2015
NEDBANK LIMITED
aNNUal RePORt
for the year ended 31 December 2015
NedbaNk limited – ANNUAL RepoR t 2015
A
SECTION HEADING (continued) 2015 HigHligHts
Headline earnings
8 275
(2014: 8 077)
Increase
2,5%
(2014: 12,4%)
Return on equity
15,4%
(2014: 16,5%)
NIR/expense ratio
74,7%
(2014: 73,5%)
Common-equity
tier 1 ratio
10,6%
(2014: 11,0%)
Credit loss ratio
78 bps
(2014: 82 bps)
Return on assets
1,05%
(2014: 1,13%)
CONtENts
ANNUAL
RepoRt
Financial highlights
Ten-year review: Consolidated statement
of comprehensive income
Ten-year review: Consolidated statement
of financial position
Responsibility of our directors
Certification from our Company Secretary
Report from our Group Audit Committee
Report from our directors
Independent auditors' report to the
shareholders of Nedbank Ltd
audited 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
Worldclass risk management
Report from group remuneration
committee chair
Reporting back on remuneration
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
Contact details
2
4
6
8
9
10
12
15
16
17
18
20
21
24
121
122
140
142
152
154
157
158
159
163
167
1
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
2015
2014
8 163
(112)
(144)
32
8 275
3,07
0,78
43,9
58,8
56 170
15,4
729 118
860 733
1,05
415 541
10,6
11,5
14,1
27,6
358,3
27,6
30 030
7 998
(79)
(96)
17
8 077
3,37
0,82
42,7
58,1
52 236
16,5
644 737
753 444
1,13
368 823
11,0
12,1
14,7
27,2
358,3
27,2
29 650
78,24198
75,62212
38,22487
36,86072
40,01711
38,76140
76,98627
72,56847
899
983
825
54,4
975
1 056
925
59,5
Rm
Rm
Rm
Rm
Rm
%
%
%
%
Rm
%
Rm
Rm
%
Rm
%
%
%
m
m
m
cents
cents
cents
cents
cents
cents
cents
cents
m
2
NedbaNk limited – ANNUAL RepoR t 2015
HEADLINE EARNINGS
(Rm)
10 000
EXPENSES AND EFFICIENCY RATIO
Expenses (Rm)
Efficiency ratio (%)
Rm
25 000
20 000
15 000
10 000
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
5
7
2
8
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
5 000
0
5
2
7
1
1
5
,
1
6
8
6
7
2
1
,
8
4
5
1
7
6
2
1
,
4
0
5
2
9
7
3
1
,
3
3
5
3
8
9
4
1
,
3
6
5
5
5
9
6
1
,
8
6
5
5
6
5
8
1
,
3
6
5
9
9
1
0
2
,
6
6
5
1
3
0
2
2
1
,
8
5
9
5
4
3
2
,
8
8
5
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
TOTAL EQUITY
(Rbn)
TOTAL ASSETS AND RETURN ON TOTAL ASSETS
60
50
40
30
20
10
0
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
,
0
0
6
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
NET INTEREST INCOME TO AVERAGE
INTEREST-EARNING BANKING ASSETS
(%)
5
Rbn
1 000
800
600
400
200
0
Total assets (Rbn)
Return on total assets (%)
2
0
4
0
,
1
1
6
4
3
,
1
7
4
5
1
,
1
5
4
5
,
7
0
6
7
5
,
7
0
4
1
6
,
9
0
5
4
6
0
,
1
9
9
6
1
,
1
3
5
7
1
,
1
1
6
8
1
,
1
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
NON-INTEREST REVENUE TO TOTAL INCOME
Non-interest revenue (NIR) (Rm)
NIR to total income (%)
Rm
20 000
15 000
10 000
8 000
6 000
4 000
2 000
0
4
3
2
1
0
%
80
60
40
20
0
%
1,5
1,2
0,9
0,6
0,3
0
%
50
40
30
20
10
0
1
,
4
1
,
4
8
3
,
5
3
,
2
3
,
2
3
,
4
3
,
4
3
,
5
3
,
3
3
,
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
5 000
0
6
6
5
8
,
0
5
4
5
2
7
9
8
,
1
4
7
7
8
9
,
3
9
3
8
3
3
0
1
,
0
0
4
1
4
7
0
1
,
4
0
4
5
5
5
2
1
1
,
2
4
1
5
1
4
1
,
9
2
4
6
6
4
5
1
,
3
3
4
6
9
1
6
1
,
7
2
4
4
1
5
7
1
,
9
3
4
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
NedbaNk limited – ANNUAL RepoR t 2015
3
TEN-yEAR REvIEW
CONSOLIDATED STATEMENT OF COMPREhENSIvE INCOME
2015
Rm
2014
2013
2012
2011
2010
2009
2008
2007
2006
Rm
Interest and similar income
Interest expense and similar charges
Net interest income
Impairments charge on loans and advances
income from lending activities
Non-interest revenue
Operating income
Total operating expenses
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
55 128
32 724
22 404
4 608
17 796
17 514
35 310
23 459
668
11 183
(144)
11 039
(1)
11 038
2 828
8 210
8 163
47
8 210
8 275
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
4
NedbaNk limited – ANNUAL RepoR t 2015
CONSOLIDATED STATEMENT OF COMPREhENSIvE INCOME
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
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
Rm
Rm
Interest and similar income
Interest expense and similar charges
Net interest income
Impairments charge on loans and advances
income from lending activities
Non-interest revenue
Operating income
Total operating expenses
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
Profit from operations before non-headline earnings items
Share of (losses)/profits of associate companies and joint arrangements
55 128
32 724
22 404
4 608
17 796
17 514
35 310
23 459
668
11 183
(144)
11 039
(1)
11 038
2 828
8 210
8 163
47
8 210
8 275
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
NedbaNk limited – ANNUAL RepoR t 2015
5
TEN-yEAR REvIEW (continued)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Rm
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
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 liabilties held for sale
Deferred taxation liabilities
Long-term employee benefit liabilities
Long-term debt instruments
total liabilities
total equity and liabilities
18 151
60 078
30 948
42 733
10 757
56 322
15 644
26 828
17 467
35 004
13 811
31 279
12 587
37 575
14 660
26 194
666 807
603 329
566 047
520 116
493 107
471 447
446 428
436 420
3 925
904
1 648
2
1 400
67
8 114
4 885
16 190
4 881
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
4 528
241
2 832
508
1 029
362
84
6 171
1 992
12 641
3 830
860 733
753 444
699 155
645 350
613 540
576 490
544 990
547 132
460 627
401 888
28
18 532
37 610
56 170
3 561
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
223
183
141
136
121
110
59 954
33 996
55 980
15 479
708 036
634 623
9 911
87
8 404
35
763
3 009
44 977
800 779
860 733
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
11 514
31 715
14 314
29 991
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
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
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
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
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
321 724
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
467 924
464 082
6
NedbaNk limited – ANNUAL RepoR t 2015
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
666 807
603 329
566 047
520 116
493 107
471 447
446 428
436 420
11 514
31 715
14 314
29 991
7 469
21 955
14 077
31 667
6 823
14 408
12 871
35 754
7 638
10 411
23 114
41 834
3 989
629
3 549
8
565
66
488
6 082
2 027
11 862
3 634
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
321 724
5 120
138
2 385
41
690
48
66
3 323
1 357
7 026
2 605
860 733
753 444
699 155
645 350
613 540
576 490
544 990
547 132
460 627
401 888
27
14 422
24 856
39 305
3 561
27
14 422
20 281
34 730
3 560
223
183
141
136
121
110
42 987
13 791
516 540
8 286
27
997
1 473
29 439
570 553
613 540
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
27
14 422
16 927
31 376
3 122
1 644
300
36 442
23 077
467 924
464 082
5 218
162
1 514
1 298
20 082
506 997
544 990
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
Investments in private-equity associates, associate companies and joint
Rm
assets
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
Current taxation assets
Investment securities
Non-current assets held for sale
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 banks
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 liabilties held for sale
Deferred taxation liabilities
Long-term employee benefit liabilities
Long-term debt instruments
total liabilities
total equity and liabilities
18 151
60 078
30 948
42 733
3 925
904
1 648
2
1 400
67
8 114
4 885
16 190
4 881
28
18 532
37 610
56 170
3 561
59 954
33 996
9 911
87
763
3 009
44 977
800 779
860 733
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
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
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
708 036
634 623
NedbaNk limited – ANNUAL RepoR t 2015
7
RESPONSIBILITy OF OUR DIRECTORS
The directors are responsible for the preparation and fair presentation of the consolidated financial statements of Nedbank Ltd (comprising the statement
of financial position at 31 December 2015, 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 and
IFRS Interpretation Committee (IFRS IC), 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. 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 independent auditors are responsible for reporting on whether the consolidated financial statements are fairly presented in accordance with IFRS.
Approval of consolidated annual financial statements
The consolidated annual financial statements of Nedbank Ltd, as identified in the first paragraph, were approved by the Nedbank Ltd Board of Directors on
1 March 2016 and are signed on its behalf by:
V Naidoo
Chairman
Sandown
1 March 2016
mWt brown
Chief Executive
8
NedbaNk limited – ANNUAL RepoR t 2015
CERTIFICATION FROM OUR COMPANy SECRETARy
In terms of section 88(2)(e) of the Companies Act, 71 of 2008 (as amended), I certify that, to the best of my knowledge and belief, Nedbank Ltd has filed
with the Commissioner all such returns and notices as are required by the Companies Act, 71 of 2008, and that all such returns and notices are true, correct
and up to date.
tSb Jali
Company Secretary
Sandown
1 March 2016
NedbaNk limited – ANNUAL RepoR t 2015
9
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 and corporate reporting processes. In addition, the GAC assesses
the effectiveness of the internal auditors and the independence and
effectiveness of the external auditors.
This report aims to provide details of how the GAC has satisfied its various
obligations during the period as well discuss some of the key issues that
arose and how the committee addressed these to assist in ensuring the
integrity of Nedbank's financial reporting.
Composition and governance
The committee is chaired by Malcolm Wyman and has five members, all of
whom are independent non-executive directors. On 25 November 2015
Stanley Subramoney joined the committee as a fifth member and
underwent a detailed induction programme, which included briefings on
matters relevant to the responsibilities of the committee and meetings with
the finance executive. The committee met six times during the year,
including the annual meeting with the Bank Supervision Department of the
South African Reserve Bank (SARB).
GAC members
Malcolm Wyman
(Chair)
Stanley Subramoney
Nomavuso Mnxasana
Mpho Makwana
Tom Boardman
Scheduled meeting attendance
6/6
–
6/6
6/6
6/6
The chair of the committee reports to the board on its activities and the
matters discussed at each meeting, highlighting any key items that the
committee feels requires action and provides recommendations for their
resolution.
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. Other members of management are invited to attend certain
meetings in order to provide the committee with greater insight into
specific issues or areas of the group.
The GAC chair has regular contact with the management team to address
relevant matters directly. The CIA and the external auditors have direct
access to the committee, including closed sessions without management,
on any matter that they regard as relevant to the fulfilment of the
committee's responsibilities. The GAC Chair meets with the CIA and
external auditors separately between audit committee meetings.
Ongoing training is provided to committee members on a range of financial,
regulatory and other topical compliance matters. During 2015 members
received training on liquid-asset portfolios and hedge-related accounting,
and IFRS 9 Accounting implications and approach. Members also received
presentations on future changes to external audit reporting, Companies
Act and Banks Act requirements of the GAC, with a 'deep dive' into the
activities of the new Nedbank Corporate and Investment Banking Cluster.
The performance of the committee is reviewed annually as part of the
effectiveness review of the board and all its committees. The 2015 review
concluded that the committee continued to operate effectively and
successfully discharged its responsibilities and duties.
Internal control
The committee is responsible for reviewing the effectiveness of systems for
internal control, financial reporting and risk management, and considering
the major findings of any internal investigations into control weaknesses,
fraud or misconduct, and management's response thereto.
The GAC receives regular reports provided as part the Enterprisewide Risk
Management Framework (ERMF) to assist in evaluating the group's
internal controls. The ERMF places emphasis on accountability,
responsibility, independence, reporting, communication and transparency,
both internally and in respect of all Nedbank's key external stakeholders.
Significant areas of focus within the reports include:
■■
■■
■■
■■
identifying and managing material risks within the group and
changes to these risk profiles during the year;
creating and maintaining an effective internal control environment
throughout the group;
demonstrating the necessary respect for the control environment;
and
identifying and correcting weaknesses in systems and internal
controls.
The GAC receives regular reports from the Group Information Technology
Committee regarding the monitoring of the adequacy and effectiveness of
the group's information system controls and from the Group Credit
Committee regarding its oversight of the adequacy and effectiveness of the
credit monitoring processes and systems.
The GAC receives 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.
having considered, analysed, reviewed and debated information provided
by management and 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.
The Audit Committee considered the following significant issues and key
areas of management judgement applied in the preparation of the financial
statements in the current year.
■■
Fair value of financial instruments – The GAC reviewed and
discussed 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 34 to 35 of the financial statements and in the
accounting policy discussed in note 1.6.
■■
Credit risk provisions – The GAC reviewed and challenged reports
from the Group Credit Committee regarding the level and
appropriateness of impairments, provisioning methodologies and
10
NedbaNk limited – ANNUAL RepoR t 2015
■■
■■
related key judgements in determining the impairment balances, and
satisfied itself as to the level of impairments.
taxation-related matters – The GAC reviewed reports from the CFO
regarding the tax computation and, where applicable, the
judgements made in determining tax accrual and the deferred tax
balance. The taxation expense and related balances are disclosed in
note 11 to the financial statements.
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 as well as 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 1.8 to the financial statements.
The external auditors are preparing for the changes in requirements to
auditors' reporting of key audit matters in their report and have actively
engaged with the GAC. The report aims to provide information that allows
users of the financial statements to understand how the external auditors
have considered and evaluated the significant matters identified during the
course of their audit. This will be effective in the auditors' report on the
2016 financial statements.
Update on key focus areas in 2015
The new SAP enterprise resource planning (ERP) system went live early in
2015, impacting the entire financial accounting control environment. The
GAC monitored the implementation of the project and received regular
updates from the CFO on its progress. The project was delivered within the
timetable and with all material controls operating effectively.
IFRS 9 received much attention this year as the planning and pilot phases
of the project were launched. The project is being managed jointly between
Group Finance and Group Risk, and the GAC satisfied itself that significant
progress is being made, with the next stage of collaboration and
development being the focus for 2016.
Regulatory reporting process
The GAC reviewed the adequacy of the regulatory reporting processes as
required by the Banks Act of South Africa, 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 SARB where,
among other things, key external audit findings, internal audit matters and
reporting responsibilities in terms of the regulations are discussed.
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 chair and an
operational reporting line to the CE.
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 annual Group Internal Audit plan. In particular the GAC:
■■
■■
ensured that the CIA has a direct reporting line to the Chair 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 GAC is responsible for the appointment, compensation and oversight
of the external auditors for the group, namely Deloitte & Touche and KPMG
Inc. 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
■■ monitored the effectiveness of the external auditors in terms of their
audit quality, expertise and independence, as well as the content and
execution of the audit plan.
A further annual review of the quality of the audit and the performance of
the joint external auditors was undertaken in 2015 through among others
questionnaires completed by key finance staff, Group Internal Audit
members central to the assessment process and members of the GAC.
As part of the assessment of the external auditors' independence, the
committee reviewed and approved the Non-audit Services Policy, which
governs the types of service that can be performed by the auditors, as well
as the value and scope of the non-audit services provided by the auditors.
Only those non-audit services that do not affect their independence and
entail skills and experience that make them the most appropriate suppliers
were approved during the period. Fees paid to the auditors are disclosed in
note 8 to the annual financial statements.
The GAC is of the view that the group continues to receive an efficient,
effective and independent audit service and recommended to the board the
reappointment of the external auditors for 2016.
Key focus areas for 2016
■■
Review and consideration of management's plans in respect of future
changes to the IFRS, most notably:
IFRS 9 Financial Instruments – significant progress was made
during 2015, with the focus for 2016 on impairments and the
development of models.
IFRS 15 Revenue Recognition – the effective date was postponed
to 1 January 2018; this continues to be an area of emphasis for
the upcoming year.
■■
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 of the Companies Act for fair
presentation.
The GAC reviewed and discussed the integrated report, reporting process
and governance and financial information included in the integrated report
after considering recommendations from the Transformation, Social and
Ethics Committee, the Group Remuneration Committee, The Group Risk
and Capital Management Committee and the 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.
m Wyman
Group Audit Committee Chair
1 March 2016
NedbaNk limited – ANNUAL RepoR t 2015
11
REPORT FROM OUR DIRECTORS
for the year ended 31 December 2015
The board of directors is pleased to present the annual financial statements
of Nedbank Ltd for the year ended 31 December 2015.
During the period under review, and also subsequent to year-end, the
following changes occurred to the Nedbank board:
Nature of business
Nedbank Ltd ('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 Limited ('the JSE').
Annual financial statements
Details of the financial results are set out on pages 16 to 120 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 International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board and IFRS
Interpretation Committee (IFRS IC), the SAICA Financial Reporting Guides
as
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.
issued by
Year under review
The year under review is fully covered in the ‘Reflections from our
Chairman’, the ‘Reflections from our Chief Executive’ and the ‘Reflections
from our Chief Financial Officer’ sections of the 2015 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, available at nedbankgroup.co.za.
ownership
The holding company of Nedbank is Nedbank Group Ltd (‘Nedbank
Group’), whose holding company is Old Mutual Life Assurance Company
(SA) Ltd 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 55 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.
■■ Mfundo Nkuhlu was appointed as an executive director and Chief
Operating Officer on 1 January 2015;
■■
■■
■■
■■
■■
■■
Reuel Khoza, Mustaq Enus-Brey and Gloria Serobe retired as non-
executive directors on 11 May 2015 having been on the board for nine
years in a non-executive capacity;
Graham Dempster retired as an executive director on 11 May 2015
having reached retirement age;
Stanley Subramoney was appointed as a non-executive director
on 23 September 2015;
Julian Roberts resigned as non-executive director on
31 October 2015;
Bruce hemphill was appointed as a non-executive director on
25 November 2015; and
Paul hanratty resigned as non-executive director with effect from
12 March 2016.
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.
Stanley Subramoney and Bruce hemphill were appointed by the board
of directors since the previous Nedbank annual general meeting on
7 May 2015 and, in terms of the memorandum of incorporation, their
appointments terminate at the close of the annual general meeting to be
held on 4 May 2016. They are available for election. Ian Gladman, Raisibe
Morathi and Malcolm Wyman 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 4 May 2016.
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. None of the current non-executive directors and independent non-
executive directors of Nedbank have served on the board in that capacity
for more than nine years.
12
NedbaNk limited – ANNUAL RepoR t 2015
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 (Ghanaian)
Non-executive director
21 February 2014
TA Boardman
Non-executive director
1 November 2002 (1 March 2010
as non-executive)
Date resigned/retired as director
(where applicable)
MWT Brown
BA Dames
GW Dempster
MA Enus-Brey
ID Gladman
PB hanratty (Irish)
JB hemphill
RJ Khoza
PM Makwana
MA Matooane
NP Mnxasana
RK Morathi
v Naidoo
JK Netshitenzhe
MC Nkuhlu
Chief Executive
Non-executive director
Executive director
Non-executive director
Non-executive director
Non-executive director
17 June 2004
30 June 2014
5 August 2009
16 August 2005
7 June 2012
8 August 2014
Retired 11 May 2015
Retired 11 May 2015
Resigned 12 March 2016
Non-executive director
25 November 2015
Chairman and non-executive
director
16 August 2005
Retired 11 May 2015
Non-executive director
17 November 2011
Non-executive director
Non-executive director
Chief Financial Officer and executive
director
Chairman and non-executive
director
Non-executive director
Chief Operating Officer and
executive director
15 May 2014
1 October 2008
1 September 2009
1 May 2015
5 August 2010
1 January 2015
JvF Roberts (British)
Non-executive director
1 December 2009
Resigned 31 October 2015
S Subramoney
GT Serobe
Non-executive director
23 September 2015
Non-executive director
16 August 2005
Retired 11 May 2015
MI Wyman (British)
Senior independent director
1 August 2009
Directors' interests
Nedbank Group holds the issued ordinary shares of Nedbank.
The directors' interests in ordinary shares in Nedbank Group and non-
in
redeemable, non-cumulative, non-participating preference shares
Nedbank at 31 December 2015 and any movements therein up to the
reporting date 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.
Audit Committee and Group transformation, Social
and ethics Committee Reports
The Audit Committee Report appears on pages 12 and 13 and the report
from the Group Transformation, Social and Ethics Committee Chair appears
in the Nedbank Group Ltd Integrated Report.
Company Secretary and registered office
As part of the annual board evaluation process, the board of directors has
conducted an assessment of the Company Secretary. The results were
discussed by the board of directors on 26 February 2016 and the board 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 and the Chairman and the Company Secretary
meet regularly through the year. Mr Jali is not a director of the Company
and the board is satisfied that as far as is reasonably possible, an arm's
length relationship between the Company Secretary and the board is intact.
Details of Mr Jali’s qualifications and experience appear in the ‘Established
and admired leadership teams’ section of the Nedbank Group Ltd Integrated
Report.
The Company Secretary’s addresses and the registered office are as
follows:
Business address
Registered address
postal address
135 Rivonia Road
Sandown, Sandton
2196
SA
Nedbank Ltd
PO Box 1144
Johannesburg, 2000
SA
Nedbank Ltd
Nedbank 135 Rivonia
Campus
135 Rivonia Road
Sandown, Sandton,
2196
SA
property and equipment
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.
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.
NedbaNk limited – ANNUAL RepoR t 2015
13
REPORT FROM OUR DIRECTORS (continued)
for the year ended 31 December 2015
Joel Netshitenzhe is an executive director of the Mapungubwe Institute for
Strategic Reflection (MISTRA). In 2014, MISTRA received a grant of
R1 million (2013: R2m) from the Nedbank Eyethu Community Trust
[formed in 2005 as part of Nedbank Group’s black economic empowerment
(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.
No grant was received by MISTRA in 2015.
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 vassi Naidoo’s position as Chairman of
Nedbank are encapsulated in a contract.
Service contracts have been entered into for Mike Brown, Mfundo Nkuhlu
and Raisibe 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 Mike 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
R3,5bn for losses in excess of R50m. Our group captive insurer provides
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
■■
9 January 2015 by Depfin Investments (Pty) Ltd for the
reclassification of 100 Class J no-par-value preference shares.
■■
■■
17 February 2015 by Depfin Investments (Pty) Ltd for the
reclassification of 1 150 Class G no-par-value preference shares.
17 February 2015 by Depfin Investments (Pty) Ltd for the
reclassification of 300 000 of Series 50B no-par-value preference
shares.
■■
■■
■■
■■
19 June 2015 by Depfin Investments (Pty) Ltd for the reclassification
of 390 K no-par-value preference shares.
19 June 2015 by Depfin Investments (Pty) Ltd for the reclassification
of 300 000 of Series 499B no-par-value preference shares.
25 November 2015 by Depfin Investments (Pty) Ltd for the
reclassification of 500 000 Class L no-par-value preference shares.
14 December 2015 by Depfin Investments (Pty) Ltd for the
reclassification of 500 000 Class M 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
In line with the subscription agreement, Nedbank will subscribe for shares
in African Bank holdings Ltd for R10,2m on 11 March 2016 and for an
additional R399,8m on 30 March 2016, representing a 4,1% holding in
African Bank holdings Ltd. This aligns with Nedbank’s commitment under
the provisions of this agreement.
On 11 March 2016, Old Mutual announced its new strategy which seeks to
realise long term value for its shareholders and other stakeholders by
separating its four businesses – Old Mutual Emerging Markets, Nedbank
Group, Old Mutual Wealth and Old Mutual Asset Management – from each
other. This strategy is referred to as the Old Mutual Managed Separation.
The Old Mutual Managed Separation, is expected to result in Old Mutual over
time reducing its approximately 54% interest in Nedbank Group to an
appropriate strategic minority position to underpin the continuing commercial
relationship between OMEM and Nedbank Group. Old Mutual currently
envisages reducing its shareholding in Nedbank Group primarily by way of a
distribution of Nedbank Group shares to the shareholders of Old Mutual in an
orderly manner and at an appropriate time in the context of the Old Mutual
Managed Separation and does not intend to sell any part of its shareholding in
Nedbank Group to a new strategic investor.
The boards of directors and management teams of Old Mutual and Nedbank
Group are working closely together to determine the most effective method
and appropriate timing to effect the Old Mutual Managed Separation, in a
way that safeguards the stability and integrity of both Nedbank Group and the
South African financial services sector. Old Mutual expects that the Old
Mutual Managed Separation will be materially completed by the end of 2018.
Nedbank Group shareholders and stakeholders will – on a regular basis – be
kept appropriately informed of further developments in this regard.
The directors are not aware of any other material events that have occurred
between the reporting date and 11 March 2016.
14
NedbaNk limited – ANNUAL RepoR t 2015
INDEPENDENT AUDITORS' REPORT TO ThE ShAREhOLDER OF NEDBANK LTD
Report on the financial statements
We have audited the consolidated financial statements of Nedbank Ltd set out on pages 16 to 120, which comprise the statement of financial position at
31 December 2015, and the statement of comprehensive income, statement of changes in equity and statement of cashflows for the year then ended, and
the notes, comprising a summary of significant accounting policies and other explanatory information, and specified sections of the remuneration report.
Directors’ responsibility for the 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 consolidated 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 Ltd at
31 December 2015, and its consolidated financial performance and consolidated cashflows 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 2015, we have read the Report from the Directors, the Report
from the Group Audit Committee and the Company Secretary’s Certification 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.
Report on other legal and reporting requirements
In terms of the Independent Regulatory Board for Auditors (IRBA) Rule published in Government Gazette Number 39475 dated 4 December 2015, we report
that Deloitte & Touche has been the auditor of Nedbank Ltd for 42 years and KPMG Inc has been the auditor of Nedbank Ltd for 42 years. We are independent
of the group in accordance with the IRBA Code of Professional Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable
to performing audits of financial statements in SA. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance
with other ethical requirements applicable to performing audits in SA. The IRBA Code is consistent with the International Ethics Standards Board for
Accountants Code of Ethics for Professional Accountants (Parts A and B).
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
1 March 2016
NedbaNk limited – ANNUAL RepoR t 2015
15
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December
Accounting
policy
Notes
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
Profit from operations
Share of (losses)/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 subsequently be reclassified to profit or loss
– Exchange differences on translating foreign operations
– Fair–value adjustments on available-for-sale assets
items that may not subsequently be reclassified 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
5
6
19.1
7
8
9
10
11.1
1.24
1.24
1.6
1.22, 1.24
1.24
1.3
1.7
1.4
1.6
1.10
1.9
1.3
1.3
1.3
1.3
2015
Rm
55 128
32 724
22 404
4 608
17 796
17 514
35 310
23 459
668
11 183
(144)
11 039
(1)
11 038
2 828
8 210
578
190
(9)
118
279
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
8 788
8 174
8 163
47
8 210
8 739
49
8 788
7 998
50
8 048
8 123
51
8 174
16
NedbaNk limited – ANNUAL report 2015
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 December 2015
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
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
²
Included in loans and advances are loans to fellow subsidiaries amounting to R19,9bn (2014: R18,6bn).
Included in amounts owed to depositors are deposits from fellow subsidiaries amounting to R21,5bn (2014: R11,4bn).
Accounting
policy
Notes
2015
Rm
2014
rm
1.5, 1.6
1.6
1.6
1.6
1.6
1.6
1.7
1.6
1.12
1.3, 1.6
1,7
1.10, 1.20
1.9
1.5, 1.6
1.3, 1.8, 1.13
1.16, 1.17
1.16
1.4, 1.15
1.16
1.3
1.6
1.6
1.6, 1.14
1.7
1.7
1.9
1.6
14
15
16
17
18
20
21
23
22
24
26
27
14
28
29.1
29.2
16
30
31
24
27
32
18 151
60 078
30 948
42 733
10 757
56 322
15 644
26 828
666 807
603 329
3 925
904
1 648
2
1 400
67
8 114
4 885
16 190
4 881
5 393
236
2 369
16
1 158
165
7 459
4 409
14 843
4 516
860 733
753 444
28
18 532
37 610
56 170
3 561
223
59 954
33 996
27
17 422
34 787
52 236
3 561
183
55 980
15 479
708 036
634 623
9 911
87
763
3 009
44 977
800 779
860 733
8 404
35
287
3 002
35 634
697 464
753 444
NedbaNk limited – ANNUAL report 2015
17
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December
reserves
ordinary
share capital
rm
ordinary
share premium
rm
Foreign
currency
translation
reserve¹
rm
property
revaluation
reserve²
rm
27
17 422
148
1 537
Number of
ordinary
shares
27 241 024
14
163
(36)
27 241 024
314 625
27
1
17 422
1 110
162
1 664
16
33 380
52 236
3 561
183
55 980
190
118
(60)
27 555 649
28
18 532
352
1 722
(1 035)
95
7
36 469
56 170
3 561
223
59 954
total equity
other
attributable to
preference
attributable to
Non-
controlling
interest
ordinary
distributable
reserves⁴
Available-for-
sale reserve⁵
distributable
equity holders
reserves⁶
of the parent
share capital
and premium
shareholders
total equity
rm
3 561
reserves
other
non-
rm
80
(7)
7
80
15
Share-based
payments
reserve³
rm
(363)
(7)
(145)
(515)
(177)
(343)
rm
129
(113)
(9)
rm
28 993
(323)
(3 400)
8 059
50
1
(371)
(5 200)
8 440
222
(2)
rm
47 973
(323)
(3 400)
8 123
(145)
–
7
1
1 111
(371)
(5 200)
8 739
–
(343)
(2)
rm
141
(9)
51
(9)
49
rm
51 675
(323)
(3 409)
8 174
(145)
–
7
1
1 111
(371)
(5 209)
8 788
–
(343)
(2)
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
Shares issued
Preference share dividend
Dividend to shareholders
Total comprehensive income for the year
Transfer (from)/to reserves
Share-based payments reserve movement
Other movements
balance at 31 december 2015
¹
²
³
⁴
⁵
⁶
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, associate company or joint venture that is disposed of is included in the determination of profit/loss on disposal of the subsidiary, associate company or joint venture.
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.
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 Ltd to various share schemes to acquire Nedbank Group Ltd shares, which is recognised directly in equity. The reconciliation shown in this note is the cumulative
share-based payment charge for all share schemes.
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.
This comprises of 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.
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.
18
NedbaNk limited – ANNUAL report 2015
Number of
ordinary
ordinary
share capital
share premium
ordinary
shares
27 241 024
rm
27
rm
17 422
27 241 024
314 625
27
1
17 422
1 110
162
1 664
reserves
Foreign
currency
translation
reserve¹
rm
148
14
property
revaluation
reserve²
rm
1 537
163
(36)
190
118
(60)
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
Shares issued
Preference share dividend
Dividend to shareholders
Total comprehensive income for the year
Transfer (from)/to reserves
Share-based payments reserve movement
Other movements
balance at 31 december 2015
income.
¹
²
³
⁴
⁵
⁶
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, associate company or joint venture that is disposed of is included in the determination of profit/loss on disposal of the subsidiary, associate company or joint venture.
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
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 Ltd to various share schemes to acquire Nedbank Group Ltd shares, which is recognised directly in equity. The reconciliation shown in this note is the cumulative
share-based payment charge for all share schemes.
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.
This comprises of 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.
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
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
3 561
Non-
controlling
interest
attributable to
ordinary
shareholders
rm
141
(9)
51
total equity
rm
51 675
(323)
(3 409)
8 174
–
(145)
7
1
28 993
(323)
(3 400)
8 059
50
1
47 973
(323)
(3 400)
8 123
–
(145)
7
1
16
33 380
52 236
3 561
183
55 980
(9)
(371)
(5 200)
8 440
222
(2)
1 111
(371)
(5 200)
8 739
–
(343)
(2)
(9)
49
1 111
(371)
(5 209)
8 788
–
(343)
(2)
(363)
80
129
(113)
(7)
(145)
(515)
(177)
(343)
(7)
7
80
15
27 555 649
28
18 532
352
1 722
(1 035)
95
7
36 469
56 170
3 561
223
59 954
NedbaNk limited – ANNUAL report 2015
19
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 from/(utilised by) operating activities
Cashflows utilised by investing activities
Acquisition of property and equipment, computer software and development costs and investment
property
Disposal of property and equipment, computer software and development costs and investment
property
Disposal/(Acquisition) of 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
Net proceeds from issue of ordinary shares
Issue of long-term debt instruments
Redemption of long-term debt instruments
Dividends paid to ordinary shareholders
Preference share dividends paid
effects of exchange rate changes on opening cash and cash equivalents
(excluding foreign borrowings)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of 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
2015
Rm
19 257
72 602
2014
rm
18 386
66 220
(54 509)
(48 803)
30
1 134
(9 508)
(102 943)
93 435
9 749
(3 771)
5 978
(2 070)
40
929
(16 624)
(64 065)
47 441
1 762
(3 463)
(1 701)
(2 011)
(2 604)
(2 439)
43
14
10
(326)
83
(443)
1 153
4 884
1 112
19 813
(10 470)
(5 200)
(371)
(51)
8 741
25 600
34 341
45
(4)
11
(181)
133
(174)
598
(1 354)
7 004
(4 635)
(3 400)
(323)
¹
(5 066)
30 666
25 600
20
NedbaNk limited – ANNUAL report 2015
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 Ltd's case is the Group Executive Committee. The
measure of segment profit is headline earnings.
Nedbank Corporate and Investment Banking
Nedbank Corporate and Investment Banking offers the full spectrum of transactional, corporate, investment banking and markets solutions, characterised
by a highly integrated partnership approach. These solutions include lending products, advisory services, leverage financing, trading, broking, structuring,
hedging and client coverage. The cluster has expertise in a broad spectrum of product and relationship-based solutions, including specialist corporate
finance advice, innovative products and services, customised transactional banking and property finance. Nedbank Corporate and Investment Banking's
primary units are Markets, Investment Banking, Property Finance, Transactional Services and Client Coverage.
Nedbank retail and Business Banking
Nedbank Retail serves the financial needs of all individuals (excluding high-net-worth individuals serviced by Nedbank wealth) 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 retail product portfolio includes transactional
accounts, home loans, vehicle and asset finance [including Motor Finance Corporation (MFC)], card (both card-issuing and merchant-acquiring services),
personal loans and investments. The business banking portfolio offers the full spectrum of commercial banking products and related services to entities 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 United Arab Emirates. 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
Rest of Africa is responsible for the group’s banking operations and expansion activities in the rest of Africa and has client-facing subsidiaries (retail and
wholesale banking) in Lesotho, Malawi, Namibia, Swaziland and Zimbabwe and an investment, with joint management control, in a bank in Mozambique,
Banco Único, SA. The division also holds the 21,8% 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.
NedbaNk limited – ANNUAL report 2015
21
SEGMENTAL REPORTING (continued)
for the year ended 31 December
Nedbank Ltd
Fellow subsidiaries
Nedbank Corporate and
Investment Banking
Nedbank retail and Business
Banking
Nedbank Wealth
rest of Africa
Centre¹
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
statement of financial position (Rm)
assets
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
34 341
60 078
30 948
42 733
666 807
25 826
25 600
56 322
15 644
26 828
603 329
25 721
(4 731)
(15 536)
460
(327)
(14 825)
(30 034)
(2 650)
(10 912)
71
(349)
(9 692)
(32 337)
12 910
35 005
30 102
24 950
355 784
11 816
total assets
860 733
753 444
(64 993)
(55 869)
470 567
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
59 954
33 996
708 036
13 770
44 977
55 980
15 479
634 623
11 728
35 634
(18 797)
368
(17 815)
(28 744)
(5)
(14 931)
7
(18 827)
(22 114)
(4)
860 733
753 444
(64 993)
(55 869)
22 404
4 608
17 796
17 514
35 310
23 459
668
11 183
(1)
11 182
2 860
8 322
21 753
4 478
17 275
16 196
33 471
22 031
522
10 918
12
10 930
2 803
8 127
47
50
(1 481)
(181)
(1 300)
(4 234)
(5 534)
(2 651)
(115)
(2 768)
(872)
(3 640)
(690)
(2 950)
(23)
(371)
(1 208)
(28)
(1 180)
(4 116)
(5 296)
(2 503)
(113)
(2 680)
(149)
(2 829)
(684)
(2 145)
(19)
(323)
23 096
32 987
346 868
18 176
1 563
47 877
470 567
6 781
1 188
5 593
6 508
12 101
5 105
78
6 918
(1)
6 917
1 702
5 215
6 054
29 414
15 499
16 010
305 158
9 106
381 241
17 497
15 429
319 400
8 184
1 159
19 572
381 241
5 919
506
5 413
5 462
10 875
4 664
74
6 137
12
6 149
1 409
4 740
7
13
Headline earnings/(loss)
8 275
8 077
(2 556)
(1 803)
5 208
4 727
1 134
1 042
selected ratios
Average interest-earning banking assets (Rm)
Return on total assets (%)²
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 (permanent staff)
¹ Includes all group eliminations.
² Includes the elimination of intercluster balances.
678 135
1,05
15,4
3,30
43,9
74,7
0,78
58,8
25,6
1 156
29 477
613 628
1,13
16,5
3,54
42,7
73,5
0,82
58,1
25,6
1 215
28 872
(45 945)
(38 566)
342 898
1,24
22,6
310 902
1,24
27,0
1,98
49,0
127,5
0,40
38,4
24,6
2 205
2 728
1,90
48,0
117,1
0,19
41,0
22,9
2 365
2 788
(1 369)
(1 835)
(897)
(1 627)
During the period the Nedbank Corporate and Nedbank Capital Clusters were merged to form the Nedbank Corporate and Investment Banking Cluster. Similarly,
the Nedbank Retail and Nedbank Business Banking Clusters were merged to form the Nedbank Retail and Business Banking Cluster. The comparative segment
information previously presented for Nedbank Corporate, Nedbank Capital, Nedbank Retail and Nedbank Business Banking has been represented based on the
new merged clusters, ie Nedbank Corporate and Investment Banking and Nedbank Retail and Business Banking. This had the consequential effect that certain
intergroup assets and liabilities and the related eliminations between Nedbank Retail and Business Banking and the Centre have been restated.
Depreciation costs of R969m (2014: R906m) and amortisation costs of R705m (2014: R644m) for property, equipment, computer software and capitalised
development are charged based on an activity-justified transfer pricing methodology by the segment owning the assets to the segment utilising the benefits
thereof.
22
NedbaNk limited – ANNUAL report 2015
16 789
23 647
305
13 944
1 198
12 453
68 336
19 198
459
75 557
2 960
36 598
(66 436)
68 336
(357)
149
(506)
(144)
(650)
(328)
279
(601)
(601)
(215)
(386)
276
(662)
15 002
26 028
10 454
49
89
13 334
64 956
19 470
(8)
66 767
3 783
32 700
(57 756)
64 956
300
153
147
153
300
54
186
60
60
73
(13)
4
260
(277)
3 161
2 932
3 839
279 929
5 631
292 560
377
268 882
5 888
278 079
26 924
27 565
248 135
224 103
292 560
278 079
3 686
6 816
6 999
15 955
3 212
12 743
10 972
23 715
17 077
302
6 336
6 336
1 781
4 555
95
4 460
1,57
16,6
4,89
40,7
64,3
1,14
63,4
28,1
960
3 373
1 775
21 263
15 216
3 771
11 445
10 530
21 975
16 076
243
5 656
5 656
1 562
4 094
63
4 031
1,49
14,6
4,97
40,9
65,5
1,39
62,4
27,6
310
1 774
15 161
5
28 206
16 176
61 322
2 734
10
34 083
16 884
7 611
61 322
766
39
727
3 593
4 320
2 730
95
1 495
1 495
361
1 134
39 612
1,84
41,5
1,93
82,4
131,6
0,15
62,6
24,1
778
2 107
934
9 943
1
24 819
21 912
57 609
2 830
4
26 122
17 626
11 027
57 609
628
41
587
3 399
3 986
2 484
102
1 400
1 400
358
1 042
32 351
1,91
36,8
1,94
84,4
136,9
0,17
61,7
25,6
660
2 119
4 438
1 801
76
327
16 515
9 784
32 941
6 799
172
21 208
808
5
3 949
32 941
740
201
539
819
1 358
1 526
29
(197)
872
675
(79)
754
63
691
2,31
10,2
3,53
52,5
53,7
1,25
62,8
(11,7)
(193)
1 812
3 328
1 849
24
336
14 073
7 818
27 428
3 549
47
17 058
876
4
5 894
27 428
898
35
863
768
1 631
1 256
30
345
149
494
85
409
52
357
1,58
10,1
4,75
46,1
61,2
0,23
69,2
17,2
(122)
1 605
20 921
20 373
(1 225)
3 744
(1 101)
3 614
325 997
306 401
20 934
18 920
(5 361)
(16 380)
Nedbank Ltd
Fellow subsidiaries
Nedbank Corporate and
Investment Banking
Nedbank retail and Business
Banking
Nedbank Wealth
rest of Africa
Centre¹
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
3 161
2 932
3 839
279 929
5 631
292 560
377
268 882
5 888
278 079
26 924
27 565
248 135
3 686
6 816
6 999
224 103
3 373
1 775
21 263
860 733
753 444
(64 993)
(55 869)
470 567
381 241
292 560
278 079
15 955
3 212
12 743
10 972
23 715
17 077
302
6 336
6 336
1 781
4 555
95
4 460
15 216
3 771
11 445
10 530
21 975
16 076
243
5 656
5 656
1 562
4 094
63
4 031
1 774
15 161
5
28 206
16 176
61 322
2 734
10
34 083
16 884
7 611
61 322
766
39
727
3 593
4 320
2 730
95
1 495
1 495
361
1 134
934
9 943
1
24 819
21 912
57 609
2 830
4
26 122
17 626
11 027
57 609
628
41
587
3 399
3 986
2 484
102
1 400
1 400
358
1 042
1 134
1 042
325 997
1,57
16,6
306 401
1,49
14,6
4,89
40,7
64,3
1,14
63,4
28,1
960
20 921
4,97
40,9
65,5
1,39
62,4
27,6
310
20 373
39 612
1,84
41,5
1,93
82,4
131,6
0,15
62,6
24,1
778
2 107
32 351
1,91
36,8
1,94
84,4
136,9
0,17
61,7
25,6
660
2 119
statement of financial position (Rm)
assets
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other 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
Return on total assets (%)²
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
¹ Includes all group eliminations.
