and debentures
preference shares
Loans and advances (secured and
unsecured)
Foreign correspondents
other loans
Debtors and accruals
private-equity associates, associate
companies and joint arrangements
Listed investments
Unlisted investments
15 282
2 794
5 809
20 785
19 030
44
2 012
5 588
3 990
6 982
383
898
624
1 728
11 293
3 612
6 285
19 698
17 169
26
2 522
7 400
5 837
6 680
335
860
818
1 963
2
26
(2)
(4)
1 Positive amounts represent gains while negative amounts represent losses. See note 18.1.
85 949
84 498
2
26
(2)
(4)
Nedbank Limited has estimated the change in credit risk as being the amount arising from the change in fair value of the financial instrument
that is not attributable to changes in market conditions that give rise to market risk. Individual credit spreads for loans or receivables that
have been designated as at fair value through profit or loss are determined at inception of the deal. The credit spread is calculated as the
difference between the benchmark interest rate and the interest rate charged to the client. Subsequent changes in the benchmark interest
rate and the credit spread give rise to changes in fair value in the financial instrument. Loans and advances are reviewed for observable
changes in credit risk and the credit spread is adjusted at subsequent dates if there has been an observable change in credit risk relating to
a particular loan or advance. No credit derivatives are used to hedge the credit risk on any of the financial assets designated as at fair value
through profit or loss.
A breakdown of the financial assets which are designated as at fair value through profit or loss can be found in note 34. A detailed explanation
of how each financial asset is valued can be found in note 35.
94
36.2 Financial liabilities designated as at fair value through profit or loss
rm
2014
Long-term debt instruments
Call and term deposits
Foreign currency liabilities
Negotiable certificates of deposit
2013
Long-term debt instruments
Call and term deposits
Fixed deposits
Foreign currency liabilities
Negotiable certificates of deposit
Contractually
payable at
maturity
Fair value
Change in fair value due to
change in credit risk1
Current period
Cumulative
2 040
20 964
8 060
10 413
41 477
3 778
36 079
2 229
8 604
42 850
93 540
1 909
20 955
8 061
10 408
41 333
3 645
36 073
2 229
8 603
42 812
93 362
38
(16)
(16)
6
(6)
1
(11)
(16)
48
(39)
(54)
(45)
10
(23)
(38)
(51)
1 Positive amounts represent losses while negative amounts represent gains.
The change in fair value due to credit risk has been determined as the difference between fair values determined using a credit-adjusted
liability curve and a risk-free liability curve.
The curves are constructed using a standard ‘bootstrapping’ process to derive a zero-coupon yield curve. The credit-adjusted curve was
based on offer rates of negotiable certificates of deposit and promissory notes with maturity periods of up to five years, and thereafter the
offer rates of issued Nedbank Limited bonds are applied.
37 oFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
In accordance with the requirements of IFRS 7 Financial Instruments: Disclosures, the table below sets out the impact of:
■ recognised financial instruments that are set off in the statement of financial position in accordance with the requirements of IAS 32
Financial Instruments: presentation; and
■ financial instruments that are subject to an enforceable master netting arrangement or similar agreement that covers similar financial
instruments and transactions that did not qualify for presentation on a net basis.
The group reports financial assets and financial liabilities on a net basis in the statement of financial position only if there is a legally
enforceable right to set off the recognised amounts and there is intention to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Certain master netting arrangements may not meet the criteria for offsetting in the statement of financial position because:
■ these agreements create a right of setoff that is enforceable only following an event of default, insolvency or bankruptcy; and
■ the group and its counterparties do not intend to settle on a net basis or to realise the assets and settle the liabilities simultaneously.
Master netting arrangements and similar agreements include derivative clearing agreements, global master repurchase agreements and
global master securities lending agreements.
Similar financial instruments include derivatives, sales and repurchase agreements, reverse sale and repurchase agreements, and securities
borrowing and lending agreements. Financial instruments such as loans and deposits are not disclosed in the table below unless they are
offset in the statement of financial position.
95
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
37 oFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
2014
effects of netting on the statement
of financial position
related amounts not set off in the
statement of financial position
Amounts
set off in the
statement
of financial
position in
accordance
with IAS 32
net
amounts
included
in the
statement
of financial
position¹
Amounts
that may
be netted
off on the
occurrence
of a future
event
Gross
amounts
net amounts
reflecting
the effect of
master netting
arrangements
Amounts
not subject
to IFrS 7
offsetting
disclosure²
Financial
collateral
total
amounts
recognised
in the
statement
of financial
position
(2 812)
2 787
(25)
15 395
(15 420)
5 386
5 386
(2 874)
(2 874)
2 512
2 512
(88 695)
29 516
(59 179)
25
–
–
190
249
165
15 644
(59)
(15 479)
–
–
2 512
2 512
600 817
600 817
603 329
603 329
(59 179)
(575 444)
(634 623)
(88 695)
29 516
(59 179)
(59 179)
(575 444)
(634 623)
Effects of netting on the statement
of financial position
Related amounts not set off in the
statement of financial position
Amounts
set off in the
statement
of financial
position in
accordance
with IAS 32
Net amounts
included
in the
statement
of financial
position¹
Amounts
that may
be netted
off on the
occurrence
of a future
event
Net amounts
reflecting
the effect of
master netting
arrangements
Amounts
not subject
to IFRS 7
offsetting
disclosure²
Financial
collateral
Total
amounts
recognised
in the
statement
of financial
position
(3 320)
12 627
(15 947)
509
(2 811)
543
1 184
(2 777)
13 811
(641)
(16 588)
Gross
amounts
(3 320)
2 885
2 885
(831)
(831)
2 054
2 054
(71 322)
16 187
(55 135)
–
–
–
–
2 054
2 054
563 993
563 993
566 047
566 047
(55 135)
(530 362)
(585 497)
(71 322)
16 187
(55 135)
(55 135)
(530 362)
(585 497)
rm
Derivative financial
instruments
– Assets
– Liabilities
Assets excluding
derivative financial
instruments
– Loans and advances
Liabilities excluding
derivative financial
instruments
– Amounts owed to
depositors
2013
rm
Derivative financial
instruments³
– Assets
– Liabilities
Assets excluding
derivative financial
instruments³
– Loans and advances
Liabilities excluding
derivative financial
instruments³
– Amounts owed to
depositors
1 Includes the net amount of financial assets and financial liabilities where offsetting has been applied in terms of IAS 32 and financial instruments that are subject to master netting agreements but where no
offsetting has been applied. Excludes financial instruments that are neither subject to setoff nor master netting agreements.
² Includes financial instruments that are neither subject to setoff nor master netting agreements.
³ During 2014 the group enhanced its accounting processes and management information and expanded the disclosure relating to the offsetting of financial assets and liabilities in its consolidated financial
statements. This expanded disclosure resulted in a restatement to 2013 comparative information.
96
38 CREDIT ANALYSIS oF oTHER SHoRT-TERM SECURITIES, AND GoVERNMENT
AND oTHER SECURITIES
Credit ratings
other short-term
securities
Negotiable certificates
of deposit
Treasury bills and
other
Government and other
securities
Government and
government-
guaranteed securities
other dated securities
Investment grade
Subinvestment grade
not rated
2014
rm
2013
Rm
2014
rm
2013
Rm
2014
rm
2013
Rm
total
2014
rm
2013
Rm
54 895
34 122
1 333
795
94
87
56 322
35 004
7 213
8 944
64
7 277
8 944
47 682
25 178
1 269
25 138
29 668
1 294
13 220
11 918
16 887
12 781
600
694
795
1 611
437
1 174
80 033
63 790
2 627
2 406
94
396
19
377
490
87
49 045
26 060
26 828
31 279
13 839
12 989
17 324
13 955
87
83 150
66 283
All debt securities that are purchased by the group are rated using an internal rating system, being the Nedbank Group Rating (NGR) scale.
The group requires that all investments be rated using the NGR scale to ensure that credit risk is measured consistently and accurately
across the group. This ensures compliance with the group’s policy surrounding the rating of investments. The NGR scale has been mapped
to the Standard & poor’s credit rating system. According to the NGR scale investment grade can be equated to a Standard & poor’s rating of
above BBB-. All government and other short-term securities are current and not impaired. Investment grade includes credit ratings from
NGR01 to NGR11 and subinvestment grade includes credit ratings from NGR12 to NGR25.
97
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
Derivative financial instruments
1 962
406
902
460 177
46 894
47 966
4 862
68 894
7 347
10 692
39 LIQUIDITY GAp
rm
2014
Cash and cash equivalents (including
mandatory reserve deposits with
central banks)
other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
other assets
Total equity
Amounts owed to depositors
provisions and other liabilities
Long-term debt instruments
net liquidity gap
2013
Cash and cash equivalents (including
mandatory reserve deposits with
central banks)
other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
other assets
Total equity
Amounts owed to depositors
provisions and other liabilities
Long-term debt instruments
<3 months
>3 months
<6 months
>6 months
<1 year
>1 year
<5 years
>5 years
non-deter-
mined
total
25 280
24 408
2 746
550
220
13 593
555
290
100
15 974
1 181
3 855
2 347
5 199
16 609
5 963
5 524
127 412
21 759
39 889
255 399
158 870
25 600
56 322
15 644
26 828
603 329
25 721
25 721
180 396
36 417
60 999
279 554
170 357
25 721
753 444
55 980
11 728
55 980
15 479
634 623
11 728
35 634
1 354
1 576
5 706
22 328
4 670
463 493
48 876
54 574
96 084
22 709
67 708
753 444
(283 097)
(12 459)
6 425
183 470
147 648
(41 987)
–
30 666
11 408
1 288
4 452
11 020
953
791
9 946
1 240
3 063
2 630
5 407
18 251
4 923
4 722
122 260
21 277
38 252
231 472
152 786
30 666
35 004
13 811
31 279
566 047
22 348
22 348
170 074
34 041
52 501
257 760
162 431
22 348
699 155
Derivative financial instruments
1 607
937
1 101
409 233
47 331
53 758
5 553
69 770
3 106
454
1 082
25 002
413 946
48 722
55 941
100 325
7 390
5 405
3 621
16 416
51 675
12 130
51 675
16 588
585 497
12 130
33 265
63 805
699 155
net liquidity gap
(243 872)
(14 681)
(3 440)
157 435
146 015
(41 457)
–
This note has been prepared on a contractual maturity basis.
98
40 CoNTRACTUAL MATURITY ANALYSIS FoR FINANCIAL LIABILITIES
Statement
of financial
position
amount
<3 months
>3 months
<6 months
>6 months
<1 year
>1 year
< 5 years
>5 years
non-
deter-
minable
maturity
total
rm
2014
Long-term debt instruments
35 634
1 891
Amounts owed to depositors
634 623
463 512
2 026
49 126
6 934
50 916
27 312
75 009
5 298
10 905
43 461
–
649 468
11 728
11 728
–
–
62 386
9 650
461 297
29 808
73 732
12 595
15 479
11 728
720 136
22 807
3 248
102 968
129 023
40 928
599 827
56 140
9 408
417 163
13 800
91 051
12 265
16 588
12 130
669 473
35 013
3 178
93 670
131 861
Current accounts
Savings deposits
other deposits and loan
accounts
62 385
9 649
62 386
9 650
453 350
336 760
Foreign currency liabilities
29 807
25 313
31 436
2 315
31 209
1 160
50 987
1 020
10 905
Negotiable certificates of
deposit
Deposits received under
repurchase agreements
Derivative financial
instruments – liabilities
provisions and other liabilities
66 849
16 808
15 375
18 547
23 002
12 583
12 595
15 479
11 728
1 962
406
902
4 862
7 347
697 464
467 365
51 558
58 752
107 183
23 550
Guarantees on behalf of clients
22 807
22 807
Confirmed letters of credit and
discounting transactions
3 248
3 248
Unutilised facilities and other
102 968
102 968
129 023
129 023
–
–
–
–
2013
Long-term debt instruments
33 265
3 641
810
Amounts owed to depositors
585 497
412 464
49 922
56 139
9 408
56 105
9 408
5
2 145
56 885
30 215
75 018
30
4 117
5 538
Foreign currency liabilities
13 799
12 195
1 605
409 320
300 554
22 546
35 044
53 481
5 538
84 573
21 937
27 371
20 236
21 507
12 258
12 265
Current accounts
Savings deposits
other deposits and loan
accounts
Negotiable certificates of
deposit
Deposits received under
repurchase agreements
Derivative financial
instruments – liabilities
provisions and other liabilities
16 588
12 130
647 480
1 607
937
1 101
5 553
7 390
417 712
35 013
3 178
93 670
131 861
51 669
60 131
110 786
17 045
12 130
12 130
–
–
–
–
–
Guarantees on behalf of clients
35 013
Confirmed letters of credit and
discounting transactions
Unutilised facilities and other
3 178
93 670
131 861
provisions and other liabilities are included in this table in order to provide a reconciliation with the statement of financial position.
99
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
41 HISToRICAL VALUE AT RISK (99%, oNE-DAY) BY RISK TYpE
rm
Foreign exchange
Interest rate
Credit
Commodity
Diversification
Total VAR exposure
2014
2013
Average Minimum Maximum
year-end
Average Minimum Maximum
Year-end
3,7
7,7
3,8
0,3
(5,7)
9,8
0,6
5,2
2,7
10,7
12,5
5,3
0,9
6,7
14,8
0,9
5,6
5,3
0,9
(3,8)
8,9
2,2
4,6
3,2
0,4
(3,8)
6,5
0,6
2,6
2,4
9,4
10,9
4,7
3,0
3,6
11,8
1,4
10,9
2,8
0,1
(4,8)
10,5
The Worldclass at Managing Risk section contains information on the group trading book VAR and the comparison of trading VAR.
42
INTEREST RATE REpRICING GAp
rm
2014
Total assets
Total equity and liabilities
Interest rate hedging activities
Repricing profile
Cumulative repricing profile
Expressed as a percentage of total assets
2013
Total assets
Total equity and liabilities
Interest rate hedging activities
Repricing profile
Cumulative repricing profile
Expressed as a percentage of total assets
<3 months
>3 months
<6 months
>6 months
<1 year
>1 year
<5 years
>5 years
trading and
non-rate
total
22 551
26 122
7 628
4 057
56 201
7,5
18 351
34 424
27 391
11 318
498 952
471 251
24 443
52 144
52 144
6,9
488 123
439 867
(9 091)
39 165
39 165
5,6
22 788
26 798
44 265
16 317
15 880
149 008
753 444
4 289
208 667
753 444
1 215
(25 199)
(8 087)
–
–
3 504
(59 659)
59 659
7,9
2 749
56 155
7,5
44 187
17 082
(2 795)
53 407
7,1
7 015
26 455
18 045
(1 395)
18 050
123 429
3 816
177 511
699 155
699 155
(24 486)
(11 859)
2 619
51 707
7,4
2 375
(54 082)
54 082
7,7
–
–
50 483
49 088
7,2
7,0
The Worldclass at Managing Risk section contains information on interest rate risk in the banking book.
43 SECURITISATIoNS
Nedbank Limited uses securitisation primarily as a funding diversification tool and to add flexibility in mitigating structural liquidity risk.
The group currently has three active traditional securitisation transactions:
■ Synthesis Funding Ltd (Synthesis), an asset-backed commercial paper (ABCp) programme launched in 2004;
■ GreenHouse Funding (RF) Ltd, Series 2 (GreenHouse), a residential mortgage-backed securitisation programme;
■ GreenHouse Funding III (RF) Ltd, Series 3 (GreenHouse 3), a residential mortgage-backed securitisation programme; and
■ precinct Funding 1 (RF) Ltd (precinct), a commercial mortgage-backed securitisation programme.
Synthesis primarily invests in long-term rated bonds and offers capital market funding to SA corporates. These assets are funded through
the issuance of short-dated investment-grade commercial paper to institutional investors. All the commercial paper issued by Synthesis is
assigned the highest short-term RSA local-currency credit rating by Fitch, and is listed on the JSE Ltd.
Greenhouse 1 securitised R2bn of home loans originated Nedbank Retail in 2007. The notes issued to finance the purchase of the home loan
portfolio were assigned credit ratings by both Fitch and Moody’s and listed on the JSE Ltd.
Greenhouse 1 was restructured and refinanced on 19 November 2012 as a static amortising structure. The proceeds from the refinance of
this transaction, through the issuance of new notes and subordinated loans, was utilised to repay the R1,3bn existing notes and subordinated
loans upon their scheduled maturity, and to acquire additional home loans. The senior notes, which are rated by Fitch and listed on the
JSE Ltd, were placed with third party investors and the junior notes and subordinated loans retained by the group. The home loans transferred
to Greenhouse have continued to be recognised as financial assets.
Greenhouse III, a second standalone RMBS programme was implemented during 2014. In anticipation of issuance of notes to the capital
markets, a portfolio of R962m eligible residential mortgages originated by Nedbank Retail were sold to the vehicle and funded by way of a
warehousing facility from Nedbank. It is anticipated that the notes will be issued in 2015.
precinct is a commercial mortgage-backed securitisation programme. The originator, seller and servicer of the commercial property loan
portfolio is Nedbank Corporate property Finance, the market leader in commercial property finance in South Africa, with a portfolio
of R109,1bn.
The precinct structure takes the form of a static pool of small commercial property loans with limited substitution and redraws/further
advance capabilities. The pool of assets at 31 December 2012 (provisional pool of assets prior to inception) had an outstanding balance of
R2,5bn with an open market value of the associated properties of R5,3bn.
100
precinct has issued notes rated by Moody’s Investors Service and listed on the JSE Ltd. The A and B notes were placed to third party investors
and the junior notes and subordinated loan retained by the group.
The following table shows the carrying amount of securitised assets, stated at the amount of the group’s continuing involvement where
appropriate, together with the associated liabilities, for each category of asset in the statement of financial position:¹
rm
loans and advances to customers
– Residential mortgage loans
Less: Impairments
– Commercial mortgage loans
Less: Impairments
other financial assets
Corporate and bank paper
other securities
Commercial paper
Total
2014
2013
Carrying
amount of
assets
Associated
liabilities
Carrying
amount of
assets
Associated
liabilities
2 520
(24)
1 586
(4)
1 989
1 295
7 362
2 743
2 309
3 285
8 337
1 762
(26)
1 959
(6)
2 809
2 286
8 784
1 994
2 551
5 096
9 641
This table presents the gross balances within the securitisation schemes and does not reflect any eliminations of intercompany and cash
balances held by the various securitisation vehicles.
1 The value of any derivative instruments taken out to hedge any financial asset or liability is adjusted against such instrument in this disclosure.
44 FoREIGN CURRENCY CoNVERSIoN GUIDE
Monetary figures in these financial statements are expressed in SA rand to the nearest million. The approximate value of the SA rand as at
31 December against the following currencies was:
United States dollar
pound sterling
Euro
2014
Actual
0,08638
0,05544
0,07108
2013
Actual
0,09524
0,05759
0,06915
45 CoNTINGENT LIABILITIES AND UNDRAWN FACILITIES
Guarantees on behalf of clients
Letters of credit and discounting transactions
Irrevocable unutilised facilities and other
2014
Average
0,09202
0,05593
0,06973
2014
rm
22 807
3 248
102 968
129 023
2013
Average
0,10289
0,06590
0,07752
2013
Rm
35 013
3 178
93 670
131 861
The group, in the ordinary course of business, enters into transactions that expose it to tax, legal and business risks. provisions are made for
known liabilities that are expected to materialise (refer to note 40). possible obligations and known liabilities where no reliable estimate can
be made or it is considered improbable that an outflow would result are reported as contingent liabilities. This is in accordance with IAS 37:
provisions, Contingent Liabilities and Contingent Assets.
There are a number of legal or potential claims against Nedbank Limited and its subsidiary companies, the outcome of which cannot at
present be foreseen.
As disclosed in the group’s 2009 annual financial statements, the largest of these potential actions are claims in the High Court against
Nedbank Limited by certain shareholders in pinnacle point Group Ltd, alleging that Nedbank Limited had a legal duty of care to them arising
from a share swap transaction. In 2013 two of these claims of R147m and of R802m were dismissed by the North Gauteng High Court. The
only claim remaining is for R355m.
originally these shareholders and others lodged proceedings with the Securities Regulation panel (SRp) for an order declaring that an
affected transaction took place. The SRp ruled that no affected transaction took place. The last remaining claimant brought an application
to the South Gauteng High Court for the review of the SRp ruling. This application was dismissed with costs on 15 November 2013.
The applicant filed a notice to apply for leave to appeal this judgment, and on 16 July 2014 the Supreme Court of Appeal ruled in Nedbank’s
favour by refusing the application.
During 2011 further actions were instituted against Nedbank Limited by other stakeholders for R210m, and by Absa Bank Limited for R773m.
In both these actions Nedbank have filed exceptions against the claims. on 25 August 2014, the R210m claim was withdrawn.
Nedbank Limited and its legal advisers remain of the opinion that the remaining claims are ambitious, and that the remaining claimants will
have great difficulty succeeding.
101
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
46 CoMMITMENTS
46.1 Capital expenditure approved by directors
Contracted
Not yet contracted
2014
rm
1 292
1 278
2 570
2013
Rm
247
856
1 103
Funds to meet capital expenditure commitments will be provided from group resources. In addition, capital expenditure is incurred in the
normal course of business throughout the year.
46.2 Operating lease commitments
Companies in the group have entered into leases over fixed property, furniture and other equipment for varying periods. The group is a major
lessor of properties, which are subject to individual contracts that specify the group’s option to renew leases, escalation clauses and
purchase options, if applicable. Due to the large number of lease agreements entered into by the group, this information has not been
provided in the annual financial statements, but is available from the group on request. The following are the minimum lease payments
under non-cancellable leases:
2014
Land and buildings1
Furniture and equipment
2013
Land and buildings1
Furniture and equipment
2015
rm
2015 – 2019
rm
Beyond 2019
rm
690
286
976
1 705
173
1 878
940
940
2014
rm
2014 – 2018
Rm
Beyond 2018
Rm
664
246
910
1 663
410
2 073
1 020
2
1 022
1 The group may from time to time enter into subleases of properties where it is the lessee. These subleases are considered to be immaterial in the context of the group’s overall leasing arrangements.
The terms of renewal and escalation clauses are as follows:
The majority of material leases entered into by the group include an option to renew the lease. If the rental for the renewal period has not
been agreed on or determined by the commencement date of the renewal period, the tenant must continue to pay the existing monthly
rental. once the rental is determined, cumulative adjustments will be made to the amount payable for the following month. Escalation
clauses for major leases entered into by the group range between 6% and 10% per annum. For all major lease agreements entered into, there
is no requirement to pay contingent rent or purchase options.
46.3 Commitments under derivative instruments
The group enters into option contracts, financial futures contracts, forward-rate and interest-rate swap agreements and other financial
agreements in the normal course of business (note 16).
47 CoLLATERAL
47.1 Collateral pledged
The group has pledged government and other securities (note 17) and negotiable certificates of deposit (note 15) amounting to R11 525m
(2013: R12 258m) as collateral for deposits received under repurchase agreements. These amounts represent assets that have been
transferred, but that do not qualify for derecognition under IAS 39.
These transactions are entered into under terms and conditions that are standard industry practice to securities borrowing and lending
activities.
47.2 Collateral held to mitigate credit risk
Credit risk mitigation refers to the actions that can be taken by the group to manage its exposure to credit risk so as to align such exposure
to its risk appetite. This action can be proactive or reactive and the level of mitigation that a bank desires may be influenced by external
factors such as the economic cycle or internal factors such as a change in risk appetite.
References to credit risk mitigation normally focus on the taking of collateral as well as the management of such collateral. While collateral
is an essential component of credit risk mitigation there are a number of other methods used for mitigating credit risk. The group’s credit risk
policy acknowledges the role to be played by credit risk mitigation in the management of credit risk, but emphasises that collateral on its own
is not necessarily a justification for lending. The primary consideration for any lending opportunity should rather be the borrower’s financial
position and ability to repay the facility from its own resources and cashflow.
102
The group generally segregates collateral received into the following two classes:
(i) Financial collateral:
The group takes financial collateral to support credit exposures in the trading book. This includes cash and debt securities in respect of
derivative transactions.
These transactions are entered into under terms and conditions that are standard industry practice to securities borrowing and lending
activities.
(ii) Non-financial collateral:
In secured financial transactions, the group takes other physical collateral to recover outstanding exposure in the event of the borrower
being unable or unwilling to fulfil its obligations. This includes mortgages over property (both residential and commercial), liens over
business assets (including, but not limited to, plant, vehicles, aircraft, inventories and trade debtors) and guarantees from parties other
than the borrower.
Should a counterparty be unable to settle its obligations, the group takes possession of collateral as full or part settlement of such
amounts. In general, the group seeks to dispose of such property and other assets that are not readily convertible into cash as soon as
the market for the relevant asset permits.
The group monitors the concentration levels of collateral to ensure that it is adequately diversified. In particular, the following collateral
types are common in the marketplace:
(i) Retail portfolio:
■ mortgage lending secured by mortgage bonds over residential property;
■ instalment credit transactions secured by the assets financed; and
■ overdrafts that are either unsecured or secured by guarantees, suretyships or pledged securities.
(ii) Wholesale portfolio:
■ commercial properties are supported by the property financed and a cession of the leases;
■ instalment credit type of transactions that are secured by the assets financed;
■ working capital facilities when secured usually by either a claim on specific assets (fixed assets, inventories or trade debtors) or
other collateral such as guarantees;
■ term and structured lending which usually relies on guarantees or credit derivatives (where only internationally recognised and
enforceable agreements are used); and
■ credit exposure to other banks where the risk is commonly mitigated through the use of financial control and netting agreements.
The valuation and management of collateral across all business units of the group are governed by the Group Credit policy.
Management considers collateral held in the retail portfolio to be homogenous by nature and therefore more reliably identifiable. Generally,
valuations in respect of mortgage portfolios are updated using statistical index models, published data by service providers are used for
motor vehicles and physical inspection is performed for other types of collateral. physical valuations are performed six monthly on the
defaulted book. At 31 December 2014 management considered R137 042m (2013: R132 268m) to be a reasonable estimate of the collateral
held in the retail portfolio.
Management considers collateral held in the wholesale portfolio to be non-homogenous and often exhibiting illiquid characteristics and
therefore valuing collateral of this nature requires a significant level of judgement. Collateral of this nature is valued at the inception of a
transaction and at least annually during the life of the transaction usually as part of the facility review, which includes a review of the security
structure and covenants to ensure that proper title is retained over the relevant collateral. At 31 December 2014 management considered
R173 627m to be a reasonable estimate of the collateral held in the wholesale portfolio.
A further consideration with regard to the valuation and management of collateral is that when credit intervention is required, or in the case
of default, all items of collateral relating to that particular client portfolio are immediately revalued. In such instances physical inspection by
an expert valuer is required. This process also ensures that an appropriate impairment is evaluated timeously.
The group does not hold any collateral (financial or non-financial) that it is permitted to sell or repledge in the absence of defaulting by
its owner.
47.3 Collateral taken possession of and recognised in the statement of financial position
Included in properties in possession (note 18.1) is an amount of R241m (2013: R555m), which represents assets the group has acquired
during the year by taking possession of collateral held as security.
103
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
48 MANAGED FUNDS
48.1 Fair value of funds under management
SA unit trusts
48.2 Reconciliation of movement in funds under management
Balance at 31 December 2012
Inflows
outflows
Mark-to-market value adjustment
Balance at 31 December 2013
Inflows
outflows
Mark-to-market value adjustment
Balance at 31 December 2014
2014
rm
128 394
128 394
2013
Rm
115 235
115 235
SA unit trusts
Rm
87 250
162 320
(145 606)
11 271
115 235
204 436
(197 862)
6 585
128 394
The group, through a number of subsidiaries, operates unit trusts. Commissions and fees earned in respect of trust and management
activities performed are included in the consolidated statement of comprehensive income as non-interest revenue.
49 SHARE-BASED pAYMENTS
Nedbank Group Limited shares, share options over Nedbank Group Limited shares and equity instruments in respect of Nedbank Group
Limited shares are granted to employees as part of their remuneration package as services are rendered, as well as to clients, business
partners and affinity groups as an incentive to retain business and develop growth within the group. The following are the share and share
option schemes that have been in place during the year. All schemes are equity-settled at group level, except the Nedbank UK schemes and
the Nedbank Wealth Management International schemes, both of which are cash-settled.
As the group cannot estimate reliably the fair value of services received nor the value of additional business received, the group rebuts the
presumption that such services and business can be measured reliably. The group therefore measures their fair value by reference to the fair
value of the shares, share options or equity instruments granted, in line with the group’s accounting policy. The fair value of such shares,
share options and equity instruments is measured at the grant date utilising the Black-Scholes valuation model.
49.1 Description of arrangements
Scheme
trust/Special-purpose
vehicle (SpV)
Description
traditional employee schemes
Nedbank Group
(2005) Share option
and Restricted Share
Scheme
Nedbank Group
(2005) Share Scheme
Trust
Nedbank Group
(2005) Matched
Share Scheme
Nedbank Group
(2005) Share Scheme
Trust
Restricted Shares are granted to key
personnel to motivate senior
employees to remain with the group.
The granting of Restricted Shares is
based on job level, merit and
performance, and is entirely at the
discretion of the trustees acting on
recommendations of executive
management. Grants are made twice
a year for new appointments and
annually for existing staff, on a date
determined by the trustees.
All employees of the group are eligible
to participate in the scheme.
An amount of not more than 50% of
their after-tax bonus can be invested,
which will be matched by the group
with shares.
Maximum
term
3 years
Vesting requirements
2012, 2013 and 2014 grants: Three
years’ service and achievement of
performance targets based on
average return on equity and
Nedbank Group Limited share price
performance against the financial
index. Where the performance
target is not met, 50% will vest,
provided that the three years’
service has been achieved.
3 years
Three years’ service and
achievement of Nedbank Group
Limited performance target. Where
this performance targets is not met,
50% will vest provided that the
three years’ service has been
achieved.
104
Scheme
trust/Special-purpose
vehicle (SpV)
Description
Nedbank UK long
term incentive plan
(LTIp)
n/a
Nedbank UK Matched
Scheme
n/a
n/a
Nedbank Wealth
Management
International long
term incentive plan
(LTIp)
n/a
Nedbank Wealth
Management
International Matched
Scheme
nedbank eyethu Bee schemes – employees
Black Executive
Scheme
Nedbank Eyethu Black
Executive Trust
Black Management
Scheme
Nedbank Eyethu Black
Management Trust
Employees who perform services in the
United Kingdom on behalf of the group
will be considered for participation in
the UK LTIp. Selected employees will
be granted share appreciation rights
(SARs). SARs are similar to options in
that SARs are granted at a
predetermined exercised price vesting
and expiry date. When the participant
elects to exercise SARs, the employer
settles the difference between the
current market price and the exercise
price in cash.
All UK employees of the group are
eligible to participate in the scheme.
An amount of not more than 50% of
their after-tax bonus can be invested,
which will be matched by the group
with shares.
Restricted Shares are granted to key
Nedbank Wealth Management
International personnel to motivate
senior employees to remain with the
group. The granting of Restricted
Shares is based on job level, merit and
performance, and is entirely at the
discretion of the trustees acting on
recommendations of executive
management. Grants are made twice
a year for new appointments and
annually for existing staff, on a date
determined by the trustees.
All Nedbank Wealth Management
International employees of the group
are eligible to participate in the
scheme. An amount of not more than
50% of their after-tax bonus can be
invested, which will be matched by the
group with shares.
Restricted shares and share options
were granted to certain black
employees at a senior-management
level. The beneficial ownership of the
shares resides with the participants,
including the voting and dividend
rights.
Restricted shares and share options
were granted to certain black
employees at a middle- and senior-
management level. The beneficial
ownership of the shares resides with
the participants, including the voting
and dividend rights.
nedbank Swaziland Sinakekelwe Schemes – Bee and ltIp
Swaziland Broad-
based Employee
Scheme
Nedbank Sinakekelwe
Trust Broad-based
Employee Scheme
Restricted shares were granted to
qualifying non-managerial employees
who do not participate in any other
incentive schemes within the group.
The beneficial ownership of the shares
lies with the participants, including
dividend rights.
Vesting requirements
Completion of three years’ service,
from grant date subject to
corporate performance targets
being met.
Maximum
term
3 years
Completion of three years’ service,
from grant date subject to
corporate performance targets
being met.
Completion of three years’ service,
from grant date subject to
corporate performance targets
being met.
3 years
3 years
Completion of three years’ service,
from grant date subject to
corporate performance targets
being met.
3 years
participants must remain in service
for four, five and six years, after
each of which one third of the
shares become unrestricted and
one third of the options vest.
participants must remain in service
for four, five and six years, after
each of which one third of the
shares become unrestricted and
one third of the options vest.
7 years
7 years
No dealing in these shares during
the restricted period of five years.
5 years
105
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
49 SHARE-BASED pAYMENTS (continued)
49.1 Description of arrangements (continued)
Scheme
trust/Special-purpose
vehicle (SpV)
Description
Swaziland
Management Scheme
Nedbank Sinakekelwe
Trust Management
Scheme
Swaziland Trust
Long-term Incentive
Scheme
Sinakekelwe Trust
Long-term Incentive
Scheme
Restricted shares and share options
were granted to key Management
personnel as an incentive to remain
within the group. Grants are allocated
on the basis of job level, performance,
potential and skills and competencies
portrayed by the employee, entirely at
the discretion of the trustees and are
allocated under recommendation of
the group’s executive management
team. The beneficial ownership of the
shares lie with the participants,
including dividend rights.
Restricted shares and share options to
be granted to key management
personnel as an incentive to remain
within the group. Grants will be
allocated on the basis of job level,
performance, potential and skills and
competencies portrayed by the
employee, entirely at the discretion of
the group’s executive management
team. The beneficial ownership of the
shares will lie with the participants,
including dividend rights. Grants to
staff have yet to be made.
Maximum
term
5 years
Vesting requirements
participants must remain in service
for three, four and five years, after
each of which one third of the
shares become unrestricted and
one third of the options vest.
participants must remain in service
for three, four and five years, after
each of which one third of the
shares become unrestricted and
one third of the options vest.
5 years
No numerical information has been included in either the share-based payment expense or reserve in respect of these schemes, as the
cumulative amount is less than R1m.
49.2 Effect on profit and financial position
traditional employee schemes
Nedbank Group (2005) Share option and Restricted
Share Scheme
Nedbank Group (2005) Matched Share Scheme
Nedbank UK long-term incentive plan1
Nedbank UK Matched Share Scheme1
Nedbank Wealth Management International long-term
incentive plan1
Nedbank Wealth Management International Matched
Share Scheme1
nedbank eyethu Bee schemes
Black Executive Scheme
Black Management Scheme
1 This scheme is cash settled and therefore creates a liability.
Share-based payments expense
Share-based payments
reserve/liability
2014
rm
607
517
79
9
2
21
14
7
628
2013
Rm
550
493
51
7
1
(3)
1
33
17
16
583
2014
rm
1 138
939
148
16
19
13
3
82
42
40
2013
Rm
988
850
93
33
2
9
1
98
38
60
1 220
1 086
106
49.3 Movements in number of instruments
nedbank Group (2005) Share option Scheme
outstanding at the beginning of the year
Granted
Forfeited
Exercised
outstanding at the end of the year
Exercisable at the end of the year
Weighted
average
exercise price
R
2014
2013
Weighted
average
exercise price
r
number of
instruments
10 710 356
3 444 280
(719 950)
(3 566 309)
9 868 377
Number of
instruments
11 321 761
3 500 768
(411 640)
(3 700 533)
10 710 356
Weighted-average share price for options exercised (R)
196,76
192,45
nedbank Group (2005) Matched Share Scheme
outstanding at the beginning of the year
Granted
Forfeited
Exercised
outstanding at the end of the year
Exercisable at the end of the year
1 274 585
732 501
(104 291)
(252 822)
1 649 973
Weighted-average share price for options exercised (R)
222,54
nedbank uK long-term Incentive plan
outstanding at the beginning of the year
Granted
Forfeited
Exercised
outstanding at the end of the year
Exercisable at the end of the year
Weighted average share price for options exercised (GBp)
nedbank uK Matched Share Scheme
outstanding at the beginning of the year
Granted
other
outstanding at the end of the year
Exercisable at the end of the year
Weighted average share price for options exercised (GBp)
nedbank Wealth Management International long-term
incentive plan
outstanding at the beginning of the year
Granted
Forfeited
Exercised
outstanding at the end of the year
Exercisable at the end of the year
Weighted average share price for options exercised (GBp)
nedbank Wealth Management International Matched
Share Scheme
outstanding at the beginning of the year
Granted
Forfeited
outstanding at the end of the year
Exercisable at the end of the year
Weighted average share price for options exercised (GBp)
198 960
52 336
(9 414)
(44 594)
197 288
16 099
2 811
(1 483)
17 427
83 254
20 708
(30 740)
73 222
12 643
7 613
(49)
20 207
917 581
626 785
(168 694)
(101 087)
1 274 585
263 972
38 084
(58 708)
(44 388)
198 960
66 196
7 856
7 584
659
16 099
99 349
22 812
(21 135)
(17 772)
83 254
6 612
6 690
(659)
12 643
189,01
17,84
51,47
107
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
49 SHARE-BASED pAYMENTS (continued)
49.3 Movements in number of instruments (continued)
2014
2013
Weighted
average
exercise price
r
number of
instruments
Weighted
average
exercise price
R
Number of
instruments
Black executive Scheme
outstanding at the beginning of the year
1 251 781
101,73
1 244 440
Granted
Forfeited
Exercised
outstanding at the end of the year
Exercisable at the end of the year
Weighted average share price for options exercised (R)
Black Management Scheme
outstanding at the beginning of the year
Forfeited
Exercised
other movements
Expired
outstanding at the end of the year
Exercisable at the end of the year
Weighted average share price for options exercised (R)
(59 335)
(178 127)
1 014 319
641
2 710 812
(220 356)
(964 666)
23 526
(3 432)
1 545 884
262 053
158 276
(10 880)
(140 055)
1 251 781
10 788
121,08
223,06
105,23
3 992 039
(304 510)
(990 044)
17 040
(3 713)
2 710 812
338 429
107,36
227,59
95,45
129,34
78,38
78,93
101,73
144,30
202,25
88,01
106,55
97,43
123,33
110,98
105,23
118,69
191,04
49.4 Instruments outstanding at the end of the year by exercise price
2014
2013
nedbank Group (2005) Share option Scheme
0,00
nedbank Group (2005) Matched Share Scheme
0,00
nedbank uK long-term incentive plan
0,00
nedbank uK Matched Share Scheme
0,00
nedbank Wealth Management International long-term
incentive plan
0,00
nedbank Wealth Management International Matched
Share Scheme
0,00
Weighted
average
remaining
contractual life
(years)
1,2
1,2
1,4
1,4
1,1
1,1
1,3
1,3
number of
instruments
9 868 377
9 868 377
1 649 973
1 649 973
197 288
197 288
17 427
17 427
73 223
73 223
20 207
20 207
Weighted
average
remaining
contractual life
(years)
1,2
1,2
1,5
1,5
0,4
0,4
1,7
1,7
0,9
0,9
1,8
1,8
Number of
instruments
10 710 356
10 710 356
1 274 585
1 274 585
198 960
198 960
16 099
16 099
83 255
83 255
12 643
12 643
108
49.4 Instruments outstanding at the end of the year by exercise price
2014
2013
Weighted
average
remaining
contractual life
(years)
number of
instruments
Weighted
average
remaining
contractual life
(years)
Number of
instruments
Black executive Scheme
0,00
75,74
104,51
120,62
121,08
128,44
132,18
140,00
144,30
161,88
182,98
189,90
Black Management Scheme
0,00
75,74
104,51
108,45
120,62
121,08
128,44
132,18
134,30
139,69
144,30
161,88
319 169
19 623
127 569
84 182
7 480
60 000
174 489
114 010
107 797
1 014 319
112 718
303 526
71 605
72 620
95 668
164 806
287 811
183 378
169 609
84 144
1 545 885
2,4
1,2
2,2
3,2
2,6
1,6
4,2
4,6
5,2
3,2
1,3
1,2
0,6
1,6
0,2
2,2
3,2
2,5
1,6
4,2
2,0
390 541
38 669
22 341
12 435
189 445
84 182
11 163
60 000
10 788
210 410
114 010
107 797
1 251 781
207 111
593 412
222 144
138 836
230 188
296 582
339 237
265 306
69 438
186 886
63 865
97 807
2 710 812
2,9
2,2
1,6
1,2
3,2
4,2
3,6
2,6
0,2
5,2
5,6
6,2
3,8
1,3
2,2
1,6
2,6
1,2
3,2
4,2
3,5
0,6
2,6
0,2
5,2
2,5
109
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
49 SHARE-BASED pAYMENTS (continued)
49.5 Instruments granted during the year
The weighted average fair value of instruments granted during the year has been calculated using the Black-Scholes option pricing model,
using the following inputs and assumptions.
nedbank
Group
(2005)
Share option
Scheme
nedbank
Group
(2005)
Matched
Share
Scheme
nedbank uK
long-term
incentive
plan
nedbank
uK Matched
Scheme
nedbank
Wealth
Management
International
long-term
incentive
plan
nedbank
Wealth
Management
International
Matched
Scheme
Black
executive
Scheme
2014
Number of instruments granted
3 440 886
731 882
52 336
2 811
20 708
7 613
Weighted average fair value per
instrument granted (R)³
Weighted average share
price (R)
Weighted average expected
volatility (%)¹
Weighted average life (years)
Weighted average risk-free
interest rate (%)
Number of participants
Weighted average vesting
period (years)
possibility of not vesting (%)
Expectation of meeting
performance criteria (%)
2013
203,61
188,72
181,75
188,72
215,58
224,01
210,25
223,03
215,77
224,04
23,0
3,0
7,2
1 615
3,0
10,0
90,0
22,0
3,0
6,8
668
3,0
7,0
22,00
3,00
22,00
3,00
6,8
11
3,0
10,0
6,8
24
3,0
10,0
5,0
13
3,0
10,0
11
3,0
10,0
93,0
90,0
90,0
90,0
90,0
95,0
Number of instruments granted
3 491 184
626 280
38 084
7 584
22 812
6 690
158 276
Weighted average fair value per
instrument granted (R)³
Weighted average share
price (R)
Weighted average expected
volatility (%)¹
Weighted average life (years)
Weighted average expected
dividends (%)²
Weighted average risk-free
interest rate (%)
Number of participants
Weighted average vesting
period (years)
possibility of not vesting (%)
Expectation of meeting
performance criteria (%)
187,76
169,98
171,36
173,25
171,58
169,98
92,40
197,02
190,53
197,21
190,53
197,21
190,53
198,50
20,0
3,0
5,3
1 792
3,0
10,0
20,0
3,0
5,3
559
3,0
7,0
20,0
3,0
5,3
13
3,0
10,0
20,0
2,5
5,3
11
3,0
10,0
22,0
3,0
5,3
12
3,0
10,0
22,0
3,0
5,3
15
3,0
10,0
90,0
93,0
90,0
90,0
90,0
90,0
20,0
5,7
2,6
6,1
7
5,0
95,0
1 Expected volatility is determined based on the historical average volatility for shares over their vesting periods. Volatility is determined using expected volatility for all shares listed on the JSE.
² The dividend yield used for grants made has been based on forecast dividends.
³ Fair value per instrument has been recalculated in line with a change in the valuation methodology for shares linked to the Financial Index.
110
50 RELATED pARTIES
50.1 Relationship with parent, ultimate controlling party and investees
The group’s parent company is Nedbank Group Limited, which holds 100% (2013: 100%) of Nedbank Limited’s ordinary shares. The ultimate
controlling party is old Mutual plc, incorporated in the United Kingdom.
Material subsidiaries of the group are identified in note 52 and associate companies and joint arrangements of the group are identified in
note 51.
50.2 Key management personnel compensation
Key management personnel are those persons who have authority and responsibility for planning, directing and controlling the activities of
the group, directly or indirectly, including all directors of the company and its parent, as well as members of the Executive Committee who
are not directors, as well as close members of the family of any of these individuals.
Details of the compensation paid to the board of directors and prescribed officers and details of their shareholdings in the company are
disclosed in the Remuneration Report. Compensation paid to the board of directors and compensation paid to other key management
personnel, as well as the number of share instruments held, are shown below:
Directors
Key management
personnel
Compensation (rm)
2014
Directors’ fees
Remuneration – paid by subsidiaries
Short-term employee benefits
Gain on exercise of share instruments
2013
Directors’ fees
Remuneration – paid by subsidiaries
Short-term employee benefits
Gain on exercise of share instruments
number of share instruments
2014
outstanding at the beginning of the year
Granted
Forfeited
Exercised
outstanding at the end of the year
2013
outstanding at the beginning of the year
Granted
Forfeited
Exercised
14
84
47
37
98
11
78
43
35
89
571 714
173 902
(7 965)
(159 183)
578 468
645 194
165 168
total
14
286
167
119
300
11
229
161
68
240
202
120
82
202
151
118
33
151
1 666 293
2 238 007
456 115
(91 879)
(455 540)
1 574 989
1 686 127
441 334
(11 541)
630 017
(99 844)
(614 723)
2 153 457
2 331 321
606 502
(11 541)
(688 275)
(238 648)
(449 627)
outstanding at the end of the year
571 714
1 666 293
2 238 007
111
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
50 RELATED pARTIES (continued)
50.3 Related-party transactions
Transactions between Nedbank Limited and its subsidiaries, which are related parties, have been eliminated on consolidation and are not
disclosed in this note. Transactions between Nedbank Limited and its other related parties are disclosed below. All of these transactions
were entered into in the normal course of business.
Due from/(owing to)
outstanding balances (rm)
parent/ultimate controlling party
Deposits owing to old Mutual Life Assurance Company (SA) Ltd
Bank accounts owing to Nedbank Group Ltd
Bank balances owing to old Mutual Life Assurance Company (SA) Ltd
Account payable owing to old Mutual plc
Forward exchange rate contracts with old Mutual plc
Fellow subsidiaries
Loans due from Nedgroup Securities (pty) Ltd
Loans owing to Nedbank Malawi Ltd
Loans due from other fellow subsidiaries
Deposits owing to old Mutual Asset Managers (SA) (pty) Ltd
Bank balances owing to old Mutual Asset Managers (SA) (pty) Ltd
Deposits owing to Nedgroup Securities (pty) Ltd
Deposits owing to Syfrets Securities Ltd
Deposits due owing to other fellow subsidiaries
Bank balances owing to other fellow subsidiaries
Equity derivatives with fellow subsidiaries
Forward exchange rate contracts with fellow subsidiaries
Interest rate contracts with various fellow subsidiaries
Associates
Loans due from associates
Deposits owing to associates
Bank balances owing to associates
Key management personnel
Mortgage bonds due from key management personnel
Deposits owing to key management personnel
Deposits owing to entities under the influence of key management personnel
Bank balances due from key management personnel
Bank balances owing to key management personnel
Bank balances due from entities under the influence of key management personnel
Bank balances owing to entities under the influence of key management personnel
The WIpHoLD and Brimstone consortia and Aka Capital (pty) Ltd are related parties since certain
key management personnel of the company have significant influence over these entities. These
entities are participants in the Nedbank Eyethu BEE schemes and the share-based payments
reserve recognised in respect of these entities and key management personnel is detailed below:
WIpHoLD consortium
Brimstone consortium
Key management personnel – directors
Key management personnel – other
Share-based payments reserve
performance fees are paid to the WIpHoLD and Brimstone consortia in terms of the
Nedbank Eyethu BEE scheme:
WIpHoLD consortium
Brimstone consortium
performance fee liability at year-end
long-term employee benefit plans
Bank balances owing to Nedgroup Medical Aid Fund
Bank balances owing to Nedgroup pension Fund
Bank balances and deposits owing to other funds
112
2014
(14)
(146)
(237)
(1)
(4)
951
(74)
6 904
(24)
(15)
(768)
(1 424)
1 642
(1 841)
(24)
1
(1)
1 692
(47)
(5)
27
(33)
(1 099)
4
(43)
1
(179)
(154)
(147)
(52)
(129)
(482)
(12)
(12)
(24)
(1)
(100)
(73)
2013
(749)
(482)
(5 970)
(1)
7 141
(60)
2 326
(60)
(5)
(1 339)
(1 881)
194
(1 212)
(6)
7
1 492
(12)
(9)
32
(33)
(1 398)
4
(40)
35
(362)
(108)
(107)
(48)
(113)
(376)
(64)
(275)
transactions (rm)
parent/ultimate controlling party
Interest income from old Mutual plc
Interest expense to old Mutual Life Assurance Company (pty) Ltd
Dividend declared to Nedbank Group Ltd
Fellow subsidiaries
Interest income from old Mutual Asset Managers (SA) (pty) Ltd
Interest income from fellow subsidiaries
Interest income from Syfrets Securities Ltd
Interest income from Nedgroup Securities (pty) Ltd
Interest expense to Syfrets Securities Ltd
Interest expense to other fellow subsidiaries
Interest expense to old Mutual Asset Managers (SA) (pty) Ltd
Interest expense to Nedgroup Securities (pty) Ltd
Management and project fee income from fellow subsidiaries
Associates
Interest expense to associates
Key management personnel
Interest income from key management personnel
Interest income from entities under the influence of key management personnel
Interest expense to key management personnel
Interest expense to entities under the influence of key management personnel
The share-based payments charge in respect of the entities that are participants in the
Nedbank Eyethu BEE schemes and key management personnel is detailed below:
Key management personnel – other
Share-based payments expense (included in BEE transaction expenses)
Key management personnel – directors
Key management personnel – other
Share-based payments expense (included in staff costs)
performance fees are also paid to the WIpHoLD and Brimstone consortia in terms of the
Nedbank Eyethu BEE scheme.
WIpHoLD consortium
Brimstone consortium
performance fee expense
long-term employee benefit plans
Interest expense to Nedgroup pension Fund
Interest expense to other funds
The Nedbank Group pension Fund has an insurance policy (optiplus policy) with a fellow
subsidiary, old Mutual Life Assurance Company (SA) Ltd, in respect of its pension plan
obligations. Nedbank Limited has an insurance policy (Symmetry policy) with a fellow
subsidiary, old Mutual Life Assurance Company (SA) (pty) Ltd, in respect of its postretirement
medical aid obligations. The group has an interest in the oMART cell captive within a fellow
subsidiary in respect of its disability plan obligations. The value of this policy and this interest
are shown as reimbursement rights, with a corresponding liability. In the case of the interest in
the cell captive, the group recognises the surplus in the cell captive. The amounts included in
the financial statements in respect of this policy and this interest are as follows:
optiplus policy reimbursement right
Symmetry policy reimbursement right
oMART policy reimbursement right (note 27.1)
Included in long-term employee benefit assets
optiplus policy obligation
postretirement medical aid obligation
Disability obligation
Included in long-term employee benefit liabilities
Income/(expense)
2014
2013
(342)
(2 200)
(344)
(2 600)
27
860
506
26
(666)
(353)
(41)
(877)
164
(22)
4
348
(31)
(227)
(5)
(5)
(17)
(60)
(77)
(4)
(25)
827
1 179
511
2 517
(827)
(1 179)
(374)
(2 380)
30
369
255
(656)
(413)
(25)
(716)
17
(11)
1
316
(17)
(227)
(5)
(5)
(7)
(24)
(31)
(14)
(13)
(27)
(4)
(12)
777
453
1 230
(777)
(320)
(1 097)
113
NedbaNk LIMITed annual report Acquisition
date
Year-end
2014
rm
2013
Rm
2014
rm
2013
Rm
2014
rm
2013
Rm
Carrying amount
(from) associates
Dividends received
Group
net indebtedness of loans to/
Dec 2010
Jul 2007
Mar 2005
Aug 2002
Aug 2005
Aug 2007
Dec
Feb
Feb
Feb
Feb
Feb
39
55
63
85
125
57
373
123
235
42
55
57
40
83
83
79
342
125
227
7
5
43
38
49
235
1 270
(4)
55
5
2
43
14
43
242
1 103
5
35
1 492
1 158
1 098
1 691
39
17
3
20
NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
51 ANALYSIS oF INVESTMENTS IN pRIVATE EQUITY ASSoCIATES, ASSoCIATE
CoMpANIES AND JoINT ARRANGEMENTS
percentage holding
2014
%
2013
%
Measurement
method
50
35
20
35
49
50
35
30
20
35
49
Fair value
Fair value
Fair value
Fair value
Fair value
Fair value
Century City JV
Erf 7 Sandown (pty) Ltd
Falcon Forest Trading 85 (pty) Ltd
Friedshelf 113 (pty) Ltd
property development
property development
property development
property development
Masingita property Investment Holdings (pty) Ltd
property development
odyssey Developments (pty) Ltd¹
property development
other individually immaterial associates²
private-equity associates (Manufacturing, industrial,
leisure and other)
private-equity associates (property investment
associates)
other
Individually immaterial joint arrangements¹
Various
Various
All investments in associate companies and joint arrangements are unlisted. There are no regulatory constraints, apart from the provisions
of the Companies Act, 71 of 2008 (as amended) that restrict the distribution of funds to the shareholders. Distribution of funds may,
however, be restricted by loan agreements that the entities have entered into. All associates and joint arrangements are considered to be
strategic to the group’s activities.
Unless otherwise stated, all entities are domiciled and incorporated in SA. The group has the same proportion of voting rights as its
proportion of ownership interest, unless stated otherwise and has not incurred any contingent liabilities with regard to the associates or joint
arrangements listed above.
No significant judgement or assumptions were applied in concluding that the group has significant influence over the associates mentioned
above or that the group has joint control over the joint arrangements mentioned above.
¹ The group’s proportion of ownership in the entity is 49% while its voting right equates to 35%.
² Represents various investments that are not individually material.
52 ANALYSIS oF INVESTMENTS IN SUBSIDIARY CoMpANIES
Banking²
Nedbank (Lesotho) Ltd
Nedbank (Swaziland) Ltd
other companies³
BoE Holdings (pty) Ltd, formerly BoE Holdings Ltd
IBL Asset Finance and Services Ltd
Depfin Investments (pty) Ltd⁴
Nedcor Trade Services Ltd (Mauritius)
Nedgroup Investment 102 Ltd
Nedcor Investments Ltd
peoples Mortgage Ltd
Group
Issued capital
effective holding
2014
rm
2013
Rm
2014
%
2013
%
20
12
2
4
¹
3
6
28
45
20
12
2
4
¹
3
6
28
45
100
65
100
100
100
100
100
100
100
100
65
100
100
100
100
100
100
100
1 Represents amounts less than R1m.
² The banking subsidiary companies are restricted in terms of Basel regulations and prudential requirements with regard to the distributions of funds to their holding company.
³ These entities are free of any restrictions imposed on the distribution of funds, save for compliance with any local regulations.
⁴ The entity is considered to be consolidated structured entity. Put options exist between the group and subscribers of issued preference shares of the entity. These options can be excercised if the entity breaches the
terms of the preference share subscription agreement. The group has not provided financial or any other support to the entity without the contractual obligation to do so. The group has no current intention to provide
financial or other support to the entity without the contractual obligation to do so.
114
51 ANALYSIS oF INVESTMENTS IN pRIVATE EQUITY ASSoCIATES, ASSoCIATE
CoMpANIES AND JoINT ARRANGEMENTS
percentage holding
2014
2013
Measurement
%
50
35
20
35
49
%
50
35
30
20
35
49
method
Fair value
Fair value
Fair value
Fair value
Fair value
Fair value
Century City JV
Erf 7 Sandown (pty) Ltd
Falcon Forest Trading 85 (pty) Ltd
Friedshelf 113 (pty) Ltd
property development
property development
property development
property development
Masingita property Investment Holdings (pty) Ltd
property development
odyssey Developments (pty) Ltd¹
property development
other individually immaterial associates²
private-equity associates (Manufacturing, industrial,
private-equity associates (property investment
leisure and other)
associates)
other
Individually immaterial joint arrangements¹
Various
Various
All investments in associate companies and joint arrangements are unlisted. There are no regulatory constraints, apart from the provisions
of the Companies Act, 71 of 2008 (as amended) that restrict the distribution of funds to the shareholders. Distribution of funds may,
however, be restricted by loan agreements that the entities have entered into. All associates and joint arrangements are considered to be
strategic to the group’s activities.
arrangements listed above.
Unless otherwise stated, all entities are domiciled and incorporated in SA. The group has the same proportion of voting rights as its
proportion of ownership interest, unless stated otherwise and has not incurred any contingent liabilities with regard to the associates or joint
No significant judgement or assumptions were applied in concluding that the group has significant influence over the associates mentioned
above or that the group has joint control over the joint arrangements mentioned above.
¹ The group’s proportion of ownership in the entity is 49% while its voting right equates to 35%.
² Represents various investments that are not individually material.
Acquisition
date
Dec 2010
Jul 2007
Mar 2005
Aug 2002
Aug 2005
Aug 2007
Carrying amount
net indebtedness of loans to/
(from) associates
Dividends received
Group
Year-end
2014
rm
2013
Rm
2014
rm
2013
Rm
2014
rm
2013
Rm
Dec
Feb
Feb
Feb
Feb
Feb
55
63
85
125
57
373
123
235
42
55
57
40
83
83
79
342
125
227
7
5
43
38
49
235
1 270
(4)
55
1 158
1 098
1 691
5
2
43
14
43
242
1 103
5
35
1 492
39
39
17
3
20
Unless otherwise stated, all entities are domiciled in SA. Unless otherwise stated, the financial statements of the subsidiaries used in the
preparation of consolidated financial statements are as of the same date or same period than that of the consolidated financial statements.
Unless otherwise stated, there are no significant restrictions (eg statutory, contractual and regulatory restrictions) on the group’s ability to
access or use the assets and settle the liabilities of the group.
Headline earnings from subsidiaries (after eliminating intercompany transactions):
Aggregate headline earnings attributable to equity holders
Aggregate headline losses attributable to equity holders
2014
rm
8 079
(2)
2013
Rm
7 232
(43)
General information required in terms of the Companies Act, 71 of 2008 (as amended), is detailed in respect of only those subsidiaries
where the financial position or results are material to the group. It is considered that the disclosure in these statements of such information
in respect of the remaining subsidiaries would entail expenses out of proportion to the value to members. other subsidiaries consist of
nominees, property-owning and financial holding companies acquired in the course of lending activities.
Nedbank Group Limited will ensure that, except in the case of political risk, and unless specifically excluded by public notice in a country
where a subsidiary is domiciled, its banking subsidiaries, and its principal non-banking subsidiaries, are able to meet their contractual
liabilities.
115
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
52 ANALYSIS oF INVESTMENTS IN SUBSIDIARY CoMpANIES (continued)
52.1 Material non-controlling interests
The table below provides detail of non-wholly owned subsidiaries of the group that have material non-controlling interests:
Financial position
Total assets
Total liabilities
Accumulated non-controlling interests at the end of the year
Comprehensive income
Income from lending activities
Non-interest revenue
profit from continuing operations
Total comprehensive income
profit allocated to non-controlling interests during the year
Cashflows
Cashflows from/(utilised by) operating activities
Cashflows utilised by investing activities
Cashflows utilised by financing activities
Net increase/(decrease) in cash and cash equivalents
nedbank (Swaziland) ltd
2014
rm
3 596
3 122
165
149
139
97
98
38
62
(8)
(25)
29
2013
Rm
2 845
2 444
136
119
131
112
78
27
(493)
(13)
(23)
(529)
52.2 Significant judgement and assumptions in the assessment of control
No significant judgements and assumptions were used in determining whether the group has control over another entity except for
the following:
Judgements and assumptions applied in concluding that the group has control over another entity:
Securitisation
The group originated and sponsors certain securitisation vehicles and acts in various capacities with regard to these structures. The group
controls these entities and have been consolidating these structures since its inception. These securitisation structures include the following:
Synthesis Funding Ltd (Synthesis), an asset-backed commercial paper (ABCp) programme; invests in long-term rated bonds and offers
capital market funding to SA corporates which is funded through the issuance of short-dated investment-grade commercial paper. The
group acts in various capacities with regard to this vehicle which includes the role of master liquidity facility provider, programme-wide
credit enhancement provider, administrator, dealer, paying and settlement agent, custodian and hedge counterparty. The group is involved
in the day-to-day activities of the vehicle. Although the activities and decisionmaking rights are predetermined and restricted; the group
exercises a significant degree of discretion in its decisionmaking regarding investments, funding and risk management. Industry knowledge
and experience of the group are crucial to successful operation of Synthesis. The group is exposed to variable returns from the entity in the
form of fees and interest income as well as residual income subsequent to certain distributions through the provisioning of credit
enhancement. As a result, the group has concluded that it controls the entity.
other securitisation vehicles consist of GreenHouse Funding (RF) Ltd, Series 1 (GreenHouse), a residential mortgage-backed securitisation
programme, and precinct Funding 1 (RF) Ltd, a commercial mortgage-backed securitisation programme. The activities of these vehicles are
predetermined and restricted in terms of the programme documentation established at its inception. The group does however exercise
some discretion in its decisionmaking which includes the selection and transfer of assets and the management of defaulted assets. Through
the provision of administration services, the interest rate hedge, and credit enhancement; Nedbank Limited has rights to the residual return
of the vehicle. The group has concluded that it controls these entities.
Refer to note 43 for further information on the securitisation activities of the group.
Employee share schemes
Employee share schemes were established by the group (or any of its subsidiaries) in terms of a trust deed for the benefit of its employees
in return for their employment services rendered. Funding is provided by the group or its subsidiaries to acquire shares that are beneficially
held on behalf of the beneficiaries of the trust. The beneficiaries of the trust are specified by group or its subsidiaries. The trustees have
limited rights and act within narrowly defined parameters in terms of the trust deed. The trustees receive limited remuneration (if any) for
their services rendered in terms of the trust. The group has concluded that the trustees merely act in an agent capacity and that the group
has control over the trust.
116
Dr Holsboer Benefit Fund
Nedbank Limited is the founder of the trust. The fund was established in terms of a trust deed for the benefit of employees of Nedbank
Limited. The beneficiaries of the trust include employees, contractors and pensioners as nominated by the trustees in their sole discretion.
The trustees have the right to vest or distribute net income of the trust in their discretion. All trustees are required to act in accordance with
trust deed. The founder, Nedbank Limited, reserves the right to terminate the appointment of any of the trustees. In terms of the trust deed,
the trustees are not entitled to remuneration for their services unless the founder and all the trustees unanimously agree. The group has
concluded that the trustees merely act in an agent capacity and that the group has control over the trust.
Judgements and assumptions applied in concluding that the group does not have control over another entity:
Investment funds
The group acts as fund manager to a number of investment funds. Determining whether the group controls such an investment fund usually
focuses on the assessment of decisionmaking rights as fund manager, the investor’s rights to remove the fund manager and the aggregate
economic interests of the group in the fund in the form of interest held and management fees.
In most instances the group’s decisionmaking authority, in capacity as fund manager, with regard to these funds is regarded to be well-
defined. Discretion is however exercised when decisions regarding the relevant activities of these funds are being made. For all funds
managed by the group, the investors have the right to remove the group as fund manager without cause.
Fees earned by the group, in its capacity as fund manager, are considered to be market related, commensurate with the services provided
and includes only terms, conditions or amounts that are customarily present in arrangements for similar services and level of skills negotiated
on an arm’s length basis.
As a result, the group has concluded that it acts as agent on behalf of the investors in all instances. The group does therefore not control
these funds and has not consolidated these funds.
Investment holding entities
The group provides funding to various investment-holding entities in the form of preference shares. The group’s rights relating to these
investment-holding entities, through the subscription of preference shares, are considered to be protective rather than substantive. As a
result, the group has concluded that it does not have power nor control over these entities.
53 UNCoNSoLIDATED STRUCTURED ENTITIES
The group considers an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls
the entity, to be structured entities. The relevant activities of structured entities are normally directed by means of contractual arrangements
and often have some or all of the following features or attributes:
■ restricted activities;
■ a narrow and well-defined objective;
■ insufficient equity to permit the structured entity to finance its activities without subordinated financial support; and
■ financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches).
However, interests in unconsolidated structured entities that result from typical customer-supplier relationships are not regarded as
exposures that are required to be disclosed in terms of IFRS 12 with specific reference to unconsolidated structured entities.
The group evaluates the nature of its involvement with all unconsolidated structured entities to determine whether it is based on a typical
customer supplier relationship. This assessment includes consideration of the following:
■ the typical operations and business model of the business unit involved;
■ the risk and variability of return the group is exposed to;
■ the purpose and design of the structured entity and/or the instrument the group is exposed to; and
■ the level of subordination of rights and concentration of risk relating to the exposure.
The group has various involvements in and exposures towards unconsolidated structured entities which include:
■ certain investments in exchange-traded funds and securitisation structures;
■ certain funding structures;
■ certain management and fiduciary functions performed in terms of trusts and partnerships; and
■ security SpVs.
Through careful assessment, these involvements and exposure are regarded to be typical customer-supplier relationships and are therefore
not required to be disclosed in terms of IFRS 12.
54 EVENTS AFTER THE REpoRTING pERIoD
Refer to the directors’ report for information on these events.