² Includes the elimination of intercluster balances.
34 341
60 078
30 948
42 733
666 807
25 826
860 733
59 954
33 996
708 036
13 770
44 977
22 404
4 608
17 796
17 514
35 310
23 459
668
11 183
(1)
11 182
2 860
8 322
1,05
15,4
3,30
43,9
74,7
0,78
58,8
25,6
1 156
25 600
56 322
15 644
26 828
603 329
25 721
753 444
55 980
15 479
634 623
11 728
35 634
21 753
4 478
17 275
16 196
33 471
22 031
522
10 918
12
10 930
2 803
8 127
1,13
16,5
3,54
42,7
73,5
0,82
58,1
25,6
1 215
(64 993)
(55 869)
470 567
(4 731)
(15 536)
460
(327)
(14 825)
(30 034)
(18 797)
368
(17 815)
(28 744)
(5)
(1 481)
(181)
(1 300)
(4 234)
(5 534)
(2 651)
(115)
(2 768)
(872)
(3 640)
(690)
(2 950)
(23)
(371)
(2 650)
(10 912)
71
(349)
(9 692)
(32 337)
(14 931)
7
(18 827)
(22 114)
(4)
(1 208)
(28)
(1 180)
(4 116)
(5 296)
(2 503)
(113)
(2 680)
(149)
(2 829)
(684)
(2 145)
(19)
(323)
12 910
35 005
30 102
24 950
355 784
11 816
23 096
32 987
346 868
18 176
1 563
47 877
6 781
1 188
5 593
6 508
12 101
5 105
78
6 918
(1)
6 917
1 702
5 215
1,24
22,6
1,98
49,0
127,5
0,40
38,4
24,6
2 205
2 728
6 054
29 414
15 499
16 010
305 158
9 106
381 241
17 497
15 429
319 400
8 184
1 159
19 572
5 919
506
5 413
5 462
10 875
4 664
74
6 137
12
6 149
1 409
4 740
1,24
27,0
1,90
48,0
117,1
0,19
41,0
22,9
2 365
2 788
47
50
7
13
8 275
8 077
(2 556)
(1 803)
5 208
4 727
Average interest-earning banking assets (Rm)
678 135
613 628
(45 945)
(38 566)
342 898
310 902
Number of employees (permanent staff)
29 477
28 872
(1 369)
(1 835)
(897)
(1 627)
During the period the Nedbank Corporate and Nedbank Capital Clusters were merged to form the Nedbank Corporate and Investment Banking Cluster. Similarly,
the Nedbank Retail and Nedbank Business Banking Clusters were merged to form the Nedbank Retail and Business Banking Cluster. The comparative segment
information previously presented for Nedbank Corporate, Nedbank Capital, Nedbank Retail and Nedbank Business Banking has been represented based on the
new merged clusters, ie Nedbank Corporate and Investment Banking and Nedbank Retail and Business Banking. This had the consequential effect that certain
intergroup assets and liabilities and the related eliminations between Nedbank Retail and Business Banking and the Centre have been restated.
Depreciation costs of R969m (2014: R906m) and amortisation costs of R705m (2014: R644m) for property, equipment, computer software and capitalised
development are charged based on an activity-justified transfer pricing methodology by the segment owning the assets to the segment utilising the benefits
thereof.
4 438
1 801
76
327
16 515
9 784
3 328
1 849
24
336
14 073
7 818
32 941
27 428
6 799
172
21 208
808
5
3 949
32 941
740
201
539
819
1 358
1 526
29
(197)
872
675
(79)
754
63
691
20 934
2,31
10,2
3,53
52,5
53,7
1,25
62,8
(11,7)
(193)
1 812
3 549
47
17 058
876
4
5 894
27 428
898
35
863
768
1 631
1 256
30
345
149
494
85
409
52
357
18 920
1,58
10,1
4,75
46,1
61,2
0,23
69,2
17,2
(122)
1 605
16 789
23 647
305
13 944
1 198
12 453
68 336
19 198
459
75 557
2 960
36 598
(66 436)
68 336
(357)
149
(506)
(144)
(650)
(328)
279
(601)
(601)
(215)
(386)
276
(662)
15 002
26 028
49
10 454
89
13 334
64 956
19 470
(8)
66 767
3 783
32 700
(57 756)
64 956
300
153
147
153
300
54
186
60
60
73
(13)
4
260
(277)
(5 361)
(16 380)
(1 225)
3 744
(1 101)
3 614
NedbaNk limited – ANNUAL report 2015
23
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 Ltd.
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. The
amendments to standards, effective 1 January 2015, did not have a significant impact on the basis of preparation. During the year the group has
complied with externally imposed capital requirements (refer to the Risk and Balance Sheet Management Review available at nedbank.co.za for
further information).
The consolidated financial statements have been prepared in accordance with the IFRS as issued by the International Accounting Standards Board
and IFRS IC, the 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 Ltd, 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 headoffice at Nedbank 135 Rivonia Road Campus, 135 Rivonia Road, Sandown,
2196, Johannesburg.
1.2
The financial statements are presented in SA rand, the functional currency of Nedbank Ltd, and are rounded to the nearest million rands.
Accounting policy elections
The following accounting policy elections have been made by the group:
asset/liability
Option
election and implication
Property and equipment ■■
International Accounting
Standards (IAS) 16 permits the
use of the cost or revaluation
model for the subsequent
measurement of property and
equipment.
Investment in venture
capital divisions
■■
IAS 28 provides an exemption
from applying the equity method
of accounting if an investment in
an associate is held by or
indirectly through a venture
capital organisation.
■■
■■
■■
■■
Land and buildings are stated at revalued amounts, being
fair value less subsequent depreciation and impairment.
Revaluation surpluses are recognised directly in equity,
through other comprehensive income. when the
property is disposed of, the cumulative revaluation
surplus is transferred directly to retained income.
Computer equipment, furniture and other equipment and
vehicles are carried at cost less accumulated
depreciation.
In venture capital divisions the group has elected to carry
associate and joint-venture entities at fair value through
profit and loss under IAS 39.
Financial instruments
■■
IAS 39 allows for the irrevocable
designation of financial assets
and liabilities on initial
recognition at fair value through
profit or loss if the designation
eliminates or significantly
reduces an accounting mismatch.
■■
■■
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.
Investments in
subsidiaries, associate
companies and joint
arrangements
■■
■■
IAS 39 permits trade date or
settlement date accounting for
the regular way purchase or sale
of financial assets.
In terms of IAS 27 investments in
subsidiaries, associates and joint
arrangements can be accounted
for in the separate financial
statements either at cost, or in
accordance with IAS 39, or in
terms of IAS 28.
■■
The group has elected to recognise these investments at
cost less impairments in the separate financial
statements.
accounting
policy
1.10
1.3
1.6
1.3
24
NedbaNk limited – ANNUAL report 2015
1.3 Group accounting
those
entities,
undertakings
subsidiary undertakings and consolidated structured
entities
Subsidiary
including
are
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
the consolidation
requirements on a continuous basis.
the entity and reassesses
to
The consolidated financial statements include the assets, liabilities
including
and results of the company plus subsidiaries,
consolidated structured entities from the date control
is
established until the date that control ceases.
Intragroup balances, transactions, income and expenses, and
profits and losses are eliminated in preparation of the consolidated
financial statements. Unrealised losses are not eliminated to the
extent that they provide objective evidence of impairment.
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.
associates
An associate is an 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 entity. This is generally demonstrated by the
group holding in excess of 20%, but no more than 50%, of the
voting rights.
in other comprehensive
The group’s share of postacquisition profit or loss and post-
acquisition movements
income are
recognised in the income statement and other comprehensive
income, respectively. The group applies the equity method of
accounting from the date significant influence commences until the
date significant influence ceases (or the associate is classified as
held for sale), ie 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 legal or constructive obligations, or guaranteed
obligations, in respect of the associate.
In applying the equity method the investor should use the financial
statements of the associate as of the same date as the financial
statements of the investor unless it is impracticable to do so. If it is
impracticable, the most recent available financial statements of the
associate or joint venture should be used, with adjustments made
for the effects of any significant transactions or events occurring
between the ends of the two accounting periods. However, the
difference between the reporting date of the associate and that of
the investor cannot be longer than three months.
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 but only to the extent
that there is no evidence of impairment.
At each reporting date the group determines whether there is
objective evidence that the investments in associates are impaired.
Objective evidence of impairment for an associate investment
includes information about significant changes with an adverse
effect that have taken place in the technological, market, economic
or legal environment in which the issuer operates, and indicates
that the cost of the associate investment may not be recovered. A
significant or prolonged decline in the fair value of an associate
investment below its cost is also considered objective evidence of
impairment. The carrying amounts of such investments are then
reduced to recognise any impairment by applying the impairment
methodology described in 1.13.
Investments in associates 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 1.12.
Joint arrangements
Joint arrangements are those entities over which the group has
joint control, established by contractual agreements requiring
unanimous consent for decisions about relevant activities that
significantly affect the arrangements’ returns. They are classified
as either joint operations or joint ventures, depending on the
contractual rights and obligations of the investor, and accounted
for 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, in accordance with the
applicable IFRS.
■■
Joint venture – when the group has rights only to the net assets
of the arrangement, it accounts for its interest using the equity
method as described in the associates accounting policy.
sponsored entities
where the group does not have an interest in an unconsolidated
structured entity, the group will assess whether it sponsors the
specific structured entity. The group will sponsor such an entity by
assessing whether the group led the formation of the entity, the
name of the group is associated with the name of the entity or it
provides certain implicit guarantees to the entity in question.
Common control transactions
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
to account for the transaction is 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 transaction will be allocated to the common-control
reserve in equity.
associate companies and joint ventures 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.
NedbaNk limited – ANNUAL report 2015
25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
1.3 Group accounting (continued)
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. Acquisition-related costs are recognised in profit or loss
as incurred.
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 fair value.
Subsequent changes in such fair values are accounted for in
accordance with IAS 39, either in profit or loss or other
comprehensive income. Changes in the fair value of a contingent
consideration that has been classified as equity are not recognised.
identifiable assets,
The acquiree’s
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.
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 arises on the acquisition of subsidiaries and is recognised
as an asset on the date that control is acquired, being the
acquisition date. Goodwill represents 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
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.
identifiable net assets recognised.
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. Refer to accounting
policy 1.8.
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 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, ie
26
NedbaNk limited – ANNUAL report 2015
exchange differences relating to an item for which gains and losses
are recognised directly in equity are generally recognised in equity.
Similarly, 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 Ltd’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 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.
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 Cash and cash equivalents
1.6
Cash and cash equivalents represents cash on hand and demand
deposits and cash equivalents, which are short-term (ie a maturity of
less than 90 days from acquisition), highly liquid investments that are
readily convertible to known amounts of cash, and which are subject to
an insignificant risk of changes in value. Cash and cash equivalents
therefore include cash and balances with central banks that can be
withdrawn on demand (except where a specific minimum balance at
the end of the day is required to be maintained), other eligible bills and
amounts due from other banks.
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 and leases. 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.
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
instruments are
initial recognition, financial
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
instruments that are held for trading and
consist of
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 designation of fair value through profit or loss
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.
to
relating
the amortised-cost basis
Gains or losses on financial instruments at fair value through profit
or loss (excluding interest income and interest expense calculated
on
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.
NedbaNk limited – ANNUAL report 2015
27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
1.6
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.
■■
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.
■■
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.
losses recognised
fair-value gains or
Available-for-sale financial assets are measured at fair value,
with
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, are reported in
profit or loss.
derivative financial instruments and hedge accounting
Derivatives are classified as financial assets when their fair value is
positive or as financial liabilities when their fair value is negative,
subject to the offsetting principles as described under ‘Offsetting
financial
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.
instruments and related
■■
Derivatives that qualify for hedge accounting
The group applies hedge accounting when transactions meet
the criteria set out in IAS 39. The group's hedging strategy
makes use of fair-value hedges, which are hedges of the
change in fair-value of recognised assets or liabilities or firm
commitments (‘fair value hedges’).
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)
(retrospective
and demonstrate actual effectiveness
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 cashflows 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
discontinued.
is revoked, then hedge accounting
■■
Derivatives that do not qualify for hedge accounting
All gains and losses from changes in the fair value of
derivatives that are not designated as being subject to hedge
in non-interest
accounting are recognised
revenue.
immediately
embedded derivatives
Derivatives in a host contract that is a financial or non-financial
instrument, such as an equity conversion option in a convertible
bond, are separated from the host contract when all of the
following conditions are met:
■■
■■
The economic characteristics and risks of the embedded
derivative are not closely related to those of the host
contract.
A separate instrument with the same terms as the
embedded derivative would meet the definition of a
derivative.
■■
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 measure the fair value of the
embedded derivative separately, either at acquisition or at a
subsequent financial reporting date, the entire hybrid instrument
is categorised as at fair value through profit or loss and measured
at fair value.
28
NedbaNk limited – ANNUAL report 2015
measurement basis of financial instruments
There are two bases of measurement, namely amortised cost and
fair value:
■■
Amortised cost
instrument
The amortised cost of a financial instrument is the amount at
initial
which the financial
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.
is measured on
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.
■■
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
is reversed by
impairment
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.
loss
■■
Available-for-sale financial assets
income,
is removed
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
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.
NedbaNk limited – ANNUAL report 2015
29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
1.6
Financial instruments (continued)
■■ 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.
1.7
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 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.
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 other comprehensive income (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).
30
NedbaNk limited – ANNUAL report 2015
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.
liabilities are recognised for all taxable
Deferred taxation
temporary differences, and deferred taxation assets are 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 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 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,
associates and jointly controlled entities to the extent that
the reversal of the temporary difference is controlled by the
group and it is probable that the temporary difference will
not reverse in the foreseeable future.
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.
1.8
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 cost 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
to complete development. The
and sufficient
expenditure capitalised includes the cost of materials and directly
attributable employee and other direct costs. Computer
development expenditure is amortised only once the relevant
intended by
software
less
management. Capitalised software
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.
is available for use
is stated at cost
in the manner
resources
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.
NedbaNk limited – ANNUAL report 2015
31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
1.9
employee benefits
The group operates a number of postemployment 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
Employee Benefits.
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, excluding
amounts included in net interest, and the asset ceiling, excluding
amounts included in net interest.
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.
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.
1.10 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.
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 other comprehensive income and presented in
'Revaluation reserve’. However,
equity under the heading
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.
1.11
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.
32
NedbaNk limited – ANNUAL report 2015
1.12
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
property are revalued at the date of transfer, with any difference
being taken to profit or loss.
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
in accordance with the group’s
liabilities are remeasured
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:
1.13
■■
■■
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.
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, are 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.
1.14 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.
Onerous contracts
A provision for onerous contracts is recognised when the expected
benefits to be derived by the group from an executory contract are
lower than the unavoidable cost of meeting the obligations under
the contract.
Future operating costs or losses are not provided for.
NedbaNk limited – ANNUAL report 2015
33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
1.15 Share-based payments
equity-settled share-based payment transactions with
employees
The group receives services from employees as consideration for
equity instruments of the group. The fair value of the employee
services is measured at the grant date, by reference to the fair value
of the equity instruments, 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 payment 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.
■■
■■
■■
■■
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.
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 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 note 13 to the financial
statements.
1.17 treasury shares
when the group acquires its own share capital, the amount of the
consideration paid, including directly attributable costs and 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.
1.18
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.
1.16 Share capital
Ordinary share capital, preference share capital or any financial
instrument issued by the group is classified as equity when:
Revenue on investment management contracts
Fees charged for investment management services in conjunction
with investment management contracts are recognised as revenue
34
NedbaNk limited – ANNUAL report 2015
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.
1.19
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 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 IAS 37 Provisions, Contingent Liabilities and
Contingent Assets.
linked products
Linked products are investment-related products where the risk
and reward of the underlying investment portfolio accrue 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.
1.20 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 commencement 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.
1.21 Borrowing costs
to
Borrowing costs directly attributable
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.
1.22 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.
NedbaNk limited – ANNUAL report 2015
35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
1.23 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 clients.
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.
1.24 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.
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.
income and expense
Interest
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 1.18 for non-interest revenue arising on investment
management contracts.
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
interest
losses are determined after deducting
component, which
interest
income and expense. Gains or losses on derecognition of any
financial assets or financial liabilities are included in non-
interest revenue.
is recognised separately
the
in
Profit from operations before non-trading and capital
items
Non-trading and capital items and fair-value adjustments of
investment properties are separately disclosed on the face of the
statement of comprehensive income, being remeasurements
excluded from the calculation of headline earnings per share in
accordance with the guidance contained in SAICA Circular
2/2015: Headline Earnings. The principal items that will be
included under these measures are: gains and losses on sale of
subsidiaries and available for sale financial assets; gains and
losses on sale of property and equipment; impairment of property
and equipment and intangible assets; and fair-value adjustments
of investment properties.
1.25 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.
2
2.1
StANDArDS AND INterpretAtIoNS
Significant standards and interpretations
issued and not yet effective
iFRs 9 Financial instruments
IFRS 9 Financial Instruments (IFRS 9) was issued in its entirety in
July 2014 and will replace IAS 39 Financial Instruments:
Recognition and Measurement (IAS 39). The final version of this
standard incorporates amendments to the classification and
measurement, hedge accounting guidance, as well as the
accounting requirements for the impairment of debt instruments
measured at amortised cost and fair value through other
comprehensive income (FVOCI). These elements of the final
standard, and a description of the expected impact on the group’s
statement of financial position, and performance, are discussed in
detail below:
■■
Other
■■
Classification and measurement
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
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.
36
NedbaNk limited – ANNUAL report 2015
Debt instruments are carried at amortised cost if it is the entity’s
business model to hold that asset for the purpose of collecting
contractual cashflows (‘hold to collect’) and those cashflows
comprise solely payments of principal and interest.
However, where the entity’s business model considers both the
collection of contractual cashflows and sale of financial assets
(‘hold to collect and sell’) and those cashflows comprise solely
payments of principal and interest, such financial assets will be
subsequently measured at FVOCI. Movements in the carrying
amount should be taken through OCI, except for the recognition of
impairment gains or losses, interest revenue, and foreign exchange
gains and losses, which are recognised in profit and loss. where
the financial asset is derecognised, the cumulative gain or loss
previously recognised in OCI is reclassified from equity to profit or
loss.
where the business model is neither ‘hold to collect’ nor ‘hold to
collect and sell’ or the cashflows are not solely payments of
principal and interest, the financial asset is carried at fair value
through profit or loss in its entirety.
The group has initiated a process to determine the various
business models that are applied by the group, and whether the
group’s financial assets meet the 'solely payments of principal and
interest' criterion. Until the process has been completed the group
is unable to quantify the expected impact.
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 changes in the entity’s own
credit risk are recognised in OCI. where the financial liability is
derecognised, the cumulative gain or loss previously recognised in
OCI is not reclassified from equity to profit or loss, but it may be
reclassified within equity. The group currently provides note
disclosure in respect of the change in fair value due to credit risk of
the group’s financial liabilities designated at fair value through
profit or loss in note 36.2.
The group currently designates certain fixed-rate assets and
liabilities, which are economically hedged via interest rate swaps,
at fair value through profit or loss. This option remains available
under IFRS 9.
■■
Impairments: IFRS 9’s expected credit loss model
Impairments in terms of IFRS 9 will be determined based on an
expected-credit-loss model rather than the current incurred-loss
model required by IAS 39. Entities are required to recognise an
allowance for either 12-month or lifetime expected credit losses
(ECLs), depending on whether there has been a significant
increase in credit risk since initial recognition. The measurement
of ECLs reflects a probability-weighted outcome, the time value of
money and the entity’s best available forward-looking information.
The aforementioned probability-weighted outcome must consider
the possibility that a credit loss occurs and the possibility that no
credit loss occurs, even if the possibility of a credit loss occurring
is low.
The expected-credit-loss model applies to debt instruments
recorded at amortised cost or at FVOCI, such as loans, debt
securities and trade receivables, lease receivables and most loan
commitments and financial guarantee contracts.
The group has initiated a process to determine the quantitative
impact of the standard on the group's statement of financial
position and ongoing performance metrics. Until the process has
been completed, the group is unable to quantify the expected
impact. For further discussion of the group’s approach to IFRS 9,
please refer to the group’s Pillar 3: Basel III Public Disclosure
Report for the year ended 31 December 2015.
■■
Hedge accounting
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.
IFRS 9 allows the deferral of the requirements relating to hedge
accounting, permitting continuation with IAS 39 principles until
the IASB’s macro-hedging project is completed, so as to ensure
that reporting entities do not have to comply with interim
measures before macro-hedging rules are finalised. The group, like
most financial institutions, is considering adopting the deferral
option. Accordingly, the new hedging model is not expected to
have a significant impact on the micro-hedge accounting of the
group.
The standard is effective for financial years commencing on or
after 1 January 2018.
iFRs 15 Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers establishes a
single, comprehensive framework for revenue recognition that
applies to all contracts with clients (except for contracts that are
within the scope of the standards on leases, insurance contracts
and financial instruments).
The core principle of the standard is that revenue recognised
reflects the consideration to which the company expects to be
entitled in exchange for the transfer of promised goods or services
to the client. The standard incorporates a five-step analysis to
determine the amount and timing of revenue recognition.
The standard is effective for the group for the financial year
commencing 1 January 2018.
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.
iFRs 16 leases
The International Accounting Standards Board (IASB) issued IFRS
16 Leases (IFRS 16) in January 2016. IFRS 16 sets out the principles
for the recognition, measurement, presentation and disclosure of
leases for both parties to a contract, ie the client (‘lessee’) and the
supplier (‘lessor’). IFRS 16 replaces the previous lease standard,
IAS 17 Leases (IAS 17), and related interpretations.
the group as lessee
IFRS 16 eliminates the classification of leases as either operating
leases or finance leased as is required by IAS 17 and, instead,
introduces a single-lessee accounting model. Applying that model,
a lessee is required to recognise:
(a) assets and liabilities for all leases with a term of more than 12
months, unless the underlying asset is of low value; and
(b) depreciation of lease assets separately from interest on lease
liabilities in the income statement.
the group as lessor
IFRS 16 substantially carries forward the lessor accounting
requirements in IAS 17. Accordingly, a lessor continues to classify
its leases as operating leased or finance leases, and to account for
those two types of leases differently.
The most significant effect of the new requirements in IFRS 16 will
be an increase in lease assets and financial liabilities. The group is
in the process of quantifying the aforementioned increase in
leased assets and financial liabilities.
The standard is effective for financial years commencing on or
after 1 January 2019.
NedbaNk limited – ANNUAL report 2015
37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
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 for 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 for 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
impairment represent management’s
for
estimate of the losses incurred in the loan portfolios at the
reporting date.
loan
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 and Business Banking, and Nedbank
wealth 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 and those
designated by management under the fair-value option.
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 when selling the asset or paid when transfering 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.
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, for them to 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; 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 changes in these assumptions
will therefore 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 investment 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
38
NedbaNk limited – ANNUAL report 2015
and separately. Further
those
securitisations, consolidated into the group financial statements,
can be found in note 44 to the financial statements.
in respect of
information
3.4 Goodwill
the
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
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 Ltd.
The goodwill impairment testing performed in 2015 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 Ltd’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.
Intangible assets other than goodwill
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;
3.5
■■
■■
■■
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.
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.
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 custom.
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 Employee Benefits.
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 financial statements.
NedbaNk limited – ANNUAL report 2015
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
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 risk management’ 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 the 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 Asset and Liability Committee (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 Pillar 3: Basel III Public Disclosure
Report, which is unaudited, unless stated otherwise.
40
NedbaNk limited – ANNUAL report 2015
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
2015
Rm
11 126
11 513
9 781
1 945
1 342
12 678
3 378
3 374
(20)
24
3 365
55 128
46 426
8 702
55 128
20 731
683
5 883
1 851
3 576
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
32 724
28 322
29 123
3 601
32 724
26 183
2 139
28 322
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 Ltd Integrated Report.
NedbaNk limited – ANNUAL report 2015
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
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
Other income¹
Interest and distribution¹
Investment income
Dividends received from unlisted investments
Long-term-asset sales
Net sundry income
Rents received
Rental income from properties in possession
Other sundry income¹
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
2015
Rm
2014
rm
13 404
12 591
505
850
652
398
1 104
181
3 247
3 601
2 866
260
(12)
(102)
90
2 783
1 225
1 545
(7)
20
905
417
(161)
384
76
189
40
30
10
134
10
1
123
121
819
613
379
921
168
2 969
3 467
3 134
284
35
73
(38)
2 394
1 148
1 194
27
25
750
350
(22)
83
188
151
51
40
11
91
61
2
28
17 514
16 196
1 617
(1 629)
(12)
146
(111)
35
The group receives various government grants, from the 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 written-off 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.
¹ 2014 restated to reflect a R339m reclassification of other sundry income to private equity income.
42
NedbaNk limited – ANNUAL report 2015
8
TOTAL OPERATING EXPENSES
Staff costs
Remuneration and other staff costs
Short-term incentives
Long-term employee benefits (note 26.2)¹
Share-based payments expense – employees
BEE transaction expenses²
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 sundries
2015
Rm
12 893
10 508
1 953
19
413
20
16
4
2014
rm
12 550
9 971
1 945
27
607
46
21
25
3 312
2 902
428
705
320
65
1 794
773
3
770
1 858
316
738
804
1 538
2 323
153
106
1
46
396
644
281
169
1 412
756
4
752
1 637
131
718
788
1 472
1 757
103
84
1
18
2 170
1 654
547
222
8
317
195
631
375
7
249
280
23 459
22 031
Certain expenses incurred by the company on behalf of subsidiary companies are recovered from subsidiary companies. Refer to the online 2015
Remuneration Report at netbankgroup.co.za, for a detailed breakdown of directors' and prescribed officers' remuneration.
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 26.
¹
² See note 48 for a description of the BEE schemes.
NedbaNk limited – ANNUAL report 2015
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
9
INDIRECT TAXATION
Value-added taxation¹
Other transaction taxes
1
Comprises the value-added taxation incurred that is irrecoverable in respect of the making of exempt supplies as defined in the Value-added
Tax Act, 1991.
10 NON-TRADING AND CAPITAL ITEMS
Net loss on sale of property and equipment
Net impairment of property and equipment, and intangible assets
11
11.1
DIRECT TAXATION
Charge for the year
SA normal taxation:
– Current charge
– Capital gains taxation – deferred
– Deferred taxation
Foreign taxation
Current and deferred taxation on income
Prior-year (underprovision)/overprovision – current taxation
Prior-year overprovision/(underprovision) – 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
11.3
Income tax recognised in other comprehensive income
2015
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
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
11.4 Future taxation relief
2015
Rm
492
176
668
(26)
(118)
(144)
2 851
(29)
24
10
2 856
(1)
5
2 860
(32)
2 828
2015
%
28,0
(2,5)
0,1
25,6
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
Gross
taxation
Net of taxation
190
(9)
388
162
14
(113)
86
195
(109)
(44)
(24)
(32)
190
(9)
279
118
14
(113)
62
163
The group has estimated taxation losses of R203m (2014: R168m) that can be set off against future taxable income, of which R91m (2014: R31m)
has been applied to the deferred taxation balance.
44
NedbaNk limited – ANNUAL report 2015
12
EARNINGS
Headline earnings reconciliations
rm
2015
2014
Gross
Net of taxation
Gross
Net of taxation
Profit attributable to ordinary and preference equity holders
Less: Non-trading and capital items
Net loss on sale of investments and property and equipment
Net impairment of property and equipment and intangible assets
Headline earnings attributable to ordinary and preference equity holders
(144)
(26)
(118)
8 163
(112)
(26)
(86)
8 275
(96)
(96)
13 DIVIDENDS
13.1 ordinary shares
2015
Final declared for 2014 – paid 2015
Interim declared for 2015
Ordinary dividends paid 2015
Final ordinary dividend declared for 2015
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 2015: 16 331 cents per share.
² Total dividend declared for 2014: 11 013 cents per share.
Millions of
shares
Cents per
shares
27
28
27
27
11 747
7 258¹
19 005
9 073¹
9 544
2 937²
12 481
8 076²
7 998
(79)
(79)
8 077
rm
3 200
2 000
5 200
2 600
800
3 400
NedbaNk limited – ANNUAL report 2015
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
13 DIVIDENDS
13.2 preference shares
dividends declared
2014
Number of
shares
Cents
per share
Amount
rm
Nedbank – Final (dividend 22) declared for 2013 – paid March 2014
Nedbank – Interim (dividend 23) declared for 2014 – paid September 2014
358 277 491
35,70775
358 277 491
36,86072
2015
Nedbank – Final (dividend 24) declared for 2014 – paid March 2015
Nedbank – Interim (dividend 25) declared for 2015 – paid September 2015
358 277 491
38,76140
358 277 491
38,22487
2016
Nedbank – Final (dividend 26) declared for 2015 – payable 4 April 2016
358 277 491
40,01711
128
132
260
139
137
276
143
rate
%
Amount
rm
7,708
7,917
8,125
143,4
17,4
92,5
33,5
143,4
rate
%
Amount
rm
Days
184
23
119
42
Days
184
184
181
29
152
184
17
167
7,083
7,083
7,500
7,500
7,708
181
7,708
127,9
127,9
127,9
132,1
20,2
111,9
63,2
323,2
138,9
12,5
126,4
136,9
94,7
370,5
dividends declared calculations
2015
Nedbank – 1 July 2015 – 31 december 2015
1 July 2015 – 23 July 2015
24 July 2015 – 19 November 2015
20 November 2015 – 31 December 2015
Total declared
dividends declared calculations
2013 (Paid march 2014)
Nedbank – 1 July 2013 – 31 december 2013
1 July 2013 – 31 Dec 2013
Profit attributable to preference shareholders
2014 (Paid september 2014)
Nedbank – 1 January 2014 – 30 June 2014
1 January 2014 – 29 January 2014
30 January 2014 – 30 June 2014
Nedbank (MFC) – Participating preference shares¹
Profit attributable to preference shareholders
2014 (Paid march 2015)
Nedbank – 1 July 2014 – 31 december 2014
1 July 2014 – 17 July 2014
18 July 2014 – 31 December 2014
2015 (Paid september 2015)
Nedbank – 1 January 2015 – 30 June 2015
Nedbank (MFC) – Participating preference shares¹
Profit attributable to preference shareholders
¹ Profit share calculated on an annual basis.
46
NedbaNk limited – ANNUAL report 2015
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
16 DERIVATIVE FINANCIAL INSTRUMENTS
2015
Rm
6 673
10 686
792
18 151
16 190
34 341
8 717
51 361
60 078
8 678
49 786
1 614
60 078
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
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, market index 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
2015
Rm
30 948
(33 996)
(3 048)
2014
rm
15 644
(15 479)
165
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 – 16.5.
NedbaNk limited – ANNUAL report 2015
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
16 DERIVATIVE FINANCIAL INSTRUMENTS (continued)
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
2015
Positive
value
Rm
Negative
value
Rm
Notional
principal
rm
2014
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
Futures
Caps
Floors
275
275
275
275
17 848
5 959
5 994
5 895
421
421
389 194
352 685
63
32 036
2 196
2 214
1 086 256
517 120
531 654
3 105
2 948
1 843
8 341
5 994
2 347
214
214
202 743
178 601
9
21 937
2 196
519 084
262 036
236 291
598
1 050
1 050
9 507
5 959
3 548
207
207
186 451
174 084
54
10 099
2 214
567 172
255 084
295 363
2 507
1 898
793
11 527
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
17 516
Credit default swaps
29 586
18 059
total notional principal
1 493 994
730 657
763 337
997 209
491 839
505 370
¹
Includes contracts for difference with positive notionals of R124m (2014: R45m) and negative notionals of R1 326m (2014: R1 677m). The equity forward agreement has positive notionals of R591m (2014: R163m) and
negative notionals of R1 536m (2014: R568m).
48
NedbaNk limited – ANNUAL report 2015
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 an orderly transaction between market participants at the measurement date, other than a forced
liquidation or sale. Fair values are obtained from quoted market prices, discounted-cashflow models and market-accepted option-pricing models.
2015
Carrying
amount of
assets
Rm
Net carrying
amount
Rm
Carrying
amount of
liabilities
Rm
Net
carrying
amount
rm
2014
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
27
27
(418)
418
(59)
(59)
(1 154)
59
18
(1 285)
184
(130)
(1 862)
(2 388)
(19)
1
(23)
1
566
902
418
484
24
24
17 760
11 383
18
6 175
184
12 235
10 827
329
44
2
1
902
418
484
83
83
18 914
11 324
7 460
130
14 097
13 215
348
43
25
1 032
466
(3 048)
30 948
33 996
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
364
352
12
1
1
5 516
1 769
3
3 585
159
9 598
8 724
37
2
12
1 017
823
15 644
15 479
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 R264m (2014: R2m).
NedbaNk limited – ANNUAL report 2015
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
16 DERIVATIVE FINANCIAL INSTRUMENTS (continued)
16.4 Analysis of derivative financial instruments
Hedging
derivatives
other derivatives
Rm
derivative assets
2015
Maturity analysis
Under one year
One to five years
Over five years
2014
Maturity analysis
Under one year
One to five years
Over five years
derivative liabilities
2015
Maturity analysis
Under one year
One to five years
Over five years
2014
Maturity analysis
Under one year
One to five years
Over five years
Interest rate
derivatives
equity
derivatives
Commodity
derivatives
exchange rate
derivatives
Interest rate
derivatives
total
5
22
27
1
1
2
283
619
902
260
112
372
283
619
24
24
10
10
83
–
902
83
252
112
–
364
1
1
13 623
3 155
982
17 760
3 425
1 932
1 288
6 645
12 527
2 999
3 388
18 914
2 385
1 653
1 478
5 516
616
3 600
8 019
12 235
787
3 154
4 674
8 615
569
3 975
9 553
14 097
632
3 097
5 869
9 598
14 546
7 379
9 023
30 948
4 482
5 199
5 963
15 644
13 462
7 593
12 941
33 996
3 270
4 862
7 347
15 479
Notional principal of derivatives
2015
Maturity analysis
Under one year
One to five years
Over five years
2014
Maturity analysis
Under one year
One to five years
Over five years
75
200
275
75
200
275
10 541
5 856
1 451
17 848
6 513
1 753
421
363 155
17 652
8 387
497 390
385 063
203 803
871 507
408 646
213 841
421
389 194
1 086 256
1 493 994
1 957
257 249
28 404
18 291
224 932
255 640
202 195
682 767
490 651
285 872
220 686
997 209
8 266
1 957
303 944
The maturity analysis in this note is prepared based on contractual maturities.
16.5 Derivatives designated as fair value hedges in terms of the group's fair value hedge accounting solution
As part of the group’s hedging activities, it enters into transactions that are designated as fair-value hedge transactions.
Fair-value hedges are used by the group to mitigate the risk of changes in the 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 hedges, designated into the fair value hedge accounting solution,
primarily consist of fixed-rate government bonds (refer to note 17).
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.
The group recognised the following gains and losses on hedging instruments and hedged items:
50
NedbaNk limited – ANNUAL report 2015
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
Retailers, catering and accommodation
Government and public sector
Other sectors
¹
Includes securitised assets. See note 42.
2015
Rm
(20)
24
4
26 398
16 335
42 733
5 838
3 368
3 872
1 647
25 285
2 723
42 733
2014
rm
(3)
3
13 839
12 989
26 828
2 516
2 897
1 882
694
17 571
1 268
26 828
18
LOANS AND ADVANCES
The group extends advances to individuals and to the corporate, commercial and public sectors. Advances made to individuals are mostly in the
form of mortgages, instalment credit, overdrafts, personal loans and credit card borrowings.
This note should be read in conjunction with note 19 'Impairment of loans and advances', as this note 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'
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 clients
– Loans and advances to banks
¹ Represents clients' indebtedness for acceptances and other loans.