117
NedbaNk LIMITed annual report NoTES To THE CoNSoLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
55 pREFERENCE SHAREHoLDERS’ ANALYSIS
2 January 2015
1 000 000 000 shares
358 277 491 shares
number of
shareholdings
172
2 353
3 083
432
41
6 081
2
60
58
3 811
32
5
11
86
1 773
35
162
5
41
6 081
13
1
9
3
6 068
6 081
Register date:
Authorised share capital:
Issued share capital:
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
Endowment funds
Individuals
Insurance companies
Investment companies
Medical aid schemes
Mutual funds
Nominees and trusts
other corporations
private companies
public companies
Retirement funds
Total
public/non-public shareholders
Non-public shareholders
Directors and associates of the company
old Mutual Life Assurance Company (South Africa)
Ltd and associates
Nedbank Group Ltd and associates
public shareholders
Total
Beneficial shareholders holding 5% or more
Coronation Fund Managers
Total
Major managers
Coronation Asset Management (pty) Ltd (SA)
Sanlam Investment Management (SA)
Various retail holders (SA)
Investec Asset Management (SA)
STANLIB Asset Management (SA)
Nedgroup private Wealth (pty) Ltd (SA)
Grindrod Asset Management (SA)
outsurance Insurance Company Ltd (SA)
pSG Konsult (SA)
Abax Investments (SA)
Melville Douglas Investment Management (SA)
118
% number of shares
%
2,83
38,69
50,70
7,10
0,68
94 421
14 724 872
102 264 535
102 875 203
138 318 460
0,03
4,11
28,54
28,71
38,61
100,00
358 277 491
100,00
0,03
0,99
0,95
62,67
0,53
0,08
0,18
1,41
29,16
0,58
2,66
0,08
0,68
13
3 628 152
7 005 883
97 329 296
33 583 795
7 208 828
883 649
87 813 188
81 597 594
1 263 914
26 911 145
2 310 100
8 741 934
1,01
1,96
27,17
9,38
2,01
0,25
24,51
22,77
0,35
7,51
0,64
2,44
100,00
358 277 491
100,00
0,21
0,02
0,15
0,05
99,79
14 797 951
158 000
4 640 245
9 999 706
343 479 540
100,00
358 277 491
33 605 476
33 605 476
Dec 2014
% holding
13,30
6,93
6,23
4,24
3,32
2,91
2,63
2,12
1,96
1,95
1,38
number of
shares
47 663 326
24 816 052
22 321 552
15 188 033
11 893 305
10 413 523
9 405 990
7 586 720
7 031 446
7 000 000
4 934 503
4,13
0,04
1,30
2,79
95,87
100,00
9,38
9,38
Dec 2013
% holding
11,81
7,29
6,89
3,38
3,00
2,63
2,16
2,12
2,08
2,01
1,92
CoMpLIANCE WITH IFRS¹ - FINANCIAL STATEMENT NoTES
note number note description
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
pRINCIpAL ACCoUNTING poLICIES
STANDARDS AND INTERpRETATIoNS
KEY ASSUMpTIoNS CoNCERNING THE FUTURE AND KEY
SoURCES oF ESTIMATIoN
CApITAL MANAGEMENT
INTEREST AND SIMILAR INCoME
INTEREST ExpENSE AND SIMILAR CHARGES
NoN-INTEREST REVENUE
opERATING ExpENSES
INDIRECT TAxATIoN
NoN-TRADING AND CApITAL ITEMS
DIRECT TAxATIoN
EARNINGS
DIVIDENDS
CASH AND CASH EQUIVALENTS
oTHER SHoRT-TERM SECURITIES
DERIVATIVE FINANCIAL INSTRUMENTS
GoVERNMENT AND oTHER SECURITIES
LoANS AND ADVANCES
IMpAIRMENT oF LoANS AND ADVANCES
oTHER ASSETS
INVESTMENT SECURITIES
INVESTMENTS IN pRIVATE ASSoCIATES, ASSoCIATE
CoMpANIES AND JoINT ARRANGEMENTS
NoN-CURRENT ASSETS AND LIABILITIES HELD FoR SALE
DEFERRED TAxATIoN
INVESTMENT pRopERTY
pRopERTY AND EQUIpMENT
LoNG-TERM EMpLoYEE BENEFITS
INTANGIBLE ASSETS
SHARE CApITAL
AMoUNTS oWED To DEpoSIToRS
pRoVISIoNS AND oTHER LIABILITIES
LoNG-TERM DEBT INSTRUMENTS
CASHFLoW INFoRMATIoN
CoNSoLIDATED STATEMENT oF FINANCIAL poSITIoN -
CATEGoRIES oF FINANCIAL INSTRUMENTS
FAIR-VALUE MEASUREMENT - FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS DESIGNATED AS AT FAIR VALUE
THRoUGH pRoFIT oR LoSS
oFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
CREDIT ANALYSIS oF oTHER SHoRT-TERM SECURITIES, AND
GoVERNMENT AND oTHER SECURITIES
LIQUIDITY GAp
CoNTRACTUAL MATURITY ANALYSIS FoR FINANCIAL
LIABILITIES
HISToRICAL VALUE AT RISK (99%, oNE-DAY ) BY RISK TYpE
INTEREST RATE REpRICING GAp
SECURITISATIoNS
FoREIGN CURRENCY CoNVERSIoN GUIDE
CoNTINGENT LIABILITIES AND UNDRAWN FACILITIES
CoMMITMENTS
CoLLATERAL
MANAGED FUNDS
SHARE-BASED pAYMENTS
RELATED pARTIES
ANALYSIS oF INVESTMENTS IN pRIVATE EQUITY ASSoCIATES,
ASSoCIATE CoMpANIES AND JoINT ARRANGEMENTS
ANALYSIS oF INVESTMENTS IN SUBSIDIARY CoMpANIES
UNCoNSoLIDATED STRUCTURED ENTITIES
WoRLDCLASS AT MANAGING RISK
IFrS required
IAS² 1
IAS 1 and IAS 8
IAS 1
IAS 1
IAS 18, IAS 32, IAS 39, IFRS 7 and IFRS 13
IAS 18, IAS 32, IAS 39, IFRS 7 and IFRS 13
IAS 18, IAS 20, IAS 32, IAS 39, IFRS 4, IFRS 7, IFRS 8 and
IFRS 13
IAS 1, IAS 19, IFRS 2 and IFRS 8
IAS 1
IAS 1, IAS 16, IAS 36 and IFRS 10
IAS 12
IAS 33
IAS 1 and IAS 10
IAS 1, IAS 7 and IFRS 7
IAS 1, IAS 39, IFRS 7, IFRS 8 and IFRS 13
IAS 32, IAS 39, IFRS 7 and IFRS 13
IAS 1, IAS 32, IAS 39, IFRS 7; IFRS 8 and IFRS 13
IAS 17, IAS 39, IFRS 7, IFRS 8 and IFRS 13
IAS 39, IFRS 7 and IFRS 8
IAS 1, IAS 39, IFRS 7 and IFRS 13
IAS 32, IAS 39, IFRS 7 and IFRS 13
IAS 28, IFRS 11, IFRS 12 and IFRS 13
IFRS 5 and IFRS 13
IAS 12
IAS 40 and IFRS 13
IAS 16, IAS 36 and IFRS 13
IAS 19, IAS 26 and IFRIC³ 14
IAS 38 and IAS 36
IAS 1
IAS 1, IAS 39, IFRS 7, IFRS 8 and IFRS 13
IAS 37, IAS 32, IAS 39, IFRS 7 and IFRS 13
IAS 32, IAS 39, IFRS 7 and IFRS 13
IAS 7
IAS 39 and IFRS 7
IAS 39, IFRS 7 and IFRS 13
IAS 32, IAS 39, IFRS 7 and IFRS 13
IFRS 7, IFRS 13 and IAS 32
IFRS 7
IFRS 7
IFRS 7
IFRS 7
IFRS 7
IAS 39, IFRS 7 and IFRS 13
IAS 21
IAS 37 and IAS 10
IAS 37, IAS 10, IAS 17 and IFRS 7
IFRS 7
IFRS 7 and IFRS 13
IFRS 2
IAS 24
IAS 28, IFRS 11, IFRS 12 and IFRS 13
IAS 27, IFRS 10 and IFRS 12
IFRS 12
IFRS 7 and IFRS 13
¹ International Financial Reporting Standards (IFRS).
² International Accounting Standards (IAS).
³ International Financial Reporting Interpretations Committee (IFRIC).
119
NedbaNk LIMITed annual report REpoRT FRoM Group
reMunerAtIon CoMMIttee
CHAIR
We have, over several years, kept our core remuneration policy and
principles largely consistent. In 2014 we conducted an appropriateness
and fit-for-purpose review for all key elements of our variable
remuneration, including our short-term incentive (STI) and deferral
arrangements, and the structure of our long-term incentives (LTIs). our
STI and deferral arrangements were deemed to meet all of the relevant
governance and design requirements, and therefore remained
unchanged. our LTI arrangements were also found to be fit for purpose.
However, it was decided to increase group and cluster executive
committee (Exco) members’ proportion of LTIs that are subject to
corporate performance targets by including an element for the delivery
of strategic initiatives as agreed by the Group Remuneration Committee
(Remco) from time to time. In line with the objective of increasing the
levels of collaboration within the broader old Mutual Group, and as
indicated in our 2013 Remuneration Report, Africa collaboration has
been selected as the strategic initiative for 2015 LTI issuance, in support
of the target of achieving R1bn of pretax synergies across the old
Mutual Group by the end of 2017. As a result 20% of all LTI awards
made to members of the Group Exco and the cluster excos in 2015 will
be subject to an Africa Collaboration performance condition, which will
be standard across the three old Mutual entities (old Mutual Emerging
Markets, Mutual & Federal and Nedbank). This will not increase the
overall quantum of the LTI awards, but will rather change the proportion
of the awards subject to the various performance conditions. It is
important, however, to note that awards made to Nedbank employees
will be in Nedbank shares and not in old Mutual plc shares, as was
previously contemplated, and will be subject to a minimum amount of
the R1bn synergy target accruing to Nedbank. Details are set out on
page 138 of this Remuneration Report.
Nedbank produced a strong set of results for 2014, which are set out in
other sections of the
integrated report. Given the continued
improvement in our performance, the STI pool earned and approved by
the Remco has continued to grow. In addition, LTI awards continue to
vest, although this vesting has been moderated downwards based on
performance according to the corporate performance targets.
There have been no material changes to our Remuneration policy
following the comprehensive review conducted in 2013. The policy is
set out in full on pages 122 to 125 of the Remuneration Report, and
shareholders will, as required by King III, be requested to vote on this on
a non-binding advisory basis at the annual general meeting on
11 May 2015. I have no reservation in recommending, on behalf of the
Nedbank Group Remuneration Committee, that shareholders vote
positively in this regard.
on pages 122 to 151 we present to our stakeholders the 2014 Nedbank
Group Remuneration Report, containing our Remuneration policy and
details of the implementation and governance of our remuneration
practices during the 2014 financial year.
Executive remuneration and remuneration governance continued to
feature prominently in 2014 and, at an individual level, the focus
remained on executive remuneration (notably that of Chief Executives).
A primary consideration in this regard remains the issue of pay for
sustainable performance.
We set out in detail in this Remuneration Report the processes that we
follow in Nedbank to ensure that our compensation practices are
sustainable and that we reward both short- and long-term performance.
As far as that is concerned, we place a large proportion of executive
compensation at risk through the implementation of deferral of short-
term incentives with appropriate forfeiture provisions, and through
corporate performance
long-term
remuneration.
targets on deferred and
King III and the principles for Sound Compensation practice published
by the Financial Stability Board are the key governance frameworks for
remuneration in banking in SA. The SA Banks Act, 94 of 1990 was,
however, amended in late 2013, setting out in section 64C the specific
requirements that must be met with regard to the establishment and
functioning of remuneration committees in banks. I am pleased to
confirm that Nedbank remains fully compliant with the relevant
regulatory and statutory provisions
remuneration
governance. We are also proud to have been given the Remuneration
Report of the Year award by the South African Reward Association for
our 2013 Remuneration Report.
related
to
Remuneration governance remains a key focus abroad. Measures have
been implemented in European banks to restrict levels of bonus
payments as a multiple of guaranteed pay. In some instances,
alternative remuneration structures have been implemented, which
resulted in increases in fixed remuneration, albeit in the form of
standalone ‘allowances’. These measures continue to be monitored by
the relevant governance authorities to ensure that they do not
circumvent the regulatory intentions, but also to ensure that they do
not
in moral hazard. The
counterargument advanced by banks is that increased regulation in
Europe may reduce the competitiveness of the employment market in
the region, with highly qualified and skilled individuals migrating to
other, less onerous jurisdictions, and that the increase in fixed
remuneration increases business risk and earnings volatility. This
debate will likely continue into the future.
inadvertently
lead to an
increase
It is clear that the regulation and the associated responses serve to
increase, rather than decrease, the complexity of remuneration design.
This will require greater transparency in reporting so that shareholders
and other stakeholders can make informed judgements on the
appropriateness of pay. This issue of transparent and standardised
reporting is also a key issue for SA.
120
In our reportback on remuneration in 2013 the Remco identified several key matters to be considered in 2014. These and the progress made are
set out below:
Issues raised in the 2013
remuneration report
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
Actions taken in 2014
The group’s decision to implement SAp-HCM (along with the finance and procurement modules) as its core
human resources system, supplemented by the SuccessFactors modules on compensation, performance,
talent and learning, resulted in a full review of the approach to performance management to enable the group
to benefit from the best-practice solution in SuccessFactors. This will be rolled out during 2015, for
implementation in the 2016 performance year.
our governance roadshows, which are outlined in more detail online in the integrated report, were very
successful. There were very few material issues raised regarding our Remuneration policy and practices.
Nedbank received the Remuneration Report of the Year award for 2013 by the South African Reward Association
in recognition of the contribution made to reporting on remuneration in a trustworthy and transparent manner.
The Group Exco and the trustees of the two Nedbank Group defined-contribution retirement funds agreed,
following an extensive due-diligence exercise, to the transition of these standalone funds to the old Mutual
SuperFund umbrella fund. This transition took place on 1 January 2015, following a communication process
with members of the funds during the second half of 2014. The Nedgroup Defined-Benefit pension Fund, which
is closed to new members, will remain a standalone fund.
Further work is scheduled for 2015 to review the Nedgroup Medical Aid Scheme.
This arrangement was not implemented in 2014 following extensive engagement in this regard between the
Remco, old Mutual and other stakeholders. It has, however, been decided to increase the proportion of LTIs in
2015 for Group Exco and cluster exco members that are subject to performance targets by including an element
for the delivery of strategic initiatives as agreed by the Remco from time to time. Details are set out on page 129
of this Remuneration Report. This will form part of, and not be in addition to, the overall LTI arrangements.
The Remco continues to function effectively and efficiently. I remain grateful to my fellow Remco members for the way in which they continue to
engage on the important issues related to remuneration.
Mpho Makwana
Group Remuneration Committee Chair
9 March 2015
2015
FoCUS AREAS
In 2015 the committee will focus
on:
■ launching an updated
approach to performance
management in the group;
■ reviewing our variable pay
arrangements; and
■ focusing on fitness for
purpose of our employee
benefit suite.
121
NedbaNk LIMITed annual report REpoRTING BACK oN
reMunerAtIon
in
jurisdictions. These
its various operating
Remuneration governance
The group complies with the relevant remuneration governance codes
include
that apply
groupwide compliance with the Financial Stability Board’s (FSB’s)
principles for Sound Compensation practice. In SA the group complies
with the provisions of King III and the requirements of regulations 39
and 43 of the Banks Act and section 64C of the Banks Amendment 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 internationally,
who provide strategic input and advice on 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 its comprehensive annual Remuneration Report
as part of its overall governance requirements.
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 that 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 the 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.
REMUNERATIoN 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 Nedbank Group Remuneration Policy
The Nedbank Group Remuneration policy (‘the remuneration 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 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’
relativity, sustainability and commercial
encompasses market
sensibility in the allocation and delivery of remuneration.
122
Components of Nedbank’s Total Remuneration Framework
RECoGNITIoN
LoNG-TERM INCENTIVES
EMpLoYEE oWNERSHIp pLAN
Long-term focus,
ownership orientation
GUARANTEED
pACKAGE
Short-term focus,
day-to-day orientation
pERFoRMANCE MANAGEMENT
SpECIAL-
pURpoSE
SHoRT-TERM
ARRANGEMENTS
SHoRT-TERM
INCENTIVES
(INCLUDING
DEFERRAL AND
FoRFEITURE)
Short-to-medium-term focus,
performance orientation
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.
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 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:
In support of remuneration benchmarking there is a robust process of
job profiling and evaluation. This enables consistency in the evaluation
and sizing of roles, and the associated benchmarking of guaranteed-
remuneration levels.
■ 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.
The primary determinant of guaranteed remuneration is market-
relatedness. The group conducts annual benchmarking against
comparable firms in the relevant jurisdictions to assess market
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. Bespoke plans will therefore result in a ‘drawdown’ on the pool.
123
NedbaNk LIMITed annual report REpoRTING BACK oN REMUNERATIoN (continued)
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 risktaking or increase the risk
of moral hazard. Where commission-type arrangements operate (usually
in respect of
income-generating sales roles), appropriate
safeguards are included to mitigate any potential moral hazard.
low-risk
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.
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,
the group has 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 are subject to
forfeiture at the discretion of Group Remco. 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 STI 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 able to receive an award under the respective
plans only once during their tenure with the group.
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 particular country’s economy.
participation in such plans may therefore 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.
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 restricted share plans (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
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.
The group does not award guaranteed bonuses.
■ Where awards are lapsed, there is no replacement compensation
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 BBBEE arrangements and ‘indigenisation’ or ‘localisation’
programmes) and employee subscription arrangements, in terms of
which employees may invest a portion of their after-tax STI in Nedbank
shares, with the possibility of matched shares.
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.
124
■ 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.
REMUNERATIoN REpoRT
The Remuneration policy is enabled and 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. LTI awards made to
executive directors are, from 2014, subject to performance conditions
on 100% of the award, up from 50% in previous award cycles.
With the introduction of the Strategic Initiatives element into our LTI
programme, awards made to qualifying executives in 2015 will now
include specific performance conditions related to African Collaboration
initiatives across the old Mutual Group. Further details of this
arrangement are set out on pages 129 to 138 of this report.
This Remuneration Report sets out the consistent implementation of
the Remuneration policy within the group during 2014, as well as
subsequent events in 2015, where applicable.
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 appropriately and
timeously to changes in this regard. There have also, for the past three
years, been dedicated training sessions, to which all boardmembers are
invited, dealing in depth with the issues of remuneration.
Interaction with regulators
During 2014 the group confirmed to SARB that it continues to comply with
the IFSB principles and the associated implementation standards. The
promulgation of section 64C of the Banks Act, in respect of which the
group confirmed its full compliance and its intention to ensure continued
compliance, was an issue raised by SARB this year. The group also
continues to be fully compliant with regard to its practices relating to the
alignment of remuneration to the long-term risks of the business.
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 met five times during 2014. Details of attendance at the
meetings are set out online in the integrated report.
The CE, Chief operating officer (Coo) and Group Executive: Human
Resources are permanent invitees to Group Remco meetings. However,
none of these attendees are present at 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 24 November 2014.
Group Remco appointed pricewaterhouseCoopers Inc. (pwC) to
conduct an independent review of the group’s Remuneration policy as
well as the implementation of the group’s remuneration practices. No
material issues were raised in this regard. The group is pleased with the
results of the review and will continue to consider ways in which to
improve its remuneration practices.
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.
REMUNERATION GOVERNANCE
Remuneration regulation
Group Remco recognises that, globally, the remuneration environment
remains highly 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’s responsibilities, which are groupwide
in their
application, are set out in the Group Remco Charter. The charter has
been amended and approved to take into account section 64C of the
Banks Act and is available online.
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 2014.
Group Remco membership in 2014 was as follows:
Name
Directorship status
paul Mpho Makwana (Chairman)
Nomavuso patience Mnxasana
Julian Victor Frow Roberts
Malcolm Ian Wyman
Independent non-executive director
Independent non-executive director
Non-executive director
Lead independent non-executive director
Current membership
Current member
Current member
Current member
Current member
125
NedbaNk LIMITed annual report REpoRTING BACK oN REMUNERATIoN (continued)
RoLES AND
ACCoUNTABILITIES
GRoUp REMUNERATIoN
CoMMITTEE
oversight and approval of
Remuneration policy and reward
programmes. Approval of senior
executive remuneration.
GRoUp ExCo
proposal of reward programmes and
structures to Group Remco. oversight
and implementation of approved
remuneration programmes.
GRoUp REWARD AND
pERFoRMANCE
Develop reward strategy and
supporting policies and programmes.
Execution of reward initiatives.
BoArD
Accountable for organisational
governance. Provides mandate to Group
Remco.
GRoUp RISK AND CApITAL
MANAGEMENT CoMMITTEE
oversight and input regarding risk
and remuneration. Works with Group
Remco to ensure appropriate risk
adjustment in remuneration
structures.
INDEpENDENT ADVISERS
Independent advice on best practice,
benchmarking and remuneration
governance issues.
LINE MANAGEMENT
Implementation of reward
programmes, with employees
adhering to reward policies and
processes.
EMpLoYEES
Adherence to reward policies and
processes.
HUMAN RESoURCES
Implementation of reward policy and
strategy with line management
support and advice.
126
Group Remco’s self-assessment, conducted in the last quarter of 2014,
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
proprietary Limited and pwC during 2014.
Group Remco is provided, through the group reward and performance
function, with market-related remuneration information based on a
number of independent remuneration surveys in which we participate.
These include the pwC Remchannel surveys, the Global Remuneration
Solutions/Mercer Top Executive Remuneration Survey, the LMo
Executive Remuneration Survey and a number of smaller niche or
bespoke remuneration surveys.
REMUNERATIoN ELEMENTS:
MATERIAL pRoGRAMMES
The group’s remuneration elements are set out in detail in the Remuneration
policy on pages 122 to 125 of this Remuneration Report. In this section
material remuneration programmes or practices are highlighted.
Total remuneration mix
The Nedbank total remuneration
mix is depicted as follows:
GuArAnteeD
reMunerAtIon
Guaranteed
package
oR
Salary
plus
benefits
Details of the items in the diagram set out below are included in the
Remuneration policy on pages 122 to 125 of this Remuneration Report.
However, in some instances, further details are provided on the pages
that follow to ensure greater understanding of Nedbank’s approach.
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 2014 a total of
9 665 employees were members of the Defined-Contribution pension
Fund and 17 988 employees were members of the Defined-Contribution
provident Fund.
The group has taken a decision to transition both of its defined-
contribution funds into the old Mutual SuperFund, which is an umbrella
fund. This transition was effective 1 January 2015, and is envisaged to
be concluded during the course of the first quarter of 2015.
VArIABle
reMunerAtIon
Short-term incentives
Cash award and
deferral (subject to forfeiture)
Long-term incentives
Matched shares and
LTI awards
We also have the closed Nedgroup Defined-Benefit pension Fund, with
244 active members and 2 967 pensioners at 31 December 2014. The
Nedgroup Defined-Benefit pension Fund is fully funded, with an
actuarial surplus. This fund will remain standalone.
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 78% of active employees participate in the benefit. This
promise is contingent on the employee actually retiring from the bank,
and is not transferable or encashable. The fund is currently fully
provided for.
The postretirement medical aid prefunding reserve has been migrated
to a policy held with old Mutual and is managed by a joint Nedbank/
old Mutual Management Committee to ensure that it continues to
meet its primary purpose of providing a postretirement medical subsidy
for Nedbank retirees.
127
NedbaNk LIMITed annual report REpoRTING BACK oN REMUNERATIoN (continued)
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.
In the income-generating clusters incentive pools are 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), together with
the Rest of Africa Division, are measured against a combination of
performance targets, namely economic profit (Ep), headline earnings (HE)
and a set of non-financial targets. The incentive pool for all central clusters
are based on a combination of group performance relative to the targets in
respect of Ep, HE and cluster-specific non-financial performance scorecards.
The detailed process for setting the STI pools is outlined on page 137 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 to 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 2014 financial year was R2 100m (2013: R1 825m). Furthermore,
in accordance with the provisions of its charter, Group Remco approved
26 individual STI payments (2013: 31) in excess of 200% of Gp in
respect of the 2014 financial year.
Deferral of short-term incentives
STIs above R1m are subject to deferral into the Compulsory Bonus Share
Scheme (CBSS), 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
full period of
36 months. This is addressed in further detail below.
in the scheme
for a
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).
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 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 corporate performance target (CpT). In practice, this
means that where the employee is at the current 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. No
(2013: two) UK-based employees earned STIs in excess of the threshold
for financial year 2014 (payable in 2015).
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
Scheme description
Scheme governance
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.
Number of awards
12 awards (2013:10)
totalling R6,23m (2013:
R2,86m).
Signon bonuses Cash awards made to
DSTI awards
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.
The group does not, as a matter of course, award guaranteed bonuses.
128
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 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.
19 awards (2013: 6)
totalling R16,4m (2013:
R6,1m).
The increase in the number
and value of awards
approved is in relation to a
number of senior and highly
specialist appointments
made in 2014, and the need
to implement specific
retention initiatives in
certain scarce skills
environments.
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 Group (2005) scheme, 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:
■ At least 50% performance shares: restricted shares with CpTs, but with a higher percentage applying for executive directors (100%) and
members of Group Exco and cluster executive committees (60%).
■ Balance as retention shares: restricted shares without CpTs.
All awards made to executive directors are 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 on an exceptional basis 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:
■ At least 50% performance shares: restricted shares with CpTs, but with a higher percentage for executive directors and members of Group
Exco and cluster excos, as set out above.
■ Balance as retention shares: restricted shares without CpTs.
All on-appointment awards made to executive directors (including on appointment to an executive director role) are subject to CpTs on 100% of the
award.
Strategic Initiative element in the nedbank long-term incentive plan
■ It was agreed by the Remuneration Committee that 20% of the total LTI award made to members of Group Exco and cluster excos will be subject
to a broader Strategic Initiative performance condition. In 2015 this will be aligned to the delivery of the combined target of R1bn of pretax
synergies by the end of 2017 across the old Mutual Group and will be standard across all three Africa-based entities in the old Mutual Group.
The award will be delivered in Nedbank shares and will be subject to a stipulated minimum amount of the R170m of the R1bn in synergies accruing
to Nedbank. For executive directors this changes the mix of performance conditions (since they are already subject to 100% CpTs) and for the
remainder of the participants this increases the proportion of LTIs subject to CpTs. LTI awards will be subject to performance conditions on the
following basis in 2015:
Metric
% of award vesting with CpTs
RoE (excl goodwill) vs CoE
Share price vs Fini 15
Strategic Initiative
% of award vesting with no target
Further details of the actual CpTs are set out on page 138 of this Remuneration Report.
Executive
directors
Group and
cluster exco
members
All other
Nedbank
LTIP
participants
40%
40%
20%
–
20%
20%
20%
40%
25%
25%
–
50%
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 pages 128 to 129 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. This is
currently that the return on equity (RoE) (excluding goodwill)
must equal or exceed the cost of equity (CoE) plus 2%
129
NedbaNk LIMITed annual report REpoRTING BACK oN REMUNERATIoN (continued)
Other long-term incentive schemes in operation
phantom Cash-settled restricted Share plan
During 2007 Group Remco approved the phantom Cash-settled Restricted Share Group plan (the Nedbank UK LTIp) for key employees in the UK.
The design principles and structure mirror the Nedbank (2005) Group Employee Share Scheme. From 2015 LTI awards made to employees in the
rest of Africa subsidiaries will be made from the phantom plan to address taxation and exchange control issues that have been identified.
Nedbank Africa subsidiary schemes
There are approved schemes in Nedbank Namibia, Nedbank Swaziland and Nedbank Malawi.
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 at nedbankgroup.co.za.
Corporate performance targets
Vesting of share awards in 2015
Group Remco approved the use of a combination of appropriately
weighted
internal absolute and external relative CpTs for the
performance shares awarded in 2014, which have remained unchanged
since these targets were originally set in 2010. The details of these
targets are set out on page 138 of this Remuneration Report. The
introduction of the Strategic Initiative element into the plan will change
the proportion of awards subject to CpTs, as set out on page 129 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.
Nedbank Group issued restricted shares in March and August 2012, 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 37,9%
of the award. In 2012 the same vesting arrangements applied in respect of
the awards issued to all employees who participate in the scheme with the
increased element of the LTI having CpTs for executive directors only
being introduced in 2014. Where necessary, in the case of executive
directors and the Company Secretary, the necessary Securities Exchange
News Service (SENS) announcements were issued at the prescribed
times in this regard.
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
New awards during 2014
Black Executive Trust
Black Management Scheme
Evergreen Trust1
Broad-based Scheme
Total beneficiaries
at 31 December 2014
42 (2013:53)
680 (2013:1038)
0
0
Total number of shares
at 31 December 2014
1 109 967
2 690 516
923 342
0 (2013:1 123) 4 788 (once-off awards are made)
Fully vested on
27 July 2010
508
318 (held by a beneficiary)
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 may be 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 2014.
Empowerment or ‘indigenisation’ schemes were approved during 2013
for the group’s subsidiaries in Lesotho, Malawi and Zimbabwe. These
are currently 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 2014
a total of 68% of our employees constituted the bargaining unit. In April
2014 a total pool of 8,1% of the guaranteed-remuneration bill for
employees in the bargaining unit was made available for annual increases
and approximately 5,5% and 5% for the non-bargaining unit and
executives respectively. The minimum Gp for permanent, fulltime
employees in SA was increased by 9,1% to R120 000 per annum.
Collective bargaining arrangements also exist in our Rest of Africa
subsidiaries in Lesotho, Namibia, Swaziland and Zimbabwe. Care is
taken that salary increase settlements in respect of these are
appropriate within the context of local market and economic conditions.
ExECUTIVE DIRECToRS AND
pRESCRIBED oFFICERS
Prescribed officers
The managing executives of the four frontline, income-generating
clusters are included in the disclosures set out on the next page. The
board has approved the executives to be regarded as prescribed officers.
During 2014 Ingrid Johnson ceased to be a prescribed officer on 30 June
and philip Wessels was appointed as a prescribed officer as of 1 August.
Increase in guaranteed package
The remuneration for the CE, executive directors and prescribed
officers are adjusted with effect from 1 April 2015. Increases for
executive directors and prescribed officers take into account market
benchmarks, performance and remuneration levels relative to those of
peers. There is 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.
130
The following adjustments to Gp were approved by Group Remco for implementation on 1 April 2015 (unless otherwise indicated):
Mike Brown
Graham Dempster
Raisibe Morathi
Ingrid Johnson1
Brian Kennedy
Dave Macready
Mfundo Nkhulu2
philip Wessels3
* Audited
*Guaranteed package
Yoy movement
New GP
effective
April 2015
(R000)
GP at
April 2014
(R000)
GP at
April 2013
2014–2015
% change
2013–2014
% change
7 500
5 250
4 200
4 200
3 940
5 000
4 650
7 200
5 000
3 900
4 650
4 000
3 750
3 750
6 600
4 435
3 570
4 200
3 780
3 300
3 500
4,2
5,0
7,7
5,0
5,1
33,0
9,1
12,7
9,2
10,7
5,8
13,6
7,1
1 Ingrid Johnson joined Old Mutual plc on 1 July 2014.
2 New GP, effective 1 January 2015, to coincide with appointment as Chief Operating Officer and to the board. No April 2015 increase applied.
3 New GP, effective 1 August 2014, to coincide with appointment as Group Managing Executive, Retail and Business Banking. No increase applied in April 2015.
The 2014 increases to Gp were informed by an extensive role evaluation
and multiple remuneration benchmarking exercises, including that
conducted with GRS/Mercer SA in respect of each individual executive
director and prescribed officer. This alignment to market has ensured
that we were appropriately placed in 2015, necessitating only standard
adjustments to ensure Gp levels did not lag.
Appointment increases were also approved for those appointed to new
roles on Group Exco, with the result that no April 2015 increase will apply for
these members.
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:
Chief Executive
Executive directors
prescribed officers
Notice
period
Retirement
age
12 months
6 months
1 to 3 months
60
60
60
New appointments to Group Exco will be placed on a standard six-
month notice period.
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.
Ingrid Johnson moved from Nedbank to old Mutual plc as the Group
Finance Director. It was agreed that she would be granted eligible-
leaver status for all historic LTI awards, except the award made in
March 2014, which was forfeited in full. Eligible-leaver treatment was
also approved in respect of all deferred STI awards not yet released
from forfeiture. All awards will remain subject to the relevant rules in
this regard, with no early vesting applying, other than in the case of
death.
Short-term incentive scheme targets
STI amounts awarded for 2014 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.
A summary of our 2014 financial and non-financial performance can be
found online in the integrated report.
131
NedbaNk LIMITed annual report REpoRTING BACK oN REMUNERATIoN (continued)
The dimensions used to measure individual performance were:
Theme
Broad objectives
Financial and business
Delivering sustainable financial outperformance.
Client and relationships
Management and internal
processes
organisational learning,
leadership and transformation
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.
Linkage to strategic focus areas
optimise to invest.
Strategic portfolio tilt.
pan-African banking network.
Client-centred innovation.
Grow transactional banking franchise.
pan-African banking network.
Strategic portfolio tilt.
optimise to invest.
For more information on progress made on the group’s strategic focus areas refer to our integrated report online.
These are broadly consistent with the dimensions applied in 2013, 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:
Ontarget
STI
% of GP
Maximum
target STI
% of GP
% of GP achieved
for group and
cluster financial
measures
% of GP achieved
for individual
performance
and based
on discretion
executive directors
Mike Brown
Graham Dempster
Raisibe Morathi
prescribed officers
Brian Kennedy
Dave Macready
Mfundo Nkuhlu
A
150
150
150
250
150
150
250
250
250
400
250
250
B
162
162
162
283
155
158
philip Wessels*
(Rounded)
* Calculation for Philip Wessels is based on a blend of his GP levels, given his appointment as Group Managing Executive: Retail and Business Banking in August 2014.
250
150
162
C
32
48
37
117
38
62
36
Final STI
as % of GP
D=B+C
Final STI
as % of
ontarget
STI
E=D/A
194
210
199
400
193
220
198
129
140
133
160
129
147
132
132
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:
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
The CE and outgoing Coo have already reached the required holding level, and have maintained compliance with the requirements.
ToTAL REMUNERATIoN oF ExECUTIVE DIRECToRS AND pRESCRIBED oFFICERS
(AUDITED*)
Executive
directors
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
made in the financial year
(face value at award)
total direct remuneration3
other payments4
Mike Brown*
Graham Dempster*
Raisibe Morathi*
2014
6 056
130
864
7 050
8 000
2013
5 614
118
800
6 532
7 000
7 000
15 000
22 050
6 000
13 000
19 532
%
change
7,9
15,4
12,9
2014
3 862
141
855
4 858
5 750
4 750
10 500
15 358
13 000
35 050
13 000
32 532
8 750
24 108
7,7
%
change
10,9
18,0
15,6
6,1
12,0
2014
3 177
91
550
3 818
4 375
3 375
7 750
11 568
2013
2 953
142
432
3 527
3 950
2 950
6 900
10 427
7 000
18 568
7 000
17 427
%
change
8,2
12,3
10,9
6,5
2013
3 521
129
732
4 382
4 950
3 950
8 900
13 282
8 250
21 532
21
133
NedbaNk LIMITed annual report REpoRTING BACK oN REMUNERATIoN (continued)
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 made in the
financial year (face value
at award)10
total direct remuneration3
other payments4
Ingrid Johnson5*
Brian Kennedy*
Dave Macready*
Philip Wessels6*
Mfundo Nkuhlu*
%
change
June
2014
1 846
40
333
2 219
2 219
2 219
2013
3 462
63
625
4 150
4 250
3 250
7 500
11 650
10 00011
21 650
2014
3 346
323
276
3 945
8 500
7 500
16 000
19 945
9 5009
29 445
2013
3 381
93
261
3 735
7 000
6 000
13 000
16 735
7 000
23 735
%
change
5,6
23,1
19,2
35,7
24,0
%
change
2013
%
change
2014
2 926
164
547
3 637
4 250
3 250
7 500
11 137
6 500
17 637
2013
2 573
166
485
3 224
4 000
3 000
7 000
10 224
6 750
16 974
2014
1 775
55
144
1 974
4 500
3 500
8 000
9 974
12,8
7,1
8,9
(3,7)
3,9
10 5007
20 474
2014
3 124
112
452
3 688
4 625
3 625
8 250
11 938
11 7508
23 688
2013
2 931
102
423
3 456
4 250
3 250
7 500
10 956
8 500
19 456
%
change
6,7
10,0
9,0
38,2
21,8
* Audited
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 corporate performance target, and the amount remaining invested 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 in the financial year.
4 Other payments are typically non-recurring payments and include leave pay and special payments, but excludes gains from vesting share awards, which are set out in the table on pages 144 to 151 of this report.
5 Ingrid Johnson joined Old Mutual plc on 1 July 2014. Payments reflect part-year of service.
6 Philip Wessels became a prescribed officer on 1 August 2014. Guaranteed remuneration payments are prorated to reflect this. Variable remuneration (STI and LTI) is reported on a full-year basis.
7 R5 000 000 of this award was awarded in November 2014, to coincide with Mr Wessels’ appointment as Group Managing Executive: Retail and Business Banking. This portion of the award will apply in respect of the 2014–2016
financial years.
8 R5 000 000 of this award is an on-appointment award to coincide with Mr Nkuhlu’s appointment as COO.
9 R4 000 000 of this award is an on-appointment award to coincide with Mr Kennedy’s appointment as Group Managing Executive: Corporate and Investment Banking.
10 Awards listed under 2014 were granted in March 2015 and apply in respect of the 2015–2017 financial years. Awards listed under 2013 were granted in March 2014 and apply in respect of the 2014–2016 financial years.
11 The R10 000 000 award was forfeited in full by Ingrid Johnson upon her joining Old Mutual Plc.
134
Ingrid Johnson5*
Brian Kennedy*
Dave Macready*
Philip Wessels6*
Mfundo Nkuhlu*
2014
2 926
164
547
3 637
4 250
3 250
7 500
11 137
6 500
17 637
2013
2 573
166
485
3 224
4 000
3 000
7 000
10 224
6 750
16 974
%
change
12,8
7,1
8,9
2014
1 775
55
144
1 974
4 500
3 500
8 000
9 974
(3,7)
3,9
10 5007
20 474
2013
%
change
2014
3 124
112
452
3 688
4 625
3 625
8 250
11 938
11 7508
23 688
2013
2 931
102
423
3 456
4 250
3 250
7 500
10 956
8 500
19 456
%
change
6,7
10,0
9,0
38,2
21,8
Prescribed
Officers
R000
Cash portion of package
other benefits
Defined-contribution retirement fund
Guaranteed remuneration
Cash performance incentive
Deferred performance incentive (delivered in
Value of share-based awards made in the
shares)
total StI1
total remuneration2
financial year (face value
at award)10
total direct remuneration3
other payments4
* Audited
scheme for 36 months.
%
change
June
2014
1 846
40
333
2 219
2 219
2 219
2013
3 462
63
625
4 150
4 250
3 250
7 500
11 650
10 00011
21 650
2014
3 346
323
276
3 945
8 500
7 500
16 000
19 945
9 5009
29 445
2013
3 381
93
261
3 735
7 000
6 000
13 000
16 735
7 000
23 735
%
change
5,6
23,1
19,2
35,7
24,0
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 corporate performance target, and the amount remaining invested in the
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 in the financial year.
4 Other payments are typically non-recurring payments and include leave pay and special payments, but excludes gains from vesting share awards, which are set out in the table on pages 144 to 151 of this report.
5 Ingrid Johnson joined Old Mutual plc on 1 July 2014. Payments reflect part-year of service.
6 Philip Wessels became a prescribed officer on 1 August 2014. Guaranteed remuneration payments are prorated to reflect this. Variable remuneration (STI and LTI) is reported on a full-year basis.
7 R5 000 000 of this award was awarded in November 2014, to coincide with Mr Wessels’ appointment as Group Managing Executive: Retail and Business Banking. This portion of the award will apply in respect of the 2014–2016
financial years.
8 R5 000 000 of this award is an on-appointment award to coincide with Mr Nkuhlu’s appointment as COO.
9 R4 000 000 of this award is an on-appointment award to coincide with Mr Kennedy’s appointment as Group Managing Executive: Corporate and Investment Banking.
10 Awards listed under 2014 were granted in March 2015 and apply in respect of the 2015–2017 financial years. Awards listed under 2013 were granted in March 2014 and apply in respect of the 2014–2016 financial years.
11 The R10 000 000 award was forfeited in full by Ingrid Johnson upon her joining Old Mutual Plc.
135
NedbaNk LIMITed annual report
REpoRTING 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.
RISK AND REMUNERATIoN
We have an integrated process of managing the relationship between
risk and remuneration. The board has ensured that there is cooperation
between Group Remco and the GRCMC to ensure appropriate
consideration of
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.
the overall
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 risktaking 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 page 137.
■ Group Remco approves an ontarget STI pool at the beginning of
the year. At year-end 50% of the overall group pool is based on
performance versus headline earnings targets and 50% 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 ERMF.
■ These mechanical calculations and adjustments (which include the
application, where appropriate, of a group-level non-financial
modifier) are presented to Group Remco (tasked with assisting the
board), 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.
136
■ Analysts in Nedbank Capital, since their STIs are predominantly
determined using Financial Mail-published ratings.
■ participants in the private-equity ‘locked box’ remuneration
scheme, 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.
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.
The current STI scheme was implemented in 2009 and ensures a
balanced approach to the determination of the STI pool.
To avoid the consequences of inappropriate performance metrics, which
include extended periods in which no LTI vesting takes place, awards made
from 2010 onwards are subject 50% to performance conditions and 50%
to time-based vesting. For members of Group Exco and cluster excos this
will change to 60% of the total award being subject to performance
conditions. All LTI awards made to executive directors are subject to
performance conditions on 100% of the award. Changes that will apply
from 2015 in terms of the applicable proportionality of the CpTs are set out
on page 129 of this Remuneration Report.
Managing the franchise risk inherent in reward
programmes
inappropriate performance metrics on reward
The
impact of
is
programmes has a material franchise risk
exacerbated when deferred or LTI remuneration lapses, in spite of
highly competitive business results, shareholder returns or share price
performance. 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).
implication. This
It is a key principle of our Remuneration policy that there should be
appropriate sharing of value among stakeholders. Therefore, while
employees should not suffer material disadvantage or prejudice
because of remuneration design issues, we are cognisant of the fact
that remuneration programmes should equally not be designed to
favour or benefit employees at the expense of other stakeholders.
Key considerations regarding the ongoing appropriateness of our LTI
scheme includes:
■ 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.
Linking performance and reward
The annual STI process is indicated in the diagram below, which describes the process of STI pool creation and
distribution based on individual performance and discretion, using both quantitative and qualitative steps in the process.
quAntItAtIVe ApproACH StepS
quAlItAtIVe ApproACH StepS
oNE
FoUR
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.
Bonus pool adjustments
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.
TWO
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.
THREE
Balanced scorecard
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.
FIVE
Individual bonus proposals
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 individu-
ally 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.
137
NedbaNk LIMITed annual report REpoRTING BACK oN REMUNERATIoN (continued)
■ 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 made only 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 participants. 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.
■ Malus provisions are in place in respect of deferred STI awards to
enable mitigation of inappropriate risktaking and 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 the 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 at least
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 2014 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 128 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). From 2015 onwards the Strategic Initiatives element outlined in
this report will be included in the LTI arrangements.
The targets used for awards made from 2015 onwards are as follows:
■ For the RoE (excluding goodwill) versus CoE target, 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 based on RoE (excluding goodwill):
COE
+0% or worse
0%
COE
COE
COE
+1,25%
+2,5%
+3,75%
COE
+5%
25%
50%
75%
100%
COE
+6%
110%
COE
COE
+7% +8% or better
120%
130%
■ For the Nedbank share versus FIN 15 Index, 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 starting and end values of the Nedbank share price 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 based on share price relative to the Fini 15 Index:
Fini 15
-20% or worse
0%
Fini 15
Fini 15
Fini 15
Fini 15
Fini 15
Fini 15
Fini 15
-15%
25%
-10%
50%
-5%
75%
100%
+10%
110%
+20% +30% or better
120%
130%
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.
■ The Strategic Initiatives element in respect of awards to be made in 2015 has been aligned to an African Collaboration target which will be
standard across the old Mutual Group. The performance conditions set out below will be applicable:
A single measure of the run rate on benefits realised in regard to Africa Collaboration will be used as the CpT for the Strategic Initiatives component
of the 2015 LTI awards. This target has been selected in support of achieving a target of R1bn pretax synergies across the old Mutual Group by the
end of 2017. The target will be evaluated on a run rate basis at the end of 2017. This will be as follows:
Total Africa Collaboration synergy benefit (applicable to LTI awards in 2015 vesting in 2018)
Total benefits realised
Africa Collaboration Synergy Target (Rm)
% of this portion of the award vesting
Linear interpolation will apply between the points in the above table.
138
Minimum
Target Maximum
600
0%
1 000
100%
1 200
130%
The combined vesting percentage, based on achievement relative to
the target, will be applied to units vesting in March and August 2018.
This is consistent with the evaluation time horizons of both current CpT
metrics outlined above.
The evaluation of the total synergies achieved is, however, subject to a
precondition that Nedbank achieves benefits of at least R170m. Should
Nedbank not achieve benefits equal to or better than this threshold,
this portion of the award will not vest, irrespective of the total synergies
achieved.
Release from forfeiture of short-term incentive
deferral
The deferral and release from forfeiture process is described on
page 128 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,
irregularities or
at the sole discretion of the board, material
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
by the board if deemed necessary.
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 2014 (and comparative 2013)
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 2013.
For 2014 a total of 48 (2013: 41) individuals were in roles classified as senior
managers and a further 32 (2013: 35) were in roles classified as material
risk-takers. There was, however, some movement within the categories and
the actual individuals for whom amounts are reported may therefore be
different from those in the prior year. In some instances amounts may also
be prorated due to part-year service in designated roles.
Total value of remuneration in the 2014 financial year1
unrestricted
Deferred
unrestricted
Deferred
2014
Senior managers
Material risk-takers
Fixed remuneration (Rm)
Variable remuneration – cash award (Rm)
Variable remuneration – deferred performance incentive (Rm)
Variable remuneration – long-term incentive awards (Rm)
116,2
122,3
total 2014 remuneration (unrestricted and deferred remuneration) (rm)
238,5
total number of employees
Value of outstanding deferred remuneration at
31 December 2014
Compulsory bonus share scheme (Rm)
Restricted share scheme (Rm)
total deferred remuneration outstanding (rm)
Value of deferred remuneration paid out during 2014 (rm)
Value of deferred remuneration forfeited during 20142 (rm)
71,0
55,0
126,0
80,3
166,0
246,3
48
27,0
47,0
74,0
32
Senior
managers
Material
risk-takers
130,2
543,3
673,5
180,8
11,7
40,2
157,0
197,2
67,0
4,6
139
NedbaNk LIMITed annual report REpoRTING BACK oN REMUNERATIoN (continued)
Total value of remuneration in the 2013 financial year1
Unrestricted
Deferred
Unrestricted
Deferred
2013
Senior managers
Material risk-takers
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
64,4
136,9
201,3
41
71,5
51,8
123,3
21,6
37,6
59,2
35
Value of outstanding deferred remuneration at 31 December 20131
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)
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.
Senior
managers
Material
risk-takers
86,7
468,1
554,8
180,2
27,0
25,6
143,7
169,3
60,3
8,0
Remuneration subject to adjustment in 2014
The total amount of outstanding deferred remuneration exposed to after explicit and/or implicit adjustments is indicated in the following table:
Year
Fy2014
FY2013
Amount
r2 575m1
R2 347m1
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 after explicit adjustments (adjustments as a consequence of non-fulfilment of
specified performance conditions) is indicated in the following table:
Year
Fy2014
FY2013
Amount
r59,1m1
R97,1m1
Value of RSp awards lapsed due to non-fulfilment or partial fulfilment of CpT conditions
1 Based on the share price at the scheduled vesting date.
The total amount of clawbacks of reductions during the financial year due to after implicit adjustments (adjustments as a consequence of specific
clawback decisions, either based on individual or group considerations) is indicated in the following table:
Year
Fy2014
FY2013
Amount
r0m No forfeitures or clawbacks were applied in the normal course.
R0m
Remuneration of risk and compliance specialists
Consistent with good corporate governance and the requirements of
the various
regulations dealing with
international
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.
local and
The remuneration of senior risk and compliance specialists is not
determined within the relevant business unit alone. Initial proposals are
made by the business unit management; however, Group Exco members
with overall accountability for the specific control function (the Chief Risk
officer and the Chief Governance and Compliance officer) have scope to
influence the performance and remuneration outcomes for senior
employees within the respective control functions. The final outcomes are
presented to Group Remco, thereby providing an addition layer of oversight.
This ensures appropriate independence in setting remuneration for the
applicable senior control function employees.
140
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
1 For the purpose of this disclosure, severance payments mean payments that exceed the bank’s contractual redundancy payment.
2014
rm
–
6,23
2,12
n
24 636
–
12
5
2013
Rm
2,86
3,73
N
23 706
–
10
7
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 first
annual general meeting after the end of this period.
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 Group Directors’
Affairs Committee, which is currently chaired by the Group Chairman.
Neither the Group Chairman nor boardmembers receive any
performance-related pay or any benefits.
Non-executive directors’ remuneration for the years ended 31 December 2014 and 31 December 2013 was as follows:
NoN-ExECUTIVE DIRECToRS’ REMUNERATIoN (AUDITED*)
Termination
date
Committee
fees
Board fees
Note
David Adomakoh
Tom Boardman
Thenjiwe Chikane
Brian Dames
Mustaq Enus-Brey
Ian Gladman
paul Hanratty
Don Hope
Reuel Khoza
Mpho Makwana
Mantsika Matooane
Nomavuso Mnxasana
Joel Netshitenzhe
Julian Roberts
Gloria Serobe
Malcolm Wyman
total
August 2013
June 2013
3, 3a
5, 5a, 5b
8
6, 6a
9
7, 9
1
4
2
9
307
986
191
355
355
152
4 350
355
233
355
355
355
355
355
53
780
110
555
327
16
651
53
429
206
164
391
921
9 059
4 656
1 Mpho Makwana was appointed as a member of the Group Directors’ Affairs Committee on 1 January 2014.
2 Joel Netshitenzhe was appointed as a member of the Group IT Committee on 17 January 2014.
3 David Adomakoh was appointed as a director of Nedbank Group Limited and Nedbank Limited on 21 February 2014.
3a David Adomakoh was appointed as a member of the Group Transformation, Social and Ethics Committee on 13 May 2014.
4 Mantsika Matooane was appointed as a director of Nedbank Limited and Nedbank Group Limited, and a member of the Group IT Committee on 15 May 2014.
5 Tom Boardman was appointed as a member of the Group Audit Committee on 13 May 2014.
5a Tom Boardman resigned as a member of the Group Transformation, Social and Ethics Committee on 13 May 2014.
5b Tom Boardman sits on the board of Nedbank Private Wealth (Isle of Man) Ltd. His board fees are therefore inclusive of the Nedbank Private Wealth (Isle of Man) Ltd fees.
6 Brian Dames was appointed as a director of Nedbank Limited and Nedbank Group Limited on 30 June 2014.
6a Brian Dames was appointed as a member of the Group Credit and Group IT Committees on 30 July 2014.
7 Paul Hanratty was appointed as a director of Nedbank Limited and Nedbank Group Limited on 8 August 2014.
8 Thenjiwe Chikane resigned from the Nedbank Limited and Nedbank Group Limited and board committees on 13 August 2013.
9 Fees for Julian Roberts, Paul Hanratty and Ian Gladman were paid to Old Mutual (SA) Ltd.
*2014
(r000)
360
1 766
301
910
682
168
4 350
1 006
286
784
561
519
746
1 276
13 715
2013
(R000)
933
617
820
611
273
4 100
661
703
448
460
686
1 099
11 411
141
NedbaNk LIMITed annual report REpoRTING BACK oN REMUNERATIoN (continued)
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 Mike Brown and Julian
Roberts, evaluated the respective committee fees from a number of
perspectives, including peer group comparisons, effective rates per
committee and year-on-year increases.
have been recommended for the Group Audit Committee, GRCMC,
Group Credit Committee, the Remuneration Committee and the
Directors Affairs Committee. These increases are proposed to ensure
that
for these committees remain appropriately market
competitive.
fees
The Lead Independent Director will chair the DAC from 11 May 2015
and therefore a Chairman’s fee for this Committee has been proposed
at twice the member fee. This role had previously been fulfilled by the
Group Chairman with no additional fee being applicable.
The proposed increases to board fees represent a total increase in the
cost of operating the board of 7,6%.
Increases to the Chairman’s fee, board fees and several committees
have been proposed at between 5,6% and 6,6%. Special increases
The board and committee fees proposed for non-executive directors
and for committee membership are as follows:
NoN-ExECUTIVE DIRECToRS’ REMUNERATIoN (AUDITED)
2015 (R)
Proposed
2014
(r)
Boards
Chairman of the board1
Lead Independent Non-executive 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 7,6%.
3 The Lead Independent Director will chair the Group Directors’ Affairs Committee from 11 May 2015.
4 750 000
4 500 000
40% of board fee
40% of board fee
220 555
184 525
206 900
173 100
562 500
225 000
55 000
27 500
312 500
125 000
387 500
155 000
475 000
190 000
500 000
200 000
52 000
26 000
275 000
110 000
350 000
140 000
437 500
175 000
%2
5,6
6,6
6,6
12,5
12,5
5,8
5,8
13,6
13,6
10,7
10,7
8,6
8,6
140 0003
part of Group
Chairman’s fees
70 000
61 000
14,8
180 000
90 000
180 000
90 000
170 000
85 000
170 000
85 000
5,9
5,9
5,9
5,9
The above increases are effective from 1 July 2015, subject to shareholders’ approval at the 11 May 2015 annual general meeting.
142
DIRECToRS’ INTERESTS (AUDITED)
At 31 December 2014 the directors’ interests in ordinary shares in Nedbank Group Limited and preference shares in Nedbank Limited were as
follows:
number of shares
David Adomakoh
Tom Boardman
Tom Boardman (preference shares)
Mike Brown
Brian Dames
Graham Dempster
Mustaq Enus-Brey
Ian Gladman
paul Hanratty
Reuel Khoza
Mpho Makwana
Mantsika Matooane
Nomavuso Mnxasana
Raisibe Morathi
Joel Netshitenzhe
Julian Roberts
Gloria Serobe
Malcolm Wyman
total ordinary shares
total preference shares
Beneficial
direct
2014
Beneficial
direct
2013
Beneficial
indirect
2014
Beneficial
indirect
2013
4 012
4 012
55 049
55 049
17 822
17 822
18 593
158 000
334 552
137 515
2 113
28 593
243 000
288 108
134 273
2 113
7 800
7 800
6 974
6 974
176
20 023
12 615
11 620
191 314
11 620
160 887
104 882
97 298
702 681
158 000
632 568
243 000
143
NedbaNk LIMITed annual report REpoRTING BACK oN REMUNERATIoN (continued)
SHARE-BASED pAYMENTS To ExECUTIVE DIRECToRS AND pRESCRIBED
oFFICERS (AUDITED)
payments from prior years’ deferred bonuses, LTIs and outstanding share plan awards, including participation in the group’s empowerment
arrangements:
Number
Number
of
of
restricted
restricted
Closing balance as at
31 December 2014
Dividends
Total
value of
dividends
Number
5Notional
paid in
of
20 071
23 357
3 286 2011/03/07
2011/03/08
128,44
128,44
215,77
215,77
4 330 648
(709 091)
5 039 740
Opening balance at 1 January 2014
Awards made during 2014
Awards vesting/lapsing during 2014
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
shares/
options
released
shares/
options
Date of
issue/
lapsed
inception
Issue
price
(R)
Vesting/
Value
value of
respect of
restricted
exercise
gained on
(R)
date
vesting
loss on
lapsing
all plans7
R
shares/
options
Market
price at
vesting
End of
perfor-
mance
period
Final
vesting/
exercise
date
23 357
23 3572
32 431
32 4312
28 962
28 9622
2011/03/07
2011/03/08
2012/03/07
2012/03/08
2013/03/07
2013/03/08
128,44
128,44
161,88
161,88
189,90
189,90
2014/03/08
2014/03/09
2015/03/08
2015/03/09
2016/03/08
2016/03/09
10 584
15 192
16 099
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
own Shares
own Shares
own Shares
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
15 571
15 571
27 798
27 798
18 430
18 430
2011/03/07
2011/03/082
2012/03/07
2012/03/082
2013/03/07
2013/03/082
128,44
128,44
161,88
161,88
189,90
189,90
2014/03/08
2014/03/09
2015/03/08
2015/03/09
2016/03/08
2016/03/09
5 292
10 477
10 426
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
own Shares
own Shares
own Shares
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
62 200
2014/03/06
209,00
2017/03/07
10 584
2014/04/01
222,50
2014/04/01
21 1683
2011/03/31
141,72
222,50 2014/04/01
4 709 880
16 141
2014/03/31
223,03
2017/04/01
2 116
2014/04/01
222,50
2014/04/01
2 1163
2014/04/01
141,72
222,50 2014/04/01
470 810
own Shares
2014/03/31
223,03
2017/04/01
13 380
15 571
2 191 2011/03/07
2011/03/08
128,44
128,44
215,77
215,77
2 887 037
3 359 755
(472 717)
14 551 078
(709 091)
2 515 594
2 515 594
39 472
2014/03/06
209,00
2017/03/07
5 292
2014/04/01
222,50
2014/04/01
10 5843
2011/03/31
141,72
222,50 2014/04/01
2 354 940
10 626
2014/03/31
223,03
2017/04/01
2 116
2014/04/01
222,50
2014/04/01
2 1163
2014/04/01
141,72
222,50 2014/04/01
470 810
own Shares
2014/04/01
223,03
2017/04/02
9 072 542
(472 717)
1 604 085
1 604 085
32 431 2014/12/31 2015/03/08
32 431 2014/12/31 2015/03/09
28 962 2015/12/31 2016/03/08
28 962 2015/12/31 2016/03/09
62 200 2016/12/31 2017/03/07
15 192 2014/12/31 2015/04/01
16 099 2015/12/31 2016/04/01
16 141 2016/12/31 2017/04/01
27 798 2014/12/31 2015/03/08
27 798 2014/12/31 2015/03/09
18 430 2015/12/31 2016/03/08
18 430 2015/12/31 2016/03/09
39 472 2016/12/31 2017/03/07
10 477 2014/12/31 2015/04/01
10 426 2015/12/31 2016/04/01
10 626 2016/12/31 2017/04/01
Executive directors
Mike Brown
Nedbank Restricted Shares
Compulsory Bonus Share
Scheme1
Voluntary Bonus Share
Scheme4
Total value of dividends
total
Graham Dempster
Nedbank Restricted Shares
Compulsory Bonus Share
Scheme1
Voluntary Bonus Share
Scheme4
Total value of dividends
total
144
SHARE-BASED pAYMENTS To ExECUTIVE DIRECToRS AND pRESCRIBED
oFFICERS (AUDITED)
arrangements:
payments from prior years’ deferred bonuses, LTIs and outstanding share plan awards, including participation in the group’s empowerment
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
23 357
23 3572
32 431
32 4312
28 962
28 9622
2011/03/07
2011/03/08
2012/03/07
2012/03/08
2013/03/07
2013/03/08
128,44
128,44
161,88
161,88
189,90
189,90
2014/03/08
2014/03/09
2015/03/08
2015/03/09
2016/03/08
2016/03/09
10 584
15 192
16 099
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
own Shares
own Shares
own Shares
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
15 571
15 571
27 798
27 798
18 430
18 430
2011/03/07
2011/03/082
2012/03/07
2012/03/082
2013/03/07
2013/03/082
128,44
128,44
161,88
161,88
189,90
189,90
2014/03/08
2014/03/09
2015/03/08
2015/03/09
2016/03/08
2016/03/09
5 292
10 477
10 426
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
own Shares
own Shares
own Shares
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
62 200
2014/03/06
209,00
2017/03/07
16 141
2014/03/31
223,03
2017/04/01
own Shares
2014/03/31
223,03
2017/04/01
39 472
2014/03/06
209,00
2017/03/07
10 626
2014/03/31
223,03
2017/04/01
own Shares
2014/04/01
223,03
2017/04/02
Executive directors
Mike Brown
Nedbank Restricted Shares
Compulsory Bonus Share
Scheme1
Voluntary Bonus Share
Scheme4
Total value of dividends
total
Graham Dempster
Nedbank Restricted Shares
Compulsory Bonus Share
Scheme1
Voluntary Bonus Share
Scheme4
Total value of dividends
total
Opening balance at 1 January 2014
Awards made during 2014
Awards vesting/lapsing during 2014
Number
of
restricted
shares/
options
released
Number
of
restricted
shares/
options
lapsed
Date of
issue/
inception
Issue
price
(R)
Market
price at
vesting
(R)
Vesting/
exercise
date
Value
gained on
vesting
5Notional
value of
loss on
lapsing
20 071
23 357
3 286 2011/03/07
2011/03/08
128,44
128,44
215,77
215,77
4 330 648
5 039 740
(709 091)
Dividends
Total
value of
dividends
paid in
respect of
all plans7
R
Closing balance as at
31 December 2014
Number
of
restricted
shares/
options
End of
perfor-
mance
period
Final
vesting/
exercise
date
10 584
2014/04/01
222,50
2014/04/01
21 1683
2011/03/31
141,72
222,50 2014/04/01
4 709 880
2 116
2014/04/01
222,50
2014/04/01
2 1163
2014/04/01
141,72
222,50 2014/04/01
470 810
13 380
15 571
2 191 2011/03/07
2011/03/08
128,44
128,44
215,77
215,77
2 887 037
3 359 755
(472 717)
14 551 078
(709 091)
2 515 594
2 515 594
5 292
2014/04/01
222,50
2014/04/01
10 5843
2011/03/31
141,72
222,50 2014/04/01
2 354 940
2 116
2014/04/01
222,50
2014/04/01
2 1163
2014/04/01
141,72
222,50 2014/04/01
470 810
9 072 542
(472 717)
1 604 085
1 604 085
32 431 2014/12/31 2015/03/08
32 431 2014/12/31 2015/03/09
28 962 2015/12/31 2016/03/08
28 962 2015/12/31 2016/03/09
62 200 2016/12/31 2017/03/07
15 192 2014/12/31 2015/04/01
16 099 2015/12/31 2016/04/01
16 141 2016/12/31 2017/04/01
27 798 2014/12/31 2015/03/08
27 798 2014/12/31 2015/03/09
18 430 2015/12/31 2016/03/08
18 430 2015/12/31 2016/03/09
39 472 2016/12/31 2017/03/07
10 477 2014/12/31 2015/04/01
10 426 2015/12/31 2016/04/01
10 626 2016/12/31 2017/04/01
145
NedbaNk LIMITed annual report REpoRTING BACK oN REMUNERATIoN (continued)
Opening balance at 1 January 2014
Awards made during 2014
Awards vesting/lapsing during 2014
Number of
restricted
shares/
options
Date of
issue/
inception
15 571
15 571
13 899
13 899
15 797
15 797
2011/03/07
2011/03/082
2012/03/07
2012/03/082
2013/03/07
2013/03/082
Issue
price
(R)
128,44
128,44
161,88
161,88
189,90
189,90
Vesting
date
2014/03/08
2014/03/09
2015/03/08
2015/03/09
2016/03/08
2016/03/09
3 175
6 636
7 666
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
own Shares
own Shares
own Shares
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
6 600
6 600
6 800
2010/03/03
2010/03/03
2010/03/03
19 800
19 800
20 400
2010/03/03
2010/03/03
2010/03/03
121,08
121,08
121,08
121,08
121,08
121,08
2014/03/04
2015/03/04
2016/03/04
2014/03/04
2015/03/04
2016/03/04
Executive directors
raisibe Morathi
Nedbank Restricted Shares
Compulsory Bonus Share
Scheme1
Voluntary Bonus Share
Scheme4
Eyethu Restricted
Shares
Eyethu Restricted
options6
Total value of dividends
total
Number of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Final
vesting/
exercise
date
shares/
options
released
shares/
options
Date of
issue/
lapsed
inception
Issue
price
(R)
Vesting/
Value
value of
respect of
restricted
exercise
gained on
loss on
all plans7
(R)
date
vesting
lapsing
R
shares/
options
Market
price at
vesting
End of
perfor-
mance
period
Final
vesting/
exercise
date
Number
Number
of
of
restricted
restricted
13 380
15 571
2 191 2011/03/07
2011/03/08
128,44
128,44
215,77
215,77
2 887 037
3 359 755
(472 717)
33 492
2014/03/06
209,00
2017/03/07
3 175
2014/04/01
222,50
2014/04/01
6 3503
2011/03/31
141,72
222,50 2014/04/01
1 412 875
7 936
2014/03/31
223,03
2017/04/01
2 116
2014/04/01
222,50
2014/04/01
2 1163
2014/04/01
141,72
222,50 2014/04/01
470 810
own Shares
2014/04/01
223,03
2017/04/02
6 600
2010/03/03
121,08
214,19 2014/03/04
1 413 654
19 800
2010/03/03
121,08
207,82 2014/03/27
1 717 452
11 261 583
(472 717)
1 343 641
1 343 641
Closing balance as at
31 December 2014
Dividends
Total
value of
dividends
Number
5Notional
paid in
of
13 899 2014/12/31 2015/03/08
13 899 2014/12/31 2015/03/09
15 797 2015/12/31 2016/03/08
15 797 2015/12/31 2016/03/09
33 492 2016/12/31 2017/03/07
6 636 2014/12/31 2015/04/01
7 666 2015/12/31 2016/04/01
7 936 2016/12/31 2017/04/01
6 600
6 800
19 800
20 400
2015/03/04
2016/03/04
2015/03/04
2016/03/04
146
Number of
restricted
shares/
options
Date of
issue/
inception
15 571
15 571
13 899
13 899
15 797
15 797
2011/03/07
2011/03/082
2012/03/07
2012/03/082
2013/03/07
2013/03/082
Issue
price
(R)
128,44
128,44
161,88
161,88
189,90
189,90
Vesting
date
2014/03/08
2014/03/09
2015/03/08
2015/03/09
2016/03/08
2016/03/09
3 175
6 636
7 666
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