2015
Rm
267 806
132 217
135 589
97 500
123 068
(25 568)
14 025
298 536
354
13 481
107 636
16 746
90 890
27 527
103 376
22 129
184
81 063
20 660
5 329
20 173
677 867
(11 060)
666 807
651 555
26 312
677 867
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
NedbaNk limited – ANNUAL report 2015
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
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
2015
Rm
230 688
181 083
26 312
42 726
9 119
25 649
20 601
28 208
32 397
5 091
17 377
58 616
2014
rm
219 820
152 858
19 506
40 397
8 878
23 696
23 444
17 456
25 009
4 283
21 551
57 379
677 867
614 277
2015
Rm
2014
rm
636 467
579 634
17 667
18 504
4 294
722
213
10 735
12 473
3 754
2 961
4 720
677 867
614 277
18.4 Net finance lease and instalment debtors
Rm
Gross
2015
unearned
finance
charges
2014
Unearned
finance
charges
Net
Net
Gross
No later than one year
28 525
(5 851)
22 674
29 912
(5 977)
23 935
Later than one year and no later than five
years
Later than five years
83 993
10 550
(17 510)
(2 207)
123 068
(25 568)
66 483
8 343
97 500
80 762
5 203
115 877
( 16 350)
(1 063)
(23 390)
64 412
4 140
92 487
52
NedbaNk limited – ANNUAL report 2015
18.5 Classification of loans and advances
total
Neither past due
nor impaired
past due but not
individually impaired
Defaulted
Rm
2015
2014
2015
2014
2015
2014
Mortgage loans
267 806
252 098
250 241
235 721
10 442
8 870
2015
7 123
2 568
1 079
354
625
3 365
2014
7 507
2 333
902
596
651
3 179
89 669
11 807
84 624
11 394
5 263
1 139
5 530
1 080
12 215
102 611
27 527
101 834
20 660
5 102
12 058
98 679
21 638
74 878
17 995
4 574
641
1 660
505
1 962
281
219
1 261
391
160
298
67
114
Net finance lease and
instalment debtors
Credit cards
Properties in
possession
Overdrafts
Term loans
97 500
14 025
354
13 481
92 487
13 376
596
13 214
107 636
103 820
Overnight loans
27 527
Other loans to clients
103 376
21 638
75 488
17 995
4 986
20 660
5 329
Preference shares
and debentures
Factoring accounts
Deposits placed
under reverse
repurchase
agreements
Trade, other bills and
bankers' acceptances
20 173
18 291
20 173
18 291
288
288
677 867
614 277
641 839
580 140
19 586
18 464
16 442
Loans and advances defaulted – not impaired
Loans and advances defaulted – impaired
403
16 039
16 442
15 673
345
15 328
15 673
NedbaNk limited – ANNUAL report 2015
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
LOANS AND ADVANCES (continued)
18
18.6 Age analysis of loans and advances
Rm
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
total
< 1 month
> 1 month
< 3 months
> 3 months
> 6 months
< 6 months
< 12 months
> 12 months
Neither past due nor impaired
641 839 580 140 641 839 580 140
Mortgage loans
250 241 235 721 250 241 235 721
Net finance lease and instalment debtors
89 669 84 624 89 669 84 624
Credit cards
Overdrafts
Term loans
Overnight loans
Other loans to clients
11 807
11 394
11 807
11 394
12 215
12 058
12 215
12 058
102 611 98 679
102 611 98 679
27 527
21 638
27 527
21 638
101 834 74 878
101 834 74 878
Preference shares and debentures
20 660 17 995
20 660 17 995
Factoring accounts
5 102
4 574
5 102
4 574
Deposits placed under reverse repurchase
agreements
20 173
18 291
20 173
18 291
Trade, other bills and bankers' acceptances
–
288
–
288
Past due but not individually impaired
19 586
18 464
12 035
10 558
7 507
7 866
Mortgage loans
10 442
8 870
7 040
5 670
3 369
3 178
Net finance lease and instalment debtors
5 263
5 530
2 580
2 311
2 677
3 214
Credit cards
Overdrafts
Term loans
Overnight loans
Other loans to clients
Factoring accounts
subtotal
Defaulted
Mortgage loans
44
33
6
40
22
5
5
13
1 139
1 080
641
505
1 660
1 962
783
570
627
739
434
356
66
341
58
890
1 033
1 072
–
281
160
–
219
298
275
160
216
298
6
3
661 425 598 604 653 874 590 698 7 507
7 866
44
40
16 442
15 673
7 123
7 507
Net finance lease and instalment debtors
2 568
2 333
Credit cards
Properties in possession
Overdrafts
Term loans
Other loans to clients
Factoring accounts
1 079
354
625
902
596
651
3 365
3 179
1 261
67
391
114
total loans and advances
677 867 614 277
54
NedbaNk limited – ANNUAL report 2015
18.7 Credit quality of loans and advances
Rm
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
total
NGr 1–12
NGr
13–20
NGr 21–25
Np1–
Np3
Unrated
Neither past due nor impaired
641 839 580 140 276 494 220 377 331 665 309 817 27 395
22 614
Mortgage loans
250 241 235 721 72 397
57 518
165 776 165 436 10 370
8 839
Net finance lease and instalment debtors
89 669 84 624
4 157
4 344
76 677
72 674
8 285
6 929
Credit cards
Overdrafts
Term loans
Overnight loans
Other loans to clients
11 807
11 394
1 134
1 099
8 958
8 714
1 715
1 581
12 215
12 058
3 305
3 314
8 323
8 256
282
247
102 611 98 679
69 878
73 127
26 718
20 427
5 636
4 787
27 527
21 638
21 088
16 834
5 700
4 800
101 834 74 878
69 875
35 243
30 875
19 896
739
368
4
227
Preference shares and debentures
20 660 17 995
15 084
11 401
2 939
3 958
Factoring accounts
5 102
4 574
1 026
143
4 076
4 431
Deposits placed under reverse repurchase
agreements
20 173
18 291
18 550
17 354
1 623
Trade, other bills and bankers' acceptances
288
937
288
Past due but not individually impaired
Mortgage loans¹
19 586
18 464
10 442
8 870
9
9
2
2
2 729
2 672
16 555
15 647
1 609
1 467
8 704
7 363
703
246
45
119
726
4 461
4 760
230
26
875
596
835
479
222
1 519
1 720
7
1
240
160
192
298
Net finance lease and instalment debtors¹
5 263
5 530
Credit cards
Overdrafts
Term loans
Overnight loans
Other loans to clients¹
Factoring accounts
Defaulted
Mortgage loans¹
1 139
1 080
641
505
1 660
1 962
281
160
219
298
16 442
15 673
7 123
7 507
Net finance lease and instalment debtors¹
2 568
2 333
Credit cards
Properties in possession
Overdrafts
Term loans
Other loans to clients¹
Factoring accounts
1 079
354
625
902
596
651
3 365
3 179
1 261
67
391
114
6 285
27 332
1 698
3 928
550
677
305
379
241
338
716
19 512
2 637
2 636
85
7
60
18
26
208
113
39
2
9
15
117
36
35
22
20
34
26
34
15 528
13 937
914
1 702
6 689
7 103
434
404
2 534
2 295
34
38
1 079
902
618
644
3 357
2 546
34
1 184
67
333
114
354
596
7
8
77
7
633
24
total loans and advances
677 867 614 277 276 503 220 379 334 394 312 489 43 950 38 295
15 613
13 963
7 407
29 151
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.
NedbaNk limited – ANNUAL report 2015
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
19
19.1
IMPAIRMENT OF LOANS AND ADVANCES
Impairment of loans and advances
Balance at beginning of year
Impairments charge
Statement of comprehensive income
charge net of recoveries:
– Loans and advances
– Advances designated as at fair
value through profit or loss
(see note 35.1)
Recoveries
Amounts written off against the
impairment/Other transfers
Impairment of loans and advances
total impairment
Specific impairment
portfolio impairment
2015
10 948
5 742
4 608
4 606
2
1 134
(5 630)
11 060
2014
11 332
5 407
4 478
4 476
2
929
(5 791)
10 948
2015
6 758
5 304
4 170
4 168
2
1 134
(5 647)
6 415
2014
7 476
5 059
4 130
4 128
2
929
(5 777)
6 758
2015
4 190
438
438
438
2014
3 856
348
348
348
17
4 645
(14)
4 190
19.2 Impairments of loans and advances by classification
total impairment – 2015
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
Total impairment – 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
Impairment of loans and advances
Balance at
the beginning
of the year
rm
Impairment
charge/
(release)
rm
Amounts
written off
against the
impairment/
other transfers
rm
2 440
908
52
986
436
3 782
2 343
1
184
290
(41)
947
222
2 945
1 194
1
(499)
(241)
11
(755)
(180)
(2 668)
(1 298)
total
rm
2 125
957
22
1 178
478
4 059
2 239
1
1
10 948
5 742
(5 630)
11 060
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
2 440
908
52
986
436
3 782
2 343
1
11 332
5 407
(5 791)
10 948
56
NedbaNk limited – ANNUAL report 2015
19.2 Impairments of loans and advances by classification (continued)
Balance at
the beginning
of the year
rm
Impairment
charge/
(release)
rm
Amounts
written off
against the
impairment/
other transfers
rm
specific impairment – 2015
Home loans
Commercial mortgages
Properties in possession
Credit cards
Overdrafts
Other loans to clients
Net finance lease and instalment debtors
Specific impairment of loans and advances
Specific impairment – 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
Portfolio impairment – 2015
Home loans
Commercial mortgages
Credit cards
Overdrafts
Other loans to clients
Net finance lease and instalment debtors
Preference shares and debentures
Trade, other bills and bankers' acceptances
Portfolio impairment of loans and advances
Portfolio impairment – 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
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
311
165
(41)
936
202
2 561
1 170
5 304
314
248
19
791
166
2 615
906
(493)
(241)
11
(755)
(180)
(2 689)
(1 300)
(5 647)
(674)
(184)
15
(702)
(236)
(2 725)
(1 272)
1
5 059
(5 777)
(127)
125
11
20
384
24
1
(6)
21
2
total
rm
1 370
464
22
1 045
321
2 077
1 116
6 415
1 552
540
52
864
299
2 205
1 246
–
6 758
755
493
133
157
1 982
1 123
1
1
438
17
4 645
(61)
56
9
14
171
159
348
3
(18)
1
(14)
888
368
122
137
1 577
1 097
1
4 190
NedbaNk limited – ANNUAL report 2015
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
IMPAIRMENT OF LOANS AND ADVANCES (continued)
19
19.3 Sectoral analysis
total impairment
Specific impairment
portfolio impairment
2015
Rm
2014
rm
2015
Rm
2014
rm
2015
Rm
2014
rm
Individuals
7 380
7 588
4 855
4 979
2 525
2 609
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
19.4 Geographical analysis
SA
Other African countries
Europe
Asia
United States
Other
1 514
1 314
365
123
229
27
131
406
82
31
772
11 060
501
101
175
29
131
157
40
58
854
10 948
10 621
10 554
363
54
8
1
13
75
282
–
37
–
11 060
10 948
418
95
52
72
6
67
251
52
17
530
6 415
6 127
275
13
6 415
488
339
41
69
4
78
47
18
47
648
6 758
1 096
270
71
157
21
64
155
30
14
242
4 645
6 444
4 494
45
232
37
88
54
8
1
6 758
4 645
953
826
162
60
106
25
53
110
22
11
206
4 190
4 110
30
50
4 190
876
19.5 Interest on specifically impaired loans and advances
Interest on specifically impaired loans and advances is determined for the period for which the loan and advance were 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
Unlisted investments
Strate Ltd
Private-equity portfolio
Other
2015
Rm
3 925
3 925
432
1 216
57
618
541
2014
rm
5 393
5 393
624
1 745
51
1 195
499
Total listed and unlisted investments
1 648
2 369
Refer to note 35.2.1 for the classification of investment securities in terms of the fair-value hierarchy.
58
NedbaNk limited – ANNUAL report 2015
22
INVESTMENTS IN PRIVATE EQUITY ASSOCIATES, ASSOCIATE COMPANIES AND
JOINT ARRANGEMENTS
22.1 Movement in carrying amount
Carrying amount at the beginning of the year
Share of associate companies’ and joint arrangements’ (losses)/profits after taxation for the current year
Net movement of associate companies and joint arrangements at cost¹
Fair-value movements
Carrying amount at the end of the 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
2015
Rm
1 158
(1)
24
219
2014
Rm
1 098
12
10
38
1 400
1 158
949
39
412
1 400
1 400
1 400
730
39
389
1 158
1 158
1 158
¹ These amounts include movements due to acquisitions and disposals.
Refer to note 50 for further information in respect of investments in private-equity associates, associate companies and joint arrangements.
23 NON-CURRENT ASSETS HELD FOR SALE
Properties sold not yet transferred¹
Property and equipment
previously
included in:
2015
Rm
2
2
2014
Rm
16
16
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, the transfer of which had not been effected at year-end.
NedbaNk limited – ANNUAL RepoR t 2015
59
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
Recognised directly in equity
Other movements
Balance at the end of the year
2015
Rm
165
22
(3)
(3)
9
2
17
(120)
67
287
22
(62)
(20)
83
(4)
150
40
(23)
(188)
(4)
50
154
300
763
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
60
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 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
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
25.1
INVESTMENT PROPERTY
Fair value
Fair value at the beginning of the year
Transfers to non-current assets held for sale (note 23)
Fair value at the end of the year
25.2 Fair value of investment property
2015
Rm
35
14
33
(41)
26
67
223
479
(238)
549
50
(1 260)
249
591
120
763
2014
Rm
(184)
(16)
(396)
272
(408)
78
1 249
31
(443)
(27)
9
165
52
28
88
119
287
87
(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:
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.
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
2015
Rm
2014
Rm
4
6
NedbaNk limited – ANNUAL RepoR t 2015
61
26 PROPERTY AND EQUIPMENT
Land
Buildings
Computer
equipment
Furniture and
other equipment
Vehicles
total
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Gross carrying amount
Balance at 1 January
873
789
4 221
4 005
3 083
2 897
3 840
3 294
24
24
12 041
11 009
Transfers from furniture and other equipment
and buildings¹
Acquisitions
Increases arising from revaluations²
13
Transfers to non-current assets held for sale
Disposals
Writeoff of accumulated depreciation on
revaluations
Effect of movements in foreign exchange rates
and other movements
(1)
2
83
(1)
1 683
459
146
(144)
180
137
(3)
(15)
(128)
(85)
(1 683)
874
728
164
745
4
3
1 501
1 658
(67)
(542)
(83)
(198)
(4)
(294)
(759)
159
220
–
(4)
(128)
(85)
(1)
27
1
17
2
24
13 296
12 041
Balance at 31 December
885
873
6 237
4 221
3 895
3 083
2 252
3 840
2
5
14
(1)
accumulated depreciation and impairment
losses
Balance at 1 January
Transfers from furniture and other equipment
and buildings¹
Depreciation charge for the year
Writeoff of accumulated depreciation on
revaluations
Disposals
Effect of movements in foreign exchange rates
and other movements
402
371
2 039
2 154
2 126
1 898
15
15
4 582
4 438
875
316
131
428
396
222
375
3
4
969
906
(875)
(128)
(115)
(85)
(15)
(64)
(511)
(70)
(147)
(4)
(249)
(677)
(128)
(85)
Balance at 31 December
1 350
402
2 405
2 039
1 408
2 126
Carrying amount
At 1 January
At 31 December
873
885
789
3 819
3 634
1 044
743
1 714
1 396
873
4 887
3 819
1 490
1 044
844
1 714
2
5
1
19
9
8
8
15
5 182
4 582
9
9
7 459
6 571
8 114
7 459
¹ At the beginning of the year assets previously classified under furniture and other equipment were transferred to buildings to reflect the underlying nature of these assets.
² 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.
Equipment (principally computer equipment, motor vehicles, fixtures and furniture) is stated at cost less accumulated depreciation and impairment
losses. Land and buildings are 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
Market comparable
approach and
discounted cashflow
Market comparable
approach and
replacement value
Income capitalisation
rates
8,0% – 13,5%
(2014: 11,0% –
13,5%)
Price per square
meter
Commercial property
Residential property
total land and
buildings
Land
Buildings
2015
Rm
2014
Rm
2015
Rm
2014
Rm
880
868
4 877
3 809
5
5
10
10
885
873
4 887
3 819
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 R3 265 m (2014: R2 444m).
62
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
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.
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 2015.
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), OMART (Nedbank Group Disability Fund) and PRMA (Symetry) annuity policy 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.
27.1 Analysis of long-term employee benefits assets and liabilities
Rm
2015
Postemployment benefits
Other long-term employee benefits – disability fund
2014
Postemployment benefits
Other long-term employee benefits – disability fund
Notes
assets
liabilities
27.1.1
27.1.1
4 512
373
4 885
4 035
374
4 409
(2 636)
(373)
(3 009)
(2 628)
(374)
(3 002)
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 of R373m
(2014: R374m). The value of the OMART asset held by the group is R373m (2014: R374m).
NedbaNk limited – ANNUAL RepoR t 2015
63
27 LONG-TERM EMPLOYEE BENEFITS
27.1.1 Net asset/(liability) recognised
Rm
2015
Present value of defined-benefit obligation
Fair value of plan assets¹
Funded status
Unrecognised due to paragraph 64 limit
Asset
Liability
2014
Present value of defined-benefit obligation
Fair value of plan assets¹
Funded status
Unrecognised due to paragraph 64 limit
Asset²
Liability²
pension and
provident
funds
Medical
aid funds
(5 065)
7 576
2 511
(57)
2 454
3 258
(804)
(5 024)
7 053
2 029
(20)
2 009
2 856
(847)
(1 832)
1 254
(578)
(578)
1 254
(1 832)
(1 772)
1 170
(602)
(602)
1 179
(1 781)
¹
²
In terms of IAS 19 Employee Benefits insurance policies issued by related parties of the reporting entity are excluded from the definition of qualifying insurance policies. The fair value of plan assets includes non-qualifying
insurance policies for pension funds to the value of R781m (2014: R828m) and for medical aid to the value of R1 254m (2014: R1 179m).
R1 179m of non-qualifying insurance policies were reflected under the pension and provident funds; however, these polices relate to the medical aid fund and the comparative information has been restated to align with the
current year's presentation.
27.2 postemployment benefits
Rm
analysis of postemployment benefit assets and liabilities
2015
Pension funds
Nedgroup Fund
Nedbank UK Fund
Other funds
Medical aid funds
Nedgroup scheme for Nedbank employees
Nedgroup scheme for BoE employees
Total
2014
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)
5 065
4 434
461
170
1 832
1 705
127
6 897
5 024
4 460
395
169
1 772
1 644
128
6 796
7 576
6 890
487
199
1 254
1 254
8 830
7 053
6 488
384
181
1 170
1 170
8 223
2 511
2 456
26
29
(578)
(451)
(127)
1 933
2 029
2 028
(11)
12
(602)
(474)
(128)
1 427
(57)
(26)
(31)
–
2 454
2 456
–
(2)
(578)
(451)
(127)
(57)
1 876
(20)
(20)
–
2 009
2 028
(11)
(8)
(602)
(474)
(128)
(20)
1 407
64
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 27.2 postemployment benefits (continued)
Rm
Present value of defined-benefit obligation
2015
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
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
Fair value of plan assets
2015
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
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
pension and
provident
funds
Medical aid
funds
total
5 024
34
384
10
(142)
(339)
94
1 772
75
165
(113)
(67)
5 065
1 832
6 796
109
549
10
(255)
(406)
94
6 897
6 352
102
533
10
180
(395)
14
6 796
8 223
649
170
94
10
(405)
(10)
99
1 571
68
151
42
(60)
1 772
1 170
106
(14)
58
(66)
1 254
8 830
893
92
(24)
265
(56)
7 413
620
266
303
10
(391)
(11)
13
7 053
1 170
8 223
4 781
34
382
10
138
(335)
14
5 024
7 053
543
184
36
10
(339)
(10)
99
7 576
6 520
528
290
38
10
(335)
(11)
13
NedbaNk limited – ANNUAL RepoR t 2015
65
LONG-TERM EMPLOYEE BENEFITS (continued)
27
27.2 postemployment benefits (continued)
Rm
Net (income)/expense recognised
2015
Current service cost
Interest cost
Scheme-settled plan administration costs
2014
Current service cost
Interest cost
Scheme-settled plan administration costs
movements in net asset/(liability) recognised
2015
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
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
distribution of plan assets
2015
Equity instruments
Debt instruments
Property
Cash
International
Other
2014
Equity instruments
Debt instruments
Property
Cash
International
Rm
actual return on plan assets
2015
2014
66
NedbaNk limited – ANNUAL RepoR t 2015
pension and
provident
funds
Medical aid
funds
34
(159)
10
(115)
34
(145)
11
(100)
2 009
115
289
36
5
75
59
134
68
59
127
(602)
(134)
99
59
total
109
(100)
10
19
102
(86)
11
27
1 407
(19)
388
95
5
2 454
(578)
1 876
1 721
100
151
38
(1)
(678)
(127)
(66)
269
1 043
(27)
85
307
(1)
2 009
(602)
1 407
%
%
%
32,14
27,23
5,07
6,08
29,48
23,00
7,00
3,00
49,00
15,00
3,00
30,84
24,36
4,78
12,17
27,42
0,43
100,00
100,00
100,00
34,18
28,74
4,89
6,32
25,87
100,00
25,00
17,00
43,00
15,00
100,00
pension and
provident
funds
Medical aid
funds
727
818
92
68
32,88
27,07
4,19
11,54
24,32
100,00
total
819
886
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 27.2 postemployment benefits (continued)
Principal actuarial assumptions
2015
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)
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)
Range
%
Used in
valuation
%
3.70 – 10.10
3.70 – 10.10
2.10 – 7.70
8.70 – 8.70
0.49 – 7.70
55 to 65
3.60 – 8.10
3.60 – 8.10
2.25 – 5.90
6.90 – 7.10
0.53 – 5.90
55 to 65
10,8
10,8
7,9
7,9
8,9
60
9,1
9,1
6,5
6,5
7,5
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
2015
%
9,69
9,69
7,92
7,14
2014
%
7,86
7,86
6,34
5,53
Medical aid funds
The overall expected long-term rate of return on plan assets is 10,8%. 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.
Rm
experience adjustments on present value of defined-benefit obligation for past five years
2015
2014
2013
2012
2011
2010
experience adjustments on fair value of plan assets for past five years
2015
2014
2013
2012
2011
2010
estimate of future contributions
Contributions expected for ensuing year
Pension and
provident
funds
medical aid
funds
113
(42)
148
18
153
48
(14)
(24)
28
18
(2)
(10)
(89)
55
229
10
(106)
30
(30)
95
40
total
24
13
377
28
47
78
(14)
(24)
28
18
(32)
85
40
NedbaNk limited – ANNUAL RepoR t 2015
67
LONG-TERM EMPLOYEE BENEFITS (continued)
27
27.2 postemployment benefits (continued)
Fund surplus/(deficit) for past five years
Rm
Pension funds
2015
2014
2013
2012
2011
2010
medical aid funds
2015
2014
2013
2012
2011
2010
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
present value
of obligation
Fair value
of plan asset
Surplus/
(Deficit)
5 065
5 024
4 781
4 784
4 191
3 917
1 832
1 772
1 571
1 584
1 482
1 222
7 576
7 053
6 520
5 635
5 115
4 908
1 254
1 170
893
854
830
810
2015
44
272
(35)
(222)
2 511
2 029
1 739
851
924
991
(578)
(602)
(678)
(730)
(652)
(412)
2014
50
274
(20)
(222)
68
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 28 INTANGIBLE ASSETS
Rm
2015
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 and impairment losses
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
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 and impairment losses
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
Goodwill
Software
Software
development
costs
957
1 032
(621)
(68)
(1)
1 299
135
1 633
7 629
149
621
(42)
(2)
6
1 633
8 361
224
5 344
705
(2)
6
total
10 219
1 181
–
(110)
(2)
5
11 293
5 703
705
(2)
6
224
6 053
135
6 412
1 409
1 409
2 285
2 308
822
1 164
4 516
4 881
1 633
6 859
241
761
(33)
(198)
(1)
952
804
(761)
(38)
9 444
1 045
–
(71)
(198)
(1)
1 633
7 629
957
10 219
224
4 897
135
5 256
644
(198)
1
644
(198)
1
224
5 344
135
5 703
1 409
1 409
1 962
2 285
817
822
4 188
4 516
NedbaNk limited – ANNUAL RepoR t 2015
69
28 INTANGIBLE ASSETS (continued)
28.1 Analysis of goodwill by segment
Nedbank Corporate and Investment Banking
Nedbank Retail and Business Banking
Other
2015
Rm
776
629
4
2014
Rm
776
629
4
1 409
1 409
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 with 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:
Riskfree 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 (2014: 30 000 000) ordinary shares of R1 each
Issued
27 555 649 (2014: 27 241 024) fully paid ordinary shares of R1 each
2015
9,76
2014
7,98
0,30– 0,76
0,21– 0,89
6,00
6,00
0,00– 4,80
0,00– 5,80
5
3
9,80– 14,33
9,08– 12,81
1 409
84 497
83 088
1 409
100 801
99 392
2015
Rm
30
28
28
2014
Rm
30
27
27
Subject to the restrictions imposed by the Companies Act, 2008, the unissued shares are under the control of the directors until the forthcoming
annual general meeting.
70
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 29.2 preference share capital and premium
Nedbank Ltd preference share capital and premium
Authorised
1 000 000 000 (2014: 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 (2014: 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.
2015
Rm
2014
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 Ltd ('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 to reduce 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
memorandum of incorporation.
NedbaNk limited – ANNUAL RepoR t 2015
71
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
2015
Rm
67 504
9 820
492 764
269 716
46 478
60 753
115 817
44 823
77 594
15 531
2014
Rm
62 385
9 649
453 350
252 157
41 264
60 025
99 904
29 807
66 849
12 583
708 036
634 623
655 024
53 012
708 036
586 058
48 565
634 623
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
The group has pledged government and other securities (note 17) and negotiable certificates of deposit (note 15) amounting to R15 614m (2014: R11 986m) 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. The associated liabilities amounted to R15 531m (2014: R12 583m).
30.2 Sectoral analysis
Banks
Government and public sector
Individuals
Business sector
30.3 Geographical analysis
SA
Rest of Africa
Europe
Asia
2015
Rm
53 012
47 880
168 698
438 446
708 036
2014
Rm
48 565
46 652
154 520
384 886
634 623
685 149
613 638
8 316
11 338
3 233
6 956
13 865
164
708 036
634 623
72
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 31
PROVISIONS AND OTHER LIABILITIES
Creditors and other accounts
Deferred revenue: client 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
31.2 Day-one gains and losses
2015
Rm
6 236
256
2 744
675
9 911
711
1 391
(1 427)
675
2014
Rm
6 668
258
767
711
8 404
676
386
(351)
711
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. There are no material day-one profits or losses to report on for the
years ended 31 December 2014 and 2015.
NedbaNk limited – ANNUAL RepoR t 2015
73
32
LONG-TERM DEBT INSTRUMENTS
instrument code
Subordinated debt
Callable notes (rand-denominated)
NED9
NED11
NED13
NED14
NED15
NED16
NED 17
NED 18
NED 19
NED 20
Callable notes (US dollar-denominated)
EMTN01
Hybrid subordinated debt
Callable notes (rand-denominated)
NEDH1A
NEDH1B
Securitised liabilities– rand-denominated
Callable notes (rand-denominated)
GRH1A1
GRH1A2
GRH1A3
GRH1B
SUBLOAN 2
GRH1A1
GRH1A2
GRH1A3
GRH1B
GH31C
SUBLOAN 1
Date callable
Date repayable
Nominal
value
Rm
Instrument terms up to callable date
Instrument terms after callable date
Interest on notes payable
6 July 2017
6 July 2022
17 September 2017
17 September 2020
25 July 2018
25 July 2023
29 November 2018
29 November 2023
8 April 2019
8 April 2019
14 October 2019
16 January 2020
1 July 2020
1 July 2020
8 April 2024
8 April 2024
14 October 2024
16 January 2025
1 July 2025
1 July 2025
3 March 2017
3 March 2022
20 November 2018
20 November 2018
20 November 2018
20 November 2018
25 October 2017
25 October 2017
25 October 2017
25 October 2017
25 October 2017
25 February 2018
25 February 2020
25 February 2020
25 February 2020
25 February 2020
25 February 2020
25 October 2039
25 October 2039
25 October 2039
25 October 2039
25 October 2039
25 February 2042
25 February 2042
25 February 2042
25 February 2042
25 February 2042
25 February 2042
2 000
1 000
1 800
1 200
450
1 737
300
225
1 624
407
US$m
100
Rm
487
1 265
Rm
480
336
900
110
227
650
100
680
80
65
180
JIBAR + 0,47% per annum
Floating 3-month JIBAR + 2,20%
10,54% per annum
Floating 3-month JIBAR + 2,85%
JIBAR + 2,75% per annum
Floating 3-month JIBAR + 2,75%
JIBAR + 2,55% per annum
Floating 3-month JIBAR + 2,55%
10,49% per annum
Fixed at 10.49% per annum
JIBAR + 2,55% per annum
Floating 3-month JIBAR + 2,55%
JIBAR + 2,75% per annum
Floating 3-month JIBAR + 2,75%
JIBAR + 2,75% per annum
Floating 3-month JIBAR + 2,75%
JIBAR + 3,50% per annum
Floating 3-month JIBAR + 3,50%
JIBAR + 2,75% per annum
Floating 3-month JIBAR + 2,75%
3-month USD LIBOR
3-month USD LIBOR + 3,00%
15,05% per annum
Floating 3-month JIBAR + 7,00%
JIBAR + 4,75% per annum
Floating 3-month JIBAR + 7,00%
JIBAR + 0,58% per annum
JIBAR + 0,58% per annum
JIBAR + 1,1% per annum
JIBAR + 1,25% per annum
JIBAR + 1,54% per annum
JIBAR + 1,90% per annum
JIBAR + 1,2% per annum
JIBAR + 1,45% per annum
JIBAR + 1,55% per annum
JIBAR + 2,2% per annum
JIBAR + 3,0% per annum
3-month JIBAR + 1,49%
3-month JIBAR + 1,69%
3-month JIBAR + 2,08%
3-month JIBAR + 2,57%
3-month JIBAR + 1,2%
3-month JIBAR + 1,45%
3-month JIBAR + 1,55%
3-month JIBAR + 2,2%
3-month JIBAR + 3,0%
Prime + 6,575% per annum
3-month JIBAR + 0,58%
2014
Rm
11 713
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
2015
Rm
11 495
9 932
2 032
1 829
1 209
461
1 772
306
229
1 664
430
1 563
1 563
2 679
161
913
112
1
558
101
685
81
66
1
Quarterly
Biannually
Quarterly
Quarterly
Biannually
Quarterly
Quarterly
Quarterly
Quarterly
Biannually
Quarterly
Biannually
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
74
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 32
LONG-TERM DEBT INSTRUMENTS
instrument code
Subordinated debt
Callable notes (rand-denominated)
Callable notes (US dollar-denominated)
Hybrid subordinated debt
Callable notes (rand-denominated)
Securitised liabilities– rand-denominated
Callable notes (rand-denominated)
NED9
NED11
NED13
NED14
NED15
NED16
NED 17
NED 18
NED 19
NED 20
EMTN01
NEDH1A
NEDH1B
GRH1A1
GRH1A2
GRH1A3
GRH1B
GRH1A1
GRH1A2
GRH1A3
GRH1B
GH31C
SUBLOAN 2
SUBLOAN 1
6 July 2017
6 July 2022
17 September 2017
17 September 2020
25 July 2018
25 July 2023
29 November 2018
29 November 2023
8 April 2019
8 April 2019
14 October 2019
16 January 2020
1 July 2020
1 July 2020
8 April 2024
8 April 2024
14 October 2024
16 January 2025
1 July 2025
1 July 2025
25 October 2017
25 October 2017
25 October 2017
25 October 2017
25 October 2017
25 February 2018
25 February 2020
25 February 2020
25 February 2020
25 February 2020
25 February 2020
25 October 2039
25 October 2039
25 October 2039
25 October 2039
25 October 2039
25 February 2042
25 February 2042
25 February 2042
25 February 2042
25 February 2042
25 February 2042
Nominal
value
Rm
2 000
1 000
1 800
1 200
450
1 737
300
225
1 624
407
US$m
100
Rm
487
1 265
Rm
480
336
900
110
227
650
100
680
80
65
180
Date callable
Date repayable
Instrument terms up to callable date
Instrument terms after callable date
Interest on notes payable
JIBAR + 0,47% per annum
Floating 3-month JIBAR + 2,20%
10,54% per annum
Floating 3-month JIBAR + 2,85%
JIBAR + 2,75% per annum
Floating 3-month JIBAR + 2,75%
JIBAR + 2,55% per annum
Floating 3-month JIBAR + 2,55%
10,49% per annum
Fixed at 10.49% per annum
JIBAR + 2,55% per annum
Floating 3-month JIBAR + 2,55%
JIBAR + 2,75% per annum
Floating 3-month JIBAR + 2,75%
JIBAR + 2,75% per annum
Floating 3-month JIBAR + 2,75%
JIBAR + 3,50% per annum
Floating 3-month JIBAR + 3,50%
JIBAR + 2,75% per annum
Floating 3-month JIBAR + 2,75%
3 March 2017
3 March 2022
3-month USD LIBOR
3-month USD LIBOR + 3,00%
20 November 2018
20 November 2018
20 November 2018
20 November 2018
15,05% per annum
Floating 3-month JIBAR + 7,00%
JIBAR + 4,75% per annum
Floating 3-month JIBAR + 7,00%
JIBAR + 1,1% per annum
JIBAR + 1,25% per annum
JIBAR + 1,54% per annum
JIBAR + 1,90% per annum
3-month JIBAR + 1,49%
3-month JIBAR + 1,69%
3-month JIBAR + 2,08%
3-month JIBAR + 2,57%
JIBAR + 0,58% per annum
JIBAR + 0,58% per annum
JIBAR + 1,2% per annum
JIBAR + 1,45% per annum
JIBAR + 1,55% per annum
JIBAR + 2,2% per annum
JIBAR + 3,0% per annum
3-month JIBAR + 1,2%
3-month JIBAR + 1,45%
3-month JIBAR + 1,55%
3-month JIBAR + 2,2%
3-month JIBAR + 3,0%
Prime + 6,575% per annum
3-month JIBAR + 0,58%
Quarterly
Biannually
Quarterly
Quarterly
Biannually
Quarterly
Quarterly
Quarterly
Quarterly
Biannually
Quarterly
Biannually
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
2014
Rm
11 713
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
2015
Rm
11 495
9 932
2 032
1 829
1 209
461
1 772
306
229
1 664
430
1 563
1 563
2 679
161
913
112
1
558
101
685
81
66
1
NedbaNk limited – ANNUAL RepoR t 2015
75
32
LONG-TERM DEBT INSTRUMENTS (continued)
instrument code
Senior unsecured debt
Senior unsecured notes (rand-denominated)
NBK2A
NBK2B
NBK3A
NBK4
NBK6A
NBK6B
NBK7B
NBK9A
NBK9B
NBK10A
NBK11A
NBK12A
NBK12B
NBK13A
NBK13B
NBK14A
NBK14B
NBK15A
NBK15B
NBK16A
NBK16B
NBK17A
NBK17B
NBK18A
NBK18B
NBK19A
NBK19B
NBK20A
NBK20B
NBK21A
NBK21B
NBK22A
NBK22B
NBK23A
NBK23B
NBK24A
NBK24B
NBK25B
NBK26B
NBK27B
NBK28B
Other
Unsecured debentures (rand-denominated)
Total long-term debt instruments in issue
Date callable
Date repayable
Nominal
value
Rm
Instrument terms up to callable date
Instrument terms after callable date
Interest on notes payable
8 September 2009
8 September 2009
8 September 2009
28 October 2009
13 April 2010
13 April 2010
13 April 2010
23 March 2011
23 March 2011
25 July 2013
15 September 2015
15 September 2015
9 September 2019
28 October 2024
19 April 2015
19 April 2015
19 April 2020
23 March 2016
23 March 2016
25 July 2016
28 November 2013
28 November 2020
19 March 2014
21 February 2012
19 March 2014
21 February 2012
26 June 2014
24 August 2012
12 February 2015
24 August 2012
12 February 2015
25 July 2013
22 April 2015
19 March 2021
20 February 2015
19 March 2024
21 February 2017
25 June 2021
27 August 2015
27 August 2022
27 August 2017
12 February 2025
25 July 2016
22 April 2026
28 November 2013
28 November 2016
1 June 2015
14 March 2014
1 June 2015
26 June 2014
1 June 2015
26 June 2014
21 July 2015
7 November 2014
19 November 2015
12 February 2015
19 November 2015
11 February 2015
19 November 2015
11 February 2015
12 February 2015
22 April 2015
1 June 2015
1 June 2020
20 March 2017
1 June 2022
26 June 2017
1 June 2026
25 June 2021
21 July 2027
9 November 2017
19 November 2022
12 February 2018
19 November 2025
12 February 2020
19 November 2027
12 February 2022
12 February 2025
22 April 2026
1 June 2018
19 November 2015
19 November 2020
30 November 2029
3 244
1 044
1 273
660
478
1 027
80
1 137
677
151
1 888
855
1 297
391
405
500
250
215
786
2 607
3 056
800
694
380
1 035
280
806
1 739
650
2 000
240
952
472
884
90
666
12
1 980
500
1 427
476
Rm
200
10,55% per annum
10,55% per annum
JIBAR + 2,20% per annum
3-month JIBAR + 2,20% per annum
11,39% per annum
Zero coupon
9,68% per annum
11,39% per annum
Zero coupon
9,68% per annum
JIBAR + 1,75% per annum
3-month JIBAR + 1,75% per annum
JIBAR + 2,15% per annum
3-month JIBAR + 2,15% per annum
9,36% per annum
9,36% per annum
JIBAR + 1,25% per annum
JIBAR + 1,25% per annum
6,91% per annum
8,92% per annum
9,38% per annum
6,91% per annum
8,92% per annum
9,38% per annum
JIBAR + 1,00% per annum
JIBAR + 1,00% per annum
9,73% per annum
9,73% per annum
JIBAR + 1,30% per annum
JIBAR + 1,30% per annum
9,29% per annum
9,29% per annum
JIBAR + 1,31% per annum
JIBAR + 1,31% per annum
9,44% per annum
9,29% per annum
JIBAR + 1,00% per annum
8,79% per annum
JIBAR + 1,31% per annum
9,44% per annum
JIBAR + 0,8% per annum
JIBAR + 0,8% per annum
9,95% per annum
9,95% per annum
JIBAR + 0,75% per annum
JIBAR + 0,75% per annum
9,26% per annum
9,26% per annum
JIBAR + 0,85% per annum
JIBAR + 0,85% per annum
9,64% per annum
9,64% per annum
JIBAR + 0,9% per annum
JIBAR + 0,9% per annum
10,36% per annum
10,36% per annum
JIBAR + 1,3% per annum
JIBAR + 1,3% per annum
JIBAR + 1,45% per annum
JIBAR + 2,00% per annum
10,63% per annum
JIBAR + 1,12% per annum
10,07% per annum
JIBAR + 1,25% per annum
10,69% per annum
10,94% per annum
JIBAR + 1,55% per annum
JIBAR + 2,00% per annum
JIBAR + 2,10% per annum
JIBAR + 1,30% per annum
JIBAR + 1,55% per annum
Zero coupon
10,63% per annum
JIBAR + 1,12% per annum
JIBAR + 1,25% per annum
JIBAR + 1,45% per annum
JIBAR + 1,55% per annum
JIBAR + 2,10% per annum
JIBAR + 1,30% per annum
10,07% per annum
10,69% per annum
10,94% per annum
JIBAR + 1,55% per annum
2015
Rm
2014
Rm
30 785
22 511
3 347
1 054
1 385
263
487
1 043
81
1 166
678
154
1 903
878
1 307
402
408
501
252
700
3 068
698
1 037
806
650
243
Biannually
Quarterly
Biannually
Biannually
Quarterly
Quarterly
Biannually
Quarterly
Biannually
Biannually
Biannually
Quarterly
Biannually
Quarterly
Biannually
Biannually
Semi-annually
Quarterly
Semi-annually
Quarterly
Semi-annually
Quarterly
Semi-annually
Quarterly
Semi-annually
Quarterly
Semi-annually
Quarterly
Semi-annually
Quarterly
Semi-annually
Quarterly
Semi-annually
Quarterly
Semi-annually
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
1 372
245
81
1 166
678
155
1 903
878
402
408
501
222
700
2 702
3 070
815
698
383
1 037
282
806
1 754
650
2 095
244
963
477
895
91
674
12
2 002
508
1 436
480
18
18
15
15
44 977
35 634
During the year there were no defaults or breaches of principal, interest or any other terms and conditions of long-term debt instruments.
76
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 32
LONG-TERM DEBT INSTRUMENTS (continued)
instrument code
Senior unsecured debt
Senior unsecured notes (rand-denominated)
28 November 2013
28 November 2020
28 November 2013
28 November 2016
8 September 2009
8 September 2009
8 September 2009
28 October 2009
13 April 2010
13 April 2010
13 April 2010
23 March 2011
23 March 2011
25 July 2013
19 March 2014
21 February 2012
19 March 2014
21 February 2012
26 June 2014
24 August 2012
12 February 2015
24 August 2012
12 February 2015
25 July 2013
22 April 2015
1 June 2015
14 March 2014
1 June 2015
26 June 2014
1 June 2015
26 June 2014
21 July 2015
7 November 2014
19 November 2015
12 February 2015
19 November 2015
11 February 2015
19 November 2015
11 February 2015
12 February 2015
22 April 2015
1 June 2015
15 September 2015
15 September 2015
9 September 2019
28 October 2024
19 April 2015
19 April 2015
19 April 2020
23 March 2016
23 March 2016
25 July 2016
19 March 2021
20 February 2015
19 March 2024
21 February 2017
25 June 2021
27 August 2015
27 August 2022
27 August 2017
12 February 2025
25 July 2016
22 April 2026
1 June 2020
20 March 2017
1 June 2022
26 June 2017
1 June 2026
25 June 2021
21 July 2027
9 November 2017
19 November 2022
12 February 2018
19 November 2025
12 February 2020
19 November 2027
12 February 2022
12 February 2025
22 April 2026
1 June 2018
Nominal
value
Rm
3 244
1 044
1 273
660
478
1 027
80
1 137
677
151
1 888
855
1 297
391
405
500
250
215
786
2 607
3 056
800
694
380
1 035
280
806
1 739
650
2 000
240
952
472
884
90
666
12
1 980
500
1 427
476
Rm
200
19 November 2015
19 November 2020
Unsecured debentures (rand-denominated)
Total long-term debt instruments in issue
During the year there were no defaults or breaches of principal, interest or any other terms and conditions of long-term debt instruments.