own Shares
own Shares
own Shares
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
6 600
6 600
6 800
2010/03/03
2010/03/03
2010/03/03
19 800
19 800
20 400
2010/03/03
2010/03/03
2010/03/03
121,08
121,08
121,08
121,08
121,08
121,08
2014/03/04
2015/03/04
2016/03/04
2014/03/04
2015/03/04
2016/03/04
Executive directors
raisibe Morathi
Nedbank Restricted Shares
Compulsory Bonus Share
Scheme1
Voluntary Bonus Share
Scheme4
Eyethu Restricted
Shares
Eyethu Restricted
options6
Total value of dividends
total
Number of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Final
vesting/
exercise
date
33 492
2014/03/06
209,00
2017/03/07
7 936
2014/03/31
223,03
2017/04/01
own Shares
2014/04/01
223,03
2017/04/02
Opening balance at 1 January 2014
Awards made during 2014
Awards vesting/lapsing during 2014
Number
of
restricted
shares/
options
released
Number
of
restricted
shares/
options
lapsed
Date of
issue/
inception
Issue
price
(R)
Market
price at
vesting
(R)
Vesting/
exercise
date
Value
gained on
vesting
5Notional
value of
loss on
lapsing
13 380
15 571
2 191 2011/03/07
2011/03/08
128,44
128,44
215,77
215,77
2 887 037
3 359 755
(472 717)
Dividends
Total
value of
dividends
paid in
respect of
all plans7
R
Closing balance as at
31 December 2014
Number
of
restricted
shares/
options
End of
perfor-
mance
period
Final
vesting/
exercise
date
3 175
2014/04/01
222,50
2014/04/01
6 3503
2011/03/31
141,72
222,50 2014/04/01
1 412 875
2 116
2014/04/01
222,50
2014/04/01
2 1163
2014/04/01
141,72
222,50 2014/04/01
470 810
6 600
2010/03/03
121,08
214,19 2014/03/04
1 413 654
19 800
2010/03/03
121,08
207,82 2014/03/27
1 717 452
11 261 583
(472 717)
1 343 641
1 343 641
13 899 2014/12/31 2015/03/08
13 899 2014/12/31 2015/03/09
15 797 2015/12/31 2016/03/08
15 797 2015/12/31 2016/03/09
33 492 2016/12/31 2017/03/07
6 636 2014/12/31 2015/04/01
7 666 2015/12/31 2016/04/01
7 936 2016/12/31 2017/04/01
6 600
6 800
19 800
20 400
2015/03/04
2016/03/04
2015/03/04
2016/03/04
147
NedbaNk LIMITed annual report REpoRTING BACK oN REMUNERATIoN (continued)
Number
Number
of
of
restricted
restricted
Closing balance as at
31 December 2014
Dividends
Total
value of
dividends
Number
5Notional
paid in
of
16 725
19 464
2 739 2011/03/07
2011/03/08
128,44
128,44
215,77
215,77
3 608 843
(590 904)
4 199 747
Opening balance at 1 January 2014
Awards made during 2014
Awards vesting/lapsing during 2014
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
shares/
options
released
shares/
options
Date of
issue/
lapsed
inception
Issue
price
(R)
Vesting/
Value
value of
respect of
restricted
exercise
gained on
(R)
date
vesting
loss on
lapsing
all plans7
R
shares/
options
Market
price at
vesting
End of
perfor-
mance
period
Final
vesting/
exercise
date
19 464
19 464
24 709
24 709
21 063
21 063
2011/03/07
2011/03/082
2012/03/07
2012/03/082
2013/03/07
2013/03/082
128,44
128,44
161,88
161,88
189,90
189,90
2014/03/08
2014/03/09
2015/03/08
2015/03/09
2016/03/08
2016/03/09
5 292
10 477
9 966
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
own Shares
own Shares
2011/03/31
2013/03/31
141,72
195,66
2014/04/01
2016/04/01
15 571
15 571
18 532
18 532
15 797
15 797
2011/03/07
2011/03/082
2012/03/07
2012/03/082
2013/03/07
2013/03/082
128,44
128,44
161,88
161,88
189,90
189,90
2014/03/08
2014/03/09
2015/03/08
2015/03/09
2016/03/08
2016/03/09
4 022
6 548
15 026
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
own Shares
own Shares
own Shares
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
23 923
23 923
2014/03/06
2014/03/072
209,00
209,00
2017/03/07
2017/03/08
23 923
23 923
229,17
229,17
(5 482 434)
(5 482 434)
5 292
2014/04/01
222,50
2014/04/01
10 5843
2011/03/31
141,72
222,50 2014/04/01
2 354 940
8 743
2014/03/31
223,03
2017/04/01
2 116
2014/04/01
222,50
2014/04/01
2 1163
2014/04/01
141,72
222,50 2014/04/01
470 810
own Shares
2014/04/01
223,03
2017/04/02
10 634 340
(11 555 772)
1 616 151
1 616 151
13 380
15 571
2 191 2011/03/07
2011/03/08
128,44
128,44
215,77
215,77
2 887 037
3 359 755
(472 717)
16 746
16 746
2014/03/06
2014/03/072
209,00
209,00
2017/03/07
2017/03/08
4 022
2014/04/01
222,50
2014/04/01
8 0443
2011/03/31
141,72
222,50 2014/04/01
1 789 790
16 141
2014/03/31
223,03
2017/04/01
2 116
2014/04/01
222,50
2014/04/01
2 1163
2014/04/01
141,72
222,50 2014/04/01
470 810
own Shares
2014/04/01
223,03
2017/04/02
8 507 392
(472 717)
1 457 378
1 457 378
24 709 2014/12/31 2015/03/08
24 709 2014/12/31 2015/03/09
21 063 2015/12/31 2016/03/08
21 063 2015/12/31 2016/03/09
2016/12/31 2017/03/07
2016/12/31 2017/03/08
10 477 2014/12/31 2015/04/01
9 966 2015/12/31 2016/04/01
8 743 2016/12/31 2017/04/01
18 532 2014/12/31 2015/03/08
18 532 2014/12/31 2015/03/09
15 797 2015/12/31 2016/03/08
15 797 2015/12/31 2016/03/09
16 746 2016/12/31 2017/03/07
16 746 2016/12/31 2017/03/08
6 548 2014/12/31 2015/04/01
15 026 2015/12/31 2016/04/01
16 141 2016/12/31 2017/04/01
Prescribed officers
Ingrid Johnson
Nedbank Restricted Shares
Compulsory Bonus Share
Scheme1
Voluntary Bonus Share
Scheme4
Total value of dividends
total
Brian Kennedy
Nedbank Restricted Shares
Compulsory Bonus Share
Scheme1
Voluntary Bonus Share
Scheme4
Total value of dividends
total
148
Prescribed officers
Ingrid Johnson
Nedbank Restricted Shares
Compulsory Bonus Share
Scheme1
Voluntary Bonus Share
Scheme4
Total value of dividends
total
Brian Kennedy
Nedbank Restricted Shares
Compulsory Bonus Share
Scheme1
Voluntary Bonus Share
Scheme4
Total value of dividends
total
19 464
19 464
24 709
24 709
21 063
21 063
2011/03/07
2011/03/082
2012/03/07
2012/03/082
2013/03/07
2013/03/082
128,44
128,44
161,88
161,88
189,90
189,90
2014/03/08
2014/03/09
2015/03/08
2015/03/09
2016/03/08
2016/03/09
5 292
10 477
9 966
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
own Shares
own Shares
2011/03/31
2013/03/31
141,72
195,66
2014/04/01
2016/04/01
15 571
15 571
18 532
18 532
15 797
15 797
2011/03/07
2011/03/082
2012/03/07
2012/03/082
2013/03/07
2013/03/082
128,44
128,44
161,88
161,88
189,90
189,90
2014/03/08
2014/03/09
2015/03/08
2015/03/09
2016/03/08
2016/03/09
4 022
6 548
15 026
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
own Shares
own Shares
own Shares
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
Opening balance at 1 January 2014
Awards made during 2014
Awards vesting/lapsing during 2014
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
Number
of
restricted
shares/
options
released
Number
of
restricted
shares/
options
lapsed
Date of
issue/
inception
Issue
price
(R)
Market
price at
vesting
(R)
Vesting/
exercise
date
Value
gained on
vesting
5Notional
value of
loss on
lapsing
16 725
19 464
2 739 2011/03/07
2011/03/08
128,44
128,44
215,77
215,77
3 608 843
4 199 747
(590 904)
Dividends
Total
value of
dividends
paid in
respect of
all plans7
R
Closing balance as at
31 December 2014
Number
of
restricted
shares/
options
End of
perfor-
mance
period
Final
vesting/
exercise
date
23 923
23 923
2014/03/06
2014/03/072
209,00
209,00
2017/03/07
2017/03/08
23 923
23 923
229,17
229,17
(5 482 434)
(5 482 434)
5 292
2014/04/01
222,50
2014/04/01
10 5843
2011/03/31
141,72
222,50 2014/04/01
2 354 940
8 743
2014/03/31
223,03
2017/04/01
own Shares
2014/04/01
223,03
2017/04/02
2 116
2014/04/01
222,50
2014/04/01
2 1163
2014/04/01
141,72
222,50 2014/04/01
470 810
10 634 340
(11 555 772)
1 616 151
1 616 151
13 380
15 571
2 191 2011/03/07
2011/03/08
128,44
128,44
215,77
215,77
2 887 037
3 359 755
(472 717)
16 746
16 746
2014/03/06
2014/03/072
209,00
209,00
2017/03/07
2017/03/08
16 141
2014/03/31
223,03
2017/04/01
own Shares
2014/04/01
223,03
2017/04/02
4 022
2014/04/01
222,50
2014/04/01
8 0443
2011/03/31
141,72
222,50 2014/04/01
1 789 790
2 116
2014/04/01
222,50
2014/04/01
2 1163
2014/04/01
141,72
222,50 2014/04/01
470 810
8 507 392
(472 717)
1 457 378
1 457 378
24 709 2014/12/31 2015/03/08
24 709 2014/12/31 2015/03/09
21 063 2015/12/31 2016/03/08
21 063 2015/12/31 2016/03/09
2016/12/31 2017/03/07
2016/12/31 2017/03/08
10 477 2014/12/31 2015/04/01
9 966 2015/12/31 2016/04/01
8 743 2016/12/31 2017/04/01
18 532 2014/12/31 2015/03/08
18 532 2014/12/31 2015/03/09
15 797 2015/12/31 2016/03/08
15 797 2015/12/31 2016/03/09
16 746 2016/12/31 2017/03/07
16 746 2016/12/31 2017/03/08
6 548 2014/12/31 2015/04/01
15 026 2015/12/31 2016/04/01
16 141 2016/12/31 2017/04/01
149
NedbaNk LIMITed annual report REpoRTING BACK oN REMUNERATIoN (continued)
Opening balance at 1 January 2014
Awards made during 2014
Awards vesting/lapsing during 2014
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
shares/
options
released
shares/
options
Date of
issue/
lapsed
inception
Issue
price
(R)
Vesting/
Value
value of
respect of
restricted
exercise
gained on
(R)
date
vesting
loss on
lapsing
all plans7
R
shares/
options
Market
price at
vesting
End of
perfor-
mance
period
Final
vesting/
exercise
date
15 571
15 571
15 443
15 443
15 797
15 797
2011/03/07
2011/03/082
2012/03/07
2012/03/082
2013/03/07
2013/03/082
128,44
128,44
161,88
161,88
189,90
189,90
2014/03/08
2014/03/09
2015/03/08
2015/03/09
2016/03/08
2016/03/09
3 704
6 548
6 899
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
16 148
16 148
2014/03/06
2014/03/072
209,00
209,00
2017/03/07
2017/03/08
3 7043
2014/04/01
222,50
2014/04/01
7 408
2011/03/31
141,72
222,50 2014/04/01
1 648 280
Number
Number
of
of
restricted
restricted
Closing balance as at
31 December 2014
Dividends
Total
value of
dividends
Number
5Notional
paid in
of
13 380
15 571
2 191 2011/03/07
2011/03/08
128,44
128,44
215,77
215,77
2 887 037
3 359 755
(472 717)
own Shares
2013/03/31
195,66
2016/04/01
own Shares
2014/04/01
223,03
2017/04/02
8 070
2014/03/31
223,03
2017/04/01
19 464
19 464
15 443
15 443
19 747
19 747
2011/03/07
2011/03/082
2012/03/07
2012/03/082
2013/03/07
2013/03/082
128,44
128,44
161,88
161,88
189,90
189,90
2014/03/08
2014/03/09
2015/03/08
2015/03/09
2016/03/08
2016/03/09
6 985
7 666
2012/03/31
2013/03/31
171,79
195,66
2015/04/01
2016/04/01
20 335
20 335
2014/03/06
2014/03/072
209,00
209,00
2017/03/07
2017/03/08
8 743
2014/03/31
223,03
2017/04/01
own Shares
2013/03/31
195,66
2016/04/01
own Shares
2014/04/01
223,03
2017/04/02
3 960
4 080
2009/03/03
2009/03/03
75,74
75,74
2014/03/04
2015/03/04
11 880
12 240
2009/03/03
2009/03/03
75,74
75,74
2014/03/04
2015/03/04
Prescribed officers
Dave Macready
Nedbank Restricted Shares
Compulsory Bonus Share
Scheme1
Voluntary Bonus Share
Scheme
Total value of dividends
total
Mfundo nkuhlu
Nedbank Restricted Shares
Compulsory Bonus Share
Scheme1
Voluntary Bonus Share
Scheme
Eyethu Restricted
Shares
Eyethu Restricted
options6
Total value of dividends
total
1 Matching on the Compulsory Bonus Share Scheme occurs only on shares in the scheme as at the vesting date. If corporate performance targets are met, 100% matching occurs, otherwise a 50% matching occurs.
2 Restricted share awards with time-based vesting only.
3 Match occurred at one share for each in the Compulsory Bonus Share Scheme and Voluntary Bonus Share Scheme as at the vesting date.
4 For the Voluntary Bonus Scheme employees invest their own Nedbank Shares into the scheme. After three years, if the corporate targets 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 scheduling vesting date.
6 Eyethu Restricted Options have a lifespan of seven years from the date of issue.
7 Plans excludes Voluntary Bonus Share Scheme which are own shares.
150
15 443 2014/12/31 2015/03/08
15 443 2014/12/31 2015/03/09
15 797 2015/12/31 2016/03/08
15 797 2015/12/31 2016/03/09
16 148 2016/12/31 2017/03/07
16 148 2016/12/31 2017/03/08
6 548 2014/12/31 2015/04/01
6 899 2015/12/31 2016/04/01
8 070 2016/12/31 2017/04/01
15 443 2014/12/31 2015/03/08
15 443 2014/12/31 2015/03/09
19 747 2015/12/31 2016/03/08
19 747 2015/12/31 2016/03/09
20 335 2016/12/31 2017/03/07
20 335 2016/12/31 2017/03/08
4 656 2014/12/30 2015/03/31
5 111 2015/12/31 2016/04/01
8 743 2016/12/31 2017/04/01
4 080
2015/03/04
12 240
2015/03/04
16 725
19 464
2 739 2011/03/07
2011/03/08
128,44
128,44
215,77
215,77
3 608 843
4 199 747
(590 904)
7 895 072
(472 717)
1 140 933
1 140 933
2 329
2 555
2012/03/31
2013/03/31
171,79
195,66
226,50 2014/11/04
226,50 2014/11/04
527 519
578 708
3 960
2009/03/03
75,74
215,31 2014/03/04
852 628
11 880
2009/03/03
75,74
215,31 2014/03/04
1 658 092
11 425 535
(590 904)
1 474 566
1 474 566
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
15 571
15 571
15 443
15 443
15 797
15 797
2011/03/07
2011/03/082
2012/03/07
2012/03/082
2013/03/07
2013/03/082
128,44
128,44
161,88
161,88
189,90
189,90
2014/03/08
2014/03/09
2015/03/08
2015/03/09
2016/03/08
2016/03/09
16 148
16 148
2014/03/06
2014/03/072
209,00
209,00
2017/03/07
2017/03/08
3 704
6 548
6 899
2011/03/31
2012/03/31
2013/03/31
141,72
171,79
195,66
2014/04/01
2015/04/01
2016/04/01
own Shares
2013/03/31
195,66
2016/04/01
own Shares
2014/04/01
223,03
2017/04/02
8 070
2014/03/31
223,03
2017/04/01
20 335
20 335
2014/03/06
2014/03/072
209,00
209,00
2017/03/07
2017/03/08
8 743
2014/03/31
223,03
2017/04/01
own Shares
2013/03/31
195,66
2016/04/01
own Shares
2014/04/01
223,03
2017/04/02
19 464
19 464
15 443
15 443
19 747
19 747
2011/03/07
2011/03/082
2012/03/07
2012/03/082
2013/03/07
2013/03/082
128,44
128,44
161,88
161,88
189,90
189,90
2014/03/08
2014/03/09
2015/03/08
2015/03/09
2016/03/08
2016/03/09
6 985
7 666
2012/03/31
2013/03/31
171,79
195,66
2015/04/01
2016/04/01
3 960
4 080
2009/03/03
2009/03/03
75,74
75,74
2014/03/04
2015/03/04
11 880
12 240
2009/03/03
2009/03/03
75,74
75,74
2014/03/04
2015/03/04
Prescribed officers
Dave Macready
Nedbank Restricted Shares
Compulsory Bonus Share
Scheme1
Voluntary Bonus Share
Scheme
total
Total value of dividends
Mfundo nkuhlu
Nedbank Restricted Shares
Compulsory Bonus Share
Scheme1
Voluntary Bonus Share
Scheme
Eyethu Restricted
Shares
Eyethu Restricted
options6
Total value of dividends
total
1 Matching on the Compulsory Bonus Share Scheme occurs only on shares in the scheme as at the vesting date. If corporate performance targets are met, 100% matching occurs, otherwise a 50% matching occurs.
2 Restricted share awards with time-based vesting only.
3 Match occurred at one share for each in the Compulsory Bonus Share Scheme and Voluntary Bonus Share Scheme as at the vesting date.
4 For the Voluntary Bonus Scheme employees invest their own Nedbank Shares into the scheme. After three years, if the corporate targets 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 scheduling vesting date.
6 Eyethu Restricted Options have a lifespan of seven years from the date of issue.
7 Plans excludes Voluntary Bonus Share Scheme which are own shares.
Opening balance at 1 January 2014
Awards made during 2014
Awards vesting/lapsing during 2014
Number
of
restricted
shares/
options
released
Number
of
restricted
shares/
options
lapsed
Date of
issue/
inception
Issue
price
(R)
Market
price at
vesting
(R)
Vesting/
exercise
date
Value
gained on
vesting
5Notional
value of
loss on
lapsing
13 380
15 571
2 191 2011/03/07
2011/03/08
128,44
128,44
215,77
215,77
2 887 037
3 359 755
(472 717)
Dividends
Total
value of
dividends
paid in
respect of
all plans7
R
Closing balance as at
31 December 2014
Number
of
restricted
shares/
options
End of
perfor-
mance
period
Final
vesting/
exercise
date
3 7043
2014/04/01
222,50
2014/04/01
7 408
2011/03/31
141,72
222,50 2014/04/01
1 648 280
16 725
19 464
2 739 2011/03/07
2011/03/08
128,44
128,44
215,77
215,77
3 608 843
4 199 747
(590 904)
7 895 072
(472 717)
1 140 933
1 140 933
2 329
2 555
2012/03/31
2013/03/31
171,79
195,66
226,50 2014/11/04
226,50 2014/11/04
527 519
578 708
3 960
2009/03/03
75,74
215,31 2014/03/04
852 628
11 880
2009/03/03
75,74
215,31 2014/03/04
1 658 092
11 425 535
(590 904)
1 474 566
1 474 566
15 443 2014/12/31 2015/03/08
15 443 2014/12/31 2015/03/09
15 797 2015/12/31 2016/03/08
15 797 2015/12/31 2016/03/09
16 148 2016/12/31 2017/03/07
16 148 2016/12/31 2017/03/08
6 548 2014/12/31 2015/04/01
6 899 2015/12/31 2016/04/01
8 070 2016/12/31 2017/04/01
15 443 2014/12/31 2015/03/08
15 443 2014/12/31 2015/03/09
19 747 2015/12/31 2016/03/08
19 747 2015/12/31 2016/03/09
20 335 2016/12/31 2017/03/07
20 335 2016/12/31 2017/03/08
4 656 2014/12/30 2015/03/31
5 111 2015/12/31 2016/04/01
8 743 2016/12/31 2017/04/01
4 080
2015/03/04
12 240
2015/03/04
151
NedbaNk LIMITed annual report WoRLD CLASS AT
MAnAGInG rISK
STRIVING To BE WoRLDCLASS AT MANAGING RISK
ACRoSS NEDBANK
The business of banking fundamentally involves the management of
risk.
The primary function of a bank in an economy is to transform the
maturity of funds. We lend out money, which gives rise to credit risk.
We also take in money to fund our lending, and that results in asset and
liability mismatches, as well as interest rate risk and liquidity risk. In
addition, we trade and invest in financial markets that drive other
market risks, and all these business activities are potentially prone to
operational risk, reputational risk and other risks. Collectively there are
17 key risks that make up the risk universe in Nedbank’s Enterprisewide
Risk Management Framework (ERMF).
Accordingly, one of Nedbank’s five Deep Green aspirations is to be
worldclass at managing risk.
Ultimately, we seek to optimise risk versus return on a sustainable
basis, and risk management is therefore approached across three
integrated core dimensions:
■ Managing risk as a THREAT – to minimise and protect against
downside risk, and against material unforeseen losses.
■ Managing risk as an UNCERTAINTY – to eliminate excessive
earnings volatility and minimise material negative surprises.
■ Managing risk as an oppoRTUNITY – to maximise financial
performance through the application of superior risk and business
intelligence, risk-based performance measurement, managing for
value, strategic portfolio management and client value
management.
A critical success factor in achieving Nedbank’s 2020 vision and related
financial aspirations is for Nedbank’s risk management, risk culture and
risk infrastructure, together, to become a clearly distinctive competitive
differentiator.
Adding to the importance of excellence in risk management has been
the persistent volatile, uncertain, complex and ambiguous (VUCA)
macroeconomic and geopolitical environments, both globally and
locally.
our regulatory landscape has changed significantly, impacted by
ongoing Basel III implementation from 2013 to 2019, anti-money-
laundering (AML) and combating the financing of terrorism (CFT),
Solvency 2/SAM, Twin peaks (in 2016), the Financial Sector Regulation
Bill and market conduct risk and regulation (eg Treating Customers
Fairly), amendments to the National Credit Act as well as other
consumer protection legislation. This means that it can no longer just
be a Deep Green aspiration to be worldclass at managing risk. Rather, it
has become an imperative to survive and thrive. Nedbank embraces
these significant regulatory changes as they help us enhance our
clients’ experience and the bank’s relationship with and service to
them, and also strengthen the safety and soundness of our organisation
and country. We approach these regulations as a lever to elevate our
risk management further in an integrated manner, through our client-
centred, strategic emphasis, the improvement of the onboarding of our
clients and the ‘know your client’ (KYC) initiative.
While regulation has indeed changed banking over the past five years,
and continues to do so, technological advancement, together with
rapid innovation, is likely to see information technology reshaping
banking for the next five to 10 years, leading to heightened key risk
focuses, such as cybercrime, but also to strategic opportunities. As in
the case of regulatory and conduct risks, we are giving much greater
focus to IT risk and strategic risk in our risk plans for 2015 to 2017.
Additionally, with our expansion and strategic intent of building a pan-
African banking network, we are enhancing our risk management focus
and capability in the rest of Africa, addressing the related risk appetite
holistically.
of course, our more traditional major risks of credit and liquidity
remain, as always, a key focus, and we will leverage the implementation
of the International Financial Reporting Standard (IFRS) 9 and Basel III
to elevate credit and liquidity risk measurement and management to an
even higher level than today.
Nedbank has a sound risk culture that has generally served us well over
the past several years. However, with the continuing VUCA, the highly
competitive environment, extensive regulation, the zero tolerance of
regulators, technological advancement and innovation, and in view of
our fundamental business of managing risk, risk management will have
to become a competitive differentiator for Nedbank if we want to
achieve our 2020 vision on a sustainable basis. We must truly be
worldclass at managing risk.
Therefore, the vision for risk at Nedbank is to be admired as Africa’s
leading bank in risk management by both our internal and external
stakeholders, being a core strategic and competitive differentiator that
helps make Nedbank’s 2020 aspirations happen in a sustainable
manner.
A synopsis of the business profiles of the group as well as our strategic
focus areas can be found online in the integrate report. These represent
the core activities that give rise to Nedbank’s risk universe.
our risk management is underpinned by a comprehensive, best-
practice ERMF, which we are constantly evolving and enhancing so it
remains relevant and most effective in these VUCA environments and
changing times and risks.
The ERMF, fully embedded in business and central functions across
Nedbank Group, is supplemented by individual frameworks such as
those for credit risk, market risk, liquidity risk, operational risk, capital
risk and a comprehensive stress and scenario testing framework.
Coupled with these is a complete set of risk policies, practices and
procedures that operate within specific limits. These include the role of
the board, the setting and monitoring of the group’s risk appetite and
risk limits, and oversight of the ERMF, duly assisted by its seven board
committees. At executive management level the Group Executive
Committee (Exco) is assisted with its risk, strategic and operational
responsibilities by six main committees.
The ERMF facilitates effective challenge and debate at executive
management and board levels, and strong interaction across the group
between the clusters and central group services. This requires a
continuous process of risk identification, measurement, management,
monitoring and formal review and assessment by our external
auditors.
Within the ERMF processes and integrated with the group’s strategic
and business planning, new and/or emerging risks are identified,
captured and addressed. A residual-heat map is used to support the
iterative reassessment of the 17 key risks. Escalation criteria have been
defined and significant risks/issues and limit breaches are raised and
recorded in the Key Issues Control Log, which is a fundamental tool of
152
THE oRIGINS oF RISK WITHIN NEDBANK
Nedbank is made up of four client-facing clusters (five before
the merger of Nedbank Capital and Corporate into a single, fully
integrated corporate and investment bank business) and our
Rest of Africa Division.
NEDBANK
BUSINESS
BANKING
Holistic financial
solutions for
businesses and their
owners.
REST oF AFRICA
DIVISIoN
NEDBANK
WEALTH
offers retail, small and
medium enterprise (SME),
business and corporate
banking services across
the rest of Africa.
Wealth management,
asset management and
insurance solutions for
clients of Nedbank Group.
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.
the ERMF and risk reporting across Nedbank Group, and is reviewed by
executive management and the board.
A formal process for purposes of the ERMF is followed in an annual
review of risk policies, limits and frameworks.
The ERMF remained resilient in 2014 and will undergo a refresh in 2015,
with a focus on:
■ Simplifying and revisiting the key risks comprising Nedbank’s risk
universe.
■ Enabling innovation, new-product development and regulatory
compliance with a strong focus on ’know your client‘ client-
centredness.
■ Ensuring best-practice risk management and leveraging the
extensive regulatory developments to make this happen.
■ Structural changes following the creation of the integrated
corporate and investment business and more integration of the
Retail and Business Banking business.
Sustaining a strong risk culture
Nedbank Group has a strong risk culture. This is achieved through
following best-practice enterprisewide risk management practices, a
strong tone from the top from the Chief Executive, top management
and the board, and ongoing risk leadership by the Chief Risk officer.
our approach aligns strategy, policies, people, processes, technology
and business intelligence to measure, evaluate, manage and optimise
the opportunities, threats and uncertainties we face every day as a
major financial institution. In this way the group is able to maximise
sustainable shareholder value within the group’s clearly defined risk
appetite.
153
NedbaNk LIMITed annual report WoRLDCLASS AT MANAGING RISK (continued)
ERMF
Accounting
and taxation
risks
Information
technology
risk
RISK UNIVERSE
operational
risk
Insurance and
assurance
risk*
New
business risk
Liquidity risk
Capital risk
Market risk**
Credit risk
Strategic risk
Compliance
risk
Reputational
risk
Transforma-
tion risk
Social and
environmen-
tal risk
Investment
risk
people risk
FIRST LINE OF DEFENCE
* Underwriting insurance risk and corporate insurance ** Trading book and banking book
BOARD COMMITTEES – board of directors
Group Finance and Oversight Committee
Group Audit
Committee
Group Risk
and Capital
Management
Committee
Group
Information
Technology
Committee
Group Credit
Committee
Large-
exposure
Approval
Committee
Directors’
Affairs
Committee
Transforma-
tion, Social
and Ethics
Committee
Group Remu-
neration
Committee
GROUP EXCO COMMITTEES – Group Executive Committee (Group Exco)
CFo Forum
Executive
Taxation
Committee
Group
operational
Risk
Committee
Group ALCo and Executive
Risk Management Committee
property
Strategy
Committee
Group
procurement
Committee
Executive
Information
Technology
Committee
Divisional
Credit
Committee
Business Risk
Management
Forum
Brand Risk
Management
Forum
Brand and
Client
Committee
Nedbank
Employee
Equity Forum
Group
Transforma-
tion Forum
Transformation and
Human Resources
Executive Committee
BUSINESS CLUSTERS’ RISK GOVERNANCE – Group Operational Committee (Opcom)
For Nedbank Business Banking, Nedbank Corporate, Nedbank Capital, Nedbank Retail and Nedbank Wealth:
■
Cluster and business unit excos, divisional credit committees (DCCs), Trading Risk Committee, Investment
Committee and enterprise risk committees (ERCos) and other specialist committees, with representation
from the relevant independent group functions.
Heads of risk and risk functions, independent of business origination, report directly to business cluster
heads.
■
CENTRAL FINANCIAL RISK AND BALANCE SHEET MANAGEMENT – Group Finance
Chief Financial Officer – Raisibe Morathi
Balance Sheet Management
Managing Executive: Balance Sheet Management – Michael Davis
SECOND LINE OF DEFENCE
INDEPENDENT GROUP RISK AND COMPLIANCE CLUSTERS
Group Risk
Chief Risk Officer – Trevor Adams
Group Enterprise Governance and Compliance
Chief Governance and Compliance Officer – Thabani Jali
THIRD LINE OF DEFENCE
INDEPENDENT ASSURANCE – Internal Audit and external auditors
Group Internal Audit
External auditors
Independent actuaries
154
Across the ERMF Nedbank applies the three-lines-of-defence model in its risk governance.
Three-lines-of-defence model
First line
The board and management of
Nedbank Group are ultimately
responsible for the implementation
and management of risk.
Group Risk and Enterprise Governance and
Compliance perform a policy-setting and
monitoring role to ensure implementation of
best-practice risk management principles,
methodologies, practices, systems and
processes, lead by the Chief Risk officer.
Second line
Third line
Group Internal Audit, external auditors and independent
actuaries provide additional assurance on the
effectiveness of risk management across the
organisation.
Nedbank embraces risk management as a core competency that allows
the business to optimise risktaking and is objective and transparent.
This ensures that the business prices for risk appropriately, linking risk
to return.
The importance attached to risk management and the attention given
to it is deeply rooted in Nedbank’s culture. Being worldclass at
managing risk is included as one of five Deep Green aspirations in the
group’s strategic framework and this cascades down across the
organisation.
In Nedbank to be worldclass at managing risk means that understanding,
measuring and managing risk are central to everything we do, and we
have engrained risk management in our business. We understand that
banking at Nedbank is about managing risk, not avoiding it. our risk
management methodologies, risk culture and risk management
infrastructure are worldclass.
oUR AppRoACH To RISK AND
BALANCE SHEET MANAGEMENT
We approach our strategy development, business activities, risk
appetite, risk and balance sheet management in a fully integrated
manner. At the heart of the group’s business and management
processes are
risk and balance sheet
management frameworks.
integrated worldclass
Nedbank’s Capital Management Framework is designed to meet our
key external stakeholders’ needs, both those focused more on the
adequacy of the group’s capital in relation to its risk profile (or risk
versus solvency) and those focused more on the return or profitability
of the group relative to the risk assumed (or risk versus return). The
challenge for management and the board is to achieve an optimal
balance between these two important dimensions.
All Nedbank’s quantifiable risks across the 17 key risks of the ERMF are
also captured in our Economic Capital Framework.
Economic capital entails the sophisticated, consistent comparison of
risks across business units and risk types, and the measurement of the
risk involved in individual products or transactions. This enables a
focus on both downside risk (risk protection) and upside potential
(earnings growth). Nedbank assesses the internal requirements for
capital using its proprietary economic capital methodology.
All of these quantifiable risks, as measured by economic capital, are
then allocated back to the businesses in the form of a capital allocation
to where the assets or risk positions reside or originate.
Nedbank’s economic capital and
Internal Capital Adequacy
Assessment process (ICAAp) methodology is constantly reviewed and
updated, taking cognisance of regulatory developments such as Basel
III and Solvency 2/SAM.
Economic capital not only facilitates a like-for-like measurement and
comparison of risk across businesses, but, by incorporating it into
performance measurement, the performance of each business can be
measured and compared on an absolute basis by using economic profit
(Ep) and a relative percentage return basis, namely return on risk-
adjusted capital (RoRAC) – the same as return on equity (RoE), by
comparing these measures against the group’s cost of capital.
ICAAp in Nedbank has been embedded across the organisation for
several years. It is an integral component of the group’s ERMF, Capital
Management Framework, strategy and business planning process,
balance sheet management, remuneration and reward mechanisms,
day-to-day business operations, pricing and lending decisions, and
client-value management. Nedbank scores highly on the use test,
because the group’s culture is one of understanding that the business
of banking is fundamentally about managing risk, and risk drives capital
and liquidity requirements against which return is measured (ie risk
versus return) and rewarded.
In view of the significance of liquidity risk in banking, Nedbank also has
an Internal Liquidity Adequacy Assessment process (ILAAp).
Embedded within Nedbank’s Liquidity Risk Management Framework is
the group’s ILAAp. The ILAAp involves an ongoing and rigorous
assessment of Nedbank Group’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 that 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
155
NedbaNk LIMITed annual report WoRLDCLASS AT MANAGING RISK (continued)
At the heart of the group’s business and management processes are integrated wordclass risk and balance
sheet management frameworks
ERMF
■
Subframeworks (examples)
Group Credit Risk Management Framework
Group Market Risk Management Framework
Group operational Risk Management
Framework
Group Liquidity Management Framework
Capital Management Framework
■
■
Solvency and Capital Management policy
Economic Capital Framework
Stress and scenario-testing framework
Risk Appetite Framework
Risk-adjusted Performance
Measurement Framework
in terms of measuring, monitoring, managing and mitigating liquidity
risk, taking cognisance of best practise and regulatory developments.
Risk-adjusted performance measurement,
management and reward
Economic capital, Ep and RoRAC (or RoE), as well as other important
metrics such as return on assets (RoA), credit loss ratio (CLR), the
ratio of non-interest revenue (NIR) to expenses and the efficiency
ratio, are included in management performance scorecards across
the group.
Economic capital and Ep are comprehensively in use across the group,
embedded within businesses on a day-to-day basis and in performance
measurement and reward schemes, as discussed above. This risk-
adjusted performance measurement (RApM) has been applied across
the group for many years now and helps ensure that excessive
risktaking is mitigated and managed appropriately within the group.
To align the group’s current short-term incentive (STI) scheme with
the shareholder value drivers the STI scheme has been designed to
incentivise a combination of profitable returns, risk and growth
appropriately. It is driven from an Ep and headline earnings basis,
using risk-based economic capital allocation, as discussed above.
Risk is therefore an integral component of capital allocation and
performance measurement (and reward) in Nedbank.
improving
The global financial crisis also precipitated a number of initiatives
aimed at
the governance and management of
remuneration. Although the recommendations, guidance and
practice notes are primarily aimed at the remuneration of senior and
top management and those whose activities could have a material
impact on the risk profile of the organisation, the underlying
principles and statements of good practice can be applied to most
incentive arrangements for the majority of staffmember. The group’s
remuneration practices and public disclosures are compliant with
the evolving principles, practices and governance codes released for
the SA financial services industry. For further detail please refer to
the group’s Remuneration Report.
Nedbank Group continues to monitor the evolving governance
environment to ensure appropriate compliance of the group’s risk-
adjusted remuneration practices with the relevant regulatory and/or
statutory requirements.
156
■
■
Internal Capital Adequacy Assessment
process (ICAAp)
Internal Liquidity Adequacy
Assessment process
(ILAAp)
■
Recovery plan
Basel III Compliant
■ Group strategy and business plans
Risk plan
Nedbank’s recovery plan and stress testing
The global financial crisis highlighted deficiencies in some banks, in
regulators’ risk management and in supervisory frameworks. After the
crisis, regulation – mainly in the form of Basel III and other regulation
lead by the international Financial Stability Board at the Bank of
International Settlements in Basel Switzerland – is to a large degree
about three key themes (capital, liquidity and risk coverage). Resolution
and recovery planning (RRp) is a fundamental part of this in:
■ reducing the risk of banks failing (recovery plans);
■ reducing the impact of failure (resolution plans); and
■ ring-fencing the state/taxpayers from any implicit support to the
banking sector (resolution, bail-in).
The Nedbank Recovery plan sets a framework for the bank to act
quickly and decisively (eg selling businesses and significant assets)
during a severe crisis to ensure that it is able to recover. The
plan describes the integration with existing contingency planning
and the possible recovery options, including a detailed assessment
of their likely effectiveness and the defined points at which they
would be invoked. The recovery plan addresses stresses invoked by
shortfalls in liquidity and capital, as well as significant operational
failures that may jeopardise Nedbank’s ability to continue business
operations. The recovery plan also covers the various options
considered by senior management to mitigate stresses encountered
by Nedbank.
The recovery plan fits into Nedbank’s ERMF and complements the
group’s existing capital, liquidity and stress-testing policies and
procedures.
Levels of low to severe stress, whereby recovery and resolution
levels represent escalating degrees of stress that the group might
encounter, are included in the plan.
The ordered levels and early-warning indicators are designed to
increase Nedbank’s ability to manage any potential crisis situation
effectively and prepare itself for recovery. This is consistent with the
Nedbank ERMF. These crisis levels allow Nedbank to assess the levels
of stress appropriately and
implement necessary responses.
Nedbank’s response to crises will include identifying and executing
2015–2017 THREE-YEAR
BUSINESS pLAN
Group Executive Committee/
Group Asset and Liability Committee
(ALCo)
INTEGRATED
STRESS/
SCENARIo/
CApITAL MoDELS
Macro-
economic
Factor
Model
(MEFM)
Capital
Adequacy
projection
Model
(CApM)
(economic
and
regulatory
capital)
BUSINESS INpUT
pillar 1 stress tests
projected risk characteristics of credit
portfolios (eg pD and LGD profiles)
Stress- and Scenario-testing Framework
Nedbank’s
empirically
derived
macro-
economic
factors
MACRo-
SCENARIoS
In cooperation with
Group economic
unit, Group AlCo
and GrCMC
Risk and capital
analytics
pDs, LGDs, EADs,
impairments, loss
rates, regulatory
capital, economic
capital, etc.
Regression models
Regression
parameters
Interest rate risk in
the banking book
Modelled by BSM
Liquidity risk
Modelled by BSM,
including Basel III
LCR
SopHISTICATED
MACRoECoNoMIC FACToR
MoDEL
■ Multifactor, fully integrated
■ Incorporates current macroeconomic state
as the starting point
■ Forecasts year by year over three-year
business plan
■ Full, integrate d with the group’s finance and
risk systems
GRCMC – Group Risk and Capital Management Committee
PD – probability at default
LGD – loss given default
EAD – exposure at default
BSM – balance sheet management
LCR – liquidity coverage ratio
qualitative overlay of
management
experience, judgement,
challenge and debate
oUTpUT
Three-year forecasts
and stress/scenario
analysis of:
■ Income statement
■ Balance sheet
■ Capital adequacy
■ Liquidity
■ Key financial ratios
Varied by:
■ Three-year business
plan base case
■ Management and
board chosen macro
scenarios and stress
tests
Also used in setting risk
appetite, business strategy
and capital buffers for:
■ Economic capital
■ Regulatory capital
■ Risk appetite
157
NedbaNk LIMITed annual report WoRLDCLASS AT MANAGING RISK (continued)
The stress test process
STRESS TEST pHASE
STRESS TEST pRoCESS
GoVERNANCE
Choice of scenarios
Choice of scenarios, for example severe recession.
The six scenarios of mild, high and severe inflation, severe deflation stress
conditions low rate and positive scenario conditions are determined by the
Group Economic Unit and endorsed by the Group ALCo and the board.
Additional specific-event scenarios are added. The scenarios are updated
regularly.
Each scenario covers a three-year forward-looking period to capture a
negative (or positive) phase of a business cycle.
Group ALCo
GRCMC
GCC
DCCs
Macroeconomic forecasting
Forecast macroeconomic variables (eg real gross domestic product
(GDp) growth, household debt-to-income ratio, etc) for each scenario
(mild, severe, etc).
Translation
of scenarios
Impact on key risk drivers
Holistic Macroeconomic Factor Model calculates the impact on the key risk
drivers (pD, LGD, decline in income growth, etc) for each
scenario.
Group Economic Unit
Stress test
calculations
on the basis of the current
portfolio and the three-year
business plan, the stress tests
calculate the consequences of
the individual scenarios for net
profit, risk-weighted assets
and so regulatory capital,
economic capital, impairments
charges and available capital
resources. Risk types, for
example credit risk, business
risk and investment risk, are
stressed within each scenario
and consolidated.
risk types
Credit risk, business
risk, operational risk,
etc, calculation of
risk-weighted assets
(RWA), economic
capital and expected
losses.
Capital requirements
For each stress
scenario based on the
Macroeconomic Fact
or Model.
earnings
Effect on earnings
change in activity
level, interest rate
margins, credit
impairments, etc.
Impact on available
capital resources
For each stress
scenario based on the
macroeconomic factor
model.
Balance Sheet
Management
Group Risk
Decision on required capital buffers
Overall results of
stress test
Decision on capital levels and buffers is based on an overall
assessment , including several factors such as probability of the
scenario and strategic measures.
Group ALCo
and
GRCMC
GCC – Group credit committee
DCC’s – Divisional credit committees
158
appropriate recovery options, proper escalation and communication within the organisation, and appropriate communication to external
stakeholders (eg regulators, investors, rating agencies and the media).
We conduct regular stress testing. The following are the framework and process that underpins this:
Our risk appetite
Risk appetite is an articulation and allocation of the risk capacity or quantum of risk Nedbank Group is willing to accept in pursuit of its strategy, duly
set and monitored by Group Exco and ultimately the board, and integrated into our strategy, business, risk and capital plans.
Nedbank Group measures and expresses risk appetite qualitatively and in terms of quantitative risk metrics.
Nedbank Group’s risk appetite is defined across five broad categories as set out in the board-approved Risk Appetite Framework, namely:
1
Core risk appetite metrics
Group metrics
Earnings at risk (EaR)
Chance of experiencing a loss
Chance of regulatory insolvency
Economic capital adequacy
Total RWA to total assets
Leverage ratio
Definition
percentage pretax earnings potentially lost over a one-year period.
Event in which Nedbank Group experiences an annual loss.
Event in which losses would result in Nedbank Group being undercapitalised relative to
the minimum total regulatory capital ratio.
Nedbank Group adequately capitalised on an economic basis to its current
international foreign currency target debt rating.
The average risk profile (risk weight) of Nedbank Group’s assets.
The extent to which Nedbank Group is leveraged in terms of assets, including off-
balace-sheet assets, per unit of qualifying tier 1 regulatory capital.
2
3
Specific risk-type limit setting [which clarify across the group’s businesses the mandate levels that are of an appropriate scale relative to the
risk and reward of the underlying activities so as to minimise concentrations and other risks that could lead to unexpected losses (ULs) of a
disproportionate scale].
Stakeholder targets (such as performance targets, regulatory capital targets and target debt rating for economic capital adequacy, economic
capital allocations to business clusters, dividend policy, target credit impairment ratios and derisking the balance sheet of non-core assets).
4 policies, procedures and controls.
5
Zero-tolerance statements.
Concentration risk appetite targets also exist in areas where Nedbank
Group is materially exposed to concentration risk. The targets are
revised and approved by senior management and the board annually as
part of the three-year strategic business planning process, in line with
the Basel III regulations and the board’s responsibilities.
Qualitatively, the group also expresses risk appetite in terms of policies,
processes, procedures, statements and controls meant to limit risks
that may or may not be quantifiable. policies, processes and procedures
relating to governance, effective risk management, adequate capital
and internal control have board and senior management oversight and
are governed by the three lines of defence. A key component of the
ERMF is a comprehensive set of board-approved risk policies and
procedures, which are updated annually.
Nedbank Group has a cascading system of risk limits at all levels of the
group and for all financial risks, which is a core component of the
implementation of the Risk Appetite Framework. The size of the various
limits is a direct reflection of the board’s risk appetite, given the
business cycle, market environment, business plans, strategy and
capital planning.
Nedbank Group has cultivated and embedded a prudent and conservative
risk appetite, focused on the basics and core activities of banking.
favourable
CURRENT KEY RISK AND BALANCE
SHEET MANAGEMENT poSITIoNS AT
YEAR-END 2014
Nedbank’s
the year ended
31 December 2014 are underpinned by a strong balance sheet across all
the core dimensions of capital adequacy, liquidity and funding, credit
asset quality aided by the strategic portfolio tilt strategy and
appropriately conservative provisioning, excellence in risk and balance
sheet management, an enabling but prudent risk appetite framework,
and a seamless implementation of Basel III.
financial
results
for
Credit risk
The operating environment in 2014 remained challenging for consumers,
with global markets reflecting a mixed performance, and the local
economy remained under pressure from strike action and electricity
supply constraints. SA’s GDp is forecast to have grown at 1,4% for 2014.
According to the South African Reserve Bank (SARB) economic growth
could have been 1% higher in the absence of strike action. overall, the
credit environment remained muted, with wholesale credit demand
continuing to outpace retail demand as poor employment prospects,
high
interest rates and weak
levels weighed against consumers. Wholesale credit
confidence
demand was supported by renewable-energy projects, corporate action
and increased dealflow from the rest of Africa. This is expected to
moderate as corporates remain hesitant to make long-term investments
and add on production capacity given the weak economic outlook.
indebtedness,
increased
levels of
The implementation of the strategic portfolio tilt strategy over the past
four years has enabled Nedbank to maintain a sound balance sheet and
good credit asset quality and reduce impairments, while strengthening
balance sheet coverage ratios. The benefits from the early action taken
in reducing our Home Loans and personal Loans portfolios are evident
in our 2014 results.
Nedbank has adopted a selective origination, client-centred growth
emphasis as a core part of its strategic portfolio tilt strategy, as is evident
in its higher-targeted-growth portfolio tilt areas such as commercial
mortgages, Motor Finance Corporation (MFC), Card and Investment
Banking, and the low or negative targeted growth areas of residential
mortgages and personal loans.
In managing its mortgages (or property portfolio) Nedbank takes a
holistic approach across both residential and commercial mortgages,
preferring a dominant market share in commercial mortgages, given
the significantly better risk-based economics and returns.
■ over 2014 commercial-mortgage lending increased to 19,8% of
gross loans and advances, and Nedbank Group has consequently
grown its dominant local market share position to just above 40%.
159
NedbaNk LIMITed annual report
WoRLDCLASS AT MANAGING RISK (continued)
% of total gross loans and advances by major credit portfolio
%
,
5
7
4
,
9
9
2
,
6
7
1
,
5
0
1
,
3
4
1
,
7
0
1
7
7
,
,
7
2
6
,
1
2010
,
6
5
4
,
4
7
2
,
2
8
1
0
,
1
1
,
9
4
1
8
,
1
1
8
8
,
5
3
,
7
,
1
2011
,
5
3
4
,
3
5
2
,
2
8
1
2
,
1
1
,
4
4
1
4
,
1
1
1
,
9
,
3
4
8
,
1
2012
0
,
1
4
,
0
3
2
,
0
8
1
0
,
1
1
,
8
3
1
,
8
0
1
3
,
1
1
6
3
,
9
,
1
2013
Total residential
mortgages
Card
Total commercial
mortgages
Corporate Banking
advances
Total mortgages
Business Banking
(SME) advances
Total motor
vehicle finance
Investment
Banking advances
8
,
1
4
,
0
2
2
,
8
9
1
6
,
1
1
,
0
4
1
,
8
0
1
8
,
1
1
9
2
,
1
,
2
2014
Total personal
loans
This potentially high concentration is mitigated by good-quality
assets, high levels of collateral, a low average loans-to-value ratio
(approximately 50%), the underpinning of corporate leases and a
highly experienced management team that is considered to be the
leader in property finance in SA.
■ While Nedbank has the smallest residential- mortgage portfolio
among the local peer group at approximately 15%, the contribution
of these advances as a percentage of total gross loans and
advances is still substantial at 22% in 2014 (2010: 30%).
■ Since 2010 the focus in Home Loans has been on lending through
our own channels and much less, compared with the industry,
through mortgage originators. This enables a better-quality risk
profile, more appropriate risk-based pricing, and therefore more
appropriate returns, with a client-centred approach.
■ When combining commercial and residential mortgages,
Nedbank’s total mortgage market share is in line with that of its
peers at approximately 21%.
Total retail motor vehicle finance exposure within Nedbank Group has
increased from 10,5% in 2010 to 11,6% in 2014 of gross loans and
advances, while current market share is approximately 29,5%. Sound
risk management principles are consistently applied by an experienced
management team.
Given the current state of the market and the concerning health of the
consumer, coupled with macroeconomic expectations, Nedbank’s
personal Loans portfolio is expected to remain relatively flat over the
medium term, and hence decrease further in terms of mix. personal
loans as a percentage of total gross loans and advances have decreased
to 2,9% over the last year (2013: 3,6%).
As a percentage of total gross loans and advances:
■ Corporate Banking and Business Banking have not changed
substantially since 2010;
■ Card advances have increased from 1,6% in 2010 to 2,2% in 2014;
and
■ Investment Banking advances have increased from 7,7% in 2010 to
11,8% in 2014, underpinned by particularly successful growth in
renewable energy.
The defaulted advances continued the downward trend observed since
2010, decreasing by 11,2% in 2014 to R15 846m (2013: R17 848m),
which was mainly driven by ongoing improvements in Nedbank Retail
as well as Nedbank Capital.
Consistently declining default advances as a percentage of gross loans and advances
9,09
9,02
5,48
3,17
5
6
7
6
2
3
8
4
5
2
7,50
7,25
4,55
2,85
0
1
2
3
2
5
8
4
1
2
6,27
5,58
3,58
1,99
3
7
2
9
1
6
6
6
6
1
5,603
4,673
3,023
1,64
3
8
4
8
7
1
3
0
2
0
5
1
1 282
1 725
2 607
2 828
4,83
3,97
2,54
1,30
(11,2%)
6
4
8
5
1
4
4
3
3
1
2 502
2010
Total Retail
2011
Total Retail
(excluding
Personal Loans1)
2012
Total Nedbank
Group
Total wholesale2
160
2013
Defaulted
advances
(excluding
Personal Loans)1
(Rm)
2014
Personal Loans
defaulted
advances1 (Rm)
The Group CLR decreased to 0,79% (2013: 1,06%) as a result of
ongoing improvement in asset quality, prudent credit-granting and
collections practices together with benefits from strategic portfolio tilt
and therefore the change in advances mix. The Group CLR is below the
lower end of the through-the-cycle (TTC) target range of 0,80% to
1,20%.
■ The CLRs across all the business clusters were either at the lower
end of, or better than, their respective TTC target ranges. A strong
risk management and collections focus resulted in improved
impairments charges across the group to support the reduction in
CLRs.
■ The R200m central portfolio impairment held in the Centre was
increased to R350m in line with the group’s view of a further
deteriorated macroeconomic environment as a result of the
country’s power crisis and other factors.
■ Nedbank Retail contributes 77,7% to the group’s total impairments
charge of R4 506m (2013: R5 565m), with the majority coming
from personal Loans (41,7% of the group’s impairments charge).
The reduction in the personal Loans impairments was the main
contributor to the reduction in the impairments charge over the
period and benefits were realised based on the early action taken
in 2012.
The total balance sheet impairment decreased to R11 095m (2013:
R11 456m) and higher levels of postwriteoff recoveries were recorded
at R941m (2013: R888m), while writeoffs and other transfers decreased
to R5 809m (2013: R5 867m).
The group total-coverage ratio strengthened to 70,0% (2013: 64,2%),
with the specific-coverage ratio improving to 43,1% (2013: 42,3%) and
the portfolio coverage on the performing portfolio increasing slightly to
0,70% (2013: 0,68%).
Consistently improving Nedbank Group credit loss ratio
%
1,36
1,32
0,04
2010
1,13
1,01
0,12
2011
1,05
0,91
0,14
2012
1,06
0,972
0,092
2013
0,79
0,72
0,07
2014
Total CLR
Specific CLR
Portfolio CLR
CLR target range
(0,8% – 1,2%)1
Previous CLR target range
(0,6% – 1,0%)1
1 The Nedbank Group target range was revised from between 0,60% and 1,00% to between 0,80% and 1,20% in 2014.
2 Restated due to the reclassification of restructures in MFC as defaulted advances.
Strengthening coverage ratios
1 Wholesale includes Nedbank Capital, Nedbank Corporate and Nedbank Business Banking.
2 Home Loans represents a specific business unit within Nedbank Retail. This excludes home loans in the Nedbank Retail Relationship Banking business unit.
3 Restated due to the reclassification of restructures in MFC as defaulted advances.
161
NedbaNk LIMITed annual report2014201320122011201020096 83211 0957 543311 4567 44310 8708 74911 4977 8309 7989 07211 22619,836,240,263,874,795,058,170,043,690,772,446,843,064,21 9682 1542 7483 4273 91334 263Wholesale total1Total RetailNedbank GroupSpecific impairments (Rm)Portfolio impairments (Rm)Home Loans2Personal Loans36,4% WoRLDCLASS AT MANAGING RISK (continued)
Market risk
Trading market risk arises through Nedbank Capital’s market-making
activities and the facilitation of client business in the foreign exchange,
interest rate, equity, credit and commodity markets. Nedbank has kept
proprietary trading low and the focus remains mainly on flow trading in
these markets, with only 1,2% of the total economic capital of the group
consumed. Current risk levels are within the board-approved limits and
risk appetite. The main development in 2014 was the major regulatory
proposals, including the Fundamental Review of the Trading Book, as
well as other derivative market reforms. The market risk associated
with the group’s high-quality liquid-asset portfolio is well managed to
minimise the effect of market volatility.
Investment risk (also referred to as equity risk in the banking book),
which is held at fair value, is relatively low at R4 761m, within the risk
appetite and limits approved by the board. This risk primarily arises
through the investment banking and private-equity activities of
Nedbank Capital, as well as property finance activities of Nedbank
Corporate. A total of R2 862m is held for capital gain within these
portfolios, while the remaining R1 899m is held for operational
requirements. The strategic acquisition of 36,6% in Banco Único held at
R286m and the appropriate 20% stake in Ecobank Transnational
Incorporated (ETI) held at R6 223m were major investments in 2014.
These are accounted for under the equity method of accounting, totalling
R6 509m.
Interest rate risk in the banking book (IRRBB) is significant and arises from
the group’s lending and funding activities, with assets and liabilities
maturing or repricing at different times, or against different base rates.
Nedbank’s IRRBB is largely in the short-end of the interest rate curve and
results from assets predominantly pricing to the prime rate, whereas term
deposits and fixed-rate advances are linked to the Johannesburg Interbank
Agreed Rate (JIBAR) or hedged using JIBAR-linked swaps. Current
exposures are within the board-approved limits and risk appetite. The net
interest income sensitivity to a 1% change in interest rates is R1 019m
(2013: R936m) over one year or 1,52% (2013: 1,54%) of capital. The
current interest rate cycle in SA is at a historically low point and the group
is well positioned for any upswings in interest rates.
Foreign currency translation risk (FCTR) arises from changes in value
of the group’s holdings of foreign capital due to shifts in exchange rates.
Although the acquisitions in ETI and Banco Único in 2014 caused an
increase in FCTR exposure, it is still in line with the group’s appropriate
offshore capital structure and risk appetite. A 10% change in the value
of the rand will have a 0,2% (2013: 0,1%) impact on the group’s total
regulatory capital adequacy ratio (CAR).
Operational risk
During 2014 we focused our strategy on capitalising on our strengths in
managing operational risk, concentrating on risk and internal control
systems in all our businesses, while prioritising operational risk areas
that offer opportunities to ensure that our businesses create and deliver
value to our stakeholders.
Despite the external headwinds and difficult macroeconomic and
geopolitical environments, Nedbank achieved a stable operational
risk environment. The group operated within board-approved
operational risk appetite limits.
Notwithstanding the above, the potential impact of operational risk
within the group remains high. We are cognisant of the fact that, as the
business evolves, the associated growth and level of operational
complexity expose the group to additional operational risks. In
response, we continued to focus on the improvement of the internal
control environment to minimise potential for losses, and with an
emphasis on making it easy to do business with Nedbank.
In 2014 the group remained focused on initiatives to enhance process
management governance aimed at optimising the risk and control
identification and assessment process.
162
Regulatory non-compliance relating to AML continues to receive focus
with a view to addressing the weaknesses identified. The fine of R25m
that Nedbank received in 2014 (as did the rest of the big four South
African banks) was publicly disclosed as a significant regulatory
operational risk event during the year. Steps have been taken to
enhance the group’s AML/CFT programme and the approach is now
more strategic.
The focus remains on enhancing Nedbank’s scenario analysis and
governance process to ensure that the group continues to scan the
operating environment and, where necessary, update scenario inputs
to ensure the group remains adequately capitalised. New scenarios
were identified or existing scenarios were updated to reflect changes in
the operating environment. Identified control gaps were enhanced as
part of the risk management process.
In recognition of the increasing growth, diversity of activities and
dynamism of the environment in which our businesses operate, the
group continued to refine the operational Risk Management Framework
(oRMF) to ensure that it is adaptive to the environment, is responsive to
regulatory requirements, is in line with emerging leading practices and
supports forward-looking and proactive risk identification and agility in
response.
The organisational transformation/restructure in the Corporate and
Investment Banking (CIB) Cluster and the Retail and Business Banking
Cluster may result in uncertainty and elevated people risk. This requires
close change management to provide stability while addressing specific
business requirements and ensuring that we deliver value to our clients
and other stakeholders.
No material spike in operational risk net losses (2014 versus 2013) was
observed on the backdrop of global operational risk losses, which are still
volatile, with strong and hostile regulatory actions being implemented.
The independent testing of our systems of internal control (and use
testing of frameworks) is a major focus requiring the combined efforts of
our stakeholders in the three lines of defence. We continuously review
our associated control frameworks and operating models to make
enhancements where necessary.
Capital adequacy
Nedbank Group’s capital ratios are strong across all classes, above the
mid-point of internal target ranges and above regulatory minimum
requirements. Similarly, Nedbank Group economic capital adequacy is
strong and ICAAp has been maintained.
Nedbank’s ICAAp confirms that we are well capitalised above the
current A or 99,93% target debt rating (solvency standard) in terms of
the group’s proprietary economic capital methodology.
Nedbank Group remains well capitalised, with a strong capital
adequacy position at December 2014. This is supported by:
■ a strong capital structure, with 80% of the group’s capital
comprising fully loss-absorbent common-equity tier 1 (CET1)
capital;
■ additional tier 1 and tier 2 capital, in line with regulatory
requirements, including the R5,5bn issued since the
implementation of Basel III;
■ a conservative RWA density of 54% (RWA: total assets ratio),
which compares favourably with that of local and international
peers; and
■ significant capital buffers above regulatory requirements.
Capital adequacy is strong relative to Nedbank’s business activities,
strategy and risk profile, and the external environment in which it
operates.
Pro forma – with and without Africa expansion (ie ETI 20% transaction and Banco Único)
regulatory capital
Common-equity tier 1 (CET1) capital ratio
Total capital ratio
Dividend cover
economic capital
Available financial resources (AFR): Economic capital
Cost of equity (Coe)
Target
ranges
Dec 2014
%
%
10,5 – 12,5
14,0 – 15,0
(times)
1,75 – 2,25
(%)
%
11,6
14,6
2,07
41 448
140
13,5
Dec 2014
without
Africa
expansion
12,5
15,5
Dec 2013
12,5
15,7
2,11
35 939
151
13,0
The acquisitions of approximately 20% of Ecobank Transnational
Incorporated (ETI) and 36,6% of Banco Único in 2014 have resulted in
a 90 basis points reduction in the Nedbank Group Limited CET1 ratio.
Furthermore, these acquisitions have resulted in an increase of the
group’s exposure to rest of Africa to approximately 10,5% of ordinary
shareholders’ equity (oSE). This is in line with the group’s strategy for
the rest of Africa.
Leverage
■ The leverage ratio is intended by the Basel Committee on Banking
Supervision (Basel Committee) to serve as a simple, transparent,
non-risk-based leverage ratio to supplement the Basel III risk-
based capital requirements in order to help avoid the buildup of
excessive leverage and to capture both on- and off-balance-sheet
exposure.
■ SA banks, including Nedbank, compare favourably with most
international banks on leverage.
■ Nedbank Group’s gearing under Basel III, which includes off-
balance-sheet exposure and is based on the latest regulations, is
17,2 times (or 5,8%) at 2014 (2013: 16,8 times or 6,0%) against an
internal risk appetite target of less than 20 times (or >5%), and
well below the Basel III limit in accordance with the revised SA
regulations of 25 times (or >4%), which is more prudent than
Basel III at 33,3 times (or > 3%). The slight decline in the leverage
position is largely as a result of the acquisition of the ETI stake and
its associated capital and impairment.
Liquidity risk
Nedbank Group remains well funded with a strong liquidity position,
underpinned by a significant quantum of
long-term funding, an
appropriately sized surplus liquid-asset buffer above the minimum Basel
III liquidity coverage ratio (LCR) regulatory requirement, a strong loan-
to-deposit ratio consistently below 100% and a low reliance on interbank
and foreign-currency funding.
The Basel Committee published a finalised net stable funding ratio
(NSFR) standard in october 2014. While the gap to full compliance
with the NSFR has substantially decreased, full SA banking industry
compliance remains challenging, given the small retail deposit base.
Consequently, Nedbank will continue to work closely with SARB, its
peer group and the National Treasury in addressing the structural
challenge ahead of the NSFR compliance date.
Nedbank’s strong funding and liquidity position is illustrated by the
following:
■ Nedbank has maintained significant sources of quick liquidity
amounting to R121,1bn, which represents 15,0% of total assets.
■ Deposits grew 8,4% to R653,5bn from R603,0bn in 2013 as
Nedbank continued to provide competitive and innovative
transactional and investment products, with ongoing emphasis on
meeting client needs.
■ In 2014 Nedbank successfully tilted its funding mix away from
wholesale funding through proportionally higher growth in retail
deposits, capital market issuance and foreign funding.
Summary of Nedbank Group liquidity risk and funding profile
total sources of quick liquidity
Surplus statutory liquid assets
Statutory liquid assets and cash reserves (ie SARB prudential minimum)
other sources of quick liquidity1
Total sources of quick liquidity as a % of total assets
long-term funding ratio (three-month average)
Retail Savings Bond2
Senior unsecured debt
Total capital market issuance
reliance on negotiable certificates of deposit3
reliance on foreign funding3
loan-to-deposit ratio
Basel III pro forma liquidity ratios
Liquidity coverage ratio (effective date – 2015 to 2019)4 including targeted access to the
committed liquidity facility (CLF)
Net stable funding ratio (effective date – 2018)5
(Rm)
(Rm)
(Rm)
(Rm)
(%)
(%)
(Rm)
(Rm)
(Rm)
(%)
(%)
(%)
(%)
(%)
2014
121 074
36 990
45 637
38 447
15,0
25,4
11 850
22 478
35 638
10,8
4,6
93,8
2013
107 252
27 965
41 734
37 553
14,3
26,2
9 638
20 850
33 268
14,5
2,3
96,1
>60
WIp6
>60
WIp6
1 This includes corporate bonds, listed equities and other marketable securities.
2 Nedbank has both Retail Savings Bonds and Green Retail Savings Bonds with tenures of two, three and five years. The proceeds of the Green Retail Savings Bonds are earmarked for renewable-energy projects, while the
proceeds of ordinary Retail Savings Bonds are applied to the general funding pool.
3 As a % of total deposits.
4 A 60% minimum LCR is required from 2015, increasing 10% per annum to 100% by 2019.
5 The Basel Committee released its final version of the NSFR in October 2014.
6 WIP – work in progress. The SA banks are working with National Treasury and SARB to address the structural challenges of complying with the NSFR before the effective date of 1 January 2018.
163
NedbaNk LIMITed annual report WoRLDCLASS AT MANAGING RISK (continued)
NEDBANK’S EMERGING RISK THEMES
AND RISK STRATEGY
The top 10 key risks flowing from Nedbank’s three-year business plans,
activities and risk strategy focus are set out below.
Heightened macroeconomic and geopolitical risk
1
The continuation of
the difficult macroeconomic environment,
compounded by the prospect of an ongoing power crisis, labour unrest
and slow gross domestic product (GDp) growth, will result in a more
challenging and risky operating environment.
For Nedbank to become a clearly distinctive competitive differentiator in
this VUCA environment, we will continue to strive to achieve risk
management of worldclass status.
To survive in the current economic environment of potential low revenue
growth, we need to manage expenses growth effectively by optimising
efficiencies, as highlighted in Nedbank’s key strategic focus of strategic
portfolio tilt, by continuing with the strategy of selective origination, by
conducting ongoing close monitoring, deep dives and reviews in respect
of the quality of our credit portfolios, and by ensuring adequate levels of
credit impairments are maintained.
Constraints on the electricity supply and prolonged blackouts have
implications on business continuity planning for banks. Business
continuity management capabilities are focusing on preparedness for an
extended regional blackout and increased generator capacity.
Further sovereign downgrades of SA’s credit rating will impact our pricing
and our ability to issue new forms of funding and capital, particularly
outside SA, impacting our margins and growth. Because we are capped at
the sovereign ceiling, all SA banks will be downgraded in such an event.
which Nedbank conducts itself, and consistently following
responsible business practices.
■ Enhancing safety and soundness of the banking system, and
balancing risk versus return.
■ Increasing the financial stability of the country, striving to minimise
activities such as money laundering and combatting the financing of
terrorism.
SA’s financial services will experience major changes during the 2015–
2016 period that will be different to what had to be dealt with in the past.
The Financial Sector Regulatory Bill (FSRB) will result in extensive changes
(expected in 2016) to the current regulatory system and the manner in
which the regulations are applied. It fundamentally changes the legal
framework in which the financial services industry has operated until now.
The main change brought about by the FSRB will be to create two distinct
regulators:
■ a prudential regulator [prudential Authority (pA)]; and
■ a market conduct regulator [Financial Market Conduct Authority
(FMCA)].
This system of dual regulation is known as the Twin peaks model. Twin
peaks will be implemented in two phases. phase one will address ‘Who
regulates?’ The pA will regulate (oversee) the safety and soundness of
financial institutions that provide financial products. on the other hand,
the FMCA will supervise the conduct of business of all financial institutions
and the integrity of the financial markets.
phase two will address the ‘How and what do they regulate?’ This phase
will deal with:
■ the implementation process focused on creating new laws to
underpin Twin peaks; and
Nedbank’s comprehensive stress testing enables us to be proactive in
managing extreme events and difficult environments, and provides
important input into a three-year plan and risk strategy.