NBK2A
NBK2B
NBK3A
NBK4
NBK6A
NBK6B
NBK7B
NBK9A
NBK9B
NBK10A
NBK11A
NBK12A
NBK12B
NBK13A
NBK13B
NBK14A
NBK14B
NBK15A
NBK15B
NBK16A
NBK16B
NBK17A
NBK17B
NBK18A
NBK18B
NBK19A
NBK19B
NBK20A
NBK20B
NBK21A
NBK21B
NBK22A
NBK22B
NBK23A
NBK23B
NBK24A
NBK24B
NBK25B
NBK26B
NBK27B
NBK28B
Other
Date callable
Date repayable
Instrument terms up to callable date
Instrument terms after callable date
Interest on notes payable
2015
Rm
2014
Rm
10,55% per annum
10,55% per annum
JIBAR + 2,20% per annum
3-month JIBAR + 2,20% per annum
11,39% per annum
Zero coupon
9,68% per annum
11,39% per annum
Zero coupon
9,68% per annum
JIBAR + 1,75% per annum
3-month JIBAR + 1,75% per annum
JIBAR + 2,15% per annum
3-month JIBAR + 2,15% per annum
9,36% per annum
9,36% per annum
JIBAR + 1,25% per annum
JIBAR + 1,25% per annum
6,91% per annum
8,92% per annum
9,38% per annum
6,91% per annum
8,92% per annum
9,38% per annum
JIBAR + 1,00% per annum
JIBAR + 1,00% per annum
9,73% per annum
9,73% per annum
JIBAR + 1,30% per annum
JIBAR + 1,30% per annum
9,29% per annum
9,29% per annum
JIBAR + 1,31% per annum
JIBAR + 1,31% per annum
9,44% per annum
9,29% per annum
JIBAR + 1,00% per annum
8,79% per annum
JIBAR + 1,31% per annum
9,44% per annum
JIBAR + 0,8% per annum
JIBAR + 0,8% per annum
9,95% per annum
9,95% per annum
JIBAR + 0,75% per annum
JIBAR + 0,75% per annum
9,26% per annum
9,26% per annum
JIBAR + 0,85% per annum
JIBAR + 0,85% per annum
9,64% per annum
9,64% per annum
JIBAR + 0,9% per annum
JIBAR + 0,9% per annum
10,36% per annum
10,36% per annum
JIBAR + 1,3% per annum
JIBAR + 1,3% per annum
10,63% per annum
JIBAR + 1,12% per annum
10,07% per annum
JIBAR + 1,25% per annum
10,69% per annum
10,63% per annum
JIBAR + 1,12% per annum
JIBAR + 1,25% per annum
JIBAR + 1,45% per annum
JIBAR + 1,55% per annum
JIBAR + 1,45% per annum
JIBAR + 2,00% per annum
10,94% per annum
JIBAR + 1,55% per annum
JIBAR + 2,00% per annum
JIBAR + 2,10% per annum
JIBAR + 1,30% per annum
JIBAR + 1,55% per annum
JIBAR + 2,10% per annum
JIBAR + 1,30% per annum
10,07% per annum
10,69% per annum
10,94% per annum
JIBAR + 1,55% per annum
30 November 2029
Zero coupon
Biannually
Quarterly
Biannually
Biannually
Quarterly
Quarterly
Biannually
Quarterly
Biannually
Biannually
Biannually
Quarterly
Biannually
Quarterly
Biannually
Biannually
Semi-annually
Quarterly
Semi-annually
Quarterly
Semi-annually
Quarterly
Semi-annually
Quarterly
Semi-annually
Quarterly
Semi-annually
Quarterly
Semi-annually
Quarterly
Semi-annually
Quarterly
Semi-annually
Quarterly
Semi-annually
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
30 785
1 372
245
81
1 166
678
155
1 903
878
402
408
501
222
700
2 702
3 070
815
698
383
1 037
282
806
1 754
650
2 095
244
963
477
895
91
674
12
2 002
508
1 436
480
18
18
22 511
3 347
1 054
1 385
263
487
1 043
81
1 166
678
154
1 903
878
1 307
402
408
501
252
700
3 068
698
1 037
806
650
243
15
15
44 977
35 634
NedbaNk limited – ANNUAL RepoR t 2015
77
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
– Net impairment of property and equipment, and intangible assets (note 10)
– Net loss on sale of property and equipment (note 10)
– 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
33.4 Increase in operating assets
Other short-term securities
Government and other securities
Loans and advances and other operating assets
2015
Rm
2014
Rm
11 039
10 822
969
705
5 742
(10)
118
26
668
19 257
55 128
13 404
2 783
1 287
72 602
906
644
5 407
(11)
96
522
18 386
50 075
12 591
2 394
1 160
66 220
(32 724)
(12 893)
(8 892)
(28 322)
(12 550)
(7 931)
(54 509)
(48 803)
(3 756)
(15 905)
(83 282)
(21 318)
4 451
(47 198)
(102 943)
(64 065)
78
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 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
Amounts receivable at the end of the year
Total indirect taxation (note 9)
Taxation paid
33.7 Dividends paid
2015
Rm
2014
Rm
5 290
54 430
10 745
2 948
20 022
93 435
201
(2 828)
341
(817)
(3 103)
(668)
(3 771)
6 487
60 038
(17 724)
325
(1 685)
47 441
327
(3 074)
7
(201)
(2 941)
(522)
(3 463)
Recognised in the consolidated statement of changes in shareholders' equity
(5 200)
(3 400)
NedbaNk limited – ANNUAL RepoR t 2015
79
34 CONSOLIDATED STATEMENT OF FINANCIAL POSITION – CATEGORIES OF FINANCIAL
INSTRUMENTS
Notes
total
Rm
at fair value through profit or loss
Held for
trading
Rm
designated¹
Rm
available-for-sale
Held-to-maturity
loans and
Financial liabilities
Non-financial assets,
financial assets
investments
receivables
at amortised cost
liabilities and equity
Rm
Rm
Rm
Rm
Rm
9 346
30 948
9 614
32 120
12
17 869
11 305
63 084
1 631
1 154
18 151
60 078
30 948
42 733
666 807
3 925
904
1 648
2
1 400
67
8 114
4 885
16 190
4 881
32 863
3 007
18 807
17
18 151
571 603
3 913
16 190
860 733
82 040
95 043
3 024
51 670
609 857
28
18 532
37 610
56 170
3 561
223
59 954
33 996
708 036
9 911
87
763
3 009
44 977
800 779
860 733
33 996
104 503
2 910
141 409
141 409
64 993
50
401
65 444
65 444
904
2
246
67
8 114
4 885
4 881
19 099
28
18 532
37 610
56 170
3 561
223
59 954
931
87
763
3 009
4 790
64 744
538 540
6 020
44 576
589 136
589 136
2015
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
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
Deferred taxation liabilities
Long-term employee benefit liabilities
Long-term debt instruments
Total liabilities
Total equity and liabilities
14
15
16
17
18
20
21
23
22
24
26
27
14
28
29.1
29.2
16
30
31
24
27
32
80
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
34 CONSOLIDATED STATEMENT OF FINANCIAL POSITION – CATEGORIES OF FINANCIAL
INSTRUMENTS
Notes
total
Rm
at fair value through profit or loss
Held for
trading
Rm
designated¹
Rm
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
32 863
3 007
18 807
17
18 151
571 603
3 913
16 190
860 733
82 040
95 043
3 024
51 670
609 857
Investments in private-equity associates, associate companies and joint
2015
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
arrangements
Deferred taxation assets
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
Deferred taxation liabilities
Long-term employee benefit liabilities
Long-term debt instruments
Total liabilities
Total equity and liabilities
14
15
16
17
18
20
21
23
22
24
26
27
14
28
29.1
29.2
16
30
31
24
27
32
18 151
60 078
30 948
42 733
666 807
3 925
904
1 648
2
1 400
67
8 114
4 885
16 190
4 881
28
18 532
37 610
56 170
3 561
223
59 954
33 996
708 036
9 911
87
763
3 009
44 977
800 779
860 733
9 346
30 948
9 614
32 120
12
17 869
11 305
63 084
1 631
1 154
33 996
104 503
2 910
141 409
141 409
64 993
50
401
65 444
65 444
904
2
246
67
8 114
4 885
4 881
19 099
28
18 532
37 610
56 170
3 561
223
59 954
931
87
763
3 009
4 790
64 744
538 540
6 020
44 576
589 136
589 136
NedbaNk limited – ANNUAL RepoR t 2015
81
34 CONSOLIDATED STATEMENT OF FINANCIAL POSITION – CATEGORIES OF FINANCIAL
INSTRUMENTS (continued)
Notes
total
Rm
At fair value through profit or loss
Held for
trading
Rm
Designated¹
Rm
Available-for-sale
Held-to-maturity
financial assets
investments
Rm
Rm
Loans and
receivables
Rm
Financial liabilities
Non-financial assets,
at amortised cost
liabilities and equity
Rm
Rm
2014
assets
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities²
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
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 liabilities³
Current taxation liabilities
Deferred taxation liabilities
Long-term employee benefit liabilities
Long-term debt instruments
total liabilities
total equity and liabilities
14
15
16
17
18
20
21
23
22
24
26
27
14
28
29.1
29.2
16
30
31
24
27
32
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
753 444
55 644
85 949
3 768
41 838
549 184
–
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
32 593
3 751
9 245
10 757
518 592
4 992
14 843
–
–
–
–
–
–
–
–
236
16
260
165
7 459
4 409
4 516
17 061
27
17 422
34 787
52 236
3 561
183
55 980
969
35
287
3 002
4 293
60 273
–
517 985
6 533
33 594
558 112
558 112
17
–
–
–
–
¹ Refer to note 35 in respect of financial instruments designated as at fair value through profit or loss.
²
³
Floating rate notes of R1 097m were included in the prior year as loans and receivables, whereas these instruments are classified as available for sale. Accordingly, the loans and receivables and available-for-sale categories
have been restated.
R969m of provisions and other liabilities were previously included in the financial liabilities at amortised cost category within the categories of financial instruments. However, these balances are not within the scope of the
IAS 39 categories of financial instruments. Therefore, this amount has been presented under non-financial assets, liabilities and equity and the comparative information has been restated to align with current year
presentation.
82
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 34 CONSOLIDATED STATEMENT OF FINANCIAL POSITION – CATEGORIES OF FINANCIAL
INSTRUMENTS (continued)
Notes
total
Rm
At fair value through profit or loss
Held for
trading
Rm
Designated¹
Rm
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
Investments in private-equity associates, associate companies and joint
2014
assets
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities²
Loans and advances
Other assets
Current taxation assets
Investment securities
Non-current assets held for sale
arrangements
Deferred taxation assets
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 liabilities³
Current taxation liabilities
Deferred taxation liabilities
Long-term employee benefit liabilities
Long-term debt instruments
total liabilities
total equity and liabilities
14
15
16
17
18
20
21
23
22
24
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
–
–
15 479
77 201
902
93 582
93 582
15 282
8 603
58 431
383
2 352
898
–
–
39 437
2 040
41 477
41 477
¹ Refer to note 35 in respect of financial instruments designated as at fair value through profit or loss.
Floating rate notes of R1 097m were included in the prior year as loans and receivables, whereas these instruments are classified as available for sale. Accordingly, the loans and receivables and available-for-sale categories
R969m of provisions and other liabilities were previously included in the financial liabilities at amortised cost category within the categories of financial instruments. However, these balances are not within the scope of the
IAS 39 categories of financial instruments. Therefore, this amount has been presented under non-financial assets, liabilities and equity and the comparative information has been restated to align with current year
²
³
have been restated.
presentation.
32 593
3 751
9 245
17
10 757
518 592
4 992
14 843
753 444
55 644
85 949
3 768
41 838
549 184
–
–
–
–
–
–
–
–
–
–
–
–
–
–
517 985
6 533
33 594
558 112
558 112
236
16
260
165
7 459
4 409
4 516
17 061
27
17 422
34 787
52 236
3 561
183
55 980
969
35
287
3 002
4 293
60 273
NedbaNk limited – ANNUAL RepoR t 2015
83
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 represent 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 for selling the asset or paid for transferring 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 35.6.
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.
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.
84
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
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.
NedbaNk limited – ANNUAL RepoR t 2015
85
35 FAIR-VALUE MEASUREMENT– 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 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
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Loans and advances
Loans and advances include mortgage loans (home loans and commercial mortgages), other asset-based loans, including collaterised 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 Ltd-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 transaction and 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.
NedbaNk limited – ANNUAL RepoR t 2015
87
35
FAIR-VALUE MEASUREMENT– 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:
Assets
Other short-term securities
Derivative financial instruments
Valuation technique
Discounted-cashflow model
Discounted-cashflow model
Key inputs
Discount rates
Discount rates
Black-Scholes model
Riskfree rate and volatilities
Multiple valuation techniques
Valuation multiples
Government and other securities
Discounted-cashflow model
Discount rates
Loans and advances
Investment securities
Discounted-cashflow model
Interest rate curves
Discounted-cashflow model
Money market rates and interest rates
Adjusted net asset value
Dividend yield method
Underlying price of market traded
instruments
Dividend growth rates
liabilities
Derivative financial instruments
Discounted-cashflow model
Discount rates
Amounts owed to depositors
Provisions and other liabilities
Black-Scholes model
Riskfree rate and volatilities
Multiple valuation techniques
Valuation multiples
Discounted-cashflow model
Discounted-cashflow model
Discount rates
Discount rates
Long-term debt instruments
Discounted-cashflow model
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
appears in note 35.7.
Discount rates
35.2 Fair-value hierarchy
35.2.1 Financial assets
total
financial
assets
recog-
nised at
amortised
cost
total
financial
assets
recog-
nised
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
841 634
661 527
180 107
7 587
74 435
18
4 182
88 984
1 877
–
3 024
–
14
34 341
34 341
–
15
60 078
32 863
27 215
9 346
17 869
16
30 948
30 948
86
30 844
18
17
42 733
18 807
23 926
7 489
2 125
3 750
7 555
3 007
18 666 807
571 603
95 204
32 120
63 051
33
Rm
2015
Cash and cash
equivalents
Other short-term
securities
Derivative
financial
instruments
Government and
other securities
Loans and
advances
Other assets
20
3 925
3 913
12
12
Investments in
private-equity
associates,
associate
companies and
joint arrangements
Investment
securities
22
1 154
21
1 648
1 154
1 648
1 154
432
509
690
17
88
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December total
financial
assets
recog-
nised at
amortised
cost
total
financial
assets
recog-
nised
at fair
value
total
financial
assets
Rm
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
2014
Cash and cash
equivalents
Other short-
term securities
Derivative
financial
instruments
Government and
other securities¹
Loans and
advances
Other assets
Investments in
private-equity
associates,
associate
companies and
joint
arrangements
Investment
securities
736 383
591 022
145 361
4 618
51 026
–
4 550
79 668
1 731
2 381
1 387
14 25 600
25 600
15 56 322
32 593
23 729
8 447
459
14 823
16 15 644
15 644
10
15 634
17 26 828
9 245
17 583
4 590
639
3 084
5 519
2 381
1 370
18 603 329 518 592
4 992
20
5 393
84 737
401
26 306
18
58 398
33
383
22
898
21
2 369
898
2 369
898
624
928
800
17
¹
Floating rate notes of R1 097m were included in the prior year as loans and receivables, whereas these instruments are classified as available for sale. Accordingly, the loans and receivables and available-for-
sale categories have been restated.
Summary of fair-value hierarchies
Rm
Other short-term securities
Derivative financial instruments
Government and other securities¹
Loans and advances
Other assets
Investments in private-equity associates,
associate companies and joint arrangements
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
2015
2014
2015
2014
2015
2014
2015
2014
27 215
30 948
23 926
95 204
12
23 729
15 644
17 583
84 737
401
1 154
898
459
10
10 055
86
11 239
27 215
30 844
12 687
95 171
23 270
15 634
7 528
84 704
12
401
18
33
33
1 154
690
898
800
Investment securities
1 648
2 369
432
624
526
945
Reconciliation to categorised statement of
financial position
Rm
Level 1
Level 2¹
Level 3
Reconciliation to statement of financial position
Rm
Total financial assets
Total non-financial assets
Total assets
180 107
145 361
11 769
11 549
166 443
132 081
1 895
1 731
Held for trading
Designated at fair
value through profit
or loss
Available for sale
2015
2014
2015
2014
2015
2014
7 587
4 618
4 182
4 550
74 435
51 026
88 984
79 668
3 024
2 381
1 387
18
1 877
1 731
82 040
55 644
95 043
85 949
3 024
3 768
Note
2015
2014
34 841 634
736 383
34
19 099
17 061
860 733
753 444
¹
Floating rate notes of R1 097m were included in the prior year as loans and receivables, whereas these instruments are classified as available for sale. Accordingly, the loans and receivables and available-for-sale categories
have been restated.
NedbaNk limited – ANNUAL RepoR t 2015
89
FAIR-VALUE MEASUREMENT– FINANCIAL INSTRUMENTS (continued)
35
35.2 Fair-value hierarchy (continued)
35.2.2 Financial liabilities
total
financial
liabilities
recog-
nised at
amortised
cost
total
financial
liabilities
recog-
nised
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
2015
795 989
589 136
206 853
2 870
138 539
156
65 288
Derivative financial instruments
16
33 996
33 996
126
33 870
Amounts owed to depositors
30 708 036
538 540
169 496
104 503
Provisions and other liabilities
Long-term debt instruments
2014
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities¹
Long-term debt instruments
31
32
16
30
31
32
Summary of fair-value hierarchies
Rm
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities¹
Long-term debt instruments
8 980
6 020
2 960
2 744
166
44 977
44 576
401
64 993
50
245
156
693 171
558 112
135 059
772
92 810
575
40 902
15 479
15 479
5
15 474
634 623
517 985
116 638
77 201
39 437
7 435
6 533
902
767
135
35 634
33 594
2 040
575
1 465
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
2015
2014
2015
2014
2015
2014
2015
2014
33 996
15 479
126
5
33 870
15 474
169 496
116 638
169 496
116 638
2 960
902
2 744
401
2 040
156
767
575
216
245
135
1 465
206 853
135 059
3 026
1 347
203 827
133 712
Reconciliation to categorised statement of financial position
Rm
Level 1
Level 2
Level 3
Reconciliation to statement of financial position
Rm
Total financial liabilities¹
Total equity and non-financial
liabilities¹
Total equity and liabilities
Held for trading
Designated at fair
value
2015
2014
2015
2014
2 870
772
156
575
138 539
92 810
65 288
40 902
141 409
93 582
65 444
41 477
Note
2015
2014
34 795 989
693 171
34
64 744
60 273
860 733
753 444
¹
R969m of provisions and other liabilities were previously included in the 'financial liabilities at amortised cost' category within the categories of financial instruments. However, these balances are not within the scope of the
IAS 39 categories of financial instruments. Therefore, this amount has been presented under non-financial assets, liabilities and equity and the comparative information has been restated to align with the current-year
presentation.
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.
90
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
35.3 Details of changes in valuation techniques
There have been no changes to valuation techniques.
35.4 Significant transfers between level 1 and level 2
There were significant transfers between level 1 and level 2 of the fair-value hierarchy within government and other securities and other short-term
securities due to changes in the level of market activity. The impacted categories are:
■■
■■
■■
Held for trading– R1 308m
Designated– R2 397m
Available for sale– R2 074m
In terms of the group’s policy, transfers of financial instruments between levels of the fair-value hierarchy are deemed to have occurred at the end
of the reporting period.
35.5 Level 3 reconciliation
assets
Rm
2015
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
18
18
53
89
(36)
305
(212)
304
(137)
1
(75)
898
33
800
1 731
71
305
(212)
Held for trading
Derivative financial
instruments
Designated as at fair value
1 731
Investments in private-
equity associates,
associate companies
and joint arrangements
Loans and advances
Investment securities
total financial assets
classified as level 3
Rm
2014
opening
balance at
1 January
Gains/
(losses)
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
2014
18
18
1 877
1 154
33
690
1 895
Held for trading
Investment securities
5
5
(5)
(5)
Designated as at fair value
1 719
250
169
(407)
Investments in private-
equity associates,
associate companies
and joint arrangements
Loans and advances
Investment securities
total financial assets
classified as level 3
860
33
826
42
208
142
(146)
27
(261)
1 724
250
169
(412)
Gains and losses include, but are not limited to, fair-value gains or losses, translation gains or losses and trading gains or losses.
35.6 Unrealised gains or losses
The unrealised gains or losses arising on instruments classified as level 3 include the following:
trading income
Private-equity gains
2015
Rm
71
71
1 731
898
33
800
1 731
2014
Rm
193
193
NedbaNk limited – ANNUAL RepoR t 2015
91
FAIR-VALUE MEASUREMENT– FINANCIAL INSTRUMENTS (continued)
35
35.7 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 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, 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:
2015
assets
Derivative financial
instruments
Valuation
technique
Significant
unobservable
input
Variance in
fair value
%
Discounted-
cashflow model,
Black-Scholes model
and multiple valuation
techniques
Discount rates,
riskfree rates,
volatilities, credit
spreads and valuation
multiples
Between (13) and
10
amount
recognised
in the
statement of
financial
position
Favourable
change in
value
Unfavourable
change in
value
Rm
Rm
Rm
18
2
(2)
Loans and advances
Discounted cashflows Credit spreads and
Between (13) and
10
Between (13) and
10
33
690
3
62
(4)
(77)
discount rates
Valuation multiples,
correlations,
volatilities and credit
spreads
Valuation multiples
Between (7) and 8
1 154
96
(108)
Discounted
cashflows, adjusted
net asset value,
earnings multiples,
third-party valuations
and dividend yields
Discounted cashflows
and earnings
multiples
Investment securities
Investments in private-
equity associates,
associate companies
and joint arrangements
total financial assets
classified as level 3
2014
assets
Discounted
cashflows, adjusted
net asset value,
earnings multiples,
third-party valuations
and dividend yields
Discounted cashflows
and earnings
multiples
Investment securities
Investments in private-
equity associates,
associate companies
and joint arrangements
total financial assets
classified as level 3
Loans and advances
Discounted cashflows Credit spreads and
discount rates
Valuation multiples,
correlations,
volatilities and credit
spreads
1 895
163
(191)
Between (13) and
13
Between (13) and
13
33
800
3
76
(4)
(95)
Valuation multiples
Between (16) and
16
898
124
(134)
1 731
203
(233)
92
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 35.8 Assets and liabilities not measured at fair value for which fair value is disclosed
Certain financial instruments of the group are not carried at fair value, including those categorised as held to maturity, loans and receivables, 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 or 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:
Rm
2015
Financial assets
Other short-term securities
Government and other securities
Loans and advances
Financial liabilities
Long-term debt instruments
2014
Financial assets
Other short-term securities
Government and other securities
Loans and advances
Financial liabilities
Long-term debt instruments
loans and advances
Fair value
level 1
level 2
level 3
Carrying
Value
623 273
32 863
18 807
618 012
32 709
17 415
571 603
567 888
44 576
44 576
42 933
42 933
17 415
17 415
24 269
24 269
560 430
560 043
9 338
32 593
9 245
518 592
33 594
33 594
32 580
9 338
518 125
33 554
33 554
9 338
23 385
23 385
567 888
567 888
518 125
518 125
32 709
32 709
18 664
18 664
32 580
32 580
10 169
10 169
Loans and advances, recognised in note 18, 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 2016 to 2018 (2014: for periods 2015 to 2017) are based on the
latest available internal data and is 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.
Government and other securities
The fair value of government and other securities is determined based on available market prices (level 1) or discounted-cashflow analysis (level 2),
where an instrument is not quoted or the market is considered to be inactive. See note 17 for further detail.
Other short-term securities
The fair value of other short-term securities is determined using a discounted-cashflow analysis (level 2). See note 15 for further detail.
long-term debt instruments
The fair value of long-term debt instruments is determined based on available market prices (level 1) or discounted-cashflow analysis (level 2)
where an instrument is not quoted or the market is considered to be inactive.
amounts owed to depositors
The amounts owed to depositors principally comprise of variable-rate liabilities. The carrying value of the amounts owed to depositors approximates
fair value because the instruments reprice to current market rates at frequent intervals. In addition, a significant portion of the balance is callable or
is short term in nature.
Cash and cash equivalents, other assets, mandatory deposits with central banks, and provisions and other liabilities
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.
NedbaNk limited – ANNUAL RepoR t 2015
93
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.
Financial assets designated as at fair value through profit or loss
36.1
Maximum exposure
to credit risk
Change in fair value due to change in credit risk¹
Current period
Cumulative
Rm
Negotiable certificates of deposit
Treasury bills and other bonds
Government-guaranteed
Other dated securities
Mortgage loans
Net finance lease and instalment debtors
Leases and debentures
Preference shares
Loans and advances (secured and
unsecured)
Foreign client lending
Other loans
Debtors and accruals
Private-equity associates, associate
companies and joint arrangements
Listed investments
Unlisted investments
2015
913
16 956
1 265
10 041
18 007
18 434
82
1 663
5 558
8 993
10 345
1 155
432
1 199
2014
2015
2014
2015
2014
2
2
(2)
15 282
2 794
5 809
20 785
19 030
44
2 012
5 588
3 990
6 982
383
898
624
1 728
95 043
85 949
2
2
(2)
¹ Positive amounts represent gains, while negative amounts represent losses. See note 19.1.
Nedbank Ltd 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 that 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
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 36.2 Financial liabilities designated as at fair value through profit or loss
Rm
2015
Long-term debt instruments
Call and term deposits
Foreign currency liabilities
Provisions and other liabilities
Negotiable certificates of deposit
2014
Long-term debt instruments
Call and term deposits
Foreign currency liabilities
Negotiable certificates of deposit
Change in fair value due to
change in credit risk¹
Contractually
payable at
maturity
Fair value
Current
period
Cumulative
401
31 221
9 527
50
24 245
65 444
2 040
20 964
8 060
10 413
41 477
409
31 291
9 527
24 369
65 596
1 909
20 955
8 061
10 408
41 333
(36)
(54)
(54)
(90)
38
(16)
(16)
6
(103)
(157)
48
(39)
(54)
(45)
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 riskfree 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 Ltd 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.
NedbaNk limited – ANNUAL RepoR t 2015
95
37 OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
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
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
total
amounts
recognised
in the
statement
of financial
position
Financial
collateral
(5 182)
2 291
(2 891)
30 055
(32 946)
1 035
(1 856)
(157)
893
(3 048)
30 948
(1 050)
(33 996)
3 939
3 939
(1 551)
(1 551)
2 388
2 388
2 388
2 388
664 419
666 807
664 419
666 807
(95 413)
36 296
(59 117)
(59 117)
(648 919)
(708 036)
(95 413)
36 296
(59 117)
(59 117)
(648 919)
(708 036)
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
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
total
amounts
recognised
in the
statement
of financial
position
Financial
collateral
(2 812)
2 787
25
(25)
15 395
(15 420)
190
249
(59)
165
15 644
(15 479)
5 386
5386
(2 874)
(2 874)
2 512
2 512
2 512
2 512
600 817
600 817
603 329
603 329
(88 695)
29 516
(59 179)
(59 179)
(575 444)
(634 623)
(88 695)
29516
(59 179)
(59 179)
(575 444)
(634 623)
Rm
2015
Derivative financial
instruments
Assets
Liabilities
Assets excluding
derivative financial
instruments
Loans and advances
Liabilities excluding
derivative financial
instruments
Amounts owed to
depositors
Rm
2014
Derivative financial
instruments
Assets
Liabilities
Assets excluding
derivative financial
instruments
Loans and advances
Liabilities excluding
derivative financial
instruments
Amounts owed to
depositors
¹
²
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.
Includes financial instruments that are neither subject to setoff nor master netting agreements.
96
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 38 CREDIT ANALYSIS OF OTHER SHORT-TERM SECURITIES, AND GOVERNMENT AND
OTHER SECURITIES
Credit ratings
Rm
2015
2014
2015
2014
2015
2014
2015
2014
Investment grade
Subinvestment grade
Not rated
total
Other short-term
securities
Negotiable
certificates of
deposit
Treasury bills and
other
Government and
other securities
Government and
government-
guaranteed
securities
Other dated
securities
58 880
54 895
1 071
1 333
127
94
60 078
56 322
8 717
7 213
64
8 717
7 277
50 163
47 682
1 071
1 269
127
94
51 361
49 045
35 133
25 138
3 761
1 294
3 839
396
42 733
26 828
25 738
13 220
660
600
19
26 398
13 839
9 395
11 918
3 101
694
94 013
80 033
4 832
2 627
3 839
3 966
377
490
16 335
12 989
102 811
83 150
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 on 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.
NedbaNk limited – ANNUAL RepoR t 2015
97
39 LIQUIDITY GAP
Rm
2015
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
Derivative financial
instruments
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-
determined
total
32 529
1 812
22 047
12 712
18 055
7 264
8 795
3 336
2 415
7 379
9 023
1 091
155 029
1 688
27 290
7 481
48 309
17 172
259 479
15 301
176 700
219 491
46 838
76 260
291 294
201 024
7 998
2 882
2 582
7 593
12 941
511 986
56 433
58 386
70 542
10 689
34 341
60 078
30 948
42 733
666 807
25 826
860 733
59 954
33 996
708 036
25 826
25 826
59 954
5 252
525 236
59 315
Net liquidity gap
(305 745)
(12 477)
13 770
13 770
3 923
64 891
11 369
19 805
97 940
193 354
15 997
39 627
161 397
44 977
73 724
860 733
(47 898)
–
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
Derivative financial
instruments
Amounts owed to
depositors
Provisions and other
liabilities
Long-term debt
instruments
Net liquidity gap
25 280
220
100
24 408
13 593
15 974
2 347
2 746
555
1 181
5 199
5 963
550
127 412
290
21 759
3 855
39 889
16 609
255 399
5 524
158 870
180 396
36 417
60 999
279 554
170 357
1 962
406
902
4 862
7 347
460 177
46 894
47 966
68 894
10 692
25 600
56 322
15 644
26 828
603 329
25 721
753 444
55 980
15 479
634 623
25 721
25 721
55 980
1 354
463 493
(283 097)
1 576
48 876
(12 459)
5 706
54 574
6 425
22 328
96 084
183 470
4 670
22 709
147 648
67 708
(41 987)
35 634
753 444
–
11 728
11 728
This note has been prepared on a contractual maturity basis.
98
NedbaNk limited – ANNUAL RepoR t 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 67 506
9 820
502 355
44 824
85 740
15 543
33 996
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-
determinable
maturity
total
Rm
2015
Long-term debt instruments
44 977
5 761
742
Amounts owed to depositors
708 036
515 772
58 518
5 637
62 361
29 997
77 482
22 263
11 655
64 400
–
725 788
Current accounts
Savings deposits
Other deposits and loan
accounts
67 504
67 506
9 820
9 820
492 764
371 842
Foreign currency liabilities
44 823
30 693
34 631
6 305
32 722
4 663
51 505
3 163
11 655
Negotiable certificates of
deposit
Deposits received under
repurchase agreements
Derivative financial
instruments – liabilities
Provisions and other
liabilities
77 594
20 368
17 582
24 976
22 814
15 531
15 543
33 996
7 998
2 882
2 582
7 593
12 941
13 770
800 779
529 531
62 142
70 580
115 072
46 859
13 769
13 769
13 769
837 953
Guarantees on behalf of
clients
Confirmed letters of credit
and discounting transactions
Unutilised facilities and
other
26 374
26 374
4 419
4 419
101 747
101 747
132 540
132 540
–
–
–
–
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
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
50 987
10 905
1 160
1 020
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
1 962
406
902
4 862
7 347
11 728
697 464
467 365
51 558
58 752
107 183
23 550
Guarantees on behalf of
clients
Confirmed letters of credit
and discounting transactions
Unutilised facilities and
other
22 807
22 807
3 248
3 248
102 968
102 968
–
–
26 374
4 419
101 747
132 540
43 461
649 468
62 386
9 650
461 297
29 808
73 732
12 595
15 479
11 728
11 728
11 728
720 136
22 807
3 248
102 968
Provisions and other liabilities are included in this table in order to provide a reconciliation with the statement of financial position. Derivatives are
not profiled on an undiscounted basis.
129 023
129 023
–
–
–
–
–
129 023
NedbaNk limited – ANNUAL RepoR t 2015
99
41 HISTORICAL VALUE AT RISK (VaR) (99%, ONE-DAY) BY RISK TYPE
2015
2014
Rm
average
minimum
maximum
Year-end
Average
Minimum Maximum
Year-end
Foreign exchange
Interest rate
Credit
Commodity
Diversification
total VaR exposure
3,2
7,3
7,0
0,4
(5,2)
12,7
0,6
3,8
4,9
17,8
22,4
11,6
2,4
7,4
41,9
17,7
21,4
9,2
1,7
(8,8)
41,2
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
The ‘Worldclass risk management’ section contains information on the group trading book VaR and the comparison of trading VaR.
42
INTEREST RATE REPRICING GAP
Rm
2015
Total assets
Total equity and liabilities
Interest rate hedging activities
Repricing profile
Cumulative repricing profile
< 3 months
> 3 months
< 6 months
> 6 months
< 1 year
> 1 year
< 5 years
> 5 years
trading and
non-rate
total
553 361
518 086
13 375
48 650
48 650
31 050
25 943
7 120
12 227
21 915
43 452
22 773
188 182
860 733
32 805
20 080
12 555
251 264
860 733
10 936
(24 385)
(7 046)
46
(1 013)
3 172
(63 082)
–
–
60 877
60 923
59 910
63 082
Expressed as a percentage of total assets (%)
5,7
7,1
7,1
7,0
7,3
2014
Total assets
Total equity and liabilities
Interest rate hedging activities
Repricing profile
Cumulative repricing profile
Expressed as a percentage of total assets (%)
498 952
471 251
24 443
52 144
52 144
6,9
22 551
26 122
7 628
4 057
56 201
7,5
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)
(2 795)
53 407
7,1
2 749
56 155
7,5
3 504
(59 659)
59 659
7,9
–
–
The ‘Worldclass risk management’ section contains information on interest rate risk in the banking book.
43 SECURITISATIONS
Nedbank Group Ltd uses securitisation primarily as a funding diversification tool and to add flexibility in mitigating structural liquidity risk. The group
currently has four active traditional securitisation transactions:
■■
■■
■■
■■
Synthesis Funding Ltd (Synthesis), an asset-backed commercial paper (ABCP) programme launched in 2004;
Greenhouse Funding (RF) Ltd, (Greenhouse), a residential mortgage-backed securitisation programme;
Greenhouse Funding III (RF) Ltd, (Greenhouse III), a residential mortgage-backed securitisation programme; and
Precinct Funding 1 (RF) Ltd (Precinct), a commercial mortgage-backed securitisation programme.
Nedbank Group also has two active Committed Liquidity Facility (CLF) transactions:
■■ West Road South No 3 (RF) Ltd, (West Road South), a commercial mortgage-backed CLF programme launched in 2014, with R14,5bn assets
transferred into the programme; and
■■
Greenhouse Funding 4 (RF) Ltd, (Greenhouse 4), a residential mortgage-backed CLF programme launched in 2015, with R3,1bn assets
transferred into the programme.
Synthesis Funding ltd
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.
Liquidity facilities have been obtained from a F1+(zaf)-rated bank in order to ensure the availability of sufficient funds in instances where timing
mismatches could occur. These timing mismatches to the possible mismatch between the receipt of funds relating to financial assets and
disbursement of funds relating to the redemption of financial liabilities. These liquidity facilities cover the nominal value of the commercial paper it
is issued against and exceed the maturity date of the underlying financial liability by five days.
Synthesis is a partially supported conduit the credit support of which is dependent on transaction-specifc credit enhancement as well as available
programme-wide credit enhancement (PWCE) provided by Nedbank. PWCE is calculated as 5% of the aggregate book value of financial assets
(excluding defaults) plus a dynamic percentage based on the credit quality of the underlying portfolio of the rated securities. If a rated security falls
below AA-(zaf), Synthesis must either remove the asset from the portfolio, obtain a guarantee by an entity rated at least AA-(zaf) or Nedbank must
post PWCE within 15 business days. Currently, there are no financial assets in the conduit portfolio and all rated securities are rated at least AA-(zaf)
or are guaranteed by Nedbank if rated below AA-(zaf). As a result, no PWCE is currently required in accordance with Synthesis's transaction
documentation.
In terms of assets not meeting the AA-(zaf) requirement, Nedbank guarantees an aggregate amount of R850m at the financial year-end.
100
NedbaNk limited – ANNUAL report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Greenhouse programmes
The Greenhouse transactions are securitisation vehicles that acquires the rights, title, interest and related security of residential home loans from
Nedbank Ltd under a segregated series medium-term note programme.
During December 2007 the first Greenhouse transaction was created and R2bn of home loans from Nedbank Ltd were securitised. Greenhouse was
subsequently 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 on their scheduled
maturity, and to acquire additional home loans from Nedbank Ltd. 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 were retained by the group. The home loans transferred to Greenhouse have
continued to be recognised as financial assets.
Greenhouse III, a second standalone residential-mortgage-backed securitisation (RMBS) programme was implemented during 2014. Greenhouse
III is a securitisation vehicle that acquires the rights, title, and interest in and to, and the related security of residential home loans from Nedbank Ltd
under a segregated series medium-term note programme. In April 2015 Greenhouse III securitised R2bn worth of home loans originated by Nedbank
Ltd through the issuance of senior notes to the capital market, as well as subordinated notes and subordinate loans provided by Nedbank Ltd. The
notes issued by Greenhouse III are listed on the JSE Ltd and rated by Fitch.
The Greenhouse vehicles make use of an internal risk management policy, and utilises the Nedbank Group Ltd credit risk monitoring process to
govern lending activities to external parties. In addition, financial assets may be introduced into the programme provided they meet certain eligibility
criteria prescribed by the programme agreements.
Nedbank has provided the Greenhouse programmes with interest-bearing subordinated loans at the commencement of each programme as part of
the initial funding. Interest is payable on a quarterly basis as part of the priority of payments. The full capital amount outstanding plus any accrued
interest will be payable in full on the final termination date, provided that all outstanding notes have been redeemed in full and all secured creditors
have been settled.
In the Greenhouse structure Nedbank holds the C and Y notes amounting to R113m, and in the Greenhouse III structure Nedbank holds the D note
amounting to R100m. These notes rank subordinated to the A and B notes in terms of the priority of payments.
Precinct Funding 1
Precinct is an RMBS programme. The originator, seller and servicer of the commercial property loan portfolio is Nedbank CIB Property Finance, the
market leader in commercial property finance in South Africa.
The Precinct structure takes the form of a static pool of small commercial property loans with limited substitution and redraws/further advance capabilities.
Precinct has issued notes rated by Moody’s Investors Service and listed on the JSE Ltd. The A and B notes were placed with third-party investors and
the junior notes and subordinated loan were retained by the group.
The vehicle makes use of an internal risk management policy and utilises the Nedbank Group credit risk monitoring process to govern lending
activities to external parties. The primary measures used to identify, monitor and report on the level of exposure to credit risk include individual loan
and loan portfolio ageing and performance analysis, analysis of impairment adequacy ratios, analysis of loss ratio trends and analysis of loan
portfolio profitability. The maximum credit exposure to credit risk in respect of the mortgage loans is the balance of outstanding advances before
taking into account the value of collateral held as security against such exposures and impairments raised. The collateral held as security for the
mortgage asset exposure is in the form of first indemnity bonds over fixed commercial property.
Nedbank has provided Precinct with an interest-bearing subordinated loan at the commencement of this transaction as part of the initial funding.
Interest is payable on a quarterly basis as part of the priority of payments. The full capital amount outstanding plus any accrued interest will be
payable in full on the final termination date, provided that all outstanding notes have been redeemed in full and all secured creditors have been
settled.
Nedbank holds the C and D notes amounting to R225m, which rank subordinated to the A and B notes in terms of the priority of payments.
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 clients
Residential mortgage loans
Less: Impairments
Commercial mortgage loans
Less: Impairments
Other financial assets
Corporate and bank paper
Other securities
Commercial paper
Total
2015
2014
Carrying
amount of
assets
associated
liabilities
Carrying
amount of
assets
Associated
liabilities
3 287
(24)
1 280
(3)
1 714
1 038
7 292
3 596
2 277
2 749
8 622
2 520
(24)
1 586
(4)
1 989
1 295
7 362
2 743
2 309
3 285
8 337
¹ The value of any derivative instruments taken out to hedge any financial asset or liability is adjusted against such instrument in this disclosure.
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.
NedbaNk limited – ANNUAL report 2015
101
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 at
31 December against the following currencies was:
United States dollar
Pound sterling
Euro
2015
actual
0,06401
0,04318
0,05861
2014
Actual
0,08638
0,05544
0,07108
45 CONTINGENT LIABILITIES AND UNDRAWN FACILITIES
Guarantees on behalf of clients
Letters of credit and discounting transactions
Irrevocable unutilised facilities and other
2015
average
0,07727
0,05067
0,06997
2015
Rm
26 374
4 419
101 747
132 540
2014
Average
0,09202
0,05593
0,06973
2014
rm
22 807
3 248
102 968
129 023
The group, in the ordinary course of business, enters into transactions that expose the group to tax, legal and business risks. Provisions are made for
known liabilities that are expected to materialise (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 Ltd and its subsidiary companies, the outcome of which cannot at present be foreseen.
The largest of these potential actions is a claim for R773m in the High Court against Nedbank Ltd (‘Nedbank’) by Absa Bank Ltd (‘Absa’) in connection
with Pinnacle Point Group Ltd, where Absa is alleging that Nedbank had a legal duty of care to them in relation to single-stock futures transactions.
Nedbank has filed an exception against the claim and the claim has been held in abeyance since April 2012 by mutual agreement.
46 COMMITMENTS
46.1 Capital expenditure approved by directors
Contracted
Not yet contracted
2015
Rm
1 314
2 222
3 536
2014
rm
1 292
1 278
2 570
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.
102
NedbaNk limited – ANNUAL report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 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:
2015
Land and buildings¹
Furniture and equipment
2014
Land and buildings¹
Furniture and equipment
2016
Rm
2015 – 2020
Rm
beyond 2020
Rm
760
181
941
2015
rm
690
286
976
1 892
1 892
767
767
2014 – 2019
rm
Beyond 2019
rm
1 705
173
1 878
940
940
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 5% 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 R15 614m
(2014: R11 986m) 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. The associated liabilities of R15 531m (2014: R12 583m) are disclosed in note 30.
These transactions are entered into on 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.
NedbaNk limited – ANNUAL report 2015
103
47 COLLATERAL (continued)
47.2 Collateral held to mitigate credit risk (continued)
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 on 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, trade debtors and financial securities that have a tradable market, such as
shares and other securities) 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, while 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 2015
management considered R142 614m (2014: R137 042m) 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 that includes a review of the security structure and covenants
to ensure that proper title is retained over the relevant collateral. At 31 December 2015 management considered R234 525m (2014: 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.
As part of the reverse repurchase agreements, the group has received securities as collateral that are allowed to be sold or repledged. The fair value
of these securities at the reporting date amounts to R20 191m (2014: R18 311m), of which Rnil (2014: Rnil) have been sold or repledged.
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 R149m (2014: R241m), which represents assets the group has acquired during the
year by taking possession of collateral held as security.
104
NedbaNk limited – ANNUAL report 2015
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 2013
Inflows
Outflows
Mark-to-market value adjustment
Balance at 31 December 2014
Inflows
Outflows
Mark-to-market value adjustment
Balance at 31 December 2015
2015
Rm
2014
rm
153 801
128 394
SA unit trusts
rm
115 235
204 436
(197 862)
6 585
128 394
240 622
(222 072)
6 857
153 801
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 Ltd shares, share options over Nedbank Group Ltd shares and equity instruments in respect of Nedbank Group Ltd 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, the Nedbank Wealth Management
International schemes and the Nedbank Africa scheme, all 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 share option awards is
measured at the grant date utilising the Black-Scholes valuation model. For the non-option equity awards, the fair value is measured by reference
to the listed share price, which includes the participant’s right to dividends over the vesting period.
49.1 Description of arrangements
trust/Special-
purpose vehicle
(SPV)
Scheme
traditional employee schemes
Nedbank Group
(2005) Share
Option and
Restricted Share
Scheme
Nedbank Group
(2005) Share
Scheme Trust
maximum
term
3 years
description
Vesting requirements
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.
Three years' service and achievement of
performance targets based on average
return on equity, as well as the Nedbank
Group Ltd share price performance against
the financial index. In addition, the 2015
grants include a strategic collaboration
condition with Old Mutual applicable to
group and cluster executives only. Where
the performance target is not met, 50%
will vest where applicable, provided that
the three years' service has been achieved.
Nedbank Group
(2005) Matched-
share Scheme
Nedbank Group
(2005) Share
Scheme Trust
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.
Three years' service and achievement of
Nedbank Group Ltd performance target.
Where this performance targets is not
met, 50% will vest provided that the three
years' service has been achieved.
3 years
Nedbank UK Long-
term Incentive Plan
(LTIP)
n/a
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.
Completion of three years' service, from
grant date, subject to corporate
performance targets being met.
3 years
NedbaNk limited – ANNUAL report 2015
105
description
Vesting requirements
Completion of three years' service, from
grant date, subject to corporate
performance targets being met.
maximum
term
3 years
49 SHARE-BASED PAYMENTS (continued)
49.1 Description of arrangements (continued)
Scheme
trust/Special-
purpose vehicle
(SPV)
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 Africa
n/a
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 are granted to key
Nedbank Africa 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.
Completion of three years' service, from
grant date, subject to corporate
performance targets being met.
3 years
Completion of three years' service, from
grant date, subject to corporate
performance targets being met.
3 years
Completion of three years' service, from
grant date, subject to corporate
performance targets being met.
3 years
Nedbank eyethu bee schemes – employees
Black Executive
Scheme
Nedbank Eyethu
Black Executive
Trust
Black Management
Scheme
Nedbank Eyethu
Black Management
Trust
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.
Participants must remain in service for
four, five and six years, after each of which
1/3 of the shares become unrestricted and
1/3 of the options vest.
7 years
Participants must remain in service for
four, five and six years, after each of which
1/3 of the shares become unrestricted and
1/3 of the options vest.
7 years
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.
No dealing in these shares during the
restricted period of 5 years.
5 years
106
NedbaNk limited – ANNUAL report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December description
Vesting requirements
maximum
term
5 years
Participants must remain in service for
three, four and five years, after each of
which 1/3 of the shares become
unrestricted and 1/3 of the options vest.
Scheme
Swaziland
Management
Scheme
trust/Special-
purpose vehicle
(SPV)
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.
Participants must remain in service for
three, four and five years, after each of
which 1/3 of the shares become
unrestricted and 1/3 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 Africa1
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
2015
2014
2015
2014
413
379
102
(59)
2
(14)
2
1
16
12
4
607
517
79
9
2
21
14
7
1 090
880
181
14
3
8
3
1
65
44
21
1 138
939
148
16
19
13
3
82
42
40
429
628
1 155
1 220
NedbaNk limited – ANNUAL report 2015
107
49 SHARE-BASED PAYMENTS (continued)
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
2015
2014
Weighted-
average
exercise price
R
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
9 868 377
3 087 302
(438 408)
(3 282 846)
9 234 425
Weighted-average share price for share instruments exercised (R)
251,42
196,76
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
1 649 973
773 259
(108 820)
(397 292)
1 917 120
1 274 585
732 501
(104 291)
(252 822)
1 649 973
Weighted-average share price for share instruments exercised (R)
240,75
222,54
Nedbank Uk long-term incentive Plan
Outstanding at the beginning of the year
Granted
Forfeited
Other
Exercised
Outstanding at the end of the year
Exercisable at the end of the year
Weighted-average share price for share instruments exercised (GBP)
Nedbank Uk matched-share Scheme
Outstanding at the beginning of the year
Granted
Exercised
Other
Outstanding at the end of the year
Exercisable at the end of the year
Weighted-average share price for share instruments 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 share instruments exercised (GBP)
197 288
28 806
(44 046)
(62 546)
119 502
17 427
7 240
(7 856)
16 811
73 223
20 513
(2 750)
(29 702)
61 284
198 960
52 336
(9 414)
(44 594)
197 288
16 099
2 811
(1 483)
17 427
83 255
20 708
(30 740)
73 223
108
NedbaNk limited – ANNUAL report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December Nedbank Wealth management international matched-share Scheme
Outstanding at the beginning of the year
Granted
Exercised
Forfeited
Outstanding at the end of the year
Exercisable at the end of the year
Weighted-average share price for share instruments exercised (GBP)
Nedbank africa
Granted
Outstanding at the end of the year
Exercisable at the end of the year
Weighted-average share price for share instruments exercised (R)
black executive Scheme
Outstanding at the beginning of the year
Forfeited
Exercised
Outstanding at the end of the year
Exercisable at the end of the year
Weighted-average share price for share instruments 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 share instruments exercised (R)
2015
2014
Weighted-
average
exercise price
R
Weighted-
average
exercise price
r
Number of
instruments
Number of
instruments
12 643
7 613
(49)
20 207
20 207
4 122
(5 932)
18 397
30 096
30 096
1 014 319
223,06
1 251 781
101,73
(25 795)
(168 317)
820 207
20 205
(59 335)
(178 127)
1 014 319
641
121,08
241,38
121,08
223,06
1 545 884
227,59
2 710 812
105,23
(100 113)
(731 182)
13 281
(21 311)
706 559
164 204
(220 356)
(964 666)
23 526
(3 432)
1 545 884
262 053
101,41
248,07
107,36
227,59
NedbaNk limited – ANNUAL report 2015
109
49 SHARE-BASED PAYMENTS (continued)
49.4 Instruments outstanding at the end of the year by exercise price
2015
2014
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
black executive Scheme
0,00
75,74
121,08
128,44
132,18
140,00
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
139,69
161,88
Nedbank africa
0,00
Weighted-
average
remaining
contractual
life (years)
Weighted-
average
remaining
contractual life
(years)
Number of
instruments
1,2
1,2
1,4
1,4
1,1
1,1
1,3
1,3
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
1,2
1,2
1,4
1,4
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
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
1,2
1,2
1,1
1,1
1,8
1,2
2,2
1,6
1,1
3,2
3,6
4,2
2,5
1,0
0,2
(0,4)
0,6
1,2
2,2
1,6
1,0
3,2
1,5
2,2
2,2
Number of
instruments
9 234 425
9 234 425
1 917 120
1 917 120
119 502
119 502
16 811
16 811
61 284
61 284
18 397
18 397
257 212
84 616
56 402
3 797
40 200
174 489
114 010
89 481
820 207
47 523
82 016
578
8 204
98 111
186 481
103 086
107 907
72 653
706 559
30 096
30 096
110
NedbaNk limited – ANNUAL report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2015
Number of instruments
granted
Weighted-average fair
value per instrument
granted (R)¹
Weighted-average share
price (R)
Weighted-average
expected volatility (%)²
Weighted-average life
(years)
Weighted-average riskfree
interest rate (%)
Weighted-average
vesting period (years)
2014
Number of instruments
granted
Weighted-average fair
value per instrument
granted (R)¹
Weighted-average share
price (R)
Weighted-average
expected volatility (%)²
Weighted-average life
(years)
Weighted-average
riskfree interest rate (%)
Number of participants
Weighted-average
vesting period (years)
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, with
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
Nedbank
Africa
3 087 302
773 259
28 806
7 240
20 513
4 122
30 096
244,45
185,48
244,40
237,78
242,84
244,45
237,78
109,66
237,78
244,40
237,78
242,84
23
3
7
23
3
7
3
3
23
3
7
11
3
23
3
7
19
3
23
3
7
41
3
14
3
6
3
Number of participants
1 350
1 635
3 440 886
731 882
52 336
2 811
20 708
7 613
203,61
188,72
181,75
188,72
215,58
224,01
210,25
223,03
215,77
224,04
23,0
22,0
22,0
22,0
3,0
7,2
1 615
3,0
3,0
6,8
668
3,0
13
3,0
11
3,0
3,0
6,8
11
3,0
3,0
6,8
24
3,0
¹
²
Fair value per instrument has been recalculated in line with a change in the valuation methodology for shares linked to the financial index.
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.
No further grants were made for the Black Executive Scheme and Black Management Scheme.
NedbaNk limited – ANNUAL report 2015
111
50 RELATED PARTIES
50.1 relationship with parent, ultimate controlling party and investees
The group's parent company is Nedbank Group Ltd, which holds 100% (2014: 100%) of Nedbank Ltd'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 51 and associate companies and joint arrangements of the group are identified in note 50.
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:
Compensation (Rm)
2015
Directors' fees
Remuneration – paid by subsidiaries
Short-term employee benefits
Gain on exercise of share instruments
2014
Directors' fees
Remuneration – paid by subsidiaries
Short-term employee benefits
Gain on exercise of share instruments
Number of share instruments
2015
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Transferred
Outstanding at the end of the year
2014
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Outstanding at the end of the year
key
management
personnel
directors
15
106
51
55
121
14
84
47
37
98
213
124
89
213
202
120
82
202
total
15
319
175
144
334
14
286
167
119
300
578 468
1 574 989
2 153 457
155 871
428 173
21 304
584 044
21 304
(214 953)
(522 789)
(737 742)
11 224
(18 626)
(7 402)
530 610
1 483 051
2 013 661
571 714
173 902
(7 965)
1 666 293
2 238 007
456 115
(91 879)
630 017
(99 844)
(159 183)
(455 540)
(614 723)
578 468
1 574 989
2 153 457
112
NedbaNk limited – ANNUAL report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 50.3 related-party transactions
Transactions between Nedbank Ltd and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in
this note. Transactions between Nedbank Ltd and its other related parties are disclosed below. All of these transactions were entered into in the
normal course of business.
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 owing to 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/(due from) Syfrets Securities Ltd
Deposits due from to other fellow subsidiaries
Bank balances owing to Syfrets Securities Ltd
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 assocoiates
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 the end of the year
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
Due from/(owing to)
2015
2014
(7)
(294)
(351)
2
(561)
(168)
2 973
(66)
(27)
(764)
448
912
(6)
(4 473)
(2)
(2)
2 127
(20)
(14)
28
(22)
(73)
4
(27)
33
(241)
(40)
(124)
(164)
(2)
(2)
(4)
(1)
(23)
(45)
(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)
NedbaNk limited – ANNUAL report 2015
113
50 RELATED PARTIES (continued)
50.3 related-party transactions (continued)
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 fee income from fellow subsidiaries
Management fee expense to 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 BBBEE transaction expenses)
Key management personnel – directors
Key management personnel – other
Share-based payments expense (included in staff costs)
Income/(expense)
2015
2014
(221)
(2 500)
(342)
(2 200)
25
940
50
27
(537)
(394)
(12)
(1 104)
168
(75)
27
860
506
26
(666)
(353)
(41)
(877)
164
(24)
(22)
3
85
(34)
(147)
(3)
(3)
(10)
(50)
(60)
4
348
(31)
(227)
(5)
(5)
(17)
(60)
(77)
114
NedbaNk limited – ANNUAL report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 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 Ltd 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 26.1)
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)
2015
2014
(3)
(159)
(4)
(25)
781
1 254
543
2 578
(781)
(1 254)
(373)
(2 408)
827
1 179
511
2 517
(827)
(1 179)
(374)
(2 380)
NedbaNk limited – ANNUAL report 2015
115
51 ANALYSIS OF INVESTMENTS IN PRIVATE-EQUITY ASSOCIATES, ASSOCIATE
COMPANIES AND JOINT ARRANGEMENTS
percentage holding
Carrying amount
(from) associates
Dividends received
Nature of activities
Property development
Property development
Property development
Property development
Property development
Property development
2015
%
50
20
35
49
2014
%
Measurement
method
50
35
20
35
49
Fair value
Fair value
Fair value
Fair value
Fair value
Fair value
Acquisition
date
Year-end
December 10
December
July 07
March 05
August 02
August 05
August 07
February
February
February
February
February
Various
Various
Group
Net indebtedness of loans to/
2015
Rm
2014
rm
2015
Rm
2014
rm
5
43
38
49
235
1 270
(4)
55
1 691
1
74
49
226
1 633
4
140
2 127
39
22
22
39
2015
Rm
55
172
56
487
318
220
92
1 400
2014
rm
55
63
85
125
57
373
123
235
42
1 158
Century City JV
Erf 7 Sandown (Pty) Ltd¹
Falcon Forest Trading 85 (Pty) Ltd²
Friedshelf 113 (Pty) Ltd
Masingita Property Investment Holdings (Pty) Ltd
Odyssey Developments (Pty) Ltd³
Other individually immaterial associates⁴
Private-equity associates (manufacturing, industrial, leisure and
other)
Private-equity associates (property investment associates)
Other
Individually immaterial joint arrangements⁴
Entity consolidated as a wholly owned subsidiary from 1 October 2015.
Entity disposed of during 2014.
¹
²
³ The group's proportion of ownership in the entity is 49%, while its voting right equates to 35%.
⁴ Represents various investments that are not individually material.
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.
116
NedbaNk limited – ANNUAL report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Nature of activities
Property development
Property development
Property development
Property development
Property development
Property development
percentage holding
2015
%
50
20
35
49
2014
Measurement
%
50
35
20
35
49
method
Fair value
Fair value
Fair value
Fair value
Fair value
Fair value
Acquisition
date
Year-end
December 10
December
July 07
March 05
August 02
August 05
August 07
February
February
February
February
February
51 ANALYSIS OF INVESTMENTS IN PRIVATE-EQUITY ASSOCIATES, ASSOCIATE
COMPANIES AND JOINT ARRANGEMENTS
Century City JV
Erf 7 Sandown (Pty) Ltd¹
Falcon Forest Trading 85 (Pty) Ltd²
Friedshelf 113 (Pty) Ltd
Masingita Property Investment Holdings (Pty) Ltd
Odyssey Developments (Pty) Ltd³
Other individually immaterial associates⁴
Private-equity associates (manufacturing, industrial, leisure and
Private-equity associates (property investment associates)
other)
Other
Individually immaterial joint arrangements⁴
Various
Various
Entity consolidated as a wholly owned subsidiary from 1 October 2015.
¹
²
Entity disposed of during 2014.
³ The group's proportion of ownership in the entity is 49%, while its voting right equates to 35%.
⁴ Represents various investments that are not individually material.
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.
Carrying amount
Net indebtedness of loans to/
(from) associates
Dividends received
Group
2015
Rm
55
172
56
487
318
220
92
1 400
2014
rm
55
63
85
125
57
373
123
235
42
1 158
2015
Rm
2014
rm
2015
Rm
2014
rm
5
43
38
49
235
1 270
(4)
55
1 691
1
74
49
226
1 633
4
140
2 127
39
22
22
39
NedbaNk limited – ANNUAL report 2015
117
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) Ltd
Nedcor Trade Services Ltd (Mauritius)
Nedgroup Investment 102 Ltd
Nedcor Investments Ltd
Peoples Mortgage Ltd
Group
Issued capital
effective holding
2015
Rm
2014
rm
20
12
2
4
¹
4
6
28
45
20
12
2
4
¹
4
6
28
45
2015
%
100
65,08
100
100
100
100
100
100
100
2014
%
100
65,08
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 distribution of funds to their holding company.
³ These entities are free of any restrictions imposed on the distribution of funds, except for compliance with any local regulations.
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
2015
Rm
8 315
(40)
2014
rm
8 079
(2)
General information required in terms of the Companies Act, 71 of 2008, 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 Ltd 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.
118
NedbaNk limited – ANNUAL report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 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 operating activities
Cashflows utilised by investing activities
Cashflows utilised by financing activities
Net increase in cash and cash equivalents
dividends paid to non-controlling interests
Nedbank (Swaziland) Ltd
2015
Rm
3 874
3 306
198
179
156
115
120
40
637
(9)
(27)
601
9
2014
rm
3 596
3 122
165
149
139
97
98
38
62
(8)
(25)
29
9
53
INTERESTS IN STRUCTURED CONSOLIDATED AND UNCONSOLIDATED STRUCTURED
ENTITIES
53.1 Consolidated structured entities
The group holds certain interests in consolidated structured entities in order to ring-fence certain risks and/or achieve specific objectives. Structured
entities are entities that have been designed so that voting rights are not the predominant factor in deciding who controls the entity.
The group has identified the following consolidated structured entities:
■■
■■
Old Mutual Alternative Risk Transfer Fund (OMART) (refer to note 26);
Securitisation vehicles (refer to note 42):
Synthesis Funding Ltd;
Greenhouse Funding (RF) Ltd;
Greenhouse Funding III (RF) Ltd;
Greenhouse Funding 4 (RF) Ltd;
Precinct Funding 1 (RF) Ltd; and
West Road South No. 3 (RF) Ltd.
The following judgements have been applied in determining that the group has control over the following structured entities:
Securitisation
The group orginated and sponsors certain securitisation vehicles and acts in various capacities with regard to these structures. The group controls
these entities and has consolidated these structures since its inception. These securitisation structures include the following:
Synthesis Funding Ltd (Synthesis), an ABCP programme, invests in long-term rated bonds and offers capital market funding to SA corporates through the
issuance of short-dated investment-grade commercial paper. The group acts in various capacities with regard to this vehicle, which include 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 Ltd has rights to the residual return of the vehicle. The group
has concluded that it controls these entities.
Westroad South No 3 and Greenhouse Funding 4 are securitisation vehicles that acquire the rights, title and interest in and to, and the related security of
commercial and residential mortgage bonds from Nedbank Ltd. The creation of these vehicles facilitated the group in having appropriately collaterised
instruments that have been pledged against the group's committed liquidity facility provided by SARB. The group has concluded that it controls these entities.
Refer to note 43 for further information on the securitisation activities of the group.
NedbaNk limited – ANNUAL report 2015
119
54 EVENTS AFTER THE REPORTING PERIOD
There are no material events after the reporting period to report on.
55
PREFERENCE SHAREHOLDERS' ANALYSIS
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 (SA) 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)
Nedgroup Private Wealth (Pty) Ltd (SA)
Sanlam Investment Management (SA)
Investec Asset Management (SA)
Various retail holders (SA)
STANLIB Asset Management (SA)
Prescient Investment Management (SA)
Grindrod Asset Management (SA)
Abax Investments (SA)
Outsurance Insurance Company Ltd (SA)
Old Mutual plc
PSG Konsult (SA)
Regent Insurance Company Ltd (SA)
Graaf Baronetcy Fund (SA)
31 December 2015
1 000 000 000 shares
358 277 491 shares
Number of
shareholdings
168
2 022
2 865
428
45
5 528
%
3,04
36,58
51,83
7,74
0,81
Number of
shares
88 790
12 713 169
94 491 522
103 126 829
147 857 181
%
0,02
3,55
26,37
28,78
41,28
100,00
358 277 491
100,00
Number of
shareholdings
Number of
shares
%
3
60
70
3 376
35
9
12
113
1 618
34
152
2
44
5 528
Number of
shareholdings
18
1
11
6
5 510
5 528
0,05
1,09
1,27
61,06
0,63
0,16
0,22
2,04
29,27
0,62
2,75
0,04
0,80
18
3 958 992
9 211 991
85 179 794
34 940 328
7 127 765
1 792 542
100 500 122
78 474 407
1 139 005
25 819 626
1 933 100
8 199 801
%
1,11
2,57
23,77
9,75
1,99
0,50
28,05
21,90
0,32
7,21
0,54
2,29
100,00
358 277 491
100,00
%
0,33
0,02
0,20
0,11
99,67
Number of
shares
22 096 537
11 000
10 420 458
11 665 079
336 180 954
%
6,17
2,91
3,26
93,83
100,00
358 277 491
100,00
Number of
shares
40 702 493
40 702 493
%
11,36
11,36
Number of
shares
dec 2015
% holding
Dec 2014
% holding
40 702 493
35 460 323
22 549 633
15 302 544
14 888 051
11 264 691
10 550 334
10 226 244
9 358 629
7 586 720
6 487 809
5 765 632
4 848 485
4 057 000
11,36
9,90
6,29
4,27
4,16
3,14
2,94
2,85
2,61
2,12
1,81
1,61
1,35
1,13
13,30
14,30
6,93
7,93
6,23
3,32
4,32
2,63
1,95
2,12
3,12
1,96
1,95
1,38
120
NedbaNk limited – ANNUAL report 2015
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
¹
²
³
International Financial Reporting Standards (IFRS).
International Accounting Standards (IAS).
International Financial Reporting Interpretations Committee (IFRIC).
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 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 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
NedbaNk limited – ANNUAL report 2015
121
WORLDCLASS RiSk MANAGeMeNt
StRiViNG tO Be WORLDCLASS At MANAGiNG
RiSk ACROSS NeDBANk
Deeply embedded in the DNA of Nedbank is the understanding that the
business of banking is fundamentally about managing risk. the origins of risk
within Nedbank evolve from the entities the group is comprised of, and the
nature of the business/activities and related processes/outcomes flowing
from these, as depicted below …
origins of risk
Lend = Credit risk
We lend out money, which gives
rise to credit risk.
Fund = Liquidity
and funding risks
We also take in deposits to fund
our lending ...
Mismatch = interest rate risk
in banking book (iRBB)
… and that results in asset and
liability mismatches, and so
interest rate risk.
trade = Market risks
We trade and invest in financial
markets that drive other market
risks …
Operate = Operational and
legal risks
Solvency = Capital risk
… and all these business activities
are prone to operational,
legal,
reputational and other risks.
We must remain solvent and so
balance sheet positioning and capital
and liquidity planning are critical
given the associated capital risks.
Regulated = Regulatory and
compliance risks
Compete = Strategic, business
and financial risks
of
regulatory
Banks are highly regulated with a
tsunami
change
following the global financial crisis,
and so the regulatory landscape for
banks will remain top of mind.
Banks are fiercely competitive as
businesses are subject to many
competitive forces, as well as to
changing technological and macro-
environmental
that
continue to influence overall bank
strategy.
landscapes
Risk management in Nedbank
is underpinned by our eRMF.
Collectively there are 17 key risks that make
up the risk universe in the eRMF.
eNteRpRiSeWiDe RiSk
MANAGeMeNt
FRAMeWORk ReFReSh
iN 2015
Since 2003 the eRMF has served Nedbank
well and has been resilient through
economic cycles. the organisation has
placed a strong reliance on this risk
governance framework and the three-
lines-of-defence model, which
are
fundamental to Nedbank’s aspiration to be
worldclass at managing risk.
in response to evolving, emerging risk
trends, a changing business environment
and the significant regulatory change and
developments, a refresh of the eRMF
commenced in 2015, incorporating the
current internal and external environment.
key considerations of the eRMF refresh
included:
■■
■■
■■
Significant regulatory change and
developments (eg AML, iFRS 9, BCBS
239 (RDAR&R), Retail Distribution
Review, Solvency ii/SAM, protection
of personal information (pOpi), Basel
iii, the pending new twin peaks
regulatory structure for SA, and the
BiS paper on Corporate Governance
principles for Banks).
evolving/emerging risk trends and
external dynamics (eg financial
crime, conduct risk and tCF, and
regulatory risk).
Stakeholder needs and experiences
and what is good for Nedbank in the
current environment, particularly in
support of the drive for
simplification.
■■
A revisit of the key risks comprising
Nedbank’s risk universe.
the refresh elevates Nedbank’s position to
achieve its long-term strategic aspiration
of being worldclass at managing risk.
122
NedbaNk limited – ANNUAL report 2015
RiSk StRAteGy AND
ViSiON
Following the refresh of the eRMF, and arising
out of the most challenging risk environment
– given the persistent VUCA macroeconomic
and geopolitical environments – exacerbated
risk both locally and globally, as well as fierce
competition
traditional and non-
traditional competitors, we have crystallised
Nedbank’s top 10 risks that form the
cornerstone of the Group Risk plan. these are:
from
■■
■■
■■
■■
■■
■■
■■
■■
■■
■■
Strategic and execution risks
Regulatory risk (regulatory tsunami)
Balance sheet risks – structure and
growth (in view of Basel iii)
Concentration risk – (traditionally
what hurts banks most)
Business risk – (VUCA environment)
Credit risk – (given the VUCA
macroeconomic environment)
Operational risks – AML/CFt and
sanctions, data and it risks,
information security and cybercrime
Rest of Africa risks
Conduct risk
Compliance risk
At Nedbank we approach risk management
across three integrated core objectives:
■■ managing risk as threat
to minimise and protect against
downside risk and against material
unforeseen losses.
■■ managing risk as uncertainty
to eliminate excessive earnings
volatility and minimise material
negative surprises.
■■ managing risk as strategic
(opportunity)
to maximise financial performance
through the application of superior
risk and business intelligence, risk-
based performance measurement,
managing for value, strategic portfolio
management
value
and
management.
client
is as much strategic and an
Risk
opportunity as it is a threat, and the Group
Risk plan embodies that, designed
in
conjunction with Nedbank’s business
plans and five key strategic focus areas.
A critical success factor for Nedbank to win in
2020, and on a sustainable basis, is that our
risk management must become a clearly
distinctive competitive differentiator.
To achieve this risk vision Nedbank will ‘differentiate
through change’ the change being the client at the heart of
the regulatory change.
Clients at
the heart of
what we do
Understand their needs
treat them fairly
Act responsibly
Be accessible
Deliver excellent service
Clients are at the
heart of regulations
Accordingly, the risk vision adopted is:
‘to be admired as Africa’s leading bank in
risk management by both our internal and
external stakeholders, a core strategic and
competitive differentiator
that enables
Nedbank to win in a sustainable manner.’
Differentiating by strategically
leveraging regulatory change
the 2016–2018/2020 Group Risk plan has
been prepared on this basis to transform risk
management strategically across Nedbank
from that of our
it
and differentiate
competitors. We are doing this
in a
collaborative, teamwork, integrated, value-
adding, strategic and partnership-based
approach.
the most fundamental aspect of the Group
Risk plan is strategically leveraging and
differentiating the regulatory environment,
and building towards a winning regulatory
environment in 2020.
■■ We will strategically leverage our
approximately R3bn regulatory change
programme to achieve this.
to build a
Nedbank aims
regulatory
environment, which will enable the business
with a robust regulatory framework, to
achieve the following objectives:
■■
■■
■■
■■
introduce a business-led regulatory
change programme that creates a
competitive advantage, as seen
and experienced by endusers/
roleplayers, through the introduction
of new systems, processes and
practices, as well as mindset and
behavioural changes.
embed and integrate regulatory
requirements into role/job-specific
processes, systems and practices to
ensure seamless and simple
integration.
Create excitement and buy-in by
linking what Nedbank needs to do,
why it needs to do it and how it needs
to do it.
enable the change closest to the
enduser, with the line manager as
change agent, led by senior leaders
across Nedbank Group.
To be admired as Africa’s leading bank in risk management
by both our internal and external stakeholders, a core
strategic and competitive differentiator that enables
Nedbank to win in a sustainable manner.
NedbaNk limited – ANNUAL report 2015
123
WORLDCLASS RiSk MANAGeMeNt (continued)
there remains an ongoing imperative to
enhance risk management continuously
across Nedbank, and the building blocks
have been put in place to build that over
2016–2018. During 2016 we will execute the
Group Risk plan, including:
■■
■■
■■
■■
■■
embedding the benefits of the eRMF
Refresh;
optimising the Combined Assurance
model comprising Risk, Compliance,
internal Audit and external audit;
remaining focused on our business-as-
usual, day-to-day risk environments
and core risk foundations, and on any
material emerging risks (being
proactive and forward-looking, not
backward-looking);
strongly focusing on risk as a strategic
driver, working in close collaboration
with internal stakeholders to add
maximum value and build on
Nedbank’s risk intelligence; and
clarifying and addressing resourcing,
roles, responsibilities and structures
(and therefore accountability) around
the implementation of regulatory
change and risk management, looking
at:
Operations versus risk and
compliance
First, second and third lines of
defence in our eRMF
the Rest of Africa subsidiaries
RiSk CULtURe
Nedbank Group has a strong risk culture.
this is achieved through following best-
practice enterprisewide risk management, a
strong ‘tone from the top’ from the Ce, top
management and the board, and ongoing
risk leadership by the CRO.
Our approach aligns strategy, policies,
people, processes, technology and business
intelligence to measure, evaluate, manage
and optimise the opportunities, threats and
uncertainties that 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.
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.
in 2015 Nedbank began the journey to
elevate risk to become a competitive
differentiator and good progress has been
made, including the following:
■■
establishing a RCpO focused on
ensuring efficient delivery against the
various regulatory programmes,
including the AML, tCF, pOpi, iFRS 9,
BCBS 239 (RDAR&R), twin peaks and
Market Conduct programmes.
■■ Maintaining transparent relationships
■■
and working closely with all
regulators.
■■ Maintaining full compliance with Basel
iii phase-in requirements.
■■
■■
ensuring we have a comprehensive
recovery plan.
■■
ensuring that Nedbank is equipped to
remain resilient through a significant
stress event.
heightening the focus on financial
crime, with new risk management
frameworks drafted, in particular for
key subrisk components thereof
(ie AML, CFt and sanctions, as well as
cyber-resilience).
Crystallising, as indicated above,
Nedbank’s top 10 risks, and including
these with comprehensive
management actions in the Group Risk
plan.
■■
Revising Nedbank’s risk universe.
■■ Managing Nedbank’s credit portfolio
soundly by keeping it as well as the
overall credit loss ratio (CLR) in good
shape.
■■ Maintaining a stable operational risk
environment despite an increased
inherent operational risk profile.
■■
placing a strong emphasis on the
basics of operational risk
management, with a focus on both
qualitative and quantitative measures.
OUR AppROACh tO RiSk
AND BALANCe Sheet
MANAGeMeNt
We approach our strategy development,
business activities, risk appetite, risk and
balance sheet management
fully
integrated manner.
in a
the backbone of the group’s strong risk
management culture and risk governance
has been and continues to be the group’s
At the heart of the group’s business and management processes
are integrated worldclass risk and balance sheet management
frameworks
■■
eRMF
Subframeworks (examples)
— Group Credit Risk Management
Framework
— Group Market Risk Management
Framework
— Group Operational Risk
Management Framework (ORMF)
— Group Compliance Framework
— Group Financial Crime Risk
■■
■■
internal Capital
Adequacy
Assessment
process
(iCAAp)
internal
Liquidity
Adequacy
Assessment
process
(iLAAp)
Recovery plan
iii-
(Basel
compliant)
Management Framework (Wip)
– AML,
CFt
and
Sanctions
Framework
– Cyber-resilience Framework
— Group Liquidity Risk 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
124
NedbaNk limited – ANNUAL report 2015
is
the group,
eRMF. the risk management function, as
fully
embedded across
described therein. it sets out the group’s risk
universe and major risk classifications, and
assigns board and executive responsibility
thereto. the CRO leads the implementation
of the eRMF across the group.
there are risk management frameworks that
cover all material risks and governance
aspects of
the organisation. these
encompass structures that are linked with
risk-based
performance management,
ensuring business units focus on key risk
areas. Compliance is constantly reviewed by
our boards and their committees, and any
identified risks or breakdowns of internal
controls are reported on, and then actively
managed and monitored.
policies, processes and procedures relating
to governance, effective risk management,
capital adequacy and sound internal control
have board and senior management
oversight and are governed by the three
lines of defence.
Credit risk is managed across the group in
terms of its Group Credit Risk Framework,
which incorporates the group credit policy,
mandate limits and governance structures,
and is reviewed on a quarterly basis.
the Group Market Risk Management
Framework is in place to achieve effective
independent monitoring and management
of market risk.
of
and
in recognition of the increasing growth,
diversity
volatile
activities
macroeconomic environment in which our
businesses operate, the group continued to
refine the ORMF to ensure that it is adaptive
to
to
the environment,
regulatory requirements,
line with
emerging leading practices and supports
forward-looking
risk
proactive
and
identification and agility in response.
is responsive
in
is
Comprehensive Capital Management and
Liquidity Risk Management Frameworks are
maintained, under the leadership of the
Sheet
Group
Management. these are monitored to
ensure adequate levels of capital adequacy
and liquidity.
of Balance
executive
is
the Capital Management Framework
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.
collectively make up and/or support the
Liquidity Risk Management Framework.
the annual iCAAp and iLAAp were signed
off by the board through the GRCMC in
July 2015, and no material issues raised by
SARB during the 2015 onsite review.
risk-adjusted performance
measurement, management
and reward
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. this risk-adjusted performance
measurement 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 monitor
Nedbank Group continues
the evolving governance environment to
ensure appropriate compliance of
the
group’s
remuneration
risk-adjusted
practices with the relevant regulatory and/
or statutory requirements.
is a
economic capital
sophisticated,
consistent measurement and comparison of
risk across business units, risk types and
individual
transactions.
Nedbank assesses the internal requirements
for capital using its proprietary economic-
capital methodology.
products
or
All of these quantifiable risks, as measured
by economic capital, are then allocated back
in the form of a capital allocation to
businesses where the assets or risk positions
reside or originate.
Nedbank’s economic capital and iCAAp
methodologies are 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
the
performance measurement,
performance of each business can be
measured and compared on an absolute
basis using ep and a relative percentage
return basis, namely return on risk-adjusted
capital (RORAC).
iCAAp in Nedbank is embedded across the
organisation and has been for several years.
Some material changes were implemented
for capital allocation purposes and iCAAp
during 2015, and these include:
■■
■■
■■
■■
■■
■■
A revised business risk methodology.
enhancements to the calculation and
allocation of credit economic capital.
A new economic capital charge for
credit valuation adjustment (CVA),
which was implemented to holistically
cover counterparty credit risk, which
consists of default risk (ie losses in the
event of default), as well as market
value losses due to a deterioration in
the counterparty’s creditworthiness.
implementation of a revised interrisk
diversification methodology.
Not capitalising for foreign-currency
translation risk (FCtR) following the
inclusion of foreign-currency
translation reserves as qualifying
regulatory capital and reserves under
Basel iii since 1 January 2013.
A revised residual capital allocation
based on 11% of minimum economic
capital for the client-facing banking
business units.
in view of the significance of liquidity risk in
banking, Nedbank also produces an 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
NedbaNk limited – ANNUAL report 2015
125
WORLDCLASS RiSk MANAGeMeNt (continued)
Nedbank’s recovery plan and
stress testing
in the event of a stress scenario Nedbank
has a detailed recovery plan and liquidity
risk contingency plan, both of which were
during Nedbank’s
tested
extensively
liquidity simulation in March 2015.
the recovery plan sets out the circumstances
under which the group may need to activate
recovery actions and options available for
addressing extreme stress scenarios caused
by either idiosyncratic events or systemwide
market
ratings
failures. A possible
downgrade to junk status is one such event
that may mobilise the plan.
assessment
the plan sets a framework for the bank to
act quickly and decisively (eg selling of
businesses and significant assets) during a
severe crisis to ensure that the bank is able
to recover. it describes the integration with
existing contingency planning and the
including a
possible recovery options,
detailed
likely
their
effectiveness and the defined points at
which they would be invoked. the 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. it also covers the various options
considered by senior management
to
mitigate stresses encountered by Nedbank.
of
Also in place is a broad Stress and Scenario
testing Framework.
the framework recognises and estimates
the potential volatility of
the capital
requirements and base case (expected)
three-year business plan projections,
including
and
sensitivities
therein, which
themselves are subject to fluctuation.
key
contained
assumptions
the
Stress and scenario testing is performed and
if
reported quarterly, or more regularly
called upon. Macroeconomic scenarios of
different severities are considered, ranging
from mild-stress to severe-inflation-stress
and severe-deflation-stress scenarios. in
addition to the quarterly stress-testing
process, a wide-ranging set of relevant
scenarios is evaluated and presented during
the annual iCAAp.
the possibility of a further SA credit ratings
downgrade has increased materially since
the events of December 2015, being
exacerbated by the local drought, slowing
growth in China, prolonged weak commodity
prices, and currency weakness among other
adverse factors.
Nedbank has defined key trigger events that
may move SA closer to a ratings downgrade
prior to Standard & poor’s and Fitch
announcing their rating reviews in June
2016. Moody’s does not perform rating
reviews on fixed future dates. As part of our
proactive contingency planning, we have
the
potential
considered a response to such an event to
adverse
mitigate
consequences – our ratings are capped at
the sovereign ceiling and therefore any
downgrade of the sovereign would lead to
a down grade of Nedbank and all SA banks.
stress
severe-inflation
A possible one-notch downgrade
to
subinvestment grade may precipitate (or
be indicative of) a high-stress event, and
may lead further to (or be indicative of)
scenario.
a
therefore, a further SA ratings downgrade
can be seen as being inbetween a high-
stress
severe-inflation-stress
scenario. the level of stress along this
continuum is likely to be determined by the
level of stress
in the macroeconomic
environment.
and
a
■■
Nedbank Group has performed
comprehensive stress testing on the
possibility of a further SA ratings
downgrade, with the conclusion that
the capital levels and capital buffers
remain appropriate and that
Nedbank Group is strongly
capitalised relative to its business
activities, strategy, risk appetite, risk
profile and the external environment
in which the group operates.
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
the Group exco and
monitored by
ultimately the board, and integrated into
our strategy, business, risk and capital
plans.
Nedbank has had a formal RAF since 2006,
with
key metrics, governance and
reporting, and has been cascaded down
effectively into business units.
Nedbank’s risk appetite is prudent and
appropriately conservative, and has been
enabling for our businesses, promoting
competitive but appropriate growth and
returns.
risk
there were no material changes made to
the
Nedbank’s
2016–2018/2020 Nedbank group business
plan and the Group Risk plan, with the
exception of:
appetite
in
■■
■■
the introduction of a comprehensive
risk appetite statement for rest of
Africa (RoA) exposure including an
increase in capital allocated; and
decrease in the group’s CLR target
range from 80–120 bps to 60–100
bps, due to strategic portfolio tilt and
wholesale asset growth outstripping
retail.
in line with the eRMF refresh, Group Risk is
undertaking a refresh of Nedbank’s RAF
and will ensure, among others, that it
remains constantly relevant, that core risk
appetite metrics are aligned with current
that new key
financial
targets, and
qualitative risks (eg AML, conduct risk/tCF
and reputational risk) are covered.