■ the repeal of current laws and introduction of new all-encompassing
financial sector legislation – the Conduct of Financial Institutions Act
(CoFI).
2
Credit risk (given above VUCA macroeconomic
environment)
Nedbank’s robust credit risk management continues to be essential in the
current economic environment, especially with interest rates remaining
flatter for longer, currency moves, job losses, increasing prices, a power
crisis, etc.
Traditional major risks of credit and liquidity are, as always, a key focus.
With interest rates expected to remain unchanged at current levels until
late in the year, the softer interest rate outlook and lower borrowing costs
should support consumer credit demand and limit credit defaults in 2015,
notwithstanding the weak job market and still high consumer debt levels.
Retail banking conditions are therefore likely to improve modestly, but
growth in wholesale banking may moderate from current levels as fixed-
investment plans and credit demand may be limited by the severity and
extent of infrastructure constraints, rising production costs, soft global
demand and low international commodity prices.
However, there is a downside risk to CLRs currently being below the TTC
target range, with limited growth in the economy and in the VUCA
macroeconomic environment.
As part of our ongoing strategic portfolio tilt strategy, Nedbank will
continue to focus on selective credit origination and client-centred
growth, with strong focus on proactive credit risk management and
collections across our businesses. It remains prudent to maintain close
scrutiny of the VUCA macroeconomic environment and current consumer
indebtedness, and to ensure that our risk appetite remains appropriate.
We will leverage the IFRS 9 (credit) and Basel III implementations to
elevate that risk measurement and management to an even higher level
than today, and remain focused on changes to the National Credit Act and
any strategic implications.
3 Regulatory risk
Since the global financial crisis regulation has been fundamentally
changing the shape of banking and financial services, these changes will
continue unabated over the next three to five years to 2020.
A highly efficient, effective, integrated and strategic-based regulatory
change programme is a primary focus of Nedbank.
We will use the extensive regulatory change requirements to leverage our
risk management, balance sheet management and business practices to
heightened levels, and we remain cognisant of the rationale underlying
regulation, which is:
■ Client-centredness (‘know your client’) and Treating Customers
Fairly, ensuring that clients are satisfied with the sound manner in
164
At the same time a market conduct framework will be introduced with the
objective being, among others, the fair treatment of clients, designing
products to meet clients’ needs and ensuring that clients are better
informed about the products they purchase.
Nedbank is launching a full Market Conduct Risk project early in 2015 as
part of Nedbank’s new Regulatory Change programme, which will have as
its aim the full understanding and implementation of the market conduct
framework released by the National Treasury.
Another change brought about by the bill provides for a framework for the
supervision of financial conglomerates. To the extent that companies in
the old Mutual Group and the Nedbank Group constitute a financial
conglomerate, and
important financial
in addition a systemically
institution (SIFI), we are at this stage unsure what will be required by the
pA. Nedbank is providing its comments on the bill through the necessary
industry bodies.
4 Rest of Africa strategy
With the expansion and strategic intent of building a pan-African banking
network, our risk management focus will be further enhanced in our
investments and operations in the rest of Africa to address the related
risk appetite more holistically and to help elevate risk management
infrastructures in these environments.
The group’s risk plan contains extensive initiatives to support Nedbank’s
pan-African strategy and the recent investments in Ecobank and Banco
Único to assist in enhancing their risk governance.
5 IT risk including cybercrime and information
security
Clients naturally expect banks to prevent, quickly detect, isolate and
contain security threats to their personal information, assets and other
items of value in the care of the bank. Given the growing pervasiveness of
the digital era, the growth in data drives higher potential vulnerability,
which requires active monitoring. This presents a need for higher maturity
in managing technology-related business risks against the background of
increasing sophistication and prevalence of cybercrime.
To ensure a safer banking environment, not only for our own clients but
also for the SA banking sector as a whole, Nedbank is a participating
member of the Cyber Security Incident Response Team (CSIRT) at the
South African Banking Risk Information Centre (SABRIC), with a view to
assisting with combatting cybercrime in the SA financial sector.
Although cybercrime is very topical worldwide, there are no specific
concerns in Nedbank. While fraud and criminality levels continue to
increase globally and locally, Nedbank’s fraud experience (losses) has
shown a year-on-year decrease.
In a bid continuously to improve Nedbank’s capability to deal with the
challenges in the areas of cybersecurity and information security, focus is
placed on landing key enabling initiatives such as the formulation of a
cybercrime risk management prevention programme and an integrated
financial crime risk management framework.
This strategic approach will enable Nedbank to become even more
predictive on emerging risks and trends, both locally and internationally,
to facilitate enhanced fraud detection capabilities and protection of
valuable and sensitive data from external threats and malicious insiders.
6 Operational risk
ongoing political, economic, social, environmental and technological
developments are expected to continue challenging business operations.
The macroeconomic environment, pressure on cost reduction and meeting
revenue targets will likely increase the exposure to operational risk in 2015.
This calls for enhanced awareness of the external business environment as
well as anticipation of and proactive response to emerging risks.
The levels of operational risk capital remain under close scrutiny by the
regulators; however, Nedbank’s robust governance process ensures that
the environment is continually scanned and scenario inputs are updated
to ensure that the group remains adequately capitalised.
The top five emerging operational risks are conduct risk, cybercrime,
fraud, IT risk and the regulatory environment, and are core components of
Nedbank’s 2015 risk plan.
To ensure the successful execution of the operational risk strategy there is
an ongoing investment in people, processes and technology in key areas
across the group.
7 Concentration risk
Unmanaged risk concentrations are traditionally a potential cause of major
problems in banks. Concentration risk is therefore considered separately,
as part of Nedbank’s Risk Appetite Framework, and monitored regularly.
While Nedbank continues to grow wholesale advances faster than retail
advances, growth remains within the risk appetite (such as CLR) and
without excessive levels of single-name concentration risk. In line with the
rest of the market Nedbank’s mortgage exposure is high, but is viewed
holistically across both residential and commercial mortgages, preferring
a dominant market share in commercial, given better risk-based
economics and returns.
8 Strategic risk
The bank’s strategic plan is chiefly dependent on the success of its ability
to execute such plan. Because of this, Nedbank is acutely aware that
strategy and execution are interdependent and failure of one will inevitably
lead to the failure of the other.
Strategic and execution risks are closely allied in any successful risk
management programme and the one cannot be realised without the
other being put into effect. In other words, the strategic plan must be done
at a practical level to realise the strategy. Because of the close nature of
the relationship between the two, it follows that execution risk in the
Nedbank Group is a core focus at top management level.
9 Basel III strategic impacts
In responding to Basel III, management continues to deliver, position and
prepare Nedbank Group optimally for these regulatory changes. Risk
principles have been incorporated in the group’s strategic portfolio tilt
objectives, facilitating the strategic direction in respect of balance sheet
portfolio growth, the consumption of capital, the use of long-dated
liquidity and determining the size of the levels of high-quality liquid assets.
Basel III is being phased in over several years, from 2013 until 2019, and as
such there are several major Basel III items that are still work in progress:
■ Net stable funding ratio (NSFR)
In october 2014 the Basel Committee announced minor changes to the
NSFR. Even after these changes SA banks still have a significant NSFR gap
to close. As SA banks look strategically to closing this gap, we must
understand and respond to any unintended consequences.
Nedbank will continue to work closely with SARB, its peer group and
the National Treasury in addressing the structural challenge ahead of the
NSFR compliance date, with implementation currently planned for
1 January 2018.
■ Balancing risk sensitivity, simplicity and comparability
RWA levels are expected to be increased by the introduction of capital
floors to advanced risk-based approaches (eg Advanced Internal Ratings-
based Approach, Advanced Measurement Approach and Value at Risk),
based on the Basel III Standardised Approach.
■ LCR transitional compliance with effect from 1 January 2015
The 60% compliance requirements for LCR came into effect on
1 January 2015 and will increase evenly by an additional 10% each year
through to 2019, when banks must comply fully with this ratio.
Nedbank has proactively responded to these requirements, building a
strong compliant position before the end of 2014 that included the
acquisition of additional high-quality liquid-asset buffers and the creation of
a collateralised pool of commercial mortgage bonds that has been pledged
against an approved appropriate-size committed liquidity facility provided
by SARB as part of the group’s optimal compliance with these requirements.
The group’s 2015 compliance level includes a conservative buffer
designed to absorb any seasonal volatility during the year, and our funding
and capital plans include a clear glide path of transitioning towards the
higher requirements of 10% pa, ensuring that we accumulate additional
high-quality liquid assets in line with these increasing requirements.
10 Regulatory capital, liquidity and funding risks
The extensive transitional Basel III requirements through to 2022 and
ongoing developments in work-in-progress items continue to create
upside risk to banks’ capital requirements through either additional
capital buffer requirements or more conservative measures of underlying
risk-weighted assets.
The Financial Stability Board (FSB) is nearing the finalisation of proposals
for global systemically important banks (G-SIBs) to have total loss-
absorbing capital (TLAC) of 16% to 20% before the inclusion of any
relevant SIFI charge, capital conservation and countercyclical buffers. The
overall aim of the proposal is to limit taxpayer exposure to failing banks,
minimise the impact of resolution on financial stability and ensure the
availability of sufficient loss-absorbing and recapitalising capacity.
Although no SA bank is included on the list of current G-SIBs, local
regulators might look to adopt some of the principles applicable in this
proposal for domestic systemically important banks (D-SIBs), and
Nedbank has been identified as such for SA, along with its peers.
Domestically, raising new capital was adversely impacted by the
curatorship of African Bank during 2014, whereby domestic investors’
appetite for new-style Basel III-compliant loss-absorbent capital declined.
Although appetite for these instruments has returned in 2015, pricing of
new-style capital instruments has become more expensive.
Nedbank Group has detailed capital planning to optimally manage the
redemption of old-style capital instruments, issue new-style capital
instruments and structure its capital base across all tiers of capital. The
group also performs ongoing active market sounding in order to meet
investor demand and fill appetite at pricing levels that reflect true risk-
based economics.
ongoing regulatory liquidity developments have and will continue to play
a significant role in shaping bank balance sheets through to 2020. The
new regulatory liquidity ratios, including the LCR and NSFR introduced
within Basel III, will have the most significant impact on regulatory
liquidity and funding risk. Implications include:
■ Banks will continue to raise higher levels of low-yielding high-quality
liquid assets to support compliance with the LCR transitional
requirements, which will consume the liquidity otherwise available
for credit extension.
■ Banks will diversify into funding pools in other jurisdictions where
domestic pools cannot create adequate levels of long-dated funding
to support the requirements of the NSFR.
■ Immature capital markets will be developed and evolve in which banks
will look to create funding tenor to support the NSFR requirements.
■ Deleveraging out of suboptimal long-dated lending as long-dated
funding is recognised as a true scarce commodity.
■ Development of originate-to-distribute business models.
Compliance with these liquidity ratios will increase the cost of banking as
the levels of liquidity transformation decline and liquid-asset buffer levels
increase. The upside, however, is that liquidity risk will decline as banks’
liquidity profiles improve, with higher levels of liquidity to support short-
dated cash outflows under stress and longer-dated cash inflows better
matched against long-dated cash outflows.
Risk-adjusted pricing and returns will need to be adjusted and banks will
need to respond strategically. At Nedbank we are focused on proactively
positioning ourselves.
Conclusion
Nedbank’s ERMF has remained resilient through 2014, with a prudent but
enabling Risk Appetite Framework, comprehensive stress and scenario
testing, a responsive Recovery plan under Basel III and a robust and
strategic Risk plan for 2015. We are well positioned to elevate risk
management to become a competitive differentiator.
165
NedbaNk LIMITed annual report BoARD
oF
DIRECToRS
at 1 January 2015
DR REUEL KHoZA
VASSI NAIDoo
Effective 1 May 2015
MIKE BRoWN
DAVID ADoMAKoH
ESTABLISHED
leADerSHIp teAMS
Vassi was previously Chief Executive of
Deloitte Southern Africa from 1998 to 2006,
a member of the Deloitte UK Executive from
2006 to 2009 and a member of Deloitte
Global Executive from 2007 to 2011, and
thereafter Vice Chairman of Deloitte UK
from 2009 to 2014.
Vassi is a member of the South African
Institute of Chartered Accountants, with
honorary life membership granted in 2011 for
his contribution to the development of the
profession in SA. He is also a member of
the Institute of Chartered Accountants in
England and Wales.
Committee membership: with effect from
1 May 2015: Group Directors’ Affairs
Committee
Mike Brown 48
Chief executive
South African
qualifications: BCom, DipAcc, CA (SA), CD
(SA), AMp (Harvard Business School, USA)
Mike was appointed as Chief Financial
officer in June 2004 and as Chief Executive
in March 2010. Mike was previously an
executive director of BoE Limited and, after
the merger between Nedbank Limited, BoE
Limited, Nedbank Investment Bank Limited
and Cape of Good Hope Bank Limited, was
appointed Head of property Finance at
Nedbank Limited.
Committee membership: Large-exposure
Approval Committee, Group Credit
Committee, Group Risk and Capital
Management Committee
Holds 389 601 Nedbank Group Limited
ordinary shares.
David Adomakoh 49
non-executive Director
Ghanaian
qualifications: BSc (Econs)(Hons) (London
School of Economics), Diplome de Langue et
de Civilisation (La Sorbonne, Université de
paris)
David joined the board as an independent
non-executive director on 21 February 2014.
David is currently the Chairman of Tiso
Investment Holdings (pty) Ltd and a
cofounder of Tiso Group, where he served as
Group Managing Director. He is a former
director of Chase Manhattan Limited,
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 the Chairman of the
Investment Committee. He also serves as a
non-executive director of Idwala Industrial
Holdings, African Explosives Limited, Aveng
(Africa) Limited 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.
Committee membership: Group
Transformation, Social and Ethics Committee
Reuel Khoza 65
non-executive Chairman
South African
qualifications: BA(Hons) psychology
(University of Limpopo), MA Marketing
Management (Lancaster, UK), EngD
(Warwick, UK), IpBM-IMD (Lausanne,
Switzerland), programme for Management
Development (pMD) (Harvard Business
School, USA), LLD(hc) Rhodes, CD (SA)
Reuel joined the board as a non-executive
director in August 2005 and was appointed
as non-executive Chairman of the group in
May 2006. Reuel is currently the Chairman
of Aka Capital (pty) Ltd, and a non-executive
director of Nampak Limited, protea Group
Limited and old Mutual plc. He is president
of the Institute of directors and, in this
capacity, served on the King II and King III
Committees on Corporate Governance. He is
a founding director of the Black Management
Forum and the former Chairman of Eskom
Holdings Limited. Reuel is also the
Chancellor of the University of Limpopo.
Committee membership: Group Directors’
Affairs Committee (Chairman)
Holds 14 774 Nedbank Group Limited
ordinary shares.
Vassi Naidoo 60
non-executive Director and Chairman
designate with effect from 1 May 2015
South African
qualifications: CA (SA), ACA and pMD
(Harvard Business School, USA)
Vassi has been appointed to the Nedbank
Group Limited and Nedbank Limited boards
as a non-executive director and Chairman
designate with effect from 1 May 2015. Vassi
has also been appointed as a non-executive
director of old Mutual plc with effect from
1 May 2015.
166
ToM BoARDMAN
BRIAN DAMES
GRAHAM DEMpSTER
MUSTAQ ENUS-BREY
IAN GLADMAN
Tom Boardman 65
non-executive Director
South African
qualifications: BCom, CA (SA)
Tom was appointed to the board as an
executive director in November 2002, and
was Chief Executive from December 2003
to February 2010, after which he was
appointed as a non-executive director. From
1 January 2014 Tom was classified as an
independent non-executive director.
Tom was previously Chief Executive and an
executive director of BoE Limited, one of
SA’s leading private and investment banking
companies and which 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 Limited in 1986. Before
this he was Managing Director of Sam
Newman Limited and worked for Anglo
American Corporation Limited for three
years. He served his articles at Deloitte.
He is also a non-executive director
of Woolworths Holdings Limited, Royal
Bafokeng Holdings (pty) Ltd and African
Rainbow Minerals Limited. 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.
Committee membership: Group Information
Technology Committee (Chairman), Group
Audit Committee, Group Credit Committee
(Chairman), Large-exposure Approval
Committee, Group Finance and oversight
Committee, Group Directors’ Affairs
Committee
Holds 22 605 Nedbank Group Limited
ordinary shares and 158 000 Nedbank
Limited preference shares.
Brian Dames 49
non-executive Director
South African
qualifications: BSc(Hons), MBA
Brian joined the board as an independent
non-executive director on 30 June 2014.
previously Brian served as the Chief
Executive of Eskom, the largest power utility
in Africa and one of the largest utilities in the
world and has extensive experience with
global (and specifically with African and
South African) energy and resource issues.
Brian has demonstrated leadership in
successful large-scale corporate turnaround
management programmes, funding
programmes, infrastructure build and
deployment programmes, as well as in
corporate governance and sustainability
reporting.
Brian is currently Chief Executive of African
Rainbow Energy and power, serves as senior
adviser to Mckinsey & Company and a
member of the Sustainability Energy for All
Executive Committee (UN and World Bank
initiative) and serves as a non-executive
director of the Industrial Development
Corporation of South Africa Limited.
Committee membership: Group Information
Technology Committee, Group Credit
Committee
Graham Dempster 59
executive Director
South African
qualifications: BCom, CTA, CA (SA), AMp
(Harvard Business School, USA)
Graham was appointed Chief operating
officer of Nedbank Group in August 2009
and became an executive director on the
board. Graham joined the group in 1980 in
the Corporate Finance Division of UAL
Merchant Bank Limited. 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
Limited, 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 joined the Telkom board on
1 December 2014 and Imperial Holdings
board on 24 February 2015 as a non-
executive director.
Holds 155 337 Nedbank Group Limited
ordinary shares.
Mustaq Enus-Brey 60
Non-executive Director
South African
qualifications: BCompt(Hons), CA (SA)
Mustaq joined the board as a non-executive
director in August 2005. He is also a
director of Brimstone Investment
Corporation Limited and oceana Group
Limited, and the Chairman of Life Healthcare
Limited.
Committee membership: Group Risk and
Capital Management Committee
(Chairman), Group Credit Committee,
Group Finance and oversight Committee,
Large-exposure Approval Committee
Holds 2 113 Nedbank Group Limited ordinary
shares.
Ian Gladman 50
non-executive Director
British
qualifications: BA(Hons) History (Christ’s
College, Cambridge)
Ian joined the board as a non-executive
director in June 2002. 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, Europe, the
Middle East and Africa (EMEA) at UBS,
Investment Bank.
Committee membership: Group Credit
Committee, Group Risk and Capital
Management Committee, Group Finance
and oversight Committee, Large-exposure
Approval Committee
167
annual reportNedbaNk LIMITed ESTABLISHED LEADERSHIp TEAMS (continued)
pAUL HANRATTY
MpHo MAKWANA
MANTSIKA MATooANE
NoMAVUSo MNxASANA
RAISIBE MoRATHI
Paul Hanratty 53
non-executive Director
Irish
qualifications: BBusSci(Hons), Fellow of
the Institute of Actuaries
paul joined the board as a non-executive
director on 8 August 2014. paul is an
executive director and the Chief operating
officer of old Mutual plc. He started his
career with old Mutual South Africa (oMSA)
and has held a number of roles at old
Mutual. These included Head of product
Development; General Manager: Finance and
Actuarial; and Head of the Retail business.
He joined the board of the oMSA life
business (oMLACSA) in 2003 and became
Managing Director of oMSA in 2006 and
was appointed as Chairman of oMSA in
September 2009.
Committee membership: Group
Transformation, Social and Ethics Committee
Mpho Makwana 44
non-executive Director
South African
qualifications: BAdmin(Hons)
Mpho joined the board as an independent
non-executive director on 17 November 2011.
Mpho is the immediate past Chairman of
Eskom Holdings Limited, an independent
director of Adcock Ingram Limited, and the
Chairman of ArcelorMittal SA Limited.
Committee membership: Group
Remuneration Committee (Chairman),
Group Transformation, Social and Ethics
Committee, Group IT Committee, Group
Audit Committee, Group Directors’ Affairs
Committee
Mantsika Matooane 39
non-executive Director
South African
qualifications: MBA (Henley Business
School, UK), phD in Computer Science
(University of Cambridge, UK)
Mantsika joined the board as an independent
non-executive director on 15 May 2014.
Mantsika currently serves as Group
Executive: Enterprise Information
Management Services at Transnet SoC
Limited, and serves as a non-executive
director of JSE Limited and NMG Consultants
and Actuaries (pty) Ltd.
Committee membership: Group Information
Technology Committee
Holds 176 Nedbank Group Limited ordinary
shares.
Nomavuso Mnxasana 58
non-executive Director
South African
qualifications: BCompt(Hons), CA (SA)
Nomavuso joined the board as an
independent non-executive director in
october 2008. She is currently a director at
Winhold Limited, JSE Limited, Transnet SoC
and Land and Agricultural Development
Bank of SA Limited (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 Limited.
Committee membership: Group Audit
Committee, Group Remuneration
Committee, Group Risk and Capital
Management Committee.
Holds 11 620 Nedbank Group Limited
ordinary shares.
Raisibe Morathi 45
Chief Financial officer
South African
qualifications: BCompt(Hons), CA (SA),
HDip Tax, AMp (INSEAD)
Raisibe was appointed as Chief Financial
officer of the group in September 2009,
and held senior positions in banking and
insurance over the past 20 years.
Before joining Nedbank Group Raisibe was
an executive director of one of the listed
insurance companies. She previously held
several executive positions at the Industrial
Development Corporation of SA Limited, the
last position being Chief operating officer.
Committee membership: Large-exposure
Approval Committee, Group Credit
Committee
Holds 211 337 Nedbank Group Limited
ordinary shares.
Joel Netshitenzhe 58
non-executive Director
South African
qualifications: MSc in Financial Economics
(University of London-SoAS, UK)
Joel joined the board as an independent
non-executive director in August 2010. He is
currently an executive director of the
Mapungubwe Institute 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.
168
JoEL NETSHITENZHE
MFUNDo NKUHLU
JULIAN RoBERTS
GLoRIA SERoBE
MALCoLM WYMAN
He is a non-executive director on the board
of Life Healthcare Group Holdings Limited.
Committee membership: Group Risk and
Capital Management Committee, Group
Information Technology Committee
Mfundo Nkuhlu 48
Chief operating officer
South African
qualifications: BA(Hons), Strategic
Management in Banking (INSEAD), AMp
(Harvard Business School, USA)
Mfundo was appointed to the board as Chief
operating officer in January 2015. Mfundo
joined the group as Head of Nedbank Africa
in 2004 and became Head of Corporate
Banking in 2005. He became a member of
the Group Executive Committee (Group
Exco) in 2008 and Managing Executive
Nedbank Corporate in 2009. As a member
of the Group Exco, Mfundo was closely
involved in the oversight of the business
strategies across Nedbank and delivered
strong and consistent performance in
Nedbank Corporate. Before joining Nedbank,
Mfundo was the executive responsible for
strategy, revenue and economic analysis at
the South African Revenue Service (SARS)
and Chief Director in the dti responsible for
Africa and NEpAD.
Committee membership: Group Credit
Committee
Holds 129 305 Nedbank Group Limited
ordinary shares.
Julian Roberts 57
non-executive Director
British
qualifications: Fellow of Institute of
Chartered Accountants, member of
Association of Corporate Treasurers,
Accountancy and Business Law (University
of Stirling, Scotland)
Julian joined the board as a non-executive
director in December 2009. He was
appointed as the Group Chief Executive of
old Mutual plc in September 2008 and is
also Chairman of New York Stock Exchange-
listed old Mutual Asset Management.
Before 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 Limited.
Committee membership: Group Directors’
Affairs Committee, Group Remuneration
Committee
Gloria Serobe 55
non-executive Director
South African
qualifications: BCom (Unitra), MBA
(Rutgers, USA)
Gloria joined the board as a non-executive
director in August 2005.
Gloria is currently the Chief Executive
of Wipcapital and also founder and
Executive Director of WIpHoLD. She was
previously the Executive Director of Finance
at Transnet SoC Limited.
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
Limited.
Committee membership: Group
Transformation, Social and Ethics
Committee (Chairman), Group Credit
Committee, Large-exposure Approval
Committee
Malcolm Wyman 68
Senior Independent non-executive
Director
British
qualifications: CA (SA), AMp (Harvard
Business School, USA)
Malcolm joined the board as an independent
non-executive director in August 2009 and
was appointed as the Senior Independent
Director on 6 May 2011.
Malcolm was previously an executive
director and the Chief Financial officer of
SABMiller plc until August 2011. He was also
previously a non-executive director of Tsogo
Sun Holdings Limited until August 2014.
He is a non-executive director and Chairman
of the Audit Committee of Imperial Tobacco
Group plc as well as Serco Group plc, which
are both listed on the London Stock
Exchange.
Committee membership: Group Audit
Committee (Chairman), Group Risk and
Capital Management Committee, Group
Directors’ Affairs Committee, Group
Remuneration Committee, Group Finance
and oversight Committee (Chairman)
169
annual reportNedbaNk LIMITed NoTICE oF oUR ANNUAL GENERAL MEETING
nedbank limited
(Incorporated in the republic of South Africa)
reg no 1951/000009/06
JSe share code: nBKp ISIn: ZAe0000043667
(‘nedbank’ or ‘the company’)
This notice is sent to holders of Nedbank non-redeemable non-cumulative non-participating preference shares (‘perpetual preference shares’) and
the holders of the Class A and Class B redeemable cumulative preference shares (collectively hereafter referred to as ‘the preference shares’) for
information only.
In terms of article 44.8 of the memorandum of incorporation of Nedbank, the holders of the perpetual preference shares will not be entitled to be
present or to vote, either in person or by proxy, at any meeting of the company by virtue of or in respect of the perpetual preference shares, unless
either or both of the following circumstances prevail at the date of the meeting:
■ the preference dividend or any part thereof remains in arrears and unpaid after six (6) months from the due date thereof; and
■ a resolution of the company is proposed (in which event the preference shareholders will be entitled to vote only on such resolution) that
directly affects the rights attached to the preference shares or the interests of the holders thereof, including a resolution for the winding up of
the company or for the reduction of its capital.
In terms of articles 45.9 and 46.9 the holders of the Class A and Class B redeemable cumulative preference shares (‘redeemable preference shares’)
respectively, are entitled to receive notice and attend the annual general meeting, but will not be entitled to speak or vote thereat, unless the
circumstances as recorded in these articles prevail at the date of the meeting.
Notice is hereby given to shareholders recorded in the securities register of Nedbank on Friday, 20 March 2015, that the annual general meeting of
shareholders will be held in the Executive Boardroom, Ground Floor, Block A, Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, on
Thursday, 7 May 2015, at 15:00 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 (’the 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 Thursday, 30 April 2015.
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.
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.
AGENDA
1 Presentation of annual financial statements and reports
The annual financial statements of the company, incorporating inter alia the Directors’ Report and the Auditors’ Report, for the financial year
ended 31 December 2014, have been distributed as required and will be presented to the shareholders as required in terms of the Companies
Act. The complete set of the consolidated audited annual financial statements, together with the reports, are contained in the annual report.
2 Ordinary dividends
To note the dividends of R2 600 000 000,00 declared and paid on 31 March 2014 and R800 000 000,00 declared and paid on 2 September 2014
to the sole shareholder holding the issued ordinary shares for the period 1 January 2014 to 31 December 2014.
3 Dividends on perpetual preference shares
To note preference dividend number 23 of 36,86072 cents per share declared for the period from 1 January 2014 to 30 June 2014, paid on
Monday, 1 September 2014, to shareholders of the non-redeemable non-cumulative non-participating preference shares recorded in the books
of the company at the close of business on Friday, 29 August 2014, and preference dividend number 24 of 38,76140 cents per preference share
declared for the period from 1 July 2014 to 31 December 2014 and payable on Monday, 23 March 2015.
4 Dividends on Class A and Class B redeemable cumulative preference shares
To note and confirm the preference dividend of R97 681,23 declared and paid on 19 February 2014 and R114 833,69 declared and paid on
30 July 2014 on the Class A redeemable cumulative preference shares and the preference dividend of R256 866,22 declared and paid
on 19 February 2014 and R187 723,38 declared and paid on 30 July 2014 on the Class B redeemable cumulative preference shares, respectively
in accordance with the terms of the preference share subscription and participation agreement entered into between Nedbank, IBL Asset
Finance and Services Limited, Imperial Holdings Limited and Associated Motor Holdings proprietary, Limited to the shareholders respectively
holding the Class A and Class B redeemable cumulative preference shares.
5 Retirement
To note the retirement of those non-executive directors of Nedbank who have served on the board for a period longer than nine years and who
therefore, in terms of Nedbank Group policy, are required to retire.
Dr RJ Khoza (Chairman), Mr MA Enus-Brey and Mrs GT Serobe were appointed to the Nedbank board on 16 August 2005 and they will retire at
the close of the Nedbank Group Limited annual general meeting on 11 May 2015. The board has resolved to elect Mr V Naidoo as Chairman of
Nedbank immediately after the close of the Nedbank Group annual general meeting on 11 May 2015, subject to Nedbank shareholders electing
him as a non-executive director in terms of ordinary resolution 7.4.
Mr GW Dempster has reached the retirement age for executive directors and he retires from the board at the close of the Nedbank Group annual
general meeting on 11 May 2015.
170
RESoLUTIoNS
6 Ordinary resolution 1
Reelection of directors of the Company
To resolve to reelect those directors that will retire by rotation in terms of the memorandum of incorporation of the company and, being eligible,
make themselves available for reelection as directors of the company, each by way of a separate vote. Biographical details of the directors to be
reelected are set out on pages 166 to 169 of the 2014 Nedbank Annual Report available at nedbankgroup.co.za.
6.1
‘To resolve that Mr PM Makwana be and is hereby reelected as a director of the company.’
6.2 'To resolve that Mrs NP Mnxasana be and is hereby reelected as a director of the company.’
7 Ordinary resolution 2
Election of directors of the company appointed during the year
During the year the board of directors appointed Dr MA Matooane and Messrs BA Dames, pB Hanratty, V Naidoo and MC Nkuhlu as directors
of the company. These directors retire in terms of the memorandum of incorporation of the company and, being eligible, make themselves
available for election. Biographical details are set out on pages 166 to 169 of the 2014 Nedbank Annual Report.
7.1
‘To resolve that Mr BA Dames be and is hereby elected as a director of the company.’
7.2 ‘To resolve that Mr PB Hanratty be and is hereby elected as a director of the company.’
7.3 ‘To resolve that Dr MA Matooane be and is hereby elected as a director of the company.’
7.4 ‘To resolve that Mr V Naidoo be and is hereby elected as a director of the company.’
7.5 ‘To resolve that Mr MC Nkuhlu be and is hereby elected as a director of the company.’
8 Ordinary resolution 3
Reappointment of external auditors
Following an evaluation of the performance of Deloitte & Touche and KpMG Inc., the Nedbank Group Audit Committee and board recommends
the reappointment of the auditors on a joint basis. If either resolution 8.1 or resolution 8.2 is not passed, the resolution which is passed shall be
effective.
8.1
‘Resolved that Deloitte and Touche (with Mr M Jordan as designated registered auditor) be and are hereby reappointed as auditors to hold office from the
conclusion of the annual general meeting until the conclusion of the next annual general meeting of Nedbank.’
8.2 ‘Resolved that KPMG Inc (with Ms H Berrange as designated registered auditor) be and are hereby reappointed as auditors to hold office from the conclusion
of the annual general meeting until the conclusion of the next annual general meeting of Nedbank.’
9 Ordinary resolution 4
External auditors remuneration
‘To resolve that the Nedbank Group Audit Committee be and is hereby authorised to determine the remuneration and the terms of engagement
of the auditors of the company.
10 Ordinary resolution 5
Control of authorised, but unissued shares
‘To resolve that the authorised, but unissued, shares in the authorised share capital of Nedbank be and are hereby placed under the control of
the directors to issue these shares, in such numbers and on such terms and conditions and at such times and at such prices as they deem fit,
subject to the provisions of the Companies Act, and the JSE Listings Requirements.’
11 Advisory endorsement of remuneration policy
‘To endorse through a non-binding advisory vote that in terms of ‘The Revised King Code and Report on Governance for South Africa’ (King III),
as published in September 2009, shareholders, as required, hereby approve the remuneration policy of the company and its implementation as
adopted by the Nedbank Group’s Remuneration Report, a copy of which appears on pages 122 to 151 of the 2014 Nedbank Annual Report.’
12 Special resolution 1
Remuneration of non-executive directors
‘To resolve that the non-executive directors’ fees for their services as directors, in accordance with the company’s remuneration policy, as set
out in the Remuneration Report contained in the annual financial statements, be and are hereby approved’.
13 Special resolution 2
General authority to provide financial assistance to related and interrelated companies
‘To resolve that, subject to the provisions of 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:
171
annual reportNedbaNk LIMITed
NoTICE oF oUR ANNUAL GENERAL MEETING (continued)
1
2
3
4
5
6
the financial assistance can be provided to any company that is currently, or in the future, ‘related’ to ‘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 and 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 these terms and conditions will limit the provision by the company of the 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.’