Risk appetite is considered in detail in the
Nedbank Group Ltd Annual Results Booklet
and the detailed 2015 Pillar 3 Risk and Capital
Management Report for the year ended
31 December 2015, available online at
nedbankgroup.co.za.
CURReNt key RiSk AND
BALANCe Sheet
MANAGeMeNt
pOSitiONS At yeAR-
eND 2015
Nedbank’s favourable financial results for
the year ended 31 December 2015
is
underpinned by a strong balance sheet
across all the core dimensions of capital
liquidity and funding, credit
adequacy,
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.
Further information is available in the Nedbank
Group Ltd Annual Results Booklet in the Risk
and Balance Sheet Management Review
section and will be available in the 2015 Pillar 3
Risk and Capital Management Report
available
at
nedbankgroup.co.za.
Credit risk
the tough economic environment placed
financial pressure on our clients, leading to
lower
levels of credit demand and
transactional banking activity.
■■
■■
this was particularly prominent in the
retail and small-business segments of
the market.
in our wholesale business stresses in
the resources, steel and construction
sectors continued to impact growth.
Strategic portfolio
tilt has delivered
excellent results since it was implemented
in 2009, resulting in the improvement of
the quality of the book’s credit profile,
which is evident in the group and RBB CLR
remaining at the bottom-end of their target
ranges.
■■ While there was some pressure on
impairments, particularly in the
Nedbank Capital portfolio with CLR
increasing to 0,83% (2014:0,14%),
driven by lower oil and commodity
prices and resulting in high specific
impairments, the total CiB CLR
remained within their new through-
the-cycle target range.
Nedbank has gained market share in the
wholesale portfolios
funding
initiatives such as renewable-energy and
infrastructure projects and commercial-
property lending.
through
126
NedbaNk limited – ANNUAL report 2015
■■
■■
■■
Gross loans and advances grew
by 11,0% to R693 043m
(2014: R624 116m), with banking and
trading advances increasing by 10,4%
and 26,2% respectively.
Derisking and selective origination in
the home loan and personal-loan
portfolios have been successful,
improving asset quality and pricing, as
well as growth in vehicle finance,
particularly of secondhand and lower-
value vehicles.
these actions have placed the group in
a strong position for the tougher
macroeconomic environment and
contributed to the change in the group
CLR target range from
0,80–1,20% to 0,60–1,00% in 2016.
impairments increased by 6,3% to R4 789m
(2014: R4 506m) and the CLR improved
slightly to 0,77% (2014: 0,79%). Continued
improvements in retail impairments were
offset by
in the
wholesale clusters.
impairments
increased
■■
■■
Additional overlays were raised in RBB
to R699m (2014: R404m) as
deteriorating economic conditions
prompted further strengthening of
provisioning levels in the second
half of 2015.
the central portfolio provision was
further strengthened to R500m to
take into account additional risks,
particularly in commodities and in the
Rest of Africa, that have been incurred
but are only expected to emerge in
2016.
portfolio coverage remained stable at 0,70%
(2014: 0,70%).
A key change in the regulatory environment
was the implementation of SARB directive
7/2015, which aims to standardise the
treatment of distressed restructures across
the industry, by adjusting the monitoring
period in which an account is held in default
to a minimum of six months. the
implementation of this change
increased
defaulted advances and reduced specific
coverage.
While defaulted advances increased to R17
559m (2014: R15 846m) as the stress in the
resources and mining sectors impacted the
wholesale portfolio, the increase was offset
by reductions in both the home loan and
personal-loans portfolios. the
largest
impact was the implementation of SARB
directive 7/2015, which shifted an additional
R1 881m into defaulted advances.
the specific coverage ratio declined to
38,0% (2014: 43,1%), driven mainly by the
implementation of SARB directive 7/2015.
Restructures tend to have lower coverage as
they are expected to cure. the remainder of
the coverage changes relate to improved
impairments in RBB and the change in mix of
retail and wholesale defaulted advances.
risk
concentrations
Unmanaged
are
potentially a cause of major risk in banks.
Concentration risk is therefore considered
separately as part of Nedbank’s Risk
Appetite Framework.
Nedbank Group has adopted a selective
origination, client-centred growth emphasis
as a core part of its strategic portfolio tilt
strategy. Nedbank’s approach to managing
its mortgages (or property portfolio) is to
take a holistic approach across both
residential and commercial mortgages,
preferring a
in
commercial mortgages given the better risk-
based economics and returns.
leading market share
■■
Commercial-mortgage lending has
increased since 2011 from 18,2% to
19,7% of gross loans and advances,
and consequently Nedbank Group has
maintained its leading local market
share position, currently at 40,4%.
this potentially high concentration is
mitigated by good-quality assets, high
levels of collateral, a low average
loan-to-value ratio (approximately
50%), the underpinning of corporate
leases, and a highly experienced
management team considered to be
the leader in property finance in SA.
■■ While Nedbank Group has the
smallest residential-mortgage
portfolio among the local peer group
at 14,5% of market share, the
contribution of these advances as a
percentage of total gross loans and
advances was still substantial at
20,6% in December 2015
(2014: 22,0%). however, this level of
contribution to the balance sheet is
lower than that of its peers.
■■
■■
the focus in home Loans since 2009
has been on lending through our own
channels, including branch, own sales
force and more recently Nedbank’s
new online home loan
application and, to a far lesser degree
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.
postwriteoff
recoveries
R1 137m
(Dec 14: r941m)
continued focus on
recoveries
portfolio
coverage
0,70%
(Dec 14: 0,70%)
remained stable
Specific
coverage
38,0%
(Dec 14: 43,1%)
SArB directive 7/2015
impact
Defaulted advances
as a % of
gross advances
2,53%
(Dec 14: 2,54%)
remained stable
Loan-to-deposit-ratio
93,9%
(Dec 14: 93,8%)
remained stable
NedbaNk limited – ANNUAL report 2015
127
■■ When including residential mortgages,
Nedbank’s total mortgage market
share is in line with that of its peers at
21,5%.
total retail motor vehicle finance exposure
within Nedbank Group has increased slightly
since 2011 to 11,1% in 2015 (2011: 11,0%) of
gross loans and advances, while current
market share is approximately 31,0%, which
is second of the big four banks in SA. Sound
risk management principles are consistently
applied by an experienced management
team, with CLR decreasing year on year.
personal-loan advances have decreased and
are now at 2,6% of gross loans and advances,
from its peak of 4,3% in 2012.
Market risks
in summary, other than interest rate risk in
the banking book (iRRBB), Nedbank does
not have a significant risk appetite for, or
exposure to, market risk:
■■
Nedbank’s iRRBB is positioned for an
upward interest rate cycle and is
predominantly managed in line with
impairment sensitivity for similar rate
change expectations.
Current exposures are within the
board-approved limits and risk
appetite.
■■
the focus of the trading businesses is
to continue to develop the flow model,
by leveraging the dealflow from
clients.
trading book
low risk
IrrBB % ordinary
shareholders’ equity
1,61%
(Dec 14: 1,52%)
well positioned
trading market risk is low in
relation to the total bank
operations, with only 0,5% of the
total economic capital of the
group consumed.
Risk levels are monitored within
board-approved limits and risk
appetite.
Focus areas in 2015 were the
major regulatory proposals,
including the fundamental review
of the trading book and CVA
governance and system
implementation.
in 2016 the overall strategic focus
of CiB will remain largely
unaltered and focused on client-
centredness. trading capabilities
within current board-approved
limit structures will selectively be
increased by retaining and
managing risks rather than
hedging back-to-back in the
market.
■■
■■
equity risk in the banking book is low
relative to the rest of the balance
sheet. the key strategic investments
(eti and Banco Único) are accounted
for under the equity method of
accounting. the total equity portfolio
that is fair-valued is R4 719m (2014:
R4 761m).
FCtR remains relatively low, even after
the acquisition of equity stakes in eti
and Banco Único in 2014, as a result of
the inclusion of FCtR in qualifying
capital and reserves since 1 January
2013. Accordingly, FCtR does not have
a material impact on the group’s total
regulatory capital adequacy ratio.
Nedbank Group’s Pillar 3 document for the year
ended 31 December 2015 provides detailed
insights into the management of all components
of market risk.
operational risk
Nedbank maintained a stable operational
risk environment despite an
increased
inherent operational risk profile. Strong
emphasis was placed on the basics of
operational risk management, with a focus
on both qualitative and quantitative
measures.
for 2015 were
the
it
the top and emerging operational risk
information/
themes
regulatory
cybersecurity,
risk,
environment,
outsourcing/third-party risk, financial crime
and business continuity planning (national
power crisis).
conduct
intense
risk,
restrained
illustrated by
the
macroeconomic
slow
environment, as
economic growth, combined with pressure
reduction,
on
rate
fluctuations,
low commodity prices and
pressure to meet targets, will likely increase
the exposure to operational risk in 2016.
exchange
cost
operational risk for regulatory purposes.
Nedbank continues to work closely with
industry bodies and regulators to ensure the
group remains abreast of reforms.
the development of a second-generation
operational risk model with enhanced
capabilities (eg to estimate economic capital
internal capital
and
adequacy),
of
review
a
methodology and technology, continues to
receive focus.
to evaluate our
including
Nedbank Group’s net losses, earnings at risk
and operational risk capital to gross income
ratio metrics remained within prescribed
limits. All single material-loss events of
more than R5m are reported to the Group
Operational Risk Committee (GORC) and
the GRCMC, where emphasis is placed on
identifying root causes and enhancing
mitigating actions.
fraud and
events relating to external
execution, delivery and process management
(eDpM) remained the primary reasons for
internal losses in terms of frequency and
severity. the eDpM event-type category’s
contribution to the operational risk loss
profile increased to 49% in 2015 (2014:
40%), while external fraud decreased to
35% in 2015 (2014: 49%).
A detailed account of the management of
operational risk management is included in the
Pillar 3 Risk and Capital Management Report
for the year ended 31 December 2015, available
online at nedbankgroup.co.za.
Capital adequacy
Nedbank Group’s capital ratios are strong
across all classes of capital, are above
regulatory minimum requirements and are
within
internal target ranges. 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.
the group maintained a well-capitalised
balance sheet. Our Cet1 ratio of 11,3%
(2014: 11,6%) remains around the mid-point
of our Basel iii 2019 internal target range.
the Cet1 ratio was
impacted by risk-
weighted assets (RWA) growing 13,7% to
R501,2bn (2014: R440,7bn), largely as a
result of an increase in credit RWA due to:
■■
■■
ratings migration across certain
wholesale portfolios in line with the
deteriorating economic environment;
an industrywide CVA capital charge by
SARB for OtC ZAR derivatives and
OtC derivatives with local
counterparties not cleared through
a central counterparty, which
increased RWA by R6,5bn; and
■■
growth in loans and advances.
there are significant developments that may
have an impact on the current state of the
to measure
risk-based
approaches
Overall capital adequacy was further impacted
by investments in the rest of Africa, resulting in
a higher capital impairment.
128
NedbaNk limited – ANNUAL report 2015
Further information is available in the Nedbank
Group Ltd Annual Results Booklet under the
Risk and Balance Sheet Management Review
section and will be available in the 2015 Pillar 3
Risk and Capital Management Report available
at nedbankgroup.co.za.
Leverage
the leverage ratio is intended by the Basel
Committee on Banking Supervision (Basel
Committee)
simple,
transparent, non-risk-based leverage ratio to
supplement the Basel iii risk-based capital
requirements, to help avoid the buildup of
excessive leverage and to capture both on-
and off-balance-sheet exposure.
serve as a
to
gearing
(including
Nedbank Group’s
unappropriated profits) under the revised
Basel iii Leverage Ratio Framework and
disclosure requirements (which came into
effect on 1 January 2015) is 16,3 times (or
6,1%) at 31 December 2015 (2014 pro
forma: 15,1 times or 6,6%). the increase in
the leverage position is largely as a result of
the increase in exposure measure, which
was primarily driven by organic on-balance-
sheet growth as well as an increase in total
derivative exposure.
Liquidity and funding 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, a strong
ratio
consistently below 100% and a low reliance
on interbank and foreign-currency funding.
loan-to-deposit
From a Basel iii perspective Nedbank has
the
successfully
LCR,
implemented
exceeding
regulatory
the minimum
requirement of 60%, which came into effect
on 1 January 2015 and the 70% requirement
from 1 January 2016. having embedded this
ratio into BaU processes, Nedbank is well
positioned
the minimum
requirement throughout the phase-in period,
as the LCR requirement increases by 10%
per annum to 100% by 1 January 2019.
to exceed
factor applicable
the Basel Committee released
its final
version of the NSFR in October 2014. On 18
November 2015 SARB released a proposed
directive relating to the NSFR, where it
proposed that the available stable funding
(ASF)
to wholesale
deposits in the 0 to 6 months bucket be
increased from 0% to 35% in order to better
reflect the stability of these deposits within
the South African context. taking cognisance
of the finalised Basel Committee NSFR
standard and the proposed directive issued
by SARB, all SA Banks are better positioned
to achieve compliance from the effective
date of 1 January 2018. the key focus going
forward, will be on achieving compliance
within
the context of balance sheet
optimisation.
Nedbank’s strong funding and liquidity position
is illustrated in the Nedbank Group Ltd Results
Booklet and Pillar 3 Report for the year ended
2015, available online at nedbankgroup.co.za
Common-equity
tier 1
11,3%
(Dec 14: 11,6%)
well capitalised
total capital
adequacy ratio
14,1%
(Dec 14: 14,6%)
in a strong position
total tier 1
12,0%
(Dec 14: 12,5%)
within target range
Liquidity
coverage ratio
88,5%
(Dec 14: 66,4%)
LCr=> 60%
regulatory
requirement
Long-term
funding ratio
28,7%
(Dec 14: 25,4%)
strong and well
diversified
Available financial
resources:economic
capital
120%
(Dec 14: 140%;
Dec 14 pro forma: 123%)
strong and above
target range
NedbaNk limited – ANNUAL report 2015
129
WORLDCLASS RiSk MANAGeMeNt (continued)
RiSk UNiVeRSe
the 17 key risks that comprise Nedbank Group’s eRMF and their materiality are reassessed, reviewed and
challenged regularly by the board, management and our primary regulator, the South African Reserve Bank.
Nedbank’s enterprisewide risk Management Framework (erMF)
risk
universe
Accounting,
financial and
taxation risk
Credit risk
Operational
risk
Financial
crime risk
Liquidity and
funding risk
Capital risk
insurance risk
(including
non-banking
risks)
Market risk
trad-
ing
book
Bank-
ing
book
Concentration
risk
Conduct risk
Regulatory
risk
information
technology
risk
Business and
strategic
(execution)
risk
Reputational
risk
Governance
and compli-
ance risk
transforma-
tion, social
and environ-
mental risk
people risk
f
o
s
e
r
u
t
a
e
f
y
e
k
F
M
R
e
e
h
t
1 the board of directors is ultimately responsible for all risks in the group, approval and oversight of the risk measurement and management
system, and the setting of risk appetite.
2 the eRMF provides the foundation and underpins the entire risk management structure and system of Nedbank Group (implementation,
monitoring, reporting and remediation).
a
b
c
d
Strong emphasis in the eRMF is placed on individual accountability and not on undue reliance on committees.
Risk management frameworks (for all major risk types), and risk officers, are in place across all businesses and Group technology.
provides a set of subrisks where relevant, to each main risk category.
Shows the statutory board committees (as required by the Banks and Companies Act) and their role as the final oversight and
monitoring functions for the group.
FIrSt LINe oF DeFeNCe
Board of directors
Board
mittees
com-
Group Audit
Committee
Group Credit
Committee
Large-exposure
Approval
Committee
Group executive Committee
Group operational Committtee
Committees
Forums
s
e
e
t
t
i
m
m
o
c
o
c
x
e
p
u
o
r
G
Finance
Forum
taxation
Forum
Cluster credit
committees
(CCCs)
Group Risk and Capital Management Committee
Directors’ Affairs Committee
Related party
transactions
Committee
transformation,
Social and
ethics
Committee
Group
Operational
Risk
Committee
Financial
Crime
Committee
Group Asset and Liability Committee and executive Risk Management Committee
Brand, Client
and Conduct
Committee
Reputational
Risk
Committee
transactional
Deposits
Forum
Regulatory
Risk and
Compliance
Forum
Mergers and
Acquisitions
Forum
Regulatory
Risk and
Compliance
Forum
transformation human
Resources Committee
Nedbank employee
equity Forum
Group transformation
Forum
Group
information
technology
Committee
executive
information
technology
Committee
Business
Clusters’ risk
governance
NedbaNk Retail aNd bUSiNeSS baNkiNG, NedbaNk CORPORate aNd iNVeStmeNt baNk, NedbaNk WealtH aNd ReSt OF aFRiCa
■■
Cluster and business unit excos, CCCs, trade Risk Committee (tRC), investment Committee and enterprise risk committees (ercos) and
other specialist committees, with the relevant independent group functions.
■■
heads of risk and risk functions, independent of business origination, report directly to business cluster managing executives.
Finance
Forum
CCC
Credit approval
meetings
(CRAMs)
erco
Balance Sheet
Management Committee
(BSMC)
tRC
BSMC
investment
Committee
Separate
Wealth
Cluster eRMF
erco
BSMC
Brand, Client
and Conduct
Committee
erco
enterprisewide
human Resources Forum
Central func-
tions
Group Finance
Group Strategic planning
Balance Sheet Management
Group technology
Group human Resources
Group Marketing, Communications
and Corporate Affairs
2ND LINe oF DeFeNCe
Group risk
Chief risk officer
Independent
group risk and
compliance
Group Credit Risk
Monitoring
Group Credit
portfolio Manage-
ment
Group Operational
Risk and Data
Management
Group Financial
Crime and Forensics
Group AML,
CFt and
Sanctions
Finance and
Operations
Group Legal
Group insurance
Group Market
Risk
Monitoring
Regulatory
Change
programme Office
enterprise Risk
Management
tHIrD LINe oF DeFeNCe
Internal and external audit
Independent
assurance
Group internal Audit
external audit
independent actuaries
130
NedbaNk limited – ANNUAL report 2015
Group enterprise Governance and
Compliance
Chief Governance and Compliance officer
includes:
■■
■■
■■
■■
■■
Group Money-laundering Reporting Office
Compliance services and oversight
Governance and ethics
Banks Act and regulatory compliance
Company secretariat
risk
universe
Accounting,
financial and
taxation risk
Credit risk
Operational
risk
Financial
crime risk
Liquidity and
funding risk
Capital risk
Market risk
insurance risk
(including
non-banking
risks)
Concentration
risk
Conduct risk
Regulatory
risk
information
technology
risk
Business and
strategic
(execution)
risk
Reputational
risk
Governance
and compli-
ance risk
transforma-
tion, social
and environ-
mental risk
people risk
the eRMF specifically allocates the 17 key risks (which individually also include various subrisks) at each of three levels to board committees;
executive management committees (at Group exco level and those within business clusters); and individual functions, roles and responsibilities
(at group level and across all business clusters, as relevant).
3
e
Shows the structure of the executive management committees and their roles/responsibilities for the proper,
efficient and effective functioning of the group’s business.
Reporting philosophy: provides a reporting structure from business units through to the board.
f
three-lines-of-defence model: sets out and positions the three-lines-of-defence model across the group and the
role and responsibility of each within the overall framework.
a
primary responsibility and accountability for the risks originating in the businesses are clearly assigned to the
respective business cluster leaders and executives.
4
the CRO reports to the Ce, who has ultimate individual accountability for risk.
FIrSt LINe oF DeFeNCe
Board of directors
Board
mittees
com-
Group Audit
Committee
Group Credit
Committee
Large-exposure
Approval
Committee
Group executive Committee
Group operational Committtee
Committees
Forums
Finance
Forum
taxation
Forum
Cluster credit
committees
(CCCs)
Finance
Forum
CCC
Credit approval
meetings
(CRAMs)
2ND LINe oF DeFeNCe
Group risk
Chief risk officer
tHIrD LINe oF DeFeNCe
Internal and external audit
Independent
assurance
transactional
Deposits
Forum
tRC
BSMC
investment
Committee
Group Risk and Capital Management Committee
Group
Operational
Risk
Committee
Financial
Crime
Committee
Group Asset and Liability Committee and executive Risk Management Committee
Brand, Client
and Conduct
Committee
Group
information
technology
Committee
executive
information
technology
Committee
Directors’ Affairs Committee
Related party
transactions
Committee
transformation,
Social and
ethics
Committee
Group
Remuneration
Committee
Reputational
Risk
Committee
transformation human
Resources Committee
Nedbank employee
equity Forum
Group transformation
Forum
Business
Clusters’ risk
governance
NedbaNk Retail aNd bUSiNeSS baNkiNG, NedbaNk CORPORate aNd iNVeStmeNt baNk, NedbaNk WealtH aNd ReSt OF aFRiCa
■■
Cluster and business unit excos, CCCs, trade Risk Committee (tRC), investment Committee and enterprise risk committees (ercos) and
other specialist committees, with the relevant independent group functions.
■■
heads of risk and risk functions, independent of business origination, report directly to business cluster managing executives.
Regulatory
Risk and
Compliance
Forum
Mergers and
Acquisitions
Forum
Regulatory
Risk and
Compliance
Forum
erco
Balance Sheet
Management Committee
(BSMC)
Separate
Wealth
Cluster eRMF
erco
BSMC
Brand, Client
and Conduct
Committee
erco
enterprisewide
human Resources Forum
Central func-
tions
Group Finance
Group Strategic planning
Balance Sheet Management
Group technology
Group human Resources
Group Marketing, Communications
and Corporate Affairs
Group enterprise Governance and
Compliance
Chief Governance and Compliance officer
Independent
group risk and
compliance
Group Credit Risk
Monitoring
Group Credit
portfolio Manage-
ment
Group Operational
Risk and Data
Management
Group Financial
Crime and Forensics
Group AML,
CFt and
Sanctions
Finance and
Operations
Group Legal
Group insurance
Group Market
Risk
Monitoring
Regulatory
Change
programme Office
enterprise Risk
Management
■■
■■
■■
■■
Group internal Audit
external audit
independent actuaries
includes:
■■
Group Money-laundering Reporting Office
Compliance services and oversight
Governance and ethics
Banks Act and regulatory compliance
Company secretariat
NedbaNk limited – ANNUAL report 2015
131
WORLDCLASS RiSk MANAGeMeNt (continued)
NeDBANkS RiSk
UNiVeRSe
RiSk type
definition
Credit risk
the risk of borrowers and counterparties failing to meet their
repayment commitments,
from
impaired assets and related impairments, provisions or
reserves and risk arising from exposure to related persons.
including risks arising
Concentration
risk
in terms of market risk and credit risk, the risk of an excessive
concentration of exposure to a single client or group of related
clients.
in terms of liquidity risk, the risk of overreliance on funding or
liquidity from a single depositor or small group of depositors.
Market risk
in terms of market risk in the trading book, the risk of loss as a
result of unfavourable changes in market prices, such as foreign
exchange rates, interest rates, equity prices, credit spreads and
commodity prices.
in terms of market risk in the banking book, the risk of loss in
the banking book as a result of unfavourable changes in foreign
exchange rates and interest rates.
operational risk
the risk of loss resulting from inadequate or failed internal
processes, people or systems or from external events.
Financial crime
risk
the risk of any kind of criminal conduct in terms of common law
or any current statutory law and any other conduct (whether an
act or omission which Nedbank deems to be dishonest,
regardless of whether the bank is the victim or perpetrator) that
relates to money or financial services, goods or products
resulting in economic or financial loss.
regulatory risk
the risk of Nedbank failing to comply with applicable regulatory
requirements or codes. Regulatory risk centres around changes
in regulations that may have a negative effect on the business.
Conduct risk
the risk associated with Nedbank’s pattern of behaviour in
executing its pricing and promotion strategy as well as in
respect of the public, markets, laws, best practices, client
expectations, regulators and ethical standards.
reputational risk
the risk of impairment of Nedbank’s image in the community or
of the long-term trust placed in the group by its stakeholders as
a result of a variety of negative factors that may result in loss of
business and/or legal action.
Governance and
compliance risk
in terms of governance risk, the risk of systems and controls
failing to enable adequate oversight on a sustainable basis.
in terms of compliance risk, the risk of legal or regulatory
sanctions, material financial loss or loss of reputation as a result of
Nedbank failing to comply with laws, regulations, rules, related
self-regulatory organisation standards and codes of conduct.
Information
technology risk
the risk of inadequate systems or inappropriate it investment,
development, implementation, support or capacity, with an
associated negative impact on the achievement of strategic
objectives.
tOp 10 RiSkS
Nedbank’s risk universe
comprises of 17 key risks.
Aligned to this, through the risk
strategy and planning process,
the top 10 risks are agreed as
key risk focus areas for the year
ahead. Management actions for
the top 10 risks have been
formally documented in the
Group Risk Plan and are
monitored and tracked in the
Operational Committee, Group
Exco and GRCMC. We provide
an insight on pages 118 to 123,
into what transpired in 2015
regarding each of the top 10
risks, the shaping forces that
informed these risks and what
the outlook is for 2016.
132
NedbaNk limited – ANNUAL report 2015
RiSk type
definition
Accounting,
financial and
taxation risk
in terms of accounting risk, the risk of inappropriate accounting
information causing suboptimal decisions to be made.
in terms of financial risk, the risk of financial targets and key
performance indicators not being met.
in terms of taxation risk, the risk that effective tax planning, co-
ordination and strategy, compliance with tax
laws and
regulations, proactive identification and management of tax
risks are not enforced or a poor relationship with revenue
authorities exits, resulting in loss and/or missed opportunities.
people risk
the risk of inadequacies in human capital management and the
management of human resource policies and processes
resulting in the inability to attract, manage, motivate, develop
and retain competent resources or the failure of employees to
adhere to the group’s policies and processes.
transformation,
social and
environmental
risk
in terms of transformation risk, the risk of Nedbank failing to
respond to and address transformation issues adequately,
proactively and positively.
in terms of social risk, the risk of not adequately contributing to
the development of a sustainable and robust social structure.
in terms of environmental risk, the risk of a Nedbank activity or
process degrading, devaluing or destabilising the environment in
such a way that it damages the environment.
Business,
strategic (incl
execution) risk
in terms of business risk, the risk of potential changes in general
business conditions, such as our competitive market environment,
client behaviour and disruptive technological innovation.
in terms of strategic risk, the risk of an adverse impact on capital
and earnings due to business policy decisions, changes in the
economic environment, deficient or insufficient implementation of
decisions, or a failure to adapt to changes.
in terms of execution risk, the risk of Nedbank’s business plans not
being successful when implemented or full implementation not
being achieved.
Insurance risk
(including non-
banking risks)
in terms of underwriting risk, the risk of a client being placed in
the incorrect risk pool.
in terms of pricing risk, the risk of the level of risk associated
with a pool being mispriced.
in terms of non-independence risk, the risk of a single event
resulting in claims from multiple clients.
Capital risk
the risk of Nedbank becoming unable to absorb losses,
maintain public confidence and support the competitive growth
of the business.
Liquidity and
funding risk
the risk of Nedbank failing to meet its payment obligations
when they fall due, replace funds when withdrawn or fund
commitments to lend at an acceptable price, at the right time
and place, and in the right currency.
the eRMF is designed around the three-lines-
of-defence model, placing strong emphasis on
accountability and responsibility of business
management, all supported by appropriate
internal control, risk management and
governance structures.
three-lines-of-defence model
First line
the board and management of Nedbank
Group are ultimately responsible for the
implementation and management of risk.
Second line
Comprises:
independent risk oversight and monitoring by
the Group Risk and enterprise Governance
and Compliance Clusters.
the CRO, who reports directly to the Ce,
provides:
■■
■■
■■
strategic risk management leadership
group independent risk oversight
key support to various risk committees
■■ management of the RCpO
■■
is responsible for championing effective
enterprisewide risk management and
control
independent model validation
some first line functions, eg forensics
and physical security
■■
■■
the Group Chief Governance and
Compliance Officer, who reports directly to
the Ce, provides:
■■
■■
■■
■■
continuous strategic compliance risk
management leadership,
independent compliance risk
monitoring (of compliance monitoring
in the first line),
sets the group governance and
compliance framework and
works closely with the cluster
governance and compliance functions
on compliance and governance matters.
third line
Group internal Audit, external auditors and
independent actuaries provide additional
assurance on the effectiveness of risk
management across the organisation.
NedbaNk limited – ANNUAL report 2015
133
WORLDCLASS RiSk MANAGeMeNt (continued)
2015
StrAteGIC AND
StrAteGY
eXeCUtIoN rISKS
(strategy is
underpinned by sound
strategic and strategy
execution risk
management)
1
■■
■■
Strategic and strategy execution risks have been highlighted in the eRMF and in the Group
Risk plan among the top 10 risks facing Nedbank, with a heightened focus on execution
across the bank to support Nedbank’s roadmap to Winning in 2020.
Nedbank believes that key in today’s climate is the ability to mitigate the adverse impact on
capital and earnings due to business policy decisions, changes in the economic
environment, deficient or insufficient implementation of decisions, or a failure to adapt to
changes in the environment.
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.
■■
Nedbank is strategically leveraging the ‘regulatory tsunami’.
Approximately R3bn has been allocated to regulatory change programmes to ensure
worldclass implementation of regulatory requirements.
reGULAtorY
rISK
2
(regulatory tsunami)
■■
Compliance and regulatory risk have become increasingly significant given the heightened
regulatory environment in which Nedbank operates.
■■
■■
■■
extensive focus and initiatives are documented in strategy, business and risk plans.
Given the extent of the significant regulatory change agenda (‘regulatory tsunami’), a RCpO
was established in 2015, under the CRO to ensure that the impact of new or pending
regulatory changes are proactively identified and appropriately managed.
the RCpO is responsible for ensuring coordinated, comprehensive and timely identification
and impact assessment of regulatory changes, and drives the integration of and alignment
between regulatory change programmes.
Nedbank’s business and risk strategies ensure these programmes are effectively delivered
in an efficient, integrated and strategic manner to maximise our success for full regulatory
compliance on a sustainable basis.
■■
Basel iii regulatory requirements continued to be phased in through to 2019 with:
ongoing transitional minimum capital requirements increasing in line with regulation;
the phasing-in of the minimum LCR requirements that came into effect in 2015
starting at 60%; and
the group continuing to position itself strategically for NSFR compliance by January
2018.
■■
Nedbank continued to shape its capital position in line with these evolving requirements,
which included:
BALANCe SHeet
rISKS
(structure and growth)
3
■■
redemption of certain old-style capital instruments and the issue of further new-style
Basel iii-compliant instruments during the period.
An appropriate level of leverage during 2015 continued, with the level of balance sheet
gearing being maintained, well above Basel iii and the more conservative SA regulatory
minimum requirements.
Nedbank also operated well within its own internal targeted levels.
■■ With the phase-in of the LCR requirements this year, Nedbank was well positioned to meet
the transitional 2015 minimum LCR requirements through its proactive liquidity risk
management and strategies.
the group has updated its recovery plan in 2015, which also included an extension of its
integrated solvency, liquidity and disaster recovery planning to its London branch and to
Nedbank private Wealth.
■■
134
NedbaNk limited – ANNUAL report 2015
eMeRGiNG/ShApiNG FORCeS
OUtLOOk FOR 2016
■■
■■
■■
■■
Fundamental shift in financial services’
landscape and technology.
Fierce competition, mobile and digital
transformation – essential to innovate,
differentiate and simplify.
A need for sound execution of regulatory
programmes.
Capacity and resources to execute delivery of
strategic focus areas and regulatory imperatives
separate from business as usual.
■■
the recent significant changes in the
regulatory landscape have focused on two key
themes, namely:
■■
■■
■■
■■
■■
■■
the stability and sustainability of the
financial services industry; and
client-focused market-conduct-driven
regulation.
the extent of regulatory change across the
industry and its impact on our businesses and
clients remain pervasive.
As these requirements become more onerous,
they are likely to change the shape of bank
balance sheets, increase the costs of
regulatory compliance, adversely impact the
price of credit extension and, as a result, will
cause banks to revise their strategies.
increasing capital and liquidity requirements will
continue to impact the group’s balance sheet and
put pressure on bank margins and ROes, for which
frontbook pricing will need to be adjusted.
the higher minimum capital requirements and
likely introduction of tLAC requirements will drive
upwards the group’s capital ratios and overall
loss-absorbing capacity.
LCR compliance is being phased in over several
years, with a 60% requirement in 2015 to full
compliance by 2019.
these requirements will result in larger liquid
asset buffers, with higher levels of bank
funding being deployed into these portfolios.
the requirements of full NSFR compliance by 2018
will result in a continued lengthening of the group’s
contractual and behavioural funding profile in order
to increase the levels of available stable funding to
support lending activities.
■■
Capacity and adequacy of resourcing will be a key priority for the
successful execution of the group’s strategy and the many
large-scale regulatory programmes.
■■
execution trumps strategy (‘grow transactional banking
franchise’ is most critical).
ensure operational and programme management
excellence.
execute on Nedbank RBB’s five key focus areas to deliver on
the transactional banking strategy.
■■ Mobile and digital transformation is essential to innovate,
differentiate and simplify.
■■
■■
■■
■■
■■
enhanced project management discipline must support
roadmaps to 2020 targets.
A journey will be undertaken to redefine a culture for Nedbank to
win in 2020 and beyond.
in acknowledging the compliance imperative, it remains crucial to
deliver a sustainable and effective compliant operating model,
underpinned by a direct link to the strategic benefits, with a view to
establishing a winning regulatory environment in 2020.
the impact of regulatory change on people, process, systems and
data remains a key focus for the year ahead to evolve the operating
model for implementing regulatory change in an integrated, cost-
effective and sustainable manner.
Although the group is well positioned to respond to the regulatory
changes, these changes are likely to put pressure on levels of return
across the financial services industry as a result of, among others,
the increased cost of compliance, increased quality and size of
capital buffers, increased liquid-asset portfolios and decreased
levels of liquidity transformation.
these should in turn lead to lower levels of risk.
■■
the FSB has finalised its minimum requirements for tLAC.
■■
■■
■■
Nedbank expects that these requirements, in a revised
form, are likely to be adopted for SA D-SiBS.
Significant changes are expected with the quantification of RWA,
with finalisation expected in December 2016.
A conceptual framework setting out primary and secondary
indicators for identifying unconsolidated entities where
significant step-in risk exists for banks has been proposed and is
to be finalised in December 2016.
Nedbank has embraced the requirements of Basel iii and is
continuously looking at how best to respond strategically in
order to create a competitive advantage rather than simply
complying:
these requirements have been embedded within our
strategic portfolio tilt focus and continue to shape the
group’s balance sheet and impact frontbook pricing.
NedbaNk limited – ANNUAL report 2015
135
WORLDCLASS RiSk MANAGeMeNt (continued)
2015
■■
Nedbank Group does not have material single-name credit concentration risk.
CoNCeNtrAtIoN
rISK
(traditionally what
hurts banks most)
4
■■
■■
Of the total group credit economic capital 7,5% is attributable to the top 20 largest
exposures, excluding banks and government.
— 2,3% is attributable to the top 20 largest bank exposures.
Commercial property finance (> 40% market share).
Nedbank continued to grow wholesale advances much faster than retail, while transactional
deposits were slower.
BUSINeSS
rISK
(VUCA environment)
5
■■
■■
■■
the risk environment and risk management across the group remained in good shape
despite the VUCA and very challenging regulatory macroenvironment in 2015, with an even
more adverse forecast for 2016.
Despite the challenging environment our CLR’s remain low.
in recognition of these facts, coupled with the ever-present and ever-growing threat posed
by financial crime to the financial services industry:
focus on financial crime risk management was increased;
the risk of financial crime was elevated to a key risk in the eRMF; and
risk management frameworks have been formulated for
— AML, CFt and sanctions and
— Cyber-resilience.
CreDIt rISK
(given VUCA
macroeconomic
environment)
■■
the tough economic environment placed financial pressure on our clients, leading to lower
levels of credit demand and transactional banking activity.
this was particularly prominent in the retail and small-business segments of the market.
in our wholesale business stresses in the resources, steel and construction sectors
continued to impact growth.
6
■■
Strategic portfolio tilt has delivered excellent results since it was implemented in 2009,
resulting in the improvement of the quality of the book’s credit profile, which is evident in
the group and RBB CLR remaining at the bottom-end of their target ranges.
While there was some pressure on impairments, particularly in the Nedbank Capital
portfolio with CLR increasing to 0,83% (2014:0,14%), driven by lower oil and
commodity prices and resulting in high specific impairments, the total CiB CLR
remained within their new through-the-cycle target range.
operAtIoNAL
rISKS
(AML, CFt and
sanctions, data and
It risks, information
security and
cybercrime)
■■ Maintained a stable operational risk environment despite an increased inherent operational
risk profile.
7
■■
■■
■■
Strong emphasis was placed on the basics of operational risk management, with a focus on
both qualitative and quantitative measures.
there was an enhanced focus on framework testing and assurance during the year.
A fundamental review of Nedbank’s cyber-resilience and financial crime risk frameworks
was initiated and remain a key focus.
136
NedbaNk limited – ANNUAL report 2015
eMeRGiNG/ShApiNG FORCeS
OUtLOOk FOR 2016
■■
VUCA macroeconomic environment and
pressure on resource and commodities prices.
■■
■■
■■
Concentration risk is now one of the key risks in Nedbank’s
refreshed eRMF.
Stress testing and deep dives show low concentration and
downside risk to most key sectors.
Continued focus on strategic portfolio tilt, with a preference for
strong market share in commercial mortgages, given its
comparatively better risk-based economics and returns.
■■
■■
the performance of banks is closely aligned with
the macroeconomic environment in which they
operate.
in the second half of 2015 the outlook for key
macroeconomic facts in SA deteriorated:
SA macro political events;
declining for 2016 GDp expectations to
0,2%;
high risk of recession.
■■
Further deterioration is possible as is the risk of
SA being downgraded to non-investment grade.
this potentially creates a severe-stress
scenario.
■■
■■
elevated financial crime is being experienced.
intense competitive pressure is experienced
from banks, non-banks and shadow banking.
■■
Despite the difficult macroeconomic environment, intense
regulation and strong competition, Nedbank is well positioned to
continue to grow and generate value.
Competitive differentiating in 2016–2018/2020 in group
business and risk plans:
— grow transactional banking; and
— differentiate by strategically leveraging regulatory change.
■■
■■
Nedbank’s comprehensive stress testing enables us to be proactive in
managing extreme events and difficult environments.
the growing threat of financial crime necessitates a risk-based,
proactive and integrated approach to financial crime risk
management to achieve a competitive advantage and to win in
2020.
Underpinning this effort will be the integrated Financial Crime
Risk Management Framework, together with detailed
frameworks being developed to support management of
various types of financial crime.
■■
■■
■■
Growth in wholesale banking will continue to
be limited by infrastructure constraints in SA,
poor global demand and low international oil
and commodity prices.
Rising interest rates will increase borrowing
costs and dampen consumer credit demand.
Deep dives and stress testing done in higher-
risk portfolios.
■■
■■
■■
■■
Continued focus on prudent risk management and excellence in
collections.
Strategic portfolio tilt – proactive risk management and selective
origination.
Leverage relatively faster growth in Africa in our wholesale
portfolios.
iFRS 9 (impairments) programme – strategic implications of
change to iFRS 9.
■■
top and emerging operational risk themes are:
information/Cybersecurity
intense regulatory environment
it risk
Conduct risk
Outsourcing/third party risk
Financial crime
Business continuity planning (national
power crisis)
technological change (eg digital age)
follows regulatory change in changing
the shape of banking
Big data + risk data = eDp as a critical
success factor to Winning in 2020.
Factors likely to increase the operational risk exposure, include:
■■
inherent risk of information security, cybercrime and elevated
financial crime
restrained macroeconomic growth
slow economic growth
pressure on cost reduction
exchange rate fluctuations
low commodity prices
pressure to meet targets
■■
Significant developments may have an impact on current state of
risk-based approaches to measure operational risk for regulatory
purposes.
■■
importance of delivering on the eDp/RDAR&R (BCBS 239).
NedbaNk limited – ANNUAL report 2015
137
WORLDCLASS RiSk MANAGeMeNt (continued)
2015
■■
Our strategy remains as follows:
reSt oF
AFrICA rISKS
8
CoNDUCt
rISK
9
Own and manage banking and operations in the Southern African Development
Community (SADC) and east Africa.
provide access to a banking network in West and Central Africa through our
investment and alliance with ecobank.
in SADC and east Africa we made good progress with our one-bank-model rollout.
the foundation was laid for the integration of Banco Único on attaining control in 2016,
with a focus on enhancing the control environment.
We continue to support eti in technical areas such as balance sheet management,
risk and it, where teams contribute through information sharing and technical skills
support.
integration of our African business into the RCpO scope.
A new core banking system, Flexcube, was successfully implemented in Namibia in 2015,
improving efficiency of operations.
A tCF market conduct programme aligned with the twin peaks model and market conduct
regulatory developments is well underway within Nedbank.
Conduct risk has been incorporated as a new risk category within the eRMF as part of the
eRMF refresh.
A conduct risk framework is being formalised to underpin tCF principles, ensuring full
integration into business processes.
■■
■■
■■
■■
■■
■■
■■
Accountability for the oversight of tCF was allocated to senior management and
committees in the eRMF, having regard to their lens over client-related matters:
the Brand and Client Conduct Committee.
the transformation, Social and ethics Committee.
■■
Nedbank regards proper compliance risk management as an enabler and source of
competitive advantage.
the Compliance Risk Management Framework and methodology were reviewed
during 2015 to ensure continued alignment with industry best practice and efficiency.
CoMpLIANCe
rISK
10
■■
Roles and responsibilities across operations and compliance were clarified.
A good and transparent relationship with regulators is of prime importance and was
maintained in 2015.
A policy and process were implemented to ensure that the group delivers on all its
commitments to regulators and an open and clear dialogue is maintained with all our
regulators.
138
NedbaNk limited – ANNUAL report 2015
eMeRGiNG/ShApiNG FORCeS
OUtLOOk FOR 2016
■■
■■
the strategy of increasing our exposure in the
rest of Africa will increase the risk profile of
the organisation in markets that are more
volatile and have less governance at this stage
of their development.
Significant new regulations are expected for
the financial industry, including regulations
relating to AML, CFt and sanctions, conduct
risk, tCF, iFRS 9, FAtCA and risk data
aggregation. A diverse operating and
regulatory environment was experienced.
Subsidiaries are separate legal entities
based in different countries, with their
own boards, regulators and legislators.
■■
Regulatory changes are expected:
Financial Sector Regulatory Bill (FSRB)
– twin peaks.
Although tCF is not yet a legislative
requirement, Nedbank is proactively
ensuring that the tCF outcomes, as well
as the recommendations contained in
two independent reviews conducted by
Deloitte Uk, are implemented.
■■
Changing/evolving role of compliance:
regulation changing from rules-based to
principles-based;
judgement-based compliance becoming
more prominent; and
enabling competitive compliance is
required.
■■
■■
■■
increasing digitisation of the business
environment.
Conduct risk developments.
extent of fines and penalties imposed by
regulators globally for non-compliance.
■■ We continue to see growth opportunities despite economic
headwinds and will continue to grow our existing businesses.
■■
■■
■■
A focus remains on improving the control environment and
governance, and strengthening of leadership.
the integration of Banco Único will commence after attaining
control in 2016.
increasing regulatory requirements continue and the monitoring
and support thereof are integrated into the overall Nedbank
Group regulatory programmes.
■■
Our new core banking system will continue to be rolled out to
other subsidiaries in 2016/17.
■■
A workstream will be implemented for each of the six tCF
outcomes, namely:
culture, product and services, communications, post-sales,
conduct risk framework and management information and
reporting are planned for delivery by December 2016.
key focus areas include:
■■
setting the right tone at the top to ensure the market conduct
principles are cascaded throughout Nedbank Group;
■■ management of conduct risk throughout the product life cycle;
■■
■■
■■
■■
■■
■■
product innovation, design, pricing and strategy;
complaints handling, claims and analysis; and
empowering clients and keeping them well informed and
educated on financial products.
embedding the revised Compliance Framework and supporting
policies will continue in 2016.
Our integrated compliance approach will keep evolving
to address the demands of the changing regulatory environment.
An increased focus will be placed on enhancing accountability
for compliance for all roleplayers, supported by appropriate
awareness.
■■
A focus will remain on resource capabilities:
war for compliance talent;
high compliance staff turnover; and
new skills/capabilities required.
NedbaNk limited – ANNUAL report 2015
139
RepORt FROM GROUp ReMUNeRAtiON COMMittee ChAiR
Composition
and attendance
pM Makwana
(Chair)
Np Mnxasana
JVR Roberts
Mi Wyman
l
d
e
u
d
e
h
c
s
e
r
p
5/5
4/5
4/4
5/5
c
o
h
d
A
2/2
2/2
2/2
2/2
executive remuneration and the governance of remuneration in large corporations remained a
feature of the corporate governance landscape in 2015. in addition, the issue of income differentials
and the steps necessary to address these continued to enjoy prominence in the local and
international discourse.
income differentials are an important topic and Nedbank remains committed to ensuring that,
where differentials exist, these are fair and defensible, based on objective criteria. We will continue
to monitor and address this critical issue.
Nedbank remains compliant with the relevant remuneration-related legislative and regulatory
requirements that apply in its operating jurisdictions, and with those set by the international
Financial Stability Board. it is clear that these requirements will continue to evolve and we will
remain focused on ensuring that our remuneration practices adapt to remain compliant. Similarly,
we will continue enhancing the overall governance of our remuneration arrangements so that we
remain appropriately aligned to international best practice.
A key feature of our remuneration policy is pay for performance. in the context of Nedbank’s
overall performance in 2015, and specifically the growth in headline earnings (he) and economic
profit (ep), which are detailed elsewhere in this integrated report, we have increased our short-
term incentive (Sti) pool by approximately 3% and have kept our Lti pool flat. the restricted
shares issued under our Lti arrangements in 2013 vest in 2016 and the operation of corporate
performance targets (Cpts) has resulted in 69,8% of the total of these awards vesting, with the
remainder being forfeited.
Based on feedback received from our shareholders, we have reviewed our Lti arrangements and
several changes to our scheme rules are proposed for implementation in 2016. these relate to our
ability to, where circumstances necessitate this, forfeit or claw back awards made, including those
already vested. Details of these arrangements are set out online in our full 2015 Remuneration
Report, and are also contained in our Notice of AGM for shareholder consideration and voting.
in line with the above, we have also made changes to our remuneration policy so that we are able
to forfeit or claw back deferred remuneration where this is deemed necessary. this is aligned with
emerging international best practice in the management of deferred remuneration. the policy is
set out in the detailed 2015 Remuneration Report, and is presented for a non-binding advisory vote
at the 2016 AGM.
We recommend that these changes, and the changes to the Nedbank 2005 employee Share
incentive Scheme rules set out in the Notice of AGM, are approved by shareholders.
integrated report
Stakeholders will also notice that we have changed
the structure of our 2015 Remuneration Report,
following feedback that we have received. included
in this
is a summarised
remuneration report covering the key aspects of
our remuneration policy and its implementation.
We also include key disclosures in the summary.
this is supplemented, for those requiring
more detail, by a
Remuneration Report, which can be
accessed at nedbankgroup.co.za.
full online 2015
mPHO makWaNa
ChAiR
140
NedbaNk limited – ANNUAL report 2015
FOCUS AReAS
actions taken in 2015
Launching an updated
approach to
performance
management
Reviewing variable pay
arrangements
Focusing on fitness for
purpose of our
employee benefits
this work was dependent on the SAp human Capital
Management system, which was launched in Nedbank on 1
November 2015. As part of this a new performance
management system was configured and is being launched for
the 2016 performance management process.
the appropriateness of the corporate performance targets
(Cpts) applicable to the Nedbank Lti arrangements was
reviewed. this resulted in the Group Remuneration Committee
(Group Remco) approving the retention of the current suite of
performance conditions for awards to be made in 2016. We
will, however, continue to engage with shareholders regarding
the performance conditions, with a view to possible
amendments for 2017.
We have also reviewed our Lti Scheme rules and have
proposed amendments thereto for implementation in 2016.
these relate to our ability to, where circumstances necessitate
this, forfeit or claw back awards made, including those already
vested. this will improve our alignment with international best
practice.
Our defined-contribution pension and provident schemes
were migrated from standalone arrangements to the Old
Mutual SuperFund arrangements. the SuperFund
is an
umbrella retirement fund within which pension and provident
subfunds have been established for Nedbank. the management
committee remains in control of key functions (notably
investment strategy and
investment choice oversight);
however, greater economies of scale were achieved in respect
of administration, improving the value for money for members.
the move to the SuperFund arrangements, which took place
following a full tender process, is also aligned with the trend in
the retirement funding environment of greater consolidation to
reduce administration costs and optimise the amount of total
contributions going directly to retirement savings.
remains a
Our defined-benefit pension arrangement
standalone scheme, given certain challenges in an umbrella
fund pertaining to defined-benefit schemes, within which the
sponsoring employer retains ultimate accountability for the
provision of pensions to members if fund resources cannot
meet the obligation.
We also reviewed the appropriateness of continuing to offer
the standalone Nedgroup Medical Aid Scheme. Our review
showed that the scheme remains viable on its current basis
and continues to offer members appropriate value for money.
related material matters
FOCUS FOR 2016 AND
BeyOND
During 2016 the Remuneration
Committee will focus on:
1
2
3
4
5
the implementation of changes to
the Lti arrangements related to
malus and clawback;
a review of our approach to the
remuneration of control function
employees, notably those in risk,
compliance, audit, finance and
actuarial functions;
the continuation of our refresh of
performance management within
Nedbank in support of the bank’s
Winning in 2020 objectives, and our
revised culture initiatives outlined
on pages 8 to 9 of the Nedbank
Group Ltd integrated report;
the appropriateness and fitness for
the purpose of our employee benefit
arrangements, with special focus on
our
employee
arrangements; and
defined-benefit
possible revisions to certain Cpts in
2017
shareholder
consultation.
following
the Group Remco continues to operate
effectively in the execution of its mandate,
and i remain grateful to the members of
the Group Remco for their contribution as
we continue to engage on these important
matters.
Pm makwana
Group Remuneration Committee Chair
NedbaNk limited – ANNUAL report 2015
141
REPORTING BACK ON REMUNERATION
abridged
Remuneration
OUR REMUNERATION
REPORT
This
Report
summarises the issues addressed in our full
online 2015 Remuneration Report, which is
available online at nedbankgroup.co.za.
Provided herein are the governing principles
in respect of our approach to remuneration
as well as an overview of the manner in
which they were implemented during 2015.
HOW WE GOVERN OUR REMUNERATION
We have a Remuneration Policy that provides a framework for the management of total
remuneration within the group, and which also supports the Nedbank employee value
proposition (EVP). Set out below is a summary of the main aims of our Remuneration Policy,
together with our approach to remuneration governance.
remuneration policy principles
The following aims of our Remuneration Policy are the guiding principles for our approach to
remuneration:
Our Remuneration Policy as well as its
implementation is independently reviewed
on an annual basis to ensure consistent
application of the policy, and legislative and
regulatory compliance.
To enable the attraction, motivation and retention of high-calibre people, with the right
mix of experience, skills and knowledge to deliver on the strategy.
To support and reinforce our desired culture and encourage behaviour consistent with
our values, thereby stimulating employee engagement.
To create an appropriate balance and alignment between the needs, expectations and
risk exposure of our stakeholders, including our staffmembers, clients, shareholders,
regulators and communities, to ensure the creation of sustainable long-term value for
each of them.
To incentivise employees to deliver sustained high levels of performance and excellent
execution of our strategic priorities, while being cognisant of the impact this delivery
has on our risk profile and exposure.
To 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.
To align with the principles of good corporate and remuneration governance, ensuring
an appropriate share value for the relevant stakeholders in our business.
Our full 2015 Remuneration Policy is set out on pages 1 to 5 of the full online 2015 Remuneration
Report, and includes proposed changes to make provision for the implementation of malus and
clawback arrangements in our LTI arrangements, as outlined in the Group Remco Chair’s
statement.
142
NedbaNk limited – ANNUAL report 2015
Governance
is responsible
Remuneration Committee
Our Group Remco
for
remuneration governance with its groupwide
responsibilities fully defined in its board-
approved charter, available online at
nedbankgroup.co.za.
The Group Remco applies the guiding
principles enunciated in the Remuneration
Policy as far as it is feasible, but retains the
right to apply discretion to deviate from this
policy in exceptional circumstances. As has
been the case for the past several years,
for such
there were no requirements
deviation in 2015.
the
The Group Remco ensures that it remains
knowledgeable
changing
about
remuneration regulatory environment, both
locally and globally. This is supported by
regular updates from the Group Reward and
Performance team and its external advisors.
The 2015 training dealt with global changes
in executive remuneration.
In addition to the above, the Group Remco
has full access to independent executive
remuneration consultants, and has utilised
Vasdex Associates (Pty) Ltd and PwC during
2015. Group Remco is also provided with
market-related remuneration
information
through the group reward and performance
function.
The Group Remco met seven times during
2015, details of which are set out on
page 104 of the Nedbank Group 2015
Integrated Report. The Group Chairman, CE,
Chief Operating Officer (COO) and Group
Executive at HR are permanent invitees to
the meetings, and they are not present
in discussions
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 advisors
deemed necessary by the Group Remco
from time to time.
regarding
their
All members of the Group Remco act as
trustees of the Nedbank Group (2005)
Employee Share Trust. The annual trustee
meeting
for this scheme was held on
24 November 2015.
There were no material issues identified in the
Group Remco’s self-assessment in 2015, which
was conducted to evaluate its effectiveness
against the objectives of its charter.
Composition of Group Remco
The Group Remco consists of four members, including an independent chair. The majority of
the members are independent non-executive directors.
Name
Directorship status
Current membership
Bruce Hemphill1
Non-executive Director
Current member
Mpho Makwana
Nomavuso Mnxasana
Malcolm Wyman
Julian Roberts2
Independent Non-
executive Director
Independent Non-
executive Director
Senior Independent
Non-executive Director
Current member and
Chair of Group Remco
Current member
Current member
Non-executive Director
Past member
1 Bruce Hemphill was appointed to the Group Remco with effect from 25 November 2015.
2 Julian Roberts resigned from the Group Remco with effect from 23 October 2015.
NedbaNk limited – ANNUAL report 2015
143
REPORTING BACK ON REMUNERATION (continued)
REMUNERATION ELEMENTS
Our total remuneration mix (as shown in the diagram below), together with the manner in
which it is governed, is set out in the Remuneration Policy on pages 1 to 5 of the full online 2015
Remuneration Report, which also expands on the group’s approach to such elements during
2015.
perForMANCe MANAGeMeNt
Short-term focus, day-to-day
orientation
Short-to-medium-term focus,
performance orientation
Long-term focus,
ownership orientation
Guaranteed package
Short-term
incentives
(including
deferral and
forfeiture)
Special-
purpose
short-term
arrange-
ments
Long-term
incentives
employee
ownership
plan
Variable remuneration
framework, and
Short-term incentive
The aim of STIs is to drive the achievement of
sustainable results within an agreed risk
appetite
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. The Group Remco has agreed on a
set of principles and all group and cluster
incentive schemes are designed according to
those principles, which are set out on page 12
of the full online Remuneration Report.
in
respect of
The total STI pool approved for distribution by
the
the Group Remco
2015 financial year was R2
162,5m
(2014: R2 100m). In accordance with its
charter, the Group Remco also approved
individual STI payments (2014: 26)
24
in
excess of 200% of guaranteed
package (GP), outside of those approved in
respect of the Group Exco, which are all
subject to individual approval by the Group
Remco and the board.
DEFERRAL
OF STIs
Compulsory StI
deferral
Voluntary Bonus
Share Scheme
r0 to r1m
> r1m
No deferral
from
Fifty percent of any amount
in excess of R1m is deferred
over a period of 30 months,
with releases
for-
feiture occurring in three
equal tranches at 6, 18 and
30 months from the date of
the award. Deferral is on a
posttax basis.
STI
Employees may select to
defer a portion of their
voluntarily
posttax
into
the Matched-share
Scheme, subject to the
total deferral
(including
compulsory deferral) not
exceeding 50% of the total
posttax STI award.
In the above instances where deferral applies, the individual must retain the shares in the
scheme for a period of 36 months to be eligible for a match in accordance with our Matched-
share Scheme, details of which are fully set out on page 9 of the full online 2015 Remuneration
Report.
For employees with earnings falling within the highest taxation bracket the total STI has the
potential to increase by 30% (before share price movement) in the event that the conditions
in the Matched-share Scheme are met at the end of the deferral period.
Subject to shareholder approval at our AGM, deferred STIs will, from February 2016, be
subject both to a malus (release from forfeiture) decision (already a feature of the scheme)
and the possibility of clawback, for a combined period of three years from the date on which
the award was made.
144
NedbaNk limited – ANNUAL report 2015
Special-purpose short-term variable remuneration
We make use of preapproved special-purpose short-term variable remuneration arrangements
only in exceptional circumstances, which is typically in the context of hiring senior and key
employees. The group does not, as a matter of course, award guaranteed bonuses, and thus none
have been awarded during 2015.
SCHEME TyPE
Scheme description
Number of awards
ExECUTIVE DIRECTORS
(%)
Signon bonus
Deferred Short-term
Incentive (DSTI) awards
20 awards (2014: 12) totalling
R19,7m (2014: R6,23m).
Included in this are awards
made on appointment to key
revenue-generating
staffmembers.
20 awards (2014: 19) totalling
R15,7m (2014: R16,4m).
The awards approved is in
relation to a number of senior
and specialist appointments
made in 2015, and the need to
implement specific retention
initiatives in certain scarce-
skills environments.
Cash awards made to
prospective employees on
joining the group are typically
awarded to compensate them
for loss of certain accrued
benefits or to make them
whole in terms of their 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
minimum time-based and
individual performance
conditions.
Executive directors and
prescribed officers are not
eligible for DSTIs in the
normal course.
Scheme governance is set out in the Remuneration Policy.
Long-term incentives
LTI awards are awarded with the joint aims of aligning participants’ interests with the interests of
stakeholders and of retaining key employees. Key considerations for LTI awards are set out on
page 4 in our 2015 Remuneration Policy in the full online Remuneration Report. The criteria and
quantum of allocations are benchmarked to the market annually. The allocation of LTIs is
discretionary and is based on the key eligibility criteria as set out in the Remuneration Policy on
page 4 in the full online 2015 Remuneration Report.
All LTI allocations are motivated by the Group Exco and approved by Group Remco members in their
capacity as trustees of the Nedbank (2005) Employee Share Scheme Trust. Specific individual
approval is also required for all LTI awards greater than 100% of GP.
Set out below are our various LTI schemes. The operation of the international LTIP has been
aligned with the Nedbank Group (2005) Share Option, Matched-share and Restricted-share
Scheme (Nedbank Group (2005) Share Incentive Scheme), but operates on a phantom basis.
Overview of long-term incentive arrangements under the Nedbank Group (2005) Share
incentive Scheme
the Option Scheme
No awards have been made since 2007 and there are no unvested awards in this scheme.
Restricted-share Scheme: annual allocations
The Group Remco awards restricted shares (including on-appointment allocations,
referred to below) with a three-year vesting period to eligible participants, which vest
on the basis set out to the right.
Further details of the actual CPTs are set out on page 13 of the full online 2015
Remuneration Report. For 2016 the CPTs will remain unchanged from those which
applied in 2015.
On-appointment allocations
On-appointment, restricted-share allocations are offered at the discretion of the
Group Remco to new senior managers and also on an exceptional basis to existing
employees who have been appointed to more senior positions and have been
recommended for an allocation by the Group Exco.
Frequency of awards
On-appointment allocations may take place biannually (and by exception on the date
of appointment, with specific approval), with awards based on the volume-weighted
average share price using the three trading days after the announcement of the
annual or interim financial results (as applicable).
20
40
40
ROE
Fini 15
Strategic initiative
GROUP ExCO/CLUSTER ExCO
(%)
40
20
20
20
ROE
Fini 15
Strategic initiative
No target
OTHER LTIP PARTICIPANTS
(%)
25
25
50
ROE
Fini 15
No target
NedbaNk limited – ANNUAL report 2015
145
REPORTING BACK ON REMUNERATION (continued)
matched-share Scheme
This scheme provides a vehicle for the compulsory deferral of STI awards, and for
employees to participate in the scheme by voluntary investment, subject to the
fulfilment of specified conditions as set out in the table below:
STI PAyMENT
Conditions for
matching
Compulsory
deferral
> R1m, where deferral
takes place in respect of
50% of any amount
exceeding R1m, applied on
a posttax basis
In service on vesting
date: three years after
the allocation date
Average ROE
excluding goodwill
≥ COE + 2% over
the period
Voluntary Bonus
Share Scheme
≤ 50% of total posttax
STI (inclusive of any
compulsory deferral)
In service on vesting
date: three years after
the allocation date
Average ROE
excluding goodwill
≥ COE + 2% over
the period
match
50%
50%
50%
50%
For employees with earnings falling within the highest taxation bracket, the total STI has the
potential to increase by 30% (before share price movement) in the event that the conditions
in the Matched-share Scheme are met at the end of the deferral period.
Changes to scheme rules
Amendments to the rules of the Nedbank Group 2005 Share Incentive Scheme (and which
will apply to deferred STIs, the Matched-share Scheme arrangements and the Restricted-
share Scheme) have been proposed for the purposes of the inclusion of malus and clawback
provisions on all awards made from February 2016. The amendments are set out in the Notice
of AGM, and are proposed for approval at the AGM to be held during May 2016.
Other long-term incentive scheme in operation
Phantom Cash-settled Restricted-share Plan
For our international and Rest of Africa operations, LTIs are made on a phantom basis, of which
the schemes mirror the Nedbank Group (2005) Share Incentive Scheme in design and
structure. These schemes will also be subject to the malus and clawback provisions proposed
for the Nedbank 2005 scheme.
Full details of all these schemes are set out in the full online 2015 Remuneration Report
available online.
Nedbank eyethu employee schemes
No new awards were made during 2015 in any of the Nedbank Eyethu employee schemes.
other employee ownership/empowerment schemes
We also have empowerment or ‘indigenisation’ schemes currently approved in several of our
Rest of Africa operations.
Set out on the following page are the employee ownership/empowerment schemes approved
in our international and African operations:
146
NedbaNk limited – ANNUAL report 2015
NEDBANK
OPERATION
Ownership/Empowerment scheme
Scheme details
Namibia
Ofifiya Black Management Scheme
Swaziland
Sinakekelwe Employee Share Scheme
Malawi
Phantom empowerment scheme, using Nedbank
Group shares as a reference point
The purpose of the scheme is to enable the group to
facilitate black economic empowerment in terms of
the framework established by the financial sector in
Namibia. It facilitates ownership of the group’s
shares by senior and middle management
employees within Nedbank Namibia and its
subsidiaries and aims to attract, retain and
incentivise such individuals.
Vesting period: Four years
The purpose of the scheme is to provide LTIs to
beneficiaries, to encourage wealth creation by way of
employee share ownership, to align the interests of
Nedbank and the beneficiaries, and to attract, retain
and reward a skilled high-performing workforce.
Vesting period: Five years
The purpose of the scheme is to build appropriate
local employee ownership or similar financial
interest, in Nedbank Malawi. It is aimed at
facilitating share ownership by local employees by
granting phantom shares to participants, which are
linked to the Nedbank share price.
Vesting period: Three years
Zimbabwe
Nedbank MBCA Employee Share Ownership Scheme This scheme is currently in the inception phase and
Lesotho
Phantom empowerment scheme, using Nedbank
Group shares as a reference point
further details will be available once this has been
completed.
The purpose of this scheme is to build appropriate
local employee ownership or similar financial interest
in Nedbank Lesotho. It is aimed at facilitating share
ownership by local employees in the subsidiary by the
granting of phantom shares to participants, which are
linked to the Nedbank share price.
Vesting period: Three years
linked
Vesting of share awards in 2016
Nedbank Group issued restricted shares in
March and August 2013, with vesting
thereof
in equal proportions to
a combination of time and the group’s
meeting of certain performance conditions.
Vesting will take place during 2016 as set
out in the chart to the right. The vesting that
took place in 2013 to 2015 is included for
comparison.
Full details of the number and value of
awards granted during the year in terms of
our share-based plans are included in the
Nedbank Group 2015 Consolidated Annual
Financial
at
nedbankgroup.co.za.
Statements,
available
VESTING OUTCOMES
(%)
100
50
0
0
1
,
7
0
7
0
0
1
,
9
5
8
0
0
1
,
9
7
3
0
0
1
,
5
9
3
2010
2011
2012
2013
2013
2014
2015
2016
0
Award
year
Vesting
year
Without CPT
With CPT
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 limited – ANNUAL report 2015
147
REPORTING BACK ON REMUNERATION (continued)
RISK AND
REMUNERATION
The board has ensured that there
is
cooperation between the Group Remco
and the GRCMC to enable appropriate
consideration of the overall risk environment
when making remuneration decisions. This
is implemented through formal discussion
by the Group Remco Chair with the GRCMC
Chair on the risk aspects of remuneration.
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. Set out briefly below is the
manner in which risk is taken into account in
the remuneration process.
taking account of future and
current risks in the
remuneration process
We are involved in retail, wholesale and
investment banking operations, as well as
wealth management and other financial
services, predominantly in SA and the rest of
Africa. We utilise a three-year budgeting,
forecasting and planning process, which is
integrated with our strategic objective, risk
appetite and capital planning, enabling us to
have a forward-looking view of the strategic,
financial and risk outcomes of remuneration
policies. The mandatory deferral of STIs for
up to 30 months and the three-year vesting
of LTI share allocations (with at least half of
the awards 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
malus or, where appropriate, clawback to be
applied.
We operate a comprehensive
internal
capital adequacy assessment process
blueprint that addresses the nature and
types 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. The STI
pools incorporate ex ante or ‘before the fact’
risk adjustments, which is incorporated into
the pool allocation process set out
in detail on page 12 of the full online 2015
Remuneration Report.
The STI scheme has been designed to
incentivise a combination of profitable
returns, appropriate risktaking and growth.
It is driven from an EP and a HE basis versus
targets, using risk-based economic capital
allocation as set out in the Risk and Balance
Sheet Review, available online.
The board has absolute discretion as to the
quantum and nature of any forfeiture, malus,
(and from 2016) clawback 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 release of the
outstanding forfeiture obligations, as well as
in cases where, at the sole discretion of the
board, material irregularities, risk failures or
misrepresentation of financial results come
to light during the deferral period. The board
has absolute discretion as to the nature of
any action to be taken against the individual
or a group of individuals who may have
transgressed. The deferral policy is reviewed
annually.
Application of corporate
performance targets and
mitigating the effect of
inappropriate performance
metrics
To avoid the consequences of inappropriate
performance metrics, which
include
extended periods in which no LTI vesting
takes place, awards made from 2010 are
subject to 50% performance conditions and
50% time-based vesting. For Group Exco
and cluster exco members this was changed
in 2015 to 60% of the total award being
subject to performance conditions and 40%
to time-based vesting. All LTI awards made
to executive directors from 2014 are subject
to performance conditions on 100% of the
award.
It is a key principle in our Remuneration
Policy that there should be appropriate
sharing of value among stakeholders.
Therefore, while employees should not be
prejudiced as a result of remuneration
design
that
remuneration programmes should equally
not be designed to favour or benefit
the expense of other
employees at
stakeholders.
issues, we are cognisant
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
terms of
occur, are appropriate
remuneration governance while also being
competitive relative to those of our peer
group.
in
remuneration
Further details of our approach to risk
and
on
pages 11 to 14 of our full online 2015
Remuneration Report.
available
are
ExECUTIVE DIRECTORS
AND PRESCRIBED
OFFICERS
prescribed officers
The managing executives of the three
income-generating clusters are
frontline,
included as prescribed officers
in the
disclosures set out below. The board has
approved these executives to be regarded as
prescribed officers.
executive directors
Mike Brown
Mfundo Nkuhlu
Raisibe Morathi
prescribed officers
Brian Kennedy
Philip Wessels
Iolanda Ruggiero1
1 Appointed as a prescribed officer effective 1 May 2015.
Disclosures are also made for executive
directors or prescribed officers whose
services terminated in 2015. These are:
■■
■■
Graham Dempster (executive director
until 11 May 2015) and
Dave Macready (prescribed officer
until 30 April 2015).
Details of share awards to executive
directors and prescribed officers are
included from page 22 of our full online
2015 Remuneration Report.
Details of the service conditions for
executive directors and prescribed
officers are set out on pages 14 to 17
of the full online 2015 Remuneration
Report. There were no material
changes
these during 2015.
Executive directors and prescribed
officers will be subject to the proposed
malus and clawback arrangements
from 2016.
to
148
NedbaNk limited – ANNUAL report 2015
TOTAL REMUNERATION OF ExECUTIVE DIRECTORS AND PRESCRIBED OFFICERS
(AUDITED*)
Mike Brown
Mfundo Nkuhlu
raisibe Morathi
Graham Dempster7,8
2015
2014
%
2015
2014
%
2015
2014
%
2015
2014
%
6 374
141
6 056
130
4 258
130
3 124
112
3 405
100
3 177
91
1 743
63
3 862
141
910
864
613
452
621
550
320
855
7 425
7 050
5,3
5 000
3 687
35,6
4 125
3 818
8,0
2 125
4 859
8 250 8 000
4 750
4 625
4 500
4 375
7 250 7 000
15 500 15 000
22 925 22 050
3 750
3,3
8 500
4,0 13 500
3 625
8 250
11 937
3 500
8 000
12 125
3 375
7 750
11 568
3,0
13,1
13 500 13 000
3,8
8 750 11 7509
(25,5) 7 500 7 000
36 425 35 050
3,9 22 250 23 687
(6,1) 19 625 18 568
5 750
4 750
10 500
15 359
8 750
2 125
2 125 24 109
1 323
3,2
4,8
7,1
5,7
Brian Kennedy
philip Wessels7, 10
Dave Macready5,7
Iolanda ruggiero6,7
2015
2014
%
2015
2014
%
2015
2014
%
2015
2014
%
3 620
3 346
4 146
1 775
1 018
2 926
1 934
executive directors
R000
Cash portion of
package
Other benefits
Defined-contribution
Retirement Fund
Guaranteed
remuneration
Cash performance
incentive
Cash performance
incentive (delivered
in shares)
total Sti1
total remuneration2
Value of share-based
awards (face value at
award)
total direct
remuneration3
Other payments4
Prescribed officers
R000
Cash portion of
package
Other benefits
Defined-contribution
Retirement Fund
239
323
113
55
57
164
291
276
391
144
191
547
4 150
8 625
3 945
8 500
Guaranteed
remuneration
Cash performance
incentive
Cash performance
incentive (delivered
in shares)
7 500
7 625
total Sti1
16 250 16 000
total remuneration2 20 400 19 945
Value of share-based
awards (face value at
award)
7 500 9 5009
5,2
4 650
1 974
1 266
3 637
4 875
4 500
2 040
4 250
3 500
3 875
8 750 8 000
9 974
1,6
2,3 13 400
1 360
3 400
4 666
3 250
7 500
11 137
(21,1) 8 000 10 5009
6 500
total direct
remuneration3
Other payments4
27 900 29 445
(5,2) 21 400 20 474
4 666 17 637
54
262
2 250
3 500
2 500
6 000
8 250
6 000
14 250
1
2
3
4
5
6
7
8
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 CPTs, and the amount remaining invested in the scheme for 36
months.
Total remuneration is the sum of Guaranteed Remuneration and Total STI.
Total Direct Remuneration is the sum of Total Remuneration and the value of share-based awards made in the following financial year.
Other payments are typically non-recurring payment and include leave pay, special payments but excludes gains from vesting share awards, which are set out from page 22 of the full 2015 online Remuneration Report.
Dave Macready joined Old Mutual SA on 1 May 2015. Payments reflect part-year service.
Iolanda Ruggiero became a prescribed officer on 1 May 2015. Guaranteed remuneration payments are pro-rated to reflect this. Variable remuneration (STI and LTI) is reported on a full-year basis.
Comparative year-on-year % not given for items that reflect part-year service.
Graham Dempster availed himself of two first-class airtickets granted as an approved incentive, and also received leave pay pursuant to his retirement from the bank. These amounts are reflected in Other Payments.
9 Awards include on appointment awards made in respect of appointment to more senior roles.
10 Philip Wessels was appointed as a prescribed officer on 1 August 2014.
NedbaNk limited – ANNUAL report 2015
149
REPORTING BACK ON REMUNERATION (continued)
ADDITIONAL
REGULATION 43/
PILLAR 3 DISCLOSURES
The disclosures required
in respect of
Regulation 43 of the Banks Act are set out
on pages 17 to 19 of the full online 2015
Remuneration Report.
relating
Specific disclosures
to senior
managers and material risktakers,
the
in
quantum of the remuneration paid
the year, signon awards, guaranteed
bonuses, severance payments and the
amount of
to
remuneration
adjustment are included.
subject
NON-ExECUTIVE
DIRECTORS
The terms of engagement of the non-
executive directors as well as the Group
Chairman are fully set out on page 89 of the
Nedbank Group 2015 Integrated Report.
reflect
remuneration
The fees of the Group Chairman and the
the
directors
non-executive
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 the
board committees. Neither the Group
Chairman nor the boardmembers receive
any performance-related remuneration or
any employee benefits.
Non-executive directors are accountable for
decisions made regardless of attendance at
meetings. They 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’
remuneration
paid for the years ended 31 December 2015
and 31 December 2014 was as follows:
Non-executive directors’ remuneration (audited*)
termination date
David Adomakoh
Tom Boardman
Brian Dames
Mustaq Enus-Brey
Ian Gladman
Paul Hanratty
Bruce Hemphill
Reuel Khoza
Mpho Makwana
Mantsika Matooane
Nomavuso Mnxasana
Vassi Naidoo
Joel Netshitenzhe
Julian Roberts
Gloria Serobe
Stanley Subramoney
Malcolm Wyman
total
1
Note
1
2, 2a
3
16
4, 16
5, 16
6
7
8
9
10, 10a
11
12, 16
13
14
15
Board
fees
(r000)
Committee
fees
(r000)
2015
(R000)
2014
(r000)
121
1 840
270
136
339
207
19
1 623
747
230
685
3 014
235
151
98
95
1 088
10 898
393
393
393
137
393
393
40
393
393
393
29
393
325
137
110
393
4 708
514
2 233
663
273
732
600
59
1 623
1 140
623
1 078
3 043
628
476
235
205
1 481
15 606
360
1 766
301
910
682
168
4 350
1 006
286
784
561
519
746
1 276
13 715
David Adomakoh was appointed as a member of the Group Related Party Transactions Committee (GRPTC) on 11 May 2015. He resigned as a member of the GTSEC on 1 September 2015. He was appointed as a
member of the GCC and the Large-exposure Approval Committee (LEAC) on 1 September 2015.
Tom Boardman was appointed as Chair of the GRCMC and resigned as Chair and member of the GITCO on 20 February 2015. He was appointed as a member of the GRPTC on 11 May 2015.
2
2a 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 of £38,000.
3
Mustaq Enus-Brey resigned as a member of the Group Finance and Oversight Committee (GFOC) and as Chair (but remained a member) of the GRCMC on 20 February 2015. He resigned as a member of the GCC,
LEAC and GRCMC and retired as a non-executive director on 11 May 2015.
Paul Hanratty was appointed as a member of the GCC and LEAC on 11 May 2015.
Bruce Hemphill was appointed as a non-executive director and a member of the Group Remco and the Group DAC on 25 November 2015.
Reuel Khoza resigned as Chair of the DAC and retired as Chairman and non-executive director of Nedbank Group on 11 May 2015.
4
5
6
7 Mpho Makwana was appointed as a member of the GRPTC on 11 May 2015.
8 Mantsika Matooane was appointed as a member of DAC and GFOC and as Chair of the GITCO on 20 February 2015.
9
10
10a
Nomavuso Mnxasana was appointed as member of the DAC and Chair of the GTSEC on 20 February 2015.
Vassi Naidoo was appointed as a non-executive director on 1 May 2015 and as Chairman of Nedbank Group on 11 May 2015. The remuneration disclosed above includes a consultancy fee payment to Mr Naidoo for
the period 13 April 2015 to 30 April 2015, as Mr Naidoo had dedicated this time to Nedbank affairs in preparation for his appointment as a boardmember. He was appointed as a member of the DAC on 1 May 2015.
IT and security expenditure was approved for Vassi Naidoo as a consequence of his appointment as Chairman of Nedbank Group. These enhancements are all necessary for the completion of his duties as Chairman,
and to ensure his security.
Joel Netshitenzhe was appointed as member of the GRPTC on 11 May 2015.
Julian Roberts resigned as a member of the Group Remco and DAC on 23 October 2015 and as a non-executive director on 31 October 2015.
Gloria Serobe resigned as Chair (but remained a member) of the GTSEC on 20 February 2015. She resigned as a member of the GCC, LEAC and GTSEC and as a non-executive director of Nedbank Group on 11 May 2015.
Stanley Subramoney was appointed as an independent non-executive director on 23 September 2015. He was appointed as a member of the GTSEC, GCC, LEAC and the GAC on 23 October 2015.
11
12
13
14
15 Malcolm Wyman was appointed Chair of the DAC and GRPTC on 11 May 2015.
16
Fees for Julian Roberts, Paul Hanratty, Ian Gladman and Bruce Hemphill were paid to Old Mutual (SA) Ltd.
150
NedbaNk limited – ANNUAL report 2015
The proposed non-executive director fees as set out below were evaluated by a board committee consisting of Mike Brown and Bruce Hemphill
with advice from independent experts. Such evaluation was conducted from a number of perspectives, including peer group comparisons,
effective rates per committee and year-on-year increases.
Increases to the Chairman’s fee, board fees and several committees have been proposed at between 5,3% and 16,1%. We have also aligned all
committee chair premiums to 2,5 times the member fee. The proposed fees for 2016 are also set out in our notice of AGM, for voting by our
shareholders. The proposed increases to board fees represent a total increase in the cost of operating the board of 10,6%.
boards
Chairman of the board
Lead Independent Director premium
Nedbank Group Ltd
Nedbank Ltd
Committees
Group audit Committee
Chair
Member
Group Finance and Oversight Committee1
Chair
Member
Group Remuneration Committee
Chair
Member
Group Risk and Capital management Committee
Chair
Member
Group Credit Committee
Chair
Member
Group directors’ affairs Committee3
Chair
Member
Group it Committee3
Chair
Member
Group transformation, Social and ethics Committee3
Chair
Member
Group Related Party transactions Committee2, 3
Chair
Member
2016
(r)
proposed
2015
(R)
5 000 000
4 750 000
40% of board fee
40% of board fee
245 000
205 000
220 555
184 525
650 000
260 000
–
–
350 000
140 000
450 000
180 000
500 000
200 000
196 250
78 500
250 000
100 000
250 000
100 000
75 000
30 000
562 500
225 000
55 000
27 500
312 500
125 000
387 500
155 000
475 500
190 000
140 000
70 000
180 000
90 000
180 000
90 000
55 000
27 500
%
5,3
11,1
11,1
15,6
15,6
12,0
12,0
16,1
16,1
5,3
5,3
40,2
12,1
38,9
11,1
38,9
11,1
36,4
9,1
Details of the individual shareholdings of the non-executive directors are included on pages 22 to 27 of the full online 2015 Remuneration Report.
1
2
3
The Group Finance and Oversight Committee was discontinued during 2015.
Fees for the Group Related Party Transactions Committee set at same level as previous Group Finance and Oversight Committee, increased by 9,1%, with adjustments to chair premium at 2,5 times.
Large increases for the chairs of these committees are as a result of the adjustments of the chair’s premium to 2,5 times the member’s fee, aligning to the chair’s premium paid for other committees.
NedbaNk limited – ANNUAL report 2015
151
ESTABLISHED AND ADMIRED LEADERSHIP TEAMS
BOARD OF DIRECTORS
The Nedbank Group board of
directors is comprised of
the three executive directors
and thirteen non-executive
directors, nine of whom are
independent.
bRiaN
dameS
Independent Non-
executive Director
bRuCe
hemPhill
Non-executive
Director
56%
independent
directors
(9 members)
mike
bROwN
Chief Executive
mPhO
makwaNa
Independent Non-
executive Director
iaN
GladmaN
Non-executive
Director
VaSSi NaidOO
NON-ExECUTIVE
CHAIRMAN
daVid
adOmakOh
Independent Non-
executive Director
maNtSika
matOOaNe
Independent Non-
executive Director
Paul
haNRatty
Non-executive
Director*
tOm
bOaRdmaN
Independent Non-
executive Director
NOmaVuSO
mNxaSaNa
Independent Non-
executive Director
19%
executive directors
(3 members)
* Stepped down from board on 12 March 2016
152
NedbaNk limited – ANNUAL report 2015
Vassi Naidoo 61
David Adomakoh 50
Non-executive Chairman
South African
Qualifications: CA(SA), ACA and PMD
(Harvard Business School)
Expertise in auditing and financial
services.