This resolution, if adopted, will have the effect of authorising the provision of the described financial assistance by the company to companies
‘related’ to and ‘interrelated’ with the company and persons ‘related’ to such companies (subject to the conditions set out in the resolution) if the
board of directors decides it is desirable to do so. The effects of providing such financial assistance will depend on the nature of the financial
assistance and the purpose for which it is used.
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
20 February 2015
172
FoRM oF pRoxY
Nedbank Limited
(Incorporated in the Republic of South Africa)
Reg No 1951/000009/06
JSE share code: NBKp ISIN” ZAE000043667
(‘the company’)
To be used by the holders of voting rights on ordinary shares
I/We
of (address)
being the holder(s) of
ordinary shares in the company, appoint (see note 1):
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
in the Executive Boardroom, Ground Floor, Block A, Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, on Thursday, 7 May 2015,
at 15:00, for the purpose of considering and, if deemed fit, passing with or without modification as 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:
Number of votes (one vote per ordinary share)
For
Against
Abstain
Resolutions
1.1
1.2
2.1
2.2
2.3
Reelection as a director of Mr pM Makwana, who is retiring by rotation
Reelection as a director of Mrs Np Mnxasana, who is retiring by rotation
Election of Mr BA Dames, who was appointed as a non-executive director since the
previous annual general meeting of shareholders
Election of Mr pB Hanratty, who was appointed as a non-executive director since the
previous annual general meeting of shareholders
Election of Dr MA Matooane, who was appointed as a non-executive director since
the previous annual general meeting of shareholders
2.4 Election of Mr V Naidoo, who was appointed as a non-executive director since the
previous annual general meeting of shareholders
2.5
Election of Mr MC Nkuhlu, who was appointed as an executive director since the
previous annual general meeting of shareholders
3.1
Reappointment of external auditors
4
5
6
7
8
Determination of the remuneration of the external auditors
placing of unissued shares under the control of the directors
Advisory endorsement of Remuneration policy
Special Resolutions
Remuneration of non-executive directors
General authority to provide financial assistance to related and interrelated companies
on a show of hands a person entitled to vote is only entitled to one vote irrespective of the number of the relevant Nedbank 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 shares held or represented by him/her bears to the aggregate
amount of the nominal value of all the Nedbank 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 Executive Boardroom, Ground Floor, Block A, Nedbank
135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton on Thursday, 7 May 2015, at 15:00 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)
2015
173
annual reportNedbaNk LIMITed NoTES 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 person(s) entitled to vote at the annual general meeting) to attend, participate in, speak and vote or abstain from voting in place of that
holder at the annual general meeting.
2
3
4
5
6
7
8
9
10
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.
A proxy appointment must be in writing, dated and signed by the holder appointing the proxy/proxies.
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.
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.
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.
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 driver’s licence or a valid passport.
Any alterations or corrections to this form of proxy shall be initialled by the signatory/signatories.
The completion and lodging of this form of proxy shall 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
shall be suspended accordingly.
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 Road Campus, 135 Rivonia Road, Sandown, Sandton, 2196 or po Box 1144, Johannesburg, 2000) or the company’s transfer
secretaries in South Africa, namely Computershare Investor Services proprietary Limited (‘Computershare’), 70 Marshall Street, Johannesburg,
2001 (po Box 61051, Marshalltown, 2107). The forms of proxy are requested to be received no later than 15:00 on Wednesday, 6 May 2015.
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.
11
This form of proxy may be completed by:
11.1 those holders who are holding Nedbank shares in a certificated form; or
11.2 those holders who are recorded in the subregister as holding Nedbank 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) as at the record date at this annual general meeting.
12
13
14
15
Holders of Nedbank 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.
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.
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.
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 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.
174
terMS uSeD In our report
Advanced internal ratings-based approach
The advanced Internal Ratings-Based (AIRB) Approach is subject to
supervisory approval where a bank may use its internal developed
credit risk measurement systems to calculate the capital requirements
for credit risk.
Advanced measurement approach
The Advanced Measurement Approach (AMA) allows a bank to
calculate its regulatory capital charge (using internal models) based on
internal risk variables and profiles. This is the only risk-sensitive
approach for operational risk allowed in Basel II.
Assets under management
These are assets managed by Nedbank Group, beneficially owned by
clients and therefore not reported on the consolidated balance sheet;
advances that have been either fully or partially utilised by a borrower.
Automated teller machine
An automated teller machine (ATM) is a cash machine or a free-
standing cash dispensing device that may also provide other information
or services for clients who have a card and a personal identification
number, a password or other personal identification.
Banks
This asset class covers all exposures to counterparties treated as banks.
Basel capital accord
The new Basel Capital Accord (Basel II) of the Bank for International
Settlements is an improved capital adequacy framework accomplished
by closely aligning banks’ capital requirements with improved modern
risk management practices and sophisticated risk assessment
capabilities. It further ensures the risk sensitivity of the minimum
capital requirements by including supervisory reviews and market
discipline through enhanced disclosure.
Basel asset classes
(as categorised in the BA 200 return)
Corporate
Corporate exposures
Corporate exposures are a debt obligation of a corporation, partnership
or proprietorship. Banks are permitted to distinguish separately
exposures to small and medium-sized enterprises.
Specialised lending high-volatility commercial real estate
High-volatility commercial real estate (HVCRE) lending is the financing
of commercial real estate that exhibits higher-loss-rate volatility
compared with other types of specialised lending.
Specialised lending income-producing real estate
Income-producing real estate (IpRE) refers to a method of providing
funding for real estate (such as office buildings to let, retail space,
multifamily residential buildings, industrial or warehouse space and
hotels) where the prospects for repayment and recovery on the
exposure depend primarily on the cashflows generated by the asset.
The primary source of these cashflows would generally be lease or
rental payments or the sale of the asset.
Specialised lending object finance
object finance (oF) refers to a method of funding the acquisition of
physical assets (eg ships, aircraft, satellites, rolling stock, and fleets)
where the repayment of the exposure is dependent on the cashflows
generated by the specific assets that have been financed and pledged.
Specialised lending commodities finance
Commodities finance (CF) refers to structured short-term lending to
finance reserves,
inventories, or receivables of exchange-traded
commodities (eg crude oil, metals or crops), where the exposure will be
repaid from the proceeds of the sale of the commodity.
Specialised lending project finance
project finance (pF) is a method of funding where the lender looks
primarily to the revenues generated by a single project, both as the
source of repayment and as security for the exposure. This type of
financing is usually for large, complex and expensive installations, for
example power plants, chemical-processing plants and mines.
Small and medium enterprises corporate
This asset class covers all exposures to small and medium enterprises
(SME) that are classified as corporate, based on criteria prescribed by
the Regulator.
Purchased receivables corporate
This asset class covers all receivables classified as corporate exposures
that are purchased for
in asset-backed securitisation
structures, but banks may also use this approach with the approval of
national supervisors for appropriate on-balance-sheet exposures that
share the same features.
inclusion
Public sector entities
This asset class covers all exposures to enterprises that are wholly or
majority owned by the central government, eg Eskom and Transnet.
Local governments and municipalities
This asset class covers all exposures to metropolitan councils, district
councils and municipalities.
Sovereign (including central government and central bank)
This asset class covers all exposures to counterparties treated as
central government.
Securities firms
This asset class covers all exposures to enterprises regulated by a
recognised authority and trading in securities.
Retail exposures
Retail mortgages (including home equity line of credit)
This asset class covers all mortgage advances or credit lines to
individuals that are fully secured by a mortgage over residential
property.
Retail revolving credit
This involves exposures to individuals that are revolving, unsecured,
and committed (both contractually and in practice). In this context,
revolving exposures may be defined as those in respect of which clients’
outstanding balances are permitted to fluctuate based on their
decisions to borrow and repay up to a limit established by the bank.
Retail other
This asset class covers all non-revolving exposures (excluding
mortgage advances) to individuals.
Small and medium enterprises retail
This asset class covers all exposures to SMEs that are classified as
retail, based on criteria prescribed by the regulator.
Purchased receivables – retail
This asset class covers all receivables classified as retail exposures and
are purchased for inclusion in asset-backed securitisation structures,
but banks may also use this approach with the approval of national
supervisors for appropriate on-balance-sheet exposures that share the
same features.
Black economic empowerment transaction
Nedbank Group’s black economic empowerment (BEE) transaction,
which focused primarily on the issuing of shares to BEE partners for the
purposes of broad-based black economic empowerment (BBBEE),
equating to approximately 9,3% (43 618 748 shares) of total share
capital and equating to black ownership of 11,5% of the value of
Nedbank Group’s SA businesses in 2005. Nedbank Namibia’s BEE
transaction, which focused primarily on the issuing of shares to BEE
partners and affinity groups for the purposes of BEE in Namibia,
equating to approximately 0,14% (665 680 shares) of total share
175
annual reportNedbaNk LIMITed TERMS USED IN oUR REpoRT (continued)
capital of Nedbank Group Limited and equating to black ownership of
11,13% of the value of NedNamibia Holdings Limited, Nedbank Group’s
Namibian business in 2006.
Borrowing group
A group of clients and their underlying loans and advances according to
the per person definition of the ‘Regulations Related to Banks’.
Capital adequacy ratio
The capital adequacy of SA banks is measured in terms of the SA Banks
Act requirements. one calculateds the ratio by dividing the primary
(tier 1), secondary (tier 2) and tertiary (tier 3) capital by the risk-
weighted assets.
Group capital adequacy ratio
Group capital adequacy is the ratio of group net qualifying capital
and reserve funds to total group risk-weighted assets as calculated
according to the SA Banks Act requirements.
Primary (tier 1) capital
primary capital consists of issued ordinary share capital and perpetual
preference share capital, qualifying perpetual callable hybrid capital,
retained earnings and reserves, less regulatory deductions.
Core tier 1 capital
Core tier 1 capital is primary capital less any amount in non-core tier 1
capital, being perpetual preference share capital and qualifying,
perpetual, callable hybrid capital.
Secondary (tier 2) capital
Secondary capital is made up of subordinated dated debt and certain
types of perpetual callable debt, the excess amount in respect of
eligible provisions, and 50% of any revaluation surplus less regulatory
deductions.
Tertiary (tier 3) capital
Tertiary capital consists of capital obtained by way of unsecured
subordinated loans, subject to any conditions that may be prescribed.
CASHFLOW
Financing activities
Activities that result in changes to the capital structure of the group.
Investment activities
Activities relating to the acquisition, holding and disposal of property
and equipment and long-term investments.
Operating activities
Activities that are not financing or investing activities and arise from
the operations conducted by the group.
Credit loss ratio
Credit loss ratio is the impairments charge as a percentage of average
advances.
Defaulted advance
This is any advance or group of advances that has triggered the relevant
definition of default criteria for that portfolio that are in line with the
amended Banks Act regulations relating to banks. For retail portfolios it
is transaction-centred and therefore a default would be specific to an
account (specific advance). For wholesale portfolios it is client- or
borrower-centred, meaning that in the event any transaction within a
borrowing group defaults, then all transactions within the borrowing
group would be defaulted.
Definition of default
At a minimum, a default is deemed to have occurred where a material
obligation is overdue for more than 90 days or an obligor exceeds an
advised limit for more than 90 days.
Deferred taxation assets
Deferred taxation assets are the amounts of
recoverable in future periods in respect of:
income taxation
Deferred taxation liabilities
Deferred taxation liabilities are the amounts of income tax payable in
future periods due to differences between the tax and accounting
treatment of transactions.
Direct taxation
Direct taxation includes normal taxation on income, capital gains tax
(CGT) and secondary tax on companies (STC).
Dividend/Distribution cover
Headline earnings per share divided by the dividend/distribution
declared per share.
Dividend/Distribution declared per share
Dividend/Distribution declared per share is the actual interim dividend
paid/capitalisation award issued and the final dividend declared/
capitalisation award declared for the period under consideration,
expressed in cents.
Dividend/Distribution paid/capitalised per share
Dividend/Distribution paid/capitalised per share is the actual final
dividend paid/capitalisation award issued for the prior year and the
interim dividend paid/capitalisation award issued for the year under
consideration, expressed in cents.
Dividend yield
Dividend/Capitalisation award declared per ordinary share as a
percentage of the closing share price of ordinary shares.
Downturn expected loss
A stress-tested value for expected loss under downturn economic
conditions that could have unfavourable effects on a bank’s credit
exposures.
dti codes
The Codes of Good practice as promulgated on 9 February 2007 under
section 9(1) of the Broad-based Black Economic Empowerment Act, 53
of 2003, establish the rules, targets and stipulations for the
measurement of BBBEE within SA based on three scorecard
classifications for organisations: emerging microenterprise (EME),
qualifying small enterprise (QSE), or generic enterprise. Nedbank is
scored as a generic enterprise under the published codes.
Earnings per share
Basic earnings basis
Income attributable to equity holders for the period divided by the
weighted average number of ordinary shares in issue (net of shares
held by group entities) during the period.
Headline earnings basis
Headline earnings divided by the weighted average number of shares in
issue (net of shares held by group entities) during the period.
Fully diluted basis
The relevant earnings figure is adjusted for the assumed adjustments
to income that would have been earned on the issue of shares issued
from dilutive instruments. The resultant earnings are divided by the
weighted average number of ordinary shares and other dilutive
instruments (ie potential ordinary shares) outstanding at the period-
end, assuming they had been in issue for the period.
Earnings yield
Headline earnings per share as a percentage of the closing price of
ordinary shares.
Economic capital
Economic capital (eCap) is the quantification of risk and an internal
assessment of the amount of capital required to protect the group
against economic losses with a desired level of confidence (solvency
standard or default probability) over a one-year time horizon. In other
words, it is the magnitude of economic losses the group could withstand
while still remaining solvent.
■ deductible temporary differences due to differences between the
taxation and accounting treatment of transactions; and
Economic profit or loss
Headline earnings after adjusting for cost of capital.
■ the carry forward of unused taxation losses.
176
Effective taxation rate
The taxation charge in the income statement, excluding taxation
relating to non-trading and capital items, as a percentage of profit
before taxation.
Efficiency ratio (cost-to-income ratio)
Total expenses as a percentage of income from normal operations (net
interest income plus non-interest revenue).
Exposure at default
Exposure at default (EAD) is an estimation of the extent to which a
bank may be exposed to a counterparty in the event of, and at the time
of, that counterparty’s default.
Expected loss
Expected loss (EL) is the expected value of portfolio losses due to
default over a specified time horizon.
Foreign exchange translation gains/losses
The results and assets/liabilities of all foreign entities controlled by the
group that have a rand-functional currency are translated at the closing
exchange rate and the differences arising are recognised in the income
statement as foreign exchange translation gains/losses.
Headline earnings
Headline earnings is not a measure of maintainable earnings. For
purposes of the definition and calculation, the guidance given on
headline earnings, as
issued by the SA Institute of Chartered
Accountants in circular 07/02 of December 2002, has been used.
Headline earnings consist of the earnings attributable to ordinary
shareholders excluding non-trading and capital items.
International Financial Reporting Standards
International Financial Reporting Standards (IFRS), as adopted by the
International Accounting Standards Board (IASB), and interpretations
issued by the
Interpretations
International Financial Reporting
Committee (IFRIC) of the IASB. Nedbank Group’s consolidated
financial results are prepared in accordance with IFRS.
Impairments charge to average advances
This is the impairments charge on loans and advances for the year
divided by average advances; also known as the credit loss ratio or
impairment ratio.
Impairment of loans and advances
Impairment of loans and advances arises where there is objective
evidence that the group will not be able to collect an amount due.
The impairment is the difference between the carrying amount and the
estimated recoverable amount.
Indirect taxation
This is value-added tax (VAT) and other taxes, levies and duties paid to
government, excluding direct taxation.
‘Jaws’ ratio
This is the difference between the rate of growth in total income from
normal operations and the rate of total expense growth.
Johannesburg Interbank Agreed Rate
The Johannesburg Interbank Agreed Rate (JIBAR) is the rate that SA
banks charge each other for wholesale money.
King II (the code)
The King Report on Corporate Governance 2002 sets out principles of
good corporate governance for SA companies and organisations.
King III
The revised King Code and Report on Corporate Governance for South
Africa 2009 sets out revised principles of good corporate governance
for SA companies.
London Interbank Offered Rate
The London Interbank offered Rate (LIBoR) is the rate that banks
participating in the London money market offer each other for short-
term deposits.
Market capitalisation
This is the group’s closing share price multiplied by the number of
shares in issue including shares held by group entities.
Net asset value per share
This is total equity attributable to equity holders of the parent divided
by the number of shares in issue, excluding shares held by group entities.
Net interest income to average interest-earning
assets (net interest margin)
This is net interest income expressed as a percentage of average net
interest-earning banking assets. Net interest-earning banking assets
are used, as these closely resemble the quantum of assets earning
income that is included in net margin.
Non-interest revenue to total expenses
This is non-interest revenue as a percentage of total expenses from
normal operations.
Non-interest revenue to total income
This is non-interest revenue as a percentage of total income from
normal operations.
Non-trading and capital items
These comprise the following:
■ surpluses and losses on disposal of long-term investments,
subsidiaries, joint ventures and associates;
■ impairment of goodwill arising on acquisition of subsidiaries, joint
ventures and associates;
■ surpluses and losses on the sale or termination of an operation;
■ capital cost of fundamental reorganisation or restructuring having
a material effect on the nature and focus of the operations of the
reporting entities;
■ impairment of investments, property and equipment, computer
software and capitalised development costs; and
■ other items of a capital nature.
Off-balance-sheet assets
These are assets managed on behalf of third parties on a fully
discretionary basis.
Price/earnings ratio
This is the closing price of ordinary shares divided by headline earnings
(for the previous 12 months) per share.
Properties in possession
properties in possession (pIpS) are acquired through payment defaults
on loans secured by properties.
Return on ordinary shareholders’ equity
Return on ordinary shareholders’ equity (RoE) is headline earnings
expressed as a percentage of average equity attributable to equity
holders of the parent.
Return on ordinary shareholders’ equity excluding
goodwill
RoE excluding goodwill is headline earnings expressed as a percentage
of average equity attributable to equity holders of the parent less
goodwill.
Return on total assets
Return on total assets (RoA) is headline earnings expressed as a
percentage of average total assets.
Risk-weighted assets
Risk-weighted assets (RWA) are determined through the application of
risk weights to balance sheet assets and off-balance-sheet financial
instruments according to the relative credit risk of the counterparty.
The risk weighting for each balance sheet asset and off-balance-sheet
financial instrument is regulated by the SA Banks Act or by regulations
in the respective countries of the other banking licences.
177
annual reportNedbaNk LIMITed TERMS USED IN oUR REpoRT (continued)
South African Reserve Bank regulations related to
banks and the BA returns*
The regulations relating to banks were amended with effect from
1 January 2008, based on the revised Basel Capital Accord (Basel II).
The new Basel Capital Accord of the Bank of International Settlements
is an improved capital adequacy framework accomplished by closely
aligning banks’ capital requirements with improved modern risk
management practices and sophisticated risk assessment capabilities.
It further ensures the risk sensitivity of the minimum capital
requirements by including supervisory reviews and market discipline
through enhanced disclosure.
* The new Banks Act regulatory returns.
Segmental reporting
Operational segment
A distinguishable component of the group, based on the market on
which each business area focuses, which is subject to risks and returns
that are different from those of other operating segments.
Geographical segment
A distinguishable component of the group that is engaged in providing
services within a particular economic environment and is subject to
risks and returns that are different from those of components operating
in other economic environments.
Securitisation exposures
This asset class covers all exposures to tradable, interest-bearing
commercial paper, which is secured by an underlying asset, eg
mortgage loans.
Share-based payments
These are the transfers of a company’s equity instruments by its
shareholders to parties that have supplied goods or services to the
company (including employees).
Shares held by group entities (treasury shares)
These are ordinary shares in Nedbank Group Limited acquired/held by
group companies, including ordinary shares held in share trusts as part
of the BEE transaction.
Self-service terminal
A self-service terminal (SST) is similar to an ATM, but is designed for
non-cash transactions.
The Standardised Approach
The Standardised Approach (TSA) is an approach to calculating
regulatory credit risk requirements that sets out specific risk weights
specified by the Regulator in lieu of the AIRB Approach.
Tangible net asset value per share
This is total equity attributable to equity holders of the parent less
goodwill, computer software and capitalised development costs,
divided by the number of shares in issue, excluding shares held by
group entities.
Total collateral
This is the total monetary value of all collateral held by a bank as
security for an advance(s), limited to exposure.
Total credit extended
This is the total of all advances extended by a bank, including unutilised
facilities and other off-balance-sheet exposures.
Total equity attributable to equity holders of the
parent
This is ordinary share capital, share premium and reserves.
Weighted average number of shares
This is the number of shares in issue increased by shares issued during
the period, weighted on a time basis for the period during which they
participated in the income of the group, less shares held by group
entities, weighted on a time basis for the period during which the
entities held these shares.
these definitions should be read in conjunction with the group’s
accounting policies, which also clarify certain terms used.
178
ABBreVIAtIonS, ACronyMS
AnD InItIAlISMS uSeD
In our report
ABASA
Advancement of Black Accountants of Southern Africa
CE
Chief Executive
ABCp
Asset-backed Commercial paper
Arts & Culture Trust
Available Financial Resources
Advanced Internal Ratings-based approach
Asset and Liability Committee
Advanced Measurement Approach
Anti-money-laundering
African National Congress
CEM
CET1
CF
CFL
CFT
CGT
CGU
Current exposure method
Common-equity tier 1
Commodities finance
Compact fluorescent lamp
Combating the financing of terrorists
Capital gains tax
Cash-generating unit
CHoC
Childhood Cancer Foundation South Africa
Annualised premium Equivalent
CLR
Credit-loss ratio
African Task Force
Automated teller machine
Assets Under Administration
CMAT™
Customer Management Assessment Tool
CNHR
CoE
Cost of non-hedgeable risk
Cost of equity
AWCA
African Women Chartered Accountants
CoID ACT
Compensation for occupational Injuries and Diseases
Act
ACT
AFR
AIRB
ALCo
AMA
AML
ANC
ApE
ATF
ATM
AUA
BA
Banks Act
BANKSETA
Banking Sector Training Authority
BASA
BAU
BBBEE
BBp
BCM
BEE
BES
BESA
Bo
BRMF
BRT
BUSA
BWA
BWo
CAGR
CAR
CBC
CBSS
CCB1
CCB2
CCMA
CCR
CDp
The Banking Association South Africa
Business as usual
Broad-based Black Economic Empowerment
Black Business partner
Business Continuity Management
Black Economic Empowerment
Board Ethics Statement
Bond Exchange of South Africa
Black-owned
Business Risk Management Forum
Bus Rapid Transport
Business Unity South Africa
Businesswomen’s Association
Black-women-owned
Compound average growth rate
Capital adequacy ratio
Commonwealth Business Council
Compulsory bonus share scheme
Capital conservation buffer
Countercyclical capital buffer
Commission for Conciliation, Mediation and
Arbitration
Counterparty credit risk
Carbon Disclosure project
CpI
CpT
CSI
CVA
CWG
DAC
DBSA
DEFRA
dEL
DEpS
DIFR
Consumer price index
Corporate performance target
Corporate social investment
Credit valuation adjustment
Cape Winemakers Guild
Directors’ Affairs Committee
Development Bank of Southern Africa
Department for Environment, Food And Rural
Affairs (UK)
Downturn expected loss
Diluted earnings per share
Disability incident frequency rate
DMTN
Domestic medium-term note
DoE
DSTI
Department of Energy
Deferred short-term incentive
DSTIS
Deferred short-term incentive scheme
DTI
EAD
EaR
ED
ECD
EE
EGC
EL
EME
Department of Trade And Industry
Exposure at default
Earnings at risk
Enterprise development
Early-childhood development
Employment equity
Enterprise Governance and Compliance
Expected loss
Exempt microenterprise
EMTN
Euro Medium-term Note
179
annual reportNedbaNk LIMITed ABBREVIATIoNS, ACRoNYMS AND INITIALISMS USED IN oUR REpoRT (continued)
Ep
EpS
EpWp
ERM
ERMF
ETI
EV
EVE
Economic profit
Earnings per share
Expanded public Works programme
Enterprisewide Risk Management
Enterprisewide Risk Management Framework
Ecobank Transnational Incorporated
Embedded value
Economic value of equity
ExCo
Executive Committee
FAIS ACT
Financial Advisory and Intermediary Services Act
FATCA
Foreign Account Tax Compliance Act
FCT
FCTR
FIC
FICA
FRTB
FSB
FSC
FSSS
FTE
Foreign currency translation
Foreign currency translation reserves
Financial Intelligence Centre
Financial Intelligence Centre Act
Fundamental review of the trading book
Financial Services Board
Financial Sector Charter
Financial Services Sector Supplement
Fulltime employee
FVTpL
Fair value through profit and loss
GAC
GCC
GDp
GDp
GEF
GFoC
GHG
GIA
GLC
GoRC
GoRM
Group Audit Committee
Group Credit Committee
Graduate development programme
Gross domestic product
Group Environmental Forum
Group Finance and oversight Committee
Greenhouse gas(es)
Group Internal Audit
Global Local Currency
Group operational Risk Committee
Group operational Risk Management
GoRMF
Group operational Risk Management Framework
Gp
GRC
Guaranteed package
Group Remuneration Committee
GRCMC
Group Risk and Capital Management Committee
GRI
GSC
GTSC
HEpS
HQLA
HR
Global Reporting Initiative
Group Sustainability Committee
Group Transformation And Sustainability Committee
Headline earnings per share
High-quality liquid asset
Human Resources
HVCRE
High-volatility commercial real estate
IAS
IASB
International Accounting Standard(s)
International Accounting Standards Board
ICAAp
Internal Capital Adequacy Assessment process
Integrated Energy plan
International Finance Corporation
IEp
IFC
180
IFRIC
IFRS
ILAAp
IMA
IpRE
IR
IRRBB
IRp2
IT
IBAR
International Financial Reporting Interpretations
Committee
International Financial Reporting Standards
Internal Liquidity Adequacy Assessment process
Internal Model Approach
Income-producing Real Estate
Industrial Relations
Interest rate risk in the banking book
Integrated Resource plan 2
Information technology
Johannesburg Interbank Agreed Rate
JSE, THE
JSE Limited
KpI
KRI
KZN
LCA
LCR
LFDG
LGD
LTI
LTIp
MDp
MFC
Key performance Indicator
Key Risk Indicator
Kwazulu-Natal
Life cycle analysis
Liquidity coverage ratio
Leading for Deep Green
Loss given default
Long-term incentive
Long-term Incentive plan
Management Development programme
Motor Finance Corporation
MMFTp
Matched maturity funds transfer pricing
NBI
NCA
NEEF
National Business Initiative
National Credit Act
Nedbank Employment Equity Forum
NEpAD
New partnership for Africa’s Development
NGo
NGR
NII
NIM
NIR
Non-government organisation
Nedbank Group Rating
Net interest income
Net interest margin
Non-interest revenue
NMCF
Nelson Mandela Children’s Fund
NMF
NMM
NpAT
Npo
NSFR
NSS
oF
oHS
Nedbank Motor Finance
Nelson Mandela Metro
Net profit after tax
Non-profit organisation
Net stable funding ratio
Nedbank Staff Survey
object Finance
occupational Health and Safety
oHS ACT
occupational Health and Safety Act
oMART
old Mutual Alternative Risk Transfer Fund
oMG
oMSA
oRM
oRMF
old Mutual Group
old Mutual (South Africa)
operational Risk Management
operational Risk Management Framework
oSE
oTC
pF
pGN
pIIGS
poS
pVFp
RApM
RBB
REDD
REFIT
RMBS
RoA
RoA
RoE
RRp
RSp
RWA
SA™
SACCT
SADC
SAE4D
SAM
SApS
SAR
SARB
SARS
SBp
SED
SEMS
ordinary shareholders’ equity
over the counter
project Finance
professional Guidance Note
SENS
SIFE
SIFI
SME
Securities Exchange News Service
Students in Free Enterprise
Systematically Important Financial Institution
Small- and medium-sized enterprises
portugal, Italy, Ireland, Greece And Spain
SMME
Small, medium and microenterprises
point of sale
present value of future profits
pVNBp
present value of new-business premiums
pWD
QASA
QIS
QSE
people with disabilities
Quadpara Association of South Africa
Quantitative impact studies
Qualifying small entity
QRopS
Qualifying recognised overseas pension funds
Risk-adjusted performance Measurement
Retail and Business Banking
Reducing Emissions from Deforestation and Forest
Degradation
Renewable-energy feed-in tariff
Residential mortgage-backed securitisation
programme
Rest of Africa
Return on (total) assets
Return on equity/return on ordinary shareholders’
funds
SpE
SpV
SREp
SRI
SRp
SST
STC
STI
STR
STT
TB
TCC
TCTS
Topp
TpA
TSA
TTC
UN
Special-purpose entity
Special-purpose vehicle
Supervisory Review and Evaluation process
Socially Responsible Index
Securities Regulation panel
Self-service terminal
Secondary Tax on Companies
Short-term incentive
Suspicious-Transaction Reporting
Securities Transfer Tax
Tuberculosis
Total cost to company
Teach Children to Save
Training outside of public practice
Tonnes per annum
The Standardised Approach
Through-the-cycle
United Nations
Resolution and recovery plan
UNEp
United Nations Environment programme
Restricted Share plan
risk-weighted assets
South Africa™
South African Children’s Charity Trust
Southern African Development Community
South African Employers 4 Disability
Solvency Assessment and Management
South African police Service
Share Appreciation Right
South African Reserve Bank
South African Revenue Service
Share-based payments
Socioeconomic development
Social and Environmental Management System
UNEp FI
United Nations Environment programme Finance
Initiative
UNISA
University of South Africa
VaR
VAT
VCT
VIF
(BUSINESS)
VNB
VYpD
WWF
Value at risk
Value-added tax
Voluntary counselling and testing
Value of in-force (business)
Value of new business
Vezokuhle Youth Development project
World Wide Fund for Nature
WWF – SA World Wide Fund for Nature – South Africa
Yoy
YTD
Year on year
Year to date
181
annual reportNedbaNk LIMITed CoDeS For our FInAnCIAl
InStruMentS
NEDBANK LIMITED
NoN-REDEEMABLE
NoN-CUMULATIVE
pREFERENCE SHARES
JSE share code:
NBKp
ISIN code:
ZAE000043667
NEDBANK LIMITED SENIoR
UNSECURED DEBT
Listed on the Bond Exchange of SA
ISIN code:
NBK1B
NBK2A
NBK2B
NBK3A
NBKI1
NBK4
NBKI1U
NBK5B
NBK6A
NBK6B
NBK7B
ZAG000071366
ZAG000071341
ZAG000071358
ZAG000071408
ZAG000071374
ZAG000072729
ZAG000073792
ZAG000076613
ZAG000076639
ZAG000076621
ZAG000076647
NEDBANK LIMITED
SUBoRDINATED DEBT
Listed on the Bond Exchange of SA
ISIN code:
LISTED oN THE LoNDoN
SToCK ExCHANGE
USD100m 13 NC 8 (EMTN01)
xS0415508307
IpB3
ZAG000062605
NEDBANK LIMITED
SECURITISATIoN ISSUE
Listed on the Bond Exchange of SA
ISIN code:
GR1A2A
GRN1A1
GRN1B
GRN1C
GRN1D
oCT1A1
oCT1A4
oCT1B1
oCT1C1
oCT1D1
oCT1E1
ZAG000047218
ZAG000047192
ZAG000047234
ZAG000047176
ZAG000047184
ZAG000040361
ZAG000040395
ZAG000040403
ZAG000040411
ZAG000040429
ZAG000040437
ZAG000029810
ZAG000033358
ZAG000036831
ZAG000036849
ZAG000041120
ZAG000043191
ZAG000044272
ZAG000047937
ZAG000047945
ZAG000053703
ZAG000053711
NED5
NED6
NED7
NED8
NED9
NED10
NED11
NED12A
NED12B
NEDH1A
NEDH1B
182
Notes:
183
annual reportNedbaNk LIMITed ContACt DetAIlS
NEDBANK LIMITED
Incorporated in the Republic of SA
Reg No 1951/000009/06
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 Proprietary Limited
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
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
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NEDBANK GROUP INTEGRATED REPORT 2014
Should you wish to engage on the content of this report or if you
require an additional copy of the Nedbank Group Limited Integrated
Report 2014, 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
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DISCLAIMER
Nedbank has acted in good faith and has made every reasonable effort
to ensure the accuracy and completeness of the information contained
in this document, including all information that may be defined as
‘forward-looking statements’ within the meaning of US securities
legislation.
Forward-looking statements may be identified by words such as
‘believe’,
‘project’,
‘plan’,
‘target’, ‘predict’ and ‘hope’.
‘anticipate’,
‘estimate’,
‘expect’,
‘intend’,
Forward-looking statements are not statements of fact, but statements
by the management of Nedbank 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 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 obtained from sustainable and internationally certified
afforestation, using independently audited chains of custody.
The carbon emissions generated through the production of this report
have been included in the calculation of Nedbank total 2014 carbon
footprint that will be offset during 2015.
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annual reportNedbaNk LIMITed