Experience in doing business in Africa
and India, and large corporate
experience.
Vassi was appointed to the Nedbank
Group Ltd and Nedbank Ltd Boards as a
non-executive director and Chairman-
designate on 1 May 2015 and then as
Chairman on 11 May 2015. Vassi was also
appointed as a non-executive director of
Old Mutual plc in May 2015. 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.
Board committees
Member: Group Directors’ Affairs
Committee
Holds 43 575 Nedbank Group Ltd
ordinary shares.
Mike Brown 49
Chief executive
South African
Qualifications: BCom, DipAcc, CA(SA),
CD(SA), AMP (Harvard Business
School)
Expertise in banking and financial
services.
Mike was appointed as Chief Financial
in June 2004 and as Chief
Officer
Executive
in March 2010. Mike was
previously an executive director of BoE Ltd
and, after the merger between Nedbank
Ltd, BoE Ltd, Nedbank Investment Bank
Ltd and Cape of Good Hope Bank Ltd, was
appointed Head of Commercial Property
Finance at Nedbank Ltd.
Board committees
Member: Large-exposure
Approval
Committee, Group Credit Committee,
Group Risk and Capital Management
Committee
Holds 408 938 Nedbank Group Ltd
ordinary shares.
independent Non-executive
director
Ghanaian
Qualifications: BSc (Econs)(Hons)
(London School of Economics),
Diplome de Langue et de Civilisation
(Université Paris-Sorbonne)
Expertise in investment banking.
Experience in doing business in Africa,
banking and economics.
David joined the board as an independent
non-executive director on 21 February
2014. David is currently the Chairman of
Tiso Investment Holdings Proprietary Ltd
and a co-founder of Tiso Group, where he
served as Group Managing Director. He is
a former director of Chase Manhattan Ltd,
London; Head of the Chase Manhattan
Bank, Southern Africa; Executive Director
of Robert Fleming SA; and Head of Africa
Corporate Finance at JP Morgan. He
currently serves as a non-executive
director of Kagiso Tiso Holdings
Proprietary Ltd, and the Chairman of the
Investment Committee. He also serves as
a non-executive director of
Idwala
Industrial Holdings, African Explosives
Ltd, Aveng (Africa) Ltd and Trident Steel.
His experience spans 25 years in executive
management and investment banking,
and includes principal investing, corporate
and project finance advisory work, debt
capital raising, and financial derivatives in
a number of countries predominantly in
Africa and Europe. He has also served on
the boards of a number of SA, Nigerian
and Ghanaian companies. He is a founding
trustee of the Tiso Foundation, and a
World Fellow of the Duke of Edinburgh’s
International Award.
Board committees
Member: Group Related Party
Transactions Committee, Group Credit
Committee, Large-Exposure Approval
Committee
tom Boardman 66
independent Non-executive
director
South African
Qualifications: BCom, CA(SA)
Expertise in banking and auditing.
Large corporate experience.
Tom was appointed to the board as an
executive director in November 2002,
and was Chief
from
December 2003 to February 2010,
after which he was appointed as a non-
executive director. From 1 January 2014
Executive
RaiSibe
mORathi
Chief Financial
Officer
mFuNdO
Nkuhlu
Chief Operating
Officer
81%
Non-executive
directors
(13 members)
JOel
NetShiteNzhe
Independent Non-
executive Director
StaNley
SubRamONey
Independent Non-
executive Director
malCOlm
wymaN
Senior Independent
Non-executive
Director
NedbaNk limited – ANNUAL report 2015
153
ESTABLISHED AND ADMIRED LEADERSHIP TEAMS (continued)
retail housewares
Tom was classified as an independent non-
executive director. Tom was previously Chief
Executive and an executive director of BoE
Ltd, 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
chain
Boardmans, which he sold to Pick n Pay
Stores Ltd in 1986. Before this he was
Managing Director of Sam Newman Ltd and
worked for Anglo American Corporation Ltd
for three years. He served his articles at
Deloitte. He is also a non-executive director
of Woolworths Holdings Ltd, Royal Bafokeng
Holdings Proprietary Ltd and African
Rainbow Minerals Ltd. Tom has also been
appointed as a non-executive director of
Kinnevik, a
investment
listed Swedish
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.
Board committees
Chairman: Group Risk and Capital
Management Committee, Group Credit
Committee, Large-exposure Approval
Committee
Member: Group Audit Committee, Group
Directors’ Affairs Committee, Group
Related Party Transactions Committee
Holds 15 000 Nedbank Group Ltd ordinary
shares.
Brian Dames 50
independent Non-executive director
South African
Qualifications: BSc(Hons), MBA
Expertise in energy and resources.
Large corporate and industrial experience,
doing business in Africa.
Brian joined the board as an independent
non-executive director on 30 June 2014.
Brian is currently Chief Executive of African
(AREP).
Rainbow Energy and Power
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 serves as a member of
the
Sustainability Energy
for All Executive
Committee (UN and World Bank initiative),
as a non-executive director of the Industrial
Development Corporation of South Africa
Ltd and as member of the Sol Plaatjie
University Finance Committee.
Board committees
Member: Group
Information Technology
Committee, Group Credit Committee, Large
Exposure Approval Committee
Ian Gladman 51
Non-executive director
British
Qualifications: BA(Hons) History (Christ’s
College, Cambridge)
Expertise in banking and financial services.
Experience in strategy development
and corporate finance.
Ian joined the board as a non-executive
director in June 2012. 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.
Board committees
Member: Group Credit Committee, Group
Risk and Capital Management Committee,
Large-exposure Approval Committee
paul Hanratty 54*
Non-executive director
Irish
*Stepped down from the board on
12 March 2016.
Qualifications: BBusSci(Hons), Fellow of the
Institute of Actuaries
Expertise in insurance and accounting.
Financial services experience.
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.
Board committees
Member: Group Transformation, Social and
Ethics Committee, Group Credit Committee,
Large-exposure Approval Committee
Bruce Hemphill 52
Non-executive director
South African
Qualifications: BA, CPE
Expertise in insurance and investment
banking.
Financial services experience.
Bruce joined the board as a non-executive
director on 25 November 2015. He was
appointed as the Group Chief Executive of Old
Mutual plc on 1 November 2015. From February
2014 to October 2015 he was Chief Executive
of Wealth, Insurance and Non-Bank Financial
Services at Standard Bank Group. Prior to that
(June 2006 to February 2014) he was Chief
Executive of Liberty Group, an African financial
services group listed on the JSE, where he led
Liberty on an extensive transformation and
growth path while delivering significant value
to shareholders.
Board committees
Member: Group Remuneration Committee,
Group Directors’ Affairs Committee
Mpho Makwana 45
independent Non-executive director
South African
Qualifications: BAdmin(Hons)
Expertise in HR, marketing, Expertise in HR,
marketing, communications and strategic
planning.
Banking, resources and large corporate and
industrial experience.
Mpho joined the board as an independent
non-executive director on 17 November
2011. Mpho is a past Chairman of Eskom
Holdings Ltd – he led the team that kept the
lights on during the 2010 FIFA World Cup.
He is an independent director of Adcock
Ingram Ltd, Sephaku Holdings Ltd and eNx
Group Ltd and Chairman of ArcelorMittal
SA Ltd. He serves in various non-profit
initiatives, amongst these as a Trustee on
the Board of the Nelson Mandela Children's
Fund.
Board committees
Chairman: Group Remuneration Committee
Member: Group Transformation, Social and
Ethics Committee, Group IT Committee,
Group Audit Committee, Group Directors’
Affairs Committee, Group Related Party
Transactions Committee
Mantsika Matooane 40
independent Non-executive director
South African
Qualifications: MBA (Henley Business
School, UK), PhD in Computer Science
(University of Cambridge, UK)
Expertise in IT and innovation.
Banking experience.
Mantsika joined the board as an independent
non-executive director on 15 May 2014.
Mantsika currently serves as a non-executive
director of JSE Ltd and NMG Consultants and
Actuaries Proprietary Ltd.
Board committees
Chairman: Group Information Technology
Committee,
Member: Group Directors’ Affairs
Committee
Holds 2 261 Nedbank Group Ltd ordinary
shares.
154
NedbaNk limited – ANNUAL report 2015
Nomavuso Mnxasana 59
independent Non-executive director
South African
Qualifications: BCompt(Hons), CA(SA)
Expertise in accounting and auditing.
Banking experience.
Nomavuso joined the board as an independent
non-executive director in October 2008. She is
currently a director atIndustrial Development
Corporation of South Africa Ltd, JSE Ltd
andArcelor Mittal SA Ltd. She was a senior
partner and member of
the executive
committee of SizweNtsaluba before serving as
Group Audit and Risk Executive at Imperial
Holdings Ltd.
Board committees
Chairman: Group Transformation, Social and
Ethics Committee
Member: Group Audit Committee, Group
Remuneration Committee, Group Risk and
Capital Management Committee, Group
Directors’ Affairs Committee
Holds 7 420 Nedbank Group Ltd ordinary
shares.
raisibe Morathi 46
Chief Financial Officer
South African
Qualifications: BCompt(Hons), CA(SA),
HDip Tax, AMP (INSEAD)
Expertise in banking and accounting.
Insurance and large corporate experience.
Raisibe was appointed as Chief Financial
Officer of the group in September 2009, and
held senior positions
in banking and
insurance over the past 21 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 Ltd, the last
position being Chief Operating Officer.
Board committees
Member: Group Credit Committee, Large-
exposure Approval Committee
Holds 229 557 Nedbank Group Ltd ordinary
shares.
Joel Netshitenzhe 59
independent Non-executive director
South African
Qualifications: MSc in Financial Economics
(University of London – SOAS, UK)
Expertise in economics, public policy,
communications and strategic planning.
Public sector, strategic research and large
corporate experience.
an
Institute
Joel joined the board as an independent non-
executive director in August 2010. He is
director
currently
of
executive
the Mapungubwe
for Strategic
Reflection (Mistra). 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 was a member
of the National Planning Commission from
2010 to 2015, and served as Head of Policy
Coordination and Advisory Services in the
Presidency from 2001 until December 2009.
He was previously Chief Executive of the
Government Communication and Information
System and also served as Head of
Communication in the President’s Office. He is
a non-executive director on the board of Life
Healthcare Group Holdings Ltd.
Board committees
Member: Group Risk and Capital
Management Committee, Group Related
Party Transactions Committee, Group
Information Technology Committee
Mfundo Nkuhlu 49
Chief Operating Officer
South African
Qualifications: BA(Hons), Strategic
Management in Banking (INSEAD), AMP
(Harvard Business School)
Expertise in banking, accounting, strategic
planning and economic.
Expansion into Africa experience.
Mfundo was appointed 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. He was appointed to the Boards of
Nedbank Ltd and Nedbank Group Ltd on 01
January 2015. He also serves on the Board of
Ecobank Transactional Incorporated (ETI) in
which Nedbank holds a 20.7% interest,
effectively from 01 August 2015. 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
joining
in Nedbank Corporate. Before
the executive
Nedbank, Mfundo was
responsible
revenue and
economic analysis at the South African
Revenue Service (SARS) and Chief Director
in the dti responsible for Africa and NEPAD.
for strategy,
Board committees
Member: Group Credit Committee
Holds 149 962 Nedbank Group Ltd ordinary
shares.
Stanley Subramoney 57
independent Non-executive director
South African
Qualifications: BCompt(Hons), CA(SA)
Expertise in accounting, auditing, expansion
into Africa.
Economic and social development and large
corporate experience.
Stanley qualified as a Chartered Accountant
(SA) in 1987 and was appointed audit partner
at PwC, serving a number of the firm’s large
clients both in the public and private sectors.
During his 27 years in the audit profession as
audit partner and later as member of the Exco
of PwC he led large and complex assignments,
attended audit committee meetings of key
clients, was the technical partner, trained
board and audit committee members on the
roles and responsibilities of the board and on
governance, and gained valuable experience
across the various sectors. He represented the
southern African firm in a number of PwC’s
African and global structures. These roles
provided Stanley with a wide international
view and exposure to global clients. At the age
of 42 he was appointed Deputy CEO for PwC
Southern Africa and member of the southern
Africa executive committee. During his time as
the strategy leader for PwC Southern Africa,
Stanley led the Government and Public Sector
Industry Group for Southern Africa. He was
the Chairman of Business Skills for South
Africa Foundation, a non-profit organisation
that has provided business skills training to
over 18 000 entrepreneurs from disadvantaged
communities. He is Chairman of the Nepad
Business Foundation – a Pan-African business
foundation that seeks to put Africa on a path of
sound sustainable economic development. He
is also on the board of Business Unity South
Africa (‘BUSA’) and Chairman of its audit
committee.
Board committees
Member: Group Audit Committee, Group
Credit Committee, Large-exposure
Approval Committee, Group
Transformation, Social and Ethics
Committee
Holds 2 300 Nedbank Group Ltd ordinary
shares.
Malcolm Wyman 69
Senior independent Non-executive
director
British
Qualifications: CA(SA), AMP (Harvard
Business School)
Expertise in accounting, financial services
and strategic planning.
Large corporate and expansion into Africa
experience.
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,
listed on the London Stock Exchange, until
August 2011. He was also previously a non-
executive director of Tsogo Sun Holdings Ltd
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.
Board committees
Chairman: Group Audit Committee, Group
Directors’ Affairs Committee, Group Related
Party Transactions Committee
Member: Group Risk and Capital
Management Committee, Group
Remuneration Committee
NedbaNk limited – ANNUAL report 2015
155
NOTICE OF OUR ANNUAL GENERAL MEETING
NedbaNk limited (incorporated in the republic of SA) 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
(‘redeemable preference shares’) (collectively hereafter referred to as ‘the
preference shares’) for information only.
In terms of article 44.8 of the memorandum of incorporation (‘MoI’) 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 6 (six) 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 of the MoI of Nedbank, the holders of the
redeemable preference shares 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 Thursday, 24 March 2016, 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
Wednesday, 4 May 2016, at 16:30 to deal with such business as may lawfully be
dealt with at the meeting and to consider and, if deemed fit, pass, with or without
modification, the ordinary and special resolutions set out hereunder in the
manner required by the Companies Act, 71 of 2008 (as amended)
(‘the Companies Act’), as read with the Listings Requirements of JSE Limited
(’JSE Listings Requirements‘), which meeting is to be participated in and voted at
by shareholders recorded in the company’s securities register on the record date
of Friday, 22 April 2016.
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 2015, have been distributed 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 interim dividend of 7 258 cents per ordinary share declared
by the board of directors on 9 September 2015 and the final dividend of
9 073 cents per ordinary share declared by the board of directors on
12 February 2016.
3 Dividends on perpetual preference shares
To note preference dividend number 25 of 38,22487 cents per share
declared for the period from 1 January 2015 to 30 June 2015, paid on
Monday, 31 August 2015 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, 28 August 2015
and preference dividend number 26 of 40,01711 cents per preference
share declared for the period from 1 July 2015 to 31 December 2015 and
payable on Monday, 4 April 2016.
4 Dividends on redeemable preference shares
To note and confirm the preference dividend of R116 662,28 declared and
paid on 19 February 2015 and R113 856,74 declared and paid on 30 July 2015
on the class A redeemable cumulative preference shares and the preference
dividend of R206 843,39 declared and paid on 19 February 2015 and
R279 566.78, declared and paid on 30 July 2015 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 Ltd, Imperial Holdings Ltd
and Associated Motor Holdings (Pty) Ltd.
154
NedbaNk limited – ANNUAL report 2015
RESOLUTIONS
5 Ordinary resolution 1
Election of directors of the company appointed during the
year
During the year the board of directors appointed Messrs S Subramoney
and JB Hemphill as non-executive directors of the company. These
directors retire in terms of the company’s MoI and, being eligible, make
themselves available for election. Biographical details are set out in the
2015 Nedbank Annual Report.
5.1
‘Resolved that Mr S Subramoney be and is hereby elected as a director
of the company.’
5.2
‘Resolved that Mr JB Hemphill be and is hereby elected as a director of
the company.’
6
Ordinary resolution 2
Reelection of directors retiring by rotation
The following directors retire by rotation in terms of the company’s MoI,
which requires not less than one third of the directors to retire at each
annual general meeting. These directors, being eligible, make themselves
available for reelection, each by way of a separate vote. Biographical
details of the directors to be reelected are set out in the 2015 Nedbank
Annual Report.
6.1
‘Resolved that Mr ID Gladman be and is hereby reelected as a director
of the company.’
6.2
'Resolved that Mrs RK Morathi be and is hereby reelected as a director
of the company.’
6.3
‘Resolved that Mr MI Wyman be and is hereby reelected as a director
of the company.’
7 Ordinary resolution 3
Reappointment of external auditors
Following an evaluation of the performance of Deloitte & Touche (with
Mr M Jordan as designated registered auditor) and KPMG Inc (with
Mr S Malaba as designated registered auditor, following the conclusion
of Ms H Berrange’s term of five years), the Nedbank Group Ltd Audit
Committee and Board recommends the reappointment of the auditors
on a joint basis. If either resolution 7.1 or resolution 7.2 is not passed, the
resolution which is passed shall be effective.
7.1
‘Resolved that Deloitte & Touche 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.’
7.2
‘Resolved that KPMG Inc 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 Ordinary resolution 4
Control of authorised, but unissued shares
‘Resolved 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, the Banks Act, 94 of
1990 (as amended) (‘the Banks Act’) and the JSE Listings Requirements.
9 Advisory endorsement of remuneration policy
‘To endorse through a non-binding advisory vote the remuneration policy
of the company (excluding the remuneration of the non-executive
directors for their services as directors) and its implementation as set out
in the Remuneration Report included in the 2015 Nedbank Annual Report.’
10 Special resolution 1
Remuneration of non-executive directors
‘Resolved 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 2015 Nedbank Annual
Report, be and are hereby approved.’
NEDBANK LIMITED – ANNUAL REPORT 2015
157
11. Special resolution 2
General authority to provide financial assistance to related
and interrelated companies
‘Resolved that, subject to the provisions of the Companies Act, 71 of
2008 (‘the Companies Act’), the shareholders of the company hereby
approve, as a general approval, for a period of two years, the company
providing direct or indirect financial assistance (‘financial assistance’) as
contemplated in sections 44 and 45 of the Companies Act on such
terms as may be authorised by the board of directors of the company in
accordance with the following:
1)
2)
the financial assistance can be provided to any related or inter-related
company, corporation 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);
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.’
Section 44 of the Companies Act essentially requires, subject to limited
exceptions, approval by way of special resolution for the provision of financial
assistance for the purpose of, or in connection with, the subscription of any
option, or any securities, issued or to be issued by the company or a related or
interrelated company, or for the purchase of any securities of the company or
a related or interrelated company. Section 45 of the Companies Act essentially
requires, subject to limited exceptions, approval by way of special resolution
for the provision of financial assistance, among others, to companies ‘related’
to and ‘interrelated’ with the company. Both sections 44 and 45 provide,
among others, that the regulated financial assistance may only be provided
pursuant to a special resolution passed by shareholders within the previous
two years.
The provision of any direct or indirect financial assistance by the company will
always be subject to the board being satisfied that, immediately after
providing such financial assistance, the company will satisfy the solvency and
liquidity test referred to in section 45(3)(b)(i) of the Companies Act, and that
the terms under which such financial assistance is to be given are fair and
reasonable to the company, as referred to in section 45(3)(b)(ii) of the
Companies Act.
The directors would like the authority to be able to provide financial assistance
to companies ‘related’ and ‘interrelated’ to the company. Such authorisation is
generally required for providing loans and guarantees and other financial
assistance to subsidiaries and group companies, which is often necessary or
desirable for the conduct of Nedbank’s business.
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
1 March 2016
Registered office
transfer secretaries in Sa
Nedbank Ltd
Reg No 1951/000009/06
Nedbank 135 Rivonia Campus,
135 Rivonia Road, Sandown,
Sandton, 2196
PO Box 1144
Johannesburg, 2000
Tel: +27 (0)11 294 4444
Computershare Investor Services
(Pty) Ltd
Ground Floor
70 Marshall Street
Johannesburg, 2001
PO Box 61051
Marshalltown, 2107
Tel: +27 (0)11 370 5000
Fax: +27 (0)11 688 5238
Email: proxy@computershare.co.za
158
NedbaNk limited – ANNUAL report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December FORM OF PROXY
NedbaNk limited (incorporated in the republic of SA) reg No 1951/000009/06
JSe share code: NBKp ISIN: ZAe000043667 (‘Nedbank’ or ‘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 notes 1):
1
__________________________________________________________________________________________________________________ or failing him/her
2
__________________________________________________________________________________________________________________ or failing him/her
the chair 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 Wednesday, 4 May 2016, at 16:30, 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
Ordinary Resolutions
Ordinary resolution 1
5.1
Election of Mr S Subramoney, who was appointed as a non-executive director since the previous
annual general meeting of shareholders
Election of Mr JB Hemphill, who was appointed as a non-executive director since the previous
annual general meeting of shareholders
5.2
Appointment of Deloitte & Touche as external auditors
Appointment of KPMG Inc as external auditors
Reelection as a director of Mr ID Gladman, who is retiring by rotation
Reelection as a director of Mrs RK Morathi, who is retiring by rotation
Reelection as a director of Mr MI Wyman, who is retiring by rotation
Ordinary resolution 2
6.1
6.2
6.3
Ordinary resolution 3
7.1
7.2
Ordinary resolution 4
Placing of authorised but unissued shares under the control of the directors
Advisory endorsement of Remuneration Policy
Special resolutions
Special resolution 1
Remuneration of non-executive directors
Special resolution 2
General authority to provide financial assistance to related and interrelated companies
8
9
10
11
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 Wednesday, 4 May 2016, at 16:30 or at any adjournment thereof, unless it is revoked earlier
Signed at (place) _____________________________________________________ on (date) ___________________________________________________________ 2016
Signature _____________________________________________________________________________________________________________________________________
Assisted by me _______________________________________________________________________________________________________________________________
(where applicable)
Please read the notes on the reverse side hereof.
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
2
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.
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.
3 A proxy appointment must be in writing, dated and signed by the
holder appointing the proxy/proxies.
4 A holder may insert the name of a proxy or the names of two
alternative proxies of the holder’s choice in the space provided, with
or without deleting ‘the chair of the annual general meeting’. The
person whose name stands first on this form of proxy and who is
present at the annual general meeting will be entitled to act as proxy
to the exclusion of the persons whose names follow. Further, a holder
may appoint more than one proxy to exercise voting rights attached to
different securities held by that holder.
5 A holder’s instructions to the proxy/proxies have to be indicated by the
insertion of the relevant number of votes exercisable by that holder in
the appropriate box provided. Failure to comply with this will be deemed
to authorise the chair of the annual general meeting, if the chair is the
authorised proxy, to vote in favour of the ordinary and special resolutions
at the annual general meeting, or the appointed proxy/proxies to vote or
to abstain from voting at the annual general meeting, without direction
as he/she/they deem(s) fit, in respect of all the holder’s votes
exercisable thereat.
6 A holder or his/her proxy/proxies is/are not obliged to vote in respect
of all the ordinary shares held by such holder or represented by such
proxy/proxies, but the total number of votes for or against the ordinary
and special resolutions and in respect of which any abstention is
recorded may not exceed the total number of votes to which the
holder or his/her proxy/proxies is/are entitled.
7 Documentary evidence establishing the authority of a person signing
this form of proxy in a representative capacity has to be attached to
this form of proxy, unless previously recorded by the company’s
transfer secretaries or waived by the chair of the annual general
meeting. Examples of satisfactory identification include a valid
identity document, a valid driving licence or a valid passport.
8 Any alterations or corrections to this form of proxy shall be initialled
by the signatory/signatories.
9
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.
Investor Services (Pty) Ltd (‘Computershare’), 70 Marshall Street,
Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107). The forms of
proxy are requested to be received no later than 16:30 on Tuesday,
3 May 2016. Forms of proxy can also be submitted by fax to Computershare
(fax number +27 (0)11 688 5238 or email: proxy@computershare.co.za),
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 Holders of Nedbank ordinary shares (whether certificated or
dematerialised) through a nominee should timeously make the
if applicable,
necessary arrangements with that nominee or,
participant (previously referred to as central securities depository
participant) or broker on how they wish their votes to be cast on their
behalf at the annual general meeting. As far as holdings in a participant
are concerned, these will be guided by the terms of the agreement
entered into between shareholders and their participant or broker.
13 Holders attending the annual general meeting will be afforded the
opportunity of putting questions to the directors and management.
A perforated question form has been included for this purpose.
14
If this form of proxy has been delivered to the company in accordance
with paragraph 10, as long as that appointment remains in effect, any
notice that is required by the Companies Act or the company’s MOI to
be delivered by the company to a holder must be delivered by the
company to the holder or, alternatively, if a holder has directed the
company to do so in writing and has paid any reasonable fees charged
by the company for doing so, to such holder’s proxy/proxies.
15 Save if a holder provides in this proxy form that a proxy appointment
is irrevocable, a holder may revoke the proxy appointment by:
(i) cancelling it in writing, or making a later inconsistent appointment
of a proxy/proxies; and (ii) delivering a copy of the revocation
instrument to the proxy/proxies and to the Company Secretary’s
office at Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown,
Sandton, 2196, for attention 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.
10 Forms of proxy have to be lodged with or posted to the Company
Secretary’s office (for the attention of Ms Jackie Katzin, Block A,
Ground Floor, Nedbank 135 Rivonia Campus, 135 Rivonia Road,
Sandown, Sandton, 2196 or PO Box 1144, Johannesburg, 2000) or the
company’s transfer secretaries in South Africa, namely Computershare
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.
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.
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.
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
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.
inventories, or
reserves,
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.
Purchased receivables corporate
This asset class covers all receivables classified as corporate exposures
that 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.
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 capital of Nedbank Group Ltd and equating to black ownership of
11,13% of the value of NedNamibia Holdings Ltd, 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’.
NedbaNk LIMITed – ANNUAL RepoR t 2015
159
TERMS uSEd IN OuR REPORT (continued)
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.
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
issued for the year under consideration,
paid/capitalisation award
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.
Credit loss ratio
Credit loss ratio is the impairments charge as a percentage of average
advances.
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.
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 income taxation recoverable in
future periods in respect of:
■■
deductible temporary differences due to differences between the
taxation and accounting treatment of transactions; and
■■
the carry forward of unused taxation losses.
Deferred taxation liabilities
deferred taxation liabilities are the amounts of income tax payable in future
periods due to differences between the tax and accounting treatment of
transactions.
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.
economic profit or loss
Headline earnings after adjusting for cost of capital.
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).
160
NedbaNk LIMITed – ANNUAL RepoR t 2015
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 International Financial Reporting Interpretations 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.
South African Reserve Bank regulations related to
banks and the BA returns1
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.
1 The new Banks Act regulatory returns.
NedbaNk LIMITed – ANNUAL RepoR t 2015
161
TERMS uSEd IN OuR REPORT (continued)
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 Ltd 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.
162
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ABBREVIATIONS, ACRONYMS ANd INITIALISMS uSEd IN OuR REPORT
ABCP
ACES
ACT
AFd
AFT
AGM
AIEA
AIRB
ALCO
AM
AMA
AML
ANW
APE
asset-backed commercial paper
Advisory Committee on Environment and Society
Arts & Culture Trust
Agence Française de développement/French
development Agency
African Task Force
annual general meeting
average interest-earning assets
Advanced Internal Ratings-based
Asset and Liability Committee
asset management
Advanced Measurement Approach
anti-money-laundering
adjusted net worth
annualised premium equivalent
ASISA
Association for Savings and Investment South Africa
ATM
AuM
Bau
automated teller machine
assets under management
business as usual
BBBEE
broad-based black economic empowerment
BBP
BCBS
BCM
black business partner
Basel Committee on Banking Supervision
business continuity management
BCMC
Balance Sheet Management Committee
BEE
BEEL
BES
BIS
BoF
bps
BSME
BTV
BuSA
BWO
CA
CAGR
black economic empowerment
best estimate of expected loss
Board Ethics Statement
Bank for International Settlements
branch of the future
basis points
black small and medium enterprises
balance to original value
Business unity South Africa
black-women-owned
chartered accountant
1 compound annual growth rate
2 compound average growth rate
CAR
capital adequacy ratio
CASA ratio
current and savings account ratio
CBSS
CCC
CCMA
Compulsory Bonus Share Scheme
cluster credit committee
Commission for Conciliation, Mediation and
Arbitration
CCMG
Contact Centre Management Group
CCR
CdP
CE
CEF
CEM
CEO
CET1
CFd
CFE
CFO
CFT
counterparty credit risk
Carbon disclosure Project
chief executive
commissions and fees
Current Exposure Method
chief executive officer
common equity tier 1
contract for difference
consumer financial education
chief financial officer
combating the financing of terrorism
CGCO
Chief Governance and Compliance Officer
CGu
CIB
CIBC
CLF
CLR
CMBS
CNHR
COd
COE
cash-generating unit
Corporate and Investment Banking (name of cluster)
Canadian Imperial Bank of Commerce
committed liquidity facility
credit loss ratio
commercial mortgage-backed securitisation
cost of non-hedgeable risk
commercial operation date
cost of equity
COId Act
Compensation for Occupational Injuries and diseases
Act
COO
COP
CPI
CPPP
CPT
CRE
chief operating officer
Conference of the Parties
consumer price index
community-public-private partnership
corporate performance target
commercial real estate
CRISA
Code for Responsible Investing in South Africa
CRO
CRS
CSI
CVA
CVF
CVP
dAC
dBSA
dEL
chief risk officer
Common Reporting Standard
corporate social investment
credit valuation adjustment
Competing Values Framework
client value proposition
directors' Affairs Committee
development Bank of Southern Africa
downturn expected loss
dHEPS
diluted headline earnings per share
dLGd
d-SIB
dSTI
downturn loss given default
domestic systemically important bank
deferred short-term incentive
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163
ABBREVIATIONS, ACRONYMS ANd INITIALISMS uSEd IN OuR REPORT (continued)
dti
dVA
EAd
EAP
ECL
EdGE
EdP
EdPM
EdTF
EE
EELN
EGC
department of Trade and Industry
debit value adjustment(s)
exposure at default
1 economically active population
2 employee assistance programme
expected credit card loss
Excellence in design for Greater Efficiencies
Executive development Programme
execution, delivery and process management
Enhanced disclosure Task Force
employment equity
Energy Efficiency Leadership Network
enterprise governance and compliance
EITCO
Executive IT Committee
EL
EME
EMM
eNaTIS
EP
EPV
ERA
erco
ERI
expected loss
1 emerging macroenterprise
2 exempted microenterprise
Ekhurhuleni Metropolitan Municipality
electronic national administration traffic information
system
1 economic profit
2 Equator Principle
employee value proposition
ethics risk assessment
enterprise risk committee
ethics responsibility index
ERMF
Enterprisewide Risk Management Framework
ERP
ESd
ESG
ETI
ETL
EVE
EVP
EWP
exco
FAIS
enterprise resource planning
enterprise supplier development
environment, social and governance
Ecobank Transnational Incorporated
expected tail loss
economic value of equity
employee value proposition
Employee Wellbeing Programme
executive committee
Financial Advisory and Intermediary Services
FAIS Act
Financial Advisory and Intermediary Services Act
FATCA
Foreign Account Tax Compliance Act (uS)
FCA
FCT
FCTR
Financial Conduct Authority
foreign currency translation
1 foreign currency translation reserve(s)
2 foreign currency translation risk
FIC
Financial Intelligence Centre
FICA
FRTB
FSB
FSC
FSCA
FTE
FVOCI
FVTPL
GAC
GAI
GCC
GdP
GFOC
GHG
GIA
GITCO
GOI
GORC
GP
GPC
Financial Intelligence Centre Act
Fundamental Review of the Trading Book
Financial Services Board
Financial Sector Code
Financial Sector Conduct Authority
fulltime employee
fair value through other comprehensive income
fair value through profit and loss
Group Audit Committee
Governance Assessment Instrument
Group Credit Committee
gross domestic product
Group Finance and Oversight Committee
greenhouse gas(es)
Group Internal Audit (department name)
Group Information Technology Committee
gross operating income
Group Operational Risk Committee
guaranteed package
Group Procurement Committee
GRCMC
Group Risk and Capital Management Committee
GRI
Global Reporting Initiative
Group Exco
Nedbank Group Executive Committee
GRPTC
GSC
GTSEC
HCM
Hdu
HE
HEPS
HQLA
HR
Group Related-party Transactions Committee
Group Sustainability Committee
Group Transformation, Social and Ethics Committee
Human Capital Management (SAP)
historically disadvantaged university
headline earnings
headline earnings per share
high-quality liquid asset(s)
human resources
HVCRE
high-volatility commercial real estate
IAS
IASB
IBSA
ICAAP
ICAS
IET
IFC
IFRS
IFRS IC
International Accounting Standard(s)
International Accounting Standards Board
Insurance and Banking Staff Association
Internal Capital Adequacy Assessment Process
Independent Counselling and Advisory Services
Infrastructure, Energy and Telecommunications
International Finance Corporation
International Financial Reporting Standard(s)
International Financial Stability Board Interpretation
Committee
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IIA
ILAAP
IMA
IMF
INE
IOd
IPRE
IRB
IRBA
IRP
IRRBB
IT
JIBAR
KICL
KPI
KYC
LCR
LEAC
LGd
LHS
LId
LTI
LTIFR
LTIP
M&A
Md
MFC
MI
Institute of Internal Auditors
Internal Liquidity Adequacy Assessment Process
Internal Model Approach
International Monetary Fund
independent non-executive
1 injuries on duty
2 Institute of directors
income-producing real estate
Internal Ratings-based
Independent Regulatory Board for Auditors
Integrated Resource Plan
interest rate risk in the banking book
information technology
Johannesburg Interbank Agreed Rate
Key Issues Control Log
key performance indicator
Know Your Client
liquidity coverage ratio
NGO
NGR
NII
NIM
NIR
NP
NPS
NPW
NSFAS
NSFR
NSS
NWu
OBS
OCI
OHS
non-governmental organisation
Nedbank Group Rating
net interest income
net interest margin
non-interest revenue
non-performing
Net Promoter Score
Nedbank Private Wealth
National Student Financial Aid Scheme
net stable funding ratio
Nedbank Staff Survey
North-West university
Ombudsman for Banking Services
other comprehensive income
occupational health and safety
OMART
Old Mutual Alternative Risk Transfer Fund
OMSA
Old Mutual South Africa/Old Mutual (South Africa)
Ltd
Large-exposure Approval Committee
Opcom
Operational Committee
loss given default
lefthand scale
lead independent director
long-term incentive
lost-time injury frequency rate
Long-term Incentive Plan
mergers and acquisitions
managing director
Motor Finance Corporation
management information
MISTRA
Mapungubwe Institute for Strategic Reflection
MRC
NAV
NBI
NBS
NCA
minimum required capital
net asset value
National Business Initiative
Network for Business Sustainability
National Credit Act
NCAA
National Credit Amendment Act
NCC
NCd
NCIB
NCR
NEd
NEI
NEO
Nedbank Contact Centre
negotiable certificate of deposit
Nedbank Corporate and Investment Banking
National Credit Regulator
non-executive director
Nedbank ethics indicator
Nedbank Ethics Officer
ORMF
ORSA
OSE
OTC
PASA
PAYE
Pd
Operational Risk Management Framework
Own Risk and Solvency Assessment(s)
ordinary shareholders' equity
over the counter
Payments Association of South Africa
pay as you earn
probability of default
Pd-LGd
probability of defaullt
PGN
PIC
PIP
PIT
POPI
POPIA
POS
PPP
PRA
PRMA
PRI
PVFP
PVNBP
PWCE
PWd
QNB
Professional Guidance Note
Public Investment Corporation
property in possession
point in time
protection of personal information
Protection of Personal Information Act
point of sale
public-private partnership
Prudential Regulatory Authority
Post-retirement Medical Aid (Old Mutual)
Principles for Responsible Investment
present value of future profits
present value of new-business premiums
programme-wide credit enhancement
persons with disabilities
Qatar National Bank
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165
ABBREVIATIONS, ACRONYMS ANd INITIALISMS uSEd IN OuR REPORT (continued)
QSE
RAF
RAS
RAT
RAu
RBB
1 qualifying small enterprise
2 qualifying small entity
Risk Appetite Framework
risk as strategic (opportunity)
risk as threat
risk as uncertainty
Retail and Business Banking (name of cluster)
RCoGP
Revised Codes of Good Practice
RCPO
RCSA
Regulatory Change Programme Office
risk and control self-assessment
RdA & RR
risk data aggregation and risk reporting
RdR
REIPPP
Retail distribution Review
Renewable Energy Independent Power Producer
Procurement
Remco
Remuneration Committee
RFP
RFQ
RHS
RI
request for proposal
request for quotation
righthand scale
Responsible Investment
RMBS
residential-mortgage-backed securitisation
RoA
ROE
ROI
RPTC
RRB
RRP
RSP
RWA
SAdC
SAEEC
SAICA
SAM
SANdF
SANEA
Rest of Africa
1 return on equity
2 return on ordinary shareholders' equity
3 return on ordinary shareholders' funds
return on investment
Related Party Transaction Committee
Retail Relationship Banking
resolution and recovery planning
restricted share plan
risk-weighed asset(s)
Southern African development Community
South African Energy Efficiency Convention
South African Institute of Chartered Accountants
Solvency Assessment and Management
South African National defence Force
South African National Energy Association
SAP HCM
SAP Human Capital Management
SAPS
SAQA
SARB
South African Police Service
South African Qualifications Authority
South African Reserve Bank
SASBO
South African Society of Banking Officials
SEMS
SME
SPV
SSA
SST
STI
STT
TCF
Social and Environmental Management System
small and medium enterprise(s)
special-purpose vehicle
Sub-Saharan Africa
self-service terminal
short-term incentive
securities transfer tax
1 Treating Clients Fairly (SA)
2 Treating Customers Fairly (uK)
TLAC
total loss-absorbing capacity
TRAHRCO
Transformation and Human Resources Committee
TRC
TSR
TTC
uAE
uJ
uKZN
uNEP FI
uNFCCC
uNGC
uNISA
uP
VaR
Trade Risk Committee
total shareholder's return
through the cycle
united Arab Emirates
university of Johannesburg
university of KwaZulu-Natal
united Nations Environment Programme Finance
Initiative
united Nations Framework Convention on Climate
Change
united Nations Global Compact
university of South Africa
university of Pretoria
value at risk
VIF (business) value of in-force (business)
VNB
VuCA
VWAP
value of new business
volatile, uncertain, complex and amgigous
volume-weighted average price
WESSA
Wildlife and Environment Society of South Africa
WIPHOLd Woman Investment Portfolio Holdings
WWF-SA
World Wide Fund for Nature South Africa
XVA
X-axis valuation adjustment
166
NedbaNk LIMITed – ANNUAL RepoR t 2015
COMPANY dETAILS
NEdBANK LIMITEd
Incorporated in the Republic of SA
Registration number 1951/000009/06
Registered address
Nedbank 135 Rivonia Campus,
135 Rivonia Road
Sandown, Sandton, 2196, SA
PO Box 1144, Johannesburg, 2000, SA
transfer secretaries in SA
Computershare Investor
Services (Pty) Ltd
70 Marshall Street, Johannesburg, 2001,
SA
PO Box 61051, Marshalltown, 2107, SA
INSTRuMENT COdES
Nedbank Limited non-redeemable
non-cumulative preference shares
JSE share code
ISIN
NBKP
ZAE000043667
Company Secretary: TSB Jali
Sponsor:
Nedbank Corporate
and Investment
Banking
This announcement is available
on the group’s website at
nedbankgroup.co.za, together
with the following additional
information:
■■
■■
Financial results presentation
to analysts.
Link to a webcast of the
presentation to analysts.
For further information please
contact Nedbank Group
Investor Relations at
nedbankgroupir@nedbank.co.za.
NedbaNk LIMITed – ANNUAL RepoR t 2015
167
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’,
‘anticipate’, ‘expect’, ‘plan’, ‘estimate’, ‘intend’, ‘project’, ‘target’, ‘predict’
and ‘hope’.
Forward-looking statements are not statements of fact, but statements by
the management of Nedbank 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.